<PAGE>
As filed with the Securities and Exchange Commission on October 4, 1999
Registration No. 333-86821
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
Under The Securities Act of 1933
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RUDOLPH TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
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Delaware 3823 22-1628009
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
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Rudolph Technologies, Inc.
One Rudolph Road
Flanders, NJ 07836
(973) 691-1300
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------
PAUL F. MCLAUGHLIN
President
Rudolph Technologies, Inc.
One Rudolph Road
Flanders, NJ 07836
(973) 691-1300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
HENRY P. MASSEY, JR. PETER B. TARR
TREVOR J. CHAPLICK JOHN M. WESTCOTT, JR.
Wilson Sonsini Goodrich & Rosati Hale and Dorr LLP
Professional Corporation 60 State Street
650 Page Mill Road Boston, MA 02109
Palo Alto, CA 94304 (617) 526-6000
(650) 493-9300 ------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 4, 1999
[Logo]
4,800,000 Shares
Common Stock
We are offering 4,800,000 shares of our common stock. This is our initial
public offering and no public market currently exists for our shares. We have
applied to have our common stock quoted on The Nasdaq National Market under the
symbol "RTEC." We anticipate that the initial public offering price will be
between $12 and $14 per share.
--------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 5.
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<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public offering price........................................... $ $
Underwriting discounts and commissions.......................... $ $
Proceeds to Rudolph Technologies, Inc. ......................... $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
We have granted the underwriters a 30-day option to purchase up to an
additional 720,000 shares of common stock to cover over-allotments. BancBoston
Robertson Stephens expects to deliver the sharesof common stock to purchasers
on , 1999.
--------------
BancBoston Robertson Stephens
Bear, Stearns & Co. Inc.
CIBC World Markets
The date of this prospectus is , 1999.
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock. In this prospectus, "Rudolph
Technologies," "we," "us," and "our" refer to Rudolph Technologies, Inc., a
Delaware corporation.
Until , 1999, all dealers that buy, sell or trade our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This requirement is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotment or subscription.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 20
Selected Financial Data.................................................. 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 23
Business................................................................. 34
Management............................................................... 48
Certain Relationships and Related Transactions........................... 55
Principal Stockholders................................................... 59
Description of Capital Stock............................................. 61
Shares Eligible for Future Sale.......................................... 63
Underwriting............................................................. 64
Legal Matters............................................................ 66
Experts.................................................................. 66
Where You Can Find More Information...................................... 66
Index to Financial Statements............................................ F-1
</TABLE>
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Rudolph Technologies, Inc. and the names of our systems are trademarks or
tradenames of Rudolph Technologies, Inc. This prospectus also contains
trademarks and tradenames of other companies.
i
<PAGE>
PROSPECTUS SUMMARY
The following summary highlights information which we present more fully
elsewhere in this prospectus. You should read the entire prospectus carefully.
This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of factors described
under the heading "Risk Factors" and elsewhere in this prospectus.
Our Business
Rudolph Technologies, Inc. is a worldwide leader in the design,
development, manufacture and support of high-performance process control
metrology systems used in semiconductor device manufacturing. Our proprietary
systems measure the thickness and other properties of thin films applied during
various steps in the manufacture of integrated circuits. We provide our
customers with a full-fab metrology solution by offering families of systems
that meet their transparent and opaque thin film measurement needs in various
applications across the semiconductor fabrication process.
Process control metrology is used by semiconductor device manufacturers to
analyze product and process quality at critical steps in the integrated circuit
manufacturing process in order to identify, diagnose and minimize fabrication
defects. The semiconductor device manufacturing industry is experiencing
several trends that are increasing the demand for process control metrology
systems and heightening the need for metrology technology that can deliver a
higher degree of accuracy and repeatability. These industry trends include:
. transition to copper as the material of choice for creating the
circuitry, or interconnect, to link the components of an integrated
circuit;
. development of thinner line widths and spaces, or feature sizes, on
integrated circuits;
. migration to larger 300 millimeter diameter wafers;
. introduction of new manufacturing process steps, including chemical
mechanical planarization;
. transition to new insulating layers, or dielectrics; and
. shortening of semiconductor device product life cycles.
Our objective is to be the premier worldwide provider of thin film
metrology systems to semiconductor device manufacturers. To extend our
technology leadership position, we intend to continue our commitment to
research and development. We also intend to capitalize on our technical
heritage in thin film measurement to expand our relationships with existing
customers and to continue to develop complementary metrology applications. In
addition, we plan to focus our resources on understanding the needs of leading
semiconductor device manufacturers in order to position ourselves as the system
of choice when manufacturers upgrade their fabrication techniques in response
to advances in semiconductor technology.
Since 1940, our technological leadership has earned us a reputation for
metrology excellence, and we believe that we have the largest installed base of
the traditional metrology tools known as ellipsometers in the world. We
maintain sales, service or applications offices throughout the world, including
in California, New Jersey, Texas, Germany, Holland, Ireland, Israel, Korea and
Taiwan. Our customers include most major semiconductor device manufacturers
worldwide, including Intel, AMD, Chartered Semiconductor, Fujitsu, Hyundai,
IBM, Lucent, Philips, Samsung, ST Microelectronics, Texas Instruments, TSMC,
Toshiba and UMC. For the past four years, we have received the top ranking
among our thin film metrology competitors in the annual VLSI Customer
Satisfaction Survey.
1
<PAGE>
The Reorganization
Prior to this offering we had two classes of common stock, Class A common
stock and Class B common stock, and two classes of preferred stock, Series A
preferred stock and Series B preferred stock. In addition, we owned our
predecessor through one of our subsidiaries. Immediately prior to the offering,
we will effect a 35.66-for-one split of our outstanding Class A common stock
and Class B common stock. Immediately following the stock split, all of our
Class A common stock and Class B common stock will be exchanged for shares of
one new class of common stock. In addition, we will merge our predecessor
company into our wholly-owned subsidiary which owned it prior to this offering.
Then we will merge that subsidiary into us.
We will use a substantial portion of the net proceeds of this offering to
repay all of our long term debt, including the indebtedness incurred in
connection with the acquisition of our predecessor, which amounts to
approximately $38.4 million including accrued interest. We will also use
approximately $7.0 million of the proceeds to redeem our outstanding shares of
Series A preferred stock and Series B preferred stock. See "Use of Proceeds"
and "Certain Relationships and Related Transactions."
Except where stated otherwise, all information in this prospectus (1)
reflects our authorization of 50,000,000 shares of a new, single class of
common stock and 5,000,000 shares of undesignated preferred stock, (2) reflects
a 35.66-for-one split of all classes of our outstanding common stock, (3)
reflects the exchange of each outstanding share of all classes of our common
stock for one share of the new single class of common stock, (4) reflects the
redemption for cash of each outstanding share of all series of our preferred
stock, (5) reflects the issuance of 2,039,460 shares of common stock upon the
exercise of warrants assuming an initial public offering price of $13.00, (6)
reflects the merger of two of our subsidiaries into us, and (7) assumes no
exercise of the underwriters' option to purchase additional shares. Our audited
financial statements included elsewhere in this prospectus are called
Consolidated Financial Statements because they were prepared prior to the
merger of our two subsidiaries into us.
The Offering
The calculation of the shares of common stock outstanding in the table
below is based on the number of shares outstanding as of July 31, 1999. The
number of shares of common stock to be outstanding after the offering excludes
(1) 693,951 shares of common stock underlying outstanding options granted under
our 1996 stock option plan, (2) 2,000,000 shares of common stock that have been
reserved for issuance under our 1999 stock plan and (3) 300,000 shares of
common stock that have been reserved for purchase by employees under our
employee stock purchase plan.
<TABLE>
<S> <C>
Common stock offered by Rudolph Technologies.... 4,800,000 shares
Common stock to be outstanding after the
offering...................................... 13,942,825 shares
Use of proceeds................................. Repayment of long term debt, including
loans made to finance the acquisition
of our predecessor company, redemption
of preferred stock, potential
acquisitions of technology or
businesses, working capital and
general corporate purposes
Proposed Nasdaq National Market symbol.......... RTEC
</TABLE>
2
<PAGE>
Summary Financial Data
(in thousands, except share and per share data)
The following summary financial data should be read in conjunction with our
Consolidated Financial Statements and the related Notes thereto appearing
elsewhere in this prospectus, "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." All
share and per share information has been restated for all periods presented to
reflect a 35.66-for-one stock split. This split is contingent upon the closing
of this offering.
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended June 30,
------------------------------ --------------------
Combined
1996 1997 1998 1998 1999
-------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $ 31,874 $35,339 $ 20,106 $11,872 $15,170
Cost of revenues (1).... 14,076 13,903 13,179 6,455 7,373
-------- --------- --------- --------- ---------
Gross profit............ 17,798 21,436 6,927 5,417 7,797
Operating expenses:
Research and
development.......... 4,162 5,750 5,096 2,688 2,097
In-process research
and development...... 3,821 -- -- -- --
Selling, general and
administrative....... 8,484 9,475 7,077 3,306 3,537
Write-down of
intangibles.......... 6,734 -- -- -- --
Amortization.......... 3,669 4,201 4,208 2,103 131
-------- --------- --------- --------- ---------
Total operating
expenses........... 26,870 19,426 16,381 8,097 5,765
-------- --------- --------- --------- ---------
Operating (loss)
income................. (9,072) 2,010 (9,454) (2,680) 2,032
Interest expense........ 2,068 3,717 4,210 2,135 2,148
Other income............ (182) (92) (199) (15) (29)
-------- --------- --------- --------- ---------
Loss before income
taxes.................. (10,958) (1,615) (13,465) (4,800) (87)
Provision (benefit) for
income taxes........... 143 (614) 613 (699) 93
-------- --------- --------- --------- ---------
Net loss................ (11,101) (1,001) (14,078) (4,101) (180)
Preferred stock
dividends.............. 239 468 507 247 269
-------- --------- --------- --------- ---------
Loss available to common
stockholders........... $(11,340) $ (1,469) $(14,585) $(4,348) $ (449)
======== ========= ========= ========= =========
Net loss per share
available to common
stockholders:
Basic................. $ (0.56) $ (3.24) $(1.66) $(0.07)
Diluted............... $ (0.56) $ (3.24) $(1.66) $(0.07)
Weighted average common
shares outstanding:
Basic................. 2,617,373 4,503,396 2,617,373 6,767,415
Diluted............... 2,617,373 4,503,396 2,617,373 6,767,415
Pro forma net loss per
share available to
common stockholders:
(2)
Basic................. $(2.23) $(0.93) $(0.05)
Diluted............... $(2.23) $(0.93) $(0.05)
Pro forma weighted
average common shares
outstanding: (2)
Basic................. 6,542,856 4,656,833 8,806,875
Diluted............... 6,542,856 4,656,833 8,806,875
Other Financial Data:
EBITA (3)............... $6,303 $(5,047) $(562) $2,192
EBITDA (3).............. 6,751 (4,269) (299) 2,466
Net cash used in
operating
activities........... (1,959) (6,872) (2,934) (550)
Net cash used in
investing
activities........... (586) (904) (508) (511)
Net cash provided by
financing
activities........... 1,200 8,000 3,400 1,043
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
December 31, June 30, 1999 June 30, 1999
---------------------------- ------------- -------------
Pro Forma
As
1996 1997 1998 Actual Adjusted(4)
-------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents........... $ 1,578 $ 189 $ 431 $ 412 $12,311
Working capital
(deficit)............. 4,262 3,134 (1,052) (279) 23,670
Total assets............ 27,013 28,513 21,121 22,924 34,823
Long-term debt, less
current portion....... 26,000 24,000 25,370 26,290 --
Accumulated deficit..... (15,192) (16,661) (31,246) (31,695) (32,182)
Total stockholders'
equity (deficit)...... (13,707) (15,327) (26,759) (27,053) 29,692
</TABLE>
- --------
(1) Our cost of revenues for the year ended December 31, 1998 includes a $1.4
million expense for the write-down of inventory to net realizable value.
(2) The pro forma share and per share data have been prepared assuming the pro
forma issuance of 2,039,460 shares of common stock upon the exercise of
warrants. This exercise is assumed to have occurred at our inception.
(3) "EBITA" is defined as income before provision for income taxes, interest
expense and amortization of intangibles. "EBITDA" is defined as income
before provision for income taxes, interest expense, depreciation and
amortization. EBITA and EBITDA are presented as supplemental information
and should not be considered as alternatives to net income or cash flow
from operating activities as indicators of our operating performance or
liquidity. We believe that EBITA and EBITDA are standard measures commonly
reported and widely used by analysts, investors and other interested
parties in the semiconductor capital equipment industry. However, EBITA and
EBITDA as presented herein may not be comparable to similarly titled
measures reported by other companies.
(4) The Pro Forma As Adjusted amounts give effect to: (1) the exchange of all
outstanding shares of our Class A common stock and Class B common stock for
7,103,365 shares of common stock; (2) the issuance of 2,039,460 shares of
common stock upon the exercise of warrants; and (3) the sale of 4.8 million
shares of common stock offered by us at an assumed initial public offering
price of $13.00 per share and the application of the estimated net proceeds
as set forth under "Use of Proceeds." The Pro Forma As Adjusted amounts
also reflect an increase in accumulated deficit of $487,000 for an
extraordinary loss related to the write-off of deferred financing costs due
to our repayment out of the proceeds of the offering of a senior term loan,
a subordinated term loan, a junior subordinated note and a senior revolving
term loan.
The statement of operations data set forth above as of and for the years
ended December 31, 1997 and 1998 and the six months ended June 30, 1999 were
derived from audited consolidated financial statements included elsewhere in
this prospectus. The combined 1996 statement of operations data represent a
combination, without adjustment, of the historical results of our predecessor
company for the period from January 1, 1996 to June 13, 1996 and our historical
results for the period from June 14, 1996 to December 31, 1996. The historical
results for each of the periods January 1, 1996 to June 13, 1996 and June 14,
1996 to December 31, 1996 were also derived from audited financial statements
included elsewhere in this prospectus.
We are presenting the combined historical results for the year ended
December 31, 1996 for convenience only, to assist investors in assessing our
underlying business trends. These combined results exclude the full year effect
of purchase accounting adjustments, specifically increased interest expense and
amortization of intangibles. In addition, the predecessor company had a lower
effective tax rate than we do because it was taxed as an S-corporation while we
are taxed as a C-corporation. Further, our results of operations for the period
from June 14, 1996 to December 31, 1996, which are a component of the combined
1996 results, include various non-recurring expenses including in-process
research and development and the write-down of intangibles. As a result, the
combined 1996 results of operations are not fully comparable to our historical
results of operations for periods after 1996.
4
<PAGE>
Our results of operations for the six months ended June 30, 1998 were
derived from our unaudited financial statements and in our opinion reflect and
include all adjustments consisting of normal recurring adjustments necessary
for a fair presentation of such data. Our results of operations data for the
six months ended June 30, 1999 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1999.
Our headquarters are located at One Rudolph Road, Flanders, New Jersey
07836 and our telephone number is (973) 691-1300.
5
<PAGE>
RISK FACTORS
You should carefully consider the risks described below in analyzing an
investment in our common stock. If any of the events described below occurs,
our business, financial condition and results of operations would likely
suffer, the trading price of our common stock could fall and you could lose all
or part of the money you paid for our common stock. This prospectus contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in the forward-looking
statements as a result of various factors, including those identified below as
well as those discussed elsewhere in this prospectus.
Risks Related to our Company
Cyclicality in the semiconductor device industry may from time to time lead to
substantial decreases in demand for our systems
Our operating results will be subject to significant variation due to the
cyclical nature of the semiconductor device industry. The semiconductor device
industry recently experienced a downturn which has seriously harmed our recent
operating results. Our business depends upon the capital expenditures of
semiconductor device manufacturers, which, in turn, depend upon the current and
anticipated market demand for semiconductors and products using semiconductors.
The semiconductor device industry is cyclical and has historically experienced
periodic downturns, which have often resulted in substantial decreases in the
semiconductor device industry's demand for capital equipment, including its
thin film metrology equipment. There is typically a six to twelve month lag
between a change in the economic condition of the semiconductor device industry
and the resulting change in the level of capital expenditures by semiconductor
device manufacturers. In most cases, the resulting decrease in capital
expenditures has been more pronounced than the precipitating downturn in
semiconductor device industry revenues. The semiconductor device industry
experienced downturns in 1998 and 1996, during which industry revenues declined
by an estimated 8.4% and 6.4% as reported by Dataquest. Our revenues decreased
from $35.3 million in 1997 to $20.1 million in 1998. Dataquest forecasts that
sales of semiconductor capital equipment will decrease by approximately 1.7% in
1999 as compared to 1998. Although there are indications that the semiconductor
device industry is recovering,
. the semiconductor device industry may not continue to improve;
. the semiconductor device industry may experience other, possibly more
severe and prolonged, downturns in the future; and
. any continued recovery of the semiconductor device industry may not
result in an increased demand by semiconductor device manufacturers for
capital equipment.
Any future downturn in the semiconductor device industry, or any failure of
that industry to fully recover from its recent downturn, will seriously harm
our business, financial condition and results of operations.
We have had significant net losses in the past, and we may have net losses in
the future
Prior to the second quarter of 1999, we had not reported net income since
our predecessor company was acquired by our management and a group of investors
in June 1996. We reported a net loss available to common stockholders for the
first half of 1999 of $0.4 million and for 1998 of $14.6 million. Because of a
recent downturn in the semiconductor device industry and a related downturn in
the semiconductor capital equipment industry, weak economic conditions in the
Asia Pacific region and other reasons, we expect to be only slightly
profitable, if profitable at all, at least through the fourth quarter of 1999,
and we cannot predict whether we will be able to achieve or sustain
profitability in any subsequent period.
6
<PAGE>
Our operating results have in the past varied and probably will in the future
continue to vary significantly from quarter to quarter, causing volatility in
our stock price
Our quarterly operating results have varied significantly in the past and
may continue to do so in the future, which could cause our stock price to
decline. Some of the factors that may influence our operating results and
subject our stock to extreme price and volume fluctuations include:
. customer demand for our systems, which is influenced by economic
conditions in the semiconductor device industry, demand for products
that use semiconductors, market acceptance of our systems and those of
our customers and changes in our product offerings;
. seasonal variations in customer demand, including the tendency of
European sales to slow significantly in the third quarter of each year;
. the timing, cancellation or delay of customer orders and shipments;
. the effects of competitive pressures, such as the introduction or
announcement of new products by our competitors, on the prices of our
systems and the level of discounts we grant to our customers;
. our failure to meet the performance estimates of securities analysts;
. fluctuations in the availability and cost of components, subassemblies
and production capacity;
. expenses incurred in connection with litigation;
. product development costs, including increased research, development,
engineering and marketing expenses associated with our introduction of
new products and product enhancements; and
. the levels of our fixed expenses, including research and development
costs associated with product development, relative to our revenue
levels.
During any quarter, a significant portion of our revenue may be derived
from the sale of a relatively small number of systems. Our transparent film
measurement systems range in price from approximately $200,000 to $1.0 million
per system and our opaque film measurement systems range in price from
approximately $900,000 to $1.6 million per system. Accordingly, a small change
in the number of systems we sell may also cause significant changes in our
operating results. The market price of our common stock may also fluctuate
significantly for reasons unrelated to our performance.
Variations in the amount of time it takes for us to sell our systems may cause
fluctuations in our operating results, which could cause our stock price to
decline
Variations in the length of our sales cycles could cause our revenue, and
thus our business, financial condition and operating results, to fluctuate
widely from period to period. This variation could cause our stock price to
decline. Our customers generally take a long time to evaluate our film
metrology systems and many people are involved in the evaluation process. We
expend significant resources educating and providing information to our
prospective customers regarding the uses and benefits of our systems in the
semiconductor fabrication process. The length of time it takes for us to make a
sale depends upon many factors, including:
. the efforts of our sales force and our independent sales representatives
and distributors;
. the complexity of the customer's fabrication processes;
. the internal technical capabilities and sophistication of the customer;
. the customer's budgetary constraints; and
. the quality and sophistication of the customer's current metrology
equipment.
Because of the number of factors influencing the sales process, the period
between our initial contact with a customer and the time when we recognize
revenue from that customer, if ever, varies widely in length. Our
7
<PAGE>
sales cycles, including the time it takes for us to build a product to customer
specifications after receiving an order, typically range from six to 15 months.
Sometimes our sales cycles can be much longer, particularly with customers in
Japan. During these cycles, we commit substantial resources to our sales
efforts in advance of receiving any revenue, and we may never receive any
revenue from a customer despite our sales efforts.
If we do make a sale, our customers often purchase only one of our systems,
and then evaluate its performance for a lengthy period before purchasing any
more of our systems. The number of additional products a customer purchases, if
any, depends on many factors, including a customer's capacity requirements. The
period between a customer's initial purchase and any subsequent purchases can
vary from six months to a year or longer, and variations in the length of this
period could cause further fluctuations in our operating results and possibly
in our stock price.
Our largest customers account for a significant portion of our revenues, and
our business and operating results could be harmed by the loss of one or more
of these customers or by reductions or delays in their purchases of our systems
Historically, a significant portion of our revenues in each quarter and
year has been derived from sales to relatively few customers, and we expect
this trend to continue. If any of our key customers were to purchase
significantly fewer of our systems in the future, or if a large order were
delayed, our revenues would significantly decline. In 1998 and in the six
months ended June 30, 1999, sales to customers that individually represented at
least five percent of our revenues accounted for 43.2% and 44.3% of our
revenues. In 1998, sales to Intel and Advanced Micro Devices accounted for
19.8% and 11.1% of our revenues. In the six months ended June 30, 1999, sales
to Intel accounted for 37.3% of our revenues. There are only a limited number
of mostly large companies operating in the highly concentrated, capital
intensive semiconductor device manufacturing industry. Accordingly, we expect
that we will continue to depend on a small number of large customers for a
significant portion of our revenues for the foreseeable future. In addition, as
large semiconductor device manufacturers seek to establish closer relationships
with their suppliers, we expect that our customer base will become even more
concentrated.
If we are not successful in developing new and enhanced products for the
semiconductor device manufacturing industry, or if our new products do not gain
general market acceptance, our business and operating results will be seriously
harmed
We operate in an industry that is subject to evolving industry standards,
rapid technological changes, rapid changes in consumer demands and the rapid
introduction of new, higher performance systems with shorter product life
cycles. Approximately 70% of our revenues in the first half of 1999 were
derived from the sale of systems that we did not begin selling until the first
quarter of 1997 or later. To be competitive in our demanding market, we must
continually design, develop and introduce in a timely manner new film metrology
systems that meet the performance and price demands of semiconductor device
manufacturers. We must also continue to refine our current systems so that they
remain competitive.
Metrology product development is inherently risky because it is difficult
to foresee developments in semiconductor device manufacturing technology,
coordinate technical personnel and identify and eliminate metrology system
design flaws. We are developing our Matrix Metrology systems, which are thin
film metrology systems specifically designed for use in the CMP, etch,
diffusion and other portions of the semiconductor device manufacturing process
where we do not currently have significant market share. We may experience
difficulties or delays in our development efforts with respect to these or
other new systems, and we may not ultimately be successful in developing them.
Any significant delay in releasing new systems could adversely affect our
reputation, give a competitor a first-to-market advantage or cause a competitor
to achieve greater market share. In addition, any new systems introduced by us
may not achieve a significant degree of market acceptance or, once accepted,
may fail to sell well for any significant period. Conversely, competition from
our new Matrix Metrology systems could have a negative effect on our sales of
our other transparent thin film metrology systems, including our SpectraLASER
and FOCUS systems, and the prices we could charge for
8
<PAGE>
these systems. We may also divert sales and marketing resources from our
current systems in order to successfully launch and promote our new Matrix
Metrology systems. This diversion of resources could have a further negative
effect on sales of our current systems. Any of the foregoing events could cause
our business, financial condition and results of operations to suffer.
We expect to spend a significant amount of time and resources to develop
new systems and refine existing systems. In light of the long product
development cycles inherent in our industry, these expenditures will be made
well in advance of the prospect of deriving revenue from the sale of new
systems. Our ability to commercially introduce and successfully market new
systems is subject to a wide variety of challenges during this development
cycle, including start-up bugs, design defects and other matters that could
delay introduction of these systems. In addition, since our customers are not
obligated by long-term contracts to purchase our systems, our anticipated
product orders may not materialize, or orders that do materialize may be
cancelled. As a result, we may not be able to realize sufficient sales of our
systems in order to recoup research and development expenditures.
If our relationships with our large customers deteriorate, our product
development activities could be jeopardized
The success of our product development efforts depends on our ability to
anticipate market trends and the price, performance and functionality
requirements of semiconductor device manufacturers. In order to anticipate
these trends and ensure that critical development projects proceed in a
coordinated manner, we must continue to collaborate closely with our largest
customers. Our relationships with these and other customers provide us with
access to valuable information regarding trends in the semiconductor device
industry, which enables us to better plan our product development activities.
If any of our current relationships is impaired, or if we are unable to develop
similar collaborative relationships with customers in the future, we will be
hindered in our ability to produce commercially successful systems.
Our ability to reduce costs is limited by our ongoing need to invest in
research and development
Our industry is characterized by the need for continual investment in
research and development as well as customer service and support. As a result
of our need to maintain our spending levels in these areas, our operating
results could be materially harmed if our revenues fall below expectations. In
addition, because of our emphasis on research and development and technological
innovation, our operating costs may increase further in the future. We expect
our level of research and development expenses to increase in absolute dollar
terms for the foreseeable future.
Our business could be harmed if we are unable to protect our proprietary
technology
Our future success and competitive position depend in part upon our ability
to obtain and maintain proprietary technology for our principal product
families, and we rely, in part, on patent, trade secret and trademark law to
protect that technology. We own or have licensed a number of patents relating
to our transparent and opaque thin film metrology systems, and have filed
applications for additional patents. Any of our pending patent applications may
be rejected, and we may not in the future be able to develop additional
proprietary technology that is patentable. In addition, the patents we do own
or that have been issued or licensed to us may not provide us with competitive
advantages and may be challenged by third parties. Third parties may also
design around these patents. Any of the foregoing could harm our business,
financial condition and results of operations.
In addition to patent protection, we rely upon trade secret protection for
our confidential and proprietary information and technology. We routinely enter
into confidentiality agreements with our employees. However, in the event that
these agreements may be breached, we may not have adequate remedies. Our
confidential and proprietary information and technology might also be
independently developed by or become otherwise known to third parties.
9
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Our business could be harmed if we infringe the proprietary technology of
others
Our commercial success depends in part on our ability to avoid infringing
or misappropriating patents or other proprietary rights owned by third parties.
If we are found to infringe or misappropriate a third party's patent or other
proprietary rights, we could be required to pay damages to the third party,
alter our systems or processes, obtain a license from the third party or cease
activities utilizing the third party's proprietary rights, including making or
selling any of our systems that use the third party's proprietary rights. If we
are required to do any of the foregoing, we may not be able to do so on
commercially favorable terms or at all. Our inability to do any of the
foregoing on commercially favorable terms could seriously harm our business.
Protection of our intellectual property rights, or the efforts of third parties
to enforce their own intellectual property rights against us, has in the past
resulted and may in the future result in costly and time-consuming litigation
We may be required to initiate litigation in order to enforce any patents
issued to or licensed by us, or to determine the scope or validity of a third
party's patent or other proprietary rights. In addition, we may be subject to
lawsuits by third parties seeking to enforce their own intellectual property
rights. Any such litigation, regardless of outcome, could be expensive and time
consuming, and could subject us to significant liabilities or require us to re-
engineer our product or obtain expensive licenses from third parties.
For example, we are presently involved in a patent interference proceeding
with Therma-Wave, Inc. in the United States Patent Office. In this proceeding,
we are defending our patent rights with respect to some of the multiple angle,
multiple wavelength ellipsometry technology we use in our transparent thin film
measurement systems. Therma-Wave requested the proceeding be initiated in 1993
by filing a reissue application for one of its own patents, and the proceeding
was initiated in June 1998. If we lose the interference, a reissue patent will
be granted to Therma-Wave permitting Therma-Wave to assert patent rights
against the ellipsometers we use in our transparent thin film measurement
systems. In that event, we would either have to pay future royalties to Therma-
Wave or redesign our transparent thin film measurement systems. Either of these
events could harm our business, financial condition and results of operations.
See "Business--Legal Proceedings." In addition, in a letter dated February 10,
1998, Therma-Wave asked us to review our technology for possible infringement
of several of Therma-Wave's patents. We denied any such infringement in a
letter to Therma-Wave dated March 10, 1998. In a letter dated March 13, 1998,
Therma-Wave requested further information regarding the basis for our belief
that our technology did not infringe Therma-Wave's patents. There has been no
further correspondence between us and Therma-Wave regarding Therma-Wave's
patent inquiries. Although we do not believe that we are infringing any of
Therma-Wave's patents, Therma-Wave could nevertheless initiate an infringement
action against us, which would be costly and distracting regardless of its
outcome.
In a letter dated December 3, 1998, Axic, Inc. asked us to review our
technology for possible infringement of one of Axic's patents. We denied any
such infringement in a letter to Axic dated December 22, 1998. There has been
no further correspondence between us and Axic regarding its patent infringement
claims.
Our efforts to protect our intellectual property may be less effective in some
foreign countries where intellectual property rights are not as well protected
as in the United States
The laws of some foreign countries do not protect our proprietary rights to
as great an extent as do the laws of the United States, and many U. S.
companies have encountered substantial problems in protecting their proprietary
rights against infringement in such countries, some of which are countries in
which we have sold and continue to sell systems. There is a risk that our means
of protecting our proprietary rights may not be adequate in these countries.
For example, our competitors in these countries may independently develop
similar technology or duplicate our systems. If we fail to adequately protect
our intellectual property in these countries, it would be easier for our
competitors to sell competing products in those countries.
We compete against many larger companies in the semiconductor capital equipment
industry
We operate in the highly competitive semiconductor capital equipment
industry and face competition from a number of companies, many of which have
greater financial, engineering, manufacturing, marketing and customer support
resources and broader product offerings than we do. Moreover, there has been
significant
10
<PAGE>
merger and acquisition activity among our competitors and potential
competitors, particularly during the recent downturn in the semiconductor
device and semiconductor capital equipment industries. These transactions by
our competitors and potential competitors may provide them with a competitive
advantage over us by enabling them to rapidly expand their product offerings
and service capabilities to meet a broader range of customer needs. Many of our
customers and potential customers in the semiconductor device manufacturing
industry are large companies that require global support and service for their
semiconductor capital equipment. While we believe that our global support and
service infrastructure is sufficient to meet the needs of our customers and
potential customers, our larger competitors have more extensive infrastructures
than we do, which could place us at a disadvantage when competing for the
business of global semiconductor device manufacturers.
Many of our competitors are investing heavily in the development of new
systems that will compete directly with ours. We expect our competitors in each
product area to continue to improve the design and performance of their
products and to introduce new products with competitive prices and performance
characteristics. Our systems may not be able to compete successfully with those
of our competitors.
Competitive conditions in our industry may cause us to reduce our prices
Due to intense competitive conditions in the thin film metrology industry,
we have from time to time selectively reduced prices on our systems in order to
protect our market share, and competitive pressures may necessitate further
price reductions. To the extent that any of our metrology systems are not
distinguished from those of our competitors by significant technological
advantages, we are likely to experience increased price competition or loss of
market share with respect to those systems.
Because of the high cost of switching equipment vendors in our markets, it is
sometimes difficult for us to win customers from our competitors even if our
systems are superior to theirs
We believe that once a semiconductor device manufacturer has selected one
vendor's capital equipment for a production line application, the manufacturer
generally relies upon that capital equipment and, to the extent possible,
subsequent generations of the same vendor's equipment, for the life of the
application. Once a vendor's equipment has been installed in a production line
application, a semiconductor device manufacturer must often make substantial
technical modifications and may experience production-line downtime in order to
switch to another vendor's equipment. Accordingly, unless our systems offer
performance or cost advantages that outweigh a customer's expense of switching
to our systems, it will be difficult for us to achieve significant sales to
that customer once it has selected another vendor's capital equipment for an
application.
We must attract and retain key personnel with knowledge of semiconductor device
manufacturing and metrology equipment to help support our future growth, and
competition for such personnel in our industry is high
Our success depends to a significant degree upon the continued
contributions of our key management, engineering, sales and marketing, customer
support, finance and manufacturing personnel. The loss of any of these key
personnel, who would be extremely difficult to replace, could harm our business
and operating results. During downturns in our industry, we have often
experienced significant employee attrition, and we may experience further
attrition in the event of a future downturn. Although we have employment and
noncompetition agreements with key members of our senior management team,
including Messrs. McLaughlin, Loiterman and Roth, these individuals or other
key employees may nevertheless leave our company. We do not have key person
life insurance on any of our executives. In addition, to support our future
growth, we will need to attract and retain additional qualified employees.
Competition for such personnel in our industry is intense, and we may not be
successful in attracting and retaining qualified employees.
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We obtain some of the components and subassemblies included in our systems from
a single source or a limited group of suppliers, and the partial or complete
loss of one of these suppliers could cause production delays and harm our
operating results.
Coherent, Inc. is our sole supplier of the lasers we use in some of our
systems, and we also obtain some of the other components and subassemblies
included in our systems from a single supplier or a limited group of suppliers.
Although our supply agreement with Coherent has expired, we are currently
negotiating a follow-on contract with Coherent. We do not have long-term
contracts with many of our suppliers. Our dependence on sole source suppliers
of components exposes us to several risks, including a potential inability to
obtain an adequate supply of components, price increases, late deliveries and
poor component quality. Disruption or termination of the supply of these
components could delay shipments of our systems, damage our customer
relationships and reduce our sales. From time to time in the past, we have
experienced temporary difficulties in receiving shipments from our suppliers.
The lead time required for shipments of some of our components can be as long
as four months. In addition, the lead time required to qualify new suppliers
for lasers could be as long as a year, and the lead time required to qualify
new suppliers of other components could be as long as nine months. If we are
unable to accurately predict our component needs, or if our component supply is
disrupted, we may miss market opportunities by not being able to meet the
demand for our systems. Further, a significant increase in the price of one or
more of these components or subassemblies included in our systems could
seriously harm our results of operations.
We manufacture all of our systems at a single facility, and any prolonged
disruption in the operations of that facility could have a material adverse
effect on our business
We produce all of our systems in our manufacturing facility located in
Ledgewood, New Jersey. Our manufacturing processes are highly complex and
require sophisticated and costly equipment and a specially designed facility.
As a result, any prolonged disruption in the operations of our manufacturing
facility, whether due to technical or labor difficulties, destruction of or
damage as a result of a fire or any other reason, could seriously harm our
business, financial condition and results of operations.
We rely upon independent sales representatives and distributors for a
significant portion of our sales, and a disruption in our relationships with
these representatives or distributors could have a negative impact on our sales
and operating results
Historically, a substantial portion of our sales have been made through
independent sales representatives and distributors. We expect that sales
through independent sales representatives and distributors will represent a
material portion of our sales for the foreseeable future. In particular, all of
our sales in Japan will continue to be made through an independent distributor
for the foreseeable future, and all our sales in Taiwan, China and Singapore
will continue to be made through independent sales representatives for the
foreseeable future. In 1998, sales to Tokyo Electron Limited, our exclusive
distributor in Japan, accounted for 17.6% of our revenues. In some locations,
including Japan, our independent sales representatives or distributors also
provide field service to our customers. The activities of these representatives
and distributors are not within our control. A reduction in the sales or
service efforts or financial viability of any of our independent sales
representatives and distributors, or a termination of our relationships with
them, could harm our sales, our financial results and our ability to support
our customers. Although we believe that we maintain good relations with our
independent sales representatives and distributors, such relationships may
nevertheless deteriorate in the future.
Because we derive a significant portion of our revenues from sales in Asia, our
sales and results of operations could be adversely affected by the instability
of Asian economies
Our sales to customers in Asian markets represented approximately 24.6% and
41.7% of our revenues in the first half of 1999 and in 1998. Countries in the
Asia Pacific region, including Japan, Korea and Taiwan, each of which accounted
for a significant portion of our business in that region, have experienced
currency, banking and equity market weaknesses over the last 18 months. These
weaknesses began to adversely affect our
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sales to semiconductor device and capital equipment manufacturers located in
these regions in the fourth quarter of 1997, and continued to adversely affect
our sales in 1998 and the first half of 1999. Although we have recently
received an increased level of orders from customers in the Asia Pacific
region, we expect that turbulence in the Asian markets could adversely affect
our sales in future periods.
We are subject to operational, financial and political risks due to our
significant level of international sales
International sales accounted for approximately 57.9% and 58.2% of our
revenues in the first half of 1999 and in 1998. We anticipate that
international sales will continue to account for a significant portion of our
revenue for the foreseeable future. Due to the significant level of our
international sales, we are subject to material risks which include:
.unexpected changes in regulatory requirements;
.tariffs and other market barriers;
.political and economic instability;
.potentially adverse tax consequences;
.outbreaks of hostilities;
.difficulties in accounts receivable collection;
.extended payment terms;
.difficulties in managing foreign sales representatives and distributors;
and
.difficulties in staffing and managing foreign branch operations.
In addition, the laws of countries in which our systems are or may be sold
may not afford our systems and intellectual property rights the same degree of
protection as the laws of the United States.
A substantial portion of our international sales are denominated in U.S.
dollars. As a result, changes in the values of foreign currencies relative to
the value of the U.S. dollar can render our systems more expensive. Such
conditions could negatively impact our international sales.
Our acquisition strategy could cause financial or operational problems
Our success depends on our ability to continually enhance and broaden our
product offerings in response to changing technologies, customer demands and
competitive pressures. To this end, we may choose to acquire new and
complementary businesses, products, or technologies instead of developing them
ourselves. We may, however, face competition for acquisition targets from
larger and more established companies with greater financial resources, making
it more difficult for us to complete acquisitions. We do not know if we will be
able to complete any acquisitions, or whether we will be able to successfully
integrate any acquired business, operate it profitably or retain its key
employees. Integrating any business, product or technology we acquire could be
expensive and time-consuming, could disrupt our ongoing business and could
distract our management. In addition, in order to finance any acquisitions, we
might need to raise additional funds through public or private equity or debt
financings. In that event, we could be forced to obtain financing on terms that
are not favorable to us and, in the case of equity financing, that result in
dilution to our stockholders. If we are unable to integrate any acquired
entities, products or technologies effectively, our business, financial
condition and operating results will suffer. In addition, any amortization of
goodwill or other assets or charges resulting from the costs of acquisitions
could harm our business and operating results.
If we deliver systems with defects, our credibility will be harmed and the
sales and market acceptance of our systems will decrease
Our systems are complex and sometimes have contained errors, defects and
bugs when introduced. If we deliver systems with errors, defects or bugs, our
credibility and the market acceptance and sales of our systems could be harmed.
Further, if our systems contain errors, defects or bugs, we may be required to
expend significant capital and resources to alleviate such problems. Defects
could also lead to product liability as a result of product liability lawsuits
against us or against our customers. We have agreed to indemnify our
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<PAGE>
customers in some circumstances against liability arising from defects in our
systems. A successful product liability claim could seriously harm our
business, financial condition and results of operations.
A small group of major stockholders will continue to have significant influence
over our business after this offering, and could delay, deter or prevent a
change of control or other business combination
Upon completion of this offering, Liberty Partners, Riverside Partners and
Paul F. McLaughlin will hold approximately 59.7% of our outstanding stock, or
56.8% if the underwriters' option to purchase additional shares is exercised in
full. We anticipate that five of the eight directors on our board following
this offering will be representatives of these stockholders. In addition, prior
to this offering, these stockholders intend to enter into an agreement under
which each party will agree to vote its shares in favor of one nominee of each
other party to serve on our board of directors. The interests of these
stockholders may not always coincide with our interests or those of our other
stockholders. By virtue of their stock ownership and board representation,
these stockholders will continue to have a significant influence over all
matters submitted to our board and our stockholders, including the election of
our directors, and will be able to exercise significant control over our
business, policies and affairs. Through their concentration of voting power,
these stockholders, acting individually or together, could cause us to take
actions that we would not consider absent their influence, or could delay,
deter or prevent a change of control of our company or other business
combination that might otherwise be beneficial to our public stockholders.
Provisions of our charter documents and Delaware law could discourage potential
acquisition proposals and could delay, deter or prevent a change in control of
our company
Provisions of our certificate of incorporation and bylaws may inhibit
changes in control of our company not approved by our board of directors. These
provisions also limit the circumstances in which a premium can be paid for the
common stock, and in which a proxy contest for control of our board may be
initiated.
These provisions provide for:
. a prohibition on stockholder actions through written consent;
. a requirement that special meetings of stockholders be called only by
our chief executive officer or board of directors;
. advance notice requirements for stockholder proposals and director
nominations by stockholders;
. limitations on the ability of stockholders to amend, alter or repeal
our by-laws; and
. the authority of our board to issue, without stockholder approval,
preferred stock with such terms as the board may determine.
We will also be afforded the protections of Section 203 of the Delaware
General Corporation Law, which could have similar effects. See "Description of
Capital Stock."
If we are forced to devote substantial resources to Year 2000 remediation
efforts, if we incur significant liability due to Year 2000 problems in our
products, or if Year 2000 problems among our suppliers or customers cause
delays in our shipping or receipt of systems, our business and operating
results could be harmed
We have implemented a multi-phase Year 2000 project consisting of
assessment, remediation and testing following remediation. Despite our efforts,
however, we may not have identified all of the potential risks. Our failure to
identify and remediate all material Year 2000 risks could adversely affect our
business, financial condition and results of operations. The Year 2000 risks
facing us include:
. the entities on whom we rely for important goods and services may not
be successful in addressing all of their software and systems problems
in order to operate without disruption in the year 2000 and beyond;
. our customers or potential customers may be affected by Year 2000
issues that may, among other things:
. cause a reduction, delay or cancellation of customer orders;
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<PAGE>
. cause a delay in payments for products shipped; and
. cause customers to expend significant resources on Year 2000
compliance matters rather than investing in our systems; and
. we have not developed a contingency plan related to a failure of our or
a third-party's Year 2000 remediation efforts, and we may not be
adequately prepared for such an event.
We have made efforts to identify any Year 2000 compliance problems in our
existing systems, and to make available to our customers who have purchased
such systems software revisions or plug-ins correcting any Year 2000 problems.
Nevertheless, these customers may assert claims against us alleging that our
systems should have been Year 2000 compliant at the time of purchase, which
could result in costly litigation and divert our management's attention. We
have agreed to indemnify our customers in some circumstances against liability
arising from Year 2000-related defects in our systems. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000 Issue."
Risks Related to this Offering
We expect to use a substantial portion of the net proceeds of this offering to
repay indebtedness and, as a result, we may be unable to meet our future
capital and liquidity requirements
We expect to use a substantial portion of the net proceeds of this offering
to repay indebtedness we incurred in connection with the acquisition of our
predecessor company by our management and a group of investors in 1996, and to
redeem the preferred stock we issued in connection with that transaction. As a
result, only a limited portion of the net proceeds will be available to fund
our future operations. We expect that our principal sources of funds following
this offering will be cash generated from our operating activities and, if
necessary, borrowings under a bank credit facility which we intend to obtain
prior to this offering. We believe that these funds will provide us with
sufficient liquidity and capital resources for us to meet our current and
future financial obligations, as well as to provide funds for our working
capital, capital expenditures and other needs, for the twelve months following
this offering. Despite our expectations, however, we may require additional
equity or debt financing to meet our working capital requirements or to fund
our research and development efforts. This financing may not be available when
required or, may be available only on terms unsatisfactory to us. Further, if
we issue equity securities, the ownership percentage of our stockholders will
be reduced, and the new equity securities may have rights senior to those of
the common stock to be issued in this offering.
Our stock price may be volatile and our stock may be thinly traded, which could
cause investors to lose all or part of their investments in our stock
The stock market in general, and the stock prices of technology companies
in particular, have recently experienced volatility which has often been
unrelated to the operating performance of any particular company or companies.
If market or industry-based fluctuations continue, our stock price could
decline regardless of our actual operating performance and investors could lose
all or part of their investments. In addition, prior to this offering, our
stock could not be bought or sold on a public market. If an active public
market for our stock does not develop, or if such a market is not sustained
after this offering, it may be difficult to resell our stock.
We could be subject to class action litigation due to stock price volatility,
which, if it occurs, will distract our management and could result in
substantial costs or large judgments against us
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market prices of their
securities. We may be the target of similar litigation in the future.
Securities litigation could result in substantial costs and divert our
management's attention and resources, which could cause serious harm to our
business, financial condition and results of operations.
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Purchasers of our common stock will experience immediate and significant
dilution upon purchasing shares in this offering because the initial public
offering price of those shares will exceed their book value
Because the initial public offering price is substantially higher than the
book value per share of our common stock, purchasers of the common stock in
this offering will be subject to immediate dilution of $11.10 per share. See
"Dilution."
Future sales of our stock could depress its market price
Future sales of our stock on the public markets could depress its market
price. Upon completion of this offering, we expect that:
. the 4,800,000 shares of common stock, or 5,520,000 shares if the
underwriters' option to purchase additional shares is exercised in
full, sold in this offering will be freely tradable without restriction
under the Securities Act unless they are held by one of our
"affiliates;" and
. 9,142,825 shares of common stock held by our existing stockholders will
be eligible for sale into the public market, subject to compliance with
the resale volume limitations and other restrictions of Rule 144 under
the Securities Act, beginning 180 days after the date of this
prospectus.
In addition, beginning 180 days after the completion of this offering, the
holders of approximately 9,048,882 shares of our stock will have limited rights
to require us to register their shares under the Securities Act for public
resale at our expense.
The forward-looking statements contained in this prospectus are based on our
predictions of future performance, and as a result, purchasers of our common
stock should not place undue reliance on them
This prospectus contains forward-looking statements that involve risks and
uncertainties, including, without limitation, statements concerning conditions
in the semiconductor and semiconductor capital equipment industries and our
business, financial condition and operating results, including in particular
statements relating to our business and growth strategies and our product
development efforts. We use words like "believe," "expect," "anticipate,"
"intend," "future" and other similar expressions to identify forward-looking
statements. Purchasers of our common stock should not place undue reliance on
these forward-looking statements, which speak only as of their dates. These
forward-looking statements are based on our current expectations, and are
subject to a number of risks and uncertainties, including, without limitation,
those identified under "Risk Factors" and elsewhere in this prospectus. Our
actual operating results could differ materially from those predicted in these
forward-looking statements, and any other events anticipated in the forward-
looking statements may not actually occur.
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<PAGE>
USE OF PROCEEDS
We expect to receive proceeds of approximately $57,232,000 from the sale of
the 4,800,000 shares of common stock at an assumed initial public offering
price of $13.00 per share, after deducting the underwriting discount and our
estimated offering expenses, or approximately $65,936,800 if the underwriters
exercise in full their option to purchase additional shares.
We expect to use approximately $38.4 million of the net proceeds to repay
several loans from the State Board of Administration of Florida, a related
party. That amount includes $9.9 million to repay a senior revolving loan which
bears interest at a rate of prime plus 1.5% and matures on December 31, 2002,
$11.1 million to repay a senior term loan which bears interest at the rate of
prime plus 1.75% and matures on December 31, 2002, $11.0 million to repay a
senior subordinated loan which bears interest at a rate of prime plus 4.0% and
matures on December 31, 2003 and $6.4 million to repay a junior subordinated
note which bears interest at a rate of 14.0% and matures on July 31, 2001. All
of these loans were made, and all of our preferred stock was issued, to finance
the acquisition of our predecessor company in 1996 or for working capital and
general corporate purposes. We also expect to use approximately $7.0 million of
the net proceeds to redeem all of our outstanding Series A preferred stock and
Series B preferred stock, which accrue cumulative dividends at 8% per annum and
are held by related parties. Although we may use a portion of the net proceeds
to acquire technology or businesses that are complimentary to our business, we
have no current plans in this regard. We expect to use the remaining net
proceeds of this offering for working capital and general corporate purposes,
including expenditures for research and development of new products.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock. We do
not currently anticipate paying any cash dividends on our common stock in the
foreseeable future, and we intend to retain any future earnings for use in the
expansion of our business and for general corporate purposes. Additionally, our
current debt instruments limit the payment of dividends.
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CAPITALIZATION
The following table summarizes our capitalization as of June 30, 1999
. on an actual basis;
. on a pro forma basis to give effect to the exchange of all outstanding
Class A common stock and Class B common stock for 7,103,365 shares of a
new single class of common stock and the issuance of 2,039,460 shares
of common stock upon the exercise of warrants, which we expect to occur
immediately prior to this offering; and
. on a pro forma as adjusted basis to give effect to the sale of 4.8
million shares of common stock offered by us at an assumed initial
public offering price of $13.00 per share and the application of the
estimated net proceeds as set forth under "Use of Proceeds," and an
increase in accumulated deficit of $487,000 to reflect the write-off of
deferred financing costs related to our repayment from the proceeds of
this offering of a senior term loan, a senior subordinated term loan, a
junior subordinated loan and a senior revolving term loan.
<TABLE>
<CAPTION>
June 30, 1999
-------------------------------
Pro Pro Forma
Actual Forma As Adjusted
-------- -------- -----------
(in thousands)
<S> <C> <C> <C>
Cash.......................................... $ 412 $ 412 $ 12,311
======== ======== ========
Current portion of obligations payable to
stockholders................................ $ 2,750 $ 2,750 --
Obligations payable to stockholders, less
current portion:
Senior term loan............................ 9,000 9,000 --
Subordinated term loan...................... 11,000 11,000 --
Junior subordinated note increased $110 for
unamortized original issue discount....... 6,400 6,400 --
Senior revolving term loan.................. 9,300 9,300 --
Series A preferred stock, $0.01 par value:
45,875 shares authorized and 45,875 shares
issued and outstanding, Actual and Pro
Forma; no shares authorized, issued and
outstanding, Pro Forma As Adjusted.......... 5,848 5,848 --
Series B preferred stock, $0.01 par value:
10,125 shares authorized and 8,125 shares
outstanding, Actual and Pro Forma; no shares
authorized, issued and outstanding, Pro
Forma As Adjusted........................... 1,035 1,035 --
-------- -------- --------
45,333 45,333 --
-------- -------- --------
Stockholders' (deficit) equity:
Class A common stock, $0.01 par value:
6,874,976 shares designated and 4,802,291
shares outstanding, Actual; no shares
designated, issued and outstanding, Pro
Forma and Pro Forma As Adjusted........... 2 -- --
Class B common stock, $0.01 par value:
3,035,705 shares designated and 2,301,095
shares outstanding, Actual; no shares
designated, issued and outstanding, Pro
Forma and Pro Forma As Adjusted........... -- -- --
Preferred stock, par value $0.001 per share;
5,000,000 shares authorized; no shares
issued and outstanding, Actual, Pro Forma
and Pro Forma As Adjusted................. -- -- --
Common stock, par value $0.001 per share;
50,000,000 shares authorized; no shares
issued and outstanding, Actual; 9,142,825
shares issued and outstanding Pro Forma;
13,942,825 shares issued and outstanding,
Pro Forma As Adjusted..................... 9 14
Additional paid-in capital.................... 4,886 4,879 62,106
Accumulated other comprehensive loss.......... (246) (246) (246)
Accumulated deficit........................... (31,695) (31,695) (32,182)
-------- -------- --------
Total stockholders' (deficit) equity...... (27,053) (27,053) 29,692
-------- -------- --------
Total capitalization................... $ 18,280 $ 18,280 $ 29,692
======== ======== ========
</TABLE>
18
<PAGE>
This table excludes the following shares:
. 589,550 shares of our common stock issuable upon exercise of stock
options outstanding under our 1996 stock option plan and 109,380 shares
of common stock reserved for future issuance under this plan;
. 2,000,000 shares of common stock reserved for future issuance under our
1999 stock plan.
. 300,000 shares of common stock reserved for future issuance under our
1999 employee stock purchase plan.
19
<PAGE>
DILUTION
Our pro forma net tangible book deficit as of June 30, 1999 was
approximately $30.7 million, or $3.36 per share of common stock. Pro forma net
tangible book value (deficit) per share represents the amount of our total
assets less intangible assets, deferred financing costs and total liabilities
divided by the pro forma number of shares of common stock outstanding as of
June 30, 1999. The pro forma number of shares of common stock outstanding
increases actual shares outstanding to reflect: (1) the exchange of all Class A
common stock and Class B common stock for 7,103,365 shares of a new single
class of common stock; and (2) the issuance of 2,039,460 shares of common stock
upon the exercise of warrants. Without taking into account any changes in pro
forma net tangible book value other than those described above, our sale of the
4,800,000 shares of common stock in this offering and the receipt and
application of the net proceeds therefrom, our as adjusted pro forma net
tangible book value as of June 30, 1999 would have been approximately $26.5
million, or $1.90 per share of common stock. This represents an immediate
increase in pro forma net tangible book value of $5.26 per share to existing
stockholders and an immediate dilution in pro forma net tangible book value of
$11.10 per share to investors purchasing common stock in this offering.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $13.00
Pro forma net tangible book value (deficit) per share as of
June 30, 1999................................................ $(3.36)
Increase per share attributable to new investors............... 5.26
------
As adjusted pro forma net tangible book value per share after
this offering.................................................. 1.90
------
Dilution per share to new investors.............................. $11.10
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1999,
the difference between the number of shares of common stock purchased from us,
the total consideration paid and the average price per share paid by existing
stockholders and by new investors, assuming an initial public offering price of
$13.00 per share.
<TABLE>
<CAPTION>
Total Cash
Shares Purchased Consideration
------------------ ------------------ Average Price
Number Percent Amount Percent Per Share
---------- ------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 9,142,825 65.6% $4,748,077 7.1% $ 0.52
New investors............... 4,800,000 34.4 62,400,000 92.9 $13.00
---------- ----- ---------- -----
Total...................... 13,942,825 100.0% 67,148,077 100.0%
========== ===== ========== =====
</TABLE>
The foregoing table assumes no exercise of the underwriters' option to
purchase additional shares and no issuance of shares of common stock underlying
outstanding options. We have outstanding options to purchase 693,951 shares of
common stock, including options to purchase 104,401 shares of common stock
granted in July 1999, net of options to purchase 3,481 shares of common stock
that were cancelled and reissued, at a weighted average exercise price of $0.66
per share. To the extent that these options are exercised, new investors will
experience further dilution.
20
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with our
Consolidated Financial Statements and the related Notes thereto appearing
elsewhere in this prospectus, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The selected financial data set
forth below as of and for the years ended December 31, 1997 and 1998, the six
months ended June 30, 1999, and for the periods from January 1, 1996 to June
13, 1996 and June 14, 1996 to December 31, 1996 were derived from audited
consolidated financial statements included elsewhere in this prospectus. The
selected financial data as of December 31, 1996 and for each of the years ended
December 31, 1994 and 1995 were derived from audited financial statements not
included herein. The results of operations for the six months ended June 30,
1998 were derived from our unaudited financial statements included elsewhere in
this prospectus, and, in our management's opinion, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of such data. Our results of operations for the six months ended
June 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
The table below sets forth our selected financial data as well as that of
our predecessor company. Our results of operations and those of our predecessor
company are not directly comparable because we revalued the assets and
liabilities of our predecessor company in connection with its acquisition
pursuant to the provisions of APB No. 16, and because our results of operations
for the period from June 14, 1996 to December 31, 1996 include various non-
recurring expenses for acquired in-process research and development and the
write-down of intangibles. In addition, because our predecessor company was
taxed as an S-corporation and we are taxed as a C-corporation, the effective
tax rate reflected in our historical results of operations is significantly
higher than the tax rate reflected in the historical results of operations of
our predecessor company. Further, we changed our business strategy immediately
after the acquisition. Finally, the financial information of our predecessor
company excludes the effects of purchase accounting adjustments, including
increased interest expense and amortization.
<TABLE>
<CAPTION>
Predecessor Company Rudolph Technologies
----------------------------- -------------------------------------------------------
Period from Period from
Year Ended January 1 June 14 to Year Ended Six Months Ended
December 31, to June 13, December 31, December 31, June 30,
---------------- ----------- ------------ -------------------- --------------------
1994 1995 1996 1996 1997 1998 1998 1999
------- ------- ----------- ------------ --------- --------- --------- ---------
(In thousands) (In thousands, except share and per share data)
Statement of Operations
Data:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $22,555 $29,436 $17,501 $ 14,373 $35,339 $ 20,106 $11,872 $15,170
Cost of revenues (1).... 10,042 13,655 7,497 6,579 13,903 13,179 6,455 7,373
------- ------- ------- --------- --------- --------- --------- ---------
Gross profit............ 12,513 15,781 10,004 7,794 21,436 6,927 5,417 7,797
Operating expenses:
Research and
development........... 1,542 2,888 1,817 2,345 5,750 5,096 2,688 2,097
In-process research and
development........... -- -- -- 3,821 -- -- -- --
Selling, general and
administrative........ 6,651 7,125 4,144 4,340 9,475 7,077 3,306 3,537
Write-down of
intangibles........... -- -- -- 6,734 -- -- -- --
Amortization........... 10 10 19 3,650 4,201 4,208 2,103 131
------- ------- ------- --------- --------- --------- --------- ---------
Total operating
expenses............... 8,203 10,023 5,980 20,890 19,426 16,381 8,097 5,765
------- ------- ------- --------- --------- --------- --------- ---------
Operating income
(loss)................. 4,310 5,758 4,024 (13,096) 2,010 (9,454) (2,680) 2,032
Interest expense........ 130 113 55 2,013 3,717 4,210 2,135 2,148
Other income............ (2) (38) (26) (156) (92) (199) (15) (29)
------- ------- ------- --------- --------- --------- --------- ---------
Income (loss) before
income taxes........... 4,182 5,683 3,995 (14,953) (1,615) (13,465) (4,800) (87)
Provision (benefit) for
income taxes........... 234 274 143 -- (614) 613 (699) 93
------- ------- ------- --------- --------- --------- --------- ---------
Net income (loss)....... $ 3,948 $ 5,409 $ 3,852 (14,953) (1,001) (14,078) (4,101) (180)
======= ======= =======
Preferred stock
dividends.............. 239 468 507 247 269
--------- --------- --------- --------- ---------
Loss available to common
stockholders........... $(15,192) $(1,469) $(14,585) $(4,348) $ (449)
========= ========= ========= ========= =========
Net loss per share
available to common
stockholders:
Basic.................. $(5.80) $(0.56) $(3.24) $(1.66) $(0.07)
Diluted................ $(5.80) $(0.56) $(3.24) $(1.66) $(0.07)
Weighted average common
shares outstanding:
Basic.................. 2,617,373 2,617,373 4,503,396 2,617,373 6,767,415
Diluted................ 2,617,373 2,617,373 4,503,396 2,617,373 6,767,415
Pro forma net loss per
share available to
common stockholders:
(2)
Basic.................. $(2.23) $(0.93) $(0.05)
Diluted................ $(2.23) $(0.93) $(0.05)
Pro forma weighted
average common shares
outstanding: (2)
Basic.................. 6,542,856 4,656,833 8,806,875
Diluted................ 6,542,856 4,656,833 8,806,875
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Predecessor Company Rudolph Technologies
----------------------------- -------------------------------------------------------
Period from Period from
Year Ended January 1 June 14 to Year Ended Six Months Ended
December 31, to June 13, December 31, December 31, June 30,
---------------- ----------- ------------ -------------------- --------------------
1994 1995 1996 1996 1997 1998 1998 1999
------- ------- ----------- ------------ --------- --------- --------- ---------
(In thousands) (In thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other Financial Data:
EBITA (3)............... $4,322 $5,806 $4,069 $1,265 $ 6,303 $(5,047) $ (562) $2,192
EBITDA (3).............. 4,569 6,212 4,256 1,470 6,751 (4,269) (299) 2,466
Net cash provided by
(used in) operating
activities............ 768 7,016 1,592 1,160 (1,959) (6,872) (2,934) (550)
Net cash provided by
(used in) investing
activities............ (311) (975) (171) (107) (586) (904) (508) (511)
Net cash provided by
(used in) financing
activities............ (507) (4,234) (3,286) 525 1,200 8,000 3,400 1,043
<CAPTION>
December 31, June 30,
------------------------------- ---------
1996 1997 1998 1999
--------- --------- --------- ---------
Balance Sheet Data: (in thousands)
<S> <C> <C> <C> <C>
Cash and cash
equivalents............ $ 1,578 $ 189 $ 431 $ 412
Working capital
(deficit).............. 4,262 3,134 (1,052) (279)
Total assets............ 27,013 28,513 21,121 22,924
Long-term debt, less
current portion........ 26,000 24,000 25,370 26,290
Accumulated deficit..... (15,192) (16,661) (31,246) (31,695)
Total stockholders'
deficit................ (13,707) (15,327) (26,759) (27,053)
</TABLE>
- -------
(1) Our cost of revenues for 1998 includes a $1.4 million expense for the
write-down of inventory to net realizable value.
(2) Our pro forma share and per share data has been prepared assuming the
issuance of 2,039,460 shares of common stock upon the exercise of warrants.
This exercise is assumed to have occurred at our inception.
(3) "EBITA" is defined as income before provision for income taxes, interest
expense and amortization. "EBITDA" is defined as income before provision
for income taxes, interest expense, depreciation and amortization. EBITA
and EBITDA are presented as supplemental information and should not be
considered as alternatives to net income or cash flow from operating
activities as indicators of our operating performance or liquidity. We
believe that EBITA and EBITDA are standard measures commonly reported and
widely used by analysts, investors and other interested parties in the
semiconductor capital equipment industry. However, EBITA and EBITDA as
presented herein may not be comparable to similarly titled measures
reported by other companies.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with our Financial
Statements and the Notes thereto included elsewhere in this prospectus. Our
discussion contains forward-looking statements based upon current expectations
that involve risks and uncertainties, such as our plans, objectives and
intentions. Our actual results may differ materially from those predicted in
such forward-looking statements. See "Risk Factors--The forward-looking
statements contained in this prospectus are based on our predictions of future
performance, and as a result, purchasers of our common stock should not place
undue reliance on them."
Overview
We are a worldwide leader in the design, development, manufacture and
support of high-performance process control metrology systems used in
semiconductor device manufacturing. Our proprietary systems measure the
thickness and other properties of thin films applied during various steps in
the manufacture of integrated circuits, enabling semiconductor device
manufacturers to improve yields and reduce overall production costs. We provide
our customers with a flexible full-fab metrology solution by offering families
of systems that meet their transparent and opaque thin film measurement needs
in various applications across the fabrication process. Our two primary
families of metrology solutions offer leading-edge metrology technology,
flexible systems cost-effectively designed for specific manufacturing
applications and a common production-worthy automation platform, all backed by
worldwide support.
Our predecessor company was founded in 1940 as Rudolph Research
Corporation, and for the past fifty-nine years we have built a reputation for
metrology excellence. We began our association with the semiconductor industry
by selling research instruments in the 1950s and 1960s to pioneers in solid
state electronics, including Bell Laboratories. We believe we have the largest
installed base of ellipsometers in the world. Our customers include most of the
major semiconductor device manufacturers worldwide, including Intel, AMD,
Chartered Semiconductor, Fujitsu, Hyundai, IBM, Lucent, Philips, Samsung,
ST Microelectronics, Texas Instruments, TSMC, Toshiba and UMC.
In June 1996, our predecessor company was purchased in a leveraged
transaction by our management and a group of investors. The acquisition
resulted in our incurring a significant amount of debt. At the time of the
transaction, we changed our name to Rudolph Technologies and changed our
corporate strategy to focus exclusively on the production semiconductor
metrology business. Our strategy was to capitalize on our reputation for
accuracy and repeatability in the measurement of very thin films, primarily in
the diffusion phase of the semiconductor device manufacturing process, to gain
market share in other areas of the semiconductor device manufacturing process.
We addressed our market opportunity by increasing our investment in research
and development to expand our product offerings and increase our
infrastructure.
During 1996 and 1998, the semiconductor device industry began unforeseen
periods of reduced capital equipment purchases. The related industry-wide
downturns in the semiconductor capital equipment industry led to decreased
sales of our products as many customers delayed shipments or canceled orders
altogether. We incurred significant losses in 1998 not only because of the
downturn in our industry but also because we continued to invest in research
and development and in building our infrastructure.
We record revenue from product and parts sales at the time of shipment to
the customer, which occurs after the customer has tested and approved the
equipment. We record a provision for the estimated cost of fulfilling warranty
and installation obligations at the time we recognize the related revenue. We
recognize service revenue ratably over the period of the contract.
Historically, a significant portion of our revenues in each quarter and
year has been derived from sales to relatively few customers, and we expect
this trend to continue. In the combined year 1996, in 1997 and 1998 and in the
six months ended June 30, 1999, sales to customers that individually
represented at least five percent
23
<PAGE>
of our revenues accounted for 18.0%, 7.7%, 43.2% and 44.3% of our revenues. In
the combined year 1996 and in 1997, no individual customer accounted for more
than 10% of our revenues. In 1998, sales to Intel and Advanced Micro Devices
accounted for 19.8% and 11.1% of our revenues. In the six months ended June 30,
1999, sales to Intel accounted for 37.3% of our revenues.
In addition, a significant portion of our revenues in each quarter and year
has been derived from sales to particular distributors. These distributors
purchase our products for ultimate distribution to customers in particular
geographic regions. In the combined year ended December 31, 1996, sales to
Tokyo Electron Limited or TEL, our exclusive distributor in Japan, accounted
for 31.4% of our revenues. In 1997, sales to TEL accounted for 29.9% of our
revenues. In 1998, sales to TEL and distributor Metron Technology accounted for
17.6% and 15.3% of our revenues. In the six months ended June 30, 1999, sales
to Metron Technology accounted for 14.0% of our revenues. Currently, the only
distributor we use is TEL. We expect that sales to TEL will continue to account
for a significant portion of our revenues for the foreseeable future.
We do not have purchase contracts with any of our customers or distributors
that obligate them to continue to purchase our products, and they could cease
purchasing products from us at any time. A delay in purchase or cancellation by
any of our large customers could cause quarterly revenues to vary
significantly. In addition, during a given quarter, a significant portion of
our revenue may be derived from the sale of a relatively small number of
systems. Our transparent film measurement systems range in price from
approximately $200,000 to $1.0 million per system and our opaque film
measurement systems range in price from approximately $900,000 to $1.6 million
per system. Accordingly, a small change in the number of systems we sell may
also cause significant changes in our operating results. Because fluctuations
in the timing of orders from our major customers or distributors or in the
number of our individual systems we sell could cause our revenues to fluctuate
significantly in any given quarter or year, we do not believe that period-to-
period comparisons of our financial results are necessarily meaningful, and
they should not be relied upon as an indication of our future performance.
A significant portion of our revenues has been derived from customers
outside of the United States, and we expect this trend to continue. In 1997,
approximately 66.0% of our revenues were derived from customers outside of the
United States, of which 57.9% were derived from customers in Asia and 8.0% were
derived from customers in Europe. In 1998, approximately 58.2% of our revenues
were derived from customers outside of the United States, of which 41.8% were
derived from customers in Asia and 16.4% were derived from customers in Europe.
In the six months ended June 30, 1999, approximately 57.9% of our revenues were
derived from customers outside of the United States, of which 24.6% were
derived from customers in Asia, 21.5% were derived from customers in Europe,
and 11.8% were derived from customers in other international markets.
Substantially all of our revenues to date have been denominated in United
States dollars.
The sales cycle for our systems typically ranges from six to 15 months, and
can be longer when our customers are evaluating new technology. Due to the
length of these cycles, we invest significantly in research and development and
sales and marketing in advance of generating revenues related to these
investments. Additionally, the rate and timing of customer orders may vary
significantly from month to month. Accordingly, if sales of our products do not
occur when we expect, and we are unable to adjust our estimates on a timely
basis, our expenses and inventory levels may increase relative to revenues and
total assets.
24
<PAGE>
Results of Operations
The following table sets forth our statements of operations data and those
of our predecessor company for the periods indicated. The results of operations
of our predecessor company are not directly comparable to ours because we
revalued the assets and liabilities of our predecessor company in connection
with its acquisition pursuant to the provisions of APB No. 16. In addition,
because our predecessor company was taxed as an S corporation and we are taxed
as a C corporation, the effective tax rate reflected in our historical results
of operations is significantly higher than the tax rate reflected in the
historical results of operations of our predecessor company. Further, we
changed our business strategy immediately after the acquisition.
The combined results of operations for 1996 represent a combination,
without adjustment, of the historical results of our predecessor company for
the period from January 1, 1996 to June 13, 1996 and our historical results for
the period from June 14, 1996 to December 31, 1996. We are presenting these
combined historical results for convenience only, to assist investors in
assessing our underlying business trends. These combined results exclude the
full year effect of purchase accounting adjustments, specifically increased
interest expense and amortization of intangibles. In addition, our results of
operations for the period from June 14, 1996 to December 31, 1996, which are a
component of the combined 1996 results, include non-recurring expenses for
acquired in-process research and development and the write-down of intangibles.
As a result, the combined 1996 results of operations are not fully comparable
to our historical results of operations for periods after 1996.
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended Dec. 31, June 30,
--------------------------- ----------------
Combined
1996 1997 1998 1998 1999
-------- ------- -------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenues....................... $ 31,874 $35,339 $ 20,106 $11,872 $15,170
Cost of revenues............... 14,076 13,903 13,179 6,455 7,373
-------- ------- -------- ------- -------
Gross profit................... 17,798 21,436 6,927 5,417 7,797
-------- ------- -------- ------- -------
Operating expenses:
Research and development...... 4,162 5,750 5,096 2,688 2,097
In-process research and
development................. 3,821 -- -- -- --
Selling, general and
administrative.............. 8,484 9,475 7,077 3,306 3,537
Write-down of intangibles..... 6,734 -- -- -- --
Amortization.................. 3,669 4,201 4,208 2,103 131
-------- ------- -------- ------- -------
Total operating expenses..... 26,870 19,426 16,381 8,097 5,765
-------- ------- -------- ------- -------
Operating income (loss)........ (9,072) 2,010 (9,454) (2,680) 2,032
Interest expense............... 2,068 3,717 4,210 2,135 2,148
Other income................... (182) (92) (199) (15) (29)
-------- ------- -------- ------- -------
Loss before income taxes....... (10,958) (1,615) (13,465) (4,800) (87)
Provision (benefit) for income
taxes........................ 143 (614) 613 (699) 93
-------- ------- -------- ------- -------
Net loss....................... (11,101) (1,001) (14,078) (4,101) (180)
Preferred stock dividends...... 239 468 507 247 269
-------- ------- -------- ------- -------
Loss available to common
stockholders................. $(11,340) $(1,469) $(14,585) $(4,348) $ (449)
-------- ------- -------- ------- -------
</TABLE>
25
<PAGE>
The following table sets forth, for the periods indicated, our statements
of operations data as percentages of our revenues. Our results of operations
are reported as a one reportable business segment.
<TABLE>
<CAPTION>
Six months
Year Ended December Ended
31, June 30,
----------------------- -------------
Combined
1996 1997 1998 1998 1999
-------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues............................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues.................... 44.2 39.3 65.5 54.4 48.6
----- ----- ----- ----- -----
Gross profit........................ 55.8 60.7 34.5 45.6 51.4
Operating expenses:
Research and development........... 13.1 16.3 25.3 22.6 13.8
In-process research and
development...................... 12.0 -- -- -- --
Selling, general and
administrative................... 26.6 26.8 35.2 27.8 23.3
Write-down of intangibles.......... 21.1 -- -- -- --
Amortization....................... 11.5 11.9 21.0 17.8 0.9
----- ----- ----- ----- -----
Total operating expenses.......... 84.3 55.0 81.5 68.2 38.0
----- ----- ----- ----- -----
Operating income (loss)............. (28.5) 5.7 (47.0) (22.6) 13.4
Interest expense.................... 6.5 10.5 20.9 18.0 14.2
Other expense (income).............. (0.6) (0.3) (1.0) (0.1) (0.2)
----- ----- ----- ----- -----
Income (loss) before income taxes... (34.4) (4.5) (67.0) (40.5) (0.6)
Provision (benefit) for income
taxes............................. 0.4 (1.7) 3.0 (5.9) 0.6
----- ----- ----- ----- -----
Net loss............................ (34.8) (2.8) (70.0) (34.6) (1.2)
Preferred stock dividends........... 0.8 1.3 2.5 2.1 1.8
----- ----- ----- ----- -----
Income (loss) available to common
stockholders...................... (35.6)% (4.1)% (72.5)% (36.7)% (3.0)%
===== ===== ===== ===== =====
</TABLE>
Results of Operations for the Six Months Ended June 30, 1998 and 1999
Revenues. Our revenues are derived from the sale of our metrology systems,
services and spare parts. Our revenues were $11.9 million and $15.2 million in
the six months ended June 30, 1998 and 1999. This change represents an increase
of 27.8% and was primarily due to increases in unit volume shipments to
existing customers and expanded sales of new products. Revenues from
international customers represented 62.6% and 57.9% of our revenues in the six
months ended June 30, 1998 and 1999. Revenues from international customers
decreased as a percentage of revenues from 1998 to 1999 as a result of
increased sales to a significant domestic customer in 1999 and reduced revenues
from Asian customers in 1998 due to the Asian economic crisis. See "Risk
Factors--Because we derive a significant portion of our revenues from sales in
Asia, our sales and results of operations could be adversely affected by the
instability of Asian economies."
Cost of Revenues and Gross Profit. Cost of revenues consists of the labor,
material and overhead costs of manufacturing our systems, spare parts cost and
the cost associated with our worldwide service support infrastructure. Our
gross profit was $5.4 million and $7.8 million in the six months ended June 30,
1998 and 1999. This change represents an increase of 43.9%. Our gross profit
represented 45.6% and 51.4% of our revenues in the six months ended June 30,
1998 and 1999. The increase in gross profit margin from 1998 to 1999 resulted
from increased revenues covering a larger portion of fixed costs and changes in
product mix to higher margin products. The increase in gross profit dollars was
the result of higher unit sales. In 1999, we initiated a supply chain
improvement program designed to reduce time to market, manufacturing
inefficiencies and inventories. There can be no assurances that such
improvement programs will be effective or materially increase our gross profit
margins.
Research and Development. Research and development expenditures consist
primarily of salaries and related expenses of employees engaged in research,
design and development activities. They also include consulting fees, prototype
equipment expenses and the cost of related supplies. Our research and
development expenses were $2.7 million and $2.1 million in the six months ended
June 30, 1998 and 1999. This change
26
<PAGE>
represents a decrease of 22.0%. Research and development expense represented
22.6% and 13.8% of our revenues for the six months ended June 30, 1998 and
1999. The decrease in dollars resulted from the timing of purchases of new
materials and supplies for engineering projects and a reduction of outside
software development consulting services. The decrease in research and
development as a percentage of revenues resulted from cost savings in our
research and development operations along with higher revenues in the six
months ended June 30, 1999.
Selling, General and Administrative. Selling, general and administrative
expense is primarily comprised of salaries and related costs for sales,
marketing, and general and administrative personnel, as well as commissions,
royalties for licensed technology and other non-personnel related expenses. Our
selling, general and administrative expense was $3.3 million and $3.5 million
in the six months ended June 30, 1998 and 1999. This change represents an
increase of 7.0%. Selling, general and administrative expense represented 27.8%
and 23.3% of revenues for the six months ended June 30, 1998 and 1999. The
increase in dollars resulted from higher general business costs.
Amortization. Amortization expense is related to the core technology and
goodwill we acquired from our predecessor company in 1996. See Note 5 of Notes
to Financial Statements. Amortization expense was $2.1 million and $0.1 million
in the six months ended June 30, 1998 and 1999. Amortization expense decreased
in 1999 because we completed our amortization of acquired technology in 1998.
Loss on Early Extinguishment of Debt. In the fourth quarter of 1999 we
expect to record an expense of approximately $450,000 for the write-off of
unamortized deferred financing costs we incurred in connection with the
acquisition of our predecessor company in 1996 and the financing we completed
in November 1998. We will recognize these expenses as a result of our
repayment, from the proceeds of this offering, of all the debt we incurred in
connection with these transactions.
Income Taxes. We use the liability method of accounting for income taxes
prescribed by Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. See Note 12 of Notes to Financial Statements. Our effective
federal and state tax rates differ from the statutory rates because of a
deferred tax valuation equal to the tax effect of temporary differences
adjusted for amounts currently refundable or payable. Since we generated a loss
in the six months ended June 30, 1998, we recorded an income tax benefit of
$0.7 million for federal tax purposes to reflect the carryback for income taxes
paid in 1997. The provision for income taxes of $0.1 million in the six months
ended June 30, 1999 is the result of state tax obligations resulting from the
acquisition of our predecessor company in 1996 that cannot be applied against
tax net operating losses.
Preferred Stock Dividends. We accrued cumulative dividends on our 8%
preferred stock of $247,000 and $269,000 in the six months ended June 30, 1998
and 1999. The increase in accrued dividends resulted from the compounding of
dividends that accrued in prior periods. To date, we have not declared or paid
any dividends.
Results of Operations for the Combined Year Ended December 31, 1996 and the
Years Ended December 31, 1997 and 1998
Revenues. Our revenues were $31.9 million, $35.3 million, and $20.1 million
in the combined year 1996 and in 1997 and 1998. These changes represent an
increase of 10.9% from 1996 to 1997 and a decrease of 43.1% from 1997 to 1998.
The increase in revenues from 1996 to 1997 was primarily due to the
introduction of our MetaPULSE and SpectraLASER families in the second half of
1997 and increased sales of our 300 millimeter wafer measurement products in
1997. The decrease in revenues from 1997 to 1998 was primarily due to lower
sales volume resulting from the downturn in the semiconductor device industry
in 1998, which resulted in reduced capital spending by semiconductor device
manufacturers. Revenues from customers outside of the United States represented
73.8%, 66.0% and 58.2% of our revenues in the combined year 1996 and in 1997
and 1998. Revenues from customers outside of the United States decreased as a
percentage of revenues
27
<PAGE>
from 1997 to 1998 as a result of reduced sales to existing customers in Asia
due to an economic downturn in a number of Asian countries. We expect that
revenues generated from customers outside of the United States will continue to
account for a significant percentage of our revenues. See "Risk Factors--
Because we derive a significant portion of our revenues from sales in Asia, our
sales and results of operations could be adversely affected by the instability
of Asian economies."
Cost of Revenues and Gross Profit. Our gross profit was $17.8 million,
$21.4 million and $6.9 million in the combined year 1996 and in 1997 and 1998.
These changes represent an increase of 20.4% from 1996 to 1997 and a decrease
of 67.7% from 1997 to 1998. Our gross profit represented 55.8%, 60.7%, and
34.5% of our revenues in the combined year 1996 and in 1997 and 1998. The
increase in gross profit margin from 1996 to 1997 resulted primarily from
improved manufacturing efficiencies and lower customer service costs. In 1998,
we recorded an expense of $1.4 million for the writedown of inventory
consisting of excess parts for older product lines and parts which design and
engineering advancements had rendered obsolete. The inventory writedown expense
reduced our gross profit margin for 1998 by 7.0% compared to our gross profit
margin in 1997. The decrease in gross profit margin from 1997 to 1998 was also
attributable in part to the spreading of relatively fixed manufacturing and
service costs over lower revenues and the expansion of our service
infrastructure, including the opening of a branch office in Taiwan.
Research and Development. Our research and development expenditures were
$4.2 million, $5.8 million and $5.1 million in the combined year 1996 and in
1997 and 1998. These changes represent an increase of 38.2% from 1996 to 1997
and a decrease of 11.4% from 1997 to 1998. Research and development
expenditures represented 13.1%, 16.3% and 25.3% of revenues in the combined
year 1996 and in 1997 and 1998. The increases in dollars and percentage in 1997
resulted from increased headcount and prototype equipment cost related to new
product development. The increase in research and development expenditures as a
percentage of revenues in 1998 resulted from lower revenues and our decision to
maintain research and development spending during the downturn in our industry.
The decrease in dollars in 1998 resulted from the cost for prototype equipment
incurred in 1997 with no significant prototype equipment cost recurring in
1998. We anticipate that our research and development expenses will increase in
the future due to planned increases in personnel, consultants and material
costs.
In-Process Research and Development. The acquisition of our predecessor
company resulted in our recording a one-time expense of approximately $3.8
million in 1996 for the write-off of in-process research and development, or
IPRD. The IPRD we acquired related to an optical acoustic metrology technology
that our predecessor company had exclusively licensed in 1995 from the Brown
University Research Foundation. At the time of the acquisition, we determined
that the IPRD had not reached technological feasibility and that it did not
have an alternative future use. Accordingly, we concluded that our ability to
derive future benefit from the IPRD was highly uncertain.
After licensing the technology from Brown, our predecessor company was able
to advance the technology toward technological feasibility by proving, under
laboratory conditions, that the pulsing of ultra-fast lasers could generate
sound waves that could be used to measure multiple layers of metal or opaque
film. At the time of the acquisition we determined that approximately 25% of
the research and development effort required to commercialize the technology
still remained, as we still needed to overcome design and engineering
requirements before a commercial product could be developed. These design and
engineering requirements included developing a compact advanced cooling system
to eliminate laser overheating, laser beam compression systems to reduce the
size of the equipment and automation to handle the movement of materials.
The technology which our predecessor company licensed from Brown ultimately
led to the introduction of our MetaPULSE systems in 1997. Our MetaPULSE systems
provides us with competitive advantages by enabling our customers to measure
multiple layers of metal and opaque thin films simultaneously. Our other
systems do not have this functionality. We began testing the MetaPULSE
prototype in November 1996, and we sold our first MetaPULSE system commercially
in May 1997. We incurred total research and development costs in developing the
MetaPULSE product, excluding the IPRD expense, of approximately $3.7 million.
28
<PAGE>
In valuing the IPRD, we performed a discounted cash flow analysis of our
expected annual revenues from the MetaPULSE technology over a period of
approximately four years. We chose a four-year period based on the historic
revenue trends of our new product introductions. We used expected annual
revenues ranging from approximately $14 million to $23 million, and a risk
rated discount rate of 30.0%.
Selling, General and Administrative. Our selling, general and
administrative expense was $8.5 million, $9.5 million and $7.1 million in the
combined year 1996 and in 1997 and 1998. These changes represent an increase of
11.7% from 1996 to 1997 and a decrease of 25.3% from 1997 to 1998. Selling,
general and administrative expense represented 26.6%, 26.8%, and 35.2% of
revenues in the combined year 1996 and in 1997 and 1998. The increase in
dollars in 1997 resulted from the addition of sales and marketing cost in the
United States as we ended our relationship with our domestic sales
representative and established a direct sales force. The decrease in dollars in
1998 resulted from a reduction in commissions paid to foreign sales
representatives as a result of the semiconductor device industry slowdown and
the Asian economic crisis. This decrease was partially offset by an increase in
royalty costs associated with licensed technology included in one of our new
systems. In 1999, we expect to increase the dollar amount we spend on selling,
general and administrative expenses.
Write-Down of Intangibles. During 1996, after the acquisition of our
predecessor company, the semiconductor device industry began an unforeseen
period of reduced capital equipment purchases. The related industry-wide
downturn in the semiconductor capital equipment industry led to decreased sales
of our products as many customers delayed shipments or canceled orders
altogether. At the same time, we also initiated the development of next
generation systems. In light of these developments, we assessed the
recoverability of one of our intangible assets and a pro-rata share of the
goodwill we acquired from our predecessor company using undiscounted future
cash flows from operations. Based on this analysis, we determined an impairment
for these assets had occurred. We then used discounted expected future cash
flows to determine the net realizable value of these assets, and recorded a
$6.7 million expense to reduce the book value of these assets to their net
realizable value.
Amortization. Our expense for amortization was $3.7 million, $4.2 million
and $4.2 million in the combined year 1996 and in 1997 and 1998.
Interest Expense. Interest expense was $2.1 million, $3.7 million and $4.2
million in the combined year 1996 and in 1997 and 1998, and results from the
substantial debt incurred to finance the purchase of our predecessor company in
June 1996.
Other Income. Included in other income is interest income on cash balances,
miscellaneous nonrecurring income resulting from the disposal of capital
equipment and several other nonrecurring transactions. Other income was
$182,000, $92,000, and $199,000 in the combined year 1996 and in 1997 and 1998.
Provision (Benefit) for Income Taxes. Our provision (benefit) for income
taxes was a provision of $143,000 in combined 1996, a benefit of $614,000 in
1997 and a provision of $613,000 in 1998. The effective income tax rate for
1996 was reduced by our predecessor company's election to be taxed as a S
corporation, thereby resulting only in the incurrence of state taxes. In
addition, we recorded a partial deferred tax valuation allowance for various
temporary differences including a net operating loss carryforward. We computed
our effective tax rate for 1997 and 1998 based on prevailing federal and state
rates adjusted for increases in our deferred tax valuation accounts and for
current taxes payable or refundable during the carryback period.
Preferred Stock Dividends. We accrued cumulative dividends on our 8%
preferred stock of $0.2 million, $0.5 million, and $0.5 million in the combined
year 1996 and in 1997 and 1998. The increase from 1996 to 1997 resulted
primarily from the preferred stock being outstanding for only part of the year
in 1996 and for the entire year in 1997. To date no dividends have been
declared or paid.
29
<PAGE>
Quarterly Results of Operations
The following tables set forth our unaudited selected quarterly results of
operations data for the eight quarters in the period ended June 30, 1999, and
such data expressed as percentages of our revenues for the same periods. This
information has been prepared on the same basis as the audited consolidated
financial statements appearing elsewhere in this prospectus and, in our
management's opinion, contains all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the unaudited
quarterly results of operations set forth below. Results of operations for any
previous quarter are not necessarily indicative of the results to be expected
for the entire year or any future period.
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------
Sep. 30, Dec. 31, Mar. 31, June 30, Sep. 30, Dec. 31, Mar. 31,
1997 1997 1998 1998 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
Statement of Operations: (in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues......................................... $ 9,664 $7,472 $ 6,452 $ 5,420 $ 2,853 $ 5,381 $6,532
Cost of revenues................................. 3,575 3,858 3,300 3,155 2,212 4,512 3,229
------- ------ ------- ------- ------- ------- ------
Gross Profit..................................... 6,089 3,614 3,152 2,265 641 869 3,303
Operating expenses:
Research and development........................ 2,199 1,372 1,225 1,463 1,154 1,254 1,043
Selling, general and administrative............. 2,569 2,261 1,640 1,666 1,502 2,269 1,604
Amortization.................................... 1,052 1,051 1,052 1,051 1,053 1,052 66
------- ------ ------- ------- ------- ------- ------
Total operating expenses....................... 5,820 4,684 3,917 4,180 3,709 4,575 2,713
------- ------ ------- ------- ------- ------- ------
Operating income (loss).......................... 269 (1,070) (765) (1,915) (3,068) (3,706) 590
Interest expense................................. 904 951 994 1,141 1,065 1,010 1,038
Other income..................................... (9) (31) (8) (7) (32) (152) (3)
------- ------ ------- ------- ------- ------- ------
Income (loss) before income taxes............... (626) (1,990) (1,751) (3,049) (4,101) (4,564) (445)
Provision (benefit) for income taxes............ 298 (1,558) -- (699) -- 1,312 93
------- ------ ------- ------- ------- ------- ------
Net income (loss)............................... (924) (432) (1,751) (2,350) (4,101) (5,876) (538)
Preferred stock dividends....................... 119 121 122 125 129 131 133
------- ------ ------- ------- ------- ------- ------
Net income (loss) available to common
stockholders.................................. $(1,043) $ (553) $(1,873) $(2,475) $(4,230) $(6,007) $ (671)
======= ====== ======= ======= ======= ======= ======
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------
Sep. 30, Dec. 31, Mar. 31, June 30, Sep. 30, Dec. 31, Mar. 31,
1997 1997 1998 1998 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
As a Percentage of Revenues:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues................................. 37.0 51.6 51.1 58.2 77.5 83.9 49.4
------- ------ ------- ------- ------- ------- ------
Gross Profit..................................... 63.0 48.4 48.9 41.8 22.5 16.1 50.6
Operating expenses:
Research and development........................ 22.8 18.4 19.0 27.0 40.5 23.3 16.0
Selling, general and administrative............. 26.6 30.3 25.4 30.7 52.6 42.2 24.6
Amortization.................................... 10.8 14.1 16.3 19.4 36.9 19.6 1.0
------- ------ ------- ------- ------- ------- ------
Total operating expenses....................... 60.2 62.8 60.7 77.1 130.0 85.0 41.6
------- ------ ------- ------- ------- ------- ------
Operating income (loss).......................... 2.8 (14.4) (11.8) (35.3) (107.5) (68.9) 9.0
Interest expense................................. 9.4 12.7 15.4 21.1 37.3 18.8 15.9
Other income..................................... (0.1) (0.4) (0.1) (0.1) (1.1) (2.8) (0.1)
------- ------ ------- ------- ------- ------- ------
Income (loss) before income taxes............... (6.5) (26.7) (27.1) (56.3) (143.7) (84.9) (6.8)
Provision (benefit) for income taxes............ 3.1 (20.9) -- (12.9) -- 24.4 1.4
------- ------ ------- ------- ------- ------- ------
Net income (loss)............................... (9.6) (5.8) (27.1) (43.4) (143.7) (109.3) (8.2)
Preferred stock dividends....................... 1.2 1.6 1.9 2.3 4.5 2.4 2.0
------- ------ ------- ------- ------- ------- ------
Net income (loss) available to common
stockholders.................................. (10.8)% (7.4)% (29.0)% (45.7)% (148.2)% (111.7)% (10.2)%
- --------------------------------------------------
======= ====== ======= ======= ======= ======= ======
June 30,
1999
--------
Statement of Operations:
<S> <C>
Revenues......................................... $8,638
Cost of revenues................................. 4,144
--------
Gross Profit..................................... 4,494
Operating expenses:
Research and development........................ 1,054
Selling, general and administrative............. 1,933
Amortization.................................... 65
--------
Total operating expenses....................... 3,052
--------
Operating income (loss).......................... 1,442
Interest expense................................. 1,110
Other income..................................... (26)
--------
Income (loss) before income taxes............... 358
Provision (benefit) for income taxes............ --
--------
Net income (loss)............................... 358
Preferred stock dividends....................... 136
--------
Net income (loss) available to common
stockholders.................................. $ 222
========
<CAPTION>
June 30,
1999
--------
As a Percentage of Revenues:
<S> <C>
Revenues......................................... 100.0%
Cost of revenues................................. 48.0
--------
Gross Profit..................................... 52.0
Operating expenses:
Research and development........................ 12.2
Selling, general and administrative............. 22.4
Amortization.................................... 0.8
--------
Total operating expenses....................... 35.4
--------
Operating income (loss).......................... 16.6
Interest expense................................. 12.9
Other income..................................... (0.3)
--------
Income (loss) before income taxes............... 4.0
Provision (benefit) for income taxes............ --
--------
Net income (loss)............................... 4.0
Preferred stock dividends....................... 1.6
--------
Net income (loss) available to common
stockholders.................................. 2.4%
- --------------------------------------------------
========
</TABLE>
Our operating results have historically been subject to significant
quarterly and annual fluctuations. We anticipate that factors affecting our
future operating results will include the timing of significant orders, the
timing of new product announcements and releases by us or our competitors,
patterns of capital spending by
30
<PAGE>
customers, market acceptance of new and enhanced versions of our products,
changes in pricing by us or in our industry or the markets served by our
customers. In addition, the timing and level of our research and development
expenditures could cause quarterly results to fluctuate. We derive a
substantial portion of our annual revenues from the sales of a relatively small
number of process control metrology systems. Our revenues and operating results
for a period may be affected by the timing of orders received or orders shipped
during a period. See "Risk Factors--Our largest customers account for a
significant portion of our revenues, and our business and operating results
could be harmed by the loss of one or more of these customers or by reductions
or delays in their purchases of our systems."
Our quarterly revenues and gross profit margins decreased quarter over
quarter for the third and fourth quarters of 1997 and the first, second and
third quarters of 1998 as a result of the recent downturn in the semiconductor
device and equipment industries. Our gross profit as a percentage of revenues
decreased in the fourth quarter of 1998 as a result of a $1.4 million charge
for the writedown of inventory consisting of excess parts for older product
lines and parts which design and engineering advances rendered obsolete.
Our research and development expenses were high in the third quarter of
1997 due to increased prototype development costs and in the second quarter of
1998 due to increased material costs for engineering projects. Amortization of
intangibles decreased in the first quarter of 1999 because we completed the
amortization of some of the technology we acquired from our predecessor company
in 1998.
Liquidity and Capital Resources
Since the purchase of our predecessor company in 1996, we have financed our
operations from internally generated funds, sales of equity, and both a
revolving credit facility and long term loans with a related party. Our
principal liquidity requirements are the financing of working capital,
inventories, capital expenditures and debt service.
Net cash generated by operating activities was $1.2 million for the period
from June 14, 1996 to December 31, 1996. Net cash used in operating activities
was $2.0 million, $6.9 million and $0.6 million for 1997, 1998 and for the six
months ended June 30, 1999. The increase in cash used by operating activities
from 1997 to 1998 was due primarily to our funding of net losses and
fluctuations in accounts receivable, inventory and current liabilities. The
decrease from 1998 to June 30, 1999 was due primarily to a decrease in our net
losses as well as the cash impact of fluctuations in accounts receivable,
inventory and current liabilities.
Net cash used in investing activities was $0.1 million, $0.6 million, $0.9
million, and $0.5 million for the period from June 14, 1996 to December 31,
1996, for 1997 and 1998, and for the six months ended June 30, 1999. Capital
expenditures for 1997 were primarily used to upgrade computer systems and for
leasehold improvements to our sales and service facility in California. Capital
expenditures for 1998 and 1999 were primarily used to establish our new
manufacturing and customer training facility in New Jersey. Capital
expenditures for 1999 are not expected to exceed $1.0 million.
Net cash provided by financing activities was $0.5 million, $1.2 million,
$8.0 million and $1.0 million for the period June 14, 1996 to December 31,
1996, the years ended December 31, 1997 and 1998, and the six months ended June
30, 1999, and was principally provided by loans and an equity investment by a
related party.
In June 1996, our predecessor company was purchased in a leveraged
transaction. In order to finance the transaction, we issued a senior term note
and a senior subordinated note in the principal amounts of $16.0 million and
$11.0 million. We also issued $1.5 million of common stock and $5.4 million of
preferred stock. The senior term note bears interest at an annual rate of prime
plus 1.75%, with the principal required to be repaid on a quarterly basis from
1997 to 2002. The senior subordinated note bears interest at an annual rate of
prime plus 4.0%, with the principal to be repaid in its entirety in 2003. Our
preferred stock accrues dividends cumulatively at a rate of 8% per year. No
dividends on the preferred stock have been declared or paid.
In conjunction with our issuance of the senior notes, we obtained a
revolving line of credit with the same related party in an aggregate principal
amount not to exceed $8.0 million. The maximum amount of the revolving line of
credit was increased to $12.0 million in 1998. At June 30, 1999, available
borrowings under this revolving line of credit totaled $2.7 million.
31
<PAGE>
In July 1998, we issued 4,115,021 shares of Class A common stock and Class
B common stock with proceeds of $3.0 million. The shares of common stock were
offered to our existing stockholders in a private transaction. The proceeds
from the issuance of the capital stock were used for general corporate
purposes.
In November 1998, we issued a junior subordinated note in the principal
amount of $7.0 million, of which we had been advanced a total of $6.4 million
as of June 30, 1999. The unpaid principal amount of the junior subordinated
note bears interest at an annual rate of 14%. The junior subordinated note
matures on July 31, 2001.
We may at any time prepay, without premium or penalty, all or any portion
of our outstanding debt. We intend to apply a substantial portion of the net
proceeds of this offering to the repayment in full of the principal and accrued
interest on our outstanding debt. See "Use of Proceeds."
We believe that the net proceeds from this offering, a working capital line
of credit which we expect to obtain before this offering and cash generated
from operations, if any, will be adequate to meet our anticipated cash needs
for working capital and capital expenditures for the twelve months following
this offering. Historically, we have received financial support from our
stockholders. Because of the operating losses we reported in 1998 and 1999, we
would not have been in compliance with the financial ratios we are required to
maintain under the terms of our outstanding debt had our lender not waived such
noncompliance through June 30, 1999. We anticipate that we will not be in
compliance with these ratios through the date of this offering.
Our future capital requirements will depend on many factors, including the
timing and amount of our revenues and our investment commitments, which will
affect our ability to generate additional cash. Thereafter, if cash generated
from operations and financing activities is insufficient to satisfy our working
capital requirements, we may seek additional funding through bank borrowings,
sales of securities or other means. There can be no assurance that we will be
able to raise any such capital on terms acceptable to us or at all.
Year 2000 Issue
The "Year 2000 Issue" refers generally to the problems that some software
may have in determining the correct century of the year. Many existing
electronic systems, including computer systems, use only the last two digits to
refer to a year. Therefore, these systems may recognize a date using "00" as
1900 rather than the year 2000. If not corrected, these electronic systems
could fail or create erroneous results when addressing dates on and after
January 1, 2000.
In assessing the potential effect of the Year 2000 Issue on us, we
determined that we needed to evaluate four general areas:
.Supplier relationships;
.Internal infrastructure;
.Products sold to customers; and
.Other third-party relationships.
Supplier Relationships. We identified our significant suppliers and
subcontractors and asked them to provide us with an assessment of their Year
2000 readiness. To date, we have received responses from a substantial majority
of our key suppliers, most of which indicated that they are in the process of
developing and implementing remediation plans. However, we have no means of
ensuring that suppliers and subcontractors will be Year 2000 ready. The
inability of suppliers or subcontractors to complete their Year 2000 resolution
process in a timely fashion could seriously harm our operating results. We are
unable to determine the effect of non-compliance by suppliers or
subcontractors.
32
<PAGE>
Internal Infrastructure. The Year 2000 Issue could also affect our internal
systems, including both our information technology and non-information
technology systems. We have completed an assessment of our material internal
information technology systems, including third-party software and hardware
technology. Based upon representations received from these third-party software
and hardware suppliers, and in some instances the implementation of Year 2000
software upgrades, we do not believe that our material internal information
technology systems will be affected by the Year 2000 Issue. We have also
initiated an assessment of our non-information technology internal systems,
such as our test equipment. Based on our preliminary assessment, we do not
believe that our non-information technology internal systems will be affected
by the Year 2000 Issue. However, we may experience serious unanticipated
problems and costs caused by undetected errors or defects in the technology
used in our internal information technology and non-information technology
systems.
Products Sold to Customers. We have completed our inventory and assessment
of our products' Year 2000 readiness utilizing testing guidelines prepared by
Sematech, a consortium of suppliers to worldwide semiconductor manufacturers.
Our new products are designed to be Year 2000 ready, but some of our older
products will require upgrades for Year 2000 readiness. We have completed
upgrades for our product, and have made these upgrades available to our
customers. Notwithstanding such efforts, any failure of our products to
perform, including system malfunctions due to the onset of Year 2000, could
result in claims against us, which could distract our management and seriously
harm our business and operating results. Moreover, our customers could choose
to convert to other Year 2000 ready products in order to avoid such
malfunctions, which could also seriously harm our business and operating
results.
We do not currently have any information concerning the Year 2000
compliance status of our customers. Our current or future customers may incur
significant expenses to achieve Year 2000 compliance. If our customers are not
Year 2000 compliant, they may experience significant costs to remedy problems,
or they may face litigation costs. In either case, the Year 2000 Issue could
reduce or eliminate the budgets that current or potential customers could have
for purchases of our products and services. As a result, our business and
operating results could be seriously harmed.
Other Third-Party Relationships. We rely on outside vendors for utilities
and telecommunication services as well as climate control, building access and
other infrastructure services. We are not capable of independently evaluating
the Year 2000 compliance of the systems utilized to supply these services. We
cannot assure you that these suppliers will resolve any or all Year 2000-
related problems with these systems before the occurrence of a material
disruption to our business. Any failure of these third parties to resolve Year
2000-related problems with their systems in a timely manner could harm our
business and operating results.
We have not developed a contingency plan to address situations that may
result if we are unable to achieve Year 2000 readiness of our critical
operations, and we do not plan to do so in the future. Any investigations we
have undertaken with respect to the Year 2000 Issue have been funded from
available cash, and these costs have not been separately accounted for. To
date, these costs have not been significant, and we do not expect that our
future expenditures for Year 2000 remediation will be material.
Impact of Recent Accounting Pronouncements
During June 1998, as amended in July 1999 for Statement No. 137, the
Financial Accounting Standards Board issued Statement No. 133, "Accounting for
Derivative Investments and Hedging Activities," known as SFAS 133. Based on our
current operations, we have concluded that the future adoption of SFAS 133 will
have no impact on our operations or financial position.
33
<PAGE>
BUSINESS
Overview
We are a worldwide leader in the design, development, manufacture and
support of high-performance process control metrology systems used in
semiconductor device manufacturing. Our proprietary systems measure the
thickness and other properties of thin films applied during various steps in
the manufacture of integrated circuits, enabling semiconductor device
manufacturers to improve yields and reduce overall production costs. We provide
our customers with a full-fab metrology solution by offering families of
systems that meet their transparent and opaque thin film measurement needs in
various applications across the fabrication process. Our two primary families
of metrology solutions offer leading-edge metrology technology, flexible
systems cost-effectively designed for specific manufacturing applications and a
common production-worthy automation platform, all backed by worldwide support.
Our objective is to be the premier worldwide provider of thin film
metrology systems to semiconductor device manufacturers. To extend our
technology leadership position, we intend to continue to invest in research and
development. In addition, we plan to focus our resources, including our global
support network, on understanding the needs of leading semiconductor device
manufacturers in order to best position ourselves to be the system of choice
when device manufacturers and foundries upgrade their fabrication techniques in
response to advances in semiconductor technology. We also intend to leverage
our technical heritage and extensive thin film measurement expertise to expand
our customer relationships and to continue to develop complementary metrology
applications.
Since 1940, our technological leadership has earned us a reputation for
metrology excellence, and we believe that we have the largest installed base of
ellipsometers in the world. Our customers include most major semiconductor
device manufacturers worldwide, including Intel, AMD, Chartered Semiconductor,
Fujitsu, Hyundai, IBM, Lucent, Philips, Samsung, ST Microelectronics, Texas
Instruments, TSMC, Toshiba and UMC.
Industry Background
Growth of the Semiconductor Market
The semiconductor industry has experienced significant growth over the past
decade. Industry analysts estimate that despite year-to-year fluctuations,
worldwide semiconductor sales will increase from approximately $124 billion in
1998 to approximately $229 billion in 2002. This increase in demand is driven
by growth in traditional markets for semiconductors such as data processing,
including personal computers, and telecommunications, especially wireless
communications. The explosive growth of Internet usage and the proliferation of
advanced consumer electronic products have also increased demand, and have made
semiconductors virtually ubiquitous in most electronic products.
The Semiconductor Device Manufacturing Process
Semiconductor integrated circuits, commonly called ICs or chips, consist of
components, typically transistors, along with interconnect circuitry that
connects the components. ICs are manufactured on silicon bases called wafers,
which are processed through a series of machines where they are ground smooth
and chemically polished. They then become the starting material for
fabrication, the central process in manufacturing integrated circuits.
Fabrication involves several complex and repetitive processing steps,
including diffusion, photolithography, deposition, etching, chemical mechanical
planarization (CMP) and ion implantation, during which numerous copies of an
integrated circuit are formed on a single wafer. These processes are constantly
monitored and wafers are measured at each step to ensure that chips are
fabricated to exacting specifications in a cost-effective manner. The
fabrication process typically creates eight to 30 very thin patterned layers on
each wafer, which are then cut into individual chips or die.
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[Diagram of the fabrication process]
Initially, a wafer is pre-cleaned using high-purity, low-particle chemicals
and then heated and exposed to ultra-pure oxygen in diffusion furnaces under
carefully controlled conditions. This diffusion process forms a silicon dioxide
film of uniform thickness on the surface of the wafer. The wafer is then
subjected to deposition, a process in which very thin films of either
electrically insulating or electrically conductive material are deposited on
its surface. Insulating films, or dielectrics, are primarily transparent, while
conductive films are primarily opaque. The three principal methods of
deposition are chemical vapor deposition (CVD), physical vapor deposition (PVD)
and electrofill. Deposition of multiple layers of thin films creates
electrically active regions in the wafer and on its surface. Depending on the
specific design of an integrated circuit, film thickness will vary and
different numbers of layers and film types will be utilized to achieve a
targeted performance level.
The deposition of these film layers occurs in series with other processes
that create circuit patterns, remove portions of film layers, implant
electrically charged ions and perform other functions such as heat treatment,
measurement and inspection. Photolithography, for example, is used to create
circuit patterns on the face of the wafer. A light-sensitive film, called
photoresist, is applied to the wafer, which is exposed to intense light. The
wafer is then "developed" when the exposed photoresist is removed to expose
newly created circuit patterns.
The developed wafer may be exposed to a chemical solution or plasma so that
areas not covered by the hardened photoresist are etched away. This etching
process selectively removes material from the surface of the wafer to create
device structures. To meet the processing challenges posed by new materials
such as copper, manufacturers are increasingly using a new process step, CMP,
in place of etching. CMP removes uneven film material from the wafer, creating
an extremely flat surface for the patterning of subsequent film layers. The
wafer can also be subjected to an ion implantation process, in which
electrically charged ions are introduced into selected areas on the wafer to
alter the electrical characteristics of the resulting device.
This series of processes is repeated several times until the last layer of
structures on the wafer is completed. After completion of the last layer, a
passivation coating is applied to protect the circuit from damage and
contamination. Openings are etched in this film to allow access to the top
layer of metal by electrical probes and wire bonds. The functionality of each
chip on the wafer is then inspected and tested before shipment.
Rising Demand for Process Control Metrology Systems
Process control metrology is used by semiconductor device manufacturers to
analyze product and process quality at critical steps in the integrated circuit
manufacturing process in order to identify, diagnose and minimize fabrication
defects. Dataquest estimates that sales of process control metrology systems
and tools will increase at a compound annual growth rate of 22.9% from
approximately $1.8 billion in 1998 to approximately $4.1 billion in 2002. We
believe that thin film measurement metrology constitutes between 15% and 25% of
this market.
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The semiconductor device manufacturing industry is experiencing several
trends that are increasing the demand for process control metrology systems and
heightening the need for metrology technology that can deliver a higher degree
of accuracy and repeatability:
Transition to Copper. Copper metal layers are increasingly replacing
aluminum as the interconnect of choice for advanced integrated circuits. While
copper has greater performance potential than aluminum, its use requires new
challenging processing methodologies.
Development of Smaller Feature Geometries. The development of smaller
feature geometries, 0.18 micron and below, enables device manufacturers to
produce greater numbers of integrated circuits, or die, per wafer. Yet as
geometry linewidths decrease, manufacturing yields become increasingly
sensitive to the magnitude of processing defects.
Migration to 300 Millimeter Wafers. The migration to larger wafer sizes,
200 millimeter wafers today and moving to 300 millimeters, scales the rate at
which semiconductor device manufacturers can produce integrated circuits, also
known as throughput, by vastly increasing the number of die per wafer.
Nevertheless, processing larger wafers both expands the complexity of
manufacturing and increases the cost of manufacturing process mistakes.
Introduction of Chemical Mechanical Planarization. The introduction of new
manufacturing processes, such as CMP in place of etch, is increasing the
complexity of some processing steps, heightening the need for more accurate
measurement and process control.
Transition to New Dielectrics. Semiconductor device manufacturers are
utilizing new materials such as low-k and high-k dielectrics to improve device
performance. Both memory and logic device manufacturers are requiring new
metrology solutions to help control the electrical capacitance of these
advanced transparent films.
Shortening of Product Life Cycles. The product life cycles of semiconductor
devices continues to shorten, making the early achievement of high
manufacturing yields critical to device manufacturers' profitability. The
maximization of yields, or the number of good die per wafer, requires the use
of metrology across the fab to ensure that manufacturing processes are accurate
and can be repeated on a consistent basis without a disqualifying level of
defects, known as repeatability.
Traditional Process Control Metrology Systems and Their Limitations
Metal and Opaque Thin Film Metrology Systems. Traditional process control
metrology systems for measuring metal and other opaque thin films can generally
be divided into contact and non-contact techniques. Contact techniques include:
. four-point probes, which are instruments that measure the resistivity of
thin films by contacting the film with four closely spaced metal probes;
. sectioning technologies, which analyze samples made by cutting the wafer
for measurement; and
.profilometry, in which a stylus is scanned over the surface of a test
wafer.
Existing non-contact, non-destructive metal and opaque metrology techniques
include surface acoustic and x-ray technologies.
Traditional metrology systems utilizing these technologies have had limited
success meeting the accuracy and repeatability demands of new manufacturing
processes such as CMP and new materials such as copper. The efficacy of these
systems is further strained by the ever shrinking feature sizes and geometries
of integrated circuits. In addition, while semiconductors composed of multi-
layer film stacks are becoming increasingly common, existing metrology systems
are generally incapable of simultaneously measuring more than two layers in
these stacks.
Finally, the industry is moving away from using contact techniques, which
require the use of non-productive test wafers, toward using non-contact
techniques to measure product wafers. The transition to
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measuring product wafers is being driven by manufacturers' inability to
adequately control the manufacturing process using test wafers alone as well as
the costs associated with the processing and destruction of test wafers.
Transparent Thin Film Metrology Systems. The most widely used technologies
to measure the thickness and properties of transparent thin films have been
reflection spectrometry and ellipsometry. Reflection spectrometers, or
reflectometers, use software algorithms to analyze the wavelength of light
reflected from the surface of a wafer after the light has passed through one or
more transparent films. Ellipsometers measure the change of polarization of
reflected light from the surface of a wafer.
Both ellipsometry and reflection spectrometry suffer from accuracy and
efficiency problems analogous to those posed for metal and opaque metrology
systems. In the case of transparent thin films these problems are exacerbated
by the fact that recent generations of film deposition tools are depositing
several films at one time, requiring measurements of stacked multi-layer films.
However, in most applications reflectometers are more suitable for measuring
thicker films whereas ellipsometers are more suitable for measuring very thin
films. Thus, neither system alone generates sufficient data to simultaneously
determine the thicknesses and other properties of film stacks with the
precision and repeatability device manufacturers demand.
The Rudolph Full-Fab Solution
We are a worldwide leader in the design, development, manufacture and
support of high-performance process control metrology systems used in
semiconductor device manufacturing. Our proprietary systems non-destructively
measure the thickness and other properties of thin films applied during various
steps in the manufacture of integrated circuits, enabling semiconductor device
manufacturers to increase yields and lower overall production costs. We provide
our customers with a flexible full-fab metrology solution by offering families
of systems that meet their transparent and opaque thin film measurement needs
in various applications across the fabrication process. Our two primary
families of metrology solutions offer leading-edge metrology technology,
flexible systems cost-effectively designed for specific manufacturing
applications and a common production-worthy automation platform, all backed by
worldwide support.
We design our systems with the flexibility to allow our customers to mix
and match tools both within and across our product lines to provide cost-
effective solutions that meet their specific manufacturing applications. Our
primary transparent and opaque thin film measurement systems are all built on
our production-worthy Vanguard common automation platform, which has been in
production since the spring of 1997. The Vanguard platform, which provides a
common software system, user interface, and hardware base for our systems,
received the Editor's Choice Award for Best Product by Semiconductor
International in 1998. We also provide our customers with direct service and
application support worldwide, which is dedicated to ensuring tool uptime and
promoting additional applications for our solutions across the fab.
Metal and Opaque Thin Film Measurement Solutions. Our MetaPULSE family of
metrology systems incorporates our proprietary technology for optical acoustic
metrology, which allows customers to simultaneously measure the thickness and
other properties of up to six metal or other opaque film layers in a non-
contact manner on product wafers. By minimizing the need for test wafers,
MetaPULSE enables our customers to achieve significant cost savings. We believe
that we currently offer the only systems that can non-destructively measure up
to six metal film layers with the degree of accuracy semiconductor device
manufacturers demand.
Our MetaPULSE systems use ultra-fast lasers to generate sound waves that
pass down through a stack of metal or opaque films such as copper and aluminum,
sending back to the surface an echo which is detected and analyzed. These
systems precisely measure the films with Angstrom accuracy and sub-Angstrom
repeatability at high throughputs. This accuracy and repeatability is critical
to semiconductor device manufacturers' ability to achieve higher manufacturing
yields with the latest fabrication processes.
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In addition to measuring thickness, MetaPULSE systems provide critical
information about the properties of a film stack, such as detection of missing
layers during deposition, which is not available from traditional single-layer
test wafer metrology. We therefore believe that MetaPULSE offers significant
cost and performance advantages to customers depositing multi-layer film
stacks. As the industry moves toward the widespread adoption of copper
metalization, we believe that MetaPULSE systems will become even more widely
used to control device process parameters.
Transparent Film Measurement Solutions. Our SpectraLASER line of
transparent film metrology systems provides precise and repeatable measurements
of an ever-increasing library of new thin films by incorporating our
proprietary and patented ellipsometer technology. Our patented technology,
which uses four lasers operating simultaneously at multiple angles and
wavelengths, provides our systems with an inherently stable design,
significantly improving the repeatability of the original manufacturing
process. In addition, our use of long life solid state lasers rather than the
traditional white light sources of competitive systems reduces maintenance
costs and minimizes the cost and time required to re-qualify a light source
when it is replaced. SpectraLASER systems can also incorporate reflectometry
technology, which is often more suitable for measuring thicker films. The
addition of reflectometry technology to our SpectraLASER systems allows
simultaneous measurement using both technologies, addressing a trend in the
industry to use film stacks composed of an increasing number of layers of
different films without compromising throughput in the fab.
To complement our SpectraLASER family of transparent film metrology
systems, we have developed our Matrix Metrology family of systems, which we
plan to introduce in September 1999 at the Semicon Taiwan industry conference.
These systems incorporate advanced ellipsometry and reflectometry technologies.
Each model is specifically configured in its hardware and software architecture
to provide an optimized metrology solution for a specific semiconductor process
application, such as CMP, diffusion or etch. Our Matrix Metrology line, when
combined with our existing families of metrology systems, is designed to
provide customers with a flexible full-fab line of metrology solutions for
transparent and opaque thin films, all built on our award-winning Vanguard
automation platform.
Strategy
Our objective is to be the premier worldwide provider of advanced thin film
measurement metrology solutions for the semiconductor device manufacturing
industry. Key elements of this strategy include:
Extend Technology Leadership. We believe that our proprietary technology
and our extensive metrology expertise provide us with a technological advantage
over competing thin film metrology system manufacturers. We further believe
that technical innovation will continue to be one of the leading drivers for
market acceptance of new metrology systems in an industry characterized by
rapid product life cycles and continuous semiconductor performance gains.
Accordingly, we intend to continue to invest in research and development to
extend our technology leadership position. We currently have 15 holders of
Ph.D. degrees and six holders of M.S. degrees on our 45-member development
staff, representing over 40% of this staff. In addition, we maintain a close
relationship with Brown University, which we use to leverage our technology
development efforts. We may also acquire complementary technologies and form
new strategic alliances to further expand our technology expertise.
Focus on Understanding the Needs of Leading Semiconductor Device
Manufacturers. We intend to maintain our emphasis on the needs of leading
semiconductor device manufacturers. We focus our resources on understanding
selected customers through close technical relationships at the operating and
management levels. We believe this strategy provides us with a first-mover
advantage in developing and qualifying products at each technology inflection
point when our customers alter their fabrication techniques in response to
advances in semiconductor technology. Due to the high costs of technical
modifications and production line downtime, semiconductor device manufacturers
are reluctant to switch to competing vendors' technologies during the life of a
production line, which underscores the importance of being selected for next-
generation products. Further,
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the selection of our systems by recognized industry leaders is an endorsement
which enhances our ability to market our metrology systems to a broader set of
semiconductor device manufacturers.
Increase Sales to Existing Customers. We intend to continue to develop and
expand our extensive customer relationships in order to increase sales of new
systems. Tracing our technical heritage to 1940, we have developed a
longstanding reputation for technological leadership as a global producer of
highly accurate and reliable systems. We believe that we have the largest
installed base of ellipsometers in the world, and that our ellipsometry
metrology systems are used by most major semiconductor device manufacturers.
Our access to such a wide base of current customers and our brand-name
recognition provide an opportunity for increased sales of additional systems to
our customers without the extensive efforts that would otherwise be required
when approaching new customers.
Seek Opportunities for Strategic Alliances and Joint Development
Arrangements. We expect to continue to strengthen our existing customer
relationships by seeking opportunities for strategic alliances and joint
development arrangements with our customers. Our customers include virtually
all of the leading semiconductor device manufacturers with their world-class
research and development organizations. We believe that we can significantly
leverage our resources in this area through alliances with these customers.
Further, we believe that pursuing joint development arrangements with these
leading manufacturers will provide us with critical insight into semiconductor
industry trends, and could lead to the development of new systems with broad
market appeal.
Develop Complementary Metrology Applications. We plan to leverage our
extensive thin film measurement expertise to develop complementary metrology
applications. The addition of complementary product offerings will enhance our
ability to provide a full-fab solution for a variety of metrology applications.
We have, for example, built upon our dominance in metrology used for the
diffusion process to develop our Matrix Metrology line of systems optimized for
the CMP, diffusion and etch processes. In addition, we have applied our
technology for the semiconductor device manufacturing process to develop
applications for the magnetic storage industry, such as measuring the thin
films applied during the manufacture of hard disk drive storage heads. The
modular architecture of the Vanguard platform is designed to enable
incorporation of new applications with our current systems in a rapid and cost-
effective manner, thereby decreasing downtime and increasing productivity of
our customers.
Capitalize on Our Global Customer Support Network. We presently maintain a
worldwide network of sales, service, and applications centers with a highly
trained technical and commercial support staff. We intend to continue to invest
in this worldwide customer support network. This network, combined with our
core team of product technical specialists in New Jersey, has led to our
receiving the top ranking among our thin film metrology competitors for the
past four years in the annual VLSI Customer Satisfaction Survey. We will
continue to provide our customers with dedicated, comprehensive support before,
during and after the sale of our systems.
Technology
We believe that our expertise in engineering, research and development
enables us to rapidly develop new technologies and products in response to
emerging industry trends. The breadth of our technology enables us to offer our
customers a combination of measurement technologies, which we believe is
critical for today's advanced thin film metrology applications.
Optical Acoustics. Optical acoustic metrology involves the use of ultra-
fast laser induced sonar for metal and opaque thin film measurement. This
technology sends ultrasonic waves into multi-layer opaque films, then analyzes
the resulting echoes to determine the thickness of each individual layer
simultaneously. The echo's amplitude and phase can be used to detect film
properties, missing layers and interlayer problems. Since different phenomena
affect amplitude and phase uniquely, a variety of interlayer problems can be
detected and measured.
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The use of optical acoustics to measure multi-layer metal and opaque films
was pioneered by scientists at Brown University in collaboration with us. The
proprietary optical acoustic technology in our MetaPULSE systems measures the
thickness of single or multi-layer opaque films ranging from less than 20
Angstroms to greater than five microns. It provides these measurements at a
rate of 60 wafers per hour with one to two percent accuracy and 0.5%
repeatability. Our optical acoustic technology also enables our MetaPULSE
systems to measure film properties on product wafers at existing test sites by
using small measurement spots of only ten microns in combination with pattern
recognition software algorithms.
Ellipsometry. Ellipsometry is a non-contact, non-destructive optical
technique for transparent thin film measurement. When a surface or interface is
struck by polarized light, ellipsometers measure the change in the reflected
light's polarization. By measuring at multiple wavelengths, an ellipsometer can
determine multiple properties of transparent films. The combination of multiple
angles of incidence and multiple wavelength ellipsometry also allows accurate
and reliable measurement across a wide range of thicknesses and a wide variety
of films and film stacks.
Since 1977, when we introduced our AutoEL, the industry's first production-
oriented, microprocessor-based ellipsometer, we have been an industry leader in
ellipsometry technology. We hold patents on several ellipsometry technologies
developed by our engineers, including our proprietary technique which uses four
lasers for multiple angle of incidence, multiple wavelength ellipsometry.
Incorporating this proprietary technology, our SpectraLASER systems provide the
accuracy and analytical power of research-grade spectroscopic ellipsometers
together with the high throughput required for production applications.
Reflectometry. For applications requiring broader spectrum coverage, some
ellipsometry tools are also equipped with a reflectometer. Reflectometry uses
white light to determine the properties of transparent thin films by analyzing
the wavelength of light reflected from the surface of a wafer. This light is
analyzed with software algorithms to determine film thickness and, in some
cases, other material properties of the measured film. Reflectometry is often
more suitable for measuring thicker films, whereas ellipsometry is often more
suitable for measuring very thin films. Thus, neither system alone is capable
of accurate and reliable measurements over the full range of film thickness.
Using state-of-the-art deep ultraviolet reflectometers along with our
proprietary ellipsometry tools, our SpectraLASER systems have the ability to
simultaneously measure the thickness and optical properties of films ranging in
thickness from 20 Angstroms to several microns. When introduced, our Matrix
Metrology systems will also incorporate next-generation reflectometry
technology to enhance their metrology performance in a broad range of
semiconductor device manufacturing applications.
Products
Our thin film measurement systems are non-contact, non-destructive
metrology systems capable of measuring thin film properties across the wafer
with a high degree of precision and repeatability. Our thin film measurement
solutions consist of five product families, three of which are built on our
Vanguard automation platform. In 1977 we introduced the industry's first
production-oriented, microprocessor-based ellipsometer, the AutoEL. As
semiconductor device manufacturing technology continued to advance rapidly, we
developed our second product family, the FOCUS ellipsometer. More recently, we
introduced two additional product families, the SpectraLASER family of
transparent thin film measurement systems and the MetaPULSE family of systems
for measuring metal and other opaque films. Finally, at the Semicon Taiwan
industry conference in September 1999, we plan to introduce our new line of
Matrix Metrology systems optimized for the CMP, diffusion and etch processes.
All of our SpectraLASER, MetaPULSE and Matrix Metrology systems will be
produced on our common Vanguard automation platform.
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The following table summarizes various features of our principal products:
<TABLE>
<CAPTION>
Year of
Product Line Introduction Principal Applications Price Range
- ---------------- ------------ ------------------------- ---------------------
<S> <C> <C> <C>
MetaPULSE
Systems 1997 $900,000-$1.6 million
MetaPULSE 200
(five
models) Deposition, CMP, CVD, PVD
MetaPULSE 300
(five
models) Deposition, CMP, CVD, PVD
SpectraLASER
Systems 1997 $350,000-$900,000
SpectraLASER CMP, Diffusion, CVD, PVD,
200 (four Lithography, Etch
models)
SpectraLASER CMP, Diffusion, CVD, PVD,
300 (four Lithography, Etch
models)
Matrix Metrology
Systems 1999 $400,000-$1.0 million
Matrix
Metrology
S200 CMP CMP
Matrix
Metrology
S200 Etch Etch
Matrix
Metrology
S200
Diffusion Diffusion
Matrix
Metrology
S300 CMP CMP
Matrix
Metrology
S300 Etch Etch
Matrix
Metrology
S300
Diffusion Diffusion
FOCUS Series 1991 $200,000-$600,000
FOCUS FE III Diffusion, Etch, CMP, CVD
FOCUS FE VII Diffusion, Etch, CMP, CVD
CALIBER 300 Diffusion, Etch, CMP, CVD
AutoEL Series 1977 $20,000-$100,000
AutoEL III
Ellipsometer Diffusion, Thin Films
AutoEL IV
Ellipsometer Diffusion, Thin Films
</TABLE>
MetaPULSE
Our MetaPULSE product family uses non-destructive optical acoustic
technology to simultaneously measure up to six layers of metal or other opaque
thin films with a broad range of thicknesses. Because it requires only a ten
micron measurement spot, MetaPULSE is able to deliver reliable measurement on
existing test spots on product wafers, reducing the cost associated with using
test wafers. MetaPULSE can also detect many problems and film properties that
remain invisible to traditional single-layer metrology systems. To date, we
have sold or received orders for over 35 MetaPULSE systems worldwide, including
some that have been deployed in copper interconnect production applications.
MetaPULSE 200. Our MetaPULSE 200 system is the first production metal and
opaque thin film metrology system that simultaneously measures up to six layers
in a multi-layer metal film stack while providing early detection of problems
due to missing layers, poor adhesion and interlayer reaction and the roughness
of top and buried layers. It delivers the Angstrom accuracy and sub-Angstrom
repeatability demanded by semiconductor device manufacturers at high throughput
of up to 60 product wafers per hour.
MetaPULSE 300. Our MetaPULSE 300 incorporates all of the features of our
MetaPULSE 200 system and is configured to measure 300 millimeter product
wafers.
SpectraLASER
Our SpectraLASER family of transparent thin film measurement systems
incorporates our proprietary ellipsometry techniques, which uses multiple angle
of incidence, multiple wavelength ellipsometry to deliver the accuracy and
analytical power of research-grade spectroscopic ellipsometers with the high
throughput required for production applications. SpectraLASER's four-laser
array provides ellipsometry at wavelengths across the spectrum from deep blue
to near infrared, a broader range of wavelengths than most competitive systems.
These features give our SpectraLASER systems the analytical power to quickly
and easily characterize new processes, solve film metrology problems and
qualify new process tools. Our SpectraLASER systems combine these ellipsometry
technologies with a deep ultraviolet reflectometer, enabling them to measure a
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broader range of film thicknesses and enhancing their ability to handle current
and future generation lithography applications.
The laser light sources employed by our SpectraLASER systems allow them to
provide repeatable measurements for powerful transparent film process control.
Intense laser light allows fast, small-spot measurements on product wafers in
CMP, CVD, diffusion, lithography and etch applications. Unlike the white light
sources used in many competing products, which begin to degrade in weeks and
require lamp changes every few months, the solid state lasers in our
SpectraLASER systems deliver stable light output for two to three years. In
addition, because a laser light source is preconfigured to emit light at a
particular wavelength, users of our SpectraLASER systems need not undergo a
lengthy recalibration process each time they replace a light source.
SpectraLASER 200. Our SpectraLASER 200 simultaneously emits laser light at
multiple wavelengths and uses multiple angles of incidence for data
acquisition, measuring a spectrum of optical properties at each wavelength. The
SpectraLASER 200 accepts 100 millimeter and 200 millimeter wafers at throughput
of up to 100 wafers per hour.
SpectraLASER 300. Our SpectraLASER 300 incorporates all of the features of
our SpectraLASER 200 product, and accepts 200 millimeter and 300 millimeter
cassettes or 300 millimeter pod loaders at throughput of up to 80 wafers per
hour.
Matrix Metrology Systems
Our Matrix Metrology systems will further enhance our full-fab solution and
allow our customers to mix and match technologies to fit their production
needs. We plan to offer several specialized Matrix Metrology systems designed
for use in specific semiconductor device manufacturing applications. These
Matrix Metrology systems will include:
Matrix Metrology S200 CMP. Our Matrix Metrology S200 CMP system, designed
for use in the CMP phase of the semiconductor device manufacturing process,
will offer a high throughput 120 wafer-per-hour visible reflectometer and a 110
wafer-per-hour long life helium neon gas laser ellipsometer.
Matrix Metrology S200 Etch. Our Matrix Metrology S200 Etch system, designed
for use in the etch phase of the semiconductor device manufacturing process,
will have all of the features of the S200 CMP product, and will also provide
customers with a 780 nanometer ellipsometer.
Matrix Metrology S200 Diffusion. Our Matrix Metrology S200 Diffusion
system, designed for use in the diffusion phase of the semiconductor device
manufacturing process, will have all of the features of our S200 Etch and S200
CMP systems, along with a 458 nanometer ellipsometer and a deep ultraviolet
190-470 nanometer reflectometer.
Matrix Metrology S300 CMP, Etch and Diffusion. Our Matrix Metrology S300
CMP, Etch and Diffusion systems will incorporate all of the features of our
Matrix Metrology S200 CMP, Etch and Diffusion systems and will be configured to
measure 300 millimeter product wafers.
Vanguard Automation Platform
Our Vanguard automation platform provides a common hardware, software and
automation system for our MetaPULSE, SpectraLASER and Matrix Metrology
families. The modular nature of the Vanguard platform will enable our customers
to upgrade their MetaPULSE, SpectraLASER and Matrix Metrology systems and
integrate new applications into their existing systems in a rapid and cost-
effective manner. By using the same Vanguard platform, our customers can
minimize the amount of equipment configuration and employee training required
to modify their metrology systems in response to changing production demands.
Our Vanguard automation platform was awarded the Editor's Choice Award for Best
Product by Semiconductor International in 1998.
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FOCUS Series
In the early 1990s, semiconductor manufacturing technology advanced rapidly
with the proliferation of 200 millimeter wafers and line widths under one
micron. In response to this industry trend, we introduced the FOCUS
ellipsometer family. Based on our patented Focused Beam measurement technology,
our FOCUS series of ellipsometers offered increased repeatability and accuracy
as well as a greater degree of automation and cleanliness for our customers. We
believe that the ability to handle complex applications has made our FOCUS
ellipsometers an industry standard in film thickness metrology.
FOCUS FE III. Our FOCUS FE III system provides a low cost 100 to 200
millimeters automated ellipsometer using our dual wavelength Focused Beam
technology. It directly measures sample wafers with a small spot at multiple
angles of incidence.
FOCUS FE VII. Our FOCUS FE VII system is designed for high volume, sub-
micron device manufacturing requiring superior film thickness and index of
refraction measurements in diffusion, etch, CMP and CVD applications. Using the
same type of Focused Beam technology as the FOCUS FE III, our FOCUS FE VII can
provide accurate results for both film composition and film thickness.
CALIBER 300. Our Caliber 300 was one of the first commercial, production-
oriented ellipsometers to measure 300 millimeter wafers. Caliber 300 combines
our patented Focused Beam technology with an ultra-fast wafer handler.
AutoEL Series
In 1977, our predecessor company developed the industry's first production-
oriented, microprocessor-based ellipsometer, the AutoEL. Our AutoEL series of
ellipsometers offers customers a fully automated desktop solution with long-
term repeatability and thin film precision. Using our proprietary Ellipto MAP
software, the AutoEL family of ellipsometers can display maps of film
thickness, refractive index and absorption, as well as the optical constants of
bare substrates. Film thicknesses and refractive index data points measured and
calculated by the AutoEL can be automatically downloaded to a personal computer
where the data can be displayed immediately or stored on a disk for off-line
processing.
AutoEL III Ellipsometer. Our AutoEL III family of ellipsometers provides
low-cost tabletop automatic tools for routine measurements of thickness and
index. Its operating wavelength is 633 nanometers.
AutoEL IV Ellipsometer. Our AutoEL IV ellipsometers have the same
specifications as our AutoEL III and operate at wavelengths of 405 nanometers,
546 nanometers and 633 nanometers.
Customers
We sell our products worldwide to over 100 semiconductor device
manufacturers, including both independent semiconductor device manufacturers
and foundries throughout the world. We seek to establish and maintain close and
mutually beneficial relationships with our customers by consistently providing
them with superior service and support. In each of the years from 1996 through
1999, we received the number one ranking among our competitors in the annual
VLSI Customer Satisfaction Survey. Customers from which we have received a
total of at least $1.0 million in revenues since January 1, 1997 include:
<TABLE>
<CAPTION>
Anam IBM Siemens
<S> <C> <C>
Advanced Micro Devices Intel Texas Instruments
Applied Materials LSI Logic TSMC
Fujitsu NEC Toshiba
Hitachi Nippon Steel Phillips Winbond Electronics
</TABLE>
43
<PAGE>
We believe that our top customers are among the fastest growing
manufacturers in the semiconductor device industry. In addition, we have a
diverse customer base in terms of both geographic location and type of
semiconductor device manufactured. Our customers are located in 24 different
countries.
As part of our strategy of developing complementary metrology applications
for our systems, we have built on our technology for the semiconductor device
manufacturing process to develop applications for the magnetic storage
industry. Our customers include Seagate Technology and other leading magnetic
storage device manufacturers.
We depend on a relatively small number of customers for a large percentage
of our revenues. In the combined year 1996, in 1997 and 1998 and in the six
months ended June 30, 1999, sales to customers that individually represented at
least five percent of our revenues accounted for 18.0%, 7.7%, 43.2% and 44.3%
of our revenues. In the combined year 1996 and in 1997, no individual customer
accounted for more than 10% of our revenues. In 1998, sales to Intel and
Advanced Micro Devices accounted for 19.8% and 11.1% of our revenues. In the
six months ended June 30, 1999, sales to Intel accounted for 37.3% of our
revenues. In addition, a significant portion of our revenues in each quarter
and year has been derived from sales to particular distributors. These
distributors purchase our products for ultimate distribution to customers in
particular geographic regions. We do not have purchase contracts with any of
our customers or distributors that obligate them to continue to purchase our
products, and these customers and distributors could cease purchasing our
products at any time. See "Risk Factors--Our largest customers account for a
significant portion of our revenues, and our business and operating results
could be harmed by the loss of one or more of these customers or by reductions
or delays in their purchases of our systems" and "Risk Factors--We rely on
independent sales representatives and distributors for a significant portion of
our sales, and a disruption in our relationships with these representatives or
distributors could have a negative impact on our sales."
Research and Development
The thin film transparent and opaque process control metrology market is
characterized by continuous technological development and product innovations.
We believe that the rapid and ongoing development of new products and
enhancements to existing products is critical to our success. Accordingly, we
devote a significant portion of our technical, management and financial
resources to research and development programs. At July 31, 1999, our research
and development staff was comprised of 45 persons, including 15 holders of
Ph.D. degrees and six holders of M.S. degrees. The efforts of our research and
development engineers have consistently received significant industry
recognition. For example, our Vanguard automation platform was awarded the
Editor's Choice Award for Best Product by Semiconductor International in 1998,
and our MetaPULSE product received Photonics magazine's Circle of Excellence
Product of the Year Award in 1999.
The core competencies of our research and development team include
metrology systems for high volume manufacturing, ellipsometry, ultra-fast
optics, picosecond acoustic and optical design, advanced metrology application
development and algorithm development. We have been granted or hold exclusive
licenses to eleven U.S. and foreign patents covering technology in the
transparent thin film measurement, altered material characterization and
picosecond ultrasonic areas. We also have 15 pending regular and provisional
applications in the U.S. and in other countries.
To leverage our internal research and development capabilities, we maintain
close relationships with leading research institutions in the metrology field
including Brown University. Our four year partnership with Brown University has
resulted in the development of the optical acoustic technology underlying our
MetaPULSE product line. We have been granted exclusive licenses from Brown
University Research Foundation, subject to rights returned by Brown and the
United States government for their own non-commercial uses for several patents
relating to this technology. The terms of these exclusive licenses are equal to
the lives of the patents. We also have the right to support patent activity
with respect to new ultra-fast acoustic technology developed by Brown
scientists, and to acquire exclusive licenses to this technology.
Our research and development expenditures in 1997, 1998 and the first half
of 1999 were $5.8 million, $5.1 million and $2.1 million. We plan to continue
our strong commitment to new product development in the future, and we expect
that our level of research and development expenses will increase in absolute
dollar terms in future periods.
44
<PAGE>
Sales, Customer Service and Application Support
Our strategy is to develop and expand our close relationships with leading
semiconductor device manufacturers worldwide in order to promote customer
satisfaction and the ongoing sale of our products. To this end, we maintain an
extensive network of direct sales, customer service and application support
offices in several locations throughout the world. We maintain sales, service
or applications offices in California, New Jersey, Texas, Germany, Holland,
Ireland, Israel, Korea, and Taiwan.
To leverage the capabilities of our direct sales, customer service and
application support team of 51 employees, we make use of leading independent
sales organizations in selected geographic regions. We believe that these
organizations significantly enhance our sales capabilities in the regions they
serve without requiring a significant capital outlay from us. For example, in
Japan we have maintained a close relationship with Tokyo Electron Limited, or
TEL, the largest semiconductor capital equipment manufacturer in Japan, for
more than ten years. TEL purchases our products directly for ultimate
distribution to customers throughout Japan, and maintains a dedicated sales,
service and applications organization of 18 professionals to support our
products. TEL has offices at several locations in close proximity to our
customers and other Japanese device manufacturers. We also work through sales
representatives that maintain support facilities near our customers in
Singapore and China, and we make some of our sales through independent
representatives in Taiwan and Korea.
We provide our customers with comprehensive support before, during and
after the delivery of our products. For example, in order to facilitate the
smooth integration of our tools into our customers' operations, we often assign
dedicated, site-specific field service and applications engineers to provide
long-term support at selected customer sites. We also provide comprehensive
service and applications training for customers at our new training facility in
Ledgewood, New Jersey and at customer locations. In addition, we maintain a
group of highly skilled applications scientists at strategically located
facilities throughout the world and at selected customer locations. Our
customer support operation also offers customers an array of fee-based support
services including preventive maintenance, on-call service and applications and
service training programs.
Our products are normally covered under warranty for a period of twelve
months. After the warranty period, customers may enter into support agreements
for continuing service and applications support.
Intellectual Property
Our success depends in part upon our ability to protect our intellectual
property. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or obtain and use
information that we regard as proprietary. We rely in part on patents to
protect our intellectual property. We have been granted or hold exclusive
licenses to eleven U.S. and foreign patents. The patents we own or exclusively
license have expiration dates ranging from 2005 to 2017. We also have 15
pending regular and provisional applications in the U.S. and other countries.
Our patents and applications principally cover various aspects of the
transparent thin film measurement and altered material characterization.
We have been granted exclusive licenses from Brown University Research
Foundation, subject to rights retained by Brown and the United States
government for their own non-commercial uses, for several patents relating to
the optical acoustic technology underlying our MetaPULSE product family. The
terms of these exclusive licenses are equal to the lives of the patents. We pay
royalties to Brown based upon a percentage of our revenues from the sale of
systems that incorporate technology covered by the Brown patents. We also have
the right to support patent activity with respect to new ultra-fast acoustic
technology developed by Brown scientists, and to acquire exclusive licenses to
this technology. Brown may terminate the licenses if we fail to pay royalties
to Brown or if we materially breach our license agreement with Brown.
Our pending patents may never be issued, and even if they are, these
patents, our existing patents and the patents we license may not provide
sufficiently broad protection to protect our proprietary rights, or they may
prove to be unenforceable. To protect our proprietary rights, we also rely on a
combination of copyrights,
45
<PAGE>
trademarks, trade secret laws, contractual provisions and licenses. We also
enter into confidentiality agreements with our employees and some of our
consultants and customers, and seek to control access to and distribution of
our proprietary information. We may be required to initiate litigation in order
to enforce any patents issued to or licensed by us, or to determine the scope
or validity of a third party's patent or other proprietary rights.
We are now involved with a patent interference proceeding with Therma-Wave,
Inc. In addition, we may in the future be subject to lawsuits by third parties
seeking to enforce their own intellectual property rights. Such litigation,
regardless of outcome, could be expensive and time consuming, and could subject
us to significant liabilities or require us to reengineer our product or obtain
expensive licenses from third parties. See "Risk Factors--Protection of our
intellectual property rights, or the efforts of third parties to enforce their
own intellectual property rights against us, has in the past resulted and may
in the future result in costly and time-consuming litigation."
The laws of some foreign countries do not protect our proprietary rights to
as great an extent as do the laws of the United States, and many U.S. companies
have encountered substantial infringement problems in protecting their
proprietary rights against infringement in such countries, some of which are
countries in which we have sold and continue to sell products. There is a risk
that our means of protecting our proprietary rights may not be adequate. For
example, our competitors may independently develop similar technology or
duplicate our products. If we fail to adequately protect our intellectual
property, it would be easier for our competitors to sell competing products.
Manufacturing
Our manufacturing strategy is to produce high-quality thin film transparent
and opaque process control metrology systems in a cost-effective manner. In
order to decrease production costs, we are continuing to focus our internal
manufacturing activities on processes that add significant value or require
unique technology or specialized knowledge. Our core manufacturing competencies
include electrical, optical and mechanical assembly and testing as well as the
management of new product transitions. We expect to rely increasingly on
subcontractors and turnkey suppliers to fabricate components, build assemblies
and perform other non-core activities in a cost-effective manner.
Our principal manufacturing activities include assembly, final test and
calibration. These activities are conducted in our new state-of-the-art
manufacturing and service facility in Ledgewood, New Jersey. While we use
standard components and subassemblies wherever possible, most mechanical parts,
metal fabrications and critical components used in our products are engineered
and manufactured to our specifications. Some of these components and
subassemblies, including the lasers we use in some of our products, are
obtained from a limited group of suppliers, and occasionally from a single
source supplier. The partial or complete loss of one of these suppliers could
cause production delays and harm our operating results. See "Risk Factors--We
obtain some of the components and subassemblies included in our products from a
single source or a limited group of suppliers, and the partial or complete loss
of one of these suppliers could cause production delays and harm our operating
results."
We use our Vanguard modular system architecture to produce metrology
equipment for both transparent and opaque films. We have realized significant
economies of scale in the manufacturing, service inventory, service training
and customer repair areas by combining these activities using the common
Vanguard architecture.
Competition
The market for semiconductor capital equipment is highly competitive. We
face substantial competition from established companies in each of the markets
that we serve. We principally compete with KLA-Tencor, Philips Analytical
Instruments and Therma-Wave. We compete to a lesser extent with companies such
as Dai Nippon Screen, Nanometrics and Sopra. Each of our product lines also
competes with products that use
46
<PAGE>
different metrology techniques. Some of our competitors have greater financial,
engineering, manufacturing and marketing resources, broader product offerings
and service capabilities and larger installed customer bases than we do.
Significant competitive factors in the market for metrology systems include
system performance, ease of use, reliability, cost of ownership, technical
support and customer relationships. We believe we compete favorably on the
basis of these factors in each of the markets we serve.
There has in the past been merger and acquisition activity among our
competitors and potential competitors. Acquisitions by our competitors and
potential competitors could enable them to expand their product offerings in
order to meet a broader range of customer needs. The greater resources,
including financial, marketing and support resources, of competitors engaged in
these acquisitions could also permit them to accelerate the development and
commercialization of new products and to further enlarge their installed
customer bases. Accordingly, business combinations and acquisitions involving
our competitors could have a detrimental impact on both our market share and
the pricing of our products, either of which could cause our business and
results of operations to suffer.
Employees
As of July 31, 1999, we had 164 employees, including 45 employees engaged
in research and development, 55 engaged in sales, marketing and customer
support, 49 engaged in manufacturing and 15 engaged in general and
administrative activities. Our employees are not represented by any collective
bargaining agreements, and we have never experienced a work stoppage. We
believe our employee relations are good.
Properties
We own our 20,000 square foot executive office building in Flanders, New
Jersey, and we lease our 31,000 square foot manufacturing facility in
Ledgewood, New Jersey pursuant to a lease agreement that expires in 2009. We
also lease space for our sales, service and applications offices in California,
Texas, Korea, Taiwan and various other locations throughout the world. We
believe that our existing facilities and capital equipment are adequate to meet
our current requirements, and that suitable additional or substitute space is
available on commercially reasonable terms if needed.
Legal Proceedings
We are presently involved in a patent interference proceeding with Therma-
Wave, Inc. in the United States Patent Office. In this proceeding, we are
defending our patent rights with respect to some of the multiple angle,
multiple wavelength ellipsometry technology we use in our transparent thin film
measurement systems. Therma-Wave requested that the proceeding be initiated in
1993 by filing a reissue application for one of its own patents, in which it
sought to broaden the original issued claims. The proceeding was initiated by
the Patent Office in June 1998.
Preliminary motions and statements have been filed, and we are presently
awaiting a decision by the Patent Office on those motions. If we lose the
interference, a reissue patent will be granted to Therma-Wave permitting
Therma-Wave to assert patent rights against the ellipsometers we use in our
transparent thin film measurement systems. In that event, we could assert a
defense of intervening rights against Therma-Wave's reissued patent since we
relied on the restricted claims of Therma-Wave's original patent. If the
intervening rights defense and other defenses fail, we would either have to pay
royalties to Therma-Wave or redesign our SpectraLASER and other transparent
thin film measurement systems. Either of these events could harm our business,
financial condition and results of operations.
In addition, from time to time we are subject to legal proceedings and
claims in the ordinary course of business. Other than the Therma-Wave patent
interference proceeding discussed above, we are not now involved in any
material legal proceedings.
47
<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
Our directors, executive officers and key employees and their ages as of
June 30, 1999 are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Directors and Executive Officers:
Paul F. McLaughlin............... 53 Chief Executive Officer, President and Director
Robert M. Loiterman.............. 40 Vice President, Engineering
Steven R. Roth................... 39 Vice President, Finance and Administration and Chief
Financial Officer
David Belluck.................... 37 Director
Daniel H. Berry (1).............. 53 Director
Paul Craig (2)................... 42 Director
Stephen J. Fisher................ 36 Director
Carl E. Ring, Jr (2)............. 61 Director
Richard F. Spanier............... 59 Chairman of the Board of Directors
Aubrey C. Tobey (1).............. 74 Director
Key Employees:
George J. Collins................ 51 Director of Marketing
Ajay Khanna...................... 40 Director of International Sales
Walter R. Knott.................. 47 Director of Manufacturing
John B. Sheridan................. 49 Director of Customer Support
Matthew J. Smith................. 38 Director of North American Sales
</TABLE>
- --------
(1)Member of the audit committee of the board of directors.
(2)Member of the compensation committe of the board of directors.
All references to "our" in the biographical information set forth below
include our predecessor company.
Biographical information for directors and executive officers:
Paul F. McLaughlin has served as our President, Chief Executive Officer
and as a director since June 1996. From 1994 to June 1996, Mr. McLaughlin
served as an associate at Riverside Partners, Inc., where he structured and
implemented leveraged transactions. Mr. McLaughlin holds a B.S. in
Metallurgical Engineering from Rensselaer Polytechnic Institute, an M.S. in
Metallurgy and Materials Science from Lehigh University and an M.B.A. from
Harvard University, Graduate School of Business Administration.
Robert M. Loiterman has served as our Vice President of Engineering since
June 1996. From June 1993 to June 1996, Mr. Loiterman served as our Director
of Engineering, from January 1990 to June 1993 he served as a Project Manager
and from January 1988 to January 1990 he served as a design engineer. Mr.
Loiterman holds a B.S. in Electrical Engineering from Rutgers University.
Steven R. Roth has served as our Vice President, Finance and
Administration and Chief Financial Officer since September 1996. From August
1991 to August 1996, Mr. Roth served as a Director of Corporate Finance for
Bell Communications Research, now called Telcordia, a research and development
company serving the telecommunications industry. Mr. Roth is a C.P.A. and
holds a B.S. in Accounting from Villanova University.
David Belluck has served as one of our directors since June 1996. Since
February 1989, Mr. Belluck has been a general partner of Riverside Partners,
Inc., a private equity investment firm. Mr. Belluck holds a B.A from Harvard
University and an M.B.A. from Harvard University, Graduate School of Business
Administration. Mr. Belluck is currently a director of Atchison Casting,
Evergreen Electronics and Riverside Partners, Inc.
Daniel H. Berry has served as one of our directors since October 1998.
Since May 1999, Mr. Berry has served as President and Chief Operating Officer
of Ultratech Stepper, Inc., a lithography tool supplier. From
48
<PAGE>
August 1998 to May 1999 he served as Executive Vice President and Chief
Operating Officer of Ultratech Stepper and from January 1994 to August 1999, he
served as a Senior Vice President of Sales and Marketing of that company. Mr.
Berry holds a B.S. in Electrical Engineering from the Polytechnic Institute of
Brooklyn.
Paul Craig has served as one of our directors since June 1996. Since
February 1989, Mr. Craig has served as a general partner and the director of
Riverside Partners, Inc., a private equity investment firm. He is also a member
of the board of directors of Evergreen Electronics. Mr. Craig holds a B.A. from
Harvard University.
Stephen J. Fisher has served as one of our directors since June 1996. Since
July 1998, Mr. Fisher has served as a partner of Liberty Partners, L.P., a
private equity investment firm. From June 1994 to July 1998, Mr. Fisher served
as a Vice President of Liberty Capital Partners, Inc. Mr. Fisher holds a B.S.
and an M.B.A. from Washington University and a J.D. from Boston University
School of Law. Mr. Fisher is currently a director of Medical Logistics and
Gallaher Paper Company.
Carl E. Ring, Jr. has served as one of our directors since June 1996. He is
a founding partner of Liberty Partners, L.P.. Mr. Ring holds a B.A. in
mathematics from George Washington University and an M.B.A. from Harvard
University, Graduate School of Business Administration. Mr. Ring is a director
of Monaco Coach Corporation and Gallaher Paper Company.
Richard F. Spanier has served as our Chairman of the Board of Directors
since September 1966. From September 1966 to June 1996, Mr. Spanier served as
our President and Chief Executive Officer. Mr. Spanier holds a B.S. in Physics,
an M.S. in Physical Chemistry and a Ph.D. in Chemical Physics from Stevens
Institute of Technology.
Aubrey C. Tobey has served as one of our directors since October 1998.
Since April 1987, Mr. Tobey has served as President of ACT International
Consulting, Inc., a company which provides marketing and management services
for high technology companies. Mr. Tobey holds a B.S. in Mechanical Engineering
from Tufts University and an M.S. in Mechanical Engineering from the University
of Connecticut.
Biographical information for key employees:
George J. Collins has served as our Director of Marketing since April 1996.
From April 1994 to April 1996, Mr. Collins served as Marketing Manager for
Topometrix Corporation. Mr. Collins holds a B.S. in Chemistry from Thiel
College, and a Ph.D. in Food Science and an M.B.A. from Rutgers University.
Ajay Khanna has served as our International Sales Director since August
1996. From June 1988 to July 1996, he served as our International Sales
Manager. Mr. Khanna holds a B.S. in Electrical Engineering from Clarkson
University and an M.B.A. from the University of Michigan.
Walter R. Knott has served as our Director of Manufacturing since 1997.
From 1996 to 1997, Mr. Knott served as Manager of Operations and Shared
Resources for Philips Electronics, a manufacturer of electron microscopes. From
1991 to 1996, he served as Vice President of Operations for Whatman
Incorporated, a manufacturer of filtration, purification, and chromatography
equipment and supplies. Mr. Knott holds a B.S. from Rutgers University and an
M.B.A. from Fairleigh Dickinson University.
John B. Sheridan has served as our Director of Customer Support since
November 1998. From 1996 to 1998, Mr. Sheridan served as the Director of
Customer Service for Plasma-Therm, Inc., a manufacturer of dry etch systems.
From 1988 to 1995, Mr. Sheridan served as president of Beta Squared, Inc., an
equipment engineering and technical services company and now a subsidiary of
Photronics, Inc. Mr. Sheridan holds a B.S. from the University of Phoenix.
Matthew J. Smith has served as our Director of North American Sales since
July 1999. From April 1998 to July 1999, Mr. Smith served as the Director of
Sales for the Semiconductor Equipment Group of Leica, Inc., a manufacturer of
microscopes and other optical metrology equipment. From September 1994 to March
1998, Mr. Smith was the Director of Business Development at the Semiconductor
Equipment Group of Leica. Mr. Smith studied optical instrumentation and
photography at the Rochester Institute of Technology.
49
<PAGE>
Under an agreement we entered into with Liberty Partners and Riverside
Partners in connection with the acquisition of our predecessor company, Messrs.
Fisher and Ring were designated to serve on our board of directors by Liberty
Partners, and Messrs. Belluck and Craig were designated to serve on our board
of directors by Riverside Partners. Prior to the offering, Liberty Partners,
Riverside Partners and Mr. McLaughlin intend to enter into an agreement under
which each party will agree to vote his or its shares in favor of one nominee
of each other party to serve on our board of directors.
Our certificate of incorporation and bylaws to be effective upon this
offering provide that our board of directors will be divided into three
classes. Each class will consist of two or three directors. The terms of office
of the class I, class II and class III directors will expire at our 2000, 2001,
and 2002 annual meetings of stockholders. Our initial class I directors will be
Messrs. Craig, Ring and McLaughlin, our initial class II directors will be
Messrs. Berry, Fisher and Spanier and our initial class III directors will be
Messrs. Belluck and Tobey. At each annual meeting of stockholders at which the
term of office of a particular class of directors first expires, the persons
elected to serve as directors of that class will be elected to serve until the
third annual meeting following election. Any additional directorships resulting
from an increase in the number of directors will be distributed among the three
classes of directors so that, as nearly as possible, each class will consist of
one-third of the directors. This classification of the board of directors may
have the effect of delaying or preventing changes in our control or management.
There are no family relationships among any of our directors or officers.
Compensation Committee Interlocks and Insider Participation
The members of the compensation committee of our board of directors are
Messrs. Craig and Ring. Neither of them has at any time been an officer or
employee of Rudolph Technologies. In addition, none of our executive officers
serves on the board of directors or compensation committee of any entity which
has one or more executive officers serving as a member of our board of
directors or compensation committee.
Director Compensation
Employee directors receive no compensation for their services as members of
the board of directors. Directors who are, or who are employed by, significant
stockholders receive cash compensation of $20,000 per year. Non-employee
directors who are not, and are not employed by, significant stockholders
receive cash compensation of $20,000 per year and are eligible to receive
annual stock option grants under our 1999 stock plan at the discretion of the
compensation committee of our board of directors. See "Management--Stock
Plans."
Committees of the Board of Directors
Our compensation committee currently consists of Messrs. Craig and Ring.
The compensation committee reviews and approves the compensation and benefits
for our executive officers and makes recommendations to the board of directors
regarding such matters. Our audit committee currently consists of Messrs. Berry
and Tobey. The audit committee makes recommendations to the board of directors
regarding the selection of independent auditors, reviews the results and scope
of the audit and other services provided by our independent auditors and
reviews and evaluates our audit and control functions.
50
<PAGE>
Executive Compensation
The following table sets forth the compensation that we paid to our
executive officers during 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
--------------------------- ---------------------
Name and Principal Other Annual Securities Underlying All Other
Positions Salary Bonus Compensation Options Compensation
- ------------------ -------- ----- ------------ --------------------- ------------
<S> <C> <C> <C> <C> <C>
Paul F. McLaughlin....... $220,014 -- -- 382,098 --
President and Chief
Executive Officer
Robert M. Loiterman...... $148,514 -- -- 42,052 --
Vice President,
Engineering
Steven R. Roth........... $111,300 -- -- 28,035 --
Vice President, Finance
and Administration and
Chief Financial Officer
</TABLE>
Option Grants
The following table sets forth information relating to stock options
granted during 1998 to our executive officers. All of these options were
granted under our 1996 stock option plan at an exercise price equal to the fair
market value of our common stock at the time of the grant, as determined by our
board of directors, and have a term of ten years from the date of grant.
<TABLE>
<CAPTION>
Option Grants in 1998
-------------------------------------------
Potential Realizable
Value at Assumed Annual
Rates of
Stock Price Appreciation
for Option Term (2)
-------------------------
% of Total
Number of Options
Securities Granted to
Underlying Employees in Exercise
Options Fiscal Or Base Expiration
Name Granted Year (1) Price Date 5% 10%
- ---- ---------- ------------ -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Paul F. McLaughlin...... 382,098 61.9% $0.73 7/20/08 $ 175,195 $ 443,979
Robert M. Loiterman..... 42,052 6.8 0.73 7/20/08 19,280 48,860
Steven R. Roth.......... 28,035 4.5 0.73 7/20/08 12,854 32,574
</TABLE>
- --------
(1) Based on a total of 617,726 shares underlying options granted to employees
and directors during 1998.
(2) The potential realizable value is calculated assuming that the fair market
value of our common stock on the date of grant appreciates at the indicated
annual rate compounded annually for the entire ten-year term of the option,
and that the option is exercised and the shares issued are sold on the last
day of its term at the appreciated stock price.
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<PAGE>
Option Exercises and Values
The following table sets forth information for our executive officers
relating to the number and value of securities underlying exercisable and
unexercisable options they held at December 31, 1998. All options were granted
under our 1996 stock option plan.
Year-End Option Exercises and Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the-Money Options at
at December 31, 1998 December 31, 1998 (1)
------------------------- -------------------------
Shares
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul F. McLaughlin...... -- -- 312,580 312,580 $18,943 $18,943
Robert M. Loiterman..... -- -- 34,400 34,400 2,085 2,085
Steven R. Roth.......... -- -- 22,933 22,933 1,390 1,390
</TABLE>
- --------
(1) Based on the fair market value of $0.73 per share of common stock as of
December 31, 1998 as determined by our board of directors, minus the
exercise price, multiplied by the number of shares underlying the option.
Stock Plans
1996 Non-Qualified Stock Option Plan
In 1996, we adopted the 1996 Non-Qualified Stock Option Plan. Under the
1996 plan, we may grant options to purchase up to 1,069,902 shares of Class B
common stock to employees and certain other individuals. The 1996 plan is
administered by a committee of our board of directors. This committee has the
power to determine the terms of the options granted. The options granted
pursuant to the 1996 plan generally expire ten years from the date of grant and
become exercisable after nine years or sooner upon the achievement of financial
targets over a period of six years. Upon this offering, the options that we
have granted will become fully vested. Options granted to date have exercise
prices equal to the fair value of the Class B common stock on the date of
grant. As of July 31, 1999, we had granted options to purchase 1,064,945 shares
of our Class B common stock.
1999 Stock Plan
The board of directors adopted the 1999 plan in August 1999, and the
stockholders are expected to approve the 1999 plan prior to closing this
offering. The 1999 plan provides for the grant of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, to employees, and for the grant of nonstatutory stock options and
stock purchase rights to employees, directors and consultants. As of the date
of this offering, a total of 2,000,000 shares of common stock will be reserved
for issuance pursuant to the 1999 plan, none of which will have been issued.
The 1999 plan provides for annual increases in the number of shares available
for issuance thereunder, on the first day of each year, effective beginning
with 2001, equal to the lesser of 2% of the outstanding shares of common stock
on the first day of the year, 400,000 shares or a lesser amount as the board
may determine.
The board of directors or a committee of the board administers the 1999
plan. In the case of options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue
Code, the committee will consist of two or more "outside directors" within the
meaning of Section 162(m) of the Internal Revenue Code. The administrator has
the power to determine the terms of the options or stock purchase rights
granted, including the exercise price, the number of shares subject to each
option or stock purchase right, the exercisability of the options and the form
of consideration payable upon exercise. The administrator determines the
exercise price of nonstatutory stock options granted under the 1999 plan, but
with respect to nonstatutory stock options intended to qualify as "performance-
based compensation" within the
52
<PAGE>
meaning of Section 162(m) of the Internal Revenue Code, the exercise price must
at least be equal to the fair market value of the common stock on the date of
grant.
The exercise price of all incentive stock options granted under the 1999
plan must be at least equal to the fair market value of the common stock on the
date of grant and the term of such options may not exceed ten years. With
respect to any participant who owns stock possessing more than 10% of the
voting power of all classes of our outstanding capital stock, the exercise
price of any incentive stock option granted must equal at least 110% of the
fair market value on the grant date and the term of such incentive stock option
must not exceed five years. The administrator determines the term of all other
options.
No optionee may be granted an option to purchase more than 500,000 shares
in any fiscal year. In connection with his or her initial service, an optionee
may be granted an option to purchase up to an additional 500,000 shares, which
shall not count against the yearly limit set forth in the previous sentence. An
optionee generally must exercise an option granted under the 1999 plan at the
time set forth in the optionee's option agreement after termination of the
optionee's status as our employee, director or consultant. Generally, in the
case of the optionee's termination by death or disability, the option will
remain exercisable for 12 months. In all other cases, the option will generally
remain exercisable for a period of three months. However, an option may never
be exercised later than the expiration of the option's term.
The administrator determines the exercise price of stock purchase rights
granted under the 1999 plan. In the case of stock purchase rights, unless the
administrator determines otherwise, the restricted stock purchase agreement
entered into in connection with the exercise of the stock purchase right shall
grant us a repurchase option that we may exercise upon the voluntary or
involuntary termination of the purchaser's service with us for any reason,
including death or disability. The purchase price for shares we repurchase
pursuant to restricted stock purchase agreements will generally be the original
price paid by the purchaser and may be paid by cancellation of any indebtedness
of the purchaser to us. The repurchase option will lapse at a rate that the
administrator determines.
The 1999 plan provides that in the event of our merger with or into another
corporation or a sale of substantially all of our assets, the successor
corporation will assume or substitute each option or stock purchase right. If
the outstanding options or stock purchase rights are not assumed or
substituted, the administrator shall provide notice to the optionee that he or
she has the right to exercise the option or stock purchase right as to all of
the shares subject to the option or stock purchase right, including shares
which would not otherwise be exercisable, for a period of 15 days from the date
of the notice. The option or stock purchase right will terminate upon the
expiration of the 15-day period.
Unless terminated sooner, the 1999 plan will terminate automatically in
2009. In addition, the board of directors has the authority to amend, suspend
or terminate the 1999 plan, provided that no such action may affect any share
of common stock previously issued and sold or any option previously granted
under the 1999 plan. An optionee generally may not transfer options and stock
purchase rights granted under the 1999 plan and only the optionee may exercise
an option and stock purchase right during his or her lifetime.
1999 Employee Stock Purchase Plan
Our 1999 employee stock purchase plan was adopted by our board of directors
in August 1999 and is expected to be approved by our stockholders prior to this
offering. A total of 300,000 shares of common stock has been reserved for
issuance under the stock purchase plan, none of which will have been issued as
of the date of this offering. The number of shares reserved for issuance under
the stock purchase plan will be subject to an annual increase on the first day
of each of our fiscal years, beginning in 2001, equal to the lesser of
(1) 300,000 shares of common stock, (2) 2% of our outstanding common stock on
the first day of the year, or (3) such other amount as may be determined by the
board of directors. The stock purchase plan will be administered by the board
of directors or by a committee appointed by the board.
The stock purchase plan, which is intended to qualify under Section 423 of
the Internal Revenue Code, will be implemented by a series of overlapping
offering periods of 24 months' duration. Each offering period includes four 6-
month purchase periods. The offering periods generally start on the first
trading day on or after
53
<PAGE>
May 1 and November 1 of each year, except for the first such offering period
which will commence on the first trading day on or after the effective date of
this offering and will end on the last trading day on or before October 31,
2001.
Employees are eligible to participate if they are customarily employed by
us or any participating subsidiary for at least 20 hours per week and more than
five months in any calendar year. However, any employee (1) who immediately
after grant owns stock possessing 5% or more of the total combined voting power
or value of all classes of our capital stock, or (2) whose rights to purchase
stock under all of our employee stock purchase plans accrues at a rate that
exceeds $25,000 worth of stock for each calendar year may not be granted an
option to purchase stock under the stock purchase plan. The stock purchase plan
permits participants to purchase common stock through payroll deductions of up
to 15% of the participant's eligible compensation which includes the
participant's base salary, wages, overtime pay, commissions, bonuses and other
compensation remuneration paid directly to the employee. The maximum number of
shares a participant may purchase during a six-month purchase period is 3,000
shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each six-month purchase period. The price
of stock purchased under the stock purchase plan is 85% of the lower of the
fair market value of the common stock at the beginning of an offering period or
at the end of a purchase period. In the event the fair market value at the end
of a purchase period is less than the fair market value at the beginning of the
offering period, participants will be withdrawn from the current offering
period following their purchase of shares on the purchase date and will be
automatically re-enrolled in a new offering period. Participants may end their
participation at any time during an offering period, and they will be paid
their payroll deductions to date. Participation ends automatically upon
termination of employment with us.
A participant may not transfer rights granted under the stock purchase plan
other than by will, the laws of descent and distribution or as otherwise
provided under the stock purchase plan. The stock purchase plan provides that,
in the event of our merger with or into another corporation or a sale of all or
substantially all of our assets, a successor corporation may assume or
substitute for each outstanding option. If the successor corporation refuses to
assume or substitute for the outstanding options, the offering period then in
progress will be shortened, and a new exercise date will be set. The stock
purchase plan will terminate in 2009. However, the board of directors has the
authority to amend or terminate the stock purchase plan, except that, subject
to certain exceptions described in the stock purchase plan, no such action may
adversely affect any outstanding rights to purchase stock under the stock
purchase plan.
Employment Agreements and Change in Control Arrangements
In 1996, we entered into management agreements with Paul F. McLaughlin,
Robert M. Loiterman, and Steven R. Roth, pursuant to which each executive
receives an annual base salary ranging from $111,000 to $220,000, subject to
annual increases. In addition, each executive is eligible for an annual bonus
ranging from 20% to 30% of his base salary. The management agreements with Mr.
Loiterman and Mr. Roth provide for terms of one year with automatic renewals
for additional one-year terms unless we or the executive deliver a notice of
non-renewal to the other party. Mr. McLaughlin's management agreement provides
for an initial term of two years with automatic renewals for additional two
year terms. For our protection, the management agreements prohibit the
executives from competing with us in any way or soliciting our employees during
their terms of employment and for two years after termination of their
employment.
The management agreements provide that if we terminate an executive's
employment without cause or if the executive retires with good cause, we will
be required to pay that executive his base salary for one year. The agreements
with Mr. McLaughlin and Mr. Loiterman also provide that in the event of the
termination of their employment within three months from the date of a change
in control, they will each be entitled to receive their base salary for one
year. In this context, a change of control would occur if we were sold to an
independent third party and that independent third party acquired enough of our
stock to elect a majority of our board of directors, or that independent third
party acquired all, or substantially all, of our assets.
54
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Acquisition and Related Financing
We were incorporated on June 13, 1996 to acquire all of the stock of our
predecessor company. On June 14, 1996, we, through our wholly-owned subsidiary,
agreed to purchase all of the outstanding stock of our predecessor company from
its stockholders.
We paid approximately $36.3 million in cash for this stock, and incurred
approximately $1.6 million in fees and expenses in connection with the
acquisition. The purchase price was determined based on arms'-length
negotiations between our predecessor company and the investors who purchased
our predecessor company through us.We acquired our predecessor company using a
combination of equity and debt financing provided by the State Board of
Administration of Florida; Liberty Partners Holdings 11, L.L.C., an affiliate
of Liberty Partners; Riverside Rudolph, L.L.C., an affiliate of Riverside
Partners; Richard F. Spanier, a former stockholder of our predecessor company
and the chairman of our board of directors; Paul F. McLaughlin, our President
and Chief Executive Officer; Robert M. Loiterman, our Vice President,
Engineering; and others. The State Board is a significant equity owner of
Liberty Partners Holdings 11, L.L.C., and under an investment management
agreement, Liberty Partners has voting and dispositive power over the shares of
our preferred stock held by the State Board.
The following table sets forth the sources and uses of funds in connection
with the acquisition (in thousands):
<TABLE>
<S> <C>
Sources:
Senior Revolving Loan from the State Board...................... $ 4,500
Senior Term Loan from the State Board........................... 16,000
Senior Subordinated Loan from the State Board................... 11,000
Loan from Richard Spanier....................................... 600
Sale of Preferred Stock to the State Board, Spanier and Others.. 5,400
Sale of Common Stock and Warrants to Liberty Partners, Riverside
Partners, Spanier and Others.................................. 1,500
-------
Total........................................................... $39,000
=======
Uses:
Purchase Price.................................................. $36,285
Fees and Expenses............................................... 1,574
Cash for Working Capital........................................ 1,141
-------
Total........................................................... $39,000
=======
</TABLE>
In connection with the acquisition, Liberty Partners and Riverside Partners
agreed to provide management services to us for an aggregate fee of $200,000
per year. Our obligation to pay management fees to Liberty Partners and
Riverside Partners will cease upon this offering. In addition, under a
stockholders agreement we entered into in connection with the acquisition, from
the time of the acquisition until this offering, Liberty Partners was entitled
to designate four directors with a total of ten votes, and Riverside Partners
was entitled to designate two directors, to serve on our board of directors.
To finance the acquisition, we borrowed from the State Board (1) $4.5
million under a senior revolving loan, which bears interest at a rate of prime
plus 1.5% and matures on December 31, 2002; (2) $16.0 million under a senior
term loan which bears interest at a rate of prime plus 1.75% and matures on
December 31, 2002; and (3) $11.0 million under a senior subordinated loan which
bears interest at a rate of prime plus 4.0% and matures on December 31, 2003.
In addition, we, through our subsidiary, borrowed $600,000 from Richard Spanier
under a junior subordinated loan which bore interest at a rate of 14% and had a
maturity date of March 31, 2004. Approximately $28.3 million of these amounts
were paid directly to the stockholders of our predecessor company and $8.0
million was placed in escrow to cover liabilities of our predecessor company.
$6.3 million of the escrow amount was subsequently released to the stockholders
of our predecessor company, $661,000 was paid to us and $1.0 million remains in
escrow. We repaid the junior subordinated loan from Mr. Spanier in full in
1997.
55
<PAGE>
In connection with the acquisition, the State Board Liberty Partners,
Riverside Partners, Messrs. Spanier, McLaughlin and Loiterman and others
purchased equity interests in us. The State Board purchased 44,195 shares of
Series A preferred stock for a purchase price of $4,419,529. Others, including
Messrs. McLaughlin and Loiterman, purchased in the aggregate 1,680 shares of
Series A preferred stock for an aggregate purchase price of $168,000. Mr.
Spanier purchased 8,125 shares of Series B preferred stock, which constitutes
all of the issued and outstanding Series B preferred stock, for a purchase
price of $812,471. Liberty Partners purchased 1,571,294 shares of Class A
common stock for a purchase price of $900,498. We also granted a warrant to
Liberty Partners to purchase shares of Class A common stock equal to 15% of our
outstanding common stock on a fully diluted basis, then 534,951 shares, at an
exercise price of $.0003 per share. Riverside Partners, Messrs. Spanier,
McLaughlin and Loiterman and others purchased a total of 1,046,079 shares of
our Class B common stock for an aggregate purchase price of $599,503. Messrs.
Spanier, McLaughlin and Loiterman purchased their stock at the same price paid
by other investors. No other stock was issued in connection with the
acquisition.
The preferred stock accrues cumulative dividends at a rate of 8% per annum
and is entitled to a liquidation preference over the common stock. The
preferred stock may be redeemed by us or by a vote of the majority of the
preferred stock upon the occurrence of a change in ownership, merger or sale of
assets. The preferred stock is not convertible into common stock. Holders of
the Series A preferred stock are entitled to vote on all matters together with
the holders of the common stock, except as provided by law and in connection
with the election of the Class A directors, as discussed below. The Series B
preferred stock is identical to the Series A preferred stock except that it
does not have any voting rights. From the time of the acquisition until this
offering, holders of the Class A common stock, voting separately as a class,
were entitled to elect two of the eight directors on our board of directors.
These directors were each entitled to four votes each on any matter on which
they voted, while each other director was entitled to one vote. The Class B
common stock is identical to the Class A common stock except that it does not
entitle the holders to vote as a class for the election of any directors.
In January 1997, Messrs. McLaughlin and Loiterman and Steven R. Roth, our
Vice President, Finance and Chief Financial Officer, each purchased from one of
our prior stockholders 53 shares of Series A preferred stock for $5,333 and
2,318 shares of Class B common stock for $1,333.
On July 20, 1998, some of our stockholders, including Liberty Partners,
Riverside Partners and Messrs. McLaughlin, Loiterman, and Roth, purchased
additional shares of our Class A common stock and Class B common stock. Liberty
Partners purchased an additional 3,230,997 shares of Class A common stock for a
purchase price of $2,355,508. Riverside Partners purchased 733,310 shares of
Class B common stock for a purchase price of $534,626. Messrs. McLaughlin,
Loiterman and Roth and others purchased an aggregate of 150,714 shares of our
Class B common stock for an aggregate purchase price of $109,866. Messrs.
McLaughlin, Loiterman and Roth purchased their stock at the same price paid by
other investors. These transactions caused an antidilution adjustment to the
warrant we granted to Liberty Partners in 1996, which resulted in an additional
945,740 shares of Class A common stock becoming subject to this warrant.
In a series of transactions occurring on or around November 1, 1998, we
issued to the State Board a junior subordinated note with a maximum principal
amount of $7.0 million, which bears interest at a rate of 14.0% and matures on
July 31, 2001. As of June 30, 1999 we had been advanced a total of $6.4 million
under the junior subordinated note. We also increased the maximum amount of our
senior revolving loan from $8 million to $12 million. On November 1, 1998, we
also granted a warrant to Liberty Partners to purchase 592,012 shares of our
Class A common stock at an exercise price of $0.73 per share.
56
<PAGE>
The following table summarizes the ownership of our preferred and common
stock following the transactions described above:
<TABLE>
<CAPTION>
Percentage
Number of of
Shares of Preferred Series of Aggregate
Preferred Stock Preferred Purchase
Purchaser Stock Ownership Stock Price
- --------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
State Board 44,195 81.8% Series A $4,419,529
Richard F. Spanier 8,125 15.0 Series B 812,471
Paul F. McLaughlin 614 1.1 Series A 61,334
Robert M. Loiterman 213 0.4 Series A 21,333
Steven R. Roth 53 0.1 Series A 5,333
Others 800 1.6 Series A 80,000
--------- ----- ----------
Total 54,000 100.0% $5,400,000
========= ===== ==========
<CAPTION>
Number of Percentage
Shares of of Common Class of Aggregate
Common Stock Common Purchase
Purchaser Stock Ownership Stock Price
- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Liberty Partners 4,802,270 67.6% Class A $3,256,006
Riverside Partners 1,089,964 15.3 Class B 739,011
Richard F. Spanier 616,160 8.7 Class B 353,118
Paul F. McLaughlin 394,336 5.6 Class B 264,404
Robert M. Loiterman 62,846 0.9 Class B 42,281
Steven R. Roth 30,027 0.4 Class B 20,137
Other 107,762 1.5 Class B 73,120
--------- ----- ----------
Total 7,103,365 100.0% $4,748,077
========= ===== ==========
</TABLE>
Management and Director Fee Arrangements
In connection with the acquisition, Liberty Partners and Riverside Partners
agreed to provide management services to us for an aggregate management fee of
$200,000 per year. Our obligation to pay management fees to Liberty Partners
and Riverside Partners will cease upon this offering. We have accrued for these
fees since April 1998 and we will pay them in arrears from the proceeds of this
offering. Liberty Partners and Riverside Partners advise us on the operations
of our business and appoint designees to serve as members of our board of
directors. After this offering, we will no longer be obligated to pay the
management fees. However, we will pay a yearly director's fee of $20,000 to
each director who is appointed by either Liberty Partners or Riverside
Partners.
Registration Rights Agreement
Liberty Partners, Riverside Partners, Messrs. Spanier and McLaughlin and
some of our other stockholders have the right to require us to register their
shares under the Securities Act for public resale. We are also required to pay
the expenses incurred in connection with such registration.
Support Agreement
Liberty Partners Holdings 11, L.L.C. has agreed to provide us with funding,
if necessary, to enable us to continue to liquidate our liabilities in the
ordinary course of business and to fulfill our obligations as they come due
through the earlier of (1) this offering and the concurrent repayment of all
outstanding debt or (2) December 31, 2000.
57
<PAGE>
The Reorganization and the Offering
Immediately prior to the offering, we will effect a 35.66-for-one split of
our outstanding common stock and each share of Class A common stock and Class B
common stock will be exchanged for one share of a new single class of common
stock.
Liberty Partners intends to exercise its warrants immediately prior to and
contingent upon the offering by surrendering a portion of the warrants as
payment of the exercise price, as permitted by the terms of the warrants, in
which case it would receive 2,039,460 shares of common stock upon such
exercise. We will use a substantial portion of the net proceeds of this
offering to repay all of the indebtedness incurred in connection with the
acquisition of our predecessor company and the financing we conducted in
November 1998, including all of the senior term loan, the senior revolving
loan, the senior subordinated loan and the junior subordinated loan from the
State Board. We will also use a portion of the proceeds to redeem all of our
outstanding Series A preferred stock and Series B preferred stock.
58
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of common stock by:
. each person or entity known to us to own beneficially more than 5% of
our common stock;
. each of our directors;
. each of our executive officers; and
. all of our executive officers and directors as a group.
The numbers in the table below are based on the number of shares outstanding as
of July 31, 1999. Except as otherwise noted, the address of each person on the
table below is c/o Rudolph Technologies, Inc., One Rudolph Road, Flanders, NJ
07836.
<TABLE>
<CAPTION>
Shares of Preferred Stock Shares of Common Stock Shares of Common Stock
Beneficially Owned Beneficially Owned Beneficially Owned
Prior to the Offering Prior to the Offering After the Offering
------------------------- ------------------------ ------------------------
Beneficial Owner Number (1) Percentage (2) Number (1)(3) Percentage Number (1)(3) Percentage
- ---------------- ---------- -------------- ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Liberty Partners
Holdings 11, L.L.C.
(4)................... 44,195 81.8% 6,841,730 74.8% 6,841,730 49.1%
c/o Liberty Capital
Partners, Inc.
1177 Avenue of the
Americas
New York, NY 10036
Riverside Rudolph,
L.L.C................. -- -- 1,089,964 15.3 1,089,964 9.2
One Exeter Plaza
Boston, MA 02116
Paul F. McLaughlin...... 614 1.1 725,461 9.8 725,461 5.9
Robert M. Loiterman..... 213 * 111,155 1.6 111,155 *
Steven R. Roth.......... 53 * 66,869 * 66,869 *
David Belluck (5)....... -- -- 1,089,964 15.3 1,089,964 9.2
c/o Riverside Rudolph,
L.L.C.
One Exeter Plaza
Boston, MA 02116
Daniel H. Berry......... -- -- 1,783 * 1,783 *
Paul Craig (5).......... -- -- 1,089,964 15.3 1,089,964 9.2
c/o Riverside Rudolph,
L.L.C.
One Exeter Plaza
Boston, MA 02116
Stephen J. Fisher
(4)(6)................ 44,195 81.8 6,841,730 74.8 6,841,730 49.1
c/o Liberty Capital
Partners, Inc.
1177 Avenue of the
Americas
New York, NY 10036
Carl E. Ring, Jr.
(4)(6)................ 44,195 81.8 6,841,730 74.8 6,841,730 49.1
c/o Liberty Capital
Partners, Inc.
1177 Avenue of the
Americas
New York, NY 10036
Richard F. Spanier...... 8,125 15.0 616,160 8.7 616,160 5.2
Aubrey C. Tobey......... -- -- 1,783 * 1,783 *
All directors and
executive officers as
a group (ten persons)
(7)................... 53,200 98.5 9,454,906 98.9 9,454,906 65.8
</TABLE>
- --------
* Less than 1% of the outstanding shares of common stock.
(Footnotes appear on the following page.)
59
<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the SEC.
In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of common stock subject to
options held by that person that are currently exercisable or exercisable
within 60 days of July 31, 1999 are deemed outstanding. Such shares,
however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other person. Except as indicated in the
footnotes to this table and pursuant to applicable community property laws,
each stockholder named in the table has sole voting and investment power
with respect to the shares set forth opposite such stockholder's name.
(2) Percentage calculations are based on 54,000 shares of preferred stock
outstanding on July 31, 1999. We intend to use approximately $7.0 million
of the net proceeds of this offering to redeem all of our outstanding
preferred stock immediately following this offering.
(3) Includes stock subject to stock options held by directors and executive
officers that will become exercisable upon completion of this offering, as
follows: Mr. McLaughlin, 331,125 shares; Mr. Loiterman, 48,309 shares; Mr.
Roth, 36,842 shares; Mr. Berry, 1,783 shares; Mr. Tobey, 1,783 shares; and
all directors and officers as a group, 419,842 shares. Percentage
calculations are based on 7,103,365 shares of common stock outstanding on
July 31, 1999.
(4) The number of shares of preferred stock beneficially owned by Liberty
Partners 11, L.L.C. and Messrs. Fisher and Ring consists of 44,195 shares
held by the State Board of Administration of Florida, over which Liberty
Partners 11, L.L.C. has voting and dispositive power. Liberty Partners 11,
L.L.C. and Messrs. Fisher and Ring disclaim beneficial ownership of such
shares except to the extent of their pecuniary interests in such shares.
The number of shares of common stock beneficially owned by Liberty
Partners Holdings 11, L.L.C. and Messrs. Fisher and Ring includes
2,039,460 shares of our common stock to be issued on exercise of warrants
immediately prior to the offering.
(5) The number of shares of common stock beneficially owned by Messrs. Belluck
and Craig consists of 1,089,964 shares of our common stock held by
Riverside Rudolph, L.L.C. Mr. Belluck and Mr. Craig disclaim beneficial
ownership of all shares except to the extent of their pecuniary interest in
Riverside Rudolph, L.L.C.
(6) The number of shares of common stock beneficially owned by Messrs. Fisher
and Ring consists of 6,841,730 shares of our common stock held by Liberty
Partners Holdings 11, L.L.C. Mr. Fisher and Mr. Ring disclaim beneficial
ownership of all shares except to the extent of their pecuniary interest in
Liberty Partners Holdings 11, L.L.C.
(7) The number of shares of preferred stock beneficially owned by our directors
and executive officers as a group includes 44,195 shares of preferred stock
held by the State Board of Administration of Florida, over which Liberty
Partners Holdings 11, L.L.C. has voting and dispositive power. The number
of shares of common stock beneficially owned by our directors and executive
officers as a group includes 6,841,730 and 1,089,964 shares of our common
stock held by Liberty Partners Holdings 11, L.L.C. and Riverside Rudolph,
L.L.C.
60
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, our authorized capital stock will
consist of 50,000,000 shares of a single class of common stock, par value
$0.001 per share, and 5,000,000 shares of undesignated preferred stock, par
value $0.001 per share. Set forth below is a description of the common stock
and the preferred stock that may be issued under our new certificate of
incorporation to become effective upon the consummation of the offering.
Common Stock
Voting Rights. Each outstanding share of common stock is entitled to one
vote on all matters submitted to a vote of our stockholders, including the
election of directors. There is no cumulative voting in the election of
directors.
Dividends, Distributions and Stock Splits. Holders of common stock are
entitled to receive dividends if, as and when such dividends are declared by
our board of directors out of assets legally available therefor after payment
of dividends required to be paid on shares of preferred stock, if any.
Liquidation. In the event of any dissolution, liquidation, or winding up of
our affairs, whether voluntary or involuntary, after payment of our debts and
other liabilities and making provision for the holders of preferred stock, if
any, our remaining assets will be distributed ratably among the holders of the
common stock.
All shares of common stock outstanding are fully paid and nonassessable,
and all the shares of common stock to be outstanding upon completion of this
offering will be fully paid and nonassessable.
Preferred Stock
Upon consummation of the offering, 5,000,000 shares of undesignated
preferred stock will be authorized, and no shares will be outstanding. Our
board of directors has the authority to issue preferred stock in one or more
series and to establish the rights and restrictions granted to or imposed on
any unissued shares of preferred stock and to fix the number of shares
constituting any series without any further vote or action by the stockholders.
Our board of directors has the authority, without approval of the stockholders,
to issue preferred stock that has voting and conversion rights superior to the
common stock, which could have the effect of delaying or preventing a change in
control. We currently have no plans to issue any shares of preferred stock.
Delaware Anti-Takeover Law and Charter and Bylaw Provisions
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, an anti-takeover law. In general, the statute prohibits a
publicly-held Delaware corporation from engaging in a business combination with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the stockholder. For purposes of Section 203, an
"interested stockholder" is defined to include any person that is:
. the owner of 15% or more of the outstanding voting stock of a
corporation;
. an affiliate or associate of a corporation and was the owner of 15% or
more of the voting stock outstanding of the corporation at any time
within three years immediately prior to the relevant date; and
. an affiliate or associate of the persons described above.
Stockholders may, by adopting an amendment to the corporation's certificate
of incorporation or bylaws, elect for the corporation not to be governed by
Section 203, effective 12 months after adoption. Neither our certificate of
incorporation nor our bylaws exempt us from the restrictions imposed under
Section 203 of the Delaware General Corporation Law. We anticipate that the
provisions of Section 203 of the Delaware General
61
<PAGE>
Corporation Law may encourage companies interested in acquiring us to
negotiate in advance with our board of directors because the stockholder
approval requirement would be avoided if a majority of the directors then in
office approve either the business combination or the transaction that results
in the stockholder becoming an interested stockholder.
Annual meetings of stockholders shall be held to elect our board of
directors and transact such other business as may be properly brought before
the meeting. Special meetings of stockholders may be called by our chairman or
the chief executive officer or by a majority of the board. Our certificate of
incorporation and bylaws provide that any action required or permitted to be
taken by our stockholders may be effected at a duly called annual or special
meeting of the stockholders or may be taken by a consent in writing by
stockholders.
Our certificate of incorporation may be amended with the approval of a
majority of the board and the holders of a majority of our outstanding voting
securities.
The number of directors shall be fixed by resolution of the board. The
size of the board is currently fixed at eight members. The directors shall be
elected at the annual meeting of the stockholders, except for filling
vacancies. Directors may be removed with the approval of the holders of a
majority of our voting power present and entitled to vote at a meeting of
stockholders. Vacancies and newly-created directorships resulting from any
increase in the number of directors may be filled by a majority of the
directors then in office, a sole remaining director, or the holders of a
majority of the voting power present and entitled to vote at a meeting of
stockholders.
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast by the stockholders entitled to vote generally shall
constitute a quorum for stockholder action at any meeting.
Limitation of Liability; Indemnification
Our certificate of incorporation contains certain provisions permitted
under the Delaware General Corporation Law relating to the liability of
directors. These provisions eliminate a director's personal liability for
monetary damages resulting from a breach of fiduciary duty, except in certain
circumstances involving certain wrongful acts, including:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. under Section 174 of the Delaware General Corporation Law; or
. for any transaction from which the director derives an improper personal
benefit.
These provisions do not limit or eliminate our rights or those of any
stockholder to seek non-monetary relief, such as an injunction or rescission,
in the event of a breach of a director's fiduciary duty. These provisions will
not alter a director's liability under federal securities laws. Our bylaws
also contain provisions indemnifying our directors and officers to the fullest
extent permitted by the Delaware General Corporation Law. We believe that
these provisions are necessary to attract and retain qualified individuals to
serve as directors and officers.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American
Securities Transfer and Trust, Inc.
62
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have 13,942,825 shares of common
stock outstanding, assuming no exercise of the underwriters' option to purchase
additional shares. Of this amount, the 4,800,000 shares of common stock offered
by this prospectus will be available for immediate sale in the public market as
of the date of this prospectus. Approximately 9,142,825 shares of common stock
will be available for sale in the public market following the expiration of
180-day lock-up agreements with the representatives of our underwriters,
subject in some cases to compliance with the volume and other limitations of
Rule 144.
<TABLE>
<CAPTION>
Days after the Date of Approximate Shares
this Prospectus Eligible for Future Sale Comment
---------------------- ------------------------ -------
<C> <C> <S>
Upon effectiveness 4,800,000 Freely tradable shares sold in offering
180 days after this 9,142,825 Lock-up released; shares salable under
offering Rule 144
</TABLE>
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least one year is entitled to sell within any
three-month period commencing 90 days after the date of this prospectus a
number of shares that does not exceed the greater of (a) 1% of the then
outstanding shares of common stock (approximately 139,428 shares immediately
after the offering) or (b) the average weekly trading volume during the four
calendar weeks preceding the sale, subject to the filing of a Form 144 with
respect to the sale. A person who is not deemed to have been an affiliate of
ours at any time during the 90 days immediately preceding the sale and who has
beneficially owned his or her shares for at least two years is entitled to sell
these shares under Rule 144(k) without regard to the limitations described
above. Persons deemed to be affiliates must always sell under Rule 144, even
after the applicable holding periods have been satisfied.
We are unable to estimate the number of shares that will be sold under Rule
144, since this will depend on the market price for our common stock, the
personal circumstances of the sellers and other factors. Prior to the offering,
there has been no public market for the common stock, and there can be no
assurance that a significant public market for the common stock will develop or
be sustained after the offering. Any future sale of substantial amounts of
common stock in the open market may adversely affect the market price of the
common stock offered by this prospectus.
Our directors, executive officers, stockholders and optionholders have
agreed that they will not sell any common stock without the prior written
consent of BancBoston Robertson Stephens Inc. for a period of 180 days from the
date of this prospectus. We have also agreed not to issue any shares during the
lock-up period without the consent of BancBoston Robertson Stephens Inc.,
except that we may, without this consent, grant options and sell shares under
our stock incentive and purchase plans. These shares may not be resold into the
public market during the lock-up period.
Any of our employees or consultants who purchased his or her shares under a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701, which permits nonaffiliates to resell their Rule 701
shares without having to comply with the public information, holding period,
volume limitation or notice provisions of Rule 144 and permits affiliates to
resell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
prospectus. As of July 31, 1999, we had outstanding options to purchase 693,951
shares of common stock under our stock plan. All of these options will become
fully exercisable upon consummation of this offering.
We intend to file a registration statement on Form S-8 under the Securities
Act shortly after the completion of the offering to register the shares of
common stock subject to outstanding stock options that may be issued under
these plans, which will permit the resale of these shares in the public market
without restriction after the lock-up period expires.
63
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Bear, Stearns & Co. Inc. and CIBC World
Markets Corp., have severally agreed with us, subject to the terms and
conditions set forth in the underwriting agreement, to purchase from us the
number of shares of common stock set forth opposite their names below. The
underwriters are committed to purchase and pay for all such shares if they are
purchased.
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
BancBoston Robertson Stephens Inc. ...............................
Bear, Stearns & Co. Inc. .........................................
CIBC World Markets Corp. .........................................
---------
Total........................................................... 4,800,000
=========
</TABLE>
We have been advised by the representatives that the underwriters propose
to offer the shares of common stock to the public at the initial public
offering price set forth on the cover page of this prospectus and to make
certain dealers at such price less a concession of not in excess of $ per
share, of which $ may be reallowed to their dealers. After the initial public
offering, the public offering price, concession and reallowance to dealers may
be reduced by the representatives. No such reduction shall change the amount of
proceeds to be received by us as set forth on the cover page of this
prospectus. The common stock is offered by the underwriters as stated in this
prospectus, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part.
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Over-allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 720,000 additional shares of common stock at the same price per
share as we will receive for the 4,800,000 shares that the underwriters have
agreed to purchase. To the extent that the underwriters exercise this option,
each of the underwriters will have a firm commitment to purchase approximately
the same percentage of these additional shares that the number of shares of
common stock to be purchased by it shown in the above table represents as a
percentage of the 4,800,000 shares offered in this offering. If purchased, such
additional shares will be sold by the underwriters on the same terms as those
on which the 4,800,000 shares are being sold. We will be obligated, according
to the option, to sell shares to the extent the option is exercised. The
underwriters may exercise this option only to cover over-allotments made in
connection with the sale of the shares of common stock offered in this
offering. If this option is exercised in full, the total public offering price
of the 5,520,000 shares we sell to the underwriters, underwriting discounts and
commissions on such shares and total proceeds to us from the sale of these
shares will be $ , $ and $ , respectively.
The following table summarizes the compensation to be paid to the
underwriters by us:
<TABLE>
<CAPTION>
Total
-------------------
Without With
Per Over- Over-
Share allotment allotment
----- --------- ---------
<S> <C> <C> <C>
Underwriting discounts and commissions payable by
us................................................ $ $ $
</TABLE>
We estimate that expenses payable by us in connection with this offering,
other than the underwriting discounts and commissions referred to above, will
be approximately $800,000.
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
64
<PAGE>
Lock-up Agreements. Each of our directors, executive officers, stockholders
and optionholders has agreed with the representatives, for a period of 180 days
after the date of this prospectus, subject to certain exceptions, not to offer
to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or grant
any rights with respect to any shares of common stock, any options or warrants
to purchase any shares of common stock, or any securities convertible into or
exchangeable for shares of common stock owned as of the date of this prospectus
or, with certain exceptions, thereafter acquired directly by such holders or
with respect to which they have or hereafter acquire the power or disposition,
without the prior written consent of BancBoston Robertson Stephens Inc.
However, BancBoston Robertson Stephens Inc. may, in its sole discretion and at
any time without notice, release all or any portion of the securities subject
to the lock-up agreements. There are no agreements between the representatives
and any of our stockholders providing consent by the representatives to the
sale of shares prior to the expiration of the period of 180 days after this
prospectus.
Future Sales. In addition, we have agreed that during the period of 180
days after this prospectus, we will not, subject to certain exceptions, without
the prior written consent of BancBoston Robertson Stephens Inc.:
. consent to the disposition of any shares held by stockholders prior to
the expiration of the period of 180 days after this prospectus; or
. issue, sell, contract to sell or otherwise dispose of any shares of
common stock, any options or warrants to purchase any shares of common
stock or any securities convertible into, exercisable for or
exchangeable for shares of common stock, other than (1) the sale of
shares in this offering, (2) the issuance of common stock upon the
exercise or conversion of outstanding options, warrants or convertible
securities, (3) our issuance of stock options under existing stock
option plans and (4) our issuance of common stock under our stock
purchase plan.
See "Shares Eligible for Future Sale."
Listing. We have applied to have our common stock quoted on The Nasdaq
National Market under the symbol RTEC.
No Prior Public Market. Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public offering price
for the common stock offered hereby was determined through negotiations between
us and the representatives. Among the factors considered in such negotiations
were prevailing market conditions, certain of our financial information, market
valuations of other companies that we and the representatives believed to be
comparable to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.
Stabilization. The representatives have advised us that, pursuant to
Regulation M under the Securities Act, certain persons participating in this
offering may engage in transactions, include stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which might otherwise prevail in the open market.
. A stabilizing bid is a bid for or the purchase of the common stock on
behalf of the underwriters for the purpose of fixing or maintaining the
price of the common stock.
. A syndicate covering transaction is the bid for or the purchase of the
common stock on behalf of the underwriters to reduce a short position
incurred by the underwriters in connection with this offering.
. A penalty bid is an arrangement permitting the representatives to
reclaim the selling concession otherwise accruing to an underwriter or
syndicate member in connection with this offering if the common stock
originally sold by such underwriter or syndicate member is purchased by
the representatives in a syndicate covering transaction and has
therefore not been effectively placed by such underwriter or syndicate
member.
The representatives have advised us that such transactions may be effected
on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
65
<PAGE>
Directed Share Program. At our request, the underwriters have reserved less
than 5% of the shares of common stock offered hereby for sale, at the initial
public offering price, to our directors, officers, employees, business
associates and related persons. The number of shares of common stock available
for sale to the general public will be reduced to the extent such individuals
purchase such reserved shares. Any reserved shares which are not so purchased
will be offered by the underwriters to the general public on the same basis as
the other shares offered hereby.
LEGAL MATTERS
Certain legal matters with respect to the validity of the common stock
offered hereby are being passed upon for us by Wilson Sonsini Goodrich &
Rosati, Palo Alto, California. Certain legal matters in connection with this
offering will be passed upon for the underwriters by Hale and Dorr LLP, Boston,
Massachusetts.
EXPERTS
The statements in this prospectus set forth under the captions "Risk
Factors--Protection of our intellectual property rights, or the efforts of
third parties to enforce their own intellectual property rights against us, has
in the past resulted and may in the future result in costly and time-consuming
litigation, " "Business--Intellectual Property," the second and third
paragraphs of "Business--Research and Development," and "Business--Legal
Proceedings," except for statements pertaining to our relationship with Brown
University Research Foundation, have been reviewed and approved by Antonelli,
Terry, Stout & Kraus, LLP, our patent counsel, as experts on such matters, and
we have included these statements in this prospectus in reliance upon such
review and approval.
The financial statements of the Company and its predecessor as of December
31, 1997 and 1998, June 30, 1999, and for the periods January 1, 1996 through
June 13, 1996, June 14, 1996 through December 31, 1996, the years ended
December 31, 1997 and 1998 and the six months ended June 30, 1999 included in
this prospectus have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the shares to be sold in the offering. This
prospectus does not contain all the information contained in the registration
statement. For further information about us and the shares to be sold in the
offering, reference is made to the registration statement and the exhibits and
schedules filed with the registration statement. We have described all material
information for each contract, agreement or other document filed with the
registration statement in the prospectus. However, statements contained in this
prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. As a result, you should refer to the
copy of the contract, agreement or other document filed as an exhibit to the
registration statement for a complete description of the matter involved.
You may read and copy all or any portion of the registration statement or
any reports, statements or other information that we file at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by
writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings,
including the registration statement, are also available to you without charge
from the SEC Web site, which is located at http://www.sec.gov.
66
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Rudolph Technologies, Inc. Consolidated Financial Statements
Report of PricewaterhouseCoopers LLP, Independent Accountants............. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 and as of
June 30, 1999 .......................................................... F-3
Consolidated Statements of Operations for the period June 14, 1996 to
December 31, 1996, the years ended December 31, 1997, and 1998 and the
six months ended June 30, 1998 (unaudited)
and 1999................................................................ F-4
Consolidated Stockholders' Equity (Deficit) for the period June 14, 1996
to December 31, 1996,
the years ended December 31, 1997, and 1998 and the six months ended
June 30, 1999........................................................... F-5
Consolidated Statements of Cash Flows for the period June 14, 1996 to
December 31, 1996, the years ended December 31, 1997, and 1998 and the
six months ended June 30, 1998 (unaudited)
and 1999................................................................ F-6
Notes to Consolidated Financial Statements................................ F-7
Rudolph Research Corporation Financial Statements
Report of PricewaterhouseCoopers LLP, Independent Accountants............. F-22
Statement of Operations for the period January 1, 1996 to June 13, 1996... F-23
Statement of Stockholders' Equity for the period January 1, 1996 to June
13, 1996................................................................ F-24
Statement of Cash Flows for the period January 1, 1996 to June 13, 1996... F-25
Notes to the Financial Statements......................................... F-26
</TABLE>
F-1
<PAGE>
The stock split described in Note 17 to the financial statements has not
been consummated at October 1, 1999. When it has been consummated, we expect to
be in a position to render the following report:
PricewaterhouseCoopers LLP
Florham Park, New Jersey
October 1, 1999
Report of Independent Accountants
To the Stockholders and Board of Directors
of Rudolph Technologies, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows present fairly, in all material respects, the financial position
of Rudolph Technologies, Inc. and subsidiaries at June 30, 1999 and December
31, 1998 and 1997, and the results of their operations and their cash flows for
the six months ending June 30, 1999 and for each of the two years in the period
ended December 31, 1998 and the period from June 14, 1996 to December 31, 1996,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
Florham Park, New Jersey
F-2
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31, June 30,
---------------- --------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents......................... $ 189 $ 431 $ 412
Accounts receivable, less allowance of $500 in
1997 and $294 in 1998 and 1999.................. 5,593 4,412 5,527
Inventories....................................... 10,302 9,418 10,006
Income tax receivables............................ 558 270 270
Prepaid expenses and other assets................. 114 210 232
------- ------- -------
Total current assets............................ 16,756 14,741 16,447
Property, plant and equipment, net................. 2,411 2,631 2,891
Intangibles........................................ 7,503 3,295 3,164
Deferred income taxes.............................. 1,263 -- --
Other assets....................................... 580 454 422
------- ------- -------
Total assets.................................... $28,513 $21,121 $22,924
======= ======= =======
Liabilities and stockholders' equity
Current liabilities
Short-term borrowings............................. $ 6,600 $ 9,600 $ 9,300
Current portion of long-term debt................. 2,000 2,500 2,750
Accounts payable.................................. 1,153 1,113 1,380
Accrued liabilities:
Commissions...................................... 1,435 564 358
Payroll and related expenses..................... 1,072 463 927
Warranty......................................... 303 342 513
Other liabilities................................. 1,059 1,211 1,498
------- ------- -------
Total current liabilities....................... 13,622 15,793 16,726
Long-term liabilities
Deferred compensation............................. 111 103 78
Long-term debt.................................... 24,000 25,370 26,290
------- ------- -------
Total long-term liabilities..................... 24,111 25,473 26,368
------- ------- -------
Commitments and contingencies (Note 6)
Redeemable preferred stock, $0.01 par value, 56,001
shares authorized:
Class A, 45,876 shares designated, 45,875.29
shares issued and outstanding
(at liquidation value)........................... 5,188 5,619 5,848
Class B, 10,125 shares designated, 8,124.71 shares
issued and outstanding (at liquidation value)... 919 995 1,035
Stockholders' deficit
Common stock, $0.01 par value, 9,910,681 shares
authorized:
Class A, 6,874,976 shares designated, 1,571,294
shares issued and outstanding at
December 31, 1997, and 4,802,291 shares issued
and outstanding at December 31, 1998 and
June 30, 1999................................... 1 2 2
Class B, 3,035,705 shares designated, 1,046,079
shares issued and outstanding at
December 31, 1997, 1,930,103 shares issued and
outstanding at December 31, 1998 and 2,301,074
issued and outstanding at June 30, 1999......... -- -- --
Additional paid-in-capital........................ 1,499 4,638 4,886
Accumulated other comprehensive loss.............. (166) (153) (246)
Accumulated deficit............................... (16,661) (31,246) (31,695)
------- ------- -------
Total stockholders' deficit...................... (15,327) (26,759) (27,053)
------- ------- -------
Total liabilities and stockholders' deficit...... $28,513 $21,121 $22,924
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
June 14 to For the Years Ended For the Six Months
December 31, December 31, Ended June 30,
------------ ---------------------- -----------------------
1996 1997 1998 1998 1999
------------ ---------- ---------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 14,373 $ 35,339 $ 20,106 $ 11,872 $ 15,170
Cost of revenues........ 6,579 13,903 13,179 6,455 7,373
---------- ---------- ---------- ---------- ----------
Gross profit........... 7,794 21,436 6,927 5,417 7,797
---------- ---------- ---------- ---------- ----------
Operating expenses:
Research &
development.......... 2,345 5,750 5,096 2,688 2,097
In-process research &
development.......... 3,821 -- -- -- --
Selling, general &
administrative....... 4,340 9,475 7,077 3,306 3,537
Write-down of
intangibles.......... 6,734 -- -- -- --
Amortization........... 3,650 4,201 4,208 2,103 131
---------- ---------- ---------- ---------- ----------
Total operating
expenses............ 20,890 19,426 16,381 8,097 5,765
---------- ---------- ---------- ---------- ----------
Operating income
(loss)................ (13,096) 2,010 (9,454) (2,680) 2,032
Interest expense........ 2,013 3,717 4,210 2,135 2,148
Other income............ (156) (92) (199) (15) (29)
---------- ---------- ---------- ---------- ----------
Loss before income
taxes................ (14,953) (1,615) (13,465) (4,800) (87)
Provision (benefit) for
income taxes.......... -- (614) 613 (699) 93
---------- ---------- ---------- ---------- ----------
Net loss............... (14,953) (1,001) (14,078) (4,101) (180)
Preferred stock
dividends............. 239 468 507 247 269
---------- ---------- ---------- ---------- ----------
Loss available to common
stockholders.......... $ (15,192) $ (1,469) $ (14,585) $ (4,348) $ (449)
========== ========== ========== ========== ==========
Net loss per share
available to common
stockholders:
Basic.................. $ (5.80) $ (.56) $ (3.24) $ (1.66) $ (.07)
Diluted................ $ (5.80) $ (.56) $ (3.24) $ (1.66) $ (.07)
Weighted average number
of shares outstanding:
Basic.................. 2,617,373 2,617,373 4,503,396 2,617,373 6,767,415
Diluted................ 2,617,373 2,617,373 4,503,396 2,617,373 6,767,415
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIT)
For the period from June 14, 1996 to December 31, 1996, the years ended
December 31, 1997 and 1998 and for the six months ended June 30, 1999
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other
---------------- Paid-In Comprehensive Accumulated Comprehensive
Shares Amount Capital Loss Deficit Total Loss
--------- ------ ---------- ------------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock:
Class A............... 1,571,294 $ 1 $ 899 $ 900
Class B............... 1,046,079 -- 600 600
Net loss............... -- -- -- $(14,953) (14,953) (14,953)
Accretion of preferred
stock dividend....... -- -- -- -- (239) (239) --
Currency translation... -- -- -- $ (15) -- (15) (15)
--------- --- ------ ----- -------- -------- --------
Balance at December 31,
1996.................. 2,617,373 1 1,499 (15) (15,192) (13,707) $(14,968)
========
Net loss............... -- -- -- -- (1,001) (1,001) (1,001)
Accretion of preferred
stock dividend....... -- -- -- -- (468) (468) --
Currency translation... -- -- -- (151) -- (151) (151)
--------- --- ------ ----- -------- -------- --------
Balance at December 31,
1997.................. 2,617,373 1 1,499 (166) (16,661) (15,327) $(16,120)
========
Issuance of common
stock:
Class A............... 3,230,997 1 2,999 -- -- 3,000
Class B............... 884,024 -- -- -- -- --
Issuance of warrants in
connection with debt
financing............ -- -- 140 -- -- 140
Net loss............... -- -- -- -- (14,078) (14,078) $(14,078)
Accretion of preferred
stock dividend....... -- -- -- -- (507) (507) --
Currency translation... -- -- -- 13 -- 13 13
--------- --- ------ ----- -------- -------- --------
Balance at December 31,
1998.................. 6,732,394 2 4,638 (153) (31,246) (26,759) $(30,185)
========
Exercise of employee
stock options........ 370,971 -- 248 -- -- 248
Net loss............... -- -- -- -- (180) (180) $ (180)
Accretion of preferred
stock dividend....... -- -- -- -- (269) (269) --
Currency translation... -- -- -- (93) -- (93) (93)
--------- --- ------ ----- -------- -------- --------
Balance at June 30,
1999.................. 7,103,365 $ 2 $4,886 $(246) $(31,695) $(27,053) $(30,458)
========= === ====== ===== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
June 14 to For the Years Ended For the Six Months
December 31, December 31, Ended June 30,
------------ --------------------- -------------------
1996 1997 1998 1998 1999
------------ --------- ---------- ----------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flow from operating
activities
Net loss................ $ (14,953) $ (1,001) $ (14,078) $ (4,101) $ (180)
Adjustment to reconcile
net loss to net cash
provided by (used in)
operating activities
Amortization and other
adjustments to
intangibles........... 14,205 4,201 4,208 2,103 131
Depreciation............ 205 448 778 263 274
Provision for doubtful
accounts.............. -- 353 71 (26) --
Gain on sale of
property.............. -- -- (147) -- --
Decrease (increase) in
assets:
Accounts receivable.... 1,999 (1,131) 1,199 (432) (1,187)
Income tax receivable.. -- (558) 288 511 --
Inventories............ (147) (4,559) 889 (402) (587)
Prepaid expenses and
other................ 13 394 (14) (128) (82)
Deferred income taxes.. -- (1,263) 1,263 (699) --
Increase (decrease) in
liabilities:
Accounts payable....... (294) 122 (36) (365) 318
Accrued liabilities.... (410) 1,065 (1,447) (1,134) 427
Other liabilities...... 542 (30) 154 1,476 336
--------- --------- ---------- -------- -------
Net cash provided by
(used in) operating
activities............ 1,160 (1,959) (6,872) (2,934) (550)
Cash flows from
investing activities
Purchase of property,
plant and equipment... (107) (586) (986) (508) (538)
Proceeds from disposal
of property, plant and
equipment............. -- -- 82 -- 27
--------- --------- ---------- -------- -------
Net cash used in
investing activities.. (107) (586) (904) (508) (511)
Cash flows from
financing activities
Principal borrowings on
long-term debt........ 27,600 -- 4,000 -- 2,345
Principal payments on
long-term debt........ -- (1,600) (2,000) -- (1,250)
Net borrowing under
lines of credit....... 3,800 2,800 3,000 3,400 (300)
Capital Contribution.... 6,900 -- 3,000 -- 248
Distribution to
stockholders.......... (37,075) -- -- -- --
Payment of financing
cost.................. (700) -- -- -- --
--------- --------- ---------- -------- -------
Net cash provided by
financing activities.. 525 1,200 8,000 3,400 1,043
Effect of exchange rate
changes on cash....... -- (44) 18 (20) (1)
--------- --------- ---------- -------- -------
Net (decrease) increase
in cash and cash
equivalents........... 1,578 (1,389) 242 (62) (19)
Cash and cash
equivalents at
beginning of period... -- 1,578 189 189 431
--------- --------- ---------- -------- -------
Cash and cash
equivalents at end of
period................ $ 1,578 $ 189 $ 431 $ 127 $ 412
========= ========= ========== ======== =======
Supplemental disclosures
of cash flow
information
Cash paid during the
period for:
Interest................ $ 1,572 $ 3,939 $ 4,031 $ 654 $ 1,723
Income taxes............ -- $ 1,257 -- -- $ 93
========= ========= ========== ======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
1. Organization and Nature of Operations:
Rudolph Technologies, Inc. (the "Company") designs, develops, manufactures
and supports high-performance process control metrology systems used in
semiconductor device manufacturing. The Company operates in a single segment
and supports a wide variety of applications in the areas of diffusion, etch,
lithography, CVD, PVD, and CMP. The Company is the successor to Rudolph
Research Corporation ("predecessor company") which was aquired on June 14, 1996
(the "Acquisition"). The Acquistion was accounted for as a purchase and
accordingly, the purchase price was allocated to the fair value of the net
assets acquired.
The results of operations for the six months ended June 30, 1999 are not
necessarily indicative of the operating results to be expected for the year
ending December 31, 1999.
2. Summary Significant Accounting Policies:
A. Revenue Recognition:
Revenues from product and parts sales are recognized at the time of
shipment. Revenue from service contracts is recognized ratably over the period
of the contract. A provision for the estimated cost of fulfilling warranty and
installation obligations is recorded at the time the related revenue is
recognized.
B. Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Significant estimates made by management include allowance for doubtful
accounts, inventory obsolescence, depreciation, amortization, taxes,
contingencies, and product warranty. Actual results could differ from those
estimates.
C. Cash and Cash Equivalents:
Cash and cash equivalents include cash and highly liquid debt instruments
with original maturities of three months or less when purchased.
D. Property, Plant and Equipment:
Property, plant and equipment are stated at cost. Depreciation of property
and equipment is computed using the straight-line method over the estimated
useful lives of the assets which are thirty years for buildings, seven years
for machinery and equipment and furnitures and fixtures, and three years for
computer equipment. Leasehold improvements are amortized using the straight-
line method over the lesser of the lease term or the estimated useful life of
the related asset. Repairs and maintenance costs are expensed as incurred and
major renewals and betterments are capitalized. Long-lived assets are reviewed
for impairment whenever events or changes in circumstances indicate that the
carry amount may not be recoverable. If the fair value is less than the
carrying amount of the asset, a loss is recognized for the difference. Asset
impairment is determined based upon undiscounted cash flows. The fair value of
an asset is computed based upon discounted cash flows.
E. Intangibles:
Intangibles, which resulted from the Acquisition, consist of Goodwill and
Purchased Technology which are amortized on a straight-line basis over useful
lives of 12 years and 2.5 to 12 years, respectively. Goodwill represents the
excess of the purchase price over the fair value of the net assets acquired.
Intangibles are reviewed for impairment whenever events or changes in
circumstances indicate that the carry amount may not be recoverable. If the
fair value is less than the carrying amount of the asset, a loss is recognized
for the difference.
F-7
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
F. Deferred Financing Costs:
Included in other assets are deferred financing costs of $538, $431 and
$377 at December 31, 1997 and 1998 and at June 30, 1999, respectively,
consisting of costs to obtain the working capital line of credit and long-term
debt, which are being amortized on a basis which approximates the interest
method, over the life of the respective debt. Amortization expense amounted to
$53 for the period June 14, 1996 to December 31,1996, $107 for each of the
years ended December 31, 1997 and 1998 and $54 for each of the six month
periods ended June 30, 1998 (unaudited) and 1999.
G. Concentration of Credit Risk:
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of accounts receivable and
cash. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral for sales on credit. The Company
maintains reserves for potential credit losses. Substantially all of its cash
is held with one major financial institution.
H. Warranties:
The Company generally provides a warranty on its products for a period of
twelve to fifteen months against defects in material and workmanship. The
Company has established reserves of $303, $342, and $513 at December 31, 1997
and 1998, and June 30, 1999, respectively, for these anticipated future
warranty costs.
I. Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market. Demonstration units, which are available for sale, are stated at their
manufacturing costs and reserves are recorded to state the demonstration units
at their net realizable value.
J. Income Taxes:
The Company accounts for income taxes using the asset and liability
approach for deferred taxes which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax returns. A
valuation allowance is recorded to reduce a deferred tax asset to that portion
which more likely than not will be realized.
K. Translation of Foreign Currencies:
The Company has foreign operations in Korea and Taiwan, which use their
local currency as their functional currency. Assets and liabilities are
translated at exchange rates in effect at the balance sheet date, and income,
expense accounts and cash flow items at average exchange rates during the
period. Resulting translation adjustments are recorded directly as a separate
component of stockholder's deficit. Foreign exchange rate gains and losses
included in operating results are not material for all periods presented.
L. Stock Based Compensation:
The Company accounts for its employee stock option plan in accordance with
provisions of the Accounting Principles Board's Opinion' (APB) No. 25,
"Accounting for Stock Issued to Employees." The Company provides additional
disclosure required by Financial Accounting Standard (SFAS) No. 123,
"Accounting for Stock-Based Compensation" (see Note 8).
F-8
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
M. Software Development Costs:
The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standards No. 86. "Accounting for Costs of
Computer Software to Be Sold, Leased or Marketed" ("SFAS No. 86"). SFAS No. 86
requires that certain software product development costs ("Capitalized Costs"),
incurred after technological feasibility has been established, be capitalized
and amortized, commencing upon the general release of the software product to
the Company's customers, over the economic life of the software product. Annual
amortization of Capitalized Costs is computed using the greater of: (i) the
ratio of current gross revenues for the software product over the total of
current and anticipated future gross revenues for the software product or (ii)
the straight-line basis. Software product development costs incurred prior to
the product reaching technological feasibility are expensed as incurred and
included in research and development costs. Capitalized Costs incurred to date
have been immaterial and, accordingly, SFAS No. 86 had no significant impact on
the financial position or results of operations of the Company.
N. Fair Value of Financial Instruments:
The carrying amounts of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, accounts payable and accrued
expenses approximates fair value due to their short maturities.
The fair values of the Company's debt, including current maturities, are
estimated using discounted cash flow analyses, based on the estimated current
incremental borrowing rates for similar types of securities. The carrying
amount of the Company's debt at December 31, 1997 and 1998 and June 30, 1999
approximates fair value.
O. Risks Inherent in the Business:
The Company sells its products to the semiconductor device industry and
believes that changes in any of the following areas could have a material
adverse effect on the Company's financial position, results of operations or
cash flows: advances and trends in new technologies and industry standards;
competitive pressures in the form of new products or price reductions on
current products; changes in product mix; changes in the overall demand for
products and services offered by the Company; changes in customer
relationships; litigation or claims against the Company based on intellectual
property, patent, product, regulatory or other factors; risks associated with
changes in domestic and international economic and/or political conditions or
regulations; dependency on suppliers and availability of necessary product
components; risks associated with year 2000 compliance; and the Company's
ability to attract and retain employees necessary to support its growth.
P. Consolidation:
The consolidated financial statements reflect the consolidated balance
sheet, results of operations and cash flows of the Company and its
subsidiaries. All intercompany accounts and transactions have been eliminated.
Q. Recent Accounting Pronouncements:
During June 1998, as amended in July 1999 for Statement No. 137, the
Financial Accounting Standards Board issued Statement No. 133 "Accounting for
Derivative Investments and Hedging Activities" ("SFAS 133"). Based on the
Company's current operations, management has concluded that the future adoption
of SFAS 133 will have no impact on the Company's operations or financial
position.
F-9
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
R. Interim Financial Data (unaudited):
The unaudited financial data for the six months ended June 30, 1998 has
been prepared by management and includes all adjustments, consisting of normal
recurring adjustments, considered necessary for a fair presentation of the
financial position, results of operations and cash flows of the Company.
3. Property, Plant And Equipment:
Property, plant and equipment is comprised of the following:
<TABLE>
<CAPTION>
December 31, June 30,
-------------- --------
1997 1998 1999
------ ------ --------
<S> <C> <C> <C>
Land and building..................................... $1,707 $1,609 $ 1,609
Machinery and equipment............................... 298 754 784
Furniture and fixtures................................ 237 250 266
Computer equipment.................................... 609 592 627
Leasehold improvements................................ 194 312 767
------ ------ -------
3,045 3,517 4,053
Accumulated Depreciation.............................. (634) (886) (1,162)
------ ------ -------
Net Property, Plant and Equipment..................... $2,411 $2,631 $ 2,891
====== ====== =======
</TABLE>
Depreciation expense amounted to $205, $448, $778, $263 and $274 for the
period June 14, 1996 to December 31, 1996, the years ended December 31, 1997
and 1998, and the six months ended June 30, 1998 (unaudited) and 1999,
respectively.
4. Inventories:
Inventories are comprised of the following:
<TABLE>
<CAPTION>
December 31, June 30,
-------------- -------
1997 1998 1999
------- ------ -------
<S> <C> <C> <C>
Materials............................................... $ 5,139 $3,664 $ 4,177
Work-in-process......................................... 3,729 3,722 4,431
Finished goods.......................................... 1,434 2,032 1,398
------- ------ -------
Total Inventories..................................... $10,302 $9,418 $10,006
======= ====== =======
</TABLE>
The Company has established reserves of $540, $413 and $413 at December 31,
1997 and 1998, and June 30, 1999, respectively, for slow moving and obsolete
inventory.
In the fourth quarter of 1998, the Company recorded a charge of $1,407 for
the writedown of inventory for excess parts, for older product lines and for
parts which design and engineering advancements rendered obsolete.
F-10
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
5. Intangibles:
Intangibles are comprised of the following:
<TABLE>
<CAPTION>
December 31, June 30,
----------------- --------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Purchased Technology.............................. $22,731 $ 22,731 $ 22,731
Goodwill.......................................... 3,178 3,178 3,178
------- -------- --------
25,909 25,909 25,909
Accumulated Amortization.......................... (18,406) (22,614) (22,745)
------- -------- --------
Total Intangibles............................... $ 7,503 $ 3,295 $ 3,164
======= ======== ========
</TABLE>
In June 1996, as part of the Acquisition, $3,821 of the purchase price was
assigned to acquired in-process research and development which was expensed at
the date of acquisition. As of the acquisition date, it was determined that the
acquired in-process research and development had not reached technological
feasibility and did not have an alternative future use. The acquired in-process
research and development related to a new laser-based acoustic technology that
the predecessor company had licensed exclusively from a third party. After
licensing the technology, the predecessor company established that by pulsing
ultra-fast lasers under laboratory conditions, sound waves could be generated
to measure materials; however, as of the acquisition date, approximately 25% of
the research and development effort remained as the Company needed to meet
substantial design and engineering requirements before a commercial product
could be developed. The major research and development efforts undertaken by
the Company included designing advanced cooling systems to eliminate laser
overheating, developing laser beam compression systems to reduce the size of
the equipment and designing robotics for material handling. The technology
licensed ultimately led to the introduction of the Company's MetaPULSE product
in 1997. The Company began testing the MetaPULSE prototype in November 1996 and
the first product was sold commercially in May 1997. In valuing the acquired
in-process research and development, the Company used discounted cash flows
over approximately a four-year period. Four years was used based on historic
trends of new product introductions. Expected annual revenues ranged from
approximately $14 million to $23 million and the risk rated discount rate used
was 30%.
During 1996, the semiconductor industry experienced an unforeseen period of
reduced capital spending. This industry-wide downturn in the semiconductor
equipment business led to decreased sales of the Company's products with many
customers delaying shipments and canceling orders. In the fourth quarter of
1996, the Company also initiated the development of the next generation of its
products. As a result, the Company assessed the recoverability of its
intangible assets and a pro rata share of the goodwill using expected
undiscounted future cash flows from operations. Based on this analysis, an
impairment was determined. The Company then used discounted expected future
cash flows to determine the net realizable value of these assets and recorded a
$6,734 charge during the fourth quarter of 1996.
In June 1997, goodwill was increased by $323 to reflect the impact of
additional tax liabilities not recorded at the acquisition date.
Amortization of Intangibles expense amounted to $3,650, $4,201, $4,208,
$2,103 and $131 for the period June 14, 1996 to December 31, 1996, the years
ended December 31, 1997 and 1998, and the six months ended June 30, 1998
(unaudited) and 1999, respectively.
F-11
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
6. Commitments and Contingencies:
The Company rents space for its manufacturing and service operations and
sales offices. Total rent expense for these facilities amounted to $110, $242,
$302, $150 and $204 for the period June 14, 1996 to December 31, 1996, the
years ended December 31, 1997 and 1998, and the six months ended June 30, 1998
(unaudited) and 1999, respectively.
The Company also leases certain equipment pursuant to operating leases,
which expire through 2001. Rent expense related to these leases amounted to $7,
$40, $76, $27 and $26 for the period June 14, 1996 to December 31, 1996, the
years ended December 31, 1997 and 1998, and the six months ended June 30, 1998
(unaudited) and 1999, respectively.
Total future minimum lease payments under noncancelable operating leases as
of June 30, 1999 amounted to $483, $474, $417, $355 and $345 for the years 1999
to 2003, respectively.
Under various licensing agreements, the Company is obligated to pay
royalties based on net sales of products sold that use certain licensed
technologies. There are no minimum annual royalty payments. Royalty expense,
which is included in selling, general and administrative expense, amounted to
$0, $30, $398, $219 and $351 for the period June 14, 1996 to December 31, 1996,
the years ended December 31, 1997 and 1998, and the six months ended June 30,
1998 (unaudited) and 1999, respectively.
The Company is presently involved in a patent interference proceeding with
Therma-Wave, Inc. in the United States Patent Office. In this proceeding, the
Company is defending its patent rights with respect to some of the multiple
angle, multiple wavelength ellipsometry technology it uses in its transparent
thin film measurement systems. Therma-Wave requested that the proceeding be
initiated in 1993 by filing a reissue application for one of its own patents,
in which it sought to broaden the original issued claims. The proceeding was
initiated by the Patent Office in June 1998.
Preliminary motions and statements have been filed, and the Company is
presently awaiting a decision by the Patent Office on those motions. If the
Company loses the interference, a reissue patent will be granted to Therma-Wave
permitting Therma-Wave to assert patent rights against the ellipsometers the
Company uses in its transparent thin film measurement systems. In that event,
the Company could assert a defense of intervening rights against Therma-Wave's
reissued patent since the Company relied on the restricted claims of Therma-
Wave's original patent. If the intervening rights defense and other defenses
fail, the Company would either have to pay royalties to Therma-Wave or redesign
its SpectraLASER and other transparent thin film measurement systems. Mangement
is unable to estimate the ultimate resolution of this matter. However, should
the Company be required to pay royalties or redesign its products, it could
have a material adverse effect on the Company's business, financial condition
and results of operations.
In addition, from time to time the Company is subject to legal proceedings
and claims in the ordinary course of business. Other than the Therma-Wave, Inc.
patent interference proceeding discussed above, we are not involved in any
material legal proceedings.
F-12
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
7. Long-Term Debt:
The Company has long-term debt agreements with a related party.
Long-Term Debt is comprised of the following:
<TABLE>
<CAPTION>
December 31, June 30,
----------------- --------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Senior term loan, due 1997 to 2002, interest rate
of prime plus 1.75%............................. $15,000 $ 13,000 $ 11,750
Subordinated term loan, due in 2003, interest rate
of prime plus 4%................................ 11,000 11,000 11,000
Junior Subordinated Note, due in 2001, with
interest at 14% and an effective interest rate
of 16.57%, net of unamortized discount of $110.. -- 3,870 6,290
Senior revolving term loan, balance due 2002,
interest rate of prime plus 1.5%................ 6,600 9,600 9,300
------- -------- --------
32,600 37,470 38,340
Less current maturities........................... (8,600) (12,100) (12,050)
------- -------- --------
Total Long-Term Debt............................ $24,000 $ 25,370 $ 26,290
------- -------- --------
</TABLE>
As of December 31, 1998 and June 30, 1999, the Company had additional
aggregate borrowings available under the junior subordinated note and senior
revolving loan of $5,400 and $3,300, respectively.
The senior term loan, senior revolving term loan and the subordinated term
loan agreements contain covenants which were modified in 1997, and among other
matters (i) limit the Company's ability to pay dividends on the Company's
capital stock, incur indebtedness, merge, consolidate and acquire or sell
assets, and (ii) require the Company to satisfy certain financial ratios
related to earnings, fixed charges and interest coverage. Because of the
operating losses reported by the Company, the Company would not have been in
compliance with the financial ratios above had the lender not granted waivers
of such technical defaults extending through June 30, 1999. It is anticipated
that the Company will not be in compliance with these financial ratios over the
next twelve months (See Note 13).
In October 1996, the Company requested a deferral of the subordinated term
loan interest payments through March 31, 1997. In March 1997, all deferred
interest on the loan was paid. In February 1998, the Company requested a
deferral of interest payments on the senior and subordinated term loans and to
reschedule the principal payments of the Senior term loan to later dates in
1998. In July 1998, the deferred interest payments on the loans were paid. The
principal payments were paid through December 1998. In consideration for
accepting the Company's requests, the lender increased the interest rate an
additional 2.0% on the loans and all deferred interest during the deferral
periods.
The junior subordinated notes issued to finance working capital needs of
the Company are subordinate in priority to the senior term loans and will
mature on July 31, 2001. The holder of the junior subordinated notes was also
issued warrants to purchase 592,012 shares of Class A common stock at a
purchase price of $(0.73) per share. These warrants expire on November 1, 2008.
The fair value of the warrants are being amortized over the life of the debt.
The long-term debt is collateralized by essentially all the assets of the
Company. The revolving term loan is classified as current. In addition, the
provisions of the long-term debt contain certain clauses that allow for the
prepayment of principal without penalty.
F-13
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
The scheduled repayment of the Senior term loan is as follows:
<TABLE>
<CAPTION>
Senior
Term Loan
---------
<S> <C>
1999............................................................... $ 2,500
2000............................................................... 3,000
2001............................................................... 3,500
2002............................................................... 4,000
-------
$13,000
=======
</TABLE>
8. Stock Options:
In 1996, the Company adopted the 1996 Stock Option Plan ("the Option
Plan"). Under the Option Plan, the Company was authorized to grant options to
purchase up to 1,069,902 shares of Class B common stock to employees at prices
not less than the fair value of the Class B common stock on the date of grant.
These options generally expire ten years from the date of grant and become
exercisable after nine years or sooner upon the achievement of certain
financial targets over a period of six years. In the event of an initial public
offering, the options will become fully vested. Options granted to date have
exercise prices equal to the fair value of the common stock on the date of
grant. As of December 31, 1998 and June 30, 1999, there were 109,380 shares of
common stock reserved for future grants under the Option Plan.
In July 1999, the Company granted options under the Option Plan to purchase
104,401 shares, net of options to purchase 3,481 shares that were cancelled and
reissued, of Class B common stock at an exercise price of $0.73 per share. The
exercise price was equal to the fair value based on an independent appraisal of
the Company's stock in June 1999.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," (SFAS 123) requires the disclosure of pro forma net loss
had the Company adopted the fair value method. Under SFAS 123, the fair value
of stock-based awards to employees is calculated through the use of option
pricing models. For the period ended June 14, 1996 to December 31, 1996, the
years ended December 31, 1997 and 1998, and for the six months ended June 30,
1999, the fair value of each option grant was estimated on the date of the
grant using the Black-Scholes option-pricing model using a dividend yield of
0%, volatility of 66%, expected life of an option of 9 years and a risk-free
interest rate of 4.85% for all periods. For purposes of pro forma disclosures,
the estimated fair value of the options is amortized to expense over the
option's vesting period. Had compensation costs been determined based upon the
fair value at the grant date for awards under the Option Plan, consistent with
the methodology prescribed under SFAS No. 123, the Company's pro forma net loss
attributable to common stockholders under SFAS No. 123 would have been $15,207,
$1,510, $14,786 and $465 for the period June 14, 1996 to December 31, 1996, the
years ended December 31, 1997 and 1998, and the six months ended June 30, 1999,
respectively. The pro forma basic and diluted net loss per share would have
been $5.81, $0.58, $3.28, $0.07 for the period June 14, 1996 to December 31,
1996, the years ended December 31, 1997 and 1998, and the six months ended June
30, 1999, respectively.
F-14
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
The following tables summarize the stock option activity for the period
June 14, 1996 to December 31, 1996 and the years ended December 31, 1997 and
1998, the six months ended June 30, 1999 and the stock option information as of
December 31, 1998 and June 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding
---------------------------------------
Weighted Average
Number of Exercise Price Number
Shares per Share Exercisable
--------- ---------------- -----------
<S> <C> <C> <C>
Balance at June 14, 1996................ 328,638 $0.57 --
Granted................................. 17,832 0.57 --
Canceled................................ -- -- --
-------- ----- --------
Balance at December 31, 1996............ 346,470 $0.57 36,448
Granted................................. 35,663 0.73 --
Canceled................................ -- -- --
-------- ----- --------
Balance at December 31, 1997............ 382,133 0.59 283,524
Granted................................. 617,726 0.73 --
Canceled................................ (39,338) 0.73 --
-------- ----- --------
Balance at December 31, 1998............ 960,521 $0.67 475,607
Granted................................. -- -- --
Exercised............................... (370,971) 0.67 (370,971)
Canceled................................ -- -- --
-------- ----- --------
Balance at June 30, 1999................ 589,550 $0.68 104,636
======== ===== ========
</TABLE>
Stock option information as of December 31, 1998:
<TABLE>
<CAPTION>
Options Vested and
Options Outstanding Exercisable
--------------------------------------------- -------------------------------
Weighted Avg.
Weighted Avg. Exercise
Exercise Options Remaining Price per Number
Price Outstanding Contract Life Share Exercisable
-------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
$0.57 346,470 7.5 $0.57 173,253
0.73 614,051 9.5 0.73 302,354
----------- ------- --- ----- -------
$0.57-$0.73 960,521 8.8 $0.67 475,607
=========== ======= === ===== =======
</TABLE>
Stock option information as of June 30, 1999:
<TABLE>
<CAPTION>
Options Vested and
Options Outstanding Exercisable
--------------------------------------------- -------------------------------
Weighted Avg.
Weighted Avg. Exercise
Exercise Options Remaining Price per Number
Price Outstanding Contract Life Share Exercisable
----------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
$0.57 202,675 6.9 $0.57 29,422
0.73 386,875 9.0 0.73 75,214
----------- ------- --- ----- -------
$0.57-$0.73 589,550 8.2 $0.68 104,636
=========== ======= === ===== =======
</TABLE>
F-15
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
9. Redeemable Preferred Stock:
On June 14, 1996, the Company issued and sold 45,875.29 shares of Series A
voting preferred stock (referred to as Series A preferred stock), $0.01 par
value at $100 per share and 8,124.71 shares of Series B non-voting preferred
stock, (referred to as Series B preferred stock), $0.01 par value at $100 per
share. Series A preferred stockholders vote on a share-for-share basis with
Series A voting common shareholders. Holders of preferred stock are entitled to
receive cumulative dividends at an annual rate of 8% on the liquidation value
of each such share. The preferred stock contains a redemption feature which
allows the holders of the preferred stock to require redemption of all of the
preferred stock if certain ownership percentages are not met. The preferred
stock can be redeemed at the Company's option at any time at a price per share
of $100 plus accrued and unpaid dividends.
10. Equity Securities:
On June 14, 1996, the Company issued and sold 1,571,294 shares of Class A
voting common stock, $0.01 par value at $0.57 per share and 1,046,079 shares of
Class B non-voting common stock, $0.01 par value at $0.57 per share. The
Company also issued to the holder of the Class A voting common stock a warrant
to purchase 534,951 shares of Class A common stock of the Company at a purchase
price of $0.0003 per share. The warrants expire on June 14, 2006.
During 1998 the Company issued additional Class A voting common stock and
Class B non-voting common stock in connection with certain capital
contributions. The Company also issued to the holder of the Class A voting
common stock warrants to purchase 945,740 shares of Class A common stock of the
Company at a purchase price of $0.0003 per share based upon the holder's
antidilution rights. The warrants expire on June 14, 2006.
11. Employee Benefit Plans:
The Company has a 401(k) savings plan to provide retirement and incidental
benefits for its employees. As allowed under Section 401(k) of the Internal
Revenue Code, the Plan provides tax-deferred salary deductions for eligible
employees. Employees may contribute from 1% to 15% of their annual compensation
to the Plan, limited to a maximum annual amount as set periodically by the
Internal Revenue Service. The Plan provides a 50% match of all employee
contributions up to 6 percent of the employee's salary. Company matching
contributions to the Plan totaled $71, $133, $158 and $82 for the period June
14, 1996 to December 31, 1996, the years ended December 31, 1997 and 1998, and
the six months ended June 30, 1999, respectively.
In addition, the Company has a profit sharing program, wherein a percentage
of pre-tax profits, at the discretion of the Board of Directors, is provided to
all employees who have completed a stipulated employment period. The Company
did not make contributions to this program for the period June 14, 1996 to
December 31, 1996, the years ended December 31, 1997 and 1998, and the six
months ended June 30, 1999.
F-16
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
12. Income Taxes:
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
Six months
June 14 to Year ended ended
December 31, December 31, June 30,
------------ ---------------- ----------
1996 1997 1998 1999
------------ ------- ------- ----------
<S> <C> <C> <C> <C>
Current:
Federal............................ $ 352 $ 557 $ (842) $ --
State.............................. -- 141 (161) 93
----- ------- ------- --------
352 698 (1,003) 93
Deferred:
Federal ........................... (352) (1,245) 1,549 --
State ............................. -- (67) 67 --
----- ------- ------- --------
(352) (1,312) 1,616 --
----- ------- ------- --------
Total Income Tax Expense
(Benefit)..................... $ -- $ (614) $ 613 $ 93
===== ======= ======= ========
</TABLE>
Deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
December 31, June 30,
---------------- --------
1997 1998 1999
------ -------- --------
<S> <C> <C> <C>
Amortization of intangibles......................... $5,755 $ 7,185 $ 6,106
Deferred Interest................................... 695 2,042 2,833
Inventory obsolescence reserve...................... 122 199 153
Fixed assets........................................ 70 25 51
Warranty............................................ 103 126 191
Accounts receivable................................. 120 109 109
Other............................................... 262 138 144
Net operating loss carryforwards.................... -- 1,426 753
Less valuation allowance............................ (5,864) (11,250) (10,340)
------ -------- --------
Net deferred tax asset.............................. $1,263 $ -- $ --
====== ======== ========
</TABLE>
At June 30, 1999, the net deferred tax asset has been reduced to zero with
a valuation allowance as a result of recurring losses and with the uncertainty
regarding the Company's ability to generate sufficient taxable income.
Management believes that it is more likely than not that the deferred tax asset
will not be realized. The Company has available at June 30, 1999 approximately
$2,026 of unused net operating loss carryforwards and carrybacks that may be
applied against future taxable income and that expire in the year 2018. In the
event of certain ownership changes, the Company's ability to utilize the tax
benefit from net operating loss carryforwards may be limited.
F-17
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
The provision (benefit) for income taxes differs from the amount of income
tax determined by applying the applicable U.S. income tax rate to income taxes
as follows:
<TABLE>
<CAPTION>
Six months
June 14 to Year ended ended
December 31, December 31, June 30,
------------ ---------------- ----------
1996 1997 1998 1999
------------ ------- ------- ----------
<S> <C> <C> <C> <C>
Federal income tax provision
(benefit) at statutory rate $(5,084) $ (549) $(4,578) $(30)
State taxes......................... -- 141 (161) 93
Change in valuation allowance....... 6,359 (1,295) 5,386 18
Other............................... (1,275) 1,089 (34) 12
------- ------- ------- ----
Provision (benefit) for income
taxes............................. $ -- $ (614) $ 613 $ 93
======= ======= ======= ====
Effective tax rate.................. 0% 38% 5% 107%
======= ======= ======= ====
</TABLE>
Earnings subject to foreign taxation and foreign taxes paid were not
material.
13. Related Party Transactions:
The Company has received a written commitment from a significant
stockholder who has agreed, if necessary, to provide the Company with the
funding to enable it to liquidate liabilities in the ordinary course of
business and to fulfill obligations as they come due through December 31, 2000.
Management believes that the stockholder has the ability to fulfill this
commitment.
The Company receives management, consulting and financial services from
related parties for an annual fee. Such services include, but are not limited
to, advice and assistance concerning any and all aspects of the operation,
planning and financing of the Company. Management fee expense amounted to $120,
$200, $200 and $100 for the period June 14, 1996 to December 31,1996, the years
ended December 31, 1997 and 1998 and the six months ended June 30, 1999,
respectively. In addition, the Company has long-term loan agreements with a
related party that is a major stockholder of Rudolph Technologies, Inc. (see
Note 7).
14. Comprehensive Income:
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" (SFAS 130). The statement established standards for the
reporting and display of comprehensive income and its components. The
disclosures required by SFAS 130 have been included with the statements of
stockholders equity (deficit) or below. The difference between net loss and
comprehensive loss for the Company is due to currency translation adjustments.
The effects of income taxes on comprehensive income was not material.
For the (unaudited) six months ended June 30, 1998 comprehensive loss
amounted to approximately $4,172.
F-18
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
15. Geographic Reporting and Customer Concentration:
<TABLE>
<CAPTION>
Six
months
June 14 to Year ended ended
December 31, December 31, June 30,
------------ ---------------- -------
1996 1997 1998 1999
------------ ------- ------- -------
<S> <C> <C> <C> <C>
Revenues from third parties:
United States........................ $ 3,538 $12,031 $ 8,388 $ 6,389
Asia................................. 8,596 20,468 8,380 3,725
Europe............................... 2,180 2,833 3,289 3,269
Other................................ 59 7 49 1,787
------- ------- ------- -------
Total................................ $14,373 $35,339 $20,106 $15,170
======= ======= ======= =======
Customers comprising 10% or more of the
Company's total revenue for the
period indicated:
Intel................................ 0.8% 3.4% 19.8% 37.3%
Tokyo Electron Limited............... 23.9% 29.9% 17.6% 7.0%
Metron Technology.................... 13.5% 5.3% 15.3% 14.0%
AMD.................................. 0.0% 0.0% 11.1% 7.6%
</TABLE>
16. Earnings Per Share:
The Company has adopted Statement of Financial Accounting Standards No.
128, Earnings per Share ("FAS 128"), which requires the presentation of basic
earnings per share ("Basic EPS") and diluted earnings per share ("Diluted
EPS"). Basic EPS is computed by dividing income available to common
stockholders by the weighted average number of Class A and Class B common
shares outstanding during the period. Diluted EPS gives effect to all potential
dilutive common shares outstanding during the period. The computation of
Diluted EPS does not assume conversion, exercise or contingent exercise of
securities that would have an anti-dilutive effect on earnings.
F-19
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
The computations of Basic EPS and Diluted EPS for the period June 14, 1996
to December 31,1996, the years ended December 31, 1997 and 1998, and the six
months ended June 30, 1998 (unaudited) and 1999 are as follows:
<TABLE>
<CAPTION>
Per-
Income Shares Share
(Numerator) (Denominator) Amount
----------- ------------ ------
<S> <C> <C> <C>
For the period June 14, 1996 to December 31,
1996
Net loss.................................... $(14,953)
Preferred Stock Dividends................... (239)
Basic EPS:
Income available to common stockholders... (15,192) 2,617,373 $(5.80)
Effect of dilutive stock options.......... -- -- --
-------- --------- ------
Diluted EPS:
Income available to common stockholders
plus assumed conversions................ $(15,192) 2,617,373 $(5.80)
======== ========= ======
For the year ended December 31, 1997
Net loss.................................... $ (1,001)
Preferred Stock Dividends................... (468)
Basic EPS:
Income available to common stockholders... (1,469) 2,617,373 $(0.56)
Effect of dilutive stock options.......... -- -- --
-------- --------- ------
Diluted EPS:
Income available to common stockholders
plus assumed conversions................ $ (1,469) 2,617,373 $(0.56)
======== ========= ======
For the year ended December 31, 1998
Net loss.................................... $(14,078)
Preferred Stock Dividends................... (507)
Basic EPS:
Income available to common stockholders... (14,585) 4,503,396 $(3.24)
Effect of dilutive stock options.......... -- -- --
-------- --------- ------
Diluted EPS:
Income available to common stockholders
plus assumed conversions................ $(14,585) 4,503,396 $(3.24)
======== ========= ======
For the six months ended June 30, 1998
(unaudited)
Net loss.................................... $ (4,101)
Preferred Stock Dividends................... (247)
Basic EPS:
Income available to common stockholders... (4,348) 2,617,373 $(1.66)
Effect of dilutive stock options.......... -- -- --
-------- --------- ------
Diluted EPS:
Income available to common stockholders
plus assumed conversions................ $ (4,348) 2,617,373 $(1.66)
======== ========= ======
For the six months ended June 30, 1999
Net loss.................................... $ (180)
Preferred Stock Dividends................... (269)
Basic EPS:
Income available to common stockholders... (449) 6,767,415 $(0.07)
Effect of dilutive stock options.......... -- -- --
-------- --------- ------
Diluted EPS:
Income available to common stockholders
plus assumed conversions................ $ (449) 6,767,415 $(0.07)
======== ========= ======
</TABLE>
For the period ending June 14, 1996 to December 31, 1996, the years ended
December 31, 1997 and 1998 and the six months ended June 30, 1998 (unaudited)
and 1999, the Company had outstanding options and warrants to purchase an
aggregate 881,421, 917,084, 3,033,208, 917,084 and 2,998,186 shares of Class A
and Class B common stock, respectively, which are not included in the
calculation of earnings per share for such periods, due to the anti-dilutive
nature of these instruments.
F-20
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited with respect to the six months ended June 30, 1998)
(In thousands, except share and per share amounts)
17. Subsequent Events:
On August 30, 1999, the Company's board of directors approved the
amendments of the certificate of incorporation to increase the authorized
shares of common stock and preferred stock to 50 million shares and 5 million
shares, respectively, and to effect a 35.66-for-1 stock split applicable to all
issued and outstanding shares of its common stock. The effectiveness of the
amendments is contingent upon the closing of the Company's proposed initial
public offering of its common stock. The Company may issue preferred stock with
rights and provisions determined by the board. All share, stock option and
stock warrant information included in these financial statements and related
footnotes have been restated for all periods to reflect this stock split for
all periods presented.
The Company established an Employee Stock Purchase Plan (the "ESPP")
effective August 31, 1999. Under the terms of the ESPP, eligible employees may
have up to 15% of eligible compensation deducted from their pay and applied to
the purchase of shares of Common Stock. The price the employee must pay for
each share of stock will be 85% of the lower of the fair market value of the
Common Stock at the beginning or at the end of the purchase term of six months.
The number of shares available for issuance under the ESPP totals 300,000.
The Company established the 1999 Stock Plan ("the 99 Plan") effective
August 31, 1999. The 99 Plan provides for the grant of 2,000,000 stock options
and stock purchase rights to employees, directors and consultants at an
exercise price equal to or greater than the fair market value of the common
stock on the date of grant. The options will expire ten years from the date of
grant.
F-21
<PAGE>
Report of Independent Accountants
To the Stockholder and Board of Directors
of Rudolph Technologies, Inc.
In our opinion, the accompanying statement of operations, stockholders'
equity and cash flows present fairly, in all material respects, the results of
operations and cash flows of Rudolph Research Corporation, the predecessor
entity of Rudolph Technologies, Inc., ("Rudolph") for the period January 1,
1996 to June 13, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of management of
Rudolph; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards, which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Florham Park, New Jersey
September 7, 1999
F-22
<PAGE>
RUDOLPH RESEARCH CORPORATION
STATEMENT OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
January 1,
1996 to
June 13,
1996
----------
<S> <C>
Revenues............................................................. $17,501
Cost of revenues..................................................... 7,497
-------
Gross profit........................................................ 10,004
-------
Operating expenses:
Research and development........................................... 1,817
Selling, general & administrative.................................. 4,144
Amortization of intangibles........................................ 19
-------
Total operating expenses............................................. 5,980
-------
Operating income..................................................... 4,024
Interest expense on long term debt................................... 55
Other income......................................................... (26)
-------
Income before income taxes.......................................... 3,995
Provision for income taxes........................................... 143
-------
Net income.......................................................... $ 3,852
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE>
RUDOLPH RESEARCH CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from January 1, 1996 to June 13, 1996
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Treasury
Common Stock Stock
------------- ------------- Retained
Shares Amount Shares Amount Earnings Total
------ ------ ------ ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996...... 2,205 $20 78 $(83) $10,409 $10,346
Net income...................... 3,852 3,852
Stockholder distributions....... (4,263) (4,263)
----- --- --- ---- ------- -------
Balance at June 13, 1996........ 2,205 $20 78 $(83) $ 9,998 $ 9,935
===== === === ==== ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements
F-24
<PAGE>
RUDOLPH RESEARCH CORPORATION
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
January 1
to
June 13,
1996
---------
<S> <C>
Cash Flow from Operating Activities
Net Income............................................................ $3,852
Adjustment to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Amortization........................................................ 19
Depreciation........................................................ 187
Accounts Receivable................................................. (2,250)
Inventories......................................................... (672)
Prepaid Expenses and Other.......................................... (16)
Accounts Payable.................................................... (198)
Accrued Liabilities................................................. 677
Other Changes in Operating Assets and Liabilities................... (7)
------
Net Cash Provided by Operating Activities............................. 1,592
------
Cash Flows from Investing Activities:
Purchase of Property, Plant and Equipment........................... (171)
------
Net Cash Used in Investing Activities................................. (171)
------
Cash Flows from Financing Activities:
Principal Payments on Long-Term Debt................................ (23)
Net Borrowing Under Lines of Credit................................. 1,000
Stockholder Distributions........................................... (4,263)
------
Net Cash Provided by Financing Activities............................. (3,286)
------
Net Decrease in Cash and Cash Equivalents............................. (1,865)
Cash and Cash Equivalents at Beginning of Period...................... 1,865
------
Cash and Cash Equivalents at End of Period............................ --
------
Supplemental Disclosures of Cash Flow Information
Interest Paid....................................................... $ 55
------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE>
RUDOLPH RESEARCH CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
(in thousands, except share amounts)
1. Nature of Operations:
Rudolph Research Corporation (the "Predecessor Company"), manufactured,
sold, and serviced optical research and control instruments both domestically
and overseas. In June of 1996, the predecessor company was sold to a group of
investors led by Liberty Partners and Riverside Partners. The Rudolph Research
name was changed to Rudolph Technologies, Inc.
2. Summary Significant Accounting Policies:
A. Revenue Recognition:
Revenues from product and parts sales are recognized at the time of
shipment. Revenue from service contracts is recognized ratably over the period
of the contract. A provision for the estimated cost of fulfilling warranty and
installation obligations is recorded at the time the related revenue is
recognized.
B. Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Significant estimates made by management include allowance for doubtful
accounts, inventory obsolescence, depreciation, amortization, taxes,
contingencies, and product warranty. Actual results could differ from those
estimates.
C. Concentration of Credit Risk:
Financial instruments, which potentially subject the Predecessor Company to
concentrations of credit risk, consist primarily of accounts receivable and
cash. The Predecessor Company performs ongoing credit evaluations of its
customers and generally does not require collateral for sales on credit. The
Predecessor Company maintains reserves for potential credit losses.
Substantially all of its cash is held with one major financial institution.
D. Income Taxes:
The Predecessor Company is an S Corporation under the Internal Revenue
Code. In lieu of corporate income taxes, the shareholders of an S Corporation
are taxed on their proportionate share of the Predecessor Company's taxable
income. Therefore, no provision or liability for federal income taxes has been
included in the financial results. State taxes are provided for in the
financial statements.
The tax affects of temporary differences are immaterial. If the Predecessor
Company had been a C Corporation the provision for income tax would have been
$1,678 (unaudited).
E. Risks Inherent in the Business:
The Company sells its products to the semiconductor device industry and
believes that changes in any of the following areas could have a material
adverse effect on the Company's financial position, results of operations or
cash flows: advances and trends in new technologies and industry standards;
competitive pressures in the form of new products or price reductions on
current products; changes in product mix; changes in the overall demand for
products and services offered by the Company; changes in customer
relationships; litigation or claims against the Company based on intellectual
property, patent, product, regulatory or other factors; risks associated with
changes in domestic and international economic and/or political conditions or
regulations; dependancy on supplier availability of necessary product
components; risks associated with year 2000 compliance; and the Company's
ability to attract and retain employees necessary to support its growth.
F-26
<PAGE>
RUDOLPH RESEARCH CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
(in thousands, except share amounts)
3. Commitments and Contingencies
The Predecessor Company rents space for its manufacturing and service
operations and sales offices. Total rent expense for these facilities amounted
to $118 for the period January 1, 1996 to June 13, 1996.
The Predecessor Company also leases certain equipment pursuant to operating
leases. Rent expense related to these leases amounted to $24 for the period
January 1, 1996 to June 13, 1996.
The Predecessor Company's obligations under its leases and licensing
agreement were acquired by Rudolph Technologies, Inc. upon its acquisition of
Rudolph Research, Inc. in June 1996.
4. Employee Benefit Plans:
Rudolph Research Corporation has a 401(k) savings plan to provide
retirement and incidental benefits for its employees. As allowed under Section
401(k) of the Internal Revenue Code, the Plan provides tax-deferred salary
deductions for eligible employees. Employees may contribute from 1% to 15% of
their annual compensation to the Plan, limited to a maximum annual amount as
set periodically by the Internal Revenue Service. The Plan provides a 50
percent match of all employee contributions up to 6 percent of the employee's
salary. The Predecessor Company's matching contributions to the Plan totaled
$72, for the period January 1, 1996 to June 13, 1996.
In addition, the Predecessor Company has a profit sharing program, wherein
a percentage of pretax profits, at the discretion of the Board of Directors, is
provided to all employees who have completed a stipulated employment period.
The Predecessor Company did not make contributions to this program for the
period January 1, 1996 to June 13, 1996.
F-27
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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 registrant in
connection with the sale of common stock being registered. All amounts are
estimates except the SEC registration fee, the NASD filing fee and the Nasdaq
National Market listing fee.
<TABLE>
<CAPTION>
Amount to
be Paid
---------
<S> <C>
SEC registration fee.................................................. $ 21,484
NASD filing fee ...................................................... 8,228
Nasdaq National Market listing fee.................................... 87,000
Printing and engraving expenses....................................... *
Legal fees and expenses............................................... *
Accounting fees and expenses.......................................... *
Blue Sky qualification fees and expenses.............................. 11,800
Transfer agent and registrar fees..................................... *
Miscellaneous fees.................................................... *
--------
Total................................................................. $800,000
========
</TABLE>
*To be supplied by amendment.
Item 14. Indemnification of Directors and Officers
Article Nine of the registrant's Certificate of Incorporation (Exhibit 3.1
hereto) and Article V of the registrant's Bylaws (Exhibit 3.3 hereto) provide
for mandatory indemnification of its directors and officers, and permissible
indemnification of employees and other agents, to the maximum extent permitted
by the Delaware General Corporation Law. In addition, the registrant has
entered into Indemnification Agreements (Exhibit 10.4 hereto) with its
officers and directors. Reference is also made to Section of the
Underwriting Agreement contained in Exhibit 1.1 hereto, which provides for the
indemnification of officers and directors of the registrant against certain
liabilities.
Item 15. Recent Sales of Unregistered Securities
During the three year period ended June 30, 1999, the registrant issued
and sold the following securities:
<TABLE>
<CAPTION>
Date of Number of Purchase
Purchaser Purchase Shares Class of Shares Price
- --------- -------- --------- ------------------------ ----------
<S> <C> <C> <C> <C>
Liberty Partners
Holdings 11, L.L.C. 7/20/98 3,230,961 Class A Common Stock $2,355,508
Riverside Rudolph,
L.L.C. 7/20/98 733,346 Class B Common Stock $ 534,626
Dale Moorman 7/20/98 71,790 Class B Common Stock $ 52,340
Paul McLaughlin 7/20/98 50,357 Class B Common Stock $ 37,169
1/17/97 53 Series A Preferred Stock $ 5,333
1/17/97 2,318 Class B Common Stock $ 1,333
Robert Loiterman 7/20/98 16,833 Class B Common Stock $ 12,621
1/17/97 53 Series A Preferred Stock $ 5,333
1/17/97 2,318 Class B Common Stock $ 1,333
Steven Roth 7/20/98 2,461 Class B Common Stock $ 2,142
1/17/97 53 Series A Preferred Stock $ 5,333
1/17/97 2,318 Class B Common Stock $ 1,333
</TABLE>
On November 1, 1998, we granted a warrant to Liberty Partners Holdings 11,
L.L.C. to purchase 592,012 shares of our common stock at an exercise price of
$0.73 per share.
In a series of transactions occurring or around November 1, 1998, we
issued to the State Board of Administration of Florida a $7 million junior
subordinated note which bears interest at a rate of 14% and matures on July
31, 2001. As of June 30, 1999 we had been advanced a total of $6.4 million
under the junior subordinated note.
II-1
<PAGE>
Since our incorporation, we have issued, and there remain outstanding,
options to purchase an aggregate of 693,951 shares of Class B common stock with
exercise prices ranging from $0.56 to $0.73 per share. Since our incorporation,
options to purchase 10,404.36 shares of Class B common stock have been
exercised.
The issuances of the securities described above were deemed to be exempt
from registration under the Securities Act in reliance on Section 4(2) of such
Act as transactions by an issuer not involving any public offering and, in the
case of the issuance of shares pursuant to options, in reliance on Section 4(2)
of the Act or Rule 701 promulgated thereunder as transactions pursuant to
contemporary benefit plans and contracts relating to compensation. All of the
securities were acquired by the recipient for investment and not with a view
toward the resale or distribution thereof. The recipient was a director and
officer of ours and/or a sophisticated investor, the offer and sales were made
without any public solicitation and the stock certificates bear restrictive
legends. No underwriter was involved in the transactions and no commissions
were paid. The recipient had adequate access, through his relationships with
the registrant, to information about the registrant.
Item 16 . Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1* Form of Underwriting Agreement.
3.1(a) Certificate of Incorporation of Registrant.
3.1(b) Form of Restated Certificate of Incorporation of Registrant to be
effective prior to this offering
3.1(c) Form of Restated Certificate of Incorporation of Registrant to be
effective following this offering
3.2(a) Bylaws of Registrant
3.2(b) Form of Restated Bylaws of Registrant to be effective following this
Offering
4.1* Form of Registrant's Common Stock certificate
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
10.1+ License Agreement, dated June 28, 1995, between the Registrant and
Brown University Research Foundation
10.2 Distributor Agreement, dated May 15, 1987, between the Registrant and
Tokyo Electron Limited
10.3* Form of Indemnification Agreement
10.4** Form of 1999 Stock Plan
10.5** Form of 1999 Employee Stock Purchase Plan
10.6 Management Agreement, dated June 14, 1996, between the Registrant and
Paul F. McLaughlin
10.7 Management Agreement, dated June 14, 1996, between the Registrant and
Robert Loiterman
10.8 Management Agreement, dated May 5, 1997 between the Registrant and
Steven R. Roth
10.9 Registration Agreement, dated June 14, 1996 by and among the
Registrant, Liberty Partners Holdings II, L.L.C., Riverside Rudolph,
L.L.C., Dri Richard F. Spanier, Paul F. McLaughlin, and Dale Moeman
21.1** List of subsidiaries
23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants
23.3** Consent of Antonelli, Terry, Stout & Kraus, LLP
24.1** Power of Attorney
27.1** Financial Data Schedule
27.2** Financial Data Schedule
27.3** Financial Data Schedule
27.4** Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
**Previously filed.
+ Confidential Treatment Requested.
(b) Financial Statement Schedule
<TABLE>
<S> <C>
S-1 Report of Independent Accountants....................................... S-1
S-2 Schedule II. Valuation and qualifying accounts.......................... S-2
</TABLE>
II-2
<PAGE>
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 for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, 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 had been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has had duly caused this Pre-Effective Amendment No. 1 to Registration
Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto
duly authorized, in Flanders, New Jersey on this 4th day of October, 1999.
Rudolph Technologies, Inc.
Paul F. McLaughlin*
By: ______________________________________
Paul F. McLaughlin
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this Pre-
Effective Amendment No. 1 to Registration Statement has had been signed by the
following persons in the capacities and on the dates indicated:
<TABLE>
Signature Title Date
<S> <C> <C>
Paul F. McLaughlin* Chief Executive Officer, October 4, 1999
__________________________ President and Director
Paul F. McLaughlin (Principal Executive
Officer)
/s/ Steven R. Roth Vice President & Chief October 4, 1999
__________________________ Financial Officer
Steven R. Roth (Principal Financial and
Accounting Officer)
David Belluck* Director October 4, 1999
____________________________
David Belluck
Daniel H. Berry* Director October 4, 1999
____________________________
Daniel H. Berry
Paul Craig* Director October 4, 1999
____________________________
Paul Craig
Stephen J. Fisher* Director October 4, 1999
____________________________
Stephen J. Fisher
Carl E. Ring, Jr.* Director October 4, 1999
____________________________
Carl E. Ring, Jr.
Richard F. Spanier* Director October 4, 1999
____________________________
Richard F. Spanier
Aubrey C. Tobey* Director October 4, 1999
____________________________
Aubrey C. Tobey
*By: /s/ Steven R. Roth
_________________________
Steven R. Roth
Attorney-in-fact
</TABLE>
II-4
<PAGE>
The stock split discussed in Note 17 to the financial statements has not
been consummated at October 1, 1999. When it has been consummated, we expect to
be in a position to render the following report:
PricewaterhouseCoopers LLP
Florham Park, New Jersey
October 1, 1999
Report of Independent Accountants
In connection with our audits of the consolidated financial statements of
Rudolph Technologies, Inc. at December 31, 1998 and 1997 and for each of the
two years in the period ended December 31, 1998 and the period from June 14,
1996 to December 31, 1996, which financial statements are included in the
Prospectus, we have also audited the financial statement schedule listed in
Item 16 herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
Florham Park, New Jersey
<PAGE>
RUDOLPH TECHNOLOGIES, INC.
Schedule II--Valuation and Qualifying Accounts
Dollars in Thousands
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- ------------ ------------------------- ---------- ----------
Balance at Charged to Charged to Balance at
Beginning of Costs & Other Accounts End of
Description Period Expenses (net) Deductions Period
- ----------- ------------ ---------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year 1998
Allowance for doubtful
accounts.............. $ 500 $ 71 -- $ 277(a) $ 294
Deferred tax asset
valuation allowance... 5,864 5,386 -- -- 11,250
Inventory valuation..... 540 1,407 -- 1,534 413
Year 1997
Allowance for doubtful
accounts.............. $ 147 $ 353 -- -- $ 500
Deferred tax asset
valuation allowance... 7,159 -- -- $1,295 5,864
Inventory valuation..... 540 -- -- -- 540
Period from June 14,
1996 through December
31, 1996
Allowance for doubtful
accounts.............. $ 147 -- -- -- $ 147
Deferred tax asset
valuation allowance... -- $7,159 -- -- 7,159
Inventory valuation..... 253 287 -- -- 540
</TABLE>
- --------
(a)Amounts written off as uncollectible
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1(a) Certificate of Incorporation of Registrant.
3.1(b) Form of Restated Certificate of Incorporation of Registrant to be
effective prior to this offering
3.1(c) Form of Restated Certificate of Incorporation of Registrant to be
effective following this offering.
3.2(a) Bylaws of Registrant
3.2(b) Form of Restated Bylaws of Registrant to be effective following this
Offering
4.1* Form of Registrant's Common Stock certificate
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
10.1+ License Agreement, dated June 28, 1995, between the Registrant and
Brown University Research
Foundation
10.2 Distributor Agreement, dated May 15, 1987, between the Registrant and
Tokyo Electron Limited
10.3* Form of Indemnification Agreement
10.4** Form of 1999 Stock Plan
10.5** Form of 1999 Employee Stock Purchase Plan
10.6 Management Agreement, dated June 14, 1996, between the Registrant and
Paul F. McLaughlin
10.7 Management Agreement, dated June 14, 1996, between the Registrant and
Robert Loiterman
10.8 Management Agreement, dated May 5, 1997, between the Registrant and
Steven R. Roth
10.9 Registration Agreement, dated June 14, 1996 by and among the
Registrant, Liberty Partners
Holdings 11, L.L.C., Riverside Rudolph, L.L.C., Dr. Richard F.
Spaniek, Paul F. McLaughlin and Dale Moorman.
21.1** List of subsidiaries
23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants
23.3** Consent of Antonelli, Terry, Stout & Kraus, LLP
24.1** Power of Attorney
27.1** Financial Data Schedule
27.2** Financial Data Schedule
27.3** Financial Data Schedule
27.4** Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
+ Confidential Treatment Requested.
(b) Financial Statement Schedule
<TABLE>
<S> <C>
S-1 Report of Independent Accountants....................................... S-1
S-2 Schedule II. Valuation and qualifying accounts.......................... S-2
</TABLE>
<PAGE>
EXHIBIT 3.1(a)
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
RUDOLPH HOLDINGS CORPORATION
----------------------------
ARTICLE ONE
-----------
The name of the corporation is Rudolph Holdings Corporation.
ARTICLE TWO
-----------
The address of the corporation's registered office in the State of Delaware
is 1013 Centre Road, County of New Castle, Wilmington, Delaware 19805. The name
of its registered agent at such address is The Prentice-Hall Corporation System,
Inc.
ARTICLE THREE
-------------
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOUR
------------
A. AUTHORIZED SHARES
-----------------
The total number of shares of capital stock which the Corporation has
authority to issue is 156,000 shares, consisting of:
45,875 shares of Series A Preferred Stock, par value $.01 per share ("Series A
--------
Preferred");
- ---------
10,125 shares of Series B Preferred Stock, par value $.01 per share ("Series B
--------
Preferred" and together with Series A Preferred, "Preferred Stock");
- --------- ---------------
59,059.25 shares of Class A Common Stock, par value $.01 per share ("Class A
-------
Common"); and
- ------
40,940.75 shares of Class B Common Stock, par value $.01 per share ("Class B
-------
Common" and together with Class A Common, "Common Stock").
- ------ ------------
COMMON STOCK
------------
Section 1. Voting Rights. In elections of directors of the
---------- -------------
Corporation, holders of Class A Common, voting separately as a single class to
the exclusion of all other classes of the Corporation's capital stock, shall be
entitled to elect two directors to serve on the Corporation's Board of Directors
(the "Board of Directors") until his or her successor is duly elected by the
holders of Class A Common (such directors, the "Class A Directors"). Each Class
A Director shall be
-1-
<PAGE>
entitled to four votes on all matters voted on by the Board of Directors, and
each other director shall be entitled to one vote on all matters voted on by the
Board of Directors. A quorum of the Board of Directors shall be determined based
upon the number of votes of all directors. Except as otherwise required by
applicable law and except as provided in the foregoing sentence with respect to
elections of the Class A Directors, the holders of Common Stock, voting together
as a single class, shall be entitled to one vote per share on all matters to be
voted on by the stockholders of the Corporation (including election of directors
other than Class A Directors).
Section 2. Dividends. Subject to the preferential rights of the
---------- ---------
holders of Preferred Stock set forth in Part C of this Article IV and to the
extent permitted under the General Corporation Law of Delaware, dividends may be
paid on Common Stock as and when declared by the Board of Directors, and the
holders of Class A Common and the holders of Class B Common shall be entitled to
receive such dividends pro rata at the same rate per share of each class of
Common Stock; provided that (i) if dividends are declared or paid in shares of
Common Stock, the dividends payable to holders of Class A Common shall be
payable in shares of Class A Common and the dividends payable to the holders of
Class B Common shall be payable in shares of Class B Common and (ii) if the
dividends consist of other voting securities of the Corporation, the Corporation
shall make available to each holder of Class A Common, at such holder's request,
dividends consisting of securities (except as otherwise provided by law) of the
Corporation having the same voting rights as Class A Common and to each holder
of Class B Common, at such holder's request, dividends consisting of securities
(except as otherwise required by law) of the Corporation which have the same
voting rights as Class B Common.
Section 3. Liquidation. Subject to the preferential rights of the
---------- -----------
holders of Preferred Stock set forth in Part C of this Article IV, the holders
of Common Stock shall be entitled to participate ratably on a per share basis in
all distributions to the holders of Common Stock in any liquidation, dissolution
or winding up of the Corporation.
PREFERRED STOCK
---------------
Section 1. Dividends.
---------- ---------
(1A) General Obligation. When and as declared by the Board of
------------------
Directors and to the extent permitted under the General Corporation Law of
Delaware, the Corporation shall pay dividends as provided in this Section 1.
Dividends on each share of Preferred Stock (each, a "Preferred Share") shall
accrue on a daily basis at the rate of 8% per annum of the sum of the
Liquidation Value thereof plus all accumulated and unpaid dividends thereon,
from and including the date of issuance of such Preferred Share to but not
including the date on which the Liquidation Value of such Preferred Share is
paid under Section 2 of this Part C, the date such Preferred Share is redeemed
pursuant to Section 4 of this Part C, or the date such Preferred Share is
otherwise acquired by the Corporation. Such dividends shall accrue whether or
not they have been declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of dividends.
Such dividends shall be cumulative such that all accrued and unpaid dividends
shall be fully paid or declared with funds irrevocably set apart for payment
before any dividend, distribution or payment may be made with respect to any
Junior Securities, subject to the provisions of Section 3 of this Part C. The
date on which the Corporation initially issues any
-2-
<PAGE>
Preferred Share shall be deemed to be its "date of issuance" regardless of the
number of times transfer of such Preferred Share is made on the stock records
maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such Preferred Share.
(1B) Dividend Reference Dates. Each March 31, June 30,
------------------------
September 30 and December 31 of each year, beginning September 30, 1996, shall
be a "Dividend Reference Date." To the extent not paid on a Dividend Reference
-----------------------
Date, all dividends which have accrued on each Preferred Share outstanding
during the three-month period (or other period in the case of the initial
Dividend Reference Date) ending upon each such Dividend Reference Date shall be
accumulated and shall remain accumulated dividends with respect to such
Preferred Share until paid.
(1C) Distribution of Partial Dividend Payments. Except as
-----------------------------------------
otherwise provided herein, if at any time the Corporation pays less than the
total amount of dividends then accrued with respect to Preferred Stock, such
payment shall be distributed ratably among the holders of Preferred Shares based
upon the aggregate accrued but unpaid dividends on Preferred Shares held by each
such holder.
Section 2. Liquidation. Upon any liquidation, dissolution or winding
---------- -----------
up of the Corporation, each holder of Preferred Stock shall be entitled to be
paid, before any distribution or payment is made upon any Junior Securities, an
amount in cash equal to the aggregate Liquidation Value (plus all accrued and
unpaid dividends) of all Preferred Shares held by such holder, and the holders
of Preferred Stock shall not be entitled to any further payment or claim or
right to any assets of the Corporation. If upon any such liquidation,
dissolution or winding up of the Corporation, the Corporation's assets to be
distributed among the holders of Preferred Stock are insufficient to permit
payment to such holders of the aggregate amount which they are entitled to be
paid, then the entire assets to be distributed shall be distributed ratably
among such holders based upon the aggregate Liquidation Value (plus all accrued
and unpaid dividends) of Preferred Stock held by each such holder. The
Corporation shall mail written notice of such liquidation, dissolution or
winding up, not less than 60 days prior to the payment date stated therein, to
each record holder of Preferred Stock. Neither the consolidation nor merger of
the Corporation into or with any other entity or entities (whether or not the
Corporation is the surviving entity after the consolidation or merger), nor the
sale or transfer by the Corporation of all or any part of its assets, nor the
reduction of the capital stock of the Corporation, nor any other form of
recapitalization shall be deemed to be a liquidation, dissolution or winding up
of the Corporation within the meaning of this Section 2.
Section 3. Priority of Preferred Stock. So long as any Preferred
---------- ---------------------------
Stock remains outstanding, neither the Corporation nor any Subsidiary shall
redeem, purchase or otherwise acquire directly or indirectly any Junior
Securities, nor shall the Corporation directly or indirectly pay or declare any
dividend or make any distribution upon any Junior Securities, except for
dividends payable in shares of Common Stock issued upon the outstanding shares
of Common Stock.
Section 4. Redemptions.
---------- -----------
(4A) Optional Redemptions. The Corporation may at any time
--------------------
redeem all or any portion of Preferred Stock then outstanding. Upon any such
redemption, the Corporation
-3-
<PAGE>
shall pay a price per Preferred Share equal to the Liquidation Value thereof
plus all accrued and unpaid dividends thereon.
(4B) Redemption Payment. For each Preferred Share which is to be
------------------
redeemed, the Corporation shall be obligated on the Redemption Date to pay to
the holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Preferred Share) an amount in
immediately available funds equal to the Liquidation Value of such Preferred
Share (plus all accrued and unpaid dividends hereon). If the funds of the
Corporation legally available for redemption of such Preferred Shares on any
Redemption Date are insufficient to redeem the total number of Preferred Shares
to be redeemed on such date, those funds which are legally available shall be
used to redeem the maximum possible number of such Preferred Shares based upon
the aggregate Liquidation Value of such Preferred Shares (plus all accrued and
unpaid dividends thereon) held by each such holder. At any time thereafter when
additional funds of the corporation are legally available for the redemption of
such Preferred Shares, such funds shall immediately be used to redeem the
balance of such Preferred Shares which the Corporation has become obligated to
redeem on any Redemption Date but which it has not redeemed.
(4C) Notice of Redemption. Unless otherwise provided herein, the
--------------------
Corporation shall mail written notice of each redemption of Preferred Stock to
each record holder of Preferred Shares not more than 60 nor less than ten days
prior to the date on which such redemption is to be made. Upon mailing any
notice of redemption which relates to a redemption at the Corporation's option,
the Corporation shall become obligated to redeem the total number of Preferred
Shares specified in such notice at the time of redemption specified therein. In
case fewer than the total number of the Preferred Shares represented by any
certificate are redeemed, a new certificate representing the number of
unredeemed Preferred Shares shall be issued to the holder thereof without cost
to such holder within three business days after surrender of the certificate
representing the redeemed Preferred Shares.
(4D) Determination of the Number of Each Holder's Shares to be
---------------------------------------------------------
Redeemed. Except as otherwise provided herein, the number of Preferred Shares to
- --------
be redeemed from each holder thereof in redemptions hereunder shall be the
number of Preferred Shares determined by multiplying the total number of
Preferred Shares to be redeemed times a fraction, the numerator of which shall
be the total number of Preferred Shares then held by such holder and the
denominator of which shall be the total number of Preferred Shares then
outstanding.
(4E) Dividends After Redemption. No Preferred Share is entitled
--------------------------
to any dividends accruing after the date on which the Liquidation Value of such
Preferred Share (plus all accrued and unpaid dividends thereon) is paid to the
holder thereof. On such date all rights of the holder of such Preferred Share
shall cease, and such Preferred Share shall be deemed to be not outstanding.
(4F) Redeemed or Otherwise Acquired Shares. Any Preferred
-------------------------------------
Shares which are redeemed or otherwise acquired by the Corporation shall be
canceled and shall not thereafter be reissued, sold or transferred.
-4-
<PAGE>
(4G) Other Redemptions or Acquisitions. Neither the Corporation
---------------------------------
nor any Subsidiary shall redeem or otherwise acquire any Preferred Stock, except
as expressly authorized herein or pursuant to a purchase offer made pro rata to
all holders of Preferred Stock on the basis of the number of Preferred Shares
owned by each such holder.
(4H) Special Redemptions.
-------------------
(i) The term "Change in Ownership" shall mean any sale or
-------------------
issuance or series of sales or issuances of the Corporation's capital stock by
the Corporation or any holders thereof, immediately after which the State Board
of Administration of Florida ("SBA") and Liberty Partners Holdings II, L.L.C.
---
("LPH") and its Affiliates in the aggregate no longer hold record ownership of
---
(a) at least 40% of the Corporation's then outstanding Common Stock or (b)
shares of the Corporation's outstanding capital stock entitled to elect
directors to the Board of Directors possessing a majority of the votes of all
directors.
(ii) If a Change in Ownership has occurred or the
Corporation obtains knowledge that a Change in Ownership is to occur, the
Corporation shall give prompt written notice of such Change in Ownership
describing in reasonable detail the definitive terms and date of consummation
thereof to each holder of Preferred Stock, but in any event such notice shall
not be given later than five days after the occurrence of such Change in
Ownership. The holders of a majority of the Preferred Stock then outstanding may
require the Corporation to redeem all of the Preferred Stock owned by holders
thereof at a price per Preferred Share equal to the Liquidation Value thereof
(plus all accrued and unpaid dividends thereon) by giving written notice to the
Corporation of such election prior to the later of (a) 20 days after receipt of
the Corporation's notice and (b) 20 days prior to the consummation of the Change
in Ownership (the "Expiration Date"). The Corporation shall give prompt written
---------------
notice of any such election to all other holders of Preferred Stock within five
days after the receipt thereof. Upon receipt of such election, the Corporation
shall be obligated to redeem all of the outstanding Preferred Shares on the
later of (a) the occurrence of the Change in Ownership or (b) five days after
the Corporation's receipt of such election. If, in any case, a proposed Change
in Ownership does not occur, all requests for redemption in connection therewith
shall be automatically rescinded.
(iii) The term "Fundamental Change" shall mean (a) a sale
------------------
or transfer of all or substantially all of the assets of the Corporation and its
Subsidiaries on a consolidated basis (measured by either book value in
accordance with generally accepted accounting principles consistently applied or
fair market value determined in the reasonable good faith judgment of the
Corporation's board of directors) in any transaction or series of transactions
(other than sales in the ordinary course of business) and (b) any merger or
consolidation to which the Corporation is a party.
(iv) If a Fundamental Change is proposed to occur, the
Corporation shall give written notice of such Fundamental Change describing in
reasonable detail the definitive terms and date of consummation thereof to each
holder of Preferred Stock not more than 60 days nor less than 20 days prior to
the consummation thereof. The holders of a majority of the Preferred Stock then
outstanding may require the Corporation to redeem all of the Preferred Stock
owned by holders thereof at a price per Preferred Share equal to the Liquidation
Value thereof (plus all accrued
-5-
<PAGE>
and unpaid dividends thereon) by giving written notice to the Corporation of
such election prior to the later of (a) 20 days prior to the consummation of the
Fundamental Change or (b) 20 days after receipt of a notice from the
Corporation. The Corporation shall give prompt written notice of such election
to all other holders of Preferred Stock (but in any event within five days prior
to the consummation of the Fundamental Change). Upon receipt of such
election(s), the Corporation shall be obligated to redeem all of the outstanding
Preferred Shares upon the consummation of such Fundamental Change. If any
proposed Fundamental Change does not occur, all requests for redemption in
connection therewith shall be automatically rescinded.
Section 5. Voting Rights.
---------- -------------
(a) The holders of Series A Preferred shall be entitled to notice of
all meetings of the Corporation's stockholders in accordance with the
Corporation's bylaws, and except in the case of election of Class A Directors
and except as otherwise provided by law, the holders of Series A Preferred shall
be entitled to vote on all matters submitted to the stockholders for a vote
together with the holders of Common Stock voting as a single class with each
share of Common Stock entitled to one vote per share and each share of Series A
Preferred entitled to one vote per such share.
(b) Except as otherwise required by law, the Series B Preferred shall
have no voting rights; provided that each holder of Series B Preferred shall be
entitled to notice of all meetings of the Corporation's stockholders at the same
time and in the same manner as notice is given to the stockholders entitled to
vote at such meeting.
Section 6. Registration of Transfer. The Corporation shall keep
---------- ------------------------
at its principal office a register for the registration of Preferred Stock.
Upon the surrender of any certificate representing Preferred Stock at such
place, the Corporation shall, at the request of the record holder of such
certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of Preferred Shares represented by the surrendered certificate. Each
such new certificate shall be registered in such name and shall represent such
number of Preferred Shares as is requested by the holder of the surrendered
certificate and shall be substantially identical in form to the surrendered
certificate, and dividends shall accrue on Preferred Stock represented by such
new certificate from the date on which dividends have been fully paid on such
Preferred Stock represented by the surrendered certificate.
Section 7. Replacement. Upon receipt of evidence reasonably
---------- -----------
satisfactory to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing Preferred Shares, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at the Corporation's expense) execute and deliver in lieu of such certificate a
new certificate of like kind representing the number of Preferred Shares of such
class represented by such lost, stolen, destroyed or mutilated certificate and
dated the original date of such lost, stolen, destroyed or mutilated certificate
and dated the original date of such lost, stolen, destroyed or mutilated
certificate, and dividends shall accrue on Preferred Stock represented by such
new
-6-
<PAGE>
certificate from the date on which dividends have been fully paid on such lost,
stolen, destroyed or mutilated certificate.
Section 8. Definitions.
---------- -----------
"Affiliate" of any Person means any other Person which controls, is
---------
controlled by or is under common control with another Person.
"Junior Securities" means any of the Corporation's capital stock or
-----------------
equity securities other than Preferred Stock.
"Liquidation Value" of any Preferred Share as of any particular date
-----------------
shall be equal to $100.
"Person" means an individual, a partnership, a corporation, an
------
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Redemption Date" as to any Preferred Share means the date specified
---------------
in the notice of any redemption at the Corporation's option or the applicable
date specified herein in the case of any other redemption; provided that no such
date shall be a Redemption Date unless the Liquidation Value of such Preferred
Share (plus all accrued an unpaid dividends thereon) is actually paid in full on
such date, and if not so paid in full, the Redemption Date shall be the date on
which such amount is fully paid.
"Subsidiary" means, with respect to any Person, any partnership,
----------
corporation, association, joint stock company, limited liability company, trust,
joint venture, unincorporated organization or other business entity of which (i)
if a corporation, a majority of the total voting power of Shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a partnership,
limited liability company, joint stock company, association or other business
entity, a majority of the partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, limited liability company, joint stock
company, association or other business entity if such Person or Persons shall be
allocated a majority of partnership, limited liability company, joint stock
company, association or other business entity gains or losses or shall be or
control the managing director or a general partner of such partnership, limited
liability company, joint stock company, association or other business entity.
Section 9. Amendment and Waiver. No amendment, modification or
---------- --------------------
waiver (including one in effect accomplished by merger or consolidation of the
Corporation with another Corporation or entity) shall be binding or effective
with respect to any provision of this Part C of Article IV without the prior
written consent of the holders of a majority of the Preferred Stock outstanding
at the time such action is taken.
-7-
<PAGE>
Section 10. Notices. Except as otherwise expressly provided
----------- -------
hereunder, all notices referred to herein shall be in writing and shall be
personally delivered or delivered by registered or certified mail, return
receipt requested and postage prepaid, or by reputable overnight courier
service, charges prepaid, and shall be deemed to have been given five business
days after being so mailed or sent (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).
ARTICLE FIVE
------------
The name and mailing address of the sole incorporator are as follows:
NAME MAILING ADDRESS
---- ---------------
Adam Pick 200 East Randolph Drive
Suite 5600
Chicago, Illinois 60601
ARTICLE SIX
-----------
The corporation is to have perpetual existence.
ARTICLE SEVEN
-------------
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the corporation is expressly authorized to make, alter
or repeal the by-laws of the corporation.
ARTICLE EIGHT
-------------
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the corporation may provide. The books of the
corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the board of directors or in the by-laws
of the corporation. Election of directors need not be by written ballot unless
the by-laws of the corporation so provide.
ARTICLE NINE
------------
To the fullest extent permitted by the General Corporation Law of the State
of Delaware as the same exists or may hereafter be amended, a director of this
corporation shall not be liable to the corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modifications of this ARTICLE NINE, shall not adversely affect any right or
------------
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE TEN
-----------
The corporation expressly elects not to be governed by Section 203 of the
General Corporation Law of the State of Delaware.
-8-
<PAGE>
ARTICLE ELEVEN
--------------
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this certificate of incorporation in the manner now or
hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
* * * * *
-9-
<PAGE>
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts stated herein are true, and
accordingly have hereunto set my hand on the 13/th/ day of June, 1996.
------
/s/ Adam Pick
-----------------------------------
Adam Pick, Sole Incorporator
-10-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
BEFORE PAYMENT OF CAPITAL
OF
RUDOLPH HOLDINGS CORPORATION
* * * * *
Adopted in accordance with the
provisions of Section 241 of the
General Corporation Law of the
State of Delaware
* * * * *
I, Adam R. Pick, being the duly acting and qualified Sole Incorporator of
Rudolph Holdings Corporation, a corporation organized and existing under any by
virtue of the Green Corporation Law of the state of Delaware (the
"Corporation"), DO HEREBY CERTIFY as follows:
FIRST: That the Corporation's original Certificate of
Incorporation (the "Certificate of Incorporation") was filed with the Secretary
of State of Delaware on June 13, 1996.
SECOND: That the Certificate of Incorporation is hereby amended by
deleting ARTICLE NINE in its entirety and substituting in lieu thereof a new
------------
ARTICLE NINE as follows:
- ------------
ARTICLE NINE
------------
Section 1. To the fullest extent permitted by the General
---------
Corporation Law of the State of Delaware as the same exists or may hereafter be
amended, a director of this corporation shall not be liable to the corporation
or its stockholder for monetary damages for a bread of fiduciary duty as a
director. Any repeal or modification of the ARTICLE NINE shall not adversely
------------
affect any right of protection of a director of the corporation existing at the
time of such repeal or modification.
Section 2. The corporation shall, to the fullest extent permitted by
---------
the General Corporation Law of the State of Delaware (including, without
limitation, Section 145 thereof), as amended from time to time, indemnify any
promoter of director whom it shall have power to indemnify form and against any
and all of the expenses, liabilities or other losses of any nature. The
indemnification provided in this ARTICLE NINE shall not be deemed exclusive of
------------
any other rights to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or
-11-
<PAGE>
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be promoter or director and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
THIRD: That the foregoing amendment has been duly adopted, pursuant
to the provisions of Sections 241 and 107 of the General Corporation Law of the
State of Delaware, by the Sole Incorporator of the Corporation.
FOURTH: That the Corporation has not received any payment for any of
its stock.
* * * * *
-12-
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the Sole Incorporator
hereinabove named, for the purpose of amending the Certificate of Incorporation
pursuant to the General Corporation Law of the State of Delaware, under
penalties of perjury does hereby declare and certify that this is the act and
deed of the Corporation and the facts stated herein are true, and accordingly
have hereunto singed this Certificate of Amendment of Certificate of
Incorporation Before Payment of Capital as of this 14/th/ day of June, 1996.
RUDOLPH HOLDINGS CORPORATION,
a Delaware corporation
/s/ Adam Pick
----------------------------------
By: Adam R. Pick
Its: Sole Incorporator
-13-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
RUDOLPH HOLDINGS CORPORATION
* * * * *
Pursuant to Section 242 of the General Corporation Law
of the State of Delaware
* * * * *
RUDOLPH HOLDINGS CORPORATION, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware
(hereinafter, the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That by the Unanimous Written Consent of the Board of Directors
of the Corporation resolutions were duly adopted setting forth a proposed
amendment to Section A of Article IV of the Certificate of Incorporation,
declaring said amendment to be advisable and directing that said amendment be
considered by the holders of the Common and Preferred Stock of the Corporation,
as the only stockholders entitled to vote thereon. The resolution setting forth
the proposed amendment is as follows:
NOW THEREFORE BE IT RESOLVED, that Section A of Article IV of the
Articles of Incorporation shall be deleted in it entirety and replaced
with the following:
A. AUTHORIZED SHARES
-----------------
The total number of shares of capital stock which the Corporation
has authority to issue is 333,896.00 shares, consisting of:
(1) 45,876 shares of Series A Preferred Stock, par value $.01
per shares ("Series A Preferred"),
(2) 10,125 shares of Series B Preferred Stock, par value $.01
per share ("Series B Preferred" and together with Series A Preferred,
"Preferred Stock"),
(3) 192,774 shares of Class A Common Stock, par value $.01 per
share ("Class A Common") and
(4) 85,121 shares of Class B Common Stock, par value $.01 per
share ("Class B Common" and together with Class A Common, "Common
Stock").
-14-
<PAGE>
SECOND: That by the Written Consent of the holders of at least a majority
of the Common and Preferred Stock of the Corporation, in lieu of a meeting and
vote pursuant to Section 228 of Delaware Corporation Law, the proposed and
recommended amendment to Section A of Article IV of the Certificate of
Incorporation was in all respects approved.
THIRD: That said amendment to the Certificate of Incorporation was duly
adopted in accordance with the provisions of Section 228 and 242 of the General
Corporation Law of the State of Delaware.
-15-
<PAGE>
IN WITNESS WHEREOF, said RUDOLPH HOLDINGS CORPORATION has caused this
Certificate of Amendment to be duly signed by its President and attested to by
its Secretary this 15/th/ day of September, 1998.
------ ---------
RUDOLPH HOLDINGS CORPORATION
/s/ Paul McLaughlin
----------------------------------
Paul McLaughlin
President
ATTEST:
/s/ Steven Roth
-----------------------
Steven Roth
Secretary
-16-
<PAGE>
EXHIBIT 3.1(B)
RESTATED CERTIFICATE OF INCORPORATION
OF
RUDOLPH TECHNOLOGIES, INC.
Rudolph Technologies, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
A. The name of the corporation is Rudolph Technologies, Inc. The
corporation was originally incorporated under the name of Rudolph Holdings
Corporation, and the original Certificate of Incorporation was filed with the
Secretary of the State of Delaware on June 13, 1996.
B. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
amends the provisions of the Certificate of Incorporation of the corporation.
C. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:
ARTICLE I
The name of this corporation is Rudolph Technologies, Inc.
ARTICLE II
The address of the corporation's registered office in the State of Delaware
is 1013 Centre Road, in the City of Wilmington, County of New Castle, Delaware
19805. The name of its registered agent at such address is The Prentice-Hall
Corporation System, Inc.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
The corporation is authorized to issue two classes of shares of stock to be
designated, respectively, Common Stock, $0.001 par value, and Preferred Stock,
$0.001 par value. The total number of shares that the corporation is authorized
to issue is 55,054,000 shares. The number of
<PAGE>
shares of Common Stock authorized is 50,000,000. The number of shares of
Preferred Stock authorized is 5,054,000, 45,875.29 of which are designated
"Series A Preferred Stock" and 8,124.71 of which are designated "Series B
Preferred Stock."
Upon the filing of this Restated Certificate of Incorporation each
outstanding share of Class A common stock shall be split up and converted into
35.66 shares of Common Stock and each outstanding share of Class B common stock
shall be split-up and converted into 35.66 shares of Common Stock (the "Stock
Split"). The number of authorized shares of the corporation's capital stock set
forth in the preceding paragraph have already been adjusted in connection with
the Stock-Split and shall not be increased further for such Stock Split.
Five million (5,000,000) shares of Preferred Stock (the "Preferred Stock")
may be issued from time to time in one or more series pursuant to a resolution
or resolutions providing for such issue duly adopted by the board of directors
(authority to do so being hereby expressly vested in the board). The board of
directors is further authorized to determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
series of Preferred Stock and to fix the number of shares of any series of
Preferred Stock and the designation of any such series of Preferred Stock. The
board of directors, within the limits and restrictions stated in any resolution
or resolutions of the board of directors originally fixing the number of shares
constituting any series, may increase or decrease (but not below the number of
shares in any such series then outstanding) the number of shares of any series
subsequent to the issue of shares of that series.
The authority of the board of directors with respect to each such class or
series shall include, without limitation of the foregoing, the right to
determine and fix:
(a) the distinctive designation of such class or series and the number
of shares to constitute such class or series;
(b) the rate at which dividends on the shares of such class or series
shall be declared and paid, or set aside for payment, whether dividends at the
rate so determined shall be cumulative or accruing, and whether the shares of
such class or series shall be entitled to any participating or other dividends
in addition to dividends at the rate so determined, and if so, on what terms;
(c) the right or obligation, if any, of the corporation to redeem
shares of the particular class or series of Preferred Stock and, if redeemable,
the price, terms and manner of such redemption;
(d) the special and relative rights and preferences, if any, and the
amount or amounts per share, which the shares of such class or series of
Preferred Stock shall be entitled to receive upon any voluntary or involuntary
liquidation, dissolution or winding up of the corporation;
(e) the terms and conditions, if any, upon which shares of such class
or series shall be convertible into, or exchangeable for, shares of capital
stock of any other class or series,
-2-
<PAGE>
including the price or prices or the rate or rates of conversion or exchange and
the terms of adjustment, if any;
(f) the obligation, if any, of the corporation to retire, redeem or
purchase shares of such class or series pursuant to a sinking fund or fund of a
similar nature or otherwise, and the terms and conditions of such obligation;
(g) voting rights, if any, on the issuance of additional shares of
such class or series or any shares of any other class or series of Preferred
Stock;
(h) limitations, if any, on the issuance of additional shares of such
class or series or any shares of any other class or series of Preferred Stock;
and
(i) such other preferences, powers, qualifications, special or
relative rights and privileges thereof as the board of directors of the
corporation, acting in accordance with this Restated Certificate of
Incorporation, may deem advisable and are not inconsistent with law and the
provisions of this Restated Certificate of Incorporation.
ARTICLE V
The relative rights, preferences, privileges and restrictions granted to or
imposed upon the Series A Preferred Stock and the Series B Preferred Stock
(together, the "Outstanding Preferred Stock") and the Common Stock are set forth
below:
1. Dividends.
---------
(a) General Obligation. When and as declared by the Board of
------------------
Directors and to the extent permitted under the General Corporation Law of
Delaware, the Corporation shall pay dividends as provided in this Article V,
Section 1. Dividends on each share of Series A Preferred Stock and Series B
Preferred Stock (each, a "Preferred Share") shall accrue on a daily basis at the
---------------
rate of 8% per annum of the sum of the Liquidation Value thereof plus all
accumulated and unpaid dividends thereon, from and including the date of
issuance of such Preferred Share to but not including the date on which the
Liquidation Value of such Preferred Share is paid under Section 2 of this
Article V, the date such Preferred Share is redeemed pursuant to Section 4 of
this Article V, or the date such Preferred Share is otherwise acquired by the
corporation. Such dividends shall accrue whether or not they have been declared
and whether or not there are profits, surplus or other funds of the corporation
legally available for the payment of dividends. Such dividends shall be
cumulative such that all accrued and unpaid dividends shall be fully paid or
declared with funds irrevocably set apart for payment before any dividend,
distribution or payment may be made with respect to any Junior Securities,
subject to the provisions of Section 3 of this Article V. The date on which the
Corporation initially issues any Preferred Share shall be deemed to be its "date
----
of issuance" regardless of the number of times transfer of such Preferred Share
- -----------
is made on the stock records maintained by or for the Corporation and regardless
of the number of certificates which may be issued to evidence such Preferred
Share.
-3-
<PAGE>
Subject to the preferential rights of the holders of Outstanding
Preferred Stock set forth in this Article V and to the extent permitted under
the General Corporation Law of Delaware, dividends may be paid on the Common
Stock when as and when declared by the Board of Directors.
(b) Dividend Reference Dates. Each March 31, June 30, September 30 and
------------------------
December 31 of each year, beginning September 30, 1996, shall be a "Dividend
--------
Reference Date." To the extent not paid on a Dividend Reference Date, all
- --------------
dividends which have accrued on each Preferred Share outstanding during the
three-month period (or other period in the case of the initial Dividend
Reference Date) ending upon each such Dividend Reference Date shall be
accumulated and shall remain accumulated dividends with respect to such
Preferred Share until paid.
(c) Distribution of Partial Dividend Payments. Except as otherwise
-----------------------------------------
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued with respect to Outstanding Preferred Stock, such
payment shall be distributed ratably among the holders of Preferred Shares based
upon the aggregate accrued but unpaid dividends on Preferred Shares held by each
such holder.
2. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
corporation, each holder of Outstanding Preferred Stock shall be entitled to be
paid, before any distribution or payment is made upon any Junior Securities, an
amount in cash equal to the aggregate Liquidation Value (plus all accrued and
unpaid dividends) of all Preferred Shares held by such holder, and the holders
of Preferred Stock shall not be entitled to any further payment or claim or
right to any assets of the corporation. If upon any such liquidation,
dissolution or winding up of the corporation, the corporation's assets to be
distributed among the holders of Outstanding Preferred Stock are insufficient to
permit payment to such holders of the aggregate amount which they are entitled
to be paid, then the entire assets to be distributed shall be distributed
ratably among such holders based upon the aggregate Liquidation Value (plus all
accrued and unpaid dividends) of Outstanding Preferred Stock held by each such
holder. The corporation shall mail written notice of such liquidation,
dissolution or winding up, not less than 60 days prior to the payment date
stated therein, to each record holder of Outstanding Preferred Stock. Neither
the consolidation nor merger of the corporation into or with any other entity or
entities (whether or not the corporation is the surviving entity after the
consolidation or merger), nor the sale or transfer by the corporation of all or
any part of its assets, nor the reduction of the capital stock of the
corporation, nor any other form of recapitalization shall be deemed to be a
liquidation, dissolution or winding up of the corporation within the meaning of
this Section 2.
Subject to the preferential rights of the holders of Outstanding Preferred
Stock set forth in this Articles V, the holders of Common Stock shall be
entitled to participate ratably on a per share basis in all distributions to the
holders of Common Stock in any liquidation, dissolution or winding up of the
corporation.
3. Priority of Preferred Stock. So long as any Outstanding Preferred
---------------------------
Stock remains outstanding, neither the corporation nor any Subsidiary shall
redeem, purchase or otherwise acquire directly or indirectly any Junior
Securities, nor shall the corporation directly or indirectly pay or
-4-
<PAGE>
declare any dividend or make any distribution upon any Junior Securities, except
for dividends payable in shares of Common Stock issued upon the outstanding
shares of Common Stock.
4. Redemptions.
-----------
(a) Optional Redemptions. The corporation may at any time redeem
--------------------
all or any portion of Outstanding Preferred Stock then outstanding. Upon any
such redemption, the corporation shall pay a price per Preferred Share equal to
the Liquidation Value thereof plus all accrued and unpaid dividends thereon.
(b) Redemption Payment. For each Preferred Share which is to be
------------------
redeemed, the corporation shall be obligated on the Redemption Date to pay to
the holder thereof (upon surrender by such holder at the corporation's principal
office of the certificate representing such Preferred Share) an amount in
immediately available funds equal to the Liquidation Value of such Preferred
Share (plus all accrued and unpaid dividends hereon). If the funds of the
corporation legally available for redemption of such Preferred Shares on any
Redemption Date are insufficient to redeem the total number of Preferred Shares
to be redeemed on such date, those funds which are legally available shall be
used to redeem the maximum possible number of such Preferred Shares based upon
the aggregate Liquidation Value of such Preferred Shares (plus all accrued and
unpaid dividends thereon) held by each such holder. At any time thereafter when
additional funds of the corporation are legally available for the redemption of
such Preferred Shares, such funds shall immediately be used to redeem the
balance of such Preferred Shares which the corporation has become obligated to
redeem on any Redemption Date but which it has not redeemed.
(c) Notice of Redemption. Unless otherwise provided herein, the
--------------------
corporation shall mail written notice of each redemption of Outstanding
Preferred Stock to each record holder of Preferred Shares not more than 60 nor
less than ten days prior to the date on which such redemption is to be made.
Upon mailing any notice of redemption which relates to a redemption at the
corporation's option, the corporation shall become obligated to redeem the total
number of Preferred Shares specified in such notice at the time of redemption
specified therein. In case fewer than the total number of the Preferred Shares
represented by any certificate are redeemed, a new certificate representing the
number of unredeemed Preferred Shares shall be issued to the holder thereof
without cost to such holder within three business days after surrender of the
certificate representing the redeemed Preferred Shares.
(d) Determination of the Number of Each Holder's Shares to be
---------------------------------------------------------
Redeemed. Except as otherwise provided herein, the number of Preferred Shares to
- --------
be redeemed from each holder thereof in redemptions hereunder shall be the
number of Preferred Shares determined by multiplying the total number of
Preferred Shares to be redeemed times a fraction, the numerator of which shall
be the total number of Preferred Shares then held by such holder and the
denominator of which shall be the total number of Preferred Shares then
outstanding.
(e) Dividends After Redemption. No Preferred Share is entitled
--------------------------
to any dividends accruing after the date on which the Liquidation Value of such
Preferred Share (plus all accrued and
-5-
<PAGE>
unpaid dividends thereon) is paid to the holder thereof. On such date all rights
of the holder of such Preferred Share shall cease, and such Preferred Share
shall be deemed to be not outstanding.
(f) Redeemed or Otherwise Acquired Shares. Any Preferred Shares which
-------------------------------------
are redeemed or otherwise acquired by the Corporation shall be canceled and
shall not thereafter be reissued, sold or transferred.
(g) Other Redemptions or Acquisitions. Neither the Corporation nor
---------------------------------
any Subsidiary shall redeem or otherwise acquire any Outstanding Preferred
Stock, except as expressly authorized herein or pursuant to a purchase offer
made pro rata to all holders of Outstanding Preferred Stock on the basis of the
number of Preferred Shares owned by each such holder.
(h) Special Redemptions.
-------------------
(i) The term "Change in Ownership" shall mean any sale or
-------------------
issuance or series of sales or issuances of the corporation's capital stock by
the corporation or any holders thereof, immediately after which the State Board
of Administration of Florida ("SBA") and Liberty Partners Holdings II, L.L.C.
---
("LPH") and its Affiliates in the aggregate no longer hold record ownership of
---
(a) at least 40% of the corporation's then outstanding Common Stock or (b)
shares of the corporation's outstanding capital stock entitled to elect
directors to the Board of Directors possessing a majority of the votes of all
directors.
(ii) If a Change in Ownership has occurred or the corporation
obtains knowledge that a Change in Ownership is to occur, the corporation shall
give prompt written notice of such Change in Ownership describing in reasonable
detail the definitive terms and date of consummation thereof to each holder of
Outstanding Preferred Stock, but in any event such notice shall not be given
later than five days after the occurrence of such Change in Ownership. The
holders of a majority of the Outstanding Preferred Stock then outstanding may
require the corporation to redeem all of the Outstanding Preferred Stock owned
by holders thereof at a price per Preferred Share equal to the Liquidation Value
thereof (plus all accrued and unpaid dividends thereon) by giving written notice
to the corporation of such election prior to the later of (a) 20 days after
receipt of the corporation's notice and (b) 20 days prior to the consummation of
the Change in Ownership (the "Expiration Date"). The corporation shall give
---------------
prompt written notice of any such election to all other holders of Preferred
Stock within five days after the receipt thereof. Upon receipt of such
election, the corporation shall be obligated to redeem all of the outstanding
Preferred Shares on the later of (a) the occurrence of the Change in Ownership
or (b) five days after the corporation's receipt of such election. If, in any
case, a proposed Change in Ownership does not occur, all requests for redemption
in connection therewith shall be automatically rescinded.
(iii) The term "Fundamental Change" shall mean (a) a sale or
------------------
transfer of all or substantially all of the assets of the corporation and its
Subsidiaries on a consolidated basis (measured by either book value in
accordance with generally accepted accounting principles consistently applied or
fair market value determined in the reasonable good faith judgment of the
Corporation's board of directors) in any transaction or series of transactions
(other than sales in the ordinary course of business) and (b) any merger or
consolidation to which the corporation is a party.
-6-
<PAGE>
(iv) If a Fundamental Change is proposed to occur, the
corporation shall give written notice of such Fundamental Change describing in
reasonable detail the definitive terms and date of consummation thereof to each
holder of Outstanding Preferred Stock not more than 60 days nor less than 20
days prior to the consummation thereof. The holders of a majority of the
Outstanding Preferred Stock then outstanding may require the Corporation to
redeem all of the Outstanding Preferred Stock owned by holders thereof at a
price per Preferred Share equal to the Liquidation Value thereof (plus all
accrued and unpaid dividends thereon) by giving written notice to the
corporation of such election prior to the later of (a) 20 days prior to the
consummation of the Fundamental Change or (b) 20 days after receipt of a notice
from the corporation. The corporation shall give prompt written notice of such
election to all other holders of Outstanding Preferred Stock (but in any event
within five days prior to the consummation of the Fundamental Change). Upon
receipt of such election(s), the corporation shall be obligated to redeem all of
the outstanding Preferred Shares upon the consummation of such Fundamental
Change. If any proposed Fundamental Change does not occur, all requests for
redemption in connection therewith shall be automatically rescinded.
5. Voting Rights.
-------------
(a) The holders of Series A Preferred shall be entitled to notice
of all meetings of the corporation's stockholders in accordance with the
corporation's bylaws and except as provided by law, the holders of Series A
Preferred shall be entitled to vote on all matters submitted to the stockholders
for a vote together with the holders of Common Stock voting as a single class
with each share of Common Stock entitled to one vote per share and each share of
Series A Preferred entitled to one vote per such share.
(b) Except as otherwise required by law, the Series B Preferred
shall have no voting rights; provided that each holder of Series B Preferred
shall be entitled to notice of all meetings of the corporation's stockholders at
the same time and in the same manner as notice is given to the stockholders
entitled to vote at such meeting.
6. Registration of Transfer. The corporation shall keep at its principal
------------------------
office a register for the registration of Preferred Stock. Upon the surrender
of any certificate representing Preferred Stock at such place, the corporation
shall, at the request of the record holder of such certificate, execute and
deliver (at the corporation's expense) a new certificate or certificates in
exchange therefor representing in the aggregate the number of Preferred Shares
represented by the surrendered certificate. Each such new certificate shall be
registered in such name and shall represent such number of Preferred Shares as
is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on Outstanding Preferred Stock represented by such new certificate
from the date on which dividends have been fully paid on such Outstanding
Preferred Stock represented by the surrendered certificate.
7. Replacement. Upon receipt of evidence reasonably satisfactory to the
-----------
corporation (an affidavit of the registered holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Preferred Shares, and in the case of any such
-7-
<PAGE>
loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to
the corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the corporation shall
(at the corporation's expense) execute and deliver in lieu of such certificate a
new certificate of like kind representing the number of Outstanding Preferred
Shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the original date of such lost, stolen, destroyed or
mutilated certificate and dated the original date of such lost, stolen,
destroyed or mutilated certificate, and dividends shall accrue on Outstanding
Preferred Stock represented by such new certificate from the date on which
dividends have been fully paid on such lost, stolen, destroyed or mutilated
certificate.
8. Definitions.
-----------
"Affiliate" of any Person means any other Person which controls, is
---------
controlled by or is under common control with another Person.
"Junior Securities" means any of the corporation's capital stock or equity
-----------------
securities other than Preferred Stock.
"Liquidation Value" of any Preferred Share as of any particular date shall
-----------------
be equal to $100.
"Person" means an individual, a partnership, a corporation, an association,
------
a joint stock company, a limited liability company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"Redemption Date" as to any Preferred Share means the date specified in the
---------------
notice of any redemption at the corporation's option or the applicable date
specified herein in the case of any other redemption; provided that no such date
shall be a Redemption Date unless the Liquidation Value of such Preferred Share
(plus all accrued an unpaid dividends thereon) is actually paid in full on such
date, and if not so paid in full, the Redemption Date shall be the date on which
such amount is fully paid.
"Subsidiary" means, with respect to any Person, any partnership,
----------
corporation, association, joint stock company, limited liability company, trust,
joint venture, unincorporated organization or other business entity of which (i)
if a corporation, a majority of the total voting power of Shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a partnership,
limited liability company, joint stock company, association or other business
entity, a majority of the partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, limited liability company, joint stock
company, association or other business entity if such Person or Persons shall be
allocated a majority of partnership, limited liability company, joint stock
company, association or other business entity gains or losses or shall
-8-
<PAGE>
be or control the managing director or a general partner of such partnership,
limited liability company, joint stock company, association or other business
entity.
9. Amendment and Waiver. No amendment, modification or waiver (including
--------------------
one in effect accomplished by merger or consolidation of the corporation with
another corporation or entity) shall be binding or effective with respect to any
provision of this Article V without the prior written consent of the holders of
a majority of the Outstanding Preferred Stock outstanding at the time such
action is taken.
10. Notices. Except as otherwise expressly provided hereunder, all notices
-------
referred to herein shall be in writing and shall be personally delivered or
delivered by registered or certified mail, return receipt requested and postage
prepaid, or by reputable overnight courier service, charges prepaid, and shall
be deemed to have been given five business days after being so mailed or sent
(i) to the corporation, at its principal executive offices and (ii) to any
stockholder, at such holder's address as it appears in the stock records of the
corporation (unless otherwise indicated by any such holder).
ARTICLE VI
The corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the stockholders
herein are granted subject to this right.
ARTICLE VII
The corporation is to have perpetual existence.
ARTICLE VIII
1. Limitation of Liability. To the fullest extent permitted by the
-----------------------
General Corporation Law of the State of Delaware as the same exists or as may
hereafter be amended, a director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director.
2. Indemnification. The corporation may indemnify to the fullest extent
---------------
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the corporation, or any predecessor of
the corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the corporation or any predecessor to the
corporation.
3. Amendments. Neither any amendment nor repeal of this Article VIII,
----------
nor the adoption of any provision of the corporation's Certificate of
Incorporation inconsistent with this
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<PAGE>
Article VIII, shall eliminate or reduce the effect of this Article VIII, in
respect of any matter occurring, or any action or proceeding accruing or arising
or that, but for this Article VIII, would accrue or arise, prior to such
amendment, repeal, or adoption of an inconsistent provision.
ARTICLE IX
In the event any shares of Preferred Stock shall be redeemed or converted
pursuant to the terms hereof, the shares so converted or redeemed shall not
revert to the status of authorized but unissued shares, but instead shall be
canceled and shall not be re-issuable by the corporation.
ARTICLE X
1. Number of Directors. The number of directors which constitutes the
-------------------
whole Board of Directors of the corporation shall be designated in the Amended
and Restated Bylaws of the corporation. The directors shall be divided into
three classes with the term of office of the first class (Class I) to expire at
the annual meeting of stockholders held in 2000; the term of office of the
second class (Class II) to expire at the annual meeting of stockholders held in
2001; the term of office of the third class (Class III) to expire at the annual
meeting of stockholders held in 2002; and thereafter for each such term to
expire at each third succeeding annual meeting of stockholders after such
election.
2. Election of Directors. Elections of directors need not be by written
---------------------
ballot unless the Amended and Restated Bylaws of the corporation shall so
provide.
3. Removal of Directors. Any director or directors may be removed from
--------------------
office at any time, but only for cause and only by the affirmative vote, at any
regular meeting or special meeting of the stockholders, of not less than 66 2/3%
of the total number of votes of the then outstanding shares of stock of this
corporation entitled to vote generally in the election of directors, voting
together as a single class, but only if notice was properly given prior to the
meeting.
ARTICLE XI
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Amended and Restated Bylaws of the corporation.
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<PAGE>
ARTICLE XII
No action shall be taken by the stockholders of the corporation except at
an annual or special meeting of the stockholders called in accordance with the
Amended and Restated Bylaws. The stockholders may not take action by written
consent. The affirmative vote of sixty-six and two-thirds percent (66 2/3%) of
the then outstanding voting securities of the corporation, voting together as a
single class, shall be required for the amendment, repeal or modification of the
provisions of Article X, Article XI or Article XII of this Restated Certificate
of Incorporation or Sections 2.3 (Special Meeting), 2.4 (Notice of Stockholders'
Meeting), 2.5 (Advanced Notice of Stockholder Nominees and Stockholder
Business), 2.10 (Voting), or 2.12 (Stockholder Action by Written Consent Without
a Meeting), or 3.2 (Number of Directors) of the corporation's Amended and
Restated Bylaws.
ARTICLE XIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Amended and Restated Bylaws may provide. The books of the
corporation may be kept (subject to any provision contained in the statutes)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Amended and Restated
Bylaws of the corporation.
ARTICLE XIV
This Restated Certificate of Incorporation shall become effective at ______
on __________, 1999.
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<PAGE>
IN WITNESS WHEREOF, Rudolph Technologies, Inc. has caused this certificate
to be signed by ____________, its _____________________, this ___th day of
__________, 1999.
____________________________________
Attest By:___________________________
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<PAGE>
EXHIBIT 3.1(C)
RESTATED CERTIFICATE OF INCORPORATION
OF
RUDOLPH TECHNOLOGIES, INC.
Rudolph Technologies, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
A. The name of the corporation is Rudolph Technologies, Inc. The
corporation was originally incorporated under the name of Rudolph Holdings
Corporation, and the original Certificate of Incorporation was filed with the
Secretary of the State of Delaware on June 13, 1996.
B. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
amends the provisions of the Certificate of Incorporation of the corporation.
C. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:
ARTICLE I
The name of this corporation is Rudolph Technologies, Inc.
ARTICLE II
The address of the corporation's registered office in the State of Delaware
is 1013 Centre Road, in the City of Wilmington, County of New Castle, Delaware
19805. The name of its registered agent at such address is The Prentice-Hall
Corporation System, Inc.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
The corporation is authorized to issue two classes of shares of stock to be
designated, respectively, Common Stock, $0.001 par value, and Preferred Stock,
$0.001 par value. The total number of shares that the corporation is authorized
to issue is 55,000,000 shares. The number of
<PAGE>
shares of Common Stock authorized is 50,000,000. The number of shares of
Preferred Stock authorized is 5,000,000.
The Preferred Stock may be issued from time to time in one or more series
pursuant to a resolution or resolutions providing for such issue duly adopted by
the board of directors (authority to do so being hereby expressly vested in the
board). The board of directors is further authorized to determine or alter the
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and to fix the number of shares of any
series of Preferred Stock and the designation of any such series of Preferred
Stock. The board of directors, within the limits and restrictions stated in any
resolution or resolutions of the board of directors originally fixing the number
of shares constituting any series, may increase or decrease (but not below the
number of shares in any such series then outstanding) the number of shares of
any series subsequent to the issue of shares of that series.
The authority of the board of directors with respect to each such class or
series shall include, without limitation of the foregoing, the right to
determine and fix:
(a) the distinctive designation of such class or series and the number of
shares to constitute such class or series;
(b) the rate at which dividends on the shares of such class or series
shall be declared and paid, or set aside for payment, whether dividends at the
rate so determined shall be cumulative or accruing, and whether the shares of
such class or series shall be entitled to any participating or other dividends
in addition to dividends at the rate so determined, and if so, on what terms;
(c) the right or obligation, if any, of the corporation to redeem shares
of the particular class or series of Preferred Stock and, if redeemable, the
price, terms and manner of such redemption;
(d) the special and relative rights and preferences, if any, and the
amount or amounts per share, which the shares of such class or series of
Preferred Stock shall be entitled to receive upon any voluntary or involuntary
liquidation, dissolution or winding up of the corporation;
(e) the terms and conditions, if any, upon which shares of such class or
series shall be convertible into, or exchangeable for, shares of capital stock
of any other class or series, including the price or prices or the rate or rates
of conversion or exchange and the terms of adjustment, if any;
(f) the obligation, if any, of the corporation to retire, redeem or
purchase shares of such class or series pursuant to a sinking fund or fund of a
similar nature or otherwise, and the terms and conditions of such obligation;
(g) voting rights, if any, on the issuance of additional shares of such
class or series or any shares of any other class or series of Preferred Stock;
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<PAGE>
(h) limitations, if any, on the issuance of additional shares of such
class or series or any shares of any other class or series of Preferred Stock;
and such other preferences, powers, qualifications, special or relative rights
and privileges thereof as the board of directors of the corporation, acting in
accordance with this Restated Certificate of Incorporation, may deem advisable
and are not inconsistent with law and the provisions of this Restated
Certificate of Incorporation.
ARTICLE V
The corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the stockholders
herein are granted subject to this right.
ARTICLE VI
The corporation is to have perpetual existence.
ARTICLE VII
1. Limitation of Liability. To the fullest extent permitted by the
-----------------------
General Corporation Law of the State of Delaware as the same exists or as may
hereafter be amended, a director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director.
2. Indemnification. The corporation may indemnify to the fullest extent
---------------
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the corporation, or any predecessor of
the corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the corporation or any predecessor to the
corporation.
3. Amendments. Neither any amendment nor repeal of this Article VII, nor
----------
the adoption of any provision of the corporation's Certificate of Incorporation
inconsistent with this Article VII, shall eliminate or reduce the effect of this
Article VII, in respect of any matter occurring, or any action or proceeding
accruing or arising or that, but for this Article VII, would accrue or arise,
prior to such amendment, repeal, or adoption of an inconsistent provision.
ARTICLE VIII
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<PAGE>
In the event any shares of Preferred Stock shall be redeemed or converted
pursuant to the terms hereof, the shares so converted or redeemed shall not
revert to the status of authorized but unissued shares, but instead shall be
canceled and shall not be re-issuable by the corporation.
ARTICLE IX
1. Number of Directors. The number of directors which constitutes the
-------------------
whole Board of Directors of the corporation shall be designated in the Amended
and Restated Bylaws of the corporation. The directors shall be divided into
three classes with the term of office of the first class (Class I) to expire at
the annual meeting of stockholders held in 2000; the term of office of the
second class (Class II) to expire at the annual meeting of stockholders held in
2001; the term of office of the third class (Class III) to expire at the annual
meeting of stockholders held in 2002; and thereafter for each such term to
expire at each third succeeding annual meeting of stockholders after such
election.
2. Election of Directors. Elections of directors need not be by written
---------------------
ballot unless the Amended and Restated Bylaws of the corporation shall so
provide.
3. Removal of Directors. Any director or directors may be removed from
--------------------
office at any time, but only for cause and only by the affirmative vote, at any
regular meeting or special meeting of the stockholders, of not less than 66 2/3%
of the total number of votes of the then outstanding shares of stock of this
corporation entitled to vote generally in the election of directors, voting
together as a single class, but only if notice was properly given prior to the
meeting.
ARTICLE X
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Amended and Restated Bylaws of the corporation.
ARTICLE XI
No action shall be taken by the stockholders of the corporation except at
an annual or special meeting of the stockholders called in accordance with the
Amended and Restated Bylaws. The stockholders may not take any action by
written consent. The affirmative vote of sixty-six and two-thirds percent (66
2/3%) of the then outstanding voting securities of the corporation, voting
together as a single class, shall be required for the amendment, repeal or
modification of the provisions of Article IX, Article X or Article XI of this
Restated Certificate of Incorporation or Sections 2.3 (Special Meeting), 2.4
(Notice of Stockholders' Meeting), 2.5 (Advanced Notice of Stockholder Nominees
and Stockholder Business), 2.10 (Voting), or 2.12 (Stockholder Action by Written
Consent Without a Meeting), or 3.2 (Number of Directors) of the corporation's
Amended and Restated Bylaws.
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<PAGE>
ARTICLE XII
Meetings of stockholders may be held within or without the State of
Delaware, as the Amended and Restated Bylaws may provide. The books of the
corporation may be kept (subject to any provision contained in the statutes)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Amended and Restated
Bylaws of the corporation.
ARTICLE XIII
This Restated Certificate of Incorporation shall become effective at
_______ on __________, 1999.
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<PAGE>
IN WITNESS WHEREOF, Rudolph Technologies, Inc. has caused this certificate
to be signed by ____________, its _____________________, this ___th day of
__________, 1999.
Attest By:
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<PAGE>
EXHIBIT 3.2(a)
BY-LAWS
-------
OF
--
RUDOLPH HOLDINGS CORPORATION
----------------------------
A Delaware Corporation
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office of the corporation
-----------------
in the State of Delaware shall be located at 1013 Centre Road, County of New
Castle, Wilmington, Delaware 19805. The name of the corporation's registered
agent at such address shall be The Prentice-Hall Corporation System, Inc. The
registered office and/or registered agent of the corporation may be changed from
time to time by action of the board of directors.
Section 2. Other Offices. The corporation may also have offices at such
-------------
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place and Time of Meetings. An annual meeting of the
--------------------------
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall be
determined by the president of the corporation; provided, that if the president
does not act, the board of directors shall determine the date, time and place of
such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
----------------
called for any purpose and may be held at such time and place, within or without
the State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof.
Section 3. Place of Meeting. The board of directors may designate any
----------------
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
<PAGE>
Section 4. Notice. Whenever stockholders are required or permitted to
------
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting.
Section 5. Stockholders List. The officer having charge of the stock
-----------------
ledger of the corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
------
capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the certificate of incorporation. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy at
the meeting, and entitled to vote at the meeting, may adjourn the meeting to
another time and/or place.
Section 7. Adiourned Meeting. When a meeting is adjourned to another
-----------------
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
-------------
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by express provisions of an
applicable law or of the certificate of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the General
-------------
Corporation Law of the State of Delaware, by written agreement of the
stockholders, or by the certificate of incorporation of the corporation or any
amendments thereto and subject to Section 3 of Article VI hereof, every
stockholder shall at every meeting of the stockholders be entitled to one vote
in person or by proxy for each share of common stock held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
-------
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another
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<PAGE>
person or persons to act for him or her by proxy, but no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period.
Section 11. Action by Written Consent. Unless otherwise provided in the
-------------------------
certificate of incorporation any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the state of Delaware, or the corporation's principal place of business, or an
officer or agent of the corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. All consents properly delivered in accordance
with this section shall be deemed to be recorded when so delivered. No written
consent shall be effective to take the corporate action referred to therein
unless, within sixty days of the earliest dated consent delivered to the
corporation as required by this section, written consents signed by the holders
of a sufficient number of shares to take such corporate action are so recorded.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing. Any action taken pursuant to such written consent or
consents of the stockholders shall have the same force and effect as if taken by
the stockholders at a meeting thereof.
ARTICLE III
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the corporation
--------------
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors
-----------------------------------
which shall constitute the first board shall be six (6). Thereafter, the number
of directors shall be established from time to time by resolution of the board.
The directors shall be elected by a plurality of the votes of the shares present
in person or represented by proxy at the meeting and entitled to vote in the
election of directors. The directors shall be elected in this manner at the
annual meeting of the stockholders, except as provided in Section 4 of this
Article III. Each director elected shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided. The provisions contained in this Section 2 shall also
be subject to the terms and conditions of that certain Stockholders Agreement,
dated as of June 14, 1996, by and among the corporation and its stockholders
(the "Stockholders Agreement") for so long as the Stockholders Agreement remains
in effect.
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<PAGE>
Section 3. Removal and Resignation. Subject to the provisions of the
-----------------------
Stockholders Agreement, any director or the entire board of directors may be
removed at any time, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors. Whenever the holders
of any class or series are entitled to elect one or more directors by the
provisions of the corporation's certificate of incorporation, the provisions of
this section shall apply, in respect to the removal without cause of a director
or directors so elected, to the vote of the holders of the outstanding shares of
that class or series and not to the vote of the outstanding shares as a whole.
Any director may resign at any time upon written notice to the corporation.
Section 4. Vacancies. Subject to the provisions of the Stockholders
---------
Agreement, vacancies and newly created directorships resulting from any increase
in the authorized number of directors shall be filled by a majority of the votes
of shares entitled to vote in the election of directors and in accordance with
the Stockholders Agreement. Each director so chosen shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected
---------------
board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
-------------------------
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at the
request of the president on at least 24 hours notice to each director, either
personally, by telephone, by mail, or by telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
-------------------------------------
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. Subject to the provisions of the Stockholders
----------
Agreement, the board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, each committee to consist of one
or more of the directors of the corporation, which to the extent provided in
such resolution or these by-laws shall have and may exercise the powers of the
board of directors in the management and affairs of the corporation except as
otherwise limited by law. The board of directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors. Each committee shall keep
regular minutes of its meetings and report the same to the board of directors
when required.
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<PAGE>
Section 9. Committee Rules. Each committee of the board of directors may
---------------
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors or
------------------------
any committee thereof may participate in and act at any meeting of such board or
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
------------------------------------------
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
-------------------------
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
ARTICLE IV
OFFICERS
--------
Section 1. Number. The officers of the corporation shall be elected by
------
the board of directors and may consist of a president, any number of vice
presidents, a secretary, a chief financial officer, any number of assistant
secretaries and such other officers and assistant officers as may be deemed
necessary or desirable by the board of directors. Any number of offices may be
held by the same person. In its discretion, the board of directors may choose
not to fill any office for any period as it may deem advisable, except that the
offices of president and secretary shall be filled as expeditiously as possible.
-5-
<PAGE>
Section 2. Election and Term of Office. The officers of the corporation
---------------------------
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. Vacancies may be filled or new offices created and filled at any meeting
of the board of directors. Each officer shall hold office until a successor is
duly elected and qualified or until his or her earlier death, resignation or
removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
-------
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
---------
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
------------
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. Chairman of the Board. The chairman of the board, if such an
---------------------
officer be elected, shall, if present, preside at meetings of the board of
directors and exercise such other powers and perform such other duties as may
from time to time be assigned to him by the board of directors or as may be
prescribed by these bylaws. If there is no president, then the chairman of the
board shall also be the chief executive officer of the corporation and shall
have the powers and duties prescribed in Section 7 of this Article IV.
Section 7. President. The president, subject to the powers of the board
---------
of directors, shall have general charge of the business, affairs and property of
the corporation, and control over its officers, agents and employees; and shall
see that all orders and resolutions of the board of directors are carried into
effect. The president shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation. The president
shall have such other powers and perform such other duties as may be prescribed
by the board of directors or as may be provided in these by-laws.
Section 8. Vice-presidents. The vice-president, or if there shall be more
---------------
than one, the vice-presidents in the order determined by the board of directors
shall, in the absence or disability of the president, act with all of the powers
and be subject to all the restrictions of the president. The vice-presidents
shall also perform such other duties and have such other powers as the board of
directors, the president or these by-laws may, from time to time, prescribe.
Section 9. The Secretary and Assistant Secretaries. The secretary shall
---------------------------------------
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under
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<PAGE>
the president's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such powers
and perform such duties as the board of directors, the president or these by-
laws may, from time to time, prescribe; and shall have custody of the corporate
seal of the corporation. The secretary, or an assistant secretary, shall have
authority to affix the corporate seal to any instrument requiring it and when so
affixed, it may be attested by his or her signature or by the signature of such
assistant secretary. The board of directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
his or her signature. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the board of directors or president may, from time to time,
prescribe.
Section 10. The Chief Financial Officer and Assistant Treasurer. The chief
---------------------------------------------------
financial officer shall have the custody of the corporate funds and securities;
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the corporation; shall deposit all monies and other valuable
effects in the name and to the credit of the corporation as may be ordered by
the board of directors; shall cause the funds of the corporation to be disbursed
when such disbursements have been duly authorized, taking proper vouchers for
such disbursements; and shall render to the president and the board of
directors, at its regular meeting or when the board of directors so requires, an
account of the corporation; shall have such powers and perform such duties as
the board of directors, the president or these by-laws may, from time to time,
prescribe. If required by the board of directors, the chief financial officer
shall give the corporation a bond (which shall be rendered every six years) in
such sums and with such surety or sureties as shall be satisfactory to the board
of directors for the faithful performance of the duties of the office of chief
financial officer and for the restoration to the corporation, in case of death,
resignation, retirement, or removal from office, of all books, papers, vouchers,
money, and other property of whatever kind in the possession or under the
control of the chief financial officer belonging to the corporation. The
assistant treasurer, or if there shall be more than one, the assistant
treasurers in the order determined by the board of directors, shall in the
absence or disability of the chief financial officer, perform the duties and
exercise the powers of the chief financial officer. The assistant treasurers
shall perform such other duties and have such other powers as the board of
directors or the president may, from time to time, prescribe.
Section 11. Other Officers, Assistant Officers and Agents. Officers,
---------------------------------------------
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 12. Absence or Disability of Officers. In the case of the
---------------------------------
absence or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
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<PAGE>
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
-------------------------------------------------
Section 1. Nature of Indemnity. Each person who was or is made a party or
-------------------
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, is or was a
director or officer, of the corporation or is or was serving at the request of
the corporation as a director, officer, employee, fiduciary, or agent of another
corporation or of a partnership, joint venture, trust or other enterprise
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee, fiduciary or agent or in any other capacity while serving as
a director, officer, employee, fiduciary or agent, shall be indemnified and held
harmless by the corporation to the fullest extent which it is empowered to do so
by the General Corporation Law of the State of Delaware, as the same exists or
may hereafter be amended against all expense, liability and loss (including
attorneys' fees actually and reasonably incurred by such person in connection
with such proceeding) and such indemnification shall inure to the benefit of his
or her heirs, executors and administrators; provided, however, that, except as
provided in Section 2 hereof, the corporation shall indemnify any such person
seeking indemnification in connection with a proceeding initiated by such person
only if such proceeding was authorized by the board of directors of the
corporation. The right to indemnification conferred in this Article V shall be
a contract right and, subject to Sections 2 and 5 hereof, shall include the
right to be paid by the corporation the expenses incurred in defending any such
proceeding in advance of its final disposition. The corporation may, by action
of its board of directors, provide indemnification to employees and agents of
the corporation with the same scope and effect as the foregoing indemnification
of directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
-------------------------------------------------------
indemnification of a director, officer, employee, fiduciary or agent of the
corporation under Section 1 of this Article V or advance of expenses under
Section 5 of this Article V shall be made promptly, and in any event within 30
days, upon the written request of the director, officer, employee, fiduciary or
agent. If a determination (as defined in the General Corporation Law of the
State of Delaware) by the corporation that the director, officer, employee,
fiduciary or agent is entitled to indemnification pursuant to this Article V is
required, and the corporation fails to respond within sixty days to a written
request for indemnity, the corporation shall be deemed to have approved the
request. If the corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within 30 days, the right to indemnification or
advances as granted by this Article V shall be enforceable by the director,
officer, employee, fiduciary or agent in any court of competent jurisdiction.
Such person's costs and expenses incurred in connection with successfully
establishing his or her right to indemnification, in whole or in part, in any
such action shall also be indemnified by the corporation. It shall be a defense
to any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any, has been tendered to the corporation) that the
claimant has not met the standards of conduct which make it permissible under
the General Corporation Law of the State of Delaware for the corporation
-8-
<PAGE>
to indemnify the claimant for the amount claimed, but the burden of such defense
shall be on the corporation. Neither the failure of the corporation (including
its board of directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the General Corporation
Law of the State of Delaware, nor an actual determination by the corporation
(including its board of directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the
---------------------
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain insurance
---------
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section
--------
1 of this Article V in defending a proceeding shall be paid by the corporation
in advance of such proceeding's final disposition upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
corporation. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the board of directors deems
appropriate.
Section 6. Employees and Agent. Persons who are not covered by the
-------------------
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
---------------
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
-9-
<PAGE>
Section 8. Merger or Consolidation. For purposes of this Article V,
-----------------------
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee, fiduciary or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under this
Article V with respect to the resulting or surviving corporation as he or she
would have with respect to such constituent corporation if its separate
existence had continued.
ARTICLE VI
CERTIFICATES OF STOCK
---------------------
Section 1. Form. Every holder of stock in the corporation shall be
----
entitled to have a certificate, signed by, or in the name of the corporation by
the president, or a vice-president and the secretary or any assistant secretary
of the corporation, certifying the number of shares owned by such holder in the
corporation. If such a certificate is countersigned (1) by a transfer agent or
an assistant transfer agent other than the corporation or its employee or (2) by
a registrar, other than the corporation or its employee, the signature of the
president, any vice-president, secretary, or any assistant secretary may be
facsimiles. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on, any such certificate or certificates
shall cease to be such officer or officers of the corporation whether because of
death, resignation or otherwise before such certificate or certificates have
been delivered by the corporation, such certificate or certificates may
nevertheless be issued and delivered as though the person or persons who signed
such certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
corporation. All certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the corporation. Shares of stock of the corporation
shall only be transferred on the books of the corporation by the holder of
record thereof or by such holder's attorney duly authorized in writing, upon
surrender to the corporation of the certificate or certificates for such shares
endorsed by the appropriate person or persons, with such evidence of the
authenticity of such endorsement, transfer, authorization, and other matters as
the corporation may reasonably require, and accompanied by all necessary stock
transfer stamps. In that event, it shall be the duty of the corporation to issue
a new certificate to the person entitled thereto, cancel the old certificate or
certificates, and record the transaction on its books. The board of directors
may appoint a bank or trust company organized under the laws of the United
States or any state thereof to act as its transfer agent or registrar, or both
in connection with the transfer of any class or series of securities of the
corporation.
Section 2. Lost Certificates. The board of directors may direct a new
-----------------
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation
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<PAGE>
alleged to have been lost, stolen, or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen,
or destroyed. When authorizing such issue of a new certificate or certificates,
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, or destroyed
certificate or certificates, or his or her legal representative, to give the
corporation a bond sufficient to indemnify the corporation against any claim
that may be made against the corporation on account of the loss, theft or
destruction of any such certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
---------------------------------------------
the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty nor less than ten
days before the date of such meeting. If no record date is fixed by the board of
directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be the close of business on the next
day preceding the day on which notice is given, or if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In order
--------------------------------------------------
that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the board of directors and prior action by the board of directors is required by
statute, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the board of directors adopts the resolution taking such
prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
---------------------------------------
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the
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<PAGE>
resolution fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
-----------------------
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the
-----------------------
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
ARTICLE VII
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the corporation,
---------
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation. Before
payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the corporation, or any other purpose and the directors may
modify or abolish any such reserve in the manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
------------------------
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
---------
officers, or any agent or agents; of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
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<PAGE>
Section 4. Loans. The corporation may lend money to, or guarantee any
-----
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed
-----------
by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors may provide a corporate
--------------
seal which shall be in the form of a circle and shall have inscribed thereon the
name of the corporation and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in
--------------------------------------
any other corporation held by the corporation shall be voted by the president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
-------------------------------
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in the State of Delaware or at its principal place of
business.
Section 9. Section Headings. Section headings in these by-laws are for
----------------
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
-----------------------
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
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<PAGE>
ARTICLE VIII
AMENDMENTS
----------
These by-laws may be amended, altered, or repealed and new by-laws adopted
at any meeting of the board of directors by a majority vote. The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the stockholders of the same powers.
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<PAGE>
EXHIBIT 3.2(B)
RESTATED BYLAWS
OF
RUDOLPH TECHNOLOGIES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CORPORATE OFFICES................................................................................ 1
1.1 REGISTERED OFFICE........................................................................ 1
1.2 OTHER OFFICES............................................................................ 1
ARTICLE II MEETINGS OF STOCKHOLDERS........................................................................ 1
2.1 PLACE OF MEETINGS........................................................................ 1
2.2 ANNUAL MEETING........................................................................... 1
2.3 SPECIAL MEETING.......................................................................... 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS......................................................... 2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS.......................... 2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE............................................. 4
2.7 QUORUM................................................................................... 4
2.8 ADJOURNED MEETING; NOTICE................................................................ 4
2.9 CONDUCT OF BUSINESS...................................................................... 4
2.10 VOTING................................................................................... 5
2.11 WAIVER OF NOTICE......................................................................... 5
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.................................. 5
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.............................. 5
2.14 PROXIES.................................................................................. 6
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE.................................................... 6
ARTICLE III DIRECTORS...................................................................................... 6
3.1 POWERS................................................................................... 6
3.2 NUMBER OF DIRECTORS...................................................................... 7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.................................. 7
3.4 RESIGNATION AND VACANCIES................................................................ 7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE................................................. 8
3.6 REGULAR MEETINGS......................................................................... 8
3.7 SPECIAL MEETINGS; NOTICE................................................................. 9
3.8 QUORUM................................................................................... 9
3.9 WAIVER OF NOTICE......................................................................... 9
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING........................................ 10
3.11 FEES AND COMPENSATION OF DIRECTORS....................................................... 10
3.12 APPROVAL OF LOANS TO OFFICERS............................................................ 10
3.13 REMOVAL OF DIRECTORS..................................................................... 10
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IV COMMITTEES...................................................................................... 11
4.1 COMMITTEES OF DIRECTORS.................................................................. 11
4.2 COMMITTEE MINUTES........................................................................ 11
4.3 MEETINGS AND ACTION OF COMMITTEES........................................................ 11
ARTICLE V OFFICERS......................................................................................... 12
5.1 OFFICERS................................................................................. 12
5.2 APPOINTMENT OF OFFICERS.................................................................. 12
5.3 SUBORDINATE OFFICERS..................................................................... 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES................................... 12
5.5 CHAIRMAN OF THE BOARD.................................................................... 13
5.6 CHIEF EXECUTIVE OFFICER.................................................................. 13
5.7 PRESIDENT................................................................................ 13
5.8 VICE PRESIDENTS.......................................................................... 13
5.9 SECRETARY................................................................................ 13
5.10 CHIEF FINANCIAL OFFICER.................................................................. 14
5.11 ASSISTANT SECRETARY...................................................................... 14
5.12 ASSISTANT TREASURER...................................................................... 15
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS........................................... 15
5.14 AUTHORITY AND DUTIES OF OFFICERS......................................................... 15
ARTICLE VI INDEMNITY....................................................................................... 15
6.1 THIRD PARTY ACTIONS...................................................................... 15
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION............................................ 16
6.3 SUCCESSFUL DEFENSE....................................................................... 16
6.4 DETERMINATION OF CONDUCT................................................................. 16
6.5 PAYMENT OF EXPENSES IN ADVANCE........................................................... 17
6.6 INDEMNITY NOT EXCLUSIVE.................................................................. 17
6.7 INSURANCE INDEMNIFICATION................................................................ 17
6.8 THE CORPORATION.......................................................................... 17
6.9 EMPLOYEE BENEFIT PLANS................................................................... 18
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.............................. 18
ARTICLE VII RECORDS AND REPORTS............................................................................ 18
7.1 MAINTENANCE AND INSPECTION OF RECORDS.................................................... 18
7.2 INSPECTION BY DIRECTORS.................................................................. 19
7.3 ANNUAL STATEMENT TO STOCKHOLDERS......................................................... 19
ARTICLE VIII GENERAL MATTERS............................................................................... 19
8.1 CHECKS................................................................................... 19
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS......................................... 20
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES................................................... 20
8.4 SPECIAL DESIGNATION ON CERTIFICATES...................................................... 20
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
8.5 LOST CERTIFICATES........................................................................ 21
8.6 CONSTRUCTION; DEFINITIONS................................................................ 21
8.7 DIVIDENDS................................................................................ 21
8.8 FISCAL YEAR.............................................................................. 21
8.9 SEAL..................................................................................... 21
8.10 TRANSFER OF STOCK........................................................................ 22
8.11 STOCK TRANSFER AGREEMENTS................................................................ 22
8.12 REGISTERED STOCKHOLDERS.................................................................. 22
ARTICLE IX AMENDMENTS...................................................................................... 22
</TABLE>
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<PAGE>
RESTATED BYLAWS
OF
RUDOLPH TECHNOLOGIES, INC.
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is Prentice-Hall Corporation System,
Inc.
1.2 OTHER OFFICES
-------------
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place, either within or
without the State of Delaware, as may be designated by the board of directors or
in the manner provided in these bylaws. In the absence of any such designation,
stockholders' meetings shall be held at the registered office of the corporation
in the State of Delaware.
2.2 ANNUAL MEETING
--------------
An annual meeting of the stockholders shall be held each year within one
hundred fifty (150) days after the close of the immediately preceding fiscal
year of the corporation for the purpose of electing directors and conducting
such other proper business as may properly come before the
<PAGE>
meeting. The date and time of the annual meeting shall be determined by the
president of the corporation; provided, that if the president does not act, the
board of directors shall determine the date and time of such meeting.
2.3 SPECIAL MEETING
---------------
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the chief executive
officer, or by the president.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president or the
secretary of the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article
II, that a meeting will be held at the time requested by the person or persons
calling the meeting, not less than ten (10) nor more than sixty (60) days after
the receipt of the request. Nothing contained in this paragraph of this Section
2.3 shall be construed as limiting, fixing, or affecting the time when a meeting
of stockholders called by action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.6 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
---------------------------------------------------------------
(i) Advance Notice of Stockholder Nominations
-----------------------------------------
Nominations of persons for election to the board of directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the board of directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this Section. Such nominations, other than those made by
or at the direction of the board of directors, shall be made pursuant to timely
notice in writing to the Secretary of the corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the corporation not less than twenty (20) days
prior to the meeting; provided, however, that in the event less than thirty (30)
-------- -------
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made.
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<PAGE>
Such stockholder's notice shall set forth (a) as to each person, if any, whom
the stockholder proposes to nominate for election or re-election as a director:
(i) the name, age, business address and residence address of such person, (ii)
the principal occupation or employment of such person, (iii) the class and
number of shares of the corporation which are beneficially owned by such person,
(iv) any other information relating to such person that is required by law to be
disclosed in solicitations of proxies for election of directors, and (v) such
person's written consent to being named as a nominee and to serving as a
director if elected; and (b) as to the stockholder giving the notice: (i) the
name and address, as they appear on the corporation's books, of such
stockholder, (ii) the class and number of shares of the corporation which are
beneficially owned by such stockholder, and (iii) a description of all
arrangements or understandings between such stockholder and each nominee and any
other person or persons (naming such person or persons) relating to the
nomination. At the request of the board of directors any person nominated by the
board of directors for election as a director shall furnish to the Secretary of
the corporation that information required to be set forth in the stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the corporation unless nominated in accordance
with the procedures set forth in this Section. The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
bylaws, and if he should so determine, he shall so declare at the meeting and
the defective nomination shall be disregarded.
(ii) Advance Notice of Stockholders Business
---------------------------------------
At the annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (a) as specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the board of directors, (b) otherwise properly brought before the meeting by or
at the direction of the board of directors, or (c) otherwise properly brought
before the meeting by a stockholder. Business to be brought before the meeting
by a stockholder shall not be considered properly brought if the stockholder has
not given timely notice thereof in writing to the Secretary of the corporation.
To be timely, a stockholder's notice must be delivered to the principal
executive offices of the corporation not less than forty five (45) days prior to
the date on which the corporation first mailed proxy materials for the prior
year's annua annual meeting; provided, however, that if the corporation's annual
-------- -------
meeting of stockholders occurs on a date more than thirty (30) days earlier or
later than the corporation's prior year's annual meeting, then the corporation's
board of directors shall determine a date a reasonable period prior to the
corporation's annual meeting of stockholders by which date the stockholders
notice must be delivered and publicize such date in a filing pursuant to the
Securities Exchange Act of 1934, as amended, or via press release. Such
publication shall occur at least ten (10) days prior to the date set by the
Board of Directors. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the annual meeting: (i)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address of the stockholder proposing such business, (iii) the class
and number of shares of the corporation, which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business, and
(v) any other information that is required by law to be provided by the
stockholder in
-3-
<PAGE>
his capacity as proponent of a stockholder proposal. Notwithstanding anything in
these bylaws to the contrary, no business shall be conducted at any annual
meeting except in accordance with the procedures set forth in this Section. The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this Section, and, if he should so
determine, he shall so declare at the meeting that any such business not
properly brought before the meeting shall not be transacted.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.7 QUORUM
------
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then either (i) the Chairman of the meeting or (ii) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.8 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 CONDUCT OF BUSINESS
-------------------
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
-4-
<PAGE>
2.10 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.13 of these bylaws,
subject to the provisions of Sections 217 and 218 of the Delaware General
Corporation Law (relating to voting rights of fiduciaries, pledgors and joint
owners of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder.
2.11 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the Delaware
General Corporation Law or of the certificate of incorporation or these bylaws,
a written waiver, signed by the person entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to notice. Attendance
of a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the certificate
of incorporation or these bylaws.
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
The stockholders of the corporation may not take action by written consent
without a meeting but must take any such actions at a duly called annual or
special meeting.
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
-5-
<PAGE>
(ii) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the first date on which a
signed written consent is delivered to the corporation.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.14 PROXIES
-------
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by a written
proxy, signed by such stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if such stockholder's name is placed on the proxy by any
reasonable means including, but not limited to, by facsimile signature, manual
signature, typewriting, telegraphic transmission or otherwise, by such
stockholder or such stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the Delaware General Corporation Law.
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. Such list shall
presumptively determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.
ARTICLE III
DIRECTORS
---------
3.1 POWERS
------
-6-
<PAGE>
Subject to the provisions of the Delaware General Corporation Law and any
limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
-------------------
The board of directors shall consist of eight (8) members. The number of
directors may be changed by an amendment to this bylaw, duly adopted by the
board of directors or by the stockholders, or by a duly adopted amendment to the
certificate of incorporation. Upon the closing of the first sale of the
corporation's common stock pursuant to a firmly underwritten registered public
offering (the "IPO"), the directors shall be divided into three classes, with
the term of office of the first class, which class shall initially consist of
three directors, to expire at the first annual meeting of stockholders held
after the IPO; the term of office of the second class, which shall initially
consist of three directors, to expire at the second annual meeting of
stockholders held after the IPO; the term of office of the third class, which
class shall initially consist of two directors, to expire at the third annual
meeting of stockholders held after the IPO; and thereafter for each such term to
expire at each third succeeding annual meeting of stockholders held after such
election.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
-------------------------------------------------------
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his successor is elected and qualified or
until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign at any time upon written notice to the attention of
the Secretary of the corporation. When one or more directors shall resign from
the board of directors, effective at a future date, a majority of the directors
then in office, including those who have so resigned, shall have power to fill
such vacancy or vacancies, the vote thereon to take effect when such resignation
or resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
-7-
<PAGE>
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by such
class or classes or series thereof then in office, or by a sole remaining
director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the Delaware General Corporation Law.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the Delaware
General Corporation Law as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of such board of directors, or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting pursuant to this section shall constitute
presence in person at the meeting.
3.6 REGULAR MEETINGS
----------------
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
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<PAGE>
3.7 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by email or by first-class
mail or telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or by telegram or by email, it shall be delivered
personally or by telephone or to the telegraph company at least forty-eight (48)
hours before the time of the holding of the meeting. Any oral notice given
personally or by telephone may be communicated either to the director or to a
person at the office of the director who the person giving the notice has reason
to believe will promptly communicate it to the director. The notice need not
specify the purpose or the place of the meeting, if the meeting is to be held at
the principal executive office of the corporation.
3.8 QUORUM
------
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute, the certificate of incorporation, or
these bylaws. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.9 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the Delaware
General Corporation Law, the certificate of incorporation, or these bylaws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when such person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
directors, or members of a committee of directors, need be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these bylaws.
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<PAGE>
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.11 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
3.12 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of its
subsidiaries, including any officer or employee who is a director of the
corporation or its subsidiaries, whenever, in the judgment of the directors,
such loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors; provided, however, that, so long
as stockholders of the corporation are entitled to cumulative voting, if less
than the entire board is to be removed, no director may be removed without cause
if the votes cast against his removal would be sufficient to elect such director
if then cumulatively voted at an election of the entire board of directors or,
if there be classes of directors, at an election of the class of directors of
which such director is a part.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
-10-
<PAGE>
ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors, or in the bylaws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers that may require it; but
no such committee shall have the power or authority (i) approving or adopting
or recommending to the stockholders, any action or matter expressly required by
the Delaware General Corporation Law to be submitted to stockholders for
approval or (ii) adopting, amending, or repealing any bylaws of the corporation;
and, unless the board resolution establishing the committee, the bylaws or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the Delaware General Corporation Law.
4.2 COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.6 (regular meetings),
Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9
(waiver of notice), and Section 3.10 (action without a meeting), with such
changes in the context of those bylaws as are necessary to substitute the
committee and its members for the board of directors and its members; provided,
however, that the time of regular meetings of committees may be determined
either by resolution of the board of directors or by resolution of the
committee, that special meetings of committees may also be called by resolution
of the board of directors and that notice of special meetings of committees
shall also be given to all alternate members, who shall have the right to attend
all meetings of the committee. The board of directors
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<PAGE>
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
ARTICLE V
OFFICERS
--------
5.1 OFFICERS
--------
The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of the
board of directors, a chairman of the board, a treasurer, one or more vice
presidents, one or more assistant vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and any such other officers as
may be appointed in accordance with the provisions of Section 5.3 of these
bylaws. Any number of offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
-----------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be appointed by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
--------------------
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES
------------------------------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
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Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.5 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to the
chairman of the board by the board of directors or as may be prescribed by these
bylaws. If there is no president and no one has been appointed chief executive
officer, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.6 of these bylaws.
5.6 CHIEF EXECUTIVE OFFICER
-----------------------
The board of directors shall select a chief executive officer of the
corporation who shall be subject to the control of the board of directors and
have general supervision, direction and control of the business and the officers
of the corporation. The chief executive officer shall preside at all meetings of
the stockholders and, in the absence or nonexistence of a chairman of the board,
at all meetings of the board of directors.
5.7 PRESIDENT
---------
The president shall have the general powers and duties of management
usually vested in the office of president of a corporation and shall have such
other powers and duties as may be prescribed by the board of directors or these
bylaws. In addition and subject to such supervisory powers, if any, as may be
given by the board of directors to the chairman of the board, if no one has been
appointed chief executive officer, the president shall be the chief executive
officer of the corporation and shall, subject to the control of the board of
directors, have the powers and duties described in Section 5.6.
5.8 VICE PRESIDENTS
---------------
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.9 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized
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<PAGE>
and the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. The secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
-----------------------
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the board of directors. The chief financial officer shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all his transactions as chief financial officer and of the financial condition
of the corporation, and shall have other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
The chief financial officer shall be the treasurer of the corporation
unless the board of directors appoints some one other than the chief financial
officer to be the treasurer of the corporation.
5.11 ASSISTANT SECRETARY
-------------------
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as may be
prescribed by the board of directors or these bylaws.
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<PAGE>
5.12 ASSISTANT TREASURER
-------------------
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the chief financial officer or in the event of his or
her inability or refusal to act, perform the duties and exercise the powers of
the chief financial officer and shall perform such other duties and have such
other powers as may be prescribed by the board of directors or these bylaws.
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
5.14 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
---------
6.1 THIRD PARTY ACTIONS
-------------------
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the corporation, which approval shall not be unreasonably
withheld) actually and reasonably incurred by such person in connection with
such action, suit or proceeding if 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 corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to
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believe such person's conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
----
contendere or its equivalent, shall not, of itself, create a presumption that
- ----------
the person did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interest of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that the person's conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
---------------------------------------------
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) and amounts paid in settlement (if such settlement is approved in advance
by the corporation, which approval shall not be unreasonably withheld) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. Notwithstanding any other
provision of this Article VI, no person shall be indemnified hereunder for any
expenses or amounts paid in settlement with respect to any action to recover
short-swing profits under Section 16(b) of the Securities Exchange Act of 1934,
as amended.
6.3 SUCCESSFUL DEFENSE
------------------
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
6.4 DETERMINATION OF CONDUCT
------------------------
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court)
shall be made by the corporation only as authorized in the specific case upon a
determination that the indemnification of the director, officer, employee or
agent is proper in the circumstances because such person has met the applicable
standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall
be made (1) by the Board of Directors or the Executive Committee by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding or (2) or if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by
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<PAGE>
independent legal counsel in a written opinion, or (3) by the stockholders.
Notwithstanding the foregoing, a director, officer, employee or agent of the
Corporation shall be entitled to contest any determination that the director,
officer, employee or agent has not met the applicable standard of conduct set
forth in Sections 6.1 and 6.2 by petitioning a court of competent jurisdiction.
6.5 PAYMENT OF EXPENSES IN ADVANCE
------------------------------
Expenses incurred in defending a civil or criminal action, suit or
proceeding, by an individual who may be entitled to indemnification pursuant to
Section 6.1 or 6.2, shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
-----------------------
The indemnification and advancement of expenses provided by or granted
pursuant to the other sections of this Article VI shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
6.7 INSURANCE INDEMNIFICATION
-------------------------
The corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of this
Article VI.
6.8 THE CORPORATION
---------------
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under and subject to the provisions of this Article VI (including,
without limitation the provisions of Section 6.4) with respect to the resulting
or surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.
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<PAGE>
6.9 EMPLOYEE BENEFIT PLANS
----------------------
For purposes of this Article VI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
-----------------------------------------------------------
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive officer or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent so to act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
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The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 CHECKS
------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
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8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
--------------------------------------
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if such person were
such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock
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a statement that the corporation will furnish without charge to each stockholder
who so requests the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
8.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS
---------
The directors of the corporation, subject to any restrictions contained in
(i) the Delaware General Corporation Law or (ii) the certificate of
incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
----
The corporation may adopt a corporate seal, which shall be adopted and
which may be altered by the board of directors, and may use the same by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
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8.10 TRANSFER OF STOCK
-----------------
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
-------------------------
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the Delaware General Corporation Law.
8.12 REGISTERED STOCKHOLDERS
-----------------------
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
Subject to the provisions of the corporation's certificate of
incorporation, the bylaws of the corporation may be adopted, amended or repealed
by the stockholders entitled to vote; provided, however, that the corporation
may, in its certificate of incorporation, confer the power to adopt, amend or
repeal bylaws upon the directors. The fact that such power has been so conferred
upon the directors shall not divest the stockholders of the power, nor limit
their power to adopt, amend or repeal bylaws.
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CERTIFICATE OF ADOPTION OF
RESTATED BYLAWS
OF
RUDOLPH TECHNOLOGIES, INC.
Certificate by Secretary
------------------------
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Rudolph Technologies, Inc. and that the foregoing
Restated Bylaws, comprising twenty-two (22) pages, were adopted as the Restated
Bylaws of the corporation on October ___, 1999 by the board of directors of the
corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this ___th day of October, 1999.
______________________________
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EXHIBIT 10.1
LICENSE AGREEMENT
-----------------
This Agreement, effective this 28th day of June, 1995, ("Effective Date"),
by and between BROWN UNIVERSITY RESEARCH FOUNDATION ("BURF" or "LICENSOR"), a
corporation duly organized and existing under the laws of the State of Rhode
Island and having a principal office at 42 Charlesfield Street, Providence,
Rhode Island 02912 and RUDOLPH RESEARCH CORPORATION ("Rudolph Research" or
"LICENSEE"), a New Jersey corporation having its principal office at One Rudolph
Road, Flanders, New Jersey.
WHEREAS, BURF is the owner of U.S. Patent Number 4,710,030 and certain
other inventions and proprietary information related to the measurement of the
properties of thin films and surface characteristics; and
WHEREAS, Rudolph Research is the owner of, inter alia, automated
----- ----
semiconductor metrology automation platforms (FE-III, FE-IV) including, an
automatic microscope, auto height, tilt optics platform, automated wafer
handling robotics and control system with proprietary software, operation
interface, pattern recognition system SECS-II/GEM system, data mapping system,
data review system and recipe system, with attendant know-how, process
technology and related software; and
WHEREAS, Rudolph Research has expertise in the production, sales,
marketing, manufacture and support of technology to industry of instruments for
the measurement of surface characteristics; and
WHEREAS, BURF desires to have its patents, inventions and proprietary
information used in the public interest and desires to grant a license thereto
on the terms set forth below; and
WHEREAS, LICENSEE desires to obtain a license for such patents, inventions
and proprietary information rights upon the terms and conditions set forth
below;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
-----------------------
For the purpose of this Agreement, the following words and phrases shall
have the following meanings:
1.1 "AFFILIATE" shall mean a corporation or other business entity
controlled by, controlling or under common control with, a party hereto. For
this purpose, control of a corporation or other business entity shall mean
direct or indirect beneficial ownership of thirty (30%) percent or more of the
voting interest in, or a thirty (30%) percent or greater interest in the equity
of, such corporation or other business entity.
<PAGE>
1.2 "CONFIDENTIAL INFORMATION" shall mean all information related to the
subject of this License Agreement or to the Intellectual Property which is
disclosed by one party to the other, to the extent that such information, as of
the date of disclosure, is not: (a) known to the receiving party; (b) disclosed
in published literature; (c) generally available to industry; (d) obtained by
the receiving party from a third party without binder or secrecy, provided,
however, that such third party has no confidentiality obligations to the
disclosing party or to any of its AFFILIATES relating to the disclosed
information; or (e) the information is later made public through sources not
related to BURF or Rudolph Research. CONFIDENTIAL INFORMATION shall also
include Rudolph Research's technology, know-how, proprietary information,
including lists of customers, trade information, sales and service information.
1.3 "FIRST COMMERCIAL SALE" shall mean the initial transfer by Licensee,
its AFFILIATE or sublicensee, to an unrelated third party of LICENSED PRODUCT
subject to royalties hereunder for commercial use and not for research,
development or testing purposes.
1.4 "LICENSED PRODUCT" shall mean any instrument system, device, software,
protocol, or service which is based on or incorporates any claim of the PATENT
RIGHTS or the claims of inventions listed on Exhibit A or Exhibit B and is part
of the initial instrument system sold to end-users, or provides upgraded
capabilities with respect to the PATENT RIGHTS. "LICENSED PRODUCT" shall not,
however, include: (i) replacement parts provided or sold to end-users after the
initial system is delivered; (ii) all software provided after delivery which
does not provide additional functional capabilities which incorporates the
claims of the PATENT RIGHTS; (iii) software upgrades or revisions which do not
provide additional functional capabilities which incorporates the claims of the
PATENT RIGHTS; (iv) service and maintenance of hardware and/or software and
peripherals to the system. For purposes of this Agreement, a product shall be
deemed a LICENSED PRODUCT if such product is covered, in whole or in part, by at
least one PATENT RIGHT in one country, whether or not that product is made, used
or sold within that country. For example, an instrument system that
incorporates one of the claims of U.S. Patent 4,710,030 would be a LICENSED
PRODUCT and would be subject to a royalty payment if sold in Japan, even though
there is no issued patent in Japan.
1.5 "NET SALES" shall mean the gross sales collected from unrelated third
party customers, anywhere in the world, by LICENSEE, and its AFFILIATES, and
sublicensees for LICENSED PRODUCTS, less the sum of (a) transportation,
insurance, and handling charges; (b) sales, excise turnover and similar taxes
and any duties and other governmental charges imposed upon the production,
importation, use or sale of such LICENSED PRODUCTS and (c) any returns. For
purposes of this definition, LICENSED PRODUCTS shall be considered sold when
paid in full by customer other than LICENSEE'S AFFILIATE. Rudolph Research
will, however, pay to LICENSOR a portion of royalties after Rudolph Research
receives at least seventy (70%) percent of the total purchase price from its
customer for LICENSED PRODUCT. The portion paid to BURF shall be the same
percentage as the percentage of the purchase price paid to Rudolph Research.
1.6 "PATENT RIGHTS" shall mean (a) United States patent number 4,710,030;
(b) all United States and foreign patents based upon United States Patent Number
4,710,030 and inventions which are patented and listed in Exhibit A or Exhibit B
hereto; (c) any additions, continuations, continuations-in-part, divisions,
reissues or renewals and extensions based thereon; and (d) all United States and
foreign patent and other industrial property rights obtained from any of said
United States or foreign patents applications, and reissues and extensions
thereof.
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<PAGE>
1.7 "OTHER INTELLECTUAL PROPERTY RIGHTS" shall mean the technology, know-
how, processes or intellectual property not listed on Exhibit A and/or Exhibit B
which results from: (i) work undertaken only by Rudolph Research during the
commercialization of the PATENT RIGHTS; (ii) work by BURF/BROWN personnel during
consulting for Rudolph Research; and (iii) work by Rudolph Research consultants
or personnel. OTHER INTELLECTUAL PROPERTY RIGHTS shall be the property of
Rudolph Research. Exhibit B shall contain a list of any "jointly owned
inventions" by BURF and Rudolph Research. A "jointly owned invention" shall be
patented technology which has been invented by the joint efforts of BURF and
Rudolph Research where each party has been materially responsible for an
integral portion of the resulting invention. BURF shall, at its option, bring
inventions to Rudolph Research which relate or have reference to the PATENT
RIGHTS. The parties shall then mutually determine whether the invention, when
patented, should be part of Exhibit A or Exhibit B.
1.8 "RESEARCH AGREEMENT" shall mean the Agreement entered into _________,
1995 by and between Rudolph Research and Brown University for the support of
research in Professor Maris' laboratory.
ARTICLE 2 - GRANT
-----------------
2.1 Grant. BURF hereby grants to LICENSEE, subject to the terms herein
-----
recited, the exclusive, nontransferable (except as provided in Article 9 herein)
perpetual, royalty bearing, worldwide right and license under the PATENT RIGHTS
with the right to grant sublicenses, to make, have made, use, sell and
distribute (directly or indirectly through third parties) LICENSED PRODUCTS.
2.2 License to U.S. Government. This Agreement is expressly subject to and
--------------------------
conditional upon the license(s) granted by BURF to the United States Government,
which licenses are nonexclusive, nontransferable, irrevocable and paid-up
license(s) to practice, on behalf of the United States Government, specific
subject inventions. True copies of the license(s) referred to by this paragraph
are annexed as Exhibit C. These licenses shall not diminish the specific
commercial opportunities Rudolph Research has advised BURF are critical to
Rudolph Research's investment in the commercialization of the technology that is
the subject matter of this License Agreement.
2.3 Reservation of Research Rights. Anything to the contrary
------------------------------
notwithstanding, BURF reserves the right to use the PATENT RIGHTS and
CONFIDENTIAL INFORMATION for its own research and educational purposes. The
"educational purposes" herein referred to shall include BURF working with
commercial entities to analyze samples. BURF shall not, however, make use of
any of the PATENT RIGHTS, in whole or in part, for any commercial purpose,
without the prior written approval of Rudolph Research. LICENSEE may refuse to
grant such rights and/or require BURF to pay LICENSEE royalties to obtain such
rights.
-3-
<PAGE>
ARTICLE 3 - ROYALTIES
---------------------
3.1 License Fee. LICENSEE shall pay BURF a license issue fee of ***
-----------
upon signing this Agreement.
3.2 Royalties. Beginning with the First Commercial Sale and subject to
---------
the terms hereof, LICENSEE agrees to pay to BURF, as partial consideration for
the rights granted under this Agreement, a royalty of *** . Royalties shall only
be paid on inventions which are then subject to a valid and existing U.S. patent
and which are listed on Exhibits A or B. *** .
3.3 Royalty Period and Territory. The obligation to pay royalties under
----------------------------
Section 3.2 shall continue, as to each U.S. patent, throughout the world, until
the date of expiration of that U.S. patent as incorporated in the PATENT RIGHTS
or on Exhibit A or Exhibit B.
3.4 Payment. Royalties will be due and payable within forty-five (45)
-------
days of the end of each calendar quarter. Royalty and fee payments shall be made
in United States dollars in Providence, Rhode Island. Exchange rates applied
will be the closing buying rates quoted by the Wall Street Journal on the last
business day of the applicable calendar quarter. In the event any royalty
payment due is not made when due, and is still not paid after written notice by
BURF to Rudolph Research that the payment is due, then the amount due shall
accrue interest from the due date at an annual rate equal to the prime rate
charged by Chase Bank compounded annually.
3.5 Maintenance Fee. *** .
---------------
ARTICLE 4 - REPORTS AND RECORDS
-------------------------------
4.1 Reports. LICENSEE shall, upon the written request of BURF, report to
-------
BURF on its efforts to bring the PATENT RIGHTS into broad commercial use and
shall provide copies of all sublicenses granted. These reports shall not be
required more often than quarterly and shall be in summary form. At the time of
each royalty payment, LICENSEE shall provide a report of the activities subject
to royalty payments hereunder in the form attached hereto and made part hereof
as Exhibit D. Rudolph Research shall, however, on each anniversary of the
execution of this License Agreement, file a written report with BURF on the
status of its efforts to commercialize the PATENT RIGHTS.
________________________________________________________________________________
*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
________________________________________________________________________________
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<PAGE>
4.2 Records. LICENSEE and its sublicensees shall keep complete and
-------
accurate books of account containing all particulars which may be reasonably
necessary for the purpose of showing the royalties payable to BURF. Books of
account shall be kept at LICENSEE'S principal place of business or the principal
place of business of a division of LICENSEE which is marketing LICENSED
PRODUCTS. Books and particulars shall be available during normal business hours,
upon reasonable notice, for two (2) years following the end of the calendar year
to which they pertain, for inspection by an independent certified public
accountant retained by BURF and reasonably acceptable to LICENSEE for the
purpose of verifying LICENSEE royalty statements. Inspection shall be limited
solely to those records directly related to LICENSEE royalty obligations under
this Agreement.
4.3 Audit Costs. If an audit conducted on behalf of BURF pursuant to
-----------
Section 4.2 reveals that LICENSEE has made an error of ten (10%) percent or more
in its favor in any payment due BURF, LICENSEE shall be obligated to pay the
audit fee in connection with the audit, but LICENSEE shall not pay an audit fee
that exceeds eight hours of audit time by an account manager level auditor.
4.4 Marking. LICENSEE and its sublicensees agree to mark all LICENSED
-------
PRODUCTS sold in the United States with all applicable U.S. patent numbers. All
LICENSED PRODUCTS shipped to or sold in other countries shall be marked in such
a manner as to conform with the patent laws and practice of the country to which
such products are shipped or in which such products are sold.
ARTICLE 5 - PATENT PROSECUTION AND ENFORCEMENT
----------------------------------------------
5.1 Applications. For so long as this Agreement shall be in effect, BURF
------------
hereby authorizes LICENSEE, and LICENSEE shall, in the name of BURF, at
LICENSEE'S expense, apply for and seek prompt issuance of, and upon issuance,
shall maintain during the Term of this Agreement, patents worldwide as described
in the PATENT RIGHTS, on Exhibit A and on Exhibit B. LICENSEE shall apply all
reasonable efforts to obtain broad patent claims. BURF hereby agrees to take
all actions necessary to cooperate with and assist LICENSEE in the filing and
prosecution of such patent applications. LICENSEE shall keep BURF informed as
to the status of such patent applications including providing BURF with copies
of all written communications with the patent offices and consulting with BURF
on responses to the patent offices in advance of submission. The filing,
continued prosecution and maintenance of patent applications, patents, and
PATENT RIGHTS shall, after consultation with BURF, be within the discretion of
LICENSEE provided, however, if LICENSEE in its discretion elects not to file, or
decides to discontinue prosecution of such patent applications or to discontinue
to maintain a patent which is owned or controlled by BURF, BURF may do so at its
own expense. If LICENSEE decides not to maintain patent applications, patents,
or PATENT RIGHTS already in existence, LICENSEE will give BURF at least ninety
(90) days prior written notice before any expiration date for response or action
required by the U.S. Patent Office or any foreign patent office. LICENSEE will
provide BURF with reasonable cooperation in the maintenance of such patent
applications, patents, or PATENT RIGHTS. BURF shall, however, at its sole
expense, prior to the execution of this Agreement, or as soon thereafter as
possible, file for a United States patent for the Ion Implant measurement by
-5-
<PAGE>
picosecond pulse technology. Subsequent prosecution of the patent for Ion
Implant shall be subject to the provisions of this Paragraph 5.1.
5.2 Inventions Funded By Licensee. All inventions, know-how, process
-----------------------------
technology which is currently the property of Rudolph Research, or in the future
becomes the property of Rudolph Research, shall remain the sole property of
Rudolph Research. Rudolph Research hereby grants to BURF a nontransferable,
royalty-free license to use technology resulting from the License Agreement for
research and academic purposes, but not for any commercial use.
5.3 Enforcement. BURF and LICENSEE shall each give immediate notice to
-----------
the other of any infringement of PATENT RIGHTS by third parties which may come
to their attention. BURF hereby grants LICENSEE, at LICENSEE'S expense, the
right to institute and conduct such legal action against third party infringers
of the PATENT RIGHTS, or enter into such settlement agreements, as are deemed
appropriate by LICENSEE. The benefits of any action taken by LICENSEE shall
first be applied to reimbursing LICENSEE'S reasonable expenses for such action
and then shall be divided equally between BURF and LICENSEE. In any such action,
LICENSEE shall be entitled to join BURF as a party plaintiff and BURF will be
obligated to reasonably assist LICENSEE. Should LICENSEE fail to commence
actions or proceedings against infringers of the PATENT RIGHTS within sixty (60)
days of receiving written notice thereof from BURF, then BURF shall initiate and
pursue such action. If BURF fails to take such action within sixty (60) days of
receiving written notice from LICENSEE, LICENSEE shall again have such right and
authority to take such actions as set forth in this Section 5.
5.4 Additional Intellectual Property. Intellectual Property developed
--------------------------------
subsequent to the effective date of this Agreement shall be the property of the
developing party. Intellectual Property developed solely by Rudolph Research
personnel, agents, or consultants, including Professor Maris when he is acting
as a consultant, shall be outside the scope of this Agreement and may be
exploited without accounting to BURF. Intellectual Property developed under the
RESEARCH AGREEMENT between Rudolph Research and Brown University shall be
treated as set forth in the RESEARCH AGREEMENT and shall be added from time to
time to Exhibit A or B hereto as appropriate. Intellectual Property developed
jointly by Brown and Rudolph Research personnel but not under the RESEARCH
AGREEMENT as, for example, during the course of technology transfer shall be
jointly owned and shall be added to Exhibit B as appropriate. Intellectual
Property developed by Brown independent of the RESEARCH AGREEMENT may, at the
discretion of Brown, be offered to Rudolph Research for inclusion in Exhibit A.
Anything to the contrary notwithstanding, if during the course of prosecution of
patent applications on inventions listed in Exhibit A, any additions,
continuations, continuations-in-part or other modifications of the original
application are made which involve Rudolph Research personnel, agents or
consultants, the inclusion of such personnel, agents or consultants as inventors
will not serve to change the ownership of such patent application from solely
BURF to jointly owned and will not result in any transfer of such Intellectual
Property from Exhibit A to Exhibit B.
-6-
<PAGE>
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES
------------------------------------------
6.1 Utilization. LICENSEE will use its best efforts to exploit the PATENT
-----------
RIGHTS so that utilization will result therefrom.
6.2 Authority. Each party represents and warrants that it has the right
---------
and authority to enter this Agreement.
6.3 Exceptions. Nothing in this Agreement shall be construed as:
----------
(A) conferring rights on BURF to use in advertising, publicity or
otherwise the name of LICENSEE or of its employees, AFFILIATES or sublicensees
without the prior written approval of LICENSEE; and
(B) conferring rights on LICENSEE to use in advertising or publicity
the name of "Brown University", "Brown University Research Foundation" or their
employees without the prior written approval of BURF.
6.4 Representations and Warranties of BURF. BURF represents and warrants
--------------------------------------
to LICENSEE that:
(i) Patent number 4,710,030 is a valid current patent in good
standing;
(ii) BURF is the sole owner of Patent number 4,710,030 and has not
assigned or diminished its rights in the patent by any agreements or
undertakings not set forth herein;
(iii) BURF is, at the date of execution of this Agreement, not aware
of any infringements, claims of infringements, threatened claims of
infringements and/or challenges to all or any claims made under the patent;
(iv) BURF is not aware of any prior claims made by anyone under the
patent;
(v) BURF has full right, title, power and authority to enter into
this Agreement and to comply with the commitments made in this agreement both
now and in the future;
(vi) BURF has no knowledge of any impediments, legal or otherwise,
that would impede, diminish or defeat the full enjoyment of rights sought by
Rudolph Research pursuant to this Agreement; and
(vii) these warranties by BURF shall be continuing and shall survive
termination of this Agreement.
6.5 Disclaimer. EXCEPT AS EXPRESSLY PROVIDED HEREIN, BURF MAKES NO
----------
REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. THE PARTIES ACKNOWLEDGE THAT THIS AGREEMENT
IS NOT A CONSUMER TRANSACTION.
ARTICLE 7 - TERM AND TERMINATION
--------------------------------
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<PAGE>
7.1 Term. The Term of this Agreement shall run from the date of execution
----
of this License Agreement until the date of expiration of the last patent listed
on Exhibits A, B or the PATENT RIGHTS, or unless sooner terminated by virtue of
Article 7.
7.2 Bankruptcy. If LICENSEE undergoes a liquidation in bankruptcy, or
----------
files a petition for liquidation in bankruptcy, or a receiver, trustee or
assignee for the benefit of creditors, is appointed, whether by the voluntary
act of LICENSEE or otherwise, and if LICENSEE fails to terminate any such
proceeding within one hundred twenty (120) days after its commencement, BURF may
at its election terminate this Agreement upon thirty (30) days written notice to
LICENSEE. LICENSEE agrees to provide written notice to BURF of LICENSEE'S or
third party's intention to file a petition for liquidation of LICENSEE in
bankruptcy prior to such filing, if known.
7.3 Failure to Pay Royalties. Should LICENSEE fail in its payment to BURF
------------------------
of royalties which are due in accordance with the terms of this Agreement, BURF
shall serve notice upon LICENSEE by certified mail at an address designated in
Article 11 hereof, of its intention to terminate this Agreement within ninety
(90) days after receipt of said notice of termination unless LICENSEE shall pay
BURF within this ninety (90) day period. If LICENSEE has not paid all royalties
which are due and payable within such ninety (90) day period, the rights,
privileges and license granted hereunder shall terminate at the end of the
ninety (90) day period. If the amount of royalties due is contested by LICENSEE,
the rights, privileges and license granted hereunder shall terminate ninety (90)
days after the resolution of such dispute, but only if the amount due still
remains unpaid at the end of such ninety (90) day period. In the event that
royalties are due after the resolution of such dispute the amount due shall
accrue interest at the average prime rate per annum compounded annually from the
date such amount was due until the amount is paid in full.
7.4 Material Breach. Upon any material breach by LICENSEE, BURF shall have
---------------
the right to terminate this Agreement and the rights and license granted
hereunder by ninety (90) days notice by certified mail to LICENSEE. Such
termination shall become effective at the end of such ninety (90) day period
unless LICENSEE has cured any such material breach prior to the expiration of
the ninety (90) day period.
7.5 Termination by Licensee. LICENSEE may terminate this Agreement upon
-----------------------
ninety (90) days' notice by certified mail to BURF.
7.6 Obligations on Termination. Upon termination of this Agreement for any
--------------------------
reason, nothing herein shall be construed to release either party of any
obligation which matured prior to the effective date of such termination, and
LICENSEE may, after the effective date of such termination, complete LICENSED
PRODUCTS in the process of manufacture at the time of such termination and sell
the same together with LICENSED PRODUCTS in inventory for a period of six
months, provided that LICENSEE pays to BURF royalties as required by Article 3
of this Agreement and submits the reports required by Article 4. Nothing
contained herein shall prevent or impede Rudolph Research from satisfying
existing contractual commitments at the effective date of termination, or to
prevent Rudolph Research from servicing, maintaining and upgrading software,
specifically related to the LICENSED PRODUCT, of existing customers for a period
of not more than one (1) year from the effective date of termination.
7.7 Survival. Articles 5; 6; 8 and 13.2 shall survive termination of this
--------
Agreement as well as the right of BURF to collect any accrued royalties as
recited in Article 3.
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<PAGE>
ARTICLE 8 - INDEMNIFICATION AND INSURANCE
-----------------------------------------
8.1 Indemnification.
---------------
(a) LICENSEE shall indemnify, defend and hold harmless BURF and BROWN
and their current or former directors, trustees, officers, faculty, professional
staff, employees, students, and agents and their respective successors, heirs
and assigns (the "Indemnitees"), against any liability, damage, loss or expenses
(including reasonable attorneys' fees and expenses of litigation) incurred by or
imposed upon the Indemnitees or any one of them in connection with any claims,
suits, actions, demands or judgments arising out of any commercial usage of the
PATENT RIGHTS by Rudolph Research under any theory of product liability
(including, but not limited to, actions in the form of tort, warranty, or strict
liability) concerning any product, process or service made, used or sold
pursuant to any right or license granted under this Agreement.
(b) LICENSEE agrees, at its own expense, to provide attorneys to
defend against any actions brought or filed against any party indemnified
hereunder with respect to the subject of indemnity contained herein, whether or
not such actions are rightfully brought. LICENSEE shall choose the attorneys and
shall have full control of the prosecution or defense of the litigation,
settlement, appeals or the like. The indemnitees shall render any reasonable
assistance and provide any information requested by LICENSOR, or shall forfeit
their right to be indemnified by Rudolph Research.
8.2 Insurance. LICENSEE shall maintain appropriate insurance coverage in
---------
order to carry out the terms of this License Agreement; including product
liability insurance, workers' compensation insurance and appropriate insurance
for negligent injury to persons or property.
8.3 Sublicense. LICENSEE shall require all of its sublicenses hereunder to
----------
carry insurance under the same terms as Section 8.2 and to be bound by the same
form of indemnification set forth in Section 8.1.
ARTICLE 9 - ASSIGNMENT
----------------------
9.1 BURF agrees that its rights and obligations under this Agreement may
not be transferred or assigned without the prior written consent of LICENSEE.
LICENSEE may assign or otherwise transfer this Agreement and the license granted
hereby and the rights acquired by it hereunder only if such assignment or
transfer is accompanied by a sale or other transfer of LICENSEE'S entire
business to which the license granted hereby relates; provided that any such
assignee or transferee has agreed in writing to be bound by the terms and
provisions of this Agreement. Upon such assignment or transfer and agreement by
such assignee or transferee, the term LICENSEE as used herein shall include such
assignee or transferee.
ARTICLE 10 - EXPORT REQUIREMENTS
--------------------------------
10.1 License to Export. Any and all licenses, permits or other governmental
-----------------
approvals for the export of materials, data, know-how, and the like carried out
under this Agreement by LICENSEE shall be the responsibility of LICENSEE.
ARTICLE 11 - PAYMENTS, NOTICES AND COMMUNICATIONS
-------------------------------------------------
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<PAGE>
11.1 Any payment, notice or other communication pursuant to this Agreement
shall be sufficiently made or given on the date of mailing if sent to such party
by certified, first class mail, postage prepaid, addressed to it at its address
below or as it shall designate by written notice given to the other party:
In the case of BURF: William M. Jackson, Ph.D.,
President
Brown University Research Foundation
42 Charlesfield Street
Box 1949
Providence, Rhode Island 02912
In the case of Licensee: Richard Spanier, Ph.D.
President
Rudolph Research Corporation
One Rudolph Road
P.O. Box 1000
Flanders, New Jersey 07836
Copy to: Theodore Margolis, Esq.
c/o Hannoch Weisman
4 Becker Farm Road
Roseland, New Jersey 07068
ARTICLE 12 - BURF SUPPORT
------------------------
12.1 Support By BURF. BURF shall render to Rudolph Research all reasonable
---------------
support and assistance to facilitate the purposes of this Agreement. BURF shall
list, on Exhibit E, all documentation, drawings or other materials to be
provided by BURF to Rudolph Research to efficiently effectuate the purposes of
this License Agreement.
12.2 Secrecy By BURF. BURF shall consider the work undertaken by this
---------------
Agreement as a Rudolph Research trade secret. BURF shall not divulge, without
the prior written permission of Rudolph Research, any information on the
Project. BURF shall require its employees, contractors and consultants to
maintain and respect Rudolph Research's trade secrets and to execute writings
satisfactory by Rudolph Research to memorialize such undertakings. The fact of
the existence of the License Agreement is not a trade secret.
12.3 Notice of Indemnification. In the event either party is seeking
-------------------------
indemnification under this Agreement, such party agrees to: (i) promptly inform
the indemnifying party of any claim, suit or demand threatened or filed; (ii)
permit the indemnifying party to assume direction and control of the defense of
any litigation or claims resulting therefrom (including the right to settle with
the third party); and (iii) cooperate, as requested, in the defense of the
claim, at the expense of the indemnifying party.
ARTICLE 13 - MISCELLANEOUS PROVISIONS
-------------------------------------
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<PAGE>
13.1 Limitation of Liability. Neither party shall be liable to the other
-----------------------
for any special, consequential, incidental or indirect damages arising out of
this Agreement, however caused, under any theory of liability, except for
tortious injuries to persons.
13.2 Governing Law. This Agreement shall be construed, governed,
-------------
interpreted and applied in accordance with the laws of the State of New Jersey,
except that questions affecting construction and effect of any patent shall be
determined by the law of the country in which the patent was granted.
13.3 Entire Agreement. The parties hereto acknowledge that this instrument
----------------
sets forth the entire agreement and understanding of the parties hereto as to
the subject matter hereof, and shall not be subject to any change or
modification except by the execution of a written instrument subscribed to by
the parties hereto. The Exhibits are incorporated and made part of this
Agreement.
13.4 Severability. The provisions of this Agreement are severable, and in
------------
the event that any provisions of this Agreement are determined to be invalid or
unenforceable under any controlling body of law, such invalidity or
enforceability shall not in any way affect the validity or enforceability of the
remaining provisions hereof.
13.5 Counterparts. This Agreement may be executed in counterparts. Such
------------
counterparts taken together shall constitute a fully-executed agreement.
13.6 Descriptive Headings. The descriptive headings of this Agreement are
--------------------
for convenience only and shall be of no force or effect in construing or
interpreting any of the provisions of this Agreement.
13.7 Force Majeure. Neither party shall be liable to the other for loss or
-------------
damage or for any default or delay attributable to any act of God, flood, fire,
explosion, shortage of raw materials, casualty or accident, war, civil unrest,
acts of public enemies, blockades or embargo, acts of government, labor unrest,
or any other cause beyond the reasonable control of such party, if the party
affected shall give prompt notice of any such cause to the other party. The
party giving such notice shall thereupon be excused from such of its obligations
hereunder for so long as it is so disabled and for thirty (30) days thereafter.
BROWN UNIVERSITY RESEARCH RUDOLPH RESEARCH CORPORATION
FOUNDATION
By /s/ William M. Jackson By /s/ Richard Spanier
---------------------- --------------------------------
Title: President Title: President
------------------ ----------------------------
Date: June 28, 1995 Date: August 15, 1995
------------------- -----------------------------
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<PAGE>
EXHIBIT A
---------
This Exhibit is incorporated in and made part of a License Agreement
between BURF and Rudolph Research, dated June 28, 1995.
1. Pursuant to Paragraph 1.6 of the Agreement, the following is a list of
all U.S. and foreign applications based upon the following inventions
(a) U.S. Patent 4,710,030, Optical generator and detector of stress
pulses.
(b) U.S. Patent 5,706,094, Ultrafast optical technique for the
characterization of altered materials
(c) U.S. Patent 5,864,393, Optical method for the determination of
stress in thin films.
(d) U.S. Patent 5,748,317, Apparatus and method for characterizing
thin film and interfaces using an optical heat generator and
detector.
(e) U.S. Patent 5,748,318, Optical stress generator and detector.
(f) U. S. Patent 5,844,684, Optical method for determining the
mechanical properties of a material.
<PAGE>
EXHIBIT B
---------
This Exhibit is incorporated in and made part of a License Agreement
between BURF and Rudolph Research, dated June 28, 1995.
1. The jointly-owned inventions by BURF and Rudolph Research are as
follows:
(a)
(b)
(c)
<PAGE>
EXHIBIT C
---------
This Exhibit is incorporated in and made part of a License Agreement
between BURF and Rudolph Research, dated June 28, 1995.
1. The License(s) referred to in Paragraph 2.2 are annexed hereto.
<PAGE>
LICENSE TO THE UNITED STATES GOVERNMENT
This instrument confers to the United States Government, as represented by
the National Science Foundation, a non-exclusive, nontransferable, irrevocable,
paid-up license to practice or have practiced on its behalf throughout the world
the following subject invention:
Invention Title: Laser System to Measure Acoustical Mechanical
Properties of Thin Films
Inventor(s): H. Maris, J. Tauc, C. Thompson
Patent No.: 4,710,030
Title: Optical Generator and Detector of Stress
Filing Date: May 17, 1985
Country, if other than the U.S.:
This license will extend to all divisions or continuations of the patent
application and all patents or re-issues which may be granted thereon.
This subject invention was made with government support from Grant/Contract
No. DMR-8216726 awarded by the National Science Foundation.
Principal rights to this subject invention have been left with the
LICENSOR: Brown University subject to the provisions of Title 35 USC 200-212, 37
CFR 401, and 45 CFR 8.
Signed: /s/ William M. Jackson Date: June 20, 1995
---------------------- ------------------------
Typed Name: William M. Jackson
Title: President, Brown University Research Foundation
Seal:
<PAGE>
EXHIBIT 10.2
DISTRIBUTOR AGREEMENT
---------------------
This Agreement made and entered into this 15th day of May, 1987, by and
between Tokyo Electron Limited, a Japanese corporation organized and existing
under the laws of Japan with its principal place of business located at
Shinjuku-Nomura Bldg., 1-26-2 Nishi-Shinjuku, Shinjuku-ku, Tokyo 163, Japan
(hereinafter referred to as TEL) and Rudolph Research International, a
corporation organized and existing under the laws of the United States of
America, with its principal place of business located at One Rudolph Road, P.O.
Box 1000, Flanders, New Jersey 07836, U.S.A.(hereinafter referred to as
Manufacturer).
In consideration of the mutual covenants contained herein, the parties
agree as follows:
1. Appointment. Manufacturer hereby appoints TEL its distributor, and TEL
-----------
hereby accepts such appointment, for the sale of the Products (defined in
Appendix A) in the Territory (defined in Appendix B).
The list of Products as set forth in Appendix A may be changed, abandoned
or added in writing by mutual agreement by the parties.
2. Term Of Agreement. This Agreement shall take effect from the date of
-----------------
execution hereof and shall remain in force unless and until terminated pursuant
to Article 10 hereof.
3. Responsibilities.
----------------
(a) Manufacturer agrees:
-------------------
To make every reasonable effort to manufacture quantities of the
Products sufficient to meet the resale requirements of TEL.
(b) TEL agrees:
----------
(i) To use its best efforts to promote the sale of the
Products.
(ii) To maintain an inventory of the spare parts in a quantity
sufficient to meet the needs of its customers in accordance with reasonable
recommendations which may be made by Manufacturer as to specific items and
quantities, provided that TEL shall have the option to sell to Manufacturer, and
then Manufacturer shall purchase from TEL, the spare parts of the Products
remained unused in TEL's inventory, at a reasonable intervals during the term of
this Agreement, which purchases shall be at the price equal to the net price
originally paid therefor by TEL.
(iii) To maintain records of inventory of the spare parts on hand
and provide the same to Manufacturer, on request, at reasonable intervals.
<PAGE>
(iv) To hold in confidence during the term of this Agreement, and
thereafter for one (1) year, any and all information of a confidential nature
regarding Manufacturer's business or affairs, including without limitation, data
provided by Manufacturer regarding the design and/or methods of manufacture of
the Products, and not to disclose the same to any person, firm or corporation.
On all such confidential information of tangible nature, Manufacturer shall
stamp "CONFIDENTIAL" thereon. As for confidential information of intangible
nature, Manufacturer shall indicate the nature of confidentiality thereof in
certain other appropriate manner.
The following information shall not be considered confidential:
(1) Information which is already generally available to the public.
(2) Information which hereafter becomes generally available to the public,
through no fault of TEL.
(3) Information which was already known to TEL prior to the disclosure
thereof by Manufacturer.
(4) Information which is developed by TEL independently of and without aid
of the information disclosed by Manufacturer.
(5) Information which lawfully becomes known to TEL through a third party.
4. Price.
-----
(a) Price. TEL agrees to pay Manufacturer for the Products purchased
-----
hereunder in accordance with price schedules or bulletins supplied by
Manufacturer from time to time. The presently applicable schedule is attached
hereto as Appendix A.
(b) Price Change. Manufacturer shall give TEL at least ninety (90)
------------
days written notice prior to the price change which may be made by Manufacturer.
5. Terms Of Payment. The payment shall be made net thirty (30) days after
----------------
the invoice date by cash remittance in U.S. dollars by cable.
6. Delivery. Manufacturer shall use its best efforts to fill all orders
--------
promptly upon acceptance thereof. Deliveries shall be made F.O.B. Manufacturer's
factory in _______________. Manufacturer shall retain title and bear the risk of
loss until such time as a shipment has been placed on board the carrier, at
which time title shall pass and the risk of loss shall be borne by TEL. TEL
shall have the right to select the carrier of its choice.
7. Advertising. TEL shall conduct advertising activity which is deemed
-----------
appropriate to promote the sale of the Products in the Territory. Manufacturer
shall supply, free of charge, advertising materials for marketing of the
Products such as catalogs, brochures, pamphlets, and the
-2-
<PAGE>
like. TEL agrees to refrain from making any claim or representation concerning
the Products in excess of those made by Manufacturer.
8. Trademarks. In connection with sales or advertising of the Products,
----------
TEL may use such trade name or trademarks owned by Manufacturer as are more
specifically listed in Appendix C. Upon termination of this Agreement, TEL will
take all reasonable and necessary steps to discontinue any use of such trade
name and trademarks.
9. Warranties.
----------
(a) Materials and Workmanship. Manufacturer shall warrant its
-------------------------
Products to be free from defects caused by faulty materials or poor workmanship
and to conform to specifications furnished or approved by Manufacturer for a
period of one (1) year from the date of shipment to TEL. The liability of
Manufacturer under this warranty is limited to replacing, repairing or making
refund payment at its option and expense for any Product which is returned by
TEL.
(b) Third Party Infringement. Manufacturer agrees to indemnify and
------------------------
hold harmless TEL and its customers from and against all damages and costs,
including legal fees, which may be assessed against TEL or its customers in any
claim or action by third parties alleging unlawful acts or omissions to act,
such as trademark, copyright, mask works right or patent infringement, where
alleged liability of TEL or its customers arises by reason of the use or sale of
any item delivered by Manufacturer to TEL or its customers, provided that TEL or
its customers shall give Manufacturer prompt notice, in writing, of all such
claims or actions instituted against it, and an opportunity to elect to take
over, settle or defend the same through counsel of its own choice and under its
sole discretion and at its own expense, and will make available to Manufacturer
in the event of such election, all defenses against such claims or actions,
known or available to TEL or its customers.
10. Termination.
-----------
(a) General. This Agreement may be terminated:
-------
(i) By an agreement in writing duly signed by the parties
hereto, or
(ii) By either party at will, with or without cause, upon not
less than sixty (60) days notice in writing, given by registered or certified
mail to the other party.
(b) Sales after Termination. The acceptance of any order from or the
-----------------------
sale of any Product to TEL after the termination of this Agreement shall not be
construed as a renewal or extension hereof nor as a waiver of termination.
(c) No Liability for Termination. Neither Manufacturer nor TEL shall,
----------------------------
by reason of the termination, be liable to the other for compensation,
reimbursement or damages on account of the loss of prospective profits on
anticipated sales, or on account of expenditures, investments, leases or
commitments made in connection with this Agreement.
-3-
<PAGE>
(d) Inventory Buy-back. Upon termination of this Agreement,
------------------
Manufacturer shall purchase from TEL and TEL shall sell to Manufacturer all
Products of Manufacturer, including all accessories, parts, options and etc.,
purchased by TEL for resale and then in TEL's inventory, such purchases to be at
a price equal to TEL's book value.
(e) Spare Parts. Despite the termination of this Agreement,
-----------
Manufacturer shall, upon request by TEL, continue to provide TEL the spare parts
for each model of the Products for a period of five (5) years from the shipment
of the last unit of such model at the Manufacturer's then current prices.
11. Arbitration. Disputes hereunder which cannot be satisfactorily
-----------
resolved by the parties themselves shall be finally settled by arbitration
pursuant to the Japan-American Trade Arbitration Agreement of September 16,
1952, by which each party hereto is bound.
If Manufacturer is the initiating party, the arbitration shall be held
in Tokyo, and if TEL is the initiating party, the arbitration shall be held in
Flanders, New Jersey.
12. Force Majeure. Neither party hereto shall be liable for default of any
-------------
obligation hereunder if such default results from the force majeure which
includes, without limitation, governmental acts or directives; strikes; acts of
God; war; insurrection, riot or civil commotion; fires, flooding or water
damage; explosions, embargoes, or delays in delivery, whether of the kind herein
enumerated or otherwise, which are not within the reasonable control of the
party affected.
13. Miscellaneous.
-------------
(a) Assignment. This Agreement is not assignable or transferable by
----------
either party in whole or in part, except with the written consent of the other
party.
(b) Notices. Any notices provided for under this Agreement shall be
-------
deemed effective when delivered in person or seven (7) days after deposit in the
mails by registered or certified mail postage prepaid and addressed to the
respective address listed in the introduction of this Agreement, or to such
different address as either party may designate in writing to the other pursuant
to this paragraph.
(c) Relationship of Parties. The parties hereto agree that TEL shall
-----------------------
operate as an independent contractor and not as an agent or employee of
Manufacturer. TEL has no express or implied authorization to incur any
obligation or in any manner otherwise make any commitments on behalf of
Manufacturer. TEL shall employ its own personnel and shall be responsible for
them and their acts and in no way shall Manufacturer be liable to TEL, its
employees or third parties for any losses, injuries, damages or the like
occasioned by TEL's activities in connection with this Agreement, except as
expressly provided herein.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above set forth.
TOKYO ELECTRON LIMITED RUDOLPH RESEARCH INTERNATIONAL
By: /s/ H. Ishibashi By: /s/ Richard Spanier
-------------------------- ----------------------------
Title: Director, SP-1 Div Title: President
-------------------------- ----------------------------
Date: May 15, 1987 Date May 21, 1987
-------------------------- ----------------------------
-5-
<PAGE>
APPENDIX A
----------
PRODUCTS AND PRICE LIST
-----------------------
AUTOEL
IN SITU
RESEARCH & SPECTROSCOPIC ELLIPSOMETERS,
including EXTERNAL SOFTWARE AND SPARE PARTS
and ACCESSORIES.
(Price Lists as presently in TEL's possession.)
<PAGE>
APPENDIX B
----------
TERRITORY
---------
Territory: JAPAN
- ---------
<PAGE>
APPENDIX C
----------
TRADEMARKS
----------
AUTOEL
<PAGE>
EXHIBIT 10.6
RUDOLPH HOLDINGS CORPORATION
MANAGEMENT AGREEMENT
--------------------
THIS MANAGEMENT AGREEMENT (the "Agreement") is made as of June 14, 1996
---------
(the "Effective Date"), by and among Rudolph Holdings Corporation, a
--------------
Delaware corporation (the "Company"), Rudolph Technologies, Inc., a New Jersey
-------
corporation ("Technologies"), and Paul F. McLaughlin ("Executive").
------------ ---------
WHEREAS, Executive desires to be employed as the President and Chief
Executive Officer of Technologies, and Technologies desires to employ Executive
as its President and Chief Executive Officer and to be assured of its right to
his services on the terms and conditions hereinafter set forth, and Executive is
willing to agree to such employment on such terms and conditions;
WHEREAS, Executive desires purchase from the Company and the Company
desires to sell to Executive, 684.98 shares of the Company's Class B Common
Stock, par value $.01 per share (the "Class B Common") and 560 shares of the
--------------
Company's Series A Preferred Stock, par value $.01 per share (the "Series A
--------
Preferred"). All of the shares of Class B Common and Series A Preferred
- ---------
purchased by Executive hereunder are referred to herein as "Executive Stock,"
---------------
and Executive Stock shall not include any other shares of capital stock of the
Company, Technologies or any affiliate thereof including, without limitation,
stock issued upon the exercise of options granted to Executive; and
WHEREAS, the execution and delivery of this Agreement by the Company
and Executive is a condition to the consummation of transactions contemplated by
the Stock Purchase Agreement dated as of the date hereof (the "Stock Purchase
--------------
Agreement") by and among Rudolph Acquisition Corporation, a Delaware corporation
- ---------
("Acquisition"), and the other persons named therein. Liberty Partners Holdings
-----------
11, L.L.C. ("LPH"), Riverside Rudolph, L.L.C., ("Riverside"), are collectively
--- ---------
referred to herein as the "Investors." Certain provisions of this Agreement are
---------
intended for the benefit of, and shall be enforceable by, the Investors.
Certain definitions are set forth in Section 1 of this Agreement.
NOW, THEREFORE, the Company and Executive agree as follows:
1. Definitions. As used herein, the following terms shall have the
-----------
following meanings.
"Board" means the Company's board of directors.
-----
"Cause" means the determination by the Board, in the exercise of its
-----
good faith judgment, that: (a) Executive has committed a fraud, felony or other
serious act of moral turpitude; or (b) Executive has breached his duty of
loyalty to the Company or its Subsidiaries; or (c) Executive has committed a
material breach of this Agreement, and if such breach is capable of cure, such
breach is not cured or remedied and continues after fifteen (15) business days
from the date on which written notice of the breach was first provided to
Executive; in each case after
<PAGE>
(i) written notice to Executive and (ii) there has been a reasonable procedure
for Executive to state his case to the Board.
"Executive Stock" Executive Stock shall continue to be Executive Stock
---------------
in the hands of any holder other than Executive (except for the Company and the
Investors and except for transferees in a Public Sale or Sale of the Company),
and except as otherwise provided herein, each such other holder of Executive
Stock shall succeed to all rights and obligations attributable to Executive as a
holder of Executive Stock hereunder. Executive Stock shall also include shares
of the Company's capital stock issued with respect to Executive Stock by way of
a stock split, stock dividend or other recapitalization.
"Fair Market Value" of each share of Executive Stock, means with
-----------------
respect to Class B Common or Series A Preferred, respectively, the average of
the closing prices of the sales of such shares on all securities exchanges on
which such shares may at the time be listed, or, if there have been no sales on
any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
shares are not so listed, the average of the representative bid and asked prices
quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day
such shares are not quoted in the NASDAQ System, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days consisting of
the day as of which the Fair Market Value is being determined and the 20
consecutive business days prior to such day. If at any time the Class B Common
or the Series A Preferred is not listed on any securities exchange or quoted in
the NASDAQ System or the over-the-counter market, the Fair Market Value of such
shares shall be the fair value as determined in good faith by the Board.
"Good Reason" means the resignation by Executive of employment with
-----------
Technologies as a direct result of either (i) a substantial diminution of duties
and responsibilities of Executive as an employee of Technologies, (ii) the
relocation of Executive outside of the Flanders, New Jersey area, (iii) any
requirement by the Company that Executive make a material misstatement or
omission in any financial report or governmental filing, or (iv) a material
breach of this Agreement by the Company or its Subsidiaries in the absence of a
material breach of this Agreement by Executive, which diminution or breach, as
the case may be, has continued 15 days after delivery of written notice by
Executive to the Board stating Executive's intent to resign as a consequence of
such diminution or breach; provided that Executive's resignation actually occurs
-------- ----
within 30 days following the occurrence of the diminution or breach.
"Independent Third Party" means any Person or group of Persons who,
------------------------
immediately prior to the contemplated transaction, does not own in excess of 5%
of the common equity of the Company or its Subsidiaries on a fully-diluted
basis, who is not controlling, controlled by or under common control with any
such 5% owner of capital stock and who is not the spouse or descendent (by birth
or adoption) of any such 5% owner of capital stock.
"Permanent Disability" means that Executive, as determined by the
--------------------
Board in its good faith judgement, is unable to perform, by reason of physical
or mental incapacity, his duties or
-2-
<PAGE>
obligation under this Agreement, for a period of ninety (90) consecutive days or
a total period of one hundred twenty (120) days in any three hundred sixty-five
(365) day period.
"Person" means an individual, a partnership, a corporation, an
------
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"Public Sale" means any sale pursuant to a registered public offering
-----------
under the 1933 Act or any sale to the public pursuant to Rule 144 promulgated
under the 1933 Act effected through a broker, dealer or market maker.
"Qualified Public Offering" means the sale, in an underwritten public
-------------------------
offering registered under the 1933 Act, of shares of common equity of the
Company or its Subsidiaries having an aggregate offering value of at least $30
million.
"Sale of the Company" means the sale of Technologies to an Independent
-------------------
Third Party or affiliated group of Independent Third Parties pursuant to which
such party or parties acquire (i) capital stock of Technologies possessing the
voting power to elect a majority of Technologies board of directors (whether by
merger, consolidation or sale or transfer of the Company's capital stock) or
(ii) all or substantially all of the Company's assets determined on a
consolidated basis.
"1933 Act" means the Securities Act of 1933, as amended from time to
--------
time.
2. Employment. Technologies agrees to employ Executive, and
----------
Executive hereby accepts employment with Technologies, upon the terms and
conditions set forth in this Agreement.
(a) Position and Duties.
-------------------
(i) Executive shall serve as President and Chief Executive
Officer of Technologies and shall have such duties as may be
consistent with such position and as are determined by the Board from
time to time.
(ii) Executive shall serve as a director on the Board, subject
to the provisions of the Stockholders Agreement dated as of the date
hereof (the "Stockholders Agreement") by and among the Company,
----------------------
Executive and the other Persons named therein.
(iii) Executive shall devote his best efforts and his full
business time and attention (except for permitted vacation periods and
reasonable periods of illness or other incapacity which does not
constitute Permanent Disability) to the business and affairs of
Technologies; provided, that subject to the prior approval by the
--------
Board, Executive may serve as a director of other companies that are
not competitive with the business of Technologies. Executive shall
perform his duties and responsibilities to the best of his abilities
in a diligent, trustworthy, businesslike and efficient manner.
(b) Term. Subject to the provisions of Section 3(a), the "Term" of
---- ----
this Agreement shall be for two (2) years from the date hereof, unless earlier
terminated by either party
-3-
<PAGE>
as provided in Section 3(a) below, subject to automatic renewals for successive
two year Terms unless either party has delivered written notice not less than
ninety (90) days prior to the expiration of the initial Term or any renewal
thereof.
(c) Compensation. Commencing from the Effective Date, Technologies
------------
shall pay to Executive, during Executive's employment by Technologies, an annual
base salary ("Base Salary") of $200.000, subject to increase as provided below
-----------
in this Section 2(c). Such Base Salary shall be paid in accordance with the
Technologies' normal payroll procedures and cycles and shall be subject to
withholding of applicable taxes and governmental charges in accordance with
federal and state law. Executives' Base Salary shall be subject to annual
review by the Board, and at a minimum shall be increased annually as of the
anniversary of the date hereof by an amount equal to the product of the Base
Salary theretofore in effect multiplied by a fraction of which (i) the numerator
is the Consumer Price Index for All Urban Consumers - New Jersey (1982/84 = 100)
(the "Index"), prepared by the Bureau of Labor Statistics of the United States
-----
Department of Labor (or if the Index is not then published, the most nearly
comparable index) of the month immediately preceding such date and (ii) the
denominator is the Index for the month immediately preceding the last date on
which the Base Salary has been adjusted pursuant to this sentence or, if not
previously adjusted, the month preceding the date of this Agreement. Executive
will also be eligible to receive an annual bonus in an amount equal to up to 30%
of Executive's then current Base Salary upon the achievement by Technologies of
certain annual operating targets as determined by the Board.
(d) Benefits. In addition to the Base Salary paid to Executive by
--------
Technologies, Executive shall be eligible to participate, during Executive's
employment by Technologies, in such benefits programs (including paid vacation
of four weeks per year) as may be appropriate for Executive's position with
Technologies and as approved by the Board. Technologies will reimburse
Executive for reasonable out-of-pocket expenses incurred by Executive in
relocating to the Flanders, New Jersey area, including arms-length real estate
broker's fees payable to an unrelated third party, incurred in connection with
the sale of Executive's home in Moorestown.
(e) Expenses. Technologies shall reimburse Executive for all
--------
reasonable expenses incurred by him in the course of performing his duties and
responsibilities under this Agreement which are consistent with Technologies'
policies in effect from time to time with respect to travel, entertainment and
other business expenses, subject to Technologies' requirements with respect to
reporting and documentation of such expenses.
(f) Key Man Life Insurance. Technologies, in its sole discretion and
----------------------
at its sole expense, may obtain a key man life insurance policy on Executive for
the benefit of Technologies, and Executive shall cooperate with Technologies in
obtaining such insurance and shall submit to medical examinations as required.
3. Termination and Severance.
-------------------------
(a) Termination. Executive and Technologies shall each have the right
-----------
to terminate the Term and Executive's employment with Technologies (a
"Termination," and the date of such termination the "Termination Date") at any
----------- ----------------
time and for any reason or for no reason at all, by
-4-
<PAGE>
delivering written notice to the other party, and upon any such Termination,
Technologies shall have no further obligations to Executive hereunder, except as
set forth in Sections 3(b) and (c) below.
(b) Base Salary through Termination; COBRA. Executive shall be
--------------------------------------
entitled to receive his Base Salary earned through his Termination Date,
prorated on a daily basis together with all accrued but unpaid vacation time
earned through his Termination Date. In addition, Executive shall be entitled
to COBRA benefits after the Termination Date. Except as set forth in Section
3(c), Executive shall not be entitled to receive his Base Salary or any bonuses
or other benefits from Technologies for any period after the Termination Date.
(c) Severance Obligations. In the event Executive's employment is
---------------------
terminated by Technologies without Cause or Executive resigns from employment
with Technologies with Good Reason, following such Termination and upon
execution by Executive of a general release in favor of the Company and its
Subsidiaries (i) satisfying all applicable requirements of the Older Workers
Benefit Protection Act, including expiration of the applicable revocation
period, and (ii) releasing any and all claims against the Company and its
Subsidiaries, Technologies shall continue to pay Executive (or his estate) his
Base Salary (as in effect on the Termination Date) for a period of one year
following the Termination Date, payable in accordance with Technologies' normal
payroll procedures and cycles and shall be subject to withholding of applicable
taxes and governmental charges in accordance with federal and state law. In the
event that Executive's employment with Technologies is terminated for any other
reason, Technologies shall have no obligation to make any severance or other
payment to or on behalf of Executive. Notwithstanding the foregoing, in the
event that Executive shall breach any of his obligations under Sections 5, 6 or
7 of this Agreement, Technologies shall be relieved from and shall have no
further obligation to pay Executive any amounts to which Executive would
otherwise be entitled pursuant to this Section 3.
(d) Sale of the Company. In the event of a Termination of Executive's
-------------------
employment with Technologies for any reason within three months from the date of
a Sale of the Company, Technologies shall pay to Executive his Base Salary as in
effect on the Termination Date, over a period of one year, in accordance with
Technologies' normal payroll procedures and cycles, and subject to withholding
of applicable taxes and governmental charges in accordance with federal and
state law.
4. Executive Stock Options. The Company shall grant to Executive an
-----------------------
option to purchase shares of its Class B Common pursuant to the terms of the
Company's 1996 Stock Option Plan and a definitive option agreement between the
Company and Executive.
5. Confidential Information. Executive acknowledges that the
------------------------
information, observations and data concerning the business or affairs of the
Company and its Subsidiaries ("Confidential Information") obtained by him as a
------------------------
result of his employment with Technologies, as a result of his serving as a
director on the Board or as a result of his ownership of capital stock of the
Company are the property of the Company. Therefore, Executive agrees that he
shall not disclose to any person or use for any other purpose, any Confidential
Information without the prior written consent of the Board, unless and to the
extent such Confidential Information becomes generally known to and available
for use by the public other than as a result of Executive's acts or omissions to
act. Executive shall deliver to the Board on Executive's Termination Date, or at
any other time the Board
-5-
<PAGE>
may request, all memoranda, notes, plans, records, reports, computer tapes and
software, and all other material, documents and data (and all copies thereof)
relating to the Confidential Information, Work Product (as defined below) and
the business of the Company and its Subsidiaries which Executive may then
possess or have under his control.
6. Inventions and Patents. Executive agrees that all inventions,
----------------------
innovations, improvements, developments, methods, designs, analyses, drawings,
reports and all similar or related information which relates to the Company's or
its Subsidiaries' actual or anticipated business, research and development or
existing or future products or services and which are conceived, developed or
made by Executive while employed by Technologies or while serving as a director
on the Board ("Work Product") are the property of and belong to the Company and
------------
its Subsidiaries. Executive understands and acknowledges that, at the request
of the Board, he must assign to the Company or its Subsidiaries any development,
invention or information that (i) relates to the actual or anticipated business
research or development of the Company and its Subsidiaries, or (ii) results
from any work performed by Executive for the Company and its Subsidiaries.
Executive will promptly disclose such Work Product to the Board and perform all
actions requested by the Board (whether during or after Executive's employment)
to establish and confirm the Company's or its Subsidiaries ownership of any Work
Product (including, without limitation, the execution and delivery of
assignments, consents, powers of attorney and other instruments).
7. Non-Compete, Non-Solicitation.
-----------------------------
(a) Executive acknowledges that during the course of his employment
with Technologies and directorship on the Board he will become familiar with the
trade secrets and with other Confidential Information of the Company and its
Subsidiaries and that his services will be of a special, unique and
extraordinary value to the Company and its Subsidiaries. Therefore, Executive
agrees that, during the time he is employed by Technologies and for two years
thereafter (the "Non-Compete Period"), Executive shall not directly or
------------------
indirectly own, operate, manage, control, participate in, consult with, advise,
provide services for, or in any manner engage in (including by himself or in
association with any person, firm, corporate or other business organization or
through any entity), any business engaged in the businesses in which the Company
and its Subsidiaries is engaged or then proposes to engage within any
geographical area in which the Company or its Subsidiaries engages in business.
Nothing herein shall prohibit Executive from being a passive owner of not more
than 5% of the outstanding stock of any class of a corporation which is publicly
traded, or any other passive minority investment in any investment fund, limited
partnership or similar entity, whether or not publicly traded, and so long as
Executive has no active participation in the business of such entity.
(b) During the time Executive is employed Technologies and for two
years thereafter (the "Non-Solicitation Period"), Executive shall not, directly
-----------------------
or indirectly through another entity, (i) induce or attempt to induce any
employee of Technologies to leave the employ of Technologies, or in anyway
interfere with the relationship between Technologies and any employee thereof,
including without limitation, inducing or attempting to induce any employee,
group of employees or any other person or persons to interfere with the business
or operations of Technologies, (ii) hire any person who was an employee of
Technologies at any time during Executive's employment period, or (iii) induce
or attempt to induce, whether directly or indirectly,
-6-
<PAGE>
any customer, supplier, distributor, franchisee, licensee or other business
relation of Technologies to cease doing business with Technologies, or in any
way interfere with the relationship between any such customer, supplier,
distributor, franchisee, licensee or business relation and Technologies.
(c) Executive agrees that: (i) the covenants set forth in this Section
7 are reasonable in geographical and temporal scope and in all other respects,
(ii) the Company would not have entered into this Agreement but for the
covenants of Executive contained herein, and (iii) the covenants contained
herein have been made in order to induce the Company to enter into this
Agreement.
(d) If, at the time of enforcement of this Section 7 a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under the circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstance shall be
substituted for the stated duration, scope or area and that the courts shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(e) Executive recognizes and affirms that in the event of his breach
of any provision of this Section 7 or Sections 5 or 6, money damages would be
inadequate and the Company and its Subsidiaries would have no adequate remedy at
law. Accordingly, Executive agrees that in the event of a breach or threatened
breach by Executive of any of the provisions of this Section 7 or Sections 5 or
6, the Company and its Subsidiaries, in addition and supplementary to other
rights and remedies existing in its favor, may apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce or prevent any violations of the provisions
hereof (without posting a bond or other security).
8. Purchase and Sale of Executive Stock.
------------------------------------
(a) Upon execution of this Agreement, Executive shall purchase, and
the Company shall sell: (i) 684.98 shares of Class B Common at a price of $20.44
per share, and (ii) 560 shares of Series A Preferred at a price of $100.00 per
share, for an aggregate purchase price of $70,000. The Company shall deliver to
Executive the certificates representing such shares of Class B Common and Series
A Preferred, and Executive shall deliver to the Company a cashier's or certified
check or wire transfer of funds in the aggregate amount of $70,000. The closing
of the purchase and sale of the Executive Stock shall take place simultaneously
with the closing of the transactions contemplated by the Stock Purchase
Agreement.
(b) In connection with the purchase and sale of the Executive Stock
hereunder, Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by Executive pursuant to
this Agreement shall be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of
the 1933 Act, or any applicable state securities laws, and the
Executive Stock shall not be disposed of in contravention of the 1933
Act or any applicable state securities laws.
-7-
<PAGE>
(ii) Executive is an executive officer of Technologies and a
director on the Board, is sophisticated in financial matters and is
able to evaluate the risks and benefits of the investment in the
Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Stock for an indefinite period of time
because the Executive Stock has not been registered under the 1933 Act
and, therefore, cannot be sold unless subsequently registered under
the 1933 Act or an exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
the Executive Stock and has had full access to such other information
concerning the Company and its Subsidiaries as he has requested.
Executive has reviewed, or has had an opportunity to review, a copy of
the Stock Purchase Agreement, and Executive is familiar with the
transactions contemplated thereby. Executive has also reviewed, or
has had an opportunity to review, the following documents: (A) the
Company's Certificate of Incorporation and Bylaws; (B) the loan
agreements, notes and related documents with Technologies senior and
subordinated lenders; (C) Technologies audited financial statements
dated as of December 31, 1995;
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Executive
do not and shall not conflict with, violate or cause a breach of any
agreement, contract or instrument to which Executive is a party or any
judgment, order or decree to which Executive is subject.
(c) As an inducement to the Company to issue the Executive Stock to
Executive, and as a condition thereto, Executive acknowledges and agrees that:
(i) neither the issuance of the Executive Stock to Executive
nor any provision contained herein shall entitle Executive to remain
in the employment of Technologies or any affiliate or subsidiary
thereof or affect the right of Technologies to terminate Executive's
employment at any time; and
(ii) the Company and its Subsidiaries shall have no duty or
obligation to disclose to Executive, and Executive shall have no right
to be advised of, any material information regarding the Company and
its Subsidiaries at any time prior to, upon or in connection with the
repurchase of Executive Stock upon Executive's Termination or as
otherwise provided hereunder, except for reports or information used
by the Board to determine the Fair Market Value of the Executive Stock
purchased from Executive.
(d) The Company and Executive acknowledge and agree that this
Agreement has been executed and delivered, and the Executive Stock has been
issued hereunder, in connection with and as part of the compensation and
incentive arrangements between the Company and Executive.
-8-
<PAGE>
9. Vesting of Executive Stock. The Executive Stock shall be fully
--------------------------
vested immediately as of the consummation of the purchase and sale of the
Executive Stock.
10. Call and Put Options.
--------------------
(a) In the event of Executive's Termination, the Executive Stock
(whether held by Executive or one or more of Executive's transferees) shall be
subject to repurchase by the Company and/or the Investors at their option
pursuant to the terms and conditions set forth in this Section 10 (the "Call
----
Option").
- ------
(b) In the event of a Termination either without Cause or with Good
Reason or as a result of the death or Permanent Disability of Executive,
Executive (or Executive's Estate) shall have the option to cause the Company to
repurchase all of the Executive Stock held by Executive as of the date of the
Termination pursuant to the terms and conditions set forth in this Section 10
(the "Put Option") by delivering a written election notice (the "Put Notice") to
---------- ----------
the Board within 60 days of Executive's Termination Date.
(c) The purchase price for each share of Executive Stock purchased
from the Executive pursuant to the Call Option or the Put Option shall be the
Fair Market Value for such share.
(d) The Board may elect to cause the Company to purchase all of the
Executive Stock by delivering written notice (the "Call Notice") to the holder
-----------
or holders of the Executive Stock within 90 days after the Termination Date.
The Call Notice shall set forth the number of shares of Executive Stock to be
acquired from each holder of Executive Stock, the aggregate consideration to be
paid for such shares and the time and place for the closing of the transaction.
(e) If for any reason the Board does not elect to cause the Company to
purchase all of the Executive Stock pursuant to the Call Option, the Investors
shall be entitled to exercise the Call Option for the shares of Executive Stock
the Company has not elected to purchase (the "Available Shares"). As soon as
----------------
practicable after the Board has determined that there will be Available Shares,
but in any event within thirty (30) days after the Termination Date, the Board
shall give written notice (the "Option Notice") to the Investors setting forth
-------------
the number of Available Shares and the purchase price for the Available Shares.
The Investors may elect to purchase any or all of the Available Shares by giving
written notice to the Board within fifteen (15) days after the Option Notice has
been given by the Board. If the Investors elect to purchase an aggregate number
of shares greater than the number of Available Shares, the Available Shares
shall be allocated among the Investors based upon the aggregate number of shares
of Class B Common and Class A Common Stock of the Company, par value $.01 per
share (the "Class A Common," and together with the Class B Common, the "Common
-------------- ------
Stock") owned by each Investor on a fully-diluted basis. If the Investors have
- -----
in the aggregate elected to purchase less than all of the Available Shares, the
Available Shares which the Investors have not elect to purchase (the "Remaining
---------
Available Shares") shall be reoffered to the Investors who have elected to
- ----------------
purchase Available Shares for an additional five (5) day period, and each
Investor may elect to purchase all (but not less than all) of such Investor's
pro rata share of all Remaining Available Shares (based on such holder's
proportionate ownership of all shares of Common Stock on a fully-diluted basis
owned by the Investors who have
-9-
<PAGE>
elected to purchase Remaining Available Shares). As soon as practicable, and in
any event within ten (10) days after the expiration of the fifteen (15) day
period set forth above, the Board shall notify each holder of Executive Stock as
to the number of shares being purchased from such holder by the Investors (the
"Supplemental Call Notice"). At the time the Board delivers the Supplemental
------------------------
Call Notice to the holder(s) of Executive Stock, the Board shall also deliver
written notice to each Investor setting forth the number of shares such Investor
is entitled to purchase, the aggregate purchase price and the time and place of
the closing of the transaction.
(f) The closing of the purchase of the Executive Stock pursuant to the
Call Option shall take place on the date designated by the Board in the Call
Notice or Supplemental Call Notice, which date shall not be more than 60 days
nor less than five days after the delivery of the later of either such notice to
be delivered. The closing of the purchase of the Executive Stock pursuant to
the Put Option shall take place on any date designated by the Board in a written
notice delivered to Executive, which date shall not be more than 60 days nor
less than 5 days after the delivery by Executive of the Put Notice. The Company
and/or the Investors shall pay for the Executive Stock to be purchased pursuant
to the Call Option or Put Option, as applicable, by delivery of, in the case of
each Investor, a check or wire transfer of funds and, in the case of the Company
at its option (i) a check or wire transfer of funds, or (ii) a subordinated note
or notes payable as soon as reasonably practicable and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate announced from time to
time by State Street Bank & Trust Co. (or any successor entity thereto) plus 2%,
or (iii) both (i) and (ii), in the aggregate amount of the purchase price for
such shares; provided that the Company shall use reasonable efforts to make all
such repurchases with a check or wire transfer of funds; and provided further,
in the event Executive exercises the Put Option and the Company pays for such
repurchase by delivery of a subordinated note, the Company shall repay such
indebtedness as soon as it is permitted under the Company's or its Subsidiaries'
loan agreements and by applicable law. Notwithstanding anything contained in
this Agreement to the contrary, any notes issued by the Company or its
Subsidiaries pursuant to this Section 10(f) shall be subject to any restrictive
covenants to which the Company or its Subsidiaries is subject at the time of
such purchase. The purchasers of Executive Stock hereunder shall be entitled to
receive customary representations and warranties from the sellers regarding such
sale of shares (including representations and warranties regarding good title to
such shares, free and clear of any liens or encumbrances) and to require all
sellers' signatures be guaranteed by a national bank or reputable securities
broker.
(g) The right and obligation of the Company and the right of the
Investors to repurchase the Executive Stock pursuant to this Section 10 shall
terminate upon the first to occur of the Sale of the Company or a Qualified
Public Offering.
(h) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company or its Subsidiaries
shall be subject to applicable restrictions contained in the New Jersey and
Delaware Corporation Law and in the Company's and its Subsidiaries debt and
equity financing agreements. If any such restrictions prohibit the repurchase
of Executive Stock hereunder which the Company is otherwise entitled or required
to make or the payment of dividends or loans to the Company to make such
repurchases, the time periods provided in this Section 10 shall be suspended,
and the Company may, or shall (as applicable), make such repurchases as soon as
it is permitted to do so under such restrictions.
-10-
<PAGE>
11. Restrictions on Transfer.
------------------------
(a) Stockholders Agreement. Shares of Executive Stock are subject to
----------------------
the restrictions on transfer set forth in the Stockholders Agreement, dated as
of the date hereof, by and among Executive and each of the other persons named
therein.
(b) The certificates representing Executive Stock shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON JUNE 14, 1996, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET
FORTH IN A MANAGEMENT AGREEMENT BETWEEN THE ISSUER AND _______________
DATED AS OF JUNE 14, 1996, AS AMENDED AND MODIFIED FROM TIME TO TIME.
A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
ISSUERS' PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(c) Except in connection with a Sale of the Company, no holder of
Executive Stock may sell, transfer or dispose of any Executive Stock (except
pursuant to an effective registration statement under the 1933 Act) without
first delivering to the Company an opinion of counsel (reasonably acceptable in
form and substance to the Board) that neither registration nor qualification
under the 1933 Act and applicable state securities laws is required in
connection with such transfer.
12. Notices. All notices or communications provided for herein shall be
-------
deemed to be validly given as of the date of delivery, if delivered personally,
and three days after mailing, if sent by registered or certified mail, return
receipt requested, addressed to the Company or Technologies at its respective
headquarters or executive offices or to Executive at his address as set forth
from time to time in the records of the Company.
13. Miscellaneous.
-------------
(a) Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in
-11-
<PAGE>
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
(b) Complete Agreement. This Agreement embodies the complete
------------------
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(c) Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(d) Governing Law. The corporate law of the State of Delaware shall
-------------
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to any
choice of law or conflicts of law rules or provisions (whether of the State of
New York or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of New York.
(e) Successors and Assigns. Except as otherwise provided herein, this
----------------------
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its Subsidiaries and Executive and their respective successors and
assigns; provided that the rights and obligations of Executive under this
Agreement shall not be assignable without the prior written approval of the
Board.
(f) Remedies. Each of the parties to this Agreement will be entitled
--------
to enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorneys' fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages may not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(g) Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended and waived only with the prior written consent of the Company and
Executive.
* * * * *
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this MANAGEMENT
AGREEMENT as of the date first written above.
RUDOLPH TECHNOLOGIES, INC.
By: /s/ Stephen J. Fisher
-----------------------------------
Title: Vice President
--------------------------------
RUDOLPH HOLDINGS CORPORATION
By: /s/ Stephen J. Fisher
-----------------------------------
Title: Vice President
--------------------------------
/s/ Paul F. McLaughlin
---------------------------------------
Paul F. McLaughlin
<PAGE>
EXHIBIT 10.7
RUDOLPH HOLDINGS CORPORATION
MANAGEMENT AGREEMENT
--------------------
THIS MANAGEMENT AGREEMENT (the "Agreement") is made as of June 14,
---------
1996 (the "Effective Date"), by and between Rudolph Holdings Corporation, a
--------------
Delaware corporation (the "Company"), Rudolph Technologies, Inc., a New Jersey
-------
corporation ("Technologies"), and Robert Loiterman ("Executive").
------------ ---------
WHEREAS, Executive desires to be employed as a Vice President of
Engineering of Technologies, and Technologies desires to employ Executive as a
Vice President of Engineering and to be assured of its right to his services on
the terms and conditions hereinafter set forth, and Executive is willing to
agree to such employment on such terms and conditions;
WHEREAS, the Company and Executive desire to enter into an agreement
pursuant to which Executive shall purchase, and the Company shall sell, 195.71
shares of the Company's Class B Common Stock, par value $.01 per share (the
"Common Stock"), and 160 shares of the Company's Series A Preferred Stock, par
------------
value $.01 per share (the "Preferred Stock") for an aggregate purchase price of
---------------
$20,000. All shares of Common Stock and Preferred Stock purchased by Executive
hereunder are referred to herein as "Executive Stock," and except as set forth
---------------
in Section 1 hereof, Executive Stock shall not include any other shares of
capital stock of the Company (including, without limitation, shares of Common
Stock issued to Executive upon the exercise of certain stock options granted to
Executive); and
WHEREAS, the execution and delivery of this Agreement by the Company,
Technologies and Executive is a condition to the consummation of transactions
contemplated by the Stock and Warrant Purchase Agreement dated as of the date
hereof by and among the Company and those Persons named therein (the "Purchase
--------
Agreement"). Certain provisions of this Agreement are intended for the benefit
- ---------
of, and shall be enforceable by, Liberty Partners Holdings 11, L.L.C. ("LPH")
---
and Riverside Rudolph, L.L.C. ("RRL" and together with LPH, the "Investors").
--- ---------
Certain definitions are set forth in Section 1 of this Agreement.
NOW, THEREFORE, the Company, Technologies and Executive agree as
follows:
1. Definitions. As used herein, the following terms shall have the
-----------
following meanings.
"Board" means the Company's board of directors.
-----
"Cause" means the determination by the Board, in the exercise of its
-----
good faith judgment, that: (a) Executive has committed a fraud, felony or other
serious act of moral turpitude; or (b) Executive has breached his duty of
loyalty to the Company and its Subsidiaries, or (c) Executive has committed a
material breach of this Agreement, and if such breach is capable of cure, such
breach is not cured or remedied and continues; after fifteen (15) business days
from the date on
<PAGE>
which written notice of the breach was first provided to Executive by the
Company or its Subsidiaries.
"Executive Stock" shall continue to be Executive Stock in the hands of
---------------
any holder other than Executive (except for the Company and the Investors and
except for transferees in a Public Sale or Sale of the Company), and except as
otherwise provided herein, each such other holder of Executive Stock shall
succeed to all rights and obligations attributable to Executive as a holder of
Executive Stock hereunder. Executive Stock shall also include shares of the
Company's capital stock issued with respect to Executive Stock by way of a stock
split, stock dividend or other recapitalization.
"Fair Market Value" of each share of Executive Stock, means with
-----------------
respect to Common Stock or Preferred Stock, respectively, the average of the
closing prices of the sales of such shares on all securities exchanges on which
such shares may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day such shares are
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such shares
are not quoted in the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days consisting of
the day as of which the Fair Market Value is being determined and the 20
consecutive business days prior to such day. If at any time the Common Stock or
the Preferred Stock is not listed on any securities exchange or quoted in the
NASDAQ System or the over-the-counter market, the Fair Market Value of the
Common Stock shall be the fair value as determined in good faith by the Board,
and the Fair Market Value of the Preferred Stock shall be the aggregate
liquidation value of such shares plus all accrued but unpaid dividends thereon.
"Good Reason" means the resignation by Executive of employment with
-----------
Technologies as a direct result of either (i) a substantial diminution of duties
and responsibilities of Executive as an employee of Technologies, (ii) the
relocation of Executive outside of the Flanders, New Jersey area, (iii) any
requirement by the Company that Executive make a material misstatement or
omission in any financial report or governmental filing, or (iv) a material
breach of this Agreement by the Company or Technologies in the absence of a
material breach of this Agreement by Executive, which diminution or breach, as
the case may be, has continued 15 days after delivery of written notice by
Executive to Technologies stating Executive's intent to resign as a consequence
of such diminution or breach; provided that Executive's resignation actually
-------- ----
occurs within 30 days following the occurrence of the diminution or breach.
"Independent Third Party" means any Person or group of Persons who,
-----------------------
immediately prior to the contemplated transaction, does not own in excess of 5%
of the common equity of the Company's Common Stock on a fully-diluted basis, who
is not controlling, controlled by or under common control with any such 5% owner
of the Company's Common Stock and who is not the spouse or descendent (by birth
or adoption) of any such 5% owner of the Company's Common Stock.
"Permanent Disability" means that Executive, as determined by the
--------------------
Board in its good faith judgement, is unable to perform, by reason of physical
or mental incapacity, his duties or obligation
-2-
<PAGE>
under this Agreement, for a period of 90 consecutive days or a total period of
120 days in any 365 day period.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Public Sale" means any sale pursuant to a registered public offering
-----------
under the 1933 Act or any sale to the public pursuant to Rule 144 promulgated
under the 1933 Act effected through a broker, dealer or market maker.
"Qualified Public Offering" means the sale, in an underwritten public
-------------------------
offering registered under the 1933 Act, of shares of the Company's Common Stock
having an aggregate offering value of at least $30 million.
"Sale of the Company" means the sale of the Company to an Independent
-------------------
Third Party or affiliated group of Independent Third Parties pursuant to which
such party or parties acquire (i) capital stock of the Company possessing the
voting power to elect a majority of the Company's board of directors (whether by
merger, consolidation or sale or transfer of the Company's capital stock) or
(ii) all or substantially all of the Company's assets determined on a
consolidated basis.
"1933 Act" means the Securities Act of 1933, as amended from time to
--------
time.
"Subsidiary" means with respect to any Person, any corporation,
----------
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of the shares
of stock entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interests thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other business
entity.
2. Employment. Technologies agrees to employ Executive, and
----------
Executive hereby accepts employment with Technologies, upon the terms and
conditions set forth in this Agreement.
(a) Position and Duties. Executive shall serve as a Vice President of
-------------------
Engineering of Technologies and shall have such duties which are consistent with
such position as may be assigned by the President, the Chief Executive Officer
of Technologies and the board of directors of Technologies from time to time.
Executive shall devote his best efforts and his full business time
-3-
<PAGE>
and attention (except for permitted vacation periods and reasonable periods of
illness or other incapacity which does not constitute Permanent Disability) to
the business and affairs of Technologies.
(b) Term. Subject to the provisions of Section 3(a), the "Term" of
---- ----
this Agreement shall be for one (1) year from the date hereof, unless earlier
terminated by either party as provided in Section 3(a) below, subject to
automatic renewals for successive one (1) year Terms unless either party has
delivered written notice not less than 90 days prior to the expiration of the
initial Term or any renewal thereof.
(c) Compensation. Commencing from the Effective Date, Technologies
------------
shall pay to Executive, during Executive's employment by Technologies, an annual
base salary ("Base Salary") of $135,000. Such Base Salary shall be paid in
-----------
accordance with Technologies' normal payroll procedures and cycles and shall be
subject to withholding of applicable taxes and governmental charges in
accordance with federal and state law. Executive's Base Salary shall be
reviewed by the Board annually, and at a minimum, shall be increased annually as
of the anniversary of the date hereof by an amount equal to the product of the
Base Salary theretofore in effect multiplied by a fraction of which (i) the
numerator is the Consumer Price Index for All Urban Consumers - New Jersey
(1982/84 = 100) (the "Index"), prepared by the Bureau of Labor Statistics of the
-----
United States Department of Labor (or if the Index is not then published, the
most nearly comparable index) of the month immediately preceding such date and
(ii) the denominator is the Index for the month immediately preceding the last
date on which the Base Salary has been adjusted pursuant to this sentence, or,
if not previously adjusted, the month preceding the date of this Agreement;
provided, however that the Board shall not reduce the Base Salary. Executive
- -------- -------
will also be eligible to receive an annual bonus in an amount as determined by
the Board equal to up to twenty-five percent (25%) of Executive's then current
Base Salary. The determination of the amount of such bonus by the Board shall
be based (i) seventy-five percent (75%) upon the Company's achievement of
Company performance goals established by the Company's Chief Executive Officer
and the Board, and (ii) twenty-five percent (25%) upon Executive's achievement
of personal performance goals established by the Company's Chief Executive
Officer and the Board.
(d) Benefits. In addition to the Base Salary paid to Executive by
--------
Technologies, Executive shall be eligible to participate, during Executive's
employment by Technologies, in such benefits programs as may be appropriate for
Executive's position with Technologies and as approved by the Board.
(e) Expenses. Technologies shall reimburse Executive for all
--------
reasonable expenses incurred by him in the course of performing his duties and
responsibilities under this Agreement which are consistent with Technologies
policies in effect from time to time with respect to travel, entertainment and
other business expenses, subject to Technologies' requirements with respect to
reporting and documentation of such expenses.
(f) Key Man Life Insurance. Technologies, in its sole discretion and
----------------------
at its sole expense, may obtain a key man life insurance policy on Executive for
the benefit of Technologies,
-4-
<PAGE>
and Executive shall cooperate with Technologies in obtaining such insurance and
shall submit to medical examinations as required.
(g) Closing Bonus. Upon consummation of the transactions completed by
-------------
the Purchase Agreement, the Company shall pay to Executive a one-time bonus of
$125,000 (the "Closing Bonus") within five (5) business days following the date
-------------
hereof. The Closing Bonus shall be paid in accordance with the Company's normal
payroll procedures and shall be subject to withholding of applicable taxes and
governmental changes in accordance with federal and state law.
3. Termination and Severance.
-------------------------
(a) Termination. Executive and Technologies shall each have the right
-----------
to terminate the Term and Executive's employment with Technologies (a
"Termination," and the date of such termination, the "Termination Date") at any
----------- ----------------
time and for any reason or for no reason at all, by delivering written notice to
the other party, and upon any such Termination, Technologies shall have no
further obligations to Executive hereunder, except as set forth in Sections 3(b)
and (c) below.
(b) Base Salary through Termination; COBRA. Executive shall be
--------------------------------------
entitled to receive his Base Salary earned through his Termination Date,
prorated on a daily basis together with all accrued but unpaid vacation time
earned through his Termination Date. In addition, Executive shall be entitled
to COBRA benefits after the Termination Date. Except as set forth in Section
3(c), Executive shall not be entitled to receive his Base Salary or any bonuses
or other benefits from Technologies for any period after the Termination Date.
(c) Severance Obligations. In the event Executive's employment is
---------------------
terminated by Technologies without Cause or Executive resigns from employment
with Technologies with Good Reason, following such Termination and upon
execution by Executive of a general release in favor of the Company (i)
satisfying all applicable requirements of the Older Workers Benefit-Protection
Act, including expiration of the applicable revocation period, and (ii)
releasing any and all claims against the Company and its Subsidiaries and
affiliates, Technologies shall continue to pay Executive (or his estate) his
annual Base Salary (as in effect on the Termination Date) over a period of one
year following the Termination Date, payable in accordance with the Company's
normal payroll procedures and cycles and shall be subject to withholding of
applicable taxes and governmental charges in accordance with federal and state
law. In the event that Executive's employment with the Company is terminated
for any other reason, the Company shall have no obligation to make any severance
or other payment to or on behalf of Executive. Notwithstanding the foregoing,
in the event that Executive shall breach any of his obligations under Sections
5, 6 or 7 of this Agreement, the Company shall be relieved from and shall have
no further obligation to pay Executive any amounts to which Executive would
otherwise be entitled pursuant to this Section 3.
4. Executive Stock Options. The Company shall grant to Executive an
-----------------------
option to purchase shares of the Company's Common Stock pursuant to the terms of
the Company's 1996 Stock Option Plan and a definitive option agreement between
the Company and Executive.
-5-
<PAGE>
5. Confidential Information. Executive acknowledges that the
------------------------
information, observations and data concerning the business or affairs of the
Company and its Subsidiaries ("Confidential Information") obtained by him as a
------------------------
result of his employment with Technologies (including employment with
Technologies prior to the date of this Agreement), and as a result of his
ownership of capital stock of the Company are the property of the Company and
its Subsidiaries. Therefore, Executive agrees that he shall not disclose to any
person or use for any other purpose, any Confidential Information without the
prior written consent of the Board, unless and to the extent such Confidential
Information becomes generally known to and available for use by the public other
than as a result of Executive's acts or omissions to act. Executive shall
deliver to the Company and its Subsidiaries on Executive's Termination Date, or
at any other time the Company or Technologies may request, all memoranda, notes,
plans, records, reports, computer tapes and software, and all other material,
documents and data (and all copies thereof) relating to the Confidential
Information, Work Product (as defined below) and the business of the Company and
its Subsidiaries which Executive may then possess or have under his control.
6. Inventions and Patents. Executive agrees that all inventions,
----------------------
innovations, improvements, developments, methods, designs, analyses, drawings,
reports and all similar or related information which relates to the Company's or
its Subsidiaries' actual or currently planned, research and development or
existing or future products or services and which are conceived, developed or
made by Executive while employed by the Company and its Subsidiaries (including
employment with Technologies prior to the date of this Agreement) ("Work
----
Product") are the property of and belong to the Company and its Subsidiaries.
Executive understands and acknowledges that, at the request of the Company or
Technologies, he must assign to the Company and its Subsidiaries any
development, invention or information that (i) relates to the actual or
anticipated business research or development of the Company or its Subsidiaries,
or (ii) results from any work performed by Executive for the Company and its
Subsidiaries. Executive shall promptly disclose such Work Product to
Technologies and the Company and perform all actions requested by the Board
(whether during or after Executive's employment) to establish and confirm the
Company's and its Subsidiaries' ownership of any Work Product (including,
without limitation, the execution and delivery of assignments, consents, powers
of attorney and other instruments).
7. Non-Competition, Non-Solicitation.
---------------------------------
(a) Executive acknowledges that during the course of his employment
with Technologies (including employment with Technologies prior to the date of
this Agreement) he will become familiar with the Company's and its Subsidiaries'
trade secrets and with other Confidential Information and that his services will
be of a special, unique and extraordinary value to the Company and its
Subsidiaries. Therefore, Executive agrees that, during the time he is employed
by Technologies and for two years thereafter (the "Non-Competition Period"),
----------------------
Executive shall not directly or indirectly own, operate, manage, control,
participate in, consult with, advise, provide services for, or in any manner
engage in (including by himself or in association with any person, firm,
corporate or other business organization or through any entity), any business
engaged in the businesses in which the Company and its
-6-
<PAGE>
Subsidiaries is engaged or then proposes to engage as of Executive's Termination
Date within any geographical area in which the Company or its Subsidiaries
engages in business. Nothing herein shall prohibit Executive from being a
passive owner of not more than 5% of the outstanding stock of any class of a
corporation which is publicly traded, or any other passive minority investment
in any investment fund, limited partnership or similar entity, whether or not
publicly traded, and so long as Executive has no active participation in the
business of such entity.
(b) During the time Executive is employed by Technologies and for two
years thereafter (the "Non-Solicitation Period"), Executive shall not, directly
-----------------------
or indirectly through another entity, (i) induce or attempt to induce any
employee of the Company or its Subsidiaries to leave their employ, or in anyway
interfere with the relationship between the Company or its Subsidiaries and any
employee thereof, including without limitation, inducing or attempting to induce
any employee, group of employees or any other person or persons to interfere
with the business or operations of the Company and its Subsidiaries, (ii) hire
any person who was an employee of the Company or its Subsidiaries at any time
during Executive's employment period, or (iii) induce or attempt to induce,
whether directly or indirectly, any customer, supplier, distributor, franchisee,
licensee or other business relation of the Company and its Subsidiaries to cease
doing business with the Company or its Subsidiaries, or in any way interfere
with the relationship between any such customer, supplier, distributor,
franchisee, licensee or business relation and the Company and its Subsidiaries.
(c) Executive agrees that: (i) the covenants set forth in this Section
7 are reasonable in geographical and temporal scope and in all other respects,
(ii) the Company and Technologies would not have entered into this Agreement but
for the covenants of Executive contained herein, and (iii) the covenants
contained herein have been made in order to induce the Company and Technologies
to enter into this Agreement.
(d) If, at the time of enforcement of this Section 7 a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under the circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstance shall be
substituted for the stated duration, scope or area and that the courts shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(e) Executive recognizes and affirms that in the event of his breach
of any provision of this Section 7 or Sections 5 or 6, money damages would be
inadequate and the Company and its Subsidiaries would have no adequate remedy at
law. Accordingly, Executive agrees that in the event of a breach or threatened
breach by Executive of any of the provisions of this Section 7 or Sections 5 or
6, the Company and its Subsidiaries, in addition and supplementary to other
rights and remedies existing in its favor, may apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce or prevent any violations of the provisions
hereof (without posting a bond or other security).
8. Purchase and Sale of Executive Stock.
------------------------------------
(a) Upon execution of this Agreement, Executive shall purchase, and
the Company shall sell: (i) 195.71 shares of Common Stock at a price of $20.44
per share, and (ii) 160
-7-
<PAGE>
shares of Preferred Stock at a price of $100 per share for an aggregate purchase
price of $20,000. The Company shall deliver to Executive the certificates
representing such shares of Common Stock and Preferred Stock, and Executive
shall deliver to the Company a cashier's or certified check or wire transfer of
funds in the aggregate amount of $20,000. The closing of the purchase and sale
of the Executive Stock shall take place simultaneously with the closing of the
transactions contemplated by the Purchase Agreement.
(b) In connection with the purchase and sale of the Executive Stock
hereunder, Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by Executive pursuant to
this Agreement shall be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of
the 1933 Act, or any applicable state securities laws, and the
Executive Stock shall not be disposed of in contravention of the 1933
Act or any applicable state securities laws.
(ii) Executive is an executive officer of the Company's
significant operating subsidiary, is sophisticated in financial
matters and is able to evaluate the risks and benefits of the
investment in the Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Stock for an indefinite period of time
because the Executive Stock has not been registered under the 1933 Act
and, therefore, cannot be sold unless subsequently registered under
the 1933 Act or an exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
the Executive Stock, and has had full access to such other information
concerning the Company as he has requested. Executive has reviewed or
has had an opportunity to review, a copy of the Purchase Agreement,
dated as of the date hereof, between the Company and those other
persons named therein, and Executive is familiar with the transactions
contemplated thereby. Executive has also reviewed, or has had an
opportunity to review, the following documents: (A) the Company's
Certificate of Incorporation and Bylaws; (B) the loan agreements,
notes and related documents with Technologies' senior and subordinated
lenders; and (C) Technologies' audited financial statements dated as
of December 31, 1995.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Executive
do not and shall not conflict with, violate or cause a breach of any
agreement, contract or instrument to which Executive is a party or any
judgment, order or decree to which Executive is subject.
(c) As an inducement to the Company to issue the Executive Stock to
Executive, and as a condition thereto, Executive acknowledges and agrees that:
-8-
<PAGE>
(i) neither the issuance of the Executive Stock to Executive
nor any provision contained herein shall entitle Executive to remain
in the employment of Technologies or the Company or affect the right
of Technologies to terminate Executive's employment at any time; and
(ii) the Company shall have no duty or obligation to disclose
to Executive, and Executive shall have no right to be advised of, any
material information regarding the Company and its Subsidiaries at any
time prior to, upon or in connection with the repurchase of Executive
Stock upon Executive's Termination or as otherwise provided hereunder,
except for reports or information used by the Board to determine the
Fair Market Value of the Executive Stock purchased from Executive.
(d) The Company and Executive acknowledge and agree that this
Agreement has been executed and delivered, and the Executive Stock has been
issued hereunder, in connection with and as part of the compensation and
incentive arrangements between the Company and Executive.
9. Vesting of Executive Stock. The Executive Stock shall be fully vested
--------------------------
immediately as of the consummation of the purchase and sale of the Executive
Stock.
10. Call and Put Options.
--------------------
(a) In the event of Executive's Termination, the Executive Stock
(whether held by Executive or one or more of Executive's transferees) shall be
subject to repurchase by the Company and/or the Investors at their option
pursuant to the terms and conditions set forth in this Section 10 (the "Call
----
Option").
- ------
(b) In the event of a Termination either without Cause or with Good
Reason or as a result of the death or Permanent Disability of Executive,
Executive (or Executive's Estate) shall have the option to cause the Company to
repurchase all of the Executive Stock held by Executive as of the date of the
Termination pursuant to the terms and conditions set forth in this Section 10
(the "Put Option") by delivering a written election notice (the "Put Notice") to
---------- ----------
the Company within 60 days of Executive's Termination Date.
(c) The purchase price for each share of Executive Stock purchased
from the Executive pursuant to the Call Option or the Put Option shall be the
Fair Market Value for such shares as determined by the Board.
(d) The Board may elect to purchase all of the Executive Stock by
delivering written notice (the "Call Notice") to the holder or holders of the
-----------
Executive Stock within 90 days after the Termination Date. The Call Notice
shall set forth the number of shares of Executive Stock to be acquired from each
holder of Executive Stock, the aggregate consideration to be paid for such
shares and the time and place for the closing of the transaction.
(e) If for any reason the Company does not elect to purchase all of
the Executive Stock pursuant to the Call Option, the Investors shall be entitled
to exercise the Call Option for the
-9-
<PAGE>
shares of Executive Stock the Company has not elected to purchase (the
"Available Shares"). As soon as practicable after the Company has determined
----------------
that there will be Available Shares, but in any event within 30 days after the
Termination Date, the Company shall give written notice (the "Option Notice") to
-------------
the Investors setting forth the number of Available Shares and the purchase
price for the Available Shares. The Investors may elect to purchase any or all
of the Available Shares by giving written notice to the Company within 15 days
after the Option Notice has been given by the Company. If the Investors elect to
purchase an aggregate number of shares greater than the number of Available
Shares, the Available Shares shall be allocated among the Investors based upon
the number of shares of Common Stock (which for purposes of this Section 10
shall include shares of the Company's Class A Common Stock any other class or
series of common equity which may hereafter be issued by the Company) then owned
by each Investor on a fully-diluted basis. If the Investors have in the
aggregate elected to purchase less than all of the Available Shares, the
Available Shares which the Investors have not elect to purchase (the "Remaining
---------
Available Shares") shall be reoffered to the Investors who have elected to
- ----------------
purchase Available Shares for an additional five day period, and each Investor
may elect to purchase all (but not less than all) of such Investor's pro rata
share of all Remaining Available Shares (based on such holder's proportionate
ownership of all shares of Common Stock on a fully-diluted basis owned by the
Investors who have elected to purchase Remaining Available Shares). As soon as
practicable, and in any event within ten days after the expiration of the 15 day
period set forth above, the Company shall notify each holder of Executive Stock
as to the number of shares being purchased from such holder by the Investors
(the "Supplemental Call Notice"). At the time the Company delivers the
------------------------
Supplemental Call Notice to the holder(s) of Executive Stock, the Company shall
also deliver written notice to each Investor setting forth the number of shares
such Investor is entitled to purchase, the aggregate purchase price and the time
and place of the closing of the transaction.
(f) The closing of the purchase of the Executive Stock pursuant to
the Call Option shall take place on the date designated by the Company in the
Call Notice or Supplemental Call Notice, which date shall not be more than 60
days nor less than 15 days after the delivery of the later of either such notice
to be delivered. The closing of the purchase of the Executive Stock pursuant to
the Put Option shall take place on any date designated by the Company in a
written notice delivered to Executive, which date shall not be more than 60 days
nor less than five days after the delivery by Executive of the Put Notice. The
Company and/or the Investors shall pay for the Executive Stock to be purchased
pursuant to the Call Option or Put Option, as applicable, by delivery of, in the
case of each Investor, a check or wire transfer of funds and, in the case of the
Company at its option (i) a check or wire transfer of funds, or (ii) a
subordinated note or notes bearing interest (payable quarterly) at a rate per
annum equal to the prime rate announced from time to time by State Street Bank &
Trust Co. (or any successor entity thereto) plus 2%, or (iii) a combination of
both (i) and (ii), in the aggregate amount of the purchase price for such
shares; provided that the Company shall use reasonable efforts to make all such
repurchases with a check or wire transfer of funds; and provided further, in the
event Executive exercises the Put Option and the Company pays for such
repurchase by delivery of a subordinated note, the Company shall repay such
indebtedness as soon as it is permitted under the Company's loan agreements and
by applicable law. Notwithstanding anything to the contrary contained herein,
any notes issued by the Company pursuant to this Section 10(f) shall be subject
to any restrictive covenants to which the Company or
-10-
<PAGE>
its Subsidiaries is subject at the time of such purchase. The purchasers of
Executive Stock hereunder shall be entitled to receive customary representations
and warranties from the sellers regarding such sale of shares (including
representations and warranties regarding good title to such shares, free and
clear of any liens or encumbrances) and to require all sellers' signatures be
guaranteed by a national bank or reputable securities broker.
(g) The right and obligation of the Company and the right of the
Investors to repurchase the Executive Stock pursuant to this Section 10 shall
terminate upon the first to occur of the Sale of the Company or a Qualified
Public Offering.
(h) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If
any such restrictions prohibit the repurchase of Executive Stock hereunder which
the Company is otherwise entitled or required to make, or the payment of
dividends or loans to the Company to make such repurchases, the time periods
provided in this Section 10 shall be suspended, and the Company may, or shall
(as applicable), make such repurchases as soon as it is permitted to do so under
such restrictions.
11. Restrictions on Transfer.
------------------------
(a) Stockholders Agreement. Shares of Executive Stock are subject to
----------------------
the restrictions on transfer set forth in the Stockholders Agreement, dated as
of the date hereof, by and among Executive and each of the other persons named
therein.
(b) The certificates representing Executive Stock shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED ON JUNE 14, 1996, HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH
IN A MANAGEMENT AGREEMENT BETWEEN THE COMPANY AND
__________ DATED AS OF JUNE 14, 1996, AS AMENDED AND
MODIFIED FROM TIME TO TIME. A COPY OF SUCH AGREEMENT MAY
BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
-11-
<PAGE>
(c) Except in connection with a Sale of the Company, no holder of
Executive Stock may sell, transfer or dispose of any Executive Stock (except
pursuant to an effective registration statement under the 1933 Act) without
first delivering to the Company an opinion of counsel (reasonably acceptable in
form and substance to the Company) that neither registration nor qualification
under the 1933 Act and applicable state securities laws is required in
connection with such transfer.
12. Holdback Agreement. Executive agrees not to effect any public sale
------------------
or distribution of Common Stock during the seven days prior to, and the 180-day
period beginning on, the effective date of any underwritten registration of
equity securities of the Company or its Subsidiaries, unless otherwise agreed to
by the Board and the underwriters managing such registration. The restrictions
on transfer set forth in this Section 12 shall continue with respect to each
share of Executive Stock until the date on which such share has been transferred
in a Public Sale.
13. Notices. All notices or communications provided for herein shall be
-------
deemed to be validly given as of the date of delivery, if delivered personally,
and three days after mailing, if sent by registered or certified mail, return
receipt requested, addressed to the Company at its headquarters or executive
offices or to Executive at his address as set forth from time to time in the
records of the Company.
14. Miscellaneous.
-------------
(a) Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(b) Complete Agreement. This Agreement embodies the complete
------------------
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way,
and Executive agrees to forever release and discharge any claims, damages, or
other causes of action relating to Executive's employment with Technologies
prior to the date hereof, including, without limitation, relating to payments
(if any) owed to Executive pursuant to the terms of Technologies By-Laws
(including the By-Laws of Rudolph Research Corporation as predecessor
corporation to Technologies).
(c) Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(d) Governing Law. The corporate law of the State of Delaware shall
-------------
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other
-12-
<PAGE>
issues and questions concerning the construction, validity, interpretation and
enforceability of this Agreement and the exhibits and schedules hereto shall be
governed by, and construed in accordance with, the laws of the State of New
York, without giving effect to any choice of law or conflicts of law rules or
provisions (whether of the State of New York or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of New York.
(e) Successors and Assigns. Except as otherwise provided herein, this
----------------------
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and Executive and their respective successors and assigns; provided that
the rights and obligations of Executive under this Agreement shall not be
assignable without the prior written approval of the Board.
(f) Remedies. Each of the parties to this Agreement will be entitled
--------
to enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorneys' fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages may not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(g) Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended and waived only with the prior written consent of the Company and
Executive.
* * * *
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this MANAGEMENT
AGREEMENT as of the date first written above.
RUDOLPH TECHNOLOGIES, INC.
By: /s/ Paul F. McLaughlin
-------------------------------
Name: Paul F. McLaughlin
-----------------------------
Title: President
----------------------------
RUDOLPH HOLDINGS CORPORATION
By: /s/ Paul F. McLaughlin
-------------------------------
Name: Paul F. McLaughlin
-----------------------------
Title: President
----------------------------
/s/ Robert Loiterman
-----------------------------------
Robert Loiterman
<PAGE>
EXHIBIT 10.8
RUDOLPH HOLDINGS CORPORATION
MANAGEMENT AGREEMENT
--------------------
THIS MANAGEMENT AGREEMENT ("Agreement") is made as of May 5, 1997 (the
---------
"Effective Date"), by and between Rudolph Holdings Corporation, a Delaware
corporation (the "Company"), Rudolph Technologies, Inc., a New Jersey
corporation ("Technologies"), and Steven R. Roth ("Executive").
WHEREAS, Executive desires to be employed as a Vice President of
Technologies, and Technologies desires to employ Executive as a Vice President
and to be assured of its right to his services on the terms and conditions
hereinafter set forth, and Executive is willing to agree to such employment on
such terms and conditions;
WHEREAS, the Company and Executive desire to enter into an agreement
pursuant to which Executive shall purchase, and the Company shall sell, 65.24
shares of the Company's Class B Common Stock, par value $.01 per share (the
"Common Stock"), and 53.33 shares of the Company's Series A Preferred Stock, par
value $.01 per share (the "Preferred Stock") for an aggregate purchase price of
---------------
$6,976.92. All shares of Common Stock and Preferred Stock purchased by
Executive hereunder are referred to herein as "Executive Stock," and except as
---------------
set forth in Section 1 hereof, Executive Stock shall not include any other
shares of capital stock of the Company (including, without limitation, shares of
Common Stock issued to Executive upon the exercise of certain stock options
granted to Executive); and
WHEREAS, the execution and delivery of this Agreement by the Company,
Technologies and Executive is a condition to the consummation of the
transactions contemplated by the Stock and Warrant Purchase Agreement dated as
of the date hereof by and among the Company and those Persons named therein (the
"Purchase Agreement"). Certain provisions of this Agreement are intended for
------------------
the benefit of, and shall be enforceable by, Liberty Partners Holdings 11,
L.L.C. ("LPH") and Riverside Rudolph, L.L.C. ("RRL" and together with LPK the
"Investors"). Certain definitions are set forth in Section 1 of this Agreement.
NOW, THEREFORE, the Company, Technologies and Executive agree as
follows:
1. Definitions. As used herein, the following terms shall have the
-----------
following meanings.
"Board" means the Company's Board of Directors.
-----
"Cause" means the determination by the Board, in the exercise of
-----
its good faith judgment, that: (a) Executive has committed a fraud, felony or
other serious act of moral turpitude, or (b) Executive has breached his duty of
loyalty to the Company and its Subsidiaries, or (c) Executive has committed a
material breach of this Agreement, and if such breach is capable of cure, such
breach is not cured or remedied and continues after fifteen (15) business days
from the date on which written notice of the breach was first provided to
Executive by the Company or its Subsidiaries.
<PAGE>
"Executive Stock" shall continue to be Executive Stock in the
---------------
hands of any holder other than Executive (except for the Company and the
Investors and except for transferees in a Public Sale or Sale of the Company),
and except as otherwise provided herein, each such other holder of Executive
Stock shall succeed to all rights and obligations attributable to Executive as a
holder of Executive Stock hereunder. Executive Stock shall also include shares
of the Company's capital stock issued with respect to Executive Stock by way of
a stock split, stock dividend or other recapitalization.
"Fair Market Value" of each share of Executive Stock, means with
-----------------
respect to Common Stock or Preferred Stock, respectively, the average of the
closing prices of the sales of such shares on all securities exchanges on which
such shares may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day such shares are
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such shares
are not quoted in the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days consisting of
the day as of which the Fair Market Value is being determined and the 20
consecutive business days prior to such day. If at any time the Common Stock or
the Preferred Stock is not listed on any securities exchange or quoted in the
NASDAQ System or the over-the-counter market, the Fair Market Value of the
Common Stock shall be the fair value as determined in good faith by the Board,
and the Fair Market Value of the Preferred Stock shall be the aggregate
liquidation value of such shares plus all accrued but unpaid dividends thereon.
"Good Reason" means the resignation by Executive of employment
-----------
with Technologies as a direct result of either (i) a substantial diminution of
duties and responsibilities of Executive as an employee of Technologies, (ii)
the relocation of Executive outside of the Flanders, New Jersey area, (iii) any
requirement by the Company that Executive make a material misstatement or
omission in any financial report or governmental filing, or (iv) a material
breach of this Agreement by the Company or Technologies in the absence of a
material breach of this Agreement by Executive, which diminution or breach, as
the case may be, has continued 15 days after delivery of written notice by
Executive to Technologies stating Executive's intent to resign as a consequence
of such diminution or breach; provided that Executive's resignation actually
--------
occurs within 30 days following the occurrence of the diminution or breach.
"Independent Third Party" means any Person or group of Persons
-----------------------
who, immediately prior to the contemplated transaction, does not own in excess
of 5% of the Company's Common Stock on a fully-diluted basis, who is not
controlling, controlled by or under common control with any such 5% owner of the
Company's Common Stock and who is not the spouse or descendent (by birth or
adoption) of any such 5% owner of the Company's Common Stock.
"Permanent Disability" means that Executive, as determined by the
--------------------
Board in its good faith judgment, is unable to perform, by reason of physical or
mental incapacity, his duties or obligation under this Agreement, for a period
of 90 consecutive days or a total period of 120 days in any 365 day period.
-2-
<PAGE>
"Person" means an individual, a partnership, a corporation, a
------
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Public Sale" means any sale pursuant to a registered public
-----------
offering under the 1933 Act or any sale to the public pursuant to Rule 144
promulgated under the 1933 Act effected through a broker, dealer or market
maker.
"Qualified Public Offering" means the sale, in an underwritten
-------------------------
public offering registered under the 1933 Act, of shares of the Company's Common
Stock having an aggregate offering value of at least $30 million.
"Sale of the Company" means the sale of the Company to an
-------------------
Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) capital stock of the Company
possessing the voting power to elect a majority of the Company's board of
directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
"1933 Act" means the Securities Act of 1933, as amended from
--------
time to time.
"Subsidiary" means with respect to any Person, any corporation,
----------
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of the shares
of stock entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interests thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other business
entity.
2. Employment. Technologies agrees to employ Executive, and
----------
Executive hereby accepts employment with Technologies, upon the terms and
conditions set forth in this Agreement.
(a) Position and Duties. Executive shall serve as a Vice
-------------------
President of Technologies and shall have such duties which are consistent with
such position as may be assigned by the President, the Chief Executive Officer
of Technologies and the board of directors of Technologies from time to time.
Executive shall devote his best efforts and his full business time and attention
(except for permitted vacation periods and reasonable periods of illness or
other incapacity which does not constitute Permanent Disability) to the business
and affairs of Technologies.
-3-
<PAGE>
(b) Term. Subject to the provisions of Section 3(a), the
----
"Term" of this Agreement shall be for one (1) year from the date hereof, unless
earlier terminated by either party as provided in Section 3(a) below, subject to
automatic renewals for successive one (1) year Terms unless either party has
delivered written notice not less than 90 days prior to the expiration of the
initial Term or any renewal thereof.
(c) Compensation. Commencing from the Effective Date,
------------
Technologies shall pay to Executive, during Executive's employment by
Technologies, an annual base salary ("Base Salary") of $105,000. Such Base
-----------
Salary shall be paid in accordance with Technologies' normal payroll procedures
and cycles and shall be subject to withholding of applicable taxes and
governmental charges in accordance with federal and state law. Executives' Base
Salary shall be subject to annual review by the Board. Executive will also be
eligible to receive an annual bonus in an amount as determined by the Board
equal to up to twenty percent (20%) of Executive's then current Base Salary. The
determination of the amount of such bonus by the Board shall be based (i)
seventy-five percent (75%) upon the Company's achievement of Company performance
goals established by the Company's Chief Executive Officer and the Board, and
(ii) twenty-five percent (25%) upon Executive's achievement of personal
performance goals established by the Company's Chief Executive Officer and the
Board.
(d) Benefits. In addition to the Base Salary paid to Executive
--------
by Technologies, Executive shall be eligible to participate, during Executive's
employment by Technologies, in such benefits programs as may be appropriate for
Executive's position with Technologies and as approved by the Board.
(e) Expenses. Technologies shall reimburse Executive for all
--------
reasonable expenses incurred by him in the course of performing his duties and
responsibilities under this Agreement which are consistent with Technologies's
policies in effect from time to time with respect to travel, entertainment and
other business expenses, subject to Technologies's requirements with respect to
reporting and documentation of such expenses.
(f) Key Man Life Insurance. Technologies, in its sole
----------------------
discretion and at its sole expense, may obtain a key man life insurance policy
on Executive for the benefit of Technologies, and Executive shall cooperate with
Technologies in obtaining such insurance and shall submit to medical
examinations as required.
3. Termination and Severance.
-------------------------
(a) Termination. Executive and Technologies shall each have
-----------
the right to terminate the Term and Executive's employment with Technologies (a
"Termination," and the date of such termination, the "Termination Date") at any
-----------
time and for any reason or for no reason at all, by delivering written notice to
the other party, and upon any such Termination, Technologies shall have no
further obligations to Executive hereunder, except as set forth in Sections 3(b)
and (c) below.
(b) Base Salary through Termination: COBRA. Executive shall be
--------------------------------------
entitled to receive his Base Salary earned through his Termination Date,
prorated on a daily basis together with
-4-
<PAGE>
all accrued but unpaid vacation time earned through his Termination Date. In
addition, Executive shall be entitled to COBRA benefits after the Termination
Date. Except as set forth in Section 3(c), Executive shall not be entitled to
receive his Base Salary or any bonuses or other benefits from Technologies for
any period after the Termination Date.
(c) Severance Obligations. In the event Executive's employment
---------------------
is terminated by Technologies without Cause or Executive resigns from employment
with Technologies with Good Reason, following such Termination and upon
execution by Executive of a general release in favor of the Company (i)
satisfying all applicable requirements of the Older Workers Benefit Protection
Act, including expiration of the applicable revocation period, and (ii)
releasing any and all claims against the Company and its Subsidiaries and
affiliates, Technologies shall pay Executive (or his estate) one half of his
annual Base Salary plus an additional one month of Base Salary for each full
year Executive is employed with Technologies (as of the Termination Date) not to
exceed one year Base Salary. Payments are to be paid in accordance with the
Company's normal payroll procedures and cycles and shall be subject to
withholding of applicable taxes and governmental charges in accordance with
federal and state law. In the event that Executive's employment with the
Company is terminated for any other reason, the Company shall have no obligation
to make any severance or other payment to or on behalf of Executive.
Notwithstanding the foregoing, in the event that Executive shall breach any of
his obligations under Sections 5, 6 or 7 of this Agreement, the Company shall be
relieved from and shall have no further obligation to pay Executive any amounts
to which Executive would otherwise be entitled pursuant to this Section 3.
4. Executive Stock Options. The Company shall grant to Executive an
-----------------------
option to purchase shares of the Company's Common Stock pursuant to the terms of
the Company's 1996 Stock Option Plan and a definitive option agreement between
the Company and Executive.
5. Confidential Information. Executive acknowledges that the
------------------------
information, observations and data concerning the business or affairs of the
Company and its Subsidiaries ("Confidential Information") obtained by him as a
------------------------
result of his employment with Technologies (including employment with
Technologies prior to the date of this Agreement), and as a result of his
ownership of capital stock of the Company are the property of the Company and
its Subsidiaries. Therefore, Executive agrees that he shall not disclose to any
person or use for any other purpose, any Confidential Information without the
prior written consent of the Board, unless and to the extent such Confidential
Information becomes generally known to and available for use by the public other
than as a result of Executive's acts or omissions to act. Executive shall
deliver to the Company and its Subsidiaries on Executive's Termination Date, or
at any other time the Company or Technologies may request, all memoranda, notes,
plans, records, reports, computer tapes and software, and all other material,
documents and data (and all copies thereof) relating to the Confidential
Information, Work Product (as defined below) and the business of the Company and
its Subsidiaries which Executive may then possess or have under his control.
6. Inventions and Patents. Executive agrees that all inventions,
----------------------
innovations improvements, developments, methods, designs, analyses, drawings,
reports and all similar or related information which relates to the Company's or
its Subsidiaries' actual or currently planned, research and development or
existing or future products or services and which are conceived, developed or
made by Executive while employed by the Company and its Subsidiaries (including
-5-
<PAGE>
employment with Technologies prior to the date of this Agreement) ("Work
Product") are the property of and belong to the Company and its Subsidiaries.
Executive understands and acknowledges that, at the request of the Company or
Technologies, he must assign to the Company and its Subsidiaries any
development, invention or information that (i) relates to the actual or
anticipated business research or development of the Company or its Subsidiaries,
or (ii) results from any work performed by Executive for the Company and its
Subsidiaries. Executive shall promptly disclose such Work Product to
Technologies and the Company and perform all actions requested by the Board
(whether during or after Executive's employment) to establish and confirm the
Company's and its Subsidiaries' ownership of any Work Product (including,
without limitation, the execution and delivery of assignments, consents, powers
of attorney and other instruments).
7. Non-Competition, Non-Solicitation.
---------------------------------
(a) Executive acknowledges that during the course of his
employment with Technologies (including employment with Technologies prior to
the date of this Agreement) he will become familiar with the Company's and its
Subsidiaries' trade secrets and with other Confidential Information and that his
services will be of a special, unique and extraordinary value to the Company and
its Subsidiaries. Therefore, Executive agrees that, during the time he is
employed by Technologies and for two years thereafter (the "Non-Competition
---------------
Period"), Executive shall not directly or indirectly own, operate, manage,
- ------
control, participate in, consult with, advise, provide services for, or in any
manner engage in (including by himself or in association with any person, firm,
corporate or other business organization or through any entity), any business
engaged in the businesses in which the Company and its Subsidiaries is engaged
or then proposes to engage as of Executive's Termination Date within any
geographical area in which the Company or its Subsidiaries engages in business.
Nothing herein shall prohibit Executive from being a passive owner of not more
than 5% of the outstanding stock of any class of a corporation which is publicly
traded, or any other passive minority investment in any investment fund, limited
partnership or similar entity, whether or not publicly traded, and so long as
Executive has no active participation in the business of such entity.
(b) During the time Executive is employed by Technologies and for
two years thereafter (the "Non-Solicitation Period"), Executive shall not,
-----------------------
directly or indirectly through another entity, (i) induce or attempt to induce
any employee of the Company or its Subsidiaries to leave their employ, or in any
way interfere with the relationship between the Company or its Subsidiaries and
any employee thereof, including without limitation, inducing or attempting to
induce any employee, group of employees or any other person or persons to
interfere with the business or operations of the Company and its Subsidiaries,
(ii) hire any person who was an employee of the Company or its Subsidiaries at
any time during Executive's employment period, or (iii) induce or attempt to
induce, whether directly or indirectly, any customer, supplier, distributor,
franchisee, licensee or other business relation of the Company and its
Subsidiaries to cease doing business with the Company or its Subsidiaries, or in
any way interfere with the relationship between any such customer, supplier,
distributor, franchisee, licensee or business relation and the Company and its
Subsidiaries.
(c) Executive agrees that: (i) the covenants set forth in this
Section 7 are reasonable in geographical and temporal scope and in all other
respects, (ii) the Company and Technologies would not have entered into this
Agreement but for the covenants of Executive
-6-
<PAGE>
contained herein, and (iii) the covenants contained herein have been made in
order to induce the Company and Technologies to enter into this Agreement.
(d) If, at the time of enforcement of this Section 7 a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under the circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstance shall be
substituted for the stated duration, scope or area and that the courts shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(e) Executive recognizes and affirms that in the event of his
breach of any provision of this Section 7 or Sections 5 or 6, money damages
would be inadequate and the Company and its Subsidiaries would have no adequate
remedy at law. Accordingly, Executive agrees that in the event of a breach or
threatened breach by Executive of any of the provisions of this Section 7 or
Sections 5 or 6, the Company and its Subsidiaries, in addition and supplementary
to other rights and remedies existing in its favor, may apply to any court of
law or equity of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce or prevent any violations of the
provisions hereof (without posting a bond or other security).
8. Purchase and Sale of Executive Stock.
------------------------------------
(a) Upon execution of this Agreement, Executive shall purchase,
and the Company shall sell: (i) 65.24 shares of Common Stock at a price of
$20.44 per share, and (ii) 53.33 shares of Preferred Stock at a price of $100
per share for an aggregate purchase price of $6,977. The Company shall deliver
to Executive the certificates representing such shares of Common Stock and
Preferred Stock, and Executive shall deliver to the Company a cashier's or
certified check or wire transfer of funds in the aggregate amount of $6,976.92.
The closing of the purchase and sale of the Executive Stock shall take place on
May 5, 1997.
(b) In connection with the purchase and sale of the Executive
Stock hereunder, Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by Executive
pursuant to this Agreement shall be acquired for Executive's own
account and not with a view to, or intention of, distribution
thereof in violation of the 1933 Act, or any applicable state
securities laws, and the Executive Stock shall not be disposed of
in contravention of the 1933 Act or any applicable state
securities laws.
(ii) Executive is an executive officer of the Company's
significant operating subsidiary, is sophisticated in financial
matters and is able to evaluate the risks and benefits of the
investment in the Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Stock for an indefinite period of
time because the Executive Stock has not been registered under
the 1933 Act and, therefore, cannot be sold unless subsequently
registered under the 1933 Act or an exemption from such
registration is available.
-7-
<PAGE>
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
the Executive Stock and has had full access to such other information
concerning the Company as he has requested. Executive has reviewed or
has had an opportunity to review, a copy of the Purchase Agreement,
dated as of the date hereof, between the Company and those other
persons named therein, and Executive is familiar with the transactions
contemplated thereby. Executive has also reviewed, or has had an
opportunity to review, the following documents: (A) the Company's
Certificate of Incorporation and Bylaws; (B) the loan agreements,
notes and related documents with Technologies's senior and
subordinated lenders; and (C) Technologies' audited financial
statements dated as of December 31, 1996.
(v) This Agreement constitutes the legal, valid, and binding
obligation of Executive, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Executive
do not and shall not conflict with, violate or cause a breach of any
agreement, contract or instrument to which Executive is a party or any
judgment, order or decree to which Executive is subject.
(c) As an inducement to the Company to issue the Executive Stock to
Executive, and as a condition thereto, Executive acknowledges and agrees that:
(i) neither the issuance of the Executive Stock to Executive nor
any provision contained herein shall entitle Executive to remain in
the employment of Technologies or the Company or affect the right of
Technologies to terminate Executive's employment at any time; and
(ii) the Company shall have no duty or obligation to disclose to
Executive, and Executive shall have no right to be advised of, any
material information regarding the Company and its Subsidiaries at any
time prior to, upon or in connection with the repurchase of Executive
Stock upon Executive's Termination or as otherwise provided hereunder,
except for reports or information used by the Board to determine the
Fair Market Value of the Executive Stock purchased from Executive.
(d) The Company and Executive acknowledge and agree that this
Agreement has been executed and delivered, and the Executive Stock has been
issued hereunder, in connection with and as part of the compensation and
incentive arrangements between the Company and Executive.
9. Vesting of Executive Stock. The Executive Stock shall be fully vested
--------------------------
immediately as of the consummation of the purchase and sale of the Executive
Stock.
10. Call and Put Options.
---------------------
(a) In the event of Executive's Termination, the Executive Stock
(whether held by Executive or one or more of Executive's transferees) shall be
subject to repurchase by the Company and/or the Investors at their option
pursuant to the terms and conditions set forth in this Section 10 (the "Call
Option").
-8-
<PAGE>
(b) In the event of a Termination either without Cause or with Good
Reason or as a result of the death or Permanent Disability of Executive,
Executive (or Executive's Estate) shall have the option to cause the Company to
repurchase all of the Executive Stock held by Executive as of the date of the
Termination pursuant to the terms and conditions set forth in this Section 10
(the "Put Option") by delivering a written election notice (the "Put Notice") to
---------- ----------
the Company within 60 days of Executive's Termination Date.
(c) The purchase price for each share of Executive Stock purchased
from the Executive pursuant to the Call Option or the Put Option shall be the
Fair Market Value for such shares as determined by the Board.
(d) The Board may elect to purchase all of the Executive Stock by
delivering written notice (the "Call Notice") to the holder or holders of the
-----------
Executive Stock within 90 days after the Termination Date. The Call Notice
shall set forth the number of shares of Executive Stock to be acquired from each
holder of Executive Stock, the aggregate consideration to be paid for such
shares and the time and place for the closing of the transaction.
(e) If for any reason the Company does not elect to purchase all of
the Executive Stock pursuant to the Call Option, the Investors shall be entitled
to exercise the Call Option for the shares of Executive Stock the Company has
not elected to purchase (the "Available Shares"). As soon as practicable after
----------------
the Company has determined that there will be Available Shares, but in any event
within 30 days after the Termination Date, the Company shall give written notice
(the "Option Notice") to the Investors setting forth the number of Available
-------------
Shares and the purchase price for the Available Shares. The Investors may elect
to purchase any or all of the Available Shares by giving written notice to the
Company within 15 days after the Option Notice has been given by the Company.
If the Investors elect to purchase an aggregate number of shares greater than
the number of Available Shares, the Available Shares shall be allocated among
the Investors based upon the number of shares of Common Stock (which for
purposes of this Section 10 shall include shares of the Company's Class A Common
Stock any other class or series of common equity which may hereafter be issued
by the Company) then owned by each Investor on a fully-diluted basis. If the
Investors have in the aggregate elected to purchase less than all of the
Available Shares, the Available Shares which the Investors have not elect to
purchase (the "Remaining Available Shares") shall be reoffered to the Investors
--------------------------
who have elected to purchase Available Shares for an additional five-day period,
and each Investor may elect to purchase all (but not less than all) of such
Investor's pro rata share of all Remaining Available Shares (based on such
holder's proportionate ownership of all shares of Common Stock on a fully-
diluted basis owned by the Investors who have elected to purchase Remaining
Available Shares). As soon as practicable, and in any event within ten days
after the expiration of the 15-day period set forth above, the Company shall
notify each holder of Executive Stock as to the number of shares being purchased
from such holder by the Investors (the "Supplemental Call Notice"). At the time
------------------------
the Company delivers the Supplemental Call Notice to the holder(s) of Executive
Stock, the Company shall also deliver written notice to each Investor setting
forth the number of shares such Investor is entitled to purchase, the aggregate
purchase price and the time and place of the closing of the transaction.
(f) The closing of the purchase of the Executive Stock pursuant to
the Call Option shall take place on the date designated by the Company in the
Call Notice or Supplemental
-9-
<PAGE>
Call Notice, which date shall not be more than 60 days nor less than 15 days
after the delivery of the later of either such notice to be delivered. The
closing of the purchase of the Executive Stock pursuant to the Put Option shall
take place on any date designated by the Company in a written notice delivered
to Executive, which date shall not be more than 60 days nor less than five days
after the delivery by Executive of the Put Notice. The Company and/or the
Investors shall pay for the Executive Stock to be purchased pursuant to the Call
Option or Put Option, as applicable, by delivery of, in the case of each
Investor, a check or wire transfer of funds and, in the case of the Company at
its option (i) a check or wire transfer of funds, or (ii) a subordinated note or
notes bearing interest (payable quarterly) at a rate per annum equal to the
prime rate announced from time to time by State Street Bank & Trust Co. (or any
successor entity thereto) plus 2%, or (iii) a combination of both (i) and (ii),
in the aggregate amount of the purchase price for such shares; provided that the
Company shall use reasonable efforts to make all such repurchases with a check
or wire transfer of funds; and provided further, in the event Executive
exercises the Put Option and the Company pays for such repurchase by delivery of
a subordinated note, the Company shall repay such indebtedness as soon as it is
permitted under the Company's loan agreements and by applicable law.
Notwithstanding anything to the contrary contained herein, any notes issued by
the Company pursuant to this Section 10(f) shall be subject to any restrictive
covenants to which the Company or its Subsidiaries is subject at the time of
such purchase. The purchasers of Executive Stock hereunder shall be entitled to
receive customary representations and warranties from the sellers regarding such
sale of shares (including representations and warranties regarding good title to
such shares, free and clear of any liens or encumbrances) and to require all
sellers' signatures be guaranteed by a national bank or reputable securities
broker.
(g) The rights and obligations of the Company and the rights of the
Investors to repurchase the Executive Stock pursuant to this Section 10 shall
terminate upon the first to occur of the Sale of the Company or a Qualified
Public Offering.
(h) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If
any such restrictions prohibit the repurchase of Executive Stock hereunder which
the Company is otherwise entitled or required to make, or the payment of
dividends or loans to the Company to make such repurchases, the time periods
provided in this Section 10 shall be suspended, and the Company may, or shall
(as applicable), make such repurchases as soon as it is permitted to do so under
such restrictions.
11. Restrictions on Transfer.
------------------------
(a) Stockholders Agreement. Shares of Executive Stock are subject to
the restrictions on transfer set forth in the Stockholders Agreement, dated as
of the date hereof, by and among Executive and each of the other persons named
therein.
(b) The certificates representing Executive stock shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED ON JUNE 14, 1996, HAVE NOT BEEN
-10-
<PAGE>
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH
IN A MANAGEMENT AGREEMENT BETWEEN THE COMPANY AND
_____________ DATED AS OF JUNE 14, 1996, AS AMENDED AND
MODIFIED FROM TIME TO TIME. A COPY OF SUCH AGREEMENT MAY
BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(c) Except in connection with a Sale of the Company, no holder of
(executive Stock may sell, transfer or dispose of any Executive Stock (except
pursuant to an effective registration statement under the 1933 Act) without
first delivering to the Company an opinion of counsel (reasonably acceptable in
form and substance to the Company) that neither registration nor qualification
under the 1933 Act and applicable state securities laws is required in
connection with such transfer.
12. Holdback Agreement. Executive agrees not to effect any public sale or
------------------
distribution of Common Stock during the seven days prior to, and the 180-day
period beginning on, the effective date of any underwritten registration of
equity securities of the Company or its Subsidiaries, unless otherwise agreed to
by the Board and the underwriters registration. The restrictions on transfer set
forth in this Section 12 shall continue with respect to each share of Executive
Stock until the date on which such share has been transferred in a Public Sale.
13. Notices. All notices or communications provided for herein shall be
-------
deemed to be validly given as of the date of delivery, if delivered personally,
and three days after mailing, if sent by registered or certified mail, return
receipt requested, addressed to the Company at its headquarters or executive
offices or to Executive at his address as set forth from time to time in the
records of the Company.
14. Miscellaneous.
-------------
(a) Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(b) Complete Agreement. This Agreement embodies the complete
------------------
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements
-11-
<PAGE>
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
(c) Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(d) Governing Law. The corporate law of the State of Delaware shall
-------------
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to any
choice of law or conflicts of law rules or provisions (whether of the State of
New York or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of New York.
(e) Successors and Assigns. Except as otherwise provided herein,
----------------------
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and Executive and their respective successors and assigns; provided that
the rights and obligations of Executive under this Agreement shall not be
assignable without the prior written approval of the Board.
(f) Remedies. Each of the parties to this Agreement will be
--------
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorneys' fees) caused by any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that any
party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(g) Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended and waived only with the prior written consent of the Company and
Executive.
(h) Stockholders Agreement. By signing this management agreement,
----------------------
the executive agrees to be bound to the rights and obligations of the
Stockholders Agreement dated June 14, 1996.
-12-
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Executive
Employment Agreement as of the date first written above.
RUDOLPH TECHNOLOGIES' INC.
By /s/ Paul F. McLaughlin
-----------------------------
Title: President
---------------------------
RUDOLPH HOLDINGS CORPORATION
By /s/ Paul F. McLaughlin
-----------------------------
Title: President
---------------------------
/s/ Steven R. Roth
---------------------------------
STEVEN R. ROTH
-13-
<PAGE>
EXHIBIT 10.9
RUDOLPH HOLDINGS CORPORATION
REGISTRATION AGREEMENT
----------------------
THIS REGISTRATION AGREEMENT is made as of June 14, 1996, by and among
Rudolph Holdings Corporation, a Delaware corporation (the "Company"), Liberty
-------
Partners Holdings 11, L.L.C. ("LPH"), Riverside Rudolph, L.L.C. ("Riverside"),
--- ---------
Dr. Richard F. Spanier ("Spanier"), Paul F. McLaughlin ("McLaughlin"), and Dale
------- ----------
Moorman ("Moorman"). LPH, Riverside, Spanier, McLaughlin and Moorman are
-------
collectively referred to herein as the "Investors" and individually as an
---------
"Investor." Unless otherwise provided in this Agreement, capitalized terms used
- ---------
herein are defined in Section 8.
The Company and LPH and Riverside are parties to a Stock and Warrant
Purchase Agreement of even date herewith (the "Purchase Agreement"), the Company
------------------
and McLaughlin are parties to a Management Agreement of even date herewith (the
"Management Agreement"), and the Company and each of Moorman and Spanier are
--------------------
parties to an Investor Purchase Agreement of even date herewith (an "Investor
--------
Purchase Agreement"). In consideration of the purchase and sale of securities
- ------------------
of the Company as provided in such agreements, the Company has agreed to provide
the registration rights set forth in this Agreement. The execution and delivery
of this Agreement is a condition to the Closing under the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Demand Registrations.
--------------------
(a) Requests for Registration. At any time after the date hereof and
-------------------------
prior to June 15, 2006, the holders of a majority of the Liberty Registrable
Securities may, request registration under the Securities Act of 1933, as
amended (the "Securities Act") of all or any portion of their Registrable
--------------
Securities on Form S-1, S-2 or any similar long-form registration ("Long-Form
---------
Registrations"), and the holders of a majority of the Liberty Registrable
- -------------
Securities or the holders of a majority of Riverside Registrable Securities may
request registration under the Securities Act of all or any portion of their
Registrable Securities on Form S-3 or any similar short-form registration
("Short-Form Registrations"), if available. All registrations requested
- --------------------------
pursuant to this Section 1(a) are referred to herein as "Demand Registrations."
--------------------
Each request for a Demand Registration shall specify the approximate number of
Registrable Securities requested to be registered and the anticipated per share
price range for such offering. Within ten days after receipt of any such
request, the Company shall give written notice of such requested registration to
all other holders of Registrable Securities and, subject to the provisions of
this Section 1, shall include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within 15 days after the receipt of the Company's notice.
(b) Long-Form Registrations. The holders of Liberty Registrable
-----------------------
Securities shall be entitled to request two Long-Form Registrations in which the
Company shall pay all Registration Expenses. A registration shall not count as
one of the permitted Long-Form Registrations until it has become effective. No
Long-Form Registration shall count as one of the permitted Long-Form
Registrations unless the holders of the Liberty Registrable Securities
requesting such registration are able
<PAGE>
to register and sell at least 75% of the Registrable Securities they have
requested to be included in such registration; provided that in any event the
-------- ----
Company shall pay all Registration Expenses in connection with any registration
initiated as a Long-Form Registration whether or not it has become effective and
whether or not such Long-Form Registration is counted as one of the Long-Form
Registrations to which the holders of Registrable Securities are entitled.
(c) Short-Form Registrations. In addition to the Long-Form
------------------------
Registrations provided pursuant to Section 1(b), the holders of a majority of
the Liberty Registrable Securities or the holders of a majority of the Riverside
Registrable Securities shall be entitled to request two Short-Form Registrations
in which the Company shall pay all Registration Expenses; provided that the
-------- ----
aggregate offering value of the Registrable Securities requested to be
registered in any Short-Form Registration must equal at least $3,000,000.
Demand Registrations shall be Short-Form Registrations whenever the Company is
permitted to use any applicable short form. After the Company has become
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended, the Company shall use its reasonable best efforts to make Short-Form
Registrations available for the sale of Registrable Securities; provided that in
-------------
any event the Company shall pay all Registration Expenses in connection with any
registration initiated as a Short-Form Registration whether or not it has become
effective and whether or not such Short-Form Registration is counted as one of
the Short-Form Registrations to which the holders of Registrable Securities are
entitled.
(d) Priority on Demand Registrations. The Company shall not include
--------------------------------
in any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the holders of a majority of the Liberty
Registrable Securities included in such registration. If a Demand Registration
is an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold therein without adversely affecting the marketability of the
offering, the Company shall include in such registration (i) first, the
-----
Registrable Securities requested to be included pro rata among the respective
holders thereof on the basis of the amount of Registrable Securities owned by
each such holder and (ii) second, other securities requested to be included in
------
such registration to the extent permitted by the managing underwriters.
(e) Restrictions on Demand Registrations. The Company shall not be
------------------------------------
obligated to effect any Demand Registration initiated by the holders of Investor
Registrable Securities within 180 days after the effective date of a previous
Demand Registration or a registration in which the holders of Investor
Registrable Securities were given piggyback rights pursuant to Section 2. On no
more than one occasion during any twelve-month period after the Company has
consummated an initial public offering of its stock for its own account or for
the account of any holders of the Common Stock under the Securities Act, the
Company may postpone for up to 90 days the filing or the effectiveness of a
registration statement for a Demand Registration if the Company's board of
directors determines in good faith that such Demand Registration would
reasonably be expected to have an adverse effect on any proposal or plan by the
Company or any of its Subsidiaries to engage in any transaction; provided that
-------- ----
in such event, the holders of Investor Registrable Securities initially
requesting such Demand Registration shall be entitled to withdraw such request
and, if such request is withdrawn, such Demand Registration shall not count as
one of the permitted Demand Registrations hereunder and the Company shall pay
all Registration Expenses in connection with such registration.
(f) Selection of Underwriters. The Company's board of directors shall
-------------------------
have the right to select the investment banker(s) and manager(s) to administer
the offering, subject to the approval of
-2-
<PAGE>
the holders of a majority of Liberty Registrable Securities included in any
Demand Registration, which shall not be unreasonably withheld or delayed.
(g) Other Registration Rights. Except as provided in this Agreement,
-------------------------
the Company shall not grant to any Persons the right to request the Company to
register any capital stock or other equity securities of the Company, or any
securities convertible or exchangeable into or exercisable for such securities,
without the prior written consent of the holders of a majority of the Liberty
Registrable Securities; provided that the Company may grant rights to other
-------- ----
Persons to participate in Piggyback Registrations so long as such rights are
subordinate to the rights of the holders of Investor Registrable Securities with
respect to such Piggyback Registrations, as provided in paragraphs 2(c) and 2(d)
below.
2. Piggyback Registrations.
-----------------------
(a) Right to Piggybacks. Whenever the Company proposes to register
-------------------
any of its securities under the Securities Act (other than on Form S-4 or S-8)
and the registration form to be used may be used for the registration of
Registrable Securities (a "Piggyback Registration"), the Company shall give
----------------------
prompt written notice to all holders of Registrable Securities of its intention
to effect such a registration and, subject to the provisions of this Section 2,
shall include in such registration all Registrable Securities with respect to
which the Company has received written requests for inclusion therein within 20
days after the receipt of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
------------------
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
---------------------------------
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the marketability
of the offering, the Company shall include in such registration (i) first, the
-----
securities the Company proposes to sell, (ii) second, Registrable Securities
------
requested to be included, pro rata among the respective holders thereof on the
basis of the total number of Registrable Securities requested to be included
therein, and (iii) third, other securities requested to be included in such
-----
registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration
-----------------------------------
is an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company shall include
in such registration (i) first, the securities requested to be included therein
-----
by the holders requesting such registration and the Registrable Securities
requested to be included in such registration, pro rata among the holders of
such securities on the basis of the total number of securities so requested to
be included therein, and (ii) second, other securities requested to be included
------
in such registration.
(e) Selection of Underwriters. If any Piggyback Registration is an
-------------------------
underwritten offering, the selection of investment banker(s) and manager(s) for
the offering must be approved by the Company's board of directors, and the
separate approval of the holders of Investor Registrable Securities of the
investment banker(s) and manager(s) selected shall not be required.
-3-
<PAGE>
(f) Other Registrations. If the Company has previously filed a
-------------------
registration statement with respect to Registrable Securities pursuant to
Section 1 or pursuant to this Section 2, and if such previous registration has
not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least 180 days has elapsed from the effective date of such
previous registration.
3. Holdback Agreements.
-------------------
(a) Each holder of Registrable Securities shall not effect any public
sale or distribution (including sales pursuant to Rule 144) of equity securities
of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 180-day
period beginning on the effective date of any underwritten Demand Registration
or any underwritten Piggyback Registration in which Registrable Securities are
included (except as part of such underwritten registration), unless the
underwriters managing the registered public offering otherwise agree.
(b) The Company (c) shall not effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
180-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing the registered public offering
otherwise agree, and (d) shall cause each holder of at least 5% (on a fully-
diluted basis) of its Common Stock, or any securities convertible into or
exchangeable or exercisable for Common Stock, purchased from the Company at any
time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any public sale or distribution (including
sales pursuant to Rule 144) of any such securities during such period (except as
part of such underwritten registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
-----------------------
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective; provided
--------
that before filing a registration statement or prospectus or any amendments or
- ----
supplements thereto, the Company shall furnish to one or more counsel selected
by the holders of Registrable Securities covered by such registration statement
copies of all such documents proposed to be filed, which documents shall be
subject to the review and comment of such counsel;
(b) notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 90 days and comply with the provisions of the Securities Act with respect
to the disposition of all
-4-
<PAGE>
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller; provided that the Company shall not be required to (a) qualify generally
-------- ----
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subsection, (b) subject itself to taxation in any such
jurisdiction or (c) consent to general service of process in any such
jurisdiction;
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any material fact necessary to make the statements
therein not misleading, and, at the request of any such seller, the Company
shall prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its reasonable
efforts to secure designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing
that, to secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Securities
with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including effecting a stock split or a combination of
shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
-5-
<PAGE>
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder; and
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order.
If any such registration or comparable statement refers to any holder by name or
otherwise as the holder of any securities of the Company and if in its sole and
exclusive judgment, such holder is or might be deemed to be a controlling person
of the Company, such holder shall have the right to require (i) the insertion
therein of language, in form and substance satisfactory to such holder and
presented to the Company in writing, to the effect that the holding by such
holder of such securities is not to be construed as a recommendation by such
holder of the investment quality of the Company's securities covered thereby and
that such holding does not imply that such holder shall assist in meeting any
future financial requirements of the Company, or (ii) in the event that such
reference to such holder by name or otherwise is not required by the Securities
Act or any similar Federal statute then in force (or any rules and regulations
promulgated thereunder), the deletion of the reference to such holder; provided
--------
that with respect to this clause (ii) such holder shall furnish to the Company
- ----
an opinion of counsel to such effect, which opinion and counsel shall be
reasonably satisfactory to the Company.
5. Registration Expenses.
---------------------
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), shall be borne as provided in this
---------------------
Agreement, except that the Company shall, in any event, pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance and
the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees and disbursements of one
counsel who shall represent all holders including shares in such registration
(other than with respect to the rendering of legal opinions to the underwriters)
and who shall be chosen by the holders of a majority of the Registrable
Securities included in such registration and for the reasonable fees and
disbursements of each additional counsel retained by any holder of Registrable
Securities for the purpose of rendering a legal opinion to the underwriters on
behalf of such holder in connection with the underwriting of any Demand
Registration or Piggyback Registration.
-6-
<PAGE>
(c) To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
shall be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered.
6. Indemnification.
---------------
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in or based on any information or
affidavit so furnished in writing by such holder; provided that the obligation
-------- ----
to indemnify shall be individual to each holder and shall be limited to the net
amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification; provided that the failure to give prompt notice
-------- ----
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim shall not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
-7-
<PAGE>
(d) The indemnification provided for under this Agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities. The Company and
each holder of Registrable Securities also agree to make such provisions, as are
reasonably requested by any indemnified party, for contribution to such party in
the event the Company's or such holders' indemnification is unavailable for any
reason.
7. Participation in Underwritten Registrations. No Person may
-------------------------------------------
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements, (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements and (iii) agrees to
such other undertakings reasonably requested by the Company or the underwriters
to comply with the applicable provisions of the Securities Act and the
Securities Exchange Act; provided that no holder of Investor Registrable
-------- ----
Securities included in any underwritten registration shall be required to make
any representations or warranties to the Company or the underwriters other than
representations and warranties regarding such holder and such holder's intended
method of distribution.
8. Definitions.
-----------
"Common Stock" means the Class A Common Stock and Class B Common Stock
------------
of the Company.
"Investor Registrable Securities" means Registrable Securities issued
-------------------------------
or issuable to the Investors and their transferees.
"Liberty Registrable Securities" means Investor Registrable Securities
------------------------------
issued or issuable to LPH and its transferees.
"NASD" means the National Association of Securities Dealers.
----
"Option" means the option to purchase shares of Common Stock issued by
------
the Company to McLaughlin pursuant to the Company's 1996 Stock Option Plan.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Purchase Agreement" shall have the meaning set forth in the preamble
------------------
hereto.
"Registrable Securities" means (a) any Common Stock issued pursuant to
----------------------
the Purchase Agreement, the Management Agreement or the Investors Purchase
Agreement on the date hereof, (b) any Common Stock issued pursuant to the
Warrant, (c) any Common Stock issued upon exercise of the Option, and (d) any
Common Stock issued or issuable with respect to the securities referred to in
clauses (a), (b) or (c) above by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities (x) when they have been
distributed to the public pursuant to an offering registered under the
Securities Act, or (y) when they have been sold to
-8-
<PAGE>
the public through a broker, dealer or market maker in compliance with Rule 144
under the Securities Act (or any similar rule then in force). For purposes of
this Agreement, a Person shall be deemed to be a holder of Registrable
Securities whenever such Person has the right to acquire directly or indirectly
such Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected.
"Riverside Registrable Securities" means Investor Registrable
--------------------------------
Securities issued or issuable to Riverside and its transferees.
"Warrant" means the Common Stock Purchase Warrant issued by the
-------
Company to LPH pursuant to the Purchase Agreement.
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company shall not hereafter
--------------------------
enter into any agreement with respect to its securities which is inconsistent
with or violates the rights granted to the holders of Registrable Securities in
this Agreement.
(b) Adjustments Affecting Registrable Securities. The Company
--------------------------------------------
shall not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) Remedies. Any Person having rights under any provision of
--------
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein,
----------------------
the provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company, the holders of a majority of the Liberty
Registrable Securities, and the holders of a majority of the Riverside
Registrable Securities.
(e) Successors and Assigns. All covenants and agreements in this
----------------------
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not; provided that each such successor or assign
-------- ----
acquires at least 1,000 shares of Registrable Securities (as adjusted for any
stock split, stock dividend, combinations of shares or any other
recapitalization). In addition, whether or not any express assignment has been
made, the provisions of this Agreement which are for the benefit of purchasers
or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
-9-
<PAGE>
(f) Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(g) Counterparts. This Agreement may be executed simultaneously
------------
in two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
(h) Descriptive Headings. The descriptive headings of this
--------------------
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(i) Governing Law. The corporate law of the State of Delaware
-------------
shall govern all issues and questions concerning the relative rights of the
Company and its stockholders. All other issues and questions concerning the
construction, validity, interpretation and enforcement of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of New York, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
(j) Notices. All notices, demands or other communications to be
-------
given or delivered under or by reason of this Agreement shall be in writing and
shall be either personally delivered, sent by telecopy (with hard copy to follow
via regular mail), or mailed by registered or certified mail (return receipt
requested, postage prepaid) or sent to the recipient by reputable overnight
courier service (charges prepaid). Notices shall be deemed to have been given
hereunder when delivered personally, the day sent by telecopy, three days after
deposit in the U.S. mail and one day after deposit with a reputable overnight
courier service. Such notices, demands and other communications shall be sent to
each Investor at the address indicated in the books and records of the Company
and to the Company at the address indicated below:
If to the Company:
-----------------
Rudolph Holdings Corporation
c/o Rudolph Technologies, Inc.
One Rudolph Road
Flanders, New Jersey 07836
Attention: President
with a copy to:
--------------
Liberty Capital Partners, L.P.
1177 Avenue of the Americas, 34th Floor
New York, NY 10036
Attention: Steven J. Fisher
-10-
<PAGE>
or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
RUDOLPH HOLDINGS CORPORATION
By: /s/ Paul F. McLaughlin
----------------------------------
Its: President
---------------------------------
LIBERTY PARTNERS HOLDINGS 11, L.L.C.
By: Liberty Partners, L.P.
Its: Manager
By: Liberty Capital Partners, Inc.
Its: General Partner
By: /s/ Steven R. Roth
----------------------------------
Its: Vice-President
---------------------------------
RIVERSIDE RUDOLPH, L.L.C.
By: /s/ Brian
----------------------------------
Its: Vice-President
---------------------------------
/s/ Richard F. Spanier
--------------------------------------
DR. RICHARD F. SPANIER
/s/ Paul F. Laughlin
-------------------------------------
PAUL F. MCLAUGHLIN
/s/ Dale Moorman
-------------------------------------
DALE MOORMAN
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Registration Statement on Form S-1 of our
reports dated October 1, 1999 and September 7, 1999, relating to the financial
statements and financial statement schedule of Rudolph Technologies, Inc. and
Rudolph Research Corporation, which appear in such Registration Statement. We
also consent to the reference to us under the heading "Experts" in such
Registration Statement.
PricewaterhouseCoopers LLP
Florham Park, New Jersey
October 1, 1999
