<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1997
REGISTRATION NO. 333-04173
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
----------------
AMENDMENT NO. 2
TO
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)
----------------
UDAY BELLARY
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.
4020 KINROSS LAKES 3700 TRAMMELL CROW CENTER 1601 ELM STREET
PARKWAY 2001 ROSS AVENUE SUITE 3000
RICHFIELD, OHIO 44286-9368 DALLAS, TEXAS 75201-2975 DALLAS, TEXAS 75201-4761
(216) 659-7714 (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
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- -------------------------------------------------------------------------------
<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
$.0002 per share...... 3,342,900 $11.00 $36,771,900 $14,468(3)
</TABLE>
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- -------------------------------------------------------------------------------
(1) Includes 303,900 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).
(3) A fee of $12,961 was paid with the initial filing of the registration
statement on May 21, 1996. An additional amount of $1,506 is being paid
herewith in connection with the registration of an additional 451,800
shares of Common Stock.
----------------
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 APRIL 3, 1997
3,039,000 SHARES
DTM CORPORATION
COMMON STOCK
-----------
Of the 3,039,000 shares of DTM Corporation common stock (the "Common Stock")
offered hereby (the "Offering"), 2,849,732 shares are being sold by DTM
Corporation (the "Company" or "DTM") and 189,268 shares are being sold by the
selling shareholders identified in "Principal and Selling Shareholders" (the
"Selling Shareholders"). Approximately $16.0 million of the proceeds received
by the Company will be used to retire existing indebtedness, including $4.0
million owed to The B.F. Goodrich Company, a shareholder of the Company. 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 $9.00
and $11.00 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.................... $ $ $ $
- --------------------------------------------------------------------------------
Total(3)..................... $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(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 $419,000 and $31,000, respectively.
(3) The B.F. Goodrich Company has granted the Underwriters a 30-day option to
purchase up to 303,900 additional shares of Common Stock 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 , 1997.
A.G. EDWARDS & SONS, INC. LADENBURG THALMANN & CO. INC.
The date of this Prospectus is , 1997.
<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 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:
"CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF A PENALTY BID.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE 'UNDERWRITING.'"
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 SLS System processes multiple powdered materials for a wide range of
applications
. The ability to create strong and durable functional plastic prototypes
. The RapidTool process can produce metal mold inserts from metal powder
. Productivity can be increased by building many parts at the same time
. Selective laser sintering technology can be expanded to include new powdered
materials and applications
Building Prototypes with the DTM SINTERSTATION 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 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 into the part build 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 build chamber, 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 Systems produce
objects in a wide range of materials that meet an expanding range of
manufacturing applications including:"
Below this text are six photographs arranged vertically on the page. The first
photograph depicts a sand casting mold created by the Sinterstation system as
well as a metal part created by such mold. To the left of the photo is the
following caption: "SAND CASTING CORES". To the right of the photo is the
following text: "Creating sand casting cores and molds for metal parts has been
a labor intensive and time consuming process. Conventional techniques typically
require weeks to produce prototype parts. Foundries can now directly produce
complex sand casting cores and molds in the Sinterstation system in a matter of
days. Parts produced through the selective laser sintering process are virtually
identical to those made using traditional methods." The second 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 third 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 fourth paragraph depicts a pyramid-shaped
flexible part created in the Sinterstation system. To the left of the photo is
the following text: " 'FLEXIBLE' FUNCTIONAL PROTOTYPES". To the right of the
photo is the following text: "Product designer can produce functional prototypes
where 'rubber-like' characteristics are a key requirement. Examples include
prototype gaskets, seals, moldings, athletic shoes and equipment and other
demanding applications where high flexibility is key. These flexible prototypes
can be used in applications where high resistance to elevated temperatures and
other demanding environments is required." The fifth photograph depicts various
plastic and 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 sixth
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 1.022-FOR-1 STOCK SPLIT EFFECTED AS A SERIES
OF RECAPITALIZATIONS COMPLETED IN APRIL 1997. SUCH STOCK SPLIT 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," "SANDFORM,"
"SINTERSTATION(R)," "SLS(R)" AND "TRUEFORM" ARE TRADEMARKS OR SERVICE MARKS OF
DTM CORPORATION. "SOMOS(R)" IS A TRADEMARK OF E.I. DUPONT DE NEMOURS AND
COMPANY ("DUPONT").
THE COMPANY
DTM Corporation develops, designs, manufactures, markets and supports, on an
international basis, rapid prototyping and rapid tooling systems, powdered
materials and related services. 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. The B.F. Goodrich Company ("BFGoodrich") currently owns
approximately 92 percent of the outstanding Common Stock.
The Company has experienced substantial sales growth since the sale of its
first commercial SLS System, the Sinterstation 2000, in December 1992. Sales of
Sinterstation Systems, powdered materials and related services have increased
each year. As of December 31, 1996, the Company had sold 136 SLS Systems and
placed an additional two SLS Systems through a rental program resulting in a
total of 138 SLS Systems shipped worldwide. Revenue has increased from
approximately $1.1 million in 1991 to approximately $24.4 million in 1996, a
level that the Company believes makes it the second largest industry
participant as measured by revenues. The Company attributes its revenue growth
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 its selective laser sintering process to a level
which affords users distinct advantages over other rapid prototyping
technologies.
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 DTM's commercial SLS
Systems. 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.
DTM believes that its SLS Systems have distinct advantages relative to
competing rapid prototyping technologies. SLS Systems have the ability to (i)
process multiple powdered materials for a wide range of applications, (ii)
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, (iii) rapidly produce prototype metal mold
inserts from metal powder, thereby significantly reducing the time required to
manufacture prototype tooling, (iv) build parts more quickly by sequencing and
stacking multiple parts in a single production run and (v) accommodate new
powdered plastic, metal and ceramic materials and expanded applications.
3
<PAGE>
Past purchasers of the Company's SLS Systems include The Boeing Company,
Eastman Kodak Company, Fiskars Oy, Ford Motor Company, General Motors
Corporation, Hughes Christensen, LG Electronics, Inc. (Goldstar), Mercedes-Benz
AG, 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.
DTM has devoted substantial effort to developing what it believes is a
leading position in the high end of the rapid prototyping industry and to
protecting its intellectual property rights. In the last two years, the Company
has introduced four new powdered sintering materials, a new tooling process and
a new Sinterstation System. The Company introduced ProtoForm powder in 1995,
which is specifically designed for the production of strong and durable
functional plastic prototypes. During 1995, the Company also introduced the
RapidTool process and RapidSteel powder, which allow customers who desire
multiple parts in their material of choice to directly create metal mold
inserts for injection mold tooling. The Company believes that, with the
introduction of its TrueForm powder in early 1996, it provides the most
effective solution for the rapid creation of patterns for investment casting.
Also in 1996 the Company introduced SandForm powder, a sand-based material that
enables foundries to create sand cores (without tooling) that can be used in
the sand casting of metal parts. The Company recently announced the expected
availability of two new powders: Somos 201 powder, a new material supplied by
DuPont that yields highly flexible parts with rubber-like characteristics, and
VeriForm powder, a significantly improved material for functional prototypes.
These developments continue to expand the potential end uses for rapid
prototyping from the original concept models to more functional plastic and
metal parts. The Company believes that its selective laser sintering technology
is the only commercially practiced rapid prototyping process that allows a user
to access all of these capabilities from a single platform. The Company
believes that it further expanded the potential end user market with the
September 1996 introduction of the Sinterstation 2500 System, a new
Sinterstation System with twice the build volume of the original System and
with a significantly higher scan speed.
The Company believes that it is positioned to capitalize on its competitive
advantages and increase its share of the rapid prototyping market through the
following strategies: (i) using its ProtoForm powder to increase the Company's
SLS System and materials sales for strong durable part applications; (ii)
targeting the RapidTool process, the TrueForm powder, and the SandForm powder
to the growing rapid prototyping markets of metal prototype tools, investment
cast parts, and sand cast parts; (iii) developing and marketing new and
improved metal, plastic and ceramic powdered materials; (iv) continuing to
significantly upgrade the performance of the Sinterstation Systems in both
productivity and accuracy; and (v) 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.......................... 2,849,732 Shares
Common Stock offered by the
Selling Shareholders............. 189,268 Shares
Common Stock to be outstanding
after the Offering............... 6,701,218 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 indebtedness and for
general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market
symbol........................... DTMC
</TABLE>
- --------
(1) Based upon the number of shares outstanding as of March 31, 1997. Includes
an estimated 608,094 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>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenue:
Products.................. $ 2,841 $ 6,989 $ 8,127 $ 12,632 $ 22,070
Service and support(1).... 2,027 2,593 1,112 1,579 2,309
-------- -------- -------- -------- ---------
Total revenue............ 4,868 9,582 9,239 14,211 24,379
Cost of sales:
Products.................. 2,462 5,699 5,370 8,803 13,021
Service and support....... 1,705 2,141 511 873 1,424
-------- -------- -------- -------- ---------
Total cost of sales...... 4,167 7,840 5,881 9,676 14,445
-------- -------- -------- -------- ---------
Gross profit.............. 701 1,742 3,358 4,535 9,934
Operating loss............ (9,624) (9,644) (5,731) (5,606) (4,338)
Interest expense, net..... (10) (328) (178) (530) (1,066)
Cost of discontinued
registration............. -- -- -- -- (752)
Income tax benefit
allocated from
BFGoodrich............... 3,032 3,084 1,825 2,138 1,667
Net loss.................. $ (6,602) $ (6,650) $ (4,084) $ (3,998) $ (4,489)
======== ======== ======== ======== =========
Pro forma(2):
Net loss.................. $ (6,156)
Net loss per share(3)..... $ (1.70)
Number of shares used(4).. 3,624,239
Pro forma, as adjusted for
the Offering(2)(5):
Net loss.................. $ (5,069)
Net loss per share(3)..... $ (0.95)
Number of shares used(4).. 5,352,842
OPERATING DATA(6):
SLS Systems sold or
rented................... 9 19 23 36 51
Cumulative SLS Systems
sold or rented........... 9 28 51 87 138
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
ACTUAL AS ADJUSTED(3)(7)
------- -----------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital..................................... $ 1,622 $12,649
Total assets........................................ 17,897 28,155
Total debt.......................................... 15,809 --
Total liabilities................................... 26,382 10,573
Shareholders' equity (deficit)...................... (8,485) 17,582
</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, 1992 and 1993 totaled approximately $1.9 million for each
year.
(2) Computed on a stand-alone basis, without allocation of income tax benefit
from BFGoodrich.
(3) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Impact of Recently Issued Accounting Standard" for
the potential impact on earnings per share of future periods under
Statement of Financial Accounting Standards No. 128, Earnings per Share.
(4) Gives effect to the issuance of an estimated 494,457 shares of Common Stock
issuable to employees upon the exercise of immediately exercisable options,
which will have exercise prices substantially less than the assumed
Offering price of $10.00 per share, that will be outstanding in connection
with the closing of the Offering under the DTM Corporation Equity
Appreciation Plan. See "Management--Equity Appreciation Plan."
(5) Gives effect to (i) that number of offered shares the net proceeds from
which are necessary to fund debt repayments (assuming such shares are sold
at an Offering price of $10.00 per share) as described in "Use of Proceeds"
and (ii) the elimination of historically incurred interest expense of
approximately $1.1 million related to such debt.
(6) Includes the rental of four SLS Systems during the year ended December 31,
1995. Two of such rental Systems were converted to sales during the year
ended December 31, 1995.
(7) Reflects the sale of 2,849,732 shares of Common Stock by the Company at an
assumed Offering price of $10.00 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, and prior to shipment of its first SLS Systems in 1992,
it derived revenues solely from a rapid prototyping service bureau that it
operated in Austin, Texas. The Company has been unprofitable from its
inception, most recently recognizing a net loss of approximately $4.5 million
for the year ended December 31, 1996. There can be no assurance that the
Company can achieve or maintain profitability in the future.
LOSS TO RESULT FROM CONVERSION OF PHANTOM STOCK APPRECIATION RIGHTS. During
the quarter and year in which it becomes probable that the Offering will
occur, the Company will incur 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,
certain of which are at exercise prices substantially less than the Offering
price. Assuming an Offering price of $10.00 per share, operating results for
the quarter and year would be adversely affected by such non-cash compensation
expense of approximately $3.8 million, resulting in a substantial reported net
loss. See "Dilution," "Management--Equity Appreciation Plan" and "Shares
Eligible for Future Sale."
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 $24.4 million in 1996. 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.
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 Systems and the materials used
in the SLS Systems. 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 a European patent
under which DTM has exclusive rights. In response, this competitor has
instituted proceedings in the European Patent Office challenging the validity
of the patent in question. The Company has received a favorable initial ruling
from the European Patent Office. However, the opponent has filed papers with
the European Patent Office asserting new arguments that the patent is invalid.
DTM continues to defend its interest in this proceeding and has responded to
this new filing. DTM is also engaged in litigation in the United States
against two related companies and their president concerning those companies'
alleged infringement of a DTM patent. One of the parties has asserted claims
in this proceeding against DTM and BFGoodrich for violation of state and
federal antitrust laws, as well as patent misuse. DTM and BFGoodrich have
denied the latter allegations. While DTM
6
<PAGE>
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 or if the Company
were found to have violated state or federal antitrust laws, the Company's
future revenues might be adversely affected. 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" and "--Legal Proceedings."
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 and materials. If such a third party
brought infringement litigation against the Company, and if the Company was
not successful in defending such litigation or in 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 to the Company by 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."
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 managing its operating
results effectively 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 effect 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."
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 BFGoodrich
has no plans to provide such funding following completion of the Offering.
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 February 1997, the Company obtained a loan commitment letter from Texas
Commerce Bank for a revolving line of credit ("line of credit") contingent
upon the successful completion of the Offering, retirement of existing bank
and BFGoodrich indebtedness and negotiation and execution of mutually
acceptable definitive documentation. Assuming a line of credit is established
with the terms set forth in the commitment letter, the Company's ability to
borrow thereunder will be subject to a borrowing base calculation and the
Company meeting certain financial thresholds, including attaining certain
levels of "established profitability," as defined therein. Until achieving one
such level, the Company would be permitted to borrow up to $3.0 million;
thereafter, available advances against eligible receivables would be increased
up to a maximum of $6.0 million. Loans under the line of credit would mature
within one year, would be collateralized by the Company's accounts receivable
and inventory and would bear interest at the bank's prime interest rate plus
three quarters of one percent. The
7
<PAGE>
commitment provides that the Company would 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 would have the option to
terminate the obligation to make further advances under the line of credit 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. 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 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.
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, none of the employees is a party to
an employment or noncompetition agreement with the Company and the Company can
give no assurance that it will retain these employees or continue to attract,
assimilate and retain other skilled personnel. See "Management."
COMPETITION. The market for rapid prototyping systems is highly competitive.
In marketing its SLS Systems, the Company experiences competition from many
sources. Certain of the Company's competitors may be better known and may have
greater financial, research and development, production and marketing
resources than DTM. Competition 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. 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 broad 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.
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."
8
<PAGE>
INTERNATIONAL OPERATIONS. For 1995 and 1996, 33.5% and 50.0%, respectively,
of the Company's revenues were derived from sales of its products and services
in geographical areas outside of the United States. The only foreign country
that accounted for more than 10% of the Company's sales during either 1995 or
1996 was Germany, which accounted for 12.0% of the Company's 1995 revenues
(declining to 9.6% of the Company's revenues in 1996). The Company expects
that sales to customers in countries outside of the United States will
continue to make up a significant 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, 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
and prior to the exercise of the over-allotment option, BFGoodrich will own
approximately 49 percent of the outstanding Common Stock. At this percentage,
BFGoodrich may be able to control 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 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. Without the tax benefit allocated from BFGoodrich,
the Company's net loss for 1996 would have increased from approximately $4.5
million to approximately $6.2 million. To the extent the Company incurs future
losses after the tax allocation agreement is no longer in effect, the
application of the resulting tax loss carryforwards would be deferred until
sufficient income is generated to utilize the carryforwards.
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 provided
either at no cost to the Company or on terms that could be considered more
favorable to the Company than those that would be available to DTM in arms-
length transactions with unrelated vendors, principally because DTM is able to
take advantage of cost efficiencies experienced by BFGoodrich due to the size
of its operations. The Company expects that it will continue to participate in
many of these arrangements after the Offering, until such time as BFGoodrich
no longer owns a significant interest in the Company. However, DTM may be
ineligible to take part in some insurance programs and certain other
arrangements once BFGoodrich no longer owns a majority of the outstanding
Common Stock. Either party has the option to terminate any of such
arrangements at any time. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Certain Transactions--
Certain Arrangements with BFGoodrich."
MANAGEMENT DISCRETION IN USE OF PROCEEDS. As of the date of this Prospectus,
the Company has not allocated the remaining $10.1 million of the net proceeds
from the Offering after repayment of debt to any specific use other than for
general corporate purposes, including the funding of working capital
requirements. See "Use of Proceeds." An investment under such circumstances
entails a higher degree of risk than an investment under circumstances in
which a company has specifically identified uses of proceeds, because
9
<PAGE>
investors have no opportunity to assess such uses. Accordingly, investors will
be reliant on the discretion afforded management in the use of a substantial
portion of the net proceeds of the Offering.
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 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 March 31, 1997, shareholders held a
total of 3,243,392 shares of Common Stock, including 2,969,691 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 (other than shares offered
pursuant to this Prospectus) 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 will have 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 608,094 shares of
Common Stock under the Equity Appreciation Plan, of which 494,457 shares will
be at prices substantially less than the assumed Offering price of $10.00 per
share. 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.
DILUTION. Purchasers of shares of Common Stock offered hereby will suffer
immediate and substantial dilution of $7.38 per share after the Offering and
the issuance of the EAP shares. 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 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 Company's SLS Systems 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; TrueForm powder, a polymer-based material that the Company believes
will be extensively used to produce patterns for soft tooling and investment
casting; and SandForm powder, a sand powder used for the production of sand
molds and cores. The Company recently announced the expected availability of
two new powders: Somos 201 powder, a new material supplied by DuPont that
yields highly flexible parts with rubber-like characteristics, and VeriForm
powder, a significantly improved material for functional prototypes.
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 $26.1 million, assuming
an Offering price of $10.00 per share. Of the net proceeds to the Company,
$11.8 million will be used to repay the Company's bank debt, $4.0 million will
be used to repay borrowings from BFGoodrich and $0.2 million will be used to
repay other short-term borrowings. The Company intends to use the remaining
net proceeds of approximately $10.1 million for general corporate purposes,
including the funding of working capital requirements. The weighted average
interest rate on the debt to be retired with the proceeds of the Offering as
of March 31, 1997 was 6.3 percent per annum for the bank debt, 8.5 percent per
annum for the borrowings from BFGoodrich and 18.6 percent per annum for the
short-term borrowings. 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."
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 expects that it will be subject to
restrictions on paying dividends pursuant to the terms of a line of credit
that it expects to establish pursuant to a 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 December 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 2,849,732 shares of Common Stock by the Company (at an assumed Offering
price of $10.00 per share and after deducting the estimated underwriting
discount and Offering expenses, totaling $2,435,000) and the application of
the estimated net proceeds therefrom.
<TABLE>
<CAPTION>
DECEMBER 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..... $ 769 $ 769 $ --
======== ======== ========
BORROWINGS UNDER LINE OF
CREDIT FROM BFGOODRICH... $ 4,000 $ 4,000 $ --
======== ======== ========
NOTES PAYABLE TO BANKS.... $ 11,040 $ 11,040 $ --
======== ======== ========
SHAREHOLDERS' EQUITY (DEF-
ICIT):
Preferred Stock, $.001
par value:
3,000,000 shares
authorized, no shares
issued and
outstanding............ $ -- $ -- $ --
Common Stock, $.0002 par
value:
60,000,000 shares
authorized; 3,243,392
actual shares issued
and outstanding;
6,093,591 shares issued
and outstanding as
adjusted for the
Offering(1)............ 1 1 1
Additional paid-in capi-
tal(2)................. 28,019 31,826 57,888
Accumulated deficit(2).. (36,469) (40,276) (40,276)
Cumulative translation
adjustment............. (36) (36) (36)
-------- -------- --------
Total shareholders' equity
(deficit)................ $ (8,485) $ (8,485) $ 17,577
======== ======== ========
</TABLE>
- --------
(1) Includes the sale of 2,849,732 shares in the Offering and excludes an
estimated 608,094 shares of Common Stock that will be issuable upon
exercise of EAP Options. See "Management--Equity Appreciation Plan" and
"Underwriting."
(2) As Adjusted gives effect to the issuance of an estimated 494,457 shares of
Common Stock issuable to employees upon the exercise of EAP Options, which
will have exercise prices substantially less than the assumed Offering
price of $10.00 per share, that will be outstanding in connection with the
closing of the Offering under the DTM Corporation Equity Appreciation
Plan. See "Management--Equity Appreciation Plan" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
12
<PAGE>
DILUTION
As of December 31, 1996, the Company had a net tangible book value (deficit)
of $(10,123,462), or $(3.12) 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 2,849,732 shares of Common
Stock at an assumed Offering price of $10.00 per share (and deducting from the
assumed proceeds estimated underwriting discount and Offering expenses to be
paid by the Company totaling $2,435,000), the Company's net tangible book
value as adjusted for the Offering at December 31, 1996 would have been
$17,075,892, or $2.62 per share of Common Stock. This constitutes an immediate
increase in net tangible book value of $5.74 per share to existing
shareholders and immediate dilution of $7.38 per share to new investors
purchasing shares in the Offering.
After giving further effect to the issuance, for cash consideration of
$1,136,100, of 494,457 shares of Common Stock (the "EAP Shares") estimated to
be issuable upon exercise of certain immediately exercisable EAP Options
having exercise prices substantially less than the assumed Offering price of
$10.00 per share, the net tangible book value per share as adjusted for the
Offering and the issuance of EAP shares would have been $2.59 per share. This
constitutes an immediate additional decrease in net tangible book value of
$(0.02) per share to existing shareholders and new investors and results in a
cumulative immediate dilution of $7.41 per share to new investors purchasing
shares in the Offering.
<TABLE>
<S> <C> <C>
Assumed Offering price per share to new investors............ $10.00
======
Net tangible book value (deficit) per share as of December
31, 1996.................................................. $(3.12)
Increase per share attributable to new investors........... 5.74
------
Net tangible book value per share as adjusted for the
Offering.................................................. 2.62
Dilution per share to new investors after the Offering....... $ 7.38
======
Adjustment to reflect assumed issuance of EAP Shares....... (0.02)
------
Pro forma net tangible book value per share as adjusted for
the Offering and the assumed issuance of EAP Shares......... $ 2.59
======
Dilution per share to new investors after the Offering and
the assumed issuance of the EAP Shares...................... $ 7.41
======
</TABLE>
The following table summarizes, on a pro forma basis as of December 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 $10.00 per share. For purposes of the table, the EAP
Shares are assumed to have been issued on December 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).... 3,243,392 49.2% $28,020,033 48.6% $ 8.64
======
EAP shareholders(3)............ 494,457 7.5 1,137,251 2.0 $ 2.30
--------- ----- ----------- ----- ======
3,737,849 56.7 29,157,284 50.6 $ 7.80
======
New investors(2)(4)............ 2,849,732 43.3 28,497,320 49.4 $10.00
--------- ----- ----------- ----- ======
Total........................ 6,587,581 100.0% $57,654,604 100.0% $ 8.75
========= ===== =========== ===== ======
</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 3,054,124 shares or 50.1% of
the total number of shares of Common Stock outstanding after the Offering
(or 45.6% assuming the exercise of an estimated 608,094 EAP Options), and
will increase the number of shares held by new investors to 3,039,000 or
49.9% of the total number of shares of Common Stock outstanding after the
Offering (or 54.4% assuming the exercise of an estimated 608,094 EAP
Options). See "Principal and Selling Shareholders."
(3) Gives effect to the issuance of Common Stock issuable to employees upon
the exercise of certain immediately exercisable EAP Options having
exercise prices substantially less than the assumed Offering price of
$10.00 per share.
(4) Total consideration is not reduced by the estimated underwriting discount
and Offering expenses to be paid by the Company totaling $2,435,000.
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,
1996 is derived from audited consolidated financial statements of the Company.
The data should be read in conjunction with the consolidated financial
statements, related notes and other financial information included herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenue:
Products................... $ 2,841 $ 6,989 $ 8,127 $ 12,632 $ 22,070
Service and support(1)..... 2,027 2,593 1,112 1,579 2,309
-------- -------- -------- -------- ---------
Total revenue............. 4,868 9,582 9,239 14,211 24,379
Cost of sales:
Products................... 2,462 5,699 5,370 8,803 13,021
Service and support........ 1,705 2,141 511 873 1,424
-------- -------- -------- -------- ---------
Total cost of sales....... 4,167 7,840 5,881 9,676 14,445
-------- -------- -------- -------- ---------
Gross profit............... 701 1,742 3,358 4,535 9,934
Operating expenses:
Selling, general and
administrative............ 4,948 5,588 5,249 6,620 9,980
Research and development... 5,377 5,798 3,840 3,521 4,292
-------- -------- -------- -------- ---------
Total operating expenses.. 10,325 11,386 9,089 10,141 14,272
Operating loss............. (9,624) (9,644) (5,731) (5,606) (4,338)
Other income (expense):
Gain on sale of service
bureau.................... -- 238 -- -- --
Interest expense, net...... (10) (328) (178) (530) (1,066)
Cost of discontinued
registration.............. -- -- -- -- (752)
-------- -------- -------- -------- ---------
Total other income
(expense)................ (10) (90) (178) (530) (1,818)
-------- -------- -------- -------- ---------
Loss before income tax
benefit allocated
from BFGoodrich........... (9,634) (9,734) (5,909) (6,136) (6,156)
Income tax benefit
allocated from
BFGoodrich................ 3,032 3,084 1,825 2,138 1,667
-------- -------- -------- -------- ---------
Net loss................... $ (6,602) $ (6,650) $ (4,084) $ (3,998) $ (4,489)
======== ======== ======== ======== =========
Pro forma(2):
Net loss................... $ (6,156)
Net loss per share(3)...... $ (1.70)
Number of shares used(4)... 3,624,239
Pro forma, as adjusted for
the Offering(2)(5):
Net loss................... $ (5,069)
Net loss per share(3)...... $ (0.95)
Number of shares used(4)... 5,352,842
BALANCE SHEET DATA (AT
PERIOD END):
Working capital (deficit).. $ (2,808) $ 1,818 $ 342 $ 236 1,622
Total assets............... 10,010 12,384 8,560 10,639 17,897
Total debt................. 4,425 3,000 4,600 9,076 15,809
Total liabilities.......... 6,965 8,306 8,516 14,557 26,382
Shareholders' equity
(deficit)................. 3,045 4,078 44 (3,918) (8,485)
</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, 1992 and 1993 totaled approximately $1.9 million for each
year.
(2) Computed on a stand-alone basis, without allocation of income tax benefit
from BFGoodrich.
(3) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Impact of Recently Issued Accounting Standard" for
the potential impact on earnings per share of future periods under
Statement of Financial Accounting Standards No. 128, Earnings per Share.
(4) Gives effect to the issuance of an estimated 494,457 shares of Common
Stock estimated to be issuable to employees upon the exercise of
immediately exercisable EAP Options, which will have exercise prices
substantially less than the assumed Offering price of $10.00 per share.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Management--Equity Appreciation Plan."
(5) Gives effect to (i) that number of offered shares the net proceeds from
which are necessary to fund debt repayments (assuming such shares are sold
at an Offering price of $10.00 per share) as described in "Use of
Proceeds" and (ii) the elimination of historically incurred interest
expense of approximately $1.1 million related to such debt.
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, powdered
materials and related services. The Company's SLS Systems and materials are
based on proprietary and patented selective laser sintering technology. The
Company was incorporated in 1987, and prior to shipment of its first SLS
System in 1992, it 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.
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 1996, sales of materials, spare parts, services and
upgrades represented approximately 33 percent of total revenues. The Company
anticipates that materials sales, in particular, will continue to represent a
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 two
sales of internally utilized SLS Systems with substantially depreciated net
book value. Specifically, in 1994, the Company's gross margin was positively
impacted by the sale of two SLS Systems that were carried at no cost. The
Company's gross margins improved during 1996, as the average SLS System price
has increased, in part, due to the introduction of several new powders and the
introduction of the new Sinterstation 2500 System. Gross margin for the year
ended December 31, 1996 increased to 40.7% from 31.9% in 1995 and for the
three months ended December 31, 1996, gross margin increased to 41.1% from
38.0% for the same period in 1995.
The Company's operating results have varied substantially from year to year
and quarter to quarter. A 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>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Revenue:
Products...................................... 88.0 % 88.9 % 90.5 %
Service and support........................... 12.0 11.1 9.5
------- ------- -------
Total revenues.............................. 100.0 100.0 100.0
Cost of sales:
Products...................................... 66.1 69.7 59.0
Service and support........................... 46.0 55.3 61.7
------- ------- -------
Total cost of sales......................... 63.7 68.1 59.3
------- ------- -------
Gross profit.................................... 36.3 31.9 40.7
Operating expenses:
Selling, general and administrative........... 56.8 46.6 40.9
Research and development...................... 41.6 24.8 17.6
------- ------- -------
Total operating expenses.................... 98.4 71.4 58.5
Other income (expense):
Interest expense, net......................... (1.9) (3.7) (4.4)
Cost of discontinued registration............. -- -- (3.1)
------- ------- -------
Total other income (expense)................ (1.9) (3.7) (7.5)
Loss before income tax benefit allocated from
BFGoodrich..................................... (64.0) (43.2) (25.3)
Income tax benefit allocated from BFGoodrich.... 19.8 15.1 6.9
------- ------- -------
Net loss........................................ (44.2)% (28.1)% (18.4)%
======= ======= =======
</TABLE>
Comparison of Years Ended December 31, 1996 and December 31, 1995
Revenues. Revenues for 1996 were $24.4 million, an increase of 71.6 percent,
or $10.2 million, compared to revenues of $14.2 million for 1995.
Product sales revenue for 1996 was $22.1 million, an increase of 74.7
percent, or $9.4 million, compared to product sales revenue of $12.6 million
for 1995. The increase was primarily attributable to greater sales of SLS
Systems and powdered materials. The number of SLS Systems sold or rented
increased to 51 in 1996 from 36 in 1995. Revenues from powdered materials
sales increased as a result of a larger number of installed SLS Systems along
with increased sales of ProtoForm powder and the introduction of TrueForm,
RapidSteel and SandForm powdered materials during 1996.
Service and support revenue for 1996 was $2.3 million, an increase of 46.2
percent, or $730,000, compared to service and support revenue of $1.6 million
for 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.
Gross Profit. Gross profit for 1996 was $9.9 million, an increase of 119.1
percent, or $5.4 million, compared to gross profit of $4.5 million for 1995.
As a percentage of revenue, gross profit increased to 40.7 percent during the
period from 31.9 percent in 1995.
16
<PAGE>
Gross profit attributable to product sales for 1996 was $9.0 million, an
increase of 136.3 percent, or $5.2 million, compared to gross profit
attributable to product sales of $3.8 million for 1995. As a percentage of
product sales revenue, gross profit attributable to product sales increased to
41.0 percent during the period, compared to 30.3 percent for the same period
in 1995. The increase in gross profit attributable to product sales as a
percentage of product sales revenue resulted primarily from an increase in the
average SLS System sales price due in part to the introduction of the higher
priced Sinterstation 2500 System. Gross profit margin was also positively
impacted during 1996 by the sale of two SLS Systems in the first quarter that
had been used in the Company's operations and were carried on the Company's
books at a substantially depreciated value.
Gross profit attributable to service and support revenues for 1996 was
$885,000, an increase of 25.4 percent, or $179,000, compared to gross profit
attributable to service and support revenues of $706,000 for 1995. As a
percentage of service and support revenue, gross profit attributable to
service and support revenues was 38.3 percent and 44.7 percent for 1996 and
1995, respectively.
Selling, General and Administrative Expense. Selling, general and
administrative expenses include payroll and fringe benefits, advertising and
promotion expenses and other. Selling, general and administrative expense for
1996 was $10.0 million, an increase of 50.8 percent, or $3.4 million, compared
to selling, general and administrative expense of $6.6 million for 1995. A
larger workforce in 1996 resulted in compensation and fringe benefits
increasing more than $1.3 million over 1995 costs. Agent commissions and
advertising and promotion costs increased by approximately $703,000 over 1995
costs. Selling, general and administrative expenses in 1996 were also
adversely impacted by a $268,000 addition to the allowance for doubtful
accounts, primarily relating to one account, in the fourth quarter and
severance costs of $250,000. Other selling, general and administrative
expenses for 1996 increased by approximately $839,000 over 1995 costs. As a
percentage of revenue, selling, general and administrative expense decreased
to 40.9 percent in 1996 from 46.6 percent in 1995, primarily due to the effect
of fixed costs being spread over a larger base of revenues.
Research and Development Expense. Research and development expense for 1996
was $4.3 million, an increase of 21.9 percent, or $771,000, compared to
research and development expense of $3.5 million for 1995. As a percentage of
revenue, research and development expense decreased to 17.6 percent for 1996
from 24.8 percent for 1995, primarily due to the increase in revenues. The
increase in research and development expense for 1996 as compared to research
and development expense for 1995 was due to the Company completing development
on the Sinterstation 2500, the continuing improvement of the selective laser
sintering process and the ongoing development of new powdered materials to be
used in the selective laser sintering process.
Interest Expense. Net interest expense for 1996 was $1.1 million, an
increase of $536,000 compared to interest expense of $530,000 for 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.
Cost of Discontinued Registration. In the fourth quarter of 1996, the
Company expensed $752,000 of legal, accounting and other professional services
related to this initial public offering, which was commenced in 1996 and
postponed.
Income Taxes. As a result of its tax sharing arrangement with BFGoodrich,
the Company was allocated an income tax benefit of $1.7 million in 1996
compared to $2.1 million in 1995.
Comparison of Years Ended December 31, 1995 and December 31, 1994
Revenues. Revenues for 1995 were $14.2 million, an increase of 53.8 percent,
or $5.0 million, compared to revenues of $9.2 million for 1994.
Product sales revenue for 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 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
17
<PAGE>
its SLS Systems and experienced increased revenues from powdered material
sales 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.
Service and support revenue for 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 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 1995 was $4.5 million, an increase of 35.1
percent, or $1.1 million, compared to gross profit of $3.4 million for 1994.
As a percentage of revenue, gross profit decreased to 31.9 percent in 1995
from 36.3 percent in 1994.
Gross profit attributable to product sales for 1995 was $3.8 million, an
increase of 38.9 percent, or $1.0 million, compared to gross profit
attributable to product sales of $2.8 million for 1994. As a percentage of
product sales revenue, gross profit decreased to 30.3 percent in 1995 from
33.9 percent in 1994. The decrease in gross profit as a percentage of product
sales revenue in 1995 resulted primarily from a lower average sales price of
the Company's SLS Systems and because in 1994, the Company's gross profit was
positively impacted by the sale of two SLS Systems that were carried at no
cost. These two SLS Systems were pre-production or "beta" units that had been
sold to customers under a special testing program in 1992 in which such
customers undertook to provide testing results to DTM. Upon providing
commercial SLS Systems to the customers involved in the testing program, the
pre-production units were returned to DTM and carried at no value because the
Company, at that time, did not intend to offer such units for resale.
Gross profit attributable to service and support revenues for 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 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 1995 was $6.6 million, an increase of 26.1 percent,
or $1.4 million, compared to selling, general and administrative expense of
$5.2 million for 1994. A larger workforce in 1995 resulted in compensation and
fringe benefits increasing more than $780,000 over 1994 costs. In addition,
agent commissions and advertising and promotion costs increased by
approximately $620,000 over the prior year. As a percentage of revenue,
selling, general and administrative expense decreased to 46.6 percent in 1995
from 56.8 percent in 1994, primarily due to the increase in revenues.
Research and Development Expense. Research and development expense for 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 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. Net interest expense for 1995 was $530,000, an increase of
$352,000 compared to interest expense of $178,000 for 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.
Income Taxes. As a result of its tax sharing arrangement with BFGoodrich,
the Company was allocated an income tax benefit of $2.1 million in 1995
compared to $1.8 million in 1994.
18
<PAGE>
SELECTED QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly results of
operations for the three-month periods ended March 31, 1995 through December
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 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,
1995 1995 1995 1995 1996 1996 1996 1996(1)
---------- --------- -------------- ------------- ---------- --------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SLS Systems sold or
rented.............. 6 9 10 11 13 12 6 20
Revenues:
Product............. $ 1,749 $ 2,903 $ 3,036 $4,944 $5,329 $ 5,049 $ 3,040 $8,652
Service and
support............ 264 291 452 572 461 507 736 605
------- ------- ------- ------ ------ ------- ------- ------
Total............... 2,013 3,194 3,488 5,516 5,790 5,556 3,776 9,257
Cost of sales:
Product............. 1,275 2,173 2,179 3,176 3,169 3,022 1,757 5,073
Service and
support............ 160 170 300 243 300 320 428 376
------- ------- ------- ------ ------ ------- ------- ------
Total............... 1,435 2,343 2,479 3,419 3,469 3,342 2,185 5,449
------- ------- ------- ------ ------ ------- ------- ------
Gross profit......... 578 851 1,009 2,097 2,321 2,214 1,591 3,808
Operating expenses... 2,304 2,437 2,475 2,925 2,990 3,219 3,724 4,339
------- ------- ------- ------ ------ ------- ------- ------
Operating loss....... $(1,726) $(1,586) $(1,466) $ (828) $ (669) $(1,005) $(2,133) $ (531)
======= ======= ======= ====== ====== ======= ======= ======
</TABLE>
- --------
(1) Operating expenses for the three months ended December 31, 1996 include
unusual expenses of $250,000 for severance costs and $268,000 of bad debt
expense. Excluding these items, operating loss for the period would have
been $13,000.
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.
FOREIGN OPERATIONS
The Company competes on an international basis through its wholly owned
subsidiary located in Germany and through export sales derived from its United
States sales operations (principally to the Pacific Rim). Sales to customers
outside of the United States constitute a significant portion of DTM's
revenues. International sales accounted for 34.8 percent, 33.5 percent and
50.0 percent of the Company's total net revenues in 1994, 1995 and 1996,
respectively. The only foreign country that accounted for more than 10% of the
Company's sales during either 1995 or 1996 was Germany, which accounted for
12.0% of the Company's 1995 revenues (declining to 9.6% of the Company's
revenues in 1996).
The Company's German subsidiary has a cost structure which is significantly
different than that of the United States operations. The German company
conducts sales within Germany on its own behalf. It also acts as a sales agent
for the Company and provides certain administrative assistance. Sales into
European countries other than Germany are made directly by the Company to the
end customer. The future results of operations in Germany are expected to be
at or near break-even.
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 does not engage in hedging to mitigate the effects of
foreign currency exchange rate risk and has not experienced any significant
impact therefrom.
19
<PAGE>
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 81.3% of the total number of SARs granted), will be equal to
approximately $3.8 million (assuming an Offering price of $10.00 per share) to
record the appreciation in value of the SARs, resulting in a substantial
reported net loss. See "Management--Equity Appreciation Plan" and "Note 11--
Equity Appreciation Plan" to the 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 $1.8 million, $1.6
million and $4.1 million in 1994, 1995 and 1996, respectively. Net cash used
in operating activities of $4.1 million for 1996 resulted primarily from the
net loss for the year of $4.5 million adjusted for depreciation and
amortization of $2.2 million. In addition, increases in accounts receivable of
$4.3 million and increases in inventory of $2.7 million were offset by an
increase to accounts payable of $3.3 million. For the three years ended
December 31, 1994, 1995 and 1996, BFGoodrich allocated to the Company
approximately $1.8 million, $2.1 million, $1.7 million, 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 9 to the Consolidated Financial Statements.
The Company's 1996 fourth quarter revenues of $9.3 million resulted from
sales of 20 SLS Systems, a majority of which Systems were sold in the second
half of the quarter. Of the $7.8 million in gross accounts receivable as of
December 31, 1996, the Company had collected approximately $5.2 million
through February 28, 1997. The Company believes that the remaining $2.6
million (other than the doubtful accounts that are reserved) will be
collected. The significant increase in the allowance for doubtful accounts was
primarily due to one account, with an impact of $268,000. The Company believes
that the remaining balance of $372,000 in the allowance for doubtful accounts
is adequate. The Company reviews the balance in the allowance for doubtful
accounts on an ongoing basis to ensure the adequacy of the reserve.
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 $1.4
million, $2.4 million and $3.0 million in 1994, 1995 and 1996, respectively.
The Company expects that capital expenditures in 1997 will approximate $2.1
million.
The existence of the tax benefit allocation and other services from
BFGoodrich reduced the Company's net loss for years 1994 through 1996. The
Company expects that the loss of the tax benefit allocation would materially
adversely affect its financial results and cash flows if the Company were to
generate losses in any given year, but does not anticipate any adverse effect
if the Company generates profits. The benefits of utilizing future tax loss
carryforwards would be realized, however, should sufficient profits be
generated prior to the expiration of any tax loss carryforwards. The Company
believes that it is reasonably likely that additional costs will be incurred
as its other arrangements with BFGoodrich are discontinued over time, but does
not believe that these costs will be material.
Total indebtedness of the Company was approximately $15.8 million as of
December 31, 1996, consisting primarily of notes payable to commercial banks
under existing lines of credit, short-term borrowings from other financing
sources and a line of credit extended to the Company by BFGoodrich under which
the Company may
20
<PAGE>
borrow up to $4.0 million. As of December 31, 1996, amounts outstanding under
these facilities were approximately $11.0 million, $769,000, and $4.0 million
respectively, at weighted average interest rates of 6.2 percent, 21.1 percent
and 8.5 percent, respectively. In connection with the Offering, the Company is
required to repay all its bank indebtedness and the amounts outstanding under
the line of credit with BFGoodrich. Absent the Offering, the notes payable to
the banks and the line of credit from BFGoodrich mature on July 31, 1998.
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 February 1997, the Company obtained a loan commitment letter from Texas
Commerce Bank for a revolving line of credit ("line of credit") contingent
upon the successful completion of the Offering, retirement of existing bank
and BFGoodrich indebtedness and negotiation and execution of mutually
acceptable definitive documentation. Assuming a line of credit is established
with the terms set forth in the commitment letter, the Company's ability to
borrow thereunder will be subject to a borrowing base calculation and the
Company meeting certain financial thresholds, including attaining certain
levels of "established profitability," as defined therein. Until achieving one
such level, the Company would be permitted to borrow up to $3.0 million;
thereafter, available advances against eligible receivables would be increased
up to a maximum of $6.0 million. Loans under the line of credit would mature
within one year, would be collateralized by the Company's accounts receivable
and inventory and would bear interest at the bank's prime interest rate plus
three quarters of one percent. The commitment provides that the Company would
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 would have the option to terminate the obligation to make further
advances under the line of credit 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, however, there can be no assurance
that this will be the case. See "--Safe Harbor Statement."
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, Earnings per Share. SFAS No.
128 replaces the presentation of primary earnings per share (EPS) under
Accounting Principles Board Opinion No. 15 and related Interpretations, with
the presentation of basic EPS (which primarily gives effect only to common
shares actually outstanding) and requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures. The Company is required to adopt SFAS No. 128 during the
fourth quarter of 1997. The Company has not completed its evaluation of the
potential impact of this new standard on EPS in future periods. However, based
on the equity instruments currently outstanding under existing stock
compensation plans, this new standard is not expected to have a material
impact on EPS in future periods.
SAFE HARBOR STATEMENT
Investors are cautioned that forward-looking statements contained in this
Prospectus involve risks and uncertainties including without limitation the
matters described in "Risk Factors" and the following: (i) the Company's
plans, strategies, objectives, expectations and intentions are subject to
change at any time at the discretion of management and the Board of Directors;
(ii) the Company's plans and results of operations will be affected by the
Company's ability to manage its growth and working capital; (iii) the
Company's business is highly competitive and the entrance of new competitors
or the expansion of the operations by existing competitors in the Company's
markets could adversely affect the Company's plans and results of operations.
21
<PAGE>
BUSINESS
DTM Corporation develops, designs, manufactures, markets and supports, on an
international basis, rapid prototyping and rapid tooling systems , powdered
materials and related services. 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 milling and computer numerically
controlled and electrode 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 involve 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.
The Rapid Prototyping Advantage
The capability of rapid prototyping to manufacture models, prototypes,
patterns and metal tool inserts quickly affords users the opportunity to save
time and money by (i) reducing the product development and design cycle and,
consequently, speeding 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.
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
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<PAGE>
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. The usage of
investment casting of rapid prototyping patterns has significantly increased
as a technique for the production of prototype metal parts.
Four emerging capabilities of rapid prototyping are (i) the creation of core
and cavity metal mold inserts from metal powder for use in plastic injection
molding, (ii) the direct production of prototype metal parts from a range of
metal powders, (iii) the manufacture of flexible parts for automotive,
consumer and medical applications and (iv) the direct manufacturing of sand
molds and cores (patterns placed in sand molds for the purpose of creating
features and voids in a cast metal part) for use in the casting of metal parts
by foundries. The Company believes that its selective laser sintering
technology is the only commercially practiced rapid prototyping process that
allows a user to access all of these capabilities from a single platform.
Market Direction
The Company believes that the emerging ability of rapid prototyping to
manufacture metal parts in a range of materials and 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 that materials and related services will
represent an increasingly significant portion of future total industry
revenues.
DTM believes that the industry has entered 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 high-end market segment is served by rapid prototyping
systems, such as its SLS Systems, 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 manufacture metal parts
directly and quickly produce both tooling that can produce parts and the parts
themselves in the manufacturers' desired quantities and
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<PAGE>
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.
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. The Company believes that
the following characteristics differentiate its selective laser sintering
process from other competing rapid prototyping technologies:
Wide Range of Applications
The Company's SLS Systems can currently process seven materials: a
polycarbonate powder; two nylon powders; ProtoForm powder (a nylon
composite); RapidSteel powder; TrueForm powder; and SandForm powder. The
Company recently announced the expected availability of two new products:
Somos 201 powder, a new material supplied by DuPont that yields highly
flexible parts with rubber-like characteristics, and VeriForm powder, a
significantly improved material for functional prototypes. This wide range
of materials permits the user of an SLS System to produce models, patterns,
functional prototypes and tooling from one platform. 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 Systems' total materials and
applications capability through the use of any other single rapid
prototyping system.
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 that can be used to produce up to 80,000
plastic parts in the material of choice 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. A variation of the Company's RapidTool process
and RapidSteel material system can also be used to manufacture, in less
than two working days, epoxy-infiltrated metal cores and cavities that can
be used on injection molding machines to produce up to approximately 200
functional parts in the material of choice.
SLS System Productivity
The Company believes that its SLS Systems have certain productivity
advantages over competing rapid prototyping systems. In the selective laser
sintering process, the unfused powder remains in the build chamber,
supporting the shape of the part during the build. Due to this support,
multiple part builds can be stacked in the Company's SLS System's part
build chamber, which allows the SLS Systems to produce multiple parts in a
single run. Conversely, many competing technologies require multiple runs
of a system to create multiple parts. The Company also believes that its
SLS Systems have certain part build speed
24
<PAGE>
advantages over other rapid prototyping technologies. The Company
anticipates that productivity enhancements now under development could
result in significant further improvements in 1997.
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. The Company has
previously introduced a number of upgrades to the Sinterstation 2000 System
that allowed 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. Additionally, in 1997, the Company expects to make an
upgrade available to customers who have the Sinterstation 2000 System and
desire the thermal and scan speed performance capability of the
Sinterstation 2500 System. The Company expects to begin shipping this
upgrade package in the middle of 1997. 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.
BUSINESS STRATEGY
Since its inception, the Company's focus has been on the development and
improvement of the SLS Systems and related materials. During 1995, the Company
also began 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, the
introduction of ProtoForm, RapidSteel, TrueForm and SandForm powders, the
introduction of the Sinterstation 2500 System and the recently announced
expected availability of Somos 201 and VeriForm powders, the Company believes
that it is positioned to capitalize on its competitive advantages through the
following strategies:
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. The Company anticipates
expanding its position in this area by introducing an improved functional
prototyping material that gives users the ability to produce parts with
significantly improved resolution and surface finish. 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 cast parts through investment casting. The Company believes that its
TrueForm powder has enhanced DTM's ability to market the SLS Systems to
customers in the fast growing pattern segment of the rapid prototyping
market. The Company also has been engaged in raising the awareness of users
of investment casting technology of the benefits of using TrueForm for the
production of high quality cast metal parts. The Company expects to realize
increased market share as customer awareness of the benefits of these
materials increases.
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. The Company
intends to improve the RapidTool process by introducing enhancements that
will allow for a significant reduction in the cycle time to produce a core
or cavity.
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<PAGE>
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)
introduce an improved RapidSteel materials system which allows for the
production in less than 48 hours of epoxy-infiltrated metal molds that have
a mold production life of up to approximately 200 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.
An example of the Company's ability to expand its offering of selective
laser sintering materials is the recent introduction of SandForm powder.
SandForm powder is used by foundries for the quick and direct production of
sand molds and cores for the casting of metal parts. Sand molds and cores
are used for casting metal parts worldwide, particularly for the mass
production of automotive engine and drive train components. The Company
believes that selective laser sintering is the only rapid prototyping
technology capable of the direct manufacture of sand molds and cores.
Broaden SLS System Product Line
The Company's strategy is to continue to pursue the development of more
advanced SLS Systems. An example of this strategy is the Company's recent
introduction of the Sinterstation 2500 System, an SLS System with a larger
part build chamber than the Sinterstation 2000 System and certain other
productivity improvements. The Sinterstation 2500 System, coupled with the
Sinterstation 2000 System, provides the Company with a family of SLS
Systems to offer to both existing and prospective customers. In addition,
the Company has announced that existing owners of its Sinterstation 2000
System will have the ability to upgrade to the performance capability of a
Sinterstation 2500 System and that it intends to begin shipping the upgrade
in 1997. The Company also intends to introduce during 1997 the
Sinterstation 2000 GT System, a system that has the speed and performance
capability of the Sinterstation 2500 System with the smaller part build
chamber of the Sinterstation 2000 System.
Expand Distribution Network
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, establish a direct sales force in the Pacific Rim and extend its
agent network into additional key South American, Pacific Rim and Eastern
European countries. Expansion of the Company's field service and support
functions is expected to parallel the growth of the installed System base.
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
26
<PAGE>
produce metal prototype mold inserts. Customers input designs into the SLS
Systems 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 into the part build 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 SLS 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. This
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. The green part also can be infiltrated with an
epoxy material to form a core and cavity capable of producing up to
approximately 200 parts on an injection molding machine in the material of
choice.
PRODUCTS
The Sinterstation Systems
The Sinterstation Systems contain 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 Systems; 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.
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 Company's SLS Systems can be configured for use with a single powder or
for any combination of thermoplastics and metal. The list prices for
Sinterstation Systems range from $299,000 to approximately
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<PAGE>
$500,000, depending on the options selected by the customers. 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. Some of these options
may increase the purchase price of the System. 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
The Company's materials are sold in drums. The list prices for the following
powdered materials range from $23 to $60 per pound, depending on the material,
except for SandForm powder, which sells for $4.50 per pound. Characteristics
and uses of selective laser sintering powders available through DTM for use in
its Sinterstation Systems are as follows:
<TABLE>
<CAPTION>
MATERIAL/
YEAR INTRODUCED DESCRIPTION CHARACTERISTICS USES
<S> <C> <C> <C>
VERIFORM POWDER 1997 DTM-developed Tough, high strength mate- Designed for testing
high resolution rial creates parts with functional prototypes in
engineering excellent feature defini- high stress, harsh envi-
thermoplastic tion in one of several ronments and other de-
colors manding applications
where the prototype
needs to operate like
the final product.
- -------------------------------------------------------------------------------------------
SOMOS 201 POWDER DuPont-developed Highly ductile rubber-like Flexible functional pro-
1997 elastomeric en- material that can with- totypes of rubber and
gineering poly- stand "under-the-hood" specialized plastic
mer high temperatures and parts such as hoses,
harsh environments gaskets, moldings seals,
athletic shoes and medi-
cal models.
- -------------------------------------------------------------------------------------------
SANDFORM POWDER Polymer-coated Interchangeable with ex- Sand molds and inserts
1996 zirconium sand isting sand mold and core for casting parts in a
particles materials; particle size variety of metals.
and material characteris-
tics that enable fast pro-
duction of smooth sand
mold patterns
- -------------------------------------------------------------------------------------------
TRUEFORM POWDER DTM-developed Capable of producing ex- Patterns for casting
1996 polymer with tremely smooth, accurate single metal parts or
very fine parti- pattern masters low-quantity plastic
cle size and parts with complex geom-
spherical shape etry; thin wall struc-
tures where surface fin-
ish is important.
- -------------------------------------------------------------------------------------------
RAPIDSTEEL POWDER DTM-developed Creates durable metal mold Injection mold core and
1995 carbon steel inserts that can produce cavity inserts for pro-
particles with a thousands of plastic parts totype hard tooling us-
special polymer ing DTM's RapidTool
coating process.
- -------------------------------------------------------------------------------------------
PROTOFORM POWDER DTM-developed Extremely durable, flexi- Prototypes with fine de-
1995 composite mate- ble and strong; stands up tail and high strength
rial consisting to harsh chemicals and de- where testing in harsh
of nylon and manding temperature conditions is required.
spherical glass environments Can also be used to make
particles models.
- -------------------------------------------------------------------------------------------
NYLON AND FINE NYLON Engineering Durable material that can Functional prototypes of
1993/1994 thermoplastic be drilled, painted and actual products that re-
used in environments simi- quire snap fits. Can
lar to the end product; also be used to make
offers substantial heat models.
and chemical resistance
- -------------------------------------------------------------------------------------------
POLYCARBONATE Engineering Durable and heat resistant Conceptual models and
1991 thermoplastic 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 or
obtains those materials directly from the producer. The Company follows a
practice of single sourcing materials with these suppliers.
Other Products
Along with the Sinterstation Systems 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 1994, 1995 and 1996, the Company devoted approximately $3.8 million,
$3.5 million and $4.3 million to research and development, respectively. These
expenditures have resulted in ongoing improvement in the selective laser
sintering technology. The Company's Sinterstation Systems have 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, the commercial release of TrueForm
powder in early 1996 and SandForm powder in the third quarter of 1996 and the
introduction of the Sinterstation 2500 System in September 1996. The Company
recently announced the expected availability of two new powders: Somos 201
powder, a new material supplied by DuPont that yields highly flexible parts
with rubber-like characteristics, and VeriForm powder, a significantly
improved material for functional prototypes.
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.
MARKETING AND CUSTOMERS
Customers
Rapid prototyping systems are purchased by OEMs, universities, military and
defense organizations and service bureaus. Past purchasers of the Company's
SLS Systems include The Boeing Company, Eastman
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<PAGE>
Kodak Company, Fiskars Oy, Ford Motor Company, General Motors Corporation,
Hughes Christensen, LG Electronics, Inc. (Goldstar), Mercedes-Benz AG, Pratt &
Whitney, Rockwell International Corporation, Samsung Electronics Co., Ltd.,
Toyota Motor Corporation and Whirlpool Corporation, among others. These
customers have purchased SLS Systems in the past and continue to purchase
materials from the Company. However, none of such customers individually
accounted for a material amount of the Company's sales in 1996. In addition,
universities and technical transfer centers in 12 countries had purchased SLS
Systems as of December 31, 1996.
The Company also sells a substantial portion of SLS Systems to service
bureaus. 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. In 1996, 46.5 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 1995 approximately 15 percent of total revenues
were derived from sales to Compression Inc. In 1994 and 1996, 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 augmented by agents in
the Upper Midwest. 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 France, Italy,
Portugal, Spain, Sweden and the United Kingdom. The Company also distributes
its goods and provides services in the Pacific Rim and South America through a
network of agents, including agents in Argentina, Australia, Brazil, China,
Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, South Korea and
Taiwan. As of December 31, 1996, the Company had shipped SLS Systems to
customers in a total of 17 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 continue the 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
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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.
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. Further decentralization in North America will occur in 1997. The
Company has also expanded its Pacific Rim field service capability by
establishing a field service office in Singapore in January of 1997.
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, annual maintenance
contracts have been purchased for the majority of the Systems sold 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 Systems, 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 final
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.
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Procurement lead time for the major sub-assemblies of the SLS Systems 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 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 SLS Systems. The Company believes that it
will have sufficient manufacturing capacity to fulfill demand for its SLS
Systems in 1997. The Company expects that it will lease additional space for
its operations in late 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 20,442 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 February 5, 1997, the Company owned or had exclusive
licenses to 25 U.S. patents and nine pending U.S. applications. As of the same
date, the Company owned or had exclusive licenses to four European patents,
five pending European applications and five international Patent Cooperation
Treaty applications. In addition, the Company owns or has exclusive rights to
seven issued patents and 19 pending applications in 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: (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. Also in 1992, DTM
acquired a patent that was originally issued to Ross Housholder in 1981. The
Company believes that the Housholder patent is a pioneer patent in the rapid
prototyping field.
Most of the key claims of the U.S. patents covering selective laser
sintering, excluding the Housholder patent, have been submitted
internationally. The first European Patent Convention patent, which was issued
by the European Patent Office ("EPO") in December 1994, gives patent
protection in Austria, Belgium, France,
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<PAGE>
Germany, Italy, the Netherlands, Sweden, Switzerland and the United Kingdom.
However, this patent is the subject of an opposition proceeding before the EPO
that was initiated by a competitor of the Company. The competitor initially
alleged that the patent claims have been the subject of an unallowable
amendment and that the subject matter is not novel and does not involve an
inventive step. The Company received a favorable initial ruling from the EPO
in response to these allegations. However, the competitor has recently filed
papers before the EPO that again allege the patent is invalid, citing new
arguments for its positions. The Company has responded to these arguments and
intends to continue to defend the validity of this patent vigorously. The
Company is the plaintiff in a lawsuit in the United States involving claims of
infringement of certain of the Company's patents and has initiated 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 in the United
States of an additional five trademarks.
LEGAL PROCEEDINGS
DTM filed an action in the United States District Court for the Eastern
District of Wisconsin in October 1995 against three parties who are operating
an SLS System. DTM alleges that the defendants willfully infringed a DTM
patent. In June 1996, DTM amended its lawsuit to also assert that one of the
defendants breached an oral settlement agreement. The Company seeks injunctive
relief, damages and attorneys fees. The defendants have denied infringement
and the existence of an oral settlement agreement, and the defendants seek
attorneys fees. The defendants have also asserted the affirmative defenses of
patent invalidity, implied license, failure to mark patented articles, patent
unenforceability and invalidity of the oral settlement agreement. Discovery
commenced in late 1995. In a subsequent filing, one of the defendants also has
asserted claims against DTM and BFGoodrich for violation of state and federal
antitrust laws. That defendant seeks injunctive relief as well as damages and
attorneys fees. DTM and BFGoodrich have indicated that they believe that the
subsequent counter and cross claims for violation of antitrust laws are
without merit. Discovery has been stayed pending determination of the validity
of the third party complaint. It is not possible at this time to predict the
outcome of this proceeding, although a ruling unfavorable to the Company could
have a material adverse effect on the Company's business and financial
performance.
The Company initiated patent infringement litigation in March 1996 in the
3rd Chamber--1st section of the Court of Paris, France against EOS GmbH
("EOS"), a German competitor, against EOS S.A (France) and against one of
EOS's customers. The Company also initiated patent infringement litigation in
April 1996 in the County Court No. 1 in Munich, Germany against EOS and one of
EOS's customers, and in December 1996 initiated similar litigation in the
court of Pinerolo, Italy, against EOS and one of EOS's customers. In each of
these cases, 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 these proceedings. 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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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. See
"Business--Intellectual Property" and "Business--Legal Proceedings." The
Company considers a process marketed by 3D Systems to be potential worldwide
competition for its RapidTool process and an EOS process to be a competitor of
the RapidTool process in Europe.
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 December 31, 1996, the Company had 114 employees. Approximately 36.0
percent of the Company's employees are involved in engineering, research and
development and engineering product support. The remaining employees are
engaged in sales, marketing, finance and administration. None of the Company's
employees is 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 1997. The Company
expects that it will acquire additional space for its operations in late 1997.
See "Business--Manufacturing."
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND OTHER MANAGEMENT PERSONNEL
The executive officers and directors of the Company and their ages as of
March 31, 1997 are set forth below. All directors were re-elected on March 18,
1997. The term of each director will continue until the 1998 annual meeting of
the Company's shareholders.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND
DIRECTORS AGE POSITION
---------------------- --- --------
<S> <C> <C>
D. Lee Tobler........... 63 Chairman of the Board and Director
John S. Murchison, III.. 56 Chief Executive Officer, President and Director
Michael A. Ervin,
Ph.D. ................. 54 Vice President, Engineering
Uday Bellary............ 42 Vice President, Chief Financial Officer, Treasurer and Secretary
Thomas L. Lee........... 43 Vice President, Marketing
Marshall O. Larsen...... 48 Director
Alexander MacLachlan.... 64 Director
Thomas G. Ricks......... 44 Director
Steven G. Rolls......... 42 Director
<CAPTION>
OTHER MANAGEMENT
PERSONNEL
----------------
<S> <C> <C>
Klaus J. Esser.......... 52 Vice President, European Sales, DTM GmbH
Kevin McAlea, Ph.D. .... 38 Director of Process and Materials Research
Dennis K Medler......... 50 Vice President, Pacific Rim and South American Sales
</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, Ph.D., the Company's Vice President, Engineering, joined
DTM in April 1993. He had 22 years of experience in manufacturing, research
and development with 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.
Uday Bellary joined the Company in February 1997 as Vice President, Chief
Financial Officer, Secretary and Treasurer. Prior to joining DTM, he served as
Director of Finance for Cirrus Logic, Inc., a manufacturer of semiconductor
chips, having served that company in various finance and accounting functions,
since May 1990. Prior to that, he was with Intel Corporation, Conner
Peripherals, Inc., Pritchard Services PLC and Price Waterhouse LLP. Mr.
Bellary is also a certified public accountant.
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.
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<PAGE>
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
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.
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.
Kevin McAlea, Ph.D., has been the Director of Process and Materials Research
since joining DTM in March of 1993. Dr. McAlea is responsible for managing the
development of new selective laser sintering materials and applications.
Before joining DTM, he spent more than eight years in materials research and
development for General Electric Company ("GE"). His last position was
managing the Polymer Physics Program at GE's Corporate Research and
Development Center.
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.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation of the
Company's Chief Executive Officer and its two other most highly compensated
executive officers (collectively, the "Named Officers") having annual cash
compensation of $100,000 or more for services rendered in all capacities to
the Company during the fiscal year ended December 31, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------------------
SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(#)(1) COMPENSATION
- --------------------------- ------------ ------------------------------- ------------
<S> <C> <C> <C> <C>
John S. Murchison, III,
President.............. $ 150,000 -- 97,488 $1,301(2)
Michael A. Ervin, Vice
President,
Engineering............ 140,000 -- 48,744 --
Thomas L. Lee, Vice
President, Marketing... 120,000 -- 21,325 --
</TABLE>
- --------
(1) Consists of immediately exercisable options to be issued upon conversion
of SARs granted under the Equity Appreciation Plan in connection with the
closing of the Offering described herein. The number of SARs granted was
as follows: Murchison, 160,000 units; Ervin, 80,000 units; and Lee, 35,000
units. See "Management--Equity Appreciation Plan."
(2) Consists of portions of club membership dues attributable to personal use.
The following table sets forth information regarding the exercise and value
of EAP Options held at December 31, 1996 by the Named Officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR END (#) FISCAL YEAR END ($)(1)
------------------- ----------------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------------ ------------------- ----------------------
<S> <C> <C> <C> <C>
John S. Murchison, III.. -- -- 0/97,488 $0/750,658
Michael A. Ervin........ -- -- 0/48,744 0/375,329
Thomas L. Lee........... -- -- 0/21,325 0/164,203
</TABLE>
- --------
(1) Represents the value of immediately exercisable EAP Options to be issued
in connection with the closing of the Offering, at an assumed Offering
price of $10.00 per share less the weighted average exercise price of the
EAP Options.
DIRECTOR COMPENSATION
In March 1996, the Company instituted a program under which its non-
employee, non-affiliated directors are 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 payable 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
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<PAGE>
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, 998,000 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 February 15,
1997. 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 998,000 SARs outstanding as of the
date of this Prospectus will convert into EAP Options to acquire an aggregate
of an estimated 608,094 shares of Common Stock. Options to purchase 494,457
shares of Common Stock (those options arising from the conversion of SARs
awarded in 1995) will be exercisable for $2.30 per share. The remaining
options to purchase 17,670 and 95,967 shares of Common Stock (those options
arising from the conversion of SARs awarded in 1996 and 1997) will be
exercisable for $15.13 and $13.95, respectively, 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.
The conversion of SARs into immediately exercisable EAP Options, certain of
which will have exercise prices substantially 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 $3.8 million if the Offering
price is $10.00 per share). Such compensation expense is 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.
In March 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 163,808 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
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<PAGE>
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 20
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 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 have discretion to adjust
individual bonus payments up or down on a case-by-case basis.
Prior to 1997, no amounts were payable under the MIP Plan. Targets for 1997
are based on net profit and free cash flow milestones. No payments are due to
be paid until early 1998, assuming threshold performance targets are met.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors was formed in April
1990. During 1996, the members of the Compensation Committee were Messrs.
Larsen, 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.
39
<PAGE>
These rights continue for the benefit of the parties to that agreement who are
not eligible to sell shares of Common Stock absent registration under the
Securities Act of 1933, as amended (the "Securities Act"). 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' 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.
40
<PAGE>
OUTSTANDING LINES OF CREDIT; FINANCING TRANSACTIONS
The Company has outstanding lines of credit with NationsBank of Texas, N.A.
National City Bank of Cleveland, Ohio, and Texas Commerce Bank National
Association for $4.7 million, $3.5 million and $4.0 million, respectively. As
of March 31, 1997, the Company had outstanding $11.8 million under these
credit facilities. BFGoodrich has issued to NationsBank, National City Bank
and Texas Commerce Bank comfort letters on behalf of DTM in connection with
these credit lines. These lines of credit expire as of July 31, 1998. In
addition, BFGoodrich has provided to the Company an additional line of credit
in the amount of $4.0 million. As of March 31, 1997, the Company had
outstanding the full $4.0 million available under the BFGoodrich line of
credit. This line of credit bears interest at a rate equal to the prime
commercial lending rate of Citibank, N.A. The BFGoodrich line of credit
matures July 31, 1998 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. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
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 provided either at no cost to the Company or on terms
that could be considered more favorable to the Company than those that would
be available to DTM in arms-length transactions with unrelated vendors,
principally because DTM is able to take advantage of cost efficiencies
experienced by BFGoodrich due to the size of its operations. The Company
expects that DTM will continue to participate in many of these arrangements
after the Offering, until such time as BFGoodrich no longer owns a significant
interest in the Company. However, DTM may be ineligible to take part in some
insurance programs and certain other arrangements once BFGoodrich no longer
owns a majority of the outstanding Common Stock. Either party has the option
to terminate any of such arrangements at any time. See "Risk Factors--Loss of
Tax Allocation Agreement and Other Benefits from BFGoodrich."
As of December 31, 1996, the Company had payables outstanding to BFGoodrich
in the approximate amount of $614,000, relating to various transactions
involving income taxes, accrued interest, payroll taxes and certain insurance.
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
1997 annual meeting of shareholders, BFGoodrich proposed the nomination of
Messrs. Larsen, MacLachlan, Murchison, Ricks, Rolls and Tobler. 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 be able to control the Board of Directors and could determine
the outcome of matters submitted to the Company's shareholders for their vote
or consent.
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 was paid as agreed 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. Through December 31, 1996, royalties to The University of Texas
paid or accrued by the Company totaled approximately $1.6 million. See
"Business--Intellectual Property."
42
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 31, 1997 by (i) DTM Holdings, Ltd.
and Joseph J. Beaman (the "Selling Shareholders") and the number of Shares to
be sold by each Selling Shareholder, (ii) each other person known to the
Company to be the beneficial owner of more than five percent of the
outstanding Common Stock, (iii) each director of the Company, (iv) each of the
Named Officers and (v) 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(2).. 2,969,691 91.56% -- 2,969,691 48.74%
4020 Kinross Lakes Parkway
Richfield, Ohio 44286-9368
DTM Holdings, Ltd.(3)...... 192,547 5.94% 186,809 5,738 *
c/o Bradley A. Fowler
Financial Services Austin,
Inc.
707 Southwest Tower
211 E. 7th Street
Austin, TX 78701
Joseph J. Beaman........... 9,505 * 2,459 7,046 *
D. Lee Tobler(4)........... 2,969,691 91.56% -- 2,969,691 48.74%
John S. Murchison, III(5).. 97,488 2.92% -- 97,488 1.57%
Michael A. Ervin(5)........ 48,744 1.48% -- 48,744 *
Uday Bellary(5)............ 48,744 1.48% -- 48,744 *
Thomas L. Lee(5)........... 21,325 * -- 21,325 *
Marshall O. Larsen(4)...... 2,969,691 91.56% -- 2,969,691 48.74%
Alexander MacLachlan....... -- -- -- -- --
Thomas G. Ricks(6)......... 20,443 * -- 20,443 *
Steven G. Rolls(4)......... 2,969,691 91.56% -- 2,969,691 48.74%
All directors and executive
officers as a group
(9 persons)............... 3,206,435 92.68% -- 3,206,435 50.82%
</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. In accordance with such
rules, EAP Options are assumed to be exercised to the extent held by the
person whose beneficial ownership is shown.
(2) BFGoodrich will beneficially own 2,665,791 shares, 43.75% of those
outstanding (or 39.78% assuming the exercise of all EAP Options), after
the Offering if the Underwriters' over-allotment option is exercised in
full.
(3) A Texas limited partnership of which Financial Services Austin, Inc. is
the general partner and may be deemed the beneficial owner of such shares.
(4) Includes only shares owned by BFGoodrich, of which the director disclaims
beneficial ownership.
(5) Represents for each individual shares of Common Stock issuable upon the
exercise of EAP Options.
(6) Includes only shares owned by The University of Texas System, of which Mr.
Ricks disclaims beneficial ownership.
43
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 60,000,000 shares of
Common Stock, $.0002 par value per share, of which 3,243,392 shares were
issued and outstanding as of March 31, 1997, 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 Chase Mellon Shareholder Services L.L.C. as the
transfer agent and registrar for the Common Stock.
44
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 6,093,124 shares of
Common Stock outstanding. In addition to the shares of Common Stock that are
currently outstanding, options to acquire up to an estimated 608,094 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." In addition, a total of 163,808 shares
of Common Stock have been reserved for issuance under the Option Plan. The
Company has not granted any options under the Option Plan. See "Management--
Stock 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 3,039,000 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
one year 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 60,900 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 two 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 two-
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 executed the lock-up
agreements described above.
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....................................................... 3,039,000
=========
</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.
BFGoodrich has 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 303,900 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 3,039,000, 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 liability of BFGoodrich under this indemnity is limited to
the amount of the proceeds received by the Company, plus any proceeds received
by BFGoodrich from the sale of shares under the over-allotment option. The
liability of the other Selling Shareholders under this indemnity is limited to
the amount of their proceeds.
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.
In connection with the Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such persons may
bid for or purchase Common Stock for the purpose of stabilizing its market
price. The Underwriters also may create a short position for the account of
the Underwriters by selling more Common Stock in connection with the Offering
than they are committed to purchase from the Company and the Selling
Stockholders, and in such case may purchase Common Stock in the open market
following completion of the Offering to cover all or a portion of such short
position. The Underwriters may also
46
<PAGE>
cover all or a portion of such short position, up to 303,900 shares of Common
Stock, by exercising the Underwriters' over-allotment option referred to
above. In addition, A.G. Edwards & Sons, Inc., on behalf of the Underwriters,
may impose "penalty bids" under contractual arrangements with the Underwriters
whereby it may reclaim from an Underwriter (or dealer participating in the
offering) for the account of the other Underwriters, the selling concession
with respect to Common Stock that is distributed in the Offering but
subsequently purchased for the account of the Underwriters in the open market.
Any of the transactions described in this paragraph may result in the
maintenance of the price of the Common Stock at a level above that which might
otherwise prevail in the open market. None of the transactions described in
this paragraph is required, and, if they are undertaken, they may be
discontinued at any time.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts 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.
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 DTM Corporation at December 31,
1995 and 1996, and for each of the three years in the period ended December
31, 1996, 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 Registration Statement may also
be obtained from the Web site that the Commission maintains at www.sec.gov.
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, 1995 and 1996............. F-3
Consolidated Statements of Operations for the years ended December 31,
1994, 1995 and 1996..................................................... F-4
Consolidated Statements of Shareholders' Equity (Deficit) for the years
ended December 31, 1994, 1995 and 1996.................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996..................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
</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 1996, 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, 1996. 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 audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of DTM
Corporation and its subsidiary at December 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
Ernst &Young LLP
Austin, Texas
February 13, 1997,
except for the stock split
information
in Note 1, as to which the
date is
April 2, 1997
F-2
<PAGE>
DTM CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
-------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................... $ 756 $ 329
Accounts receivable, net of allowance for doubtful
accounts of $263 in 1995 and $640 in 1996............... 2,941 7,205
Due from BFGoodrich...................................... 381 --
Inventory................................................ 2,143 4,835
Prepaid expenses and other............................... 372 595
-------- -------
Total current assets....................................... 6,593 12,964
Furniture and equipment, net............................... 2,647 3,057
Capitalized software development costs, net of accumulated
amortization of $388 in 1995 and $292 in 1996............. 843 848
Patent and license fees, net of accumulated amortization of
$470 in 1995 and $766 in 1996............................. 406 791
Other noncurrent assets.................................... 150 237
-------- -------
Total assets............................................... $ 10,639 $17,897
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable......................................... $ 2,502 $ 5,845
Due to BFGoodrich........................................ -- 614
Deferred revenues........................................ 905 1,474
Accrued expenses and other liabilities................... 2,074 2,640
Short-term borrowings.................................... 676 769
-------- -------
Total current liabilities.................................. 6,157 11,342
Borrowings under line of credit from BFGoodrich............ 200 4,000
Notes payable to banks..................................... 8,200 11,040
Commitments and contingencies (Note 10)....................
Shareholders' equity (deficit):
Preferred stock, $.001 par value, 3,000,000 shares
authorized, no shares issued and outstanding............ -- --
Common stock, $.0002 par value, 60,000,000 shares
authorized;
3,243,392 shares issued and outstanding................. 1 1
Additional paid-in capital............................... 28,019 28,019
Accumulated deficit...................................... (31,980) (36,469)
Cumulative translation adjustment........................ 42 (36)
-------- -------
Total shareholders' equity (deficit)....................... (3,918) (8,485)
-------- -------
Total liabilities and shareholders' equity (deficit)....... $ 10,639 $17,897
======== =======
</TABLE>
See accompanying notes.
F-3
<PAGE>
DTM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1994 1995 1996
------- ------- ----------
<S> <C> <C> <C>
Revenue:
Products...................................... $ 8,127 $12,632 $ 22,070
Service and support........................... 1,112 1,579 2,309
------- ------- ----------
9,239 14,211 24,379
Cost of sales:
Products...................................... 5,370 8,803 13,021
Service and support........................... 511 873 1,424
------- ------- ----------
5,881 9,676 14,445
------- ------- ----------
Gross profit.................................... 3,358 4,535 9,934
Operating expenses:
Selling, general and administrative........... 5,249 6,620 9,980
Research and development...................... 3,840 3,521 4,292
------- ------- ----------
9,089 10,141 14,272
------- ------- ----------
Operating loss.................................. (5,731) (5,606) (4,338)
Other income (expense):
Interest expense, net......................... (178) (530) (1,066)
Cost of discontinued registration............. -- -- (752)
------- ------- ----------
(178) (530) (1,818)
------- ------- ----------
Loss before income tax benefit allocated from
BFGoodrich..................................... (5,909) (6,136) (6,156)
Income tax benefit allocated from BFGoodrich.... 1,825 2,138 1,667
------- ------- ----------
Net loss........................................ $(4,084) $(3,998) $ (4,489)
======= ======= ==========
Pro forma, giving effect to stand-alone taxa-
tion:
Net loss...................................... $ (6,156)
==========
Net loss per share............................ $ (1.70)
==========
Number of shares used......................... 3,624,239
==========
</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,
1994................... 3,243,392 $ 1 $28,019 $(23,898) $(44) $ 4,078
Net loss.............. -- -- -- (4,084) -- (4,084)
Translation adjust-
ment................. -- -- -- -- 50 50
--------- --- ------- -------- ---- -------
Balance at December 31,
1994................... 3,243,392 1 28,019 (27,982) 6 44
Net loss.............. -- -- -- (3,998) -- (3,998)
Translation adjust-
ment................. -- -- -- -- 36 36
--------- --- ------- -------- ---- -------
Balance at December 31,
1995................... 3,243,392 1 28,019 (31,980) 42 (3,918)
Net loss.............. -- -- -- (4,489) -- (4,489)
Translation adjust-
ment................. -- -- -- -- (78) (78)
--------- --- ------- -------- ---- -------
Balance at December 31,
1996................... 3,243,392 $ 1 $28,019 $(36,469) $(36) $(8,485)
========= === ======= ======== ==== =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
DTM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss........................................... $(4,084) $(3,998) $(4,489)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization.................... 2,292 2,487 2,170
Loss on disposal of equipment.................... 34 32 --
Changes in assets and liabilities used in
operating activities:
Accounts receivable............................ 854 (1,314) (4,264)
Inventory...................................... (182) 157 (2,692)
Due to/from BFGoodrich......................... 326 (1,064) 995
Prepaid expenses and other assets.............. 19 (90) (310)
Accounts payable............................... (302) 1,469 3,343
Deferred revenues.............................. (64) 103 569
Accrued expenses and other liabilities......... (656) 654 566
------- ------- -------
Net cash used in operating activities.............. (1,763) (1,564) (4,112)
INVESTING ACTIVITIES
Purchases of furniture and equipment............... (757) (1,674) (1,898)
Capitalized software development costs............. (325) (440) (374)
Patent and license expenditures.................... (362) (247) (698)
------- ------- -------
Net cash used in investing activities.............. (1,444) (2,361) (2,970)
FINANCING ACTIVITIES
Proceeds from notes payable........................ 1,600 3,600 --
Proceeds from short-term borrowings................ -- 2,681 3,448
Repayments of short-term borrowings ............... -- (2,005) (3,355)
Draws on line of credit from financial
institutions...................................... -- -- 2,840
Draws on line of credit from BFGoodrich............ -- 200 3,800
------- ------- -------
Net cash provided by financing activities.......... 1,600 4,476 6,733
Effect of foreign exchange rate changes on cash.... 50 36 (78)
------- ------- -------
Net increase (decrease) in cash.................... (1,557) 587 (427)
Cash at beginning of year.......................... 1,726 169 756
------- ------- -------
Cash at end of year................................ $ 169 $ 756 $ 329
======= ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
DTM Corporation ("DTM" or the "Company") 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, 1996, 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.
BFGoodrich provides DTM with tax administration services, participation in a
group program for various types of insurance and certain other assistance,
including legal services. These arrangements are provided either at no cost to
the Company or on terms that could be considered more favorable to the Company
than those that would be available to DTM in arms-length transactions. The
cost of these services is not reflected in the accompanying financial
statements as estimates of these costs are insignificant to the results of
operations of each period presented.
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 products include 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.
Technological feasibility is established when a product design and working
model of the software product have been completed and when the completeness of
the working model and its consistency with the
F-7
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
product design have been confirmed by testing. 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 $325,000 in 1994, $440,000 in 1995 and $374,000
in 1996. Amortization of capitalized software development costs totaled
$537,000 in 1994, $561,000 in 1995 and $369,000 in 1996. Amortization is
included in cost of product sales in the consolidated statements of
operations.
Patent and License Fees
Patent and license fees represent the costs associated with filing and
maintaining patent applications and obtaining, maintaining and defending
rights under patents under which DTM operates. DTM capitalized patent and
license fees of $362,000 in 1994, $247,000 in 1995 and $698,000 in 1996. These
fees are amortized for accounting purposes over a five-year estimated economic
useful life utilizing the straight-line method and are included in selling,
general and administrative expense.
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, when the Company's remaining obligations are
insignificant and when collectibility of the related receivable is probable,
which is upon shipment. The Company defers from three to six percent of the
revenues, excluding certain accessories, from each SLS system sale for
warranty service. This deferred amount represents the Company's estimate of
the cost of providing such warranty service and is recognized ratably as
service and support revenue over the 12-month warranty period.
Upon expiration of the 12-month warranty period discussed above, the Company
offers for sale to its customers an annual maintenance contract, the revenues
from which are recognized ratably as service and support revenue over the
related support period.
Pro Forma Net Loss Per Share
Pro forma net loss per share for the year ended December 31, 1996 was
calculated on a stand-alone basis without allocation of the income tax benefit
from BFGoodrich using the weighted average number of common shares outstanding
plus the number of shares under options (certain of which will have exercise
prices substantially less than the Offering price) that will be outstanding
under the Equity Appreciation Plan (see Note 11) upon completion of an initial
public offering of the Company's common stock (see Note 15). In addition, an
effective 1.022-for-1 stock split, effected by the Company as a series of
recapitalizations completed on April 2, 1997, has been retroactively applied
to all share and per share amounts. Historical per share amounts are not
presented because DTM is a majority-owned subsidiary of BFGoodrich.
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.
F-8
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 $346,000 in 1994,
$596,000 in 1995 and $757,000 in 1996.
Stock-Based Compensation
The Company accounts for stock-based employee compensation in accordance
with the provisions of APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations.
Income Taxes
The Company accounts 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.
Fair Value of Financial Instruments
The Company believes that the carrying amount of its financial instruments,
including debt, approximates fair value. Fair value is estimated based on
quoted market prices for similar instruments.
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
OF PERIOD EXPENSES WRITE-OFFS PERIOD
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1994............................. $150 $75 $21 $204
1995............................. 204 60 1 263
1996............................. 263 389 12 640
</TABLE>
3. INVENTORY
Inventory at December 31 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Raw materials and purchased parts.............................. $1,423 $3,187
Finished goods................................................. 720 1,648
------ ------
$2,143 $4,835
====== ======
</TABLE>
F-9
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
4. FURNITURE AND EQUIPMENT
Furniture and equipment at December 31 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Equipment.................................................. $ 5,977 $ 7,437
Leasehold improvements..................................... 1,289 1,366
Office furniture........................................... 347 356
------- -------
7,613 9,159
Less accumulated depreciation and amortization............. (4,966) (6,102)
------- -------
$ 2,647 $ 3,057
======= =======
</TABLE>
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 System, whereby DTM is licensed to
make, have made and sell products utilizing the selective laser sintering
technology. In consideration of rights granted in the license agreement, DTM
issued 20,442 shares of its common stock to The University of Texas System.
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, included in cost of sales, was $296,000 in 1994, $424,000 in 1995 and
$676,000 in 1996.
The Company evaluates the carrying values of patents and licenses to
determine if the facts and circumstances suggest that they may be impaired. If
this review indicates that patents and licenses will not be recoverable, as
determined based on the undiscounted cash flows of the entity over the
remaining amortization period, the carrying value of the patents and licenses
will be reduced accordingly.
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following as of
December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Royalties..................................................... $ 491 $ 360
Payroll and related accruals.................................. 431 525
Other......................................................... 1,152 1,755
------ ------
$2,074 $2,640
====== ======
</TABLE>
7. FINANCING ARRANGEMENTS
Line of Credit with 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 1996,
the amount which the Company may borrow was increased to $4,000,000. The line
bears interest at the prime commercial lending rate of Citibank, N.A. (8.5
percent at December 31, 1996) and matures on the earlier of July 31, 1998 or
the date upon which the Company receives any proceeds from an IPO of the
Company's common stock. At December 31, 1995 and 1996, $200,000 and
$4,000,000, respectively, was outstanding under this agreement.
F-10
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
7. FINANCING ARRANGEMENTS (CONTINUED)
Short-Term Borrowings
At December 31, 1995 and 1996, DTM had a total of $676,000 and $769,000,
respectively, of short-term debt outstanding under the terms of a financing
arrangement with a leasing company. The weighted average interest rates on
outstanding short-term borrowings were 19 and 20 percent at December 31, 1995
and 1996, respectively. The weighted average interest rates during 1995 and
1996 were 18 and 21 percent, respectively. The debt is collateralized by
certain equipment and accounts receivable.
Notes Payable to Banks
At December 31, 1995, DTM had lines of credit with two banks under unsecured
promissory notes with available borrowings of $8,200,000. During 1996, DTM
obtained a third line of credit with a third bank under an unsecured
promissory note with available borrowings of $4,000,000. The combined
available borrowings for these lines of credit is $12,200,000, of which
$11,040,000 was outstanding as of December 31, 1996. BFGoodrich has provided
letters of comfort to each of these banks upon which the banks have relied in
providing credit to DTM. The notes mature on July 31, 1998 but the Company has
committed to pay them on the successful completion of an IPO. Interest on the
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, 1995 and 1996 were as follows:
<TABLE>
<CAPTION>
1995 1996
-------------------------------- -----------------------------------------------
INTEREST OUTSTANDING INTEREST OUTSTANDING
RATES BORROWINGS RATES BORROWINGS
-------- ----------- -------- -----------
<S> <C> <C> <C>
6.5% $4,700,000 6.2% $ 4,700,000
6.4% 2,800,000 6.2% 3,500,000
8.5% 700,000 -- --
-- 6.2% 2,840,000
---------- -----------
$8,200,000 $11,040,000
========== ===========
</TABLE>
Interest paid in connection with all of the above financing arrangements was
approximately $212,000 in 1994, $451,000 in 1995 and $1,079,000 in 1996
(approximately $153,000 of which was paid to BFGoodrich in 1996).
8. COST OF DISCONTINUED REGISTRATION
During 1996, DTM attempted an IPO. However, due to market volatility and
other issues the IPO was postponed. The Company incurred approximately
$752,000 of legal, accounting and other professional services related to the
unsuccessful IPO which were expensed in the fourth quarter.
9. 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 tax benefit of any losses 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.
F-11
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
9. INCOME TAXES (CONTINUED)
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, 1995 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Book over tax depreciation and amortization............ $ 91 $ 206
Allowance for doubtful accounts........................ 92 224
Net operating loss carryforwards (for periods prior to
October 31, 1990)..................................... 1,470 1,470
Other.................................................. 115 106
------- -------
Total deferred tax assets................................ 1,768 2,006
Valuation allowance for deferred tax assets.............. (1,478) (1,599)
------- -------
290 407
Deferred tax liabilities:
Deferred revenue....................................... 290 407
------- -------
Total deferred tax liabilities........................... 290 407
------- -------
Net deferred tax assets.................................. $ -- $ --
======= =======
</TABLE>
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,
----------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Income tax benefit at the federal statutory rate
(34%).......................................... $ 2,009 $ 2,086 $ 2,093
Net operating loss not utilized by the Company.. (2,009) (2,086) (2,093)
Income tax benefit allocated from BFGoodrich.... 1,825 2,138 1,667
-------- -------- --------
$ 1,825 $ 2,138 $ 1,667
======== ======== ========
</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, 1996 would have been $6,156,000, or a loss of $1.70 per share,
and has been reflected in the pro forma amounts presented in the consolidated
statements of operations.
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
F-12
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
9. INCOME TAXES (CONTINUED)
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. 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.
10. COMMITMENTS AND CONTINGENCIES
DTM leases facilities and equipment under noncancelable operating leases,
expiring primarily in 1997. Total rent expense incurred under these leases was
approximately $246,000 in 1994, $252,000 in 1995 and $332,000 in 1996. Future
minimum payments under these leases are as follows (in thousands):
<TABLE>
<S> <C>
1997.............................................. $281
1998.............................................. 22
1999.............................................. 7
</TABLE>
As of December 31, 1996, the Company had purchase commitments for inventory
totaling approximately $3,257,000.
In the ordinary course of business, the Company is subject to legal
proceedings and claims. In one such instance, DTM filed an action in the
United States District Court for the Eastern District of Wisconsin in October
1995 against three parties who are operating an SLS System. DTM alleges that
the defendants willfully infringed a DTM patent. In June 1996, DTM amended its
lawsuit to also assert that one of the defendants breached an oral settlement
agreement. The Company seeks injunctive relief, damages and attorneys fees.
The defendants have denied infringement and the existence of an oral
settlement agreement, and the defendants seek attorneys fees. The defendants
have also asserted the affirmative defenses of patent invalidity, implied
license, failure to mark patented articles, patent unenforceability and
invalidity of the oral settlement agreement. Discovery commenced in late 1995.
In a subsequent filing, one of the defendants also has asserted claims against
DTM and BFGoodrich for violation of state and federal antitrust laws. That
defendant seeks injunctive relief as well as damages and attorneys fees. It is
not possible at this time to predict the outcome of this proceeding, although
DTM and BFGoodrich have indicated that they believe that the subsequent
counter and cross claims for violation of antitrust laws are without merit.
However, a ruling unfavorable to the Company could have a material adverse
effect on the Company's business and financial performance.
11. EQUITY APPRECIATION 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 percent 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 in
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
F-13
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
11. EQUITY APPRECIATION PLAN (CONTINUED)
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 based upon the
applicable valuation of the Company. From and after, but not prior to, the
occurrence of a Change in 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 and 1996, there were 998,000 and 840,500 SARs outstanding,
respectively. The SARs granted during 1995 were granted at a fair value of
$1.40 per SAR. During 1996, 29,000 SARs were granted at a fair value of $9.22
per SAR. In addition, 185,500 SARs were forfeited in 1996. Subsequent to
December 31, 1996, the Company granted an additional 157,500 SARs at a fair
value of $8.50 per SAR. Assuming an initial public offering of 2,849,732
shares by the Company at a price of $10.00 per share, the SARs granted in
1995, 1996 and subsequent to December 31, 1996 will be converted to stock
options with exercise prices of approximately $2.30 per share, $15.13 per
share and $13.95 per share, respectively.
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, upon the closing of an IPO, the Company will
recognize a non-cash charge (compensation) of approximately $3.8 million
(assuming an initial public offering price of $10.00 per share) to record the
appreciation in value of the SARs. The Company has reserved 800,000 shares of
Common Stock for future issuance under the SAR Plan.
The Company has elected to follow APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and related Interpretations in accounting for its
employee incentive plan. The required additional disclosures under the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," are not provided as no compensation
expense would be recognized on a pro forma basis.
12. KEY EMPLOYEE STOCK OPTION PLAN
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 set
aside 163,808 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 percent of the options
granted becoming exercisable on the first anniversary date of the option
grant, 35 percent becoming exercisable on the next succeeding anniversary date
and 30 percent 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. The term of the Option Plan is five years unless terminated
earlier by the Board of Directors. There have been no grants made under the
Option Plan.
13. MANAGEMENT INCENTIVE PLAN
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 20 to 50 percent of base salary and the compensation committee
F-14
<PAGE>
DTM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
13. MANAGEMENT INCENTIVE PLAN (CONTINUED)
of the Board of Directors creates personal and corporate performance targets,
as well as minimum thresholds. If the minimum thresholds are met, the bonus
payable will be between 50 to 150 percent of the participant's cash bonus
target. No expense was recognized in connection with the MIP Plan in 1996.
14. 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>
1994:
United States........... $ 6,689(a) $ 1,449 $ 8,138 $(5,743) $(4,096) $ 7,974
Germany................. 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
Germany................. 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
======= ======= ======= ======= ======= =======
1996:
United States........... $18,731(a) $ 4,184 $22,915 $(4,691) $(4,767) $16,906
Germany................. 5,648 -- 5,648 353 278 3,103
Eliminations............ -- (4,184) (4,184) -- -- (2,112)
------- ------- ------- ------- ------- -------
$24,379 $ -- $24,379 $(4,338) $(4,489) $17,897
======= ======= ======= ======= ======= =======
</TABLE>
- --------
(a) The Company's United States net revenues from unaffiliated customers
include export sales (principally to the Pacific Rim) of $666,000 in 1994,
$2,611,000 in 1995 and $6,540,000 in 1996.
The Company's revenues are derived from sales to a wide range of
international customers. During 1995, $2,111,000, approximately 15 percent of
total revenues, were from sales to one customer.
15. SUBSEQUENT EVENT
On February 13, 1997, the Company's Board of Directors authorized management
of the Company to proceed with an IPO of the Company's common stock. Although
the success of such a proposed offering cannot be certain, management is
proceeding with activities relating to this process.
F-15
<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 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".
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............................................................... 35
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 , 1997 (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.
================================================================================
================================================================================
3,039,000 SHARES
COMMON STOCK
---------------
PROSPECTUS
---------------
A.G. EDWARDS & SONS, INC.
LADENBURG THALMANN & CO. INC.
, 1997
================================================================================
<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............................................ $ 14,468
NASD filing fee................................................. 4,259
Nasdaq National Market listing fee.............................. 21,715
Blue sky qualification fees and expenses........................ 10,000
Printing and engraving expenses................................. 110,000
Legal fees and expenses......................................... 65,000
Accounting fees and expenses.................................... 200,000
Transfer agent and registrar fees............................... 15,000
Miscellaneous................................................... 9,558
--------
Total....................................................... $450,000
========
</TABLE>
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 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 1994 through 1996 fiscal years, and to date, the
Registrant has not sold or issued any unregistered securities pursuant to the
Securities Act.
II-1
<PAGE>
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, as Restated.
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 of Texas, N.A.
10.8+ -- Promissory Note to National City Bank.
10.9+ -- Promissory Note to Texas Commerce Bank National Association.
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.
10.13+ -- Amendment to Patent License Agreement between DTM Corporation and
the Board of Regents of The University of Texas, dated as of
October 27, 1994.
10.14* -- Loan Commitment Letter from Texas Commerce Bank National
Association.
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 Independent Auditors, Ernst & Young LLP.
24.1+ -- Power of Attorney for D. Lee Tobler.
24.2+ -- Power of Attorney for Marshall O. Larsen.
24.3+ -- Power of Attorney for Alexander MacLachlan.
24.4+ -- Power of Attorney for Thomas G. Ricks.
24.5+ -- Power of Attorney for Steven G. Rolls.
27+ -- Financial Data Schedule
</TABLE>
- --------
* Filed herewith.
+ Previously filed.
(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 April 2, 1997.
DTM Corporation
By: /s/ John S. Murchison, III
_________________________________
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
/s/ Uday Bellary Chief Financial
- ------------------------------------- Officer,
Uday Bellary Secretary and
Treasurer
(Principal
Financial and
Accounting
Officer)
*Marshall O. Larsen Director
- ------------------------------------- April 2, 1997
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, as
Restated.
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 of Texas, N.A.
10.8+ -- Promissory Note to National City Bank.
10.9+ -- Promissory Note to Texas Commerce Bank National
Association.
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.
10.13+ -- Amendment to Patent License Agreement between DTM
Corporation and the Board of Regents of The
University of Texas, dated as of October 27, 1994.
10.14* -- Loan Commitment Letter from Texas Commerce Bank
National Association.
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 Independent Auditors, Ernst & Young LLP.
24.1+ -- Power of Attorney for D. Lee Tobler.
24.2+ -- Power of Attorney for Marshall O. Larsen.
24.3+ -- Power of Attorney for Alexander MacLachlan.
24.4+ -- Power of Attorney for Thomas G. Ricks.
24.5+ -- Power of Attorney for Steven G. Rolls.
27+ -- Financial Data Schedule.
</TABLE>
- --------
* Filed herewith.
+ Previously filed.
<PAGE>
Exhibit 1.1
-----------
DTM CORPORATION
3,039,000 Shares
Common Stock
($.0002 Par Value)
UNDERWRITING AGREEMENT
----------------------
____________________, 1997
A.G. EDWARDS & SONS, INC.
LADENBURG THALMANN & CO. INC.
As Representatives of the Several Underwriters
c/o A.G. Edwards & Sons, Inc.
One North Jefferson Avenue
St. Louis, Missouri 63103
The undersigned, DTM Corporation, a Texas corporation (the "Company"), The
B.F. Goodrich Company, a New York corporation ("Goodrich"), and the persons
listed on Schedule I hereto (collectively with Goodrich, the "Selling
Shareholders"), hereby address you as the representatives (the
"Representatives") of each of the persons, firms and corporations listed on
Schedule II hereto (collectively, the "Underwriters") and hereby confirm their
agreement with the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell to the
Underwriters 2,849,732 shares of its Common Stock, par value $.0002 per share,
and the Selling Shareholders propose to sell to the Underwriters a total of
189,268 shares of the Company's Common Stock, par value $.0002 per share, as set
forth on Schedule I hereto (such 3,039,000 shares of Common Stock are herein
referred to as the "Firm Shares"). Solely for the purpose of covering over-
allotments in the sale of the Firm Shares, Goodrich further proposes to grant
the right to the Underwriters to purchase up to an additional 303,900 shares
(the "Option Shares"), as provided in Section 3 of this Agreement. The Firm
Shares and the Option Shares are herein sometimes referred to as the "Shares"
and are more fully described in the Prospectus hereinafter defined.
2. PURCHASE, SALE AND DELIVERY OF FIRM SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees and each Selling
Shareholder agrees, severally and not jointly, to sell to the Underwriters, and
each such Underwriter agrees, severally and not jointly, (a) to purchase from
the Company and from each of the Selling Shareholders, pro rata, at a purchase
price of $_______ per share, the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule II hereto and (b) to purchase from Goodrich
any additional number of Option Shares which such Underwriter may become
obligated to purchase pursuant to Section 3 hereof.
The Company and the Selling Shareholders will deliver definitive
certificates for the Firm Shares at the office of A.G. Edwards & Sons, Inc., 77
Water Street, New York, New York ("Edwards' Office"), or such other place as you
and the Company may mutually agree upon, for the accounts of the Underwriters
against payment to the Company and the Selling Shareholders of the purchase
price for the Firm Shares sold by them to the several Underwriters by wire
transfer or certified or bank cashiers' check in federal (same day available)
funds payable to the order of the Company and the Selling Shareholders,
respectively, and delivered to One North Jefferson Avenue, St. Louis, Missouri
63103, or at such other place as may be agreed upon between you and the Company
(the "Place of Closing"), at 10:00 a.m., St. Louis time, on ________________,
1997, or at such other time and date not later than five full business days
thereafter as you and the Company may agree, such time and date of payment and
delivery being herein called the "Closing Date."
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The certificates for the Firm Shares so to be delivered will be made
available to you for inspection at Edwards' Office (or such other place as you
and the Company may mutually agree upon) at least one full business day prior to
the Closing Date and will be in such names and denominations as you may request
at least three full business days prior to the Closing Date.
It is understood that an Underwriter, individually, may (but shall not be
obligated to) make payment on behalf of the other Underwriters whose funds shall
not have been received prior to the Closing Date for Shares to be purchased by
such Underwriter. Any such payment by an Underwriter shall not relieve the other
Underwriters of any of their obligations hereunder.
It is understood that the Underwriters propose to offer the Shares to the
public upon the terms and conditions set forth in the Registration Statement
hereinafter defined.
3. PURCHASE, SALE AND DELIVERY OF THE OPTION SHARES. Goodrich hereby grants
an option to the Underwriters to purchase from it up to 303,900 Option Shares on
the same terms and conditions as the Firm Shares; provided, however, that such
option may be exercised only for the purpose of covering any over-allotments
which may be made by them in the sale of the Firm Shares. No Option Shares shall
be sold or delivered unless the Firm Shares previously have been, or
simultaneously are, sold and delivered.
The option is exercisable on behalf of the several Underwriters by you, as
Representatives, at any time, and from time to time, before the expiration of 30
days from the date of this Agreement, for the purchase of all or part of the
Option Shares covered thereby, by notice given by you to the Company and
Goodrich in the manner provided in Section 13 hereof, setting forth the number
of Option Shares as to which the Underwriters are exercising the option, and the
date of delivery of said Option Shares, which date shall not be more than five
business days after such notice unless otherwise agreed to by the parties. You
may terminate the option at any time, as to any unexercised portion thereof, by
giving written notice to the Company and Goodrich to such effect.
You, as Representatives, shall make such allocation of the Option Shares
among the Underwriters as may be required to eliminate purchases of fractional
Shares.
Delivery of definitive certificates for the Option Shares with respect to
which the option shall have been exercised shall be made to or upon your order
at Edwards' Office (or at such other place as you and the Company may mutually
agree upon), against payment by you of the per share purchase price to Goodrich
by wire transfer or certified or bank cashier's check or checks, payable in
federal (same day available) funds. Such payment and delivery shall be made at
10:00 a.m., St. Louis time, on the date designated in the notice given by you as
above provided for, unless some other date and time are agreed upon, which date
and time of payment and delivery are called the "Option Closing Date." The
certificates for the Option Shares so to be delivered will be made available to
you for inspection at Edwards' Office at least one full business day prior to
the Option Closing Date and will be in such names and denominations as you may
request at least two full business days prior to the Option Closing Date. On the
Option Closing Date, the Company and Goodrich shall provide the Underwriters
such representations, warranties, opinions and covenants with respect to the
Option Shares as are required to be delivered on the Closing Date with respect
to the Firm Shares.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY, THE B.F.
GOODRICH COMPANY AND THE SELLING SHAREHOLDERS. (a) The Company represents and
warrants to and agrees with each Underwriter that:
(i) A registration statement (Registration No. 333-04173) on Form S-1
with respect to the Shares, including a preliminary prospectus, and such
amendments to such registration statement as may have been required to the
date of this Agreement, has been carefully prepared by the Company pursuant
to and in conformity with the requirements of the Securities Act of 1933,
as amended (the "Act"), and the Rules and Regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder and has been filed with the Commission under the Act. Copies of
such registration statement, including any amendments thereto, each related
preliminary prospectus (meeting the requirements of Rule 430 or 430A of the
Rules and Regulations) contained therein, the exhibits, financial
statements and schedules have
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heretofore been delivered by the Company to you. If such registration
statement has not become effective under the Act, a further amendment to
such registration statement, including a form of final prospectus,
necessary to permit such registration statement to become effective will be
filed promptly by the Company with the Commission. If such registration
statement has become effective under the Act, a final prospectus containing
information permitted to be omitted at the time of effectiveness by Rule
430A of the Rules and Regulations will be filed promptly by the Company
with the Commission in accordance with Rule 424(b) of the Rules and
Regulations. The term "Registration Statement" as used herein means the
registration statement as amended at the time it becomes or became
effective under the Act (the "Effective Date"), including financial
statements and all exhibits and, if applicable, the information deemed to
be included by Rule 430A of the Rules and Regulations. The term
"Prospectus" as used herein means (i) the prospectus as first filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations or,
(ii) if no such filing is required, the form of final prospectus included
in the Registration Statement at the Effective Date or (iii) if a Term
Sheet or Abbreviated Term Sheet (as such terms are defined in Rules 434(b)
and 434(c), respectively, of the Rules and Regulations) is filed with the
Commission pursuant to Rule 424(b)(7) of the Rules and Regulations, the
Term Sheet or Abbreviated Term Sheet and the last Preliminary Prospectus
filed with the Commission prior to the time the Registration Statement
became effective, taken together. The term "Preliminary Prospectus" as used
herein shall mean a preliminary prospectus as contemplated by Rule 430 or
430A of the Rules and Regulations included at any time in the Registration
Statement.
(ii) The Commission has not issued, and is not to the knowledge of the
Company threatening to issue, an order preventing or suspending the use of
any Preliminary Prospectus or the Prospectus nor instituted proceedings for
that purpose. Each Preliminary Prospectus at its date of issue, the
Registration Statement and the Prospectus and any amendments or supplements
thereto contains or will contain, as the case may be, all statements which
are required to be stated therein by, and in all material respects conform
or will conform, as the case may be, to the requirements of, the Act and
the Rules and Regulations. Neither the Registration Statement nor any
amendment thereto, as of the applicable effective date, and neither the
Prospectus nor any supplement thereto contains or will contain, as the case
may be, any untrue statement of a material fact or omits or will omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company does not
make any representation or warranty as to information contained in or
omitted from the Registration Statement or the Prospectus, or any such
amendment or supplement, in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of the Underwriters
specifically for use in the preparation thereof.
(iii) The filing of the Registration Statement and the execution and
delivery of this Agreement have been duly authorized by the Board of
Directors of the Company; this Agreement constitutes a valid and legally
binding obligation of the Company enforceable in accordance with its terms
(except to the extent the enforceability of the indemnification and
contribution provisions of Section 7 hereof may be limited by public policy
considerations as expressed in the Act as construed by courts of competent
jurisdiction, and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws affecting creditors'
rights generally and by general principles of equity); the issue and sale
of the Shares by the Company and the performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a
violation of the Company's articles of incorporation or bylaws or result in
a breach or violation of any of the terms and provisions of, or constitute
a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any properties or assets of the Company or its
subsidiary under, any statute, or under any indenture, mortgage, deed of
trust, note, loan agreement, sale and leaseback arrangement or other
agreement or instrument to which the Company or its subsidiary is a party
or by which they are bound or to which any of the properties or assets of
the Company or its subsidiary is subject, or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over the
Company or its subsidiary or their properties, except to such extent as
does not materially adversely affect the business of the Company and its
subsidiary taken as a whole; no consent, approval, authorization, order,
registration or qualification of or with any court or governmental agency
or body is required for the consummation of the transactions herein
contemplated, except such as may be required by the National Association of
Securities Dealers, Inc. (the
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"NASD") or under the Act or Rules and Regulations or any state securities
laws.
(iv) Except as described in the Prospectus, neither the Company nor
its subsidiary has sustained since the date of the latest audited financial
statements included in the Prospectus any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order or decree. Except as contemplated in the
Prospectus, subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company and its
subsidiary taken as a whole have not incurred any material liabilities or
material obligations, direct or contingent, other than in the ordinary
course of business, or entered into any material transactions not in the
ordinary course of business, and there has not been any material change in
the capital stock or long-term debt of the Company and its subsidiary taken
as a whole or any material adverse change in the condition (financial or
other), net worth, business, affairs, management, prospects or results of
operations of the Company and its subsidiary taken as a whole. The Company
and its subsidiary have filed all material federal, state and foreign
income and franchise tax returns and paid all taxes shown as due thereon;
all tax liabilities are adequately provided for on the books of the Company
and its subsidiary except to such extent as would not materially adversely
affect the business of the Company and its subsidiary taken as a whole; the
Company and its subsidiary have made all necessary payroll tax payments and
are current in the payment thereof and up-to-date as of the date of this
Agreement except to such extent as would not materially adversely affect
the business of the Company and its subsidiary taken as a whole; and
neither the Company nor its subsidiary has knowledge of any tax proceeding
or action pending or threatened against the Company or its subsidiary which
might materially adversely affect their business or property.
(v) Except as described in the Prospectus, there is not now pending
or, to the knowledge of the Company, threatened or contemplated, any
action, suit or proceeding to which the Company or its subsidiary is a
party before or by any court or public, regulatory or governmental agency
or body which might be expected to result (individually or in the
aggregate) in any material adverse change in the condition (financial or
other), business or prospects of the Company and its subsidiary taken as a
whole, or might be expected (individually or in the aggregate) to
materially and adversely affect the properties or assets thereof; and there
are no contracts or documents of the Company or its subsidiary which would
be required to be filed as exhibits to the Registration Statement by the
Act or by the Rules and Regulations which have not been filed as exhibits
to the Registration Statement.
(vi) The Company has duly and validly authorized capital stock as
described in the Prospectus; all outstanding shares of Common Stock of the
Company and the Shares conform, or when issued will conform, to the
description thereof in the Registration Statement and the Prospectus and
have been, or, when issued and paid for will be, duly authorized, validly
issued, fully paid and nonassessable; and the issuance of the Shares to be
purchased from the Company hereunder is not subject to preemptive rights.
(vii) The Company and its subsidiary have been duly incorporated and
are validly existing as corporations in good standing under the laws of the
states or other jurisdictions in which they are incorporated, with full
power and authority (corporate and other) to own, lease and operate their
properties and conduct their businesses as described in the Registration
Statement; the Company and its subsidiary are duly qualified to do business
as foreign corporations in good standing in each state or other
jurisdiction in which their ownership or leasing of property or conduct of
business legally requires such qualification, except where the failure to
be so qualified would not have a material adverse effect on the ability of
the Company and its subsidiary to conduct its or their business as
described in the Registration Statement; and the outstanding shares of
capital stock of the Company's subsidiary have been duly authorized and
validly issued, are fully paid and nonassessable and are owned by the
Company free and clear of any mortgage, pledge, lien, encumbrance, charge
or adverse claim and are not the subject of any agreement or understanding
with any person; no options, warrants or other rights to purchase,
agreement or other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interests in the
subsidiary are outstanding.
(viii) Ernst & Young LLP, the accounting firm which has audited the
financial statements filed
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with the Commission as a part of the Registration Statement, is an
independent public accounting firm within the meaning of the Act and the
Rules and Regulations.
(ix) The consolidated financial statements and schedules of the
Company and its subsidiary, including the notes thereto, filed with and as
a part of the Registration Statement, present fairly in all material
respects the consolidated financial position of the Company and its
subsidiary as of the respective dates thereof and the consolidated results
of operations and statements of cash flow for the respective periods
covered thereby, all in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved
except as otherwise disclosed in the Prospectus. The selected financial
data included in the Registration Statement and Prospectus present fairly
the information shown therein and have been compiled on a basis consistent
with that of the audited financial statements in the Registration Statement
and Prospectus.
(x) Neither the Company nor its subsidiary is in default with respect
to any contract or agreement to which it is a party; provided that this
representation shall not apply to defaults which in the aggregate are not
materially adverse to the condition, financial or other, of the business or
prospects of the Company and its subsidiary taken as a whole.
(xi) Neither the Company nor its subsidiary is in violation of any
laws, ordinances or governmental rules or regulations to which it is
subject, and neither the Company nor its subsidiary has failed to obtain
any other licenses, permits, franchises, easements, consents, or other
governmental authorizations necessary to the ownership, leasing and
operation of its properties or to the conduct of its business, which
violation or failure would materially adversely affect the business,
operations, properties, prospects, profits or condition (financial or
other) of the Company and its subsidiary taken as a whole. Neither the
Company nor its subsidiary has, at any time during the past five years (A)
made any unlawful contributions to any candidate for any political office,
or failed fully to disclose any contribution in violation of law, or (B)
made any payment to state, federal or foreign government officer or
officers, or other person charged with similar public or quasi-public duty
(other than payment required or permitted by applicable law).
(xii) Except as described in the Prospectus, (a) the Company and its
subsidiary own or possess, or can acquire on reasonable terms, adequate
patents, patent licenses, trademarks, service marks and trade names
necessary to conduct the business now operated by them, and (b) neither the
Company nor its subsidiary has received any notice of infringement of or
conflict with asserted rights of others with respect to any patents, patent
licenses, trademarks, service marks or trade names which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would materially adversely affect the conduct of the business, operations,
financial condition or income of the Company and its subsidiary taken as a
whole.
(xiii) The Company and its subsidiary have good and marketable title
to all property owned by them, free and clear of all liens, encumbrances,
restrictions and defects except such as are described in the Registration
Statement or do not interfere in any material respect with the use made and
proposed to be made of such property; and any property held under lease or
sublease by the Company or its subsidiary is held under valid, subsisting
and enforceable leases or subleases with such exceptions as are not
material and do not interfere in any material respect with the use made and
proposed to be made of such property by the Company and its subsidiary, and
neither the Company nor its subsidiary has any notice or knowledge of any
material claim of any sort which has been, or is reasonably likely to be,
asserted by anyone adverse to the Company's or its subsidiary's rights as
lessee or sublessee under any lease or sublease described above, or
affecting or questioning the Company's or its subsidiary's rights to the
continued possession of the leased or subleased premises under any such
lease or sublease in conflict with the terms thereof.
(xiv) Except as described in the Prospectus, to the knowledge of the
Company, there is no factual basis for any action, suit or other proceeding
involving the Company or its subsidiary or any of their material assets for
any failure of the Company or its subsidiary, or any predecessor thereof,
to comply with any requirements of federal, state or local regulation
relating to air, water, solid waste management, hazardous or toxic
substances, or the protection of health or the environment. Except as
described in the Prospectus, none
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of the property owned or leased by the Company or its subsidiary is, to the
knowledge of the Company, contaminated with any waste or hazardous
substances, and neither the Company nor its subsidiary may be deemed an
"owner or operator" of a "facility" or "vessel" which owns, possesses,
transports, generates or disposes of a "hazardous substance" as those terms
are defined in (S)9601 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. (S)9601 et seq.
------
(xv) No labor disturbance exists with the employees of the Company or
its subsidiary or, to the knowledge of the Company, is imminent which would
have a material adverse effect on the Company and its subsidiary taken as a
whole.
(xvi) The Company has not taken nor will it take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in stabilization or manipulation of the price of the
Company's Common Stock, and the Company is not aware of any such action
taken or to be taken by affiliates of the Company.
(xvii) All issuances of stock appreciation rights pursuant to the DTM
Corporation Equity Appreciation Plan were exempt from the registration
requirements of the Act.
(xviii) The Company is not an "investment company" or a company
"controlled" by an "investment company" with the meaning of the Investment
Company Act of 1940, as amended.
(b) Goodrich represents and warrants to and agrees with each Underwriter
that:
(i) To Goodrich's knowledge, the representations and warranties of the
Company set forth in subsection (a) of this Section 4 are true and correct.
For purposes of this Section 4(b), the knowledge of Goodrich is deemed to
include the knowledge of the following directors, officers, employees,
agents and representatives of Goodrich who have had significant involvement
with the business and affairs of the Company: D. Lee Tobler, Marshall O.
Larsen, Steven G. Rolls, John Shamanis, Nicholas J. Calise and Sonja M.
Haller. For purposes of this subsection (i), the knowledge of Messrs.
Tobler, Larsen and Rolls shall include what each of the foregoing
individuals knows or should have known in his capacity as director of the
Company or in connection with any duties specifically delegated to him by
the Board of Directors of the Company, and the knowledge of Messrs.
Shamanis and Calise and Ms. Haller shall include what each of such
individuals knows, or in the absence of his or her negligence should have
known, in the scope of any representation of the Company or Goodrich
undertaken by such person.
(ii) Other than the individuals identified in subsection (i) above, no
other directors, officers, employees, agents or representatives of Goodrich
have had significant involvement with the business of the Company.
(c) Each Selling Shareholder severally represents and warrants to and
agrees with each Underwriter that:
(i) All authorizations and consents necessary for the execution and
delivery by it of this Agreement and the sale and delivery of the Shares to
be sold by such Selling Shareholder hereunder have been given and are in
full force and effect on the date hereof and will be in full force and
effect on the Closing Date (and, if applicable, the Option Closing Date).
(ii) Such Selling Shareholder has, and on the Closing Date (and, if
applicable, the Option Closing Date) will have, good and valid title to the
Shares to be sold by such Selling Shareholder, free and clear of all liens,
mortgages, pledges, encumbrances, claims, equities and security interests
whatsoever, and full right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver the Shares to be sold
by such Selling Shareholder hereunder.
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(iii) Upon delivery of and payment for such Shares hereunder, the
several Underwriters will acquire valid and unencumbered title to such
Shares to be sold by such Selling Shareholder hereunder, free and clear of
all liens, mortgages, pledges, encumbrances, claims, equities and security
interests whatsoever.
(iv) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to or which might be reasonably
expected to cause or result in stabilization or manipulation of the price
of the Company's Common Stock, and such Selling Shareholder is not aware of
any such action taken or to be taken by affiliates of such Selling
Shareholder.
(v) Certificates in negotiable form representing all of the Shares to
be sold by such Selling Shareholder hereunder have been placed in the
custody of D. Lee Tobler and Uday Bellary (the "Custodians") under a Power
of Attorney and Custody Agreement (the "Custody Agreement"), duly executed
and delivered by such Selling Shareholder, with the Custodians having the
authority to deliver the Shares to be sold by such Selling Shareholder
hereunder, which Custody Agreement appoints the Custodians as such Selling
Shareholder's attorneys-in-fact (the "Attorneys-in-Fact") with the
Attorneys-in-Fact having authority to execute and deliver this Agreement on
behalf of such Selling Shareholder, to determine the purchase price to be
paid by the Underwriters to the Selling Shareholders as provided in Section
2, to authorize the delivery of the Shares to be sold by it hereunder and
otherwise to act on behalf of such Selling Shareholder in connection with
the transactions contemplated by this Agreement and such Custody Agreement.
(vi) The Shares represented by the certificates held in custody for
such Selling Shareholder under the Custody Agreement are subject to the
interests of the Underwriters hereunder, and the arrangements made by such
Selling Shareholder for such custody, and the appointment by such Selling
Shareholder of the Custodians and of the Attorneys-in-Fact under the
Custody Agreement, are to that extent irrevocable.
(vii) The obligations of such Selling Shareholders hereunder shall not
be terminated by operation of law, and if any such event should occur
before the delivery of the Shares hereunder, certificates representing the
Shares shall be delivered by or on behalf of each Selling Shareholder in
accordance with the terms and conditions of this Agreement and of the
Custody Agreement, and actions taken by the Custodians pursuant to the
Custody Agreement or by the Attorneys-in-Fact pursuant to the Power of
Attorney shall be as valid as if such event had not occurred, regardless of
whether or not the Custodians or Attorneys-in-Fact, or any of them, shall
have received notice of such event.
(viii) Such Selling Shareholder is not prompted to sell shares of
Common Stock by any material non-public information concerning the Company
or its subsidiary which is not included in the Registration Statement.
(d) Any certificate signed by any officer of the Company or Goodrich and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company or Goodrich, as applicable, to each
Underwriter as to the matters covered thereby; and any certificate signed by or
on behalf of any Selling Shareholder as such and delivered to you or to counsel
for the Underwriters shall be deemed a representation and warranty by such
Selling Shareholder to each Underwriter as to the matters covered thereby.
5. ADDITIONAL COVENANTS. The Company, with respect to itself, and, where
expressly indicated, Goodrich and/or the Selling Shareholders, each with respect
to itself, covenant and agree with the several Underwriters that:
(a) If the Registration Statement is not effective under the Act, the
Company will use its best efforts to cause the Registration Statement to become
effective as promptly as possible, and it will notify you, promptly after it
shall receive notice thereof, of the time when the Registration Statement has
become effective. The Company (i) will prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations, if required, a
Prospectus containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rule 430A of the
Rules and Regulations or otherwise or Term Sheet or Abbreviated Term Sheet, as
applicable; (ii) will not file any amendment to the Registration Statement or
supplement to the Prospectus of which the Underwriters shall not
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previously have been advised and furnished with a copy or to which the
Underwriters shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations; and (iii) will promptly notify you
after it shall have received notice thereof of the time when any amendment to
the Registration Statement becomes effective or when any supplement to the
Prospectus has been filed.
(b) The Company will advise the Underwriters promptly, after it shall
receive notice or obtain knowledge thereof, of any request of the Commission for
amendment of the Registration Statement or for the preparation, filing and
circulation of a supplement to the Prospectus or for any additional information,
or of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the use of the Prospectus or of
the institution or threatening of any proceedings for that purpose, and the
Company will use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(c) The Company will cooperate with the Underwriters and their counsel in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as they may have designated and will make such applications, file
such documents, and furnish such information as may be necessary for that
purpose, provided the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction where it is not now so qualified or required to file such a consent
or to subject itself to taxation as doing business in any jurisdiction where it
is not now so taxed. The Company will, from time to time, file such statements,
reports, and other documents, as are or may be required to continue such
qualifications in effect for so long a period as the Underwriters may reasonably
request.
(d) The Company will deliver to, or upon the order of, the Underwriters,
without charge from time to time, as many copies of any Preliminary Prospectus
as they may reasonably request. The Company will deliver to, or upon the order
of, the Underwriters without charge as many copies of the Prospectus, or as it
thereafter may be amended or supplemented, as they may from time to time
reasonably request. The Company consents to the use of such Preliminary
Prospectus, Prospectus or amendment or supplement thereto by the Underwriters
and by all dealers to whom the Shares may be sold, both in connection with the
offering or sale of the Shares and for such period of time thereafter as the
Prospectus is required by law to be delivered in connection with the offering or
sale of the Shares. The Company further consents to the use of such Prospectus
or amendment or supplement thereto by the Underwriters and by all dealers to
whom the Shares may be sold for other ordinary and customary purposes at the
Underwriters' sole risk. The Company will deliver to the Underwriters at or
before the Closing Date three signed copies of the Registration Statement and
all amendments thereto including all exhibits filed therewith, and will deliver
to the Underwriters such number of copies of the Registration Statement, without
exhibits, and of all amendments thereto, as they may reasonably request.
(e) If, during the period in which a prospectus is required by law to be
delivered by an Underwriter or dealer, any event shall occur as a result of
which, in the judgment of the Company or in your judgment or in the opinion of
counsel for the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with law.
(f) The Company will make generally available to its shareholders as soon
as it is practicable to do so, but in any event not later than 15 months after
the effective date of the Registration Statement, an earnings statement in
reasonable detail, covering a period of at least 12 consecutive months beginning
after the effective date of the Registration Statement, which earnings statement
shall satisfy the requirements of Section 11(a) of the Act and Rule 158 of the
Rules and Regulations and will advise the Underwriters in writing when such
statement has been so made available.
(g) The Company will, for a period of five years from the Closing Date,
deliver to the Underwriters at their principal executive offices a reasonable
number of copies of annual reports, quarterly reports, current reports and
copies
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of all other documents, reports and information furnished by the Company to its
shareholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"). The Company will deliver to
the Underwriters similar reports with respect to any significant subsidiaries,
as that term is defined in the Rules and Regulations, which are not consolidated
in the Company's financial statements. Any report, document or other information
required to be furnished under this paragraph (g) shall be furnished as soon as
practicable after such report, document or information becomes available.
(h) The Company will apply the proceeds from the sale of the Shares as set
forth in the description under "Use of Proceeds" in the Prospectus, which
description complies in all respects with the requirements of Item 504 of
Regulation S-K.
(i) The Company will file with the Commission such reports on Form SR as
may be required pursuant to Rule 463 under the Act.
(j) The Company will supply you with copies of all correspondence to and
from, and all documents issued to and by, the Commission in connection with the
registration of the Shares under the Act.
(k) Prior to the Closing Date (and, if applicable, the Option Closing
Date), the Company will furnish to you promptly, copies of any unaudited interim
consolidated financial statements of the Company and its subsidiary for any
periods subsequent to the periods covered by the financial statements appearing
in the Registration Statement and the Prospectus.
(l) Prior to the Closing Date (and, if applicable, the Option Closing
Date), neither the Company nor any Selling Shareholder will issue any press
releases directly or indirectly and will hold no press conferences with respect
to the Company or its subsidiary, the financial condition, results of
operations, business, properties, assets or liabilities of the Company or its
subsidiary, or the offering of the Shares, without prior written notice to the
Representatives. The Company and each Selling Shareholder will agree with the
Underwriters prior to any other public communication, as to the nature and scope
of such communications and the limitations thereof.
(m) The Company will use its best efforts to obtain approval for and
maintain the quotation of the Shares on The Nasdaq National Market ("NASDAQ").
(n) For a period of 180 days from the Effective Date, the Company will not,
directly or indirectly, sell, contract to sell or otherwise dispose of any
shares of Common Stock, any securities exchangeable for Common Stock or any
other rights to acquire such shares without your prior written consent, except
for the Shares sold hereunder and except for sales of shares of Common Stock to
the Company's employees pursuant to the exercise of options under the DTM
Corporation Stock Option Plan and the DTM Corporation Equity Appreciation Plan.
(o) For a period of 180 days from the Effective Date, neither Goodrich nor
any other Selling Shareholder will directly or indirectly sell, contract to sell
or otherwise dispose of any shares of Common Stock or rights to acquire such
shares without your prior written consent, except for the Shares sold hereunder.
(p) The Company and its subsidiary will maintain and keep accurate books
and records reflecting their assets and maintain internal accounting controls
which provide reasonable assurance that (1) transactions are executed in
accordance with management's authorization, (2) transactions are recorded as
necessary to permit the preparation of the Company's consolidated financial
statements and to maintain accountability for the assets of the Company and its
subsidiary, (3) access to the assets of the Company and its subsidiary is
permitted only in accordance with management's authorization, and (4) the
recorded accounts of the assets of the Company and its subsidiary are compared
with existing assets at reasonable intervals.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase and pay for the Shares, as provided herein, shall
be subject to the accuracy in all material respects, as of the date hereof and
as of the Closing Date (and, if applicable, the Option Closing Date), of the
representations and warranties of the
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Company, Goodrich and the Selling Shareholders contained herein, to the
performance in all material respects by the Company, Goodrich and the Selling
Shareholders of their covenants and obligations hereunder, and to the following
additional conditions:
(a) All filings required by Rule 424 and Rule 430A of the Rules and
Regulations shall have been made. No stop order suspending the effectiveness of
the Registration Statement, as amended from time to time, shall have been issued
and no proceeding for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened or contemplated by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the reasonable satisfaction of the Underwriters.
(b) No Underwriter shall have disclosed in writing to the Company on or
prior to the Closing Date (and, if applicable, the Option Closing Date), that
the Registration Statement or Prospectus or any amendment or supplement thereto
contains an untrue statement of fact which, in the opinion of counsel to the
Underwriters, is material, or omits to state a fact which, in the opinion of
such counsel, is material and is required to be stated therein or is necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(c) On the Closing Date (and, if applicable, the Option Closing Date), you
shall have received the opinion of Vinson & Elkins L.L.P., counsel for the
Company, addressed to you and dated the Closing Date (and, if applicable, the
Option Closing Date), to the effect that:
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Texas, with
full corporate power and authority to own, lease and operate its properties
and conduct its business as described in the Registration Statement; the
Company is duly qualified to do business as a foreign corporation in good
standing in each state or other jurisdiction in which its ownership or
leasing of property or conduct of business requires such qualification,
except where the failure to be so qualified would not have a material
adverse effect on the ability of the Company to conduct its business as
described in the Registration Statement.
(ii) The Company's authorized capital stock is as set forth under the
heading "Capitalization" in the Prospectus; all outstanding shares of
Common Stock and the Shares conform to the description thereof in the
Prospectus under the heading "Description of Capital Stock", and the
outstanding shares of Common Stock have been duly authorized and are
validly issued, fully paid and non-assessable; the Shares to be sold by the
Company have been duly authorized and, when delivered and paid for in
accordance with this Agreement, will be validly issued, fully paid and non-
assessable, and the shareholders of the Company have no preemptive rights
with respect to the Shares.
(iii) The Registration Statement has become effective under the Act
and, to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act.
(iv) The Registration Statement and the Prospectus, and each amendment
or supplement thereto, as of their respective effective or issue date,
complied as to form in all material respects with the requirements of the
Act and the applicable rules and regulations (except that such counsel need
express no opinion as to the financial statements or other financial data).
(v) The descriptions in the Registration Statement and Prospectus of
contracts and other documents filed as exhibits to the Registration
Statement are accurate in all material respects.
(vi) No authorization, approval, consent, order, registration or
qualification of or with any court or governmental body, authority or
agency is required with respect to the Company in connection with the
transactions contemplated by this Agreement, except such as may be required
under the Act or the Rules and
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Regulations or as may be required by NASDAQ or under state securities laws
in connection with the purchase and distribution of the Shares by the
Underwriters.
(vii) The filing of the Registration Statement has been duly
authorized by the Board of Directors of the Company. This Agreement has
been duly authorized, executed and delivered by the Company. The
performance of this Agreement and the consummation of the transactions
herein contemplated will not result in a violation of the Company's
articles of incorporation or bylaws or result in a breach or violation of
any of the terms and provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any properties or assets of the Company and its subsidiary under, any
statute, or under any indenture, mortgage, deed of trust, note, loan
agreement, sale and leaseback arrangement, or any other agreement or
instrument known to such counsel to which the Company or its subsidiary is
a party or by which they are bound or to which any of the properties or
assets of the Company or its subsidiary are subject, or any order, rule or
regulation known to such counsel of any court or governmental agency or
body having jurisdiction over the Company or its subsidiary or their
properties, except, in the case of any such violation, breach, default,
creation or imposition, to such extent as does not materially adversely
affect the business of the Company and its subsidiary taken as a whole.
(viii) To the knowledge of such counsel, there are no contracts or
documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement which are not described or filed as required.
(ix) The statements made in the Registration Statement under the
captions "Dividend Policy", "Capitalization" and "Description of Capital
Stock", to the extent that they constitute summaries of documents referred
to therein or matters of law or legal conclusions, have been reviewed by
such counsel and are accurate summaries and fairly present the information
disclosed therein.
(x) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent accountants of the Company and
representatives of the Underwriters and their counsel at which the contents of
the Registration Statement and Prospectus and related matters were discussed and
that in the course of such participation, no facts have come to their attention
that would lead them to believe that the Registration Statement, either at its
effective date or on the date hereof, contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the Prospectus,
either at the time it was filed pursuant to Rule 424(b) or on the date hereof,
contains an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading (it being understood that such counsel shall express no comment
as to the financial statements and schedules and other financial data included
in the Registration Statement or the Prospectus).
(d) On the Closing Date (and, if applicable, the Option Closing Date), you
shall have received the opinion of Nicholas J. Calise, Associate General Counsel
of Goodrich, addressed to you and dated the Closing Date (and, if applicable,
the Option Closing Date), to the effect that:
(i) Goodrich has duly authorized, executed and delivered the Custody
Agreement and Power of Attorney, appointing D. Lee Tobler and Uday Bellary
as its Custodians with authority to take custody of and deliver the Shares
as represented by certificates on behalf of Goodrich in connection with the
transactions contemplated by this Agreement and the Custody Agreement and
appointing D. Lee Tobler and Uday Bellary as Goodrich's attorneys-in-fact
with authority to execute and deliver this Agreement on behalf of Goodrich
and otherwise to act on behalf of Goodrich in connection with the
transactions contemplated by this Agreement and the Custody Agreement.
(ii) This Agreement has been duly authorized, executed and delivered
on behalf of Goodrich,
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and is a valid and legally binding obligation of Goodrich.
(iii) Goodrich has full legal right, power and authority, and any
approval required by law (other than as required by the Act, the NASDAQ and
state securities and Blue Sky Laws) to sell, assign, transfer and deliver
the Shares to be sold by it.
(iv) No consent, approval, authorization or order of any court, or
governmental agency or body is required for consummation of the
transactions contemplated by this Agreement in connection with the Shares
to be sold by Goodrich hereunder except such as may be required under the
Act or the Rules and Regulations or as may be required by the NASDAQ or
under state securities laws.
(v) Goodrich has good and valid title to the Shares being sold by it
hereunder, free and clear of all liens, mortgages, pledges, encumbrances,
claims, equities and security interests, and has transferred to the
Underwriters good and valid title to the Shares being sold by it on the
Option Closing Date, free and clear of all liens, mortgages, pledges,
encumbrances, claims, equities and security interests whatsoever.
(vi) To the knowledge of such counsel, (A) there are no material
(individually, or in the aggregate) legal, governmental or regulatory
proceedings pending or threatened to which the Company or its subsidiary is
a party or of which the business or properties of the Company or its
subsidiary is the subject which are not disclosed in the Registration
Statement and Prospectus and (B) there are no statutes or regulations
required to be described in the Registration Statement or Prospectus which
are not described as required.
In rendering the foregoing opinion, such counsel may rely, provided that
the opinion shall state that you and they are entitled to so rely, (1) as to
matters involving laws of any jurisdiction other than Texas or Federal law, upon
opinions addressed to the Underwriters of other counsel satisfactory to them and
Gardere & Wynne, L.L.P. (2) as to all matters of fact, upon certificates and
written statements of Goodrich or the Company.
(e) On the Closing Date, you shall have received the opinion of
__________________, counsel to DTM Holdings Ltd. ("DTM Holdings") and Dr. Joseph
J. Beaman ("Dr. Beaman"), addressed to you and dated the Closing Date, to the
effect that:
(i) Each of DTM Holdings and Dr. Beaman has duly authorized, executed
and elivered the Custody Agreement, appointing D. Lee Tobler and Uday
Bellary as its Custodians with authority to take custody of and deliver the
Shares as represented by certificates on behalf of DTM Holdings and Dr.
Beaman in connection with the transactions contemplated by this Agreement
and the Custody Agreement and appointing D. Lee Tobler and Uday Bellary as
DTM Holdings' attorneys-in-fact with authority to execute and deliver this
Agreement on behalf of DTM Holdings and Dr. Beaman and otherwise to act on
behalf of DTM Holdings and Dr. Beaman in connection with the transactions
contemplated by this Agreement and the Custody Agreement.
(ii) This Agreement has been duly authorized, executed and delivered
on behalf of each of DTM Holdings and Dr. Beaman, and is a valid and
legally binding obligation of DTM Holdings and Dr. Beaman.
(iii) Each of DTM Holdings and Dr. Beaman has full legal right, power
and authority, and any approval required by law (other than as required by
the Act, the NASD and state securities and Blue Sky Laws) to sell, assign,
transfer and deliver the Shares to be sold by it.
(iv) No consent, approval, authorization or order of any court, or
governmental agency or body is required for consummation of the
transactions contemplated by this Agreement in connection with the Shares
to be sold by DTM Holdings and Dr. Beaman hereunder except such as may be
required under the Act or the Rules and Regulations or as may be required
by the NASD or under state securities laws.
(v) Each of DTM Holdings and Dr. Beaman has good and valid title to
the Shares being sold by it hereunder, free and clear of all liens,
mortgages, pledges, encumbrances, claims, equities and security interests,
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and has transferred to the Underwriters good and valid title to the Shares
being sold by it on the Closing Date, free and clear of all liens,
mortgages, pledges, encumbrances, claims, equities and security interests
whatsoever.
In rendering the foregoing opinion, such counsel may rely, provided that
the opinion shall state that you and they are entitled to so rely, (1) as to
matters involving laws of any jurisdiction other than Texas or Federal law, upon
opinions addressed to the Underwriters of other counsel satisfactory to them and
Gardere & Wynne, L.L.P. (2) as to all matters of fact, upon certificates and
written statements of DTM Holdings.
(f) You shall have received on the Closing Date (and, if applicable, the
Option Closing Date), from Gardere & Wynne, L.L.P., counsel to the Underwriters,
such opinion or opinions, dated the Closing Date (and, if applicable, the Option
Closing Date) with respect to the incorporation of the Company, the validity of
the Shares, the Registration Statement, the Prospectus and other related matters
as you may reasonably require; the Company and Selling Shareholders shall have
furnished to such counsel such documents as they reasonably request for the
purpose of enabling them to pass on such matters.
(g) You shall have received at or prior to the Closing Date a memorandum
or memoranda, in form and substance satisfactory to you, with respect to the
qualification for offering and sale by the Underwriters of the Shares under
state securities or Blue Sky laws of such jurisdictions as the Underwriters may
have designated to the Company.
(h) On the business day immediately preceding the date of this Agreement
and on the Closing Date (and, if applicable, the Option Closing Date), you shall
have received from Ernst & Young LLP, a letter or letters, dated the date of
this Agreement and the Closing Date (and, if applicable, the Option Closing
Date), respectively, in form and substance satisfactory to you, confirming that
they are independent public accountants with respect to the Company within the
meaning of the Act and the published Rules and Regulations, and any information
set forth in the Registration Statement in response to Item 509 of Regulation
S-K is correct insofar as it relates to them, and stating to the effect set
forth in Schedule III hereto.
(i) Except as contemplated in the Prospectus, (i) neither the Company nor
its subsidiary shall have sustained since the date of the latest audited
financial statements included in the Prospectus any loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree; and (ii) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, neither
the Company nor its subsidiary shall have incurred any liability or obligation,
direct or contingent, or entered into transactions, and there shall not have
been any change in the capital stock or long-term debt of the Company and its
subsidiary or any change in the condition (financial or other), net worth,
business, affairs, management, prospects or results of operations of the Company
or its subsidiary, the effect of which, in any such case described in clause (i)
or (ii), is in your reasonable judgment so material or adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered on such Closing Date (and, if applicable, the
Option Closing Date) on the terms and in the manner contemplated in the
Prospectus.
(j) There shall not have occurred any of the following: (i) a suspension
or material limitation in trading in securities generally on the New York Stock
Exchange or the American Stock Exchange or the establishing on such exchanges by
the Commission or by such exchanges of minimum or maximum prices which are not
in force and effect on the date hereof; (ii) a general moratorium on commercial
banking activities declared by either federal or state authorities; (iii) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the effect
of any such event specified in this clause (iii) in your reasonable judgment
makes it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares in the manner contemplated in the Prospectus; (iv) any
calamity or crisis, change in national, international or world affairs, act of
God, change in the international or domestic markets, or change in the existing
financial, political or economic conditions in the United States or elsewhere,
if the effect of any such event specified in this clause (iv) makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares in the manner contemplated in the Prospectus; or (v) the
enactment, publication, decree, or other promulgation of any federal or state
statute, regulation, rule, or order of any court or other governmental
authority, or the taking of any action by any federal, state or local
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<PAGE>
government or agency in respect of fiscal or monetary affairs, if the effect of
any such event specified in this clause (v) in your reasonable judgment makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares in the manner contemplated in the Prospectus.
(k) You shall have received certificates, dated the Closing Date (and, if
applicable, the Option Closing Date) and signed by the President and the Chief
Financial Officer of the Company stating that (i) they have carefully examined
the Registration Statement and the Prospectus as amended or supplemented and
nothing has come to their attention that would lead them to believe that either
the Registration Statement or the Prospectus, or any amendment or supplement
thereto as of their respective effective or issue dates, contained, and the
Prospectus as amended or supplemented at such Closing Date, contains any untrue
statement of a material fact, or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and, that (ii) all
representations and warranties made herein by the Company are true and correct
in all material respects at such Closing Date, with the same effect as if made
on and as of such Closing Date, and all agreements herein to be performed by the
Company on or prior to such Closing Date have been duly performed in all
material respects.
(l) You shall have received a certificate, dated the Closing Date (and, if
applicable, the Option Closing Date) and signed by the Selling Shareholders, to
the effect that all representations and warranties made herein by the Selling
Shareholders are true and correct in all material respects at such Closing Date,
with the same effect as if made on and as of such Closing Date, and all
agreements herein to be performed by the Selling Shareholders on or prior to
such Closing Date have been duly performed in all material respects.
(m) The Company and each of the Selling Shareholders shall not have failed,
refused, or been unable, at or prior to the Closing Date (and, if applicable,
the Option Closing Date) to have performed in all material respects any
agreement on their part to be performed or any of the conditions herein
contained and required to be performed or satisfied by them at or prior to such
Closing Date.
(n) The Shares shall have been approved for trading upon official notice
of issuance on NASDAQ.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and to Gardere & Wynne, L.L.P., counsel for the several Underwriters. The
Company, Goodrich and Selling Shareholders will furnish you with such conformed
copies of such opinions, certificates, letters and documents as you may request.
If any of the conditions specified above in this Section 6 shall not have
been satisfied at or prior to the Closing Date (and, if applicable, the Option
Closing Date) or waived by you in writing, this Agreement may be terminated by
you on notice to the Company and the Selling Shareholders.
7. INDEMNIFICATION. (a) The Company will indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act, against any losses, claims, damages, liabilities (or actions
in respect thereof), joint or several, to which such Underwriter or such
controlling person may become subject, under the Act or otherwise, insofar as
such losses, claims, damages, liabilities or actions arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or in any blue sky
application or other document executed by the Company or based on any
information furnished in writing by the Company, filed in any jurisdiction in
order to qualify any or all of the Shares under the securities laws thereof
("Blue Sky Application"), or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and will reimburse each Underwriter and
each such controlling person for any reasonable legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company shall not be liable in any such case
to the extent that any such loss, claim, damage, liability or action arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in the Registration Statement, such Preliminary
Prospectus or the
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Prospectus, or such amendment or supplement, or any Blue Sky Application in
reliance upon and in conformity with written information furnished to the
Company by you or by any Underwriter through you, or by any Selling Shareholder,
specifically for use in the preparation thereof; and provided, further, that if
any Preliminary Prospectus or the Prospectus contained any alleged untrue
statement or allegedly omitted to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading and
such statement or omission shall have been corrected in a revised Preliminary
Prospectus or in the Prospectus or in an amended or supplemented Prospectus, the
Company shall not be liable to any Underwriter or controlling person under this
subsection (a) with respect to such alleged untrue statement or alleged omission
to the extent that any such loss, claim, damage, liability or action of such
Underwriter or controlling person results from the fact that such Underwriter
sold Shares to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, such revised Preliminary Prospectus or
Prospectus or amended or supplemented Prospectus. This indemnity agreement shall
be in addition to any liabilities which the Company may otherwise have.
Notwithstanding the foregoing, the obligations of the Company pursuant to this
subsection (a) shall be limited to the Net Proceeds (as hereinafter defined)
received by the Company. Net Proceeds shall mean any and all amounts of net
proceeds from the offering (before deducting expenses) of the Shares.
(b) Goodrich will indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of the Act,
against any losses, claims, damages, liabilities or actions in respect thereof,
joint or several, to which such Underwriter or such controlling person may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or in any Blue Sky Application, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and
will reimburse each Underwriter and each such controlling person for any
reasonable legal or other expenses reasonably incurred by such Underwriter or
such controlling person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that Goodrich shall
not be liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or such
amendment or supplement, or any Blue Sky Application in reliance upon and in
conformity with written information furnished to the Company by you or by any
Underwriter through you, or by any other Selling Shareholder, specifically for
use in the preparation thereof; and provided, further, that if any Preliminary
Prospectus or the Prospectus contained any alleged untrue statement or allegedly
omitted to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading and such statement or
omission shall have been corrected in a revised Preliminary Prospectus or in the
Prospectus or in an amended or supplemented Prospectus, Goodrich shall not be
liable to any Underwriter or controlling person under this subsection (b) with
respect to such alleged untrue statement or alleged omission to the extent that
any such loss, claim, damage or liability of such Underwriter or controlling
person results from the fact that such Underwriter sold Shares to a person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, such revised Preliminary Prospectus or Prospectus or amended or
supplemented Prospectus. This indemnity agreement shall be in addition to any
liabilities which Goodrich may otherwise have. Notwithstanding the foregoing,
the obligations of Goodrich pursuant to this subsection (b) shall be limited to
the Net Proceeds received by Goodrich and the Company, collectively, for the
Shares.
(c) DTM Holdings and Dr. Beaman will indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or any Blue Sky Application or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in the Registration Statement, such Preliminary Prospectus or the
Prospectus, or such amendment or supplement, or any Blue Sky Application, in
reliance upon and in conformity with written information furnished to the
Company or any Underwriter by DTM Holdings or Dr. Beaman
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specifically for use in the preparation thereof; and will reimburse any
reasonable legal or other expenses reasonably incurred by each Underwriter and
each person, if any, who controls any Underwriter within the meaning of the Act,
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity contained in this
subsection (c) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter (or to the benefit of any person controlling such
Underwriter) in respect of any action or claim asserted by a person who
purchased any Shares from such Underwriter, if, within the time required by the
Act such person was not sent or given a copy of the Prospectus, as then amended
or supplemented. This indemnity agreement shall be in addition to any
liabilities which DTM Holdings or Dr. Beaman may otherwise have. Notwithstanding
the foregoing, the obligations of each of DTM Holdings and Dr. Beaman pursuant
to this subsection (c) shall be limited to the Net Proceeds received by it or
him for the Shares.
(d) Each Underwriter will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the Registration Statement,
Goodrich, and each other person, if any, who controls the Company within the
meaning of the Act, and each Selling Shareholder, against any losses, claims,
damages or liabilities, joint or several, to which the Company or any such
director or officer, Goodrich or other controlling person or any such Selling
Shareholder may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, any amendment or supplement thereto, or any Blue Sky
Application or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, such Preliminary
Prospectus or the Prospectus, such amendment or supplement, or any Blue Sky
Application in reliance upon and in conformity with written information
furnished to the Company by any such Underwriter specifically for use in the
preparation thereof; and will reimburse any reasonable legal or other expenses
reasonably incurred by the Company or any such director or officer, Goodrich or
other controlling person or any such Selling Shareholder in connection with
investigating or defending any such loss, claim, damage, liability or action.
This indemnity agreement shall be in addition to any liabilities which the
Underwriters may otherwise have. Notwithstanding the foregoing, the obligations
of each Underwriter pursuant to this subsection (d) shall be limited to the
underwriting discounts and commissions applicable to the Shares purchased by
each such Underwriter.
(e) Any party which proposes to assert the right to be indemnified under
this Section 7 shall, within ten days after receipt of notice of commencement of
any action, suit or proceeding against such party in respect of which a claim is
to be made against an indemnifying party under this Section 7, notify each such
indemnifying party of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served, but the omission so to notify such
indemnifying party of any such action, suit or proceeding shall not relieve such
indemnifying party from any liability which it may have to any indemnified party
otherwise than under this Section 7, except to the extent the indemnifying party
is actually prejudiced thereby. In case any such action, suit or proceeding
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any reasonable legal or other expenses, other than
reasonable costs of investigation, subsequently incurred by such indemnified
party in connection with the defense thereof. The indemnified party shall have
the right to employ its own counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment of counsel by such indemnified party at the expense of
the indemnifying party has been authorized by the indemnifying party, (ii) the
indemnified party shall have been advised by such counsel in a written opinion
that there may be a conflict of interest between the indemnifying party and the
indemnified party in the conduct of the defense, or certain aspects of the
defense, of such action (in which case the indemnifying party shall not have the
right to direct the defense of such action with respect to those matters or
aspects of the defense on which a conflict exists or may exist on behalf of the
indemnified party) or (iii) the indemnifying party shall not in fact have
employed counsel to assume the defense of such action, in any of which events
such fees and expenses to the extent applicable shall be borne by the
indemnifying party. An indemnifying party shall not be liable for
16
<PAGE>
any settlement of any action or claim effected without its consent. Each
indemnified party, as a condition of such indemnity, shall cooperate in good
faith with the indemnifying party in the defense of any such action or claim.
(f) If the indemnification provided for in this Section 7 is, for any
reason other than pursuant to the terms thereof, judicially determined (by the
entry of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right to appeal) to be
unavailable to an indemnified party under subsections (a), (b), (c) or (d) above
in respect of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Company, the Selling
Shareholders and the Underwriters from the offering of the Shares. For purposes
of this subsection (f), all benefits received by the Company shall be deemed to
have been received jointly by the Company and Goodrich. If, however, the
allocation provided by the immediately preceding sentences is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault, as
applicable, of the Company, Goodrich, the Selling Shareholders and the
Underwriters in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as other relevant equitable considerations. The relative benefits received
by, as applicable, the Company, the Selling Shareholders and the Underwriters
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company and the Selling
Shareholders bear to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company, Goodrich, the Selling Shareholders or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, Goodrich, the Selling
Shareholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this subsection (f) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (f). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (f) shall be deemed to include any reasonable legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the foregoing, (i) the
obligations of the Company pursuant to this subsection (f) shall be limited to
the Net Proceeds received by the Company for Shares, (ii) the obligations of
Goodrich pursuant to this subsection (f) shall be limited to the Net Proceeds
received by Goodrich and the Company, collectively, for the Shares and (iii) the
obligations of each of DTM Holdings and Dr. Beaman pursuant to this subsection
(f) shall be limited to the Net Proceeds received by it or him for the Shares.
Notwithstanding the provisions of this subsection (f), no Underwriter shall be
required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in this
subsection (f) to contribute are several in proportion to their respective
underwriting obligations and not joint.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All representations,
warranties, and agreements of the Company and the Selling Shareholders contained
herein, including but not limited to those contained in Sections 7 and 11 herein
or in certificates delivered pursuant hereto, all the representations,
warranties, and agreements of Goodrich contained herein, including but not
limited to those contained in Section 7 hereof or in certificates delivered
pursuant hereto, and the agreements of the Underwriters contained herein,
including but not limited to those contained in Section 7 hereof, shall remain
operative and in full force and effect regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
Underwriter or any controlling person, the Company or any of its officers,
directors or any controlling persons, or the Selling Shareholders, and shall
survive delivery of the Shares to the Underwriters hereunder until barred by
applicable statutes of limitation with respect thereto.
9. SUBSTITUTION OF UNDERWRITERS. (a) If any Underwriter shall default in
its obligation to purchase the Shares which it has agreed to purchase hereunder,
you may in your discretion arrange for you or another party or other
17
<PAGE>
parties to purchase such Shares on the terms contained herein. If within thirty-
six hours after such default by any Underwriter you do not arrange for the
purchase of such Shares, then the Company and the Selling Shareholders shall be
entitled to a further period of thirty-six hours within which to procure another
party or parties reasonably satisfactory to you to purchase such Shares on such
terms. In the event that, within the respective prescribed periods, you notify
the Company and the Selling Shareholders that you have so arranged for the
purchase of such Shares, or the Company and the Selling Shareholders notify you
that they have so arranged for the purchase of such Shares, you or the Company
and the Selling Shareholders shall have the right to postpone the Closing Date
for a period of not more than seven days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company agrees to file
promptly any amendments to the Registration Statement or the Prospectus which in
your opinion may thereby be made necessary. The term "Underwriter" as used in
this Agreement shall include any persons substituted under this Section 9 with
like effect as if such person had originally been a party to this Agreement with
respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters made by you or the Company
and the Selling Shareholders as provided in subsection (a) above, the aggregate
number of Shares which remains unpurchased does not exceed one tenth of the
total Shares to be sold on the Closing Date, then the Company and the Selling
Shareholders shall have the right to require each non-defaulting Underwriter to
purchase the Shares which such Underwriter agreed to purchase hereunder and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters made by you or the Company
and the Selling Shareholders as provided in subsection (a) above, the number of
Shares which remains unpurchased exceeds one tenth of the total Shares to be
sold on the Closing Date, or if the Company and the Selling Shareholders shall
not exercise the right described in subsection (b) above to require the non-
defaulting Underwriters to purchase Shares of the defaulting Underwriter or
Underwriters, then this Agreement shall thereupon terminate, without liability
on the part of any non-defaulting Underwriter or the Company and the Selling
Shareholders except for the expenses to be borne by the Company and the
Underwriters as provided in Section 11 hereof and the indemnity and contribution
agreements in Section 7 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
10. EFFECTIVE DATE AND TERMINATION. (a) This Agreement shall become
effective at 1:00 p.m., St. Louis time, on the first business day following the
effective date of the Registration Statement, or at such earlier time after the
effective date of the Registration Statement as you in your discretion shall
first release the Shares for offering to the public; provided, however, that the
provisions of Sections 7 and 11 shall at all times be effective. For the
purposes of this Section 10(a), the Shares shall be deemed to have been released
to the public upon release by you of the publication of a newspaper
advertisement relating to the Shares or upon release of telegrams, facsimile
transmissions or letters offering the Shares for sale to securities dealers,
whichever shall first occur.
(b) This Agreement may be terminated by you at any time before it becomes
effective in accordance with Section 10(a) by notice to the Company and the
Selling Shareholders; provided, however, that the provisions of this Section 10
and of Section 7 and Section 11 hereof shall at all times be effective. In the
event of any termination of this Agreement pursuant to Section 9 or this Section
10(b) hereof, the Company and the Selling Shareholders shall not then be under
any liability to any Underwriter except as provided in Section 7 or Section 11
hereof.
(c) This Agreement may be terminated by you at any time at or prior to the
Closing Date by notice to the Company and the Selling Shareholders if any
condition specified in Section 6 hereof shall not have been satisfied on or
prior to the Closing Date. Any such termination shall be without liability of
any party to any other party except as provided in Sections 7 and 11 hereof.
(d) This Agreement also may be terminated by you, by notice to the Company
and the Selling Shareholders, as to any obligation of the Underwriters to
purchase the Option Shares, if any condition specified in
18
<PAGE>
Section 6 hereof shall not have been satisfied at or prior to the Option Closing
Date or as provided in Section 9 of this Agreement.
If you terminate this Agreement as provided in Sections 10(b), 10(c) or
10(d), you shall notify the Company and the Selling Shareholders by telephone or
telegram, confirmed by letter.
11. COSTS AND EXPENSES. The Company and the Selling Shareholders will bear
and pay the costs and expenses incident to the registration of the Shares and
public offering thereof, including, without limitation, (a) the fees and
expenses of the Company's accountants and the fees and expenses of counsel for
the Company, (b) the preparation, printing, filing, delivery and shipping of the
Registration Statement, each Preliminary Prospectus, the Prospectus and any
amendments or supplements thereto (except as otherwise expressly provided m
Section 5(d) hereof) and the printing, delivery and shipping of this Agreement,
the Agreement Among Underwriters, the Selected Dealer Agreement, Underwriters'
Questionnaires and Powers of Attorney and Blue Sky Memoranda, (c) the furnishing
of copies of such documents (except as otherwise expressly provided in Section
5(d) hereof) to the Underwriters, (d) the registration or qualification of the
Shares for offering and sale under the securities laws of the various states,
including the reasonable fees and disbursements of Underwriters' counsel
relating to such registration or qualification, (f) the fees payable to the
NASD, the NASDAQ National Market and the Commission in connection with their
review of the proposed offering of the Shares, (f) all printing and engraving
costs related to preparation of the certificates for the Shares, including
transfer agent and registrar fees, (g) all initial transfer taxes, if any, (h)
all fees and expenses relating to the authorization of the Shares for trading on
NASDAQ, (i) all travel expenses, including air fare and accommodation expenses,
of representatives of the Company in connection with the offering of the Shares
and (j) all of the other costs and expenses incident to the performance by the
Company of the registration and offering of the Shares; provided, however, that
the Underwriters will bear and pay the fees and expenses of the Underwriters'
counsel (other than fees and disbursements relating to the registration or
qualification of the Shares for offering and sale under the securities laws of
the various states), the Underwriters' out-of-pocket expenses, and any
advertising costs and expenses incurred by the Underwriters incident to the
public offering of the Shares; and provided, further, that the Selling
Shareholders will bear and pay the fees and expenses of the Selling
Shareholders' counsel.
If this Agreement is terminated by you in accordance with the provisions of
Section 10(c), the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel to the Underwriters.
12. DEFAULT OF SELLING SHAREHOLDERS. Failure or refusal by any of the
Selling Shareholders to sell and deliver on the Closing Date the Shares agreed
to be sold and delivered by such Selling Shareholder shall in no manner relieve
the other Selling Shareholders or the Company of their respective obligations
under this Agreement. If any Selling Shareholder should fail or refuse to sell
and deliver his Shares, the remaining Selling Shareholders shall have the right
hereby granted to increase, pro rata or otherwise, the number of Shares to be
sold by them hereunder to the total number of Shares to be sold by all Selling
Shareholders as set forth in Schedule I. If the remaining Selling Shareholders
do not fully exercise the right to increase the number of Shares to be sold by
them, the Underwriters, at your option, will have the right to elect to purchase
or not to purchase the Shares to be sold by the Company and the remaining
Selling Shareholders. In the event the Underwriters purchase the Shares of the
Company and such other Selling Shareholders pursuant to this Section 12, the
Closing Date shall be postponed for a period of not more than seven days in
order that the Registration Statement and Prospectus or other documents may be
amended or supplemented to the extent necessary under the provisions of the Act
and the Rules and Regulations or under the securities laws of any jurisdiction.
If the Underwriters determine not to purchase the Shares of the Company and the
other Selling Shareholders, if any, this Agreement shall terminate and neither
the Company nor the Underwriters nor any other Selling Shareholder shall be
under any obligation under this Agreement except as provided in Section 7 hereof
and except for the obligation of the Company to pay for such expenses as are set
forth in Section 11 hereof. Nothing herein shall relieve a defaulting Selling
Shareholder from liability for his default or from liability under Section 7
hereof or for expenses imposed by this Agreement upon such Selling Shareholder.
13. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the
Underwriters shall be mailed, delivered, sent by facsimile transmission, or
19
<PAGE>
telegraphed and confirmed c/o A. G. Edwards & Sons, Inc. at One North Jefferson
Avenue, St. Louis, Missouri 63103, Attention: Syndicate, facsimile number (314)
955-7387, with a copy to Gardere & Wynne, L.L.P., 1601 Elm Street, Suite 3000,
Dallas, Texas 75201, Attention: John T. Kipp, facsimile number (214) 999-4667;
or if sent to the Company shall be mailed, delivered, sent by facsimile
transmission, or telegraphed and confirmed to the Company at 1611 Headway
Circle, Building 2, Austin, Texas 78754, Attention: Chief Executive Officer,
facsimile number (512) 339-0634, with a copy to Goodrich at 4020 Kinross Lakes
Parkway, Richfield, Ohio 44286-9368, Attention: Legal Department, facsimile
number (216) 659-7713; or if sent to Goodrich shall be mailed, delivered, sent
by facsimile transmission, or telegraphed and confirmed to Goodrich at 4020
Kinross Lakes Parkway, Richfield, Ohio 44286-9368, Attention: Legal Department,
facsimile number (216) 659-7713; or if sent to any Selling Shareholder shall be
mailed, delivered, sent by facsimile transmission or telegraphed and confirmed
to such Selling Shareholder, to the Attorneys-in-Fact at 1611 Headway Circle,
Building 2, Austin, Texas 78754, Attention D. Lee Tobler and Uday Bellary.
Notice to any Underwriter pursuant to Section 7 shall be mailed, delivered, sent
by facsimile transmission, or telegraphed and confirmed to such Underwriter's
address as it appears in the Underwriters' Questionnaire furnished in connection
with the offering of the Shares or as otherwise finished to the Company and the
Selling Shareholder.
14. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the Underwriters, the Selling Shareholders, and the Company and their
respective heirs, successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, corporation or
other entity, other than the parties hereto and their respective heirs,
successors and assigns and the controlling persons, officers and directors
referred to in Section 7, any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provision herein contained; this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of the parties hereto and their respective heirs,
successors and assigns and said controlling persons and said officers and
directors, and for the benefit of no other person, corporation or other entity.
No purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign by reason merely of such purchase.
In all dealings with the Company and the Selling Shareholders under this
Agreement, you shall act on behalf of each of the several Underwriters; and the
Company and the Selling Shareholders shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of the Underwriters, made or
given by you on behalf of the Underwriters, as if the same shall have been made
or given in writing by the Underwriters.
15. COUNTERPARTS. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.
16. PRONOUNS. Whenever a pronoun of any gender or number is used herein,
it shall, where appropriate, be deemed to include any other gender and number.
17. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Missouri.
20
<PAGE>
If the foregoing is in accordance with your understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company, Goodrich, each of the
Selling Shareholders and the Underwriters.
DTM CORPORATION
By:
------------------------------------
Title:
---------------------------------
THE B.F. GOODRICH COMPANY
By:
------------------------------------
Title:
---------------------------------
Selling Shareholders Named in
Schedule I Hereto
By:
------------------------------------
Attorney-in-Fact
Accepted in St. Louis,
Missouri as of the date
first above written, on
behalf of ourselves and each
of the several Underwriters
named in Schedule II hereto.
A. G. EDWARDS & SONS, INC.
LADENBURG THALMANN & CO. INC.
By: A.G. EDWARDS & SONS, INC.
By:
---------------------------
Title: Vice President
21
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Selling Shareholder Firm Shares
- ------------------- -----------
<S> <C>
DTM Holdings, Ltd. .............................................. 186,809
Dr. Joseph J. Beaman............................................. 2,459
-------
Total 189,268
=======
</TABLE>
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Name Number of Shares
- ---- ----------------
<S> <C>
A. G. Edwards & Sons, Inc.....................................
Ladenburg Thalmann & Co. Inc..................................
Total 3,039,000
=========
</TABLE>
<PAGE>
SCHEDULE III
Pursuant to Section 6(g) of the Underwriting Agreement, Ernst & Young LLP
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiary within the meaning of the Act and the
applicable Rules and Regulations thereunder.
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules audited (and, if applicable, prospective
financial statements and/or pro forma financial information examined) by them
and included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the Act
and the applicable Rules and Regulations thereunder; and, if applicable, they
have made a review in accordance with standards established by the American
Institute of Certified Public Accountants of the unaudited consolidated interim
financial statements, selected financial data, pro forma financial information,
prospective financial statements and/or condensed financial statements derived
from audited financial statements of the Company for the periods specified in
such letter, as indicated in their reports thereon, copies of which have been
furnished to the Representatives of the Underwriters (the "Representatives").
(iii) On the basis of limited procedures, not constituting an audit in
accordance with generally accepted auditing standards, consisting of a reading
of the unaudited financial statements and other information referred to below,
performing the procedure specified by the AICPA for a review of interim
financial information as discussed in SAS No. 71, Interim Financial Information,
on the latest available interim financial statements of the Company and its
subsidiary, inspection of the minute books of the Company and its subsidiary
since the date of the latest audited financial statements included in the
Prospectus, inquiries of officials of the Company and its subsidiary responsible
for financial and accounting matters and such other inquiries and procedures as
may be specified in such letter, nothing came to their attention that caused
them to believe that:
(A) any material modifications should be made to the unaudited
statements of consolidated income, statements of consolidated
financial position and statements of consolidated cash flows included
in the Prospectus for them to be in conformity with generally accepted
accounting principles, or the unaudited statements of consolidated
income, statements of consolidated financial position and statements
of consolidated cash flows included in the Prospectus do not comply as
to form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations thereunder.
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated
financial statements included in the Prospectus.
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived any unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus.
(D) any unaudited pro forma consolidated financial statements
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical amounts
in the compilation of those statements.
<PAGE>
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock or any increase in the consolidated long-term debt of
the Company and its subsidiary, or any decreases in net current assets
or net assets or other items specified by the Representatives, or any
changes in any items specified by the Representatives, in each case as
compared with amounts shown in the latest balance sheet included in
the Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or may occur or
which are described in such letter.
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in Clause (E) there were any decreases in consolidated net revenues
or operating profit or the total or per share amounts of consolidated
net income or any other changes in any other items specified by the
Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding
length specified by the Representatives, except in each case for
changes, decreases or increases which the Prospectus discloses have
occurred or may occur or which are described in such letter.
(iv) In addition to the audit referred to in their report(s) included
in the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraph (iii) above, they have
carried out certain specified procedures, not constituting an audit in
accordance with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the Representatives,
which are derived from the general accounting records of the Company and its
subsidiary for the periods covered by their reports and any interim or other
periods since the latest period covered by their reports, which appear in the
Prospectus, or in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives, and have compared certain of such
amounts, percentages and financial information with the accounting records of
the Company and its subsidiary and have found them to be in agreement.
<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, $.0003 par value per share, into .468022 of a share of Common
Stock, $.0002 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 $.0002 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, $.0003 par value
per share ("Old Common Stock"), then issued shall automatically be reclassified,
changed and converted into .468022 of a share of Common Stock, $.0002 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 common stock, par value $.0004 per share, and
certificates representing shares of such common stock, par value $.0004 per
share, which by virtue of a recapitalization effective May 20, 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 $648.67.
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
4020 Kinross Lakes Parkway
Richfield, OH 44286-9368
D. Lee Tobler The B.F.Goodrich Company
4020 Kinross Lakes Parkway
Richfield, OH 44286-9368
</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 March 31, 1997.
ARTICLE VI
At the time of such adoption 6,930,004 shares of the Corporation's common
stock, par value $.0003 per share, were outstanding, all of which were entitled
to vote thereon.
-8-
<PAGE>
ARTICLE VII
6,930,004 shares voted for and 0 shares voted against such Amended and
Restated Articles of Incorporation.
Dated this 31st day of March, 1997.
DTM CORPORATION
By: /s/ John S. Murchison, III
----------------------------
John S. Murchison, III
President & Chief
Executive Officer
-9-
<PAGE>
[LETTERHEAD OF VINSON & ELKINS APPEARS HERE]
April 2, 1997
DTM Corporation
1611 Headway Circle
Building 2
Austin, Texas 78754
Ladies and Gentlemen:
We have acted as counsel for DTM Corporation, a Texas corporation (the
"Company"), in connection with the preparation of a Registration Statement on
Form S-1, File No. 333-04173, as amended (the "Registration Statement"), which
has been filed by the Company with the Securities and Exchange Commission for
the purpose of registering under the Securities Act of 1933, as amended (the
"1933 Act"), and the rules and regulations thereunder, the sale of up to
3,342,900 shares (the "Shares") of the Company's Common Stock, $.0002 par value
per share ("Common Stock"). The Shares will be offered and sold (the
"Offering") pursuant to an underwriting agreement (the "Underwriting Agreement")
to be entered into between the Company and A.G. Edwards & Sons, Inc. and
Ladenburg Thalmann & Co. Inc. (the "Underwriters"), and the selling shareholders
(the "Selling Shareholders") listed therein.
We are rendering this opinion as of the time the Registration Statement
becomes effective in accordance with Section 8(a) of the 1933 Act.
Before rendering the opinions hereinafter set forth, we examined, among
other things, the proposed form of Underwriting Agreement, the Registration
Statement, the Company's Amended and Restated Articles of Incorporation and
Bylaws, resolutions of the Company's Board of Directors, and originals or
photostatic or certified copies of all those corporate records of the Company
and of all those agreements, communications and other instruments, certificates
of public officials, certificates of corporate officials and such other
documents as we have deemed relevant and necessary as a basis for the opinions
hereinafter set forth. As to factual matters, information with respect to which
is in the possession of the Company relevant to the opinions herein stated, we
have relied without investigation, to the extent we deem such reliance proper,
upon certificates or representations made by its duly authorized
representatives.
In rendering the opinions set forth below, we have assumed, with your
approval and without independent investigation, the genuineness of all
signatures, the authenticity of all documents
<PAGE>
DTM Corporation
April 2, 1997
Page 2
submitted to us as originals and the conformity to original documents of all
documents submitted to us as certified or photostatic copies.
Based upon the foregoing assumptions, and subject to the qualifications set
forth hereinafter, we are of the opinion that, when (i) the Registration
Statement becomes effective under the 1933 Act, (ii) the final terms of the
Underwriting Agreement and the Offering have been approved by the Board of
Directors (or a duly constituted committee thereof), (iii) the Underwriting
Agreement has been duly executed and delivered by each of the parties thereto,
and (iv) the Shares have been issued or sold and delivered in accordance with
the terms of the Underwriting Agreement (including the receipt by the Company of
the consideration for the Shares fixed therein, assuming the consideration per
share so fixed is at least equal to the par value of such Shares), the Shares
will be validly issued, fully paid and non-assessable.
We are counsel admitted to practice law in the State of Texas and this
opinion is limited to the laws of the State of Texas and the federal law of the
United States of America.
We express no opinion as to any matter other than as expressly set forth
above, and no opinion is to or may be inferred or implied herefrom. This
opinion is given as of the date hereof, and we undertake no, and hereby disclaim
any, obligation to advise the Company or anyone else of any change in any matter
set forth herein.
We hereby consent to the filing of this opinion letter as an exhibit to the
Registration Statement and the references to us under the heading "Legal
Matters" in the prospectus that forms a part of the Registration Statement. In
giving this consent, we do not hereby admit that we are within the category of
persons whose consent is required under Section 7 of the 1933 Act and the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
<PAGE>
EXHIBIT 10.14
[LETTERHEAD OF TEXAS COMMERCE BANK APPEARS HERE]
February 14,1997
John Murchison, President and CEO
DTM Corporation
1611 Headway Circle, Building 2
Austin, Texas 78754
Dear Mr. Murchison:
Texas Commerce Bank National Association ("Bank") is prepared to make funds
(the "Loan") available to DTM Corporation ("Borrower") according to the terms
and conditions outlined below.
This commitment is subject to the completion of an Initial Public Offering with
minimum net cash proceeds in an amount sufficient to repay all existing bank
indebtedness, indebtedness owed to The BFGoodrich Company and to comply with
NASDAQ's liquidity requirements.
BORROWER: DTM Corporation, a Texas Corporation
1611 Headway Circle, Building 2
Austin, Texas 78754
By signing below and accepting the terms of this letter,
the Borrower represents that it is acting for its own
account, and not as an agent, trustee or nominee for any
other person. This letter is not intended for the benefit
of any party other than the Borrower and may not be relied
on by any other party. This letter is not assignable.
AMOUNT: $6,000,000.00 revolving line of credit ("Line of Credit").
PURPOSES: To finance timing differences in cash flow.
INTEREST RATE: Texas Commerce Bank National Association Prime Rate (as
defined in the Loan Documents) plus .75%, floating
daily.
MATURITY: April 1,1998.
<PAGE>
DTM Corporation
February 14, 1997
Page 2
PAYMENTS: Accrued interest shall be due on the last day of each
month. The Borrower will have the ability to borrow and
repay the principal of the Line of Credit on a daily basis
with the outstanding balance at April 1, 1998 due in full
along with accrued and unpaid interest.
FEES: 1) Ordinary closing costs and attorney's fees, which costs
and fees shall not exceed $2,000.00.
2)1/4th of 1% fee on unused portion of line of credit to be
paid quarterly in arrears.
3) $30,000.00 up front fee. $15,000.00 of this fee has
already been paid. $15,000 of this fee will be due at the
execution of this letter by the Borrower and will be non-
refundable.
COLLATERAL: First blanket priority lien on all accounts receivable and
inventory. Borrowing base to govern the availability of
funds under the Line of Credit. The Borrower will at no
time pledge any or all assets which include but are not
limited to all property, plant and equipment, intellectual
property and the licensing rights for the Borrower's
product from the University of Texas.
BORROWING
BASE: Borrowing base shall consist of 80% of all eligible
domestic accounts receivable 0-90 days from date of
invoice, 80% of foreign accounts receivable 0-90 days from
date of invoice covered by an acceptable Letter of Credit
or on open account as approved by Bank, and 90% for all
foreign accounts receivable 0-90 days from date of invoice
covered by Eximbank insurance or private foreign credit
insurance acceptable to the Bank. Subject to the
profitability test described below, borrowing availability
shall be the lesser of the Borrowing Base or the commitment
amount of the Line of Credit. All domestic accounts
receivable of Borrower shall be collected through a Lockbox
at the Bank and similar arrangements shall be made for the
Borrower's non-domestic accounts receivable. So long as
there is a Loan outstanding under the Line of Credit, and
EBITDA before Capitalized Expenses and before SAR Expenses
does not exceed $1,000,000 for the previous quarter, all
collected funds through the Lockbox will be applied to any
outstanding balance on the Line of Credit. When EBITDA
before Capitalized Expenses and before SAR Expenses exceeds
$1,000,000 for the previous quarter, this requirement will
no longer be in effect.
<PAGE>
DTM CORPORATION
February 14, 1997
Page 3
REPORTING
REQUIREMENTS: 1) Monthly unaudited financial statements of Borrower due
within 35 days of each month end.
2) Annual audited financial statements of Borrower due
within 90 days of fiscal year end.
3) Weekly accounts receivable aging report due every Monday
if there is an outstanding balance under the Line of Credit
and if EBITDA before Capitalized Expenses has not been
$1,000,000 for the previous quarter. When the preceding
quarterly EBITDA before Capitalized Expenses and before SAR
Expenses exceeds $1,000,000, then both of these reports
will be required on a monthly basis within 15 days of each
month end. Additionally, if there are no outstandings under
the Line of Credit, these reports will only be required
monthly within 15 days of each month end.
4) Weekly borrowing base certificate due every Monday if
there is an outstanding balance under the Line of Credit
and if EBITDA before Capitalized Expenses and before SAR
Expenses has not been $1,000,000 for the previous quarter.
When the preceding quarterly EBITDA before Capitalized
Expenses and before SAR Expenses exceeds $1,000,000, then
both of these reports will be required on a monthly basis
within 15 days of each month end. Additionally, if there
are no outstandings under the Line of Credit, these reports
will only be required monthly within 15 days of each month
end.
5) Monthly accounts payable aging report due within 15 days
of each month end.
FINANCIAL
COVENANTS: All financial covenants will be calculated at the end of
each month. All accounting terms not defined in this
---
section shall have the same meaning as Generally Accepted
Accounting Principles.
1) Minimum Tangible Net Worth shall be at all times, the
greater of either: a) $7,500,000 (defined as total
Shareholder Equity less Intangibles) or b) IPO proceeds
plus Shareholder's Deficit at 12/31/96 plus Net Income
(Loss) at 3/31/97 less $750,000 less Intangibles.
2) Minimum Quick Ratio of .85 until September 30, 1997
increasing to 1.0 to 1.0 thereafter. Quick Ratio shall mean
Total Current Assets less Inventory divided by Current
Liabilities (which includes any outstandings under the Line
of Credit).
<PAGE>
DTM Corporation
February 14, 1997
Page 4
3) Minimum Quarterly EBITDA before Capitalized Expenses and
before SAR Expenses of the following:
-----------------------------------------------------------
Quarter ending Minimum EBITDA before Capitalized
Expenses and SAR Expenses
-----------------------------------------------------------
3/31/97 $ (600,000)
6/30/97 & 9/30/97 $ 250,000
12/31/97 & thereafter. $1,000,000
-----------------------------------------------------------
4) Availability under the Line of Credit will be limited to
3,000,000 while the preceding quarterly EBITDA before
Capitalized Expenses and before SAR Expenses is less than
$1,000,000.
GUARANTORS: None.
OTHER
PROVISIONS: 1) THIS COMMITMENT IS SUBJECT TO THE COMPLETION OF AN
INITIAL PUBLIC OFFERING WITH MINIMUM NET CASH PROCEEDS IN
AN AMOUNT TO REPAY ALL EXISTING BANK INDEBTEDNESS AND
INDEBTEDNESS OWED TO THE BFGOODRICH COMPANY AND IN AN
AMOUNT TO COMPLY WITH NASDAQ'S LIQUIDITY REQUIREMENTS. NET
CASH PROCEEDS SHALL BE DEFINED AS THE BORROWER'S GROSS
PROCEEDS FROM THE INITIAL PUBLIC OFFERING LESS THE
UNDERWRITING DISCOUNT.
2) Field analyses of the Borrower's assets by a Bank
representative must be performed and the results must be
acceptable to the Bank in its sole discretion on a
semiannual basis.
3) No additional liens and encumbrances, except as
approved by Bank. This would include no liens incurred on
any and all intellectual property.
4) No additional indebtedness, except as approved by Bank.
5) No dividends or advances, except as approved by Bank.
6) The Borrower will not permit a change in the CEO unless
(a) the Borrower replaces the CEO with a qualified
successor within a reasonable period of time after the
removal, termination, resignation, failure to serve, etc.
of the CEO and (b) the Bank has approved in writing such
successor officer within 30 days after the date of such
replacement. If the Bank does not approve of the new CEO
then all cash collected through the Lockbox will be applied
as immediate make cash advances under the Line of Credit
will terminate.
<PAGE>
DTM Corporation
February 14,1997
Page 5
7) The Bank will allow the merger or acquisition of a
company in a similar line of business provided Borrower's
consideration is in the form of equity and as long as the
Borrower is in compliance with its Loan Agreement on a
proforma and post acquisition basis. All merger and
acquisition activity which either involves the assumption,
issuance or the incurrence of debt will require approval
by Bank.
CLOSING DATE: If the conditions to the making of the Loan are not
satisfied on or before April 21, 1997, then this commitment
shall automatically terminate and be of no further force or
effect.
EXPENSES: Borrower shall be liable for and shall promptly pay all
reasonable fees, expenses and charges incurred in
connection with the issuance, amendment or modification of
this commitment, the negotiation and preparation of the
documents governing or securing the Loan, the disbursement
of the Loan, the administration of the Loan and the
enforcement of the obligations of Borrower under this
commitment of the documents governing or securing the Loan,
whether or not this commitment is terminated or any Loans
are advanced. These fees will include all legal expenses
associated with closing this transaction which are
currently estimated at $2,000.00. Any costs above this
amount will be discussed with the Borrower before they are
incurred. Additionally, field analysis fees will not exceed
$2,500.00 on a semi-annually basis.
LOAN
DOCUMENTS: The Bank will require among other terms and conditions, at
the time of each advance; reporting requirements,
covenants, events of default, representations and
warranties; indemnifications and other requirements
customary for transactions of this type which are not
specifically outlined but which are, nevertheless,
conditions to closing. All documentation must be
satisfactory to the Bank in its sole discretion and that of
its counsel.
<PAGE>
DTM Corporation
February 14, 1997
Page 6
ENTIRE
AGREEMENT: Notwithstanding any discussions or other action or conduct
undertaken by or on behalf of Borrower or Bank on or before
the date of this letter, this letter constitutes the only
evidence of Bank's consent to make the Loan which consent
is subject to the terms and conditions contained herein.
THE TERMS AND CONDITIONS OF THE BANK'S AGREEMENT HEREUNDER ARE NOT LIMITED
TO THE ABOVE TERMS AND CONDITIONS, AND THIS LETTER DOES NOT SET OUT IN
FULL ALL THE REQUIREMENTS OF THE BANK AS TO THE BORROWER AND THE
CONDITIONS TO MAKING THE LOAN AVAILABLE. THOSE MATTERS WHICH ARE NOT
COVERED BY OR MADE CLEAR IN THE ABOVE OUTLINE ARE SUBJECT TO MUTUAL
AGREEMENT OF THE PARTIES, AND ALL MATTERS ARE SUBJECT TO AMPLIFICATION IN
THE LOAN DOCUMENTS.
THIS COMMITMENT IS ALSO CONDITIONAL UPON THE PREPARATION, EXECUTION AND
DELIVERY OF LEGAL DOCUMENTATION (INCLUDING ASSURANCES, VERIFICATIONS AND
RELATED AGREEMENTS REGARDING THE MATTERS NOTED ABOVE) IN FORM AND
SUBSTANCE SATISFACTORY TO THE BANK AND ITS COUNSEL INCORPORATING
SUBSTANTIALLY THE TERMS AND CONDITIONS OUTLINED OR REFERRED TO ABOVE.
FURTHERMORE, AT THE TIME OF THE CLOSING OF THE LOAN THERE MUST NOT BE: ANY
RECEIVERSHIP OR INSOLVENCY PROCEEDINGS OF ANY KIND RELATING TO THE
BORROWER OR GUARANTORS; ANY DEFAULT UNDER THE LOAN DOCUMENTS; ANY MATERNAL
ADVERSE CHANGE IN THE BUSINESS OR FINANCIAL CONDITION OF THE BORROWER FROM
THE CONDITION DESCRIBED IN THE FINANCIAL STATEMENTS DATED DECEMBER 31,
1996 WHICH BANK HAS REVIEWED JUST PRIOR TO DELIVERING THIS COMMITMENT, OR
ANY MATERIAL ADVERSE CHANGES WITH RESPECT TO THE COLLATERAL OR ANY OTHER
INFORMATION OR DOCUMENT SUBMITTED TO BANK BY BORROWER.
THIS WRITTEN COMMITMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
<PAGE>
DTM Corporation
February 14, 1997
Page 7
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Please evidence your acceptance of the foregoing by signing and returning to us
to the attention of Donna Tanner-Day the enclosed copy of this letter on or
before February 21, 1997 along with a fee of $15,000.00. Unless we receive your
executed acceptance hereof and the fee of $15,000.00 by the close of business on
February 21, 1997, this commitment will be null and void.
Upon receipt of your acceptance we will commence preparation of the
documentation process and advise you of those documents which you will need to
provide to us in anticipation of the closing of the Loan.
Very Truly Yours,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
BY: /s/ DONNA TANNER-DAY
------------------------------------
DONNA TANNER-DAY
VICE PRESIDENT
Accepted on FEB. 18, 1997
DTM CORPORATION
/s/ JOHN MURCHISON, III
- --------------------------
By: John Murchison, III
- --------------------------
Title: President and CEO
- --------------------------
<PAGE>
EXHIBIT 11.1
STATEMENT OF COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
1996
1996 AS ADJUSTED
----------- -----------
<S> <C> <C>
Pro forma net loss(1)................................ $(6,156,000) $(6,156,000)
Plus interest on debt repaid with proceeds from
offering(2)....................................... -- 1,087,000
----------- -----------
Pro forma net loss as adjusted....................... $(6,156,000) $(5,069,000)
=========== ===========
Shares:
Weighted average number of shares outstanding...... 3,243,392 3,243,392
Dilutive effect of options to be issued(3)......... 380,847 380,847
Shares issued in the Offering used to repay
outstanding debt(4)............................... -- 1,728,603
----------- -----------
Total shares used in computing pro forma net loss
per share......................................... 3,624,239 5,352,842
=========== ===========
Pro forma net loss per share (primary & fully
dilutive)........................................... $ (1.70) $ (0.95)
=========== ===========
</TABLE>
- --------
(1) Computed on a stand alone basis, without allocation of income tax benefit
from BF Goodrich.
(2) Reflects elimination of historically incurred interest expense related to
debt to be repaid with proceeds from the offering.
(3) 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 with the closing of the offering
under the Equity Appreciation Plan, less shares assumed to be repurchased
using the treasury stock method.
(4) Reflects that number of shares to be offered, the net proceeds from which
are necessary to fund debt repayments (assuming such shares are sold at an
offering price of $10 per share).
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 13, 1997 (except for the stock split
information in Note 1, as to which the date is April 2, 1997), in Amendment
No. 2 to the Registration Statement (Form S-1, No. 333-04173) and related
Prospectus of DTM Corporation dated April 3, 1997.
Ernst & Young LLP
Austin, Texas
April 2, 1997
