10-K 1 ten-k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: October 26, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ___________. Commission file number: 0-25066 OWOSSO CORPORATION (Exact name of registrant as specified in its charter) Pennsylvania 23-2756709 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 22543 Fisher Road, PO Box 6660, Watertown, New York 13601 (Address of principal executive offices)(Zip Code) Registrant's telephone number, including area code: (315) 782-5910 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by a check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES [ ] NO [X]. The aggregate market value of the voting common stock held by non-affiliates of the registrant was approximately $744,000 as of April 27, 2003, which is based upon the closing price on such date. As of July 9, 2003 the registrant's common stock has traded on the OTC Bulletin Board. As of January 20, 2004, 5,824,306 shares of the registrant's Common Stock, $.01 par value, were outstanding. Documents Incorporated By Reference Portions of the registrant's Proxy Statement intended to be filed with the Commission in connection with the 2004 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K. To the extent the Proxy Statement is not filed within the prescribed time period, the registrant will amend Part III of this Form 10-K as required by instruction G(3) to this Form 10-K. -2- PART I Item 1. Business. Owosso Corporation (the "Company") was incorporated in Pennsylvania and organized as a holding company in 1994. The holding company structure separated the administrative and financing activities of the Company from the activities of its operating subsidiaries. As of July 30, 2002, the Company had one operating subsidiary, Stature Electric, Inc. ("Stature"), representing the Company's historical "Motors segment." Stature is a custom designer and manufacturer of motors and gear motors, including AC, DC, and Universal. Established in 1974 in Watertown, New York, Stature is a progressive company, which emphasizes a partnership approach in all aspects of its business. Significant markets for Stature include commercial products and equipment, healthcare, recreation and non-automotive transportation. Stature's component products are sold throughout North America and in Europe, primarily to original equipment manufacturers who use them in their end products. On February 10, 2004, the Company reached a definitive agreement with Allied Motion Control Technologies, Inc. ("Allied") for the acquisition by Allied of all the shares of the Company on the following terms: .068 shares of common stock of Allied for each share of common stock of the Company, and a combination of .127 shares of Allied common stock, a warrant to purchase 0.28 shares of Allied common stock and cash of $0.9333 for each share outstanding of the Company's Class A convertible preferred stock. Based on the Company's 5,824,306 common shares and 1,071,428 preferred shares issued, the aggregate amount to common shareholders will be approximately $1.75 million, and the aggregate amount to preferred shareholders will be approximately $1.6 million. In addition, Allied has agreed to repay and assume up to $10.6 million of the Company's outstanding debt, and the Company's preferred shareholders may be entitled to Allied subordinated promissory notes with an aggregate principal amount of up to $500,000 based on the 2004 gross revenue of Stature. Accordingly, the transaction has an aggregate value of approximately $14.0 million, exclusive of any value attributable to the warrants and Allied notes. The board of directors of each Company has approved the transaction. The consummation of the transaction is subject to the approval of the Company's shareholders and other customary conditions. The transaction is expected to be completed prior to July 1, 2004. In 1998, the Company formulated a long-term plan to concentrate on value-added components for industry. In connection with its implementation of that plan, the Company began a series of divestitures beginning with the sale of the four businesses comprising its historical Agricultural Equipment segment. The sale of the last of those businesses was completed in January 2001 with the divestiture of Sooner Trailer Manufacturing Company ("Sooner Trailer"). During that time, however, the Company experienced a significant downturn in its operating results and at the end of fiscal 2000 was out of compliance with covenants under its bank credit facility. Throughout fiscal 2001, the Company remained out of compliance with financial covenants, including maintenance of minimum operating profit, under its bank credit facility. As a result, the Company and its lenders entered into a series of amendments to the facility during fiscal 2001, 2002 and 2003, and in each case the Company's lenders agreed to forebear from exercising their rights and remedies under the facility. In order to meet the lenders' requirements for reduced outstanding balances and to secure the lenders' agreement to forebear, the Company engaged in a series of divestitures of its operating subsidiaries, concluding with the sale of its Motor Products subsidiaries, Motor Products Owosso Corporation and Motor Products Ohio Corporation in July of 2002. As disclosed under Note 9 "Long-term Debt," the amendments to the bank credit facility modified the interest rates charged, called for reductions in the outstanding balance during calendar 2001, 2002 and 2003, added additional reporting requirements, suspended payments of principal and interest on subordinated debt, prohibited the payment of preferred or common dividends, prohibited the purchase of the Company's stock and added a covenant requiring the maintenance of minimum operating profit. In December 2003 (fiscal 2004), the Company entered into a further amendment to the facility which extended the maturity date to March 31, 2004. During fiscal 2004, the Company intends to dispose of real estate at the Company's former Snowmax Corporation subsidiary. An entity controlled by Mr. Lemmon, the Company's President, CEO and Chairman, has expressed interest in purchasing such real estate, however no binding agreement has been entered into and any such sale will be subject to the approval of the Company's audit committee. Based on current negotiations, the Company estimates proceeds of approximately $312,000 if successful in completing the sale. Management believes that, along with the sale of this real estate, available cash and cash equivalents, cash flows from operations and available borrowings under the Company's bank credit facility will be sufficient to fund the Company's operating activities, investing activities and debt maturities through March 2004. It is management's intent to refinance the Company's bank credit facility prior to its maturity in March 2004. However, there can be no assurance that management's plans will be successfully executed. On July 30, 2002, the Company completed the sale of all of the outstanding stock of its Motor Products subsidiaries, manufacturers of fractional and integral horsepower motors. The purchase price paid by Allied (F.K.A. Hathaway Motion Control Corporation) (the "Buyer") for the outstanding stock of Motor Products consisted of $11.5 million in cash and a promissory note in the principal amount of $300,000, paid six months after closing. Net cash proceeds of $10.7 million from the sale, after payment of certain transaction costs, were utilized to reduce outstanding bank debt. The principal amount of the note was also utilized to reduce outstanding bank debt. As a result of this transaction, the Company presently has only one operating subsidiary, Stature. The Company's historical Other segment included Dura-Bond Bearing Company ("Dura-Bond") and Cramer Company ("Cramer"). Dura-Bond manufactured replacement camshaft bearings, valve seats and shims for the automotive after-market. In November 2000, the Company completed the sale of the stock of Dura-Bond to a joint venture formed by Melling Tool Company of Jackson, Michigan and Engine Power Components, Inc. of Grand Haven, Michigan (the "Joint Venture"). The Joint Venture acquired the stock of Dura-Bond for approximately $4.6 million, plus the assumption of approximately $5.0 million of debt. Based upon the terms of the sale, the Company recorded, in the fourth quarter of fiscal 2000, a pretax charge of $1.2 million to adjust the carrying value of Dura-Bond's assets to their estimated fair value. Cramer manufactured timers and subfractional horsepower motors for use in commercial applications. On December 4, 2000, the Company completed the sale of the assets associated with the timer and switch line of Cramer to Capewell Components, LLC of South Windsor, Connecticut for cash of approximately $2.0 million, plus the assumption of approximately $400,000 in liabilities. In connection with the sale of the timer and switch line and the anticipated sale of the remainder of the operating assets (excluding the real estate) of Cramer, the Company recorded, in the fourth quarter of fiscal 2000, a pretax charge of $1.6 million to adjust the carrying value for the Cramer assets to their estimated fair value, based upon an estimated sales price of the assets. Such charge represented a reduction in goodwill of $400,000 and the write-down of other non-current assets of $1.2 million. In September 2001, the Company sold substantially all of the remaining operating assets (excluding the real estate) of Cramer to the Chestnut Group of Wayne, Pennsylvania for cash proceeds of $565,000, plus the assumption of $317,000 in liabilities. In connection with that sale, the Company recorded a further adjustment to the carrying value of the Cramer assets resulting in a pre-tax charge of $1.1 million, recorded in the third fiscal quarter of 2001. The Company recorded a pretax charge of $270,000 in the fourth quarter of 2002 to adjust the carrying value for the Cramer real estate to the estimated fair value, based upon an estimated sales price of the assets and was included in "Write-down of net assets held for sale" in the consolidated statements of operations for fiscal 2002. -2- The Company's historical Coils segment manufactured heat exchange coils and included Astro Air Coils, Inc. ("Astro Air"), Snowmax, Inc. ("Snowmax"), and Astro Air UK, Limited ("Astro UK"). Astro UK was a joint venture with the Company's largest customer, Bergstrom, Inc. In May 2001, the sale of substantially all of the assets of Astro UK to ACR Heat Transfer Limited of Norfolk, England for cash of (pound)450,000 (approximately $643,000) was completed. Based upon the terms of the sale, the Company recorded, in the second quarter of 2001, a pretax charge of $700,000 to adjust the carrying value of Astro UK's assets to their estimated realizable value. No additional gain or loss was recorded upon completion of the sale. Proceeds from the sale were utilized to reduce the Company's bank credit facility. In October 2001, the Company completed the sale of the assets of the remaining businesses in its Coils segment, Astro Air and Snowmax (together, the "Coils Subsidiaries"). The sale of the Coils Subsidiaries was effectuated pursuant to an Asset Purchase Agreement, dated as of October 26, 2001, by and among the Coils Subsidiaries, Astro Air, Inc. (the "Buyer"), and Rex Dacus, the manager of the Coils segment and the person from whom the Company acquired the assets and operations of Astro Air Coils, Inc. in 1998. Proceeds from the sale of $5.6 million were utilized to reduce the Company's bank credit facility. The Buyer also assumed approximately $3.7 million of liabilities. The Company recorded a pretax charge of approximately $9.3 million related to this sale in the fourth quarter of 2001. The Company recorded a charge of $520,000 net of taxes in the fourth quarter of 2002 to adjust the carrying value for the real estate assets to the estimated fair value, based upon an estimated sales price of the assets. The Company has reported the results of the Coils segment as discontinued operations for all periods presented in the consolidated statements of operations. In January 2001, the Company completed the sale of stock of Sooner Trailer to the McCasland Investment Group and certain members of Sooner Trailer's management for cash of $11.5 million, subject to certain post-closing adjustments based on changes in working capital, plus the assumption of debt of approximately $670,000. In May 2001, the Company received approximately $2.0 million related to such post-closing adjustments. In connection with the anticipated sale, the Company recognized a loss of $8.6 million in the fourth quarter of 2000 to adjust the carrying value of Sooner Trailer's assets to their estimated fair value based on an expected sales price. No additional gain or loss was recorded upon completion of the sale. Sooner Trailer had been included in the Company's historical Agricultural Equipment segment (formerly known as the Trailers and Agricultural Equipment segment). Accordingly, the Company has reported the results of Sooner Trailer as discontinued operations for all periods presented in the consolidated statements of operations. Owosso Corporation (the "Company") was incorporated in Pennsylvania and organized as a holding company in 1994. The holding company structure separated the administrative and financing activities of the Company from the activities of its operating subsidiaries. The Company obtains raw materials, component parts and supplies from a variety of sources, generally from more than one supplier. In certain cases, where it has an impact on improving quality control or cost control, the Company obtains raw materials and component parts from sole source suppliers. The Company anticipates it will have no significant problems with respect to sources or availability of the raw materials or component parts essential to the conduct of its business. No material portion of the Company's business is seasonal, nor was any historical segment's seasonal. -3- A significant portion of the Company's sales are concentrated among a small number of customers. Sales to the two largest customers represented approximately 26%, 14% and 15% of total sales from continuing operations for 2003, 2002 and 2001, respectively. Subsequent to October 26, 2003, the Company is no longer selling to the second largest customer that accounted for 9% of its sales in 2003. The Company's backlog of unfilled orders for the historical Motors segment was $6.4 million as of December 12, 2003, as compared to $5.5 million as of December 12, 2002. The Company's business is highly competitive. Competition is based primarily on design and application engineering capabilities and product reliability and quality, as well as price. The Company has approximately 170 employees and believes that its relationship with its employees is good. The Company is subject to federal, state and local environmental regulations with respect to its operations. The Company believes that it is operating in substantial compliance with applicable environmental regulations. Manufacturing and other operations at the Company's facilities may result, and may have resulted, in the discharge and release of hazardous substances and wastes from time to time. The Company routinely responds to such incidents as deemed appropriate pursuant to applicable federal, state and local environmental regulations. The Company's manufacturing operations involve the storage, use, handling and disposal of various hazardous substances and wastes. Under applicable federal, state and local environmental laws, ordinances and regulations, a current or previous owner of real property may be liable for the costs of removal or remediation of certain hazardous or toxic substances on, in, under or discharged from such property. The Company is also subject to the federal Occupational Safety and Health Act and similar state statutes. See Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations - Environmental Matters." The Company currently maintains product liability insurance coverage of $1.0 million per occurrence and $2.0 million in aggregate annual coverage, and an umbrella policy for an additional $20.0 million of blanket liability protection per occurrence. There can be no assurance that such insurance will be sufficient to cover potential product liability claims or that the Company will be able to maintain such insurance or obtain product liability insurance in the future at a reasonable cost. Executive officer(s) of the registrant The sole executive officer of the Company is: Name Age Positions ---- --- --------- George B. Lemmon, Jr. 42 President, Chief Executive Officer, and Chairman of the Board George B. Lemmon, Jr. became President of the Company in May 1996, and has served as Chief Executive Officer of the Company since August 1995 and as a director of the Company since its inception in March 1994. Mr. Lemmon has been acting as the Company's principle accounting officer and principle financial officer since February 2002. In April 2003, Mr. Lemmon was elected Chairman of the Board. As an officer of the Company Mr. Lemmon serves until his successor is elected and qualifies. Prior to joining the Company, Mr. Lemmon was the CFO of Brynavon Group, a private equity firm that contributed part of its investment portfolio to the Company in exchange for shares during the initial public offering of the Company in October of 1994. -4- Item 2. Properties. The Company's principal executive offices and manufacturing, warehousing and distribution facility are located at 22543 Fisher Road, Watertown, New York. This facility consists of approximately 112,000 square feet, of which 107,800 square feet are dedicated to manufacturing, warehousing and distribution, with the remaining portion dedicated to office space. This facility is utilized by Stature, the Company's sole remaining business, and is subject to a mortgage securing a $4.6 million industrial revenue bond financing. The Company's former principal executive offices, located at 2200 Renaissance Boulevard, King of Prussia, Pennsylvania, were under lease to expire in September 2006 with a base rent of approximately $305,000 per year. The Company successfully negotiated a lease surrender agreement in December 2003 at a cost of $280,000 and vacated the office space in January 2004. The Company paid $89,000 covering rent through March 2004. The landlord also has the right to negotiate an existing letter of credit held by the landlord as security under the lease and retain the proceeds therefrom in the amount of $191,000 on the termination date. The Company continues to own a 90,000 square foot manufacturing facility located in Kilgore, Texas, which housed the Company's former Snowmax subsidiary. During fiscal 2004, the Company intends to dispose of this facility. An entity controlled by Mr. Lemmon, the Company's President, CEO and Chairman, has expressed interest in purchasing such real estate, however no binding agreement has been entered into and any such sale will be subject to the approval of the Company's audit committee. Based on current negotiations, the Company estimates proceeds of approximately $312,000 if successful in completing the sale. The Company believes that its machinery, plants and offices are in satisfactory operating condition and are adequate for the Company's current needs. Item 3. Legal Proceedings. As discussed in Item 7 under "Environmental Matters," the Company is a party to various legal proceedings concerning environmental regulations. In addition, the Company is a party to various lawsuits arising in the ordinary course of business, none of which are expected to be material with respect to the business assets or continuing operations of the Company. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. -5- PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities. In July 2003, the Company's common stock was de-listed from the NASDAQ SmallCap Market. At that time, the Company's common stock began trading on the NASD's electronic over-the-counter quotation system, the Over-the-Counter Bulletin Board (the "OTCBB"). The following table sets forth, for all fiscal quarters in fiscal 2002 and for the first through third fiscal quarters of fiscal 2003, the high and low sales prices per share for the Company's common stock on the NASDAQ SmallCap Market, and for the fourth quarter of fiscal 2003 sets forth the high and low bid prices per share for the Company's common stock on the OTCBB. Fiscal year ended October 28, 2003: High Low ------ ----- First Quarter $0.660 $0.230 Second Quarter $0.410 $0.200 Third Quarter $0.580 $0.040 Fourth Quarter $0.200 $0.050 Fiscal year ended October 27, 2002: High Low ------ ----- First Quarter $0.550 $0.100 Second Quarter $0.780 $0.210 Third Quarter $0.850 $0.290 Fourth Quarter $0.805 $0.450 As of January 20, 2004, there were 114 holders of record of the Company's common stock and an estimated 450 beneficial owners of the common stock. Effective for the second quarter of 2000 the Company modified certain covenants included in its bank credit facility. In connection with such modifications, the Company was, and continues to be, prohibited from making common stock dividend payments subsequent to August 28, 2000. Further modifications to the Company's bank credit facility in February 2001 resulted in the Company also being prohibited from making future preferred stock dividend payments and from purchasing the Company's stock. -6- Item 6. Selected Financial Data. The information set forth below, which has been derived from the audited consolidated financial statements of the Company, has been restated to reflect the Coils segment and Agricultural Equipment as discontinued operations and should be read in conjunction with the Consolidated Financial Statements and notes thereto and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."

Fiscal Year Ended ------------------------------------------------------------- Oct. 2726, Oct. 2827, Oct. 2928, Oct. 3129, Oct. 2531, 2003 2002(42) 2001 2000 1999(1) ~~1998(2)~~ ---------- ----------- --------- --------- ---------- (in thousands, except ~~per~~ share amounts) STATEMENT OF OPERATIONS DATA: Net sales $17,715 $36,901 $ 54,326 $ 75,204 $84,214 ~~$95,264~~ Cost of products sold 14,374 31,242 43,897 59,429 65,009 ~~72,742~~ -------- -------- -------- -------- -------- Gross profit 3,341 5,659 10,429 15,775 19,205 ~~22,522~~ Selling, general and administrative expenses 3,881 8,224 11,183 13,240 16,305 ~~19,229~~Goodwill ~~Restructuring~~impairment ~~charge~~expense 5,331 -- -- -- -- ~~909~~ Write-down of net assets held for sale -- 381 1,100 2,800 -- ~~1,635~~ -------- -------- -------- -------- -------- Income (loss) from operations (5,871) (2,946) (1,854) (265) 2,900 ~~749~~ Interest expense 708 1,588 4,335 5,069 4,947 ~~4,788~~ Gain on sale of business -- (6,055) -- -- -- ~~(2,775)~~ Other (income) expense (122) -- (110) 530 (444) ~~(87)~~ -------- -------- -------- -------- -------- Income (loss) from continuing operations before income taxes (6,457) 1,521 (6,079) (5,864) (1,603) ~~(1,177)~~ Income tax ~~expense~~benefit (~~benefit~~604) (4,197) (1,968) (1,082) (658) ~~812~~ -------- -------- -------- -------- -------- Income (loss) from continuing operations (5,853) 5,718 (4,111) (4,782) (945) ~~(1,989)~~ Discontinued operations: Income (loss) from discontinued operations -- (520) (2,073) (290) 2,722 ~~2,691~~ Loss on disposal of discontinued operations -- -- (10,040) (8,600) -- -- Cumulative effect of accounting change -- -- (67) -- -- -- ------- -------- -------- -------- -------- Net income (loss) (5,853) 5,198 (16,291) (13,672) 1,777 ~~702~~ Dividends and accretion on preferred stock (1,~~349~~370) (1,~~316~~349) (1,~~121~~316) (1,~~095~~121) (1,~~070~~095) -------- -------- -------- -------- -------- Net income (loss) available to common Shareholders $(7,223) $3,849 $(17,607) $(14,793) $ 682 ~~$ (368)~~ ======== ======== ========= ======= == ===== Basic and diluted income (loss) available for common shareholders from continuing operations per share $(1.24) $0.75 $ (0.93) $ (1.01) $ (0.35) ~~$ (0.53)~~ Weighted average number of common shares outstanding (basic) 5,824 5,~~866~~824 5,~~844~~866 5,~~826~~844 5,~~813~~826

-7-

Fiscal Year Ended ------------------------------------------------------------ Oct. 26, Oct.27, Oct. 28, Oct. 29, Oct. 31, ~~Oct.~~2003 ~~25,~~ 2002(42) 2001 2000 1999(1) ~~1998(2)~~ ---- --- ---- ---- ------- ------- (in thousands) OTHER DATA: Capital expenditures $171 $ 132 $ 757 $1,195 $3,789 ~~$7,838~~ Depreciation and amortization 1,432 3,840 3,867 5,025 4,984 ~~4,968 EBITDA (3) 1,275 3,113 7,560 7,884 8,261~~

Fiscal Year Ended ------------------------------------------------------------ Oct. 2726, Oct. 2827, Oct. 2928, Oct. 3129, Oct. 2531, 2003 2002(42) 2001 2000 1999(1) ~~1998~~ ---- --- ---- ---- ---- ------- BALANCE SHEET DATA: Total assets $18,380 $27,970 $46,394 $81,163 $105,345 ~~$116,499~~ Total short-term and long-term obligations 11,096 13,545 29,604 49,968 54,222 ~~67,024 Shareholders~~Stockholders' (deficit) equity (2,971) 4,252 403 18,432 33,984 ~~34,643~~

-------------------------------------------------------------------------------- (1) Includes the results of operations of the Company's former Parker Industries subsidiary through its disposition on March 5, 1999. Fiscal 1999 included 53 weeks, while the other years presented included 52 weeks. (2) The results include Motor Products which was sold July, 30, 2002. See "Item 1. Business." of this Form 10-K for further information on the sale of Motor Products. -8- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. General Owosso Corporation (the "Company") was incorporated in Pennsylvania and organized as a holding company in 1994. The holding company structure separated the administrative and financing activities of the Company from the activities of its operating subsidiaries. As of July 30, 2002, the Company had one operating subsidiary, Stature Electric, Inc. ("Stature"), representing the Company's historical "Motors segment." Stature's component products are sold throughout North America and in Europe, primarily to original equipment manufacturers who use them in their end products. On February 10, 2004, the Company reached a definitive agreement with Allied Motion Control Technologies, Inc. ("Allied") for the acquisition by Allied of all the shares of the Company on the following terms: .068 shares of common stock of Allied for each share of common stock of the Company, and a combination of .127 shares of Allied common stock, a warrant to purchase 0.28 shares of Allied common stock and cash of $0.9333 for each share outstanding of the Company's Class A convertible preferred stock. Based on the Company's 5,824,306 common shares and 1,071,428 preferred shares issued, the aggregate amount to common shareholders will be approximately $1.75 million, and the aggregate amount to preferred shareholders will be approximately $1.6 million. In addition, Allied has agreed to repay and assume up to $10.6 million of the Company's outstanding debt, and the Company's preferred shareholders may be entitled to Allied subordinated promissory notes with an aggregate principal amount of up to $500,000 based on the 2004 gross revenue of Stature. Accordingly, the transaction has an aggregate value of approximately $14 million, exclusive of any value attributable to the warrants and Allied notes. The board of directors of each Company has approved the transaction. The consummation of the transaction is subject to the approval of the Company's shareholders and other customary conditions. The transaction is expected to be completed prior to July 1, 2004. In 1998, the Company formulated a long-term plan to concentrate on value-added components for industry. In connection with its implementation of that plan, the Company began a series of divestitures beginning with the sale of the four businesses comprising its former Agricultural Equipment segment. The sale of the last of those businesses was completed in January 2001 with the divestiture of Sooner Trailer. During that time, however, the Company experienced a significant downturn in its operating results and at the end of fiscal 2000 was out of compliance with covenants under its bank credit facility. Throughout fiscal 2001, the Company remained out of compliance with financial covenants, including maintenance of minimum operating profit, under its bank credit facility. As a result, the Company and its lenders entered into a series of amendments to the facility during fiscal 2001, 2002 and 2003, and in each case the Company's lenders agreed to forebear from exercising their rights and remedies under the facility. In order to meet the lenders' requirements for reduced outstanding balances and to secure the lenders' agreement to forebear, the Company engaged in a series of divestitures of its operating subsidiaries, concluding with the sale of its Motor Products subsidiaries, Motor Products Owosso Corporation and Motor Products Ohio Corporation in July of 2002. As disclosed under Note 9 "Long-term Debt," the amendments to the bank credit facility modified the interest rates charged, called for reductions in the outstanding balance during calendar 2001, 2002, and 2003, added additional reporting requirements, suspended payments of principal and interest on subordinated debt, prohibited the payment of preferred or common dividends, prohibited the purchase of the Company's stock and added a covenant requiring the maintenance of minimum operating profit. In December 2003 (fiscal 2004), the Company entered into a further amendment to the facility, which extended the maturity date to March 31, 2004. -9- During fiscal 2004, the Company intends to dispose of the real estate at the Company's former Snowmax Corporation subsidiary. An entity controlled by Mr. Lemmon, the Company's President and CEO, has expressed interest in purchasing such real estate, however no binding agreement has been entered into and any such sale will be subject to the approval of the Company's audit committee. Based on current negotiations, the Company estimates proceeds of approximately $312,000 if successful in completing the sale. Management believes that, along with the sale of the real estate, available cash and cash equivalents, cash flows from operations and available borrowings under the Company's bank credit facility will be sufficient to fund the Company's operating activities, investing activities and debt maturities through March 2004. It is management's intent to refinance the Company's bank credit facility prior to its maturity in March 2004. However, there can be no assurance that management's plans will be successfully executed. In July 2002, the Company completed the sale of all of the outstanding stock of its Motor Products subsidiaries, manufacturers of fractional and integral horsepower motors. The purchase price paid by Allied Motion Technologies, Inc. F.K.A. Hathaway Motion Control Corporation (the "Buyer") for the outstanding stock of Motor Products consisted of $11.5 million in cash and a promissory note in the principal amount of $300,000, paid six months after closing. Net cash proceeds of $10.7 million from the sale, after payment of certain transaction costs, were utilized to reduce outstanding bank debt. The principal amount of the note was also utilized to reduce outstanding bank debt. As a result of this transaction, the Company presently has only one operating subsidiary, Stature. The Company's historical Other segment included Cramer. Cramer manufactured timers and subfractional horsepower motors for use in commercial applications. On December 4, 2000, the Company completed the sale of the assets associated with the timer and switch line of Cramer to Capewell Components, LLC of South Windsor, Connecticut for cash of approximately $2.0 million, plus the assumption of approximately $400,000 in liabilities. In connection with the sale of the timer and switch line and the anticipated sale of the remainder of the operating assets (excluding the real estate) of Cramer, the Company recorded, in the fourth quarter of fiscal 2000, a pretax charge of $1.6 million to adjust the carrying value for the Cramer assets to their estimated fair value, based upon an estimated sales price of the assets. Such charge represented a reduction in goodwill of $400,000 and the write-down of other non-current assets of $1.2 million and was included in "Write-down of net assets held for sale" in the consolidated statements of operations for fiscal 2000. In September 2001, the Company sold substantially all of the remaining operating assets (excluding the real estate) of Cramer to the Chestnut Group of Wayne, Pennsylvania for cash proceeds of $565,000, plus the assumption of $317,000 in liabilities. In connection with that sale, the Company recorded a further adjustment to the carrying value of the Cramer assets resulting in a pre-tax charge of $1.1 million, recorded in the third fiscal quarter of 2001. The Company recorded a pretax charge of $270,000 in the fourth quarter of 2002 to adjust the carrying value for the Cramer real estate to the estimated fair value, based upon an estimated sales price of the assets and was included in "Write-down of net assets held for sale" in the consolidated statements of operations for fiscal 2002. The Company's historical Coils segment manufactured heat exchange coils and included Astro Air Coils, Snowmax and Astro Air UK. Astro UK was a joint venture with the Company's largest customer, Bergstrom, Inc. In May 2001, the sale of substantially all of the assets of Astro UK to ACR Heat Transfer Limited of Norfolk, England for cash of (pound)450,000 (approximately $643,000) was completed. Based upon the terms of the sale, the Company recorded, in the second quarter of 2001, a pretax charge of $700,000 to adjust the carrying value of Astro UK's assets to their estimated realizable value. No additional gain or loss was recorded upon completion of the sale. Proceeds from the sale were utilized to reduce the Company's bank credit facility. -10- In October 2001, the Company completed the sale of the assets of the remaining Coils Subsidiaries. The sale of the Coils Subsidiaries was effectuated pursuant to an Asset Purchase Agreement, dated as of October 26, 2001, by and among the Coils Subsidiaries, Astro Air, Inc. (the "Buyer"), and Rex Dacus, the manager of the Coils segment and the person from whom the Company acquired the assets and operations of Astro Air Coils, Inc. in 1998. Proceeds from the sale of $5.6 million were utilized to reduce the Company's bank credit facility. The Buyer also assumed approximately $3.7 million of liabilities. The Company recorded a pretax charge of $9.3 million related to this sale in the fourth quarter of 2001. The Company recorded a charge of $520,000 net of taxes in the fourth quarter of 2002 to adjust the carrying value for the real estate assets to the estimated fair value, based upon an estimated sales price of the assets. Critical Accounting Policies The Securities and Exchange Commission ("SEC") recently issued disclosure guidance for critical accounting policies. The SEC defines critical accounting policies as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. The Company's significant accounting policies are described in Note 3 to the Consolidated Financial Statements. Not all of these significant accounting policies require management to make difficult, subjective or complex judgments or estimates. However, the following accounting policies could be deemed to be critical by the SEC. Use of estimates. In preparing the consolidated financial statements we use estimates in determining the economic useful lives of our assets, asset impairments, obligations under our employee benefit plans, provisions for doubtful accounts, tax valuation allowances and various other recorded or disclosed amounts. Estimates require us to use our judgment. While we believe that our estimates for these matters are reasonable, if the actual amount is significantly different than the estimated amount, our assets, liabilities or results of operations may be overstated or understated. Contingencies. We account for contingencies in accordance with Statement of Financial Accounting Standards ("SFAS") No. 5, "Accounting for Contingencies." SFAS No. 5 requires that we record estimated loss from a loss contingency when information available prior to issuance of the consolidated financial statements indicates that it is probable that an asset has been impaired or liability has been incurred at the date of the consolidated financial statements and the amount of the loss can be reasonable estimated. Accounting for contingencies such as environmental, legal and income tax matters requires us to use our judgment. While we believe that our accruals for these matters are adequate, if the actual loss from a loss contingency is significantly different from the estimated loss, our results of operations may be overstated or understated. Impairments of Long-Lived Assets. We record impairment losses on long-lived assets used in operations, exclusive of goodwill, when events and circumstances indicate that the assets might be impaired and the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future net cash flows expected to be generated by the asset. If the asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed are reported at the lower of the carrying amount or fair value, less cost to sell. If the actual value is significantly less than the estimated value, our assets may be overstated. -11- Inventories. We record the value of inventory at the lower of cost or market, and periodically review the book value of products and product lines to determine if they are properly valued. We also periodically review the composition of our inventories and seek to identify slow-moving inventories. In connection with those reviews, we seek to identify products that may not be properly valued and assess the ability to dispose of them at a price greater than cost. If it is determined that the cost is less than market value, then cost is used for inventory valuation. If a write down to current market value is necessary, the market value cannot be greater than the net realizable value, sometimes called the ceiling (defined as selling price less cost to complete and dispose), and cannot be lower than net realizable value less a normal profit margin, sometimes called the floor. If the actual value is significantly less than the recorded value, our assets may be overstated. Goodwill. On an annual basis, we test goodwill for impairment unless an event occurs or circumstances change that would require us to test goodwill for impairment between our annual tests. An impairment expense is recognized immediately if such testing indicates that goodwill is impaired. Results of Operations The Company's fiscal year includes 52 or 53 weeks, ending on the last Sunday in October. Fiscal years 2003, 2002 and 2001 consisted of 52 weeks. Year ended October 26, 2003 compared to year ended October 27, 2002 Net sales. Net sales for 2003 were $17.7 million, as compared to net sales of $36.9 million in 2001, a decrease of 52.0%. These results include the effects of the disposition of Motor Products in July 2002, the loss of the Company's second biggest customer, the effects of the general economic slowdown on the Company's primary markets, particularly the recreational vehicle markets, as well as the effects of increased Pacific Rim competition in the healthcare market. Loss from operations. For 2003, the Company recorded a loss from operations of $5.9 million, as compared to a loss from operations of $2.9 million in 2002. These results include a $5.3 million goodwill impairment expense for 2003. Interest expense. Interest expense decreased to $708,000 for 2003 from $1.6 million in the prior year, primarily as a result of lower debt levels. The current period includes a credit of $110,000 resulting from a decrease in the fair market value of the Company's interest rate swap agreement that expired October 1, 2003. Other (income) expense. For 2003, the Company recorded other income of $122,000. This was primarily the result of the Company negotiating a settlement with all of the Cramer retirees covered by a post retirement benefit. As a result of the settlement, Owosso paid out $76,000 and recognized a gain of $165,000. Income tax expense (benefit). The Company recorded an income tax benefit of $604,000 for 2003. The Company recorded an income tax benefit at an effective rate of 9.4% for 2003. Income (loss) from discontinued operations. For 2002, the Company recorded a loss from discontinued operations, representing the remaining real estate asset of the Coils segment, of $520,000 (net of income tax expense of $268,000). There were no discontinued operations in 2003. -12- Net income (loss) available for common shareholders. Net loss available for common shareholders was $7.2 million, or $1.24 per share, in 2003, as compared to net income of $3.8 million, or $0.66 per share, in 2002. Income (loss) available for common shareholders is calculated by subtracting dividends of preferred stock of $1.4 million for 2003 and 1.3 million for 2002. Year ended October 27, 2002 compared to year ended October 28, 2001 Net sales. Net sales for 2002 were $36.9 million, as compared to net sales of $54.3 million in 2001, a decrease of 32.0%. Net sales from Motors, the Company's only remaining segment decreased to $36.9 million in 2002, as compared to $51.4 million in 2001, a decrease of 28.2%. These results include the effects of the disposition of Motor Products in July 2002, the effects of the general economic slowdown on the Company's primary markets, particularly the heavy truck and recreational vehicle markets, as well as the effects of increased Pacific Rim competition in the healthcare market. These results also include the effect of disposing of Cramer's operating assets (excluding the real estate) in 2001. Sales attributed to Cramer were $2.9 million in 2001. Loss from operations. For 2002, the Company recorded a loss from operations of $2.9 million, as compared to a loss from operations of $1.9 million in 2001. These results reflect decreased sales volumes and decreased margins caused by price pressures and changes in product mix, as well as the under absorption of overhead costs, partially offset by a reduction in selling, general and administrative expenses. The 2002 fiscal year loss includes a charge of $381,000, as compared to $1.1 million in 2001 for the write-down of net assets held for sale, related to the Cramer real estate asset. Interest expense. Interest expense decreased to $1.6 million for 2002 from $4.3 million in the prior year, primarily as a result of lower debt levels. The 2002 fiscal year includes a credit of $589,000 resulting from a decrease in the fair market value of the Company's interest rate swap agreements as a result of decreases in interest rates. Other (income) expense. For 2001, other (income) expense primarily represents the partial recovery of a note received in connection with the sale of certain Cramer assets in 1999 (the "Cramer Note Receivable"). Income tax expense (benefit). The Company recorded an income tax benefit of $4.5 million for 2002 of which $4.3 million was as a result of recent changes in federal tax laws, which allow the carryback of net operating losses for five years. The Company recorded an income tax expense at an effective rate of 6.4% for 2002, excluding the $4.3 million tax benefit, as compared to an effective tax rate of 32.4% in the prior year. Income (loss) from discontinued operations. For 2002, the Company recorded a loss from discontinued operations, representing the remaining real estate asset of the Coils segment, of $520,000 (net of income tax expense of $268,000). For 2001, the Company recorded a loss from discontinued operations, representing the operations of the Coils segment, of $12.1 million (net of income tax expense of $514,000) on revenues of $35.6 million. The fiscal 2001 year results reflect a pre-tax loss on the sale of the Coils segment of $10.0 million. Net income (loss) available for common shareholders. Net income available for common shareholders was $3.8 million, or $.66 per share, in 2002, as compared to a net loss of $17.6 million, or $3.00 per share, in 2001. Net income (loss) available for common shareholders is calculated by subtracting dividends of preferred stock of $1.3 million for both 2002 and 2001. -13- Liquidity and Capital Resources The following discussion does not consider the definitive agreement with Allied Motion Control Technologies, Inc. for the acquisition of the Company. Refer to Note 19 of the consolidated financial statements. At October 26, 2003, cash and cash equivalents were $309,000. The Company had negative working capital at October 26, 2003 of $9.5 million, as compared to negative working capital of $5.4 million at October 27, 2002. Net cash provided by operating activities was $2.0 million for 2003, as compared to $5.7 million in the prior year. Cash from operations in the prior year includes operations of the Motor Products subsidiaries, some of which were sold in the prior year. The Company currently plans to invest approximately $280,000 in capital expenditures during fiscal 2004. Management anticipates funding such capital expenditures with cash from operations and proceeds from the Company's bank credit facility. Net cash used in financing activities included net repayments of $2.4 million under the Company's revolving credit agreement, and debt repayments of $49,000. At October 26, 2003, $4.5 million was outstanding under the Company's bank credit facility. On January 22, 1999, the Company entered into a new bank credit facility with the Company's two primary banks, originally expiring in December 2002. The agreement included financial and other covenants, including fixed charge, cash flow and net worth ratios and restrictions on certain asset sales, mergers and other significant transactions. The Company was not in compliance with such covenants at October 29, 2000. In February 2001, the Company entered into an amendment to its bank credit facility agreement, wherein the lenders agreed to forbear from exercising their rights and remedies under the facility in connection with such non-compliance until February 15, 2002, at which time the facility was to mature. The amendment to the bank credit facility, which was further amended in February 2001, called for reductions in the outstanding balance during calendar 2001 and modified the interest rates charged. The amendment required additional collateral, effectively all the assets of the Company, and reporting requirements, as well as the addition of a covenant requiring minimum operating profits. The amendment also required the suspension of principal and interest payments on subordinated debt, with an aggregate outstanding balance of $2.1 million as of October 28, 2001. Furthermore, the amendment to the facility prohibits the payment of preferred or common stock dividends and prohibited the purchase of the Company's stock. Beginning in August 2001, the Company was out of compliance with its minimum operating profit covenant. In February 2002, the Company entered into a further amendment to the facility, which extended the maturity date to December 31, 2002. That amendment called for further reductions in the outstanding balance based on expected future asset sales, increases the interest rate charged and requires minimum EBITDA. For further information see "Item 7. General." of this Form 10-K. In December 2002, the Company entered into a further amendment to the facility, which extends the maturity date to December 31, 2003. This amendment calls for further reductions in outstanding balance based on expected future asset sales and cash flow generated from operations and requires minimum EBITDA. In April 2003, the Company entered into a further amendment to the facility, which amended the financial covenant. In September 2003, the Company entered into a further amendment to the facility, which waived a mandatory paydown. In December 2003, the Company entered into a further amendment to the facility, which extended the maturity date to March 31, 2004. Borrowings under the facility are charged interest at the Prime Rate plus 2.75% (6.75% at October 26, 2003). -14- Contractual Obligations The following table summarizes the Company's future obligations, based on original maturities, under contracts as of October 26, 2003:

~~Year~~Contractual ofObligations ~~Maturity~~2004 ~~Fair~~2005 ~~Value~~2006 2007 2008 Thereafter Total -----------------------~~------------------------------------~~ ~~Total Due at 2003 2004 2005 2006 2007 Thereafter at Maturity 10/27/02~~ ---- ---- ---- ---- ---- ---------- -----~~------~~ ~~--------~~Revolving ~~Debt:~~Credit ~~Fixed~~Agreement ~~rate~~ $ 14,~~451~~500,000 $ ~~254~~- $ ~~216~~- $ 93- $ 81- $ - $ 24,~~095 $ 2~~500,~~095~~000 ~~Average~~Term ~~interest~~Loans ~~rate~~288,000 ~~8.0%~~88,000 ~~8.0%~~93,000 ~~8.0%~~81,000 ~~8.0%~~- ~~8.0%~~- ~~8.0%~~550,000 ~~Variable~~Industrial ~~rate~~Revenue $Bonds 7600,~~500~~000 $ 600,000 $ 600,000 $ 900,000 $ 900,000 $ 950 ~~$ 11~~,~~450~~000 ~~$ 11~~4,~~450~~550,000 ~~Average~~Subordinated ~~interest~~Promissory ~~rate~~Notes ~~2.8%~~1,368,000 ~~2.8%~~128,000 ~~2.8%~~- ~~2.8%~~- ~~2.8%~~- ~~2.8%~~- ~~Interest~~1,496,000 ~~rate~~---------------------------------------------------------------------------------------- ~~swap~~Total ~~agreements: Variable to fixed swaps~~ $ 46,~~550~~756,000 $816,000 - $ -693,000 $981,000 - $ -900,000 $ -950,000 $ 411,~~550~~096,000 ~~$ (110) Average pay rate 4.2% Average receive rate 2.1%~~========================================================================================

Environmental Matters The Company is subject to federal, state and local environmental regulations with respect to its operations. The Company believes that it is operating in substantial compliance with applicable environmental regulations. Manufacturing and other operations at the Company's facilities may result, and may have resulted, in the discharge and release of hazardous substances and waste from time to time. The Company routinely responds to such incidents as deemed appropriate pursuant to applicable federal, state and local environmental regulations. In connection with the Company's divestitures of its operating businesses over the past four years, it has agreed to indemnify buyers from and against certain known and unknown environmental liabilities. In addition, the Company may be liable for the costs of removal or remediation of hazardous or toxic substances on, in, under or discharged from it's current or previously owned real property under applicable federal, state and local environmental laws, ordinances and regulations. A subsidiary of the Company is a party to a consent decree with the State of Connecticut pursuant to which it has agreed to complete its environmental investigation of the site on which its Old Saybrook facility was previously located and conduct any remedial measures which may be required. Based upon the amounts recorded as liabilities, the Company believes that the ultimate resolution of this matter will not have a material adverse effect on the financial results of the Company. Recently Issued Financial Accounting Standards In April 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". There was no effect on the Company's financial statements from the adaptation of SFAS No. 145 in fiscal 2003. In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Others" ("FIN 45"). FIN 45 requires that a liability be recorded on the guarantor's balance sheet upon issuance of a guarantee. In addition, FIN 45 requires disclosures about the guarantees that an entity has issued. The Company's adoption of FIN 45 did not have an effect on its consolidated financial statements in fiscal 2003. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46"). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for the Company for the interim period ended April 30, 2004, or earlier in certain instances. Such instances did not have a material effect on the Company's consolidated financial statements in fiscal 2003. -15- In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative discussed in SFAS No. 133, clarifies when a derivative contains a financing component, amends the definition of an underlying to conform it to language used in FIN 45 and amends certain other existing pronouncements. These changes are intended to result in more consistent reporting of contracts as either derivatives or hybrid instruments. The Statement is generally effective for contracts entered into or modified after, and for hedging relationships designated after, June 30, 2003. The Company's adoption of SFAS No. 149 did not have a material effect on its consolidated financial statements in fiscal 2003. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. The new Statement requires that those instruments be classified as liabilities in the balance sheet. This Statement is effective for mandatory redeemable instruments entered into or modified after May 31, 2003 and for all other instruments for interim periods beginning after June 15, 2003. The Company's adoption of SFAS No. 150 did not have a material effect on its consolidated financial statements in fiscal 2003. Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 The following information is provided pursuant to the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Certain statements in Management's Discussion and Analysis of this Form 10-K, including those which express "belief," "anticipation" or "expectation" as well as other statements which are not historical fact, are "forward-looking statements" made pursuant to the "Safe Harbor" provisions. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The Company cautions readers that the following important factors, among others, have in the past affected and could in the future affect the Company's actual results of operations and cause the Company's actual results to differ materially from the results expressed in any forward-looking statements made by or on behalf of the Company: o The Company's continued liquidity is dependent upon its ability to achieve levels of revenue necessary to support the Company's cost structure, its ability to maintain adequate financing, its ability to maintain compliance with debt covenants, and its ability to generate sufficient cash flows to meets its obligations on a timely basis. o In July 2003, the Company's common stock was delisted from the NASDAQ SmallCap Market and began trading on the NASD's Over-the-Counter Bulletin Board ("OTCBB"). As a result, the price of the Company's common stock may be subject to greater volatility and reduced liquidity. In addition, among other challenges, the Company may have difficulties in obtaining future financing. o The Company's results have been and can be expected to continue to be affected by the general economic conditions in the United States and specific economic factors influencing the manufacturing sector of the economy. Lower demand for the Company's products can lower revenues as well as cause underutilization of the Company's plants, leading to reduced gross margins. -16- o Metal prices, particularly of copper and steel, can affect the Company's costs as well as demand for the Company's products and the value of inventory held at the end of a reporting period. Lack of availability of certain commodities could also disrupt the Company's production. o Changes in demand that change product mix may reduce operating margins by shifting demand toward less profitable products. o Loss of a substantial customer or customers may affect results of operations. o The influence of foreign competition from low-cost areas of the world may affect results of operations. o The Company's results have been and can be affected by engineering difficulties in designing new products or applications for existing products to meet the requirements of its customers. o The Company's results can be affected by changes in manufacturing processes and techniques. o Obsolescence or quality problems leading to returned goods in need of repair can affect the value of the Company's inventories and its profitability. o The Company has a substantial amount of floating rate debt. Increases in short-term interest rates could be expected to increase the Company's interest expense. o The Company has divested all but one of its operating businesses over the past four years. The Company remains responsible for certain third party liabilities in connection with these transactions, including product liabilities, environmental liabilities and taxes, and has obligations to indemnify the buyers against certain matters arising out of the transactions. Although the Company maintains general liability insurance coverage, including coverage for errors and omissions, there can be no assurance that such coverage will continue to be available on reasonable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer(s) will not disclaim coverage as to any future claim. The successful assertion of one or more large claims against the Company that are uninsured, exceed available insurance coverage or result in changes to the Company's insurance policies, including premium increases or the imposition of a large deductible or co-insurance requirements, could adversely affect the Company's business, results of operations and financial condition. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The Company uses a bank credit facility, industrial revenue bonds and term loans to finance a significant portion of its operations. These on-balance sheet financial instruments, to the extent they provide for variable rates of interest, expose the Company to interest rate risk resulting from changes in the prime rate. -17- To the extent that the Company's financial instruments expose the Company to interest rate risk and market risk, they are presented in the table below. The table presents principal cash flows and related interest rates by year of original maturity for the Company's bank credit facility, industrial revenue bonds and term loans in effect at October 26, 2003. Fair values included herein have been determined based upon rates currently available to the Company for debt with similar terms and the original maturities. Note 9 to the consolidated financial statements should be read in conjunction with the table below (dollar amounts in thousands).

~~Number~~Year of ~~securities~~Maturity ~~remaining~~Fair ~~available~~Value ~~for Number of securities future issuance under to be issued upon Weighted~~-average equity compensation exercise of exercise price of plans (excluding outstanding options, outstanding options, securities reflected in Plan category warrants and rights warrants and rights column (a)) ------------------------------------ ---------------------- --- Total Due at 2004 2005 2006 2007 2008 Thereafter at Maturity 10/26/2003 ---- ---- ---- ---- ---- ---------- ----------- ---------- ~~(a)~~Debt: ~~(b)~~Fixed ~~(c)~~rate ~~Equity~~$ ~~Compensation~~1,656 ~~plans~~$ ~~approved~~216 ~~324~~$ 93 $ 81 $ - $ - $ 2,~~000~~046 $~~7.74~~ ~~676~~2,~~000~~046 byAverage ~~security~~interest ~~holders~~rate 8.9% 6.4% 5.0% 5.~~.............~~0% ~~Equity~~Variable ~~compensation~~rate ~~plans~~$5,100 ~~not~~$ ~~approved~~600 by$600 ~~security~~$900 ~~holders........~~$900 0$950 0$ 09,050 ~~Total~~$ 9,050 Average interest rate 6.1% 1.1% 1.1% 1.~~.................~~1% ~~324,000 $7~~1.741% ~~676,000~~1.1%

Item 8. Financial Statements and Supplementary Data. The Company's consolidated financial statements and financial statement schedule appear at pages F-1 through F-23, as set forth in Item 15. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A. Controls and Procedures. The Company carried out an evaluation under the supervision and with the participation of its internal review committee and its management, including its Chief Executive Officer (the principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) at the end of the period covered by this Annual Report on Form 10-K (the "Evaluation Date"). Based on that evaluation, the Chief Executive Officer (the principal executive officer, principal financial officer and principal accounting officer), concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in its Exchange Act reports was recorded, processed, summarized and reported within the applicable time periods. There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of such evaluation. -18- PART III Item 10. Directors and Executive Officers of the Registrant. Information concerning (i) directors, appearing under the caption "Election of Directors" in the Company's Proxy Statement (the "Proxy Statement") intended to be filed with the Securities and Exchange Commission in connection with the 2004 Annual Meeting of Shareholders, (ii) information concerning executive officers, appearing under the caption "Item 1. Business - Executive Officer(s) of the Company" in Part I of this Form 10-K, and (iii) information under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement are incorporated herein by reference in response to this Item 10. To the extent the Proxy Statement is not filed within the required time period, the Company will amend this Item 10 as required by general instruction G(3) to this Form 10-K. The Board of Directors has adopted a Code of Business Conduct and Ethics, which has been filed as an exhibit to this Form 10-K. Item 11. Executive Compensation. The information contained in the section titled "Executive Compensation" in the Proxy Statement, with respect to executive compensation, and the information contained in the section entitled "Director Compensation" with respect to director compensation, are incorporated herein by reference in response to this Item 11. To the extent the Proxy Statement is not filed within the required time period, the Company will amend this Item 11 as required by general instruction G(3) to this Form 10-K. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table summarizes information about the Company's equity compensation plans as of October 26, 2003. All outstanding awards relate to the Company's common stock. For additional information about the Company's equity compensation plans, see note 17 of Notes to Consolidated Financial Statements under Item 8.

~~Page~~Number ~~INDEPENDENT~~of ~~AUDITORS'~~securities ~~REPORT~~remaining Favailable for Number of securities future issuance under to be issued upon Weighted-1average ~~CONSOLIDATED~~equity ~~FINANCIAL~~compensation ~~STATEMENTS~~exercise ~~FOR~~of ~~THE~~exercise ~~YEARS~~price ~~ENDED~~of ~~OCTOBER~~plans ~~27,~~(excluding ~~2002~~outstanding options, ~~OCTOBER~~outstanding 28options, ~~2001,~~securities ~~AND~~reflected ~~OCTOBER~~in ~~29,~~Plan ~~2000:~~category ~~Statements~~warrants ofand ~~Operations~~rights ~~F-2~~warrants ~~Balance~~and ~~Sheets~~rights Fcolumn (a)) -3-------------- ~~Statements~~---------------------- of---------------------- ~~Changes~~-------------------------- in(a) ~~Shareholders'~~(b) (c) Equity ~~F-4~~Compensation ~~Statements~~plans ofapproved ~~Cash~~229,000 ~~Flows F-~~$5.38 ~~Notes~~771,000 toby ~~Consolidated~~security ~~Financial~~holders................. ~~Statements~~Equity Fcompensation plans not approved by security holders........ 0 0 0 -6------ ----- F-24------ ~~FINANCIAL~~Total ~~STATEMENT~~..................... ~~SCHEDULE~~229,000 II$5.38 ~~F-25~~771,000 ======= ===== =======

The other information required under this Item is contained in the section titled "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement and is incorporated herein by reference in response to this Item 12. To the extent the Proxy Statement is not filed within the required time period, the Company will amend this Item 12 as required by general instruction G(3) to this Form 10-K. -19- Item 13. Certain Relationships and Related Transactions. The information contained in the section titled "Certain Relationships and Transactions" of the Proxy Statement, with respect to certain relationships and related transactions, is incorporated herein by reference in response to this Item 13. To the extent the Proxy Statement is not filed within the required time period, the Company will amend this Item 13 as required by general instruction G(3) to this Form 10-K. Item 14. Principal Accountant Fees and Services. The information contained in the section titled "Audit Fees" of the Proxy Statement is incorporated herein by reference in response to this Item 14. To the extent the Proxy Statement is not filed within the required time period, the Company will amend this Item 14 as required by general instruction G(3) to this Form 10-K. -20- PART IV Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a)(1) Financial Statements The financial statements listed in the accompanying Table of Contents to Consolidated Financial Statements are filed as part of this Form 10-K, commencing on page F-1. (a)(2) Schedules The following consolidated financial statement schedule of the Company is filed as part of this Form 10-K: Schedule II - Valuation and Qualifying Accounts (a)(3) Exhibits The exhibits are listed in the index to Exhibits appearing below. (b) Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of the Company's fiscal year. (c) Exhibits

~~---------------------------------------------------------------------------------------------------------------------------~~Exhibit ~~Year~~No. ~~Ended~~Description --------------------------------------------------- ~~October 27, October 28, October 29, 2002 2001 2000~~ ------------- -------~~-----~~ ~~------------~~* ~~Net~~2.1 ~~sales~~Stock $Purchase ~~36,901,000~~Agreement $among ~~54,326,000~~Hathaway $Motion 75Control Corporation,~~204,000~~ ~~Costs~~Motor ofProducts ~~products~~-- ~~sold~~Owosso 31Corporation,~~242,000~~ ~~43,897,000~~Motor ~~59,429,000~~Products --~~-----------~~ ~~------------~~Ohio ~~------------~~Corporation, ~~Gross~~and ~~profit~~Owosso 5Corporation,~~659,000~~ ~~10,429,000~~dated ~~15,775,000~~July ~~Selling~~8, ~~general~~2002. ~~and~~(Exhibit ~~administrative~~2.1 ~~expenses~~to ~~8,224,000~~the ~~11,183,000~~Company's ~~13,240,000~~Current ~~Write-down~~Report ofon ~~net~~Form ~~assets~~8-K ~~held~~dated ~~for~~July ~~sale 381~~30,~~000~~ ~~1,100,000~~2002). *2~~,800,000~~.2 ~~-------------~~Asset ~~------------~~Purchase ~~------------~~Agreement ~~Loss~~among ~~from~~Rex ~~operations (2~~Dacus,~~946,000)~~ (1Dacus Properties,~~854,000)~~ ~~(265~~Inc.,~~000)~~ ~~Interest~~Astro ~~expense~~Air 1Coils,~~588,000~~ ~~4,335,000~~Inc. ~~5,069,000~~and ~~Gain~~Snowmax onIncorporated, ~~sale~~dated ofOctober ~~Business~~26, 2001 (~~6,055,000)~~Exhibit --2.1 --to ~~Other~~the ~~(income)~~Company's ~~expense~~Current --Report ~~(110,000)~~on ~~530,000~~Form 8-~~------------~~K, ~~------------~~dated ~~------------~~October ~~Income~~26, ~~(loss~~2001). ~~from~~*3.1 ~~continuing~~Articles ~~operations~~of ~~before~~Incorporation ~~income~~of ~~taxes~~the ~~1,521,000~~Company (~~6,079,000)~~Exhibit ~~(5,864,000)~~3.1 ~~Income~~to ~~tax~~the ~~benefit~~Company's ~~(4,197,000)~~Form (S-1~~,968,000)~~ (1Registration Statement,~~082,000)~~ ~~-------------~~No. 33-~~-----------~~76964 ~~------------ Income~~ (~~loss)~~the ~~from~~"1994 ~~continuing~~Registration ~~operations 5,718,000 (4,111,000~~Statement") ~~(4,782,000~~). ~~Discontinued~~*3.2 ~~operations:~~By-Laws ~~Loss~~of ~~from~~the ~~discontinued operations~~Company, ~~net~~as ofamended ~~income~~June ~~tax benefit of $268~~5,~~000,~~ ~~$514,000~~1997 ~~and $522,000~~ (~~520,000)~~Exhibit (3.2~~,073,000)~~ ~~(290,000)~~to ~~Loss~~the onCompany's ~~disposal~~Quarterly ofReport ~~discontinued~~on ~~operations~~Form 10--Q ~~(10,040,000)~~for ~~(8,600,000)~~the ~~-------------~~quarter ~~------------~~ended ~~------------~~July ~~Income~~27, ~~(loss~~1997). ~~before~~*3.3 ~~cumulative~~Designations ~~effect~~ of ~~accounting~~the ~~change~~Class ~~5,198,000~~A ~~(16,224,000)~~Convertible ~~(13,672,000)~~Preferred ~~Cumulative~~Stock ~~effect~~ of ~~accounting~~Owosso ~~change~~Corporation (~~net~~Exhibit of4.1 ~~tax~~to ofthe ~~$34,000)~~Company's --Current ~~(67,000)~~Report --on ~~-------------~~Form 8-~~-----------~~K ~~------------~~dated ~~Net~~October ~~income (loss) 5~~31,~~198,000~~ ~~(16,291,000)~~1995 (~~13,672,000)~~the ~~Dividends~~"October ~~and~~31, ~~accretion~~1995 onForm ~~preferred stock (1,349,000~~8-K") ~~(1,316,000~~). (#*10.1~~,121,000)~~ ~~-------------~~1994 ~~------------~~Stock ~~------------~~Option ~~Net~~Plan ~~income~~ (~~loss)~~Exhibit ~~available~~10.1 ~~for~~to ~~common~~the ~~shareholders~~Company's $Annual ~~3,849,000~~Report ~~$(17,607,000)~~on ~~$(14,793,000)~~Form ~~=============~~10-K ~~============~~for ~~============~~the ~~Basic~~year ~~and~~ended ~~diluted~~October ~~income~~30, 1994 (~~loss)~~the ~~per~~"1994 ~~common~~Form ~~share:~~10-K ~~Income (loss~~")). ~~available for common shareholders from continuing operations $ 0~~*10.752 $Employment ~~(0.93)~~Agreement $between ~~(1.01)~~Michael ~~Loss~~Koepke ~~from~~and ~~discontinued~~Owosso ~~operations~~Motor ~~(0.09)~~Group, (2Inc.~~06)~~, ~~(1.52)~~dated ~~Cumulative~~September ~~effect of accounting change~~30, ~~net~~1996 -- (0Exhibit 10.~~01)~~2 --to ~~-------------~~the ~~------------~~Company's ~~------------~~Annual ~~Net~~Report ~~income (loss) available~~ for ~~common~~the ~~shareholders~~year ~~per~~ended ~~share~~October $27 02002).66 ~~$ (3~~*10.~~00)~~3 $Lease, ~~(2.53)~~dated ~~=============~~March ~~============~~21, ~~============~~1995, ~~Weighted~~between ~~average~~Motor ~~number~~Products of- ~~common~~Ohio ~~shares~~Corporation ~~outstanding:~~and ~~Basic~~William ~~5,824,000~~Berhard ~~5,866,000~~Realty ~~5,844,000~~Company ~~=============~~(Exhibit ~~============~~10.44 ~~============~~to ~~Diluted~~the ~~5,824,000~~1995 ~~5,866,000~~Form ~~5,844,000 ============= ============ ============~~10-K).

-21-

Exhibit No. Description ----------------------------------------------------------------------- *10.4 Confidentiality and Non-~~---------------------------------------------------------~~Solicitation ~~October~~Agreement 27between the Company and Eugene P. Lynch, dated October 2831, ~~2002~~1994 ~~2001~~(Exhibit 10.45 to the 1994 Form 10-~~------------~~K). *10.5 Confidentiality and Non-~~------------~~Solicitation ~~ASSETS~~Agreement ~~CURRENT~~between ~~ASSETS:~~the ~~Cash~~Company and ~~cash~~Ellen ~~equivalents~~D. ~~$ 524~~Harvey,~~000~~ $dated ~~200,000~~October ~~Receivables~~31, ~~net~~1994 ~~3,111,000~~(Exhibit 10.46 to the 1994 Form 10-K). *10.6~~,061,000~~ ~~Inventories,~~Confidentiality ~~net~~and ~~1,906,000~~Non-Solicitation ~~4,815,000~~Agreement ~~Net~~between ~~assets~~the ~~held~~Company ~~for~~and ~~sale~~George ~~800~~B. Lemmon,~~000~~ 1Jr.,~~181~~ dated October 31,~~000~~ ~~Prepaid~~1994 ~~expenses~~(Exhibit 10.48 to the 1994 Form 10-K). *10.7 Confidentiality and ~~other~~Non-Solicitation ~~690,000~~Agreement ~~1,446,000~~between ~~Tax~~the ~~refund~~Company ~~receivable~~and ~~919,000~~John 1R. Reese,~~696,000~~ ~~Deferred~~dated ~~taxes~~October ~~295~~31,~~000~~ ~~2,453,000~~1994 ~~------------~~(Exhibit ~~------------~~10.51 ~~Total~~to ~~current~~the ~~assets~~1994 Form 10-K). *10.8~~,245,000~~ ~~17,852,000~~Agreement ~~PROPERTY~~and Plan of Merger dated October 25, ~~PLANT~~1995 ~~AND~~by ~~EQUIPMENT~~and among Owosso Corporation, ~~NET~~Stature 5Electric,~~616,000~~ 11Inc. and the stockholders of Stature Electric,~~874,000~~ ~~GOODWILL~~Inc. (Exhibit 2.1 to the October 31, ~~NET~~1995 Form 8~~,405,000~~-K). *10.9~~,395,000~~ ~~OTHER~~Registration ~~INTANGIBLE~~Rights ~~ASSETS~~Agreement dated October 31, ~~NET~~1995 5by and among Owosso Corporation,~~218,000~~ 5Lowell Huntsinger,~~614,000~~ ~~NET~~Randall ~~ASSETS~~James OFand ~~DISCONTINUED~~Morris ~~OPERATIONS~~Felt ~~HELD~~(Exhibit ~~FOR~~10.2 ~~SALE~~to ~~350,000~~the 1October 31,~~078,000~~ ~~OTHER~~1995 ~~ASSETS~~Form ~~136~~8-K). *10.10 Lease Agreement by and between Owosso Corporation and Philadelphia Freedom Partners,~~000~~ ~~581~~L.P. dated September 6,~~000~~ ~~------------~~1996 (Exhibit 10.62 to the Company's Annual Report on Form 10-~~-----------~~K ~~TOTAL~~for ~~ASSETS~~the $year ended October 27,~~970,000~~ $1996). 46*10.11 Owosso Corporation 401(k) Savings Plan (Exhibit 10.2 to the January 25,~~394,000~~ ~~============~~1998 ~~============~~Form ~~LIABILITIES~~10-Q). ~~AND~~#*10.12 ~~SHAREHOLDERS'~~1998 ~~EQUITY~~Long-Term ~~CURRENT~~Incentive ~~LIABILITIES:~~Plan ~~Accounts~~(Exhibit ~~payable~~4.1 to the Company's Registration Statement on Form S-8 ~~trade~~filed $June 2,~~025~~ 1998,~~000~~ $Registration ~~3,350,000~~No. ~~Accrued~~333-55835). ~~compensation~~*10.13 Amended and ~~benefits~~Restated ~~537~~Credit Agreement by and among Owosso Corporation,~~000~~ 1its subsidiaries,~~085~~ NBD Bank,~~000~~ ~~Accrued~~PNC ~~expenses~~Bank, 2N.A.,~~085~~ and NBD Bank,~~000~~ 3as Agent,~~738~~ dated as of January 22,~~000~~ ~~Related~~1999. ~~party~~(Exhibit ~~debt~~10.1 to the Company's Quarterly Report on Form 10--Q ~~400~~for the quarter ended January 31,~~000~~ ~~Current~~1999). ~~portion~~*10.14 ofFirst ~~long~~Amendment to Amended and Restated Credit Agreement (Exhibit 10.1 to the Company's Quarterly Report on Form 10-~~term~~Q ~~debt~~for ~~8,951,000~~the 23quarter ended July 30,~~684,000~~ ~~------------~~2000). ~~------------~~*10.15 ~~Total~~Stock ~~current~~Purchase ~~liabilities~~and 13Redemption Agreement among Owosso Corporation,~~598~~ MEPC,~~000~~ 32L.L.C.,~~257,000~~ ~~LONG~~the Landover Company (d/b/a "Dura-~~TERM~~Bond ~~DEBT~~Bearing Company"), ~~LESS~~Engine ~~CURRENT~~Power ~~PORTION~~Components, 4Inc.,~~594,000~~ 5and Melling Tool Co.,~~520,000~~ ~~COMMON~~effective ~~STOCK~~as ~~PUT~~of ~~OPTION~~October ~~600~~29,~~000~~ ~~600,000~~2000. ~~POSTRETIREMENT~~(Exhibit ~~BENEFITS~~10.2 ~~AND~~to ~~OTHER~~the ~~LIABILITIES~~Company's ~~362,000~~Current 3Report on Form 8-K,~~532,000~~ ~~DEFERRED~~dated ~~TAXES~~January 124,~~900,000~~ 22001). *10.16 Asset Purchase Agreement by and between M.H. Rhodes,~~766,000~~ ~~ACCRUED~~Inc. ~~PREFERRED~~and ~~STOCK~~Capewell ~~DIVIDENDS~~Component 2Company,~~664~~ L.L.C.,~~000~~ dated December 1,~~316,000~~ ~~COMMITMENTS~~2000 ~~AND~~(Exhibit ~~CONTINGENCIES~~10.35 ~~(Note~~to ~~14)~~the ~~SHAREHOLDERS~~Company's ~~EQUITY~~Annual ~~Convertible~~Report ~~preferred~~on ~~stock~~Form ~~Class~~10-K Afor the year ended October 29, 7%2000). in*10.17 ~~2002~~Stock Purchase Agreement between Sooner Investment Manufacturing Company (purchaser) and 6%Owosso inCorporation ~~2001~~(seller), ~~cumulative~~dated January 19, $2001 (Exhibit 10.011 ~~par~~to ~~value:~~the 10Company's Current Report on Form 8-K,~~000,000~~ ~~shares~~dated ~~authorized;~~January 124,~~071,428~~ ~~shares~~2001). ~~issued~~*10.18 Amendment Agreement by and ~~outstanding~~among ~~(aggregate~~Owosso ~~liquidation~~Corporation, ~~value~~its ~~2002~~subsidiaries, -Bank ~~$16~~One and PNC Bank,~~500~~ N.A.,~~000~~ ~~and~~dated February 12, 2001 (Exhibit 10.37 to the Company's Annual Report on Form 10-K ~~$15~~for the year ended October 29,~~750,000~~ 2000). ~~15,000,000~~*10.19 15Executive Salary Continuation Agreement between Owosso Corporation and John M. Morrash,~~000,000~~ ~~Common~~dated ~~stock~~August 27, $2001 (Exhibit 10.0119 ~~par~~to ~~value;~~the ~~authorized~~Company's ~~15,000,000~~Annual ~~shares;~~Report ~~issued~~for ~~5,874,345~~the ~~shares~~year inended October 27 2002). *10.20 Seventh Amendment to Amended and ~~5,874,345~~Restated ~~shares~~Credit inAgreement ~~2001~~by 59and among Owosso Corporation,~~000~~ 59its subsidiaries,~~000~~ ~~Additional~~Bank ~~paid-in~~One ~~capital~~and 21PNC Bank,~~179,000~~ 21N.A.,~~179,000~~ ~~Accumulated~~effective ~~deficit~~May ~~(31~~9,~~587,000)~~ 2001 (~~35,436,000)~~Exhibit ~~------------~~10.1 to the Company's Quarterly Report on Form 10-~~-----------~~Q ~~4,651,000~~for ~~802,000~~the ~~Less~~quarter ~~treasury~~ended ~~stock~~July 29, at2001). ~~cost,~~*10.21 ~~50,039~~Tenth ~~shares~~Amendment into ~~2002~~Amended and ~~2001~~Restated ~~(399~~Credit Agreement by and among Owosso Corporation,~~000)~~ ~~(399~~its subsidiaries,~~000)~~ ~~------------~~Bank ~~------------~~One ~~Total~~and ~~stockholders'~~PNC ~~equity~~Bank, 4N.A.,~~252,000~~ ~~403~~effective February 8,~~000~~ ~~------------~~2002 ~~------------~~(Exhibit ~~TOTAL~~10.21 ~~LIABILITIES~~to ~~AND~~the ~~SHAREHOLDERS~~Company's ~~EQUITY~~Annual $Report ~~27,970,000~~on $Form ~~46,394,000~~10-K ~~============~~for ~~============~~the year ended October 28, 2001).

-22-

Exhibit No. Description -----------------------------------------------------------------------~~-----------------------------------------------------------~~ ~~Accumulated~~*10.22 ~~Additional~~Eleventh ~~Other~~Amendment ~~Preferred~~to ~~Common~~Amended ~~Paid-in~~and ~~Comprehensive~~Restated ~~Accumulated~~Credit ~~Treasury~~Agreement ~~Stock~~by ~~Stock~~and ~~Capital~~among ~~Income~~Owosso ~~Deficit~~Corporation, ~~Stock~~its ~~Total~~subsidiaries, ~~---------~~Bank ~~--------~~One ~~----------~~and ~~-------------~~PNC ~~----------~~Bank, ~~---------~~N.A., effective May 16, 2002 (Exhibit 10.22 to the Company's Quarterly Report on Form 10-~~-----~~Q ~~BALANCE~~for the quarter ended April 28, ~~OCTOBER~~2002). 31*10.23 Twelfth Amendment to Amended and Restated Credit Agreement by and among Owosso Corporation, ~~1999~~its 14subsidiaries,~~630~~ Bank One and PNC Bank,~~000~~ 59N.A.,~~000~~ 21effective July 8,~~682,000~~ 2002 (3Exhibit 10.23 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 28,~~000~~ 2002). (1*10.24 Thirteenth Amendment to Amended and Restated Credit Agreement by and among Owosso Corporation,~~985~~ its subsidiaries,~~000~~ ~~(399~~Bank One and PNC Bank,~~000)~~ 33N.A.,~~984,000~~ ~~Net~~effective ~~loss~~July ~~(13~~30,~~672,000)~~ 2002 (~~13,672,000)~~Exhibit ~~Other~~10.24 ~~comprehensive~~to ~~income:~~the ~~Cumulative~~Company's ~~translation~~Quarterly ~~adjustment~~Report ~~(139,000)~~on ~~(139,000)~~Form 10-~~-----------~~Q ~~Total~~for ~~comprehensive~~the ~~income~~quarter ~~(loss)~~ended ~~(13~~July 28,~~811,000~~ 2002). ~~Dividends~~*10.25 ~~(1,802,000)~~Fourteenth ~~(1,802,000)~~Amendment ~~Accretion~~to onAmended ~~convertible~~and ~~preferred~~Restated ~~stock~~Credit ~~370~~Agreement by and among Owosso Corporation,~~000~~ ~~(370~~its subsidiaries,~~000)~~ --Bank ~~Issuance~~One ofand ~~common~~PNC ~~stock~~Bank, 61N.A.,~~000~~ 61effective September 30,~~000~~ ~~------------~~2002 ~~-------~~(Exhibit ~~-----------~~10.25 ~~--------~~to ~~-----------~~the ~~--------~~Company's ~~------------~~Annual ~~BALANCE~~Report for the year ended October 27 2002). *10.26 Fifteenth Amendment to Amended and Restated Credit Agreement by and among Owosso Corporation, ~~OCTOBER~~its 29subsidiaries, ~~2000~~Bank 15One and PNC Bank,~~000,000~~ 59N.A.,~~000~~ 21effective October 27,~~743,000~~ 2002 (~~142,000~~Exhibit 10.26 to the Company's Annual Report for the year ended October 27 2002). ~~(17~~*10.27 Sixteenth Amendment to Amended and Restated Credit Agreement by and among Owosso Corporation,~~829~~ its subsidiaries,~~000)~~ ~~(399~~Bank One and PNC Bank,~~000)~~ 18N.A.,~~432,000~~ ~~Net~~effective ~~loss~~December ~~(16~~13,~~291,000)~~ 2002 (~~16,291,000)~~Exhibit ~~Other~~10.27 ~~comprehensive~~to ~~income:~~the ~~Cumulative~~Company's ~~translation~~Annual ~~adjustment~~Report ~~142,000~~for ~~142,000~~the ~~Total~~year ~~comprehensive~~ended ~~income~~October ~~(loss~~27 2002). ~~(16~~*10.28 Executive Salary Continuation Agreement between Owosso Corporation and George B. Lemmon,~~149~~ Jr.,~~000)~~ ~~Dividends~~dated (October 1,~~316,000)~~ 2001 (~~1,316,000~~Exhibit 10.28 to the Company's Annual Report for the year ended October 27 2002). ~~Exercise~~*10.29 ~~common~~Executive ~~stock~~Salary ~~put~~Continuation ~~option~~Agreement ~~(600~~between Owosso Corporation and Kirk E. Moore,~~000)~~ ~~(600~~dated August 27,~~000~~ 2001 (Exhibit 10.29 to the Company's Annual Report for the year ended October 27 2002). ~~Issuance~~*10.30 ofExecutive ~~common~~Salary ~~stock~~Continuation 36Agreement between Owosso Corporation and Harry Holiday III,~~000~~ 36dated August 24,~~000~~ ~~------------~~2001 ~~-------~~(Exhibit ~~-----------~~10.30 ~~--------~~to ~~-----------~~the ~~--------~~Company's ~~------------~~Annual ~~BALANCE,~~Report ~~OCTOBER~~for 28the year ended October 27 2002). *10.31 Seventeenth Amendment to the Amended and Restated Credit Agreement by and among Owosso Corporation, ~~2001~~its ~~$15~~subsidiaries,~~000,000~~ 59Bank One and PNC Bank,~~000~~ 21N.A.,~~109,000~~ $effective ~~$(35~~March 31,~~430,000)~~ 2003 (~~399,000)~~Exhibit ~~403,000~~10.31 ~~------------~~to ~~-------~~the ~~-----------~~Company's ~~--------~~Quarterly ~~-----------~~Report ~~--------~~on Form 10-~~-----------~~Q ~~Net~~for ~~Income~~the ~~5,198,000~~quarter 5ended April 27,~~198,000~~ ~~Other~~2003). ~~comprehensive~~*10.32 ~~income:~~Eighteenth ~~Total~~Amendment ~~comprehensive~~to ~~income~~the ~~(loss)~~Amended 5and Restated Credit Agreement by and among Owosso Corporation,~~198~~ its subsidiaries,~~000~~ ~~Dividends~~Bank (1One and PNC Bank,~~349~~ N.A.,~~000)~~ (1effective September 10,~~349,000)~~ ~~Issuance~~2003 of(Exhibit ~~common~~10.32 ~~stock~~to ~~------------~~the ~~-------~~Company's ~~-----------~~Quarterly ~~--------~~Report ~~-----------~~on ~~--------~~Form 10-~~-----------~~Q ~~BALANCE,~~for ~~OCTOBER~~the quarter ended July 27, ~~2002~~2003). ~~$15~~10.33 Nineteenth Amendment to the Amended and Restated Credit Agreement by and among Owosso Corporation,~~000~~ its subsidiaries,~~000~~ 59Bank One and PNC Bank,~~000~~ 21N.A.,~~109~~ effective December 19,~~000~~ $2003. -10.34 (Lease Surrender Agreement by and between Owosso Corporation and Triad Realty Associates L.L.C. dated December 31,~~507~~ 2003. 11 Computation of per share earnings 14 Code of Ethics 21 Subsidiaries of the registrant. 23 Consent of Deloitte & Touche LLP 31 Certification of Chief Executive Officer (principal executive officer,~~000~~ principal financial officer and principal accounting officer) pursuant to section 302 of the Sarbanes Oxley act of 2002. 32 Certification of Chief Executive Officer (~~399~~principal executive officer,~~000~~ principal financial officer and principal accounting officer) 4pursuant to 18 U.S.C. Section 1350,~~252,000~~ ~~------------~~as ~~-------~~adopted ~~-----------~~pursuant ~~--------~~to ~~-----------~~Section ~~--------~~906 ~~------------~~of the Sarbanes Oxley Act of 2002.

---------- * Incorporated by reference. # Management contract or compensatory plan or arrangement. -23- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. OWOSSO CORPORATION Date: February 10, 2004 By: /s/ George B. Lemmon, Jr. -------------------------------------------- George B. Lemmon, Jr., President, Chief Executive Officer ( principal executive officer, principal financial officer and principal accounting officer) and Chairman Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on February 10, 2004, in the capacities indicated:

~~-----------------------------------------------------------------------------------------------------------------------~~Signature ~~Year~~Title ~~Ended~~ ---------~~-----------------------------------~~ ~~October 27, October 28, October 29, 2002 2001 2000~~ -----~~-------~~ ~~-------------~~/s/ ~~-------------~~George ~~OPERATING~~B. ~~ACTIVITIES: Net income (loss) $ 5~~Lemmon,~~198,000~~ $Jr. ~~(16,291,000)~~George $B. ~~(13~~Lemmon,~~672,000)~~ ~~Loss from discontinued operations 520~~Jr.,~~000~~ 12President,~~113,000~~ ~~8,890,000~~Chief ~~Adjustments~~Executive toOfficer reconcile net income (loss) to net cash provided by (used in) operating activities: Allowance for doubtful accounts (339,000) 155,000 272,000 Provision for deferred taxes 1,426,000 (238,000) (1,338,000) Write-~~down of net assets held for sale 381,000 1,100,000 2,800,000 Change in net assets held for sale~~ -- ~~(543,000)~~ -- ~~Interest rate swap contracts~~ - ~~market value adjustment (589,000) 699,000~~ -- ~~Gain on the sale of business Assets (6,055,000)~~ -- -- ~~Loss on sale of assets~~ -- 4,000 1,000 Depreciation 2,454,000 2,798,000 3,700,000 Amortization 1,386,000 1,069,000 1,325,000 Changes in assets and liabilities which provided (used) cash: Accounts receivable 341,000 1,696,000 1,918,000 Inventories 907,000 715,000 182,000 Prepaid expenses and other 1,382,000 116,000 (369,000) Accounts payable 287,000 (1,212,000) (874,000) Accrued expenses (1,566,000) (672,000) (860,000) ------------ --------~~---~~ ~~----------- Net cash provided by continuing operations 5,733,000 1,509,000 1,975,000 Net cash provided by~~ (~~used~~principal ~~in)~~executive ~~discontinued operations -- (5~~officer,~~678,000)~~ ~~1,797,000~~principal ~~------------~~financial ~~-----------~~officer ~~-----------~~George ~~Net~~B. ~~cash provided by (used in) operating activities 5~~Lemmon,~~733,000~~ ~~(4,169,000)~~Jr. ~~3,772,000 ------------ ----------- ----------- INVESTING ACTIVITIES: Purchases of property, plant~~ and ~~equipment~~principal ~~(132,000)~~accounting ~~(757,000~~officer) ~~(1,195,000) Proceeds from the sale of businesses~~ and ~~assets~~Chairman ~~10,782,000~~/s/ ~~6,575,000~~Harry --E. ~~Decrease~~Hill inDirector ~~other assets~~ -- ~~729,000 1,929,000~~ ------------ ----------- ----------- ~~Net~~Harry ~~cash~~E. ~~provided~~Hill by/s/ ~~continuing~~Harry ~~operations 10~~Holiday,~~650,000~~ ~~6,547,000~~III ~~734,000~~Director ~~Net cash provided by (used in) discontinued operations~~ -- ~~18,038,000 (2,599,000)~~ ------------ ----------- ----------- ~~Net~~Harry ~~cash~~Holiday ~~provided~~III by/s/ ~~(used~~Lowell ~~in)~~P. ~~investing~~Huntsinger ~~activities~~Director ~~10,650,000 24,585,000 (1,865,000) FINANCING ACTIVITIES: Borrowings from (payments on) line of credit (15,100,000) (19,100,000) 2,950,000 Proceeds from long~~-~~term debt~~ -- -- ~~580,000 Payments on long~~-~~term debt (559,000) (664,000) (1,774,000) Payments on related party debt (400,000) (600,000) (815,000) Dividends paid~~ -- ~~(142,000) (2,152,000) Other~~ -- ~~38,000 (86,000)~~ ------------ ----------- -~~----------~~ ~~Net~~Lowell ~~cash~~P. ~~used~~Huntsinger in/s/ ~~continuing~~Eugene ~~operations~~P. ~~(16,059,000)~~Lynch ~~(20,468,000)~~Director ~~(1,297,000) Net cash used in discontinued operations~~ -- ~~(239,000) (280,000)~~ ------------ ----------- ----------- ~~Net~~Eugene ~~cash~~P. used in financing activities (16,059,000) (20,707,000) (1,577,000) ------------ ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 324,000 (291,000) 330,000 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 200,000 491,000 161,000 ------------ ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 524,000 $ 200,000 $ 491,000 ============ =========== ===========Lynch

-24- OWOSSO CORPoration TABLE OF CONTENTS --------------------------------------------------------------------------------

~~2002~~Page ~~2001~~INDEPENDENT ~~2000~~AUDITORS' ~~Potential~~REPORT ~~common~~F-1 ~~shares~~CONSOLIDATED ~~resulting~~FINANCIAL ~~from:~~STATEMENTS ~~Stock~~FOR ~~options~~THE ~~and~~YEARS ~~put~~ENDED ~~option~~OCTOBER on26, ~~common~~2003, ~~stock~~OCTOBER ~~399~~27,~~000~~ ~~835~~2002,~~000~~ ~~955~~AND OCTOBER 28,~~000~~ ~~Convertible~~2001: ~~preferred~~Statements ~~stock~~of ~~1,071,000~~Operations ~~1,071,000~~F-2 ~~1,071,000~~Balance Sheets F-3 Statements of Changes in Stockholders' (Deficit) Equity F-4 Statements of Cash Flows F-5 Notes to Consolidated Financial Statements F-~~-----~~6 -~~--------~~ F-~~--------~~23 ~~1,470,000~~FINANCIAL ~~1,906,000~~STATEMENT ~~2,026,000~~SCHEDULE ~~=========~~II ~~========= =========~~F-24

INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders of Owosso Corporation Watertown, New York We have audited the accompanying consolidated balance sheets of Owosso Corporation and subsidiaries as of October 26, 2003 and October 27, 2002, and the related consolidated statements of operations, changes in stockholders' (deficit) equity, and cash flows for each of the three fiscal years in the period ended October 26, 2003. Our audits also included the financial statement schedule listed in the index at Item 15(a)(2). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Owosso Corporation and subsidiaries as of October 26, 2003 and October 27, 2002, and the results of their operations and their cash flows for each of the three fiscal years in the period ended October 26, 2003 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As described in Note 3 to the consolidated financial statements, in 2003 the Company changed its method of accounting for goodwill to conform with Statement of Financial Standards No. 142, Goodwill and Other Intangible Assets. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company's recurring losses from operations, working capital and stockholders' equity deficiencies, and the Company's inability to comply with the covenants of its credit agreement raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Deloitte & Touche -------------------------------- Deloitte & Touche LLP Rochester, New York December 5, 2003 (February 10, 2004 as to Note 19) F-1 OWOSSO CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS --------------------------------------------------------------------------------

Year Ended --------------------------------------------------- October 26, October 27, October 28, 2003 2002 2001 ~~2000~~ Net sales $ 17,715,000 $ 36,901,000 $ 54,326,000 Costs of products sold 14,374,000 31,242,000 43,897,000 ------------ ------------ ------------ Gross profit 3,341,000 5,659,000 10,429,000 Selling, general and administrative expenses 3,881,000 8,224,000 11,183,000 Goodwill impairment expense 5,331,000 -- -- Write-down of net assets held for sale -- 381,000 1,100,000 ------------ ------------ ------------ Loss from operations (5,871,000) (2,946,000) (1,854,000) Interest expense 708,000 1,588,000 4,335,000 Gain on sale of business -- (6,055,000) -- Other income (122,000) -- (110,000) ------------ ------------ ------------ Income (loss) $from 5continuing operations before income taxes (6,~~198~~457,000) $1,521,000 (166,~~291~~079,000) $Income tax benefit (13604,~~672~~000) (4,197,000) ~~Foreign~~(1,968,000) ~~currency~~------------ ~~translation~~------------ ------------ Income (loss) from continuing operations (5,853,000) 5,718,000 (4,111,000) Discontinued operations: Loss from discontinued operations, net of income tax benefit of $0, ~~142~~$268,000 and $514,000 -- (~~139~~520,000) (2,073,000) Loss on disposal of discontinued operations -- -- (10,040,000) ------------ ------------ ------------ Income (loss) before cumulative effect of accounting change (5,853,000) 5,198,000 (16,224,000) Cumulative effect of accounting change (net of tax of $34,000) -- -- (67,000) ------------ ~~Total~~------------ ~~comprehensive~~------------ Net income (loss) $(5,853,000) 5,198,000 (16,291,000) Dividends and accretion on preferred stock (1,370,000) (1,349,000) (1,316,000) ------------ ------------ ------------ Net income (loss) available for common stockholders $ (167,~~149~~223,000) $ 3,849,000 $ (1317,~~811~~607,000) ============ ============ ============= Basic and diluted income (loss) per common share: Income (loss) available for common stockholders from continuing operations $ (1.24) $ 0.75 $ (0.93) Loss from discontinued operations -- (0.09) (2.06) Cumulative effect of accounting change, net -- -- (0.01) ------------ ------------ ------------ Net income (loss) available for common stockholders per share $ (1.24) $ 0.66 $ (3.00) ============ ============ ============= Weighted average number of common shares outstanding: Basic 5,824,000 5,824,000 5,866,000 ============ ============ ============= Diluted 5,824,000 5,824,000 5,866,000 ============ ============ =============

See notes to consolidated financial statements. F-2 OWOSSO CORPORATION CONSOLIDATED BALANCE SHEETS --------------------------------------------------------------------------------

October 26, October 27, 2003 2002 ~~2001~~ASSETS CURRENT ASSETS: Cash and cash equivalents $ 309,000 $ 524,000 Restricted cash 400,000 -- Receivables, net 2,323,000 3,111,000 Inventories, net 1,745,000 1,906,000 Net ~~sales~~assets held for sale 350,000 800,000 Prepaid expenses and other 251,000 690,000 Tax refund receivable -- 919,000 Deferred taxes 240,000 295,000 ------------ ----------- Total current assets 5,618,000 8,245,000 PROPERTY, PLANT AND EQUIPMENT, NET 4,755,000 5,616,000 GOODWILL 3,074,000 8,405,000 CUSTOMER LIST, NET 4,800,000 5,200,000 OTHER ASSETS 133,000 504,000 ------------ ----------- TOTAL ASSETS $ 2018,~~953~~380,000 $ 2627,~~043~~970,000 ~~Income~~============ ============ LIABILITIES AND STOCKHOLDERS' (~~loss~~DEFICIT) ~~from~~EQUITY ~~operations~~CURRENT (LIABILITIES: Accounts payable - trade $ 1,918,000 $ 2,~~110~~025,000 Accrued compensation and benefits 504,000 537,000 Accrued expenses 1,753,000 2,085,000 Current portion of long-term debt 10,968,000 8,951,000 ------------ ----------- Total current liabilities 15,143,000 13,598,000 LONG-TERM DEBT, LESS CURRENT PORTION 128,000 4,594,000 COMMON STOCK PUT OPTION 600,000 600,000 POSTRETIREMENT BENEFITS AND OTHER LIABILITIES -- 362,000 DEFERRED TAXES 1,446,000 1,900,000 ACCRUED PREFERRED STOCK DIVIDENDS 4,034,000 2,664,000 COMMITMENTS AND CONTINGENCIES (Note 12) STOCKHOLDERS' (5DEFICIT) EQUITY Convertible preferred stock Class A,~~193~~ 8% in 2003 and 7% in 2002 cumulative, $.01 par value: 10,000),000 ~~Net~~shares ~~Income~~authorized; 1,071,428 shares issued and outstanding (~~loss~~aggregate liquidation value 2003 - $17,250,000 and 2002 - $16,500,000) ~~971~~15,000,000 (15,000,000 Common stock, $.01 par value; authorized 15,000,000 shares; issued 5,~~940~~874,345 shares in 2003 and 2002 59,000 59,000 Additional paid-in capital 21,179,000 21,179,000 Accumulated deficit (38,810,000) ~~Net~~(31,587,000) ~~Income~~------------ ----------- (~~loss~~2,572,000) ~~available~~4,651,000 ~~for~~Less ~~common~~treasury ~~shareholders~~stock, at cost, 50,039 shares in 2003 and 2002 (~~378~~399,000) (7399,~~256,~~000) ~~Basic~~------------ ~~income~~----------- Total stockholders' (~~loss~~deficit) ~~per~~equity ~~common~~(2,971,000) ~~share~~4,252,000 ------------ ----------- TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY $ ~~0.06~~18,380,000 $ (127,970,000 ============ ============ See notes to consolidated financial statements.~~24)~~

F-3 OWOSSO CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY --------------------------------------------------------------------------------

~~2002~~Accumulated ~~2001~~Additional ~~Raw~~Other ~~materials~~Preferred ~~and~~Common ~~purchased~~Paid-in ~~parts~~Comprehensive Accumulated Treasury Stock Stock Capital Income Deficit Stock Total BALANCE, OCTOBER 29, 2000 $ ~~810~~15,000,000 $59,000 $21,743,000 $(142,000) $(17,829,000) $(399,000) $18,432,000 Net loss (16,291,000) (16,291,000) Other comprehensive income: Cumulative translation adjustment 142,000 142,000 ---------- Total comprehensive income (loss) (16,149,000) Dividends (1,~~858~~316,000) ~~Work~~(1,316,000) inExercise ~~process~~common ~~909~~stock put option (600,000) (600,000) Issuance of common stock 36,000 36,000 ----------- ------ ---------- ------- ------------ --------- ---------- BALANCE, OCTOBER 28, 2001 15,000,000 59,000 21,179,000 -- (35,436,000) (399,000) 403,000 Net income 5,198,000 5,198,000 Dividends (1,~~662~~349,000) ~~Finished~~(1,349,000) ~~goods~~----------- ~~187~~------ ---------- ------- ------------ --------- ---------- BALANCE, OCTOBER 27, 2002 15,000,000 59,000 21,179,000 -- (31,587,000) (399,000) 4,252,000 Net loss (5,853,000) (5,853,000) Dividends (1,~~295~~370,000) (1,370,000) ----------- ------ ---------- ~~Total~~------- ------------ --------- ---------- BALANCE, OCTOBER 26, 2003 $15,000,000 1$59,~~906~~000 $21,179,000 $ 4-- $(38,~~815~~810,000) $(399,000) $(2,971,000) =========== ======= ========== ======= ============ ========= ==========

See notes to consolidated financial statements. F-4 OWOSSO CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS --------------------------------------------------------------------------------

Year Ended ---------------------------------------------- October 26, October 27, October 28, 2003 2002 2001 ~~Land~~OPERATING ~~and~~ACTIVITIES: ~~improvements~~Net income (loss) $(5,853,000) ~~112~~$ 5,198,000 $ ~~218~~(16,291,000) ~~Buildings~~Loss ~~and~~from ~~improvements~~discontinued 3operations -- 520,~~350~~000 12,113,000 4Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Provision for deferred taxes (399,000) 1,426,000 (238,000) Write-down of net assets held for sale -- 381,000 1,100,000 Change in net assets held for sale -- -- (543,000) ~~Machinery~~Interest ~~and~~rate ~~equipment~~swap 12contracts - market value adjustment (110,~~115~~000) (589,000) 24699,~~595~~000 Goodwill impairment expense 5,331,000 ~~Construction~~-- -- Gain on the sale of business -- (6,055,000) -- Loss on sale of assets -- -- 4,000 Depreciation 1,032,000 2,454,000 2,798,000 Amortization 400,000 1,386,000 1,069,000 Changes in ~~progress~~assets 53and liabilities which provided (used) cash: Accounts receivable 788,000 2,000 1,~~198~~851,000 Inventories 161,000 907,000 715,000 Prepaid expenses and other 439,000 1,382,000 116,000 Tax refund receivable 919,000 -- -- Accounts payable (107,000) 287,000 (1,212,000) Accrued expenses (617,000) (1,566,000) (672,000) ----------- ----------- ------------ ~~Total~~Net 15cash provided by continuing operations 1,~~630~~984,000 305,~~554~~733,000 ~~Accumulated~~1,509,000 ~~depreciation~~Net 10cash used in discontinued operations -- -- (5,~~014~~678,000) 18----------- ----------- ------------ Net cash provided by (used in) operating activities 1,~~680~~984,000 5,733,000 (4,169,000) ----------- ----------- ------------ ~~Property~~INVESTING ACTIVITIES: Purchases of property, plant and equipment (171,000) ~~net~~(132,000) $(757,000) 5Proceeds from the sale of businesses and assets 450,~~616~~000 10,782,000 6,575,000 Decrease in other assets 371,000 -- 729,000 ----------- ----------- ------------ Net cash provided by continuing operations 650,000 10,650,000 6,547,000 Net cash provided by discontinued operations -- -- 18,038,000 ----------- ----------- ------------ Net cash provided by investing activities 650,000 10,650,000 24,585,000 ----------- ----------- ------------ FINANCING ACTIVITIES: Payments on line of credit (2,400,000) (15,100,000) (19,100,000) Restricted cash payment (400,000) -- -- Payments on long-term debt (49,000) (559,000) (664,000) Payments on related party debt -- (400,000) (600,000) Dividends paid -- -- (142,000) Other -- -- 38,000 ----------- ----------- ------------ Net cash used in continuing operations (2,849,000) (16,059,000) (20,468,000) Net cash used in discontinued operations -- -- (239,000) ----------- ----------- ------------ Net cash used in financing activities (2,849,000) (16,059,000) (20,707,000) ----------- ----------- ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (215,000) 324,000 (291,000) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 524,000 200,000 491,000 ----------- ----------- ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11309,~~874~~000 $ 524,000 $ 200,000 =========== =========== ============

See notes to consolidated financial statements. F-5 OWOSSO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FISCAL YEARS ENDED OCTOBER 26, 2003, OCTOBER 27, 2002, AND OCTOBER 28, 2001 -------------------------------------------------------------------------------- 1. NATURE OF BUSINESS The Company - The consolidated financial statements represent the consolidated financial position, results of operations and cash flows of Owosso Corporation and its subsidiaries (the "Company"). The Company has one operating subsidiary, Stature Electric, Inc. ("Stature"), representing the Company's historical Motors segment. Stature is a custom designer and manufacturer of motors and gear motors both AC and DC, established in 1974 in Watertown, New York. Significant markets for Stature, or the Motors segment, include commercial products and equipment, healthcare, recreation and non-automotive transportation. The products are sold throughout North America and in Europe, primarily to original equipment manufacturers who use them in their end products. The Company completed the sale of all of the outstanding stock of Motor Products - Owosso Corporation and Motor Products - Ohio Corporation (together, "Motor Products"), manufacturers of fractional and integral horsepower motors, on July 30, 2002. Prior to that time, these entities were included in the results of the Motors segment. The Company's Other segment included Cramer Company (formerly known as M.H. Rhodes, Inc., and hereinafter referred to as "Cramer"). Cramer manufactured timers and subfractional horsepower motors for use in commercial applications. The Company completed the sale of the assets associated with the timer and switch line of Cramer on December 4, 2000. The Company disposed of substantially all of the remaining Cramer assets (excluding real property) in a separate transaction completed on September 23, 2001. 2. BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses from operations in each of the past four fiscal years and, as shown in the consolidated financial statements, the Company incurred a net loss of $5,853,000 for the year ended October 26, 2003. In addition, at October 26, 2003 and October 27, 2002, the Company had a working capital deficiency since current liabilities exceeded its current assets by $9,525,000 and $5,353,000, respectively, and the Company had a stockholders' deficit of $2,971,000 at October 26, 2003. The Company is also out of compliance with covenants under its bank credit facility. The amount outstanding under the bank credit facility totaled $4,500,000 at October 26, 2003 which becomes due on March 31, 2004 (see note 9). These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. As disclosed in note 19, the Company has entered into a definitive purchase agreement to sell the Company. If the sale does not occur, then the Company intends to refinance the Company's bank credit facility prior to its maturity in March 2004. However, there can be no assurance that the Company's plans will be successfully executed. F-6 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation - The consolidated financial statements of the Company include the accounts of Owosso Corporation and its majority owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Reclassifications - Certain reclassifications have been made to the 2002 financial statements to conform to the classifications used in 2003. Fiscal Year - The Company's fiscal year includes 52 or 53 weeks ending on the last Sunday in October. Fiscal years 2003, 2002 and 2001 consisted of 52-week years. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates and assumptions. Cash and Cash Equivalents - Cash and cash equivalents consist of cash and highly liquid investments with an original maturity of three months or less. Inventories - Inventories of the Company are recorded at cost, which is not in excess of market, determined on a first-in, first-out (FIFO) basis. Property, Plant and Equipment - Items of property, plant and equipment are stated at cost and are depreciated principally on the straight-line method over their estimated useful lives as follows: Land improvements 10 - 20 years Buildings 30 years Machinery and equipment 3 - 10 years Customer list - The customer list is amortized on a straight-line basis over 20 years, its estimated useful life. Accumulated amortization totaled $3,200,000 and $2,800,000 as of October 26, 2003 and October 27, 2002, respectively. Amortization expense totaled $400,000 in each of 2003, 2002 and 2001. The Company expects to record amortization expense of $400,000 in each of the next five fiscal years. Asset Impairment for long-lived assets - The Company evaluates the carrying value of long-lived assets and other intangible assets, excluding goodwill, based upon current and anticipated undiscounted cash flows, and recognizes an impairment when such estimated cash flows will be less than the carrying value of the asset. Measurement of the amount of impairment, if any, is based upon the difference between carrying value and fair value. Revenue Recognition - Revenue is recognized at the time the product is shipped and title of ownership has passed. An allowance for doubtful accounts of $35,000 and $49,000 has been recorded as of October 26, 2003 and October 27, 2002, respectively. F-7 Income Taxes - Deferred income taxes are determined based on the difference between the financial reporting and tax bases of assets and liabilities. Deferred income tax expense (benefit) represents the change during the reporting period in the deferred tax assets and deferred tax liabilities, net of the effect of acquisitions and dispositions. Deferred tax assets include tax loss and credit carry forwards and are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Stock-Based Compensation - In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation --Transition and Disclosure, an amendment of SFAS No. 123 Accounting for Stock-Based Compensation, to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of that Statement to require prominent disclosure about the effects on reported net income of an entity's accounting policy decisions with respect to stock-based employee compensation. As permitted in those standards, the Company has elected to continue to follow recognition provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for employee stock-based compensation. No employee stock-based compensation expense was recorded for the years ended October 26, 2003, October 27, 2002 and October 28, 2001. Proforma information regarding the Company's net income (loss) available for common stockholders and related per share amounts as required by SFAS No. 123 and SFAS No. 148 are as follows:

2003 2002 2001 ~~Goodwill:~~Net ~~Goodwill~~Income $(loss) ~~12,931,000~~available ~~$13,380,000~~for ~~Accumulated~~common ~~amortization~~stockholders: 4As reported $ (7,~~526~~223,000) $ 3,~~985~~849,000 ~~------------ ----------- Goodwill, net~~ $ 8(17,~~405~~607,000) Proforma $ 9(7,~~395~~263,000) ~~============ =========== Other Intangible Assets: Customer lists~~ $ 83,~~000~~790,000 $ 8(17,~~000~~745,000) ~~Other~~Net ~~97,000~~Income ~~128,000~~(loss) ~~------------~~per ~~-----------~~share ~~Total~~available ~~8,097,000~~for ~~8,128,000~~common ~~Accumulated~~stockholders: ~~amortization~~As ~~2,879,000~~reported ~~2,514,000~~$ ~~------------~~(1.24) ~~-----------~~$ ~~Other~~0.66 ~~intangible~~$ ~~assets,~~(3.00) ~~net~~Proforma $ ~~5,218,000~~(1.25) $ ~~5,614,000~~0.65 ~~============~~$ ~~===========~~(3.02)

The weighted average fair value of options granted in 2003 and 2001 is estimated as $2,200 and $48,000, respectively. The Company did not grant options in 2002. The fair value of options granted were estimated on the date of grant using the Binomial option pricing model with the following assumptions: 2003 2001 Expected Life 5 years 5 years Volatility 45% 59% Risk-free interest rate 4.0% 4.51% Dividend yield 0% 0% Earnings (loss) per Share - Basic earnings per common share is computed by dividing net earnings (the numerator) by the weighted average number of common shares outstanding during each period (the denominator). The computation of diluted earnings per common share is similar to that of basic earnings per common share, except that the denominator is increased by the dilutive effect of stock options outstanding, computed using the treasury stock method, the diluted effect of convertible preferred stock computed using the "if converted" method, and by the dilutive effect of the put option on common stock, computed using the reverse-treasury stock method. F-8 The following table summarizes those securities that could potentially dilute income (loss) for common shareholders per common share in the future that were not included in determining net income (loss) available for common shareholders per common share as the effect was antidilutive:

2003 2002 2001 ~~Revolving~~Potential ~~credit~~common ~~agreement~~shares $resulting ~~6,900,000 $ 22,000,000 Term loans, payable in monthly installments through 2007 at variable rates~~ from: 5%Stock tooptions ~~8.5%,~~and ~~collateralized~~put byoption ~~certain~~on ~~real~~common ~~property~~stock ~~599~~304,000 ~~734~~399,000 ~~Industrial revenue bonds~~835,000 ~~payable~~Convertible inpreferred ~~varying~~stock ~~installments through 2018 at rates from 4.25% to 7.5%~~1, ~~collateralized by certain real property~~071, ~~building and equipment 4,550,~~000 ~~4,974,000 Subordinated promissory notes, payable in varying installments through 2005 at rates from 7.6% to 11%~~ 1,~~496~~071,000 1,~~496~~071,000 ----------- ----------- ~~Total long~~-~~term debt 13,545,000 29,204,000 Less current portion 8,951,000 23,684,000~~ --------~~---~~ ~~----------- Long-term debt~~1,375,000 ~~net of current portion $ 4~~1,~~594~~470,000 ~~$ 5~~1,~~520~~906,000 =========== ========= =========

Comprehensive Income - The Company presents comprehensive income (loss) as a component of stockholders' equity. The components of comprehensive income are as follows:

2003 2002 2001 ~~2000~~Net ~~Current:~~income ~~Federal~~(loss) $ (5,~~767~~853,000) $ (15,~~861~~198,000) $ ~~151,000 State 44,000 131,000 219,000 Deferred - Federal 1,598,000~~ (~~257~~16,~~000) (1~~291,~~395,~~000) ~~Deferred~~Foreign -currency ~~State~~translation ~~(72,000)~~0 ~~19,000~~0 ~~(57~~142,000) ------------ ------------ ------------- ~~Income~~Total ~~tax~~comprehensive ~~benefit~~income (loss) $ (45,~~197~~853,000) $ (15,~~968~~198,000) $ (116,~~082~~149,000) ============= ============ =============

Derivatives - In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 was amended in June 2000 by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities", which addressed a limited number of issues causing implementation difficulties. SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivative instruments as either assets or liabilities and measure them at fair value. The accounting for changes in fair value depends upon the purpose of the derivative instrument and whether it is designated and qualifies for hedge accounting. To the extent derivative instruments qualify and are designated as hedges of the variability in cash flows associated with forecasted transactions, the effective portion of the gain or loss on such derivative instruments will generally be reported in other comprehensive income and the ineffective portion, if any, will be reported in net income. Such amounts recorded in accumulated other comprehensive income will be reclassified into net income when the forecasted transaction affects earnings. To the extent derivative instruments qualify and are designated as hedges of changes in the fair value of an existing asset, liability or firm commitment, the gain or loss on the hedging instrument will be recognized currently in earnings along with changes in the fair value of the hedged asset, liability or firm commitment attributable to the hedged risk. The Company was required to adopt the provisions of SFAS No. 133 effective October 30, 2000. The Company's derivative instruments outstanding, variable-to-fixed interest rate swaps, do not qualify for hedge accounting under SFAS No. 133. The adoption of SFAS No. 133 required the Company to mark its interest rate swaps to market. The result was to record a net liability of $101,000 with an offsetting charge to cumulative effect of accounting change. This amount, net of tax of $34,000, is reflected in the 2001 accompanying consolidated statement of operations as a "Cumulative effect of accounting change." F-9 Goodwill - In July 2001, the Financial Accounting Standards Board issued SFAS No. 142 "Goodwill and Other Intangible Assets" ("SFAS No. 142"). SFAS No. 142 requires the use of a nonamortization approach to account for purchased goodwill and certain intangibles. Under a nonamortization approach, goodwill and certain intangibles will not be amortized into results of operations but, instead, would be reviewed for impairment and written down and charged to results of operations only in the periods in which the recorded value of goodwill and certain intangibles is more than its fair value. The Company adopted SFAS No. 142 on October 28, 2002 and, based on its transitional goodwill impairment test, the Company was not required to record a goodwill impairment charge as of October 28, 2002. Actual net income (loss) available for common stockholders and the related per share amounts for the years ended October 26, 2003, October 27, 2002 and October 28, 2001 and as adjusted net income (loss) and the related per share amounts for 2002 and 2001 had the nonamortization provisions of SFAS No. 142 been applied in those periods are as follows:

2003 2002 2001 ~~2000~~Net Income ~~tax~~(loss) ~~benefit~~available ~~from~~for ~~continuing~~common ~~operations~~stockholders: As reported $ (47,~~197~~223,000) $(1 3,~~968~~849,000) $ (117,~~082~~607,000) ~~Income~~Goodwill ~~tax~~amortization ~~expense~~-- ~~(benefit) from discontinued operations (268~~990,000) ~~514~~665,000 ~~522,000~~ ------------ ------------ ------------- ~~Total~~As ~~income~~adjusted ~~tax~~$ ~~expense~~ (~~benefit) $(4~~7,~~465~~223,000) $(1 4,~~454~~839,000) $ (~~560~~16,942,000) ============ ============ ============= Net income (loss) per share available for common stockholders: As Reported $ (1.24) $ 0.66 $ (3.00) As Adjusted $ (1.24) $ 0.83 $ (2.89)

The Company's annual assessment of goodwill impairment is conducted in the first quarter of its fiscal year. The Company completed its annual goodwill impairment test in the first quarter of fiscal 2004 and concluded that its goodwill was partially impaired. Accordingly, in the fourth quarter of fiscal 2003, the Company recorded an expense for goodwill impairment totaling $5,331,000 in the accompanying 2003 consolidated statement of operations. As disclosed in note 19, the Company has entered into a definitive purchase agreement to sell the Company. The fair value of the Company was estimated based on the terms of the definitive purchase agreement. New Accounting Pronouncements - In April 2002, the FASB issued SFAS No.145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." There was no effect on the Company's financial statements from the adoption of SFAS No. 145 in fiscal 2003. In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Others" ("FIN 45"). FIN 45 requires that a liability be recorded on the guarantor's balance sheet upon issuance of a guarantee. In addition, FIN 45 requires disclosures about the guarantees that an entity has issued. The Company's adoption of FIN 45 did not have an effect on its consolidated financial statements in fiscal 2003. F-10 In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46"). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for the Company for the interim period ended April 30, 2004, or earlier in certain instances. Such instances did not have a material effect on the Company's consolidated financial statements in fiscal 2003. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative discussed in SFAS No. 133, clarifies when a derivative contains a financing component, amends the definition of an underlying to conform it to language used in FIN 45 and amends certain other existing pronouncements. These changes are intended to result in more consistent reporting of contracts as either derivatives or hybrid instruments. The Statement is generally effective for contracts entered into or modified after, and for hedging relationships designated after, June 30, 2003. The Company's adoption of SFAS No. 149 did not have a material effect on its consolidated financial statements in fiscal 2003. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. The new Statement requires that those instruments be classified as liabilities in the balance sheet. This Statement is effective for mandatory redeemable instruments entered into or modified after May 31, 2003 and for all other instruments for interim periods beginning after June 15, 2003. The Company's adoption of SFAS No. 150 did not have a material effect on its consolidated financial statements in fiscal. 4. SUPPLEMENTAL CASH FLOW INFORMATION Cash payments for interest in 2003, 2002 and 2001 were $674,000, $2,530,000 and $3,594,000, respectively. Cash paid (or received) for income taxes was $(1,215,000), $(4,481,000) and $226,000 for 2003, 2002 and 2001, respectively. Dividends recorded and not paid in 2003, 2002 and 2001 totaled $1,370,000, $1,349,000 and $1,316,000, respectively. 5. DISPOSITIONS OF BUSINESSES Cramer - On December 4, 2000, the Company completed the sale of the assets associated with the timer and switch line of Cramer to Capewell Components, LLC of South Windsor, Connecticut for cash of approximately $2,000,000, plus the assumption of approximately $400,000 in liabilities. In connection with the sale, the name of the Company was changed from M.H. Rhodes, Inc. to Cramer Company. On September 23, 2001, the Company sold substantially all of the remaining assets of Cramer to the Chestnut Group of Wayne, Pennsylvania for cash proceeds of $565,000, plus the assumption of $317,000 in liabilities. In connection with such sale, the Company recorded an adjustment to the carrying value of the Cramer assets resulting in a pre-tax charge of $1,100,000, recorded in the third fiscal quarter of 2001. Motor Products - On July 30, 2002, Owosso Corporation, (the "Company") completed the sale of all of the outstanding stock of Motor Products - Owosso Corporation, and Motor Products - Ohio Corporation, (together, "Motor Products"), manufacturers of fractional and integral horsepower motors. The purchase price paid by Allied (F.K.A. Hathaway Motion Control Corporation) (the "Buyer") for the outstanding stock of Motor Products consisted of $11.5 million in cash and a promissory note in the principal amount of $300,000, paid six months after closing. Net cash proceeds of $10.7 million from the sale, after payment of certain transaction costs, were utilized to reduce outstanding bank debt. The Company has reported a gain of $6,055,000 on the sale of this business in the accompanying consolidated statement of operations for the year ended October 27, 2002. F-11 6. DISCONTINUED OPERATIONS Coils Segment - On May 9, 2001, the Company completed the sale of substantially all of the assets of Astro Air UK to ACR Heat Transfer, Ltd., of Norfolk, England for cash of (pound)450,000 (approximately $643,000). Based upon the terms of the sale, the Company recorded, in the second quarter of 2001, a pretax charge of $700,000 to adjust the carrying value of Astro UK's assets to their estimated realizable value. No additional gain or loss was recorded upon completion of the sale. On October 26, 2001, the Company completed the sale of the assets of its Coils segment, which included Astro Air and Snowmax (together, the "Coils Subsidiaries"). The sale of the Coils Subsidiaries was effectuated pursuant to an Asset Purchase Agreement, dated as of October 26, 2001, by and among the Coils Subsidiaries, Astro Air, Inc. (the "Buyer"), and Rex Dacus, the manager of the Coils segment and the person from whom the Company acquired the assets and operations of Astro Air Coils, Inc. in 1998. Proceeds from the sale were $5,600,000 of cash and the assumption of approximately $3,700,000 of liabilities. The Company recorded a pretax charge of $9,340,000 related to this sale in the fourth quarter of 2001. Revenues from discontinued operations were $35,608,000 for 2001. 7. INVENTORIES

2003 2002 ~~2001~~Raw ~~2000~~materials ~~Federal~~and ~~income~~purchased ~~tax~~parts ~~provision~~$ at744,000 ~~statutory~~$ ~~rate 34.0% 34.0% 34.0% State income taxes~~810,000 ~~net~~Work of federal income tax benefit (1.2) (1.7) (1.8) Amortization of excess cost of net assets acquired 22.1 (6.1) (5.3) Effect of disposition of businesses 0.0 0.6 (7.5) Meal and Entertainment Expense 0.0 0.0 0.0 Change in ~~valuation~~process ~~allowance~~844,000 ~~(331.6)~~909,000 ~~0.0~~Finished ~~0.0~~goods ~~Other~~157,000 ~~0.5~~187,000 ~~5.6 (0.8)~~ ------ ----- ----------- ~~Effective~~Total ~~tax~~$ ~~rate~~1,745,000 ~~continuing~~$ ~~operations~~1,906,000 ~~(276.2)% 32.4% 18.6%~~ ====== ===== ===========

8. PROPERTY, PLANT AND EQUIPMENT

2003 2002 ~~2001~~Land ~~Deferred~~and ~~tax~~improvements ~~asset:~~$ ~~Accruals~~112,000 ~~and~~$ ~~reserves~~112,000 $Buildings 1and improvements 3,~~633~~350,000 ~~$ 2~~3,~~432~~350,000 ~~Tax~~Machinery ~~credits~~ and ~~loss~~equipment ~~carryforwards 6~~12,~~690~~202,000 712,~~644~~115,000 ~~Other~~Construction 11in progress 120,000 2153,000 ------------ ------------ Total ~~gross deferred tax assets 8~~15,~~334~~784,000 1015,~~097~~630,000 ~~Valuation~~Accumulated ~~allowance~~depreciation (611,~~645~~029,000) (710,~~246~~014,000) ------------ ------------ ~~Net~~Property, ~~deferred~~plant ~~tax~~and ~~assets~~equipment, net $ 14,~~689~~755,000 $ 25,~~851~~616,000 ============ ============ Deferred tax liability: Intangibles $ 1,976,000 $ 2,128,000 Pension 197,000 Property, plant and equipment 1,318,000 839,000 ------------ ------------ Total gross deferred tax liabilities $ 3,294,000 $ 3,164,000 ------------ ------------ Net deferred tax liability $ (1,605,000) $ (313,000)

F-12 9. LONG-TERM DEBT

~~Year~~2003 ~~Ended~~2002 ~~-------------------------------------------------------------------------------~~Revolving ~~October~~credit ~~27,~~agreement ~~2002~~$ ~~October 28~~4,500,000 ~~2001~~$ ~~October~~6,900,000 29Term loans, ~~2000~~payable ~~Weighted~~in ~~Weighted~~monthly ~~Weighted~~installments ~~Average~~through ~~Average~~2007 ~~Average~~at ~~Exercise~~5%, ~~Exercise~~collateralized ~~Exercise~~by ~~Options~~certain ~~Price~~real ~~Options~~property ~~Price~~550,000 ~~Options~~599,000 ~~Price~~Industrial ~~Outstanding~~revenue bonds, ~~beginning~~payable ofin ~~year~~varying ~~760,000~~installments $through ~~5.16~~2018 ~~880,000~~at $a 5variable rate (1.841% ~~785~~at October 28,~~000~~ $2003), ~~7.58~~collateralized ~~Granted~~by 0certain 75real property,~~000~~ ~~1.03~~building ~~259~~and equipment 4,550,000 ~~2.23~~4,550,000 ~~Cancelled~~Subordinated ~~(436~~promissory notes,~~000)~~ 4payable in varying installments through 2005 at rates from 7.306% ~~(195~~to 11% 1,496,000) ~~6.64 (164~~1,496,000) ~~8.44~~ ------- ---- --- -------- ~~Outstanding,~~Total ~~end~~long-term ofdebt ~~year~~11,096,000 ~~324~~13,545,000 $Less ~~6.33~~current ~~760~~portion 10,968,000 ~~$ 5.16 880~~8,951,000 $----------- ~~5.84~~----------- ~~=======~~Long-term ~~======= ======= Exercisable~~debt, ~~end~~net of ~~year~~current ~~229,000~~portion $ ~~7.74 398~~128,000 $ ~~7.13 324~~4,594,000 ~~$ 8.31~~ ======= ==== === ========

The aggregate amount of required payments on long-term debt is as follows: Year ending October: 2004 $ 10,968,000 2005 128,000 ------------ Total $ 11,096,000 ============ On January 22, 1999, the Company entered into a new bank credit facility with the Company's two primary banks, originally expiring in December 2002. The agreement included financial and other covenants, including fixed charge, cash flow and net worth ratios and restrictions on certain asset sales, mergers and other significant transactions. The Company was not in compliance with such covenants at October 29, 2000. In February 2001, the Company entered into an amendment to its bank credit facility agreement, wherein the lenders agreed to forbear from exercising their rights and remedies under the facility in connection with such non-compliance until February 15, 2002, at which time the facility was to mature. This amendment to the bank credit facility called for reductions in the outstanding balance during calendar 2001 and modified the interest rates charged. The amendment required additional collateral, effectively all of the assets of the Company, and reporting requirements, as well as the addition of a covenant requiring minimum operating profits. The amendment also required the suspension of principal and interest payments on subordinated debt, with an aggregate outstanding balance of $2.1 million as of October 28, 2001. Furthermore, the amendment to the facility prohibits the payment of preferred or common stock dividends and prohibits the Company from purchasing its stock. Beginning in August 2001, the Company was out of compliance with its minimum operating profit covenant. In February 2002, the Company entered into a further amendment to the facility, which extended the maturity date to December 31, 2002. That amendment calls for further reductions in the outstanding balance based on expected future asset sales, increased the interest rate charged and requires minimum EBITDA. In December 2002, the Company entered into a further amendment to the facility, which extends the maturity date to December 31, 2003. This amendment calls for further reductions in outstanding balance based on expected future asset sales and cash flow generated from operations and requires minimum EBITDA. In April 2003, the Company entered into a further amendment to the facility which amended the financial covenant. In September 2003, the Company entered into a further amendment to the facility which waived a mandatory paydown. In December 2003 , the Company entered into a further amendment to the facility which extended the maturity date to March 31, 2004. Borrowings under the facility are charged interest at the Prime Rate plus 2.75% (6.75% at October 26, 2003). The Company's lender required the Company to place $400,000 in a restricted cash account to be used to service the debt. F-13 At October 26, 2003, $4,500,000 was outstanding under the Company's bank credit facility and $611,000 was available for additional borrowing. The average amount outstanding in 2003 was $5,528,000 and the weighted average interest rate was 7.0%. Repayment of the Industrial Revenue Bonds of Stature Electric has been guaranteed by the Company and its subsidiaries. The Company has classified primarily all of its long-term debt as a current liability in the accompanying consolidated balance sheet at October 26, 2003 as a result of not complying with the covenants in the revolving credit agreement. Derivative Interest Rate Contracts - The Company had previously had an interest rate swap agreement with one of its banks with a notional amount of $4,850,000 which expired in fiscal 2003. The agreement required the Company to make quarterly fixed payments on the notional amount at 4.22% through October 2003 in exchange for receiving payments at the BMA Municipal Swap Index. The Company entered into the interest rate swap agreement to change the fixed/variable interest rate mix of its debt portfolio to reduce the Company's aggregate risk to movements in interest rates. Such swap agreements do not meet the stringent requirements for hedge accounting under SFAS No. 133. Accordingly, changes in the fair value of such agreements are recorded in the accompanying consolidated statements of operations as a component of interest expense. The fair market value of the swap agreement liability was $0 and $110,000 at October 26, 2003, and October 27, 2002 respectively. The credit to interest expense related to this agreement in 2003 and 2002 totaled $110,000 and $589,000 respectively. 10. FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosures of the estimated fair value of financial instruments were made in accordance with the requirements of SFAS No. 107, Disclosures about Fair Value of Financial Instruments. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Cash and Cash Equivalents, Accounts Receivable, and Accounts Payable - The carrying amount of these items are a reasonable estimate of their fair value. Short-term Debt and Long-term Debt - Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value for debt issues. Accordingly, the carrying amount of debt is a reasonable estimate of its fair value. 11. BENEFIT PLAN Benefit Plan - The Company sponsors a defined contribution 401(k) plan covering substantially all of its employees. Eligible employees may contribute up to 15% of their compensation to this plan and their contributions are matched by the Company at a rate of 50% on the first 4% of the employees' contribution. The plan also provides for a fixed contribution of 3% of eligible employees' compensation. Pension expense related to this plan was $213,000, $333,000 and $895,000 for 2003, 2002 and 2001 respectively. F-14 12. COMMITMENTS AND CONTINGENCIES The Company leased office space production facilities and equipment under operating leases. Operating lease expense was approximately $285,000, $285,000 and $623,000 for 2003, 2002 and 2001, respectively, net of sublease rentals and reimbursements of utilities of $119,000, $119,000 and $119,000 for 2003, 2002 and 2001, respectively. The lease on the former corporate headquarters office space was to expire in September 2006 with a base rent of approximately $305,000. The Company successfully negotiated a lease surrender agreement in December 2003 at a cost of $280,000 and vacated the office space in January 2004. The Company paid $89,000 covering rent through March 2004. The landlord also has the right to negotiate an existing letter of credit held by the landlord as security under the lease and retain the proceeds therefrom in the amount of $191,000 on the termination date. At October 26, 2003, outstanding letters of credit totaled approximately $5,184,000 which primarily guarantees industrial revenue bonds. The Company is subject to federal, state and local environmental regulations with respect to its operations. The Company believes that it is operating in substantial compliance with applicable environmental regulations. Manufacturing and other operations at the Company's facilities may result, and may have resulted, in the discharge and release of hazardous substances and waste from time to time. The Company routinely responds to such incidents as deemed appropriate pursuant to applicable federal, state and local environmental regulations. In connection with the Company's divestitures of its operating businesses over the past four years, it has agreed to indemnify buyers from and against certain known and unknown environmental liabilities. In addition, the Company may be liable for the costs of removal or remuneration of hazardous or toxic substances on, in, under or discharged from it's current or previously owned real property under applicable federal, state and local environmental laws, ordinances and regulations. A subsidiary of the Company is a party to a consent decree with the State of Connecticut pursuant to which it has agreed to complete its environmental investigation of the site on which its Old Saybrook facility was previously located and conduct any remedial measures which may be required. Based upon the amounts recorded as liabilities, the Company believes that the ultimate resolution of this matter will not have a material adverse effect on the consolidated financial results of the Company. In addition to the matters reported herein, the Company is involved in litigation dealing with certain aspects of its business operations. The Company believes that settlement of such litigation will not have a material adverse effect on its consolidated financial position or results of operations. 13. MAJOR CUSTOMERS A significant portion of the Company's sales are concentrated among a small number of customers. Sales to the two largest customers represented approximately 26%, 14%, and 15%, of total sales from continuing operations for 2003, 2002 and 2001, respectively. Subsequent to October 26, 2003, the Company is no longer selling to the second largest customer that accounted for 9% of its sales in 2003. F-15 14. INCOME TAX EXPENSE The income tax provision for continuing operations consists of the following:

~~Options~~2003 ~~Outstanding~~2002 ~~Options~~2001 ~~Exercisable~~Current: ~~---------------------------------------------~~Federal ~~------------------------ Weighted Average Remaining Weighted Weighted Contractual Average Average Life Exercise Exercise Range of Exercise Prices Options in Years Price Options Price~~ $~~1.00~~ -(237,000) $~~1.13~~ 25(5,767,000) ~~8.54~~ $ (1~~.05 -- $ -- $1.44 30~~,861,000) ~~7.98~~State ~~$ 1.44 6~~32,000 ~~$ 1.~~44 ~~$3.16 20~~,000 ~~7.13 $ 3.16 8~~131,000 $Deferred ~~3.16 $4.16~~ - ~~$5.75~~Federal 60(372,000) ~~6.15 $ 4.16 36~~1,~~000 $ 4.16 $5.88 - $8.00 111~~598,000 ~~5.03 $ 7.75 101~~(257,000) $Deferred ~~7.74 $8.88~~ - ~~$11.38~~State 46(27,000) ~~3.08 $ 9.21 46~~(72,000) ~~$ 9.21 $12.00 32~~19,000 ~~1.99~~---------- ~~$ 12.00 32,000 $ 12.00~~ ------------ ------------ ~~324,000~~Income ~~5.33~~tax benefit $ ~~6.33~~(604,000) ~~229~~$ (4,197,000) $ ~~7.74~~(1,968,000) ========== ============ ============

A reconciliation of the income tax provision as presented in the consolidated statements of operations is as follows:

2003 2002 2001 ~~2000~~Income ~~Identifiable~~tax ~~assets:~~benefit ~~Motors~~from $continuing ~~25,376,000 $ 38,506,000 $ 44,483,000 Other 845,000 1,181,000 9,137,000 Assets of discontinued~~ operations ~~350,000 1,078,000 24,659,000 Corporate 1,399,000 5,629,000 2,884,000 ------------ ------------ ------------ Total identifiable assets~~ $ 27(604,~~970,~~000 $ 46,394,000 $ 81,163,000 ============ ============ ============ Net sales: Motors $ 36,901,000 $ 51,356,000 $ 57,696,000 Other -- 2,970,000 17,508,000 ------------ ------------ ------------ Total net sales $ 36,901,000 $ 54,326,000 $ 75,204,000 ============ ============ ============ Income (loss) ~~from operations: Motors~~ $ ~~716,000 $~~ (4,~~669~~197,000) $ ~~4,978,000 Other~~ (1~~) (381~~,~~000) (1~~968,~~417,~~000) ~~(666,000)~~Income ~~Corporate~~tax ~~(2)~~expense (~~3,281,000~~benefit) ~~(5,106,000) (4,577,000) ------------ ------------ ------------ Total income (loss)~~ from discontinued operations $0 (2268,~~946,~~000) $ (1514,~~854,~~000) $Income ~~(265,000)~~tax ~~============~~benefit ~~============~~associated ~~============~~with ~~Capital~~cumulative ~~Additions:~~effect ~~Motors~~of $accounting ~~132,000~~change $0 ~~695,000~~0 ~~$ 810~~(34,000) ~~Other~~ -- -- ~~245,000 Corporate~~ -- ~~62,000 140,000~~ ----~~--------~~ ------------ ------------ Total ~~capital~~income ~~additions~~tax $benefit ~~132,000~~ $ ~~757~~(604,000) $ 1(4,~~195~~465,000) ~~============ ============ ============ Depreciation and amortization expense: Motors~~ $ 3(2,~~694~~516,000) ~~$ 3,711,000 $ 3,543,000 Other -- -- 1,141,000 Corporate 146,000 156,000 341,000 ------------ ------------ ------------ Total depreciation and amortization expense $ 3,840,000 $ 3,867,000 $ 5,025,000~~ ============ ============ ============

The reconciliation of the statutory federal income tax rate and the effective rate, for continuing operations, is as follows:

~~First~~2003 ~~Second~~2002 ~~Third~~2001 ~~Fourth~~Federal ~~Quarter~~income ~~Quarter~~tax ~~Quarter~~provision ~~Quarter~~at ~~-------~~statutory ~~-------~~rate ~~-------~~34.0% ~~-------~~34.0% ~~Year~~34.0% ~~Ended~~State ~~October~~income 27taxes, ~~2002~~net ~~--------------------------------------------------~~of ~~Net~~federal ~~sales~~income $tax ~~8,993,000~~benefit ~~$ 11,107,000 $ 11,415,000 $ 5,386,000 Gross profit 1,055,000 1,875,000 1,672,000 1,057,000 Income~~ (~~loss~~0.3) ~~from continuing operations~~ (1~~,555,000~~.2) ~~4,451,000~~ (1~~,119,000~~.7) ~~3,941,000~~Goodwill ~~Loss~~impairment ~~from~~charge ~~discontinued operations~~ (~~520,000~~28.1) ~~Net~~0.0 ~~income~~0.0 ~~(loss)~~Amortization ~~(1,555,000)~~of ~~4,451,000~~goodwill (0.0 22.1~~,119,000)~~ ~~3,421,000 Net income~~ (~~loss~~6.1) ~~available~~Effect ~~for~~of ~~common~~disposition ~~shareholders~~of ~~(1,890,000)~~businesses ~~4,115,000~~0.0 ~~(1,457,000)~~0.0 ~~3,081,000~~0.6 ~~Basic~~Meal and ~~diluted~~Entertainment ~~earnings~~Expense (~~loss~~0.1) ~~per~~0.0 ~~common~~0.0 ~~share:~~Change ~~Continuing~~in ~~operations~~valuation ~~(0.32)~~allowance 0.703 (0331.256) 0.620 ~~Discontinued~~Other ~~operations~~3.6 (0.~~09)~~5 ~~Year~~5.6 ~~Ended October 28, 2001~~ ------ ------ -----~~---------------------------------~~ ~~Net~~Effective ~~sales~~tax ~~$ 14~~rate,~~123,000~~ ~~$ 14,438,000 $ 13,813,000 $ 11,952,000 Gross profit 2,577,000 2,951,000 3,064,000 1,837,000 Loss from~~ continuing operations (1,131,000) (159,000) (1,106,000) (1,715,000) Income (loss) from discontinued operations (690,000) (672,000) 141,000 (10,892,000) Net loss (1,888,000) (831,000) (965,000) (12,607,000) Net loss available for common shareholders (2,214,000) (1,159,000) (1,295,000) (12,939,000) Basic and diluted earnings (loss) per common share: Continuing operations (09.~~25)~~4% (0276.082)% (032.~~24)~~4% ~~(0.35)~~====== ~~Discontinued~~====== ~~operations (0.12) (0.11) 0.02 (1.85) Discontinued operations 0.05 0.12 (0.01) (1.68)~~=====

The difference between the statutory federal rate and the reported amount of income tax expense attributable to continuing operations is primarily due to non-deductible goodwill and change in the valuation allowance resulting from the utilization of the capital loss carryforward and the five year carryback of net operating losses related to the changes in tax laws. F-16 The components of the Company's net deferred tax assets and liabilities are as follows:

~~Schedule~~2003 II2002 ~~Owosso~~Deferred ~~Corporation~~tax ~~Valuation~~asset: Accruals and ~~Qualifying~~reserves ~~Accounts~~$ ~~and~~683,000 ~~Reserves~~$ ~~For~~1,633,000 ~~the~~Tax ~~three~~credits ~~years~~and ~~ended~~loss ~~October~~carryforwards 277,031,000 ~~2002~~6,690,000 Other 9,000 11,000 ------------ ------------~~--------------------------------------------------------------------------------------------------------~~ ~~Balance~~Total atgross ~~Charged~~deferred totax ~~Charged~~assets ~~Balance~~7,723,000 at8,334,000 ~~Beginning~~Valuation ~~Costs~~allowance ~~and to Other Deductions End of of Period Expenses Accounts~~ (a6,866,000) (b6,645,000) ~~Period~~ --------- ---~~-----~~ ------------ ~~---~~Net ~~------~~deferred ~~For~~tax ~~the~~assets ~~year~~$ ~~ended~~857,000 ~~October~~$ 271,689,000 ~~2002~~============ ~~Allowances~~============ ~~on:~~Deferred ~~Accounts~~tax ~~receivable~~liability: $Intangibles ~~388,000~~ $ ~~(56~~1,759,000) $ ~~(21~~1,976,000) ~~$ (262~~Property,~~000)~~ $plant ~~49,000~~and ~~Inventory~~equipment ~~926~~304,000 ~~(384~~1,~~000) (307~~318,000) ~~235,000~~------------ ~~For~~------------ ~~the~~Total ~~year~~gross ~~ended~~deferred ~~October~~tax ~~28,~~liabilities ~~2001 Allowances on: Accounts receivable~~ $ ~~233~~2,063,000 $ ~~155~~3,294,000 $ -- $ ---------- ~~$ 388,000 Inventory 1,162,000 62,000~~ ------------ ~~(298,000)~~Net ~~926,000~~deferred ~~For~~tax ~~the~~liability ~~year ended October 29, 2000 Allowances on: Accounts receivable~~ $ ~~164,000 $ 272,000 $~~ (~~127~~1,~~000) $ (76~~206,000) $ ~~233,000 Inventory 974,000 815,000~~ (~~352~~1,~~000) (275~~605,000) ~~1,162,000~~============ ============

These amounts are included in the accompanying consolidated financial statements as follows:

The Company has recorded valuation allowances which management has determined are sufficient to reduce its deferred tax assets to an amount which is more likely than not to be realized. The Company's valuation allowances relate primarily to intangible assets, federal and state net operating loss carry-forwards, and other state deferred tax assets. The Company has approximately $3,081,000 of net operating loss carry forwards as of October 26, 2003 for federal income tax reporting purposes and which expire between 2006 and 2023. Approximately $2,498,000 of these net operating losses are subject to annual utilization limitations under Section 382 of the Internal Revenue Code. The Company also has approximately $11,051,000 of capital loss carry forwards as of October 26, 2003 for federal income tax reporting purposes and which expire in 2006. 15. COMMON STOCK PUT OPTION During 2001 the Company received notice from a former employee and shareholder requesting payment of $8.00 per share for 75,000 shares of common stock of the Company owned by him under a conditional put right that a subsidiary of the Company had granted to such shareholder. The shareholder in question renewed his request in late 2002. Neither the Company nor the subsidiary of the Company that had granted the conditional put right believes that the shareholder has a contractual right to require the purchase of his shares at this time, principally due to a negative covenant in the Company's bank credit facility precluding the Company and its subsidiaries from making any payments or other distributions with respect to the Company's common stock. While the Company believes that it has complied with all terms associated with the put right, including those excusing performance when payment is precluded by financing documents, it has recorded a liability totaling $600,000 as of October 26, 2003 and October 27, 2002 related to this matter. F-17 16. CONVERTIBLE PREFERRED STOCK In connection with the acquisition of Stature in October 1995, the Company issued 1,071,428 of its 10,000,000 authorized preferred shares of Class A convertible preferred stock with a stated value of $14.00 per share. Such preferred stock was convertible into the Company's common stock on a one-for-one basis, at the holders' option, through October 2000, at which time, the Company had the right, but was not obligated, to redeem the preferred stock for cash at its stated value of $14.00 per share. Neither the option to convert the preferred stock into the Company's common stock, nor the Company's right to redeem the preferred stock, has been exercised. The Company's option to redeem the preferred stock continues after October 2000, with the redemption price increasing annually until it reaches $21.00 in 2009 for a maximum liquidation amount of $22,500,000. The preferred stock earns quarterly cash dividends as a percentage of the stated value of $15,000,000 at a rate of 5% per annum through October 2000. Thereafter, the dividend percentage rate increases 1% each year to its maximum rate of 10% in November 2004 and thereafter. Since the preferred stock was not converted by October 2000, the increasing rate dividend is accounted for by the accrual of amounts in excess of the cash dividend through the consolidated statements of operations using the effective interest method, at a rate of 8.7%. Dividends accrued but not paid on the preferred stock were $4,034,000 and $2,664,000 for October 26, 2003 and October 27, 2002, respectively. The Company may not pay any common stock dividends unless all preferred dividend requirements have been met. The convertible preferred shareholders are entitled to vote as a class to elect one member of the Board of Directors of the Company, provided at least 40% of the originally issued Class A preferred stock is outstanding. The convertible preferred stock has liquidation priority over common stock. In certain circumstances, the issuance of other classes of securities require the approval of the Class A preferred shareholders. In connection with the amendment to the Company's bank credit facility in February 2001, the Company is prohibited from making future preferred stock dividend payments. 17. STOCK OPTION PLANS In 1998, the Company adopted a long-term incentive plan (the "Incentive Plan") which permits the granting of Stock Options, Stock Appreciation Rights, Restricted Stock, Long-Term Performance Awards, Performance Shares and Performance Units. Officers, other employees and directors of the Company are eligible to receive awards under the Incentive Plan. The maximum number of shares of Common Stock of the Company that may be made the subject of awards granted under the Incentive Plan is 500,000. Stock options granted under the Incentive Plan generally vest over five years and are exercisable for periods up to ten years from the date of grant at a price which equals fair value at the date of grant. The Company also maintains a stock option plan (the "1994 Plan"), designed to serve as an incentive for retaining valuable employees and directors. All employees and directors of the Company are eligible to participate in the 1994 Plan. The 1994 Plan provides for the granting of options to purchase an aggregate of up to 500,000 shares of common stock of the Company. Options granted generally vest over five years and are exercisable for periods up to ten years from the date of grant at a price which equals fair market value at the date of grant. F-18 The 1994 Plan provides for the automatic acceleration of the exercisability of all outstanding options upon the occurrence of a change in control (as defined) and for the cancellation of options and cash payment to the holders of such canceled options upon the occurrence of certain events constituting a change in control. The 1994 Plan may be amended, altered or discontinued at any time, but no amendment, alteration or discontinuation will be made which would impair the rights of an optionee with respect to an outstanding stock option without the consent of the optionee. The following schedule summarizes stock option activity and status:

F-19 The following table summarizes information about stock options outstanding at October 26 2003:

18. SEGMENT INFORMATION The Company is organized based upon the products and services it offers. Under this organizational structure, the Company has two business segments: Motors and Other. The Motors segment, the Company's only remaining business segment, is comprised of Stature Electric, Inc., established in 1974 in Watertown, New York. Stature is a custom designer and manufacturer of motors and gear motors, including AC, DC and Universal. Significant markets for Stature, or the Motors segment, include commercial products and equipment, healthcare, recreation and non-automotive transportation. Stature's component products are sold throughout North America and in Europe, primarily to original equipment manufacturers who use them in their end products. Prior to July 30, 2002, the Motors segment also included the operations of Motor Products - Owosso Corporation and Motor Products - Ohio Corporation. The Company's Other segment includes Cramer, a business that manufactured timers and subfractional horsepower motors for use in commercial applications. The Company completed the sale of the assets associated with the timer and switch line of Cramer on December 4, 2000 and, in connection with the sale, changed the name of the company from M.H. Rhodes, Inc. to Cramer Company. The Company disposed of substantially all of the remaining Cramer assets (excluding real property) in a separate transaction completed on September 23, 2001. The Company derives substantially all of its revenues from within the United States. Information about interest expense, other income and income taxes is not provided on a segment level. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. F-20 The following table reflects, from continuing operations, net sales, income (loss) from operations, capital additions, and depreciation and amortization expense for the fiscal years ended October 2003, 2002 and 2001 and identifiable assets as of October 2003, 2002 and 2001 for each segment:

(1) Includes an expense of $5,331,000 for goodwill impairment in 2003. (2) Includes write-down of net assets held for sale of $0 in 2003, $381,000 in 2002 and $1,100,000 in 2001. (3) Includes unallocated corporate expenses, primarily salaries and benefits, information technology, and other administrative expenses. F-21 19. SUBSEQUENT EVENT On February 10, 2004, the Company reached a definitive agreement with Allied Motion Control Technologies, Inc. ("Allied") for the acquisition by Allied of all the shares of the Company on the following terms: .068 shares of common stock of Allied for each share of common stock of the Company, and a combination of .127 shares of Allied common stock, a warrant to purchase 0.28 shares of Allied common stock and cash of $0.9333 for each share outstanding of the Company's Class A convertible preferred stock. Based on the Company's 5,824,306 common shares and 1,071,428 preferred shares issued, the aggregate amount to common shareholders will be approximately $1.75 million, and the aggregate amount to preferred shareholders will be approximately $1.6 million. In addition, Allied has agreed to repay and assume up to $10.6 million of the Company's outstanding debt, and the Company's preferred shareholders may be entitled to Allied subordinated promissory notes with an aggregate principal amount of up to $500,000 based on the 2004 gross revenue of Stature. Accordingly, the transaction has an aggregate value of approximately $14.0 million, exclusive of any value attributable to the warrants and Allied notes. The board of directors of each Company has approved the transaction. The consummation of the transaction is subject to the approval of the Company's shareholders and other customary conditions. The transaction is expected to be completed prior to July 1, 2004. F-22 20. QUARTERLY INFORMATION (UNAUDITED)

Loss from continuing operations for the fourth quarter of 2003 included an expense of $5,331,000 for goodwill impairment. Loss from continuing operations for the fourth quarter of 2002 included $381,000 for the writedown of assets held for sale. Income (loss) from discontinued operations for the fourth quarter of 2002 included $520,000 for the write-down of assets held for sale. F-23 Schedule II Owosso Corporation Valuation and Qualifying Accounts and Reserves For the three years ended October 26, 2003 --------------------------------------------------------------------------------

--------------- (a) Reflects reclassification to Net Assets Held for Sale (b) As to accounts receivable and inventory, primarily represents amounts written off against related assets. F-24

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