AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON DECEMBER 24, 1997
REGISTRATION NO. 333-38059
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
The PRIMA Group International, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
3541
(Standard Industrial Classification Code Number)
56-2042959
(IRS Employer Identification No.)
447 S. Sharon Amity Road
Suite 250
Charlotte, NC 28211
(704) 366-0393
(Address, telephone no. of principal executive offices)
James R. Currier, Sr.
447 S. Sharon Amity Road
Suite 250
Charlotte, NC 28211
(704) 366-0393
(Name, address and telephone no. of agent for service)
COPIES TO:
C. Richard Rayburn, Jr., Esq. Kevin A. Cudney, Esq.
W. Scott Cooper, Esq. Jonathan P. Freedman, Esq
Rayburn, Moon & Smith, P.A. Dorsey & Whitney LLP
227 W. Trade St., Suite 1200 4400 Republic Plaza Blvd.
Charlotte, NC 28202 370 Seventeenth Street
(704) 334-0891 Denver, CO 80202-5644
(303) 629-3400
<PAGE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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 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 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. / /
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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each
Class of Proposed Proposed Maximum Amount of
Securities to Amount to be Maximum Offering Aggregate Offering Registration
Be Registered registered (1) price per share (2) Price Fee Paid (3)
- ------------- ------------- ---------------------- ------------------ ---------
<S> <C> <C> <C> <C>
Common Stock, 2,070,000 $13.00 $26,910,000 $7,938.45
par value $0.01
per share
</TABLE>
- ---------------
(1) Includes 270,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457.
(3) The Registrant paid $7,318.19 upon initial filing of the Registration
Statement. The balance of the fee ($620.26) is being paid with this filing.
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 THIS 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 THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
PROSPECTUS (Subject to Completion, dated December
24, 1997) THE PRIMA GROUP
INTERNATIONAL, INC.
1,800,000 Shares
COMMON STOCK
All of the 1,800,000 shares (the "Shares") of Common Stock, par value $0.01 per
share (the "Common Stock"), offered hereby are being sold by The PRIMA Group
International, Inc., a Delaware corporation (the "Company"), whose sole assets
consist of 99.98% ownership of Prima Industrie S.p.A. and 60% indirect ownership
of Prima Electronics S.p.A., each a Societa(accent) per Azioni organized under
the laws of the Republic of Italy. The Company and Miojusti Investments BV
(hereinafter referred to as "Miojusti," or the "Selling Shareholder") have
granted to the Underwriters an option, exercisable within 30 days of the date
hereof, to purchase all, but not less than all, of an additional 150,000 Shares
from the Company and 120,000 Shares from the Selling Shareholder, upon the same
terms and conditions as set forth above, solely to cover over-allotments, if any
(the "Over-Allotment Option"). See "Certain Beneficial Owners." In the event
that the Over-Allotment Option is exercised and the Selling Shareholder does not
deliver the Shares to be sold by it pursuant to such Option, or otherwise fails
to satisfy any condition to closing, the Company will sell additional Shares
equal in amount to the number of Shares that were to be sold by the Selling
Shareholder pursuant to the Over-Allotment Option. The Selling Shareholder will
only sell Shares in the Offering if the Over-Allotment Option is exercised. See
"Underwriting."
PRIOR TO THIS OFFERING (this "OFFERING"), THERE HAS BEEN NO PUBLIC MARKET FOR
THE COMMON STOCK OF THE COMPANY, AND THERE CAN BE NO ASSURANCE THAT SUCH A
MARKET WILL DEVELOP AFTER COMPLETION OF THIS OFFERING OR THAT, IF DEVELOPED, IT
WILL BE SUSTAINED. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING
PRICE WILL BE BETWEEN $9 AND $13 PER SHARE (the "OFFERING PRICE"). SEE
"UNDERWRITING" FOR A DISCUSSION OF THE FACTORS TO BE CONSIDERED IN DETERMINING
THE INITIAL PUBLIC OFFERING PRICE. THE COMPANY HAS APPLIED FOR QUOTATION OF THE
COMMON STOCK ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "TPGI."
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION.
SEE "RISK FACTORS" COMMENCING ON PAGE 7 HEREOF, AND DILUTION.
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.
<PAGE>
Underwriting Discounts Proceeds to
Price to Public and Commissions (1) Company (2)(3)
--------------- ---------------------- --------------
Per Share $
Total $
(1) The Company has agreed to sell to the Underwriters a warrant to purchase
180,000 shares of Common Stock, exercisable at a price per share equal to 150%
of the Offering Price. In addition, see "Underwriting" for information
concerning indemnification arrangements with the Underwriters and other
compensation payable to the Underwriters.
(2) Before deducting expenses payable by the Company estimated at
$______________ and a non-accountable expense allowance payable to the
Underwriters in an amount equal to three percent (3%) of the gross proceeds of
this Offering (the "Non-Accountable Expense Allowance"), or approximately
$____________ ($__________ if the Underwriters' Over-Allotment Option is
exercised).
(3) If the Underwriters exercise the Over-Allotment Option, the total price to
public, underwriting discounts and commissions, proceeds to Company and proceeds
to the Selling Shareholder will be $ , $, $ and $ , respectively. See
"Underwriting."
The Shares are offered, subject to prior sale, when, as and if delivered to and
accepted by the Underwriters named herein and subject to the approval of certain
legal matters by counsel for the Underwriters, and certain other 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
will be made on or about _____, 1998, at the offices of Chatfield Dean & Co.,
Greenwood Village, Colorado, against payment therefor in immediately available
funds.
CHATFIELD DEAN & CO. ---------------- , 1998
<PAGE>
[PICTURE OF ONE OF THE COMPANY'S 3-D PRODUCTS AT A CUSTOMER SITE.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. PLEASE
NOTE THAT, PURSUANT TO REGULATION M, PROMULGATED UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, SHORT SALES PRIOR TO THE EFFECTIVE DATE OF THIS
OFFERING ARE PROHIBITED.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Except as otherwise indicated, all information contained in
this Prospectus: (i) reflects the issuance of (A) 2,700,000 shares of Common
Stock to substantially all of the shareholders of Prima Industrie S.p.A. ("Prima
Industrie") in exchange for their stock interests in Prima Industrie and (B)
300,000 shares of Common Stock to James R. Currier, Sr. and Giovanni Ciamaroni
for cash; and (ii) assumes no exercise of the Over-Allotment Option.
THE COMPANY
The PRIMA Group International, Inc. (the "Company") is one of the leading
international providers of software-controlled, robotic, precision laser cutting
and welding systems (the "Products"). The Company designs, manufactures and
sells two-dimensional ("2-D") Products that cut and weld shapes on a flat
surface, and three-dimensional ("3-D") Products that trim, punch, slot and weld
shaped or profiled materials. The Company's Products are used in automotive
prototype development and the manufacture of consumer durable goods. The
Company's customers include major European and North American automotive
manufacturers such as BMW, Fiat, Ford, Chrysler, Mercedes-Benz, Nissan, Peugeot,
Renault and Volvo. They are also used by Tier One suppliers (suppliers that
provide goods and services directly to automotive manufacturers) for the
manufacture of automotive components that are incorporated into the vehicles
sold by these manufacturers. Prima Industrie and Prima Electronics are ISO 9001
certified, which means that they have each obtained certification under an
international protocol that their respective production processes incorporate
quality practices, disciplines and checks and balances on a fully documented
basis. As part of the certification process, each company has been examined by a
member of the ISO to assess compliance with the international protocol. The
certification provides assurances to customers that the required goods or
services will fully meet customer expectations. See discussion under "Business
- -- Quality."
The Company believes that it has a leading position in the market for the
manufacture and sale of 3-D precision laser cutting and welding systems. The
Company's advantages are based on proprietary
<PAGE>
processes and technologies for automated robotic systems that integrate
traditional machine tool equipment with lasers, laser optics and computer
technology. These robotic systems utilize electronic process control systems
that interface with computer-aided engineering/computer-aided
design/computer-aided manufacturing ("CAE/CAD/CAM") software to convert
engineering designs into instructions for machinery operations.
Industry sources project that, by 2015, an additional 160 automotive assembly
plants will be constructed outside Europe, the United States, and Japan,
representing an increase of 80% over the current 200 assembly facilities
worldwide. These new plants and their Tier One suppliers will be equipped with
advanced factory automation systems, potentially including those provided by the
Company, in place of traditional manufacturing and assembly technologies. The
Company expects vigorous demand for its Products in developing markets, as well
as accelerating demand within Europe and the United States, as older automotive
assembly operations are retrofitted, relocated or replaced.
The Company, through Prima Electronics S.p.A. ("Prima Electronics"), its
majority-owned subsidiary, designs and manufactures state-of-the-art software
and hardware-based industrial process controls for the Company's equipment and
for other industrial equipment manufacturers. Industrial process controls
function as the "brains" of the machinery, directing all aspects of its
operation. Prima Electronics' primary outside customer is Atlas Copco Airpower
NV ("Atlas Copco"), one of the world's leading suppliers of power generation and
pneumatic equipment. In 1996, sales to Atlas Copco represented approximately 66%
of the total revenues of Prima Electronics. All such sales were made pursuant to
a supply contract between Prima Electronics and Atlas Copco.
See "History of the Company -- Prima Electronics."
The Company's goal is to exploit its technological superiority to become the
leading international provider of fully integrated, robotic systems for the
precision cutting and finishing stages of the manufacturing process. The Company
also intends to become a recognized supplier of industrial process controls for
the machine tool industry. The specific elements of the Company's strategy to
achieve these objectives are as follows:
(bullet) Enhance the Company's Products for use in higher volume
production environments;
<PAGE>
(bullet) Maintain and expand its current market share in 2-D and 3-D
Products through aggressive global marketing;
(bullet) Market Prima Electronics' industrial process controls through
worldwide distribution channels;
(bullet) Develop, as a discrete profit center, comprehensive warranty
and service, training and support, preventive maintenance
programs and upgrades for the Company's Products;
(bullet) Expand the licensing of its technology for the manufacture and
sale of the Company's 2-D Products outside Europe; and
(bullet) Achieve vertical and horizontal integration through strategic
acquisitions and joint ventures.
THIS OFFERING
Common Stock outstanding
prior to this Offering 3,000,000 shares
Common Stock offered 1,800,000 shares
Common Stock to be
outstanding after this Offering 4,800,000 shares(1)
Use of Offering proceeds Marketing and sales promotion,
research and development and general
corporate purposes, including working
capital
Proposed Nasdaq National
Market symbol TPGI
- ---------------
(1) Assumes no exercise of the Over-Allotment Option. See "Underwriting."
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA(1)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
-------- -------- ---------- ------- ------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Total revenues $42,315 $38,560 $28,396 $33,111 $45,155
Operating income (loss) 1,411 75 (3,798) (1,304) (2,439)
Net income (loss) 1,335 (2,400) (5,270) (765) (1,064)
Earnings (loss) per share .44 (1.19) (2.34) (.33) (.46)
Pro forma weighted
average common and
common equivalent
shares outstanding 3,000 2,021 2,254 2,333 2,333
</TABLE>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
---- ----
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Total revenues $ 30,029 $ 26,967
Operating income (loss) 674 399
Gain on Sale of Sapri 1,059
Net income (loss) (358) 748
Pro forma earnings
(loss) per share (.12) .25
Pro forma weighted
average common and
common equivalent
shares outstanding 3,000 3,000
SEPTEMBER 30, 1997
ACTUAL AS ADJUSTED(2)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents $ 216 $17,339
Working capital 5,589 22,712
Total assets 31,819 48,942
Total liabilities 27,705 27,705
Stockholders' equity 4,114 21,237
- ---------------
<PAGE>
(1) This financial data reflects the financial condition and operations of Prima
Industrie prior to the acquisition by the Company of substantially all of the
issued and outstanding capital stock of Prima Industrie.
(2) Adjusted to reflect the sale by the Company of 1,800,000 Shares offered
hereby at an assumed Offering Price of $11.00 per share, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company, and the application of the estimated net proceeds therefrom as
described herein. See "Use of Proceeds" and "Capitalization."
RISK FACTORS
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK,
INCLUDING RISKS RELATING TO THE COMPANY, THE INDUSTRIES IN WHICH THE COMPANY
OPERATES AND THE SECURITIES MARKETS IN GENERAL. IN ADDITION TO OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED
CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE
SHARES OFFERED HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE DESCRIBED IN SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT
MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
IN THE FOLLOWING RISK FACTORS.
DEPENDENCE ON AUTOMOTIVE INDUSTRY. A significant portion of the Company's
revenues are derived from the automotive industry. The automotive industry is
cyclical and has experienced significant periodic downturns, which often have
had an adverse effect on the demand for capital goods equipment used in the
production of automobiles. The Company believes that downturns in the automotive
industry will continue to occur in the future and may result in decreased demand
for the Company's Products. At the same time, however, the automotive industry
tends to exempt from capital expenditure cutbacks capital goods that increase
productivity. Furthermore, since the Company sells its Products in Europe, North
America and Asia, it is unlikely that all of these markets will experience the
effects of an economic downturn simultaneously, thereby moderating the Company's
exposure to adverse automotive business cycles. The Company has significant
sales of its 2-D Products
<PAGE>
to customers in other business segments outside of the automotive industry that
will further moderate the effects of the adverse automotive cycles; however, the
benefit from non-automotive business may lessen, as the Company intends to focus
product and technology development activities on the automotive industry for a
substantial portion of its future growth. In addition, the Company believes that
its ability to reduce expenses in a future downturn will be constrained by the
need for continual investment in research and development and the need to
maintain extensive ongoing customer service and support capability. Accordingly,
any downturn in the automotive industry could have a material adverse effect on
the Company's business, financial condition and results of operations.
RISKS OF DOING BUSINESS IN ITALY; RISKS OF UNENFORCEABILITY OF CIVIL LIABILITIES
AGAINST FOREIGN PERSONS. While the Company's corporate headquarters are in the
United States, the majority of its operations are carried on in or near Turin,
Italy, and a substantial number of the Company's officers and directors reside
in Italy and other countries in Europe. Accordingly, the operations of the
Company will be subject to political, social and economic conditions in Italy.
Italy has two different economic regions -- the North, starting at Rome and
extending to the northern borders with France, Switzerland and Austria, and the
South, extending from Rome southward, and including Sicily and Sardinia.
Northern Italy is one of Europe's richest regions, while Southern Italy is one
of its poorest. The Italian government continues to confront the problem of
providing aid and social welfare programs to the residents of the South without
increasing the burden on the comparatively wealthy residents of the North. A new
factor in this decades-old problem is the budget deficit and national debt
requirements that European states must satisfy to be eligible to join the
European Monetary Union (the "EMU") which has, as one of its primary objectives,
the establishment of a single European currency by 1999. Although a dispute
arose over the 1998 proposed budget that included cuts in pension and healthcare
programs, resulting in the tendering of a resignation by Prime Minister Romano
Prodi and his ruling coalition, the budget was eventually passed and the ruling
coalition has remained in power. The impetus for the budget cuts was the
requirements for entry into the EMU.
<PAGE>
Another factor in the North/South regional controversy in Italy is the
phasing-out of special tax breaks for manufacturers located in the South, due to
EMU rules on state aid. The institution by the Italian government of tax, labor
and social security programs that cover Northern and the Southern Italy for the
most part equally has resulted in higher taxes and an unpredictable regulatory
environment.
A substantial number of the directors and executive officers of Prima Industrie
and Prima Electronics, as well as those of the Company, reside outside the
United States (principally in the Republic of Italy). All or a substantial
portion of the assets of the Company and of these persons are located outside
the United States. As a result, it may not be possible for investors to effect
service of process within the United States upon such persons or to enforce
against them judgments obtained in United States courts predicated upon the
civil liability provisions of the Federal securities laws of the United States.
The Company has been advised by its Italian counsel, Chiomenti Studio Legale,
that (a) enforceability in Italy, in actions for enforcement of final judgments
of United States courts, of civil liabilities predicated upon the Federal
securities laws of the United States is subject, among other things, to the
Italian courts' determination that enforcement would not violate Italian public
policy and (b) in original actions in Italy to enforce such liabilities, an
Italian court would examine the merits of the claims in accordance with Italian
procedure and applicable conflict of laws rules and would not necessarily apply
United States substantive laws.
Prima Industrie and Prima Electronics are each an Italian Societa per
Azioni (S.p.A.). The S.p.A. is the form of organization closest to a U.S.
corporation; however, under Italian law, if a S.p.A. has a single shareholder,
then the single shareholder will, in the case of the insolvency of the S.p.A.,
be liable for all of the debts of the S.p.A. incurred during the time when it
was the single shareholder. At present, there are at least two independent
shareholders of Prima Industrie and Prima Electronics. The Company has been
advised by its Italian counsel, Chiomenti Studio Legale, that, as a result of
this structure, the insolvency of either entity would not create additional
liability for its shareholders. However, there is some uncertainty under Italian
law as to this issue, and there can be no assurance that the current structure
will allow the Company to avoid liability for the debts of Prima Industrie in
the event that Prima Industrie becomes insolvent. Moreover, if the Company were
to acquire all of the share capital of Prima Industrie, it would be possible
that the assets of the Company would be subject to the liability of Prima
Industrie arising after the date of this Prospectus in the event of the
insolvency of Prima Industrie. See "History of the Company."
DEPENDENCE UPON THE CONTINUATION OF CHANGING TRENDS IN THE MANUFACTURING
INDUSTRY. Historically, manufacturers have utilized tool and die technology both
to stamp the shape of a component and to cut and finish its details. The use of
precision laser cutting and welding systems as a replacement for tool and die
technology in the precision cutting and finishing stages of manufacturing has
been limited to prototype development and relatively low volume production runs
because these systems do not process components as quickly as do tool and die
systems. The Company believes that certain trends in the manufacturing industry
are causing an increasing emphasis on lower volume production runs and a
decreasing emphasis on processing speed for precision cutting and finishing. A
key component of the Company's strategy is to take advantage of the continued
and expanded use of precision laser cutting and welding systems as a result of
these trends. There can be no assurance, however, that these trends will
continue or, indeed, that they will not reverse course. The deceleration or
reversal of any of these trends could have a material adverse effect on the
Company's growth strategy, and, therefore, its business, financial condition and
results of operations. See "Business -- Strategy" and "-- the Automotive
Fabrication Process."
HISTORIC LACK OF PROFITABILITY. Prior to 1996, Prima Industrie experienced
several years of net operating losses. These losses were financed by capital
infusions and loans. A substantial part of the Company's profits in 1996 are
attributable to gains resulting from the sale of Sapri S.p.A., a subsidiary of
Prima Industrie, rather than from ongoing operations. While Prima Industrie has
changed its business plan to focus on precision laser cutting and welding
systems, there can be no assurance that this business plan will produce
profitable results. See "History of the Company," "Management's Discussion and
Analysis of Financial Condition and Results of Operation" and "Business --
Strategy."
RISKS ASSOCIATED WITH LICENSING. The Company's strategy for expansion of its
market for 2-D Products is to license its technology to other entities for the
manufacture and distribution of those Products in geographic regions in which
the Company has not achieved market penetration. See "Business -- Strategy."
Since a license will grant to the licensee exclusive rights in a specified
territory outside of Europe, the success of the Company's strategy will depend
on the ability of the Company's management to select licensees that will
aggressively promote the products made under such licenses. While the Company
expects to enter into license agreements that give the Company certain
termination rights if the licensee is not performing as required, the ability of
the Company to enforce those rights will depend upon the laws and the judicial
system of the territory in which the licensee is resident.
The Company has entered into licenses with Strippit, Inc. to market the
Company's 2-D Products in North America and with Beijing Machinery and
Electricity Institute to market certain of the Company's 2-D Products in China
(the "China License"). See "Business -- Licensing." The China License is
awaiting approval by the Chinese government. There can be no assurance that the
requisite approval will be forthcoming for consummation of the China License and
the payments required thereunder. Delays in the approval of the China License,
and the payment of royalties required to be made thereunder, could adversely
affect the Company's financial performance in the last quarter of 1997.
COMPETITION. To remain competitive, the Company believes that it will be
required to manufacture and deliver products to customers on a timely basis with
high quality and that it will also be required to maintain a high level of
capital commitment to research and development and to sales and marketing. There
can be no assurance that the Company will have sufficient resources to continue
to make the investments necessary to maintain its competitive position. In
addition, there can be no assurance that the Company's larger competitors in the
2-D market place, which have substantially greater financial resources than the
Company, will not attempt to enter the 3-D marketplace. The chances of
competitors with a larger capital base entering the 3-D market will increase if
the 3-D market expands at the rate that the Company expects. See "Business --
Competition."
CURRENCY RISKS. The Company's profitability has been affected by the changes in
the relative values of the Italian Lira ("Lit"), the German Deutsche Mark ("DM")
and the U.S. Dollar ("Dollar"). The Company purchases various components of its
Products, including all of its lasers, in DM denominated transactions. It also
has had significant delays in collecting its accounts receivable. These factors
exacerbate the effects that result from the traditional volatility of the Lit.
The planned conversion under the EMU to a single currency will affect the
Company's profitability as the conversion occurs. As the Company attempts to
increase sales in North and South America and Asia, currency risks will continue
to affect its profitability, although management expects that these non-European
transactions will be denominated in Dollars. For as long as the Lit remains
volatile against the Dollar and other important trading currencies, the Company
will attempt to minimize exposure to exchange rate fluctuations by purchasing
goods and services in currencies with more favorable exchange rates. Management
will continue to monitor the Company's exposure to currency fluctuations and use
forward currency purchases to minimize the effect of these fluctuations;
however, exchange rate fluctuations may have a material adverse effect on the
Company's business, financial condition and results of operations. In the
future, the Company may be required to sell its products in other currencies,
making the management of currency fluctuations more difficult and exposing the
Company to greater risks in this regard. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
RISK OF EXPANSION OF FOREIGN OPERATIONS. The Company's growth strategy involves
an aggressive expansion of its business in Europe, the Americas and the Pacific
Rim. There can be no assurance that the Company will be able to manage this
expansion effectively or that the Company's investment in these activities will
enable it to compete successfully in these markets or to meet the service and
support needs of its customers. Additionally, a significant portion of the
Company's sales and operations could be subject to certain additional risks as a
result of continued expansion into foreign markets, including tariffs and other
barriers, difficulties in staffing and managing foreign subsidiary and branch
operations, currency exchange risks and exchange controls, potentially adverse
tax consequences and the possibility of difficulty in collecting its accounts
receivable. Further, while the Company is presently in full compliance with
export controls, these rules could change in the future and make it more
expensive, difficult or impossible for the Company to export its products to
various countries. There can be no assurance that any of these factors will not
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business."
DEPENDENCE ON KEY SUPPLIERS. Certain of the components and subassemblies
included in the Company's products are obtained from a limited group of
suppliers. In particular, there are few alternative sources for certain laser
and optical components used in the Company's Products. In addition, the Company
is increasingly outsourcing the manufacture of subassemblies. The Company has
agreed to sell certain machine tools and equipment to Macromeccanica S.p.A.
("Macromeccanica") and the Company will enter into a supply agreement with
Macromeccanica for certain subassemblies. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Overview." If the
Company is unable to obtain a sufficient quantity of components or
subassemblies, or if such items do not meet the Company's quality standards,
delays or reductions in product shipments could occur, which would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Manufacturing."
GOVERNMENTAL REGULATION. The Company's products are subject to numerous foreign
government standards and regulations that are regularly being amended. Although
the Company endeavors to meet foreign technical and regulatory standards, there
can be no assurance that the Company's products will continue to comply with
foreign government standards and regulations, or changes thereto, or that it
will be cost-effective for the Company to redesign its products to comply with
such standards and regulations. Although Prima Industrie and Prima Electronics
have each received an ISO 9001 certification, the inability of the Company to
design or redesign products to comply with foreign standards could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Manufacturing" and "-- Quality."
RAPID TECHNOLOGICAL CHANGE; ACCEPTANCE OF NEW PRODUCT INTRODUCTIONS. Precision
laser cutting and welding equipment and processes are subject to rapid
technological change. The Company believes that its future success will depend
in part upon its ability to continue to enhance its products and to develop and
manufacture new products with improved capabilities. In order to enhance and
improve its products and develop new products, among other things, the Company
must work closely with its customers to integrate its laser cutting and welding
equipment into its customer's production systems. There can be no assurance that
future technologies will not render the Company's Products obsolete or that the
Company will be able to develop and introduce new Products or enhancements to
its existing products and processes in a timely manner that satisfy customer
needs or achieve market acceptance. The failure to do so could materially
adversely affect the Company's business, financial condition and results of
operations. See "Business -- Research and Development."
RISKS ASSOCIATED WITH RAPID AND SUBSTANTIAL MANUFACTURING EXPANSION. To meet
current and anticipated demand for its Products, the Company must substantially
increase the rate by which it manufactures and tests its Products by the end of
1998. Additionally, the Company may underestimate the costs required to increase
its manufacturing capacity, which may materially adversely affect the Company's
business, financial condition and results of operations. In addition to
increasing manufacturing and assembly capacity at its facilities in Turin,
Italy, the Company plans to commence assembly operations in North America within
two years. However, there can be no assurance that the Company will be
successful and commence assembly operations on schedule. The failure of the
Company to commence assembly operations on schedule could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Manufacturing."
LIKELY FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. The Company's quarterly
operating results have fluctuated in the past and are likely to fluctuate
significantly in the future, depending upon a variety of factors. Such factors
may include: the demand for precision laser cutting and welding systems in
general and, in particular, for the Company's Products; the timing and size of
orders from the Company's base of customers; the ability of the Company to
manufacture, test and deliver its Products in a timely and cost-effective
manner; the timing of new product announcements and releases by the Company and
its competitors; the entry of new competitors into the market for precision
laser cutting and welding equipment; the ability of the Company to manage its
costs as it begins to supply its Products in larger volumes; and the Company's
ability to manage effectively its exposure to foreign currency exchange rate
fluctuations.
The Company derives substantial portions of its quarterly and annual revenues
from the sales of its Products, and these revenues are subject to historical
seasonality. The Company's fourth quarter is typically its strongest revenue
quarter. By contrast, in the first and third quarters of each fiscal year, the
Company historically has experienced lower revenues as a result of extended
European holidays during Christmas and New Year's and the traditional European
month-long summer holiday, typically taken in August. In addition, the timing of
the recognition of revenue from an order for one or a small number of systems
can have a significant impact on the Company's total revenues and operating
results for a particular period. In addition, the Company's operating results
for a particular period could be adversely affected by the cancellation,
re-scheduling or delay of orders for a small number of systems, or even one
system. The Company's expense levels are based, in large part, on the Company's
expectations as to future revenues and are, therefore, relatively fixed in the
short term. If revenues fall below expectations, net income will be
disproportionately and adversely affected. The impact of these and other factors
on the Company's revenues and operating results in any future period cannot be
forecast with any degree of certainty. See "Business -- Backlog." Due to the
foregoing factors, as well as other unanticipated factors, it is likely that in
some future quarter the Company's operating results will be below the
expectations of public market analysts or investors. In such event, the price of
the Common Stock will be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
NEED TO MANAGE GROWTH. The Company intends to expand its operations
substantially following the completion of this Offering. This expansion may
place a significant strain on the Company's management, financial and other
resources. Managing the growth of the Company's business, if such growth occurs,
will require the Company to continue to improve and expand its management,
operational and financial systems, procedures and controls, including accounting
and other internal management systems, and its quality control, delivery and
field service and customer support capabilities. There can be no assurance that
the Company will be able to successfully expand its operations, effect timely
deliveries of its Products or maintain the product quality and reliability
required by its customers. The Company has experienced, and may continue to
experience, delays in deliveries to customers as a result of its inability to
increase its manufacturing capacity fast enough to meet demand. Any failure to
manage the Company's growth, if such growth occurs, would materially adversely
affect the Company's business, financial condition and results of operations.
NEED TO EXPAND FIELD SERVICE AND SUPPORT ORGANIZATION. The Company believes that
the need to provide fast and responsive service to the automotive industry and
automotive equipment suppliers is critical to the Company's success. Therefore,
the Company believes it is essential to establish, through its own personnel or
through third-party personnel, a rapid response capability to service its
Products throughout the world. There can be no assurance that the Company will
be able to attract qualified personnel to establish these operations
successfully or that the costs of such operations will not be excessive. A
failure to implement this plan effectively could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business -- Strategy."
AVAILABILITY OF FUTURE FINANCING. The Company requires substantial working
capital to fund its business, particularly to finance inventories, accounts
receivable and capital expenditures. The Company believes that the net proceeds
of this Offering, together with anticipated cash provided by operations and
available lines of credit, will be adequate to meet its cash needs for at least
the next 12 months. The Company's future capital requirements will depend on
many factors, including the rate of the Company's manufacturing expansion, the
timing and extent of spending to support product development efforts and
expansion of sales and marketing and field service and support, the timing of
introductions of new products and enhancements to existing Products, and market
acceptance of the Company's Products. The Company expects that it may need to
raise additional equity or debt financing in the future. There can be no
assurance that additional equity or debt financing, if required, will be
available on acceptable terms or at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
UNCERTAINTY REGARDING PROTECTION OF PROPRIETARY TECHNOLOGY AND PATENTS. The
Company relies upon patent and other intellectual property protection, including
trademark, copyright and, more recently, trade secret protection. The Company
owns 11 United States, European and Japanese patents covering certain aspects of
technology associated with laser cutting and welding. These patents expire on
dates beginning in November, 2002 and ending in January, 2014. The Company has
chosen to maintain patent protection primarily in its core lines of business.
There can be no assurance that any issued patents will provide the Company with
competitive advantages or that such patents will not be challenged by third
parties, or that the patents of others will not have an adverse effect on the
Company's ability to do business. Additionally, because foreign patents may
afford less protection under foreign law than is available under United States
patent law, there can be no assurance that any foreign patents issued to the
Company will adequately protect the Company's proprietary information.
Furthermore, there can be no assurance that others will not independently
develop similar products, duplicate the Company's products or, if patents are
issued to the Company, design products that duplicate the uses of the Company's
Products without violating its patents.
Others may have filed, and in the future may file, patent applications that are
similar or identical to those of the Company. No assurance can be given that any
such patent application will not have priority over patent applications filed by
the Company. Determining priority for such inventions could result in
substantial cost to the Company and there can be no assurance as to the outcome
of any such proceeding.
Within the past few years, the Company also has begun to rely upon trade secret
protection, including employee and third party confidentiality agreements.
Despite these efforts, there can be no assurance that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets and
technology or that the Company can meaningfully protect its trade secrets.
DEPENDENCE ON KEY PERSONNEL. The Company is highly dependent on the services of
a number of key employees in various areas, including engineering, research and
development, sales and marketing and manufacturing. The Company has in the past
experienced difficulty in hiring personnel, including experts in laser
technology. The Company believes that, to a large extent, its future success
will depend upon the continued service of its engineering, research and
development, sales and marketing and manufacturing personnel and on its ability
to attract and retain highly skilled personnel in each of these areas as the
Company expands its operations. Prior to the effective date of this Offering,
the Company will purchase key-man life insurance policies, in the amount of
$1,000,000, each on the lives of James R. Currier, Sr., the Company's President
and Chief Executive Officer, and Gianfranco Carbonato, the Company's Executive
Vice President and Chief Operating Officer and the Managing Director and Chief
Executive Officer of Prima Industrie. The Company has entered into employment
agreements with certain of its key executives, but there is no assurance that
the Company will be able to retain other key employees. The failure of the
Company to hire and retain such personnel or recruit replacement personnel could
have a material adverse effect on the Company's business, financial condition
and results of operation. See "Business -- Employees," and "Management --
Employment Agreements."
RISK OF PRODUCT LIABILITY CLAIMS AND PRODUCT RECALLS. The Company faces a
significant risk of exposure to product liability claims in the event that the
use of its Products results in personal injury or death, and there can be no
assurance that the Company will not experience material product liability losses
in the future. The Company maintains insurance against product liability claims
in the amount of $1.0 million per occurrence and $1.5 million in the aggregate,
which it believes is sufficient in light of historical loss experience and
industry custom. There can be no assurance, however, that such coverage will
continue to be available on terms acceptable to the Company or that such
coverage will be adequate for liabilities actually incurred. In addition, in the
event that any of the Company's products prove to be defective, the Company may
be required to recall or redesign such products. A successful claim brought
against the Company in excess of available insurance coverage, or any claim or
product recall, especially one that results in significant adverse publicity
against the Company, could have a material adverse effect on the Company's
business, financial condition and results of operations.
YEAR 2000 AND EMU COMPLIANCE ISSUES. In 1998, the Company intends to replace the
information technology systems at Prima Industrie and Prima Electronics. The
Company has allocated $150,000 of the net proceeds of this Offering for
hardware, software, installation, and training expenditures for new information
technology systems. The Enterprise Resource Planning software programs that the
Company intends to purchase are designed to be Year 2000 and EMU compliant. The
failure by the Company to implement this software and to convert its existing
data for use with this software will adversely affect the Company's business,
financial condition and results of operations and may cause the reported
financial condition to not be indicative of future operating results or
financial condition.
RISKS OF HOLDING COMPANY STRUCTURE. The Company presently conducts all of its
operations through Prima Industrie and its subsidiaries, including Prima
Electronics. Accordingly, the primary internal source of the Company's cash is
dividends and other distributions from its subsidiaries, as well as
inter-company advances. The ability of Prima Industrie and its subsidiaries to
make distributions to the Company is subject to their having sufficient funds
legally available for payment thereof which are not needed to fund operations,
obligations or other business plans. The laws of the Republic of Italy provide
generally that dividends may be declared out of yearly profits, subject to
maintenance of registered capital and required reserves and after the recovery
of accumulated losses. As a stockholder of Prima Industrie, the Company's claims
as such will generally rank junior to all other creditors of and claimants
against Prima Industrie. However, in addition to capital investments to be made
in Prima Industrie, the Company has established a secured lending facility with
Prima Industrie in order to collateralize certain advances made to Prima
Industrie. See "Use of Proceeds."
SHARES ELIGIBLE FOR FUTURE SALE. Sales of a substantial number of shares of
Common Stock in the public market following this Offering could adversely affect
the market price for the Company's Common Stock. Upon completion of this
Offering, the 1,800,000 Shares sold in this Offering will be freely tradeable
without restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"), by persons other than "affiliates" of the
Company. The remaining 3,000,000 shares of Common Stock to be outstanding
following the Offering will be "restricted securities" within the meaning of
Rule 144 promulgated under the Securities Act ("Rule 144") and may not be sold
in the absence of registration under the Securities Act unless an exemption from
registration is available, including the exemption provided by Rule 144. In
addition, all of the holders of such shares have executed lock-up agreements
pursuant to which they have each agreed not to sell or otherwise dispose of any
of their shares for a period of two years after the date of this Prospectus
without the prior written consent of both the Underwriters and the Company;
provided, that the Underwriters will waive the restrictions contained in such
agreements, on a pro rata basis to all parties subject to such agreements, if
the Company undertakes a public offering or private placement of Common Stock
and the underwriters or placement agent for such public offering or private
placement agrees that the shares of Common Stock for which such restrictions are
waived will be sold as part of the orderly distribution of securities to be sold
in such public offering or private placement. Following the expiration of such
lock-up agreements, such shares will become available for resale in the public
market, subject to the volume limitations, holding periods and other
restrictions of Rule 144. See "Shares Eligible for Future Sale."
ADDITIONAL SHARES ISSUED IN FUTURE ACQUISITIONS. The Company's strategy for
growth is based, in part, upon acquisitions of existing businesses. Those
acquisitions may involve additional issuances of shares of Common Stock or
preferred stock to the owners of the acquired businesses. While the Company has
had discussions with several potential acquisition candidates, it has no present
plans for acquisitions or the issuance of additional shares. The issuance of
additional shares may adversely affect the market price of the Common Stock. See
"Business -- Strategy."
NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior to this Offering,
there has been no public market for the Common Stock, and there can be no
assurance that an active public market will develop or be sustained after this
Offering. The Offering Price has been determined by negotiations among the
Company and the representatives of the Underwriters and does not necessarily
reflect the market price of the Common Stock after this Offering. The trading
price of the Common Stock could be subject to wide fluctuations in response to
quarterly variations in operating results, announcements of technological
innovations or new products by the Company or its competitors, as well as other
events or factors, such as the issuance of shares of Common Stock to consummate
an acquisition. In addition, the equity markets have from time to time
experienced extreme price and volume fluctuations which have particularly
affected the market price of many high technology companies and which often have
been unrelated to the operating performance of these companies. These broad
market fluctuations may adversely affect the market price of the Company's
Common Stock. See "Underwriting."
DILUTION. Purchasers of the Shares offered by this Prospectus will suffer
immediate and substantial dilution of 60% of their investment in the Shares from
the Offering Price. See "Dilution."
ANTI-TAKEOVER EFFECT OF CHARTER, BYLAW PROVISIONS AND EMPLOYMENT AGREEMENTS;
AVAILABILITY OF PREFERRED STOCK FOR ISSUANCE. The Company's Articles of
Incorporation and Bylaws contain provisions that could discourage a proxy
contest or make more difficult the acquisition of a substantial block of the
Common Stock. Furthermore, the employment agreement entered into by the Company
and Mr. James R. Currier, Sr., its Chief Executive Officer, contains a provision
obligating the Company to make a payment of three times his annual salary if the
agreement is terminated after a change of control of the Company. This agreement
may make the acquisition of control of the Company more expensive. In addition,
the Board of Directors is authorized to issue, without stockholder approval, up
to 1,000,000 shares of preferred stock with voting, conversion and other rights
and preferences that may be superior to those of the Common Stock and that could
adversely affect the voting power or other rights of the holders of Common
Stock. The issuance of Preferred Stock or of rights to purchase the Company's
preferred stock could be used to discourage an unsolicited acquisition proposal.
See "Description of Capital Stock -- Preferred Stock."
RISKS ASSOCIATED WITH THE REPRESENTATIVE'S INFLUENCE ON THE MARKET. The
representative of the Underwriters (the "Representative") may from time to time
following the completion of this Offering act as a market-maker and otherwise
effect transactions in the Common Stock. The Representative is not legally
obligated by law or by contract to continue such trading, which may be
discontinued at any time. Any such cessation could have a material effect upon
the price and liquidity of the Common stock. The Representative is subject to
the supervision of various governmental and self regulatory organizations, as
well as certain capital requirements. Such regulatory authorities periodically
investigate and audit the activities of broker-dealers, such as the
Representative. In the event the Representative is required to curtail or cease
operations as a result of administrative actions instituted by the regulatory
authorities or because of lack of capital, the price and liquidity of the Common
stock may be materially adversely affected by the reduced participation or
complete absence of the Representative from the market.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,800,000 Shares offered
hereby are estimated to be $17,120,000 ($18,605,000 if the Over-Allotment Option
is exercised), assuming an Offering Price of $11.00 per share and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by the Company. The Company anticipates that the net
proceeds will be used in the following manner.
<TABLE>
<CAPTION>
Exercise of
Over-Allotment Option
Application of Approximate Percentage of Approximate Percentage of
Net Proceeds Amount Net Proceeds Amount Net Proceeds
<S> <C> <C> <C> <C>
Marketing
and Sales
Promotion (1) $ 4,750,000 27.7% $ 4,750,000 25.5%
Research and
Development (2) 5,200,000 30.4% 5,200,000 28.0%
Working Capital (3) 7,170,000 41.9% 8,655,000 46.5%
---------- ----- ---------- -----
TOTAL $17,120,000 100.0% $18,605,000 100.0%
========== ===== ========== =====
</TABLE>
- ---------------
(1) Expenditures will be made for marketing and sales promotion in the periods
from 1998 through the year 2000, including the presentation of exhibits at major
machine tool exhibitions throughout the world, extensive marketing and
promotional efforts to introduce new products and key account promotions.
(2) Expenditures will be made to fund research and development activities
through the year 2000 to introduce the "Laser-On-Line" product family of
precision cutting and welding products and systems. These product developments
are intended to transform existing 3-D Products from "prototyping" equipment to
a more robust production oriented family of precision cutting and welding
products and technology. See "Business -- Strategy." The Company has entered
into a joint development agreement with Prima Industrie to complete these
developments. Pursuant to the joint development agreement, the Company will have
exclusive rights to these developments outside of Italy. The Company will
provide funding for these R&D projects in amounts of approximately $2,000,000
during the 1998 fiscal year, $1,800,000 during the 1999 fiscal year, and
$1,400,000 during the 2000 fiscal year.
(3) The balance of the net offering proceeds will be utilized for general
corporate requirements, including financing working capital needs of the
Company's subsidiary operations. Approximately $150,000 will be used in 1998 to
fund the replacement of the information technology systems used by Prima
Industrie, Prima Electronics and affiliates to ensure that the Company and its
subsidiaries will not be impacted by Year 2000 issues or the conversion to a
single European currency under the EMU. The Company will provide internal
lending facilities for all subsidiary operations, including financing working
capital, foreign currency purchases, research and development and other capital
expenditures, either by the use of cash from the proceeds of this Offering or by
guaranteeing, or otherwise providing credit enhancement of, credit facilities
provided by lending institutions.
Pending such uses, the net proceeds to the Company from this Offering will be
invested in short-term, investment grade, interest-bearing securities.
The foregoing represents the Company's best estimate of the allocation of the
net proceeds of this Offering based upon the Company's currently contemplated
operations and business plans, as well as current economic and industry
conditions, and is subject to reapportionment among the categories listed above
in response to, among other things, changes in the Company's plans,
unanticipated future revenues and expenditures and unanticipated industry
conditions. The amount and timing of expenditures will vary depending on a
number of factors, including, without limitation, the results of operations and
changing industry conditions. To the extent deemed appropriate by management,
the Company may acquire fully developed products or businesses which, in the
opinion of management, facilitate the growth of the Company or enhance the
market penetration or reputation of its Products. To the extent that the Company
identifies any such opportunities, an acquisition may involve the expenditure of
significant cash or the issuance of capital stock of the Company. Any
expenditure of cash will reduce the amount of cash available for working capital
or marketing and promotional purposes. The Company currently has no commitments,
understandings or arrangements with respect to any such acquisition.
DIVIDEND POLICY
To date, Prima Industrie, Prima Electronics and the Company have not declared or
paid any cash dividends on their capital stock. The Company currently intends to
retain any future earnings to finance the growth and development of its business
and, therefore, does not anticipate paying any cash dividends in the foreseeable
future.
CAPITALIZATION
The following table sets forth, as of September 30, 1997, (i) the actual
short-term obligations and capitalization of the Company on a consolidated
basis, and (ii) the pro forma short-term obligations and capitalization of the
Company, after giving effect to the receipt by the Company of the estimated net
proceeds from the sale of the 1,800,000 shares of Common Stock offered hereby at
an assumed Offering Price of $11.00 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company and the application of the net proceeds thereof.
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
ACTUAL PRO FORMA
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
Short-term
obligations(1) $ 9,601 $ 9,601
Stockholders' equity
(deficit): Preferred Stock,
$0.01 par value: actual,
pro forma and pro forma
as adjusted -- 1,000,000
shares authorized, no
shares issued or outstanding -- --
Common Stock: actual $0.01
par value, 14,000,000
shares authorized,
3,000,000 shares issued
and outstanding; pro
forma -- $0.01 par value,
14,000,000 shares
authorized, 4,800,00 shares
issued and outstanding(2) 30 48
Additional paid-in capital 13,775 30,877
Accumulated deficit (9,419) (9,419)
Cumulative translation
adjustment (269) (269)
Total stockholders' equity 4,117 21,237
Total capitalization $13,718 $30,838
====== ======
</TABLE>
- ---------------
(1) Short-term obligations consist of short-term indebtedness for borrowed money
and the current portion of capital lease obligations. See Note 7 of Notes to
Consolidated Financial Statements.
(2) Excludes 150,000 Shares subject to the Underwriters' Over-Allotment Option
(270,000 Shares if the Selling Shareholder fails to deliver to the Underwriters
the 120,000 Shares held by it that are subject to the Over-Allotment Option, or
otherwise fails to satisfy any of the conditions to the closing of such sale).
See "Underwriting."
DILUTION
The net tangible book value of the Company as of September 30, 1997 was
$3,782,000, or approximately $1.26 per share. After giving effect to the sale by
the Company of 1,800,000 Shares in this Offering at an assumed Offering Price of
$11.00 per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company, the pro
forma net tangible book value of the Company at September 30, 1997 would be
$20,902,000, or $4.35 per share. This represents an immediate increase in pro
forma net tangible book value of $3.09 per share to existing stockholders and an
immediate dilution in pro forma net tangible book value of $6.65 per share to
new investors purchasing Shares in this Offering. The following table
illustrates the per share dilution:
Assumed Offering Price per Share: $11.00
Pro forma net tangible book value per Share
before this Offering: $1.26
Increase in pro forma net tangible book
value per Share attributable to investors
in this Offering: $3.09
Pro forma net tangible book value per share
after this Offering: $ 4.35
-------
Dilution per share to investors in
this Offering: $ 6.65
=======
The following table summarizes on a pro forma basis, as of the date of this
Prospectus, the difference between the existing stockholders and the purchasers
of Shares in this Offering with respect to the number of shares purchased from
the Company, the total consideration paid and the average price per share paid,
and the sale of 1,800,000 Shares at an Offering Price of $11.00 per share
(before deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by the Company):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
NUMBER PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C>
Existing stockholders(1) 3,000,000 62.5% $ 7,078,000 26.3%
New investors 1,800,000 37.5% 19,800,000 73.7
--------- ---- ---------- -----
Total 4,800,000 100.0% $26,878,000 100.0%
========= ===== ========== =====
</TABLE>
- ---------------
(1) The amount shown takes into account (a) the issuance of 300,000 shares at
par value for $3,000 to James R. Currier, Sr. and Giovanni Ciamaroni; and (b)
the exchange by the Prima Industrie Shareholders of substantially all of the
outstanding capital stock of Prima Industrie in return for 2,700,000 shares of
Common Stock.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in conjunction
with Prima Industrie's consolidated financial statements and notes thereto and
with Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included elsewhere in this Prospectus. Immediately prior
to the date of this Prospectus, the Company acquired substantially all of the
outstanding shares of Prima Industrie. The acquisition of Prima Industrie will
be accounted for as a recapitalization of Prima Industrie, with no goodwill or
other intangibles recorded. The consolidated statement of operations data for
the years ended December 31, 1992 and 1993 and the consolidated balance sheet
data at December 31, 1992 and 1993 are derived from consolidated financial
statements of Prima Industrie not included in this Prospectus, which have not
been audited by Hein + Associates, LLP. The data for 1992 and 1993 has been
revised by the Company to reflect the requirements of U.S. generally accepted
accounting principles. The consolidated statement of operations data for the
nine months ended September 30, 1996 and 1997 are derived from unaudited
financial statements of Prima Industrie included elsewhere in this Prospectus
that have been prepared on the same basis as the audited financial statements
and, in the opinion of management, contain all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
position and results of operations for such period. These historical results are
not necessarily indicative of the results to be expected in the future and
results for interim periods are not necessarily indicative of results for the
entire year.
<PAGE>
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
NINE MONTHS ENDED
SEPTEMBER 30 YEARS ENDED DEC. 31
------------------ -------------------------------
1997 1996 1996 1995 1994 1993 1992
------- -------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA: (1)
Revenues:
Product Sales $29,688 $26,052 $41,108 $37,356 $27,774 $27,814 $38,215
Other 341 915 1,207 1,204 622 965 1,518
Total Revenues 30,029 26,967 42,315 38,560 28,396 28,779 39,733
Cost of Product Sales 24,353 22,177 34,357 32,565 27,373 24,302 34,111
Gross Profit 5,676 4,790 7,958 6,847 2,297 4,477 5,622
Research and Development 977 970 1,329 670 656 705 589
General and
Administrative 4,025 3,421 5,218 5,250 4,165 5,076 7,472
Total Costs and
Expenses 29,355 26,568 40,904 38,485 32,194 30,083 42,172
Operating Income 674 399 1,411 75 (3,798) (1,304) (2,439)
Gain on Sale of Sapri 1,059 1,059
Other Income (expense) (588) (414) (733) (2,302) (1,637) 524 751
Income (loss) before
provision for Income
Taxes 86 1,044 1,737 (2,227) (5,435) (780) (1,688)
Provision for Income
Taxes (243) (100) (189) (43) (4) (27)
Minority Interest (201) (196) (213) (130) 169 15 651
Net Income (loss) (358) 748 1,335 (2,400) (5,270) (765) (1,064)
Pro forma Earnings Loss
per share (2)(3) $(.12) $ .25 $ 0.44 $(1.19) $(2.34) $(0.33) $(0.46)
Pro forma weighted
average common and
common equivalent
shares outstanding 3,000 3,000 3,000 2,021 2,254 2,333 2,333
CONSOLIDATED BALANCE SHEET DATA: (1)
Cash and cash equivalents 216 24 585 804 620 2,518 1,412
Working Capital 5,589 3,919 6,320 3,574 (687) 2,365 366
Total Assets 31,819 32,067 36,352 35,268 31,244 34,240 45,362
Total Liabilities 27,705 27,825 31,608 32,037 33,796 31,871 41,457
Stockholders' Equity 4,114 4,242 4,744 3,231 (2,552) 2,369 3,905
- ---------------
</TABLE>
(1) This financial data reflects the financial condition and operations of Prima
Industrie prior to the acquisition by the Company of substantially all of the
issued and outstanding capital stock of Prima Industrie.
(2) Reflects the issuance of (a) 2,700,000 shares of Common Stock to
substantially all of the shareholders of Prima Industrie in exchange for their
stock interests in Prima Industrie and (b) 300,000 shares of Common Stock to
James R. Currier, Sr., and Giovanni Ciamaroni for cash.
(3) No cash dividends have been declared by the Company or Prima Industrie.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion contains trend analysis and other forward-looking
statements that involve risks and uncertainties. Immediately prior to the date
of this Prospectus, the Company acquired substantially all of the outstanding
capital stock of Prima Industrie by the exchange of shares of the Company's
Common Stock for shares of Prima Industrie. The following discussions of
historical results of operations, liquidity and capital resources reflect the
consolidated condition of Prima Industrie and Prima Electronics and not the
Company. The Company's actual results may differ materially from those described
in such forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed below and elsewhere in this
Prospectus, particularly under "Risk Factors."
OVERVIEW
Prima Industrie was established in 1977 as a design and engineering firm. In
1978, Prima Electronics was established to manufacture industrial process
controls. Prima Industrie developed its first 3-D Products in 1979 and
introduced the Platino 2-D Product based upon the same technology in 1997. These
Products have evolved into the major focus of the Company's business.
Approximately 30% of the sales of Prima Industrie are within Italy and the
majority of the remaining sales are to customers in other countries in Europe.
During 1998, Company management will concentrate on increasing the sales of its
3-D Products, which have greater gross margins than its 2-D Products, and on
improving profit margins for sales of its new Platino 2-D Product. Further,
primarily because of the fixed nature of the Company's overhead costs, these
increases in sales will result in proportionately greater increases in net
income. Additionally, the Company expects margins to improve if assembly
operations are commenced outside of Italy, as a result of lower direct labor
costs. The Company has entered into a license agreement with Strippit, Inc.
("Strippit"), a Delaware corporation and a subsidiary of Idex Corporation, for
the manufacture and sale of products using the technology for the Platino 2-D
Product. The Company has also executed a license agreement with Beijing
Machinery and Electricity Institute in China for the Company's 2-D Laserwork
Product, subject to the approval of the government of the People's Republic of
China. There can be no assurance that the requisite approval will be forthcoming
for consummation of the China License and the payments required thereunder.
Delays in the approval of the China License, and in the payment of royalties
required to be made thereunder, could adversely affect the Company's financial
performance in the last quarter of 1997.
Company management will focus on improving the cash flow from contracts with
European customers to the extent that competitive and European business
practices permit. Management expects improving cash flows will decrease the
Company's dependence on its Working Capital Facility ("WCF") thereby reducing
interest expenses. Furthermore, upon completion of this Offering, significant
portions of the subsidiary operations' cash requirements will be financed by the
Company at more favorable interest rates on a consolidated basis. The Company
will act as an "internal lending facility" to its subsidiary operations and will
supervise the cash management of all its subsidiary operations.
The Company expects R&D and marketing expenses to increase significantly during
the 1998 Fiscal Year. Development of the Company's "Laser On-Line" family of 3-D
Products will involve substantial development costs, and the introduction of
that product family to the market in late 1998 or early 1999 will have an impact
on earnings for the year, although Company management believes net income will
increase in year-to-year comparisons and as a percentage of sales. See "Business
- -- Research & Development" and "Use of Proceeds."
During the 1998 fiscal year, the Company expects to update its management and
control systems by purchasing new hardware and software products. Several
Enterprise Resource Planning Software products are commercially available that
can closely approximate the Company's requirements without significant
customizing. These products will ensure that the Company and its subsidiaries
will not be impacted by Year 2000 issues or the conversion to a single European
currency under the EMU. This capital expenditure will occur during the middle
part of the year, and management does not expect this expenditure to exceed
$150,000. No other significant capital expenditures are currently anticipated.
During the fourth quarter of 1997, Prima Industrie will consummate certain
transactions under an agreement pursuant to which it will become a minority
owner of Macromeccanica of Turin, Italy. Macromeccanica has two primary lines of
business -- refurbishment of machine tool equipment for customers and
subcontracting of sophisticated machining services. Pursuant to the agreement,
Prima Industrie will sell certain machine tools and equipment (the AEquipment@)
currently used by Prima Industrie to create parts for its Products, to a leasing
company, which will then lease the Equipment to Macromeccanica. Prima Industrie
will be paid 1.05 billion Lit (approximately $636,400) for the Equipment. Prima
Industrie and Macromeccanica will enter into a requirements supply agreement,
whereby Macromeccanica will provide Prima Industrie machining services currently
performed internally by Prima Industrie or sub-contracted by other sources. As a
result of this transaction, Prima Industrie expects to reduce its cost of
manufacturing parts for its Products and increase the capacity of Prima
Industrie's assembly operations by up to 30% above current levels.
In addition, Prima Industrie will purchase 25% of the existing equity of
Macromeccanica from a existing shareholder for 600 million Lit (approximately
$363,300) and subscribe to an increase in capital of Macromeccanica for 700
million Lit (approximately $424,200) (the "Follow-on Investment"). At the
conclusion of this Follow-on Investment, Prima Industrie will hold approximately
37% of the outstanding capital stock of Macromeccanica. The other owners of
Macromeccanica are unrelated to Prima Industrie. It is projected that Prima
Industrie's business will account for approximately 10% of the total revenues of
Macromeccanica (which are projected to be 18 billion Lit for 1998).
The Company has also identified several additional candidates for acquisition or
merger and is engaged in preliminary discussions regarding possible business
combinations. Management expects discussions with these candidates to accelerate
upon completion of this Offering, although no assurances can be given about the
outcome of these discussions. The Company will focus on those candidates that
will add to earnings and provide significant critical mass to produce economies
of scale in both sales and manufacturing activities.
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this Prospectus.
For purposes of the following discussion, references to exchange rates are
between the Lit and the Dollar.
RESULTS OF OPERATIONS
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997, COMPARED TO NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
TABLE 1
(In Thousands)
Change
9/30/97 9/30/96 Amount Percent
<S> <C> <C> <C>
TOTAL REVENUES $30,029 $26,967 $3,062 11.4 %
Cost of Sales 24,353 22,177 2,176 9.8 %
Research and Development 977 970 7 .7 %
Selling, General and
Administrative Expenses 4,025 3,421 604 17.7 %
Total costs 29,355 26,568 2,787 10.5 %
Operating Income 674 399 275 69.0 %
OTHER INCOME (EXPENSE)
Gain on Sale of Sapri 1,059 (1,059) -
Interest and other income 313 497 (184) (37.0)%
Interest and other expense (901) (911) 10 - %
Total Other Income (Expense) (588) 645 (1,233) - %
Income (loss) before taxes 86 1,044 (958) (91.8)%
Income taxes (243) (100) (143) (143.0)%
Minority interest (201) (196) (5) (2.5)%
Net income (loss) (358) 748 (1,106) - %
</TABLE>
Consolidated revenues for the nine month period ended September 30, 1997
increased 11.4% to $30.029 million from $26.967 million in the comparable nine
month period ended September 30, 1996. Stated without the effect of fluctuations
in the exchange rate between the Dollar and the Lit for these periods,
consolidated revenues increased 23.10% from Lit 41.609 billion in the nine month
period ended September 30, 1996 to Lit 51.224 billion in the nine month period
ended September 30, 1997. Backlog for the period increased 16.1% from $5.441
million on September 30, 1996 to $6.317 million on September 30, 1997. Stated
without the effect of fluctuations in the exchange rate, backlog increased 31.3%
from Lit 8.304 billion on September 30, 1996 to Lit 10.906 billion on September
30, 1997.
The composition of revenues for the nine months ended September 30, 1997 was
significantly different from the comparable period of 1996, reflecting the
influence of several factors. Sales of 3-D Products and Laserwork 2-D Products
provided 46.6% and 16.5%, respectively of total sales during the nine months
ended September 30, 1996. These contribution levels declined to 41.7% and 7.4%
of total sales, respectively, for the nine months ended September 30, 1997.
While the number of 3-D Products sold in the nine months ended September 30,
1997 increased by two units, sales of Laserwork 2-D Products declined by 5
units, supplanted by sales of 17 units of the Platino line of 2-D Products. This
transition in sales of the 2-D Products toward the more efficient Platino Line
reflects the Company's strategy of being able to sell 2-D Products to a wider
variety of users.
Sales of service and parts increased by $.708 million or 22.1% in the nine
months ended September 30, 1997, when compared to the same period in 1996, as
did sales to Atlas Copco, which increased $.369 million or 6.1%. Due to the
contribution to sales effected by the changing product mix, virtually all
components of sales, except for the Platino product line, were reduced as a
percentage of the total sales, as shown in Table 2.
TABLE 2
CONTRIBUTION TO REVENUES
(In Percent)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-----------------------
1997 1996 Change
-----------------------
<S> <C> <C> <C> <C>
By PRIMA Industrie:
3D Products 41.7% 46.6% (4.9)
Laserwork 2-D Products 7.4 16.5 (9.1)
Platino 2-D Products 17.6 -0- 17.6
Service and Parts 11.9 11.3 0.6
By PRIMA Electronics:
To Atlas Copco 13.3 14.2 (0.9)
To Other Customers 4.1 5.9 (1.8)
To PRIMA Industrie 4.0 5.5 (1.5)
----- ----- -----
Total Sales 100.0% 100.0% -0-
===== ===== =====
</TABLE>
Cost of goods sold as a percentage of consolidated revenues improved modestly
from 82.2% during the nine month period ended September 30, 1996 to 81.1% during
the nine month period ended September 30, 1997. The period-to-period comparison
increased 9.8% to $24.353 million for the nine month period ended September 30,
1997 from $22.177 million for the nine month period ended September 30, 1996.
Without giving effect to the fluctuations in exchange rates between the Dollar
and Lit, cost of goods sold increased 21.4% to Lit 41.541 billion (or 81.0% of
revenue) in the nine month period ended September 30, 1997 from Lit 34.218
billion (or 82.2% of revenue) in the nine month period ended September 30, 1996.
During the nine months ended September 30, 1997, a trend continued in which
labor costs, as a percentage of total cost of goods sold, declined, as did
overhead and depreciation. The gradual reduction of labor costs as a portion of
cost of goods sold produced a corresponding increase in the relative portion of
materials costs to total cost of goods sold. This improvement would have been
greater had the divestiture of Sapri S.p.A. occurred at the beginning of the
year.
TABLE 3
COMPONENTS OF COST OF GOODS SOLD
BY PERCENTAGE
For the Nine Months
Ended September 30
1997 1996 Difference
Materials 62.4% 61.2% 1.2%
Labor 17.1 17.5 (.4)
Overhead 18.8 19.0 (.2)
Depreciation 1.7 2.3 (.6)
---- ----- ---
Total 100.0% 100.0% -0-
===== ===== ===
The margin of profit between sales and cost of goods sold is expected to improve
further as the Company completes its transition to the Platino line and achieves
operational efficiencies as its experience in manufacturing these Products
increases and economics of scale from production increases.
As a percentage of consolidated revenues, research and development remained
substantially unchanged between the nine month periods ended September 30, 1997
and 1996 at 3.2% and 3.6%, respectively. However, without giving effect to
exchange rate differences between the periods, R&D expenses increased 11.3% from
the nine period ended September 30, 1996 to the same period ended September 30,
1997. This increase resulted from the Company's ongoing R&D projects aimed at
enhancing the technical capability of the Company's 2-D and 3-D Products.
Selling, general and administrative expenses ("SG&A") increased $0.604 million
between the nine month periods ended September 30, 1996 and 1997. As a
percentage of consolidated revenues, SG&A remained substantially identical at
13.4% during the nine month period ended September 30, 1997 and 12.7% for the
nine month period ended September 30, 1996. However, without giving effect to
differences in the exchange rates, SG&A expenses increased 30.0% from Lit 5.279
billion during the nine month period ended September 30, 1996 to Lit 6.865
billion during the nine month period ended September 30, 1997. This relative
change expressed in Lit occurred primarily as a result of increased sales
efforts.
Other operating revenues, which consist of governmental grants for research and
development and license revenues, declined by $0.574 million in the nine months
ended September 30, 1997 as compared to the nine months ended September 30,
1996. This change was due primarily to research grants being provided to the
Company in 1997 in the form of low interest loans rather than outright grants.
As a result of the above factors, operating income for the nine month period
ended September 30, 1997 increased 68.9% to $.674 million from $.399 million in
the comparable nine month period ended September 30, 1996. Without giving effect
to the fluctuations in the exchange rate between the Dollar and Lit during the
periods, operating income increased 252.7% from Lit .493 billion for the nine
month period ended September 30, 1996 to Lit 1.246 billion for the nine month
period ended September 30, 1997.
Interest income declined $.183 million from the nine month period ending
September 30, 1996 to the nine month period ending September 30, 1997 due to
reductions in the amounts receivable for products sold pursuant to a government
sponsored financing program.
Interest expense for the nine month period ended September 30, 1997 was
essentially equivalent to that for the prior period in 1996.
Income before income taxes declined from a profit of $1.044 million for the nine
month period ended September 30, 1996 to $.086 million for the comparable period
in 1997. This decrease was primarily due to the sale of Sapri occurring during
the nine months ended September 30, 1996.
Income taxes for the nine month period ended September 30, 1997 increased 143.0%
from $.100 million during the nine month period ended September 30, 1996 to
$.243 million. This increase occurred primarily as a result of taxes accrued on
profits from the operations of Prima Electronics, which is subject to
significantly higher taxation rates than Prima Industrie. As a result of loss
carry-forwards, Prima Industrie's effective tax rate was 16.2% instead of the
normal Italian corporate tax rate of 53.2%, which applies to the earnings of
Prima Electronics. Allocation of profits for the minority interest in the Prima
Electronics subsidiary increased 2.5% to $.201 million during the nine month
period ended September 30, 1997 from $.196 million during the comparable nine
month period ended September 30, 1996.
Without considering the gain on the sale of Sapri in 1996, the Company's net
loss during the nine month period ended September 30, 1997 was essentially the
same loss as in the comparable period in 1996, amounting to $.358 and ..311
million for the nine months ended September 30, 1997 and September 30, 1996,
respectively. The 1997 net loss was largely attributable to the increased income
tax expense related to the profits of Prima Electronics.
FISCAL YEAR ENDED DECEMBER 31, 1996, COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1995
TABLE 4
(In Thousands)
<TABLE>
<CAPTION>
Change
12/31/96 12/31/95 Amount Percent
<S> <C> <C> <C>
TOTAL REVENUES $42,315 $38,560 $3,755 9.7 %
Cost of Sales 34,357 32,565 1,792 5.5 %
Research and Development 1,329 670 659 98.3 %
Selling, General and
Administrative 5,218 5,250 (32) - %
------ ------ ----- -----
Total Costs $40,904 $38,485 $2,419 6.2 %
Operating Income $ 1,411 $ 75 $1,336 - %
OTHER INCOME (EXPENSE)
Gain on Sale of Sapri 1,059 - 1,059 -
Interest and Other Income 1,033 776 257 33.1 %
Interest and Other
Expense (1,766) (3,078) 1,312 (42.6)%
Total other income
(expense) $ 326 $(2,302) $2,628 -
Income Before Taxes $ 1,737 $(2,227) $3,964 -
Income Taxes (189) (43) (146) (339.5)%
Minority Interest (213) (130) (83) (63.8)%
------ ------ ----- -------
Net Income (Loss) $ 1,335 $(2,400) $3,735 -
====== ====== =====
</TABLE>
Consolidated revenues for the fiscal year ended December 31, 1996 increased 9.7%
to $42.315 million from $38.560 million in the year ended December 31, 1995.
This increase was largely attributable to a decline in the Dollar relative to
the Lit of 6% from approximately 1640 Lit during 1995 to approximately 1540 Lit
during 1996. Year-to-year consolidated revenues increased only 3.8% expressed in
Lit, or Lit 67.032 billion for 1996 from Lit 64.582 billion for 1995. The
Company's relatively flat sales between the yearly periods resulted from
offsetting trends in the increasing sales of the Products and the divestiture of
other Company products.
For the year ended December 31, 1996, Prima Electronics accounted for
approximately 21.5% of total revenues, up from 20.9% during the comparable prior
year ended December 31, 1995. The increase in Prima Electronics' revenues and
percentage of consolidated revenues was primarily the result of a 78.7% increase
in the sales of regulators for industrial compressors and generators
manufactured by Atlas Copco from $3.118 million during the year ended December
31, 1995 to $5.489 million during the year ended December 31, 1996.
Additionally, and without giving effect to intercompany eliminations in the
consolidated financial statements, Prima Electronics' sales to the Company
increased 11.6% from $1.672 million during the year ended December 31, 1995 to
$1.867 million during the year ended December 31, 1996. The increase in sales
from Prima Electronics to the Company was the result of the Company's increasing
sales of the Products.
As a percentage of revenues, the Company's 3-D and 2-D Products accounted for
43.9% and 17.6%, respectively, of the Company's total revenues for the year
ended December 31, 1996, and 42.1% and 27.0%, respectively, for the comparable
prior year ended December 31, 1995. In year-to-year comparisons, revenues
derived from 2-D and 3-D Products increased 26.2% and 22.8%, respectively, from
the year ended December 31, 1995 to the year ended December 31, 1996. Expressed
in unit revenues, 2-D Products increased 38.8% from 18 units during the year
ended December 31, 1995 to 25 units for the year ended December 31, 1996; and
3-D Products increased 40.0% from 20 units to 28 units, respectively. These
increases in sales of the Company's 2-D and 3-D Products resulted from: (i) the
improvement in the worldwide economy, and (ii) exclusive R&D, sales and
marketing focus on the Company's 2-D and 3-D Products.
The year ended December 31, 1996 exhibited the early phases of the transition in
the 2-D Product line from the smaller of the two Laserwork machines to the new
Platino Product line. The percentage of contributions to total revenues by the
various revenue sources can be seen in the following table:
TABLE 5
CONTRIBUTION TO REVENUES
IN PERCENTAGES
<TABLE>
<CAPTION>
Year Ended
December 31
-----------------------
1996 1995 Change
----------------------- ------
<S> <C> <C> <C>
By PRIMA Industrie:
3D Products 43.9% 42.1% 1.8
Laserwork 2-D Products 17.6 27.0 (9.4)
Platino 2-D Products 4.2 - 4.2
Service and Parts 12.8 10.0 2.8
By PRIMA Electronics:
To Atlas Copco 12.4 9.0 3.4
To Other Customers 4.8 7.0 (2.2)
To PRIMA Industrie 4.3 4.9 (0.6)
----- ----- -----
Total Sales 100.0% 100.0% 0
===== ===== ====
</TABLE>
See Table 6 below for a graphic presentation of the growth in revenues for the
Prima Electronics and 2-D/3-D Products compared to the discontinued products.
Please note that the Y Axis is represented in billion Lit.
<PAGE>
TABLE 6
Table 6 is a bar chart showing the revenues in Lit during the period from 1992
to 1996, identifying revenues derived from discontinued products, laser products
and Prima Electronics.
Cost of goods sold as a percentage of consolidated revenues improved to 81.2%
for the year ended December 31, 1996 from 84.5% in the comparable prior year
ended December 31, 1995. This improvement was the result of economies of scale
in the purchase of raw materials occurring because of increased sales in the
Company's Products. The year-to-year comparison showed a 5.5% increase from
$32.565 million for December 31, 1995 to $34.357 million for December 31, 1996;
however, this increase was attributable to the decline in value of the Dollar to
the Lit as explained above.
During the year ended December 31, 1996 labor costs declined as a percentage of
total cost of goods sold, while a corresponding larger percentage of total cost
of goods sold was attributed to materials cost. This gradual reduction in labor
and related costs can be seen in the following Table 7:
TABLE 7
COMPONENTS OF COST OF GOODS SOLD
BY PERCENTAGE
For the Year
Ended December 31
---------------------------
1996 1995 Difference
----- ----- ----------
Materials 62.5% 59.5% 3.0%
Labor 15.9 18.7 (2.8)
Overhead 19.8 19.3 .5
Depreciation 1.8 2.5 (.7)
----- ----- ----
Total 100.0% 100.0% -0-
===== ===== ====
Research and development ("R&D") expense, net of grants received, doubled from
the year ended December 31, 1995 to the year ended December 31, 1996 from $.670
million to $1.329 million, respectively. As a percentage of consolidated
revenues, R&D increased from 1.7% to 3.1% for the same periods. This increase in
R&D expense was attributable to the completion of the Company's Platino 2-D
equipment and "Primach" numeric controller developed by Prima Electronics.
Selling, general and administrative expenses were stable at $5.250 million for
the year ended December 31, 1995 and $4.165 million for the year ended December
31, 1996, representing a 0.6% decline. SG&A decreased to 12.3% as a percentage
of consolidated revenues for the year ended December 31, 1996 from 13.6% for the
comparable prior year. This decline occurred as a result of: (i) favorable
exchange rates, (ii) the decrease in Company employees from 204 in 1995 to 193
in 1996, (iii) the transfer of employees from overhead activities to
manufacturing operations, and (iv) the divestiture of underperforming product
lines and associated overheads.
As a result of the above factors, operating income for the year ended December
31, 1996 increased to $1.411 million from a profit of $0.75 million in the prior
year. Net other income and expense changed from a net expense of $2.302 million
in 1995 to net income of $.326 million in 1996. These effects on net other
income and expense were produced by: (i) the gain of approximately $1 million
recognized on the sale of Sapri S.p.A., (ii) larger down payments with orders,
(iii) lower bank interest rates during the period, and (iv) the addition of new
capital from the year ended December 31, 1995.
Income before income taxes improved from a loss of $2.227 million for the year
ended December 31, 1995 to a profit of $1.737 million in the year ended December
31, 1996. This was attributable to the following factors: (i) the Company's
increase in operating income, (ii) interest and other income, without the gain
on the sale of Sapri, increased 33.1% from $.776 million in 1995 to $1.033
million in 1996, and (iii) interest and other expenses decreased 42.6% from
$3.078 million in 1995 to $1.766 million in 1996.
Income taxes for the year ended December 31, 1996 increased 339.5% to $.189
million from $.043 million in the year ended December 31, 1995. Net income was
reduced by the 40% minority interest in the Company's Prima Electronics
subsidiary to produce a consolidated net income of $1.335 million for the year
ended December 31, 1996, compared with a loss of $2.4 million for the year ended
December 31, 1995, although the minority interest increased 63.8% to $.213
million for 1996 from $.13 million for 1995. The minority interest increased as
a result of the increased profitability of Prima Electronics' operations.
FISCAL YEAR ENDED DECEMBER 31, 1995, COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1994
TABLE 8
(In Thousands)
<TABLE>
<CAPTION>
Change
12/31/95 12/31/94 Amount Percent
-------- -------- ------ --------
<S> <C> <C> <C> <C>
TOTAL REVENUES $38,560 $28,396 $10,164 35.8%
Cost of Sales 32,565 27,373 5,192 18.9%
Research and Development 670 656 14 2.1%
Selling, General and
Administrative 5,250 4,165 1,085 26.1%
------ ------ ------ ------
Total Costs $38,485 $32,194 $ 6,291 19.5%
Operating Income (loss) $ 75 $(3,798) $ 3,873 - %
OTHER INCOME (EXPENSE)
Interest and Other Income 776 508 268 52.8%
Interest and Other
Expense (3,078) (2,143) 935 (43.6)%
Other Costs (2) 2
------ ------ ------
Total Other Income (Expense) $(2,302) $(1,637) $ (665) (40.6)%
Income (Loss) Before Taxes $(2,227) $(5,435) $ 3,208 59.0%
Income Taxes (43) (4) (39) 975.0%
Minority Interest (130) 169 (299) --%
------ ------ ------ ------
Net Income (Loss) $(2,400) $(5,270) $ 2,870 --%
======== ======== ====== ======
</TABLE>
Consolidated revenues for the year ended December 31, 1995 increased 35.8% to
$38.560 million from $28.396 million in the year ended December 31, 1994. The
impact of differences in exchange rates on the increase in year-to-year
consolidated revenues were not significant, although the increase in net revenue
from Lit 44.679 billion in 1994 to Lit 64.582 billion in 1995 represented a
44.5% increase.
For the year ended December 31, 1995, the Company's Prima Electronics subsidiary
accounted for approximately 20.9% of revenue, as compared to 18.3% for the year
ended December 31, 1994. This increase in Prima Electronics' revenues and
percentage of revenues was primarily the result of a 119.4% increase in the
sales of regulators for industrial compressors and generators manufactured by
Atlas Copco, from $1.409 million during the year ended December 31, 1995 to
$3.092 million during the year ended December 31, 1996. Additionally, Prima
Electronics sales to the Company increased 28.3% from $1.303 million during the
year ended December 31, 1994 to $1.672 million during the year ended December
31, 1995.
As a percentage of revenues, the Company's 3-D and 2-D Products accounted for
approximately 42.1% and 27.0%, respectively, of consolidated revenues for the
year ended December 31, 1995, as compared to 40.7% and 28.8% in the prior year.
The lower 3-D percentages in 1994 were attributable to revenues from other
product lines that were subsequently divested in 1995 to unrelated third
parties. In year-to-year comparisons, revenues derived from 2-D and 3-D Products
increased 32.6% and 63.8%, respectively, during the fiscal year ended December
31, 1994 to the year ended December 31, 1995. However, expressed in unit
revenues, 2-D Products increased 10.5% from 19 units during the year ended
December 31, 1994 to 21 units during the year ended December 31, 1995; and 3-D
Products increased 25% from 16 units to 20 units, respectively. This increase
occurred primarily by giving effect to pricing increases in the 2-D and 3-D
Products, since exchange rates between the $ and Lit increased from 1595.9 for
the year ended December 31, 1994 to 1638.6 for the year ended December 31, 1995.
The contribution by each product line to total revenues was relatively static in
the two years, as shown in the following table 9. No significant shifts in
product lines took place during this period, with no related notable changes in
the product mix.
TABLE 9
CONTRIBUTION TO REVENUES
IN PERCENTAGES
Year Ended
December 31
----------------
1995 1994 Change
---------------- ------
By PRIMA Industrie:
3D Products 42.1% 40.7% 1.4
Laserwork 2-D Products 27.0 28.8 (1.8)
Platino 2-D Products - - -
Service and Parts 10.0 12.2 (2.2)
By PRIMA Electronics:
To Atlas Copco 9.0 6.1 2.9
To Other Customers 7.0 7.2 (0.2)
To PRIMA Industrie 4.9 5.0 (0.1)
----- ----- ------
Total Sales 100.0% 100.0% 0
===== ====== =====
Cost of goods sold as a percentage of consolidated revenues improved to 84.4%
for the year ended December 31, 1995 from 96.4% in the prior year ended December
31, 1994. This significant decline in cost of goods sold is attributable to (i)
the economies of scale achieved as a result of higher net revenues and the
amortization of the Company's fixed costs against those higher sales, (ii)
increased volume discounts available in the purchase of raw materials, also as a
result of the higher net revenues, (iii) significant discounting of sales prices
for Products in 1994 as a result of the economic recession in Europe in 1994 and
the intense competitive pressures that resulted, and (iv) significant
strengthening of the Lit against the DM. The year-to-year comparison resulted in
an 18.9% increase from $27.373 million for 1994 to $32.565 million for 1995,
attributable solely to the increase in consolidated revenues.
The year ended December 31, 1995 showed a significant reduction in labor and
related costs as a percent of costs of goods sold. Materials cost, as a percent
of total cost of goods sold, increased accordingly from 1995 to 1996.
TABLE 10
COMPONENTS OF COST OF GOODS SOLD
BY PERCENTAGE
For the Year
Ended December 31
-----------------
1995 1994 Difference
---- ---- ----------
Materials 59.5% 53.6% 5.9%
Labor 18.7 20.8 (2.1)
Overhead 19.3 21.9 (2.6)
Depreciation 2.5 3.7 (1.2)
----- ----- ----
Total 100.0% 100.0% -0-
===== ===== ====
R&D remained relatively constant comparing the year ended December 31, 1994 with
the year ended December 31, 1995, at $.656 million and $.670 million,
respectively. As a percentage of consolidated revenues, R&D decreased to 1.7%
from 2.3%, respectively, for the same periods. R&D expenses remained relatively
low during the periods as a result of the European recession and as part of the
Company's program of maintaining rigid cost control policies.
Selling, general and administrative expenses as a percentage of consolidated
revenues improved from 14.7% for the year ended December 31, 1994 to 13.6% for
the comparable year ended December 31, 1995. This reduction is attributable to
the increase in consolidated revenues for the comparable 1994 and 1995 years
ended on December 31. On a year-to-year comparison for the year ended December
31, 1995, SG&A increased 19.9% to $5,250 million from $4.165 million in the
prior year ended December 31, 1994. This increase in SG&A expenses was
attributable to: (i) increases in bad debt expenses and other expenses related
to the divestiture of other Company products, (ii) reorganization costs
associated with the divestiture of these other Company products, and (iii)
provisions for losses occurring in subsidiary operations. Comparing year-to-year
increases without the effect of currency translation from Lit to Dollars this
increase represents a 23.1% increase from the year ended December 31, 1994 to
year ended December 31, 1995.
As a result of the above factors, the Company's operating deficit decreased from
$3.798 million in the year ended December 31, 1994 to a profit of $.075 million
in the year ended December 31, 1995. Other income and expense increased 40.6%
from a net expense of $1.637 million in 1994 to a net expense of $2.302 million
for 1995. In addition to the factors mentioned above, this decline was
attributable to increased usage of the Company's WCF as a result of cash flow
needs to fund operating losses. See "-- Liquidity and Capital Resources." The
recapitalization and infusion of cash into the Company in mid 1995 occurred too
late in the business cycle to offset this increased usage of the WCF.
Income taxes increased from $.004 million in 1994 to $.043 million in 1995. This
increase in income taxes was solely the result of the Company's improved
profitability, although the Company continued to be the beneficiary of
preferential tax assessments under Italian tax law as a result of loss
carry-forwards available at Prima Industrie. Net loss decreased from $5.27
million during the year ended December 31, 1994 to a loss of $2.4 million during
the year ended December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its cash requirements through cash flow from
operations and by borrowings from banks and government agencies. At September
30, 1997 the Company had outstanding bank and government agency debt of $10.379
million.
Net cash provided by (used in) operating activities was ($.056 million), and
($.265 million), for the nine month period ended September 30, 1997 and for the
year ended December 31, 1996, respectively. Cash flow from operations for the
nine months ended September 30, 1997 increased by $.209 million compared to the
year ended December 31, 1996, primarily due to the collection of large
receivables at the beginning of 1997 generated by large sales volume during the
fourth quarter of 1996.
Trade accounts receivable, net of allowances, decreased $4.543 million to
$16.701 million at September 30, 1997 from December 31, 1996 and increased
$3.278 million to $21.244 million at December 31, 1996 from December 31, 1995.
Inventories increased $.599 million to $8.548 million at September 30, 1997 from
December 31, 1996 anticipating increased 1997 fourth quarter shipments.
Inventories decreased $.463 million to $7.949 million at December 31, 1996 from
December 31, 1995 reflecting the draw down of stocks resulting from the growth
in sales for 1996. Accounts receivable continue to increase due to the normal
longer payment terms in Europe, while inventories increase primarily to support
the growth in sales.
Cash provided by (used in) investing activities was ($.461 million) for the nine
month period ended September 30, 1997 and $.596 million for the year ended
December 31, 1996. The increase in cash used for investing activities in the
nine months ended September 30, 1997 was primarily attributable to capital
expenditures. The increase in cash provided in the year ended December 31, 1996
was generated primarily by the sale of the Company's investment in its Sapri
subsidiary.
Capital expenditures were $.211 million and $.231 million in the nine months
ended September 30, 1997 and the year ended December 31, 1996 respectively. In
general, these expenditures reflect the acquisition of additional manufacturing
and research and development equipment.
Cash provided by (used in) financing activities primarily reflects borrowings
and payments related to bank and other debt. Cash used in financing activities
during the nine months ended September 30, 1997 included advances to an
affiliated company to fund costs related to the Company's initial public
offering. Cash provided by financing activities was $.253 million for the nine
months ended September 30, 1997 as compared to ($.811) million used in the year
ended December 31, 1996.
As of September 30, 1997, the Company had lines of credit with 12 different
Italian banks totaling $12.804 million, collateralized by the Company's
accounts receivable sales contracts. As of December 31, 1996 the Company had
drawn down $8.977 million, and as of September 30, 1997, the Company had drawn
down $9.118 million, with the draw down amount remaining relatively stable
during the nine months period. Wide fluctuations in the usage of the lines of
credit are normal throughout the year because the Company's revenues are highly
seasonal. The first and third quarters of each year are negatively affected by
European holidays during Christmas and New Year's and the month-long summer
holiday.
The Company engages in policies designed to minimize the risk of loss (or gain)
resulting from fluctuations among foreign currencies. General practices consist
of activities such as (1) attempting to make purchases in volumes equivalent to
sales in the same foreign currency and (2) financing the sales of products in
the same currency in which the sales invoice is denominated. From time to time,
the Company engages in currency swaps to: (1) buy at a fixed future date a
certain currency needed to settle payments to a supplier at that date, and (2)
sell at a fixed future date a certain currency needed to cover the full
amount of the receivable.
Currency fluctuations are expected to remain volatile and unstable during the
forthcoming periods because of the continued strength of the U.S. economy and
the desirability of the Dollar as an international currency. Until the EMU has
reached more significant levels of consensus among its membership, European
currencies may continue to experience wide fluctuations against the Dollar, as
well as against intra-European currencies, as individual European nations
attempt reconciliations of their domestic economies to EMU requirements.
Historically, the Lit experiences greater fluctuations against the Dollar than
against its European counterparts. For so long as the Lit remains volatile
against the Dollar and other important trading currencies, the Company will
attempt to minimize exposure to exchange rate fluctuations by purchasing
non-Italian goods and services in currencies with more favorable exchange rates
(e.g., the DM) and to use forward currency purchases to stabilize currency
translation volatility.
During the forthcoming periods, the Company expects increasing revenues from
non-European sources, particularly the Far East, South America and North
America, where pricing can be established under Dollar denominations. This
practice will lead to more stable presentations of the Company's financial
position in Dollars and less impact from currency translations.
The Company intends to fund significant increases in R&D and marketing
expenditures with a portion of the net proceeds of this offering. Similarly, the
expenditures for new hardware and software necessary to update management and
control systems will be funded by a portion of the net proceeds of this
offering. See discussion under "Use of Proceeds."
The allowance for bad debts, as a percentage of amounts receivable at December
31, 1996 decreased significantly due to the removal of the reserve, along with
all other assets and liabilities, of Sapri, S.p.A., during 1996. Without the
effects of the write-off of the Sapri reserve, the reserve for the year ended
December 31, 1996 would have, net of normal write downs, increased as compared
to the reserve for the year ended December 31, 1995.
The collection of trade accounts receivable by the Company has historically been
slow, conforming to a traditional pattern in the machine tool business in Italy.
Collection of accounts receivable, while extended, has remained relatively
constant for the past several fiscal periods, at an average of 178 days.
HISTORY OF THE COMPANY
The Company was incorporated in Delaware on July 29, 1997. As of the date of
this Prospectus, the Company has acquired 99.98% of the outstanding capital
stock of Prima Industrie. The Company has acquired, through the holdings of
Prima Industrie, approximately 60% of the outstanding capital stock of Prima
Electronics. The holding company structure, with the Company, a Delaware
corporation, as the parent and Prima Industrie, as its subsidiary, was
established to promote the internationalization of the Company's business.
Historically, Prima Industrie has focused its marketing and sales efforts in
Europe. In order to achieve the objectives set forth in "Business -- Strategy"
below, management believes that a presence in the United States is critical. In
addition, management believes that a public offering of the Company's securities
will be more readily received than one by Prima Industrie because a Delaware
corporation is a more familiar corporate entity than an Italian S.p.A. and the
Company's presence in the U.S. will facilitate better shareholder relations and
communications. There are certain risks associated with a holding company
structure (including certain risks peculiar to Italian law), see "Risks of
Holding Company Structure" and "Risks of Doing Business in Italy." Management
believes these risks are similar to those that a direct shareholder of Prima
Industrie would experience.
PRIMA INDUSTRIE
The predecessor of Prima Industrie was Prima Progetti S.p.A. ("Prima Progetti"),
an engineering company formed in 1977. Prima Industrie was formed in 1980 and
merged with Prima Progetti in October of 1985. The business evolved from
assisting in engineering and design of its customers' products to manufacturing
its own or customer-designed products. In 1979, Prima Progetti introduced its
first 3-D Product for plastic cutting and, in 1982, its first 3-D Product for
metal cutting.
In 1985, Amada Co. Ltd. ("Amada"), a large Japanese holding company, invested
approximately Lit 8.561 billion in the share capital of Prima Industrie,
becoming its largest shareholder and subsequently arranged for term loan
financing for Prima Industrie. Prima Industrie began the development of new
products for Amada, including a robotic sheet-metal bending machine.
In 1992, Prima Industrie acquired the assets of Laser Work AG, a
Switzerland-based manufacturer of 2-D laser cutting machines. Prima Industrie
transferred the manufacturing assets of Laser Work AG from Zurich, Switzerland
to Turin, Italy.
In 1993, Prima Industrie transferred to Amada a division dedicated to the
development of products for third parties. This division had worked almost
exclusively for Amada. In that year, Prima Industrie experienced weak demand for
its products, and Europe was in an economic recession. Prima Industrie organized
a sales subsidiary in the United States in order to better penetrate the
American markets.
In 1994, the relationship with Amada ended, and Prima Industrie determined to
concentrate its efforts in a single business sector -- precision laser cutting
and welding systems. This determination was based upon its competitive position,
the research and development efforts that had produced a complete range of
products in this business sector and the potential for growth in this business
sector. The discontinuance of business with Amada and losses in its other lines
of business, Prima Electronics and Sapri S.p.A., led to a $5.27 million loss in
1994, despite a 50% increase in the sale of the Products. The investment of
Prima Industrie in Sapri S.p.A. was written off, as the losses suffered by Sapri
were greater than its net capital. Sapri was engaged in the manufacture and sale
of arc welding cells and robots, which business was adversely affected by
intense competition, industry consolidation, low margins and economic
conditions. The loss experienced by Prima Electronics was primarily due to the
discontinuance of its work for Amada and a change in products being produced by
Prima Electronics.
In 1995, Prima Industrie reached agreement to sell its interest in Sapri to Asea
Brown Boveri. The loss experienced in 1994 and the termination of the
relationship with Amada resulted in a recapitalization of Prima Industrie in
1995. Amada forgave a Lit 3 Billion loan to Prima Industrie. Amada's
participation in the share capital of Prima Electronics was sold to the
management of Prima Electronics in exchange for cash. As a condition to
cancellation of its loan to Prima Industrie and the renunciation of its share
capital, Amada required that the equity in Prima Industrie be reduced to zero or
less. It was, therefore, necessary under Italian law for Prima Industrie to
attract new equity investments. In March 1995, an agreement was reached among
Itainvest S.p.A., formerly known as GEPI - Gestion e Participazion; Industrieli
S.p.A., a government-owned merchant bank ("Itainvest"), Gian Mario Rossignolo,
Gianfranco Carbonato, Hans Werthen, Cambria Ltd., on behalf of Miojusti
Invesments BV, and Prima Industrie to increase the share capital of Prima
Industrie to approximately Lit 10.9 billion. See "Management" and "Certain
Beneficial Owners" for further information on this entity and these individuals.
The parties to this agreement agreed to subscribe for a capital investment of
Lit 10.9 billion, of which Itainvest was to invest Lit 5.0 billion. There were
certain remaining shareholders holding approximately Lit .228 billion in
equity capital.
Itainvest had entered into an agreement with the other subscribing shareholders
that permitted those shareholders to require Itainvest to sell its shares in
Prima Industrie to those shareholders. As a result of this Offering, Itainvest
and the other subscribing shareholders of Prima Industrie have restructured
their agreement. Itainvest will retain full ownership of 394,121 of the
1,212,683 shares of Common Stock that it received prior to this Offering and
will grant purchase options to each of the subscribing shareholders for the
remaining 818,562 shares. Miojusti Investments BV has the right to purchase
424,440 of the remaining shares of Common Stock at any time during the period
commencing on the sixth month anniversary of the date of this Prospectus and
ending on the one year anniversary of the date of this Prospectus at a price
equivalent to a minimum of 4,945 Lit. ($2.91) per share. Messrs. Carbonato,
Rossignolo and Werthen have the right to purchase 118,234, 137,944, and 137,944,
respectively, of the remaining shares of Common Stock during a two-year period
beginning on the second anniversary of the date of this Prospectus. The purchase
price for Mr. Carbonato is equivalent to 4,125 Lit. ($2.43) per share. The
purchase price for Messrs. Rossignolo and Werthen is equivalent to a minimum of
4,945 Lit. ($2.91) per share.
In 1996, the sale of Sapri S.p.A. to Asea Brown Boveri was completed. Prima
Industrie also introduced a new 2-D precision cutting and welding system, the
Platino. In July 1997, Prima Industrie received ISO 9001 certification. Also in
July 1997, Prima Industrie licensed certain of its 2-D Product technology to
Strippit, Inc. for the manufacture and sale of those Products in North America.
See "Business -- Licensing."
PRIMA ELECTRONICS
Prima Electronics was organized in 1978 as a controlled company of Prima
Progetti, manufacturing industrial process controls. In 1990, Prima Electronics
entered into an agreement with Atlas Copco to supply regulators and drives
pursuant to Atlas Copco's specifications. The agreement provides for pricing and
quantity requirements, which are adjusted periodically. The agreement was
extended in 1996 through December 31, 2001. In 1994, Prima Industrie's Products
were equipped with new numeric controls, under the trade name APRIMACH,@ which
were developed by Prima Electronics. In December, 1997, Prima Electronics
received ISO 9001 certification.
BUSINESS
GENERAL
The Company is one of the leading international providers of
software-controlled, robotic, precision laser cutting and welding systems. The
Company designs, manufactures and sells 2-D Products that cut and weld shapes on
a flat surface, and 3-D Products that trim, punch, slot and weld shaped or
profiled materials. The Company's Products are used in automotive prototype
development and the manufacture of consumer durable goods. The Company's
customers include major European and North American automotive manufacturers,
such as BMW, Fiat, Ford, Chrysler, Mercedes-Benz, Nissan, Peugeot, Renault and
Volvo. They are also used by Tier One suppliers for the manufacture of
automotive components that are incorporated into the vehicles sold by these
manufacturers. Prima Industrie and Prima Electronics are ISO 9001 certified.
The Company believes that it has a leading position in the market for the
manufacture and sale of 3-D precision laser cutting and welding systems. The
Company's advantages are based on proprietary processes and technologies for
automated robotic systems that integrate traditional machine tool equipment with
laser, laser optics and computer technology. These robotic systems utilize
electronic process control systems that interface with CAE/CAD/CAM software to
convert engineering designs into instructions for machinery operations.
The Company, through Prima Electronics, its majority-owned subsidiary, designs
and manufactures state-of-the-art software and hardware-based industrial process
controls for the Company's equipment and for other industrial equipment
manufacturers. Industrial process controls function as the "brains" of the
machinery, directing all aspects of its operations. Prima Electronics' primary
outside customer is Atlas Copco, one of the world's leading suppliers of power
generation and pneumatic equipment.
The Company sells its Products to manufacturers of consumer durable goods such
as automobiles, trucks, appliances, farm implements and aircraft for use in
producing components that are incorporated into such manufacturer's finished
products. The Company believes that manufacturers in other industries tend to
follow the lead of the automotive industry in choosing manufacturing methods.
Accordingly, the Company has traditionally focused, and will continue to focus,
its marketing efforts on the automotive industry.
MARKET
The Company's primary market for its 3-D Products is the automotive industry.
Currently there are 40 automotive manufacturers throughout the world, of which
20 are widely recognized. Of the 20 primary automotive suppliers, 8 control
approximately 50% of the worldwide market. Industry sources project that, by
2015, an additional 160 assembly plants will be constructed outside Europe, the
United States, and Japan. This represents an increase of 80% over the current
200 assembly facilities worldwide. Moreover, these sources further indicate
that, by the year 2015, vehicle consumption in Europe, the United States and
Japan, which currently account for half of the world sales of automobiles, will
slip to approximately 34% of worldwide consumption. As a result, major
automotive manufacturers will accelerate the construction of assembly operations
outside of these territories. These new plants will be equipped with advanced
factory automation systems, potentially including those provided by the Company,
in place of traditional manufacturing and assembly technologies. Therefore, the
Company expects vigorous demand for its Products in developing markets, as well
as accelerating demand within Europe and the United States as older assembly
operations are retrofitted, relocated or replaced.
The Company expects that decision making for the purchase of capital equipment
for use in worldwide assembly operations will remain highly centralized.
Furthermore, the primary automotive manufacturers have reduced their Tier One
suppliers to approximately 1,000 vendors each, down from approximately 25,000
each ten years ago. Therefore, it is expected that the Company's sales and
marketing efforts will be focused on a limited number of manufacturers'
headquarter operations and Tier One suppliers, resulting in a more efficient
sales and marketing organization.
THE AUTOMOTIVE FABRICATION PROCESS
Automotive components have traditionally been produced through an assembly line
process utilizing tool and die equipment. Under the traditional method, raw
material is stamped or pressed into the basic shape through the use of a die
that is constructed to form the appropriate shape in the material. After the
basic shape has been formed, additional dies, along with various mechanical
machine tools, are used to stamp, cut, slot, punch and trim the appropriate
details into the component.
Although the purchase of a die for component production represents a large
capital expenditure, the duration of its use is limited because it must be
constructed to stamp particular shapes or details. When the style of a component
changes, a new die must be constructed to reflect the new shape and details of
the component. In response to this problem, manufacturers have begun to use
laser cutting systems, such as those produced by the Company, to replace the
mechanical tool and die technology traditionally used to punch, cut, slot and
trim appropriate details into automotive components after the stamping or
pressing of the initial shape. Because laser cutting systems may be reprogrammed
to cut different patterns, there is no need to purchase a new die each time the
style of a component changes. Thus, a manufacturer is not forced to undertake
large capital expenditures each time it wishes to make changes to the details of
a component.
While the ability to generate different patterns and shapes makes laser cutting
technology more cost-effective than traditional tool and die technology, its use
has been limited primarily to prototype development and limited production runs,
due to the inability of laser cutting systems to cut components at the same
speed as a mechanical die. In addition, the available laser cutting systems
products have not been designed to be installed within an assembly line for full
production runs.
PROTOTYPE DEVELOPMENT. The initial stage of manufacturing a component involves
the development of a prototype for testing and marketing purposes. During this
process, the automotive manufacturer and Tier One supplier may produce several
different versions of the prototype in succession, each version containing
refinements suggested by tests run on the earlier versions. It is
cost-prohibitive to use dies in producing these prototypes because a new die
would have to be constructed for each successive version of the prototype. Thus,
the prototype development process traditionally has involved metal-working by
hand or with small machine tools. The advent of laser technology, however, has
greatly increased the precision and efficiency with which prototypes can be
manufactured. The use of the laser avoids the natural imperfections that result
from metal working by hand or by conventional tool and die technology. Moreover,
because the laser can interface directly with CAE/CAD/CAM, there is no danger of
translation errors that may occur when the CAE/CAD/CAM design is converted into
cutting instructions. In addition, because the laser's cutting instructions are
stored in its computer operating system, it can be used to create duplicates of
the prototype without significantly increasing costs.
PRODUCTION. Following the manufacturer's approval of the prototype, full scale
production of the component begins. Traditionally, this process commences with
the casting of one die to stamp the basic shape of the component into the sheet
metal and additional dies to stamp the necessary details into the basic shape.
As discussed above, re-programmable laser cutting and welding systems may be
used to perform the precision cutting and finishing functions traditionally
performed by dies in a more cost-efficient manner. However, the use of laser
cutting systems as a replacement for tool and die technology in the precision
cutting and finishing stages of manufacturing has been limited to relatively low
volume production runs.
The Company believes that certain trends in the manufacturing industry are
causing an increasing emphasis on lower volume production runs and a decreasing
emphasis on the speed of precision cutting and finishing. These trends include:
(i) the decentralization of the production of components that make up a finished
product among a wider array of factories as a result of manufacturers' increased
reliance on the outsourcing of component production; (ii) the shift towards
just-in-time production methods and away from the stockpiling of partially
finished goods; (iii) the acceleration of the rate of change in a product's
internal components from one year's model to the next; and (iv) the use of a
larger number of small components in the design of a finished product. The
Company believes that this increasing emphasis on lower volume production runs
and decreasing emphasis on speed will result in continued increases in the
demand for laser cutting and welding systems, such as those produced by the
Company, as replacements for tool and die systems in the precision cutting and
finishing stages of manufacturing.
The advantages of laser cutting and welding technology over traditional tool and
die technology for production operations include the following:
o laser systems produce more precise structural configurations
without the imperfections inherent in tool and die
applications, resulting in fewer rejects and more efficient
assembly operations;
o the automotive industry is producing lighter and more fuel
efficient vehicles because of cost considerations and
government mandates and, as a result, automotive manufacturers
are utilizing formed steel and composite profiles that cannot
be processed by conventional tool and die technology; and
o because of the integration of CAE/CAD/CAM technologies within
the Company's Products, interruptions in the production
process caused by design errors are minimized, resulting in
better assembly fits of component parts and enhanced
structural integrity of the vehicle.
PRODUCTS
The Company sells both 2-D and 3-D Products. 2-D Products cut and weld shapes on
a flat surface, while 3-D Products trim, punch, slot and weld objects on a
three-dimensional basis. The Company's Products are based upon high-power carbon
dioxide lasers.
The term "laser" is an acronym for "light amplification by the simulated
emission of radiation." A laser converts energy into an intense beam of light
comprised of a single or limited number of wavelengths. A laser beam may be
strong enough to cut sheet metal or may be sensitive enough to perform eye
surgery.
THREE-DIMENSIONAL LASERS. The Company produces two 3-D Products -- the Rapido 5
model and the Optimo model. Both models utilize a flying optics system pursuant
to which the material to be cut remains stationary while the laser head moves to
the appropriate position for cutting. Both models are equipped with a five-axis
laser head, which permits profile cutting, i.e., cutting on three-dimensional,
rather than flat, materials. Both models have an industrial process control
system developed by Prima Electronics, which allows for the machine to either
interface with CAE/CAD/CAM software or be controlled by off-line, manual
instructions. In addition, both machines can store instructions in memory for
future repetitions. The laser head of the Rapido 5 is controlled by a fully
retracting arm, while the laser head of the Optimo is controlled by a gantry
structure which allows longer strokes than the fully retracting arm of the
Rapido. In the gantry structure, the laser head is suspended from a spanning
frame that is supported by four corner poles. The Optimo model is designed to
process large automobile body parts and to provide cutting and trimming to large
areas. The Optimo permits laser cutting and welding to five sides of the piece
(i.e., front, back, right, left, and top). The Optimo is the Company's highest
priced product because it requires more expensive installation and on-site
commissioning. The retracting arm of the Rapido 5 is a cantilever structure that
does not support as much weight as the Optimo does. The term "cantilever" refers
to the retracting arm which is supported at only one end. The cantilever
structure of the Rapido 5 permits laser cutting and welding to four sides of the
work piece (i.e., front, right, left, and top).
TWO DIMENSIONAL LASERS. The Company produces two 2-D Products - the Platino
model and the Laserwork Gold model. Both models utilize a flying optics system.
Both models have an industrial process control system developed by Prima
Electronics, which allows the machine to either interface with CAE/CAD/CAM or be
controlled by off-line, manual instructions. In addition, both machines can
store instructions in memory for future repetitions. The laser head of the
Platino is controlled by a cantilevered arm that extends over the work area. The
laser head moves along this arm in accordance with instructions and the arm
itself moves over the work area, with the laser head remaining at all times
perpendicular to the cutting surface. The laser head of Laserwork Gold is
controlled by a gantry structure. The same distinctions between the cantilever
and gantry structures as discussed above apply to the Platino and the Laserwork
Gold models.
NEW PRODUCT DEVELOPMENTS. As described above under "Market," the Company
anticipates greater demand for its Products; however, its 3-D Products must
undergo certain design changes to meet the requirements of the production
environment. The Company will embark on its "Laser On-Line" development program
to produce a family of production-oriented 3-D Products. The 3-D product family,
named "Laser-Gate," will consist of a high speed cutting and welding system of
integrated units.
INDUSTRIAL CONTROLS
Prima Electronics manufactures industrial controls. Prima Industrie uses these
controls in its Products to instruct the laser head as to the specific tasks to
be completed as well as the laser settings.
Prima Electronics also produces regulators and drives for Atlas Copco pursuant
to a supply agreement extending through 2001. The specifications and technology
for these products were developed by Prima Electronics, but are owned by Atlas
Copco, and Prima Electronics manufactures these products solely for Atlas
Copco's use in its products. The supply agreement provides for the maintenance
of rigorous quality standards.
QUALITY
Prima Industrie and Prima Electronics have each obtained certification as being
in compliance with International Organization for Standardization (ISO) 9001.
The ISO is a worldwide federation of national standards bodies, one from each of
over one hundred countries. ISO 9000 standards, of which ISO 9001 is a part, are
basic rules for quality systems, that ensure that a supplier has the capability
to produce the required goods or services and to meet fully customer expections.
ISO 9000 standards were developed to establish a common set of universally
accepted quality standards, especially for international trade. The procedure
for attaining certification is for the applicant to evaluate and revise its
quality procedures against the requirements of the applicable standard, e.g.,
ISO 9001. The applicant presents its revised quality procedures to the national
standards body for its country. Representatives of the national standards body
assess the procedures and the applicant's operations prior to certification.
Certain countries or business sectors may not accept products or services from
businesses without such certification. Series ISO 9001 provides certification
for companies that design, manufacture, install or service products. The
certification means that the production processes of Prima Industrie and Prima
Electronics incorporate quality practices, disciplines and checks and balances
on a fully documented basis.
BACKLOG
At September 30, 1997, the Company had orders for 16 Products with a value of
Lit 10.906 billion or approximately $6.317 million. This compares to a backlog
of Lit 8.304 billion, or approximately $5.441 million, on September 30, 1996,
consisting of 10 units.
STRATEGY
The Company's goal is to exploit its technological superiority to become the
leading international provider of fully integrated robotic systems for the
precision cutting and finishing stages of the manufacturing process. The Company
also intends to become a recognized supplier of industrial process controls for
the machine tool industry. The following discussion summarizes the major aspects
of the Company's corporate strategy:
o Enhance the Company's Products for Use in Higher Volume
Production Environments. The Company believes that there is a
trend in the manufacturing industry towards lower volume
production runs. This trend favors the use of laser cutting
and welding systems over tool and die technology for the
precision cutting and finishing stages of the manufacturing
process as a method of reducing production costs per unit.
The Company expects to take advantage of this trend by
enhancing its Products for use in a production environment as
part of its "Laser-On-Line" development program. Through this
program, the Company will modify its Products to make them
better able to withstand the rigors of a full production run
and will add automated loading and unloading systems to allow
the Products to be integrated into an assembly line.
o Maintain and Expand its Current Market Share in 2-D and 3-D
Products Through Aggressive Global Marketing. The Company
intends to maintain its current share of the market for both
2-D and 3-D Products through aggressive global marketing and
sales promotion. Marketing initiatives will include exhibits
at major machine tool exhibitions throughout the world,
extensive marketing and promotional efforts to introduce new
products and key account promotions.
o Market Prima Electronics' Industrial Process Controls Through
Worldwide Distribution Channels. The Company intends to
leverage the experience of Prima Electronics in providing
industrial controls to Prima Industrie and Atlas Copco by
independently marketing its state-of-the-art industrial
process control products through electronic and electrical
distribution channels worldwide. While initial marketing
efforts will focus on machine tool companies, management
believes that its industrial control products, both hardware
and software, can be utilized by virtually all flexible
manufacturing, automated production and assembly, automated
material handling, welding, and process control system
suppliers.
o Develop, as a Discrete Profit Center, Comprehensive Warranty
and Service, Training and Support, Preventive Maintenance
Programs and Upgrades for the Company's Products. The Company
expects these programs to increase its competitive position
in both the 2-D and 3-D markets by establishing a corporate
reputation for quality and service. Accordingly, the Company
intends to expand its direct support infrastructure worldwide
and expand its field service and support. The establishment
of these activities will entail recruiting and training
qualified personnel, identifying qualified independent
service organizations and building effective and highly
trained organizations that can provide service to customers
in various countries in their assigned regions.
o Expand the Licensing of its Technology for the Manufacture
and Sale of the Company's 2-D Products Outside Europe. The
Company will seek more licensing partners for its 2-D
equipment. The Company has entered into a license agreement
with Strippit for the manufacture and sale of products using
the technology for the Platino product. Moreover, the Company
has executed a license agreement with a licensee in China for
the Company's 2-D Products, subject to the approval of the
government of the People's Republic of China. See "Business
-- Licensing." Assuming the requisite approvals are obtained,
the revenues generated from this licensing program will
significantly increase total revenues. Moreover, this program
will allow the Company to take advantage of purchasing
economies of scale because subassemblies purchased by
licensees from the Company's outside suppliers will be
included in the calculation of the Company's volume
discounts. Finally, the Company expects this program to
increase its sales of 3-D Products by requiring licensees to
refer customers interested in such products to the Company.
o Achieve Vertical and Horizontal Integration Through Strategic
Acquisitions and Joint Ventures. Following this Offering, the
Company will seek to expand its operations through strategic
acquisitions throughout the world. In pursuing strategic
acquisitions, the Company will attempt to achieve both
vertical integration, through the acquisition of critical
material suppliers (e.g., laser and auxiliary equipment
suppliers), and horizontal integration, through the
acquisition of complementary businesses and products. In
addition, the Company may enter into joint ventures pursuant
to which a local manufacturer will join with the Company to
provide products to the automotive industry in the region.
RESEARCH AND DEVELOPMENT
The Company believes it has achieved a technology leadership position in the 3-D
Products market by investing heavily in research and development and by
developing higher performance products and satisfying the needs of its
customers. The Company intends to continue to invest heavily in research and
development; however, the Company's development programs do not involve the
authorship of any new technology. The Company already utilizes Intel Pentium
based hardware and Microsoft Windows and Windows NT based software; accordingly,
off-line interfaces are easily specified and developed. Prima Electronics has
developed automatic loading and unloading sequences and conveying equipment, and
these devices and technology are also readily available from third party
suppliers. For the Company, adapting automotive "prototyping" equipment to the
production environment involves only the refinement of existing bodies of
technology to a different manufacturing environment. In 1994, 1995, and 1996,
the Company spent, net of grants received, $.656 million, $.670 million, and
$1.329 million respectively. The Company received R&D grants of $.042 million in
1994, $.231 million in 1995, and $.199 million in 1996. For the year ending
December 31, 1997, the Company expects R&D expense to approximate expenditures
in 1996.
COMPETITION
The Company currently has four significant competitors in the market for 3-D
laser-cutting and welding systems, including Trumpf of Germany; Mazak and NTC,
both located in Japan; and Lumonics, Inc., a U.S. supplier of YAG based laser
cutting and welding products. With the exception of Lumonics, all of these
companies are larger than the Company and have access to greater financial,
technical and other resources than the Company. Although the Company believes
that these competitors are not yet supplying technically equivalent laser
cutting products, the Company believes that these companies will aggressively
seek larger positions in the 3-D market. To remain competitive, the Company
believes that it will be required to manufacture and deliver products to
customers on a timely basis and without significant defects and that it will
also be required to maintain a high level of investment in research and
development and in sales and marketing. In addition, the market for 3-D laser
cutting and welding equipment is still small and developing, and there can be no
assurance that larger competitors with substantially greater financial
resources, including manufacturers of 2-D laser products and other manufacturers
of industrial lasers will not attempt to enter the market.
Competition in the 2-D laser cutting and welding industry is intense,
characterized by large, multi-national corporations with significantly more
resources than the Company. The competition has achieved their successes
primarily as a result of their participation in the conventional machine tool
stamping and cutting industry. The Company enjoys no significant technological
advantage over the competitors in the 2-D marketplace; however, the Company
maintains competitive, state-of-the-art products, and has achieved, maintained
and extended its participation in the 2-D market place without the benefit of
complementary product lines or sales resources.
LICENSING
The Company has begun licensing the technology for manufacture of 2-D Products
in territories outside Europe. The first licensing agreement was reached in July
1997, with Strippit for the manufacture and sale of products using the
technology for the Platino Product. The agreement provides for an exclusive
sales territory limited to North America with a non-exclusive license for the
rest of the world, excluding Asia. The license agreement provides for an
up-front royalty payment with additional payments per machine sold, subject to a
minimum royalty payment during the period ending on December 31, 1999. Strippit
is also required to furnish to the Company information regarding potential
purchases of 3-D Products.
The Company has executed the China License with Beijing Machinery and
Electricity Institute for the manufacture and sale in China of the Company's 2-D
Laserwork Product, subject to the approval of the government of the People's
Republic of China. The China License has a term of five (5) years commencing
with the approval by the government and grants a non-exclusive license for the
manufacture and sale of the Laserwork Product in China. The China License
requires an initial payment for the License and royalty payments based upon net
sales of the Products.
EMPLOYEES
As of September 30, 1997, the Company employed 207 people on a full-time basis,
including 20 in sales offices outside Italy. The Company believes that its
relations with its employees are good. None of the employees is covered by a
collective bargaining agreement. See "Risk Factors --Dependence on Key
Personnel."
MANUFACTURING
Prima Industrie's manufacturing activities consist of assembly, integration and
testing. These activities are performed in a 72,000 square foot facility in
Turin, Italy. In order to focus on its core technology, leverage the expertise
of its key suppliers and respond more efficiently to customer demand, the
Company has outsourced some of its machining operations on certain structural
subassemblies. During the fourth quarter of 1997, the Company will finalize a
transaction with Macromeccanica pursuant to which it will sell certain equipment
used to manufacture parts for its Products to Macromeccanica. The Company will
enter into a requirements contract pursuant to which Macromeccanica will supply
such parts to the Company. Upon consummation of the transaction with
Macromeccanica, the Company will no longer machine the frame and structure
components of its Products. With the exception of smaller machining on the laser
head and other small parts, Prima Industrie will focus its manufacturing
activities primarily on assembly operations, beginning in January 1998. In the
event Macromeccanica is unable to satisfy quality standards or production
quantities, Prima Industrie will experience temporary delivery problems until
other machining subcontractors can be retained, which subcontractors are readily
available to Prima Industrie.
At present, the production capacity of Prima Industrie is approximately 100
machines per year, and it is operating at 70% of capacity. In the event that
sales increases as a result of the Company's strategic initiatives, the Company
intends to commence assembly operations in North American and Asia at the
appropriate time.
FACILITIES
Prima Industrie's headquarters and manufacturing facilities are housed in a
72,000 square foot building located in Collegno, Turin, which Prima Industrie
leases under a lease expiring in 2002. Prima Electronics' headquarters and
manufacturing facilities are housed in a 33,850 square foot building located in
Moncalieri, Turin, which Prima Electronics leases under a lease expiring in
1998. Upon expiration of the lease in 1998, Prima Electronics will acquire the
facility with the final payment under the lease. The Company maintains its U.S.
headquarters at 447 S. Sharon Amity Road, Suite 250, Charlotte, North Carolina.
Prima Industrie also leases various office spaces in France, The United Kingdom,
Spain, and the United States either directly or through wholly owned
subsidiaries.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, who have served in such
capacities since the Company was incorporated on July 29, 1997 unless otherwise
indicated, and their ages as of November 30, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Gian Mario Rossignolo 67 Chairman of the Board of
Directors
James R. Currier, Sr. 51 President, Chief Executive
Officer and Director
Gianfranco Carbonato 52 Executive Vice President, Chief
Operating Officer and Director
Giovanni Ciamaroni 52 Vice President Sales and Marketing and
Director
Michael H. Gilbert 56 Vice President Finance and
Administration,Chief Financial
Officer, Secretary and Treasurer(1)
Mario Mauri 47 Director
Hans Lennart Oscar Werthen 82 Director
Pio Pellegrini 51 Director(2)
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</TABLE>
(1) Mr. Gilbert was elected to serve in the positions shown above effective
October 1, 1997.
(2) Mr. Pellegrini was elected to serve as a member of the Board of Directors
of the Company on October 15, 1997.
The number of members of the Board of Directors is set at nine and there are
seven directors currently serving. After the closing of this Offering, the Board
of Directors intends to elect Mr. W. Edwin McMahan and Mr. Michael A. Almond to
fill these vacancies. Mr. McMahan, age 53, and Mr. Almond, age 48, have agreed
to accept the election and to serve on the Board, provided that acceptable
directors' and officers' liability insurance is in place and appropriate
indemnification agreements with the Company are obtained. It is anticipated that
Messrs. McMahan and Almond will serve as independent directors of the Company
and on the Compensation and Audit Committees of the Board of Directors, but they
have not participated in the affairs of the Company or, in any way, in the
preparation of this Prospectus.
The executive officers and directors of Prima Industrie and their ages as of
November 30, 1997, are as follows:
NAME AGE POSITION
Gianfranco Carbonato 52 Managing Director and Chief Executive
Officer
Gian Mario Rossignolo 67 Chairman of Board of Directors
Mario Mauri 47 Director
Hans Lennart Oscar Werthen 82 Vice Chairman of Board of Directors
Alberto Delle Piane 50 Deputy General Manager
The executive officers and directors of Prima Electronics and their ages as of
November 30, 1997, are as follows:
NAME AGE POSITION
Domenico Peiretti 47 Managing Director and Chief Executive Officer
Gianfranco Carbonato 52 Chairman of Board of Directors
GIAN MARIO ROSSIGNOLO, a founder of Prima Industrie, has served as Chairman of
Prima Industrie since July 1995. Prior to that he served as its Vice President
from July 1, 1985, to February 9, 1995. Mr. Rossignolo serves as a member or
chairman of the Board of Directors of seventeen European companies, including
Electrolux Zanussi S.p.A., Atlas Copco Italia S.p.A., Perstop S.p.A., Sanitari
Pozzi and Consortium, Ericsson S.p.A., SKF Industrie S.p.A., and SKF,
Incorporated. SKF Incorporated is traded on the National Market System of the
NASDAQ Stock Market, Inc.
JAMES R. CURRIER, SR., served as President of Apogee Robotics, Inc. ("Apogee"),
from October 1994 to June 1997. Apogee filed in December 1994, a petition under
Chapter 11 in the United States Bankruptcy Court for the District of Colorado.
On June 17, 1997, the proceeding was converted to a Chapter 7 case. From August
1994 to present, Mr. Currier has also served as Secretary and Treasurer of
Currier Properties, Inc., a commercial real estate company. From February 1987
to November 1992, Mr. Currier served as Executive Vice President of NDC
Automation, Inc., a publicly held factory automation company.
GIANFRANCO CARBONATO has served as Chief Executive Officer and Managing Director
of Prima Industrie since June 7, 1985. Mr. Carbonato was General Manager of
Prima Progetti from July 1977 until its merger with Prima Industrie in May 1984.
Mr. Carbonato has also served as President of Prima Electronics since April
1995.
GIOVANNI CIAMARONI has served as Managing Partner of Rimex GmbH, a technology
broker since 1993 and as a business consultant since 1991. Mr. Ciamaroni was a
founder and served as Chairman of the Board of Directors and Chief Executive
Officer from 1974 to July 1991 of Logosystem S.p.A., a company involved in
computer integrated manufacturing.
MICHAEL H. GILBERT is a certified public accountant and from May 1986 to
September 1997, was a shareholder, officer and director of Hitchner, Whitt &
Co., P.A., a firm of certified public accountants in Charlotte, North Carolina.
MARIO MAURI has served as a Director of Prima Industrie since 1995. He has also
served as Chairman of the Board of Directors and Chief Executive Officer of
Cambria Ltd. since 1990. Cambria Ltd. is a private merchant bank regulated by
IMRO headquartered in London.
HANS LENNART OSCAR WERTHEN has served as Vice Chairman of the Board of Directors
of Prima Industries since October 1995. Mr. Werthen is retired and serves as
Honorary Chairman of the Board of Directors of AB Electrolux. Prior to
retirement, Mr. Werthen served as Chairman of the Board of Directors of
Electrolux from 1991 to 1993.
PIO PELLEGRINI has served as Manager of Itainvest, a government owned investment
firm, from May 1982 to present.
DOMENICO PEIRETTI has served in various management capacities with Prima
Electronics since November 1987. In the period from 1986 to 1996, he served as
Vice-President of Prima Electronics. Since October 1987, he has served as
General Manager of Prima Electronics. Since April 1995, he has also served as
Managing Director of Prima Electronics.
ALBERTO DELLE PIANE has served as Deputy General Manager and Director of Sales
for Prima Industrie since January 26, 1994. From January 1989 to January 1994,
he served as Director of the Laser Division of Prima Industrie.
W. EDWIN MCMAHAN is a nominee for election as a director after consummation of
this Offering. Mr. McMahan has served since 1974 as Chief Executive Officer of
Little & Associates Architects, an architectural firm based in Charlotte, North
Carolina and as President of McMahan-Carver Properties, Inc., an affiliated real
estate development company.
MICHAEL A. ALMOND is a nominee for election as a director after consummation of
this Offering. Mr. Almond is an attorney and has been a member of the law firm
of Parker, Poe & Adams and Bernstein, LLP, since March 1, 1984. Mr. Almond has
specialized in the practice of international law, representing U.S. businesses
overseas and foreign businesses in the U.S.
DIRECTOR COMPENSATION
Members of the Company's Board of Directors who are employed by the Company,
Prima Industrie, Prima Electronics or affiliates do not receive compensation for
their services as directors. All other directors receive $10,000 per year, plus
expenses.
BOARD COMMITTEES
Upon completion of this Offering, the Board will have two standing committees,
the Compensation Committee and the Audit Committee. The Compensation Committee
will be responsible for reviewing the compensation of executives of the Company
and recommending changes to the Board. The Compensation Committee also will
administer The PRIMA International Group, Inc. 1997 Stock Incentive Plan. The
Compensation Committee will be composed of Messrs. McMahan and Almond.
The Audit Committee will be responsible for meeting periodically with
representatives of the Company's independent certified public accountants to
review the general scope of audit coverage, including consideration of the
Company's accounting practices and procedures and systems of internal controls,
and will report to the Board with respect thereto. The Audit Committee also will
recommend to the Board the appointment of the Company's independent auditors.
The Audit Committee will be composed of Messrs. McMahan and Almond.
EXECUTIVE COMPENSATION
The following table sets forth in summary form information concerning the
compensation awarded to, earned by, or paid for services rendered to Prima
Industrie or Prima Electronics in all capacities during the year ended December
31, 1996, by (i) the Chief Executive Officer of each entity and (ii) the most
highly compensated executive officers of either entity whose salary and bonus
for such year exceeded $100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1)(2)
NAME AND PRINCIPAL OTHER ANNUAL
POSITION YEAR SALARY($) BONUS($) COMPENSATION($)
Gianfranco Carbonato 1996 268,824(3) -- (4)
CEO Prima Industrie 1995 170,588(3) -- (4)
1994 161,765(3) -- (4)
Alberto Delle Piane 1996 126,471(3) 17,647(5) (4)
1995 123,529(3) 17,647(5) (4)
1994 97,059(3) 17,647(5) (4)
Domenico Peiretti 1996 127,647 -- (4)
CEO Prima Electronics 1995 85,882 -- (4)
1994 79,412 -- (4)
- ---------------
(1) All compensation paid in this table was denominated in Italian lire, but has
been converted to U.S. dollars at the exchange rate of 1700 Lire to the dollar.
On October 6, 1997, the exchange rate among banks selling in amounts of $1
million or more as published by the Wall Street Journal was 1722.15 Lira to the
dollar.
(2) Prima Industrie and Prima Electronics do not have incentive compensation
plans or make any form of payouts or awards under long term compensation plans.
(3) Included in salary are amounts paid to Messrs. Carbonato and Peiretti as
managing director or director fees for Prima Industrie and Prima Electronics.
(4) The Chief Executive Officer and each Named Executive Officer receive
perquisites and other personal benefits, however, the aggregate amount is less
than ten percent (10%) of the total salary and bonus shown in the table.
(5) Mr. Delle Piane receives a discretionary bonus based upon performance as
determined by the Managing Director of Prima Industrie, Mr. Carbonato.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Currier,
Ciamaroni, Carbonato and Gilbert. The employment agreements with Messrs.
Currier, Ciamaroni and Carbonato are subject to ratification by the Compensation
Committee prior to taking effect. Each employment agreement has an initial term
of three years and contains certain covenants regarding the employee's right to
compete with the Company following the termination of his employment (the
"Non-Compete Covenants"). Messrs. Currier, Ciamaroni and Carbonato will each
receive a base salary of $250,000 per year, while Mr. Gilbert will receive a
base salary of $150,000 per year. In addition, Mr. Currier is entitled to
receive a payment equal to three times his total compensation for the previous
year upon termination of his agreement after a change in control of the Company.
Messrs. Currier and Ciamaroni will also receive payments of $250,000 and
$150,000, respectively, in January of 1998 for entering into the Non-Compete
Covenants. Messrs. Carbonato and Gilbert will not receive any additional
compensation for entering into the Non-Compete Covenants. A portion of Mr.
Carbonato's salary will be paid by Prima Industrie. Under each of these
agreements, non-qualified stock options have been granted as described below.
1997 STOCK INCENTIVE PLAN
The shareholders of the Company have adopted an incentive compensation plan
entitled "The PRIMA Group International, Inc. 1997 Stock Incentive Plan" (the
"Plan"). The purpose of the Plan is to reward and provide incentives for
executive officers, key employees, non-employee directors and consultants by
providing them with an opportunity to acquire equity interests in the Company,
thereby increasing their personal interest in the success of the Company. The
purpose of the Plan is also to retain the services of executive officers and key
employees as well as to assist in attracting new executive officers and key
employees. The maximum number of shares authorized to be issued under the Plan
is 675,000 shares of Common Stock and the maximum number of shares underlying
awards that can be granted to an individual employee in a calendar year is
150,000 shares of Common Stock.
As of the date of this Prospectus, an aggregate of 350,000 shares of Common
Stock had been reserved under the Plan through the exercise of non-qualified
stock options. The following table sets forth information regarding the
outstanding options under the Plan:
Shares of
Common Stock
Underlying When Exercise
Participant Options(1) Exercisable(2) Price (3)
- ----------- ------------ -------------- ---------
James R. Currier, Sr. 30,000 1st anniversary 120%
30,000 2nd anniversary 130%
40,000 3rd anniversary 140%
Gianfranco Carbonato 30,000 1st anniversary 120%
30,000 2nd anniversary 130%
40,000 3rd anniversary 140%
Giovanni Ciamaroni 30,000 1st anniversary 120%
30,000 2nd anniversary 130%
40,000 3rd anniversary 140%
Michael H. Gilbert 20,000 1st anniversary 105%
15,000 2nd anniversary 120%
15,000 3rd anniversary 140%
- ---------------
(1) The grants have been made in aggregate totals of 100,000 to Messrs. Currier,
Carbonato and Ciamaroni and 50,000 to Mr. Gilbert. The table sets forth the
installments as they became exercisable.
(2) The stock options vest and become exercisable on the indicated anniversary
dates of this Offering.
(3) The exercise price on date of grant will be the indicated percentage of the
Offering Price.
The Plan permits the granting of stock options, including incentive stock
options ("ISOs") as defined under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and non-qualified stock options ("NQSOs") which
do not qualify as ISOs.
The Plan is administered by the Compensation Committee, which has the sole and
complete authority to select the employees (including executive officers),
directors and consultants who will receive options under the Plan. The
Compensation Committee has the authority to determine the number of stock
options to be granted to eligible individuals, whether the options will be ISOs
or NQSOs and the terms and conditions of the options (which may vary from
grantee to grantee). The Compensation Committee determines the period for which
each stock option may be exercisable, but in no event may a stock option be
exercisable more than ten years from the date the option becomes vested. The
number of shares available under the Plan and the exercise price of the options
granted thereunder are subject to adjustment by the Compensation Committee to
reflect stock splits, stock dividends, recapitalization, mergers, or other major
corporate actions.
The Compensation Committee also has the authority under the Plan to grant Stock
Appreciation Rights ("SARs") to participants. SARs confer on the holder a right
to receive, upon exercise, the excess of the fair market value of one share on
the date of exercise over the grant price of the SAR as specified by the
Committee, which price may not be less than 100% of the fair market value of one
share on the date of grant of the SAR. The grant price, term, methods of
exercise, dates of exercise, methods of settlement and any other terms and
conditions of any SAR are determined by the Committee.
The Board of Directors may discontinue, amend, or suspend the Plan in a manner
consistent with the Plan's provisions or existing agreements, provided such
changes do not violate the federal or state securities laws.
INDEMNIFICATION OF DIRECTORS AND OFFICERS AND RELATED MATTERS
The Company's Articles of Incorporation limit the personal liability of
directors and officers for monetary damages for breach of their fiduciary duties
as directors and officers (other than liabilities arising from acts or omissions
which involve intentional misconduct, fraud or knowing violations of law or the
payment of distributions in violation of the General Corporation Law of
Delaware). The Company's Bylaws provide that the Company shall indemnify
directors and officers for all costs reasonably incurred in connection with any
action, suit or proceeding in which such director or officer is made a party by
virtue of his being an officer or director of the Company, except where such
director or officer is finally adjudged to have been derelict in the performance
of his duties in such capacity. The Company has entered into indemnification
agreements with its officers and directors containing provisions which may
require the Company, among other things, to indemnify the officers and directors
against certain liabilities that may arise by reason of their status or service
as directors or officers (other than liabilities arising from willful misconduct
of a culpable nature), and to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified. At the present
time, there is no pending material litigation or proceeding involving a
director, officer, employee or other agent of the Company in which
indemnification would be required or permitted. The Company is not aware of any
threatened material litigation or proceeding which may result in a claim for
such indemnification.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements or employment agreements
with each of its directors and executive officers pursuant to which the Company
is obligated to indemnify such individuals to the fullest extent permitted by
law including certain liabilities and claims arising under the Securities Act.
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of December 18, 1997, and as
adjusted reflect the sale of the Shares offered hereby, by (i) each person with
address who is not an executive officer or director of the Company and who is
known by the Company own beneficial more than five percent (5%) of the Company's
outstanding stock, (ii) each Named Executive Officer, (iii) each of the
Company's directors and (iv) all current directors and executive officers as a
group. Except as indicated in the footnotes to this table, the person named in
the table has sole voting and investment powers with respect to all shares of
Common Stock shown as beneficially owned by them, subject to community property
laws where applicable.
Directors, Executive Officers Shares Beneficially
& 5% Shareholders(1) Owned(2) Percentage(3)
Itainvest (5)
Via Del Serafico
Rome, Italy 1,212,683 25.3%
Miojusti Invesments BV (3)(5)
3105 Stravinsky Laan Amsterdam
The Netherlands 405,036 8.4%
Gian Mario Rossignolo(5) 422,657 8.8%
James R. Currier, Sr. 150,000 3.125%
Gianfranco Carbonato(5) 199,643 4.16%
Giovanni Ciamaroni 150,000 3.125%
Michael H. Gilbert 0 0%
Mario Mauri (3) (4) 405,036 8.4%
Hans Werthen(5) 405,036 8.4%
All directors and executive
officers as a group
(seven persons) 1,732,372 36.1%
- ---------------
(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. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment powers with
respect to all the shares of common stock shown as beneficially owned by
them.
(2) For purposes of this table, the number of outstanding of the Company's
Common Stock is 4,800,000.
(3) Pursuant to the Over-Allotment Option, the Underwriters have an option
to purchase all, but not less than all, of 120,000 Shares from Miojusti,
solely for the purpose of covering over-allotments, if any. The Selling
Shareholder will only sell Shares in the Offering if the Over-Allotment
Option is exercised. See "Underwriting."
(4) Cambria 1990 Ltd. Partnership and Demercroft Holding N.V. hold 97.75%
and 2.25%, respectively, of the outstanding capital stock of Miojusti. The
general partner of Cambria 1990 Ltd. Partnership is Cambria Ltd. Cambria
1990 Ltd. Partnership's limited partners are Cambria 1990 Exempt Trust (an
entity owned 50% by Candover Investments p.l.c. and 50% by West Midland
Authorities Pension Fund), Candover Investments p.l.c. and Kleinwort Benson
Investment Trust Ltd. In addition, Demercroft Investments Ltd. is a special
limited partner of Cambria. Mario Mauri, a director of the Company, is the
Chairman of Cambria Ltd. and, accordingly, may be deemed to beneficially own
the shares of Common Stock held by Miojusti.
(5) Not including the right to acquire a portion or all of the 818,562
shares of Common Stock held by Itainvest S.p.A. See discussion under
"History of the Company -- Prima Industrie."
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 14,000,000 shares of
Common Stock, $.01 par value, and 1,000,000 shares of Preferred Stock, $.01 par
value.
The following summary of certain rights and preferences of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of the Company's Articles of Incorporation,
which are included as an exhibit to the Registration Statement of which this
Prospectus is a part and by the provisions of applicable law.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the stockholders. Subject to preferences that may be applicable
to any outstanding Preferred Stock, the holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior rights of Preferred
Stock, if any, then outstanding. The Common Stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions available to the Common Stock. All outstanding shares of
Common Stock are fully paid and non-assessable, and the shares of Common Stock
to be issued upon completion of this offering will be fully paid and
non-assessable.
At September 30, 1997, 3,000,000 shares of Common Stock were outstanding and
held of record by 12 stockholders.
PREFERRED STOCK
Pursuant to the Company's Articles of Incorporation, the Board of Directors has
the authority, without further action by the stockholders, to issue up to
1,000,000 shares of Preferred Stock in one or more series and to fix the
designations, powers, preferences, privileges, and relative participation,
optional or special rights and the qualifications, limitations or restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption and liquidation preferences, any or all of which may be greater than
the rights of the Common Stock. The Board of Directors, without stockholder
approval, can issue Preferred Stock with voting, conversion or other rights that
could adversely affect the voting power and other rights of the holders of
Common Stock. Preferred Stock could thus be issued quickly, with terms
calculated to delay or prevent a change in control of the Company or make
removal of management more difficult. Additionally, the issuance of Preferred
Stock may have the effect of decreasing the market price of the Common Stock.
Upon the completion of this Offering, there will be no shares of Preferred Stock
outstanding. The Company has no plans to issue any of the Preferred Stock. See
"Risk Factors -- Charter and Bylaw Provisions; Availability of Preferred Stock
for Issuance."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock are American Securities
Transfer & Trust, Inc.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no public market for the Common Stock of
the Company and no predictions can be made of the effect, if any, that the sale
or availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise capital through an offering of its equity
securities.
Upon completion of this Offering, the Company will have 4,800,000 shares of
Common Stock outstanding, assuming no exercise of the Over-Allotment Option. Of
these shares, the 1,800,000 shares sold in this Offering will be freely tradable
without restriction or registration under the Securities Act, except that any
shares purchased by "affiliates" of the Company, as that term is defined under
the Securities Act ("Affiliates"), may generally only be sold in compliance with
the limitations of Rule 144 described below.
The remaining 3,000,000 shares of outstanding Common Stock are deemed
"Restricted Shares" under Rule 144. The number of shares of Common Stock
available for sale in the public market is limited by restrictions under the
Securities Act and lock-up agreements under which the holders of such shares
have agreed not to sell or otherwise dispose of any of their shares for a period
of two years after the date of this Prospectus without the prior written consent
of the Underwriters and the Company; provided, that the Underwriters will waive
the restrictions contained in such agreements, on a pro rata basis to all
parties subject to such agreements, if the Company undertakes a public offering
or private placement of Common Stock and the underwriter or placement agent for
such public offering or private placement agrees that the shares of Common Stock
for which such restrictions are waived will be sold as part of the orderly
distribution of securities to be sold in such public offering or private
placement. Restricted Shares may be sold in the public market only if registered
or if they qualify for an exemption from Registration under Rules 144, 144(k) or
701 promulgated under the Securities Act.
As a result of contractual restrictions described below and the provisions of
Rules 144, 144(k) and 701, those 3,000,000 Restricted Shares will be available
for sale in the public market in the Public market without the consent of the
Company or Chatfield Dean & Co. upon expiration of their respective two-year
holding periods.
In general, under Rule 144 of the Securities Act as currently in effect,
beginning 90 days after this Offering, a person (or persons whose shares are
aggregated) who has beneficially owned "restricted" shares for at least one
year, including a person who may be deemed an Affiliate, is entitled to sell
within any three-month period a number of shares of Common Stock that does not
exceed the greater of 1% of the then outstanding shares of Common Stock of the
Company (approximately 48,000 shares after giving effect to this Offering) or
the average weekly trading volume of the Common Stock on the National Market
System of the NASDAQ Stock Market, Inc. during the four calendar weeks preceding
such sale. Sales under Rule 144 of the Securities Act are subject to certain
restrictions relating to manner of sale, notice, and the availability of current
public information about the Company. A person who is not an Affiliate at any
time during the 90 days preceding a sale, and who has beneficially owned shares
for at least one year, would be entitled to sell such shares immediately
following this Offering without regard to the volume limitations, manner of sale
provisions, or notice or other requirements of Rule 144 of the Securities Act.
No predictions can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the
prevailing market price for the Common Stock. Sales of substantial amounts of
Common Stock, or the perception that such sales might occur, could adversely
affect prevailing market prices for the Common Stock and could impair the
Company's future ability to obtain capital through an offering of equity
securities.
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement, the Underwriters named below, for whom Chatfield Dean & Co. are
serving as Representatives, have severally agreed to purchase, and the Company
has agreed to sell to the Underwriters, the respective number of shares of
Common Stock set forth opposite their names below:
NUMBER
NAME OF SHARES
Chatfield Dean & Co. _________
TOTAL 1,800,000
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Shares of Common Stock
offered hereby are subject to the approval of certain legal matters by counsel
and to certain other conditions. The Underwriters are obligated to take and pay
for all of the Shares of Common Stock offered hereby (other than the shares
covered by the Over-Allotment Option) if any are taken.
The Underwriters initially propose to offer part of the Shares of Common Stock
offered hereby directly to the public at the Offering Price set forth on the
cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ ____ per share under the Offering Price. The
Underwriters intend to offer Shares to the public and to certain dealers and
institutions in the United States and in Europe, principally Italy, Switzerland,
France and the United Kingdom. Any Underwriter may allow, and such dealers may
reallow, a concession not in excess of $ ____ per share to other Underwriters or
to certain other dealers.
The Company and the Selling Shareholder have granted to the Underwriters an
option, exercisable within 30 days of the date hereof, to purchase all, but not
less than all, of an additional 150,000 Shares from the Company and 120,000
Shares from the Selling Shareholder to cover over-allotments, if any, at the
same price per Share as the initial 1,800,000 Shares to be purchased by the
Underwriters. In the event that the Over-Allotment Option is exercised and the
Selling Shareholder does not deliver the Shares to be sold by it pursuant to the
Over-Allotment Option, or otherwise fails to satisfy any condition to closing,
the Company will sell additional Shares equal in amount to the number of Shares
that were to be sold by the Selling Shareholder pursuant to the Over-Allotment
Option. The Selling Shareholder will not sell any shares in the Offering unless
the Over-Allotment Option is exercised. To the extent that the Underwriters
exercise the Over-Allotment Option, each of the Underwriters will be committed,
subject to certain conditions, to purchase such additional Shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such Shares only to cover over-allotments made in
connection with the Offering.
The Company, the Selling Shareholder and the Underwriters have each agreed to
indemnify the other parties against certain liabilities, including liabilities
under the Securities Act.
Subject to certain limited exceptions, the Company has agreed not to offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock, or any securities convertible into or exercisable or
exchangeable for Common Stock, or enter into any swap or similar agreement that
transfers in whole or in part, the economic risk of ownership of the Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of Chatfield Dean & Co.
In connection with this Offering, the 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 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 cover all or a portion of such short
position, up to 270,000 shares of Common Stock, by exercising the Over-Allotment
Option. In addition, the Underwriters may impose "penalty bids" whereby they may
reclaim from each other (or any dealer participating in the Offering) for their
account, the selling concession with respect to Common Stock that is distributed
in the Offering but subsequently purchased for their account 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 Company has agreed to sell to the Representative, for a purchase price of
$100.00, a warrant to purchase shares of Common Stock at 150% of the Offering
Price. The total number of shares of Common Stock that may be purchased on the
exercise of the Underwriters' Warrant will be equal to 10% of the number of
shares sold in this Offering, excluding shares sold as part of the
Over-Allotment Option. Pursuant to the Underwriters' Warrant, the Underwriters
have been granted certain "piggyback" registration rights with respect to the
shares of Common Stock underlying such warrant. Such registration rights expire
seven (7) years after the effective date of this Offering. The Underwriters'
Warrant will be nonexercisable for a period of 12 months following the date of
this Prospectus and will thereafter be exercisable during the next succeeding
four-year period. During the term of the Underwriters' Warrant, the Underwriters
may transfer a portion or all of the Underwriters' Warrant to such Underwriters'
officers or partners. The Underwriters' Warrant may not be sold, transferred,
assigned or hypothecated at any time, other than to officers or partners of the
Underwriters or members of the selling group.
The Company has a financial consulting agreement with the Representative
pursuant to which the Representative will provide the Company with services,
including advising the Company in connection with possible acquisitions,
stockholder relations (including the preparation of the annual report),
long-term financial planning, corporate reorganization, expansion and capital
structure and other financial assistance. The consulting agreement has a term of
one year commencing at the completion of this Offering. The agreement states
that the Representative will be paid a consulting fee of $40,000, which will be
paid upon the consummation of this Offering.
Prior to this Offering, there has been no public market for the Common Stock.
Consequently, the Offering Price will be determined through negotiations among
the Company and the Representative. Among the factors considered in such
negotiations will be the history of, and prospects for, the Company and the
industry in which it competes, an assessment of the Company's management, the
Company's past and present operations and financial performance, its past and
present earnings and the trend of such earnings, the prospects for future
earnings of the Company, the present state of the Company's development, the
general condition of the securities markets at the time of this Offering and the
market prices of publicly traded common stocks of comparable companies in recent
periods.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Rayburn, Moon & Smith, P.A., Charlotte, North Carolina. Certain legal
matters relating to this Offering will be passed upon for the Underwriters by
Dorsey & Whitney LLP, Denver, Colorado.
EXPERTS
The financial statements of the Company as of September 30, 1997 and for the
period from inception to September 30, 1997 and the consolidated financial
statements of Prima Industrie as of December 31, 1994, 1995 and 1996 and for
each of the three years in the period ended December 31, 1996 included in this
Prospectus have been audited by Hein + Associates, LLP, independent auditors, as
stated in their report appearing herein, and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1, including amendments
thereto, under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus omits certain information contained in the
Registration Statement, and reference is made to the Registration Statement and
the exhibits and schedules thereto for further information with respect to the
Company and the Common Stock offered hereby. Statements contained herein
concerning the provisions of any documents are not necessarily complete, and in
each instance reference is made to the copy of such document filed as an exhibit
to the Registration Statement. Each such statement is qualified in its entirety
by such reference. The Registration Statement, including exhibits and schedules
filed therewith, may be inspected without charge at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of all or any part thereof may
be obtained from such office upon payment of the prescribed fees. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the site is http://www.sec.gov.
The Company intends to furnish its stockholders annual reports containing
consolidated financial statements audited by its independent auditors.
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
THE PRIMA GROUP INTERNATIONAL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
PRO FORMA COMBINED FINANCIAL INFORMATION
<S> <C>
INTRODUCTION ........................................................................................................F-2
PRO FORMA COMBINED BALANCE SHEET - September 30, 1997................................................................F-3
PRO FORMA COMBINED STATEMENT OF OPERATIONS - For the Year Ended December 31, 1996....................................F-4
PRO FORMA COMBINED STATEMENT OF OPERATIONS - For the Nine Months Ended September 30, 1997............................F-5
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION....................................................................F-6
THE PRIMA GROUP INTERNATIONAL, INC.
INDEPENDENT AUDITOR'S REPORT.........................................................................................F-7
BALANCE SHEET - September 30, 1997...................................................................................F-8
STATEMENT OF STOCKHOLDERS' EQUITY - For the Period from Inception (July 29, 1997)
to September 30, 1997.......................................................................................F-9
STATEMENT OF CASH FLOWS - For the Period from Inception (July 29, 1997)
to September 30, 1997......................................................................................F-10
NOTES TO FINANCIAL STATEMENTS.......................................................................................F-11
PRIMA INDUSTRIE S.P.A.
INDEPENDENT AUDITOR'S REPORT........................................................................................F-13
CONSOLIDATED BALANCE SHEETS - As of September 30, 1997 (Unaudited), and December 31, 1996
and 1995...................................................................................................F-14
CONSOLIDATED STATEMENTS OF OPERATIONS - For the Nine Months Ended September 30, 1997
and 1996, (Unaudited) and for the Years Ended December 31, 1996, 1995, and 1994............................F-15
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - For the Period from January 1, 1994
to September 30, 1997 (Unaudited)..........................................................................F-16
CONSOLIDATED STATEMENTS OF CASH FLOWS - For the Nine Months Ended September 30, 1997
and 1996 (Unaudited), and for the Years Ended December 31, 1996, 1995, and 1994............................F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..........................................................................F-19
</TABLE>
F-1
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
PRO FORMA COMBINED FINANCIAL INFORMATION
The Prima Group International, Inc. (PRIMA) has entered into a subscription
agreement with the shareholders of Prima Industrie S.p.A. (Prima Industrie)
whereby, prior to the effective date of Prima's public offering, PRIMA will
acquire substantially all of the outstanding shares of Industrie in exchange for
2,700,000 shares of PRIMA.
For accounting purposes, the acquisition of Industrie will be accounted for as a
recapitalization of Prima Industrie, with no goodwill or other intangibles
recorded, as PRIMA has no operations and the shareholders of Prima Industrie
will have effective control of the combined entity.
The accompanying unaudited pro forma balance sheet combines the September 30,
1997 balance sheets of Prima Industrie and PRIMA as if the transaction had
occurred on that date.
The accompanying unaudited pro forma statements of operations combine the
operations of Prima Industrie and PRIMA for the year ended December 31, 1996 and
the nine months ended September 30, 1997, as if the transaction had occurred as
of the beginning of the periods presented. PRIMA had no operations during these
periods.
These statements are not necessarily indicative of future operations or the
actual results that would have occurred had the transaction been consummated at
the beginning of the periods indicated.
The unaudited pro forma combined financial statements should be read in
conjunction with the historical financial statements and notes thereto, included
elsewhere in this document.
F-2
<PAGE>
<TABLE>
<CAPTION>
THE PRIMA GROUP INTERNATIONAL, INC.
PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
PRIMA PRO FORMA PRO FORMA
PRIMA INDUSTRIE ADJUSTMENTS COMBINED (a)
------- --------- ------------ ---------------
ASSETS
-------
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 9 $216 $ - $ 225
Trade accounts receivable, net of allowance of
$350 (unaudited), $426, and $772, respectively - 16,701 - 16,701
Other accounts receivable - 3,367 3,367
Inventories - 8,548 8,548
Other - 466 466
---- ---- ---- ----
Total current assets 9 29,298 29,307
PROPERTY, PLANT AND EQUIPMENT, net 1,343 - 1,343
DEFERRED OFFERING COSTS 91 - - 91
PATENTS AND OTHER INTANGIBLE ASSETS, net - 335 - 335
INVESTMENTS AND OTHER ASSETS - 743 - 743
ADVANCES TO AFFILIATE - 100 (100)(b) -
--------- -------- ---------- ----------
TOTAL ASSETS $100 $31,819 $(100) $31,819
=========== ========== =========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C> <C> <C>
Current portion of notes payable and
long-term debt $ - $ 9,601 $ - $ 9,601
Accounts payable - 9,272 - 9,272
Customer deposits - 1,625 - 1,625
Other accrued expenses and liabilities - 2,971 - 2,971
Deferred income - - - -
Income taxes payable - 240 - 240
Advances from affiliate 100 - (100)(b) -
------- --------- ------------ --------------
Total current liabilities 100 23,709 (100) 23,709
LONG-TERM DEBT - 778 - 778
EMPLOYEE TERMINATION ACCRUAL - 2,612 - 2,612
MINORITY INTEREST - 606 - 606
STOCKHOLDERS' EQUITY:
Common stock 3 27 - 30
Additional paid-in capital - 13,775 - 13,775
Foreign currency translation adjustments - (269) - (269)
Common stock subscriptions receivable (3) - - (3)
Accumulated deficit - (9,419) - (9,419)
------ ---------- --------- ---------------
Total stockholders' equity - 4,114 - 4,114
------- --------- ---------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $100 $31,819 $(100) $31,819
======== =========== =========== ===============
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
<TABLE>
<CAPTION>
THE PRIMA GROUP INTERNATIONAL, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
PRIMA PRO FORMA PRO FORMA
PRIMA INDUSTRIE ADJUSTMENTS COMBINED
-------- ------------ -------------- -----------
REVENUES:
<S> <C> <C>
Net sales $ $ 41,108 $ $ 41,108
Other operating revenue 1,207 1,207
------- --------- ----------- ---------
Total revenues 42,315 42,315
COSTS AND EXPENSES:
Cost of goods sold 34,357 34,357
Research and development costs 1,329 1,329
Selling, general and administrative
costs 5,218 783(c) 6,001
---- --------- --------- ---------
Total costs and expenses 40,904 783 41,687
---- --------- --------- ---------
OPERATING INCOME 1,411 628
OTHER INCOME (EXPENSE):
Interest and other income 818 818
Gain on sale of Sapri 1,059 1,059
Gain (loss) on foreign exchange 215 215
Interest expense (1,375) (1,375)
Other expenses (391) (391)
-------- --------- --------
326 326
------- --------- -------
INCOME (LOSS) BEFORE
INCOME TAXES 1,737 (783) 954
CURRENT INCOME TAXES (189) (189)
MINORITY INTEREST (213) (213)
--------- ---------- -------- ----
NET INCOME $ $1,335 $(783) $552
======== ========= ====== ====
================================================================== ============= ====================================
================================================================== ============= ====================================
PRO FORMA NET INCOME PER SHARE $ $.44 $.18
======== ==== ====
================================================================== ============= ====================================
================================================================== ============= ====================================
PRO FORMA WEIGHTED AVERAGE 3,000,000 3,000,000
======== =========== =============
COMMON SHARES OUTSTANDING
================================================================== ============= ====================================
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
<TABLE>
<CAPTION>
THE PRIMA GROUP INTERNATIONAL, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
PRIMA PRO FORMA PRO FORMA
PRIMA INDUSTRIE ADJUSTMENTS COMBINED
-------- ------------ -------------- ----------
REVENUES:
<S> <C> <C>
Net sales $ $ 29,688 $ $ 29,688
Other operating revenue 341 341
---- ------- ---------- -------
Total revenues 30,029 30,029
COSTS AND EXPENSES:
Cost of goods sold 24,353 24,353
Research and development costs 977 977
Selling, general and administrative
costs 4,025 587 (c) 4,612
------- --------- --------- --------
Total costs and expenses 29,355 587 29,942
---- ---------- --------- ---------
OPERATING INCOME 674 87
OTHER INCOME (EXPENSE):
Interest and other income 313 313
Gain on sale of Sapri - -
Gain (loss) on foreign exchange (46) (46)
Interest expense (855) (855)
Other expenses - -
---- --------- -----
(588) (588)
---- ---- ----
INCOME (LOSS) BEFORE
INCOME TAXES 86 (587) (501)
CURRENT INCOME TAXES (243) (243)
MINORITY INTEREST (201) (201)
---- ---- ---- ----
NET INCOME (LOSS) $ $(358) $(587) $(945)
======= ===== ===== =====
================================================================== ============= ====================================
================================================================== ============= ====================================
PRO FORMA NET INCOME (LOSS) (.32)
=========
PER SHARE $ $(.12) $
======= ======= =========
================================================================== ============= ====================================
================================================================== ============= ====================================
PRO FORMA WEIGHTED AVERAGE 3,000,000 3,000,000
==== ========= =========
COMMON SHARES OUTSTANDING
================================================================== ============= ====================================
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
(a) To reflect the exchange of 2,700,000 shares of PRIMA common stock for
substantially 100% of the outstanding shares of Prima Industrie. No entry
is required as this transaction will be accounted for as a
recapitalization of Prima Industrie, and the equity section of the
historical financial statements has been recast to reflect the
recapitalization.
(b) To eliminate intercompany balances.
(c) To reflect compensation expense pursuant to employment agreements with the
officers of PRIMA.
F-6
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
The PRIMA Group International, Inc.
Charlotte, North Carolina
We have audited the accompanying balance sheet of The PRIMA Group International,
Inc. (a development stage enterprise) as of September 30, 1997, and the related
statements of stockholders' equity and cash flows for the period from inception
July 29, 1997 through September 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The PRIMA Group International,
Inc. as of September 30, 1997, and its cash flows for the period from inception
July 29, 1997 through September 30, 1997, in conformity with generally accepted
accounting principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
December 18, 1997
F-7
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
($ IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, PRO FORMA
1997 UNAUDITED
(Note 4)
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 9
DEFERRED OFFERING COSTS 91
TOTAL ASSETS $ 100
=====
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES -
Advances from affiliate $ 100
COMMITMENTS (Notes 3 and 4)
STOCKHOLDERS' EQUITY:
Preferred stock, .01 par value, 1,000,000 shares authorized, no
shares issued - $-
Common stock, .01 par value, 14,000,000 shares authorized,
300,000 shares issued and outstanding, 3,000,000 shares pro
forma 3 30
Additional paid-in capital - 13,775
Common stock subscriptions receivable (3) -
Foreign currency translation adjustments - (269)
Accumulated deficit - (9,419)
----- ------
Total stockholders' equity - 4,117
----- -----
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 100
=====
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-8
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JULY 29, 1997) TO SEPTEMBER 30, 1997
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Total
Common Stock Subscriptions Accumulated Stockholder's
Shares Amount Receivable Deficit Equity
<S> <C> <C> <C>
BALANCES, July 29, 1997 - $- $- $- $-
Issuance of common stock 300,000 3 (3) - -
Net loss - - - - -
----- ----- ------ ------ --
BALANCES, September 30, 1997 300,000 $ 3 $ (3) $- $-
======= ===== ====== ====== ==
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-9
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JULY 29, 1997) TO SEPTEMBER 30, 1997
($ IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliate $ 100
Increase in deferred offering costs (91)
-----
Net cash provided by financing activities 9
-----
NET CHANGE IN CASH 9
CASH, beginning of period -
-----
CASH, end of period $ 9
=====
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-10
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF OPERATIONS - The PRIMA Group International, Inc. ("PRIMA" or the
"Company") was formed on July 29, 1997 for the purpose of acquiring
substantially all of the outstanding common stock of Prima Industrie S.p.A.
(Prima Industrie). The Company has had no operations through September 30,
1997.
USE OF ESTIMATES - The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
requires the Company's management to make estimates and assumptions that
affect the amounts reported in these financial statements and accompanying
notes. Actual results could differ from those estimates.
INCOME TAXES - The Company accounts for income taxes under the liability
method, which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statements and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse.
DEFERRED OFFERING COSTS - Direct costs incurred by the Company in
connection with its proposed initial public offering have been deferred,
and will be charged against the proceeds of the offering when completed.
Should the offering not be completed, such costs will be charged to
expense.
2. ADVANCES FROM AFFILIATE:
Advances from affiliate represents non-interest bearing advances from Prima
Industrie. These advances have been used to pay costs associated with the
Company's proposed initial public offering.
3. COMMITMENTS:
STOCK OPTION PLAN - The Company has proposed a 1997 Stock Incentive Plan,
under which 675,000 shares will be authorized for future issuance. The
Company has agreed to grant a total of 350,000 options under
F-11
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
the plan to three officers of the Company and an officer of Prima
Industrie. Following is a summary of options to be granted under the plan:
Weighted Average
When Exercise
Number of Shares Exercisable(1) Price(2)
20,000 1st Anniversary 105%
90,000 1st Anniversary 120%
15,000 2nd Anniversary 120%
90,000 2nd Anniversary 130%
15,000 3rd Anniversary 140%
120,000 3rd Anniversary 140%
- ------- ---
350,000 135%
======= ===
------------------------
(1)The stock options will vest and become exercisable upon
anniversary dates of the public offering.
(2)The exercise price will be a percentage of the public offering
price.
EMPLOYMENT AGREEMENTS - The Company has agreed to enter into employment
agreements with three officers, effective upon closing of the proposed
public offering. These agreements call for salaries of $250,000, $250,000,
and $150,000, respectively, per year for a period of three years. Two of
the officers will also receive payments of $250,000 and $150,000,
respectively, in 1998 for entering into non-compete covenants under their
employment agreements. These payments are subject to a three-year vesting
period.
OFFICE LEASE - The Company has entered into an office sublease with an
entity owned by an officer and his spouse, for the period from October 1,
1997 to June 30, 1999. The lease provides for monthly payments of $1,805
commencing December 1997 through June 1998 and $1,895 commencing July 1998
through June 1999. It also provides for additional rent of $800 per month
for office furniture and equipment.
4. SUBSEQUENT EVENTS:
The Company has entered into a letter of intent with an underwriter for an
initial public offering (IPO) of 1,800,000 shares of common stock. The
Company has also agreed to enter into a subscription agreement with the
stockholders of Prima Industrie, whereby prior to the closing of the IPO,
the Company would exchange 2,700,000 shares of stock for substantially 100%
of the outstanding shares of Prima Industrie. The unaudited pro forma
financial information presented on the face of the accompanying balance
sheet reflects the issuance of these shares in exchange for the net equity
of Prima Industrie as of September 30, 1997. This transaction will be
accounted for as a recapitalization of Industrie in a manner similar to a
reverse acquisition, in which the transaction is treated as the issuance of
stock by Prima Industrie for the net assets of PRIMA, and no goodwill or
other intangibles will be recorded.
F-12
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Prima Industrie S.p.A.
Turin, Italy
We have audited the accompanying consolidated balance sheets of Prima Industrie
S.p.A. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Prima Industrie
S.p.A. and subsidiaries as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
October 7, 1997
F-13
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
September 30, DECEMBER 31,
1997 1996 1995
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 216 $ 585 $ 804
Trade accounts receivable, net of allowance of $350
(unaudited), $426, and $772, respectively 16,701 21,244 17,966
Other accounts receivable 3,367 3,127 3,970
Inventories 8,548 7,949 8,412
Prepaid expenses and other current assets 466 872 130
---- ---- ----
Total current assets 29,298 33,777 31,282
PROPERTY, PLANT AND EQUIPMENT 7,011 7,612 7,583
Less accumulated depreciation (5,668) (5,966) (5,679)
------ ------ ------
Property, plant and equipment, net 1,343 1,646 1,904
PATENTS AND OTHER INTANGIBLE ASSETS, net 335 339 239
INVESTMENTS AND OTHER ASSETS 743 590 1,843
ADVANCES TO AFFILIATE 100 - -
------ ----- -------
TOTAL ASSETS $31,819 $36,352 $35,268
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable and long-term debt $ 9,601 $ 10,276 $10,331
Accounts payable 9,272 12,721 11,206
Customer deposits 1,625 506 1,726
Other accrued expenses and liabilities 2,971 3,210 4,183
Deferred income - 559 230
Income taxes payable 240 185 32
------ ------ ------
Total current liabilities 23,709 27,457 27,708
LONG-TERM DEBT 778 948 1,347
EMPLOYEE TERMINATION ACCRUAL 2,612 2,655 2,663
MINORITY INTEREST 606 548 319
COMMITMENTS AND CONTINGENCIES (Notes 2 and 12)
STOCKHOLDERS' EQUITY:
Common stock, .01 par value, 14,000,000 shares
authorized, 2,700,000 shares issued and outstanding 27 27 27
Additional paid-in capital 13,775 13,775 13,775
Foreign currency translation adjustments (269) 3 (175)
Accumulated deficit (9,419) (9,061) (10,396)
-------- ---------- -------
Total stockholders' equity 4,114 4,744 3,231
-------- ---------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $31,819 $36,352 $35,268
======= ======= =======
=========================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-14
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------------ -----------------------------------------
1997 1996 1996 1995 1994
-------------- -------------- ------------- -------------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Net sales $ 29,688 $ 26,052 $ 41,108 $ 37,356 $ 27,774
Other operating revenue 341 915 1,207 1,204 622
-------------- -------------- ------------- -------------- ---------
Total revenues 30,029 26,967 42,315 38,560 28,396
COSTS AND EXPENSES:
Cost of goods sold 24,353 22,177 34,357 32,565 27,373
Research and development costs 977 970 1,329 670 656
Selling, general and administrative
costs 4,025 3,421 5,218 5,250 4,165
-------------- -------------- ------------- -------------- ---------
Total costs and expenses 29,355 26,568 40,904 38,485 32,194
-------------- -------------- ------------- -------------- ---------
OPERATING INCOME 674 399 1,411 75 (3,798)
OTHER INCOME (EXPENSE):
Interest and other income 313 496 818 776 508
Gain on sale of Sapri -- 1,059 1,059 -- --
Gain (loss) on foreign exchange (46) 1 215 (618) (165)
Interest expense (855) (911) (1,375) (2,460) (1,978)
Other expenses -- -- (391) -- (2)
-------------- -------------- ------------- -------------- ---------
(588) 645 326 (2,302) (1,637)
-------------- -------------- ------------- -------------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES 86 1,044 1,737 (2,227) (5,435)
CURRENT INCOME TAXES (243) (100) (189) (43) (4)
MINORITY INTEREST (201) (196) (213) (130) 169
-------------- -------------- ------------- -------------- ---------
NET INCOME (LOSS) $ (358) $ 748 $ 1,335 $ (2,400) $ (5,270)
============== ============== ============= ============= ===========
PRO FORMA NET INCOME (LOSS)
PER SHARE $ (.12) $ .25 $ .44 $ (1.19) $ (2.34)
PRO FORMA WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 3,000,000 3,000,000 3,000,000 2,021,000 2,254,000
============== ============== ============= ============= ===========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-15
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1994 TO SEPTEMBER 30, 1997
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
Foreign
Additional Currency Total
COMMON STOCK Paid-In Translation Accumulated Stockholders'
Shares Amount Capital Adjustments Deficit Equity
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, January 1, 1994 2,032,605 $ 20 $5,186 $(111) $(2,726) $2,369
Shares canceled (1,903,111) (19) 19 - - -
Foreign currency translation adjustments 185 185
Net loss - - - - (5,270) (5,270)
-----------------------------------------------------------------------------------
BALANCES, December 31, 1994 129,494 1 5,205 74 (7,996) (2,716)
Forgiveness of debt from stockholder - - 1,860 - - 1,860
Common shares issued 2,570,506 26 6,710 - - 6,736
Foreign currency translation adjustments - - - (249) - (249)
Net loss - - - - (2,400) (2,400)
-----------------------------------------------------------------------------------
BALANCES, December 31, 1995 2,700,000 27 13,775 (175) (10,396) 3,231
Foreign currency translation adjustments - - - 178 - 178
Net income - - - - 1,335 1,335
-----------------------------------------------------------------------------------
BALANCES, December 31, 1996 2,700,000 27 13,775 3 (9,061) 4,744
Foreign currency translation adjustments
(unaudited) - - - (272) - (272)
Net loss (unaudited) - - - - (358) (358)
-----------------------------------------------------------------------------------
BALANCES, September 30, 1997 (Unaudited) 2,700,000 $ 27 $13,775 $(269) $(9,419) $4,114
==================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-16
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
--------------------------- -------------------------------------
1997 1996 1996 1995 1994
------------- ------------ ----------- ------------ --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ (358) $748 $ 1,335 $(2,400) $(5,270)
Adjustments to reconcile to cash from
operating activities:
Depreciation and amortization 341 356 745 839 742
(Gain) loss on sale of assets, net - (1,059) (708) (40) -
(Gain) loss on foreign exchange 46 (1) (215) 618 165
Changes in:
Receivab1es 1,733 5,206 (1,214) (5,159) (261)
Inventory (1,462) 225 933 434 (1,316)
Other assets 316 (415) (736) 168 1,032
Account payable, accrued
liabilities, and customer deposits (771) (4,698) (929) 3,523 2,593
Deferred income (505) (275) 317 228 -
Taxes payable 76 97 151 32 -
Employee termination accrual 242 (253) (156) (80) 308
Minority interest 117 195 212 177 (283)
Other 169 2 - - -
Net cash provided by (used in)
operating activities (56) 128 (265) (1,660) (2,290)
CASH FLOW FROM INVESTING
ACTIVITIES:
Payments for property, plant and
equipment (211) (263) (231) (1,452) (200)
Additions to patent and other intangibles (32) - (288) (49) (149)
Proceeds from sale of property, plant
and equipment - 140 52 647 657
Additions to investments and other
assets (218) (359) - - -
Proceeds from sale of investments - 640 1,063 325 -
Net cash provided by (used in) ------ ----- ----- --- ----
investing activities (461) 158 596 (529) 308
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
F-17
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
--------------------------- -------------------------------------
1997 1996 1996 1995 1994
------------- ------------ ----------- ------------ --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net changes in short-term debt 317 (996) (384) (2,398) 1,095
Additions to long-term debt 290 354 565 620 1,758
Repayments of long-term debt (254) (462) (992) (1,683) (2,592)
Advances to affiliate (100) - - - -
Proceeds from issuance of common
stock - - - 6,469 -
Net cash provided by (used in) ------ ------ ----- ------ ------
financing activities 253 (1,104) (811) 3,008 261
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS (105) 38 261 (635) (177)
------ ------ ----- ------ ------
NET CHANGE IN CASH AND CASH
EQUIVALENTS (369) (780) (219) 184 (1,898)
CASH AND CASH EQUIVALENTS
beginning of period 585 804 804 620 2,518
------ ------ ----- ------ ------
CASH AND CASH EQUIVALENTS,
end of period $216 $24 $585 $804 $620
------ ------ ----- ------ ------
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $1,421 $2,603 $1,945
Cash paid for income taxes 325 11 4
Non-cash investing and financing
activities-
Forgiveness of debt by stockholder 1,860
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
F-18
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR PERIODS SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF OPERATIONS - Prima Industrie S.p.A. ("Prima
Industrie" or "the Company") manufactures
software-controlled, robotic laser cutting and welding
systems. The Company, through Prima Electronics S.p.A.
(Prima Electronics), a 60% owned subsidiary, also designs
and manufactures electronic industrial process controls
for its own equipment and for other industrial equipment
manufacturers. The Company's manufacturing operations are
located in Turin, Italy, and its customers include major
automotive manufacturers in Europe and North America.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES - The
accompanying financial statements have been prepared in
accordance with generally accepted accounting principles
in the United States.
PRINCIPLES OF CONSOLIDATION - The consolidated financial
statements include the accounts of the Company and its
majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in
consolidation.
USE OF ESTIMATES - The preparation of the Company's
consolidated financial statements in conformity with
generally accepted accounting principles requires the
Company's management to make estimates and assumptions
that affect the amounts reported in these financial
statements and accompanying notes. Actual results could
differ from those estimates.
EARNINGS PER SHARE - Earnings per share is based on the
weighted average number of shares outstanding. All share
and per share data has been restated to reflect the
exchange of the existing shares for 2,700,000 shares of
the Prima Group International, Inc. as described in Note
15. Pursuant to Staff Accounting Bulletin No. 64, the
Company has included in pro forma weighted average shares
for all periods 300,000 shares of Prima Group issued
within one year of the proposed public offering.
CASH EQUIVALENTS - The Company considers all highly liquid
debt instruments purchased with an original maturity of
three months or less to be cash equivalents.
INVENTORIES - Inventories are stated at the lower of cost
or market, determined by the average cost method.
PROPERTY AND EQUIPMENT - Property and equipment are stated
at cost. Depreciation of property and equipment is
calculated using the straight-line method over the
estimated useful lives (ranging from 4 to 10 years) of the
respective assets. The cost of normal maintenance and
repairs is charged to operating expenses as incurred.
Material expenditures which increase the life of an asset
are capitalized and depreciated over the estimated
remaining useful life of the asset. The cost of properties
sold, or otherwise disposed of, and the related
accumulated depreciation or amortization are removed from
the accounts, and any gains or losses are reflected in
current operations.
IMPAIRMENT OF LONG-LIVED ASSETS - The Company evaluates
the carrying value of property, plant and equipment,
intangibles, investments, and other long-lived assets when
facts and circumstances indicate that the carrying amount
of an asset may not be recoverable. In such an instance,
if the estimated future
F-19
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR PERIODS SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
undiscounted cash flows are less than the carrying amount,
impairment is recorded based on an estimate of future
discounted cash flows.
PATENTS AND OTHER INTANGIBLE ASSETS - Patents and other
intangible assets are amortized on the straight-line
method over their estimated useful life of 5 years.
INVESTMENTS IN DEBT AND EQUITY SECURITIES - Debt
securities are generally classified as held to maturity
due to their short-term nature and the fact that they are
pledged as collateral for a loan. Held to maturity
securities are carried at cost, which approximates fair
value. Equity securities are classified as available for
sale, and are carried at estimated fair value. Unrealized
gains or losses are included in retained earnings.
Realized gains or losses are included in other income.
INCOME RECOGNITION - Income related to sales of equipment
and parts is recognized upon shipment.
OTHER OPERATING REVENUE - Other operating revenue consists
primarily of Italian government grants received for
completed research and development projects and in the
nine months ended September 30, 1997, license fees of
approximately $114,000.
INCOME TAXES - The Company accounts for income taxes under
the liability method, which requires recognition of
deferred tax assets and liabilities for the expected
future tax consequences of events that have been included
in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined
based on the difference between the financial statements
and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are
expected to reverse.
EMPLOYEE TERMINATION ACCRUAL - The Company's employees are
eligible, immediately upon termination, for severance pay
pursuant to Italian law. This entitlement is approximately
1 month's pay for each year of service, adjusted for
inflation. The Company accrues a liability for such
employee termination obligations, net of applicable
advances, as provided by law. The amount accrued at each
balance sheet date reflects the aggregate liability for
all employees, if terminated. The expense related to this
plan was $531,000, $654,000, and $469,000 for 1996, 1995,
and 1994, respectively.
RESEARCH AND DEVELOPMENT COSTS - Research and development
costs, net of grants received from Italian government
agencies as reimbursement for current project costs, are
charged to operations in the period incurred.
FOREIGN CURRENCY TRANSLATION - The Company's functional
currency is the Italian lire. Gains and losses from the
effects of exchange rate fluctuations on transactions
denominated in foreign currencies are included in results
of operations. Assets and liabilities of the Company's
foreign subsidiaries are translated into Italian lire at
period-end exchange rates, and their revenues and expenses
are translated at average exchange rates for the period.
Translation adjustments are accumulated in a separate com
ponent of stockholders' equity until a foreign business is
sold or substantially liquidated.
F-20
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR PERIODS SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
For United States reporting purposes, the financial
statements have been translated from Italian lire into
U.S. dollars. Assets and liabilities were translated at
the exchange rate at the applicable balance sheet date.
Revenues and expenses were translated at average exchange
rates for the period. All translation effects of exchange
rate changes are included as a separate component of
stockholders' equity.
UNAUDITED INFORMATION - The consolidated balance sheet as
of September 30, 1997 and the consolidated statements of
operations for the nine month periods ended September 30,
1997 and 1996 were taken from the Company's books and
records without audit. However, in the opinion of
management, such information includes all adjustments
(consisting only of normal recurring accruals) which are
necessary to properly reflect the consolidated financial
position of the Company as of September 30, 1997 and the
results of operations for the nine months ended September
30, 1997 and 1996.
IMPACT OF RECENTLY ISSUED STANDARDS - Statement of
Financial Accounting Standards 128, "Earnings per Share"
and Statement of Financial Accounting Standards 129,
"Disclosure of Information About an Entity's Capital
Structure." Statement 128 provides a different method of
calculating earnings per share than is currently used in
accordance with Accounting Principles Board Opinion 15,
"Earnings per Share." Statement 128 provides for the
calculation of "basic" and "diluted" earnings per share.
Basic earnings per share includes no dilution and is
computed by dividing income available to common
shareholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities that
could share in the earnings of an entity, similar to fully
diluted earnings per share. Statement 129 establishes
standards for disclosing information about an entity's
capital structure. Statements 128 and 129 are effective
for financial statements issued for periods ending after
December 15, 1997. Their implementation is not expected to
have a material effect on the consolidated financial
statements.
Statement of Financial Accounting Standards 130,
"Reporting Comprehensive Income" and Statement of
Financial Accounting Standards 131, "Disclosures About
Segments of an Enterprise and Related Information."
Statement 130 establishes standards for reporting and
display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to
include all changes in equity except those resulting from
investments by owners and distributions to owners. Among
other disclosures, Statement 130 requires that all items
that are required to be recognized under current
accounting standards as components of comprehensive income
be reported in a financial statement that displays with
the same prominence as other financial statements.
Statement 131 supersedes Statement of Financial Accounting
Standards 14, "Financial Reporting for Segments of a
Business Enterprise." Statement 131 establishes standards
on the way that public companies report financial
information about operating segments in annual financial
statements and requires reporting of selected information
about operating segments in interim financial statements
issued to the public. It also establishes standards for
disclosures regarding products and services, geographic
areas, and major customers. Statement 131 defines segments
as components of a company about which separate financial
information is available that is evaluated regularly by
the chief operating decision maker in deciding how to
allocate resources and in assessing performance.
Statements 130 and 131 are effective for financial
statements for periods beginning after December 15, 1997
and require comparative information for earlier years to
be restated. Because of the recent issuance
F-21
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR PERIODS SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
of these standards, management has been unable to fully
evaluate the impact, if any, the standards may have on the
future financial statement disclosures. Management
believes that the operations of Prima Electronics would
presently comprise a separate segment as defined by
Statement 131. Results of operations and financial
position will be unaffected by implementation of these
standards.
2. LIQUIDITY:
The Company has incurred net losses in two of the past
three years and has had negative cash flows from
operations. The Company's working capital needs have been
funded primarily through bank lines-of-credit. In order to
fund the Company's plans for growth and related research
and development expenditures, additional equity or debt
funding will be necessary. Management believes that the
proceeds of the planned public offering will be adequate
for this purpose. If the public offering is not
successful, management's plans include pursuing long-term
debt financing or changes in the planned rate of growth.
3. OTHER RECEIVABLES:
Other receivables consist of the following:
DECEMBER 31,
1996 1995
($ in 000's)
Tax refunds $ 2,774 $ 3,041
Other, primarily research and
development grants 353 929
-----------------------------
Total $ 3,127 $ 3,970
========= =========
-----------------------------
4. INVENTORIES:
Inventories consist of the following:
DECEMBER 31,
1996 1995
($ in 000's)
Raw materials $ 5,604 $ 4,737
Work-in-progress 1,366 1,610
Finished goods 979 2,065
------------------------------
Total $ 7,949 $ 8,412
========= =========
F-22
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR PERIODS SUBSEQUENT TO DECEMBER 31, 1997 IS UNAUDITED)
5. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
DECEMBER 31,
1996 1995
($ in 000's)
Land and leasehold improvements $ 1,084 $ 1,053
Machinery and equipment 4,819 4,830
Office furniture and fixtures 1,709 1,700
---------------------------
Total $ 7,612 $ 7,583
========= =========
6. INVESTMENTS AND OTHER ASSETS:
Investments and other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
($ in 000's)
<S> <C> <C>
Treasury bonds and certificates of deposit $ 590 $ 774
Investments in and receivables from unconsolidated
subsidiaries - 1,050
Other - 19
----------------------------
Total $ 590 $ 1,843
========= =========
</TABLE>
7. NOTES PAYABLE AND LONG-TERM DEBT:
Notes payable and long-term debt consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
($ in 000's)
<S> <C> <C>
Borrowings under $2,641,000 bank line-of-credit, with interest
at prime plus .5%*, without collateral. $ 2,864 $2,793
</TABLE>
F-22
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR PERIODS SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
------------- -------------
($ in 000's)
<S> <C> <C>
Borrowings under $10,163,000 bank line-of-credit, with interest
at prime plus .5% for advances on accounts receivable and
prime* for advances on customer orders collateralized by
accounts receivable. Borrowing base is limited to 80% of
accounts receivable and 50% of outstanding customer orders. 6,113 6,733
Loan from an Italian government agency for research funding,
payable in annual installments of approximately $216,000
through 1999, plus interest at 4.5% collateralized by
investments of $590,000. 559 -
Borrowings under factoring agreements with a financial
institution, with interest at prime*, collateralized by accounts
receivable. 935 -
Loan from Italian government agency, payable in annual
installments of $33,000 from February 1998 through 2007, with
interest at 2.1% through February 1998 and 8.37% from
February 1998 through 2007, without collateral. 335 317
Obligation under capital lease (Note 11). 333 -
Note payable, collateralized by property and equipment, repaid
in 1996. - 47
Other. 85 1,788
---------------------------
11,224 11,678
--------------------------------------------------------------------------------------------
Less current portion (10,276) (10,331)
---------------------------
--------------------------------------------------------------------------------------------
Total $ 948 $ 1,347
========= =========
--------------------------------------------------------------------------------------------
------------------------
*Prime was 9.875% at December 31, 1996.
</TABLE>
F-23
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR PERIODS SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
Aggregate maturities of long-term debt are due as follows:
Years Ending
December 31, ($ in 000's)
------------ -----------
1997 $10,276
1998 552
1999 160
2000 33
2001 33
Thereafter 170
-------
$11,224
=======
8. DISPOSITION OF SAPRI, S.P.A.:
During 1996, the Company sold its interest in Sapri,
S.p.A., a 100% owned subsidiary engaged in the
manufacture and sale of robotic systems, for
approximately $570,000. The sale resulted in a gain of
approximately $1,059,000. Sapri had net revenues of
approximately $7,200,000 in 1995.
9. RESEARCH AND DEVELOPMENT GRANTS:
Government grants for research and development projects
are recorded when their realizability is assured. Grants
received for current projects are credited to research
and development expense. Grants received for completed
projects are recorded as other operating revenue.
Following is a summary of grants recorded for the periods
indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1996 1995 1994
-------------- -------------- ---------
($ in 000's)
<S> <C> <C> <C>
Other operating revenue $ 1,207 $ 1,204 $ 622
Offset to research and development expense 199 231 42
-------------- -------------- ----------
Total $ 1,406 $ 1,435 $ 664
============== ============== ==========
- -----------------------------------------------------------------------------------------------------------
</TABLE>
F-24
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR PERIODS SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
10. INCOME TAXES:
The components of the net deferred tax asset at December
31, 1996 are as follows:
($ in 000's)
Inventory allowances $ 216
Accounts receivable allowances 62
Warranty accrual 600
Loss carryforwards 2,486
Other 115
Depreciation (91)
Grants (154)
-------
Net deferred tax asset 3,234
Valuation allowance (3,234)
======
$ -
======
Total income tax expense (benefit) differed from the
amounts computed by applying the Italian statutory tax
rate of 53.2% to pre-tax income primarily due to the fact
that Prima Industrie and Prima Electronics file separate
tax returns. Therefore, losses incurred by one company
are not available to offset taxable income of the other.
In addition, an equity tax is assessed each year on the
net equity of the Company without regard to taxable
income, and losses carried forward result in a reduced
tax rate.
As of December 31, 1996, the Company has net operating
losses for Italian tax purposes of approximately
$3,500,000 which, if not utilized, will expire in the
years 1997 through 2000. These loss carryforwards are not
offset dollar for dollar against future taxable income,
but rather result in a reduced tax rate.
11. STOCKHOLDERS' EQUITY:
In December 1994, due to significant losses incurred, the
Company and its largest stockholder agreed to a
recapitalization of the Company. The Stockholder agreed
to a cancellation of the 1,903,000 shares it held. It
also agreed to forgive outstanding loans of 3,000 million
lire ($1,860,000), contingent upon the Company raising
additional equity.
In February 1995, an Italian government agency agreed to
purchase 1,200,000 shares for a total of 500 million lire
($3,100,000). In addition, 1,370,000 shares of stock were
sold to other stockholders for a total of 5,600 million
lire ($3,600,000). Upon the completion of these
transactions, the $1,860,000 in debt described above was
forgiven. This amount was credited to stockholders'
equity in 1995 as part of the recapitalization.
F-25
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR PERIODS SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
12. COMMITMENTS AND CONTINGENCIES:
CAPITAL LEASE OBLIGATIONS - The Company leases certain facilities under
agreements classified as capital leases. Property under these leases has a
cost of $1,398,000 and accumulated amortization of approximately $268,000 at
December 31, 1996. The following is a schedule of future minimum lease
payments under capital leases at December 31, 1996.
($ in 000's)
------------
Future minimum lease payments $490
Less amount representing interest (157)
------------
Present value of net minimum lease payments 333
Less current portion (118)
------------
$215
OPERATING LEASES - The Company also leases certain facilities under
operating leases. Future minimum payments on noncancellablle operating
leases are as follows:
Years Ending
December 31, $ in 000's
------------ ------------
1997 $ 202
1998 185
1999 183
2000 9
------------
$ 579
------------
Rent expense was approximately $680,000, $610,000, and $355,000 for the
years ended December 31, 1996, 1995, and 1994, respectively.
LITIGATION - The Company has been named as defendant in litigation matters
arising from the ordinary course of business. In the opinion of the
Company's management and after consultation with outside legal counsel, the
ultimate resolution of these matters will not have a material adverse effect
on the Company's financial condition, results of operations or cash flows.
Subsequent to December 31, 1996, the Company discovered that the accrual for
potential losses from litigation matters was understated by approximately
F-26
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR PERIODS SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
$190,000 due to interest and inflation adjustments mandated by Italian law
related to one matter which had commenced in 1985. The 1996 financial
statements have been restated to reflect this accrual.
COMMITMENTS - In connection with customer financing under certain sales
contracts, the Company has agreed to repurchase machines in the amount of
$1,233,000 and $915,000 as of December 31, 1996 and 1995, respectively. The
repurchase price is based on a percentage of the sales price, and decreases
based on the amount of time elapsed since the sale. The Company believes
that the repurchase prices are less than the market value of the machines.
The Company is presently involved in litigation with a finance company
regarding one of these agreements, and has accrued $15,000 as an estimate of
the liability under the agreement as of December 31, 1996. This litigation
is the only instance in which any of the repurchase agreements have been
attempted to be enforced. The Company does not consider any additional
accrual to be necessary based on its past experience.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair values for financial instruments under SFAS No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, are determined at
discrete points in time based on relevant market information. These
estimates involve uncertainties and cannot be determined with precision.
Management estimates that the carrying amounts reported in the consolidated
balance sheets for cash and equivalents, accounts receivable, investments,
and notes payable approximate fair value because of the short-term maturity
of these financial instruments.
14. CONCENTRATIONS OF CREDIT RISK:
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as contracted.
Concentrations of credit risk (whether on or off balance sheet) that arise
from financial instruments exist for groups of customers or counterparties
when they have similar economic characteristics that would cause their
ability to meet contractual obligations to be similarly effected by changes
in economic or other conditions described below.
The Company operates in one industry segment, the manufacture of laser
cutting and welding systems. The Company's primary customers are in one
industry, automobile manufacturers and, thus, may be subject to similar
economic risks. Financial instruments that subject the Company to credit
risk consist principally of accounts receivable.
At December 31, 1996, accounts receivable totaled $21,670,000, and the
Company has provided an allowance for doubtful accounts of $426,000. The
Company performs periodic credit evaluations on its customers' financial
condition and believes that the allowance for doubtful accounts is adequate.
F-27
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR PERIODS SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
The Company had sales in excess of 10% of total revenues to the following
customers:
Receivable at
December 31,
1996 1995 1994 1996
----------- ------------ --------- -------------
($ in 000's)
Customer A $5,671 * * $3,300
Customer B $5,526 * * $ 421
------------------
*Less than 10%.
Following is a summary of sales by geographic region:
1996 1995 1994
-------------- ------------- ------------
Italy $13,153 $15,770 $12,330
Other Western Europe 23,662 14,664 9,162
United States 2,471 2,320 2,462
Other 1,822 4,601 3,820
-------------- ------------- ------------
$41,108 $37,355 $27,774
============== ============= ============
The Company may also be exposed to certain risks as a result of its
manufacturing operation being located in Italy which are not typically
associated with companies operating in the United States. These include
risks associated with the political, economic, social, and legal environment
and foreign currency exchange rates. Management believes that it has
adequately compensated for these risks. There can be no assurance, however,
that changes in the political, economical, social, and other conditions will
not result in any material adverse impact on the Company's business,
financial condition or results of operations.
The Company maintains most of its cash balances with various banks and
financial institutions located in Italy. Consistent with local practice,
such amounts are not insured or otherwise protected should the financial
institutions be unable to meet their liabilities. There has been no history
of such credit losses.
F-28
<PAGE>
PRIMA INDUSTRIE S.P.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR PERIODS SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
15. SUBSEQUENT EVENTS:
Substantially all of the stockholders of the Company have agreed to enter
into a subscription agreement with The PRIMA Group International, Inc.
(PRIMA), whereby, immediately prior to the closing of PRIMA's proposed
public offering, the stockholders would exchange their shares for 2,700,000
shares of PRIMA. This transaction will be accounted for as a
recapitalization of the Company in a manner similar to a reverse
acquisition, in which the transaction is treated as the issuance of stock by
the Company for the net assets of PRIMA, and no goodwill or other
intangibles will be recorded.
F-29
<PAGE>
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING 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, ANY SELLING
STOCKHOLDER OR ANY UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF,
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF. UNTIL______________ , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT 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.
TABLE OF CONTENTS
PAGE
Prospectus Summary 3
Risk Factors 7
Use of Proceeds 20
Dividend Policy 22
Capitalization 22
Dilution 25
Selected Consolidated Financial Data 26
Management's Discussion and Analysis of Financial
Condition and Results of Operations 27
History of the Company 46
Business 50
Management 64
Certain Beneficial Owners 73
Description of Capital Stock 75
Transfer Agent and Registrar 76
Shares Eligible for Future Sale 77
Underwriting 78
Legal Matters 82
Experts 82
Additional Information 82
Index to Consolidated Financial Statements F-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale of
Common Stock being registered. All amounts are estimates except the registration
fee and the NASD filing fee.
AMOUNT
TO BE
PAID
Registration Fee $ 7,938.45
NASD Filing Fee 3,363.50
Nasdaq National Market Listing fee 29,750.00
Printing *
Legal Fees and Expenses *
Accounting Fees and Expenses *
Blue Sky Fees and Expenses *
Transfer Agent Fees *
Miscellaneous *
------
Total $
======
*to be supplied
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, the Registrant has
broad powers to indemnify its Directors and Officers against liabilities that
they may incur in such capacities (plus reimbursement for expenses incurred)
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act").
II-1
<PAGE>
The Registrant's Certificate of Incorporation and Bylaws include provisions to
(i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by
Section 102(b)(7) of the General Corporation Law of Delaware (the "Delaware
Law") and (ii) require the Registrant to indemnify its Directors and officers to
the fullest extent permitted by Section 145 of the Delaware Law, including
circumstances in which indemnification is otherwise discretionary. Pursuant to
Section 145 of the Delaware Law, a corporation generally has the power to
indemnify its present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they are
or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in or not opposed to, the best interests of the corporation and
with respect to any criminal action, they had no reasonable cause to believe
their conduct was unlawful. The Registrant believes that these provisions are
necessary to attract and retain qualified persons as Directors and officers.
These provisions do not eliminate the Directors' duty of care, and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware Law. In addition,
each Director will continue to be subject to liability for breach of the
Director's duty of loyalty to the Registrant, for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
acts or omissions that the Director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from which
the Director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the Director's duty to the Registrant or its
stockholders when the Director was aware or should have been aware of a risk of
serious injury to the Registrant or its stockholders, for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the Director's duty to the Registrant or its stockholder, for improper
transactions between the Director and the Registrant and for improper
distributions to stockholders and loans to Directors and officers. The provision
also does not affect a Director's responsibilities under any other law, such as
the federal securities law or state or federal environmental laws.
The Registrant has entered into indemnity agreements with each of its Directors
and executive officers that require the Registrant to indemnify such persons
against expenses, judgments, fines, settlements and other amounts incurred
(including expenses of a derivative action) in connection with any proceeding,
whether actual or threatened, to which any such person may be made a party by
reason of the fact that such person is or was a Director or an executive officer
of the Registrant or any of its affiliated enterprises, provided that such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Registrant and, with respect to
any criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder. The
Registrant has entered into similar indemnity agreements with certain of its key
employees.
At present, there is no pending litigation or proceeding involving a Director or
officer of the Registrant as to which indemnification is being sought nor is the
Registrant aware of any threatened litigation that may result in claims for
indemnification by any officer or Director.
The Registrant has an insurance policy covering the officers and Directors of
the Registrant with respect to certain liabilities, including liabilities
arising under the Securities Act or otherwise.
II-2
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On July 29, 1997, the Registrant issued 150,000 shares to Mr. James R. Currier,
Sr. and 150,000 shares to Mr. Giovanni Ciamaroni for a total consideration of
$3,000. The sales of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder. The recipients of
securities in each such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were attached to the share
certificates issued in such transactions. All recipients had adequate access to
information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
1.1 Form of Underwriting Agreement
3.1 Articles of Incorporation of Registrant+
3.2 Bylaws of Registrant+
5.1 Opinion of Rayburn, Moon & Smith, P.A.*
10.1 Form of Indemnification Agreement with Directors and Officers
10.2 Employment agreement with James R. Currier, Sr.+
10.3 Employment agreement with Gianfranco Carbonato+
10.4 Employment agreement with Giovanni Ciamaroni+
10.5 Employment agreement with Michael H. Gilbert+
10.6 1997 Stock Incentive Plan+
10.7 Cooperative Manufacturing and Selling Agreement dated July 15,
1997 between Strippit, Inc. and Prima Industrie S.p.A.
10.8 Supply Agreement dated April 29, 1996, between Atlas Copco Airpower
NV and Prima Electronics S.p.A.
10.9 Selling and Manufacturing License Agreement dated July 11, 1997 by
and between Prima Industrie S.p.A. and Beijing Machinery and
Electricity Institute.
10.10 Form of Revolving Credit, Term Loan and Security Agreement.*
10.11 Agreement for Co-Development of Laser-on-Line Products and
Technology by and among The PRIMA Group International, Inc., Prima
Industrie S.p.A. and Prima Electronics S.p.A.*
23.1 Independent Auditors' Consent
23.2 Consent of Counsel (included in Exhibit 5.1)
23.3 Rule 438 Consent - Michael A. Almond*
23.4 Rule 438 Consent - W. Edwin McMahan*
24.1 Powers of Attorney
27 Financial Data Schedule
+ Previously filed.
* To be supplied by amendment.
II-3
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above have been omitted because the information required to
be set forth therein is not applicable or is shown in the financial statements
or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes 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.
Insofar as indemnification by the Registrant for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions referenced in Item 14 of this
Registration Statement 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 the Securities 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 hereunder, 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.
The undersigned registrant hereby undertakes that:
(1) 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.
(2) 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.
(3) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(4) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment 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.
(5) To remove from registration by means of a post-effective amendment any of
the securities being registered that remain unsold at the termination of the
offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, The PRIMA Group International, Inc., a corporation organized and
existing under the laws of the State of Delaware, has duly caused this
Registration Statement on Form S-1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Charlotte, State of North
Carolina, on this 22nd day of December, 1997.
The PRIMA Group International, Inc.
By: /s/_________________
James R. Currier, Sr.
President and Chief
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.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
/s/ President, Chief December 22, 1997
- ---------------------
James R. Currier, Sr. Executive, and Director
(Principal Executive
Officer)
/s/ Vice President Finance December 22, 1997
- ---------------------
Michael H. Gilbert and Administration,
Secretary and Treasurer
(Principal Financial
and Accounting Officer)
/s/ Executive Vice December 22, 1997
- ---------------------
Gianfranco Carbonato President Chief Operating
Officer and Director
/s/ Vice President Sales December 22, 1997
Giovanni Ciamaroni and Marketing and
Director
/s/ Chairman of the Board December 22, 1997
- ---------------------
Gian Mario Rosignolo of Directors
/s/ Director December 22, 1997
- ---------------------
Mario Mauri
/s/ Director December 22, 1997
- ---------------------
Hans Werthen
/s/ Director December 22, 1997
- ---------------------
Pio Pellegrini
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Filed
No. Exhibit Herewith At
<S> <C> <C>
1.1 Form of Underwriting Agreement
3.1 Articles of Incorporation of Registrant+
3.2 Bylaws of Registrant+
5.1 Opinion of Rayburn, Moon & Smith, P.A.*
10.1 Form of Indemnification Agreement with Directors and Officers
10.2 Employment agreement with James R. Currier, Sr.+
10.3 Employment agreement with Gianfranco Carbonato+
10.4 Employment agreement with Giovanni Ciamaroni+
10.5 Employment agreement with Michael H. Gilbert+
10.6 1997 Stock Incentive Plan+
10.7 Cooperative Manufacturing and Selling Agreement dated
July 15, 1997 between Strippit, Inc. and Prima Industrie S.p.A.
10.8 Supply Agreement dated April 29, 1996, between
Atlas Copco Airpower NV and Prima Electronics S.p.A.
10.9 Selling and Manufacturing License Agreement dated
July 11, 1997 by and between Prima Industrie S.p.A. and
Beijing Machinery and Electricity Institute.
10.10 Form of Revolving Credit, Term Loan and Security Agreement.*
10.11 Agreement for Co-Development of Laser-on-Line Products
and Technology by and among The PRIMA Group
International, Inc., Prima Industrie S.p.A. and
Prima Electronics S.p.A.*
23.1 Independent Auditors' Consent
23.2 Consent of Counsel
(included in Exhibit 5.1)
23.3 Rule 438 Consent - Michael A. Almond*
23.4 Rule 438 Consent - W. Edwin McMahan*
24.1 Powers of Attorney
27 Financial Data Schedule
</TABLE>
+ Previously filed.
* To be supplied by amendment.
UNDERWRITING AGREEMENT
BY AND BETWEEN
CHATFIELD DEAN & CO., INC.,
THE PRIMA GROUP INTERNATIONAL, INC.,
MIOJUSTI INVESTMENTS BV
CAMBRIA 1990 LTD. PARTNERSHIP,
CAMBRIA LTD., AND
DEMERCROFT HOLDING N.V.
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TABLE OF CONTENTS
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SECTION 1 Description of Securities.................................................................. 1
1.1 Offering.................................................................................. 1
1.2 Shares .................................................................................. 2
1.3 Representative's Warrants.................................................................. 2
SECTION 2 Representations and Warranties of the Company............................................... 2
2.1 Registration Statement on Form S-1 and Related Prospectus................................... 2
2.2 Accuracy of Registration Statement and Related Prospectus................................... 3
2.3 Financial Statements........................................................................ 3
2.4 Independent Public Accountants.............................................................. 4
2.5 No Material Adverse Change.................................................................. 4
2.6 No Defaults................................................................................. 4
2.7 Incorporation and Standing.................................................................. 5
2.8 Legality of Outstanding Common Stock........................................................ 5
2.9 Legality of Securities...................................................................... 6
2.10 Prior Sales................................................................................. 6
2.11 Litigation.................................................................................. 6
2.12 Representative's Warrants................................................................... 7
2.13 Finder .................................................................................. 7
2.14 Exhibits.................................................................................. 7
2.15 Tax Returns................................................................................. 7
2.16 Property.................................................................................. 8
2.17 Use of Proceeds............................................................................. 8
2.18 Authority................................................................................... 8
2.19 Subsidiaries................................................................................ 8
2.20 Availability of Information Concerning the Company.......................................... 8
2.21 Stop or Suspension Orders................................................................... 9
2.22 Transfer Agent.............................................................................. 9
2.23 Employment Agreements; Employee Incentive Plans............................................. 9
2.24 Intellectual Property Rights................................................................ 10
2.25 Prior Issuances............................................................................. 10
2.26 Tax Consequences of Reorganization.......................................................... 11
2.27 Stock Incentive Plan ...................................................................... 11
2.28 Florida Compliance.......................................................................... 11
2.29 Compliance with Business Advisory Letter.................................................... 11
SECTION 3 Representations and Warranties of the Selling
Shareholder Parties........................................................................ 11
3.1 Ownership of Selling Shareholder Shares.................................................... 11
3.2 Validity of Agreement....................................................................... 11
3.3 Representations and Warranties.............................................................. 12
3.4 Accuracy of Registration Statement and Related Prospectus.................................. 12
3.5 Payment of Costs and Expenses.............................................................. 12
3.6 Capitalization of Miojusti and Cambria 1990 Ltd. Partnership............................... 12
3.7 Miojusti Acting as Principal................................................................ 12
SECTION 4 Issue, Sale and Delivery of the Shares..................................................... 12
4.1 Appointment of Representative.............................................................. 12
4.2 Default by a Member........................................................................ 13
4.3 Offering Price............................................................................. 14
4.4 Principal Terms of Representative's Warrants............................................... 14
4.5 Inspection of Certificates................................................................. 15
4.6 Closing .................................................................................. 15
4.7 Representative's Expense Allowance......................................................... 16
4.8 Mutual Warranty............................................................................ 16
4.9 Sales Reports.............................................................................. 16
4.10 Re-offers By Selected Dealers.............................................................. 16
SECTION 5 Registration Statement and Prospectus............................................ ......... 17
5.1 Representative's Copies.................................................................... 17
5.2 Copies of Preliminary Prospectus and Prospectus............................................ 17
5.3 Post-Effective Amendments.................................................................. 17
5.4 Use of Prospectus.......................................................................... 18
5.5 Further Reports............................................................................ 19
SECTION 6 Covenants of the Company................................................................... 18
6.1 Filing of Amendments....................................................................... 18
6.2 Declaration of Effectiveness............................................................... 19
6.3 Amendments at the Request of the Representative............................................ 20
6.4 Blue Sky................................................................................... 20
6.5 Further Reports............................................................................ 21
6.6 Reports to Representative.................................................................. 21
6.7 Expenses of Offering....................................................................... 22
6.8 Stockholder Reports........................................................................ 22
6.9 1933 Act Reporting......................................................................... 23
6.10 Use of Proceeds............................................................................ 23
6.11 Transfer Sheets............................................................................ 23
6.12 Information About the Company.............................................................. 23
6.13 Due Diligence Investigation for Offering and for
Proceedings involving the Representative............................................... 23
6.14 Transfer Agent............................................................................. 24
6.15 Conditions Precedent....................................................................... 24
6.16 1934 Act Registration and Reporting; Listing............................................... 24
6.17 No Material Change......................................................................... 24
6.18 Bound Volumes.............................................................................. 25
6.19 Financial Consulting Agreement............................................................. 25
6.20 Additional Financing....................................................................... 25
6.21 Restriction on Sale of Securities.......................................................... 26
6.22 Public Relations Firm...................................................................... 27
6.23 Board of Directors Meetings................................................................ 27
6.24 Fundamental Corporate Transactions......................................................... 27
6.25 Potential Acquisition of Prima Electronics................................................. 27
6.26 Stock Incentive Plan; Incentive Compensation............................................... 28
6.27 Composition of Board of Directors.......................................................... 28
6.28 Compliance with Business Advisory Letter................................................... 28
SECTION 7 Indemnification............................................................................ 29
SECTION 8 Effectiveness of Agreement................................................................. 33
SECTION 9 Conditions to the Representative's Obligations............................................. 33
9.1 Effective Date............................................................................. 33
9.2 Accuracy of Registration Statement......................................................... 34
9.3 Casualty....................................... .......................................... 34
9.4 Litigation................................................................................. 34
9.5 No Material Change......................................................................... 34
9.6 Review by Representative's Counsel......................................................... 35
9.7 Opinion of Company Counsel................................................................. 35
9.8 Opinion of Italian Counsel................................................................. 39
9.9 Opinion of Intellectual Property Counsel................................................... 41
9.10 Opinion of Counsel to Selling Shareholder Parties.......................................... 42
9.11 Auditor's Letter........................................................................... 43
9.12 Officer's Certificate...................................................................... 44
9.13 Secretary's Certificate.................................................................... 46
9.14 Selling Shareholder Parties Certificate.................................................... 47
9.15 Opinion of Representative's Counsel........................................................ 47
9.16 Tender of Securities....................................................................... 47
9.17 Blue Sky Qualification..................................................................... 47
9.18 Approval of Representative's Counsel....................................................... 47
9.19 Officer's Certificate as a Company Representation.......................................... 48
9.20 Exchange Listing........................................................................... 48
9.21 Board Committees........................................................................... 48
SECTION 10 Termination............................................................................ 48
10.1 Termination by Representative.............................................................. 48
10.2 Termination by Representative--"Market Out"................................................ 48
10.3 Survival of Obligations After Termination.................................................. 49
10.4 Suspension Proceedings..................................................................... 49
SECTION 11 Representative's Representations and Warranties............................................ 49
11.1 Registration as Broker-Dealer............................................................... 49
11.2 No Pending Proceedings...................................................................... 50
11.3 Compliance with NASD Rules.................................................................. 50
11.4 Finder ................................................................................... 50
SECTION 12 Notices................................................................................. 50
SECTION 13 Miscellaneous........................................................................... 51
13.1 Sole Benefit................................................................................ 51
13.2 Survival.................................................................................. 52
13.3 Specific Performance........................................................................ 52
13.4 Governing Law............................................................................... 52
13.5 Jurisdiction................................................................................ 52
13.6 Waiver ................................................................................... 52
13.7 Counterparts................................................................................ 53
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UNDERWRITING AGREEMENT
Chatfield Dean & Co., Inc.
7935 East Prentice Avenue
Suite 200
Greenwood Village, Colorado 80111
Gentlemen:
The PRIMA Group International, Inc., a Delaware corporation (unless the
context requires otherwise, referred to herein, together with its subsidiaries,
as the Company"), and Miojusti Investments BV ( Miojusti"), Demercroft Holding
N.V. (as a beneficial owner of Miojusti), Cambria 1990 Ltd. Partnership (as a
beneficial owner of Miojusti), and Cambria Ltd. (as general partner of Cambria
1990 Ltd. Partnership) (collectively, the Selling Shareholder Parties"), hereby
confirm their agreement with Chatfield Dean & Co., Inc. a Colorado corporation
(the "Representative"), and with the other members of the Underwriting Group
named in Schedule I attached hereto (individually referred to as Member" and
collectively referred to as Members"), including the Representative
(collectively, the Underwriting Group") as follows (if there is no Schedule I
attached, all references in this Agreement to the Underwriting Group shall be
deemed to refer only to the Representative):
SECTION 1.
Description of Securities
1.1. Offering. The Company represents, covenants, warrants and agrees
that its authorized, issued and outstanding capitalization, when the offering
(the "Offering") of the Shares (as hereinafter defined) contemplated hereby is
permitted to commence and at the Closing Date (as hereinafter defined), will be
as set forth in the Registration Statement and related Prospectus (as such terms
are hereinafter defined or described). The Company proposes to issue, offer and
sell to the Underwriting Group an aggregate of 1,800,000 shares of the Company's
Common Stock, $.01 par value per share, at an offering price of $____ per share
(the "Offering Price") and on the other terms hereinafter set forth. The
Underwriting Group shall also have an over-allotment option to purchase from the
Company an additional 150,000 shares (together with the 1,800,000 shares
described above, the "Company Shares") and from Miojusti 120,000 shares (the
Selling Shareholder "Shares") as provided in Section 4.1 hereof; provided that,
in the event that the conditions specified in Sections 9.10 and 9.14 are not met
on the Over-allotment Closing Date, or the Selling Shareholder Parties otherwise
fail to deliver the Selling Shareholder Shares at the Over-allotment Closing,
the Representative shall have the option to
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purchase an additional number of shares of Common Stock from the Company equal
to the number of Selling Shareholder Shares, and that, in such event, the
additional shares of Common Stock purchased from the Company shall, for all
purposes of this Agreement, be considered "Shares," as that term is defined in
Section 1.2 hereof.
1.2. Shares. As used herein, the shares of the Company's common stock,
$0.01 par value, which include both the Company Shares and the Selling
Shareholder Shares, may be referred to as the "Stock" or the "Common Stock", and
the shares of the Common Stock to be registered in the Registration Statement,
including those which comprise the over-allotment option described above, but
excluding the Representative's Warrant Stock (as hereinafter defined), may be
referred to as the "Shares."
1.3. Representative's Warrants. As partial consideration for the
services of the Representative hereunder, the Company will authorize, issue,
sell and deliver to the Representative at the Closing (as hereinafter defined)
for a purchase price of $100.00, warrants (the "Representative's Warrants") to
purchase a certain number of shares of the Common Stock (the "Representative's
Warrant Stock"), as more fully set forth at Section 4.4 of this Agreement.
SECTION 2.
Representations and Warranties of the Company
In order to induce the Representative to enter into this Agreement, the
Company hereby represents and warrants to, and agrees with, the Representative
as follows:
2.1. Registration Statement on Form S-1 and Related Prospectus. The
Registration Statement on Form S-1 (File No. 333-38059) and the Prospectus in
the form specified by Form S-1 with respect to the Shares, copies of which have
been delivered heretofore by the Company to the Representative, have been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "1933 Act"), and the rules and regulations
promulgated thereunder, including, but not limited to, Regulations C and S-K
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission"), and the Registration Statement and related Prospectus, together
with all exhibits and other documents required by the Rules and Regulations,
have been filed by the Company with the Commission under the 1933 Act; and the
Company will use its best efforts to cause the Commission to declare such
Registration Statement effective as promptly as possible. The Company may file
one or more additional amendments to the Registration Statement and related
Prospectus with the Commission on or prior to the Effective Date (as hereinafter
defined), and copies of each such
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amendment will be delivered to the Representative for its approval prior to such
filing.
As used in this Agreement, the terms "Registration Statement on Form S-1"
and "Registration Statement" refer to and mean the Registration Statement on
Form S-1 prepared by the Company in connection with the Offering and any and all
amendments thereto, including, but not limited to, exhibits and financial
statements and, in the event of any amendment after the Effective Date, the term
"Registration Statement on Form S-1" or "Registration Statement" is inclusive of
such amendments. The term "Prospectus" refers to and means the Prospectus,
including each Preliminary Prospectus (as hereinafter defined) prepared by the
Company in the form specified by Form S-1, and all amendments thereto, and, in
the event of any amendment or supplement to such Prospectus after the Effective
Date, the term "Prospectus" shall refer to and mean such Prospectus inclusive of
such amendments or supplements. For purposes of this Agreement, the term
"Preliminary Prospectus" means any prospectus included in the Registration
Statement before the Effective Date.
2.2. Accuracy of Registration Statement and Related Prospectus. The
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus with respect to the Shares, and each Preliminary
Prospectus has conformed in all material respects with the requirements of the
1933 Act and the applicable Rules and Regulations and has not included any
untrue statement of a material fact (except to the extent that the Preliminary
Prospectus anticipates facts that will be true and correct as of the Effective
Date that are not true on the date of the Preliminary Prospectus) or omitted to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. On the Effective Date
and on the Closing Date: (a) the Registration Statement and the Prospectus will
comply in all respects with the requirements of the 1933 Act and the Rules and
Regulations for the purpose of the proposed Offering of the Shares; and (b) all
statements of material fact contained in the Registration Statement and the
Prospectus will be true and correct, and neither the Registration Statement nor
the Prospectus will include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.3. Financial Statements. The audited and other financial statements
of the Company, together with related schedules and notes as set forth in the
Registration Statement and the Prospectus, present fairly and reflect correctly
the financial position and results of operations of the Company as of the
respective dates, and for the respective periods, to which they apply. Such
financial statements have been prepared in accordance with generally accepted
accounting principles (applied on a consistent basis throughout the periods
covered thereby) and the applicable rules and regulations of the Commission
relating to financial statements
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and are correct, complete and consistent with the books and records of the
Company (which books and records are correct and complete). All financial
statements filed with the Registration Statement and the Prospectus reflect all
liabilities of the Company, contingent or otherwise, required to be set forth
therein under generally accepted accounting principles in effect as of the
respective dates thereof and include adequate reserves for all federal and state
tax liabilities incurred prior to their respective dates, and the Company has no
material liabilities, contingent or otherwise, obligations or claims against it
except as set forth therein.
2.4. Independent Public Accountants. Hein + Associates LLP, who have
certified or will certify certain of the financial statements filed or to be
filed with the Commission as part of the Registration Statement and the
Prospectus and, as experts, have reviewed certain other information of a
financial or accounting nature contained in the Registration Statement and the
Prospectus, are independent certified public accountants as required by the
1933 Act.
2.5. No Material Adverse Change. Except as may be reflected in or
contemplated by the Registration Statement and the Prospectus, subsequent to the
dates as of which information is given therein and through the Closing Date:
(a) there has not been, and will not be, any material adverse
change in the condition, financial or otherwise, or in the results of operations
of the Company or in its business taken as a whole;
(b) there has not been, and will not be, any material
transaction entered into by the Company other than transactions in the ordinary
course of the Company's business;
(c) the Company has not, and shall not have, incurred any
material obligations, contingent or otherwise, which are not disclosed in the
Registration Statement and the Prospectus;
(d) there has not been, and will not be, any change in the
capital stock or long-term debt (except current payments thereof) of the
Company; and
(e) the Company has not, and shall not have, paid or declared
any dividends or made any other distribution in respect of the capital stock of
the Company.
2.6. No Defaults. Other than as disclosed in the Registration
Statement and the Prospectus, the Company is not in default in the performance
of any obligation, agreement or condition contained in any debenture, note or
other evidence of indebtedness or any indenture or loan agreement of the
Company. The execution and delivery of this Agreement and the consummation of
the transactions
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contemplated herein, and compliance with the terms of this
Agreement, will not conflict with or result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, the Company's
Articles of Incorporation or Bylaws (as each is currently in effect), any note,
indenture, mortgage, deed of trust or other contract, agreement or instrument to
which the Company is a party or by which it or any of its property is bound, or
any existing law, order, rule, regulation, writ, injunction or decree of any
government, governmental instrumentality, agency or body, arbitration tribunal
or court, domestic or foreign, having jurisdiction over the Company or its
property. No consent, approval, authorization or order of any court or
government instrumentality, agency or body is required for the consummation of
the transactions contemplated herein except such as may be required under the
1933 Act or under the Blue Sky, or securities laws, of any state or
jurisdiction.
2.7. Incorporation and Standing. The Company and each of its
subsidiaries: (a) is, and, at the Closing Date will be, duly incorporated and
validly existing in good standing as a corporation under the laws of its
jurisdiction of incorporation with full power and authority (corporate and
otherwise) to own its property and conduct its business, present and proposed,
as described in the Registration Statement and the Prospectus; (b) has full
power and authority to enter into this Agreement; (c) owns, free and clear of
any lien, charge or encumbrance, all of the unissued capital stock as set forth
in the Registration Statement and the Prospectus; and (d) is duly qualified and
in good standing as a foreign corporation in each jurisdiction in which it owns
or leases real property or transacts business requiring such qualification and
in which the failure to so qualify would have a material adverse effect on the
Company.
2.8. Legality of Outstanding Common Stock. The authorized, issued and
outstanding capital stock of the Company is as set forth in the Registration
Statement and the Prospectus under the heading "Capitalization." At the Closing
Date, the Company will have an authorized capitalization of (a) 14,000,000
shares of Common Stock, $0.01 par value per share, of which no more than
4,800,000 shares (excluding shares issued pursuant to exercise of the
over-allotment option described in Section 3.1 or any shares issued in
connection with the proposed acquisition of the minority interest in Prima
Electronics (as hereinafter defined)) will be issued and outstanding and no
shares of which will be held in the treasury of the Company; and (b) 1,000,000
shares of Preferred Stock, $0.01 par value per share, of which no shares will be
issued and outstanding and no shares of which will be held in the treasury of
the Company. At the Closing Date, the outstanding shares of Common Stock will
have been duly and validly authorized and issued and will be fully paid and
nonassessable. The outstanding shares of Common Stock conform to all statements
with regard thereto contained in the Registration Statement and the Prospectus.
No offers or sales of the Common Stock or other securities have been made by the
Company in violation of the 1933 Act. On the Effective Date, and through and
including the Closing Date, there will be no outstanding options,
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warrants or other rights (however characterized or described) to purchase any
shares of the Common Stock or securities convertible into Common Stock, except
as described in the Registration Statement and the Prospectus.
2.9. Legality of Securities. The Shares, the Representative's
Warrants, and the Representative's Warrant Stock have each been duly and validly
authorized and, when issued and delivered against payment therefor as provided
in this Agreement, each of the Shares, the Representative's Warrants and the
Representative's Warrant Stock will be validly issued, fully paid and
nonassessable. Said securities, upon issuance, will not be subject to any
preemptive right of any stockholder of the Company, and no preemptive rights
will exist with respect to any securities of the Company through the Closing
Date or until the expiration of the Representative's Warrant Period (as
hereinafter defined). No stockholder of the Company is subject to personal
liability solely on the basis of his, her or its ownership of capital stock of
the Company. The Representative's Warrants, when sold and delivered, will
constitute the valid and binding obligation of the Company, enforceable against
the Company in accordance with their terms. A sufficient number of shares of the
Common Stock have been reserved for issuance as Representative's Warrant Stock
upon exercise of the Representative's Warrants. The Shares, the Representative's
Warrants and the Representative's Warrant Stock will conform to all statements
with regard thereto in the Registration Statement and the Prospectus.
2.10. Prior Sales. No shares of the Common Stock or other securities
of the Company have been sold by the Company or by or on behalf of, or for the
benefit of, any officer, director, predecessor, affiliate, promoter, associate,
principal security holder, Representative or other controlling person of the
Company during the period beginning three years (3) prior to the date hereof and
ending on the date hereof, except as set forth in the Registration Statement.
For purposes of this Agreement, an "affiliate" of a person or entity shall mean:
(a) any person or entity which directly or indirectly controls, or is controlled
by, or is under common control with, such person or entity; (b) any person or
entity which owns, beneficially or of record, 10% or more of any class of
capital stock of such person or entity or of which 10% or more of any class of
capital stock (or in the case of a person or entity that is not a corporation,
10% or more of the equity interest) is owned, beneficially or of record, by such
person or entity; and (c) any person or entity directly or indirectly controlled
by any of the foregoing. For purposes of this Agreement, the term "control"
means the possession, directly or indirectly, of the power to direct the
management or policies of a person or entity, whether through the ownership of
voting securities, by contract or otherwise.
2.11. Litigation. Except as set forth in the Registration Statement
and the Prospectus, there is, and, at the Closing Date, there will be, no
litigation, cause of action, suit or proceeding before any court or governmental
agency, authority, or
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body pending or, to the knowledge of the Company, threatened, which might result
in a judgment or judgments against the Company not adequately covered by
insurance or which collectively might result in any material adverse change in
the condition (financial or otherwise), the business or the prospects of the
Company or would, individually or collectively, have a material adverse effect
on the properties or assets of the Company.
2.12. Representative's Warrants. Upon delivery and receipt of payment
for the Representative's Warrants to be sold by the Company as set forth in
Section 3.4 of this Agreement, the Representative and its assignees will receive
good and marketable title thereto, free and clear of all liens, encumbrances,
charges and claims whatsoever. The Company will have, on the Effective Date and
the Closing Date, full legal right, power and authority to issue, sell, transfer
and deliver the Representative's Warrants in the manner provided hereunder.
2.13. Finder. No finder's fee has been or will be paid in connection
with the transactions contemplated by this Agreement. It is understood that,
should a claim be made for any finder's fee in connection with such transactions
and based upon any agreement by the Company, the Company will indemnify the
Representative with respect to any such claim in accordance with the procedures
set forth in Section 6(c) hereof.
2.14. Exhibits. There are no contracts, instruments or other documents
which are required by the 1933 Act or by the Rules and Regulations to be filed
as exhibits to the Registration Statement which have not been so filed. Each
contract or other instrument (however characterized or described) to which the
Company is a party and to which reference is made in the Registration Statement
and the Prospectus has been duly and validly executed, is in full force and
effect in all material respects and is enforceable against the parties thereto
in accordance with its terms, and none of such contracts or instruments has been
assigned by the Company to any third party. The Company knows of no present
situation or condition or fact which would prevent compliance by the parties
with the terms of such contracts or instruments as amended to date. Except for
amendments or modifications of such contracts or instruments in the ordinary
course of business, the Company has no intention of exercising any right which
would cause any other party to the contract to cancel any of their obligations
under any of such contracts or instruments, and the Company has no knowledge
that any other party to any of such contracts or instruments has any intention
not to render full performance thereunder.
2.15. Tax Returns. The Company has filed all federal, foreign, state
and local tax returns which are required to be filed and has paid all taxes
shown on such returns and on all assessments received by it to the extent such
taxes have become due. All taxes with respect to which the Company is obligated
have been paid, or adequate accruals have been established to cover any taxes
which remain unpaid.
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2.16. Property. Except as otherwise set forth in, or contemplated by,
the Registration Statement and the Prospectus: (i) the Company has good title,
free and clear of all liens, encumbrances and defects, except liens for current
taxes not due and payable, to all real and personal property and assets
described in the Registration Statement and the Prospectus as being owned by the
Company, subject only to such exceptions as are not material and do not
individually or collectively affect adversely the present or prospective
business of the Company; and (ii) the properties, including equipment, referred
to in the Registration Statement and the Prospectus as being held under lease or
option by the Company, are held under valid, subsisting and enforceable leases
or options, with only such exceptions which collectively are not material and do
not affect adversely the present or prospective business of the Company.
2.17. Use of Proceeds. The Company plans to, and will, apply the
proceeds from the sale of the Shares solely and exclusively to the purposes
described in the Registration Statement and the Prospectus under the caption
"Use of Proceeds."
2.18. Authority. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action, and this
Agreement is the valid and binding obligation of the Company, enforceable
against it in accordance with its terms.
2.19. Subsidiaries. The Company has no subsidiaries except for those
listed on Schedule 2.19 hereto (the "Subsidiaries"). The PRIMA Group
International, Inc. (the "U.S. Corporation"), directly or indirectly through one
or more Subsidiaries, owns 59.998% of the issued and outstanding capital stock
of Prima Electronics S.p.A., a societa per azioni incorporated with limited
liability under the laws of the Republic of Italy ("Prima Electronics"), and
99.98% of the issued and outstanding capital stock of each of the other
Subsidiaries. All of the Company's capital stock of Prima Industrie S.p.A., a
societa per azioni incorporated with limited liability under the laws of the
Republic of Italy ("Prima Industrie," and, together with Prima Electronics, the
"Italian Subsidiaries"), is held in the name of the U.S. Corporation. All of the
Company's capital stock of Prima Electronics is held in the name of Prima
Industrie.
2.20. Availability of Information Concerning the Company. All
documents and other information relating to the Company's affairs have been made
available upon request to the Representative and its counsel at the
Representative's office or at the office of its counsel, as the case may be, and
copies of any such documents have been furnished upon request to the
Representative or its counsel. Prior to the Effective Date, the substantive
provisions of all such documents shall be subject to the approval of the
Representative and, if not so approved, the Representative may elect not to
proceed with the Offering. Notice of disapproval of any document shall be given
to the Company or counsel to the Company within a reasonable time after
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the document is made available to the Representative or its counsel. Included
among the documents to be made available to the Representative are the Company's
articles of incorporation, as amended, and related charter documents, bylaws and
amendments thereto, minutes of all meetings and other actions taken by the
Company's incorporators, directors and stockholders and committees of the
Company's Board of Directors, all financial statements, correct copies of any
material contracts, licenses, leases or agreements to which the Company is a
party or by which it or any of its assets is bound, including contracts for the
sale of products or services in the normal course of business and including any
employee (including officers and/or directors) incentive plans and any other
type of fringe benefit plan, of whatever nature, and copies of all patents,
patent applications, trademarks and trademark applications and assignments,
licenses or concessions of any patent, patent application, trademark or
trademark application in which the Company may have an interest.
2.21. Stop or Suspension Orders. The Company is not aware of any
threat of, or the initiation of, any steps or proceedings which would impair or
prevent the right to offer the Shares or any other securities of the Company, or
the issuance by the Commission or other regulatory authority of any stop order
or suspension order or other prohibition preventing or impairing the
transactions contemplated by this Agreement. The Company will advise the
Representative immediately, and confirm in writing, the receipt of any such
threat, the initiation of any such steps or proceedings or the issuance of any
such order or prohibition.
2.22. Transfer Agent. The Company has appointed American Securities
Transfer & Trust, Incorporated, 1825 Lawrence Street, Suite 444, Denver,
Colorado 80202, as its transfer agent (the "Transfer Agent") for the Common
Stock.
2.23. Employment Agreements; Employee Incentive Plans. The Company has
entered into employment agreements with James R. Currier, Sr., Gianfranco
Carbonato, Michael H. Gilbert and Gianni Ciamaroni, and has no employment
agreements, written or oral, with any other employee of the Company. The Company
has previously delivered to the Representative complete and correct copies of
each of such employment agreements, and, in the case of any oral employment
agreements, written memoranda summarizing all material terms thereof. The
Company has obtained key man life insurance on the lives of Gianfranco Carbonato
and James R. Currier, Sr., in the amount of $1 million each. Except as set forth
on Schedule 2.23, the Company has no employee benefit plans. The Company has
previously delivered to the Representative complete and correct copies of each
such employee benefit plan.
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2.24. Intellectual Property Rights.
(a) The Company owns or is licensed to use, in each case free
and clear of all liens or encumbrances and rights thereto or therein by third
parties, all United States or foreign patents (including rights under United
States or foreign patent applications), trade secrets, trademarks, service
marks, copyrights or other proprietary information or know-how (collectively,
Intellectual Property Rights") necessary or advisable to conduct the business
now being, or proposed to be, conducted by the Company as described in the
Registration Statement and the Prospectus. All such Intellectual Property Rights
are cross-licensed to the U.S. Corporation from the Italian Subsidiaries without
the payment of any royalties to the extent such Intellectual Property Rights are
used in the development of new products or technology pursuant to the Company's
Laser On-Line" program, and the U.S. Corporation has a valid and perfected first
priority security interest in all of the Intellectual Property Rights as
security for obligations owed to the U.S. Corporation by the Italian
Subsidiaries. The Joint Development Agreement among the U.S. Corporation and
each of the Italian Subsidiaries provides the U.S. Corporation with the
exclusive right to use outside of Italy any Intellectual Property Rights
developed pursuant to the Company's "Laser On-Line Program."
(b) The Company is not infringing, misappropriating or
otherwise violating any Intellectual Property Rights of any person and, except
as set forth with particularity on Schedule 2.24 to this Agreement, the Company
has not received any notice of, and is not otherwise aware of, any claim or the
basis of any claim that it is infringing, misappropriating or otherwise
violating any Intellectual Property Rights of any person. In each instance set
forth on Schedule 2.24 to this Agreement in which the Company has received
notice of a claim that it is infringing, misappropriating or otherwise violating
any Intellectual Property Rights of any person, the Company has formed a good
faith belief that it is not infringing, misappropriating or otherwise violating
such Intellectual Property Rights.
(c) To the best of the Company's knowledge, no person is
infringing, misappropriating or otherwise violating any of the Company's
Intellectual Property Rights. There are no pending legal proceedings relating to
any Intellectual Property Rights of the Company.
(d) The Company has entered into appropriate non-use and
non-disclosure and assignment of inventions agreements with all persons that
have access to the Company's Intellectual Property Rights and, to the Company's
knowledge after due inquiry, no such person has violated or breached any such
agreements.
2.25. Prior Issuances. All prior offers and sales of securities of the
Company were (a) exempt from registration under the 1933 Act, (b) registered
pursuant to, or
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exempt from registration under, all pertinent state securities, or Blue Sky,
laws, and (c) registered pursuant to, or exempt from registration under, all
pertinent foreign securities laws.
2.26. Tax Consequences of Reorganization. The purchase by the U.S.
Corporation of all of the issued and outstanding capital stock of PRIMA
Industrie (a) was non-taxable to the U.S. Corporation and its stockholders
domiciled in the United States under the Internal Revenue Code of 1986, as
amended; and (b) did not subject the U.S. Corporation, Prima Industrie or any
other Subsidiary to any tax under the laws of the Republic of Italy.
2.27. Stock Incentive Plan. The PRIMA Group International, Inc. 1997
Stock Incentive Plan (the "Stock Incentive Plan") permits the granting of
incentive stock options, as defined under Section 422 of the Internal Revenue
Code of 1986, as amended.
2.28. Florida Compliance. The Company has complied and will comply
with all provisions of Florida Statutes Section 517.075 (Chapter 92-198, Laws of
Florida). Neither the Company, nor any affiliate thereof, does business with the
government of Cuba or with any person or affiliate located in Cuba.
2.29. Compliance with Business Advisory Letter. The Company has
provided the Representative with a full and complete copy of the business
advisory letter received by it from Hein + Associates LLP, dated November 12,
1997 (the "Business Advisory Letter"). Schedule 2.29 hereto sets forth which
recommendations contained in the Business Advisory Letter have and have not been
fully complied with as of the date hereof.
SECTION 3.
Representations and Warranties of the Selling Shareholder Parties
In order to induce the Representative to enter into this Agreement, the
Selling Shareholder Parties hereby, jointly and severally, represent and warrant
to, and agree with, the Representative as follows:
3.1. Ownership of Selling Shareholder Shares. Miojusti owns all of the
Selling Shareholder Shares free and clear of any liens, charges, claims,
security interests or encumbrances.
3.2. Validity of Agreement. The Agreement has been duly authorized,
executed and delivered by each Selling Shareholder Party, and the sale of the
Selling Shareholder Shares by Miojusti and the compliance by the Selling
Shareholder Parties with all of the provisions of this Agreement and the
consummation of the
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transactions contemplated herein will not conflict with, result in a breach or
violation of, or constitute, either by itself or upon notice or passage of time
or both, a default under any indenture, mortgage, deed of trust, loan agreement,
lease, franchise, license or other contract, agreement or instrument to which
any Selling Shareholder Party is a party or by which any Selling Shareholder
Party is bound or to which any property or assets of any Selling Shareholder
Party are subject.
3.3. Representations and Warranties. To the best knowledge of each of
the Selling Shareholder Parties, all of the representations and warranties of
the Company contained in this Agreement are true and correct as of the date
hereof.
3.4. Accuracy of Registration Statement and Related Prospectus. The
material set forth under "Principal and Selling Stockholders" in the Prospectus,
insofar as it relates to the Selling Shareholder Parties, is accurate and
complete.
3.5. Payment of Costs and Expenses. The Selling Shareholder Parties
shall be responsible for and shall pay a pro rata share of the non-accountable
expense allowance of the Representative (equal to 3% of the gross proceeds
derived from the sale of the Selling Shareholder Shares) and the
Representative's discount from the Offering Price (equal to 7% of the gross
proceeds derived from the sale of the Selling Shareholder Shares). Miojusti
shall be entitled to receive the purchase price specified in Section 4.1 for the
Selling Shareholder Shares only.
3.6. Capitalization of Miojusti and Cambria 1990 Ltd. Partnership. The
capitalizations of Miojusti and Cambria 1990 Ltd. Partnership are as set forth
on Schedule 3.6 hereto.
3.7. Miojusti Acting as Principal. Miojusti will be acting as a
principal in the sale of the Selling Shareholder Shares pursuant to the terms of
this Agreement, rather than as an agent for the other Selling Shareholder
Parties.
SECTION 4.
Issue, Sale and Delivery of the Shares
4.1. Appointment of Representative. The Company hereby agrees to sell
1,800,000 Shares, and each Member, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
agrees to purchase from the Company the number of Shares set forth opposite
their respective names in Schedule I attached hereto at a purchase price of
$____ per Share at the Closing of the Offering (the "Closing"). The Company and
the Selling Shareholder Parties hereby grant to the Underwriting Group an
over-allotment option for a period of thirty (30) days after the Effective Date
to purchase at a purchase price of $____ per Share all, but not less than all,
of 150,000 additional
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Shares of Common Stock from the Company and 120,000 Shares of Common Stock from
Miojusti; provided that, in the event that the conditions specified in Sections
9.10 and 9.14 are not met on the Over-allotment Closing Date, or the Selling
Shareholder Parties otherwise fail to deliver the Selling Shareholder Shares at
the Over-allotment Closing, the Representative shall have the option to purchase
an additional number of shares of Common Stock from the Company equal to the
number of Selling Shareholder Shares, and that, in such event, the additional
shares of Common Stock purchased from the Company shall, for all purposes of
this Agreement, be considered "Shares," as that term is defined in Section 1.2
hereof. Such Shares shall be purchased for the account of each Member as nearly
as practicable in the proportion that the number of Shares set opposite the name
of each of the Members in Schedule I attached hereto bears to the 1,800,000
Shares purchased hereunder prior to the exercise of the over-allotment option.
The obligations of the Members hereunder are subject to, among other things: (a)
notice from the Commission of effectiveness of the Registration Statement; (b)
receipt of written advice from the National Association of Securities Dealers,
Inc. (the "NASD"), pursuant to Section 1 of Article III of the NASD's Rules of
Fair Practice, approving the fairness and reasonableness of the underwriting
arrangements in connection with the sale of the Shares; (c) qualification of the
sale of the Shares under applicable state laws and the absence of any action by
any government body, agency or official prohibiting the sale of the Shares; and
(d) the terms and conditions contained in this Agreement and in the Registration
Statement and the Prospectus.
4.2. Default by a Member. If for any reason one or more Members shall
fail or refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 10 hereof) to
purchase and pay for the number of Shares agreed to be purchased by such Member,
the Company shall immediately give notice thereof to the Representative, and the
non-defaulting Members shall have the right, within twenty-four (24) hours after
the receipt by the Representative of such notice, to purchase or procure one or
more other Members to purchase, in such proportions as may be agreed upon
between the Representative and such purchasing Member or Members, and upon the
terms herein set forth, the Shares which such defaulting Member or Members
agreed to, and subsequently failed, to purchase. If the non-defaulting Members
fail to make such arrangements with respect to all such Shares, the number of
Shares which each non-defaulting Member is otherwise obligated to purchase under
the Agreement shall be automatically increased PRO RATA to absorb the remaining
Shares which the defaulting Member or Members agreed to purchase; provided,
however, that the non-defaulting Members shall not be obligated to purchase the
Shares which the defaulting Member or Members agreed to purchase if the
aggregate number of such Shares exceeds ten percent (10%) of the total number of
Shares which all Members agreed to purchase hereunder. If the total number of
Shares which the defaulting Member or Members agreed to purchase shall not be
purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right,
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within twenty-four (24) hours next succeeding the twenty-four (24) hour period
above referred to, to make arrangements with other underwriters or purchasers
satisfactory to the Representative for the purchase of such Shares on the terms
herein set forth. In any such case, either the Representative or the Company
shall have the right to postpone the Closing determined as provided in Section
4.6 hereof for not more than seven (7) business days after the date originally
fixed as the Closing pursuant to said Section in order that any necessary
changes in the Registration Statement, the Prospectus or any other documents or
arrangements may be made. If neither the non-defaulting Members nor the Company
shall make arrangements within the twenty-four (24) hour periods stated above
for the purchase of all the Shares which the defaulting Member or Members agreed
to purchase hereunder, this Agreement shall be terminated without further act or
deed and without any liability on the part of the Company to any non-defaulting
Member and without any liability on the part of any non-defaulting Member to the
Company.
Nothing contained in this Section 4.2 shall relieve any defaulting
Member of its liability, if any, to the Company or to the remaining Members for
damages occasioned by its default hereunder.
4.3. Offering Price. After the Commission notifies the Company that the
Registration Statement has become effective, the Members propose to offer the
Shares to the public at an Offering Price of $_____ per Share as set forth in
the Prospectus. The Members may allow such concessions and discounts upon sales
to selected dealers as may be determined from time to time by the
Representative. Payment for the Shares (including Shares included in the
over-allotment option) which the Representative agrees to purchase shall be made
to the Company or Miojusti (as the case may be) or to their respective order by
certified or official bank check or checks in the amount of the purchase price
by or on behalf of the Representative at the offices of Dorsey & Whitney LLP in
Denver, Colorado, or by wire transfer of immediately available funds in the
amount of the purchase price pursuant to instructions delivered by the Company,
against delivery to the Representative of certificates for the Shares in
definitive form in such numbers and registered in such names as the
Representative shall request in writing at least two (2) full business days
prior to such delivery.
4.4. Principal Terms of Representative's Warrants. Upon payment for
the Shares, at the Closing, the Company shall sell and deliver to the
Representative and/or its designees, the Representative's Warrants to purchase a
total of 180,000 shares of Common Stock, for a purchase price of $100.00,
registered in such names and in such denominations as the Representative shall
have requested. The Representative's Warrants shall be in the form attached as
Exhibit A hereto and shall be in form and content acceptable to counsel for the
Representative. The Representative's Warrants shall evidence the right of the
Representative and/or its
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designees to purchase a total of 180,000 shares of the Common Stock and shall be
exercisable commencing one (1) year after the Effective Date and for a period of
four (4) years thereafter (such four (4) year period shall be known as the
Representative's Warrant Period") and shall contain anti-dilution and adjustment
provisions acceptable to the Representative. The Representative's Warrants shall
be exercisable at an exercise price of $____ per share (150% of the Offering
Price). On the fifth anniversary of the Effective Date, the Representative's
Warrants shall expire. The Company will not be obligated to sell and deliver the
Representative's Warrants, and the Representative will not be obligated to
purchase and pay for the Representative's Warrants, except upon payment for the
Shares. The Representative's Warrants to be acquired by the Representative
and/or its designees shall be restricted from sale, transfer, exercise,
assignment or hypothecation for twelve (12) months after the Effective Date,
except that the Representative may elect that the Representative's Warrants be
issued in varying amounts directly to its officers, and not to the
Representative, or to other Members and their designees. Such designation will
only be made at the Closing if the Representative determines that such
designation would not violate the interpretation of the Board of Governors of
the NASD relating to the review of corporate financing arrangements. The
Representative has disclosed to the Company, and the Company has agreed, that
the Representative may transfer, after twelve (12) months from the date of the
Representative's Warrants, a portion or all of the Representative's Warrants to
certain persons, including, but not limited to, the Representative's officers,
directors, stockholders, employees or registered representatives. The
Representative and the Company agree that such transfers will only be made if
they do not violate the registration provisions of the 1933 Act.
4.5. Inspection of Certificates. For the purpose of expediting the
checking and packaging of the certificates for the securities comprising the
Shares and the Representative's Warrants, the Company agrees to make the
certificates available for inspection by the Representative at the main office
of the Representative in Denver, Colorado, at least one (1) full business day
prior to the proposed delivery date.
4.6. Closing. The delivery of the Shares and payment therefor is herein
called the "Closing." The date of the Closing is herein called the "Closing
Date." The Company and, in the case of the Over-allotment Closing Date (as
hereinafter defined), Miojusti will deliver the certificates for the Shares to
the Representative at the offices of the Representative in Denver, Colorado or
at such other location as may be specified by the Representative, at 10:00 a.m.,
New York time, against payment of the purchase price, on the third full business
day after commencement of the Offering or, if the Offering commences after 4:30
p.m., New York time, on the fourth full business day after commencement of the
Offering, or such earlier time as may be agreed upon by the Representative and
the Company. In the event that the Representative elects to exercise any part of
the over-allotment option pursuant to Section 3.1 hereof, the time and date of
delivery and payment for the Shares to be
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issued pursuant to said over-allotment option shall be as mutually agreed, but
not later than the thirtieth (30th) calendar day after the Effective Date. Said
date is hereinafter referred to as the "Over-allotment Closing Date."
4.7. Representative's Expense Allowance. It is understood that the
Company will reimburse the Representative for its expenses on a non-accountable
basis in the amount of three percent (3%) of the gross proceeds from the sale of
the Shares, including proceeds from the sale of the Shares included in the
over-allotment option. In no event shall this expense allowance be refundable or
accountable, except as provided in the next paragraph.
The Company and the Representative mutually acknowledge that the
Company has heretofore paid to the Representative $50,000 towards the
Representative's nonaccountable expense allowance, and the Representative hereby
acknowledges receipt of such portion of the nonaccountable expense allowance. At
the Closing and, if applicable, on the Over-allotment Closing Date, the Company
shall pay to the Representative the unpaid balance of such expense allowance to
defray the expenses incurred by the Representative in connection with the
Offering. The Representative's expenses shall include, but are not to be limited
to, the fees of Representative's counsel, plus any additional expenses and fees,
travel expenses, postage expenses, duplication expenses, long distance telephone
expenses and other expenses incurred by the Representative in connection with
the proposed sale of the Shares. In the event that the Offering is not
consummated for any reason, the Company shall reimburse the Representative for
all of its accountable expenses; provided, however, that if such accountable
expenses are less than $50,000, any unaccounted for portion of the $50,000
advanced to the Representative for non-accountable expenses will be returned to
the Company.
4.8. Mutual Warranty. The parties represent and warrant that, as of
the date hereof and as of the Closing Date, the representations and warranties
herein contained and the statements contained in all certificates delivered by
any party to another pursuant to this Agreement shall in all respects be true
and correct.
4.9. Sales Reports. The Representative covenants that, reasonably
promptly after the Closing Date, it will supply the Company with all information
requested in writing by the Company and required from the Representative in
connection with its periodic reporting requirements under the Securities
Exchange Act of 1934, as amended (the "1934 Act") and such additional
information as the Company may reasonably request to be supplied to the
securities commissions of the states in which the Shares have been qualified for
sale.
4.10. Re-offers By Selected Dealers. In connection with each sale by
the Representative of any of the Shares through such dealers and institutions
agreeing to purchase Shares under the Selected Dealers Agreement with the
Representative
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(each, a "Selected Dealer"), the Representative shall require the Selected
Dealer purchasing any such Shares to agree to re-offer the same on the terms and
conditions of the Offering set forth in the Registration Statement and the
Prospectus.
SECTION 5.
Registration Statement and Prospectus
5.1. Representative's Copies. The Company shall deliver to the
Representative, without charge, two (2) signed copies of the Registration
Statement, including all financial statements and exhibits and amendments or
supplements thereto as filed with the Commission, and shall deliver, without
charge to the Representative, an additional seven (7) conformed copies of the
Registration Statement and any amendments or supplements thereto, including such
financial statements and exhibits. The signed copies of the Registration
Statement so furnished to the Representative shall include signed copies of any
and all consents and certificates of the independent public accountants
certifying to the financial statements included in the Registration Statement
and the Prospectus and signed copies of any and all consents and certificates of
any other person whose profession gives authority to statements made by him or
her and who is named in the Registration Statement or Prospectus as having
prepared, certified or reviewed any part thereof.
5.2. Copies of Preliminary Prospectus and Prospectus. Prior to the
Effective Date, the Company shall procure, at its sole expense, and shall
deliver to Members and to other broker/dealers, as many printed copies of each
Preliminary Prospectus filed with the Commission bearing the statement required
by Rule 481(b)(2) of Regulation C under the 1933 Act as may be required by the
Representative. The Company consents to the use of the same by Members and by
dealers prior to the Effective Date; provided, however, that with respect to any
Preliminary Prospectus that will not be distributed publicly to potential
investors in the Offering (a "Quiet Filing Preliminary Prospectus"), the
Representative will be provided with no more than 500 copies of such Preliminary
Prospectus (excluding copies provided to the Representative or its counsel for
filing purposes) and will distribute such copies only to originating investment
bankers, potential Members in the Underwriting Group and institutional
investors. In addition, on and after the Effective Date, the Company shall
procure, at its sole expense, as many printed copies of the Prospectus at such
addresses as the Representative may direct for the purposes contemplated by this
Agreement and shall deliver such printed copies of the Prospectus within one (1)
business day after the Effective Date.
5.3. Post-Effective Amendments. If, during such period of time as in
the opinion of the Representative or its counsel a Prospectus relating to the
sale of the
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Shares contemplated hereby is required to be delivered under the 1933 Act, any
event occurs or any event known to the Company relating to or affecting the
Company shall occur as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, if it is
necessary at any time after the Effective Date to amend or supplement the
Prospectus to comply with the 1933 Act, the Company shall forthwith notify the
Representative thereof and shall prepare and file with the Commission such
further amendment to the Registration Statement or supplemental or amended
Prospectus as may be required and shall furnish and deliver to the
Representative and to others whose names and addresses are designated by the
Representative, all at the sole expense of the Company, a reasonable number of
copies of the amended or supplemented Prospectus which, as so amended or
supplemented, will not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the Prospectus not
misleading in the light of the circumstances existing when it is delivered to a
purchaser or prospective purchaser and which will comply in all respects with
the 1933 Act. In the event the Representative shall be required to deliver a
Prospectus ninety (90) days or more after the Effective Date, upon request of
the Representative, the Company shall prepare promptly such Prospectus as may be
necessary to permit compliance with the requirements of Section 10 of the 1933
Act.
5.4. Use of Prospectus. The Company authorizes the Members, in
connection with the distribution of the Shares, and all dealers to whom any of
the Shares may be sold to or through the Members, to use the Prospectus, as from
time to time may be amended or supplemented, in connection with the Offering and
sale of the Shares and in accordance with the applicable provisions of the 1933
Act, the applicable Rules and Regulations and the applicable state securities or
Blue Sky laws; provided, however, that the Representative's use of any Quiet
Filing Preliminary Prospectus shall be made in accordance with the provisions of
Section 5.2 hereof. Each recipient shall be provided with a copy of the amended
Prospectus in the form as amended through the Effective Date.
SECTION 6.
Covenants of the Company
The Company covenants and agrees with the Representative and other
Members that:
6.1. Filing of Amendments. After the date hereof, the Company will not
at any time, whether before or after the Effective Date, file with the
Commission any amendment or supplement to the Registration Statement or
Prospectus unless a
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copy of such amendment or supplement was previously furnished to the
Representative and its counsel a reasonable time prior to the proposed filing
thereof, and the Representative or its counsel did not reasonably object to such
proposed filing on the ground that it is not in compliance with the 1933 Act or
the Rules and Regulations. The Company agrees to supply the Representative's
counsel with the contents of any oral comments and copies of all comments,
correspondence and orders received from the Commission or any state securities
administrator in connection with the filing of any Registration Statement or
amendment or supplement thereto.
6.2. Declaration of Effectiveness. The Company shall use its best
efforts to cause the Registration Statement and any post-effective amendment
subsequently filed with the Commission to become effective as promptly as
practicable, but shall not obtain an Effective Date or allow the Registration
Statement to become effective without the approval of the Representative. The
Company will promptly advise the Representative, and will confirm such advice in
writing:
(a) of the effectiveness of the Registration Statement or any
amendment thereto and of the filing with the Commission of any amendment of or
supplement to the Prospectus;
(b) of any request or suggestion made by the Commission for
any amendment to the Registration Statement or the Prospectus or for additional
information and the nature and substance thereof;
(c) of the issuance by the Commission of any order suspending
the effectiveness of the Registration Statement pursuant to Section 8 of the
1933 Act or of the initiation of any proceeding for that purpose;
(d) of the happening of any event which, in the judgment of
the Company, makes any material statement in the Registration Statement or
Prospectus untrue or which requires the making of any change in the Registration
Statement or Prospectus in order to make the statements therein not misleading;
and
(e) of the failure to qualify or the suspension of the
qualification of the Shares for offering or sale in any jurisdiction or of the
institution of any proceeding for any of such purposes.
The Company shall use every reasonable effort to prevent the issuance of any
such order or of any order preventing or suspending such use, to prevent any
such failure to qualify or any such suspension and to obtain as soon as possible
a lifting of any such order, the reversal of any such failure and the
termination of any such suspension.
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6.3. Amendments at the Request of the Representative. The Company
shall prepare and file promptly with the Commission, upon the request of the
Representative, such amendments or supplements to the Registration Statement and
the Prospectus, in form satisfactory to counsel to the Company as, in the
opinion of counsel to the Representative, may be necessary or advisable in
connection with the sale of the Shares, and will use its best efforts to cause
the same to become effective as promptly as possible.
6.4. Blue Sky.
(a) The Company shall, at its sole expense and when and as
requested by the Representative, apply for and qualify the sale of the Shares in
all states in which the Representative reasonably requests in order to qualify
under such state's Blue Sky laws. The Company agrees that the Representative
will instruct counsel to the Representative to make all of the appropriate
filings, and the Company agrees to advance to the Representative the estimated
attorneys' fees of the Representative incurred in connection therewith and to
pay any balance of such fees promptly upon the Representative's request
therefor. The maximum number of Shares to be offered in the entire Offering
shall be registered in each state (or if sales will be permitted by exemption
rather than registration, the exemption shall be obtained for such maximum
number of Shares), unless the Representative agrees otherwise in writing. The
Company will advance to the Representative all filing fees for all state
filings. The Company will continue such qualifications in effect so long as
required for the purposes of the sale of the Shares. Copies of the applications
for the registration of securities filed with the various states shall be
supplied to the Company's and Representative's counsel, and copies of all
comments and orders received from the various states will be supplied to
Company's and Representative's counsel.
(b) No less than one week prior to the expected Effective Date
of the Registration Statement, and immediately prior to the release of the
Preliminary Prospectus, Representative's counsel shall prepare and deliver to
both parties and other counsel, a preliminary Blue Sky Memorandum, including,
among other things, all states wherein the proposed Offering has been qualified
or registered for sale and the number of Shares registered in any such state,
all states where an exemption from qualification or registration is available
and the basis therefor. Immediately prior to the Effective Date of the
Registration Statement, counsel who prepared the Blue Sky filings shall prepare
and deliver to both parties and other counsel a final Blue Sky Memorandum
(together with the preliminary Blue Sky Memorandum, the "Blue Sky Memoranda"),
including, among other things, all states wherein the Offering may be sold to
the public and all states where an exemption from qualification or registration
is available, the basis therefor, and the number of Shares which may be sold in
each such state.
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6.5. Further Reports. The Company, at its sole expense, shall prepare
and give and shall continue to give such financial statements and other
information to the Commission and the proper public bodies of the states in
which the Shares may be qualified as may be required from time to time by the
Commission and such proper public bodies and will furnish the Representative
with copies thereof promptly upon the filing thereof with the Commission or such
proper public bodies.
6.6. Reports to Representative. During the period of five (5) years
after the Closing Date, the Company shall deliver to the Representative copies
of each annual report of the Company, and also shall deliver to the
Representative:
(a) within ninety (90) days (or such later period for filing
of the Company's Annual Report on Form 10-K as may be permitted under Rule
12b-25 or any successor rule or regulation) after the close of each fiscal year
of the Company, a financial report of the Company on a consolidated basis (if
applicable) and a similar financial report of all unconsolidated subsidiaries,
if any, all such reports to include a balance sheet as of the end of the
preceding fiscal year, an income statement, a statement of cash flow, all to be
in reasonable detail and certified by independent public accountants who may,
however, be the regularly employed independent public accountant of the Company
to the extent included in the Company's Form 10-K for such fiscal year as filed
with the SEC;
(b) within forty-five (45) days (or such later period for
filing of the Company's Quarterly Report on Form 10-Q as may be permitted under
Rule 12b-25 or any successor rule or regulation) after the end of each quarterly
fiscal period of the Company, other than the last quarterly fiscal period in any
fiscal year, copies of the consolidated (if applicable) income statement and
statement of changes in financial condition for that period and the balance
sheet as of the end of that period of the Company and the income statement,
statement of changes in financial condition and the balance sheet of each
unconsolidated subsidiary, if any, of the Company for that period, all subject
to year-end adjustment, certified by the principal financial or accounting
officer of the Company to the extent included in the Company's Form 10-Q for
such quarter as filed with the SEC;
(c) copies of all other statements, documents or other
information which the Company shall mail or otherwise make available to any
class of its security holders or shall file with the Commission pursuant to the
1933 Act, the 1934 Act or otherwise; and
(d) copies of all news, press or public information releases
when made.
If the Company shall fail to furnish the Representative financial
statements as provided in subparagraphs (a) and (b) above within the times
specified, and the
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Company has not received an extension of such time for filing or is not in the
immediate process of preparing such filing, the Representative shall have the
right to have such financial statements prepared by independent public
accountants of its own choosing, and the Company shall furnish such independent
public accountants such data and assistance and access to such records as they
may reasonably require to enable them to prepare such statements and shall pay
their reasonable fees and expenses in preparing the same.
6.7. Expenses of Offering. The Company shall pay, whether or not the
transactions contemplated hereunder are consummated or this Agreement is
prevented from becoming effective or is terminated, all costs and expenses
incident to the performance of its obligations under this Agreement, including
all expenses incident to the authorization, issuance and delivery of the Shares
and the Representative's Warrants, any original issue taxes in connection
therewith, all transfer taxes, if any, incident to the initial sale of the
Shares, the Representative's Warrants and Representative's Warrant Stock, if
such sales are consummated, the fees and expenses of the Transfer Agent, if any,
the fees and expenses of the Company's counsel and accountants, the costs and
expenses incident to the preparation, printing and filing under the 1933 Act and
with the NASD of the Registration Statement and the Prospectus and any
amendments or supplements thereto, the cost of preparing and filing all exhibits
to the Registration Statement, this Agreement, and the Questionnaires to
officers, directors and certain stockholders of the Company for the obtaining of
information for the Registration Statement and Preliminary and final Prospectus,
the fees of the Representative's counsel incurred in connection with the
preparation of the Blue Sky Memoranda, the cost of printing and furnishing to
the Representative copies of the Registration Statements and copies of the
Preliminary and final Prospectus as herein provided and the cost of qualifying
the Shares under the state securities or Blue Sky laws as provided in Section
6.4 herein, including filing fees. In addition to the above, the Company shall
also pay all expenses, up to a maximum of $15,000, incurred in connection with
the placement of a "tombstone" advertisement in the national edition of THE WALL
STREET JOURNAL, INVESTOR'S BUSINESS DAILY, INVESTMENT DEALERS DIGEST and the
ROCKY MOUNTAIN NEWS or any other periodical determined appropriate by the
Representative, after the Closing. The Company, at its sole expense, shall also
make a representative of its management available for the Representative's
corporate manager's meeting after the completion of the Offering, and the
Company shall be responsible for all reasonable expenses related to such
meeting.
6.8. Stockholder Reports. The Company shall, as promptly as possible
after each annual fiscal period, render and distribute reports to its
stockholders which will include audited statements of its operations and cash
flow during such period and its balance sheet as of the end of such period.
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6.9. 1933 Act Reporting. Within the time during which the Prospectus
is required to be delivered under the 1933 Act, the Company shall comply, at its
own expense, with all requirements imposed upon it by the 1933 Act, the Rules
and Regulations as from time to time in force and any order of the Commission,
so far as is necessary to permit the continuance of offers, sales and trading of
the Shares.
6.10. Use of Proceeds. The Company will apply the net proceeds from
the sale of the Shares solely and exclusively in the manner set forth in the
Registration Statement and the Prospectus under the caption "Use of Proceeds."
6.11. Transfer Sheets. The Company shall issue at the Closing
irrevocable instructions to the Transfer Agent to provide the Representative,
for its confidential use and at the Company's expense, reasonable access to its
daily transfer sheets for a period of three years after the Closing Date, to
forward such daily transfer sheets to the Representative bi-weekly for the 60
days following the Closing Date and monthly for the remainder of the first year
following the Closing Date, and, annually, for a period of five years after the
Closing Date, upon request of the Representative to the Transfer Agent therefor
(but more frequently in the event of an investigation requiring the same or
inquiry therefor by the Commission or other government body or agency or by the
NASD), to provide the Representative with lists of stockholders of the Company.
6.12. Information About the Company. The Company shall deliver to the
Representative the documents described in Section 2.20. In addition, at Closing,
the Company shall deliver to the Representative or its counsel, certificates of
good standing for each jurisdiction (whether foreign or domestic) where the
Company does business, certificates as to tax status, incumbency or any other
certificate or document which the Representative may reasonably require prior to
Closing.
6.13. Due Diligence Investigation for Offering and for Proceedings
involving the Representative. Prior to the Closing Date, the Company shall
cooperate with the Representative in such investigation as it may make or cause
to be made of all the properties, business and operations of the Company in
connection with the sale of the Shares, the Company shall make its officers and
directors available to the Representative for interrogation, without cost or
expense to the Representative, in connection therewith, and the Company shall
make available such information in its possession as the Representative may
reasonably request. Subsequent to the Closing Date, the Company shall cooperate
with the Representative in such investigation as it may make or cause to be made
of all the properties, business and operations of the Company in connection with
any proceeding in which claims are asserted against the Representative by virtue
of its participation in the Offering or in any activities as a broker-dealer in
transactions involving the Common Stock or as a market-maker for the Common
Stock, the Company shall make its officers and directors available to the
Representative for interrogation, without cost or expense
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to the Representative, in connection therewith, and the Company shall make
available such information in its possession as the Representative may
reasonably request.
6.14. Transfer Agent. During the period ending three (3) years after
the Closing Date, the Company shall not change or terminate the appointment of
the Transfer Agent named in Section 2.22 hereto, without first giving notice to
the Representative.
6.15. Conditions Precedent. The Company shall use due diligence to
comply or cause to be complied with all conditions precedent to the obligations
of the Representative specified in this Agreement.
6.16. 1934 Act Registration and Reporting; Listing. Simultaneously
with a declaration of effectiveness of the Registration Statement, the Company,
at its sole cost and expense, shall register the Common Stock by filing with the
Commission, pursuant to Section 12(g) of the 1934 Act, a Registration Statement
on Form 10, or Form 8-A, or other appropriate filing, containing such
information and documents as the Commission may specify (the "1934 Act
Registration Statement"). Two (2) signed copies of the 1934 Act Registration
Statement, including the certified financial statements and other required
exhibits, shall be supplied to the Representative prior to the filing thereof.
In addition, any amendments or supplements that may be made by the Company or
required by the Commission to the 1934 Act Registration Statement will be
furnished to the Representative after the filing thereof with the Commission.
The Company shall thereafter comply with all periodic reporting and proxy
solicitation requirements imposed by the Commission pursuant to the 1934 Act, so
long as the Company is legally required to do so and shall furnish the
Representative promptly with copies of all materials filed with the Commission
pursuant to the 1934 Act or otherwise furnished to stockholders of the Company.
In addition, simultaneously with a declaration of effectiveness of the
Registration Statement, the Company agrees to qualify for the listing of its
Common Stock on the American Stock Exchange or the Nasdaq National Market and to
maintain such qualification following the Closing.
6.17. No Material Change. The Company shall not, except as described
in the Prospectus or with approval of the Representative, until (a) the
termination of this Agreement prior to the Closing pursuant to Section 10.1 or
Section 10.2, or (b) the expiration of ninety (90) days after the Effective
Date, whichever occurs later:
(a) undertake or authorize any change in its capital structure
or authorize or issue or permit any public offering of any additional shares of
its capital stock, except as herein provided;
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(b) authorize, create, issue or sell any funded obligations,
notes or other evidences of indebtedness, except in the ordinary course of
business and maturing not more than twelve (12) months from the date thereof
except for recorded loans between the Company and its Subsidiaries pursuant to
(i) arm's length transactions governed by credit terms consistent with typical
U.S. banking arrangements or (ii) the credit agreement between the U.S.
Corporation and its subsidiaries filed as an exhibit to the Registration
Statement; or
(c) consolidate, merge or form a joint venture with or into or
acquire any other enterprise (whether in the form of a corporation or otherwise)
or create any mortgage or lien upon any of its properties or assets other than
in the ordinary course of business.
6.18. Bound Volumes. The Company shall supply to the Representative
and the Representative's counsel, at the Company's cost, four (4) sets of bound
transcripts each containing all of the Closing materials within a reasonable
time after the Closing Date, not to exceed six (6) months.
6.19. Financial Consulting Agreement. At the time of the Closing, the
Company shall enter into a financial consulting agreement with the
Representative in the form attached hereto as Exhibit B, pursuant to which the
Representative shall receive a consulting fee of $40,000 per annum. The services
of the Representative pursuant to such agreement shall include, but shall not be
limited to, advising the Company in connection with possible acquisitions,
stockholder relations (including the preparation of the Company's annual report
to stockholders), long-term financial planning, advice relating to corporate
reorganizations, expansion and capital structure, and other financial
assistance. The term of the consulting agreement shall be one (1) year,
commencing on the Closing Date. The entire consulting fee shall be paid to the
Representative on the Closing Date.
6.20. Additional Financing.
(a) If, at the request of the Company, the Representative
introduces, negotiates or arranges for a non-public equity or debt financing
(including any bridge financing) for the Company, and such financing is accepted
and consummated (other than as contemplated herein) prior on or prior to
August 7, 2000, the Company will pay a fee to the Representative for such
services equal to ten percent of the equity raised in such transaction.
(b) If, at the request of the Company, the Representative (i)
arranges for bank debt financing, and such financing is accepted and consummated
on or prior to August 7, 2000, or (ii) arranges for the purchase or sale of
assets, or for a merger, acquisition or joint venture for the Company, and such
transaction is accepted and
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consummated on or prior to August 7, 2000, the Company will pay a fee to the
Representative for such services, calculated as follows:
-four percent (4%) of the value of the financing or other
transaction to the Company up to and including five million
dollars ($5,000,000);
-three percent (3%) of the value of the financing or other
transaction to the Company greater than five million dollars
($5,000,000) and up to and including six million dollars
($6,000,000);
-two percent (2%) of the value of the financing or other
transaction to the Company greater than six million dollars
($6,000,000) and up to and including seven million dollars
($7,000,000); and
-one percent (1%) of the value of the financing or other
transaction to the Company in excess of seven million dollars
($7,000,000).
Notwithstanding the foregoing, nothing in this Agreement shall be construed to
require the Company to utilize the services of the Representative for any such
additional financing or other transaction, and the Company shall be free to
obtain additional financings, and to consummate other transactions, with the
assistance of other investment banking firms.
6.21. Restriction on Sale of Securities. Prior to the declaration of
effectiveness of the Registration Statement, the Company will obtain from each
key officer, insider and director of the Company, as well as the shareholders of
Prima Electronics that may receive securities of the U.S. Corporation in
connection with the proposed acquisition by the U.S. Corporation of the
remaining issued and outstanding capital stock of Prima Electronics not
currently held by the Company, and deliver to the Representative, agreements
from said persons concerning restrictions on future sales of securities of the
Company owned by them. All of said agreements shall be in a form for which prior
approval has been obtained from the Representative, but shall include agreements
that such securities and underlying securities may not be publicly sold during
the twenty-four (24) month period following the Effective Date, without the
prior written consent of the Representative and the Company, which may be
withheld in either of their sole discretion; provided, however, that such
securities may be sold during that time period, provided that such sale or
disposition is a privately negotiated transaction, that the purchaser agrees in
writing with the Representative and the Company to the provisions of the
transferor's written agreement with the Representative and the Company and that
the disposition is otherwise in accordance with applicable securities laws; and
further provided, that the Representative will waive the restrictions contained
in such agreements, on a pro rata basis to all parties subject to such
agreements, if the Company undertakes a public offering or private placement
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of Common Stock and the underwriter or placement agent for such public offering
or private placement agrees that the shares of Common Stock for which such
restrictions are waived will be sold as part of the orderly distribution of
securities to be sold in such public offering or private placement. Moreover,
such agreements will provide that, during such twenty-four (24) month period,
the Representative will have the right of first refusal to sell, as agent or
broker, any and all shares of Common Stock that the person signing may wish to
sell pursuant to Rule 144, promulgated under the 1933 Act.
6.22. Public Relations Firm. The Company shall engage a public
relations firm acceptable to the Representative, for a period of one (1) year
after the Effective Date; provided, however, that the acceptance of the
Representative to such public relations firm shall not be unreasonably withheld.
6.23. Board of Directors Meetings. For the three (3) year period
commencing on the Effective Date, the Company shall give written notice to the
Representative of all Board of Directors' meetings at the time such meeting is
called and as such notice is given to the Company's directors and the
Representative shall be entitled to have an observer attend all such Board of
Directors' meetings; provided, however, that the Representative shall pay for
any travel costs associated with such observer's attendance at such meetings.
Such observer shall be an Affiliate of the Representative, shall have no right
to speak at the meetings, and will not be entitled to attend executive sessions
of the Board. In addition, the Company shall promptly forward to the
Representative, as completed, minutes of each meeting of the Board of Directors
of the Company, or any committee thereof.
6.24. Fundamental Corporate Transactions. For a period of three (3)
years following the Effective Date, the Company shall not make any transfer of a
material portion of the assets or capital stock of the Company or any current or
future subsidiary (each, a "Company Entity") to any other person or entity
(including, without limitation, a Company Entity) without the prior consultation
of the Representative, and will submit any proposal for the transfer of any
material portion of the assets of the Company to a vote of the stockholders of
the Company unless the Representative concurs with the Company that stockholder
approval is not necessary.
6.25. Potential Acquisition of Prima Electronics. In the event that
the Company determines to acquire the remaining issued and outstanding capital
stock of Prima Electronics not currently held by the Company, the Company will
use its best efforts to structure such acquisition as a non-taxable transaction
under of the Internal Revenue Code of 1986, as amended, and the laws of the
Republic of Italy. In addition, the consideration paid by the Company in
exchange for any capital stock of Prima Electronics shall be (a) cash, (b) debt
or equity securities of the U.S. Corporation, or (c) some combination thereof.
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6.26. Stock Incentive Plan; Incentive Compensation.
(a) Prior to the Closing, the Company shall not issue any
award under the Stock Incentive Plan to the extent that such award would cause
the aggregate number of shares of Common Stock underlying awards issued under
the Stock Incentive Plan to equal or exceed fifty-three percent (53%) of the
number of shares of Common Stock authorized for issuance pursuant to awards
granted under the Stock Incentive Plan.
(b) For the three (3) year period commencing on the Effective
Date, the Company will not grant any bonus or incentive compensation (whether in
the form of cash, awards granted under the Stock Incentive Plan, or other
securities of the Company) to any person to the extent that the aggregate of
such compensation granted by the Company to all persons during the fiscal year
in which such grant is made would decrease the Company's earnings for such
fiscal year by an amount greater than or equal to five percent (5%) of the
Company's earnings in the prior fiscal year; provided, however, that such grants
may decrease the Company's earnings for such fiscal year by an amount greater
than five percent (5%), but not to exceed ten percent (10%), to the extent that,
and only to the extent that, such additional grants are made in connection with
the establishment of an employee stock ownership plan that will purchase shares
of the Company's Common Stock on the open market.
6.27. Composition of Board of Directors. For the three (3) year period
commencing on the Effective Date, the Company will use its best efforts to
insure that, at all times, at least three (3) members of the Board of the U.S.
Corporation are citizens of the United States.
6.28. Compliance with Business Advisory Letter. The Company will fully
implement all recommendations contained in the Business Advisory Letter which
have not been implemented as of the date hereof within the time frame set forth
on Schedule 6.28 hereto.
SECTION 7.
Indemnification
7.28.0.0.0.1. The Company agrees to indemnify and hold harmless
the Representative and each person, if any, who controls the Representative, its
affiliated companies and each of the Representative's and such affiliated
companies' respective officers, directors, agents and controlling persons
(within the meaning of each of Section 20 of the 1934 Act and Section 15 of the
1933 Act) (each of the foregoing, including the Representative, is individually
referred to in this Section 7 as a "Representative" and collectively are
referred to as the "Representative").
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against any losses, claims, damages, liabilities or expenses, joint or several,
brought by a third party, to which such Representative or each such controlling
person may become subject, under the 1933 Act, the 1934 Act, common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arise out of, or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto or made orally or in writing to the
Representative or to any representative of a Member, or the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereof 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; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
application or other statement executed by the Company or based upon written
information furnished by the Company and filed in any jurisdiction in order to
qualify the Shares under, or exempt the Shares or the sale thereof from
qualification under, the securities laws of such jurisdiction, or the omission
or alleged omission to state in such application or statement 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; (iii) the
breach or violation of any covenant of the Company made in this Agreement; or
(iv) the inaccuracy or failure of any representation or warranty of the Company
in this Agreement; provided, however, that the Company will not be liable in any
such case to the extent that, with respect to clauses (i) and (ii) of this
Section 7(a), any such loss, claim, damage, liability or expense arises out of,
or is based upon, an untrue statement, or alleged untrue statement, omission or
alleged omission, made in reliance upon and in conformity with information
furnished to the Company by, or on behalf of, the Representative in writing
specifically for use in the preparation of the Registration Statement or any
amendment or supplement thereto, any such Preliminary Prospectus or the
Prospectus or other application or statement filed under any states' securities,
or blue sky, law or any such amendment thereof or supplement thereto. Subject to
the provisions of this Section 7, the Company will reimburse such Representative
for any legal or other expenses reasonably incurred by such Representative in
connection with investigating, defending or settling any such loss, claim,
liability or action. This indemnity agreement is in addition to any liability
which the Company may otherwise have at law or in equity. Any losses, claims,
damages, liabilities or expenses for which the Representative is entitled to
indemnification under this Section 7 shall be paid by the Company as such
losses, claims, damages, liabilities or expenses are incurred. At the election
of the Representative, and subject to subsection (d) below, the Representative
may request, and is entitled to receive, from the Company reimbursement for
legal or other expenses reasonably incurred on a monthly basis, with the effect
that the Company will pay in full each detailed invoice for legal or other
expenses incurred by the Representative within thirty (30) days after the date
of presentation thereof by the Representative.
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7.28.0.0.0.2. The Selling Shareholder Parties jointly and severally
agree to indemnify and hold harmless the Representative and each person, if any,
who controls the Representative within the meaning of Section 15 of the Act
against any losses, claims, damages or liabilities, joint or several, to which
the Representative or each such controlling person may become subject, under the
Act, the Exchange Act, the common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of, or
are based upon any breach or violation of any representation or warranty of the
Selling Shareholder Parties contained in Section 3 of this Agreement; and,
subject to the provisions of paragraph (d) of this Section 7, will reimburse the
Representative and each such controlling person for any legal or other expenses
reasonably incurred by the Representative or controlling person in connection
with investigating or defending against any such loss, claim, damage, liability
or action; provided, however, that the Selling Shareholder Parties will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of, or is based upon, an untrue statement, or alleged
untrue statement, omission or alleged omission, made in reliance upon and in
conformity with information furnished to the Selling Shareholder Parties or the
Company by, or on behalf of, the Representative in writing specifically for use
in the preparation of the Registration Statement or any such post effective
amendment thereof, any such Preliminary Prospectus or the Prospectus or other
application or statement filed under any states' securities, or blue sky, law or
any such amendment thereof or supplement thereto. This indemnity agreement is in
addition to any liability which the Selling Shareholder Parties may otherwise
have. Notwithstanding the foregoing provisions of this Section 7(b), in no event
shall the liability of the Selling Shareholder Parties in respect of the
indemnification obligations hereunder exceed the net proceeds received by
Miojusti from the sale of the Selling Shareholder Shares. Any losses, claims,
damages, liabilities or expenses for which the Representative is entitled to
indemnification under this Section 7 shall be paid by the Selling Shareholder
Parties as such losses, claims, damages or expenses are incurred. At the
election of the Representative, and subject to subsection (d) below, the
Representative may request, and is entitled to receive, from the Selling
Shareholder Parties reimbursement for legal or other expenses reasonably
incurred on a monthly basis, with the effect that the Selling Shareholder
Parties will pay in full each detailed invoice for legal or other expenses
incurred by the Representative within 30 days after the date of presentation
thereof by the Representative.
7.28.0.0.0.3. The Representative agrees to indemnify and hold
harmless the Company, the Selling Shareholder Parties and each of their
respective directors, each of the Company's officers who has signed the
Registration Statement, and each person who controls the Company within the
meaning of Section 15 of the 1933 Act against any losses, claims, damages,
liabilities or expenses, joint or several, to which the Company or any such
director, officer, or controlling person may become subject, under the 1933 Act,
the 1934 Act, the common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof)
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arise out of, or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or the omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
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; or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any application or other statement executed by the
Company or by the Representative or based upon written information furnished by
the Company or the Representative and filed in any jurisdiction in order to
qualify the Shares under, or exempt the Shares or the sale thereof from
qualification under, the securities laws of such jurisdiction, or the omission
or alleged omission to state in such application or statement 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; provided,
however, that the Representative shall only be obligated to indemnify such
person or persons in each of the above cases only to the extent that such untrue
statement, alleged untrue statement, omission or alleged omission, was made in
reliance upon and in conformity with information contained in the material set
forth under the section entitled "Underwriting" of the Registration Statement,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto. Any losses, claims, damages, liabilities or expenses for which the
Company is entitled to indemnification under this Section 7 shall be paid by the
Representative as such losses, claims, damages, liabilities or expenses are
incurred. This indemnity agreement is in addition to any liability which the
Representative may otherwise have at law or in equity.
7.28.0.0.0.4. Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 7, notify in writing the indemnifying
party of the commencement thereof. The omission to so notify the indemnifying
party will not relieve it from any liability under this Section 7 as to the
particular item for which indemnification is then being sought, unless such
omission so to notify prejudices the indemnifying party's ability to defend such
action. In case any such action is brought against any indemnified party and the
indemnified party notifies an indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof with counsel who shall be reasonably
satisfactory to such indemnified party. After notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
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costs of investigation; provided, however, that if, in the reasonable judgment
of the indemnified party or parties, it is advisable for such party or parties
and any controlling persons to be represented by separate counsel by reason of a
conflict of interest of the counsel chosen by the indemnifying party, any
indemnified party shall have the right to employ separate counsel to represent
it and other parties and their controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by any party hereunder, in which event the reasonable fees and expenses of such
separate counsel shall be borne by the indemnifying party. In any such event,
the indemnifying party will not be obligated to pay the fees and expenses of
more than one counsel for the indemnified parties with respect to such claim,
unless either (i) the nature of the claim makes it reasonable to engage counsel
in more than one jurisdiction, or (ii) in the reasonable judgment of any
indemnified party, a conflict of interest may exist between such indemnified
party and any other indemnified parties with respect to such claim, in which
event the indemnifying party shall be obligated to pay the reasonable fees and
expense of additional counsel or counsels for the indemnified parties. Any such
indemnifying party shall not be liable to any such indemnified party on account
of any settlement of any claim or action effected without the written consent of
such indemnifying party, which consent shall not be unreasonably withheld. In
the event that an indemnifying party assumes the defense of a claim in
accordance with its obligation to indemnify under this Section 7, it is
understood and agreed that the indemnifying party will thereby assume a
fiduciary duty to the indemnified party to conduct the defense of such claim
consistent with the interests of the indemnified party.
SECTION 8.
Effectiveness of Agreement
This Agreement shall become effective the later of (a) the
date and time that this Agreement is executed and delivered by the parties
hereto and (b) at 10:00 a.m., Eastern Daylight Time, on the first full business
day following the Effective Date, or at such earlier time after the Effective
Date as the Representative in its discretion shall first release the Shares for
offering to the public. For purposes of this Section 8, the Shares shall be
deemed to have been released to the public upon release by the Representative of
the publication of a newspaper advertisement relating to the Shares or upon
release of a telegram or a letter offering the Shares for sale to securities
dealers, whichever shall first occur.
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SECTION 9.
Conditions to the Representative's Obligations
The Representative's obligation to purchase the Shares and to make
payment to the Company hereunder on the Closing Date and on the Over-allotment
Closing Date shall be subject to the accuracy, as of the Closing Date and the
Over-allotment Closing Date, of the representations and warranties on the part
of the Company herein contained, to the performance by the Company of all its
agreements herein contained, to the fulfillment of or compliance by the Company
with all covenants and conditions hereof, and to the following additional
conditions specified in the subsections of this Section 9; provided, however,
that the additional conditions specified in Sections 9.10 and 9.14 shall only be
conditions to the purchase of Shares from Miojusti on the Over-allotment Closing
Date; and, further provided that, in the event that the conditions specified in
Sections 9.10 and 9.14 are not met on the Over-allotment Closing Date, or the
Selling Shareholder Parties otherwise fail to deliver the Selling Shareholder
Shares at the Over-allotment Closing, the Representative shall have the option
to purchase an additional number of shares of Common Stock from the Company
equal to the number of Selling Shareholder Shares, and that, in such event, the
additional shares of Common Stock purchased from the Company shall, for all
purposes of this Agreement, be considered "Shares," as that term is defined in
Section 1.2 hereof.
9.1. Effective Date. The effective date of the Registration Statement
(the "Effective Date") shall occur on or prior to 1:00 p.m., Denver, Colorado
time, on ____________ __, 1998, or such later date as the Representative may
agree to in writing. On or prior to the Closing Date, no order suspending the
effectiveness of the Registration Statement pursuant to Section 8 of the 1933
Act or otherwise shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission or any state securities
administrator; any request for additional information on the part of the
Commission, the NASD or any state securities administrator shall have been
complied with to the satisfaction of the Commission, the NASD or such state
securities administrator, as the case may be; and neither the Registration
Statement, the Prospectus nor any amendment thereto shall have been filed to
which counsel to the Representative reasonably shall have objected in writing.
9.2. Accuracy of Registration Statement. The Representative shall not
have disclosed in writing to the Company that the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto contains an untrue
statement of a fact which, in the opinion of counsel to the Representative, 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.
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9.3. Casualty. Between the date hereof and the Closing Date and
Over-allotment Closing Date, the Company shall not have sustained any loss on
account of fire, explosion, flood, accident, calamity, rebellion, civil
uprising, act of a foreign state, or any other cause of such character as
materially adversely affects its business or property considered as an entire
entity, whether or not such loss is covered by insurance.
9.4. Litigation. Except as set forth in the Registration Statement,
between the date hereof and the Closing Date and the Over-allotment Closing
Date, there shall be no litigation instituted or threatened against the Company,
and there shall be no proceeding instituted or threatened against the Company
before or by any federal or state commission, regulatory body or administrative
agency or other government body, domestic or foreign, wherein an unfavorable
ruling, decision or finding would materially adversely affect the business,
franchises, licenses, permits, operations or financial condition, income or
prospects of the Company.
9.5. No Material Change. Except as contemplated herein or as set forth
in the Registration Statement and the Prospectus, during the period subsequent
to the Effective Date, and prior to the Closing Date and the Over-allotment
Closing Date: (a) the Company shall have conducted its business in the usual and
ordinary manner as the same was being conducted on the Effective Date, and (b)
except in the ordinary course of its business, the Company shall not have
incurred any liabilities or obligations (direct or contingent) or disposed of
any of its assets or entered into any material transaction or suffered or
experienced any materially adverse change in its condition, financial or
otherwise. At the Closing Date and the Over-allotment Closing Date, the capital
stock and surplus accounts of the Company shall be substantially the same as at
the Effective Date, without considering the proceeds from the sale of Shares,
other than as may be set forth in the Registration Statement and the Prospectus.
9.6. Review by Representative's Counsel. The authorization of the
Shares and the Representative's Warrants, the Registration Statement, the
Prospectus and all corporate proceedings and other legal matters incident
thereto and to this Agreement shall be reasonably satisfactory in all respects
to the Representative and its counsel, and the Company shall have furnished the
Representative and such counsel such documents as they may have requested to
enable them to evaluate the matters referred to in this Section 9.6.
9.7. Opinion of Company Counsel. The Company shall have furnished to
the Representative the opinion, dated the Closing Date or the Over-allotment
Closing Date (as the case may be), addressed to the Representative, of Rayburn,
Moon & Smith, P.A. and/or such other counsel as may be acceptable to the
Representative, to the effect that, based upon a review by them of the
Registration Statement, the Prospectus, the Company's articles of incorporation,
bylaws and
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relevant corporate proceedings, an examination of such statutes and such other
investigation by such counsel as they deem necessary to express such opinion:
(a) The Company and each of its Subsidiaries has been duly
incorporated and is a validly existing corporation in good standing under the
laws of its respective jurisdiction of incorporation (specifying the same and
attaching a certificate of good standing for each), with full corporate power
and authority to own and operate its properties and to carry on its business as
set forth in the Registration Statement and the Prospectus.
(b) The Company and each of its Subsidiaries is duly qualified
and registered to transact the business in which it is engaged and is qualified
and in good standing in each and every foreign or domestic jurisdiction in which
its ownership of property or its conduct of business requires such qualification
or registration and in which failure to so qualify would have a material adverse
effect upon the business of the Company.
(c) The Company has an authorized and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
The Shares and the Representative's Warrants conform to the statements
concerning them in the Registration Statement and the Prospectus. The
outstanding Common Stock of the Company has been duly and validly issued and is
fully paid and nonassessable and is not subject to any preemptive rights.
Cumulative voting is not permitted by the holders of any of the Company's
securities. No stockholder of the Company is subject to personal liability
solely on the basis of his, her or its ownership of capital stock of the
Company. The Shares and the shares of Representative's Warrant Stock issuable
upon exercise of the Representative's Warrants, have been duly and validly
authorized and, upon issuance thereof and payment therefor in accordance with
this Agreement will be duly and validly issued, fully paid and nonassessable,
free and clear of all liens, encumbrances, equities and claims whatsoever, and
will not be subject to any preemptive rights.
(d) The Representative's Warrants have been duly and validly
authorized and issued and are valid and binding instruments enforceable against
the Company in accordance with their terms.
(e) A sufficient number of shares of Common Stock have been
duly reserved for issuance as Representative's Warrant Stock upon exercise of
the Representative's Warrants.
(f) The holders of the issued and outstanding shares of Common
Stock are, and the holders of the Shares, Representative's Warrant Stock and
Representative's Warrants (when such securities have been issued and fully paid
for in accordance with the provisions of the Registration Statement and in the
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Representative's Warrants, as applicable) will be, entitled to the rights and
preferences set forth in the certificates representing the same and in the
Representative's Warrants, as applicable.
(g) No consents, approvals, authorizations or orders of
agencies, officers or other regulatory authorities are necessary for the valid
authorization, issuance or sale of the Shares, the Representative's Warrant
Stock or the Representative's Warrants, or the other transactions contemplated
by this Agreement, except as required under the 1933 Act or state Blue Sky or
other securities laws.
(h) The issuance and sale of the Shares, the Representative's
Warrant Stock and the Representative's Warrants and the consummation of the
transactions contemplated herein, and compliance with the terms of this
Agreement, will not conflict with or result in a breach of any of the terms,
conditions, or provisions of, or constitute a default under, the Company's
Articles of Incorporation or its Bylaws (as each is currently in effect), or any
note, indenture, mortgage, lease, deed of trust, bank loan or credit agreement
or other agreement, instrument or undertaking (however characterized or
described) known to such counsel to which the Company is a party or by which the
Company or any of its property is bound or any existing laws, order, rule,
regulation, writ, injunction or decree known to such counsel of any government,
governmental instrumentality, agency, body, arbitration tribunal or court,
domestic or foreign, having jurisdiction over the Company or its property.
(i) The Registration Statement and the Prospectus have become
effective under the 1933 Act and, to the knowledge of such counsel, no order
suspending the effectiveness of the Registration Statement pursuant to Section 8
of the 1933 Act or otherwise has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated by the Commission under the
1933 Act or otherwise. The Registration Statement and the Prospectus, and each
amendment and supplement thereto, comply as to form in all material respects
with the requirements of the 1933 Act and the Rules and Regulations thereunder
(except that no opinion needs to be expressed as to financial statements and
financial data contained in the Registration Statement or Prospectus).
(j) The Company owns or holds by valid lease the real and
personal properties as shown in the Registration Statement and the Prospectus
and, to the extent such properties are owned by the Company, they are owned free
and clear of all liens, encumbrances and equities of record except for those
expressly referred to in the Registration Statement and the Prospectus and
except for those as do not in the opinion of counsel adversely affect materially
the value of such assets and except for the lien of current taxes not then due.
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(k) This Agreement has been duly authorized and executed by
the Company and is a valid and binding agreement of the Company, enforceable in
accordance with its terms.
(l) The U.S. Corporation, directly or indirectly through one
or more Subsidiaries, owns 59.998% of the issued and outstanding capital stock
of Prima Electronics and 99.98% of the issued and outstanding capital stock of
each of the other Subsidiaries. All of the Company's capital stock of Prima
Industrie is held in the name of the U.S. Corporation. All of the Company's
capital stock of Prima Electronics is held in the name of Prima Industrie. The
Company does not, directly or indirectly, own capital stock, or hold an
ownership interest in, any entities other than the Subsidiaries.
(m) The form of certificate for the Shares is in due and
proper form and complies with all applicable statutory requirements.
(n) All prior offers and sales of securities of the Company
were (i) exempt from registration under the 1933 Act, (ii) registered pursuant
to, or exempt from registration under, all pertinent state securities, or Blue
Sky, laws, and (iii) registered pursuant to, or exempt from registration under,
all pertinent foreign securities laws.
(o) The purchase by the U.S. Corporation of all of the issued
and outstanding capital stock of PRIMA Industrie constituted a non-taxable
transaction to the U.S. Corporation and to its stockholders domiciled in the
United States under the Internal Revenue Code of 1986, as amended.
(p) The Stock Incentive Plan permits the granting of incentive
stock options, as defined under Section 422 of the Internal Revenue Code of
1986, as amended.
(q) To such counsel's knowledge after due inquiry, there are
no pending legal proceedings relating to any Intellectual Property Rights of the
Company, and no such proceedings are threatened or contemplated.
Such opinion shall also cover such other matters incident to the
transactions contemplated by this Agreement in form satisfactory to the
Representative's counsel as the Representative shall reasonably request. As an
illustration of the foregoing, but not as a limitation thereof, it is expected
that such opinion will cover the ownership by the Company of all licenses
required to conduct their businesses and such matters concerning disclosure of
and compliance with applicable environmental laws or regulations as may be
deemed advisable by the Representative.
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In addition to the matters set forth above, such opinion shall also
include a statement to the effect that, although such counsel is not passing
upon and does not assume any responsibility for, the accuracy, completeness or
fairness of any of the statements contained in the Registration Statement or the
Prospectus and such counsel makes no representation that it has independently
verified the accuracy, completeness or fairness of such statements, in
connection with such counsel's representation of the Company in the preparation
of the Registration Statement and the Prospectus, nothing came to the attention
of such counsel which caused it to conclude that, as of the Effective Date, the
Closing Date or the Over-allotment Closing Date, as the case may be, and except
to the extent that the Preliminary Prospectus anticipates facts true as of the
Effective Date, the Registration Statement or any further amendment thereto
(other than the financial statements and notes thereto and other financial and
statistical data included therein, as to which such counsel need express no
opinion), contained an untrue statement of a material fact or omitted to state 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 or that, as of its date, the Prospectus or any further amendment or
supplement thereto (other than the financial statements and notes thereto and
other financial and statistical data included therein, as to which such counsel
need express no opinion), contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
Any portion of such opinion as to the enforceability of any agreement
may be subject to the effect of (i) any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar law of general application affecting
creditors' rights, and (ii) general principles of equity, including (without
limitation) concepts of materiality, reasonableness, good faith and fair
dealing, and other similar doctrines affecting the enforceability of agreements
generally (regardless of whether considered in a proceeding in equity or at
law).
9.8. Opinion of Italian Counsel. The Company shall have furnished to
the Representative the opinion, dated the Closing Date and the Over-allotment
Closing Date (as the case may be), addressed to the Representative, of Chiomente
Studio Legale and/or such other counsel as may be reasonably acceptable to the
Representative, to the effect that, based upon a review by them of the
Registration Statement, the Prospectus and such other investigation by such
counsel as they deem necessary to express such opinion:
(a) Each of the Italian Subsidiaries has been duly
incorporated and is a validly existing corporation in good standing under the
laws of the Republic of Italy (attaching a certificate of good standing for
each), with full corporate power and authority to own and operate its properties
and to carry on its business as set forth in the Registration Statement and the
Prospectus.
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(b) Each of the Italian Subsidiaries is duly qualified and
registered to transact the business in which it is engaged and is qualified and
in good standing in each and every foreign or domestic jurisdiction in which its
ownership of property or its conduct of business requires such qualification or
registration and in which the failure to so qualify would have a material
adverse effect upon the business of the Company.
(c) The outstanding capital stock of each of the Italian
Subsidiaries has been duly and validly issued and is fully paid and
nonassessable and is not subject to any preemptive rights. Cumulative voting is
not permitted by the holders of such company's securities. No stockholder of
such company is subject to personal liability (including, without limitation,
any liability upon the insolvency of such Italian Subsidiary) solely on the
basis of his, her or its ownership of capital stock of such company.
(d) No consents, approvals, authorizations or orders of
agencies, officers or other regulatory authorities under the laws of the
Republic of Italy are necessary for the valid authorization, issuance or sale of
the Shares, the Representative's Warrant Stock, the Representative's Warrants,
or the other transactions contemplated by this Agreement.
(e) With respect to each Italian Subsidiary, the issuance and
sale of the Shares, the Representative's Warrant Stock and the Representative's
Warrants and the consummation of the transactions contemplated herein, and
compliance with the terms of this Agreement, will not conflict with or result in
a breach of any of the terms, conditions, or provisions of, or constitute a
default under, such company's Articles of Incorporation, its Bylaws or any
similar governing document or instrument (as each is currently in effect).
(f) The U.S. Corporation owns 59.998% of the issued and
outstanding capital stock of Prima Electronics and 99.98% of the issued and
outstanding capital stock of Prima Industrie.
(g) All prior offers and sales of securities of each of the
Italian Subsidiaries were registered pursuant to, or exempt from registration
under, Italian securities laws and were issued and sold in accordance with the
laws of the Republic of Italy.
(h) The purchase by the U.S. Corporation of all of the issued
and outstanding capital stock of Prima Industrie, and the granting to the U.S.
Corporation of security interests in the Intellectual Property Rights did not
subject the U.S. Corporation, Prima Industrie or any Subsidiary to any tax under
the laws of the Republic of Italy.
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(i) The statements in the Registration Statement and the
Prospectus that purport to describe Italian law, the recapitalization of Prima
Industrie, the corporate structure of the Italian Subsidiaries and the legal
implications thereof, provide a fair and accurate description of such matters.
In addition to the matters set forth above, such opinion shall also
include a statement to the effect that, although such counsel is not passing
upon and does not assume any responsibility for, the accuracy, completeness or
fairness of any of the statements contained in the Registration Statement or the
Prospectus and such counsel makes no representation that it has independently
verified the accuracy, completeness or fairness of such statements, in
connection with such counsel's representation of the Company in the preparation
of the Registration Statement and the Prospectus, nothing came to the attention
of such counsel which caused it to conclude that, as of the Effective Date, the
Closing Date or the Over-allotment Closing Date, as the case may be, and except
to the extent that the Preliminary Prospectus anticipates facts true as of the
Effective Date, the Registration Statement or any further amendment thereto
(other than the financial statements and notes thereto and other financial and
statistical data included therein, as to which such counsel need express no
opinion), contained an untrue statement of a material fact or omitted to state 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 or that, as of its date, the Prospectus or any further amendment or
supplement thereto (other than the financial statements and notes thereto and
other financial and statistical data included therein, as to which such counsel
need express no opinion), contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
9.9. Opinion of Intellectual Property Counsel. The Company shall have
furnished to the Representative the opinion, dated the Closing Date or the
Over-allotment Closing Date (as the case may be), addressed to the
Representative, of Buzzi Notaro & Antonielli d'Oulx and/or such other counsel as
may be reasonably acceptable to the Representative, to the effect that, based
upon a review by them of the Registration Statement, the Prospectus and such
other investigation by such counsel as they deem necessary to express such
opinion:
(a) The Company owns or is licensed to use, in each case free
and clear of all liens or encumbrances and rights thereto or therein by third
parties, all Intellectual Property Rights necessary or advisable to conduct the
business now being, or proposed to be, conducted by the Company as described in
the Registration Statement and the Prospectus.
(b) All of the Intellectual Property Rights are cross-licensed
to the U.S. Corporation from the Italian Subsidiaries without the payment of any
royalties to
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the extent such Intellectual Property Rights are used in the development of new
products or technology pursuant to the Company's "Laser On-Line" program, and
the U.S. Corporation has a valid and perfected security interest in all of the
Intellectual Property Rights as security for obligations owed to the U.S.
Corporation by the Italian Subsidiaries. The Joint Development Agreement among
the U.S. Corporation and each of the Italian Subsidiaries provides the U.S.
Corporation with the exclusive right to use outside of Italy any Intellectual
Property Rights developed pursuant to the Company's "Laser On-Line Program."
(c) To such counsel's knowledge after due inquiry, the Company
is not infringing, misappropriating or otherwise violating any Intellectual
Property Rights of any person and, except as set forth with particularity on
Schedule 2.25 to this Agreement, the Company has not received any notice of, and
is not aware of, any claim that it is infringing, misappropriating or otherwise
violating any Intellectual Property Rights of any person. As to each instance
described in Schedule 2.25 to this Agreement in which the Company has received
notice of a claim that it is infringing, misappropriating or otherwise violating
any Intellectual Property Rights of any person, the Company has a good faith
basis to believe that, and to such counsel's knowledge after due inquiry, has
formed a belief that, it is not infringing, misappropriating or otherwise
violating such Intellectual Property Rights.
(d) To such counsel's knowledge after due inquiry, no person
is infringing, misappropriating or otherwise violating any of the Company's
Intellectual Property Rights.
(e) The statements in the Registration Statement and the
Prospectus under the heading, "Risk Factors -- Uncertainty Regarding Protection
of Proprietary Technology and Patents," insofar as such statements purport to
describe the Company's Intellectual Property Rights, provide a fair and accurate
description of such Intellectual Property Rights.
(f) To such counsel's knowledge after due inquiry, there are
no pending legal proceedings relating to any Intellectual Property Rights of the
Company, and no such proceedings are threatened or contemplated.
9.10. Opinion of Counsel to Selling Shareholder Parties. The Selling
Shareholder Parties shall have furnished to the Representative the opinion,
dated the Over-allotment Closing Date, addressed to the Representative, of
Loyens & Volkmaars and/or such other counsel as may be acceptable to the
Representative, to the effect that, based upon a review by them of the
Registration Statement, Prospectus, an examination of such statutes and such
other investigation by such counsel as they deem necessary to express such
opinion:
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(a) The Agreement has been duly authorized, executed and
delivered by each Selling Shareholder Party and the performance and consummation
of the Agreement by each Selling Shareholder Party of the transactions therein
contemplated will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any agreement or
instrument known to such counsel to which such Selling Shareholder Party is a
party or by which it is bound or to which any of the property of such Selling
Shareholder Party is subject, or any order, rule or regulation known to such
counsel of any court or governmental agency or body having jurisdiction over
such Selling Shareholder Party or any of its properties; and no consent,
approval, authorization or order of, or filing with, any court or governmental
agency or body is required for the consummation of the transactions contemplated
by the Agreement in connection with the sale of the Selling Shareholder Shares
thereunder, except such as have been obtained under the 1933 Act and such as may
be required under any state securities or Blue Sky laws in connection with the
purchase and distribution by the Representative of the Selling Shareholder
Shares.
(b) Immediately prior to the time of delivery of the Selling
Shareholder Shares to the Representative, Miojusti is the sole registered owner
of the shares of Common Stock to be delivered by the Selling Shareholder Parties
free and clear of any claims, liens, encumbrances or security interests of which
we are aware, and, assuming the Representative purchases such shares for value
in good faith and without notice of any adverse claim, upon delivery of such
shares to the Representative and registration of the Representative in the stock
records of the Company, the Representative will acquire all of the rights of the
Selling Shareholder Parties in such shares free of any adverse claim, lien in
favor of the Company and any restrictions on transfer imposed by the Company.
Such opinion shall also cover such other matters incident to the
transactions contemplated by this Agreement in form satisfactory to the
Representative's counsel as the Representative shall reasonably request.
9.11. Auditor's Letter. On the Closing Date and the Over-allotment
Closing Date, the Representative shall have received from Hein + Associates LLP
an opinion letter dated the Closing Date and Over-allotment Closing Date, as
applicable, stating that:
(a) They are independent public accountants within the meaning
of the 1933 Act and the Rules and Regulations, and the response to Item 509 of
Regulation S-K as reflected by the Registration Statement is correct insofar as
it relates to them;
(b) In their opinion, the financial statements and supporting
schedules of the Company examined by them at all dates and for all periods
referred to in their opinion letter and included in the Registration Statement
and the Prospectus
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comply as to form in all material aspects with the applicable requirements of
the 1933 Act and the published Rules and Regulations with respect to
registration statements on Form S-1;
(c) On the basis of certain indicated procedures (but not
necessarily an examination in accordance with generally accepted accounting
principles), including an examination of the Company's underlying financial
books and records, debt instruments (if any) of the Company described in the
Prospectus, a reading of the latest available interim unaudited financial
statements of the Company, whether or not appearing in the Prospectus, inquiries
to the officers of the Company and other persons responsible for the Company's
financial and accounting matters, and a reading of the minute books of the
Company, nothing has come to their attention which would cause them to believe
that during the period from the date of the last audited financial statement, to
a specified date not more than five (5) days prior to the date of such opinion
letter:
(i) there has been any material change in the
financial position of the Company not contemplated by and disclosed in the
Prospectus;
(ii) there has been any material change in the
capital stock and surplus accounts of the Company or any payment or declaration
of any dividend or other distribution in respect thereof or exchange therefor or
in the debt of the Company from that shown in its audited balance sheet, in the
Registration Statement and the Prospectus, other than as set forth or
contemplated by the Registration Statement and the Prospectus;
(iii) there have been any material decreases in
working capital or shareholders' equity (deficit) as compared with amounts shown
in the last audited balance sheet included in the Prospectus; or
(iv) there were any material decreases, as compared
with amounts shown in the last audited balance sheet, in the cash balance,
except in all instances for changes disclosed in or contemplated by the
Registration Statements and Prospectus; and
(d) On the basis of their examinations referred to in their
opinion letter, report and consent included in the Registration Statement and
the Prospectus and the indicated procedures and discussions referred to in
clause (c) above, nothing has come to their attention which, in their judgment,
would cause them to believe or indicate that (i) the financial statements set
forth in the Registration Statement and the Prospectus do not present fairly the
financial position and results of operations of the Company, for the period
indicated, in conformity with generally accepted accounting principles applied
on a consistent basis, and are not in all material respects a fair presentation
of the information purported to be shown, and
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(ii) the dollar amounts, percentages and other financial information set forth
in the Registration Statement and the Prospectus under the captions "Prospectus
Summary," "Summary Consolidated Financial Data," "Risk Factors,"
"Capitalization," "Dilution," "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" are
not in agreement with the Company's general ledger, financial records or
computations made by the Company therefrom.
9.12. Officer's Certificate. The Company shall have furnished to the
Representative certificates of the President and Chief Financial Officer (or the
executive officer that performs the duties typically performed by the President
or the Chief Financial Officer (as the case may be)) of each of the U.S.
Corporation, Prima Industrie and Prima Electronics, and attested by the
Secretary (or the executive officer that performs the duties typically performed
by the Secretary) of each such company, dated the Closing Date and the
Over-allotment Closing Date, to the effect that:
(a) There is no litigation, arbitration, claim by any current
or former employee or any form of regulatory proceeding instituted or threatened
against the Company of a character required to be disclosed in the Registration
Statement and the Prospectus which is not disclosed. There is no material
contract required to be filed as an exhibit to the Registration Statement which
has not been so filed.
(b) The representations and warranties of the Company in this
Agreement are true and correct at and as of the date of the certificate. The
Company has complied with all of its covenants and agreements herein contained.
No stop order suspending the effectiveness of the Registration Statement
pursuant to Section 8 of the 1933 Act or otherwise has been issued at or before
the date of the certificate and no proceeding for that purpose have been
initiated at or before the date of the certificate and, to the best of their
knowledge, no such proceeding has been threatened by the Commission. Any request
for additional information on the part of the Commission or NASD (to be included
in the Registration Statement or the Prospectus or any amendment or supplement
thereto or otherwise) has been complied with to the reasonable satisfaction of
counsel for the Representative and no amendment or supplement to the
Registration Statement or Prospectus has been filed to which counsel for the
Representative has reasonably objected after adequate notice.
(c) There has been no material adverse change in the general
affairs of the Company, financial or otherwise, except as disclosed or indicated
in the Registration Statement and the Prospectus.
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(d) Since the Effective Date, there has not been any material
transaction entered into by the Company other than in the ordinary course of
business.
(e) There are no material direct or indirect contingent
liabilities or obligations of the Company not disclosed in the Registration
Statement and the Prospectus.
(f) Since the Effective Date, the Company has not sustained
any loss on account of fire, flood, accident or other calamity of such character
as to interfere materially with the continuous operation of the Company's
business or which materially adversely affects the financial position or
business of the Company regardless of whether or not such loss shall have been
insured.
(g) The Company is not delinquent in the filing of any
federal, state or municipal or other local, state or municipal taxes required to
be reported and paid; to the best of their knowledge (after diligent
investigation in connection therewith) there is no proposed redetermination or
reassessment of such taxes adverse to the Company; and the Company has paid or
provided for, by adequate reserves, all known tax liabilities.
(h) This Agreement, the consummation of the transactions
herein contemplated and the fulfillment of the terms hereof will not result in a
breach by the Company of any term of, or constitute a default under, any
indenture, mortgage, lease, deed of trust, bank loan or credit agreement or any
other agreement, instrument or undertaking (however characterized or described)
of the Company, including by way of specification but not by way of limitation,
any agreement or instrument to which the Company is now a party or pursuant to
which it has acquired any right or obligation by succession or otherwise, and
that any existing agreement materially affecting the Company has been delivered
to the Representative or its counsel.
(i) They have examined the Registration Statement and the
Prospectus and, in their opinion (i) as of the Effective Date, the statements
contained in the Registration Statement and the Prospectus are true and correct
and the Registration Statement and the Prospectus do not omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading (such opinion need not be expressed, however, as to any material
contained in the Registration Statement and the Prospectus furnished by the
Representative), and (ii) since the Effective Date, no event has occurred which
should have been set forth in a supplement to or amendment of the Registration
Statement or Prospectus which has not been set forth in such supplement or
amendment.
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(j) At and as of the Effective Date and the date of the
certificate, there are no agreements, understandings or negotiations in force
and effect, in process or contemplated by them or of which they are aware to the
best of their individual and collective knowledge which, if in force and effect
or in process or so contemplated would be required to be disclosed.
(k) The officers and directors of the Company have not taken
and will not take, directly or indirectly, any action designed to, or which
might reasonably be expected to, cause or result in the stabilization or
manipulation of the price of the Company's Common Stock to facilitate the sale
and resale of the Shares.
9.13. Secretary's Certificate. The Representative shall have received
from the Secretary (or the executive officer that performs the duties typically
performed by the Secretary) of each of the U.S. Corporation, Prima Industrie and
Prima Electronics a certificate of incumbency, dated as of the Closing Date,
certifying the names, titles and signatures of the officers authorized to
execute, deliver and perform this Agreement. Attached to such certificate shall
be a copy of the Bylaws of the Company and, in the case of the U.S. Corporation,
the resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance of this Agreement. Such certificate shall
also certify that the Articles of Incorporation of the Company, the Bylaws of
the Company and, in the case of the U.S. Corporation, such resolutions have been
validly adopted and have not been amended or modified, except as described in
the Prospectus.
9.14. Selling Shareholder Parties Certificate. The Representative shall
have received from each Selling Shareholder Party a certificate, dated as of the
Over-allotment Closing Date, to the effect that:
(a) The representations and warranties contained in Section 3
of this Agreement are true and correct with the same effect as though expressly
made as of the Closing Date and such Selling Shareholder Party has performed all
covenants and complied with all conditions required by the Agreement on its part
to be performed or complied with by it at or prior to the delivery of the
Selling Shareholder Shares and on such date.
(b) The information set forth in the Registration Statement
and the Prospectus and any amendments or supplements thereto under the caption
"Principal and Selling Shareholders," insofar as it relates to the Selling
Shareholder Parties, contains all material statements that are required to be
stated therein in accordance with the Act and the Regulations and conform in all
material respects to the requirements of the Act and the Regulations, and with
respect to such information, neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto contains any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make
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the statements therein, in light of the circumstances under which they were
made, not misleading.
9.15. Opinion of Representative's Counsel. The Representative shall
have received from Dorsey & Whitney LLP, counsel for the Representative, a
satisfactory opinion dated the Closing Date and the Over-Allotment 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 the
Representative may reasonably request, and such counsel shall have received such
papers and information as they may reasonably request to enable them to pass
upon such matters.
9.16. Tender of Securities. All the Shares being offered by the
Company and/or Miojusti (as the case may be) and the Representative's Warrants
shall be tendered for delivery in accordance with the terms and provisions of
this Agreement.
9.17. Blue Sky Qualification. The Shares shall be qualified in such
states as determined under Section 6.4 hereof, and each qualification shall be
in effect and not subject to any stop order or other proceeding on the Closing
Date.
9.18. Approval of Representative's Counsel. All opinions, letters,
certificates and documents mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Representative, whose approval
shall not be unreasonably withheld.
9.19. Officer's Certificate as a Company Representation. Any
certificate signed by an officer of the Company and delivered to the
Representative or to counsel for the Representative will be deemed a
representation and warranty by the Company to the Representative as to the
statements made therein.
9.20. Exchange Listing. The Company's Shares must be qualified for
listing on either the Nasdaq National Market or the American Stock Exchange
(whichever such exchange the Company's Shares are qualified for listing on is
hereinafter referred to as the "Exchange") on the Effective Date of the
Registration Statement.
9.21. Board Committees. A compensation committee, which shall consist
of at least two (2) independent outside board members, shall be in place to
review executive compensation and make recommendations to the Board of Directors
on an as needed basis. An audit committee of the Board of Directors shall be in
place consisting of at least two (2) independent outside directors. Such audit
committee shall be charged with reviewing all systems and making recommendations
for corrective actions to the Board of Directors on an as needed basis.
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<PAGE>
SECTION 10.
Termination
10.1. Termination by Representative. This Agreement may be terminated
by the Representative by notice to the Company in the event the Company shall
have failed or been unable to comply with any of the terms, conditions,
representations, warranties, covenants or other provisions of this Agreement on
the part of the Company to be performed, complied with or fulfilled within the
respective times herein provided for, unless compliance therewith or performance
or satisfaction thereof shall have been expressly waived by Representative in
writing.
10.2. Termination by Representative -- "Market Out". This Agreement may
be terminated by Representative by notice to the Company at any time if, in the
sole judgment of the Representative, payment for and delivery of the Shares is
rendered impracticable or inadvisable because of: (a) material adverse changes
in the Company's business, business prospects, management, earnings, properties
or conditions, financial or otherwise; (b) any action, suit or proceedings,
threatened or pending, at law or equity against the Company, or by any federal,
state or other commission, board or agency wherein any unfavorable result or
decision could materially adversely affect the business, business prospects,
properties, financial condition, income or earnings of the Company; (c)
additional material governmental restrictions not in force and effect on the
date hereof shall have been imposed upon the trading in securities generally, or
minimum or maximum prices shall have been generally established on a registered
securities exchange, or trading in securities generally on any such exchange
shall have been suspended, or a general moratorium upon the trading in
securities shall have been established by federal or state authorities; (d)
substantial and material changes in the condition of the market beyond normal
fluctuations are such that it would be undesirable, impracticable or inadvisable
in the judgment of the Representative to proceed with this Agreement or with the
offering; (e) any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the judgment
of the Representative, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the sale of and payment for the Shares; (f) the Company is
notified that the Shares will not be listed for trading on the Exchange as
required under this Agreement; or (g) any suspension of trading in the Common
Stock in the over-the-counter market or the interruption or termination of
quotations of the Shares on the Exchange.
10.3. Survival of Obligations After Termination. Any termination of
this Agreement under Section 10.1 or Section 10.2 hereof shall be without
liability of any nature whatsoever (including, but not limited to, loss of
anticipated profits or consequential damages) on the part of either party
hereto, except that the Company
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shall remain obligated to pay the costs and expenses provided to be paid by it
specified in Section 6.7 (subject to the limitation which entitles the
Representative to return or be paid only the accountable out-of-pocket expenses
described therein); and the Company and the Representative shall be obligated to
pay, respectively, all losses, claims, demands, liabilities and expenses under
Section 7.
10.4. Suspension Proceedings. It is understood that the Company and
the Representative will each advise the other party immediately and confirm in
writing the receipt of any threat of or the initiation of any steps or
procedures which would impair or prevent the right to offer any of the Company's
Shares or the issuance of any "suspension orders," stop orders" or other
prohibitions preventing or impairing the proposed offering by the Commission or
other regulatory authority.
SECTION 11.
Representative's Representations and Warranties
The Representative represents, warrants and agrees with the Company
that:
11.1. Registration as Broker-Dealer. The Representative is registered
as a Broker/Dealer with the Commission and in the State of Colorado and are
members in good standing of the NASD.
11.2. No Pending Proceedings. Except as otherwise disclosed in the
Registration Statement, there is not now pending or threatened against the
Representative any material action or proceeding of which the Representative has
been advised, either in any court of competent jurisdiction, before the
Commission or before any state securities commission concerning the
Representative's activities as a broker or dealer that is material to this
offering, nor has the Representative been named as a "cause" in any such action
or proceeding.
11.3. Compliance with NASD Rules. Assuming that each of the
representations and warranties of the Company contained in Section 2 hereof is
true, complete and correct, all selling activities of the Representative with
respect to the Offering will be conducted in accordance with the rules of the
NASD and the SEC.
11.4. Finder. The Representative represents that no finder's fee has
been or will be paid in connection herewith. It is understood that should a
claim be made for any finder's fee in connection with the sale of the Shares and
based upon any agreement by the Representative, the Representative will
indemnify the Company with respect to any such claim in accordance with the
procedures set forth in Section 6(c) hereof.
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SECTION 12.
Notices
All notices, demands or requests required or authorized hereunder shall
only be deemed given sufficiently if in writing and hand delivered by messenger
or courier service or sent by registered mail or certified mail, return receipt
requested and postage prepaid, in the case of the Representative:
Chatfield Dean & Co., Inc.
7935 East Prentice Avenue, Suite 200
Greenwood Village, Colorado 80111
Attention: Sanford D. Greenberg, President
with a copy to:
Dorsey & Whitney LLP
370 Seventeenth Street, Suite 4400
Denver, Colorado 80202
Attention: Kevin A. Cudney, Esq.
in the case of the Company:
The PRIMA Group International, Inc.
447 South Sharon Amity, Suite 250
Charlotte, North Carolina 28226
Attention: James R. Currier, President
50
<PAGE>
with a copy to:
Rayburn, Moon & Smith, P.A.
The Carillion
227 West Trade Street, Suite 1200
Charlotte, North Carolina 22802-1675
Attention: C. Richard Rayburn, Jr., Esq.
, and in the case of the Selling Shareholder Parties to:
c/o Miojusti Investments BV
Strawinskylaan 3105
Postbox 1469
1000 BL Amsterdam
The Netherlands
Attention: Mario Mauri
Any such notice shall be deemed effectively given on the earlier of the
date of actual receipt or the third (3rd) business day after delivered,
telecopied, or deposit of the notice with the United States Postal Service.
SECTION 13.
Miscellaneous
13.1. Sole Benefit. This Agreement is made solely for the benefit of
the Company, the Representative, the Selling Shareholder Parties other Members,
their respective officers and directors and any controlling person thereof
(within the meaning of Section 15 of the 1933 Act) and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. The terms "successors" or successors and
assigns" shall not under any circumstance include any purchaser, as such
purchaser, of the Shares from any person or of any of the Representative's
Warrants or shares of the Representative's Warrant Stock from any person unless
otherwise expressly provided herein. This Agreement constitutes the entire
agreement between the parties concerning the subject matter hereof, and
supersedes all prior agreements and understandings, including, but not limited
to, the Letter of Intent by and between the Company and the Representative dated
August 7, 1997.
13.2. Survival. The respective indemnities, agreements,
representations, warranties, covenants and other statements of the Company, the
Selling Shareholder Parties, the Representative and their respective officers or
directors as set forth in or made pursuant to this Agreement, and the indemnity
agreements of the Company, the Selling Shareholder Parties and the
Representative contained in
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Section 7 hereof shall survive and remain in full force and effect regardless
of: (a) any investigation or inspection made by or on behalf of the Company, the
Selling Shareholder Parties or the Representative or any such officer or
director of any of them or any controlling person (within the meaning of Section
15 of the 1933 Act) of the Company, the Selling Shareholder Parties or of the
Representative; (b) delivery of or payment for the Shares; and (c) the Closing
Date.
13.3. Specific Performance. The Company hereby acknowledges that any
breach of the covenants contained in Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.8,
6.9, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.17, 6.19, 6.21, 6.22, 6.23,
6.24, 6.25, 6.26, 6.27 and 6.28 of this Agreement by the Company would cause the
Representative irreparable harm and that a remedy at law for such breach would
be inadequate. The Company therefore hereby agrees that, in addition to any
other available remedy at law or in equity, injunctive relief and specific
performance may be granted in any proceeding commenced by the Representative to
enforce this Agreement without the necessity of proof that any other remedy at
law is inadequate.
13.4. Governing Law. This Agreement and all instruments, if any,
delivered in connection herewith or pursuant hereto shall be governed by and
construed in accordance with the substantive laws of the State of Colorado.
13.5. Jurisdiction. The parties hereto (a) agree that any action, suit
or proceeding arising in connection with this Agreement or the transactions
contemplated hereby will be brought only in the federal or state courts sitting
in Denver County, Colorado, (b) hereby irrevocably submit to the jurisdiction of
such courts for purposes of adjudicating any such action, suit or proceeding,
and (c) waive any objection based on lack of personal jurisdiction, FORUM NON
CONVENIENS or any other objection to venue in such courts.
13.6. Waiver. All the rights and remedies of any party under this
Agreement are cumulative and are not exclusive of any other rights and remedies
provided by law. Unless expressly stated to the contrary elsewhere herein, no
delay or failure on the part of either party in the exercise of any right or
remedy arising from a breach of this Agreement or any agreement or instrument
executed in connection with this Agreement shall operate as a waiver of any
subsequent right or remedy arising from a subsequent breach of this Agreement or
any agreement or instrument executed in connection with this Agreement. The
consent of any party where required hereunder to any act or occurrence shall not
be deemed to be a consent to any other act or occurrence.
13.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original, but all of which together
shall constitute one and the same instrument.
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If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose
wherein this letter and your acceptance shall become and evidence a binding
contract between us.
Very truly yours,
The PRIMA Group International, Inc.,
a Delaware corporation
By:
--------------------------------
James R. Currier, President
Miojusti Investments BV
By:
-----------------------------------
Name:
Title:
Cambria 1990 Ltd. Partnership
By:
--------------------------------
Name:
Title:
Cambria Ltd.
By:
----------------------------------
Name:
Title:
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<PAGE>
Demercroft Holding N.V.
By:
------------------------------------
Name:
Title:
ACCEPTED AND CONFIRMED AS OF THE ___ DAY OF _______, 1998:
Chatfield Dean & Co., Inc. (for itself and
as representative of Members of the
Underwriting Group)
By:___________________________
Kenneth L. Greenberg
Vice President
Corporate Finance
Mergers and Acquisitions
54
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
SCHEDULE I
This Schedule sets forth the name of each Member referred to in the
above Agreement and the number of Shares to be purchased by each Member.
Name Number of Shares
------- -----------------
Total ===================
55
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
SCHEDULE 2.19
SUBSIDIARIES
56
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
SCHEDULE 2.23
EMPLOYEE BENEFIT PLANS
57
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
SCHEDULE 2.24
INTELLECTUAL PROPERTY RIGHTS
58
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
SCHEDULE 2.29
COMPLIANCE WITH BUSINESS ADVISORY LETTER AS OF THE DATE HEREOF
59
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
SCHEDULE 3.6
CAPITALIZATION OF MIOJUSTI AND CAMBRIA 1990 LTD. PARTNERSHIP
MIOJUSTI
% CAP.
---------
Cambria 1990 Ltd. Partnership 97.75
Demercroft Holding N.V. 2.25
CAMBRIA 1990 LTD. PARTNERHIP
% CAP.
GENERAL PARTNER
Cambria Ltd. 0.0
LIMITED PARTNERS
Cambria 1990 Exempt Trust (1) 34.0
Candover Investments p.l.c. 25.5
Kleinwort Benson Investment Trust Ltd. 25.5
SPECIAL LIMITED PARTNER
Demercroft Investments Ltd. 15.0
- ----------
(1) Cambria 1990 Exempt Trust is held 50% by Candover Investments p.l.c. and
50% by West Midland Authorities Pension Fund.
60
<PAGE>
THE PRIMA GROUP INTERNATIONAL, INC.
SCHEDULE 6.28
TIME FRAME FOR FULL COMPLIANCE WITH BUSINESS ADVISORY LETTER
61
EXHIBIT 10.1
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT, dated as of ________________, 199_____,
between The PRIMA Group International, Inc., a Delaware corporation (the
"Corporation"), and ____________________________ (the "Indemnitee"),
W I T N E S S E T H:
WHEREAS, Indemnitee is a member of the board of directors of the
Corporation (the "Board of Directors") or is an officer of the Corporation, and
in such capacity is performing a valuable service for the Corporation; and
WHEREAS, the Corporation's Bylaws (the "Bylaws") provide various rights
to directors and officers of the Corporation with respect to indemnification and
advancement of expenses; and
WHEREAS, the Bylaws specifically provide that the rights provided
therein shall not be deemed exclusive of any other rights to those seeking
indemnification or the advancement of expenses under any agreement or vote of
Disinterested Directors; and
WHEREAS, in order to provide greater certainty with respect to
Indemnitee's rights of indemnification and advancement of expenses and thereby
induce Indemnitee to serve, continue to serve, and take on additional service
for or on behalf of the Corporation; and
WHEREAS, it is intended that Indemnitee shall be paid promptly by the
Corporation all amounts necessary to effectuate in full the indemnity provided
herein;
NOW, THEREFORE, in consideration of the premises and the covenants in
this Agreement, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Services by Indemnitee. Indemnitee agrees to serve as a director or
officer of the Corporation so long as he or she is duly appointed or elected and
qualified in accordance with the applicable provisions of the Bylaws of the
Corporation or any subsidiary of the Corporation and until such time as he or
she resigns or fails to stand for election or is removed from his or her
position. Indemnitee may at any time and for any reason resign or be removed
from such position (subject to any other contractual obligation or other
obligation imposed by operation of law), in which event the Corporation shall
have no obligation under this Agreement to continue Indemnitee in any such
position.
2. Indemnification.
(a) The Corporation shall indemnity Indemnitee against Expenses and
Liabilities in connection with any Proceeding arising out of acts or omissions
of Indemnitee occurring during Indemnitee's service as a director or as an
officer of the Corporation to the fullest extent permitted by applicable law or
the Bylaws of the Corporation in effect on the date hereof or as
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<PAGE>
such law or Bylaws may from time to time be amended (but, in the case of any
such amendment, only to the extent such amendment permits the Corporation to
provide broader indemnification rights than the law or Bylaws permitted the
Corporation to provide before such amendment). The right to indemnification
provided in the Bylaws shall be presumed to have been relied upon by Indemnitee
in serving or continuing to serve the Corporation and shall be enforceable as a
contract right. Without diminishing the scope of the indemnification provided by
this Section 2, the Corporation shall indemnify Indemnitee whenever he or she is
or was a party or is threatened to be made a party to any Proceeding, including
without limitation any such Proceeding brought by or in the right of the
Corporation, because he or she is or was a director or officer of the
Corporation or because of anything done or not done by Indemnitee in such
capacity, against Expenses and Liabilities actually and reasonably incurred by
Indemnitee or on his or her behalf in connection with such Proceeding, including
the costs of any investigation, defense, settlement or appeal, except that no
indemnification shall be made with respect to any claim, issue or matter (i) if
a final adjudication establishes that his or her actions were not taken in good
faith or in a manner reasonably believed to be in or not opposed to the best
interests of the Corporation or, with respect to any criminal action or
proceeding, with no reasonable cause to believe his or her conduct was unlawful,
or (ii) if Indemnitee was finally adjudged to be liable to the Corporation by a
court of competent jurisdiction unless and to the extent that a Delaware Court
of Chancery or the court in which the action was heard determines that
Indemnitee is entitled to indemnification for such amounts as the court deems
proper. In addition to, and not as a limitation of, the foregoing, the rights of
indemnification of Indemnitee provided under this Agreement shall include those
rights set forth in Sections 3, 7, 8 and 13 below.
(b) Indemnitee shall be paid promptly by the Corporation all amounts
necessary to effectuate the foregoing indemnity.
3. Advance of Expenses. All reasonable Expenses incurred by or on
behalf of Indemnitee shall be advanced from time to time by the Corporation to
Indemnitee within thirty (30) days after the Corporation's receipt of a written
request for an advance of Expenses, whether prior to or after final disposition
of a Proceeding (except to the extent that there has been a Final Adverse
Determination that Indemnitee is not entitled to be indemnified for such
Expenses), including without limitation any Proceeding brought by or in the
right of the Corporation. The written request for an advancement of any and all
Expenses under this paragraph shall contain reasonable detail of the Expenses
incurred by Indemnitee. If required by law at the time of such advance,
Indemnitee hereby agrees to repay the amounts advanced if it is ultimately
determined that Indemnitee is not entitled to be indemnified pursuant to the
terms of this Agreement.
4. Limitations. The foregoing indemnity and advance of Expenses shall
apply only to the extent that Indemnitee has not been indemnified and reimbursed
pursuant to such insurance as the Corporation may maintain for Indemnitee's
benefit, or otherwise; provided, however, that notwithstanding the availability
of such other indemnification and reimbursement, Indemnitee may claim
indemnification and advancement of Expenses pursuant to this Agreement by
assigning to the Corporation, at its request, Indemnitee's claims under such
insurance to the extent Indemnitee has been paid by the Corporation. In
addition, the foregoing indemnity and advance of expenses shall not apply to an
accounting of profits made from the purchase and sale
2
<PAGE>
by the Indemnitee of securities of the Corporation within the meaning of Section
16(b) of the Securities Exchange Act of 1934, as amended.
5. Maintenance of Insurance and Self-Insurance.
(a) Subject only to the provisions of Section 5(b) hereof, so long as
Indemnitee shall continue to serve as a director or officer of the Corporation,
and thereafter so long as Indemnitee shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal, by
reason of the fact that Indemnitee is or was a director or officer of the
Corporation (or while such a director or officer, served as a director, officer,
employee or agent of the Corporation or as a director, officer, trustee,
partner, employee or agent of a Subsidiary, as hereafter defined, or at the
Corporation's request, served in any such position with any other corporation,
partnership, joint venture, trust or other enterprise), the Corporation shall
seek to purchase and maintain in effect for the benefit of Indemnitee one or
more valid, binding and enforceable policies of directors' and officers'
liability insurance ("D&O Insurance").
(b) The Corporation shall not be required to maintain said policy or
policies of D&O Insurance in effect if said insurance is not reasonably
available or if, in the reasonable business judgment of the Board of Directors,
either (i) the premium cost for such insurance is substantially disproportionate
to the amount of coverage, or (ii) such insurance provides insufficient benefit
by reason of the extent of applicable exclusions, the limitation of the
insurer's liability, the size of retentions, or any other similar limitations
under any such policy.
(c) In the event the Corporation does not purchase and maintain D&O
Insurance in effect, the Corporation agrees to use its best efforts to make,
establish and fund one or more independent financial arrangements, such as an
indemnification trust, letter of credit or security arrangement, that will, in
the best judgment of the Board of Directors, provide the greatest reasonable
assurance that Indemnitee is and will be held harmless and indemnified to the
full extent permitted by law.
6. Procedure for Determination of Entitlement to Indemnification.
(a) Whenever Indemnitee believes that he or she is entitled to
indemnification pursuant to this Agreement, Indemnitee shall submit a written
request for indemnification to the Corporation. Any request for indemnification
shall include sufficient documentation or information reasonably available to
Indemnitee to support his or her claim for indemnification. Indemnitee shall
submit such claim for indemnification within a reasonable time not to exceed
five years after any judgment, order, settlement, dismissal, arbitration award,
conviction, acceptance of a plea of nolo contendere or its equivalent, final
termination or other disposition or partial disposition of any Proceeding,
whichever is the later date for which Indemnitee requests indemnification. The
President or the Secretary or other appropriate officer shall, promptly upon
receipt of Indemnitee's request for indemnification, advise the Board of
Directors in writing that Indemnitee has made such request. Determination of
Indemnitee's entitlement to indemnification shall be made not later than thirty
(30) days after the Corporation's receipt of his or her written request for such
indemnification.
3
<PAGE>
(b) The Indemnitee shall be entitled to select the forum in which
Indemnitee's request for indemnification will be heard, which selection shall be
included in the written request for indemnification required in Section 6(a).
The forum shall be any one of the following:
(i) The stockholders of the Corporation;
(ii) A quorum of the Board of Directors consisting of
Disinterested Directors;
(iii) Independent Legal Counsel, who shall made the
determination in a written opinion; or
(iv) A panel of three arbitrators, one selected by the
Corporation, another by Indemnitee and the third by the first two
arbitrators selected. If for any reason three arbitrators are not
selected within thirty (30) days after the appointment of the first
arbitrator, then selection of additional arbitrators shall be made by
the American Arbitration Association. If any arbitrator resigns or is
unable to serve in such capacity for any reason, the American
Arbitration Association shall select such arbitrator's replacement. The
arbitration shall be conducted pursuant to the commercial arbitration
rules of the American Arbitration Association now in effect.
If Indemnitee fails to make such designation, his or her claim shall be
determined by a quorum of the Board of Directors consisting of Disinterested
Directors, if available. If no such quorum is available, the designation shall
be made by an appropriate court of the State of Delaware.
7. Fees and Expenses of Independent Legal Counsel. The Corporation
agrees to pay the reasonable fees and expenses of Independent Legal Counsel or a
panel of three arbitrators should such Counsel or such panel of arbitrators be
retained to make a determination of Indemnitee's entitlement to indemnification
pursuant to Section 6 of this Agreement, and to fully indemnify such Counsel or
arbitrators against any and all expenses and losses incurred by any of them
arising out of or relating to this Agreement or their engagement pursuant
hereto.
8. Remedies of Indemnitee.
(a) In the event that (i) a determination pursuant to Section 6 hereof
is made that Indemnitee is not entitled to indemnification, (ii) advances of
Expenses are not made pursuant to this Agreement, (iii) payment has not been
timely made following a determination of entitlement to indemnification pursuant
to this Agreement, or (iv) Indemnitee otherwise seeks enforcement of this
Agreement, Indemnitee shall be entitled to a final adjudication in an
appropriate court of the State of Delaware of his or her rights. The Corporation
shall not oppose Indemnitee's right to seek any such adjudication.
(b) In the event that a determination that Indemnitee is not entitled
to indemnification, in whole or in part, has been made pursuant to Section 6
hereof, the decision in the judicial proceeding provided in paragraph (a) of
this Section 8 shall be made de novo and
4
<PAGE>
Indemnitee shall not be prejudiced by reason of a determination that he or she
is not entitled to indemnification.
(c) If a determination that Indemnitee is entitled to indemnification
has been made pursuant to Section 6 hereof or otherwise pursuant to the terms of
this Agreement, the Corporation shall be bound by such determination in the
absence of (i) a misrepresentation or omission of a material fact by Indemnitee
or (ii) a specific finding (which has become final) by an appropriate court of
the State of Delaware that all or any part of such indemnification is expressly
prohibited by law.
(d) In any court proceeding pursuant to this Section 8, the Corporation
shall be precluded from asserting that the procedures and presumptions of this
Agreement are not valid, binding and enforceable. The Corporation shall
stipulate in any such court that the Corporation is bound by all the provisions
of this Agreement and is precluded from making any assertion to the contrary.
(e) Expenses reasonably incurred by Indemnitee in connection with his
or her request for indemnification under this Agreement, seeking enforcement of
this Agreement or to recover damages for breach of this Agreement shall be borne
by the Corporation.
9. Modification, Waiver, Termination and Cancellation. No supplement,
modification, termination, cancellation or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver.
10. Subrogation. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Corporation effectively to
bring suit to enforce such rights.
11. Notice by Indemnitee and Defense of Claim. Indemnitee shall
promptly notify the Corporation in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document
relating to any matter, whether civil, criminal, administrative or
investigative, but the omission so to notify the Corporation will not relieve it
from any liability which it may have to Indemnitee if such omission does not
prejudice the Corporation's rights. If such omission does prejudice the
Corporation's rights, the Corporation will be relieved from liability only to
the extent of such prejudice; nor will such omission relieve the Corporation
from any liability which it may have to Indemnitee otherwise than under this
Agreement. With respect to any Proceeding as to which Indemnitee notifies the
Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at its own
expense; and
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(b) The Corporation jointly with any other
indemnifying party similarly notified will be entitled to assume the
defense thereof, with counsel reasonably satisfactory to Indemnitee;
provided, however, that the Corporation shall not be entitled to assume
the defense of any Proceeding if Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the
Corporation and Indemnitee with respect to such Proceeding. After
notice from the Corporation to Indemnitee of its election to assume the
defense thereof, the Corporation will not be liable to Indemnitee under
this Agreement for any expenses subsequently incurred by Indemnitee in
connection with the defense thereof, other than reasonable costs of
investigation or as otherwise provided below. Indemnitee shall have the
right to employ his or her own counsel in such Proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation
of its assumption of the defense thereof shall be at the expense of
Indemnitee unless:
(i) The employment of counsel by Indemnitee has been
authorized by the Corporation;
(ii) Indemnitee shall have reasonably concluded that counsel
engaged by the Corporation cannot adequately represent Indemnitee;
(iii) The Corporation shall not in fact have employed counsel
to assume the defense in such Proceeding or shall not in fact have
assumed such defense and be acting in connection therewith with
reasonable diligence; or
(iv) Indemnitee shall have reasonably concluded that there may
be a conflict of interest between the Corporation and Indemnitee with
respect to such Proceeding;
in each of which cases the fees and expenses of such counsel shall be at the
expense of the Corporation.
(c) The Corporation shall not settle any Proceeding in any manner which
would impose any penalty or limitation on Indemnitee without Indemnitee's
written consent; provided, however, that Indemnitee will not reasonably withhold
his or her consent to any proposed settlement.
12. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
(a) If to Indemnitee to:
-------------------
-------------------
-------------------
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(b) If to the Corporation to:
The PRIMA Group International, Inc.
Attn: President
447 S. Sharon Amity Rd., Suite 250
Charlotte, NC 28211
or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.
13. Nonexclusivity. The rights of Indemnitee hereunder shall not be
deemed exclusive of any other rights to which Indemnitee may now or in the
future be entitled under the Delaware General Corporation Law, the Corporation's
Certificate of Incorporation or Bylaws, or any agreements, vote of stockholders,
resolution of the Board of Directors or otherwise.
14. Certain Definitions.
(a) "Disinterested Director" shall mean a director of the Corporation
who is not or was not a party to, or whose property or interests are not
affected, the Proceeding in respect of which indemnification is being sought by
Indemnitee.
(b) "Expenses" shall include all direct and indirect costs (including,
without limitation, attorneys' fees, retainers, court costs, transcripts, fees
of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees, all other
disbursements or out-of-pocket expenses and reasonable compensation for time
spent by Indemnitee for which he or she is otherwise not compensated by the
Corporation) actually and reasonably incurred in connection with a Proceeding or
establishing or enforcing a right to indemnification under this Agreement,
applicable law or otherwise; provided, however, that "Expenses" shall not
include any Liabilities.
(c) "Final Adverse Determination" shall mean that a determination that
Indemnitee is not entitled to indemnification shall have been made pursuant to
Section 6 hereof and either (i) a final unappealable adjudication in a Delaware
court pursuant to Section 8(a) hereof shall have denied Indemnitee's right to
indemnification hereunder, or (ii) Indemnitee shall have failed to file a
complaint in a Delaware court pursuant to Section 8(a) for a period of one
hundred twenty (120) days after the determination made pursuant to Section 6
hereof.
(d) "Indemnification Period" shall mean the period of time during which
Indemnitee shall continue to serve as a director or as an officer of the
Corporation, and thereafter so long as Indemnitee shall be subject to any
possible Proceeding arising out of acts or omissions of Indemnitee as a director
or as an officer of the Corporation.
(e) "Independent Legal Counsel" shall mean a law firm or a member of a
law firm selected by the Corporation and approved by Indemnitee (which approval
shall not be unreasonably withheld) and that neither is presently nor in the
past five (5) years has been
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retained to represent: (i) the Corporation, in any material matter, or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Legal Counsel"
shall not include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Corporation or Indemnitee in an action to determine Indemnitee's
right to indemnification under this Agreement.
(f) "Liabilities" shall mean liabilities of any type whatsoever
including, but not limited to, any judgments, fines, ERISA excise taxes and
penalties, penalties and amounts paid in settlement (including all interest
assessments and other charges paid or payable in connection with or in respect
of such judgments, fines, penalties or amounts paid in settlement) of any
proceeding.
(g) "Proceeding" shall mean any threatened, pending or completed
action, claim, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative, including any appeal therefrom.
(h) "Subsidiary" shall mean any corporation, joint venture, trust,
partnership, unincorporated business association or other enterprise of which
more than 50% of the outstanding capital stock having voting power to elect a
majority of the board of directors or similar body of such enterprise is owned
by the Corporation (irrespective of whether or not, at the time capital stock of
any other class or series of such enterprise shall or might have voting power
upon the occurrence of any contingency) or which the Corporation otherwise
controls or a non-profit corporation which receives its principal financial
support from the Corporation or its Subsidiaries.
15. Binding Effect, Duration and Scope of Agreement. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto, the successors and assigns of the Corporation (including any
direct or indirect successor by purchase, merger, consolidation or otherwise to
all or substantially all of the business or assets of the Corporation), spouses,
heirs and personal and legal representatives. This Agreement shall continue in
effect during the Indemnification Period, regardless of whether Indemnitee
continues to serve as a director or as an officer.
16. Severability. If any provision or provisions of this Agreement (or
any portion hereof) shall be held to be invalid, illegal or unenforceable for
any reason whatsoever:
(a) the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby; and
(b) to the fullest extent legally possible, the provisions of this
Agreement shall be construed so as to give effect to the intent of any provision
held invalid, illegal or unenforceable.
17. Governing Law and Interpretation of Agreement. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of Delaware, as
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applied to contracts between Delaware residents entered into and to be performed
entirely within Delaware. If the laws of the State of Delaware are hereafter
amended to permit the Corporation to provide broader indemnification rights than
said laws permitted the Corporation to provide prior to such amendment, the
rights of indemnification and advancement of expenses conferred by this
Agreement shall automatically be broadened to the fullest extent permitted by
the laws of the State of Delaware, as so amended.
18. Consent to Jurisdiction. The Corporation and Indemnities each
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
19. Entire Agreement. This Agreement represent the entire agreement
between the parties hereto, and there are no other agreements, contracts or
understandings between the parties hereto with respect to the subject matter of
this Agreement, expect as specifically referred to herein or as provided in
Section 13 hereof.
20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement.
THE PRIMA GROUP INTERNATIONAL, INC.
By: ____________________________________
Its: ____________________________________
----------------------------------------
(INDEMNITEE)
9
COOPERATIVE MANUFACTURING AND SELLING AGREEMENT
THIS AGREEMENT is by and between STRIPPIT, INC., a corporation
organized under the laws of Delaware, and its principal place of business at
12975 Clarence Center Road, Akron, New York 14001 ("Strippit"), and PRIMA
ELECTRONICS S.p.A., a company organized under the laws of Italy, with its
principal place of business at Via Antonelli, 32, 10097 Collegno (To), Italy
("Prima").
WHEREAS, Strippit desires to acquire and Prima desires to grant to
Strippit the exclusive right to manufacture and sell within the territory set
forth on Exhibit A hereto, as such exhibit may be hereafter amended (the
"Territory"), those products set forth on Exhibit B hereto, as such exhibit may
be hereafter amended (the "Products");
NOW, THEREFORE, in furtherance of the foregoing objectives, Strippit
and Prima agree as follows:
1.0 Exclusive Rights; License.
1.1 Prima hereby grants Strippit the exclusive right (i) to
manufacture, sell and service the Products within the Territory and (ii) to
purchase the Products from Prima for sale within the Territory, for its own
account and under its own brand and label. In furtherance of the foregoing,
Prima agrees to sell to Strippit on order of Strippit as set forth in this
Agreement, (i) those component parts of the Products set forth on Exhibit C
hereto, including current configurations and any superseding modifications
thereto (the "Product Components") and (ii) the Products. During the term of
this Agreement, Strippit agrees to purchase all its requirements for Product
Components from Prima and not to manufacture such Product Components for its own
account.
1.2 In order to facilitate Strippit's exercise of the rights provided
in paragraph 1.1 hereof, Prima hereby grants to Strippit a non-exclusive license
to utilize its proprietary and non-proprietary technology relating to the
Products and the Product Components and agrees to provide Strippit with all
necessary engineering data, drawings, designs, specifications, manuals and
schematics, technical information and advice and know-how, and all other
information so as to permit Strippit to manufacture, sell and service the
Products and the Product Components.
1.3 Pursuant to the rights granted in Section 1.1 hereof, Strippit
shall mark the Products sold and manufactured hereunder with the Strippit name,
logo and model designation and/or in such other manner as Strippit shall
determine; provided, however, that Strippit shall prominently mark the Products
manufactured and sold by Strippit hereunder with the Prima name and logo. In
addition, the Products shall be marked as follows: "Manufactured Under a
Cooperative Manufacturing Agreement with Prima Industrie S.p.A." The placement
and nature of the foregoing Prima markings on the Products shall be mutually
agreed to by the parties.
<PAGE>
2.0 Royalty.
In consideration of the rights granted Strippit in Section 1.0 hereof,
Strippit agrees that:
2.1 Strippit shall pay to Prima, on execution of this Agreement, the
sum of US [*] as a prepayment of royalties due pursuant to paragraph 2.2 hereof
with respect to sales of the Products (the "Prepaid Royalties").
2.2 Strippit shall pay to Prima royalties in the amounts set forth on
Exhibit D hereto with respect to the sale of the Products and those other items
identified on such exhibit (the "Earned Royalties").
2.3 Strippit shall pay royalties pursuant to paragraph 2.2 hereof to
Prima within 30 days following such calendar quarter for shipments made during
such quarter of the Products or other items for which royalties are payable.
Strippit shall charge against the amount of royalties due Prima hereunder the
amount of any royalties credited or paid to Prima in connection with any
Products or other items returned and refunds or adjustments given by reason of
defects in material and/or workmanship, provided that Prima shall have been
given a reasonable explanation of such charge against royalties and the reasons
therefor.
2.4 Strippit and Prima acknowledge and agree that the Prepaid Royalties
are non-refundable, and that such arrangement is made in consideration of
Prima's irrevocable transfer to Strippit under this Agreement, including,
without limitation, pursuant to paragraphs 7.3 and 7.4 hereof, of its know-how,
information and data and documentation with respect to the Products and the
Product Components.
3.0 Term; Termination.
3.1 This Agreement shall be effective as of its date of execution and
shall continue in effect for an initial term of five (5) years ending on the
fifth anniversary of such execution date, unless earlier terminated or extended
as provided herein. At least 90 days prior to the completion of such initial
five-year term, both parties shall negotiate in good faith the terms of an
extension or renewal of this Agreement. In the event such negotiations are
unsuccessful, this Agreement shall terminate as of the completion of its initial
term.
3.2 Either party may terminate this Agreement at any time for any
reason or no reason upon six months' prior written notice to the other party. In
the event of a termination pursuant to this paragraph by Prima (not for any
reason described in paragraphs 3.3, 3.4 or 3.5 hereof), Prima shall continue to
sell to Strippit, on order of Strippit, the Products and the Product Components
during the 12-month period immediately following the effective date of
termination on the terms and conditions contained in this Agreement; provided,
however, that (i) with respect to any sale by Strippit of the Products within
the Territory during such 12-month period, royalties shall continue to be
payable by Strippit to Prima at the rate in effect immediately prior to such
termination and (ii) during such 12-month period neither Prima nor any of its
affiliates shall, directly or indirectly, sell, attempt to sell or enter into
any agreement for the sale of the Products (or any similar products manufactured
by Prima or its affiliates) within the Territory. In the event of a termination
pursuant to this paragraph by Strippit (not for any reason described in
paragraphs 3.3 or 3.5 hereof), Strippit agrees that during the 12-month period
following the effective date of termination, neither Strippit nor any
<PAGE>
of its affiliates shall, directly or indirectly, sell any products or product
components competitive with the Products or the Product Components within the
Territory, excluding, however, sales by Strippit of its HELIOS laser cutting
machine, combination punching and laser cutting machine, mechanical punching
machine and hydraulic punching machine product lines and any improvements to,
variations of and new models offered under such product lines.
3.3 Either party may terminate this Agreement upon 60 days' prior
written notice to the other party in the event that such other party has
breached any material obligation under this Agreement, including, without
limitation, any obligation to make any payment hereunder or any obligations
pursuant to Sections 9.0 or 13.0 hereof, which breach has not been cured or is
incapable of cure during such 60-day notice period. Either party may terminate
this Agreement, effective immediately, upon written notice to the other party,
if any of the following events occur: (i) the other party files a voluntary
petition in bankruptcy or commences a proceeding seeking protection from its
creditors; (ii) the other party is adjudged bankrupt; (iii) a court or other
authority assumes jurisdiction of the assets of the other party; (iv) a trustee,
receiver or other appropriate party is appointed by a court or other appropriate
authority to take charge of all or a substantial portion of the assets of the
other party; (v) the other party becomes insolvent (however such insolvency is
evidenced) or suspends or discontinues its business; or (vi) the other party
makes an assignment of its assets for the benefit of its creditors.
3.4 Following December 31, 1999, Prima shall have the right to
terminate this Agreement in the event Strippit shall have failed, as of such
date, to sell [*] units of the Products. Prima shall provide Strippit written
notice of its intention to terminate this Agreement under this paragraph 3.4 and
the effective date thereof within 30 days following December 31, 1999. In the
event Prima does not exercise such right of termination within said 30-day
period, such right shall be deemed waived and this Agreement shall remain in
full force and effect.
3.5 Strippit shall have the right to terminate this Agreement,
effective immediately, upon written notice to Prima, in the event that at any
time during the term of this Agreement any competitor of Strippit shall have or
acquire an equity interest (or a right to acquire an equity interest) in Prima
or any of its affiliates, whether as a shareholder, partner, holder of
convertible debt or otherwise; provided, however, that Strippit's right of
termination shall not apply to the extent Prima shall have become publicly-owned
and the equity interest in Prima acquired represents less than 5% of the class
of Prima's outstanding publicly-owned shares. Prima shall have the right to
terminate this Agreement, effective immediately, upon written notice to
Strippit, in the event that at any time during the term of this Agreement any
competitor of Prima shall have or acquire an equity interest (or a right to
acquire an equity interest) in Strippit, whether as a shareholder, partner,
holder of convertible debt or otherwise.
3.6 In the event Prima shall suspend, discontinue or cease the
manufacture and sale of the Products or the Product Components for any reason or
be unable to manufacture and sell the Products or the Product Components
hereunder by reason of force majeure (as defined in Section 15.0 hereof), in
addition to any further rights of Strippit hereunder, Prima shall cooperate with
Strippit, at Strippit's request, in taking such actions as are necessary or
desirable to ensure Strippit a continuing source of supply of the Products and
the Product Components, including, without limitation, providing Strippit with
drawings, technical information and know-how regarding the Product Components
such as would permit Strippit to manufacture or arrange for the manufacture
thereof.
<PAGE>
3.7 On any termination of this Agreement other than for cause (which
for purposes of this Agreement shall mean a termination other than pursuant to
paragraph 3.3, 3.4 or 3.5 hereof), Strippit shall be entitled to the grant from
Prima of a royalty-bearing, non-exclusive and non-transferable license, in the
Territory, to use any patents and patent applications issued to, filed by or
licensed to Prima and covering inventions contained or incorporated in the
Products and/or the Product Components and to continue the manufacture of the
Products. Notwithstanding anything to the contrary contained in the preceding
sentence, Strippit shall be entitled to the grant of the license described in
the sentence on any termination of this Agreement by Strippit pursuant to
paragraphs 3.3 or 3.5 hereof. Any such license shall entitle Strippit to
manufacture, sell and use any invention that is the subject matter of such
patents for the life thereof, subject only to payment by Strippit to Prima of a
royalty at a commercially reasonable rate mutually agreeable to the parties. In
the event that this Agreement terminates because the parties are unsuccessful in
negotiating an extension or renewal of this Agreement pursuant to paragraph 3.1
hereof and Strippit determines that it wishes to be granted the license
described in this paragraph, Strippit shall pay Prima US [*] in consideration of
the grant of such license.
3.8 Following any termination of this Agreement, Prima agrees to sell,
on order of Strippit, and in accordance with the terms hereof, the Product
Components necessary to permit Strippit to fill orders for the Products existing
as of the effective date of termination and orders for the Products received
after the effective date of termination which arise from quotations outstanding
as of the effective date of termination.
4.0 Prices: Purchase Orders: Payment.
4.1 Prima agrees to sell the Products and the Product Components to
Strippit at all times during the term of this Agreement at the prices for such
Products and Product Components set forth on Exhibit B and Exhibit C,
respectively. All prices are F.O.B. Prima's plant, Collegno (To), Italy and
shall include all packing and boxing charges and shall exclude all applicable
freight charges, taxes or duties and insurance charges.
4.2 Any provision or condition of a purchase order from Strippit with
respect to the Products or the Product Components which is in any way
inconsistent with or in addition to the terms and conditions of this Agreement
shall not be binding on Prima and shall be inapplicable, except as provided by
law. Any provision, item or condition of an acceptance from Prima which is in
any way inconsistent with or in addition to the terms and conditions of this
Agreement shall not be binding on Strippit and shall be inapplicable, except as
provided by law.
4.3 The purchase price of the Products and the Product Components
purchased by Strippit hereunder shall be paid in United States funds within 60
days of the date of invoice from Prima, unless Strippit shall reject the
Products and/or the Product Components following inspection pursuant to normal
testing and inspection standards mutually acceptable to the parties.
5.0 Exclusivity.
5.1 Prima, for itself and its affiliates, represents to Strippit that
it has not, and agrees with Strippit that it will not, during the term of this
Agreement and during the 12 month period following any termination of this
Agreement by Prima pursuant to paragraph 3.2 hereof, enter into any other
<PAGE>
agreement or discussions for the manufacture and sale of, or sell or permit the
manufacture and/or sale of, the Products or any other similar products
manufactured by Prima or its affiliates, within the Territory; provided,
however, that such restriction shall not apply to sales by Prima of its RAPIDO 5
and OPTIMO 5-axis laser cutting machines and any improvements to, variations of
and new models offered under such product lines.
5.2 Strippit agrees that during the term of this Agreement it will not
sell for its own account products or product components competitive with the
Products or Product Components; provided, however, that such restrictions shall
not apply to sales by Strippit of its HELIOS laser cutting machine, combination
punching and laser cutting machine, mechanical punching machine and hydraulic
punching machine product lines and any improvements to, variations of and new
models offered under such product lines.
5.3 During the term of this Agreement, Strippit shall have the right to
sell within the Territory Prima's Laserwork Gold 2040 and 2060 product lines on
terms to be mutually determined by the parties.
6.0 Strippit's Obligations Under the Agreement.
6.1 Strippit shall use its commercially reasonable best efforts to
promote the sale of the Products within the Territory and maintain a sales
organization sufficient for such purposes and shall provide Prima with quarterly
sales activity reports, sales forecasts and sales quoting activity.
6.2 Strippit shall service the Products within the Territory and
maintain a service organization sufficient for such purposes. Strippit shall
provide Prima with a monthly summary of its service and repair activities
regarding the Products.
6.3 Strippit shall disclose to Prima from time to time any ideas,
concepts, processes or techniques which relate to and may be useful in the
improvement, enhancement or further development of the Products (collectively,
"inventions"). Such inventions made by Strippit, if patentable, shall be the
property of Strippit. On request of Prima, Strippit shall grant Prima a
royalty-bearing non-exclusive license in all areas of the world outside the
Territory to make, use and sell the invention that is the subject of any patents
granted to Strippit covered under this Section 6.3, such license to be on terms
mutually agreed upon by the parties. In the event Strippit wishes to incorporate
any invention of Strippit into the Products sold in the Territory and Prima
shall have no desire to utilize such invention for its own use, Prima shall at
Strippit's request take such action as may be reasonably necessary to assist
Strippit in incorporating such invention into the Products. Prima shall charge
Strippit and Strippit shall reimburse Prima for such costs and expenses incurred
in providing any such assistance as are mutually agreed to by the parties. In
the event Prima wishes to utilize any invention for its own use in connection
with its three-axis and five-axis laser cutting machine product lines, then
Prima shall incorporate such invention into the Products free of charge to
Strippit and shall pay to Strippit a royalty or other fee for use of the
invention on terms to be mutually agreed upon by the parties, which royalty or
other fee shall not be duplicative of any royalty paid by Prima under any
license granted by Strippit to Prima under this paragraph.
6.4 Strippit shall instruct its employees, representatives and agents
to promptly forward exclusively to Prima or its designated representative any
sales leads they become aware of with respect to Prima's five-axis laser cutting
machine product line.
<PAGE>
7.0 Prima's Obligations Under the Agreement.
7.1 With respect to the sale of Products and the Product Components to
Strippit hereunder, Prima shall manufacture the Products and Product Components
on a basis so as to enable it to meet its obligations under purchase orders
submitted from time to time by Strippit. Prima shall ship any such Products and
Product Components F.O.B. Prima's plant, Collegno (To), Italy within the times
and to the designated locations as provided for in purchase orders of Strippit.
7.2 Prima agrees to affix any name plates, tags and other markings as
Strippit may reasonably instruct to any Products and Product Components
designated by Strippit prior to shipment and to include in each shipment any
reasonable documentation supplied by Strippit.
7.3 Prima shall provide Strippit from time to time with all
documentation and information necessary to permit Strippit to develop sales and
service literature regarding the Products, including, without limitation, copies
of catalogs, outline assembly drawings, material lists, parts lists, advertising
cuts and other written materials produced by Prima and relating to the Products.
7.4 Prima shall provide Strippit with all technical assistance,
proprietary and non-proprietary information and data, know-how and other
information necessary or desirable in Strippit's judgment so as to permit
Strippit to manufacture, sell and service the Products, including, without
limitation, information regarding the Product Components and suppliers and
consultation and assistance in application engineering relating to specific
sales of the Products. Prima shall provide training and instruction to those
personnel designated by Strippit with respect to the operation, performance,
product applications and servicing of the Products. In the event Strippit shall
request Prima to provide extraordinary consultation, support or training
services pursuant to this paragraph, Strippit agrees to pay to Prima a fee for
such services at a rate to be agreed upon and to reimburse Prima for reasonable
travel and lodging expenses incurred by its personnel in providing such
services. For purposes of the preceding sentence, "extraordinary consultation,
support or training services" shall mean any in-person support or training
requested by Strippit involving Prima personnel that (i) extends beyond a period
of two weeks and relates to Strippit's first assembly of the Products and (ii)
extends beyond a period of two weeks and relates to training and instruction of
Strippit personnel in the operation, performance, product applications and
servicing of the Products.
7.5 Prima shall provide Strippit with prompt advance written notice of
changes, modifications or alterations to the Products and the Product Components
or any policies or procedures of Prima in connection with its manufacture and
sale of the Products and the Product Components.
7.6 Prima shall promptly forward to Strippit all inquiries it receives
regarding the manufacture, sale and service of the Products within the
Territory.
7.7 At Strippit's request, Prima shall provide Strippit with product
pricing and cost information regarding the Products and the Product Components
and assist Strippit in developing similar product pricing and cost information
regarding the Products manufactured and sold by Strippit pursuant to the rights
granted hereunder.
<PAGE>
7.8 In order to assist Strippit in the effective marketing of the
Products, Prima shall provide Strippit with all available marketing and customer
data and information relating to the sale of the Products within the Territory.
7.9 Prima shall disclose to Strippit from time to time any ideas,
concepts, processes or techniques which relate to and may be useful in the
improvement, enhancement or further development of the Products, all such
information so disclosed being subject to Section 9.0 of this Agreement.
7.10 Prima shall use its best efforts to design, with the cooperation
and input of Strippit, a Platino-style laser cutting machine with a 5' x 10' bed
to be included within the definition of "Products" hereunder.
7.11 In furtherance of the objectives of paragraph 6.4 hereof, Prima
agrees to provide supplementary training to agents, employees and
representatives of Strippit with respect to Prima's five-axis laser cutting
machine product line in order to enhance their ability to recognize applications
for such products. Prima agrees to pay Strippit a finder's fee in the amount of
[*] of the sales price for any sales lead that results in a sale of such
products by Prima.
8.0 New Products.
Prima shall undertake reasonable best efforts to develop new products
within that portion of the laser cutting machine market in which the Products
compete for inclusion under this Agreement, including such new products as may
be suggested by Strippit. Prima shall advise and share with Strippit information
related to its efforts and progress with respect to such new product development
and with respect to any developments or improvements made by Prima in any of its
laser cutting machine products or components that are or could be adapted for
use in connection with the Products or the Product Components. Strippit shall to
the extent reasonably appropriate be utilized by Prima in connection with such
new product development, including, without limitation, the testing of new
product prototypes and related matters.
9.0 Confidentiality.
9.1 For purposes of this Agreement, "Confidential Information" shall
mean any and all information relating to the business or assets of either party
which is not generally available to the public, including, without limitation,
technical know-how and data, manufacturing, producing pricing and cost
information, financial information, trade secrets, marketing and sales
information, information as to customers, customer lists, suppliers and supplier
lists, and business plans and strategies.
9.2 Each party shall take all reasonable precautions to safeguard the
confidential nature of all Confidential Information belonging to the other party
and any other precautions with respect thereto which such other party may, in
its sole discretion, reasonably request. Neither party shall at any time,
whether before or after the termination of this Agreement, sell, offer to sell,
transfer, disclose or otherwise make available any Confidential Information of
the other party to any third party other than (i) as authorized in writing by
such other party in connection with this Agreement or (ii) as required by
applicable law after written notice has been given to such other party. Except
with respect to that information of Prima irrevocably transferred to Strippit
hereunder, all
<PAGE>
Confidential Information disclosed by either party shall at all times remain the
personal property of the disclosing party and all documents, drawings, models
and other tangible items which constitute Confidential Information, together
with all copies thereof, shall be returned to the disclosing party immediately
upon termination of this Agreement.
10.0 Warranty; Service: Insurance.
10.1 Prima agrees to warrant the Products and the Product Components
sold to Strippit in accordance with and to the extent of the standard Prima
warranty to its customers as set forth on Exhibit E hereto. All customer service
within the Territory with respect to any Products will be the right and
responsibility of Strippit, its agents or representatives.
10.2 Prima shall procure and maintain during the term of this Agreement
and for a period ending five years after termination of this Agreement, with a
company reasonably acceptable to Strippit, general liability insurance,
including products and contractual liability insurance, insuring Prima against
claims by third parties for personal injury or property damage arising out of
Prima's manufacture and sale of the Products and the Product Components
hereunder, with limits of not less than US $1,000,000 for bodily injuries to one
person and US $1,500,000 for injuries to more than one person in any one
accident or occurrence and for loss or damage to the property of any one person
or persons of not less than US $1,500,000. Prima shall furnish to Strippit
certificates of insurance or other evidence of the existence of the policies of
insurance required to be maintained by Prima hereunder, such certificates of
insurance or other evidence stipulating that the insurance shall not be
canceled, changed or allowed to lapse through nonrenewal or failure to pay the
premium thereof without 30 days' advance notice in writing to Strippit. Strippit
shall procure and maintain during the term of this Agreement and for a period
ending five years after termination of this Agreement, with a company reasonably
acceptable to Prima, general liability insurance, including products and
contractual liability insurance, insuring Strippit against claims by third
parties for personal injury or property damage arising out of Strippit's
manufacture and sale of the Products hereunder, with limits of not less than US
$1,500,000 for bodily injuries to one person and US $1,500,000 for injuries to
more than one person in any one accident or occurrence and for loss or damage to
the property of any one person or persons of not less than US $1,500,000.
Strippit shall furnish to Prima certificates of insurance or other evidence of
the existence of the policies of insurance required to be maintained by Strippit
hereunder, such certificates of insurance or other evidence stipulating that the
insurance shall not be canceled, changed or allowed to lapse through nonrenewal
or failure to pay the premium thereof without 30 days' advance notice in writing
to Prima.
11.0 Indemnification.
11.1 Strippit agrees to indemnify, hold harmless and defend Prima
against all losses, liabilities, claims and expenses resulting directly or
indirectly from Strippit's breach of this Agreement or Strippit's negligence or
willful misconduct in the manufacturing, producing, selling, receiving, storing,
shipping and handling of the Products and the Product Components. Prima agrees
to indemnify, hold harmless and defend Strippit against all losses, liabilities,
claims and expenses resulting directly or indirectly from Prima's breach of this
Agreement or Prima's negligence or willful misconduct in the manufacturing,
producing, selling, receiving, storing, shipping and handling of the Products
and the Product Components. With respect to Prima's obligations under the
preceding sentence, "Products and Product Components" shall include only those
items sold by
<PAGE>
Prima to Strippit pursuant to this Agreement. A party's liability pursuant to
this paragraph 11.1 shall survive the termination of this Agreement for a period
of 5 years. In no event, however, shall Strippit's or Prima's liability for any
claim made under this paragraph 11.1 exceed US $1,500,000.
11.2 In addition to the warranty set forth in paragraph 11.1 hereof,
Prima warrants that the Products and the Product Components shall be sold to
Strippit free from the rightful claim of any third person for infringement of
patent. In this regard, during the term of this Agreement and for a period of 5
years following termination or expiration thereof, Prima shall defend, indemnify
and hold harmless Strippit from and against any such claim of infringement and
shall pay any and all resulting losses, liabilities, assessments, expenses,
costs, charges, penalties, rebates and reimbursements resulting directly or
indirectly from such claim of infringement. Strippit agrees to give Prima prompt
notice of any claim made against it falling under this paragraph 11.2. With
respect to any claim against Strippit covered under this paragraph, upon Prima's
written acknowledgment of its obligation to defend, indemnify and hold harmless
Strippit with respect to such claim, Prima shall have full authority and right
to control the defense, settlement and compromise thereof. In the event of any
such claim, Strippit may, at Prima's expense, procure the right to continue the
manufacture and sale of the Products, replace or modify the Products so that the
Products become non-infringing or, if applicable, return the infringing Products
or Product Components to Prima in exchange for an appropriate refund of the
purchase price. In no event shall Prima's liability for any claim under this
paragraph exceed the aggregate amount of royalties paid by Strippit to Prima
hereunder.
12.0 Notices.
All notices given pursuant to this Agreement shall be deemed to have
been properly given (a) if hand delivered, (b) if mailed, addressed to the
appropriate party, first-class air mail, postage prepaid, at the address
indicated at the beginning of this Agreement, or (c) if transmitted by confirmed
facsimile transmission to the appropriate party at the following facsimile
numbers: Prima--39-11-411-73-34; Strippit--716-542-5232. Either Prima or
Strippit may from time to time designate by written notice to the other party in
accordance with this Section 12.0 any other address and facsimile number to
which such notices shall be sent.
13.0 Assignment.
Neither this Agreement nor any right under this Agreement may be
assigned by either party without first obtaining the written consent of the
other party, which consent shall not be unreasonably withheld.
14.0 Failure, Delay or Waiver.
No failure of a party to require, and no delay by a party in requiring,
the other party to comply with any agreement, requirement or condition of this
Agreement shall constitute a waiver of the right to require such compliance or
compliance with any other agreement, requirement or condition of this Agreement.
No failure of a party to exercise, and no delay by a party in exercising, any
right or remedy under this Agreement shall constitute a waiver of such right,
such remedy or any other right or remedy under this Agreement. No waiver by a
party of any right or remedy under this Agreement shall be effective unless made
in writing. Any waiver by a party of any right or remedy under this Agreement
shall be limited to the specific instance and shall not constitute a waiver of
such right or remedy in the future or of any other right or remedy under this
Agreement.
<PAGE>
15.0 Force Majeure.
Neither party hereunder shall be responsible for delays, failures or
omissions under this Agreement due to any cause beyond its control constituting
force majeure, and not due to its own negligence and which cannot be overcome by
the exercise of due diligence. "Force majeure" for purposes of this Section 15.0
shall mean labor disturbances, riots, fires, earthquakes, floods, lightning,
epidemics, disorders, war, hostilities, expropriation or confiscation of
properties, interference by civil or military authorities, whether legal or
defacto, and other occurrences generally constituting acts of God.
16.0 Severability.
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law.
If, however, any provision of this Agreement shall be prohibited by or invalid
under any such law, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder thereof or any of
the remaining provisions of this Agreement which shall remain in full force and
effect.
17.0 Governing Law: Arbitration.
This Agreement shall be governed by and interpreted and construed in
accordance with the laws of the State of New York including the Uniform
Commercial Code as enacted in that state. The United Nations Convention on
Contracts for the International Sale of Goods shall not apply to this Agreement
or the transactions covered hereby. Any dispute, controversy or claim arising
under or related to this Agreement shall be finally settled by binding
arbitration conducted in English language in Geneva, Switzerland under the Rules
of Conciliation and Arbitration of the International Chamber of Commerce by one
arbitrator appointed in accordance with said rules. Any award rendered in such
arbitration shall be governed by the 1958 United Nations Convention on the
Recognition and Enforcement of Foreign Arbitral Awards.
18.0 General.
This Agreement may not be amended orally or by any course of conduct.
This Agreement (or any exhibit hereto) may be amended only by a written
agreement executed by Prima and Strippit. This Agreement shall be binding upon
and inure to the benefit of Prima and Strippit and each of their legal
representatives, successors and assignees (as limited by Section 13.0). This
Agreement constitutes the entire agreement between Prima and Strippit with
respect to the matters dealt with herein and supersedes all oral and written
proposals, representations, understandings and agreements previously made or
existing with respect to any such matters. The headings of the paragraphs of
this Agreement have been added for convenience only and shall not be deemed to
be a substantive part of this Agreement. If more than one language version of
the Agreement is executed, the English language version shall control. Any
written information or materials supplied by either party hereunder shall be in
the English language and if no English language version of such information or
materials is available, an English language translation of such information or
materials shall be provided.
<PAGE>
IN WITNESS WHEREOF, Prima and Stippit have executed this Agreement as
of the ____ day of __________________, 1997.
STRIPPIT, INC.
By: ______________________________
Name_________________________
Title _________________________
PRIMA INDUSTRIE S.p.A.
By: ______________________________
Name_________________________
Title _________________________
<PAGE>
EXHIBIT A
TERRITORY
For purposes of this Agreement, "Territory" shall mean North America.
Strippit shall have no rights under this Agreement in Europe and Japan. With
respect to any other area of the world, Strippit shall have a non-exclusive
right to sell and service the Products under this Agreement; provided, however,
that (other than with respect to China and Korea) Strippit shall notify Prima of
the country into which it wishes to sell prior to consummating such sale and in
the event Prima has exclusive representation in such country or another
relationship it wishes to protect Prima may so advise Strippit and Strippit and
Prima shall enter into prompt discussions regarding such sale. With respect to
sales into China and Korea, Strippit shall notify Prima of the country into
which it wishes to sell and the prospective customer prior to consummating any
such sale; provided, however, that Strippit may proceed with the consummation of
any such sale only following authorization from Prima.
<PAGE>
EXHIBIT B
PRODUCTS
Platino machine as described in PRIMA sales brochure identified as
9/GB/02/04/00/7 and as modified per the conditions of this Agreement and as
further defined below:
a. Machine per item 1, with X and Y travel of 2500 mm and 1250 mm,
respectively.
b. Machine per item 1, with X and Y travel of 3000 mm and 1500 mm,
respectively.
c. Pallet Changer for the machine per item 1a.
d. Pallet Changer for the machine per item 1b.
e. Sheet Loader for the Pallet Changer per item 1c.
f. Sheet Loader for the Pallet Changer per item 1d.
g. Rotary Axis including Tailstock and Lunette for machines per items
1a and 1b.
The products shall include those listed above in their current configurations
and any superseding modifications thereto which are made throughout the life of
the Agreement.
<PAGE>
EXHIBIT C
PRODUCT COMPONENTS
CONFIDENTIAL TREATMENT
REQUESTED
<PAGE>
EXHIBIT D
ROYALTIES
CONFIDENTIAL TREATMENT
REQUESTED
<PAGE>
EXHIBIT E
WARRANTY
Product Components supplied by Prima to Strippit under this Agreement shall be
warranted to be free from defects in materials and workmanship for a period of
18 months from date of shipment, excluding Product Components such as lenses,
mirrors and sensors that are otherwise not defective and are consumed in the
normal use of such Product Components.
During the warranty period, defective Product Components shall be returned by
Strippit to Prima and replaced by Prima to Strippit free of charge.
<PAGE>
Prima Industrie SpA
VIA ANTONELLI, 32
10097 REGINA MARGHERITA DI COLLEGNO ITALY
July 16, 1997
Strippit, Inc.
A Unit of IDEX Corporation
12975 Clarence Center Road
Akron, NY 14001
Attention: Mr. John P. Snow, President
Dear John,
The following will serve to summarize our discussions regarding certain issues
relating to our Cooperative Manufacturing and Selling Agreement.
1. Prima agrees to discontinue all selling activities in North America with
respect to the Platino product line and related accessories, effective October
1, 1997. Further, it is agreed that Prima will provide Strippit a copy of all
quotations still in effect as of October 1, 1997. Prima will have the right to
close orders against these quotations through December 31, 1997.
2. Prima agrees to discontinue all selling activities in North America with
respect to the Laserwork Gold product line and related accessories effective
November 15, 1997. Further, it is agreed that Prima will provide Strippit a copy
of all quotations still in effect as of November 15, 1997. Prima will have the
right to close orders against these quotations through December 31, 1997. Prima
and Strippit will finalize marketing plans for Laserwork Gold 2040 & 2060
product lines by December 31, 1997.
3. Prima agrees to provide Strippit a copy of all announcements to its customer
base regarding the Cooperative Manufacturing and Selling Agreement in advance
for Strippits approval. Strippit will communicate to its customer base, the
availability of a new laser product line at it's own discretion with due
consideration for preserving Prima's relationship with its customers.
4. Prima has advised Strippit of the existence of a license granted by Prima to
Amada Co., Ltd. with respect to a product know as "Delta-Laser" and certain
related technology and inventions. This will confirm that Strippit has
acknowledged that the existence of such license, on the terms disclosed to
Strippit, does not constitute a breach of the Cooperative Manufacturing and
Selling Agreement between Strippit and Prima.
Acknowledged and agreed to by both parties:
Strippit, Inc. Prima Industrie SpA
- -------------------------------- ---------------------------
John P. Snow Dr. Gianfranco Carbonato
- ------------------------------ ---------------------------
Date Date
/rd
ATLAS COPCO
SUPPLY AGREEMENT
<PAGE>
ATLAS COPCO AIRPOWER
SUPPLY AGREEMENT
Except for quotations of short passages for the purposes of review and
criticism, no part of this agreement may be reproduced or transmitted in any
form or by any means electronic, mechanical, photocopying, recording or
otherwise without the prior written permission of the assigned Purchase
Departments of the Atlas Copco Airpower Industrial Air and Oil-free Air
Divisions, and Prima Electronics SpA.
This agreement is a common document; it remains the property of both Atlas Copco
Airpower and Prima Electronics SpA. If no longer used, this agreement should be
returned to:
Atlas Copco Airpower NV Atlas Copco Airpower NV
Industrial Air Division Oil-free Air Division
Purchase Department Purchase Department
Boomsesteenweg 057 Boomsesteenweg 957
PO Box 103 PO Box 104
B-2610 Wilrijk B-2610 Wilrijk
Belgium Belgium
Modifications to this document shall be made in writing and agreed upon by both
Atlas Copco Airpower and Prima Electronics SpA. Agreed modifications will be
filed in this Agreement. The document control is the responsibility of the
Purchase department at Atlas Copco Airpower and of the General Manager at Prima
Electronics SpA.
Derived (operational) documents are subjected to document control as Quality
record (cfr ISO 9003).
The Supply Agreement is a document drawn up jointly. Both Prima Electronics SpA
and Atlas Copco Airpower set out the principles of and practical arrangements
for their cooperation herein.
Further in this text the Atlas Copco Airpower Industrial Air and Oil-free Air
Divisions are called "Atlas Copco" or "ACA", and Prima Electronics SpA is
further called "Supplier".
<PAGE>
TABLE OF CONTENTS
1. PRINCIPLE OF COOPERATION AND SPECIFIC CONDITIONS..................... 1
1.1 PURPOSE AND SCOPE ................................................... 2
1.2 PRODUCTS ............................................................ 4
1.3 PRICES .............................................................. 5
1.3.1 Price agreement ............................................ 5
1.3.2 Price validity and evolution ............................... 5
1.3.3 Confidential nature of the price agreement ................. 5
1.3.4 Price List ................................................. 6
1.4 AFTER SALES ......................................................... 7
1.4.1 Warranty ................................................... 7
1.4.2 Warranty handling .......................................... 8
1.4.3 Spare parts ................................................ 8
1.5 TOOLING ............................................................. 8
1.6 PRODUCT LIABILITY ................................................... 9
1.6.1 Product liability .......................................... 9
1.6.2 Limitation of liability .................................... 9
1.7 PRODUCT SPECIFICATION ............................................... 9
1.7.1 Product specification ...................................... 9
1.7.2 Supplier product specification ............................. 10
1.8 TECHNICAL COOPERATION ............................................... 10
1.8.1 Spirit ..................................................... 10
1.8.2 Product modifications ...................................... 10
1.8.3 Product development ........................................ 11
1.9 EXCLUSIVITY AND CONFIDENTIALITY ..................................... 11
1.9.1 Exclusivity ................................................ 11
1.9.2 Confidentiality ............................................ 11
1.9.3 Industrial property rights ................................. 12
1.10 PRODUCTION .......................................................... 12
1.11 QUALITY POLICY ...................................................... 12
1.12 FINANCIAL STATUS AND STABILITY ...................................... 13
1.12.1 Financial status ........................................... 13
1.12.2 Financial stability ........................................ 13
1.3 BREACH OF CONTRACT .................................................. 13
1.13.1 Stipulations ............................................... 13
1.13.2 Tooling .................................................... 14
1.13.3 Application of law ......................................... 14
1.13.4 Arbitration ................................................ 14
2. PRACTICAL ARRANGEMENTS .............................................. 15
2.1 CONTACTS AND RESPONSIBILITIES........................................ 17
2.1.1 Organization ............................................... 17
2.1.2 ACA contacts ............................................... 17
2.1.2.1 Industrial Air Division ......................... 17
2.1.2.2 Oil-free Air Division ........................... 18
2.1.3 Supplier contacts .......................................... 19
<PAGE>
2.2 PRODUCT SPECIFICATION AND IDENTIFICATION ............................ 20
2.2.1 Validity ................................................ 20
2.2.2 Accessibility and deviations ............................... 20
2.2.3 Modification procedure ..................................... 21
2.3 DELIVERY ORGANIZATION ............................................... 21
2.3.1 Logistic organization ...................................... 21
2.3.1.1 KANBAN deliveries ............................... 21
2.3.1.2 Call-off ........................................ 22
2.3.1.3 Late deliveries ................................. 22
2.3.2 Packing .................................................... 22
2.3.3 Transport .................................................. 23
2.4 PAYMENT TERMS ....................................................... 23
2.5 QUALITY POLICY ...................................................... 24
2.5.1 General requirements ....................................... 24
2.5.2 Quality Assurance System ................................... 24
2.5.3 Quality Plan ............................................... 24
2.5.4 Zero Defect Supply - ZDS ................................... 25
2.5.4.1 Purpose ......................................... 25
2.5.4.2 ZDS status ...................................... 25
2.5.4.3 Rejected products ............................... 25
2.5.4.4 Evaluation ...................................... 26
2.5.4.5 Problem reporting ............................... 26
2.5.4.6 Duty to disclose ................................ 26
2.5.5 Definition of product quality requirement .................. 27
2.5.6 First sample inspection .................................... 27
2.6 TOOLING ........................................................... 28
2.6.1 Property ................................................... 28
2.6.2 Liability .................................................. 28
2.6.3 Replacement ................................................ 28
2.6.4 Period of holding .......................................... 28
2.6.5 Payment .................................................... 28
2.6.6 Life time .................................................. 28
2.7 PRODUCT LIFE CYCLE .................................................. 29
2.7.1 Pilot batch ................................................ 29
2.7.2 Production start-up ........................................ 29
2.7.3 Series production .......................................... 29
2.7.4 Series production phase-out ................................ 29
2.7.5 Spare part production & end of life cycle .................. 30
2.8 PURCHASE DOCUMENT ................................................... 30
3. ADDENDUM 1: LIST OF TOOLING ........................................ 31
<PAGE>
1. PRINCIPLE OF COOPERATION AND
SPECIFIC CONDITIONS
<PAGE>
1.1 PURPOSE AND SCOPE
Supplier remains in all circumstances responsible for product availability and
product. This Supply Agreement records the agreements for the supply of goods
and services between party for the first part,
Supplier: Prima Electronics SPA
here represented by: Mr. D. Peiretti
and party of the second part, Atlas Copco Airpower NV (Atlas Copco), for the
Industrial Air Division, Purchase Department,
here represented by: Mr. G. Follens,
for the Oil-free Air Division, Purchase Department,
here represented by: Mr. G. Van Gucht
These agreements are aimed at bringing about clarity and creating an
understanding of the cooperation between the two organizations.
Amendments to these agreements must be ratified by parties signing below or
their representatives.
These agreements in no way replace the numerous contacts between the two
organizations; they constitute the background to and the structure within which
these contacts can take place. However, to the extent such contacts affect or
alter the terms and conditions in this agreement, they should be documented in
amendments hereto.
For Prima Electronics SpA Atlas Copco Airpower NV
Industrial Air Division
D. Peiretti, G. Follens,
General Manager Purchasing Manager
Atlas Copco Airpower NV
Oil-free Air Division
G. Van Gucht
Purchasing Manager
This Supply Agreement confirms and succeeds the Supply Agreement of 13.04.1992
as well as it's attached document Practical Arrangements.
The purpose of this Agreement is:
- to confirm the co-operation as established in the above
mentioned first agreement
- to establish a new basis for the product prices and price
evolution
<PAGE>
- to define the prolonged term of the Agreement
- to update the text of the Agreement for those clauses for
which the relevant date and/or conditions have already expired
- to update the practical arrangements of the co-operation
The Supply Agreement covers the supply of products as mentioned in this
Agreement by Supplier until 31.12.2001.
Prima Electronics SpA will be the preferred Supplier as sole source for the
duration of the project.
The Supply Agreement is therefore subject to confirmation from 1.1.2002 onwards,
for agreed upon period(s) of time.
<PAGE>
<TABLE>
<CAPTION>
1.2 PRODUCTS
This Supply Agreement covers the products referred to as:
========================================== -------------------------------- --------------------------------------
Reference ACA Part Number Product Reference
========================================== -------------------------------- --------------------------------------
<S> <C> <C>
Basic Regulator * standard product
------------------------------------------ -------------------------------- --------------------------------------
High Range Regulator 4x16 * standard product
------------------------------------------ -------------------------------- --------------------------------------
High Range Regulator 4x40 * standard product
------------------------------------------ -------------------------------- --------------------------------------
Relay Expansion Module * optional product
------------------------------------------ -------------------------------- --------------------------------------
Sensor I/O Expansion Module * standard & optional product
------------------------------------------ -------------------------------- --------------------------------------
Digital I/O Expansion Module * optional product
------------------------------------------ -------------------------------- --------------------------------------
Communication Expansion * standard product
Module type 1 optional product
------------------------------------------ -------------------------------- --------------------------------------
Communication Expansion * optional product
Module type 2
------------------------------------------ -------------------------------- --------------------------------------
Communication Expansion * optional product
Module type 3
------------------------------------------ -------------------------------- --------------------------------------
High Range Regulator 4x40 * optional product
dedicated version 1
------------------------------------------ -------------------------------- --------------------------------------
High Range Regulator 4x40 * optional product
dedicated version 2
------------------------------------------ -------------------------------- --------------------------------------
Sensor I/O Expansion Module * optional product
dedicated version 1
------------------------------------------ -------------------------------- --------------------------------------
Sensor I/O Expansion Module * optional product
dedicated version 2
------------------------------------------ -------------------------------- --------------------------------------
</TABLE>
The products are defined by the relevant ACA and Supplier specifications
emanating from the development agreement ref.
733/010.027
dd.27.02.1990
with addenda
1) 771/110.037/336.799
dd.26.04.1991
2) 771/210.023/348.576
dd.04.03.1992
and subsequent derived specifications.
<PAGE>
1.3 PRICES
1.3.1 PRICE AGREEMENT
Prices recorded in the table below (see 1.3.4) shall be considered as maximum
prices until 31.12.1997. Changes must always be ratified after introduction of a
new Price List under the modification procedures agreed upon for this Supply
Agreement.
A detailed price break-down of each Product will be made available for ACA at
release and at each update, and at each modification of the prices in the Price
List.
The price is defined for delivery Free Carrier (F.C.A.) Moncalieri (TO) (I),
individual transport packing included.
The price agreement to be considered valid under normal conditions of trade,
economy, political stability and currency exchange in the Western World, and
with the exclusion of Acts of God regarding the company and the country.
Change of indicated quantities due to negative effects of fluctuations of
business cycles and economic conditions shall not affect the Product prices,
provided such effects do not exceed +/- 20% of the quantity of each standard
Product, and +/- 20% of the indicative total quantity of the optional modules,
as indicated in the Price List (see 1.3.4). The effects of larger deviations
shall be negotiated when and if this happens.
1.3.2 PRICE VALIDITY AND EVOLUTION
The Product prices in this Agreement are based on following components:
1.3.3 CONFIDENTIAL NATURE OF THE PRICE AGREEMENT
No element whatsoever of the former or present price agreement shall be
disclosed to third parties, except to the extent that such disclosure may be
requested by competent authorities through mandatory provisions of law; in such
cases ACA must be informed of the request and subsequent disclosure.
Exceptions from this can only be authorized subject to written confirmation from
the purchase departments of ACA and Supplier.
<PAGE>
<TABLE>
<CAPTION>
1.3.4 PRICE LIST
================================== ================================================ ==================================
ACA Indicated yearly Price
Part Number quantity ((pound)it)
================================== ================================================ ==================================
<S> <C> <C>
* * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
================================== ================================================ ==================================
</TABLE>
Remark (1): prices of these products are based on single orders;
indicated yearly quantities can be determined when more
extensive production history has been gathered.
<PAGE>
1.4 AFTER SALES
1.4.1 WARRANTY
A warranty period of nineteen (19) months from date of delivery is guaranteed by
Supplier.
During the warranty period Supplier shall be liable to:
1. full replacement free-of-charge of every defective Product in case it can be
proven that the failure was caused by Supplier, and not by misuse nor as a
result of malfunctioning of other external components;
2. costs of transport of the defective Product from the field location to
Supplier's premises.
The above shall fully exhaust Supplier's warranty liability except in case the
field failure rate exceeds .5% of the total quantity of each type of Product
delivered during the warranty period. In such case Supplier shall be liable to
pay, additional to the above, 50% of the field intervention cost per defective
Product. The time basis for the calculation of the average field failure rate
will be an evolving period of six (6) months. The amount of the field
intervention cost has been fixed at 12 000 BEC for 1996. The amount of the field
intervention cost has to be communicated by ACA to Supplier at the beginning of
every year for the duration of the Supply Agreement. The last amount thus
communicated remains valid until a new field intervention cost has been given.
ACA involves Supplier in its after-sales activities.
Supplier undertakes to grant full worldwide technical assistance including
on-the-spot repairs if required by and under instruction and supervision of ACA.
If such intervention is required as a result of a field failure rate below 0.5%,
ACA will compensate for Supplier's intervention at normal market rates for
manhour and transportation.
If such intervention is required as a result of a field failure rate exceeding
0.5% and it has been established that the cause of the intervention was a
defective Supplier's Product, then all costs for field intervention will be at
Supplier's charge, whereby the charge of intervention cost outside Europe will
be decided upon case-by-case.
1.4.2 WARRANTY HANDLING
Written reporting will be sufficient for approval of warranty claims when the
failure rate remains below the level of 0.5%.
Above 0.5% approval of warranty claims will be based upon the written reports
and field returns of defective products from the selected representative group
of reporting countries.
<PAGE>
Until further notice from ACA the reporting countries are: Belgium, the
Netherlands, France, Germany, Switzerland and the USA.
1.4.3 SPARE PARTS
Supplier assures the availability of replacement products as well as spare parts
to the Products under this Agreement for at least ten years after series
production has ceased of the last compressor equipped with the product(s)
covered by this Agreement.
Functional replacement is acceptable after this period.
1.5 TOOLING
ACA pays for the tooling dedicated to the project, according to the development
agreement with addenda (ref.: 733/010.027, 771/110.037/336.799,
771/210.023/348.576), and to the products under this Agreement.
As a consequence hereof ACA becomes and remains owner of this tooling.
Supplier shall keep the tooling in perfect workable condition at his charge.
The tooling hereby referred to is listed in addendum 1.
1.6 PRODUCT LIABILITY
1.6.1 PRODUCT LIABILITY
Supplier remains in all circumstances responsible for product availability and
product quality as defined in the relevant specifications.
Supplier undertakes only to deliver products complying with all applicable
safety legislation and regulations.
In accordance with EEC directive 85/374/EEC "Liability for defective products",
Supplier shall be liable for damage caused by a defect in his product.
1.6.2 LIMITATION OF LIABILITY
Supplier shall be liable for material damages and pecuniary loss which ACA
and/or its customer may suffer and for which Supplier is responsible, the
liability being limited to 5 000 000 BEC for each event of damage or loss.
<PAGE>
Supplier shall not be liable for loss of production, interruption of business
and loss of profit.
Supplier shall, in accordance with the prevailing legal regulations, be liable
for personal damages which ACA and/or its customer may suffer and for which
Supplier is responsible.
1.7 PRODUCT SPECIFICATION
1.7.1 PRODUCT SPECIFICATION
ACA informs Supplier of the product specifications of the goods to be supplied
by the sole official document: "Identification Sheet" (see 2.2)
ACA undertakes to provide all required information together with the
specifications mentioned in the Identification Sheet. Supplier is to ensure that
he understands and comprehends the specifications and information contained in
the Identification Sheet. When the production capabilities are such that it is
not possible to deliver in accordance with these, Supplier is to inform ACA
thereof by return.
Supplier must supply in accordance with the details of the Identification Sheet.
Deviations from these can only be made subject to a written acceptance from ACA.
1.7.2 SUPPLIER PRODUCT SPECIFICATION
Supplier will, after the original development and after each adaptation and/or
update of one of the products, present detailed and full specifications,
drawings, parts lists as well as complete Software specifications.
The parts list will contain approved vendors for the components for each
Product. For critical components (such as - but not exclusively - IC's, relays,
displays, connectors) alternative vendors will be identified whenever possible.
If a component becomes no longer available from an original vendor, Supplier
will request and substantiate its replacement alternative in writing.
If testing is necessary in the opinion of Supplier and/or ACA in order to
approve a component from a new vendor, then such costs as may result from such
testing shall be carried by Supplier. After written confirmation by ACA the
component may be sourced from the new vendor.
1.8 TECHNICAL COOPERATION
1.8.1 SPIRIT
ACA and Supplier declare to work jointly and continuously towards product
improvement.
<PAGE>
ACA implements a policy of sole sourcing and early supplier involvement. To this
effect ACA requires Supplier to provide engineering capacity, prototype
services, pilot batch production facilities as well as continuous quality
checking.
Flexibility in connection with production of prototypes is by consequence an
essential requirement.
1.8.2 PRODUCT MODIFICATIONS
Supplier may make no modifications to the products under this Agreement without
first consulting and approval of ACA in writing.
If changes in the Product appear to be necessary due to non availability of
certain components or any other reason except for change of specification by
ACA, Supplier will redesign the product at his own cost as long as the Supply
Agreement is valid.
In all cases the written approval of ACA is essential.
This approval will result in a renewed product specification Identification
Sheet.
1.8.3 PRODUCT DEVELOPMENT
The representatives of ACA and Supplier will contact each other for the purpose
of co-operation regarding development of modified products.
The execution of the modifications follow the same routines and project handling
as product development projects, as specified in the development Agreement (ref.
733/010.027) and other relevant ACA instructions.
ACA undertakes to involve Supplier in an early stage of the development of
product modifications.
Supplier has the right and duty to propose improvements to the design relative
to performance, product cost and ease of production on the basis of his own
capabilities.
1.9 EXCLUSIVITY AND CONFIDENTIALITY
1.9.1 EXCLUSIVITY
Supplier is not allowed to perform any development and/or production services
for any competitor of Atlas Copco Airpower nv during the term of this Agreement
and two years thereafter.
<PAGE>
1.9.2 CONFIDENTIALITY
All information concerning compressors and the company Atlas Copco of
confidential nature will be disclosed to Supplier in order to allow Supplier to
evaluate such information for the purpose of determining his course of action in
establishing a technical and business relationship with Atlas Copco in respect
of developing and producing within the frame of this agreement.
No item of this information may be disclosed by Supplier to any third party
unless ACA gives its permission in writing.
The name of Atlas Copco Airpower may not be used in any publication of any kind
without the written consent of ACA.
1.9.3 INDUSTRIAL PROPERTY RIGHTS
All industrial property rights to the design, modifications and updates of the
products covered by this Agreement, including films, masks, patterns, drawings,
combination of components reflecting technical specifications and software; as
well as tooling, test equipment and related software dedicated to the project
and production are the property of ACA. Supplier is not allowed to convey any of
the above to other parties or use it in any similar application without the
written consent of ACA.
All inventions relating to the products covered by this Agreement are the
property of ACA. When applicable, patent applications shall be filed in the name
of the Supplier's inventor with ACA as the stated owner.
1.10 PRODUCTION
Procedures and routines concerning production are covered in Part 2: Practical
Arrangements, of this Agreement.
1.11 QUALITY POLICY
ACA requires Supplier to establish and put into effect a Quality Assurance
System. ACA requires Supplier to establish and put into effect a Quality Plan
for (each of) the products covered by this agreement.
The Quality Assurance System and Quality Plan shall be implemented for the
production of all products delivered to ACA.
<PAGE>
Supplier undertakes to supply products in accordance with technical
specifications and other specified features.
ACA undertakes to specify the technical specifications and features and to
provide corresponding documentation.
Supplier undertakes to maintain systems which result in the achievement of the
technical specifications and features in a documented manner.
Supplier undertakes to improve the quality of the production processes and hence
the products on a continuous basis.
Supplier undertakes to supply the products according to the ZDS system with a
maximum allowed monthly ppm rating of 600. Supplier shall be liable for all
costs due to replacement of faulty products on the ACA assembly lines when the
monthly ppm rating exceeds the 600 limit.
1.12 FINANCIAL STATUS AND STABILITY
1.12.1 FINANCIAL STATUS
The continuity of this agreement is also dependent on sound financial conditions
of the parties involved.
For this reason Supplier shall submit copies of the following officially
published financial reports to ACA:
* the annual accounts deposited with the central filing organization
for Supplier
* the Annual Report of the parent company of Supplier
These reports are to be supplied within 2 months of their public filing.
1.12.2 FINANCIAL STABILITY
Since, in the longer term, the interests of both parties are convergent,
Supplier will inform ACA at the first hint of financial difficulties.
In the event of suspicions of financial problems or when there are serious
suspicions about oncoming financial difficulties it must be possible for
representatives of the ACA financial department to obtain access upon request to
the financial accounts of supplier in order to investigate and discuss this
problem openly.
Suitable steps will be taken to safeguard the interests of both parties.
<PAGE>
1.13 BREACH OF CONTRACT
1.13.1 STIPULATIONS
The agreement cannot be terminated by either party before 31.12.2001, unless by
mutual consent.
From 1.1.2002 and for the duration of the term of this agreement, either party
has the right to terminate this agreement on eighteen (18) months written notice
to the other party.
If Supplier however cannot perform according to the agreement, and/or cannot
guarantee:
* the prices defined in the Price List
* the quality requirements
* the logistic requirements
* the after sales service requirements
as defined in or referred to by this agreement, this will be considered as
breach of contract by Supplier. In such case Supplier will be held liable to pay
the transfer costs of change of supplier to the amount of 10 000 000 BEC.
The date of the written notice of termination defines the date of termination.
Should Supplier end up having financial problems that effect the prices,
quality, supply efficiency or services, then ACA reserves the right to terminate
this Agreement giving three (3) months notice in advance.
1.13.2 TOOLING
In case of termination of this Agreement for any reason all tooling or other
production items paid for and owned by ACA (see 1.5) shall be returned to ACA
unless an alternative arrangement has been agreed upon.
1.13.3 APPLICATION OF LAW
Parties acknowledge formally that for this agreement the Belgian Law, excluding
its conflict of law rules, is applicable.
1.13.4 ARBITRATION
All disputes arising out of or in connection with this agreement, including any
question regarding its existence, validity or termination, shall be settled by
an amicable effort of both parties to the
<PAGE>
agreement. An attempt to arrive at a settlement shall be deemed to have failed
as soon as one of the parties to the contract so notifies the other party in
writing.
If an attempt at settlement has failed, then the dispute shall be finally
settled under the Rules of Arbitration of the International Chamber of Commerce
in Paris by three arbitrators appointed in accordance with said Rules.
The place of arbitration shall be Brussels. The procedural law of this place
shall apply where the arbitration Rules are silent.
Litigation will be carried out in the French or English language.
<PAGE>
2. PRACTICAL ARRANGEMENTS
<PAGE>
This second part of the agreement defines and describes the practical
arrangements under which the cooperation shall be organized.
Procedures and routines outlined in documents which are not contained within
this Agreement but to which this part refers, are to be considered binding to
the same extent as the Agreement.
<PAGE>
2.1 CONTACTS AND RESPONSIBILITIES
2.1.1 ORGANIZATION
The authorized contact person at ACA is the representative within the Purchasing
Department.
It is this Purchaser Representative who makes decisions on behalf of ACA. For
specific matters this Purchaser Representative will be assisted by various
functions and departments within ACA.
It is through this Purchaser Representative that Supplier is to cooperate with
other departments of ACA.
2.1.2 ACA CONTACTS
Below are given the names and coordinates for the Purchaser Representative and
for the various applicable departments:
2.1.2.1 INDUSTRIAL AIR DIVISION
Atlas Copco Airpower NV
Industrial Air Division
Address Boomsesteenweg 957
B-2610 Wilrijk
P. O. Box 103
Belgium
Purchase Department Mrs. Hilde Ribbens
tel: Belgium (0)3/870 26 06
fax: Belgium (0)3/870 28 83
Quality Department Mr. Louis Van der Jeught
tel: Belgium (0) 3/870 22 49
fax: Belgium (0)3/870 28 83
Engineering Department Mr. Peter Van Turnhout
tel: Belgium (0)3/870 23 94
fax: Belgium (0)3/870 25 76
Financial Department Mr. Francis Liekens
tel: Belgium (0)3/870 28 30
fax: Belgium (0)3/870 27 05
Order Handling Line GA 5-10
Mr. Rudy Boussemaere
tel: Belgium (0) 3/870 23 14
fax: Belgium (0)3/870 28 83
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Line GA 11-22
Mr. Johny Maertens
tel: Belgium (0)3/870 26 27
fax: Belgium (0)3/870 28 83
Line GA 30-45
Mr. Karel Paridaens
tel: Belgium (0)3/870 23 61
fax: Belgium (0)3/870 28 83
Line GA 55-75
Mr. Willy De Caluwe
tel: Belgium (0)3/870 23 38
fax: Belgium (0)3/870 28 83
2.1.2.2 OIL-FREE AIR DIVISION
Atlas Copco Airpower NV
Oil-free Air Division
Address Boomsesteenweg 957
B-2610 Wilrijk
PO Box 104
Belgium
Purchase Department Mrs. Nicole van Deventer
tel: Belgium (0)3/870 26 09
fax: Belgium (0)3/870 29 00
Quality Department Mr. Paul Mondelaers
tel: Belgium (0)3/870 22 59
fax: Belgium (0)3/870 21 97
Engineering Department Mr. Hans Magits
tel: Belgium (0)3/870 28 61
fax: Belgium (0)3/870 24 43
Financial Department Mr. Walter Adams
tel: Belgium (0)3/870 21 09
fax: Belgium (0)3/870 28 85
Order Handling planner E
Mrs. Renild de Clercq
tel: Belgium (0)3/870 24 29
fax: Belgium (0)3/870 29 91
<PAGE>
planner C
Mrs. Ann Van Houdt
tel: Belgium (0)3/870 28 95
fax: Belgium (0)3/870 29 89
planner B
Mr. Marc d'Aes
tel: Belgium (0)3/870 24 39
fax: Belgium (0)3/870 29 92
planner I
Mr. Guido Pierloot
tel: Belgium (0)3/870 26 21
fax: Belgium (0)3/870 27 00
planner Q
Mr. Francois Van den Eynde
tel: Belgium (0)3/870 22 31
fax: Belgium (0)3/870 29 00
2.1.3 SUPPLIER CONTACTS
Supplier shall appoint a responsible representative who makes decisions on
behalf of Prima Electronics SpA. For specific matters this representative will
be assisted by various functions and departments within Supplier's organization.
Below are given the names and coordinates for the various applicable contacts:
Prima Electronics SpA
Address Strada Carignano 48/2
I-10024 Moncalieri (TO)
Italy
tel: Italy (0)11/64 41 44
Representative Mrs. E. Trento
tel: Italy (0)11/64 41 44
fax: Italy (0)11/640 42 77
Quality Department Mr. G. Moschella
tel: Italy (0)11/64 41 44
fax: Italy (0)11/640 42 77
<PAGE>
Engineering Department Mr. C. Guariso
tel: Italy (0)11/64 41 44
fax: Italy (0)11/640 42 77
Financial Department Mr. A. Fascio
tel: Italy (0)11/64 41 44
fax: Italy (0)11/640 42 77
Order Handling Mrs. E. Trento
tel: Italy (0)11/64 41 44
fax: Italy (0)11/640 42 77
2.2 PRODUCT SPECIFICATION AND IDENTIFICATION
2.2.1 VALIDITY
The ACA product Identification Sheet is valid as from the date it is received by
Supplier, and remains valid until replaced by an Identification Sheet with
specifications reflecting a later edition.
2.2.2 ACCESSIBILITY AND DEVIATIONS
The Identification Sheet must be understood by Supplier's personnel responsible
for costing, production and quality.
When there is doubt about the completeness or clarity of the specification(s),
the Purchaser must be contacted without delay. The implementation of the product
concerned shall be postponed until a response is received from the Purchaser
representative.
If no questions are asked within a period of 14 days from the date of receipt of
an Identification Sheet it is assumed that the information given therein has
been understood and accepted by Supplier.
Any deviation by Supplier from the information given in the Identification Sheet
must be approved by ACA in writing prior to the implementation thereof by
Supplier.
2.2.3 MODIFICATION PROCEDURE
Any modification of a product specified in an Identification Sheet shall always
be communicated to Supplier together with a new Identification Sheet covering
the modification and the new specifications.
<PAGE>
To the extent required, Supplier and the Purchaser Representative shall consult
with each other prior to the release of a new Identification Sheet based on the
modification of a product.
2.3 DELIVERY ORGANIZATION
The logistic organization described below applies to the Industrial Air
Division. The logistic organization for the Oil-free Air Division will be
communicated to Supplier through a separate document.
2.3.1 LOGISTIC ORGANIZATION
Supplier's products are to be delivered under two logistic systems:
1. KANBAN system
2. CALL-OFF system
Supplier will be informed separately for each product under which system the
product has to be delivered.
2.3.1.1 KANBAN DELIVERIES
The KANBAN products are packed in the specified packing with fixed quantity per
packing, e.g. a standard Atlas Copco pallet with 2 rings (P2) containing 42
products.
ACA has a buffer of each type of KANBAN product.
This buffer is calculated assuming a reaction time (including transport) at
Supplier of 10 working days.
The KANBAN card is scanned each time a standard packing is moved from the buffer
to its assembly line location.
The contents of the scanned KANBAN cards is transmitted to Supplier every night.
ACA can always generate demand for an extra (manual) KANBAN, additional to the
automatic (scanned) KANBAN.
Supplier will collect all transmitted orders, from all relevant order handling
contacts, over 5 (working) days, i.e. from Wednesday through Tuesday. These
orders will be combined into a single delivery which is collected at Supplier's
location each week on Friday.
<PAGE>
I.e. the system functions as follows:
* scanning during day 1 through 5 (Wednesday = day 1 through Tuesday =
day 5)
* transfer of orders during the night from day 1 to day 5, orders are
at Supplier by the morning 7.00 hrs of each subsequent day
* Supplier combines the orders transmitted from day 1 through 5
* delivery is at the latest by the afternoon 17.00 hrs of day 8 (e.g.
next Friday)
* the products are available at the ACA assembly line in the morning of
day 8 + 2 (e.g. next Tuesday morning)
2.3.1.2 CALL-OFF
Call-off orders are transmitted when ACA has a customer order for such product.
Call-off is transferred together with the KANBAN contents.
These call-off products are packed in pallet(s) separately, and may not be mixed
in the same packing with KANBAN products.
Call-off products are to be delivered with maximum 16 working days of call-off.
Call-off products will be shipped together with the regular KANBAN transport,
unless explicitly otherwise indicated by the relevant ACA order handling
responsible.
2.3.1.3 LATE DELIVERIES
Supplier shall carry the transport cost for late deliveries with regard to the
established logistic system and delivery schedule.
In case ACA cannot keep its scheduled delivery date for a compressor containing
Supplier's product due to late delivery, Supplier shall be liable to the cost of
2 500 BEC per man hour lost on the ACA assembly line.
2.3.2 PACKING
Packing is specified through the ACA packing specification.
The packing shall be identified by the bar-code packing label according to the
relevant ACA specification.
Supplier is responsible for the suitable packing of the products, according to
the packing specification, thereby ensuring that the products arrive in ACA in
the specified condition.
<PAGE>
2.3.3 TRANSPORT
Transport is organized by ACA.
Dispatching, coordination and transport insurance are ACA responsibilities.
Supplier is responsible for timely delivery of the products F.C.A. (Free
Carrier).
F.C.A. shall be interpreted in accordance with INCOTERM 1990 with the passing of
risk and cost taking place when the products are safely put on a truck or
similar at Supplier's production site, warehouse or any other agreed upon site.
The transport company in charge of ACA transport organization is:
ADES nv
Dynamicalaan 16
P.B. 110
B-2610 Wilrijk
Belgium
Contact: Mr. G. Meuris
Tel.: Belgium (0)3/825 25 95
Fax.: Belgium (0)3/825 25 26
Unless agreed upon in a separate agreement, air freight of products to ACA can
only be allowed after explicite instructions from the Purchaser Representative
or the Order Handling responsible from ACA.
Unless changed through separate agreement, deliveries will be collected at
Supplier's premises each FRIDAY.
Deliveries will be collected at Thursday when Friday is not available through
holiday closure. In such case Supplier will contact the transport forwarder at
his own initative.
2.4 PAYMENT TERMS
The payment condition for this agreement is 60 days end-of-month of arrival of
good in ACA-Wilrijk.
2.5 QUALITY POLICY
2.5.1 GENERAL REQUIREMENTS
The purpose of the Quality Policy is to achieve a Zero Defect Supply cooperation
between ACA and the Supplier.
<PAGE>
To achieve this effect, the Supplier shall continuously and completely control
his production processes, product quality and product quality procedures.
In order to achieve such level of control ACA requires the Supplier to pursue
and implement a policy of continuous improvement of the quality system, the
process(es) and product(s).
ACA evaluates the performance of its Supplier in accordance with the ISO 9000
standard series on quality systems.
Thus ACA suppliers shall endeavor to have a quality system structure and
production process in accordance with these ISO standards.
2.5.2 QUALITY ASSURANCE SYSTEM
ACA requires its Supplier to establish, implement and maintain a Quality
Assurance System.
The performance of Supplier's Quality Assurance System will be audited by ACA in
accordance with the ISO 9001 standard.
Each audit will result in a written audit report of which the Supplier will get
a copy.
Failure to reach the required standard level will result in specifications from
ACA regarding actions to be taken within a stated period of time established
after consultations with the Supplier. Failure to reach the standard level may
lead to the decision by ACA that no further orders will be placed until
corrective actions have been taken resulting in the achievement of the standard.
2.5.3 QUALITY PLAN
ACA requires its Suppliers to establish, implement and maintain a Quality Plan
for each of the products subject to a Supply Agreement or other cooperation with
ACA.
Such Quality Plan must at least cover:
* a complete and comprehensive description of the production process
* all critical product and process parameters affecting the product
quality; these parameters will be utilized to assess the quality
level achieved in the production process
* methods and criteria for establishing and evaluating the critical
product and process parameters
The Quality Plan shall be approved by ACA.
Quality Plans shall be continuously evaluated and improved by the Supplier.
<PAGE>
2.5.4 ZERO DEFECT SUPPLY - ZDS
2.5.4.1 PURPOSE
ACA and Supplier agree to operate in a ZDS (Zero Defect Supply) system with the
purpose of guaranteeing delivery of faultless parts directly to the ACA assembly
lines in accordance with the technical and packing specifications and with an
agreed delivery schedule.
To this effect ACA requires and expects Supplier to guarantee complete control
of process, product quality and logistic organization.
2.5.4.2 ZDS STATUS
The Supplier acquires ZDS after:
* approval of the Quality Assurance System
* approval of the Quality Plan(s)
* three consecutive faultless deliveries of any one product
When these three parameters have been complied with products shall be supplied
directly to the assembly lines and ACA will not make an entry inspection until
further notice.
2.5.4.3 REJECTED PRODUCTS
Rejected products are products that have been found not to comply with the
product specification as established in the Identification Sheet.
Following procedure will be applied to rejected products:
- - Supplier will be informed by fax regarding the occurrence of rejected
products; such fax will contain ACA Part Number(s), quantity per part
number and ACA rejected product report reference, i.e. the HK
reference.
- - rejected products will be returned to Supplier unless explicitly
otherwise agreed
- - if the products are rejected due to Supplier's cause, then Supplier
will be charged with the product cost, handling cost, and the costs of
packing and transport of the rejected products; depending on the amount
to be charged, such invoices will be grouped per month or per quarter
- - if the products are rejected due to ACA cause or transport mishandling,
then Supplier will invoice ACA with the product cost of the replacing
products at delivery, and/or with the cost of repair (if applicable) on
a separate invoice which contains the HK reference of the rejected
products;
- - Supplier can choose to fetch the rejected products at his own expense
if he so prefers; in this case Supplier must notify ACA within 2
working days of receiving the fax;
<PAGE>
- - a specific or general agreement can be made to scrap rejected products
at ACA; Supplier will be charged with the product cost of the scrapped
products in case the products have been rejected due to Supplier's
cause.
2.5.4.4 EVALUATION
The evaluation of the Supplier's performance in the area of product quality is
based on rejection reports and/or problem reports in which the rejection rate is
calculated.
Rejection rate is expressed in parts per million (ppm) per month, i.e. the
overall rejection of any one product on the assembly line is divided by the
number of such products delivered during the same month multiplied by 10
to the sixth power.
ACA will provide the Supplier with a ppm report every month in case there are
rejected products; otherwise the ppm report will be provided twice per year
(June/December).
The present maximum rejection rate ppm limit for ACA is 600, whereas the target
is zero rejection rate.
2.5.4.5 PROBLEM REPORTING
In addition to the rejection rate report provided by ACA in the monthly ppm
report, flagrant quality problems shall be reported directly to the Supplier
General Manager.
This reporting will take the form of a Problem Report.
Supplier must then reply stating which actions will be taken to eliminate,
completely and effectively, the reported problems, as well as which improvements
to the system will be implemented in order to exclude a repetition of the
problems reported.
2.5.4.6 DUTY TO DISCLOSE
The common objective of achieving a viable ZDS cooperation can only be reached
through an intensive and complete exchange of information between the Supplier
and ACA.
This exchange of information shall cover reporting of mutual problems as well as
identification of opportunities for quality improvement and the implementation
thereof.
In this respect both parties have the duty to disclose all information necessary
to achieve the above defined objective.
<PAGE>
2.5.5 DEFINITION OF PRODUCT QUALITY REQUIREMENT
Supplier has the right and duty to specify the product quality requirements
These requirements shall be established in cooperation with ACA, and all
agreements relating thereto shall be in writing and be kept by the Supplier.
These product quality requirements can be obtained in:
* functional (technical) specifications
* certificates
* specific preventive operations or treatment instructions
* specific packing instructions
In the Identification Sheet reference to the relevant documents must be made.
2.5.6 FIRST SAMPLE INSPECTION
Control in conjunction with the introduction of new products and the
introduction of modifications to existing products is a key issue in ACA's
product control system. The procedure of First Sample Inspection is the key
element of the introduction control system.
Specific instructions relating to First Sample Inspection will be provided to
the Supplier together with the Identification Sheet for each new or modified
product.
Such instructions will specify the applicability of requirements concerning:
* the Quality Plan
* pilot batch production
* reports and/or certificates to be furnished by the Supplier
* inspection of the first sample at the Supplier production site
* qualification tests on the product or parts of it.
The first sample to be inspected must be produced using the tooling and
production methods which will be used for serial production. Exceptions to this
rule can only be applied under special circumstances and are subject to written
approval by the ACA Quality Department.
2.6 TOOLING
2.6.1 PROPERTY
Tooling ordered and paid for by ACA remains the property of ACA. Supplier may
not use it for carrying out work for other contractors or projects. Such tooling
shall be marked "Property of Atlas Copco Airpower nv."
<PAGE>
2.6.2 LIABILITY
Supplier shall keep the tooling deposited with him in accordance with the
customary rules.
2.6.3 REPLACEMENT
Supplier shall inform ACA within 90 days when this tooling requires replacement
as a result of end-of-lifetime. Supplier may proceed to replace only after
receiving written agreement from ACA. The cost of replacement is chargeable to
ACA.
2.6.4 PERIOD OF HOLDING
Supplier is required to manufacture spare parts for a period of 10 years after
end of serial production. Supplier is authorized to keep this tooling for the
time necessary to carry out this obligation.
2.6.5 PAYMENT
The tooling will be paid by ACA after the acceptance of the first samples by the
quality department of ACA division concerned and after receiving the property
rights. These rights are identified by and contain the drawings, pictures and
identification of the tooling through the part number(s) with edition of the
products produced with the tooling. Only these tooling costs will be paid which
have been officially ordered by ACA.
2.6.6 LIFE TIME
The life time (in number of units of the product(s)) of the tooling has to be
confirmed by Supplier.
2.7 PRODUCT LIFE CYCLE
2.7.1 PILOT BATCH
Pilot batch products will be considered and produced as series production
products, i.e. manufactured at Supplier" series production line using series
production tooling. Deviations from this principle can only be allowed after
written approval from ACA.
Pilot batch products will be delivered at series product prices.
<PAGE>
2.7.2 PRODUCTION START-UP
The products will be available in all their variants at the moment of series
production start-up, in the quantities defined in the relevant delivery schedule
and/or according to agreements with the ACA order handling responsible.
2.7.3 SERIES PRODUCTION
The agreements and arrangements contained in this Supply Agreement apply to
their full extent as long as series production runs.
Exceptions to regular arrangements can only be allowed as far as defined in this
Agreement.
Series production deliveries must be guaranteed under the logistic system
established in this Agreement through the whole calendar year, since ACA does
not have a period of collective factory closure.
2.7.4 SERIES PRODUCTION PHASE-OUT
ACA undertakes to notify Supplier three months in advance of series production
phase-out due to change of compressor model or compressor end-of-lifetime.
In such case ACA does not bear any costs of overstock of complete products or
material.
In case the notification of phase-out is shorter than three months, then ACA
will accept charges for material and/or complete products to a maximum amount of
1 000 000 BEC, provided it can be proven that the overstock was due to short
notification.
2.7.5 SPARE PART PRODUCTION & END OF LIFE CYCLE
Time of availability of products and spare parts for the products under this
Agreement, after series production phase-out and during the ACA spare part
period, is defined in part 1.4.3 of this Agreement.
Supplier will notify ACA at least three months in advance in case Supplier plans
production phase-out of the products during the spare part period.
In such case, Supplier will make available to ACA replacement product(s) and/or
spare parts to the product(s) which are functionally identical as well as
interchangeable.
<PAGE>
2.8 PURCHASE DOCUMENT
Procedures and routines outlined in documents which are not contained within the
agreement but to which this part refers, are to be considered binding to the
same extent as the agreement.
ACA reserves the right to amend and modify the procedures and requirements
stated in this part: Practical Arrangements.
<PAGE>
3. ADDENDUM 1: LIST OF TOOLING
<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C> <C>
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</TABLE>
-----------------------------------------------------------------------
SELLING AND MANUFACTURING LICENSE AGREEMENT
NO. BMEI 97-A-102
-------------------------------------------------------------------------
* * * * * *
This Agreement is made and entered into this 11th day of July, 1997
by and between
PRIMA INDUSTRIES S.p.A., a corporation organized and existing under the laws of
Italy, having its offices at Via Antonelli 32, 10097 Regina Margherita di
Collegno (TO), Italy (hereafter called "Licensor")
And
Beijing Machinery and Electricity Institute, an institute organized and existing
under the laws of China, having its principal office at No. 4 Gong Ti Bei Lu,
100027, Chao Yang District, Beijing, China (hereinafter called "Licensee")
WHEREAS, Licensor in the course of years of developing and designing
the most advanced laser cutting machines and robots with specific electronic
controls of quality recognized all over the world, has acquired and is
continuing to develop particular skills and technical know-how in this field
through a staff of engineers capable of developing and designing such products
and of rendering assistance to Licensee in his manufacture of such products.
WHEREAS, Licensee desires to obtain, and Licensor is willing to grant
to Licensee, a license to manufacture and sell the Licensed Products as
hereinafter defined. It is therefore mutually agreed by each of the Parties
hereto as follows:
ARTICLE 1
DEFINITIONS
For the purpose of this Agreement, the following terms shall have the following
meanings:
1.1 The AGREEMENT shall mean this Agreement and any exhibits attached
thereto and any amendments permitted under this Agreement.
1.2 The LICENSED PRODUCT shall mean the Laser Cutting Machines called
LASERWORK GOLD model 1530 (also briefly defined as LW1530) and their
ancillary and optional equipment of Licensor's design, which technical
specifications are described in the EXHIBIT A, here attached.
<PAGE>
1.3 The TERRITORY shall mean the countries as defined in article II in
which Licensee will have the non-exclusive, non-transferable,
non-divisible right to manufacture, use, sell and assist the Licensed
Product.
1.4 The LICENSED TECHNOLOGY shall mean Licensor's drawings of mechanical
parts, electric and pneumatic diagrams as well as other written
Technical Information, pertaining to items developed by the Licensor in
relation with the Licensed Product and as defined in EXHIBIT C here
enclosed, and all unwritten/oral technical information which are
transferred and communicated to Licensee in any occasion and
particularly during the Training Classes.
1.5 The LICENSED TRADEMARK means the trademark itself, the type of its
characters and its colors which can be used by Licensee under the
Agreement in the Territory of the Licensed Product.
ARTICLE II
SCOPE OF LICENSE AND ITS LICENSED PRODUCT
2.1 Licensor hereby grants to Licensee for the term of this Agreement the
not exclusive, non-transferable, non-divisible license under the
Licensed Technology for the manufacture, use, sale and assistance of
the Licensed Product including its Trademark within the Territory of
China.
2.2 Licensor grants to Licensee not to sell at lower license fee (see
ARTICLE IV) the LW1530 technology to another Chinese customer until the
schedule of EXHIBIT G is completed.
2.3 During the Agreement, Licensee and Licensor, in case of request of
Licensee, will agree for a common logo including the two logos and
Trademarks in equal evidence and dimension, in order to show the
existing cooperation.
ARTICLE III
TECHNICAL ASSISTANCE
3.1 Licensor will permit to Licensee to send its engineers to Licensor's
premises where such engineers will be granted access to the Licensed
Technology, as Licensor and Licensee deem necessary and appropriate.
Licensor further agrees to give to Licensee's engineers technical
training through Technical Classes and explanation of Technical
Information (documentation), part at Licensor's premises and part at
Licensee's premises. The total maximum time length of the training
classes will be according to EXHIBIT B. Travel and living expenses of
Licensee's personnel in Italy will be at Licensee's charge. Travel and
living expenses of Licensor's personnel in China will be at Licensor's
charge.
<PAGE>
3.2 The Licensee may require from Licensor further technical assistance for
engineering, manufacturing, installation, setting up, service and
marketing of the Licensed Product in the Territory. The request must
reach the Licensor with adequate notice and he shall supply such
assistance within reasonable time, completely at Licensee's charge.
Consequently, the Licensee will issue a purchase order for such
assistance according to the conditions currently used by the Licensor
at that time. For further technical assistance provided in addition to
EXHIBIT B training, agreed conditions are [ * ] /per actual working day
plus travel and living expenses of Licensor's personnel.
3.3 During the term of this Agreement, the Licensor will timely transfer to
the Licensee possible updating of the Technical Information, showing
improvements and modifications and further development of the Licensed
Product. Reciprocally, modifications, improvements and further
developments of the Licensed Product made by the Licensee will be
timely transferred to the Licensor. These transfers will be [ * ]
charge, except cost of the transfer.
3.4 The Licensor grant to Licensee that the Licensed Technology is
complete, accurate and workable.
ARTICLE IV
PRICE OF THE LICENSE
The Licensee shall pay to the Licensor the following sums related to the
following items:
4.1 The license fee, for the transfer of the Licensed Technology and for
granting the manufacturing and selling rights of the Licensed Product
with its Trademark. The License Fee is divided into two items:
front payment and running royalties.
4.1.1 The front payment is split in two installments:
Front payment related to the LW1530 and to the licensed ancillary and
optional equipment (see EXHIBIT A): [ * ]
4.1.2 The running royalties for model LW1530:
[ * ]
Royalties will apply to all units of the Licensed Product
delivered by the Licensee during the terms of the Agreement
within the Territory.
4.2 The training classes and documentation as set forth in item 3.1 hereof.
The following prices must be considered splitted as follows:
(arrow appears here.)[ * ] for the training classes;
(arrow appears here.)[ * ] for the documentation.
Training classes and documentation for the model LW1530:
[ * ]
<PAGE>
ARTICLE V
PAYMENT TERMS OF THE LICENSE FEES
5.1 Front payment related to the model LW1530, according to item 4.1.1,
4.2, hereof, shall be paid to Licensor in the following way:
(arrow appeears here.)[ * ] down payment, by telegraphic transfers,
within 15 (fifteen) days after the execution of the Agreement, it is:
[ * ]
(arrow appears here.)[ * ], by letter of credit, against the shipping
document of technical documentation:
[ * ]
5.2 The sum related the training classes and documentation for the model
LW1530, subject to the provisions of item 4.2 hereof, shall be paid by
Letter of Credit within 15 (fifteen)days after completion of the
training classes in Italy, in a single installment, i.e.: [ * ]
5.3 The running royalties, as per item 4.1.2 hereof, will be paid by
telegraphic transfer not later than January 31, of the following year
on all the units of Licensed Product invoiced during the previous year.
The payment will be accompanied by a clear breakdown, with a complete
name and address of the customers who received the machines and their
invoicing dates.
ARTICLE VI
ORDER FOR BASIC KITS
6.1 In conjunction with the execution of this Agreement, the Licensee will
pass to Licensor a formal purchase order for one basic LW1530 kit,
which will be delivered and invoiced by Licensor to Licensee at the end
of the training classes.
The purchase order is based on Licensor's price as in EXHIBIT D.
The Licensee will also issue a formal purchase order for further 2
(two) basic LW1530 kits, according to the scheduled of EXHIBIT G and
the price of EXHIBIT D.
The purchase contract of the Kits will be signed separately.
ARTICLE VII
TRAINING CLASSES
7.1 The training classes are described in EXHIBIT B.
<PAGE>
Their purpose is to transfer and explain the Licensee's engineers and
specialized workers the Licensed Technology as defined at item 1.4
hereof, in order to make them capable of manufacturing and of selling
the Licensed Product.
7.2 During the training, the basic kit purchased by the Licensee, according
to item 6.1. Hereof, will be assembled and tested by Licensee's
engineers under the supervision of Licensor's personnel.
7.3 The training classes related to the model LW1530 will start 2 (two)
months after the execution of this Agreement.
ARTICLE VIII
TERM OF AGREEMENT
8.1 This Agreement shall become effective upon the date of the signature,
subject to the approval by the final agency of the Licensee Government,
and it will have duration of 5 (five) years.
8.2 Licensee will be bound to consider confidential all information on
Licensed Technology and Licensed Product for the term of the Agreement.
8.3 Licensor may, on 90 (ninety) days prior written notice, given to
Licensee at any time during the term of this Agreement, terminate this
Agreement, if Licensee commits any material breach of his obligation
hereunder.
8.4 Licensee may terminate this Agreement, through a 90 (ninety) days prior
written notice given to Licensor at any time during the term of this
Agreement, if Licensor commits a material breach of any of his
obligation under this Agreement.
8.5 For the purpose of this article, the 90 day period shall commence from
the date the notice is received by Licensor or Licensee, as the case
may be, and such notice shall contain a statement setting forth the
reasons for canceling the Agreement. The Party receiving the said
notice may, within said 90 day period, remedy such breach or other
basis for terminating the Agreement as stated in said notice, in which
event termination will not become effective.
8.6 This Agreement shall terminate immediately and without any prior
written notice if Licensor or Licensee becomes insolvent or bankrupt or
enter into or becomes involved in a similar proceeding.
8.7 In the above cases of "forced termination" as of items 8.3, 8.4 and
8.6, if the termination is caused by default of the Licensor, he will
lose his right to receive the remaining license fee. If the termination
is caused by default of the Licensee, he will lose immediately the
rights granted with this Agreement.
<PAGE>
ARTICLE IX
COOPERATION BETWEEN THE PARTIES
9.1 During the term of this Agreement, Licensee agrees to buy from
Licensor, who agrees to sell, the CNC control of the Licensed Product,
PRIMACH-L, as defined in EXHIBIT E.
The price of this unit, ex-works the Licensor's plant, is agreed for:
[ * ]
9.2 During the term of this Agreement, Licensee agrees to buy from
Licensor, who agrees to sell, the Z/F axes group including the cutting
head, as defined in EXHIBIT F.
The price for this unit, ex-works the Licensor's plant, is agreed for:
[ * ]
ARTICLE X
INDUSTRIAL PROPERTY RIGHTS
10.1 To the best of Licensor's knowledge and belief, the manufacture and use
of the Licensed Product does not infringe rights of others in the
Territory. In the event of any suit against Licensee related to the
Licensed Product, Licensor will cooperate with its best capabilities in
defending Licensee or otherwise dealing with such suit.
10.2 Licensor shall guarantee the Licensor owns the industrial property
right of Licensed Product. Licensor shall be responsible for any loss
and dispute occurred from possible infringe of others rights in the
Territory due to this industrial property.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Neither this Agreement nor any rights or obligation hereunder may be
transferred or assigned by the Licensee to any third Party without
prior written consent of the Licensor.
11.2 All the Licensed Products and their optional of Licensee's design shall
be a joint trademark of the Parties hereto, with both names in equal
evidence. Furthermore each Licensed Product manufactured by the
Licensee shall bear a plate in both Chinese and English languages with
a description to the effect that the product is manufactured by the
Licensee under license of "Prima Industrie S.P.A-Torino, Italy".
11.3 The Licensor and the Licensee mutually agree, under this Agreement, to
protect all information reciprocally exchanged for the purpose of this
Agreement including license Price. However, the Licensee may disclose
such information to any of its contractors or
<PAGE>
sub-contractors as long as the contractor or sub-contractor will
undertake with the Licensee to protect such information in the same
manner as established herein.
11.4 All notices to be given under or with respect to this Agreement shall
be given in writing and in English language.
11.5 All headings herein are inserted for convenience of reference only and
shall not affect the interpretation of the Agreement in any manner.
11.6 This Agreement totally supersedes and makes null and void all the
previous written and oral Agreements and it is intended as the final
and complete expression of the will of the Parties with respect to the
subject matter hereof. It shall not be modified or amended except in
writing signed by duly authorized Officer of each Party hereto.
11.7 The obligations of the Parties hereto shall be subject to all laws and
regulations, both present and future, of any government having
jurisdictions over one of the Parties hereto and to war, acts of God,
strikes, or other labour disturbance, fires, floods, earthquakes, and
any causes beyond the control of the Parties. The Parties hereto shall
also be excused from any failure to perform any obligation hereunder to
the extent of such failure is caused by any such law, regulation or
contingency.
11.8 In the event that any dispute or controversy should arise between the
Parties relating to or in connection with the performance of this
Agreement or any breach thereof, the Parties thereto shall use their
best efforts to settle the same amicably. Failing an amicable
settlement, the matter shall be finally settled pursuant to the Rules
of Conciliation and Arbitration of the International Chamber of
Commerce by three arbitrators appointed in accordance with the Rules.
The parties agree that the place of arbitration shall be London, UK.
The decision of the arbitrators pursuant to this section and rules
shall be final and binding upon the Parties and the expense of such
arbitration shall be born according to the decision of the arbitrators.
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be
executed by its duly authorized representative in English language and in
duplicate originals as of the day and year first above set forth.
PRIMA INDUSTRIE S.p.A. BEIJING MACHINERY AND
ELECTRICITY INSTITUTE
- ----------------------------------- ------------------------------------
<PAGE>
---------------------------
LIST OF EXHIBITS
---------------------------
*****
EXHIBIT A - The Licensed Product
EXHIBIT B - Training Program
EXHIBIT C - Technical Information
EXHIBIT D - Quotation for one kit of LASERWORK GOLD 1530
EXHIBIT E - PRIMACH-L, CNC control
EXHIBIT F - Z/F axes group and cutting head
EXHIBIT G - Schedule for further purchase orders
<PAGE>
------------------
EXHIBIT A
------------------
1. THE LICENSED PRODUCT
o LASERWORK GOLD 1530
o PALLET EXCHANGER
o SHEET LOADER
o ROTARY AXIS
NOTES:
1. Licensee will manufacture:
- machine structure;
- X/Y carriages;
- electromechanics/pneumatic subassemblies;
- optical chain;
- main options.
2. Licensee will purchase
- Z/F axes group with cutting head (from PRIMA)
- PRIMACH controller (from PRIMA)
- laser generator
- chiller, air filter
3. Licensee will take care of:
- machine assembly and wiring
- machine commissioning and testing
- machine installation
- customer training
- after sale service
<PAGE>
2. TECHNICAL DESCRIPTION OF THE LICENSED PRODUCT
INTRODUCTION
The most important and innovative features which make the difference between the
LASERWORK GOLD from the previous LASERWORK versions are the following:
1. The LASERWORK GOLD head allows an independent programmable adjustment
both of focus (focal point position) and of the stand-off (the distance
between the nozzle and the workpiece). This is possible thanks to a
real CNC controlled axis which runs the lens movement (F axis).
In this way it is possible:
o to cut any material, even having a certain thickness, without
any intervention of the machine operator;
o to program in advance all the parameters necessary to cut
every material, for the easy and safe use of the machine, even
without the intervention of highly skilled personnel
o to accurately check the cutting process in all the working
volume;
2. The LASERWORK GOLD head allows a very fast substitution of the focusing
lens (from focal 5" to focal 7.5") without any subsequent adjustment.
The lenses are centred once, i.e. when they are positioned in the
machine, and they can be substituted, whenever necessary, with a
"drawer type" system having safety interlocks.
3. The LASERWORK GOLD head is equipped with a capacitive sensor which is
able to automatically find the right position of the workpiece. A
sliding pad (contacting sensor) is available as an option to process
non-conductive materials. The sliding pad may also be charge to press
against the workpiece and allow, for example, the multilayer cutting.
4. The LASERWORK GOLD protective cabin (option) has been completely
redesigned with the following features:
o front sliding opening and movable door for the total side
accessibility.
o Lateral "bellow" opening for the total accessibility on the
other machine side.
The shape of this cabin (which can be completely opened either in the
front door direction or at the end of the machine) together with the
right side of the machine lower than the process pallet, allows the
best possible accessibility to the process for the manual
loading/unloading of the pieces and for maintenance and/or inspection.
<PAGE>
Moreover, many machine components have been furtherly developed and engineered:
o dynamic and accuracy are further improved (new main chariot simplified
with movement through high precision ball screw)
o restyling of the mobile fumes and scraps collector grants higher
efficiency against a lower consumption o better performance also of
pallet exchanger driving system due to its re-design (for machine
equipped with pallet exchanger option)
o big simplification of the water canalization, collecting, filtering and
re-circulating system for the water assisted cutting (cool-cut option).
<PAGE>
A THE BASIC MACHINE
A.1 LASER CUTTING OF MACHINE, MODEL LW 1530 GOLD
A.1.01 MACHINE DESCRIPTION
The features of the LASERWORK machine are the following:
o The machine is a three numerically controlled axes moving with
the following strokes:
X=3050mm
Y=1525mm
Z=150mm
The actual Z travel depends from the focal length being used.
The LASERWORK GOLD head allows the independent programmable
adjustment of the focal point position and of the stand-off
thanks to another numerically controlled axis (F) parallel to
Z.
o All movements are performed by the laser head (FLYING OPTICS).
The workpiece remains stationary during cutting.
o The system has been specially conceived and designed for laser
cutting and welding flat metal and/or plastic parts. The
workpiece (i.e. sheet metal, etc.) is positioned on a pallet
which is locked in position during laser cutting and can roll
longitudinally backwards alongside the machine when manually
pushed thus making it very accessible during loading/unloading
operations.
o The machine is equipped with a N/C smoke and scrap collector.
This device continuously follows the laser head. In this way
the smoke and dust suction becomes very efficient, minimizing
the required air-flow.
o X axis is driven by precision rack and pinion system as well
as Y, Z and F are driven by precision ball screw, using
backlash-free gear-boxes and AC brushless motor.
o The structure of the machine is modular. Optional features can
be retrofitted as wanted:
[ ] a pallet changer, an automatic plate loading device
and an automatic unloading and sorting unit are
optionally available for handling parts in production
environments;
<PAGE>
[ ] when necessary, workpieces can be machined mounting
and clamping them in a N/C rotary indexer,
(optionally available) which can be operated at the
front of the machine;
o The beam delivery system includes mirrors and lenses
adequately protected by clean and dry air into an hermetically
closed and over pressurized environment. Mirrors can be
removed for cleaning or replacement and can be easily set-out
again in identical position.
o The focusing lens, easy to re-set towards the workpiece
surface, is cooled with a suitable solution adequate for beam
power up to 3.5KW. Lenses with various focal length are
available.
The lens of 5" and 7.5" are included in the basic supply.
o Air dryer and filter are integrated with the machine. (Air
compressor may be supplied on request.)
o The NUMERICAL CONTROL system PRIMACH-L is developed and
manufactured by PRIMA ELECTRONICS, a Company of PRIMA
INDUSTRIE Group. Its main features are:
[ ] integration into a single box (made according to IP54
protection level) with all man-machine interface and
Input/Output devices
[ ] MOTOROLA 32 BIT Multiprocessor architecture with extremely
high performance
[ ] VME buss compatible
[ ] VGA colour screen
[ ] hard disk 425 Mbyte
[ ] interface card operator/PC (INTEL 486)
[ ] WINDOWS(TM) environment
[ ] menu for man/machine communication for programming,
monitoring, machine parameter setting, laser and cutting
programs
[ ] complete integration with laser generation
[ ] programming in G Codes
[ ] scale factors
<PAGE>
[ ] tool radius compensation
[ ] interpolation: linear, circular
[ ] fly capabilities
[ ] integration
[ ] 5" floppy drive
[ ] possibility of out-of-line programming (CAD/CAM) by PICAM.
o The machine is equipped with a control box for distribution of
water, gas, compressed air.
o The electric and electromechanic circuitry as well as the
power amplifiers of servomotors are completely integrated with
the machine structure.
o The prescribed stand-off of nozzle tip is kept constant by a
capacitive head which moves on the part-piece surface.
o The focus depth is automatically controlled by CNC.
o The machine has been designed keeping its right shoulder at
the same level of the part piece. In this way the parts on the
pallet are perfectly accessible not only from both ends of the
pallet but also on its complete right side. Of course
accessibility becomes perfect when using the automatic pallet
changer which is optionally available.
o The machine is easily and quickly installed. No foundation is
necessary (unless in presence of strong vibrations). The
machine stands on 4 pads only. Unlike machines of other
manufacturers, LW 1530 GOLD is aligned and leveled in a few
minutes. In case of floor dislocation the machine can be
aligned and leveled again in a few minutes. This is made
possible by the very sturdy machine structure and a propriety
design of the machine pads.
A.1.02 LASER GENERATOR AND WATER CHILLER
LW 1530 GOLD can be equipped with different laser generators and water
chillers having different features and power.
A.1.03 HIGH PRESSURE CUT SYSTEM
The basic machine provides a high pressure HIGH PRESSURE CUT kit. Such
a device is used for cutting stainless steel using Nitrogen or other
covering gas to
<PAGE>
reduce oxidization along the cutting edge. The device consists of a
system for distributing gas to the cutting area, a lens with the
appropriate focal length and thickness and an analogue display of
pressure. The change of type gas and its setting at the right pressure
is made automatically according to part-program. Any workpieces
requiring subsequent welding will not need dressing before processing
if cut with HIGH PRESSURE CUT SYSTEM.
<PAGE>
B. OPTIONS
B.01 AUTOMATIC PALLET EXCHANGE PA-TYPE (including no.1 pallet)
An automatic pallet changer unit is used to minimize non-productive
time and to improve productivity. Pallets are moved horizontally
between the working position and the changer unit. Two pallets are
placed one on top of the other inside the changing unit. A hoisting
device positions the pallet, which holds the new plate to be processed,
to the required work level and then the pallet is moved horizontally in
the working area.
Max electrical consumption: 2KW (2.2kVA).
A two-level photoelectric cell for safety is supplied which the
automatic pallet exchange type both in the version with sheet loader
and without sheet loader.
They must comply with the C.E. (Europe) and CDRH (USA) rules.
B.02 SHEET LOADER
Capacity 650kg with No. 2 automatic clamps
B.03 N/C SELF-CENTERING ROTARY AXIS
Its maximum diameter measures 300mm while its passing hole diameter
150mm. Software is included
Max electrical consumption: 1KW (1.1kVA)
B.04 TAILSTOCK FOR THE N/C ROTARY AXIS
B.05 LUNETTE FOR THE N/C ROTARY AXIS
<PAGE>
------------------
EXHIBIT B
------------------
TRAINING
1. ENGINEERING TRAINING 1 week in Italy
2. MANUFACTURING/ASSEMBLY TRAINING 2 weeks in Italy
3. COMMISSIONING/TESTING TRAINING 2 weeks in Italy
4. USE AND PROGRAMMING TRAINING 1 week in Italy
1 week in China
5. SERVICE TRAINING 1 week in Italy
1 week in China
6. MARKETING TRAINING 1 week in China
NOTE: Trainings will be made in English language.
<PAGE>
------------------
EXHIBIT C
------------------
TECHNICAL INFORMATION OF LICENSED PRODUCT
1. MECHANICAL DRAWING INCLUDING PRODUCTION DRAWING OF COMPONENTS PROVIDED
IN PRIMA INDUSTRIE FACTORY
2. ELECTRICAL DRAWINGS
3. DESIGN DOCUMENTS FOR MACHINE
4. CNC & CAD/CAM DOCUMENTS
5. PROCEDURES FOR ASSEMBLY, COMMISSIONING, INSTALLATION, ACCEPTANCE
6. PRODUCTION DATA BASE
7. BILL OF MATERIAL OF PURCHASED PARTS (SPECS., VENDORS, PRICES, ETC.)
8. PLC PROGRAMS
9. CUTTING APPLICATION INFORMATION
10. MISCELLANEOUS (PACKING, TRANSPORTATION, SPARES LISTS, ETC.)
11. TIPS DRAWINGS
NOTE 1:
o Technical documentation will be in English language
o Drawings will be supplied in CAD formats
NOTE 2:
The following items are excluded:
o Z/F axes group with cutting head
o PRIMACH-L controller
o Laser generator
o Chiller, air filter
<PAGE>
------------------
EXHIBIT D
------------------
PRICE FOR PRIMA NC LASER CUTTING SYSTEM KIT
LW GOLD 1530
ITEM DESCRIPTION PRICE (USD)
A. LASER CUTTING MACHINE BASIC KIT LW GOLD 1530 - DISASSEMBLED BASIC
MACHINE
No. of NC axes 3 (X, Y, Z) + 2 (F,V)
strokes: X 3050mm
Y 1525mm
Z 150mm
No. of axes CNC controlled: 5 (including focusing axis and collector)
Independent and programmable check of the focusing position and of the
nozzle/piece distance Automatic adjustment of focusing position (F
axis) CNC PRIMACH-L CNC collector for smokes, scraps, water (when
installed), small pieces (V axis) Focusing head with 5" lens (9mm
thickness) and capacitive sensor Additional lens 7.5" (thickness 9mm)
and lens holder High pressure kit and gas switching Air dryer and
filters No. 1 pallet with No. 2 manual clamps and No. 1 reference hook
======================================================= [ * ]
B. SALES CONDITIONS
B.1 PAYMENT TERMS
*[ * ] at order by telegraphic transfers [ * ]
*[ * ] by Letter of Credit against shipment documents [ * ]
all Bank charges will be borne by customer
The Letter of Credit should specify the following items:
a) L/C to be opened and to be advised to PRIMA INDUSTRIE
by telex or fax
b) Documentation to be presented to Bank for L/C
negotiation within 30 days as from date of issuance
of transport documents.
B.2 DELIVERY
Ex-works PRIMA INDUSTRIE, Collegno (TO), Italy (INCOTERMS 1990)
<PAGE>
LASERWORK GOLD 1530 - BASIC KIT COMPONENTS
- Disassembled fixed structure of the machine
- Assembled "x" carriage with its specific wiring
- Assembled "y" carriage with its specific wiring
- Assembled "z/f" group including 5" lens kit and capacitive sensor
- Disassembled beam delivery system
- Mirrors
- 7.5" lens kit
- Pneumatics panel
- Pneumatical connections kit
- Disassembled "v" carriage for scraps and smokes collection
- Gases panel
- Gases connections kit
- Wiring connection kit
- Electromechanic panel
- CNC including cabinet
- Machine plates for logos, names, safety indications, etc.
- Kit of all the other unit components used in connections
NOTE: The above components are ALL the components of a COMPLETE LW1530
BASIC MACHINE, as per EXHIBIT D page 1/2.
<PAGE>
<TABLE>
<CAPTION>
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EXHIBIT E
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CONFIGURATION FOR LASERWORK GOLD PRIMACH-L
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MECHANICAL ENCLOSURE
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<S> <C>
Degree of protection [ * ]
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Dimensions (height x width x depth) (650 x 650 x 635)mm
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Weight 80 Kg
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Cooling system [ * ]
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Operating temperature 0 [ * ]
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Electrical supply [ * ]
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Servodrives Contained in a separate electromechanical and power unit
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BASIC CONTROL UNIT
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Architecture [ * ]
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Control boards power supply [ * ]
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Man Machine Interface Unit [ * ]
M4-VME
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Main CPU M3 [ * ]
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Auxiliary CPU M2 [ * ]
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Axis control board CPU MI [ * ]
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Digital I/O 32+32 [ * ]
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Technological Interface INTEC [ * ]
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PLC Board [ * ]
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONFIGURATION FOR LASERWORK GOLD PRIMACH-L
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CONTROL UNIT MAIN FEATURES
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<S> <C>
Number of controlled axes [ * ]
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Programming - Graphic, through CAD workstation and post-processor
- Off-line, through Personal Computer or NC console
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Programming language [ * ]
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Operating modes - MANUAL: only manual movements
- PROG: creation, modification and test of part-programs
- PROD: continuous automatic execution of part-programs
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Motion Control - Point-to-point in joint coordinates
- Linear interpolation in cartesian coordinates
- Circular interpolation in cartesian coordinates
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Linking Trajectories (FLY) Different trajectories can be linked to create a smoother trajectory
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Special Features - Rototranslation of part-programs
- Scaling factors
- Tool radius compensation
- Absolute or incremental movements
- Mirror: mirror-execution of part programs with respect to a
selected axis
- Measuring functions
- Projection or "glueing" of 2D figures on a cylinder
- Automatic scrap-collector tracking control
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Integrated management of technologies [ * ]
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Monitoring - All programs variables, as well as digital and analog I/O scans can be
monitored in graphic mode on the NC console
- Tool path display
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Networking Standard Ethernet board optionally available
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</TABLE>
<PAGE>
------------------
EXHIBIT F
------------------
DIAGRAM
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in the Registration Statement and Prospectus of The
PRIMA Group International, Inc. of our report dated December 18, 1997,
accompanying the financial statements of The PRIMA Group International, Inc.
and our report dated October 7, 1997, accompanying the consolidated financial
statements of Prima Industrie S.p.A. contained in such Registration Statement,
and to the use of our name and the statements with respect to us, as appearing
under the headings "Experts" and "Selected Financial Data" in the Prospectus.
Hein + Associates LLP
Denver, Colorado
December 18, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997
<PERIOD-END> DEC-31-1997 SEP-30-1997
<CASH> 585 216
<SECURITIES> 0 0
<RECEIVABLES> 21,670 17,051
<ALLOWANCES> 426 350
<INVENTORY> 7,949 8,548
<CURRENT-ASSETS> 33,777 29,298
<PP&E> 7,612 7,011
<DEPRECIATION> 5,966 5,668
<TOTAL-ASSETS> 36,352 31,819
<CURRENT-LIABILITIES> 27,457 23,709
<BONDS> 0 0
0 0
0 0
<COMMON> 27 27
<OTHER-SE> 4,717 4,087
<TOTAL-LIABILITY-AND-EQUITY> 36,352 31,819
<SALES> 41,108 29,688
<TOTAL-REVENUES> 42,315 30,029
<CGS> 34,357 24,353
<TOTAL-COSTS> 40,904 29,355
<OTHER-EXPENSES> 391 46
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,375 855
<INCOME-PRETAX> 1,737 86
<INCOME-TAX> 189 243
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,335 (358)
<EPS-PRIMARY> .44 (.12)
<EPS-DILUTED> 0 0
</TABLE>
