Standex International
Annual Report 2014

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KSTANDEX INTERNATIONAL CORP/DE/ - SXIFiled: August 28, 2014 (period: June 30, 2014)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2014Commission File Number 1-7233 STANDEX INTERNATIONAL CORPORATION(Exact name of registrant as specified in its Charter) DELAWARE31-0596149(State of incorporation)(I.R.S. Employer Identification No.) 11 KEEWAYDIN DRIVE, SALEM, NEW HAMPSHIRE03079(Address of principal executive offices)(Zip Code) (603) 893-9701(Registrant’s telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THESECURITIES EXCHANGE ACT OF 1934: Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, Par Value $1.50 Per Share New York Stock ExchangeIndicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.YES [ ] NO[X]Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.YES [ ] NO[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 ExchangeAct of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. YES [X] NO [ ]Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive DataFile required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months(or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [ ]Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not becontained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. [ ]Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer X Accelerated filer Non-accelerated filer __ Smaller Reporting Company __Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YES [ ] NO[X]The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant at the close of business onDecember 31, 2013 was approximately $777,812,000. Registrant’s closing price as reported on the New York Stock Exchange forDecember 31, 2013 was $62.88 per share.The number of shares of Registrant's Common Stock outstanding on August 21, 2013 was 12,760,139DOCUMENTS INCORPORATED BY REFERENCEPortions of the Proxy Statement for the Registrant’s 2014 Annual Meeting of Stockholders (the “Proxy Statement”) are incorporated byreference into Part III of this report.1Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Forward Looking StatementStatements contained in this Annual Report on Form 10-K that are not based on historical facts are "forward-lookingstatements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may beidentified by the use of forward-looking terminology such as “should,” “could,” "may," “will,” “expect," "believe,""estimate," "anticipate," ”intends,” "continue," or similar terms or variations of those terms or the negative of those terms. There are many factors that affect the Company’s business and the results of its operations and may cause the actualresults of operations in future periods to differ materially from those currently expected or desired. These factors include,but are not limited to material adverse or unforeseen legal judgments, fines, penalties or settlements, conditions in thefinancial and banking markets, including fluctuations in exchange rates and the inability to repatriate foreign cash,general and international recessionary economic conditions, including the impact, length and degree of the current slowgrowth conditions on the customers and markets we serve and more specifically conditions in the food service equipment,automotive, construction, aerospace, energy, transportation and general industrial markets, lower-cost competition, therelative mix of products which impact margins and operating efficiencies, both domestic and foreign, in certain of ourbusinesses, the impact of higher raw material and component costs, particularly steel, petroleum based products andrefrigeration components, an inability to realize the expected cost savings from restructuring activities, effectivecompletion of plant consolidations, cost reduction efforts, restructuring including procurement savings and productivityenhancements, capital management improvements, strategic capital expenditures, and the implementation of leanenterprise manufacturing techniques, the inability to achieve the savings expected from the sourcing of raw materials fromand diversification efforts in emerging markets, the inability to attain expected benefits from strategic alliances oracquisitions and the inability to achieve synergies contemplated by the Company. Other factors that could impact theCompany include changes to future pension funding requirements. In addition, any forward-looking statements representmanagement's estimates only as of the day made and should not be relied upon as representing management's estimates asof any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, theCompany and management specifically disclaim any obligation to do so, even if management's estimates change.PART IItem 1. BusinessStandex International Corporation (“Standex”, the “Company" or "we" (1)) was incorporated in 1975 and is the successor ofa corporation organized in 1955. We have paid dividends each quarter since Standex became a public corporation inNovember 1964. (1)References in this Annual Report on Form 10-K to "Standex" or the "Company" or “we,” “our” or “us” shallmean Standex International Corporation and its subsidiaries.Unless otherwise noted, references to years are to fiscal years.We are a leading manufacturer of a variety of products and services for diverse commercial and industrial market segments. We have 11 operating segments, aggregated and organized for reporting purposes into five segments: Food ServiceEquipment Group, Engraving Group, Engineering Technologies Group, Electronics Products Group and Hydraulics ProductsGroup. Overall management, strategic development and financial control are maintained by the executive staff from ourcorporate headquarters located in Salem, New Hampshire. Our corporate strategy has several primary components.·It is our objective to grow larger and more profitable business units through both organic initiatives andacquisitions. On an ongoing basis we identify and implement organic growth initiatives such as new productdevelopment, geographic expansion, introduction of products and technologies into new markets and applicationsand leveraging of sales synergies between business units, key accounts and strategic sales channel partners. Also,we utilize strategically aligned or “bolt on” acquisitions to create both sales and cost synergies with our corebusiness platforms to accelerate their growth and margin improvement. There is a particular focus on identifyingand investing in opportunities that complement our products and will increase the global presence and capabilitiesof our businesses. From time to time we have divested businesses that we felt were not strategic or did not meet ourgrowth and return expectations.·We create “Customer Intimacy” by partnering with our customers in order to develop and deliver customersolutions or engineered products that provide higher levels of value-added technology-driven solutions to ourcustomers. This relationship generally provides us with the ability to sustain sales and profit growth over time andprovide superior operating margins to enhance shareholder returns. Further, we have made a priority in developingnew sales2Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.channels and leveraging strategic customer relationships.·We focus on operational excellence through continuous improvement in the cost structure of our businesses andrecognize that our businesses are competing in a global economy that requires that we constantly strive to improveour competitive position. We have deployed a number of management competencies including lean enterprise, theuse of low cost manufacturing facilities in countries such as Mexico, India, and China, the consolidation ofmanufacturing facilities to achieve economies of scale and leveraging of fixed infrastructure costs, alternatesourcing to achieve procurement cost reductions, and capital improvements to increase shop floor productivity,which drives improvements in the cost structure of our business units.·Our capital allocation strategy is to use cash flow generated from operations to fund the strategic growth programsabove, including acquisitions, dividends, and capital investments for organic growth and cost reductions. Werecognize that cash flow is fundamental in our ability to invest in organic and acquisitive growth for our businessunits and return cash to our shareholders in the form of dividends to reflect the measure of quality from the earningsthat we generate over time.Please visit our website at www.standex.com to learn more about us or to review our most recent SEC filings. Theinformation on our website is for informational purposes only and is not incorporated into this Annual Report on Form 10-K.Description of SegmentsFood Service Equipment GroupOur Food Service Equipment businesses are leading, broad-line manufacturers of commercial food service equipment whichinclude products on the “cold side” or in the refrigerated segment of food service applications and on the “hot side” or in thecooking, warming or holding segment of the market. Our products are used throughout the entire commercial food serviceprocess; from storage, to preparation, to cooking and to display. The equipment that we design and manufacture is utilizedin restaurants, convenience stores, quick-service restaurants, supermarkets, drug stores and institutions such as hotels,casinos and both corporate and school cafeterias to meet the challenges of providing food and beverages that are fresh andappealing while at the same time providing for food safety, energy efficiency and reliability of the equipment performance. The Food Service Equipment Group also applies technology and product expertise in the health science and medicalmarkets. Customers in this segment include laboratories, health care institutions, and blood banks. Our products are solddirect, through dealers, and through industry representatives. Through innovation and acquisition, we continue to expandthis segment. Our brands and products include: -Master-Bilt® and Kool Star® refrigerated reach-in and under counter refrigerated cabinets, cases, display units, andwalk-in coolers and freezers;-Nor-Lake, Incorporated walk-in coolers and freezers and reach-in and under counter refrigerated cabinets to meetfood service and scientific needs;-APW Wyott®, American Permanent Ware, Bakers Pride®, Tri-Star and BevLes® commercial ranges, ovens,griddles, char broilers, holding cabinets, toasters and combination steam and convection ovens used in cooking,toasting, warming and merchandising food;-Ultrafryer Systems®, producer of commercial deep fryers for restaurant and commercial installations;-Barbecue King® and BKI® commercial cook and hold units, rotisseries, pressure fryers, ovens and bakingequipment-Federal Industries merchandizing display cases for bakery, deli and confectionary products; and-Procon® pump systems used in beverage and industrial fluid handling applications.Engraving GroupOur Engraving Group is a leader in providing texturizing services world-wide. Our products and finishes are used invirtually every industry by the world’s largest manufacturers. We shorten the supply chain for global OEMs as a singlesource texturing supplier. Our established worldwide network of manufacturing centers and design centers provide uniformengravings for countless applications and provide consumer products a distinct competitive advantage. Texturizing moldsused in the production of plastic components, giving the final product the cosmetic appearance and appeal that consumersrequire. We provide texturizing services for molds used to produce plastic components, automotive applications, andconsumer products including household items made of plastic, toys, computers, and electronic devices. Our worldwidelocations enable us to better serve our customers within key geographic areas, including the United States, Canada, Europe,China, India, Southeast Asia, Korea, Australia, South Africa, and South America. We also produce specialized tooling used3Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.in the manufacture of cores for consumer and medical products. The Engraving Group also texturizes and producesembossed and engraved rolls, plates, process tooling, and machinery serving a wide variety of industries.Through the development of proprietary digital based process technology, new “green field” facilities particularly focusedon expansion through acquisitions and in emerging markets. The Engraving Group continues to build its market leadershipposition through continuously expanding the breadth of products and services it provides to its customers on a global basis. The companies and products and services within the Engraving Group include:-Mold-Tech® which texturizes molds used in manufacturing plastic injected components; Mullen® Burst Testers;-Roehlen®, Eastern Engraving and I R International which engrave and emboss rolls and plates used inmanufacturing continuous length materials;-Innovent is an engineering and manufacturing company delivering innovative product and service solutions tocore forming, aerospace, and industrial clients around the world; and-B.F. Perkins® providing customized texturing solution machinery for every application.Our products are primarily sold direct through our global sales network. The Engraving Group serves a number of industriesincluding automotive, plastics, building products, synthetic materials, converting, textile and paper, computer, housewares,hygiene product tooling and aerospace industries. Engineering Technologies GroupThe Company’s Engineering Technologies Group consists of the Spincraft unit, with locations in North Billerica,Massachusetts, New Berlin, Wisconsin, and in Newcastle, UK. The group provides single-source customized solutions usinga wide variety of world-class precision manufacturing capabilities, including metal spinning and metal forming, heattreating, machining, high speed milling, and other fabrication services in all thickness and size ranges for virtually allworkable metal alloys. Our components and assemblies can be found in a wide variety of advanced applications. Sales aremade directly to our customers in the manned and unmanned space, aviation, defense, energy, industrial, medical, marine,and oil and gas markets. Electronics Products GroupOur Electronics Products Group is a leading manufacturer of reed switches; reed relays; fluid level, flow, pressure, proximity,conductive and inductive sensors; electronic assemblies; and magnetic components such as toroid and planar transformersas well as providing other value added customer solutions. Sales are made both directly to customers and throughmanufacturers’ representatives, dealers and distributors. End user market segments include automotive, white goods,lighting, HVAC, space, military, medical, security, and general industrial applications.Our investment in technology and resources to support profitable growth is a major focus for the business. The fiscal 2013investment in Meder more than doubled the size of our Electronics Products Group, allowed us to complement our existingelectronics business with significantly broadened product line offerings, end-user markets, and manufacturing support thathave enhanced our global footprint for sales coverage and profitable growth. We are also expanding the product line bydeveloping new products, further global expansion, and strategic acquisitions that will drive our growth initiatives.Hydraulics Products GroupOur Hydraulics Products Group is a leader in mobile hydraulic cylinders including single or double acting telescopic andpiston rod hydraulic cylinders. Custom Hoists is a global supplier and manufacturer of hydraulic cylinders used in theproduction of both dump trucks and dump trailers, refuse vehicles, and other material handling applications. Sales are madeboth directly to customers and through dealers and distributors. The Group has also expanded its product line to include wetkits, which are complete hydraulic systems including pumps, hoses and fittings.Raw MaterialsRaw materials and components necessary for the manufacture of our products are generally available from numerous sources. Generally, we are not dependent on a single source of raw materials and supplies. We do not foresee unavailability ofmaterials or supplies which would have a significant adverse effect on any of our businesses, nor any of our segments, in thenear term. 4Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.SeasonalityWe are a diversified business with generally low levels of seasonality, however our fiscal third quarter is typically the periodwith the lowest level of sales volume.Patents and TrademarksWe hold approximately 66 United States patents and patents pending covering processes, methods and devices andapproximately 43 United States trademarks. Many counterparts of these patents have also been registered in various foreigncountries. In addition, we have various foreign registered and common law trademarks. While we believe that many of our patents are important, we credit our competitive position in our niche markets tocustomer intimacy, engineering capabilities, manufacturing techniques and skills, marketing and sales promotions, serviceand the delivery of quality products. Due to the diversity of our businesses and the markets served, the loss of any single patent or trademark would not, in ouropinion, materially affect any individual segment. CustomersOur business is not dependent upon a single customer or a few large customers, the loss of any one of which would have amaterial adverse effect on our operations. No customer accounted for more than 5% of our consolidated revenue in fiscal2014 or any of the years presented. Working CapitalOur primary source of working capital is the cash generated from continuing operations. No segments require any specialworking capital needs outside of the normal course of business. BacklogBacklog includes all active or open orders for goods and services that have a firm fixed customer purchase order withdefined delivery dates. Backlog also includes any future deliveries based on executed customer contracts, so long as suchdeliveries are based on agreed upon delivery schedules. Backlog is not generally a significant factor in the Company’sbusinesses because of our relatively short delivery periods and rapid inventory turnover with the exception of EngineeringTechnologies.Backlog orders believed to be firm at June 30, 2014 and 2013 are as follows (in thousands): 2014 2013Food Service Equipment$$51,516 $ 37,888Engraving 11,456 11,116Engineering Technologies 64,083 55,356Electronics Products 32,102 28,671Hydraulics Products 5,678 2,687 Total 164,835 135,718Net realizable beyond one year 21,703 10,322Net realizable within one year$$143,132 $ 125,396 CompetitionStandex manufactures and markets products many of which have achieved a unique or leadership position in their market. However, we encounter competition in varying degrees in all product groups and for each product line. Competitorsinclude domestic and foreign producers of the same and similar products. The principal methods of competition are productperformance and technology, price, delivery schedule, quality of services, and other terms and conditions.5Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.International OperationsWe have international operations in all of our business segments. International operations are conducted at 42 locations, inEurope, Canada, China, India, Singapore, Korea, Australia, Mexico, Brazil, and South Africa. See the Notes to ConsolidatedFinancial Statements for international operations financial data. Our international operations contributed approximately29% of operating revenues in 2014 and 28% in 2013. International operations are subject to certain inherent risks inconnection with the conduct of business in foreign countries including, exchange controls, price controls, limitations onparticipation in local enterprises, nationalizations, expropriation and other governmental action, restrictions of repatriation of earnings, and changes in currency exchange rates. Research and DevelopmentDeveloping new and improved products, broadening the application of established products, continuing efforts to improveour methods, processes, and equipment continues to drive our success. However, due to the nature of our manufacturingoperations and the types of products manufactured, expenditures for research and development are not significant to anyindividual segment or in the aggregate. Research and development costs are quantified in the Notes to ConsolidatedFinancial Statements. We develop and design new products to meet customer needs in order to offer enhanced products orto provide customized solutions for customers. Environmental MattersTo the best of our knowledge, we believe that we are presently in substantial compliance with all existing applicableenvironmental laws and regulations and do not anticipate any instances of non-compliance that will have a material effecton our future capital expenditures, earnings or competitive position. Financial Information about Geographic AreasInformation regarding revenues from external customers attributed to the United States, all foreign countries and anyindividual foreign country, if material, is contained in the Notes to Consolidated Financial Statements for “IndustrySegment Information.” Number of EmployeesAs of June 30, 2014, we employed approximately 4,200 employees of which approximately 2,000 were in the United States. About 300 of our U.S. employees were represented by unions. Approximately 43% of our production workforce is situatedin low-cost manufacturing regions such as Mexico, Brazil and Asia. Executive Officers of StandexThe executive officers of the Company as of June 30, 2014 were as follows:NameAgePrincipal Occupation During the Past Five YearsDavid A. Dunbar52President and Chief Executive Officer of the Company since January 2014; Presidentof the Valves and Controls global business unit of Pentair Ltd from 2009 throughDecember 31, 2013.Thomas D. DeByle54Vice President and Chief Financial Officer of the Company since March 2008.Deborah A. Rosen59Chief Legal Officer of the Company since October 2001; Vice President of theCompany since July 1999.John Abbott55Group Vice President of the Food Service Group since December 2006.The executive officers are elected each year at the first meeting of the Board of Directors subsequent to the annual meetingof stockholders, to serve for one-year terms of office. There are no family relationships among any of the directors orexecutive officers of the Company.Long-Lived AssetsLong-lived assets are described and discussed in the Notes to Consolidated Financial Statements under the caption “Long-Lived Assets.” 6Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Available InformationStandex’s corporate headquarters are at 11 Keewaydin Drive, Salem, New Hampshire 03079, and our telephone number atthat location is (603) 893-9701.The U.S. Securities and Exchange Commission (the “SEC”) maintains an internet website at www.sec.gov that contains ourannual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements, and allamendments thereto. All reports that we file with the SEC may be read and copied at the SEC’s Public Reference Room at100 F Street, N.E., Washington, DC 20549. Information about the operation of the Public Reference Room can be obtainedby calling the SEC at 1-800-SEC-0330. Standex’s internet website address is www.standex.com. Our annual reports onForm 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements, and all amendments thereto,are available free of charge on our website as soon as reasonably practicable after such reports are electronically filed with,or furnished to, the SEC. In addition, our code of business conduct, our code of ethics for senior financial management, ourcorporate governance guidelines, and the charters of each of the committees of our Board of Directors (which are not deemedfiled by this reference), are available on our website and are available in print to any Standex shareholder, without charge,upon request in writing to “Chief Legal Officer, Standex International Corporation, 11 Keewaydin Drive, Salem, NewHampshire, 03079.”The certifications of Standex’s Chief Executive Officer and Chief Financial Officer, as required by the rules adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 2002, are filed as exhibits to this Form 10-K. Item 1A. Risk FactorsAn investment in the Company’s common shares involves various risks, including those mentioned below and those that arediscussed from time to time in our other periodic filings with the SEC. Investors should carefully consider these risks, alongwith the other information filed in this report, before making an investment decision regarding our common shares. All ofthese risks could have a material adverse effect on our financial condition, results of operations and/or value of our commonshares.A deterioration in the domestic and international economic environment could adversely affect our operating results andfinancial condition.Recessionary economic conditions coupled with a tightening of credit could adversely impact major markets served by ourbusinesses, including cyclical markets such as automotive, heavy construction vehicle, general industrial and food service. An economic recession could adversely affect our business by:•reducing demand for our products and services, particularly in markets where demand for our products and services iscyclical;•causing delays or cancellations of orders for our products or services;•reducing capital spending by our customers;•increasing price competition in our markets;•increasing difficulty in collecting accounts receivable;•increasing the risk of excess or obsolete inventories;•increasing the risk of impairment to long-lived assets due to reduced use of manufacturing facilities;•increasing the risk of supply interruptions that would be disruptive to our manufacturing processes; and•reducing the availability of credit for our customers.We rely on our credit facility to provide us with sufficient capital to operate our businesses.We rely on our revolving credit facility to provide us with sufficient capital to operate our businesses. The availability ofborrowings under our revolving credit facility is dependent upon our compliance with the covenants set forth in the facility,including the maintenance of certain financial ratios. Our ability to comply with these covenants is dependent upon ourfuture performance, which is subject to economic conditions in our markets along with factors that are beyond our control. Violation of those covenants could result in our lenders restricting or terminating our borrowing ability under our creditfacility, cause us to be liable for covenant waiver fees or other obligations, or trigger an event of default under the terms ofour credit facility, which could result in acceleration of the debt under the facility and require prepayment of the debt before7Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.its due date. Even if new financing is available in the event of a default under our current credit facility, the interest ratecharged on any new borrowing could be substantially higher than under the current credit facility, thus adversely affectingour overall financial condition. If our lenders reduce or terminate our access to amounts under our credit facility, we maynot have sufficient capital to fund our working capital needs or we may need to secure additional capital or financing tofund our working capital requirements or to repay outstanding debt under our credit facility.Our credit facility contains covenants that restrict our activities.Our revolving credit facility contains covenants that restrict our activities, including our ability to:•incur additional indebtedness;•make investments;•create liens;•pay cash dividends to shareholders unless we are in compliance with the financial covenants set forth in the creditfacility; and•sell material assets.Our global operations subject us to international business risks.We operate in 42 locations outside of the United States in Europe, Canada, China, India, Singapore, Korea, Australia,Mexico, Brazil, and South Africa. If we are unable to successfully manage the risks inherent to the operation and expansionof our global businesses, those risks could have a material adverse effect on our business, results of operations or financialcondition. Those international business risks include:•fluctuations in currency exchange rates;•restrictions on repatriation of earnings;•import and export controls;•political, social and economic instability or disruptions;•potential adverse tax consequences;•difficulties in staffing and managing multi-national operations;•difficulties in our ability to enforce legal rights and remedies; and•changes in regulatory requirements.Failure to achieve expected savings and synergies could adversely impact our operating profits and cash flows.We focus on improving profitability through lean enterprise, low cost sourcing and manufacturing initiatives, improvingworking capital management, developing new and enhanced products, consolidating factories where appropriate,automating manufacturing processes, diversification efforts and completing acquisitions which deliver synergies tosupplement sales and growth. If we were unable to successfully execute these programs, this failure could adversely affectour operating profits and cash flows. In addition, actions we may take to consolidate manufacturing operations to achievecost savings or adjust to market developments may result in restructuring charges that adversely affect our profits.Violation of anti-bribery or similar laws by our employees, business partners or agents could result in fines, penalties,damage to our reputation or other adverse consequences.We cannot assure that our internal controls, code of conduct and training of our employees will provide complete protectionfrom reckless or criminal acts of our employees, business partners or agents that might violate US or international lawsrelating to anti-bribery or similar topics. An action resulting in a violation of these laws could subject us to civil or criminalinvestigations that could result in substantial civil or criminal fines and penalties and which could damage our reputation.We face significant competition in our markets and, if we are not able to respond to competition in our markets, our netsales, profits and cash flows could decline.Our businesses operate in highly competitive markets. In order to effectively compete, we must retain long standingrelationships with significant customers, offer attractive pricing, develop enhancements to products that offer performancefeatures that are superior to our competitors and which maintain our brand recognition, continue to automate ourmanufacturing capabilities, continue to grow our business by establishing relationships with new customers, diversify intoemerging markets and penetrate new markets. If we are unable to compete effectively, our net sales, profitability and cashflows could decline. Pricing pressures resulting from competition may adversely affect our net sales and profitability.8Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.If we are unable to successfully introduce new products and product enhancements, our future growth could be impaired.Our ability to develop new products and innovations to satisfy customer needs or demands in the markets we serve can affectour competitive position and often requires significant investment of resources. Difficulties or delays in research,development or production of new products and services or failure to gain market acceptance of new products andtechnologies may significantly reduce future net sales and adversely affect our competitive position.Increased prices or significant shortages of the commodities that we use in our businesses could result in lower net sales,profits and cash flows.We purchase large quantities of steel, refrigeration components, freight services, foam insulation and other metalcommodities for the manufacture of our products. Historically, prices for commodities have fluctuated, and we are unable toenter into long term contracts or other arrangements to hedge the risk of price increases in many of these commodities. Significant price increases for these commodities could adversely affect our operating profits if we cannot timely mitigatethe price increases by successfully sourcing lower cost commodities or by passing the increased costs on to customers. Shortages or other disruptions in the supply of these commodities could delay sales or increase costs.An inability to identify or complete future acquisitions could adversely affect our future growth.As part of our growth strategy, we intend to pursue acquisitions that provide opportunities for profitable growth for ourbusinesses and which enable us to leverage our competitive strengths. While we continue to evaluate potential acquisitions,we may not be able to identify and successfully negotiate suitable acquisitions, obtain financing for future acquisitions onsatisfactory terms, obtain regulatory approval for certain acquisitions or otherwise complete acquisitions in the future. Aninability to identify or complete future acquisitions could limit our future growth.We may experience difficulties in integrating acquisitions.Integration of acquired companies involves a number of risks, including:•inability to operate acquired businesses profitably;•failure to accomplish strategic objectives for those acquisitions;•unanticipated costs relating to acquisitions or to the integration of the acquired businesses;•difficulties in achieving planned cost savings synergies and growth opportunities; and•possible future impairment charges for goodwill and non-amortizable intangible assets that are recorded as a result ofacquisitions.Additionally, our level of indebtedness may increase in the future if we finance acquisitions with debt, which would causeus to incur additional interest expense and could increase our vulnerability to general adverse economic and industryconditions and limit our ability to service our debt or obtain additional financing. We cannot assure that future acquisitionswill not have a material adverse effect on our financial condition, results of operations and cash flows.Impairment charges could reduce our profitability.We test goodwill and our other intangible assets with indefinite useful lives for impairment on an annual basis or on aninterim basis if an event occurs that might reduce the fair value of the reporting unit below its carrying value. Variousuncertainties, including continued adverse conditions in the capital markets or changes in general economic conditions,could impact the future operating performance at one or more of our businesses which could significantly affect ourvaluations and could result in additional future impairments. The recognition of an impairment of a significant portion ofgoodwill would negatively affect our results of operations and could be a material effect to us. Material adverse or unforeseen legal judgments, fines, penalties or settlements could have an adverse impact on ourprofits and cash flows.We are and may, from time to time, become a party to legal proceedings incidental to our businesses, including, but notlimited to, alleged claims relating to product liability, environmental compliance, patent infringement, commercial disputesand employment matters. In accordance with United States generally accepted accounting principles, we have establishedreserves based on our assessment of contingencies. Subsequent developments in legal proceedings may affect ourassessment and estimates of loss contingencies recorded as reserves which could require us to record additional reserves ormake9Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.material payments which could adversely affect our profits and cash flows. Even the successful defense of legal proceedingsmay cause us to incur substantial legal costs and may divert management's time and resources away from our businesses.The costs of complying with existing or future environmental regulations, and of correcting any violations of theseregulations, could increase our expenses and reduce our profitability.We are subject to a variety of environmental laws relating to the storage, discharge, handling, emission, generation, use anddisposal of chemicals, hazardous waste and other toxic and hazardous materials used to manufacture, or resulting from theprocess of manufacturing, our products. We cannot predict the nature, scope or effect of regulatory requirements to whichour operations might be subject or the manner in which existing or future laws will be administered or interpreted. We arealso exposed to potential legacy environmental risks relating to businesses we no longer own or operate. Future regulationscould be applied to materials, products or activities that have not been subject to regulation previously. The costs ofcomplying with new or more stringent regulations, or with more vigorous enforcement of these or existing regulations, couldbe significant.In addition, properly permitted waste disposal facilities used by us as a legal and legitimate repository for hazardous wastemay in the future become mismanaged or abandoned without our knowledge or involvement. In such event, legacy landfillliability could attach to or be imposed upon us in proportion to the waste deposited at any disposal facility.Environmental laws require us to maintain and comply with a number of permits, authorizations and approvals and tomaintain and update training programs and safety data regarding materials used in our processes. Violations of theserequirements could result in financial penalties and other enforcement actions. We could be required to halt one or moreportions of our operations until a violation is cured. Although we attempt to operate in compliance with theseenvironmental laws, we may not succeed in this effort at all times. The costs of curing violations or resolving enforcementactions that might be initiated by government authorities could be substantial.Strategic divestitures could negatively affect our results and contingent liabilities from businesses that we have sold couldadversely affect our results of operations and financial condition.We have retained responsibility for some of the known and unknown contingent liabilities related to a number of businesseswe have sold, such as lawsuits, tax liabilities, product liability claims, and environmental matters and have agreed toindemnify purchasers of these businesses for certain of those contingent liabilities. The trading price of our common stock has been volatile, and investors in our common stock may experience substantiallosses.The trading price of our common stock has been volatile and may become volatile again in the future. The trading price ofour common stock could decline or fluctuate in response to a variety of factors, including:•our failure to meet the performance estimates of securities analysts;•changes in financial estimates of our net sales and operating results or buy/sell recommendations by securitiesanalysts;•fluctuations in our quarterly operating results;•substantial sales of our common stock;•changes in the amount or frequency of our payment of dividends or repurchases of our common stock;•general stock market conditions; or•other economic or external factors.Decreases in discount rates and actual rates of return could require future pension contributions to our pension planswhich could limit our flexibility in managing our company.Key assumptions inherent in our actuarially calculated pension plan obligations and pension plan expense are the discountrate and the expected rate of return on plan assets. If discount rates and actual rates of return on invested plan assets were todecrease significantly, our pension plan obligations could increase materially. The size of future required pensioncontributions could require us to dedicate a greater portion of our cash flow from operations to making contributions, whichcould negatively impact our financial flexibility.10Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Our business could be negatively impacted by cybersecurity threats, information systems and network interruptions, andother security threats or disruptions.Our information technology networks and related systems are critical to the operation of our business and essential to ourability to successfully perform day-to-day operations. Cybersecurity threats in particular, are persistent, evolve quickly, andinclude, but are not limited to, computer viruses, attempts to access information, denial of service and other electronicsecurity breaches. These events could disrupt our operations or customers and other third party IT systems in which we areinvolved and could negatively impact our reputation among our customers and the public which could have a negativeimpact on our financial conditions, results of operations, or liquidity.Various restrictions in our charter documents, Delaware law and our credit agreement could prevent or delay a change incontrol of us that is not supported by our board of directors.We are subject to a number of provisions in our charter documents, Delaware law and our credit facility that may discourage,delay or prevent a merger, acquisition or change of control that a stockholder may consider favorable. These anti-takeoverprovisions include:•maintaining a classified board and imposing advance notice procedures for nominations of candidates for election asdirectors and for stockholder proposals to be considered at stockholders' meetings;•a provision in our certificate of incorporation that requires the approval of the holders of 80% of the outstandingshares of our common stock to adopt any agreement of merger, the sale of substantially all of the assets of Standex toa third party or the issuance or transfer by Standex of voting securities having a fair market value of $1 million ormore to a third party, if in any such case such third party is the beneficial owner of 10% or more of the outstandingshares of our common stock, unless the transaction has been approved prior to its consummation by all of ourdirectors;•requiring the affirmative vote of the holders of at least 80% of the outstanding shares of our common stock forstockholders to amend our amended and restated by-laws;•covenants in our credit facility restricting mergers, asset sales and similar transactions; and•the Delaware anti-takeover statute contained in Section 203 of the Delaware General Corporation Law.Section 203 of the Delaware General Corporation Law prohibits a merger, consolidation, asset sale or other similar businesscombination between Standex and any stockholder of 15% or more of our voting stock for a period of three years after thestockholder acquires 15% or more of our voting stock, unless (1) the transaction is approved by our board of directors beforethe stockholder acquires 15% or more of our voting stock, (2) upon completing the transaction the stockholder owns at least85% of our voting stock outstanding at the commencement of the transaction, or (3) the transaction is approved by ourboard of directors and the holders of 66 2/3% of our voting stock, excluding shares of our voting stock owned by thestockholder.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesWe operate a total of 74 manufacturing plants and warehouses located throughout the United States, Europe, Canada,Australia, Singapore, Korea, China, India, Brazil, South Africa, and Mexico. The Company owns 26 of the facilities and thebalance are leased. The approximate building space utilized by each product group is as follows (in thousands): Area in Square Feet Owned LeasedFood Service Equipment1,059 401Engraving268 380Engineering Technologies171 145Electronics Products177 157Hydraulics Products101 40Corporate and other43 12 Total1,819 1,135 11Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In general, the buildings are in sound operating condition and are considered to be adequate for their intended purposes andcurrent uses.We own substantially all of the machinery and equipment utilized in our businesses.Item 3. Legal ProceedingsDiscussion of legal matters is incorporated by reference to Part II, Item 8, Note 12, “CONTINGENCIES,” in the Notes to theConsolidated Financial Statements.Item 4. Mine Safety DisclosuresNot ApplicablePART IIItem 5. Market for Standex Common StockRelated Stockholder Matters and Issuer Purchases of Equity SecuritiesThe principal market in which the Common Stock of Standex is traded is the New York Stock Exchange under the tickersymbol “SXI”. The high and low sales prices for the Common Stock on the New York Stock Exchange and the dividendspaid per Common Share for each quarter in the last two fiscal years are as follows: Common Stock Price Range Dividends Per Share 2014 2013 Year Ended June 30HighLow HighLow 20142013First quarter $ 60.96 $ 52.00 $ 47.34 $ 41.29 $ 0.08 $ 0.07Second quarter 64.90 56.15 52.14 43.00 0.10 0.08Third quarter 63.76 52.29 57.64 51.28 0.10 0.08Fourth quarter 78.49 53.82 55.18 49.18 0.10 0.08The approximate number of stockholders of record on August 21, 2014 was 1,783. Additional information regarding our equity compensation plans is presented in the Notes to Consolidated FinancialStatements under the caption “Stock-Based Compensation and Purchase Plans” and Item 12 “Security Ownership of CertainBeneficial Owners and Management and Related Stockholder Matters.”Issuer Purchases of Equity Securities (1) Quarter Ended June 30, 2014 Period (a) Total Number ofShares (or units)Purchased(b) Average PricePaid per Share(or unit)(c) Total Number ofShares (or units)Purchased as Part ofPublicly AnnouncedPlans or Programs(d) Maximum Number(or Appropriate DollarValue) of Shares (orunits) that May Yet BePurchased Under thePlans or Programs April 1 - April 30, 2014 20,531 $55.06 20,531 501,862May 1 - May 31, 2014 14,752 $72.74 14,752 487,110June 1 - June 30, 2014 521 $73.90 521 486,589 TOTAL 35,804 $62.62 35,804 486,589 (1) The Company has a Stock Buyback Program (the “Program”) which was originally announced on January 30, 1985. Under theProgram, the Company may repurchase its shares from time to time, either in the open market or through private transactions,12Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.whenever it appears prudent to do so. The Program has no expiration date, and the Company from time to time may authorizeadditional increases of share increments for buyback authority so as to maintain the Program. The Company authorized, on August20, 2013, the repurchase of 0.5 million shares for repurchase pursuant to its Program. All previously announced repurchases havebeen completed.The following graph compares the cumulative total stockholder return on the Company’s Common Stock as of the end ofeach of the last five fiscal years, with the cumulative total stockholder return on the Standard & Poor’s Small Cap 600(Industrial Segment) Index and on the Russell 2000 Index, assuming an investment of $100 in each at their closing prices onJune 30, 2008 and the reinvestment of all dividends.13Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 6. Selected Consolidated Financial DataSelected financial data for the five years ended June 30, is as follows:See Item 7 for discussions on comparability of the below. 2014 2013 2012 2011 2010SUMMARY OF OPERATIONS (in thousands) Net sales Food Service Equipment $ 377,848 $ 367,008 $ 364,759 $ 343,150 $ 318,225 Engraving 109,271 93,380 93,611 85,258 77,372 Engineering Technologies 79,642 74,838 74,088 61,063 58,732 Electronics Products 114,881 108,085 48,206 46,600 37,201 Hydraulics Products 34,538 30,079 29,922 22,925 16,598 Total $ 716,180 $ 673,390 $ 610,586 $ 558,996 $ 508,128Gross profit $ 238,269 $ 218,191 $ 201,736 $ 185,858 $ 170,095Operating income (loss) Food Service Equipment $ 38,203 $ 37,533 $ 38,389 $ 37,633 $ 39,732 Engraving 22,145 15,596 17,896 14,182 9,395 Engineering Technologies 12,676 13,241 14,305 12,606 13,843 Electronics Products 19,732 16,147 8,715 7,551 4,074 Hydraulics Products 5,781 4,968 4,403 2,436 963 Restructuring (a) (10,077) (2,666) (1,685) (1,843) (3,494) Gain on sale of real estate - - 4,776 3,368 1,405 Other operating income (expense), net 3,462 - - - - Corporate and Other (26,054) (22,924) (23,443) (20,959) (20,137) Total $ 65,868 $ 61,895 $ 63,356 $ 54,974 $ 45,781Interest expense (2,249) (2,469) (2,280) (2,107) (3,624)Other non-operating (loss) income 4,184 (128) 519 (199) 748Provision for income taxes (18,054) (15,244) (15,699) (15,027) (13,050)Income from continuing operations 49,749 44,054 45,896 37,641 29,855Income/(loss) from discontinued operations(6,883) 794 (14,991) (2,275) (1,156)Net income $ 42,866 $ 44,848 $ 30,905 $ 35,366 $ 28,699 (a)See discussion of restructuring activities in Note 16 of the consolidated financial statements. 2014 2013 2012 2011 2010PER SHARE DATA Basic Income from continuing operations $ 3.94 $ 3.51 $ 3.67 $ 3.02 $ 2.40Income/(loss) from discontinuedoperations(0.55) 0.06 (1.20) (0.18) (0.09) Total $ 3.39 $ 3.57 $ 2.47 $ 2.84 $ 2.31Diluted Income from continuing operations $ 3.89 $ 3.45 $ 3.59 $ 2.95 $ 2.35Income/(loss) from discontinuedoperations(0.54) 0.06 (1.17) (0.18) (0.09)14Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Total $ 3.35 $ 3.51 $ 2.42 $ 2.77 $ 2.26 Dividends declared $ 0.38 $ 0.31 $ 0.27 $ 0.23 $ 0.20 2014 2013 2012 2011 2010BALANCE SHEET (in thousands) Total assets $ 578,160 $ 510,573 $ 479,811 $ 474,905 $ 446,279Accounts receivable 107,674 97,995 96,493 92,032 83,890Inventories 97,065 81,811 70,802 72,447 56,015Accounts payable 85,206 67,552 60,229 66,103 48,289Goodwill 125,965 111,905 100,633 102,439 87,870 Short-term debt $ - $ - $ - $ 5,100 $ - Long-term debt 45,056 50,072 50,000 46,500 93,300Total debt 45,056 50,072 50,000 51,600 93,300Less cash 74,260 51,064 54,749 14,407 33,630Net debt (cash) (29,204) (992) (4,749) 37,193 59,670Stockholders' equity 340,726 290,988 242,907 245,613 192,063 KEY STATISTICS 2014 2013 2012 2011 2010Gross profit margin 33.3% 32.4% 33.0% 33.2% 33.5%Operating income margin 9.2% 9.2% 10.4% 9.8% 9.0%15Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsOverviewWe are a leading manufacturer of a variety of products and services for diverse commercial and industrial market segments.We have five reportable segments: Food Service Equipment Group, Engraving Group, Engineering Technologies Group,Electronics Products Group, and the Hydraulics Products Group. Our business objectives are to provide value-added,technology-driven solutions to our customers, grow our businesses, and increase our business profitability. Our strategicbusiness objective is to 1) identify those businesses which are best able to meet our objectives, and invest in them by takingadvantage of both organic growth and acquisition opportunities and 2) pursue operational excellence in order to improveoperating margins and working capital management.Over the past 24 months, we invested in new strategic businesses that enhance and provide complementary products andservices to our segments. During June 2014, the Company acquired two companies. The Company purchased UltrafryerSystems, Inc., (“Ultrafryer”), a manufacturer of high quality commercial deep fryers for restaurant and commercialinstallations. This investment complements our Food Service Equipment Group’s product line and allows us to providebroader solutions to restaurant chains and commercial food service installations. The Company acquired planar technologyfrom Planar Quality Corporation, a developer of transformers for commercial, military and space applications. Thisinvestment will enhance our Electronics Production Group’s capabilities. In addition, July 2012, the Company acquiredMeder electronic AG (“Meder”), a German manufacturer of magnetic reed switch, reed relay, and reed sensor products. Meder’s products and geographic markets are complementary to Standex Electronics and the acquisition more than doubledthe size of the Electronics Products Group. This investment also substantially broadened the global footprint, product lineofferings, and end-user markets of the Electronics segment.We have successfully taken substantial measures over the same periods to reduce our cost structure and improve businessprofitability. As part of this ongoing strategy, beginning in the first quarter of fiscal 2014, the Company, in our efforts toreduce cost and improve productivity across the Food Service Equipment Group, announced that we will consolidateoperations in the Cooking Solutions Cheyenne, Wyoming plant into its Mexico facility and other Food Service operationsin North America. As of June 30, 2014, the Cheyenne consolidation has been completed. During June 2014, the Companydivested American Foodservice Company, a manufacturer of custom design and fabrication of counter systems and cabinetsin our Food Service Equipment Group segment. We continue to evaluate our products and production processes and expectto execute similar cost reductions and restructuring programs on an ongoing basis. We continue to strive for improved profitability in all aspects of our operations through low cost manufacturing and value-added engineering initiatives, plant consolidations, procurement savings, and improved productivity. These measures havebeen the principal factors in allowing the Company to improve margins and profitability. In addition to the focus onimproving our cost structure, we have improved the Company’s liquidity through better working capital management, andthe sale of excess land and buildings. This additional liquidity has allowed us to increase dividends, increase capitalinvestments, and expand through acquisitions. Our net debt (cash) to capital ratio for June 2014 and 2013 was (9.4%) and(0.3%) respectively.Our business units are actively engaged in initiating new product introductions, expansion of product offerings throughprivate labeling and sourcing agreements, geographic expansion of sales coverage, the development of new sales channels,leveraging strategic customer relationships, development of energy efficient products, new applications for existingproducts and technology, and next generation products and services for our end-user markets.Because of the diversity of the Company’s businesses, end user markets and geographic locations, management does not usespecific external indices to predict the future performance of the Company, other than general information about broadmacroeconomic trends. Each of our individual business units serves niche markets and attempts to identify trends other than16Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.general business and economic conditions which are specific to their businesses and which could impact their performance. Those units report pertinent information to senior management, which uses it to the extent relevant to assess the futureperformance of the Company. A description of any such material trends is described below in the applicable segmentanalysis.We monitor a number of key performance indicators (“KPIs”) including net sales, income from operations, backlog, effectiveincome tax rate, and gross profit margin. A discussion of these KPIs is included within the discussion below. We may alsosupplement the discussion of these KPIs by identifying the impact of foreign exchange rates, acquisitions, and othersignificant items when they have a material impact on the discussed KPI. We believe that the discussion of these itemsprovides enhanced information to investors by disclosing their consequence on the overall trend in order to provide a clearercomparative view of the KPI where applicable. For discussion of the impact of foreign exchange rates on KPIs, the Companycalculates the impact as the difference between the current period KPI calculated at the current period exchange rate ascompared to the KPI calculated at the historical exchange rate for the prior period. For discussion of the impact ofacquisitions, we isolate the effect to the KPI amount that would have existed regardless of our acquisition. Sales resultingfrom synergies between the acquisition and existing operations of the Company are considered organic growth for thepurposes of our discussion.Unless otherwise noted, references to years are to fiscal years.Consolidated Results from Continuing Operations (in thousands): 2014 2013 2012Net sales$ 716,180$ 673,390$ 610,586Gross profit margin 33.3% 32.4% 33.0%Restructuring costs 10,077 2,666 1,685Gain on sale of real estate - - 4,776Other income/(expense) operating 3,462 - - Income from operations 65,868 61,895 63,356 Backlog (realizable within 1 year)$ 143,132$ 125,396$ 111,208 2014 2013 2012Net sales$ 716,180 $ 673,390 $ 610,586Components of change in sales: Effect of acquisitions 297 55,129 14,117 Effect of exchange rates 3,954 (2,807) (888) Organic sales growth 38,539 10,482 38,361 Net sales for the fiscal year 2014 increased by $42.8 million, or 6.4%, when compared to the prior year. The increase isdriven by $38.5 million or 5.7% of organic sales growth from all our segments and favorable foreign exchange of $4.0million. Sales growth is a result of success of our top-line growth initiatives and improvements in end-user markets. Net sales in 2013 increased $62.8 million, or 10.3%, from 2012 levels. Of the increase, $55.1 million, or 9.0% wasattributable to the acquisition related to Electronics and $10.5 million, or 1.7% of organic growth, from all of our segments. Sales growth was partially offset by unfavorable foreign exchange of $2.8 million.Gross Profit MarginDuring 2014, gross margin increased to 33.3% as compared to 32.4% in 2013. This increase is primarily a result of salesvolume and favorable sales mix, coupled with the absence of $1.5 million of purchase accounting charges incurred during2013 associated with the Meder acquisition. Gross margin has increased at the Engraving Group due to strong automotiveMold-Tech sales.During 2013, gross margin decreased to 32.4% as compared to 33.0% in 2012. This decrease is primarily a result of $1.5million in our Meder purchase accounting expenses primarily related to a step up of acquired inventory to fair value, and a17Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.gross margin decline at Engineering Technologies offset by the improvement in Food Service Equipment Group andHydraulics.Selling, General, and Administrative ExpensesSelling, general, and administrative expenses for the fiscal year 2014 increased by $12.2 million, or 7.9%, when comparedto the prior year. The increase was driven by $3.9 million of management transition costs, and $3.4 million ofcompensation expense due to improved performance and increase of $3.1 million of increased selling and distributionexpenses due to incremental sales volume. The charge for management transition expense includes search fees, relocationand other costs associated with the hiring of a new chief executive officer (“CEO”) and the acceleration of stock incentivecompensation expenses related to the retired CEO.Selling, general, and administrative expenses for the fiscal year 2013 increased by $12.2 million, or 8.6%, when compared tothe prior year. The increase was driven by $9.6 million of Meder acquisition costs, $3.0 million related to our legacydefined benefit pension plans, and the settlement of a lawsuit related to our Refrigerated Solutions business. Income from OperationsIncome from operations for the fiscal year 2014 increased by $4.0 million or 6.4%, when compared to the prior year. Theincrease is primarily driven by $42.8 million of sales increases, gross profit improvement of $20.0 million, and a $3.5million net gain from insurance proceeds, partially offset by increased operating expense and restructuring costs.Income from operations for the fiscal year 2013 decreased by $1.5 million, or 2.3%, when compared to the prior year. Thedecrease was primarily the result of 2012 gain on sale of real-estate of $4.8 million and $1.5 million of purchase accountingexpense associated with the Meder acquisition during 2013.Discussion of the performance of all of our Groups is more fully explained in the segment analysis that follows. Income TaxesThe Company's income tax provision from continuing operations for the fiscal year ended June 30, 2014 was $18.1 million,or an effective rate of 26.6%, compared to $15.2 million, or an effective rate of 25.7% for the year ended June 30, 2013, and$15.7 million, or an effective rate of 25.5% for the year ended June 30, 2012. Changes in the effective tax rates from periodto period may be significant as they depend on many factors including, but not limited to, the amount of the Company'sincome or loss, the mix of income earned in the US versus outside the US, the effective tax rate in each of the countries inwhich we earn income, and any one time tax issues which occur during the period.The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2014 was impacted bythe following items: (i) a benefit of $0.5 million related to the R&D tax credit that expired during the fiscal year onDecember 31, (ii) a benefit of $0.5 million related to a decrease in the statutory tax rate in the United Kingdom on priorperiod deferred tax liabilities recorded during the first quarter during the fiscal year, (iii) a benefit of $1.1 million due to non-taxable life insurance proceeds received in the third quarter and (iv) a benefit of $3.8 million due to the mix of incomeearned in jurisdictions with beneficial tax rates.The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2013 was impacted bythe following items: (i) a benefit of $0.4 million related to the retroactive extension of the R&D credit recorded during thethird quarter, (ii) a benefit of $0.3 million related to a decrease in the statutory tax rate in the United Kingdom on priorperiod deferred tax liabilities recorded during the first and fourth quarters, (iii) a benefit of $1.0 million from the reversal of adeferred tax liability that was determined to be no longer required during the third quarter and (iv) a benefit of $2.8 milliondue to the mix of income earned in jurisdictions with beneficial tax rates.The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2012 was impacted bythe following items: (i) a benefit of $1.3 million from the reversal of income tax contingency reserves that were determinedto be no longer needed due to the lapsing of the statute of limitations and re-measurement of existing tax contingencyreserves based on recently completed tax examinations, (ii) a benefit of $0.4 million related to a decrease in the statutory taxrate in the United Kingdom on prior period deferred tax liabilities recorded during the first quarter, and (iii) a benefit of $4.5million due to the mix of income earned in jurisdictions with beneficial tax rates.18Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Capital ExpendituresIn general, our capital expenditures over the longer term are expected to be approximately 2% to 3% of net sales but couldincrease to fund targeted sales growth initiatives and cost reduction programs. During 2014, capital expenditures increasedto $19.9 million compared to 2013 of $14.4 million. The increase is primarily the result of the catastrophic failure of a largevertical machining center located at our Engineering Technologies facility in Massachusetts and support of our new longterm customer contracts. BacklogBacklog includes all active or open orders for goods and services that have a firm fixed customer purchase order withdefined delivery dates. Backlog also includes any future deliveries based on executed customer contracts, so long as suchdeliveries are based on agreed upon delivery schedules. Backlog is not generally a significant factor in the Company’sbusinesses because of our relatively short delivery periods and rapid inventory turnover with the exception of EngineeringTechnologies.Backlog realizable within one year increased $17.7 million, or 14.1%, to $143.1 million at June 30, 2014 from $125.4million at June 30, 2013. Backlog realizable within one year has increased due to increase in customer demand and theacquisition of Ultrafryer.Segment Analysis (in thousands)Food Service Equipment 2014 compared to 2013 2013 compared to 2012 % % 2014 2013 Change 2013 2012 ChangeNet sales $ 377,848 $ 367,008 3.0% $ 367,008 $ 364,759 0.6%Income from operations 38,203 37,533 1.8% 37,533 38,390 -2.2%Operating income margin10.1% 10.2% 10.2% 10.5% Net sales for fiscal year 2014 increased $10.8 million, or 3.0%, when compared to the prior year. The Refrigerated Solutions(walk-in coolers and freezers and refrigerated cabinets) and Specialty Solutions businesses grew approximately 5.8% and3.6%, respectively, year over year, while the Cooking Solutions Group net sales declined by 3.0% year over year. TheRefrigeration business continued to see penetration into the dollar store segment with its new line of “endless”merchandising products. Also strong were the general dealer markets and specialty cabinets for the beverage industry. Thisstrength was partially offset by continued weakness in the drug retail segment as new store construction is at reduced levelscompared to prior year, and to our quick-service restaurant chain customers that had reduced domestic capital spending dueto customer changes in timing of deliveries. The Specialty Solutions Group growth was driven by strong growth in thebeverage pump business as demand returned in both the domestic and international markets, particularly with demand fornew products in the European espresso market segment. This growth was partial offset by a sales decline in the SpecialtyMerchandising segment due to soft demand in the middle of the fiscal year. The sales decline in the Cooking SolutionsGroup was driven by weakness at several key dealers, lapping of a chain rollout in the prior year and reductions ininventories at parts distributors. In addition, disruption late in the fiscal year due to the manufacturing realignment shiftedsome backlog out of the fourth quarter to 2015. This was partially overcome by strengthening of the U.S. retail supermarketdeli market segment, overcoming further softening of sales in the UK as capital spending in the UK supermarket segmentcontinued to be weak. In addition, the Cooking Group benefited from $0.3 million of sales from the Ultrafryer acquisition.Income from operations for fiscal year 2014 increased $0.7 million, or 1.8%, when compared to the prior year. The Group’sreturn on sales decreased from 10.2% to 10.1% in the current year. The positive impact of the year over year volumeincrease was partially offset by a combination of adverse product and customer mix changes. Additionally, productivity wasnegatively impacted by disruption related to the manufacturing realignment. This disruption is expected to be resolvedduring 2015 as the benefits of the factory consolidation are realized. In response to these margin challenges, the Group hasimplemented multiple productivity improvement actions, including cost reductions through capital investments andproduct redesign, and material cost reductions, coupled with selective price increases.We have targeted a 200 basis point improvement to Food Service operating margins in the next 18 to 24 months. Duringthe fourth quarter of 2014 we took steps to achieve that goal with the closure of the Cheyenne facility, the sale of theAmerican Food Service, (“AFS”) business, and the acquisition of Ultrafryer. The Company expects that half of the targetedmargin19Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.improvements will be achieved through the Cheyenne consolidation, and that the AFS divestiture and the Ultrafryeracquisition to will substantially contribute to the remaining margin improvements. Net sales for fiscal year 2013 increased $2.2 million, or 0.6%, when compared to fiscal 2012. The top line growth includedthe negative effect of foreign exchange rates of $0.6 million in sales. The Refrigerated Solutions (walk-in coolers andfreezers and refrigerated cabinets) grew approximately 4.0% and the Specialty Solutions group grew 0.4%, while theCooking Solutions Group net sales declined by 5.7% year over year. The Refrigeration business experienced strong sales toour quick-service restaurant chain customers, and we saw continued traction in the dollar store segment. This strength wasoffset by weakness in the Drug Retail segment as new store construction was at reduced levels. The Specialty SolutionsGroup growth was driven by double digit growth in the specialty merchandising, partially offset by a 7% decline in theglobal beverage pump business due to soft demand, particularly in the European markets. The sales decline in the CookingSolutions group was driven by the BKI division which experienced weakness in both the US and UK which were negativelyimpacted by reduced capital spending in the supermarket segments, and a difficult year over year comparison due to asignificant roll-out to a major US supermarket chain in fiscal 2012. This decline was partially offset by 3.6% growth in theAAI segment of the Cooking Group which primarily serves the restaurant and convenience store markets.Income from operations for fiscal year 2013 declined $0.9 million, or 2.2%, when compared to the prior year. This includesthe negative effect of foreign exchange rates of $0.1 million. The Group’s return on sales decreased from 10.5% in fiscal2012 to 10.2% in fiscal 2013. The positive impact of the year over year volume increase was partially offset by acombination of adverse product and customer mix changes, marketing cost increases and increased warranty costs in thebeverage business.Engraving 2014 compared to 2013 2013 compared to 2012 % % 2014 2013 Change 2013 2012 ChangeNet sales $ 109,271 $ 93,380 17.0% $ 93,380 $ 93,611 -0.2%Income from operations 22,145 15,596 42.0% 15,596 17,896 -12.9%Operating income margin20.3% 16.7% 16.7% 19.1% Net sales for fiscal year 2014 increased by $15.9 million or 17.0%, compared to the prior year. This growth is driven byrecord new model launches and refreshed platforms in the global automotive industry which we do not anticipate tocontinue in 2015. Increased market share gained by our Mold-Tech business resulted in a 26% or $16.9 million increase inmold texturing sales as compared to the prior year. Growth for Mold-Tech was strong in all markets we operate inworldwide. Sales of core forming tooling grew 6% or $0.5 million as compared to prior year. We continue to experiencesoftness in our roll plate and machinery business, primarily in North America. Income from operations in fiscal year 2014 increased by $6.5 million, or 42%, when compared to the prior year. Highmargins associated with new automotive model platform launches and refreshed platforms worldwide drove higherprofitability for the year. During 2015, capital spending is expected to increase in order to support the increased demand fordirect laser engraving capabilities worldwide. We also intend to devote additional resources to our new design capability inorder to further customer intimacy.Net sales for the fiscal year 2013 remained flat, when compared to the prior year. During the fourth quarter sales toautomotive OEM’s in the mold texturing market softened as compared to the very strong sales level achieved in the prioryear quarter. The decline in mold texturizing sales occurred primarily in North America mold texturizing while both theEurope and China markets showed year over year growth. During the fourth quarter sales in the Innovent core forming tooland rolls, plates and machinery businesses also declined. Income from operations in fiscal year 2013 decreased by $2.3 million, or 12.9%, when compared to the prior year. Unfavorable performance was primarily driven by one-time costs related to moving our Brazilian operations, start-up of ourMT Korea operation and lower fourth quarter demand in North America.Engineering Technologies 2014 compared to 2013 2013 compared to 2012 % %20Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 2014 2013 Change 2013 2012 ChangeNet sales $ 79,642 $ 74,838 6.4% $ 74,838 $ 74,088 1.0%Income from operations 12,676 13,241 -4.3% 13,241 14,305 -7.4%Operating income margin15.9% 17.7% 17.7% 19.3% Net sales in the fiscal year 2014 increased $4.8 million, or 6.4%, when compared to the prior year. Sales growth in the space,energy, aviation, and oil and gas markets was offset by declines in the medical and industrial market segments. The spacemarket segment increased from prior year levels due to continued strong demand on launch vehicle development programsand the satellite launch segment. The land based gas turbine business improved year-over-year due to increased demandfrom our OEM customers. Sales to the oil and gas segment increased year-over-year as a result of additional large offshoreplatform projects. The aviation market was up from the prior year as a result of newly awarded programs and developmentcontracts as well as increased market penetration. New business development resources will be devoted to further penetratekey customer markets during 2015. Income from operations in the fiscal year 2014 decreased $0.6 million, or 4.3%, when compared to the prior year. Volumeand product mix improvements in the UK were offset by higher manufacturing and development costs in the U.S. In 2015,capital spending is expected to increase to support strategic long term agreements primarily with aviation and spacecustomers.Net sales in the fiscal year 2013 increased $0.8 million, or 1.0%, when compared to the prior year. Sale growth in theaerospace and energy markets was offset by declines in the oil and gas segment. The aerospace segment increased from prioryear levels due to strong demand for unmanned space launch vehicles. The land based gas turbine business improvedsignificantly year over year due to strong demand from several of our OEM customers. Sales to the oil and gas segment weredown as the prior year benefited from several very large offshore platform projects which did not repeat in the current year. The aviation market was down from prior year due to order phasing and the defense market was up slightly over the prioryear.Income from operations in the fiscal year 2013 decreased $1.1 million, or 7.4%, when compared to the prior year. Thisdecrease is primarily due to the impact of reduced sales in the higher margin oil and gas marketsElectronics Products 2014 compared to 2013 2013 compared to 2012 % % 2014 2013 Change 2013 2012 ChangeNet sales $ 114,881 $ 108,085 6.3% $ 108,085 $ 48,206 124.2%Income from operations 19,732 16,147 22.2% 16,147 8,715 85.3%Operating income margin17.2% 14.9% 14.9% 18.1% Net sales in the fiscal year 2014 increased $6.8 million, or 6.3%, when compared to the prior year. Much of the increase tookplace within the sensor product line both in North America and Europe. Sales in various markets improved particularly intransportation, industrial, contract manufacturing and metering. Sales were also helped by favorable exchange totalingroughly $2.6 million. To drive strategic growth in 2015, we plan to increase business development initiatives in order todrive new business opportunities.Income from operations in the fiscal year 2014 increased $3.6 million, or 22.2%, when compared to the prior year. Theimprovement was driven by the sales increase as well as various cost savings both material and labor, product mix in sensors,a consolidation of the Tianjin manufacturing and Hong Kong distribution operations into the existing Shanghai operation,and the absence of $1.5 million of purchase accounting expenses related to the Meder acquisition incurred in 2013. During2015, we plan to increase capital spending to further automate our new Mexico factory and to further develop our planar andsensor technologies.Net sales in the fiscal year 2013 increased $59.9 million, or 124.2%, when compared to the prior year. This increase includesthe impact of $55.1 million from the acquisition of Meder and $4.8 million of organic growth driven by increased sales fromthe new sensor programs launched over the past 18 months partially offset by lower sales in magnetic products.21Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Income from operations in the fiscal year 2013 increased $7.4 million, or 85.3%, when compared to the prior year. Thisincrease was primarily driven by the Meder acquisition. The integration of the Meder acquisition continued successfullythroughout the year with a focus on identifying and implementing both sales and cost synergies. These cost synergies wereprimarily the result of procurement savings and the consolidation of our sales and production facilities in China into a singlefacility. Income from the Meder acquisition was accretive to earnings inclusive of $1.5 million in purchase accountingexpenses primarily related to a step up of inventory to fair value.Hydraulics Products 2014 compared to 2013 2013 compared to 2012 % % 2014 2013 Change 2013 2012 ChangeNet sales $ 34,538 $ 30,079 14.8% $ 30,079 $ 29,922 0.5%Income from operations 5,781 4,968 16.4% 4,968 4,403 12.8%Operating income margin16.7% 16.5% 16.5% 14.7% Net sales in the fiscal year 2014 increased $4.5 million, or 14.8%, when compared to the prior year. Diversification of ourOEM business into refuse and construction equipment along with the revitalization of the traditional North American dumptruck and trailer and export markets drove the 14.8% growth in net sales. The strategy to penetrate alternative markets eitherwith new engineered cylinder designs or modifications to existing designs has proven to be very successful. Several of thesenew products are being applied in North American refuse garbage trucks, roll off container handlers, and constructionequipment. Typically the telescopic cylinders for these new applications are being manufactured in the United States andthe rod cylinders are built in our factory in Tianjin, China. To support our global customer base, we completed anotherexpansion of the factory in China. The geographic sales growth continues in Germany, South America, Australia, andCentral America.Income from operations in the fiscal year 2014 increased $0.8 million or 16.4% when compared to the prior year. Thisincrease in annual income from operations was primarily due to better factory expense absorption both in the NorthAmerican and the Tianjin China factories in addition to very close monitoring of costs.Net sales in the fiscal year 2013 increased $0.2 million, or 0.5%, when compared to the prior year. Continued market sharegains in the North American refuse market coupled with growth in the aftermarket segment was offset by softness in thetraditional North American dump truck and trailer and export markets. In many cases end users continue to hold off inmaking capital investments until absolutely necessary. We have successfully penetrated several large roll off containerrefuse vehicle OEM’s by leveraging our engineering expertise and low cost manufacturing position provided by our factoryin Tianjin, China. We also have recently launched a new telescopic cylinder product line for the garbage truck refusemarkets that two large OEM customers are now utilizing. We are currently expanding the capacity of our Chinese facility aswe expect to continue to drive sales growth by utilizing our low cost position to further penetrate both rod and telescopiccylinder product applications for our global customer base. This expansion geographically includes Australia, SouthAmerica, Germany, and Central America.Income from operations in the fiscal year 2013 increased $0.6 million or 12.8% when compared to the prior year. Thisincrease in annual income from operations can be attributed to cost containment and improvements in both process andproductivity during the year in both North America and China.Corporate, Restructuring and Other 2014 compared to 2013 2013 compared to 2012 % % 2014 2013 Change 2013 2012 ChangeIncome (loss) fromoperations: Corporate $ (26,054) $ (22,924) 13.7% $ (22,924) $(23,443) -2.2%22Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Gain on sale of real estate - - - 4,776 -100.0% Restructuring (10,077) (2,666) 278.0% (2,666) (1,685) 58.2% Other operating income(expense), net 3,462 - 100.0% - - Corporate expenses in fiscal year 2014 increased $3.1 million or 13.7% when compared to the prior year. The increase wasdriven by $3.9 million of management transition. The charge for management transition expense includes search fees,relocation and other costs associated with the hiring of a new chief executive officer (“CEO”) and the acceleration of stockincentive compensation expenses related to the retired CEO.Corporate expenses in the fiscal year 2013 decreased $0.5 million, or 2.2% when compared to the prior year. The decrease isprimarily driven by a gain of $2.3 million resulting from the termination of the retiree life insurance benefit and lowerincentive compensation expense of $2.3 million partially offset by an increase of $1.3 million in pension expense and $2.8million of legal settlement costs.Restructuring expenses reflect costs associated with the Company’s efforts to continuously improve operational efficiencyand expand globally in order to remain competitive in the end-user markets we serve. Each year the Company incurs costsfor actions to size its businesses to a level appropriate for current economic conditions and to improve its cost structure toimprove our competitive position and operating margins. Such expenses include costs for moving facilities to low-costlocations, starting up plants after relocation, curtailing/downsizing operations because of changing economic conditions,and other costs resulting from asset redeployment decisions. Shutdown costs include severance, benefits, stay bonuses, leaseand contract terminations, asset write-downs, costs of moving fixed assets, moving, and relocation costs. Vacant facilitycosts include maintenance, utilities, property taxes, and other costs.Restructuring expenses of $10.1 million in the fiscal year 2014 are composed of $9.2 million at Food Service Equipmentprimarily related to the announced closure of the Cheyenne, Wyoming facility, which includes a non-cash impairmentcharge of $5.4 million.Restructuring expense of $2.7 million in the fiscal year 2013 is primarily composed of $2.0 million in the EngravingGroup for ongoing headcount reductions in our European operations and the relocation of our Brazil facility, and $0.4million in Electronics, where we are eliminating redundant positions due to the Meder acquisition.The Company currently expects to incur between $4.0 and $5.0 million of restructuring expense in 2015, including the costto complete actions initiated during 2014 and actions anticipated to be approved and initiated during 2015.During fiscal year 2014, other operating income (expense), net includes a $3.5 million net gain from insurance proceeds wereceived related to a catastrophic failure of a large vertical machining center located at our Engineering Technologiesfacility in Massachusetts. Insurance proceeds of $4.5 million were partially offset by the write-off of the net book value ofthe machine of $1.0 million. We have acquired a replacement machine for approximately $2.9 million and anticipate beingoperational in the first half of the first quarter of 2015.Discontinued OperationsIn June 2014, the Company divested the American Foodservice Company, a manufacturer of custom design and fabricationof counter systems and cabinets, in our Food Service Equipment Group segment. In connection with this sale, the Companyreceived proceeds of $3.1 million and recorded a net loss on disposal of $3.2 million. In December 2011, the Company divested the Air Distribution Products Group, (“ADP”). In connection with this sale, theCompany adjusted the carrying value of ADP’s assets to their net realizable value based on a range of expected sale prices. As a result, the Company recorded goodwill impairment charges of $14.9 million and impairment charges of $5.0 million tofixed assets.On March 30, 2012, ADP was sold to a private equity buyer for consideration of $16.1 million consisting of $13.1 million incash and a $3.0 million note secured by first mortgages on three ADP facilities. During the quarter ended March 31, 2012,additional pre-tax charges of $2.6 million were taken in connection with the closing of the sale. These charges relatedprimarily to the impairment of a non-cancellable lease liability that the buyer elected not to assume as part of the purchase.During 2014, the Company received notice that its obligations under a guarantee provided to the buyers of ADP weretriggered as a result of its withdrawal from both of the multi-employer pension plans in which ADP previously participated. 23Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.As a result, the Company has recorded charges of $1.6 million in excess of the value of the guarantee previously recorded inorder to fully settle these obligations. The following table summarizes the Company’s discontinued operations activity, by operation, for the years ended June 30,2014, 2013 and 2012 (in thousands): Year Disposed2014 2013 2012Sales: American Foodservice Company2014 $ 20,556 $ 27,870 $ 24,054Air Distribution Products Group2012 - - 43,537 20,556 27,870 67,591Income (loss) before taxes: American Foodservice Company (1)2014 (8,339) 1,934 1,220Air Distribution Products Group2012 (1,849) (451) (24,871)Other loss from discontinued operations (387) (207) (453)Income (loss) before taxes from discontinuedoperations (10,575) 1,276 (24,104)(Provision) benefit for tax 3,692 (482) 9,113Net income (loss) from discontinuedoperations $ (6,883) $ 794 $ (14,991) (1) American Foodservice Company incurred a pretax operational loss of $3.5 million and pretax loss on sale of $4.8 million.Liquidity and Capital ResourcesAt June 30, 2014, our total cash balance was $74.3 million, of which $64.0 million was held by foreign subsidiaries. Therepatriation of cash balances from certain of our subsidiaries could have adverse tax consequences or be subject to capitalcontrols; however, those balances are generally available without legal restrictions to fund ordinary business operations. Our current plans are not expected to require a repatriation of cash to fund our U.S. operations and as a result, we intend toindefinitely reinvest our foreign earnings to fund our overseas growth. If the undistributed earnings of our foreignsubsidiaries are needed for operations in the United States we would be required to accrue and pay U.S. taxes uponrepatriation. Cash FlowNet cash provided by operating activities from continuing operations for the year ended June 30, 2014 was $72.0 million,compared to $64.2 million for the same period in 2013. The increase of $7.8 million in net cash provided by operatingactivities from continuing operations is primarily due to $5.7 million of increases to net income from continuing operations,$4.2 million of cash provided by income taxes payable offset by increased pension contributions of $1.5 million and $1.5million of increased working capital.Net cash used in investing activities from continuing operations for the year ended June 30, 2014 was $35.6 million,consisting primarily of $23.1 million for the acquisitions of Ultrafryer and Planar, $18.8 million for capital expenditures,offset by $3.2 million of insurance proceeds received from corporate owned life insurance policies.Net cash used in financing activities for continuing operations for the year ended June 30, 2014, was $15.0 millionconsisting primarily of dividends paid of $4.8 million, repurchased treasury stock of $7.8 million, and net debt payments of$5.0 million.24Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Capital StructureOn January 5, 2012, the Company entered into a five-year $225 million unsecured Revolving Credit Facility (“CreditAgreement”, or “facility”), which can be increased by the Company by an amount of up to $100 million, in accordancewith specified conditions contained in the agreement. The facility also includes a $10 million sublimit for swing lineloans and a $30 million sublimit for letters of credit. Under the terms of the Credit Agreement, we will pay a variable rate of interest and a commitment fee on available, butunused, amounts under the facility. The amount of the commitment fee will depend upon both the undrawn amountremaining available under the facility and the Company’s funded debt to EBITDA (as defined in the agreement) ratio atparticular points in time. As our funded debt to EBITDA ratio increases, the commitment fee will increase. Amountsborrowed under the facility may be in the form of either Base Rate or Eurodollar Rate loans. The rate of interest on BaseRate loans shall be the higher of (i) the Federal Funds rate plus ½ of 1%, (ii) the “prime rate” announced by Citizens Bank,N. A. or (iii) the London interbank offered rate (“LIBOR”) plus ½ of 1% (the rate in effect shall be referred to as the “BaseRate”), plus an additional amount based upon the Company’s debt to EBITDA ratio. The rate of interest on EurodollarRate loans shall be the LIBOR rate which corresponds to the interest period (either one, two, three or six months) selectedby the Company, plus an additional amount based upon the Company’s funded debt to EBITDA ratio. Swing Line loansshall bear interest at the Base Rate, plus an additional amount based upon the Company’s funded debt to EBITDA ratio. As the Company’s funded debt to EBITDA ratio increases, the additional amount will also increase.The facility expires in January 2017, and contains customary representations, warranties and restrictive covenants, as wellas specific financial covenants. The Company’s current financial covenants under the facility are as follows:Interest Coverage Ratio - The Company is required to maintain a ratio of Earnings Before Interest and Taxes, as Adjusted(“Adjusted EBIT per the Credit Agreement”), to interest expense for the trailing twelve months of at least 3:1. AdjustedEBIT per the Credit Agreement specifically excludes extraordinary and certain other defined items such as non-cashrestructuring and acquisition-related charges up to $2.0 million, and goodwill impairment. At June 30, 2014, theCompany’s Interest Coverage Ratio was 35.58:1.Leverage Ratio - The Company’s ratio of funded debt to trailing twelve month Adjusted EBITDA per the credit agreement,calculated as Adjusted EBIT per the Credit Agreement plus Depreciation and Amortization, may not exceed 3.5:1. AtJune 30, 2014, the Company’s Leverage Ratio was 0.59:1.As of June 30, 2014, we had borrowings under the facility of $45.0 million. As of June 30, 2014, the effective rate ofinterest for outstanding borrowings under the facility was 3.87%.Funds borrowed under the facility may be used for the repayment of debt, working capital, capital expenditures,acquisitions (so long as certain conditions, including a specified funded debt to EBITDA leverage ratio is maintained), andother general corporate purposes.Our primary cash requirements in addition to day-to-day operating needs include interest payments, capital expenditures,and dividends. Our primary sources of cash for these requirements are cash flows from continuing operations andborrowings under the facility. We expect to spend between $24.0 and $26.0 million on capital expenditures during 2015,and expect that depreciation and amortization expense will be between $13.0 and $14.0 million and $2.5 and $3.0 million,respectively.In order to manage our interest rate exposure, we are party to $45.0 million of floating to fixed rate swaps. These swapsconvert our interest payments from LIBOR to a weighted average rate of 2.40%.The following table sets forth our capitalization at June 30, (in thousands): 2014 2013Long-term debt$45,056 $50,072Less cash 74,260 51,064 Net (cash) debt (29,204) (992)Stockholders’ equity 340,726 290,988Total capitalization$ 311,522 $ 289,99625Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Stockholders’ equity increased year over year primarily as a result of current year net income of $42.9 million partially offsetby dividends paid of $4.8 million. The Company's net (cash) debt to capital percentage increased from -0.3% to -9.4% in2014 due to the aforementioned, net income to retained earnings, debt reduction and increase availability of cash.We sponsor a number of defined benefit and defined contribution retirement plans. The fair value of the Company's U.S.pension plan assets was $216.0 million at June 30, 2014 and the projected benefit obligation in the U.S. was $240.4 millionat that time. In June 2012, the Moving Ahead for Progress in the 21st Century (“MAP 21”) bill was signed into law byCongress. Based on changes in pension funding provisions under MAP 21, we made a $3.25 million contribution duringJuly 2012 due to its favorable treatment under the bill and retroactive treatment under the Pension Protection Act (“PPA”). As a result of this contribution and an additional $6 million contribution made in June 2012, the plan is 100% funded underPPA rules at June 30, 2014, and we do not expect to make mandatory contributions to the plan until 2019. We do not expectcontributions to our other defined benefit plans to be material in 2015.The Company’s pension plan for U.S. salaried employees was frozen as of December 31, 2007, and participants in the planceased accruing future benefits. The Company’s pension plan for U.S. hourly employees was frozen for substantially allparticipants as of July 31, 2013, and replaced with a defined contribution benefit plan. We have frozen benefits forsubstantially all participants in our U.S. defined benefit pension plan as of July 31, 2013. These actions contributed to adecrease of $2.6 million, or $0.13 per diluted share, of reduced expense related to our legacy U.S. plan in 2014 compared to2013.We have evaluated the current and long-term cash requirements of our defined benefit and defined contribution plans as ofJune 30, 2014 and determined our operating cash flows from continuing operations and available liquidity are expected tobe sufficient to cover the required contributions under ERISA and other governing regulations. We have an insurance program for certain retired key executives that have underlying policies with a cash surrender value atJune 30, 2014 of $17.7 million and are reported net of loans of $9.8 million for which we have the legal right of offset. These policies have been purchased to fund supplemental retirement income benefits.Contractual obligations of the Company as of June 30, 2014 are as follows (in thousands): Payments Due by Period Less More than 1 1-3 3-5 than 5Contractual Obligations Total Year Years Years YearsLong-term debt obligations$ 45,056 $ 18 $ 45,030 $ 8 $ - Operating lease obligations 25,936 6,053 9,108 4,941 5,834Estimated interest payments (1) 2,583 1,477 1,106 - - Post-retirement benefit payments (2) 28,108 578 1,141 1,096 25,293 Total$101,683 $8,126 $56,385 $6,045 $31,127(1)Estimated interest payments are based upon effective interest rates as of June 30, 2014, and includethe impact of interest rate swaps. See Item 7A for further discussions surrounding interest rateexposure on our variable rate borrowings. (2)Post-retirement benefits and pension plan contribution payments are based upon current benefitpayment levels.At June 30, 2014, we had $0.6 million of non-current liabilities for uncertain tax positions. We are not able toprovide a reasonable estimate of the timing of future payments related to these obligations.Off Balance Sheet ItemsIn March 2012, the Company sold substantially all of the assets of the ADP business. In connection with the divestiture, theCompany remained the lessee of ADP’s Philadelphia, PA facility and administrative offices, with the purchaser subleasing afractional portion of the building at current market rates. In connection with the transaction, the Company recognized alease impairment charge of $2.3 million for the remaining rental expense. The Company’s aggregate obligation with respectto the26Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.lease is $1.8 million, of which $1.3 million was recorded as a liability at June 30, 2014. Additionally, the Companyremained an obligor on an additional facility lease that was assumed in full by the buyer, for which our aggregate obligationin the event of default by the buyer is $0.8 million. With the exception of the impaired portion of the Philadelphia lease, theCompany does not expect to make any payments with respect to these obligations. The buyer’s obligations under therespective sublease and assumed lease are secured by a cross-default provision in the purchaser’s promissory note for aportion of the purchase price which is secured by mortgages on the ADP real estate sold in the transaction.At June 30, 2014, and 2013, the Company had standby letters of credit outstanding, primarily for insurance purposes, of$11.3 million and $10.7 million, respectively.We had no other material off balance sheet items at June 30, 2014, other than the operating leases summarized above. Other MattersInflation – Certain of our expenses, such as wages and benefits, occupancy costs and equipment repair and replacement, aresubject to normal inflationary pressures. Inflation for medical costs can impact both our reserves for self-insured medicalplans as well as our reserves for workers' compensation claims. We monitor the inflationary rate and make adjustments toreserves whenever it is deemed necessary. Our ability to manage medical costs inflation is dependent upon our ability tomanage claims and purchase insurance coverage to limit the maximum exposure for us. Foreign Currency Translation – Our primary functional currencies used by our non-U.S. subsidiaries are the Euro, BritishPound Sterling (Pound), Mexican (Peso), and Chinese (Yuan). During the current year, the Pound and Euro haveexperienced increases but the Yuan and Peso have decreased in value related to the U.S. Dollar, our reporting currency. Since June 30, 2013 the Pound and Euro have appreciated by 12.5% and 5.2%, respectively, the Yuan and Peso havedepreciated by 0.2% and 0.1%, respectively (all relative to the U.S. Dollar). These exchange values were used in translatingthe appropriate non-U.S. subsidiaries’ balance sheets into U.S. Dollars at the end of the current year. Defined Benefit Pension Plans – We record expenses related to these plans based upon various actuarial assumptions such asdiscount rates and assumed rates of returns. We have frozen benefits for substantially all participants in our U.S. definedbenefit pension plan as of July 31, 2014. These actions contributed to a decrease of $2.6 million, or $0.13 per diluted share,of reduced expense related to our legacy U.S. plan in 2014 compared to 2013.Environmental Matters – To the best of our knowledge, we believe that we are presently in substantial compliance with allexisting applicable environmental laws and regulations and do not anticipate any instances of non-compliance that willhave a material effect on our future capital expenditures, earnings or competitive position.Seasonality – We are a diversified business with generally low levels of seasonality, however our fiscal third quarter istypically the period with the lowest level of activity.Employee Relations – The Company has labor agreements with a number of union locals in the United States and a numberof European employees belong to European trade unions. There are three union contracts in the U.S expiring during fiscalyear 2015.Critical Accounting PoliciesThe Consolidated Financial Statements include accounts of the Company and all of our subsidiaries. The preparation offinancial statements in conformity with accounting principles generally accepted in the United States of America requires usto make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying ConsolidatedFinancial Statements. Although, we believe that materially different amounts would not be reported due to the accountingpolicies described below, the application of these accounting policies involves the exercise of judgment and use ofassumptions as to future uncertainties and, as a result, actual results could differ from these estimates. We have listed anumber of accounting policies which we believe to be the most critical. Collectability of Accounts Receivable – Accounts Receivable are reduced by an allowance for amounts that may becomeuncollectible in the future. Our estimate for the allowance for doubtful accounts related to trade receivables includesevaluation of specific accounts where we have information that the customer may have an inability to meet its financialobligation together with a general provision for unknown but existing doubtful accounts. Realizability of Inventories – Inventories are valued at the lower of cost or market. The Company regularly reviewsinventory values on hand using specific aging categories, and records a provision for obsolete and excess inventory basedon27Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.historical usage and estimated future usage. As actual future demand or market conditions may vary from those projected bymanagement, adjustments to inventory valuations may be required.Realization of Goodwill - Goodwill and certain indefinite-lived intangible assets are not amortized, but instead are tested forimpairment at least annually and more frequently whenever events or changes in circumstances indicate that the fair value ofthe asset may be less than its carrying amount of the asset. The Company’s annual test for impairment is performed using aMay 31st measurement date.We have identified our reporting units for impairment testing as our eleven operating segments, which are aggregated intoour five reporting segments as disclosed in Note 18 – Industry Segment Information. The test for impairment is a two-step process. The first step compares the carrying amount of the reporting unit to itsestimated fair value (Step 1). To the extent that the carrying value of the reporting unit exceeds its estimated fair value, asecond step is performed, wherein the reporting unit’s carrying value is compared to the implied fair value (Step 2). To theextent that the carrying value exceeds the implied fair value, impairment exists and must be recognized. As quoted market prices are not available for the Company’s reporting units, the fair value of the reporting units isdetermined using a discounted cash flow model (income approach). This method uses various assumptions that are specificto each individual reporting unit in order to determine the fair value. In addition, the Company compares the estimatedaggregate fair value of its reporting units to its overall market capitalization.Our annual impairment testing at each reporting unit relied on assumptions surrounding general market conditions, short-term growth rates, a terminal growth rate of 2.5%, and detailed management forecasts of future cash flows prepared by therelevant reporting unit. Fair values were determined primarily by discounting estimated future cash flows at a weightedaverage cost of capital of 10.59%. An increase in the weighted average cost of capital of approximately 350 basis points inthe analysis would not result in the identification of any impairments.While we believe that our estimates of future cash flows are reasonable, changes in assumptions could significantly affectour valuations and result in impairments in the future. The most significant assumption involved in the Company’sdetermination of fair value is the cash flow projections of each reporting unit. Certain reporting units have beensignificantly impacted by the current global economic downturn and if the effects of the current global economicenvironment are protracted or the recovery is slower than we have projected estimates of future cash flows for each reportingunit may be insufficient to support the carrying value of the reporting units, requiring the Company to re-assess itsconclusions related to fair value and the recoverability of goodwill.As a result of our annual assessment, the Company determined that the fair value of the reporting units and indefinite-livedintangible assets substantially exceeded their respective carrying values. Therefore, no impairment charges were recorded inconnection with our assessments during 2014.In connection with the divestiture of ADP, the Company determined that based on the net realizable value of the business inthe transaction, the goodwill of the ADP reporting unit was impaired. As such, the Company recognized $14.9 million inimpairment charges in discontinued operations during the second quarter of 2012.Cost of Employee Benefit Plans – We provide a range of benefits to our employees, including pensions and somepostretirement benefits. We record expenses relating to these plans based upon various actuarial assumptions such asdiscount rates, assumed rates of return, compensation increases, turnover rates, and health care cost trends. The expectedreturn on plan assets assumption of 7.25% in the U.S. is based on our expectation of the long-term average rate of return onassets in the pension funds and is reflective of the current and projected asset mix of the funds and considers the historicalreturns earned on the funds. We have analyzed the rates of return on assets used and determined that these rates arereasonable based on the plans’ historical performance relative to the overall markets as well as our current expectations forlong-term rates of returns for our pension assets. The U.S. discount rate of 4.5% reflects the current rate at which pensionliabilities could be effectively settled at the end of the year. The discount rate is determined by matching our expectedbenefit payments from a stream of AA- or higher bonds available in the marketplace, adjusted to eliminate the effects of callprovisions. We review our actuarial assumptions, including discount rate and expected long-term rate of return on planassets, on at least an annual basis and make modifications to the assumptions based on current rates and trends whenappropriate. Based on information provided by our actuaries and other relevant sources, we believe that our assumptions arereasonable.The cost of employee benefit plans includes the selection of assumptions noted above. A twenty-five basis point change inthe expected return on plan assets assumptions, holding our discount rate and other assumptions constant, would increase or28Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.decrease pension expense by approximately $0.5 million per year. A twenty-five basis point change in our discount rate,holding all other assumptions constant, would increase or decrease pension expense by approximately $0.3 millionannually. See the Notes to the Consolidated Financial Statements for further information regarding pension plans.Business Combinations - The accounting for business combinations requires estimates and judgments as to expectations forfuture cash flows of the acquired business and the allocation of those cash flows to identifiable intangible assets indetermining the estimated fair values for assets acquired and liabilities assumed. The fair values assigned to tangible andintangible assets acquired and liabilities assumed, are based on management’s estimates and assumptions, as well as otherinformation compiled by management, including valuations that utilize customary valuation procedures and techniques. Ifthe actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the consolidatedfinancial statements could result in a possible impairment of the intangible assets and goodwill, or require acceleration ofthe amortization expense of finite-lived intangible assets.Allocations of the purchase price for acquisitions are based on estimates of the fair value of the net assets acquired and aresubject to adjustment upon finalization of the purchase price allocation. During this measurement period, the Company willadjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition datethat, if known, would have resulted in the recognition of those assets and liabilities as of that date. All changes that do notqualify as measurement period adjustments are included in current period earnings.Recently Issued Accounting PronouncementsIn June 2014, the Financial Accounting Standards Board (“FASB”) issued accounting standard update (“ASU”) 2014-12,Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achievedafter the Requisite Service Period. The update provides guidance on how to account for certain share-based payment awardswhere employees would be eligible to vest in the award regardless of whether the employee is still rendering service on thedate the performance target is achieved. The standard is effective for annual and interim periods with those annual periodsbeginning after December 15, 2015. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-12 to have a material impact to its consolidated results of operation. In May 2014, the FASB and the International Accounting Standards Board jointly issued a comprehensive new revenuerecognition standard, ASU 2014-09, Revenue from Contract with Customers, that will supersede nearly all existing revenuerecognition guidance under US GAAP and IFRS. The standard’s primary principle is that a company will recognize revenuewhen it transfers promised goods or services to customers in an amount that reflects the consideration to which the companyexpects to be entitled in exchange for those goods or services. The standard is effective for public entities for annual andinterim periods beginning after December 15, 2016. We expect to adopt this standard in the quarter ending September 30,2017. The Company is still evaluating the impact of adopting ASU 2014-09 on its consolidated financial statements. In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals ofComponents of an Entity. ASU 2014-08 revised guidance to only allow disposals of components of an entity that representa strategic shift (e.g., disposal of a major geographical area, a major line of business, a major equity method investment, orother major parts of an entity) and that have a major effect on a reporting entity’s operations and financial results to bereported as discontinued operations. The revised guidance also requires expanded disclosure in the financial statements fordiscontinued operations, as well as for disposals of significant components of an entity that do not qualify for discontinuedoperations presentation. ASU 2014-08 is effective for interim and annual reporting periods beginning after December 15,2014. The Company is still evaluating the impact of adopting ASU 2014-08 on its consolidated financial statements.Item 7A. Quantitative and Qualitative Disclosures About Market RiskRisk ManagementWe are exposed to market risks from changes in interest rates, commodity prices and changes in foreign currency exchange. To reduce these risks, we selectively use, from time to time, financial instruments and other proactive managementtechniques. We have internal policies and procedures that place financial instruments under the direction of the Treasurerand restrict all derivative transactions to those intended for hedging purposes only. The use of financial instruments fortrading purposes (except for certain investments in connection with the non-qualified defined contribution plan) orspeculation is strictly prohibited. The Company has no majority-owned subsidiaries that are excluded from the consolidatedfinancial statements. Further, we have no interests in or relationships with any special purpose entities. Exchange Risk29Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.We are exposed to both transactional risk and translation risk associated with exchange rates. The transactional risk ismitigated, in large part, by natural hedges developed with locally denominated debt service on intercompany accounts. Wealso mitigate certain of our foreign currency exchange rate risks by entering into forward foreign currency contracts fromtime to time. The contracts are used as a hedge against anticipated foreign cash flows, such as dividend payments, loanpayments, and materials purchases, and are not used for trading or speculative purposes. The fair values of the forwardforeign currency exchange contracts are sensitive to changes in foreign currency exchange rates, as an adverse change inforeign currency exchange rates from market rates would decrease the fair value of the contracts. However, any such lossesor gains would generally be offset by corresponding gains and losses, respectively, on the related hedged asset or liability. At June 30, 2014 and 2013, the fair value, in the aggregate, of the Company’s open foreign exchange was $1.2 million and$1.4 million respectively. Our primary translation risk is with the Euro, British Pound Sterling, and Chinese Yuan. A hypothetical 10% appreciation ordepreciation of the value of any these foreign currencies to the U.S. Dollar at June 30, 2014, would not result in a materialchange in our operations, financial position, or cash flows. We do not hedge our translation risk. As a result, fluctuations incurrency exchange rates can affect our stockholders’ equity.Interest RateThe Company’s effective rate on variable-rate borrowings under the revolving credit agreement is 3.87% and 3.65% at June30, 2014 and 2013, respectively. Our interest rate exposure is limited primarily to interest rate changes on our variable rateborrowings. From time to time, we will use interest rate swap agreements to modify our exposure to interest rate movements. We currently have a $45.0 million of floating to fixed rate swaps with terms ranging from two to five years. These swapsconvert our interest payments from LIBOR to a weighted average rate of 2.40%. Due to the impact of the swaps, an increasein interest rates would not materially impact our annual interest expense at June 30, 2014. Concentration of Credit RiskWe have a diversified customer base. As such, the risk associated with concentration of credit risk is inherently minimized. As of June 30, 2014, no one customer accounted for more than 5% of our consolidated outstanding receivables or of oursales.Commodity PricesThe Company is exposed to fluctuating market prices for all commodities used in its manufacturing processes. Each of oursegments is subject to the effects of changing raw material costs caused by the underlying commodity price movements. Ingeneral, we do not enter into purchase contracts that extend beyond one operating cycle. While Standex considers ourrelationship with our suppliers to be good, there can be no assurances that we will not experience any supply shortage.The Engineering Technologies, Food Service Equipment, Electronics, and Hydraulics Groups are all sensitive to priceincreases for steel products, other metal commodities and petroleum based products. In the past year, we have experiencedprice fluctuations for a number of materials including steel, copper wire, other metal commodities, refrigeration componentsand foam insulation. These materials are some of the key elements in the products manufactured in these segments. Wherever possible, we will implement price increases to offset the impact of changing prices. The ultimate acceptance ofthese price increases, if implemented, will be impacted by our affected divisions’ respective competitors and the timing oftheir price increases.30Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 8. Financial Statements and Supplementary DataConsolidated Balance Sheets Standex International Corporation and Subsidiaries As of June 30 (in thousands, except share data)2014 2013 ASSETS Current assets: Cash and cash equivalents $ 74,260 $ 51,064 Accounts receivable, net 107,674 97,995 Inventories 97,065 81,811 Prepaid expenses and other current assets 7,034 7,286 Income taxes receivable 922 - Deferred tax asset 12,981 12,237 Current assets - discontinued operations - 7,909 Total current assets 299,936 258,302 Property, plant, equipment, net 96,697 92,542Intangible assets, net 31,490 24,632Goodwill 125,965 111,905Deferred tax asset 878 - Other non-current assets 23,194 19,401Non-current assets - discontinued operations - 3,791 Total non-current assets 278,224 252,271 Total assets $ 578,160 $ 510,573 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 85,206 $ 67,552 Accrued liabilities 51,038 46,497 Income taxes payable 4,926 1,638 Current liabilities – discontinued operations - 2,786 Total current liabilities 141,170 118,473 Long-term debt 45,056 50,072Deferred income taxes 10,853 7,838Pension obligations 31,815 33,538Other non-current liabilities 8,540 9,664 Total non-current liabilities 96,264 101,112 Commitments and Contingencies (Notes 11 and 12) Stockholders' equity: Common stock, par value $1.50 per share - 60,000,000 shares authorized, 27,984,278 issued, 12,639,615 and 12,549,806 shares outstanding in 2014 and 2013 41,976 41,976 Additional paid-in capital 43,388 37,19931Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Retained earnings 584,014 546,031 Accumulated other comprehensive loss (55,819) (65,280) Treasury shares (15,344,663 shares in 2014 and 15,434,472 shares in 2013) (272,833) (268,938) Total stockholders' equity 340,726 290,988 Total liabilities and stockholders' equity$ 578,160 $ 510,573 See notes to consolidated financial statements. Consolidated Statements of Operations Standex International Corporation and Subsidiaries For the Years Ended June 30 (in thousands, except pershare data) 2014 2013 2012Net sales $ 716,180 $ 673,390 $ 610,586Cost of sales 477,911 455,199 408,850Gross profit 238,269 218,191 201,736 Selling, general and administrative 165,786 153,630 141,471Gain on sale of real estate - - (4,776)Restructuring costs 10,077 2,666 1,685Other operating (income) expense, net (3,462) - - Income from operations 65,868 61,895 63,356 Interest expense 2,249 2,469 2,280Other, net (4,184) 128 (519)Total (1,935) 2,597 1,761 Income from continuing operations before incometaxes 67,803 59,298 61,595Provision for income taxes 18,054 15,244 15,699Income from continuing operations 49,749 44,054 45,896 Income (loss) from discontinued operations, net of tax (6,883) 794 (14,991) Net income $ 42,866 $ 44,848 $ 30,905 Basic earnings per share: Income (loss) from continuing operations $ 3.94 $ 3.51 $ 3.67Income (loss) from discontinued operations (0.55) 0.06 (1.20)Total $ 3.39 $ 3.57 $ 2.47 Diluted earnings per share: Income (loss) from continuing operations $ 3.89 $ 3.45 $ 3.59Income (loss) from discontinued operations (0.54) 0.06 (1.17)Total $ 3.35 $ 3.51 $ 2.42 See notes to consolidated financial statements. 32Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Consolidated Statements of Comprehensive Income Standex International Corporation and Subsidiaries For the Years Ended June 30, 2014 (in thousands) 2014 2013 2012 Net income (loss)$ 42,866 $ 44,848 $ 30,905Other comprehensive income (loss): Defined benefit pension plans: Actuarial gains (losses) and other changes in unrecognized costs$ (604) $ 12,640 $ (38,283) Amortization of unrecognized costs 4,855 8,701 5,603 Derivative instruments: Change in unrealized gains and losses (194) (195) (1,987) Amortization of unrealized gains and losses into interestexpense 1,031 1,050 820 Foreign currency translation adjustments 6,055 (4,025) (7,847)Other comprehensive income (loss) before tax$ 11,143 $ 18,171 $ (41,694) Income tax provision (benefit): Defined benefit pension plans: Actuarial gains (losses) and other changes in unrecognized costs$ 362 $ (4,836) $ 13,848 Amortization of unrecognized costs (1,724) (3,165) (2,793) Derivative instruments: Change in unrealized gains and losses 74 75 752 Amortization of unrealized gains and losses into interestexpense (394) (400) (310)Income tax provision benefit to other comprehensive income (loss)$ (1,682) $ (8,326) $ 11,497Other comprehensive income (loss), net of tax 9,461 9,845 (30,197)Comprehensive income (loss)$ 52,327 $ 54,693 $ 708 See notes to consolidated financial statements.33Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.34Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Consolidated Statements of Stockholders'Equity Standex International Corporationand Subsidiaries Accumulated Additional Other Total Common Paid-in Retained ComprehensiveTreasury Stock Stockholders’For the Years EndedJune 30 (in thousands) Stock Capital Earnings Income (Loss)Shares Amount EquityBalance, June 30, 2011$ 41,976 $ 33,228 $ 477,726 $ (44,928)15,536 $ (262,389)$ 245,613Stock issued for employeestock option and purchase plans, including related incometax benefit (2,156) (229) 3,875 1,719Stock-based compensation 3,856 3,856Treasury stock acquired 154 (5,521) (5,521)Comprehensive income: Net Income 30,905 30,905Foreign currencytranslation adjustment (7,847) (7,847)Pension and OPEBadjustments, net of tax of $11.1 million (21,625) (21,625)Change in fair value ofderivatives, net of tax of $0.4 million (725) (725)Dividends paid ($.27 pershare) (3,468) (3,468)Balance, June 30, 2012$ 41,976 $ 34,928 $ 505,163 $ (75,125)15,461 $(264,035)$ 242,907Stock issued for employeestock option and purchase plans, including related incometax benefit and other (1,072) (210) 3,606 2,534Stock-based compensation 3,343 3,343Treasury stock acquired 184 (8,509) (8,509)Comprehensive income: Net Income 44,848 44,848Foreign currencytranslation adjustment (4,025) (4,025)Pension and OPEB adjustments, net oftax of ($8.0) million 13,340 13,340Change in fair value ofderivatives, net of tax of ($0.3) million 530 530Dividends paid ($.31 pershare) (3,980) (3,980)Balance, June 30, 2013$ 41,976 $ 37,199 $ 546,031 $ (65,280)15,435 $(268,938)$ 290,988Stock issued for employeestock option and purchase plans, includingrelated income tax benefit and other (441) (222) 3,895 3,454Stock-based compensation 6,630 6,630Treasury stock acquired 132 (7,790) (7,790)Comprehensive income: Net Income 42,866 42,866Foreign currencytranslation adjustment 6,055 6,055Pension and OPEBadjustments, net of tax of ($1.3) million 2,889 2,889Change in fair value ofderivatives, net of tax of ($0.3) million 517 517Dividends paid ($.38 pershare) (4,883) (4,883)Balance, June 30, 2014$ 41,976 $ 43,388 $ 584,014 $ (55,819)15,345 $(272,833)$ 340,726See notes to consolidated financial statements. Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.35Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Consolidated Statements of Cash Flows Standex International Corporation and Subsidiaries For the Years Ended June 30 (in thousands) 2014 2013 2012 Cash Flows from Operating Activities Net income $ 42,866 $ 44,848 $ 30,905 Income (loss) from discontinued operations (6,883) 794 (14,991) Income (loss) from continuing operations 49,749 44,054 45,896 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 14,591 15,235 13,142 Stock-based compensation 6,630 3,343 3,768 Deferred income taxes (3,343) (2,416) 2,342 Non-cash portion of restructuring charge 5,982 (31) 81 (Gain)/loss on sale of real estate - - (4,776) Disposal of real estate and equipment 925 - - Life insurance benefit (3,353) - - Increase/(decrease) in cash from changes in assets and liabilities, net of effects from discontinued operations and businessacquisitions: Accounts receivables, net (6,614) 4,335 (6,628) Inventories (10,041) 656 792 Contributions to defined benefit plans (1,527) (4,578) (7,268) Prepaid expenses and other (6,388) (2,889) (2,666) Accounts payable 15,166 3,414 (433) Accrued payroll, employee benefits and other liabilities 6,192 2,372 4,317 Income taxes payable 4,023 710 (3,078) Net cash provided by operating activities from continuing operations 71,992 64,205 45,489 Net cash used for operating activities from discontinued operations (1,693) (4,024) (1,823) Net cash provided by operating activities 70,299 60,181 43,666 Cash Flows from Investing Activities Expenditures for capital assets (18,832) (14,104) (9,741) Expenditures for acquisitions, net of cash acquired (23,075) (39,613) - Expenditures for executive life insurance policies (444) (435) (476) Proceeds withdrawn from life insurance policies 3,654 1,480 152 Proceeds from sale of real estate and equipment 118 28 5,207 Other investing activity 2,964 - (2,367) Net cash provided by (used for) investing activities from continuingoperations(35,615) (52,644) (7,225) Net cash provided by (used for) investing activities from discontinuedoperations 2,452 (43) 15,809 Net cash provided by (used for) investing activities (33,163) (52,687) 8,584 Cash Flows from Financing Activities Proceeds from borrowings 71,000 121,000 210,500 Payments of debt (76,000) (121,785) (210,300) Short-term borrowings, net - - (1,800) Stock issued under employee stock option and purchase plans 1,098 279 316 Excess tax benefit associated with stock option exercises 1,650 1,990 649 Cash dividends paid (4,793) (3,891) (3,383) Purchase of treasury stock (7,790) (8,509) (5,521) Net cash used for financing activities (14,835) (10,916) (9,539) Effect of exchange rate changes on cash 895 (263) (2,369) Net change in cash and cash equivalents 23,196 (3,685) 40,342 Cash and cash equivalents at beginning of year 51,064 54,749 14,407 Cash and cash equivalents at end of year $ 74,260 $ 51,064 $ 54,749 Supplemental Disclosure of Cash Flow Information: Cash paid during the year for: Interest $ 1,834 $ 2,193 $ 1,792 Income taxes, net of refunds $ 14,048 $ 14,018 $ 13,377 36Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.See notes to consolidated financial statements. STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. SUMMARY OF ACCOUNTING POLICIESBasis of Presentation and ConsolidationStandex International Corporation (“Standex” or the “Company”) is a diversified manufacturing company with operations inthe United States, Europe, Asia, Africa, and Latin America. The accompanying consolidated financial statements include theaccounts of Standex International Corporation and its subsidiaries and are prepared in accordance with accountingprinciples generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions havebeen eliminated in consolidation.During the year ended June 30, 2014, the Company completed the divestiture of American Foodservice, “AFS” a custom-fabricated food service counter systems, buffet tables and cabinets division. During the year ended June 30, 2012, theCompany completed the divestiture of Air Distribution Products, “ADP” a manufacture of metal and fittings for residentialheating ventilating and air conditioning applications business. As a result, the Statement of Operations for all periods hasbeen restated to reflect the operations of AFS and ADP as discontinued operations. The June 30, 2013, ConsolidatedBalance Sheet has been revised to present the assets and liabilities of AFS as the assets and liabilities of a discontinuedoperation. For further information, please see Note 15 – Discontinued Operations.The Company considers events or transactions that occur after the balance sheet date, but before the financial statements areissued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. We evaluated subsequent events through the date and time our consolidated financial statements were issued. Accounting EstimatesThe preparation of consolidated financial statements in conformity with GAAP requires the use of estimates, judgments andassumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure ofcontingent assets and liabilities at the date of the financial statements and for the period then ended. Estimates are based onhistorical experience, actuarial estimates, current conditions and various other assumptions that are believed to bereasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assetsand liabilities when they are not readily apparent from other sources. These estimates assist in the identification andassessment of the accounting treatment necessary with respect to commitments and contingencies. Actual results may differfrom these estimates under different assumptions or conditions.Cash and Cash EquivalentsCash and cash equivalents include highly liquid investments purchased with a maturity of three months or less. Theseinvestments are carried at cost, which approximates fair value. At June 30, 2014 and 2013, the Company’s cash wascomprised solely of cash on deposit.Trading SecuritiesThe Company purchases investments in connection with the KEYSOP Plan for certain retired executives and for its non-qualified defined contribution plan for employees who exceed certain thresholds under our traditional 401(k) plan. Theseinvestments are classified as trading and reported at fair value. The investments generally consist of mutual funds, areincluded in other non-current assets and amounted to $3.1 million and $2.5 million at June 30, 2014 and 2013, respectively. Gains and losses on these investments are recorded as other non-operating income (expense), net in the ConsolidatedStatements of Operations.Accounts Receivable AllowancesThe Company has provided an allowance for doubtful accounts reserve which represents the best estimate of probable lossinherent in the Company’s account receivables portfolio. This estimate is derived from the Company’s knowledge of its endmarkets, customer base, products, and historical experience.37Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The changes in the allowances for uncollectible accounts during 2014, 2013, and 2012 were as follows (in thousands): 2014 2013 2012Balance at beginning of year$ 2,325 $ 1,974 $ 2,166Acquisitions 93 190 - Provision charged to expense 375 268 389Write-offs, net of recoveries (511) (107) (581)Balance at end of year$ 2,282 $ 2,325 $ 1,974 InventoriesInventories are stated at the lower of (first-in, first-out) cost or market. Long-Lived AssetsLong-lived assets that are used in operations, excluding goodwill and identifiable intangible assets, are tested forrecoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Recognition and measurement of a potential impairment loss is performed on assets grouped with other assets and liabilitiesat the lowest level where identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Animpairment loss is the amount by which the carrying amount of a long-lived asset (asset group) exceeds its estimated fairvalue. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets.Property, Plant and EquipmentProperty, plant and equipment are reported at cost less accumulated depreciation. Depreciation is recorded on assets overtheir estimated useful lives, generally using the straight-line method. Lives for property, plant and equipment are as follows:Routine maintenance costs are expensed as incurred. Major improvements are capitalized. Major improvements to leasedbuildings are capitalized as leasehold improvements and depreciated over the lesser of the lease term or the life of theimprovement.Goodwill and Identifiable Intangible AssetsAll business combinations are accounted for using the acquisition method. Goodwill and identifiable intangible assets withindefinite lives, are not amortized, but are reviewed annually for impairment or more frequently if impairment indicatorsarise. Identifiable intangible assets that are not deemed to have indefinite lives are amortized on an accelerated basis overthe following useful lives: See discussion of the Company’s assessment of impairment in Note 5 – Goodwill, and Note 6 – Intangible Assets.Fair Value of Financial Instruments38Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The financial instruments, shown below, are presented at fair value. Fair value is defined as the price that would be receivedto sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models may be applied.Assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon the level ofjudgment associated with the inputs used to measure their fair values. Hierarchical levels directly related to the amount ofsubjectivity associated with the inputs to fair valuation of these assets and liabilities and the methodologies used invaluation are as follows:Level 1 – Quoted prices in active markets for identical assets and liabilities. The Company’s deferredcompensation plan assets consist of shares in various mutual funds (for the deferred compensation plan, investmentsare participant-directed) which invest in a broad portfolio of debt and equity securities. These assets are valuedbased on publicly quoted market prices for the funds’ shares as of the balance sheet dates. For pension assets (seeNote 17 – Employee Benefit Plans), securities are valued based on quoted market prices for securities held directlyby the trust.Level 2 – Inputs, other than quoted prices in an active market, that are observable either directly or indirectlythrough correlation with market data. For foreign exchange forward contracts and interest rate swaps, the Companyvalues the instruments based on the market price of instruments with similar terms, which are based on spot andforward rates as of the balance sheet dates. For pension assets held in commingled funds (see Note 17 – EmployeeBenefit Plans) the Company values investments based on the net asset value of the funds, which are derived fromthe quoted market prices of the underlying fund holdings. The Company has considered the creditworthiness ofcounterparties in valuing all assets and liabilities.Level 3– Unobservable inputs based upon the Company’s best estimate of what market participants would use inpricing the asset or liability.We did not have any transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchyat June 30, 2014 and 2013.Cash and cash equivalents, accounts receivable, and accounts payable are carried at cost, which approximates fair value.The fair values of our financial instruments at June 30, 2014 and 2013 were (in thousands): 2014 Total Level 1 Level 2 Level 3Financial Assets Marketable securities - deferred compensationplan$ 3,114 $ 3,114 $ - $ - Foreign Exchange contracts 356 356 - Financial Liabilities Foreign Exchange contracts$ 1,552 $ - $ 1,552 $ - Interest rate swaps 1,061 - 1,061 - 2013 Total Level 1 Level 2 Level 3Financial Assets Marketable securities - deferred compensationplan$ 2,478 $ 2,478 $ - $ - Foreign Exchange contracts 37 37 - Financial Liabilities Foreign Exchange contracts$ 1,443 $ - $ 1,443 $ - Interest rate swaps 1,875 - 1,875 - Concentration of Credit Risk39Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The Company is subject to credit risk through trade receivables and short-term cash investments. Concentration of risk withrespect to trade receivables is minimized because of the diversification of our operations, as well as our large customer baseand our geographical dispersion. No individual customer accounts for more than 5% of revenues or accounts receivable inthe periods presented.Short-term cash investments are placed with high credit-quality financial institutions. The Company monitors the amount ofcredit exposure in any one institution or type of investment instrument. Revenue RecognitionThe Company’s product sales are recorded when persuasive evidence of an arrangement exists, delivery has occurred, theprice to the buyer is fixed or determinable, and collectability is reasonably assured. For products that include installation,and if the installation meets the criteria to be considered a separate element, product revenue is recognized upon delivery,and installation revenue is recognized when the installation is complete. Revenues under certain fixed price contracts aregenerally recorded when deliveries are made.Sales and estimated profits under certain long-term contracts are recognized under the percentage-of-completion methods ofaccounting, whereby profits are recorded pro rata, based upon current estimates of costs to complete such contracts. Losseson contracts are provided for in the period in which the losses become determinable. Revisions in profit estimates arereflected on a cumulative basis in the period in which the basis for such revision becomes known. Any excess of the billingsover cost and estimated earnings on long-term contracts is included in deferred revenue.Cost of Goods Sold and Selling, General and Administrative ExpensesThe Company includes expenses in either cost of goods sold or selling, general and administrative categories based uponthe natural classification of the expenses. Cost of goods sold includes expenses associated with the acquisition, inspection,manufacturing and receiving of materials for use in the manufacturing process. These costs include inbound freight charges,purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs as well as depreciation,amortization, wages, benefits and other costs that are incurred directly or indirectly to support the manufacturing process. Selling, general and administrative includes expenses associated with the distribution of our products, sales effort,administration costs and other costs that are not incurred to support the manufacturing process. The Company recordsdistribution costs associated with the sale of inventory as a component of selling, general and administrative expenses in theConsolidated Statements of Operations. These expenses include warehousing costs, outbound freight charges and costsassociated with distribution personnel. Our gross profit margins may not be comparable to those of other entities due todifferent classifications of costs and expenses.Research and DevelopmentResearch and development expenditures are expensed as incurred. Total research and development costs, which areclassified under selling, general, and administrative expenses, were $4.8 million, $4.4 million, and $4.4 million for the yearsended June 30, 2014, 2013, and 2012, respectively.WarrantiesThe expected cost associated with warranty obligations on our products is recorded when the revenue is recognized. TheCompany’s estimate of warranty cost is based on contract terms and historical warranty loss experience that is periodicallyadjusted for recent actual experience. Since warranty estimates are forecasts based on the best available information, claimscosts may differ from amounts provided. Adjustments to initial obligations for warranties are made as changes in theobligations become reasonably estimable.The changes in warranty reserve, which are recorded as accrued liabilities, during 2014, 2013, and 2012 were as follows (inthousands): 2014 2013 2012Balance at beginning of year$ 6,782 $ 5,767 $ 4,840Acquisitions 274 795 - Warranty expense 3,937 4,282 4,434Warranty claims (4,052) (4,062) (3,507)40Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Balance at end of year$ 6,941 $ 6,782 $ 5,767 Stock-Based Compensation PlansRestricted stock awards generally vest over a three-year period. Compensation expense associated with these awards isrecorded based on their grant-date fair values and is generally recognized on a straight-line basis over the vesting periodexcept for awards with performance conditions, which are recognized on a graded vesting schedule. Compensation cost foran award with a performance condition is based on the probable outcome of that performance condition. The stated vestingperiod is considered non-substantive for retirement eligible participants. Accordingly, the Company recognizes anyremaining unrecognized compensation expense upon participant reaching retirement eligibility.Foreign Currency TranslationThe functional currency of our non-U.S. operations is generally the local currency. Assets and liabilities of non-U.S.operations are translated into U.S. Dollars on a monthly basis using period-end exchange rates. Revenues and expenses ofthese operations are translated using average exchange rates. The resulting translation adjustment is reported as acomponent of comprehensive income (loss) in the consolidated statements of stockholders’ equity and comprehensiveincome. Gains and losses from foreign currency transactions are included in results of operations and were not material forany period presented.Derivative Instruments and Hedging ActivitiesThe Company recognizes all derivatives on its balance sheet at fair value.Forward foreign currency exchange contracts are periodically used to limit the impact of currency fluctuations on certainanticipated foreign cash flows, such as foreign purchases of materials and loan payments from subsidiaries. The Companyenters into such contracts for hedging purposes only. For hedges of intercompany loan payments, the Company recordsderivative gains and losses directly to the statement of operations due to the general short-term nature and predictability ofthe transactions.The Company also uses interest rate swaps to manage exposure to interest rates on the Company’s variable rateindebtedness. The Company values the swaps based on contract prices in the derivatives market for similar instruments. The Company has designated the swaps as cash flow hedges, and changes in the fair value of the swaps are recognized inother comprehensive income (loss) until the hedged items are recognized in earnings. Hedge ineffectiveness, if any,associated with the swaps will be reported by the Company in interest expense.The Company does not hold or issue derivative instruments for trading purposes.Income TaxesDeferred assets and liabilities are recorded for the expected future tax consequences of events that have been included in thefinancial statements or tax returns. Deferred tax assets and liabilities are determined based on the differences between thefinancial statements and the tax bases of assets and liabilities using enacted tax rates. Valuation allowances are providedwhen the Company does not believe it more likely than not the benefit of identified tax assets will be realized.The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positionsand other issues. The Company accounts for uncertain tax positions based on a determination of whether and how much of atax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution ofany potential contingencies present related to the tax benefit, assuming that the matter in question will be raised by the taxauthorities. Interest and penalties associated with such uncertain tax positions are recorded as a component of income taxexpense.Earnings Per Share(share amounts in thousands) 2014 2013 2012Basic – Average Shares Outstanding 12,613 12,561 12,517Effect of Dilutive Securities – Stock Options and Restricted Stock Awards 165 219 27041Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Diluted – Average Shares Outstanding 12,778 12,780 12,787 Both basic and dilutive income is the same for computing earnings per share. There were no outstanding instruments thathad an anti-dilutive effect at June 30, 2014, 2013 and 2012.Recently Issued Accounting PronouncementsIn June 2014, the Financial Accounting Standards Board (“FASB”) issued accounting standard update (“ASU”) 2014-12,Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achievedafter the Requisite Service Period. The update provides guidance on how to account for certain share-based payment awardswhere employees would be eligible to vest in the award regardless of whether the employee is still rendering service on thedate the performance target is achieved. The standard is effective for annual and interim periods with those annual periodsbeginning after December 15, 2015. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-12 to have a material impact to its consolidated results of operation.In May 2014, the FASB and the International Accounting Standards Board jointly issued a comprehensive new revenuerecognition standard, ASU 2014-09, Revenue from Contract with Customers, that will supersede nearly all existing revenuerecognition guidance under US GAAP and IFRS. The standard’s primary principle is that a company will recognize revenuewhen it transfers promised goods or services to customers in an amount that reflects the consideration to which the companyexpects to be entitled in exchange for those goods or services. The standard is effective for public entities for annual andinterim periods beginning after December 15, 2016. The Company expects to adopt this standard in the quarter endingSeptember 30, 2017. The Company is still evaluating the impact of adopting ASU 2014-09 on its consolidated financialstatements.In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals ofComponents of an Entity. ASU 2014-08 revised guidance to only allow disposals of components of an entity that representa strategic shift (e.g., disposal of a major geographical area, a major line of business, a major equity method investment, orother major parts of an entity) and that have a major effect on a reporting entity’s operations and financial results to bereported as discontinued operations. The revised guidance also requires expanded disclosure in the financial statements fordiscontinued operations, as well as for disposals of significant components of an entity that do not qualify for discontinuedoperations presentation. ASU 2014-08 is effective for interim and annual reporting periods beginning after December 15,2014. The Company is still evaluating the impact of adopting ASU 2014-08 on its consolidated financial statements.2. ACQUISITIONSIn June 2014, the Company acquired Ultrafryer Systems, Inc. (“Ultrafryer”) a producer of commercial deep fryers forrestaurant and commercial installations. This investment complements our Food Service Equipment Group’s product lineand allows us to provide broader solutions to restaurant chains and commercial food service installations. The Company paid $20.7 million in cash for 100% of the stock of Ultrafryer and has preliminarily recorded intangible assetsof $7.6 million, consisting of $2.4 million of trademarks which are indefinite-lived, $4.9 million of customer relationships,and $0.3 million of other intangible assets which are expected to be amortized over a period of fifteen and three to five years,respectively. Acquired goodwill of $10.9 million is not deductible for income tax purposes due to the nature of thetransaction. The Company anticipates finalizing the purchase price allocation, primarily as it relates to acquired tangibleassets, during the quarter ended September 30, 2014.The components of the fair value of the Ultrafryer acquisition, including the preliminary allocation of the purchase price areas follows (in thousands): UltrafryerFair value of business combination: Cash payments$ 20,745 Less: cash acquired (20) Total$ 20,725Identifiable assets acquired and liabilities assumed Current assets$ 5,87142Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Property, plant, and equipment 1,259 Identifiable intangible assets 7,612 Goodwill 10,930 Liabilities assumed (1,733) Deferred taxes (3,214) Total$ 20,725In addition, during June 2014, the Company also purchased the assets of Planar Quality Corporation, producer oftransformers for commercial, military and space applications. This investment will enhance our Electronics Group’stransformer product group capabilities. The company paid $2.4 million in cash, recorded intangible assets of $1.0 millionconsisting of $0.4 million of patents and $0.7 million of other intangible assets, which are expected to be amortized over aperiod of seven and five years, respectively. Acquired goodwill of $1.2 million is fully deductible for income tax purposes.In July 2012, the Company acquired Meder electronic AG (“Meder”), a German manufacturer of magnetic reed switch, reedrelay, and reed sensor products. Meder, whose products and geographic markets are complementary to Standex Electronics,is reported under the Electronics Products Group. This investment substantially broadens the global footprint, product lineofferings, and end-user markets of the Electronics segment.The Company paid $43.2 million in cash for 100% of the equity of Meder. Acquired intangible assets of $8.2 millionconsist of $3.4 million of trademarks, which are indefinite-lived, and $4.8 million of customer relationships, which areexpected to be amortized over a period of 10 years. Acquired goodwill of $12.1 million is not deductible for income taxpurposes due to the nature of the transaction. The Company finalized the purchase price allocation during the quarter endedDecember 31, 2012. The components of the fair value of the Meder acquisition, including the final allocation of the purchase are as follows (inthousands): MederElectronicFair value of business combination: Cash payments$ 43,181 Less: cash acquired (3,568) Total$ 39,613Identifiable assets acquired and liabilities assumed Current assets$ 20,246 Property, plant, and equipment 11,060 Identifiable intangible assets 8,200 Goodwill 12,063 Other non-current assets 222 Liabilities assumed (8,642) Deferred taxes (3,536) Total$ 39,6133. INVENTORIESInventories are comprised of (in thousands):June 30 2014 2013Raw materials$ 44,273 $ 36,526Work in process 24,551 22,886Finished goods 28,241 22,399 Total$ 97,065 $ 81,811 43Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Distribution costs associated with the sale of inventory are recorded as a component of selling, general and administrativeexpenses and were $20.8 million, $20.1 million, and $19.9 million in 2014, 2013, and 2012, respectively.4. PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment consist of the following (in thousands):June 30 2014 2013 Land, buildings and leasehold improvements $ 78,596 $ 75,635 Machinery, equipment and other 171,238 154,376 Total 249,834 230,011 Less accumulated depreciation 153,137 137,469Property, plant and equipment - net $ 96,697 $ 92,542 Depreciation expense for the years ended June 30, 2014, 2013, and 2012 totaled $12.2 million, $12.7 million, and $10.6million, respectively.5. GOODWILLGoodwill and certain indefinite-lived intangible assets are not amortized, but instead are tested for impairment at leastannually and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may beless than its carrying amount of the asset. The Company’s annual test for impairment is performed using a May 31stmeasurement date.The Company has identified our reporting units for impairment testing as its eleven operating segments, which areaggregated into five reporting segments as disclosed in Note 18 – Industry Segment Information. As quoted market prices are not available for the Company’s reporting units, the fair value of the reporting units isdetermined using a discounted cash flow model (income approach). This method uses various assumptions that are specificto each individual reporting unit in order to determine the fair value. In addition, the Company compares the estimatedaggregate fair value of its reporting units to its overall market capitalization.While the Company believes that estimates of future cash flows are reasonable, changes in assumptions could significantlyaffect valuations and result in impairments in the future. The most significant assumption involved in the Company’sdetermination of fair value is the cash flow projections of each reporting unit. If the estimates of future cash flows for eachreporting unit may be insufficient to support the carrying value of the reporting units, requiring the Company to re-assess itsconclusions related to fair value and the recoverability of goodwill.As a result of our annual assessment, the Company determined that the fair value of the reporting units and indefinite-livedintangible assets substantially exceeded their respective carrying values. Therefore, no impairment charges were recorded inconnection with our assessments during 2014 and 2013.Changes to goodwill during the years ended June 30, 2014 and 2013 are as follows (in thousands): 2014 2013Balance at beginning of year$ 129,844 $ 118,572Accumulated impairment losses 17,939 17,939Balance at beginning of year, net 111,905 100,633Acquisitions 12,132 12,063Foreign currency translation 1,928 (791)Balance at end of year$ 125,965 $ 111,905 44Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.6. INTANGIBLE ASSETSIntangible assets consist of the following (in thousands): Customer Trademarks Relationships (Indefinite-lived) Other TotalJune 30, 2014 Cost$ 36,145 $ 14,508 $ 4,061 $ 54,714Accumulated amortization (21,137) - (2,087) (23,224)Balance, June 30, 2014$ 15,008 $ 14,508 $ 1,974 $ 31,490 June 30, 2013 Cost$ 30,289 $ 11,977 $ 4,228 $ 46,494Accumulated amortization (18,272) - (3,590) (21,862)Balance, June 30, 2013$ 12,017 $ 11,977 $ 638 $ 24,632 Amortization expense from continuing operations for the years ended June 30, 2014, 2013, and 2012totaled $2.6 million, $2.6 million, and $2.6 million, respectively. At June 30, 2014, aggregateamortization expense is estimated to be $2.8 million in fiscal 2015, $2.7 million in fiscal 2016, $2.2million in fiscal 2017, $2.0 million in fiscal 2018, $1.9 million in fiscal 2019, and $5.4 millionthereafter.7. DEBTLong-term debt is comprised of the following at June 30 (in thousands): 2014 2013Bank credit agreements$ 45,000 $ 50,000Other 56 72 Total long-term debt$ 45,056 $ 50,072 Long-term debt is due as follows (in thousands): 2015$ 182016 152017 45,0152018 82019 - Thereafter - Bank Credit AgreementsOn January 5, 2012, the Company entered into a five-year $225 million unsecured Revolving Credit Facility (“CreditAgreement”, or “facility”), which can be increased by the Company by an amount of up to $100 million, in accordance withspecified conditions contained in the agreement. The facility also includes a $10 million sub-facility for swing line loansand a $30 million sub-facility for letters of credit. Interest is payable on borrowings at either a LIBOR or base ratebenchmark rate plus an applicable margin, which will fluctuate based on financial performance. The Credit Agreementrequires a ratio of funded debt to EBITDA (as defined in the Credit Agreement) of no greater than 3.5:1, an interest coverageratio of no less than 3:1, as well as customary affirmative and negative covenants and events of default. The CreditAgreement also includes certain requirements related to acquisitions and dispositions. Borrowings under the CreditAgreement are guaranteed by the Company’s domestic subsidiaries and are unsecured. The Company intends to use thisCredit Agreement to fund potential acquisitions, to support organic growth initiatives, working capital needs, and forgeneral corporate purposes.As of June 30, 2014, the Company had the ability to borrow $168.6 million under this facility. The carrying value of thecurrent borrowings under the facility approximated fair value.45Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The facility expires in January 2017 and contains customary representations, warranties and restrictive covenants, as wellas specific financial covenants. The terms of the Credit Agreement limited the ability of the Company to pay dividends toshareholders unless the Company is in compliance with the specific financial covenants under the facility. TheCompany’s current financial covenants under the facility are as follows:Interest Coverage Ratio - The Company is required to maintain a ratio of Earnings Before Interest and Taxes, as Adjusted(“Adjusted EBIT per the Credit Agreement”), to interest expense for the trailing twelve months of at least 3:1. AdjustedEBIT per the Credit Agreement specifically excludes extraordinary and certain other defined items such as non-cashrestructuring and acquisition-related charges up to $2.0 million, and goodwill impairment. At June 30, 2014, theCompany’s Interest Coverage Ratio was 35.58:1.Leverage Ratio - The Company’s ratio of funded debt to trailing twelve month Adjusted EBITDA per the credit agreement,calculated as Adjusted EBIT per the Credit Agreement plus Depreciation and Amortization, may not exceed 3.5:1. AtJune 30, 2014, the Company’s Leverage Ratio was 0.59:1.Other Long-Term BorrowingsAt June 30, 2014, and 2013, the Company had standby letters of credit outstanding, primarily for insurance purposes, of$11.3 million and $10.7 million, respectively.8. ACCRUED LIABILITIESAccrued expenses consist of the following (in thousands): 2014 2013Payroll and employee benefits$ 26,736 $ 25,403Workers' compensation 2,610 2,489Warranty 7,401 6,995Other 14,291 11,610 Total$ 51,038 $ 46,497 9. DERIVATIVE FINANCIAL INSTRUMENTSInterest Rate SwapsIn order to manage our interest rate exposure, we are party to $45.0 million of floating to fixed rate swaps. These swapsconvert our interest payments from LIBOR to a weighted average rate of 2.40% at June 30, 2014.The fair value of the swaps recognized in accrued liabilities and in other comprehensive income (loss) at June 30, 2014 and2013 is as follows (in thousands): Fair Value at June 30,Effective Date NotionalAmountFixed InterestRateMaturity 2014 2013June 1, 2010$5,0002.495%May 26, 2015$ (108) $ (205)June 1, 2010 5,0002.495%May 26, 2015 (108) (205)June 4, 2010 10,0002.395%May 26, 2015 (206) (389)June 9, 2010 5,0002.34%May 26, 2015 (100) (190)June 18, 2010 5,0002.38%May 26, 2015 (103) (194)September 21, 20115,0001.28%September 21, 2013 - (14)September 21, 20115,0001.60%September 22, 2014 (18) (83)March 15, 2012 10,0002.75%March 15, 2016 (418) (595) $ (1,061) $ (1,875) The Company reported no losses for the years ended June 30, 2014, 2013, and 2012, as a result of hedge ineffectiveness.Future changes in these swap arrangements, including termination of the agreements, may result in a reclassification of anygain or loss reported in accumulated other comprehensive income (loss) into earnings as an adjustment to interest expense. Accumulated other comprehensive income (loss) related to these instruments is being amortized into interest expenseconcurrent with the hedged exposure.46Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Foreign Exchange ContractsForward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain anticipatedforeign cash flows, such as foreign purchases of materials and loan payments to and from subsidiaries. The Company entersinto such contracts for hedging purposes only. For hedges of intercompany loan payments, the Company has not electedhedge accounting due to the general short-term nature and predictability of the transactions, and records derivative gainsand losses directly to the consolidated statement of operations. At June 30, 2014 and 2013 the Company had outstandingforward contracts related to hedges of intercompany loans with net unrealized (losses) of ($1.2) million and ($1.4) million,respectively, which approximate the unrealized gains or losses on the related loans. The contracts have maturity datesranging from 2014-2016, which correspond to the related intercompany loans. The notional amounts of these instruments,by currency, are as follows:Currency 2014 2013Euro 24,289,064 48,349,064Canadian Dollar 3,600,000 3,600,000Pound Sterling 3,975,192 2,580,289 The table below presents the fair value of derivative financial instruments as well as their classification on the balance sheetat June 30, (in thousands): Asset Derivatives 2014 2013 Derivative designated asBalance Balance hedging instrumentsSheet Sheet Line Item Fair Value Line Item Fair ValueForeign exchange contractsOther Assets $ 356 Other Assets $ 37 Liability Derivatives 2014 2013 Derivative designated asBalance Balance hedging instrumentsSheet Sheet Line Item Fair Value Line Item Fair ValueInterest rate swapsAccrued Liabilities $ 1,061 Accrued Liabilities $ 1,875Foreign exchange contractsAccrued Liabilities 1,552 Accrued Liabilities 1,443 $ 2,613 $ 3,318 The table below presents the amount of gain (loss) recognized in comprehensive income on our derivative financialinstruments (effective portion) designated as hedging instruments and their classification within comprehensive income forthe periods ended (in thousands): 2014 2013 2012Interest rate swaps $ (194) $ (195) $ (1,987)The table below presents the amount reclassified from accumulated other comprehensive income (loss) to Net Income for theperiods ended (in thousands):Details about Accumulated Affected line itemOther Comprehensive in the StatementsIncome (Loss) Components 2014 2013 2012 of OperationsInterest rate swaps $ 1,031 $ 1,050 $ 820 Interest expense47Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.10. INCOME TAXESThe components of income from continuing operations before income taxes are as follows (in thousands): 2014 2013 2012U.S. Operations$ 26,965 $ 35,805 $ 26,366Non-U.S. Operations 40,838 23,493 35,229 Total$ 67,803 $ 59,298 $ 61,595 The Company utilizes the asset and liability method of accounting for income taxes. Deferred income taxes are determinedbased on the estimated future tax effects of differences between the financial and tax bases of assets and liabilities given theprovisions of the enacted tax laws. The components of the provision for income taxes on continuing operations (inthousands) were as shown below: 2014 2013 2012Current: Federal$ 9,653 $ 9,099 $ 5,176State 415 1,382 403Non-U.S. 11,329 7,179 7,778 Total Current 21,397 17,660 13,357 Deferred: Federal$ (2,017) $ (454) $ 2,109State (376) 18 640Non-U.S. (950) (1,980) (407) Total Deferred (3,343) (2,416) 2,342 Total$ 18,054 $ 15,244 $ 15,699 A reconciliation from the U.S. Federal income tax rate on continuing operations to the total tax provision is as follows (inthousands): 2014 2013 2012Provision at statutory tax rate35.0% 35.0% 35.0%State taxes0.0% 1.5% 1.1%Impact of Foreign Operations-5.6% -6.5% -6.3%Federal tax credits-0.7% -2.2% -0.7%Life Insurance Proceeds-1.7% 0.0% 0.0%Other-0.4% -2.1% -3.6%Effective income tax provision26.6% 25.7% 25.5% Changes in the effective tax rates from period to period may be significant as they depend on many factors including, butnot limited to, size of the Company’s income or loss and any one-time activities occurring during the period.The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2014 was impacted bythe following items: (i) a benefit of $0.5 million related to the R&D tax credit that expired during the fiscal year onDecember 31, (ii) a benefit of $0.5 million related to a decrease in the statutory tax rate in the United Kingdom on priorperiod deferred tax liabilities recorded during the first quarter during the fiscal year, (iii) a benefit of $1.1 million due to non-taxable life insurance proceeds received in the third quarter and (iv) a benefit of $3.8 million due to the mix of incomeearned in jurisdictions with beneficial tax rates.The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2013 was impacted bythe following items: (i) a benefit of $0.4 million related to the retroactive extension of the R&D credit recorded during thethird quarter, (ii) a benefit of $0.3 million related to a decrease in the statutory tax rate in the United Kingdom on priorperiod deferred tax liabilities recorded during the first and fourth quarters, (iii) a benefit of $1.0 million from the reversal of a48Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.deferred tax liability that was determined to be no longer required during the third quarter and (iv) a benefit of $2.8 milliondue to the mix of income earned in jurisdictions with beneficial tax rates.The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2012 was impacted bythe following items: (i) a benefit of $1.3 million from the reversal of income tax contingency reserves that were determinedto be no longer needed due to the lapsing of the statute of limitations and re-measurement of existing tax contingencyreserves based on recently completed tax examinations, (ii) a benefit of $0.4 million related to a decrease in the statutory taxrate in the United Kingdom on prior period deferred tax liabilities recorded during the first quarter, and (iii) a benefit of $4.5million due to the mix of income earned in jurisdictions with beneficial tax rates.Significant components of the Company’s deferred income taxes are as follows (in thousands): 2014 2013Deferred tax liabilities: Depreciation and amortization$ (20,934) $ (18,778)Total deferred tax liability$ (20,934) $ (18,778) Deferred tax assets: Accrued compensation$ 4,463 $ 3,464 Accrued expenses and reserves 3,040 2,429 Pension 10,975 12,246 Inventory 1,549 1,588 Other 758 806 Net operating loss and credit carry forwards 3,685 3,164Total deferred tax asset$ 24,470 $ 23,697 Less: Valuation allowance (530) (520) Net deferred tax asset (liability)$ 3,006 $ 4,399 The Company estimates the degree to which deferred tax assets, including net operating loss and credit carry forwards willresult in a benefit based on expected profitability by tax jurisdiction and provides a valuation allowance for tax assets andloss carry forwards that it believes will more likely than not go unrealized. The valuation allowances at June 30, 2014 applyto the tax benefit of state loss carry forwards, which management has concluded that it is more likely than not that these taxbenefits will not be realized. The increase (decrease) in the valuation allowance from the prior year was less than $0.1million, ($0.3) million, and $0.6 million in 2014, 2013, and 2012, respectively.As of June 30, 2014, the Company had gross state net operating loss ("NOL") and credit carry forwards of approximately$40.7 million and $2.8 million, respectively, which may be available to offset future state income tax liabilities and expireat various dates from 2015 through 2034. In addition, the Company had foreign NOL carry forwards of approximately $2.6million, $1.4 million of which carry forward indefinitely, $1.0 million that carry forward for 10 years and $0.2 million thatcarry forward for 5 years.The Company’s income taxes currently payable for federal and state purposes have been reduced by the benefit of the taxdeduction in excess of recognized compensation cost from employee stock compensation transactions. The provision forincome taxes that is currently payable has not been adjusted by approximately $1.7 million and $2.0 million of suchbenefits of the Company that have been allocated to additional paid in capital in 2014 and 2013, respectively. A provision has not been made for U.S. or additional non-U.S. taxes on $127.9 million of undistributed earnings ofinternational subsidiaries that could be subject to taxation if remitted to the U.S. It is not practicable to estimate the amountof tax that might be payable on the remaining undistributed earnings. Our intention is to reinvest these earningspermanently or to repatriate the earnings only when it is tax effective to do so. Accordingly, we believe that U.S. tax on anyearnings that might be repatriated would be substantially offset by U.S. foreign tax credits.49Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The total provision for income taxes included in the consolidated financial statements was as follows (in thousands): 2014 2013 2012Continuing operations$ 18,054 $ 15,244 $ 15,699Discontinued operations (3,692) 482 (9,109) $ 14,362 $ 15,726 $ 6,590The changes in the amount of gross unrecognized tax benefits during 2014, 2013 and 2012 were as follows (in thousands): 2014 2013 2012Beginning Balance$ 1,286 $ 1,298 $ 2,146 Additions based on tax positions related to the current year 25 77 64 Additions for tax positions of prior years - 19 394 Reductions for tax positions of prior years (278) (108) (1,306)Ending Balance$ 1,033 $ 1,286 $ 1,298 If the unrecognized tax benefits in the table above were recognized in a future period, $0.6 million of the unrecognized taxbenefit would impact the Company’s effective tax rate.Within the next twelve months, the statute of limitations will close in various U.S., state and non-U.S. jurisdictions. As aresult, it is reasonably expected that net unrecognized tax benefits from these various jurisdictions would be recognizedwithin the next twelve months. The recognition of these tax benefits is not expected to have a material impact to theCompany's financial statements. The Company does not reasonably expect any other significant changes in the next twelvemonths. The following tax years, in the major tax jurisdictions noted, are open for assessment or refund:Country Years Ending June 30,United States2011 to 2014Canada2010 to 2014Germany2010 to 2014Ireland2011 to 2014Portugal2010 to 2014United Kingdom2013 to 2014The Company’s policy is to include interest expense and penalties related to unrecognized tax benefits within the provisionfor income taxes on the consolidated statements of operations. At both June 30, 2014 and June 30, 2013, the company hadless than $0.1 million for accrued interest expense on unrecognized tax benefits.11. COMMITMENTSThe Company leases certain property and equipment under agreements with initial terms ranging from one to twenty years.Rental expense related to continuing operations for the years ended June 30, 2014, 2013, and 2012 was approximately $5.5million, $4.9 million and $4.8 million, respectively.The gross minimum annual rental commitments under non-cancelable operating leases, principally real-estate at June 30,2014:(in thousands) Lease Sublease Netobligation2015 $ 6,053 $ 666 $ 5,3872016 4,960 356 4,6042017 4,148 338 3,8102018 2,813 185 2,6282019 2,128 - 2,128Thereafter 5,834 - 5,83450Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In March 2012, the Company sold substantially all of the assets of its ADP business. In connection with the divestiture, theCompany remained the lessee of ADP’s Philadelphia, PA facility and administrative offices, with the purchaser subleasing afractional portion of the building at current market rates. In connection with the transaction, the Company recognized alease impairment charge of $2.3 million for the remaining rental expense. The Company’s aggregate obligation with respectto the lease is $1.8 million, of which $1.3 million was recorded as a liability at June 30, 2014. Additionally, the Companyremained an obligor on an additional facility lease that was assumed in full by the buyer, for which our aggregate obligationin the event of default by the buyer is $0.8 million. With the exception of the impaired portion of the Philadelphia lease, theCompany does not expect to make any payments with respect to these obligations. The buyer’s obligations under therespective sublease and assumed lease are secured by a cross-default provision in the purchaser’s promissory note for aportion of the purchase price which is secured by mortgages on the ADP real estate sold in the transaction.12. CONTINGENCIESFrom time to time, the Company is subject to various claims and legal proceedings, including claims related toenvironmental remediation, either asserted or unasserted, that arise in the ordinary course of business. While the outcome ofthese proceedings and claims cannot be predicted with certainty, the Company’s management does not believe that theoutcome of any of the currently existing legal matters will have a material impact on the Company’s consolidated financialposition, results of operations or cash flow. The Company accrues for losses related to a claim or litigation when theCompany’s management considers a potential loss probable and can reasonably estimate such potential loss.13. STOCK-BASED COMPENSATION AND PURCHASE PLANSStock-Based Compensation PlansUnder incentive compensation plans, the Company is authorized to make grants of stock options, restricted stock andperformance share units to provide equity incentive compensation to key employees and directors. In fiscal 2004, theCompany began granting stock awards instead of stock options. The stock award program offers employees and directorsthe opportunity to earn shares of our stock over time, rather than options that give the employees and directors the right topurchase stock at a set price. The Company has stock plans for directors, officers and certain key employees. Total compensation cost recognized in income for equity based compensation awards was $6.6 million, $3.3 million, and$3.8 million for the years ended June 30, 2014, 2013 and 2012, respectively, primarily within Selling, General, andAdministrative Expenses. The total income tax benefit recognized in the consolidated statement of operations for equity-based compensation plans was $2.3 million, $1.2 million, and $1.3 million for the years ended June 30, 2014, 2013 and2012, respectively.458,513 shares of common stock were reserved for issuance under various compensation plans at June 30, 2014. Restricted Stock AwardsThe Company may award shares of restricted stock to eligible employees and non-employee directors of the Company at nocost, giving them in most instances all of the rights of stockholders, except that they may not sell, assign, pledge orotherwise encumber such shares and rights during the restriction period. Such shares and rights are subject to forfeiture ifcertain employment conditions are not met. During the restriction period, recipients of the shares are entitled to dividendequivalents on such shares, providing that such shares are not forfeited. Dividends are accumulated and paid out at the endof the restriction period. During 2014, 2013 and 2012, the Company granted 62,698, 44,388, and 52,884 shares,respectively, of restricted stock to eligible participants. Restrictions on the stock awards generally lapse between fiscal 2015and fiscal 2017. For the years ended June 30, 2014, 2013 and 2012, $3.3 million, $1.5 million, and $1.4 million,respectively, was recognized as compensation expense related to restricted stock awards. Substantially all awards areexpected to vest.51Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.A summary of restricted stock awards activity during the year ended June 30, 2014 is as follows: Restricted Stock Awards Number Aggregate of Intrinsic Shares Value Outstanding, June 30, 2013172,490 $ 9,098,848Granted62,698 Exercised / vested(88,826) 4,932,618Canceled(2,267) Outstanding, June 30, 2014144,095 $ 10,732,196 Performance stock units during 2014, 2013 and 2012 had a weighted average grant date fair value of $58.84, $44.59, and$29.05, respectively. The grant date fair value of restricted stock awards is determined based on the closing price of theCompany’s common stock on the date of grant. The total intrinsic value of awards exercised during the years ended June 30,2014, 2013, and 2012 was $3.1 million, $3.5 million, and $2.4 million, respectively. As of June 30, 2014, there was $2.4 million of unrecognized compensation costs related to awards expected to be recognizedover a weighted-average period of 1.22 years.Executive Compensation ProgramThe Company operates a compensation program for key employees. The plan contains both an annual component as well aslong-term component. Under the annual component, participants may elect to defer up to 50% of their annual incentivecompensation in restricted stock which is purchased at a discount to the market. Additionally, non-employee directors ofthe Company may defer a portion of their director’s fees in restricted stock units which is purchased at a discount to themarket. During the restriction period, recipients of the shares are entitled to dividend equivalents on such units, providingthat such shares are not forfeited. Dividend equivalents are accumulated and paid out at the end of the restriction period. The restrictions on the units expire after three years. At June 30, 2014 and 2013 respectively, 52,431 and 105,967 shares ofrestricted stock units are outstanding and subject to restrictions that lapse between fiscal 2014 and fiscal 2016. Thecompensation expense associated with this incentive program is charged to income over the restriction period. TheCompany recorded compensation expense related to this program of $0.7 million, $0.6 million, and $0.4 million for theyears ended June 30, 2014, 2013 and 2012, respectively.As of June 30, 2014, there was $0.2 million of unrecognized compensation costs related to awards expected to be recognizedover a weighted-average period of 1.00 yearsThe fair value of the awards under the annual component of this incentive program is measured using the Black-Scholesoption-pricing model. Key assumptions used to apply this pricing model are as follows: 2014 2013 2012Risk-free interest rates 0.70% 0.25% 0.25%Expected life of option grants (in years) 3 3 3Expected volatility of underlying stock 38.9% 47.4% 63.2%Expected quarterly dividends (per share)$ 0.08 $ 0.07 $ 0.06 Under the long-term component, grants of performance share units (“PSUs”) are made annually to key employees and theshare units are earned based on the achievement of certain overall corporate financial performance targets over theperformance period. At the end of the performance period, the number of shares of common stock issued will be determinedby adjusting upward or downward from the target in a range between 50% and 200%. No shares will be issued if theminimum performance threshold is not achieved. The final performance percentage, on which the payout will be based,considering the performance metrics established for the performance period, will be certified by the CompensationCommittee of the Board of Directors. 52Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The awards granted by the Committee provided that the PSUs will be converted to shares of common stock if the Company’sEBITDA (earnings before interest, taxes, depreciation and amortization) and return on assets meet specified levels approvedby the Committee. A participant’s right to any shares that are earned will vest in three equal installments. An executivewhose employment terminates prior to the vesting of any installment for a reason other than death, disability, retirement, orfollowing a change in control, will forfeit the shares represented by that installment. In certain circumstances, such as death,disability, or retirement, PSUs are paid on a pro-rata basis. In the event of a change in control, vesting of the awards grantedis accelerated.A summary of the awards activity under the executive compensation program during the year ended June 30, 2014 is asfollows: Annual Component Performance Stock Units Weighted Number Average Aggregate Number Aggregate of Exercise Intrinsic of Intrinsic Shares Price Value Shares Value Non-vested, June 30, 2013105,967 $ 23.68 $ 1,683,260 41,003 $ 2,162,926Granted15,608 39.56 87,220 Vested(68,504) 22.49 2,308,140 (58,584) 2,386,361Forfeited(639) 28.78 (29,273) Non-vested, June 30, 201452,432 $ 29.91 $ 1,360,566 40,366 $ 2,156,759 Restricted stock awards granted under the annual component of this program in fiscal 2014, 2013, and 2012 had a grant datefair value of $69.47, $55.61, and $40.78, respectively. The PSUs granted in fiscal 2014, 2013 and 2012 had a grant date fairvalue of $54.48, $44.20, and $26.60, respectively. The total intrinsic value of awards vested under the executivecompensation program during the years ended June 30, 2014, 2013 and 2012 was $2.2 million, $3.1 million, and $5.4million, respectively.The Company recognized compensation expense related to the PSUs of $2.7 million, $1.3 million, and $2.1 million for theyears ended June 30, 2014, 2013 and 2012, respectively. The total unrecognized compensation costs related to non-vestedperformance share units was $1.3 million at June 30, 2014, which is expected to be recognized over a weighted averageperiod of 1.90 years. Employee Stock Purchase PlanThe Company has an Employee Stock Purchase Plan that allows employees to purchase shares of common stock of theCompany at a discount from the market each quarter. Shares of our stock may be purchased by employees quarterly at 95%of the fair market value on the last day of each quarter. Shares of stock reserved for the plan were 97,890 at June 30, 2014. Shares purchased under this plan aggregated 4,473, 5,813, and 9,185 in 2014, 2013 and 2012, respectively, at an averageprice of $58.54, $48.16, and $34.48, respectively. 14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)The components of the Company’s accumulated other comprehensive income (loss) at June 30 are as follows (in thousands): 2014 2013Foreign currency translation adjustment $ 9,800 $ 3,745Unrealized pension losses, net of tax (64,968) (67,857)Unrealized losses on derivative instruments, net of tax (651) (1,168)Total $ (55,819) $ (65,280) 53Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.15. DISCONTINUED OPERATIONSIn June 2014, the Company divested the American Foodservice Company, a manufacturer of custom design and fabricationof counter systems and cabinets, in our Food Service Equipment Group segment. In connection with this sale, the Companyreceived proceeds of $3.1 million and recorded a net loss on disposal of $3.2 million. In December 2011, the Company divested the Air Distribution Products Group, (“ADP”). In connection with this sale, theCompany adjusted the carrying value of ADP’s assets to their net realizable value based on a range of expected sale prices. As a result, the Company recorded goodwill impairment charges of $14.9 million and impairment charges of $5.0 million tofixed assets.On March 30, 2012, ADP was sold to a private equity buyer for consideration of $16.1 million consisting of $13.1 million incash and a $3.0 million note secured by first mortgages on three ADP facilities. During the quarter ended March 31, 2012,additional pre-tax charges of $2.6 million were taken in connection with the closing of the sale. These charges relatedprimarily to the impairment of a non-cancellable lease liability that the buyer elected not to assume as part of the purchase.During 2014, the Company received notice that its obligations under a guarantee provided to the buyers of ADP weretriggered as a result of its withdrawal from both of the multi-employer pension plans in which ADP previously participated. As a result, the Company has recorded charges of $1.6 million in excess of the value of the guarantee previously recorded inorder to fully settle these obligations. The following table summarizes the Company’s discontinued operations activity, by operation, for the years ended June 30,2014, 2013 and 2012 (in thousands): Year Disposed2014 2013 2012Sales: American Foodservice Company2014 $ 20,556 $ 27,870 $ 24,054Air Distribution Products Group2012 - - 43,537 20,556 27,870 67,591Income (loss) before taxes: American Foodservice Company (1)2014 (8,339) 1,934 1,220Air Distribution Products Group2012 (1,849) (451) (24,871)Other loss from discontinued operations (387) (207) (453)Income (loss) before taxes from discontinued operations (10,575) 1,276 (24,104)(Provision) benefit for tax 3,692 (482) 9,113Net income (loss) from discontinued operations $ (6,883) $ 794 $ (14,991) (1) American Foodservice Company incurred a pretax operational loss of $3.5 million and pretax loss on sale of $4.8 million.Assets and liabilities related to discontinued operations to be retained by the Company are recorded in the ConsolidatedBalance Sheets at June 30 under the following captions (in thousands): 2014 2013Current assets$ 199$ 483Non-current assets 3,014 3,000Current liabilities 2,340 795Non-current liabilities 1,791 3,21916. RESTRUCTURINGThe Company has undertaken a number of initiatives that have resulted in severance, restructuring, and related charges. Asummary of charges by initiative is as follows (in thousands):54Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Involuntary Employee Severance and Year Ended June 30, Benefit Costs Other Total 2014 2014 Restructuring Initiatives $ 1,528 $ 8,477 $ 10,005 Prior Year Initiatives 72 - 72 Total expense $ 1,600 $ 8,477 $ 10,077 2013 2013 Restructuring Initiatives $ 1,299 $ 1,367 $ 2,666 Prior Year Initiatives - - - Total expense $ 1,299 $ 1,367 $ 2,666 2012 2012 Restructuring Initiatives $ 901 $ 206 $ 1,107 Prior Year Initiatives 87 491 578 Total expense $ 988 $ 697 $ 1,685 2014 Restructuring InitiativesOn August 23, 2013 the Company announced a consolidation of its Cheyenne, Wyoming plant into its Mexico facilityand other cooking solutions operations in North America. Restructuring expenses of $10.1 million in the fiscal year 2014are composed of $9.2 million at Food Service Equipment primarily related to the announced closure of the Cheyenne,Wyoming facility, which includes a non-cash impairment charge of $5.4 million.Activity in the reserves related to 2014 restructuring initiatives is as follows (in thousands): Involuntary Employee Severance and Benefit Costs Other TotalRestructuring Liabilities at June 30, 2013$ 10 $ - $ 10 Additions 1,528 3,051 4,579 Payments (983) (3,051) (4,034)Restructuring Liabilities at June 30, 2014$ 555 $ - $ 555 Prior Year InitiativesDuring the first half of 2013, the Company began a new headcount reduction program in its European Engraving Groupoperations as part of the realignment of the Group’s global footprint. Restructuring cost of $0.6 million related to thisactivity was substantially completed for the year ended June 30, 2013. During the third quarter, the Company completed themove and startup of the Sao Paolo, Brazil, Engraving Group facility to a location more suited to the Group’s operationalneeds. Restructuring expenses for the year ended June 30, 2013 related to these activities were $1.5 million. Also during theyear as redundant positions due to the Meder acquisition are being eliminated the Company incurred $0.4 million ofrestructuring costs in China, which was substantially completed for the year ended June 30, 2013.Activity in the reserves related to prior year restructuring initiatives is as follows (in thousands):55Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Involuntary Employee Severance and Benefit Costs Other TotalRestructuring Liabilities at June 30, 2012$ 41 $ - $ 41 Additions - - Payments (41) - (41)Restructuring Liabilities at June 30, 2013$ - $ - $ - Additions 72 - 72 Payments (72) - (72)Restructuring Liabilities at June 30, 2014$ - $ - $ - The Company’s total restructuring expenses by segment are as follows (in thousands): Involuntary Employee Severance and Benefit Year Ended June 30, Costs Other Total 2014Food Service Equipment Group $ 746 $ 8,408 $ 9,154Engraving Group 667 21 688Electronics Products Group 187 48 235 Total expense $ 1,600 $ 8,477 $ 10,077 2013Food Service Equipment Group $ 183 $ 25 $ 208Engineering Technologies Group 44 - 44Engraving Group 776 1,253 2,029Electronics Products Group 296 89 385 Total expense $ 1,299 $ 1,367 $ 2,666 2012Food Service Equipment Group $ 279 $ 647 $ 926Engraving Group 683 50 733Corporate 26 - 26 Total expense $ 988 $ 697 $ 1,685 17. EMPLOYEE BENEFIT PLANSRetirement PlansThe Company has defined benefit pension plans covering certain current and former employees both inside and outside ofthe U.S. The Company’s pension plan for U.S. salaried employees was frozen as of December 31, 2007, and participants inthe plan ceased accruing future benefits. The Company’s pension plan for U.S. hourly employees was frozen forsubstantially all participants as of July 31, 2013, and replaced with a defined contribution benefit plan. Based on changes tothe plan, the Company recorded a reduction in U.S. non-cash pension plan expense of $2.6 million as compared to 2013,which was partially offset by increased expenses associated with the implementation of the defined contribution benefitprogram. 56Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Net periodic benefit cost for U.S. and non-U.S. plans included the following components (in thousands):Components of NetPeriodic Benefit CostPension Benefits U.S. Plans Foreign Plans Year Ended June 30, Year Ended June 30, 2014 2013 2012 2014 2013 2012Service Cost$ 233 $ 702 $ 447 $ 46 $ 40 $ 34Interest Cost 11,241 10,941 11,975 1,723 1,667 1,758Expected returnon plan assets (13,513) (14,790) (15,333) (1,532) (1,339) (1,527)Recognized netactuarial loss 3,941 7,577 4,814 819 901 527Amortization ofprior service cost(benefit) 57 98 111 (60) (57) (59)Amortization oftransition Obligation (asset) - 2 2 - - - Curtailment - 52 - - - - Net periodicbenefit cost(benefit) $ 1,959 $ 4,582 $ 2,016 $ 996 $ 1,212 $ 733 The following table sets forth the funded status and amounts recognized as of June 30, 2014 and 2013 for our U.S. andforeign defined benefit pension plans (in thousands): U.S. Plans Foreign Plans Year Ended June 30, Year Ended June 30, 2014 2013 2014 2013Change in benefit obligation Benefit obligation at beginning of year$ 227,874 $ 45,212 $ 37,897 $ 37,527Service cost 233 702 46 40Interest cost 11,241 10,941 1,723 1,667Actuarial loss (gain) 16,317 (12,366) 2,161 705Benefits paid (15,239) (14,776) (1,662) (1,361)Curtailment - (1,839) - - Foreign currency exchange rate - - 4,113 (681)Projected benefit obligation at end of year$ 240,426 $ 227,874 $ 44,278 $ 37,897 Change in plan assets Fair value of plan assets at beginning of year$ 200,174 $ 198,718 $ 30,889 $ 29,138Actual return on plan assets 30,956 12,825 3,034 2,805Employer contribution 152 3,407 1,375 1,171Benefits paid (15,239) (14,776) (1,662) (1,361)Foreign currency exchange rate - - 3,851 (864)Fair value of plan assets at end of year$ 216,043 $ 200,174 $ 37,487 $ 30,889 Funded Status$ (24,383) $ (27,700) $ (6,791) $ (7,008) 57Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Amounts recognized in the consolidated balance sheets consist of: Prepaid Benefit Cost$ - $ - $ 1,167 $ 99Current liabilities (199) (149) (327) (1,120)Non-current liabilities (24,184) (27,551) (7,631) (5,987)Net amount recognized$ (24,383) $ (27,700) $ (6,791) $ (7,008) Unrecognized net actuarial loss 92,036 97,103 10,506 9,651Unrecognized prior service cost 312 370 (220) (267)Accumulated other comprehensive income, pre-tax$ 92,348 $ 97,473 $ 10,286 $ 9,384 The accumulated benefit obligation for all defined benefit pension plans was $283.7 million and $264.9 million at June 30,2014 and 2013, respectively.The estimated actuarial net loss and prior service benefit for the defined benefit pension plans that will be amortized fromaccumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $4.8 million and lessthan $0.1 million, respectively.Plan Assets and AssumptionsThe fair values of the Company’s pension plan assets at June 30, 2014 and 2013 by asset category, as classified in the threelevels of inputs described in Note 1 under the caption Fair Value of Financial Instruments, are as follows (in thousands): June 30, 2014 Total Level 1 Level 2 Level 3 Cash and cash equivalents$ 3,078 $ 287 $ 2,791 $ - Common and preferred stocks 107,498 16,754 90,744 - U.S. Government securities 13,334 - 13,334 - Corporate bonds and other fixed incomesecurities 118,131 7,297 110,834 - Other 11,488 - 11,488 - $ 253,529 $ 24,338 $ 229,191 $ - June 30, 2013 Total Level 1 Level 2 Level 3 Cash and cash equivalents$ 726 $ 439 $ 287 $ - Common and preferred stocks 107,130 18,824 88,306 - U.S. Government securities 13,018 - 13,018 - Corporate bonds and other fixed incomesecurities 101,990 775 101,215 - Other 8,196 - 8,196 - $ 231,060 $ 20,038 $211,022 $ - Asset allocation at June 30, 2014 and 2013 and target asset allocations for 2014 are as follows: U.S. Plans Foreign Plans Year Ended June 30, Year Ended June 30, 2014 2013 2014 2013Asset Category Equity securities32% 38% 26% 35%Debt securities28% 25% 73% 64%Global balanced securities28% 27% - - Other12% 10% 1% 1%Total100% 100% 100% 100%58Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 2014Asset Category – TargetU.S. U.K.Equity securities32% 25%Debt and market neutral securities33% 75%Global balanced securities25% 0%Other10% 0%Total100% 100%Our investment policy for the U.S. pension plans targets a range of exposure to the various asset classes. Standex rebalancesthe portfolio periodically when the allocation is not within the desired range of exposure. The plan seeks to provide returnsin excess of the various benchmarks. The benchmarks include the following indices: S&P 500; Citigroup PMI EPAC;Citigroup World Government Bond and Barclays Aggregate Bond. A third party investment consultant tracks the plan’sportfolio relative to the benchmarks and provides quarterly investment reviews which consist of a performance and riskassessment on all investment managers and on the portfolio. Certain managers within the plan use, or have authorization to use, derivative financial instruments for hedging purposes,the creation of market exposures and management of country and asset allocation exposure. Currency speculationderivatives are strictly prohibited.Year Ended June 302014 2013 2012Plan assumptions - obligation Discount rate2.90 - 4.50% 3.50 - 5.10% 4.00 - 4.60%Rate of compensation increase3.80% 3.50 - 3.90% 3.40 - 3.50% Plan assumptions - cost Discount rate3.50 - 5.10% 4.00 - 4.60% 5.50 - 6.00%Expected return on assets4.60 - 7.25% 4.80 - 7.80% 5.40 - 8.10%Rate of compensation increase3.90% 3.40 - 3.50% 3.50 - 4.00%Included in the above are the following assumptions relating to the obligations for defined benefit pension plans in theUnited States at June 30, 2014; a discount rate of 4.5% and expected return on assets of 7.25%. The U.S. defined benefitpension plans represent the majority of our pension obligations. The expected return on plan assets assumption is based onour expectation of the long-term average rate of return on assets in the pension funds and is reflective of the current andprojected asset mix of the funds. The discount rate reflects the current rate at which pension liabilities could be effectivelysettled at the end of the year. The discount rate is determined by matching our expected benefit payments from a stream ofAA- or higher bonds available in the marketplace, adjusted to eliminate the effects of call provisions.Expected benefit payments for the next five years are as follows: 2015, $16.6 million; 2016,$16.6 million; 2017, $16.8 million; 2018, $16.9 million; 2019, $17.1 million and thereafter, $87.0 million. The Companyexpects to make $1.7 million of contributions to its pension plans in 2015.The Company operates a defined benefit plan in Germany which is unfunded.Multi-Employer Pension PlansWe contribute to a number of multiemployer defined benefit plans under the terms of collective bargaining agreements thatcover our union-represented employees. These plans generally provide for retirement, death and/or termination benefits foreligible employees within the applicable collective bargaining units, based on specific eligibility/participationrequirements, vesting periods and benefit formulas. The risks of participating in these multiemployer plans are differentfrom single-employer plans in the following aspects:·Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees ofother participating employers.·If a participating employer stops contributing to the multiemployer plan, the unfunded obligations of the plan maybe borne by the remaining participating employers.59Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.·If we choose to stop participating in some of our multiemployer plans, we may be required to pay those plans anamount based on the underfunded status of the plan, referred to as a withdrawal liability. However, cessation ofparticipation in a multiemployer plan and subsequent payment of any withdrawal liability is subject to thecollective bargaining process.The following table outlines the Company’s participation in multiemployer pension plans for the periods ended June 30,2014, 2013, and 2012, and sets forth the yearly contributions into each plan. The “EIN/Pension Plan Number” columnprovides the Employer Identification Number (“EIN”) and the three-digit plan number. The most recent Pension ProtectionAct zone status available in 2014 and 2013 relates to the plans’ two most recent fiscal year-ends. The zone status is based oninformation that we received from the plans’ administrators and is certified by each plan’s actuary. Among other factors,plans certified in the red zone are generally less than 65% funded, plans certified in the orange zone are both less than 80%funded and have an accumulated funding deficiency or are expected to have a deficiency in any of the next six plan years,plans certified in the yellow zone are less than 80% funded, and plans certified in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates whether a financial improvement plan (“FIP”) foryellow/orange zone plans, or a rehabilitation plan (“RP”) for red zone plans, is either pending or has been implemented. Forall plans, the Company’s contributions do not exceed 5% of the total contributions to the plan in the most recent year. Pension Protection Act ZoneStatusContributions Pension FundEIN/PlanNumber20142013FIP/RP Status2014 2013 2012 SurchargeImposed?ExpirationDate ofCollectiveBargainingAgreementNew EnglandTeamsters andTruckingIndustry PensionFund04-6372430-001RedRedYes/Implemented$541 $427 $367 No 4/15/2015IAM NationalPension Fund,National PensionPlan51-6031295-002GreenGreenNo 659 623 584 No 5/31/2015 -10/14/16 $ 1,200 $1,050 $ 951 Retirement Savings PlansThe Company has two primary employee savings plans, one for salaried employees and one for hourly employees. Substantially all of our full-time domestic employees are covered by these savings plans. Under the provisions of the plans,employees may contribute a portion of their compensation within certain limitations. The Company, at the discretion of theBoard of Directors, may make contributions on behalf of our employees under the plans. Company contributions were $4.0million, $4.1 million, and $4.1 million for the years ended June 30, 2014, 2013, and 2012, respectively. At June 30, 2014,the salaried plan holds approximately 120,000 shares of Company common stock, representing approximately 10% of theholdings of the plan.Postretirement Benefits Other Than PensionsThe Company sponsors an unfunded postretirement medical plan covering certain full-time employees who retire and haveattained the requisite age and years of service. Retired employees are required to contribute toward the cost of coverageaccording to various established rules.The accumulated benefit obligation of the post-retirement medical plan was less than $0.2 million at both June 30, 2014 andJune 30, 2013. The plan holds no assets as the Company makes contributions as benefits are due. Contributions for each ofthe last two fiscal years were less than $0.1 million. The assumed weighted average discount rate was 4.50% and 5.10% as ofJune 30, 2014 and 2013, respectively. A 1% increase in the assumed health care cost trend rate does not impact either theaccumulated benefit obligation or the net postretirement cost, as the employer contribution for each participant is a fixedamount.60Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Effective January 1, 2013, the Company terminated its life insurance benefit provided to certain current and future retirees,resulting in a curtailment and settlement of the plan’s obligations. The Company recorded a $2.3 million benefit of thesettlement and curtailment as a component of selling general and administrative expenses during the third quarter of 2013. The following table sets forth the postretirement benefit cost reflected in the consolidated income statement sheet at yearend (in thousands):Components of Net Periodic Benefit Cost (in thousands) Year Ended June 30, 2014 2013 2012Service Cost$ - $ 13 $ 19Interest Cost 9 49 101Recognized net actuarial gain (7) (24) (55)Curtailment - 51 - Plan Settlement - (2,329) - Amortization of transition obligation - 112 223Net periodic benefit cost$ 2 $ (2,128) $ 288 18. INDUSTRY SEGMENT INFORMATIONThe Company has determined that it has five reportable segments organized around the types of product sold:•Food Service Equipment Group– an aggregation of seven operating segments that manufacture and sell commercialfood service equipment;•Engraving Group – provides mold texturizing, slush molding tools, project management and design services, rollengraving, hygiene product tooling, low observation vents for stealth aircraft, and process machinery for a numberof industries;•Engineering Technologies Group – provides customized solutions in the fabrication and machining of engineeredcomponents for the aerospace, aviation, energy, aviation, medical, oil and gas, and general industrial markets.•Electronics Products Group – manufacturing and selling of electronic components for applications throughout theend-user market spectrum; and•Hydraulics Products Group – manufacturing and selling of single- and double-acting telescopic and piston rodhydraulic cylinders.Net sales include only transactions with unaffiliated customers and include no significant intersegment or export sales. Operating income by segment and geographic area excludes general corporate and interest expenses. Assets of theCorporate segment consist primarily of cash, office equipment, and other non-current assets.Given the nature of our corporate expenses, management has concluded that it would not be appropriate to allocate theexpenses associated with corporate activities to our operating segments. These corporate expenses include the costs for thecorporate headquarters, salaries and wages for the personnel in corporate, professional fees related to corporate matters andcompliance efforts, stock-based compensation and post-retirement benefits related to our corporate executives, officers anddirectors, and other compliance related costs. The Company has a process to allocate and recharge certain direct costs to theoperating segments when such direct costs are administered and paid at corporate. Such direct expenses that are rechargedon an intercompany basis each month include such costs as insurance, workers’ compensation programs, audit fees andpension expense. The accounting policies applied by the reportable segments are the same as those described in theSummary of Accounting Policies footnote to the consolidated financial statements. There are no differences in accountingpolicies which would be necessary for an understanding of the reported segment information.61Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Industry Segments (in thousands)Net Sales Depreciation and Amortization 2014 2013 2012 2014 2013 2012Food ServiceEquipment$ 377,848 $ 367,008 $64,759 $ 4,485 $ 4,930 $ 4,994Engraving 109,271 93,380 93,611 3,342 3,226 3,293EngineeringTechnologies 79,642 74,838 74,088 3,063 3,288 3,188Electronics Products 114,881 108,085 48,206 2,807 2,986 878Hydraulics Products 34,538 30,079 29,922 625 566 518Corporate and Other - - - 269 239 271Total$ 716,180 $ 673,390 $610,586 $ 14,591 $ 15,235 $ 13,142 Income (Loss) From Operations Capital Expenditures 2014 2013 2012 2014 2013 2012Food ServiceEquipment$ 38,203 $ 37,533 $ 38,389 $ 3,740 $ 3,149 $ 2,318Engraving 22,145 15,596 17,896 4,648 5,106 2,223EngineeringTechnologies 12,676 13,241 14,305 7,686 1,734 2,577Electronics Products 19,732 16,147 8,715 1,631 3,243 963Hydraulics Products 5,781 4,968 4,403 684 580 304Restructuring charge (10,077) (2,666) (1,685) - - - Gain on sale of realestate - - 4,776 - - - Other operatingincome (expense),net 3,462 - - - - - Corporate (26,054) (22,924) (23,443) 1,531 568 13Total$ 65,868 $ 61,895 $ 63,356 $19,920 $14,380 $ 8,398Interest expense (2,249) (2,469) (2,280) Other, net 4,184 (128) 519 Income fromcontinuingoperations before income taxes$ 67,803 $ 59,298 $ 61,595 Goodwill Identifiable Assets 2014 2013 2014 2013Food ServiceEquipment$ 56,731 $ 45,790 $ 214,674 $ 192,895Engraving 20,716 20,614 101,106 88,064EngineeringTechnologies 12,188 10,861 75,591 68,597Electronics Products 33,272 31,582 103,699 94,369Hydraulics Products 3,058 3,058 16,410 15,250Corporate & Other - - 66,680 51,398Total$ 125,965 $ 111,905 $ 578,160 $ 510,573 Net sales (1) 2014 2013 2012United States$ 505,853 $ 488,048 $ 466,248Asia Pasific 53,551 51,664 28,739EMEA (2) 130,602 113,367 91,819Other Americas 26,174 20,311 23,780Total$ 716,180 $ 673,390 $ 610,586(1) Net sales were identified based on geographic location where our products and services were initiated.(2) EMEA consists primarily of Europe, Middle East and S. Africa.Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.62Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Long-lived assets 2014 2013 2012United States$ 59,225 $ 58,890 $ 60,327Asia Pasific 5,627 4,166 2,658EMEA (2) 23,266 22,065 11,846Other Americas 8,579 7,421 5,075Total$ 96,697 $ 92,542 $ 79,90619. GAIN ON SALE OF REAL ESTATEDuring, 2012, the Company completed the sale of an Engraving Group facility in Sao Paolo, Brazil, which was replaced by aleased facility more suited to the Company’s operational needs. Proceeds from the sale were $5.1 million and the saleresulted in a pre-tax gain of $4.8 million, net of related costs.20. INSURANCE PROCEEDSDuring 2014, the Company recorded $3.5 million net gain, as a component of other operating income net, from insuranceproceeds we received related to a catastrophic failure of a large vertical machining center located at our EngineeringTechnologies facility in Massachusetts. Insurance proceeds of $4.5 million were partially offset by the write-off of the netbook value of the machine of $1.0 million. We have acquired a replacement machine for approximately $2.9 million andanticipate being operational in the first half of the first quarter of 2015.During 2014, the Company recorded $3.4 million gain, as a component of other net, from proceeds for a life insurancepolicy triggered by the death of a former executive. This life insurance policy relates to an inactive program for keyexecutives. There are six retired executives remaining in this program and current management is ineligible to participate.21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)The unaudited quarterly results of operations for the years ended June 30, 2014 and 2013 are as follows (in thousands,except for per share data): 2014 First Second Third FourthNet sales$ 178,140 $ 166,540 $ 174,160 $ 197,340Gross profit 60,405 55,894 57,572 64,398Net income (loss) 9,082 10,517 13,220 10,047EARNINGS PER SHARE (1) Basic$ 0.97 $ 0.84 $ 1.05 $ 1.08 Diluted$ 0.96 $ 0.83 $ 1.04 $ 1.07 2013 First Second Third FourthNet sales$ 176,611 $ 160,866 $ 160,090 $ 175,823Gross profit 57,320 54,061 50,826 55,988Net income (loss) 11,830 10,961 9,561 12,500EARNINGS PER SHARE (1) Basic$ 0.09 $ 0.84 $ 0.75 $ 0.98 Diluted$ 0.91 $ 0.83 $ 0.74 $ 0.97(1) Basic and diluted earnings per share are computed independently for each reporting period. Accordingly,the sum of the quarterly earnings per share amounts may not agree to the year-to-date amounts.63Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.22. SUBSEQUENT EVENTOn August 15, 2014, the Company signed a Stock Purchase Agreement to acquire Ohio-based Enginetic Corporation,(“Enginetics”), a leading producer of aircraft engine components for all major aircraft platforms for approximately $55.2million in cash. Enginetics will report to our Engineering Technologies Group and the completion of the transaction issubject to customary closing conditions and is anticipated to close in September 2014.64Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofStandex International CorporationSalem, New HampshireWe have audited the accompanying consolidated balance sheets of Standex International Corporation and subsidiaries (the"Company") as of June 30, 2014 and 2013, and the related consolidated statements of operations, comprehensive income,stockholders' equity, and cash flows for each of the three years in the period ended June 30, 2014. These consolidatedfinancial statements are the responsibility of the Company's management. Our responsibility is to express an opinion onthese financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position ofStandex International Corporation and subsidiaries as of June 30, 2014 and 2013, and the results of their operations andtheir cash flows for each of the three years in the period ended June 30, 2014, in conformity with accounting principlesgenerally accepted in the United States of America.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),the Company's internal control over financial reporting as of June 30, 2014, based on the criteria established in InternalControl—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commissionand our report dated August 28, 2014 expressed an unqualified opinion on the Company's internal control over financialreporting./s/ Deloitte & Touche LLPBoston, MassachusettsAugust 28, 201465Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 9. Changes In and Disagreements with Accountants on Accounting and Financial DisclosureNot ApplicableItem 9A. Controls and ProceduresThe management of the Company including its Chief Executive Officer, and Chief Financial Officer, have conducted anevaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) as of the end of theperiod covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concludedas of June 30, 2014, that the disclosure controls and procedures are effective in ensuring that the information required to bedisclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarizedand reported within the time periods specified in the Commission's rules and forms and (ii) that such information isaccumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief FinancialOfficer as appropriate to allow timely decisions regarding required disclosure. SEC guidance permits the exclusion of an evaluation of the effectiveness of a registrant's disclosure controls and proceduresas they relate to the internal control over financial reporting for an acquired business during the first year following suchacquisition. As discussed in Note 2 to the consolidated financial statements contained in this Report, the Company acquiredall of the outstanding stock of Ultrafryer Systems, Inc., (“Ultrafryer”) on June 20, 2014. Ultrafryer represents less than 1% ofthe Company's consolidated revenue for the period ended June 30, 2014 and approximately 4.5% of the Company'sconsolidated assets at June 30, 2014. Management's evaluation and conclusion as to the effectiveness of the design andoperation of the Company’s disclosure controls and procedures as of June 30, 2014 excludes any evaluation of the internalcontrol over financial reporting of Ultrafryer.There were no changes in the Company’s internal control over financial reporting identified in connection withmanagement’s evaluation that occurred during the fourth quarter of our fiscal year (ended June 30, 2014) that has materiallyaffected, or is reasonably likely to materially affect our internal control over financial reporting.Management's Report on Internal Control over Financial ReportingThe management of Standex is responsible for establishing and maintaining adequate internal control over financialreporting (as defined in Section 240.13a-15(f) of the Exchange Act). The Company’s internal control over financialreporting is designed to provide reasonable assurance as to the reliability of the Company’s financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management, including the Chief Executive Officer and the Chief Financial Officer, assessed the effectiveness of ourinternal control over financial reporting as of the end of the fiscal year covered by this report on Form 10-K. In making thisassessment, management used the criteria established by the Committee of Sponsoring Organizations of the TreadwayCommission in “Internal Control-Integrated Framework (1992).” These criteria are in the areas of control environment, riskassessment, control activities, information and communication and monitoring. Management’s assessment includeddocumenting, evaluating and testing the design and operating effectiveness of our internal control over financial reporting.Based on the Company’s processes, as described above, management, including the Chief Executive Officer and the ChiefFinancial Officer, has concluded that our internal control over financial reporting was effective as of June 30, 2014 toprovide reasonable assurance of achieving its objectives. These results were reviewed with the Audit Committee of theBoard of Directors. Deloitte & Touche LLP, the independent registered public accounting firm that audited ourconsolidated financial statements included in this Annual Report on Form 10-K, has issued an unqualified attestation reporton the Company’s internal control over financial reporting, which is included below.Inherent Limitation on Effectiveness of ControlsNo matter how well designed, internal control over financial reporting has inherent limitations. Internal control overfinancial reporting determined to be effective can provide only reasonable, not absolute, assurance with respect to financialstatement preparation and may not prevent or detect all misstatements that might be due to error or fraud. In addition, adesign of a control system must reflect the fact that there are resource constraints, and the benefits of controls must beconsidered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls canprovide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.66Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofStandex International CorporationSalem, New HampshireWe have audited the internal control over financial reporting of Standex International Corporation and subsidiaries (the"Company") as of June 30, 2014, based on criteria established in Internal Control — Integrated Framework (1992) issued bythe Committee of Sponsoring Organizations of the Treadway Commission. As described in “Management’s Annual Reporton Internal Control over Financial Reporting”, management excluded from its assessment the internal control over financialreporting at Ultrafryer Systems, Inc. (“Ultrafryer”), which was acquired on June 20, 2014, and whose financial statementsconstitute 6.1% and 4.5% of net and total assets, respectively, and less than 1% each of revenues and net income of theconsolidated financial statements as of and for the year ended June 30, 2014. Accordingly, our audit did not include theinternal controls over financial reporting at Ultrafryer. The Company's management is responsible for maintaining effectiveinternal control over financial reporting and for its assessment of the effectiveness of internal control over financialreporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effectiveinternal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for ouropinion.A company's internal control over financial reporting is a process designed by, or under the supervision of, the company'sprincipal executive and principal financial officers, or persons performing similar functions, and effected by the company'sboard of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles. A company's internal control over financial reporting includes those policies and procedures that (1)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositionsof the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,or disposition of the company's assets that could have a material effect on the financial statements.Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion orimproper management override of controls, material misstatements due to error or fraud may not be prevented or detected ona timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting tofuture periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate.In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2014, based on the criteria established in Internal Control — Integrated Framework (1992) issued by theCommittee of Sponsoring Organizations of the Treadway Commission.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates), the consolidated financial statements as of and for the year ended June 30, 2014 of the Company and our reportdated August 28, 2014 expressed an unqualified opinion on those financial statements./s/ Deloitte & Touche LLPBoston, MassachusettsAugust 28, 2014  67Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 9B. Other InformationNonePART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe Company will file with the Securities and Exchange Commission (“SEC”) a definitive Proxy Statement no later than120 days after the close of the fiscal year ended June 30, 2014 (the “Proxy Statement”). The information required by thisitem and not provided in Part 1 of this report under Item 1 “Executive Officers of Standex” is incorporated by reference fromthe Proxy Statement under the captions “Election of Directors,” “Stock Ownership in the Company,” “Other InformationConcerning the Company, Board of Directors and its Committees” and “Section 16(a) Beneficial Ownership ReportingCompliance.”There have been no material changes to the procedures by which security holders may recommend nominees to our board ofdirectors. Information regarding the process for identifying and evaluating candidates for director are set forth andincorporated in reference to the information in the Proxy Statement under the caption “Corporate Governance/NominatingCommittee Report.”Information regarding the Audit Committee Financial Expert and the identification of the Audit Committee is incorporatedby reference to the information in the Proxy Statement under the caption “Other Information Concerning the CompanyBoard of Directors and its Committee, Audit Committee.” The Audit Committee is established in accordance with Section3(a)(58)(A) of the Securities Exchange Act.We maintain a corporate governance section on our website, which includes our code of ethics for senior financialmanagement that applies to our chief executive officer, principal financial officer, principal accounting officer, controller orpersons performing similar functions. Our corporate governance section also includes our code of business conduct andethics for all employees. In addition, we will promptly post any amendments to or waivers of the code of ethics for seniorfinancial management on our website. You can find this and other corporate governance information at www.standex.com. Item 11. Executive CompensationInformation regarding executive compensation is incorporated by reference from the Proxy Statement under the captionsand sub-captions: “Executive Compensation,” “Compensation Discussion and Analysis,” “Report of the CompensationCommittee,” “2014 Summary Compensation Table,” “Other Information Concerning the Company Board of Directors andIts Committees,” and “Directors Compensation.” Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe stock ownership of each person known to Standex to be the beneficial owner of more than 5% of its Common Stock isincorporated by reference in the Proxy Statement under the caption “Stock Ownership of Certain Beneficial Owners.” Thebeneficial ownership of Standex Common Stock of all directors and executive officers of the Company is incorporated byreference in the Proxy Statement under the caption and sub-caption “Stock Ownership in the Company” and “StockOwnership by Directors, Nominees for Directors and Executive Officers,” respectively.68Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The Equity Compensation Plan table below presents information regarding the Company’s equity based compensation planat June 30, 2014. (A) (B) (C) Number of Securities Remaining Available Number of Securities Weighted-Average For Future Issuance To Be Issued Upon Exercise Price Of Under Equity Exercise Of Outstanding Compensation Plans Outstanding Options, Options, Warrants (Excluding SecuritiesPlan CategoryWarrants And Rights And Rights reflected in Column (A)) Equity compensation plans approved by stockholders 278,129 $ 5.64 458,513 Equity compensation plans notapproved by stockholders - - - Total278,129 $ 5.64 458,513 The Company has one equity compensation plan, approved by stockholders, under which equity securities of the Companyhave been authorized for issuance to employees and non-employee directors. This plan is further described in the “Notes toConsolidated Financial Statements” under the heading “Stock-Based Compensation and Purchase Plans.”Item 13. Certain Relationships and Related Transactions and Director IndependenceInformation regarding certain relationships and related transactions is incorporated by reference in the Proxy Statementunder the caption and sub-caption “Certain Relationships and Related Transactions” And “Stock Ownership by Directors,Nominees for Director and Executive Officers,” respectively.Information regarding director independence is incorporated by reference in the Proxy Statement under the caption“Election of Directors - Determination of Independence.”Item 14. Principal Accountant Fees and ServicesThis Information in addition to information regarding aggregate fees billed for each of the last two fiscal years forprofessional services rendered by the professional accountant for audit of the Company’s annual financial statements andreview of financial statements included in the Company’s Form 10-K as well as others are incorporated by reference in theProxy Statement under the caption “Independent Auditors’ Fees.”PART IVItem 15. Exhibits and Financial Statement Schedules(a)(1)Financial StatementsFinancial Statements covered by the Report of Independent Registered Public Accounting Firm(A)Consolidated Statements of Operations for the fiscal years ended June 30, 2014, 2013 and 2012(B)Consolidated Balance Sheets as of June 30, 2014 and 2013(C)Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the fiscal years endedJune 30, 2014, 2013 and 2012(D)Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2014, 2013 and 2012(E)Notes to Consolidated Financial Statements69Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (2)Financial Statements ScheduleThe following financial statement schedule is included as required by Item 8 to this report on Form 10-KSchedule II – Valuation and Qualifying Accounts is included in the Notes to Consolidated FinancialStatementsAll other schedules are not required and have been omitted (3)Exhibits IncorporatedExhibit by Reference Filed Number Exhibit Description Form DateHerewith(b)3.(i)Restated Certificate of Incorporation of Standex,10-Q12/31/1998dated October 27, 1998 filed as Exhibit 3(i).(ii)By-Laws of Standex, as amended, and restated on8-K10/30/2008October 28, 2008 filed as Item 5.03, Exhibit 3.(b)4.(a)Agreement of the Company, dated September 15, 1981,10-K6/30/1981to furnish a copy of any instrument with respect tocertain other long-term debt to the Securities andExchange Commission upon its request filed asExhibit 4.10.(a)Amended and Restated Employment Agreement10-K6/30/2010dated August 25, 2010 between the Companyand Roger L. Fix*(b)Amended and Restated Employment Agreement10-K6/30/2010dated August 25, 2010 between the Companyand John Abbott*(c)Amended and Restated Employment Agreement10-K6/30/2010dated August 25, 2010 between the Companyand Thomas D. DeByle*(d)Amended and Restated Employment Agreement10-K6/30/2010dated August 25, 2010 between the Companyand Deborah A. Rosen*(e)Employment Agreement10-Q9/30/2013August 2, 2012 between the CompanyAnd Michael A. Patterson*(f)Amended and Restated Employment Agreement10-K6/30/2010dated August 25, 2010 between the Companyand James L. Mettling*(g)Standex International Corporation Amended and10-K6/30/2012And Restated 2008 Long Term Incentive Plan,effective October 28, 2008. Filed as Exhibit 10.*(h)Standex International Corporation Executive10-Q3/31/2001Security Program, as amended and restated onJanuary 31, 2001 filed as Exhibit 10(a).*(i)Standex International Corporation Executive Life10-K6/30/2001Insurance Plan effective April 27, 1994 and as70Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Amended and restated on April 25, 2001 filedas Exhibit 10(k).*(j)Standex International Corporation Supplemental10-K6/30/1995Retirement Plan adopted April 26, 1995 andAmended on July 26, 1995 filed as Exhibit 10(n).*(k)Standex International Corporation Key Employee10-K6/30/2003Share Option Plan dated June 27, 2002 filedas Exhibit 10(p).*(l)Form of Indemnification Agreement for directors8-K5/5/2008and executive officers of the Company filed asItem 1.01, Exhibit 10.*(m)Executive Officer long-term performance share8-K8/28/2008Unit awards filed as Item 5.02.*(n)Standex Deferred Compensation Plan for highly8-K1/31/2008compensated employees filed as Item 5.02.*(o)Restricted stock Unit Award granted to Roger L.8-K1/27/2006Fix dated January 25, 2006 filed as Item 1.01.*(p)Credit Agreement dated January 5, 20128-K1/05/2012between the Company and RBS Citizens, N.A.,Bank of America, N.A., Sovereign Bank,T. D. Bank, N.A. and the lenders named in theCredit Agreement as Lenders filed as Exhibit 10.(q)Amendment to Directors’ Compensation Program8-K11/2/2006for members of the Board of Directors of theCompany filed as Item 1.01.*(r)Purchase and Sale Agreement dated February 22,10-Q3/31/20122012 among the Company, Standex Air Distribution,Products, Inc., Snappy Air Distribution Products, Inc.as Sellers and BW HVAC Operations, LLC andBW HVAC Real Estate Holdings, LLC as Buyers(s)Stock Purchase AgreementXdated June 20, 2014 among the Company, asBuyer, and the shareholders of Ultrafryer Systems, Inc.,as Sellers(t)Code of Ethics for chief Executive Officer and10-K6/30/2005Senior Financial Officers is incorporated byreference as Exhibit 14.21.Subsidiaries of Standex International CorporationX23.Consent of Independent Registered PublicXAccounting Firm24.Powers of Attorney of Charles H. Cannon, Thomas E.XChorman, William R. Fenoglio, Gerald H. Fickenscher, Roger L. Fix,Thomas J. Hansen, Daniel B. Hogan, and H. Nicholas Muller, III, Ph. D.71Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.31.1Rule 13a-14(a) Certification of President andXChief Executive Officer31.2Rule 13a-14(a) Certification of Vice President andXChief Financial Officer32.Section 1350 CertificationX101.INSXBRL Instance Document101.SCHXBRL Taxonomy Extension Schema Document101.CALXBRL Taxonomy Extension Calculation Linkbase Document101.DEFXBRL Taxonomy Extension Definition Linkbase Document101.LABXBRL Taxonomy Extension Label Linkbase Document101.PREXBRL Taxonomy Extension Presentation Linkbase Document* Management contract or compensatory plan or arrangement.72Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Standex InternationalCorporation has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereuntoduly authorized, on August 28, 2014.STANDEX INTERNATIONAL CORPORATION(Registrant)/s/ DAVID A. DUNBARDavid A. DunbarPresident/Chief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of Standex International Corporation and in the capacities indicated on August 28, 2014:SignatureTitle/s/ DAVID A. DUNBARPresident/Chief Executive OfficerDavid A. Dunbar/s/ THOMAS D. DEBYLEVice President/Chief Financial OfficerThomas D. DeByle/s/ SEAN VALASHINASChief Accounting OfficerSean ValashinasDavid A. Dunbar, pursuant to powers of attorney which are being filed with this Annual Report on Form 10-K, has signedbelow on August 28, 2014 as attorney-in-fact for the following directors of the Registrant:Charles H. CannonThomas E. ChormanWilliam R. FenoglioH. Nicholas Muller, III, Ph.D.Gerald H. FickenscherDaniel B. Hogan,Roger L. FixThomas J. Hansen/s/ DAVID A. DUNBARDavid A. DunbarSupplemental Information to be furnished with reports filed pursuant to Section 15(d) of the Act by Registrants which havenot registered securities pursuant to Section 12 of the Act.The Company will furnish its 2014 Proxy Statement and proxy materials to security holders subsequent to the filing of theannual report on this Form. Copies of such material shall be furnished to the Commission when they are sent to securityholders.73Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.INDEX TO EXHIBITSPAGE10(s)Stock Purchase Agreement datedJune 20, 2014 among the Company, as buyer, andthe shareholders of Ultrafryer Systems, Inc., as Seller21.Subsidiaries of Standex23.Consentof Independent Registered Public Accounting Firm24.Powers of Attorney of Charles H. Cannon, Thomas E. Chorman,William R. Fenoglio, Gerald Fickenscher, Roger L. Fix, Thomas J.Hansen, Daniel B. Hogan, and H. Nicholas Muller, III, Ph.D.31.1Rule 13a-14(a) Certification of President and Chief Executive Officer31.2Rule 13a-14(a) Certification of Vice President and Chief FinancialOfficer32.Section 1350 CertificationEND OF FORM 10-KSUPPLEMENTAL INFORMATION FOLLOWS74Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Board of DirectorsTitleRoger L. Fix 4ChairmanCharles H. Cannon, Jr.,2, 4Chairman and CEO, JBT CorporationThomas E. Chorman1, 3CEO, Solar LED Innovations, LLCWilliam R. Fenoglio1, 4Former President/CEO, Augat, Inc.Gerald H. Fickenscher1, 3Retired Vice President, Europe, Middle East,and Africa, Crompton CorporationDavid A. Dunbar4President and Chief Executive OfficerThomas J. Hansen1Former Vice Chairman of IllinoisTool Works, Inc.Daniel B. Hogan, Ph. D. 2, 3Executive Director, Passim Folk Music and Cultural CenterH. Nicholas Muller, III, Ph.D. 2, 3Former President/CEO, Frank Lloyd Wright Foundation________________________1Member of Audit Committee2Member of Compensation Committee3Member of Corporate Governance/Nominating Committee4Member of Executive CommitteeCorporate OfficersDavid A. DunbarPresident and Chief Executive OfficerThomas D. DeByleVice President, Chief Financial Officer and TreasurerDeborah A. RosenVice President, Chief Legal Officer and SecretaryStacey S. ConstasCorporate Governance Officer and Assistant SecretarySean ValashinasChief Accounting Officer and Assistant TreasurerChristopher J. SeilerTax DirectorOperating ManagementFOOD SERVICE EQUIPMENT GROUPJohn AbbottGroup Vice President of Food Service Equipment GroupCooking Solutions GroupKevin ClarkPresidentRefrigerated Solutions GroupNor-Lake, IncorporatedCharles DulleaPresidentFederal Industries75Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.John W. MinahanPresidentMaster-Bilt ProductsScott JordanPresidentProcon ProductsPaul RobertsPresidentUltrafryer Systems Inc.Edward T. OdmarkPresidentENGINEERING TECHNOLOGIESSpincraftLeonard PaolilloPresidentENGRAVING GROUPStandex EngravingPhillip R. WhismanPresidentInternational OperationsFlavio MascheraPresidentELECTRONICS PRODUCTS GROUPStandex Electronics, IncStandex Meder Electronics, Inc.John MeeksPresidentHYDRAULICS PRODUCTS GROUPCustom Hoists, Inc.Richard HiltunenPresidentShareholder InformationCorporate HeadquartersStandex International Corporation11 Keewaydin DriveSalem, NH 03079(603) 893-9701Facsimile: (603) 893-7324www.standex.comCommon StockListed on the New York Stock Exchange(Ticker symbol: SXI)Transfer Agent and RegistrarRegistrar and Transfer Company10 Commerce DriveCranford, NJ 07016(800) 866-1340www.RTCO.com76Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Independent AuditorsDeloitte & Touche LLP200 Berkeley StreetBoston, MA 02116-5022Shareholder ServicesStockholders should contact Standex’s Transfer Agent (Registrarand Transfer Company, 10 Commerce Drive, Cranford, NJ07016) regarding changes in name, address or ownership ofstock; lost certificates of dividends; and consolidation ofaccounts.Stockholders’ MeetingThe Annual Meeting of Stockholders will be held at 11:00 a.m.on Wednesday, October 29, 2014 at the Burlington Marriott, OneBurlington Mall Road, Burlington, MA 01803.77Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 10(s)NO AGREEMENT, ORAL OR WRITTEN, REGARDING OR RELATING TO ANY OFTHE MATTERS COVERED BY THIS DRAFT HAS BEEN ENTERED INTOBETWEEN THE PARTIES. THIS DOCUMENT, IN ITS PRESENT FORM OR AS ITMAY BE HEREAFTER REVISED BY ANY PARTY, WILL NOT BECOME ABINDING AGREEMENT OF THE PARTIES UNLESS AND UNTIL, WITH ALLSCHEDULES AND EXHIBITS ATTACHED, IT HAS BEEN SIGNED BY ALLPARTIES AND COMPLETE SIGNED COPIES HAVE BEEN EXCHANGED. THEEFFECT OF THIS LEGEND MAY NOT BE CHANGED BY ANY ACTION OF THEPARTIES.STOCK PURCHASE AGREEMENTBY AND AMONGTHE SHAREHOLDERS OFULTRAFRYER SYSTEMS, INC.(“Seller”)ANDSTANDEX INTERNATIONAL CORPORATION(“Buyer”)June 20, 20141Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.TABLE OF CONTENTSARTICLE 1 DEFINITIONS83ARTICLE 2 SALE AND TRANSFER OF SHARES; CLOSING912.1Shares.912.2Purchase Price.912.3Payments.912.4Closing.932.5Closing Obligations.94ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLERS943.1Organization and Good Standing.943.2Authority; No Conflict.953.3Capitalization.953.4Financial Statements.963.5Books and Records.963.6Title to Properties; Encumbrances.963.7Condition of Assets.973.8No Undisclosed Liabilities.973.9Taxes.973.10No Material Adverse Change.983.11Employee Benefits.983.12Compliance with Legal Requirements; GovernmentalAuthorizations.993.13Legal Proceedings; Orders.1003.14Absence of Certain Changes and Events.1003.15Applicable Contracts; No Defaults.1023.16Insurance.1033.17Environmental Matters.1043.18Employees1053.19Labor Relations; Compliance.1053.20Intellectual Property.1063.21Brokers or Finders.1073.22Product Warranty.1073.23Product Liability.10778Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.3.24Customers.1073.25Trade Secrets and Proprietary Information.1083.26Personal Property Leases.1083.27Real Property Lease.1083.28Related Party Interests.1093.29Delivery of Documents.1093.30Truth of Representations and Warranties.1093.31Books and Records.109ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER1094.1Organization and Good Standing.1104.2Authority; No Conflict.1104.3Investment Intent.1104.4Certain Proceedings.1104.5Available Funds.1104.6Brokers or Finders.110ARTICLE 5 COVENANTS OF SELLERS PRIOR TO CLOSING DATE1105.1Access and Investigation.1105.2Operation of the Business of the Company.1115.3Negative Covenant.1115.4Required Approvals.1115.5Notification.1115.6Best Efforts.112ARTICLE 6 COVENANTS OF BUYER PRIOR TO CLOSING DATE1126.1Required Approvals.1126.2Best Efforts.1126.3Disputes with Company Customers.112ARTICLE 7 CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE1127.1Accuracy of Representations.1137.2Sellers' Performance.1137.3Resignations.1137.4Escrow Agreement1137.5Good Standing Certificate.1137.6Other Documents.11479Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.7.7No Claim Regarding Stock Ownership or Sale Proceeds.1147.8Consulting Agreement.1147.9Consents from Material Customers.1147.10Availability of Employees.1147.11Extended Reporting Period Coverage for Company’s LiabilityInsurance Policies Written on a Claims-Made Basis. 114ARTICLE 8 CONDITIONS PRECEDENT TO SELLERS’ OBLIGATION TO CLOSE1148.1Accuracy of Representations.1158.2Buyer's Performance.1158.3No Injunction.1158.4Escrow Agreement.1158.5Consulting Agreement.115ARTICLE 9 TERMINATION1159.1Termination Events.1169.2Effect of Termination.116ARTICLE 10 INDEMNIFICATION; REMEDIES11710.1Survival.11710.2Indemnification and Payment of Damages by Sellers.11710.3Indemnification and Payment of Damages by Buyer.11710.4Time Limitations.11710.5Limitations on Amount.11810.6Procedure for Indemnification—Third Party Claims.11810.7Procedure for Indemnification – Other Claims.11910.8Exclusive Representations and Warranties.11910.9Credits, Etc.11910.10Exclusive Remedy.12010.11Limitation on Damages.12010.12Independent Investigation.12010.13Subrogation.121ARTICLE 11 ADDITIONAL COVENANTS AND AGREEMENTS12111.1Preservation of Books and Records.12111.2Indemnification of Directors Officers and Fiduciaries.12211.3Tax Matters.12380Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.11.4Sellers’ Representative.12511.5Real Estate Purchase.12811.6Clay Street Dog Wash Agreement.128ARTICLE 12 GENERAL PROVISIONS12812.1Expenses.12812.2Public Announcements.12812.3Confidentiality.12812.4Non-Competition.12912.5Notices.13012.6Jurisdiction; Service of Process.13012.7Further Assurances.13012.8Waiver.13112.9Entire Agreement and Modification.13112.10Assignments, Successors, and No Third-Party Rights.13112.11Severability.13212.12Section Headings, Construction.13212.13Schedules.13212.14Offset.13212.15Time of Essence.13212.16Governing Law.13312.17Counterparts.13312.18Attorney Client Privilege.13312.19Shareholders Agreement.13312.20Mutual Releases.13381Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.SCHEDULESSchedule 2.1:ShareholdersSchedule 2.3:Calculation Procedures for Working Capital AdjustmentSchedule 2.3(a)(ii):Outstanding DebtSchedule 3.1:Organization and Foreign QualificationSchedule 3.2:Authority; No ConflictSchedule 3.3:Authorized CapitalizationSchedule 3.6:Title to Properties; EncumbrancesSchedule 3.8:No Undisclosed LiabilitiesSchedule 3.9(a):Tax ReturnsSchedule 3.9(b):AuditsSchedule 3.9(d):JurisdictionsSchedule 3.9(f)Unclaimed Property ReportsSchedule 3.11:Employee BenefitsSchedule 3.12:Compliance with Legal Requirements; Governmental AuthorizationsSchedule 3.13:Legal Proceedings; OrdersSchedule 3.14:Absence of Certain Changes and EventsSchedule 3.15:Default, Penalty, Modifications to Applicable ContractsSchedule 3.15(a):Applicable ContractsSchedule 3.15(b):EnforceabilitySchedule 3.15(c):Compliance with Applicable ContractsSchedule 3.16:InsuranceSchedule 3.17:Environmental MattersSchedule 3.18:EmployeesSchedule 3.20(a):PatentsSchedule 3.20(a)(iii): Patent ReissueSchedule 3.20(a)(iv): Patent SettlementSchedule 3.20(b):MarksSchedule 3.22:Product WarrantySchedule 3.23:Product LiabilitySchedule 3.24:CustomersSchedule 3.27:Real Property LeasesSource: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Real Property LeasesSchedule 3.28:Related Party InterestsSchedule 7.9:Consent Exceptions82Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.STOCK PURCHASE AGREEMENTTHIS STOCK PURCHASE AGREEMENT (this “Agreement”), made as of June 20,2014, is between Standex International Corporation, a Delaware corporation (“Buyer”), havingexecutive offices at 11 Keewaydin Drive, Suite 300, Salem, New Hampshire 03079, and all of theshareholders, as listed on the signature page of this Agreement (collectively, the “Sellers”), ofUltrafryer Systems, Inc., a Georgia corporation with offices and its manufacturing facility at 302Spencer Lane, San Antonio, Texas 78201 (the “Company”).WHEREAS, Sellers desire to sell, and Buyer desires to purchase, all of the issued andoutstanding shares (the “Shares”) of the capital stock of the Company for the consideration and onthe terms set forth in this Agreement.The parties, intending to be legally bound, agree as follows:ARTICLE 1DEFINITIONSFor purposes of this Agreement, the following terms have the meanings specified orreferred to in this Article 1:“Agreement” shall have the meaning set out in the first paragraph of this Agreement.“Applicable Contract” shall have the meaning set out in Section 3.15.“Benefit Obligations” means all obligations, arrangements, or customary practices toprovide benefits, other than salary, as compensation for services rendered, to present or formerdirectors, employees, or agents, other than obligations, arrangements, and practices that are Plans. “Best Efforts” means the commercially reasonable efforts that a prudent Person desirousof achieving a result would use in similar circumstances to ensure that such result is achieved asexpeditiously as reasonably possible; provided, however, that an obligation to use Best Effortsunder this Agreement does not require the Person subject to that obligation to take actions thatwould reasonably be expected to result in an adverse change in the benefits to such Person arisingout of this Agreement and the Contemplated Transactions or that would reasonably be expected tohave an adverse effect on such Person.“Breach” means an inaccuracy in or breach of, or any failure to perform or comply with,any representation, warranty, covenant, obligation, or other provision of this Agreement, theSchedules to this Agreement, any supplements to the Schedules, or any instrument deliveredpursuant to this Agreement.“Business” means the design, manufacture, marketing, and sale of commercial deep fryers,filtering machines, rethermalizer food warmers, food holding stations and custom batter tables forrestaurants and commercial installations as conducted by the Company as of the Closing.83Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.“Business Day” means any day, other than Saturday and Sunday, on which federally-insured commercial banks in Atlanta, Georgia are generally open for business and capable ofsending and receiving wire transfers.“Buyer” shall have the meaning set out in the first paragraph of this Agreement.“Buyer’s Advisors” shall have the meaning set out in Section 5.1“Closing” shall have the meaning set out in Section 2.4.“Closing Date” means the 12:01 a.m. on the day on which the Closing actually takesplace.“Closing Date Purchase Price” means $22,701,000 plus or minus the Working CapitalAdjustment pursuant to the second sentence of Section 2.2 and less the purchase price under theReal Estate Purchase.“Company” shall have the meaning set out in the first paragraph of this Agreement.“Company Plan” means all Plans of which the Company is a Plan Sponsor or to whichthe Company otherwise contributes.“Consent” means any approval, consent, ratification, waiver, or other authorization.“Contemplated Transactions” means all of the transactions contemplated by thisAgreement, including:(i)the sale of the Shares by Sellers to Buyer;(ii)the Closing and completion of the Real Estate Purchase;(iii)the performance by Buyer and Sellers of their respective covenants and obligationsunder this Agreement; and(iv)Buyer's acquisition and ownership of the Shares and exercise of control over theCompany.“Contract” means any agreement, contract, obligation, promise, or undertaking (whetherwritten or oral) that is legally binding.“Copyrights” means all copyrights in both published works and unpublished works.“Damages” shall have the meaning set forth in Section 10.2.“Director/Officer/Fiduciary Indemnitee(s)” shall have the meaning set out inSection 11.2.84Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.“Director/Officer/Fiduciary Indemnified Liabilities” shall have the meaning set out inSection 11.2.“Encumbrance” means any charge, claim, community property interest, equitable interest,lien, pledge, security interest, or restriction of any kind, including any restriction on use, voting,transfer, receipt of income, or exercise of any attribute of ownership.“Environment” means soil, air, land surface or subsurface strata, groundwater, drinkingwater supply, and any other environmental medium or natural resource.“Environmental, Health, and Safety Liabilities” means any cost, damages, liability, orobligation arising from or under Environmental Law or Occupational Safety and Health Law andconsisting of or relating to:(i)any environmental, health, or safety matters or conditions; and(ii)fines, penalties, judgments, awards, legal or administrative proceedings, assessments,expenses, costs, damages, and losses, arising under any Environmental Law orOccupational Safety and Health Law.“Environmental Law” means any Legal Requirement that requires:(i)advising appropriate authorities, employees, and the public of intended or actualreleases of Hazardous Materials, violations of discharge limits, or other prohibitionsand of the commencements of activities, such as resource extraction or construction,that could have significant impact on the Environment;(ii)preventing or reducing to acceptable levels the release of Hazardous Materials into theEnvironment;(iii)reducing the quantities, preventing the release, or minimizing the hazardouscharacteristics of wastes that are generated;(iv)assuring that products do not present unreasonable risks to human health or theEnvironment when used or disposed of;(v)the cleaning up of Hazardous Materials that have been released, preventing the Threatof Release, or paying the costs of such cleanup or prevention;(vi)the treatment, storage, disposal, generation and transportation of industrial, toxic orHazardous Materials;(vii)the prevention of any release or Threat of Release into the Environment of HazardousMaterials;(viii)the protection of wildlife, marine sanctuaries and wetlands, including withoutlimitation all endangered and threatened species;85Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(ix)the closure or removal of underground and other storage tanks or vessels, abandoned,disposed or discarded barrels, containers and other closed receptacles; and(x)any procedures relating to the manufacture, processing, use, distribution, treatment,storage, disposal, transportation or handling of Hazardous Materials.“ERISA” means the Employee Retirement Income Security Act of 1974 or any successorlaw, and regulations and rules issued pursuant to that Act or any successor law.“Escrow Agent” means the escrow agent under the Escrow Agreement.“Escrow Agreement” means an agreement to be entered into by and among Buyer,Sellers’ Representative, and RBS Citizens N.A. on or before the Closing Date, in substantially theform attached hereto as Exhibit A, or such other form as Sellers’s Representative and Buyer shallreasonably agree.“Escrow Amount” means ten percent of the Closing Date Purchase Price.“Escrow Fund” means the funds held by the Escrow Agent pursuant to the EscrowAgreement, as adjusted from time to time by any disbursements in accordance with this Agreementand the Escrow Agreement, and interest and other income of investments thereof.“Facility” means the land and buildings subject to the Real Estate Purchase.“Final Closing Financial Statements” shall have the meaning set forth in Section 2.3.“Final Closing Statement of Net Working Capital” shall have the meaning set forth inSection 2.3 and shall be determined in accordance with the policies and procedures described inSchedule 2.3.“GAAP” means generally accepted United States accounting principles, applied on a basisconsistent with the basis on which the Company’s financial statements have been prepared.“Governmental Authorization” means any Consent, license or permit issued, granted,given, or otherwise made available by or under the authority of any Governmental Body.“Governmental Body” means any:(i)federal, state, local, county, municipal, foreign, or other government; or(ii)governmental authority of any nature (including any governmental agency, branch,department, official representative, or entity and any court or other tribunal).“Hazardous Activity” means the distribution, generation, handling, importing,management, manufacturing, processing, production, refinement, Release, storage, transfer,86Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.transportation, treatment, or use (including any withdrawal or other use of groundwater) by theCompany of Hazardous Materials in, on, under, about, or from the Facility.“Hazardous Materials” means any waste or other substance that is listed, defined,designated, or classified as hazardous, radioactive, toxic, or a pollutant under or pursuant to anyEnvironmental Law and specifically including petroleum and all derivatives thereof or syntheticsubstitutes therefor and asbestos or asbestos containing materials.“Interim Financial Statements” shall have meaning set out in Section 3.4.“IRC” means the Internal Revenue Code of 1986, as amended.“Knowledge” means to the best of the Sellers’ knowledge and belief, after due inquiry andinvestigation by the Senior Management Team.“Legal Requirement” means any federal, state, local, municipal, or other administrativeorder, constitution, law, ordinance, regulation, or statute applicable and relevant to the Company,the Contemplated Transactions and/or this Agreement.“Marks” means all legal names, all fictional business names, trading names, registered andunregistered trademarks, service marks, and registrations and applications for registration of any ofthe foregoing.“Material Adverse Change” means either (a) the substantial loss of the PopeyesLouisiana Kitchen business or (b) a material adverse effect on the Business, financial condition orresults of operation of the Company taken as a whole, but excluding any effect resulting from: (i)the announcement or pendency of the Contemplated Transactions, including the loss of customersor suppliers or cancellations or delays of orders placed with the Company, other than PopeyesLouisiana Kitchen to the extent such loss independently triggers a Material Adverse Change undersubsection (a); (ii) conditions affecting the industry in which the Company operates, generalbusiness or economic conditions or financial markets; (iii) compliance by the Company with theterms of, or the taking of any action contemplated by, this Agreement; (iv) changes in any LegalRequirement applicable to the Company; or (v) changes by the Company in its accountingmethods, principles of practice, as required by applicable Legal Requirements or GAAP. For thepurposes of this definition “Material Adverse Change” under subsection (b) shall be deemed tooccur whenever the effect of the change in question would exceed Two Hundred ThousandDollars ($200,000) individually or in the aggregate.“Non-Compete Period” shall have meaning set out in Section 12.4.“Normalized Working Capital” means the average working capital for the prior historicmonths in calendar year 2014. Assuming the Closing is in June of 2014, the Normalized WorkingCapital calculation is set forth on Schedule 2.3.“Occupational Safety and Health Law” means any Legal Requirement designed toprovide safe and healthful working conditions and to reduce occupational safety and healthhazards, and any program designed to provide safe and healthful working conditions.87Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.“Optionholders” means those individuals who own Options.“Options” means those nonqualified stock options granted by the Company and listed onSchedule 3.3.“Order” means any award, decision, injunction, judgment, order, or ruling entered, issued,made, or rendered by any court, administrative agency, or other Governmental Body.“Ordinary Course of Business” means any action taken by a Person if such action isconsistent with the past practices of such Person and in the ordinary course of the normal day-to-day operations of such Person.“Organizational Documents” means (a) the articles or certificate of incorporation and thebylaws of the Company; (b any charter or similar document adopted or filed in connection with thecreation, formation, or organization of a Person; and (e) any amendment to any of the foregoing.“Outstanding Debt” means all of the Company’s (i) all long-term (including the currentportion thereof) and short-term indebtedness for borrowed money, and any accrued interestthereon, and (ii) all indebtedness for capital leases.“Patents” means all patents, patent applications, and inventions and discoveries that maybe patentable.“Person” means any individual, corporation (including any non-profit corporation),general or limited partnership, limited liability company, joint venture, estate, trust, association,organization, or other entity.“Plans” has the meaning given in ERISA § 3(3) and as defined in Section 3.11.“Plan Sponsor” has the meaning given in ERISA § 3(16)(B).“Proceeding” means any action, audit, arbitration, hearing, investigation, litigation, or suit(whether civil, criminal, administrative, or investigative) commenced, brought, conducted,Threatened, or heard by or before, or otherwise involving, any Governmental Body or any otherPerson claiming damages.“Purchase Price” shall have the meaning set out in Section 2.2.“Qualified Plan” means any Plan that meets or purports to meet the requirements of IRC §401(a).“Real Estate Purchase” means the purchase by Buyer of the real estate and buildings atLot 64 and 66 of Evening View Subdivision in San Antonio, Texas for a purchase price of$3,200,000.“Real Estate Stub Amount” means $1,020,800.88Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.“Real Property Lease” shall have the meaning set out in Section 3.27.“Related Person” means, with respect to a particular individual:(i)each other member of such individual's Family; or(ii)any Person that is directly or indirectly controlled by such individual or one or moremembers of such individual's Family.With respect to a specified Person other than an individual:(i)any Person that directly or indirectly controls, is directly or indirectly controlled by, oris directly or indirectly under common control with such specified Person; or(ii)any Person that holds a Material Interest in such specified Person.For purposes of this definition, (a) the “Family” of an individual includes (i) the individual, (ii) theindividual's spouse, and (iii) any other natural person who is related to the individual or theindividual's spouse within the second degree, and (b) “Material Interest” means direct or indirectbeneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) ofvoting securities or other voting interests representing at least 25% of the outstanding voting powerof a Person or equity securities or other equity interests representing at least 25% of the outstandingequity securities or equity interests in a Person.“Release” means any spilling, leaking, emitting, discharging, depositing, escaping,leaching, dumping, or other releasing into the Environment, whether intentional or unintentional.“Released Party” shall have the meaning set out in Section 12.20.“Representative” means, with respect to a particular Person, any director, officer,employee, agent, consultant, advisor, or other representative of such Person, including legalcounsel, accountants, and financial advisors.“Schedules” means the schedules, and supplements to the schedules, delivered by Sellersto Buyer pursuant to Section 5.5 concurrently with or subsequent to the execution and delivery ofthis Agreement.“Securities Act” means the Securities Act of 1933 or any successor law, and regulationsand rules issued pursuant to that Act or any successor law.“Seller Released Party” shall have the meaning set out in Section 12.20.“Sellers” shall have the meaning set out in the first paragraph of this Agreement.“Sellers’ Representative” shall have the meaning set out in Section 11.4.“Senior Management Team” means Edward Odmark, William Collins, Richard Jones,Steven Hartford and A.C. McNamara.89Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.“Shareholders Agreement” means the Ultrafryer Systems, Inc. Shareholders Agreementdated June 1, 2000, by and among the Company and its Shareholders, as such agreement has beenthereafter amended to date.“Shares” shall have the meaning set out in the Recitals of this Agreement.“Straddle Period” shall have the meaning set out in Section 11.3.“Tax Contest” shall have the meaning set out in Section 11.3.“Taxes” means all federal, state, local, foreign and other income, sales, use, ad valorem,transfer property, gross receipts, excise, withholding, social security, unemployment andemployment, occupation, disability, severance, use, service, license, payroll, franchise, net worth,transfer, alternative and add-on minimum tax, estimated, stamp, capital stock, environmental,windfall profits tax, custom, import, duty, value added, premium, registration and recording taxesor other taxes, fees, assessments or charges of any kind, together with any interest, fines, anypenalties, or additions with respect thereto, and the term “Tax” means any one of the foregoingTaxes imposed by the United States or any state, local or foreign government or subdivision oragency thereof, whether computed on a separate, consolidated, unitary, combined or any otherbasis which is a liability of the Company for any period occurring prior to the Closing Date, asdetermined pursuant to Section 11.3(b).“Tax Return” means any return (including any information return), report, (includingabandoned property reports) statement, schedule, or other document or information and anyamendments thereto filed with any Governmental Body in connection with the determination,assessment, collection, or payment of any Tax or in connection with the administration,implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax.“Threat of Release” means a substantial likelihood of a Release that may require action inorder to prevent or mitigate damage to the Environment that may result from such Release.“Threatened” means a claim, Proceeding, or dispute, if any demand or statement has beenmade in writing or any notice has been given in writing that would lead a prudent Person toconclude that such a claim, Proceeding, or dispute is likely to be asserted, commenced, taken, orotherwise pursued in the future.“Trade Secrets” means all know-how, trade secrets, confidential information, customerlists, software, technical information, data, process technology, plans, drawings, and blueprints.“Working Capital Adjustment” means the process used to address the movement (up ordown) of the Company’s working capital components (inventory, accounts receivable andaccounts payable) from the mutually agreed Normalized Working Capital up through the ClosingDate.90Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ARTICLE 2SALE AND TRANSFER OF SHARES;CLOSING2.1Shares. Subject to the terms and conditions of this Agreement, at the Closing, each Seller will sell andtransfer all of such Seller’s right, title and interest in and to the Shares indicated next to suchSeller’s name on Schedule 2.1, such sale to be evidenced by delivery of original certificatesevidencing all of the Shares of the Company owned by such Seller, duly endorsed in blank oraccompanied by duly executed stock assignments in blank, in proper form, for transfer to Buyer,free and clear, in each case, of all liens, security interests and other encumbrances, and Buyeragrees to purchase such Shares from each such Seller.2.2Purchase Price.The total gross aggregate purchase price (the “Purchase Price”) for the Shares will be an amountequal to the Closing Date Purchase Price, as adjusted pursuant to Sections 2.3(b) through (d). AtClosing, the Closing Date Purchase Price shall be calculated using a mutually agreed estimate ofthe Working Capital Adjustment. For any distributions to the Sellers as a group under thisAgreement, the Sellers shall be paid pro rata according to their Share ownership interest in theCompany.2.3Payments. Prior to Closing, the Options shall be cancelled and payments made to the Optionholders by theCompany pursuant to the terms of the Option Cancellation and Payment Acknowledgementsexecuted by the Optionholders. Following payments made to the Optionholders, all remaining cashheld by the Company shall be paid to the Sellers prior to Closing. Immediately thereafter, thePurchase Price shall be paid by Buyer to Sellers, by wire transfer of immediately available funds toan account designated by each respective payee, as follows:(a)Closing Date Purchase Price. The Closing Date Purchase Price shall be payable incash at the Closing by wire transfer of immediately available funds, as follows:(i)the Escrow Amount shall be paid to the Escrow Agent to be held inaccordance with the terms of the Escrow Agreement;(ii)the entire payoff amount due and payable to those financial institutions whohold evidence of Outstanding Debt, as more specifically described inSchedule 2.3(a)(ii), shall be paid to such institutions;(iii)the fees and expenses of the broker and counsel to the Company inconnection with the Contemplated Transaction shall be paid to such parties;and(iv)the balance of the Closing Date Purchase Price shall be paid to Sellers prorata according to the Share ownership.91Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(b)Real Estate Stub Amount. At the Closing, the Buyer shall pay the Real Estate StubAmount by wire transfer of immediately available funds to the Escrow Agent to beheld in accordance with the terms of the Escrow Agreement. If the Real EstatePurchase occurs on or before the date that is forty-five (45) days following theClosing, then Buyer and Sellers’ Representative shall cause the Escrow Agent torelease the Real Estate Stub Amount to Spencer Lane Properties A, Ltd. (or itsdesignee) simultaneously with the closing of the Real Estate Purchase as paymentby Buyer for a portion of the purchase price under the Real Estate Purchase. If theReal Estate Purchase does not occur on or before the date that is forty-five (45)days following the Closing, then the Escrow Agent shall release the Real EstateStub Amount to Sellers’ Representative, on behalf of Sellers, in accordance withthe terms of the Escrow Agreement. For the avoidance of doubt, upon the paymentof the Real Estate Stub Amount to Sellers Representative, on behalf of Sellers, suchpayment shall be deemed to be additional Purchase Price hereunder. (c)Payment for Working Capital Adjustment. Within three (3) Business Days of thedetermination of the Final Closing Financial Statements, (1) if the Working CapitalAdjustment reflecting the Final Closing Statement of Net Working Capital (definedbelow) is less than the Working Capital Adjustment used at Closing, Sellers shallpay the difference of up to $50,000 through the Escrow Fund and the balance ofany amount in excess of $50,000 from Sellers directly to Buyer by wire transfer ofimmediately available funds to an account designated by Buyer, and (2) if theWorking Capital Adjustment reflecting the Final Closing Statement of Net WorkingCapital is more than the Working Capital Adjustment used at Closing, Buyer shallpay the difference to the Sellers pro rata according to the Share ownership by wiretransfer of immediately available funds to accounts designated by Sellers.Notwithstanding anything to the contrary contained in this Agreement, any amountspayable pursuant to this sub-section 2.3(c) shall be paid dollar-for-dollar and shallnot be subject to any deductible or basket for claims.(d)Determination of Final Closing Statement of Net Working Capital.(i)Within ninety (90) days following the Closing Date, the Sellers’Representative shall, deliver to Buyer and Sellers financial statements forthe Company as of the Closing Date (the “Final Closing FinancialStatements”) and a Final Closing Statement of Net Working Capitalprepared pursuant to the policies and procedures described in Schedule 2.3,in each case as of the Closing. The Final Closing Financial Statements shallbe prepared in accordance with GAAP, applied on a basis consistent withthe methodology used in prior periods and shall fairly present the financialcondition of the Company, and shall be prepared using the results of theClosing Inventory (as defined in Schedule 2.3) to determine the value of theInventory.(ii)Sellers agree that they will provide Buyer, and its auditors and accountantswith reasonable access to the data, work papers and information on which92Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the Final Closing Financial Statements and the Final Closing Statement ofNet Working Capital are based. Buyer shall within thirty (30) daysfollowing receipt of the Final Closing Financial Statements and the FinalClosing Statement of Net Working Capital, notify Sellers’ Representative asto Buyer’s specific objection or objections. Buyer and Sellers’Representative shall use their Best Efforts to resolve these objections withinforty-five (45) days following the receipt of the Final Closing FinancialStatements and the Final Closing Statement of Net Working Capital. IfBuyer and Sellers’ Representative do not reach a final resolution withinsuch forty-five (45) day period, they shall submit the disputed matter tobinding arbitration before a regionally or nationally recognized independentaccounting firm mutually agreed upon by both of them. If the parties do notagree on an accounting firm, each side will select an accounting firm whowill then together pick a third party accounting firm. Buyer and Sellersshall share equally in the cost of such arbitration. The arbitration willconcern, and the arbitrator will consider, only those items and amounts indispute between Buyer and Sellers’ Representative and may not assign orvalue any item greater than the greatest value for such item claimed byBuyer or Sellers’ Representative, or less than the smallest value for suchitem claimed by Buyer or Sellers’ Representative. The arbitrator'sdetermination will be based solely on written presentations by Buyer andSellers’ Representative, and the arbitrator shall not be permitted (absentmutual written agreement of Buyer and Sellers’ Representative to thecontrary) to make any independent inquiry. Absent mutual writtenagreement of Buyer and Sellers’ Representative, or order of the arbitrator,neither Buyer nor Sellers’ Representative shall be permitted to conductdiscovery in the manner of a dispute being litigated in a court of competentjurisdiction. Such prohibition shall include without limitation the taking ofdepositions; the service of written interrogatories, requests for production ofdocuments or requests for admission; and the testimony of live witnesses. The determination of the arbitrator shall be binding and conclusive on theparties as to the items and amounts presented. The amount of Final ClosingStatement of Net Working Capital as finally determined pursuant to thisSection 2.3(d), whether due to no objections raised by Buyer or pursuant tothe dispute resolutions described herein, shall be referred to herein as the“Final Closing Statement of Net Working Capital.”2.4Closing.The closing of the purchase and sale (the “Closing”) provided for in this Agreement will take placeat the offices of Alston & Bird LLP in Atlanta, GA at 10:00 a.m. (local time) on the date firstabove written. Subject to Article 9, failure to consummate the purchase and sale provided for inthis Agreement on the date and time and at the place determined pursuant to this Section 2.4 willnot result in the termination of this Agreement and will not relieve any party of any obligationunder this Agreement.93Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2.5Closing Obligations. At the Closing, in addition to the documents referenced in Articles 7 and 8:(a)Sellers will deliver to Buyer:(i)certificates representing all of the issued and outstanding Shares of theCompany, duly endorsed (or accompanied by duly executed stock powers)by the applicable Sellers for transfer to Buyer; and(ii)such other instruments or documents in form and substance as may bereasonably necessary and satisfactory to Buyer to consummate theContemplated Transactions and to comply with the terms of this Agreement.(b)Buyer will deliver to Sellers:(i)in accordance with their pro-rata ownership of the Shares the Closing DatePurchase Price; and(ii)such other instruments or documents in form and substance as may bereasonably necessary and satisfactory to Sellers’ Representative toconsummate the Contemplated Transactions and to comply with the termsof this Agreement.(c)Buyer will deliver to the Escrow Agent the Real Estate Stub Amount.ARTICLE 3REPRESENTATIONS ANDWARRANTIES OF SELLERSEach Seller, severally, represents and warrants to Buyer as follows:3.1Organization and Good Standing.Schedule 3.1 contains a complete and accurate list of the jurisdiction of incorporation of theCompany and each other jurisdiction in which the Company is authorized to do business. TheCompany is a corporation duly organized, validly existing, and in good standing under the laws ofGeorgia, with full corporate power and authority to conduct its Business as it is now beingconducted, to own or use the properties and assets that it purports to own or use, and to perform allits obligations under Applicable Contracts. The Company is duly qualified to do business as aforeign corporation and is in good standing under the laws of each state or other jurisdiction inwhich either the ownership or use of the properties owned or used by it, or the nature of theactivities conducted by it, requires such qualification, except where the failure to be so qualified orbe in good standing would not have a Material Adverse Change.94Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.3.2Authority; No Conflict.(a)This Agreement constitutes the legal, valid, and binding obligation of Sellers,enforceable against Sellers in accordance with its terms. Sellers have the absoluteand unrestricted right, power, authority, and capacity to execute and deliver thisAgreement and to perform their obligations under this Agreement. The foregoingrepresentations and warranties, however, are limited to the extent that theenforceability of this Agreement may be limited by:(i)bankruptcy, insolvency, reorganization, liquidation, moratorium,receivership, fraudulent conveyance or other similar laws affecting theenforcement of creditors' rights and remedies generally; and(ii)judicial limitations on the enforcement of the remedy of specificperformance and injunctive and other forms of equitable relief.(b)Except as set forth in Schedule 3.2, neither the execution and delivery of thisAgreement nor the consummation or performance of any of the ContemplatedTransactions will:(i)contravene, conflict with, or result in a violation of (A) any provision of theOrganizational Documents of the Company, or (B) any resolution adoptedby the board of directors or the shareholders of the Company;(ii)give any Governmental Body the right to challenge any of theContemplated Transactions (to Sellers’ Knowledge) or to exercise anyremedy or obtain any relief under, any Legal Requirement or any Order towhich the Company or any Seller may be subject;(iii)contravene or result in a violation or breach of any provision of, or give anyPerson the right to declare a default or exercise any remedy under, or toaccelerate the maturity or performance of, or to cancel, terminate, or modify,any Applicable Contract; or(iv)result in the imposition or creation of any Encumbrance upon or any of theassets owned by the Company.(c)Except as set forth in Schedule 3.2, no Seller nor the Company is or will berequired to give any notice to or obtain any material Consent from any Person inconnection with the execution and delivery of this Agreement or the consummationor performance of the Contemplated Transactions.3.3Capitalization.The authorized equity securities of the Company are set forth on Schedule 3.3. Sellers will be onthe Closing Date the record owners of their respective Shares, free and clear of all Encumbrances. All of the outstanding equity securities and other securities of Company are owned of record bySellers and the Options are owned of record by the Optionholders. All of the95Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.outstanding equity securities of the Company have been duly authorized and validly issued and arefully paid and non-assessable. There are no Contracts relating to the issuance, sale, or transfer bythe Company of any equity securities or other securities of the Company, other than the Options setforth on Schedule 3.3. Except for the Options set forth on Schedule 3.3, there are no outstandingor authorized options, warrants, rights, agreements or commitments to which either the Companyor any of Sellers is a party or which are binding upon the Company providing for the issuance,disposition or acquisition of any of its capital stock. There are no outstanding or authorized stockappreciation, phantom stock or similar rights with respect to the Company. Except for theShareholders Agreement, there are no agreements, voting trusts, proxies, or understandings withrespect to the voting, or registration under the Securities Act, of any Shares. All of the issued andoutstanding Shares and Options were issued in compliance with applicable federal and statesecurities laws.3.4Financial Statements.Sellers have delivered to Buyer (a) audited financial statements of the Company for the fiscal years2013 through 2014, including the balance sheets as of such dates and the related auditedconsolidated statements of income and cash flow for each of the fiscal years then ended, includingthe notes thereto, and (b) an unaudited, consolidated balance sheet of the Company as of April 30,2014 and the related unaudited, consolidated statements of income and cash flow for the Company,(the “Interim Financial Statements”). Such financial statements and notes fairly present in allmaterial respects the financial condition and the results of operations and cash flow of theCompany as at the respective dates of and for the periods referred to in such financial statements,all in accordance with GAAP, on a consistent basis with financial statements previously providedin the data room subject, in the case of Interim Financial Statements, to normal recurring year-endadjustments and the absence of notes. The financial statements referred to in this Section 3.4reflect the consistent application of such accounting principles throughout the periods involved,except as disclosed in the notes thereto.3.5Books and Records. The books of account, minute books, stock record books, and other records of the Company arecomplete and correct in all material respects and have been maintained in accordance withcommercially reasonable business practices. The minute books of the Company contain materiallyaccurate and complete records of all meetings held of, and corporate action taken by, thestockholders, the Boards of Directors, and committees of the Boards of Directors of the Company.3.6Title to Properties; Encumbrances. The Company owns (with good, and marketable title, subject only to the matters permitted by thefollowing sentence) all the properties and assets (whether tangible or intangible) located in theFacility (except as set forth in Schedule 3.6) and reflected as owned in the books and records of theCompany, including all of the properties and assets reflected in the balance sheet included in theInterim Financial Statements (the “Interim Balance Sheet”), except for properties and assets (i)purchased or otherwise acquired by the Company since the date of the Interim Balance Sheet and(ii) sold since the date of the Interim Balance Sheet in the Ordinary Course of Business and96Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.consistent with past practice. All material properties and assets reflected in the Interim BalanceSheet will be free and clear of all Encumbrances as of the Closing except (a) security interestsshown on the Interim Balance Sheet as securing specified liabilities or obligations, with respect towhich no default or event that, with notice or lapse of time or both, would constitute a default,exists, (b) security interests incurred in connection with the purchase of property or assets after thedate of the Interim Balance Sheet (such security interests being limited to the property or assets soacquired), with respect to which no default or event that, with notice or lapse of time or both,would constitute a default, exists, and (c) liens for current Taxes not yet due.To Sellers’ Knowledge, the current use and operation of the Facility is in compliance in all materialrespects with all applicable laws (other than Environmental Laws which are separately addressedin Section 3.17), including without limitation laws relating to parking, zoning and land use, andpublic and private covenants and restrictions. The Company has not received written notice ofnon-compliance with any applicable laws that has not been cured, except to the extent any suchnon-compliance would not have a Material Adverse Change.3.7Condition of Assets. The buildings, plants, structures, machinery, tools, dies, furniture, fixtures and equipment of theCompany including the Facility are structurally sound and are in good and serviceable operatingcondition and repair, ordinary wear and tear excepted. None of such buildings, plants, structures,machinery, tools, dies, furniture, fixtures or equipment including the Facility is in need ofmaintenance or repairs except for ordinary, routine maintenance and repairs that are not material innature or cost. All such buildings, plants, structures, machinery, tools, dies, furniture, fixtures andequipment including the Facility are sufficient to carry on the Business of the Company as it iscurrently conducted.3.8No Undisclosed Liabilities.The Company has no material liabilities or obligations of any nature (whether Threatened, knownor unknown and whether absolute, accrued, contingent, or otherwise) that are required to bereflected in the Company’s financial statements except for (a) liabilities or obligations reflected orreserved against in the Interim Balance Sheet, (b) current liabilities incurred since the InterimBalance Sheet in the Ordinary Course of Business since the date thereof and which are comparablein type and amount to liabilities for prior periods, and (c) liabilities reflected in the Final ClosingFinancial Statements.3.9Taxes.(a)Except as set forth in Schedule 3.9(a), the Company has filed on a timely basis allTax Returns that are or were required to be filed by or with respect to it, pursuant toapplicable Legal Requirements. All such Tax Returns were true, complete andcorrect in all material respects. The Company has paid all Taxes due and payableand made provision for the payment of all Taxes for which the Company hasreceived an assessment but that are not yet due and payable.(b)Schedule 3.9(b) contains a complete and accurate list of all audits of all such TaxReturns, including a reasonably detailed description of the nature and outcome of97Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.each audit. There have been no deficiencies proposed as a result of such audits. The Company has not given or been requested to give waivers or extensions (or isor would be subject to a waiver or extension given by any other Person) of anystatute of limitations relating to the payment of Taxes of the Company or for whichthe Company may be liable.(c)All Tax amounts required to be withheld by the Company, and the portion of anysuch taxes to be paid by the Company to any Governmental Body, have beencollected or withheld and either paid to the appropriate Governmental Body or setaside in accounts for such purpose or reserved against or made adequate provisionfor in the financial statements of the responsible the Company.(d)All foreign, state and local jurisdictions where the Company has filed Tax Returnsfor fiscal year ended February 28, 2013 are set forth in Schedule 3.9(d). TheCompany has not received any claim, notice or questionnaire from anyGovernmental Body in any jurisdiction that such the Company is or may be subjectto taxation by such jurisdiction.(e)The Company is not a party to any Tax allocation or sharing agreement, and theCompany does not have any liability for Taxes of any other Person and is nototherwise liable or obligated to indemnify any Person with respect to any Taxes.(f)Except as set forth in Schedule 3.9(f), the Company has accurately filed on a timelybasis all unclaimed property reports and filings required by applicable Law.3.10No Material Adverse Change.Since February 28, 2014, the Company has not suffered any Material Adverse Change, nor hasthere been any Threatened Material Adverse Change.3.11Employee Benefits.Schedule 3.11 contains a complete and accurate list of all Company Plans and other BenefitObligations of the Company (collectively for the purposes of this Section 3.11, the “Plans”). NoCompany Plans are defined benefit Pension Plans, Qualified Plans, or Multi-Employer Plans. TheCompany has performed in all material respects all of its obligations under all Company Plans andother Benefit Obligations of the Company. The Company has made appropriate entries in itsfinancial records and statements for all material obligations and liabilities under such CompanyPlans and other Benefit Obligations that have accrued but are not due; and the Company, withrespect to all Company Plans and other Benefits Obligations of the Company, and each CompanyPlan and other Benefit Obligation of the Company, is in compliance in all material respects withERISA, the IRC, and other applicable laws including the provisions of such laws expresslymentioned in this Section 3.11. The Company has complied in all material respects with allprovisions, rules, regulations and legislation relating to funding requirements for the CompanyPlans. No past service funding liabilities exist under the Company Plans. All Company Plansrequired by law or the terms of the Company Plans to be authorized by the Board of Directorshave been duly authorized by the Board of Directors and, if required by law98Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.or by the terms of the Company Plans, by the shareholders of the Company. There are no pendingor Threatened audits or investigations by any Governmental Body with respect to any CompanyPlan.Copies of each Company Plan, any amendments thereto and any trust agreement and contracts orinsurance policies relating to such Company Plan have been made available to Buyer through theelectronic data room provided by the Company. Copies of the documentation and materialcorrespondence directly related to the Company Plans have also been made available to Buyer.Sellers represent and warrant that the Company has not sponsored, maintained or contributed atany time during the preceding five years to any plan, program, fund or arrangement that constitutesa defined benefit Pension Plan, a Qualified Plan or a Multi-Employer Plan.Neither Sellers nor the Company has made any promises of welfare benefit plans, within themeaning of Section 3(1) of ERISA that provides for continuing benefits or coverage for any formeremployees or retirees of the Company including but not limited to retiree medical benefits.3.12Compliance with Legal Requirements; Governmental Authorizations.Except as set forth in Schedule 3.12 or as would not have a Material Adverse Change:(a)The Company is in full compliance with each Legal Requirement that is or wasapplicable to it or to the conduct or operation of its business or the ownership or useof any of its assets;(b)no event has occurred or circumstance exists that constitutes or results in a violationor Threatened violation by the Company of, or a failure on the part of the Companyto comply with, any Legal Requirement;(c)the Company has not received, at any time since February 28, 2014, any writtennotice or other communication from any Governmental Body regarding (A) anyactual, alleged, possible, or potential violation of, or failure to comply with, anyLegal Requirement, or (B) any actual, alleged, possible, or potential obligation onthe part of the Company to undertake, or to bear all or any portion of the cost of,any remedial action of any nature except as disclosed on Schedule 3.12; and(d)Schedule 3.12 contains a complete and accurate list of each GovernmentalAuthorization that is held by the Company. Unless by its terms it is non-transferable, each such Governmental Authorization shall remain in full force andeffect after the Closing Date.To the Knowledge of Sellers, the Governmental Authorizations listed in Schedule 3.12 collectivelyconstitute all of the material Governmental Authorizations necessary to permit the Company tolawfully conduct and operate its Business in the manner it currently conducts and operates suchBusiness and to permit the Company to own and use its assets in the manner in which its currentlyowns and uses such assets. 99Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Notwithstanding anything to the contrary set forth in this Section 3.12, none of the representationsand warranties set forth in this Section 3.12 is intended or shall be construed to apply to any matterrelating to Environmental Laws, Occupational Safety and Health Laws or any laws relating toemployment practices, which matters are addressed in Sections 3.17 and 3.18, respectively.3.13Legal Proceedings; Orders.(a)Except as set forth in Schedules 3.13 and 3.17, there is no pending or ThreatenedProceeding:(i)that has been commenced by or against the Company; or(ii)that challenges, or that may have the effect of preventing, delaying, makingillegal, or otherwise interfering with, any of the Contemplated Transactions.(b)Except as set forth in Schedule 3.13:(i)there is no Order to which the Company, or any of the assets owned by theCompany, is subject; and(ii)no Seller is subject to any Order that relates to the Business of, or any of theassets owned or used by, the Company.3.14Absence of Certain Changes and Events.Except as set forth in Schedule 3.14 or as otherwise specifically contemplated by this Agreement,since the date of the Interim Balance Sheet, the Company has conducted its Business only in theOrdinary Course of Business and there has not been any:(a)change in the Company's authorized or issued capital stock, grant of any stockoption or right to purchase shares of capital stock of the Company; issuance of anysecurity convertible into such capital stock, grant of any registration rights, grant ofoptions, warrants or stock awards, purchase, redemption, retirement, or otheracquisition by the Company of any shares of any such capital stock, or declarationor payment of any dividend or other distribution or payment in respect of shares ofcapital stock;(b)amendment to the Organizational Documents of the Company;(c)except in the Ordinary Course of Business, payment or increase by the Company ofany bonuses, salaries, loans, perquisites, severance arrangements or othercompensation to any stockholder, director, officer, or employee or entry into anyemployment, severance, or similar Contract with any director, officer, or employee;100Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(d)adoption of, or increase in the payments to or benefits under, any profit sharing,bonus, deferred compensation, savings, insurance, pension, retirement, or otheremployee benefit plan for or with any employees of the Company;(e)damage to or destruction or loss of any asset or property of the Company, whetheror not covered by insurance, which would cause a Material Adverse Change to theproperties, assets, business or financial condition of the Company;(f)except in the Ordinary Course of Business, entry into, termination of, or receipt ofnotice of termination of (i) any license, distributorship, dealer, sales representative,joint venture, credit, or similar agreement, or (ii) any Contract or transactioninvolving a total remaining commitment by or to the Company of at least $50,000or a term in excess of twelve (12) months;(g)material change in the accounting methods or principles or practices used by theCompany;(h)payment of long term debt except as in accordance with the normal scheduledmaturities for any long term debt;(i)grant or making of any mortgage or pledge or subject itself or any of its propertiesor assets (tangible or intangible) to any claim, lien, charge or encumbrance of anykind (absolute or contingent), except liens for Taxes not currently due;(j)making of any commitment or incurring of any liability, through negotiations orotherwise, to any labor organization which could have a Material Adverse Change;(k)increase or establishment of any reserve for Taxes or other liabilities on its books orotherwise provide therefor, except for Taxes or other liabilities relating to theOrdinary Course of Business of the Company since the date of the Interim BalanceSheet; or write up or down the value of inventory or determine as collectable anynotes or accounts receivable that were previously considered to be uncollectible,except for write-ups or write-downs in accordance with GAAP in the OrdinaryCourse of Business consistent with past practice;(l)making or authorizing of any capital expenditure in excess of $100,000 for anyindividual commitment, except as may be necessary for ordinary repair,maintenance or replacement;or(m)entry into any contract, except in the Ordinary Course of Business, for the sale ofgoods or the performance of services for or by the Company that is not terminableupon sixty (60) days’ notice or less; entry into any contract continuing for a periodof more than three months from its date that is not terminable upon sixty (60) days’notice or less; entry into any agreement or instrument, except in the OrdinaryCourse of Business, relating to the borrowing or lending of money or extension ofcredit, guarantee or indemnitee of any Person with respect to any obligation forborrowed money or otherwise, excluding endorsements made for101Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.collection; or making or permitting to be made any amendment, modification,cancellation or termination of any material contract, agreement, lease, license,finance agreement or written evidence of indebtedness, except for the renewal oflines of credit in place as of the date hereof, in an amount and on terms consistentwith past practice of the Company.3.15Applicable Contracts; No Defaults.(a)Schedule 3.15(a) contains a complete and accurate list of the following executoryContracts to which the Company is a party (each, an “Applicable Contract”):(i)each Contract that involves performance of services or delivery of goods ormaterials by the Company of an amount or value in excess of $50,000;(ii)each Contract that involves performance of services or delivery of goods ormaterials to the Company of an amount or value in excess of $50,000;(iii)each Contract that was not entered into in the Ordinary Course of Businessand that involves expenditures by or receipts of the Company in excess of$50,000;(iv)each Contract that involves the furnishing of goods or services whichcannot be cancelled, without penalty, on sixty (60) days or less notice andwhich affects the ownership of, leasing of, title to, use of, or any leaseholdor other interest in, any real or personal property (except personal propertyleases and installment and conditional sales agreements having a value peritem or aggregate payments of less than $50,000 and with terms of less thanone year);(v)each Contract containing covenants that in any way purport to restrict thebusiness activity of the Company or limit the freedom of the Company toengage in any line of business or to compete with any Person(vi)each Contract for capital expenditures in excess of $50,000;(vii)each written warranty, guaranty, and or other similar undertaking withrespect to contractual performance extended by the Company other than inthe Ordinary Course of Business;(viii)each Contract guaranteeing any indebtedness obligation or liability of aPerson other than the Company;(ix)each Contract involving a joint venture, partnership or other cooperativearrangement or any other agreement involving a sharing of profits;(x)each Contract which contains any provisions requiring the Company toindemnify any other Person other than in the Ordinary Course of Business;102Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(xi)except in the Ordinary Course of Business, each Contract obligating theCompany to sell or deliver any product or service at a price which does notcover the cost (including labor, materials and production overhead) plus theCompany’s customary profit margin associated therewith;(xii)each Contract concerning confidentiality or non-competition, other than inthe Ordinary Course of Business; and(xiii)each amendment, supplement, and modification (whether oral or written) inrespect of any of the foregoing.The Company has provided or made available true and correct copies of all Applicable Contractsto Buyer. No notice of material default arising under any Applicable Contract has been deliveredto or by the Company. Except as set forth in Schedule 3.15, the transfer of the Sharescontemplated by this Agreement will not result in any default, penalty or modifications to any suchApplicable Contract.(b)Each Applicable Contract is a legal, valid and binding obligation of the Companyand, to Sellers’ Knowledge, each other party thereto, enforceable against each suchparty thereto in accordance with its terms, except as may be limited by applicablebankruptcy, insolvency, reorganization, moratorium or similar laws affectingcreditors’ rights generally and subject to general principles of equity.(c)Except as set forth in Schedule 3.15(c):(i)the Company is in compliance with all applicable terms and requirements ofeach Applicable Contract under which it has or had any obligation orliability, except where such non-compliance would not have a MaterialAdverse Change; and(ii)the Company has not given to or received from any other Person any noticeor other communication regarding any actual, Threatened or allegedviolation or breach of, or default under, any Applicable Contract.3.16Insurance.(a)The Company has delivered to Buyer true and complete copies of all policies ofinsurance for the 2013-2014 policy year and binders for all policies of insurance tobe issued for the 2014-2015 policy year for which the Company is a namedinsured. Schedule 3.16 describes any self-insurance arrangement by or affectingthe Company, including any reserves established thereunder and identifies allinsurance policies for all policy years from the incorporation date of the Companyand through the 2012-2013 policy year. Except as set forth on Schedule 3.16, allpolicies of insurance to which the Company is a named insured:(i)to Sellers’ Knowledge, are valid, outstanding, and enforceable and shall soremain through the Closing Date (except to the extent any such policyexpires and is renewed in the Ordinary Course of Business);103Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(ii)to the Sellers’ Knowledge, were procured from insurance companies, inpart, by providing insurers with representations and estimated exposureinformation, after reasonable good faith inquiry;(iii)to Sellers’ Knowledge, are sufficient for compliance with all LegalRequirements and Contracts to which the Company is a party;(iv)to Sellers’ Knowledge, all material facts, circumstances, situations, events oracts which could give rise to a claim as well as any actual notice of claim orlegal action against the Company or its directors, officers, fiduciaries oremployees have been reported and filed with any and all insurancecompanies underwriting insurance policies that may provide coverage forsuch potential or actual losses for the purpose of complying with theinsurance policy(s)’ notice requirements and conditions; and(v)do not provide for any retrospective premium adjustment on the part of theCompany.(b)The Company has paid all insurance premiums due, and has otherwise performedall of its obligations and complied with all conditions, under each insurance policyto which the Company is a named insured or that provides coverage to theCompany, directors, officers, fiduciaries or employees thereof, and no event hasoccurred which, with notice or the lapse of time, would constitute such a breach ordefault, or permit termination, modification, or acceleration, under the policies.3.17Environmental Matters.Except as set forth in Schedule 3.17:(a)There are no pending or, to the Knowledge of Sellers, Threatened claims resultingfrom any Environmental, Health, and Safety Liabilities or arising under or pursuantto any Environmental Law, with respect to or affecting the Facility or theCompany.(b)The Company is in compliance in all material respects with all presentinterpretations of, or enforcement policies applicable to, Environmental Laws andOccupational Safety and Health Laws.(c)At no time did the Company release on, upon, adjacent to, or into the Facility,substances in violation of Environmental Laws or Occupational Safety and HealthLaws which would require remediation or abatement, the cost of which wouldreasonably be concluded to amount to $10,000 or more.(d)The Company has in full force and effect all Governmental Authorizations requiredby all applicable Environmental Laws for the operation of its Business and is inmaterial compliance with the terms and conditions of such GovernmentalAuthorizations.104Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(e)The Company is not subject to any decree, order, writ, judgment or injunctionissued pursuant to, and to the Sellers' Knowledge, is not the subject of any pendingor Threatened investigation under any, applicable Environmental Laws.(f)To Sellers’ Knowledge, there has been no Hazardous Activity at the Facility(except in material compliance with or which have been remediated in materialcompliance with applicable Environmental Laws at the Facility).(g)Buyer has been provided with, in the course of due diligence inquiry, full andaccurate disclosure of all known or Threatened material Environmental, Health andSafety Liabilities, and material documentation regarding the Company’s policies,procedures and operations in connection with Environmental Laws.3.18EmployeesSchedule 3.18 contains (a) a complete and accurate list, as of May 31, 2014, of the name, job title(to the extent applicable), and current rate of compensation for each Company employee, officerand director, and (b) a list of each such employee/officer who has entered into a contract foremployment or a confidentiality/assignment of inventions agreement with the Company, a copy ofwhich has been provided to Buyer. Except as set forth in Schedule 3.18, to Sellers’ Knowledge,no employee with annual compensation in excess of seventy-five thousand dollars ($75,000) orgroup of at least five (5) employees has any plans to terminate employment with the Company. There are no controversies pending or, to the Knowledge of Sellers, Threatened controversiesinvolving any employee with annual compensation in excess of seventy-five thousand dollars($75,000) or any group of at least five (5) employees of the Company. The Company is incompliance in all material requests with all applicable federal, state and municipal OccupationalSafety and Health Laws concerning or affecting employees of the Company.Except as set forth on Schedule 3.18, the Company has not been since March 1, 2011, or is,subject to any adverse rulings, findings or determinations of unlawful employment practices orviolations of other related statutes, and Sellers have not received any written notice of any pendingor Threatened investigation, Proceeding, labor dispute or litigation relating to any unlawfulemployment practice claim or claims or violations of other related statutes, executive orders oradministrative determinations or regulations.3.19Labor Relations; Compliance.The Company is not a party to any collective bargaining agreement. Since March 1, 2011, therehas not been, there is not presently pending or existing, and to Sellers' Knowledge there is notThreatened, (a) any Proceeding against or affecting the Company relating to the alleged violationof any Legal Requirement pertaining to labor relations or employment matters, including anycharge or complaint filed by an employee with the Equal Employment Opportunity Commission,or (c) any petition for certification of a collective bargaining agent. 105Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.3.20Intellectual Property.(a)Patents.(i)Schedule 3.20(a) contains a complete and accurate list of all Patents ownedby the Company. Except for licenses granted in the Applicable Contracts,the Company is the owner of all right, title, and interest in and to each of itsPatents, free and clear of all liens, security interests, charges, encumbrances,equities, and other adverse claims.(ii)All of the issued Patents owned by the Company are currently incompliance with formal legal requirements (including payment of filing,examination, and maintenance fees and proofs of working or use) and arevalid and no Governmental Body has declared any such Patentunenforceable.(iii)To Sellers’ Knowledge, since the period the Company owned the Patent, noPatent owned by the Company has been or is now involved in anyinterference, reissue, reexamination, or opposition proceeding.(iv)To Sellers' Knowledge, since the period the Company owned the Patent, noPatent owned by the Company is infringed or has been challenged orThreatened in any way.(b)Marks.(i)Schedule 3.20(b) contains a complete and accurate list and summarydescription of all Marks used by the Company. Except for licenses grantedin the Applicable Contracts, the Company is the owner of all right, title, andinterest in and to each of its Marks, free and clear of all liens, securityinterests, charges, encumbrances, equities, and other adverse claims.(ii)All Marks owned by the Company that have been registered with theUnited States Patent and Trademark Office are currently in compliance withall formal legal requirements (including the timely post-registration filing ofaffidavits of use and incontestability and renewal applications) and are validand subsisting.(iii)No Mark owned by the Company has been or is now involved in anyopposition, invalidation, or cancellation Proceeding and, to Sellers'Knowledge, no such action is Threatened with the respect to any of suchMarks.(iv)To Sellers' Knowledge, there is no trademark or trademark application ofany third party that potentially interferes with any Mark of the Company.106Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(v)To Sellers' Knowledge, no Mark owned by the Company is infringed or hasbeen challenged or Threatened in any way.(c)Copyrights. The Company does not have any registered Copyrights(d)Royalties. The Company does not pay any royalty to any Person in connectionwith the property described in this Section 3.20.3.21Brokers or Finders.Sellers and their agents have incurred no obligation or liability, contingent or otherwise, forbrokerage or finders' fees or agents' commissions or other similar payment in connection with thisAgreement other than in connection with an agreement with Billow Butler & Company, L.L.C. Any payments to Billow Butler & Company, L.L.C. after the Closing Date shall be paid bySellers.3.22Product Warranty.Schedule 3.22 hereto contains an accurate and complete statement of all written warranties,warranty policies, service, subscription and maintenance agreements of the Company. To Sellers’Knowledge, there are no material warranty liabilities or recalls of the Company’s products, and noclaims for service, repair, replacement, refund, recall or claims for other product-related remediesthat are pending, or are reasonably anticipated to be presented with respect to the Company’sproducts.3.23Product Liability.Schedule 3.23 contains a complete and accurate list and summary description of all writtenoutstanding liabilities, claims or obligations, absolute or (to Sellers’ Knowledge) contingent,pending or (to Sellers’ Knowledge) Threatened or otherwise arising from or alleged to arise fromany actual or alleged injury to persons or property as a result of the ownership, possession or use ofany product assembled or sold by the Company prior to the Closing Date, including but not limitedto any claims arising from or alleged to arise from any actual or alleged exposure to asbestos and/orasbestos containing materials. All such claims are fully covered by product liability insurancesubject to applicable deductibles and reserves and available limits of coverage or if not are noted onSchedule 3.23. To Sellers’ Knowledge, there are no recalls, Threatened or pending, and no reporthas been filed or required to have been filed with respect to any products of the Company underany applicable statute or regulation.3.24Customers.None of the customers of the Company identified on Schedule 3.24 has provided written notice toany member of the Senior Management Team of its intention to terminate its relationship with theCompany or to substantially reduce the amount of business it provides to the Company, and Sellersdo not have any Knowledge of any such intention unless identified on Schedule 3.24.107Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.3.25Trade Secrets and Proprietary Information.To Sellers’ Knowledge no use of the Trade Secrets owned by the Company violates any tradesecret rights of any other Person.3.26Personal Property Leases.There are no leases of personal property used by the Company involving annual payments inexcess of Fifty Thousand Dollars ($50,000).3.27Real Property Lease.Schedule 3.27 hereto sets forth a complete description of the real property lease related tothe Company (the “Real Property Lease”) leased or subleased by the Company including theamount of the security deposit, if any, thereunder, a street address, legal description, descriptivesummary and list of contracts, agreements, leases, subleases, options and commitments, oral orwritten, including all material contracts, agreements, leases, subleases, options and commitmentsrelating to or affecting such real property or any interests therein to which the Company is a partyor is otherwise bound or affected. Sellers have heretofore made available to Buyer a true andcomplete copy of the Real Property Lease. The Real Property Lease is legally valid and bindingand in full force and effect, and there have been no written or oral modifications, alterations oramendments of or to the Real Property Lease except as set forth on Schedule 3.27. The Companyis not in default under any of the terms and provisions of the Real Property Lease, and to theSellers’ Knowledge, the landlord under the Real Property Lease is not in default of any of itsobligations thereunder. To the Sellers’ Knowledge, there are no defaults, offsets, counterclaims ordefenses under the Real Property Lease, and no Seller has received any notice of any default,offset, counterclaim or defense under any of the Real Property Lease. As of Closing, there will beno agreements in place, and binding upon Buyer, regarding the payment of any leasingcommissions to any party with respect to the Real Property Lease. With respect to the RealProperty Lease:(a)No amount payable under the Real Property Lease is past due;(b)The Company has complied with all material commitments and obligations on itspart to be performed or observed under the Real Property Lease;(c)No Seller has received any notice of default (other than defaults which have beenwaived or cured) under the Real Property Lease or any other communicationcalling upon Seller to comply with any provision of the Real Property Lease orasserting noncompliance and, except for events, and conditions which have beenwaived or cured; and(d)Except as set forth on Schedule 3.27, there does not exist any security interest, lien,encumbrance or claim of others (excluding the lessor) created or suffered to exist onthe leasehold interest created under the Real Property Lease.The Company has good and valid title to the leasehold estate under the Real PropertyLease, free and clear of all liens.108Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.3.28Related Party Interests.Except as disclosed on Schedule 3.28, to Sellers’ Knowledge, no Person that is not a publiclytraded corporation in which any of the Sellers has a direct or indirect ownership interest orinvestment:(a)has any cause of action or other claim whatsoever against or owes any amount to,or is owed any amount by the Company in excess of $50,000;(b)has any interest in or owns any property or right used in the conduct of the Businessof the Company;(c)is a party to any Contract with the Company;(d)received from or furnished to the Company any goods or services other thanemployment services (with or without consideration) since the date of the InterimBalance Sheet; or(e)owns, directly or indirectly, any debt, equity or other interest or investments in anycorporation, firm or other entity which is a competitor, lessor, lessee, customer,supplier or advertiser of the Company.3.29Delivery of Documents.Complete copies of all notices and other instruments and documents, including all amendments,supplements and modifications thereto, listed in the Schedules to this Agreement have been madeavailable in the data room to Buyer.3.30Truth of Representations and Warranties.No representation or warranty by Sellers in this Agreement or in the Schedules contains or willcontain at Closing an untrue statement of a material fact necessary to make the statements and factscontained therein not materially misleading.3.31Books and Records.All accounting books, ledgers, records, minute books, share certificate books and corporate seals,where applicable, of the Company and all other records of or concerning the Company are locatedat the business premises of the Company or retained in the offices of Company counsel.ARTICLE 4REPRESENTATIONS ANDWARRANTIES OF BUYERBuyer represents and warrants to Sellers as follows:109Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.4.1Organization and Good Standing. Buyer is a corporation duly organized, validly existing, and in good standing under the laws of theState of Delaware.4.2Authority; No Conflict. This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable againstBuyer in accordance with its terms. Buyer has the absolute and unrestricted right, power, andauthority to execute and deliver this Agreement and the other agreements contemplated hereby andto perform its obligations under this Agreement and such other agreements. Buyer is not and willnot be required to obtain any Consent from any Person in connection with the execution anddelivery of this Agreement or the other agreements contemplated hereby or the consummation orperformance of any of the Contemplated Transactions.4.3Investment Intent. Buyer is acquiring the Shares for its own account and not with a view to their distribution withinthe meaning of Section 2(11) of the Securities Act.4.4Certain Proceedings. There is no pending Proceeding against Buyer and that challenges, or may have the effect ofpreventing, delaying, making illegal, or otherwise interfering with, any of the ContemplatedTransactions. To Buyer's knowledge, no such Proceeding has been Threatened.4.5Available Funds. Buyer has, or will have as of the Closing Date, sufficient funds to perform all of its obligationsunder this Agreement, including, without limitation, to make the payments required hereunder.4.6Brokers or Finders.Buyer and its officers and agents have incurred no obligation or liability, contingent or otherwise,for brokerage or finders' fees or agents' commissions or other similar payment in connection withthis Agreement and will indemnify and hold Sellers harmless from any such payment alleged to bedue by or through Buyer as a result of the action of Buyer or its officers or agents.ARTICLE 5COVENANTS OF SELLERS PRIOR TOCLOSING DATE5.1Access and Investigation.Between the date of this Agreement and the Closing Date, Sellers will, and will cause theCompany and its Representatives to: (a) afford Buyer and its Representatives and prospectivelenders and their Representatives (collectively, “Buyer's Advisors”) reasonable access, upon110Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.reasonable prior notice and coordination with Ed Odmark, to the Company's properties, contracts,books and records, and other documents and data, and will permit Buyer to contact any third partyfrom whom information is sought relevant to the Contemplated Transactions; (b) furnish Buyer andBuyer's Advisors with full and complete copies of all such contracts, books and records, and otherexisting documents and data as Buyer may reasonably request; (c) furnish Buyer and Buyer'sAdvisors with such additional financial, operating, and other data and information as Buyer mayreasonably request; and (d) facilitate Buyer’s due diligence visits with certain primary vendors andcustomers of the Company as specifically provided for herein. Notwithstanding the foregoing, anycontact with employees, vendors, and customers of the Company shall be made only with Sellers’prior approval and after all other due diligence has been completed by Buyer and all other relevantmaterials issues have been agreed to and concluded between the parties. Buyer shall comply fully with all rules, regulations, policies and instructions issued by theCompany while upon, entering or leaving the Company’s property, including any insurancerequirements that the Company may impose on contractors authorized to perform work on anyproperty owned or operated by the Company. Buyer shall not unreasonably interfere with the day-to-day operations of the Business of the Company. The Company and the Sellers shall be deemedto have “provided” the Buyer documents and information as reflected hereunder to the extent suchdocuments and information are posted to the data room provided in connection with theseContemplated Transactions.5.2Operation of the Business of the Company.Between the date of this Agreement and the Closing Date, the Sellers who are also members of theSenior Management Team will cause the Company to use their Best Efforts to (a) conduct businessonly in the Ordinary Course of Business, (b) confer with Buyer concerning operational matters of amaterial nature, and (c) otherwise report regularly and periodically to Buyer concerning the statusof the Business, operations, and finances of the Company.5.3Negative Covenant.Except as otherwise expressly permitted by this Agreement, between the date of this Agreementand the Closing Date, the Sellers who are also members of the Senior Management Team will usetheir Best Efforts to cause the Company not to, without the prior consent of Buyer, take anyaffirmative action, or fail to take any reasonable action within their or its control, as a result ofwhich any of the changes or events listed in Section 3.14 is likely to occur.5.4Required Approvals.As promptly as practicable after the date of this Agreement to the extent not already done, theSellers who are also members of the Senior Management Team will use their Best Efforts to causethe Company to make all filings required by Legal Requirements to be made by them in order toconsummate the Contemplated Transactions.5.5Notification.Between the date of this Agreement and the Closing Date, each Seller will promptly notify Buyerin writing if such Seller becomes aware of any fact or condition that causes or constitutes a Breachor potential Breach of any of Sellers' representations and warranties set forth in this111Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Agreement, or if such Seller becomes aware of the occurrence after the date of this Agreement ofany fact or condition that would (except as expressly contemplated by this Agreement) cause orconstitute a Breach or potential Breach of any such representation or warranty had suchrepresentation or warranty been made as of the time of occurrence or discovery of such fact orcondition. Should any such fact or condition require any change in the Schedules if the Scheduleswere dated the date of the occurrence or discovery of any such fact or condition, Sellers willpromptly deliver to Buyer a supplement to the Schedules specifying such change. During the sameperiod, each Seller will promptly notify Buyer of the occurrence of any Breach or potential Breachof any covenant of Sellers in this Article 5 or of the occurrence of any event that may make thesatisfaction of the conditions in Article 7 impossible or reasonably unlikely.5.6Best Efforts.Between the date of this Agreement and the Closing Date, the Sellers who are also members of theSenior Management Team will use their Best Efforts to cause the conditions in Article 7 andSection 8.3 to be satisfied.ARTICLE 6COVENANTS OF BUYER PRIOR TOCLOSING DATE6.1Required Approvals.As promptly as practicable after the date of this Agreement to the extent not already done, Buyerwill, and will cause each of its Related Persons to, make all filings required by Legal Requirementsto be made by them in order to consummate the Contemplated Transactions.6.2Best Efforts.Except as set forth in the proviso to Section 6.1, between the date of this Agreement and theClosing Date, Buyer will use its Best Efforts to cause the conditions in Section 7.2(c) and Article 8to be satisfied.6.3Disputes with Company Customers.If and to the extent Buyer elects to contact any customer of the Company as permitted by the termsof this Agreement, Buyer shall only do so after confirming in writing to Sellers’ Representative thatBuyer has never asserted any claim against, or otherwise been engaged in any dispute of anynature with, such customer.ARTICLE 7CONDITIONS PRECEDENT TOBUYER’S OBLIGATION TO CLOSEBuyer's obligation to purchase the Shares and to take the other actions required to be takenby Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of thefollowing conditions (any of which may be waived by Buyer, in whole or in part):112Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.7.1Accuracy of Representations.The representations and warranties of Sellers contained in this Agreement shall be true and correcton and as of the Closing Date, with the same effect as though such representations and warrantieshad been made on and as of the Closing Date (except to the extent that any such representation orwarranty is stated to be made as of a specified date, in which case, such representation andwarranty shall be true and correct as of such specified date), except that any inaccuracies in suchrepresentations and warranties will be disregarded if the circumstances giving rise to suchinaccuracies do not, individually or in the aggregate, constitute, and could not reasonably beexpected to constitute, a Material Adverse Change.7.2Sellers' Performance.(a)All of the covenants and obligations that Sellers are required to perform or tocomply with pursuant to this Agreement at or prior to the Closing (consideredcollectively), and each of such covenants and obligations (considered individually),must have been duly performed and complied with in all material respects.(b)Each document required to be delivered pursuant to Section 2.5(a) and thisArticle 7 must have been delivered.(c)No Proceeding shall be pending or Threatened by or before any GovernmentalBody wherein an unfavorable judgment, order, decree, stipulation or injunctionwould (i) prevent consummation of any of the Contemplated Transactions,(ii) cause any of the Contemplated Transactions to be rescinded followingconsummation or (iii) affect adversely the right of the Buyer to own, operate orcontrol any of the assets and operations of the Company following theContemplated Transactions, and no such judgment, order, decree, stipulation orinjunction shall be in effect.7.3Resignations.Buyer shall have received in writing prior to or at the Closing the resignations, effective as of theClosing Date, of each corporate director and officer of the Company. 7.4Escrow AgreementSellers’ Representative and the Escrow Agent shall have executed and delivered to Buyer theEscrow Agreement.7.5Good Standing Certificate.Buyer shall have received certificates certifying that the Company is in good standing under thestate of its incorporation.113Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.7.6Other Documents.Sellers shall have executed and delivered to Buyer such other documents as counsel for Buyershall reasonably request to carry out the purposes of this Agreement.7.7No Claim Regarding Stock Ownership or Sale Proceeds. There must not have been made or Threatened by any Person any claim asserting that such Person(a) is the holder or the beneficial owner of, or has the right to acquire or to obtain beneficialownership of, any stock of, or any other voting, equity, or ownership interest in, the Company, or(b) is entitled to all or any portion of the Purchase Price. Sellers shall either have obtained anagreement from each of the Optionholders who hold Options to acquire Shares of the Company forpurchase or cancellation of those respective Options by the Company prior to the Closing and shallprovide evidence of this to Buyer, or any Optionholder who does not execute a cancellationagreement shall have exercised his or her Options and become a Seller hereunder. 7.8Consulting Agreement. Edward Odmark shall have executed and delivered to Buyer a consulting agreement relating toservices to be provided by him to the Company after the Closing Date.7.9Consents from Material Customers.The completion and Closing of the Contemplated Transaction is contingent upon the consent toassignment of all Applicable Contracts with customers and/or vendors and lessors to the extentsuch Contracts require consent due to change of control, other than the Applicable Contracts setforth on Schedule 7.9.7.10Availability of Employees.Buyer shall have been reasonably satisfied of the availability of the Senior Management Team ofthe Company and their direct reports for employment with Buyer subsequent to the Closing.7.11Extended Reporting Period Coverage for Company’s Liability Insurance Policies Writtenon a Claims-Made Basis.The Company shall have procured any additional premium for extended reporting period coverage,for a period of three years from the Closing Date; for any liability insurance policy written, inwhole or in part, on a claims-made basis, in compliance with policy conditions. Sellers shall paythe Company $10,000 towards the cost of such insurance at the Closing.ARTICLE 8CONDITIONS PRECEDENT TOSELLERS’ OBLIGATION TO CLOSESellers' obligation to sell the Shares and to take the other actions required to be taken bySellers at the Closing is subject to the satisfaction, at or prior to the Closing, of each of thefollowing conditions (any of which may be waived by Sellers, in whole or in part):114Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.8.1Accuracy of Representations. The representations and warranties of Buyer contained in this Agreement shall be true and correcton and as of the Closing Date, with the same effect as though such representations and warrantieshad been made on and as of the Closing Date (except to the extent that any such representation orwarranty is stated to be made as of a specified date, in which case, such representation andwarranty shall be true and correct as of such specified date), except that any inaccuracies in suchrepresentations and warranties will be disregarded if such inaccuracies do not, and could not havereasonably be expected to, have a material adverse effect on Buyer’s business, financial condition,or results of operation or Buyer’s ability to consummate the Contemplated Transactions.8.2Buyer's Performance.(a)All of the covenants and obligations that Buyer is required to perform or to complywith pursuant to this Agreement at or prior to the Closing (considered collectively),and each of such covenants and obligations (considered individually), must havebeen performed and complied with in all material respects.(b)Each document required to be delivered pursuant to this Article 8 must have beendelivered.(c)Buyer must have satisfied its obligations pursuant to Section 2.3(a) and 2.3(b) to besatisfied at the Closing.8.3No Injunction.No Proceeding shall be pending or Threatened by or before any Governmental Body wherein anunfavorable judgment, order, decree, stipulation or injunction would (i) prevent consummation ofany of the Contemplated Transactions or (ii) cause any of the Contemplated Transactions to berescinded following consummation, and no such judgment, order, decree, stipulation or injunctionshall be in effect.8.4Escrow Agreement.Buyer and the Escrow Agent shall have executed and delivered to Sellers’ Representative theEscrow Agreement.8.5Consulting Agreement.Buyer shall have executed and delivered to Edward Odmark a consulting agreement relating toservices to be provided by him to the Company after the Closing Date.ARTICLE 9TERMINATION115Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.9.1Termination Events.This Agreement may, by notice given prior to the Closing, be terminated:(a)by Buyer if there is a Breach of any representation or warranty of Sellers in Article3 of this Agreement such that the conditions set forth in Section 7.1 would not besatisfied as of the time of said Breach, provided that if such Breach is curable, thenBuyer may not terminate this Agreement under this Section 9.1(a) for thirty (30)days after it has given written notice to Sellers of such Breach, provided that Sellerscontinue to exercise their Best Efforts to cure such Breach (it being understood thatBuyer may not terminate this Agreement under this Section 9.1(a) if such Breach iscured during such thirty (30) day period);(b)by Sellers if there is a Breach of any representation or warranty of Buyer in Article4 of this Agreement such that the conditions set forth in Section 8.1 would not besatisfied as of the time of said Breach, provided that if such Breach is curable, thenSellers may not terminate this Agreement under this Section 9.1(b) for thirty (30)days after giving written notice to Buyer of such Breach, provided that Buyercontinues to exercise its Best Efforts to cure such Breach (it being understood thatSellers may not terminate this Agreement under this Section 9.1(b) if such Breach iscured during such thirty (30) day period);(c)by Buyer if any of the conditions in Sections 7.2 through and including 7.12(excluding Section 7.7) has not been satisfied as of the Closing Date or ifsatisfaction of such a condition is or becomes impossible or commerciallyimpracticable (other than through the failure of Buyer to comply with its obligationsunder this Agreement) and Buyer has not waived such condition on or before theClosing Date;(d)by Sellers, if any of the conditions in Sections 8.2 through and including 8.5 has notbeen satisfied of the Closing Date or if satisfaction of such a condition is orbecomes impossible or commercially impracticable (other than through the failureof Sellers to comply with their obligations under this Agreement) and Sellers havenot waived such condition on or before the Closing Date; or(e)by mutual agreement in writing of Buyer and Sellers.9.2Effect of Termination.Each party's right of termination under Section 9.1 is in addition to any other rights it may haveunder this Agreement or otherwise, and the exercise of a right of termination will not be an electionof remedies.116Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ARTICLE 10INDEMNIFICATION; REMEDIES10.1Survival.All representations, warranties, covenants, and obligations in this Agreement, the Schedules, thecertificates delivered pursuant to Section 2.5, and any other certificate or document deliveredpursuant to this Agreement will survive the Closing.10.2Indemnification and Payment of Damages by Sellers.Subject to the other provisions of this Article 10, Sellers, severally, will indemnify and holdharmless Buyer and the Companyfor, and will pay to them the amount of, any loss, liability, damage, deficiency, penalty, cost,assessment or reasonable expense (including without limitation reasonable attorneys' fees) whetheror not involving a third-party claim (collectively, “Damages”), arising from or in connection with:(a)any Breach of any representation or warranty made by Sellers in this Agreement, orthe Schedules; and(b)any Breach by Sellers of any covenant or obligation of Sellers in this Agreement.10.3Indemnification and Payment of Damages by Buyer. Subject to the other provisions of this Article 10, Buyer will indemnify and hold harmless Sellersfor, and will pay to Sellers the amount of, any Damages, arising from or in connection with:(a)any Breach of any representation or warranty made by Buyer in this Agreement; and(b)any Breach by Buyer of any covenant or obligation of Buyer in this Agreement.10.4Time Limitations.Notwithstanding Section 10.1, Buyer will have no liability (for indemnification or otherwise) underSection 10.3 with respect to any representation or warranty, or any covenant or obligation to beperformed and complied with prior to the Closing Date, unless Sellers notify Buyer of a claimspecifying the factual basis of that claim in reasonable detail to the extent then known by Sellers nolater than eighteen months after the Closing Date. Notwithstanding Section 10.1, Sellers will haveno liability (for indemnification or otherwise) under Section 10.2 with respect to any representationor warranty, or any covenant or obligation to be performed and complied with hereunder, unlessBuyer notifies Sellers of a claim specifying the factual basis of that claim in reasonable detail to theextent then known by Buyer prior to the dates specified below:(a)A claim in respect of the representations and warranties set forth in Sections 3.2(Authority; No Conflict), 3.3 (Capitalization), or a claim in respect of fraud, can beasserted indefinitely;117Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(b)A claim in respect of the representations and warranties set forth in Section 3.9(Taxes) must be asserted prior to the expiration of the respective limitation periodscontained in the IRC, or applicable state revenue code or statute, respectively, andany other applicable legislation affecting Taxes;(c)A claim in respect of the representation and warranties set forth in Section 3.17(Environmental Matters) must be asserted prior to the third (3rd) anniversary of theClosing Date;(d)A claim in respect of the representation and warranties set forth in Section 3.7(Condition of Assets) must be asserted prior to expiration of 120 days after theClosing Date; and(e)A claim in respect of all representation and warranties not listed in Sections 10.4(a)through (e) must be asserted no later than eighteen months after the Closing Date.10.5Limitations on Amount.Sellers will have no liability (for indemnification or otherwise) with respect to the matters describedin Section 10.2 until the total of all Damages with respect to such matters exceeds One HundredFifty Thousand Dollars ($150,000), and then only for the amount by which such Damages exceedOne Hundred Fifty Thousand Dollars ($150,000). The maximum liability of Sellers in aggregateunder this Article 10 for any and all Damages, regardless of when suffered, shall be equal totwenty percent (20%) of the Closing Date Purchase Price as adjusted by the Final ClosingStatement of Net Working Capital provided, however, that no restriction shall apply in cases offraud or intentional misrepresentation by any of Sellers and provided further that the Escrow Fundshall be the exclusive remedy for any and all Damages arising from indemnification claims of thetype set forth in Sections 10.4(d) and (e).10.6Procedure for Indemnification—Third Party Claims.(a)Promptly after receipt by an indemnified party of notice of the commencement orThreatened commencement of any Proceeding against it, such indemnified partywill, if a claim is to be made against an indemnifying party under this Article 10give notice to the indemnifying party of the commencement or reasonablyanticipated commencement of such claim, but the failure to notify the indemnifyingparty will not relieve the indemnifying party of any liability that it may have to anyindemnified party, except to the extent that the indemnifying party demonstrates thatthe defense of such action is actually prejudiced by the indemnified party's failure togive such notice.(b)If any Proceeding referred to in Section 10.6(a) is brought against an indemnifiedparty or Threatened against an indemnified party and notice is given to theindemnifying party of the commencement or Threatened commencement of suchProceeding, the indemnifying party will be entitled to participate in such Proceedingand, to the extent that it wishes, to assume the defense of such Proceeding utilizingRepresentatives reasonably acceptable to the indemnified118Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.party, and, after notice from the indemnifying party to the indemnified party of itselection to assume the defense of such Proceeding, the indemnifying party will not,as long as it diligently, in good faith and using its Best Efforts conducts suchdefense, be liable to the indemnified party under this Article 10 for any fees of othercounsel or any other expenses with respect to the defense of such Proceeding, ineach case subsequently incurred by the indemnified party in connection with thedefense of such Proceeding. If the indemnifying party assumes the defense of aProceeding, no compromise or settlement of such claims may be effected by theindemnifying party without the indemnified party's consent (which shall not beunreasonably withheld, conditioned or delayed) unless the sole relief provided ismonetary damages that are paid in full by the indemnifying party and the settlementthereof imposes no liability or obligation on, and includes a complete release fromliability of, the indemnified party or unless the amount in controversy is less thanTwenty Thousand Dollars ($20,000). If notice is given to an indemnifying party ofthe commencement or Threatened commencement of any Proceeding and theindemnifying party does not, within thirty (30) days after the indemnified party'snotice is given, give notice to the indemnified party of its election to assume thedefense of such Proceeding, subject to the provisions of this Article 10, theindemnifying party will be bound by any reasonable determination made in suchProceeding or any reasonable compromise or settlement effected by the indemnifiedparty, and will be liable for all reasonable expenses, fees or costs incurred by theindemnified party, whether in connection with the defense of the Proceeding or inany legal or equitable proceeding brought by the indemnified party against theindemnifying party to enforce this Article 10.10.7Procedure for Indemnification – Other Claims.A claim for indemnification for any matter not involving a third-party claim may be asserted bynotice to the party from whom indemnification is sought.10.8Exclusive Representations and Warranties.Buyer acknowledges that no Seller has made to Buyer any representation or warranty, express orimplied, other than as expressly made in Article 3 (including the Schedules). Without limiting thegenerality of the foregoing, and notwithstanding any otherwise express representations andwarranties made in Article 3 (including the Schedules), Sellers make no representation or warrantyto Buyer with respect to (a) any projections, estimates or budgets of future revenues, expenses orexpenditures and future results of operations heretofore delivered to or made available to Buyer; or(b) any other information or documents made available to Buyer or its Representatives with respectto Sellers, except as expressly covered by a representation or warranty contained in Article 3(including the Schedules).10.9Credits, Etc.Notwithstanding anything contained herein to the contrary, in no event shall Buyer or any otherindemnified Person be entitled to recover against the Escrow Fund or Sellers with respect to any119Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.claim for which the Company is entitled to indemnification under the provisions of any Contract orother right, until such time as all remedies available to the Company under such Contract or otherright, as provided therein, have been exhausted. Buyer shall recover the insurance proceeds underall applicable insurance policies prior to being entitled to recover Damages from or against Sellershereunder, and any such recovery shall be net of all such insurance proceeds. In determining anyDamages payable from the Escrow Fund or otherwise by Sellers to Buyer under this Agreement,Sellers shall be entitled to a credit or offset against such Damages in an amount equal to the valueof any documented net tax benefit realized (by reason of a deduction, basis adjustment, credit orotherwise), or any insurance benefit realized or realizable by Buyer in connection with the Damagewhich forms the basis of an indemnity claim hereunder. Furthermore, Buyer shall not be entitled toany recovery under this Article 10 if and to the extent an adjustment to the Purchase Price haspreviously been made with respect to such matter. No Seller shall be obligated to pay any amountarising out of Sellers’ indemnification obligations pursuant to this Article 10 unless and until theEscrow Fund shall be completely depleted.10.10Exclusive Remedy.The right of Buyer and Sellers to indemnification pursuant to Sections 10.2 and 10.3, shall be thesole and exclusive right and remedy exercisable under this Agreement regardless of the legaltheory advanced in support of such claims; provided, however, that this Section 10.10 shall notapply in cases of fraud and intentional misrepresentation. 10.11Limitation on Damages.NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, INNO EVENT SHALL ANY PARTY BE LIABLE UNDER THIS AGREEMENT OROTHERWISE FOR ANY EXEMPLARY, PUNITIVE, REMOTE, SPECULATIVE,CONSEQUENTIAL, SPECIAL OR INCIDENTAL DAMAGES OR LOSS OF PROFITS,AND NO CLAIM SHALL BE MADE OR AWARDED AGAINST THE ESCROWFUND, OR AGAINST ANY PARTY, FOR ANY SUCH DAMAGES OR LOSS OFPROFITS AND IN NO EVENT SHALL THE FOREGOING CONSTITUTE DAMAGESHEREUNDER.10.12Independent Investigation.In making the decision to enter into this Agreement and consummate the ContemplatedTransactions, Buyer has relied upon its own independent due diligence investigations andinspection of the assets of the Company, and on the representations, warranties, covenants,schedules and undertakings of Sellers in this Agreement. Notwithstanding anything containedherein to the contrary, in no event shall Buyer or any the other Indemnified Persons be entitled toassert a claim or recover under this Article 10 with respect to a breach by the Sellers of anyrepresentation, warranty, covenant or agreement if Buyer had knowledge thereof at or beforeClosing solely arising out of any information provided to Buyer in writing by Sellers or madeavailable to Buyer through the data room.BUYER ACKNOWLEDGES THAT BY VIRTUE OF BUYER’S ACQUISITION OFTHE SHARES, BUYER IS ACQUIRING THE ASSETS AND BUSINESS OWNED BYTHE120Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.COMPANY IN ITS “AS IS, WHERE IS” CONDITION AND STATE OF REPAIR, ANDWITH ALL FAULTS AND DEFECTS, AND THAT EXCEPT AS EXPRESSLY SETOUT IN THIS AGREEMENT, SELLERS HAVE NOT MADE ANYREPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR NATURE,EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO,WARRANTIES OF MARKETABILITY, QUALITY, CONDITION, CONFORMITY TOSAMPLES, MERCHANTABILITY, AND/OR FITNESS FOR A PARTICULARPURPOSE, ALL OF WHICH ARE, EXCEPT AS OTHERWISE SET OUT IN THISAGREEMENT, EXPRESSLY DISCLAIMED BY SELLERS. EXCEPT AS EXPRESSLY SET OUT IN THIS AGREEMENT, SELLERS DO NOTMAKE ANY REPRESENTATION, COVENANT OR WARRANTY, EXPRESS,IMPLIED OR STATUTORY, AS TO (A) THE ACCURACY OR COMPLETENESS OFANY RECORDS DELIVERED TO BUYER WITH RESPECT TO THE ASSETS OFTHE COMPANY (PROVIDED THAT THE DISCLAIMER SET FORTH IN THISCLAUSE (A) IS NOT INTENDED TO EXTEND TO THE SCHEDULES TO THISAGREEMENT OR TO FRAUD OR INTENTIONAL MISREPRESENTATION), OR (B)ANY FUTURE BUSINESS OR EVENT. WITH RESPECT TO ANY PROJECTION ORFORECAST DELIVERED TO BUYER BY OR ON BEHALF OF SELLERS OR ANYOF THEIR AFFILIATES, BUYER ACKNOWLEDGES THAT (I) THERE AREUNCERTAINTIES INHERENT IN ATTEMPTING TO MAKE SUCH PROJECTIONSAND FORECASTS, (II) BUYER IS FAMILIAR WITH SUCH UNCERTAINTIES, AND(III) BUYER IS TAKING FULL RESPONSIBILITY FOR MAKING ITS OWNEVALUATION OF THE ADEQUACY AND ACCURACY OF ALL SUCHPROJECTIONS AND FORECASTS FURNISHED.10.13Subrogation.If and to the extent Sellers are liable to Buyer or any other indemnified Person pursuant to thisArticle 10, Sellers shall be subrogated to any and all rights of the Company, and Sellers shall beentitled to any and all benefits, rights and remedies that would otherwise be available or accrue tothe Company in respect thereof. If and to the extent necessary, desirable, or appropriate, Sellersshall be entitled to exercise their rights pursuant to this Section 10.13 in the name of the Company. Buyer shall, and shall cause the Company, to cooperate, at Sellers’ sole cost and expense, with allreasonable requests made by Sellers to effectuate the intent of this Section 10.13.ARTICLE 11ADDITIONAL COVENANTS ANDAGREEMENTS11.1Preservation of Books and Records.For a period of seven (7) years after the Closing Date, Buyer will retain all books and recordsbelonging to the Company at Buyer’s sole cost and expense and, upon request, will make suchbooks and records (including access to personnel familiar therewith) available to Sellers forinspection and/or copying, at the expense of Sellers, at the headquarters of the Company at121Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.reasonable times and during regular office hours. If Buyer, at any time, directly or indirectly,proposes to transfer any of the books and records to another Person, Buyer will provide advancenotice of the transfer, obligate the transferee to maintain the books and records as herein requiredand will retain access to the books and records for the benefit of itself and Sellers. After theseventh (7th) anniversary of the Closing Date, if Buyer decides to destroy any books and records,Buyer shall give Sellers at least sixty (60) days prior written notice of the proposed destruction ofbooks and records and Sellers shall have the right, at their own expense, to retrieve all such booksand records proposed to be destroyed. If Buyer directly or indirectly sells or otherwise transfersany of the books and records belonging to the Company to any other Person, as a condition to suchsale or transfer Buyer shall require such other Person to agree in writing, in form and substancereasonably satisfactory to Sellers, to be bound by the terms of this Section 11.1.11.2Indemnification of Directors Officers and Fiduciaries.From and after the Closing Date, Buyer shall, to the fullest extent permitted by applicable Law andcovered by insurance, cause the Company to indemnify, defend and hold harmless each Seller whois now, or has been at any time prior to the date hereof, or who becomes prior to the Closing, adirector, officer and/or fiduciary of the Company (each a “Director/Officer/Fiduciary Indemnitee”and collectively, the “Director/Officer/Fiduciary Indemnitees”) against all Damages or, subject tothe proviso of the next sentence, amounts paid in settlement, arising out of actions or omissionsoccurring prior to or at the Closing (and whether asserted or claimed prior to, at or after theClosing) that are, in whole or in part, based on or arise out of the fact that such Person is or was adirector, officer and/or fiduciary of the Company prior to the Closing (the“Director/Officer/Fiduciary Indemnified Liabilities”), but specifically excluding Damages to theextent arising out of fraud, intentional misrepresentation or willful misconduct by anyDirector/Officer/Fiduciary Indemnitee. In the event of the occurrence of any suchDirector/Officer/Fiduciary Indemnified Liability, (A) Buyer shall cause the Company to pay thereasonable fees and expenses of counsel selected by the Director/Officer/Fiduciary Indemnitees,which counsel shall be reasonably satisfactory to the Company, promptly after statements thereforare received and otherwise advance to each such Director/Officer/Fiduciary Indemnitee uponrequest reimbursement of documented expenses reasonably incurred, in either case to the extent notprohibited by applicable law, (B) Buyer, the Company and the Director/Officer/FiduciaryIndemnitees shall cooperate in the defense of any such matter, and (C) any determination requiredto be made with respect to whether a Director/Officer/Fiduciary Indemnitee’s conduct complieswith the standards set forth under applicable law shall be made by independent counsel mutuallyacceptable to Buyer and the Director/Officer/Fiduciary Indemnitee (which acceptance shall not beunreasonably withheld, conditioned or delayed); provided, however, that neither the Company northe Director/Officer/Fiduciary Indemnitee shall be liable for any settlement effected without itsprior written consent (which consent shall not be unreasonably withheld, conditioned or delayed),and provided further, that the foregoing shall be in conformance and compliance with the termsand conditions of any applicable underlying insurance policy. The Director/Officer/FiduciaryIndemnitees as a group may retain only one law firm (other than any local counsel) with respect toeach related matter except to the extent that there is, in the opinion of counsel to anDirector/Officer/Fiduciary Indemnitee, under applicable standards of professional conduct, aconflict on any significant issue between122Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.positions of such Director/Officer/Fiduciary lndemnitee and any other Director/Officer/FiduciaryIndemnitee.To the fullest extent permitted by law, from and after the Closing Date, all rights to indemnificationas of the date hereof in favor of the Director/Officer/Fiduciary Indemnitees with respect to theiractivities as such prior to the Closing, as provided in the charters and bylaws in effect on theClosing Date and pursuant to this Section 11.2 shall survive the Closing and shall continue ineffect for a period of five years following the Closing, and neither Buyer nor the Company shallderogate such rights by taking or failing to take any action.The provisions of this Section 11.2 are intended to be for the benefit of, and shall be enforceableby, each Director/Officer/Fiduciary Indemnitee and his or her heirs and representatives, as a thirdparty beneficiary of this Section 11.2.11.3Tax Matters.(a)Following the Closing, Sellers shall be solely responsible at their expense forpreparing, or causing to be prepared, and timely filing with the appropriateGovernmental Body, of the final federal, sub-chapter S Tax Returns of theCompany that are due as of the Closing Date (taking into account all applicabletimely filed and valid extensions). With respect to any Tax Returns of the Companyfor a period that begins on or before the Closing Date, including a period thatbegins on or before but ends after the Closing Date (a “Straddle Period”), Buyershall prepare such Tax Return in a manner consistent with the prior practice of theCompany unless otherwise required by applicable Tax law and shall furnish a copyof such Tax Return to Sellers for their review and prompt approval, which shall notbe unreasonably withheld, within 15 days before filing such Tax Return.(b)For the sole purpose of appropriately apportioning any Taxes of the Companyrelating to a Straddle Period, the Company will, when permitted, elect with therelevant Governmental Body to treat for all purposes the Closing Date as the lastday of a taxable period of the Company. In the case where applicable law does notpermit the Company to treat the Closing Date as the last day of a taxable period,then for purposes of this Agreement, the portion of such Tax that is attributable tothe Company for the part of such Straddle Period that ends on the Closing Dateshall be (i) in the case of a Tax that is not based or measured by income or receiptsof the Company or that is not imposed in connection with any sale or other transferor assignment of property or any other specifically identifiable transaction or event(or, in the case of such Taxes determined on an arrears basis, the amount of suchTaxes for the immediately preceding period), the total amount of such Tax for thefull taxable period that includes the Closing Date multiplied by a fraction, thenumerator of which is the number of days from the beginning of such taxableperiod to and including the Closing Date and the denominator of which is the totalnumber of days in such full taxable period, and (ii) in the case of a Tax that is basedon or measured by income or receipts of the Company or imposed in connectionwith any sale or other transfer or assignment123Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.of property or any other specifically identifiable transaction or event, the Tax thatwould be due with respect to such partial period, if such partial period were a fulltaxable period, apportioning income, gain, expenses, loss, deductions and creditsequitably based on an interim closing of the books as of the end of the ClosingDate. All determinations necessary to give effect to the foregoing allocations shallbe made in a manner consistent with the prior practices of the Company. Buyershall not permit the Company to take any actions on the Closing Date that are out ofthe Ordinary Course of Business of the Company, except as required orcontemplated by this Agreement.(c)Buyer, the Company and the Sellers shall reasonably cooperate, to the extentreasonably requested by the other party, in connection with the furnishing ofinformation relating to and the filing of Tax Returns of the Company and relating toany audit, litigation or other proceeding with respect to Taxes of the Company. The Company and Buyer agree to retain all books and records with respect to Taxmatters pertinent to the Company relating to any taxable period beginning beforethe Closing Date until the expiration of the statute of limitations (and, to the extentnotified by Buyer or the Sellers, any extensions thereof) of the respective taxableperiods, and to abide by all record retention agreements entered into with any taxingauthority.(d)If any Governmental Body asserts a claim, makes an assessment or otherwisedisputes or affects the Tax reporting position of the Company for any taxable periodending on or prior to the Closing Date, Buyer shall, promptly upon receipt byBuyer or the Company of notice thereof, provide written notice to the Sellersthereof. The Sellers, at their own expense, shall have the right to represent andcontrol the interests of the Company in any Tax audit or administrative or courtproceeding (a “Tax Contest”) relating to taxable periods of the Company which endon or before the Closing Date and to employ counsel of their choice; provided,however, that Buyer shall have the right to participate in, and consult with theSellers regarding, any Tax Contest that may affect the Company for any periodsending after the Closing Date at Buyer's own expense and provided, further, thatany settlement or other disposition of any Tax Contest may only be made with thewritten consent of Buyer, which consent will not be unreasonably withheld. Buyer,at its own expense, shall have the right to represent and control the interests of theCompany in any Tax Contest relating to Straddle Periods and to employ counsel ofits choice; provided, however, that the Sellers shall have the right to participate in,and consult with Buyer regarding, any Tax Contest that may affect the Companyfor any periods ending on the Closing Date pursuant to Section 11.3(b) at their ownexpense and provided, further, that any settlement or other disposition of any TaxContest may only be with the written consent of the Sellers, which consent will notbe unreasonably withheld or delayed.(e)Neither Buyer nor the Company may amend or cause the amendment of a TaxReturn of the Company, change an annual accounting period, adopt or change anyaccounting method, or file or amend any Tax election concerning the Company,with respect to any period ending on or prior to the Closing Date (including with124Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.respect to a Tax period of the Company described in Section 11.3(b), the portion ofsuch period ending on the Closing Date pursuant to Section 11.3(b)) without thewritten consent of the Sellers, which consent shall not be unreasonably withheld ordelayed. The Company shall, upon request by the Sellers and at the Sellers’ soleexpense, cooperate in the preparation, execution and submission to the proper Taxauthority of any amended Tax Return, claim or documentation necessary to resolveany Tax matter with respect to the Company for any taxable period ending (or,pursuant to Section 11.3(b), treated as ending) on or before the Closing Date whichis required by applicable law to be filed.(f)Any refund of Taxes of the Company (including any interest with respect thereto)attributable to any period occurring on or before the Closing Date (including thatportion of a period treated as ending on the Closing Date under Section 11.3(b))shall be the property of the Sellers, shall be paid promptly to the Sellers and ifreceived by Buyer, the Company or any other affiliated entity of Buyer shall bepayable promptly to the Sellers.11.4Sellers’ Representative.(a)In order to efficiently administer (i) the determination and payment of the FinalClosing Statement of Net Working Capital and the Working Capital Adjustment,(ii) the distribution of any amounts payable or distributable to Sellers, (iii) thewaiver of any condition to the obligations of the Company or the Sellers toconsummate the Contemplated Transactions, and (iv) the defense and/or settlementof any Proceedings with respect to which the Buyer or the Company may beentitled to be indemnified pursuant to Section 10.2 hereof, by approving thisAgreement, or by executing and delivering any of the Closing deliveriescontemplated by the Contemplated Transactions, Sellers hereby designate EdwardT. Odmark as their representative (the “Sellers’ Representative”).(b)Sellers, by executing this Agreement, shall authorize the Sellers’ Representative(i) to make all decisions relating to the determination of the Closing Date PurchasePrice, the Final Closing Statement of Net Working Capital and the Working CapitalAdjustment, (ii) to make all decisions relating to the distribution of any amountspayable or distributable to or from Sellers hereunder, in accordance with thisAgreement and the Escrow Agreement, (iii) to take all action necessary inconnection with the waiver of any condition to the obligations of the Company orthe Sellers to consummate the Contemplated Transactions, or the defense and/orsettlement of any Proceedings with respect to which Buyer or the Company may beentitled to be indemnified pursuant to Section 10.2 hereof, (iv) to give and receiveall notices required to be given under this Agreement or the Escrow Agreement,(v) to take any and all additional action as is contemplated to be taken by or onbehalf of Sellers by the terms of this Agreement or the Escrow Agreement, (vi) totake all other actions to be taken by or on behalf of Sellers in connection herewith,(vii) to withhold funds to pay Seller-related expenses and obligations, (viii) towithhold additional funds as determined by the Sellers’ Representative in itsdiscretion to pay future or contingent Seller125Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.expenses and obligations and (ix) to seek recourse against any Seller for the benefitof the other Sellers in the event of a disbursement to the Buyer or the Company dueto any breach of the representations and warranties made by such Seller as tohimself, herself, or itself and his, her or its Shares and/or Options in a Closingdelivery.(c)In the event that the Sellers’ Representative becomes unable to perform hisresponsibilities hereunder or resigns from such position, Sellers holding, prior to theClosing, a majority of the Shares outstanding as set forth on Schedule 3.3 shallselect another representative to fill such vacancy, and upon such approval suchsubstituted representative shall be deemed to be the Sellers’ Representative for allpurposes of this Agreement.(d)All decisions and actions by the Sellers’ Representative, including, withoutlimitation, any agreement between the Sellers’ Representative and the Buyerrelating to the determination of the Closing Date Purchase Price, the Final ClosingStatement of Net Working Capital or the Working Capital Adjustment or thedefense or settlement of any Proceedings with respect to which Buyer or theCompany may be entitled to be indemnified pursuant to Section 10.2 hereof, shallbe binding upon all of the Sellers, and no Seller shall have the right to object,dissent, protest or otherwise contest the same.(e)By approving this Agreement, Sellers agree that:(i)Buyer and the Company shall be able to rely conclusively on the writteninstructions and decisions of the Sellers’ Representative as to thedetermination of the Closing Date Purchase Price, the Final ClosingStatement of Net Working Capital or the Working Capital Adjustment orthe settlement of any claims for indemnification by Buyer or the Companypursuant to Section 10.2 hereof or any other actions required to be taken bythe Sellers’ Representative hereunder, and no Seller or party hereunder shallhave any cause of action against Buyer or the Company for any actiontaken by any such Person in reliance upon the instructions or decisions ofthe Sellers’ Representative;(ii)all actions, decisions and instructions of the Sellers’ Representative inaccordance with this Section 11.4 shall be conclusive and binding upon allof the Sellers and no Seller shall have any cause of action against theSellers’ Representative for any action taken, decision made or instructiongiven by the Sellers’ Representative under this Agreement, except for fraudor willful breach of this Agreement or the Escrow Agreement by theSellers’ Representative;(iii)the provisions of this Section 11.4 are independent and severable, areirrevocable and coupled with an interest and shall be enforceablenotwithstanding any rights or remedies that any Seller may have inconnection with the Contemplated Transactions or the Escrow Agreement;126Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(iv)the provisions of this Section 11.4 shall be binding upon the executors,heirs, legal representatives and successors of each Seller, and any referencesin this Agreement or the Escrow Agreement to a Seller or Sellers shall meanand include the successors to Sellers’ rights hereunder, whether pursuant totestamentary disposition, the laws of descent and distribution or otherwise;(v)the fees and expenses to be paid at or prior to Closing (either throughavailable cash of the Company or from the Closing Date Purchase Price)shall include the sum of $300,000 to be paid to the Sellers’ Representativeand to be used by the Sellers’ Representative for the payment of costs andexpenses reasonably incurred by the Sellers’ Representative in connectionwith the exercise by it of the authority granted to it herein and in the Sellerdeliveries (including reasonable attorney fees and expenses and the fees andexpenses of any accountants or other professional advisors retained by theSellers’ Representative and any Working Capital Adjustment owed afterClosing by Sellers pursuant to the terms of this Agreement). From time totime after the Closing, Sellers’ Representative may distribute to Sellers, prorata in accordance with the Sellers’ ownership of Shares, such portion ofsuch sum as the Sellers’ Representative reasonably determines will not beneeded for the payment of future costs and expenses. After the finalresolution of all claims asserted against, or asserted by or on behalf of,Sellers hereunder or under the Escrow Agreement and the final distributionto Sellers of all monies that are or could be distributable to them hereunderor under the Escrow Agreement, any portion of such sum remaining shallbe distributed to Sellers pro rata in accordance with the Sellers’ ownershipof Shares; provided, however, that if the Sellers’ Representative incurs costsand expenses disproportionately due to a Seller’s breach of his, her or itsrepresentations and warranties made by such Seller in one of the Sellerdeliveries as to himself, herself or itself, or his, her or its Shares or Options,such breaching Seller shall reimburse the Sellers’ Representative for theadditional costs and expenses disproportionately incurred; and(vi)they will indemnify and hold harmless the Sellers’ Representative, severallyand jointly, from and against any and all damages which may at any time beimposed on, incurred by or asserted against the Sellers’ Representative inany way relating to or arising out of this Agreement, or any relatedagreement or instrument or any action taken or omitted to be taken by theSellers’ Representative under or in connection herewith, unless suchdamages resulted solely from the bad faith or willful misconduct of theSellers’ Representative.(f)All fees and expenses reasonably incurred by the Sellers’ Representative in excessof $300,000 shall be paid from any funds otherwise due to Sellers (including fundsdue to the Sellers from the Escrow and eligible for distribution in accordance withthe terms of this Agreement and the Escrow Agreement) in127Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.proportion to the Sellers’ ownership of the Shares and if no funds are available fromthe Escrow, then directly from Sellers in proportion to the Sellers’ ownership of theShares received by each Seller.11.5Real Estate Purchase.Buyer shall, and Sellers shall cause Spencer Lane Properties A, Ltd. to, use Best Efforts toclose the Real Estate Purchase or before the date that is forty-five (45) days following theClosing. 11.6Clay Street Dog Wash Agreement. If, following the Closing, Clay St LLC exercises its right to purchase all of the designinformation and drawings from the Company under that certain Clay St. Dog Washcontract dated July 20, 2013 (the “Clay St. Agreement”), then Buyer shall cause Companyto distribute such amounts received with respect thereto to Sellers’ Representative, onbehalf of Sellers.ARTICLE 12GENERAL PROVISIONS12.1Expenses.Buyer will bear its expenses incurred in connection with the preparation, execution, andperformance of this Agreement and the Contemplated Transactions, including all fees andexpenses of its Representatives. Sellers will bear all of their expenses in connection with thepreparation, execution, and performance of this Agreement and the Contemplated Transactions,including all fees and expenses of their Representatives.12.2Public Announcements.Unless required by Legal Requirements or required by this Agreement (in which case thedisclosing party shall advise the non-disclosing party in advance and provide a copy of anyproposed written disclosure), prior to the Closing the parties shall, and shall cause the Company to,keep this Agreement strictly confidential and may not make any disclosure of this Agreement orthe negotiations or discussions made in connection with this Agreement to any Person. Sellers andBuyer will consult with each other concerning the means by which the Company's employees,customers, and suppliers and others having dealings with the Company will be informed of theContemplated Transactions. Press releases or other written disclosures or announcementsconcerning the Contemplated Transactions shall be approved by Buyer and Sellers prior to suchrelease or disclosure.12.3Confidentiality.Between the date of this Agreement and the Closing Date, Buyer and Sellers will maintain inconfidence, and will cause the directors, officers, employees, agents, and advisors of Buyer and128Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the Company to maintain in confidence, any written, oral, or other information obtained inconfidence from each other, another party or the Company in connection with this Agreement orthe Contemplated Transactions, unless (a) such information is already known to such party or toothers not bound by a duty of confidentiality or such information becomes publicly availablethrough no fault of such party, (b) the use of such information is necessary or appropriate inmaking any filing or obtaining any consent or approval required for the consummation of theContemplated Transactions (in which case the disclosing party shall provide the non-disclosingparty a reasonable opportunity to comment on any proposed written disclosure in advance of itsdisclosure), or (c) the furnishing or use of such information is required by legal proceedings, (inwhich case the disclosing party shall provide the non-disclosing party a reasonable opportunity tocomment on any proposed written disclosure in advance of its disclosure). If the ContemplatedTransactions are not consummated, each party will return promptly at the requestor’s expense asmuch of such written information as the other party may reasonably request. Notwithstandinganything to the contrary herein, the Confidentiality Agreement, dated January 21, 2014, betweenBuyer and Sellers’ investment banker shall remain in full force and effect and is specificallyincorporated herein.12.4Non-Competition.After the Closing, none of the Sellers shall directly or indirectly own, manage, be employed by,operate or control, invest in, serve as officer or director for, serve as consultant to, directly orindirectly, or otherwise engage in (except as a holder of less than 2% of the outstanding stock ofany company whose securities are traded on any national stock exchange or over-the-counter), themanufacture, design, distribution, marketing or sales of any commercial deep fryers for restaurantsand commercial installations, filtering machines, rethermalizer food warmers, food holding stationsor batter tables worldwide for a period of five (5) years from the Closing Date for Edward T.Odmark and for a period of three (3) years from the Closing Date for all other Sellers (respectivelythe“Non-Compete Period”). In addition, during the Non-Compete Period, no Seller shall, directly orindirectly, persuade or attempt to persuade any employee of the Company to leave the Company'semploy, or to become employed by any Person other than the Company for the purpose ofengaging in the manufacture, design, distribution, marketing or sales of any commercial deep fryersfor restaurants and commercial installations, filtering machines, rethermalizer food warmers, foodholding stations or batter tables worldwide. Each Seller agrees that the provisions of this Section12.4 are reasonable and necessary for Buyer's protection and that if any portion thereof shall beheld contrary to law or invalid or unenforceable in any respect in any jurisdiction, or as to one ormore periods of time, geographic area, areas of business activities, or any part thereof, theremaining provisions shall not be affected but shall remain in full force and effect and that any suchinvalid or unenforceable provision shall be deemed, without further action on the part of anyPerson, modified and limited to the extent necessary to render the same valid and enforceable insuch jurisdiction. Each Seller further agrees that the remedies at law in the event of a breach of ora default under this Section 12.4 would be insufficient and that Buyer shall be entitled to theimmediate grant of equitable relief including, but not limited to, the remedy of specific performanceto enjoin any breach, or the continuation of any breach, of the provisions of this Section 12.4. Ifany proceeding is brought to enforce this Section 12.4, the prevailing party shall be entitled torecover its attorneys’ fees incurred in connection with such proceeding from the other party.129Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.12.5Notices.All notices, consents, waivers, and other communications under this Agreement must be in writingand will be deemed to have been duly given (a) when delivered by hand (with written confirmationof receipt), (b) when sent by telecopier (with written confirmation of receipt), provided that a copyis mailed by registered mail, return receipt requested, or (c) one (1) Business Day after being sentby a nationally recognized overnight delivery service (receipt requested), in each case to theappropriate addresses and telecopier numbers set forth below (or to such other addresses andtelecopier numbers as a party may designate by notice to the other parties). Notices of change ofaddress shall also be governed by this Section.Sellers:c/o Sellers’ RepresentativeEdward Odmark5345 Linnadine WayNorcross, GA 30092-1221E-Mail: eodmark@ultrafryer.comwith a copy to (which shall not constitute notice):Teri Lynn McMahon, Esq.Alston & BirdOne Atlantic Center1201 West Peachtree StreetAtlanta, GA 30309-3424E-Mail: teri.mcmahon@alston.comBuyer:Standex International Corporation11 Keewaydin Drive, #300Salem, NH 03079Attention: Legal DepartmentE-Mail: rosen@standex.com12.6Jurisdiction; Service of Process. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of,this Agreement shall be brought exclusively in the Federal courts of the state where the breachoccurred, and each of the parties consents to the jurisdiction of such courts (and of the appropriateappellate courts) in any such action or proceeding and waives any objection to venue laid therein.Process in any action or proceeding referred to in the preceding sentence may be served on anyparty anywhere in the world.12.7Further Assurances.The parties agree on a prompt basis and at the requestee’s cost and expense (a) to furnish uponrequest to each other such further information, (b) to execute and deliver to each other such other130Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.documents, and (c) to do such other acts and things, all as the other party may reasonably requestfor the purpose of carrying out the intent of this Agreement and the documents referred to in thisAgreement. After the Closing, Buyer will direct the Company’s employees to devote reasonableamounts of time to assisting, in good faith, Sellers and Sellers’ Representative in connection withany activity related to enforcing Sellers’ rights or performing Sellers’ obligations set forth inArticles 2 and 11.12.8Waiver.Except as otherwise provided herein, the rights and remedies of the parties to this Agreement arecumulative and not alternative. Neither the failure nor any delay by any party in exercising anyright, power, or privilege under this Agreement or the documents referred to in this Agreement willoperate as a waiver of such right, power, or privilege, and no single or partial exercise of any suchright, power, or privilege will preclude any other or further exercise of such right, power, orprivilege or the exercise of any other right, power, or privilege. To the maximum extent permittedby applicable law, (a) no claim or right arising out of this Agreement or the documents referred toin this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciationof the claim or right unless in writing signed by the other party; (b) no waiver that may be given bya party will be applicable except in the specific instance for which it is given; and (c) no notice toor demand on one party will be deemed to be a waiver of any obligation of such party or of theright of the party giving such notice or demand to take further action without notice or demand asprovided in this Agreement or the documents referred to in this Agreement. 12.9Entire Agreement and Modification.This Agreement and the Schedules and any Exhibits supersede all prior agreements or oralnegotiations or commitments between the parties with respect to the subject matter hereof andconstitutes (along with the documents referred to in this Agreement) a complete and exclusivestatement of the terms of the agreement between the parties with respect to the subject matterhereof. This Agreement may not be amended except by a written agreement executed by bothparties.12.10Assignments, Successors, and No Third-Party Rights. No party hereto may assign any of its rights under this Agreement without the prior consent of theother parties, unless such assignment is made to a subsidiary, affiliate or successor in interest bymerger, operation of law, assignment, purchase or otherwise of all or a portion of its business, inwhich event assignment shall be permitted and the non-assigning party’s consent shall not benecessary. In the event of any such assignment or transfer, the transferring party shall still remainliable for the full and complete performance of any outstanding obligations owed under thisAgreement. Any assignment within the meaning of this Section shall not be construed as novation. This Agreement shall be binding upon and inure to the benefit of the parties hereto and theirsuccessors, heirs and permitted assigns. Except with respect to Section 11.2 and to the extentotherwise provided, nothing expressed or referred to in this Agreement will be construed to giveany Person other than the parties to this Agreement any legal or equitable right, remedy, or claimunder or with respect to this Agreement or any provision of this Agreement, and this131Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Agreement and all of its provisions and conditions are for the sole and exclusive benefit of theparties to this Agreement and their successors, heirs and permitted assigns.12.11Severability.If any provision of this Agreement is held invalid or unenforceable by any court of competentjurisdiction, the other provisions of this Agreement will remain in full force and effect. Anyprovision of this Agreement held invalid or unenforceable only in part or degree will remain in fullforce and effect to the extent not held invalid or unenforceable.12.12Section Headings, Construction.The headings of Sections in this Agreement are provided for convenience only and will not affectits construction or interpretation. All references to “Section” or “Sections” refer to thecorresponding Section or Sections of this Agreement. All words used in this Agreement will beconstrued to be of such gender or number as the circumstances require. Unless otherwiseexpressly provided, the word “including” does not limit the preceding words or terms.12.13Schedules.The information in the Schedules constitutes (a) exceptions or qualifications to particularrepresentations, warranties, covenants and obligations of Sellers as set forth in this Agreement or(b) descriptions or lists of assets and liabilities and other items referred to in this Agreement. TheSchedules shall not be construed as indicating that any disclosed information is required to bedisclosed, and no disclosure shall be construed as an admission that such information is material toor required to be disclosed by Sellers. Capitalized terms used in the Schedules which are notdefined therein have the meanings given them in this Agreement. A matter or item disclosed inany Schedule shall be deemed to be incorporated into each other Schedule with respect to whichsuch disclosure applies if a reasonable person can conclude from the disclosure that it is intended toqualify such other representations, warranties or covenants. The disclosures in each of theSchedules shall be deemed to relate to and function as disclosures and exceptions to therepresentations and warranties in all Sections of the Agreement to the extent applicable, and notmerely to the given representations and warranties in the Section that corresponds numerically tosuch Schedule.12.14Offset.Nothing contained herein shall create a right of offset or setoff, and Buyer hereby waives anddisclaims any right of offset or setoff under all applicable laws.12.15Time of Essence. With regard to all dates and time periods set forth or referred to in this Agreement, time is of theessence.132Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.12.16Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State ofGeorgia without regard to conflicts of laws principles.12.17Counterparts.This Agreement may be executed in one or more counterparts, each of which will be deemed to bean original copy of this Agreement and all of which, when taken together, will be deemed toconstitute one and the same agreement.12.18Attorney Client Privilege. In any dispute or proceeding arising under or in connection with this Agreement, Sellers shall havethe right, at its election, to retain the firm of Alston & Bird LLP to represent it in such matter, andBuyer, for itself and for its successors and assigns, hereby irrevocably waives, and shall cause theCompany to waive, any objection and consent to any such representation in any such matter.Buyer acknowledges that the foregoing provision shall apply whether or not Alston & Bird LLPprovides legal services to the Company after the Closing Date. Buyer, for itself and its successorsand assigns, hereby irrevocably acknowledges and agrees that all communications among theCompany, Sellers and their counsel, including Alston & Bird LLP, made in connection with thenegotiation, preparation, execution, delivery and closing under, or any dispute or proceedingarising under or in connection with, this Agreement or any other agreement contemplated hereby,or any matter relating to any of the foregoing, are privileged communications among the Company,Sellers and such counsel and after closing, the privilege shall remain within the exclusive control ofSeller. Neither Buyer, the Company, nor any Person purporting to act on behalf of or through theBuyer or the Company will seek to obtain the same by any process. In addition, if the transactionscontemplated by this Agreement are consummated, all of the Company’s privileged records relatedto such transactions will become property of (and be controlled by) Sellers, and the Company shallnot retain any copies of such records or have any access to them. Alston & Bird LLP is anintended beneficiary of this Section 12.18 and is entitled to specifically enforce such provision.12.19Shareholders Agreement.The Sellers hereby waive receipt of the Exercise Notice (as defined in the ShareholdersAgreement) and agree that upon Closing, the Shareholders Agreement shall be automaticallyterminated.12.20Mutual Releases.(a)If the Closing occurs, each Seller executing this Agreement, on a several basis, foritself, and its successors, personal representatives and assigns, as the case may be,hereby irrevocably releases and forever discharges the Company, the Buyer andeach of their respective past and present officers and directors, as the case may be(each, a “Released Party”), from any and all claims and liabilities based upon orrelated to any fact, thing, act, event, happening, inaction or omission with respectto, arising out of, or attributable to a period prior to the Closing related to the133Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Company, in law or equity, known or unknown, vested or contingent, suspected orunsuspected, and whether or not concealed or hidden, which ever have or mayhave existed, or which do exist, that may now or hereafter at any time be made orbrought against a Released Party by the Seller; provided, however, that this releaseshall not apply to (i) any acts or omissions that constitute fraud or willfulmisconduct on the part of any Released Party, (ii) claims for indemnification orpayment of defense costs arising under any of the Company’s OrganizationalDocuments, (iii) claims or rights under any employee benefit plan or any Contractbetween the Company and such Seller in effect as of the Closing (including theClay St. Agreement), (iv) rights or coverage under insurance policies, (v) claimsagainst any Released Party based upon, related to, arising out of or attributable tothis Agreement, the Real Estate Purchase, the Real Property Lease or any otheragreement entered into in connection with the Contemplated Transactions, and (vi)claims for compensation and reimbursement of expenses made in the ordinarycourse of business by a Seller who is an employee of the Company.(b)If the Closing occurs, the Buyer, on behalf of itself and its wholly-ownedsubsidiary, the Company, hereby irrevocably releases and forever discharges theSellers and their successors, personal representatives and assigns, as the case maybe (each, a “Seller Released Party”), from any and all claims and liabilities basedupon or related to any fact, thing, act, event, happening, inaction or omission withrespect to, arising out of, or attributable to a period at or prior to the Closing ofwhatever kind or nature, in law or equity, known or unknown, vested orcontingent, suspected or unsuspected, and whether or not concealed or hidden,which ever have or may have existed, or which do exist, that may now or hereafterat any time be made or brought against a Seller Released Party by the Company orthe Buyer; provided, however, that this release shall not apply to (i) any acts oromissions that constitute fraud or willful misconduct on the part of any SellerReleased Party, and (ii) claims against any Seller Released Party based upon,related to, arising out of or attributable to this Agreement or any other agreemententered into in connection with the Contemplated Transactions.[Remainder of page intentionally left blank]134Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.IN WITNESS WHEREOF, the parties have hereto executed and delivered thisAgreement as of the date first written above.Standex International Corporation/s/ David A. DunbarBy: David A. Dunbar, President\CEO SELLERS: /s/ Edward T. Odmark Edward T. Odmark /s/ William A. Collins, III William A. Collins III /s/ A. C. McNamara A. C. McNamara /s/ W. Craig Farr W. Craig Farr /s/ Robert L. Shaunnessey Robert L. Shaunnessey /s/ Mary Ann Shaunnessey Mary Ann Shaunnessey Endnotes135Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit21STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIESSUBSIDIARIES OF REGISTRANTInformation is set forth below concerning all operating subsidiaries of the Company as of June 30, 2014 (exceptsubsidiaries which, considered in the aggregate do not constitute a significant subsidiary).Jurisdiction ofName of SubsidiaryIncorporationAssociated American Industries, Inc.TexasCustom Hoists, Inc.OhioDornbusch & Cia Industria E. Comercio Ltda.BrazilMold-Tech Singapore Pte. Ltd.SingaporeNor-Lake, IncorporatedWisconsinPrecision Engineering International LimitedUnited KingdomS. I. de Mexico S.A. de C.V.MexicoStandex de Mexico S.A. de C.V.MexicoStandex Electronics, Inc.DelawareStandex Electronics (U.K.) LimitedUnited KingdomStandex Engraving L.L.C.VirginiaStandex Europe B.V.The NetherlandsStandex Holdings LimitedUnited KingdomStandex International GmbHGermanyStandex International LimitedUnited KingdomStandex International S.r.l.ItalyStandex (Ireland) LimitedIrelandSXI LimitedCanadaUltrafryer Systems, Inc.GeorgiaSource: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 23CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement No. 333-162044 on Form S-3 and Nos. 333-161647, 333-147190, and 333-179513 on Form S-8 of our reports dated August28, 2014, relating to the consolidated financial statements of Standex International Corporation andthe effectiveness of Standex International Corporation’s internal control over financial reporting,appearing in this Annual Report on Form 10-K of Standex International Corporation for the yearended June 30, 2014./s/ Deloitte & Touche LLPAugust 28, 2014Boston, Massachusetts137Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 24POWER OF ATTORNEYThe undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Deborah A. Rosen, andeach of them singly, my true and lawful attorney with full power to them, andeach of them singly, to sign for me and in my name in my capacity as a directorof Standex, the Annual Report of Standex on Form 10-K for the fiscal yearended June 30, 2014, and any and all amendments thereto and generally to dosuch things in my name and behalf to enable Standex to comply with therequirements of the Securities and Exchange Commission relating to Form 10-K.Witness my signature as of the 15th day of August, 2014./s/ Charles H. Cannon, Jr._______________________________Charles H. Cannon, Jr.1Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 24POWER OF ATTORNEYThe undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Deborah A. Rosen, andeach of them singly, my true and lawful attorney with full power to them, andeach of them singly, to sign for me and in my name in my capacity as a directorof Standex, the Annual Report of Standex on Form 10-K for the fiscal yearended June 30, 2014, and any and all amendments thereto and generally to dosuch things in my name and behalf to enable Standex to comply with therequirements of the Securities and Exchange Commission relating to Form 10-K.Witness my signature as of the 15th day of August, 2014./s/ Thomas E. Chorman_______________________________Thomas E. Chorman2Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 24POWER OF ATTORNEYThe undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Deborah A. Rosen, andeach of them singly, my true and lawful attorney with full power to them, andeach of them singly, to sign for me and in my name in my capacity as a directorof Standex, the Annual Report of Standex on Form 10-K for the fiscal yearended June 30, 2014, and any and all amendments thereto and generally to dosuch things in my name and behalf to enable Standex to comply with therequirements of the Securities and Exchange Commission relating to Form 10-K.Witness my signature as of the 15th day of August, 2014./s/ William R. Fenoglio_______________________________William R. Fenoglio3Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 24POWER OF ATTORNEYThe undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Deborah A. Rosen, andeach of them singly, my true and lawful attorney with full power to them, andeach of them singly, to sign for me and in my name in my capacity as a directorof Standex, the Annual Report of Standex on Form 10-K for the fiscal yearended June 30, 2014, and any and all amendments thereto and generally to dosuch things in my name and behalf to enable Standex to comply with therequirements of the Securities and Exchange Commission relating to Form 10-K.Witness my signature as of the 15th day of August, 2014./s/ Gerald H. Fickenscher_______________________________Gerald H. Fickenscher4Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 24POWER OF ATTORNEYThe undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Deborah A. Rosen, andeach of them singly, my true and lawful attorney with full power to them, andeach of them singly, to sign for me and in my name in my capacity as a directorof Standex, the Annual Report of Standex on Form 10-K for the fiscal yearended June 30, 2014, and any and all amendments thereto and generally to dosuch things in my name and behalf to enable Standex to comply with therequirements of the Securities and Exchange Commission relating to Form 10-K.Witness my signature as of the 15th day of August, 2014./s/ Roger L. Fix_______________________________Roger L. Fix5Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 24POWER OF ATTORNEYThe undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Deborah A. Rosen, andeach of them singly, my true and lawful attorney with full power to them, andeach of them singly, to sign for me and in my name in my capacity as a directorof Standex, the Annual Report of Standex on Form 10-K for the fiscal yearended June 30, 2014, and any and all amendments thereto and generally to dosuch things in my name and behalf to enable Standex to comply with therequirements of the Securities and Exchange Commission relating to Form 10-K.Witness my signature as of the 15th day of August, 2014./s/ Thomas J. Hansen_______________________________Thomas J. Hansen6Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 24POWER OF ATTORNEYThe undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Deborah A. Rosen, andeach of them singly, my true and lawful attorney with full power to them, andeach of them singly, to sign for me and in my name in my capacity as a directorof Standex, the Annual Report of Standex on Form 10-K for the fiscal yearended June 30, 2014, and any and all amendments thereto and generally to dosuch things in my name and behalf to enable Standex to comply with therequirements of the Securities and Exchange Commission relating to Form 10-K.Witness my signature as of the 15th day of August, 2014./s/ Daniel B. Hogan_______________________________Daniel B. Hogan7Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 24POWER OF ATTORNEYThe undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Deborah A. Rosen, andeach of them singly, my true and lawful attorney with full power to them, andeach of them singly, to sign for me and in my name in my capacity as a directorof Standex, the Annual Report of Standex on Form 10-K for the fiscal yearended June 30, 2014, and any and all amendments thereto and generally to dosuch things in my name and behalf to enable Standex to comply with therequirements of the Securities and Exchange Commission relating to Form 10-K.Witness my signature as of the 15th day of August, 2014./s/ H. Nicholas Muller, III_______________________________H. Nicholas Muller, III8Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.1RULE 13a-14(a) CERTIFICATIONI, David A. Dunbar, certify that:1.I have reviewed this Annual Report on Form 10-K of Standex International Corporationfor the period ending June 30, 2014;2.Based on my knowledge, this report does not contain any untrue statement of a materialfact or omit to state a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information includedin this report, fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periods presented in thisreport;4.The registrant’s other certifying officer(s) and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in ExchangeAct Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controlsand procedures to be designed under our supervision, to ensure that materialinformation relating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period in whichthis report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal controlover financial reporting to be designed under our supervision, to provide reasonableassurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally acceptedaccounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures andpresented in this report our conclusions about the effectiveness of the disclosurecontrols and procedures, as of the end of the period covered by this report based onsuch evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financialreporting that occurred during the registrant’s most recent fiscal quarter (theregistrant’s fourth fiscal quarter in the case of an annual report) that has materiallySource: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.affected, or is reasonably likely to materially affect, the registrant’s internal controlover financial reporting; and5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recentevaluation of internal control over financial reporting, to the registrant’s auditors and theaudit committee of the registrant’s board of directors (or persons performing the equivalentfunctions): (a)All significant deficiencies and material weaknesses in the design or operation ofinternal control over financial reporting which are reasonably likely to adversely affectthe registrant’s ability to record, process, summarize and report financial information;and(b)Any fraud, whether or not material, that involves management or other employeeswho have a significant role in the registrant’s internal control over financial reporting.Date: August 28, 2014/s/ David A. Dunbar______________________________David A. DunbarPresident/Chief Executive OfficerSource: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.2RULE 13a-14(a) CERTIFICATIONI, Thomas D. DeByle, certify that:1.I have reviewed this Annual Report on Form 10-K of Standex International Corporationfor the period ending June 30, 2014;2.Based on my knowledge, this report does not contain any untrue statement of a materialfact or omit to state a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information includedin this report, fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periods presented in thisreport;4.The registrant’s other certifying officer(s) and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in ExchangeAct Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controlsand procedures to be designed under our supervision, to ensure that materialinformation relating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period in whichthis report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal controlover financial reporting to be designed under our supervision, to provide reasonableassurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally acceptedaccounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures andpresented in this report our conclusions about the effectiveness of the disclosurecontrols and procedures, as of the end of the period covered by this report based onsuch evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financialreporting that occurred during the registrant’s most recent fiscal quarter (theregistrant’s fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant’s internal controlover financial reporting; andSource: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recentevaluation of internal control over financial reporting, to the registrant’s auditors and theaudit committee of the registrant’s board of directors (or persons performing the equivalentfunctions):(a)All significant deficiencies and material weaknesses in the design or operation ofinternal control over financial reporting which are reasonably likely to adversely affectthe registrant’s ability to record, process, summarize and report financial information;and (b)Any fraud, whether or not material, that involves management or other employeeswho have a significant role in the registrant’s internal control over financial reporting.Date: August 28, 2014/s/ Thomas D. DeByle______________________________Thomas D. DeByleVice President/Chief Financial OfficerSource: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 32SECTION 1350 CERTIFICATIONThe following statement is being made to the Securities and Exchange Commission solely forpurposes of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), which carries withit certain criminal penalties in the event of a knowing or willful misrepresentation.Each of the undersigned hereby certifies that the Annual Report on Form 10-K for the periodended June 30, 2014 fully complies with the requirements of Section 13(a) or Section 15(d), asapplicable, of the Securities Exchange Act of 1934, as amended, and that the informationcontained in such report fairly presents, in all material respects, the financial condition and resultsof operations of the registrant.Dated: August 28, 2014/s/ David A. Dunbar_______________________________David A. DunbarPresident/Chief Executive OfficerDated: August 28, 2014/s/ Thomas D. DeByle_______________________________Thomas D. DeByleVice President/Chief Financial OfficerSource: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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