<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 1997
Commission File Number:
0-29194
NEXAR TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3268334
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
182 TURNPIKE ROAD
WESTBOROUGH, MASSACHUSETTS 01581
(Address of principal executive offices)
(508) 836-8700
(Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [x] No [_]
The number of shares of the registrant's Common Stock, $ 0.01 par value,
outstanding as of November 11, 1997 was 9,340,780.
1
<PAGE>
INDEX
<TABLE>
<CAPTION>
Item Number Page
Part I: Financial Information
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
December 31, 1996 and September 30, 1997 (Unaudited) 3
Condensed Consolidated Statements of Operations
for the three months and nine months ended
September 30, 1996 and September 30, 1997 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1996 and
September 30, 1997 (Unaudited) 5
Notes to Condensed Consolidated Financial
Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 10
Part II: Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
NEXAR TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1997
1996 (Unaudited)
------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ......................................... $ 2,739 $ 1,730
Short term investments ............................................ -- 997
Accounts receivable, net .......................................... 7,747 11,439
Inventories ....................................................... 6,113 6,698
Prepaid expenses and other current assets ......................... 368 1,336
------------- -------------
Total current assets .......................................... 16,967 22,200
Property and equipment, net ........................................... 255 555
Purchased technology, net ............................................. 1,375 1,031
Other assets .......................................................... 992 276
------------- -------------
$19,589 $ 24,062
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable .................................................. $ 4,537 $ 5,966
Accrued expenses .................................................. 2,005 1,888
Deferred revenue .................................................. -- 1,908
------------- -------------
Total current liabilities ..................................... 6,542 9,762
Due to related parties ................................................ 22,818 --
------------- -------------
Stockholders' Equity (Deficit):
Preferred stock, $.01 par value, 10,000,000 shares
authorized; no shares issued and outstanding at
December 31, 1996; 45,684 shares issued and
outstanding at September 30, 1997............................ -- 1
Common stock, $.01 par value, 30,000,000 shares
authorized; 4,800,000 shares issued and outstanding
at December 31,1996; 9,340,780 shares issued and
outstanding at September 30, 1997............................. 48 93
Additional paid-in capital ....................................... (48) 34,162
Accumulated deficit .............................................. (9,771) (19,956)
------------- -------------
Total Stockholders' Equity (Deficit) ......................... (9,771) 14,300
------------- -------------
$19,589 $ 24,062
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
NEXAR TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Share And Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ ------------------------
SEPT 30, SEPT 30, SEPT 30, SEPT 30,
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues ............................................. $ 9,190 $ 4,403 $ 11,341 $ 22,399
Cost of revenues ......................................... 7,424 6,119 9,338 22,769
----------- ----------- ----------- -----------
Gross profit (loss)...................................... 1,766 (1,716) 2,003 (370)
Operating expenses:
Research and development ................................ 131 464 301 1,184
Selling and marketing ................................... 981 1,692 2,987 5,612
General and administrative .............................. 620 1,646 1,696 3,170
----------- ----------- ----------- -----------
Total operating expenses ................................ 1,732 3,802 4,984 9,966
----------- ----------- ----------- -----------
Interest income........................................... -- 64 -- 151
----------- ----------- ----------- -----------
Net income (loss)......................................... $ 34 $ (5,454) $ (2,981) $ (10,185)
=========== =========== =========== ===========
Net loss per common and common
equivalent share......................................... $ 0.00 $ (0.65) $ (0.35) $ (1.24)
=========== =========== =========== ===========
Weighted average number of common
and common equivalent shares outstanding................. 8,421,838 8,437,029 8,421,838 8,211,313
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
NEXAR TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss .............................................. $ (2,981) $ (10,185)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ...................... 18 444
Changes in current assets and liabilities:
Accounts receivable ................................ (7,822) (3,692)
Inventories ........................................ (2,984) (585)
Prepaid expenses and other current assets (132) (968)
Accounts payable ................................... 4,626 1,429
Accrued expenses ................................... 210 (117)
Due to related parties ............................. -- (545)
Deferred revenue ................................... -- 1,908
-------------- --------------
Net cash used in operating activities ............ (9,065) (12,311)
Cash flows from investing activities:
Increase in short term investments .................... -- (997)
Purchases of property and equipment ................... (134) (370)
Decrease in other assets .............................. (91) 686
-------------- --------------
Net cash (used in) provided by investing activities.. (225) (681)
Cash flows from financing activities:
Borrowings (payments) of amounts to related parties ... 16,457 (7,704)
Net proceeds from issuance of common stock............. -- 19,687
-------------- --------------
Net cash provided by financing activities............. 16,457 11,983
Net increase (decrease) in cash and cash equivalents..... 7,167 (1,009)
Cash and cash equivalents, beginning of period........... 981 2,739
-------------- --------------
Cash and cash equivalents, end of period ................ $ 8,148 $ 1,730
============== ==============
Supplemental disclosure of non cash investing
and financing activities:
Conversion of amounts due to related parties to
preferred stock ........................................ $ -- $ 4,568
============== ==============
Conversion of amounts due to related parties to
common stock ........................................... $ -- $ 10,000
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
NEXAR TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared by Nexar Technologies, Inc. (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission regarding interim
financial reporting. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 1996 included in
the Company's Registration Statement on Form S-1 (File No. 333-18489), as
amended (the "Registration Statement"). The accompanying condensed consolidated
financial statements reflect all adjustments (consisting of normal, recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of results for the interim periods presented. The results of
operations for the nine month period ended September 30, 1997 may not be
indicative of the results to be expected for the full year.
2.) Principles of Consolidation
The accompanying condensed consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary. All significant
intercompany balances and transactions have been eliminated in consolidation.
3.) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market and
consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
(Unaudited)
----------- -----------
<S> <C> <C>
Raw materials .................................... $4,214 $3,656
Work-in-process .................................. 769 581
Finished goods ................................... 1,130 2,461
------ ------
$6,113 $6,698
====== ======
</TABLE>
Work-in-process and finished goods inventories consist of material, labor and
manufacturing overhead.
6
<PAGE>
4.) Concentration of Credit Risk
Statement of Financial Accounting Standards (SFAS) No. 105, Disclosure of
Information About Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentrations of Credit Risk, requires disclosures
of any significant off-balance-sheet and credit risk concentrations. The Company
has no significant off-balance-sheet concentrations of credit risk such as
foreign currency exchange contracts, options contracts or other foreign hedging
arrangements. Financial instruments that subject the Company to credit risk
consist primarily of cash and cash equivalents and trade accounts receivable.
The Company places its cash and cash equivalents in highly rated financial
institutions. The Company's accounts receivable credit risk is limited to one
customer who represented approximately $2,968,000 of accounts receivable at
September 30, 1997. To reduce risk, the Company routinely assesses the financial
strength of its customers and, as a result, believes that its accounts
receivable credit risk exposure is limited. The Company maintains an allowance
for potential credit losses. The Company has not experienced any significant
losses related to individual customers or groups of customers in any particular
industry or geographic area.
5.) Net Loss per Common and Common Equivalent Share
Net loss per common and common equivalent share is computed by dividing the net
loss by the weighted average number of common and common equivalent shares
outstanding. Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin No. 83, and the Accounting Principles Board (APB) Opinion No. 15, the
weighted average number of common and common equivalent shares outstanding
assumes the conversion of $10,000,000 due to related parties into 700,000 shares
of the Company's common stock (excluding 1,200,000 shares of common stock
subject to a contingent repurchase right of the Company, at a nominal price per
share, and will only be released upon the attainment of certain revenue, net
income and stock price milestones, as defined in an agreement between the
Company's majority stockholder and the Company), and assumes that all common
stock and common stock equivalents issued within twelve months prior to the
initial filing of the Company's initial public offering (See Note 7) have been
included in the calculation, using the treasury stock method, as if they were
outstanding for all periods immediately preceding the initial public offering.
Options issued more than twelve months prior to the initial filing of the
Company's initial public offering have not been included as their effect would
be anti-dilutive.
6.) New Accounting Standard
On March 31, 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings Per Share. SFAS No. 128 establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock or potential common stock. SFAS No. 128 is effective for fiscal years
ending after December 15, 1997 and early adoption is not permitted. When adopted
by the Company, SFAS No. 128 will require restatement of prior years' earnings
per share. The Company will adopt SFAS No. 128 for its fiscal year ended
December 31, 1997. The Company believes that the adoption of SFAS No. 128 will
not have a material effect on its financial statements.
7
<PAGE>
7.) Initial Public Offering
The Company completed its initial public offering of 2,500,000 shares at $9.00
per share on April 14, 1997. Net proceeds to the Company amounted to $19.7
million.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Nexar Technologies, Inc. (the "Company") was organized and commenced
operations in March of 1995. The Company has focused on developing its products
and its marketing and distribution strategies and did not generate material
revenues until April 1996 when it began shipping its proprietary personal
computers (PCs). The Company develops, manufactures and markets high-
performance, competitively-priced desktop PCs based upon patented and patent
pending technologies.
The table below presents the statement of operations items for the three
months and nine months ended September 30, 1996 and September 30, 1997 as a
percentage of net revenues and provides the percentage increase in absolute
dollars of such items comparing the interim periods ended September 30, 1997 to
the corresponding period from the prior fiscal period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- % Change ----------------- % Change
Sept 30, Sept 30, of Dollar Sept 30, Sept 30 of Dollar
1996 1997 Increase 1996 1997 Increase
------- ------ -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Net revenues .................... 100.0% 100.0% (52.1)% 100.0% 100.0% 97.5%
Cost of revenues ................ 80.8 139.0 (17.6) 82.3 101.7 143.8
----- ------- --------- ------ ------ ------
Gross profit .................... 19.2 (39.0) (197.2) 17.7 (1.7) (118.5)
Operating expenses:
Research and development ...... 1.4 10.5 254.2 2.7 5.3 293.4
Selling and marketing ......... 10.7 38.4 72.5 26.3 25.1 87.9
General and administrative .... 6.7 37.4 165.5 15.0 14.2 86.9
----- ------- --------- ------ ------ ------
Total operating expenses ....... 18.8 86.3 119.5 44.0 44.6 100.0
Interest income ................. -- 1.5 100.0 -- 0.7 100.0
----- ------- --------- ------ ------ ------
Net loss ........................ 0.4% (123.8)% (16141.2)% (26.3)% (45.6)% 241.7%
===== ======= ========= ====== ====== ======
</TABLE>
8
<PAGE>
Net Revenues
Net revenues decreased 52% in the third quarter of 1997 to $4.4 million
from $9.2 million in the third quarter of 1996. For the nine months ended
September 30, 1997, net revenues increased 98% to $22.4 million from $11.3
million in the comparable period of 1996. The decrease in net revenues for the
quarter was the direct result of the Company's turnkey suppliers' inability to
deliver its proprietary motherboards on a timely basis. During August 1997, the
Company entered into agreements with two world class motherboard manufacturers
to be the primary suppliers of XPA motherboards. The increase in net revenues
for the first nine months of 1997 over the comparable period of 1996 was
attributed to increased units sold as a direct result of continued demand for
the Company's PCs.
Unit shipments in the nine month period ended September 30, 1997 increased
152% to approximately 28,000 from approximately 11,100 in the first nine months
of 1996. This growth is attributed to the acceptance of the Company's technology
and products by its growing customer base.
Gross Profit (Loss)
Gross profit (loss) in the three month and nine month period ended
September 30, 1997 decreased 197% and 119% respectively over comparable periods
of 1996. As a percentage of revenues, gross profit (loss) for the third quarter
and nine months of 1997 decreased significantly over comparable periods of 1996.
This was primarily due to a short term interruption in supply of essential
components which resulted in lower than anticipated shipment levels and
unabsorbed factory overhead costs attributed to the lower revenues. The Company
anticipates improved product margins with resumed to full factory production and
fulfillment of the Company's backlog of orders for XPA product.
Operating Expenses
Research and development costs have increased in absolute dollars due to
increased staffing levels and accelerated product development costs of the
Company's XPA product. Research and development costs as a percentage of
revenues increased for both the third quarter of 1997 and the nine month period
ended September 30, 1997 as compared to the corresponding period(s) of 1996. The
increased percentage for the quarter was due primarily to lower revenues and
accelerated costs associated to its development efforts of the XPA product.
Similarly, the increased percentage for the comparable nine months period was
attributed to the company's accelerated efforts.
Selling, general and administrative expenses increased in absolute dollars
109% and 88% for the third quarter and nine months of 1997, respectively as
compared to the same periods of the prior year. As a percentage of net revenues,
selling, general and administrative expenses increased both in the third quarter
and nine months ended September 30, 1997 comparatively over the same period for
1996. These increases are attributed to increased sales staffing , aggressive
advertising campaigns, trade show expenses and related infrastructure needs to
meet the demands of the Company's growth.
9
<PAGE>
Liquidity and Capital Resources
The Company has financed its operating activities and capital expenditure
requirements since the date of its initial public offering from the net proceeds
received from the initial public offering. The Company's working capital has
increased to $12.5 million at September 30, 1997, as compared to $10.4 million
at December 31, 1996.
The Company's cash, cash equivalents and short term investments was $2.7
million at September 30, 1997. At September 30, 1997, accounts receivable and
inventories were $11.4 million and $6.7 million, respectively, as compared to
$7.7 million and $6.1 million, respectively, at September 30, 1996. The increase
in accounts receivable is primarily due to longer than anticipated collection
cycles from customers. Inventory increased primarily due to receipt of those
essential components at the end of the quarter which were delayed during the
third quarter of 1997.
The Company expects to fund capital expenditures requirements , as well as,
working capital needs with a combination of its cash and cash equivalent funds
provided by operations and possible future financing arrangements, as the need
arises.
Item 3 - Quantitative and Qualitative Disclosure About Market Risk
None
Cautionary Statement
Statements in this report expressing the expectations and beliefs of the
Company regarding its future results or performance are forward-looking
statements that involve a number of risks and uncertainties. In particular,
certain statements contained in the Management's Discussion and Analysis of
Financial Condition and Results of Operations which are not historical facts
(including, but not limited to, statements concerning anticipated availability
of capital for working capital and for capital expenditures) constitute
"forward-looking statements". The Company's actual future results may differ
significantly from those stated in any forward-looking statements. Factors that
may cause or contribute such differences include, but are not limited to, risks
discussed in the Company's Prospectus dated April 8, 1997 included in its
Registration Statement on Form S-1 (Reg. No. 333-18489) and from time to time in
the Company's other filings with the Securities and Exchange Commission,
including, without limitation, the following, (a) the risks and uncertainties
associated with reliance on suppliers, (b) intense competition in the personal
computer business, (c) the Company's dependence on a substantial customer, (d)
the risks associated with rapid substantial growth, (e) the uncertainty of
market acceptance of the Company's products, (f) the risks associated with
international expansion, (g) the dependence of the Company on outside
engineering for the development of its products, (h) the risks associated with
the protection and possible infringement of the Company's intellectual property,
(i) dependence upon a third party to
10
<PAGE>
provide service and support to the Company's customers, and (j) dependence on
third party distributors and resellers.
As a result of the foregoing and other factors, the Company may experience
material fluctuations in future operating results on a quarterly or annual basis
which could materially and adversely affect its business, financial condition,
operating results and stock price. The Company specifically declines any
obligation to publicly release the result of any revisions which may be made to
forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statement.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
The Company filed a Form SR with the Securities and Exchange Commission on July
18, 1997 reporting through June 30, 1997 the Company's use of proceeds from its
initial public offering (under Form S-1 Registration Statement No. 333-18489;
declared effective April 8, 1997) of its Common Stock, $0.01 par value. The
Company registered and sold 2,500,000 shares of its common stock in such
offering for aggregate gross proceeds of $22,500,000. Net proceeds after
underwriting discounts and commissions and offering expenses were $18,637,285.
The managing underwriters of the offering were Sands Brothers & Co., Ltd. and
Credit Lyonnais Securities (USA) Inc. As of June 30, 1997 the Company had
utilized $8,248,549 and $4,387,736 of the net offering proceeds for repayment of
indebtedness (to the Company's majority stockholder, Palomar Medical
Technologies, Inc.) and working capital, respectively. During the quarter ended
September 30, 1997, the Company utilized an additional $4,000,000 of the net
proceeds for working capital.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 10.1 - Key Employment Agreement Between the Registrant and E. Craig
Conrad
Exhibit 10.2 - Amendment to Key Employment Agreement and Confidential
Information Agreement Between Registrant and Gerald Y. Hattori
Exhibit 11.1 - Statement Re: Per Share Earnings
Exhibit 27 - Financial Data Schedule
No reports have been filed on Form 8-K during the quarter ended September 30,
1997.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NEXAR TECHNOLOGIES, INC.
Date: November 11, 1997 BY /s/ Albert J. Agbay
-----------------------------------
Albert J. Agbay
Chairman, Chief Executive Officer
and President
(as authorized officer)
BY /s/ Gerald Y. Hattori
-----------------------------------
Gerald Y. Hattori
Vice President, Finance , Chief Financial
Officer and Treasurer
(as authorized officer and as principal
financial officer)
13
<PAGE>
Exhibit 10.1
______________________
KEY EMPLOYEE AGREEMENT
______________________
To: E. Craig Conrad
The undersigned, Nexar Technologies, Inc., a Delaware corporation (the
"Company"), with its principal place of business located at 182 Turnpike Road,
Westborough, Massachusetts 01581, hereby agrees with you as follows:
1. Position and Responsibilities.
-----------------------------
1.1 You shall serve as Vice President of Marketing of the Company (or in
such other executive capacity as shall be designated by the Chief Executive
Officer of the Company) and shall perform the duties customarily associated with
such capacity from time to time and at such place or places as the Chief
Executive Officer of the Company shall designate as appropriate and necessary in
connection with such employment.
1.2 You will, to the best of your ability, devote your full time and best
efforts to the performance of your duties hereunder and the business and affairs
of the Company. You agree to perform such executive duties as may be assigned
to you by or on authority of the Company's Chief Executive Officer from time to
time.
1.3 You will duly, punctually, and faithfully perform and observe any and
all rules and regulations that the Company may now or shall hereafter reasonably
establish governing your conduct as an employee and the conduct of its business.
2. Term of Employment
------------------
2.1 The term of this Agreement shall be for the period of years set forth
on Exhibit A annexed hereto. Your employment with the Company may be terminated
---------
as provided in Sections 2.2 or 2.3.
2.2 The Company shall have the right to terminate your employment at any
time under this Agreement prior to the stated term in any of the following ways:
(a) on thirty (30) days prior written notice to you upon your death or
disability (disability shall be defined as your inability to perform duties
under this Agreement for an aggregate of ninety (90) days out of any one
hundred eighty (180) day period due to mental or physical disability);
<PAGE>
(b) immediately without prior notice to you by the Company for Cause, as
hereinafter defined, provided, however, that prior to any such termination
for Cause, you have had a reasonable opportunity to be heard thereon;
(c) immediately without prior notice to you or Cause, in the event of the
liquidation or reorganization of the Company under the federal Bankruptcy
Act or any state insolvency or bankruptcy law;
(d) at any time without Cause, provided the Company shall be obligated to
pay to you upon notice of termination, as severance pay, a lump sum amount
equal to the number of months of Base Salary set forth on Exhibit A
---------
attached hereto, less applicable taxes and other required withholdings and
any amounts you may owe to the Company. If, however, a change in control
of the Company should occur causing termination of your employment without
Cause, then you shall be entitled to receive as severance pay a lump sum
amount equal to the number of months of Base Salary set forth on Exhibit A
---------
attached hereto, or an amount equal to the salary due to you under the
terms of this contract at the time of termination, whichever is less. For
purposes of this Agreement "change of control" shall be deemed to be the
sale of all or substantially all of the stock or assets of the Company or
the merger of the Company with another entity where the other entity
survives the merger.
2.3 You shall have the right to terminate your employment hereunder for
any reason, upon not less than ninety (90) days' prior written notice to the
Company.
2.4 "Cause" for the purpose of Section 2 of this Agreement shall mean:
(i) the falseness or material inaccuracy of any of your warranties or
representations herein; (ii) your willful failure or refusal to comply with
explicit directives of the Chief Executive Officer or to render the services
required herein; (iii) fraud or embezzlement involving assets of the Company,
its customers, suppliers or affiliates or other misappropriation of the
Company's assets or funds; (iv) your conviction of a criminal felony offense;
(v) the willful breach or habitual neglect of your obligations under this
Agreement or your duties as an employee of the Company; (vi) habitual use of
drugs or insanity. The existence of Cause for termination of your employment by
the Company shall be subject, upon the written election by you or the Company,
to binding arbitration as provided in Section 9 hereof. The cost of
arbitration, exclusive of the cost of each party's legal representation (which,
except as hereinafter otherwise provided, shall be borne by the party incurring
the expense), shall be borne by the instigating party; provided, however, that
the arbitrators' award may require either party to reimburse the other for the
reasonable cost of legal representation in the arbitration proceedings.
Further, any dispute, controversy, or claim arising out of, in connection
with or in relation to this definition of "Cause" shall be settled by
arbitration as provided in Section 9 hereof. Any award or determination shall
be final, binding, and conclusive upon the parties, and a judgment rendered may
be entered in any court having jurisdiction thereof.
2
<PAGE>
2.5 If your employment is terminated because of your death, pursuant to
subsection 2.2(a), all obligations of the Company hereunder cease, except with
respect to amounts and obligations accrued to you through the last day of the
month during which your death has occurred.
If your employment is terminated by the Company for any other reason,
pursuant to subsection 2.2(b), (c), or (d) above, all obligations of the Company
(except with respect to amounts and obligations accrued to you prior to the date
of termination) shall cease.
3. Compensation
------------
You shall receive the compensation and benefits set forth on Exhibit A
attached hereto ("Compensation") for all services to be rendered by you
hereunder and for your transfer of property rights pursuant to an agreement
relating to proprietary information and inventions of even date herewith
attached hereto as Exhibit C between you and the Company (the "Confidential
---------
Information Agreement"). Such Compensation shall be subject to temporary or
permanent reduction by the Board of Directors or Executive Committee if the
Board or Committee shall determine in good faith that economic conditions so
warrant.
4. Other Activities During Employment.
----------------------------------
4.1 Except for any outside employments and directorships currently held by
you as listed on Exhibit B attached hereto, and except with the prior written
---------
consent of a disinterested majority of the Company's Board of Directors, which
consent will not be unreasonably withheld, you will not, during the term of this
Agreement, undertake or engage in any other employment, occupation or business
enterprise other than one in which you are an inactive investor.
4.2 You hereby agree that, except as disclosed on Exhibit B attached
---------
hereto, during your employment hereunder, you will not, directly or indirectly,
engage (i) individually, (ii) as an officer, (iii) as a director, (iv) as an
employee, (v) as a consultant, (vi) as an advisor, (vii) as an agent (whether a
salesperson or otherwise), (viii) as a broker, or (ix) as a partner, covenantor,
stockholder or other proprietor owning directly or indirectly more than five
percent (5) interest in any firm, corporation, partnership, trust, association,
or other organization which is engaged in the planning, research, development,
production, manufacture, marketing, sales, or distribution of products,
equipment, or services similar to those produced by the Company, its parent
corporation Palomar Medical Technologies, Inc. ("Palomar") or any company owned
or controlled by Palomar, (such firm, corporation, partnership, trust,
association, or other organization being hereinafter referred to as a
"Prohibited Enterprise"). Except as may be shown on Exhibit B attached hereto,
---------
you hereby represent that you are not engaged in any of the foregoing capacities
(i) through (ix) in any Prohibited Enterprise.
3
<PAGE>
5. Former Employers.
----------------
5.1 You represent and warrant that your employment by the Company will not
conflict with and will not be constrained by any prior or current employment,
consulting agreement or relationship whether oral or written. You represent and
warrant that you do not possess confidential information arising out of any such
employment, consulting agreement or relationship which, in your best judgment,
would be utilized in connection with your employment by the Company in the
absence of Section 5.2.
5.2 If, in spite of the second sentence of Section 5.1, you should find
that confidential information belonging to any other person or entity might be
usable in connection with the Company's business, you will not intentionally
disclose to the Company or use on behalf of the Company any confidential
information belonging to any of your former employers; but during your
employment by the Company you will use in the performance of your duties all
information which is generally known and used by persons with training and
experience comparable to your own all information which is common knowledge in
the industry or otherwise legally in the public domain.
6. Proprietary Information and Inventions.
--------------------------------------
You agree to execute, deliver and be bound by the provisions of the
Confidential Information Agreement attached hereto as Exhibit C.
---------
7. Post-Employment Activities.
--------------------------
7.1 For a period of one (1) year after the termination or expiration, for
any reason, of your employment with the Company hereunder, absent the Board of
Directors' prior written approval, you will not directly or indirectly engage in
activities similar to those described in Section 4.2, nor render services
similar or reasonably related to those which you shall have rendered hereunder
to, any person or entity whether now existing or hereafter established which
directly competes with (or proposes or plans to directly compete with) the
Company ("Direct Competitor") in the same or similar business. Nor shall you
entice, induce or encourage any of the Company's other employees to engage in
any activity which, were it done by you, would violate any provision of the
Confidential Information Agreement or this Section 7. As used in this
Agreement, the term "any line of business engaged in or under demonstrable
development by the Company" shall be applied as at the date of termination of
your employment, or, if later, as at the date of termination of any post-
employment consultation.
7.2 For a period of one (1) year after the termination of your employment
with the Company, the provisions of Section 4.2 shall be applicable to you and
you shall comply therewith.
4
<PAGE>
7.3 No provision of this Agreement shall be construed to preclude you from
performing the same services which the Company hereby retains you to perform for
any person or entity which is not a Direct Competitor of the Company upon the
expiration or termination of your employment (or any post-employment
consultation) so long as you do not thereby violate any term of this Agreement
or the Confidential Information Agreement.
8. Remedies.
--------
Your obligations under the Confidential Information Agreement and the
provisions of Sections 4.2, 7, 8, 9, and 11 of this Agreement (as modified by
Section 4, if applicable) shall survive the expiration or termination of your
employment (whether through your resignation or otherwise) with the Company.
You acknowledge that a remedy at law for any breach or threatened breach by you
of the provisions of the Confidential Information Agreement or Section 4 or 7
hereof would be inadequate and you therefore agree that the Company shall be
entitled to such injunctive relief in case of any such breach or threatened
breach.
9. Arbitration
-----------
Any dispute concerning this Agreement including, but not limited to, its
existence, validity, interpretation, performance or non-performance, arising
before or after termination or expiration of this Agreement, shall be settled by
a single arbitrator in Boston, Massachusetts, in accordance with the expedited
procedures of the commercial rules then in effect of the American Arbitration
Association; provided, however, that the arbitrator shall have sole discretion
with regard to the admissibility of evidence. The parties shall have the right
to be represented by counsel in any arbitration. Judgment upon any award may be
entered in the highest court, state or federal, having jurisdiction. The cost
of such arbitration (but not expenses of counsel, which shall be borne by each
party) shall be borne equally between the parties thereto unless otherwise
determined by such arbitration panel.
10. Assignment.
----------
This Agreement and the rights and obligations of the parties hereto shall
bind and inure to the benefit of any successor or successors of the Company by
reorganization, merger or consolidation and any assignee of all or substantially
all of its business and properties, but, except as to any such successor or
assignee of the Company, neither this Agreement nor any rights or benefits
hereunder may be assigned by the Company or by you, except by operation or law
or by a further written agreement by the parties hereto.
5
<PAGE>
11. Interpretation.
--------------
IT IS THE INTENT OF THE PARTIES THAT in case any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. MOREOVER, IT IS THE INTENT OF THE
PARTIES THAT if any one or more of the provisions contained in this Agreement is
or becomes or is deemed invalid, illegal or unenforceable or in case any shall
for any reason be held to be excessively broad as to duration, geographical
scope, activity or subject, such provision shall be construed by amending,
limiting and/or reducing it to conform to applicable laws so as to be valid and
enforceable or, if it cannot be so amended without materially altering the
intention of the parties, it shall be stricken and the remainder of this
Agreement shall remain in full force and effect.
12. Notices.
-------
Any notice which the Company is required to or may desire to give you shall
be given by registered or certified mail, return receipt requested, addressed to
you at your address of record with the Company, or at such other place as you
may from time to time designate in writing. Any notice which you are required
or may desire to give to the Company hereunder shall be given by registered or
certified mail, return receipt requested, addressed to the Company at its
principal office, or at such other office as the Company may from time to time
designate in writing, to the attention of the Chief Executive Officer of the
Company.
13. Waivers.
-------
No waiver of any right under this Agreement shall be deemed effective
unless contained in a writing signed by the party charged with such waiver, and
no waiver of any right arising from any breach or failure to perform shall be
deemed to be a waiver of any future such right or of any other right arising
under this Agreement.
14. Complete Agreement; Amendments.
------------------------------
The foregoing, including Exhibits A and B and C attached hereto, is the
entire agreement of the parties with respect to the subject matter hereof,
superseding any previous oral or written communications, representations,
understandings, or agreements with the Company or any officer or representative
thereof. This Agreement may be amended or modified or certain provisions waived
only by a written instrument signed by the parties hereto.
6
<PAGE>
15. Headings.
--------
The headings of the Sections contained in this Agreement are inserted for
convenience and reference only and in no way define, limit, extend or describe
the scope of this Agreement, the intent of any provisions hereof, and shall not
be deemed to constitute a part hereof nor to affect the meaning of this
Agreement in any way.
16. Counterparts.
------------
This Agreement may be signed in two counterparts, each of which shall be
deemed an original and both of which shall together constitute one agreement.
17. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
* * * * *
7
<PAGE>
If you are in agreement with the foregoing, please sign your name below and
also at the bottom of the Confidential Information Agreement, whereupon both
agreements shall become binding in accordance with their terms. Please then
return this Agreement to the Company. (You may retain for your records the
accompanying counterpart of this Agreement enclosed herewith).
Very truly yours,
NEXAR TECHNOLOGIES, INC.
By: Albert J. Agbay, President,
Chief Executive Officer and Chairman
Accepted and Agreed:
E. Craig Conrad
8
<PAGE>
EXHIBIT A
EMPLOYMENT TERM, COMPENSATION AND BENEFITS
OF
E. Craig Conrad
1. Term.
----
The term of the Agreement to which this Exhibit A is annexed and
incorporated shall be for 3 years, commencing March 1, 1997, unless terminated
prior thereto in accordance with Section 2.2 or 2.3 of the Agreement.
2. Compensation.
------------
(a) Base Salary. Your initial Base Salary shall be One Hundred Fifteeen
Thousand Dollars ($115,000) per annum, during the term of the Agreement, to
be paid in accordance with the Company's payroll policies and to be subject
to increases or deceases thereafter as determined in good faith by the
Company's Chief Executive Officer or Board of Directors.
(b) Bonus. Such amounts as are payable pursuant to present and future
annual bonus goals as have been and are to be determined in good faith by
the Chief Executive Officer of the Company.
(c) Lump Sum Severance Pursuant to Section 2.2(d) of the Agreement: 12
months Base Salary.
3. Vacation.
--------
You shall be paid for and entitled to all legal and religious holidays, and
three (3) weeks paid vacation per annum. You shall arrange for vacations in
advance at such time or times as shall be mutually agreeable to you and the
Company. Any vacation time not used in any particular year may be carried
forward into the subsequent year. You may not receive pay in lieu of vacation.
A-1
<PAGE>
4. Insurance Benefits.
------------------
You shall be eligible for participation in any health or other group
insurance plan to be established by or for the benefit of the Company, with
benefits substantially identical to those provided to executive officers of the
Company, or which the Company is required to maintain by law. You shall also
be entitled to participate in any employee benefit program which the Company may
establish for its key employees or for its employees generally, including, but
in no way limited to, bonuses and stock purchase or option plans. Without
limiting the foregoing, you shall be entitled to participate in a 401(k) plan to
be established by or for the benefit of the Company, on terms substantially
identical to those provided to executive officers of the Company. The Company
shall provide comprehensive health insurance for you and your dependents.
Should your employment be terminated for any reason, the Company will use its
best efforts to allow you to assume these policies. The Company shall provide
term life insurance for you in an amount equal to three times your annual base
compensation.
5. Expenses.
--------
The Company shall reimburse you promptly for all reasonable and ordinary
business and out-of-pocket expenses incurred by you in connection with the
Company's business and in the scope of your employment hereunder, as approved by
the Company, including, without limitation, reasonable and necessary travel,
lodging, entertainment and meals incurred by you during the term of this
Agreement, provided the expenses are incurred in furtherance of the Company's
business and at the request of the Company. You agree to keep and maintain
records of the aforesaid expenses as may be requested by the Company and to
account to the Company for the expenses prior to reimbursement.
6. Acceleration of Stock Options.
-----------------------------
All stock options held by you as of February 28, 1997 will vest 50% upon
consummation of the Company's initial public offering (the "IPO") of the common
stock of the Company and in full one year after the closing of the IPO and
immediately prior to a change of control.
A-2
<PAGE>
EXHIBIT B
OUTSIDE EMPLOYMENTS AND DIRECTORSHIPS
OF
E. Craig Conrad
NONE
----
B-1
<PAGE>
EXHIBIT C
__________________________________
CONFIDENTIAL INFORMATION AGREEMENT
__________________________________
As of February 28, 1997
To: Nexar Technologies, Inc.
The undersigned, in consideration of and as a condition of my employment or
continued employment by you and/or by companies which you own, control, or are
affiliated with or their successors in business (collectively, the "Company"),
hereby agrees as follows:
1. Confidentiality.
---------------
I agree to keep confidential, except as the Company may otherwise consent
in writing, and, except for the Company benefit, not to disclose or make any use
of at any time either during or subsequent to my employment, any Inventions (as
hereinafter defined), trade secrets and confidential information, knowledge,
data or other information of the Company, its parent corporation Palomar Medical
Technologies, Inc. ("Palomar") or any company owned or controlled by Palomar
relating to products, processes, know-how, techniques, methods, designs,
formulas, test data, customer lists, business plans, marketing plans and
strategies, pricing strategies, or other subject matter pertaining to any
business of the Company or any of its affiliates, which I may produce, obtain,
or otherwise acquire during the course of my employment, except as herein
provided. I further agree not to deliver, reproduce or in any way allow any
such trade secrets and confidential information, knowledge, data or other
information, or any documentation relating thereto, to be delivered to or used
by any third parties without specific direction or consent of a duly authorized
representative of the Company.
2. Conflicting Employment; Return of Confidential Material.
-------------------------------------------------------
I agree that during my employment with the Company I will not engage in any
other employment, occupation, consulting or other activity relating to the
business in which the Company is now or may hereafter become engaged, or which
would otherwise conflict with my obligations to the Company. In the event my
employment with the Company terminates for any reason whatsoever, I agree to
promptly surrender and deliver to the Company all records, materials, equipment,
drawings, computer disks, documents and data of which I
C-1
<PAGE>
may obtain or produce during the course of my employment, and I will not take
with me any description containing or pertaining to any confidential
information, knowledge or data of the Company which I may produce or obtain
during the course of my employment.
3. Assignment of Inventions.
------------------------
3.1 I hereby acknowledge and agree that the Company is the owner of all
Inventions. In order to protect the Company's rights to such Inventions, by
executing this Agreement I hereby irrevocably assign to the Company all my
right, title and interest in and to all Inventions to the Company.
3.2 For purposes of this Agreement, "Inventions" shall mean all
discoveries, processes, designs, methods, technologies, devices, or improvements
in any of the foregoing or other ideas, whether or not patentable or
copyrightable and whether or not reduced to practice, made or conceived by me
(whether solely or jointly with others) during the period of my employment with
the Company, or within one year thereafter, which relate in any manner to the
actual or demonstrably anticipated business, work, or research and development
of the Company, or result from or are suggested by any task assigned to me or
any work performed by me or on behalf of the Company.
3.3 Any discovery, process, design, method, technique, technology, device,
or improvement in any of the foregoing or other ideas, whether or not patentable
or copyrightable and whether or not reduced to practice, made or conceived by me
(whether solely or jointly with others) which I develop entirely on my own time
not using any of the Company's equipment, supplies, facilities, or trade secret
information ("Personal Invention") is excluded from this Agreement, provided
such Personal Invention (i) does not relate to the actual or demonstrably
anticipated business, products or research and development of the Company, and
(ii) does not result, directly or indirectly, from any work performed by me or
on behalf of the Company.
4. Disclosure of Inventions.
------------------------
I agree that in connection with any Invention, I will promptly disclose
such Invention to the Board of Directors and the Executive Committee of the
Company in order to permit the Company to enforce its property rights to such
Invention in accordance with this Agreement. My disclosure shall be received in
confidence by the Company.
5. Patents and Copyrights: Execution of Documents.
-----------------------------------------------
5.1 Upon request, I agree to assist the Company or its nominee (at its
expense) during and at any time subsequent to my employment in every reasonable
way to obtain for its own benefit patents and copyrights for Inventions in any
and all countries. Such patent and copyrights shall be and remain the sole and
exclusive property of the Company or its
C-2
<PAGE>
nominee. I agree to perform such lawful acts as the Company deems to be
necessary to allow it to exercise all right, title and interest in and to such
patents and copyrights.
5.2 In connection with this Agreement, I agree to execute, acknowledge and
deliver to the Company or its nominee upon request and at its expense all
documents, including assignments of title, patent or copyright applications,
assignments of such applications, assignments of patents or copyrights upon
issuance, as the Company may determine necessary or desirable to protect the
Company's or its nominee's interest in Inventions, and/or to use in obtaining
patents or copyrights in any and all countries and to vest title thereto in the
Company or its nominee to any of the foregoing.
6. Maintenance of Records.
----------------------
It is understood that all Personal Inventions if any, whether patented or
unpatented, which I made prior to my employment by the Company, are excluded
from this Agreement. To preclude any possible uncertainty, I have set forth on
a separate schedule attached hereto a complete list of all of my prior Personal
Inventions, including numbers of all patents and patent applications and a brief
description of all unpatented Personal Inventions which are not the property of
a previous employer. I represent and covenant that the list is complete and
that, if no items are on the list, I have no such prior Personal Inventions. I
agree to notify the Company in writing before I make any disclosure or perform
any work on behalf of the Company which appears to threaten or conflict with
proprietary rights I claim in any Personal Invention. In the event of my
failure to give such notice, agree that I will make no claim against the Company
with respect to any such Personal Invention.
7. Other Obligations.
-----------------
I acknowledge that the Company from time to time may have agreements with
other persons, companies, entities, the U.S. Government or agencies thereof,
which impose obligations or restrictions on the Company regarding Inventions
made during the course of work thereunder or regarding the confidential nature
of such work. I agree to be bound by all such obligations and restrictions and
to take all action necessary to discharge the Company's obligations.
8. Trade Secrets of Others.
-----------------------
I represent that my performance of all the terms of this Agreement and as
an employee of the Company does not and will not breach any agreement to keep
confidential proprietary information, knowledge or data acquired by me in
confidence or in trust prior to my employment with the Company, and I will not
disclose to the Company, or induce the Company to use, any confidential or
proprietary information or material belonging to any previous employer or
others. I agree not to enter into any agreement either written or oral in
conflict herewith.
C-3
<PAGE>
9. Modification.
------------
I agree that any subsequent change or changes in my employment duties,
salary or compensation or, if applicable, in any Employment Agreement between
the Company and me, shall not affect the validity or scope of this Agreement.
10. Arbitration.
-----------
Any dispute concerning this Agreement including, but not limited to, its
existence, validity, interpretation, performance or non-performance, arising
before or after termination or expiration of this Agreement, shall be settled by
a single arbitrator in Boston, Massachusetts, in accordance with the expedited
procedures of the commercial rules then in effect of the American Arbitration
Association; provided, however, that the arbitrator shall have sole discretion
with regard to the admissibility of evidence. The parties shall have the right
to be represented by counsel in any arbitration. Judgment upon any award may be
entered in the highest court, state or federal, having jurisdiction. The cost
of such arbitration (but not expenses of counsel, which shall be borne by each
party) shall be borne equally between the parties thereto unless otherwise
determined by such arbitration panel.
11. Binding Effect.
--------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective legal representatives and successors.
12. Interpretation.
--------------
IT IS THE INTENT OF THE PARTIES THAT in case any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. MOREOVER, IT IS THE INTENT OF THE
PARTIES THAT if any provision of this Agreement is or becomes or is deemed
invalid, illegal or unenforceable or in case any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity or subject, such provision shall be
construed by amending, limiting and/or reducing it to conform to applicable laws
so as to be valid and enforceable or, if it cannot be so amended without
materially altering the intention of the parties, it shall be stricken and the
remainder of this Agreement shall remain in full force and effect.
13. Waivers.
-------
No waiver of any right under this Agreement shall be deemed effective
unless contained in a writing signed by the party charged with such waiver, and
no waiver of any
C-4
<PAGE>
right arising from any breach or failure to perform shall be deemed to be a
waiver of any future such right or of any other right arising under this
Agreement.
14. Entire Agreement; Modification.
------------------------------
This Agreement constitutes the entire agreement between the parties and
supersedes any prior oral or written communications, representations,
understandings or agreements concerning the subject matter hereof with the
Company or any officer or representative thereof. This Agreement may be
amended, modified, or certain provisions waived only by a written instrument
signed by the parties hereto, upon authorization of the Company's Board of
Directors.
15. Headings.
--------
The headings of the Sections contained in this Agreement are inserted for
convenience and reference only and in no way define, limit, extend or describe
the scope of this Agreement, the intent of any provisions hereof, and shall not
be deemed to constitute a part hereof nor to affect the meaning of this
Agreement in any way.
16. Counterparts.
------------
This Agreement may be signed in two counterparts, each of which shall be
deemed an original and both of which shall together constitute one agreement.
17. Governing Law.
-------------
This Agreement shall be governed and construed in accordance with the laws
of the Commonwealth of Massachusetts.
18. Notices.
-------
All notices, requests, demands and communications which are or may be
required to be given hereunder shall be deemed given if and when sent by
registered or certified mail, return receipt requested, postage prepaid, to the
following addresses.
If to the Company: Nexar Technologies, Inc.
182 Turnpike Road
Westborough, MA 01581
Attention: Chief Executive Officer
C-5
<PAGE>
If to Employee: _________________________
_________________________
_________________________
Executed as of the date first above written.
EMPLOYEE
E. Craig Conrad
(Signature of Employee)
Print Name: E. Craig Conrad
Accepted and Agreed:
NEXAR TECHNOLOGIES, INC.
By: Albert J. Agbay
Chief Executive Officer, President
and Chairman of the Board
C-6
<PAGE>
Exhibit 10.2
AMENDMENT TO
KEY EMPLOYEE AGREEMENT
AND
CONFIDENTIAL INFORMATION AGREEMENT
THIS AGREEMENT, dated and effective as of February 28, 1997, among Gerald
Y. Hattori ("Employee") and Nexar Technologies, Inc., a Delaware corporation
(the "Company"), amends (i) the Key Employee Agreement entered into on or about
September 30, 1996 (the "Original Employment Agreement") between the Company and
Employee and (ii) the Confidential Information Agreement entered into on or
about September 30, 1996 (the "Original Confidentiality Agreement") between the
Company and Employee.
The parties hereto agree as follows:
1. The text of Section 1 of Exhibit A (entitled "Term") to the Original
Employment Agreement is amended to read in its entirety as follows:
"The term of the Agreement to which this Exhibit A is annexed and
incorporated shall be for three (3) years, commencing March 1, 1997, unless
terminated prior thereto in accordance with Section 2.2 or 2.3 of the
Agreement."
2. The text of subparagraphs (c) and (d) (subparagraphs (a) and (b)
remaining in full force and effect) of Section 2 of Exhibit A (entitled
"Compensation") to the Original Employment Agreement are each amended to read in
their entirety as follows:
"(c) Severance Package Pursuant to Section 2.2(d) of the Agreement:
twelve (12) months Base Salary.
(d) Car allowance of $600 per month."
3. The following new Section 7 of Exhibit A (entitled "Vesting of Stock
Options Upon IPO") is added to the Original Employment Agreement:
"7. Vesting of Stock Options Upon IPO. All stock options held by you as
---------------------------------
of February 28, 1997, will vest 50% upon consummation of an underwritten
registered initial public offering (an "IPO") of the common stock of the
Company and in full one year after the closing of such IPO and immediately
prior to a change of control."
4. Section 3.2 of the Original Confidentiality Agreement is hereby
amended to read in its entirety as follows:
"For purposes of this Agreement, "Inventions" shall mean all discoveries,
processes, designs, methods, works, technologies, devices, or improvements
in any of the foregoing or other ideas, whether or not patentable or
copyrightable, or reduced to
<PAGE>
practice, made, conceived, authored or developed by me (whether solely or
jointly with others) during the period of my employment with the Company,
or within one year thereafter, which relate in any manner to the actual or
demonstrably anticipated business, products, or research and development of
the Company, or result from or are suggested by any task assigned to me or
any work performed by me or on behalf of the Company."
5. Section 3.3 of the Original Confidentiality Agreement is hereby
amended to read in its entirety as follows:
"Any discovery, process, design, method, technique, work, technology,
device, or improvement in any of the foregoing or other ideas, whether or
not patentable or copyrightable and whether or not reduced to practice,
made or conceived by me (whether solely or jointly with others) which I
develop entirely on my own time not using any of the Company's equipment,
supplies, facilities, or trade secret information ("Personal Invention") is
excluded from this Agreement, provided such Personal Invention (i) does not
relate to the actual or demonstrably anticipated business, products, or
research and development of the Company, and (ii) does not result, directly
or indirectly, from any work performed by me or on behalf of the Company."
6. The respective addresses for notices under the Original Employment
Agreement and the Original Confidentiality Agreement shall be as follows:
If to Nexar: Nexar Technologies, Inc.
182 Turnpike Road
Westborough, MA 01581
Attention: Albert J. Agbay, Chairman
If to Employee: Mr. Gerald Y. Hattori
13 Judy Drive
Londonderry, New Hampshire 03053
7. Except to the extent modified hereby, all terms of the Original
Employment Agreement and the Original Confidentiality Agreement shall be
unaffected hereby and shall continue in full force and effect.
* * * * *
<PAGE>
EXECUTED as of the date first above written.
Gerald Y. Hattori
NEXAR TECHNOLOGIES, INC.
By: Albert J. Agbay, Chairman,
Chief Executive Officer and President
<PAGE>
Exhibit 11.1
Statement Re: Per Share Earnings (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------------------- -----------------------------------------
Sept 30, Sept 30, Sept 30, Sept 30,
1996 1997 1996 1997
--------------------- --------------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Net income (loss) $ 34,283 $(5,453,663) $(2,981,021) $(10,184,886)
========== =========== =========== ============
Weighted average common
shares outstanding 4,800,000 8,437,029 4,800,000 7,121,726
Stock issued within twelve
months of initial public
offering 2,921,838 -- 2,921,838 1,089,587
Conversion of amounts due
to related parties 700,000 -- 700,000 --
---------- ----------- ----------- ------------
Weighted average number of
common and common equivalent
shares outstanding 8,421,838 8,437,029 8,421,838 8,211,313
========== =========== =========== ============
Net loss per share $ 0.00 $ (0.65) $ (0.35) $ (1.24)
========== =========== =========== ============
</TABLE>
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83,
stock and stock options issued at prices below the initial public offering price
during the twelve month period immediately preceding the initial filing date of
the Company's Registration Statement of its initial public offering have been
included as outstanding for all periods presented prior to the initial public
offering. The dilutive effect of the common stock equivalents are in accordance
with the treasury stock method.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,727
<SECURITIES> 0
<RECEIVABLES> 12,439
<ALLOWANCES> (1,000)
<INVENTORY> 6,698
<CURRENT-ASSETS> 22,200
<PP&E> 555
<DEPRECIATION> (444)
<TOTAL-ASSETS> 24,062
<CURRENT-LIABILITIES> 9,762
<BONDS> 0
0
1
<COMMON> 93
<OTHER-SE> 14,206
<TOTAL-LIABILITY-AND-EQUITY> 24,062
<SALES> 22,399
<TOTAL-REVENUES> 22,399
<CGS> 22,769
<TOTAL-COSTS> 22,769
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151
<INCOME-PRETAX> (10,185)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,185)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,185)
<EPS-PRIMARY> (1.24)
<EPS-DILUTED> (1.24)
</TABLE>
