<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1996
REGISTRATION NO. 333-3836
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THE AMERICAN MATERIALS & TECHNOLOGIES
CORPORATION
(Name of small business issuer in its charter)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 2295 33-0659916
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
5915 RODEO ROAD
LOS ANGELES, CALIFORNIA 90016
(310) 841-5200
(Address and telephone number of principal executive offices and principal place
of business)
PAUL W. PENDORF
PRESIDENT AND CHIEF EXECUTIVE OFFICER
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
5915 RODEO ROAD
LOS ANGELES, CALIFORNIA 90016
(310) 841-5200
(Name, address and telephone number of agent for service)
------------------------
Copies to:
<TABLE>
<S> <C>
DAVID A. BROADWIN, ESQ. JOHN A. PICCIONE, ESQ.
WILLIAM R. KOLB, ESQ. EPSTEIN BECKER & GREEN, P.C.
FOLEY, HOAG & ELIOT 75 STATE STREET
ONE POST OFFICE SQUARE BOSTON, MASSACHUSETTS 02109
BOSTON, MASSACHUSETTS 02109 (617) 342-4000
(617) 832-1000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As promptly
as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED MAY 29, 1996
PROSPECTUS
2,000,000 SHARES
LOGO
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by The
American Materials & Technologies Corporation, a Delaware corporation (the
"Company"). Prior to this offering (the "Offering"), there has been no public
market for the Common Stock of the Company, and there can be no assurance that
an active market will develop. It is currently estimated that the initial
offering price per share will be between $5.00 and $6.00. The initial offering
price of the Common Stock has been determined by negotiation between the Company
and the Representative and is not necessarily related to the Company's asset
value or any other established criterion of value. For the method of determining
the initial offering price of the Common Stock, see "Risk Factors" and
"Underwriting." The Company has filed applications to have the Common Stock
listed on the Nasdaq SmallCap Market under the symbol "AMTK" and the Pacific
Stock Exchange under the symbol "AMT."
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE
CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS" BEGINNING AT PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
======================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Per Share.............................. $ $ $
- ------------------------------------------------------------------------------------------------------
Total(3)............................... $ $ $
======================================================================================================
</TABLE>
(1) Does not include additional compensation to be received by H.J. Meyers &
Co., Inc. (the "Representative") in the form of (i) a non-accountable
expense allowance equal to 3% of the gross proceeds of the Offering, or
$ ($ if the Underwriters' over-allotment option described
in footnote (3) is exercised in full), and (ii) a warrant to purchase up to
200,000 shares of Common Stock at an exercise price of $ per share
(120% of the initial offering price to the public), exercisable over a
period of four years, commencing one year from the date of this Prospectus.
In addition, the Company has agreed to indemnify the Underwriters against
certain civil liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $ , including the Representative's non-accountable expense
allowance.
(3) The Company has granted the Underwriters an option, exercisable within 45
days of the date of this Prospectus, to purchase up to 300,000 additional
shares of Common Stock on the same terms and conditions as set forth above
to cover over-allotments, if any. See "Underwriting." If all such shares are
purchased, the total Price to Public, Underwriting Discounts and Commissions
and Proceeds to Company (before deducting expenses of the Offering payable
by the Company, estimated at $ ), will be $ , $ ,
and $ , respectively.
The shares of Common Stock are offered on a "firm commitment" basis by the
Underwriters when, as and if delivered to and accepted by the Underwriters, and
subject to prior sale, withdrawal, or cancellation of the offer without notice.
It is expected that delivery of the certificates representing the Common Stock
will be made at the offices of H.J. Meyers & Co., Inc., 1895 Mt. Hope Avenue,
Rochester, NY 15620 on or about , 1996.
H.J. MEYERS & CO., INC.
------------------------
The date of this Prospectus is , 1996.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY
STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 3
===============================================================================
[Photograph of The American Materials
control panel & Technologies
for Company's Corporation, through its
equipment being wholly owned subsidiary,
operated by Culver City Composites
employee] Corporation, produces (at the
facility shown on left of page)
and markets advanced composite
[Photograph of materials for use in
Company's equipment] the aerospace industry,
including transportation
(aircraft and mass
[Company's Logo] transit), communications
(communication satellites
and their launchers),
defense, and recreation
[Photograph of Company's equipment] industries. Products include
fabrics and tapes utilizing
graphite, fiberglass, aramid,
quartz, and other fibers which
are impregnated with proprietary
resin systems.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ SMALLCAP MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
The Company intends to distribute to its stockholders annual reports
containing audited consolidated financial statements examined by an independent
accounting firm and such interim reports as it deems appropriate or as may be
required by law.
The Company asserts common law trademark rights in the following
trademarks, although it has not applied for formal registration of these marks:
AMT(TM), Culver City Composites(TM), and CCC(TM). This Prospectus also includes
trade names and marks of companies other than the Company.
2
===============================================================================
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to more
detailed information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. Each prospective investor is urged to
read this Prospectus in its entirety. Unless the context indicates otherwise,
the term "Company" refers to The American Materials & Technologies Corporation
and its wholly-owned subsidiary, Culver City Composites Corporation. Unless
otherwise indicated, all information in this Prospectus assumes no exercise of
the Underwriters' over-allotment option or the Representative's Warrant. All
information in this Prospectus has been adjusted to reflect a 1.1591612 for 1
stock split effected in the form of a Common Stock dividend on February 5, 1996.
See "Description of Securities" and "Underwriting."
THE COMPANY
The American Materials & Technologies Corporation ("AMT") was formed in
March 1995 to acquire and manage businesses in the advanced materials and
technologies industries. In December 1995, the Company acquired Structural
Polymer Systems, Inc. (renamed Culver City Composites Corporation ("CCC")), from
a subsidiary of Montedison S.p.A., an Italian multinational conglomerate
("Montedison"). The Company manufactures and sells advanced composites, which
are a combination of high performance reinforcement fabrics or fibers (such as
fiberglass, carbon, or aramid) and a plastic resin (such as epoxy, phenolic, or
polyimide). The Company coats or impregnates the fabrics or fibers with resins
to produce a "prepreg." The combination of high performance reinforcement
fabrics or fibers with plastic resins forms an advanced composite with
exceptional structural properties. The Company believes it is a leader in sales
of advanced composites containing PMR-15 resin, which are used in
high-temperature jet engine applications, and a leading supplier of advanced
composites used in aircraft interiors. See "Business -- Products."
The Company sells its products to the following markets: aerospace,
including transportation (aircraft and mass transit) and communications
(communications satellites and their launchers); defense (military aircraft,
naval vessels, defense systems, and military support equipment); and recreation
(skis). Major customers include: The Boeing Company, General Electric Company,
Lockheed Martin Corporation, McDonnell Douglas Corporation, de Havilland Inc.,
the Aerojet division of GenCorp Inc., and Daimler-Benz AG. See "Risk
Factors -- Dependence on Major Customers."
The Company's business strategy is to achieve profitability through
increased utilization of existing plant capacity and acquisitions of companies
with complementary businesses. There can, however, be no assurance that the
Company will be able to achieve profitability. The Company is currently
operating significantly below the capacity of its facilities, and management
believes that the Company could expand its business and rapidly increase
revenues without material additional capital expenditures. Although the Company
suffered losses in 1994 and 1995, it believes that it is well positioned to
capitalize on certain currently improving industry trends, including announced
increases in the build rate for commercial aircraft, the increased use of
advanced composites in sporting goods, and the recently approved use of advanced
composites in infrastructure applications such as reinforcement of freeway
bridge columns. Increased demand, if any, for advanced composites as a result of
these trends may not occur immediately; in particular, any increase in aircraft
procurement is not expected to have a material impact on the Company's sales to
the aerospace market before the fourth quarter of 1996. However, the Company
believes that in general these trends, coupled with the decrease in
industry-wide available capacity caused by other companies' plant shutdowns
during the past few years, will lead to increased demand for product from the
remaining advanced composite manufacturing companies. In addition, the Company
plans to acquire companies in the advanced materials and technologies industries
that the Company believes will enable it to expand its customer base, reduce
costs, and offer new products. The Company believes that many companies with
annual sales under $30 million which originally developed advanced materials and
technologies for the defense industry are now potentially available for purchase
and consolidation by the Company. The Company has no commitments or agreements
with respect to any acquisition. See "Risk Factors -- Limited Operating History;
Recent Operating Losses" and "-- Risks Inherent in Possible Future Unspecified
Acquisitions."
The Company's principal executive offices are at 5915 Rodeo Road, Los
Angeles, CA 90016. The Company's telephone number is 310-841-5200.
3
<PAGE> 5
THE OFFERING
Securities Offered by the
Company.......................... 2,000,000 shares of common stock, $0.01 par
value per share ("Common Stock"). See
"Description of Securities."
Common Stock Outstanding Prior to
the Offering................... 1,541,908 shares(1)
Common Stock to be Outstanding
after
the Offering................... 3,541,908 shares(1)
Use of Proceeds.................. Repayment of bridge financing, partial
repayment of senior indebtedness, business
opportunities (including acquisitions),
purchase of capital equipment, and working
capital and other general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq SmallCap
Market Symbol.................. AMTK
Proposed Pacific Stock Exchange
Symbol........................... AMT
- ---------------
(1) Does not give effect to an aggregate of up to 1,056,692 shares of Common
Stock issuable upon exercise of: (i) the Underwriters' over-allotment
option; (ii) the Representative's Warrant; (iii) a warrant to purchase
289,790 shares of Common Stock granted to a shareholder of the Company; and
(iv) options outstanding as of May 24, 1996 to purchase an aggregate of
266,902 shares of Common Stock. See "Executive Compensation," "Certain
Transactions," and "Underwriting."
RISK FACTORS
There can be no assurance that the Company will be able to achieve its
business goals or ever achieve profitability. See "Risk Factors -- Limited
Operating History; Recent Operating Losses." The loss of a significant amount of
business from either of the Company's two largest customers would have a
material adverse effect on the sales and operating results of the Company. See
"Risk Factors -- Dependence on Major Customers." The aerospace industry,
including transportation and communications, which accounted for approximately
78% of the Company's sales in 1995, historically has been subject to cyclical
downturns, and the Company expects that a similar pattern of downturns may occur
in the future. See "Risk Factors -- Cyclical Nature of the Aerospace Industry."
The defense industry, which accounted for approximately 22% of the Company's
sales in 1995, has been adversely affected by reduced spending by the U.S.
Government, and there can be no assurance of any future increase in demand for
advanced composites from the defense industry. See "Risk Factors -- Dependence
on U.S. Government Spending." In the past, particularly during downturns in the
aerospace industry, certain of the Company's customers have substantially
reduced their purchases, and there can be no assurance that the Company will not
experience such substantial reductions in the future. See "Risk
Factors -- Possible Termination of Certain Customer Contracts." The Company
relies on a limited number of suppliers to provide materials used to manufacture
its products, and if it can not obtain adequate quantities of necessary
materials from its existing suppliers, there can be no assurance that the
Company would be able to access alternative sources of supply within a
reasonable period of time or at commercially reasonable rates. See "Risk
Factors -- Dependence on Suppliers." The Company faces competition from a number
of companies, many of which have greater financial resources, research and
development facilities and manufacturing and marketing capabilities than the
Company. See "Risk Factors -- Intense Competition in Advanced Composites
Industry." No assurance can be given that additional financing which might be
needed by the Company will be available, or, if available, that it will be
available on acceptable terms. See "Risk Factors -- Need for Additional
Capital." Management of the Company intends to pursue additional acquisitions,
which involve numerous risks including potential difficulties in the
assimilation of acquired operations, diversion of management's attention away
from normal operating activities, negative financial impact based on the
amortization of any acquired intangible assets, potential loss of key employees
of the acquired operation and potential financial risk resulting from
pre-acquisition liabilities that may exceed any indemnities which may be
provided by the seller. See "Risk Factors -- Risks Inherent in Possible Future
Unspecified Acquisitions." If the Company's securities were removed from the
Nasdaq SmallCap Market, they would be subject to so-called penny stock rules
that impose additional sales practice and market-making requirements on
broker-dealers who sell and/or make a market in the Company's securities. See
"Risk Factors -- Possible Delisting of Securities from Nasdaq; Shares of Common
Stock May Be Subject to Penny Stock Rules." The Company will have broad
discretion in the application of a substantial portion of the net proceeds of
this Offering. See "Risk Factors -- Broad Management Discretion in the Use of
Proceeds."
4
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth summary financial information of CCC, AMT
and the Company at the dates and for the periods indicated. Also set forth are
the combined results of AMT and CCC for the year ended December 31, 1995, as
well as certain pro forma information with respect to AMT which reflects the
acquisition of CCC on December 19, 1995, as if such acquisition had taken place
on January 1, 1995. All information set forth below should be read in
conjunction with the consolidated financial statements and notes thereto of AMT
and CCC and the unaudited pro forma consolidated statement of operations of AMT
and notes thereto included elsewhere in this Prospectus. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL CONSOLIDATED
-------------------------------------------- COMBINED ------------- THE
CCC AMT AMT & CCC AMT & CCC CCC COMPANY
---------------------------- ------------- ------------- ------------- ------------ ------------
PERIOD
MARCH 29,
PERIOD 1995
JANUARY 1, (INCEPTION) THREE MONTHS ENDED(2)
YEAR ENDED 1995 TO TO YEAR ENDED YEAR ENDED ---------------------------
DECEMBER 31, DECEMBER 19, DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1994 1995 1995 1995 1995(1) 1995 1996
------------- ------------ ------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales............ $15,943 $ 15,300 $ 616 $15,916 $15,916 $4,018 $5,251
Earnings (loss)
before interest,
taxes, depreciation
and amortization... (494) 719 (216) 503 502 396 683
Income (loss) from
operations......... (781) (495) (259) (754) (18) 76 547
Interest expense..... 567 585 18 603 600 212 187
Depreciation
expense............ 1,264 1,214 43 1,257 520 320 136
Net income (loss).... (2,325) (1,080) (277) (1,357) (618) (136) 246
Net income (loss) per
common share....... (0.18) (0.41) 0.13
Weighted average
number of common
shares............. 1,517 1,517 1,879
</TABLE>
<TABLE>
<CAPTION>
THE COMPANY
--------------------------
MARCH 31, 1996
--------------------------
ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency).............................................................. $(1,714) $ 6,297
Total assets.............................................................................. 10,148 15,068
Long-term debt............................................................................ 2,463 1,463
Stockholders' equity(4)................................................................... 181 9,193
</TABLE>
- ---------------
(1) Includes pro forma adjustments to give effect to changes in: (i)
depreciation and amortization (a decrease of $737,000), (ii) interest
expense as a result of changes in the Company's debt structure (a decrease
of $3,000), and (iii) certain compensation arrangements (an increase of
$1,000), all as a result of the acquisition by AMT of CCC. See Unaudited Pro
Forma Consolidated Statement of Operations and Notes thereto.
(2) Interim data for the three months ended March 31, 1995 are for CCC only;
data for the three months ended March 31, 1996 reflect the consolidated
operations of AMT and CCC.
(3) Adjusted to reflect the net proceeds from the Offering. See "Use of
Proceeds."
(4) The Company has never paid cash dividends on its Common Stock. See "Dividend
Policy."
5
<PAGE> 7
RISK FACTORS
This Offering involves a HIGH DEGREE OF RISK. Each prospective investor
should carefully consider the following factors in evaluating the Company and
its business before purchasing the Common Stock offered hereby. No investor
should participate in the Offering unless such investor can afford a complete
loss of his investment.
LIMITED OPERATING HISTORY; RECENT OPERATING LOSSES
AMT was incorporated in March 1995 and has a limited operating history. The
Company's operating subsidiary, Culver City Composites Corporation, was acquired
in December 1995. CCC sustained a net loss of $2,325,000 in the year ended
December 31, 1994 and AMT and CCC, on a combined historical basis, sustained a
net loss of $1,357,000 in the year ended December 31, 1995. In order to become
profitable, the Company must increase revenues and/or reduce costs. The Company
plans to increase revenues through more efficient utilization of existing plant
capacity and by acquiring companies with complementary businesses. There can be
no assurance that the Company will be able to achieve these goals or ever
achieve profitability. See "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
"Business."
DEPENDENCE ON MAJOR CUSTOMERS
Approximately 30% of the Company's sales in 1995 were made to two
customers, The Boeing Company and General Electric Company. The Company has no
significant purchase commitments from these or other customers extending beyond
one year. There can be no assurance that these customers will continue to
purchase the Company's products at the same levels as in previous years or that
such relationships will continue in the future. The loss of a significant amount
of business from either of these customers would have a material adverse effect
on the sales and operating results of the Company. See "Business -- Customers."
CYCLICAL NATURE OF THE AEROSPACE INDUSTRY
The aerospace industry, including transportation and communications, which
accounted for approximately 78% of the Company's sales in 1995, historically has
been subject to cyclical downturns, and the Company expects that a similar
pattern of downturns may occur in the future. For example, after increasing each
year from 1985 to 1991, annual revenues in the aerospace industry dropped
significantly in 1992 and remained depressed through late 1995. There can be no
assurance that, even if revenues in the industry increase, the Company will be
able to increase its own sales. See "Business."
DEPENDENCE ON U.S. GOVERNMENT SPENDING
The defense industry, which accounted for approximately 22% of the
Company's sales in 1995, has been adversely affected by reduced spending by the
U.S. Government. Since 1987, the aircraft procurement budget of the U.S.
Department of Defense has declined by approximately 40%. The Company believes
that, although spending for military aircraft is unlikely to reach pre-1987
levels or to increase significantly in the next three years, the demand for
advanced composites from defense contractors may increase as the use of advanced
composites in military aircraft increases. However, there can be no assurance of
any increase in demand for advanced composites from the defense industry. See
"Business."
POSSIBLE TERMINATION OF CERTAIN CUSTOMER CONTRACTS
The Company's contracts to supply materials for military and some
commercial projects, including the Company's contracts with its major customers,
contain provisions for termination at the convenience of the customer. In the
past, particularly during downturns in the aerospace industry, certain customers
have substantially reduced their purchases. There can be no assurance that the
Company will not experience such substantial reductions in the future. See
"Business -- Products."
6
<PAGE> 8
DEPENDENCE ON SUPPLIERS
The Company relies on a limited number of suppliers to provide materials
used to manufacture its products. Certain of these suppliers are the Company's
sole source for the materials which they supply. Typically, there are no
contracts or agreements between these sole source suppliers and the Company. In
the event the Company can not obtain adequate quantities of necessary materials
from its existing suppliers, there can be no assurance that the Company would be
able to access alternative sources of supply within a reasonable period of time
or at commercially reasonable rates. Aerospace and defense customer
specifications tend to make the substitution of suppliers costly and time
consuming. The unavailability of adequate commercial quantities, the inability
to develop alternative sources, a reduction or interruption in supply, or a
significant increase in the price of raw materials could have a material adverse
effect on the Company's ability to manufacture products. See "Business -- Raw
Materials."
INTENSE COMPETITION IN ADVANCED COMPOSITES INDUSTRY
The advanced composites industry is highly competitive. The Company faces
competition from a number of companies, many of which have greater financial
resources, research and development facilities, and manufacturing and marketing
capabilities than the Company. There can be no assurance that developments by
the Company's competitors or potential competitors will not make the Company's
products obsolete. The Company's ability to compete effectively will depend upon
its products' functional features and upon the ability of the Company to attract
and retain qualified personnel, to maintain and expand the capabilities of its
technologies, to sell existing products to new customers, to develop new
products for existing customers, to service its products, and to further develop
its sales force or enter into satisfactory arrangements for the marketing of its
products. No assurance can be given that the Company will be able to compete
effectively. See "Risk Factors -- Dependence on Suppliers" and "Business --
Competition."
Most of the companies in the defense, aerospace, and communications markets
of the advanced composites industry require materials purchased from suppliers
to meet detailed specifications through a qualification process. The Company has
qualified its advanced composites to meet over 200 specifications for use in
these markets. The Company believes that, while the qualification process
protects it to a certain degree from competitors and assures it of some revenues
during the life of the program or product for which the Company's advanced
composites products have been qualified, the qualification process also tends to
hinder the Company's ability to increase its market share and compete in new
markets. In order to remain competitive in these markets, the Company must
maintain its current qualifications and develop or acquire new products or
technologies capable of meeting new qualification requirements. See
"Business -- Products."
DEPENDENCE ON UNPATENTED PROPRIETARY TECHNOLOGY; RISK OF INFRINGEMENT
The Company's ability to compete effectively depends in part on its ability
to protect its proprietary information. The Company relies primarily on trade
secret laws and confidentiality procedures to protect its proprietary resin
formulations. The Company has not filed any patent applications with respect to
its intellectual property. Although the Company intends to protect its
intellectual property, there can be no assurance that the steps taken by the
Company in this regard will be adequate to prevent misappropriation of its
technology or that the Company's competitors will not independently develop
technologies that are substantially equivalent or superior to the Company's
technology. Furthermore, litigation may be necessary to enforce the Company's
intellectual property rights, to protect the Company's trade secrets, to
determine the validity and scope of the proprietary rights of others or to
defend against claims of infringement. Such litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Patents and Proprietary Information."
NEED FOR ADDITIONAL CAPITAL
To the extent that the funds generated by this Offering, together with
existing resources, are insufficient to fund the Company's activities,
additional funds may be required, through either public or private financing.
7
<PAGE> 9
No assurance can be given that additional financing will be available, or, if
available, that it will be available on acceptable terms. If additional funds
are raised by issuing equity securities, further dilution to then existing
stockholders may result. If adequate funds are not available, the Company may be
required to curtail its activities. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
RISKS INHERENT IN POSSIBLE FUTURE UNSPECIFIED ACQUISITIONS
Management of the Company intends to pursue additional acquisitions as an
important part of its corporate strategy. While as of the date of this
Prospectus, the Company has no commitments or agreements with respect to any
acquisition, the Company plans regularly to evaluate acquisition opportunities
that fit within its business plan. Acquisitions involve numerous risks,
including potential difficulties in the assimilation of acquired operations,
diversion of management's attention away from normal operating activities,
negative financial impact based on the amortization of any acquired intangible
assets, potential loss of key employees of the acquired operation and potential
financial risk resulting from pre-acquisition liabilities that may exceed any
indemnities which may be provided by the seller.
Although the Company has allocated approximately $3,750,000 from the
proceeds of this Offering for acquisitions, the Company may require additional
capital for acquisitions. Funds for these purposes may be obtained from a number
of sources, including bank financing and additional sales of equity securities
through either public or private financing. The Company currently has available
borrowing capacity under the Revolving Credit Agreement, but if additional
financing is necessary, there can be no assurance that any such additional
financing can be obtained or, if obtained, that it would be on commercially
acceptable terms. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
POSSIBLE ILLIQUIDITY OF TRADING MARKET
Upon completion of this Offering, the Common Stock will be eligible for
initial quotation on the Nasdaq SmallCap Market and the Pacific Stock Exchange
(the "PSE"), which markets may be significantly less liquid than the Nasdaq
National Market System. Moreover, if the Company should continue to experience
losses from operations, it may be unable to maintain the standards for continued
quotation on the Nasdaq SmallCap Market and/or the PSE, and the Common Stock
could be subject to removal from either or both of those markets. Trading, if
any, in the Common Stock would thereafter be conducted in the over-the-counter
market on an electronic bulletin board or in what are commonly referred to as
the pink sheets. As a result, an investor would find it more difficult to
dispose of, or to obtain accurate quotations as to the price of, the Company's
securities.
POSSIBLE DELISTING OF SECURITIES FROM NASDAQ; SHARES OF COMMON STOCK MAY BE
SUBJECT TO PENNY STOCK RULES
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure, relating to the market for penny stocks, in connection
with trades in any stock defined as a penny stock. The Securities and Exchange
Commission has adopted regulations that generally define a penny stock to be any
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions. Such exceptions include any equity security listed on the
Nasdaq National Market System or the Nasdaq SmallCap Market and any equity
security issued by an issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer has been in continuous operation for at least three
years, (ii) net tangible assets of at least $5,000,000, if such issuer has been
in continuous operation for less than three years, or (iii) average annual
revenue of at least $6,000,000 for the last three years. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith.
In addition, if the Company's securities are not quoted on the Nasdaq
National Market System or the Nasdaq SmallCap Market, or the Company does not
have at least $5,000,000 in net tangible assets or at least $6,000,000 in
average annual revenue for the last three years, trading in the Company's
securities would be
8
<PAGE> 10
covered by Rules 15g-1 through 15g-6 and 15g-9 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act") for non-Nasdaq and non-exchange listed
securities. Under such rules, broker/dealers who recommend such securities to
persons other than established customers and accredited investors must make a
special written suitability determination for the purchaser's written agreement
to a transaction prior to sale. Securities are exempt from these rules if the
market price of the Common Stock is at least $5.00 per share.
Although the Company's Common Stock will, as of the date of this
Prospectus, be outside the definitional scope of a penny stock, as it will be
listed on the Nasdaq SmallCap Market, in the event the Common Stock was
subsequently to become characterized as a penny stock, the market liquidity for
the Company's securities could be severely affected. In such an event, the
regulations on penny stocks could limit the ability of broker/dealers to sell
the Company's securities and thus the ability of purchasers of the Company's
securities to sell their securities in the secondary market.
BROAD MANAGEMENT DISCRETION IN USE OF PROCEEDS
The Company intends to use a substantial portion of the net proceeds of
this Offering for business opportunities, working capital and general corporate
purposes. Accordingly, the Company will have broad discretion in the application
of such net proceeds. Purchasers of Common Stock in this offering will not have
the opportunity to evaluate the economic, financial or other information which
the Company will use to determine application of such proceeds. See "-- Risks
Inherent in Future Unspecified Acquisitions" and "Use of Proceeds."
REPRESENTATIVE'S INFLUENCE IN THE MARKET
A significant amount of the securities offered hereby may be sold to
customers of the Representative (none of which are discretionary accounts).
Although it has no obligation to do so, the Representative intends to make a
market in the Company's securities. If it participates in the market, the
Representative may exert a dominating influence on the market, if one develops,
for the securities offered hereby. Such market making activity may be
discontinued at any time. The price and liquidity of the Common Stock may be
significantly affected by the degree, if any, of the Representative's
participation in the market.
REPRESENTATIVE'S INFLUENCE OVER POTENTIAL FUTURE CAPITAL FINANCING
The Company has agreed that for a period of one year from the date of this
Prospectus, it will not sell or otherwise dispose of any securities (with the
exception of the shares of Common Stock issued upon exercise of currently
outstanding options or warrants, and options granted under the Company's 1996
Incentive and Nonqualified Stock Option Plan) without the Representative's prior
written consent, which shall not be unreasonably withheld. The Company has also
agreed that, for a period of 24 months from the date of this Prospectus, it will
not sell or issue any securities pursuant to Regulation S under the Securities
Act without the Representative's prior written consent. These agreements
represent significant potential restrictions on the Company's ability to raise
capital or consummate any merger or acquisition through the sale or issuance of
the Company's securities, which would have a material adverse effect on the
Company. There can be no assurance that additional sales of securities will not
occur that may have dilutive effects. The Representative has further advised the
Company that in determining whether consent will be granted the Representative
will consider on a case-by-case basis, in addition to the potential dilution to
existing shareholders, a number of factors, including the Company's current need
for additional financing, the purposes for which the financing is sought, the
cost and availability of alternative sources of non-equity financing and, in the
case of a proposed acquisition, the type of business to be acquired, its
relation to the Company's current business and the existence of alternative
methods of financing the transaction. See "Underwriting."
PAYMENTS TO AFFILIATES
Upon the closing of this Offering, Palomar Medical Technologies, Inc.
("Palomar") will receive approximately $3,307,000, or 36% of the proceeds of the
Offering, in repayment of outstanding loans. Palomar owns 173,874 shares of
Common Stock of the Company, and holds a warrant to purchase 289,790 shares of
9
<PAGE> 11
Common Stock at an exercise price of $1.29 per share. Steven Georgiev, a founder
and Chairman of the Board of Directors of the Company, is the Chairman and Chief
Executive Officer of Palomar. See "Use of Proceeds" and "Certain Transactions."
CONTROL BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
Upon completion of this Offering, current principal stockholders and
management of the Company will own approximately 44% of the outstanding Common
Stock of the Company, assuming no exercise of options or warrants. Although no
voting arrangement exists among them, the Company's principal stockholders and
current management will, as a practical matter, be able to direct the affairs of
the Company. See "Principal Stockholders."
UNCERTAINTY OF ACCEPTANCE OF PRODUCTS IN NEW MARKETS
The Company has recently commenced marketing in two new
markets -- infrastructure and recreation. The introduction of advanced
composites to the infrastructure market is a result of recent technological
developments, and there can be no assurance that advanced composites will gain
market acceptance in this market. The Company has not commissioned any
independent market surveys or reports regarding these markets or other potential
new markets, and limited public information is available. In addition, there can
be no assurance that the Company will have the financial, managerial, and
manufacturing resources necessary to achieve a profitable level of sales in
these markets. See "Business."
NEED TO RESPOND TO TECHNOLOGICAL CHANGE
The markets for the Company's products are characterized by rapidly
changing technology and evolving industry standards. The Company's future
success will depend in part upon its ability to enhance its existing products
and to introduce new products to meet changing customer requirements and
emerging industry standards. There can be no assurance that the Company will
successfully complete any such developments or that the Company's current or
future products will achieve market acceptance. Any delay or failure of these
products to achieve market acceptance would adversely affect the Company's
business. In addition, there can be no assurance that products or technologies
developed by others will not render the Company's products or technologies
non-competitive or obsolete.
MANUFACTURING ACTIVITIES SUBJECT TO EXTENSIVE GOVERNMENT AND ENVIRONMENTAL
REGULATION
The Company's manufacturing activities are subject to extensive and
rigorous government regulation designed to protect the environment. The U.S.
Environmental Protection Agency and comparable state and local regulatory
agencies actively enforce environmental regulations, and some of these agencies
conduct periodic inspections to determine compliance with government
regulations. Failure to comply with applicable regulatory requirements can
result in, among other things, fines, suspensions of approvals, seizures or
recalls of products, operating restrictions, and criminal prosecutions.
Furthermore, changes in existing regulations or adoption of new regulations
could impose costly new procedures for compliance with, or prevent the Company
from obtaining, or affect the timing of, regulatory approvals. Prior to the
acquisition of CCC, an acetone leak was discovered at CCC's facility by
Montedison, the prior owner. Although the Company is indemnified for potential
liability for remediation of the leak, there can be no assurance that the
indemnification will be sufficient to pay the costs that the Company may incur.
The restrictions imposed by environmental regulations may change from time
to time. There can be no assurance that subsequent legislation or administrative
changes might not materially adversely affect the Company's business and future
prospects. See "Business -- Environmental Matters."
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
The Company believes that its operating results may be subject to
substantial quarterly fluctuations due to several factors, some of which are
outside the control of the Company, including fluctuating market demand for, and
declines in the average selling price of, the Company's products, the timing of
significant orders from
10
<PAGE> 12
customers, delays or cancellations of commercial and/or government programs
utilizing the Company's products, delays in the introduction of new or improved
products, delays in obtaining customer acceptance of new or changed products,
the cost and availability of raw materials, and general economic conditions. A
substantial portion of the Company's revenue in any quarter is derived from
orders booked in that quarter, and historically, backlog has not been a
meaningful indicator of revenues for a particular period. Accordingly, the
Company's sales expectations are based almost entirely on its internal estimates
of future demand and not from firm customer orders. See "Business -- Backlog."
DEPENDENCE UPON KEY PERSONNEL
The Company is highly dependent on the principal members of its management
staff, the loss of whose services could have a material adverse effect on the
Company's business. The Company believes that its future success will also
depend in part on its ability to attract, retain, and motivate qualified
personnel. The Company has entered into employment agreements with each of its
four executive officers. The loss of the services of any of the executive
officers could have a material adverse effect on the Company's business and
future prospects. See "Management."
FUTURE SALES OF SHARES OF COMMON STOCK MAY ADVERSELY AFFECT MARKET PRICE OF
COMMON STOCK
Sales in the public market of substantial amounts of Common Stock, or the
perception that such sales could occur, could materially adversely affect
prevailing market prices for the Common Stock and the Company's ability to raise
additional capital through the sale of equity securities. See "Description of
Securities," "Shares Eligible for Future Sale," and "Underwriting."
SUBSTANTIAL SHARES OF COMMON STOCK RESERVED FOR ISSUANCE
The Company has reserved 350,000 shares of Common Stock for issuance to
employees, officers, directors, and consultants pursuant to option exercises
under the Company's 1996 Incentive and Nonqualified Stock Option Plan. The
Company has also reserved 143,302 shares of Common Stock to be issued upon the
exercise of options granted to certain members of senior management in
connection with their employment contracts and to a consultant to the Company.
To date, the Company has granted options to purchase a total of 266,902 shares
of Common Stock, at prices ranging from $.86 to $4.00 per share. The Company has
also reserved 289,790 shares of Common Stock for issuance upon exercise of
warrants issued to Palomar in connection with bridge financing it provided to
the Company. The Company will issue to the Representative, in connection with
this Offering, the Representative's Warrant to purchase 200,000 shares of Common
Stock, and has reserved 200,000 shares of Common Stock for issuance upon the
exercise thereof. The existence of the Representative's Warrant and any other
options or warrants may prove to be a hindrance to the Company's future equity
financing. Further, the holders of such warrants and options may exercise them
at a time when the Company would otherwise be able to obtain additional equity
capital on terms more favorable to the Company. Sales in the public market of
substantial amounts of Common Stock, or the perception that such sales could
occur, could depress prevailing market prices for the Common Stock. See
"Executive Compensation -- 1996 Incentive and Nonqualified Stock Option Plan,"
"Certain Transactions," and "Underwriting."
NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
There has been no prior market for the Company's Common Stock and there can
be no assurance that a public market for the Common Stock will develop or be
sustained after the Offering. In the absence of such a market, purchasers of the
Common Stock may experience substantial difficulty in selling their securities.
The initial public offering price for the Common Stock has been determined by
negotiations between the Company and the Representative. The trading price of
the Company's Common Stock could be subject to significant fluctuations in
response to variations in quarterly operating results, changes in analysts'
estimates, announcements of technological innovations by the Company or its
competitors, general conditions in the defense and aerospace industries and
other factors. In addition, the capital markets are subject to price and volume
fluctuations that affect the market prices of publicly traded securities in
general, and the market prices of less
11
<PAGE> 13
heavily capitalized high technology companies in particular. Such fluctuations
may be unrelated to actual operating performance.
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock offered hereby will incur immediate and
substantial dilution of approximately $2.89 per share, or 53% of their
investment in the shares of Common Stock (assuming an initial public offering
price of $5.50 per share), in that the pro forma net tangible book value of the
Company's Common Stock after this Offering will be approximately $2.61 per
share. See "Dilution."
NO ANTICIPATED DIVIDENDS
The Company has not previously paid any dividends on its Common Stock and,
for the foreseeable future, intends to continue its policy of retaining any
earnings to finance the development and expansion of its business. The Company's
Revolving Credit Agreement with its principal lender prohibits the payment of
cash dividends from CCC to AMT without the written consent of the lender, which
could limit the Company's ability to obtain cash to pay dividends to its
stockholders. See "Dividend Policy."
ISSUANCE OF PREFERRED STOCK MAY DISCOURAGE CHANGE OF CONTROL
The Company's Certificate of Incorporation authorizes the issuance of up to
5,000,000 shares of preferred stock, $0.01 par value per share ("Preferred
Stock"), with designations, rights, and preferences determined from time to time
by its Board of Directors. Accordingly, the Company's Board of Directors is
empowered, without stockholder approval, to issue Preferred Stock with
dividends, liquidation, conversion, voting, or other rights that could adversely
affect the voting power or other rights of the holders of Common Stock. In the
event of issuance, the Preferred Stock could be used, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by Delaware General Corporation Law, the Company has included
in its Certificate of Incorporation a provision to eliminate the personal
liability of its directors for monetary damages for breach or alleged breach of
their fiduciary duties as directors, subject to certain exceptions. In addition,
the Bylaws of the Company provide that the Company is required to indemnify its
officers and directors under certain circumstances, including circumstances in
which indemnification would otherwise be discretionary, and that the Company is
required to advance expenses to its officers and directors as incurred in
connection with any proceeding against them for which they may be indemnified.
See "Management -- Limitation of Liability and Indemnification of Directors and
Officers."
12
<PAGE> 14
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock being offered hereby (at an assumed initial public offering price
of $5.50 per share), after deducting underwriting discounts and commissions, the
Representative's non-accountable expense allowance, and offering expenses, are
estimated to be approximately $9,070,000 ($10,505,500 if the Underwriters'
over-allotment option is exercised in full). The Company expects to use the net
proceeds from this Offering approximately as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENT
---------- -------
<S> <C> <C>
Repayment of bridge financing(1)................................ $3,307,000 36%
Repayment of senior indebtedness(2)............................. 1,000,000 11
Business opportunities(3)....................................... 3,750,000 41
Purchase of capital equipment(4)................................ 500,000 6
Working capital and general corporate purposes(5)............... 513,000 6
------- ----
Total................................................. $9,070,000 100%
======= ====
</TABLE>
- ---------------
(1) The Company expects to use approximately $3,307,000 of the estimated net
proceeds to repay in full two 10% Promissory Notes, due December 31, 1996,
in the principal amounts of $3,000,000 and $150,000, respectively, with
interest accrued thereon from December 19, 1995, payable to Palomar, an
affiliate of the Company. The proceeds of this debt were used by the Company
to acquire CCC. See "Capitalization" and "Certain Transactions."
(2) The Company expects to use approximately $1,000,000 of the estimated net
proceeds to repay a portion of the principal amount outstanding under its
$4,440,000 revolving credit facility (the "Revolving Facility"), which is
part of a $5,000,000 Loan and Security Agreement secured by the Company's
assets (the "Revolving Credit Agreement"). The Revolving Credit Agreement,
which provides for interest to accrue daily on unpaid principal amounts at
the annual rate of one and one-half percent (1 1/2%) above the Prime Rate,
as defined therein, matures on December 19, 1998 and generally is renewable
on an annual basis thereafter. At March 31, 1996, $2,043,362 was outstanding
under the Revolving Facility. The Company retains the right to re-borrow
under the terms of the Revolving Facility. The Company has used amounts
borrowed under the Revolving Credit Agreement as part of the funds used to
acquire CCC and for working capital. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
(3) The Company intends to use a portion of the proceeds of this Offering to
acquire businesses, interests in joint ventures, and technology rights that
are complementary to its current business. The Company has no present
commitments or agreements with respect to any acquisitions. In the event the
Company does not use all of this portion of the proceeds for acquisitions,
it will use the unspent portion for working capital and general corporate
purposes. See "Business."
(4) The Company intends to use a portion of the proceeds of this Offering to
purchase certain capital equipment to upgrade and replace existing
equipment.
(5) Includes $72,000 payable to the Representative pursuant to a financial
consulting agreement between the Representative and the Company, all of
which will be paid at the closing of this Offering. See "Underwriting."
The projected expenditures described above are estimates and approximations
only and do not represent firm commitments by the Company. The Company may find
it necessary or advisable to change the allocation of net proceeds due to the
availability of other business opportunities or other factors, including future
developments in the Company's expansion program, arrangements with other
companies and competitive developments.
Pending the use of the net proceeds for the above purposes, the Company
intends to invest such funds in investment-grade obligations, including
short-term, interest-bearing money market funds. The Company believes that the
net proceeds from this Offering, together with existing cash resources,
borrowings under its Revolving Credit Agreement and revenue from operations,
will be adequate to satisfy working capital
13
<PAGE> 15
requirements for a period of 24 months from the date of this Offering. See "Risk
Factors -- Need for Additional Capital" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently anticipates that it will retain all future earnings
for the expansion and operation of its business, and does not anticipate paying
cash dividends in the foreseeable future. The Company's Revolving Credit
Agreement with its principal lender prohibits the payment of cash dividends from
CCC to AMT without the written consent of the lender, which could limit the
Company's ability to obtain cash to pay dividends to its stockholders.
14
<PAGE> 16
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1996, on an actual basis and as adjusted to reflect the sale by the
Company of 2,000,000 shares of Common Stock offered hereby (at an assumed
initial public offering price of $5.50 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company) and the application of the estimated net proceeds therefrom. The
capitalization information set forth in the following table is qualified by the
more detailed Consolidated Financial Statements and Notes thereto included
elsewhere in this Prospectus and should be read in conjunction with such
Consolidated Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
AS ADJUSTED
ACTUAL (1)(2)
---------- -----------
<S> <C> <C>
Short-term Debt:
Notes payable -- affiliate....................................... $3,091,277 $ 0
Current portion of term loan -- bank............................. 112,000 112,000
Long-term debt..................................................... 2,463,361 1,463,361
Stockholders' Equity:
Preferred Stock, par value $0.01 per share; 5,000,000 shares
authorized, no shares issued or outstanding, actual and as
adjusted...................................................... 0 0
Common Stock, par value $.01 per share; 15,000,000 shares
authorized and 1,516,908 shares issued and outstanding,
actual; 15,000,000 shares authorized and 3,516,908 shares
issued and outstanding, as adjusted........................... 15,169 35,169
Additional paid-in capital....................................... 197,167 9,247,167
Accumulated deficit.............................................. (30,964) (89,687)
-------- --------
Total stockholders' equity....................................... 181,372 9,192,649
-------- --------
Total capitalization..................................... $5,848,010 $10,768,010
======== ========
</TABLE>
- ---------------
(1) Does not include 25,000 shares of Common Stock issued by the Company after
March 31, 1996.
(2) Does not give effect to an aggregate of up to 1,056,692 shares of Common
Stock issuable upon exercise of: (i) the Underwriters' over-allotment
option; (ii) the Representative's Warrant; (iii) a warrant to purchase
289,790 shares granted to a shareholder of the Company with an exercise
price of $1.29 per share; and (iv) options outstanding as of May 24, 1996 to
purchase an aggregate of 266,902 shares of Common Stock at a weighted
average exercise price of $2.06 per share. See "Executive Compensation --
1996 Incentive and Nonqualified Stock Option Plan," "Certain Transactions,"
and "Underwriting."
15
<PAGE> 17
DILUTION
The net tangible book value of the Company's Common Stock as of March 31,
1996 was $181,372, or approximately $0.12 per share. Net tangible book value per
share represents the amount of the Company's total tangible assets less total
liabilities, divided by the 1,516,908 shares of Common Stock outstanding as of
March 31, 1996.
Net tangible book value dilution per share represents the difference
between the amount per share paid by new investors who purchase shares of Common
Stock in this Offering and the pro forma net tangible book value per share of
Common Stock immediately after completion of this Offering. After giving effect
to the sale of 2,000,000 shares of Common Stock in this Offering at an assumed
initial public offering price of $5.50 per share, after deduction of
underwriting discounts and commissions, the Representative's non-accountable
expense allowance and estimated offering expenses, the pro forma net tangible
book value of the Company at March 31, 1996 would have been $9,192,649, or $2.61
per share.
This represents an immediate increase in net tangible book value of $2.49
per share to existing shareholders, and an immediate dilution in net tangible
book value of $2.89 per share to new investors in the Offering, as illustrated
in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of Common
Stock(1).......................................................... $5.50
Net tangible book value per share at March 31, 1996............... $ 0.12
Increase per share attributable to new investors.................. 2.49
----
Pro forma net tangible book value per share after the Offering(2)... 2.61
----
Net tangible book value dilution per share to new investors(3)...... $2.89
====
</TABLE>
- ---------------
(1) Before deduction of underwriting discounts and commissions, the
Representative's non-accountable expense allowance and estimated offering
expenses to be paid by the Company.
(2) Does not give effect to an aggregate of up to 1,056,692 shares of Common
Stock issuable upon exercise of: (i) the Underwriters' over-allotment
option; (ii) the Representative's Warrant; (iii) a warrant to purchase
289,790 shares granted to a shareholder of the Company with an exercise
price of $1.29 per share; and (iv) options outstanding as of May 24, 1996 to
purchase an aggregate of 266,902 shares of Common Stock at a weighted
average exercise price of $2.06 per share. See "Underwriting," "Certain
Transactions" and "Management -- 1996 Incentive and Nonqualified Stock
Option Plan."
(3) Represents dilution of approximately 53% to purchasers of the shares of
Common Stock.
The following table summarizes, on a pro forma basis, the number of shares
of Common Stock purchased from the Company as of March 31, 1996, the total
consideration paid and the average price per share paid by (i) the existing
holders of Common Stock and (ii) the new investors in the Offering, assuming the
sale of 2,000,000 shares of Common Stock by the Company hereby at an initial
public offering price of $5.50 per share. The calculations are based upon total
consideration given by new and existing shareholders, before any deduction of
underwriting discounts and commissions, the Representative's non-accountable
expense allowance and estimated offering expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders.......... 1,516,908 43.1% $ 134,093 1.2% $0.09
New Investors.................. 2,000,000 56.9% $11,000,000 98.8% $5.50
------- ---- ------- ----
Total(1)............. 3,516,908 100.0% $11,134,093 100.0%
======= ==== ======= ====
</TABLE>
- ---------------
(1) The foregoing table does not give effect to the items described in footnote
(2) to the previous dilution table or to the issuance by the Company of
25,000 shares of Common Stock after March 31, 1996.
16
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected statements of operations data of
CCC for the year ended December 31, 1994, the period from January 1, 1995 to
December 19, 1995, and the three months ended March 31, 1995, which are derived
from the consolidated financial statements of CCC that are included elsewhere in
this Prospectus. Such financial statements, excluding the financial statements
for the three months ended March 31, 1995, were audited by Feldman Radin & Co.,
P.C., independent certified public accountants, whose report with respect
thereto is included elsewhere in this Prospectus. The following table also sets
forth certain financial data for AMT for the period from March 29, 1995
(inception) through December 31, 1995 and as of March 31, 1996 and for the three
months then ended, which are derived from the consolidated financial statements
of AMT that are included elsewhere in this Prospectus. Such financial
statements, other than the financial statements as of March 31, 1996 and for the
three months then ended, were audited by Feldman Radin & Co., P.C., independent
certified public accountants, whose report with respect thereto is included
elsewhere in this Prospectus. Also set forth in the table are the combined
results of AMT and CCC for the year ended December 31, 1995, as well as pro
forma consolidated statement of operations data reflecting the acquisition of
CCC on December 19, 1995 as if such acquisition had taken place on January 1,
1995. This data is qualified by reference to, and should be read in conjunction
with, the unaudited pro forma consolidated statement of operations included
elsewhere in this Prospectus. The results of operations of the Company for the
three months ended March 31, 1996 may not be indicative of the results for the
entire fiscal year. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL CONSOLIDATED
------------------------------------------------- COMBINED --------- THE
CCC AMT AMT & CCC AMT & CCC CCC COMPANY
------------------------------ ---------------- --------- --------- ------------ ---------
PERIOD
PERIOD MARCH 29, YEAR YEAR
JANUARY 1, 1995 ENDED ENDED THREE MONTHS ENDED(2)
YEAR ENDED 1995 TO (INCEPTION) TO DECEMBER DECEMBER ------------------------
DECEMBER 31, DECEMBER 19, DECEMBER 31, 31, 31, MARCH 31, MARCH 31,
1994 1995 1995 1995 1995(1) 1995 1996
------------ --------------- ---------------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net sales.................. $ 15,943 $15,300 $ 616 $15,916 $15,916 $4,018 $ 5,251
Gross margin............... 2,105 2,260 98 2,358 3,016 690 1,467
Operating Expenses:
Selling, general and
administrative......... 2,580 2,424 350 2,774 2,705 536 826
Research and
development............ 306 331 7 338 329 94 78
Income (loss) from
operations............... (781) (495) (259) (754) (18) 76 547
Interest expense........... 567 585 18 603 600 212 187
Other expenses (income).... 977 -- -- -- -- (24) --
Net income (loss).......... (2,325) (1,080) (277) (1,357) (618) (136) 246
Net income (loss) per
common share............. (0.18) (0.41) 0.13
Weighted average number of
common shares............ 1,517 1,517 1,879
OTHER DATA:
Depreciation expense....... 1,264 1,214 43 1,257 520 320 136
Earnings (loss) before
interest, taxes,
depreciation and
amortization............. (494) 719 (216) 503 502 396 683
</TABLE>
<TABLE>
<CAPTION>
THE COMPANY
MARCH 31, 1996
--------------
<S> <C>
BALANCE SHEET DATA:
Working capital (deficiency)............................................................................ $ (1,714)
Total assets............................................................................................ 10,148
Long-term debt.......................................................................................... 2,463
Stockholders' equity(3)................................................................................. 181
</TABLE>
- ---------------
(1) Includes pro forma adjustments to give effect to changes in: (i)
depreciation and amortization (a decrease of $737,000), (ii) interest
expense as a result of changes in the Company's debt structure (a decrease
of $3,000) and (iii) certain compensation arrangements (an increase of
$1,000), all as a result of the acquisition by AMT of CCC. See Unaudited Pro
Forma Consolidated Statement of Operations and Notes thereto.
(2) Interim data for the three months ended March 31, 1995 are for CCC only;
data for the three months ended March 31, 1996 reflect the consolidated
operations of AMT and CCC.
(3) The Company has never paid cash dividends on its Common Stock. See "Dividend
Policy."
17
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and Notes thereto contained elsewhere in
this Prospectus.
OVERVIEW
AMT was incorporated in Delaware on March 29, 1995 and operates in the
advanced materials and technologies industries. AMT is a holding company with
one operating subsidiary, Culver City Composites Corporation. AMT's activities
for the period March 29, 1995 (inception) to December 19, 1995 produced no
revenue, and were limited to the acquisition of CCC. On December 19, 1995, AMT
acquired all the stock of CCC. The following discussion reviews the financial
results of the Company for the three months ended March 31, 1996, as compared to
the financial results of CCC for the three months ended March 31, 1995. In
addition, the following discussion reviews the financial results of the combined
operations of CCC and AMT for the year ended December 31, 1995, as compared to
the financial results of CCC for the year ended December 31, 1994.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 and March 31, 1995
The Company's net sales during the first quarter of 1996 were $5,251,000,
an increase of approximately $1,234,000, or 30.7%, compared to net sales of
$4,018,000 in the first quarter of 1995. The increase in sales covered all
sectors, with transportation increasing over $500,000, defense by almost
$400,000, and communications by over $300,000. The sales increase was, in part,
due to changes in CCC's management, resulting in increased sales and marketing
activities and a substantial improvement in on-time delivery. In addition, the
Company benefited from a general improvement in the defense and aerospace
business.
In the first quarter of 1996, The Boeing Company ("Boeing") announced
increased build rates for the latter part of 1996 and 1997, which the Company
believes should result in higher demand for the materials it produces for
aircraft interiors and commercial jet engines.
In the first quarter of both 1995 and 1996, sales were highly concentrated,
with the top two customers, General Electric Company ("General Electric") and
Boeing and their subsidiaries, accounting for approximately 26% of sales in the
1996 period, compared to approximately 34% in the corresponding period of 1995.
The Company's twenty largest customers accounted for approximately 86% of sales
in the first quarter of 1996 and 83% in the first quarter of 1995.
In May, 1996, the Company's major suppliers informed the Company that
fiberglass prices, which had already been increased by approximately 8% in early
1996, would be increased by an additional 4%. To date, the Company has been able
to pass on most of these price increases to its customers, but it has no
assurances that it will be able to continue to do so.
For the quarter ended March 31, 1996, the Company realized a gross margin
of $1,467,000 or 27.9% of sales, an increase of $777,000 or 113% over the
corresponding period of 1995. The improvement was a result of the increase in
sales without a proportional increase in costs of manufacturing, and
management's continued efforts to improve on-time delivery and to increase
product yield by reducing scrap. Fixed and variable manufacturing costs declined
due to a reduction in workers compensation insurance and fuel costs. The
unionized employees received a pay increase of 3% in May, 1996.
Selling, general and administrative expenses were $826,000, or 15.7% of
sales, in the first quarter of 1996, an increase of $290,000 or 54% over the
first quarter of 1995. Most of the increase was due to the cost of additional
employees hired by CCC, and the extra corporate expenses of AMT.
Research and development expenses were $94,000 in the first quarter of
1996, an increase of approximately $16,000, or 20%, over the comparable period
of 1995. These expenses were 1.8% of sales in 1996 and
18
<PAGE> 20
2% of sales in 1995. The Company intends to expand research and development and
to that effect it has already hired additional staff and upgraded equipment.
Interest expense was $187,000, or 3.6% of sales, for the first quarter of
1996, a decrease of $25,000 or 12% compared to interest expense of $212,000 in
the first quarter of 1995. Debt levels in the first quarter of 1996 were
approximately 50% what they were in 1995, although the interest rate was
substantially higher.
Years Ended December 31, 1995 and 1994
The Company's net sales during 1995 were $15,916,000, a decrease of
approximately $27,000, or 0.2%, compared to net sales in 1994. In 1994 and 1995,
the Company's primary customers in the commercial aircraft sector of the
aerospace industry continued to experience lower aircraft build rates than in
the years prior to 1991. The Company, however, was able to increase sales in
this sector by approximately $500,000 due to increased business from existing
customers under a new aircraft engine program, which offset declines in
shipments to other customers and the nonrenewal of one contract with one
commercial aircraft customer. Boeing has announced increased build rates for the
latter part of 1996 and 1997, which the Company believes should result in higher
demand for the materials it produces for aircraft interiors and commercial jet
engines. In the defense sector, an increase in funding for the particular
programs the Company supplies led to an approximate $400,000 increase in sales
in 1995. The Company believes that sales to this sector may improve in the
latter half of 1996, as a result of the Company's recently completed
qualification of its high-temperature PMR-15 material for use in engines
manufactured by General Electric to be used on the U.S. Navy's F-18 E/F fighter
plane. Sales to the communication industry declined $900,000 because of the
timing of purchases by the Company's largest customer in that industry. That
customer has typically made large purchases every two years as it builds
inventory, and it made significant purchases in 1994 that were not repeated in
1995. In 1996, the two-year cycle and a new qualification leads the Company to
expect that this customer will increase its purchases over 1994 levels, although
the Company does not have a commitment from the customer to do so.
The Company believes that in 1995 customers remained cautious in committing
to purchase composites from the Company pending the consummation of the purchase
of CCC in December, 1995.
Two customers, Boeing and General Electric, accounted for approximately 30%
of 1995 sales, compared to approximately 31% of 1994 sales. The Company's twenty
largest customers accounted for approximately 73% of sales in 1995 and 74% of
sales in 1994.
In the fourth quarter of 1995, the Company's major suppliers informed the
Company that fiber material prices, which had remained stable in 1994 and most
of 1995, would likely increase in late 1995 and 1996. To date, the Company has
been able to pass on most of these price increases to its customers.
For the year ended December 31, 1995, the Company realized a gross margin
of $2,358,000, or 14.8% of sales, an increase of $253,000 or 12% over 1994. The
improvement was a result of management's continued effort to increase product
yield by reducing scrap (an improvement of approximately $100,000) and to reduce
overhead. Staff costs declined slightly, due to reductions in staff and a
decrease in manufacturing management salary levels. The unionized staff received
cost of living adjustments in 1994 and 1995. Insurance costs declined
approximately $100,000, due to an improved safety record which allowed the
Company to negotiate lower rates with a new carrier. Cost of natural gas
declined approximately $100,000 due to more efficient usage and lower negotiated
rates. Other costs increased by approximately $47,000.
Selling, general and administrative expenses were $2,774,000 or 17.4% of
sales, in 1995, an increase of $194,000 or 7.5% over the 1994 total. Most of the
increase was due to expenses incurred by AMT in connection with the acquisition
of CCC. If the Company is successful in making additional acquisitions, the
Company intends to allocate to any additional operating entities a pro rata
share of the Company's general overhead. A reduction in management salaries in
early 1995 partially offset the increases in expenses resulting from use of
temporary help and overtime pending the closing of the sale of CCC to AMT. In
addition, new sales commission agreements added approximately $100,000 to 1995
expenses.
19
<PAGE> 21
Research and development expenses were $338,000 in 1995, an increase of
approximately $32,000, or 10.5%, from the 1994 amount. These expenses were 2.1%
of sales in 1995 and 1.9% of sales in 1994.
Interest expense was $603,000, or 3.8% of sales, for 1995, an increase of
$36,000 or 6.3% over interest expense for 1994. Debt levels increased slightly
in the latter part of 1995, with an increase in inventory required by a major
customer and a higher amount of receivables financed. Interest rates were
constant.
Other expenses of $977,000, or 6.1% of sales, were incurred in 1994. During
that year, the Company reduced the space needed to manufacture its products and,
as a result, one leased facility became surplus. The costs associated with the
lease were expensed in 1994. In addition, the Company settled certain litigation
at a cost of $450,000.
As of December 31, 1995, the Company had net operating loss carryforwards
for federal income tax purposes of which, due to the change-in-ownership
provisions of Section 382 of the Internal Revenue Code, the amount available to
offset future taxable income of the Company is limited to approximately $320,000
per year for the next fifteen years.
LIQUIDITY AND CAPITAL RESOURCES
The Company used $5,657,546 to acquire CCC on December 19, 1995. The
Company financed the purchase of CCC with loans aggregating $3,150,000 from
Palomar (see "Certain Transactions"), and borrowings under its Revolving Credit
Agreement. The Revolving Credit Agreement consists of a $560,000 term loan and a
$4,440,000 revolving line of credit (the "Revolving Facility"), the ability to
borrow from which is tied to a formula based on inventory and accounts
receivable. The borrowings under the Revolving Credit Agreement are secured by
all the assets of the Company. The Company paid approximately $4,900,000 to
purchase the shares of CCC and approximately $700,000 with respect to closing
and preclosing expenses.
For the three month period ended March 31, 1996, cash used in operations
was $431,000, as cash generated was not sufficient to fund the increase in
receivables ($951,000) resulting from the increase in sales. Other working
capital items resulted in little net change in cash. The net cash deficit from
operations was financed by an increase in the borrowings under the Revolving
Facility and a draw down of cash balances from the year end level. The Company's
policy is to use cash received to reduce outstanding loans under the Revolving
Facility and to re-borrow as needed. As a result, the Company showed $1,800 of
cash on hand at March 31, 1996. As of May 1, 1996, over $1,500,000 was available
for additional borrowing under the Revolving Facility.
Capital expenditures were $40,000 for the three months ended March 31,
1996. However, the Company plans to expend approximately $500,000 from the
proceeds of this Offering to install three new liquid bulk storage tanks, modify
its resin mixing facilities, and purchase additional testing equipment. The
Company anticipates that the new tanks, which will replace those that were
removed in 1995, and the modifications to the mixing facilities will improve
operating efficiency.
Cash used in operations of CCC of $632,000 and $1,084,000 in 1995 and 1994,
respectively, as well as capital expenditures of $163,000 and $108,000 in 1995
and 1994, respectively, were funded by advances and capital contributions by its
parent company. Sales increased in the fourth quarter of 1995 as compared to the
fourth quarter of 1994; as a result, year-end accounts receivable increased over
1994 year-end levels, notwithstanding a decrease in sales for the 1995 period as
compared to the year ended December 31, 1994. In addition, inventories at
December 19, 1995 increased substantially over the prior year-end amount in
anticipation of continued sales growth in 1996. In 1995, CCC wrote off
previously reserved accounts receivable, thereby reducing its allowance for
doubtful accounts from $500,000 in 1994 to $104,000 in 1995.
The Company has no known environmental violations or assessments that the
Company believes would have a material adverse effect on the Company's business
or its financial results. Nevertheless, there can be no assurance that
activities at the Company's facilities will not result in environmental claims
being asserted against the Company, or remedial actions being required, in the
future.
20
<PAGE> 22
As all sales are made in U.S. dollars, fluctuations in exchange rates have
no direct impact on earnings or liquidity. However, to the extent the dollar
appreciates against foreign currencies, the Company's products will become less
attractive to foreign customers when compared to products manufactured in other
countries.
Although the Company manufactures against firm orders, it does maintain an
inventory of raw materials which may become obsolete through cancellation of the
program for which they were purchased, expiration of shelf lives, or
substitution of improved materials for existing ones. The Company sells obsolete
inventory in the normal course of business.
The Company believes that the net proceeds from this Offering, along with
the existing capital resources of the Company, the Revolving Credit Agreement
and revenue from operations of the Company, will be adequate to satisfy its
working capital and capital expenditure requirements for the next 24 months.
Management of the Company intends to pursue acquisitions of businesses,
interests in joint ventures and technology rights that are complementary to its
current business. Although the Company has allocated approximately $3,750,000
from the proceeds of this Offering for acquisitions, the Company may require
additional capital for acquisitions. If the Company is unable to find suitable
acquisition opportunities, it will use the unspent proceeds allocated to
acquisitions for working capital and general corporate purposes. See
"Business -- Strategy."
The Company has, as of May 1, 1996, over $1,500,000 available for borrowing
under the Revolving Facility. The Company intends to repay part of the
borrowings under the Revolving Credit Agreement from the proceeds of this
Offering. The amount so paid on the Revolving Facility will be available for
re-borrowing. See "Use of Proceeds."
OTHER INFORMATION
The Company accounts for stock options in accordance with APB Opinion No.
25, "Accounting for Stock Issued to Employees." In accordance with Statement No.
123 of the Financial Accounting Statements Board, "Accounting for Stock Based
Compensation," the Company intends to continue to apply APB Opinion No. 25 for
purposes of determining net income and to adopt the pro forma disclosure
requirements of Statement No. 123 in its annual financial statements for 1996.
Therefore, Statement No. 123 will have no impact on the Company's reported
results of operations.
21
<PAGE> 23
BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
AMT was incorporated in Delaware in March 1995. AMT had no material
operations until December 19, 1995, when it acquired Structural Polymer Systems,
Inc. (renamed Culver City Composites Corporation), from a subsidiary of
Montedison S.p.A., an Italian multinational conglomerate which in turn had
acquired it from Ferro Corporation in 1991. AMT financed the purchase of CCC
with loans aggregating $3,150,000 from Palomar (see "Certain Transactions"), and
borrowings under its $5,000,000 Revolving Credit Agreement.
THE COMPANY
The Company manufactures and sells advanced composites, which are a
combination of high performance reinforcement fabrics or fibers (such as
fiberglass, carbon, or aramid) and a plastic resin (such as epoxy, phenolic, or
polyimide). The Company coats or impregnates the fabrics or fibers with resins
to produce a "prepreg." The combination of high performance reinforcement
fabrics or fibers with plastic resins forms an advanced composite with
exceptional structural properties. The Company believes it is a leader in sales
of advanced composites containing PMR-15 resin, which are used in
high-temperature jet engine applications, and a leading supplier of advanced
composites used for aircraft interiors.
The Company sells its products to the following markets: aerospace,
including transportation (aircraft and mass transit) and communications
(communications satellites and their launchers); defense (military aircraft,
naval vessels, defense systems, and military support equipment); and recreation
(skis). Major customers include: The Boeing Company, General Electric Company,
Lockheed Martin Corporation, McDonnell Douglas Corporation, de Havilland Inc.,
the Aerojet division of GenCorp Inc. and Daimler-Benz AG. See "Risk
Factors -- Dependence on Major Customers."
The Company's business strategy is to achieve profitability through
increased utilization of existing plant capacity and acquisitions of companies
with complementary businesses. There can, however, be no assurance that the
Company will be able to achieve profitability. The Company is currently
operating significantly below the capacity of its facilities and management
believes that it could expand its business and rapidly increase revenues without
material additional capital expenditures. Although the Company suffered losses
in 1994 and 1995, it believes that it is well positioned to capitalize on
certain currently improving industry trends, including announced increases in
the build rate for commercial aircraft, the increased use of advanced composites
in sporting goods, and the recently approved use of advanced composites in
infrastructure applications such as reinforcement of freeway bridge columns.
Increased demand, if any, for advanced composites as a result of these trends
may not occur immediately; in particular, any increase in aircraft procurement
is not expected to have a material impact on the Company's sales to the
aerospace market before the fourth quarter of 1996. However, the Company
believes that in general these trends, coupled with the decrease in available
capacity caused by other companies' plant shutdowns during the past few years,
will lead to increased demand for product from the remaining advanced composite
manufacturing companies. In addition, the Company plans to acquire companies in
the advanced materials and technologies industries that the Company believes
will enable it to expand its customer base, reduce costs, and offer new
products. The Company believes that many companies with annual sales under $30
million which originally developed advanced materials and technologies for the
defense industry are now potentially available for purchase and consolidation by
the Company. The Company has no commitments or agreements with respect to any
acquisition. See "Risk Factors -- Limited Operating History; Recent Operating
Losses" and "-- Risks Inherent in Possible Future Unspecified Acquisitions."
INDUSTRY BACKGROUND
The advanced composites industry had its origins in the early stages of the
Cold War and the military's need for strong, lightweight materials to replace
metal parts on rockets, missiles, satellites, and aircraft. From that start,
uses of advanced composites expanded into the fields of commercial aircraft,
recreation, construction, communications, printed circuit boards, boats,
automobiles, and civil infrastructure. CCC and its predecessors were involved in
the commercial aerospace, defense, communications, and, peripherally, the
22
<PAGE> 24
printed circuit board markets. These markets grew at a rate the Company
estimates to be approximately 20% per annum from the 1960s through 1991, as a
result of increased defense spending and greater demand for commercial aircraft.
From that peak, over the next four years sales declined a total of approximately
30%, due to simultaneous downturns in defense spending and the commercial
aircraft build rate. The advanced composites industry as a whole grew slightly
during this period, due to increases in non-aerospace markets. As a result of
this downturn, certain manufacturers of advanced composites in the aerospace
industry closed production facilities and consolidated from 1991 through 1995.
The Company believes that annual sales in the commercial aircraft segment
of the aerospace industry reached a five-year low in 1995, and expects sales in
the segment to increase in the near term. Commercial aircraft manufacturers,
such as Boeing, have announced projected increases in their requirements.
According to Boeing's 1996 Current Market Outlook, airlines will require 12,000
new commercial airplanes over the next 20 years due to anticipated increases in
worldwide air travel, and an additional 3,900 new airplanes will be needed over
the next 20 years to replace aging airplanes presently in service. The Company
believes defense spending on new aircraft and missiles may increase slightly
after a decline of approximately 40% in the U.S. government aircraft procurement
budget since 1987. In addition, new uses have been developed for advanced
composites. For instance, in the infrastructure segment, the California
Department of Transportation has recently approved the use of advanced
composites to retrofit freeway bridge columns to make them better able to
withstand earthquakes.
In the defense and aerospace markets, manufacturers of advanced composites
are generally selected to supply an advanced composite from one month to several
years in advance of actual use in production by the customer. Typically, a
manufacturer developing a new product, such as a commercial aircraft, will set
forth specifications for a part or component. Advanced composites manufacturers
develop and supply an advanced composite meeting the called for specifications.
An advanced composite is deemed "qualified" for use in production when the
customer determines that the manufacturer's product and production process meet
its specifications. The qualification process for any given product is lengthy
and expensive, and there can be no assurance that, once it is begun, the
manufacturer will successfully qualify a given product or recoup the costs
invested in the product's development. Once the advanced composite is qualified,
the customer is not likely to qualify alternative suppliers. Nevertheless,
revenues from any particular part or component will depend upon market demand
for the customer's product.
STRATEGY
The Company's strategy is to expand its business by utilizing its existing
excess plant capacity to meet expected increases in demand for aircraft, to
increase its market share by offering new products to existing customers, and to
offer existing products to new markets such as recreation and infrastructure,
while continuing the cost reduction efforts begun in mid-1994. In addition, the
Company plans to grow through acquisitions of companies in the advanced
materials and technologies industries, where the Company believes there are
numerous opportunities to expand its customer base, reduce costs, and obtain new
products. There can be no assurance, however, that the Company will achieve
these goals. See "Risk Factors -- Limited Operating History; Recent Operating
Losses" and "-- Risks Inherent in Possible Future Unspecified Acquisitions."
The Company believes that it is well positioned to meet the anticipated
increases in market demand because it has approximately 70% excess capacity in
its Culver City plant, which it believes will enable it to expand its business
rapidly and increase revenues without material additional capital expenditures,
and because of its established relations with the major aircraft manufacturers
and their subcontractors. See "Risk Factors -- Dependence on Major Customers."
The Company has also recently intensified attempts to seek customer
qualification for products for both aerospace and non-aerospace applications for
existing and new customers. For example, in early 1996 the Company qualified as
a sole source supplier for two new defense and communications programs, from
which the Company expects to derive revenues commencing in 1997. However, no
assurance can be given that these qualifications will result in orders. See
"Risk Factors -- Dependence on U.S. Government Spending."
23
<PAGE> 25
The Company believes it will also grow by introducing its existing products
to new markets and by introducing new products to its existing markets. For
instance, the Company recently shipped a modified aerospace product to a ski and
snowboard manufacturer. Also, in the first quarter of 1996, the Company entered
into a joint venture agreement with Advanced Polymer Sciences, Inc. ("APS"),
pursuant to which the Company will produce, and the joint venture will market,
advanced composites products containing APS's patented Siloxirane(R)
high-temperature resin system to the Company's customer base.
The Company intends to use approximately $3,750,000 of the proceeds of this
Offering to acquire companies that sell to the same customers as the Company or
make similar products. The Company believes that the recent contraction in the
aerospace and defense industries has increased competitive pressure on many
smaller companies. The Company believes that many companies with annual sales
under $30 million which originally developed advanced materials and technologies
are now potentially available for purchase and consolidation by the Company. See
"Risk Factors -- Risks Inherent in Possible Future Unspecified Acquisitions."
PRODUCTS
General. Advanced composites are a combination of two different materials:
high-performance reinforcement fabrics or fibers (such as fiberglass, carbon, or
aramid) and a plastic resin. The Company impregnates these reinforcement fabrics
or fibers with resins to produce a "prepreg." The combination of high-
performance reinforcement fabrics or fibers with plastic resins forms a
composite material with exceptional structural properties not found in
fabrics/fibers or resins alone. Most of the advanced composites are sold by the
Company as fabrics, but a small percentage of the Company's products is made
from fibers aligned into unidirectional tapes.
The Company has qualified its advanced composites to meet over 200
specifications for use in the defense, aerospace, and communications markets.
Approximately 30% of the Company's annual sales are derived from contracts where
the Company is the sole source supplier on certain parts for commercial aircraft
and satellite launchers, as well as parts for defense applications. It has been
the Company's experience that customers rarely change suppliers for a qualified
composite. The Company believes that while the qualification process protects it
to a certain degree from competition, and assures it of some revenues during the
life of the program or product for which the Company's advanced composite has
been qualified, the qualification process also tends to hinder the Company's
ability to increase its market share and compete in new markets. The Company
believes the qualification process for industries other than defense and
aerospace may be less costly and more rapid. Despite the Company's established
relationships with its most significant customers, there can be no assurance
that the Company will qualify as a supplier for future projects. See "Risk
Factors -- Intense Competition in Advanced Composites Industry."
In 1995, approximately 70% of the Company's sales were products for which
it was one of two or more qualified sources of supply for the customer. In such
a situation, the customer may divide its orders among suppliers according to a
preset allocation or may ask for quotes from each qualified supplier prior to
issuing the purchase order. In the latter case, the rapidity with which the
Company can fulfill the order is frequently more important than being the lowest
bidder.
The Company's contracts to supply materials for military and some
commercial projects contain provisions for termination at the convenience of the
customer. See "Risk Factors -- Possible Termination of Certain Customer
Contracts."
S-2(R) and E-Type Fiberglass. Approximately 50% of the Company's sales are
derived from prepregs made from standard S-2(R) and E-type fiberglass. These
materials are low-cost, lightweight, exhibit high strength, and are used in
overhead bins, seats, lavatories, and other items in aircraft and train
interiors.
Carbon Fiber. Approximately 30% of the Company's sales are derived from
prepregs made from carbon fiber. Carbon fiber exhibits high strength and
stiffness relative to weight and is sold primarily for aerospace and
recreational uses.
24
<PAGE> 26
Aramid, Quartz, and Ceramic Fibers. Approximately 20% of the Company's
sales are derived from prepregs made from aramid, quartz, and ceramic fibers.
Aramid fiber is exceptionally resistant to impact and is used in aircraft and
various armor protection applications. Quartz and ceramic fibers are resistant
to extremely high temperatures and are used in various aerospace and general
industrial applications.
Resins. The Company's resins include epoxy, phenolic, and polyimide. Epoxy
resins are used in a wide variety of applications including aircraft interiors,
radomes, helicopter blades, rocket nozzles, and other applications.
Among the phenolic resins, which are mainly used to make interiors for
commercial aircraft, the Company recently developed its "2400 series," which the
Company believes has the lowest smoke, fire, and toxicity rating of any resin
system used in commercial aerospace applications. The Company anticipates that
this resin system will replace older systems of its competitors, as products
using older resins systems are phased out and opportunities arise for the
Company to qualify its 2400 series for new commercial aerospace products.
Polyimides are high-temperature resins used in missiles, rockets, and
aircraft engines. The major polyimide system is PMR-15, which was developed by
NASA and which the Company produces under a no-fee license. The Company believes
it has a competitive advantage in that it has significant experience with the
difficult manufacturing process for PMR-15. The Company believes that it is the
largest producer of PMR-15 in the market.
SALES AND MARKETING
A staff of salaried salespeople markets the Company's products directly to
customers in the U.S. The Company uses independent distributors and/or
manufacturer's representatives for international markets.
In 1994 and 1995, the Company sold its advanced composites to the following
markets: aerospace, including transportation (aircraft and mass transit) and
communications (communication satellites and their launchers); and defense
(military aircraft, naval vessels, defense systems and military support
equipment). The following table sets forth the percentage of the Company's sales
made to each of these markets in the years indicated:
<TABLE>
<CAPTION>
Sales by Market: 1994 1995
---- ----
<S> <C> <C>
Aerospace:
Transportation............................ 69 % 73 %
Communications............................ 11 5
Defense...................................... 20 22
---- ----
Total................................ 100 % 100 %
==== ====
Exports as a percentage of sales............... 15 % 16 %
</TABLE>
In 1996, the Company commenced sales of advanced composites for skis in the
recreational market.
CUSTOMERS
Sales to the Company's two largest customers, Boeing and General Electric,
accounted for approximately 31% of net sales in 1994 and approximately 30% in
1995. The Company's twenty largest customers accounted for approximately 74% of
sales in 1994 and approximately 73% of sales in 1995. The loss of any of these
customers could have a material adverse effect on the Company and its business.
See "Risk Factors -- Dependence on Major Customers."
25
<PAGE> 27
MARKET
The Company estimates that industry sales to the advanced composites
markets in which it competes totaled approximately $800 million worldwide in
1995, with approximately $480 million of those sales in North America. The
Company believes that the market growth rate for advanced composites in the past
has been closely correlated to the overall build rate of commercial and military
aircraft, because these customers constitute by far the largest source of
demand. The Company believes this will continue to be the case for the next
several years. Beyond that time, the Company expects that growth will be
propelled by new uses, particularly in the infrastructure markets where over
time, the Company believes, the use of advanced composites will increase
significantly.
Commercial aircraft build rates, based on the estimated number of aircraft
delivered, declined approximately 30% from 1992 to 1995. The Company believes
that, as a result of this decline, many advanced composite businesses suffered
losses in those years. Major aircraft builders have announced slight increases
in their build rates for 1996 and larger build rates for 1997. Based on
information provided by a major customer, the Company believes the commercial
aircraft build rates will remain at the projected 1997 level through the end of
the century.
The Company believes that the advantages of lower weight and resulting fuel
economy will cause aircraft manufacturers to use increasing amounts of advanced
composite materials, particularly in newer models and development programs. For
example, recently developed military aircraft, such as the stealth fighter and
the B-2 bomber, contain a higher percentage by weight of advanced composites
than the older aircraft they replace. The use of advanced composites has
increased in commercial aircraft also, but in a much less dramatic fashion.
Advanced composites are now used in overhead bins, seats, lavatories, and other
items in aircraft. The Company believes that the use of advanced composites in
commercial aircraft will continue to increase.
The Company believes that activity within the military aerospace industry
fluctuates in relation to world tensions and the attitudes of the then current
administration and Congress toward defense spending. Since 1987, the aircraft
procurement budget of the U.S. Department of Defense has declined by
approximately 40%.
MANUFACTURING
To manufacture its products, the Company uses both vertical treaters and
horizontal treaters, as well as unidirectional tape and roving lines. The
Company believes that the equipment is well maintained and is operating at
approximately 30% of capacity.
The Company typically makes products to customer's predefined
specifications once it has received a firm purchase order. The specifications
can include materials to be used, testing results to be obtained, and the
procedure to use when making the product. The Company maintains an inventory of
the most commonly used fibers, fabrics, and resins. Other items are purchased
specifically for that customer's order.
On average, the prepregging process requires less than one day to fill an
order. Aerospace, defense, and communication customers typically require the
Company to conduct testing on the product both during the process and once the
material is manufactured. The duration of these tests ranges from a few minutes
up to 15 days. The Company ships products when the material has successfully
passed the required tests.
COMPETITION
The market for advanced composite materials is highly competitive. In the
production and sale of advanced composites, the Company has numerous U.S. and
foreign competitors on a world-wide basis, at least six of whom (Cytec Inc.,
Hexcel Corporation, Fiberite, Inc., Toray Industries, Inc., Mitsubishi Chemical
Corporation, and Mitsubishi Rayon Co., Ltd.) are considerably larger than the
Company in size and financial resources. To the Company's knowledge, in the
aerospace and defense markets it is the seventh-largest manufacturer of advanced
composites. In addition, the Company competes with many smaller U.S. and foreign
manufacturers. The Company has focused on specific niche markets and specialty
products within markets to gain market share. Depending upon the material and
markets, relevant competitive factors include
26
<PAGE> 28
price, delivery, service, quality, and product performance. See "Risk
Factors -- Intense Competition in Advanced Composites Industry."
RAW MATERIALS
The Company purchases all raw materials used in production. One supplier
accounted for over 70% of total fabric supply in the years ended December 31,
1994 and 1995 and for the three months ended March 31, 1996. The Company
believes it has a satisfactory relationship with that supplier, and that if that
supplier were unable to supply it the Company would be able to obtain fabric
from other suppliers. However, there is no assurance that such other suppliers
would offer fabric on the same favorable terms and conditions. In addition,
several key raw materials are available from relatively few sources. If raw
materials were no longer available, which the Company does not anticipate, such
an occurrence could have a material adverse effect on operations. See "Risk
Factors -- Dependence on Suppliers."
BACKLOG
The backlog of orders to be filled in the next twelve months totaled
approximately $6,000,000 at April 30, 1996. Orders for advanced composites
generally lag behind the award of orders for new aircraft by a considerable
period. Thus, the anticipated increase in new aircraft procurement is not
expected to have a material impact on the Company's sales to the aerospace
market before the fourth quarter of 1996. Historically, backlog has not been a
meaningful indicator of revenues for a particular period.
RESEARCH AND DEVELOPMENT
In manufacturing its products, the Company relies primarily upon technology
derived from the field of polymer chemistry, as well as advanced engineering and
assembly of composite structures. With a few exceptions, all of the resin
formulations used by the Company in its manufacturing operations are proprietary
and have been developed in its research and development laboratories.
PATENTS AND PROPRIETARY INFORMATION
The Company's ability to compete effectively depends in part on its ability
to protect its proprietary information. The Company relies primarily on trade
secret laws and confidentiality procedures to protect its proprietary resin
formulations. The Company has not filed any patent applications with respect to
its intellectual property. See "Risk Factors -- Dependence on Unpatented
Proprietary Technology; Risk of Infringement."
ENVIRONMENTAL MATTERS
Environmental control regulations have not had a significant adverse effect
on the overall operations of the Company. The Company believes that it is in
compliance in all material respects with all applicable environmental laws and
regulations.
An environmental site assessment authorized by Montecatini U.S.A., Inc., a
subsidiary of Montedison S.p.A. and the former owner of CCC, determined that
there had been a leak of acetone into the ground at the Culver City
manufacturing facility. Although acetone is not on the federal hazardous
substances list, it is on California's hazardous substances list. The terms of
the Purchase Agreement by and between the Company and Montecatini U.S.A., Inc.
provide for certain limited indemnification of the Company for this liability.
In addition, Ferro Corporation agreed to indemnify the former owner of CCC
against environmental liabilities. Nevertheless, there can be no assurance that
the indemnification provided by Montecatini U.S.A., Inc. or Ferro Corporation
will be sufficient to pay the full extent of any potential liability for
remediation or any damages to third parties caused by the acetone leak, nor can
there be any assurance that the Company will be able to obtain indemnification
from Ferro Corporation. See "Risk Factors -- Manufacturing Activities Subject to
Extensive Government and Environmental Regulation."
27
<PAGE> 29
PERSONNEL
The Company had 83 full-time employees on April 30, 1996. Of these
employees, 61 were in manufacturing and the remainder were administrative,
sales, engineering, marketing, and clerical employees. A total of 44 of the
employees are represented by the Stove, Furnace, and Allied Appliance Workers
Division, International Brotherhood of Boilermaker, Iron Ship Builders,
Blacksmiths, Forgers and Helpers, under a contract that expires April 30, 1997.
Management believes labor relations to be generally good.
FACILITIES
The Company leases a 40,000-square foot corporate headquarters and research
and development facility in Los Angeles, California. A second facility of 37,000
square feet, located nearby in Culver City, California, houses the main
manufacturing plant. The leases are for terms of ten years, ending in 2005 and
2006, and may be extended for another ten years at the Company's option. Because
the Company's manufacturing facility is estimated to be currently operating at
30% of its maximum capacity, the Company believes it can increase production by
approximately 200% without significant additional capital expenditures.
LEGAL PROCEEDINGS
From time to time, the Company may be involved in litigation from claims
arising from its operations in the normal course of business. As of the date of
the Prospectus, the Company is not a party to any legal proceedings the outcome
of which, in the opinion of management, would have a material adverse effect on
the Company's results of operations or financial condition.
28
<PAGE> 30
MANAGEMENT
The current executive officers and directors of the Company are as follows:
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- ---- -------------------------------------------------
<S> <C> <C>
Steven Georgiev.................... 61 Chairman of the Board of Directors
Paul W. Pendorf.................... 56 President, Chief Executive Officer and Director
William A. Timmerman............... 50 Chief Financial Officer
Philip D. Cunningham............... 56 Director of Operations, Culver City Composites
Leslie Jay Cohen, Ph.D. ........... 55 Director of Business Development, Culver City
Composites
</TABLE>
The Company currently has two directors. All directors are elected to hold
office until the next annual meeting of shareholders of the Company and until
their successors have been duly elected and qualified. Officers are elected to
serve subject to the discretion of the Board of Directors and until their
successors are appointed. There are no family relationships among executive
officers and directors of the Company.
Steven Georgiev has been Chairman of the Board of Directors of the Company
since its inception in March 1995. Mr. Georgiev is also Chairman and Chief
Executive Officer of Palomar. Palomar owns 173,874 shares of Common Stock of the
Company and holds a warrant to purchase 289,790 shares of Common Stock at an
exercise price of $1.29 per share. Mr. Georgiev was named Chairman of Palomar in
1991 and President and CEO of Palomar in 1993. Palomar designs, manufactures,
and markets lasers, delivery systems and related disposable products for use in
medical and cosmetic procedures, and also manufacturers and distributes flexible
circuit boards and personal computers. Mr. Georgiev has served as a financial
consultant to emerging high growth companies, and has served as a director of
Excel Technologies, Inc. since 1992. He was a director at Cybernetics Products,
Inc., a publicly held company, from 1988 to 1992 and a director at XXsys
Technologies, Inc., a publicly held company engaged in developing advanced
composites for use in infrastructure repair and design ("XXsys"), from 1993 to
1995. Mr. Georgiev was Chairman of the Board of Directors of Dynatrend, Inc., a
publicly traded consulting firm that he co-founded in 1972, until 1989. Mr.
Georgiev received a B.S. degree in Engineering Physics from Cornell University
and an M.S. degree in Management from the Massachusetts Institute of Technology,
where he was a Sloan Fellow.
Paul W. Pendorf has been President and Chief Executive Officer and a
director of the Company since its inception in March 1995. Prior to that, Mr.
Pendorf served from 1991 to 1995 as President and Chief Executive Officer and a
director of XXsys. He was a consultant to XXsys from 1990 until he was named
President. From 1989 to 1990 he was a Vice President of Quadrax Corporation, a
publicly traded advanced composites company. From 1985 to 1989 Mr. Pendorf held
a series of senior executive positions with ICI Fiberite, a subsidiary of
Imperial Chemical Industries ("ICI") engaged in the advanced composites
business. From 1982 to 1985, he was Director of International Ventures of
Beatrice Chemicals Group (acquired by ICI in 1985), where he worked extensively
in expanding Beatrice's composites business. Prior to his involvement in the
composites industry, Mr. Pendorf held executive positions with American Cyanamid
Company (now part of American Home Products Inc. and Cytec Inc.), Virginia
Chemicals Company (now part of Hoechst Celanese Corp.), and Pfizer, Inc. Mr.
Pendorf received a B.S. degree in Chemical Engineering from the University of
Maryland and an M.S. degree in Management from Rensselaer Polytechnic Institute.
William A. Timmerman has been Chief Financial Officer of the Company since
its inception in March 1995. Prior to that, Mr. Timmerman was Chief Financial
Officer and Secretary of XXsys from 1994 to 1995. From 1993 to 1994, he was
Chief Financial Officer of Trion Capitol Corporation, a real estate development
firm based in San Diego. Prior to that, he was President and served on the
boards of directors of several private entrepreneurial companies, including
serving as President and Chief Executive Officer from 1990 to 1993 of The
France-USA Link, Inc., a company he founded that manufactured and distributed
recreational products. Earlier, he was with Chase Manhattan Bank for 11 years,
during which time he served in the New York headquarters, as well as in Paris,
France and the Ivory Coast. He was named a Vice President with Chase
29
<PAGE> 31
Manhattan Bank in 1978. He received a B.A. degree in Philosophy from Washington
and Lee University, an M.B.A. in Economics from New York University, and a
Certificate d'etudes from L'Institute des Etudes Politiques in Paris, France.
Philip D. Cunningham has been Director of Operations of CCC since January
1996. From 1994 to 1995, Mr. Cunningham served as a Plant Manager for Bio-Rad
Laboratories, a company engaged in chemical reagent manufacturing and packaging.
For the ten years prior to that, he managed Hexcel Corporation's Livermore,
California advanced composites plant, one of the largest such plants in the
world. For the eleven years prior to that, he held various executive and
manufacturing positions with Stauffer Chemical Company and E.I. Du Pont de
Nemours & Co. Mr. Cunningham holds a B.S. degree in Chemical Engineering from
the Massachusetts Institute of Technology.
Leslie Jay Cohen, Ph.D. has been Director of Business Development of CCC
since April 1996. In 1995, Dr. Cohen elected early retirement from McDonnell
Douglas Corporation after a 29-year career. He was a private consultant to
industry prior to joining the Company. From 1993 to 1995, Dr. Cohen was Director
of Advanced Programs for McDonnell Douglas Aerospace -- Huntington Beach and was
responsible for all new business development in Russia and the Commonwealth of
Independent States. From 1988 to 1993, Dr. Cohen served as the Program Manager
for the U.S. Army/McDonnell Douglas Aerospace Neutral Particle Beam Space
Experiment -- NPBSE, and was responsible for the cost, scheduling and technical
performance of the experiment. For ten years prior to that, he held various
management positions with McDonnell Douglas Aerospace. Dr. Cohen holds B.S.,
M.S., and Ph.D. degrees in Civil Engineering from Carnegie Institute of
Technology, and was a Fulbright-Hayes Post-Doctoral Fellow at the
Technion-Israel Institute of Technology. Dr. Cohen received the Gold Medal for
Science and Technology from the U.S.S.R. Academy of Sciences and is an
Academician of the International Academy of Engineering.
NEW DIRECTORS
Prior to the closing of this Offering, the Company intends to appoint two
additional directors to its Board of Directors, each of whom has indicated to
the Company that he will accept his appointment. The Company anticipates that
the new directors will also serve on the Audit Committee and the Compensation
Committee. Biographical information for each of these persons is as follows:
Robert V. Glaser, 44, is the founder and Chief Executive Officer of
MapleWood Inc., a private company formed in 1995 ("MapleWood") that undertakes
corporate investments for its own account and provides merger and acquisition
advisory services to others. Prior to the foundation of MapleWood, Mr. Glaser
was a member of the worldwide Management Committee of the Investcorp group of
companies (the "Investcorp Group"), from 1983, the first year of the Investcorp
Group's operation, through 1995. From 1987 to 1995, he was a member of the board
of directors of Investcorp International Inc., the U.S. arm of the Investcorp
Group. From 1983 to 1987, Mr. Glaser was employed by other entities of the
Investcorp Group. The Investcorp Group invests, for its own account and on
behalf of its clients, in corporate and real estate investments in the United
States and Europe. During his career at the Investcorp Group, Mr. Glaser was
active in numerous areas of corporate acquisitions, including: the screening,
evaluating, and selecting of acquisition targets, overseeing the due diligence
process, leading negotiations with sellers, arranging senior and subordinated
financing for companies acquired, overseeing companies acquired, and selling
investments. During this period, Mr. Glaser worked on numerous acquisitions and
sat on over a dozen boards of directors of acquired companies on Investcorp's
behalf. Prior to joining the Investcorp Group in 1983, Mr. Glaser was employed
by The Chase Manhattan Bank, N.A. for 10 years, and was a vice president at the
time of his departure. Mr. Glaser is currently a director of Atlas Air, Inc. Mr.
Glaser is a member of the Board of Trustees of the National Foundation for the
Advancement of the Arts and the Greater Miami Chamber of Commerce. He is also a
member of the National Association of Corporate Directors.
Lt. Gen. Buster C. Glosson (USAF Ret.), 54, was an officer in the United
States Air Force ("USAF"), from 1965 until June 1994. Most recently, he served
as a Lieutenant General and Deputy Chief of Staff for plans and operations,
Headquarters USAF, Washington, D.C. Gen. Glosson is a veteran of combat missions
in Vietnam and, during the Gulf War, he commanded the 14th Air Force Division
and was director of campaign
30
<PAGE> 32
plans for the United States Central Command Air Forces, Riyadh, Saudi Arabia.
Gen. Glosson is Chairman and CEO of Alliance Partners Inc., an investment
holding company developing international oil and power projects. In 1994 he
founded and has since served as President of Eagle Ltd., a consulting firm
concentrating on international business opportunities in the high-technology
arena. He has served as a director of GreenMan Technologies, Inc., a publicly
traded company, since August 1994, and has agreed to serve as a director of
Palomar beginning in May 1996. Gen. Glosson received a B.S. degree in Electrical
Engineering from North Carolina State University.
COMPENSATION OF DIRECTORS
The Company's directors do not currently receive any cash compensation for
service on the Board of Directors, but directors are reimbursed for reasonable
expenses incurred in connection with attendance at Board and committee meetings.
Under the terms of the 1996 Incentive and Nonqualified Stock Option Plan (the
"Stock Option Plan"), each year directors who are not employees of the Company
automatically receive options to purchase 5,000 shares of the Company's Common
Stock with a per share exercise price equal to the fair market value of a share
of Common Stock at the time of grant. Mr. Georgiev has waived his right to
receive such options for 1996. Mr. Glaser and Gen. Glosson will each receive
options to purchase 5,000 shares of the Company's Common Stock upon joining the
Company's Board of Directors, as contemplated by the Stock Option Plan. See
"Management -- 1996 Incentive and Nonqualified Stock Option Plan." In accordance
with Company policy, directors who are employees of the Company serve as
directors without compensation.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides that no director of the
Company shall be personally liable to the Company or to any stockholder for
monetary damages arising out of such director's breach of fiduciary duty, except
for (i) any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) any acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) any payment of a
dividend or approval of a stock purchase or redemption that is illegal under
Section 174 of the Delaware General Corporation Law or (iv) any transaction from
which the director derived an improper personal benefit. A principal effect of
this provision of the Company's Certificate of Incorporation is to limit or
eliminate the potential liability of the Company's directors for monetary
damages arising from breaches of their duty of care, unless the breach involves
one of the four exceptions described in (i) through (iv) above. The provision
does not prevent stockholders from obtaining injunctive or other equitable
relief against directors, nor does it shield directors from liability under
federal or state securities laws.
The Company's Certificate of Incorporation and Bylaws further provide for
the indemnification of the Company's directors and officers and persons who
serve at the request of the Company as directors, officers or other agents of
other entities to the maximum extent permitted by the Delaware General
Corporation Law, including circumstances in which indemnification is otherwise
discretionary. The Company has entered into indemnity agreements with each of
its current directors which provide for indemnification of, and advancement of
expenses to, such persons to the greatest extent permitted by Delaware Law,
including by reason of action or inaction occurring in the past and
circumstances in which indemnification and the advancement of expenses are
discretionary under Delaware Law. The Company also intends to enter into similar
indemnity agreements with Mr. Glaser and Gen. Glosson when they join the Board
of Directors.
A principal effect of these provisions is to limit or eliminate the
potential liability of the Company's directors for monetary damages arising from
breaches of their duty of care, unless the breach involves one of the four
exceptions described in (i) through (iv) above. These provisions may also shield
directors from liability under federal and state securities laws.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
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<PAGE> 33
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation earned in the fiscal year ended December 31, 1995 by the Company's
Chief Executive Officer and Chief Financial Officer (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION(1) SECURITIES
--------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) OPTIONS(2)
- ---------------------------------------------------------------- --------------- ------------
<S> <C> <C>
Paul W. Pendorf
President and Chief Executive Officer......................... $ 116,250(3) 86,937
William A. Timmerman
Chief Financial Officer....................................... 75,000(4) 46,366
</TABLE>
- ---------------
(1) Other than salary described herein, the Company did not pay any Named
Executive Officer any compensation, including incidental personal benefits,
in excess of 10% of such Named Executive Officer's salary.
(2) See "Option Grants During 1995," below.
(3) Mr. Pendorf joined the Company in March 1995 at an annual salary of
$155,000.
(4) Mr. Timmerman joined the Company in March 1995 at an annual salary of
$100,000.
The following table sets forth for each of the Named Executive Officers
certain information concerning stock options granted during the fiscal year
ended December 31, 1995. The Company did not grant any stock appreciation rights
during the fiscal year ended December 31, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE
NAME GRANTED(1) FISCAL YEAR ($/SH)(2) EXPIRATION DATE
- ----------------------------------------- --------- ------------- --------- --------------
<S> <C> <C> <C> <C>
Paul W. Pendorf.......................... 86,937 65.22% $0.86 March 29, 2005
William A. Timmerman..................... 46,366 34.78% $0.86 March 29, 2005
</TABLE>
- ---------------
(1) Represents shares of Common Stock issuable upon exercise of options granted
pursuant to each named officer's employment agreement.
(2) All options were granted at exercise prices not less than the fair market
value of the Common Stock on the date of grant. The options vest in equal
installments on each of the first, second and third anniversaries of the
effective date of this Offering.
No options to purchase securities of the Company have been exercised. The
following table sets forth certain information concerning the value of
unexercised stock options held by the Named Executive Officers as of December
31, 1995.
32
<PAGE> 34
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1995 AT FISCAL YEAR END(1)
----------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
- ---------------------------------------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C>
Paul W. Pendorf......................... 0 86,937 0 $403,388
William A. Timmerman.................... 0 46,366 0 $215,138
</TABLE>
- ---------------
(1) Value is based on an assumed public offering price of $5.50. Actual gains,
if any, on exercise will depend on the value of the Common Stock on the date
of the sale of the shares.
1996 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
On February 6, 1996, the Company's Board of Directors adopted, and holders
of stock representing a majority of the outstanding voting stock approved, the
Stock Option Plan. A total of 350,000 shares of Common Stock are reserved for
issuance under the Stock Option Plan. The Stock Option Plan authorizes (i) the
grant of options to purchase Common Stock intended to qualify as incentive stock
options ("Incentive Options"), as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and (ii) the grant of options that do not
so qualify ("Nonqualified Options"). As of May 24, 1996, options to purchase
123,600 shares of Common Stock were outstanding under the Stock Option Plan.
The Stock Option Plan is administered by the Board of Directors. The Board
selects the individuals to whom awards will be granted, and determines the
option exercise price and other terms of each award, subject to the provisions
of the Stock Option Plan.
Incentive Options may be granted under the Stock Option Plan to employees
and officers of the Company, including members of the Board of Directors who are
also employees. Nonqualified Options may be granted under the Stock Option Plan
to employees, officers, individuals providing services to the Company and
members of the Board of Directors, whether or not they are employees of the
Company.
No options may extend for more than ten years from the date of grant (five
years in the case of employees or officers holding 10% or more of the total
combined voting power of all classes of stock of the Company or any subsidiary
or parent ("greater-than-ten-percent-stockholders")). The exercise price for
Incentive Options may not be less than the fair market value of the Common Stock
on the date of grant or, in the case of a greater-than-ten-percent-stockholder,
not less than 110% of the fair market value. The aggregate fair market value
(determined at the time of grant) of shares issuable pursuant to Incentive
Options first becoming exercisable by any employee or officer in any calendar
year may not exceed $100,000.
Options are non-transferable except by will or by the laws of descent or
distribution. Options generally may not be exercised after (i) termination by
the Company for cause or voluntary termination by the optionee of the optionee's
employment with the Company, (ii) sixty days following termination by the
Company without cause of the optionee's employment with the Company, or (iii) in
the event of the optionee's permanent and total disability or death, the earlier
of the expiration date of such option or one year following the date of such
disability or death.
Payment of the exercise price for shares subject to options may be made
with cash, certified check, bank draft, postal or express money order payable to
the order of the Company for an amount equal to the exercise price for such
shares, or, with the consent of the Company, shares of Common Stock of the
Company having a fair market value equal to the option price of such shares, or,
with the consent of the Company, a combination of the foregoing. Full payment
for shares exercised must be made at the time of exercise.
The Stock Option Plan provides for automatic grants of Nonqualified Options
to the Company's non-employee directors. Each non-employee director is annually
granted a five-year option for 5,000 shares at the then current fair market
value. These options become exercisable one year after the date of grant,
subject to continuing service as a director. Directors may also be granted
additional options to acquire shares of the Company's Common Stock at the
discretion of the Board of Directors.
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<PAGE> 35
Shares underlying options which expire or terminate may be the subject of
future options. The Stock Option Plan terminates on February 6, 2006.
EMPLOYMENT AGREEMENTS
On March 25, 1995, the Company entered into employment agreements with each
of Paul W. Pendorf, the Company's President and Chief Executive Officer, and
William A. Timmerman, the Company's Chief Financial Officer. Pursuant to their
employment agreements which expire on March 24, 1998, Mr. Pendorf is entitled to
an annual base salary of $155,000 and is eligible for annual bonuses up to 120%
of his base salary and Mr. Timmerman is entitled to an annual base salary of
$100,000 and is eligible for annual bonuses up to 120% of his base salary. Mr.
Pendorf was granted options to purchase 86,937 shares of Common Stock at an
exercise price of $0.86 per share under the terms of his agreement with the
Company. Mr. Timmerman was granted options to purchase 46,366 shares of Common
Stock at an exercise price of $0.86 per share under the terms of his agreement
with the Company. The options vest in three equal annual installments beginning
on the first anniversary of the effective date of this Offering. Pursuant to
these agreements, which are each for a term of three years, if the Company
terminates the officer's employment without cause, (i) the Company shall pay the
officer's salary, plus a bonus equal to 60% of salary, until the later of the
end of the term of the agreement or twelve months from the date of termination,
and (ii) any unvested stock options shall immediately vest. The Company
maintains a "key man" life insurance policy on Mr. Pendorf's life in the amount
of $1,000,000, the proceeds of which are payable to the Company's principal
lender to be applied to the Company's debt.
On February 13, 1996, the Company entered into a one-year employment
agreement with Philip D. Cunningham, CCC's Director of Operations. Pursuant to
his employment agreement, Mr. Cunningham is entitled to an annual base salary of
$120,000 and is eligible for annual bonuses up to 40% of his base salary. Mr.
Cunningham is also entitled to receive relocation assistance from the Company,
including a one-time housing assistance payment of $20,000 payable at the time
of Mr. Cunningham's move, a bridge loan of up to $200,000 secured by a junior
lien on his current residence to assist in the move, and payment of certain
costs for a new residence. The Company granted Mr. Cunningham options to
purchase 25,000 shares of Common Stock under the Company's 1996 Incentive and
Nonqualified Stock Option Plan in connection with this agreement, at an exercise
price of $1.00 per share. Pursuant to this agreement, if Mr. Cunningham's
employment terminates for any reason other than resignation or for cause, he
will be eligible to receive six months' severance pay, increasing at the rate of
one-half month per month of employment up to a maximum of twelve months'
severance after two full years of employment. Mr. Cunningham's right to receive
severance pay under this agreement would terminate upon his obtaining new
employment.
On April 15, 1996, the Company entered into a one-year employment agreement
with Leslie Jay Cohen, Ph.D., CCC's Director of Business Development. Pursuant
to his employment agreement, Dr. Cohen is entitled to an annual base salary of
$80,000 and is eligible to receive annual bonuses of up to 20% of his base
salary. The Company granted Dr. Cohen options to purchase 12,000 shares of
Common Stock under the Stock Option Plan, at a per share exercise price of
$4.00.
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<PAGE> 36
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the date of this Prospectus, by
(i) each person or entity known to the Company to own beneficially five percent
or more of the Company's Common Stock, (ii) each of the Company's directors,
(iii) the Company's Principal Executive Officer and each of the other Named
Executive Officers, and (iv) all directors and executive officers of the Company
as a group. Except as otherwise noted, each beneficial owner has sole voting and
investment power with respect to the shares shown.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY OWNED
NUMBER OF SHARES ----------------------------------
NAME AND ADDRESSES OF BENEFICIAL OWNERS(1) BENEFICIALLY OWNED(2) BEFORE OFFERING AFTER OFFERING
- -------------------------------------------- --------------------- --------------- --------------
<S> <C> <C> <C>
Steven Georgiev............................. 985,287(3) 53.8% 25.7%
Paul W. Pendorf............................. 521,623 33.8 14.7
Palomar Medical Technologies, Inc.
66 Cherry Hill Drive
Beverly, MA 01915......................... 463,664(4) 25.3 12.1
William A. Timmerman........................ 173,874(5) 11.3 4.9
All directors and executive officers
as a group (5 persons).................... 1,680,784(3)(5) 91.8 43.9
</TABLE>
- ---------------
(1) With the exception of Palomar, each person's address is in care of The
American Materials & Technologies Corporation, 5915 Rodeo Road, Los Angeles,
California 90016.
(2) To the Company's knowledge, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes table.
(3) Includes 463,664 shares owned by Palomar or which Palomar has the right to
acquire within 60 days of the date of this Prospectus. Mr. Georgiev is
Chairman and Chief Executive Officer of Palomar. Mr. Georgiev disclaims
beneficial ownership of these shares.
(4) Includes 289,790 shares issuable upon exercise of a warrant exercisable
within 60 days of the date of this Prospectus that expires on December 31,
2005.
(5) Includes 23,183 shares owned by Pierrette Timmerman, Mr. Timmerman's wife.
Mr. Timmerman disclaims beneficial ownership of these shares.
CERTAIN TRANSACTIONS
The Company's policy, as adopted by its Board of Directors on April 1,
1996, regarding related party transactions is that any transaction between the
Company and any of its officers, directors, 5% stockholders, or their affiliates
will be entered into only if such transaction is approved by a majority of the
directors disinterested in such transaction, is on terms no less favorable to
the Company than could be obtained from unaffiliated parties, and is reasonably
expected to benefit the Company. The Company believes that all transactions
entered into by the Company prior to April 1, 1996 would have met the criteria
set forth in this policy if the policy had then been in effect.
On December 19, 1995, Palomar loaned to the Company a total of $3,150,000,
and the Company issued to Palomar two promissory notes, one in the principal
amount of $3,000,000 and one in the principal amount of $150,000 (the "Loans").
The proceeds of the Loans were used to pay part of the purchase price of the
shares of CCC. The Loans are secured by a pledge of the shares of the Common
Stock owned by Messrs. Georgiev, Pendorf, and Timmerman and Mr. Timmerman's
wife. The Loans mature on December 31, 1996 and bear interest at the rate of 10%
per annum, payable at maturity. The $3,000,000 note is required to be prepaid
from the proceeds of any sale of equity by the Company, and the $150,000 note is
required to be prepaid upon receipt of payment for certain specified accounts
receivable of the Company. In addition, the Company issued Palomar a ten-year
warrant to purchase 289,970 shares of Common Stock at $1.29 per share. If the
$3,000,000 note is not paid in full by October 1, 1996, the Company will become
obligated to issue to Palomar another warrant to purchase an additional 289,790
shares of the Company's Common Stock at $1.29
35
<PAGE> 37
per share; if it is not paid in full by January 31, 1997, the Company will
become obligated to issue to Palomar another warrant to purchase an additional
173,874 shares of Common Stock at $1.29 per share. Under certain circumstances,
the $3,000,000 note may be converted into Preferred Stock if not paid prior to
December 31, 1996. The Company intends to repay these Loans in full with the
proceeds of the Offering. See "Use of Proceeds."
In addition, Palomar owns 173,874 shares of the Company's Common Stock. The
Chairman of the Board of Directors and Chief Executive Officer of Palomar is Mr.
Steven Georgiev, Chairman of the Board of Directors of the Company. Mr. Georgiev
directly owns 521,623 shares of the Company's Common Stock.
On May 1, 1995, the Company entered into a five-month consulting contract
at $10,000 per month with Mr. Steven Georgiev, its Chairman. Pursuant to this
contract, the Company has paid a total of $50,000 to Mr. Georgiev in 1996.
Steven Georgiev, Chairman of the Board of Directors of the Company,
previously served as a director of XXsys. Paul W. Pendorf, President and Chief
Executive Officer of the Company, was previously employed by XXsys as Chief
Executive Officer. William A. Timmerman, Chief Financial Officer of the Company,
was previously employed by XXsys as Chief Financial Officer. In connection with
their departure from XXsys in March 1995, Messrs. Pendorf, Timmerman, and
Georgiev entered into an agreement with XXsys (the "XXsys Agreement"), pursuant
to which, among other things, XXsys assigned to them the right to pursue certain
corporate opportunities, one of which was the acquisition of CCC, in
consideration for specified payments. Under the provisions of the XXsys
Agreement, Messrs. Pendorf, Timmerman, and Georgiev agreed to pay XXsys the sum
of $100,000 upon the consummation of the acquisition of CCC, which sum has not
been paid to date. In addition, XXsys agreed to pay to Mr. Pendorf the
approximate amount of $161,000, and Mr. Timmerman the approximate amount of
$18,000, in compensation and outstanding expenses. In connection with the
Company's incorporation, Messrs. Pendorf, Timmerman, and Georgiev each assigned
to the Company certain of their rights and obligations under the XXsys
Agreement, including Mr. Pendorf's right to collect payments owed him by XXsys
under the provisions of the XXsys Agreement. The Company has taken the position
that it is entitled to, and the Company intends to, set off from the $100,000
owed to XXsys under the XXsys Agreement, the approximate amount of $77,000
currently owed and previously due Mr. Pendorf.
DESCRIPTION OF SECURITIES
Following the closing of the sale of the shares of Common Stock offered
hereby, the authorized capital stock of the Company will consist of 15,000,000
shares of common stock, $0.01 par value per share ("Common Stock") and 5,000,000
shares of preferred stock, $0.01 par value per share ("Preferred Stock").
COMMON STOCK
As of the date of this Prospectus, there were 1,541,908 shares of Common
Stock outstanding and held of record by 13 shareholders. There will be 3,541,908
shares of Common Stock outstanding after giving effect to the sale of shares of
Common Stock offered hereby. All outstanding shares of Common Stock after
completion of this Offering will be validly issued, fully paid and
nonassessable.
Holders of Common Stock are entitled to one vote per share in all matters
to be voted on by the shareholders. Subject to the preferences that may be
applicable to any Preferred Stock then outstanding, holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of the Company's liabilities and the liquidation
preference, if any, of any then outstanding shares of Preferred Stock. Holders
of Common Stock have no preemptive rights and no rights to convert their Common
Stock into any other securities, and there are no redemption or sinking fund
provisions with respect to such shares. The rights, preferences and privileges
of holders of Common
36
<PAGE> 38
Stock are subject to, and may be materially adversely affected by, the rights of
the holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.
PREFERRED STOCK
The Board of Directors is authorized, subject to limitations prescribed by
Delaware law, to provide for the issuance of up to 5,000,000 shares of Preferred
Stock in one or more series, to establish from time to time the number of shares
to be included in each such series, to fix the voting powers, designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, and to increase or decrease
the number of shares of any such series (but not below the number of shares of
such series then outstanding) without further vote or action by the
stockholders. The Board of Directors is authorized to issue Preferred Stock with
voting, conversion and other rights and preferences that could adversely affect
the voting power or other rights of the holders of Common Stock. Although the
Company has no current plans to issue such shares, the issuance of Preferred
Stock or of rights to purchase Preferred Stock could have the effect of making
it more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, a majority of the outstanding voting stock of the
Company. As of the date of this Prospectus, there were no shares of Preferred
Stock outstanding.
The Company has agreed with the Representative that it will not issue any
shares of Preferred Stock for a period ending 36 months after the date of this
Prospectus, without the prior written consent of the Representative. See
"Underwriting."
REGISTRATION RIGHTS
The Company has granted registration rights to the holder of the
Representative's Warrant, which provide the holder with certain rights to
register the shares of Common Stock underlying the Representative's Warrant. In
connection with the issuance of 105,097 shares of Common Stock to five
unaffiliated investors in the period from July 24, 1995 to December 8, 1995, the
Company agreed to register the shares in the event of an initial public
offering. The Company is currently in the process of obtaining amendments to the
subscription agreements in order to delete this registration requirement. See
"Underwriting."
DELAWARE LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date that the
person became an interested stockholder unless (with certain exceptions) the
business combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the stockholder. Generally, an "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years prior, did own) 15% or more of the corporation's voting
stock.
As a result of the foregoing provisions, the acquisition of the Company by
means of a tender offer, a proxy contest or otherwise and the removal of
incumbent officers and directors could be made more difficult. These provisions
are expected to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control of
the Company to negotiate with the Company first. The Company believes that the
benefits of increased protection of the Company's potential ability to negotiate
with the proponent of an unfriendly or unsolicited proposal to acquire or
restructure the Company outweigh the disadvantages of discouraging such
proposals because, among other things, negotiation of such proposals could
result in an improvement of their terms.
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock is The American Stock
Transfer & Trust Company, located at 40 Wall Street, New York, NY 10005.
37
<PAGE> 39
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no public market for the Common
Stock of the Company. Future sales of substantial amounts of Common Stock in the
public market could materially adversely affect the market price of the Common
Stock. As described below, only a limited number of shares will be available for
sale shortly after this Offering, due to certain contractual and legal
restrictions on resale. Nevertheless, sales of substantial amounts of the
Company's Common Stock in the public market or the perception that such sales
could occur after such restrictions lapse could materially adversely affect the
market price of the Common Stock and the ability of the Company to raise equity
capital in the future.
Upon completion of this Offering, the Company will have outstanding
3,541,908 shares of Common Stock, assuming no exercise of outstanding warrants
to purchase Common Stock, no exercise of the Underwriters' over-allotment option
and no exercise of outstanding options. The 2,000,000 shares of Common Stock
that are to be sold by the Company to the public in this Offering will be freely
tradable without restriction under the Securities Act, unless purchased by
affiliates of the Company as that term is defined in Rule 144 under the
Securities Act.
The remaining 1,541,908 shares of Common Stock outstanding upon completion
of this Offering will be restricted securities as that term is defined in Rule
144 under the Securities Act ("Restricted Shares"). Restricted Shares may be
sold in the public market only if registered or if they qualify for an exemption
from registration pursuant to Rule 144, 144(k) or 701 promulgated under the
Securities Act, which are summarized below. Sales of the Restricted Shares in
the public market, or the availability of such shares for sale, could materially
adversely affect the market price of the Common Stock. In general, under Rule
144 as currently in effect, beginning 90 days after the date of this Prospectus,
a person (or persons whose shares are aggregated) who has beneficially owned
Restricted Shares for at least two years (including the holding period of any
owner other than an affiliate of the Company) would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of
(i) one percent of the number of shares of Common Stock then outstanding (which
will equal approximately 35,419 shares immediately after this Offering) or (ii)
the average weekly trading volume of the Common Stock during the four calendar
weeks preceding the filing of notice of such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an affiliate of the Company at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least three years (including the holding
period of any owner other than an affiliate of the Company), is entitled to sell
such shares without regard to any of the limitations described above.
Any employee, officer or director of or consultant to the Company who
purchased shares pursuant to a written compensatory plan or contract may be
entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates of the Company to sell their Rule 701 shares under Rule 701 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell such shares in reliance on Rule 144
without having to comply with the public information, volume limitation or
notice requirement of Rule 144. In both cases, a holder of Rule 701 shares is
required to wait until 90 days after the date of this Prospectus before selling
such shares. The Company has granted options to purchase an aggregate of 123,600
shares of Common Stock to a total of 80 employees of the Company, pursuant to
its 1996 Incentive and Nonqualified Stock Option Plan (the "Stock Option Plan").
These options vest in equal installments on each of the first four anniversaries
of the date of grant. Shares of Common Stock issued upon exchange of such
options will be Restricted Shares.
Holders of all of the Restricted Shares have entered into contractual
lock-up agreements providing that they will not offer, sell, contract to sell or
grant any option to purchase or otherwise dispose of the shares of stock owned
by them or that could be purchased by them through the exercise of options to
purchase Common Stock of the Company, for 24 months after the date of this
Prospectus without prior written consent of the Representative. Holders of
options to purchase an aggregate of 123,600 shares of Common Stock have entered
into similar contractual lock-up agreements. Taking into account the lock-up
agreements, the
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<PAGE> 40
restrictions of Rule 144, 144(k) and 701 described above, Restricted Shares will
be eligible for sale beginning 24 months after the date of this Prospectus,
unless the Representative permits earlier sales.
The Company has agreed not to offer, issue, sell, contract to sell, grant
any option for the sale of, or otherwise dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or any rights to acquire Common Stock for a period
of 12 months from the date of this Prospectus without the prior written consent
of the Representative, subject to certain exceptions.
UNDERWRITING
The Underwriters named below have agreed, subject to the terms and
conditions of the Underwriting Agreement between the Company and H.J. Meyers &
Co., Inc., as Representative, to purchase from the Company the number of shares
of Common Stock set forth opposite their names. The underwriting discount set
forth on the cover page of this Prospectus will be allowed to the Underwriters
at the time of delivery to the Underwriters of the shares of Common Stock so
purchased.
<TABLE>
<CAPTION>
NUMBER
NAME OF UNDERWRITER OF SHARES
- ---------------------------------------------------------------------------------- ---------
<S> <C>
H.J. Meyers & Co., Inc. ..........................................................
---------
Total................................................................... 2,000,000
=========
</TABLE>
The Underwriters have advised the Company that they propose to offer the
shares of Common Stock to the public at an offering price $ per share and
that the Underwriters may allow to certain dealers who are members of the
National Association of Securities Dealers, Inc. a concession not in excess of
$ per share, of which the Underwriters may allow and such dealers may
reallow concessions not in excess of $ per share to certain other dealers.
After commencement of the Offering, the public price and the concession may be
changed.
The Company has granted to the Underwriters an over-allotment option
exercisable during the 45-day period following the date of this Prospectus to
purchase up to a maximum of 300,000 additional shares of Common Stock at the
public offering price, less the underwriting discount set forth on the cover
page of this Prospectus. The Underwriters may exercise such option only to
satisfy over-allotments in the sale of the shares of Common Stock.
The Company has agreed to pay to the Representative a non-accountable
expense allowance equal to 3% of the total proceeds of this Offering, or
$ ($ if the Underwriters exercise the over-allotment option in
full), of which $15,000 has already been paid. In addition to the Underwriters'
commissions and the Representative's expense allowance, the Company is required
to pay the costs of qualifying the shares of Common Stock under federal and
state securities laws, together with legal and accounting fees, printing and
other costs in connection with this Offering, estimated to total approximately
$500,000.
At the closing of this Offering, the Company will issue to the
Representative, for nominal consideration and for investment, a warrant (the
"Representative's Warrant") to purchase up to 200,000 shares of Common Stock.
The shares of Common Stock subject to the Representative's Warrant are identical
to the shares of Common Stock to be sold to the public, except for the purchase
price and certain registration rights as
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<PAGE> 41
provided below. The Representative's Warrant will, subject to certain
exceptions, be exercisable for a four-year period commencing one year from the
effective date of this Prospectus, at an exercise price of $ per share (120%
of the public offering price per share). The Representative's Warrant will not
be transferable prior to its initial exercise date except to successors in
interest to the Representative and officers of the Representative and members of
the selling group and officers and partners thereof.
The Representative's Warrant will contain anti-dilution provisions
providing for appropriate adjustment in the event of any recapitalization,
reclassification, stock dividend, stock split or similar transaction. The
Representative's Warrant does not entitle the Representative to any rights as a
stockholder of the Company until such Warrant is exercised and the shares of
Common Stock are purchased thereunder.
The Representative's Warrant and the shares of Common Stock issuable
thereunder may not be offered for sale to the public except in compliance with
the applicable provisions of the Securities Act. The Company has agreed that, if
it shall cause a post-effective amendment to the Registration Statement of which
this Prospectus is a part, or a new registration statement or offering statement
under Regulation A of the Securities Act, to be filed with the Commission, the
Representative, or the holder(s) of the Representative's Warrant, shall have the
right during the life of the Representative's Warrant to include therein for
registration the Representative's Warrant and/or the shares of Common Stock
issuable upon exercise of such Warrant at no expense to the Representative or
the holder(s) thereof. Additionally, the Company has agreed that, upon demand by
the holder(s) of at least 50% of (i) the total unexercised Representative's
Warrant (based upon the remaining number of shares of Common Stock purchasable
thereunder) and (ii) the shares of Common Stock issued upon the exercise of the
Representative's Warrant, made on no more than two separate occasions during the
exercise period of the Representative's Warrant, the Company shall register the
Representative's Warrant and/or any of the shares of Common Stock issuable upon
the exercise thereof, the initial such registration to be at the Company's
expense and the second at the expense of the holder(s). These registration
rights expire five years from the date of issuance of the Representative's
Warrant.
For the period during which the Representative's Warrant is exercisable,
the holder(s) will have the opportunity to profit from a rise in the market
value of the Company's Common Stock, with a resulting dilution in the interests
of the other stockholders of the Company. The holder(s) of the Representative's
Warrant can be expected to exercise it at a time which the Company would, in all
likelihood, be able to obtain any needed capital from an offering of unissued
Common Stock on terms more favorable to the Company than those provided for in
the Representative's Warrant. Such facts may adversely affect the terms on which
the Company can obtain additional financing. To the extent that the
Representative realizes any gain from the resale of the Representative's Warrant
or the shares of Common Stock issuable thereunder, such gain may be deemed
additional underwriting compensation under the Securities Act.
The Company has agreed to enter into a one-year consulting agreement with
the Representative, pursuant to which the Representative will act as a financial
consultant to the Company, commencing on the closing date of this Offering.
Under the terms of this agreement, the Representative, to the extent reasonably
required in the conduct of the business of the Company and at the prior written
request of the principal executive officer of the Company, has agreed to
evaluate the Company's managerial and financial requirements, assist when
requested by the Company in recruiting, screening, evaluating and recommending
key personnel, directors, accountants, commercial and investment bankers, assist
in the preparation of budgets and business plans, advise with regard to sales
planning and sales activities, advise with respect to stockholder relations and
public relations matters, evaluate financial requirements, and assist in
financial arrangements. The Representative will make available qualified
personnel for this purpose. The consulting fee of $72,000 will be payable, in
full, on the closing date of this Offering.
The Company has agreed that it will engage a public relations firm
acceptable to the Representative and the Company. The Company has also agreed to
maintain a relationship with such public relations firm for a minimum period of
24 months and on such other terms as are acceptable to the Representative.
The Company has also agreed that, for a period of two years from the
closing of this Offering, if it participates in any merger, consolidation or
other transaction which the Representative has brought to the Company (including
an acquisition of assets or stock for which it pays, in whole or in part, with
shares of the
40
<PAGE> 42
Company's Common Stock or other securities), and the transaction is consummated
within 36 months of the closing of this Offering, then it will pay for the
Representative's services an amount equal to 5% of the first $3,000,000 of value
paid or value received in the transaction, 2 1/2% of any consideration above
$3,000,000 and less than $5,000,000, and 2% of any consideration in excess of
$5,000,000. The Company has also agreed that if, during this two-year period,
someone other than the Representative brings such a merger, consolidation or
other transaction to the Company, and if the Company in writing retains the
Representative for consultation or other services in connection therewith, then
upon consummation of the transaction, the Company will pay to the Representative
as a fee the appropriate amount as set forth above or as otherwise agreed
between the Company and the Representative.
The Company has agreed that for a period of 12 months from the date of this
Prospectus it will not sell or otherwise dispose of any securities without the
prior written consent of the Representative, which consent shall not be
unreasonably withheld, with the exception of shares issued pursuant to the
exercise of options, warrants and other convertible securities outstanding on
the date of this Prospectus. The Company has also agreed that for a period of 36
months from the closing date of this Offering, it will not sell or issue any
shares of Preferred Stock without the prior written consent of the
Representative. The Company has also agreed that for a period of 24 months from
the closing date of this Offering, the Company will not sell or issue any
securities pursuant to Regulation S under the Securities Act without the prior
written consent of the Representative.
The holders of all of the shares of Common Stock outstanding immediately
prior to this Offering and the holders of options and warrants to purchase
556,692 shares of Common Stock have agreed that for a period of 24 months from
the date of this Prospectus they will not offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock acquired prior to this Offering
or obtainable under any option, warrant or convertible security held by them
prior to this Offering, without the prior written consent of the Representative.
The Company has been advised by the Representative that the Representative has
neither any agreements or understandings, nor any present intention, to release
any shares of Common Stock subject to this restriction prior to the expiration
of the two-year lock-up period.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
the Registration Statement, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
The Company has agreed with the Representative that for a period of 36
months from the closing date of this Offering, the Representative may designate
an observer to the Board of Directors who will be entitled to attend and receive
notice of all meetings of the Board. The observer will be reimbursed all
out-of-pocket expenses incurred in attending such meetings.
The Underwriters have advised the Company that they do not intend to sell
shares to any discretionary accounts.
DETERMINATION OF OFFERING PRICE
Prior to this Offering, there has been no public market for the Common
Stock. The offering price of the shares of Common Stock being offered hereby was
determined by negotiation between the Company and the Underwriter. Factors
considered in determining such price include the history and the prospects for
the industry in which the Company competes, the past and present operations of
the Company, the future prospects of the Company, the abilities of the Company's
management, the earnings, net worth and financial condition of the Company, the
general condition of the securities markets at the time of this Offering, and
the prices of similar securities of comparable companies.
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<PAGE> 43
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Foley, Hoag & Eliot, Boston, Massachusetts. Certain legal matters in
connection with this Offering will be passed upon for the Underwriter by Epstein
Becker & Green, P.C., Boston, Massachusetts.
EXPERTS
The financial statements of the Company at December 31, 1995 and for the
period March 29, 1995 (inception) to December 31, 1995, and the financial
statements of CCC as of December 19, 1995 and December 31, 1994 and for the
period January 1, 1995 through December 19, 1995 and the year ended December 31,
1994, included in this Prospectus and Registration Statement, have been audited
by Feldman Radin & Co., P.C., independent certified public accountants, as set
forth in their reports appearing elsewhere herein, and are included in reliance
upon such reports given on the authority of such firm as experts in auditing and
accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form SB-2 under the
Securities Act with respect to the shares of Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules to the Registration Statement. For
further information with respect to the Company and the shares of Common Stock
offered hereby, reference is made to the Registration Statement and the exhibits
and schedules filed as a part of the Registration Statement. The Registration
Statement, including exhibits and schedules thereto, may be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Regional Offices of the Commission at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Thirteenth Floor,
New York, New York 10048. Copies also may be obtained from the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549, at prescribed rates.
42
<PAGE> 44
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION AND SUBSIDIARY:
Independent Auditors' Report..................................................... F-2
Consolidated Balance Sheet at December 31, 1995.................................. F-3
Consolidated Statement of Operations for the period March 29, 1995 (inception) to
December 31, 1995............................................................. F-4
Consolidated Statement of Stockholders' Deficit for the period March 29, 1995
(inception) to December 31, 1995.............................................. F-5
Consolidated Statement of Cash Flows for the period March 29, 1995 (inception) to
December 31, 1995............................................................. F-6
Notes to Consolidated Financial Statements....................................... F-7
UNAUDITED FINANCIAL STATEMENTS AS OF MARCH 31, 1996 AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 1996 AND 1995:
Condensed Consolidated Balance Sheet at March 31, 1996........................... F-16
Condensed Consolidated Statement of Operations for the three months ended March
31, 1996
and 1995...................................................................... F-17
Condensed Consolidated Statement of Cash Flows for the three months ended
March 31, 1996 and 1995....................................................... F-18
Notes to Condensed Consolidated Financial Statements............................. F-19
CULVER CITY COMPOSITES CORPORATION:
Independent Auditors' Report..................................................... F-20
Consolidated Balance Sheet at December 19, 1995 and December 31, 1994............ F-21
Consolidated Statement of Operations for the period January 1, 1995 to December
19, 1995 and the year ended December 31, 1994................................. F-22
Consolidated Statement of Stockholders' Equity (Deficit) for the period January
1, 1995 to December 19, 1995 and the year ended December 31, 1994............. F-23
Consolidated Statement of Cash Flows for the period January 1, 1995 to December
19, 1995 and the year ended December 31, 1994................................. F-24
Notes to Consolidated Financial Statements....................................... F-25
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION AND SUBSIDIARY UNAUDITED PRO
FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND NOTES THERETO..................... F-32
</TABLE>
F-1
<PAGE> 45
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
The American Materials & Technologies Corporation and Subsidiary
We have audited the accompanying consolidated balance sheet of The American
Materials & Technologies Corporation and Subsidiary as of December 31, 1995, and
the related consolidated statements of operations, stockholders' deficit and
cash flows for the period March 29, 1995 (inception) to December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The American Materials &
Technologies Corporation and Subsidiary as of December 31, 1995, and the results
of its operations and its cash flows for the period March 29, 1995 (inception)
to December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ FELDMAN RADIN & CO., P.C.
--------------------------------------
Feldman Radin & Co., P.C.
Certified Public Accountants
New York, New York
February 19, 1996
F-2
<PAGE> 46
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Current assets
Cash.......................................................................... $ 173,517
Accounts receivable, net of allowance for doubtful accounts of $104,000....... 2,427,605
Inventories, net.............................................................. 1,969,310
Prepaid expenses and other current assets..................................... 311,265
----------
Total current assets.................................................. 4,881,697
Property and equipment, net of accumulated depreciation and amortization of
$42,904....................................................................... 4,403,440
Other assets.................................................................... 144,251
----------
$9,429,388
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable.............................................................. $2,591,357
Notes payable -- affiliate.................................................... 3,071,757
Accrued liabilities........................................................... 1,555,517
Current portion of term loan -- bank.......................................... 112,000
----------
Total current liabilities............................................. 7,330,631
Term loan -- bank............................................................... 448,000
Revolving credit facility -- bank............................................... 1,715,696
----------
Total liabilities..................................................... 9,494,327
----------
Commitments and contingencies
Stockholders' deficit
Preferred stock, par value $.01, authorized 5,000,000 shares; none issued and
outstanding................................................................ --
Common stock, par value $.01 per share, authorized 15,000,000 shares; issued
and outstanding 1,516,908 shares........................................... 15,169
Additional paid-in capital.................................................... 197,167
Accumulated deficit........................................................... (277,275)
----------
Total stockholders' deficit........................................... (64,939)
----------
$9,429,388
==========
</TABLE>
See notes to the financial statements.
F-3
<PAGE> 47
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 29, 1995 (INCEPTION)
TO DECEMBER 31, 1995
<TABLE>
<S> <C>
Net sales........................................................................ $ 616,372
----------
Costs and expenses
Materials...................................................................... 307,799
Fixed and variable manufacturing............................................... 210,396
Selling, general and administrative............................................ 350,418
Research and development....................................................... 6,760
----------
875,373
----------
Loss from operations............................................................. (259,001)
Interest expense................................................................. 18,274
----------
Loss before income taxes......................................................... (277,275)
Provision for income taxes....................................................... --
----------
Net loss......................................................................... $ (277,275)
==========
Net loss per common share........................................................ $ (.18)
==========
Weighted average number of common shares......................................... 1,516,908
==========
</TABLE>
See notes to the financial statements.
F-4
<PAGE> 48
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD MARCH 29, 1995 (INCEPTION)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON
SHARES TOTAL
OUTSTANDING ADDITIONAL ACCUMULATED STOCKHOLDERS'
PAR VALUE $.01 AMOUNT PAID-IN CAPITAL DEFICIT DEFICIT
-------------- ------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE -- MARCH 29, 1995............ 0 $ 0 $ 0 $ 0 $ 0
Issuance of common stock........... 1,516,908 15,169 118,924 134,093
Issuance of warrant................ 78,243 78,243
Net loss........................... (277,275) (277,275)
-------------- ------- --------------- ----------- -------------
BALANCE -- DECEMBER 31, 1995......... 1,516,908 $15,169 $ 197,167 $(277,275) $ (64,939)
========== ======= =========== ========= ==========
</TABLE>
See notes to the financial statements.
F-5
<PAGE> 49
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD MARCH 29, 1995 (INCEPTION)
TO DECEMBER 31, 1995
<TABLE>
<S> <C>
Cash provided by operations:
Net loss........................................................................ $ (277,275)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization................................................. 42,904
(Increase) decrease in current assets:
Accounts receivable, net................................................... (51,305)
Inventory.................................................................. (42,558)
Prepaid expenses and other current assets.................................. 4,958
Increase in current liabilities:
Accounts payable........................................................... 763,395
Accrued liabilities........................................................ 9,029
Decrease in other assets...................................................... 802
-------
Net cash provided by operating activities....................................... 449,950
-------
Cash used for investing activities:
Capital expenditures.......................................................... (4,376)
Acquisition of SPS Holdings, Inc. and Subsidiary net of cash acquired of
$29,608.................................................................... (5,657,546)
-------
Net cash used for investing activities.......................................... (5,661,922)
-------
Cash provided by (used for) financing activities:
Proceeds from notes payable -- affiliate and warrant.......................... 3,150,000
Proceeds from bank line of credit............................................. 2,275,696
Loan origination costs........................................................ (174,300)
Proceeds from issuance of common stock........................................ 134,093
-------
Net cash provided by financing activities....................................... 5,385,489
-------
Net increase in cash............................................................ 173,517
Cash at beginning of period..................................................... 0
-------
Cash at end of period........................................................... $ 173,517
=======
Supplementary Information:
Cash paid for interest........................................................ $ --
Cash paid for taxes........................................................... --
</TABLE>
See notes to the financial statements.
F-6
<PAGE> 50
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF THE COMPANY AND NATURE OF OPERATIONS
The American Materials & Technologies Corporation (the "Company"), a
holding company, was incorporated in the State of Delaware on March 29, 1995 to
acquire and manage businesses in the advanced materials and technologies
industries. As more fully described in Note 3, the Company completed its first
acquisition on December 19, 1995, when it acquired all of the common stock of
Culver City Composites Corporation ("CCC"), (formerly known as SPS Holdings,
Inc. and Subsidiary). These financial statements contain the results of
operations of the Company's subsidiary for the twelve day period from December
20, 1995 through December 31, 1995.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash
The Company maintains its cash in demand deposit accounts which, at times,
may exceed federally insured limits. The Company has not experienced any losses
in such accounts. The Company does not have any cash equivalents.
Inventories
Inventories are stated at the lower of average cost or market. Cost is
determined by the weighted average method.
Property and Equipment
Property and equipment are carried at cost. Depreciation is provided using
the straight-line method of depreciation over the estimated useful lives of the
assets which range from three to seven years. Leasehold improvements are
amortized on a straight line basis over the shorter of the useful life of the
improvement or the term of the lease (including tenant options). Expenditures
for maintenance and repairs are expensed when incurred; expenditures for
betterments are capitalized.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and CCC, its wholly owned subsidiary, from the date of acquisition. All
significant intercompany accounts and transactions have been eliminated.
Revenue Recognition
Revenues are recognized at the time of shipment when the earnings process
is considered complete. Reserves are maintained to reflect the estimated
exposure to product returns.
Foreign Currency Transactions
The Company conducts business in a number of different countries, which is,
in all material respects, denominated in U.S. dollars.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109) -- Accounting for Income
Taxes. SFAS 109 requires a company to recognize deferred tax liabilities and
assets for the expected future income tax consequences of events that have been
recognized in the company's financial statements. Under this method, deferred
tax liabilities and assets are
F-7
<PAGE> 51
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
determined based on the temporary differences between the financial statement
carrying amounts and the tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the temporary differences are expected to
reverse. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment. See Note 11 for additional information.
Loss Per Common Share
Loss per common share is computed by dividing the net loss by the weighted
average number of common shares outstanding during the period. The effect of
stock options and warrants outstanding has not been included as the effect would
be anti-dilutive.
New Accounting Pronouncement
In 1995, the Financial Accounting Standards Board issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets to be Disposed Of" which
requires impairment costs to be recorded on long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the asset's carrying
amount. The Company will adopt Statement No. 121 in the first quarter of 1996
and, based on current circumstances, it does not believe the effect of adoption
will be material.
Stock-Based Compensation
The Company accounts for stock options in accordance with APB Opinion No.
25, "Accounting for Stock Issued to Employees." In accordance with Statement No.
123 of the Financial Accounting Standards Board, "Accounting for Stock Based
Compensation," the Company intends to continue to apply APB Opinion No. 25 for
purposes of determining net income and to adopt the pro forma disclosure
requirements of Statement No. 123 in its annual financial statements for 1996.
Research and Development
Expenditures relating to the development of new products and processes,
including significant improvements and refinements to existing products, are
expensed as incurred.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ materially from estimates.
Environmental Remediation Costs
The Company's policy is to accrue remediation liabilities when it is
probable that a liability exists and the costs can be reasonably estimated. The
Company's estimates of these costs are based on existing technology, current
enacted laws and regulations, its current legal obligations regarding
remediation and site-specific costs. These liabilities are adjusted when the
effect of new facts or changes in law or technology are determinable. The
Company's liability for environmental remediation totaled $30,000 at December
31, 1995.
F-8
<PAGE> 52
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- BUSINESS ACQUISITION
On December 19, 1995, the Company's wholly owned subsidiary, AMT Sub, Inc.,
acquired all of the outstanding common stock of SPS Holdings, Inc., a company
whose wholly owned subsidiary, Structural Polymer Systems, Inc., manufactures
and markets advanced composite materials for the aerospace and defense
industries utilizing both proprietary and non-proprietary resin systems. The
purchase price of $5,587,154, which includes direct acquisition costs of
$669,180, included a $4,917,974 cash payment to Montecatini U.S.A., Inc. (the
"Seller"), SPS Holdings, Inc.'s owner and parent. The purchase was financed in
part from proceeds received by the Company from the sale of its common stock and
loans obtained from an affiliated party and a bank line of credit and term loan
(see Notes 7 and 9). The purchase agreement provides for certain
indemnifications by the Seller. Following the acquisition, SPS Holdings, Inc.
and its subsidiary merged with AMT Sub, Inc., and AMT Sub, Inc. changed its name
to Culver City Composites Corporation. The acquisition was accounted for using
the purchase method of accounting and, accordingly, the operating results of
Culver City Composites Corporation have been included in the Company's
consolidated financial statements since the date of acquisition.
The following unaudited pro forma summary combines the consolidated results
of the Company and Culver City Composites Corporation as if the acquisition had
occurred at the beginning of 1994 after giving effect to certain pro forma
adjustments, including increased interest expense assuming the acquisition and
related capital contribution and the issuance of acquisition debt at the
beginning of the period, new compensation agreements effected after the close of
the transaction and revisions to the useful lives and depreciable bases of the
assets.
Prior to the acquisition on December 19, 1995, the operations of the
Company consisted solely of identifying and negotiating target acquisitions. No
changes were made to the Company's historical results during the stand alone
period.
The pro forma results are for illustrative purposes only, and do not
purport to be indicative of the actual results which would have occurred had the
transaction been consummated as of those earlier dates, nor are they indicative
of results of operations which may occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Net sales........................................ $ 15,916,000 $ 15,943,000
Net loss......................................... 618,000 1,740,000
Loss per common share............................ $ (.41) $ (1.15)
</TABLE>
The purchase included, at fair value, current assets of $4,575,142,
property, plant and equipment of $4,346,344, other assets of $45,736, and the
assumption of liabilities of $2,869,453.
NOTE 4 -- STOCK DIVIDEND
On February 5, 1996, the Company issued a stock dividend of 1.1591612 new
shares for each old share. All references to amounts per share and number of
shares have been adjusted to give retroactive effect to this transaction.
F-9
<PAGE> 53
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- INVENTORIES
Inventories consist of the following at December 31, 1995:
<TABLE>
<S> <C>
Raw Materials.................................................... $ 1,166,801
Work-in-process.................................................. 802,509
----------
$ 1,969,310
==========
</TABLE>
Because manufactured product is shipped to the customer upon completion of
the manufacturing process, no substantial inventory of finished goods is
maintained.
NOTE 6 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995:
<TABLE>
<S> <C>
Machinery and equipment.......................................... $2,856,669
Leasehold improvements........................................... 1,453,288
Computers........................................................ 31,483
Construction in progress......................................... 104,904
----------
4,446,344
Less accumulated depreciation and amortization................... 42,904
----------
$4,403,440
==========
</TABLE>
NOTE 7 -- NOTES PAYABLE -- AFFILIATE
The Company is obligated under a $3,000,000 promissory note to a company in
which the Company's Chairman is an officer and director (the "Lender"). The
note, maturing on December 31, 1996, bears interest at the rate of 10% per
annum. The entire outstanding principal together with interest accrued thereon
matures on the earlier of (a) December 31, 1996 or (b) successful completion of
an initial public offering of the Company's common stock. The note can be
prepaid without premium or penalty, in whole or in part at any time.
The Company is obligated under a $150,000 promissory note to a company in
which the Company's Chairman is an officer and director. The note, maturing on
December 31, 1996 bears interest at the rate of 10% per annum. The entire
outstanding principal together with interest accrued thereon shall be paid on
the maturity date. The note is collaterized by specific accounts receivable and
the note is to be prepaid from time to time, until paid in full, and when the
net cash proceeds of these specific accounts receivable are received by the
Company. The note contains default provisions providing for Notice of Default
and its curing within a sixty day period.
If the $3,000,000 promissory note is not paid on or before October 11, 1996
the Company is required to issue a warrant to purchase 289,790 shares of its
common stock at $1.29 per share, (or such greater number of shares at such other
exercise prices as shall result from appropriate adjustment for dilutive events)
to the holder of the promissory note. If the note is not paid on or before
January 31, 1997, the Company shall deliver a warrant to purchase 173,874 shares
of its common stock at $1.29 per share (or such greater number of shares at such
other exercise prices as shall result from appropriate adjustment for dilutive
events) to the holder of the promissory note.
F-10
<PAGE> 54
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- NOTES PAYABLE -- AFFILIATE -- (CONTINUED)
In the event that the note is not prepaid or paid on the maturity date,
then the entire outstanding principal amount of the note and all interest
accrued thereon is required to be converted into a 15% cumulative preferred
stock. Among other things, the preferred stock will provide that 1) if it is not
redeemed after one year of issuance, each month thereafter the Company shall
issue to the preferred stockholder a number of shares equal to 10% of its then
issued and outstanding shares of common stock until the preferred stock is
redeemed and 2) the holders of preferred stock may elect at least one member of
the board of directors of the Company.
This note and the rights and remedies of the holder of the note, and the
terms of the Preferred Stock, are subject to the terms and conditions of a
subordination agreement dated December 19, 1995 between the Company and the bank
providing the credit facility (see Note 9).
Certain stockholders of the Company have entered into a Pledge Agreement
with the holder of the promissory note pledging their stock and all proceeds
thereon, as collateral.
For the period December 20, 1995 through December 31, 1995, the amount of
interest charged to operations under these notes was $9,625.
On December 19, 1995, the Company issued a warrant to purchase 289,790
shares of the Company's stock at $1.29 per share to a company in which the
Company's Chairman is an officer and director and which company has made loans
discussed earlier. The warrant may be exercised in whole or in part and expires
December 31, 2005. The warrant purchase price may be adjusted based on the
dilutive effects of further stock sales. A value of $78,243 was assigned to the
warrant.
NOTE 8 -- ACCRUED LIABILITIES
Amounts in accrued liabilities at December 31, 1995 were as follows:
<TABLE>
<S> <C>
Amounts due to employees......................................... $ 481,451
Liability for idle facilities.................................... 267,471
Amounts due others............................................... 646,595
Due to affiliates................................................ 160,000
----------
$1,555,517
==========
</TABLE>
NOTE 9 -- CREDIT FACILITIES
On December 19, 1995, Culver City Composites Corporation entered into a
Loan and Security Agreement providing for a revolving credit facility of
$4,440,000 and a term loan in the amount of $560,000. The credit facility's
original term runs through the third anniversary of the closing date and is
automatically renewable from year to year thereafter. Interest is charged on the
revolving note at the annual rate of 1 1/2% above the prime rate. The revolving
credit facility also provides for Letters of Credit aggregating up to $750,000.
A fee of 1% per annum is to be paid on the aggregate undrawn face amount of all
outstanding Letters of Credit. A fee of 1/2 of 1% per annum is charged on the
unused portion of the revolving credit facility. The Loan and Security Agreement
requires, among other things, the company to maintain certain financial
covenants including tangible net worth, interest coverage and debt service
coverage ratios, and restrictions on capital expenditures. The credit facility
is secured by substantially all of the assets of the Company. Closing costs
charged by the bank in connection with the credit facility of $67,000 are
included in loan origination costs on the Company's balance sheet and are being
amortized over a period of three years. For the period December 20, 1995 to
December 31, 1995, the amount of interest charged to operations under the
facility was $8,599. The effective annual interest rates on the term and
revolving notes for the period from December 20, 1995 to December 31, 1995 were
10.0% and 10.5%, respectively. As mentioned above, the credit facility
F-11
<PAGE> 55
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- CREDIT FACILITIES -- (CONTINUED)
provides for a term loan of $560,000 and is evidenced by a term note. The term
note bears interest at the annual rate of 1 1/2% above the prime rate and is
payable in successive monthly installments on the first day of each month based
on an amortization schedule of sixty equal and level payments. The entire unpaid
principal balance of the term loan is due upon the expiration of the original
term of the Loan and Security Agreement or of the expiration of the renewal
period. Should expiration occur at the 36th or 48th month, the Company is to pay
eleven monthly installments equal to the amounts paid during the original term
followed by a final installment payable equal to the then unpaid principal
balance upon the renewal date. The Company guarantees to the bank the amounts
borrowed under the credit facility, and under the terms of a Stock Pledge
Agreement with the bank, has pledged the stock and all additional shares of
stock or other securities at any time issued by CCC.
Annual maturities of the term note are as follows:
<TABLE>
<S> <C>
1996...................................................... $112,000
1997...................................................... 112,000
1998...................................................... 336,000
</TABLE>
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its principal manufacturing and office facilities under
non-cancellable operating leases with lease terms of up to ten years expiring
through the year 2006. The leases generally provide for the lessee to pay taxes,
maintenance, insurance, and certain other operating costs of the leased
property. The leases on most of the properties contain renewal provisions and
certain base rents are subject to annual increases determined by indexing.
Minimum future lease payments on operating lease commitments are
approximately:
<TABLE>
<S> <C>
1996..................................................... $ 756,619
1997..................................................... 625,551
1998..................................................... 578,768
1999..................................................... 573,072
2000..................................................... 573,072
Thereafter............................................... 3,014,384
</TABLE>
Rent expense for the period March 29, 1995 through December 31, 1995
amounted to approximately $18,467. Included in commitments are lease payments of
$170,856 and $42,714 for 1996 and 1997, respectively, which were accrued as part
of the loss on idle facility at December 31, 1994.
Employment Agreements
The Company has entered into employment agreements with certain of its
executive officers expiring on March 24, 1998. The agreements provide for
aggregate annual base compensation of $255,000 per year as well as for incentive
bonuses which are payable upon the attainment of specified management goals.
In addition, the agreements entered into on March 25, 1995 provide for the
issuance of stock options for the purchase of an aggregate of 133,303 shares of
the Company's common stock, which grants will vest in one-third equal
installments on the first, second and third anniversaries of the effective date
of the initial public offering. The options are exercisable for a period
expiring ten years after issuance. The purchase price shall be $0.86 per share,
subject to adjustment in the event of stock dividends, stock splits, or other
adjustment events.
In February, 1996, the Company entered into additional employment contracts
with key employees which expire at various dates. The agreements provide for
annual base compensation of an aggregate of $198,000 per
F-12
<PAGE> 56
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
annum as well as incentive bonuses. One agreement provides for the issuance of
25,000 stock options with an exercise price of $1.00 per share, vesting in equal
increments over a four year period.
Other Matters
Culver City Composites Corporation is involved in certain litigation and
other legal matters which are being defended and handled in the ordinary course
of business. While the ultimate results of the matters described above cannot be
determined, management does not expect that they will have a material adverse
effect on the Company's results of operations or financial position.
NOTE 11 -- INCOME TAXES
The Company accounts for income taxes in accordance with SFAS 109,
"Accounting for Income Taxes". SFAS 109 permits the recognition of a deferred
tax asset if it is more likely than not that the future tax benefit will be
realized. The Company does not recognize a deferred tax asset except to the
extent that future years' deductible items will offset future years' taxable
items or will, as loss carrybacks, generate a refund in the current and two
previous years. Previously, under SFAS 96, the Company treated future years' net
tax deductible items as if they were net operating losses for the years in which
they were expected to occur. The Company reported a tax benefit for these losses
to the extent the losses would generate a tax refund in the current and two
previous years.
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Depreciation.................................................... $ 184,291
----------
Gross deferred tax liabilities.................................. 184,291
----------
Net operating loss carryforwards................................ 1,632,000
Inventory valuation............................................. 166,000
Expense accruals................................................ 92,458
Allowance for bad debts......................................... 64,000
Allowance for loss on idle facility............................. 69,905
Uniform capitalization costs.................................... 12,400
Pensions........................................................ 4,793
----------
Gross deferred tax assets....................................... 2,041,556
----------
Deferred tax asset valuation allowance.......................... 1,857,265
----------
Net deferred tax asset.......................................... $ --
==========
</TABLE>
The Company's effective tax rate is 0% compared to the federal statutory
rate of 34% due to the Company's history of operating losses and the resultant
lack of income from which to guarantee benefits.
At December 31, 1995, the Company had generated net operating loss
carryforwards of approximately $200,000 for federal tax purposes. To the extent
not utilized, the federal net operating loss carryforwards will expire in 2010.
In addition, as the result of the acquisition of Culver City Composites
Corporation on December 19, 1995, the Company had at December 31, 1995,
approximately $32,665,000 of net operating loss carryforwards for federal income
tax purposes which will expire beginning in fiscal year 2011. The utilization of
these net operating losses, which expire from 2002 to 2010 is limited to
approximately $320,000 each year as a result of an "ownership change" (as
defined by Section 382 of the Internal Revenue Code of 1986, as amended) which
occurred on December 19, 1995.
F-13
<PAGE> 57
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- EMPLOYEE BENEFIT PLANS
Defined Benefit Plan
The Company maintains a defined benefit pension plan covering all
bargaining unit employees which provides for monthly benefit payments upon
retirement. The benefits are based on a fixed monthly payment for each year of
credited service. Plan contributions are made in accordance with ERISA
regulations. The plan maintains investments in various pooled funds at a bank.
Net periodic pension costs and net pension liability for the years ended
December 31, 1995 and 1994 are reflected in the December 19, 1995 and December
31, 1994 financial statements of CCC, respectively, and amounted to $31,568 and
$11,982, respectively, and $32,097 and $83,897, respectively. The funded status
of the plan and amounts recognized in the CCC consolidated balance sheets at
December 19, 1995 and December 31, 1994, were based on a valuation date of
August 1.
Because the acquisition of CCC occurred on December 19, 1995, no expense
for the plan was recorded by the Company in its financial statements. The
Company currently carries a minor liability under SFAS 87 on its balance sheet.
The information presented above is intended to assist the reader in identifying
the size, scope and range of costs for the plan.
The components of net pension costs are as follows:
<TABLE>
<CAPTION>
PERIOD JANUARY 1,
1995 TO YEAR ENDED
DECEMBER 19, DECEMBER 31,
1995 1994
----------------- ------------
<S> <C> <C>
Service cost for benefits earned.......... $ 23,343 $ 18,852
Interest cost on projected benefit
obligation.............................. 62,195 56,704
Expected return on plan assets............ (56,924) (54,373)
Prior service cost amortization........... 8,639 3,224
Net actuarial (gain) loss assumption...... (5,685) 7,690
-------- --------
Net pension costs......................... $ 31,568 $ 32,097
======== ========
</TABLE>
The following table sets forth the funded status of the plan and amounts
recognized in the consolidated balance sheet at December 19, 1995 and December
31, 1994, based on a valuation date of August 1:
<TABLE>
<CAPTION>
DECEMBER 19, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligation........................ $788,440 $ 718,572
Non-vested benefit obligation.................... 416 --
------------ ----------- -
Projected benefit obligation..................... 788,856 718,572
Plan assets at fair value.......................... 776,874 634,675
------------ ----------- -
Plan assets less than projected benefit
obligation....................................... (11,982) (83,897)
Unrecognized net (gain) loss....................... (8,305) 94,723
Unrecognized prior service cost.................... 79,838 38,876
Adjustment to recognize minimum liability.......... (71,513) (133,599)
------------ ----------- -
Net pension liability recognized in the
consolidated balance sheets...................... $(11,962) $ (83,897)
============ ============
Assumptions used (August 1 measurement date):
Discount rate.................................... 8% 8%
Long term rate of return on plan assets.......... 9% 9%
</TABLE>
F-14
<PAGE> 58
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- EMPLOYEE BENEFIT PLANS -- (CONTINUED)
Defined Contribution Plan
Substantially all non-bargaining unit employees of the Company participate
in a defined contribution plan. The plan contains a matched savings provision
that permits both pretax and after tax employee contributions. Participants can
contribute up to 12% of their annual salary and receive a matching contribution
from the employer according to the provisions of the plan document. The defined
contribution plan expense was $2,200 for the period December 20, 1995 through
December 31, 1995.
NOTE 13 -- CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments subject to credit risk are primarily
trade accounts receivable and cash. Cash is held in a United States bank.
Generally, the Company does not require collateral or other security to support
customer receivables. The majority of the Company's business is conducted with
major aerospace and defense companies and their subcontractors.
NOTE 14 -- SUBSEQUENT EVENTS
On February 6, 1996, the Company approved and adopted The American
Materials & Technologies Corporation's 1996 Incentive and Nonqualified Stock
Option Plan. The total number of shares that may be issued pursuant to options
granted under the Plan shall not exceed 350,000 shares of common stock. Whenever
any outstanding option under the Plan expires, is cancelled or is otherwise
terminated (other than by exercise), the shares of common stock allocated to the
unexercised portion of such option may again be the subject of options under the
Plan.
Incentive stock options under the Plan may be granted only to officers and
other employees of the Company or its subsidiaries, and to consultants or other
persons who provide services to the Company or its subsidiaries. No Incentive
Stock Option shall be granted to an individual who owns more than 10% of the
combined power of all classes of stock of the Company or its subsidiaries unless
the Incentive Stock Option provides that (i) the purchase price per share shall
not be less than 110% of the fair market value of the common stock at the time
such option is granted and (ii) that such option shall not be exercisable to any
extent after the expiration of five years from the date it was granted. The
purchase price per share under each option, other than for a greater than 10%
stockholder, shall be determined by the Board or Committee at the time the
option is granted. Each option agreement is subject to its own terms.
F-15
<PAGE> 59
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets
Cash.......................................................................... $ 1,800
Accounts receivable, net of allowance of $69,447.............................. 3,379,150
Inventories................................................................... 2,037,520
Prepaid expenses and other current assets..................................... 369,889
----------
Total current assets.................................................. 5,788,359
Property and equipment, less accumulated depreciation and amortization of
$178,978...................................................................... 4,307,344
Other assets.................................................................... 51,876
----------
$10,147,579
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.............................................................. $ 2,382,504
Notes payable-affiliate....................................................... 3,091,277
Accrued liabilities........................................................... 1,803,138
Current portion of term loan-bank............................................. 112,000
Taxes payable................................................................. 113,927
----------
Total current liabilities............................................. 7,502,846
Term loan-bank.................................................................. 419,999
Revolving credit facility-bank.................................................. 2,043,362
----------
Total liabilities..................................................... 9,966,207
----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01, authorized 5,000,000 shares; none issued
and outstanding............................................................ --
Common stock, par value $.01 per share, authorized 15,000,000; issued
and outstanding 1,516,908 shares........................................... 15,169
Additional paid-in capital.................................................... 197,167
Accumulated deficit........................................................... (30,964)
----------
Total stockholders' equity............................................ 181,372
----------
$10,147,579
==========
</TABLE>
See notes to the financial statements.
F-16
<PAGE> 60
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------
MARCH 31, 1996 MARCH 31, 1995
-------------- --------------
(NOTE 1)
<S> <C> <C>
Net sales....................................................... $5,251,321 $4,017,596
---------- ----------
Costs and expenses
Materials..................................................... 2,431,382 1,916,657
Fixed and variable manufacturing.............................. 1,352,853 1,411,295
Selling, general and administrative........................... 825,650 535,589
Research and development...................................... 94,310 78,389
---------- ----------
4,704,195 3,941,930
---------- ----------
Income from operations.......................................... 547,126 75,666
Interest expense................................................ 186,888 211,600
---------- ----------
Income (loss) before income taxes............................... 360,238 (135,934)
Provision for income taxes...................................... 113,927 --
---------- ----------
Net income (loss)............................................... $ 246,311 $ (135,934)
========== ==========
Net income (loss) per common share.............................. $0.13
Weighted average number of common shares........................ 1,878,879
==========
</TABLE>
See notes to the financial statements.
F-17
<PAGE> 61
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------
MARCH 31, 1996
-------------- MARCH 31, 1995
--------------
(NOTE 1)
<S> <C> <C>
Cash used in operations:
Net income (loss)............................................... $ 246,311 $ (135,934)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization................................. 136,074 320,436
Non-cash interest expense..................................... 19,520 --
(Increase) decrease in current assets:
Accounts receivable........................................ (951,545) (135,460)
Inventory.................................................. (68,210) 160,527
Prepaid expenses and other current assets.................. (58,624) 86,599
Increase (decrease) in current liabilities:
Accounts payable........................................... (208,853) (501,287)
Accrued liabilities........................................ 247,621 (53,606)
Taxes payable.............................................. 113,927 --
Decrease in other assets...................................... 92,375 --
----------- ---------
Net cash used in operating activities........................... (431,404) (258,725)
----------- ---------
Cash used for investing activities:
Capital expenditures.......................................... (39,978) (22,276)
----------- ---------
Net cash used for investing activities.......................... (39,978) (22,276)
----------- ---------
Cash provided by financing activities:
Increase in intercompany debt................................. -- 211,467
Borrowings under revolving credit............................. 2,722,488 --
Repayments under revolving credit............................. (2,394,822) --
Payment of term loan-bank..................................... (28,001) --
----------- ---------
Net cash provided by financing activities....................... 299,665 211,467
----------- ---------
Net decrease in cash............................................ (171,717) (69,534)
Cash at beginning of period..................................... 173,517 109,586
----------- ---------
Cash at end of period........................................... $ 1,800 $ 40,052
=========== =========
Supplementary Information:
Cash paid for interest........................................ $ 73,718 $ 132
=========== =========
Cash paid for taxes........................................... $ 3,200 $ 800
=========== =========
</TABLE>
See notes to the financial statements.
F-18
<PAGE> 62
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
1. BASIS OF PRESENTATION
The information contained in these unaudited consolidated financial
statements is condensed from that which would appear in the Company's annual
consolidated financial statements. Accordingly, the condensed consolidated
financial statements included herein should be reviewed in conjunction with the
consolidated financial statements and related notes included elsewhere in this
Prospectus. The unaudited condensed consolidated financial statements as of
March 31, 1996 and 1995 and for the quarterly periods then ended include all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation. The results of operations for interim periods are not
necessarily indicative of the results which may be expected for the entire year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
The results of operations and cash flows for the period ended March 31,
1995 represent those of Culver City Composites Corporation prior to its
acquisition by the Company.
2. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number
of shares of outstanding common stock and dilutive common stock equivalents from
the assumed exercise of stock options and warrants.
F-19
<PAGE> 63
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Culver City Composites Corporation (formerly known as SPS Holdings, Inc.) and
Subsidiary
We have audited the accompanying consolidated balance sheet of Culver City
Composites Corporation (formerly known as SPS Holdings, Inc.) and Subsidiary as
of December 19, 1995 and December 31, 1994, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
period January 1, 1995 to December 19, 1995 and the year ended December 31,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Culver City Composites
Corporation and Subsidiary as of December 19, 1995 and December 31, 1994, and
the results of its operations and its cash flows for the period January 1, 1995
to December 19, 1995 and the year ended December 31, 1994, in conformity with
generally accepted accounting principles.
By: /s/ FELDMAN RADIN & CO., P.C.
------------------------------------
Feldman Radin & Co., P.C.
Certified Public Accountants
New York, New York
February 9, 1996
F-20
<PAGE> 64
CULVER CITY COMPOSITES CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 19, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash.......................................................... $ 29,608 $ 109,586
Accounts receivable, net of allowance for doubtful accounts of
$104,000 and $500,000, respectively........................ 2,376,300 2,193,678
Inventories................................................... 1,926,752 1,294,772
Prepaid expenses and other current assets..................... 242,482 693,690
---------- -----------
Total current assets.................................. 4,575,142 4,291,726
Property and equipment, net of accumulated depreciation and
amortization of $5,415,983 and $4,201,934, respectively....... 4,328,005 5,379,231
Other assets.................................................... 45,736 515,610
---------- -----------
$ 8,948,883 $ 10,186,567
========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities
Accounts payable.............................................. $ 2,258,438 $ 2,092,479
Line of credit -- parent company.............................. -- 12,098,172
Accrued liabilities........................................... 840,423 1,405,257
---------- -----------
Total current liabilities............................. 3,098,861 15,595,908
---------- -----------
Commitments and contigencies
Stockholder's equity (deficit)
Common stock, par value $.01 per share,
authorized 1,000 shares; issued and outstanding 116
shares................................................... 1 1
Additional paid-in capital.................................... 61,622,590 49,283,511
Deficit....................................................... (55,772,569) (54,692,853)
---------- -----------
Total stockholder's equity (deficit).................. 5,850,022 (5,409,341)
---------- -----------
$ 8,948,883 $ 10,186,567
========== ===========
</TABLE>
See notes to the financial statements.
F-21
<PAGE> 65
CULVER CITY COMPOSITES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD JANUARY 1,
1995 TO YEAR ENDED
DECEMBER 19, DECEMBER 31,
1995 1994
----------------- ------------
<S> <C> <C>
Net sales...................................................... $15,299,977 $ 15,943,341
-------- --------
Costs and expenses
Materials.................................................... 7,351,665 7,552,104
Fixed and variable manufacturing............................. 5,688,480 6,286,058
Selling, general and administrative.......................... 2,424,354 2,580,137
Research and development..................................... 330,694 305,692
-------- --------
15,795,193 16,723,991
-------- --------
Loss from operations........................................... (495,216) (780,650)
Other expense
Interest expense............................................. 584,500 567,403
Loss on idle facilities...................................... -- 500,600
Other........................................................ -- 476,347
-------- --------
Loss before income taxes....................................... (1,079,716) (2,325,000)
Provision for income taxes..................................... -- --
-------- --------
Net loss....................................................... $(1,079,716) $ (2,325,000)
======== ========
</TABLE>
See notes to the financial statements.
F-22
<PAGE> 66
CULVER CITY COMPOSITES CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON TOTAL
SHARES STOCKHOLDER'S
OUTSTANDING ADDITIONAL EQUITY
PAR VALUE $.01 AMOUNT PAID-IN CAPITAL DEFICIT (DEFICIT)
--------------- ------ --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE -- DECEMBER 31, 1993...... 116 $1 $49,283,511 $(52,367,853) $ (3,084,341)
Net loss........................ (2,325,000) (2,325,000)
--- - -------- -------- --------
BALANCE -- DECEMBER 31, 1994...... 116 1 49,283,511 (54,692,853) (5,409,341)
Net loss........................ (1,079,716) (1,079,716)
Capital contribution............ 12,339,079 -- 12,339,079
--- - -------- -------- --------
BALANCE -- DECEMBER 19, 1995...... 116 $1 $61,622,590 $(55,772,569) $ 5,850,022
=== = ======== ======== ========
</TABLE>
See notes to the financial statements.
F-23
<PAGE> 67
CULVER CITY COMPOSITES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD JANUARY 1,
1995 TO YEAR ENDED
DECEMBER 19, DECEMBER 31,
1995 1994
----------------- ------------
<S> <C> <C>
Cash used in operations:
Net loss..................................................... $(1,079,716) $ (2,325,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 1,214,049 1,263,617
Decrease (increase) in current assets:
Accounts receivable, net................................ (182,622) 54,353
Inventories............................................. (631,980) (384,028)
Prepaid expenses and other current assets............... 451,208 (476,662)
Note receivable......................................... -- (475,000)
Other assets............................................ (5,126) 106,401
Increase (decrease) in current liabilities:
Accounts payable........................................ 165,959 351,107
Accrued liabilities..................................... (564,242) 320,571
Assets held for sale.................................... -- 2,110,190
Accrued loss on disposal................................ -- (1,629,548)
----------- -----------
Net cash used in operating activities.......................... (632,470) (1,083,999)
----------- -----------
Cash provided by (used in) investment activities:
Capital expenditures......................................... (162,823) (108,113)
Proceeds from sale of property and equipment................. -- 381,995
Loss on sale of assets....................................... -- 34,730
----------- -----------
(162,823) 308,612
----------- -----------
Cash provided by financing activities:
Borrowings under line of credit -- parent company............ 695,794 877,250
Repayments of borrowings under line of credit -- parent
company................................................... (290,297) --
Capital contribution......................................... 309,818 --
----------- -----------
715,315 877,250
----------- -----------
Net increase (decrease) in cash................................ (79,978) 101,863
Cash at beginning of period.................................... 109,586 7,723
----------- -----------
Cash at end of period.......................................... $ 29,608 $ 109,586
=========== ===========
</TABLE>
See notes to the financial statements.
F-24
<PAGE> 68
CULVER CITY COMPOSITES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF THE COMPANY AND NATURE OF OPERATIONS
Culver City Composites Corporation (the "Company"), a wholly owned
subsidiary of Montecatini USA, Inc., until December 19, 1995, was incorporated
in the State of Delaware in June, 1991 to acquire the assets of the Composites
Division of Ferro Corporation. The Company develops, manufactures and markets
advanced composite materials for the aerospace, defense and transportation
industries utilizing both proprietary and non-proprietary resin systems. The
Company's products are sold both in the United States and in various foreign
countries. On December 19, 1995, all of the Company's outstanding stock was
acquired for cash by The American Materials & Technologies Corporation.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash
The Company maintains its cash in demand deposit accounts at a bank which,
at times, may exceed federally insured limits. The Company has not experienced
any losses in such accounts. The Company does not have any cash equivalents.
Inventories
Inventories are stated at the lower of average cost or market. Cost is
determined by the weighted average method.
Property and Equipment
Property and equipment are carried at cost. Depreciation is provided using
the straight-line method of depreciation over the estimated useful lives of the
assets which range from three to seven years. Leasehold improvements are
amortized on a straight line basis over the shorter of the useful life of the
improvement or the term of the lease (including tenant options). Expenditures
for maintenance and repairs are expensed when incurred; expenditures for
betterments are capitalized.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and Structural Polymer Systems, Inc., its wholly owned subsidiary. All
significant intercompany accounts and transactions have been eliminated.
Revenue Recognition
Revenues are recognized at the time of shipment when the earnings process
is considered complete. Reserves are maintained to reflect the estimated
exposure to product returns.
Foreign Currency Transactions
The Company conducts business in a number of different countries which is,
in all material respects, denominated in U.S. dollars.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109) -- Accounting for Income
Taxes. SFAS 109 requires a company to recognize deferred tax liabilities and
assets for the expected future income tax consequences of events that have been
recognized in the company's financial statements.
F-25
<PAGE> 69
CULVER CITY COMPOSITES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Under this method, deferred tax liabilities and assets are determined based
on the temporary differences between the financial statement carrying amounts
and the tax bases of assets and liabilities using enacted tax rates in effect in
the years in which the temporary differences are expected to reverse. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment. See Note 7 for additional information.
For calendar year 1994 and the period January 1, 1995 to December 19, 1995,
the Company was a participant in the filing of the Montecatini USA, Inc.
consolidated federal tax return.
New Accounting Pronouncement
In 1995, the Financial Accounting Standards Board issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" which requires impairment costs to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the asset's carrying amount. The Company will adopt Statement No. 121 in the
first quarter of 1996 and, based on current circumstances, it does not believe
the effect of adoption will be material.
Research and Development
Expenditures relating to the development of new products and processes,
including significant improvements and refinements to existing products, are
expensed as incurred.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ materially from estimates.
Environmental Remediation Costs
The Company's policy is to accrue environmental remediation liabilities
when it is probable that a liability exists and the costs can be reasonably
estimated. The Company's estimates of these costs are based on existing
technology, current enacted laws and regulations, its current legal obligations
regarding remediation and site-specific costs. These liabilities are adjusted
when the effect of new facts or changes in law or technology are determinable.
The Company's liability for environmental remediation totaled $30,000 at
December 19, 1995.
NOTE 3 -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 19, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Raw Materials..................................... $1,092,659 $ 642,121
Work-in-process................................... 834,093 652,651
---------- ----------
$1,926,752 $1,294,772
========== ==========
</TABLE>
Because manufactured product is shipped to the customer upon completion of
the manufacturing process, no substantial inventory of finished goods is
maintained.
F-26
<PAGE> 70
CULVER CITY COMPOSITES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 19, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Machinery and equipment........................... $7,110,777 $7,071,645
Leasehold improvements............................ 2,351,894 2,351,894
Computers......................................... 176,414 157,626
Construction in Progress.......................... 104,903 --
---------- ----------
9,743,988 9,581,165
Less accumulated depreciation and amortization.... 5,415,983 4,201,934
---------- ----------
$4,328,005 $5,379,231
========== ==========
</TABLE>
NOTE 5 -- ACCRUED LIABILITIES
Amounts in accrued liabilities at December 19, 1995 and December 31, 1994
were as follows:
<TABLE>
<CAPTION>
DECEMBER 19, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Amounts due to employees.......................... $384,795 $ 202,256
Liability for idle facility....................... 267,471 450,600
Amounts due others................................ 188,157 524,401
Due to affiliates................................. -- 228,000
---------- ----------
$840,423 $1,405,257
========== ==========
</TABLE>
NOTE 6 -- COMMITMENTS AND CONTINGENCIES
Operating leases
The Company leases its principal manufacturing and office facilities under
non-cancellable operating leases with lease terms of up to ten years expiring
through the year 2005. The leases generally provide for the lessee to pay taxes,
maintenance, insurance and certain other operating costs of the leased property.
The leases on most of the properties contain renewal provisions and certain base
rents are subject to annual increases determined by indexing.
Minimum future lease payments on operating lease commitments are
approximately:
<TABLE>
<S> <C>
1996............................................. $ 756,619
1997............................................. 625,551
1998............................................. 578,768
1999............................................. 573,072
2000............................................. 573,072
Thereafter....................................... 3,014,384
</TABLE>
Rent expense for the period January 1, 1995 through December 19, 1995 and
the year ended December 31, 1994 amounted to approximately $653,043 and
$841,893, respectively. Included in commitments are lease payments of $170,856
and $42,714 for 1996 and 1997, respectively, which were accrued as part of the
loss on idle facility at December 31, 1994.
F-27
<PAGE> 71
CULVER CITY COMPOSITES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Other Matters
The Company was involved in certain litigation and other legal matters in
1995 and 1994 which are being defended and handled in the ordinary course of
business. While the ultimate results of the matters described above cannot be
determined, management does not expect that they will have a material adverse
effect on the Company's results of operations or financial position.
Litigation Settlement
In 1994, the Company settled a lawsuit involving a former employee of the
Company for $450,000. This amount was expensed in 1994 when the settlement was
made and is included in other expense.
NOTE 7 -- INCOME TAXES
The Company adopted SFAS 109, "Accounting for Income Taxes" effective
December 31, 1993. SFAS 109 permits the recognition of a deferred tax asset if
it is more likely than not that the future tax benefit will be realized. the
Company does not recognize a deferred tax asset except to the extent that future
years' deductible items will offset future years' taxable items or will, as loss
carrybacks, generate a refund in the current and two previous years. Previously,
under SFAS 96, the Company treated future years' net tax deductible items as if
they were net operating losses for the years in which they were expected to
occur. The Company reported a tax benefit for these losses to the extent the
losses would generate a tax refund in the current and two previous years.
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
PERIOD JANUARY 1,
1995 TO
DECEMBER 19, DECEMBER 31,
1995 1994
----------------- ------------
<S> <C> <C>
Depreciation.................................... $ 181,891 $ 370,800
------- -------
Gross deferred tax liabilities.................. 181,891 370,800
------- -------
Net operating loss carryforwards................ 1,632,000 1,265,000
Inventory valuation............................. 166,000 104,000
Expense accruals................................ 92,458 80,902
Allowance for bad debts......................... 64,000 224,000
Allowance for loss on idle facility............. 69,905 140,240
Uniform capitalization costs.................... 12,400 12,400
Pensions........................................ 4,793 33,559
------- -------
Gross deferred tax assets....................... 2,041,556 1,860,101
------- -------
Deferred tax asset valuation allowance.......... 1,859,665 1,489,301
------- -------
Net deferred tax asset.......................... $ -- $ --
======= =======
</TABLE>
The change in the valuation allowance from December 31, 1993 to December
31, 1994 was $756,000 and from December 31, 1994 to December 19, 1995 was
$370,364.
At December 19, 1995 and December 31, 1994, for federal income tax
purposes, the Company had net operating loss carryforwards of approximately
$32,450,000 and $31,470,000, respectively which will expire beginning in fiscal
year 2000. Certain changes in stock ownership can result in a limitation on the
amount of net operating loss carryforwards that can be utilized in each year.
The Company determined it has undergone
F-28
<PAGE> 72
CULVER CITY COMPOSITES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- INCOME TAXES -- (CONTINUED)
such an ownership change. Consequently, utilization of net operating loss
carryforwards will be limited to approximately $320,000 per year.
NOTE 8 -- DISCONTINUED OPERATIONS
In August, 1993, the Company's owner, Montecatini USA, Inc. (the "Parent")
decided to divest SPS Holdings, Inc. and its wholly owned subsidiary, Structural
Polymer Systems, Inc. In connection with this plan, Structural Polymer Systems,
Inc. received a letter of intent from Reinhold Industries, Inc. to acquire the
assets of its Compositair Division in December, 1993. This sale was consummated
on May 14, 1994.
The terms of sale included placing a portion of the purchase price in an
escrow account for a period of one year from the close. This amount, subject to
determination by a formula within the asset purchase agreement, was $376,082 and
was paid to Structural Polymer Systems, Inc. in May, 1995. This amount is
included in prepaid expenses and other current assets at December 31, 1994.
The terms of sale also included a $475,000, 6% interest bearing promissory
note due on May 14, 1996. Both principal and interest are due at maturity. This
note was assigned to Montecatini U.S.A., Inc., on September 25, 1995 in partial
satisfaction of balances due to them. This note is included in other assets at
December 31, 1994. Structural Polymer Systems, Inc. completed its disposal plan
during 1994.
NOTE 9 -- RELATED PARTY TRANSACTIONS
Line of Credit -- Parent Company
The Company maintained a revolving credit facility with its Parent,
Montecatini USA, Inc. in the amount of $12,000,000 through September 25, 1995.
At December 31, 1994, outstanding borrowings under this line of credit were
$12,098,172. The credit facility carried interest at negotiated rates,
principally ranging from 6.63% to 6.94% for the period January 1, 1995 to
September 25, 1995 and 3.84% to 6.875% for the year ended December 31, 1994.
There are no commitment fees for unused credit facility. The weighted average
interest rate on the credit facility for the period from January 1, 1995 to
September 25, 1995 was 6.8%. On September 25, 1995 the Parent contributed all
outstanding amounts due under this credit facility to equity and cancelled the
facility.
Other Related Party Transactions
During 1994, the Company sold, at the direction of Montecatini S.p.A.,
certain machinery and equipment with a net book value of approximately $416,000
to Structural Polymer Systems Ltd., (a foreign subsidiary of Montecatini S.p.A),
realizing a loss of approximately $35,000.
The Company paid management charges of $200,000 to Tencara S.p.A. (a
foreign subsidiary of Montecatini S.p.A.) for the year ended December 31, 1994.
During 1994, Montecatini S.p.A. billed Structural Polymer Systems, Inc.
$65,000 for the use of the Montecatini Advanced Materials name.
NOTE 10 -- EMPLOYEE BENEFIT PLANS
Defined Benefit Plan
The Company maintains a defined benefit pension plan covering all
bargaining unit employees which provides for monthly benefit payments upon
retirement. The benefits are based on a fixed monthly payment for each year of
credited service. Plan contributions are made in accordance with ERISA
regulations. The plan maintains investments in various pooled funds at a bank.
F-29
<PAGE> 73
CULVER CITY COMPOSITES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- EMPLOYEE BENEFIT PLANS -- (CONTINUED)
The components of net pension costs are as follows:
<TABLE>
<CAPTION>
PERIOD JANUARY 1,
1995 TO YEAR ENDED
DECEMBER 19, DECEMBER 31,
1995 1994
----------------- ------------
<S> <C> <C>
Service cost for benefits earned............... $ 23,343 $ 18,852
Interest cost on projected benefit
obligation................................... 62,195 56,704
Expected return on plan assets................. (56,924) (54,373)
Prior service cost amortization................ 8,639 3,224
Net actuarial (gain) loss assumption........... (5,685) 7,690
-------- --------
Net pension costs.............................. $ 31,568 $ 32,097
======== ========
</TABLE>
The following table sets forth the funded status of the plan and amounts
recognized in the consolidated balance sheet at December 19, 1995 and December
31, 1994, based on a valuation date of August 1:
<TABLE>
<CAPTION>
DECEMBER 19, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation........................ $788,440 $ 718,572
Non-vested benefit obligation.................... 416 --
------ ------
Projected benefit obligation..................... 788,856 718,572
Plan assets at fair value.......................... 776,874 634,675
------ ------
Plan assets less than projected benefit
obligation....................................... (11,982) (83,897)
Unrecognized net (gain) loss....................... (8,305) 94,723
Unrecognized prior service cost.................... 79,838 38,876
Adjustment to recognize minimum liability.......... (71,513) (133,599)
------ ------
Net pension liability recognized in the
consolidated balance sheets...................... $(11,962) $ (83,897)
====== ======
Assumptions used (August 1 measurement date):
Discount rate.................................... 8% 8%
Long term rate of return on plan assets.......... 9% 9%
</TABLE>
The net pension liability was recognized in accrued liabilities in the
consolidated balance sheet.
Defined Contribution Plan
Substantially all non-bargaining unit employees of the Company participate
in a defined contribution plan. The plan contains a matched savings provision
that permits both pretax and after tax employee contributions. Participants can
contribute up to 12% of their annual salary and receive a matching contribution
from the employer according to the provisions of the plan document.
The defined contribution plan expense was $52,000 for the period from
January 1, 1995 to December 19, 1995 and $59,000 for the year ended December 31,
1994.
F-30
<PAGE> 74
CULVER CITY COMPOSITES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11 -- CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments subject to credit risk are primarily
trade accounts receivable and cash. Cash is held in a United States bank.
Generally, the Company does not require collateral or other security to support
customer receivables.
The majority of the Company's business is conducted with major aerospace
and defense companies, and their subcontractors which constitute a single
segment of business. In 1995, two customers accounted for approximately 30% of
the Company's sales. In 1994, two customers accounted for 31% of the Company's
sales. No other customer accounted for 10% or more of the Company's sales in
either year.
The Company's sales by geographic locations are summarized in the table
below:
<TABLE>
<CAPTION>
DECEMBER 19, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
United States..................................... $ 13,110,789 $ 14,010,721
Germany........................................... 797,299 1,066,081
Other foreign countries........................... 1,391,889 866,539
</TABLE>
NOTE 12 -- CASH FLOW INFORMATION
<TABLE>
<CAPTION>
PERIOD JANUARY 1,
1995 TO YEAR ENDED
DECEMBER 19, DECEMBER 31,
1995 1994
----------------- ------------
<S> <C> <C>
Supplemental disclosures of non-cash financing
activities:
Contribution of borrowings under line of
credit -- parent company to capital........ $12,029,728 $ --
Assignment of Note Receivable to parent
company.................................... 475,000
Supplemental disclosures of cash flow:
Cash paid for interest........................ $ 132 $ --
Cash paid for taxes........................... 800 800
</TABLE>
F-31
<PAGE> 75
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
The accompanying unaudited consolidated pro forma statement of operations
of The American Materials & Technologies Corporation and Subsidiary (the
"Company") as of December 31, 1995 is derived from the Company's historical
financial statements at that date, and gives pro forma effect to the acquisition
of Culver City Composites Corporation ("CCC") as if the acquisition occurred on
January 1, 1995.
The unaudited pro forma consolidated statement of operations does not
necessarily represent actual results that would have been achieved had the
companies been together at the beginning of the year ended December 31, 1995,
nor may they be indicative of future operations. This unaudited pro forma
consolidated statement of operations should be read in conjunction with the
companies' respective historical financial statements and notes thereto.
F-32
<PAGE> 76
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
THE AMERICAN
MATERIALS &
TECHNOLOGIES
CORPORATION CULVER CITY PRO FORMA ADJUSTMENTS
AND COMPOSITES -------------------------
SUBSIDIARY CORPORATION COMBINED DR CR PRO FORMA
------------ ------------ ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................. $ 616,372 $15,299,977 $15,916,349 $ $ $15,916,349
Cost of sales......................... 518,195 13,040,145 13,558,340 129,780(2) 84,527(1) 12,900,068
472,666(5) 1,176,191(5)
--------- ----------- ----------- ---------- ---------- -----------
Gross profit.......................... 98,177 2,259,832 2,358,009 602,446 1,260,718 3,016,281
Operating expenses
Selling, general and administrative
expenses.......................... 350,418 2,424,354 2,774,772 86,557(2) 130,212(1) 2,705,475
47,026(5) 72,668(5)
Research and development............ 6,760 330,694 337,454 8,094(5) 329,360
--------- ----------- ----------- ---------- ---------- -----------
Total operating expenses...... 357,178 2,755,048 3,112,226 133,583 210,974 3,034,835
--------- ----------- ----------- ---------- ---------- -----------
Loss from operations.................. (259,001) (495,216 ) (754,217) 736,029 1,471,692 (18,554)
Interest expense...................... (18,274) (584,500 ) (602,774) 630,788(4) 634,049(3) (599,513)
--------- ----------- ----------- ---------- ---------- -----------
Loss before income taxes.............. (277,275) (1,079,716 ) (1,356,991) 1,366,817 2,105,741 (618,067)
Provision for income taxes............ -- -- -- -- -- --
--------- ----------- ----------- ---------- ---------- -----------
Net loss.............................. $ (277,275) $(1,079,716 ) $(1,356,991) $1,366,817 $2,105,741 $ (618,067)
========= =========== =========== ========== ========== ===========
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
The unaudited pro forma consolidated statement of operations has been
prepared to reflect the acquisition of Culver City Composites Corporation
("CCC") as if it occurred on January 1, 1995. The acquisition has been accounted
for under the purchase method of accounting.
The following is a summary of adjustments reflected in the accompanying
unaudited pro forma consolidated statement of operations for the year ended
December 31, 1995:
(1) Represents the elimination of the salary of certain employees whose
services were terminated after the acquisition.
(2) Represents the adjustment to give effect to a full year of officers'
compensation.
(3) Represents the elimination of interest expense on loan from parent
company.
(4) Represents interest expense on acquisition debt and bank financing in
connection with the acquisition of CCC.
(5) Represents an adjustment to revise the depreciation of the acquired
plant and equipment to reflect the post acquisition basis of accounting
and revised estimates of the useful lives of the assets.
F-33
<PAGE> 77
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR THE FACTS HEREIN
SET FORTH SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 13
Dividend Policy....................... 14
Capitalization........................ 15
Dilution.............................. 16
Selected Consolidated Financial
Data................................ 17
Management's Discussion and Analysis
of Financial Condition and
Results of Operations............... 18
Business.............................. 22
Management............................ 29
Executive Compensation................ 32
Principal Stockholders................ 35
Certain Transactions.................. 35
Description of Securities............. 36
Shares Eligible for Future Sale....... 38
Underwriting.......................... 39
Legal Matters......................... 42
Experts............................... 42
Additional Information................ 42
Financial Statements.................. F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE EFFECTIVE DATE OF THE REGISTRATION
STATEMENT) ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN DISTRIBUTIONS, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,000,000 SHARES
LOGO
COMMON STOCK
---------------------
PROSPECTUS
---------------------
H.J. MEYERS & CO., INC.
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE> 78
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation includes certain provisions
permitted pursuant to the Delaware General Corporation Law ("Delaware Law")
whereby officers and directors of the Company are to be indemnified against
certain liabilities. The Certificate of Incorporation also limits to the fullest
extent permitted by Delaware Law a director's liability to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
including gross negligence, except liability for (i) breach of the director's
duty of loyalty, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii) the unlawful
payment of a dividend or unlawful stock purchase or redemption, and (iv) any
transaction from which the director derives an improper personal benefit.
Delaware Law does not permit a corporation to eliminate a director's duty of
care and this provision of the Company's Certificate of Incorporation has no
effect on the availability of equitable remedies, such as injunction or
rescission, based upon a director's breach of the duty of care.
The Company has entered into indemnity agreements with each of its current
directors which provide for indemnification of, and advancement of expenses to,
such persons to the greatest extent permitted by Delaware Law, including by
reason of action or inaction occurring in the past and circumstances in which
indemnification and the advancement of expenses are discretionary under Delaware
Law. The Company also intends to enter into similar indemnity agreements with
Mr. Glaser and Gen. Glosson when they join the Board of Directors. The Company
believes that the limitation of liability provision in the Certificate of
Incorporation and the indemnification agreements will facilitate the Company's
ability to continue to attract and retain qualified individuals to serve as
directors of the Company. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers, and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
An itemized statement of expenses in connection with the issuance and
distribution of the securities to be registered, other than underwriting
discounts and commissions, appears below. All amounts are estimates, except for
the SEC registration fee, NASD filing fee, Nasdaq SmallCap Market Listing Fee
and Pacific Stock Exchange Listing Fee.
<TABLE>
<S> <C>
SEC Registration Fee...................................................... $ 5,255
NASD Filing Fee........................................................... 2,024
Nasdaq SmallCap Market Listing Fee........................................ 9,825
Pacific Stock Exchange Listing Fee........................................ 20,000
Blue Sky Qualification Fees and Expenses.................................. 35,000
Accounting Fees and Expenses.............................................. 130,000
Legal Fees and Expenses................................................... 200,000
Transfer Agent Fees....................................................... 5,000
Printing and Engraving Expenses........................................... 50,000
Miscellaneous Expenses.................................................... 42,896
--------
TOTAL........................................................... $500,000
========
</TABLE>
II-1
<PAGE> 79
ITEM 26: RECENT SALES OF UNREGISTERED SECURITIES.
<TABLE>
Registrant has sold and issued the following unregistered securities:
ISSUANCES OF COMMON STOCK
<CAPTION>
NUMBER PURCHASE
NAME OF SHARES PRICE DATE SOLD
---- --------- -------- ---------
<S> <C> <C> <C>
Steven Georgiev........................................... 521,623 $ 4,500 3/29/95
Paul W. Pendorf........................................... 521,623 4,500 3/29/95
Palomar Medical Technologies, Inc.(1)..................... 173,874 1,500 3/29/95
William A. Timmerman...................................... 173,874 1,500 3/29/95
Joyce A. Huber............................................ 10,818 93 3/29/95
Edoardo B. Fornaro........................................ 30,911 20,000 7/24/95
Edward M. Giles........................................... 16,228 10,500 9/14/95
C.F. Stone III............................................ 11,592 7,500 9/14/95
Celide S. Hogan........................................... 7,728 5,000 9/18/95
Mercury, L.P. ............................................ 38,638 25,000 12/08/95
Haviland and Associates(2)................................ 9,999 34,504 12/22/95
Advanced Polymer Sciences, Inc. .......................... 25,000 100,000 4/02/96
---------
Total........................................... 1,541,908
=========
<FN>
- ---------------
(1) Also received a warrant to purchase 289,790 shares of Common Stock at an
exercise price of $1.29 per share on December 19, 1995.
(2) Also received an option to purchase 9,999 shares of Common Stock at an
exercise price of $1.50 per share on December 22, 1995.
</TABLE>
The sales and issuance of securities in the above-described transactions
were deemed to be exempt from registration under the Securities Act of 1933 by
virtue of Section 4(2) thereof. Appropriate legends restricting transferability
are affixed to the stock certificates issued in each of the above-described
transactions. All recipients either received adequate information about the
Registrant or had access, through employment or other relationships, to such
information.
<TABLE>
ITEM 27: EXHIBITS.
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Financial Consulting Agreement
1.3 Form of Merger and Acquisition Agreement
3.1* Restated Certificate of Incorporation of the Company
3.2* Amended and Restated By-laws of the Company
4.1 Specimen certificate for the Common Stock of the Company
4.2 Form of Representative's Warrant
4.3 Form of Lock-Up Agreement
5.1 Form of Opinion of Foley, Hoag & Eliot
10.1 Agreement among XXsys Technologies, Inc., Composite Retrofit Corporation, Gloria
Ma, Steven Georgiev, Paul W. Pendorf and William A. Timmerman, dated March 25,
1995
10.2* Consulting Agreement with Steven Georgiev
10.3* Employment Agreement with Paul W. Pendorf, as amended
10.3.1 Option Agreement for Paul W. Pendorf
</TABLE>
II-2
<PAGE> 80
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
10.4* Employment Agreement with William A. Timmerman, as amended
10.4.1 Option Agreement for William A. Timmerman
10.5* Employment Agreement with Philip D. Cunningham
10.6* Employment Agreement with Leslie Jay Cohen, Ph.D.
10.7* Purchase Agreement between the Company and Montecatini U.S.A., Inc., dated
November 16, 1995
10.8* Assignment and Assumption Agreement between the Company and AMT Sub, Inc., dated
December 19, 1995
10.9* Lease Agreement dated March 1, 1996, with respect to real property located at 5915
Rodeo Road, Los Angeles, California, between Rodeo Properties, Inc. as lessor and
the Company as lessee
10.10* Lease Agreement dated December 20, 1995, with respect to real property located at
5610 Helms Avenue, Culver City, California, between Sybel Heller Revocable Trust
as lessor and the Company as lessee
10.11* Lease Agreement dated December 8, 1988, with respect to real property located at
8592 National Boulevard, Culver City, California, between Lawrence Greener,
trustee of the Lawrence and Rosemary Greener Trust, as lessor and the Company as
lessee, together with amendments thereto
10.12* Lease Agreement dated October 31, 1994, with respect to real property located at
3517 Schaeffer Street, Culver City, California, between Bostwick & Newman as
lessor and the Company as lessee, together with amendments thereto
10.13* Loan and Security Agreement between Culver City Composites Corporation and LaSalle
Business Credit, Inc., dated December 19, 1995
10.14* $560,000 Term Note of the Company dated December 19, 1995, in favor of LaSalle
Business Credit, Inc.
10.15* $4,440,000 Revolving Note of the Company dated December 19, 1995, in favor of
LaSalle Business Credit, Inc.
10.16* Guaranty of the Company in favor of LaSalle Business Credit, Inc., dated December
19, 1995
10.17* Stock Pledge Agreement between the Company and LaSalle Business Credit, Inc.,
dated December 19, 1995
10.18* 10% Promissory Note of the Company in the principal amount of $3,000,000, dated
December 19, 1995 in favor of Palomar Medical Technologies, Inc.
10.19* Warrant for the purchase of 250,000 shares of Common Stock at an exercise price of
$1.50 per share issued to Palomar Medical Technologies, Inc., dated December 19,
1995
10.20* Pledge Agreement among Palomar Medical Technologies, Inc., Steven Georgiev, Paul
W. Pendorf, William A. Timmerman and Pierrette Timmerman, dated December 19, 1995
10.21* 10% Promissory Note of Culver City Composites Corporation in the principal amount
of $150,000, dated December 19, 1995, in favor of Palomar Medical Technologies,
Inc.
10.22* Joint Venture Agreement dated March 20, 1996, among AMT, CCC, Advanced Polymer
Systems, Inc., and Donald J. Keehan
10.23* 1996 Incentive and Nonqualified Stock Option Plan
10.23.1 Form of Option Agreement -- Incentive Stock Option
10.23.2 Form of Option Agreement -- Nonqualified Stock Option
10.24* Agreement dated as of May 1, 1995, between Structural Polymer Systems, Inc. and
the Stove, Furnace, and Allied Appliance Workers Division, International
Brotherhood of Boilermaker, Iron Ship Builders, Blacksmiths, Forgers and Helpers,
AFL-CIO, CFL, Local Lodge No. S230
10.25* Retirement Plan for Hourly-Rate Employees of Structural Polymer Systems, Inc.,
effective as of August 1, 1994
11.1 Computation of Net Income (Loss) per Share
</TABLE>
II-3
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
21.1* Subsidiaries of the Company
23.1 Consent of Feldman Radin & Co., PC
23.2 Form of Consent of Foley, Hoag & Eliot (included in Exhibit 5.1)
24.* Power of Attorney
99.1* Consent of Robert V. Glaser
99.2* Consent of Lt. Gen. Buster C. Glosson (USAF Ret.)
<FN>
- ---------------
* Previously filed.
</TABLE>
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(a) The undersigned registrant hereby undertakes to:
(1) File, during any period in which it offers or sells, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of such securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the termination of the offering.
(4) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer under Rule 424(b)(1) or
(4) of 497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it effective.
(5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-4
<PAGE> 82
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on May 28, 1996.
THE AMERICAN MATERIALS &
TECHNOLOGIES CORPORATION
By: /s/ PAUL W. PENDORF
------------------------------------
Paul W. Pendorf
President and Chief
Executive Officer
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board of Directors May 28, 1996
- ------------------------------------------
Steven Georgiev
/s/ PAUL W. PENDORF President, Chief Executive Officer, May 28, 1996
- ------------------------------------------ and Director (Principal Executive
Paul W. Pendorf Officer)
/s/ WILLIAM A. TIMMERMAN Chief Financial Officer (Principal May 28, 1996
- ------------------------------------------ Financial and Accounting Officer)
William A. Timmerman
* By: /s/ DAVID A. BROADWIN,
- ------------------------------------------
David A. Broadwin,
as Attorney-in-Fact
</TABLE>
II-5
<PAGE> 83
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- -------- ----------------------------------------------------------------------------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement
1.2 Form of Financial Consulting Agreement
1.3 Form of Merger and Acquisition Agreement
3.1* Restated Certificate of Incorporation of the Company
3.2* Amended and Restated By-laws of the Company
4.1 Specimen certificate for the Common Stock of the Company
4.2 Form of Representative's Warrant
4.3 Form of Lock-Up Agreement
5.1 Form of Opinion of Foley, Hoag & Eliot
10.1 Agreement among XXsys Technologies, Inc., Composite Retrofit Corporation,
Gloria Ma, Steven Georgiev, Paul W. Pendorf and William A. Timmerman, dated
March 25, 1995
10.2* Consulting Agreement with Steven Georgiev
10.3* Employment Agreement with Paul W. Pendorf, as amended
10.3.1 Option Agreement for Paul W. Pendorf
10.4* Employment Agreement with William A. Timmerman, as amended
10.4.1 Option Agreement for William A. Timmerman
10.5* Employment Agreement with Philip D. Cunningham
10.6* Employment Agreement with Leslie Jay Cohen, Ph.D.
10.7* Purchase Agreement between the Company and Montecatini U.S.A., Inc., dated
November 16, 1995
10.8* Assignment and Assumption Agreement between the Company and AMT Sub, Inc.,
dated December 19, 1995
10.9* Lease Agreement dated March 1, 1996, with respect to real property located at
5915 Rodeo Road, Los Angeles, California, between Rodeo Properties, Inc. as
lessor and the Company as lessee
10.10* Lease Agreement dated December 20, 1995, with respect to real property
located at 5610 Helms Avenue, Culver City, California, between Sybel Heller
Revocable Trust as lessor and the Company as lessee
10.11* Lease Agreement dated December 8, 1988, with respect to real property located
at 8592 National Boulevard, Culver City, California, between Lawrence
Greener, trustee of the Lawrence and Rosemary Greener Trust, as lessor and
the Company as lessee, together with amendments thereto
10.12* Lease Agreement dated October 31, 1994, with respect to real property located
at 3517 Schaeffer Street, Culver City, California, between Bostwick & Newman
as lessor and the Company as lessee, together with amendments thereto
10.13* Loan and Security Agreement between Culver City Composites Corporation and
LaSalle Business Credit, Inc., dated December 19, 1995
10.14* $560,000 Term Note of the Company dated December 19, 1995, in favor of
LaSalle Business Credit, Inc.
10.15* $4,440,000 Revolving Note of the Company dated December 19, 1995, in favor of
LaSalle Business Credit, Inc.
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- -------- ----------------------------------------------------------------------------- ----
<C> <S> <C>
10.16* Guaranty of the Company in favor of LaSalle Business Credit, Inc., dated
December 19, 1995
10.17* Stock Pledge Agreement between the Company and LaSalle Business Credit, Inc.,
dated December 19, 1995
10.18* 10% Promissory Note of the Company in the principal amount of $3,000,000,
dated December 19, 1995 in favor of Palomar Medical Technologies, Inc.
10.19* Warrant for the purchase of 250,000 shares of Common Stock at an exercise
price of $1.50 per share issued to Palomar Medical Technologies, Inc., dated
December 19, 1995
10.20* Pledge Agreement among Palomar Medical Technologies, Inc., Steven Georgiev,
Paul W. Pendorf, William A. Timmerman and Pierrette Timmerman, dated December
19, 1995
10.21* 10% Promissory Note of Culver City Composites Corporation in the principal
amount of $150,000, dated December 19, 1995, in favor of Palomar Medical
Technologies, Inc.
10.22* Joint Venture Agreement dated March 20, 1996, among AMT, CCC, Advanced
Polymer Systems, Inc., and Donald J. Keehan
10.23* 1996 Incentive and Nonqualified Stock Option Plan
10.23.1 Form of Option Agreement -- Incentive Stock Option
10.23.2 Form of Option Agreement -- Nonqualified Stock Option
10.24* Agreement dated as of May 1, 1995, between Structural Polymer Systems, Inc.
and the Stove, Furnace, and Allied Appliance Workers Division, International
Brotherhood of Boilermaker, Iron Ship Builders, Blacksmiths, Forgers and
Helpers, AFL-CIO, CFL, Local Lodge No. S230
10.25* Retirement Plan for Hourly-Rate Employees of Structural Polymer Systems,
Inc., effective as of August 1, 1994
11.1 Computation of Net Income (Loss) per Share
21.1* Subsidiaries of the Company
23.1 Consent of Feldman Radin & Co., PC
23.2 Form of Consent of Foley, Hoag & Eliot (included in Exhibit 5.1)
24.* Power of Attorney
99.1* Consent of Robert V. Glaser
99.2* Consent of Lt. Gen. Buster C. Glosson (USAF Ret.)
</TABLE>
- ---------------
* Previously filed.
<PAGE> 85
Quality control technicians Culver City Composites
work in the laboratory. Corporation researches, develops
and produces advanced composite
fabrics and tapes.
The autoclave is
used to cure laminates.
[Photograph of quality control [Photograph of
technicians in laboratory] autoclave]
Dry graphite, aramid or glass [Photograph of rolls of
fibers are combined with finished goods]
proprietary wet resin
formulations to make advanced
composite materials.
Wound rolls of Culver City
Composites Corporation's products
are made ready for shipment to
customers in the finished goods warehouse.
[Photograph of rolls of fiber and beaker of resin mixture]
Culver City Composites
Corporation manufactures
advanced composite materials for
commercial aviation/transportation
interiors (overhead bins, side walls,
ceilings and floor panels). These
materials have been engineered to
emit low amounts of smoke, flame
and toxic gasses in fires, helping to
save lives in emergency situations.
[Photograph of aircraft interior]
Advanced composites are used in
defense and aerospace applications
because of their ability to withstand
high temperatures and stress.
The black area of the jet engine to
the left, is made from an advanced
composite material manufactured by
the Culver City Composites Corporation.
[Photograph of jet engine]
<PAGE> 1
Exhibit 1.1
DRAFT OF 4/16/96
2,000,000 Shares
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
Common Stock
UNDERWRITING AGREEMENT
_______________ ___, 19___
H.J. MEYERS & CO., INC.
(as Representative of the Several
Underwriters named in Schedule I hereto)
1895 Mt. Hope Avenue
Rochester, New York 14620
Gentlemen:
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION, a Delaware
corporation (the " COMPANY"), proposes to issue and sell to the Underwriters
named in Schedule I hereto (the "UNDERWRITERS") pursuant to this Underwriting
Agreement (the "AGREEMENT"), an aggregate of 2,000,000 shares (the "SHARES") of
Common Stock of the Company, $.01 par value per share (the "COMMON STOCK").
In addition, the Company proposes to grant to the Underwriters the
option referred to in Section 2(c) to purchase all or any part of an aggregate
of 300,000 additional Shares to cover over-allotments. Unless the context
otherwise indicates, the term "SHARES" shall include the additional Shares
referred to above and the Shares issuable upon exercise of the Representative's
Warrant described below.
You have advised the Company that the Underwriters desire to purchase
the Shares, and that you have been authorized to execute this Agreement as the
Representative of the Underwriters. The Company confirms the agreements made by
it with respect to the purchase of the Shares by the Underwriters, as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company,
including its subsidiaries, represents and warrants to, and agrees with, each
Underwriter that:
<PAGE> 2
(a) REGISTRATION STATEMENT AND PROSPECTUS. A registration
statement (File No. 333-3836) on Form SB-2 relating to the public offering
of the Shares, including a preliminary form of prospectus, copies of which have
heretofore been delivered to you, has been prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations (the "RULES AND REGULATIONS") of the Securities and
Exchange Commission (the "COMMISSION") thereunder, and has been filed with the
Commission under the Act. As used herein, the term "PRELIMINARY PROSPECTUS"
shall mean each prospectus filed pursuant to Rule 430 or Rule 424(a) of the
Rules and Regulations. The registration statement (including all financial
statements, schedules and exhibits) as amended at the time it becomes effective
and the final prospectus included therein are respectively referred to herein as
the "REGISTRATION STATEMENT" and the "PROSPECTUS," except that (i) if the
prospectus first filed by the Company pursuant to Rule 424(b) or Rule 430A of
the Rules and Regulations or otherwise utilized and required to be so filed
shall differ from said prospectus as then amended, the term "PROSPECTUS" shall
mean the prospectus first filed pursuant to said Rule 424(b) or Rule 430A or so
utilized from and after the date on which it shall have been filed or utilized,
and (ii) if such registration statement or prospectus is amended or such
prospectus is supplemented after the effective date of such registration
statement and prior to the Option Closing Date (as defined in Section 2(c)), the
term "Registration Statement" shall include such registration statement as so
amended, and the term "Prospectus" shall include the prospectus as so amended or
supplemented, or both, as the case may be.
(b) CONTENTS OF REGISTRATION STATEMENT. At the time the
Registration Statement becomes effective (the "EFFECTIVE DATE") and at all times
subsequent thereto for so long as the delivery of a prospectus is required in
connection with the offering or sale of any of the Shares, (i) the Registration
Statement and Prospectus will in all respects conform to the requirements of the
Act and the Rules and Regulations; and (ii) neither the Registration Statement
nor the Prospectus shall include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading; provided, however, that the Company makes no representations,
warranties or agreements as to the information contained in or omitted from the
Registration Statement or Prospectus in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of any Underwriter
specifically for use in the preparation thereof. It is understood that the
statements set forth in the Prospectus with respect to stabilization, the
material set forth under the heading "UNDERWRITING", and the identity of counsel
to the Underwriters under the heading "LEGAL MATTERS" constitute the only
information furnished in writing by or on behalf of any Underwriter for
inclusion in the Registration Statement and Prospectus, as the case may be.
(c) ORGANIZATION AND GOOD STANDING. The Company and its
subsidiaries each have been duly incorporated and are validly existing as
corporations in good standing under the laws of the jurisdiction of their
incorporation, with full power and authority (corporate and other) to own their
properties and conduct their business as described in the
- 2 -
<PAGE> 3
Prospectus, and are duly qualified or licensed to do business as foreign
corporations and are in good standing in all other jurisdictions in which the
nature of their business or the character or location of their properties
requires such qualification, except where failure to so qualify will not
materially affect the Company's business, properties or financial condition.
(d) CAPITALIZATION. The authorized capital stock of the Company as
of the Effective Date was, as set forth under "DESCRIPTION OF SECURITIES" in the
Prospectus, (i) 15,000,000 shares of Common Stock, par value $.01 per share, of
which not more than 1,541,907 shares will be issued and outstanding as of the
Effective Date, and (ii) 5,000,000 shares of Preferred Stock, par value $.01 per
share, of which no shares will be issued and outstanding on the Effective Date.
The shares of issued and outstanding capital stock of the Company set forth
thereunder have been duly authorized, validly issued and are fully paid and
non-assessable; except as set forth in the Prospectus and in the notes to the
financial statements contained in the Prospectus, no options, warrants or other
rights to purchase, agreements or other obligations to issue or agreements or
other rights to convert any obligation into, any shares of capital stock of the
Company have been granted or entered into by the Company, except for up to
289,790 shares of Common Stock reserved for issuance to holders of bridge
warrants and 350,000 shares of Common Stock reserved for issuance under the
Company's Stock Option Plan. The shares conform to all statements relating
thereto contained in the Registration Statement and Prospectus.
(e) SECURITIES AUTHORIZED. The Shares and the Representative's
Warrant are duly authorized and, when issued, delivered and paid for pursuant to
this Agreement, will be duly authorized, validly issued, fully paid and
non-assessable and free of pre-emptive rights of any security holder of the
Company. Neither the filing of the Registration Statement nor the offering or
sale of the Shares or the Representative's Warrant as contemplated in this
Agreement gives rise to any rights, other than those which have been waived in
writing or satisfied, for or relating to the registration of any shares of
capital stock, except as described in the Registration Statement.
(f) AUTHORITY AND ENFORCEABILITY OF AGREEMENTS. This Agreement,
the Representative's Warrant (as defined in Section 12), the Financial
Consulting Agreement (as defined in Section 3(s)), and the Merger and
Acquisition Agreement (as defined in Section 3(t)) have been duly and validly
authorized, executed and delivered by the Company, and assuming due execution by
the other party or parties hereto and thereto, constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting the rights of creditors generally. The
Company has full right, power and lawful authority to authorize, issue and sell
the Shares and the Representative's Warrant to be sold by it hereunder on the
terms and conditions set forth herein, and no consent, approval, authorization
or other order of any governmental authority is required in connection with such
authorization, execution and delivery or with the authorization, issue and sale
of the Shares or the Representative's Warrant, except such as may be required
- 3 -
<PAGE> 4
under the Act, state securities laws or the by-laws and rules of the National
Association of Securities Dealers, Inc. ("NASD").
(g) NO CONFLICTS. Except as described in the Prospectus, the
Company is not in violation, breach or default of or under, and consummation of
the transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with or result in a breach of, any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance pursuant to the terms of, any
material contract, indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the property or assets of the Company are
subject, nor will such action result in any violation of the provisions of the
certificate of incorporation or the by-laws of the Company, as amended, or any
statute or any order, rule or regulation applicable to the Company of any court
or of any regulatory authority or other governmental body having jurisdiction
over the Company.
(h) TITLE TO ASSETS. Subject to the qualifications stated in the
Prospectus, the Company has good and marketable title to all properties and
assets described in the Prospectus as owned by it, including without limitation
intellectual property, free and clear of all liens, charges, encumbrances or
restrictions, except such as are not materially significant or important in
relation to its business; all of the material leases and subleases under which
the Company is the lessor or sublessor of properties or assets or under which
the Company holds properties or assets as lessee or sublessee as described in
the Prospectus are in full force and effect, and, except as described in the
Prospectus, the Company is not in default in any material respect with respect
to any of the terms or provisions of any of such leases or subleases, and no
claim has been asserted by anyone adverse to rights of the Company as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company to continued
possession of the leased or subleased premises or assets under any such leases
or sublease except as described or referred to in the Prospectus; and the
Company owns or leases all such properties described in the Prospectus as are
necessary to its operations as now conducted and, except as otherwise stated in
the Prospectus, as proposed to be conducted as set forth in the Prospectus.
(i) INDEPENDENT ACCOUNTANTS. Feldman Radin & Co., P.C., who have
given their report on certain financial statements filed and to be filed with
the Commission as a part of the Registration Statement, which are included in
the Prospectus, are with respect to the Company independent public accountants
as required by the Act and the Rules and Regulations.
(j) FINANCIAL STATEMENTS. The financial statements, together with
the related notes set forth in the Registration Statement and the Prospectus,
present fairly the financial position, results of operations, changes in
stockholders' equity and cash flows of the Company on the basis stated in the
Registration Statement, at the respective dates and
- 4 -
<PAGE> 5
for the respective periods to which they apply. Such financial statements and
related notes have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the entire period
involved, except to the extent disclosed therein. The financial information for
each of the periods presented in the Registration Statement and the Prospectus
present a true and complete statement of the financial position of the Company
at the dates indicated and the results of their operations for the periods then
ended. The Summary Financial Information and Selected Financial Data included in
the Registration Statement and the Prospectus present fairly the information
shown therein and have been prepared on a basis consistent with that of the
audited financial statements included in the Registration Statement and the
Prospectus.
(k) NO MATERIAL CHANGE. Except as described in the Prospectus,
subsequent to the respective dates as of which information is given in the
Registration Statement and Prospectus, the Company has not incurred any
liabilities or obligations, direct or contingent, not in the ordinary course of
business, or entered into any transaction not in the ordinary course of
business, which is material to the business of the Company, and there has not
been any change in the capital stock of, or any incurrence of long-term debt by,
the Company or any issuance of options, warrants or other rights to purchase the
capital stock of the Company or any adverse change or any development involving,
so far as the Company can now reasonably foresee, a prospective adverse change
in the condition (financial or other), net worth, results of operations,
earnings, business, key personnel or properties of it which would be material to
the business or financial condition of the Company, and the Company has not
become party to, and neither the business nor the property of the Company has
become the subject of, any material litigation whether or not in the ordinary
course of business.
(l) LITIGATION. Except as set forth in the Prospectus, there is
not now pending nor, to the best knowledge of the Company, threatened, any
action, suit or proceeding (including those related to environmental matters or
discrimination on the basis of age, sex, religion or race), whether or not in
the ordinary course of business, to which the Company is a party or property is
subject before or by any court or governmental agency or body, which might
result in any material adverse change in the condition (financial or other),
business prospects, revenues, net worth or properties of the Company; and no
labor disputes involving the employees of the Company exist which might be
expected to materially adversely affect the conduct of the business, property,
operations or the condition (financial or otherwise) or earnings of the Company.
(m) TAXES. Except as disclosed in the Prospectus, the Company has
filed all necessary federal, state, local and foreign income and franchise tax
returns and has paid all taxes shown as due thereon; and there is no tax
deficiency which has been asserted against the Company or, to the best knowledge
of the Company, any basis for asserting a tax deficiency against the Company.
- 5 -
<PAGE> 6
(n) LICENSES AND PERMITS. The Company has all material licenses,
permits and other governmental authorizations currently required for the conduct
of its business or the ownership of its property as described in the Prospectus
and is in all material respects complying therewith and owns or possesses
adequate rights to use all material patents, patent applications, trademarks,
service-marks, mask registrations, copyrights and licenses necessary for the
conduct of such business and, except as described in the Prospectus, has not
received any notice of conflict with the asserted rights of others in respect
thereof. To the best knowledge of the Company, none of the activities or
business of the Company is in violation of, or causes the Company to violate,
any law, rule, regulation or order of the United States, any state, county or
locality, or of any foreign agency or locality, the violation of which would
have a material adverse impact upon the condition (financial or otherwise),
business, property, prospective results of operations or net worth of the
Company.
(o) NO PROHIBITED PAYMENTS. The Company has not, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or if made, failed to disclose fully any such contribution
made in violation of law, or (ii) made any payment to any state, federal or
foreign governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments or contributions required or
allowed by applicable law. The Company's internal accounting controls and
procedures are sufficient to cause the Company to comply in all material
respects with the Foreign Corrupt Practices Act of 1988, as amended.
(p) TRANSFER TAXES. On the Closing Dates (as defined in Section
2(d)), all transfer or other taxes (including franchise, capital stock or other
tax, other than income taxes imposed by any jurisdiction), if any, which are
required to be paid in connection with the sale and transfer of the Shares to
the Underwriters hereunder will have been fully paid or provided for by the
Company and all laws imposing such taxes will have been fully complied with.
(q) EXHIBITS. All contracts and other documents of the Company
which are, under the Rules and Regulations, required to be filed as exhibits to
the Registration Statement have been so filed.
(r) STABILIZATION ACTIVITIES. Each of the Company and its
directors and officers has not taken and will not take, directly or indirectly,
any action designed to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or manipulation of
the price of the Shares to facilitate the sale or resale of the Shares
hereunder.
(s) NO SUBSIDIARIES. Except as set forth in the Prospectus, the
Company has no subsidiaries.
- 6 -
<PAGE> 7
(t) NO FINDERS. The Company has not entered into any agreement
pursuant to which any person is entitled either directly or indirectly to
compensation from the Company for services as a finder in connection with the
proposed public offering.
(u) NO UNLAWFUL PROSPECTUSES. The Company has not distributed any
prospectus or other offering material in connection with the Offering
contemplated herein, other than any Preliminary Prospectus, the Prospectus or
other material permitted by the Act and the Rules and Regulations.
(v) SHAREHOLDER AGREEMENTS, REGISTRATION RIGHTS. Except as
described in the Prospectus, no security holder of the Company has any rights
with respect to the purchase, sale or registration of any securities of the
Company and all registration rights with respect to the Offering have been
waived.
(w) LOCK-UP AGREEMENTS. The Company has obtained from all of its
directors, officers and shareholders, and holders of options or warrants to
purchase Common Stock, agreements in favor of the Representative restricting the
sale, pledge or other transfer of shares of Common Stock for a period of
twenty-four (24) months from the Effective Date.
2. PURCHASE, DELIVERY AND SALE OF THE SHARES.
(a) PURCHASE PRICE FOR SHARES. The Shares shall be sold to and
purchased by the Underwriters hereunder at the purchase price of $_____ per
Share [the initial public offering price of the Shares of $_____ less an
underwriting discount of ten percent (10%)] (the "PURCHASE PRICE").
(b) FIRM SHARES. Subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company agrees to issue and sell to the Underwriters, and
the Underwriters agree to buy from the Company at the Purchase Price at the
place and time hereinafter specified, the number of Shares set forth opposite
each Underwriter's name in Schedule I hereto (the "FIRM SHARES").
Delivery of the Firm Shares against payment therefor shall take place
at the offices of H.J. Meyers & Co., Inc., 1895 Mt. Hope Avenue, Rochester, New
York 14620 (or at such other place as may be designated by agreement between you
and the Company) at 10:00 a.m. New York time on ____________ ___, 1996, or at
such later time and date, not later than ten (10) banking days after the
Effective Date, as you may designate, such time and date of payment and delivery
for the Firm Shares being herein called the "FIRST CLOSING DATE." Time shall be
of the essence and delivery at the time and place specified in this subsection
(a) is a further condition to the obligations of the Underwriters hereunder.
(c) OVER-ALLOTMENT OPTION. In addition, subject to the terms and
conditions of this Agreement, and upon the basis of the representations,
warranties and
- 7 -
<PAGE> 8
agreements herein contained, the Company hereby grants an option to the
Underwriters to purchase from the Company all or any part of an aggregate of
300,000 additional Shares (the "OVER-ALLOTMENT OPTION") at the same
price per Share as the Underwriters shall pay for the Firm Shares being sold
pursuant to this Agreement (such additional Shares being referred to herein as
the "OPTION SHARES").
This Over-Allotment Option may be exercised by the Underwriters, in
whole or in part, within forty-five (45) calendar days after the Effective Date
upon notice by you to the Company advising it as to the amount of Option Shares
as to which the Over-Allotment Option is being exercised, the names and
denominations in which the certificates for such Option Shares are to be
registered and the time and date when such certificates are to be delivered.
Such time and date shall be determined by you but shall not be earlier than four
(4) and not later than ten (10) full business days after the exercise of said
option, nor in any event prior to the First Closing Date, and such time and date
is referred to herein as the "OPTION CLOSING DATE." Delivery of the Option
Shares against payment therefor shall take place at the offices of H.J. Meyers &
Co., Inc., 1895 Mt. Hope Avenue, Rochester, New York 14620. Time shall be of the
essence, and delivery at the time and place specified in this subsection (b) is
a further condition to the obligations of the Underwriters hereunder.
The Over-Allotment Option granted hereunder may be exercised only to
cover over-allotments in the sale by the Underwriters of Firm Shares referred to
in subsection (a) above. No Option Shares shall be sold or delivered unless all
of the Firm Shares previously have been, or simultaneously are, sold and
delivered.
(d) INSPECTION OF CERTIFICATES. The Company will make the
certificates for the Shares to be purchased by the Underwriters hereunder
available to you for checking at least two (2) full business days prior to the
First Closing Date or the Option Closing Date (which are collectively referred
to herein as the "CLOSING DATES" and individually as a "CLOSING DATE"), as the
case may be. The certificates shall be in such names and denominations as you
may request, at least three (3) full business days prior to the relevant Closing
Dates. Time shall be of the essence, and the availability of the certificates at
the time and place specified in this Agreement is a further condition to the
obligations of the Underwriters.
Definitive engraved certificates in negotiable form for the Shares to
be purchased by the Underwriters hereunder will be delivered by the Company to
you for the several accounts of the Underwriters against payment of the purchase
price by you, for the several accounts of the Underwriters, at your option, by
certified or bank cashier's checks in New York Clearing House funds or by wire
transfer, payable to the order of the Company.
In addition, in the event the Underwriters exercise the option to
purchase from the Company all or any portion of the Option Shares pursuant to
the provisions of subsection (c) above, payment for such Option Shares shall be
made, at your option, to or upon the order of the Company by certified or bank
cashier's checks payable in New York Clearing
- 8 -
<PAGE> 9
House funds or by wire transfer, at the offices of H.J. Meyers & Co., Inc. at
the time and date of delivery of such Option Shares as required by the
provisions of subsection (c) above, against receipt of the certificates for such
Option Shares by you for the several accounts of the Underwriters, registered in
such names and in such denominations as you may request.
It is understood that the Underwriters propose to offer the Shares to
be purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement becomes effective.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriters that:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Company will use
its best efforts to cause the Registration Statement to become effective and,
upon notification from the Commission that the Registration Statement has become
effective, will so advise you and will not at any time, whether before or after
the Effective Date, file any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been advised
and furnished with a copy or to which you or your counsel shall have objected in
writing or which is not in compliance with the Act and the Rules and
Regulations. At any time prior to the later of (i) the completion by the
Underwriters of the distribution of the Shares contemplated hereby (but in no
event more than nine (9) months after the Effective Date), and (ii) twenty-five
(25) days after the Effective Date, the Company will prepare and file with the
Commission, promptly upon your request, any amendments or supplements to the
Registration Statement or Prospectus which, in your reasonable opinion, may be
necessary or advisable in connection with the distribution of the Shares.
Promptly after you or the Company is advised thereof, you will advise
the Company or the Company will advise you, as the case may be, and confirm the
advice in writing, of the receipt of any comments of the Commission, of the
effectiveness of any post-effective amendment to the Registration Statement, of
the filing of any supplement to the Prospectus or any amended Prospectus, of any
request made by the Commission for amendment of the Registration Statement or
for amending or supplementing the Prospectus or for additional information with
respect thereto, or of the issuance by the Commission or any state or regulatory
body of any stop orders or other order suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of any
Preliminary Prospectus, or of the suspension of the qualification of the Shares
for offering in any jurisdiction, or the institution of any proceedings for any
of such purposes, or otherwise preventing or impairing the offering of Shares,
and will use its best efforts to prevent the issuance of any such order and, if
issued, to obtain as soon as possible the lifting thereof. The Company and you
shall not acquiesce in such order or proceeding, and shall instead use its best
efforts to defend such order or proceeding, unless the Company and you agree in
writing to such acquiescence.
- 9 -
<PAGE> 10
The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company authorizes
the Underwriters and selected dealers to use the Prospectus in connection with
the sale of the Shares for such period as in the opinion of counsel for the
Underwriters the use thereof is required to comply with the applicable
provisions of the Act and the Rules and Regulations. In case of the happening,
at any time within such period as a Prospectus is required under the Act to be
delivered in connection with sales by an underwriter or dealer, of any event of
which the Company has knowledge and which materially affects the Company or the
Shares, or which in the opinion of counsel for the Company or counsel for the
Underwriters should be set forth in an amendment to the Registration Statement
or a supplement to the Prospectus in order to make the statements therein not
then misleading, in light of the circumstances existing at the time the
Prospectus is required to be delivered to a purchaser of the Shares, or in case
it shall be necessary to amend or supplement the Prospectus to comply with the
Act or with the Rules and Regulations, the Company will notify you promptly and
forthwith prepare and furnish to you copies of such amended Prospectus or such
supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
shall not contain any untrue statement of a material fact or omit to state any
material facts necessary in order to make the statements in the Prospectus, in
the light of the circumstances under which they are made, not misleading. The
preparation and furnishing of any such amendment or supplement to the
Registration Statement or amended Prospectus or supplement to be attached to the
Prospectus shall be without expense to the Underwriters, except that in case the
Underwriters are required, in connection with the sale of the Shares, to deliver
a Prospectus nine (9) months or more after the Effective Date, the Company will,
upon request of and at the expense of the Underwriters, amend or supplement the
Registration Statement and Prospectus and furnish the Underwriters with
reasonable quantities of prospectuses complying with Section 10(a)(3) of the
Act.
The Company will comply with the Act, the Rules and Regulations and the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and
the rules and regulations thereunder in connection with the offering and
issuance of the Shares.
(b) BLUE SKY. The Company will use its best efforts to qualify
or register the Shares for sale under the securities or "blue sky" laws of such
jurisdictions as you may designate and will make such applications and furnish
such information to counsel for the Underwriters as may be required for that
purpose and to comply with such laws; PROVIDED, HOWEVER, that
the Company shall not be required to qualify as a foreign corporation or a
dealer in securities or to execute a general consent to service of process in
any jurisdiction in any action other than one arising out of the offering or
sale of the Shares. The Company shall, from time to time, prepare and file such
statements and reports as are or may be required to continue such qualification
in effect for so long a period as you may reasonably request. Legal fees of
Underwriter's counsel for such qualifications shall not exceed $35,000.00,
exclusive of filing fees. The Company shall promptly pay all filing fees in
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<PAGE> 11
connection with the registration or qualification of the Shares. After each
Closing Date, the Company shall, at its own expense, from time to time prepare
and file such statements and reports as may be required to continue each such
qualification in effect for so long a period as the Underwriters may reasonably
request.
(c) EXCHANGE ACT REGISTRATION. The Company shall, at its own
expense, prepare and file with the Commission a registration statement (on Form
8-A or Form 10) under Section 12(b) of the Exchange Act at least ten (10)
business days prior to the Effective Date, and shall use its best efforts to
cause such registration statement to be declared effective and maintained in
effect for at least five (5) years from the Effective Date (unless otherwise
agreed in writing by the Underwriter).
(d) PROSPECTUS COPIES. The Company shall deliver to you at or
before the First Closing Date two (2) signed copies of the Registration
Statement including all financial statements and exhibits filed therewith, and
of all amendments thereto. The Company shall deliver to or upon your order, from
time to time until the Effective Date, as many copies of any Preliminary
Prospectus filed with the Commission prior to the Effective Date as you may
reasonably request. The Company shall deliver to you on the Effective Date and
thereafter for as long as a Prospectus is required to be delivered under the
Act, from time to time, as many copies of the Prospectus, in final form, or as
thereafter amended or supplemented, as you may from time to time reasonably
request.
(e) AMENDMENTS AND SUPPLEMENTS. The Company shall, promptly
upon your request, prepare and file with the Commission any amendments to the
Registration Statement, and any amendments or supplements to the Preliminary
Prospectus or the Prospectus, and take any other action which in the reasonable
opinions of the Company's counsel and the Underwriter's counsel may be
reasonably necessary or advisable in connection with the distribution of the
Shares, and shall use its best efforts to cause the same to become effective as
promptly as possible.
(f) NASDAQ SMALLCAP LISTING, ETC. The Company shall, upon the
initial filing of the Registration Statement, make all filings required to
obtain approval for the quotation of the Shares on the NASDAQ SmallCap Market of
The Nasdaq Stock Market and shall effect and maintain the aforesaid approval for
at least five (5) years from the date of this Agreement. In addition, the
Company shall use its best efforts to cause the Common Stock to be accepted for
listing on the Pacific Stock Exchange or other exchange acceptable to the
Representative, if such listing has not occurred prior to the Effective Date.
Within ten (10) days after the Effective Date, the Company shall cause the
Company to be listed in Moody's OTC Industrial Manual, Standard & Poor's or
other recognized securities manual acceptable to the Representative and cause
such listing to be maintained for five (5) years from the date of this
Agreement.
(g) CERTAIN MARKET PRACTICES. The Company represents that it
has not taken, and agrees that it will not take, directly or indirectly, any
action designed to or which
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<PAGE> 12
has constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Shares, or to facilitate the
sale or resale of the Shares.
(h) CERTAIN REPRESENTATIONS. Neither the Company nor any
representative of the Company shall make any written or oral representation in
connection with the offering and sale of the Shares or the Representative's
Warrant which is not contained in the Prospectus or which shall constitute a
violation of the Act, the Rules and Regulations, the Exchange Act or the rules
and regulations promulgated under the Exchange Act.
(i) USE OF PROCEEDS. The Company will apply the net proceeds
from the sale of the Shares substantially for the purposes set forth under "USE
OF PROCEEDS" in the Prospectus and shall file such reports with the Commission
with respect to the sale of the Shares and the application of the proceeds
therefrom as may be required pursuant to Rule 463 of the Rules and Regulations.
(j) TWELVE MONTHS' EARNINGS STATEMENT. The Company will make
generally available to its security holders and deliver to you as soon as it is
practicable to do so, but in no event later than ninety (90) days after the end
of twelve (12) months after its current fiscal quarter, an earnings statement
(which need not be audited) covering a period of at least twelve (12)
consecutive months beginning after the Effective Date which shall satisfy the
requirements of Section 11(a) of the Act.
(k) LOCK-UP. Prior to the Effective Date, the Company shall use
its best efforts to cause all members of management, all officers and directors
of the Company, and all holders of the outstanding securities of the Company, to
execute agreements in the form previously delivered, to the effect that for a
period of twenty-four (24) months from the First Closing Date, such persons
shall not sell, assign, hypothecate or pledge or otherwise dispose of, directly
or indirectly, any shares of capital stock of the Company, whether currently
owned or subsequently acquired through the exercise of any option, warrant or
right or through the conversion of any convertible security without your prior
written consent, and agreeing to permit all certificates evidencing such shares
to be endorsed with the appropriate restrictive legends, and consent to the
placement of appropriate stop transfer orders with the transfer agent for the
Company, and to note such restrictions on the transfer books and records of the
Company.
(l) PERIODIC REPORTS. For so long as the Company is a reporting
company under Section 12(b), 12(g) or Section 15(d) of the Exchange Act, the
Company shall, at its own expense, furnish to its shareholders an annual report
(including financial statements audited by certified public accountants) in
reasonable detail. In addition, during the period ending five (5) years from the
date hereof, the Company shall, at its own expense, furnish to you: (i) within
ninety (90) days of the end of each fiscal year, a balance sheet of the Company
and its Subsidiaries as at the end of such fiscal year, together with statements
of income, stockholders' equity and cash flows of the Company and its
Subsidiaries as at the end of such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate
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<PAGE> 13
or report thereon of certified public accountants; (ii) as soon as they are
available, a copy of all reports (financial or otherwise) distributed to
security holders; (iii) as soon as they are available, a copy of all
non-confidential reports and financial statements furnished to or filed with the
Commission; and (iv) such other information as you may from time to time
reasonably request. The financial statements referred to herein shall be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its shareholders
generally.
(m) REPORTS OF SUBSIDIARIES. In the event the Company has an
active subsidiary or subsidiaries, such financial statements referred to in
subsection (l) above will be on a consolidated basis to the extent the accounts
of the Company and its subsidiary or subsidiaries are consolidated in reports
furnished to its stockholders generally.
(n) OPTION GRANTS BELOW OFFERING PRICE. During the 90-day
period commencing as of the First Closing Date, the Company will not, without
your prior written consent, grant options to purchase shares of Common Stock at
a price less than the initial public offering price of the Shares.
(o) FORM S-8 REGISTRATIONS. For a period of one year following
the First Closing Date, the Company shall not register or otherwise facilitate
the registration of any of its securities issuable upon the exercise of options,
warrants (other than the Representative's Warrant) or other rights, whether by
means of a Registration Statement on Form S-8 or otherwise, without your prior
written consent.
(p) FUTURE SALES. During the period of the Offering and for a
period of twelve (12) months from the Effective Date, the Company will not sell
or otherwise dispose of any securities of the Company (except options issued
pursuant to the Company's stock option plan and except for shares of Common
Stock issuable upon exercise of (i) options issued pursuant to the Company's
stock option plan, or (ii) options, warrants or other convertible securities
outstanding on the Effective Date, without the prior written consent of the
Underwriter, which consent shall not be unreasonably withheld. For a period of
twenty-four (24) months from the Effective Date, the Company will not sell or
otherwise issue any securities pursuant to Regulation S under the Act, without
the Underwriter's prior written consent, which consent shall not be unreasonably
withheld.
(q) AVAILABLE SHARES. The Company shall reserve and at all
times keep available that maximum number of its authorized but unexercised
issued shares which are issuable upon exercise of the Representative's Warrant,
taking into account the anti-dilution provisions thereof.
(r) MANAGEMENT. Prior to the Effective Date, the Company will
have in place key person life insurance on the life of Paul W. Pendorf, for so
long as such individual remains an officer of the Company, in the amount of
$1,000,000, on terms, and with an insurance agency, mutually agreed upon by the
Company and you, and will use its best
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<PAGE> 14
efforts to maintain such insurance during the three-year period commencing on
the First Closing Date.
(s) FINANCIAL CONSULTING AGREEMENT. On the First Closing Date
and simultaneously with the delivery of the Firm Shares, the Company shall
execute and deliver to you an agreement with you, in the form previously
delivered to the Company by you, regarding your services as a financial
consultant to the Company (the "FINANCIAL CONSULTING AGREEMENT").
(t) MERGER AND ACQUISITION AGREEMENT. On the First Closing Date
and simultaneously with the delivery of the Firm Shares, the Company will
execute and deliver to you an agreement with you regarding mergers,
acquisitions, joint ventures and certain other forms of transactions in the form
previously delivered to the Company by you (the "MERGER AND ACQUISITION
AGREEMENT").
(u) BOARD OF DIRECTORS OBSERVER. For a period of thirty-six
(36) months from the First Closing Date, the Company shall allow an observer
designated by the Representative and acceptable to the Company to receive notice
of and to attend all meetings of the Board of Directors of the Company. Such
observer shall have no voting rights, and shall be reimbursed for all
out-of-pocket expenses incurred in attending such meetings. The Company shall
hold at least four (4) meetings per year, and the observer will be indemnified
by the Company against any claims arising out of his participation at Board
meetings.
(v) CONSENT TO FUTURE ISSUANCES OF PREFERRED STOCK. The Company
agrees to obtain the Representative's written consent prior to the issuance of
any shares of preferred stock of any class or series of the Company during the
period of thirty-six (36) months from the First Closing Date.
(w) DTC TRANSFER SHEETS. The Company will supply the
Representative with DTC Stock Transfer sheets on a weekly basis for the first
six (6) weeks after the Effective Date and a monthly basis for one (1) year
thereafter.
(x) BOUND VOLUMES. Within ninety (90) days from the First
Closing Date, the Company shall deliver to you, at the Company's expense, three
bound volumes in form and content acceptable to you, containing the Registration
Statement and all exhibits filed therewith, and all amendments thereto, and all
other correspondence, filings, certificates and other documents filed and/or
delivered in connection with this offering.
(y) PUBLIC RELATIONS. At least five (5) days prior to the
Effective Date, the Company shall retain a public relations firm acceptable to
you, and shall continue to retain such firm, or any alternate firm acceptable to
you, for a period of twenty-four (24) months following the Effective Date.
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<PAGE> 15
(z) RULE 144 SALES. The Representative shall have the right
for a five-year period after the First Closing Date, to purchase as principal or
sell as agent any of the Company's securities sold pursuant to Rule 144 of the
Rules and Regulations by any officer, director, or stockholder owning
beneficially at least 5% of the Company's Stock.
4. CONDITIONS OF UNDERWRITERS' OBLIGATIONS.
The obligations of the several Underwriters to purchase and pay for the
Shares which they have agreed to purchase hereunder are subject to the accuracy
(as of the date hereof, and as of each Closing Date) of and compliance with the
representations and warranties of the Company contained herein, the performance
by the Company of its obligations hereunder, and to the following conditions:
(a) EFFECTIVE REGISTRATION STATEMENT; NO STOP ORDER. The
Registration Statement shall have become effective and you shall have received
notice thereof not later than 6:00 p.m., New York time, on the date of this
Agreement, or at such later time or on such later date as to which you may agree
in writing. In addition, on each Closing Date, (i) no stop order denying or
suspending the effectiveness of the Registration Statement shall be in effect
and no proceedings for that or any similar purpose shall have been instituted or
shall be pending or, to your knowledge or to the knowledge of the Company, shall
be contemplated by the Commission, and (ii) all requests on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Epstein Becker & Green, P.C., counsel to the
Underwriters.
(b) OPINION OF COMPANY COUNSEL. On the First Closing Date, you
shall have received the opinion, dated as of the First Closing Date, of Foley,
Hoag & Eliot, counsel for the Company, in form and substance satisfactory to
counsel for the Underwriters, to the effect that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of Delaware with full corporate power and authority to own
its properties and conduct its business as described in the Prospectus,
and is duly qualified or licensed to do business as a foreign
corporation and is in good standing in California;
(ii) to the best knowledge of such counsel: (A) the
Company has obtained, or is in the process of obtaining, all necessary
licenses, permits and other governmental authorizations currently
required for the conduct of its business or the
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<PAGE> 16
ownership of its property, as described in the Prospectus; (B) such
obtained licenses, permits and other governmental authorizations are in
full force and effect; and (C) the Company is in all material respects
complying therewith;
(iii) (A) the authorized capitalization of the Company
as of the date of the Prospectus was as set forth under the
"CAPITALIZATION" Section of the Prospectus; (B) all of the shares of
the Company's Common Stock now outstanding have been duly authorized
and validly issued, are fully paid and non-assessable and conform to
the description thereof contained in the Prospectus, have not been
issued in violation of the pre-emptive rights of any stockholder and,
except as described in the Prospectus, to the best knowledge of such
counsel, are not subject to any restrictions upon the voting or
transfer thereof; the Shares and the Representative's Warrant conform
to the respective descriptions thereof contained in the Prospectus; (C)
the Shares and the Representative's Warrant to be issued as
contemplated in the Registration Statement have been duly authorized
and, when issued and delivered against payment therefor as provided
herein, will be validly issued, fully paid and nonassessable, will not
have been issued in violation of the pre-emptive rights of any
stockholder, and no personal liability will attach to the ownership
thereof; (D) except as described in the Prospectus, the security
holders of the Company do not have any pre-emptive rights or other
rights to subscribe for or purchase, and there are no restrictions upon
the voting or transfer of, any shares of Common Stock owned by them,
except for transfer restrictions imposed by federal or state securities
laws or contained in lock-up agreements; (E) the Shares and the
Representative's Warrant conform in all material respects to the
respective descriptions thereof contained in the Prospectus; (F) all
prior sales of the Company's securities have been made in compliance
with, or under an exemption from, the Act and applicable state
securities laws; (G) a sufficient number of shares of Common Stock has
been reserved for issuance upon exercise of the Representative's
Warrant; and (H) to the best of such counsel's knowledge, except as
described in the Prospectus, neither the filing of the Registration
Statement nor the offering or sale of the Shares as contemplated by
this Agreement gives rise to any registration rights or other rights,
other than those which have been waived or satisfied or described in
the Prospectus, for or relating to the registration of any securities
of the Company;
(iv) this Agreement, the Representative's Warrant, the
Financial Consulting Agreement and the Merger and Acquisition Agreement
have been duly and validly authorized, executed and delivered by the
Company, and assuming due execution and delivery by you, all of such
agreements are, or when duly executed will be, the valid and legally
binding obligations of the Company; provided, however, that no opinion
need be expressed as to the enforceability of the indemnity provisions
contained in Section 6 or the contribution provisions contained in
Section 7 of this Agreement;
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<PAGE> 17
(v) the certificates or instruments evidencing the
Shares and the Representative's Warrant are in valid and proper legal
form; and the Representative's Warrant will be exercisable for shares
of Common Stock of the Company in accordance with the terms of the
Representative's Warrant and at the prices therein provided for;
(vi) to the best knowledge of such counsel, except as
required to be described in the Prospectus: (A) there is no pending or
threatened legal or governmental proceeding affecting the Company which
could materially and adversely affect the business, property,
operations, condition (financial or otherwise) or results of operations
of the Company, or which questions the validity of the Shares, this
Agreement, the Representative's Warrant, the Financial Consulting
Agreement or the Merger and Acquisition Agreement, or any action taken
or to be taken by the Company pursuant thereto; and (B) there is no
legal or governmental proceeding or regulation required to be described
or referred to in the Registration Statement which is not so described
or referred to;
(vii) to the best knowledge of such counsel: (A) the
Company is not in violation of or default under this Agreement, the
Representative's Warrant, the Financial Consulting Agreement or the
Merger and Acquisition Agreement; and (B) and the execution and
delivery hereof and thereof and the incurrence of the obligations
herein and therein set forth and the consummation of the transactions
herein or therein contemplated will not result in a violation of, or
constitute a default under, the Certificate of Incorporation or By-laws
of the Company, or any material obligation, agreement, covenant or
condition contained in any bond, debenture, note or other evidence of
indebtedness or in any material contract, indenture, mortgage, loan
agreement, lease, joint venture, other agreement or instrument filed as
an Exhibit to the Registration Statement and to which the Company is a
party or by which its assets are bound or any material order, rule,
regulation, writ, injunction or decree of any government, governmental
instrumentality or court, domestic or foreign;
(viii) the Registration Statement has become effective
under the Act, and to the best of such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for that or any similar purpose have been
instituted or are pending before, or threatened by, the Commission;
(ix) the Registration Statement and the Prospectus
(except for the financial statements and other financial data contained
therein, or omitted therefrom, as to which such counsel need express no
opinion) comply as to form in all material respects with the applicable
requirements of the Act and the Rules and Regulations;
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<PAGE> 18
(x) all descriptions contained in the Registration
Statement and the Prospectus, and any amendment or supplement thereto,
of contracts and other documents are accurate and fairly present the
information required to be described, and such counsel is familiar with
all contracts and other documents referred to in the Registration
Statement and the Prospectus and any such amendment or supplement, or
filed as exhibits to the Registration Statement, and such counsel does
not know of any contracts, documents, licenses or permits of a
character required to be summarized or described therein or to be filed
as exhibits thereto which are not so summarized, described or filed;
(xi) no authorization, approval, consent or license of
any governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale or delivery
of the Shares by the Company, in connection with the execution,
delivery and performance of this Agreement by the Company or in
connection with the taking of any action contemplated herein, or the
issuance of the Representative's Warrant or the Shares underlying the
Representative's Warrant, other than registration or qualification of
the Shares under applicable state or foreign securities or blue sky
laws and registration under the Act; and
(xii) the statements in the Registration Statement
under the captions "BUSINESS," "USE OF PROCEEDS," "MANAGEMENT" and
"DESCRIPTION OF SECURITIES" have been reviewed by such counsel and
insofar as they refer to descriptions of agreements, statements of
laws, descriptions of statutes, licenses, rules or regulations or legal
conclusions, are correct in all material respects.
Such opinion shall also state that Company counsel's examination of the
Registration Statement and its discussions with the Company and its independent
auditors did not disclose any information which gives Company counsel reason to
believe that the Registration Statement (other than the financial statements and
other financial and statistical information as to which counsel need not express
an opinion) at the time it became effective contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus (other than the schedules, financial statements and other financial
and statistical information as to which no view is expressed) at the time it
became effective contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus (other than the
financial statements and other financial and statistical information as to which
counsel need not express an opinion) contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
In addition, such opinion shall also cover such matters incident to the
transactions contemplated hereby as you or your counsel shall reasonably
request. In rendering such
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<PAGE> 19
opinion, such counsel may rely upon certificates of any officer of the Company
or public officials as to matters of fact; and may rely as to all matters of law
other than the law of the United States, or the State of Delaware or the
Commonwealth of Massachusetts upon opinions of counsel satisfactory to you, in
which case the opinion shall state that they have no reason to believe that you
and they are not entitled to so rely.
(c) CORPORATE PROCEEDINGS. All corporate proceedings and other
legal matters relating to this Agreement, the Registration Statement, the
Prospectus, and other related matters shall be satisfactory to or approved by
Epstein Becker & Green, P.C., counsel to the Underwriters, and you shall have
received from such counsel a signed opinion, dated as of the First Closing Date,
with respect to the validity of the issuance of the Shares, the form of the
Registration Statement and Prospectus (other than the financial statements and
other financial data contained therein), the execution of this Agreement and
other related matters. The Company shall have furnished to counsel for the
Underwriters such documents as they may reasonably request for the purpose of
enabling them to render such opinion.
(d) COMFORT LETTER. You shall have received a letter on and as
of the Effective Date and again on and as of the First Closing Date, from
Feldman, Radin & Co., P.C., certified public accountants for the Company, in
each instance describing the procedures carried out to a date within five (5)
days of the date of the letter and substantially in the form approved by you.
(e) BRING DOWN. At each of the Closing Dates, (i) the
representations and warranties of the Company contained in this Agreement shall
be true and correct with the same effect as if made on and as of such Closing
Date, and the Company shall have performed all of its obligations hereunder and
satisfied all the conditions on its part to be satisfied at or prior to such
Closing Date; (ii) the Registration Statement and the Prospectus shall contain
all statements which are required to be stated therein in accordance with the
Act and the Rules and Regulations, and shall in all material respects conform to
the requirements thereof, and neither the Registration Statement nor the
Prospectus shall contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading; (iii) there shall have been, since the
respective dates of which information is given, no material adverse change in
the business, properties, condition (financial or otherwise), results of
operations, capital stock, long-term or short-term debt or general affairs or
operations of the Company from that set forth in the Registration Statement and
the Prospectus, except changes which the Registration Statement and Prospectus
indicate might occur after the Effective Date, and the Company shall not have
incurred any material liabilities nor entered into any agreement not in the
ordinary course of business other than as referred to in the Registration
Statement and Prospectus; and (iv) except as set forth in the Prospectus, no
action, suit or proceeding at law or at equity shall be pending or threatened
against the Company which would be required to be disclosed in the Registration
Statement, and no proceedings shall be pending or threatened against the Company
before or by any commission, board or administrative agency in the United States
or elsewhere, wherein an unfavorable decision, ruling or finding
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<PAGE> 20
would materially and adversely affect the business, property, condition
(financial or otherwise), results of operations or general affairs of the
Company. In addition, you shall have received at the First Closing Date, a
certificate signed by the principal executive officer and the principal
financial or accounting officer of the Company, dated as of the First Closing
Date, evidencing compliance with the provisions of this Section 4(e).
(f) TRANSFER AGENT. The Company shall have appointed American
Stock Transfer and Trust Company (or other agent mutually acceptable to the
Company and you), as its transfer agent and warrant agent to transfer all of the
Shares issued in the Offering, as well as to transfer other shares of the Common
Stock outstanding from time to time.
(g) CERTAIN FURTHER MATTERS. On each Closing Date,
Underwriter's counsel shall have been furnished with all such other documents
and certificates as they may reasonably request for the purpose of enabling them
to render their legal opinion to the Underwriter and in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements, the performance of any of the covenants, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the Company on
or prior to each of the Closing Dates in connection with the authorization,
issuance and sale of the Shares as herein contemplated shall be reasonably
satisfactory in form and substance to you and to Underwriter's counsel.
(h) OVER-ALLOTMENT OPTION. Upon exercise of the option provided
for in Section 2(c) hereof, the obligations of the several Underwriters to
purchase and pay for the Option Shares referred to therein will be subject (as
of the date hereof and as of the Option Closing Date) to the following
additional conditions:
(i) The Registration Statement shall remain effective
at the Option Closing Date, no stop order suspending the effectiveness
thereof shall have been issued, and no proceedings for that or any
similar purpose shall have been instituted or shall be pending, or, to
your knowledge or the knowledge of the Company, shall be contemplated
by the Commission, and any reasonable request on the part of the
Commission for additional information shall have been complied with to
the satisfaction of Epstein Becker & Green, P.C., counsel to the
Underwriters.
(ii) On the Option Closing Date, there shall have been
delivered to you the signed opinion of Foley, Hoag & Eliot, counsel for
the Company, dated as of the Option Closing Date, in form and substance
satisfactory to Epstein Becker & Green, P.C., counsel to the
Underwriters, which opinion shall be substantially the same in scope
and substance as the opinion furnished to you at the First Closing Date
pursuant to Section 4(b) hereof, except that such opinion, where
appropriate, shall cover the Option Shares rather than the Firm Shares.
If the First Closing Date is the same as the Option Closing Date, such
opinions may be combined.
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<PAGE> 21
(iii) On the Option Closing Date, there shall have
been delivered to you a certificate of the principal executive officer
and the principal financial or accounting officer of the Company dated
the Option Closing Date, in form and substance satisfactory to Epstein
Becker & Green, P.C., counsel to the Underwriters, substantially the
same in scope and substance as the certificate furnished to you at the
First Closing Date pursuant to Section 4(e) hereof.
(iv) On the Option Closing Date, there shall have been
delivered to you a letter in form and substance satisfactory to you
from Feldman, Radin & Co., P.C. dated the Option Closing Date and
addressed to you, confirming the information in their letter referred
to in Section 4(d) hereof as of the date thereof and stating that,
without any additional investigation required, nothing has come to
their attention during the period from the ending date of their review
referred to in said letter to a date not more than five (5) days prior
to the Option Closing Date which would require any change in said
letter if it were required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option
Closing Date in connection with the sale and issuance of the Option
Shares shall be satisfactory in form and substance to you, and you and
Epstein Becker & Green, P.C., counsel to the Underwriters, shall have
been furnished with all such documents, certificates and opinions as
you may request in connection with this transaction in order to
evidence the accuracy and completeness of any of the representations,
warranties or statements of the Company or its compliance with any of
the covenants or conditions contained therein.
If any of the conditions provided for in this Section shall not have
been completely fulfilled as of the date indicated, this Agreement and all
obligations of the several Underwriters under this Agreement may be cancelled
at, or at any time prior to, each Closing Date by your notifying the Company of
such cancellation in writing or by telegram at or prior to the applicable
Closing Date. Any such cancellation shall be without liability of any
Underwriter to the Company, except as otherwise provided herein.
5. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
The obligation of the Company to sell and deliver the Shares is subject
to the following conditions:
(a) REGISTRATION STATEMENT EFFECTIVE. The Registration
Statement shall have become effective not later than 6:00 p.m. New York time, on
the date of this Agreement, or at such later time on such later date as the
Company and you may agree in writing.
- 21 -
<PAGE> 22
(b) NO STOP ORDER. On each applicable Closing Date, no stop
order denying or suspending the effectiveness of the Registration Statement
shall have been issued under the Act or any proceedings therefor initiated or
threatened by the Commission.
(c) PAYMENT FOR SHARES. On each applicable Closing Date, you
shall have made payment, for the several accounts of the Underwriters, of the
aggregate Purchase Price for the Shares then being purchased, by certified or
bank cashier's checks payable in next-day funds to the order of the Company.
If the conditions to the obligations of the Company provided for in
this Section have been fulfilled on the First Closing Date but are not fulfilled
after the First Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Option Shares upon exercise of
the Over-Allotment Option shall be affected.
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY COMPANY. As used in this Agreement, the
term "LIABILITIES" shall mean any and all losses, claims, damages and
liabilities, and actions and proceedings in respect thereof (including without
limitation all reasonable costs of defense and investigation and all attorneys'
fees) including without limitation those asserted by any party to this Agreement
against any other party to this Agreement. The Company hereby indemnifies and
holds harmless each Underwriter and each person, if any, who controls such
Underwriter, within the meaning of the Act, from and against any Liabilities,
joint and several, to which such Underwriter or such controlling person may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon:
(i) any untrue statement or alleged untrue statement
of any material fact contained in (A) the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment thereof or
supplement thereto, or (B) any "blue sky" application or other document
executed by the Company specifically for that purpose or based upon
written information furnished by the Company filed in any state or
other jurisdiction in order to qualify any or all of the Shares and the
Representative's Warrant under the securities laws thereof (any such
application, document or information being hereinafter called a
"BLUE SKY APPLICATION"); or
(ii) the omission or alleged omission to state in the
Registration Statement, or any amendment thereto, or the Prospectus or
any Preliminary Prospectus, or any amendment or supplement thereto, or
in any Blue Sky Application, a material fact required to be stated
therein or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, that the Company shall not be liable in any
such case to the extent, but only to the extent, that any such Liabilities arise
out of or are based upon an untrue
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<PAGE> 23
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company through you by or on behalf of any Underwriter specifically for use in
the preparation of the Registration Statement, or any amendment thereto, or the
Prospectus or any Preliminary Prospectus, or any amendment or supplement
thereto, or any such Blue Sky Application; and
PROVIDED, FURTHER, that the Company shall not be liable in any
such case with respect to any Preliminary Prospectus to the extent that any such
loss, claim, damage or liability of each Underwriter results from the fact that
such Underwriter sold shares of Common Stock to a person to whom there was not
sent or given, at or prior to the time that such person was sent or given a
written confirmation of such sale, a copy of the Prospectus if the Company had
previously furnished copies thereof to such Underwriter and the untrue statement
or omission of a material fact contained in such Preliminary Prospectus was
corrected in the Prospectus. The foregoing indemnity will be in addition to any
liability which the Company may otherwise have.
(b) INDEMNIFICATION BY UNDERWRITERS. Each Underwriter,
severally but not jointly, hereby indemnifies and holds harmless the Company,
each of its directors, each nominee (if any) for director named in the
Prospectus, each of the officers who have signed the Registration Statement,
each person, if any, who signed the Registration Statement, and each person, if
any, who controls the Company, within the meaning of the Act, from and against
any Liabilities to which the Company or any such director, nominee, officer or
controlling person may become subject under the Act or otherwise, insofar as
such Liabilities arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment thereto, or the Prospectus or Preliminary Prospectus,
or any amendment or supplement thereto, or (ii) the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent that such Liabilities arise out of or are based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement or any amendment thereto, the
Prospectus or Preliminary Prospectus, or any amendment or supplement thereto, or
any Blue Sky Application, or any amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to the Company through
you by or on behalf of any Underwriter specifically for use in preparation
thereof. In no event shall the Underwriter be liable under this Section 6(b) for
any amount in excess of the compensation received by such underwriter in the
form of underwriting discounts or otherwise, pursuant to this Agreement or any
other agreement contemplated hereby. The foregoing indemnity will be in addition
to any liability which any Underwriter may otherwise have.
(c) PROCEDURES FOR CLAIMS. Promptly after receipt by an
indemnified party under this Section of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 6, notify in writing the
indemnifying party of the commencement thereof, but the
- 23 -
<PAGE> 24
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, subject to the provisions herein stated, with counsel
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. The indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
PROVIDED, HOWEVER, that if the indemnified party is any Underwriter or a person
who controls any underwriter within the meaning of the Act, the fees and
expenses of such counsel shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been specifically authorized in writing
by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the indemnifying party, and in the judgment of such
Underwriter, it is advisable for such Underwriter or such controlling persons to
be represented by separate counsel (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of such
Underwriter or such controlling person, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys). No
settlement of any action against an indemnified party shall be made without the
consent of the indemnified party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnified party.
7. CONTRIBUTION.
In order to provide for just and equitable contribution under the Act
in any case in which (a) any indemnified party makes claims for indemnification
pursuant to Section 6 hereof but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
the express provisions of Section 6 provide for indemnification in such case, or
(b) contribution under the Act may be required on the part of any indemnified
party, then such indemnified party and each indemnifying party (if more than
one) shall contribute to the aggregate Liabilities to which they may be subject,
in either such case (after contribution from others) in such proportions that
such Underwriter is responsible in the aggregate for that portion of such
Liabilities represented by the percentage that the underwriting discount
- 24 -
<PAGE> 25
per Share appearing on the cover page of the Prospectus bears to the public
offering price per Share appearing thereon, and the Company shall be responsible
for the remaining portion; PROVIDED, HOWEVER, that if such allocation is not
permitted by applicable law, then the relative fault of the Company and such
Underwriter and controlling persons, in the aggregate, in connection with the
statements or omissions which resulted in such damages and other relevant
equitable considerations shall also be considered. Notwithstanding the
foregoing, there shall be subtracted from such aggregate Liabilities suffered by
the Company any contribution received by the Company from persons, other than
the Underwriters, who may also be liable for contribution, including persons who
control the Company, within the meaning of Section 15 of the Act, officers of
the Company who signed the Registration Statement and directors of the Company,
and there shall be subtracted from such aggregate Liabilities suffered by the
Underwriters any contribution received by the Underwriter from persons, other
than the Company (including persons who control the Company within the meaning
of Section 15 of the Act, officers of the Company who signed the Registration
Statement and directors of the Company), who may also be liable for
contribution, including persons who control the Underwriter within the meaning
of Section 15 of the Act.
The relative fault shall be determined by reference to, among other
things, whether in the case of an untrue statement of a material fact or the
omission to state a material fact, such statement or omission relates to
information supplied by the Company, its officers or directors, or the
Underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company and the Underwriters agree that it would not be just and equitable if
the respective obligations of the Company and the Underwriters to contribute
pursuant to this Section 7 were to be determined by pro rata or per capita
allocation of the aggregate Liabilities (even if the Underwriters have to be
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in this
Section 7. In addition, the contribution of any Underwriter shall not be in
excess of its proportionate share of the portion of such Liabilities for which
such Underwriter is responsible. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. As used in this Section 7, the word "Company" includes any
officer, director or person who controls the Company within the meaning of
Section 15 of the Act. Each Underwriter's obligations under this Section 7 to
contribute are several in proportion to their respective underwriting
obligations and not joint. If the full amount of the contribution specified in
this paragraph is not permitted by law, then each Underwriter and each person
who controls such Underwriter shall be entitled to contribution from the Company
to the full extent permitted by law. The foregoing contribution agreement shall
in no way affect the contribution liabilities of any persons having liability
under Section 11 of the Act other than the Company and the Underwriters. No
contribution shall be requested with regard to the settlement of any matter from
any party who did not consent to the settlement; PROVIDED, HOWEVER, that such
consent shall not be unreasonably withheld in light of all factors of importance
to such party.
- 25 -
<PAGE> 26
8. COSTS AND EXPENSES.
(a) PAYMENT OF EXPENSES. Whether or not this Agreement becomes
effective or the sale of the Shares to the Underwriters is consummated, the
Company shall pay all costs and expenses incident to the issuance, offering,
sale and delivery of the Shares and the Representative's Warrant and the
performance of this Agreement, including without limitation: (i) all fees and
expenses of the Company's counsel and accountants; (ii) all costs and expenses
incident to the preparation, printing, filing and distribution of the
Registration Statement (including the financial statements therein and all
exhibits and amendments thereto), each Preliminary Prospectus and the
Prospectus, each as amended or supplemented, this Agreement and the other
agreements and documents referred to herein, each in such quantities as you
shall deem necessary; (iii) all fees required by the NASD to be paid in
connection with the filing to be made with the NASD by the Representative with
respect to the Offering; (iv) all expenses, including fees (but not in excess of
$35,000) and disbursements of counsel to the Underwriters, in connection with
the qualifications of the Shares under the state securities or "Blue Sky" laws
which you shall designate; (v) all costs and expenses of printing the
certificates representing the Shares; (vi) the expense (which shall not exceed
$10,000) of placing one or more "tombstone" advertisements as directed by you;
(vii) all costs and expenses of the Company and its employees (but not of the
Representative or its employees) associated with due diligence meetings and
presentations; (viii) all costs and expenses (if required by the Representative)
associated with the preparation of a seven-to-ten-minute video presentation
concerning the Company, its products and its management for broker due diligence
purposes; (ix) any and all taxes (including without limitation any transfer,
franchise, capital stock or other tax imposed by any jurisdiction) on sales of
the Shares to the Underwriters hereunder; and (x) all costs and expenses
incident to the furnishing of any amended Prospectus or of any supplement to be
attached to the Prospectus as called for in Section 3(a) of this Agreement
except as otherwise set forth in said Section.
(b) EXPENSE ALLOWANCE. In addition to the foregoing expenses,
the Company shall on the First Closing Date pay to you the balance of a
non-accountable expense allowance (which shall include fees of Underwriter's
counsel, exclusive of the fees referred to in Section 3(b)) of $__________ (that
being an amount equal to three percent (3%) of the gross proceeds received upon
sale of the Firm Shares) of which $[60,000] has been paid to you prior to the
date hereof. In the event the Over-Allotment Option is exercised, the Company
shall pay to you at the Option Closing Date an additional amount equal to three
percent (3%) of the gross proceeds received by the Company upon exercise of the
Over-Allotment Option. In the event that the transactions contemplated hereby
fail to be consummated for any reason, then you shall return to the Company that
portion of the $[60,000] heretofore paid by the Company to the extent that it
has not been utilized by you in connection with the proposed offering for
accountable out-of-pocket expenses; PROVIDED, HOWEVER, that if such failure is
due to a breach by the Company of any covenant, representation or warranty
contained herein or because any other condition to the Underwriters' obligations
hereunder required to be fulfilled by the Company or any is not
- 26 -
<PAGE> 27
fulfilled, then the Company shall be liable for your accountable out-of-pocket
expenses to the full extent thereof (with credit given to the $35,000 paid).
(c) NO FINDERS. No person is entitled either directly or
indirectly to compensation from the Company, from any Underwriter or from any
other person for services as a finder in connection with the proposed offering,
and the Company hereby agrees to indemnify and hold harmless each Underwriter,
and each Underwriter hereby agrees to indemnify and hold harmless the Company
from and against any losses, claims, damages or liabilities, joint or several
(which shall, for all purposes of this Agreement, include, but not be limited
to, all reasonable costs of defense and investigation and all attorneys' fees),
to which the indemnified party may become subject insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon the claim of any person (other than an employee of the party
claiming indemnity) or entity that he or it is entitled to a finder's fee in
connection with the proposed offering by reason of such person's or entity's
influence or prior contact with the indemnifying party.
9. SUBSTITUTION OF UNDERWRITERS.
If any Underwriter defaults in its obligation to purchase the number of
Shares which it has agreed to purchase under this Agreement, you shall be
obligated to purchase all of the Shares not purchased by the defaulting
Underwriter unless such purchase shall cause you to be in violation of the net
capital requirements of Rule 15c3-1 of the Exchange Act, in which case you, and
any other underwriters satisfactory to you who so agree, shall have the right,
but shall not be obligated, to purchase (in such proportions as may be agreed
upon among them) all of the Shares. If any Underwriter or Underwriters default
in their obligations to purchase Shares hereunder and the aggregate number of
Shares that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed ten percent (10%) of the total number of Shares, you
may make arrangements satisfactory to the Company for the purchase of such
Shares by other persons, including any of the Underwriters, but if no such
arrangements are made by the Closing Date, the non-defaulting Underwriters shall
be obligated severally, in proportion to their respective commitments hereunder,
to purchase the Shares that such defaulting Underwriters agreed but failed to
purchase. If you or the other Underwriters satisfactory to you do not elect to
purchase the Shares which the defaulting Underwriter or Underwriters agreed but
failed to purchase, then this Agreement shall terminate without liability on the
part of any non-defaulting Underwriter or the Company except for the payment of
expenses to be borne by the Company and the Underwriters as provided in Section
8(a), the payment by the Company of accountable expenses as provided by Section
8(b), and the indemnity and contribution agreements of the Company and the
Underwriters contained in Sections 6 and 7 hereof.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have for damages caused by its default. If the other
Underwriters satisfactory to you are obligated or agree to purchase the Shares
of a defaulting Underwriter, either you or the Company may postpone the First
Closing Date for up to seven (7) banking days in order to
- 27 -
<PAGE> 28
affect any changes that may be necessary in the Registration Statement, the
Prospectus or in any other document or agreement, and to file promptly any
amendments or any supplements to the Registration Statement and the Prospectus
which in your opinion may thereby be made necessary.
10. EFFECTIVE DATE.
This Agreement shall become effective upon its execution, except that
you may, at your option, delay its effectiveness until 10:00 a.m., New York
time, on the first full business day following the Effective Date, or at such
earlier time after the Effective Date as you in your discretion shall first
commence the initial public offering by the Underwriter of any of the Shares.
The time of the initial public offering shall mean the time of release by you of
the first newspaper advertisement with respect to the Shares, or the time when
the Shares are first generally offered by you to dealers by letter or telegram,
whichever shall first occur. This Agreement may be terminated by you at any time
before it becomes effective as provided above, except that Sections 3(a), 6, 7,
8, 13, 14, 15 and 16 shall remain in effect notwithstanding such termination.
11. TERMINATION.
(a) GROUNDS FOR TERMINATION. This Agreement, except for
Sections 3(a)(iii), 6, 7, 8, 13, 14, 15 and 16, may be terminated at any time
prior to the First Closing Date, and the option referred to in Section 2(c), if
exercised, may be cancelled at any time prior to the Option Closing Date, by you
if in your sole judgment it is impracticable to offer for sale or to enforce
contracts made by the Underwriters for the resale of the Shares agreed to be
purchased hereunder, by reason of: (i) the Company having sustained a material
loss, whether or not insured, by reason of fire, earthquake, flood, accident or
other calamity, or from any labor dispute or court or governmental action, order
or decree; (ii) trading in securities on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market having been suspended or
limited; (iii) material governmental restrictions having been imposed on trading
in securities generally which are not in force and effect on the date hereof;
(iv) a banking moratorium having been declared by federal or New York State
authorities; (v) an outbreak or significant escalation of major international
hostilities or other national or international calamity having occurred; (vi)
the passage by the Congress of the United States or by any state legislative
body of similar impact, of any act or measure, or the adoption of any order,
rule or regulation by any governmental body or any authoritative accounting
institute or board, or any governmental executive, which is reasonably believed
likely by you to have material adverse effect on the business, property,
operations, condition (financial or otherwise) or earnings of the Company; (vii)
any material adverse change in the financial or securities markets beyond normal
fluctuations in the United States having occurred since the date of this
Agreement; or (viii) any material adverse change having occurred, since the
respective dates for which information is given in the Registration Statement
and Prospectus, in the business, property, operations, condition
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<PAGE> 29
(financial or otherwise), earnings or business prospects of the Company, whether
or not arising in the ordinary course of business.
(b) NOTIFICATION. If you elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section 11
or in Section 10, the Company shall be promptly notified by you, by telephone,
facsimile or telegram, confirmed by letter.
12. REPRESENTATIVE'S WARRANT.
On the First Closing Date, the Company will issue and sell to you, for
a total purchase price of $5.00, and upon the terms and conditions set forth in
the form of Representative's Warrant filed as an exhibit to the Registration
Statement, a warrant entitling you to purchase 200,000 Shares (the
"REPRESENTATIVE'S WARRANT"). In the event of conflict in the terms of this
Agreement and the Representative's Warrant, the language of the Representative's
Warrant shall control.
13. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties,
covenants and other statements of the Company and the Underwriters set forth in
or made pursuant to this Agreement will remain in full force and effect
regardless of any investigation made by or on behalf of the Underwriters, the
Company, or any of its officers or directors or any controlling persons, and
will survive delivery of and payment for the Shares and the termination of this
Agreement.
14. NOTICE.
All communications hereunder will be in writing and, except as
otherwise expressly provided herein, if sent to any Underwriter, will be mailed,
sent by facsimile transmission or overnight courier service, delivered or
telegraphed and confirmed to it at H.J. Meyers & Co., Inc., 1895 Mt. Hope
Avenue, Rochester, New York 14604, with a copy sent to John A. Piccione, Esq.,
Epstein Becker & Green, P.C., 75 State Street, Boston, Massachusetts 02109, or
if sent to the Company, will be mailed, sent by facsimile transmission or
overnight courier service, delivered or telegraphed and confirmed to it at 5915
Rodeo Road, Los Angeles, California 90016, with a copy sent to David A.
Broadwin, Esq., Foley, Hoag & Eliot, One Post Office Square, Boston,
Massachusetts 02109.
15. PARTIES IN INTEREST.
This Agreement herein set forth is made solely for the benefit of the
Underwriters, the Company and, to the extent expressed, any person controlling
the Company, or any Underwriter, as the case may be, and directors of the
Company, nominees for directors of the Company (if any) named in the Prospectus,
the officers of the Company who have
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<PAGE> 30
signed the Registration Statement, and their respective executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser, as such, from any Underwriter of the
Shares.
16. APPLICABLE LAW.
This Agreement will be governed by, and construed in accordance with,
the laws of the State of New York applicable to agreements made and to be
entirely performed within such state.
17. COUNTERPARTS.
This Agreement may be executed in two or more counterpart copies, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 31
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Underwriting Agreement, whereupon it will
become a binding agreement between the Company and you in accordance with its
terms.
Yours very truly,
THE AMERICAN MATERIALS & TECHNOLOGIES
CORPORATION
By:
-------------------------------
Title:
----------------------------
Dated: , 1996
----------------
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
H.J. MEYERS & CO., INC.
By:
-------------------------------
Title:
----------------------------
Dated: , 1996
----------------
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<PAGE> 32
SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------
H.J. Meyers & Co., Inc.
Total 2,000,000
=========
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<PAGE> 1
EXHIBIT 1.2
DRAFT OF 4/16/96
FINANCIAL CONSULTING AGREEMENT
This Agreement is made on ____________, 1996, by and between THE
AMERICAN MATERIALS & TECHNOLOGIES CORPORATION, a Delaware corporation having its
principal office at 5915 Rodeo Road, Los Angeles, California 90016 (the
"Company"), and H.J. MEYERS & CO., INC., a New York corporation having its
principal office at 1895 Mt. Hope Avenue, Rochester, New York 14620
("Consultant").
In consideration of the mutual premises contained herein and on the
terms and conditions hereinafter set forth, the Company and Consultant agree as
follows:
1. PROVISION OF SERVICES.
(a) Consultant shall, to the extent reasonably required in the
conduct of the business of the Company, place at the disposal of the
Company its judgment and experience and, to such extent and at the
prior written request of the President of the Company, provide business
development and corporate finance services to the Company, including
without limitation the following:
(i) evaluation of the Company's managerial and financial
requirements;
(ii) assistance when requested by the Company in recruiting,
screening, evaluating and recommending key personnel,
directors, accountants, commercial and investment bankers,
underwriters, attorneys and other professional
consultants;
(iii) assistance in the preparation of budgets and business
plans;
(iv) advice with regard to sales planning and sales activities;
(v) advice with regard to stockholder relations and public
relations matters; and
(vi) assistance in financial arrangements.
All such services shall at all times be at the request of the Company and shall
be on a non-exclusive basis. Notwithstanding the foregoing, Consultant shall not
provide services to the Company hereunder in connection with mergers,
acquisitions, consolidations, joint ventures and similar corporate finance
transactions, which transactions are instead the subject of a certain letter
agreement dated this date between Consultant and the Company.
<PAGE> 2
(b) Consultant shall use its best efforts in the furnishing of
advice and recommendations, and for this purpose Consultant shall at
all times maintain or keep and make available qualified personnel or a
network of qualified outside professionals for the performance of its
obligations under this Agreement. To the extent reasonably practicable,
Consultant shall so use its own personnel rather than outside
professionals.
2. COMPENSATION. In consideration of Consultant's services hereunder,
the Company shall pay Consultant a consulting fee of $72,000, payable in advance
on the date hereof (that being the closing date of the sale of the Company's
securities pursuant to a Registration Statement on Form SB-2, No. 333-3836,
filed with the Securities and Exchange Commission). Consultant hereby accepts
such compensation.
3. EXPENSES. The Company shall reimburse Consultant for reasonable
expenses incurred by Consultant in connection with its services rendered
hereunder. All expenses in excess of $500.00 shall be approved in writing by the
Company in advance. Consultant shall invoice the Company for its expenses
incurred. Payment of invoices shall be due on the date thirty days after receipt
by the Company.
4. LIABILITY; INDEMNIFICATION.
(a) It is expressly understood and agreed that, in furnishing the
Company with management advice and other services as herein provided,
neither Consultant nor any of its officers, directors, employees or
agents shall be liable to the Company, its stockholders or its
creditors for errors of judgment or for any act or omission except
willful malfeasance, bad faith or gross negligence in the performance
of its duties or reckless disregard of its obligations and duties
hereunder. It is further understood and agreed that Consultant may rely
upon information furnished to it and reasonably believed by it to be
accurate and reliable and that, except as herein provided, Consultant
shall not be liable for any loss suffered by the Company, or by any
officer, director, employee, stockholder or creditor of the Company, by
reason of the Company's action or non-action on the basis of any
advice, recommendation or approval of Consultant or any of its
officers, directors, employees or agents.
(b) The Company shall indemnify, save harmless and defend Consultant
and its officers, directors, employees and agents (including without
limitation any observer to the Company's Board of Directors appointed
by the Consultant) from, against, and in respect of, any loss, damage,
liability, judgment, cost or expense whatsoever, including counsel
fees, suffered or incurred by it or him by reason of, or on account of,
its status or activities as a consultant to the Company hereunder,
except for any loss, damage, liability, judgment, cost or expense
resulting from willful malfeasance, bad faith or gross negligence in
the performance of Consultant's duties or reckless disregard of its
obligations and duties hereunder.
-2-
<PAGE> 3
(c) Consultant shall indemnify, save harmless and defend the Company
and its officers, directors, employees and agents from, against, and in
respect of, any loss, damage, liability, judgment, cost or expense
whatsoever, including counsel fees, suffered or incurred by it or him
by reason of, or on account of, willful malfeasance, bad faith or gross
negligence in the performance of Consultant's duties or reckless
disregard of its obligations and duties hereunder.
5. STATUS OF CONSULTANT. Consultant shall at all times be an
independent contractor of the Company and, except as expressly provided or
authorized by this Agreement, shall have no authority to act for or represent
the Company.
6. OTHER ACTIVITIES OF CONSULTANT. The Company recognizes that
Consultant now renders and may continue to render management and other services
to other companies which may or may not have policies and conduct activities
similar to those of the Company. Consultant shall be free to render such advice
and other services, and the Company hereby consents thereto. Consultant shall
not be required to devote its full time and attention to the performance of its
duties under this Agreement, but shall devote only so much of its time and
attention as it deems reasonable or necessary for such purposes.
7. CONTROL. Nothing contained herein shall be deemed to require the
Company to take any action contrary to its Certificate of Incorporation or
By-laws, or any applicable statute or regulation, or to deprive its Board of
Directors of its responsibility for and control of the conduct of the affairs of
the Company.
8. TERM. Consultant's performance of services hereunder shall be for a
term of one year commencing on the date hereof.
9. IN GENERAL. This Agreement sets forth the entire agreement and
understanding between the parties with respect to its subject matter and
supersedes all prior discussions, agreements and understandings of every and any
nature between them with respect thereto. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective offices or representatives duly authorized on the day and
year first above written.
THE AMERICAN MATERIALS & TECHNOLOGIES
CORPORATION
By:________________________________________
Its
H.J. MEYERS & CO., INC.
By:________________________________________
Its
-4-
<PAGE> 1
EXHIBIT 1.3
DRAFT OF 4/16/96
H.J. MEYERS & CO., INC.
1895 MT. HOPE AVENUE
ROCHESTER, NEW YORK 14620
____________, 1996
The American Materials & Technologies Corporation
3915 Rodeo Road
Los Angeles, California 90016
Ladies and Gentlemen:
You have agreed that H.J. Meyers & Co., Inc. ("H.J. Meyers") may act as
a non-exclusive finder or financial consultant for you in various transactions
in which The American Materials & Technologies Corporation (the "Company") may
be involved, such as mergers, acquisitions, consolidations, joint ventures and
similar corporate finance transactions, for a period of twenty-four (24) months
from the date of this Agreement (the "Period").
1. H.J. Meyers' Fee.
(a) If, during the Period, H.J. Meyers brings to the Company
an opportunity for a proposed merger, consolidation, acquisition of
assets or joint venture involving the Company as one of the parties
thereto, or an acquisition of all or substantially all of the
securities of the Company or of another entity (including an
acquisition of assets or securities that is paid for in part or in full
by the issuance of shares of the Company's Common Stock or other
securities), then upon the consummation of any such transaction (but
only if such consummation occurs within thirty-six (36) months from the
date of this Agreement), the Company will pay to H.J. Meyers as a fee
the amount provided for in Paragraph 1(c) hereof; provided, however,
that H.J. Meyers shall be deemed to have brought an opportunity to the
Company for purposes of this Paragraph 1(a) only if the opportunity is
at least briefly specifically described in a writing (which need not
identify the other parties) signed by H.J. Meyers and received (with
receipt acknowledged in writing by the Company) prior to any
negotiations between representatives of the Company and representatives
of the other party or parties to such transaction, and such writing
signed by H.J. Meyers refers to the Company's obligations under this
Paragraph 1(a).
<PAGE> 2
The American Materials & Technologies Corporation
___________, 1996
Page 2
(b) If, during the Period, an opportunity for a proposed
transaction of the type described in Paragraph 1(a) hereof is brought
to the Company by someone other than H.J. Meyers, and if the Company in
writing retains H.J. Meyers for consultation or other services in
connection therewith, then upon the consummation of that transaction,
if it occurs within thirty (36) months from the date of this Agreement,
the Company will pay H.J. Meyers as a fee the amount provided for in
Paragraph 1(c) hereof or such fee as is otherwise agreed to by the
Company and H.J. Meyers.
(c) The amount to be paid by the Company to H.J. Meyers in any
case described in Paragraphs 1(a) or 1(b) hereof shall be calculated
based on the fair-market value of the consideration paid to or received
by the Company (or its stockholders), as follows: five percent (5%) of
the first three million dollars; two and one-half percent (2.5%) of any
consideration above three million dollars and less than five million
dollars; and two percent (2%) of any consideration in excess of five
million dollars. "Consideration" shall mean the total value of all
cash, securities, other property and any other consideration,
including, without limitation, any contingent, earned or other
consideration paid or payable, directly or indirectly, in connection
with a transaction and consideration shall be determined at the
closing. The value of any such securities (whether debt or equity) or
other property shall be determined as follows: (1) the value of
securities that are freely tradeable in an established public market
shall be the last closing market price of such securities prior to the
public announcement of the transaction; and (2) the value of the
securities which are not freely tradeable or which have no established
public market, or if the consideration consists of property other than
securities, the value of such securities or other property shall be the
fair-market value thereof as mutually agreed by the Company and H.J.
Meyers. In the event of an asset purchase, consideration shall also be
deemed to include any indebtedness, including, without limitation,
pension liabilities, guarantees and other obligations assumed, directly
or indirectly, in connection with, or which survives the closing of, a
transaction. If the consideration to be paid is computed or payable in
any foreign currency, the value of such foreign currency shall, for the
purposes hereof, be converted into U.S. Dollars at the prevailing
exchange rate on the dates on which such consideration is payable.
(d) If during that period the Company consummates any of the
type of transactions described in Paragraph 1(a) herein, which was not
brought to the attention of the Company by H.J. Meyers in writing prior
to any negotiations between representatives of both companies, H.J.
Meyers agrees that no compensation as provided in Paragraph 1(a) shall
be payable to H.J. Meyers by the Company unless the Company has
retained H.J. Meyers in writing as provided in Paragraph 1(b) to render
consulting services in connection with such transaction.
<PAGE> 3
The American Materials & Technologies Corporation
___________, 1996
Page 3
2. Payment. The fee due to H.J. Meyers hereunder shall be paid by
the Company in cash at the closing of the transaction, without regard to whether
the transaction involves payment in cash, stock or a combination of stock and
cash, or is made on an installment sales basis. By way of example, if the
transaction involves securities of the acquiring entity (whether securities of
the Company, if the Company is the acquiring party, or securities of another
entity, if the Company is the selling party) having a value of $5,000,000, the
cash consideration to be paid by the Company to H.J. Meyers at closing shall be
$200,000.
3. Binding Obligation. The Company represents and warrants to H.J.
Meyers that H.J. Meyers' engagement hereunder has been duly authorized and
approved by the Board of Directors of the Company and that this letter agreement
has been duly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company.
4. In General. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State. This Agreement sets forth the
entire agreement and understanding between the undersigned with respect to its
subject matter and supersedes all prior discussions, agreements and
understandings of every kind and nature between them with respect thereto. This
Agreement shall inure to the benefit of, and be enforceable against, each of the
undersigned and their respective successors and assigns.
<PAGE> 4
The American Materials & Technologies Corporation
___________, 1996
Page 4
Please sign this letter at the place indicated below, whereupon it will
constitute our mutually binding agreement with respect to the matters contained
herein.
Yours very truly,
H.J. MEYERS & CO., INC.
By:__________________________________________
Its
ACCEPTED AND AGREED TO:
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
By:_______________________________________
Its
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
The following Restated Certificate of Incorporation restates the
provisions of the Certificate of Incorporation of The American Materials &
Technologies Corporation, originally incorporated under the name "American
Materials and Technology, Inc." (the "Corporation"), originally filed with the
Secretary of State of Delaware on March 29, 1995, as amended to date, and has
been duly adopted by the Board of Directors of the Corporation and by the
stockholders of the Corporation pursuant to Sections 228 and 245 of the Delaware
General Corporation Law. Written notice of the taking of such action has been
given pursuant to said Section 228.
FIRST. The name of the Corporation is THE AMERICAN MATERIALS &
TECHNOLOGIES CORPORATION.
SECOND. The address of the Corporation's registered office in the State
of Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The
Corporation's registered agent at such address is The Prentice Hall Corporation
System, Inc.
THIRD. The nature of the business and purposes to be conducted or
promoted are as follows:
To engage in any lawful act or activity for which a corporation may
be organized under the General Corporation Law of Delaware.
FOURTH: (a) The total number of shares of stock that the Corporation
shall have authority to issue is 20,000,000, consisting of 15,000,000 shares of
common stock, $0.01 par value per share ("Common Stock"), and 5,000,000 shares
of preferred stock, $0.01 par value per share ("Preferred Stock"). Each share of
Common Stock shall be entitled to one vote.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors hereby is expressly authorized to provide for the
issuance of shares of Preferred Stock in one or more series, to establish from
time to time the number of shares to be included in each such series and to fix
the voting powers, designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, of the shares of each such series, to the full extent now
or hereafter permitted by law.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following:
1. the number of shares constituting that series, which number may
be
<PAGE> 2
increased or decreased (but not below the number of shares of such
series then outstanding) from time to time by the Board of Directors,
and the distinctive designation of that series;
2. whether any dividends shall be paid on shares of that series,
and, if so, the dividend rate on the shares of that series; whether
dividends shall be cumulative and, if so, from which date or dates, and
the relative rights of priority, if any, of payment of dividends on
shares of that series;
3. whether shares of that series shall have voting rights in
addition to the voting rights provided by law and, if so, the terms of
such voting rights;
4. whether shares of that series shall be convertible into shares
of Common Stock or another security and, if so, the terms and
conditions of such conversion, including provisions for adjustment of
the conversion rate in such events as the Board of Directors shall
determine;
5. whether or not the shares of that series shall be redeemable
and, if so, the terms and conditions of such redemption, including the
date or dates upon or after which they shall be redeemable and the
amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates; and
whether that series shall have a sinking fund for the redemption or
purchase of shares of that series and, if so, the terms and amount of
such sinking fund;
6. whether, in the event of purchase or redemption of the shares of
that series, any shares of that series shall be restored to the status
of authorized but unissued shares or shall have such other status as
shall be set forth in the Certificate of Designation;
7. the rights of the shares of that series in the event of the
sale, conveyance, exchange or transfer of all or substantially all of
the property and assets of the Corporation, or the merger or
consolidation of the Corporation into or with any other corporation, or
the merger of any other corporation into it, or the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation,
and the relative rights of priority, if any, of shares of that series
to payment in any such event;
8. whether the shares of that series shall carry any preemptive
right in or preemptive right to subscribe to any additional shares of
Preferred Stock or any shares of any other class of stock which may at
any time be authorized or issued, or any bonds, debentures or other
securities convertible into shares of stock of any class of the
Corporation, or options or warrants carrying rights to purchase such
shares or securities; and
9. any other voting powers, designations, preferences and relative,
<PAGE> 3
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, of the shares of that series.
(b) Except as provided to the contrary in the provisions establishing a class or
series of stock, the amount of the authorized stock of the Corporation of any
class or classes may be increased or decreased by the affirmative vote of the
holders of a majority of the stock of the Corporation entitled to vote.
FIFTH. In furtherance and not in limitation of powers conferred by
statute, it is further provided that:
(a) election of Directors need not be by written ballot unless so
provided in the By-Laws of the Corporation; and
(b) the Board of Directors is expressly authorized to adopt, amend
or repeal the By-Laws of the Corporation.
SIXTH. No Director of the Corporation shall be personally liable to the
Corporation or its Stockholders for monetary damages for breach of fiduciary
duty as a Director; provided, however, that a Director of the Corporation shall
be liable for: (i) breach of the Director's duty of loyalty to the Corporation
or its Stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) under
section 174 of Title 8 of the Delaware Code, the General Corporation Law of the
State of Delaware; or (iv) for any transaction from which the Director derived
an improper personal benefit. If the General Corporation Law of the State of
Delaware is hereafter amended to permit further limitation on or elimination of
the personal liability of the Corporation's Directors for breach of fiduciary
duty, then a Director of the Corporation shall be exempt from such liability for
any such breach to the full extent permitted by the General Corporation Law of
the State of Delaware as so amended from time to time. Any repeal or
modification of the foregoing provisions of this Article, or the adoption of any
provision inconsistent herewith, shall not adversely affect any right or
protection of a Director of the Corporation hereunder in respect of any act or
omission of such Director occurring prior to such repeal, modification or
adoption of an inconsistent provision.
SEVENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
Stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned, being the duly elected and acting
Secretary of The American Materials & Technologies Corporation, has hereunto set
his hand this 3rd day of January, 1996.
<PAGE> 4
David A. Broadwin
Secretary
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
THE AMERICAN MATERIALS & TECHNOLOGIES
CORPORATION
As adopted on May 16, 1995
<PAGE> 2
TABLE OF CONTENTS
Page
Section 1. Certificate of Incorporation and By-Laws........................ 1
1.1. Conflicts........................................... 1
1.2. References.......................................... 1
Section 2. Offices......................................................... 1
2.1. Registered Office................................... 1
2.2. Other Offices....................................... 1
Section 3. Stockholders.................................................... 1
3.1. Location of Meetings................................ 1
3.2. Annual Meeting...................................... 1
3.3. Special Meeting in Place of Annual Meeting.......... 1
3.4. Notice of Annual Meeting............................ 2
3.5. Other Special Meetings.............................. 2
3.6. Notice of Special Meeting........................... 2
3.7. Notice of Stockholder Business at a Meeting
of the Stockholders.......................... 2
3.8. Stockholder List.................................... 4
3.9. Quorum of Stockholders.............................. 4
3.10. Adjournment......................................... 4
3.11. Proxy Representation................................ 4
3.12. Inspectors.......................................... 5
3.13. Action by Vote...................................... 5
3.14. Action Without Meetings............................. 5
Section 4. Directors....................................................... 6
4.1. Number ............................................ 6
4.2. Tenure ............................................ 6
4.3. Powers ............................................ 6
4.4. Chairman and Vice-Chairman of the Board............. 6
4.5. Vacancies........................................... 6
4.6. Nomination of Directors............................. 6
4.7. Committees.......................................... 8
4.8. Regular Meeting..................................... 8
4.9. Special Meetings.................................... 8
4.10. Notice ............................................ 9
4.11. Quorum ............................................ 9
4.12. Action by Vote..................................... 9
4.13. Action Without a Meeting........................... 9
4.14. Participation in Meetings by Conference Telephone.. 9
<PAGE> 3
4.15. Compensation....................................... 9
4.16. Interested Directors and Officers.................. 10
4.17. Resignation or Removal of Directors................ 10
Section 5. Notices......................................................... 11
5.1. Form of Notice...................................... 11
5.2. Waiver of Notice.................................... 11
Section 6. Officers and Agents............................................. 11
6.1. Enumeration; Qualification.......................... 11
6.2. Powers ............................................ 12
6.3. Election............................................ 12
6.4. Tenure ............................................ 12
6.5. President and Vice Presidents....................... 12
6.6. Chief Financial Officer; Treasurer
and Assistant Treasurers........................ 12
6.7. Secretary and Assistant Secretaries................. 12
6.8. Resignation and Removal............................. 13
6.9. Vacancies........................................... 13
Section 7. Capital Stock................................................... 13
7.1. Stock Certificates.................................. 13
7.2. Lost Certificates................................... 14
Section 8. Transfer of Shares of Stock..................................... 14
8.1. Transfer on Books................................... 14
Section 9. General Provisions.............................................. 14
9.1. Record Date......................................... 14
9.2. Dividends........................................... 15
9.3. Payment of Dividends................................ 15
9.4. Checks ............................................ 15
9.5. Fiscal Year......................................... 16
9.6. Seal ............................................ 16
Section 10. Indemnification................................................ 16
Section 11. Amendments..................................................... 17
<PAGE> 4
SECTION 1. CERTIFICATE OF INCORPORATION AND BY-LAWS.
1.1. Conflicts. In the event of any conflict between the provisions of
these by-laws and the provisions of the certificate of incorporation of The
American Materials & Technologies Corporation (the "Corporation"), the
provisions of the certificate of incorporation shall govern.
1.2. References. In these by-laws, references to the certificate of
incorporation and by-laws mean the provisions of the certificate of
incorporation of the Corporation and these by-laws, respectively, as are from
time to time in effect.
SECTION 2. OFFICES.
2.1. Registered Office. The registered office of the Corporation shall
be 1209 Orange Street, in the City of Wilmington, County of New Castle, State of
Delaware, and the name of its registered agent at such address is the
Corporation Trust Company.
2.2. Other Offices. The Corporation may also have offices at such other
places within or without the State of Delaware as the board of directors may
from time to time determine or the business of the Corporation may require.
SECTION 3. STOCKHOLDERS.
3.1. Location of Meetings. All meetings of stockholders shall be held
at such place or places within or without the State of Delaware as shall be
designated from time to time by the board of directors. Any adjourned session of
any meeting shall be held at the place designated in the vote of adjournment.
3.2. Annual Meeting. The annual meeting of stockholders shall be held
11:00 a.m. on the second Tuesday in May in each year (unless that day shall be a
legal holiday at the location where the meeting is to be held, in which case the
meeting shall be held at 11:00 a.m. on the next succeeding day that is not a
legal holiday) (the "Specified Date") or at such other time and date as shall be
designated from time to time by the board of directors, at which the
stockholders shall elect a board of directors and transact such other business
as may be required by law or these by-laws or as may otherwise properly come
before the meeting.
3.3. Special Meeting in Place of Annual Meeting. If the election of
directors shall not be held on the day designated by these by-laws, the
directors shall cause the election to be held as soon thereafter as convenient.
To that end, if the annual meeting is not held on the day provided in Section
3.2 or if the election of directors is not held at the annual meeting, a special
meeting of the stockholders may be held in place of such omitted meeting or
election
1
<PAGE> 5
and any business transacted or election held at such special meeting shall have
the same effect as if transacted or held at the annual meeting. In such case all
references in these by-laws to the annual meeting of the stockholders, or to the
annual election of directors, shall be deemed to refer to or include such
special meeting. Any such special meeting shall be called, and the purposes
thereof shall be specified in the call, as provided in Section 3.5.
3.4. Notice of Annual Meeting. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. Such notice may specify the business
to be transacted and actions to be taken at such meeting. No action shall be
taken at such meeting unless such notice is given, or unless waiver of such
notice is given by the holders of outstanding stock having not less than the
minimum number of votes necessary to take such action at a meeting at which all
shares entitled to vote thereon were voted. Prompt notice of all actions taken
in connection with such waiver of notice shall be given to all stockholders not
present or represented at such meeting.
3.5. Other Special Meetings. Unless otherwise prescribed by law or by
the certificate of incorporation, special meetings of the stockholders may be
called for any purpose or purposes by the chairman of the board of directors,
the principal executive officer or the chief financial officer and shall be
called by the principal executive officer or secretary or an assistant secretary
at the written request of a majority of the board of directors. Such request
shall state the purpose or purposes of the proposed meeting and the business to
be transacted thereat.
3.6. Notice of Special Meeting. Written notice of a special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called shall be given not less than ten nor more than sixty
days before the date of the meeting to each stockholder entitled to vote at such
meeting. No action shall be taken at such meeting unless such notice is given,
or unless waiver of such notice is given by the holders of outstanding stock
having not less than the minimum number of votes necessary to take such action
at a meeting at which all shares entitled to vote thereon were voted. Prompt
notice of all actions taken in connection with such waiver of notice shall be
given to all stockholders not present or represented at such meeting.
3.7. Notice of Stockholder Business at a Meeting of the Stockholders.
The following provisions of this Section 3.7 shall apply to the conduct
of business at any meeting of the stockholders. (As used in this Section 3.7,
the term annual meeting shall include a special meeting in lieu of an annual
meeting.)
(a) At any meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the board of
directors or (iii) by any
2
<PAGE> 6
stockholder of the Corporation who is a stockholder of record at the time of
giving of the notice provided for in paragraph (b) of this Section 3.7, who
shall be entitled to vote at such meeting and who complies with the notice
procedures set forth in paragraph (b) of this Section 3.7.
(b) For business to be properly brought before any meeting of the
stockholders by a stockholder pursuant to clause (iii) of paragraph (a) of this
Section 3.7, the stockholder must give timely notice thereof in writing to the
secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation (i) in the case of an annual meeting (or a special meeting in lieu
of the annual meeting), not less than ninety (90) days prior to the date for
such annual meeting, regardless of any postponements, deferrals or adjournments
of that meeting to a later date; provided, however, that if the annual meeting
of stockholders or a special meeting in lieu thereof is to be held on a date
prior to the Specified Date, and if less than one hundred (100) days' notice or
prior public disclosure of the date of such annual or special meeting is given
or made, notice by the stockholder to be timely must be so delivered or mailed
and received not later than the close of business on the tenth (10th) day
following the earlier of the date on which notice of the date of such annual or
special meeting was mailed or the day on which public disclosure was made of the
date of such annual or special meeting; and (ii) in the case of a special
meeting (other than a special meeting in lieu of an annual meeting), not later
than the tenth (10th) day following the earlier of the day on which notice of
the date of the scheduled meeting was mailed or the day on which public
disclosure was made of the date of the scheduled meeting. A stockholder's notice
to the secretary shall set forth as to each matter the stockholder proposes to
bring before the meeting (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, the name and address of the
beneficial owner, if any, on whose behalf the proposal is made, and the name and
address of any other stockholders or beneficial owners known by such stockholder
to be supporting such proposal, (iii) the class and number of shares of the
Corporation which are owned beneficially and of record by such stockholder of
record, by the beneficial owner, if any, on whose behalf the proposal is made
and by any other stockholders or beneficial owners known by such stockholder to
be supporting such proposal, and (iv) any material interest of such stockholder
of record and/or of the beneficial owner, if any, on whose behalf the proposal
is made, in such proposed business and any material interest of any other
stockholders or beneficial owners known by such stockholder to be supporting
such proposal in such proposed business, to the extent known by such
stockholder.
(c) Notwithstanding anything in these by-laws to the contrary, no
business shall be conducted at a meeting except in accordance with the
procedures set forth in this Section 3.7. The person presiding at the meeting
shall, if the facts warrant, determine that business was not properly brought
before the meeting in accordance with the procedures prescribed by these
by-laws, and if the person presiding should so determine, he or she shall
3
<PAGE> 7
so declare at the meeting and any such business not properly brought before the
meeting shall not be transacted. Notwithstanding the foregoing provisions of
this Section 3.7, a stockholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended (or any
successor provision), and the rules and regulations thereunder with respect to
the matters set forth in this Section 3.7.
(d) This provision shall not prevent the consideration and
approval or disapproval at the meeting of reports of officers, directors and
committees of the board of directors, but, in connection with such reports, no
new business shall be acted upon at such meeting unless properly brought before
the meeting as herein provided.
3.8. Stockholder List. The officer who has charge of the stock record
books of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
3.9. Quorum of Stockholders. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise required by
law, the certificate of incorporation or these by-laws; provided, however, that
where a separate vote by a class or classes is required with respect to a
particular matter, a majority of the outstanding shares of such class or
classes, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter. Except as
otherwise provided by law, no stockholder present at a meeting may withhold
shares owned by such stockholder from the quorum count by declaring those shares
to be absent from the meeting.
3.10. Adjournment. Any meeting of stockholders may be adjourned from
time to time to any other time and place at which a meeting of stockholders may
be held under these by-laws, which time and place shall be announced at the
meeting, by a majority of votes cast upon the question, whether or not a quorum
is present. If a quorum shall be present or represented at any adjourned
meeting, any business may be transacted that might have been transacted at the
original meeting. If the adjournment is for more than thirty days or if a new
record date is fixed for the adjourned meeting after the adjournment, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
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3.11. Proxy Representation. Any stockholder may authorize another
person or persons to act for such stockholder by proxy in all matters in which
the stockholder is entitled to participate, whether by waiving notice of any
meeting, objecting to or voting or participating at a meeting, or expressing
consent or dissent without a meeting. Every proxy must be signed by the
stockholder or the stockholder's attorney-in-fact. No proxy shall be voted or
acted upon after three years from its date unless such proxy provides for a
longer period. Except as provided by law, a revocable proxy shall be deemed
revoked if the stockholder is present at the meeting for which the proxy was
given. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and, if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally. The
authorization of a proxy may but need not be limited to specified action;
provided, however, that if a proxy limits its authorization to a meeting or
meetings of stockholders, unless otherwise specifically provided such proxy
shall entitle the holder thereof to vote at any adjourned session but shall not
be valid after the final adjournment thereof.
3.12. Inspectors. If required to do so by Section 231 of the Delaware
General Corporation Law or other applicable law or regulation, the directors or
the person presiding at the meeting shall appoint one or more inspectors of
election and any substitute inspectors to act at the meeting or any adjournment
thereof. If not so required, the directors or the person presiding at the
meeting may but need not appoint such inspectors or substitute inspectors. In
either event, the inspectors and substitute inspectors shall have such duties
and responsibilities not inconsistent therewith as the directors or the person
presiding at the meeting shall deem appropriate.
3.13. Action by Vote. When a quorum is present at any meeting, whether
an original or adjourned session, a plurality of the votes properly cast for
election to any office shall elect to such office and a majority of the votes
properly cast upon any question other than an election to an office shall decide
such question, except when a larger vote or a separate class vote is required by
law, the certificate of incorporation or these by-laws. No ballot shall be
required for any election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election.
3.14. Action Without Meetings. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action that may be taken at any annual
or special meeting of stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing setting forth the
action so taken shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action without a
meeting by less than
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unanimous written consent shall be given to those stockholders who have not
consented in writing.
SECTION 4. DIRECTORS.
4.1. Number. The board shall consist of such number of directors as
shall be determined, from time to time and in accordance with this Section 4.1,
by a vote of a majority of directors or by the stockholders. Subject to the
provisions of the certificate of incorporation, the number of directors may be
increased or decreased at any time or from time to time by the stockholders or
by the directors by vote of a majority of directors then in office, except that
any such decrease by vote of the directors shall only be made to eliminate
vacancies existing by reason of the death, resignation or removal of one or more
directors. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 4.5 of these by-laws. Directors need
not be stockholders.
4.2. Tenure. Except as otherwise provided by law, the certificate of
incorporation or these by-laws, each director shall hold office until the next
annual meeting and until a successor is duly elected and qualified, or until
such director sooner dies, resigns, is removed or becomes disqualified.
4.3. Powers. The business of the Corporation shall be managed by or
under the direction of the board of directors, which shall have and may exercise
all the powers of the Corporation and do all such lawful acts and things as are
not by law, the certificate of incorporation or these by-laws directed or
required to be exercised or done by the stockholders.
4.4. Chairman and Vice-Chairman of the Board. The directors may elect a
chairman and vice-chairman of the board of directors. The chairman of the board,
or, in the absence of the chairman of the board, the vice-chairman of the board,
shall preside at all meetings of the stockholders and of the board of directors
at which he or she is present, except as otherwise voted by the board of
directors.
4.5. Vacancies. Subject to the provisions of the certificate of
incorporation, newly created directorships resulting from any increase in the
number of directors and other vacancies may be filled by vote of the
stockholders at a meeting called for the purpose, or by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. When one or more directors shall resign from the board of directors,
effective at a future date, a majority of the directors then in office,
including those who have resigned, shall have power to fill such vacancy or
vacancies, the vote or action by writing thereon to take effect when such
resignation or resignations shall become effective. The directors shall have and
may exercise all their powers notwithstanding the existence of one or more
vacancies in their number, subject to any requirements of law or of the
certificate of incorporation or of
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these by-laws as to the number of directors required for a quorum or for any
vote or other actions.
4.6. Nomination of Directors.
The following provisions of this Section 4.6 shall apply to the
nomination of persons for election by the stockholders to the board of
directors.
(a) Nominations of persons for election to the board of directors
of the Corporation may be made (i) by or at the direction of the board of
directors or (ii) by any stockholder of the Corporation who is a stockholder of
record at the time of giving of notice provided for in paragraph (b) of this
Section 4.6, who shall be entitled to vote for the election of directors at the
meeting and who complies with the notice procedures set forth in paragraph (b)
of this Section 4.6.
(b) Nominations by stockholders shall be made pursuant to timely
notice in writing to the secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation, not less than ninety (90) days
prior to the date for the annual meeting, regardless of any postponements,
deferrals or adjournments of that meeting to a later date; provided, however,
that if the annual meeting of stockholders or a special meeting in lieu thereof
is to be held on a date prior to the Specified Date, and if less than one
hundred (100) days' notice or prior public disclosure of the date of such annual
or special meeting is given or made, notice by the stockholder to be timely must
be so delivered or mailed and received not later than the close of business on
the tenth (10th) day following the earlier of the day on which notice of the
date of such annual or special meeting was mailed or the day on which public
disclosure was made of the date of such annual or special meeting. Such
stockholder's notice shall set forth (i) as to each person whom the stockholder
proposes to nominate for election or reelection as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended, or
pursuant to any other then existing statute, rule or regulation applicable
thereto (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (ii) as to the
stockholder giving the notice, the name and address of such stockholder, as they
appear on the books of the Corporation, and the class and number of shares of
the Corporation which are beneficially owned by such stockholder and also which
are owned of record by such stockholder; and (iii) as to the beneficial owner,
if any, on whose behalf the nomination is made, the name and address of such
person and the class and number of shares of the Corporation which are
beneficially owned by such person and also which are owned of record by such
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee as a director. At the request of the
board of directors, any person nominated by the board of directors for election
as a director shall furnish to the
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secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee.
(c) No person shall be eligible to serve as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 4.6. The person presiding at the meeting shall, if the facts warrant,
determine that a nomination was not made in accordance with the procedures
prescribed by these by-laws, and if the person presiding should so determine, he
or she shall so declare to the meeting and the defective nomination shall be
disregarded. Notwithstanding the foregoing provisions of this Section 4.6, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended (or any successor provision), and the rules and
regulations thereunder with respect to the matters set forth in this by-law.
4.7. Committees. The board of directors may, by vote of a majority of
the whole board, (a) designate, change the membership of or terminate the
existence of any committee or committees, each committee to consist of one or
more directors; (b) designate one or more directors as alternate members of any
such committee who may replace any absent or disqualified member at any meeting
of the committee; and (c) determine the extent to which each such committee
shall have and may exercise the powers and authority of the board of directors
in the management of the business and affairs of the Corporation, including the
power to authorize the seal of the Corporation to be affixed to all papers that
require it and the power and authority to declare dividends or to authorize the
issuance of stock; excepting, however, such powers that by law, the certificate
of incorporation or these by-laws they are prohibited from so delegating. In the
absence or disqualification of any member of such committee and such member's
alternate, if any, the member or members thereof present at any meeting and not
disqualified from voting, whether or not constituting a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member. Except as the board of
directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the board or such rules, its
business shall be conducted as nearly in the same manner as is provided by these
by-laws for the conduct of business by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors upon request.
4.8. Regular Meeting. Regular meetings of the board of directors may be
held without call or notice at such place within or without the State of
Delaware and at such times as the board may from time to time determine;
provided, however, that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of the stockholders.
4.9. Special Meetings. Special meetings of the board of directors may
be held at any time and at any place within or without the State of Delaware
designated in the notice of the
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meeting, when called by the chairman of the board of directors, the principal
executive officer, the chief financial officer or two or more directors. Notice
of a special meeting of the directors shall be given to each director by the
secretary or an assistant secretary or by the principal executive officer or by
any one of the directors calling the meeting.
4.10. Notice. It shall be reasonable and sufficient notice to a
director to send notice by mail at least forty-eight hours or by telegram,
telecopier or facsimile transmission at least twenty-four hours before the
meeting, addressed to the director at the director's usual or last known
business or residence address or to give notice to the director in person or by
telephone at least twenty-four hours before the meeting. Notice of a meeting
need not be given to any director if a written waiver of notice, executed by the
director before or after the meeting, is filed with the records of the meeting,
or to any director who attends the meeting without protesting prior thereto or
at its commencement the lack of notice to the director. Neither notice of a
meeting nor a waiver of a notice need specify the purposes of the meeting.
4.11. Quorum. Except as may be otherwise provided by law, the
certificate of incorporation or these by-laws, at any meeting of the directors a
majority of the directors then in office shall constitute a quorum; a quorum
shall not in any case be less than one-third of the total number of directors
constituting the whole board. Any meeting may be adjourned from time to time by
a majority of the votes cast upon the question, whether or not a quorum is
present, and the meeting may be held as adjourned without further notice.
4.12. Action by Vote. Except as may be otherwise provided by law, the
certificate of incorporation or these by-laws, when a quorum is present at any
meeting the vote of a majority of the directors present shall be the act of the
board of directors.
4.13. Action Without a Meeting. Unless otherwise restricted by law, the
certificate of incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting if all the members of the board or of such
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the records of the meetings of the board or of such
committee. Such consent shall be treated for all purposes as the act of the
board or of such committee, as the case may be.
4.14. Participation in Meetings by Conference Telephone. Unless
otherwise restricted by the certificate of incorporation or these by-laws,
members of the board of directors or of any committee thereof may participate in
a meeting of such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person at such meeting.
4.15. Compensation. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix from time to time the
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compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and the performance of
their responsibilities as directors and may be paid a fixed sum for attendance
at each meeting of the board of directors and/or a stated salary as director. No
such payment shall preclude any director from serving the Corporation or its
parent or subsidiary corporations in any other capacity and receiving
compensation therefor. The board of directors may also allow compensation for
members of special or standing committees for service on such committees.
4.16. Interested Directors and Officers.
(a) No contract or transaction between the Corporation and one
or more of its directors or officers, or between the Corporation and
any other corporation, partnership, association or other organization
in which one or more of the Corporation's directors or officers are
directors or officers or have a financial interest, shall be void or
voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the board or
committee thereof that authorizes the contract or transaction, or
solely because the vote of any such person is counted for such purpose,
if:
(1) the material facts as to the relationship or
interest of the director or officer and the contract or
transaction are disclosed or known to the board of directors
or the committee, and the board or committee in good faith
authorizes the contract or transaction by the affirmative vote
of a majority of the disinterested directors, even though the
disinterested directors do not constitute a quorum;
(2) the material facts as to the relationship or
interest of the director or officer and as to the contract or
transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the
stockholders; or
(3) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or
ratified, by the board of directors, a committee thereof, or
the stockholders.
(b) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of
directors or of a committee that authorizes the contract or
transaction.
4.17. Resignation or Removal of Directors. Unless otherwise restricted
by law or the certificate of incorporation, any director or the entire board of
directors may be removed, with or without cause, by the holders of a majority of
the stock issued and outstanding and entitled to vote at an election of
directors; provided, however, that the directors elected by a particular
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class of stockholders may be removed only by the vote of the holders of a
majority of the shares of such class. Any director may resign at any time by
delivering a resignation in writing to the principal executive officer or the
secretary or to a meeting of the board of directors. Such resignation shall be
effective upon receipt unless specified to be effective at some other time; and
without in either case the necessity of its being accepted unless the
resignation shall so state. No director resigning and (except where a right to
receive compensation shall be expressly provided in a duly authorized written
agreement with the Corporation) no director removed shall have any right to
receive compensation as such director for any period following the director's
resignation or removal, or any right to damages on account of such removal,
whether the director's compensation be by the month or by the year or otherwise;
unless in the case of a resignation, the directors, or in the case of removal,
the body acting on the removal, shall in their or its discretion provide for
compensation.
SECTION 5. NOTICES.
5.1. Form of Notice. Whenever, under the provisions of law, the
certificate of incorporation or these by-laws, notice is required to be given to
any director or stockholder, such notice may be given by mail, addressed to such
director or stockholder, at the director's or stockholder's address as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Unless written notice by mail is required
by law, written notice may also be given by telegram, cable, telecopy,
commercial delivery service, telex or similar means, addressed to such director
or stockholder at the address thereof as such address appears on the records of
the Corporation, in which case such notice shall be deemed to be given when
delivered into the control of the persons charged with effecting such
transmission, the transmission charge to be paid by the Corporation or the
person sending such notice and not by the addressee. Oral notice or other
in-hand delivery (in person or by telephone) shall be deemed given at the time
it is actually given.
5.2. Waiver of Notice. Whenever notice is required to be given under
the provisions of law, the certificate of incorporation or these by-laws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any meeting of the stockholders, directors
or members of a committee of the board of directors need be specified in any
written waiver of notice.
SECTION 6. OFFICERS AND AGENTS.
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6.1. Enumeration; Qualification. The officers of the Corporation shall
be a principal executive officer, a chief financial officer, a treasurer, a
secretary, an assistant secretary and such other officers, if any, as the board
of directors from time to time may in its discretion elect or appoint, including
without limitation one or more vice presidents, assistant treasurers and
assistant secretaries. Any officer may but need not be a director or
stockholder. Any two or more offices may be held by the same person. Any officer
may be required by the board of directors to secure the faithful performance of
the officer's duties to the Corporation by giving bond in such amount and with
sureties or otherwise as the board of directors may determine.
6.2. Powers. Subject to law, the certificate of incorporation and these
by-laws, each officer shall have, in addition to the duties and powers herein
set forth, such duties and powers as are commonly incident to the officer's
office and such additional duties and powers as the board of directors may from
time to time designate.
6.3. Election. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a principal executive officer, a
chief financial officer, a treasurer and a secretary. Other officers may be
appointed by the board of directors at such meeting, at any other meeting or by
written consent. At any time or from time to time, the directors may delegate to
any officer their power to elect or appoint any other officer or any agents.
6.4. Tenure. Each officer shall hold office until the first meeting of
the board of directors following the next annual meeting of the stockholders and
until a successor is duly elected and qualified unless a shorter period shall
have been specified in terms of the officer's election or appointment, or in
each case until the officer sooner dies, resigns, is removed or becomes
disqualified. Each agent of the Corporation shall retain authority at the
pleasure of the directors, the officer by whom the agent was appointed or the
officer who then holds the power to appoint agents.
6.5. President and Vice Presidents. The president shall have direct and
active charge of all business operations of the Corporation and shall have
general supervision of the entire business of the Corporation, subject to the
control of the board of directors. The chief executive officer or chief
financial officer shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the Corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the Corporation. Any vice presidents shall have such
duties and powers as shall be designated from time to time by the board of
directors or the principal executive officer.
6.6. Chief Financial Officer; Treasurer and Assistant Treasurers. The
chief financial officer shall be in charge of its funds and valuable papers, and
shall have such other duties and powers as may be assigned to the chief
financial officer from time to time by the board of directors or the principal
executive officer. The treasurer and any assistant treasurers shall
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have such duties and powers as shall be designated from time to time by the
board of directors, the principal executive officer or the chief financial
officer.
6.7. Secretary and Assistant Secretaries. The secretary shall record
all proceedings of the stockholders, the board of directors and committees of
the board of directors in a book or series of books to be kept therefor and
shall file therein all writings of, or related to, action by stockholder or
director consent. In the absence of the secretary from any meeting, an assistant
secretary, or if there is none or each assistant secretary is absent, a
temporary secretary chosen at the meeting, shall record the proceedings thereof.
Unless a transfer agent has been appointed, the secretary shall keep or cause to
be kept the stock and transfer records of the Corporation, which shall contain
the names and record addresses of all stockholders and the number of shares
registered in the name of each stockholder. The secretary shall have such other
duties and powers as may from time to time be designated by the board of
directors or the principal executive officer. Any assistant secretaries shall
have such duties and powers as shall be designated from time to time by the
board of directors, the principal executive officer or the secretary.
6.8. Resignation and Removal. Any officer may resign at any time by
delivering a resignation in writing to the principal executive officer, the
secretary or a meeting of the board of directors. Such resignation shall be
effective upon receipt unless specified to be effective at some other time, and
without in any case the necessity of its being accepted unless the resignation
shall so state. The board of directors may at any time remove any officer either
with or without cause. The board of directors may at any time terminate or
modify the authority of any agent. No officer resigning and (except where a
right to receive compensation shall be expressly provided in a duly authorized
written agreement with the Corporation) no officer removed shall have any right
to any compensation as such officer for any period following the officer's
resignation or removal, or any right to damages on account of such removal,
whether the officer's compensation be by the month or by the year or otherwise;
unless in the case of a resignation, the directors, or in the case of removal,
the body acting on the removal, shall in their or its discretion provide for
compensation.
6.9. Vacancies. If the office of the principal executive officer, the
chief financial officer, the treasurer or the secretary becomes vacant, the
directors may elect a successor by vote of a majority of the directors then in
office. If the office of any other officer becomes vacant, any person or body
empowered to elect or appoint that office may choose a successor. Each such
successor shall hold office for the unexpired term of the predecessor, and in
the case of the principal executive officer, the chief financial officer, the
treasurer and the secretary until a successor is chosen and qualified, or in
each case until such officer sooner dies, resigns, is removed or becomes
disqualified.
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SECTION 7. CAPITAL STOCK.
7.1. Stock Certificates. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by the stockholder, in such form as shall be
prescribed, in conformity to law, the certificate of incorporation and the
by-laws, from time to time by the board of directors. Such certificate shall be
signed by (a) the chairman or vice-chairman of the board or the principal
executive officer or any vice-president and (b) the treasurer, the secretary or
any assistant treasurer or secretary. Any of the signatures on the certificate
may be facsimiles. In case an officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed on such certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if the signatory were such officer, transfer agent, or registrar at the time
of its issue.
7.2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or such owner's legal representative, to advertise the same in
such manner as it shall require and/or to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
SECTION 8. TRANSFER OF SHARES OF STOCK.
8.1. Transfer on Books.
(a) Subject to any restrictions with respect to the transfer of
shares of stock, shares of stock may be transferred on the books of the
Corporation by the surrender to the Corporation or its transfer agent
of the certificate therefor properly endorsed or accompanied by a
written assignment and power of attorney properly executed, with
necessary transfer stamps affixed, and with such proof of the
authenticity of signature as the board of directors or the transfer
agent of the Corporation may reasonably require. Except as may be
otherwise required by law, the certificate of incorporation or these
by-laws, the Corporation shall be entitled to treat the record holder
of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to receive
notice and to vote or to give any consent with respect thereto and to
be held liable for such calls and assessments, if any, as may lawfully
be made thereon, regardless of any transfer, pledge or other
disposition of
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such stock until the shares have been properly transferred on the books
of the Corporation.
(b) It shall be the duty of each stockholder to notify the
Corporation of the stockholder's post office address.
SECTION 9. GENERAL PROVISIONS.
9.1. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty days nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action to which
such record date relates. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting. If no record date is fixed:
(a) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held;
(b) the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when
no prior action by the board of directors is necessary, shall be the
day on which the first written consent is expressed; and
(c) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board
of directors adopts the resolution relating to such purpose.
9.2. Dividends. Dividends upon the capital stock of the Corporation may
be declared by the board of directors at any regular or special meeting or by
written consent, pursuant to law. Dividends may be paid in cash, property or
shares of the capital stock of the Corporation, subject to the provisions of the
certificate of incorporation.
9.3. Payment of Dividends. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet
15
<PAGE> 19
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the directors shall
think conducive to the interest of the Corporation, and the directors may modify
or abolish any such reserve in the manner in which it was created.
9.4. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
9.5. Fiscal Year. The fiscal year of the Corporation shall begin on the
first of January in each year and shall end on the last day of December next
following, unless otherwise determined by the board of directors.
9.6. Seal. The board of directors may, by resolution, adopt a corporate
seal. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the word "Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. The seal may be altered from time to time by the board
of directors.
SECTION 10. INDEMNIFICATION.
This Corporation shall, to the maximum extent permitted from time to
time under the law of the State of Delaware, indemnify any person who is or was
a party or is threatened to be made a party to any threatened, pending or
completed action, suit, proceeding or claim, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was or has agreed to be a director or officer of this Corporation or while a
director or officer is or was serving at the request of this Corporation as a
director, officer, partner, trustee, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, against expenses (including attorneys' fees
and expenses), judgments, fines, penalties and amounts paid in settlement
incurred in connection with the investigation, preparation to defend or defense
of such action, suit, proceeding or claim; provided, however, that the foregoing
shall not require this Corporation to indemnify or advance expenses to any
person in connection with any action, suit, proceeding, claim or counterclaim
initiated by or on behalf of such person. Such indemnification shall not be
deemed exclusive of any other indemnification rights arising under any by-law,
agreement, vote of directors or stockholders or otherwise and shall inure to the
benefit of the heirs and legal representatives of such person. Any repeal or
modification of the foregoing provisions of this Section shall not adversely
affect any right or protection of a director or officer of this Corporation with
respect to any acts or omission of such director or officer occurring prior to
such repeal or modification. The right to indemnification conferred in this
Section shall include the right to be paid by the Corporation the expenses
(including attorneys' fees) incurred in defending any such proceeding in advance
of its final disposition;
16
<PAGE> 20
provided, however, that if the Delaware General Corporation Law requires, an
advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon receipt by the Corporation of an
undertaking, by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined that such indemnitee is not
entitled to be indemnified for such expenses under this Section or otherwise.
SECTION 11. AMENDMENTS.
These by-laws may be altered, amended or repealed or new by-laws may be
adopted by the stockholders or by the board of directors if such power is
conferred upon the board of directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors. If the power
to adopt, amend or repeal by-laws is conferred upon the board of directors by
the certificate of incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
17
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK [LOGO] COMMON STOCK
NUMBER SHARES
AMT
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 027397 10 8
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $0.01 PAR VALUE, OF
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers. Dated:
[SIGNATURE] [SIGNATURE]
SECRETARY PRESIDENT
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
CORPORATE
SEAL
MAR. 29, 1995
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional, or other special rights of each class of stock or series thereof and
the qualifications, limitations, or restrictions of such preferences and/or
rights. Such requests shall be made to the Corporation's Secretary at the
principal office of the Corporation.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ...........Custodian ............
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act..............................
in common (State)
UNIF TRF MIN ACT -- .......Custodian (until age .........)
(Cust)
....... under Uniform Transfers
(Minor)
to Minors Act........................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,___________________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated__________________________
X____________________________________
X____________________________________
THE SIGNATURE(S) TO THIS ASSIGNMENT
NOTICE: MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By _____________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4.2
DRAFT OF 4/16/96
Warrants to Purchase
200,000 shares of Common Stock
REPRESENTATIVE'S WARRANT
DATED: ____________ __, 1996
THIS CERTIFIES THAT H.J. Meyers & Co., Inc. (herein sometimes called
the "HOLDER" and the "REPRESENTATIVE") is entitled to purchase from THE AMERICAN
MATERIALS & TECHNOLOGIES CORPORATION, a Delaware corporation (the "COMPANY"), at
the price and during the period as hereinafter specified, up to 200,000 shares
of the Company's Common Stock, par value $0.01 per share (the "COMMON STOCK"),
at any time during the period from the first anniversary of the Effective Date
of the Registration Statement (as defined below) through ________ __, 2001 (60
months after the Effective Date) at $_____ per share.
This Representative's Warrant (the "REPRESENTATIVE'S WARRANT") is
issued pursuant to an Underwriting Agreement between the Company and H.J. Meyers
& Co., Inc., as Representative of the several Underwriters named in Schedule I
thereto in connection with a public offering, through the Underwriters, of
2,000,000 shares of Common Stock, (and up to 300,000 additional shares of Common
Stock covered by an over-allotment option granted by the Company to the
Underwriters) and for the aggregate consideration of $5.00 received by the
Company for this Representative's Warrant. Except as specifically otherwise
provided herein, the Common Stock issued pursuant to the Representative's
Warrant shall bear the
<PAGE> 2
same terms and conditions as described under the caption "DESCRIPTION OF
SECURITIES" in the Registration Statement on Form SB-2, File No. 333-3836
(the "REGISTRATION STATEMENT") except that (i) the Holder shall have
registration rights under the Securities Act of 1933, as amended (the "ACT"),
for the Representative's Warrant and the Common Stock issuable upon exercise of
the Representative's Warrant as more fully described in paragraph 6 herein.
1. EXERCISE RIGHTS. The rights represented by the Representative's
Warrant shall be exercised at the price, subject to adjustment in accordance
with Section 8 hereof (the "EXERCISE PRICE"), and during the periods as follows:
(a) PARITY FOR MERGERS OR CONSOLIDATIONS. During the period
from the Effective Date to ____________ __, 1997 (the "FIRST
ANNIVERSARY DATE"), inclusive, the Holder shall have no right to
purchase any Common Stock hereunder, except that in the event of any
merger, consolidation or sale of substantially all the capital stock or
assets of the Company prior to the First Anniversary Date, the Holder
shall have the right to exercise this Representative's Warrant at such
time and into the kind and amount of shares of stock and other
securities and property (including cash) receivable by a holder of the
number of shares of Common Stock into which this Representative's
Warrant might have been exercisable for immediately prior thereto.
(b) Between _________, __ 1997 and ________ __, 2001, five
years from the Effective Date (the "EXPIRATION DATE"), inclusive, the
Holder shall have the option to purchase Common Stock hereunder at a
price of $____ per share [120% OF THE INITIAL PUBIC OFFERING PRICE OF
THE COMMON STOCK].
(c) After the Expiration Date, the Holder shall have no right
to purchase any Common Stock hereunder.
2. MECHANICS OF EXERCISE.
(a) EXERCISE FOR CASH. The rights represented by the
Representative's Warrant may be exercised at any time within the
periods above specified, in whole or in part, by (i) the surrender of
the Representative's Warrant (with the purchase form at the end hereof
properly executed) at the principal executive office of the Company (or
such other office or agency of the Company as it may designate by
notice in writing to the Holder at the address of the Holder appearing
on the books of the Company); (ii) payment to the Company of the
exercise price then in effect for the number of shares of Common Stock
specified in the above-mentioned purchase form together with applicable
stock transfer taxes, if any; and (iii) delivery to the Company of a
duly executed agreement signed by the person(s) designated in the
<PAGE> 3
purchase form to the effect that such person(s) agree(s) to be bound by
the provisions of paragraph 6 and subparagraphs (b), (c) and (d) of
paragraph 7 hereof. The Representative's Warrant shall be deemed to
have been exercised, in whole or in part to the extent specified,
immediately prior to the close of business on the date the
Representative's Warrant is surrendered and payment is made in
accordance with the foregoing provisions of this paragraph 2, and the
person or persons in whose name or names the certificates for shares of
Common Stock shall be issuable upon such exercise shall become the
holder or holders of record of such Common Stock at that time and date.
The Common Stock and the certificates for the Common Stock so purchased
shall be delivered to the Holder within a reasonable time, not
exceeding ten (10) days after the rights represented by this
Representative's Warrant shall have been so exercised.
(b) CASHLESS EXERCISE. Notwithstanding anything to the
contrary contained in subparagraph (a) of paragraph 2, the Holder may
elect to exercise this Representative's Warrant in whole or in part by
receiving shares of Common Stock equal to the value (as determined
below) of this Representative's Warrant at the principal office of the
Company together with notice of such election, in which event the
Company shall issue to the Holder a number of shares of Common Stock
computed using the following formula:
X = Y(A-B)
----------
A
Where: X = the number of shares of Common Stock
------ to be issued to the Holder;
Y = the number of shares of Common Stock
issuable under this Warrant;
A = the current fair-market value of one
share of Common Stock (calculated as
described below); and
B = the Per Share Exercise Price.
As used herein, the current fair-market value of one
share of Common Stock shall mean the greater of (x) the average of the
closing prices of the Company's Common Stock sold on all securities
exchanges on which the Common Stock may at the time be listed and the
NASDAQ National Market, or, if there have been no sales on any such
exchange or the NASDAQ National Market on such day, the average of the
highest bid and lowest asked price on such day on The Nasdaq Stock
Market or otherwise in the domestic over-the-counter market as reported
by the National Quotation Bureau, Incorporated, or any similar
successor organization (the
-3-
<PAGE> 4
"Market Price"), on the trading day immediately preceding the date
notice of exercise of this Representative's Warrant is given or (y) the
average of the Market Price per share of Common Stock for the five
trading days immediately preceding the date notice of exercise of this
Representative's Warrant is given. If on any date for which the Market
Price per share of Common Stock is to be determined, the Common Stock
is not listed on any securities exchange or quoted on the NASDAQ
National Market or on The Nasdaq Stock Market or otherwise in the
over-the-counter market, the Market Price per share of Common Stock
shall be the highest price per share which the Company could then
obtain from a willing buyer (not a current employee or director) for
shares of Common Stock sold by the Company, from authorized but
unissued shares, as determined in good faith by the Board of Directors
of the Company, unless prior to such date the Company has become
subject to a merger, acquisition or other consolidation pursuant to
which the Company is not the surviving party, in which case the Market
Price per share of Common Stock shall be deemed to be the value
received by the holders of the Company's Common Stock for each share
thereof pursuant to the Company's acquisition.
3. TRANSFER OF WARRANT. The Representative's Warrant shall not be
transferred, sold, assigned, or hypothecated for a period of twelve (12) months
commencing on the Effective Date except that it may be transferred to successors
of the Holder, and may be assigned in whole or in part to any person who is an
officer of the Holder or to any member of the selling group and/or the officers
or partners thereof during such period. Any such assignment shall be effected by
the Holder by (i) executing the form of assignment at the end thereof and (ii)
surrendering the Representative's Warrant for cancellation at the office or
agency of the Company referred to in paragraph 2 hereof, accompanied by a
certificate (signed by an officer of the Holder if the Holder is a corporation),
stating that each transferee is a permitted transferee under this paragraph 3;
whereupon the Company shall issue, in the name or names specified by the Holder
(including the Holder) a new Representative's Warrant or Warrants of like tenor
and representing in the aggregate rights to purchase the same number of shares
of Common Stock as are purchasable hereunder. The Representative may designate
that this Representative's Warrant be issued in varying amounts directly to its
officers and other assigns; PROVIDED, HOWEVER, that such designation will only
be made by the Representative if it determines and substantiates to the Company
that such issuance will not violate the interpretation of the Board of Governors
of the National Association of Securities Dealers, Inc. ("NASD") relating to the
review of corporate financing arrangements.
4. DUE AUTHORIZATION OF STOCK UPON ISSUANCE; RESERVATION OF SHARES. The
Company covenants and agrees that all shares of Common Stock which may be issued
hereunder will, upon issuance, be duly and validly issued, fully paid and
nonassessable, and no personal liability will attach to the holder thereof. The
Company further covenants and agrees that, during the periods within which the
Representative's Warrant may be exercised, the Company will at all times have
authorized and reserved a sufficient number of shares of its Common Stock to
provide for the exercise of the Representative's Warrant.
-4-
<PAGE> 5
5. NO VOTING RIGHTS. The Representative's Warrant shall not entitle the
Holder to any voting rights or other rights as a shareholder of the Company
until it is actually exercised.
6. REGISTRATION RIGHTS.
(a) NOTICE OF REGISTRATION. Commencing twelve (12) months from
the Effective Date, the Company shall advise the Holder or its
transferee, whether the Holder holds the Representative's Warrant or
has exercised the Representative's Warrant and holds Common Stock, by
written notice at least four weeks prior to the filing of any
post-effective amendment to the Registration Statement or of any new
registration statement or post-effective amendment thereto under the
Act covering any securities of the Company, or for the account of
others, except for any registration statement filed on Form S-4 or S-8,
or the filing of a Notification on Form 1-A under the Act for a public
offering of securities and will, for a period of five (5) years from
the Effective Date, upon the request of the Holder, include in any such
post-effective amendment or new registration statement such information
as may be required to permit a public offering of the Representative's
Warrant, and all or any of the Common Stock issuable upon exercise of
the Representative's Warrant (the "REGISTRABLE SECURITIES"). The
Company shall supply prospectuses and such other documents as the
Holder may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities, use its best efforts
to register and qualify any of the Registrable Securities for sale in
such states as such Holder designates and do any and all other acts and
things which may be necessary or desirable to enable such Holder to
consummate the public sale or other disposition of the Registrable
Securities, all at no expense to the Holder or the Representative, and
furnish indemnification in the manner provided in paragraph 7 hereof.
The Holder shall furnish information and indemnification as set forth
in paragraph 7.
(b) DEMAND REGISTRATION RIGHTS. On two (2) separate occasions,
if any 50% Holder (as defined below) shall give notice to the Company
at any time to the effect that such Holder desires to register under
the Act any or all of the Registrable Securities under such
circumstances that a public distribution (within the meaning of the
Act) of any such securities will be involved, then the Company will
promptly, but no later than four weeks after receipt of such notice,
file a post-effective amendment to the current Registration Statement
or a new registration statement pursuant to the Act, so that such
designated Registrable Securities may be publicly sold under the Act as
promptly as practicable thereafter and the Company will use its best
efforts to cause such registration to become and remain effective
(including the taking of such steps as are necessary to obtain the
removal of any stop order) within ninety (90) days after the receipt of
such notice, provided, that such Holder shall furnish the Company with
appropriate information in connection therewith as the Company may
reasonably request in writing. The 50% Holder may, at its option,
-5-
<PAGE> 6
request the filing of a post-effective amendment to the current
Registration Statement or a new registration statement under the Act on
two (2) occasions during the four-year period beginning one (1) year
from the Effective Date. The 50% Holder may, at its option, request the
registration of the Representative's Warrant and/or any of the Common
Stock underlying the Representative's Warrant in a registration
statement made by the Company as contemplated by Section 6(a) or in
connection with a request made pursuant to this Section 6(b) prior to
acquisition of the Common Stock issuable upon exercise of the
Representative's Warrant. The 50% Holder may, at its option, request
such post-effective amendment or new registration statement during the
described period with respect to the Representative's Warrant and/or
the Common Stock issuable upon the exercise of the Representative's
Warrant, and such registration rights may be exercised by the 50%
Holder prior to or subsequent to the exercise of the Representative's
Warrant. Within ten (10) days after receiving any such notice pursuant
to this subsection (b) of paragraph 6, the Company shall give notice to
any other Holders of the Representative's Warrant, advising that the
Company is proceeding with such post-effective amendment or
registration statement and offering to include therein the Registrable
Securities underlying that part of the Representative's Warrant held by
the other Holders, provided that they shall furnish the Company with
such appropriate information (relating to the intentions of such
Holders) in connection therewith as the Company shall reasonably
request in writing. All costs and expenses of the first post-effective
amendment or new registration statement shall be borne by the Company,
except that the Holder(s) shall bear the fees of their own counsel and
any underwriting discounts or commissions applicable to any of the
securities sold by them. All costs and expenses of the second such
post-effective amendment or new registration statement shall be borne
by the Holder(s). The Company will maintain such registration statement
or post-effective amendment current under the Act for a period of at
least six months (and for up to an additional three months if requested
by the Holder(s)) from the effective date thereof. The Company shall
supply prospectuses, and such other documents as the Holder(s) may
request in order to facilitate the public sale or other disposition of
the Registrable Securities, use its best efforts to register and
qualify any of the Registrable Securities for sale in such states as
such Holder(s) designate and furnish indemnification in the manner
provided in paragraph 7 hereof.
(c) DEFINITION OF 50% HOLDER. The term "50% HOLDER" as used in
this paragraph 6 shall mean the Holder(s) of at least 50% of the
Representative's Warrant and/or the Common Stock underlying the
Representative's Warrant and shall include any owner or combination of
owners of such securities, which ownership shall be calculated by
determining the number of shares of Common Stock held by such owner or
owners as well as the number of shares of Common Stock then issuable
upon exercise of the Representative's Warrant, all calculated on an "as
if exercised" basis.
-6-
<PAGE> 7
7. INDEMNIFICATION.
(a) INDEMNIFICATION OF DISTRIBUTING HOLDER BY COMPANY.
Whenever pursuant to paragraph 6 a registration statement relating to
the Representative's Warrant or any Common Stock issued or issuable
upon the exercise of any Warrant is filed under the Act, amended or
supplemented, the Company will indemnify and hold harmless each Holder
of the securities covered by such registration statement, amendment or
supplement (such Holder being hereinafter called the "DISTRIBUTING
HOLDER"), and each person, if any, who controls (within the meaning of
the Act) the Distributing Holder, and each underwriter (within the
meaning of the Act) of such securities and each person, if any, who
controls (within the meaning of the Act) any such underwriter, against
any losses, claims, damages or liabilities, joint or several, to which
the Distributing Holder, any such controlling person or any such
underwriter may become subject, under the Act or otherwise, insofar as
such losses, claims, damages, or liabilities, or actions in respect
thereof, arise out of or are based upon any untrue statement or alleged
untrue statement or any material fact contained in any such
registration statement or any preliminary prospectus or final
prospectus constituting a part thereof or any amendment or supplement
thereto or any "blue sky" application or document (the "Blue Sky
Application") executed by the Company and filed in any state or other
jurisdiction in order to qualify the Warrant or any Common Stock issued
or issuable upon exercise of the Warrant, or arise out of or are based
upon the omission or the alleged omission to the state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Company shall reimburse the
Distributing Holder or such controlling person or underwriter in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in
said registration statement, said preliminary prospectus, said
financial prospectus, said amendment or supplement or said Blue Sky
Application in reliance upon and in conformity with written information
furnished by such Distributing Holder or any other Distributing Holder
for use in the preparation thereof.
(b) INDEMNIFICATION OF COMPANY BY DISTRIBUTING HOLDER. The
Distributing Holder will indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, and
each person, if any, who controls the Company (within the meaning of
the Act) against any losses, claims, damages or liabilities, joint or
several, to which the Company or any such director, officer or
controlling person may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities, or actions in
respect thereof, arise out of or are based upon (i) any untrue
statement of any material fact contained in said registration
statement, said
-7-
<PAGE> 8
preliminary prospectus, said final prospectus, or said amendment or
supplement, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such loss, claim,
damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in
said registration statement, said preliminary prospectus, said
financial prospectus or said amendment or supplement in reliance upon
and in conformity with written information furnished by such
Distributing Holder for use in the preparation thereof or (ii) the
Distributing Holder's failure to deliver a prospectus as required under
applicable federal or state securities laws. The Distributing Holders
shall reimburse the Company or any such director, officer or
controlling person for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss,
claim, damage, liability or action.
(c) NOTICE OF CLAIMS. Promptly after receipt by an indemnified
party under this paragraph 7 of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is
to be made against any indemnifying party, give the indemnifying party
notice of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise then under this paragraph 7.
(d) PARTICIPATION IN DEFENSE OF CLAIMS. In case any such
action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate in and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under
this paragraph 7 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation.
8. ADJUSTMENTS TO EXERCISE PRICE. The Exercise Price in effect at any
time and the number of shares purchasable upon the exercise of the
Representative's Warrant shall be subject to adjustment from time to time upon
the happening of certain events as follows:
(a) STOCK DIVIDENDS, COMBINATIONS OR RECLASSIFICATIONS. In
case the Company shall (i) declare a dividend or make a distribution on
its outstanding shares of Common Stock in shares of Common Stock, (ii)
subdivide or reclassify its outstanding shares of Common Stock into a
greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such
dividend or
-8-
<PAGE> 9
distribution or of the effective date of such subdivision, combination
or reclassification shall be proportionately adjusted so that the
Holder of this Representative's Warrant exercised after such date shall
be entitled to receive the aggregate number and kind of security which,
if this Representative's Warrant had been exercised by such Holder
immediately prior to such date, he would have owned upon such exercise
and been entitled to receive upon such dividend, distribution,
subdivision, combination or reclassification. For example, if the
Company declares a 2-for-1 stock distribution, the adjusted Exercise
Price immediately after such event would be reduced by 50% per share of
Common Stock and the adjusted number of shares of Common Stock then
issuable upon exercise of the Representative's Warrant purchasable upon
exercise of this Representative's Warrant would be doubled. Such
adjustment shall be made successively whenever any event listed above
shall occur.
(b) ISSUANCE OF RIGHTS TO PURCHASE COMMON STOCK. In case the
Company shall fix a record date for the issuance of rights or warrants
to all holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock (or securities convertible into Common
Stock) at a price (the "SUBSCRIPTION PRICE") (or having a conversion
price per share) less than the current market price of the Common Stock
(as defined in Subsection (h) below) on the record date mentioned
below, or less than the Exercise Price on a per share basis (the "PER
SHARE EXERCISE PRICE") on such record date, the Exercise Price shall be
adjusted so that the same shall equal the lower of (i) the price
determined by multiplying the number of shares of Common Stock by the
Per Share Exercise Price in effect immediately prior to the date of
such issuance, multiplied by a fraction, the numerator of which shall
be the sum of the number of shares of Common Stock outstanding on the
record date mentioned below and the number of additional shares of
Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of
the convertible securities so offered) would purchase at such current
market price per share of the Common Stock, and the denominator of
which shall be the sum of the number of shares of Common Stock
outstanding on such record date and the number of additional shares of
Common Stock offered for subscription or purchase (or into which the
convertible securities so offered are convertible) or (ii) in the event
the Subscription Price is equal to or higher than the current market
price but is less than the Per Share Exercise Price, the price
determined by multiplying the number of shares of Common Stock then
issuable upon exercise of the Representative's Warrant by the Per Share
Exercise Price in effect immediately prior to the date of issuance by a
fraction, the numerator of which shall be the sum of the number of
shares outstanding on the record date mentioned below and the number of
additional shares of Common Stock which the aggregate offering price of
the total number of shares of Common Stock so offered (or the aggregate
conversion price of the convertible securities so offered) would
purchase at the Per Share Exercise Price in effect immediately prior to
the date of
-9-
<PAGE> 10
such issuance, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding on the record date
mentioned below and the number of additional shares of Common Stock
offered for subscription or purchase (or into which the convertible
securities so offered are convertible). Such adjustment shall be made
successively whenever such rights or warrants are issued and shall
become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or
warrants; and to the extent that shares of Common Stock are not
delivered (or securities convertible into Common Stock are not
delivered) after the expiration of such rights or warrants the Exercise
Price shall be readjusted to the Exercise Price which would then be in
effect had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into Common Stock)
actually delivered.
(c) DISTRIBUTIONS OF OTHER ASSETS TO HOLDERS OF COMMON STOCK.
In case the Company shall hereafter distribute to all holders of its
Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and dividends or distributions referred to
in Subsection (a) above) or subscription rights or warrants (excluding
those referred to in Subsection (b) above), then in each such case the
Exercise Price in effect thereafter shall be determined by multiplying
the number of shares of Common Stock then issuable upon exercise of the
Representative's Warrant by the Per Share Exercise Price in effect
immediately prior thereto, multiplied by a fraction, the numerator of
which shall be the total number of shares of Common Stock then
outstanding multiplied by the current market price per share of Common
Stock (as defined in Subsection (h) below), less the fair market value
(as determined by the Company's Board of Directors) of said assets, or
evidences of indebtedness so distributed or of such rights or warrants,
and the denominator of which shall be the total number of shares of
Common Stock outstanding multiplied by such current market price per
share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of shareholders entitled to receive
such distribution.
(d) ISSUANCES OF COMMON STOCK BELOW MARKET PRICE. In case the
Company shall issue shares of its Common stock excluding shares issued
(i) in any of the transactions described in Subsection (a), (b), or (c)
above, (ii) upon exercise of options granted to the Company's employees
under a plan or plans adopted by the Company's Board of Directors and
approved by its shareholders, if such shares would otherwise be
included in this Subsection (d), (iii) upon exercise of options and
warrants outstanding at ____________, 1996, or of this Representative's
Warrant or (iv) to shareholders of any corporation which merges into
the Company in proportion to their stock holdings of such corporation
immediately prior to such merger, upon such merger, or in a bona fide
public offering pursuant to a firm commitment underwriting, but only if
no adjustment is required pursuant to any other specific
-10-
<PAGE> 11
subsection of this Section 8 (without regard to Subsection (i) below),
with respect to the transaction giving rise to such rights or for a
consideration per share (the "OFFERING PRICE") [determined as provided
in Subsection (g) below] less than the current market price per share
of Common Stock [as defined in Subsection (h) below] on the date the
Company fixes the offering price of such additional shares, or the Per
Share Exercise Price, the Exercise Price shall be adjusted immediately
thereafter so that it shall equal the lower of (i) the price determined
by multiplying the number of shares of Common Stock then issuable upon
exercise of the Representative's Warrant by the Per Share Exercise
Price in effect immediately prior thereto, multiplied by a fraction,
the numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares and the number of shares of Common Stock which the
aggregate consideration received [determined as provided in Subsection
(g) below] for the issuance of such additional shares would purchase at
such current market price per share, and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after
the issuance of such additional shares or (ii) in the event that
Offering price is equal to or higher than the current market price per
share but less than the Per Share Exercise Price, the price determined
by multiplying the number of shares of Common Stock then issuable upon
exercise of the Representative's Warrant by the Per Share Exercise
Price in effect immediately prior to the date or issuance multiplied by
a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares and the number of shares of Common Stock which the
aggregate consideration received (determined as provided in subsection
(g) below) for the issuance of such additional shares would purchase at
the per Share Exercise Price in effect immediately prior to the date of
such issuance, and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after the issuance of
such additional shares. Such adjustment shall be made successively
whenever such an issuance is made.
(e) ISSUANCES OF CONVERTIBLE SECURITIES BELOW MARKET PRICE. In
case the Company shall issue any securities convertible into or
exchangeable for its Common Stock [excluding securities issued in
transactions described in Subsections (b) or (c) above] for an initial
consideration per share of Common Stock (the "CONVERSION PRICE")
deliverable upon conversion or exchange of such securities [determined
as provided in Subsection (g) below] less than the current market price
per share of Common Stock [as defined in Subsection (h) below] in
effect immediately prior to the issuance of such securities, or the Per
Share Exercise Price, the Exercise Price shall be adjusted immediately
thereafter so that it shall equal the lower of (i) the price determined
by multiplying the number of shares of Common Stock then issuable upon
exercise of the Representative's Warrant by the Per Share Exercise
Price in effect immediately prior thereto multiplied, by a fraction,
the numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately
-11-
<PAGE> 12
prior to the issuance of such securities and the number of shares of
Common Stock which the aggregate consideration received [determined as
provided in Subsection (g) below] for such securities would purchase at
such current market price per share, and the denominator of which shall
be the sum of the number of shares of Common Stock outstanding
immediately prior to such issuance and the maximum number of shares of
Common Stock of the Company deliverable upon conversion of or in
exchange for such securities at the initial conversion or exchange
price or rate or (ii) in the event the Conversion Price is equal to or
higher than the current market price per share but less than the Per
Share Exercise Price in effect immediately prior to the date of
issuance by a fraction, the numerator of which shall be the sum of the
number of shares of Common Stock outstanding prior to the issuance of
such securities and the number of shares of Common Stock which the
aggregate consideration received (determined as provided in subsection
(g) below) for such securities would purchase at the Per Share Exercise
Price in effect immediately prior to the date of such issuance, the
denominator of which shall be the sum of the number of shares of Common
Stock outstanding immediately prior to the issuance of such securities
and the maximum number of shares of Common Stock of the Company
deliverable upon conversion of or in exchange for such securities at
the initial conversion or exchange price or rate. Such adjustment shall
be made successively whenever such an issuance is made.
(f) ADJUSTMENTS TO NUMBER OF SHARES PURCHASABLE UPON EXERCISE.
Whenever the Exercise Price payable upon exercise of the
Representative's Warrant is adjusted pursuant to Subsections (a), (b),
(c), (d) or (e) above, the number of shares of Common Stock purchasable
upon exercise of this Representative's Warrant shall simultaneously be
adjusted by multiplying the number of shares of Common Stock issuable
upon exercise of this Representative's Warrant by the Exercise Price in
effect on the date hereof and dividing the product so obtained by the
Exercise Price, as adjusted.
(g) DETERMINATION OF CONSIDERATION. For purposes of any
computation respecting consideration received pursuant to Subsections
(d) and (e) above, the following shall apply:
(A) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the Company for
any underwriting of the shares or otherwise in connection therewith;
(B) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market
value thereof as determined in good faith by
-12-
<PAGE> 13
the Board of Directors of the Company (irrespective of the
accounting treatment thereof), whose determination shall be conclusive;
and
(C) in the case of the issuance of securities
convertible into or exchangeable for shares of Common Stock the
aggregate consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be
received by the Company upon the conversion or exchange thereof [the
consideration in each case to be determined in the same manner as
provided in clauses (A) and (B) of this Subsection (g)].
(h) DETERMINATION OF MARKET PRICE. For the purpose of any
computation under Subsections (b), (c), (d) or (e) above, the current
market price per share of Common Stock at any date shall be deemed to
be the average of the daily closing prices of the Common Stock for
thirty (30) consecutive business days before such date. The closing
price for each day shall be the last sale price regular way or, in case
no such reported sale takes place on such day, the average of the last
reported bid and asked prices regular way, in either case on the
principal national securities exchange on which the Common Stock is
admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the average of the highest reported bid and lowest
reported asked prices as reported by NASDAQ, or other similar
organization if NASDAQ is no longer reporting such information, or if
not so available, the fair market price as determined by the Board of
Directors.
(i) CALCULATIONS OF ADJUSTMENTS. No adjustment in the Exercise
Price shall be required unless such adjustment would require an
increase or decrease of at least five cents ($0.05) in such price;
provided, however, that any adjustments which by reason of this
Subsection (i) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made
hereunder. All calculations under this Section 8 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case
may be. Anything in this Section 8 to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such
changes in the Exercise Price, in addition to those required by this
Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of
Common Stock, or any subdivision, reclassification or combination of
Common Stock, hereafter made by the Company shall not result in any
Federal income tax liability to the holders of Common Stock.
(j) NOTICE OF ADJUSTMENTS. Whenever the Exercise Price is
adjusted, as herein provided, the Company shall promptly cause a notice
setting forth the adjusted Exercise Price and adjusted number of shares
of Common Stock issuable upon exercise of the Representative's Warrant
to be mailed to the Holder, at its address set forth herein, and shall
cause a certified copy thereof to be mailed to the
-13-
<PAGE> 14
Company's transfer agent, if any. The Company may retain a firm of
independent certified public accountants selected by the Board of
Directors (who may be the regular accountants employed by the Company)
to make any computation required by this Section 8, and a certificate
signed by such firm shall be conclusive evidence of the correctness of
such adjustment.
(k) PROTECTION AGAINST DILUTION. In the event that at any
time, as a result of an adjustment made pursuant to the provisions of
this Section 8, the Holder of the Representative's Warrant thereafter
shall become entitled to receive any shares of the Company, other than
Common Stock, thereafter the number of such other shares so receivable
upon exercise of the Representative's Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common
Stock contained in Subsections (a) to (i), inclusive, above.
9. GOVERNING LAW. This Agreement shall be governed by and in accordance
with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Representative's
Warrant to be signed by its duly authorized officers under its corporate seal,
and this Representative's Warrant to be dated ___________________, 1996.
THE AMERICAN MATERIALS & TECHNOLOGIES
CORPORATION
[CORPORATE SEAL] By:
------------------------------------
Attest:
Title:
- ----------------------------- ----------------------------------
-14-
<PAGE> 15
PURCHASE FORM
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
The undersigned, the holder of the foregoing Representative's Warrant,
hereby irrevocably elects to exercise the purchase rights represented by such
Representative's Warrant for, and to purchase thereunder, __________ Shares of
Common Stock of THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION and herewith
makes payment of $__________ therefor, and request that the certificates of
shares of Common Stock be issued in the name(s) of, and delivered to
_____________________________, whose address(es) is(are):
Dated:
----------------------- ----------------------------------
Address
----------------------------------
-15-
<PAGE> 16
TRANSFER FORM
(TO BE SIGNED ONLY UPON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns and transfers
unto _______________________________ the right to purchase shares of Common
Stock represented by the foregoing Representative's Warrant to the extent of
___________________ shares of Common Stock, and appoints ______________________
attorney to transfer such rights on the books of __________________________,
with full power of substitution.
Dated: By:
----------------------- -----------------------------
---------------------------------
---------------------------------
Address
In the presence of:
- --------------------------------
-16-
<PAGE> 1
EXHIBIT 4.3
DRAFT OF 4/16/96
LOCK-UP AGREEMENT
The American Materials & Technologies Corporation
3915 Rodeo Road
Los Angeles, California 90016
H.J. Meyers & Co., Inc.
1895 Mount Hope Avenue
Rochester, New York 14620
Ladies and Gentlemen:
The undersigned, a beneficial owner of shares of the common stock, par
value $0.01 per share (the "Common Stock"), of The American Materials &
Technologies Corporation (the "Company"), and/or warrants, options or rights to
purchase, or securities or debt convertible into, Common Stock, understands that
the Company has filed with the Securities and Exchange Commission a registration
statement on Form SB-2 (No. 333-3836) for the registration of shares of
Common Stock of the Company (the "Registration Statement") in connection with a
proposed public offering of such securities (the "Offering"). The undersigned
further understands that upon the effectiveness of the Registration Statement,
the Company and H.J. Meyers & Co., Inc. (the "Representative"), as
representative of the several underwriters (including H.J. Meyers & Co.) intend
to enter into an underwriting agreement (the "Underwriting Agreement") relating
to the Offering.
In order to induce the Representative to proceed with the Offering, the
undersigned agrees, for the benefit of the Company and the Underwriter, that
should the Offering become effective, the undersigned will not, without the
prior written consent of the Underwriter, sell, assign, donate, bequeath,
pledge, hypothecate or otherwise dispose of, directly or indirectly, any shares
of Common Stock of the Company owned by the undersigned or subsequently acquired
through the exercise of any options, warrants or rights, split or other
distribution of stock, or grant of options, rights or warrants with respect to
any such shares of Common Stock, during the twenty-four (24) month period
commencing on the closing date of the Offering. Furthermore, the undersigned
hereby permits all certificates evidencing the shares of Common Stock and/or
options, warrants,
<PAGE> 2
The American Materials & Technologies Corporation
H.J. Meyers & Co., Inc.
Page 2
rights and convertible securities or debt owned by the undersigned on the date
hereof to be endorsed with the appropriate restrictive legends, and consents to
the placement of appropriate stop transfer orders with the transfer agent of the
Company.
Very truly yours,
Dated:
--------------------------- ------------------------------------
Printed Name
------------------------------------
Signature
------------------------------------
If the signatory is an entity, print
name and title of individual signing.
- -------------------------------
Please indicate number of
shares of Common Stock owned.
Please list any options, warrants,
rights or convertible securities
owned and the number of shares
of Common Stock issuable upon the
exercise or conversion of such
securities:
- -------------------------------
Options
- -------------------------------
Warrants
- -------------------------------
Rights
- -------------------------------
Convertible Securities
<PAGE> 1
EXHIBIT 5.1
[Date]
The American Materials & Technologies Corporation
5915 Rodeo Road
Los Angeles, California 90016
Gentlemen:
We are familiar with the Registration Statement on Form SB-2,
Registration No. 333-3836, as amended by Amendment No. 1 thereto (as amended,
the "Registration Statement"), filed by The American Materials & Technologies
Corporation, a Delaware corporation (the "Company"), with the Securities and
Exchange Commission under the Securities Act of 1933, as amended. The
Registration Statement relates to the proposed public offering by the Company
of 2,500,000 shares (the "Shares") of its Common Stock, $0.01 par value per
share ("Common Stock"), to be issued by the Company. (The foregoing number of
Shares assumes exercise in full of the Underwriters' over-allotment option and
the Representative's Warrant, as each is described in the Registration
Statement.)
We are familiar with the Company's Restated Certificate of
Incorporation and all amendments thereto, its Amended and Restated By-laws and
all amendments thereto, records of meetings and consents of its Board of
Directors and of its stockholders provided to us by the Company, and its stock
records. In addition, we have examined and relied on the originals or copies
certified or otherwise identified to our satisfaction of all such corporate
records of the Company and such other instruments and other certificates of
public officials, officers and representatives of the Company and such other
persons, and we have made such investigations of law, as we have deemed
appropriate as a basis for the opinions expressed below.
Based on the foregoing, it is our opinion that the Company has
corporate power adequate for the issuance of the Shares in accordance with the
Registration Statement. The Company has taken all necessary corporate action
required to authorize the issuance and sale of the Shares. When certificates
for the Shares have been duly executed and countersigned, and delivered against
due receipt of consideration therefor as described in the Registration
Statement, the Shares will be legally issued, fully paid and non-assessable.
<PAGE> 2
The American Materials & Technologies Corporation
[Date]
Page 2
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the prospectus forming part of the Registration Statement.
Very truly yours,
FOLEY, HOAG & ELIOT
By: _______________________________
A Partner
<PAGE> 1
EXHIBIT 10.1
AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of March 25,
1995 by and among XXsys Technologies, Inc., a California corporation ("XXsys"),
Composit Retrofit Corporation, a California corporation ("CRC") , Gloria Ma
("Ma"), Paul W. Pendorf ("Pendorf"), William A. Timmerman ("Timmerman") and
Steven Georgiev ("Georgiev") (collectively, XXsys, CRC and Ma shall hereinafter
be referenced as the XXsys Parties") (collectively, Pendorf and Timmerman shall
hereinafter be referenced as the "Exiting Parties").
RECITALS:
WHEREAS, Ma is chairman of the Board Directors of XXsys, as well as
President of CRC, a wholly owned subsidiary of XXsys;
WHEREAS, Pendorf is President and Chief Executive Officer of XXsys and
a member of XXsys' Board of Directors;
WHEREAS, Timmerman is Chief Financial Officer and Secretary of XXsys;.
WHEREAS, Georgiev is a member of XXsys' Board of Directors and Chief
Executive Officer of Palomar Medical Technologies, Inc. ("Palomar");
WHEREAS, potentially irreconcilable differences have arisen between the
XXsys Parties and the Exiting Parties as to the future direction of XXsys and as
a result thereof the Exiting Parties desire to separate from Xxsys and XXsys
desires to facilitate their departure; and
WHEREAS, the XXsys Parties and Exiting Parties desire to implement the
exit arrangements for the Exiting Parties in accordance with the terms of this
Agreement;
AGREEMENT:
NOW, THEREFORE, IN CONSIDERATION of the promises and mutual covenants
and agreements herein contained, the parties hereto covenant and agree as
follows:
<PAGE> 2
1. The parties hereto agree that this Agreement supersedes in its
entirety any and all prior agreements relating to the subject matter hereof.
2. Pendorf hereby resigns effective as of March 25, 1995 as an
employee, officer and director of XXsys. The parties agree to do the following:
(a) Upon execution of this Agreement (or as soon thereafter as the
necessary legal documents may be drafted and executed),
Pendorf shall deposit in escrow with Charles D. Christopher
all of his original XXsys stock certificates (consisting of
126,000 shares), together with documents transferring
ownership of said shares to Ma, and Ma shall deposit in escrow
with Charles D. Christopher the original $125,000 promissory
note dated December 11, 1990, held by Ma and the deed of trust
on Pendorf house in Virginia which secures said promissory
note, together with documents transferring ownership of said
note and reconveying said deed of trust to Pendorf. A true and
correct copy of the documents to be escrowed are attached
hereto as EXHIBIT A. Ma and Pendorf shall take any and all
reasonable steps necessary to immediately implement the
above-described escrow.
During the period commencing on the date hereof and ending on
the one year anniversary of the date hereof (the "Option
Period"), Ma shall have and is hereby granted the option to
require the transfer to Ma of all or part of Pendorf is XXsys
stock (consisting of 126,000 shares) in exchange for transfer
to Pendorf of the original $125,000 promissory note and
reconveyance to Pendorf of the deed of trust securing said
note. To exercise her option, Ma must notify Charles D.
Christopher and Pendorf in writing, prior to expiration of the
Option Period, that she is exercising the option. Upon such
exchange and transfer, the original $125,000 promissory note
shall be immediately canceled and of no further force or
effect.
<PAGE> 3
In the event that at any time during the option Period, XXsys
has failed (as defined below), due to events unrelated to
Pendorf is direct or indirect activities (as defined below),
and Ma does not prior to the expiration of the Option Period
exercise her option as set forth above, Pendorf's stock shall,
immediately after the expiration of the Option Period, be
exchanged for the original $125,000 promissory note and
reconveyance of the deed of trust. Upon such exchange and
transfer, the original $125,000 promissory note shall be
canceled and of no further force or effect.
Finally, in the event that (i) at any time during the Option
Period, XXsys has failed due to events related to Pendorf's
direct or indirect activities or (ii) XXsys has not failed
during the Option
Period and Ma has not exercised her option prior to expiration
of the Option Period, then all documents escrowed with Charles
D. Christopher shall be returned to the party who placed them
in escrow.
The parties hereby agree that the due date of the original
$125,000 Promissory Note is hereby extended, and that the
original $125,000 Promissory Note shall not be due and
payable, until May 1, 1996.
"Failure" is defined to mean (i) an average daily NASDAQ
closing price of XXsys stock during the ten trading days
immediately prior to the expiration of the Option Period of
$.50 or less per share as adjusted for any stock splits and
the like, (ii) an assignment by XXsys for the benefit of its
creditors or the voluntary or involuntary filing of a petition
in bankruptcy or the adjudication of XXsys as bankrupt or
insolvent, (iii) the cessation or other substantial
termination of XXsys' business as presently operated, or (iv)
the sale of all or substantially all of the assets of XXSYS.
"Pendorf's direct or indirect activities" means Pendorf's
direct or indirect activities,
<PAGE> 4
excluding activities occurring prior to the date hereof or
which are contemplated by this Agreement (such as Pendorf
executing this Agreement, Pendorf leaving his position at
Xxsys, Pendorf pursuing the acquisitions referenced in
paragraph 4, etc.).
To effect exchange of the escrowed documents in the event that
XXsys fails, Pendorf must notify Charles D. Christopher and Ma
in writing, prior to expiration of the one year period, that
he is requesting said exchange and that XXsys has failed due
to events unrelated to Pendorf is direct or indirect
activities. If Pendorf gives written notice as specified
above, Charles D. Christopher shall act in accordance with
said written notice unless, within 14 days, he receives an
objection to so acting from Ma.
Upon receipt of a timely objection, Charles D. Christopher
shall continue to hold the escrowed documents in trust until
such time as Ma and Pendorf agree on the disposition of the
documents, or their dispute is resolved through binding AAA
arbitration. Said AAA arbitration shall be conducted
expeditiously upon demand as follows: (1) there shall be no
right to discovery or to appeal; (2) if the parties cannot
agree on an approved AAA arbitrator, the AAA shall chose one
for them by any means the AAA deems fair and impartial; and
(3) the, prevailing party shall be entitled to an award of
attorneys' fees and costs.
(b) In order to assure the XXsys Parties that Pendorf will not
do anything to negatively impact XXsys stock price, Pendorf
hereby agrees not to compete with XXsys' business for two
years from the date of this Agreement.
(c) XXsys hereby agrees to pay to Pendorf his outstanding
expenses (which shall be deemed to total $980), deferred
salary (which shall be deemed to total $98,231.94 including
accrued vacation pay), and severance pay (which shall be
deemed to total $63,000); such amounts shall be
<PAGE> 5
immediately due and payable provided that XXsys shall, at its
option, be entitled to pay such amounts to Pendorf in
consecutive monthly payments at the rate of $10,000 per month,
with the first such payment due one month after the date
hereof.
(d) XXsys will provide Pendorf and Timmerman with medical and
dental insurance as long as it is possible under its current
group coverage plan, not to exceed 18 months, provided Pendorf
and Timmerman will pay on a current basis XXsys for all
associated costs and expenses relating to their own coverage.
Should Pendorf or Timmerman fail to pay XXsys for costs and
expenses of the medical and/or dental policies, XXsys will be
free to terminate the policy for which payment has not been
made if, after 10 days' written notice, Pendorf or Timmerman
fails to pay XXsys for said costs and expenses. In addition,
XXsys agrees to assign and transfer to Pendorf all of its
right, title and interest in the "key man" life insurance
policy which it holds on Pendorf's life, subject to the policy
requirements and conditions concerning such transfer and the
payment and assumption by Pendorf of all premiums and
obligations from and after the date of transfer (Pendorf will
also reimburse Xxsys for any prepaid premium).
3. Timmerman hereby resigns effective as of March 25, 1995 as an
employee and officer of XXsys. XXsys shall pay to Timmerman two month's
severance (consisting of a total of $15,000) and deferred salary and vacation
pay (consisting of days' pay totalling $12,921.61). Payment to Timmerman of the
above amounts shall be made by XXsys in payments on a semi-monthly basis of
3,461.54 (less standard payroll deductions) commencing on April 1, 1995, and
continuing until Timmerman is owned less than $3,461.54, at which time XXsys
shall pay the remainder owed to Timmerman on the next regularly scheduled
semi-monthly payment date.
4. XXsys (including without limitation CRC) hereby assigns to Pendorf,
Timmerman and Georgiev the corporate opportunity to pursue the Acquisition one
Candidate and/or Acquisition Two candidate acquisitions for their own accounts.
If Pendorf,
<PAGE> 6
Timmerman and Georgiev (or any entity or group controlled by Pendorf, Timmerman,
Georgiev or any one or more of them, acquire the Acquisition One Candidate
and/or the Acquisition Two Candidate (an "Acquisition"), they shall be obligated
to pay XXsys $100,000 upon closing of the first such acquisition and, if they
acquire both Acquisition One and Acquisition Two Candidates, they shall be
obligated to pay XXsys an additional $50,000 upon closing of the second
acquisition. Upon the closing of such acquisitions, all sums of money owing by
XXsys to Pendorf but not yet due or payable under this Agreement shall be
extinguished, except for the Acquisition Three Candidate Payment (as defined
below). In the event that Pendorf, Timmerman, Georgiev or any one or more of
them, receive a finders fee, consulting fee or other fee or compensation in
connection with any acquisition of Acquisition One Candidate and/or Acquisition
Two Candidate (other than an Acquisition), they shall pay to XXsys an amount
equal to one-third of such fee, not to exceed $150,000.
XXsys will allow Pendorf access to the Acquisition Three
candidate due diligence package should he find an interested third party to sell
Acquisition Three Candidate to. Should Pendorf be the procuring cause of such a
buyer for this package, XXsys will pay Pendorf one-third of the proceeds
received by XXsys from said sale of the package, not to exceed $100,000 (the
"Acquisition Three Candidate Payment").
5. Georgiev hereby agrees to cause Palomar to grant an irrevocable
option to Ma, or her designee, in the form attached hereto as EXHIBIT B, which
shall consist of the right to purchase from Palomar its 175,000 shares of XXsys
common stock for $137,500 and which shall expire six months from the date
Palomar notifies XXsys that it has granted the option. To exercise the option,
Ma must notify Palomar in writing of her intent to do so and tender to Palomar a
certified check for $137,500, all before expiration of the option.
6. Georgiev hereby grants an irrevocable option to Ma, or her designee,
which consists of the right to purchase his 100,000 shares of XXsys common stock
for $50,000 and which shall expire six months from the date of this Agreement.
To exercise the option, Ma must notify Georgiev in writing of her intent to do
so and tender to Georgiev a certified check for $50,000, all before expiration
of the option.
<PAGE> 7
7. XXsys agrees to register such the shares referenced in paragraphs 5
and 6 above in its current S-3 registration filing.
8. The parties agree to issuance of a press release and an S-K filing
regarding the disengagement of the Exiting Parties, and agree to follow the fair
and accurate disclosure rule required by the SEC. The agreed upon press release
and 8-K filing are attached hereto as EXHIBITS C and D, respectively.
9. The parties agree not to engage in any activities that would
negatively impact the stock price. In their contact with the outside world, the
parties agree to be supportive of the others' business objectives and to refrain
from disparaging the others in any way shape or form.
10. The parties (and each of them) warrant and represent that they are
fully entitled and duly authorized to enter this Agreement.
11. This Agreement (including the Exhibits attached hereto) contains
the entire agreement between the parties and constitutes the complete, final and
exclusive embodiment of their agreement with respect to the subject matter
hereof, and may only be modified by a writing signed by all affected parties.
The terms of this Agreement are contractual and not a mere recital. This
Agreement is executed without reliance upon any promise, warranty or
representation by any party or any representative of any party other than those
expressly contained herein, and each party has carefully read this Agreement,
hat been advised of its meaning and consequences by its respective attorney, and
signs the same of his, her or its own free will.
12. This Agreement shall bind the heirs, personal representatives,
successors and assigns of each party, and inure to the benefit of each party,
its agents, directors, officers, employees, servants, successors, assigns,
parent and subsidiary corporations and affiliates.
13. Except as otherwise expressly provided herein, each party to this
Agreement will bear its own costs, expenses, and Attorneys' fees, whether
taxable or otherwise, incurred in or arising out of or in any way related to the
matters described herein, including without limitation costs, expenses, and
attorneys' fees.
<PAGE> 8
14. Each party to this Agreement agrees to take all such further action
and execute all such further documents as may be necessary or appropriate in
order to effectuate the provisions of this Agreement.
15. Time is of the essence with regard to all payments, notices and
other items of performance under this Agreement (including Exhibits attached
hereto). The XXsys Parties' (or any of them) failure to pay timely any of the
amounts due under this Agreement on the date the same becomes due and payable
shall constitute a default under this Agreement, as shall any voluntary or
involuntary bankruptcy filing by or against XXsys, the inability of XXsys to
meet its obligations as they come due, any acquisition of or merger with XXsys,
or the sale, assignment or transfer of more than 20% of XXsys assets in any six
month period. Upon the occurrence of a default hereunder, all amounts owing
hereunder shall, at the option of the Exiting Parties (and each of them), be
immediately due and payable, pursuant to this Agreement and/or applicable law.
16. Delivery of documents, payments, and notices under this Agreement
shall be made via certified mail return receipt requested, postage prepaid as
follows, unless otherwise specified in writing:
If to Pendorf - Mr. Paul Pendorf
5875 Friars Road, #4207
San Diego, California 92110
If to Timmerman - Mr. William a. Timmerman
5632 Soledad Mountain Road
La Jolla, California 92037
If to Georgiev - Mr. Stephen Georgiev
c/o Palomar Medical
Technologies, Inc.
66 Cherry Hill Drive
Beverly, Massachusetts 01915
If to Ma - XXsys Technologies, Inc.
4619 Viewridge Avenue
<PAGE> 9
San Diego, California 92123
If to XXsys - XXsys Technologies, Inc.
4619 Viewridge Avenue
San Diego, California 92123
If to CRC - XXsys Technologies, Inc.
4619 Viewridge Avenue
San Diego, California 92123
If to Christopher - Charles D. Christopher, Esq.
600 B Street, Suite 2250
San Diego, California 92101
17. This Agreement shall be deemed to have been entered into and shall
be construed and enforced in accordance with the laws of the State of California
as applied to contracts made and to be performed entirely within California; it
shall be interpreted and construed neutrally in accordance with the plain
meaning of the language contained herein and shall not be presumptively
construed against the drafters.
18. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have duly authorized and caused this
Agreement to be executed on the dates set forth below.
XXSYS TECHNOLOGIES, INC.
Dated: April 10, 1995 By:/s/ Gloria Ma
----------------------------------
Name: Gloria Ma
Title: Chairman/CEO
COMPOSIT RETROFIT CORPORATION
Dated: April 10, 1995 By:/s/ Gloria Ma
----------------------------------
Name: Gloria Ma
Title: Chairman/CEO
<PAGE> 10
Dated: April 10, 1995 /s/ Gloria Ma
-------------------------------------
GLORIA MA
Dated: April 10, 1995 /s/ Paul Pendorf
--------------------------------------
PAUL W. PENDORF
Dated: April 10, 1995 /s/ William A. Timmerman
--------------------------------------
WILLIAM A. TIMMERMAN
Dated: April 10, 1995 /s/ Steven Georgiev
--------------------------------------
STEVEN GEORGIEV
<PAGE> 11
Approved by directors:
/s/ Gloria Ma
- -------------
Gloria Ma
/s/ William Dale
- ----------------
William Dale
/s/ Steve Georgiev
- ------------------
Steve Georgiev
<PAGE> 1
EXHIBIT 10.3.1
The American Materials and Technologies Corporation
STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into as of the 9th day of May, 1995, by and
between The American Materials and Technologies Corporation, a California
corporation (the "Company") with its principal office at 5632 Soledad Mountain
Road, La Jolla, California 92037, and Paul W. Pendorf ("Employee").
Recitals
The Board of Directors ("the Board") regards Employee as a key employee
and has determined that it would be in the best interests of the Company and its
stockholders to grant the option provided for herein to Employee as an
inducement to become employed by, or to remain in the service of, the Company
and as an incentive for productive efforts during such service.
NOW, THEREFORE, the parties agree:
1. Grant of Option. The Company hereby grants to Employee the right and
option to purchase under the terms of this Agreement all or any part of an
aggregate of 75,000 shares of the Company's common stock ("Stock"). These
options are intended to be "incentive stock options" within the meaning of
Section 422A of the Internal Revenue Code to the maximum extent permitted by the
Code. Employee is advised to consult his or her personal advisor concerning the
federal and state income tax consequences of this option.
2. Option Price. The option price for the shares of Stock covered by
this Agreement shall be $1.00 per share ("Option Price").
3. Exercise of Option. Employee may exercise this option with respect
to all or any part of the shares of Stock then subject to purchase under this
option by (i) giving the Company written notice of such exercise specifying the
number of shares of Stock as to which such option is so exercised, and (ii)
delivering to the Company (a) cash equal to the Option Price for such shares,
(b) shares of Stock owned by the Employee in a form acceptable to the Committee,
or (c) a combination of such Stock or cash; except that the Committee in its
sole discretion may require that payment be made solely by delivering cash equal
to the option price of the shares as to which the option is exercised.
4. Conditions of Exercise. The Employee's right to exercise this option
shall be subject to and limited by the following conditions:
(a) This option shall become exercisable as follows: 25,000
shares on the first anniversary of the Company's initial public offering (if and
only if that occurs), 25,000
<PAGE> 2
shares on the second anniversary of the Company's initial public offering,
25,000 shares on the third anniversary of the Company's initial public offering.
(b) The options shall not be exercisable if and to the extent
the Committee determines that such exercise would be in violation of applicable
state or federal securities laws or the rules and regulations of any securities
exchange on which the stock is traded. If the Committee makes such a
determination, it shall use its best efforts to obtain compliance with such
laws, rules or regulations. In making any determination hereunder the Committee
may rely on an opinion of counsel for the Company.
If deemed appropriate by the Company's counsel, the share certificates
issued hereunder will bear a legend restricting transfer in conformity with the
Securities Act of 1933.
(c) In the event the Company determines that it is required to
withhold or collect, as a result of any exercise of this option or as a result
of the disposition of the shares of Stock acquired upon such exercise, any state
or federal income or other tax, Employee agrees to make arrangements
satisfactory to the Company to meet such withholding or collection requirements.
Withholding may be paid by delivery of shares of Stock owned by the employee in
form acceptable to the Committee.
(d) As soon as practicable after receipt of payment and notice
of exercise, without transfer or issue tax or other incidental expense to
Employee (except incident to a transfer permitted by Section 6), the Company
shall deliver to Employee at Company's principal office, or such other place as
may be mutually acceptable to the Company and Employee, a certificate or
certificates for the shares of Stock with respect to which exercise is made
hereunder. Such shares, which shall be fully paid and non-assessable, shall be
issued in the name of Employee, or, in the event the options granted hereby are
properly exercised by some person other than Employee, such person. With the
consent of the Committee such shares may be issued jointly in the name of
Employee and one or more other persons specified by Employee.
5. Term of Option. This Agreement and all rights of Employee hereunder
shall terminate at 5:00 p.m. Pacific Time on the tenth anniversary of issuance.
Further, the option granted hereunder may be exercised only while Employee is in
the employ of the Company, to the extent the option was exercisable at the date
of termination, as follows:
(i) within six months following termination of employment on
account of death or disability or by the Company without cause;
(ii) within three months following termination of employment
by the Company or by employee upon retirement after age 60; or
(iii) within 30 days following termination by resignation
(other than retirement after age 60) or by the Company for cause.
-2-
<PAGE> 3
6. Nontransferability. The option granted hereby shall, during
Employee's lifetime, be exercisable only by him or her, and neither such option
nor any right thereunder shall be transferable by him or her by operation of
law, or otherwise, except by will or the laws of descent and distribution.
7. Adjustment for stock splits, stock dividends and other unusual
adjustment events. In the event of stock splits, stock dividends and other
unusual adjustment events the Compensation Committee will make the appropriate
adjustments in the option terms so as to leave the Employee's potential
financial position unchanged.
8. Miscellaneous.
(a) Stockholder Rights. Employee shall not have any of the rights of
a stockholder with respect to the shares of Stock subject- to the option granted
hereby, except to the extent the certificates for such shares shall have been
issued upon the exercise of such option as provided for herein.
(b) Employment. Nothing in this Agreement shall confer upon Employee
any right to continue in the employ of the Company or interfere in any way with
the right of the Company to terminate his or her employment at any time with or
without cause.
(c) Notices. Any notices or communications by either party to the
other hereunder shall be given by first class mail, return receipt requested,
addressed, if to the Company, at its principal office, and if to Employee, at:
William A. Timmerman
5632 Soledad Mountain Road
La Jolla, CA 92037
Notices or communications shall be deemed given on the date of mailing. Either
party may change its address for the receipt of notices or communications
hereunder, provided notice of such change is given in advance to the other party
in the manner provided in this paragraph.
(d) Interpretation and Enforcement. The interpretation,
constructions, performance and enforcement of this Agreement and the Plan shall
be within the sole discretion of the Board, and its determination shall be
conclusive and binding upon all interested persons.
(e) Executors, Successors and Assigns. Subject to terms and
provisions of this Agreement limiting the right of assignment, this Agreement
shall be binding upon and inure to the benefit of the parties, their heirs,
executors, successors and assigns.
(f) Governing Law. This Agreement, and all rights and obligations
hereunder, shall be governed by the laws of the State of California.
-3-
<PAGE> 4
IN WITNESS HEREOF, this Agreement has been executed the year and date
first herein above written.
/s/ Paul Pendorf
----------------------------------
Paul Pendorf
The American Materials and
Technologies Corporation
By:/s/ Steven Georgiev
-------------------------------
Chairman
-4-
<PAGE> 1
EXHIBIT 10.4.1
The American Materials and Technologies Corporation
STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into as of the 9th day of May, 1995, by and
between The American Materials and Technologies Corporation, a California
corporation (the "Company") with its principal office at 5632 Soledad Mountain
Road, La Jolla, California 92037, and William A. Timmerman ("Employee").
Recitals
The Board of Directors ("the Board") regards Employee as a key employee
and has determined that it would be in the best interests of the Company and its
stockholders to grant the option provided for herein to Employee as an
inducement to become employed by, or to remain in the service of, the Company
and as an incentive for productive efforts during such service.
NOW, THEREFORE, the parties agree:
1. Grant of Option. The Company hereby grants to Employee the right and
option to purchase under the terms of this Agreement all or any part of an
aggregate of 40,000 shares of the Company's common stock ("Stock"). These
options are intended to be "incentive stock options" within the meaning of
Section 422A of the Internal Revenue Code to the maximum extent permitted by the
Code. Employee is advised to consult his or her personal advisor concerning the
federal and state income tax consequences of this option.
2. Option Price. The option price for the shares of Stock covered by
this Agreement shall be $1.00 per share ("Option Price").
3. Exercise of Option. Employee may exercise this option with respect
to all or any part of the shares of Stock then subject to purchase under this
option by (i) giving the Company written notice of such exercise specifying the
number of shares of Stock as to which such option is so exercised, and (ii)
delivering to the Company (a) cash equal to the Option Price for such shares,
(b) shares of Stock owned by the Employee in a form acceptable to the Committee,
or (c) a combination of such Stock or cash; except that the Committee in its
sole discretion may require that payment be made solely by delivering cash equal
to the option price of the shares as to which the option is exercised.
4. Conditions of Exercise. The Employee's right to exercise this option
shall be subject to and limited by the following conditions:
(a) This option shall become exercisable as follows: 13,333
shares on the first anniversary of the Company's initial public offering (if and
only if that occurs), 13,333
<PAGE> 2
shares on the second anniversary of the Company's initial public offering,
13,334 shares on the third anniversary of the Company's initial public offering.
(b) The options shall not be exercisable if and to the extent the
Committee determines that such exercise would be in violation of applicable
state or federal securities laws or the rules and regulations of any securities
exchange on which the stock is traded. If the Committee makes such a
determination, it shall use its best efforts to obtain compliance with such
laws, rules or regulations. In making any determination hereunder the Committee
may rely on an opinion of counsel for the Company.
If deemed appropriate by the Company's counsel, the share certificates
issued hereunder will bear a legend restricting transfer in conformity with the
Securities Act of 1933.
(c) In the event the Company determines that it is required to
withhold or collect, as a result of any exercise of this option or as a result
of the disposition of the shares of Stock acquired upon such exercise, any state
or federal income or other tax, Employee agrees to make arrangements
satisfactory to the Company to meet such withholding or collection requirements.
Withholding may be paid by delivery of shares of Stock owned by the employee in
form acceptable to the Committee.
(d) As soon as practicable after receipt of payment and notice of
exercise, without transfer or issue tax or other incidental expense to Employee
(except incident to a transfer permitted by Section 6), the Company shall
deliver to Employee at Company's principal office, or such other place as may be
mutually acceptable to the Company and Employee, a certificate or certificates
for the shares of Stock with respect to which exercise is made hereunder. Such
shares, which shall be fully paid and non-assessable, shall be issued in the
name of Employee, or, in the event the options granted hereby are properly
exercised by some person other than Employee, such person. With the consent of
the Committee such shares may be issued jointly in the name of Employee and one
or more other persons specified by Employee.
5. Term of Option. This Agreement and all rights of Employee hereunder
shall terminate at 5:00 p.m. Pacific Time on the tenth anniversary of issuance.
Further, the option granted hereunder may be exercised only while Employee is in
the employ of the Company, to the extent the option was exercisable at the date
of termination, as follows:
(i) within six months following termination of employment on
account of death or disability or by the Company without cause;
(ii) within three months following termination of employment by
the Company or by employee upon retirement after age 60; or
(iii) within 30 days following termination by resignation (other
than retirement after age 60) or by the Company for cause.
-2-
<PAGE> 3
6. Nontransferability. The option granted hereby shall, during
Employee's lifetime, be exercisable only by him or her, and neither such option
nor any right thereunder shall be transferable by him or her by operation of
law, or otherwise, except by will or the laws of descent and distribution.
7. Adjustment for stock splits, stock dividends and other unusual
adjustment events. In the event of stock splits, stock dividends and other
unusual adjustment events the Compensation Committee will make the appropriate
adjustments in the option terms so as to leave the Employee's potential
financial position unchanged.
8. Miscellaneous.
(a) Stockholder Rights. Employee shall not have any of the rights of
a stockholder with respect to the shares of Stock subject- to the option granted
hereby, except to the extent the certificates for such shares shall have been
issued upon the exercise of such option as provided for herein.
(b) Employment. Nothing in this Agreement shall confer upon Employee
any right to continue in the employ of the Company or interfere in any way with
the right of the Company to terminate his or her employment at any time with or
without cause.
(c) Notices. Any notices or communications by either party to the
other hereunder shall be given by first class mail, return receipt requested,
addressed, if to the Company, at its principal office, and if to Employee, at:
William A. Timmerman
5632 Soledad Mountain Road
La Jolla, CA 92037
Notices or communications shall be deemed given on the date of mailing. Either
party may change its address for the receipt of notices or communications
hereunder, provided notice of such change is given in advance to the other party
in the manner provided in this paragraph.
(d) Interpretation and Enforcement. The interpretation,
constructions, performance and enforcement of this Agreement and the Plan shall
be within the sole discretion of the Board, and its determination shall be
conclusive and binding upon all interested persons.
(e) Executors, Successors and Assigns. Subject to terms and
provisions of this Agreement limiting the right of assignment, this Agreement
shall be binding upon and inure to the benefit of the parties, their heirs,
executors, successors and assigns.
(f) Governing Law. This Agreement, and all rights and obligations
hereunder, shall be governed by the laws of the State of California.
-3-
<PAGE> 4
IN WITNESS HEREOF, this Agreement has been executed the year and date
first herein above written.
/s/ William A. TImmerman
----------------------------------
William A. Timmerman
The American Materials and
Technologies Corporation
By: /s/ Paul Pendorf
-------------------------------
President
-4-
<PAGE> 1
EXHIBIT 10.23.1
INCENTIVE STOCK OPTION
GRANTED BY
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
(hereinafter called the "Company")
TO
--------------------------------
(hereinafter called the "Holder")
UNDER THE
1996 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
For valuable consideration, the receipt of which is hereby
acknowledged, the Company hereby grants to the Holder the following option:
FIRST: Subject to the terms and conditions hereinafter set forth, the
Holder is hereby given the right and option to purchase from the Company shares
of the common stock, $.01 par value per share, ("Common Stock"), of the Company.
Schedule A hereto, the provisions of which are incorporated by reference herein,
sets forth (a) the maximum number of shares that the Holder may purchase upon
exercise of this Option, (b) the exercise price per share of Common Stock
purchasable hereunder, (c) the expiration date of this Option, (d) the vesting
rate and (e) certain other terms and conditions applicable to this Option.
This Option is and shall be subject in every respect to the provisions
of The American Materials & Technologies Corporation 1996 Incentive and
Nonqualified Stock Option Plan, as the same may be amended from time to time
(the "Plan"). A copy of the Plan is being delivered herewith, and the Plan is
hereby incorporated herein by reference and made a part hereof. In the event of
any conflict or inconsistency between the terms of this Option and those of the
Plan, the terms of the Plan shall govern. The term "Committee" is used herein
with the meaning ascribed to it in the Plan.
This Option shall be exercised in whole or in part by the Holder's
delivery to the Company of written notice (the "Notice of Exercise") setting
forth the number of shares with respect to which this Option is to be exercised,
together with (a) cash in an amount, or a check, bank draft or postal or express
money order payable in an amount, equal to the aggregate exercise price for the
shares being purchased, (b) with the consent of the Committee, shares of Common
Stock having a fair market value equal to such aggregate exercise price; (c)
with the consent of the Committee, a personal recourse note issued by the Holder
to the Company in a principal amount equal to such aggregate exercise price and
with such other
<PAGE> 2
terms, including interest rate and maturity, as the Committee may determine in
its discretion, provided that the interest rate borne by such note shall not be
less than the lowest applicable federal rate, as defined in Section 1274(d) of
the Internal Revenue Code of 1986, as amended; (d) with the consent of the
Committee, such other consideration that is acceptable to the Committee and that
has a fair market value, as determined by the Committee, equal to such aggregate
exercise price; or (e) with the consent of the Committee, any combination of the
foregoing. The "fair market value" of the Common Stock shall equal (i) the
closing price per share on the date of grant of the Option as reported by a
nationally recognized stock exchange, (ii) if the Common Stock is not listed on
such an exchange, as reported by the National Market System or another automated
quotation system of the National Association of Securities Dealers, Inc., or
(iii) if the Common Stock is not quoted on any such system, the fair market
value as determined by the Committee.
SECOND: The Company, in its discretion, may file a registration
statement on Form S-8 under the Securities Act of 1933, as amended, to register
shares of Common Stock reserved for issuance under the Plan. At any time at
which such a registration statement is not in effect, it shall be a condition
precedent to any exercise of this Option that the Holder shall deliver to the
Company a customary "investment letter" satisfactory to the Company and its
counsel in which, among other things, the Holder shall (a) state that he or she
is acquiring shares of Common Stock subject to the Option for his or her own
account for investment and not with a view to the resale or distribution thereof
and (b) acknowledge that those shares are not freely transferable except in
compliance with federal and state securities laws.
THIRD: As promptly as practicable after receipt by the Company of the
Notice of Exercise and related investment letter and payment of exercise price
pursuant to Paragraphs First and Second hereof, the Company shall deliver to the
Holder (or if any other individual or individuals are exercising this Option, to
such individual or individuals) a certificate registered in the name of the
Holder (or the names of the other individual or individuals exercising this
Option) and representing the number of shares with respect to which this Option
is then being exercised; provided, however, that if any law or regulation or
order of the Securities and Exchange Commission or any other body having
jurisdiction in the premises shall require the Company or the Holder (or the
individual or individuals exercising this Option) to take any action in
connection with the shares then being purchased, the date for the delivery of
the certificate for such shares shall be extended for the period necessary to
take and complete such action. The Company may imprint upon said certificate the
legends contemplated by Sections 9.3 and 9.4 of the Plan or such other legends
as counsel for the Company may consider appropriate. Delivery by the Company of
the certificates for such shares shall be deemed effected for all purposes when
the Company or a stock transfer agent of the Company shall have deposited such
certificates in the United States mail, addressed to the Holder, at the address
specified in the Notice. The Company will pay all fees or expenses necessarily
incurred by the Company in connection with the issuance and delivery of shares
pursuant to the exercise of this Option.
The Company will, at all times while any portion of this Option is
outstanding, reserve and keep available, out of shares of its authorized and
unissued Common Stock or shares of Common Stock held in treasury, a sufficient
number of shares of its Common Stock to satisfy the requirements of this Option.
FOURTH: If the Company shall effect any subdivision or consolidation of
shares of its stock or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares outstanding, in
any such case without receiving compensation therefor in money, services or
property, then the number, class and per share price of shares of stock subject
to this Option shall be appropriately adjusted in such a manner as to entitle
the Holder to receive upon exercise of this Option, for the same aggregate cash
consideration, the same total number and class of shares as he or she would have
received as a result of the event requiring the adjustment had he or she
exercised this Option in full immediately prior to such event.
-2-
<PAGE> 3
If the Company shall be a party to a reorganization or merger with one
or more other corporations (whether or not the Company is the surviving or
resulting corporation), shall consolidate with or into one or more other
corporations, shall be liquidated, or shall sell or otherwise dispose of
substantially all of its assets to another corporation (each a "Transaction"),
then:
(a) subject to the provisions of clauses (b) and (c) below, after
the effective date of the Transaction, the Holder of this Option shall
be entitled, upon exercise hereof and at no additional cost, to receive
shares of Common Stock or, if applicable, shares of such other stock or
other securities, cash or property as the holders of shares of Common
Stock received pursuant to the terms of the Transaction;
(b) the Committee may accelerate the time for exercise of this
Option to a date prior to the effective date of the Transaction, as
specified by the Committee; or
(c) this Option may be canceled by the Committee as of the
effective date of the Transaction, provided that (i) notice of such
cancellation shall have been given to the Holder and (ii) the Holder
shall have the right to exercise this Option to the extent the same is
then exercisable or, if the Committee shall have accelerated the time
for exercise of this Option, in full during the thirty-day period
preceding the effective date of the Transaction.
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to this Option.
FIFTH: Neither the Holder nor any other person shall, by virtue of the
granting of this Option, be deemed for any purpose to be the owner of any shares
of Common Stock subject to this Option or to be entitled to the rights or
privileges of a holder of such shares unless and until this Option has been
exercised pursuant to the terms hereof with respect to such shares and the
Company has issued and delivered the shares to the Holder.
SIXTH: This Option is not transferable by the Holder or by operation of
law, otherwise than by will or under the laws of descent and distribution. This
Option is exercisable, during the Holder's lifetime, only by the Holder.
In the event that the Holder voluntarily terminates employment with the
Company or any subsidiary (other than for reasons of retirement, death or
disability as hereinafter provided), the Holder shall have the right to exercise
this Option within sixty days after the latest date on which the Holder so
ceases to be an employee of the Company or any subsidiary (but not later than
the expiration date of this Option) with respect to the shares which were
purchasable by the Holder by exercise of this Option on such date.
In the event that the Company or any subsidiary terminates the
employment of the Holder for cause, this Option shall terminate immediately. As
used in this Option, "Cause" shall mean a determination by the Company
(including the Board) or a subsidiary that the Holder's employment with the
Company or such subsidiary should be terminated as a result of (i) a material
breach by the Holder of any agreement to which the Holder and the Company (or
such subsidiary) are both parties, (ii) any act (other than retirement) by the
Holder that may have a material and adverse effect on the business of the
Company,
-3-
<PAGE> 4
such subsidiary or any other subsidiary or on the ability to perform services
for the Company or such subsidiary, including the proven or admitted commission
of any crime (other than an ordinary traffic violation), or (iii) any material
misconduct or material neglect of duties by the Holder in connection with the
business or affairs of the Company or such subsidiary.
In the event of (i) the termination of Holder's employment by the
Company or any subsidiary without cause, (ii) the permanent and total disability
of the Holder prior to termination of the Holder's employment with the Company
and all subsidiaries and prior to the date of expiration of this Option, or
(iii) the retirement of the Holder in good standing from the employ of the
Company for reasons of age under the then established rules of the Company, the
Holder shall have the right to exercise this Option at any time until the
expiration date of this Option with respect to the number of shares which were
purchasable by the Holder at the date of such termination, disability or
retirement.
In the event of the death of the Holder prior to termination of the
Holder's employment with the Company and all subsidiaries and prior to the date
of expiration of this Option, the Holder's executors, administrators or any
individual or individuals to whom this Option is transferred by will or under
the laws of descent and distribution, as the case may be, shall have the right
to exercise this Option with respect to the number of shares purchasable by the
Holder at the date of death at any time until the expiration date of this
Option.
SEVENTH: The Holder agrees that, during the 180-day period commencing
with the closing date of the Company's initial public offering of shares of
Common Stock pursuant to a registration statement filed under the Securities Act
of 1933, as amended, or any successor act, the Holder will not, without the
prior written consent of the representative or representatives of the
underwriters of such offering, directly or indirectly, sell, offer to sell,
contract to sell, grant any option for the sale of, assign, transfer, pledge,
hypothecate or otherwise dispose of or encumber any shares of Common Stock
acquired upon exercise of this Option, other than such shares, if any, as shall
be covered by such registration statement or as shall be consented to by the
Company and such representative or representatives. The Holder further agrees
that, in order to facilitate any such public offering, (a) the agreements in
this Paragraph Seventh shall be for the benefit of such underwriters as well as
the Company and (b) upon request of such representative or representatives, the
Holder will execute a separate written instrument to the effect set forth in the
preceding sentence, with such changes therein as such representative or
representatives may request, provided that such changes are not materially
adverse to the interest of the Holder.
EIGHTH: If the Company in its discretion determines that it is
obligated to withhold tax with respect to shares of Common Stock received on
exercise of this Option, the Holder agrees that the Company may withhold from
the Holder's wages the appropriate amount of federal, state or local withholding
taxes attributable to the Holder's exercise of such Option. At the Company's
discretion, the amount required to be withheld may be withheld in cash from such
wages or (with respect to compensation income attributable to the exercise of
this Option) in kind from the Common Stock otherwise deliverable to the Holder
on exercise of this Option. The Holder further agrees that, if the Company does
not withhold an amount from the Holder's wages sufficient to satisfy the
Company's withholding obligation, the Holder will reimburse the Company on
demand, in cash, for the amount underwithheld.
NINTH: Any notice to be given to the Company hereunder shall be deemed
sufficient if addressed to the Company and delivered at the office of the Chief
Operating Officer of the Company, or such other address as the Company may
hereafter designate, or when deposited in the mail, postage prepaid, addressed
to the attention of the Chief Operating Officer of the Company at such office or
other address.
-4-
<PAGE> 5
Any notice to be given to the Holder hereunder shall be deemed
sufficient if addressed to and delivered in person to the Holder at his address
furnished to the Company or when deposited in the mail, postage prepaid,
addressed to the Holder at such address.
TENTH: This Option is subject to all laws, regulations and orders of
any governmental authority which may be applicable thereto and, notwithstanding
any of the provisions hereof, the Holder agrees that he will not exercise the
Option granted hereby nor will the Company be obligated to issue any shares of
stock hereunder if the exercise thereof or the issuance of such shares, as the
case may be, would constitute a violation by the Holder or the Company of any
such law, regulation or order or any provision thereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in its name and on its behalf as of the effective date.
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
[SEAL]
By:___________________________________________
Paul W. Pendorf
President and Chief Executive Officer
Acknowledgment
The undersigned Holder acknowledges receipt of this Stock Option
Agreement, including Schedule A hereto, and agrees to be bound by all
obligations of the Holder as set forth in such Stock Option Agreement.
HOLDER
_______________________________________________
-5-
<PAGE> 6
SCHEDULE A
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
INCENTIVE STOCK OPTION
Date of Grant: _______________________________
Name of Holder: _______________________________
Address: _______________________________
_______________________________
Social Security Number: _______________
Maximum number of shares for which
this Option is exercisable: _______________
Exercise (purchase) price per share: $______________
Expiration date of this Option: ________________________________
Vesting rate: 25% vesting on each of the first, second,
third and fourth anniversaries of the date
of grant
Other terms and conditions: None
<PAGE> 1
EXHIBIT 10.23.2
NONQUALIFIED STOCK OPTION
GRANTED BY
THE AMERICAN MATERIAL & TECHNOLOGIES CORPORATION
(hereinafter called the "Company")
TO
-------------------------------
(hereinafter called the "Holder")
UNDER THE
1996 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
For valuable consideration, the receipt of which is hereby
acknowledged, the Company hereby grants to the Holder the following option:
FIRST: Subject to the terms and conditions hereinafter set forth, the
Holder is hereby given the right and option to purchase from the Company shares
of the common stock, $.01 par value per share, ("Common Stock"), of the Company.
Schedule A hereto, the provisions of which are incorporated by reference herein,
sets forth (a) the maximum number of shares that the Holder may purchase upon
exercise of this Option, (b) the exercise price per share of Common Stock
purchasable hereunder, (c) the expiration date of this Option, (d) the vesting
rate and (e) certain other terms and conditions applicable to this Option.
This Option is and shall be subject in every respect to the provisions
of The American Materials & Technologies Corporation 1996 Incentive and
Nonqualified Stock Option Plan, as the same may be amended from time to time
(the "Plan"). A copy of the Plan is being delivered herewith, and the Plan is
hereby incorporated herein by reference and made a part hereof. In the event of
any conflict or inconsistency between the terms of this Option and those of the
Plan, the terms of the Plan shall govern. The term "Committee" is used herein
with the meaning ascribed to it in the Plan.
This Option shall be exercised in whole or in part by the Holder's
delivery to the Company of written notice (the "Notice of Exercise") setting
forth the number of shares with respect to which this Option is to be exercised,
together with (a) cash in an amount, or a check, bank draft or postal or express
money order payable in an amount, equal to the aggregate exercise price for the
shares being purchased, (b) with the consent of the Committee, shares of Common
Stock having a fair market value equal to such aggregate exercise price; (c)
with the consent of the Committee, a personal recourse note issued by the Holder
to the Company in a principal amount equal to such aggregate exercise price and
with such other
<PAGE> 2
terms, including interest rate and maturity, as the Committee may determine in
its discretion, provided that the interest rate borne by such note shall not be
less than the lowest applicable federal rate, as defined in Section 1274(d) of
the Internal Revenue Code of 1986, as amended; (d) with the consent of the
Committee, such other consideration that is acceptable to the Committee and that
has a fair market value, as determined by the Committee, equal to such aggregate
exercise price; or (e) with the consent of the Committee, any combination of the
foregoing. The "fair market value" of the Common Stock shall equal (i) the
closing price per share on the date of grant of the Option as reported by a
nationally recognized stock exchange, (ii) if the Common Stock is not listed on
such an exchange, as reported by the National Market System or another automated
quotation system of the National Association of Securities Dealers, Inc., or
(iii) if the Common Stock is not quoted on any such system, the fair market
value as determined by the Committee.
SECOND: The Company, in its discretion, may file a registration
statement on Form S-8 under the Securities Act of 1933, as amended, to register
shares of Common Stock reserved for issuance under the Plan. At any time at
which such a registration statement is not in effect, it shall be a condition
precedent to any exercise of this Option that the Holder shall deliver to the
Company a customary "investment letter" satisfactory to the Company and its
counsel in which, among other things, the Holder shall (a) state that he or she
is acquiring shares of Common Stock subject to the Option for his or her own
account for investment and not with a view to the resale or distribution thereof
and (b) acknowledge that those shares are not freely transferable except in
compliance with federal and state securities laws.
THIRD: As promptly as practicable after receipt by the Company of the
Notice of Exercise and related investment letter and payment of exercise price
pursuant to Paragraphs First and Second hereof, the Company shall deliver to the
Holder (or if any other individual or individuals are exercising this Option, to
such individual or individuals) a certificate registered in the name of the
Holder (or the names of the other individual or individuals exercising this
Option) and representing the number of shares with respect to which this Option
is then being exercised; provided, however, that if any law or regulation or
order of the Securities and Exchange Commission or any other body having
jurisdiction in the premises shall require the Company or the Holder (or the
individual or individuals exercising this Option) to take any action in
connection with the shares then being purchased, the date for the delivery of
the certificate for such shares shall be extended for the period necessary to
take and complete such action. The Company may imprint upon said certificate the
legends contemplated by Sections 9.3 and 9.4 of the Plan or such other legends
as counsel for the Company may consider appropriate. Delivery by the Company of
the certificates for such shares shall be deemed effected for all purposes when
the Company or a stock transfer agent of the Company shall have deposited such
certificates in the United States mail, addressed to the Holder, at the address
specified in the Notice. The Company will pay all fees or expenses necessarily
incurred by the Company in connection with the issuance and delivery of shares
pursuant to the exercise of this Option.
The Company will, at all times while any portion of this Option is
outstanding, reserve and keep available, out of shares of its authorized and
unissued Common Stock or shares of Common Stock held in treasury, a sufficient
number of shares of its Common Stock to satisfy the requirements of this Option.
FOURTH: If the Company shall effect any subdivision or consolidation of
shares of its stock or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares outstanding, in
any such case without receiving compensation therefor in money, services or
property, then the number, class and per share price of shares of stock subject
to this Option shall be appropriately adjusted in such a manner as to entitle
the Holder to receive upon exercise of this Option, for the same aggregate cash
consideration, the same total number and class of shares as he or she would have
received as a result of the event requiring the adjustment had he or she
exercised this Option in full immediately prior to such event.
-2-
<PAGE> 3
If the Company shall be a party to a reorganization or merger with one
or more other corporations (whether or not the Company is the surviving or
resulting corporation), shall consolidate with or into one or more other
corporations, shall be liquidated, or shall sell or otherwise dispose of
substantially all of its assets to another corporation (each a "Transaction"),
then:
(a) subject to the provisions of clauses (b) and (c) below, after
the effective date of the Transaction, the Holder of this Option shall
be entitled, upon exercise hereof and at no additional cost, to receive
shares of Common Stock or, if applicable, shares of such other stock or
other securities, cash or property as the holders of shares of Common
Stock received pursuant to the terms of the Transaction;
(b) the Committee may accelerate the time for exercise of this
Option to a date prior to the effective date of the Transaction, as
specified by the Committee; or
(c) this Option may be canceled by the Committee as of the
effective date of the Transaction, provided that (i) notice of such
cancellation shall have been given to the Holder and (ii) the Holder
shall have the right to exercise this Option to the extent the same is
then exercisable or, if the Committee shall have accelerated the time
for exercise of this Option, in full during the thirty-day period
preceding the effective date of the Transaction.
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to this Option.
FIFTH: Neither the Holder nor any other person shall, by virtue of the
granting of this Option, be deemed for any purpose to be the owner of any shares
of Common Stock subject to this Option or to be entitled to the rights or
privileges of a holder of such shares unless and until this Option has been
exercised pursuant to the terms hereof with respect to such shares and the
Company has issued and delivered the shares to the Holder.
SIXTH: This Option is not transferable by the Holder or by operation of
law, otherwise than by will or under the laws of descent and distribution. This
Option is exercisable, during the Holder's lifetime, only by the Holder.
In the event that the Holder voluntarily terminates employment with the
Company or any subsidiary (other than for reasons of retirement, death or
disability as hereinafter provided), the Holder shall have the right to exercise
this Option within sixty days after the latest date on which the Holder so
ceases to be an employee of the Company or any subsidiary (but not later than
the expiration date of this Option) with respect to the shares which were
purchasable by the Holder by exercise of this Option on such date.
In the event that the Company or any subsidiary terminates the
employment of the Holder for cause, this Option shall terminate immediately. As
used in this Option, "Cause" shall mean a determination by the Company
(including the Board) or a subsidiary that the Holder's employment with the
Company or such subsidiary should be terminated as a result of (i) a material
breach by the Holder of any agreement to which the Holder and the Company (or
such subsidiary) are both parties, (ii) any act (other than retirement) by the
Holder that may have a material and adverse effect on the business of the
Company,
-3-
<PAGE> 4
such subsidiary or any other subsidiary or on the ability to perform services
for the Company or such subsidiary, including the proven or admitted commission
of any crime (other than an ordinary traffic violation), or (iii) any material
misconduct or material neglect of duties by the Holder in connection with the
business or affairs of the Company or such subsidiary.
In the event of (i) the termination of Holder's employment by the
Company or any subsidiary without cause, (ii) the permanent and total disability
of the Holder prior to termination of the Holder's employment with the Company
and all subsidiaries and prior to the date of expiration of this Option, or
(iii) the retirement of the Holder in good standing from the employ of the
Company for reasons of age under the then established rules of the Company, the
Holder shall have the right to exercise this Option at any time until the
expiration date of this Option with respect to the number of shares which were
purchasable by the Holder at the date of such termination, disability or
retirement.
In the event of the death of the Holder prior to termination of the
Holder's employment with the Company and all subsidiaries and prior to the date
of expiration of this Option, the Holder's executors, administrators or any
individual or individuals to whom this Option is transferred by will or under
the laws of descent and distribution, as the case may be, shall have the right
to exercise this Option with respect to the number of shares purchasable by the
Holder at the date of death at any time until the expiration date of this
Option.
SEVENTH: The Holder agrees that, during the 180-day period commencing
with the closing date of the Company's initial public offering of shares of
Common Stock pursuant to a registration statement filed under the Securities Act
of 1933, as amended, or any successor act, the Holder will not, without the
prior written consent of the representative or representatives of the
underwriters of such offering, directly or indirectly, sell, offer to sell,
contract to sell, grant any option for the sale of, assign, transfer, pledge,
hypothecate or otherwise dispose of or encumber any shares of Common Stock
acquired upon exercise of this Option, other than such shares, if any, as shall
be covered by such registration statement or as shall be consented to by the
Company and such representative or representatives. The Holder further agrees
that, in order to facilitate any such public offering, (a) the agreements in
this Paragraph Seventh shall be for the benefit of such underwriters as well as
the Company and (b) upon request of such representative or representatives, the
Holder will execute a separate written instrument to the effect set forth in the
preceding sentence, with such changes therein as such representative or
representatives may request, provided that such changes are not materially
adverse to the interest of the Holder.
EIGHTH: If the Company in its discretion determines that it is
obligated to withhold tax with respect to shares of Common Stock received on
exercise of this Option, the Holder agrees that the Company may withhold from
the Holder's wages the appropriate amount of federal, state or local withholding
taxes attributable to the Holder's exercise of such Option. At the Company's
discretion, the amount required to be withheld may be withheld in cash from such
wages or (with respect to compensation income attributable to the exercise of
this Option) in kind from the Common Stock otherwise deliverable to the Holder
on exercise of this Option. The Holder further agrees that, if the Company does
not withhold an amount from the Holder's wages sufficient to satisfy the
Company's withholding obligation, the Holder will reimburse the Company on
demand, in cash, for the amount underwithheld.
NINTH: Any notice to be given to the Company hereunder shall be deemed
sufficient if addressed to the Company and delivered at the office of the Chief
Operating Officer of the Company, or such other address as the Company may
hereafter designate, or when deposited in the mail, postage prepaid, addressed
to the attention of the Chief Operating Officer of the Company at such office or
other address.
-4-
<PAGE> 5
Any notice to be given to the Holder hereunder shall be deemed
sufficient if addressed to and delivered in person to the Holder at his address
furnished to the Company or when deposited in the mail, postage prepaid,
addressed to the Holder at such address.
TENTH: This Option is subject to all laws, regulations and orders of
any governmental authority which may be applicable thereto and, notwithstanding
any of the provisions hereof, the Holder agrees that he will not exercise the
Option granted hereby nor will the Company be obligated to issue any shares of
stock hereunder if the exercise thereof or the issuance of such shares, as the
case may be, would constitute a violation by the Holder or the Company of any
such law, regulation or order or any provision thereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in its name and on its behalf as of the effective date.
THE AMERICAN MATERIALS &
TECHNOLOGIES CORPORATION
[SEAL]
By:___________________________________________
Paul W. Pendorf
President and Chief Executive Officer
Acknowledgment
The undersigned Holder acknowledges receipt of this Stock Option
Agreement, including Schedule A hereto, and agrees to be bound by all
obligations of the Holder as set forth in such Stock Option Agreement.
HOLDER
_______________________________________________
-5-
<PAGE> 6
SCHEDULE A
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
NONQUALIFIED STOCK OPTION
Date of Grant: _______________________________
Name of Holder: _______________________________
Address: _______________________________
_______________________________
Social Security Number: _______________
Maximum number of shares for which
this Option is exercisable: _______________
Exercise (purchase) price per share: $______________
Expiration date of this Option: _______________
Vesting rate: _________________________________
_________________________________
Other terms and conditions: None
<PAGE> 1
EXHIBIT 11.1
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
AND SUBSIDIARY
COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Period from
March 29, 1995 Three Months
(inception) to ended
December 31, 1995 Pro Forma March 31, 1996
----------------- ---------- --------------
Historical
<S> <C> <C> <C>
Net income (loss) $ (277,275) $ (618,007) $ 246,311
Weighted average number of common
shares outstanding:
Shares issued 1,516,908 1,516,908 1,516,908
Warrants and stock options --- --- 361,971
---------- ---------- ----------
Total 1,516,908 1,516,908 1,878,879
========== ========== ==========
Net income (loss) per common share $ ( 0.18) $ ( 0.41) $ 0.13
========== ========== ==========
</TABLE>
1 All Shares of Common stock issued at prices below the proposed public
offering price are assumed to have been outstanding since inception.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in this Registration Statement on Form SB-2 of our
reports dated February 19, 1996 relating to the financial statements of The
American Materials & Technologies Corporation and Subsidiary as of December 31,
1995 and for the period March 29, 1995 (inception) to December 31, 1995 and
February 9, 1996 relating to the financial statements of Culver City Composites
Corporation (formerly known as SPS Holdings, Inc. and Subsidiary) as of December
19, 1995 and December 31, 1994, and for the periods January 1, 1995 to December
19, 1995 and the year ended December 31, 1994 and the reference to our firm
under the captions "SELECTED FINANCIAL DATA" and "EXPERTS" in the Prospectus.
[SIG]
FELDMAN RADIN & CO., P.C.
Certified Public Accountants
May 29, 1996
New York, New York
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,800
<SECURITIES> 0
<RECEIVABLES> 3,448,597
<ALLOWANCES> 69,447
<INVENTORY> 2,037,520
<CURRENT-ASSETS> 5,788,359
<PP&E> 4,486,322
<DEPRECIATION> 178,978
<TOTAL-ASSETS> 10,147,579
<CURRENT-LIABILITIES> 7,502,846
<BONDS> 0
0
0
<COMMON> 15,169
<OTHER-SE> 197,167
<TOTAL-LIABILITY-AND-EQUITY> 10,147,579
<SALES> 5,251,321
<TOTAL-REVENUES> 5,251,321
<CGS> 3,784,235
<TOTAL-COSTS> 919,960
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 186,888
<INCOME-PRETAX> 360,238
<INCOME-TAX> 113,927
<INCOME-CONTINUING> 246,311
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 246,311
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
