<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
DTM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 3559 74-248705
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
----------------
1611 HEADWAY CIRCLE
BUILDING 2
AUSTIN, TEXAS 78754
(512) 339-2922
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
MR. GREGORY A. LOGWINUK
1611 HEADWAY CIRCLE
BUILDING 2
AUSTIN, TEXAS 78754
(512) 339-2922
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
SONJA M. HALLER DEREK R. MCCLAIN JOHN T. KIPP
THE B.F.GOODRICH COMPANY VINSON & ELKINS L.L.P. GARDERE & WYNNE, L.L.P.
3925 EMBASSY PARKWAY 3700 TRAMMELL CROW CENTER 1601 ELM STREET
AKRON, OHIO 44333-1799 2001 ROSS AVENUE SUITE 3000
(330) 374-4190 DALLAS, TEXAS 75201-2975 DALLAS, TEXAS 75201-4761
(214) 220-7700 (214) 999-3000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
----------------
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, check the following box: [_]
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. [_]
----------------
CALCULATION OF THE REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.0003 per share...... 2,891,100 $13.00 $37,584,300 $12,961
</TABLE>
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- -------------------------------------------------------------------------------
(1) Includes 377,100 shares which the underwriters have an option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
----------------
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 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF PART I ITEMS
OF FORM S-1 REGISTRATION STATEMENT
<TABLE>
<CAPTION>
ITEM AND CAPTION IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS
---------------------------- ---------------------------------
<S> <C>
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus.... Facing Page; Outside Front Cover Page of
Prospectus.
2. Inside Front and Outside
Back Cover Pages of
Prospectus.................. Inside Front and Outside Back Cover Pages of
Prospectus; Additional Information.
3. Summary Information, Risk
Factors and Ratio of
Earnings to Fixed Charges... Prospectus Summary; Risk Factors.
4. Use of Proceeds............. Prospectus Summary; Use of Proceeds;
Capitalization; Management's Discussion and
Analysis of Financial Condition and Results of
Operations.
5. Determination of Offering
Price....................... Outside Front Cover Page of Prospectus;
Underwriting.
6. Dilution.................... Risk Factors; Dilution.
7. Selling Security Holders.... Principal and Selling Shareholders.
8. Plan of Distribution........ Outside Front Cover Page of Prospectus;
Underwriting.
9. Description of Securities to
be Registered............... Description of Capital Stock.
10. Interest of Named Experts
and Counsel................. Not Applicable.
11. Information with Respect to
the Registrant.............. Prospectus Summary; The Company; Dividend
Policy; Capitalization; Selected Consolidated
Financial Data; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling
Shareholders; Description of Capital Stock;
Shares Eligible for Future Sale; Consolidated
Financial Statements.
12. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................. Not Applicable.
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 21, 1996
2,514,000 SHARES
DTM CORPORATION
COMMON STOCK
-----------
Of the 2,514,000 shares of DTM Corporation common stock (the "Common Stock")
offered hereby (the "Offering"), 1,330,000 shares are being sold by DTM
Corporation (the "Company" or "DTM") and 780,000 shares and 404,000 shares are
being sold by The B.F.Goodrich Company ("BFGoodrich") and DTM Holdings Ltd.,
respectively, as selling shareholders (the "Selling Shareholders"). The Company
will receive no proceeds from Common Stock sold by the Selling Shareholders.
Prior to the Offering, there has been no public market for the Common Stock.
It is anticipated that the Offering price of Common Stock will be between
$11.00 and $13.00 per share. See "Underwriting" for information relating to
factors considered in determining the Offering price. The Company has made
application for quotation and trading of the Common Stock on the Nasdaq
National Market under the symbol "DTMC."
SEE "RISK FACTORS" BEGINNING AT PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK.
-----------
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>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
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Total(3)..................... $ $ $ $
</TABLE>
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- --------------------------------------------------------------------------------
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering to be paid by the Company and the
Selling Shareholders, estimated at $ and $ , respectively.
(3) The Company and BFGoodrich have granted the Underwriters a 30-day option to
purchase up to 377,100 additional shares of Common Stock at the Price to
Public per share less the Underwriting Discount solely to cover over-
allotments, if any. If such option is exercised in full, the total Price to
Public, Underwriting Discount, Proceeds to Company and Proceeds to Selling
Shareholders will be $ , $ , $ and $ , respectively. See
"Underwriting."
-----------
The Common Stock is offered by the Underwriters, subject to prior sale, when,
as and if issued to and accepted by them and subject to certain conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders, in whole or in part. It is expected that delivery of the shares
of Common Stock will be made on or about , 1996.
A.G. EDWARDS & SONS, INC. LADENBURG, THALMANN & CO. INC.
The date of this Prospectus is , 1996.
<PAGE>
Inside the front cover is a photograph of a SINTERSTATION 2000 System. Below
the photograph to the left is the DTM logo and the following text:
"Rapid Prototyping is the creation of a solid three-dimensional model or
prototype directly from three-dimensional computer aided design data. DTM's SLS
Systems significantly reduce the time required to produce models and prototypes
for testing actual product fit and form, ergonomic design and functionality.
From aerospace to consumer electronics and automobiles to appliances - companies
around the world use DTM SINTERSTATION 2000 Systems to accelerate the design,
development and market introduction of their new products."
The SINTERSTATION 2000 System logo appears to the right of the above text.
Next appears the following stabilization language:
"IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME."
On the left page of the two-page gate-fold is the following text and
photographs:
"The DTM Rapid Prototyping Solution
DTM believes that its SLS Systems have distinct advantages relative to competing
rapid prototyping technologies. Key differentiators include:
. The ability to create strong and durable functional plastic prototypes
. The RapidTool process can produce metal mold inserts from metal powder
. The SLS System processes multiple powdered materials for a wide range of
applications
. Selective laser sintering technology can be expanded to include new powdered
materials and applications
. Productivity can be increased by building many parts at the same time
Building Prototypes with the DTM SINTERSTATION 2000 System
Briefly, the selective laser sintering process creates three-dimensional
objects, layer by layer, from powdered materials with heat generated by a
CO\2\ laser within the SINTERSTATION 2000 System.
Processing requirements
First, three-dimensional CAD data must be output in the industry-standard.
STL format.
The process
(1) As the selective laser sintering process begins, a thin layer of the heat-
fusible powder is deposited onto the part-building cylinder within a
process chamber.
(2) An initial cross-section of the object under fabrication is selectively
"drawn" on the layer of powder by a heat-generating CO\2\ laser. The
interaction of the laser beam with the powder elevates the temperature to
the point of melting, fusing the powder particles and forming a solid mass.
The intensity of the laser beam is modulated to melt the powder only in
areas defined by the object's design geometry.
(3) An additional layer of powder is deposited via a roller mechanism on top of
the previously scanned layer.
(4) The process is repeated, with each layer fusing to the layer below it.
Successive layers of powder are deposited and the process is repeated until
the part is complete.
After processing
The part is removed from the build chamber and the loose powder falls away.
Parts may then require some post-processing, such as sanding, depending upon the
intended application."
To the right of the above text is a photograph of a process chamber encasing the
part-building cylinder, the CO\2\ laser, the laser optics/scanning mirrors and
the roller mechanism, with numbers which correspond to the process numbers
above.
On the right page of the two-page gate-fold is the following text and
photographs:
"DTM's selective laser sintering process and SINTERSTATION 2000 Systems produce
objects in a wide range of materials that meet an expanding range of
manufacturing applications including:"
Below this text are four photographs arranged vertically on the page. The first
photograph depicts a plastic model of a cellular telephone. To the left of the
photo is the following caption: "CONCEPTUAL MODELS". To the right of the photo
is the following text: "Conceptual models are physical representations of
product designs used to review form and style of a manufacturer's product.
Material requirements include the ability to produce parts with fine detail and
smooth surface finish." The second photograph depicts a plastic model of an
electric sander. To the left of the photo is the following caption: "FUNCTIONAL
PROTOTYPES". To the right of the photo is the following text: "Functional
prototypes are used in applications that require durable materials that can be
snap-fitted, hinged, drilled, painted, functionally tested, and used in
environments that are similar to those intended for the final product. This
application includes product testing of the prototype in actual working
assemblies, ergonomic evaluations, and exposure to high humidity and demanding
temperature environments." The third photograph depicts various plastic or
metal parts. To the left of the photo is the following caption: "PATTERNS FOR
SECONDARY PROCESSES". To the right of the photo is the following text:
"Patterns for secondary processes are used in manufacturing applications with
requirements for producing single metal parts through investment casting or low-
quantity plastic parts using rubber molds. This application often requires
complex geometry, thin wall structures, and superior surface finish." The
fourth photograph depicts a metal part. To the left of the photo is the
following caption: "METAL MOLD INSERTS". To the right of the photo is the
following text: "DTM's RAPIDTOOL process is used in manufacturing applications
for the direct creation of metal injection mold core and cavity inserts for
prototype tooling. The material properties of mold core and cavity sets created
with the RAPIDTOOL process can produce thousands of plastic parts."
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY SHOULD BE READ WITH AND IS QUALIFIED IN ITS ENTIRETY BY
THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS. INVESTORS SHOULD CAREFULLY CONSIDER THE
RISK FACTORS RELATED TO THE PURCHASE OF COMMON STOCK. SEE "RISK FACTORS."
UNLESS OTHERWISE INDICATED, THE INFORMATION CONTAINED IN THIS PROSPECTUS
ASSUMES THAT THERE HAS BEEN NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT
OPTION AND REFLECTS AN EFFECTIVE 2.184-FOR-1 STOCK SPLIT UNDERTAKEN BY THE
COMPANY EFFECTED IN MAY 1996, WHICH HAS BEEN RETROACTIVELY APPLIED TO ALL SHARE
AND PER SHARE AMOUNTS CONTAINED HEREIN. UNLESS THE CONTEXT OTHERWISE REQUIRES,
REFERENCES IN THIS PROSPECTUS TO "DTM" AND THE "COMPANY" REFER TO DTM
CORPORATION AND ITS SUBSIDIARY ON A CONSOLIDATED BASIS. "DTM," "PROTOFORM,"
"RAPIDSTEEL," "RAPIDTOOL," "SINTERSTATION(R)," "SLS(R)" AND "TRUEFORM" ARE
TRADEMARKS OR SERVICE MARKS OF DTM CORPORATION.
THE COMPANY
DTM Corporation develops, designs, manufactures, markets and supports, on an
international basis, rapid prototyping and rapid tooling systems and related
materials. The Company's selective laser sintering systems ("Systems") and
materials are based on proprietary and patented selective laser sintering
technology. Rapid prototyping is the creation of a solid three-dimensional
model, prototype or pattern directly from three-dimensional computer aided
design ("CAD") data. Rapid tooling is the creation of durable tooling from CAD
data that can be subsequently employed to produce substantial quantities of
parts for market introduction of a product. Use of the Company's SLS Systems
significantly reduces the time required to produce models and prototypes for
testing actual product fit and form, ergonomic design and functionality from
what otherwise could be months or weeks to days or, in some cases, hours. The
Company's SLS Systems are used to accelerate the design, development and market
introduction of products in a wide range of industries, including but not
limited to the automotive, aerospace, medical, electronics, telecommunications,
computer, appliance, footwear, toy and power tool industries. BFGoodrich
currently owns approximately 92 percent of the outstanding Common Stock.
The selective laser sintering rapid prototyping process employed by the
Company replicates a CAD model by using laser energy to convert heat-fusible
powders into three-dimensional solid objects within the Sinterstation 2000
System, DTM's commercial SLS System. A focused carbon dioxide laser beam melts
and bonds ("sinters") the surface of a bed of powder into a solid horizontal
cross-section of the object being modeled. Subsequent powder layers are
deposited, sintered and bonded to the previous layer as the energy from the
laser beam fuses sequential layers together. This layered manufacturing process
is continued until the CAD model has been fully replicated as a plastic part or
metal tool insert. Upon completion of the part build, the excess, or
unsintered, plastic or metal powder is removed for use in subsequent part
builds. The Company either owns or has exclusive licenses under various patents
covering the technology utilized in its SLS Systems and related products.
Since the 1980s, the field of product engineering, design and development has
undergone rapid change with ever-increasing emphasis on time to market as a key
factor in successful product introduction. The rapid prototyping industry has
arisen as a part of, and in response to, this change. According to industry
analysts Wohlers Associates, the estimated worldwide market for rapid
prototyping goods and services in 1995 was approximately $295 million, a 50
percent increase over 1994. Wohlers Associates projects that the industry will
grow at a compound annual rate of approximately 49% for the next two years,
reaching a size of over $650 million by the end of 1997.
DTM believes that its SLS Systems have distinct advantages relative to
competing rapid prototyping technologies. SLS Systems have the ability to (i)
produce strong and durable functional plastic prototypes that can be drilled,
painted, equipped with electronics and mounted in working product assemblies
that duplicate the final product, (ii) rapidly produce prototype metal mold
inserts from metal powder, thereby significantly reducing the time required to
manufacture tooling for the production of substantial quantities of plastic
parts for market testing or introduction, (iii) process multiple powdered
materials for a wide range of applications, thereby enabling users to avoid
making investments in multiple competing rapid prototyping technologies, (iv)
be expanded to include new powdered materials and applications and (v) be more
productive than competing rapid prototyping systems because of their ability to
build parts more quickly and to sequence multiple parts in a single production
run.
3
<PAGE>
DTM's customers include The Boeing Company, Daimler-Benz AG, Eastman Kodak
Company, Fiskars Oy, Ford Motor Company, General Motors Corporation, Hughes
Christensen, LG Electronics, Inc. (Goldstar), Pratt & Whitney, Rockwell
International Corporation, Samsung Electronics Co., Ltd., Toyota Motor
Corporation and Whirlpool Corporation, among others. The Company also sells a
substantial portion of its SLS Systems to service bureaus, which are businesses
that use rapid prototyping technology to fabricate and sell models and
prototype parts.
The Company has experienced substantial sales growth since the sale of its
first commercial SLS System in December 1992. Sales of the Sinterstation 2000
System have increased each year and, as of May 15, 1996, the Company had sold
99 SLS Systems and placed an additional two SLS Systems through a rental
program resulting in a total of 101 SLS Systems worldwide. Revenue has
increased from approximately $1.1 million in 1991 to approximately $14.2
million in 1995, a level that the Company believes makes it the second largest
industry participant as measured by revenues. The Company attributes the growth
in its revenues primarily to the increasing worldwide acceptance of rapid
prototyping as a technology capable of accelerating development and design of
new products, as well as the refinement of the selective laser sintering
process to a level which affords users certain advantages over other rapid
prototyping technologies.
DTM has devoted substantial effort to developing what it believes is a
leading position in the high end of the rapid prototyping market. The Company
has recently introduced ProtoForm and TrueForm powders for use in the SLS
System. The Company believes that ProtoForm and TrueForm powders will enable it
to expand its position as a leading supplier of rapid prototyping systems for
the production of strong and durable functional plastic prototypes, as well as
to compete effectively in the fast growing pattern segment of the rapid
prototyping market. In part due to the introduction of these powdered
materials, the Company expects that materials sales will represent an
increasing portion of total revenues. The Company has also recently introduced
its RapidTool process, which produces prototype mold inserts from its
RapidSteel metal powder. The Company believes that its RapidTool process will
facilitate the integration of selective laser sintering technology into the
manufacturing processes of tool makers, a market segment that has experienced
limited penetration by other rapid prototyping techniques. Additionally, the
Company believes that its RapidTool process is currently the only commercially
available technology of this type.
With the advances the Company has recently achieved in the form of the
RapidTool process and the introduction of its RapidSteel, TrueForm and
ProtoForm powders, the Company believes that it is positioned to capitalize on
its competitive advantages through the following strategies: (i) marketing the
RapidTool process to tool making companies, service bureaus and tool making
departments within original equipment manufacturers ("OEMs"); (ii) using its
TrueForm and ProtoForm powders to increase the Company's SLS System and
materials sales and its share of the traditional rapid prototyping markets for
pattern and strong durable part applications; (iii) developing and marketing
new and improved metal, ceramic and plastic powdered materials; and
(iv) expanding the Company's distribution network, including the Company's
direct sales force and agent network.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the
Company.......................... 1,330,000 Shares
Common Stock offered by the
Selling Shareholders............. 1,184,000 Shares
Common Stock to be outstanding
after the Offering............... 9,085,188 Shares(1)
Risk Factors...................... The Offering involves a high degree of risk
and immediate and substantial dilution. See
"Risk Factors" and "Dilution."
Use of Proceeds................... To retire existing bank debt and borrowings
from BFGoodrich and to fund working capi-
tal, research and development activities
and expansion of the Company's distribution
network. See "Use of Proceeds."
Proposed Nasdaq National Market
symbol........................... DTMC
</TABLE>
- --------
(1) Based upon the number of shares outstanding as of May 20, 1996. Includes an
estimated 825,175 shares of Common Stock issuable to employees upon the
exercise of immediately exercisable stock options that will be outstanding
in connection with the closing of the Offering under the DTM Corporation
Equity Appreciation Plan. See "Management--Equity Appreciation Plan."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA: (UNAUDITED)
Revenue:
Products............... $ -- $ 2,841 $ 6,989 $ 8,127 $ 12,632 $ 1,733 $ 5,329
Service and
support(1)............ 1,107 2,027 2,593 1,112 1,579 280 461
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenue......... 1,107 4,868 9,582 9,239 14,211 2,013 5,790
Cost of sales:
Products............... -- 2,431 5,329 4,833 8,242 1,132 3,109
Service and support.... 1,441 1,705 2,141 511 873 160 271
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total cost of sales... 1,441 4,136 7,470 5,344 9,115 1,292 3,380
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit (loss).... (334) 732 2,112 3,895 5,096 721 2,410
Operating loss......... (7,327) (9,624) (9,644) (5,731) (5,606) (1,725) (669)
Interest income
(expense), net........ 93 (10) (328) (178) (530) (91) (219)
Income tax benefit
allocated from
BFGoodrich............ 2,159 3,032 3,084 1,825 2,138 487 319
Net loss............... $ (5,075) $ (6,602) $ (6,650) $ (4,084) $ (3,998) $ (1,329) $ (569)
Net loss per share..... $ (1.74) $ (1.69) $ (1.03) $ (0.54) $ (0.52) $ (0.17) $ (0.07)
Number of shares used
in computing net loss
per share(2).......... 2,912,248 3,902,327 6,465,898 7,618,117 7,618,117 7,618,117 7,618,117
OPERATING DATA(3):
SLS Systems sold or
rented................ -- 9 19 23 36 6 12
Cumulative SLS Systems
sold or rented........ -- 9 28 51 87 57 99
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------
ACTUAL AS ADJUSTED(4)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).............................. $ (911) $ 5,349
Total assets........................................... 13,209 17,469
Total debt............................................. 11,338 1,138
Total liabilities...................................... 17,676 7,476
Shareholders' equity (deficit)......................... (4,467) 9,993
</TABLE>
- --------
(1) Includes domestic rapid prototyping service bureau activity through
December 1993, at which time the Company sold its domestic service bureau.
Revenues associated with the service bureau operations for the years ended
December 31, 1991, 1992 and 1993 were approximately $1.1 million, $1.9
million and $1.9 million, respectively.
(2) Includes, for all periods, the effect of an estimated 825,175 shares of
Common Stock issuable to employees upon the exercise of exercisable options
(at exercise prices substantially less than the Offering price) that will
be outstanding in connection with the closing of the Offering under the DTM
Corporation Equity Appreciation Plan. See "Management--Equity Appreciation
Plan."
(3) Includes the rental of four SLS Systems during the year ended December 31,
1995, of which two were rented in the three months ended March 31, 1995.
Two of such rental Systems were converted to sales during the year ended
December 31, 1995, including one in the three months ended March 31, 1995;
and, one of such Systems was converted to a sale in the three months ended
March 31, 1996.
(4) Reflects the sale of 1,330,000 shares of Common Stock by the Company at an
assumed Offering price of $12.00 per share, less estimated underwriting
discount, offering expenses and the application of the net proceeds to the
Company therefrom. See "Use of Proceeds" and "Capitalization."
5
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the Company and its
business and prospects before purchasing any shares of Common Stock offered
hereby.
LIMITED OPERATING HISTORY AND LACK OF PROFITABILITY. The Company was
incorporated in 1987. Prior to shipment of its first commercial SLS Systems in
December 1992, the Company derived revenues solely from a rapid prototyping
service bureau that it operated in Austin, Texas. The Company has been
unprofitable from its inception, recognizing net losses of approximately $4
million and $569,000 for the year ended December 31, 1995 and the quarter
ended March 31, 1996, respectively, and had an accumulated deficit of
approximately $33 million at March 31, 1996. There can be no assurance that
the Company can achieve or maintain profitability in the future. During the
quarter and year in which it becomes probable that the Offering will occur,
the Company will incur a non-recurring, non-cash compensation expense as a
result of the conversion of phantom stock appreciation rights outstanding
under the DTM Corporation Equity Appreciation Plan (the "Equity Appreciation
Plan") into immediately exercisable options to acquire shares of Common Stock
at substantially less than the Offering price. Assuming an Offering price of
$12.00 per share, operating results for the quarter and year would be
adversely affected by such compensation expense of approximately $8 million,
resulting in a substantial reported net loss. See "Management--Equity
Appreciation Plan."
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS. Protection of the Company's
intellectual property is an important factor in its ability to be successful
in a highly competitive market that is subject to rapid technological changes.
In pursuing protection for its proprietary rights in its SLS Systems,
materials and related technology, the Company currently relies on a
combination of patent, copyright, trademark and trade secret rights, as well
as contractual provisions. The Company typically seeks patent protection for
its selective laser sintering technology, including, where deemed appropriate,
the selective laser sintering process, the SLS System and the materials used
in the SLS System. However, patent protection may not always be available.
There can be no assurance that patents will be issued under any or all of the
patent applications to which the Company has rights. In addition, the laws of
various countries in which the Company's products may be sold may not protect
the Company's products and intellectual property rights to the same extent as
the laws of the United States.
Furthermore, the Company can give no assurance that the issued patents to
which it holds rights will be adequate to protect its interests or, if
challenged, held valid. The Company's competitors could develop non-infringing
systems, materials or technologies that are equivalent or superior to those of
the Company. Competitors also may practice technology covered by DTM's patents
or other legal or contractual protection regardless of the fact that it is
legally protected, forcing the Company to engage in costly litigation to
defend its interests. The Company is currently engaged in patent infringement
litigation with a German competitor concerning the competitor's sale in Europe
of rapid prototyping systems that DTM believes infringe on a European patent
under which DTM has exclusive rights. DTM is also engaged in litigation in the
United States against a company concerning that company's alleged infringement
of a DTM patent covering powdered materials. See "Business--Intellectual
Property" and "Business--Legal Proceedings." While DTM defends its
intellectual property vigorously, there can be no assurance that it will be
successful in this litigation. If the Company were unsuccessful in enforcing
its intellectual property rights or other contractual rights in the context of
third-party offers to sell SLS Systems or powders, the Company's revenues
might be adversely affected. Patents that have been issued and are believed by
the Company to be valid may be challenged. Specifically, proceedings are
pending in the U.S. Patent and Trademark Office challenging the validity of a
significant patent owned by the Company relating to the selective laser
sintering process. Proceedings are also pending in Europe challenging the
validity of a significant patent exclusively licensed to the Company. While
the Company is vigorously defending its interests in both of these
proceedings, there is no assurance that it will be successful. The inability
of the Company to successfully establish and defend its intellectual property
rights could have a material adverse effect on the Company's business and
financial performance. See "Business--Intellectual Property."
6
<PAGE>
Although no claims have been made against the Company for patent
infringement, it is possible that unrelated third parties hold many patents
and pending patent applications under which the Company is not a licensee that
relate to the design and manufacture of rapid prototyping systems. If such a
third party brought infringement litigation against the Company, and if the
Company was not successful in defending or obtaining a license, the Company's
business and financial performance could be materially adversely affected.
Certain key intellectual property used in the selective laser sintering
process is licensed from The University of Texas System ("The University of
Texas"). As a licensee, the Company's rights to practice the technology are
not absolute. The University of Texas could terminate, attempt to terminate or
amend the license if the Company could be shown to be in material default of
the terms of the license. Even if DTM has a basis for objection, defense of
its rights as a licensee could be costly and the outcome would be uncertain.
Loss of significant rights as a licensee under this license could have a
material adverse effect on the Company's business and financial performance.
See "Business--Intellectual Property."
MANAGEMENT OF GROWTH. DTM has experienced rapid sales growth since 1991,
recognizing increases in total net revenues from approximately $1.1 million in
1991 to approximately $14.2 million in 1995. This growth has, from time to
time, strained its management resources and systems. DTM's ability to manage
its growth effectively will depend on, among other things, its ability to
increase the capability and quality of its operational, financial and
management information systems and controls and to train, motivate and manage
a larger number of employees. There is no assurance that the Company will be
successful in managing any future growth. Failure to do so could have a
material adverse affect on the Company's business and financial performance.
CAPITAL RESOURCES. The Company's future capital requirements will depend on
a number of factors, including its profitability, growth rate, working capital
requirements associated with increased sales, expenses associated with
protection of its patents and other intellectual property and costs of future
research and development activities. BFGoodrich, the Company's majority
shareholder, has been a significant source of debt and equity funding in the
past. However, BFGoodrich has indicated to the Company that it believes there
will not be a need for it to provide funding in the future and that upon
completion of the Offering BFGoodrich has no plans to provide such funding.
Future operating results will depend, in part, on the Company's ability to
obtain and manage capital sufficient to finance its business. The inability of
the Company to secure capital funding sufficient to meet its needs could have
a material adverse effect on the Company's business and financial performance.
In May 1996, the Company obtained a loan commitment letter from Texas
Commerce Bank for a revolving line of credit ("line of credit") contingent
upon the Company receiving net cash proceeds (gross proceeds less underwriting
discount) of $13.4 million from the Offering and the negotiation of definitive
loan agreements. During the remainder of 1996, and on an ongoing basis
thereafter, the Company's ability to borrow under the line of credit is
subject to meeting certain financial thresholds, including attaining certain
levels of "established profitability," as defined in the commitment letter.
Until achieving one such level, the Company may borrow up to $2 million;
thereafter, subject to a borrowing base calculation, available advances
against eligible receivables may be increased up to a maximum of $6 million.
Loans under the line of credit will mature within one year, will be
collateralized by the Company's accounts receivable and inventory and will
bear interest at the bank's prime interest rate plus one and one quarter
percent. The Company will be bound by customary covenants, including
restrictions on additional liens or borrowings, as well as the payment of
dividends, and affirmative reporting requirements. In addition, the terms of
the commitment letter specify that the bank has the option to terminate the
commitment on 30 days notice if employment of the chief executive officers of
the Company terminates and a qualified successor is not appointed by the
Company and approved by Texas Commerce Bank within a specified period of time.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
NEW PRODUCTS; ENGINEERING TESTING DELAYS. The Company's ability to achieve
and maintain a significant market share may depend heavily on its ability to
improve its existing products, as well as to introduce new and innovative
products that facilitate increased use and more specialized applications of
existing products. DTM cannot predict with any certainty the degree to which
its ongoing research and development efforts in the
7
<PAGE>
areas of SLS System and materials enhancements will be successful or, if so,
when. In addition, the Company can provide no assurance of its future success
in selecting, developing, manufacturing and marketing new products. When the
Company or its competitors announce new products with capabilities or
technologies that have the potential to replace the Company's existing product
offerings, customers may defer or forego purchases of existing Company
products. This could materially adversely affect the Company's business and
financial performance. While the Company performs extensive testing prior to
releasing new product designs or product enhancements, products may contain
unforeseen errors or performance problems. The correction of errors and
problems in new products could cause delays in product introductions or
shipments, require design modifications to previously shipped products or cause
adverse publicity, any of which could adversely affect the Company's business
and financial performance.
QUARTERLY FLUCTUATIONS IN OPERATING RESULTS. The Company's revenues and
operating results have varied substantially from quarter to quarter and may
continue to do so. DTM typically experiences a relatively long lead time to
complete an SLS System sale and has historically experienced little or no
backlog. Furthermore, new product introductions, seasonality of customer buying
patterns and other factors can cause fluctuations in quarterly results. These
fluctuations may preclude the Company from effectively managing its operating
results from quarter to quarter. The failure of the Company to complete a
particular SLS System sale in any given quarter can have a material adverse
effect on the Company's business and financial performance for that quarter and
quarterly fluctuations could cause a material adverse affect on the price at
which the Common Stock trades. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Selected Quarterly Results" and
"--Seasonality."
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a substantial
extent on certain key employees, particularly John S. Murchison, III, its
President and Chief Executive Officer. Losing the services of one or more key
employees could have a material adverse effect on the Company's business and
financial performance. The Company's success also depends on its ability to
continue to attract highly talented technical personnel. Candidates with
appropriate training and expertise may be in short supply in the geographic
areas where the Company is attempting to recruit personnel. While the Company
has put in place incentive compensation plans intended to provide motivation
for continued employment of key employees, the Company can give no assurance
that it will retain these employees and continue to attract, assimilate and
retain other skilled personnel. See "Management."
COMPETITION. The market for rapid prototyping systems is highly competitive.
In marketing its Sinterstation 2000 System, the Company experiences competition
from many sources. Certain of the Company's competitors are better known and
have greater financial, research and development, production and marketing
resources than DTM. That competition, and the Company's resulting
vulnerability, could increase as a result of the introduction of new products
or product enhancements by these competitors or the entry into the industry by
other companies. Increased competition could result in price reductions,
reduced margins and loss of market share, all of which could materially
adversely affect the Company's business and financial results. See "Business--
Competition."
EMERGING RAPID PROTOTYPING MARKET; PRODUCT CONCENTRATION. The market for
rapid prototyping products and services is in an early stage of development and
includes multiple, competing technologies, many of which are not yet fully
developed. Participants in this market are moving to address new applications,
many of which may not yet be known or accepted by potential users. Significant
education of the end user in both CAD modeling and rapid prototyping in general
may be a prerequisite to product acceptance. It is not clear at this time which
one or more technologies will gain market acceptance. There can be no assurance
that DTM will emerge as a market leader, or even a major market participant, as
the market matures.
Sales and installations of the Company's Sinterstation 2000 System and
related products and services accounted for all of the Company's revenues for
fiscal years 1993, 1994 and 1995. Any factor adversely affecting the market for
rapid prototyping products in general, or perception or market acceptance of
the Company's SLS System in particular, could materially adversely affect the
Company's business and financial performance.
8
<PAGE>
DEPENDENCE ON THIRD-PARTY SUPPLIERS. The Company subcontracts for
manufacture of SLS System components, powdered sintering materials and
accessories from single-source, third-party suppliers. A disruption in supply
or failure of a supplier to remain competitive in functionality or price could
have a material adverse effect on the Company's sales or reputation for timely
delivery, and, hence, on the Company's business and financial performance. See
"Business--Manufacturing."
INTERNATIONAL OPERATIONS. For the last two fiscal years, approximately one-
third of the sales of the Company's products have been made in geographical
areas outside of the United States. The Company expects that sales to
customers in countries outside of the United States will increase in future
periods as a percentage of total sales. Fluctuations in exchange rates as well
as interest rates could significantly affect DTM's sales in foreign markets.
In particular, a strengthening dollar may adversely affect the price
competitiveness or revenues realized on DTM's sales of products and services.
In addition, exchange rates could adversely affect the value of receivables
arising from foreign sales. The Company does not currently engage in any
hedging to limit the currency exchange risk related to these sales. The
regulatory environment, including import/export laws and protective trade
policies of foreign governments, also could materially adversely affect the
Company's business and financial performance. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
CONTROL OF THE COMPANY. Following the completion of the Offering and prior
to the exercise of any of the options that will be outstanding in connection
with the closing of the Offering under the DTM Corporation Equity Appreciation
Plan, BFGoodrich will own approximately 67 percent of the outstanding Common
Stock. Accordingly, BFGoodrich will be able to elect at least a majority of
the Company's board of directors (the "Board of Directors") and could
determine the outcome of matters submitted to the Company's shareholders for
their vote or consent. In addition, BFGoodrich has indicated that its interest
in DTM is primarily financial and that, if market conditions are favorable, it
may divest its interest in the Company over a period of time, most probably in
multiple future registered offerings of the Common Stock, but possibly also in
one or more private transactions. The Company cannot predict the effect of a
private sale of a controlling interest in the Company, although, depending on
the identity of the purchaser and its reason for acquiring control of the
Company, minority shareholders could be adversely affected.
LOSS OF TAX ALLOCATION AGREEMENT AND OTHER BENEFITS FROM BFGOODRICH. As a
result of the Offering described herein, the ownership of outstanding Common
Stock by BFGoodrich will decrease to less than 80 percent. Effective as of the
date that such decrease occurs, BFGoodrich will no longer be able to include
DTM's income or loss in BFGoodrich's consolidated federal income tax return;
consequently, DTM will lose the benefit of the tax allocation agreement
between DTM and BFGoodrich. Under that agreement, BFGoodrich credits to the
Company the amount of any benefits realized by BFGoodrich as a result of the
inclusion of DTM's losses and/or tax credits in BFGoodrich's consolidated
federal income tax return. In addition, BFGoodrich currently provides DTM tax
administration services, participation in a group program for various types of
insurance and certain other assistance, including legal services. These
arrangements are on terms that could be considered more favorable to the
Company than those that would be available to the Company in arms-length
transactions. The Company expects that these arrangements will be
discontinued, or amended to include arms-length terms, as BFGoodrich's
percentage ownership interest in the Company decreases. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Certain Transactions--Certain Arrangements with BFGoodrich."
POSSIBLE ISSUANCE OF PREFERRED STOCK. The Company's Articles of
Incorporation authorize the issuance of up to 3,000,000 shares of preferred
stock, $.001 par value (the "Preferred Stock"), the terms of which would be
determined by the Board of Directors at the time of issuance, without further
shareholder approval. The Board of Directors would determine whether these
shares would carry voting rights, preferences in the payment of dividends,
sinking fund provisions and liquidation, redemption or conversion rights, if
any. The Company has no current plans to issue Preferred Stock. However, if
such stock is issued in the future, the rights of the holders of Common Stock
could be materially adversely affected. It is possible that the Board of
Directors could grant
9
<PAGE>
future holders of Preferred Stock rights that could restrict the Company's
ability to merge or sell its assets to a third party, resulting in preservation
of the control of the Company by its then current owners. The Preferred Stock
provisions of the Company's Articles of Incorporation could inhibit a third
party from acquiring a significant amount of the Common Stock, thereby delaying
or preventing changes of the management or control of the Company, and possibly
materially adversely affecting the Common Stock price as a result. See
"Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE. As of May 20, 1996, shareholders held a
total of 6,930,013 shares of Common Stock, including 6,345,197 shares of Common
Stock held by BFGoodrich. All holders of outstanding shares of Common Stock
have signed agreements ("lock-up agreements") under which they have agreed not
to sell any shares of Common Stock for a period of 180 days from the date of
this Prospectus without the prior written consent of the Representatives of the
Underwriters. After expiration of the lock-up agreements, shares of Common
Stock may become eligible for sale in the public market, subject to the volume
limitations under Rule
144 of the Securities Act of 1933, as amended (the "Securities Act"). Of the
holders of Common Stock, only affiliates of the Company will be affected by the
volume limitations of Rule 144. Furthermore, BFGoodrich has rights to require
the Company to register sales of its shares of Common Stock under the
Securities Act in certain circumstances.
In connection with the closing of the Offering, DTM employees will hold
immediately exercisable options to purchase an estimated 825,175 shares of
Common Stock under the Equity Appreciation Plan at prices substantially less
than the Offering price. See "Management--Equity Appreciation Plan." The sale
of shares of Common Stock issued upon exercise of stock options outstanding
under the Equity Appreciation Plan will not be restricted other than by the
registration requirements of the federal securities laws. The Company intends
to register the issuance and the sale of the shares of Common Stock issuable on
exercise of options under the Equity Appreciation Plan on a Form S-8
Registration Statement concurrently with the Offering described herein. As a
result, the Common Stock acquired by employees of DTM upon exercise of options
outstanding under the Equity Appreciation Plan will be freely tradeable.
However, all employees of the Company have signed lock-up agreements under
which they have agreed not to sell any shares of Common Stock, including shares
issuable upon the exercise of options under the Equity Appreciation Plan, for a
period of 180 days from the date of this Prospectus, without the prior written
consent of the Representatives of the Underwriters.
Sales of shares of Common Stock into the market by current shareholders or
employees exercising options could cause a decline in the price of such stock.
See "Management," "Shares Eligible for Future Sale" and "Underwriting."
LACK OF PRIOR PUBLIC MARKETS; VOLATILITY. Prior to the Offering, the Common
Stock was held by a small number of investors and was not traded on any public
market. There can be no assurance of active trading in the Common Stock after
the Offering is completed. The Offering price of the Common Stock was
determined by negotiations among the Company and the Underwriters and may not
be indicative of the market price for shares of the Common Stock after the
Offering. See "Underwriting." The Company has applied for quotation of the
Common Stock on the Nasdaq National Market. Historically, the stock market has
experienced volatility that has particularly affected the market price of
common stock of technology-related companies. That volatility sometimes has
been unrelated to the operating performance of such companies. These
fluctuations could, in themselves, and without reference to any fact unique to
the Company, cause a material adverse effect on the price of the Common Stock.
General economic conditions, such as recessions or high interest rates, could
have a similar material adverse effect. In addition, developments in the rapid
prototyping industry and failure to meet financial analysts' expectations could
cause significant fluctuations in the price of the Common Stock.
DILUTION. Purchasers of shares of Common Stock offered hereby will suffer
immediate and substantial dilution of $10.96 per share. See "Dilution."
10
<PAGE>
THE COMPANY
DTM Corporation was incorporated in Texas in 1987 for the purpose of
licensing and commercializing the selective laser sintering technology
developed and patented by The University of Texas. DTM has acquired an
exclusive worldwide license to the selective laser sintering technology from
The University of Texas, which includes the original patents plus a right of
first refusal to all improvements thereon. The Company has nine shareholders,
including BFGoodrich, which owns approximately 92 percent of the outstanding
Common Stock, DTM Holdings, Ltd. and The University of Texas. See "Principal
and Selling Shareholders."
In 1992, the Company began commercial sales of the Sinterstation 2000
System. Prior to that time, the Company's revenues were generated solely from
operating a service bureau in Austin, Texas. Materials that have been
introduced for use in the Sinterstation 2000 System include: a polycarbonate
powder; two nylon powders; ProtoForm powder, a composite nylon powder;
RapidSteel powder, a metal powder used for the production of prototype mold
inserts; and TrueForm powder, a polymer-based material that the Company
believes will be extensively used to produce patterns for soft tooling and
investment casting.
The Company's executive offices are located at 1611 Headway Circle, Building
2, Austin, Texas 78754-5199, and its telephone number is (512) 339-2922.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Common
Stock offered hereby are estimated to be approximately $14.5 million, assuming
an Offering price of $12.00 per share. Of the net proceeds to the Company,
$8.2 million will be used to repay the Company's bank debt and $3.0 million
will be used to repay borrowings from BFGoodrich. The remaining net proceeds,
approximately $3.3 million, will be used to fund (i) working capital
requirements, (ii) research and development activities and (iii) expansion of
the Company's distribution network. The weighted average interest rate on the
debt to be retired with the proceeds of the Offering was 6.7% as of May 15,
1996. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Certain
Transactions--Outstanding Lines of Credit; Financing Transactions."
Other than repayment of debt, the actual amounts that the Company spends on
the various uses described above will be subject to the discretion of the
Board of Directors and the Company's management. DTM's spending patterns will
vary depending on changes in the cost of goods or services purchased by the
Company, evolution of its research and development programs and business
strategy, as well as market conditions, among other factors. Pending their use
as set forth above, the net proceeds to the Company from the Offering will be
invested in deposits with banks, investment grade securities and short-term
income-producing investments, including government obligations and other money
market instruments.
DIVIDEND POLICY
The Company has never paid any dividends on the Common Stock and does not
anticipate that it will pay dividends in the foreseeable future. The Company
intends to reinvest any earnings in the development and expansion of its
business. Any future determinations to pay cash dividends will be at the
discretion of the Board of Directors and will depend upon the Company's
earnings, capital requirements, financial condition, credit and loan covenants
at that time, as well as any other factors deemed relevant by the Board of
Directors. Furthermore, the Company is subject to restrictions on paying
dividends pursuant to the terms of a loan commitment letter from Texas
Commerce Bank. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
11
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company and its
consolidated subsidiary at March 31, 1996: (i) on an actual basis; (ii) on an
as adjusted basis to reflect the estimated accounting impact of the
conversion, in connection with the Offering, of all phantom stock appreciation
rights ("SARs") outstanding under the Equity Appreciation Plan into
immediately exercisable options to acquire shares of Common Stock ("EAP
Options"); and (iii) on an as adjusted basis to reflect item (ii) and the sale
of 1,330,000 shares of Common Stock by the Company (at an assumed Offering
price of $12.00 per share and after deducting estimated underwriting discount
and Offering expenses, totaling $1,500,000) and the application of the
estimated net proceeds therefrom.
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------------------
AS ADJUSTED
------------------------------------------
FOR THE OFFERING AND
CONVERSION OF THE
FOR CONVERSION OF THE SARS INTO
ACTUAL SARS INTO EAP OPTIONS EAP OPTIONS
-------- --------------------- --------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
SHORT-TERM BORROWINGS:
Borrowings under line of
credit from
BFGoodrich(1).......... $ 2,000 $ 2,000 $ --
Other short-term
borrowings............. 1,138 1,138 1,138
-------- -------- --------
Total short-term
borrowings............... $ 3,138 $ 3,138 $ 1,138
======== ======== ========
NOTES PAYABLE............. $ 8,200 $ 8,200 $ --
======== ======== ========
SHAREHOLDERS' EQUITY (DEF-
ICIT):
Preferred Stock, $.001
par value:
3,000,000 shares
authorized, no shares
issued and
outstanding............ $ -- $ -- $ --
Common Stock, $.0003 par
value:
60,000,000 shares
authorized(2);
6,930,013 actual shares
issued and outstanding;
8,260,013 shares issued
and outstanding as
adjusted for the
Offering(3)............ 2 2 2
Additional paid-in capi-
tal(4)................. 28,018 36,270 50,730
Accumulated deficit(4).. (32,549) (40,801) (40,801)
Cumulative translation
adjustment............. 62 62 62
-------- -------- --------
Total shareholders' equity
(deficit)................ $ (4,467) $ (4,467) $ 9,993
======== ======== ========
</TABLE>
- --------
(1) Borrowings under lines of credit from BFGoodrich were increased to $3
million during April 1996. The use of proceeds of the Offering will
include the repayment of all such borrowings from BFGoodrich at the date
of closing of the Offering.
(2) Reflects increase of authorized shares of Common Stock to 60,000,000
effected as of May 15, 1996.
(3) Includes the sale of 1,330,000 shares in the Offering and excludes an
estimated 825,175 shares of Common Stock that will be issuable upon
exercise of EAP Options. See "Management--Equity Appreciation Plan" and
"Underwriting."
(4) As Adjusted includes adjustments associated with the conversion, in
connection with the Offering, of SARs outstanding under the Equity
Appreciation Plan into immediately exercisable EAP Options with exercise
prices substantially less than the assumed Offering price. See
"Management--Equity Appreciation Plan" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
12
<PAGE>
DILUTION
As of March 31, 1996, the Company had a net tangible book value (deficit) of
$(5,864,000), or $(0.85) per outstanding share of Common Stock. Net tangible
book value (deficit) represents the amount of total tangible assets less total
liabilities. Adjusting such net tangible book value (deficit) per share to give
effect to the sale by the Company of 1,330,000 shares of Common Stock at an
assumed Offering price of $12.00 per share (and deducting from the assumed
proceeds estimated underwriting discount and Offering expenses to be paid by
the Company totaling $1,500,000), the Company's net tangible book value as
adjusted for the Offering at March 31, 1996 would have been $8,596,000, or
$1.04 per share of Common Stock. This constitutes an immediate increase in net
tangible book value of $1.89 per share to existing shareholders and immediate
dilution of $10.96 per share to new investors purchasing shares in the
Offering.
r After giving further effect to the issuance, for cash consideration of
$1,650,350, of the estimated 825,175 shares of Common Stock (the "EAP shares")
issuable upon exercise of immediately exercisable EAP Options to be outstanding
in connection with the closing of the Offering, the net tangible book value per
share as adjusted for the Offering and the issuance of EAP shares would have
been $1.13 per share. This constitutes an immediate additional increase in net
tangible book value of $0.09 per share to existing shareholders and new
investors and results in a cumulative immediate dilution of $10.87 per share to
new investors purchasing shares in the Offering.
<TABLE>
<S> <C> <C>
Assumed Offering price per share to new investors............ $12.00
======
Net tangible book value (deficit) per share as of March 31,
1996...................................................... $(0.85)
Increase per share attributable to new investors........... 1.89
------
Net tangible book value per share as adjusted for the
Offering.................................................. 1.04
Dilution per share to new investors after the Offering....... $10.96
======
Increase per share attributable to the issuance of EAP
shares.................................................... 0.09
------
Pro forma net tangible book value per share as adjusted for
the Offering and the issuance of EAP shares................. $ 1.13
======
Dilution per share to new investors after the Offering and
the issuance of the EAP shares.............................. $10.87
======
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1996,
the differences in the total consideration and the average price per share of
Common Stock paid or contributed by existing shareholders and to be paid by
purchasers of Common Stock from the Company in the Offering at an assumed
Offering price of $12.00 per share. For purposes of the table, the EAP Shares
are assumed to have been issued on March 31, 1996.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)(2).... 6,930,013 76.3% $28,020,000 61.4% $ 3.93
======
EAP shareholders............... 825,175 9.1 1,650,350 3.6 $ 2.00
--------- ----- ----------- ----- ======
7,755,188 85.4 29,670,350 65.0 $ 3.83
======
New investors(2)(3)............ 1,330,000 14.6 15,960,000 35.0 $12.00
--------- ----- ----------- ----- ======
Total........................ 9,085,188 100.0% $45,630,350 100.0% $ 5.02
========= ===== =========== ===== ======
</TABLE>
- --------
(1) Total consideration for existing shareholders is the Company's recorded
amounts for Common Stock and additional paid-in capital.
(2) Sales by the Selling Shareholders in the Offering will reduce the number of
shares held by existing shareholders to 5,746,013 shares or 69.6% of the
total number of shares of Common Stock outstanding after the Offering (or
63.2% assuming the exercise of the EAP Options), and will increase the
number of shares held by new investors to 2,514,000 or 30.4% of the total
number of shares of Common Stock outstanding after the Offering (or 27.7%
assuming the exercise of the EAP Options). See "Principal and Selling
Shareholders."
(3) Total consideration is not reduced by estimated underwriting discounts and
Offering expenses to be paid by the Company totaling $1,500,000.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial data for the five years ended December 31,
1995 is derived from audited consolidated financial statements of the Company.
The financial data for the three-month periods ended March 31, 1996 and 1995 is
derived from unaudited financial statements. The unaudited financial statements
include all adjustments, consisting of normal recurring accruals, which the
Company considers necessary for a fair presentation of the financial position
and the results of operations for these periods. Operating results for the
three months ended March 31, 1996 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 1996. The data
should be read in conjunction with the consolidated financial statements,
related notes and other financial information included herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA: (UNAUDITED)
Revenue:
Products............... $ -- $ 2,841 $ 6,989 $ 8,127 $ 12,632 $ 1,733 $ 5,329
Service and
support(1)............ 1,107 2,027 2,593 1,112 1,579 280 461
--------- --------- --------- --------- --------- --------- ---------
Total revenue......... 1,107 4,868 9,582 9,239 14,211 2,013 5,790
Cost of sales:
Products............... -- 2,431 5,329 4,833 8,242 1,132 3,109
Service and support.... 1,441 1,705 2,141 511 873 160 271
--------- --------- --------- --------- --------- --------- ---------
Total cost of sales... 1,441 4,136 7,470 5,344 9,115 1,292 3,380
--------- --------- --------- --------- --------- --------- ---------
Gross profit (loss).... (334) 732 2,112 3,895 5,096 721 2,410
Operating expenses:
Selling, general and
administrative........ 2,592 4,979 5,958 5,786 7,181 1,508 2,128
Research and
development........... 4,401 5,377 5,798 3,840 3,521 938 951
--------- --------- --------- --------- --------- --------- ---------
Total operating
expenses............. 6,993 10,356 11,756 9,626 10,702 2,446 3,079
Other income (expense):
Gain on sale of service
bureau................ -- -- 238 -- -- -- --
Interest income
(expense), net........ 93 (10) (328) (178) (530) (91) (219)
--------- --------- --------- --------- --------- --------- ---------
Total other income
(expense)............ 93 (10) (90) (178) (530) (91) (219)
--------- --------- --------- --------- --------- --------- ---------
Loss before income tax
benefit allocated
from BFGoodrich....... (7,234) (9,634) (9,734) (5,909) (6,136) (1,816) (888)
Income tax benefit
allocated from
BFGoodrich............ 2,159 3,032 3,084 1,825 2,138 487 319
--------- --------- --------- --------- --------- --------- ---------
Net loss............... $ (5,075) $ (6,602) $ (6,650) $ (4,084) $ (3,998) $ (1,329) $ (569)
========= ========= ========= ========= ========= ========= =========
Historical:
Net loss per share..... $ (1.74) $ (1.69) $ (1.03) $ (0.54) $ (0.52) $ (0.17) $ (0.07)
========= ========= ========= ========= ========= ========= =========
Number of shares used
in computing net loss
per share(2).......... 2,912,248 3,902,327 6,465,898 7,618,117 7,618,117 7,618,117 7,618,117
========= ========= ========= ========= ========= ========= =========
As Adjusted for the
Offering(3):
Net loss per share..... $ (0.41) $ (0.14) $ (0.05)
========= ========= =========
Number of shares used
in computing net loss
per share............. 8,948,117 8,948,117 8,948,117
========= ========= =========
BALANCE SHEET DATA (AT
PERIOD END):
Working capital
(deficit)............. $ 616 $ (2,808) $ 1,818 $ 342 $ 236 $ 558 $ (911)
Total assets........... 6,392 10,010 12,384 8,560 10,639 8,520 13,209
Total debt............. 100 4,425 3,000 4,600 9,076 6,240 11,338
Total liabilities...... 2,079 6,965 8,306 8,516 14,557 9,805 17,676
Shareholders' equity
(deficit)............. 4,313 3,045 4,078 44 (3,918) (1,285) (4,467)
</TABLE>
- --------
(1) Includes domestic rapid prototyping service bureau activity through
December 1993, at which time the Company sold its domestic service bureau.
Revenues associated with the service bureau operations for the years ended
December 31, 1991, 1992 and 1993 were $1.1 million, $1.9 million and $1.9
million, respectively.
(2) Includes, for all periods, the effect of an estimated 825,175 shares of
Common Stock issuable to employees upon the exercise of immediately
exercisable options (at exercise prices substantially less than the
Offering price) that will be outstanding under the Equity Appreciation Plan
in connection with the closing of the Offering. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and "Management--Equity Appreciation Plan."
(3) Reflects historical information, as adjusted for the issuance of 1,330,000
shares of Common Stock by the Company in the Offering and the elimination
of interest expense on the debt to be repaid with the proceeds of the
Offering.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto appearing
elsewhere in this Prospectus.
OVERVIEW
DTM Corporation develops, designs, manufactures, markets and supports, on an
international basis, rapid prototyping and rapid tooling systems and related
materials. The Company's SLS Systems and materials are based on proprietary and
patented selective laser sintering technology. The Company was incorporated in
1987. Prior to shipment of its first commercial SLS System in December 1992,
the Company derived revenues solely from a service bureau it operated in
Austin, Texas.
Revenues are generated by product sales and service and support activities.
Product revenues include sales of SLS Systems, related powdered materials and,
beginning in 1995, upgrades and rentals of SLS Systems. Service and support
activities include maintenance, warranty service, customer training and,
through 1993, the operation of a service bureau. When an SLS System is sold,
between 94 and 97 percent of the sales price is immediately recognized as
product revenue, with the remainder deferred and recognized ratably over the
System's 12-month warranty period as service and support revenue. Revenue
related to annual maintenance contracts is also deferred and recognized ratably
over the support period. The Company derived substantially all of its revenue
in fiscal years 1993, 1994 and 1995 and in the three months ended March 31,
1996 from sales of its Sinterstation 2000 System and related products and
services.
The Company competes on an international basis. Sales to customers outside of
the United States constitute a significant portion of DTM's revenues.
International sales are generally priced in U.S. dollars. However, European
sales prices are sometimes negotiated in either Deutsch Marks or the local
currency. The Company expects that international sales will continue to
represent a substantial portion of the Company's total revenues. See Note 16 to
the Consolidated Financial Statements.
Over the past three years, an element of the Company's business strategy has
been to increase its recurring sources of revenue, primarily through sales of
materials, maintenance services, SLS System upgrades and other supporting
products and accessories to users of SLS Systems. The Company expects to
continue this strategy. In 1995, sales of materials, services and upgrades
represented approximately 27 percent of total revenues. The Company anticipates
that materials sales, in particular, will represent an increasingly significant
portion of future revenues as its installed base of SLS Systems increases.
As more fully described herein, the Company has historically experienced
significant fluctuations in its gross margins. Such fluctuations were impacted
by, among other factors, the trade-in of pre-commercial SLS Systems for
commercial SLS Systems, the resale of such pre-commercial SLS Systems and the
sale of an internally utilized SLS System with a substantially depreciated net
book value. In addition, during 1994 and 1995, the Company experienced a
decline in the average sales price of the Sinterstation 2000 System over 1993
levels. Currently, however, the Company's gross margins have improved as SLS
System prices have increased due to the introduction of ProtoForm, RapidSteel
and TrueForm powders and the increased versatility of the Sinterstation 2000
System. Gross margins for the quarter ended March 31, 1996 increased to 41.6%
from 35.8% for the same period in 1995.
The Company's operating results have varied substantially from year to year
and quarter to quarter. Each sale by the Company of one of its SLS Systems can
be material to the operating results for any one quarter. Furthermore, new
product introductions, seasonality of customer buying patterns and other
factors can cause fluctuations in operating results.
15
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain income
statement data as a percentage of total revenues and certain cost of sales data
as a percentage of respective product revenues and service and support
revenues.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------- ---------------
1993 1994 1995 1995 1996
-------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Revenue:
Products................... 72.9% 88.0% 88.9% 86.1% 92.0%
Service and support........ 27.1 12.0 11.1 13.9 8.0
-------- ------- ------- ------ ------
Total revenues........... 100.0 100.0 100.0 100.0 100.0
Cost of sales:
Products................... 76.2 59.5 65.2 65.4 58.3
Service and support........ 82.6 46.0 55.3 57.1 58.8
-------- ------- ------- ------ ------
Total cost of sales...... 78.0 57.8 64.1 64.2 58.4
-------- ------- ------- ------ ------
Gross profit................. 22.0 42.2 35.9 35.8 41.6
Operating expenses:
Selling, general and
administrative............ 62.2 62.6 50.5 75.0 36.7
Research and development... 60.5 41.6 24.8 46.6 16.4
-------- ------- ------- ------ ------
Total operating
expenses................. 122.7 104.2 75.3 121.6 53.1
Other income (expense):
Gain on sale of service
bureau.................... 2.5 -- -- -- --
Interest expense, net...... (3.4) (1.9) (3.7) (4.5) (3.8)
-------- ------- ------- ------ ------
Total other income
(expense)............... (.9) (1.9) (3.7) (4.5) (3.8)
Loss before income tax
benefit allocated from
BFGoodrich.................. (101.6) (63.9) (43.1) (90.3) (15.3)
Income tax benefit allocated
from BFGoodrich............. 32.2 19.7 15.0 24.2 5.5
-------- ------- ------- ------ ------
Net loss..................... (69.4)% (44.2)% (28.1)% (66.1)% (9.8)%
======== ======= ======= ====== ======
</TABLE>
Comparison of Three Months Ended March 31, 1996 and March 31, 1995
Revenues. Revenues for the three months ended March 31, 1996 were $5.8
million, an increase of 187.8 percent, or $3.8 million, compared to revenues of
$2.0 million for the same period in 1995.
Product sales revenue for the three months ended March 31, 1996 was $5.3
million, an increase of 204.9 percent, or $3.6 million, compared to product
sales revenue of $1.7 million for the same period in 1995. The increase was
primarily attributable to higher sales of SLS Systems and powdered materials.
The number of SLS Systems sold or rented increased to 12 in the three months
ended March 31, 1996 from six in the same period in 1995. Revenues from
powdered materials sales increased as a result of a larger number of installed
SLS Systems along with the introduction of the Company's ProtoForm and TrueForm
powdered materials in late March 1995 and February 1996, respectively.
Service and support revenue for the three months ended March 31, 1996 was
$461,000, an increase of 64.6 percent, or $181,000, compared to service and
support revenue of $280,000 for the same period in 1995. Service and support
revenue increased primarily as a result of the recognition of deferred warranty
and maintenance revenue associated with the larger number of installed SLS
Systems.
16
<PAGE>
Gross Profit. Gross profit for the three months ended March 31, 1996 was
$2.4 million, an increase of 234.3 percent, or $1.7 million, compared to gross
profit of $721,000 for the same period in 1995. As a percentage of revenue,
gross profit increased to 41.6 percent during the period from 35.8 percent in
the three months ended March 31, 1995.
Gross profit attributable to product sales for the three months ended March
31, 1996 was $2.2 million, an increase of 270.0 percent, or $1.6 million,
compared to gross profit attributable to product sales of $600,000 for the
same period in 1995. As a percentage of product sales revenue, gross profit
increased to 41.7 percent during the period, compared to 34.6 percent for the
same period in 1995. The increase in gross profit as a percentage of product
sales revenue resulted primarily from an increase in the average SLS System
sales price in the three months ended March 31, 1996 compared to the same
period in 1995. Gross profit margin was also positively impacted during the
three months ended March 31, 1996 by the sale of an SLS System that had been
used in the Company's operations and was carried on the Company's books at a
substantially depreciated value.
Gross profit attributable to service and support revenues for the three
months ended March 31, 1996 was $190,000, an increase of 58.3 percent, or
$70,000, compared to gross profit attributable to service and support revenues
of $120,000 for the same period in 1995. As a percentage of service and
support revenue, gross profit was 41.2 percent and 42.9 percent for the three-
month periods ended March 31, 1996 and 1995, respectively.
Selling, General and Administrative Expense. Selling, general and
administrative expense for the three months ended March 31, 1996 was $2.1
million, an increase of 41.1 percent, or $620,000, compared to selling,
general and administrative expense of $1.5 million for the same period in
1995. As a percentage of revenue, selling, general and administrative expense
decreased to 36.8 percent in the three months ended March 31, 1996 from 75.0
percent in the same period in 1995, primarily due to the effect of fixed costs
being spread over a larger base of revenues. The increase in dollar costs
resulted from a larger workforce, increased marketing activities and increased
commissions paid to agents.
Research and Development Expense. Research and development expense for the
three months ended March 31, 1996 was $951,000, an increase of 1.4 percent, or
$13,000, compared to research and development expense of $938,000 for the same
period in 1995. As a percentage of revenue, research and development expense
decreased to 16.4 percent for the three months ended March 31, 1996 from 46.6
percent for the three months ended March 31, 1995, primarily due to the
increase in revenues.
Interest Expense. Interest expense for the three months ended March 31, 1996
was $219,000, an increase of $128,000 compared to interest expense of $91,000
for the same period in 1995. This reflects an increase in the average daily
balance of the Company's outstanding indebtedness and an increase in the
average interest rates on such debt.
Comparison of Years Ended December 31, 1995 and December 31, 1994
Revenues. Revenues for fiscal 1995 were $14.2 million, an increase of 53.8
percent, or $5.0 million, compared to revenues of $9.2 million for fiscal
1994.
Product sales revenue for fiscal 1995 was $12.6 million, an increase of 55.4
percent, or $4.5 million, compared to product sales revenue of $8.1 million
for fiscal 1994. The increase was primarily attributable to higher SLS Systems
and powdered materials sales. The number of SLS Systems shipped increased to
36 in 1995 (including two rental SLS Systems) from 23 in 1994. In 1995 the
Company began offering technological enhancements as upgrades to its SLS
Systems, which accounted for approximately $713,000 or 5.6 percent of product
revenues. Additionally, revenues from powdered materials sales increased by
approximately $784,000, or 72.7 percent, as a result of a larger number of SLS
System users purchasing DTM materials and the introduction of the Company's
new ProtoForm powdered material in March 1995.
17
<PAGE>
Service and support revenue for fiscal 1995 was $1.6 million, an increase of
42.0 percent, or $467,000, compared to service and support revenue of $1.1
million for fiscal 1994. Service and support revenue increased primarily as a
result of the recognition of deferred warranty and maintenance revenues
associated with the larger number of installed SLS Systems.
Gross Profit. Gross profit for fiscal 1995 was $5.1 million, an increase of
30.8 percent, or $1.2 million, compared to gross profit of $3.9 million for
fiscal 1994. As a percentage of revenue, gross profit decreased to 35.9
percent in 1995 from 42.2 percent in 1994.
Gross profit attributable to product sales for fiscal 1995 was $4.4 million,
an increase of 33.3 percent, or $1.1 million, compared to gross profit
attributable to product sales of $3.3 million for fiscal 1994. As a percentage
of product sales revenue, gross profit decreased to 34.8 percent in 1995 from
40.5 percent in 1994. The decrease in gross profit as a percentage of product
sales revenue resulted primarily from a lower average sales price of the
Company's SLS Systems in 1995 and because in 1994, the Company's gross profit
was positively impacted by the sale of two SLS Systems, the cost of which had
been recognized in 1993.
Gross profit attributable to service and support revenues for fiscal 1995
was $706,000, an increase of 17.5 percent, or $105,000, compared to gross
profit attributable to service and support revenues of $601,000 for fiscal
1994. As a percentage of service and support revenue, gross profit decreased
to 44.7 percent in 1995 from 54.0 percent in 1994. The decrease in gross
profit as a percentage of service and support revenue resulted from a greater
number of field service employees and related costs required to service a
larger, more geographically diverse installed base.
Selling, General and Administrative Expense. Selling, general and
administrative expense for fiscal 1995 was $7.2 million, an increase of 24.1
percent, or $1.4 million, compared to selling, general and administrative
expense of $5.8 million for fiscal 1994. As a percentage of revenue, selling,
general and administrative expense decreased to 50.5 percent in 1995 from 62.6
percent in 1994, primarily due to the increase in revenues. The increase in
dollar costs resulted from a larger workforce, increased marketing activities
and increased commissions paid to agents.
Research and Development Expense. Research and development expense for
fiscal 1995 was $3.5 million, a decrease of 8.3 percent, or $319,000, compared
to research and development expense of $3.8 million for fiscal 1994. As a
percentage of revenue, research and development expense decreased to 24.8
percent in 1995 from 41.6 percent in 1994, primarily due to the increase in
revenues.
Interest Expense. Interest expense for fiscal 1995 was $530,000, an increase
of $352,000 compared to interest expense of $178,000 for fiscal 1994. This
reflects an increase in the average daily balance of the Company's outstanding
indebtedness and an increase in the average interest rates on such debt.
Comparison of Years Ended December 31, 1994 and December 31, 1993
Revenues. Revenues for fiscal 1994 were $9.2 million, a decrease of 3.6
percent, or $343,000, compared to revenues of $9.6 million for fiscal 1993.
The decrease was primarily a result of the sale of the Company's domestic
service bureau operations in December 1993, which contributed $1.9 million of
revenues in 1993.
Product sales revenue for fiscal 1994 was $8.1 million, an increase of 16.3
percent, or $1.1 million, compared to product sales revenue of $7.0 million
for fiscal 1993. The increase was primarily attributable to higher sales of
SLS Systems and powdered materials. The number of SLS Systems shipped
increased to 23 in 1994 from 19 in 1993. The increase in materials sales was
reflective of the higher number of installed SLS Systems as well as the
introduction of the Company's fine nylon powdered material in 1994.
18
<PAGE>
Service and support revenue for fiscal 1994 was $1.1 million, a decrease of
57.1 percent, or $1.5 million, compared to service and support revenue of $2.6
million for fiscal 1993. The decrease was primarily a result of the sale of
the Company's domestic service bureau operations in 1993 as described above.
Gross Profit. Gross profit for fiscal 1994 was $3.9 million, an increase of
84.4 percent, or $1.8 million, compared to gross profit of $2.1 million for
fiscal 1993. As a percentage of revenue, gross profit increased to 42.2
percent in 1994 from 22.0 percent in 1993.
Gross profit attributable to product sales for fiscal 1994 was $3.3 million,
an increase of 98.4 percent, or $1.5 million, compared to gross profit
attributable to product sales of $1.7 million for fiscal 1993. As a percent of
product sales revenue, gross profit increased to 40.5 percent in 1994 from
23.8 percent in 1993. The increase in gross profit as a percentage of revenues
was to a large extent attributable to a new marketing and pricing strategy for
materials implemented in 1994 and a decrease in the average SLS System cost
due to volume discounts negotiated with suppliers. Gross margin for product
sales in 1994 was positively impacted by the sale of two SLS Systems, the cost
of which had been recognized in 1993. Additionally, 1993's gross profit margin
was negatively impacted by the exchange of five SLS Systems it sold in 1992
for five next generation SLS Systems.
Gross profit attributable to service and support revenues for fiscal 1994
was $601,000, an increase of 33.0 percent, or $149,000, compared to gross
profit attributable to service and support revenues of $452,000 for fiscal
1993. As a percentage of service and support revenues, gross profit increased
to 54.0 percent in 1994 from 17.4 percent in 1993. Additionally, 54.4 percent
of the gross profit in 1993 was attributable to the Company's domestic service
bureau operations that were sold in December 1993. The relatively low gross
profit as a percentage of revenues in 1993 was due to an upgrade to a large
portion of the installed base of SLS Systems for which there were no
associated revenues.
Selling, General and Administrative Expense. Selling, general and
administrative expense for fiscal 1994 was $5.8 million, a decrease of 2.9
percent, or $172,000, compared to selling, general and administrative expense
of $6.0 million for fiscal 1993. As a percentage of revenue, selling, general
and administrative expense remained relatively constant at 62.6 percent and
62.2 percent for 1994 and 1993, respectively.
Research and Development Expense. Research and development expense for
fiscal 1994 was $3.8 million, a decrease of 33.8 percent, or $2.0 million,
compared to research and development expense of $5.8 million for fiscal 1993.
As a percentage of revenue, research and development expense decreased to 41.6
percent in 1994 from 60.5 percent in 1993, primarily due to the increase in
revenues. The dollar decrease was primarily due to a substantial reduction in
the use of consultants and contractors in 1994 and a reduction of the
Company's work force in late 1993.
Interest Expense. Interest expense for fiscal 1994 was $178,000, a decrease
of $150,000 compared to interest expense of $328,000 for fiscal 1993. This
reflects a decrease in the average daily balance of the Company's indebtedness
and a decrease in the average interest rates on such debt. Average borrowings
decreased due to the exercise by BFGoodrich of its options to convert a $3.0
million loan to equity in March 1993 and a $4.5 million loan to equity in
December 1993.
SELECTED QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly results of
operations for the three-month periods ended March 31, 1994 through March 31,
1996. This information has been presented on substantially the same basis as
the audited consolidated financial statements appearing elsewhere herein. The
unaudited quarterly results of operations should be read in conjunction with
the Company's audited consolidated financial statements and
19
<PAGE>
related notes. The quarterly financial information presented herein should not
be relied upon as an indication of future quarterly performance.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1994 1994 1994 1994 1995 1995 1995 1995 1996
--------- -------- ------------- ------------ --------- -------- ------------- ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SLS Systems sold
or rented........ 5 6 5 7 6 9 10 11 12
Revenues:
Product.......... $ 1,761 $ 2,106 $ 1,620 $ 2,640 $ 1,733 $ 2,870 $ 3,000 $5,029 $5,329
Service and
support......... 287 280 278 267 280 324 488 487 461
------- ------- ------- ------- ------- ------- ------- ------ ------
Total............ 2,048 2,386 1,898 2,907 2,013 3,194 3,488 5,516 5,790
Cost of sales:
Product.......... 1,193 1,037 993 1,610 1,132 2,030 2,014 3,066 3,109
Service and
support......... 114 143 192 62 160 170 300 243 271
------- ------- ------- ------- ------- ------- ------- ------ ------
Total............ 1,307 1,180 1,185 1,672 1,292 2,200 2,314 3,309 3,380
------- ------- ------- ------- ------- ------- ------- ------ ------
Gross profit...... 741 1,206 713 1,235 721 994 1,174 2,207 2,410
Operating
expenses......... 2,107 2,332 2,381 2,806 2,446 2,580 2,642 3,034 3,079
------- ------- ------- ------- ------- ------- ------- ------ ------
Operating loss.... $(1,366) $(1,126) $(1,668) $(1,571) $(1,725) $(1,586) $(1,468) $ (827) $ (669)
======= ======= ======= ======= ======= ======= ======= ====== ======
</TABLE>
SEASONALITY
The Company's revenues are affected by capital budgeting and spending
patterns in the North American market and shortened selling periods in certain
international markets. Due to these seasonal factors, the Company typically
experiences slowdowns in sales of SLS Systems during the first quarter as the
result of capital spending patterns in the North American market and during
the third quarter as the result of shortened selling periods in certain
international markets. As total revenues have increased on an annual basis,
the impact of these seasonal trends has become less apparent to the Company's
results of operations.
EQUITY APPRECIATION PLAN
The Company adopted a phantom stock appreciation rights plan whereby all
phantom stock appreciation rights outstanding upon the Offering will be
converted into immediately exercisable options to acquire shares of the
Company's Common Stock. Such conversion will result in a non-recurring, non-
cash, compensation expense, in the quarter in which it becomes probable that
the closing of the Offering will occur. The amount to be recognized as
compensation expense, with respect to SARs granted during 1995 (which comprise
approximately 96.8% of the total number of SARs granted), will be equal to
approximately 10 percent of the equity value of the Company in excess of $14
million and will adversely affect operating results in the quarter and in the
year in which it is recorded. Assuming an Offering price of $12.00 per share,
such operating results would be adversely affected by a compensation expense
of approximately $8 million, resulting in a substantial reported net loss. See
"Management--Equity Appreciation Plan" and "Note 15--Employee Incentive Plan"
to the audited Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, cash used by the Company for operations and investing
activities has exceeded cash generated by the Company. The Company generally
has financed its cash needs through transactions with BFGoodrich and
borrowings from commercial banks and other short-term sources.
Net cash used in operating activities was approximately $3.3 million, $1.8
million and $1.6 million in 1993, 1994 and 1995, respectively and $1.7 million
for the three months ended March 31, 1996. Net cash used in operating
activities of $1.6 million for fiscal 1995 resulted primarily from the net
loss for the year of $4.0 million adjusted for depreciation and amortization
of $2.5 million. In addition, increases in accounts receivable of $1.3 million
and net amounts due to BFGoodrich (excluding short-term borrowings) of $1.1
million were offset by increases to both accounts payable of $1.5 million and
accrued expenses and other liabilities of $654,000. Net cash used in operating
activities of $1.7 million for the three months ended March 31, 1996 included
the net loss of $569,000 adjusted for depreciation and amortization of
$449,000. Increases in accounts receivable of $1.1
20
<PAGE>
million and in inventory of $1.2 million were both the result of the
substantial increase in sales volume experienced by the Company in the
quarter. An increase in prepaid expenses and other assets of $576,000 and a
decrease in accrued expenses and other liabilities of $555,000 was offset by
an increase in accounts payable of $1.4 million. For the three years ended
December 31, 1993, 1994 and 1995, and for the three months ended March 31,
1996, BFGoodrich paid the Company approximately $3.1 million, $1.8 million,
$2.1 million and $319,000, respectively, for tax benefits resulting from
inclusion of the Company in the consolidated income tax return of BFGoodrich.
Such amounts are included in "Due to/from BFGoodrich" in changes in assets and
liabilities used in operating activities in the Consolidated Statements of
Cash Flows in the Consolidated Financial Statements. See Note 10 to the
Consolidated Financial Statements.
The Company's investing activities include expenditures for patents and
licenses, capitalized software costs and furniture and equipment, principally
consisting of the Company's SLS Systems built for internal use and rental
purposes. Net cash used by investing activities was approximately $1.1
million, $1.4 million and $2.4 million in 1993, 1994 and 1995, respectively
and $883,000 for the three months ended March 31, 1996. The Company expects
that capital expenditures in 1996 will approximate $2.1 million.
The Company has, to a large extent, financed its operations through various
transactions with BFGoodrich. In March 1993, BFGoodrich exercised an option to
convert a $3.0 million note from the Company into equity; and, in December
1993, converted a $4.5 million note and interest thereon into equity. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations."
Total indebtedness of the Company was approximately $11.3 million as of
March 31, 1996, consisting primarily of notes payable to commercial banks,
short-term borrowings from other financing sources and two lines of credit
extended to the Company by BFGoodrich under which the Company may borrow up to
$3.0 million. As of March 31, 1996, amounts outstanding under these facilities
were $8.2 million, approximately $1.1 million, and $2.0 million respectively,
at weighted average interest rates of 5.94 percent, 19.29 percent and 8.75
percent, respectively. In connection with the Offering, the Company is
required to repay all its bank indebtedness and the amounts outstanding under
the lines of credit with BFGoodrich. Absent the Offering, the notes payable to
the banks mature July 31, 1997, the $1.0 million line of credit from
BFGoodrich, which the Company entered into in April 1996, matures December 31,
1996 and the $2.0 million line of credit from BFGoodrich matures March 1,
1997. Short term borrowings mature upon collection of the related
collateralized receivables or termination of the related SLS System rental
agreement. In the past, BFGoodrich assisted the Company in obtaining loans
from commercial banks by providing comfort letters to lenders. The Company has
been advised by BFGoodrich that upon completion of the Offering it does not
intend to continue to finance, or arrange for the financing of, the operations
of the Company.
In May 1996, the Company obtained a loan commitment letter from Texas
Commerce Bank for a revolving line of credit ("line of credit") contingent
upon the Company receiving net cash proceeds (gross proceeds less underwriting
discount) of $13.4 million from the Offering and the negotiation of definitive
loan agreements. During the remainder of 1996, and on an ongoing basis
thereafter, the Company's ability to borrow under the line of credit is
subject to meeting certain financial thresholds, including attaining certain
levels of "established profitability," as defined in the commitment letter.
Until achieving one such level, the Company may borrow up to $2 million;
thereafter, subject to a borrowing base calculation, available advances
against eligible receivables may be increased up to a maximum of $6 million.
Loans under the line of credit will mature within one year, will be
collateralized by the Company's accounts receivable and inventory and will
bear interest at the bank's prime interest rate plus one and one quarter
percent. The Company will be bound by customary covenants, including
restrictions on additional liens or borrowings, as well as the payment of
dividends, and affirmative reporting requirements. In addition, the terms of
the commitment letter specify that the bank has the option to terminate the
commitment on 30 days notice if employment of the chief executive officer of
the Company terminates and a qualified successor is not appointed by the
Company and approved by Texas Commerce Bank within a specified period of time.
The Company believes that the available cash balances upon completion of the
Offering, after repayment of the amounts identified above and the new bank
line of credit, along with cash from operations, will provide sufficient
liquidity for the Company to meet its anticipated cash requirements for at
least the 12 months following the Offering.
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<PAGE>
BUSINESS
DTM Corporation develops, designs, manufactures, markets and supports, on an
international basis, rapid prototyping and rapid tooling systems and related
materials. The Company's SLS Systems and materials are based on proprietary
and patented selective laser sintering technology. Rapid prototyping is the
creation of a solid three-dimensional model or prototype directly from CAD
data. Rapid tooling is the creation of durable tooling that can be
subsequently employed to produce substantial quantities of parts for market
introduction. Use of the Company's SLS Systems significantly reduces the time
required to produce models and prototypes for testing actual product fit and
form, ergonomic design and functionality from what otherwise could be months
or weeks to days or, in some cases, hours. The Company's SLS Systems are used
to accelerate the design, development and market introduction of products in a
wide range of industries, including but not limited to the automotive,
aerospace, medical, electronics, telecommunications, computer, appliance,
footwear, toy and power tool industries. BFGoodrich currently owns
approximately 92 percent of the outstanding Common Stock. See "Principal and
Selling Shareholders."
INDUSTRY OVERVIEW
Since the 1980s, the field of product engineering, design and development
has undergone rapid change with ever-increasing emphasis on time to market as
a key factor in successful product introduction. The rapid prototyping
industry has arisen as a part of, and in response to, this change. In
addition, utilization and growth in purchases of rapid prototyping systems
have been directly influenced by the availability of CAD installations. During
the early years of the rapid prototyping industry, the limited availability of
CAD outside of North America restricted growth; however, worldwide
installations of CAD have proliferated in recent years, making rapid
prototyping technology a viable alternative to conventional methods.
Development of Rapid Prototyping
Under conventional technology, models, prototypes, patterns and metal mold
inserts are typically created using "subtractive" milling and machining
techniques--cutting and sanding solid blocks of materials to arrive at the
desired shape. Depending on the material used and the complexity of the part,
this process can be time-consuming and expensive. In some cases, the only way
to create an appropriate test model or prototype using conventional methods is
essentially to duplicate the steps used to create the mass-produced product.
The conventional processes can take weeks, and in some cases months, and often
introduce costly steps and delays for a manufacturer seeking to take advantage
of a new market opportunity.
The first rapid prototyping systems were introduced in 1986 in an attempt to
address some of the cost and time to market disadvantages of conventional
technology. These systems were based on stereolithography, a process that uses
a laser to convert liquid resin into a solid part. Because of the nature of
the resin material, these initial systems were only capable of producing parts
for use as concept models that were limited to verification of the design's
form and fit. Successive technologies such as selective laser sintering, along
with advances in stereolithography, have broadened the applications for rapid
prototyping to include functional prototypes and patterns for secondary
processes that enable users to test actual product fit and form, ergonomic
design and functionality.
Benefits of Rapid Prototyping
The capability of rapid prototyping to quickly manufacture models,
prototypes, patterns and metal tool inserts affords users the opportunity to
save time and money by (i) reducing the product development and design cycle
and, consequently, speed the time to market for new products, (ii) avoiding
product design and development errors by allowing designers to check the fit,
form and function of new designs prior to mass production and (iii) minimizing
the use of more costly conventional techniques.
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<PAGE>
Rapid prototyping also has made it possible to create patterns that are
subsequently converted into usable parts through secondary processes such as
the production of non-durable molds and investment casting. A common technique
for replicating small numbers of parts is to use a non-durable mold, in which
the rapid prototyping pattern is embedded in silicone rubber that hardens,
then is cut open to create a mold. The non-durable mold is used to replicate
parts by injecting the mold with a plastic polymer. Typically, between 10 and
30 parts can be replicated before the mold breaks down. The Company believes
that the creation of patterns for the production of non-durable molds is one
of the fastest growing applications in the rapid prototyping market.
Investment casting is a common manufacturing process used for the production
of metal parts. For investment casting, a rapid prototyping pattern is coated
with a ceramic slurry (particles suspended in a liquid). After the slurry has
hardened, the ceramic coated pattern is placed in a furnace where the pattern
is burned out leaving a ceramic shell. The ceramic shell is cooled and molten
metal is poured into the shell. When the metal has hardened, the ceramic shell
is removed, leaving a metal part.
An emerging capability of rapid prototyping is the creation of core and
cavity metal mold inserts from metal powder for use in making injection molded
plastic parts. The Company believes that its RapidTool process is currently
the only commercially practiced rapid prototyping process that produces such
prototype tooling from metal powder or that has the potential to produce metal
parts from metal powder.
Market Direction
According to industry analysts Wohlers Associates, the estimated worldwide
market for rapid prototyping goods and services in 1995 was approximately $295
million, a 50 percent increase over 1994. Wohlers Associates projects that the
industry will grow at a compound annual rate of approximately 49% for the next
two years, reaching a size of over $650 million by the end of 1997. Wohlers
Associates further estimated that suppliers of rapid prototyping systems,
services and materials accounted for about half of the industry's 1995
revenue, with service bureaus accounting for the remainder. Service bureaus
typically offer a full line of product design, prototyping and limited-run
manufacturing services. They are generally used by companies that may not be
able to justify the cost of their own rapid prototyping system, that have
elected to outsource rapid prototyping services or that may choose to
investigate different technologies before making their own investment in a
rapid prototyping system. The Company anticipates that service bureaus will
continue to be a major provider of rapid prototyping goods and services.
The Company believes that the emerging ability of rapid prototyping to make
prototype metal molds for use in plastic injection molding will expand rapid
prototyping beyond pattern, model and prototype applications, thereby further
fueling market growth. The Company also anticipates that the demand for rapid
prototyping materials and related services will grow significantly as the
installed base increases and will represent an increasingly significant
portion of future total industry revenues.
DTM believes that the industry is entering a process of market segmentation
with a high- and low-end distinction emerging. The low-end segment is
characterized by smaller, lower-priced rapid prototyping systems, or "desk-
top" systems. These desk-top systems produce models primarily for evaluating
design form and fit and are designed with an emphasis on speed of part build
as opposed to part accuracy and functionality. Today, this type of application
is served by virtually all existing commercial systems regardless of their
price or size. The Company also believes that a high-end market segment is
emerging, which will be served by rapid prototyping systems, such as the
Sinterstation 2000 System, that produce functional parts and can be integrated
into rapid manufacturing processes. These systems are generally larger, more
complex, more expensive and more versatile than desk-top systems. The Company
anticipates that integration of high-end systems into the manufacturing
process will occur as rapid prototyping technologies such as selective laser
sintering introduce the capability to quickly produce both tooling that can
produce parts and the parts themselves in the manufacturers' desired
quantities and materials of choice. In particular, the Company believes that
the key to continuing widespread acceptance of a particular rapid prototyping
system will be its ability to reduce time to market by quickly producing
tooling, either permanent or prototype, for functional part production.
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<PAGE>
THE DTM RAPID PROTOTYPING SOLUTION
The market for rapid prototyping products and services includes multiple,
competing technologies. DTM believes that it is the only company that markets
selective laser sintering in North America and one of only two companies that
market the technology outside of the United States. See "Business--
Intellectual Property" and "Business--Legal Proceedings." The Company believes
that the following characteristics differentiate its selective laser sintering
process from other competing rapid prototyping technologies:
Strong and Durable Functional Plastic Prototypes
The selective laser sintering process produces parts that can be drilled,
painted, equipped with electronics and mounted in working product
assemblies that duplicate the final product. Unlike parts produced with
many other technologies, these prototypes can be used for rigorous testing
of product designs in harsh conditions such as extreme temperatures and
high humidity. For example, prototype parts produced using the selective
laser sintering process have been placed in automobile engines and operated
for up to 30,000 miles. Product development and design teams can minimize
performance problems and reduce design errors by testing parts in projected
use conditions prior to the mass production of a product.
RapidTool Process Capability
The ability to produce metal mold inserts from metal powder reduces the
time required to make tooling for the production of substantial quantities
of plastic parts for market testing or introduction. Conventional milling
and machining techniques can require weeks, and in some cases months, and
are labor intensive. The RapidTool process can produce prototype metal mold
inserts in less than 10 working days, with minimal supervision. The Company
believes that competing, commercial rapid prototyping technologies
currently do not have the ability to create tooling from metal powder.
Wide Range of Applications
The Company's Sinterstation 2000 System can process six different
materials: a polycarbonate powder; two nylon powders; ProtoForm powder (a
nylon composite); RapidSteel powder; and TrueForm powder. RapidSteel powder
was introduced in late 1995 for use in the Company's RapidTool process.
TrueForm powder was introduced in early 1996 for use as a pattern material
for non-durable mold applications and investment casting. This range of
materials permits the user of an SLS System to produce models, functional
prototypes, tooling and patterns. Transition from one material to another,
and hence from one application to another, generally takes less than one
hour. The Company does not believe that a potential rapid prototyping user
could duplicate the SLS System's total materials and applications
capability through the use of any other single rapid prototyping system.
Expandable and Upgradable Technology
DTM's selective laser sintering technology has potential for expansion,
both in terms of improvements to the process and in terms of current and
potential powdered sintering materials and applications. The Company
believes that a significant advantage of selective laser sintering is that
new and improved materials will, in most cases, be capable of being used in
existing SLS Systems with very few modifications, if any. In addition, the
Company has recently introduced a number of upgrades to the Sinterstation
2000 System that allow current SLS System users to capture the benefits of
DTM's SLS System product improvement programs without having to purchase a
new SLS System. For example, DTM recently made available to its existing
customers a laser scanning upgrade that, with an on-site retrofit, provides
enhanced part accuracy and quality. The ability to retrofit SLS Systems
affords DTM's customers a degree of protection against the rapid
obsolescence found in many products using other emerging technologies.
SLS System Productivity
The Company believes that its SLS System has certain productivity
advantages over competing rapid prototyping systems. In the selective laser
sintering process, the unfused powder remains in the build
24
<PAGE>
chamber, supporting the shape of the part during the build. Due to this
support, multiple part builds can be stacked in the Sinterstation 2000
System part build chamber, which allows the SLS System to produce multiple
parts in a single run. Conversely, competing technologies require multiple
runs of a system to create multiple parts. The Company also believes that
its SLS System has part build speed advantages over other rapid prototyping
technologies.
BUSINESS STRATEGY
Since its inception, the Company's focus has been on the development and
improvement of the SLS System and related materials. During 1995, the Company
began shifting its focus to concentrate on the development and execution of an
international marketing and distribution strategy for its products. With the
advances the Company has recently achieved in the form of the RapidTool
process and the introduction of RapidSteel, TrueForm and ProtoForm powders,
the Company believes that it is positioned to capitalize on its competitive
advantages through the following strategies:
Capitalize on RapidTool Process Capability
DTM plans to pursue a leadership role in metal injection mold insert
applications by marketing the proprietary RapidTool process to tool making
operations within OEMs, service bureaus and tool manufacturing companies.
The Company believes that the successful introduction of its RapidTool
process will facilitate the integration of the selective laser sintering
technology into manufacturing processes, an area that has experienced
limited penetration by other rapid prototyping techniques.
Increase Share of Existing Market Applications
The creation of strong and durable parts, as well as patterns for secondary
processes, are two of the fastest growing existing applications in the
rapid prototyping industry. The Company believes that its ProtoForm powder
has allowed it to become a leading supplier of rapid prototyping systems
for use in the production of functional prototypes. Additionally, TrueForm
powder allows the SLS System user to manufacture non-durable patterns that
can be used to fabricate non-durable molds, as well as to create rubber
parts through investment casting. The Company believes that its TrueForm
powder will enhance DTM's ability to market the SLS System to customers in
the fast growing pattern segment of the rapid prototyping market. The
Company expects to realize increased market share as customer awareness of
the benefits of ProtoForm and TrueForm powders increases.
Expand Selective Laser Sintering Materials Offerings
Based upon recent successful new materials introductions, the Company
believes that it has established the requisite expertise and processes with
which to further broaden its selective laser sintering materials product
line. Preliminary experiments, coupled with the proven diversity of the
selective laser sintering materials capability, lead the Company to believe
that in the future it should be possible to (i) broaden the performance of
the selective laser sintering process to include the production of metal
prototype parts, (ii) develop new and improved functional plastic
prototyping materials, (iii) broaden the selective laser sintering metal
mold inserts product line to include additional durable materials, (iv)
develop a metal material which, when used in the selective laser sintering
process, allows for the production in less than 48 hours of durable molds
that have a mold production life of up to approximately 500 parts, an
application not efficiently served by current rapid prototyping technology
and (v) develop a ceramic-based materials system for the production of
tools and parts. The Company believes that as a result of this strategy,
recurring sources of revenue, such as materials, will become an
increasingly larger portion of total revenues.
Expand Distribution Network
Throughout the next year, the Company intends to continue to expand its
direct sales force, agent network and service and support capabilities.
Specifically, the Company intends to increase its direct sales force in
Western Europe and North America and extend its agent network into
additional key South American,
25
<PAGE>
Pacific Rim and Eastern European countries. Expansion of the Company's
field service and support functions will parallel the growth of the sales
organization. The Company intends to emphasize its commitment to customer
support by decentralizing its field service and applications support
resources into regional offices, thereby minimizing its response time to
customer support requests.
DTM'S SELECTIVE LASER SINTERING TECHNOLOGY
The Selective Laser Sintering Process
The Company's SLS Systems employ a combination of software and hardware to
produce plastic models, functional prototypes and patterns from powdered
materials. The patterns can, in turn, be used for secondary processes such as
the production of non-durable molds and investment casting. SLS Systems also
can be used to produce metal prototype mold inserts. Customers input designs
into the SLS System in the form of CAD drawings, typically in STL format, an
industry-standard file type that most CAD systems can generate. From the CAD
file, SLS Systems quickly and accurately produce models, prototypes, patterns
and tooling in the specified shape.
The Company's selective laser sintering process uses laser energy to sinter
powdered material to create solid objects. The object described by the CAD
file is built layer by layer using the following technique:
. As the selective laser sintering process begins, a thin layer of the
heat-fusible powder is deposited onto the part-build cylinder within the
process chamber.
. An initial cross-section of the object under fabrication is selectively
"drawn" on the layer of powder by a heat-generating CO/2/ laser. The
interaction of the laser beam with the powder elevates the temperature to
the point of melting, fusing the powder particles and forming a solid
mass. The intensity of the laser beam is modulated to melt the powder
only in areas defined by the object's design geometry.
. An additional layer of powder is deposited via a roller mechanism on top
of the previously scanned layer.
. The process is repeated, with each new layer fusing to the layer below
it. Successive layers of powder are deposited and the process is repeated
until the part is complete.
The RapidTool Process
The RapidTool process employs selective laser sintering to produce
steel/copper composite mold inserts. RapidSteel powder, DTM's polymer-coated
steel powder, is placed in the Sinterstation 2000 System. A "green" part
(which consists of metal powder held together by the polymer) is then produced
by using the laser to selectively sinter the polymer binder and effectively
bind the metal particles together, replicating the mold inserts described in a
CAD file. The green part is formed using the same layer by layer manufacturing
process that is used to make plastic parts. The green part is dipped in a
polymer binder solution that infiltrates the part and, after drying for
several hours, gives the green part the hardness necessary for the subsequent
process step in a furnace. The furnace cycle consists of a multi-stage firing
cycle. The first stage burns out the remaining polymers from the steel matrix,
the second stage lightly sinters the metal particles together and the final
stage infiltrates copper into the steel matrix.
PRODUCTS
The Sinterstation 2000 System
The Sinterstation 2000 System contains three key hardware modules: (i) the
Powder Engine Module, where the laser sinters the powdered material and builds
the prototype, model or mold insert; (ii) the Controls Module, which contains
the computer and system operator's console for running the SLS System; and
(iii) the Environment Control Module, which regulates the temperature and
atmosphere of the build chamber. The size and number of objects that can be
built in the build chamber varies depending on the part size, type of
sintering powder used and part configuration. Objects that are larger than the
size of the build chamber can often be built in pieces and then assembled with
no sacrifice in strength or accuracy.
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<PAGE>
The Company has developed a large library of application software designed
to control the selective laser sintering process. This software sets
parameters and directs the various components of the platform hardware based
on the type of material being used in the build process. The Company also has
designed a range of service, support and utility software programs to assist
customers in optimizing the prototype and mold building process. For example,
one of the Company's productivity programs organizes multiple parts within the
build chamber for maximum space utilization.
The Sinterstation 2000 System can be configured for use with a single powder
or for any combination of thermoplastics and metal. The list price for an
average Sinterstation 2000 System ranges from $325,000 to $375,000, depending
on the materials configuration selected by the customer. Systems typically
include the SLS System platform including all three modules, material handling
equipment, documentation, software licenses, licenses for using DTM-supplied
powdered material and installation. The purchase price also includes a one-
week training course in operation of the SLS System for up to two of the
customer's personnel.
Sintering Materials
Polycarbonate and wax were the first sintering materials offered by the
Company when it began marketing SLS Systems in 1992. Materials that are
available for use in the Sinterstation 2000 System include: a polycarbonate
powder; two nylon powders; ProtoForm powder, a composite nylon product used
for the production of functional prototypes; RapidSteel powder, a metal powder
used for the production of prototype mold inserts; and TrueForm powder, a
polymer-based material particularly suited for producing patterns for non-
durable molds, as well as for investment casting. The Company believes that
its TrueForm powder yields patterns with surface finish, feature detail and
level of accuracy required for pattern applications.
The Company's materials are sold in drums and typically sell for $23 to $37
per pound, depending on the material. Their characteristics and uses are as
follows:
<TABLE>
<CAPTION>
MATERIAL DESCRIPTION CHARACTERISTICS USES
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
PROTOFORM POWDER DTM-developed compos- Extremely durable, Models and prototypes
ite material consist- flexible and strong; with fine detail and
ing of nylon and stands up to harsh high strength where
spherical glass par- chemicals and demand- testing in harsh condi-
ticles ing temperature tions is required
environments
RAPIDSTEEL POWDER DTM-developed carbon Creates durable metal Injection mold core and
steel particles with mold inserts that can cavity inserts for pro-
a special polymer produce thousands of totype hard tooling us-
coating plastic parts ing DTM's RapidTool
process
TRUEFORM POWDER DTM-developed polymer Capable of producing Patterns for making sin-
with very fine parti- ex-tremely smooth, gle metal parts or low-
cle size and spheri- accurate pattern mas- quantity plastic parts
cal shape ters with complex geometry;
thin wall structures
where surface finish is
important
NYLON AND FINE NYLON Engineering thermo- Durable material that Conceptual models and
plastic can be drilled, true functional proto-
painted and used in types of actual products
environments similar that require snap fits
to the end product;
offers substantial
heat and chemical re-
sistance
POLYCARBONATE Engineering thermo- Durable and heat re- Conceptual models and
plastic sistant durable pattern masters
for plastic short run
tooling, metal invest-
ment casting and sand
casting
</TABLE>
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<PAGE>
The Company sells its SLS Systems with the materials capabilities selected
by the customer and an initial supply of powders. Thereafter customers can add
materials capabilities by purchasing materials start-up modules, which include
an initial supply of materials plus the software developed by the Company for
optimal processing of that particular material. The Company subcontracts with
other manufacturing organizations for the production of sintering materials.
The Company follows a practice of single sourcing materials with these
suppliers.
Other Products
Along with the Sinterstation 2000 System and powdered sintering materials,
the Company supplies ancillary equipment used for finishing parts as well as
processing and handling powdered materials. These products are offered by DTM
primarily as a convenience to its customers. However, a specialized furnace
used as part of the Company's RapidTool process is manufactured expressly for
DTM, which holds the worldwide marketing rights. In addition, DTM is currently
the exclusive source of a custom workbench for recycling powder, which is also
manufactured solely for the Company.
RESEARCH AND NEW PRODUCT DEVELOPMENT
The Company's research and development effort focuses on improving core
technologies that are critical to future growth. These include development of
new materials, as well as improved powder handling technology, laser beam
delivery systems and thermal control systems. The Company's development
efforts are enhanced through informal development arrangements with key
customers, materials suppliers and hardware suppliers. The Company also
collaborates on research and development with The University of Texas as well
as other universities and research institutions that operate SLS Systems.
During 1993, 1994 and 1995 the Company devoted approximately $5.8 million,
$3.8 million and $3.5 million to research and development, respectively. These
expenditures have resulted in ongoing improvement in the selective laser
sintering technology. For example, the Company's primary product, the
Sinterstation 2000 System, has been improved significantly since the first
commercial sale in 1992, which improvements have resulted in higher degrees of
accuracy, reliability and productivity. Recent research and development
successes in the powder and process area include the introduction of a second
nylon powder in 1994, the commercial release of ProtoForm powder in early
1995, the introduction of the RapidTool process and related RapidSteel powder
in late 1995 and the commercial release of TrueForm powder in early 1996.
During the remainder of 1996, the Company expects to be engaged in a number
of ongoing research and development projects, some of which may continue into
1997. The Company anticipates that the recently introduced RapidTool process
will undergo continuing improvement in order to keep pace with rising customer
performance expectations and expects to devote a significant portion of its
research efforts for the foreseeable future to that process. DTM expects to
invest resources in 1996 in order to broaden its metal materials offering to
include the production of metal prototype parts. The Company also is pursuing
the development of new metal materials, which, when used in the selective
laser sintering process, will allow for the production of durable molds in
less than 48 hours and will result in a mold production life of up to
approximately 500 parts, an application that the Company believes is not
efficiently served by current rapid prototyping technology. Finally, the
Company's near-term business plan also anticipates that a redesigned SLS
System and new platforms with larger build areas will be available for future
market introduction.
Longer term, the Company believes that the selective laser sintering
technology is capable of processing an even wider range of materials, thereby
improving the performance of the Company's products in existing applications
and advancing the technology into new applications. Based on preliminary
experiments, coupled with the proven diversity of the selective laser
sintering materials capability, the Company believes that it should be able to
(i) broaden the performance of the SLS System to include the production of
prototype metal parts, (ii) develop new and improved functional plastic
prototyping materials, (iii) broaden the metal mold inserts product line to
include additional durable materials and (iv) develop ceramic materials for
the production of special tooling and part applications.
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<PAGE>
MARKETING AND CUSTOMERS
Customers
Rapid prototyping systems are purchased by OEMs, universities and military
and defense organizations. The Company's customers include The Boeing Company,
Daimler-Benz AG, Eastman Kodak Company, Fiskars Oy, Ford Motor Company,
General Motors Corporation, Hughes Christensen, LG Electronics, Inc.
(Goldstar), Pratt & Whitney, Rockwell International Corporation, Samsung
Electronics Co., Ltd., Toyota Motor Corporation and Whirlpool Corporation,
among others. In addition, universities and technical transfer centers in 10
countries had purchased SLS Systems as of May 15, 1996. The Company also sells
a substantial portion of SLS Systems to service bureaus. In 1995,
approximately 49 percent of the Company's revenues were derived from the sales
of products and services to service bureaus, and the Company anticipates that
service bureaus will continue to provide a significant portion of its
revenues. Many of the Company's customers have purchased more than one SLS
System and, based on these experiences, the Company anticipates a significant
repeat business with its existing customers.
Generally, the Company's revenues are derived from sales to a wide variety
of customers. However, during 1993 approximately 13 percent of total revenues
were derived from sales to one customer. In 1995, approximately 15 percent of
total revenues were from sales to another customer. In 1994, the Company did
not have a customer representing 10 percent or more of sales revenues. While
the Company anticipates that occasional multiple unit purchases by a single
purchaser could result in a large percentage of total sales being concentrated
in one customer from time to time, it does not consider itself dependent on
any particular customer.
Product Distribution
The Company distributes its products in the United States, Canada, Western
Europe and key Pacific Rim and South American countries. In the United States
and Canada, the Company employs a direct sales force. In Germany, the
Company's products are distributed by DTM GmbH, a wholly owned German
subsidiary. DTM GmbH is a sales and service organization whose efforts are
augmented by sales agents in the United Kingdom, Spain, Portugal, Italy and
France. The Company also distributes its goods and provides services in the
Pacific Rim and South America through a network of agents, including agents in
Japan, South Korea, Hong Kong, China, Taiwan, Singapore, Malaysia, Brazil and
Argentina. As of May 15, 1996, the Company had shipped SLS Systems to
customers in a total of 15 countries.
DTM's sales agents are selected for their sales and product service
capabilities. They generally are experienced in selling products in fields
related to rapid prototyping, but agree contractually to represent the
Company's products exclusively in the field of rapid prototyping. The sales
agents periodically undergo refresher training in SLS System service.
Throughout the next year, the Company intends to undertake a significant
expansion of its direct sales force, agent network and service and support
capabilities.
Marketing and Sales
The Company's marketing programs utilize a mix of seminars, trade shows,
direct mailings, literature, videos, press releases, telemarketing, brochures
and customer and application profiles to identify prospects that match a
typical SLS System user profile. The Company also focuses its marketing
resources on expanding the use of the selective laser sintering technology by
existing customers. This strategy includes marketing SLS Systems, upgrades and
related products.
The Company views ongoing sales to service bureaus as important to its
overall business strategy and focuses a significant share of its marketing and
selling resources on these target customers. In early 1996, the Company
introduced its "DTM OnBoard" marketing program. DTM OnBoard is a strategic
partnering effort between DTM and service bureaus. Upon enrollment in DTM
OnBoard, the Company trains the service bureau's personnel to promote
selective laser sintering applications, conducts joint seminars and direct
mail campaigns for sales lead generation and carries out a cooperative
marketing program.
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<PAGE>
The Company offers an SLS System rental program for customers who wish to
test the selective laser sintering technology prior to making a purchase
commitment or who wish to get an early start on implementation of the process
while waiting for completion of their internal funding process.
SERVICE AND SUPPORT
The Company maintains a staff of field service and support personnel in
Europe and North America. The field service organization is responsible for
installations of new SLS Systems and for conducting the Company's warranty
service and maintenance program. The Company's sales agents in the Pacific Rim
and South America also are trained to service SLS Systems. As a result of the
capability of the Company's field service organization and its trained agents,
the Company's response time to customer requests for assistance is generally
24 hours or less. The Company's applications support personnel assist
customers with SLS System operations and provide advice and assistance on
building unusually complicated parts. The applications team also is charged
with keeping customers informed of changes and advancements in the selective
laser sintering technology or SLS System operating procedures.
The Company is in the process of decentralizing its field service and
applications groups in order to maintain its high level of customer service.
In the United States, a service facility was opened in the Detroit area in
early 1996. Additional facilities are expected to be opened on the east and
west coasts of the United States during 1996. Furthermore, the Company
anticipates expanding its Pacific Rim field service capability in 1996 by
establishing a field service office in Singapore.
The Company provides each new customer with a one-week training course in
advance of delivery of its SLS System. The course covers SLS System operation
and preventive maintenance procedures, materials and process information,
safety training and problem-solving techniques. The class includes formal
classroom instruction, guided user-interface simulations and actual SLS System
operation in the DTM applications laboratory. Supplemental technical
assistance is provided to customers through a telephone customer support line
or additional on-site training that can be scheduled at the customer's
request. Furthermore, when customers add metal powder capability, the Company
provides additional RapidTool process training at its facilities in Austin,
Texas.
The Company's SLS Systems are sold with a comprehensive 12-month warranty on
parts and labor, which excludes consumable items and the laser charge. The
Company's customers may continue the level of service provided by the initial
12-month warranty by purchasing an annual maintenance contract. The
maintenance contract provides comprehensive part and labor coverage,
preventive maintenance and software upgrades. Historically, approximately 80
percent of the Company's customers have chosen to purchase annual maintenance
contracts after expiration of the initial warranty period. For those customers
choosing not to purchase annual maintenance contracts, DTM also provides
repair and maintenance services on a time and materials basis.
MANUFACTURING
The Company's manufacturing strategy is based on the outsourcing of major
sub-assemblies of the Sinterstation 2000 System, which include the Powder
Engine Module, Controls Module and Environment Control Module. The sub-
assemblies are built by different suppliers and shipped to Austin, Texas, for
assembly. The Company performs final assembly by connecting the sub-assemblies
and adding other key components. The SLS System then is put through extensive
calibration and testing, which includes making parts from various materials. A
final quality check precedes clean-up and packaging for shipment. Assembly and
testing at the Company's site comprises a 21-day cycle. When the SLS System
arrives at the customer's location, DTM personnel install it and perform on-
site testing over a period of two to three days. The Company also assembles
upgrade packages and, in some cases, installs those packages.
Procurement lead time for the major sub-assemblies of the SLS System can be
up to 16 weeks. Due to the Company's long lead time for major sub-assemblies,
it places orders for such parts on a forecast basis with the
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<PAGE>
intention of moving raw materials inventory immediately into work in process.
The Company involves its suppliers in the design and testing stages of new
components in order to improve manufacturability. The Company believes that
the benefits of maintaining close relationships with its suppliers are more
cost efficient product designs and the ability to control manufacturing costs.
While the Company subcontracts for manufacture of SLS System components,
powdered sintering materials and accessories from single-source, third-party
suppliers, multiple sources exist for almost all of the components of the
Company's products.
The Company's manufacturing facilities in Austin, Texas, are currently
configured to assemble and test the Sinterstation 2000 System. In the second
half of 1996, the Company plans to expand its manufacturing capacity by
reconfiguring its existing facilities. With this reconfiguration, the Company
believes that it will have sufficient manufacturing capacity to fulfill demand
for its SLS Systems in 1996. The Company expects that it will acquire
additional space for its operations in early 1997.
INTELLECTUAL PROPERTY
The selective laser sintering technology was initially developed by
researchers at The University of Texas. The first selective laser sintering
patent was issued to The University of Texas in 1989. DTM has an exclusive
worldwide license from The University of Texas to use the selective laser
sintering technology (the "License"), the term of which continues until
expiration of the patent rights that are the subject of the License. The
License includes the original patents plus a right of first refusal for all
improvements thereon. It requires that DTM commercialize the technology, which
it has done and continues to do. Under the License, DTM is required to make
royalty payments equal to four percent of net sales of SLS Systems and certain
powdered materials. In connection with obtaining the License, the Company
issued 43,680 shares of Common Stock to The University of Texas. Under the
License, The University of Texas reserves the right to practice the patented
technology for research and educational purposes. The License can be
terminated by The University of Texas (i) if DTM becomes bankrupt or
insolvent, (ii) if DTM commits a material breach or default and fails to cure
that breach or default within 90 days of notice thereof or (iii) as to foreign
jurisdictions, after 1997, if DTM fails to commercialize the technology in
that jurisdiction. The License provides that DTM will indemnify The University
of Texas from expenses or damages incurred by The University of Texas arising
from DTM's use of the licensed subject matter.
The Company has further refined and improved the selective laser sintering
process and materials and has been issued patents in its own name for many of
those developments. As of May 15, 1996, the Company owned or had exclusive
licenses to 24 U.S. patents and 10 pending U.S. applications. As of the same
date, the Company had an exclusive license to a European patent relating to
selective laser sintering, and the Company owned or had exclusive licenses to
three allowed European patents (i.e., initial approval had been granted), five
additional pending European applications and two international Patent
Cooperation Treaty applications. In addition, the Company owns or has
exclusive rights to six issued patents and 18 pending applications in other
countries outside of the United States and Europe. Technology that is covered
by existing patents or is the subject matter of pending patent applications
includes some or all of the following aspects: (i) the fundamental elements of
the selective laser sintering process; (ii) related inventions on powder
delivery, beam delivery and thermal control; (iii) certain of the sintering
powders that DTM has developed; (iv) certain combinations of powdered
materials; and (v) certain post-processing steps for part finishing. Pending
patent applications cover recent developments in composite materials, as well
as specially tailored powder formulations that produce exceptional feature
detail and surface finish. It is anticipated that DTM will make additional
patent application filings as a result of research currently in progress.
Some of the Company's patents have been acquired from third parties other
than The University of Texas. DTM acquired certain patents in the powdered
materials area through assignment from BFGoodrich in 1992. In 1992, DTM
acquired a patent that was originally issued to Mr. Ross Housholder in 1981.
The Company believes that this patent is a pioneer patent in the rapid
prototyping field. This patent is currently under reexamination by the U.S.
Patent and Trademark Office, such reexamination having been initiated by a
competitor during patent
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<PAGE>
litigation in response to a claim of infringement by the Company. In this
reexamination, the patentability of certain of the claims of the patent has
been confirmed, however, a significant claim of the patent in the field of
rapid prototyping has been found unpatentable by the U.S. Patent and Trademark
Office. The rejection of this claim, in its amended form, and of some claims
added during the reexamination, has been made final, but other claims of
business importance that were added to the patent during the reexamination and
that contain additional limitations have been indicated as allowable. The
Company intends to pursue the prosecution of this reexamination in its best
business interests, and is currently considering its strategy in that regard.
While the Company continues to believe that it has a sound position in favor
of the patentability of the rejected patent claim in its amended form, there
can be no assurance that the rejected patent claim will continue to be
pursued, or that it will eventually be allowed. Although the rejected patent
claim may have value to the Company because of its coverage over certain
aspects of the field of rapid prototyping, the Company has rights under other,
unrelated patents that would continue to protect certain aspects of its
selective laser sintering technology.
Most of the key claims of the U.S. patents covering selective laser
sintering, excluding the Housholder patent, have been submitted
internationally in combined form. The first European Patent Office ("EPO")
patent, which was issued in December 1994, gave DTM rights under patent
coverage in Europe. However, this patent is currently the subject of an
opposition proceeding before the EPO initiated by a competitor of the Company.
The competitor has alleged that the patent claims are too broad and
repetitious, as well as that the subject matter is not novel and does not
involve an inventive step. The Company believes that it has a sound position
and is vigorously defending the validity of this patent. The Company is the
plaintiff in a lawsuit in the United States involving claims of infringement
of certain of the Company's patents and is in the process of initiating
similar litigation in Europe. See "Business--Legal Proceedings."
The Company has three trademarks registered with the U.S. Patent and
Trademark Office and has filed applications for registration of an additional
four trademarks.
LEGAL PROCEEDINGS
The Company is party to three legal proceedings with respect to its patents.
DTM filed an action in the U.S. District Court for the Eastern District of
Wisconsin on October 24, 1995, against a company operating an SLS System. DTM
alleges that the defendant willfully infringed DTM's patents. The action is
based on the use by the corporate defendants of certain powders in the
selective laser sintering process without a license from DTM. The Company
seeks injunctive relief, damages and attorneys fees. Defendants assert
affirmative defenses of patent invalidity and implied license and also seek
attorney fees. Discovery commenced in late 1995, and it is not possible at
this time to predict the outcome of this proceeding.
The Company initiated patent litigation in France in March 1996 and in
Germany in April 1996 against EOS GmbH ("EOS"), a German competitor, and one
of EOS's customers for infringement. The Company has alleged that EOS is
selling rapid prototyping systems in Europe that make unauthorized use of
selective laser sintering technology covered by the European patent under
which DTM has exclusive rights. The Company seeks injunctive relief plus
damages. It is anticipated that this litigation will be pursued in conjunction
with the EPO proceeding in which EOS has opposed the validity of that European
patent. It is not possible at this time to predict the outcome of this
proceeding. See "Business--Intellectual Property."
COMPETITION
The market for rapid prototyping systems and materials is highly
competitive. Several United States-based companies other than DTM are in
various stages of developing and marketing rapid prototyping systems and
services. These companies include 3D Systems Corporation ("3D Systems"), BPM
Technology, Inc., Helisys, Inc. ("Helisys"), Sanders Prototype, Inc., Soligen
Technologies, Inc. and Stratasys, Inc. ("Stratasys"). Of these, 3D Systems,
Helisys and Stratasys compete with DTM on a worldwide basis. The Company also
faces competition in various regions outside North America from companies such
as EOS and several Japanese companies, including CMET (Mitsubishi) and D-MEC
(Sony-JSR).
A number of the companies participating in the rapid prototyping industry
have developed or may be developing desk-top systems that are sold or will be
sold primarily on the basis of price. DTM believes that
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<PAGE>
these companies include 3D Systems, BPM Technology, Inc., Denken Engineering
Co., Ltd., Helisys, Kira Corporation, Sanders Prototype, Inc. and Stratasys,
among others. Their products are based on ink jet printing, plastic extrusion
or paper laser cutting and laminating technologies. The Company expects that
low-end products eventually will be priced at less than $50,000. Competing for
the low-end desk-top market segment is not part of the Company's business
strategy and the Company does not consider the desk-top systems to provide
competition in the high end of the market.
The Company believes that its principal competitors for the plastic model,
functional prototype and pattern-creation segments of the rapid prototyping
market are 3D Systems, EOS and CMET (Mitsubishi). They employ a
stereolithography ("SLA")-based process that utilizes ultraviolet light
sources to polymerize liquid monomers into a solid plastic object. 3D Systems
was the first company to commercially introduce rapid prototyping technology.
The Company competes with 3D Systems on a worldwide basis and anticipates that
its competition with CMET (Mitsubishi) primarily will be confined to Japan.
EOS, located in Munich, Germany, markets systems based on both SLA and SLS
technologies, principally in Western Europe. EOS has been sued in Germany by
DTM for infringement of selective laser sintering technology patents. 3D
Systems also has instituted patent litigation against EOS. See "Business--
Intellectual Property" and "Business--Legal Proceedings."
The Company competes for business with other rapid prototyping companies
primarily on the basis of product performance, reliability, accuracy and
versatility, as well as price and product service. The Company also competes
for business with conventional machining and milling techniques, which
continue to be the most common methods by which plastic models, functional
prototypes and tool inserts are manufactured.
EMPLOYEES
At May 15, 1996, the Company had 109 full-time employees. Approximately 40
percent of the Company's employees are involved in engineering, research and
development and engineering product support. None of the Company's employees
are represented by a union and the Company has no prior experience with a work
stoppage. The future success of the Company depends on its ability to attract
and retain a qualified work force including employees with critical
engineering and selling skills.
FACILITIES
The Company currently occupies a 30,000-square foot facility at 1611 Headway
Circle, Building 2, Austin, Texas. The Company's lease on this facility
expires November 30, 1997, at which time the Company has an option to renew
the lease at then-current market rates. This facility houses the bulk of the
Company's operations except for off-site sales offices located in various
areas of the United States and offices of the Company's German subsidiary,
which are leased. The Company also leases a warehouse in Austin, Texas,
primarily for the purpose of maintaining an inventory of selective laser
sintering powders. DTM expects that such facilities will be sufficient to
support the Company's operations through the remainder of 1996. The Company
expects that it will acquire additional space for its operations in early
1997. See "Business--Manufacturing."
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
March 31, 1996 are set forth below. All directors were elected or re-elected
on March 19, 1996. The term of each director will continue until the 1997
annual meeting of the Company's shareholders.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
D. Lee Tobler........... 62 Chairman of the Board and Director
John S. Murchison, III.. 55 Chief Executive Officer, President and Director
Michael A. Ervin........ 53 Vice President, Engineering
Gregory A. Logwinuk..... 44 Vice President, Treasurer and Secretary
Daniel J. Dapper........ 39 Vice President, North American Sales
Klaus J. Esser.......... 51 Vice President, European Sales, DTM GmbH
Thomas L. Lee........... 42 Vice President, Marketing
Dennis K Medler......... 49 Vice President, Pacific Rim and South American Sales
Marshall O. Larsen...... 47 Director
Alexander MacLachlan.... 63 Director
Thomas G. Ricks......... 43 Director
Steven G. Rolls......... 41 Director
</TABLE>
D. Lee Tobler is Chairman of the Board of the Company. He has served in that
capacity since March 1996 and as a director since September 1993. Mr. Tobler
is currently Executive Vice President and Chief Financial Officer of
BFGoodrich, the Company's majority shareholder, having joined BFGoodrich in
those capacities in early 1985 and having served as a director of BFGoodrich
since April 1985. Mr. Tobler is a member of the Company's Audit, Compensation
and Financial Policy Committees.
John S. Murchison, III joined the Company as Chief Executive Officer and
President in September 1990. He was a Director of the Company from September
1990 through September 1993 and currently serves as a Director, having been
again elected as a member of the Board of Directors in March 1996. Prior to
joining the Company, Mr. Murchison was a General Manager for The Pratt Group,
a privately held Australian-based company with worldwide holdings in
packaging, insurance, banking and trading, from 1987 to 1990.
Michael A. Ervin, the Company's Vice President, Engineering, joined DTM in
April 1993. He had 22 years of experience in manufacturing, research and
development with E.I. DuPont de Nemours and Company ("DuPont") prior to
joining DTM. Most recently, he was Vice President of Research and Development
for DuPont's Imaging System and Medical Products Sector from 1990 to 1992.
Gregory A. Logwinuk, the Company's Vice President, Treasurer and Secretary,
is a certified public accountant and joined DTM in July 1994. From June 1992
to June 1994, Mr. Logwinuk worked with various start-up companies in different
financial capacities. From January 1991 to June 1992, he served as Chief
Financial Officer for Eastern Environmental Services, Inc. Prior to 1991, Mr.
Logwinuk held financial management positions with Carbon Products Operation,
Inc., a wholly owned U.S. subsidiary of Morgan Crucible, plc., Solvay
Veterinary, Inc., a U.S. subsidiary of Solvay & Cie. and MCO Resource, Inc.,
and was also an audit manager with Arthur Andersen & Co.
Daniel J. Dapper joined the Company in July 1995 as Vice President, North
American Sales. Prior to joining the Company, from July 1990 to June 1995 he
held positions in sales and management with Parametric Technology Corporation,
developer of the Pro/ENGINEER mechanical design automation software.
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<PAGE>
Klaus J. Esser joined DTM GmbH in 1993 as Sales Engineer, Germany, and was
subsequently appointed Vice President, European Sales. Prior to joining DTM
GmbH, Mr. Esser was Sales Manager, Northern Europe, GUS and Middle East, with
3D Systems GmbH, having joined that company in 1989. Prior to working in the
rapid prototyping industry for DTM GmbH and 3D Systems GmbH, he served in
sales, technical service and engineering capacities for companies in the
automotive and materials testing fields.
Thomas L. Lee joined the Company in October 1995 as Vice President,
Marketing. From February 1993 to September 1995, Mr. Lee was a Marketing
Consultant for Foundation Marketing. He was a Division Marketing Manager for
Tektronix, Inc., a manufacturer of test and measurement instrumentation
systems from October 1991 to February 1993. From July 1990 to October 1991, he
was a marketing manager for Sequent Computer Systems. More than 12 years of
his career were spent in marketing and management roles at Intel Corporation.
Dennis K Medler joined the Company as Executive Vice President, Sales and
Marketing in September 1993, and was subsequently appointed as Vice President,
Pacific Rim and South American Sales in July 1995. He initially worked for DTM
as Vice President, Sales and Marketing from 1988 to 1990 as the Company
entered the rapid prototyping industry. From April 1991 to December 1992, Mr.
Medler served as Vice President, Sales and Marketing of 3D Systems and from
January 1993 to September 1993, he served in a similar position with Point
Control Company, a software company.
Marshall O. Larsen has served as a Director of the Company since January
1996. Mr. Larsen is the President and Chief Operating Officer of BFGoodrich
Aerospace, one of two major business segments of BFGoodrich. He joined
BFGoodrich in 1977 and has served in various managerial positions, including
assistant to the President, and most recently, Group Vice President,
BFGoodrich Aerospace. He is a member of the Company's Compensation and
Financial Policy Committees.
Alexander MacLachlan has served as a Director of the Company since March
1996. From December 1994 to March 1996, Mr. MacLachlan served as Deputy Under
Secretary for the U.S. Department of Energy with oversight responsibilities
for technology transfer and laboratory operations. Prior to that time, he held
the position of Senior Vice President, Research and Development, and Chief
Technical Officer for DuPont beginning in 1986. He is a member of the
Company's Audit Committee.
Thomas G. Ricks has served as a Director of the Company since May 1988. From
August 1991 to March 1996, he served as Chairman of the Board of the Company.
Since March 1996, he has served as President and Chief Executive Officer of
The University of Texas Investment Management Company, a non-profit
corporation engaged exclusively in providing investment management services to
the Board of Regents of The University of Texas, a minority shareholder in the
Company. From August 1988 through March 1996, he held several financial and
asset management positions at The University of Texas. Mr. Ricks serves as a
member of the Audit, Compensation and Financial Policy Committees of the Board
of Directors. Mr. Ricks also is a director of the Newfield Exploration
Company, LifeCell Corporation and BDM International, Inc.
Steven G. Rolls has served as a Director of the Company since August 1994.
Mr. Rolls joined BFGoodrich as a Financial Analyst in 1981 and progressed
through a number of positions, including, most recently Vice President,
Finance of BFGoodrich Aerospace from 1989 until being elected Vice President
and Controller of BFGoodrich in 1993. He is a member of the Company's Audit
and Financial Policy Committees.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation of the
Company's Chief Executive Officer and its four other most highly compensated
executive officers (collectively, the "Named Officers") for services rendered
in all capacities to the Company during the fiscal year ended December 31,
1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------- ----------------------
SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS(1) SARS(#)(2) COMPENSATION
- --------------------------- ---------- ---------- ---------------------- ------------
<S> <C> <C> <C> <C>
John S. Murchison, III,
President.............. $ 125,355 $ -- 160,000 $ 714(3)
Michael A. Ervin, Vice
President,
Engineering............ 122,730 -- 80,000 1,075(4)
Gregory A. Logwinuk,
Vice President,
Treasurer and
Secretary.............. 89,010 -- 80,000 37,296(4)
Dennis K Medler, Vice
President, Pacific Rim
and South American
Sales.................. 105,000 31,997 60,000 --
Daniel J. Dapper(5),
Vice President, North
American Sales......... 59,000 49,203 50,000 12,229(4)
</TABLE>
- --------
(1) Comprised solely of commissions on product sales.
(2) Consists of units of stock appreciation rights granted under the Equity
Appreciation Plan. In connection with the closing of the Offering
described herein, the SARs will convert into options to purchase Common
Stock as follows: Murchison, 132,160 shares; Ervin, 66,080 shares;
Logwinuk, 66,080 shares; Medler, 49,560 shares; and Dapper, 41,300 shares.
See "Management--Equity Appreciation Plan."
(3) Consists of portions of club membership dues attributable to personal use.
(4) Comprised solely of relocation expense reimbursements.
(5) Consists of compensation paid for services rendered to the Company
beginning in July 1995 when Mr. Dapper joined the Company.
The following table sets forth information regarding the number and value of
SARs granted during 1995 to the Named Officers:
SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
POTENTIAL REALIZED
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING SARS GRANTED EXERCISE OR OPTION TERM
SARS GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION ------------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($)
---- ------------ --------------- ----------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
John S. Murchison, III.. 132,160 16% $1.69 06/29/2005 $736,131 $1,733,508 $3,263,679
Michael A. Ervin........ 66,080 8% 1.69 06/04/2005 420,269 918,957 1,684,043
Gregory A. Logwinuk..... 66,080 8% 1.69 03/27/2005 524,014 1,022,703 1,787,788
Dennis K Medler......... 49,560 6% 1.69 04/05/2005 393,011 767,027 1,340,841
Daniel J. Dapper........ 41,300 5% 1.69 08/10/2005 197,414 509,094 987,273
</TABLE>
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<PAGE>
The following table sets forth information regarding the exercise and value
of SARs held at December 31, 1995 by the Named Officers:
AGGREGATED SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SARS AT SARS AT
FISCAL YEAR END (#) FISCAL YEAR END ($)
------------------- -------------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
John S. Murchison, III.. -- -- 0/132,160 $0/859,040
Michael A. Ervin........ -- -- 0/66,080 0/481,723
Gregory A. Logwinuk..... -- -- 0/66,080 0/585,469
Dennis K Medler......... -- -- 0/49,560 0/439,102
Daniel J. Dapper........ -- -- 0/41,300 0/235,823
</TABLE>
DIRECTOR COMPENSATION
In March 1996, the Company instituted a program under which its non-
employee, non-affiliated directors will be paid an annual retainer of $15,000,
a fee of $1,000 for each board meeting attended and a fee of $800 for each
committee meeting attended. The Company permits directors to defer all or part
of their compensation, if they so choose. Under these arrangements, the only
directors who are eligible to receive compensation are Messrs. Ricks and
MacLachlan. Mr. Ricks' compensation is paid to The University of Texas
Investment Management Company.
EQUITY APPRECIATION PLAN
In January 1995, the Company established the DTM Corporation Equity
Appreciation Plan. An aggregate of 10,000,000 phantom stock units were created
thereunder, and 1,000,000 of such units were allocated for the issuance of a
like number of phantom stock appreciation rights ("SARs") to employees of the
Company. The value of each phantom stock unit as of any date is equal to the
fraction obtained by dividing the total value of the Company (as determined
under the Equity Appreciation Plan) as of such date by 10,000,000. The total
value of DTM as of any date is deemed for purposes of the Equity Appreciation
Plan to be equal to a valuation of DTM, using a methodology approved by the
Board of Directors, as of the end of the immediately preceding fiscal year
made by an independent third party, subject to approval of the Board of
Directors.
Of the 1,000,000 authorized SARs, 999,000 have been granted to eligible
employees and are outstanding as of the date of this Prospectus. All employees
of the Company participated in the Equity Appreciation Plan as of May 20,
1996. Each granted SAR represents the right to receive the dollar amount of
any appreciation in the value of one phantom stock unit between the date on
which the SAR is granted and the date on which it is exercised. While the SARs
are not exercisable until the occurrence of a "Change of Control" (as defined
in the Equity Appreciation Plan), upon the date of execution of the
underwriting agreement relating to the Offering (the "Conversion Date"), all
SARs then outstanding will convert into immediately exercisable options to
acquire Common Stock ("EAP Options"). The 999,000 SARs outstanding as of the
date of this Prospectus will convert into EAP Options to acquire an aggregate
of an estimated 825,175 shares of Common Stock. Options to purchase 798,743
shares of Common Stock (those options arising from the conversion of SARs
awarded in 1995) will be exercisable for $1.69 per share. The remaining
options to purchase 26,432 shares of Common Stock (those options arising from
the conversion of SARs awarded in 1996) will be exercisable for $11.16 per
share. Each EAP Option will continue to be exercisable through the tenth
anniversary of the grant of the SAR from which it was converted. Each holder
of an EAP Option may exercise it in full or in part. EAP Options are only
exercisable for cash.
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<PAGE>
The conversion of SARs into immediately exercisable EAP Options with
exercise prices less than the market price per share of Common Stock on the
Conversion Date (such market price being deemed for such purposes to be equal
to the Offering price) will result in the recognition by the Company of a non-
recurring, non-cash compensation expense measured by the difference between
the aggregate market value of the shares of Common Stock subject to such
options and the aggregate exercise price of such options (compensation expense
of approximately $8 million if the Offering price is $12.00 per share). Such
compensation expense would be expected to materially adversely affect
operating results in the quarter and year in which it becomes probable that
the closing of the Offering will occur.
On March 19, 1996, the Board of Directors capped at 1,000,000 the aggregate
number of SARs that can be granted under the Equity Appreciation Plan.
STOCK OPTION PLAN
In January 1996, the Company adopted the DTM Corporation Stock Option Plan
(the "Option Plan"), which authorizes the Compensation Committee of the Board
of Directors (the "Compensation Committee") to grant options to key management
employees to acquire up to 764,400 shares of Common Stock, at option prices of
not less than 100 percent of the fair market value of the Common Stock on the
date of grant. No options have been granted under the Option Plan.
Under the Option Plan, options are granted upon terms and conditions
established by the Compensation Committee, which terms and conditions include
the option price, the term of the option (which in no event shall exceed 10
years), the status of the option as a non-incentive stock option, or an
incentive or other statutory stock option, the date on which the option will
first become exercisable, and the type of consideration that may be used to
exercise an option, which may include existing shares of the Common Stock.
Options granted under the Option Plan will vest in three separate installments
with 35 percent of the options granted becoming exercisable on the first
anniversary date of the option grant, 35 percent becoming exercisable on the
second anniversary date and 30 percent becoming exercisable on the third
anniversary date. The Compensation Committee also has the right to determine
the length of time, if any, following the termination of an optionee's
employment by reason of death, disability or retirement during which an
outstanding option may remain exercisable, except that in no event may an
option remain exercisable for more than 10 years after the date of grant. The
Option Plan also authorizes the Compensation Committee to grant stock
appreciation rights, pursuant to which stock options may be surrendered to the
Company in exchange for consideration equal to the difference between the
option price and the fair market value of the Common Stock on the date of
surrender.
All grants of options will be subject to agreements between the Company and
the optionee, which will contain the terms and conditions of the option and
will bind the optionee to any temporary restrictions on sales of Common Stock
required by the underwriters in any public offering of the Common Stock.
MANAGEMENT INCENTIVE PLAN
In January 1996, the Company adopted the DTM Corporation Management
Incentive Plan (the "MIP Plan"), which provides for the grant of incentive
compensation to key management employees who have the potential to positively
influence the performance of the Company, as a reward for levels of
performance above the ordinary performance standards compensated by base
salary.
Under the MIP Plan, each participant is assigned a "cash bonus target" of 25
to 50 percent of base salary, depending upon the management level of the
particular individual. Each year, the Compensation Committee creates corporate
performance measures, establishes targets for each such measure and, if it so
chooses, assigns different weights to each measure. The MIP Plan is structured
so that if each measure is met precisely, the MIP Plan establishes a bonus
equal to each individual's cash bonus target. If the performance measures are
exceeded, or if they are not met, a greater or lesser bonus is paid, depending
upon the extent to which actual performance
38
<PAGE>
varies from the performance target and the weights given to the particular
performance measures. Under the MIP Plan, minimum thresholds are established
that must be reached if any bonus is to be paid. If the minimum thresholds are
met or exceeded, the bonus payable will be between 50 percent and 150 percent
of the individual's cash bonus target. The corporate performance measures that
may be used by the Company in any given year may include net income, pretax
income, consolidated operating income, operating income return on net capital
employed, cash flow, working capital, return on equity, return on assets and
earnings per share. The Compensation Committee and the Company's management
has discretion to adjust individual bonus payments up or down on a case-by-
case basis.
Prior to 1996, no awards were made under the MIP Plan. The first targets
were established under the MIP Plan for performance during the Company's 1996
fiscal year and are based on net profit and free cash flow milestones. No
payments are due to be paid until early 1997, assuming performance targets are
met.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors was formed in April
1990. During 1995, the members of the Compensation Committee were Messrs.
Rolls, Ricks and Tobler. The Compensation Committee oversees administration of
the Company's employee benefit plans and compensation policies.
CERTAIN TRANSACTIONS
SHAREHOLDERS' AGREEMENT
The Company and all of its existing shareholders are parties to a
shareholders' agreement (the "Shareholders' Agreement") that was originally
entered into in March 1988, and has been amended periodically since that time,
having been significantly amended and restated in late 1989 in connection with
BFGoodrich's initial involvement in the Company, and amended and restated
again in April 1996. Most of the provisions of the Shareholders' Agreement
will terminate as of the completion of the Offering. The following summary of
the Shareholders' Agreement is qualified in its entirety by reference to the
full Shareholders' Agreement, which is filed as Exhibit 10.9 to the
Registration Statement of which this Prospectus is a part.
Under the Shareholders' Agreement, the existing DTM shareholders have
certain rights of participation in public offerings by the Company of Common
Stock, sometimes referred to as "piggyback" registration rights. These rights
continue for the benefit of the parties who are shareholders at the time of an
initial public offering to subsequent offerings of Common Stock undertaken by
the Company. However, if the underwriter of such an offering determines that
not all shares tendered for a public offering can be sold, then the shares
tendered by each shareholder will be reduced proportionately. Participating
shareholders must enter into underwriting agreements, make representations and
share in registration and filing fees. DTM is obligated to pay all other costs
associated with a public offering and must indemnify shareholders for certain
liabilities that could arise in the context of a registered public offering of
Common Stock. Shareholders have a reciprocal obligation of indemnification for
information supplied by them. Shareholders' registration rights terminate when
two conditions are met: (a) there is a public market for the Common Stock; and
(b) their Common Stock can be sold pursuant to Rule 144 under the Securities
Act.
Two shareholders expressed interest in exercising their registration rights
in connection with the Common Stock offered at the time of the Offering. Their
shares have been included to the extent described herein. See "Principal and
Selling Shareholders." Following the Offering described herein, it is expected
that only BFGoodrich will have ongoing registration rights.
Under the Shareholders' Agreement, shares of Common Stock are subject to
restrictions on transfer until such time as there is a public market for the
Common Stock. In addition, the Shareholders' Agreement contains a methodology
whereby the Common Stock can be valued in advance of the existence of a public
market for purposes of exercises of rights of first refusal and for certain
other purposes thereunder. The Shareholders'
39
<PAGE>
Agreement terminates automatically, except for the obligations related to
compliance with securities laws on transfer and certain registration rights,
when there is a public market for the Common Stock, as defined in the
Shareholders' Agreement. The remaining provisions of the Shareholders'
Agreement may be terminated only by shareholders holding 85 percent of the
outstanding shares subject to that agreement.
In April 1996, the Shareholders' Agreement was substantially amended and
restated. Provisions that had been amended or superseded, or that had expired,
either by agreement or the passage of time were deleted and various amendments
were incorporated. A provision allowing certain minority shareholders to
initiate an initial public offering of the Common Stock was deleted, with
BFGoodrich agreeing to deletion of a corresponding provision allowing it to
purchase minority shares in lieu of a shareholder-initiated initial public
offering. Special provisions granting BFGoodrich certain representation rights
on the Board of Directors, and committees thereof, were deleted. The survival
of registration rights after an initial public offering of the Common Stock
was limited to those parties who were parties to the Shareholders' Agreement
at the time of the amendment and restatement in April 1996. Finally, certain
rights to include minority shares in a sale of outstanding Common Stock were
revised to terminate at the time of an initial public offering.
INDEMNIFICATION AND LIABILITY OF OFFICERS AND DIRECTORS
The Company's directors and officers are granted certain indemnities by
virtue of the Articles of Incorporation and Bylaws of the Company. Under the
Articles of Incorporation, directors cannot be held liable to shareholders for
monetary damages except in the event of breach of the duty of loyalty, bad
faith, intentional misconduct or knowing violations of law and certain other
specified events. The Bylaws of DTM also contain provisions consistent with
Texas law providing for indemnification of directors, officers, employees and
agents acting on behalf of the Company. There is no pending litigation or
proceeding involving a director or officer of the Company as to which
indemnification is being sought. The Company is not aware of any pending or
threatened litigation that could result in claims for indemnification by any
director or officer.
Individuals who serve as directors and executive officers of the Company are
included in the directors and officers insurance coverage of BFGoodrich, as
part of the insurance program that BFGoodrich maintains for its business units
and subsidiaries. DTM directors who are also employees of BFGoodrich are
entitled to indemnification pursuant to BFGoodrich's bylaws. Furthermore,
BFGoodrich's bylaws provide for discretionary indemnification for certain
other persons acting as officers or directors of its subsidiaries.
TERMINATION OF OPTION AGREEMENTS
In April 1991 and again in December 1991, in connection with the sale of
shares of Common Stock in its 1990 through 1992 capitalization efforts, the
Company granted shareholders the right to purchase options to sell shares
purchased in these capitalizations back to the Company. The options generally
are exercisable after five years. DTM's obligation to repurchase such stock,
however, is limited to its ability to fund such payments (or borrow the
required funding) without jeopardizing the ongoing existence or financial
stability of DTM or without materially and adversely affecting preexisting or
foreseeable capital spending programs. The options purchased in the April 1991
transactions have expired unexercised. Due to conditions on the exercise of
the remaining options that were deemed highly unlikely to be fulfilled, the
remaining outstanding options to sell will terminate by voluntary agreement of
the parties thereto, including the Company, DTM Holdings Ltd., BFGoodrich and
Dr. Joseph Beaman, effective on or prior to the closing of an initial public
offering of the Common Stock.
OUTSTANDING LINES OF CREDIT; FINANCING TRANSACTIONS
The Company has outstanding with NationsBank of Texas, N.A. ("NationsBank"),
a credit line of up to $4.7 million and a similar credit line with National
City Bank, of Cleveland, Ohio, for $3.5 million. As of May 15, 1996, the
Company had outstanding the full $8.2 million available under these credit
facilities. BFGoodrich has issued to NationsBank and National City Bank
comfort letters on behalf of DTM in connection with these
40
<PAGE>
credit lines. Both the NationsBank and the National City Bank lines of credit
expire as of July 31, 1997. In addition, BFGoodrich has provided to the
Company two backup lines of credit in the amounts of $2.0 million and $1.0
million, respectively which may be utilized if the NationsBank and National
City Bank lines of credit are fully drawn. As of May 15, 1996, the Company had
outstanding the full $3.0 million available under the backup lines of credit.
These lines of credit bear interest at a rate equal to the prime commercial
lending rate of Citibank, N.A. The BFGoodrich backup lines of credit mature
March 1, 1997, and December 31, 1996, respectively or, if earlier, at the time
of completion of the Offering of Common Stock described herein. The Company
has committed to prepay and terminate all of the borrowing facilities referred
to above shortly following completion of the Offering. The Company plans to
replace them with a stand-alone commercial borrowing facility that would be
available to finance its then current operations, including temporary cash
shortages, or to meet future, currently unforeseen cash needs.
In March 1993, BFGoodrich exercised its option to convert its then-existing
loan of $3.0 million to the Company into 436,800 shares of common stock ($6.87
per common share) as specified in the promissory note. In addition, under
another agreement, the conversion of the $3.0 million loan to equity resulted
in the issuance of 126,665 additional shares of common stock to BFGoodrich. In
January 1993, DTM executed a $4.5 million promissory note with BFGoodrich
bearing interest at Citibank prime rate plus one percent. In December 1993,
BFGoodrich exercised its option to convert the promissory note to equity. The
promissory note, including principal of $4.5 million and related unpaid
interest of $244,000 under the note at December 1993, was converted to
1,036,190 shares of Common Stock ($4.58 per common share) as specified in the
promissory note.
CERTAIN ARRANGEMENTS WITH BFGOODRICH
The Company is a party to a tax allocation agreement with BFGoodrich. This
agreement provides for DTM to receive credit from BFGoodrich equal to the tax
benefit related to the losses DTM creates, to the extent that those losses are
utilized in the consolidated federal income tax return of BFGoodrich. As a
result of the sale of shares of Common Stock in the Offering described herein,
the ownership of outstanding Common Stock by BFGoodrich will decrease to less
than 80 percent. In that event, BFGoodrich will not be able to include DTM's
income or loss in BFGoodrich's consolidated federal income tax return
effective as of the time the 80 percent threshold is no longer met and,
consequently, DTM would lose the potential future benefit of the tax
allocation agreement between DTM and BFGoodrich. While DTM would be able to
use loss carryovers accrued during the time before the Company's taxes were
consolidated with those of BFGoodrich, these carryovers are subject to
significant annual limitations due to substantial changes in DTM's ownership.
In addition, BFGoodrich currently provides tax administration services and
participation in a group program for various types of insurance on a regular
basis, along with certain treasury and legal assistance on a periodic basis.
These arrangements are on terms that could be considered more favorable to the
Company than arms-length transactions. The Company expects that these
arrangements will be discontinued, or amended to include arms-length terms, as
BFGoodrich's percentage ownership interest in the Company decreases. See "Risk
Factors--Loss of Tax Allocation Agreement and Other Benefits from BFGoodrich."
As of March 31, 1996, the Company had payables outstanding to BFGoodrich in
the approximate amount of $538,000, reflecting payments made on behalf of the
Company for payroll taxes and certain insurance. Additionally, DTM had accrued
interest on the promissory note to BFGoodrich in the approximate amount of
$22,000. Under the terms of the tax allocation agreement with BFGoodrich, as
of March 31, 1996, the Company had a receivable of approximately $474,000
related to its first quarter losses.
In December 1992, BFGoodrich transferred to DTM the intellectual property
rights used in its business of developing and selling powdered materials for
SLS Systems, in exchange for Common Stock. In connection with that transfer,
BFGoodrich entered into a non-competition agreement with DTM, in which
BFGoodrich agreed not to compete with DTM in the development or manufacture of
materials for use in DTM's SLS Systems, or of selective laser sintering
systems themselves. This agreement will expire on the fifth anniversary of the
date that BFGoodrich no longer owns, directly or indirectly, more than 50
percent of DTM's voting stock.
41
<PAGE>
CERTAIN MATTERS AFFECTING CORPORATE GOVERNANCE
Mr. Ricks was elected to the Board of Directors pursuant to a license
agreement between the Company and The University of Texas, which agreement
grants The University of Texas the right to maintain one Director on the
Company's Board. The University of Texas, however, has agreed to the deletion
of that provision contemporaneously with the closing of the Offering. Until
the March 1996 annual meeting of the Company's shareholders, BFGoodrich had
the right, under the Shareholders' Agreement, to nominate directors
proportionate to its percentage ownership of outstanding Common Stock, subject
to the rights of The University of Texas to elect one director. Preceding the
1996 annual meeting of shareholders, BFGoodrich proposed the nomination of
Messrs. Larsen, Murchison, Ricks, Rolls and Tobler. Mr. MacLachlan was
selected as a director based on a search carried out by the Company's
management, at the request of the Board of Directors. Messrs. MacLachlan,
Murchison and Ricks are not employees of BFGoodrich and have no understandings
with BFGoodrich in connection with their nomination or service as directors of
the Company. Messrs. Larsen, Rolls and Tobler are BFGoodrich employees and
serve on the Board of Directors at the request of BFGoodrich but subject to
the duties and responsibilities of directors under Texas corporate law. Due to
the large percentage of shares of Common Stock held by BFGoodrich, BFGoodrich
may control the selection of most or all of the remaining directors for some
period into the future.
ROYALTIES
In return for the exclusive, worldwide license from The University of Texas
for use of the selective laser sintering process patent, the Company is
obligated to pay The University of Texas a royalty equal to four percent of
net sales of SLS Systems and certain powdered materials. From the Company's
first commercial sale of an SLS System through December 31, 1994, DTM had paid
The University of Texas $134,000 of royalties attributable to sales of
licensed products. This amount was less than required under the License. Upon
the application of certain credits due DTM by The University of Texas, the
parties agreed that the net balance due The University of Texas from DTM as of
December 31, 1994 was $403,000, which the parties agreed would be paid in
eight quarterly payments, plus interest, commencing in January 1995. Royalties
on sales commencing January 1, 1995 are paid currently in accordance with the
terms of the License. Since the Company's first commercial sale of an SLS
System, it has accrued royalties of approximately $1 million payable to The
University of Texas. See "Business--Intellectual Property."
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<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of May 20, 1996 by (i) each person known to
the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock (including the Selling Shareholders), (ii) each
director of the Company, (iii) each of the Named Officers and (iv) all
directors and executive officers of the Company as a group. Except as
otherwise indicated below, the Company believes that each person listed below
has sole voting and investment power with respect to the shares owned, subject
to applicable community property laws. The address of each individual is in
care of the Company, 1611 Headway Circle, Building 2, Austin, Texas 78754.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER THE
OFFERING(1) OFFERING(1)
NAME AND ADDRESS OF BENEFICIAL ----------------------SHARES ----------------------
OWNER OR IDENTITY OF GROUP NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------ ----------- ----------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
The BFGoodrich Company..... 6,345,197 91.56% 780,000 5,565,197 67.38%
3925 Embassy Parkway
Akron, OH 44333
DTM Holdings, Ltd.(2)...... 411,406 5.94% 404,000 7,406 *
c/o Bradley A. Fowler
Financial Services Austin,
Inc.
707 Southwest Tower
211 E. 7th Street
Austin, TX 78701
D. Lee Tobler(3)........... 6,345,197 91.56% 780,000 5,565,197 67.38%
John S. Murchison, III(4).. 132,160 1.87% -- 132,160 1.57%
Michael A. Ervin(4)........ 66,080 * -- 66,080 *
Gregory A. Logwinuk(4)..... 66,080 * -- 66,080 *
Dennis K Medler(4)......... 49,560 * -- 49,560 *
Daniel J. Dapper(4)........ 41,300 * -- 41,300 *
Marshall O. Larsen(3)...... 6,345,197 91.56% 780,000 5,565,197 67.38%
Alexander MacLachlan....... -- -- -- -- --
Thomas G. Ricks(5)......... 43,680 * -- 43,680 *
Steven G. Rolls(3)......... 6,345,197 91.56% 780,000 5,565,197 67.38%
All directors and executive
officers as a group
(12 persons).............. 6,793,617 92.62% 780,000 6,013,617 69.40%
</TABLE>
- --------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities.
(2) A Texas limited partnership of which Financial Services Austin, Inc. is
the general partner and may be deemed the beneficial owner of such shares.
(3) Includes only shares owned by BFGoodrich, of which the director disclaims
beneficial ownership.
(4) Represents for each individual the following shares of Common Stock
issuable upon the exercise of EAP Options that will be outstanding in
connection with the closing of the Offering under the Equity Appreciation
Plan: Murchison, 132,160 shares; Ervin, 66,080 shares; Logwinuk, 66,080
shares; Medler, 49,560 shares; and Dapper, 41,300 shares.
(5) Includes only shares owned by The University of Texas System, of which Mr.
Ricks disclaims beneficial ownership.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 60,000,000 shares of
Common Stock, $.0003 par value per share, of which 6,930,013 shares were
issued and outstanding as of May 20, 1996, and 3,000,000 shares of Preferred
Stock, $.001 par value per share, none of which have been issued. See
"Capitalization."
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the Company's shareholders. Holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefor, after payment of
any dividends on any outstanding Preferred Stock. See "Dividend Policy." Upon
the liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to share ratably in all assets of the Company that
are legally available for distribution, after payment of all debts and other
liabilities and payment of any liquidation preference, if any, associated with
outstanding shares of Preferred Stock. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are, and the shares of Common Stock being sold by the
Company in the Offering will be, when issued and delivered, validly issued,
fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations prescribed
by the laws of the State of Texas, but without further action by the Company's
shareholders, to provide for the issuance 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 designations, powers, preferences and rights of
the shares of each such series and any 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 any further vote or action by the shareholders. The Board
of Directors may authorize and issue Preferred Stock with voting or conversion
rights that could adversely affect the voting power or other rights of the
holders of Common Stock. In addition, the issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no current plan to issue any shares of Preferred
Stock.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION
The Company's Articles of Incorporation eliminate, to the fullest extent
permitted by law, the liability of its directors to the Company and its
shareholders for monetary damages for acts or omissions in the director's
capacity as such, except for liability (i) for breach of a duty of loyalty to
the Company or its shareholders, (ii) for acts or omissions not in good faith,
or which involve intentional misconduct or a knowing violation of law, (iii)
for receipt of improper benefits, (iv) where liability is expressly provided
for by statute or (v) for unlawful stock repurchases or dividend payments.
This provision is intended to afford the Company's directors the benefit of
the Texas Business Corporation Act, which provides that directors of Texas
corporations may be relieved of these types of liabilities. The Articles of
Incorporation further provide that directors receive the benefit of any future
amendment to Texas statutes that further limits the liability of a director.
TRANSFER AGENT AND REGISTRAR
The Company has appointed Chemical Mellon Shareholder Services as the
transfer agent and registrar for the Common Stock.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 8,260,013 shares of
Common Stock outstanding. In addition to the shares of Common Stock that are
currently outstanding, options to acquire up to an estimated 825,175 shares of
Common Stock will be outstanding and immediately exercisable as of the
completion of the Offering under the Equity Appreciation Plan. See
"Management--Equity Appreciation Plan" and "Management--Stock Option Plan." In
addition, a total of 764,400 shares of Common Stock have been reserved for
issuance under the Option Plan. The Company has not granted any options under
the Option Plan. The Company plans to file Form S-8 registration statements
for the issuance of the shares issuable upon exercise of options granted under
such plans, with the result that shares so issued will be freely tradable by
the holders thereof, subject, in certain cases, to the lock-up agreements
described below. All of the 2,514,000 shares sold in the Offering (and any
shares sold upon exercise of the Underwriters' over-allotment option) will be
freely transferable by persons other than "affiliates" of the Company (as that
term is defined under the Securities Act) without restriction or further
registration under the Securities Act.
However, pursuant to the terms of the Underwriting Agreement, the
Underwriters have required current holders of the Common Stock to execute
agreements ("lock-up agreements") providing that they will not sell Common
Stock in the public markets for a period of 180 days from the date of this
Prospectus without the consent of the Representatives of the Underwriters. In
addition, all employees who hold options to acquire Common Stock under the
Equity Appreciation Plan have entered into similar agreements indicating that
they will not, without the consent of the Representatives of the Underwriters,
sell shares of Common Stock for a period of 180 days from the date of this
Prospectus.
In general, under Rule 144 under the Securities Act ("Rule 144"), as
currently in effect, a person who has beneficially owned shares for at least
two years is entitled to sell, within any three-month period, a number of
"restricted" shares that does not exceed the greater of one percent of the
then outstanding shares of Common Stock (approximately 82,600 shares
immediately following the Offering) or the average weekly trading volume
during the four calendar weeks preceding such sale. Sales under Rule 144 also
are subject to certain manner of sale limitations, notice requirements and the
availability of current public information about the Company. Rule 144(k)
provides that a person who is not deemed an "affiliate" and who has
beneficially owned shares for at least three years is entitled to sell such
shares at any time under Rule 144 without regard to the limitations described
above. All of the shares outstanding prior to the Offering have met the three-
year holding period requirement under Rule 144 and will be eligible for sale
90 days after the Offering, subject to volume limitations applicable to sales
by affiliates. However, all existing shareholders have agreed to a 180-day
lock-up period with the Underwriters.
The Company is unable to estimate the number of shares that may be sold in
the future by its existing shareholders or employees exercising stock options
or the effect, if any, that sales of shares by such shareholders or employees
will have on the market price of Common Stock prevailing from time to time.
Sales of substantial amounts of Common Stock by existing shareholders or
employees exercising options could adversely affect prevailing market prices.
45
<PAGE>
UNDERWRITING
The Underwriters named below have severally agreed with the Company and the
Selling Shareholders, subject to the terms and conditions of the Underwriting
Agreement, to purchase the respective numbers of shares of Common Stock set
forth opposite their names below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
A.G. Edwards & Sons, Inc........................................
Ladenburg, Thalmann & Co. Inc...................................
---------
Total....................................................... 2,514,000
=========
</TABLE>
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the shares of Common Stock, if any are purchased.
The Company has been advised by A.G. Edwards & Sons, Inc. and Ladenburg,
Thalmann & Co. Inc., the Representatives of the several Underwriters (the
"Representatives"), that the Underwriters propose to offer the Common Stock to
the public at the offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in
excess of $. per share and that the Underwriters and such dealers may
reallow a discount of not in excess of $. per share to other dealers. The
public offering price and the concession and discount to dealers may be
changed by the Representatives after the Offering.
The Company and BFGoodrich have granted the Underwriters an option, expiring
at the close of business on the 30th day subsequent to the date of the
Underwriting Agreement, to purchase up to 377,100 additional shares of Common
Stock at the Offering price, less the underwriting discount set forth on the
cover page of this Prospectus. The Underwriters may exercise such option
solely to cover over-allotments, if any, in the sale of the shares. To the
extent the Underwriters exercise such option, each of the Underwriters will
have a firm commitment, subject to certain conditions, to purchase
approximately the same percentage of the option shares as the number of shares
to be purchased by it shown in the table above bears to 2,514,000, and the
Company and BFGoodrich will be obligated, pursuant to the option, to sell such
shares to the Underwriters.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
The Company and all of its existing shareholders and SAR holders have agreed
that they will not, directly or indirectly, offer, sell or otherwise dispose
of any shares of Common Stock, other than the shares offered pursuant to this
Prospectus, for a period of 180 days from the date of this Prospectus without
the prior written consent of each of the Representatives. See "Shares Eligible
for Future Sale."
The Representatives have advised the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.
Prior to the Offering, there has been no public market for the Common Stock.
The Offering price for the Common Stock was determined by negotiation among
the Company and the Representatives. Among the factors considered in
determining the Offering price was the history of and the prospects for the
Company and the industry in which it operates, the past and present operating
results of the Company and the trends of such results, the future prospects of
the Company, an assessment of the Company's management, the general condition
for the securities markets at the time of the Offering and the prices for
similar securities of comparable companies.
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<PAGE>
LEGAL MATTERS
The legality of the issuance of the shares of Common Stock offered hereby
under Texas law and certain other legal matters will be passed upon for the
Company by Vinson & Elkins L.L.P., Dallas, Texas. Certain legal matters will
be passed upon for the Underwriters by Gardere & Wynne, L.L.P., Dallas, Texas.
EXPERTS
The consolidated financial statements of the Company at December 31, 1994
and 1995, and for each of the three years in the period ended December 31,
1995, appearing in this Prospectus and the Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
A Registration Statement on Form S-1 including amendments thereto relating
to the Common Stock offered hereby has been filed by the Company with the
Securities and Exchange Commission, Washington, D.C. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to such Registration Statement, exhibits and schedules. A
copy of the Registration Statement may be inspected by anyone without charge
at the Securities and Exchange Commission's principal office located at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, the New York Regional
Office located at 7 World Trade Center, Suite 1300, New York, New York 10048,
and the Chicago Regional Office located at Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 60661-2511 and copies of all or any
part thereof may be obtained from the Public Reference Section of the
Securities and Exchange Commission upon the payment of certain fees prescribed
by the Securities and Exchange Commission.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by an independent public
accounting firm and quarterly reports for each of the first three quarters of
each fiscal year containing unaudited financial information.
47
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors........................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995............. F-3
Consolidated Statements of Operations for the years ended December 31,
1993, 1994 and 1995..................................................... F-4
Consolidated Statements of Shareholders' Equity (Deficit) for the years
ended December 31, 1993, 1994 and 1995.................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995..................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Balance Sheet as of March 31, 1996...... F-17
Unaudited Condensed Consolidated Statements of Operations for the three
months ended March 31, 1995 and 1996.................................... F-18
Unaudited Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 1995 and 1996.................................... F-19
Notes to Unaudited Condensed Consolidated Financial Statements........... F-20
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
DTM Corporation
We have audited the consolidated balance sheets of DTM Corporation (a
majority-owned subsidiary of The B.F.Goodrich Company) and its subsidiary as
of December 31, 1995 and 1994, and the related consolidated statements of
operations, shareholders' equity (deficit) and cash flows for each of the
three years in the period ended 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of DTM Corporation at December 31, 1995 and 1994, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Ernst &Young LLP
Austin, Texas
February 5, 1996, except for Note 18,
as to which the date is May 17, 1996
F-2
<PAGE>
DTM CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................... $ 169 $ 756
Accounts receivable, net of allowance for doubtful
accounts of $204 in 1994 and $263 in 1995............... 1,627 2,941
Due from BFGoodrich...................................... -- 381
Inventory................................................ 2,297 2,143
Prepaid expenses and other............................... 165 372
-------- --------
Total current assets....................................... 4,258 6,593
Furniture and equipment, net............................... 2,443 2,647
Capitalized software development costs, net of accumulated
amortization of $937 in 1994 and $388 in 1995............. 963 843
Patent and license fees, net of accumulated amortization of
$568 in 1994 and $470 in 1995............................. 626 406
Other noncurrent assets.................................... 270 150
-------- --------
Total assets............................................... $ 8,560 $ 10,639
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable......................................... $ 1,033 $ 2,502
Due to BFGoodrich........................................ 683 --
Deferred revenues........................................ 802 905
Accrued expenses and other liabilities................... 1,398 2,074
Short-term borrowings.................................... -- 676
Borrowings under line of credit from BFGoodrich.......... -- 200
-------- --------
Total current liabilities.................................. 3,916 6,357
Notes payable.............................................. 4,600 8,200
Shareholders' equity (deficit):
Common stock, $.0003 par value, 60,000,000 shares
authorized;
6,930,013 shares issued and outstanding................. 2 2
Additional paid-in capital............................... 28,018 28,018
Accumulated deficit...................................... (27,982) (31,980)
Cumulative translation adjustment........................ 6 42
-------- --------
Total shareholders' equity (deficit)....................... 44 (3,918)
-------- --------
Total liabilities and shareholders' equity (deficit)....... $ 8,560 $ 10,639
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
DTM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
Products................................... $ 6,989 $ 8,127 $ 12,632
Service and support........................ 2,593 1,112 1,579
--------- --------- ---------
9,582 9,239 14,211
Cost of sales:
Products................................... 5,329 4,833 8,242
Service and support........................ 2,141 511 873
--------- --------- ---------
7,470 5,344 9,115
--------- --------- ---------
Gross profit................................. 2,112 3,895 5,096
Operating expenses:
Selling, general and administrative........ 5,958 5,786 7,181
Research and development................... 5,798 3,840 3,521
--------- --------- ---------
11,756 9,626 10,702
Other income (expense):
Gain on sale of service bureau............. 238 -- --
Interest expense........................... (328) (178) (530)
--------- --------- ---------
(90) (178) (530)
--------- --------- ---------
Loss before income tax benefit allocated from
BFGoodrich.................................. (9,734) (5,909) (6,136)
Income tax benefit allocated from
BFGoodrich.................................. 3,084 1,825 2,138
--------- --------- ---------
Net loss..................................... $ (6,650) $ (4,084) $ (3,998)
========= ========= =========
Net loss per share........................... $ (1.03) $ (0.54) $ (0.52)
========= ========= =========
Number of shares used in computing net loss
per share................................... 6,465,898 7,618,117 7,618,117
========= ========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE>
DTM CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON PAID-IN ACCUMULATED TRANSLATION
SHARES STOCK CAPITAL DEFICIT ADJUSTMENT TOTAL
--------- ------ ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1993................... 5,330,358 $ 2 $20,292 $(17,248) $ (1) $ 3,045
Conversion of notes
payable to common
stock ............... 1,599,655 -- 7,726 -- -- 7,726
Net loss.............. -- -- -- (6,650) -- (6,650)
Translation adjust-
ment................. -- -- -- -- (43) (43)
--------- --- ------- -------- ---- -------
Balance at December 31,
1993................... 6,930,013 2 28,018 (23,898) (44) 4,078
Net loss.............. -- -- -- (4,084) -- (4,084)
Translation adjust-
ment................. -- -- -- -- 50 50
--------- --- ------- -------- ---- -------
Balance at December 31,
1994................... 6,930,013 2 28,018 (27,982) 6 44
Net loss.............. -- -- -- (3,998) -- (3,998)
Translation adjust-
ment................. -- -- -- -- 36 36
--------- --- ------- -------- ---- -------
Balance at December 31,
1995................... 6,930,013 $ 2 $28,018 $(31,980) $ 42 $(3,918)
========= === ======= ======== ==== =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
DTM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss........................................... $(6,650) $(4,084) $(3,998)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization.................... 2,406 2,292 2,487
Gain on sale of service bureau................... (238) -- --
Loss on disposal of equipment.................... 195 34 32
Changes in assets and liabilities used in
operating activities:
Accounts receivable............................ (430) 854 (1,314)
Inventory...................................... (901) (182) 157
Due to/from BFGoodrich......................... 354 326 (1,064)
Prepaid expenses and other assets.............. (220) 19 (90)
Accounts payable............................... 969 (302) 1,469
Deferred revenues.............................. 471 (64) 103
Accrued expenses and other liabilities......... 730 (656) 654
------- ------- -------
Net cash used in operating activities.............. (3,314) (1,763) (1,564)
INVESTING ACTIVITIES
Purchases of furniture and equipment............... (610) (757) (1,674)
Proceeds from sale of equipment.................... 300 -- --
Capitalized software development costs............. (422) (325) (440)
Patent and license expenditures.................... (378) (362) (247)
------- ------- -------
Net cash used in investing activities.............. (1,110) (1,444) (2,361)
FINANCING ACTIVITIES
Proceeds from notes payable........................ 1,500 1,600 3,600
Net change in short-term borrowings................ -- -- 676
Proceeds from note payable to BFGoodrich........... 4,575 -- --
Draws on line of credit from BFGoodrich............ -- -- 200
------- ------- -------
Net cash provided by financing activities.......... 6,075 1,600 4,476
Effect of foreign exchange rate changes on cash.... (43) 50 36
------- ------- -------
Net increase (decrease) in cash.................... 1,608 (1,557) 587
Cash at beginning of year.......................... 118 1,726 169
------- ------- -------
Cash at end of year................................ $ 1,726 $ 169 $ 756
======= ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
DTM Corporation ("DTM" or the "Company"), a Texas corporation, was formed in
November 1987. Through the proprietary and patented selective laser sintering
process, the Company is engaged in the development, design, manufacture,
marketing and support of rapid prototyping and rapid tooling systems. This
technology, exclusively licensed to DTM by The University of Texas, enables
the fabrication of three-dimensional solid models, prototypes or tool inserts
directly from three-dimensional computer aided design ("CAD") data. The
Company's products, related materials and maintenance and support services are
available to the worldwide, rapid prototyping market. The financial statements
include the accounts of DTM GmbH, a wholly-owned German subsidiary. All
significant intercompany accounts and transactions have been eliminated.
At December 31, 1995, DTM was approximately 92 percent owned by The
B.F.Goodrich Company ("BFGoodrich"). DTM has continued to incur operating
losses and cash flow deficiencies. As a result, DTM is substantially reliant
upon BFGoodrich for capital funding or other financial assistance to enable
DTM to meet its financial obligations. DTM has been advised by management of
BFGoodrich that it is BFGoodrich's current intention to assure that DTM
secures financial resources on an as-needed basis to meet its financial
obligations, until the successful completion of an initial public offering
("IPO") of the Company's common stock or the Company otherwise develops
financial resources to meet its current financial obligations.
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 from those estimates.
Inventory
Inventories are carried at the lower of cost or market, with cost determined
using the first-in, first-out (FIFO) method.
Furniture and Equipment
Furniture and equipment is carried at cost less accumulated depreciation.
Depreciation expense is calculated on the straight-line method over the useful
life of each asset, which lives range from three to five years. Leasehold
improvements are amortized on the straight-line method over the life of the
related lease or the useful life of the respective asset, whichever is
shorter.
Capitalized Software Development Costs
The Company's principal product includes a software component. Costs
incurred in the development of software, once technological feasibility has
been established but prior to general release to customers, are capitalized.
Amortization is provided on a product by product basis at the greater of
amortization based on the estimated revenues of the products or the straight-
line amortization over their estimated economic lives of not more than three
years. DTM capitalized software development costs of $422,000 in 1993,
$325,000 in 1994 and $440,000 in 1995. Amortization of capitalized software
development costs totaled $370,000 in 1993, $537,000 in 1994 and $561,000 in
1995. Amortization is included in selling, general and administrative expenses
in the consolidated statements of operations.
F-7
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Patent and License Fees
Patent and license fees represent the costs associated with filing and
maintaining patent applications and obtaining and maintaining rights under
patents under which DTM operates. These fees are amortized over a five-year
period utilizing the straight-line method.
Translation of Foreign Subsidiary Financial Statements
The financial statements of DTM GmbH (a wholly-owned subsidiary located in
Germany) are translated to U.S. dollars substantially as follows: all assets
and liabilities at year-end exchange rates; sales and expenses at average
exchange rates; and shareholders' equity at historical exchange rates. Gains
and losses from translating the financial statements of DTM GmbH are recorded
directly in shareholders' equity.
Recognition of Revenue
Revenues from the sale of SLS systems are recognized when title has
transferred to the customer, which is generally upon shipment. The Company
defers from three to six percent of the revenues, excluding certain
accessories, from each SLS system sale for warranty and maintenance service,
which is recognized ratably over the following 12-month period.
Revenue related to service and support programs for the SLS system is
deferred and recognized ratably over the support period.
Net Loss Per Share
Net loss per share for each of the three years in the period ended December
31, 1995 was calculated using the weighted average number of common and common
equivalent shares outstanding during the respective periods. The number of
shares under options (at exercise prices substantially less than the Offering
price) that will be outstanding under the DTM Corporation Equity Appreciation
Plan (see Note 15) upon completion of an initial public offering of the
Company's common stock (see Note 17) have been treated as outstanding for all
reported periods. In addition, an effective 2.184-for-1 stock split effected
by the Company in May 1996 (see Note 18) has been retroactively applied to all
share and per share amounts for all reported periods.
Concentration of Credit Risk
The Company sells its products and services to companies in diversified
industries. Credit is extended based on an evaluation of each customer's
financial condition, generally without requiring collateral. The Company
monitors its exposure to credit losses and maintains allowances for potential
losses. Credit losses have not been material to the Company's financial
statements.
Dependence on Third-Party Suppliers
The Company subcontracts for the manufacture of product sub-assemblies from
single-source, third-party suppliers. In addition, the Company has adopted a
"just-in-time" inventory system for product sub-assemblies and relies on
suppliers to provide components on a timely basis.
Advertising Costs
Advertising costs, which are expensed as incurred, were $389,000 in 1993,
$346,000 in 1994 and $596,000 in 1995.
F-8
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock Plans
The Company accounts for its stock compensation arrangements under the
provisions of APB 25, "Accounting for Stock Issued to Employees," and intends
to continue to do so.
Income Taxes
Since January 1, 1993, DTM has accounted for income taxes using Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under Statement
109, the liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
Reclassifications
Certain 1993 and 1994 balances have been reclassified to conform to the 1995
presentation.
2. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company maintains an allowance for doubtful accounts related to its
trade accounts receivable. The activity in this allowance account for the
years ended December 31, is as follows (in thousands):
<TABLE>
<CAPTION>
BALANCE AT CHARGES TO BALANCE AT
BEGINNING COSTS AND END OF
PERIOD EXPENSES WRITE-OFFS PERIOD
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1993....................... $ 37 $115 $ 2 $150
1994....................... 150 75 21 204
1995....................... 204 60 1 263
</TABLE>
3. INVENTORY
Inventory at December 31 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Raw materials and purchased parts........................ $1,159 $1,423
Finished goods........................................... 1,138 720
------ ------
$2,297 $2,143
====== ======
</TABLE>
4. FURNITURE AND EQUIPMENT
Furniture and equipment at December 31 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Equipment.................................................. $ 4,468 $ 5,977
Leasehold improvements..................................... 1,195 1,289
Office furniture........................................... 383 347
------- -------
6,046 7,613
Less accumulated depreciation and amortization............. (3,603) (4,966)
------- -------
$ 2,443 $ 2,647
======= =======
</TABLE>
F-9
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
5. PATENT AND LICENSE AGREEMENTS
On December 3, 1987, DTM entered into a patent license agreement with the
Board of Regents of The University of Texas (a shareholder of the Company),
whereby DTM is licensed to make, have made and sell products utilizing
selective laser sintering technology.
The agreement provides for royalty payments in the amount of four percent of
DTM's net sales for products covered by the license agreement (gross receipts
net of commissions, returns, freight, discounts and sales taxes). Royalty
expense was $125,000 in 1993, $296,000 in 1994 and $424,000 in 1995. The
amount of $125,000 is net of a $158,000 credit granted per an amendment to the
original license agreement. Under such amendment, DTM also deferred 75 percent
of royalty payments related to the three years ended December 31, 1994. The
amounts deferred totaled $427,000 at December 31, 1994 and $227,000 at
December 31, 1995 and are included in accrued expenses. The deferred royalties
are due in eight equal quarterly installments, plus interest at an annual rate
of 12.3 percent, between January 1, 1995 and October 1, 1996.
Also, in 1987, DTM issued 43,680 shares of its common stock to The
University of Texas in consideration of the rights granted in the license
agreement. At the time that DTM agreed to issue its common stock to The
University of Texas, there was uncertainty surrounding the likelihood that a
patent would be obtained, thus DTM's right to the patent license agreement was
assigned no value (such patent was subsequently received). The license
agreement expires upon the expiration of the underlying patents.
In March 1992, DTM entered into a licensing agreement with another company,
whereby certain technology was licensed from that company in exchange for an
initial payment of $200,000, additional future payments totaling $400,000
based on the achievement of certain milestones as specified by the agreement
and the payment of royalties based on future sales of the technology as
specified by the agreement. As of December 31, 1993, DTM had made an
additional $200,000 payment. In 1994, it was determined that this technology
was not viable and the licensing agreement was not renewed. As a result, the
unamortized balance of $243,000 was written off to patent and license
amortization in December 1994.
During 1992, DTM entered into a licensing agreement with an individual,
whereby certain rapid prototyping technology was licensed from that individual
in exchange for payment of approximately $300,000, which was paid upon
execution of the license, and which is being amortized over a five-year
period.
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following as of
December 31 (in thousands):
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Royalties..................................................... $ 422 $ 491
Payroll and related accruals.................................. 76 431
Other......................................................... 900 1,152
------ ------
$1,398 $2,074
====== ======
</TABLE>
7. LINE OF CREDIT FROM BFGOODRICH AND SHORT-TERM BORROWINGS
In November 1995, the Company entered into a line of credit agreement with
BFGoodrich under which the Company may borrow up to $2,000,000. The line bears
interest at the prime commercial lending rate of Citibank, N.A. (8.75% at
December 31, 1995) and matures on the earlier of March 1, 1997 or the date
upon which the Company receives any proceeds from an IPO of the Company's
common stock. At December 31, 1995, $200,000 was outstanding under this
agreement (see Note 18).
F-10
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
7. LINE OF CREDIT FROM BF GOODRICH AND SHORT-TERM BORROWINGS (CONTINUED)
At December 31, 1995, DTM had a total of $676,000 of short-term debt
outstanding under the terms of a financing arrangement with a third party. The
balance is comprised of three loans which bear interest at annual rates
between 15% and 24%. The weighted average interest rate during 1995 was 18
percent. The debt is collateralized by certain equipment and accounts
receivable.
8. NOTES PAYABLE
In March 1993, BFGoodrich exercised its option to convert its loan of
$3,000,000 to the Company into 436,800 shares of common stock ($6.87 per
common share) as specified in the promissory note. In addition, under another
agreement, the conversion of the $3,000,000 loan to equity resulted in the
issuance of 126,665 additional shares of common stock to BFGoodrich.
In January 1993, DTM executed a $4,500,000 promissory note with BFGoodrich
bearing interest at the prime commercial lending rate of Citibank, N.A., plus
one percent. In December 1993, BFGoodrich exercised its option to convert the
promissory note to equity. The promissory note, including principal of
$4,500,000 and related unpaid interest of $244,000 under the note at December
1993, was converted to 1,036,190 shares of common stock ($4.58 per common
share) as specified in the promissory note.
At December 31, 1995, DTM had lines of credit with two banks under unsecured
promissory notes with available borrowings of $8,200,000, of which $4,600,000
and $8,200,000 was outstanding at December 31, 1994 and 1995, respectively.
BFGoodrich has provided letters of comfort to each of these banks upon which
the banks have relied in providing credit to DTM. DTM has been advised by
management of BFGoodrich that it is BFGoodrich's current intention to assure
that DTM secures financial resources on an as-needed basis to meet its
financial obligations, until the successful completion of an IPO of the
Company's common stock or the Company otherwise develops financial resources
to meet its current financial obligations, at which time BFGoodrich will no
longer provide such letters of comfort. The notes mature at the earlier of
March 31, 1997 or the successful completion of an IPO. Interest on both notes
is payable monthly, determined on an advance-by-advance basis; and, at the
Company's election, may be based on each bank's then current prime rate, CD
rate or Eurodollar rate. Interest rates and outstanding balances on notes
payable at December 31, 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
1994 1995
-------------------------------- -----------------------------------------------
INTEREST OUTSTANDING INTEREST OUTSTANDING
RATES BORROWINGS RATES BORROWINGS
-------- ----------- -------- -----------
<S> <C> <C> <C>
6.56% $4,600,000 6.49% $4,700,000
-- -- 6.43% 2,800,000
-- -- 8.50% 700,000
---------- ----------
$4,600,000 $8,200,000
========== ==========
</TABLE>
Interest paid was approximately $189,000 in 1993, $211,000 in 1994 and
$451,000 in 1995.
9. COMMON STOCK
During 1991, DTM, BFGoodrich and the minority shareholders of DTM entered
into an option agreement (the "Option Agreement"). The Option Agreement
provides holders of the options the right to require DTM to repurchase certain
shares issued to the option holders. The options may be exercised at the fifth
anniversary of their issuance at a price equal to the fair market value of the
Company's common stock or an agreed upon price if the fair market value is not
readily determinable. DTM's obligation to repurchase such stock, however, is
limited to its ability to fund such payments (or borrow the required funding)
without jeopardizing the ongoing
F-11
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
9. COMMON STOCK (CONTINUED)
existence or financial stability of DTM or without materially and adversely
affecting preexisting or foreseeable capital spending programs.
As of December 31, 1995, approximately 60,000 shares of the Company's common
stock were subject to options which allow the holders to require DTM to
repurchase the stock at the prices described above. Such options will
terminate at the earlier of August 1996 or the effective date of an initial
public offering of the common stock of the Company.
10. INCOME TAXES
Since October 31, 1990, DTM has been included in the consolidated federal
tax return of BFGoodrich. Accordingly, for all periods since that date, the
Company has recorded the tax benefit allocated to it by BFGoodrich, which
credits the Company with a tax benefit approximating the benefit that
BFGoodrich derives from the consolidation of the Company. Such benefits are
generally paid to the Company by BFGoodrich on a current basis. Should
BFGoodrich's ownership interest fall below 80 percent, such benefits will no
longer be available to the Company. Based on the tax sharing agreement, if
BFGoodrich loses part of the loss previously utilized or has to report
additional income as the result of a federal tax audit of DTM, DTM will be
required to reimburse BFGoodrich for any additional taxes paid.
DTM has net operating loss carryforwards totaling approximately $4,200,000
for federal income tax purposes, incurred from inception to October 31, 1990.
These carryforwards expire in the years 2002 to 2004 and, although available
to DTM, should DTM subsequently file a federal income tax return separate from
BFGoodrich, are subject to significant annual limitations due to substantial
changes in DTM's ownership.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities of DTM for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets as of December
31, 1994 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Book over tax depreciation and amortization............ $ 193 $ 431
Allowance for doubtful accounts........................ 71 92
Inventory reserve...................................... 18 28
Net operating loss carryforwards (for periods prior to
October 31, 1990)..................................... 1,470 1,470
Research and development credits....................... 293 87
------- -------
Total deferred tax assets................................ 2,045 2,108
Valuation allowance for deferred tax assets.............. (1,764) (1,818)
------- -------
281 290
Deferred tax liabilities:
Deferred revenue....................................... 281 290
------- -------
Total deferred tax liabilities........................... 281 290
------- -------
Net deferred tax assets.................................. $ -- $ --
======= =======
</TABLE>
F-12
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
10. INCOME TAXES (CONTINUED)
DTM was allocated federal income tax benefits of $3,084,000 in 1993,
$1,825,000 in 1994 and $2,138,000 in 1995 from BFGoodrich. These benefits
approximate BFGoodrich's utilization of the Company's net operating losses and
tax credits to offset taxable income on a consolidated basis and are
calculated by BFGoodrich on an annual basis.
A reconciliation of income tax benefit calculated at the statutory rate and
the provision for income tax benefit is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Income tax benefit at the federal statutory rate
(35%).......................................... $ 3,310 $ 2,009 $ 2,086
Net operating loss not utilized by the Company.. (3,310) (2,009) (2,086)
Income tax benefit allocated from BFGoodrich.... 3,084 1,825 2,138
-------- -------- --------
$ 3,084 $ 1,825 $ 2,138
======== ======== ========
</TABLE>
BFGoodrich files a consolidated federal income tax return which includes all
of its eligible subsidiaries, including the Company. If federal taxes were
computed assuming the Company filed a separate federal income tax return, no
benefit would be available to the Company. Accordingly, without the tax
benefit allocated from BFGoodrich, the Company's net loss for the year ended
December 31, 1995 would have been $6,136,000, or a loss of $0.81 per share.
11. RELATED PARTY TRANSACTIONS
The Company is reliant on BFGoodrich for financing of a significant portion
of its cash flow requirements (see Note 1--Organization) and BFGoodrich
assists the Company in obtaining loans (see Note 8).
During the period covered by the accompanying financial statements,
BFGoodrich loaned money to the Company and converted certain of those loans
and interest thereon to equity (see Note 8).
Due to and from BFGoodrich results from receivables from income tax benefits
utilized by BFGoodrich and certain expenditures made by BFGoodrich on behalf
of DTM, primarily related to payroll taxes. Amounts are generally settled with
BFGoodrich subsequent to year end.
DTM currently has a line of credit with BFGoodrich for $2,000,000, under
which $200,000 was outstanding at December 31, 1995 (see Notes 7 and 18).
The Company has entered into an Option Agreement with BFGoodrich and certain
minority shareholders (see Note 9).
12. COMMITMENTS
DTM leases facilities and equipment under noncancelable operating leases,
expiring primarily in 1997. Total rent expense incurred under these leases was
approximately $268,000 in 1993, $246,000 in 1994 and $252,000 in 1995. Future
minimum payments under these leases are as follows (in thousands):
<TABLE>
<S> <C>
1996.............................................. $263
1997.............................................. 246
1998.............................................. 8
1999.............................................. 3
</TABLE>
F-13
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
12. COMMITMENTS (CONTINUED)
As of December 31, 1995, the Company had purchase commitments for inventory
totaling approximately $2,700,000.
13. BENEFIT PLANS
In March 1995, the Company established an employee savings plan (the
"Savings Plan") that qualifies as a deferred salary arrangement under Section
401(k) of the Internal Revenue Code. Under the Savings Plan, U.S. employees
may defer a portion of their pretax earnings, up to the Internal Revenue
Service annual contribution limit. Although the Savings Plan provides that DTM
can match all or a portion of employee contributions, no Company matches were
made in 1995. Administrative expenses of the Savings Plan, which are borne by
the Company, are not material.
14. SALE OF SERVICE BUREAU
In December 1993, DTM sold its domestic service bureau operations for a
total sales price of $1,500,000 and recognized a gain of approximately
$238,000 on the sale.
15. EMPLOYEE INCENTIVE PLAN
In January 1995, the Board of Directors approved the DTM Corporation Equity
Appreciation Plan (the "SAR Plan"), which created 10,000,000 Phantom Stock
Units. Ten percent of the Phantom Stock Units were allocated for the issuance
of a like number of Phantom Stock Appreciation Rights ("SARs") under the SAR
Plan to eligible employees. Each SAR granted to a Participant will vest and
become exercisable upon, but not prior to, a "Change in Control" of DTM. A
"Change in Control" of DTM shall be deemed to have occurred either: (1) when
common stock of DTM is issued to the public in an IPO; or (2) BFGoodrich is no
longer the owner of at least 50% of the outstanding common stock of DTM as a
result of an arms-length sale of all or a part of its interest in DTM to a
third party not affiliated or associated with BFGoodrich. If the Change of
Control results from an IPO, the SARs will immediately convert to fully vested
options to purchase common stock of the Company. If the Change in Control
occurs as the result of a sale of all or a part of BFGoodrich's interest in
DTM to a third party, the SARs will become immediately exercisable; and, a
Participant may exercise an SAR by providing written notice to DTM whereupon
the Participant will receive a cash amount equal to the appreciation in value
of a Phantom Stock Unit from its value on the date the SAR was granted to its
value on the date it is exercised. From and after, but not prior to, the
occurrence of a Change of Control, the SARs or stock options granted to the
Participants will become exercisable by the Participants for a period of 10
years from the date on which the SARs or stock options are granted. As of
December 31, 1995, there were 997,000 SARs outstanding.
Due to the terms and conditions of the SAR Plan, the SARs or stock options
outstanding thereunder will be accounted for by the Company as compensation
expense when it becomes probable that a Change in Control of DTM will occur.
The amount of compensation expense so recognized will be equal to the number
of SARs or stock options outstanding multiplied by the difference between the
exercise price of each SAR or stock option and the value of each SAR or stock
option at the date of the Change in Control. The exercise price and value at
the date of Change in Control of the SARs or stock options is determined by a
complex formula. However, the appreciation in value of the SARs or stock
options (compensation to be recognized) will approximate 10% of the increase
in total market value of the Company's common stock over a base value of $14
million.
F-14
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
16. GEOGRAPHIC AND CUSTOMER INFORMATION
The Company and its subsidiary, located in Germany, operate in one industry
segment: the development, manufacturing and service of SLS systems and related
products. Operations outside of the United States consist principally of
sales, marketing and customer support. Transfers between geographic areas are
accounted for at amounts which are generally above cost and consistent with
the rules and regulations of governing tax authorities. Such transfers are
eliminated in the consolidated financial statements. Identifiable assets are
those assets that can be directly associated with a particular geographic
area. The following is a summary of operations within each geographic area (in
thousands):
<TABLE>
<CAPTION>
NET REVENUES TRANSFERS
FROM BETWEEN TOTAL
UNAFFILIATED GEOGRAPHIC NET LOSS FROM IDENTIFIABLE
CUSTOMERS AREAS REVENUES OPERATIONS NET LOSS ASSETS
------------ ---------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
1993:
United States........... $ 9,458(a) $ -- $ 9,458 $(8,890) $(5,896) $12,167
Europe.................. 124 -- 124 (754) (754) 642
Eliminations............ -- -- -- -- -- (425)
------- ------- ------- ------- ------- -------
$ 9,582 $ -- $ 9,582 $(9,644) $(6,650) $12,384
======= ======= ======= ======= ======= =======
1994:
United States........... $ 6,689(a) $ 1,449 $ 8,138 $(5,743) $(4,096) $ 7,974
Europe.................. 2,550 -- 2,550 12 12 1,656
Eliminations............ -- (1,449) (1,449) -- -- (1,070)
------- ------- ------- ------- ------- -------
$ 9,239 $ -- $ 9,239 $(5,731) $(4,084) $ 8,560
======= ======= ======= ======= ======= =======
1995:
United States........... $12,056(a) $ 2,102 $14,158 $(5,431) $(3,822) $10,446
Europe.................. 2,155 -- 2,155 (175) (176) 2,386
Eliminations............ -- (2,102) (2,102) -- -- (2,193)
------- ------- ------- ------- ------- -------
$14,211 $ -- $14,211 $(5,606) $(3,998) $10,639
======= ======= ======= ======= ======= =======
</TABLE>
- --------
(a) The Company's United States net revenues from unaffiliated customers
include export sales (principally to the Pacific Rim) of $860,000 in 1993,
$666,000 in 1994 and $2,611,050 in 1995.
The Company's revenues are derived from sales to a wide range of
international customers. During 1993, $1,270,000, approximately 13% of total
revenues, were from sales to one customer and in 1995, $2,111,000,
approximately 15% of total revenues, were from sales to another customer.
17. ACTIONS BY BOARD OF DIRECTORS IN JANUARY 1996
In January 1996, the Company's Board of Directors approved a DTM Corporation
Stock Option Plan (the "Option Plan"). Under the Option Plan, the Company will
set aside 764,400 shares which may be awarded to key employees, as selected by
management and approved by the Compensation Committee of the Board of
Directors (the "Committee") through stock options, stock appreciation rights,
limited stock appreciation rights, restricted stock, performance shares or
other awards as determined by the Committee. In the case of stock option
awards, the option price per share may not be less than the fair market value
of a share on the date the option is granted. Options granted under the Option
Plan will vest in three separate installments with 35% of the options granted
becoming exercisable on the anniversary date of the option grant, 35% becoming
exercisable on the next succeeding anniversary date, and 30% becoming
exercisable on the next succeeding anniversary date. Options will be
exercisable for a period of no more than 10 years from the date of grant.
There have been no grants made under this option plan. The term of the Option
Plan is five years unless terminated earlier by the Board of Directors.
F-15
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
17. ACTIONS BY BOARD OF DIRECTORS IN JANUARY 1996 (CONTINUED)
In January 1996, the Company's Board of Directors approved a DTM Corporation
Management Incentive Plan (the "MIP Plan"). The MIP Plan provides for the grant
of incentive compensation to key management employees who have the potential to
positively influence the performance of the Company as a reward for levels of
performance above the ordinary performance standards compensated by base
salary. Under the MIP Plan, each participant is assigned a "cash bonus target"
of 25 to 50 percent of base salary and the Compensation Committee of the Board
of Directors creates corporate performance targets, as well as minimum
thresholds. If the minimum thresholds are met, the bonus payable will be
between 50 and 150 percent of the participant's cash bonus target. The first
awards were granted under the MIP Plan for performance during the Company's
1996 fiscal year and will be paid, if the conditions of the MIP Plan are met,
after the close of the 1996 fiscal year.
In January 1996, the Company's Board of Directors authorized management of
the Company to begin the process of an IPO of the Company's common stock.
Although the success of such a proposed offering cannot be certain, management
is proceeding with negotiations relating to this process.
18. SUBSEQUENT EVENTS
BFGoodrich Line of Credit
In April 1996, the Company entered into an additional line of credit
agreement with BFGoodrich (see Note 7), which provides an additional credit
line of $1,000,000, and matures on December 31, 1996. The Company had
$3,000,000 outstanding under its lines of credit with BFGoodrich as of May 17,
1996.
Line of Credit
In May 1996, the Company obtained a loan commitment letter from Texas
Commerce Bank for a revolving line of credit ("line of credit") contingent upon
the Company receiving net cash proceeds (gross proceeds less underwriting
discount) of $13.4 million from the Offering and the negotiation of definitive
loan agreements. During the remainder of 1996, and on an ongoing basis
thereafter, the Company's ability to borrow under the line of credit is subject
to meeting certain financial thresholds, including attaining certain levels of
"established profitability," as defined in the commitment letter. Until
achieving one such level, the Company may borrow up to $2 million; thereafter,
subject to a borrowing base calculation, available advances against eligible
receivables may be increased up to a maximum of $6 million. Loans under the
line of credit will mature within one year, will be collateralized by the
Company's accounts receivable and inventory and will bear interest at the
bank's prime interest rate plus one and one quarter percent. The Company will
be bound by customary covenants, including restrictions on additional liens or
borrowings, as well as the payment of dividends, and affirmative reporting
requirements. In addition, the terms of the commitment letter specify that the
bank has the option to terminate the commitment on 30 days notice if employment
of the chief executive officer of the Company terminates and a qualified
successor is not appointed by the Company and approved by Texas Commerce Bank
within a specified period of time.
Stock Split
In May 1996, the Company's Board of Directors and shareholders authorized an
effective stock split of 2.184-for-1. The effect of the stock split has been
retroactively applied to all share and per share amounts in these financial
statements.
Authorization of Preferred Shares
In May 1996, the Company's Board of Directors and shareholders authorized the
issuance by the Company of up to 3,000,000 shares of preferred stock, $.001 par
value per share, none of which have been issued.
Reservation of Shares of Common Stock
In May 1996, the Company reserved 800,000 shares of common stock for future
issuance under the DTM Corporation Equity Appreciation Plan.
Extension of Notes Payable
In May 1996, the Company extended the maturity dates of its bank lines of
credit to July 31, 1997.
F-16
<PAGE>
DTM CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31,
1996
---------
<S> <C>
ASSETS
Current assets:
Cash............................................................... $ 435
Accounts receivable, net of allowance for doubtful accounts of
$293.............................................................. 4,020
Inventory.......................................................... 3,335
Prepaid expenses and other......................................... 775
--------
Total current assets................................................. 8,565
Furniture and equipment, net......................................... 2,933
Capitalized software development costs, net of accumulated amortiza-
tion of $487........................................................ 874
Patent and license fees, net of accumulated amortization of $534..... 523
Other noncurrent assets.............................................. 314
--------
Total assets......................................................... $ 13,209
========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................................... $ 3,919
Due to BFGoodrich.................................................. 64
Deferred revenues.................................................. 836
Accrued expenses and other liabilities............................. 1,519
Short-term borrowings.............................................. 1,138
Borrowings under line of credit from BFGoodrich.................... 2,000
--------
Total current liabilities............................................ 9,476
Notes payable........................................................ 8,200
Shareholders' equity (deficit):
Common stock, $.0003 par value, 60,000,000 shares authorized;
6,930,013 shares issued and outstanding........................... 2
Additional paid-in capital......................................... 28,018
Accumulated deficit................................................ (32,549)
Cumulative translation adjustment.................................. 62
--------
Total shareholders' equity (deficit)................................. (4,467)
--------
Total liabilities and shareholders' equity (deficit)................. $ 13,209
========
</TABLE>
See accompanying notes.
F-17
<PAGE>
DTM CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1995 1996
--------- ---------
<S> <C> <C>
Revenue:
Products.............................................. $ 1,733 $ 5,329
Service and support................................... 280 461
--------- ---------
2,013 5,790
Cost of sales:
Products.............................................. 1,132 3,109
Service and support................................... 160 271
--------- ---------
1,292 3,380
--------- ---------
Gross profit............................................ 721 2,410
Operating expenses:
Selling, general and administrative................... 1,508 2,128
Research and development.............................. 938 951
--------- ---------
2,446 3,079
Interest expense, net................................... 91 219
--------- ---------
Loss before income tax benefit allocated from
BFGoodrich............................................. (1,816) (888)
Income tax benefit allocated from BFGoodrich............ 487 319
--------- ---------
Net loss................................................ $ (1,329) $ (569)
========= =========
Net loss per share...................................... $ (0.17) $ (.07)
========= =========
Number of shares used in computing net loss per share... 7,618,117 7,618,117
========= =========
</TABLE>
See accompanying notes.
F-18
<PAGE>
DTM CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss................................................ $(1,329) $ (569)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization......................... 534 449
Changes in assets and liabilities used in operating
activities:
Accounts receivable................................. 102 (1,079)
Inventory........................................... 117 (1,192)
Due to/from BFGoodrich.............................. (346) 445
Prepaid expenses and other assets................... (124) (567)
Accounts payable.................................... 129 1,417
Deferred revenues................................... (9) (69)
Accrued expenses and other liabilities.............. (125) (555)
------- -------
Net cash used in operating activities................... (1,051) (1,720)
INVESTING ACTIVITIES
Purchases of furniture and equipment.................... (502) (582)
Capitalized software development costs.................. (110) (120)
Patent and license expenditures......................... (47) (181)
------- -------
Net cash used in investing activities................... (659) (883)
FINANCING ACTIVITIES
Proceeds from notes payable............................. 1,640 --
Net change in short-term borrowings..................... -- 462
Draws on line of credit from BFGoodrich................. -- 1,800
------- -------
Net cash provided by financing activities............... 1,640 2,262
Effect of foreign exchange rate changes on cash......... -- 20
------- -------
Net decrease in cash.................................... (70) (321)
Cash at beginning of period............................. 169 756
------- -------
Cash at end of period................................... $ 99 $ 435
======= =======
</TABLE>
See accompanying notes.
F-19
<PAGE>
DTM CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
DTM Corporation ("DTM" or the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996. For further information, refer to the consolidated
financial statements and related footnotes of the Company for the year ended
December 31, 1995.
2. INVENTORY
Inventory at March 31, 1996 consisted of the following (in thousands):
<TABLE>
<S> <C>
Raw materials and purchased parts............... $2,088
Finished goods.................................. 1,247
------
$3,335
======
</TABLE>
3. SHORT-TERM BORROWINGS
During the three-month period ended March 31, 1996, DTM borrowed $832,000
and repaid $370,000 under the terms of financing arrangements with a third
party. At March 31, 1996, the Company had a total of $1,138,000 of short-term
borrowings outstanding, comprised of four loans which bear interest at annual
rates between 15 and 24 percent. The borrowings are collateralized by certain
equipment and accounts receivable.
4. LINE OF CREDIT FROM BFGOODRICH
In November 1995, the Company entered into a line of credit agreement with
BFGoodrich under which the Company may borrow up to $2,000,000. During the
three-month period ended March 31, 1996, the Company made draws on the line of
credit of $1,800,000 increasing the outstanding balance under this agreement
to $2,000,000 at March 31, 1996. In April 1996, the Company entered into an
additional line of credit agreement with BFGoodrich, which provides an
additional credit line of $1,000,000, and matures on December 31, 1996. The
Company had $3,000,000 outstanding under these lines of credit as of April 30,
1996.
5. NOTES PAYABLE
DTM has lines of credit with two banks under promissory notes that are
unsecured, but comforted by BFGoodrich. Available borrowings and outstanding
balances total $8,200,000 at March 31, 1996. The notes mature at the earlier
of July 31, 1997 or the successful completion of an initial public offering
("IPO") of the Company's common stock. If an IPO is completed, a portion of
the net proceeds from the IPO will be used to repay the notes.
6. INCOME TAXES
DTM is included in the consolidated federal tax return of BFGoodrich.
Accordingly, the Company has recorded the tax benefit allocated to it by
BFGoodrich, which credits the Company with a tax benefit approximating the
benefit that BFGoodrich derives from the consolidation of the Company.
7. COMMITMENT
In February 1996, the Company entered into an arrangement with a lender to a
customer in which the Company agreed to buy back a System purchased by the
customer if the customer commits a material breach of the loan agreement
during its three-year term.
F-20
<PAGE>
DTM CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. ACTIONS BY BOARD OF DIRECTORS IN JANUARY 1996
In January 1996, the Company's Board of Directors approved a DTM Corporation
Stock Option Plan (the "Option Plan"). Under the Option Plan, the Company will
set aside 764,400 shares which may be awarded to key employees, as selected by
management and approved by the Compensation Committee of the Board of
Directors (the "Committee") through stock options, stock appreciation rights,
limited stock appreciation rights, restricted stock, performance shares or
other awards as determined by the Committee. In the case of stock option
awards, the option price per share may not be less than the fair market value
of a share on the date the option is granted. Options granted under the Option
Plan will vest in three separate installments with 35% of the options granted
becoming exercisable on the anniversary date of the option grant, 35% becoming
exercisable on the next succeeding anniversary date, and 30% becoming
exercisable on the next succeeding anniversary date. Options will be
exercisable for a period of no more than 10 years from the date of grant.
There have been no grants made under this option plan. The term of the Option
Plan is five years unless terminated earlier by the Board of Directors.
In January 1996, the Company's Board of Directors approved a DTM Corporation
Management Incentive Plan (the "MIP Plan"). The MIP Plan provides for the
grant of incentive compensation to key management employees who have the
potential to positively influence the performance of the Company as a reward
for levels of performance above the ordinary performance standards compensated
by base salary. Under the MIP Plan, each participant is assigned a "cash bonus
target" of 25 to 50 percent of base salary and the Compensation Committee of
the Board of Directors creates corporate performance targets, as well as
minimum thresholds. If the minimum thresholds are met, the bonus payable will
be between 50 and 150 percent of the participant's cash bonus target. The
first awards were granted under the MIP Plan for performance during the
Company's 1996 fiscal year and will be paid, if the conditions of the MIP Plan
are met, after the close of the 1996 fiscal year.
In January 1996, the Company's Board of Directors authorized management of
the Company to begin the process of an IPO of the Company's common stock.
Although the success of such a proposed offering cannot be certain, management
is proceeding with negotiations relating to this process.
9. SUBSEQUENT EVENTS
BFGoodrich Line of Credit
In April 1996, the Company entered into an additional line of credit
agreement with BFGoodrich (see Note 7), which provides an additional credit
line of $1,000,000, and matures on December 31, 1996. The Company had
$3,000,000 outstanding under its lines of credit with BFGoodrich as of May 17,
1996.
Line of Credit
In May 1996, the Company obtained a loan commitment letter from Texas
Commerce Bank for a revolving line of credit ("line of credit") contingent
upon the Company receiving net cash proceeds (gross proceeds less underwriting
discount) of $13.4 million from the Offering and the negotiation of definitive
loan agreements. During the remainder of 1996, and on an ongoing basis
thereafter, the Company's ability to borrow under the line of credit is
subject to meeting certain financial thresholds, including attaining certain
levels of "established profitability," as defined in the commitment letter.
Until achieving one such level, the Company may borrow up to $2 million;
thereafter, subject to a borrowing base calculation, available advances
against eligible receivables may be increased up to a maximum of $6 million.
Loans under the line of credit will mature within one year, will be
collateralized by the Company's accounts receivable and inventory and will
bear interest at the bank's prime interest rate plus one and one quarter
percent. The Company will be bound by customary covenants, including
restrictions on additional liens or borrowings, as well as the payment of
dividends, and affirmative reporting requirements. In addition, the terms of
the commitment letter specify that the bank has the option to terminate the
commitment on 30 days notice if employment of the chief executive officer of
the Company terminates and a qualified successor is not appointed by the
Company and approved by Texas Commerce Bank within a specified period of time.
F-21
<PAGE>
DTM CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. SUBSEQUENT EVENTS (CONTINUED)
Stock Split
In May 1996, the Company's Board of Directors and the shareholders authorized
an effective stock split of 2.184-for-1. The effect of the stock split has been
retroactively applied to all share and per share amounts in these financial
statements.
Authorization of Preferred Shares
In May 1996, the Company's Board of Directors and shareholders authorized the
issuance by the Company of up to 3,000,000 shares of preferred stock, $.001 par
value per share, none of which have been issued.
Reservation of Shares of Common Stock
In May 1996, the Company reserved 800,000 shares of common stock for future
issuance under the DTM Corporation Equity Appreciation Plan.
Extension of Notes Payable
In May 1996, the Company extended the maturity dates of its bank lines of
credit to July 31, 1997.
F-22
<PAGE>
On the inside back cover is the following text and drawings:
"DTM's RAPIDTOOL Process Capabilities
The ability to produce metal mold inserts from metal powder reduces the time
required to make tooling for the production of substantial quantities of plastic
parts for market testing or introduction. Conventional milling and machine
techniques can require weeks, and in some cases months, and are labor intensive.
The RAPIDTOOL process can produce prototype metal mold inserts in less than ten
working days, with minimal supervision. The Company believes that competing,
commercial rapid prototyping technologies currently do not have the ability to
create tooling from metal powder."
Below the above text is a drawing of a desktop computer. Below the picture is
the following text:
"(1) Complex Metal Mold Designs
. Design engineers can use their existing software design environment"
Below this text is a drawing of a stop watch with the following caption: "Clock
Starts..."
The desktop computer picture is connected by an arrow to a drawing of a
SINTERSTATION 2000 System. Below this drawing is the following text:
"(2) The DTM Selective Laser Sintering Process
. Users input metal mold insert designs into the SLS System in the form of CAD
drawings
. The selective laser sintering process is used to fuse RAPIDSTEEL powder in
order to create a "green" part which replicates the CAD drawing
. Upon (part build) completion, the "green" part is removed, dipped in a
polymer solution and dried for several hours"
Below this text is a stop watch with the following caption: "Total Elapsed
Time: One Day".
The SINTERSTATION 2000 System picture is connected by an arrow to a drawing of a
furnace in which two injection molds are being heat-treated. Below the drawing
is the following text:
"(3) Furnace Treatment
. The metal mold insert is heat-treated in a furnace and infiltrated with
copper to increase strength and mold life."
Below this text is a stop watch with the following caption: "Total Elapsed
Time: 3.5 days".
The drawing of the furnace is connected by an arrow to a drawing of an injection
molding machine with five injecting molded plastic parts coming out of the
machine. Below the drawing is the following text:
"(4) Injection Molding
. The metal mold insert is mounted in a standard injection molding machine
. These durable molds are capable of producing thousands of injection molded
plastic parts"
Below this text is a stop watch with the following caption: "Total Elapsed
Time: 5-10 days from Design to Completion".
On the outside back cover page in the lower right-hand corner is the DTM
Corporation logo.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHARE-
HOLDERS OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OF-
FER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CRE-
ATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
The Company.............................................................. 11
Use of Proceeds.......................................................... 11
Dividend Policy.......................................................... 11
Capitalization........................................................... 12
Dilution................................................................. 13
Selected Consolidated Financial Data..................................... 14
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 15
Business................................................................. 22
Management............................................................... 34
Certain Transactions..................................................... 39
Principal and Selling Shareholders....................................... 43
Description of Capital Stock............................................. 44
Shares Eligible for Future Sale.......................................... 45
Underwriting............................................................. 46
Legal Matters............................................................ 47
Experts.................................................................. 47
Additional Information................................................... 47
Index to Financial Statements............................................ F-1
</TABLE>
---------------
UNTIL , 1996 (25 DAYS AFTER COMMENCEMENT OF THIS OFFERING), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY RE-
QUIREMENT 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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,514,000 SHARES
DTM CORPORATION
COMMON STOCK
---------------
PROSPECTUS
---------------
A.G. EDWARDS & SONS, INC.
LADENBURG, THALMANN & CO. INC.
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities
being registered, other than the underwriting discount. All of the amounts
shown are estimated except the Securities and Exchange Commission registration
fee, the Nasdaq National Market filing fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC Registration fee............................................. $12,961
NASD filing fee.................................................. 4,259
Nasdaq National Market listing fee............................... 19,456
Blue sky qualification fees and expenses......................... 10,000
Printing and engraving expenses.................................. *
Legal fees and expenses.......................................... *
Accounting fees and expenses..................................... *
Transfer agent and registrar fees................................ *
Miscellaneous.................................................... *
-------
Total........................................................ $ *
=======
</TABLE>
- --------
* To be completed by Amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation include provisions to permit the
Registrant to indemnify its directors and officers to the fullest extent
permitted by Texas law. Article 2.02-1 of the Texas Business Corporation Act
makes provision for the indemnification of officers and directors in terms
sufficiently broad as to include indemnification under certain circumstances
for liabilities (including reimbursement of expenses incurred) arising under
the Securities Act of 1933, as amended (the "Securities Act"). In addition, as
permitted by Article 2.02-1 of the Texas Business Corporation Act, the
Articles of Incorporation of the Registrant provide that a director of the
Registrant shall not be liable to the Registrant or its shareholders for
monetary damages for acts or omissions in the director's capacity as such,
except for liability (i) for breach of a duty of loyalty to the Registrant or
its shareholders, (ii) for acts or omissions not in good faith, or which
involve intentional misconduct or a knowing violation of law, (iii) for
receipt of improper benefits, (iv) where liability is expressly provided for
by statute or (v) for unlawful stock repurchases or dividend payments. The
Articles of Incorporation further provide that directors receive the benefit
of any future amendment to Texas statutes that further limits the liability of
a director.
Individuals who serve as directors and executive officers of the Company are
included in the directors and officers insurance coverage of BFGoodrich, as
part of the insurance program that BFGoodrich maintains for its business units
and subsidiaries. Directors who are also employees of BFGoodrich are entitled
to indemnification pursuant to BFGoodrich's bylaws. Furthermore, BFGoodrich's
bylaws provide for discretionary indemnification for certain other persons
acting as officers or directors of its subsidiaries.
The Underwriting Agreement to be filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant
and the Selling Shareholders and its officers and directors for certain
liabilities arising under the Securities Act, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
During the Registrant's 1993 through 1995 fiscal years, and to date, the
Registrant has sold and issued the following unregistered securities pursuant
to Section 4(2) of the Securities Act:
II-1
<PAGE>
1. In January 1993, the Registrant borrowed $4.5 million from BFGoodrich
pursuant to a convertible promissory note that was converted to Common
Stock in December 1993 at a price of $4.58per share. The Registrant
issued an aggregate of 1,036,190 shares in connection with the
conversion.
2. In March 1993, BFGoodrich exercised its option to convert a convertible
promissory note in the amount of $3.0 million to Common Stock at a price
of $6.87 per share. The Registrant issued an aggregate of 436,800 shares
in connection with the conversion.
The foregoing information has been adjusted to reflect a 2.184-for-1 stock
split of the Common Stock effected in March 1996.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a list of exhibits filed as a part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Articles of Incorporation of Registrant.
3.2 -- Amended and Restated Bylaws of Registrant.
4.1* -- Form of Stock Certificate of Registrant
5.1* -- Opinion of Vinson & Elkins L.L.P.
10.1 -- DTM Corporation Equity Appreciation Plan.
10.2 -- Form of Supplemental Phantom Stock Appreciation Rights Agreement.
10.3 -- DTM Corporation Management Incentive Plan.
10.4 -- DTM Corporation Stock Option Plan.
10.5 -- Patent License Agreement between DTM Corporation and the Board of
Regents, The University of Texas, effective as of December 3, 1987.
10.6 -- Supplement to Patent License Agreement between DTM Corporation and
the Board of Regents, The University of Texas, dated March 20,
1992.
10.7 -- Promissory Note to NationsBank.
10.8 -- Promissory Note to National City Bank.
10.9 -- Promissory Note to The B.F.Goodrich Company.
10.10 -- Promissory Note to The B.F.Goodrich Company.
10.11 -- Amended and Restated Shareholders' Agreement.
10.12 -- Lease Agreement for Facilities in Austin, Texas.
11.1 -- Statement of Computation of Earnings Per Share.
21.1 -- Subsidiaries of the Registrant.
23.1* -- Consent of Vinson & Elkins L.L.P. (included in the opinion to be
filed as Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney for D. Lee Tobler.
24.2 -- Power of Attorney for Gregory A. Logwinuk.
24.3 -- Power of Attorney for Marshall O. Larsen.
24.4 -- Power of Attorney for Alexander MacLachlan.
24.5 -- Power of Attorney for Thomas G. Ricks.
24.6 -- Power of Attorney for Steven G. Rolls.
27 -- Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
(b) Financial Statement Schedules.
All schedules are omitted since the required information is inapplicable or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the Consolidated Financial
Statements and Notes thereto.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in said Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant 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
Registrant 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 of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(3) That for purposes of determining any liability under the Securities
Act, 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 Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(4) That for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Austin, State of Texas,
on May 20, 1996.
DTM Corporation
/s/ John S. Murchison, III
By: _________________________________
John S. Murchison, III
President, Chief Executive Officer
and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ John S. Murchison, III President, Chief
- ------------------------------------- Executive Officer
John S. Murchison, III and Director
(Principal Executive
Officer)
*D. Lee Tobler Chairman of the
- ------------------------------------- Board of
D. Lee Tobler Directors
*Gregory A. Logwinuk Chief Financial
- ------------------------------------- Officer,
Gregory A. Logwinuk Secretary and
Treasurer
(Principal
Financial and
Accounting
Officer)
*Marshall O. Larsen Director May 20, 1996
- -------------------------------------
Marshall O. Larsen
*Alexander MacLachlan Director
- -------------------------------------
Alexander MacLachlan
*Thomas G. Ricks Director
- -------------------------------------
Thomas G. Ricks
*Steven G. Rolls Director
- -------------------------------------
Steven G. Rolls
*By: /s/ John S. Murchison, III
- -------------------------------------
John S. Murchison, III Attorney-in-
Fact
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1.1* -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Articles of Incorporation of
Registrant.
3.2 -- Amended and Restated Bylaws of Registrant.
4.1* -- Form of Stock Certificate of Registrant
5.1* -- Opinion of Vinson & Elkins L.L.P.
10.1 -- DTM Corporation Equity Appreciation Plan.
10.2 -- Form of Supplemental Phantom Stock Appreciation
Rights Agreement.
10.3 -- DTM Corporation Management Incentive Plan.
10.4 -- DTM Corporation Stock Option Plan.
10.5 -- Patent License Agreement between DTM Corporation and
the Board of Regents, The University of Texas,
effective as of December 3, 1987.
10.6 -- Supplement to Patent License Agreement between DTM
Corporation and the Board of Regents, The University
of Texas, dated March 20, 1992.
10.7 -- Promissory Note to NationsBank.
10.8 -- Promissory Note to National City Bank.
10.9 -- Promissory Note to The B.F.Goodrich Company.
10.10 -- Promissory Note to The B.F.Goodrich Company.
10.11 -- Amended and Restated Shareholders' Agreement.
10.12 -- Lease Agreement for Facilities in Austin, Texas.
11.1 -- Statement of Computation of Earnings Per Share.
21.1 -- Subsidiaries of the Registrant.
23.1* -- Consent of Vinson & Elkins L.L.P. (included in the
opinion to be filed as Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney for D. Lee Tobler.
24.2 -- Power of Attorney for Gregory A. Logwinuk.
24.3 -- Power of Attorney for Marshall O. Larsen.
24.4 -- Power of Attorney for Alexander MacLachlan.
24.5 -- Power of Attorney for Thomas G. Ricks.
24.6 -- Power of Attorney for Steven G. Rolls.
27 -- Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
DTM CORPORATION
Pursuant to the provisions of Articles 4.02, 4.04 and 4.07 of the Texas
Business Corporation Act, DTM Corporation hereby amends and restates its
Articles of Incorporation as follows:
ARTICLE I
Article Four of the Corporation's Articles of Incorporation is hereby
amended in its entirety to (i) authorize the reclassification of each share of
Common Stock, $.0004 par value per share, into one share of Common Stock, $.0003
par value per share, and (ii) reduce the amount of stated capital due to the
reclassification of shares of Common Stock. The text of such Article, as so
amended, is set forth in the Corporation's Amended and Restated Articles of
Incorporation below.
ARTICLE II
The following is a restatement of the Corporation's entire Articles of
Incorporation as amended and supplemented by all certificates of amendment
previously issued by the Secretary of State of Texas and as further amended
hereby:
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF DTM CORPORATION
ARTICLE ONE
The name of the Corporation is DTM Corporation.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose or purposes for which the Corporation is organized are:
To transact any and all lawful business for which corporations may be
incorporated under the Texas Business Corporation Act, to have and exercise
all of the powers conferred by the laws of Texas upon corporations formed
under the Texas Business Corporation Act, and to do any and all things
hereinbefore set forth to the same extent as natural persons might or could
do.
<PAGE>
ARTICLE FOUR
Effective as of the close of business on the date of first filing with the
Secretary of State of the State of Texas of Amended and Restated Articles of
Incorporation including this provision (the "Effective Time"), the aggregate
number of shares that the Corporation shall have authority to issue is Sixty-
Three Million (63,000,000) shares, consisting of Three Million (3,000,000)
shares of Preferred Stock, par value $.001 per share, and Sixty Million
(60,000,000) shares of Common Stock, par value $.0003 per share.
At the Effective Time, and without any further action on the part of the
Corporation or its shareholders, each share of Common Stock, $.0004 par value
per share ("Old Common Stock"), then issued shall automatically be reclassified,
changed and converted into .9715302 of a share of Common Stock, $.0003 par value
per share.
After the Effective Time, each holder of an outstanding certificate
theretofore representing Old Common Stock (including certificates originally
representing shares of the Corporation's original common stock, $.001 par value
per share, which by virtue of a recapitalization effective May 15, 1996 were
converted into shares of Old Common Stock) shall surrender such certificate to
the Corporation. As soon as practicable after the surrender to the Corporation
of any certificate that prior to the Effective Time represented any shares of
Old Common Stock, together with a duly executed transmittal letter and any other
documents the Corporation may specify, the Corporation shall distribute to the
person in whose name such certificate has been issued certificates registered in
the name of such person representing the number of full shares of Common Stock
into which the shares of Old Common Stock previously represented by the
surrendered certificate shall have been reclassified, changed and converted.
Until surrendered as contemplated by the preceding sentence, each certificate
that immediately prior to the Effective Time represented any such shares of Old
Common Stock shall be deemed at and after the Effective Time to represent the
number of full shares of Common Stock contemplated by the preceding sentence.
No service charges, brokerage commissions or transfer taxes shall be payable by
any holder of any certificate that prior to the Effective Time represented any
shares of Old Common Stock, except that, if any certificates for Common Stock
are to be issued in a name other than that in which the certificates for shares
of Old Common Stock surrendered are registered, it shall be a condition of such
issuance that (i) the person requesting such issuance shall pay to the
Corporation any transfer taxes payable by reason thereof (or of any prior
transfer of such surrendered certificate) or establish to the satisfaction of
the Corporation that such taxes have been paid or are not payable, and (ii) such
surrendered certificate be properly endorsed and otherwise be in proper form for
transfer. The Corporation may impose such other reasonable conditions upon the
exchange of certificates as it may deem to be necessary or desirable and as are
consistent with the provisions of this Article Four.
In lieu of issuing fractional shares of Common Stock, the Corporation shall
issue scrip to its shareholders pursuant to Article 2.20 of the Texas Business
Corporation Act. Such scrip shall be in a form approved by, and subject to such
terms and conditions as shall be determined by, the Corporation's Board of
Directors.
Upon the submission to the Corporation of each certificate that prior to
the Effective Time represented shares of Old Common Stock the same shall
forthwith be cancelled.
-2-
<PAGE>
As a result of the reclassification of the Common Stock, the stated capital
of the Corporation shall be reduced to $2,079.00.
The following is a statement fixing certain of the designations and rights,
voting rights, preferences, and relative, participating, optional or other
rights of the Preferred Stock and the Common Stock of the Corporation, and the
qualifications, limitations or restrictions thereof, and the authority with
respect thereto expressly granted to the Board of Directors of the Corporation
to fix any such provisions not fixed by this Certificate:
A. Preferred Stock
---------------
The Board of Directors is hereby expressly vested with the authority to
adopt a resolution or resolutions providing for the issuance of authorized but
unissued shares of Preferred Stock, which shares may be issued from time to time
in one or more series and in such amounts as may be determined by the Board of
Directors in such resolution or resolutions. The rights, voting rights,
designations, preferences, and relative, participating, optional or other
rights, if any, of each series of Preferred Stock and the qualifications,
limitations or restrictions, if any, of such preferences and/or rights
(collectively, the "Series Terms"), shall be such as are stated and expressed in
a resolution or resolutions providing for the creation or revision of such
Series Terms (a "Preferred Stock Series Resolution") adopted by the Board of
Directors. The Board shall have the power and authority, to the fullest extent
permissible under the Texas Business Corporation Act, as currently in effect or
as amended, to determine and establish by a Preferred Stock Series Resolution,
the Series Terms of a particular series, including, without limitation,
determination of the following:
(1) The number of shares constituting that series and the distinctive
designation of that series, or any increase or decrease (but not below
the number of shares thereof then outstanding) in such number;
(2) The dividend rate on the shares of that series; whether such
dividends, if any, shall be cumulative, noncumulative, or partially
cumulative and, if cumulative or partially cumulative, the date or
dates from which dividends payable on such shares shall accumulate;
and the relative rights of priority, if any, of payment of dividends
on shares of that series.
(3) Whether 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 that series shall have conversion privilege with respect to
shares of any other class or classes of stock or of any other series
of any class of stock, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the conversion rate
upon occurrence of such events as the Board of Directors shall
determine;
(5) Whether the shares shall be redeemable at the option of either the
Corporation or the holder, and, if so, the terms and conditions of
such redemption, including relative rights of priority, if any, of
redemption, the date or dates upon or after which they shall be
redeemable, provisions regarding redemption notices, and the amount
per share payable in case of
-3-
<PAGE>
redemption, which amount may vary under different conditions and at
different redemption dates;
(6) Whether the Corporation shall have any repurchase obligation with
respect to the shares of that series and, if so, the terms and
conditions of such obligation, subject, however, to the limitations of
the Texas Business Corporation Act;
(7) 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;
(8) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation,
and the relative rights of priority, if any, of payment of shares of
that series;
(9) The conditions or restrictions upon the creation of indebtedness of
the Corporation or upon the issuance of additional Preferred Stock or
other capital stock ranking on a parity therewith, or prior thereto,
with respect to dividends or distribution of assets upon liquidation;
(10) The conditions or restrictions with respect to the issuance of,
payment of dividends upon, or the making of other distributions to, or
the acquisition or redemption of, shares ranking junior to the
Preferred Stock or to any series thereof with respect to dividends or
distribution of assets upon liquidation;
(11) The relative priority of each series of Preferred Stock in relation to
other series of Preferred Stock with respect to dividends or
distribution of assets upon liquidation; and
(12) Any other designations, powers, preferences and rights, including,
without limitation, any qualifications, limitations or restrictions
thereof.
Any of the Series Terms, including voting rights, of any series may be made
dependent upon facts ascertainable outside the Articles of Incorporation and
the Preferred Stock Series Resolution, provided that the manner in which such
facts shall operate upon such Series Terms is clearly and expressly set forth in
the Articles of Incorporation or in the Preferred Stock Series Resolution.
Subject to the provisions of this Article Four, shares of one or more
series of Preferred Stock may be authorized or issued from time to time as shall
be determined by and for such consideration as shall be fixed by the Board of
Directors, in an aggregate amount not exceeding the total number of shares of
Preferred Stock authorized by the Articles of Incorporation. Except in respect
of series particulars fixed by the Board of Directors or its committee as
permitted hereby, all shares of Preferred Stock shall be of equal rank and shall
be identical. All shares of any one series of Preferred Stock so designated by
the Board of Directors shall be alike in every particular, except that shares of
any one series issued at different times may differ as to the dates from which
dividends thereon shall be cumulative.
B. Common Stock
------------
-4-
<PAGE>
1. Dividends. Subject to the provisions of any Preferred Stock Series
---------
Resolution, the Board of Directors may, in its discretion, out of funds legally
available for the payment of dividends and at such times and in such manner as
determined by the Board of Directors, declare and pay dividends on the Common
Stock of the Corporation.
No dividend (other than a dividend in capital stock ranking on a parity
with the Common Stock or cash in lieu of fractional shares with respect to such
stock dividend) shall be declared or paid on any share or shares of any class of
stock or series thereof ranking on a parity with the Common Stock in respect of
payment of dividends for any dividend period unless there shall have been
declared, for the same dividend period, like proportionate dividends on all
shares of Common Stock then outstanding.
2. Liquidation. In the event of any liquidation, dissolution or winding
-----------
up of the Corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Corporation and
payment or setting aside for payment of any preferential amount due to the
holders of any other class or series of stock, the holders of the Common Stock
shall be entitled to receive ratably any or all assets remaining to be paid or
distributed.
3. Voting Rights. Subject to any special voting rights set forth in any
-------------
Preferred Stock Series Resolution, the holders of the Common Stock of the
Corporation shall be entitled at all meetings of shareholders to one vote for
each shares of such stock held by them. Cumulative voting for directors shall
not be permitted.
C. Prior, Parity or Junior Stock
-----------------------------
Whenever reference is made in this Article Four to shares "ranking prior
to" another class of stock or "on a parity with" another class of stock, such
reference shall mean and include all other shares of the Corporation in respect
of which the rights of the holders thereof as to the payment of dividends or as
to the distributions in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation are given preference
over, or rank on an equality with, as the case may be, the rights of the holders
of such other class of stock. Whenever reference is made to shares "ranking
junior to" another class of stock, such reference shall mean and include all
shares of the Corporation in respect of which the rights of the holders thereof
as to the payment of dividends and as to distributions in the event of a
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation are junior and subordinate to the rights of the holders of
such class of stock.
Except as otherwise provided herein or in any Preferred Stock Series
Resolution, each series of Preferred Stock ranks on a parity with each other and
each ranks prior to the Common Stock. Common Stock ranks junior to the Preferred
Stock.
D. Liquidation
-----------
For the purposes of Paragraph 2 of Section B of this Article Four and for
the purpose of the comparable sections of any Preferred Stock Series Resolution,
the merger or consolidation of the Corporation into or with any other
corporation, or the merger of any other corporation into it, or the
-5-
<PAGE>
sale, lease or conveyance of all or substantially all of the assets, property or
business of the Corporation, shall not be deemed to be a liquidation,
dissolution or winding up of the Corporation.
E. Reservation and Retirement of Shares
------------------------------------
The Corporation shall at all times reserve and keep available, out of its
authorized but unissued shares of Common Stock or out of shares of Common Stock
held in its treasury, the full number of shares of Common Stock into which all
shares of any series of Preferred Stock having conversion privileges from time
to time outstanding are convertible.
Unless otherwise provided in a Preferred Stock Series Resolution with
respect to a particular series of Preferred Stock, all shares of Preferred Stock
redeemed or acquired (as a result of conversion or otherwise) shall be retired
and restored to the status of authorized but unissued shares.
F. Preemptive Rights
-----------------
No holder of any shares of Common Stock (or of any other class of stock of
the Corporation hereafter authorized) shall, as such holder, have any preemptive
or preferential right to acquire, receive, purchase or subscribe to (a) any
unissued or Treasury shares of any class of stock (whether now or hereafter
authorized) of the Corporation, (b) any obligations, evidences of indebtedness,
or other securities of the Corporation convertible into or exchangeable for, or
carrying or accompanied by any rights to acquire, receive, purchase, or
subscribe to, any such unissued or Treasury shares, (c) any right of
subscription to or to receive, or any warrant or option for the purchase of, any
of the foregoing securities, or (d) any other securities that may be issued or
sold by the Corporation.
ARTICLE FIVE
The Corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00), consisting of money paid, labor done, or property actually
received.
ARTICLE SIX
The address of its current registered office is c/o CT Corporation System,
350 N. St. Paul Street, Dallas, TX 75201, and the name of its current registered
agent at such address is CT Corporation System.
ARTICLE SEVEN
The number of directors now constituting the Board of Directors is six (6)
and the names and addresses of the persons now serving as directors of the
Corporation until the next annual meeting of the shareholders or until their
successors are elected and qualified are:
-6-
<PAGE>
<TABLE>
<S> <C>
Marshall O. Larsen BFGoodrich Aerospace
250 N. Cleveland-Massillon Road
P.O. Box 5501
Akron, OH 44334-0501
Alexander MacLachlan 301 Centennial Circle
Wilmington, Delaware 19807
John S. Murchison, III DTM Corporation
1611 Headway Circle
Building 2
Austin, Texas 78754
Thomas G. Ricks University of Texas System
Office of Asset Management
210 West 6th Street
Austin, TX 78701
Steven G. Rolls The B.F.Goodrich Company
3925 Embassy Parkway
Akron, OH 44333-1799
D. Lee Tobler The B.F.Goodrich Company
3925 Embassy Parkway
Akron, OH 44333-1799
</TABLE>
ARTICLE EIGHT
No director of the Corporation shall be liable to the Corporation or its
shareholders for monetary damages for an act or omission in the director's
capacity as a director occurring at any time, whether on or after the date
hereof or, to the full extent permitted by law, prior to the date hereof,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
any transaction from which the director received an improper benefit, whether or
not the benefit resulted from an act taken within the scope of the director's
office, (iv) for acts or omissions for which the liability of a director is
expressly provided by statute, or (v) for acts related to an unlawful stock
repurchase or payment of a dividend. Any repeal or amendment of this Article by
the shareholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or amendment. In addition to
the circumstances for which a director of the Corporation is not personally
liable as set forth in the preceding sentences, a director shall not be liable
to the fullest extent permitted by any amendment to the Texas statutes hereafter
enacted that further limits the liability of a director.
-7-
<PAGE>
ARTICLE NINE
Any action required by the Texas Business Corporation Act to be taken at
any annual or special meeting of shareholders, or any action which may be taken
at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holder or
holders of shares having not less than the minimum number of votes that would be
necessary to take such action at a meeting at which the holders of all shares
entitled to vote on the action were present and voted. The provisions of Texas
Business Corporation Act Article 9.10.A(2), (3) and (4), as amended from time to
time, will govern the form, timing and delivery of, and other matters pertaining
to, such consents and the requirement of notice of actions taken pursuant
thereto.
ARTICLE III
The amendments to Article Four of the Corporation's Articles of
Incorporation as set forth in the preceding Restated Articles of Incorporation
have been effected in conformity with the provisions of the Texas Business
Corporation Act.
ARTICLE IV
The preceding Restated Articles of Incorporation accurately copy the
Corporation's Articles of Incorporation and all amendments thereto that are in
effect to date and as further amended hereby and contain no other change in any
provision thereof (except that as permitted by Texas Business Corporation Act
Article 4.07.C(2), the number of directors now constituting the Board of
Directors and the names and addresses of the persons now serving as directors
have been inserted in lieu of similar information concerning the initial board
of directors, and the name and address of the incorporator have been omitted).
Such Restated Articles of Incorporation (including the amendments effected
hereby) supersede the Corporation's original Articles of Incorporation and all
amendments thereto.
ARTICLE V
These Amended and Restated Articles of Incorporation and the amendments to
the Corporation's Articles of Incorporation effected hereby were duly adopted by
the shareholders of the Corporation on May 17, 1996.
ARTICLE VI
At the time of such adoption 7,133,090 shares of the Corporation were
outstanding, all of which were entitled to vote thereon.
-8-
<PAGE>
ARTICLE VII
7,105,790 shares voted for and no shares voted against such Amended and
Restated Articles of Incorporation.
Dated this 20th day of May, 1996.
DTM CORPORATION
By: /s/ John S. Murchison, III
----------------------------
John S. Murchison, III
President & Chief
Executive Officer
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<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
DTM CORPORATION
A TEXAS CORPORATION
DATE OF ADOPTION:
APRIL 23, 1991
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I -- REGISTERED OFFICE 1
ARTICLE II -- SHAREHOLDERS 1
ARTICLE III -- BOARD OF DIRECTORS 7
ARTICLE IV -- COMMITTEES 9
ARTICLE V -- OFFICERS 11
ARTICLE VI -- INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS 13
ARTICLE VII -- CAPITAL STOCK 15
ARTICLE VIII -- MISCELLANEOUS PROVISIONS 17
ARTICLE IX -- AMENDMENTS 18
</TABLE>
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
DTM CORPORATION
A TEXAS CORPORATION
ARTICLE I
REGISTERED OFFICE
The registered office of the Corporation required by the Texas Business
Corporation Act (the "TBCA") to be maintained in the State of Texas shall be the
registered office named in the original Articles of Incorporation of the
Corporation or such other office (which need not be a place of business of the
Corporation) as may be designated from time to time by the Board of Directors in
the manner provided by law.
ARTICLE II
SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the shareholders shall
be held at the principal place of business of the Corporation or at such other
place within or without the State of Texas as shall be specified or fixed in the
notices or waivers of notice thereof; provided that any or all shareholders may
participate in any such meeting by means of conference telephone or similar
communications equipment pursuant to Article II, Section 12 of these bylaws.
SECTION 2. QUORUM; REQUIRED VOTE FOR SHAREHOLDER ACTION; ADJOURNMENT OF
MEETINGS.
(a) Quorum. A quorum shall be present at a meeting of shareholders if
the holders of a majority of the shares entitled to vote are represented at the
meeting in person or by proxy.
(b) Voting on Matters Other than the Election of Directors. With
respect to any matter, other than the election of directors or a matter for
which the affirmative vote of the holders of a specified portion of the shares
entitled to vote is required by the TBCA, the affirmative vote of the holders of
a majority of the shares entitled to vote on that matter and represented in
person or by proxy at a meeting of shareholders at which a quorum is present
shall be the act of the shareholders, unless otherwise provided in the Articles
of Incorporation or these bylaws in accordance with the TBCA.
(c) Voting in the Election of Directors. Subject to agreements among
shareholders now and hereafter existing regarding the election of directors,
directors shall be elected only if the director
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receives the vote of the holders of a majority of the Shares entitled to vote in
the election of directors.
(d) Adjournment. Notwithstanding the other provisions of the Articles
of Incorporation or these bylaws, the chairman of the meeting or the holders of
a majority of the shares entitled to vote that are represented in person or by
proxy at any meeting of shareholders, whether or not a quorum is present, shall
have the power to adjourn such meeting from time to time, without any notice
other than announcement at the meeting of the time and place of the holding of
the adjourned meeting. If such meeting is adjourned by the shareholders, such
time and place shall be determined by a vote of the holders of a majority of the
shares entitled to vote that are represented in person or by proxy in such
meeting. Upon the resumption of such adjourned meeting, any business may be
transacted that might have been transacted at the meeting as originally called.
SECTION 3. ANNUAL MEETINGS. An annual meeting of the shareholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, within or without the State of Texas, on such date
and at such time as the Board of Directors shall fix and set forth in the notice
of the meeting, which date shall be within 13 months subsequent to the last
annual meeting of shareholders.
SECTION 4. SPECIAL MEETINGS. Special meetings of the shareholders for
any proper purpose or purposes may be called at any time by (a) the Chairman of
the Board (if any); (b) the President; or (c), the Secretary, on written request
of any two directors, and (d) the holders of at least ten percent of all the
shares entitled to vote at the proposed special meeting. The record date for
determining shareholders entitled to call a special meeting is the date any
shareholder first signs the notice of that meeting. Only business within the
purpose or purposes described in the notice (or waiver thereof required by these
bylaws) may be conducted at a special meeting of the shareholders.
SECTION 5. CLOSING SHARE TRANSFER RECORDS; RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive a
distribution by the Corporation (other than a distribution involving a purchase
or redemption by the Corporation of any of its own shares) or a share dividend,
or in order to make a determination of shareholders for any other purpose (other
than determining shareholders entitled to consent to action by shareholders
proposed to be taken without a meeting of shareholders), the Board of Directors
of the Corporation may provide that the share transfer records shall be closed
for a stated period but not to exceed, in any case, 60 days. If the share
transfer records shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such records
shall be closed for at least ten days immediately preceding such meeting.
In lieu of closing the share transfer records, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than 60 days and, in the case
of a meeting of shareholders, not less than ten days, prior to the date on which
the particular action requiring such determination of shareholders is to taken.
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<PAGE>
If the share transfer records are not closed and no record date is fixed
for the determination of shareholders entitled to notice of or to vote at a
meeting of shareholders, or shareholders entitled to receive a distribution
(other than a distribution involving a purchase or redemption by the Corporation
of any of its own shares) or a share dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such distribution or share dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided herein, such determination shall also
apply to any adjournment thereof except where the determination has been made
through the closing of share transfer records and the stated period of closing
has expired.
SECTION 6. NOTICE OF MEETINGS. Written or printed notice stating the
place, day and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten nor more than 60 days before the date of the meeting, either personally
or by mail, by or at the direction of the President, the Secretary or the
officer or person calling the meeting, to each shareholder entitled to vote at
such meeting. If mailed, any such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at his address
as it appears on the share transfer records of the Corporation, with postage
thereon prepaid.
SECTION 7. VOTING LIST. The officer or agent having charge of the
share transfer records of the Corporation shall make, at least ten days before
each meeting of shareholder, a complete list of the shareholders entitled to
vote at such meeting or any adjournment thereof, arranged in alphabetical order,
with the address of and the number of shares held by each, which list, for a
period of ten days prior to such meeting, shall be kept on file at the
registered office or principal place of business of the Corporation and shall be
subject to inspection by any shareholder at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting. The original share transfer records shall be prima-
facie evidence as to who are the shareholders entitled to examine such list or
transfer records or to vote at any meeting of shareholders. Failure to comply
with the requirements of this Section shall not affect the validity of any
action taken at such meeting.
SECTION 8. PROXIES. A shareholder may vote either in person or by
proxy executed in writing by the shareholder. A telegram, telex, cablegram or
similar transmission by the shareholder, or a photographic, photostatic,
facsimile or similar reproduction of a writing executed by the shareholder shall
be treated as an execution in writing for purposes of this Section. Proxies for
use at any meeting of shareholders or in connection with the taking of any
action by written consent shall be filed with the Secretary, or such other
officer as the Board of Directors may from time to time determine by resolution,
before or at the time of the meeting or execution of the written consent as the
case may be. All proxies shall be received and taken charge of and all ballots
shall be received and canvassed by the secretary of the meeting who shall decide
all questions touching upon the qualification of voters, the validity of the
proxies, and the acceptance or rejection of votes, unless
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<PAGE>
an inspector or inspectors shall have been appointed by the chairman of the
meeting, in which event such inspector or inspectors shall decide all such
questions.
No proxy shall be valid after 11 months from the date of its execution
unless otherwise provided in the proxy. A proxy shall be revocable unless the
proxy form conspicuously states that the proxy is irrevocable and the proxy is
coupled with an interest. Proxies coupled with an interest shall include the
appointment as proxy of any of the persons set forth in the TBCA including
without limitation:
(a) a pledgee;
(b) a person who purchased or agreed to purchase, or owns or holds an
option to purchase, the shares;
(c) a creditor of the Corporation who extended it credit under terms
requiring the appointment;
(d) an employee of the Corporation whose employment contract requires
the appointment; or
(e) a party to a voting agreement executed under Section B, Article 2.30
of the TBCA.
Should a proxy designate two or more persons to act as proxies, unless such
instrument shall provide to the contrary, a majority of such persons present at
any meeting at which their powers thereunder are to be exercised shall have and
may exercise all the powers of voting or giving consents thereby conferred, or
if only one be present, then such powers may be exercised by that one; or, if an
even number attend and a majority do not agree on any particular issue, the
Corporation shall not be required to recognize such proxy with respect to such
issue if such proxy does not specify how the shares that are the subject of such
proxy are to be voted with respect to such issue.
SECTION 9. VOTING; INSPECTORS; ELECTIONS. Unless otherwise required by
law or provided in the Articles of Incorporation each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote at a meeting of shareholders. If the Articles of Incorporation provide for
more or less than one vote per share for all the outstanding shares or for the
shares of any class or series on any matter, every reference in these bylaws or
in the Articles of Incorporation (unless expressly stated otherwise therein), in
connection with such matter, to a specified portion of such shares shall mean
such portion of the votes entitled to be cast in respect of such shares by
virtue of the provisions of such Articles of Incorporation.
All voting, except as required by the Articles of Incorporation or where
otherwise required by law, may be by a voice vote; provided, however, that a
vote by ballot shall be taken upon demand therefor by shareholders holding
issued and outstanding shares representing a majority of the voting power
present in person or by proxy at any meeting. Every vote by ballot shall be
taken by written ballots, each of which shall state the name of the shareholder
or proxy voting and such other information as may be required under the
procedure established for the meeting.
At any meeting at which a vote is taken by ballots, the chairman of the
meeting may appoint one more inspectors, each of whom shall subscribe an oath or
affirmation to execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of such person's
4
<PAGE>
ability. Such inspector shall receive the ballots, count the votes and make and
sign a certificate of the result thereof. The chairman of the meeting may
appoint any person to serve as inspector, except no candidate for the office of
director shall be appointed as an inspector.
At each election of directors each shareholder entitled to vote thereat
shall, unless otherwise provided by law or by the Articles of Incorporation,
have the right to vote the number of shares owned by such shareholder for as
many persons as there are to be elected and for whose election such shareholder
has a right to vote. Unless expressly prohibited by the Articles of
Incorporation, a shareholder shall have the right to cumulate votes by giving
one candidate as many votes as the number of such directors multiplied by such
shareholder's shares shall equal, or by distributing such votes on the same
principle among any number of such candidates. Any shareholder who intends to
cumulate votes shall give written notice of such intention to the Secretary of
the Corporation on or before the day preceding the election at which such
shareholder intends to cumulate votes. Any shareholder may cumulate his votes
if such shareholder or any other shareholder gives the written notice provided
for herein.
SECTION 10. CONDUCT OF MEETINGS. All meetings of the shareholders shall
be presided over by the chairman of the meeting, who shall be the Chairman of
the Board (if any), or if the Chairman of the Board is not present, the
President or if neither the Chairman of the Board (if any) nor President is
present, a chairman elected at the meeting. The Secretary of the Corporation, if
present, shall act as secretary of such meetings, or if the Secretary is not
present an Assistant Secretary (if any) shall so act; if neither the Secretary
nor an Assistant Secretary (if any) is present then a secretary shall be
appointed by the chairman of the meeting. The chairman of any meeting of
shareholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to the chairman of the meeting in order. Unless the chairman
of the meeting shall otherwise determine or otherwise conduct the meeting, the
order of business shall be as follows:
(a) Calling of meeting to order.
(b) Election of a chairman, and the appointment of a secretary,
if necessary.
(c) Presentation of proof of the due calling of the meeting.
(d) Presentation and examination of proxies and determination of
a quorum.
(e) Reading and settlement of the minutes of the previous
meeting.
(f) Reports of officers and committees.
(g) The election of directors, if an annual meeting or a meeting
called for that purpose.
(h) Other business.
(i) Adjournment.
SECTION 11. TREASURY SHARES. Neither the Corporation nor any other
person shall vote, directly or indirectly, at any meeting, Treasury Shares, as
defined in the TBCA, shares of the Corporation's own stock owned by another
corporation the majority of the voting stock of which is owned or controlled by
the Corporation, and shares of the Corporation's own stock held by the
Corporation in a fiduciary capacity; and such shares shall not be counted in
determining the total number of outstanding shares at any given time.
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<PAGE>
SECTION 12. ACTION BY WRITTEN CONSENT OR TELEPHONE CONFERENCE. Any
action required or permitted to be taken at any annual or special meeting of
shareholders may be taken without a meeting, without prior notice, and without a
vote, if a consent or consents in writing setting forth the action so taken,
shall be signed by the holder or holders of (i) all the shares entitled to vote
with respect to the action that is the subject of the consent or (ii) if
provided in the Articles of Incorporation, shares having not less than the
minimum number of votes that would be required to take action at a meeting at
which the holders of all shares entitled to vote on such action were present and
voted.
Every written consent shall bear the date of signature of each shareholder
who signs the consent. No written consent shall be effective to take the action
that is the subject to the consent unless, within 60 days after the date of the
earliest dated consent delivered to the Corporation in the manner required by
this Section, a consent or consents signed by the holder or holders of shares
having not less than the minimum number of votes that would be necessary to take
the action that is the subject of the consent are delivered to the Corporation
by delivery to its registered office, its principal place of business, or an
officer or agent of the Corporation having custody of the books in which
proceedings of meetings of shareholders are recorded. Delivery shall be by hand
or certified or registered mail, return receipt requested. Delivery to the
Corporation's principal place of business shall be addressed to the President or
chief executive officer.
A telegram, telex cablegram or similar transmission by a shareholder, or a
photostatic, facsimile or similar reproduction of a writing signed by a
shareholder, shall be regarded as signed by the shareholder for purposes of this
Section.
Prompt notice of the taking of any action by shareholders without a meeting
by less than unanimous written consent shall be given to those shareholders who
did not consent in writing to the action.
If any action by shareholders is taken by written consent, any articles or
documents filed with the Secretary of State as a result of the taking of the
action shall state, in lieu of any statement required by the TBCA concerning any
vote of shareholders, that written consent has been given in accordance with the
provisions of the TBCA and that any written notice required by the TBCA has been
given.
Subject to the provisions of the TBCA, or these bylaws for notice of
meetings, shareholders may participate in and hold a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
such meeting shall constitute attendance and presence in person at such meeting,
except where a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
SECTION 13. FIXING RECORD DATES FOR CONSENTS TO ACTION. Whenever action
by shareholders is proposed to be taken by consent in writing without a meeting
of shareholders, the Board of Directors may fix a record date for the purpose of
determining shareholders entitled to consent to that action, which record date
shall not precede, and shall not be more than ten days after,
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<PAGE>
the date upon which the resolution fixing the record date is adopted by the
Board of Directors. If no record date has been fixed by the Board of Directors
and the prior action of the Board of Directors is not required by law or these
bylaws, the record date for determining shareholders entitled to consent to
action in writing without a meeting shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office, its principal
place of business, or an officer or agent of the Corporation having custody of
the books in which proceedings of meetings of shareholders are recorded.
Delivery shall be by hand or by certified or registered mail, return receipt
requested. Delivery to the Corporation's principal place of business shall be
addressed to the President or the chief executive officer of the Corporation.
If no record date shall have been fixed by the Board of Directors and prior
action of the Board of Directors is required by the TBCA or these bylaws, the
record date for determining shareholders are entitled to consent to action in
writing without a meeting shall be at the close of business on the date on which
the Board of Directors adopts a resolution taking such prior action.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. POWER; NUMBER; TERM OF OFFICE. The powers of the
Corporation shall be exercised by or under the authority of, and the business
and affairs of the Corporation shall be managed under the direction of, the
Board of Directors. Directors need not be residents of the State of Texas or
shareholders of the Corporation.
Unless otherwise provided in the Articles of Incorporation, the number of
directors that shall constitute the entire Board of Directors, which shall be
not less than three, shall be determined from time to time by resolution of the
Board of Directors (provided that no decrease in the number of directors that
would have the effect of shortening the term of an incumbent director may be
made by the Board of Directors). As of the time of adoption of these Amended
and Restated Bylaws, the number of directors shall be nine. Each director shall
hold office for the term for which he is elected and thereafter until his
successor shall have been elected and qualified, or until his earlier death,
resignation or removal.
SECTION 2. QUORUM; REQUIRED VOTE FOR DIRECTOR ACTION. Unless otherwise
required by law, a majority of the total number of directors fixed by, or in the
manner provided in, these bylaws shall constitute a quorum for the transaction
of business of the Board of Directors, and the act of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
SECTION 3. MEETINGS; ORDER OF BUSINESS. Meetings of the Board of
Directors, regular or special, may be held within or outside the State of Texas.
At all meetings of the Board of Directors business shall be transacted in such
order as shall from time to time be determined by the Chairman of the Board (if
any), or in his absence by the President (if the President is a director), or by
resolution of the Board of Directors.
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Attendance of a director at a meeting shall constitute a waiver of notice
of such meeting, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
SECTION 4. FIRST MEETING. In connection with any annual meeting of
shareholders at which directors were elected, the Board of Directors may, if a
quorum is present hold its first meeting for the transaction of business
immediately after and at the same place of such annual meeting of the
shareholders. Notice of such meeting at such time and place shall not be
required.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such times and places as shall be designated from
time to time by resolution of the Board of Directors. Notice of such regular
meetings shall not be required.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors maybe called by the Chairman of the Board (if any), the President or,
on the written request of any two directors, by the Secretary, in each case on
at least 24 hours personal, written, telegraphic, cable or wireless notice to
each director. Such notice, or any waiver thereof pursuant to Article VIII,
Section 3 hereof, need not state the purpose or purposes of such meeting, except
as may otherwise be required by law or these bylaws.
SECTION 7. REMOVAL. At any meeting of shareholders at which a quorum
of shareholders is present called expressly for that purpose, or pursuant to a
written consent adopted pursuant to Article II, Section 12 hereof, any director
may be removed with or without cause, by vote of the holders of issued and
outstanding shares representing a majority of the votes entitled to be cast for
the election of such director; provided that if the shareholders have the right
to cumulate votes for the election of directors, and less than the entire Board
of Directors is to be removed, no director may be removed if the votes cast
against removal would be sufficient to elect such person if then cumulatively
voted (a) at an election of the entire Board of Directors, or (b) if there be
classes of directors, at an election of the class of directors of which such
director is a part.
SECTION 8. VACANCIES; INCREASES IN THE NUMBER OF DIRECTORS. Any
directorship to be filled by reason of an increase in the number of directors
may be filled (a) by the Board of Directors for a term of office continuing only
until the next election of one or more directors by the shareholders; provided,
however, that during the period between any two successive annual meetings of
shareholders, the Board of Directors may not fill more than two such
directorships; or (b) by election at an annual or special meeting of
shareholders entitled to vote in the election of such directors called for that
purpose.
Any vacancy occurring in the Board of Directors other than by reason of an
increase in the number of directors may be filled (a) by election at an annual
or special meeting of the shareholders called for that purpose or (b) by the
affirmative vote of a majority of the remaining directors though less than a
quorum of the Board of Directors. A director elected to fill a vacancy
occurring other than by reason of an increase in the number of directors shall
be elected for the unexpired term of his predecessor in office.
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SECTION 9. COMPENSATION. The Board of Directors shall have the
authority to fix the compensation, if any, of directors.
SECTION 10. PRESUMPTION OF ASSENT. A director who is present at a
meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action unless his dissent shall
be entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as secretary of the meeting before
the adjournment thereof or shall forward such dissent by registered mail to the
Secretary immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
SECTION 11. APPROVAL OR RATIFICATION OF ACTS OR CONTRACTS BY
SHAREHOLDERS. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the shareholders,
or at any special meeting of the shareholders called for the purpose of
considering any such act or contract and any act or contract that shall be
approved or be ratified by the vote of the shareholders holding a majority of
the issued and outstanding shares of stock of the Corporation entitled to vote
and represented in person or by proxy at such meeting (provided that a quorum is
present), shall be as valid and as binding upon the Corporation and upon all the
shareholders as if it shall have been approved or ratified by every shareholder
of the Corporation.
SECTION 12. ACTION BY WRITTEN CONSENT OR TELEPHONE CONFERENCE. Any
action permitted or required by the TBCA, the Articles of Incorporation or these
bylaws to be taken at a meeting of the Board of Directors or any committee
designated by the Board of Directors may be taken without a meeting if a consent
in writing, setting forth the action to be taken, is signed by all the members
of the Board of Directors or committee, as the case may be. Such consent shall
have the same force and effect as a unanimous vote at a meeting and may be
stated as such in any document or instrument filed with the Secretary of State,
and the execution of such consent shall constitute attendance or presence in
person at a meeting of the Board of Directors or any such committee, as the case
may be. Subject to the requirement of the TBCA or these bylaws for notice of
meetings, members of the Board of Directors, or members of any committee
designated by the Board of Directors, may participate in and hold a meeting of
the Board of Directors or any committee of directors, as the case may be, by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in such meeting shall constitute attendance and presence in person
at such meeting, except where a person participates in the meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
ARTICLE IV
COMMITTEES
SECTION 1. DESIGNATION; POWERS. The Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from among
its members one or more
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committees, each of which shall be comprised of one or more of its members, and
may designate one or more of its members as alternate members of any committee,
who may, subject to any limitations imposed by the Board of Directors, replace
absent or disqualified members at any meeting of that committee. Committee
members may be removed from committees, with or without cause, by the Board of
Directors. Any such committee, to the extent provided in such resolution or in
the Articles of Incorporation or bylaws shall have and may exercise all of the
authority of the Board of Directors, subject to the limitations set forth in the
TBCA or below.
No committee of the Board of Directors shall have the authority of the
Board of Directors in reference to:
(1) amending the Articles of Incorporation, except that a committee may,
to the extent provided in the resolution designating that committee
or in the Articles of Incorporation or these bylaws, exercise the
authority of the Board of Directors vested in it in accordance with
Article 2.13 of the TBCA;
(2) proposing a reduction in the stated capital of the Corporation in
the manner permitted by Article 4.12 of the TBCA;
(3) approving a plan of merger or share exchange of the Corporation;
(4) recommending to the shareholders the sale, lease or exchange of all
or substantially all of the property and assets of the Corporation
otherwise than in the usual and regular course of its business;
(5) recommending to the shareholders a voluntary dissolution of the
Corporation or a revocation thereof;
(6) amending, altering or repealing the bylaws of the Corporation or
adopting new bylaws of the Corporation;
(7) filling vacancies in the Board of Directors;
(8) filling vacancies in or designating alternate members of any such
committee;
(9) filling any directorship to be filled by reason of an increase in
the number of directors;
(10) electing or removing officers of the Corporation or members or
alternate members of any such committee;
(11) fixing the compensation of any member or alternate members of such
committee; or
(12) altering or repealing any resolution of the Board of Directors that
by its terms provided that it shall not be so amendable or
repealable.
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Unless the resolution designating a particular committee, the Articles of
Incorporation or these bylaws expressly so provide, no committee of the Board of
Directors shall have the authority to authorize a distribution (as such term is
defined in the TBCA) or to authorize the issuance of shares of the Corporation.
SECTION 2. PROCEDURE; MEETINGS; QUORUM. Any committee designated
pursuant to Section 1 of this Article shall choose its own chairman and
secretary, shall keep regular minutes of its proceedings and report the same to
the Board of Directors when requested, shall fix its own rules or procedures,
and shall meet at such times and at such place or places as may be provided by
such rules, or by resolution of such committee or of the Board of Directors. At
every meeting of any such committee, the presence of a majority of all the
members thereof shall constitute a quorum, and the affirmative vote of a
majority of the members shall be necessary for the adoption by it of any
resolution.
SECTION 3. DISSOLUTION. The Board of Directors may dissolve any
committee at any time, unless otherwise provided in the Articles of
Incorporation or these bylaws.
ARTICLE V
OFFICERS
SECTION 1. NUMBER, TITLES AND TERM OF OFFICE. The officers of the
Corporation shall be a President and a Secretary and such other officers as the
Board of Directors may from time to time elect or appoint including, without
limitation a Chairman of the Board, one or more Vice Presidents (any one or more
of whom may be designated Executive Vice President or Senior Vice President), a
Treasurer and one or more Assistant Secretaries or Assistant Treasurers. Each
officer shall hold office until his successor shall be duly elected and shall
qualify or until his death or until he shall resign or shall have been removed
in the manner hereinafter provided. Any number of offices may be held by the
same person. Except for the Chairman of the Board, if any, no officer need be a
director.
SECTION 2. SALARIES. The salaries or other compensation, if any, of
the officers of the Corporation shall be fixed from time to time by the Board of
Directors.
SECTION 3. REMOVAL. Any officer or agent may be removed, either with
or without cause, by the Board of Directors whenever in its judgment the best
interests of the Corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
SECTION 4. VACANCIES. Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors.
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SECTION 5. POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER. The
President shall be the chief executive officer of the Corporation unless the
Board of Directors designates the Chairman of the Board (if any) or other
officer as chief executive officer. Subject to the control of the Board of
Directors, the chief executive officer shall have general executive charge,
management and control of the properties, business and operations of the
Corporation with all such powers as may be reasonably incident to such
responsibilities; subject to any limitations placed by the Board of Directors,
the chief executive officer may agree upon and execute on behalf of the
Corporation leases, contracts, evidences of indebtedness and other obligations
in the name of the Corporation and may sign certificates for shares of capital
stock of the Corporation. The chief executive officer shall have such other
powers and duties as designated in accordance with these bylaws and as from time
to time may be assigned by the Board of Directors.
SECTION 6. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. The
Chairman of the Board (if any) shall preside at all meetings of the shareholders
and of the Board of Directors and shall have such other powers and duties as
designated in these bylaws and as from time to time may be assigned to that
office by the Board of Directors.
SECTION 7. POWERS AND DUTIES OF THE PRESIDENT. Unless the Board of
Directors otherwise determines, the President shall have the authority, subject
to any limitations placed by the Board of Directors, to agree upon and execute
leases, contract, evidences of indebtedness and other obligations in the name of
the Corporation; and, unless the Board of Directors otherwise determines, the
President shall, in the absence of the Chairman of the Board or if there be no
Chairman of the Board, preside at all meetings of the shareholders and (should
he be a director) of the Board of Directors; and the President shall have such
other powers and duties as designated in accordance with these bylaws and as
from time to time may be assigned by the Board of Directors.
SECTION 8. VICE PRESIDENTS. The Vice President(s), if any, shall
perform such duties and have such powers as of the Board of Directors may from
time to time prescribe. In addition, in the absence of the Chairman of the Board
(if any) or President, or in the event of their inability or refusal to act, (i)
a Vice President designated by the Board of Directors or (ii) in the absence of
such designation, the Vice President who is present and who is senior in terms
of rank (or in the absence of a senior rank, time) as a Vice President of the
Corporation, shall perform the duties of the Chairman of the Board (if any), or
the President as the case may be, and when so acting shall have all the powers
of and be subject to all the restrictions upon the Chairman of the Board (if
any), or the President; provided that such person shall not preside at meetings
of the Board of Directors unless such person is a director.
SECTION 9. TREASURER. The Treasurer, if any, shall have responsibility
for the custody and control of all the funds and securities of the Corporation,
and shall have such other powers and duties as designated in these bylaws and as
from time to time may be assigned by the Board of Directors. The Treasurer shall
perform all acts incident to the position of Treasurer subject to the control of
the chief executive officer and the Board of Directors; and the Treasurer shall,
if required by the Board of Directors, give such bond for the faithful discharge
of the Treasurer's duties in such form as the Board of Directors may require.
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SECTION 10. ASSISTANT TREASURERS. The Assistant Treasurers shall assist
the Treasurer and shall exercise the powers of the Treasurer during that
officer's absence or inability or refusal to act. Each Assistant Treasurer, if
any, shall have such other powers and duties as designated in these bylaws and
as from time to time may be assigned by the chief executive officer, the Board
of Directors of the Treasurer.
SECTION 11. SECRETARY. The Secretary shall keep the minutes of all
meetings of the Board of Directors, and the minutes of all meetings of the
shareholders, in books provided for that purpose; shall attend to the giving and
serving of all notices; may in the name of the Corporation affix the seal (if
any) of the Corporation to all contracts of the Corporation and attest thereto;
may sign with the other appointed officers all certificates for shares of
capital stock of the Corporation; shall have charge of the certificate books,
transfer books and stock ledgers, and such other books and papers as the Board
of Directors may direct, all of which shall at all reasonable times be open to
inspection of any director upon application at the office of the Corporation
during business hours. The Secretary shall have such other powers and duties as
designated in these bylaws and as from time to time may be assigned by the chief
executive officer or the Board of Directors; and shall in general perform all
duties incident to the office of Secretary, subject to the control of the chief
executive officer of the Board of Directors.
SECTION 12. ASSISTANT SECRETARIES. The Assistant Secretaries shall
assist the Secretary and shall exercise the powers of the Secretary during that
officer's absence or inability or refusal to act. Each Assistant Secretary, if
any, shall have such other powers and duties as designated in these bylaws and
as from time to time be assigned by the chief executive officer, the Board of
Directors or the Secretary.
SECTION 13. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, each of the chief executive
officer and the Treasurer (if any), or either of them, shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of shareholders of or with respect to any action of shareholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
SECTION 1. RIGHT TO INDEMNIFICATION. Subject to the limitations and
conditions as provided in this Article VI, and in Section 2.02-1 of the TBCA
(relating among other matters to liability for receipt of an improper personal
benefit or liability to the Corporation), as from time to time amended, each
person who was or is made a party or is threatened to be made a party to or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative or investigative
(hereinafter a "proceeding"), or any appeal in such a
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proceeding or any inquiry or investigation that could lead to such a proceeding,
by reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or while a
director or officer of the Corporation is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust employee
benefit plan or other enterprise shall be indemnified by the Corporation to the
fullest extent permitted by the TBCA as the same exists or may hereafter be
amended against judgments, penalties (including excise and similar taxes and
punitive damages), fines, settlements and reasonable expenses (including,
without limitation, attorneys' fees) actually incurred by such person in
connection with such proceeding, and indemnification under this Article VI shall
continue as to a person who has ceased to serve in the capacity which initially
entitled such person to indemnity hereunder. The rights granted pursuant to
this Article VI shall be deemed contract rights, and no amendment, modification
or repeal of this Article VI shall have the effect of limiting or denying any
such rights with respect to actions taken or proceedings arising prior to any
such amendment, modification or repeal. It is expressly acknowledged that the
indemnification provided in this Article VI could involve indemnification for
negligence or under theories of strict liability.
SECTION 2. ADVANCE PAYMENT. The right to indemnification conferred in
this Article VI shall include the right to be paid or reimbursed by the
Corporation the reasonable expenses incurred by a person of the type entitled to
be indemnified under Section 1 who was, is or is threatened to be made a named
defendant or respondent in a proceeding in advance of the final disposition of
the proceeding and without any determination as to the person's ultimate
entitlement to indemnification; provided, however, that the payment of such
expenses incurred by any such person in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of a written
affirmation by such director or officer of his or her good faith belief that he
or she has met the standard of conduct necessary for indemnification under this
Article VI and a written undertaking, by or on behalf of such person, to repay
all amounts so advanced if it shall ultimately be determined that such
indemnified person is not entitled to be indemnified under this Article VI or
otherwise.
SECTION 3. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation,
by adoption of a resolution of the Board of Directors, may (but shall not be
required to) indemnify and advance expenses to an employee or agent of the
Corporation to the same extent and subject to the same conditions under which it
may indemnify and advance expenses to directors and officers under this Article
VI; and, the Corporation may (but shall not be required to) indemnify and
advance expenses to persons who are not or were not directors, officers,
employees or agents of the Corporation but who are or were serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise against any liability asserted against
that person and incurred by that person in such a capacity or arising out of
such individual's status as such a person to the same extent that it may
indemnify and advance expenses to directors under this Article VI.
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SECTION 4. APPEARANCE AS A WITNESS. Notwithstanding any other
provision of this Article VI, the Corporation may pay or reimburse expenses
incurred by a director or officer in connection with his or her appearance as a
witness or other participation in a proceeding at a time when he or she is not a
named defendant or respondent in the proceeding.
SECTION 5. NONEXCLUSIVITY OF RIGHTS. The right to indemnification and
the advancement and payment of expenses conferred in this Article VI shall not
be exclusive of any other right which a director or officer or other person
indemnified pursuant to Section 3 of this Article VI may have or hereafter
acquire under any law (common or statutory), provision of the Articles of
Incorporation or these bylaws, agreement, vote of shareholders or disinterested
directors or otherwise.
SECTION 6. INSURANCE. The Corporation may purchase and maintain
insurance and, to the extent permitted by the TBCA, similar arrangements, at its
expense, to protect itself and any person who is or was serving as a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic corporation, partnership, joint venture, proprietorship, employee
benefit plan, trust or other enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under this Article VI.
SECTION 7. SHAREHOLDER NOTIFICATION. To the extent required by law,
any indemnification of or advance of expenses to a director or officer in
accordance with this Article VI shall be reported in writing to the shareholders
with or before the notice or waiver of notice of the next shareholders' meeting
or with or before the next submission to shareholders of a consent to action
without a meeting and, in any case, within the 12-month period immediately
following the date of the indemnification or advance.
SECTION 8. SAVINGS CLAUSE. If this Article VI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify and hold harmless each director,
officer or any other person indemnified pursuant to this Article VI as to costs,
charges and expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement with respect to any action, suit or proceeding, whether
civil, criminal, administrative or investigative to the full extent permitted by
any applicable portion of this Article VI that shall not have been invalidated
and to the fullest extent permitted by applicable law.
ARTICLE VII
CAPITAL STOCK
SECTION 1. CERTIFICATES OF STOCK. The certificates for shares of the
capital stock of the Corporation shall be in such form, consistent with that
required by law and the Articles of Incorporation, as shall be approved by the
Board of Directors. The Chairman of Board (if any), President or a Vice
President (if any) shall cause to be issued to each shareholder one or more
certificates, which shall be signed by (a) one of the Chairman of the Board,
President, or a Vice
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President and (b) one of the Secretary, an Assistant Secretary, the Treasurer or
an Assistant Treasurer certifying the number of shares (and, if the stock of the
Corporation shall be divided into classes or series, the class and series of
such shares) owned by such shareholder in the Corporation; provided however,
that any of or all the signatures on the certificate may be facsimile. If the
Board of Directors shall have provided for a seal, such certificates shall bear
such seal or a facsimile thereof. The stock record books and the blank stock
certificate books shall be kept by the Secretary, or at the office of such
transfer agent or transfer agents as the Board of Directors may from time to
time by resolution determine. In case any officer, transfer agent or registrar
who shall have signed or have ceased to be such officer, transfer agent or
registrar before such certificate is issued by the Corporation, such certificate
may nevertheless be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue. The
stock certificates shall be consecutively numbered and shall be entered in the
books of the Corporation as they are issued and shall exhibit the holder's name
and number of shares. Each certificate shall conspicuously bear any legend
required pursuant to Article 2.19 or Article 2.22 of the TBCA, indicating
special characteristics and voting restrictions, respectively, as well as any
other legend required by law.
SECTION 2. TRANSFER OF SHARES. The shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal
representatives, upon surrender and cancellation of certificates for a like
number of shares (or upon compliance with the provisions of Section 5 of this
Article VII, if applicable). Upon such surrender to the Corporation or a
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer (or upon compliance with the provisions of Section 5 of this Article
VII, if applicable) and of compliance with any transfer restrictions applicable
thereto contained in an agreement to which the Corporation is a party or of
which the Corporation has knowledge by reason of legend with respect thereto
placed on any such surrendered stock certificate, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
SECTION 3. OWNERSHIP OF SHARES. Unless otherwise provided in the TBCA
and subject to the provisions of Chapter 8 - Investment Securities of the Texas
Business & Commerce Code:
(i) the Corporation may regard the person in whose name any
shares issued by the Corporation are registered in the share transfer records of
the Corporation at any particular time (including, without limitation, as of a
record date fixed pursuant to Article 2.26B or 2.26C of the TBCA) as the owner
of those shares at that time for purposes of voting those shares, receiving
distributions thereon or notices in respect thereof, transferred those shares,
exercising rights of dissent with respect to those shares, exercising or waiving
any preemptive right with respect to those shares, entering into agreements with
respect to those shares in accordance with Article 2.22 or 2.30 of the TBCA or
giving proxies with respect to those shares; and
(ii) neither the Corporation nor any of its officers, directors,
employees, or agents shall be liable for regarding that person as the owner of
those shares at that time for those purposes, regardless of whether that person
does not possess a certificate for those shares.
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SECTION 4. REGULATIONS REGARDING CERTIFICATES. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issuance, transfer and registration or
the replacement of certificates for shares of capital stock of the Corporation.
SECTION 5. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES. The
Board of Directors may determine the conditions upon which a new certificate of
stock may be issued in place of a certificate that is alleged to have been lost,
stolen, destroyed or mutilated; and may, in its discretion, require the owner of
such certificate or his legal representative to give bond, with sufficient
surety, to indemnify the Corporation and each transfer agent and registrar
against any and all losses or claims which may arise by reason of the issuance
of a new certificate in the place of the one so lost, stolen, destroyed or
mutilated.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall be
such as established from time to time by the Board of Directors.
SECTION 2. CORPORATE SEAL. The Board of Directors may provide a
suitable seal, containing the name of the Corporation. The Secretary shall have
charge of the seal (if any). If and when so directed by the Board of Directors,
duplicates of the seal may be kept and used by the Treasurer, if any, or by any
Assistant Secretary or Assistant Treasurer.
SECTION 3. NOTICE AND WAIVER OF NOTICE. Whenever any notice is
required to be given by law, the Articles of Incorporation or these bylaws,
except with respect to notices of meetings of shareholders (with respect to
which the provisions of Article II, Section 6 apply) and except with respect to
notices of special meetings of directors (with respect to which the provisions
of Article III, Section 6 apply), said notice shall be deemed to be sufficient
if given (a) by telegraphic, cable or wireless transmission or (b) by deposit of
same in a post office box in a sealed prepaid wrapper addressed to the person
entitled thereto at his address as it appears on the records of the Corporation,
and such notice shall be deemed to have been given on the day of such
transmission or mailing, as the case may be.
Whenever notice is required to be given by law, the Articles of
Incorporation or these bylaws, 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.
SECTION 4. RESIGNATIONS. Any director, member of a committee or
officer may resign at any time. Such resignation shall be made in writing and
shall take effect at the time specified therein, or if no time be specified, at
the time of its receipt by the chief executive officer or Secretary. The
acceptance of a resignation shall not be necessary to make it effective, unless
expressly so provided in the resignation.
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SECTION 5. FACSIMILE SIGNATURES. In addition to the provisions for the
use of facsimile signatures elsewhere specifically authorized in these bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors.
SECTION 6. BOOKS AND RECORDS. The Corporation shall keep books and
records of account and shall keep minutes of the proceedings of its
shareholders, its Board of Directors and each committee of its Board of
Directors. The Corporation shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a record
of the original issuance of shares issued by the Corporation and a record of
each transfer of those shares that have been presented to the Corporation for
registration of transfer. Such records shall contain the names and addresses of
all past and current shareholders of the Corporation and the number and class of
shares issued by the Corporation held by each of them. Any books, records,
minutes and share transfer records may be in written form or in any other form
capable of being converted into written form within a reasonable time.
ARTICLE IX
AMENDMENTS
The Board of Directors may amend or repeal the Corporation's bylaws, or
adopt new bylaws, unless: (a) the Articles of Incorporation or the TBCA
reserves the power exclusively to the shareholders in whole or part; or (b) the
shareholders, in amending, repealing or adopting a particular bylaw, expressly
provide that the Board of Directors may not amend or repeal that bylaw.
Unless the Articles of Incorporation or a bylaw adopted by the shareholders
provides otherwise as to all of some portion of the Corporation's bylaws, the
Corporation's shareholders may amend, repeal or adopt the Corporation's bylaws
even though the bylaws may also be amended, repealed or adopted by the Board of
Directors.
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EXHIBIT 10.1
THE DTM CORPORATION EQUITY APPRECIATION PLAN
--------------------------------------------
The DTM Corporation Equity Appreciation Plan (the "Plan") has been established
to provide those employees of DTM Corporation ("DTM") who are selected by the
Board of Directors of DTM (the "Board") with an opportunity to profit from
increases in the value of DTM which encourage third party investors to acquire
all or a portion of the ownership of DTM. The Plan further provides those
employees with a financial incentive to remain employed at DTM until and after
such time as such an ownership change is effected, and to work to enhance the
value of DTM during that period.
The Plan shall consist of the terms and conditions set forth below:
1. CREATION OF PHANTOM STOCK UNITS. There shall be created hereunder a total
--------------------------------
of 10,000,000 Phantom Stock Units. Ten percent of such Phantom Stock Units
shall be allocated for the issuance of a like number of Phantom Stock
Appreciation Rights ("Phantom SARs") under the Plan to eligible employees.
The remainder of said Phantom Stock Units shall remain unallocated and no
further grants of Phantom SARs shall be made until further action to
allocate the remaining Phantom Stock Units is taken by the Board.
2. VALUATION OF PHANTOM STOCK UNITS. The total value of all Phantom Stock
---------------------------------
Units created shall equal the total value of DTM as of the date on which
the Phantom Stock Units are created. Each individual Phantom Stock Unit
shall equal the dollar value of DTM, divided by 10,000,000. The value of
each Phantom Stock Unit shall be determined as of the last day of each
fiscal year, based upon the value of DTM on such date, and shall continue
to be so valued until the last day of the next fiscal year. The value
shall be adjusted as of the last day of each succeeding fiscal year. The
value of DTM shall be determined in accordance with a cash flow-based
valuation made by an independent third party who is professionally
competent to make such determination. Both the independent third party
performing the valuation and the final valuation shall be subject to the
approval of the Board. Such valuation method and/or third party retained
to perform the valuation may be changed from time to time by the Board.
Any valuation of DTM during a fiscal year is subject to adjustment during
such fiscal year due to changes in accounting methods or transfers of
capital between DTM and its majority shareholder, The B.F.Goodrich Company
("Goodrich").
3. PHANTOM SARs GRANTED TO ELIGIBLE EMPLOYEES. The Board shall have the right
-------------------------------------------
to grant Phantom SARs to those of its employees who are determined by the
Board to be in a position to influence the value of DTM through their
efforts, and whose continued employment may enhance the efforts of DTM to
increase its value, and attract third-party investors. Employees who
receive grants hereunder shall be referred to herein as Participants. A
Phantom SAR granted to a Participant shall give that Participant the right
to receive the dollar amount of any appreciation in the value of one
Phantom Stock
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Unit between the date on which the Phantom SAR is granted and the date on
which it is exercised.
4. GRANTS TO ELIGIBLE EMPLOYEES. Grants of Phantom SARs made to eligible
-----------------------------
employees under Paragraph 3 shall be made at such time and in such manner
as is determined by the Board, and shall be evidenced by letter agreements
with Participants which shall contain such terms and conditions as the
Board deems appropriate and which are not inconsistent with the provisions
of this Plan. Such grants of Phantom SARs shall not become effective until
the letter agreements containing such grants are executed by the
Participant, and returned to DTM in accordance with such procedures as are
established by the Board.
5. EXERCISE OF PHANTOM SARs. Each Phantom SAR granted to a Participant will
-------------------------
vest and become exercisable by that Participant upon, but not prior to, a
"Change in Control" of DTM. A "Change in Control" of DTM shall be deemed
to have occurred either 1) when common stock of DTM is issued to the public
in an initial public offering of the common stock of DTM, or 2) Goodrich is
no longer the owner of at least 50% of the outstanding common stock of DTM,
as a result of an arms-length sale of all or a part of its interest in DTM
to a third party not affiliated or associated with Goodrich. From and
after, but not prior to, the occurrence of such an event, the Phantom SARs
(or, if the Change in Control results from an initial public offering,
stock options, as described in Paragraph 6 herein) granted to Participants
will become exercisable and, except as otherwise described in this Plan,
will remain exercisable by the Participant for a period of ten years from
the date on which the Phantom SARs or stock options are granted.
6. TREATMENT OF PHANTOM SARs UPON AN INITIAL PUBLIC OFFERING.
----------------------------------------------------------
a) Phantom SARs which become exercisable due to an initial public
offering of common stock of DTM will, immediately upon becoming
exercisable, be converted to options to purchase shares of the common
stock being offered to the public through the initial public offering,
and will not be exercisable for cash. The number of stock options to
which each Participant shall be entitled upon such conversion shall be
determined by multiplying the number of Phantom SARs granted to that
Participant by a fraction, the numerator of which shall be the total
number of shares of common stock of DTM created upon the initial
public offering, and the denominator of which shall be 10,000,000.
b) The exercise price of each stock option created upon conversion
of a Phantom SAR to a stock option under subparagraph 6(a) shall be
determined by dividing the value of a Phantom Stock Unit at the date
of grant of the Phantom SAR by a fraction, the numerator of which is
the total number of shares of common stock of DTM created upon the
initial public offering, and the denominator of which shall be
10,000,000.
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7. MINIMUM VALUE OF PHANTOM SARs AND OPTIONS. Notwithstanding anything
------------------------------------------
contained in Paragraphs 5 and 6 above, if, at the time the Phantom SARs or
stock options described above first become exercisable as a result of a
Change in Control of DTM, the total aggregate value of all such Phantom
SARs or stock options granted to all Participants is less than $1,000,000,
then the value of each such Phantom SAR or stock option shall be increased
pro rata such that the total aggregate value of all such Phantom SARs or
stock options shall equal $1,000,000. This shall be accomplished by a pro
rata reduction in the exercise price of each Phantom SAR or stock option,
to the extent necessary to effectuate the foregoing.
8. EXERCISE OF PHANTOM SARs OR STOCK OPTIONS.
------------------------------------------
a) A Participant shall have the right to exercise a Phantom SAR or
stock option, whichever the case may be, by providing written notice
to DTM of his or her desire to exercise such Phantom SARs or stock
options. Notice shall be provided in accordance with such procedures
as are approved by the Board of Directors.
b) Any exercise of a Phantom SAR or stock option by a Participant
must be of all of the Phantom SARs or stock options then held by that
Participant. Partial exercise of Phantom SARs or stock options will
not be permitted.
c) Upon the exercise of a Phantom SAR, a Participant will receive a
cash amount equal to the appreciation in value of a Phantom Stock Unit
from its value on the date on which the Phantom SAR was granted to its
value on the date on which it is exercised (which value, in accordance
with Paragraph 3, shall be based upon the value of DTM as of the last
day of its previous fiscal year).
d) Upon the exercise of a stock option, a Participant will receive
shares of common stock of DTM having a value on the date on which the
stock option is exercised which is equal to the difference between the
exercise price, as set forth in subparagraph 6(b) (or adjusted
pursuant to Paragraph 7, if necessary), and the average of the high
and low prices of the common stock of DTM on the principal stock
exchange on which the common stock of DTM is then trading, on the day
on which the stock option is exercised.
e) DTM shall have the right, to the extent which it deems necessary,
to withhold from the cash payable to a Participant on the exercise of
a Phantom SAR, or from a Participant's regular pay, in the case of the
exercise of stock options, an amount sufficient to meet any applicable
Federal, state or local tax withholding requirements.
3
<PAGE>
9. TERMINATION OF EMPLOYMENT PRIOR TO EXERCISABILITY OR EXERCISE OF PHANTOM
------------------------------------------------------------------------
SARs OR STOCK OPTIONS.
----------------------
a) If the employment of any Participant terminates prior to the date
of a Change in Control, all of such Participant's rights under this
Plan will cease, and the Participant will forfeit all rights under all
Phantom SARs granted to him or her, regardless of the reason for the
termination.
b) If such a Participant's employment terminates for a reason other
than death, total and permanent disability (as defined in subparagraph
(c)), or retirement, as defined in any DTM-sponsored qualified
retirement plan in which the Participant is then participating, after
the occurrence of a Change in Control, such Participant's right to
exercise any vested and exercisable Phantom SARs or stock options will
terminate 90 days after the date of termination of employment, except
that the Board, in its sole discretion, may agree to provide a longer
period of time following termination in which to exercise such
Participant's Phantom SARs or stock options. In no event will that
period of time exceed the shorter of the remaining term of the Phantom
SARs or stock options, or one year.
c) If the employment of a Participant terminates after the Phantom
SARs or stock options have become exercisable, for reasons of death,
or total and permanent disability, such that the Participant has been
determined by a physician to be unable to work and unlikely to ever be
able to work, or retirement, as defined in subparagraph (b) above,
that Participant's Phantom SARs or stock options will remain
exercisable for a period equal to the shorter of the remaining term of
the Phantom SARs or stock options, or one year.
10. MISCELLANEOUS PROVISIONS.
-------------------------
a) Phantom SARs or stock options shall not be transferable other
than by will or by the laws of descent and distribution.
b) Neither the grant of Phantom SARs nor any value realized upon the
exercise of them or any stock options shall be considered to be
compensation for purposes of determining the amount of any benefit
provided under any benefit plan of DTM.
c) The award of Phantom SARs to a Participant shall not change or
otherwise affect in any way the employment relationship between the
Participant and DTM, or grant to any Participant any status other than
that of being an employee at will.
d) The Board of Directors shall have the right to condition the
award of Phantom SARs to any employee on the employee's agreement to
such terms and conditions of employment as the Board sees fit to
require, including but not limited
4
<PAGE>
to such post-employment non-compete provisions as the Board determines
are appropriate.
e) If any provision of this Plan is found by a court of competent
jurisdiction to be unlawful, it shall not affect the validity or
enforceability of any other provisions of the Plan.
f) The Board shall have complete discretionary authority to
interpret the Plan, and determine the rights of any Participant under
the Plan, and its interpretation of any provision of the Plan, or of
any right of any Participant hereunder, shall be final and conclusive.
11. AMENDMENT OR TERMINATION OF PLAN. The Board of Directors shall have the
---------------------------------
right to amend or terminate the Plan at any time. No such amendment or
termination, however, shall affect the rights of any Participant with
respect to any Phantom SARs or stock options available to that Participant
prior to the date of amendment or termination.
This Plan is hereby adopted by the Board and is effective as of the 25th day of
January, 1995.
5
<PAGE>
[FORM OF LETTER AGREEMENT]
Dear :
I am pleased to inform you that, upon the terms and conditions contained in this
letter agreement (the "Agreement"), the Board of Directors of DTM Corporation
(the "Company) has granted you ________ phantom stock appreciation rights
("phantom SARs"), under the DTM Equity Appreciation Plan (the "Plan").
Each phantom SAR granted to you gives you the right to receive the dollar amount
of any appreciation in value of one Phantom Stock Unit, as defined in the Plan,
from its value on the date on which that particular phantom SAR was granted to
its value on the date on which it is exercised by you. The value of a Phantom
Stock Unit during each day of a particular fiscal year of the Company, shall be
based upon the value of the Company as of the last day of the previous fiscal
year of the Company, and shall equal the value of the Company determined at such
time divided by the total number of Phantom Stock Units created under the Plan.
The value of the Company shall be determined based upon either a) a cash-flow
based valuation made by an independent third party, or b) the Company's net
income multiplied by an industry average price-to-earnings ratio, or another
formula intended to approximate the fair market value of the stock of the
Company. The particular valuation method chosen shall be determined by the
Company's Board of Directors, so long as it meets the objectives described
above.
The phantom SARs granted to you will vest and become exercisable upon any
initial public offering of common stock of the Company, or any sale of all of
the common stock or assets of the Company to a third party. Either such
occurrence shall constitute a "change in control". Until such time, you will
have no ability to exercise your phantom SARs. Upon the occurrence of such an
event, your phantom SARs will become exercisable and will remain exercisable for
a period of ten years.
If your phantom SARs become exercisable because of an initial public offering of
Company stock, they will be converted to options to purchase common stock of the
Company. The number of options which you will have upon conversion will be
determined by multiplying the total number of phantom SARs granted to you by a
fraction, the numerator of which is the total number of shares of common stock
created upon the initial public offering, and the denominator of which shall be
the total number of Phantom Stock Units created by the Board on the "effective
date" of the Plan. The exercise price of each option created upon conversion
shall be determined by dividing the value of a Phantom Stock Unit at the date of
grant of a phantom SAR by a fraction, the numerator of which is the total number
of shares of Company common stock created under the initial public offering, and
the denominator of which is the total number of Phantom Stock Units created on
the effective date of the Plan.
6
<PAGE>
Notwithstanding the foregoing calculations, however, the total value to all Plan
participants of all phantom SARs or stock options, as the case may be,
immediately following any initial public offering or other change in control of
the Company, as previously defined, shall not be less than $1,000,000. The
value of your phantom SARs (or stock options) shall not be less than a pro rata
share of $1,000,000, based upon the ratio of phantom SARs and options held by
you relative to the total held by all Plan participants. The exercise price of
each phantom SAR or stock option will be reduced to the extent necessary to
insure that all such phantom SARs and stock options will have an aggregate value
of at least $1,000,000.
You may exercise your vested phantom SARs and stock options upon giving written
notice to the Company, and in accordance with any procedures established under
the Plan. You may not exercise a portion of your phantom SARs and stock
options, but must exercise all such phantom SARs and stock options held by you
at one time. When you exercise your phantom SARs, you will receive the
appreciation in value of the number of Phantom Stock Units which equals the
number of phantom SARs being exercised from their value on the date on which the
phantom SARs were granted to their value on the date on which they are
exercised. When you exercise your stock options, you will receive shares of
common stock of the Company having a value on the date the option is exercised
equal to the difference between the exercise price, as determined above, and the
average of the high and low price of the shares of the Company on the principal
stock exchange on which the common stock of the Company is then trading, as of
the day on which the option is exercised. The Company will have the right to
withhold from the cash payable to you on the exercise of phantom SARs, or from
your regular pay on the exercise of stock options, an amount sufficient to meet
Federal, state, and local tax withholding requirements resulting from the
exercise of the phantom SARs or stock options.
If your employment with the Company terminates prior to the date of an initial
public offering of the Company's common stock or other change in control, as
previously described, all of your rights under this Agreement will cease, and
you will forfeit all of your rights under all phantom SARs granted to you. If
your employment terminates for a reason other than death, disability, or
retirement, as defined in any Company-sponsored qualified retirement plan in
which you are then participating, your right to exercise any vested phantom SARs
and stock options will terminate, unless the Board of Directors of the Company,
in its sole discretion, agrees to provide you with a period of time following
your termination in which to exercise your phantom SARs and stock options. In
no event will that period of time exceed one year.
If your employment terminates after your phantom SARs and stock options have
vested, for reasons of death, or total and permanent disability, such that you
have been determined by a physician to be unable to work and unlikely to ever be
able to work, or retirement, as defined above, your vested phantom SARs and
stock options will remain exercisable for a period equal to the lesser of the
remaining term of the phantom SARs or stock options, or one year.
The phantom SARs and stock options into which they may be converted are not
transferable other than by will or by the laws of descent and distribution.
They are not considered to be
7
<PAGE>
compensation for purposes of any benefit plan of the Company, and the award of
them to you does not create in you any ownership interest in either the Company
or The B.F.Goodrich Company. Further, such award does not change in any way the
employment relationship between you and the Company, or give you any status
other than that of an employee at will. You do recognize, however, that the
award of phantom SARs to you has value to you, and as such, you agree that as
consideration for this award, you will not, for a period of three years after
any termination of your employment with the Company, become employed by or
perform services for, in any capacity, whether as an employee, consultant, or
otherwise, any corporate or other business entity which competes with the
Company, or which performs services for a competitor of the Company, in the
areas in which such competitor competes with the Company.
Please acknowledge your receipt of your award of phantom SARs, upon the terms
and conditions contained herein, by signing your name in the space provided
below, and returning the form to the Company.
Very truly yours,
DTM Corporation
By:______________________
Agreed and accepted:
___________________
Employee
8
<PAGE>
EXHIBIT 10.2
[LETTERHEAD OF DTM CORPORATION APPEARS HERE]
May 16, 1996
Dear DTM Corporation Equity Appreciation Plan Participant:
You have previously received a letter agreement (your "Agreement") pursuant to
which you were granted a number of phantom stock appreciation rights ("Phantom
SARs") under the DTM Corporation Equity Appreciation Plan (the "Plan"). You
have been delivered together with this supplemental letter agreement (the
"Amendment") a copy of a memorandum from DTM Corporation's Board of Directors
(the "Memorandum") concerning an amendment to the Plan proposed to be effected
through your execution and return of this letter agreement, and you have been
invited to address any questions or concerns you may have concerning the
Amendment with the undersigned.
Upon your execution and return of this Amendment, your Agreement will be
modified as follows:
1. You may exercise in whole or in part from time to time any stock
options you receive upon conversion of your Phantom SARs in accordance
with the terms of your Agreement (and the Plan).
2. You may not exercise any such stock options in a cashless manner. Such
stock options will be exercisable only by payment in cash of the
exercise price for the number of shares of DTM Corporation Common
Stock for which the option is being exercised. When you so exercise
any such stock option, you will receive the full number of shares for
which you have exercised the option.
In all other respects your Agreement will remain unmodified and in full force
and effect.
Please give this Amendment your prompt consideration and, if you agree to the
Amendment, please so indicate by signing below and returning this Amendment,
retaining a copy for your files.
Very truly yours,
DTM Corporation
By:
--------------------------------
John S. Murchison, III
President & CEO
ACCEPTED AND AGREED:
- -----------------------------------
(Signature)
- -----------------------------------
(Printed name)
- -----------------------------------
(Date)
<PAGE>
EXHIBIT 10.3
THE DTM CORPORATION
MANAGEMENT INCENTIVE PLAN
-------------------------
PURPOSE
- -------
The DTM Management Incentive Plan (the Plan) has been established to provide
opportunities to certain key management personnel to receive incentive
compensation as a reward for high levels of personal performance above the
ordinary performance standards compensated by base salary. The Plan is designed
to provide a competitive level of rewards when all relevant performance
objectives are achieved.
ELIGIBILITY
- -----------
Participation in the Plan will be limited to those key executives that have the
potential to influence significantly and positively the performance of the
Company. Participants will be selected by management annually. Inclusion of a
key manager as a participant does not, however, assure that an incentive award
will be paid to the participant for the year since actual awards are determined
at the sole discretion of management.
To be eligible for participation in a particular year, a key manager must have
assumed the duties of an incentive-eligible position and have been selected for
participation in the Plan by the date which is at least three months prior to
the beginning of the Plan Year. Incentive awards for participants who become
eligible for the Plan, other than at the beginning of the Plan Year, will be
paid pro rata based on a fraction, the numerator of which is the number of full
and partial months of the Plan Year during which the person was a Participant in
the Plan, and the denominator of which is the total number of months in the Plan
Year.
PARTICIPANT CATEGORIES
- ----------------------
Each participant will be assigned each year to an incentive category based on
organizational level and potential impact on important Company results. The
participant categories define the target level of incentive opportunity, stated
as a percentage of base salary, that will be available to the participant.
Category assignments are approved by the Chief Executive Officer. The category
assignment for the Chief Executive Officer shall be approved by the Compensation
Committee.
<PAGE>
The DTM Corporation Management Incentive Plan Page 2
EXECUTIVE INCENTIVE CATEGORIES
------------------------------
<TABLE>
<CAPTION>
Target Bonus Percentage Position
Category (As % of Base Salary) Eligibility
--------- --------------------- ------------
<S> <C> <C>
A 50% CEO
B 35% Vice Presidents
C 25% Directors
</TABLE>
PARTICIPANT TARGET BONUS
- ------------------------
The target bonus is the dollar amount of target level incentive opportunity for
each participant. It is the product of the participant's annual base salary and
the target bonus percentage determined by his or her incentive category
designation.
MAXIMUM AND THRESHOLD AWARDS
- ----------------------------
Each participant will be assigned maximum and threshold award levels. Maximum
award levels represent the maximum amount of incentive award that may be paid to
a participant for a Plan Year. Threshold award levels represent the minimum non-
zero amount of incentive award that will be paid to a participant. Performance
below the level for which a threshold-level award is paid will earn no incentive
payments.
Each participant's maximum award level will be 150% of his or her target bonus.
Each participant's threshold award level will be 50% of his or her target bonus.
PERFORMANCE MEASURES
- --------------------
Performance measures that may be used under the Plan include Net Income, Pretax
Income, Consolidated Operating Income, Operating Income Return on Net Capital
Employed, Cash Flow, Working Capital, Return on Equity, Return on Assets, and
Earnings per Share of Common Stock of the Company for the Plan Year.
<PAGE>
The DTM Corporation Management Incentive Plan Page 3
PARTIAL PLAN YEAR PARTICIPATION
- -------------------------------
Subject to Compensation Committee approval, incentive awards to participants who
terminate during the Plan Year for reasons of death, disability, or normal or
early retirement will be calculated as specified herein and will be paid pro
rata based on a fraction, the numerator of which is the number of full and
partial months of the Plan Year during which the participant was employed by the
Company, and the denominator of which is the total number of months in the Plan
Year. These payments will be made at the time that award payments are made to
all other participants.
Subject to the sole discretion of the Compensation Committee, participants who
terminate during a Plan Year for reasons other than death, disability, or normal
or early retirement may receive incentive award payments for such Plan Year on a
pro rata basis as described above.
PERFORMANCE GOALS
- -----------------
The Compensation Committee will designate at the beginning of each Plan Year:
. The performance measures to be used for the Plan Year;
. A schedule for each performance measure relating achievement levels
for the performance measure to incentive award levels as a percentage
of participants' target awards; and
. The relative weightings of the performance measures for the Plan year.
INCENTIVE POOLS
- ---------------
The total target incentive pool for DTM is equal to the sum of the individual
target bonuses for all DTM participants. The total target incentive pool is
divided into generator pools -- one generator pool for each performance measure.
The weightings for each performance measure determine the target dollar amount
for each generator pool.
<PAGE>
The DTM Corporation Management Incentive Plan Page 4
POOL GENERATION
- ---------------
Each generator pool will be funded according to performance against goals
based on the following schedule:
<TABLE>
<CAPTION>
Performance for Percent of Generator
Generator Pool Pool Funded
--------------- --------------------
<S> <C>
Below Threshold 0%
Performance
Threshold Performance 50%
Funding Level
Target Performance 100%
Funding Level (100% of Goal)
Maximum Funding Level 150%
</TABLE>
The sum of the dollar amounts from each generator pool provides the total
dollar amount from which participant bonus payments will be made. Payment
is limited to each pool maximum.
DETERMINATION OF PARTICIPANT BONUS AWARDS
- -----------------------------------------
Participant bonus awards will be determined as follows based on each
generator pool:
Participant's Percentage Percent of Participant
Target X Weighting X Generator = Bonus Earned
Bonus for Generator Pool Funded Based on Generator Pool
Pool
The participant bonuses earned based on each generator pool will be summed to
arrive at the participant's total bonus payment for the Plan year. A
participant's total bonus payment may be further adjusted either up or down by
management or the Compensation Committee, in its sole discretion.
<PAGE>
The DTM Corporation Management Incentive Plan Page 5
PROVISIONS
- ----------
The Management Incentive Plan is a discretionary compensation plan. While
performance is an important element in determining incentive under the Plan,
actual payments, if any, are made at the sole discretion of the Compensation
Committee. No awards under the Plan are to be considered earned until received.
PLAN YEAR
- ---------
The Plan Year shall be the fiscal year of the Company.
PLAN ADMINISTRATION
- -------------------
The Plan will be administered by the Committee. The Committee is empowered to
set preestablished performance targets, measure the results and determine the
amounts payable.
G.L. Habegger/bl
3/11/96
<PAGE>
EXHIBIT 10.4
THE DTM CORPORATION
STOCK OPTION PLAN
1. PURPOSE. The purpose of the Plan is to promote the interests of the
-------
shareholders by providing stock-based incentives to selected employees to align
their interests with shareholders and to motivate them to put forth maximum
efforts toward the continued growth, profitability and success of the Company.
In furtherance of this objective, stock options, stock appreciation rights,
performance shares, restricted shares, common stock, and/or other incentive
awards may be granted in accordance with the provisions of this Plan.
2. ADMINISTRATION. The Plan is to be administered by the Compensation
--------------
Committee or any successor committee (the "Committee") of the Board of Directors
of the Company. The Committee shall consist of at least three members who shall
not be eligible to participate in the Plan. The Committee shall have full power
and authority to construe, interpret and administer the Plan. All decisions,
actions or interpretations of the Committee shall be final, conclusive and
binding on all parties.
The Committee may delegate to the Chief Executive Officer and to other
senior officers of the Company the authority to make awards under the Plan with
respect to not more than ten percent of the shares authorized under the Plan,
pursuant to such conditions and limitations as the Committee may establish,
except that only the Committee may make awards to Participants who are subject
to Section 16 of the Securities Exchange Act of 1934.
3. SHARES AVAILABLE FOR THE PLAN. An aggregate of 350,000 shares of
-----------------------------
common stock of the Company shall be available for delivery pursuant to the
provisions of the Plan. Such shares may be either authorized but unissued
shares or treasury shares. Any shares awarded under the Plan which are not
issued or otherwise are returned to the Company, whether because awards have
been forfeited, lapsed, expired, been canceled, withheld to satisfy withholding
tax obligations or otherwise, shall again be available for other awards under
the Plan. However, upon surrender of a stock option or exercise of any related
stock appreciation right, the number of shares subject to the surrendered option
shall be charged against the maximum number of shares issuable under the Plan
and shall not be available for future awards.
4. LIMITATION ON AWARDS. No individual employee may receive awards under
--------------------
this Plan with respect to more than 25,000 shares in any calendar year.
<PAGE>
5. TERM. The Plan shall become effective as of such date as is
----
designated by the Board of Directors and shall remain effective for a period of
five years thereafter. No awards may be made under this Plan except during the
period when the Plan is effective.
6. ELIGIBILITY. Awards under the Plan may be made to any salaried, full-
-----------
time employee of the Company or any subsidiary corporation of which more than
50% of the voting stock is owned by the Company. Directors who are not full-
time employees are not eligible to participate.
7. STOCK OPTIONS. The Committee may in its discretion from time to time
-------------
grant to eligible employees options to purchase, at a price not less than 100%
of the fair market value on the date of grant (the "option price"), common stock
of the Company, subject to the conditions set forth in this Plan. The Committee
may not reduce the option price of any stock option grant after it is made,
except in connection with a Corporate Reorganization, nor may the Committee
agree to exchange a new lower priced option for an outstanding higher priced
option.
The Committee, at the time of granting to any employee an option to
purchase shares or any related stock appreciation right or limited stock
appreciation right under the Plan, shall fix the terms and conditions upon which
such option or appreciation right may be exercised, and may designate options
incentive stock options pursuant to Section 422 of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code") or any other statutory stock
option that may be permitted under the Internal Revenue Code from time to time,
provided, however that (i) the date on which such options and related
appreciation rights shall expire, if not exercised, may not be later than ten
years after the date of grant of the option, (ii) in the case of options
designated as incentive stock options (as defined in Section 422 of the Internal
Revenue Code), the aggregate fair market value of stock optioned to an employee
(determined at time of grant) under this plan or any other plan of this Company
and its subsidiaries with respect to which incentive stock options are
exercisable for the first time by such employee during any calendar year shall
be limited to $100,000 (unless such Section 422 limit is revised, then in
conformance with such revision) and (iii) in case of any other statutory stock
option permitted under the Internal Revenue Code, then in accordance with such
provisions as in effect from time to time.
Within the foregoing limitations, the Committee shall have the
authority in its discretion to specify all other terms and conditions, including
but not limited to provisions for the time limits during which options may be
exercised, and in lieu of payment in cash, the exercise in whole or in part of
options by tendering common stock of the Company owned by the employee, valued
at the fair market value on the date of exercise or other
2
<PAGE>
acceptable forms of consideration equal in value to the option price. All
options granted hereunder shall become exercisable in three separate
installments with 35% of the options granted becoming exercisable on the
anniversary date of the option grant, 35% becoming exercisable on the next
succeeding anniversary date, and 30% becoming exercisable on the next succeeding
anniversary date. The Committee may, in its discretion, issue rules or
conditions with respect to utilization of common stock for all or part of the
option price, including limitations on the pyramiding of shares.
8. STOCK APPRECIATION RIGHTS. The Committee may, in its discretion,
-------------------------
grant stock appreciation rights and limited stock appreciation rights (as
hereinafter described) in connection with any stock option, either at the time
of grant of such stock option or any time thereafter during the term of such
stock option. Except for the terms of this Plan with respect to limited stock
appreciation rights, each stock appreciation right shall be subject to the same
terms and conditions as the related stock option and shall be exercisable at
such times and to such extent as the Committee shall determine, but only so long
as the related option is exercisable. The number of stock appreciation rights or
limited stock appreciation rights shall be reduced not only by the number of
appreciation rights exercised but also by the number of shares purchased upon
the exercise of a related option. A related stock option shall cease to be
exercisable to the extent the stock appreciation rights or limited stock
appreciation rights are exercised. Upon surrender to the Company of the
unexercised related stock option, or any portion thereof, a stock appreciation
right shall entitle the optionee to receive from the Company in exchange
therefor (a) a payment in stock as determined below, or (b) to the extent
determined by the Committee, the cash equivalent of the fair market value of
such payment in stock on the exercise date had the employee been awarded a
payment in stock instead of cash, or any combination of stock and cash. The
number of shares which shall be issued pursuant to the exercise of stock
appreciation rights shall be determined by dividing (1) the total number of
stock appreciation rights being exercised multiplied by the amount by which the
fair market value of a share of common stock of the Company on the exercise date
exceeds the option price of the related option, by (2) the fair market value of
a share of common stock of the Company on the exercise date. No fractional
shares shall be issued.
The grant of limited stock appreciation rights will permit a grantee
to exercise such limited stock appreciation rights for cash during a sixty-day
period commencing on the date on which any of the events described in the
definition of Change of Control occurs, each of which events shall hereinafter
be known as a "Change in Control Event." Notwithstanding the foregoing, however,
if the Change in Control Event occurs within six months after the date on which
limited stock appreciation rights were granted, then the sixty-day period during
which such limited stock appreciation rights may be exercised for cash
3
<PAGE>
shall commence six months after the date on which the limited stock appreciation
rights were granted. The amount of cash received upon the exercise of any
limited stock appreciation rights under either of the preceding two sentences
shall equal the excess, if any, of the fair market value of a share of the
Company's common stock on the date of exercise of the limited stock appreciation
rights, over the option price of the stock option to which the limited stock
appreciation rights relate.
9. PERFORMANCE SHARE AWARDS. The Committee may make awards in common
------------------------
stock subject to conditions established by the Committee which may include
attainment of specific performance objectives ("Performance Share Awards").
Performance Share Awards may include the awarding of additional shares upon
attainment of the specified performance objectives.
10. PERFORMANCE OBJECTIVES. Performance objectives that may be used under
----------------------
the Plan include Net Income, Pretax Income, Consolidated Operating Income,
Return on Equity, Operating Income Return on Net Capital Employed, Return on
Assets, Cash Flow, Working Capital and Earnings per Share of Common Stock of the
Company (the "Performance Objectives"). The Performance Objectives shall be
calculated without regard to any change in accounting standards adopted pursuant
to the Financial Accounting Standards Board after the goal for a Performance
Objective is adopted which will affect the performance measure by 10 percent or
more.
11. RESTRICTED SHARES. The Committee may make awards in common stock
-----------------
subject to conditions, if any, established by the Committee which may include
continued service with the Company or its subsidiaries. The maximum number of
Restricted Shares that may be awarded under the plan shall be 50,000 shares.
12. OTHER AWARDS. The Committee may make awards authorized under this
------------
Plan in Units, the value of which is based, in whole or in part, on the value of
the Company's common stock, in lieu of making such awards in common stock. The
Committee may provide for the deferral of cash-based awards under such terms and
conditions as in its discretion it deems appropriate.
13. FAIR MARKET VALUE. For all purposes of this Plan the fair market
-----------------
value of a share of stock shall be the mean of the high and low prices of the
Company's common stock on the relevant date as reported on the NASDAQ National
Market, or, if no sale was made on such date, then on the next preceding day on
which such a sale was made.
4
<PAGE>
14. TERMINATION OF EMPLOYMENT. Upon the termination of employment of any
-------------------------
employee for any reason, his or her options and any related appreciation rights
shall terminate at that time with respect to all shares which were not then
purchasable by him or her, provided, however, that if the termination of
employment is by reason of death, disability or retirement the Committee may in
its sole discretion provide that such options and related appreciation rights
shall not terminate upon death, disability or retirement and may become
immediately exercisable or continue to become exercisable in accordance with the
terms of the original grant.
15. ASSIGNABILITY. Options and any related appreciation rights and other
-------------
awards granted under this Plan shall not be transferable other than by will or
the laws of descent and distribution or by such other means as the Committee may
approve from time to time.
16. CORPORATE REORGANIZATION. The number and kind of shares authorized
------------------------
for delivery under the Plan and the price at which shares may be purchased may
be adjusted appropriately in the event of any stock split, stock dividend,
combination of shares, merger, consolidation, reorganization, or other change in
the structure of the Company or the nature of the shares of the Company. The
determination of what adjustments, if any, are appropriate shall be made in the
discretion of the Board of Directors or the Committee.
In the event of a dissolution or liquidation of the Company or a
merger, consolidation, sale of all or substantially all of its assets, or other
corporate reorganization in which the Company is not the surviving corporation
or any merger in which the Company is the surviving corporation but the holders
of its common stock receive securities of another corporation, any outstanding
options hereunder shall terminate, provided that each optionee shall, in such
event, have the right immediately prior to such dissolution, liquidation,
merger, consolidation, sale of assets or reorganization in which the Company is
not the surviving corporation or any merger in which the Company is the
surviving corporation but the holders of its common stock receive securities of
another corporation, to exercise any unexpired option and/or stock appreciation
right in whole or in part without regard to the exercise date contained in such
option. Nothing herein contained shall prevent the assumption and continuation
of any outstanding option or the substitution of a new option by the surviving
corporation.
17. COMMITTEE'S DETERMINATION. The Committee's determinations under the
-------------------------
Plan including without limitation, determinations of the employees to receive
awards or grants, the form, amount and timing of such awards or grants, the
terms and provisions of
5
<PAGE>
such awards or grants and the agreements evidencing same, and the establishment
of Performance Objectives need not be uniform and may be made by it selectively
among employees who receive, or are eligible to receive awards or grants under
the Plan whether or not such employees are similarly situated.
18. LEAVE OF ABSENCE OR OTHER CHANGE IN EMPLOYMENT STATUS. The Committee
-----------------------------------------------------
shall be entitled to make such rules, regulations and determinations as it deems
appropriate under the Plan in respect of any leave of absence taken by an
employee or any other change in employment status, such as a change from full
time employment to a consulting relationship, of an employee relative to any
grant or award. Without limiting the generality of the foregoing, the Committee
shall be entitled to determine (i) whether or not any such leave of absence or
other change in employment status shall constitute a termination of employment
within the meaning of the Plan and (ii) the impact, if any, of any such leave of
absence or other change in employment status on awards under the Plan
theretofore made to any employee who takes such leave of absence or otherwise
changes his or her employment status.
19. WITHHOLDING TAXES. The Committee shall have the right to require any
-----------------
Federal, state or local withholding tax requirements to be satisfied by
withholding shares of common stock or other amounts which would otherwise be
payable under the Plan.
20. RETENTION OF SHARES. If shares of common stock are awarded subject to
-------------------
attainment of Performance Objectives, continued service with the Company or
other conditions, the shares may be registered in the employees' names when
initially awarded, but possession of certificates for the shares shall be
retained by the Secretary of the Company for the benefit of the employees, or
shares may be registered in book entry form only, in both cases subject to the
terms of this Plan and the conditions of the particular awards. In either
event, each employee shall have the right to receive all dividends and other
distributions made with respect to such awards registered in his or her name and
shall have the right to vote or execute proxies with respect to such registered
shares.
21. FORFEITURE OF AWARDS. Any awards or parts thereof made under this
--------------------
plan which are subject to Performance Objectives or other conditions which are
not satisfied, shall be forfeited, and any shares of common stock issued shall
revert to the Treasury of the Company.
22. CONTINUED EMPLOYMENT. Nothing in the Plan or in any agreement entered
--------------------
into pursuant to the Plan shall confer upon any employee the right to continue
in the
6
<PAGE>
employment of the Company or affect any right which the Company may have to
terminate the employment of such employee.
23. CHANGE IN CONTROL. For purposes of the Plan, a Change in Control
-----------------
shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (A) the
then outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
the following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company (other than by exercise of a conversion
privilege), (B) any acquisition by the Company or any of its subsidiaries or
affiliates, (C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries or affiliates
or (D) any acquisition by any corporation with respect to which, following such
acquisition, more than 70% of, respectively, the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such acquisition in substantially
the same proportions as their ownership, immediately prior to such acquisition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(ii) During any period of two consecutive years, individuals who, as
of the beginning of such period, constitute the Board (the "Incumbent Board"),
cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the beginning of
such period whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or
(iii) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, with respect to which all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger or
consolidation, do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 70% of,
7
<PAGE>
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger or consolidation in substantially the
same proportions as their ownership, immediately prior to such reorganization,
merger or consolidation of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be; or
(iv) Approval by the shareholders of the Company of (A) a complete
liquidation or dissolution of the Company or (B) a sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation, with respect to which following such sale or other disposition,
more than 70% of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then outstanding voting
securities of such corporation to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be.
Notwithstanding the foregoing, no Change in Control shall be deemed to
have taken place upon the occurrence of any of the above-described events, if
immediately prior to such occurrence (immediately prior to the beginning of the
two-year period, with respect to the occurrence described in subparagraph (ii)
above), The B.F.Goodrich Company or any of its subsidiaries or affiliates is a
beneficial owner, either directly or indirectly, of any of the Outstanding
Company Common Stock or Outstanding Company Voting Securities. In addition, no
sale by either The B.F.Goodrich Company or any shareholder of the Company on the
date of adoption of this Plan by the shareholders of the Company of all or any
portion of any Outstanding Company Common Stock or Outstanding Company Voting
Securities beneficially owned by it shall result in a Change in Control.
24. EFFECT OF CHANGE IN CONTROL. Options and any related appreciation
---------------------------
rights that are not then exercisable shall become immediately exercisable in the
event of a Change in Control. The Committee may make such provision with
respect to other awards under this Plan as it deems appropriate in its
discretion.
25. COMPLIANCE WITH LAWS AND REGULATIONS. Notwithstanding any other
------------------------------------
provisions of the Plan, the issuance or delivery of any shares may be postponed
for such period as may be required to comply with any applicable requirements of
any national securities exchange or any requirements under any other law or
regulation applicable to the issuance or delivery of such shares, and the
Company shall not be obligated to issue or deliver any such shares if the
issuance or delivery thereof shall constitute a violation of any
8
<PAGE>
provision of any law or any regulation of any governmental authority, whether
foreign or domestic, or any national securities exchange.
26. AMENDMENT. The Board of Directors of the Company may alter or amend
---------
the Plan, in whole or in part, from time to time, or terminate the Plan at any
time, provided however, that no amendment shall be made without the approval of
the shareholders which has the effect of increasing the number of shares subject
to this Plan (other than in connection with a Corporate Reorganization), but no
such action shall adversely affect any rights or obligations with respect to
awards previously made under the Plan.
9
<PAGE>
EXHIBIT 10.5
PATENT LICENSE AGREEMENT
------------------------
THIS AGREEMENT is made by and between the BOARD OF REGENTS, THE UNIVERSITY
OF TEXAS SYSTEM ("BOARD"), an agency of the State of Texas, whose address is 201
West 7th Street, Austin, Texas 78701, on behalf of its component, The University
of Texas at Austin ("UNIVERSITY") and NOVA AUTOMATION CORPORATION ("LICENSEE"),
a Texas corporation, having an office at 1515 Capital of Texas Highway South,
Austin, Texas 78746.
W I T N E S S E T H:
Whereas BOARD owns certain PATENT RIGHTS relating to methods and apparatus
for Layered Part Generation Using Laser Sintering; and
Whereas BOARD also owns certain unpatented technology for Layered Part
Generation Using Laser Sintering; and
Whereas BOARD wishes to have LICENSED SUBJECT MATTER developed and used for
the benefit of the inventor, UNIVERSITY, and the public as outlined in the
Intellectual Property Policy and Guidelines promulgated by the aforementioned
BOARD; and
Whereas LICENSEE wishes to obtain a license subject to preexisting rights
or licenses, if any, under BOARD'S PATENT RIGHTS or unpatented technology; and
Whereas BOARD wishes to grant a license to LICENSEE, subject to the terms
and conditions stated herein;
NOW, THEREFORE, in consideration of the mutual covenants and premises
herein contained, the parties hereto agree as follows:
I. EFFECTIVE DATE
--------------
This agreement shall be effective December 3, 1987, subject to approval by
BOARD.
<PAGE>
II. DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the meanings
indicated:
2.1 LICENSED SUBJECT MATTER shall mean all information contained in either
PATENT RIGHTS or TECHNOLOGY RIGHTS.
2.2 PATENT RIGHTS shall mean BOARD'S rights in information covered at any
time by United States Patent Application Serial Number 920,580, filed October
17, 1986, and any division, continuation, continuation-in-part, reissue or re-
examination thereof, and any letters patent that may be issued thereon, or any
foreign counterpart thereof.
2.3 TECHNOLOGY RIGHTS shall mean unpatented technology, technical
information, design data, and other information owned by BOARD which relates to
methods and/or apparatus for layered part generation using laser sintering to
the extent necessary for practicing the inventions or discoveries covered by
PATENT RIGHTS. TECHNOLOGY RIGHTS shall include without limitation all
information, know-how, process, procedures, methods, protocols, formulas,
techniques, software, designs, drawings, data and other valuable technical
information not in the public domain at the time of disclosure by BOARD to
LICENSEE.
2.4 SALE shall mean any transfer or disposition to a party other than
LICENSEE or a sublicensee hereunder of LICENSED SUBJECT MATTER in exchange for
value received.
2.5 NET SALES shall mean LICENSEE's gross receipts from SALE(S) of
products covered by LICENSED SUBJECT MATTER, less any deduction for commissions,
trade discounts, returns, freight, taxes or government tariffs.
III. WARRANTY; SUPERIOR RIGHTS
-------------------------
3.1 Except for the rights, if any, of the Government of the United States,
as referenced in paragraph 3.2 below, BOARD represents and warrants that it is
the owner of the entire right, title,
-2-
<PAGE>
and interest in and to PATENT RIGHTS and TECHNOLOGY RIGHTS, that it has the sole
right to grant licenses under LICENSED SUBJECT MATTER and that it has not
granted licenses thereunder to any other person or entity.
3.2 LICENSEE understands that the PATENT RIGHTS and TECHNOLOGY RIGHTS
licensed hereunder may have been developed under a funding agreement with the
Government of the United States of America and that the Government may have
certain rights relative thereto. This Agreement is explicitly made subject to
the Government's rights, if any, under any such agreement. To the extent that
there is a conflict between any such funding agreement, and this Agreement, the
terms of such funding agreement shall prevail.
IV. LICENSE
-------
4.1 BOARD hereby grants to LICENSEE an exclusive, worldwide
royalty-bearing license (except as provided under Paragraph 3.2 and 4.4 hereof)
to make, have made, use or sell LICENSED SUBJECT MATTER.
4.2 LICENSEE shall have the right to grant sublicenses consistent
with this Agreement, provided that LICENSEE shall be responsible for the
operations of its sublicensee(s) relevant to this Agreement as if such
operations were carried out by LICENSEE. However, LICENSEE shall not be
obligated to make royalty payments to BOARD on income from its sublicenses until
the receipt by LICENSEE of such royalty payments from its sublicensee(s). Any
sublicense granted hereunder shall, by its terms, not extend beyond the term of
this Agreement. If this Agreement is earlier terminated pursuant to Paragraph
7.2, all sublicenses then in effect shall revert to BOARD as licensor, and BOARD
shall have no further obligation to account to LICENSEE for royalties received
thereunder; however, any such royalties from sublicenses applicable to the
period prior to termination shall belong to LICENSEE. LICENSEE further agrees
to deliver to BOARD a true and correct copy
-3-
<PAGE>
of each sublicense granted by LICENSEE, and any modification or termination
thereof, within thirty (30) days after execution, modification, or termination,
as applicable. BOARD shall have the right of consent to the terms and
conditions of any sublicense; however, such consent shall not be unreasonably
withheld. BOARD shall exercise its right of consent within sixty (60) days of
receipt by UNIVERSITY or BOARD of any proposed sublicense. Upon termination of
this Agreement, any and all existing sublicense rights granted by LICENSEE shall
automatically revert to BOARD.
4.3 BOARD specifically retains the right for itself and its component
institutions to:
(a) Publish the general scientific findings from research related to
LICENSED SUBJECT MATTER; and
(b) Use any information contained in LICENSED SUBJECT MATTER for
research, teaching, and other educational purposes.
4.4 BOARD shall have the right at any time after the date of this
Agreement to terminate the license granted herein if LICENSEE within ninety days
after written notice from BOARD of termination fails to provide written evidence
that it has commercialized or is actively attempting to commercialize LICENSED
SUBJECT MATTER. LICENSEE further agrees to use its best efforts to produce and
demonstrate a working commercial prototype adapted to practice LICENSED SUBJECT
MATTER within eighteen (18) months from the date of this Agreement.
4.5 With respect to any foreign operations of LICENSEE, BOARD shall have
the right at any time after December 31, 1997 to terminate the license granted
herein in any foreign national political jurisdiction if LICENSEE, within one
hundred eighty (180) days after written notice from BOARD of such intended
termination, fails to provide written evidence to BOARD that it has
commercialized or is actively attempting to commercialize LICENSED SUBJECT
MATTER in that foreign jurisdiction.
-4-
<PAGE>
4.6 Evidence provided by LICENSEE that it has an ongoing and active
research, development, manufacturing, marketing or licensing program as
appropriate, directed toward production and sale of products within LICENSED
SUBJECT MATTER shall be deemed satisfactory evidence of such an attempt to
commercialize.
4.7 The exercise of the license granted to LICENSEE under this Agreement
shall be conditioned on the issuance of stock to BOARD as required by paragraph
6.1.
V. PAYMENTS AND REPORTS
--------------------
5.1 Within one (1) year following execution of this Agreement LICENSEE
will reimburse BOARD for reasonable attorneys' fees and expenses incurred by
BOARD in preparing, filing and prosecuting patent application serial number
920,580, filed October 17, 1986, up to a maximum of Fifteen Thousand Dollars
($15,000.00). BOARD shall control the preparation and prosecution of all patent
applications directed to inventions covered by this license, and BOARD shall
decide whether or not to file patent applications in the United States and shall
notify LICENSEE of such decision. LICENSEE shall also reimburse BOARD for the
reasonable costs of all additional U. S. filings if LICENSEE elects to include
claimed subject matter of such U. S. patent applications within the scope of the
license. LICENSEE may, however, credit one half of sums paid to BOARD hereunder
for reimbursement of fees and expenses for the additional U. S. patent
applications against royalties due to BOARD under Paragraph 5.2 below. Such
credit shall be in addition to the waiver provided under Paragraph 5.2.
LICENSEE shall have the right to elect whether or not to file foreign patent
applications and LICENSEE will pay all fees and expenses associated with the
filing, prosecution and maintenance of such foreign applications with no credit
against royalties.
5.2 LICENSEE will pay BOARD a running royalty in the amount of four
percent (4%) of LICENSEE'S NET SALES. BOARD hereby agrees to waive one half the
amount of royalty
-5-
<PAGE>
otherwise due on LICENSEE'S first Three Hundred Thousand Dollars ($300,000) of
NET SALES provided that LICENSEE has otherwise fully complied with this
agreement at the time such royalty is due.
5.3 Any UNIVERSITY research sponsored by LICENSEE shall be negotiated with
UNIVERSITY in accordance with BOARD's usual research agreement procedures.
5.4 LICENSEE will, in exchange for the rights granted hereunder, within
one (1) year from the date of the execution of this Agreement, demonstrate to
the satisfaction of BOARD that it has raised Three Hundred Thousand Dollars
($300,000) in capital financing. At LICENSEE's request, BOARD may in its
discretion extend the period to raise the Three Hundred Thousand Dollars
($300,000) in capital financing for an additional period of time not to exceed
180 days. If LICENSEE fails to demonstrate timely to the BOARD's satisfaction
that it has raised the requisite capital, BOARD shall have the right to
terminate this Agreement.
5.5 If any sublicenses are granted by LICENSEE pursuant to Paragraph 4.2,
BOARD will receive a percentage of the gross receipts received by LICENSEE from
any sublicensees in an amount of not less than four percent (4%) nor more than
fifty percent (50%), the exact percentage of gross receipts to be negotiated in
a timely fashion between BOARD and LICENSEE at the time BOARD exercises its
right of consent to the sublicensee under Paragraph 4.2. Among the factors to be
taken into consideration in negotiating the sublicense fee will be (a) whether
LICENSEE merely functions as a broker; (b) whether LICENSEE manufactures the
licensed products to be sold by the sublicensee; (c) the extent of LICENSEE's
investment in developing the sublicensed product.
5.6 Within sixty (60) days after March 31, June 30, September 30, and
December 31, LICENSEE shall deliver to BOARD a true and accurate report, giving
such particulars of the business conducted by LICENSEE and its sublicensees, if
any exist, during the preceding three (3)
-6-
<PAGE>
calendar months as are pertinent to an account for payments hereunder. Such
report shall include at least (a) the quantities of LICENSED SUBJECT MATTER that
it has produced; (b) the total SALES; (c) the NET SALES; (d) the calculation of
royalties on NET SALES; and (e) the total royalties so computed and due BOARD.
Simultaneously with the delivery of each such report, LICENSEE shall pay to
BOARD the amount, if any, due for the period of such report. If no payments are
due, it shall be so reported. At LICENSEE's request and for good cause shown,
BOARD may in its discretion permit LICENSEE to defer payment of current
royalties due BOARD until the next quarterly reporting period.
5.7 Upon the request of BOARD, but not more often than once per calendar
year, LICENSEE shall deliver to BOARD a written report as to LICENSEE's efforts
and accomplishment during the preceding year in commercializing LICENSED SUBJECT
MATTER and its commercialization plans for the upcoming year.
5.8 All amounts payable hereunder by LICENSEE shall be payable in United
States funds without deductions of any kind other than those permitted under
this Agreement. Royalty checks shall be made payable to BOARD OF REGENTS, The
University of Texas System and shall be mailed to the Office of Asset
Management, 210 West Sixth Street, Austin, Texas 78701.
VI. COMMON STOCK; EQUITY OWNERSHIP
------------------------------
6.1 In consideration of the rights granted to LICENSEE by BOARD in this
Agreement, LICENSEE agrees to issue twenty percent (20%) of its common stock to
BOARD with pre-emptive rights. Such shares shall be fully paid and non-
assessable.
6.2 BOARD shall have the right to name directors on the board of directors
of LICENSEE in proportion to the number of shares held by BOARD relative to the
total number of
-7-
<PAGE>
issued shares, provided, that BOARD shall always have the right to elect at
least one seat on LICENSEE's board of directors.
VII. TERM AND TERMINATION
--------------------
7.1 Subject to the provisions of Paragraph 7.2, the Term of this Agreement
shall extend from the Effective Date set forth above for a term of seventeen
(17) years or until the expiration date of all patents under PATENT RIGHTS,
whichever occurs last.
7.2 The license and right to sublicense granted by BOARD to LICENSEE in
this Agreement will earlier terminate:
(a) Automatically if LICENSEE shall become bankrupt or insolvent
and/or if the business of LICENSEE shall be placed in the hands of a
receiver, assignee, or trustee, whether by voluntary act of LICENSEE or
otherwise and all rights of LICENSEE shall immediately revert to BOARD and
all rights of any sublicensees shall survive, but the obligations of such
sublicensees will automatically accrue to the benefit of BOARD;
(b) If either party hereto shall breach or default on any material
obligation under this Agreement. However, termination of the Agreement
shall be avoided if, within ninety (90) days after receipt of written
notice of breach or default, the party in default cures the breach and
notifies the other party in writing of the manner of such cure.
(c) Under the provisions of Paragraph 4.4 if invoked.
(d) Under the provisions of Paragraph 4.5 if invoked.
(e) Under the provisions of Paragraph 5.4 if invoked.
7.3 Upon termination of this Agreement for any cause, nothing herein shall
be construed to release either party of any obligation matured prior to the
effective date of such termination, and LICENSEE may, with BOARD's written
consent, after the effective date of such termination, sell
-8-
<PAGE>
any LICENSED SUBJECT MATTER in the possession of LICENSEE, its agents or bailees
at the date of termination, provided that it pays BOARD royalties thereon as
provided in this Agreement when sold.
VIII. INFRINGEMENT
------------
8.1 LICENSEE shall have the obligation to enforce any patent licensed
hereunder against substantial infringement by third parties. If LICENSEE elects
to bring suit for infringement, then the running royalty will apply to all
amounts recovered by LICENSEE, excluding LICENSEE's legal expenses. If LICENSEE
elects not to bring suit and thereafter BOARD elects to bring suit, LICENSEE
must join in the suit and must share fifty percent (50%) of the expenses in
order for LICENSEE to maintain its exclusive license under this agreement. If
BOARD elects to bring suit, BOARD shall control the suit and LICENSEE shall
receive fifty percent (50%) of any net recovery to BOARD after legal expenses.
8.2 In any suit or dispute involving alleged patent infringement, the
parties to this Agreement shall cooperate fully including making available all
relevant personnel, records, papers, information, samples, specimens, and the
like which are in their possession.
IX. ASSIGNMENT
----------
This Agreement may not be assigned by either party hereto without the prior
written consent of the other party hereto which consent shall not be
unreasonably withheld.
X. PATENT MARKING
--------------
LICENSEE agrees to mark permanently and legibly all products and
documentation manufactured or sold by it under this Agreement with such patent
notice as may be permitted or required under Title 35, United States Code.
-9-
<PAGE>
XI. INDEMNIFICATION
---------------
LICENSEE shall hold harmless and indemnify BOARD, UNIVERSITY, their
Regents, officers, employees and agents from and against any claims, demands, or
causes of action whatsoever, caused by, arising out of, or resulting from the
exercise or practice of the license granted hereunder by LICENSEE or its
officers, employees, agents or representatives, including without limitation
those arising on account of any injury or death of persons or damage to
property.
XII. USE OF BOARD AND COMPONENT'S NAME
---------------------------------
LICENSEE shall not use the name of UNIVERSITY, SYSTEM, or BOARD for
commercial purposes (other than providing disclosure to potential investors to
the extent required by law) without the express written consent of the Office of
General Counsel for The University of Texas System or another individual
designated by the Office of the Chancellor, which consent shall not be
unreasonably withheld.
XIII. CONFIDENTIAL INFORMATION
------------------------
13.1 BOARD and LICENSEE each agree that all information contained in
documents marked "confidential" which are forwarded to one by the other shall be
received in strict confidence, used only for the purposes of this Agreement, and
not disclosed by the recipient (except as required by law or by court order),
its agents or employees without the prior written consent of the other unless
such information (a) was in the public domain at the time of disclosure, (b)
later became part of the public domain through no act or omission of the
recipient, its employees, agents, successors or assigns, (c) was lawfully
disclosed to the recipient party by third party having the right to disclose it,
(d) was already known by the recipient at the time of disclosure, (e) was
independently developed, or (f) is required to be submitted to a government
agency pursuant to any preexisting obligation.
-10-
<PAGE>
13.2 Each party's obligation of confidence hereunder shall be fulfilled by
using at least the same degree of care with the other party's confidential
information it used to protect its own confidential information. This obligation
shall exist while this agreement is in force and for a period of three (3) years
thereafter.
XIV. GENERAL
-------
14.1 This Agreement constitutes the entire and only agreement between the
parties for LICENSED SUBJECT MATTER and all other prior negotiations,
representations, agreements, and understandings are superseded hereby. No
agreements altering or supplementing the terms hereof may be made except by
means of a written document signed by the duly authorized representatives of the
parties hereto.
14.2 Any notice required by this Agreement shall be given by prepaid,
first class, certified mail, return receipt requested, addressed in the case of
BOARD to:
BOARD OF REGENTS
The University of Texas System
201 West 7th Street
Austin, Texas 78701
ATTENTION: System Intellectual Property Office
or in the case of LICENSEE to:
NOVA AUTOMATION CORP.
1515 Capital of Texas Highway S.
Austin, Texas 78746
or such other addresses as may be given from time to time under the terms of
this notice provision.
14.3 This Agreement shall be construed and enforced in accordance with the
laws of the United States of America and of the State of Texas.
14.4 Failure of either party hereto to enforce a right under this
Agreement shall not act as a waiver of that right or the ability to later assert
that right relative to the particular situation involved.
-11-
<PAGE>
14.5 Headings included herein are for convenience only and shall not be
used to construe this Agreement.
14.6 If provision of this Agreement shall be found by a court to be void,
invalid or unenforceable, the same shall be reformed to comply with applicable
law or stricken if not so conformable, so as not to affect the validity or
enforceability of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this AGREEMENT.
ATTEST: BOARD OF REGENTS OF THE
UNIVERSITY OF TEXAS SYSTEM
By /s/ Arthur H. Dilly By /s/ Michael E. Patrick
---------------------------- ---------------------------------------------
Arthur H. Dilly Michael E. Patrick
Executive Secretary Executive Vice Chancellor
for Asset Management
APPROVED AS TO FORM: APPROVED AS TO CONTENT:
By /s/ Michael H. Corley By /s/ William H. Cunningham
---------------------------- ---------------------------------------------
Michael H. Corley William H. Cunningham
Office of General Counsel President, THE UNIVERSITY OF
TEXAS AT AUSTIN
NOVA AUTOMATION CORPORATION
By /s/ Paul McClure
---------------------------------------------
President
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<PAGE>
EXHIBIT 10.6
SUPPLEMENT
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To the PATENT LICENSE AGREEMENT between the BOARD OF REGENTS, THE UNIVERSITY OF
TEXAS SYSTEM ("BOARD") and NOVA AUTOMATION CORPORATION ("NAC") of December 3,
1987. Definitions of the PATENT LICENSE AGREEMENT shall apply to this
SUPPLEMENT.
WHEREAS pursuant to the above identified Agreement, BOARD granted NAC a license
to certain Patent Rights and Technology Rights, and provided for the payment of
royalties to BOARD by NAC; and
WHEREAS the terms of said Agreement do not deal in specifics with the internal
use in a Service Bureau of laser sintering apparatus ("LSA") to make parts for
third parties or leasing such apparatus; and
WHEREAS both parties have reached mutual understandings and agreements on the
issues of how royalty should be calculated on different LSA systems and
materials sold, leased and/or used by Licensee and on other matters and now wish
to incorporate such understandings and agreements as part of said Agreement; and
WHEREAS on February 27, 1989, the corporate name of the Licensee, NOVA
AUTOMATION CORPORATION, was changed to DTM CORPORATION;
NOW, THEREFORE, BOARD and DTM CORPORATION ("DTM"), agree to the understandings,
terms and provisions specified below and to incorporate this SUPPLEMENT and make
it part of the above identified PATENT LICENSE AGREEMENT
1. In Article IV (LICENSE), add the following Section 4.1(a):
<PAGE>
4.1(a). If during the term of the PATENT LICENSE AGREEMENT faculty or
students of the University of Texas System make inventions or develop technology
pursuant to research sponsored by another party and such inventions or
technology are assigned to BOARD and reasonably relate to LICENSED SUBJECT
MATTER of the PATENT LICENSE AGREEMENT then to the extent BOARD has the right to
do so and subject to any restrictions, reservations, limitations and licenses
contained in any agreement between BOARD and any other party sponsoring such
research, BOARD agrees to grant DTM an option to an exclusive royalty-bearing
license to such inventions or technology rights for use in the selective laser
sintering field of use.
Said option shall be at no cost to DTM for three (3) months from the date of
receipt by DTM of a written notice from BOARD describing such invention or
technology. Upon written request, DTM may obtain a three (3) month extension of
said option but in consideration for such extension DTM shall pay either Ten
Thousand Dollars ($10,000) or the expenses of preparing and filing any patent
application covering such invention. If DTM makes said payment, then BOARD
shall pay the expenses of preparing and filing a patent application covering
such invention. During said option period or its extension, DTM must give a
written notice to BOARD if it wishes to exercise its option to obtain said
license.
2. In Article V (PAYMENTS AND REPORTS), add the following Section 5.2(a):
5.2(a). The running royalty which LICENSEE is obligated to pay BOARD
pursuant to Section 5.2 shall be calculated on various laser sintering products
and on materials as more specifically provided below:
(i) For each SLS125 unit which LICENSEE places into its internal DTM
Service Bureau use, royalty shall be calculated on the
preestablished price for each unit of Two Hundred Twenty Five
Thousand Dollars ($225,000).
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<PAGE>
(ii) For each LSA unit other than the SLS125 which LICENSEE places into
its internal DTM Service Bureau use or is leased to a third party,
royalty shall be calculated initially on the preestablished price
for each unit of Three Hundred Seventy Thousand Dollars ($370,000),
less any deductions as specified in the definition of NET SALES.
After six (6) LSA units have been sold to third parties, the Average
NET SALES price of each of said six (6) units shall be calculated by
adding the NET SALES prices of the six (6) units and dividing the
sum by six (6). The Average NET SALES price shall be used to
recalculate royalty on said previously sold six units. If the
Average NET SALES price of each unit is higher than Three Hundred
Seventy Thousand Dollars ($370,000), then LICENSEE shall pay BOARD
the royalty specified in Section 5.2 on the difference. If the
Average NET SALES price is lower than Three Hundred Seventy Thousand
Dollars ($370,000), then the difference multiplied by the royalty
percent specified in Section 5.2 shall be credited to LICENSEE
against the next royalty payment. Royalty on each LSA unit
thereafter placed into the DTM Service Bureau use or leased to a
third party shall be calculated on the Average NET SALES price of
the latest six (6) units sold, on a rolling basis.
Royalty on LSA units sold shall be calculated on the NET SALES price of each
unit as provided in Section 5.2.
(iii) If during the first eighteen (18) months following the first sale of
LSA (other than the sale of Beta units), more than twenty five
percent (25%) of all LSA units placed in service (sold, leased or
placed in any service bureaus) are placed in the DTM Service
Bureaus, then the Alternative Royalty Calculation Method shall be
used to determine royalty for those LSA units which are placed in
the DTM Service Bureaus during the following twenty four (24) month
period.
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<PAGE>
Thereafter if during any twenty four (24) month period more than
twenty five percent (25%) of all LSA units placed in service (sold,
leased or placed in any service bureaus) are placed in the DTM
Service Bureaus, then the Alternative Royalty Calculation Method
shall be used to determine royalty for the LSA units which are
placed in the DTM Service Bureaus during the following twenty four
(24) month period. If, however, during any twenty four (24) month
period twenty five percent (25%) or less of all LSA units placed in
service (sold, leased or placed in any service bureaus) are placed
in the DTM Service Bureaus, then the provisions of Section
5.2(a)(ii) shall be used to calculate royalty for LSA units which
are placed in the DTM Service Bureaus during the following twenty
four (24) month period.
Alternative Royalty Calculation Method - LICENSEE shall determine
--------------------------------------
Net Income from DTM Service Bureau operation and also determine the
percentage of LSA units which were placed in the DTM Service
Bureau's service during a particular twenty four (24) month period,
based on the total number of LSA units that were in service anywhere
during said period. The Net Income shall be multiplied by said
percentage and the result shall constitute Net Sales based on which
the royalty specified in Section 5.2 will be calculated. Royalty
payments shall be made pursuant to Section 5.6.
Net Income shall mean revenues generated from the use of all LSA
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units less expenses associated with their operation including cost
of labor, materials used for making parts, repairs and overhead
under generally accepted accounting principles.
Once a method of royalty calculation for the specific LSA unit is
established (pursuant to Section 5.2(a)(ii) or Alternative Royalty
Calculation Method), that method will continue to be used for
calculating royalty for the specific unit during the entire
commercial life of that unit.
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<PAGE>
However, if a unit, which was initially placed in the DTM Service
Bureau and royalty on that unit was calculated by the Alternative
Royalty Calculation Method, is thereafter sold, DTM shall pay
royalty to BOARD on the sale of such unit pursuant to Section 5.2.
Furthermore, if any unit for which royalty was originally paid
pursuant to Section 5.2 is thereafter sold back or, if originally
leased, returned to DTM and DTM refurbishes or upgrades such unit
and then sells it or places it in DTM Service Bureau, DTM shall pay
royalty to BOARD on such sale pursuant to Section 5.2 or 5.2(a),
whichever is applicable.
(iv) LICENSEE shall pay royalty on NET SALES of materials which are
specifically covered as such by a patent assigned to BOARD.
3. In Article VIII (INFRINGEMENT), add the following Section 8.1(a):
8.1(a): In the event that LICENSEE determines that it must obtain a
license to practice under a third party patent in order to avoid patent
infringement in making, using or selling apparatus pursuant to the PATENT
LICENSE AGREEMENT or in having such apparatus used by its customers, or
LICENSEE determines that it needs a license to use a third party technology
to maintain the commercial and competitive viability of its apparatus in
the market place, BOARD agrees to negotiate in good faith with LICENSEE a
reduction, if appropriate, in the royalty rate specified in Section 5.2 of
the PATENT LICENSE AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this SUPPLEMENT to the PATENT LICENSE AGREEMENT.
BOARD OF REGENTS OF THE
UNIVERSITY OF TEXAS SYSTEM
Approved as to Content:
By /s/ Thomas G. Ricks
------------------------------------
/s/ William H. Cunningham
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William H. Cunningham DTM CORPORATION
President
The University of Texas
at Austin
By /s/ John S. Murchison
------------------------------------
John S. Murchison
President & CEO
-6-
<PAGE>
EXHIBIT 10.7
AMENDED, RESTATED AND SUBSTITUTED
PROMISSORY NOTE
$4,700,000 May 13, 1996
FOR VALUE RECEIVED, the undersigned, DTM CORPORATION, a Texas
corporation (the "Borrower") hereby promises to pay to the order of NATIONSBANK
--------
OF TEXAS, N.A., a national banking association, its successors or assigns (the
"Bank"), at its offices in Austin, Texas (or at such other place or places as
- -----
the Bank may designate) the maximum principal amount of FOUR MILLION SEVEN
HUNDRED THOUSAND DOLLARS ($4,700,000), as such maximum amount is reduced
hereunder, or such lesser principal amount as may be borrowed and outstanding
hereunder from time to time on the earlier of (i) the last day of an Interest
Period or (iii) July 31, 1997 (as such date may be extended, if extended, from
time to time in the Bank's sole discretion, the "Maturity Date").
-------------
Advances (including conversions and extensions) shall be made from
time to time hereunder upon request of the Borrower not later than 11:00 a.m.
(Austin, Texas time) on the date of requested advance in the case of Prime
Loans, on the second business day prior to the requested advance in the case of
Adjusted CD Loans and on the third business day prior to the requested advance
in the case of Eurodollar Loans. The terms of each advance shall be noted on
the schedule attached hereto, the terms of which shall be presumed correct
absent evidence of error; provided, however that any failure to make such
--------
notation (or any inaccuracy in such notation) shall not limit or otherwise
affect the obligations of the Borrower hereunder. The Bank's obligation to make
advances hereunder is subject to the condition that immediately prior to and
immediately after giving effect to any such advance (i) no Event of Default
hereunder, or event or condition which upon notice or lapse of time would
constitute an Event of Default, shall then exist and be continuing, and (ii) the
aggregate amount of advances outstanding hereunder shall not exceed the maximum
committed amount of this Note (as such maximum amount may be reduced from time
to time). As used herein, "Interest Period" means a period of (i) 30, 60, 90 or
---------------
180 days duration, in the case of Adjusted CD Loans, (ii) one, two, three or six
months, duration, in the case of Eurodollar Loans, and (iii) such number of days
duration as the Borrower may request not to exceed 30 days, in the case of Prime
Loans; provided, however, that (A) each Interest Period which would otherwise
end on a day which is not a business day shall end on the next succeeding
business day unless, in the case of Eurodollar Loans, such succeeding business
day falls in the next calendar month and then in such case on the next preceding
business day and (B) no Interest Period shall extend beyond the Maturity Date.
The principal amount of each advance shall be due and interest thereon
shall accrue as agreed upon and noted on the schedule attached. This Note shall
bear interest on the outstanding balance hereunder at a per annum interest rate
equal to (i) the Adjusted Eurodollar Rate plus 5/8% (hereinafter advances which
bear interest based on the Adjusted Eurodollar Rate may be referred to as
"Eurodollar Loans"), (ii) the Adjusted CD Rate plus 5/8% (hereinafter advances
- -----------------
which bear interest based on the Adjusted CD Rate may be referred to as
"Adjusted CD Loans") or (iii) the Prime Rate (hereinafter advances which bear
- ------------------
interest based on the Prime Rate may be referred to as "Prime Loans"), as the
-----------
Borrower may elect in accordance with the provisions hereof; provided, however,
--------
that the interest rate applicable hereunder shall not exceed the Maximum Lawful
Rate (as hereafter defined). Unless otherwise agreed, accrued interest with
respect to each such advance shall be payable in arrears on the last day of an
Interest Period for such advance, but in any event not less frequently than once
every 90 days. Whenever a payment on this Note is stated to be due on a day
which is not a business day, such payment shall be made on the next succeeding
business day with interest accruing to the date of payment. Interest hereunder
shall be computed on the basis of actual number of days elapsed over a year of
360 days, except for the Default Rate (as hereafter defined) which shall be
computed on the basis of actual number of days elapsed over a year of 365/366
days, as applicable. Prepayments of fixed-rate advances (Adjusted CD Loans and
Eurodollar Loans) are not permitted prior to maturity of Interest Periods. The
Borrower agrees to indemnify the Bank against all reasonable losses, expenses
and liabilities sustained by the Bank on account of the Borrower (i) failing to
accept a fixed rate loan after notice to the Bank of its acceptance of any such
fixed rate loan and (ii) making a prepayment on a fixed rate loan prior to the
last day of an Interest period. As used
<PAGE>
herein; "Adjusted CD Rate" means for the respective Interest Period a per annum
----------------
interest rate equal to the sum of (a) the per annum rate obtained by dividing
(i) the rate of interest determined by the Bank to be the average (rounded
upward to the nearest whole multiple of 1/100 of 1% per annum, if such average
is not such a multiple) of the consensus bid rate determined by the Bank for the
bid rates per annum, at 9:00 A.M. (Austin, Texas time) (or as soon thereafter as
is practicable) on the first day of such Interest Period, of certificate of
deposit dealers of recognized standing selected by the Bank for the purchase at
face value of the Bank's certificates of deposit in an amount substantially
equal to the Adjusted CD Loan comprising part of such borrowing (including
extensions and renewals) and with a maturity equal to such Interest Period, by
(ii) a percentage equal to 100% minus the Adjusted CD Reserve Percentage (as
defined below) for such Interest Period, plus (b) the Assessment Rate (as
defined below) for such Interest Period; "Adjusted CD Rate Reserve Percentage"
-----------------------------------
for the Interest Period for each Adjusted CD Loan comprising part of the same
borrowing (including conversions, extensions and renewals) means the reserve
percentage applicable on the first day of such Interest Period under regulations
issued from time to time by the Board of Governors of the Federal Reserve System
(or any successor) for determining the maximum reserve requirement (including,
but not limited to, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in New York City
with deposits exceeding one billion dollars with respect to liabilities
consisting of or including (among other liabilities) U.S. dollar nonpersonal
time deposits in the United States with a maturity equal to such Interest
Period; "Assessment Rate" for the Interest Period for each Adjusted CD Loan
---------------
comprising part of the same borrowing (including conversions, extensions and
renewals) means the annual assessment rate estimated by the Bank on the first
day of such Interest Period for determining the then current annual assessment
payable by the Bank to the Federal Deposit Insurance Corporation (or any
successor) for insuring U.S. dollar deposits of the Bank in the United States;
"Adjusted Eurodollar Rate" means for the respective Interest Period, a per annum
------------------------
interest rate equal to the per annum rate obtained by dividing (a) the rate of
interest determined by the Bank to be the average (rounded upward to the nearest
whole multiple of 1/16 of 1% per annum, if such average is not such a multiple)
of the per annum rates at which deposits in U.S. dollars are offered to the Bank
in the interbank eurodollar market at 10:00 A.M. (Austin, Texas time) (or as
soon thereafter as is practicable), in each case two Business Days before the
first day of such Interest Period in an amount substantially equal to such
Eurodollar Loan and for a period equal to such Interest Period by (b) a
percentage equal to 100% minus the Adjusted Eurodollar Reserve Percentage for
such Interest Period; "Adjusted Eurodollar Rate Reserve Percentage" means the
-------------------------------------------
percentage applicable two Business Days before the first day of such Interest
Period under regulations issued from time to time by the Board of Governors of
the Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement) for the Bank with respect to liabilities
or assets consisting of or including eurocurrency liabilities, as such term is
defined in Regulation D (or with respect to any other category of liabilities
which includes deposits by reference to which the interest rate on Eurodollar
Loans is determined) having a term equal to the Interest Period for which such
Adjusted Eurodollar Reserve Percentage is determined; "Maximum Legal Rate" means
------------------
the maximum rate of interest and the term "Maximum Legal Amount" means the
--------------------
maximum amount of interest that are permissible under applicable state or
federal law for the type of loan evidenced by this Note; provided that if
Article 1.04 of the Texas Credit Code is applicable to this Note, and applicable
state or federal law does not permit a higher interest rate, the "Indicated
(Weekly) Ceiling" (as defined in Article 1.04(a)(1) of the Texas Credit Code)
shall be the Interest Rate Ceiling applicable to this Note and shall be the
basis for determining the Maximum Lawful Rate in effect from time to time during
the term of this Note, unless a different Interest Rate Ceiling is designated on
the first page of this Note; and provided further that if applicable state or
federal law allows a higher interest rate or federal law preempts the state law
limiting the rate of interest, then the foregoing Interest Rate Ceiling shall
not be applicable to this Note; and provided further still that if the Maximum
Lawful Rate is increased by statute or other governmental action subsequent to
the date of this Note, then the new Maximum Lawful Rate shall be applicable to
this Note from the effective date thereof, unless otherwise prohibited by
applicable law; and "Prime Rate" means, for any day, the fluctuating rate of
-----------
interest announced by NationsBank of Texas, N.A. (or its successor) as its
"Prime Rate" or "NationsBank Prime Rate"; provided that NationsBank of Texas,
N.A. (or its successor) may from time to time announce other reference rates for
calculating interest, such as a "Business Base Rate", which shall not be
applicable to this Note; provided further that the Prime Rate
- 2 -
<PAGE>
may not (i) be the only general reference rate used by NationsBank of Texas,
N.A. (or its successor) in calculating interest, (ii) correspond with increases
or decreases in interest rates charged by other lenders or market rates in
general, or (iii) be the lowest rate at which interest is charged by NationsBank
of Texas, N.A. (or its successor); and provided further still that if the Prime
Rate ceases to be available for any reason, then the Bank or any subsequent
holder of this Note may select a new interest rate based upon comparable
information which shall then be used as the reference rate for calculating
interest with regard to Prime Loans hereunder.
Because of the possibility of irregular periodic balances of
principal, premature payment, and the fluctuating nature of the interest rate
applicable under this Note, the total interest which will accrue under this Note
cannot be determined in advance. The Bank does not intend to contract for,
charge or receive more than the Maximum Lawful Rate or the Maximum Lawful Amount
permitted by applicable state or federal law, and to prevent such an occurrence
the Bank and the Borrower agree that all amounts of interest, whenever
contracted for, charged or received by the Bank, with respect to the loan of
money evidenced by this Note, shall be spread, prorated or allocated over the
full period of time this Note is unpaid, including the period of any renewal or
extension of this Note. If demand for payment of this Note is made by the Bank
prior to the full stated term, the total amount of interest contracted for,
charged or received to the time of such demand shall be spread, prorated or
allocated along with any interest thereafter accruing over the full period of
time that this Note thereafter remains unpaid for the purpose of determining if
such interest exceeds the Maximum Lawful Amount. At maturity (whether by
acceleration or otherwise) or on earlier final payment of this Note, the Bank
shall compute the total amount of interest that has been contracted for, charged
or received by the Bank or payable by the Borrower under this Note and compare
such amount to the Maximum Lawful Amount which could have been contracted for,
charged or received by the Bank. If such computation reflects that the total
amount of interest that has been contracted for, charged or received by the Bank
or payable by the Borrower exceeds the Maximum Lawful Amount, then the Bank
shall apply such excess to the reduction of the principal balance and not to the
payment of interest; or if such excess interest exceeds the unpaid principal
balance, such excess shall be refunded to the Borrower. This provision
concerning the crediting or refund or excess interest shall control and take
precedence over all other agreements between the Borrower and the Bank so that
under no circumstances shall the total interest contracted for, charged or
received by the Bank exceed the Maximum Lawful Amount.
In consideration of the Bank's commitment to make advances hereunder,
the Borrower agrees to pay to the Bank a commitment fee of one-fourth of one
percent (1/4%) per annum on the daily average unused amount of the maximum
amount committed hereunder, payable quarterly in arrears on the last day of each
calendar quarter and on the Maturity Date.
In the event the Bank shall determine (which determination shall be
presumed correct absent evidence of error) that:
(i) Unavailability. On any date for determining the appropriate
--------------
Adjusted Eurodollar Rate or Adjusted CD Rate for any Interest Period, that
by reason of any changes arising on or after the date of this Note
affecting the interbank Eurodollar market or the certificate of deposit
market, dollar deposits in the principal amount requested are not generally
available in the interbank Eurodollar Market, in the case of Eurodollar
Loans, or quotes for determination of the Adjusted CD Rate are unavailable,
in the case of Adjusted CD Loans, or adequate, and fair means do not exist
for ascertaining the applicable interest rate on the basis provided for in
the definition of Adjusted Eurodollar Rate or Adjusted CD Rate,
respectively; then Eurodollar Loans or Adjusted CD Loans, as appropriate,
will no longer be available, and requests for a Eurodollar Loan or Adjusted
CD Loans shall be deemed requests for Prime Loans, until such time as the
Bank shall notify the Borrower that the circumstances giving rise thereto
no longer exist.
(ii) Increased Costs. At any time, that the Bank shall incur
---------------
increased costs or reductions in the amounts received or receivable
hereunder with respect to any Eurodollar Loans or Adjusted CD Loans because
of any change since the date of this Note in any applicable law,
governmental rule, regulation, guideline or order (or in the interpretation
or administration thereof and including the introduction of any new law or
governmental rule, regulation, guideline or order) including without
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<PAGE>
limitation the imposition, modification or deemed applicability of any
reserves, deposits or similar requirements as related to Eurodollar Loans
or Adjusted CD Loans (such as, for example, but not limited to, a change in
official reserve requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in the computation of
the Adjusted Eurodollar Rate or Adjusted CD Rate, as appropriate); then the
Borrower shall pay to the Bank promptly upon written demand therefor, such
additional amounts (in the form of an increased rate of, or a different
method of calculating, interest or otherwise as the Bank may determine in
its reasonable discretion) as may be required to compensate the Bank for
such increased costs or reductions in amounts receivable hereunder (written
notice as to the additional amounts owed to the Bank, showing the basis for
calculation thereof, shall, absent evidence of error, be binding on all
parties hereto).
(iii) Illegality. At any time, that the making or continuance of any
----------
Eurodollar Loan has become unlawful by compliance by the Bank in good faith
with any law, governmental rule, regulation, guideline or order (or would
conflict with any such governmental rule, regulation, guideline or order
not having the force of law even though the failure to comply therewith
would not be unlawful), or has become impractical as a result of a
contingency occurring after the date of this Note which materially and
adversely affects the interbank Eurodollar market; then Eurodollar Loans
will no longer be available, requests for Eurodollar Loans shall be deemed
requests for Prime Loans and the Borrower may, and upon direction of the
Bank, shall, as promptly as possible and, in any event within the time
period required by law, have any such Eurodollar Loans then outstanding
converted into Prime Loans.
If the Bank shall have determined that the adoption or effectiveness of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change after the date hereof in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation of administration thereof, or compliance
by the Bank with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has the effect of materially reducing the rate of return on the Bank's
capital or assets as a consequence of its commitments or obligations hereunder
to a level below that which the Bank could have achieved but for such adoption,
effectiveness, change or compliance (taking into consideration the Bank's
policies with respect to capital adequacy), then from time to time, within 15
days after demand by the Bank the Borrower shall pay to the Bank such additional
amount or amounts as will compensate the Bank for such reduction. Upon
determining in good faith than any additional amounts will be payable pursuant
to this Section, the Bank will give prompt written notice thereof to the
Borrower, which notice shall set forth the basis of the calculation of such
additional amounts, although the failure to give any such notice shall not
release or diminish any of the Borrower's obligations to pay additional amounts
pursuant to this paragraph. Determination by the Bank of amounts owing under
this paragraph shall, absent evidence of error, be binding on the parties
hereto. Failure on the part of the Bank to demand compensation for any period
hereunder shall not constitute a waiver of the Bank's rights to demand any such
compensation in such period or in any other period. Notwithstanding the
foregoing, amounts will be owing and payable under this paragraph only if it is
the Bank's general policy and practice to charge similarly situated borrowers
under such capital adequacy provisions.
All payments made by the Borrower hereunder will be made without (but
without waiving any rights with respect to) setoff or counterclaim. Promptly
upon notice from the Bank to the Borrower, the Borrower will pay, prior to the
date on which penalties attach thereto, but without duplication, all present and
future, stamp and other taxes, levies, or costs and charges whatsoever imposed,
assessed, levied or collected on or in respect of advances hereunder solely as a
result of the interest rate being determined by reference to the Adjusted
Eurodollar Rate or Adjusted CD Rate, as appropriate, and/or the provisions of
this Note relating to the Adjusted Eurodollar Rate or Adjusted CD Rate, as
appropriate, and/or the recording, registration, notarization or other
formalization of any thereof and/or any payments of principal, interest or other
amounts made on or in respect of advances hereunder when the interest rate is
determined by reference to the Adjusted Eurodollar Rate or Adjusted CD Rate, and
any increases thereof (all such taxes, levies, costs and charges being herein
collectively call "Taxes"), provided that Taxes shall not include taxes imposed
-----
on or measured by the income of the Bank by the United States of America or any
political subdivision or taxing authority thereof or therein, or taxes on or
measured by the overall net income of any foreign office, branch or Subsidiary
of the Bank by any foreign country of subdivision thereof in which that office,
branch or Subsidiary is doing business. Promptly
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<PAGE>
after the date on which payment of any such Tax is due pursuant to applicable
law, the Borrower will at the request of the Bank, furnish to the Bank evidence,
in form and substance satisfactory to the Bank, that the Borrower has met its
obligations under this paragraph. The Borrower will indemnify the Bank against,
and reimburse the Bank on demand for, any Taxes, as determined by the Bank in
its good faith discretion. The Bank shall provide the Borrower with appropriate
receipts for any payments or reimbursements made by the Borrower pursuant to
this Section.
The Borrower covenants and agrees that it will provide to the Bank (i)
detailed company-prepared consolidated financial statements of the Borrower
containing a balance sheet and income statement (with quarterly and year-to-date
figures) certified by the chief financial officer of the Borrower to be correct
and accurate in all material respects within 45 days of the end of each fiscal
quarter, and (ii) detailed audited consolidated financial statements of the
Borrower containing a balance sheet and income statement with an unqualified
opinion of independent certified public accountants of national standing
reasonably acceptable to the Bank within 120 days of the end of each fiscal
year.
The following shall constitute Events of Default hereunder: (i) the failure
-----------------
by the Borrower to make payment of principal on demand or when and as otherwise
due, (ii) the occurrence and continuance of an event of default under any other
note or agreement relating to indebtedness for borrowed money owing by the
Borrower which results in, or would permit, without further notice and/or the
expiration of any grace or cure periods, acceleration of such indebtedness for
borrowed money in an aggregate amount in excess of $1,000,000, (iii) failure to
observe or comply with any other covenants or provisions contained herein and
such failure shall continue for 30 days from the earlier of an officer of the
Borrower becoming aware thereof or receipt of written notice thereof from the
Bank, (iv) the filing of an action in bankruptcy or insolvency by the Borrower,
(v) the filing of an action in bankruptcy or insolvency against the Borrower and
the continuance of such action undismissed, unstayed and in effect for 60 days
from the date of filing, or (vi) the failure by B.F. Goodrich ("Goodrich") to
--------
abide by the terms of that comfort letter dated May 13, 1996, given by Goodrich
to the Bank and relating to the Borrower (which comfort letter is an extension
of the terms and conditions contained in that certain comfort letter given by
Goodrich to the Bank relating to the Borrower dated February 1, 1995). Upon the
occurrence of an Event of Default hereunder, the unpaid principal amount of all
advances under this Note, together with all accrued but unpaid interest hereon,
may become, or may be declared to be, (or in the case of any Event of Default
resulting from items (iv) or (v) relating to the bankruptcy or insolvency of the
Borrower, shall, without action on the part of the Bank, become), immediately
due and payable, without presentation, demand, protest or notice of any kind,
all of which are hereby waived by the Borrower. In addition, if Goodrich fails
to maintain a controlling interest in the outstanding capital stock of the
Borrower, the amounts as set forth in the immediately preceding sentence shall
immediately become due and payable although the failure of Goodrich to maintain
such a controlling interest shall not constitute an Event of Default under this
paragraph.
In the event amounts under this Note are not paid when due at any stated or
accelerated maturity, interest on all amounts owing hereunder shall accrue at a
rate 2% in excess of the rate otherwise applicable but not in excess of the rate
permitted by law (such rate sometimes being referred to herein as the "Default
-------
Rate"). The Borrower agrees to pay, in addition to the principal and interest,
- ----
all costs of collection, including reasonable attorneys fees.
The Bank agrees not to assign or otherwise transfer this Note, other than
to a subsidiary of affiliate of the Bank, without the prior written consent of
the Borrower.
Notices hereunder shall be deemed given and be effective (i) when
delivered, (ii) when transmitted via telecopy to the number set out below, (iii)
the day following the day on which the same has been delivered prepaid to a
reputable national overnight air courier service, or (iv) the third business day
following the day on which the same is sent by certified or registered mail,
postage prepaid, in each case to the respective parties at the address set forth
below, or at such other address as such party may specify by written notice to
the other parties hereto:
- 5 -
<PAGE>
if to the Borrower: DTM Corporation
1611 Headway Circle
Building 2
Austin, Texas 78754
Attn: Greg Logwinuk
Telephone: (512) 339-2922
Telecopy: (512) 339-0634
if to the Bank: NationsBank of Texas, N.A.
NationsBank Corporate Center, 8th Floor
Charlotte, North Carolina 28255
Attn: Jay Johnston
Telephone: (704) 386-8335
Telecopy: (704) 386-3271
No delay or omission on the part of the holder of this Note in exercising
any right hereunder shall operate as a waiver of such right or of any right of
such holder nor shall any delay, omission or waiver on any one occasion be
deemed a bar to or waiver of the same or any other right on any future
occasion. The Borrower assents to any one or more extensions or postponements
of the time of payment or any other indulgences, to any substitutions, exchanges
or releases of collateral if at any time there is collateral available to the
holder of this Note, and to the additions or releases of any other parties or
persons primarily or secondarily liable.
BORROWER AND ALL OTHER PARTIES LIABLE FOR THIS NOTE WAIVE DEMAND, NOTICE OF
INTENT TO DEMAND, PRESENTMENT FOR PAYMENT, NOTICE OF NONPAYMENT, PROTEST, NOTICE
OF PROTEST, GRACE, NOTICE OF DISHONOR, NOTICE OF INTENT TO ACCELERATE MATURITY,
NOTICE OF ACCELERATION OF MATURITY, AND DILIGENCE IN COLLECTION. EACH MAKER,
SURETY, ENDORSER, AND GUARANTOR OF THIS NOTE WAIVES AND AGREES TO ONE OR MORE
EXTENSIONS FOR ANY PERIOD OR PERIODS OF TIME, AND ANY PARTIAL PAYMENTS, BEFORE
OR AFTER MATURITY, WITHOUT PREJUDICE TO THE HOLDER OF THIS NOTE. EACH MAKER,
SURETY, ENDORSER, AND GUARANTOR WAIVES NOTICE OF ANY AND ALL RENEWALS,
EXTENSIONS, REARRANGEMENTS, AND MODIFICATIONS OF THIS NOTE.
THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN TEXAS, AND SHALL BE CONSTRUED
IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE
UNITED STATES OF AMERICA APPLICABLE TO TRANSACTIONS IN TEXAS. IN ADDITION, THE
BORROWER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE AND THE ADVANCES
HEREUNDER AND CONSENTS TO THE JURISDICTION OF FEDERAL AND STATE COURTS LOCATED
IN TRAVIS COUNTY, TEXAS.
THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, OR CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
This Note amends and restates, and is given in substitution of, that
certain $4,700,000 Amended, Restated and Substituted Promissory Note dated
December 13, 1995 executed by the Borrower in favor of the Bank (the "Replaced
--------
Note"). This Note evidences the same indebtedness evidenced by the Replaced
- ----
Note and is secured by the same collateral, if any, securing the Replaced Note.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
under seal and delivered by its duly authorized officer as of the date first
above written.
DTM CORPORATION
ATTEST:
By /s/ JOHN S. MURCHISON, III
---------------------------------
By /s/ GREG A. LOGWINUK
- -------------------------
Title President & CEO
_______ Secretary ------------------------------
(Corporate Seal)
- 7 -
<PAGE>
SCHEDULE OF ADVANCES
--------------------
<TABLE>
<CAPTION>
Principal Amount Applicable Outstanding Principal
of Advance Interest Rate Maturity of Balances After Advances Notation
Date (Payment) of Advance Advance (Payment) Made By
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
- 8 -
<PAGE>
EXHIBIT 10.8
AMENDED PROMISSORY NOTE
$3,500,000.00 May_____, 1996
FOR VALUE RECEIVED, the undersigned, DTM CORPORATION, a Texas
corporation (the "Borrower") hereby promises to pay to the order of NATIONAL
CITY BANK, a national banking association, its successors or assigns (the
"Bank"), at its offices in Cleveland, Ohio (or at such other place or places as
the Bank may designate) the maximum principal amount of Three Million Five
Hundred Thousand and No/100ths Dollars ($3,500,000.00), as such maximum amount
is reduced hereunder, or such lesser principal amount as may be borrowed and
outstanding hereunder from time to time on the earlier of (i) the last day of an
Interest Period or (ii) July 31, 1997 (as such may be extended, if extended,
from time to time in the Bank's sole discretion, the "maturity Date").
Advances (including conversions and extensions) shall be made from
time to time hereunder upon request of the Borrower not later than 11:00 a.m.
(Cleveland, Ohio time) on the date of requested advance in the case of Adjusted
CD Loans and on the third business day prior to the requested advance in the
case of Eurodollar Loans. The terms of each advance shall be noted on the
schedule attached hereto, the terms of which shall be presumed correct absent
evidence of error; provided, however that any failure to make such notation (or
any inaccuracy in such notation) shall not limit or otherwise affect the
obligations of the Borrower hereunder. The Bank's obligation to make advances
hereunder is subject to the condition that immediately prior to and immediately
after giving effect to any such advance (i) no Event of Default hereunder, or
event or condition which upon notice or lapse of time would constitute an Event
of Default, shall then exist and be continuing, and (ii) the aggregate amount of
advances outstanding hereunder shall not exceed the maximum committed amount of
this Note (as such maximum amount may be reduced from time to time). As used
herein, "Interest Period" means a period of (i) thirty (30), sixty (60), ninety
(90) or one hundred eighty (180) days duration, in the case of Adjusted CD
Loans, (ii) one (1), two (2), three (3) or six (6) months, duration, in the case
of Eurodollar Loans, and (iii) such number of days duration as the Borrower may
request not to exceed thirty (30) days, in the case of Prime Loans, provided,
however, that (A) each Interest Period which would otherwise end on a day which
is not a business day shall end on the next succeeding business day unless, in
the case of Eurodollar Loans, such succeeding business day falls in the next
calendar month and then in such case on the next preceding business day and (B)
no Interest Period shall extend beyond the Maturity Date.
The principal amount of each advance shall be due and interest thereon
shall accrue as agreed upon and noted on the schedule attached. This Note shall
bear interest on the outstanding balance hereunder at a per annum interest rate
equal to (i) the Adjusted Eurodollar Rate plus 5/8% (hereinafter advances which
bear interest based on the Adjusted Eurodollar Rate may be referred to as
"Eurodollar Loans"), (ii) the Adjusted CD Rate plus 5/8% (hereinafter advances
which bear interest based on the Adjusted CD Rate may be referred to as
"Adjusted CD Loans") or (iii) the Prime Rate (hereinafter advances which bear
interest based on the Prime Rate may be referred to as "Prime Loans"), as the
Borrower may elect in accordance with the provisions hereof. Unless otherwise
agreed, accrued interest with respect to each such advance shall be
<PAGE>
payable in arrears on the last day of an Interest Period for such advance, but
in any event not less frequently than once every ninety (90) days. Whenever a
payment on this Note is stated to be due on a day which is not a business day,
such payment shall be made on the next succeeding business day with interest
accruing to the date of payment. Interest hereunder shall be computed on the
basis of actual number of days elapsed over a year of 360 days, except for the
Default Rate (as hereinafter defined) which shall be computed on the basis of
actual number of days elapsed over a year of 365/366 days, as applicable.
Prepayments of fixed-rate advances (Adjusted CD Loans and Eurodollar Loans) are
not permitted prior to maturity of Interest Periods. The Borrower agrees to
indemnify the Bank against all reasonable losses, expenses and liabilities
sustained by the Bank on account of the Borrower (i) failing to accept a fixed
rate loan after notice to the Bank of its acceptance of any such fixed rate loan
and (ii) making a prepayment on a fixed rate loan prior to the last day of an
Interest period. As used herein; "Adjusted CD Rate" means for the respective
----------------
Interest Period a per annum interest rate equal to the sum of (a) the per annum
rate obtained by dividing (i) the rate of interest determined by the Bank to be
the average (rounded upward to the nearest whole multiple of l/100 of 1% per
annum, if such average is not such a multiple) of the consensus bid rate
determined by the Bank for the bid rates per annum, at 9:00 a.m. (Cleveland,
Ohio time) ( or as soon thereafter as is practicable) on the first day of such
Interest Period, of certificate of deposit dealers of recognized standing
selected by the Bank for the purchase at face value of the Bank's certificates
of deposit in an amount substantially equal to the Adjusted CD Loan comprising
part of such borrowing (including extensions and renewals) and with a maturity
equal to such Interest Period, by (ii) a percentage equal to one hundred percent
(100%) minus the Adjusted CD Reserve Percentage (as defined below) for such
Interest Period, plus (b) the Assessment Rate (as defined below) for such
Interest Period; "Adjusted CD Rate Reserve Percentage" for the Interest Period
for each Adjusted CD Loan comprising part of the same borrowing (including
conversions, extensions and renewals) means the reserve percentage applicable on
the first day of such Interest Period under regulations issued from time to time
by the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York City with deposits exceeding One
Billion and No/100ths Dollars ($1,000,000,000.00) with respect to liabilities
consisting of or including (among other liabilities) U.S. dollar nonpersonal
time deposits in the United States with a maturity equal to such Interest
Period; "Assessment Rate" for the Interest Period for each Adjusted CD Loan
comprising part of the same borrowing (including conversions, extensions and
renewals) means the annual assessment rate estimated by the Bank on the first
day of such Interest Period for determining the then current annual assessment
payable by the Bank to the Federal Deposit Insurance Corporation (or any
successor) for insuring U.S. dollar deposits of the Bank in the United States;
"Adjusted Eurodollar Rate" means for the respective Interest Period, a per annum
------------------------
interest rate equal to the per annum rate obtained by dividing (a) the rate of
interest determined by the Bank to be the average (rounded upward to the nearest
whole multiple of 1/16 of 1% per annum, if such average is not such a multiple)
of the per annum rates at which deposits in U.S. dollars are offered to the Bank
in the interbank eurodollar market at 10:00 A.M. (Cleveland, Ohio time) (or as
soon thereafter as is practicable), in each case two (2) Business Days before
the first day of such Interest Period in an amount substantially equal to such
Eurodollar Loan and for a period equal to such Interest Period
2
<PAGE>
by (b) a percentage equal to one hundred percent (100%) minus the Adjusted
Eurodollar Reserve Percentage for such Interest Period; "Adjusted Eurodollar
-------------------
Rate Reserve Percentage" means the percentage applicable two (2) Business Days
- -----------------------
before the first day of such Interest Period under regulations issued from time
to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
for the Bank with respect to liabilities or assets consisting of or including
eurocurrency liabilities, as such term is defined in Regulation D (or with
respect to any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Loans is determined) having a
term equal to the Interest Period for which such Adjusted Eurodollar Reserve
Percentage is determined; and "Prime Rate" means, for any day, the fluctuating
----------
rate of interest announced by Bank (or its successor) as its "Prime Rate";
provided that Bank (or its successor) may from time to time announce other
reference rates for calculating interest which shall not be applicable to this
Note; provided further that the Prime Rate may not (i) be the only general
reference rate used by Bank (or its successor) in calculating interest, (ii)
correspond with increases or decreases in interest rates charged by other
lenders or market rates in general, or (iii) be the lowest rate at which
interest is charged by Bank (or its successor); and provided further still that
if the Prime Rate ceases to be available for any reason, then the Bank or any
subsequent holder of this Note may select a new interest rate based upon
comparable information which shall then be used as the reference rate for
calculating interest with regard to Prime Loans hereunder.
In consideration of the Bank's commitment to make advances hereunder,
the Borrower agrees to pay to the Bank a commitment fee of one-fourth of one
percent (1/4%) per annum on the daily average unused amount of the maximum
amount committed hereunder, payable quarterly in arrears on the last day of each
calendar quarter and on the Maturity Date.
In the event the Bank shall determine (which determination shall be
presumed correct absent evidence of error) that:
(i) Unavailability. On any date for determining the appropriate
--------------
Adjusted Eurodollar Rate or Adjusted CD Rate for any Interest Period, that
by reason of any changes arising on or after the date of this Note
affecting the interbank Eurodollar market or the certificate of deposit
market, dollar deposits in the principal amount requested are not generally
available in the interbank Eurodollar Market, in the case of Eurodollar
Loans, or quotes for determination of the Adjusted CD Rate are unavailable,
in the case of Adjusted CD Loans, or adequate, and fair means do not exist
for ascertaining the applicable interest rate on the basis provided for in
the definition of Adjusted Eurodollar Rate or Adjusted CD Rate,
respectively; then Eurodollar Loans or Adjusted CD Loans, as appropriate,
will no longer be available, and requests for a Eurodollar Loan or adjusted
CD Loans shall be deemed requests for Prime Loans, until such time as the
Bank shall notify the Borrower that the circumstances giving rise thereto
no longer exist.
(ii) Increased Costs. At any time, that the Bank shall incur increased
---------------
costs or reductions in the amounts received or receivable hereunder with
respect to any Eurodollar Loans or
3
<PAGE>
Adjusted CD Loans because of any change since the date of this Note in any
applicable law, governmental rule, regulation, guideline or order (or in
the interpretation or administration thereof and including the introduction
of any new law or governmental rule, regulation, guideline or order)
including without limitation the imposition, modification or deemed
applicability of any reserves, deposits or similar requirements as related
to Eurodollar Loans or Adjusted CD Loans (such as for example, but not
limited to, a change in official reserve requirements, but, in all events,
excluding reserves required under Regulation D to the extent included in
the computation of the Adjusted Eurodollar Rate or Adjusted CD Rate, as
appropriate); then the Borrower shall pay to the Bank promptly upon written
demand therefor, such additional amounts (in the form of an increased rate
of, or a different method of calculating, interest or otherwise as the Bank
may determine in its reasonable discretion) as may be required to
compensate the Bank for such increased costs or reductions in amounts
receivable hereunder (written notice as to the additional amounts owed to
the Bank, showing the basis for calculation thereof, shall, absent evidence
of error, be binding on all parties hereto).
(iii) Illegality. At any time, that the making or continuance of any
----------
Eurodollar Loan has become unlawful by compliance by the Bank in good faith
with any law, governmental rule, regulation, guideline or order (or would
conflict with any such governmental rule, regulation, guideline or order
not having the force of law even though the failure to comply therewith
would not be unlawful), or has become impractical as a result of a
contingency occurring after the date of this Note which materially and
adversely affects the interbank Eurodollar market; then Eurodollar Loans
will no longer be available, requests for Eurodollar Loans shall be deemed
requests for Prime Loans and the Borrower may, and upon direction of the
Bank, shall, as promptly as possible and, in any event within the time
period required by law, have any such Eurodollar Loans then outstanding
converted into Prime Loans.
If the Bank shall have determined that the adoption or effectiveness of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change after the date hereof in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Bank with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has the effect of materially reducing the rate of return on the Bank's
capital or assets as a consequence of its commitments or obligations hereunder
to a level below that which the Bank could have achieved but for such adoption,
effectiveness, change or compliance (taking into consideration the Bank's
policies with respect to capital adequacy), then from time to time, within
fifteen (15) days after demand by the Bank the Borrower shall pay to the Bank
such additional amount or amounts as will compensate the Bank for such
reduction. Upon determining in good faith than any additional amounts will be
payable pursuant to this Section, the Bank will give prompt written notice
thereof to the Borrower, which notice shall set forth the basis of the
calculation of such additional amounts, although the failure to give any such
notice shall not release or diminish any of the Borrower's obligations to pay
additional amounts pursuant to this paragraph. Determination by
4
<PAGE>
the Bank of amounts owing under this paragraph shall, absent evidence of error,
be binding on the parties hereto. Failure on the part of the Bank to demand
compensation for any period hereunder shall not constitute a waiver of the
Bank's rights to demand any such compensation in such period or in any other
period. Notwithstanding the foregoing, amounts will be owing and payable under
this paragraph only if it is the Bank's general policy and practice to charge
similarly situated borrowers under such capital adequacy provisions.
All payments made by the Borrower hereunder will be made without (but
without waiving any rights with respect to) setoff or counterclaim. Promptly
upon notice from the Bank to the Borrower, the Borrower will pay, prior to the
date on which penalties attach thereto, but without duplication, all present and
future, stamp and other taxes, levies, or costs and charges whatsoever imposed,
assessed, levied or collected on or in respect of advances hereunder solely as a
result of the interest rate being determined by reference to the Adjusted
Eurodollar Rate or Adjusted CD Rate, as appropriate, and/or the provisions of
this Note relating to the Adjusted Eurodollar Rate or Adjusted CD Rate, as
appropriate and/or the recording, registration, notarization or other
formalization of any thereof and/or any payments of principal, interest or other
amounts made on or in respect of advances hereunder when the interest rate is
determined by reference to the Adjusted Eurodollar Rate or Adjusted CD Rate, and
any increases thereof (all such taxes, levies, costs and charges being herein
collectively called "Taxes"), provided that Taxes shall not include taxes
imposed on or measured by the income of the Bank by the United States of America
or any political subdivision or taxing authority thereof or therein, or taxes on
or measured by the overall net income of any foreign office, branch or
Subsidiary of the Bank by any foreign country or subdivision thereof in which
that office, branch or Subsidiary is doing business. Promptly after the date on
which payment of any such Tax is due pursuant to applicable law, the Borrower
will at the request of the Bank, furnish to the Bank evidence, in form and
substance satisfactory to the Bank, that the Borrower has met its obligations
under this paragraph. The Borrower will indemnify the Bank against, and
reimburse the Bank on demand for, any Taxes, as determined by the Bank in its
good faith discretion. The Bank shall provide the Borrower with appropriate
receipts for any payments or reimbursements made by the Borrower pursuant to
this Section.
The Borrower covenants and agrees that it will provide to the Bank (i)
detailed companyprepared consolidated financial statements of the Borrower
containing a balance sheet and income statement (with quarterly and year-to-date
figures) certified by the chief financial officer of the Borrower to be correct
and accurate in all material respects within forty-five (45) days of the end of
each fiscal quarter, and (ii) detailed audited consolidated financial statements
of the Borrower containing a balance sheet and income statement with an
unqualified opinion of independent certified public accountants of national
standing reasonably acceptable to the Bank within one hundred twenty (120) days
of the end of each fiscal year.
The following shall constitute Events of Default hereunder: (i) the failure
by the Borrower to make payment of principal on demand or when and as otherwise
due, (ii) the occurrence and continuance of an event of default under any other
note or agreement relating to indebtedness for borrowed money owing by the
Borrower which results in, or would permit, without further notice and/or the
expiration of any grace or cure periods, acceleration of such indebtedness for
borrowed
5
<PAGE>
money in an aggregate amount in excess of One Million and No/l00ths Dollars
($1,000,000.00), (iii) failure to observe or comply with any other covenants or
provisions contained herein and such failure shall continue for thirty (30) days
from the earlier of an officer of the Borrower becoming aware thereof or receipt
of written notice thereof from the Bank, (iv) the filing of an action in
bankruptcy or insolvency by the Borrower, (v) the filing of an action in
bankruptcy or insolvency against the Borrower and the continuance of such action
undismissed, unstayed and in effect for sixty (60) days from the date of filing,
or (vi) the failure by B. F. Goodrich ("Goodrich") to abide by the terms of that
comfort letter dated May ___, 1996 given by Goodrich to the Bank. Upon the
occurrence of an Event of Default hereunder, the unpaid principal amount of all
advances under this Note, together with all accrued but unpaid interest hereon,
may become, or may be declared to be, (or in the case of any Event of Default
resulting from items (iv) or (v) relating to the bankruptcy or insolvency of the
Borrower, shall, without action on the part of the Bank, become), immediately
due and payable, without presentation, demand, protest or notice of any kind,
all of which are hereby waived by the Borrower. In addition, if Goodrich fails
to maintain a controlling interest in the outstanding capital stock of the
Borrower, the amounts as set forth in the immediately preceding sentence shall
immediately become due and payable although the failure of Goodrich to maintain
such a controlling interest shall not constitute an Event of Default under this
paragraph.
In the event amounts under this Note are not paid when due at any stated or
accelerated maturity, interest on all amounts owing hereunder shall accrue at a
rate two percent (2%) in excess of the rate otherwise applicable but not in
excess of the rate permitted by law (such rate sometimes being referred to
herein as the "Default Rate"). The Borrower agrees to pay, in addition to the
principal and interest, all costs of collection, including reasonable attorneys
fees.
The Bank agrees not to assign or otherwise transfer this Note, other than
to a subsidiary of affiliate of the Bank, without the prior written consent of
the Borrower.
Notices hereunder shall be deemed given and be effective (i) when
delivered, (ii) when transmitted via telecopy to the number set out below, (iii)
the day following the day on which the same has been delivered prepaid to a
reputable national overnight air courier service, or (iv) the third business day
following the day on which the same is sent by certified or registered mail,
postage prepaid, in each case to the respective parties at the address set forth
below, or at such other address as such party may specify by written notice to
the other parties hereto:
6
<PAGE>
IF TO THE BORROWER: DTM CORPORATION
1611 Headway Circle
Building 2
Austin, Texas 78754
Attn: Greg Logwinuk
Telephone: (512) 339-2922
Telecopy: (512) 339-0634
IF TO THE BANK: NATIONAL CITY BANK
1900 East Ninth Street
Cleveland, Ohio 44108
Attn: David R. Evans
Telephone: 216 575-2356
Telecopy: 216 575-9396
No delay or omission on the part of the holder of this Note in
exercising any right hereunder shall operate as a waiver of such right or of any
right of such holder nor shall any delay, omission or waiver on any one occasion
be deemed a bar to or waiver of the same or any other right on any future
occasion. The Borrower assents to any one or more extensions or postponements of
the time of payment or any other indulgences, to any substitutions, exchanges or
releases of collateral if at any time there is collateral available to the
holder of this Note, and to the additions or releases of any other parties or
persons primarily or secondarily liable.
This Note amends, extends the maturity of and replaces Borrower's
December 1995 Amended Promissory Note.
BORROWER AND ALL OTHER PARTIES LIABLE FOR THIS NOTE WAIVE DEMAND, NOTICE OF
INTENT TO DEMAND, PRESENTMENT FOR PAYMENT, NOTICE OF NONPAYMENT, PROTEST,
NOTICE OF PROTEST, GRACE, NOTICE OF DISHONOR, NOTICE OF INTENT TO
ACCELERATE MATURITY, NOTICE OF ACCELERATION OF MATURITY, AND DILIGENCE IN
COLLECTION. EACH MAKER, SURETY, ENDORSER, AND GUARANTOR OF THIS NOTE WAIVES
AND AGREES TO ONE OR MORE EXTENSIONS FOR ANY PERIOD OR PERIODS OF TIME, AND
ANY PARTIAL PAYMENTS, BEFORE OR AFTER MATURITY, WITHOUT PREJUDICE TO THE
HOLDER OF THIS NOTE. EACH MAKER, SURETY, ENDORSER, AND GUARANTOR WAIVES
NOTICE OF ANY AND ALL RENEWALS, EXTENSIONS, REARRANGEMENTS, AND
MODIFICATIONS OF THIS NOTE.
THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN OHIO, AND SHALL BE CONSTRUED
IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF OHIO AND THE LAWS OF
THE UNITED STATES OF AMERICA APPLICABLE TO TRANSACTIONS IN OHIO. IN
ADDITION, THE BORROWER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY
7
<PAGE>
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE AND THE ADVANCES
HEREUNDER AND CONSENTS TO THE JURISDICTION OF FEDERAL AND STATE COURTS
LOCATED IN CUYAHOGA COUNTY, OHIO.
THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, OR CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed under
seal and delivered by its duly authorized officer as of the date first above
written.
ATTEST: DTM CORPORATION
By: /s/ GREG LOGWINUK By: /s/ JOHN S. MURCHISON, III
-----------------------------------
__________________ Secretary Title: President & CEO
8
<PAGE>
SCHEDULE OF ADVANCES
<TABLE>
<CAPTION>
Principal Applicable Maturity Outstanding Notation
Amount of Interest of Advance Principal Made
Advance rate of Balances After By
(Payment) Advance Advances
(Payment)
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 10.9
PROMISSORY NOTE
---------------
$ 2,000,000 NOVEMBER 15, 1995
FOR VALUE RECEIVED, the undersigned maker, DTM Corporation, a Texas
corporation (the "Borrower") promises to pay to the order of THE B.F.GOODRICH
COMPANY, a New York corporation ("Lender"), at its principal office and place of
business in Akron, Ohio, or at such other place as the holder hereof may from
time to time designate in writing, the principal amount outstanding hereunder,
which shall not exceed at any time, a maximum of Two Million Dollars
($2,000,000), as evidenced on Schedule A hereto from time to time, and as
described below (the "Loan"), on the earlier of March 1, 1997 or the date as of
which the Borrower receives the proceeds of an initial public stock offering
(the "Maturity Date").
The Borrower shall pay interest on the unpaid principal amount of the Loan
from time to time from the date outstanding until paid in full at a rate per
annum equal to the prime commercial lending rate (or the base rate applicable to
general commercial borrowings, or the equivalent rate in effect at the time in
question, as the case may be), of Citibank, NA, New York, New York as published
from time to time in the Wall Street Journal. The interest rate shall be
adjusted quarterly on the first day of each calendar quarter on which rates are
quoted. Such interest shall be payable quarterly on each March 31, June 30,
September 30, and December 31 of each calendar year, commencing December 31,
1995, and at maturity. Interest hereunder shall be computed on the basis of a
year of 360 days and twelve 30-day months. Any overdue payment of principal
and, to the extent permitted by law, interest on the Loan shall bear interest,
payable on demand, at a rate per annum equal to the rate of interest applicable
prior to maturity plus one percent (1%).
Borrower shall have the right at any time and from time to time to prepay
this Note in whole or in part, without premium or penalty, provided that three
day's notice is given prior to the effective date of prepayment and further
provided that any and all prepayments of principal shall be accompanied by
payment of all interest then accrued on the principal amount so prepaid. Any
sums received by the Lender or other holder hereof shall be applied first to
accrued interest.
If any payment of principal or interest on this Note shall become due on a
day on which banks in the State of Texas or New York are not open for business,
such payment shall be made on the next succeeding day on which banks in both of
the State of Texas and the State of New York are open (a "Business Day"), and
such extension of time shall in such case be included in computing interest in
connection with such payment.
<PAGE>
The principal outstanding hereunder from time to time shall be recorded by
the Lender on Schedule A to this note, a copy of which, when delivered to the
Borrower, shall be conclusive as to the amounts outstanding absent evidence of
error.
If any of the following events ("Events of Default") shall occur and be
continuing:
(a) Borrower fails to pay principal of this Note as and when due;
(b) Borrower fails to pay interest on this Note within 5 days of the date
due;
(c) Borrower becomes insolvent (however, such insolvency may be evidenced)
or proceedings are instituted by or against Borrower under the United
States Bankruptcy Code or under any bankruptcy, reorganization or
insolvency law or other law for the relief of debtors and are consented to
by Borrower or are not dismissed within 60 days of such institution,
then, in any such case, Lender may, by written notice to Borrower: a) declare
the outstanding principal amount of this Note to be forthwith due and payable,
together with accrued interest, whereupon the same shall become forthwith due
and payable without further notice, demand, protest, presentment or any other
notice or demand whatsoever, all of which are hereby waived by Borrower; and (b)
proceed to pursue any other right or remedy to which it may be entitled under
applicable law.
This Note shall be governed and construed according to the laws of the
State of Ohio. It is expressly stipulated and agreed to be the intent of the
Borrower and the Lender at all times to comply with the applicable Ohio law
governing the maximum rate or amount of interest payable on this Note or the
indebtedness evidenced hereby. If the applicable law is ever judicially
interpreted so as to render usurious any amount called for under this Note, or
contracted for, charged, taken, reserved or received with respect to such
indebtedness, or if any prepayment by the Borrower results in the Borrower
having paid any interest in excess of that permitted by applicable law, then it
is the Borrower's and the Lender's express intent that all excess amounts
theretofore collected by the Lender be credited on the principal balance of this
Note (or, if this Note has been or would thereby be paid in full, refunded to
the Borrower), and the provisions of this Note immediately be deemed reformed
and the amounts thereafter collectible hereunder and thereunder reduced, without
the necessity of the execution of any new document, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder.
- 2 -
<PAGE>
DTM CORPORATION has caused this Note to be executed on its behalf by a duly
authorized officer as of November 15, 1995.
THE UNDERSIGNED WAIVES PRESENTMENT AND DEMAND FOR PAYMENT, NOTICE OF INTENT
TO ACCELERATE MATURITY, NOTICE OF ACCELERATION OF MATURITY, PROTEST AND NOTICE
OF PROTEST AND NON-PAYMENT, AND THE BRINGING OF SUIT AND DILIGENCE IN TAKING ANY
ACTION TO COLLECT ANY SUMS OWING HEREUNDER.
DTM CORPORATION
By: /s/ Gregory A. Logwinuk
-------------------------------
Name: Gregory A. Logwinuk
-----------------------------
Title: Vice President, Finance &
----------------------------
Administration
--------------
THE STATE OF TEXAS )
) SS
COUNTY OF TRAVIS )
BEFORE ME, the undersigned authority on this 16th day of November, 1995,
--------
personally appeared Gregory A. Logwinuk of DTM Corporation, a Texas
------------------------
corporation, known to me to be the person and officer whose name is subscribed
to the foregoing instrument and being by me first duly sworn acknowledged to me
that he executed the same as the act and deed of such corporation for the
purposes and consideration therein expressed, and in the capacity therein
stated.
/s/ Kathleen Klein
--------------------------
Notary Public in and for
Travis County, Texas
- 3 -
<PAGE>
EXHIBIT 10.10
PROMISSORY NOTE
---------------
$ 1,000,000 APRIL 26, 1996
FOR VALUE RECEIVED, the undersigned maker, DTM Corporation, a Texas corporation
(the "Borrower") promises to pay to the order of THE B.F.GOODRICH COMPANY, a New
York corporation ("Lender"), at its principal office and place of business in
Akron, Ohio, or at such other place as the holder hereof may from time to time
designate in writing, the principal amount outstanding hereunder, which shall
not exceed at any time, a maximum of One Million Dollars ($1,000,000), as
evidenced on Schedule A hereto from time to time, and as described below (the
"Loan"), on the earlier of December 31, 1996 or the date as of which the
Borrower receives the proceeds of an initial public stock offering (the
"Maturity Date").
The Borrower shall pay interest on the unpaid principal amount of the Loan
from time to time from the date outstanding until paid in full at a rate per
annum equal to the prime commercial lending rate (or the base rate applicable to
general commercial borrowings, or the equivalent rate in effect at the time in
question, as the case may be), of Citibank, NA, New York, New York as published
from time to time in the Wall Street Journal. The interest rate shall be
adjusted quarterly on the first day of each calendar quarter on which rates are
quoted. Such interest shall be payable on June 30, 1996, September 30, 1996 and
at maturity. Interest hereunder shall be computed on the basis of a year of 360
days and twelve 30-day months. Any overdue payment of principal and, to the
extent permitted by law, interest on the Loan shall bear interest, payable on
demand, at a rate per annum equal to the rate of interest applicable prior to
maturity plus one percent (1%).
Borrower shall have the right at any time and from time to time to prepay
this Note in whole or in part, without premium or penalty, provided that three
day's notice is given prior to the effective date of prepayment and further
provided that any and all prepayments of principal shall be accompanied by
payment of all interest then accrued on the principal amount so prepaid. Any
sums received by the Lender or other holder hereof shall be applied first to
accrued interest.
If any payment of principal or interest on this Note shall become due on a
day on which banks in the State of Texas or New York are not open for business,
such payment shall be made on the next succeeding day on which banks in both of
the State of Texas and the State of New York are open (a "Business Day"), and
such extension of time shall in such case be included in computing interest in
connection with such payment.
The principal outstanding hereunder from time to time shall be recorded by
the Lender on Schedule A to this note, a copy of which, when delivered to the
Borrower, shall be conclusive as to the amounts outstanding absent evidence of
error.
If any of the following events ("Events of Default") shall occur and be
continuing:
(a) Borrower fails to pay principal of this Note as and when due;
(b) Borrower fails to pay interest on this Note within 5 days of the date
due;
(c) Borrower becomes insolvent (however, such insolvency may be evidenced)
or proceedings are instituted by or against Borrower under the United
States Bankruptcy Code or under any bankruptcy, reorganization or
insolvency law or other law for the
<PAGE>
relief of debtors and are consented to by Borrower or are not dismissed
within 60 days of such institution,
then, in any such case, Lender may, by written notice to Borrower: a) declare
the outstanding principal amount of this Note to be forthwith due and payable,
together with accrued interest, whereupon the same shall become forthwith due
and payable without further notice, demand, protest, presentment or any other
notice or demand whatsoever, all of which are hereby waived by Borrower; and (b)
proceed to pursue any other right or remedy to which it may be entitled under
applicable law.
This Note shall be governed and construed according to the laws of the
State of Ohio. It is expressly stipulated and agreed to be the intent of the
Borrower and the Lender at all times to comply with the applicable Ohio law
governing the maximum rate or amount of interest payable on this Note or the
indebtedness evidenced hereby. If the applicable law is ever judicially
interpreted so as to render usurious any amount called for under this Note, or
contracted for, charged, taken, reserved or received with respect to such
indebtedness, or if any prepayment by the Borrower results in the Borrower
having paid any interest in excess of that permitted by applicable law, then it
is the Borrower's and the Lender's express intent that all excess amounts
theretofore collected by the Lender be credited on the principal balance of this
Note (or, if this Note has been or would thereby be paid in full, refunded to
the Borrower), and the provisions of this Note immediately be deemed reformed
and the amounts thereafter collectible hereunder and thereunder reduced, without
the necessity of the execution of any new document, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder.
DTM CORPORATION has caused this Note to be executed on its behalf by a duly
authorized officer as of April 26, 1996.
THE UNDERSIGNED WAIVES PRESENTMENT AND DEMAND FOR PAYMENT, NOTICE OF INTENT
TO ACCELERATE MATURITY, NOTICE OF ACCELERATION OF MATURITY, PROTEST AND NOTICE
OF PROTEST AND NON-PAYMENT, AND THE BRINGING OF SUIT AND DILIGENCE IN TAKING ANY
ACTION TO COLLECT ANY SUMS OWING HEREUNDER.
DTM CORPORATION
By: /s/ Gregory A. Logwinuk
-------------------------------
Name: Gregory A. Logwinuk
---------------------------
Title: Vice President, Finance & Administration
-----------------------------------------
- 2 -
<PAGE>
THE STATE OF TEXAS )
) SS
COUNTY OF TRAVIS )
BEFORE ME, the undersigned authority on this 26th day of April, 1996,
-------
personally appeared Gregory A. Logwinuk of DTM Corporation, a Texas
--------------------------------
corporation, known to me to be the person and officer whose name is subscribed
to the foregoing instrument and being by me first duly sworn acknowledged to me
that he executed the same as the act and deed of such corporation for the
purposes and consideration therein expressed, and in the capacity therein
stated.
/s/ Kathleen Klein
--------------------------------
Notary Public in and for
Travis County, Texas
- 3 -
<PAGE>
EXHIBIT 10.11
DTM CORPORATION
AMENDED AND RESTATED
SHAREHOLDERS' AGREEMENT
This Amended and Restated Shareholders' Agreement (the "Agreement") is
entered into this 30th day of April, 1996 by and among DTM CORPORATION, a Texas
------
corporation formerly known as Nova Automation Corporation (the "Company"), the
EXISTING SHAREHOLDERS (as defined below), who are the registered owners of all
of the presently issued and outstanding shares of Stock (as defined below) and
all other Persons who enter into this Agreement after the date hereof pursuant
to the provisions of this Agreement.
W I T N E S S E T H :
- - - - - - - - - -
STATEMENT OF BACKGROUND
-----------------------
Prior to the date hereof, the parties to this Agreement were parties to
that certain Amended and Restated Shareholders' Agreement dated December 20,
1989, as amended by that certain Amendment No. 1 to Shareholders' Agreement
effective December 1, 1990; that certain second amendment to Shareholders'
Agreement via unanimous Shareholder consent effective April 23, 1991; that
certain Amendment No. 3 to Shareholders' Agreement dated September 15, 1991;
that certain Amendment No. 4 to Shareholders' Agreement dated July 20, 1993; and
that certain Amendment No. 5 to Shareholders' Agreement dated April 26, 1994
(such Shareholders' Agreement, as so amended, being herein called the "Last
Amended Shareholders' Agreement").
In entering into the Last Amended Shareholders' Agreement, it was the
intention of the parties thereto to promote their mutual interests by imposing
certain restrictions and obligations on themselves and on their shares of Stock.
The parties hereto continue to believe that their mutual interests are best
promoted by maintaining certain
1
<PAGE>
restrictions and obligations on themselves and on the Stock, but they desire to
eliminate, modify or amend certain of the rights, privileges, restrictions and
obligations set forth in the Last Amended Shareholders' Agreement and to provide
for certain additional rights, privileges, restrictions and obligations, all as
hereinafter set forth.
This Agreement is being entered into in reliance on the mutual promises and
agreements contained in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Termination of Last Amended Shareholders' Agreement. Effective
--------- ---------------------------------------------------
upon the execution and delivery of this Agreement by the Company and each of the
Existing Shareholders, the Last Amended Shareholders' Agreement is hereby
terminated in all respects and shall have no further force or effect whatsoever.
In lieu of the Last Amended Shareholders' Agreement, the parties hereto agree
that from and after execution and delivery of this Agreement by the Company and
each of the Existing Shareholders, they and all their shares of Stock shall be
subject to and bound by the terms, conditions and provisions of this Agreement.
SECTION 2. Definitions.
--------- -----------
2.1. Defined Terms. As used in this Agreement the following terms shall
-------------
have the following meanings:
"Affiliate" of any specified Person means (a) any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, or (b) any trust of which such Person is the
settlor. For the
2
<PAGE>
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings relative to the foregoing.
"BFG" shall mean The B.F.Goodrich Company, a New York corporation.
"Disposition" means the sale, pledge, assignment, gift, transfer, grant of
a security interest in or other voluntary or involuntary disposition of all or
any portion of Stock or any interest therein (including, without limitation, any
sale, pledge, assignment, gift, transfer or other disposition to Shareholders or
to the relatives, spouses, heirs, descendants or affiliates of a Shareholder),
whether by operation of law or otherwise, and shall include, without limitation,
Permitted Transfers.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar or successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Exchange Act shall include a reference
to the comparable section, if any, of any such similar or successor federal
statute.
"Existing Shareholders" means each of the following persons or entities,
who collectively are the registered owners of all of the shares of Stock issued
and outstanding as of the date hereof, with the number of shares of Stock owned
as of the date hereof by each such Shareholder set forth next to such
Shareholder's name:
<TABLE>
<CAPTION>
Name No. of Shares
---- -------------
<S> <C>
Dr. Joseph J. Beaman 9,300
Dr. Carl R. Deckard 8,333
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Sally L. Deckard 8,333
The Thomas Roland Deckard Trust 4,167
The Michael Edison Deckard Trust 4,167
Dr. Paul F. McClure 25,100
The B.F.Goodrich Company 2,905,310
DTM Holdings, Ltd. 188,373
The University of Texas 20,000
</TABLE>
"Holdings" means DTM Holdings, Ltd.
"Initial Public Offering" or "IPO" means the Company's initial sale of
Stock in an underwritten public offering through underwriters of recognized
national or regional standing selected by the Company pursuant to an effective
registration statement under the Securities Act.
"Minority Shares" means at any time all Stock then outstanding other than
Stock held directly or indirectly by or for the benefit of BFG.
"Offer" means the tendering to the Optionees of the right to purchase Stock
as a result of a proposed Disposition to a Third Party, the occurrence of an
Automatic Selling Event, or the failure of an Optionee to exercise an option, as
further described in Sections 5 through 7 of this Agreement.
"Offer Date" means the date on which an Offer relating to a proposed
Disposition to a Third Party is actually received by the Company under Section 5
hereof, or as the context may require, any other date deemed to be an "Offer
Date" under Sections 6 or 7 hereof.
"Optionee" or "Optionees" means (i) the Company, and (ii) each person or
entity (other than the Selling Shareholder) that is a Shareholder as of the
applicable Offer
4
<PAGE>
Date, and (iii) in the case of an Offer (whether actual or deemed) by a Selling
Shareholder of shares of Stock acquired by intervivos gift in a Permitted
Transfer under Section 4.3 hereof, the Person who transferred such shares to the
Selling Shareholder, whether or not such Person is still a Shareholder;
provided, however, that if an Offer arises with respect to shares of Stock of a
Shareholder who transferred any shares of Stock to Related Persons in an
intervivos gift under Section 4.3.1, the Related Persons shall not be Optionees
with respect to such Offer.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government.
"Proportionate Share" means, with respect to any Shareholder, an amount
equal to the then current share ownership of such Shareholder in Stock, divided
by the aggregate share ownership of all Shareholders in the class in respect of
which the determination of Proportionate Share is being made.
"Public Market" means the existence of quotations for the purchase and sale
of Stock on a national or regional securities exchange or through any recognized
publicly disseminated quotation service on a periodic or regular basis.
"Purchase Option" means an option and preferential right (but not an
obligation) of the Company and/or the Shareholders to purchase Stock under
certain circumstances, as a result of a proposed Disposition to a Third Party,
as a result of an Automatic Selling Event or as a result of the failure of
another Optionee to exercise his or its Purchase Option.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar or successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
References to a particular section of the
5
<PAGE>
Securities Act shall include a reference to the comparable section, if any, of
any such similar or successor federal statute.
"Selling Shareholder" means any Shareholder proposing to make a Disposition
of Stock which gives rise to a Purchase Option or with respect to whom an
Automatic Selling Event occurs, together with any Related Party holding shares
of Stock acquired from such Shareholder in an intervivos gift permitted under
subsection 4.3(i) of this Agreement (but only with respect to the shares of
Stock acquired by such intervivos gift).
"Shareholder" or "Shareholders" shall include (i) each of the Existing
Shareholders, (ii) each direct or indirect successor in interest to Stock now or
in the future held by any of the Existing Shareholders (whether or not such
successor in interest elects to be a "Shareholder" under this Agreement), (iii)
any Person not described in clauses (i) or (ii) above that may become a holder
of Stock that has not been previously held by any of the Existing Shareholders
or their successors in interest, provided that such other Person elects to
become a "Shareholder" under this Agreement, and (iv) each direct or indirect
successor in interest to Stock previously held by a person or entity included as
a "Shareholder" under the preceding clause (iii) of this definition. A person
or entity who is a Shareholder with respect to any shares of Stock held by him
shall be a Shareholder with respect to all shares of Stock held by him, and all
shares of Stock held by a Shareholder shall be subject to this Agreement. The
community interest of a Shareholder's spouse in Stock held by a Shareholder
shall not constitute such spouse a Shareholder; rather, a spouse of a
Shareholder shall become a Shareholder only if he or she acquires Stock other
than a community interest in Stock by virtue of being married to a Shareholder.
Each Shareholder shall hold the Stock owned by him or it subject to this
Agreement. A Shareholder shall cease to be a Shareholder when and for so long
as such Shareholder owns no Stock; provided, however, that in connection with an
Offer by a Selling Shareholder of shares of Stock acquired in an intervivos gift
to a Related Person, as described in subsection 4.3(i)
6
<PAGE>
hereof, the Person who transferred such shares to the Selling Shareholder shall
be deemed to be a Shareholder (and entitled to a Purchase Option as provided in
Section 7(f) below), even if that person is not in fact still a Shareholder. In
addition, for purposes of the provisions of this Agreement regarding Automatic
Selling Events and the consequences thereof, a Shareholder who makes a Permitted
Transfer by intervivos gift under subsection 4.3(i) hereof shall continue to be
deemed a Shareholder, and any Automatic Selling Event that occurs after the gift
with respect to such Shareholder shall be an Automatic Selling Event also with
respect to each of such Shareholder's transferees under Section 4.3(i).
"Stock" means any issued and outstanding shares of the Company's common
stock, $0.001 par value per share, as well as any stock or securities received
in exchange for or with respect to the Company's common stock as a result of a
merger, consolidation, recapitalization, stock dividend or reorganization with
respect to or involving the Company (including, without limitation, the
liquidation of the Company after the sale of all or substantially all of its
assets) and any other legal interest therein. All references herein to Stock
owned by a Shareholder shall include the community or marital interest, if any,
of the spouse of such Shareholder in such Stock.
"Third Party" means any Person who is not a Shareholder or an Affiliate of
a Shareholder at the time in question.
"UT" means The University of Texas.
2.2. Additional Terms. The following additional terms shall have the
----------------
meanings given to such terms in the Sections hereof set forth below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
"Automatic Selling Event" 6.1
"Board" 8.1
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
"Closing" 7.5
"Death or Merger Transfer" 4.2
"Expiration Date" 5.3
"Indemnified Party" 9.6.3
"Indemnifying Party" 9.6.3
"Offer Stock" 5.2.1
"Permitted Transfer" 4
"Pledge" 4.4
"Private Offering" 10.2
"Related Person" 4.3
"Securities Laws" 3.2
</TABLE>
SECTION 3. Transfer Restrictions.
--------- ---------------------
3.1. Prohibition on Disposition. No Shareholder shall make or suffer a
--------------------------
Disposition of Stock and no Disposition of Stock of any kind shall be effected
or occur except as specifically permitted in this Agreement.
3.2. Compliance with Securities Laws. Each Shareholder acknowledges that
-------------------------------
the Stock acquired by him or it has been acquired for investment and not with a
view toward distribution and that such Stock has not been registered under the
Securities Act of 1933 or the securities laws of any state or other jurisdiction
and the rules and regulations thereunder (the "Securities Laws"). No
Shareholder shall make or suffer any Disposition of Stock that is not in
compliance with the Securities Laws. Each Disposition of Stock must be in a
transaction that is registered or exempt from registration under all such
applicable Securities Laws. The Shareholder making or suffering such
Disposition must, in advance thereof, deliver to the Company evidence
satisfactory to the Company (including, upon request, an opinion of counsel
satisfactory to the Company) to the effect that any proposed Disposition is in
compliance with this subsection 3.2.
3.3. Execution of Shareholders' Agreement. No Disposition shall be valid
------------------------------------
or permitted, nor shall any transferee or purchaser of shares of Offer Stock
have any rights hereunder or as a Shareholder generally until the transferee or
purchaser (and
8
<PAGE>
his or her spouse, if any) has executed a counterpart of this Agreement
evidencing such person's agreement to be bound hereby as a Shareholder and has
delivered such counterpart to the Secretary of the Company. Notwithstanding the
failure to execute a counterpart of this Agreement, any transferee or purchaser
of shares of Offer Stock shall take such Stock subject to this Agreement and by
acceptance of any certificate representing such Stock shall be bound by this
Agreement.
3.4. Dispositions Void. Any Disposition or attempted Disposition that
-----------------
violates or is not made in full compliance with this Section 3 and the other
provisions of this Agreement applicable thereto shall be invalid, void ab initio
--
and of no effect.
SECTION 4. Permitted Dispositions. Notwithstanding the prohibitions of
--------- ----------------------
Section 3 hereof, Shareholders shall be permitted to make the following types of
Dispositions (the "Permitted Transfers"), provided that they give notice thereof
to the Company and to each other Shareholder, and further provided that the
requirements of Section 3.2 and 3.3 hereof are complied with in connection with
such Disposition:
4.1. Sales to Third Parties. Sales to Third Parties that comply with all
----------------------
terms and conditions of Section 5 hereof.
4.2. Death or Merger Transfers. Transfers by descent or devise, by will
-------------------------
or by operation of law resulting solely from the death of a Shareholder, or by
operation of law as a result of the merger, consolidation, recapitalization,
reorganization, liquidation or dissolution of the Company (hereinafter referred
to as "Death or Merger Transfers").
4.3. Dispositions to Related Persons. Dispositions of Stock by any
-------------------------------
Shareholder (i) by intervivos gift to any one or more of his spouse or
descendants, (ii) to any trust or other custodial arrangement created primarily
for the benefit of any one or more of such Shareholder and his spouse or
descendants, (iii) in the case of a Shareholder that is a corporation, to
another corporation that directly or indirectly (a) wholly owns such
9
<PAGE>
Shareholder, (b) is wholly owned by such Shareholder, or (c) is wholly owned by
the same corporation that wholly owns, directly or indirectly, such Shareholder;
or (iv) in the case of a non-corporate Shareholder, to any corporation wholly
owned, directly or indirectly, by such Shareholder (the foregoing transferees
being hereinafter referred to as "Related Persons").
4.4. Certain Pledges. Bona fide pledges of all or a part of the Stock held
---------------
by a Shareholder, or a grant of a security interest in or encumbrance on such
Stock (each herein called a "Pledge"), provided that: (i) the party obtaining
such interest is a financial institution or another Shareholder; (ii) the
Shareholder making such Pledge is not insolvent at the time; (iii) such
Shareholder retains all voting rights with respect to such Stock prior to any
foreclosure, conveyance in lieu of foreclosure or similar conveyance in full or
partial satisfaction of the secured indebtedness; (iv) the Pledge is made solely
as security for borrowed money; and (v) the transferee agrees in writing to be
bound by the terms and conditions of this Agreement in the event that there is a
foreclosure, conveyance in lieu of foreclosure or similar conveyance in full or
partial satisfaction of the secured indebtedness. All Stock so pledged or
encumbered shall remain subject to this Agreement. The foreclosure, conveyance
in lieu of foreclosure or similar conveyance in full or partial satisfaction of
the secured indebtedness shall be an Automatic Selling Event. If the Purchase
Option arising upon the occurrence of such Automatic Selling Event is not
exercised, the transferee of such Stock in connection with the foreclosure,
conveyance in lieu of foreclosure or similar conveyance in full or partial
satisfaction of the secured indebtedness shall be a Shareholder for purposes of
this Agreement and shall be bound hereby, and any further Disposition of such
Stock shall be subject in all respects to the provisions of this Agreement.
4.5. Transfers to Shareholders. Dispositions by one Shareholder to
-------------------------
another Shareholder for good and valid consideration.
10
<PAGE>
SECTION 5. Sales to Third Parties. Notwithstanding the prohibitions of
--------- ----------------------
Section 3 hereof, a Shareholder may effect a sale of Stock to a Third Party, but
only after first strictly complying with the following terms and conditions (any
other sale or purported sale being void as provided in Section 3.4):
5.1. Third Party Offer. The Shareholder desiring to sell (the "Selling
-----------------
Shareholder") must have received a bona fide written offer from a Third Party to
purchase all or part of its Stock (but no fractional shares) entirely for cash.
For purposes of this Agreement, a sale is "entirely for cash" if all of the
consideration therefor is money, payable entirely at the closing of such sale.
5.2. Offer to Optionees. The Selling Shareholder must deliver a written
------------------
offer (the "Offer") to each Optionee which:
5.2.1. Sets forth the number of shares of Stock which the Selling
Shareholder desires to sell (the "Offer Stock").
5.2.2. Sets forth the names and addresses of the proposed purchasers.
5.2.3. Encloses a copy of the written offer from the Third Party
including a description of the nature and all of the terms and conditions of
such proposed sale, including, without limitation, the price per share and the
manner of payment.
5.2.4. Sets forth the address of the Selling Shareholder at which any
notice required to be given to the Selling Shareholder may be given.
5.2.5. Includes an irrevocable offer to sell and transfer the Offer
Stock to the Optionees on the same terms and conditions proposed by the Third
Party and pursuant to the further terms and conditions of Section 7 of this
Agreement.
11
<PAGE>
5.3. Sale. In the event that the Offer Stock is not sold to the Optionees
----
pursuant to subsections 7.1 through 7.6 hereof, then the Selling Shareholder may
sell all (but not less than all) of the shares of Offer Stock to the proposed
purchaser named in the Offer, strictly on the terms and conditions set forth
therein, and subject to the provisions of Sections 3.2 and 3.3, on or before the
50th day (the "Expiration Date") after whichever of the following dates is
applicable: (i) if all shares of Offer Stock have not been subscribed for
pursuant to Section 7 hereof, the date on which the Shareholders' Purchase
Option expires, or (ii) if all of the shares of Offer Stock are subscribed for
pursuant to Section 7 hereof, but are not actually purchased, the date of the
Closing (as postponed pursuant to Section 7.5 hereof).
5.4. New Offer. If all shares of Offer Stock are not transferred on or
---------
prior to the Expiration Date, then no Disposition of any such shares may be made
unless a new Offer covering such Stock is received and the Optionees are given
the opportunity to purchase such Stock pursuant to this Section 5 and subsection
7.1 through 7.6 hereof.
SECTION 6. Automatic Selling Events.
--------- ------------------------
6.1. Definition. An "Automatic Selling Event" shall occur with respect to
----------
any Shareholder and all shares of Stock held by such Shareholder under any of
the following circumstances:
6.1.1. A judicial determination of insanity or incompetence of such
Shareholder.
6.1.2. The foreclosure, conveyance in lieu of foreclosure or similar
conveyance of such Shareholder's Stock in full or partial satisfaction of the
indebtedness secured by a Pledge of such Stock or the offering for sale or
attempted
12
<PAGE>
transfer of any of such Stock pursuant to a security agreement or similar
instrument resulting from such Pledge.
6.1.3. The entry of a decree or order by a court of competent
jurisdiction adjudging the Shareholder bankrupt or insolvent.
6.1.4. The Shareholder institutes proceedings to be adjudicated a
voluntary bankrupt, consents in writing to the institution of a bankruptcy
proceeding against him or it, files a petition or answer or written consent
seeking reorganization under the United States Bankruptcy Code or any other
similar applicable federal or state law, makes a general assignment for the
benefit of creditors, or admits in writing his or its inability to pay his or
its debts generally as they become due.
6.1.5. The entry, by a court of competent jurisdiction, of a decree
terminating or dissolving such Shareholder's marriage by divorce or otherwise,
which decree transfers or otherwise recognizes ownership or control of any of
the Stock to be in such Shareholder's spouse, or which grants ownership of less
than all of such Stock to the Shareholder.
6.1.6. The occurrence of any other event (other than a Permitted
Transfer) whether by operation of law or otherwise, which would, without further
action by such Shareholder or his or its legal representatives, result in a
Disposition of all or any portion of the Stock owned by such Shareholder, or any
interest therein.
6.2. Certain Additional Events. It is the intention of the Shareholders
-------------------------
not to permit the evasion of the transfer restrictions imposed herein by reason
of a Permitted Transfer by a Shareholder to a corporate transferee under Section
4.3 of this Agreement followed by the direct or indirect Disposition of any or
all of the stock of that transferee. Accordingly, any transaction that has the
effect described in the preceding sentence shall also be an Automatic Selling
Event. In addition, if a
13
<PAGE>
Shareholder makes a Permitted Transfer to a Related Person under Section 4.3
hereof or makes a Pledge pursuant to Section 4.5 hereof and thereafter suffers
or commits an Automatic Selling Event, such Automatic Selling Event shall also
constitute an Automatic Selling Event with respect to each of the Related
Persons who acquired Stock in such Permitted Transfer and with respect to such
Shareholder's pledgee.
6.3. Notice. If a Shareholder commits or suffers an Automatic Selling
------
Event or has knowledge that he or it will in the foreseeable future commit or
suffer an Automatic Selling Event, such Shareholder or his or its legal
representative, as the case may be, shall promptly send a written notice of such
event to the Optionees disclosing in full the nature and details of such event,
the number of shares of Stock held by such Shareholder and the names and
addresses of any prospective transferees of such Stock as a result of the
Automatic Selling Event. If such Shareholder or his or its legal representative
fails to give such notice, the Company may, and on request of any other
Shareholder shall, give such notice on behalf of the Shareholder committing or
suffering such event. Notice given by the Company shall have the same effect as
notice given by such Shareholder.
6.4. Offer. Notice of an Automatic Selling Event given by a Shareholder,
-----
or by the Company on behalf of a Shareholder, shall constitute and be deemed an
Offer by the Shareholder suffering or committing the Automatic Selling Event or
his or its legal representative, who shall be considered a Selling Shareholder
for purposes of this Agreement. The Offer Date for such Offer shall be the date
that the notice of the Automatic Selling Event is received by the Company if the
notice comes from the Shareholder suffering the Automatic Selling Event (or, if
not, the date the Company mails or otherwise initiates delivery of notice of the
Automatic Selling Event to the other Optionees). All Stock held by the
Shareholder in question shall be considered to be Offer Stock. The Offer shall
be carried out on the terms and conditions of Section 7 hereof and shall be at a
price per share determined in accordance with Section 8 hereof.
14
<PAGE>
SECTION 7. Right of First Refusal. All Offers shall be carried out in
--------- ----------------------
accordance with the following terms and conditions:
7.1. Company Option. For 30 days following the Offer Date, the Company
--------------
shall have a Purchase Option for the Offer Stock with respect to which the Offer
Date relates. The Company's Purchase Option shall be exercisable by sending a
written notice of exercise to the Selling Shareholder.
7.2. Shareholder Options. If the Company fails to exercise its Purchase
-------------------
Option as to any portion of the Offer Stock prior to its expiration, then on or
before 10 days after the earlier of (i) the expiration date of the Company's
Purchase Option, or (ii) the date on which the Company notified the Selling
Shareholder that it will not purchase all of the Offer Stock, the Selling
Shareholder shall notify each other Optionee in writing of the number of shares
of Option Stock as to which the Company failed to exercise its Purchase Option.
Each of such Optionees shall have a Purchase Option to purchase his or its
Proportionate Share of such remaining Offer Stock by giving written notice
thereof to the Selling Shareholder within 30 days of receipt of the Offer notice
from the Selling Shareholder. If there is more than one Shareholder Optionee,
the notice of exercise of each Optionee must state the maximum number of shares
of Offer Stock that such person is willing to purchase. If the aggregate number
of shares of Offer Stock that the Shareholder Optionees are willing to purchase
equals or exceeds the number of shares of Offer Stock that have not been
subscribed for by the Company, then the Shareholders' Purchase Option shall have
been exercised.
7.3. Allocation. If the Shareholders' Purchase Option has been exercised,
----------
then each Shareholder Optionee offering to purchase shall be allocated his or
its Proportionate Share of the Offer Stock that has not been subscribed for by
the Company. If any Shareholder Optionees have stated in their notice of
exercise that they would purchase fewer shares than their Proportionate Share,
such Optionees shall be allocated such lesser number and any remaining
unallocated shares shall be
15
<PAGE>
allocated among those Shareholder Optionees who offered to purchase more than
their Proportionate Share, on a basis of their Proportionate Share as part of
the group electing to purchase additional shares, taking into account all shares
subscribed for in the preceding sentence, or as the Optionees may otherwise
agree.
7.4. Price. If the Offer arose from a proposed Disposition to a Third
-----
Party in a sale for cash, the price per share to be paid by each Optionee shall
be the price to be paid by the proposed Third Party purchaser named in the
Offer. In the case of an Offer arising from an Automatic Selling Event, the
price per share shall be determined in accordance with the appropriate
provisions of Section 8 of this Agreement. In either such event, the entire
purchase price shall be paid in cash at the Closing.
7.5. Closing. If Purchase Options have been timely exercised with respect
-------
to all of the Offer Stock in question, the closing of all purchases of the Offer
Stock (the "Closing") shall be held simultaneously at 10:00 local time at the
Company's principal office on the 30th day following the expiration of the
applicable option period, or at such other time and place as the parties shall
mutually agree.
7.6. Failure to Close. If, for any reason (other than the default of the
----------------
Selling Shareholder), an Optionee fails to purchase at the Closing all of the
Offer Stock it has subscribed to purchase, then the Selling Shareholder shall
give notice thereof to each other Optionee. The Closing shall be postponed
until 15 days after such notice is properly given to allow the other Optionees
to arrange to purchase the Offer Stock not so purchased. Such shares shall be
allocated among the other Optionees desiring to purchase such Stock based on
their Proportionate Share of the Offer Stock being purchased by them pursuant to
the foregoing provisions of this Section 7, or in such other proportions as they
mutually agree.
16
<PAGE>
7.7. Failure of Optionees to Purchase. If all shares of Offer Stock
--------------------------------
subject to in any Purchase Option are not actually purchased, then no shares of
Offer Stock shall be purchased by the Optionees and the following shall apply:
7.7.1. The Selling Shareholder may retain all such shares of Offer
Stock.
7.7.2. If the Offer resulted from an Automatic Selling Event, the
transferee of such Offer Stock may retain the same subject to the provisions of
Sections 3.2 and 3.3 hereof.
7.7.3. If the Offer arose in connection with a purchase offer from a
Third Party which the Selling Shareholder wishes to accept, the Selling
Shareholder may sell the Offer Stock to the Third Party pursuant to the
provisions of Section 5.3 hereof.
SECTION 8. Determination of Stock Price for Certain Purposes.
--------- -------------------------------------------------
8.1. Automatic Selling Events, Mandatory Purchases, Etc. During any
---------------------------------------------------
period in which there is not a Public Market for the Stock, the valuation for
purposes of determining the per share price of Stock in connection with offers
resulting from Automatic Selling Events, Mandatory Purchases, the repurchase of
Stock from employees or optionees terminating their employment with the Company
and for certain other purposes referenced in this or other agreements or
documents shall be determined by agreement among the parties to the proposed
transaction, or if such parties cannot agree on a per share price, such price
shall be determined by a qualified independent appraiser selected by the board
of directors of the Company (the "Board"). Such appraiser's fee and expenses
shall be borne pro-rata by such parties.
8.2. Employee Compensation. During any period in which there is not a
---------------------
Public Market for the Stock, the valuation for purposes of determining the per
share price of Stock in connection with employee stock options, performance
related bonuses or
17
<PAGE>
other incentive compensation plans shall be the fair market value of the Stock
as determined by the Board, or any committee thereof, in its sole discretion.
8.3 Indemnity. Each Shareholder recognizes and acknowledges (i) that the
---------
determination of a definitive fair value for the Stock may require a great deal
of discretion during any period in which there is no Public Market for the
Stock, (ii) that such determination will, during such period of time, require
that certain assumptions be made about the prospects of the Company as well as
future economic and competitive conditions in markets where the Company does
business, and (iii) that any number, or even all, of the directors on the Board
at any given time may be subject to a conflict of interest where valuation of
the Stock is concerned, due to their affiliation with certain Shareholders or
their status as holders of options for Stock or otherwise. The Shareholders
acknowledge and agree (a) that valuations made pursuant to this Section 8 shall
be conclusive and binding, subject only to such revisions as specifically
provided herein, (b) that all conflicts of interest of members of the Board are
fully understood and waived unless the Board includes sufficient disinterested
directors to constitute an independent committee for valuation purposes or there
is specific evidence demonstrating that a director has acted in bad faith or
violated his duties to the Company and (c) that the members of the Board and its
advisors shall be entitled to be indemnified and held harmless by the Company to
the fullest extent permissible under Texas Law, as in effect at the time in
question, for all actions taken pursuant to Section 8 hereof, or any other
provision of this Agreement.
SECTION 9. Registration Rights.
--------- -------------------
9.1. Right to Register. If the Company at any time after the date hereof
-----------------
proposes to file a registration statement pursuant to the Securities Act to
register the sale of Stock in an underwritten public offering (whether for the
account of the Company, the Shareholders or both), each Existing Shareholder
shall be entitled to participate in such
18
<PAGE>
underwritten offering subject to the terms and conditions (and to the extent)
provided herein.
9.2. Underwriting Agreement. If an Existing Shareholder desires to
----------------------
participate in any underwriting as set forth in this Section 9, such Shareholder
(together with the Company and any other Shareholders selling shares through
such underwriting) shall enter into an underwriting agreement in customary form
with the representatives of the underwriter or underwriters selected by the
Company. The selling Shareholders may, at their option, require that any or all
of the representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be made
to and for the benefit of such selling Shareholders and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
selling Shareholders. Any such selling Shareholder shall not be required to
make any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
selling Shareholder, such selling Shareholder's Stock and such selling
Shareholder's intended method of distribution and any other representation
required by law. Any Existing Shareholder who disapproves of the terms of the
underwriting agreement may withdraw from the underwritten offering by written
notice to the Company and the underwriter's representatives within fifteen days
after the form of the underwriting agreement is presented to such Shareholder,
and such Shareholder's shares of Stock shall be simultaneously withdrawn from
registration and the underwritten offering.
9.3. Notice and Exercise. The Company shall give each Existing
-------------------
Shareholder written notice of its intent to file a registration statement in
connection with an underwritten public offering as described in Section 9.1 and
the date (not less than 15 days after the date of delivery of such notice) by
which each such Shareholder must give the Company written notice of the number
of shares of Stock such Shareholder desires to include in such registration and
offering. Any Existing Shareholder's failure
19
<PAGE>
to give such written notice to the Company by such date shall disqualify such
Shareholder from participating further in such registration and offering (but
not subsequent registrations and underwritings pursuant to this Section 9).
After determining the total number of shares of Stock the Company and its
Existing Shareholders desire to include in the registration and underwriting, if
the underwriter's representatives reasonably determine in writing that marketing
factors require a limitation on the total number of shares to be underwritten,
then to the extent required by such limitation, the shares of each such
Shareholder shall be excluded from the registration and underwriting in
proportion to the number of shares each such Shareholder requested to be
included in the registration and underwriting. In connection with any
registration under this Section 9, each Shareholder shall bear its pro rata
share of all Federal registration fees and filing fees. The Company will pay
all other costs incurred in connection with any such registration.
9.4. Qualification. In connection with any registration pursuant to this
-------------
Section 9, the Company will use its best efforts to qualify for sale, in each
state in which the Underwriters request that the Company qualify the shares of
Stock for sale, the shares of Stock of the Existing Shareholders being included
in such registration.
9.5. Expiration. The registration rights of Existing Shareholders
----------
provided in this Section 9 shall terminate at such time as there is a Public
Market for the Company's shares of Stock and the Shareholder is able to dispose
of its shares of Stock pursuant to the provisions of subparagraph (k) of Rule
144 of the Securities and Exchange Commission.
9.6. Indemnity.
---------
9.6.1. In the event of any registration of any Shareholder's shares
of Stock under the Securities Act pursuant to this Section 9, the Company shall
indemnify and hold harmless each Shareholder whose shares of Stock are so
registered, each
20
<PAGE>
underwriter (as defined in the Securities Act) of such shares and each person,
if any, who controls such underwriter from and against any losses, claims,
damages or liabilities, joint or several, to which they may become subject under
the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement under
which such shares were registered under the Securities Acts, any preliminary
prospectus or final prospectus issued in connection therewith, or any summary
prospectus issued in connection with any such securities being registered, or
any amendment or supplement thereto, or (ii) any alleged omission to state in
any such document a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse each such
Shareholder or each such underwriter 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; provided, however,
-------- -------
that the Company shall not be liable to any such Shareholder or any underwriter
or controlling person in any such case to the extent that any such loss, claim,
damage, liability or action arises out of or is based upon (a) any alleged
untrue statement or alleged omission made in such registration statement,
preliminary prospectus, summary prospectus, prospectus, or amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by such Shareholder or such underwriter or controlling
person specifically for use therein or (b) the failure of such Shareholder or
such underwriter or controlling person to furnish a copy of the preliminary
prospectus or the prospectus as required by the Securities Act, or (c) the use
of a preliminary prospectus or prospectus after receipt of notice from the
Company that it should no longer be used. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Shareholder or such underwriter or controlling person, and shall survive
transfer of the shares by such Shareholder. The foregoing indemnity agreement
is further subject to the condition that, insofar as it relates to any untrue
statement, alleged untrue statement, omission or alleged
21
<PAGE>
omission made in any preliminary prospectus but eliminated or remedied in the
prospectus, such indemnity agreement shall not inure to the benefit of any such
Shareholder or any underwriter or controlling person from whom the person
asserting any loss, claim, damage or liability purchased the shares which are
the subject thereof if a copy of the prospectus was not sent or given to such
person. For the purpose of this Section 9, the terms "control" and
"controlling" shall be defined as set forth in Rule 405 promulgated by the
Securities and Exchange Commission under the Securities Act.
9.6.2. Each Shareholder whose shares of Stock are registered under
the Securities Act pursuant to this Section 9 shall indemnify and hold harmless
the Company, its directors and officers, each other Shareholder, each
underwriter, and each other person, if any, who controls the Company or any
underwriter, to the fullest extent permitted by applicable law, from and against
any losses, claims, damages, or liabilities, joint or several, to which the
Company, any such director or officer, any other Shareholder, any such
underwriter, or any such person, may become subject under the Securities Act or
any other statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (i) arise out of or are based upon
any alleged untrue statement of any material fact contained, on the effective
date thereof, in any registration statement under which such shares of Stock
were registered at the request of such Shareholder pursuant to this Section 9,
any preliminary prospectus or final prospectus contained therein, or any summary
prospectus issued in connection with any such securities being registered, or
any amendment or supplement thereto, or (ii) arise out of or are based upon any
alleged omission to state in any such document a material fact required to be
stated therein or necessary to make the statements therein not misleading, to
the extent (in the case of both clauses (i) and (ii)), but only to the extent,
that such alleged untrue statement or alleged omission was made in such
registration statement, preliminary prospectus, summary prospectus, prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Shareholder
22
<PAGE>
specifically for use therein (and further, if such alleged untrue statements or
alleged omissions by such Shareholder were based on the authority of an expert,
only to the extent that such Shareholder had no reasonable ground to believe, or
did not believe, that the statements made on the authority of such expert were
untrue or that there was an omission to state a material fact), or (iii) arise
out of or are based upon the failure of such Shareholder to furnish a copy of
the preliminary prospectus or the prospectus as required by the Securities Act,
or (iv) arise out of or are based upon the use of a preliminary prospectus or
prospectus by such Shareholder after receipt of notice from the Company that it
should no longer be used. Such Shareholder shall reimburse the Company, such
director or officer, such other Shareholder, such underwriter or such
controlling person for any legal or other expenses reasonably incurred in
connection with investigating or defending any such loss, claim, damage,
liability or action. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company, its
directors and officers, such other Shareholder, such underwriter or such
controlling person and shall survive transfer of the shares by such Shareholder.
9.6.3. Each party entitled to indemnification under this Section 9
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought hereunder,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 9 and provided further,
that the Indemnifying Party shall not assume the defense for matters as to which
there is a conflict of interest or separate and different defenses. No
Indemnifying Party, in the
23
<PAGE>
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
9.7. Registration Procedures. In connection with any registration of
-----------------------
Stock pursuant to the Securities Act for the account of any Shareholder under
the provisions of this Section 9, the Company will as expeditiously as possible:
(i) furnish to each selling Shareholder such number of
conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and
any summary prospectus) and any other prospectus filed under Rule
424 under the Securities Act, in conformity with the requirements of
the Securities Act, and such other documents, as such selling
Shareholder may reasonably request;
(ii) use its best efforts to register or qualify all Stock
covered by such registration statement under such other securities
or blue sky laws of such jurisdictions as each selling Shareholder
shall reasonable request, to keep such registration or qualification
in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary
or advisable to enable such selling Shareholder to consummate the
disposition in such jurisdictions of the securities owned by such
selling Shareholder, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (ii) be obligated to be so
qualified or to consent to general service of process in any such
jurisdiction;
(iii) use its best efforts to cause all Stock covered by such
registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary
24
<PAGE>
to enable the selling Shareholder or selling Shareholders to
consummate the disposition of such Stock;
(iv) furnish to each selling Shareholder a signed counterpart,
addressed to such selling Shareholder of
(A) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the
date of the closing under the underwriting agreement), reasonably
satisfactory in form and substance to such selling Shareholder, and
(B) a "comfort" letter, dated the date effective date
of such registration statement (and, if such registration includes
an underwritten public offering, dated the date of the closing under
the underwriting agreement), signed by the independent public
accountants who have certified the Company's financial statements
included in such registration statement, covering substantially the
same matters with respect to such registration statement (and the
prospectus included therein) and, in the case of the accountants'
letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities and, in
the case of the accountants' letter, such other financial matters,
and, in the case of the legal opinion, such other legal matters, as
such selling Shareholder or such holder may reasonably request;
(v) notify each selling Shareholder, at any time when a
prospectus relating to Stock to be sold by such selling Shareholder
is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any
such selling Shareholder promptly prepare and furnish to such
selling Shareholder a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material
25
<PAGE>
fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(vi) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange
Commission, and make available to its security holders, as soon as
reasonably practicable, an historical earnings statement covering
the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act, and will furnish to each such selling Shareholder at
least five business days prior to the filing thereof a copy of any
amendment or supplement to such registration statement or prospectus
and shall not file any thereof to which any such selling Shareholder
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all respects with the requirements of
the Securities Act or of the rules or regulations thereunder;
(vii) provide and cause to be maintained a transfer agent and
registrar for the Stock covered by such registration statement from
and after a date not later than the effective date of such
registration statement; and
(viii) use its best efforts to list all Stock covered by such
registration statement on any securities exchange on which any
shares of Stock are then listed.
The Company may require each selling Shareholder to furnish the Company such
information regarding such selling Shareholder and the distribution of such
selling Shareholder's Stock as the Company may from time to time reasonably
request in writing.
Each selling Shareholder agrees that upon receipt of any notice from the
Company of the happening of any event of the kind described in subdivision (v)
of this Section 9.7, such holder will forthwith discontinue such holder's
disposition of Stock pursuant to the registration statement relating to such
Stock until such selling Shareholder's receipt of the copies of the supplemented
or amended prospectus contemplated by
26
<PAGE>
subdivision (v) of this Section 9.7 and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
relating to such Stock current at the time of receipt of such notice.
9.8. Right to Terminate Registration. The Company shall have the right to
-------------------------------
terminate or withdraw any registration initiated by it under this Section 9
prior to the effectiveness of such registration whether or not any Shareholder
has elected to include shares of Stock in such registration.
SECTION 10. Participation Rights.
---------- --------------------
10.1. Sale of Shares. Any Shareholder who shall have received a bona fide
--------------
written offer to purchase some or all of its shares of Stock shall, if requested
by any other Shareholder, attempt in good faith to have the offeror expand its
offer to include on the same terms such shares of Stock that such other
Shareholder or Shareholders may also wish to sell. The Shareholder who shall
have received such offer shall have no liability to any other Shareholder if the
offeror fails or refuses to expand its offer, nor shall such Shareholder be
required to reduce the number of shares of its Stock to be sold pursuant to such
offer in order to include or accommodate within the scope of such offer any
shares of Stock of any other Shareholder. Any purchase and sale pursuant to
such offer shall be subject to all other applicable provisions of this
Agreement, including without limitation the provisions of Sections 5 and 7.
10.2. Private Offering. In connection with any Private Offering of Stock
----------------
by the Company (a "Private Offering" being any offering exempt from registration
under the Securities Act of 1933 by reason of Section 4(2) thereof or Regulation
D promulgated thereunder, as amended or superseded from time to time, or any
successor provision thereto), the Company shall attempt in good faith to have
the purchaser or purchasers thereunder expand their purchases to include, on the
same terms and conditions as
27
<PAGE>
their purchases of the shares of Stock being issued to them by the Company in
such Private Offering, such shares of Stock that any of the Shareholders of the
Company may then wish to sell. The Company shall have no obligation to any
Shareholder who wishes to include some or all of its shares of Stock in such
Private Offering if the prospective purchasers decline to expand the offering to
include such other shares, nor shall the Company be required to reduce the
number of shares of Stock it wishes to issue in the offering in order to include
or accommodate shares held by any of the Shareholders. In addition, subject to
the registration rights of Shareholders set forth in Section 9, the Company
shall not be required to expand the offering referred to in this Section 10.2.
to include shares of any Shareholder (even if the purchasers are agreeable to
such an expansion) if the expansion of such offering and the inclusion of such
additional shares would cause the offering to lose its status as a Private
Offering.
10.3. Participation in Sale. In the event that holders of 80 percent or
---------------------
more of the issued and outstanding shares of Stock agree to sell such shares to
any Person or in any IPO, such holders shall have the right to require that the
holders of the remaining issued and outstanding shares of Stock participate in
such sale or IPO; provided, however, that the holders of the remaining Stock are
offered the same terms and conditions as the holders of the 80% who have agreed
to sell. In the event that such participation is requested, the holders of the
remaining Stock shall provide all reasonable cooperation in effecting such sale.
SECTION 11. Matters Regarding Directors.
---------- ---------------------------
11.1. Election of Directors. Directors of the Company shall be elected as
---------------------
specified under applicable law and any agreements regarding the election of
directors to which the Company and/or its Shareholders may be a party, if any.
SECTION 12. Termination and Amendment. This Agreement shall terminate
---------- -------------------------
upon the written agreement of Shareholders holding 85% or more of the Stock then
subject
28
<PAGE>
to this Agreement or upon the establishment of a Public Market in the Company's
Stock, whichever first occurs; provided, however, that the provisions of Section
3.2 and Section 9 shall also survive any prior expiration or termination of this
Agreement for the full duration provided in those Sections (or indefinitely if
no duration is therein specified unless all Shareholders shall agree in writing
to the termination thereof). If any provision of this Agreement is subject to
the Rule Against Perpetuities, then if not sooner terminated pursuant to the
provisions of this Section 12, such provision shall terminate, expire and be of
no further force or effect one day prior to 21 years after the death of the last
to die of each signatory hereto who is a natural person and each now living
descendant of each such signatory. No modification or amendment of this
Agreement shall be valid and binding unless such modification or amendment is in
writing and signed by Shareholders holding 85% of the outstanding shares of
Stock of the Company subject to this Agreement, except that (i) the provisions
of Section 9 may not be modified or amended without the written consent of
Shareholders holding 66 2/3% or more of the Minority Shares, and (ii) the
provisions of the first sentence and this last sentence of this Section 12 may
not be modified or amended without the written consent of each party affected by
the proposed modification or amendment.
SECTION 13. Legends. The reverse side of each certificate representing
-------
shares of Stock subject hereto shall be endorsed as follows (which endorsement
shall be referred to on the front side of each such certificate):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
OR OTHER JURISDICTION. SUCH SHARES MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED
AT ANY TIME WHATSOEVER EXCEPT UPON SUCH REGISTRATION OR IN A TRANSACTION
EXEMPT FROM SUCH REGISTRATION. AS A CONDITION OF ANY SALE, ASSIGNMENT OR
TRANSFER OF SUCH SHARES, THERE SHALL BE DELIVERED TO THE
29
<PAGE>
CORPORATION SUCH EVIDENCE AS MAY BE REQUIRED BY THE CORPORATION (INCLUDING
OPINIONS OF COUNSEL SATISFACTORY TO THE CORPORATION) TO THE EFFECT THAT ANY
SUCH SALE, ASSIGNMENT OR TRANSFER SHALL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE STATE SECURITIES LAW OR
ANY RULE OR REGULATION PROMULGATED THEREUNDER.
THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, GIFT, ENCUMBRANCE OR OTHER
DISPOSITION OF SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
THE RESTRICTIONS, TERMS AND CONDITIONS, INCLUDING THE PRIOR RIGHT TO
PURCHASE, SET FORTH IN AN AGREEMENT BY AND AMONG THE CORPORATION AND ITS
SHAREHOLDERS. SUCH SHAREHOLDERS' AGREEMENT ALSO INCLUDES PROVISIONS
GRANTING OPTIONS TO THE CORPORATION AND CERTAIN OTHER SHAREHOLDERS TO
PURCHASE THE SHARES EVIDENCED HEREBY IN CERTAIN CIRCUMSTANCES, PROVIDING
CERTAIN REGISTRATION RIGHTS, AND COVERING OTHER MATTERS AS SET FORTH
THEREIN. A COUNTERPART OF SUCH SHAREHOLDERS' AGREEMENT HAS BEEN PLACED ON
FILE BY THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS AND ITS
REGISTERED OFFICE AND, UPON WRITTEN REQUEST TO THE CORPORATION AT ITS
PRINCIPAL PLACE OF BUSINESS OR ITS REGISTERED OFFICE, THE CORPORATION WILL
FURNISH TO THE HOLDER OF THIS CERTIFICATE WITHOUT CHARGE A COPY OF SUCH
AGREEMENT.
After such endorsement, the certificates shall be returned to the Shareholders,
who shall, subject to the terms of this Agreement, be entitled to exercise all
rights of ownership of such Stock.
SECTION 14. Miscellaneous Provisions.
---------- ------------------------
30
<PAGE>
14.1. Notices. Unless otherwise provided for herein, and except where
-------
receipt is required for the running of a time period, all notices and other
communications hereunder to a party hereto shall be deemed to be properly given
when delivered personally in writing, by hand delivery, confirmed facsimile
transmission, or air express delivery or mailed by registered or certified mail
(return receipt requested), postage prepaid, to such party at its address for
notice set forth on Exhibit A hereto, or at such other address as may have been
specified by like notice.
14.2. Entire Agreement. This Agreement shall supersede all prior
----------------
agreements, documents or other instruments with respect to the matters covered
hereby.
14.3. Separability. The provisions contained herein are independent and
------------
separate, and in the event that any provision contained herein is declared
invalid or illegal, the other provisions hereof shall not be affected or
impaired thereby and shall remain valid and enforceable, provided that the
fundamental bargains of the parties evidenced hereby are, as a practical matter,
maintained in all material respects.
14.4. Injunctions. In the event of a breach or threatened breach by any
-----------
party hereto of the provisions of this Agreement, any other party hereto shall
be entitled to an injunction to prevent irreparable injury (subject to the
availability of that remedy under general equitable principles). Nothing herein
shall be construed as prohibiting any Shareholder from pursuing any other
remedies available for such breach or threatened breach, including the recovery
of damages.
14.5. Holidays. If any act is required to take place or any notice period
--------
expires on a day which is a Saturday, Sunday or legal holiday in Texas, the date
for such action or the expiration of such notice period shall be the next
succeeding business day.
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<PAGE>
14.6. Headings. The descriptive headings of the several Sections of this
--------
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
14.7. Waivers. The waiver of any provision hereof shall be effective only
-------
if in writing and signed by the Shareholders for whose benefit such provision
operates, and then only in the specific instance and for the particular purpose
for which such waiver is given. Except as otherwise provided herein (e.g., the
failure to exercise any Purchase Option), no failure to exercise, and no delay
in exercising, any right or power hereunder shall operate as a waiver of such
right or power.
14.8. Further Assurances. Each party hereto shall execute and deliver
------------------
such other certificates, agreements and other documents and take such other
actions as may reasonably be requested by the other parties in order to
consummate or implement the transactions contemplated by this Agreement.
14.9. Governing Law. The terms of this Agreement shall be governed by,
-------------
and interpreted in accordance with the provisions of, the laws of the State of
Texas, disregarding choice of law rules.
14.10. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed an original, but
all of which together shall constitute one and the same instrument.
14.11. Filing. The Company shall cause a counterpart of this Agreement to
------
be placed on file at its principal place of business and in its registered
office in the State of Texas, and this Agreement shall be subject to the same
right of examination by a Shareholder, in person or by attorney or other agent,
as are the books and records of the Company.
32
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14.12. Gender. Whenever the context requires, the gender of all words
------
used in this Agreement shall include the masculine, feminine and neuter, and the
singular of any word shall include the plural.
14.13. Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the successors and assigns of each party hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first written above.
THE COMPANY: DTM CORPORATION
- -----------
By: /s/ John S. Murchison, III
-------------------------------
John S. Murchison, III, President
THE SHAREHOLDERS:
- ----------------
A.
/s/ J.J. Beaman
--------------------------------
Dr. Joseph J. Beaman
B.
/s/ Dr. Carl R. Deckard
--------------------------------
Dr. Carl R. Deckard
C.
/s/ Paul McClure
--------------------------------
Dr. Paul F. McClure
D.
/s/ Sally L. Deckard
--------------------------------
Sally L. Deckard
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E. The Thomas Roland Deckard Trust
By: /s/ Rebecca A. English , Co-Trustee
--------------------------------
By: /s/ Luisa M. Deckard , Co-Trustee
--------------------------------
F. The Michael Edison Deckard Trust
By: /s/ Rebecca A. English , Co-Trustee
--------------------------------
By: /s/ Luisa M. Deckard , Co-Trustee
--------------------------------
G. The BFGoodrich Company
By: /s/ D. L. Tobler
--------------------------------
Name: _____________________________
Title:_____________________________
H. DTM Holdings, Ltd.
By: Financial Services-Austin, Inc.,
General Partner
By: /s/ Bradley A. Fowler
------------------------------------
Name: Bradley A. Fowler
----------------------------------
Title: President
---------------------------------
I. THE UNIVERSITY OF TEXAS
By: /s/ T. Ricks
--------------------------------
Name: _____________________________
Title:_____________________________
34
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JOINDER OF SPOUSES. THE SPOUSE OF EACH MARRIED SHAREHOLDER HEREBY JOINS IN
------------------
THE EXECUTION OF THIS AGREEMENT TO EVIDENCE THAT SUCH SPOUSE AGREES TO BE BOUND
BY THIS AGREEMENT AND THAT THE ENTIRE INTEREST THAT SUCH SPOUSE MAY NOW HAVE OR
HEREAFTER ACQUIRE IN ANY SHARES OF STOCK OF THE COMPANY HELD BY THE SHAREHOLDER
TO WHOM SUCH SPOUSE IS MARRIED SHALL IN ALL RESPECTS BE SUBJECT TO THE TERMS OF
THIS AGREEMENT. SUCH SPOUSE AGREES THAT THE SHAREHOLDER TO WHOM SHE IS MARRIED
SHALL HAVE AND IS HEREBY GRANTED ALL NECESSARY RIGHT AND AUTHORITY TO SELL,
ASSIGN, CONVEY, GIVE OR OTHERWISE TRANSFER OR DISPOSE OF ANY OR ALL OF HER
INTEREST (IF ANY) IN THE SHARES OF STOCK HELD BY SUCH SHAREHOLDER WHEN SUCH
SHAREHOLDER'S INTEREST THEREIN IS TRANSFERRED OR DISPOSED OF AS PROVIDED FOR OR
REQUIRED BY ANY PROVISIONS OR TERMS OF THIS AGREEMENT. SUCH SPOUSE'S EXECUTION
OF THIS AGREEMENT DOES NOT, HOWEVER, CONSTITUTE SUCH SPOUSE AS A SHAREHOLDER OR
INDICATE THAT SUCH SPOUSE HAS ANY RIGHTS OR PRIVILEGES AS A SHAREHOLDER OF THE
COMPANY. SUCH SPOUSE SHALL BECOME A SHAREHOLDER IN RESPECT OF SHARES OF STOCK
HELD BY THE SHAREHOLDER TO WHOM SUCH SPOUSE IS MARRIED ONLY UPON THE DISPOSITION
OF SUCH STOCK TO SUCH SPOUSE BY SUCH SHAREHOLDER.
/s/ Lisa E. Beaman /s/ Sharon M. McClure
- ------------------------- -------------------------------
Lisa E. Beaman Sharon M. McClure
Exhibits: A. Addresses for Notice
35
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EXHIBIT A
ADDRESSES FOR NOTICE
--------------------
If to DTM: If to Holdings:
- --------- --------------
DTM Corporation DTM Holdings, Ltd.
1611 Headway Circle c/o Bradley A. Fowler, President
Building 2 Financial Services - Austin Inc.
Austin, TX 78754 211 E. 7th Street, Suite 707
Fax: (512) 339-0634 Austin, TX 78701
Attn: President Fax: (512) 476-4625
If to Beaman: If to McClure:
- ------------ -------------
Dr. Joseph J. Beaman Dr. Paul F. McClure
DTM Corporation 7505 Greenhaven Drive
1611 Headway Circle Austin, TX 78757
Building 2 Phone: (512) 454-8393
Austin, TX 78754
Fax: (512) 339-0634
If to BFG: If to UT:
- --------- --------
The B.F.Goodrich Company The University of Texas
3925 Embassy Parkway Office of Asset Management
Akron, Ohio 44333-1799 210 W. 6th Street
Fax: (330) 374-3456 Austin, TX 78701
Attn: Secretary Fax (512) 499-4365
Attn: Thomas G. Ricks
If to Dr. Carl Deckard: If to Deckard Trust Funds:
- ---------------------- -------------------------
Dr. Carl R. Deckard c/o Becky English, Co-Trustee
Dept. Of Mechanical Engineering 802 E. Bernard Street
Rigs 318 W. Columbia, TX 77486
Clemson University Fax: (409) 848-8337
P.O. Box 340921 c/o Lucy Deckard, Co-Trustee
Clemson, SC 29634-0921 4 Marie Court
Fax: (803) 656-4435 Newark, DE 19713
If to Sally L. Deckard:
- ----------------------
200 Cedar Lane
Clemson, SC 29631
Phone: (864) 654-5503
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EXHIBIT 10.12
AUGUST MANAGEMENT, INCORPORATED
INDUSTRIAL REAL ESTATE LEASE
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease (the "Lease")
between the Landlord and Tenant named below. Other Articles, Sections and
Paragraphs of the Lease referred to in this Article One explain and define the
Basic Terms and are to read in conjunction with the Basic Terms.
Section 1.01. Date of Lease. May 4, 1990
Section 1.02. Landlord. August Properties Fund 82 and August Properties
Fund III.
Address of Landlord: 2361 Campus Drive, Suite 204, Irvine, California 92715.
Section 1.03. Tenant. DTM Corporation, a Texas corporation
Address of Tenant: 1611 Headway Circle, Building II, Austin, Texas 78754
Section 1.04. Property. (Include street address, approximate square
footage and description) 1611 Headway Circle, Building II (approximately 30,000
square feet). See Exhibit A attached hereto. The Property is part of a multi-
tenant industrial/commercial real property development of Landlord, shown on an
exhibit attached hereto and incorporated herein by this reference (the
"Project"). The Project includes the land, the building(s) and all other
improvements located thereon, and the common areas described in Paragraph
4.05(a) herein.
Section 1.05. Lease Term. 7 years beginning on (see attached Addendum) or
such other date as is specified in this Lease, and ending on (see attached
Addendum).
Section 1.06. Permitted Uses. (See Section 5.01). See attached Addendum.
Section 1.07. Tenant's Guarantor. (If none, so state) None.
Section 1.08. Landlord's Broker. (See Article Fourteen) (If none, so
state) Cushman & Wakefield of Texas, Inc. (Robert B. Wynn).
Section 1.09. Tenant's Broker. (If none, so state) Carter King & Company.
Section 1.10. Initial Security Deposit. (See Paragraph 3.03 and
13.03(c)). Twenty-Five Thousand and No/100 ($25,000.00) dollars.
Section 1.11. Vehicle Parking Space Allocated to Tenant. sixty (60).
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Section 1.12. Rent and Other Charges Payable by Tenant.
(a) BASE RENT. See attached Addendum.
(b) OTHER PERIODIC PAYMENTS. (i) Real Property Taxes above the
"Base Real Property Taxes" (See Section 4.02); (ii) Utilities (See Section
4.03); (iii) Insurance Premiums above the "Base Premiums" (See Section 4.04);
(iv) Common Area Charges above the "Base Common Area Charges" (See Section
4.05); (v) Maintenance, Repairs and Alterations (See Article Six).
Section 1.13. Costs and Charges Payable by Landlord.
(a) BASE REAL PROPERTY TAXES. (See Section 4.02),
(b) BASE INSURANCE PREMIUMS. (See Section 4.04(c)),
(c) BASE COMMON AREA COSTS. (See Section 4.05), and
(d) MAINTENANCE AND REPAIR. (See Article Six).
Section 1.14. Addendum. The following Addendum (Addenda) are attached to
and made a part of this Lease: (If none, so state) Addendum attached.
ARTICLE TWO: LEASE TERM
Section 2.01. Lease of Property For Lease Term. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.05 above and shall
begin and end on the dates specified in Section 1.05 above, unless the beginning
or end of the Lease Term is changed under any provisions of this Lease. The
"Commencement Date" shall be the date specified in Section 1.05 above for the
beginning of the Lease Term, unless advanced or delayed under any provision of
this Lease.
Section 2.02. Intentionally omitted.
Section 2.03. Early Occupancy. If Tenant occupies the Property prior to
the Commencement Date with Landlord's prior consent, Tenant's occupancy of the
Property shall be subject to all of the provisions of this Lease. Early
occupancy of the Property shall not advance the expiration date of this Lease.
Tenant shall pay Base Rent and all other charges specified in this Lease for the
early occupancy period.
Section 2.04. Holding Over. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse
Landlord for and indemnify Landlord against all damages incurred by Landlord
from any delay by Tenant in vacating the Property. If Tenant does not vacate
the Property upon the expiration or earlier termination of the Lease and
Landlord
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thereafter accepts rent from Tenant, Tenant's occupancy of the Property shall be
a "month-to-month" tenancy, subject to all of the terms of this Lease applicable
to a month-to-month tenancy, except that the Base Rent then in effect shall be
increased by fifty-percent (50%).
ARTICLE THREE: BASE RENT
Section 3.01. Time and Manner of Payment. Upon execution of this Lease,
Tenant shall pay Landlord the Base Rent in the amount stated in Paragraph
1.12(a) above for the first month of the Lease Term. On the first day of the
second month of the Lease Term and each month thereafter, Tenant shall pay
Landlord the Base Rent, in advance, without offset, deduction or prior demand
except as provided in Section 7.05 and Article Eight. The Base Rent shall be
payable at Landlord's address or at such other place as Landlord may designate
in writing.
Section 3.02. Intentionally omitted.
Section 3.03. Intentionally omitted.
Section 3.04. Termination; Advance Payments. Within thirty (30) days
after termination of this Lease under Article Seven (Damage or Destruction),
Article Eight (Condemnation) has vacated the Property in the manner required by
this Lease, an equitable adjustment shall be made concerning advance rent,
accrued real property taxes, and any other advance payments made by Tenant to
Landlord.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01. Additional Rent. All charges payable by Tenant other than
Base Rent are called "Additional Rent." Unless this Lease provides otherwise,
all Additional Rent shall be paid with the next monthly installment of Base
Rent. The term "rent" shall mean Base Rent and Additional Rent.
Section 4.02. Real Property Taxes. (a) Payment of Taxes. Landlord shall
pay the "Base Real Property Taxes" on the Property during the Lease Term. Base
Real Property Taxes are real property taxes applicable to the Property as shown
on the tax bill for the most recent tax fiscal year ending prior to the
Commencement Date. However, if the structures on the Property are not completed
by the tax lien date of such tax fiscal year, the Base Real Property Taxes are
the taxes shown on the first tax bill showing the full assessed value of the
Property after completion of the structures. Tenant shall pay Landlord the
amount, if any, by which the real property taxes during the Lease Term exceed
the Base Real Property Taxes. Subject to Paragraph 4.02(c), Tenant shall make
such payments within thirty (30) days after receipt of Landlord's statement
showing the amount and computation of such increase.
(b) Definition of "Real Property Tax." "Real property tax" means
general real property and improvement taxes including but not limited to: (i)
any fees, license fee, license tax, business license fee, commercial rental tax,
levy, charge, assessment, penalty or tax imposed by any
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taxing authority against the Property; (ii) any tax on the Landlord's right to
receive, or the receipt of, rent or income from the Property or against
Landlord's business of leasing the Property; (iii) any tax or charge for fire
protection, streets, sidewalks, road maintenance, refuse or other service
provided to the Property by any governmental agency; (iv) any tax imposed upon
this transaction or based upon a re-assessment of the Property due to a change
in ownership or transfer of all or part of Landlord's interest in the Property;
and (v) any charge or fee in addition to or in substitution, partially or
totally, of any tax previously included within the definition of real property
tax. "Real property tax" does not, however, include Landlord's federal, state
or local income, franchise, inheritance or estate taxes. See attached Addendum.
(c) Joint Assessment. If the Property is not separately assessed,
Tenant's share of the real property tax payable by Tenant under Paragraph
4.02(a) shall be determined from the assessor's worksheets or other reasonably
available information. Subject to Section 4.05(e), Landlord shall make a
reasonable determination of Tenant's proportionate share of such real property
tax and Tenant shall pay such share to Landlord within thirty (30) days after
receipt of Landlord's written statement.
(d) Personal Property Taxes.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxed separately from the Property.
(ii) To the extent not included as "real property tax," Tenant
shall pay all taxes on the value of any lease-hold improvements, alterations or
additions made in or to the Property, regardless of whether title to such
improvements, alterations or additions shall be in the name of Landlord or
Tenant.
(iii) If any of Tenant's personal property is taxed with the
Property, Tenant shall pay Landlord the taxes for the personal property within
thirty (30) days after Tenant receives a written statement from Landlord for
such personal property taxes.
(e) Tenant's Right to Contest Taxes: Tenant may attempt to have the
assessed valuation of the Property reduced or may initiate proceedings to
contest the real property taxes. If required by law, Landlord shall join in the
proceedings brought by Tenant. However, Tenant shall pay all costs of the
proceedings, including any reasonable costs or fees incurred by Landlord. Upon
the final determination of any proceedings or contest, Tenant shall immediately
pay the real property taxes due, together with all costs, charges, interest and
penalties incidental to the proceedings. If Tenant does not pay the real
property taxes when due and contests such taxes, Tenant shall not be in default
under this Lease for non payment of such taxes if Tenant deposits funds with
Landlord or opens an interest bearing account reasonably acceptable to Landlord
in the joint names of Landlord and Tenant. The amount of such deposit shall be
sufficient to pay the real property taxes plus a reasonable estimate of the
interest, costs, charges and penalties which may accrue if Tenant's action is
unsuccessful, less any applicable tax impounds previously paid by Tenant to
Landlord. The
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<PAGE>
deposit shall be applied to the real property taxes due, as determined at such
proceedings. The real property taxes shall be paid under protest from such
deposit if such payment under protest is necessary to prevent the Property from
being sold under a "tax sale" or similar enforcement proceedings.
Section 4.03. Utilities: Tenant shall pay, directly to the appropriate
supplier, when due, the cost of all natural gas, heat, light, power, sewer
service, telephone, water, refuse disposal and other utilities and services
supplied to the Property, together with any taxes thereon from and after
delivery of possession of the Property. Landlord shall not be liable in damages
or otherwise for any failure or interruption of any utility service being
furnished to the property, and no such failure or interruptions entitle Tenant
to terminate the Lease or to abate payment of any portion of the rent due
hereunder, except as is otherwise provided in the attached Addendum.
Section 4.04. Insurance Premiums:
(a) Liability and Property Damage Insurance: During the Lease Term,
Tenant shall maintain a policy of comprehensive public liability and property
damage insurance at Tenant's expense, insuring Tenant and Landlord (as an
"additional named insured") against liability arising out of the ownership, use
occupancy or maintenance of the Property. The initial amount of such insurance
shall be at least $1,000,000 combined single limit with property damage
insurance of $50,000 and shall be subject to periodic increases based upon
inflation, increased liability awards, recommendation of professional insurance
advisors, and other relevant factors; provided, however, that such insurance
limits shall not be increased beyond the insurance limits commonly maintained
for similar buildings and tenants in the Walnut Creek Business Park in Austin,
Texas. However, the amount of such insurance shall not limit Tenant's liability
nor relieve Tenant of any obligation hereunder. The policy shall insure
Tenant's performance of the indemnity provisions of Section 5.04. Such policy
shall contain a provision which prohibits cancellation or modification of the
policy except upon thirty (30) days prior written notice to Landlord. Tenant
shall deliver a copy of such policy or certificate (or a renewal thereof) to
Landlord prior to the Commencement Date and prior to the expiration of any such
policy during the Lease Term. Landlord may also elect to maintain, at
Landlord's expense, a Landlord's protective liability endorsement with respect
to the Property. Tenant shall, at Tenant's expense, maintain such other
liability insurance as Tenant deems necessary to protect Tenant.
(b) Hazard and Rental Income Insurance: During the Lease Term,
Landlord shall maintain policies of insurance covering loss of or damage to the
Property in such amount or percentage of replacement value as Landlord or its
insurance advisor deems reasonable in relation to the age, location, type of
construction and physical condition of the Property and the availability of such
insurance at reasonable rates. Such policies shall provide protection against
all perils included within the classification of fire, extended coverage,
vandalism, malicious mischief, special extended perils (all _______, sprinkler
leakage, and any other perils (except flood and earthquake)) which Landlord
deems necessary. Landlord may obtain insurance coverage for Tenant's fixtures,
equipment or building improvements installed by Tenant in or on the Property.
Tenant shall, at Tenant's expense, maintain such primary or additional insurance
on its fixtures, equipment and
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building improvements as Tenant deems necessary to protect its interest. Tenant
shall not do or permit to be done anything which invalidates any such insurance
policies of either Landlord or Tenant.
(c) Payment of Premiums: Insurance Policies.
(i) Landlord shall pay the "Base Premiums" for the insurance
policies maintained by Landlord under Paragraph 4.04(b). If the Property has
been previously fully occupied, the "Base Premiums" are the insurance premiums
paid during or applicable to the last twelve (12) months of such prior
occupancy. If the Property has not been previously fully occupied or has been
occupied for less than twelve (12) months, the base Premiums are the lowest
annual premiums reasonably obtainable for the required insurance for the
Property as of the Commencement Date.
(ii) Tenant shall pay Landlord the amount, if any, by which the
insurance premiums for all policies maintained by Landlord under Paragraph
4.04(b) have increased over the Base Premiums, whether such increases result
from the nature of Tenant's occupancy, any act or omission of Tenant, the
reasonable requirement of any lender referred to in Article Eleven (Protection
of Lenders), the increased value of the Property or general rate increases.
However, if Landlord substantially increases the amount of insurance carried or
the percentage of insured value after the period during which the Base Premiums
were calculated, Tenant shall only pay Landlord the amount of increased premiums
which would have been charged by the insurance carrier if the amount of
insurance or percentage of insured value had not been substantially increased by
Landlord. This upon the amount due from Tenant shall be made only once during
the Lease Term. Thereafter, Tenant shall be obligated to pay the full amount of
any additional increases in the insurance premiums, including increases
resulting from any further increases in the amount of insurance or percentage of
insured value. Subject to Section 4.05(e), Tenant shall pay Landlord the
increases over the Base Premiums within thirty (30) days after receipt by Tenant
of a copy of the premium statement or other evidence of the amount due. If the
insurance policies maintained by Landlord cover improvements or real property
other than the Property, Landlord shall also deliver to Tenant a statement of
the amount of the premiums applicable to the Property showing, in reasonable
detail, how such amount was computed. If the Lease Term expires before the
expiration of the insurance period, Tenant's liability shall be prorated on an
annual basis. See attached Addendum.
Section 4.05. Common Areas; Use, Maintenance and Costs.
(a) Common Areas. As used in this Lease, "Common Areas" shall mean
all areas within the Project which are available for the common use of tenants
of the Project and which are not leased or held for the exclusive use of Tenant
or other tenants, including, but not limited to, parking areas, driveways,
sidewalks, loading areas, access roads, corridors, landscaping and planted
areas. Landlord may from time to time change the size, location, nature and use
of any of the Common Areas, including converting Common Areas into leasable
areas, constructing additional parking facilities (including parking structures)
in the Common Areas, and increasing or decreasing
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Common Area land and/or facilities. Tenant acknowledges that such activities
may result in occasional inconvenience to Tenant from time to time. Such
activities and changes shall be expressly permitted if they do not materially
affect Tenant's use of the Property, the Common Areas and vehicle parking spaces
allocated to Tenant. Tenant shall not be entitled to any abatement of rent for
the foregoing activities.
(b) Use of Common Areas. Tenant shall have the nonexclusive right
(in common with other tenants and others to whom Landlord has granted or may
grant such rights) to use the Common Areas for the purpose intended, subject to
such reasonable rules and regulations as Landlord may establish from time to
time. Tenant shall abide by such rules and regulations and shall use its best
effort to cause others who use the Common Areas with Tenant's expressed or
implied permission to abide by Landlord's rules and regulations. At any time,
Landlord may close any Common Area to perform any acts in and to the Common
Areas as, in Landlord's reasonable judgment, may be desirable to improve the
Project; provided, however, that such closure shall not materially interfere
with Tenant's right to use the Common Areas for more than thirty (30) days,
subject to extension for events beyond Landlord's control as provided in Section
13.13. Tenant, shall not, at any time, interfere with the rights of Landlord,
other Tenants, or any other person entitled to use the Common Areas. Tenant
acknowledges that Landlord makes no representation or warranty whatsoever
concerning the safety of the Common Areas or the adequacy of any security system
which may be instituted for the Common Areas, though Landlord is under no
obligation at all to install any security system whatsoever. In no event shall
Tenant have the right to sell or solicit in any manner upon or from any of the
Common Areas.
(c) Vehicle Parking. Tenant shall be entitled to use the vehicle
parking spaces on the Project allocated to Tenant in Section 1.11 of the Lease
without paying any additional rent. Tenant's parking shall not be reserved and
shall be limited to vehicles no larger than standard size automobiles or pickup
utility vehicles. Tenant shall not cause large trucks or other large vehicles
to be parked on the Project or on the adjacent public streets. Temporary
parking of large delivery vehicles on the Project may be permitted by the rules
and regulations established by Landlord. Vehicles shall be parked only in
striped parking spaces and not in driveways loading areas or other locations not
specifically designated for parking. If Tenant parks more vehicles in the
parking area than the number set forth in Section 1.11 of the Lease, such
conduct shall be a material breach of the Lease. In addition to Landlord's
other remedies under the Lease, Tenant shall pay a reasonable daily charge for
each such additional vehicle. See attached Addendum.
(d) Maintenance of Common Areas. Landlord shall maintain the Common
Areas in good order, condition and repair. Tenant shall pay Tenant's pro rata
share (as defined below) of the increase in costs over the costs incurred by
Landlord for the operation and maintenance of the Common Areas in the calendar
year 1990. Common Area costs include, but are not limited to, costs and
expenses for the following: gardening and landscaping; utilities, water and
sewage, charges, maintenance of signs (other than Tenant's signs); premiums for
liability, property damage, fire and other types of casualty insurance on the
Common Areas and worker's compensation insurance, all real property taxes and
assessments levied on or attributable to the Common Areas and all Common Area
improvements; all personal property taxes levied or attributable to personal
property used in
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connection with the Common Areas; straight-line depreciation on personal
property owned by Landlord which is consumed in the operation or maintenance of
the Common Areas, rental or lease payments paid by Landlord for rented or leased
personal property used in the operation or maintenance of the Common Areas; fees
for required licenses and permits, repairing, resurfacing, repaving,
maintaining, painting, lighting, cleaning, refuse removal, security and similar
items, and property management fees. Landlord may cause any or all of such
services to be provide by third parties. Common Area costs shall not include
depreciation of real property or new capital improvements which forms part of
the Common Areas. See attached Addendum.
(e) Tenant's Share and Payment. Landlord may, at Landlord's
election, estimate in advance and charge to Tenant monthly as Common Area costs,
all real property taxes for which Tenant is liable under Section 4.02 of the
Lease, all insurance premiums for which Tenant is liable under Section 4.04 of
the Lease, all common area costs for which Tenant is liable under Section 4.05,
and all maintenance and repair costs for which Tenant is liable under Section
6.04 of the Lease. See attached Addendum.
Tenant shall pay Tenant's pro rata share of said estimated costs, in advance, in
monthly installments on the first day of each month during the Lease Term
(prorated for any fractional month). Tenant's pro rata share shall be
calculated by dividing the square foot area of the Property, as set forth in
Section 1.04 of the Lease, by the aggregate square foot area of the Project
which is leased or held for lease for the exclusive use by Tenants upon the date
the computation is made. Landlord may adjust such estimates at any time and
from time to time based upon Landlord's experience and reasonable anticipation
of costs. Such adjustments shall be effective as of the next rent payment date
after notice to Tenant. After the end of each calendar year of the Lease Term,
Landlord shall endeavor to deliver to Tenant a statement prepared in accordance
with generally accepted accounting principles setting forth, in reasonable
detail, the actual costs paid or incurred by Landlord as provided herein, and
Tenant's pro rata share of the increase in said costs. Within fifteen (15) days
after receipt of such statement, there shall be an adjustment between Landlord
and Tenant with payment to or credit given by Landlord (as the case may be) so
that Landlord shall receive the entire amount of Tenant's share of such costs
and expenses for such period. Any changes in the costs and/or the aggregate
area leased or held for lease for the exclusive use of all Tenants of the
Project during the Lease Term shall be effective on the first day of the month
after such change occurs.
Section 4.06. Late Charges. Tenant's failure to pay rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but
are not limited to, processing and accounting charges and late charges which may
be imposed on Landlord by any ground lease, mortgage or trust deed encumbering
the Property. Therefore, if Landlord does not receive any rent payment by the
tenth (10th) day of the month, Tenant shall pay Landlord a late charge equal to
three percent (3%) of the overdue amount. The parties agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of such late payment. See attached Addendum.
Section 4.07. Interest on Past Due Obligations. Any amount owed by Tenant
to Landlord which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from
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the due date of such amount. However, interest shall not be payable on late
charges to be paid by Tenant under this Lease. The payment of interest on such
amounts shall not excuse or cure any default by Tenant under this Lease. If the
interest rate specified in this Lease is higher than the rate permitted by law,
the interest rate is hereby decreased to the maximum legal interest rate
permitted by law.
Section 4.08. Intentionally omitted.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01. Section Permitted Uses. Tenant may use the Property only
for the Permitted Uses set forth in Section 1.06 above.
Section 5.02. Manner of Use. Tenant shall not cause or permit the
Property to be used in any way which constitutes a violation of any law,
ordinance, or governmental regulation or order, which annoys or interferes with
the rights of tenants of the development of which the Property is part or which
constitutes a nuisance or waste. Tenant shall obtain and pay for all permits,
including a Certificate of Occupancy, required for Tenant's occupancy of the
Property and shall promptly take all substantial and non-substantial actions
necessary to comply with all applicable statutes, ordinances, rules,
regulations, orders and requirements regulating the use by Tenant of the
Property, including the Occupational Safety and Health Act.
Section 5.03. Signs and Auctions. Tenant shall not place any signs on the
Property or Building of which the Property is a part without Landlord's prior
written consent. Tenant shall not conduct or permit any auctions or sheriff's
sales at the Property.
Section 5.04. Indemnity. Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant's use of the Property; (b) the conduct of Tenant's business or anything
else done or permitted by Tenant to be done in or about the Property; (c) any
breach or default in the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant. Tenant shall defend Landlord against any
such cost, claim or liability at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any reasonable legal fees or costs incurred by Landlord in
connection with any such claim. As a material part of the consideration to
landlord, Tenant hereby assumes all risk of damage to property or injury to
persons in or about the Property arising from any cause, and Tenant hereby
waives all claims in respect thereof against Landlord, except for any claim
arising out of Landlord's gross negligence or willful misconduct. See attached
Addendum.
Section 5.05. Landlord's Access. Landlord or its agents may enter the
Property to show the Property to potential buyers, investors, tenants or other
parties, or for any other purpose Landlord deems necessary. Landlord shall give
Tenant prior notice of such entry, except in the case of an emergency. Landlord
may place customary "For Sale" or "For Lease" signs on the Property. See
attached Addendum.
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Section 5.06. Quiet Possession. If Tenant pays the rent and complies with
all other terms of this Lease, Tenant may occupy and enjoy the Property for the
full Lease Term, subject to the provisions of this Lease.
Section 5.07. Mechanics Liens. Tenant hereby agrees that it will pay or
cause to be paid all costs for work done by it or caused to be done by it o the
Property, and it will keep the property free and clear of all mechanics' liens
on account of work done by Tenant or persons claiming under it. Tenant hereby
agrees to indemnify and save Landlord free and harmless against liability, loss
damage, costs, attorneys' fees, and all other expenses on account of claims of
lien of laborers or materialmen or others for work performed or materials or
supplies furnished for Tenant or persons claiming under it.
If Tenant shall desire to contest any claim of lien, it shall furnish
Landlord adequate security of the value or in the amount of the claim, plus
estimated costs and interest, or a bond of a responsible corporate surety in
such amount as is necessary to release the lien. If a final judgment
establishing the validity or existence of a lien for any amount is entered,
Tenant shall pay and satisfy the same at once.
If Tenant shall be in default in paying any charge for which a mechanic's
lien claim and suit to foreclose the lien have been filed and shall not have
given Landlord security to protect the Property and Landlord against such claim
of lien, then Landlord may, but shall not be obligated to, pay said claim and
any costs, and the amount so paid, together with reasonable attorneys' fees
incurred in connection therewith, shall be immediately due and owing from Tenant
to Landlord, and Tenant agrees to and shall pay the same with interest at the
prime commercial rate then being charged by the Bank of America plus two percent
(2%) per annum from the dates of Landlord's payments, but not to exceed the
maximum legal rate of interest per annum.
Should any claims of lien be filed against the Property or any action
affecting the title to such Property be commenced, the Party receiving notice of
such lien or action shall forthwith give the other party written notice thereof.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.01. Existing Conditions. Tenant accepts the Property in its
condition as of the execution of the Lease, subject to all laws, ordinances, and
governmental regulations and orders. Tenant acknowledges that neither Landlord
nor any agent of Landlord has made any representation as to the condition of the
Property or the suitability of the Property for Tenant's intended use, the
physical condition of the Building of which the Property may form a part; the
land upon which it is erected; the rents, leases, expenses or any other matter
or thing affecting or related to the Property except as set forth herein; and no
rights, easements or licenses are acquired by Tenant, by implication or
otherwise, except as expressly set forth herein. See attached Addendum.
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Section 6.02. Exemption of Landlord from Liability. Subject to Sections
16.01 and 5.04 and any other similar provision of this Lease expressly to the
contrary, Landlord shall not be liable for any damage or injury to the person,
business (or any loss of income therefrom), goods, wares, merchandise or other
property of Tenant, Tenant's employees, invitees, customers or any other person
in or about the Property, whether such damage or injury is caused by or results
from: (a) fire, steam, electricity, water, gas or rain; (b) the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures or any other cause; (c)
conditions arising in or about the Property or upon other portions of any
building of which the Property is a part, or from other sources or places; or
(d) any act or omission of any other tenant of any building of which the
Property is a part. Subject to Sections 16.01 and 5.04 and any other similar
provision of this Lease expressly to the contrary, Landlord shall not be liable
for any such damage or injury even though the cause of or the means of repairing
such damage or injury are not accessible to Tenant. The provisions of this
Section 6.02 shall not, however, exempt Landlord from liability for Landlord's
gross negligence or willful misconduct, or from any liability of Landlord under
Sections 16.01 or 5.04 of this Lease.
Section 6.03. Tenant's Obligations.
(a) Except as provided in Section 6.04 (Landlord's Obligations),
Article Seven (Damage and Destruction), and Article Eight (Condemnation), Tenant
shall keep all portions of the Property in good order, condition and repair. If
any portion of the Property or any system or equipment in the Property which
Tenant is obligated to repair cannot be fully repaired, Tenant shall promptly
replace such portion of or system or equipment in the Property, regardless of
whether the benefit of such replacement extends beyond the Lease Term. Tenant
shall maintain a preventative maintenance contract providing for the regular
inspection and maintenance of the heating and air conditioning system by a
licensed heating and air conditioning contractor, unless such equipment is
maintained by Landlord pursuant to Section 6.04. If any part of the Property or
Project is damaged by any act or omission of Tenant, Tenant shall pay Landlord
the cost of repairing or replacing such damaged property, whether or not
Landlord would otherwise be obligated to pay the cost of maintaining or
repairing such property. It is the intention of Landlord and Tenant that, at
all times during the Lease Term, Tenant shall maintain the portions of the
property, which it is obligated to maintain, in an attractive, first-class and
fully operative manner. Tenant shall not install any exterior lighting or
plumbing fixtures, shades or awnings, or make any exterior decoration or
painting or build any fences or install any radio or television antennae, loud
speakers, sound amplifiers or similar devices on the roof or exterior walls of
the Property, or make any changes to the storefront without Landlord's prior
written consent. Tenant expressly agrees that the roof areas shall be limited
to ingress for maintenance purposes only, with Landlord's prior written consent,
and such area shall not be used for storage of inventory or any other purpose.
See attached Addendum.
(b) All of Tenant's obligations under this Section shall be
accomplished at Tenant's sole expense. If Tenant fails to maintain or repair
the Property as required by this Section, Landlord shall have the right but not
the obligation, upon ten (10) days' prior written notice to Tenant (except that
no notice shall be required in the case of an emergency), to enter the Property
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and perform such maintenance or repair on behalf of Tenant. In such case,
Tenant shall reimburse Landlord for all costs incurred in performing such
maintenance or repair immediately upon demand.
Section 6.04. Section Landlord's Obligation.
(a) Except as provided in Article Seven (Damage & Destruction) herein
and Article Eight (Condemnation) herein Landlord shall keep the following in
good order, condition and repair, the foundations, exterior walls and exterior
roof of the Property (including painting the exterior walls of the Property not
more often than once every five (5) years, if necessary) and all components of
electrical, mechanical, plumbing, heating and air conditioning systems and
facilities located in the Property which are concealed or used in common by
tenants of the building in which the Property is located. However, Landlord
shall not be obligated to maintain or repair windows, doors, plate glass or the
interior surfaces of exterior walls. Landlord shall have no obligation to make
repairs under this Section until a reasonable time after receipt of written
notice from Tenant for the need for such repairs. See attached Addendum.
(b) Tenant shall pay all costs and expenses incurred by Landlord
under this Section excluding the cost of maintaining and repairing the
foundations, the structural portion of the Property (Landlord having liability
for maintaining and repairing the same), the roof of the Property and any
plumbing lines within the foundation of the Property, unless the need for
maintenance or repair of such plumbing lines arises from damage caused by the
act or neglect of Tenant, its agents, employees or invitees, in which event the
costs and expenses of such maintenance and repair shall be paid by Tenant.
(c) Landlord may either (i) estimate in advance all costs and
expenses of maintenance and repair for which Tenant is liable and charge such
costs and expenses to Tenant monthly as Common Area costs in the manner
described in Section 4.05 of the Lease or (ii) bill Tenant for the costs and
expenses for which Tenant is liable as such costs are incurred by Landlord.
Tenant expressly waives the benefit of any statute in effect now or in the
future which might give Tenant the right to make repairs at Landlord's expense
or to terminate this Lease due to Landlord's failure to keep the Property in
good order, condition and repair.
Section 6.05. Alterations, Additions, and Improvements.
(a) Tenant shall not make any alterations, additions, or improvements
to the Property without Landlord's prior written consent, except for non-
structural alterations which do not exceed in cost cumulatively over the Lease
Term and which are not visible from the outside of any building of which the
Property is part. Landlord may require Tenant to provide demolition and/or lien
and completion bonds in form and amount satisfactory to Landlord. Tenant shall
promptly remove any alterations, additions, or improvements constructed in
violation of this Paragraph 6.05(a) upon Landlord's written request. All
alterations, additions, and improvements will be accomplished in a good and
workmanlike manner, in conformity with all applicable laws and regulations, and
by a contractor approved by Landlord. Upon completion of any such work, Tenant
shall provide
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Landlord with "as built" plans, copies of all construction contracts, and proof
of payment for all labor and materials. See attached Addendum.
(b) Subject to Section 5.07, Tenant shall pay when due all claims for
labor and material furnished to the Property. Tenant shall give Landlord at
least ten (10) days' prior written notice of the commencement of any work on the
Property. Landlord may elect to record and post notices of non-responsibility
on the Property.
Section 6.06. Condition Upon Termination. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in good
condition except for ordinary wear and tear which Tenant was not otherwise
obligated to remedy under any provision of this Lease. However, Tenant shall not
be obligated to repair any damage which Landlord is required to repair under
Article Seven (Damage or Destruction). All alterations, additions and
improvements shall become Landlord's property and shall be surrendered to
Landlord upon the termination of the Lease, except that Tenant may remove any of
Tenant's machinery or equipment which can be removed without material damage to
the Property. Tenant shall repair, at Tenant's expense, any damage to the
Property caused by the removal of any such machinery or equipment. In no event,
however, shall Tenant remove any of the following materials or equipment without
Landlord's prior written consent: any power wiring or power panels; lighting or
lighting fixtures; wall coverings, drapes, blinds or other window coverings;
carpets or other floor coverings; heaters, air conditioners or any other heating
or air conditioning equipment; fencing or security gates; or other similar
building operating equipment and decorations.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01. Partial Damage to Property. Tenant shall notify Landlord in
writing immediately upon the occurrence of any damage to the Property. If the
Property is only partially damaged, this Lease shall remain in effect and
Landlord shall repair the damage as soon as reasonably possible. Such
reconstruction or repair shall be only to the extent necessary to restore the
Property to the condition existing on delivery of possession to Tenant. Tenant
shall be obligated for repairing or restoring all items installed by Tenant as
well as Tenant's other leasehold improvements, fixtures, equipment and personal
property on the Property.
Section 7.02. Total or Substantial Destruction. In the event of
substantial or total damage to or destruction of the Property by fire or other
casualty, Landlord shall, within ninety (90) days of the date of such casualty
have the right to elect and shall notify the Tenant in writing of its election,
either to (a) terminate the Lease as of the date of such casualty, or (b)
repair, restore or rehabilitate the Property, in which latter event this Lease
shall not terminate, and provided that the extent of such restoration shall
always be limited to the replacing of the Property to a condition reasonably
similar to that existing before the occurrence of such casualty. Tenant shall
not be entitled to any compensation or damages from Landlord for loss of the
Property or any inconvenience or annoyance occasioned by such damage and
reconstruction. In the event the Landlord elects to repair, restore or
rehabilitate the said Property, the Landlord shall commence such work in a
timely manner and shall complete such work within one hundred eighty (180) days
after the date of such casualty,
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subject to reasonable delays of up to sixty (60) days caused by the adjustment
of insurance strikes labor difficulties, or any other cause beyond Landlord's
control (except for lack of funds). This provision will govern over Section
13.13, and with regard to matters covered by this Section 7.02, no additional
time will be permitted pursuant to Section 13.13 or 13.03(b).
Section 7.03. Damage Near End of Term. Notwithstanding the foregoing, in
the event that the Property is partially or totally destroyed during the last
one (1) year of the Lease Term as renewed or extended, Landlord and Tenant each
shall have the option to terminate this Lease by giving written notice to the
other of the exercise of such option within thirty (30) days after such
destruction, in which event this Lease shall cease and terminate as of the date
of service of such notice. For the purposes of this Article Seven, partial
destruction shall be deemed to be a destruction to an extent of one-third (1/3)
or less of the full replacement cost of the Property as of the date of
destruction and substantial destruction shall be deemed to be anything greater.
Section 7.04. Release of Liability. In the event of any termination of
this Lease in accordance with this Article, the parties shall be released
thereby without further obligation to the other party coincidental with the
surrender of possession of the Property to Landlord except for items which have
theretofore accrued and are then unpaid, or unperformed.
Section 7.05. Abatement of Rent. In the event of reconstruction and
restoration as herein provided, the Rent provided to be paid under this Lease
shall be abated in the same proportion that Tenant's use of the Property is
impaired commencing from the date of construction and continuing during the
period of such reconstruction or restoration. Tenant shall continue the
operation of its business on the Property during any such period to the extent
reasonably practicable from the standpoint of prudent business management, and
the obligation of Tenant to pay all other charges, except the Base Rent, shall
remain in full force and effect. Tenant shall not be entitled to any
compensation or damages from Landlord for loss of the use of the whole or any
part of the Property, Tenant's personal property or any inconvenience or
annoyance occasioned by such destruction, reconstruction or restoration. Tenant
hereby waives any statutory rights of termination which may arise by reason of
any partial or total destruction of the Property which Landlord is obligated to
restore or may restore under Article Seven of this Lease.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of eminent
domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If more than twenty percent (20%) of the floor area of the building in which the
Property is located, or which is located on the Property, is taken, either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes possession). See attached Addendum. If neither Landlord or Tenant
terminates this Lease, this Lease shall remain in effect as to the portion of
the Property not taken, except that the Base Rent shall be reduced in
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proportion to the reduction in the floor area of the Property. Any Condemnation
award or payment shall be distributed in the following order: (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust encumbering the
Property, the amount of its interest in the Property; (b) second, to Tenant,
only the amount of any award specifically designated for loss of or damage to
Tenant's trade fixtures or removable personal property and tenant and moving
expenses; and (c) third, to Landlord, the remainder of such award, whether as
compensation for reduction in the value of the leasehold, the taking of the fee,
or otherwise, all other amounts except as specified in (a) or (b) hereof. If
this Lease is not terminated, Landlord shall repair any damage to the Property
caused by the Condemnation, except that Landlord shall not be obligated to
repair any damage for which Tenant has been reimbursed by the condemning
authority. If the severance damages received by Landlord are not sufficient to
pay for such repair, Landlord shall have the right to either terminate this
Lease or make such repair at Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. Landlord's Consent Required. No portion of the Property or
of Tenant's interest in this Lease may be acquired by any other person or
entity, whether by assignment, mortgage, sublease, transfer, operation of law,
or act of Tenant, without Landlord's prior written consent, except as provided
in Section 9.02 below. Landlord shall grant or withhold its consent as provided
in Section 9.04 below. Any attempted transfer without consent shall be void and
shall constitute a noncurable breach of this Lease. If Tenant is a partnership,
cumulative transfer of more than twenty percent (20%) of the partnership
interests shall require Landlord's consent. If Tenant is a corporation, any
change in a controlling interest of the voting stock of the corporation which
would result in B.F. Goodrich owning less than a controlling interest of the
voting stock of the corporation, shall require Landlord's consent. Landlord
shall charge Tenant a $750.00 fee for the transfer of this Lease as provided for
in this Article Nine.
Section 9.02. Tenant Affiliate. Tenant may assign this Lease or sublease
the Property, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant ("Tenant's
Affiliate"), provided Tenant remains primarily liable for the obligations of the
Lease (if Tenant is a surviving entity) and further provided that the financial
net worth of the transferee is the same or greater than Tenant's hereunder. In
such case, any Tenant's Affiliate shall assume in writing all of Tenant's
obligations under this Lease.
Section 9.03. No Release of Tenant. No transfer permitted by this Article
Nine, whether with or without Landlord's consent, shall release Tenant or change
Tenant's primary liability to pay the rent and to perform all other obligations
of Tenant under this Lease. Landlord's acceptance of rent from any other person
is not a waiver of any provision of this Article Nine. Consent to one transfer
is not a consent to any subsequent transfer. If Tenant's transferee defaults
under this Lease, Landlord may proceed directly against Tenant without pursuing
remedies against the transferee. Landlord may consent to subsequent assignments
or modifications of this Lease by Tenant's transferee, without notifying Tenant
or obtaining its consent. Such action shall not relieve Tenant's liability
under this Lease.
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Section 9.04. Landlord's Election. Tenant's request for consent to any
transfer described in Section 9.01 above shall be accompanied by a written
statement setting forth the details of the proposed transfer, including the
name, business and financial condition of the prospective transferee, financial
details of the proposed transfer (e.g., the term of and rent and security
deposit payable under any assignment or sublease), and any other information
Landlord deems relevant which statement shall be submitted to Landlord at least
sixty (60) days prior to the proposed "effective date" of the transfer.
Landlord shall have the right (a) to withhold consent, if reasonable; (b) to
grant consent; or (c) if the transfer is a sublease of the Property or an
assignment of this Lease, to terminate this Lease as of the effective date of
such sublease or assignment, in which case Landlord may elect to enter into a
direct lease with the proposed assignee or subtenant. Landlord and Tenant
acknowledge that it shall be reasonable for Landlord to withhold its consent to
any transfer herein excluding those in Section 9.02 if in Landlord's sole
discretion and opinion the quality of the business operation conducted on the
Property or throughout any portion of the Building of which the Property forms a
part or the Project is or may be adversely affected during the term of the Lease
by such proposed assignment or transfer or if the financial net work of the
proposed transferee is less than that of Tenant.
Section 9.05. No Merger. No merger shall result from Tenant's sublease of
the Property under this Article Nine, Tenant's surrender of this lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord thereunder.
Section 9.06. Excess Profits. In the event of any approved assignment or
sublease by Landlord of all or any portion of the Property where the rental
reserved in the assignment or sublease exceeds the rental or pro rata portion of
the rental, as the case may be, for such space reserved in this Lease, Tenant
shall pay Landlord monthly, as Additional Rent, at the same time as the monthly
installments of rent required hereunder, fifty percent (50%) of the excess of
the rental reserved in the assignment or sublease over the rental reserved in
this Lease, applicable to the assigned or subleased space. See attached
Addendum.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. Covenants and Conditions. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants
and conditions.
Section 10.02. Defaults. Tenant shall be in material default under this
Lease:
(a) If Tenant abandons the Property (pursuant to state law) or if
Tenant's vacation of the Property results in the cancellation of any insurance
described in Section 4.04;
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(b) If Tenant fails to pay rent or any other charge required to be
paid by Tenant, as and when due and such failure continues for five (5) business
days after written notice by Landlord;
(c) If Tenant fails to perform any of Tenant's non-monetary
obligations under this lease for a period of thirty (30) days after written
notice from Landlord; provided that if more than thirty (30) days are required
to complete such performance, Tenant shall not be in default if Tenant commences
such performance within the thirty (30) day period and thereafter diligently
pursues its completion. However, Landlord shall not be required to give such
notice if Tenant's failure to perform constitutes a non-curable breach of this
Lease. The notice required by this Paragraph is intended to satisfy any and all
notice requirements imposed by law on Landlord and is not in addition to any
such requirement;
(d) (i) If Tenant makes a general assignment or general arrangement
for the benefit of creditors; (ii) if a petition for adjudication of bankruptcy
or for reorganization or rearrangement is filed by or against Tenant and is not
dismissed within sixty (60) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant's assets located at the
Property or of Tenant's interest in this Lease and possession is not restored to
Tenant within sixty (60) days; or (iv) if substantially all of Tenant's assets
located at the Property or of Tenant's interest in this Lease is subjected to
attachment, execution or other judicial seizure which is not discharged within
sixty (60) days. If a court of competent jurisdiction determines that any of
the acts described in this subparagraph (d) is not a default under this Lease,
and a trustee is appointed to take possession (or if Tenant remains a debtor-in-
possession) and such trustee or Tenant transfers Tenant's interest hereunder,
then Landlord shall receive, as Additional Rent, the difference between the rent
(or any other consideration) paid in connection with such assignment or sublease
and the rent payable by Tenant hereunder.
Section 10.03. Remedies. On the occurrence of any material default of
Tenant, Landlord may, at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:
(a) Terminate Tenant's right to possession of the Property by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Property to Landlord. In such event,
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default, including (i) the worth at the time of
the award of the unpaid Base Rent, Additional Rent and other charges which had
been earned at the time of the termination; (ii) the worth at the time of the
award of the amount by which the unpaid Base Rent, Additional Rent and other
charges which would have been earned after termination until the time of the
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; (iii) the worth at the time of the award of the amount by
which the unpaid Base Rent, Additional Rent and other charges which would have
been paid for the balance of the term after the time of award exceeds the amount
of such rental loss that Tenant proves could have been reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under the
Lease or which in the
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ordinary course of things would be likely to result therefrom, including, but
not limited to, any costs or expenses incurred by Landlord in maintaining or
preserving the Property after such default, the cost of recovering possession of
the Property, expenses of reletting, including necessary renovation or
alteration of the Property, Landlord's reasonable attorneys' fees incurred in
connection therewith, and any real estate commission paid or payable. As used
in subparts (i) and (ii) above, the "worth at the time of the award" is computed
by allowing interest on unpaid amounts at the rate of fifteen percent (15%) per
annum, or such lesser amount as may then be the maximum lawful rate. As used in
subpart (iii) above, the "worth at the time of the award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award, plus one percent (1%). If Tenant shall have
abandoned the Property, Landlord shall have the option of (a) retaking
possession of the Property and recovering from Tenant the amount specified in
this Paragraph 1.03(a), or (b) proceeding under Paragraph 1.03(b); or (c)
exercise any other available right or remedy at law or in equity;
(b) Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Property. In such event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including the right to recover
the rent as it becomes due hereunder; and
(c) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state in which the Property is
located.
Section 10.04. Cumulative Remedies. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
Section 10.05. No Termination. No reentry or taking possession of the
Property by Landlord pursuant to this Article Ten shall be construed as an
election to terminate this Lease unless a written notice of such intention be
given to Tenant or unless determined by a court of competent jurisdiction.
Landlord may, at any time after such reletting, elect to terminate this Lease
for any such default by Tenant.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.01. Subordination. Landlord shall have the right to subordinate
this Lease to any ground lease, deed of trust or mortgage encumbering the
Property, any advances made on the security thereof and any renewals,
modifications, consolidations, replacements or extensions thereof, whenever made
or recorded. However, Tenant's right to quiet possession of the Property during
the Lease Term shall not be disturbed if Tenant pays the rent and performs all
of Tenant's obligations under this Lease and is not otherwise in default. If
any ground lessor, beneficiary or mortgagee elects to have this Lease prior to
the lien of its ground lease, deed of trust or mortgage and gives written notice
thereof to Tenant; this Lease shall be deemed prior to such ground lease, deed
of trust or mortgage whether this Lease is dated prior to subsequent to the date
of said ground lease, deed of trust or mortgage or the date or recording
thereof. See attached Addendum.
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Section 11.02. Attornment. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.
Section 11.03. Signing of Documents. Tenant shall sign and deliver any
reasonable instrument or documents necessary or appropriate to evidence any such
attornment or subordination or agreement to do so. If Tenant fails to do so
within thirty (30) days after written request, Tenant hereby makes, constitutes
and irrevocably appoints Landlord, or any transferee or successor of Landlord,
the attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
Section 11.04. Estoppel Certificates.
(a) Upon Landlord's written request, Tenant shall execute,
acknowledge and deliver to Landlord a written statement certifying: (i) that
none of the terms or provisions of this Lease have been changed (or if they have
been changed, stating how they have been changed); (ii) that this Lease has not
been cancelled or terminated (unless it has been cancelled or terminated, in
which event Tenant shall so state) (iii) the last date of payment of the Base
Rent and other charges and the time period covered by such payment; and (iv)
that Landlord is not in default under this Lease (or, if Landlord is claimed to
be in default, stating why). Tenant shall deliver such statement to Landlord
within ten (10) days after Landlord's written request. Any such statement by
Tenant may be given by Landlord to any prospective purchaser or encumbrancer of
the Property. Such purchaser or encumbrancer may rely conclusively upon such
statement as true and correct.
(b) If Tenant does not deliver such statement by Landlord within such
ten (10) day period, Landlord, and any prospective purchaser or encumbrancer,
may conclusively presume and rely upon the following facts: (i) that the terms
and provisions of this Lease have not been changed except as otherwise
represented by Landlord; (ii) that this Lease has not been cancelled or
terminated except as otherwise represented by Landlord; (iii) that not more than
one month's Base Rent or other charges have been paid in advance; and (iv) that
Landlord is not in default under the Lease. In such event, Tenant shall be
estopped from denying the truth of such facts.
Section 11.05. Intentionally omitted.
ARTICLE TWELVE: LEGAL COSTS
Section12.01. Legal Proceedings. Tenant shall reimburse Landlord, upon
demand, for any costs or expenses incurred by Landlord in connection with any
breach or default of Tenant under this Lease, whether or not suit is commenced
or judgment entered. Such costs shall include reasonable legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum
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as attorneys' fees and costs. Such attorneys' fees and costs shall be paid by
the losing party in such action. Tenant shall also indemnify Landlord against
and hold Landlord harmless from all costs, expenses, demands and liability
incurred by Landlord if Landlord becomes or is made a party to any claim or
action (a) instituted by Tenant, or by any third party against Tenant, or by or
against any person holding any interest under or using the Property by license
of or agreement with Tenant; (b) for foreclosure of any lien for labor or
material furnished to or for Tenant or such other person; (c) otherwise arising
out of or resulting from any act or transaction of Tenant or such other person;
or (d) necessary to protect Landlord's interest under this Lease in a bankruptcy
proceeding, or other proceeding under Title 11 of the United States Code, as
amended. Tenant shall defend Landlord against any such claim or action at
Tenant's expense with counsel reasonably acceptable to Landlord or, at
Landlord's election, Tenant shall reimburse Landlord for any reasonable legal
fees or costs incurred by Landlord in any such claim or action.
Section 12.02. Landlord's Consent. Tenant shall pay Landlord's reasonable
attorneys' fees incurred in connection with Tenant's request for Landlord's
consent under Article Nine (Assignment and Subletting) or in connection with any
other act which Tenant proposes to do and which requires Landlord's consent.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.01. Non-Discrimination. Tenant promises, and it is a condition
to the continuance of this Lease, that there will be no discrimination against,
or segregation of, any person or group of persons on the basis of race, color,
sex, creed, national origin or ancestry in the leasing, subleasing,
transferring, occupancy, tenure or use of the Property or any portion thereof.
Section13.02. Waiver of Subrogation. Landlord and Tenant each hereby
waive any and all rights of recovery against the other, or against the officers,
employees, agents or representatives of the other, for loss of or damage to its
property or the property of others under its control, if such loss or damage is
covered by any insurance policy in force (whether or not described in this
Lease) at the time of such loss or damage. Upon obtaining the policies of
insurance described herein, Landlord and Tenant shall give notice to the
insurance carrier or carriers of the foregoing mutual waiver of subrogation.
Section 13.03. Landlord's Liability; Certain Duties.
(a) As used in this Lease, the term "Landlord" means only the current
owner or owners of the fee title to the Property or the leasehold estate under a
ground lease of the Property at the time in question. Each Landlord is
obligated to perform the obligations of Landlord under this Lease only during
the time such Landlord owns such interest or title. Any Landlord who transfers
its title or interest is relieved of all liability with respect to the
obligations of Landlord under this Lease to be performed on or after the date of
transfer. However, each Landlord shall deliver to its transferee all funds
previously paid by Tenant if such funds have not yet been applied under the
terms of this Lease.
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(b) Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord and to any ground
lessor, mortgages or beneficiary under any deed of trust encumbering the
Property whose name and address have been furnished to Tenant in writing.
Landlord shall not be in default under this Lease unless Landlord (or such
ground lessor, mortgagee or beneficiary) fails to cure such non-performance
within thirty (30) days after receipt of Tenant's notice. However, if such non-
performance reasonably requires more than thirty (30) days to cure, Landlord
shall not be in default if such cure is commenced within such thirty (30) day
period and thereafter diligently pursued to completion. See attached Addendum.
Section 13.04. Severability. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
Section 13.05. Interpretation. The captions of the Articles or Sections of
this Lease are to assist the parties in reading this Lease and are not a part of
the terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors or others using the Property with Tenant's expressed or
implied permission.
Section 13.06. Incorporation of Prior Agreements; Modifications. This
Lease is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 13.07. Notices. All notices required or permitted under this Lease
shall be in writing and shall be personally delivered or sent by certified mail,
return receipt requested, postage prepaid. Notices to Tenant shall be delivered
to the address specified in Section 1.03 above, except that upon Tenant's taking
possession of the Property, the Property shall be Tenant's address for notice
purposes. Notices to Landlord shall be delivered to the address specified in
Section 1.02 above. All notices shall be effective upon delivery. Either party
may change its notice address upon written notice to the other party.
Section 13.08. Waivers. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.
Section13.09. No Recordation. Tenant shall not record this Lease without
prior written consent from Landlord. However, either Landlord or Tenant may
require that a "Short Form" memorandum of this Lease executed by both parties be
recorded.
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Section 13.10. Binding Effect; Choice of Law. This Lease binds any party
who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor unless
the rights or interests of Tenant's successor are acquired in accordance with
the terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease.
Section 13.11. Corporate Authority; Partnership Authority. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person signing this Lease for Tenant represents and warrants that he is a
general partner of the partnership, that he has full authority to sign for the
partnership and that this Lease binds the partnership and all general partners
of the partnership. Tenant shall give written notice to Landlord of any general
partner's withdrawal or addition. Within thirty (30) days after this Lease is
signed, Tenant shall deliver to Landlord a copy of Tenant's recorded statement
of partnership or certificate of limited partnership.
Section 13.12. Joint and Several Liability. All parties signing this Lease
as Tenant shall be jointly and severally liable for all obligations of Tenant.
Section 13.13. Force Majeure. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortages of labor or material, government regulation
or restriction and weather conditions. See attached Addendum.
ARTICLE FOURTEEN: BROKERS
Section 14.01. Brokers' Fee. When this Lease is signed by and delivered to
both Landlord and Tenant, Landlord shall pay a real estate commission as
provided in a written agreement attached hereto as Exhibit "C". Notwithstanding
the foregoing, Brokers hereby waive any and all rights and remedies they have or
might have under this Lease, including any and all rights and remedies as third
party beneficiaries under this Lease. The preceding sentence does not, however,
effect the separate enforceability of the agreement attached as Exhibit "C" as
between the parties to that agreement.
Section 14.02. Protection of Brokers. If Landlord sells the Property, or
assigns Landlord's interest in this Lease, the buyer or assignees shall, by
accepting such conveyance of the Property or assignment of the Lease, be
conclusively deemed to have agreed to make all payments to Landlord's Broker and
Tenant's Broker thereafter required of Landlord under this Article Fourteen and
Exhibit C, and upon such conveyance, Landlord shall be relieved of all
obligations to Landlord's Broker and to Tenant's Broker.
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Section 14.03. No Other Broker. Tenant represents and warrants to Landlord
that the brokers named in Sections 1.08 and 1.09 above are the only agents,
brokers, finders or other parties with whom Tenant has dealt who are or may be
entitled to any commission or fee with respect to this Lease or the Property.
ARTICLE FIFTEEN: SUBMISSION OF LEASE
The submission of this document for examination and negotiation does not
constitute an offer to lease, or a reservation of, or option for the Property;
and this document shall become effective and binding only upon execution and
delivery hereby by Tenant and by Landlord (or when duly authorized, by
Landlord's agent or employee). No act or omission of any agent of Landlord or
of Landlord's broker shall alter, change or modify any of the provisions hereof.
ARTICLE SIXTEEN: HAZARDOUS WASTE ACTIVITY
Section 16.01. Hazardous Waste Activity. Tenant agrees that it will
exercise all due care in its activities and operations on the Property. Tenant
agrees that this duty of due care shall extend to and include the disposal of
all hazardous waste, all hazardous waste being hazardous waste, any hazardous
substance, or any material which may injure property, flora, fauna, air, water,
subsurface rights, or humans, including but not limited to any hazardous waste
as defined by the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et sq., and any hazardous substance as defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq., from the premises. Tenant agrees that it will obtain all necessary
permits to dispose of such hazardous waste properly, and that it will not,
absent express prior written consent from Landlord, dispose of any hazardous
waste on, in, or adjoining the premises.
Tenant will further notify and obtain Landlord's express written consent
prior to any use of the Property to treat, store, or dispose of any hazardous
waste within the meaning of the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq.
Tenant further agrees that it will notify the Landlord immediately upon any
release (as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Section 9601, et seq.) of any hazardous
waste on the Property. Tenant will take all necessary and proper measures to
immediately remediate any such release and restore the Property to its original
condition.
In the event that any of Tenant's activities with respect to hazardous
waste cause any claim to be made against Landlord by any governmental entity or
person(s), then Tenant agrees to indemnify, defend, protect and hold Landlord
harmless against and from any and all damages, losses, liabilities, obligations,
penalties, claims, litigation, demands, defenses, judgments, suits, proceedings,
costs, disbursements or expenses of any kind or any nature whatsoever
(including, without limitation, reasonable attorneys' and experts' fees and
disbursements) which may at any time be imposed upon, incurred by, or asserted
or awarded against Landlord and arising from or out of:
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(1) Any hazardous waste on, in, under or affecting all or any portion
of the Property or any surrounding areas; or
(2) The enforcement of this Section or the assertion by Tenant of any
defense to its obligations hereunder.
Such liability shall include without limitation:
(1) The costs of removal of any and all hazardous wastes from any and
all portions of the Property or any surrounding areas.
DTM:
---
DTM CORPORATION, a Texas corporation
By: /s/ Paul F. McClure
-------------------------------
Paul F. McClure
President
EXHIBITS:
- --------
Exhibit A - The Property
Exhibit B - Mutual Recognition and Attornment Agreement
Exhibit C - Confidentiality Agreement
Exhibit D - Memorandum of Lease
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EXHIBIT A
---------
The Property
------------
Lot 2B HEADWAY 7A, a subdivision in Travis County, Texas, according to the map
or plat of record in Book 83, Pages 222B-222C, of the Plat Records of Travis
County, Texas.
A-1
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This page of document contains a plot titled "Headway Circle," which depicts
Buildings I,II, and III, among other things. There appears the following
language at the bottom of the page:
"Lot 1, HEADWAY 7, a subdivision in Travis County, Texas, according to the map
or plat thereof recorded in Volume 82, Pages 31-32, of the Plat Records of
Travis County, Texas."
A-2
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EXHIBIT B
---------
MATTERS OF RECORD
-----------------
1. Restrictive Covenants recorded in Volume 82, Pages 31-32, Plat Records
of Travis County, Texas; Volume 7188, Page 1326, and Volume 7327, Page 93, of
the Deed Records of Travis County, Texas; and in Volume 7988, Page 355, Volume
8447, Page 546, Volume 8531, Page 159, Volume 8812, Page 626, Volume 8996, Page
606, Volume 8996, Page 609, Volume 9741, Page 883, Volume 10393, Page 716, and
Volume 11077, Page 1736, of the Real Property Records of Travis County, Texas.
2. Twenty-five foot (25') building line along the north line of the
Project as shown on plat recorded in Volume 82, Page 31, Plat Records of Travis
County, Texas.
3. Easements as set out in Article VIII of the Restrictions recorded in
Volume 8447, Page 546, and Volume 10393, Page 716, of the Real Property Records
of Travis County, Texas.
4. Underground telecommunication systems easement granted to Southwestern
Bell Telephone Company recorded in Volume 8375, Page 180, Real Property Records
of Travis County, Texas.
5. Temporary electric and telephone line easement granted to the City of
Austin, recorded in Volume 8777, Page 71, Real Property Records of Travis
County,Texas.
6. Annual maintenance charge, together with special assessments for
capital improvements, as provided for in Restrictive Instrument recorded in
Volume 8447, Page 546 and Volume 10393, Page 716, of the Real Property Records
of Travis County, Texas.
7. Subordination Agreement dated June 30, 1989, by and between the First
West Companies and OmniSwiss Properties Ltd., recorded in Volume 11068, Page
1023, Real Property Records of Travis County, Texas.
8. Subordination Agreement dated June 30, 1989, by and between the First
West Companies and OmniSwiss Properties Ltd., recorded in Volume 11068, Page
1007, Real Property Records of Travis County, Texas.
9. Financing Statement No. 7875 filed November 20, 1986, recorded in
Volume 9981, Page 285, Real Property Records of Travis County, Texas, executed
by Dell Computer Corporation dba PC's Ltd., as debtor, to Centel Credit Company,
as secured party.
10. Deed of Trust dated June 30, 1989, filed for record in Volume 10978,
Page 892, Real Property Records of Travis County, Texas, executed by August
Properties Fund III to Ticor Title Insurance Company of California, Trustee, for
the benefit of OmniSwiss Properties Ltd., in the amount of $473,955.00, as
therein provided and all of the terms, provisions and conditions of said
instrument.
B-1
<PAGE>
11. Deed of Trust dated June 30, 1989, filed for record in Volume 10978,
Page 836, Real Property Records of Travis County, Texas, executed by August
Properties Fund 82 to Ticor Title Insurance Company of California, Trustee, for
the benefit of OmniSwiss Properties Ltd., in the amount of $231,545.00, as
therein provided and all of the terms, provisions and conditions of said
instrument.
12. Financing Statement No. 2829 filed July 13, 1989, recorded in Volume
10978, Page 1379, Real Property Records of Travis County, Texas, executed by
August Properties Fund III, as debtor, to OmniSwiss Properties, Ltd., as secured
party.
13. Financing Statement No. 2828 filed July 13, 1989, recorded in Volume
10978, Page 1385, Real Property Records of Travis County, Texas, executed by
August Properties Fund 82, as debtor, and OmniSwiss Properties Ltd., as secured
party.
B-2
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EXHIBIT C
CONFIDENTIALITY AGREEMENT
-------------------------
(Building I)
This Confidentiality Agreement ("Agreement") is made and is effective as of
the 4th day of May, 1990, by and between DTM CORPORATION (hereinafter
"Discloser") and AUGUST PROPERTIES FUND II and AUGUST PROPERTIES FUND III
(hereinafter "Disclosee").
W I T N E S S E T H:
-------------------
WHEREAS, Discloser possesses certain commercially useful technology
concerning the utilization of a directed energy beam to selectively sinter
powder materials to produce objects (hereinafter "Selective Laser Sintering
Technology").
WHEREAS, Disclosee has leased certain real property to Discloser pursuant
to that certain August Management, Incorporated Industrial Real Estate Lease
dated of even date herewith by and between Disclosee and Discloser ("Lease") and
may receive or obtain certain information regarding Discloser's operations in
the form of plans and specifications of Discloser's offices, assembly plant and
general business operations (such information together with the Selective Laser
Sintering Technology is hereinafter referred to collectively as "Confidential
Information").
WHEREAS, Disclosee may discover certain Confidential Information, whether
intentionally or inadvertently during permitted visits to Discloser's premises
which Disclosee has leased pursuant to the Lease ("Leased Premises").
NOW, THEREFORE, for and in consideration of the premises and the material
promises and covenants contained herein and in a lease between Discloser and
Disclosee, the receipt and sufficiency of which is hereby acknowledged,
Discloser and Disclosee agree as follows:
Disclosee shall safeguard all Confidential Information that is clearly
designated or marked confidential or proprietary either by notation on the
Confidential Information or by a sign placed in an area of the Leased Premises.
Disclosee shall not copy or transmit the Confidential Information to any other
party without permission of the Discloser. Disclosee shall return at
Discloser's request all Confidential Information so supplied or discovered.
Excepted from this agreement shall be information (i) generally available
to the public or which becomes a part of the public domain, (ii) information
known by Disclosee prior to receipt from Discloser or (iii) information obtained
from a third party not bound to Discloser under an arrangement of
confidentiality.
The term of this agreement shall be (a) continuous until superseded by
another agreement, and if not so superseded, (b) perpetual; provided, however,
if a claim arises under this Agreement, then such claim shall be filed in a
court of competent jurisdiction, if at all, on or before the following
applicable dates:
(i) Any claim involving the intentional misconduct, gross negligence or
wilful disregard of prudent business practices of Disclosee or any
party constituting Disclosee or any
C-1
<PAGE>
employee or partner of any party constituting Disclosee or any
employee, officer, shareholder or director of any such partner
(hereinafter all such claims being collectively called "Primary
Claims"), may be filed in a court of competent jurisdiction at any
time and from time to time, such claims having no limit as to when
they may be filed.
(ii) Any other claim (other than a Primary Claim) by Discloser against
Disclosee including, without limitation, any claim involving any
agent or contractor of Disclosee (hereinafter all such claims being
collectively called "Third Party Claims") must be filed in a court of
competent jurisdiction on or before the date which is five years
after the termination or expiration of the Lease; provided, however,
nothing contained herein shall be deemed to benefit any third party
including, without limitation, the agents and contractors of
Disclosee, and Discloser may at any time and from time to time file a
Third Party Claim in a court of competent jurisdiction against any
other party.
The laws of the State of Texas shall govern any disputes hereunder.
Notwithstanding anything to the contrary contained in this Agreement, under
no circumstances shall (1) Disclosee be liable to Discloser or any successor or
assign of Discloser as to any Third Party Claim for any sum in excess of the
total amount of Base Rent required to be paid by Discloser to Disclosee under
the terms of the Lease or (2) any employee, officer, shareholder or director of
any partner of Disclosee be liable to Discloser for any Third Party Claims due
solely to the status of such person as an employee, officer, shareholder or
director of such partner (as distinguished from the involvement of such
employee, officer, shareholder or director in a matter involving a Primary
Claim). Nothing contained herein shall be deemed to benefit any other party
including, without limitation, the agents and contractors of Disclosee, and
there shall be no limit imposed on Discloser with respect to any claims that may
be brought by Discloser against any such other party.
Notwithstanding anything to the contrary contained in the Lease, Disclosee,
its agents, employees and contractors shall not, except in a bona fide emergency
situation involving material injury to the Leased Premises (after Disclosee has
attempted to contact Discloser by telephone notifying Discloser of the emergency
situation and Disclosee's intentions), enter onto the Leased Premises without at
least 48 hours prior written notice delivered to Discloser at the address for
notice set forth in the Lease. Each agent, employee or contractor of Disclosee
so entering the Leased Premises shall at all times be accompanied by an employee
of Discloser. Further, at any time during Disclosee's inspection or entry into
the Leased Premises, Discloser shall be entitled to designate an area of the
Leased Premises, which does not exceed 20 percent of the floor area of the
Leased Premises, as an area into which Disclosee, its agents, employees,
contractors and other parties shall not enter.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the parties hereto and each party who is a Landlord or
Tenant under the Lease.
C-2
<PAGE>
IN WITNESS WHEREOF, Discloser and Disclosee have caused this Agreement to
be executed on the date first stated above.
AUGUST PROPERTIES FUND II,
a limited partnership
By: Provine & Associates,
a California corporation, general partner
By:________________________________________
Forbes W. Burdette,
Vice President
AUGUST PROPERTIES FUND III,
a limited partnership
By: Provine & Associates,
a California corporation,
general partner
By:________________________________________
Forbes W. Burdette,
Vice President
"Disclosee"
DTM CORPORATION
By:______________________________________________
Paul F. McClure, President
"Discloser"
C-3
<PAGE>
EXHIBIT D
CONFIDENTIALITY AGREEMENT
-------------------------
(Building III)
This Confidentiality Agreement ("Agreement") is made and is effective as of
the 4th day of May, 1990, by and between DTM CORPORATION (hereinafter
"Discloser") and AUGUST PROPERTIES FUND II and AUGUST PROPERTIES FUND III
(hereinafter "Disclosee").
W I T N E S S E T H:
-------------------
WHEREAS, Discloser possesses certain commercially useful technology
concerning the utilization of a directed energy beam to selectively sinter
powder materials to produce objects (hereinafter "Selective Laser Sintering
Technology").
WHEREAS, Disclosee has leased certain real property to Discloser pursuant
to that certain August Management, Incorporated Industrial Real Estate Lease
dated of even date herewith by and between Disclosee and Discloser ("Lease") and
may receive or obtain certain information regarding Discloser's operations in
the form of plans and specifications of Discloser's offices, assembly plant and
general business operations (such information together with the Selective Laser
Sintering Technology is hereinafter referred to collectively as "Confidential
Information").
WHEREAS, Disclosee may discover certain Confidential Information, whether
intentionally or inadvertently during permitted visits to Discloser's premises
which Disclosee has leased pursuant to the Lease ("Leased Premises").
NOW, THEREFORE, for and in consideration of the premises and the material
promises and covenants contained herein and in a lease between Discloser and
Disclosee, the receipt and sufficiency of which is hereby acknowledged,
Discloser and Disclosee agree as follows:
Disclosee shall safeguard all Confidential Information that is clearly
designated or marked confidential or proprietary either by notation on the
Confidential Information or by a sign placed in an area of the Leased Premises.
Disclosee shall not copy or transmit the Confidential Information to any other
party without permission of the Discloser. Disclosee shall return at
Discloser's request all Confidential Information so supplied or discovered.
Excepted from this agreement shall be information (i) generally available
to the public or which becomes a part of the public domain, (ii) information
known by Disclosee prior to receipt from Discloser or (iii) information obtained
from a third party not bound to Discloser under an arrangement of
confidentiality.
The term of this agreement shall be (a) continuous until superseded by
another agreement, and if not so superseded, (b) perpetual; provided, however,
if a claim arises under this Agreement, then such claim shall be filed in a
court of competent jurisdiction, if at all, on or before the following
applicable dates:
(i) Any claim involving the intentional misconduct, gross negligence or
wilful disregard of prudent business practices of Disclosee or any
party constituting Disclosee or any
D-1
<PAGE>
employee or partner of any party constituting Disclosee or any
employee, officer, shareholder or director of any such partner
(hereinafter all such claims being collectively called "Primary
Claims"), may be filed in a court of competent jurisdiction at any
time and from time to time, such claims having no limit as to when
they may be filed.
(ii) Any other claim (other than a Primary Claim) by Discloser against
Disclosee including, without limitation, any claim involving any
agent or contractor of Disclosee (hereinafter all such claims being
collectively called "Third Party Claims") must be filed in a court of
competent jurisdiction on or before the date which is five years
after the termination or expiration of the Lease; provided, however,
nothing contained herein shall be deemed to benefit any third party
including, without limitation, the agents and contractors of
Disclosee, and Discloser may at any time and from time to time file a
Third Party Claim in a court of competent jurisdiction against any
other party.
The laws of the State of Texas shall govern any disputes hereunder.
Notwithstanding anything to the contrary contained in this Agreement, under
no circumstances shall (1) Disclosee be liable to Discloser or any successor or
assign of Discloser as to any Third Party Claim for any sum in excess of the
total amount of Base Rent required to be paid by Discloser to Disclosee under
the terms of the Lease or (2) any employee, officer, shareholder or director of
any partner of Disclosee be liable to Discloser for any Third Party Claims due
solely to the status of such person as an employee, officer, shareholder or
director of such partner (as distinguished from the involvement of such
employee, officer, shareholder or director in a matter involving a Primary
Claim). Nothing contained herein shall be deemed to benefit any other party
including, without limitation, the agents and contractors of Disclosee, and
there shall be no limit imposed on Discloser with respect to any claims that may
be brought by Discloser against any such other party.
Notwithstanding anything to the contrary contained in the Lease, Disclosee,
its agents, employees and contractors shall not, except in a bona fide emergency
situation involving material injury to the Leased Premises (after Disclosee has
attempted to contact Discloser by telephone notifying Discloser of the emergency
situation and Disclosee's intentions), enter onto the Leased Premises without at
least 48 hours prior written notice delivered to Discloser at the address for
notice set forth in the Lease. Each agent, employee or contractor of Disclosee
so entering the Leased Premises shall at all times be accompanied by an employee
of Discloser. Further, at any time during Disclosee's inspection or entry into
the Leased Premises, Discloser shall be entitled to designate an area of the
Leased Premises, which does not exceed 20 percent of the floor area of the
Leased Premises, as an area into which Disclosee, its agents, employees,
contractors and other parties shall not enter.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the parties hereto and each party who is a Landlord or
Tenant under the Lease.
D-2
<PAGE>
IN WITNESS WHEREOF, Discloser and Disclosee have caused this Agreement to
be executed on the date first stated above.
AUGUST PROPERTIES FUND II,
a limited partnership
By: Provine & Associates, a California
corporation, general partner
By:___________________________________
Forbes W. Burdette,
Vice President
AUGUST PROPERTIES FUND III,
a limited partnership
By: Provine & Associates, a California
corporation, general partner
By:___________________________________
Forbes W. Burdette,
Vice President
"Disclosee"
DTM CORPORATION
By:________________________________________
Paul F. McClure, President
"Discloser"
D-3
<PAGE>
SUBORDINATION JOINDER
The undersigned, OmniSwiss Properties, Ltd., is the owner and holder of
that certain promissory note executed by August Properties Fund II in the
original principal amount of $1,651,113, dated June 30, 1989 (herein called the
"Note"), the payment of which is secured by that certain Deed of Trust recorded
in Volume 10978, Page 948, Real Property Records of Travis County, Texas. The
undersigned joins in the execution of this instrument to evidence its consent to
the Agreement referenced in this instrument and the undersigned hereby
subordinates all of the liens, security interests and instruments securing
payment of the Note including, without limitation, the Deed of Trust referenced
in this paragraph, to all of the terms and provisions of the Agreement, with the
same force and effect as if the Agreement had been executed and this Memorandum
recorded prior to the recordation of said Deed of Trust.
Executed as of the 14th day of June, 1990.
OMNISWISS PROPERTIES, LTD,.
a Delaware corporation
By: /s/ J. H. Charlup
-------------------------------------
Name: J.H. Charlup
--------------------------------
Title: President
-----------------------------
THE STATE OF CALIFORNIA (S)
(S)
COUNTY OF ORANGE (S)
BEFORE ME, the undersigned authority, on this day personally appeared J.H.
Charlup, President of OMNISWISS PROPERTIES, LTD., a Delaware corporation, known
to me to be the person whose name is subscribed to the foregoing instrument and
acknowledged to me that he executed the same for the purposes and consideration
therein expressed, in the capacity therein stated, and as the act and deed of
said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 14th day of June, 1990.
/s/ Lois M. Rosenbladt
--------------------------------------
Notary Public in and for the
State of California
Lois M. Rosenbladt
--------------------------------------
(Printed Name of Notary)
My commission expires: May 10, 1993
----------------
1
<PAGE>
THE STATE OF CALIFORNIA (S)
(S)
COUNTY OF ORANGE (S)
BEFORE ME, the undersigned authority, on this day personally appeared
Forbes W. Burdette, Vice President of Provine & Associates, a corporation, the
duly authorized agent of AUGUST PROPERTIES FUND III, a California limited
partnership, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that he executed the same
for the purposes and consideration therein expressed, in the capacity therein
stated, and as the act and deed of said corporation in its capacity as the duly
authorized agent of AUGUST PROPERTIES FUND III.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 10th day of June, 1990.
/s/ Lois M. Rosenbladt
--------------------------------------
Notary Public in and for the
State of California
Lois M. Rosenbladt
--------------------------------------
(Printed Name of Notary)
My commission expires: May 10, 1993
---------------
THE STATE OF CALIFORNIA (S)
(S)
COUNTY OF ORANGE (S)
BEFORE ME, the undersigned authority, on this day personally appeared
Forbes W. Burdette, Vice President of Provine & Associates, a corporation, the
duly authorized agent of AUGUST PROPERTIES FUND II, a Delaware limited
partnership, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that he executed the same
for the purposes and consideration therein expressed, in the capacity therein
stated, and as the act and deed of said corporation in its capacity as the duly
authorized agent of AUGUST PROPERTIES FUND II.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 12th day of June, 1990.
/s/ Lois M. Rosenbladt
--------------------------------------
Notary Public in and for the
State of California
Lois M. Rosenbladt
--------------------------------------
(Printed Name of Notary)
My commission expires: May 10, 1993
---------------
2
<PAGE>
THE STATE OF TEXAS (S)
(S)
COUNTY OF TRAVIS (S)
BEFORE ME, the undersigned authority, on this day personally appeared Paul
F. McClure, President of DTM CORPORATION, a Texas corporation, known to me to
be the person whose name is subscribed to the foregoing instrument and
acknowledged to me that she executed the same for the purposes and consideration
therein expressed, in the capacity therein stated, and as the act and deed of
said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 4th day of May, 1990.
/s/ J.B. Sokolik
----------------------------------------
Notary Public in and for the
State of TEXAS
J. Brian Sokolik
----------------------------------------
(Printed Name of Notary)
My commission expires: January 23, 1994
------------------
3
<PAGE>
BUILDING II
A D D E N D U M
---------------
THIS ADDENDUM is attached to and made a part of that certain Industrial
Real Estate Lease (the "Lease") by and between AUGUST PROPERTIES FUND 82 and
AUGUST PROPERTIES FUND III, as Landlord, and DTM CORPORATION, a Texas
corporation, as Tenant, of even date with this Addendum. To the extent
inconsistent with the terms of the Lease, the terms of this Addendum shall
govern and control. The Lease is hereby modified and amended as follows
(section numbers and heading used herein shall correspond to the same section
numbers and headings, if any, contained in the Lease):
1.05. Lease Term. The Lease Term shall begin on the date that Landlord
----------
secures possession of the Property from the existing tenant and delivers the
same to Tenant, which date is contemplated to be on or about June 1, 1990. For
the purpose of commencement of Monthly Base Rent pursuant to Section 1.12(a),
and subject to the Free Rent paragraph contained on Page 6 of this Addendum,
Year 1 shall begin on the date which is 90 days after the beginning date of the
Lease Term. The Lease Term shall end on the date which is seven (7) years after
the beginning of Year 1.
1.06. Permitted Uses. Office, technological research, manufacturing,
--------------
assembly, retail sales and leasing, storage and servicing of manufactured goods.
1.12. Rent and Other Charges Payable Tenant.
-------------------------------------
(a) Base Rent. Monthly Base Rent shall be payable during the Lease
Term in the following amounts:
<TABLE>
<CAPTION>
-----------------------------------------------------------
Annual Rate
Period Per Square Foot Monthly Base Rent
------ --------------- -----------------
-----------------------------------------------------------
<S> <C> <C>
Year 1 $2.00 $5,000.00
Year 2 3.00 7,500.00
Year 3 4.00 10,000.00
Year 4 5.00 12,500.00
Year 5 6.00 15,000.00
Year 6 6.50 16,250.00
Year 7 7.00 17,500.00
-----------------------------------------------------------
</TABLE>
4.02. Real Property Taxes.
--------------------
(b) "Real property tax" shall not include any penalty or interest
assessed with regard to the late payment of taxes unless Tenant fails to
timely pay any of its share of the real property taxes upon which such
penalty or interest was assessed.
4.03. Utilities. If there occurs any failure or interruption of any
---------
utility service being furnished to the Property, and such failure or
interruption renders it reasonably impracticable from the standpoint of prudent
business management to operate Tenant's business upon the Property for
-1-
<PAGE>
a period of more than sixty (60) days in any year, then Tenant may, at its
option, terminate this Lease by giving Landlord written notice thereof during
the period of such failure or interruption.
4.04. Insurance Premiums.
------------------
(a) Subject to Landlord's review and written approval, which will not
be unreasonably withheld, such policy or policies may be maintained as a
component part of a blanket policy of comprehensive public liability and
property damage insurance maintained by B. F. Goodrich.
(c)(ii) In determining the increase of insurance premiums over the Base
Premiums pursuant to this Paragraph 4.04(c)(ii), Landlord shall credit such
increase with any and all applicable insurance premium rebates or refunds
received during the year.
4.05. Common Area; Use, Maintenance and Costs.
---------------------------------------
(c) Vehicle Parking. As part of the number of vehicle parking
---------------
spaces allocated to Tenant in Section 1.11, Tenant shall be allowed the
exclusive (as to all other tenants of the Project) right to use the parking
spaces highlighted in green on the attached Exhibit A.
---------
(d) Maintenance of Common Areas. Landlord shall operate the
---------------------------
Project as a first-class industrial/commercial real property development,
comparable to other projects in the Walnut Creek Business Park in Austin,
Texas.
(e) Tenant's Share and Payment. For the purpose of calculating
--------------------------
the increase in Common Area costs reimbursable by Tenant under this Lease,
it is agreed that the total Common Area costs for any year may not exceed
one hundred fifteen percent (115%) of the Common Area costs for the prior
year. Tenant shall not be obligated to pay any part of an actual increase
in costs which exceeds such limitation.
Notwithstanding anything to the contrary contained in this Lease,
including, without limitation, Section 4.02, Section 4.04 and Section 4.05(d),
Tenant shall not have any obligation to pay any portion of any increase in the
Common Area costs, taxes or insurance premiums incurred by Landlord in
connection with the Property or the Project until the total of the Common Area
costs, taxes and insurance premiums incurred by Landlord exceed the greater of
(i) $1.20 per square foot of floor area in the Property, or (ii) the costs
incurred by Landlord for the operation and maintenance of the Common Areas
during the calendar year 1990. Thereafter, Tenant shall pay its pro rata share
of the increased cost to Landlord of such matters which exceeds the greater of
(i) or (ii) above. Notwithstanding anything to the contrary contained in this
Lease, Tenant shall have no obligation to pay any Common Area costs, taxes or
insurance premiums incurred by Landlord in connection with the Property during
calendar year 1990.
4.06. Late Charges. Tenant shall be allowed, free of any late charge,
------------
to make no more than two (2) late payments in any twelve (12) month period;
provided, however, that if Landlord does not receive any rent payment by the
twentieth (20th) date of the month, Tenant shall pay Landlord a late charge
equal to three percent (3%) of the overdue amount, regardless of the number of
late payments made.
-2-
<PAGE>
5.03. Signs and Auctions. Tenant shall have the right, at its cost and
------------------
expense, to utilize one-third (1/3) of the existing monument sign for the
Project, and shall have the right to utilize an additional one-third (1/3) of
such sign for each additional building which Tenant may lease from Landlord in
the future. The color, location, size and overall design of Tenant's signage to
be located upon such monument sign shall be subject to the prior review and
approval of Landlord, such approval not to be unreasonably withheld.
5.04. Indemnity. Landlord shall indemnify Tenant against and hold
---------
Tenant harmless from any and all costs, claims or liability arising from: (a)
anything done by Landlord in or about the Project; (b) any breach or default in
the performance of Landlord's obligations under this Lease; (c) any
misrepresentation, default or breach of warranty by Landlord under this Lease;
or (d) other acts or omissions of Landlord. Landlord shall defend Tenant
against any such costs, claim or liability at Landlord's expense with counsel
reasonably acceptable to Tenant or, at Tenant's election, Landlord shall
reimburse Tenant for any reasonable legal fees or costs incurred by Tenant in
connection with any such claim. As between Tenant and Landlord, and except as
otherwise expressly provided in this Lease, Landlord hereby assumes all risk of
damage to its property or injury to Landlord, its employees and agents, in or
about any part of the Project (other than the Property) arising from any cause,
and Landlord hereby waives all claims in respect thereof against Tenant, except
for any claim arising out of Tenant's gross negligence or willful misconduct.
In any provision in this Section 5.04 relating to the conduct, acts or omissions
of Landlord, the term "Landlord" shall include Landlord's agents, employees,
contractors, invitees, successors or others using the Property with Landlord's
express or implied permission, but shall not include any other tenant of the
Project or such tenant's agents, employees, invitees or successors.
The indemnity made by Tenant in favor of Landlord in this Section 5.04
shall not apply to any matters the liability for which Tenant is indemnified by
Landlord pursuant to Section 16.01. Likewise, the indemnity made by Landlord in
favor of Tenant in this Section 5.04 shall not apply to any matters the
liability for which Landlord is indemnified by Tenant pursuant to Section 16.01.
5.05. Landlord's Access. Tenant may, from time to time, designate
-----------------
certain areas within the Property as "restricted areas," due to the confidential
nature of the activities or processes taking place within such areas. Landlord
shall give Tenant at least seventy-two (72) hours' prior notice of its intent to
enter upon any restricted areas within the Property, and shall give Tenant
twenty-four (24) hours' prior notice of its intent to enter upon any other part
of the Property.
6.01. Existing Conditions. Tenant accepts the Property subject to all
-------------------
of the encumbrances, easements, restrictive covenants and other matters more
particularly described in Exhibit B attached to this Lease.
---------
6.03. Tenant's Obligations.
--------------------
(a) Tenant shall not be obligated to maintain a preventative
maintenance contract with respect to the heating and air conditioning
system until the last year of the term of this Lease
-3-
<PAGE>
6.04. Landlord's Obligations.
----------------------
(a) In addition to and inclusive of the above, Landlord shall keep
in good order, condition and repair all structural elements of the Property
other than those structural elements, if any, which are to be maintained by
Tenant by the express terms of this Lease. Landlord shall commence making
repairs under this Section within thirty (30) days after receipt of written
notice from Tenant of the need for such repairs, and shall diligently
prosecute the same to completion within sixty (60) days after receipt of
such written notice.
6.05. Alterations, Additions and Improvements. Failure of Landlord to
---------------------------------------
object to any proposed alterations, additions or improvements within fifteen
(15) working days after receipt by Landlord of written request for consent to
the same shall be deemed to constitute approval and consent.
6.06. Condition Upon Termination. Provided that Tenant is not then in
--------------------------
default under this Lease, Tenant shall have the right to remove from the
Property all of Tenant's movable trade fixtures located thereon. In addition,
and regardless of whether Tenant is in default under this Lease, Landlord may
require Tenant to remove any and all such movable trade fixtures (whether or not
installed with Landlord's consent) upon termination of the Lease. Such trade
fixtures shall be deemed "movable" only if they can be removed without material
damage to the Property. Any trade fixtures so removed shall be removed at
Tenant's expense, and Tenant shall repair, at its expense, any damage to the
Property caused by or connected with such removal.
ARTICLE EIGHT: Condemnation. If (i) more than twenty percent (20%) of the
------------- ------------
number of parking spaces allocated to Tenant pursuant to Section 1.11 are taken
and Landlord does not elect to reallocate parking spaces or construct new
parking spaces to replace the spaces taken, or (ii) the main entryway or the
loading dock to the Property is taken so as to make it reasonably impracticable
from the standpoint of prudent business management to operate Tenant's business
upon the Property, then Tenant may terminate this Lease as of the date the
condemning authority takes title or possession, by delivering written notice to
Landlord within thirty (30) days after receipt of written notice of such taking
(or in the absence of such notice, within thirty (30) days after the condemning
authority takes possession). If Tenant does not so terminate this Lease, then
the Base Rent shall be reduced by an equitable amount agreed to between Landlord
and Tenant; provided, however, that if, within sixty (60) days after receipt of
written notice of such taking (or in the absence of such notice, with 60 days
after the condemning authority takes possession), Landlord and Tenant fail to
agree upon the amount of Base Rent payable after condemnation, then either
Landlord or Tenant may thereafter terminate this Lease by delivering written
notice to the other within ninety (90) days after receipt of written notice of
such taking (or in the absence of such notice, within ninety (90) days after the
condemning authority takes possession). If Landlord elects to reallocate
parking spaces or construct new parking spaces to replace those taken, it shall
give Tenant notice thereof. The location of such spaces shall be subject to the
approval of Tenant, not to be unreasonably withheld. Landlord shall accomplish
such reallocation or construction within sixty (60) days after Landlord and
Tenant agree upon the amount of Base Rent payable after condemnation.
9.06. Excess Profits. No such excess shall be payable by Tenant with
--------------
respect to an assignment of this Lease to Tenant's Affiliate pursuant to Section
9.02 of this Lease.
-4-
<PAGE>
13.03(c) Upon execution of this Lease, Tenant shall deposit with
Landlord a security deposit in the form of an unconditional, irrevocable letter
of credit in favor of Landlord in the amount of Twenty-Five Thousand and No/100
Dollars ($25,000.00), issued by a federally insured national bank in the Austin,
Texas area reasonably acceptable to Landlord, and expiring no earlier than June
1, 1992. At any time after the occurrence of a material default by Tenant under
Section 10.02 of this Lease, Landlord may present such letter of credit, draw
upon the same, and hold and/or apply the proceeds thereof as set forth herein.
Landlord may apply all or part of such security deposit funds to any unpaid rent
or other charges due from Tenant or to cure any other defaults of Tenant. If
Landlord uses any part of the security deposit, Tenant shall restore the
security deposit to its full amount within ten (10) days after Landlord's
written request. Tenant's failure to do so shall be a material default under
this Lease. No interest shall be paid on the security deposit. Landlord shall
not be required to keep any security deposit funds separate from its other
accounts, and no trust relationship is created with respect to the security
deposit. If Tenant shall fully and faithfully perform every provision of this
Lease to be performed by it during the first year of the term hereof, Tenant
may, at its option, replace the letter of credit serving as the security deposit
with a similar letter of credit in the amount of Twelve Thousand Five Hundred
and No/100 Dollars ($12,500.00). Upon receipt of such replacement letter of
credit, Landlord will return to Tenant the original $25,000.00 letter of credit.
If Tenant shall fully and faithfully perform every provision of this Lease to be
performed by it through the end of the second year of the term hereof, the
letter of credit serving as the security deposit, or any balance thereof, shall
be returned to Tenant thereafter.
16.01. Hazardous Waste Activity. In the event that any claim is made
------------------------
with respect to hazardous waste, as defined in this Section 16.01, existing on,
in or under the Property, or any portion thereof, on or before the date of
execution of this Lease, by any governmental entity or person or persons, then
Landlord agrees to indemnify, defend, protect and hold Tenant harmless against
and from any and all damages, losses, liabilities, obligations, penalties,
claims, litigation, demands, defenses, judgments, suits, proceedings, costs,
disbursements or expenses of any kind or nature whatsoever (including, without
limitation, reasonable attorneys' and experts' fees and disbursements) which may
at any time be imposed upon, incurred by, or asserted or awarded against Tenant
and arising from or out of:
(i) any hazardous waste on, in, under or affecting all or any
portion of the Property or any surrounding area on or before the date of
execution of this Lease (existing hazardous waste); or
(ii) the enforcement of this Section or the assertion by Landlord
of any defense to its obligations hereunder.
Such liabilities shall include, without limitation:
(i) the costs of removal of any and all such existing hazardous
waste from any and all portions of the Property or any surrounding area;
(ii) the costs required to take necessary precautions to protect
against the release of such existing hazardous waste on, in, under or
affecting the Property into the air, any body of water, any other public
domain or any surrounding area;
-5-
<PAGE>
(iii) costs incurred to comply with all applicable laws,
ordinances, orders, judgments, consent decrees and regulations with respect
to such existing hazardous waste; and
(iv) costs incurred to remediate past releases of such existing
hazardous waste on, in, under, or affecting all or any portion of the
Property, including, without limitation, any costs or claims relating to
natural resources damages.
The liability of Landlord under this Section may not be changed, waived,
discharged or terminated orally, by telephone or by any other means, except by
an instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
This Section shall be binding upon and inure to the benefit of Tenant and
Landlord and their respective heirs, personal representatives, successors and
assigns, including, without limitation, any affiliate of Tenant which acquires
all or a part of the Property by any sale, assignment or otherwise.
FREE RENT: As further consideration for the execution of this Lease and
---------
the performance of all obligations to be performed by Tenant under this Lease,
Landlord shall permit Tenant free Base Rent for the period commencing September
1, 1990, to and including February 28, 1991 (the "Free Rent Period"). The Free
Rent Period shall be subject to all of the provisions, terms, covenants and
conditions of this Lease except for the payment of Base Rent. The provisions
hereof shall not affect the termination date of the Lease. Base Rent referred
to in this Paragraph shall not include any utilities, late charges or any other
additional charges under the Lease which must be paid during the Free Rent
Period.
MISCELLANEOUS OBLIGATIONS OF LANDLORD: Within sixty (60) days after the
-------------------------------------
commencement date of this Lease, Landlord shall paint the exterior of Buildings
I, II and III located at 1611 Headway Circle, Austin, Texas. Such painting
shall be in accordance with a color scheme agreed to by Landlord and Tenant.
RIGHT TO TERMINATE LEASE IN CERTAIN EVENTS: Notwithstanding anything to
------------------------------------------
the contrary contained in the Lease, and except for events covered by Section
7.02 and/or ARTICLE EIGHT of the Lease (which Section 7.02 and/or ARTICLE EIGHT
shall govern and control with regard to such events), if (i) there occurs any
damage to the Property or there exists any other situation, which damage or
situation, Landlord is required by the terms of this Lease to remedy or repair,
and (ii) the damage or situation renders it reasonably impracticable from the
standpoint of prudent business management to operate Tenant's business upon the
Property, and (iii) Tenant has in fact ceased operating its business upon the
Property because of such damage or situation, then Tenant may give Landlord
written notice thereof, specifying in detail the damage or situation complained
of, and stating Tenant's intention to terminate the Lease if such damage or
situation is not repaired or remedied. If Landlord fails to repair or remedy
such damage or situation, so that it becomes reasonably practicable from the
standpoint of prudent business management to operate Tenant's business upon the
Property, within one hundred twenty (120) days from the date of such notice,
Tenant may, at its option, terminate this Lease by giving Landlord written
notice thereof prior to the time such damage or situation is repaired or
remedied. The 120-day cure period referenced in this paragraph shall not be
subject to extension pursuant to any provision of this Lease, including, without
limitation, Sections 13.03(b) and 13.13.
-6-
<PAGE>
REIMBURSEMENT OF CONSTRUCTION COSTS: Tenant shall be entitled to make
-----------------------------------
alterations, additions and improvements to the Property in accordance with
Section 6.05 of this Lease. Provided that Tenant is not then in default under
the terms of this Lease and has provided Landlord with releases of lien executed
by all persons who have provided services, labor or materials with respect to
such improvements, together with bills-paid affidavits, invoices, supporting
documentation and such other documents and information as Landlord may
reasonably require, Landlord will reimburse Tenant for up to Two Hundred
Thousand and No/100 Dollars ($200,000.00) of costs paid by Tenant in making such
alterations, additions or improvements. Such amount shall be reimbursed within
fifteen (15) working days after Landlord receives written request therefor in
accordance with the terms of this Paragraph. In connection with Tenant's
construction of the improvements to the Property, Landlord, at its sole cost and
expense, shall make electricity, water, wastewater, gas and telephone service
available to the Property in the same quantities and in the same capacities as
are currently available to Building I at 1611 Headway Circle, Austin, Texas,
which is adjacent to Building II (although all such quantities and capacities
may not be subjected to use at the present time by Tenant).
RENEWAL OPTION: If, (i) at the time Tenant notifies Landlord of its
--------------
intention to renew (as provided below) and (ii) on the applicable expiration
date of the Lease Term, Tenant is not in default of any of the terms, conditions
or covenants of this Lease, Tenant, but not any assignee or subtenant of Tenant
(other than Tenant's Affiliate or an assignee or subtenant consented to by
Landlord in writing), is hereby granted two (2) successive options to renew this
Lease for an additional term of five (5) years each upon the same terms and
conditions contained in this Lease with the following exceptions:
(a) The first renewal option term will contain only one further five-year
renewal option, and the second renewal option term will contain no further
renewal options, unless expressly granted by Landlord in writing;
(b) The rental for the renewal option term shall be based on then
prevailing market rental rates for properties of equivalent quality, size,
utility and location, with the length of the renewal option term and credit
standing of the Tenant to be taken into account;
(c) Tenant shall not be entitled to and shall not receive any credits for
leasehold improvements; and
(d) Tenant shall not be entitled to and shall not receive any abatement of
Base Rent or Additional Rent, except as provided for in Section 7.05 and ARTICLE
EIGHT of this Lease.
If Tenant desires to renew this Lease under the first renewal option, Tenant
must notify Landlord in writing of its intention to renew on or before the date
which is at least six (6) months prior to the expiration date of this Lease. If
Tenant desires to renew this Lease under the second renewal option, Tenant must
notify Landlord in writing of its intention to renew on or before the date which
is at least six (6) months prior to the expiration date of this Lease, as
extended by the first renewal. If Tenant fails to renew this Lease pursuant to
the first renewal option, both the first and second renewal options shall
terminate and expire. After receipt of notice of Tenant's intention to renew
this Lease, Landlord shall, within the next fifteen (15) working days, notify
Tenant in writing of the proposed renewal rental rate and Tenant shall, within
the next fifteen (15) working days (the "Second Fifteen Day Period") following
receipt of the proposed renewal rental rate, notify Landlord in
-7-
<PAGE>
writing of Tenant's acceptance or rejection of the proposed renewal rental rate.
If Tenant notifies Landlord of Tenant's acceptance of the proposed renewal
rental rate on or before the last day of the Second Fifteen Day Period, this
Lease shall be extended as provided herein, unless Tenant is in material default
of any of the terms, conditions or covenants of this Lease (as set forth in
Section 10.02 hereof) on the applicable expiration date of this Lease, in which
event this Lease shall end on such expiration date.
If Tenant fails to accept Landlord's proposed renewal rental rate within
the Second Fifteen Day Period, and the parties are not otherwise able to agree
upon the prevailing market rental rate within the Second Fifteen Day Period,
Landlord and Tenant shall, within ten (10) days following the expiration of the
Second Fifteen Day Period, each select a disinterested third party appraiser,
and the two appraisers shall jointly attempt to determine the rental rate
applicable to the renewal term. If either party fails to appoint an appraiser
within the time period indicated above, the decision of the sole appraiser
appointed shall be binding upon the parties. If the two appraisers are not able
to jointly agree upon the applicable renewal rental rate within thirty (30) days
following their appointment, the two appraisers shall appoint a third
disinterested and qualified appraiser, and the decision of any two of the three
appraisers shall be binding upon the parties. If any two of the three
appraisers are not able to agree upon the applicable renewal rental rate within
fifteen (15) days after the appointment of the third appraiser, then the
applicable renewal rental rate shall be the average of the two closest
appraisals. The appraisers selected shall be professional appraisers who are
either Members of the Appraisal Institute (MAI) or Senior Real Estate Analysts
(SREA), and shall be familiar with rental values in the Austin, Texas community.
Landlord and Tenant shall bear the expense of the appraiser appointed by each of
them, and the expense of the third appraiser shall be shared equally by Landlord
and Tenant.
CONFIDENTIALITY AGREEMENT: Reference is herein made to that certain
Confidentiality Agreement of even date herewith by and between Landlord and
Tenant, which is incorporated herein for all purposes. Landlord and Tenant
hereby agree to abide by all the terms and provisions of said Confidentiality
Agreement.
-8-
<PAGE>
EXECUTED as of the 4th day of May, 1990.
LANDLORD:
--------
AUGUST PROPERTIES FUND 82 and
AUGUST PROPERTIES FUND III, by
their duly authorized agent:
PROVINE & ASSOCIATES
By: /s/ Forbes W. Burdette
---------------------------
Forbes W. Burdette,
Vice President
TENANT:
------
DTM CORPORATION, a Texas corporation
By: /s/ Paul McClure
-------------------------------------
Name: Paul F. McClure
-------------------------------
Title: President
------------------------------
-9-
<PAGE>
RIGHT OF FIRST REFUSAL
----------------------
(Building I)
THIS RIGHT OF FIRST REFUSAL (this "Agreement") is made and entered into by
and between AUGUST PROPERTIES FUND III and AUGUST PROPERTIES FUND II
(collectively, "Owner") and DTM CORPORATION, a Texas corporation ("DTM").
R E C I T A L S
---------------
A. Pursuant to an Industrial Real Estate Lease of even date with this
Agreement (the "Lease"), August Properties Fund III and August Properties Fund
82, as Landlord, have leased to DTM, as Tenant, a building more particularly
described in the Lease and known as Building II, said Building II being adjacent
to the land owned by Owner, being more particularly described in Exhibit A
---------
attached hereto and made a part hereof for all purposes (the "Property"), upon
which is located a building known and referred to herein as "Building I."
B. Contemporaneously with the execution of this Agreement, Owner and DTM
have also executed and entered into that certain Option and Right of First
Refusal (Building III) covering the building ("Building III") and certain
parking spaces which are located immediately adjacent to the southeasterly
corner of Building I (the "Building III Option").
C. In connection with its execution of the Lease, DTM has requested the
right of refusal to lease Building I, and Owner is willing to give DTM the same,
upon the terms, covenants and conditions set forth herein.
A G R E E M E N T
-----------------
NOW, THEREFORE, for and in consideration of the mutual terms, covenants and
conditions set forth herein, $100.00 paid by DTM to Owner, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. If, from and after the date hereof but prior to July l, 1995, Owner
receives a bona fide third party offer to lease all or any part of Building I
upon terms and conditions acceptable to Owner, and which Owner desires to accept
(a "Third Party Offer"), then, provided that the Lease is in force and there has
occurred no material default of DTM thereunder or under any lease of Building
III which has not been cured by DTM and the cure accepted by the Landlord
thereunder (if such cure occurs after the date DTM is permitted to cure such
default under the terms of either such lease, as applicable), Owner shall give
DTM written notice of such Third Party Offer, including the material terms and
conditions thereof. DTM may, at its option, within ten (10) business days after
delivery of such Third Party Offer, elect to lease that part of Building I
subject to the Third Party Offer (the "Offered Property"), pursuant to the terms
of the Third Party Offer. If DTM elects to lease the Offered Property, DTM
shall give Owner written notice of such election within such ten (10) business
day period. DTM shall thereafter validly and unconditionally execute and
deliver a written lease evidencing the terms of such lease. If DTM fails to
timely elect to lease the Offered Property pursuant to this Paragraph l, then
Owner shall thereafter have the right to lease the Offered Property to others in
accordance with the terms of such Third Party Offer, or upon terms more
favorable to Owner. If Owner so leases the Offered Property to others, the
right of refusal contained in this Agreement shall cease and terminate as to
such Offered Property unless and until such third party
1
<PAGE>
lease is cancelled or terminated as to the Offered Property, whereupon the right
of refusal contained in this Agreement shall be reinstated, and shall apply to
any subsequent Third Party Offer for such space made prior to the date of
termination of this Agreement. Notwithstanding anything herein to the contrary,
this right of refusal shall terminate for all purposes on June 30, 1995.
2. As used herein, the term "Other Lease" shall mean that certain
Industrial Real Estate Lease by and between Owner and Macro Electronics
Corporation, dated November 6, 1989, fully executed by the parties on February
23, 1990, the initial term of which expires on May 31, 1995, and which contains
one option to extend the term of said lease for an additional five (5) year
period. Owner shall have the unencumbered right to extend the term of the Other
Lease beyond the term called for therein without the consent of DTM.
3. Owner shall deliver to DTM, contemporaneously with the execution and
delivery of the Lease of Building I (a) a Mutual Recognition and Attornment
Agreement in the form attached hereto as Exhibit B, or in some other form
---------
reasonably requested by a lienholder, fully executed and acknowledged by each
lienholder holding liens or security interests covering the Property, or any
portion thereof, (b) a Confidentiality Agreement in the form attached hereto as
Exhibit C, executed by the then owner of the Property, and (c) a Memorandum of
- ---------
Lease in the form attached hereto as Exhibit D. DTM may record such Mutual
---------
Recognition and Attornment Agreement and Memorandum of Lease in the Real
Property Records of Travis County, Texas, and DTM agrees, upon expiration or
termination of any option or right referenced in any of such instruments to
execute and deliver to Owner an instrument in recordable form acknowledging such
expiration or termination.
4. All notices, requests, demands, elections, offers, acceptances and
other communications which the parties hereto may be required or permitted to
give hereunder shall be in writing, addressed to the party to whom given at the
address set forth below (or such other address as may be designated by written
notice served on the other party), and shall be deemed properly served and
received when delivered by hand to the party to whose attention it is directed,
or if mailed, 24 hours after depositing the same in the United States Mail,
postage prepaid, registered or certified, return receipt requested, or 24 hours
after depositing the same with a commercial carrier guaranteeing next day
delivery. For the purpose of notice, the addresses of the parties shall be as
follows:
Owner: August Properties Fund III and
August Properties Fund II
c/o Provine & Associates
2361 Campus Drive, Suite 204
Irvine, California 92715
With copy to: Mr. William G. Shown
Foster, Lewis, Langley, Gardner &
Banack, Incorporated
1100 NBC Bank Plaza
112 East Pecan Street
San Antonio, Texas 78205-1533
2
<PAGE>
DTM: DTM Corporation
1611 Headway Circle, Building II
Austin, Texas 78754
With copy to: Mr. J. Brian Sokolik
Vinson & Elkins
First City Centre
816 Congress Avenue
Austin. Texas 78701-2496
5. At any time prior to the date when DTM is required to exercise the
right of first refusal contained in Paragraph 1 above, DTM and its contractors,
employees and affiliates shall have the right to go onto the Property and into
Building I (but not Building III, the right of entry to which is covered by a
separate agreement) to perform environmental site testing as well as an
engineering inspection. In connection with such environmental site testing and
engineering inspections: (a) all such parties may obtain soil samples, ground
water table samples and other samples of the Property to-tether with samples of
materials used in Building I to ascertain the presence of hazardous substances
and other matters; (b) Owner, upon the request of DTM, shall deliver to DTM
copies of plans, drawings and specifications that Owner possesses with regard to
Building I; (c) the written results of such environmental site testing shall be
addressed to Owner and DTM, and DTM shall pay all costs associated with such
environmental site testing; and (d) all such tests which involve the entry into
Building I shall be scheduled by a party appointed by Owner, and conducted by
DTM or its contractors in a manner that will not unreasonably interfere with
such tenants and which will not violate the terms of such tenants' leases. DTM
shall (i) indemnify and hold harmless owner from and against all costs, claims,
and causes of action relating to any damage or injury which occurs in Building I
or any of the parking lots adjacent thereto and which result from the actions of
DTM or its contractors in connection with such inspections and (ii) cause all
damage to the Property or Building I which results from the actions of DTM or
its contractors in connection with such inspections to be repaired so that the
Property and Building I shall be returned as nearly as reasonably practical to
the condition existing prior to such inspections.
6. Notwithstanding anything to the contrary contained herein, all rights
of DTM under this Agreement are subordinate and inferior to an existing first
right of refusal in favor of American Microelectronics, Inc. ("AMI"), which
existing right of refusal is more particularly set forth in that certain Lease
Extension dated December 5, 1989, by and between AMI and Owner. Should such
existing first right of refusal be in force at the time Owner desires to accept
a Third Party Offer, and should AMI elect to accept such Third Party Offer in
accordance with the terms of such existing first right of refusal, (i) DTM shall
have no right to lease from Owner, and Owner shall have no obligation to lease
to DTM, the Offered Property subject to such Third Party Offer, and (ii) the
right of refusal contained in this Agreement shall cease and terminate as to
such Offered Property unless and until such lease to AMI is cancelled or
terminated as to such Offered Property, whereupon the right of refusal contained
in this Agreement shall be reinstated (subordinate and inferior to the first
right of refusal in favor of AMI, if the same is then still in force and
effect), and shall apply to any subsequent Third Party Offer made prior to the
date of termination of this Agreement.
7. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. DTM may
not assign its rights hereunder to any party other than a permitted and actual
assignee of its rights under the Lease.
3
<PAGE>
EXECUTED as of the 4th day of May, 1990.
OWNER:
-----
AUGUST PROPERTIES FUND III and
AUGUST PROPERTIES FUND II, by
their authorized agent:
PROVINE & ASSOCIATES
By: /s/ Forbes W. Burdette
------------------------------------
Forbes W. Burdette,
Vice President
[Signatures continued on next page]
4
<PAGE>
EXHIBIT 11.1
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss......... $ (5,075) $ (6,602) $ (6,650) $ (4,084) $ (3,998) $ (1,329) $ (569)
Plus interest on
debt repaid with
proceeds from
the
Offering(1)..... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
--------- --------- --------- --------- --------- --------- ---------
Net loss (as
adjusted)........ $ (5,075) $ (6,602) $ (6,650) $ (4,084) $ (3,998) $ (1,329) $ (569)
========= ========= ========= ========= ========= ========= =========
Shares:
Weighted average
number of shares
outstanding..... 2,301,283 3,214,223 5,777,794 6,930,013 6,930,013 6,930,013 6,930,013
Dilutive effect
of options to be
issued(2)....... 688,104 688,104 688,104 688,104 688,104 688,104 688,104
Shares to be
issued in the
Offering(3)..... 0 0 0 0 0 0 0
--------- --------- --------- --------- --------- --------- ---------
Shares used in
computation of
EPS............. 2,912,248 3,902,327 6,465,898 7,618,117 7,618,117 7,618,117 7,618,117
========= ========= ========= ========= ========= ========= =========
Loss per share
(primary and
fully dilutive).. (1.74) (1.69) (1.03) (0.54) (0.52) (0.17) (0.07)
========= ========= ========= ========= ========= ========= =========
<CAPTION>
AS ADJUSTED
----------------------------------------
FOR THE YEAR FOR THE THREE FOR THE THREE
ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, MARCH 31, MARCH 31,
1995 1995 1996
------------ ------------- -------------
<S> <C> <C> <C>
Net loss......... $ (3,998) $ (1,329) $ (569)
Plus interest on
debt repaid with
proceeds from
the
Offering(1)..... $ 305 $ 58 $ 94
------------ ------------- -------------
Net loss (as
adjusted)........ $ (3,693) $ (1,271) $ (475)
============ ============= =============
Shares:
Weighted average
number of shares
outstanding..... 6,930,013 6,930,013 6,930,013
Dilutive effect
of options to be
issued(2)....... 688,104 688,104 688,104
Shares to be
issued in the
Offering(3)..... 1,330,000 1,330,000 1,330,000
------------ ------------- -------------
Shares used in
computation of
EPS............. 8,948,117 8,948,117 8,948,117
============ ============= =============
Loss per share
(primary and
fully dilutive).. (0.41) (0.14) (0.05)
============ ============= =============
</TABLE>
- ----
A fully dilutive computation has not been included, as it would not differ
from the above.
(1) Reflects interest on the debt which would be retired with the proceeds
from the Offering.
(2) Reflects the shares of Common Stock issuable to employees related to
exercisable options (at exercise prices substantially less than the
Offering price) that will be outstanding in connection with the closing of
the Offering under the DTM Corporation Equity Appreciation Plan, less
shares assumed to be repurchased using the treasury stock method.
(3) Reflects the sale of 1,330,000 shares of Common Stock in the Offering.
<PAGE>
Exhibit 21.1
DTM Corporation Subsidiary
DTM GmbH (incorporated under the laws of Germany)
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 5, 1996, except for Note 18, as to which
the date is May 17, 1996, in the Registration Statement and related Prospectus
of DTM Corporation dated May 21, 1996.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Austin, Texas
May 17, 1996
<PAGE>
Exhibit 24.1
DTM CORPORATION
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director and/or
officer of DTM Corporation, a Texas corporation (the "Company"), does hereby
constitute and appoint John S. Murchison, III and Gregory A. Logwinuk, either of
whom may act without the joinder of the other, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him, and in his name, place and stead, in any and all
capacities to do any and all acts and things and to execute any and all
instruments which said attorneys-in-fact and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
of 1933, as amended (the "Act"), and any rules, regulations and requirements of
the Securities and Exchange Commission (the "Commission") in respect thereof, as
well as any rules, regulations and requirements of any other regulatory
authority, in connection with an underwritten public offering by the Company of
up to 2,000,000 shares of the Company's common stock, $.0003 par value per share
(the "Common Stock"), including the execution of a registration statement on
Form S-1 or any other appropriate form, and any or all amendments (including,
without limitation, any amendment or amendments increasing the number of shares
of Common Stock for which registration is being sought) and post-effective
amendments thereto or supplements to the prospectuses contained therein and any
additional registration statement for the same offering that is to be effective
upon filing pursuant to Rule 462(b) of the Act (collectively, the "Registration
Statements"), with all exhibits and any and all documents required to be filed
as a part of, an exhibit to, or in connection with said Registration Statements
or any amendment thereto, with the Commission or any other regulatory authority,
granting under said attorneys-in-fact and agents, or either of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in order to effectuate the same, as fully to all intents
and purposes as he himself might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or either
of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name this ___ day of
May, 1996.
/s/ D. Lee Tobler
-----------------------------------------
(Signature)
-----------------------------------------
D. Lee Tobler
Chairman of the Board of Directors
<PAGE>
Exhibit 24.2
DTM CORPORATION
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director and/or
officer of DTM Corporation, a Texas corporation (the "Company"), does hereby
constitute and appoint John S. Murchison, III and Gregory A. Logwinuk, either of
whom may act without the joinder of the other, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him, and in his name, place and stead, in any and all
capacities to do any and all acts and things and to execute any and all
instruments which said attorneys-in-fact and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
of 1933, as amended (the "Act"), and any rules, regulations and requirements of
the Securities and Exchange Commission (the "Commission") in respect thereof, as
well as any rules, regulations and requirements of any other regulatory
authority, in connection with an underwritten public offering by the Company of
up to 2,000,000 shares of the Company's common stock, $.0003 par value per share
(the "Common Stock"), including the execution of a registration statement on
Form S-1 or any other appropriate form, and any or all amendments (including,
without limitation, any amendment or amendments increasing the number of shares
of Common Stock for which registration is being sought) and post-effective
amendments thereto or supplements to the prospectuses contained therein and any
additional registration statement for the same offering that is to be effective
upon filing pursuant to Rule 462(b) of the Act (collectively, the "Registration
Statements"), with all exhibits and any and all documents required to be filed
as a part of, an exhibit to, or in connection with said Registration Statements
or any amendment thereto, with the Commission or any other regulatory authority,
granting under said attorneys-in-fact and agents, or either of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in order to effectuate the same, as fully to all intents
and purposes as he himself might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or either
of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name this ___ day of
May, 1996.
/s/ Gregory A. Logwinuk
-----------------------------------------
(Signature)
-----------------------------------------
Gregory A. Logwinuk
Chief Financial Officer, Secretary
and Treasurer
<PAGE>
Exhibit 24.3
DTM CORPORATION
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director and/or
officer of DTM Corporation, a Texas corporation (the "Company"), does hereby
constitute and appoint John S. Murchison, III and Gregory A. Logwinuk, either of
whom may act without the joinder of the other, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him, and in his name, place and stead, in any and all
capacities to do any and all acts and things and to execute any and all
instruments which said attorneys-in-fact and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
of 1933, as amended (the "Act"), and any rules, regulations and requirements of
the Securities and Exchange Commission (the "Commission") in respect thereof, as
well as any rules, regulations and requirements of any other regulatory
authority, in connection with an underwritten public offering by the Company of
up to 2,000,000 shares of the Company's common stock, $.0003 par value per share
(the "Common Stock"), including the execution of a registration statement on
Form S-1 or any other appropriate form, and any or all amendments (including,
without limitation, any amendment or amendments increasing the number of shares
of Common Stock for which registration is being sought) and post-effective
amendments thereto or supplements to the prospectuses contained therein and any
additional registration statement for the same offering that is to be effective
upon filing pursuant to Rule 462(b) of the Act (collectively, the "Registration
Statements"), with all exhibits and any and all documents required to be filed
as a part of, an exhibit to, or in connection with said Registration Statements
or any amendment thereto, with the Commission or any other regulatory authority,
granting under said attorneys-in-fact and agents, or either of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in order to effectuate the same, as fully to all intents
and purposes as he himself might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or either
of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name this ___ day of
May, 1996.
/s/ Marshall O. Larsen
-----------------------------------------
(Signature)
-----------------------------------------
Marshall O. Larsen
Director
<PAGE>
Exhibit 24.4
DTM CORPORATION
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director and/or
officer of DTM Corporation, a Texas corporation (the "Company"), does hereby
constitute and appoint John S. Murchison, III and Gregory A. Logwinuk, either of
whom may act without the joinder of the other, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him, and in his name, place and stead, in any and all
capacities to do any and all acts and things and to execute any and all
instruments which said attorneys-in-fact and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
of 1933, as amended (the "Act"), and any rules, regulations and requirements of
the Securities and Exchange Commission (the "Commission") in respect thereof, as
well as any rules, regulations and requirements of any other regulatory
authority, in connection with an underwritten public offering by the Company of
up to 2,000,000 shares of the Company's common stock, $.0003 par value per share
(the "Common Stock"), including the execution of a registration statement on
Form S-1 or any other appropriate form, and any or all amendments (including,
without limitation, any amendment or amendments increasing the number of shares
of Common Stock for which registration is being sought) and post-effective
amendments thereto or supplements to the prospectuses contained therein and any
additional registration statement for the same offering that is to be effective
upon filing pursuant to Rule 462(b) of the Act (collectively, the "Registration
Statements"), with all exhibits and any and all documents required to be filed
as a part of, an exhibit to, or in connection with said Registration Statements
or any amendment thereto, with the Commission or any other regulatory authority,
granting under said attorneys-in-fact and agents, or either of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in order to effectuate the same, as fully to all intents
and purposes as he himself might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or either
of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name this ___ day of
May, 1996.
/s/ Alexander MacLachlan
-----------------------------------------
(Signature)
-----------------------------------------
Dr. Alexander MacLachlan
Director
<PAGE>
Exhibit 24.5
DTM CORPORATION
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director and/or
officer of DTM Corporation, a Texas corporation (the "Company"), does hereby
constitute and appoint John S. Murchison, III and Gregory A. Logwinuk, either of
whom may act without the joinder of the other, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him, and in his name, place and stead, in any and all
capacities to do any and all acts and things and to execute any and all
instruments which said attorneys-in-fact and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
of 1933, as amended (the "Act"), and any rules, regulations and requirements of
the Securities and Exchange Commission (the "Commission") in respect thereof, as
well as any rules, regulations and requirements of any other regulatory
authority, in connection with an underwritten public offering by the Company of
up to 2,000,000 shares of the Company's common stock, $.0003 par value per share
(the "Common Stock"), including the execution of a registration statement on
Form S-1 or any other appropriate form, and any or all amendments (including,
without limitation, any amendment or amendments increasing the number of shares
of Common Stock for which registration is being sought) and post-effective
amendments thereto or supplements to the prospectuses contained therein and any
additional registration statement for the same offering that is to be effective
upon filing pursuant to Rule 462(b) of the Act (collectively, the "Registration
Statements"), with all exhibits and any and all documents required to be filed
as a part of, an exhibit to, or in connection with said Registration Statements
or any amendment thereto, with the Commission or any other regulatory authority,
granting under said attorneys-in-fact and agents, or either of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in order to effectuate the same, as fully to all intents
and purposes as he himself might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or either
of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name this ___ day of
May, 1996.
/s/ Thomas G. Ricks
-----------------------------------------
(Signature)
-----------------------------------------
Thomas G. Ricks
Director
<PAGE>
Exhibit 24.6
DTM CORPORATION
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director and/or
officer of DTM Corporation, a Texas corporation (the "Company"), does hereby
constitute and appoint John S. Murchison, III and Gregory A. Logwinuk, either of
whom may act without the joinder of the other, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him, and in his name, place and stead, in any and all
capacities to do any and all acts and things and to execute any and all
instruments which said attorneys-in-fact and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
of 1933, as amended (the "Act"), and any rules, regulations and requirements of
the Securities and Exchange Commission (the "Commission") in respect thereof, as
well as any rules, regulations and requirements of any other regulatory
authority, in connection with an underwritten public offering by the Company of
up to 2,000,000 shares of the Company's common stock, $.0003 par value per share
(the "Common Stock"), including the execution of a registration statement on
Form S-1 or any other appropriate form, and any or all amendments (including,
without limitation, any amendment or amendments increasing the number of shares
of Common Stock for which registration is being sought) and post-effective
amendments thereto or supplements to the prospectuses contained therein and any
additional registration statement for the same offering that is to be effective
upon filing pursuant to Rule 462(b) of the Act (collectively, the "Registration
Statements"), with all exhibits and any and all documents required to be filed
as a part of, an exhibit to, or in connection with said Registration Statements
or any amendment thereto, with the Commission or any other regulatory authority,
granting under said attorneys-in-fact and agents, or either of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in order to effectuate the same, as fully to all intents
and purposes as he himself might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or either
of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed his name this ___ day of
May, 1996.
/s/ Steven G. Rolls
-----------------------------------------
(Signature)
-----------------------------------------
Steven G. Rolls
Director
<TABLE> <S> <C>
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
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0
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