<PAGE>
As filed with the Securities and Exchange Commission on July 24, 1995
Registration No. 33-59637
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------
ROBOTIC VISION SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 3827 11-2400145
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
425 RABRO DRIVE EAST
HAUPPAUGE, NEW YORK 11788
(516) 273-9700
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
----------
PAT V. COSTA, CHAIRMAN
ROBOTIC VISION SYSTEMS, INC.
425 RABRO DRIVE EAST
HAUPPAUGE, NEW YORK 11788
(516) 273-9700
FAX: (516) 273-1167
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------
COPIES TO:
IRA I. ROXLAND, ESQ. DAVID L. ENGEL, ESQ.
PARKER DURYEE ROSOFF & HAFT BINGHAM, DANA & GOULD
529 FIFTH AVENUE 150 FEDERAL STREET
NEW YORK, NEW YORK 10017 BOSTON, MASSACHUSETTS 02110
(212) 599-0500 (617) 951-8000
FAX: (212) 972-9487 FAX: (617) 951-8736
----------
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 being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
----------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Class Amount to be Proposed Maximum Proposed Maximum Amount of
of Securities to be Registered Registered Offering Price Aggregate Registration
Per Share Offering Price Fee
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value . . . . . . 2,500,000 shs.(1) N.A.(2) $20,828,097 $7,182.10
- ----------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value . . . . . . 24,000 shs.(3) $13.4375(4) $ 322,500 $ 111.21
- ----------------------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,293.31(5)
- ----------------------------------------------------------------------------------------------------------------------
<FN>
- -----------
(1) Represents the maximum number of shares of Common Stock, $.01 par value, of
Registrant ("RVSI Common Stock") issuable to stockholders and certain
optionholders of Acuity Imaging Inc. ("Acuity") upon consummation of the
merger of a wholly-owned subsidiary of Registrant with and into Acuity.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Section 6(b) of the Securities Act of
1933, as amended, and Rule 457(f)(1) thereunder on the basis of $8.375, the
average of the high and low sale prices of Common Stock, $.01 par value,
of Acuity ("Acuity Common Stock") as reported on The Nasdaq Small-Cap
Market on July 19, 1995, and 2,486,937, the maximum number of such shares
that may be received by Registrant in the merger as of July 19, 1995.
(3) Represents the maximum number of shares of RVSI Common Stock issuable upon
the exercise of rights that will be issued pursuant to the merger in
exchange for rights granted under Acuity's 1994 Employee Qualified Stock
Purchase Plan.
(4) The average of the high and low sales prices of RVSI Common Stock as
reported on The Nasdaq National Market on July 19, 1995.
(5) $8,197.91 previously paid.
</TABLE>
________________________________
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
===============================================================================
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 501(b) of Regulation S-K)
<TABLE>
<CAPTION>
PROXY STATEMENT/
S-4 ITEM PROSPECTUS CAPTION
-------- ------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement
and Outside Front Cover Page of Prospectus Facing Page of Registration
Statement; Cross Reference
Sheet; Cover Page of Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus Available Information; Table of Contents
3. Risk Factors, Ratio of
Earnings to Fixed Charges
and Other Information Summary; Risk Factors; Acuity and
RVSI Pro Forma Financial Statements
4. Terms of the Transaction Summary; The Proposed Merger;
Certain Federal Income Tax
Considerations; Description of
RVSI's Securities; Comparison of
Rights of Holders of Acuity Common
Stock and RVSI Common Stock
5. Pro Forma Financial Information Summary; Acuity and RVSI Pro
Forma Financial Statements
6. Material Contracts with the Company
Being Acquired Summary; The Proposed Merger
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters Selling Stockholders
8. Interests of Named Experts and Counsel The Proposed Merger; Legal
Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants Not Applicable
11. Incorporation of Certain Information by
Reference Not Applicable
<PAGE>
12. Information with Respect to S-2 or
S-3 Registrants Comparative Per Share Prices and
Dividends of RVSI Common Stock and
Acuity Common Stock; Selected
Historical Financial Data of RVSI;
Management's Discussion and
Analysis of Financial Condition and
Results of Operations of RVSI;
Business of RVSI; Financial
Statements of RVSI
13. Incorporation of Certain Information
by Reference Not Applicable
14. Information with Respect to Registrants
Other than S-3 or S-2 Registrants Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies Comparative Per Share Prices
and Dividends of RVSI Common
Stock and Acuity Common Stock;
Selected Historical Financial
Data of Acuity; Management's
Discussion and Analysis of
Financial Condition and
Results of Operations of
Acuity; Business of Acuity;
Financial Statements of Acuity
16. Information with Respect to S-2 or
S-3 Companies Not Applicable
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited Summary; Introduction; The
RVSI Special Meeting; The
Acuity Special Meeting; The
Proposed Merger; Election of
Directors; Management of
Acuity; Management of RVSI;
Principal Stockholders of
RVSI; Experts; Stockholder
Proposals
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer Not Applicable
</TABLE>
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
425 Rabro Drive East
Hauppauge, New York 11788
-----------------
NOTICE OF SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER , 1995
-----------------
NOTICE IS HEREBY GIVEN that a Special Meeting in lieu of Annual Meeting of
Stockholders (the "Special Meeting") of Robotic Vision Systems, Inc., a Delaware
corporation ("RVSI"), will be held on , September , 1995, commencing
at 10:00 A.M., local time, at The Bank of New York, One Wall Street, New York,
New York for the following purposes:
1. To consider and vote upon the approval and adoption of that certain
Agreement and Plan of Merger and Reorganization, dated as of April 27,
1995, as amended and restated as of July 11, 1995 (the "Merger Agreement"),
by and among RVSI, Acuity Imaging, Inc., a Delaware corporation ("Acuity"),
and RVSI Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of RVSI ("Subsidiary"), pursuant to which, among other matters,
(i) Subsidiary will be merged with and into Acuity (the "Merger") and
Acuity will become a wholly-owned subsidiary of RVSI, and (ii) each share
of Common Stock, $.01 par value, of Acuity will be converted into the right
to receive, and become exchangeable for (the "Exchange Ratio"), 0.766 of a
share of Common Stock, $.01 par value, of RVSI (the "RVSI Common Stock");
provided, however, that if the average of the closing prices of RVSI Common
Stock on The Nasdaq National Market for the 20 trading days ending on (and
including) the third day immediately prior to the Special Meeting (the
"Average Closing Price") is greater than $14.50, then the Exchange Ratio
shall be equal to the quotient of $11.107 divided by the Average Closing
Price (provided that in no event shall the Exchange Ratio be less than
0.555375); and if the Average Closing Price is less than $10.00, then the
Exchange Ratio shall be equal to the quotient of $7.66 divided by the
Average Closing Price (provided that in no event shall the Exchange Ratio
be more than 0.925626), all as more fully described in the accompanying
Joint Proxy Statement/Prospectus;
2. To elect nine directors of RVSI for the ensuing year;
3 To consider and vote upon a proposal to approve RVSI's Amended and
Restated 1991 Stock Option Plan;
4. To consider and vote upon a proposal to amend RVSI's Certificate of
Incorporation to increase the number of shares of RVSI Common Stock
authorized thereunder from 20,000,000 shares to 30,000,000 shares;
5. To ratify the selection of Deloitte & Touche LLP as RVSI's independent
auditors for the fiscal year ending September 30, 1995; and
6. To transact such other business incidental to the RVSI Special Meeting
as may properly come before such meeting or any adjournment or postponement
thereof.
A copy of the Merger Agreement is attached as Exhibit A to the accompanying
Joint Proxy Statement/Prospectus and is incorporated herein by reference.
<PAGE>
The Board of Directors of RVSI has fixed July , 1995 as the record date
for the determination of stockholders entitled to notice of and to vote at the
Special Meeting. The affirmative vote of holders of a majority of all
outstanding RVSI Common Stock present (in person or represented by proxy) at
the Special Meeting is necessary to approve and adopt the Merger Agreement and
for the taking of the other actions specified above at the Special Meeting
except the proposal to amend RVSI's Certificate of Incorporation. The
affirmative vote of holders of a majority of all outstanding RVSI Common Stock
entitled to vote at the Special Meeting is necessary to approve the proposal
to amend RVSI's Certificate of Incorporation.
Whether or not you plan to attend the Special Meeting, please complete,
date and sign the accompanying proxy card and mail it promptly in the enclosed
pre-addressed envelope, which requires no postage if mailed in the United
States.
Robert H. Walker
SECRETARY
Dated: July , 1995
<PAGE>
ACUITY IMAGING, INC.
9 Townsend West
Nashua, New Hampshire 03063
--------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER , 1995
--------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Special
Meeting") of Acuity Imaging, Inc., a Delaware corporation ("Acuity"), will be
held on , September , 1995, commencing at 10:00 A.M., local time, at
the offices of Acuity, 9 Townsend West, Nashua, New Hampshire, for the following
purposes:
1. To consider and vote upon the approval and adoption of that certain
Agreement and Plan of Merger and Reorganization, dated as of April 27,
1995, as amended and restated as of July 11, 1995 (the "Merger Agreement"),
by and among Acuity, Robotic Vision Systems, Inc., a Delaware corporation
("RVSI"), and RVSI Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of RVSI ("Subsidiary"), pursuant to which, among
other matters, (i) Subsidiary will be merged with and into Acuity (the
"Merger") and Acuity will become a wholly-owned subsidiary of RVSI, and
(ii) each share of Common Stock, $.01 par value, of Acuity (the "Acuity
Common Stock") will be converted into the right to receive, and become
exchangeable for (the "Exchange Ratio"), 0.766 of a share of Common Stock,
$.01 par value, of RVSI (the "RVSI Common Stock"); provided, however, that
if the average of the closing prices of RVSI Common Stock on The Nasdaq
National Market for the 20 trading days ending on (and including) the third
trading day immediately prior to the Special Meeting (the "Average Closing
Price") is greater than $14.50, then the Exchange Ratio shall be equal to
the quotient of $11.107 divided by the Average Closing Price (provided that
in no event shall the Exchange Ratio be less than 0.555375); and if the
Average Closing Price is less than $10.00, then the Exchange Ratio shall be
equal to the quotient of $7.66 divided by the Average Closing Price
(provided that in no event shall the Exchange Ratio be more than 0.925626),
all as more fully described in the accompanying Joint Proxy
Statement/Prospectus; and
2. To transact such other business incidental to the Special Meeting that
may properly come before such meeting or any adjournment or postponement
thereof.
A copy of the Merger Agreement is attached as Exhibit A to the accompanying
Joint Proxy Statement/Prospectus and is incorporated herein by reference.
The Board of Directors of Acuity has fixed July , 1995 as the record date
for the determination of stockholders entitled to notice of and to vote at the
Special Meeting. The affirmative vote of holders of a majority of all
outstanding Acuity Common Stock entitled to vote at the Special Meeting is
necessary to approve and adopt the Merger Agreement.
Whether or not you plan to attend the Special Meeting, please complete,
date and sign the accompanying proxy card and mail it promptly in the enclosed
pre-addressed envelope, which requires no postage if mailed in the United
States.
BY ORDER OF THE BOARD OF DIRECTORS
Ofer Gneezy
PRESIDENT
Dated: July , 1995
<PAGE>
Subject to Completion
Preliminary Prospectus dated July 24, 1995
ROBOTIC VISION SYSTEMS, INC.
and
ACUITY IMAGING, INC.
JOINT PROXY STATEMENT
------------
ROBOTIC VISION SYSTEMS, INC.
PROSPECTUS
------------
This Joint Proxy Statement/Prospectus ("Proxy Statement/ Prospectus") is
being furnished by Robotic Vision Systems, Inc., a Delaware corporation
("RVSI"), to holders of shares of Common Stock, $.01 par value, of RVSI (the
"RVSI Common Stock"), and by Acuity Imaging, Inc., a Delaware corporation
("Acuity"), to holders of shares of Common Stock, $.01 par value, of Acuity (the
"Acuity Common Stock"), in connection with the respective solicitation of
proxies by the Boards of Directors of RVSI and Acuity for use at the Special
Meeting in lieu of Annual Meeting of Stockholders of RVSI and the Special
Meeting of Stockholders of Acuity, respectively, to be held at the times and
places and for the purposes set forth in the accompanying Notice of Special
Meeting in lieu of Annual Meeting and Notice of Special Meeting of Stockholders
or any adjournment or postponement thereof (the "RVSI Special Meeting" and the
"Acuity Special Meeting," respectively, and collectively, the "Meetings").
At each of the Meetings, the stockholders of RVSI and Acuity will consider
and vote upon a proposal to approve and adopt that certain Agreement and Plan of
Merger and Reorganization, dated as of April 27, 1995, as amended and restated
as of July 11, 1995 (the "Merger Agreement"), by and among RVSI, RVSI
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of RVSI
("Subsidiary"), and Acuity. A copy of the Merger Agreement is attached to this
Proxy Statement/Prospectus as Exhibit A and is incorporated herein by reference.
Under the terms of the Merger Agreement, Acuity will become a wholly-owned
subsidiary of RVSI through the merger of Subsidiary with and into Acuity (the
"Merger"), and each outstanding share of Acuity Common Stock will be converted
into the right to receive, and become exchangeable for (the "Exchange Ratio"),
0.766 of a share of RVSI Common Stock; provided, however, that if the average of
the closing prices of RVSI Common Stock on The Nasdaq National Market for the 20
trading days ending on (and including) the third trading day immediately prior
to the RVSI Special Meeting (the "Average Closing Price") is greater than
$14.50, then the Exchange Ratio shall be equal to the quotient of $11.107
divided by the Average Closing Price (provided that in no event shall the
Exchange Ratio be less than 0.555375) (the "Minimum Collar"); and if the
Average Closing Price is less than $10.00, then the Exchange Ratio shall be
equal to the quotient of $7.66 divided by the Average Closing Price (provided
that in no event shall the Exchange Ratio be more than 0.925626) (the "Maximum
Collar" and collectively with the Minimum Collar, the "Collars").
----------
This Proxy Statement/Prospectus also constitutes the prospectus of RVSI
with respect to a maximum of 2,500,000 shares
<PAGE>
(less the aggregate amount of fractional shares that are paid in cash) of
RVSI Common Stock to be issued in exchange for the Acuity Common Stock in
connection with the Merger and up to 24,000 shares of RVSI Common Stock
issuable upon the exercise of rights that will be issued pursuant to the Merger
in exchange for rights granted under Acuity's 1994 Employee Qualified Stock
Purchase Plan. This Proxy Statement/Prospectus does not cover any resales of
RVSI Common Stock that will be received by affiliates of Acuity in connection
with the Merger, and no person is authorized to make any use of this Proxy
Statement/Prospectus in connection with any such resale. The Registration
Statement, of which this Proxy Statement/Prospectus forms a part, includes a
separate prospectus covering such resales.
This Proxy Statement/Prospectus and the enclosed form of proxy are first
being mailed to the respective stockholders of RVSI and Acuity on or about
July , 1995.
On July , 1995 the reported closing sales price of a share of RVSI Common
Stock on The Nasdaq National Market and the closing sales price of a share of
Acuity Common Stock on The Nasdaq Small-Cap Market was $ and $ ,
respectively. Acuity stockholders are urged to obtain current price
information for RVSI Common Stock in connection with their consideration of
the Merger Agreement and the transactions contemplated thereby.
----------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
The date of this Proxy Statement/Prospectus is July , 1995.
<PAGE>
AVAILABLE INFORMATION
RVSI and Acuity are subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Copies of such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Regional Offices of the Commission at 7 World Trade Center, New York, New York
10048 and Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60611. Copies of such material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549.
RVSI has filed a Registration Statement on Form S-4 (the "Registration
Statement") with the Commission pursuant to the provisions of the Securities Act
of 1933, as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder, of which this Proxy Statement/Prospectus is a part. As
permitted by the rules and regulations of the Commission, this Proxy
Statement/Prospectus omits certain information contained in the Registration
Statement. Such Registration Statement and the exhibits thereto may be
inspected and copied at the Commission's principal office in Washington, D.C. as
well as its Regional Offices in New York, New York and Chicago, Illinois at
their respective offices set forth above.
No person is authorized to give any information or to make any
representations other than those contained in this Proxy Statement/Prospectus,
and if given or made, such information or representations should not be relied
upon as having been authorized. This Proxy Statement/Prospectus does not
constitute an offer to sell, or a solicitation of an offer to purchase, the
securities offered by this Proxy Statement/Prospectus, or the solicitation of a
proxy, in any jurisdiction to or from any person to whom or from whom it is
unlawful to make such offer, solicitation of an offer or proxy solicitation in
such jurisdiction. Neither the delivery of this Proxy Statement/Prospectus nor
any distribution of securities pursuant to this Proxy Statement/Prospectus
shall, under any circumstances, create any implication that there has been no
change in the information set forth herein in the affairs of RVSI or Acuity
since the date of this Proxy Statement/Prospectus. However, if any material
change occurs during the period that this Proxy Statement/Prospectus is required
to be delivered, this Proxy Statement/Prospectus will be amended or supplemented
accordingly. All information regarding RVSI in this Proxy Statement/Prospectus
has been supplied by RVSI, and all information regarding Acuity in this Proxy
Statement/Prospectus has been supplied by Acuity.
<PAGE>
TABLE OF CONTENTS
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
THE PROPOSED MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . i
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Special Meeting of RVSI Stockholders . . . . . . . . . . . . . . . i
Special Meeting of Acuity Stockholders . . . . . . . . . . . . . . ii
The Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Required Vote. . . . . . . . . . . . . . . . . . . . . . . . . . . iii
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . v
Exchange of Stock Certificates . . . . . . . . . . . . . . . . . . v
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
Recommendations of the Boards of Directors and Reasons for the
Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
Opinion of Financial Advisors. . . . . . . . . . . . . . . . . . . vii
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . vii
Rights to Terminate and Amendments . . . . . . . . . . . . . . . .viii
Conflicts of Interest. . . . . . . . . . . . . . . . . . . . . . .viii
Comparison of Rights under Applicable Law. . . . . . . . . . . . .viii
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . ix
Certain Federal Income Tax Consequences of the Merger. . . . . . . ix
Absence of Appraisal Rights. . . . . . . . . . . . . . . . . . . . ix
Absence of Regulatory Filings and Approvals. . . . . . . . . . . . ix
Comparative Per Share Data of RVSI Common Stock and Acuity Common
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . x
Summary Historical Financial Information . . . . . . . . . . . . . . . xi
Summary Historical Financial Information of RVSI . . . . . . . . . xi
Summary Historical Financial Information of Acuity . . . . . . . .xiii
Summary Pro Forma Combined Financial Information . . . . . . . . .. . . xv
Comparative Per Share Information . . . . . . . . . . . . . . . . . . . xv
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risks Relating to the Merger. . . . . . . . . . . . . . . . . . . . . . 1
Risks Associated with Exchange Ratio . . . . . . . . . . . . . . . . 1
<PAGE>
Uncertainties of Post-Merger Operations. . . . . . . . . . . . . . 1
Fluctuations in the Semiconductor Market . . . . . . . . . . . . . 1
Market Impact of Future Sales of RVSI Common Stock . . . . . . . . 1
Absence of Dividends . . . . . . . . . . . . . . . . . . . . . . . 2
Possible Volatility of Stock Price . . . . . . . . . . . . . . . . 2
Risks Relating to Acuity. . . . . . . . . . . . . . . . . . . . . . . . 2
Recent Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Accumulated Deficit; History of Operating Losses;. . . . . . . . . 2
Loan Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Dependence on Distributors . . . . . . . . . . . . . . . . . . . . 3
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Recent Merger and Changes in Management. . . . . . . . . . . . . . 3
Risks Relating to RVSI. . . . . . . . . . . . . . . . . . . . . . . . . 4
Concentration of Revenues. . . . . . . . . . . . . . . . . . . . . 4
Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . . 5
Uncertainty of Patent Protection . . . . . . . . . . . . . . . . . 5
Major Supplier in Bankruptcy . . . . . . . . . . . . . . . . . . . 5
Export Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
THE RVSI SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Purpose of the Meeting. . . . . . . . . . . . . . . . . . . . . . . . . 6
Date, Time and Place; Record Date . . . . . . . . . . . . . . . . . . . 7
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
THE ACUITY SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . 9
Purpose of the Meeting. . . . . . . . . . . . . . . . . . . . . . . . . 9
Date, Time and Place; Record Date . . . . . . . . . . . . . . . . . . . 9
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
THE PROPOSED MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Closing; Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 12
Exchange of Stock Certificates. . . . . . . . . . . . . . . . . . . . . 13
No Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Background of the Merger. . . . . . . . . . . . . . . . . . . . . . . . 14
Recommendations of the Boards of Directors
and Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . 19
RVSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Acuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Opinions of Financial Advisors. . . . . . . . . . . . . . . . . . . . . 21
Janney Montgomery Scott Inc. . . . . . . . . . . . . . . . . . . . 21
Fechtor, Detwiler & Co., Inc.. . . . . . . . . . . . . . . . . . . 24
The Merger Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 32
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Conversion of Options. . . . . . . . . . . . . . . . . . . . . . . 33
Stock Purchase Rights. . . . . . . . . . . . . . . . . . . . . . . 33
Representations and Warranties . . . . . . . . . . . . . . . . . . 33
Certain Covenants and Agreements . . . . . . . . . . . . . . . . . 34
No Solicitation of Other Transactions. . . . . . . . . . . . . . . 36
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . 37
Termination and Expense Reimbursement. . . . . . . . . . . . . . . 39
Break-up Fees and Expense Reimbursement. . . . . . . . . . . . . . 40
Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . 41
Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . 42
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Absence of Regulatory Filings and Approvals . . . . . . . . . . . . . . 42
Restrictions on Sales by Affiliates . . . . . . . . . . . . . . . . . . 42
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . 43
<PAGE>
Listing on The Nasdaq National Market . . . . . . . . . . . . . . . . . 43
Appraisal Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS. . . . . . . . . . . . . . . . . . 44
ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Information Concerning Nominees . . . . . . . . . . . . . . . . . . . . 46
Information Concerning the Board. . . . . . . . . . . . . . . . . . . . 49
Reporting Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . 49
PROPOSAL TO APPROVE RVSI
AMENDED AND RESTATED 1991 STOCK OPTION PLAN. . . . . . . . . . . . . . . . . 50
Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Key Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 57
Administration . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Term of 1991 Option Plan . . . . . . . . . . . . . . . . . . . . . 57
Term of Options. . . . . . . . . . . . . . . . . . . . . . . . . . 57
Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Certain Rules for Certain Stockholders . . . . . . . . . . . . . . 52
Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Option Document; Restriction on Transferability. . . . . . . . . . 52
Amendments to the Option Document and the 1991 Option Plan . . . . 52
Tax Aspects of the 1991 Option Plan. . . . . . . . . . . . . . . . 53
Recommendation and Vote . . . . . . . . . . . . . . . . . . . . . . . . 54
LIMITATION OF SECTION 16(b) LIABILITY
UPON APPROVAL OF THE 1991 OPTION PLAN. . . . . . . . . . . . . . . . . . . . 54
PROPOSAL TO AMEND RVSI'S CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED CAPITALIZATION. . . . . . . . . . . . . . . . . . . . 55
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS. . . . . . . . . . . . . . 56
COMPARATIVE PER SHARE PRICES AND DIVIDENDS
OF RVSI COMMON STOCK AND ACUITY COMMON STOCK . . . . . . . . . . . . . . . . 56
SELECTED HISTORICAL FINANCIAL DATA OF ACUITY . . . . . . . . . . . . . . . . 58
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ACUITY. . . . . . . . . . . 60
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 60
Liquidity, Capital Resources and Financial Condition. . . . . . . . . . 73
SELECTED HISTORICAL FINANCIAL DATA OF RVSI . . . . . . . . . . . . . . . . . 76
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF RVSI . . . . . . . . . . 78
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 78
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . 82
Export Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Effect of Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Proposed Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . 83
<PAGE>
ACUITY AND RVSI
PRO FORMA COMBINED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . 84
BUSINESS OF ACUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Business and Products . . . . . . . . . . . . . . . . . . . . . . . . . 88
Compatibility with Factory Standards . . . . . . . . . . . . . . . 90
Flexible Product Architecture. . . . . . . . . . . . . . . . . . . 90
Easy to Use Products . . . . . . . . . . . . . . . . . . . . . . . 90
Hardware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Engineering Services. . . . . . . . . . . . . . . . . . . . . . . . . . 93
Marketing, Sales and Service. . . . . . . . . . . . . . . . . . . . . . 94
Materials and Supply. . . . . . . . . . . . . . . . . . . . . . . . . . 96
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 97
Research and Development. . . . . . . . . . . . . . . . . . . . . . . . 97
Environmental Conditions. . . . . . . . . . . . . . . . . . . . . . . . 98
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
COGNITION (Discontinued Operations) . . . . . . . . . . . . . . . . . . 99
MANAGEMENT OF ACUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Executive Officers and Directors. . . . . . . . . . . . . . . . . . . . 100
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 101
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year
End Option Values. . . . . . . . . . . . . . . . . . . . . . . . . 103
Employment Contracts and Termination of Employment Arrangements . . . . 103
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . 104
Certain Relationships and Related Transactions. . . . . . . . . . . . . 104
Security Ownership of Certain Beneficial Owners and Management. . . . . 105
DESCRIPTION OF ACUITY'S SECURITIES . . . . . . . . . . . . . . . . . . . . . 108
Acuity Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Transfer Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Reports to Stockholders . . . . . . . . . . . . . . . . . . . . . . . . 108
BUSINESS OF RVSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Vision Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Markets and Products. . . . . . . . . . . . . . . . . . . . . . . . . . 112
Semiconductor Lead Inspection Systems. . . . . . . . . . . . . . . 113
Aircraft Ice Detection System. . . . . . . . . . . . . . . . . . . 114
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Research and Development. . . . . . . . . . . . . . . . . . . . . . . . 116
Sources of Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Customer Service and Support. . . . . . . . . . . . . . . . . . . . . . 118
Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . 118
<PAGE>
Proprietary Protection. . . . . . . . . . . . . . . . . . . . . . . . . 118
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
MANAGEMENT OF RVSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Executive Officers and Directors. . . . . . . . . . . . . . . . . . . . 121
Prior to the Merger. . . . . . . . . . . . . . . . . . . . . . . . 121
After the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 122
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 122
Employee Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Directors' Compensation . . . . . . . . . . . . . . . . . . . . . . . . 124
Certain Relationships and Related Transactions. . . . . . . . . . . . . 124
PRINCIPAL STOCKHOLDERS OF RVSI . . . . . . . . . . . . . . . . . . . . . . . 125
DESCRIPTION OF RVSI'S SECURITIES . . . . . . . . . . . . . . . . . . . . . . 127
Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Transfer Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Reports to Stockholders . . . . . . . . . . . . . . . . . . . . . . . . 127
COMPARISON OF RIGHTS OF HOLDERS
OF ACUITY COMMON STOCK AND RVSI COMMON STOCK . . . . . . . . . . . . . . . . 128
Authorized Shares of Capital Stock. . . . . . . . . . . . . . . . . . . 128
Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . 129
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
CHANGE IN ACUITY'S ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . 130
STOCKHOLDER PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Agreement and Plan of Reorganization, dated as of April 27, 1995, as
amended and restated as of July 11, 1995, by and between Robotic
Vision Systems, Inc., RVSI Acquisition Corp. and Acuity
Imaging, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit A
Section 262 of the General Corporation Law of the State of Delaware . Exhibit B
Opinion of Janney Montgomery Scott Inc. . . . . . . . . . . . . . . . Exhibit C
Opinion of Fechtor, Detwiler & Co., Inc. . . . . . . . . . . . . . . Exhibit D
Amended and Restated 1991 Stock Option Plan . . . . . . . . . . . . . Exhibit E
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS.
STOCKHOLDERS ARE URGED TO REVIEW THE ENTIRE PROXY STATEMENT/PROSPECTUS AND THE
EXHIBITS THERETO. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED IN THIS
SUMMARY HAVE THE MEANINGS GIVEN TO THEM ELSEWHERE IN THIS PROXY
STATEMENT/PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROXY
STATEMENT/PROSPECTUS ASSUMES THAT THE EXCHANGE RATIO WILL EQUAL 0.766.
THE PROPOSED MERGER
GENERAL
This Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of RVSI Acquisition Corp. ("Subsidiary"), a newly-organized Delaware
corporation and a wholly-owned subsidiary of Robotic Vision Systems, Inc., a
Delaware corporation ("RVSI"), with and into Acuity Imaging, Inc., a Delaware
corporation ("Acuity"), pursuant to that certain Agreement and Plan of Merger
and Reorganization, dated as of April 27, 1995, as amended and restated as of
July 11, 1995 (the "Merger Agreement"), by and among RVSI, Subsidiary and
Acuity. At such time as the Certificate of Merger required under Delaware law is
filed with the Secretary of State of the State of Delaware (the "Effective
Time"), each outstanding share of Common Stock, $.01 par value, of Acuity (the
"Acuity Common Stock") will be converted into the right to receive, and become
exchangeable for (the "Exchange Ratio"), 0.766 of a share of Common Stock, $.01
par value, of RVSI (the "RVSI Common Stock"); provided, however, that if the
average of the closing prices of RVSI Common Stock on The Nasdaq National Market
for the 20 trading days ending on (and including) the third trading day
immediately prior to the RVSI Special Meeting (the "Average Closing Price") is
greater than $14.50, then the Exchange Ratio shall be equal to the quotient of
$11.107 divided by the Average Closing Price (provided that in no event shall
the Exchange Ratio be less than 0.555375) (the "Minimum Collar"); and if the
Average Closing Price is less than $10.00, then the Exchange Ratio shall be
equal to the quotient of $7.66 divided by the Average Closing Price (provided
that in no event shall the Exchange Ratio be more than 0.925626) (the "Maximum
Collar" and collectively with the Minimum Collar, the "Collars").
SPECIAL MEETING OF RVSI STOCKHOLDERS
At the Special Meeting in lieu of Annual Meeting of Stockholders of RVSI,
or any adjournment or postponement thereof (the "RVSI Special Meeting"), the
stockholders of RVSI (the "RVSI Stockholders") will be asked to consider and
vote upon proposals to (i) approve and adopt the Merger Agreement and the
transactions contemplated thereby, (ii) elect nine directors, (iii) approve
RVSI's Amended and Restated 1991 Stock Option Plan, (iv) approve an amendment
to RVSI's Certificate of Incorporation increasing RVSI's authorized shares of
Common Stock and (v) ratify the selection by RVSI's Board of Directors (the
"RVSI Board") of RVSI's independent auditors. The RVSI Special Meeting is
scheduled to be held at 10:00 A.M., local time, on , September , 1995, at
The Bank of New York, One Wall Street, New York, New York. The RVSI Board has
fixed the close of business on July , 1995 as the record date (the "RVSI Record
Date") for the determination of holders of RVSI Common Stock entitled to notice
of and to vote at the RVSI Annual Meeting. See "The RVSI Special Meeting."
THE RVSI BOARD WITHOUT DISSENT HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS
<PAGE>
THAT THE RVSI STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO APPROVE AND ADOPT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
THE RVSI BOARD WITHOUT DISSENT HAS ALSO DESIGNATED EACH OF THE NOMINEES FOR
ELECTION AS DIRECTORS, APPROVED RVSI'S AMENDED AND RESTATED 1991 STOCK OPTION
PLAN AND THE PROPOSED AMENDMENT TO RVSI'S CERTIFICATE OF INCORPORATION AND
RATIFIED THE SELECTION OF RVSI'S INDEPENDENT AUDITORS. THE RVSI BOARD
RECOMMENDS THAT THE RVSI STOCKHOLDERS VOTE "FOR" EACH OF SUCH NOMINEES, "FOR"
THE PROPOSALS TO APPROVE RVSI'S AMENDED AND RESTATED 1991 STOCK OPTION PLAN AND
THE AMENDMENT TO RVSI'S CERTIFICATE OF INCORPORATION AND "FOR" RATIFICATION OF
ITS SELECTION OF RVSI'S INDEPENDENT AUDITORS. SEE "THE PROPOSED MERGER -
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS AND REASONS FOR THE MERGER - RVSI,"
"ELECTION OF DIRECTORS," "PROPOSAL TO APPROVE RVSI'S AMENDED AND RESTATED 1991
STOCK OPTION PLAN," "PROPOSAL TO AMEND RVSI'S CERTIFICATE OF INCORPORATION" AND
"RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS."
SPECIAL MEETING OF ACUITY STOCKHOLDERS
At the Special Meeting of Stockholders of Acuity, or any adjournment or
postponement thereof (the "Acuity Special Meeting"), the stockholders of Acuity
(the "Acuity Stockholders") will be asked to consider and vote upon a proposal
to approve and adopt the Merger Agreement and the transactions contemplated
thereby. The Acuity Special Meeting is scheduled to be held at 10:00 A.M.,
local time, on , September , 1995, at the offices of Acuity, 9
Townsend West, Nashua, New Hampshire. The Board of Directors of Acuity (the
"Acuity Board") has fixed the close of business on July , 1995 as the record
date (the "Acuity Record Date") for the determination of holders of Acuity
Common Stock entitled to notice of and to vote at the Acuity Special Meeting.
See "The Acuity Special Meeting."
THE ACUITY BOARD WITHOUT DISSENT HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT THE ACUITY STOCKHOLDERS
VOTE "FOR" THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY. SEE "THE PROPOSED MERGER - RECOMMENDATIONS
OF THE BOARDS OF DIRECTORS AND REASONS FOR THE MERGER - ACUITY."
THE PARTIES
RVSI. RVSI designs, manufactures, markets and installs machine vision-
based products for productivity improvement and quality control applications in
the manufacturing workplace. These products have as their primary component
RVSI's proprietary three-dimensional ("3-D") machine vision technology. This
technology
(ii)
<PAGE>
uses sophisticated structured laser light and optical triangulation techniques
to acquire precise three-dimensional measurement information about the surface
of a viewed object.
RVSI's LS Lead Scanning Systems offer automated high-speed 3-D
semiconductor package lead inspection with the added feature of non-contact
scanning of the packages in their shipping trays ("in-tray scanning"). The
system uses a laser-based, non-contact, 3-D measurement technique to inspect and
sort quad flat packs, thin quad flat packs, plastic leaded chip carriers, ball
grid arrays and thin small outline packs from their carrying trays. The system
measurements include coplanarity, total package height, true position spread and
span, as well as lead angle, width, pitch and gap.
RVSI was incorporated in New York in 1976 and reincorporated in Delaware in
1977. RVSI's executive offices are located at 425 Rabro Drive East, Hauppauge,
New York 11788; its telephone number is (516) 273-9700.
ACUITY. Acuity designs, manufactures, markets and services two-dimensional
("2-D") machine vision systems for use in industrial automation. These products
emulate many of the functions performed by the human eye and are used for image
processing within the industrial and manufacturing processes to perform such
functions as measurement, flaw detection, verification of the presence and
correctness of parts and subassemblies, and inspection of manufactured products.
Typically, this equipment is utilized in applications where human inspection is
not practical or where the use of machine vision systems is faster, more
reliable and more economical than human inspection. Acuity's products utilize a
combination of software, an image processing computer and electronic cameras to
perform their functions.
Acuity was incorporated in Delaware in 1980 as Automatix Incorporated
("Automatix"). On January 26, 1994 Itran Corp., a privately held corporation,
was merged with and into Automatix. In connection with such merger, Automatix
contemporaneously changed its name to Acuity Imaging, Inc. ("Acuity"). Acuity's
executive offices are located at 9 Townsend West, Nashua, New Hampshire 03063
and its telephone number is (603) 598-8400.
SUBSIDIARY. Subsidiary is a newly-organized Delaware corporation and a
wholly-owned subsidiary of RVSI. Subsidiary was organized for the sole purpose
of merging with and into Acuity.
REQUIRED VOTE
RVSI STOCKHOLDERS. The vote of RVSI stockholders in favor of the Merger
Agreement and consummation of the transactions contemplated thereby is not
required by the General Corporation Law
(iii)
<PAGE>
of the State of Delaware ("DGCL"). Such vote is being sought by RVSI pursuant to
the requirements of The Nasdaq National Market. The affirmative vote of the
majority of shares of RVSI Common Stock present, either in person or represented
by proxy, at the Special Meeting is required to approve the Merger Agreement and
each of the other matters presented for stockholder approval with the exception
of the proposal to amend RVSI's Certificate of Incorporation, which requires the
affirmative vote of a majority of all of the outstanding shares of RVSI Common
Stock entitled to vote thereon. At the Record Date, there were 13,119,133 shares
of RVSI Common Stock outstanding. The presence, either in person or represented
by proxy, of the holders of a majority of the shares of RVSI Common Stock
outstanding as of the Record Date is necessary to constitute a quorum at the
RVSI Special Meeting. As of the Record Date, RVSI's directors, executive
officers and their respective affiliates as a group held shares representing
approximately 2.0% of the votes entitled to be cast by RVSI Stockholders at the
RVSI Special Meeting. Such percentage does not include shares issuable pursuant
to currently exercisable options and warrants. See "The RVSI Special Meeting -
Voting Rights."
RVSI Stockholders do not have appraisal rights under the DGCL. See "The
Proposed Merger - Absence of Appraisal Rights."
ACUITY STOCKHOLDERS. Pursuant to the DGCL, the affirmative vote of the
holders of at least a majority of the shares of Acuity Common Stock outstanding
as of the Record Date is required to approve and adopt the Merger Agreement and
the transactions contemplated thereby. At the Record Date, there were 2,486,937
shares of Acuity Common Stock outstanding. The presence, either in person or
represented by proxy, of the holders of a majority of the shares of Acuity
Common Stock outstanding as of the Record Date is necessary to constitute a
quorum at the Acuity Special Meeting. As of the Record Date, Acuity's directors,
executive officers and their respective affiliates as a group held shares
representing approximately 3.2% of the votes entitled to be cast by Acuity
Stockholders at the Acuity Special Meeting. Such percentage does not include
shares issuable pursuant to currently exercisable options. See "The Acuity
Special Meeting - Voting Rights."
Acuity Stockholders do not have appraisal rights under the DGCL. See "The
Proposed Merger - Absence of Appraisal Rights."
THE MERGER
GENERAL. All issued and outstanding shares of Acuity Common Stock will be
converted into RVSI Common Stock upon completion of the Merger. It is a
condition of the Merger that the shares of RVSI Common Stock issued in the
Merger be listed on The Nasdaq National Market. At the Effective Time,
Subsidiary will be merged with and into Acuity, and Subsidiary will cease to
exist as a separate entity. Acuity will be the surviving corporation in the
Merger and will thereby become a wholly-owned subsidiary of RVSI.
(iv)
<PAGE>
CONVERSION OF SHARES. At the Effective Time, each then outstanding share of
Acuity Common Stock will be converted into the right to receive, and become
exchangeable for (the "Exchange Ratio"), 0.766 of a share of RVSI Common Stock
(subject to possible adjustments to the Exchange Ratio as a result of
implementation of the Collars), the Exchange Ratio having been established
through arms-length negotiations between RVSI and Acuity. See "Description of
RVSI's Securities - Common Stock." No fractional shares of RVSI Common Stock
will be issued in the Merger, and holders of shares of Acuity Common Stock that
are converted in the Merger will be entitled to a cash payment (without
interest) in lieu of such fractional shares. See "The Proposed Merger - No
Fractional Shares."
CONVERSION OF OPTIONS. As a consequence of the Merger, options to purchase
up to 205,646 shares of Acuity Common Stock ("Acuity Options") at various
exercise prices will be converted at the Effective Time into options to purchase
up to 157,524 shares of RVSI Common Stock at exercise prices determined by
dividing the exercise price per share of Acuity Common Stock provided for in
such Acuity Option by the Exchange Ratio. See "The Merger Agreement -
Conversion of Options."
STOCK PURCHASE RIGHTS. As a consequence of the Merger, purchase rights
under Acuity's 1994 Employee Qualified Stock Purchase Plan will be converted
into rights to purchase up to an estimated 19,150 shares of RVSI Common Stock,
based upon the Exchange Ratio. See "The Merger Agreement - Stock Purchase
Rights."
EFFECTIVE TIME
After all the conditions set forth in the Merger Agreement have been
satisfied or waived, the Merger will become effective at such time as the
Certificate of Merger required under the DGCL is accepted for filing by the
Secretary of State of the State of Delaware. Such filing will be made
simultaneously with or as soon as practicable after the closing of the
transactions contemplated by the Merger Agreement. See "The Proposed Merger -
Closing; Effective Time."
EXCHANGE OF STOCK CERTIFICATES
From and after the Effective Time, each holder of an outstanding
certificate which immediately prior to the Effective Time represented shares of
Acuity Common Stock (the "Acuity Certificates") shall cease to have any rights
as a stockholder of Acuity and each holder's sole right shall be to receive in
exchange for such holder's Acuity Certificates, upon surrender to American Stock
Transfer & Trust Company (the "Exchange Agent"), a certificate or certificates
representing the number of whole shares of RVSI Common Stock (the "RVSI
Certificates"), which such holder is entitled to receive pursuant to the Merger
Agreement. As soon as
(v)
<PAGE>
practicable after the Effective Time, the Exchange Agent will send transmittal
instructions to each Acuity Stockholder describing the procedure for
surrendering the Acuity Certificates for the RVSI Certificates. See "The
Proposed Merger - Exchange of Stock Certificates."
RVSI STOCKHOLDERS WILL NOT BE REQUIRED TO SURRENDER CERTIFICATES EVIDENCING
SHARES OF RVSI COMMON STOCK FOLLOWING THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE SUBSEQUENT IMPLEMENTATION OF THE MERGER.
BACKGROUND
The terms of the Merger Agreement resulted from arm's length negotiations
between representatives of RVSI and Acuity. See "The Proposed Merger -
Background."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS AND REASONS FOR THE MERGER
RVSI. On July 11, 1995, the RVSI Board without dissent approved the
Merger Agreement and the transactions contemplated thereby. The RVSI Board
recommends that the RVSI Stockholders vote "FOR" approval and adoption of the
Merger Agreement and the transactions contemplated thereby.
The recommendation of the RVSI Board is based upon its belief that the
terms of the Merger Agreement are fair and in the best interests of RVSI and the
RVSI Stockholders and that the Merger will result in benefits to the RVSI
Stockholders. For a discussion of the factors considered by the RVSI Board in
making its recommendation, see "The Proposed Merger - Recommendations of the
Boards of Directors and Reasons for the Merger - RVSI."
ACUITY. On July 6, 1995, the Acuity Board without dissent approved the
Merger Agreement and the transactions contemplated thereby. The Acuity Board
recommends that the Acuity Stockholders vote "FOR" approval and adoption of the
Merger Agreement and the transactions contemplated thereby.
The recommendation of the Acuity Board is based upon its belief that the
terms of the Merger Agreement are fair and in the best interests of Acuity and
the Acuity Stockholders and that the Merger will result in benefits to the
Acuity Stockholders. For a discussion of the factors considered by the Acuity
Board in making its recommendation, see "The Proposed Merger - Recommendations
of the Boards of Directors and Reasons for the Merger - Acuity."
(vi)
<PAGE>
OPINION OF FINANCIAL ADVISORS
JANNEY MONTGOMERY SCOTT INC. In its role as financial advisor to RVSI,
Janney Montgomery Scott Inc. ("JMS") was asked to render an opinion to the RVSI
Board as to the fairness to the RVSI Stockholders, from a financial point of
view, of the Exchange Ratio. JMS delivered its written opinion dated July 20,
1995, a copy of which is attached hereto as Exhibit C (the "JMS Opinion"), to
the RVSI Board to the effect that, as of the date of its opinion, and based upon
and subject to the matters set forth in its opinion, the Exchange Ratio is fair,
from a financial point of view, to the RVSI Stockholders. The JMS Opinion is
necessarily based on market, economic and other conditions as they existed on
the date JMS delivered its opinion, the information made available to JMS as of
such date and the review and analysis conducted by JMS as of such date. The
summary of the JMS Opinion set forth in this Proxy Statement/Prospectus is
qualified in its entirety by reference to the full text of such opinion, a copy
of which is attached hereto as Exhibit C. See "The Proposed Merger - Opinions of
Financial Advisors - Janney Montgomery Scott Inc." and Exhibit C hereto.
FECHTOR, DETWILER & CO., INC. In its role as financial advisor to Acuity,
Fechtor, Detwiler & Co., Inc. ("Fechtor, Detwiler") was asked to render an
opinion to the Acuity Board as to the fairness to the Acuity Stockholders, from
a financial point of view, of the Exchange Ratio. On July 10, 1995, Fechtor,
Detwiler orally advised the Acuity Board to the effect that the Exchange Ratio
was fair, from a financial point of view, to the Acuity Stockholders. Fechtor,
Detwiler thereafter delivered its written opinion dated July 17, 1995, a copy of
which is attached hereto as Exhibit D (the "Fechtor, Detwiler Opinion"), to the
Acuity Board to the effect that, as of the date of its opinion, and based upon
and subject to the matters set forth in its opinion, the Exchange Ratio is fair,
from a financial point of view, to the Acuity Stockholders. The Fechtor,
Detwiler Opinion is necessarily based on market, economic and other conditions
as they existed on the date Fechtor, Detwiler delivered its opinion, the
information made available to Fechtor, Detwiler as of such date and the review
and analysis conducted by Fechtor, Detwiler as of such date. The summary of the
Fechtor, Detwiler Opinion set forth in this Proxy Statement/Prospectus is
qualified in its entirety by reference to the full text of such opinion, a copy
of which is attached hereto as Exhibit D. See "The Proposed Merger - Opinions of
Financial Advisors - Fechtor, Detwiler & Co., Inc." and Exhibit D hereto.
CONDITIONS TO THE MERGER
The obligations of RVSI and Acuity to consummate the Merger are subject
to the satisfaction of a number of conditions, including the approval of the
Merger Agreement and the transactions contemplated thereby by the holders of
a majority of the shares of RVSI Common Stock present at the RVSI Special
Meeting and by the holders of a majority of the shares of
(vii)
<PAGE>
Acuity Common Stock. See "The Proposed Merger - The Merger Agreement
- - Conditions to the Merger."
RIGHTS TO TERMINATE AND AMENDMENTS
The Merger Agreement may be terminated prior to the closing of the
transactions contemplated thereby (the "Closing Date") under certain
circumstances. If the Merger Agreement is terminated, under certain
circumstances, (i) either RVSI or Acuity may be obligated to reimburse the other
for up to $450,000 in documented transaction expenses, and (ii) Acuity may be
obligated to pay RVSI a break-up fee. See "The Proposed Merger - The Merger
Agreement - Termination and Expense Reimbursement" and "Break-up Fees and
Expenses Reimbursement."
Subject to compliance with applicable law, the Merger Agreement may be
amended at any time prior to or, subject to certain conditions, after its
approval by the RVSI Stockholders and the Acuity Stockholders by a written
agreement executed by RVSI, Subsidiary and Acuity. See "The Proposed Merger -
The Merger Agreement - Amendment and Waiver."
CONFLICTS OF INTEREST
Upon effectiveness of the Merger, and assuming a favorable vote by a
majority of the RVSI Stockholders, both Donald J. Kramer and Ofer Gneezy, each
presently a director of Acuity, will become directors of RVSI. See "The
Proposed Merger - Conflicts of Interest" and "Election of Directors."
COMPARISON OF RIGHTS UNDER APPLICABLE LAW
The rights of Acuity Stockholders are currently governed by the DGCL,
Acuity's Certificate of Incorporation (the "Acuity Certificate of
Incorporation") and Acuity's Bylaws (the "Acuity Bylaws"). Holders of Acuity
Common Stock immediately prior to the Effective Time will become RVSI
Stockholders, and from and after the Effective Time, their rights as RVSI
Stockholders will be governed by the DGCL, RVSI's Certificate of Incorporation
(the "RVSI Certificate of Incorporation") and RVSI's Bylaws (the "RVSI
Bylaws"). There are no significant differences between the rights of Acuity
Stockholders under the Acuity Certificate of Incorporation and the Acuity
Bylaws and the rights of RVSI Stockholders under the RVSI Certificate of
Incorporation and the RVSI Bylaws. See "Comparison of Rights of Holders of
Acuity Common Stock and RVSI Common Stock."
(viii)
<PAGE>
ACCOUNTING TREATMENT
The Merger will be accounted for as a "pooling of interests" transaction in
accordance with generally accepted accounting principles. See "The Proposed
Merger - Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
It is expected that the Merger will constitute a reorganization for
federal income tax purposes and, accordingly, that no gain or loss will be
recognized by Acuity Stockholders upon the exchange of Acuity Common Stock
solely for shares of RVSI Common Stock. See "Certain Federal Income Tax
Considerations." BECAUSE CERTAIN FEDERAL TAX CONSEQUENCES OF THE MERGER MAY
VARY DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF EACH ACUITY STOCKHOLDER,
EACH SUCH HOLDER IS URGED TO CONSULT HIS OR HER TAX ADVISOR TO DETERMINE
THE SPECIFIC FEDERAL AND ANY STATE, LOCAL AND FOREIGN TAX CONSEQUENCES
OF THE MERGER TO SUCH HOLDER.
ABSENCE OF APPRAISAL RIGHTS
Acuity Stockholders and RVSI Stockholders are not entitled to appraisal
rights under the DGCL in connection with the Merger. See "The Proposed Merger -
Absence of Appraisal Rights" and Section 262 of the DGCL attached as Exhibit B
hereto.
ABSENCE OF REGULATORY FILINGS AND APPROVALS
The Merger is not subject to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, and the rules and regulations thereunder,
which provide that certain merger transactions may not be consummated until
required information and material have been furnished to the Antitrust Division
of the Department of Justice and the Federal Trade Commission and certain
waiting periods have expired or been terminated. See "The Proposed Merger -
Absence of Regulatory Filings and Approvals."
COMPARATIVE PER SHARE DATA OF RVSI COMMON STOCK AND ACUITY COMMON STOCK
RVSI Common Stock is quoted on The Nasdaq National Market and Acuity Common
Stock is quoted on The Nasdaq Small-Cap Market under the symbols "ROBV" and
"ACUT," respectively. On July 11, 1995 (the last trading day prior to the
public announcement that RVSI and Acuity had entered into the Merger Agreement),
the closing bid prices of RVSI Common Stock and Acuity Common Stock were $13.75
and $10.125, respectively. On an equivalent per share basis calculated by
multiplying the closing bid price of RVSI Common Stock on The
(ix)
<PAGE>
Nasdaq National Market on July 11, 1995 by 0.766, the applicable Exchange Ratio,
the value of shares of RVSI Common Stock to be received by Acuity Stockholders
was $10.53 per share of Acuity Common Stock. On July , 1995, the closing bid
price of RVSI Common Stock was $ per share; therefore, the value of the shares
of RVSI Common Stock to be received by Acuity Stockholders was $ per share of
Acuity Common Stock on such date. ACUITY STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT PRICE INFORMATION FOR RVSI COMMON STOCK IN CONNECTION WITH THEIR
CONSIDERATION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
See "Comparative Per Share Prices and Dividends of RVSI Common Stock and Acuity
Common Stock."
RISK FACTORS
In considering whether to approve the Merger Agreement and the transactions
contemplated thereby, RVSI and Acuity Stockholders should consider the
following:
RISKS RELATING TO THE MERGER
- Risks Associated With Exchange Ratio
- Uncertainties of Post-Merger Operations
- Fluctuations in the Semiconductor Market
- Market Impact of Future Sales of RVSI Common Stock
- Absence of Dividends
- Possible Volatility of Stock Price
RISKS RELATING TO ACUITY
- Recent Losses
- Accumulated Deficit; History of Operating Losses
- Loan Default
- Dependence on Distributors
- Competition
- Recent Merger and Changes in Management
RISKS RELATING TO RVSI
- Concentration of Revenues
- Competition
- Pending Litigation
- Uncertainty of Patent Protection
- Major Supplier in Bankruptcy
- Export Sales
See "Risk Factors."
(x)
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following summary historical information, which does not give effect to
the Merger, should be read in conjunction with the financial statements of RVSI,
with the consolidated financial statements of Acuity and with the pro forma
combined financial information which gives effect to the Merger, which appear
elsewhere in this Proxy Statement/Prospectus.
SUMMARY HISTORICAL FINANCIAL INFORMATION OF RVSI
STATEMENT OF OPERATIONS DATA (IN THOUSANDS, EXCEPT PER SHARE DATA):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
-------------------- ----------------------------------------------------------
1995(e) 1994(e) 1994 1993 1992 1991 1990
------- ------- ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $16,600 $11,790 $24,613 $19,943 $13,335 $ 8,519 $11,256
Income (loss) before Benefit
(Provision) from Income Taxes
and Extraordinary Items $ 3,222 $ 1,006 $ 2,710 $ 1,104 $ (983) $(2,428) $(5,523)(a)
Benefit from Income Taxes $ 2,060 $ 1,093 $ 401 $ 495 - - -
Income (Loss) before
Extraordinary Items $ 5,282 $ 2,099 $ 3,111 $ 1,599 $ (983) $(2,428) $(5,523)(a)
Extraordinary Items - - - - $ 1,210(b)(c) - -
Net Income (Loss) $ 5,282 $ 2,099 $ 3,111 $ 1,599 $ 227(b)(c) $(2,428) $(5,523)(a)
Income (Loss) Per Share before
Extraordinary Items $ .38 $ .16 $ .24 $ .14 $ (.13) $ (.38) $ (.87)
Net Income (Loss) Per Share $ .38 $ .16 $ .24 $ .14 $ .03 $ (.38) $ (.87)
Weighted Average Number of
Common Shares and Equivalents 13,765(d) 12,830(d) 13,057(d) 12,534(d) 7,783 6,354 6,337
<FN>
(a) Includes restructuring charges of $2,526,000.
(b) Includes an extraordinary credit of $1,138,000 (net of income tax provision
of $97,000) relating to an agreement with General Motors Corporation. See
Note 12 of Notes to Financial Statements of RVSI.
(c) Includes extraordinary credits of $72,000 resulting from utilization of net
operating loss carryforwards.
(d) Weighted average number of common shares and common share equivalents
calculated using the modified treasury stock method. See Note 1i of Notes
to Financial Statements of RVSI.
(e) Derived from unaudited financial statements.
</TABLE>
(xi)
<PAGE>
BALANCE SHEET DATA (IN THOUSANDS):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------------------------------
MARCH 31, 1995(a) 1994 1993 1992 1991 1990
----------------- ------- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Total Assets $21,710 $14,988 $7,889 $ 4,515 $ 4,296 $5,963
Current Liabilities $ 6,936 $ 5,742 $6,215 $ 4,463 $ 5,899 $5,140
Total Liabilities $ 7,149 $ 5,952 $6,460 $ 4,798 $ 6,297 $5,564
Stockholders' Equity (Deficiency) $14,561 $ 9,036 $1,429 $ (283) $(2,001) $ 399
Working Capital (Deficiency) $ 8,311 $ 4,664 $ (766) $(1,326) $(2,476) $ (530)
<FN>
(a) Derived from unaudited financial statements.
</TABLE>
Reference is made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations of RVSI" and the Notes to Financial
Statements of RVSI.
(xii)
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION OF ACUITY
STATEMENT OF OPERATIONS DATA (IN THOUSANDS, EXCEPT PER SHARE DATA):
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
APRIL 1 APRIL 2 -----------------------------------------------------
1995(a) 1994(a) 1994 1993 1992 1991(a) 1990(a)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $4,895 $5,189 $22,168 $18,734 $16,610 $15,230 $14,038
Income (Loss) from Continuing
Operations Before Income Taxes $ (141) $ 454 $ 1,416 $ 67 $ 499 $ 642 $ 67
Provision for Income Taxes - $ 44 $ 110 $ 97 $ 48 $ 37 -
Income (Loss) from Continuing
Operations $ (141) $ 410 $ 1,306 $ (30) $ 451 $ 605 $ 67
Income (Loss) from Discontinued
Operations(b) - - - - $ 1,214 $ (333) $(1,188)
Income (Loss) before Extraordinary
Item $ (141) $ 410 $ 1,306 $ (30) $ 1,665 $ 272 $(1,121)
Extraordinary Item(c) - - - - 46 - -
Net Income (Loss) $ (141) $ 410 $ 1,306 $ (30) $ 1,711 $ 272 $(1,121)
------ ------ ------- ------- ------- ------- -------
------ ------ ------- ------- ------- ------- -------
Income (Loss) Per Share from
Continuing Operations $(0.06) $ 0.16 $ 0.51 $ (0.01) $ 0.19 $ 0.25 $ 0.03
Discontinued Operations - - - - $ 0.51 (0.14) $ (0.50)
Extraordinary Item(c) - - - - $ 0.02 - -
Net Income (Loss) Per Share $(0.06) $ 0.16 $ 0.51 $ (0.01) $ 0.72 $ 0.11 $ (0.47)
------ ------ ------- ------- ------- ------- -------
------ ------ ------- ------- ------- ------- -------
Weighted Average Number of
Common Shares and Equivalents 2,417 2,579 2,569 2,380 2,383 2,383 2,383
------ ------ ------- ------- ------- ------- -------
------ ------ ------- ------- ------- ------- -------
<FN>
(a) Derived from unaudited data.
(b) Discontinued operations related to SuperCads, Inc. (known by its trade
name, Cognition), which was sold on July 15, 1992. See Note 3 of Notes to
Financial Statements of Acuity.
(c) Extraordinary Item represents gain of $46 (net of income taxes of $3) for
extinguishment of debt in 1992.
</TABLE>
RECENT LOSSES
Acuity estimates it has incurred a loss of approximately $500,000
on revenues of approximately $4,100,000 in
its second quarter ended July 1, 1995. For the six months ended July 1, 1995,
Acuity estimates that it incurred a loss of $640,000 on revenues of
$9,000,000. This compares with earnings of $669,000 on revenues of $10,575,000
for the six months ended July 2, 1994.
(xiii)
<PAGE>
BALANCE SHEET DATA (IN THOUSANDS):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
APRIL 1, 1995(a) 1994 1993 1992 1991(a) 1990(a)
---------------- ------ ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Assets $6,470 $6,720 $7,622 $6,409 $5,855 $6,043
Current Liabilities $4,166 $3,357 $6,597 $2,326 $1,934 $2,822
Total Liabilities $4,166 $4,372 $6,597 $5,351 $6,357 $6,663
Stockholders' Equity
(Deficiency) $2,304 $2,348 $1,025 $1,058 $ (502) $ (620)
Working Capital $1,296 $2,470 $ 353 $3,467 $3,269 $2,463
<FN>
(a) Derived from unaudited financial statements.
</TABLE>
Reference is made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Acuity" and Notes to
Consolidated Financial Statements of Acuity.
(xiv)
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended
------------------------ For Fiscal Year Ended
March 31, March 31, --------------------------------
1995 1994 1994[a] 1993[a] 1992[a]
--------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues $27,330 $21,996 $46,781 $38,677 $29,945
Income (Loss) From Continuing
Operations Before Income Taxes $ 3,292 $ 790 $ 4,126 $ 1,171 $ (484)
Income Tax Benefit (Provision) $ 2,067 $ 1,059 $ 291 $ 398 $ (48)
Income (Loss) From Continuing
Operations $ 5,359 $ 1,849 $ 4,417 $ 1,569 $ (532)
Income From Discontinued Operations - - - - $ 1,214
Extraordinary Items - - - - $ 1,256
Net Income $ 5,359 $ 1,849 $ 4,417 $ 1,569 $ 1,938
Income (Loss) Per Share:
Primary:
Continued Operations $ .34 $ .13 $ .30 $ .13 $ (.06)
Discontinued Operations - - - - $ .13
------- ------- ------- ------- -------
Income Before Extraordinary Items $ .34 $ .13 $ .30 $ .13 $ .07
Extraordinary Items - - - - $ .13
------- ------- ------- ------- -------
Net Income $ .34 $ .13 $ .30 $ .13 $ .20
Fully Diluted:
Continuing Operations $ .34 $ .13 $ .29 $ .12 $ (.06)
Discontinued Operations - - - - $ .13
------- ------- ------- ------- -------
Income Before Extraordinary Items $ .34 $ .13 $ .29 $ .12 $ .07
Extraordinary Items - - - - $ .13
------- ------- ------- ------- -------
Net Income $ .34 $ .13 $ .29 $ .12 $ .20
Weighted Average Number of Common
and Common Equivalent Shares Out-
standing
Primary: 15,615[b] 14,335[b] 14,858[b] 14,023[b] 9,608
Fully Diluted: 15,700[b] 14,450[b] 15,061[b] 14,023[b] 9,608
<FN>
[a] The fiscal year ended 1994, 1993, and 1992 was September 30, 1994, 1993, and 1992 for RVSI
and was December 31, 1994, 1993, and 1992 for Acuity, respectively.
[b] Weighted average number of common shares and common equivalents calculated using the
modified treasury stock method.
</TABLE>
PRO FORMA COMBINED BALANCE SHEET DATA (in thousands):
<TABLE>
<CAPTION>
March 31,
1995
---------
<S> <C>
Total Assets $28,096
Current Liabilities $11,785
Total Liabilities $11,998
Stockholders' Equity $16,098
Working Capital $ 8,840
</TABLE>
COMPARATIVE PER SHARE INFORMATION
<TABLE>
<CAPTION>
RVSI Acuity
RVSI Acuity Pro Forma Equivalent
Historical Historical Combined (1) Pro Forma (1)
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Book Value Per Share
as of March 31, 1995 $ 1.25 $ .94 $ 1.19 $ .91
Income (Loss) From Continuing Operations
Per Share for the six months
ended March 31,1995
Primary: $ .38 $ .05 $ .34 $ .26
Fully Diluted: $ .38 $ .05 $ .34 $ .26
For the year ended
Fiscal 1994 (2):
Primary: $ .24 $ .51 $ .30 $ .23
Fully Diluted: $ .24 $ .51 $ .29 $ .22
Fiscal 1993 (2):
Primary: $ .14 $ (.01) $ .13 $ .10
Fully Diluted: $ .14 $ (.01) $ .12 $ .09
Fiscal 1992 (2):
Primary: $ (.13) $ .19 $ (.06) $ (.04)
Fully Diluted: $ (.13) $ .19 $ (.06) $ (.04)
Dividends per share (3)
<FN>
(1) RVSI pro forma combined per share amounts and the Acuity equivalent pro forma
per share amounts represent the historical information of RVSI and the
historical information of Acuity effected by the exchange ratio of the
merger.
(2) The year ended fiscal 1994 was September 30, 1994 for RVSI and December 31,
1994 for Acuity, the year ended fiscal 1993 was September 30, 1993 for RVSI
and December 31, 1993 for Acuity and the year ended fiscal 1992 was
September 30, 1992 for RVSI and December 31, 1992 for Acuity.
(3) Neither Company paid any dividends during the periods indicated.
</TABLE>
(xv)
<PAGE>
RISK FACTORS
In addition to the other information contained in this Proxy
Statement/Prospectus, RVSI Stockholders and Acuity Stockholders should review
carefully the following factors in deciding whether to vote in favor of approval
of the Merger Transaction.
RISKS RELATING TO THE MERGER:
- RISKS ASSOCIATED WITH EXCHANGE RATIO. The Merger Agreement provides
that upon consummation of the Merger, each share of Acuity Common Stock will be
exchanged for 0.766 of a share of RVSI Common Stock; provided, however, that if
the average of the closing prices of RVSI Common Stock on The Nasdaq National
Market for the 20 trading days ending on (and including) the third trading day
immediately prior to the RVSI Special Meeting (the "Average Closing Price") is
greater than $14.50, then the Exchange Ratio shall be equal to the quotient of
$11.107 divided by the Average Closing Price (provided that in no event shall
the Exchange Ratio be less than 0.555375); and if the Average Closing Price is
less than $10.00, then the Exchange Ratio shall be equal to the quotient of
$7.66 divided by the Average Closing Price (provided that in no event shall the
Exchange Ratio be more than 0.925626). However, the Exchange Ratio is not
subject to adjustment if the Average Closing Price per share of RVSI Common
Stock is (i) between $10.00 and $14.50, (ii) below approximately $8.27 or (iii)
above approximately $20.00. As the price of RVSI Common Stock at the Effective
Time may vary from the price as of the date on which the Merger Agreement was
executed due to changes in the business, operations and prospects of RVSI,
general market and economic conditions, and other factors, the market value of
the shares of RVSI Common Stock which holders of Acuity Common Stock will
receive in the Merger may be greater or less than the market value of such RVSI
Common Stock as of the date of the Merger Agreement. Acuity and RVSI each
obtained the opinion of its respective financial advisor, dated as of July 20,
1995 and July 17, 1995, respectively, that the consideration to be received by
the stockholders of Acuity upon the consummation of the Merger is fair from a
financial point of view and that the Exchange Ratio is fair, from a financial
point of view, to the RVSI Stockholders, respectively. Each of Acuity and RVSI
do not intend to obtain an updated opinion of its respective financial advisor
subsequent to the date of this Proxy Statement/Prospectus. See "The Merger
Agreement - Exchange Ratio."
- UNCERTAINTIES OF POST-MERGER OPERATIONS. Mergers of companies in
technological industries are generally considered more difficult to make
successful than in other industries, since combining the different technologies
as they currently exist may not be completely possible. Also, key employees in
the technology industry are less easily replaced than in general manufacturing
companies. Therefore, the loss of key employees as a result of the Merger could
have a negative effect on RVSI. See "Business of RVSI - Employees" and
"Business of Acuity - Employees."
- FLUCTUATIONS IN THE SEMICONDUCTOR MARKET. The semiconductor industry
has been subject to significant market fluctuations and periodic downturns,
which often have had a disproportionately negative effect on manufacturers of
semiconductor capital equipment including RVSI's and its LS 2000 and 3000
Series lead scanning systems. The future financial results of RVSI may,
therefore, depend significantly on the market demand for integrated circuit
devices. See "Business of Acuity" and "Business of RVSI."
- MARKET IMPACT OF FUTURE SALES OF RVSI COMMON STOCK. Sales of
substantial amounts of shares of RVSI Common Stock in the public market
following the Merger could adversely affect the market price of the RVSI Common
Stock. As of the date of this Proxy
<PAGE>
Statement/Prospectus, 10,730,465 shares of RVSI Common Stock are unrestricted
and freely tradable. There are currently 2,388,668 restricted shares of RVSI
Common Stock, as such term is defined under Rule 144 of the Securities Act, of
which 1,110,000 shares will be registered under the Securities Act prior to
January 1996, 1995 and thereby be freely tradable.
Upon consummation of the Merger, an additional 1,904,993 shares (excluding
shares issuable upon exercise of options) of RVSI Common Stock (the "Merger
Shares") will be outstanding. Merger Shares owned by nonaffiliates of Acuity
(approximately 1,844,590 shares) will be eligible for sale immediately upon
consummation of the Merger. Merger Shares owned by affiliates of Acuity
(approximately 60,403 shares) may not be sold until after the results covering
30 days of post-Merger combined operations of RVSI and Acuity have been filed
with the Commission, sent to stockholders of RVSI or otherwise publicly
disclosed. After such public disclosure, affiliates of Acuity will be able to
sell such shares without restriction. See "The Proposed Merger - Restrictions
on Sales by Affiliates."
Upon consummation of the Merger, there also will be outstanding options,
warrants and rights to purchase up to 2,904,453 shares of RVSI Common Stock.
The sale of a substantial amount of these shares could have an adverse effect
on the future market price of RVSI Common Stock. See "The Proposed
Merger - Conversion of Options" and "Principal Stockholders of Acuity" and
"Principal Stockholders of RVSI."
- ABSENCE OF DIVIDENDS. Neither Acuity nor RVSI has paid cash dividends
on its Common Stock, and RVSI does not anticipate paying cash dividends on its
Common Stock in the foreseeable future. RVSI intends to reinvest any funds that
might otherwise be available for the payment of dividends in further development
of its business following the Merger. See "Comparative Share Prices and
Dividends of RVSI Common Stock and Acuity Common Stock."
- POSSIBLE VOLATILITY OF STOCK PRICE. Stock prices for many technology
companies fluctuate widely for reasons which may be unrelated to operating
performance or new product or service announcements. Broad market fluctuations,
earnings and other announcements of other companies, general economic conditions
or other matters unrelated to RVSI and outside its control also could affect the
market price of the RVSI Common Stock. See "Comparative Per Share Prices and
Dividends of RVSI Common Stock and Acuity Common Stock."
RISKS RELATING TO ACUITY
- RECENT LOSSES. Acuity estimates it has incurred a loss of
approximately $500,000 on revenues of approximately $4,100,000 in its second
quarter ended July 1, 1995. For the six months ended July 1, 1995, Acuity
estimates that it incurred a loss of $640,000 on revenues of $9,000,000. This
compares with earnings of $669,000 on revenues of $10,575,000 for the six months
ended July 2, 1994.
- ACCUMULATED DEFICIT; HISTORY OF OPERATING LOSSES. Acuity has incurred
significant periodic operating losses during its history, the most recent being
an estimated loss of approximately $500,000 in the quarter ended July 1,
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1995. At present, Acuity has an accumulated deficit of approximately
$60,000,000. See Acuity's Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Acuity."
- LOAN DEFAULT. As a result of Acuity's recent net losses in 1995,
Acuity is in default of certain of the covenants in its outstanding bank line
of credit. Although Acuity has received a temporary forbearance from such
defaults from its lender, there can be no assurance that Acuity will not
continue to be in default of its line of credit upon expiration of such
forbearance. If Acuity is in default of its line of credit upon expiration of
the forbearance, it would be required to enter into negotiations with its
lender in an attempt to resolve the termination of such forbearance. The lender
can demand payment at the earlier of (i) September 30, 1995 or (ii) any
termination of the Merger without the Merger having been consummated. If the
lender demands payment at the time of the Merger, RVSI and Acuity anticipate no
difficulty in repaying the loan. If the lender demands payment without a
consummation of the Merger, however, Acuity will be required to enter into
negotiations with its lender relating to such defaults. See Note 7 to Acuity's
Consolidated Financial Statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Acuity."
- DEPENDENCE ON DISTRIBUTORS. The majority of Acuity's current sales
are made, and a significant portion of future sales are expected to be made,
primarily through third party distributors. Accordingly, Acuity is dependent
upon the continued desire and ability of its distributors to successfully market
and sell its products, as well as their continued viability and financial
stability. See "Business of Acuity - Marketing, Sales and Service."
- COMPETITION. Competition in the image processing/machine vision
markets is intense. There are a large number of companies that sell into these
markets, some of which are substantially larger and have greater financial
resources, customer product bases and distribution alternatives than Acuity. No
one company is recognized as the dominant force in the marketplace. Acuity
believes that the high level of competition in this marketplace will continue
unabated. The product development barriers to entering this market are not
overwhelming.
- RECENT MERGER AND CHANGES IN MANAGEMENT. On January 26, 1994 Acuity
was formed by the merger of Automatix Incorporated ("Automatix") and Itran Corp.
("Itran"), a privately held corporation, with Automatix (now Acuity) as the
surviving company. Within the first twelve months after the merger of Automatix
and Itran, John Pemble, the Chief Executive Officer, and Roger Kuhn, the Chief
Financial Officer, of Acuity (who each held the same respective positions with
Itran prior to such merger) resigned from
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Acuity. Acuity has not replaced Mr. Pemble. Mr. Kuhn was replaced by John A.
Rogers, who was then the Chief Accounting Officer of Acuity and had served as
Chief Financial Officer of Automatix prior to such merger. There can be no
assurance that there may not be additional changes in the key employees of
Acuity in the future. See "Risk Factors - Risks Relating to the Merger" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Acuity."
RISKS RELATING TO RVSI
- CONCENTRATION OF REVENUES. RVSI's sales have been historically
concentrated in a small number of customers at any time, although the specific
customers change over time. Sales to Advanced Semiconductor Engineering Inc.
("ASE") and Anam Industrial Co., Ltd. ("Anam") accounted for approximately 11%
and 10%, respectively, of RVSI's revenues during the six months ended March 31,
1995. Sales to Intel Corporation and Motorola Inc. accounted for approximately
15% and 10%, respectively, of RVSI's revenues during the fiscal year ended
September 30, 1994. Sales to Samsung Corporation, Anam Corporation and Intel
Corporation accounted for approximately 15%, 13% and 13%, respectively, of
RVSI's revenues during its year ended September 30, 1993. No other customers
accounted for more than 10% of sales during such fiscal periods and fiscal
years. The loss of any one or more of these customers or any significant
reduction in their orders for RVSI's products may be expected to materially
adversely affect RVSI's operations and prospects. A majority of RVSI's sales in
recent years has been export sales to the Far East. For the six months ended
March 31, 1995 and for the fiscal years ended September 30,1994 and 1993, export
sales accounted for approximately 79%, 62% and 74%, respectively, of RVSI's
revenues. See "Business of RVSI - Customers."
- COMPETITION. RVSI believes that the machine vision industry is
currently highly fragmented and intensely competitive. RVSI is aware that a
large number of concerns, which it estimates to be upward of 100, entered the
industry in the years 1980 through 1986 and that most of these were relatively
young, private concerns. Over the past several years, however, RVSI estimates
that the number of its competitors has narrowed to less than 25, which RVSI
believes is attributable in substantial part to a consolidation within the
industry. RVSI is not aware of any other entity having a 3-D vision system
capability as comprehensive and highly automated as that achieved by RVSI.
However, RVSI is aware of several competitors which promote substitute
technologies. In addition, RVSI believes that there are other concerns, some of
which may be substantially larger and have substantially greater assets and
resources than RVSI, engaged in the development of technology and products which
would be competitive with those of
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RVSI should such concerns choose to enter the machine vision marketplace. See
"Business of RVSI - Competition."
- PENDING LITIGATION. RVSI has been the subject of a counterclaim in
excess of $3.0 million asserted by the defendant in a proceeding previously
instituted by RVSI in which RVSI had alleged that such defendant had breached
certain agreements between RVSI and the defendant relating to the defendant's
purchase of all of the assets of RVSI's former welding and cutting systems
business. Based upon the advice of its general counsel, RVSI believes that the
counterclaim asserted against RVSI is without merit. RVSI, after consultation
with such counsel, further believes that the ultimate outcome of this proceeding
will not have a material adverse impact upon RVSI's financial condition or
results of operations. However, in view of the magnitude of the counterclaim
against RVSI when compared to RVSI's total assets of approximately $21.7 million
at March 31, 1995, and given the inherent uncertainties of litigation, an
adverse outcome to RVSI in the counterclaim could materially adversely affect
RVSI's financial viability. See "Business - Legal Proceedings."
- UNCERTAINTY OF PATENT PROTECTION. At March 31, 1995, RVSI owned 76
issued U.S. patents relating to its 3-D vision technology. RVSI also owns the
rights to several U.S. patent applications relating to such technology. RVSI
does not believe that its present operations are materially dependent upon the
proprietary protection that may be available to RVSI by reason of any one or
more of such patents. Moreover, there can be no assurance given as to the
effectiveness of the protection afforded by its patent rights. See "Business of
RVSI - Proprietary Protection."
- MAJOR SUPPLIER IN BANKRUPTCY. During fiscal 1994, one of RVSI's major
suppliers voluntarily filed for protection under Chapter 11 of the Federal
Bankruptcy Act. This supplier has presented a plan of reorganization to its
creditors, which plan is currently before the bankruptcy court for approval.
However, to ensure a stable supply of this product, RVSI has acquired a three
month inventory and has negotiated an escrow arrangement with this supplier
that would afford RVSI access to the documentation required to reprocure or
manufacture this product in the event the vendor is no longer able to furnish
such product to RVSI. RVSI anticipates that it may experience a short term
interruption in rebuilding its inventory of this product should this supplier
not emerge from bankruptcy successfully. See "Business of RSVI - Sources of
Supply."
- EXPORT SALES. Foreign export sales accounted for 63%, 74% and 54% of
RVSI's revenues in fiscal 1994, 1993 and 1992, respectively. RVSI's foreign
export sales are denominated in U.S. dollars and, therefore, RVSI's receivables
are not exposed to the risk of foreign currency fluctuations. However, to the
extent foreign currencies weaken relative to the U.S. dollar, RVSI's products
could become more expensive in these countries. This could adversely affect
both RVSI's sales volumes and gross profitability. See "Business of RVSI -
Markets and Products."
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INTRODUCTION
This Proxy Statement/Prospectus is provided to the RVSI Stockholders in
connection with the RVSI Special Meeting. The RVSI Special Meeting will be held
on the date, at the time and in the location, and will be held to consider the
matters, set forth under "The RVSI Special Meeting." The RVSI Board is
soliciting proxies hereby for use at the RVSI Special Meeting. A form of proxy
is being provided to the RVSI Stockholders with this Proxy Statement/
Prospectus. Information with respect to the execution and revocation of proxies
is provided under "The RVSI Special Meeting - Voting Rights."
This Proxy Statement/Prospectus also is provided to the Acuity Stockholders
in connection with the Acuity Special Meeting. The Acuity Special Meeting will
be held on the date, at the time and in the location, and will be held to
consider the matters, set forth under "The Acuity Special Meeting." The Acuity
Board is soliciting proxies hereby for use at the Acuity Special Meeting. A form
of proxy is being provided to the Acuity Stockholders with this Proxy
Statement/Prospectus. Information with respect to the execution and revocation
of proxies is provided under "The Acuity Special Meeting - Voting Rights."
The costs of solicitation of RVSI Stockholder proxies and Acuity
Stockholder proxies will be borne by RVSI and Acuity, respectively. RVSI and
Acuity will reimburse the respective brokers, fiduciaries, custodians and other
nominees for reasonable out-of-pocket expenses incurred in sending this Proxy
Statement/Prospectus and other proxy materials to, and obtaining instructions
relating to such materials from, the respective beneficial owners of RVSI Common
Stock and Acuity Common Stock. RVSI Stockholder proxies may be solicited by
directors, executive officers or regular employees of RVSI, in person, by letter
or by telephone or telegram.
Acuity has retained D.F. King & Co., Inc. to assist it in the
solicitation of proxies at an estimated cost of $5,000, plus reimbursement of
such company's accountable expenses. Acuity Stockholder proxies will be
solicited by employees of D.F. King & Co. and also may be solicited by
directors, executive officers or regular employees of Acuity, in person, by
letter or by telephone or telegram.
It is expected that representatives of Deloitte & Touche LLP and Arthur
Andersen LLP will be present at the respective Meetings of RVSI and Acuity and
will be available to respond to questions. They will be given an opportunity to
make a statement at the respective Meetings if they so desire.
THE RVSI SPECIAL MEETING
PURPOSE OF THE MEETING
At the RVSI Special Meeting, the RVSI Stockholders will be asked (1) to
consider and vote upon the approval and adoption of the Merger Agreement and the
transactions contemplated thereby, pursuant to which, among other matters, (i)
Subsidiary will be merged with and into Acuity and Acuity will become a
wholly-owned subsidiary of RVSI, and (ii) each share of Acuity Common Stock will
be converted into the right to receive, and become exchangeable for, 0.766 of a
share of RVSI Common Stock (subject to possible adjustments to the Exchange
Ratio as a result of implementation of the Collars)) (2) to elect nine
directors, (3) to consider and vote upon a proposal to approve the Amended and
Restated RVSI 1991 Stock Option Plan (the "1991 Option Plan"), (4) to consider
and vote upon a proposal to approve an amendment to the RVSI Certificate of
Incorporation increasing RVSI's authorized Common Stock from 20,000,000 shares
to 30,000,000 shares and (5) to ratify the selection by the RVSI Board of RVSI's
independent auditors.
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The RVSI Board without dissent has approved the Merger Agreement and the
transactions contemplated thereby and recommends that the RVSI Stockholders vote
"FOR" the proposal to approve and adopt the Merger Agreement and the
transactions contemplated thereby.
The RVSI Board without dissent has also designated each of the nominees for
election as directors, has approved the 1991 Option Plan and the proposed
amendment to the RVSI Certificate of Incorporation and has selected RVSI's
independent auditors. The RVSI Board recommends that the RVSI Stockholders vote
"FOR" each of such nominees, "FOR" the proposals to approve the 1991 Option Plan
and the amendment to the RVSI Certificate of Incorporation and "FOR"
ratification of its selection of independent auditors. See "The Proposed Merger
- - Recommendations of the Boards of Directors and Reasons for the Merger - RVSI,"
"Election of Directors," "Proposal to Approve RVSI's Amended and Restated 1991
Stock Option Plan," "Proposal to Amend RVSI's Certificate of Incorporation" and
"Ratification of Selection of Independent Auditors."
DATE, TIME AND PLACE; RECORD DATE
The RVSI Special Meeting is scheduled to be held at 10:00 A.M., local time,
on , September , 1995, at The Bank of New York, One Wall Street, New
York, New York. The RVSI Board has fixed the RVSI Record Date at the close of
business on July , 1995 for the determination of RVSI Stockholders entitled
to notice of and to vote at the RVSI Special Meeting. Only holders of record of
RVSI Common Stock as of the close of business on the RVSI Record Date will be
entitled to notice of and to vote at the RVSI Special Meeting.
VOTING RIGHTS
The vote of RVSI Stockholders in favor of the Merger Agreement and
consummation of the transactions contemplated thereby is not required by the
General Corporation Law of the State of Delaware ("DGCL"). Such vote is being
sought by RVSI pursuant to the requirements of The Nasdaq National Market. The
affirmative vote of the majority of shares of RVSI Common Stock present, either
in person or represented by proxy, at the RVSI Special Meeting is required to
approve the Merger Agreement and each of the
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other matters presented for stockholder approval with the exception of the
proposal to amend the RVSI Certificate of Incorporation. Pursuant to the DGCL,
the affirmative vote of the holders of at least a majority of the shares of RVSI
Common Stock outstanding as of the Record Date is required to approve the
proposal to amend the RVSI Certificate of Incorporation. At the RVSI Record
Date, there were 13,119,133 shares of RVSI Common Stock outstanding. Holders of
record of RVSI Common Stock outstanding as of the RVSI Record Date are entitled
to one vote per share at the RVSI Special Meeting. The presence, either in
person or represented by proxy, of the holders of a majority of the shares of
RVSI Common Stock outstanding as of the RVSI Record Date is necessary to
constitute a quorum at the RVSI Special Meeting. As of the RVSI Record Date,
RVSI's directors, executive officers and their respective affiliates as a group
held shares representing approximately 2.0% of the votes entitled to be cast by
RVSI Stockholders at the RVSI Special Meeting. Such percentage does not
include shares issuable pursuant to currently exercisable options and warrants.
The RVSI Board is soliciting proxies so that each RVSI Stockholder on the
RVSI Record Date has the opportunity to vote on the proposals to be considered
at the RVSI Special Meeting. When a proxy card is returned properly signed and
dated, the shares represented thereby will be voted in accordance with the
instructions on the proxy card. If a RVSI Stockholder does not return a signed
proxy card, his or her shares will not be voted, unless such stockholder attends
and votes at the RVSI Special Meeting, and thus will have the effect of a vote
against the proposal to approve the amendment to the RVSI Certificate of
Incorporation.
A broker who holds shares in street name will not be entitled to vote on
the Merger, the 1991 Option Plan and the amendment to the RVSI Certificate of
Incorporation without instructions from the beneficial owner. This inability to
vote is referred to as a broker nonvote. Abstentions and broker nonvotes will be
counted for purposes of determining the existence of a quorum at the RVSI
Special Meeting. However, since the proposal for amendment of the RVSI
Certificate of Incorporation to be considered at the RVSI Special Meeting
requires the affirmative vote of at least a majority of the shares of RVSI
Common Stock outstanding as of the RVSI Record Date, abstentions and broker
nonvotes will have the effect of a negative vote with respect to such proposal,
but not as to the other proposals to be considered at the RVSI Special Meeting.
RVSI Stockholders are urged to mark the boxes on the proxy card to indicate
how their shares will be voted. If a RVSI Stockholder (other than a broker
which holds shares in street name for its customers) returns a signed proxy
card, but does not indicate how his or her shares are to be voted, the shares
represented by the proxy card will be voted "FOR" the proposal to approve and
adopt the Merger Agreement and the transactions contemplated thereby, in favor
of each of the nominees for election of directors, "FOR" the proposals to
approve the 1991 Plan and the amendment to the RVSI Certificate of
Incorporation and "FOR" ratification of the RVSI Board's selection of RVSI's
independent auditors.
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The proxy card also confers discretionary authority on the individuals
appointed by the RVSI Board and named on the proxy card to vote the shares
represented thereby on any other matter incidental to the RVSI Special Meeting
that is properly presented for action at the RVSI Special Meeting or any
adjournment or postponement thereof.
Any RVSI Stockholder who executes and returns a proxy card may revoke such
proxy at any time before it is voted by (i) notifying in writing the Secretary
of RVSI, at 425 Rabro Drive East, Hauppauge, New York 11788, (ii) granting a
subsequent proxy or (iii) appearing in person and voting at the RVSI Special
Meeting. Attendance at the RVSI Special Meeting will not in and of itself
constitute revocation of a proxy.
THE ACUITY SPECIAL MEETING
PURPOSE OF THE MEETING
At the Acuity Special Meeting, the Acuity Stockholders will be asked to
consider and vote upon the proposal to approve and adopt the Merger Agreement
and the transactions contemplated thereby, pursuant to which, among other
matters, (i) Subsidiary will be merged with and into Acuity and Acuity will
become a wholly-owned subsidiary of RVSI, and (ii) each share of Acuity Common
Stock will be converted into the right to receive, and become exchangeable for,
0.766 of a share of RVSI Common Stock (subject to possible adjustments to the
Exchange Ratio as a result of implementation of the Collars).
The Acuity Board without dissent has approved the Merger Agreement and the
transactions contemplated thereby and recommends that the Acuity Stockholders
vote "FOR" the proposal to approve and adopt the Merger Agreement and the
transactions contemplated thereby. See "The Proposed Merger - Recommendations of
the Boards of Directors and Reasons for the Merger - Acuity."
DATE, TIME AND PLACE; RECORD DATE
The Acuity Special Meeting is scheduled to be held at 10:00 A.M., local
time, on , September , 1995, at the offices of Acuity, 9 Townsend
West, Nashua, New Hampshire. The Acuity Board has fixed the Acuity Record
Date as the close of business on July , 1995 for the determination of Acuity
Stockholders entitled to notice of and to vote at the Acuity Special Meeting.
Only holders of record of Acuity Common Stock at the close of business on the
Acuity Record Date will be entitled to notice of and to vote at the Acuity
Special Meeting.
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VOTING RIGHTS
Pursuant to the DGCL, the affirmative vote of the holders of at least a
majority of the shares of Acuity Common Stock outstanding as of the Acuity
Record Date is required to approve and adopt the Merger Agreement and the
transactions contemplated thereby. At the Acuity Record Date, there were
2,486,937 shares of Acuity Common Stock outstanding. Holders of record of
Acuity Common Stock outstanding as of the Acuity Record Date are entitled to
one vote per share at the Acuity Special Meeting. The presence, either in
person or represented by proxy, of the holders of a majority of the shares of
Acuity Common Stock outstanding as of the Acuity Record Date is necessary to
constitute a quorum at the Acuity Special Meeting. As of the Acuity Record
Date, Acuity's directors, executive officers and their respective affiliates as
a group held shares representing approximately 3.2% of the votes entitled to be
cast by Acuity Stockholders at the Acuity Special Meeting. Such percentage does
not include shares issuable pursuant to currently exercisable options.
The Acuity Board is soliciting proxies so that each Acuity Stockholder on
the Acuity Record Date has the opportunity to vote on the proposals to be
considered at the Acuity Special Meeting. When a proxy card is returned properly
signed and dated, the shares represented thereby will be voted in accordance
with the instructions on the proxy card. If an Acuity Stockholder does not
return a signed proxy card, his or her shares will not be voted, unless such
stockholder attends and votes at the Acuity Special Meeting, and thus will have
the effect of a vote against the Merger Agreement and the transactions
contemplated thereby.
A broker who holds shares in street name will not be entitled to vote on
the Merger without instructions from the beneficial owner. This inability to
vote is referred to as a broker nonvote. Abstentions and broker nonvotes will be
counted for purposes of determining the existence of a quorum at the Acuity
Special Meeting. However, since the proposal to be considered at the Acuity
Special Meeting requires the affirmative vote of at least a majority of the
shares of Acuity Common Stock outstanding as of the Acuity Record Date,
abstentions and broker nonvotes will have the effect of a negative vote. Acuity
Stockholders are urged to mark the box on the proxy card to indicate how their
shares will be voted. If an Acuity Stockholder (other than a broker which holds
shares in street name for its customers) returns a signed proxy card, but does
not indicate how his or her shares are to be voted, the shares represented by
the proxy card will be voted "FOR" the proposal to approve and adopt the Merger
Agreement and the transactions contemplated thereby.
The proxy card also confers discretionary authority on the individuals
appointed by the Acuity Board and named on the proxy card to vote the shares
represented thereby on any other matter incidental to the Acuity Special Meeting
that is properly presented for action at such meeting or at any postponement or
adjournment thereof.
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Any Acuity Stockholder who executes and returns a proxy card may revoke
such proxy at any time before it is voted by (i) notifying in writing the
President of Acuity, at 9 Townsend West, Nashua, New Hampshire 03063, (ii)
granting a subsequent proxy or (iii) appearing in person and voting at the
Acuity Special Meeting. Attendance at the Acuity Special Meeting will not in and
of itself constitute revocation of a proxy.
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THE PROPOSED MERGER
GENERAL
The following is a brief summary of certain aspects of the Merger. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement, which is attached to this Proxy
Statement/Prospectus as Exhibit A.
At the Effective Time, Subsidiary will be merged with and into Acuity, and
Subsidiary will cease to exist as a corporation. Acuity will be the surviving
corporation in the Merger and shall become a direct, wholly-owned subsidiary of
RVSI.
At the Effective Time, each then outstanding share of Acuity Common Stock
will be converted into the right to receive, and become exchangeable for, 0.766
of a share of RVSI Common Stock (subject to possible adjustments to the Exchange
Ratio as a result of implementation of the Collars). No fractional shares of
RVSI Common Stock will be issued in the Merger, and Acuity Stockholders whose
shares are converted in the Merger will be entitled to a cash payment in lieu of
such fractional shares. See "- No Fractional Shares."
As a consequence of the Merger, options to purchase 205,646 shares of
Acuity Common Stock at exercise prices ranging from $.89 to $22.50 per share
(the "Acuity Options") will be converted at the Effective Time into options to
purchase 157,524 shares of RVSI Common Stock at exercise prices ranging from
$1.16 to $29.37 per share. See "Management of Acuity - Stock Option Plans."
None of the shares of RVSI Common Stock issued and outstanding immediately
prior to the Effective Time will be converted or otherwise modified in the
Merger. All of such shares will continue to be outstanding capital stock of RVSI
after the Merger.
A description of the relative rights, privileges and preferences of RVSI
Common Stock, including certain non-significant differences between RVSI Common
Stock and Acuity Common Stock, is set forth under "Description of RVSI's
Securities" and "Comparison of Rights of Holders of Acuity Common Stock and RVSI
Common Stock."
CLOSING; EFFECTIVE TIME
The closing of the transactions contemplated by the Merger Agreement (the
"Closing") will take place on the third business day immediately following the
date on which the last of the conditions set forth in the Merger Agreement is
satisfied or waived, or at such other time as RVSI and Acuity may agree
("Closing Date"). The Merger will become effective on the date the Certificate
of Merger required under Delaware law is accepted for filing by the Secretary
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of State of the State of Delaware. Such filing will be made simultaneously
with, or as soon as practicable after, the Closing.
EXCHANGE OF STOCK CERTIFICATES
From and after the Effective Time, Acuity Stockholders immediately prior to
the Effective Time will be entitled to receive 0.766 of a share of RVSI Common
Stock (subject to possible adjustments to the Exchange Ratio as a result of
implementation of the Collars) in exchange for each share of Acuity Common Stock
held immediately prior to the Effective Time. See "- General." Notwithstanding
the Exchange Ratio, no fractional shares of RVSI Common Stock will be issued.
See "- No Fractional Shares." As soon as practicable after the Effective Time,
the Exchange Agent will mail transmittal instructions and a form of letter of
transmittal to each person who was an Acuity Stockholder immediately prior to
the Effective Time. The transmittal instructions will describe the procedures
for surrendering the Acuity Certificates that prior to the Merger represented
Acuity Common Stock in exchange for the RVSI Certificates representing RVSI
Common Stock. The form of letter of transmittal will specify that delivery shall
be effected, and the risk of loss and title to the RVSI Certificates shall pass,
only upon actual delivery of the Acuity Certificates to the Exchange Agent. Upon
surrender of the Acuity Certificates for cancellation to the Exchange Agent,
together with a duly executed letter of transmittal and such other documents as
the Exchange Agent may reasonably require, such Acuity Certificates will be
canceled and the holder of such Acuity Certificates will receive an RVSI
Certificate representing that number of whole shares of RVSI Common Stock to
which the former Acuity stockholder is entitled pursuant to the provisions of
the Merger Agreement, in addition to payment in cash for any fractional share of
RVSI Common Stock. ACUITY STOCKHOLDERS SHOULD NOT SUBMIT THEIR ACUITY
CERTIFICATES FOR EXCHANGE UNLESS AND UNTIL THEY HAVE RECEIVED THE TRANSMITTAL
INSTRUCTIONS AND A FORM OF LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
Acuity Stockholders will not be entitled to receive any dividends or other
distributions on RVSI Common Stock until the Merger has been consummated and
they have exchanged their Acuity Certificates for RVSI Certificates. Subject to
applicable laws, any such dividends and distributions after the Effective Time
will be accumulated and, at the time a former Acuity Stockholder surrenders his
or her Acuity Certificates to the Exchange Agent, all such accrued and unpaid
dividends and distributions, together with any cash payments in lieu of
fractional shares of RVSI Common Stock, will be paid without interest. It is not
anticipated that any accrued and unpaid dividends or distributions would exist
at the Effective Time. See "Comparative Per Share Prices and Dividends of RVSI
Common Stock and Acuity Common Stock."
If any RVSI Certificate is to be issued in a name other than that in which
the corresponding Acuity Certificate is registered,
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it is a condition to the exchange of the Acuity Certificate that the former
Acuity Stockholder requesting such exchange comply with applicable transfer
requirements and pay any applicable transfer or other taxes, or establish to
the satisfaction of RVSI that such tax has been paid or is not applicable. No
transfers of Acuity Common Stock will be made on the stock transfer books of
Acuity after the close of business on the day prior to the Effective Time.
Neither the Exchange Agent nor any party to the Merger Agreement will be
liable to any former Acuity Stockholder for any shares of RVSI Common Stock
delivered to state authorities pursuant to applicable abandoned property,
escheat or other similar laws. At any time following 180 days after the
Effective Time, RVSI may require the Exchange Agent to return all RVSI Common
Stock and cash deposited with the Exchange Agent which has not been disbursed to
former Acuity Stockholders and thereafter any such holders which have not
remitted their Acuity Certificates to the Exchange Agent may look to RVSI only
as a general creditor with respect thereto.
NO FRACTIONAL SHARES
No certificates or scrip for fractional shares of RVSI Common Stock will be
issued upon the surrender for exchange of Acuity Certificates in the Merger. No
dividend, stock split or interest will be paid with respect to any fractional
share of RVSI Common Stock, and such fractional interests will not entitle the
owner thereof to vote or to any of the other rights of a RVSI Stockholder.
Instead, each Acuity Stockholder who would otherwise have been entitled to a
fraction of a share of RVSI Common Stock upon surrender of Acuity Certificates
for exchange will be entitled to receive from the Exchange Agent a cash payment
(without interest) at a pro rata price based on the average of the last reported
sale prices of RVSI Common Stock on The Nasdaq National Market for the 20-day
period ending with the third trading day prior to the Closing Date.
BACKGROUND OF THE MERGER
The terms of the Merger Agreement resulted from arm's length negotiations
between representatives of RVSI and Acuity.
At a regular meeting of the RVSI Board held on February 1, 1994, the RVSI
Board unanimously authorized Pat V. Costa, RVSI's Chairman, President and Chief
Executive Officer, to seek out potential acquisition candidates. Mr. Costa was
entrusted with this task in view of his prior service as president of the
machine vision industry's national trade association, as a consequence of which
he was particularly knowledgeable as to the business, operations and prospects
of other companies in the machine vision industry.
The RVSI Board authorized the search for potential acquisition candidates
due to its desire to expand and diversify RVSI's product line and to accelerate
the growth of RVSI's business. The RVSI Board believed RVSI could better
withstand the cyclical changes characteristic of its industry with a broader
product line. The RVSI Board considered, but rejected, the possibility of
expanding its product line through internal diversification because it believed
that an acquisition of an existing operating company was a quicker and more
efficient method of product line expansion and diversification.
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In initially determining whether or not to approach potential acquisition
candidates, Mr. Costa, together with other senior members of RVSI's management,
considered, among other factors, the following:
- valuation of the candidate relative to RVSI
- complementary nature of the candidate's products
- synergies that could be expected to accrue from the combination of
RVSI and the candidate
- management and technical capability resident in the candidate's
organization
- profitability of the candidate's business and its impact on RVSI's
earnings per share
- stage of development and competitive position of the candidate's
products
- ability of the candidate to operate as an independent entity
RVSI made its initial contact with Acuity in August 1994 when Mr. Costa
telephoned John Pemble, who was then Chief Executive Officer of Acuity, to
inquire whether Acuity had an interest in holding business combination
discussions with RVSI. Mr. Pemble advised Mr. Costa that the matter required
discussion within Acuity before he could reply.
There were no subsequent discussions between RVSI and Acuity in these
regards until October 1994 when Mr. Pemble telephoned Mr. Costa to advise that
Acuity was interested in exploratory discussions with RVSI with respect to a
possible business combination. Mr. Costa visited Acuity's offices in Nashua,
New Hampshire to commence such discussions on October 18, 1994. Subsequently,
Mr. Costa met with Mr. Pemble at the Scan-Tech trade show in Chicago on November
1, 1994 for further discussions.
Mr. Pemble thereafter visited RVSI in Hauppauge, New York on November 3,
1994, and met with Mr. Costa and other senior RVSI officers. On November 24,
1994, at a regularly scheduled meeting of the Acuity Board, Mr. Pemble reviewed
the potential for a business combination with RVSI as part of an overall
discussion of merger and acquisition opportunities. Mr. Pemble reported on his
recent visit to RVSI and discussions with Mr. Costa. On December 8, 1994, Mr.
Costa and Ofer Gneezy, Acuity's President, spoke by telephone and set December
20, 1994 as the date for Mr. Gneezy to visit RVSI.
At the RVSI Board meeting held on December 14, 1994, the RVSI Board
specifically authorized Mr. Costa to continue to pursue Acuity as an acquisition
candidate.
On December 12, 1994, RVSI and Acuity entered into reciprocal non-
disclosure agreements.
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On December 20, 1994, Mr. Gneezy visited RVSI, at which time he met with
Mr. Costa and other senior RVSI officers. On the following day, Mr. Pemble
called Mr. Costa to advise of his resignation as Acuity's Chief Executive
Officer. He indicated that he would remain at Acuity through January 1995 for
transition purposes, including continuity of discussions with RVSI.
Subsequent to the December 20, 1994 meeting with Mr. Gneezy at RVSI, and
continuing over a period of approximately five weeks, RVSI and Acuity had
several exchanges of information and documents with the objective of providing
each other with insight into, among other things, each company's products,
capabilities, performance history and prospects.
Acuity retained JMS in January 1995 to advise it on the fairness, from a
financial point of view, of the proposed Merger to the RVSI Stockholders. JMS
did not participate in the negotiation between RVSI and Acuity of the Merger
terms.
Mr. Costa and Mr. Pemble next spoke by telephone on January 13, 1995. A
meeting for representatives of RVSI and Acuity to discuss a possible business
combination transaction was scheduled for January 20, 1995 at Logan Airport in
Boston.
Representing Acuity at the January 20th meeting in Boston were Donald J.
Kramer, Acuity's Chairman, Mr. Gneezy and Mr. Pemble. RVSI was represented by
Mr. Costa and Robert H. Walker, RVSI's Chief Financial Officer. RVSI presented
an offer to Acuity, along with various associated conditions. The offer was
neither accepted nor rejected by Acuity's representatives.
Mr. Costa spoke twice by phone with Mr. Pemble over the weekend of January
21 and 22, 1995. In those conversations it became apparent that there was a
misunderstanding between the parties as to the effect RVSI's offer would have
upon holders of Acuity's then outstanding stock options.
Mr. Costa and Mr. Pemble spoke again by phone on January 23, 1995. In that
conversation RVSI revised its offer to make specific provision for the
conversion upon the consummation of a business combination of Acuity's stock
options into options covering RVSI Common Stock. Messrs. Costa and Pemble also
discussed the quantitative parameters of "collars" and "break-up fees." Mr.
Pemble noted that R. Schorr Berman, an Acuity director, had been advised of the
status of discussions.
Mr. Costa and Mr. Pemble spoke again by phone on January 24, 1995. Mr.
Pemble said that C. William McDaniel, another Acuity director, had also then
been advised of the status of discussions. Mr. Pemble indicated that there was
some concern over the size of the break-up fees requested by RVSI as part of its
offer.
On January 26, 1995, at a regularly scheduled meeting of the Acuity Board,
Mr. Pemble reviewed the entire history of the discussions between Acuity and
RVSI and Mr. Gneezy detailed the elements of their proposed combination. After
lengthy discussion, the Acuity Board decided that the merger price should be
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approximately $12.08 per Acuity share and it authorized Acuity's management to
retain Fechtor, Detwiler to advise Acuity on the fairness of the proposed
transaction. The Acuity Board authorized management to move forward with trying
to negotiate an agreement in principle with RVSI. Acuity engaged Fechtor,
Detwiler on January 30, 1995 to advise it on the fairness of the proposed
transaction from a financial point of view. An engagement letter for such
services was finalized and executed on March 2, 1995.
RVSI retained JMS in January 1995 to advise it on the fairness,
from a financial point of view, of the proposed Merger to the RVSI
Stockholders. JMS did not participate in the negotiations between
RVSI and Acuity of the Merger terms.
Mr. Costa and Mr. Pemble spoke again by phone on January 26, 1995 after the
conclusion of the Acuity Board meeting. Mr. Pemble indicated that Acuity wished
to receive the equivalent of $12.08 in RVSI Common Stock for each share of
Acuity Common Stock and a specified minimum number of shares of RVSI Common
Stock. Acuity also objected to the spread of the "collars," and provided a
counter offer on a break-up fee arrangement.
RVSI held a telephonic Board meeting on January 27, 1995 at which the RVSI
Board agreed to accept the $12.08 per share valuation requested by Acuity and to
fix the number of shares of RVSI Common Stock issuable to the Acuity
Stockholders at approximately 4,360,000, based on an RVSI share price of $6.625.
The RVSI Board insisted on "collars" which were later in the day finalized by
Mr. Costa with Mr. Pemble and Mr. Gneezy at $5.50 and $7.50 per RVSI share,
i.e., RVSI could elect not to proceed with the transaction if the average market
price of RVSI Common Stock during a 20-day trading period preceding the proposed
merger transaction exceeded $7.50 per share and Acuity could elect not to
proceed with the transaction if the average market price of Acuity Common Stock
during the 20-day trading period preceding the proposed merger transaction fell
below $5.50 per share. General agreement was also reached on the issue of
break-up fees. It was also further agreed that RVSI's counsel would draft a
letter of intent for review by Acuity's counsel and the respective officers and
directors of both companies, with the objective of executing a letter of intent
before the end of the weekend (January 29, 1995). The difficulty of
communications over the weekend, with the number of parties involved and
remaining issues to be resolved, led to the continuation of discussions into
Monday, January 30, 1995.
The RVSI Board held a telephonic meeting on January 30, 1995 to review
resolution of final open issues. On the same day, the Acuity Board held a
telephonic meeting and, at that meeting, Mr. Gneezy and Mr. Engel, Acuity's
counsel, reviewed the terms of the Letter of Intent and the Acuity Board voted
to authorize Acuity's management to execute the Letter of Intent. The Letter
of Intent was finalized and executed by RVSI and Acuity on the evening of
January 31, 1995. It provided for an exchange ratio of 1.823396 shares of RVSI
Common Stock for each outstanding share of Acuity Common Stock. A joint press
release announcing the signing was issued on the morning of February 1, 1995.
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Subsequent to the execution of the Letter of Intent, counsel for RVSI
prepared and distributed to both Acuity and its counsel a draft of the Merger
Agreement on February 10, 1995.
Following telephonic discussions and negotiations among the parties and
their respective counsel, revised drafts of the Merger Agreement were prepared
and distributed on February 22, 1995 and March 9, 1995, respectively.
After the Letter of Intent was signed, the "due diligence" process
commenced. At the outset RVSI and Acuity exchanged requests for documents
needed for that purpose. Due diligence visits were then made to Acuity
by JMS. Several RVSI officers and other personnel also visited Acuity during
the due diligence process.
Mr. Costa, accompanied by Maxwell Morton, a machine vision industry
consultant retained by RVSI, visited Acuity on February 7th and 8th, March 21st,
and April 4th and 5th, primarily to review and discuss Acuity's marketing and
sales organization, strategy, and activities. Prior thereto, on March 2, 1995,
Howard Stern, RVSI's Senior Vice President and technical director, met with Mr.
Agapakis to gain further insight into Acuity's technology. Mr. Walker also
visited Acuity on March 9, 1995 to meet with Mr. Rogers to discuss certain
issues raised in the course of due diligence activities.
In February several Acuity officers and advisors visited RVSI to conduct
due diligence. On February 14, 1995, Mr. Gneezy, accompanied by Noel Coletti
and John E. Agapakis, Acuity's Director of Marketing and Vice President for
Research and Development, respectively, visited RVSI for this purpose. On
February 23 and 24, 1995, John A. Rogers, Acuity's Chief Financial Officer
visited RVSI to conduct management and accounting due diligence.
During the due diligence period, it became progressively clear to RVSI that
Acuity was going to fall short of its revenues and bookings forecast for the
quarter ending April 1, 1995 furnished by Acuity to RVSI. Following the end of
that fiscal quarter, Acuity advised RVSI that its revenues for the quarter would
be under $5.0 million and that Acuity expected a then unquantifiable loss for
the quarter.
Mr. Kramer and Mr. Gneezy were invited to attend RVSI's regularly scheduled
Board meeting in New York City on April 13, 1995. At that meeting, they advised
RVSI that Acuity's revenues for its first quarter of 1995 were approximately
$4.85 million and that the loss for the quarter was approximately $140,000. Mr.
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Costa thereupon advised Messrs. Kramer and Gneezy on behalf of the RVSI Board
that RVSI wished to renegotiate the Exchange Ratio.
On April 18, 1995, Mr. Costa offered Acuity a transaction valued at
approximately $22.1 million, premised on a per share value of RVSI Common Stock
at $8-3/8 per share with no "collars." This resulted in a revised Exchange
Ratio of 1.072 shares of RVSI Common Stock for each share of Acuity Common
Stock. Mr. Costa and Mr. Gneezy discussed the revised Exchange Ratio on April
19, 1995 and again on April 20, 1995. At such time Fechtor, Detwiler had not
formally concluded to the Acuity Board that the 1.823336 exchange ratio was fair
to Acuity Stockholders from a financial point of view.
On April 24, 1995, the Acuity Board authorized Mr. Gneezy to sign an
extension of the Letter of Intent giving effect to the new Exchange Ratio and
other new terms, including the absence of "collars", and also authorized
Mr. Gneezy to execute a definitive Merger Agreement incorporating these
provisions An amendment to the Letter of Intent was signed on April 24, 1995
and announced by a joint press release on the same day.
Subsequently, counsel for RVSI distributed a revised draft of the Merger
Agreement to counsel for Acuity. On April 26, 1995, the RVSI Board authorized
execution of the definitive Merger Agreement. The final terms of the
definitive Merger Agreement were agreed upon that evening and the Merger
Agreement was signed on the morning of April 27, 1995, at which time a joint
press release announcing its execution was issued.
Following execution of the Merger Agreement, RVSI management and Acuity
management periodically exchanged information regarding their respective
operations. Towards the end of Acuity's second calendar quarter of 1995, it
became progressively clear to RVSI that Acuity was going to fall short of its
revised revenues and bookings forecast for that quarter furnished by Acuity to
RVSI.
Messrs. Gneezy and Rogers were invited to attend RVSI's regularly
scheduled board meeting on June 22, 1995. At that meeting, they advised RVSI
that Acuity contemplated incurring an operating loss of approximately $500,000
for the quarter ended July 1, 1995. Following the departure of Messrs.
Gneezy and Rogers, the RVSI Board determined that the Exchange Ratio should be
renegotiated, but deferred making any decision on the terms of a renegotiation
proposal in view of recent increases in the market price of RVSI Common Stock.
At a regularly scheduled Acuity Board meeting on June 28, 1995, the
Acuity Board, as a result of Acuity's projected operating results for the
second quarter and in anticipation of a possible proposal from RVSI to
renegotiate the terms of the Merger, discussed the kind of package of revised
terms of the Merger that would be acceptable, including (1) some reduction in
the Exchange Ratio, (2) elimination of the material adverse change
termination provisions, (3) an extension of the "drop dead" date to
September 30, 1995, (4) an increase in the break-up fees to $750,000 and (5)
price adjustment "collars." Pursuant to such instructions, the Board
authorized Messrs. Kramer and Gneezy to discuss any proposals from RVSI
relating to renegotiation of the Merger terms.
On July 3, 1995, the RVSI Board authorized Mr. Costa to present
a proposal to Acuity which, based on the then trading price of RVSI Common
Stock, would involve an aggregate consideration of approximately $30,000,000.
Such proposal would also reduce the Acuity Board's designees for election as
RVSI directors from two to one, and would also reduce such designee director's
term from a period of two years to one year. Upon receipt of such
authorization, Mr. Costa offered Acuity a transaction valued at approximately
$30 million, with "no collars." The proposal was made by Mr. Costa by
telephone in separate conversations first with Mr. Gneezy and then with
Mr. Kramer.
Later that day, Mr. Kramer offered to Mr. Costa and Mr. Walker a counter-
proposal providing an additional $1 million in the Merger valuation, an
increase in break-up fees to $750,000, elimination of material adverse
change termination provisions and price adjustment "collars" of $14.50 and
$12.00, respectively.
Thereafter, also on July 3, 1995, Mr. Costa and Mr. Walker advised
Messrs. Gneezy and Rogers by telephone that they would not accept the increased
valuation and increased break-up fees provisions of Mr. Kramer's
counter-proposal but were agreeable to excluding from the material adverse
change termination provisions, a loss or projected operating loss of up to
$500,000 for Acuity for the quarter ending September 30, 1995. Mr. Gneezy was
also advised that price adjustment "collars" of $14.50 and $9.00, would be
acceptable to RVSI.
There was no contact between Acuity and RVSI on July 4 or 5 1995. On
July 6, 1995, the Acuity Board held a telephonic Board Meeting
and authorized Mr. Gneezy to accept the latest RVSI Merger terms if he could
obtain an increase in the Minimum Collar. Later that day Mr. Costa and
Mr. Gneezy agreed verbally to revised price adjustment "collars" of $14.50 and
$10.00, respectively. Final agreement was predicated upon mutually acceptable
documentation, respective Board approvals and receipt of fairness opinions from
RVSI's and Acuity's respective investment advisors.
Counsel for RVSI distributed a draft of an amendment to the Merger
Agreement to Acuity and its counsel on July 7, 1995.
A revised draft of the Merger Agreement amendment was distributed by
RVSI's counsel on July 10, 1995, after receipt of comment from Acuity's counsel.
RVSI's counsel and Acuity's counsel thereafter exchanged
comments on the draft amendment and effected revisions thereto. A final
draft was agreed to in the evening of July 11, 1995, and signed on the morning
of July 12, 1995, at which time a joint press release announcing its execution
was issued.
On July 10, 1995, Mr. Gneezy individually polled the Acuity Board
members and each of such Board members indicated that they were in favor of
execution of the amendment pursuant to the Board's authority resolutions of
July 6. RVSI's Board authorized the signing of the amendment on July 11, 1995.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
AND REASONS FOR THE MERGER
RVSI. At a meeting held on July 11, 1995 the RVSI Board unanimously
approved the Merger Agreement and the transactions contemplated thereby and
concluded that the Merger was fair to, and in the best interests of, the RVSI
Stockholders. Accordingly the RVSI Board recommends that the RVSI Stockholders
vote "FOR" the approval and adoption of the Merger Agreement and the
transactions contemplated thereby. In reaching its determination, the RVSI Board
consulted with its financial advisor, Janney Montgomery Scott Inc. ("JMS"), its
counsel and its management, and considered the following material factors:
consolidation trends in the machine vision industry, the current status of the
respective operations and financial prospects of RVSI and Acuity, RVSI's and
Acuity's capital requirements for growth, the current and historical trading
volume and price of both the RVSI Common Stock and the Acuity Common Stock and
the detailed financial analysis of the proposed transaction as performed by its
financial advisor and as more fully described herein. See "- Opinions of
Financial Advisors - Janney Montgomery Scott Inc." and Exhibit C. The RVSI Board
concluded that the Merger would provide important benefits to the RVSI
Stockholders, including:
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- The reduction in the number of participants in the machine vision
industry that has taken place since the mid-1980s may accelerate in
the next few years. The combination of the technology and products of
RVSI with those of Acuity, and the market position and access to
capital that RVSI currently enjoys, should permit RVSI to survive as
an industry leader in any such consolidation.
- A combination of RVSI's 3-D laser-based machine vision products with
Acuity's diversified 2-D machine vision products could be expected to
result in a diverse, technologically advanced and industry leading
product line, thereby strengthening the competitive position of both
companies.
- Increased financial industry visibility may also result in higher
daily trading volume for RVSI Common Stock, thereby increasing RVSI
Stockholder liquidity.
- Expanded marketing opportunities for both RVSI and Acuity as RVSI's
semi-conductor manufacturing customers have informed RVSI of their
desire for increased 2-D machine vision inspection of packaging
materials. Further, RVSI's increasing volume of sales outside the
United States could be expected to enhance Acuity's level of
international sales (62% of RVSI's 1994 sales, and 19% of Acuity's
1994 sales, were international).
- With a skilled and technologically proficient management team in
place, Acuity could operate in substantial part as an autonomous
company, cooperating with RVSI in the development and marketing of new
products.
- The larger and more diversified nature of RVSI would increase the
likelihood that RVSI would achieve greater financial industry
visibility, thereby enhancing its access to capital markets, if
required to fund future growth.
In view of the wide variety of factors considered in connection with its
evaluation of the Merger, the RVSI Board did not find it practicable to, and did
not, quantify or otherwise attempt to assign relative weight to the specific
factors considered in reaching its determination.
ACUITY. At a meeting held on July 6, 1995, the Acuity Board unanimously
approved the Merger Agreement and the transactions contemplated thereby and
concluded that the Merger was fair to, and in the best interests of, the Acuity
Stockholders. Accordingly, the Acuity Board recommends that the Acuity
Stockholders vote "FOR" the approval and adoption of the Merger Agreement and
the transactions contemplated thereby. In reaching its determination, the Acuity
Board consulted with its financial advisor, Fechtor, Detwiler, its counsel and
its management, and considered the following material factors: potential
operating synergies between the two companies, consolidation trends in the
machine vision industry, the current status of the respective operations and
financial prospects of Acuity and RSVI, their respective capital needs and the
projected capital needs of the combined companies, the perceived compatibility
of the management cultures of the two companies, the strategic alternatives
available to Acuity, the current and historical trading volume and price of
both the Acuity Common Stock and the RVSI Common Stock, and the detailed
financial analysis of the proposed transaction as performed by its financial
advisor and as more fully described herein. See "Opinions of Financial
Advisors - Fechtor, Detwiler & Co., Inc." and Exhibit D.
Among the matters considered by the Board in relation to the status of
operations of the two companies and their respective financial prospects were
the following:
- Acuity's financial results for its quarter ended July 1, 1995 were
substantially below expectations, with revenues of $[4.1] million and
a loss of approximately $500,000. Acuity's financial results for its
immediately preceding quarter, ended April 1, 1995, had also been
disappointing, with revenues of $4.9 million and a loss of $141,000.
Throughout these two quarters, Acuity had not been able to secure a
large contract to replace the single large contract that had accounted
for a large proportion of its shipments during the second half of
1994 (see "Management's Discussion and Analysis of Financial Condition
and Results of Operations of Acuity). By contrast RVSI had revenues
of approximately $9,000,000 and income before tax benefit of
$1,857,000 for the three months ended March 31, 1995 and record
bookings for the three months ended June 30, 1995.
- Acuity was and is in default of certain covenants under its long-term
bank line of credit. While Acuity had obtained forbearance from such
defaults from the bank until the earlier of August 15, 1995 (more
recently extended to September 30, 1995) or any abandonment of the
Merger, Acuity had no concrete plan for curing the defaults -- other
than further negotiation with its bank -- in the absence of the
Merger (see Management's Discussion and Analysis of Financial
Condition and Results of Operations of Acuity -- Liquidity, Capital
Resources and Financial Condition).
- Even apart from the defaults just referenced, Acuity was and is
relatively highly leveraged for a high-technology company, whereas
RVSI had and has a very strong balance sheet with several million
dollars of cash and cash equivalents.
- RVSI's product distribution is heavily into the semiconductor
industry, which was enjoying a boom of major proportions that
industry projections expected to continue, and where RVSI has been
able to realize high gross margins. While the Board believes that
Acuity has strong product offerings for the long term, it also
believes that market perceptions of Acuity's products are such
that their penetration of major new markets is not likely to be
achieved quickly. Whereas, once Acuity is a part of RVSI the Board
believes that Acuity could penetrate the semiconductor industry.
With reference to available strategic alternatives, the Acuity Board
concluded that, based on extensive exploration by management and the Acuity
Board over a long period, it was highly unlikely any strategic transaction on
terms more favorable to Acuity's shareholders than the terms of the Merger was
available with a different partner or acquiring party.
The Acuity Board concluded that the Merger would provide important benefits
to the Acuity Stockholders, and would be more beneficial to them than remaining
in a standalone Acuity. The benefits that the Board believed the Merger would
provide to the Acuity Stockholders include the following:
- Potential operating synergies between the two companies could include
those in applications, market segments, distribution channels,
geography and productivity. Specifically and by way of example,
the Acuity Board believes that the customer base in the machine vision
marketplace is very important because of the relative difficulty of
breaking into competitive accounts, and that the combination of
Acuity's diversified 2-D machine vision products with RSVI's 3-D
laser-based machine vision products could be expected to result in a
diverse, technologically advanced and industry leading product line
with considerable potential for cross-selling between the two customer
bases. Moreover, the Acuity Board believes that the combined direct
sales coverage and distribution channels of the two companies can
provide a fuller coverage of the market both domestically and
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internationally than either company has now, and that the increased
size of the combined operation should increase the diversification
of the customer base and reduce reliance on a few very large
customers.
- The reduction in the number of participants in the machine vision
industry that has taken place since the mid-1980s may accelerate
in the next few years. The combination of the technology and products
of RVSI with those of Acuity, and the market position and access to
capital that RVSI currently enjoys, should permit RVSI to survive as
an industry leader in any such consolidation.
- The expectation of the parties that the continuing Acuity operation be
run in large part in its present location by its own management after
the Merger should enable Acuity to continue to pursue its particular
lines of business with the necessary focus and expertise to build them
within the combined operation of RVSI.
- Historically, the Acuity Common Stock has been
thinly traded and, therefore, subject to greater volatility. The
historically greater daily trading volume for RVSI's Common Stock
than Acuity's, combined with the still greater financial industry
visibility that should accrue to the larger, combined operation, may
well enhance both the liquidity of the Acuity Stockholders and the
access of RVSI after the Merger to capital markets if required to
fund further growth.
In view of the wide variety of factors considered in connection with its
evaluation of the Merger, the Acuity Board did not find it practicable to, and
did not, quantify or otherwise attempt to assign relative weight to the specific
factors considered in reaching its determination.
OPINIONS OF FINANCIAL ADVISORS
JANNEY MONTGOMERY SCOTT INC. In its role as financial advisor to RVSI, JMS
was asked by RVSI to render its opinion to the RVSI Board as to the fairness to
the public stockholders of RVSI, from a financial point of view, of the Exchange
Ratio.
On July 20, 1995, JMS orally advised the RVSI Board that, as of such date,
the Exchange Ratio was fair, from a financial point-of-view, to the RVSI holders
of outstanding shares of RVSI Common Stock. JMS subsequently confirmed its oral
opinion by delivery of a written opinion dated July 20, 1995.
A COPY OF THE JMS OPINION IS ATTACHED HERETO AS EXHIBIT C. RVSI
STOCKHOLDERS ARE URGED TO READ THE OPINION CAREFULLY AND IN ITS ENTIRETY FOR
ASSUMPTIONS MADE, MATTERS CONSIDERED, PROCEDURES FOLLOWED AND LIMITS OF THE
REVIEW UNDERTAKEN BY JMS. THE SUMMARY OF THE JMS OPINION SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION. THE JMS OPINION WAS PREPARED FOR THE RVSI BOARD, IS DIRECTED
ONLY TO THE FAIRNESS TO THE RVSI STOCKHOLDERS AS OF JULY 20, 1995, FROM A
FINANCIAL-POINT-OF-VIEW, OF THE EXCHANGE RATIO PURSUANT TO THE MERGER AGREEMENT
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW TO VOTE AT
THE RVSI SPECIAL MEETING. ADDITIONALLY, JMS' OPINION DOES NOT EXPRESS AN OPINION
AS TO THE PRICE OR TRADING RANGE AT WHICH THE RVSI COMMON STOCK WILL TRADE
SUBSEQUENT TO THE DATE OF ITS OPINION.
In connection with its opinion, JMS (i) reviewed the Merger Agreement; (ii)
reviewed and analyzed certain publicly available information concerning Acuity
and RVSI; (iii) reviewed and analyzed certain internal financial and operating
information with respect to the business, operations and prospects of Acuity
furnished to JMS by Acuity; (iv) reviewed and analyzed certain internal
financial and operating information with respect to the business, operations and
prospects of RVSI furnished to JMS by RVSI; (v) reviewed and analyzed certain
financial forecasts of Acuity and RVSI prepared by their respective managements;
(vi) discussed the past and current operations and financial condition and the
prospects of Acuity with senior management of Acuity; (vii) discussed with
senior management of RVSI the strategic and operating benefits anticipated from
the Merger; (viii) reviewed the price and trading histories of Acuity Common
Stock and RVSI Common Stock; (ix) compared the financial positions and operating
results of Acuity and RVSI with those of publicly traded companies it deemed
relevant; (x) compared certain financial terms of the Merger to certain
financial terms of selected other business combinations it deemed relevant; (xi)
analyzed the pro forma financial effect of the Merger; (xii) conducted such
other financial studies, analyses (as discussed below) and investigations, and
reviewed such other factors, as it deemed relevant.
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JMS assumed and relied upon, without independent verification, the accuracy
and completeness of the information reviewed by it for purposes of its opinion.
With respect to financial projections, JMS assumed that they had been reasonably
prepared on bases reflecting the best currently available information and
judgments of the future financial performance of Acuity and RVSI. JMS has not
made an independent valuation or appraisal of the assets or liabilities of
Acuity, nor has it been furnished with any such valuations or appraisals. JMS
has also assumed the Merger will be accounted for as a pooling of interests.
The JMS Opinion is necessarily based on financial, economic, market and other
conditions as they existed on, and information made available to it as of, the
date of the opinion.
The following is a brief summary of certain of the financial analyses
utilized by JMS in connection with providing its opinion to the RVSI Board on
July 20, 1995.
COMPARATIVE STOCK PRICE PERFORMANCE: As part of its analysis, JMS reviewed
the history of the trading prices and their relative relationships for both
Acuity and RVSI since May 20, 1994. The review indicated that since May 20,
1994 Acuity Common Stock traded between $6.00 and $10.25 and averaged
approximately $8.39, and in the period ending April 24, 1995 between $6.00 and
$10.25 and averaged approximately $8.39. The ratios of closing stock prices of
Acuity and RVSI for various periods ending April 24, 1995 were: 0.94 to 2.28 and
averaged approximately 1.33 for the period ended April 24, 1995, 0.94 to 2.28
and averaged approximately 1.34 for the six months ended April 24, 1995, 0.94 to
1.59 and averaged approximately 1.40 for the three months ended April 24, 1995,
0.94 to 1.45 and averaged approximately 1.24 for the 30 days ended April 24,
1995 and approximately 1.00 for April 24, 1995. This stock price study was then
compared to the exchange ratio as of the date of the Merger Agreement.
CONTRIBUTION ANALYSIS: JMS analyzed the pro forma contribution of each of
RVSI and Acuity to the combined company if the Merger were to be consummated.
The pro forma figures reflect the adjusted contribution levels of each company
for the 12 months ended March 31, 1995. JMS calculated that each of RVSI and
Acuity contributes 57% and 43% to pro forma revenues, 78% and 22% to pro forma
operating income, 80% and 20% to pro forma pre-tax income, 84% and 16% to pro
forma net income and 86% and 14% to pro forma book value, respectively. This
contribution analysis was then compared to the pro forma ownership percentage of
RVSI stockholders in the combined company of 88%. The results of these
contribution analyses are not necessarily indicative of the future contributions
of each company.
PRO FORMA ANALYSIS: JMS analyzed certain pro forma effects of the Merger
on the combined companies' earnings per share, consolidated capitalization and
financial ratios. JMS found changes in earnings per share from $0.46 to $0.48,
book value per share from $1.06 to $1.08 and debt to equity from 0.49 to 0.67
for the 12 month period ended March 31, 1995. Furthermore, such analysis
indicated that based on the realization of potential synergies estimated by the
managements of RVSI and Acuity, earnings per share for fiscal 1995, 1996 and
1997 may be reduced by 15%, may be unchanged and may increase by 8%,
respectively.
SELECTED COMPANIES ANALYSIS: JMS compared certain financial information of
Acuity with a group of publicly traded companies in the machine vision industry
that, in JMS' judgment, were comparable to Acuity (the "Acuity Comparable
Companies"). The Acuity
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Comparable Companies were chosen by JMS as companies that possess general
business, operational and financial characteristics representative of companies
in the industry in which Acuity operates, although JMS recognized that each
of the Acuity Comparable Companies is distinguishable from Acuity in certain
respects. The Acuity Comparable Companies consists of Cognex Corp.,
Perceptron, Inc., Medar, Inc., KLA Instruments Corporation, Electroglas, Inc.
and Tencor Instruments.
The financial information considered by JMS included, among other items,
selected balance sheet data, operating statement data and earnings per share
estimates made by research analysts. JMS calculated several market multiples
for the Acuity Comparable Companies which include price ranges of 2.36 to 12.62
times sale, 11.71 to 34.49 times operating income, 18.81 to 53.85 times pro
forma earnings and 2.70 to 7.83 times book value. These figures were then used
to calculate an implied common stock price range for Acuity of $20.78 to
$111.11 based on Acuity's sales, $6.33 to $18.64 based on operating income,
$9.05 to $25.90 based on pro forma earnings and $2.50 to $7.26 based on book
value. JMS found that the price per share of Acuity Common Stock contemplated
by the Exchange Ratio is within this range of values.
COMPARABLE TRANSACTION ANALYSIS: JMS examined certain completed merger
and acquisition transactions of machine vision-related companies. To the
extent information was available, JMS calculated a range of market multiples
which ranged from 1.11 to 1.30 times revenues, 19.50 to 46.42 times operating
income, 22.98 to 48.17 times earnings per share and 2.95 to 3.50 times book
value. These figures were then used to calculate an implied common stock price
range for Acuity of $9.78 to $11.43 per share based on Acuity's sales, $10.54
to $25.09 per share based on operating income, $11.05 to $23.17 per share
based on net income and $2.73 to $3.24 per share based on book value. JMS
found the price per share of Acuity Common Stock contemplated by the Exchange
Ratio is within this range.
DISCOUNTED CASH FLOW ANALYSIS: JMS performed a discounted cash flow
analysis of Acuity based on fiscal 1995 to 1997 projections provided by the
management of Acuity. In performing its analysis, JMS applied discount rates
ranging from 15% to 25% and terminal value multiples of 13 to 18 times operating
income. The resulting range of values, from $8.23 to $14.37 per share, was then
compared to the implied purchase price per share of Acuity. JMS found the price
per share of Acuity Common Stock contemplated by the Exchange Ratio is within
this range.
The summary set forth above does not purport to be a complete description
of the analyses performed by JMS in arriving at its opinion. The preparation of
a fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. JMS believes that its analyses and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, or of the above
summary, without considering all factors and analyses, could create an
incomplete view of the process underlying the analyses performed by JMS in
connection with the preparation of its opinion letter. In performing its
analyses, JMS made numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of Acuity and RVSI. The analyses performed by JMS are not
necessarily indications of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. In
addition, analyses relating to value of a business do not purport to be
appraisals or to reflect the prices at which businesses actually may be sold.
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JMS is a nationally recognized investment banking firm and is continually
engaged in the valuation of businesses and securities in connection with mergers
and acquisitions, negotiated underwritings, secondary distributions of listed
and unlisted securities, private placements, and valuations of corporate and
other purposes. JMS has not provided investment banking services to RVSI prior
to its services related to the Merger. JMS does not make a market in either
Acuity or RVSI Common Stock, however, as a full service securities firm, JMS
may from time-to-time effect transactions for its own account or the accounts of
customers and hold positions in securities of Acuity and RVSI. JMS has been
paid a fee of $130,000 for its services regarding the merger plus the
reimbursement of its accountable out-of-pocket expenses. JMS' fee was not
contingent on the conclusion reached in its opinion.
FECHTOR, DETWILER & CO., INC. In its role as financial advisor to Acuity,
Fechtor, Detwiler was asked by Acuity to render its opinion to the Acuity Board
as to the fairness to the public stockholders of Acuity, from a financial point
of view, of the Exchange Ratio.
On July 7, 1995, Fechtor, Detwiler orally advised Acuity that, as of such
date, the Exchange Ratio was fair, from a financial point of view, to the Acuity
Stockholders. Fechtor, Detwiler subsequently confirmed its oral opinion by
delivery of a written opinion dated July 17, 1995.
In rendering such opinion in regard to the Merger, Fechtor, Detwiler (1)
reviewed the Agreement and Plan of Merger and Reorganization dated April 27,
1995, and the Amendment to Agreement and Plan of Merger and Reorganization dated
July 11, 1995, (2) reviewed historical financial and business information about
Acuity, (3) met with management of Acuity to discuss its operations, financial
condition and future prospects, (4) visited Acuity's Nashua, New Hampshire
facility, (5) reviewed historical financial and business information about RVSI,
(6) met with the management of RVSI to discuss its operations, financial
condition and future prospects, (7) visited RVSI's Hauppauge, New York facility,
(8) reviewed the trading histories of Acuity and RVSI common stock, (9) compared
the market valuations, financial condition and performance of Acuity and RVSI
with those of other publicly traded companies (the "Comparable Companies"),
(10) compared certain financial terms of the Merger to certain financial terms
of selected other business combinations deemed relevant, (11) considered the
potential for accretion in operating earnings and earnings per share for the
Acuity Stockholders which may result from the Merger, (12) analyzed the pro
forma contribution of each of Acuity and RVSI to the combined company's
revenues, operating income, tax-adjusted earnings and book value if the Merger
were to be consummated, (13) calculated the pro forma financial effect of the
Merger on the combined company's financial ratios and compared these with the
financial ratios of both Acuity and RVSI prior to the Merger, and (14) compared
the valuation of the Acuity shares in the Merger to the closing price of Acuity
shares prior to the announcement of the Merger.
Acuity and RVSI furnished certain material non-public information to
Fechtor, Detwiler including projected income statements through December 1996 by
Acuity and September 1995 by RVSI. In rendering its opinion, Fechtor, Detwiler
has assumed and relied upon the accuracy and completeness of all information
provided to them by Acuity and RVSI, and has not assumed any responsibility for
independent verification of such
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information or any independent valuation or appraisal of any of the assets of
Acuity or RVSI.
Acuity did not place any limitations on Fechtor, Detwiler's report. Acuity
did not ask Fechtor, Detwiler to render any opinion as to the fairness, from a
financial point of view, of the Merger, but only as to the fairness, from a
financial point of view, of the Exchange Ratio.
The following is a summary of the financial analyses performed by Fechtor,
Detwiler in connection with providing its written opinion to Acuity on July 17,
1995.
COMPARATIVE TRADING HISTORY: Fechtor, Detwiler examined trading volumes in
the Common Stock of Acuity and RVSI to determine whether an open and active
market existed for both stocks prior to the announcement of the Merger on
February 1, 1995. Trading volume on the Nasdaq National Market for RVSI Common
Stock exceeded 530,000 shares in December 1994 and 795,000 shares in January
1995. Trading volume on the NASDAQ Small Capitalization Market for Acuity
Common Stock exceeded 160,000 shares in December 1994 and 90,000 shares in
January 1995. In Fechtor, Detwiler's opinion, these volumes were sufficient to
constitute an open and active market for the shares of RVSI and Acuity.
Fechtor, Detwiler also observed that in December 1994 and January 1995,
trading volume in shares of RVSI was 3.3 times and 8.8 times higher,
respectively, than trading volume in Acuity shares. Based on this history,
Fechtor, Detwiler concluded that the Acuity Stockholders may experience
improvement in the liquidity of the market for their shares as a result of the
Merger.
COMPARABLE COMPANIES ANALYSIS: Fechtor, Detwiler compared certain
financial information of RVSI and Acuity with a group of publicly traded
comparable companies in the machine vision and related industries that, in
Fechtor, Detwiler's judgment, were comparable to RVSI and Acuity. The
Comparable Companies were chosen by Fechtor, Detwiler as companies which possess
general business, operational and financial characteristics representative of
companies in the industry in which RVSI and Acuity operate, although Fechtor,
Detwiler recognized that each of the Comparable Companies differs from RVSI and
Acuity in certain respects. The Comparable Companies consist of Cognex, Medar,
Pattern Processing, Perceptron, Orbotech, KLA Instruments, Electromagnetic
Sciences, Metrologic Instruments, and Computer Identics.
The financial information Fechtor, Detwiler considered was the most recent
information available to it as of the date of the opinion. The financial
measures considered and the median values for each of these measures for the
Comparable Companies were as follows: the
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multiple of firm value to revenues (1.39x), the multiple of firm value to
operating income (15.43), the multiple of the stock price to trailing earnings
per share (24x), the multiple of the stock price to the estimated earnings per
share for the current fiscal year (19x), and the multiple of the stock price to
the estimated earnings per share for the next fiscal year (13x).
Fechtor, Detwiler compared RVSI's and Acuity's valuation multiples on a
trailing four quarters basis ended in March 31, 1995 to those of the Comparable
Companies. Based upon RVSI's Common Stock price of $14.50 on July 14, 1995,
Fechtor, Detwiler calculated the following values for RVSI: the multiple of firm
value to revenues (7.30x), the multiple of firm value to operating income
(45.01x), the multiple of the stock price to trailing earnings per share (32x),
the multiple of the stock price to the estimated earnings per share for the
current fiscal year (21x), and the multiple of the stock price to the estimated
earnings per share for the next fiscal year (16x).
Fechtor, Detwiler noted that for the period examined, RVSI traded at
valuation multiples that were generally higher than the median valuation
multiples for the Comparable Companies. Fechtor, Detwiler attributed the
variation in part to differences in operating performance. RVSI's average
annual growth rate in revenues for the three fiscal years ended September 1994
and its gross and operating margins for the four quarters ended March 1995
exceeded the median of the Comparable Companies as a group. Companies with
comparable growth rates and profit margins to RVSI
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include Cognex, Perceptron and KLA Instruments. For these three companies, the
median and average valuation multiples were as follows: the multiple of firm
value to revenues (4.97x) and (7.66x), the multiple of firm value to operating
income (29.41x) and (24.97), the multiple of the stock price to the trailing
earnings per share (45x) and (40x), the multiple of the stock price to the
estimated earnings per share for the current fiscal year (31x) and (27x), and
the multiple of the stock price to the estimated earnings per share for the next
fiscal year (23x) and (22x). Fechtor, Detwiler concluded that the multiples for
RVSI were in line with those of Cognex, Perceptron and KLA Instruments.
For the Acuity Common Stock, Fechtor, Detwiler calculated an effective
merger price of $10.55 per share based upon the Exchange Ratio of 0.766 and an
average closing price for RVSI Common Stock for the twenty trading days ending
on (and including) July 14, 1995 of $13.77 per share. Based upon this effective
merger price, Fechtor, Detwiler calculated the multiple of merger value to
revenues (1.30x), the multiple of merger value to operating income (21.15), the
multiple of the effective merger price per share to trailing earnings per share
(23x), the multiple of the effective merger price per share to the estimated
earnings per share for the current fiscal year (not meaningful), and the
multiple of the effective merger price per share to the estimated earnings per
share for the next fiscal year (14x). For the period examined, Acuity's merger
value to revenues multiple was lower than the
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median of the Comparable Companies. Fechtor, Detwiler attributed the variation
in part to differences in the three average revenue growth rate and differences
in operating margins. Acuity's three year average revenue growth rate was 13%
compared with the median of the Comparable Companies at 26%. Acuity's operating
profit margin for the period examined was 6% while the median for the Comparable
Companies was 20%.
COMPARABLE TRANSACTION ANALYSIS: Fechtor, Detwiler examined certain
completed or announced merger and acquisition transactions of machine-vision
related companies. Fechtor, Detwiler calculated the multiple of revenues paid
by the acquiring firm in each transaction and compared it with the multiple of
revenue being offered to Acuity by RVSI. The comparable transactions examined
and the multiple of revenues paid in each transaction were as follows: Fairey
Group's acquisition of Imaging Technology (1.17x), PSC's acquisition of Lazer
Data (0.90x), Medar's acquisition of Integral Vision (1.00x), and Cognex's
acquisition of Acumen (2.80x). Fechtor, Detwiler concluded that these multiples
were in line with RVSI's offer to merger with Acuity at an effective valuation
multiple of 1.3 times revenues.
DILUTION ANALYSIS: Fechtor, Detwiler also considered the potential for
accretion in operating earnings and earnings per share for the Acuity
Stockholders which may result from the Merger. Fechtor, Detwiler took into
account each company's reported performance through March 31, 1995 and
management's internal estimates of performance in the quarter ended June 30,
1995. RVSI and Acuity
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provided Fechtor, Detwiler with projected income statements for their fiscal
years ending in September 1995 and December 1996 respectively. Estimates for
RVSI's earnings in the fiscal year ending September 1996 were available from a
research report prepared by Barrington Research Associates dated June 19, 1995.
Based upon this information, Fechtor, Detwiler determined that the Merger would
be accretive to the Acuity Stockholders for the four quarters ending in
September 1995 and September 1996.
CONTRIBUTION ANALYSIS: Using financial information supplied to it by
Acuity and RVSI, Fechtor, Detwiler analyzed the pro forma contribution of each
of Acuity and RVSI to the combined company's revenues, operating income, tax
adjusted income and tangible book value if the Merger were to be consummated.
Based upon the average closing price of $13.77 for RVSI shares for the twenty
trading days ending on (and including) July 14, 1995 and an exchange ratio of
0.766, Acuity shareholders would own 12% of the combined companies after the
Merger. Fechtor, Detwiler determined that on a trailing four quarters basis
ended June 30, 1995, Acuity would have contributed 37% of revenue, 7% of
operating income, and 6% of tax adjusted income for the combined companies.
On a pro forma basis, as of March 31, 1995, Acuity would have contributed 15%
of tangible book value for the combined companies. Fechtor, Detwiler
calculated that Acuity, over the three year period ended December 31, 1994, had
an average annual revenue growth rate of 13% while RVSI, over the three year
period ending September 30, 1994, had an average
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annual revenue growth rate of 42%. Based upon information provided to Fechtor,
Detwiler by RVSI and Acuity, as well as the Barrington Research Associates
research report dated June 19, 1995, Fechtor, Detwiler concluded that Acuity's
percentage contribution to the revenues and operating income of the combined
company would be 32% and 12% respectively, for the period ending September 30,
1996.
FINANCIAL AND LIQUIDITY RATIO ANALYSIS: Fechtor, Detwiler analyzed certain
pro forma effects of the Merger on the combined company's financial and
liquidity ratios. Fechtor, Detwiler noted that, as of March 31, 1995, RVSI had
a current ratio of 2.2 and an acid test ratio of 1.7 while Acuity had a current
ratio of 1.3 and an acid test ratio of 0.8. The pro forma effect of the Merger
would result in a current ratio of 1.9 and an acid test ratio of 1.6. This
would represent an increase of 0.6 in the current ratio and an increase of 0.2
in the acid test ratio to the benefit of the Acuity Stockholders. Additionally,
Fechtor, Detwiler noted that, as of March 31, 1995, RVSI had a debt to equity
ratio of 0.5 while Acuity had a debt to equity ratio of 1.8. The pro forma
effect of the Merger would result in a debt to equity ratio of 0.7 representing
a benefit to the Acuity Stockholders.
MERGER PRICING ANALYSIS: Fechtor, Detwiler considered the Exchange Ratio
relative to the closing price of Acuity Common Stock on January 31, 1995, one
day prior to the announcement of the Merger, and relative to the average closing
price of RVSI shares for the
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twenty trading days ending on (and including) July 14, 1995. Fechtor, Detwiler
noted that on January 31, 1995, the closing price for Acuity Common Stock on the
NASDAQ Small Capitalization Market was $8.25. Fechtor, Detwiler determined that
the average closing price of RVSI Common Stock for the twenty trading days
ending on (and including) July 14, 1995 on the NASDAQ National Market was
$13.77. Based on these prices, Fechtor, Detwiler determined that the Acuity
Stockholders would receive a premium of approximately 28% in the exchange of
shares.
In light of these considerations, Fechtor, Detwiler concluded that the
Exchange Ratio is fair, from a financial point of view, to the Acuity
Stockholders.
See Exhibit D of this Proxy Statement/Prospectus for the Fechtor, Detwiler
Opinion.
Fechtor, Detwiler is an investment banking firm founded in 1962 and engaged
in research and brokerage services, public offerings, private placements,
valuations, mergers, acquisitions and divestitures. Prior to being retained in
March 1995 Fechtor, Detwiler acted as financial advisor to the Board of
Directors of Automatix, Inc. with respect to the merger of Automatix, Inc. and
Itran Corporation. Fechtor, Detwiler's role was limited to passing upon the
fairness to Automatix's Stockholders, from a financial point of view, of the
proposed merger. Fechtor, Detwiler currently makes a market in the Common Stock
of both Acuity and RVSI. In the course of its market making activities,
Fechtor, Detwiler may from time to time have a long or short position in,
buy or sell securities in Acuity or RVSI. In addition, Fechtor, Detwiler
directors, officers, employees and clients may, from time to time, have a long
or short position in, buy or sell securities in Acuity or RVSI.
For its work in formulating its opinion, Acuity will pay Fechtor, Detwiler
a fee of $105,000 of which $75,000 has been paid to date. Additionally, Acuity
will reimburse Fechtor, Detwiler for
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its out-of-pocket expenses incurred in connection with this engagement. Acuity
has agreed to indemnify Fechtor, Detwiler against certain losses, expenses,
liabilities or claims, including claims under the securities laws, which may be
incurred by Fechtor, Detwiler in connection with its engagement by Acuity.
THE MERGER AGREEMENT
GENERAL. The following is a brief summary of certain provisions of the
Merger Agreement and their effect. This summary is not intended to be a
complete statement of all material provisions of the Merger Agreement and is
qualified in its entirety by reference to the full text of the Merger Agreement,
a copy of which is attached hereto as Exhibit A and incorporated by reference.
The Merger Agreement provides that, at the Effective Time, each then
outstanding share of Acuity Common Stock will be converted into the right to
receive, and become exchangeable for, 0.766 of a share of RVSI Common Stock;
provided, however, that if the average of the closing prices of RVSI Common
Stock on The Nasdaq National Market for the 20 trading days ending on (and
including) the third trading day immediately prior to the RVSI Special Meeting
(the "Average Closing Price") is greater than $14.50, then the Exchange Ratio
shall be equal to the quotient of $11.107 divided by the Average Closing Price
(provided that in no event shall the Exchange Ratio be less than 0.555375); and
if the Average Closing Price is less than $10.00, then the Exchange Ratio shall
be equal to the quotient of $7.66 divided by the Average Closing Price (provided
that in no event shall the Exchange Ratio be more than 0.925626). Such exchange
ratio was established through arms-length negotiations between RVSI and Acuity.
None of the shares of RVSI Common Stock issued and outstanding immediately prior
to the Effective Time will be converted or otherwise modified in the Merger and
all of such shares will continue to be outstanding capital stock of RVSI after
the Merger.
As soon as practicable after the Effective Time, the Exchange Agent will
mail transmittal instructions and a form of letter of transmittal to each Acuity
Stockholder to be used in forwarding his or her Acuity Certificates for
surrender and exchange for RVSI Certificates and, if applicable, cash in lieu of
a fractional share of RVSI Common Stock. After receipt of such transmittal
instructions and form of transmittal letter, each former Acuity Stockholder
should surrender his or her Acuity Certificates to the Exchange Agent in
accordance with the transmittal instructions. See "- Exchange of Stock
Certificates" and "- No Fractional Shares."
After the Effective Time, each Acuity Certificate, until so surrendered and
exchanged, will be deemed to evidence the right to receive the number of shares
of RVSI Common Stock that the former Acuity Stockholder is entitled to receive
pursuant to the Merger Agreement and the right to receive any cash payment in
lieu of a fractional share of RVSI Common Stock. The holder of such unexchanged
Acuity Certificates will not be entitled to receive any dividends or other
distributions payable by RVSI until such Acuity Certificates are surrendered.
Subject to applicable laws, any such dividends and distributions after the
Effective Time, if any, will be accumulated and, at the time a former Acuity
Stockholder surrenders his or her Acuity Certificates to the Exchange Agent, all
such accrued and unpaid dividends and distributions, together
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with any cash payment in lieu of a fractional share of RVSI Common Stock, will
be paid without interest.
None of the shares of RVSI Common Stock will be converted or otherwise
modified in the Merger and all of such shares will continue to be outstanding
capital stock of RVSI after the Effective Time.
CONVERSION OF OPTIONS. As a consequence of the Merger, options to purchase
up to 205,646 shares of Acuity Common Stock ("Acuity Options") at various
exercise prices will be converted at the Effective Time into options to purchase
up to 157,524 shares of RVSI Common Stock ("Conversion Options") at exercise
prices determined by dividing the exercise price per share of Acuity Common
Stock provided for in such Acuity Option by the Exchange Ratio.
STOCK PURCHASE RIGHTS. As a consequence of the Merger, rights under
Acuity's 1994 Employee Qualified Stock Purchase Plan ("ESPP") to purchase shares
of Acuity Common Stock will be converted into rights to purchase up to an
estimated 19,150 shares of RVSI Common Stock. Under the ESPP, an Acuity
employee may elect to have amounts withheld from his salary which, at the end of
the applicable twelve-month withholding period, are applied to the purchase of
stock at a price equal to 85% of the lesser of the fair market value per share
of Acuity's Common Stock on (i) the first business day of the withholding period
or (ii) on the last business day of the withholding period. ESPP participants
will have the right to purchase shares of RVSI Common Stock based upon the
Exchange Ratio.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties of RVSI and Acuity, respectively, relating to,
among other things, its respective: (i) due organization, corporate power, good
standing and similar corporate matters; (ii) capital structure;
(iii) subsidiaries; (iv) authorization, execution, delivery, performance and
enforceability of the Merger Agreement and related matters; (v) absence of
conflicts under its Certificate of Incorporation or Bylaws, absence of
violations of any instruments or law and required governmental or regulatory
authorizations, consents or approvals; (vi) documents filed with the Commission
and the accuracy of the information contained or incorporated therein,
including, without limitation, the preparation of the financial statements
contained therein in accordance with generally accepted accounting principles
applied on a consistent basis; (vii) absence of undisclosed liabilities;
(viii) absence of certain material adverse events or changes; (ix) litigation;
(x) accuracy of the information to be provided by it with respect to the
Registration Statement filed with the Commission, of which this Proxy
Statement/Prospectus is a part; (xi) compliance with requirements of law; (xii)
compliance with its Certificate of Incorporation and
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Bylaws; (xiii) taxes; (xiv) retirement and other employee benefit plans; (xv)
absence of certain employment agreements, change-in-control provisions and
agreements with affiliates; (xvi) labor matters; (xvii) environmental matters;
(xviii) absence of appraisal rights in connection with the Merger; (xix) status
of material contracts; (xx) intellectual property; (xxi) customers; (xxii)
insurance; (xxiii) accuracy of books and records; (xxiv) accounting matters;
(xxv) brokers' and finders' fees with respect to the Merger; and (xxvi) accuracy
of the information contained in the Merger Agreement and schedules thereto.
The Merger Agreement also contains various representations and warranties
of RVSI relating to: (i) organization, activities, ownership and assets of
Subsidiary; and (ii) absence of violations of any instruments or law by
Subsidiary and absence of required governmental or regulatory authorizations,
consents or approvals on part of Subsidiary.
CERTAIN COVENANTS AND AGREEMENTS. Pursuant to the Merger Agreement, Acuity
and RVSI have each agreed that, during the period from the date of the Merger
Agreement until the Effective Time or the earlier termination of the Merger
Agreement, each will, among other things (except as permitted by the Merger
Agreement or as consented to in writing by the other): (i) conduct its business
in the ordinary and usual course of business and consistent with past practice;
(ii) not split, combine or reclassify its outstanding capital stock, declare or
pay any dividends or engage in any transaction for the purpose of effecting a
recapitalization or any transaction or series of transactions which has a
similar effect to any of the foregoing; (iii) not spin-off any assets or
business; (iv) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of its capital stock or any debt or
equity securities convertible into or exchangeable for such capital stock or
amend or modify the terms and conditions of any of the foregoing; (v) not
redeem, purchase, acquire or offer to purchase or acquire any shares of its
capital stock; (vi) not take any action which would jeopardize the treatment of
the Merger as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), or as a "pooling of
interests" transaction; (vii) not take or fail to take any action which would
cause Acuity or its stockholders (except to the extent that any Acuity
Stockholders receive cash in lieu of fractional shares) to recognize gain or
loss for federal income tax purposes as a result of the Merger; (viii) not make
any acquisition of any material assets (other than in the ordinary course of
business or businesses); (ix) not sell any material assets (other than in the
ordinary course of business) or businesses; (x) use reasonable efforts to
preserve intact its business organization and goodwill, keep available the
services of its present officers and key employees and preserve the goodwill
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and business relationships with its suppliers, distributors, customers and
others having business relations with it and not engage in any action directly
or indirectly, with the intent to impact adversely the transactions contemplated
by the Merger Agreement; (xi) confer on a regular basis with one or more
representatives of the other to report on material operational matters and the
general status of ongoing operations; (xii) file with the Commission all forms,
statements, reports and documents (including all exhibits, amendments and
supplements thereto) required to be filed by it pursuant to the Exchange Act;
(xiii) afford to the other and the other's accountants, counsel, financial
advisors and other representatives full access during normal business hours
throughout the period prior to the Effective Time to all of its properties,
books, contracts, commitments and records, and, during such time, furnish a copy
of each report, schedule or other document filed or received by it pursuant to
the requirements of the federal or state securities laws or filed by it with the
Commission in connection with the transactions contemplated by the Merger
Agreement or which may have a material effect on its business, properties or
personnel or such other information as the other may reasonably request; (xiv)
prepare and file with the Commission the Proxy Statement/Prospectus and use all
reasonable efforts to have the Registration Statement of which this Proxy
Statement/Prospectus forms a part declared effective by the Commission;
(xv) cooperate and use its best efforts to take all actions, make all filings,
registrations and submissions, and do all things necessary and advisable to
consummate the Merger, including, but not limited to, obtaining all required
consents, waivers and approvals from the Commission, and any other applicable
governmental entity; (xvi) use its best efforts to obtain its stockholders
approval and adoption of the Merger Agreement and the transactions contemplated
thereby; (xvii) use its best commercially reasonable efforts to obtain and
deliver to the other certain letters from its "affiliates" as defined under
Rule 145 under the Securities Act, or used in Commission Accounting Service
Releases 130 and 135, agreeing, in the case of affiliates of Acuity, to certain
restrictions on dispositions of Acuity and RVSI Common Stock prior to the
Merger, and on resale of RVSI Common Stock received in the Merger in exchange
for Acuity Common Stock and, in the case of affiliates of RVSI, to certain
restrictions on dispositions of Acuity and RVSI Common Stock prior to and after
the Merger; and (xviii) subject to the fiduciary duties of its Board of
Directors, recommend to the holders of its Common Stock approval of the Merger
Agreement and the Merger.
Pursuant to the Merger Agreement, Acuity has further agreed that it will,
among other things: (i) not amend or propose to amend the Acuity Certificate of
Incorporation or Acuity Bylaws; (ii) not incur or become contingently liable
with respect to any indebtedness for borrowed money (other than in the ordinary
course of business or pursuant to the revolving credit arrangements referred to
in the Merger Agreement); (iii) not enter into or amend in any material respect
any material employment, severance, or special pay arrangement with respect to
termination of employment or other similar material arrangements or agreements
with any directors,
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<PAGE>
officers or key employees; (iv) not increase the rate of remuneration payable
to any of its directors or key officers or, except in the ordinary course of
business consistent with past practices, to any other employees or other
representatives, or agree to do so; (v) not adopt, enter into or amend any
bonus, profit sharing, compensation, stock option, pension, retirement deferred
compensation, health care, employment or other employee benefit plan,
agreement, trust, fund or arrangement for the benefit or welfare of any
employee or retiree, except as required to comply with changes in applicable
law; and (vi) use its best efforts to maintain in force its existing insurance
coverage.
Pursuant to the Merger Agreement, RVSI has also agreed to (i) use its best
efforts to effect a listing on The Nasdaq National Market, upon official notice
of issuance, of the shares of RVSI Common Stock to be issued pursuant to the
Merger; (ii) take any action required to be taken under applicable state blue
sky or securities laws in connection with the issuance of shares of RVSI Common
Stock to be issued pursuant to the Merger; (iii) as soon as practicable
following the Effective Time, file with the Commission a registration statement
on Form S-8 covering the issuance of shares of RVSI Common Stock issuable upon
exercise of the Conversion Options; and (iv) exert its best efforts, as soon as
practicable, subsequent to the Effective Time, subject to then prevailing market
conditions, to arrange for a managed offering of all shares of RVSI Common Stock
received by affiliates of Acuity as a result of the Merger through an
underwriter to be selected by RVSI and reasonably satisfactory to a majority in
interest of Acuity's affiliates so receiving RVSI Common Stock. RVSI has also
agreed that at the Effective Time one designee of Acuity's current directors,
reasonably acceptable to RVSI, shall be appointed a director of RVSI to serve
until RVSI's first annual meeting of stockholders next following the Effective
Time. At the sole discretion of RVSI, an additional designee of Acuity's
current directors may be appointed as a director of RVSI.
NO SOLICITATION OF OTHER TRANSACTIONS. The Merger Agreement provides that,
prior to the Effective Time or the earlier of (i) termination of the Merger
Agreement or (ii) September 30, 1995, Acuity will not, unless RVSI consents in
writing, initiate, solicit, negotiate or encourage, or provide any confidential
information to facilitate any proposal or offer to acquire all or any
substantial part of the business and properties or capital stock of Acuity,
whether by merger, purchase of assets, tender offer or otherwise (an
"Acquisition Transaction"), except as otherwise provided below. Acuity also has
agreed to cause its executive officers, directors and employees, and any
attorney, accountant, investment banker or other agent retained by it to refrain
from such activities.
Pursuant to the Merger Agreement, Acuity may furnish confidential
information concerning its business, properties or assets to a potential
acquiror if the Acuity Board: (i) receives from its financial advisor advice
that such person has the financial wherewithal to consummate an Acquisition
Transaction that would yield a higher value to Acuity's stockholders than the
Merger; (ii) determines that such person is reasonably likely to submit a bona
fide offer to consummate an Acquisition Transaction on terms that would yield a
higher value to Acuity's stockholders
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<PAGE>
if such information is provided to the potential acquiror; and (iii) after
consultation with counsel, determines that the failure to provide such
confidential information would constitute a breach of its fiduciary duty to
Acuity's stockholders. After receipt of a bona fide offer which the Acuity
Board determines would likely yield a higher value to the Acuity stockholders
than the Merger, Acuity may, with respect to such acquiror, negotiate such bona
fide offer if in the opinion of the Acuity Board, after consultation with
counsel, the failure to negotiate would constitute a breach of its fiduciary
duty to the Acuity stockholders. Acuity must give prompt notice to RVSI that
Acuity has determined to provide confidential information to a potential
acquiror or that it has received an offer from a potential acquiror. In
addition, Acuity must identify the recipient of any information and describe
the material terms of the offer. Acuity may enter into a definitive agreement
with a potential acquiror with which it is permitted to negotiate as set forth
above, provided that Acuity furnishes to RVSI a description in writing of the
material terms of such agreement and Acuity's intention to enter into such
agreement at least one business day prior to the execution thereof by Acuity.
Concurrently with Acuity's execution of such definitive agreement, RVSI or
Acuity may terminate the Merger Agreement subject to the fee and expense
reimbursement provisions set forth below. See "- Termination and Breakup Fees."
CONDITIONS TO THE MERGER. The respective obligations of RVSI and Acuity to
effect the Merger are subject to fulfillment of a number of conditions,
including among others: (i) the Merger Agreement and the transactions
contemplated thereby shall have been approved and adopted by the respective
holders of Acuity Common Stock, and of RVSI Common Stock; (ii) the Registration
Statement shall have become effective and no stop order suspending such
effectiveness shall have been issued and remain in effect; (iii) no preliminary
or permanent injunction or other order or decree by any federal or state court
which prevents the consummation of the Merger shall have been issued or taken
and remain in effect (each party agreeing to use its reasonable efforts to have
any such injunction, order or decree lifted); (iv) no action shall have been
taken, and no statute, rule or regulation shall have been enacted, by any state
or federal government or governmental agency in the United States that would
prevent the consummation of the Merger; (v) all governmental and third party
consents, orders and approvals legally required for the consummation of the
Merger and the transactions contemplated thereby (including, without limitation,
all Required Statutory Approvals, as defined in the Merger Agreement), shall
have been obtained and be in effect at the Effective Time without any material
limitations and conditions; and (vi) all blue sky filings as may be required in
order for the offer, issuance and sale of all of the shares of RVSI Common
Stock, options and stock purchase rights to be issued pursuant to the Merger
Agreement, and all of the shares of RVSI Common Stock issuable upon exercise of
such options and stock purchase rights,
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<PAGE>
respectively, to be in full compliance with all applicable state securities
laws and regulations shall have been made and shall be in effect and not
subject to any suspension, revocation, or stop order, as may be required in
order for the offer, issuance and sale of all such securities to be legally
permitted under all such laws and regulations.
In addition to the conditions set forth above, the obligations of Acuity to
effect the Merger are subject to the following conditions: (i) RVSI and
Subsidiary shall have performed in all material respects their agreements
contained in the Merger Agreement required to be performed on or prior to the
Closing Date and all representations and warranties of RVSI and Subsidiary
contained in the Merger Agreement, with certain exceptions, shall be true and
correct in all material respects on and as of the date made and the Closing Date
and Acuity shall have received a certificate from an executive officer of RVSI
and Subsidiary to such effect; (ii) the receipt of a written legal opinion from
Parker Duryee Rosoff & Haft, counsel to RVSI and Subsidiary, as to certain legal
matters; (iii) the receipt of an opinion from each of Deloitte & Touche LLP and
Arthur Andersen LLP, Acuity's independent public accountants, stating that the
Merger will qualify as a "pooling of interests" transaction under generally
accepted accounting principles; (iv) the receipt by Acuity of letters from the
"affiliates" of RVSI relating to restrictions on the transferability of their
shares of RVSI Common Stock; (v) the receipt of an opinion of Fechtor, Detwiler,
or another nationally recognized investment banking firm, that the Exchange
Ratio is fair from a financial point of view to Acuity's public stockholders;
(vi) the RVSI Common Stock to be issued in connection with the Merger shall have
been authorized for listing on The Nasdaq National Market upon official notice
of issuance; (vii) the receipt of a written legal opinion from Bingham, Dana &
Gould, counsel to Acuity, dated the Effective Time, with respect to certain tax
matters; and (viii) the receipt of a certificate from RVSI as to certain tax
matters.
In addition to the conditions set forth in the first paragraph of this
subsection, the obligations of RVSI to effect the Merger are subject to the
following conditions: (i) Acuity shall have performed in all material respects
its agreements contained in the Merger Agreement required to be performed on or
prior to the Closing Date and all representations and warranties of Acuity
contained in the Merger Agreement, with certain exceptions, shall be true and
correct in all material respects on and as of the date made and the Closing Date
and RVSI shall have received a certificate from an executive officer of Acuity
to such effect;
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<PAGE>
(ii) the receipt of a written legal opinion from Bingham, Dana &
Gould, counsel to Acuity, as to certain legal matters; (iii) RVSI shall have
received an opinion from each of Deloitte & Touche LLP and Arthur Andersen LLP,
dated the Closing Date, each stating that, as it relates to RVSI or Acuity,
respectively, the Merger will qualify as a "pooling of interests" transaction
under generally accepted accounting principles; (iv) the receipt by RVSI of
letters from affiliates of Acuity relating to the restrictions on the
transferability of the shares of RVSI Common Stock to be received in the Merger
pursuant to Rule 145 promulgated under the Securities Act; (v) RVSI shall have
received an opinion of JMS, or another nationally recognized investment banking
firm, dated as of the Closing Date, that the Exchange Ratio is fair, from a
financial point of view, to Parent's public stockholders; (vi) RVSI shall have
received an opinion of Parker Duryee Rosoff & Haft, counsel to RVSI, dated the
Effective Time, with respect to certain tax matters; and (vii) RVSI shall
have received a certificate of Acuity as to certain tax matters.
TERMINATION AND EXPENSE REIMBURSEMENT. The Merger Agreement may be
terminated at any time prior to the Closing Date: (i) by mutual consent of RVSI
and Acuity; (ii) unilaterally by either RVSI or Acuity upon the occurrence of a
Material Adverse Effect (as defined in the Merger Agreement, which specifically
excludes losses of up to $700,000 by Acuity in the first six months of 1995 and
a loss or projected loss of up to $500,000 by Acuity for the quarter ending
September 30, 1995) with respect to the other, the likelihood of which was not
previously disclosed prior to the date of the Merger Agreement (absent fraud or
gross negligence on the part of the party failing to make disclosure prior to
the date of the Merger Agreement, neither party shall have any liability to the
other for Transaction Expenses); (iii) unilaterally by RVSI: (a) if Acuity
materially breaches any material representation or warranty of Acuity set forth
in the Merger Agreement, (b) upon Acuity's willful failure to comply with or
satisfy any material covenant or condition of Acuity contained in the Merger
Agreement or (c) if Acuity's stockholders at the Acuity Special Meeting fail to
approve the Merger Transaction; (iv) unilaterally by Acuity: (a) if RVSI
materially breaches any material representation or warranty of RVSI set forth in
the Merger Agreement, (b) upon RVSI's willful failure to comply with or satisfy
any material covenant or condition of RVSI contained in the Merger Agreement or
(c) if RVSI's stockholders at the RVSI Annual Meeting fail to approve the Merger
Transaction; (v) unilaterally by either RVSI or Acuity upon notification to the
other that the notifying party elects not to proceed with the Merger Transaction
(other than by reason of a Material Adverse Effect or Breach (as defined in the
Merger Agreement) by the other or the notifying party's failure to obtain its
stockholders approval of the Merger Transaction), in which event the notifying
party shall promptly pay the other party
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<PAGE>
$500,000 together with the other party's Transaction Expenses (not in excess of
$450,000); and (vi) by either RVSI or Acuity after September 30, 1995, if the
Merger has not been consummated on or before such date, whereupon, subject to
certain provisions of the Merger Agreement, neither party shall have any
obligation to the other for Transaction Expenses.
In the event of termination of the Merger Agreement by either RVSI or
Acuity as provided above, the Merger Agreement will become void and, except as
set forth above in the preceding paragraph, and under "- Break-up Fees and
Expense Reimbursement" in the following paragraph, there will be no further
obligation on the part of either RVSI or Acuity or the Subsidiary.
BREAK-UP FEES AND EXPENSE REIMBURSEMENT. The Merger Agreement provides
that, upon the occurrence of certain events, Acuity will pay to RVSI a break-up
fee, and reimburse RVSI for certain transaction expenses. If (1) Acuity fails
to effect the Merger within 156 days of the date of the Merger Agreement (i.e.
September 30, 1995), other than as a result of a Notification from RVSI, an
Adverse Change of RVSI or a Breach by RVSI (each as defined in the Merger
Agreement), or any other condition set forth in the Merger Agreement required to
be satisfied by RVSI to effect the Merger set forth in Article VIII of the
Merger Agreement, and (2) a proposal for an Acquisition Transaction from other
than RVSI is accepted by the Board of Directors of Acuity or, if applicable, by
the holders of 51% or more of the outstanding Acuity Common Stock (irrespective
of whether or not such acceptance is then binding upon the initiator of the
Acquisition Transaction so long as it is ultimately so binding), in each case
prior to or within 90 days of the termination of the Merger Agreement, or if
earlier, 246 days after the date of the Merger Agreement (i.e. December 29,
1995), or if such a proposal is so accepted after the expiration of such 90 or
246-day period, but resulted from Acuity commencing to seek offers for an
Acquisition Transaction within 20 calendar days after the date of termination of
the Merger Agreement, then Acuity shall promptly (i) issue to RVSI a six-month
option, which shall be immediately exercisable, to acquire such number of shares
of Acuity Common Stock as shall equal 10% of the outstanding Acuity Common Stock
as of the date of such acceptance, after giving effect to the exercise of such
option, at an exercise price of $8.978 per share (subject to proportionate
adjustment in the event of any stock dividend, stock split, reverse stock split,
or other recapitalization or similar change with respect to Acuity Common Stock)
(the "Topping Option"), and (ii) giving credit to Acuity for any other payments
to RVSI made pursuant to the termination article of the Merger Agreement
(referred in the preceding paragraph) and/or this provision, pay RVSI the sum of
$500,000 (the "Break-up Fee"), together with up to $450,000 of the reasonable
outside legal, accounting and investment banking fees and disbursements and
printing expenses incurred in connection with the preparation, execution and
delivery of the Merger Agreement and the transactions contemplated thereby
(subject
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<PAGE>
to such $450,000 maximum, "Transaction Expenses") by RVSI; provided, however,
that if the aggregate value of the accepted Acquisition Transaction proposal
does not exceed $30,000,000, then, in such event, the Break-up Fee shall be
$750,000 rather than $500,000. In the event a proposal for an Acquisition
Transaction is so accepted within such time periods by the holders of 30% or
more but less than 51% of the shares of Acuity Common Stock (the "Tender
Acceptance"), then, should RVSI elect not to proceed with the Merger, giving
credit for any other payments to RVSI made pursuant to the termination
article of the Merger Agreement and/or this provision, Acuity shall
promptly pay RVSI the Break-up Fee (but in no event more than $500,000) and
RVSI's Transaction Expenses; provided, however, that if within 12 months of the
Tender Acceptance, the person who initiated such Acquisition Transaction shall
acquire such additional number of shares of Acuity Common Stock as shall
increase such person's equity interest in Acuity to at least 51% or shall
effectuate a transaction which, directly or indirectly, will afford such person
ownership or control of all or substantially all of the assets or business of
Acuity, then Acuity shall promptly (i) issue to RVSI the Topping Option (the
number of shares covered by which shall be computed as of the date of the Tender
Acceptance), and (ii) if the aggregate value of all consideration paid by such
person for all assets and interests of and in Acuity acquired by it does not
exceed $30,000,000, pay to RVSI an additional $250,000 of Break-up Fee.
AMENDMENT AND WAIVER. At any time prior to the Effective Time, RVSI and
Acuity may (i) extend the time for the performance of any of the obligations or
other acts to be performed by the other party pursuant to the Merger Agreement,
(ii) waive any inaccuracies in the representations and warranties by the other
party contained in the Merger Agreement or in any document delivered pursuant to
the Merger Agreement and (iii) waive compliance with any of the agreements or
conditions of the other party contained in the Merger Agreement.
Subject to applicable law, the Merger Agreement may be amended by the
written agreement of RVSI and Acuity. Under applicable law, neither RVSI nor
Acuity may amend the Merger Agreement subsequent to obtaining approval of the
Acuity stockholders if such amendments would (i) alter or change the amount or
kind of shares, securities, cash, property and/or rights to be received in
exchange for shares of Acuity Common Stock, (ii) alter or change any term of the
certificate of incorporation of the surviving corporation to be affected by the
Merger or (iii) alter or change any of the terms or conditions of the Merger
Agreement if such alteration or change would adversely affect the Acuity
Stockholders.
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CONFLICTS OF INTEREST
Upon effectiveness of the Merger, and assuming a favorable vote by a
majority of the RVSI Stockholders, both Donald J. Kramer and Ofer Gneezy, each
presently a director of Acuity, will become directors of RVSI. See "Management
of Acuity" for additional information regarding Messrs. Kramer and Gneezy. Also
see "Election of Directors."
EXPENSES
The Merger Agreement provides that, whether or not the Merger is
consummated, all expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby will be paid by the party incurring such
expenses, except as set forth above under "- Break-up Fees and Expense
Reimbursement" and "- Termination and Expense Reimbursement." In no event,
shall either party be required to pay Transaction Expenses of the other party in
excess of $450,000.
ABSENCE OF REGULATORY FILINGS AND APPROVALS
The Merger is not subject to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, and the rules and regulations thereunder,
which provide that certain merger transactions may not be consummated until
required information and materials have been furnished to the Antitrust Division
of the Department of Justice and the Federal Trade Commission and certain
waiting periods have expired or been terminated.
RESTRICTIONS ON SALES BY AFFILIATES
The shares of RVSI Common Stock to be issued in the Merger are being
registered pursuant to the Registration Statement. Such shares will be freely
transferable under the Securities Act, except for shares issued to any person
who may be deemed to be an affiliate (as such term is defined for purposes of
Rule 145 under the Securities Act, an "Affiliate") of Acuity. Affiliates may not
sell their shares of RVSI Common Stock acquired in connection with the Merger
until after the results covering 30 days of post-merger combined operations of
RVSI and Acuity have been filed with the Commission, sent to stockholders of
RVSI or otherwise publicly disclosed ("Publication"), Acuity has agreed to use
its best efforts to procure written agreements ("Affiliate Agreements") from its
executive officers, directors and other Affiliates containing appropriate
representations and commitments intended to ensure compliance with these
requirements. It is a condition of RVSI's obligations to consummate the Merger
that RVSI shall have received such Affiliate Agreements from each Affiliate
of Acuity. RVSI has agreed to use its best efforts to procure Affiliate
Agreements from its executive officers, directors and other Affiliates
containing appropriate representations and commitments prohibiting their sale
of shares of RVSI Common Stock until Publication. It is a condition of
Acuity's obligations to consummate the Merger that Acuity shall have received
such Affiliate Agreements from each Affiliate of RVSI.
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The Registration Statement of which this Proxy Statement/Prospectus forms
a part includes a resale prospectus which covers the resale by Affiliates of
Acuity of shares of RVSI Common Stock issued to such Affiliates pursuant to the
Merger.
ACCOUNTING TREATMENT
The Merger will be accounted for as a "pooling of interests" transaction in
accordance with generally accepted accounting principles. It is a condition of
RVSI's obligations to consummate the Merger that RVSI shall have received an
opinion from each of Deloitte & Touche LLP, independent public accountants for
RVSI, and Arthur Andersen LLP, independent certified public accountants for
Acuity, each stating that, as it relates to RVSI or Acuity, respectively, the
Merger will qualify as a "pooling of interests" transaction under generally
accepted accounting principles.
LISTING ON THE NASDAQ NATIONAL MARKET
RVSI has agreed to use its best efforts to list the shares of RVSI Common
Stock to be issued in the Merger on The Nasdaq National Market. The obligations
of the parties to the Merger Agreement to consummate the Merger are subject to
authorization for listing by The Nasdaq National Market upon notice of issuance
of such shares. See "- The Merger Agreement - Conditions to the Merger." If the
Merger is consummated, the Acuity Common Stock will be delisted from The Nasdaq
Small-Cap Market and will be deregistered under the Exchange Act.
APPRAISAL RIGHTS
Acuity Stockholders and RVSI Stockholders will not be entitled to appraisal
rights under the DGCL in connection with the Merger. See Exhibit B attached
hereto.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
It is a condition to the obligation of Acuity to consummate the Merger that
Acuity receive an opinion from Bingham, Dana & Gould, counsel for Acuity, to the
effect that (i) the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, (ii) no gain or
loss will be recognized by Acuity as a result of the Merger and (iii) no gain or
loss will be recognized by an Acuity Stockholder as a result of the Merger with
respect to shares of Acuity Common Stock exchanged solely for shares of RVSI
Common Stock. It is a condition to the obligation of RVSI to consummate the
Merger that RVSI receive an opinion to the same effect from Parker Duryee Rosoff
& Haft and in addition, to the effect that no gain or loss will be recognized by
RVSI or Subsidiary as a result of the Merger. In rendering their respective
opinions, each counsel will be entitled to rely upon certain representations of
Acuity, RVSI and Subsidiary. The effects for federal income tax purposes of any
cash received in the Merger in lieu of any fractional share of RVSI Common Stock
and of any RVSI Exchange Options received in exchange for Acuity's options are
referred to or discussed below.
Assuming due delivery of the foregoing opinions, Acuity and RVSI expect
that the Merger will qualify as a reorganization under the Code with the
consequences set forth above. Assuming that the Merger so qualifies, the
federal tax basis of the shares of RVSI Common Stock received by Acuity
Stockholders in the Merger will be the same, in each instance, as the
adjusted tax basis of the Acuity Common Stock surrendered in exchange
therefor, excluding any basis allocable to fractional shares of RVSI Common
Stock for which cash is received. In addition, the holding period of the
shares of RVSI Common Stock received in the Merger by Acuity Stockholders
will include the period during which the shares of Acuity Common Stock
surrendered in exchange therefor were held, provided that such shares of
Acuity Common Stock were held as capital assets at the Effective Time.
Acuity Stockholders who receive cash in the Merger in lieu of fractional
shares of RVSI Common Stock will be treated, in each instance, as having
received the fractional share and then as having sold such fractional share for
the cash received. This sale will result in the recognition of gain or loss for
federal income tax purposes, measured by the difference between the amount of
cash received and the portion of the basis of the share of Acuity Common Stock
allocable to such fractional share. Such gain or loss will be capital gain or
loss, provided that such share of Acuity Common Stock was held as a capital
asset at the Effective Time, and will be long-term capital gain or loss if such
share of Acuity Common Stock has been held for more than one year.
Should the Merger fail to qualify for any reason as a reorganization for
federal income tax purposes, no gain or loss would be recognized by Acuity, RVSI
or Subsidiary. However, in
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that event exchanges of Acuity Common Stock for shares of RVSI Common Stock
pursuant to the Merger would be taxable transactions for federal income tax
purposes. Each exchanging holder of Acuity Common Stock would therefore
recognize gain or loss for federal income tax purposes equal to the
difference between such holder's adjusted basis in the Acuity Common Stock
exchanged and the amount of cash (if any) plus the fair market value of RVSI
Common Stock received by such holder in the Merger. Such gain or loss would
be capital gain or loss if the shares of Acuity Common Stock were held as a
capital asset and would be long-term capital gain or loss if such shares had
been held for more than one year at the time of the consummation of the
exchanges.
IN THE OPINION OF COUNSEL TO ACUITY AND RVSI, THE FOREGOING DISCUSSION
ACCURATELY SUMMARIZES THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER. HOWEVER, NO RULINGS HAVE BEEN OR WILL BE REQUESTED FROM THE INTERNAL
REVENUE SERVICE WITH RESPECT TO ANY OF THE MATTERS ADDRESSED HEREIN. MOREOVER,
THIS DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR LISTING OF ALL
POTENTIAL TAX EFFECTS RELEVANT TO A DECISION WHETHER TO VOTE IN FAVOR OF
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. THE DISCUSSION
DOES NOT ADDRESS THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO A PARTICULAR
ACUITY STOCKHOLDER SUBJECT TO SPECIAL TREATMENT UNDER CERTAIN FEDERAL INCOME TAX
LAWS, SUCH AS DEALERS IN SECURITIES, BANKS, INSURANCE COMPANIES, TAX-EXEMPT
ORGANIZATIONS, NON-UNITED STATES PERSONS AND STOCKHOLDERS WHO ACQUIRED THEIR
SHARES OF ACUITY COMMON STOCK AS COMPENSATION, NOR ANY CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION. THE DISCUSSION
ALSO DOES NOT ADDRESS TAX CONSEQUENCES TO HOLDERS OF OUTSTANDING ACUITY STOCK
OPTIONS (INCLUDING OPTIONS ISSUED UNDER ACUITY'S 1991 STOCK OPTION PLAN, AS
AMENDED). THE DISCUSSION IS BASED UPON THE CODE, TREASURY REGULATIONS
THEREUNDER AND ADMINISTRATIVE RULINGS AND COURT DECISIONS AS OF THE DATE HEREOF.
ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE
CONTINUING VALIDITY OF THIS DISCUSSION. ACUITY STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL AND ANY STATE, LOCAL AND FOREIGN
TAX CONSEQUENCES OF THE MERGER TO THEM.
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ELECTION OF DIRECTORS
Nine directors are to be elected at the RVSI Special Meeting to serve for a
term of one year or until their respective successors are elected and qualified.
INFORMATION CONCERNING NOMINEES
The following table sets forth the positions and offices presently held
with RVSI by each nominee, his age, his tenure as a director and the number of
shares of RVSI Common Stock beneficially owned as of July 18, 1995:
<TABLE>
<CAPTION>
POSITIONS AND NUMBER OF
OFFICES PRESENTLY BENEFICIALLY SHARES
HELD WITH DIRECTOR OWNED APPROXIMATE
NAME AGE RVSI SINCE OF CLASS(1) PERCENTAGE
---- --- --------------------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Pat V. Costa 51 Chairman of Board, 1984 326,647(2) 2.4%
President and Chief
Executive Officer
Frank A. DiPietro 68 Director 1992 45,000(3) (10)
Donald F. Domnick 73 Director 1988 25,500(4) (10)
Jay M. Haft 59 Director 1977 516,546(5) 3.8%
Mark J. Lerner 42 Director 1994 100,411(6) (10)
Howard Stern 57 Senior Vice President and 1981 109,222(7) (10)
Director
Robert H. Walker 59 Executive 1990 69,983(8) (10)
Vice President,
Secretary, Treasurer and
Director
Donald J. Kramer(9) 62 - - 0 (10)
Ofer Gneezy(9) 43 - - 0 (10)
46
<PAGE>
<FN>
- ------------
(1) Includes shares issuable pursuant to currently exercisable options and
warrants as well as those options and warrants which will become
exercisable within 60 days of July 18, 1995. Except as otherwise indicated,
the persons named herein have sole voting and dispositive power with
respect to the shares beneficially owned.
(2) Includes (i) 295,326 shares issuable to Mr. Costa upon exercise of
outstanding options and (ii) 1,321 vested shares held under RVSI's Stock
Ownership Plan over which shares Mr. Costa has voting power, but does not
have dispositive control.
(3) Includes (i) 12,000 shares issuable to Mr. DiPietro upon exercise of
outstanding options and (ii) 28,000 shares owned of record by his spouse.
(4) Includes 12,000 shares issuable to Mr. Domnick upon exercise of outstanding
options.
(5) Includes (i) 52,000 shares issuable to Mr. Haft upon exercise of
outstanding options, (ii) 305,600 shares issuable upon exercise of
outstanding warrants, of which 286,100 are held by his spouse, (iii)
142,000 shares owned of record by his spouse and (iv) 7,666 shares held
indirectly in a retirement trust.
(6) Includes (i) 5,000 shares issuable to Mr. Lerner upon exercise of
outstanding options and (ii) 95,411 shares issuable to Morgen, Evan &
Company, Inc. of which Mr. Lerner is the principal owner, upon exercise of
outstanding warrants.
(7) Includes (i) 103,330 shares issuable to Mr. Stern upon exercise of
outstanding options and (ii) 5,892 vested shares held under RVSI's Stock
Ownership Plan over which shares Mr. Stern has voting power, but does not
have dispositive control.
(8) Includes (i) 64,636 shares issuable to Mr. Walker upon exercise of
outstanding options and (ii) 5,347 vested shares held under RVSI's Stock
Ownership Plan over which shares Mr. Walker has voting power, but does not
have dispositive control.
(9) To assume office only if the Merger is consummated and each of Mr. Kramer
and Mr. Gneezy is elected. Upon consummation of the Merger, Mr. Kramer
will beneficially own 4,946 shares of RVSI Common Stock and Mr. Gneezy will
own 28,303 shares of RVSI Common Stock. See "The Proposed Merger -
Conflicts of Interest."
(10) Less than one percent.
</TABLE>
PAT V. COSTA has served as President, Chief Executive Officer and Chairman
of the Board of Directors of RVSI since July 1984. Prior thereto and from 1977,
Mr. Costa was employed by GCA Corporation, most recently in the capacity of
Executive Vice President. GCA is engaged in the manufacture of various
electronic instrumentation equipment and systems.
47
<PAGE>
FRANK A. DIPIETRO began his career with General Motors Corporation ("GM")
in 1944. During his forty-five year career with GM, he was actively involved in
automobile assembly and manufacturing engineering systems. He retired in 1990
and continues as a consultant in laser systems in several industries. At the
time of his retirement, Mr. DiPietro held the position of Director of
Manufacturing Engineering, Chevrolet-Pontiac-Canada Car Group, for GM.
DONALD F. DOMNICK served as Vice President of Caterpillar, Inc. from 1977
through 1985. Mr. Domnick, who has been retired since 1985, is a fellow of
the Society of Manufacturing Engineers, is a Director of Midstate College in
Peoria, Illinois and is on the Board of Advisors of St. Francis Medical Center.
JAY M. HAFT is Of Counsel to the law firms of Parker Duryee Rosoff & Haft,
RVSI's counsel, and Ruden, Barnett, McClosky, Smith, Schuster & Russell, P.A.,
of Fort Lauderdale, Florida. He has been a practicing lawyer since 1959. Mr.
Haft is also the temporary President and CEO and a director of Noise
Cancellation Technologies, Inc. In addition, he is a director of Extech
Corporation, CAS Medical Systems, Inc., Nova Technologies, Inc. and Viragen,
Inc., all of which are publicly-owned concerns.
MARK J. LERNER has been President of Morgen, Evan & Company, Inc., an
investment banking firm which focuses on Japanese-U.S. transactions, since 1992.
Prior thereto and from 1990, he was a managing director at Chase Manhattan Bank
where he headed the Japan corporate finance group. From 1982 to 1990 Mr. Lerner
worked in the Investment Banking Division of Merrill Lynch as head of its Japan
Group, coordinating its New York-based Japanese activities with professionals in
Tokyo and London.
HOWARD STERN has been Senior Vice President and Technical Director of RVSI
since December 1984. Prior thereto and from 1981, he was Vice President of RVSI.
ROBERT H. WALKER is and has been Executive Vice President and
Secretary/Treasurer of RVSI since December 1986. Prior thereto and from December
1984 he was Senior Vice President of RVSI. From 1983 to 1985 he also served as
Treasurer. Mr. Walker is also a Director of Tel Instrument Electronics
Corporation, a publicly-owned company.
See pps. 100-101 for certain information as to Messrs. Kramer and Gneezy
who will only serve as Directors if the Merger is consummated and they are
elected as Directors.
As long as it is the beneficial owner of at least 5% of the outstanding
shares of RVSI Common Stock, GM has the right to designate a representative for
nomination to serve on the RVSI
48
<PAGE>
Board. GM has not yet designated such representative for the current year.
INFORMATION CONCERNING THE BOARD
The RVSI Board held six meetings during the year ended September 30, 1994.
All then incumbent directors attended at least 75% of such meetings.
The Stock Option Committee of the RVSI Board reviews and implements
appropriate action with respect to all matters pertaining to stock options
granted under RVSI's 1991 Plan and 1987 Incentive Stock Option Plan (the "1987
Plan"). The Committee is presently composed of Messrs. Costa, Haft and Stern.
Such Committee met 15 times during fiscal 1994.
The Audit Committee of the RVSI Board is charged with the review of the
activities of RVSI's independent auditors, (including, but not limited to, fees,
services and scope of audit). The Audit Committee is presently composed of
Messrs. Costa, Haft and Domnick, of which Mr. Costa is an ex-officio, non-voting
member thereof. The Audit Committee met once during the period of performance of
the 1994 fiscal year end audit.
RVSI does not have a nominating committee, charged with the search for and
recommendation to the RVSI Board of potential nominees for Board positions, nor
does RVSI have a compensation committee, charged with reviewing and recommending
to the RVSI Board compensation programs for RVSI's officers. These functions are
performed by the RVSI Board as a whole.
REPORTING DELINQUENCIES
Section 16(a) of the Exchange Act requires RVSI's officers and directors,
and persons who own more than 10% of RVSI Common Stock, to file reports of
ownership and changes in ownership with the Commission. Officers, directors and
greater than 10% stockholders are required by the Commission's regulations to
furnish RVSI with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, RVSI believes that during the fiscal year ended
September 30, 1994, all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with except that
Mr. DiPietro was not timely in his filing of one monthly report of one
transaction.
49
<PAGE>
PROPOSAL TO APPROVE RVSI
AMENDED AND RESTATED 1991 STOCK OPTION PLAN
BACKGROUND
RVSI's 1991 Stock Option Plan was adopted by the RVSI Board and a majority
in interest of the RVSI Stockholders on December 12, 1991 and March 26, 1992,
respectively. On April 26, 1995, the RVSI Board approved, subject to the
approval of the RVSI Stockholders, the RVSI Amended and Restated 1991 Stock
Option Plan (as amended and restated, the "1991 Option Plan"). The primary
purposes of adopting the 1991 Option Plan was to increase the number of shares
of RVSI Common Stock available for grant thereunder from 1,425,000 shares to
2,200,000 shares, and, if the Alternative Administration referred to on the
following page is elected by the RVSI Board, to establish a mechanism to afford
RVSI the ability subsequent to the Merger to award formula grants of options to
certain non-employee directors, thereby permitting the recipients of any such
grants to serve as "disinterested" administrators of the 1991 Option Plan for
the purposes of Rule 16b-3, promulgated under the Exchange Act, and to also
provide that certain transactions relating to the 1991 Option Plan by executive
officers and directors of RVSI subsequent to the Merger may be exempt from
Section 16(b) of the Exchange Act. See "Limitation of Section 16(b) Liability
Upon Approval of the 1991 Option Plan."
The 1991 Option Plan is intended to recognize the contributions made to
RVSI or its subsidiaries by employees and directors of, and certain consultants
and advisors to, RVSI or its subsidiaries, to provide such persons with
additional incentive to devote themselves to the future success of RVSI and its
subsidiaries, and to improve the ability of RVSI or its subsidiaries to attract,
retain and motivate individuals upon whom the sustained growth and financial
success of RVSI and its subsidiaries depend, by providing such persons with an
opportunity to acquire or increase their proprietary interest in RVSI through
receipt of options to acquire RVSI Common Stock. Options granted under the 1991
Option Plan to employees may be designated as "incentive stock options" ("ISOs")
within the meaning of Section 422 of the Code, or may be designated as options
not intended to be ISOs ("non-qualified stock options"). Options granted to
directors who are not employees of RVSI or its subsidiaries and to consultants
and advisors will be non-qualified stock options.
The 1991 Option Plan will amend and restate in its entirety RVSI's 1991
Stock Option Plan. At March 31, 1995, options to acquire an aggregate of
1,394,659 shares of RVSI Common Stock have been granted under the 1991 Option
Plan to 107 persons at exercise prices ranging from $.75 to $7.56 per share
(including options covering an aggregate of 899,623 shares to 12 present or
former executive officers and directors). With the exception of those Acuity
Options which are to be converted at the Effective Time into options under the
1991 Option Plan to acquire
50
<PAGE>
an aggregate of 157,524 shares of RVSI Common Stock, no post-Merger grants are
presently contemplated with any degree of specificity as to individual
recipients.
KEY PROVISIONS
The following summary of the provisions of the 1991 Option Plan is
qualified in its entirety by express reference to the text of the 1991 Option
Plan attached as Exhibit E hereto:
- NUMBER OF SHARES. The aggregate maximum number of shares for which
options may be granted under the 1991 Option Plan will be 2,200,000 shares of
RVSI Common Stock if the amendment and restatement is approved, subject to
adjustment upon the occurrence of a stock dividend, stock split,
recapitalization or certain other capital adjustments.
- ADMINISTRATION. The 1991 Option Plan will be administered by a
committee composed of two or more directors. The RVSI Board in its sole
discretion may elect ("Alternative Administration") to have the 1991 Plan
administered by either (i) providing that the committee be composed of
directors who are not eligible to receive options under the Plan or (ii)
designating two committees to operate and administer the Plan, one of such
committees composed of two or more directors who are not eligible to receive
options under the Plan to operate and administer the Plan with respect to each
person who is a "Principal Officer," and the other such committee composed of
two or more directors to operate and administer the Plan with respect to each
person other than a "Principal Officer." Any of such committees administering
the 1991 Option Plan is referred to herein as the "Committee." Among other
things, the Committee determines the persons to whom, the times at which and the
price at which options will be granted, the vesting period, the number of shares
subject to the option and whether the option is an ISO or a non-qualified stock
option.
- ELIGIBILITY. All employees, directors, consultants and advisors of
RVSI and its subsidiaries are eligible to receive options under the 1991 Option
Plan. At June 30, 1995, there were approximately 156 employees (including six
executive officers) eligible to participate in the 1991 Option Plan; in
addition, ten non-employee directors and consultants are also eligible
participants. Upon consummation of the Merger, approximately 115 additional
persons are expected to be eligible to participate in the 1991 Option Plan.
- TERM OF 1991 OPTION PLAN. No option may be granted under the 1991
Option Plan after December 11, 2001.
- TERM OF OPTIONS. All options terminate on the earliest of: (a) the
expiration of the term specified in the option document, which may not exceed
ten years from the date of grant; (b) the expiration of three months from the
date an option holder's
51
<PAGE>
employment or service with RVSI or its subsidiaries terminates for any reason
other than disability, death or as set forth in clause (d) below); (c) the
expiration of one year from the date an option holder's employment or service
with RVSI or its subsidiaries terminates by reason of such option holder's
disability or death; or (d) the date upon which a determination is made by the
Committee that the option holder has breached his employment or service contract
with RVSI or its subsidiaries, has been engaged in disloyalty to RVSI or its
subsidiaries including, without limitations, fraud, embezzlement, theft,
commission of a felony or proven dishonesty or has disclosed trade secrets or
confidential information of RVSI or its subsidiaries. The Committee, in its
discretion, may provide for additional limitations on the term of any option.
- OPTION PRICE. The option price for non-qualified options may be less
than, equal to or greater than the fair market value of the shares subject to
the option on the date that the option is granted, and for ISOs will be at least
100% of the fair market value of the shares subject to the option on the date
that the option is granted.
- CERTAIN RULES FOR CERTAIN STOCKHOLDERS. If an ISO is granted to an
employee who then owns, directly or by attribution under the Code, shares
possessing more than 10% of the total combined voting power of all classes of
shares of RVSI capital stock, the term of the option may not exceed five years
and the option price must be at least 110% of the fair market value of the
shares on the date that the option is granted.
- PAYMENT. An option holder may pay for shares covered by an option in
cash or by certified or cashier's check payable to the order of RVSI, by payment
through a broker in accordance with Regulation T of the Federal Reserve Board or
by such other mode of payment as the Committee may approve, including payment in
whole or in part in shares of RVSI Common Stock, based on the fair market value
of such Common Stock at the time of payment.
- OPTION DOCUMENT; RESTRICTION ON TRANSFERABILITY. All options will be
evidenced by a written option document containing provisions consistent with the
1991 Option Plan and such other provisions as the Committee deems appropriate.
No option granted under the 1991 Option Plan may be transferred, except by will,
the laws of descent and distribution or pursuant to a qualified domestic
relations order, as defined by the Code or in Title I of ERISA.
- AMENDMENTS TO THE OPTION DOCUMENT AND THE 1991 OPTION PLAN. Subject
to the provisions of the 1991 Option Plan, the Committee may amend an option
document, subject to the option holder's consent if the amendment is not
favorable to the option holder or is not being made pursuant to provisions of
the 1991
52
<PAGE>
Option Plan relating to acceleration of the expiration date in the
event of liquidation or dissolution of RVSI. The RVSI Board may amend the 1991
Option Plan from time to time in such manner as it may deem advisable.
Nevertheless, the RVSI Board may not, without obtaining stockholder approval
within twelve months before or after such action, change the class of
individuals eligible to receive an ISO or increase the maximum number of shares
as to which options may be granted.
- TAX ASPECTS OF THE 1991 OPTION PLAN. The following discussion is
intended to briefly summarize the general principles of federal income tax law
applicable to options granted under the 1991 Option Plan. A recipient of an ISO
will not recognize taxable income upon either the grant or exercise of an ISO.
The option holder will recognize long-term capital gain or loss on a disposition
of the shares acquired upon exercise of an ISO, provided the option holder does
not dispose of those shares within two years from the date the ISO was granted
or within one year after the shares were transferred to such option holder.
Currently, for regular federal income tax purposes, long-term capital gain is
taxed at a maximum rate of 28%, while ordinary income may be subject to an
effective maximum rate of 39.6%. If the option holder satisfies both of the
foregoing holding periods, then RVSI will not be allowed a deduction by reason
of the grant or exercise of an ISO.
As a general rule, if the option holder disposes of the shares before
satisfying both holding period requirements (a "disqualifying disposition"), the
gain recognized by the option holder on the disqualifying disposition will be
taxed as ordinary income to the extent of the difference between (i) the lesser
of the fair market value of the shares on the date of exercise or the amount
received for the shares in the disqualifying disposition, and (ii) the adjusted
basis of the shares, and RVSI will be entitled to a deduction in that amount.
The gain (if any) in excess of the amount recognized as ordinary income on a
disqualifying disposition will be long-term or short-term capital gain,
depending on the length of time the option holder held the shares prior to the
disposition.
The amount by which the fair market value of a share at the time of
exercise exceeds the option price will be included in the computation of such
option holder's "alternative minimum taxable income" in the year the option
holder exercises the ISO. Currently, the maximum alternative minimum tax rate
for individuals is 28%. If an option holder pays alternative minimum tax with
respect to the exercise of an ISO, then the amount of such tax paid will be
allowed as a credit against regular tax liability in subsequent years. The
option holder's basis in the shares for purposes of the alternative minimum tax
will be adjusted when income is included in alternative minimum taxable income.
53
<PAGE>
A recipient of a non-qualified stock option will not recognize taxable
income at the time of grant, and RVSI will not be allowed a deduction by reason
of the grant. Such an option holder will recognize ordinary income in the
taxable year in which the option holder exercises the non-qualified stock
option, in an amount equal to the excess of the fair market value of the shares
received upon exercise, at the time of exercise of such options, over the
exercise price of the option, and RVSI will be allowed a deduction in that
amount. Upon disposition of the shares subject to the option, an option
holder will recognize long-term or short-term capital gain or loss, depending
upon the length of time the shares were held prior to disposition, equal to
the difference between the amount realized on disposition and the option
holder's basis in a share subject to the option (which basis ordinarily is
the fair market value of the shares subject to the option on the date the
option was exercised).
RECOMMENDATION AND VOTE
The affirmative vote of the holders of a majority of the shares of RVSI
Common Stock present in person or by proxy at the RVSI Special Meeting is
required to adopt the 1991 Option Plan. The RVSI Board unanimously recommends a
vote FOR this proposal.
LIMITATION OF SECTION 16(B) LIABILITY
UPON APPROVAL OF THE 1991 OPTION PLAN
Section 16(b) of the Exchange Act provides, among other things, that any
profit (a "Short-swing Profit Liability") realized from the purchase and sale or
sale and purchase of any class of equity security registered under the Exchange
Act, within any period of less than six months, by an officer or director, or
any person who owns, directly or indirectly, in excess of 10% of such class of
equity security (a "10% Stockholder") is recoverable by the issuer of such
equity security. Absent an appropriate exemption under the Exchange Act, a
grant of an option under the 1991 Option Plan to a director, officer, or 10%
stockholder would be deemed to be a purchase of the underlying RVSI Common Stock
which may be matched with a sale of RVSI Common Stock within the six months
before or after such grant and may result in Short-swing Profit Liability. Rule
16b-3, promulgated under the Exchange Act, provides relief from Short-swing
Profit Liability in connection with the grant of options when certain conditions
are met.
The availability of the provisions of Rule 16b-3 is predicated, among other
things, upon the mandatory administration of the 1991 Option Plan with respect
to matters involving directors and executive officers of RVSI by a committee
consisting of at least two members, all of whom must be "disinterested" as
defined under Rule 16b-3. Such Rule further provides that formula grants
54
<PAGE>
of options may be used in tandem with disinterested administration. Stockholder
approval pursuant to a solicitation conducted in accordance with the provisions
of Section 14 of the Exchange Act is also a pre-condition to the availability of
the exemption from Short-swing Profit Liability. If the 1991 Option Plan is
approved by the RVSI Stockholders and, if Alternative Administration is elected
by the RVSI Board, the grant of options thereunder will be exempt from Short-
swing Profit Liability to the extent provided under Rule 16b-3. In the event
such approval is not secured, RVSI's officers, directors and 10% Stockholders
who receive option grants under the 1991 Option Plan will not be able to avail
themselves of the exemption from Short-swing Profit Liability otherwise
permitted pursuant to Rule 16b-3.
PROPOSAL TO AMEND RVSI'S CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED CAPITALIZATION
The RVSI Board has approved an amendment to the RVSI Certificate of
Incorporation to increase the number of shares of RVSI Common Stock which RVSI
shall be authorized to issue from 20,000,000 to 30,000,000. The RVSI Board
believes such action to be in the best interest of RVSI so as to make additional
shares available for future employee benefit programs, possible acquisitions and
financings and other corporate purposes. The additional shares of RVSI Common
Stock may be issued from time to time as the RVSI Board may determine without
further action by the RVSI Stockholders. With the exception of the issuance of
RVSI Common Stock upon the consummation of the Merger and upon the exercise of
options granted pursuant to RVSI's 1982 Stock Option Plan, options granted and
to be granted pursuant to RVSI's 1987 Stock Option Plan and 1991 Option Plan
(collectively, the "Stock Option Plans") and options to be granted pursuant to
the Merger Agreement in exchange for Acuity Options, the issuance of any other
additional shares of RVSI Common Stock authorized by the proposed amendment is
not presently contemplated. Except for the Merger Agreement, RVSI does not
currently have any agreements, arrangements or understandings with respect to
any acquisition, financing, stock split or dividend.
RVSI Stockholders do not currently possess, nor upon the adoption of the
proposed amendment will they acquire, preemptive rights which would entitle such
persons, as a matter of right, to subscribe for the purchase of any securities
of RVSI.
The affirmative vote of a majority of all of the outstanding shares of RVSI
Common Stock is required for approval of this proposal. The RVSI Board
unanimously recommends a vote FOR this proposal.
55
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has selected Deloitte & Touche LLP to audit RVSI's accounts for
the fiscal year ending September 30, 1995. Such firm, which has served as
RVSI's independent auditor since 1986, has reported to RVSI that none of its
members has any direct financial interest or material indirect financial
interest in the Company.
Unless instructed to the contrary, the persons named in the enclosed proxy
intend to vote the same in favor of the ratification of Deloitte & Touche LLP as
RVSI's independent auditors.
A representative of Deloitte & Touche LLP is expected to attend the meeting
and will be afforded the opportunity to make a statement and/or respond to
appropriate questions from stockholders.
COMPARATIVE PER SHARE PRICES AND DIVIDENDS
OF RVSI COMMON STOCK AND ACUITY COMMON STOCK
RVSI Common Stock is quoted on The Nasdaq National Market. Acuity Common
Stock is quoted on The Nasdaq Small-Cap Market. The following table sets forth,
for the calendar periods indicated, the high and low bid prices of RVSI Common
Stock and Acuity Common Stock, as reported by National Quotation Bureau
Incorporated. Such quotations reflect inter-dealer prices, without retail mark-
up, mark-down or commission and may not necessarily represent actual
transactions.
RVSI ACUITY COMMON
COMMON STOCK (1) STOCK (2)(3)
---------------- -----------------
HIGH LOW HIGH LOW
---- --- ---- ---
1992:
Fourth Quarter $1.44 $ .75 $ 5.60 $ 3.00
(ended December 31)
1993:
First Quarter 3.03 1.25 3.60 3.00
Second Quarter 2.88 1.88 3.40 2.60
Third Quarter 4.63 2.00 8.80 2.60
Fourth Quarter 5.63 3.50 8.80 5.00
56
<PAGE>
1994:
First Quarter 7.13 4.63 11.25 5.64
Second Quarter 6.75 4.75 10.00 6.50
Third Quarter 6.25 4.38 7.75 5.75
Fourth Quarter 8.13 5.50 9.25 7.00
1995:
First Quarter 7.63 5.50 10.50 6.75
Second Quarter 15.25 6.63 13.13 7.25
Third Quarter 15.63 12.55 11.75 8.25
(through July 18)
____________
(1) Quotations for RVSI Common Stock commenced on The Nasdaq National Market on
January 5, 1994. The bid prices shown prior to such date represent
quotations on The Nasdaq Small-Cap Market.
(2) Acuity share prices have been adjusted to reflect a 1 for 20 reverse stock
split which was effectuated on January 26, 1994.
(3) Quotations for Acuity Common Stock commenced on The Nasdaq Small-Cap Market
on May 17, 1994. The bid prices shown prior to such date represent
quotations on the OTC Bulletin Board.
On January 31, 1995 (the last trading day prior to the public announcement
that RVSI and Acuity had entered into a letter of intent), the closing bid
prices of RVSI Common Stock and Acuity Common Stock were $6.75 and $8.25,
respectively. On April 21, 1995 (the last trading day prior to the public
announcement that RVSI and Acuity had agreed to change the Exchange Ratio set
forth in the Letter of Intent), the closing bid prices of RVSI Common Stock and
Acuity Common Stock were $8.38 and $8.38, respectively. On April 26, 1995 (the
last trading day prior to the public announcement that RVSI and Acuity had
entered into the Merger Agreement), the closing bid prices of RVSI Common Stock
and Acuity Common Stock were $8.88 and $8.06, respectively. On July 11, 1995
(the last trading day prior to the public announcement that RVSI and Acuity had
agreed to change the Exchange Ratio to its current value), the closing bid
prices of RVSI Common Stock and Acuity Common Stock were $13.75 and $10.125,
respectively. Stockholders are urged to obtain current market quotations.
57
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF ACUITY
The following selected historical data of Acuity should be read in
conjunction with the historical financial statements of Acuity and the notes
thereto appearing elsewhere in the Proxy Statement/Prospectus. The selected
financial data of Acuity as of December 31, 1994, 1993 and 1992 and for the
years then ended have been derived from the financial statements of Acuity,
which have been audited by Arthur Andersen LLP, independent public accountants.
The selected financial data of Acuity as of December 31, 1991 and 1990 and for
the years then ended have been derived from unaudited statements.
STATEMENT OF OPERATIONS DATA (IN THOUSANDS, EXCEPT PER SHARE DATA):
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED YEAR ENDED DECEMBER 31,
APRIL 1 APRIL 2 --------------------------------------------------------
1995(a) 1994(a) 1994 1993 1992 1991(a) 1990(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 4,895 $ 5,189 $22,168 $18,734 $16,610 $15,230 $14,038
Income (Loss) from Continuing
Operations Before Income Taxes $ (141) $ 454 $ 1,416 $ 67 $ 499 $ 642 $ 67
Provision for Income Taxes - $ 44 $ 110 $ 97 $ 48 $ 37 -
Income (Loss) from Continuing Operations $ (141) $ 410 $ 1,306 $ (30) $ 451 $ 605 $ 67
Income (Loss) from Discontinued Operations(b) - - - - $ 1,214 $ (333) $(1,188)
Income (Loss) before Extraordinary Item S (141) $ 410 $ 1,306 $ (30) $ 1,665 $ 272 $(1,121)
Extraordinary Item(c) - - - - $ 46 - -
Net Income (Loss) $ (141) $ 410 $ 1,306 $ (30) $ 1,711 $ 272 $(1,121)
======= ======= ======= ======= ======= ======= =======
Income (Loss) Per Share from
Continuing Operations $ (0.06) $ 0.16 $ 0.51 $ (0.01) $ 0.19 $ 0.25 $ 0.03
Discontinued Operations - - - - $ 0.51 $ (0.14) $ (0.50)
Extraordinary Item(c) - - - - $ 0.02 - -
Net Income (Loss) Per Share $ (0.06) $ 0.16 $ 0.51 $ (0.01) $ 0.72 $ 0.11 $ (0.47)
======= ======= ======= ======= ======= ======= =======
Weighted Average Number of
Common Shares and Equivalents 2,417 2,579 2,569 2,380 2,383 2,383 2,383
======= ======= ======= ======= ======= ======= =======
<FN>
- -----------------
(a) Derived from unaudited data.
(b) Discontinued operations related to SuperCads, Inc., which was sold on July
15, 1992. See Note 3 of Notes to Financial Statements of Acuity.
(c) Extraordinary item represents a gain of $46 (net of income taxes of $3) for
extinguishment of debt in 1992.
</TABLE>
58
<PAGE>
BALANCE SHEET DATA (IN THOUSANDS):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------
APRIL 1, 1995(a) 1994 1993 1992 1991(a) 1990(a)
---------------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Assets $6,470 $ 6,720 $ 7,622 $ 6,409 $ 5,855 $ 6,043
Current Liabilities $4,166 $ 3,357 $ 6,597 $ 2,326 $ 1,934 $ 2,822
Total Liabilities $4,166 $ 4,372 $ 6,597 $ 5,351 $ 6,357 $ 6,663
Stockholders' Equity (Deficiency) $2,304 $ 2,348 $ 1,025 $ 1,058 $ (502) $ (620)
Working Capital $1,296 $ 2,470 $ 353 $ 3,467 $ 3,269 $ 2,463
<FN>
- ---------------
(a) Derived from unaudited financial statements.
</TABLE>
Reference is made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Acuity" and Notes to
Consolidated Financial Statements of Acuity.
59
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ACUITY
On January 26, 1994 Itran Corp.("Itran"), a privately held corporation, was
merged with and into Acuity. In connection with such merger, Acuity effected a
1 for 20 reverse stock split. Such merger has been accounted for as a pooling
of interests; accordingly, Acuity has restated its historical consolidated
financial statements and financial information to reflect the combined financial
condition and results of operations of Acuity and Itran. See Note 2 to Acuity's
Consolidated Financial Statements.
RESULTS OF OPERATIONS
RECENT LOSSES
Acuity estimates it has incurred a loss of approximately $500,000 on
revenues of approximately $4,100,000 in its second quarter ended July 1,
1995. For the six months ended July 1, 1995, Acuity estimates that it
incurred a loss of $640,000 on revenues of $9,000,000. This compares with
earnings of $669,000 on revenues of $10,575,000 for the six months ended
July 2, 1994.
THIRTEEN WEEKS ENDED APRIL 1, 1995 AND APRIL 2, 1994
Total revenues decreased approximately 6% in the first quarter of 1995 as
compared to the first quarter of 1994. The decrease consisted of a 12% decrease
in the core business of machine vision systems and software revenues partially
offset by an 8% increase in Customer Service revenues combined with a 77%
increase in Engineering Service revenues. The decrease in total revenues was
primarily a result of Acuity's lack of securing any one or two customers which
have traditionally accounted for a significant percentage of Acuity's revenues,
combined with a somewhat changing product line which included certain newly
introduced products which did not achieve their projected sales level during the
quarter. In addition, the decrease in total revenues was also a result of
increased sales through Acuity's distribution network, as a percentage of total
revenues, to which Acuity sells at a percentage off of its standard list prices.
Revenues by product line are summarized in the following table:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------
APRIL 1, APRIL 2,
1995 1994
------------- -------------
<S> <C> <C> <C> <C>
$ % $ %
- - - -
Vision Systems and Software 3,915 80 4,452 86
Customer Service and Training 501 10 466 9
Engineering Services 479 10 271 5
------ ---- ------ ----
Total . . . . . . . . . . . . $4,895 100% $5,189 100%
------ ---- ------ ----
------ ---- ------ ----
</TABLE>
Vision Systems and Software include vision product and application
engineering revenues. Customer Service and Training
60
<PAGE>
represents revenues from the sale of spare parts, training and maintenance
agreements. Engineering Services include both vision and robotic software
development contracts, robotic hardware sales, and U.S. government sponsored
SBIR (Small Business Innovation Research) revenues.
Vision systems designed for the general purpose market comprise the
largest portion of Acuity's revenues. In the first quarter of 1995 and also
in the first quarter of 1994 general purpose vision revenues accounted for
62% of total Acuity revenues for each of such quarters. In 1994 general
purpose vision revenues represented 69% of total Acuity revenues. Acuity
believes that this market will be its fastest growing market although
quarterly fluctuations are possible. Fluctuations in revenues from vision
systems and software for the general purpose market were, and are expected to
continue to be, primarily due to fluctuations in sales volume and to a lesser
extent to price fluctuations caused by competitive pricing pressures. Acuity's
products for the general purpose market include the PV60-Registered Trademark-
(Powervision60-Registered Trademark-), PV90-Registered Trademark-(Powervision
90-Registered Trademark-), AV100-Registered Trademark- (Autovision
100-Registered Trademark-), IVS-Registered Trademark- (Intelligent Visual
Sensors), the MVP-Registered Trademark- (Modular Vision Processor) and the newly
introduced Mentorvision-TM-.
Vision systems designed for niche (application specific) markets accounted
for 18% of total Acuity revenues in the first quarter of 1995 as compared to 24%
in the first quarter of 1994. In 1994 such revenues represented 17% of total
Acuity revenues. Acuity believes that this market will continue to be an
important part of its business but its growth is not expected to keep pace with
the anticipated growth in the general purpose market, although quarterly
fluctuations are possible. Fluctuations in revenues, from vision systems for the
niche market were, and are expected to continue to be, primarily due to
fluctuations in sales volume and to a lesser extent to price fluctuations caused
by competitive pricing pressures. Acuity's products for the niche markets
include the I-Pak-Registered Trademark-, a pharmaceutical label inspection
product; DMR (Data Matrix Reader-TM-), a reader of matrix-coded information;
ICIS-TM- (Integrated Circuit Inspection System), primarily a semiconductor
package inspection product; BP-100-TM- (Blister Pak Inspection System), and
CLS-500-TM-.
Customer Service revenue including spare parts, training and maintenance
agreements increased 8% in the first quarter of 1995 as compared to the first
quarter of 1994 while it accounted for 10% of total Acuity revenues in the 1995
period as compared to 9% in the 1994 period. While the newer generation machine
vision product lines require much less repair, maintenance and general customer
support than the previous models, revenues from other types of services,
including maintenance contracts, training and field support, are expected to
offset the decline in the demand for the spare parts of the older product lines.
Engineering Service revenue increased 77% and accounted for 10% of total
revenues in the 1995 quarterly period as compared to 5% of total revenues in the
1994 quarterly period. The increase in revenues was primarily a result of
increased billings of vision related Engineering Service contracts under the
U.S. Government sponsored SBIR program. This included billings on both ongoing
and newly obtained contracts. These increases were partially offset by
declining revenues from sales of robotic hardware and from robotic
61
<PAGE>
software development contracts. Acuity plans to continue work on its several
SBIR contracts and to bid on new SBIR contracts in the future.
Historically, Acuity has had one or two customers which have accounted for
a significant percentage of its total revenues for a given year. In 1994 Brown
& Williamson was Acuity's largest customer, accounting for 16% of total
revenues. These revenues were a result of a $3.6 million contract completed in
December 1994. In 1993 Acuity's largest customer, Motorola, accounted for 12%
of Acuity's total revenues. As of the end of the first quarter of 1995, Acuity
did not have any order or contract in its backlog that would compare with the
size of the Brown & Williamson contract which was booked in March 1994 and which
accounted for a significant part of Acuity's total 1994 revenues. There can be
no assurance that Acuity will be able to secure and complete a similar contract
in the future. Acuity recognizes the potential effects of reliance upon a few
significant customers and therefore continues to attempt to expand its market
share through a diversified customer base.
International revenues (non-North American) increased approximately 70% in
the first quarter of 1995 from the comparable quarter in 1994. The increase was
a result of a 78% increase in European revenues combined with a 50% increase in
Asian revenues. The increase in international revenues was a result of what
Acuity believes were slightly improved economic conditions in Europe and Asia
with regard to Acuity's products while Acuity believes that the 22% decrease in
North American revenues was primarily a result of Acuity's lack of securing any
one or two North American customers which traditionally account for a
significant percentage of Acuity's revenues. Sales to all foreign countries were
made in United States dollars with the exception of the United Kingdom in which
sales are denominated in pound sterling and are transacted by Acuity's wholly-
owned subsidiary located in the United Kingdom. Acuity believes that a weak
U.S. dollar may have contributed to the increase in foreign revenues in the
periods presented and that any future strengthening of the U.S. dollar may
negatively impact the growth of foreign revenues. Acuity believes that its
foreign exchange exposure from its U.K. subsidiary is not significant because
revenues and a majority of the costs incurred are denominated in Pound Sterling.
The following table summarizes total revenues by geographic region:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------
APRIL 1, APRIL 2,
1995 1994
------------- -------------
<S> <C> <C> <C> <C>
$ % $ %
- - - -
North America 3,347 68 4,279 83
Europe 1,151 24 646 12
Asia 397 8 264 5
------ ---- ------ ----
Total . . . . . . . . . . . . $4,895 100% $5,189 100%
------ ---- ------ ----
------ ---- ------ ----
</TABLE>
Total costs and expenses, as a percentage of revenue, increased to
approximately 103% of revenue in the first quarter of 1995 from approximately
90% of revenue in the first quarter of 1994. As a percentage of revenue, the
increase in total costs and
62
<PAGE>
expenses consisted of an approximate 3 percentage point increase in the cost
of goods sold and an approximate 10 percentage point increase in the other
costs and expenses. In the first quarter of 1995 other costs and expenses
included costs associated with Acuity's reduction in force which occurred at
the end of the first quarter. The December 31, 1994 headcount was 117
full-time employees. After the personnel reduction, which consisted of 6
full-time employees and 4 sub-contractors, headcount totaled 113 at the end
of the first quarter of 1995 as compared to 112 at the end of the first
quarter of 1994.
Cost of goods sold, as a percentage of revenue, increased approximately 3
percentage points to approximately 43% in the first quarter of 1995 from
approximately 40% in the first quarter of 1994. The increase was primarily
attributable to a product mix change to lower gross margin products in the 1995
period. In addition, increased sales through distribution, as a percentage of
total revenues, and somewhat higher manufacturing labor costs in 1995 also
contributed to the increased cost of goods sold. Future gross margins will be
impacted by the product mix of future revenues, the overall level of revenues
and the level of revenues generated through Acuity's distribution network which
Acuity is attempting to increase. Because a significant percentage of Acuity's
quarterly revenues are for products booked and shipped in the same quarter, it
is difficult for Acuity to accurately predict the flow and product mix of
shipments. Acuity believes that its margins may slightly further decrease due
to increased percentage of sales of lower gross margin products and an increased
percentage of sales through distribution. This trend is expected to continue at
least through the second quarter of 1995. Acuity continues to monitor and react
to market events and developments in an attempt to improve its gross margin
levels.
Research and development expenses increased 16% in the thirteen weeks ended
April 1, 1995 as compared to the similar period of 1994. The expense increase
reflects a higher average R&D headcount in 1995 which increased salary, travel,
and employee development expenses. Acuity expects to expend additional
resources in the future to improve and expand its product lines and to respond
to its customers' needs.
Marketing and selling expenses increased approximately 18% in the first
quarter of 1995 as compared to the comparable quarter in 1994. The increase was
partially attributable to increased trade show, advertising, salary and travel
expenses. Other expenses also increased as a result of the higher average
headcount in the 1995 period. The decrease in revenues in the 1995 quarter as
compared to the 1994 quarter produced a corresponding decrease in commission
expense which partially offset the other expense increases. As Acuity attempts
to expand its marketing and sales programs, in an effort to increase its market
share and subsequently its revenues, additional expenditures in marketing and
sales are planned.
General and administrative expenses decreased 10% in the 1995 quarter as
compared to the 1994 quarter. The decrease was primarily attributable to a
lower average headcount which decreased salary and other employee related
expenses. Additional resources will be invested in the general and
administrative areas as required by the future growth of Acuity.
63
<PAGE>
Net interest expense decreased 73% in the first quarter of 1995 as compared
to the first quarter of 1994. This was primarily a result of the retirement of
Acuity's 10% subordinated notes (See Note 8 to Acuity's Consolidated Financial
Statements). Given current market interest rates and Acuity's intention to
reduce its outstanding borrowings under its bank line of credit whenever
possible, Acuity believes that its net interest expense in 1995 should decline
from its 1994 level.
A provision for income taxes was not made in the 1995 period since Acuity
had an operating loss. The first quarter of 1994 tax rate of approximately 10%
reflects federal and state taxes, and the use of tax loss and tax credit
carryovers. The 10% rate is the approximate rate estimated for Acuity during
1995. Acuity has significant tax loss and tax credit carryovers both in the
United States and the United Kingdom, but these have certain limitations on
their use. See Note 11 to Acuity's Consolidated Financial Statements.
YEARS ENDED DECEMBER 31, 1994 AND 1993
Total revenues increased approximately 18% in 1994 as compared to 1993.
The increase was primarily a result of increased vision revenues which included
a $3.6 million contract from Brown & Williamson for 60 machine vision-based
integrated package inspection systems which Acuity performed during 1994.
Revenues from this contract accounted for 16% of total 1994 revenues. The
increase in total yearly revenues was also partially a result of increased
vision related Engineering Service contracts combined with increased customer
service revenue including spare parts, training and maintenance agreements.
Revenues by product line are summarized in the following table:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
DECEMBER 31, DECEMBER 31,
1994 1993
------------- -------------
<S> <C> <C> <C> <C>
$ % $ %
- - - -
Vision Systems and Software 18,950 86 16,083 86
Customer Service and Training 1,807 8 1,481 8
Engineering Services 1,411 6 1,170 6
------ ---- ------ ----
Total . . . . . . . . . . . . $22,168 100% $18,734 100%
------- ---- ------ ----
------- ---- ------ ----
</TABLE>
Vision Systems and Software include vision product and application
engineering revenues. Customer Service and Training represents the total of
such revenues for both vision and robotic systems. Engineering Services include
both vision and robotic
64
<PAGE>
commercial software development contracts, robotic hardware sales, and U.S.
government sponsored SBIR revenues.
Vision systems and software revenue increased 18% in 1994 from the 1993
level. This increase resulted from a 27% increase in general purpose vision
revenues partially offset by a 10% decrease in niche market vision revenues.
Vision systems designed for the general purpose market comprise the largest
portion of Acuity's revenues. In 1994 general purpose vision revenues accounted
for 81% of total vision revenues and 69% of total Acuity revenues as compared to
75% and 64%, respectively, in 1993. Acuity believes that this market will
continue to be its largest market. Acuity's products for the general purpose
market include the PV60 (Powervision 60), PV90 (Powervision 90), AV100
(Autovision 100), IVS (Intelligent Visual Sensors), MVP (Modular Vision
Processor) and the newly introduced Mentorvision. Revenues from the Brown &
Williamson contract (essentially IVS systems and associated handling equipment)
were also included in the 1994 general purpose market total.
Vision systems designed for niche (application specific) markets accounted
for 19% of total vision revenues and 17% of total Acuity revenues in 1994 as
compared to 25% and 22%, respectively, in 1993. Acuity believes that this
market will continue to be a part of Acuity's business but its percentage of
Acuity's total revenue is expected to decrease as compared to the general
purpose market percentage of Acuity's total revenue, as was the case in 1994 as
compared to 1993. Acuity's products for the niche markets include the I-Pak, a
pharmaceutical label inspection product; DMR (Data Matrix Reader), a reader of
matrix-coded information; ICIS (Integrated Circuit Inspection System), primarily
a semiconductor package inspection product; BP-100 (Blister Pak Inspection
System), and CLS-500.
Customer service and training revenue including spare parts, training and
maintenance agreements increased 22% in 1994 as compared to 1993 while it
accounted for 8% of total Acuity revenues in both 1994 and 1993. A portion of
this service revenue is related to the installed base of robotic and older
vision systems. The newer generation machine vision product lines require much
less repair, maintenance and general customer support. Revenues from other
types of services, including maintenance, training and field support, are
expected to offset the decline in the demand for the spare parts of the older
product lines.
Engineering Services revenue increased 21% in 1994 and accounted for 6% of
total revenues in both 1994 and 1993. The increase in yearly revenues was
mainly a result of increased Engineering Service contracts, mostly under the
U.S. Government sponsored SBIR program. These increases were partially offset
by declining revenues from sales of robotic hardware and revenues from
65
<PAGE>
robotic software development contracts. Acuity plans to continue to bid on
new SBIR contracts in the future.
In 1994 Brown & Williamson was Acuity's largest customer accounting for
16% of total revenues. These revenues were a result of the aforementioned
$3.6 million contract completed in December 1994. In 1993 Motorola, Inc. was
Acuity's largest customer, accounting for 12% of total revenues.
Historically, Acuity has had one or two customers which have accounted for a
large percentage of its total revenues for a given year. Acuity recognizes
the potential effects of reliance upon a few significant customers and
therefore continues to attempt to expand its market share through a
diversified customer base. As of year-end 1994 Acuity did not have any order
or contract in its backlog that would compare with the size of the Brown &
Williamson contract which was booked in March 1994 and which accounted for a
significant part of Acuity's total 1994 revenues.
International revenues decreased 14% in 1994 from the 1993 total. The
decrease was primarily due to the significant 50% decrease in Asian revenues in
1994, as compared to 1993, partially offset by a 10% increase in European
revenues. The decrease in Asian revenues was a result of a downturn in the
business of Acuity's relatively new Japanese distributorships which were signed
during 1992. Acuity continues to foster these new distributorships with the
intent of increasing its presence, which it believes could lead to an increased
market share, in Asia. European revenues increased partially as a result of
what Acuity believes were slightly improved European economic conditions with
regard to Acuity's products during 1994, as compared to 1993. The 30% increase
in North American revenues in 1994 as compared to 1993 was primarily a result of
increased sales of Acuity's core machine vision products, including revenues
from the Brown & Williamson contract.
The following table summarizes total revenues by geographic region:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
DECEMBER 31, DECEMBER 31,
1994 1993
------------- -------------
<S> <C> <C> <C> <C>
$ % $ %
- - - -
North America 17,980 81 $13,848 74
Europe 3,197 14 2,898 15
Asia 991 5 1,988 11
------ ---- ------ ----
Total . . . . . . . . . . . . $22,168 100% $18,734 100%
------- ---- ------ ----
------- ---- ------ ----
</TABLE>
Total costs and expenses (excluding restructuring costs in 1994 and merger
related costs in 1993), as a percentage of revenue, decreased to 91% of revenue
in 1994 from 92% of revenue in 1993.
66
<PAGE>
As a percentage of revenue, the decrease in total costs and expenses
consisted of an approximate 1 percentage point increase in the cost of goods
sold and a 2 percentage point decrease in the other costs and expenses in
1994 as compared to 1993. The increase in the percentage of cost of goods
sold was the result of factors discussed below. As part of the overall growth
of Acuity during 1994 the headcount grew by 6% which contributed to the
increase, in absolute dollars, in other costs and expenses. Headcount totaled
117 at the end of 1994 as compared to 110 at the end of 1993.
Cost of goods sold, as a percentage of revenue, increased 1 percentage
point to approximately 42% in 1994 from approximately 41% in 1993. The increase
was primarily attributable to an overall product mix change to somewhat lower
gross margin products in 1994 including revenues from the Brown & Williamson
contract which included non-Acuity manufactured handling equipment. In
addition, somewhat higher manufacturing labor costs in 1994 also contributed to
the increased cost of goods sold. Future gross margins will be impacted by the
product mix of future revenues, the level of revenues generated through Acuity's
distribution network, and also by sales volume, which would have a tendency to
increase gross margin as sales volumes increase due to economies of scale in the
manufacturing and purchasing processes. Acuity continues to monitor and react
to market events in an attempt to improve its gross margin levels.
Research and development expenses increased 12% in 1994 as compared to
1993. The expense increase reflects an increased average R&D headcount during
1994 which contributed to increased salary, travel and employee development
expenses. In addition, 1994 included expenses associated with several product
introductions and enhancements which were completed during the year. Acuity
expects to expend additional resources in the future to improve and expand its
product lines and to respond to its customers' needs.
Marketing and selling expenses increased 15% in 1994 as compared to 1993.
The increase is partially attributable to increased trade show, public relations
and advertising expenses in 1994 as compared to 1993. In addition, the
headcount in marketing and sales increased 6% by the end of 1994 as compared to
the end of 1993 and this contributed to increased expenses such as salary and
travel costs. The increase in revenues in 1994 as compared to 1993 also
produced an increase in total commission expense. As Acuity attempts to expand
its marketing and sales programs, in an effort to increase its market share and
subsequently its revenues, additional expenditures in marketing and sales are
planned.
General and administrative expenses increased 9% in 1994 as compared to
1993. The increase is mainly attributable to higher professional fees and
personnel costs in 1994. These increases were partially offset by ongoing cost
control programs in other
67
<PAGE>
expense categories. Additional resources will be invested in the general and
administrative areas as required by the future growth of Acuity.
Restructuring charges in 1994 totaled $440,000. These expenses included
charges for the abandonment of a leased facility as well as personnel related
expenses. In 1993 merger related costs totaled $1,091,000. This amount
primarily consisted of fees to investment bankers, auditors, attorneys and
transfer agents to complete the merger. See Note 2 to Acuity's Consolidated
Financial Statements.
Acuity had net interest expense in both 1994 and 1993. Net interest
expense decreased 51% in 1994 as compared to 1993 primarily as a result of
Acuity's retirement of its subordinated notes. By utilizing its cash resources
and its bank line of credit, which carried a lower interest rate than the
subordinated notes, Acuity was able to decrease its overall interest expense.
See Notes 7 and 8 to Acuity's Consolidated Financial Statements. Given current
market interest rates and Acuity's intention to reduce its outstanding
borrowings under its bank line of credit whenever possible, Acuity believes that
its net interest expense in 1995 should decline from its 1994 level.
A provision for income taxes was made in both 1994 and 1993. As more
fully described in Note 11 to Acuity's Consolidated Financial Statements, Acuity
has significant tax loss and tax credit carryovers both in the United States and
the United Kingdom, but these have certain limitations on their use.
The 1994 net income of $1,306,000, or $.51 per share, included a
restructuring charge of $440,000. This compares with the 1993 net loss of
$30,000, or $.01 per share, which included a charge of $1,091,000 of merger
related costs.
YEARS ENDED DECEMBER 31, 1993 AND 1992
Total revenues increased 13% in 1993 as compared to 1992. The increase was
primarily a result of a 15% increase in the core business of machine vision
systems and software revenues which was attributable to a continued successful
sales effort in 1993, combined with an effective marketing strategy during the
year, which Acuity believes contributed to an increased demand for its products,
as compared to 1992. The increase in total revenues was also partially a result
of increased vision related Engineering Service contracts. However, the
aforementioned increases in revenues were partially offset by declining revenues
in the older robotic product lines including robot controllers, spare parts and
robot related engineering service contracts. In addition, customer service
revenue including spare parts, training and maintenance agreements declined 4%
in 1993 as compared to 1992.
68
<PAGE>
Revenues by product line are summarized in the following table:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
DECEMBER 31, DECEMBER 31,
1993 1992
------------- -------------
<S> <C> <C> <C> <C>
$ % $ %
- - - -
Vision Systems and Software 16,083 86 13,937 84
Customer Service and Training 1,481 8 1,543 9
Engineering Services 1,170 6 1,130 7
------- ---- ------ ----
Total . . . . . . . . $18,734 100% $16,610 100%
------- ---- ------ ----
------- ---- ------ ----
</TABLE>
Vision Systems and Software include vision product and application
engineering revenues. Customer Service and Training represents the total of
such revenues for both vision and robotic systems. Engineering Services include
both vision and robotic software development contracts, robotic hardware sales,
and U.S. government sponsored SBIR (small business innovation research)
revenues.
Vision systems and software revenue increased 15% in 1993 to $16,083,000
from the 1992 level of $13,937,000. This increase resulted from a 23% increase
in general purpose vision revenues partially offset by a 5% decrease in niche
market vision revenues.
Vision systems designed for the general purpose market comprise the largest
portion of Acuity's revenues. In 1993 general purpose vision revenues accounted
for 75% of total vision revenues and 64% of total Acuity revenues as compared to
71% and 60%, respectively, in 1992. Acuity believes that this market will
continue to be its fastest growing market. Acuity's products for the general
purpose market include the AV60 (Autovision 60), AV90 (Autovision 90), AV100
(Autovision 100), IVS (Intelligent Visual Sensors) and the MVP (Modular Vision
Processor).
Vision systems designed for niche (application specific) markets accounted
for 25% of total vision revenues and 22% of total Acuity revenues in 1993 as
compared to 29% and 24%, respectively, in 1992. Acuity believes that this
market will continue to be an important part of Acuity's business but its growth
is not expected to keep pace with the anticipated growth in the general purpose
market. Acuity's products for application specific markets include the ICIS
(Integrated Circuit Inspection System), primarily a semiconductor package
inspection product, and the I-Pak, a pharmaceutical label inspection product
whose revenues are expected to increase as a result of recently adopted U.S.
federal regulations requiring electronic inspection of certain types of
pharmaceutical labels. During 1993 Acuity also introduced three new niche
products.
69
<PAGE>
Customer service revenue, including spare parts, training and maintenance
agreements, declined 4% in 1993 as compared to 1992 while it accounted for 8% of
total Acuity revenues in 1993 as compared to 9% in 1992.
Engineering Services revenues increased 4% in 1993 and accounted for 6% of
total revenues in 1993 as compared to 7% in 1992. The increase in yearly
revenues was mainly a result of increased Engineering Service contracts, mostly
under the U.S. Government sponsored SBIR program. These increases were
partially offset by declining revenues from sales of robotic hardware and
revenues from robotic software development contracts.
Acuity's largest customer in 1993 and 1992 was Motorola, Inc. which
accounted for 12% and 15%, respectively, of total revenues. Historically,
Acuity has had one or two customers which account for a significant percentage
of its total revenues for a given year. Furthermore, in March, 1994 Acuity
received a $3.6 million contract to be supplied approximately over the next two
years.
International revenues increased 78% in 1993 from the 1992 total. The
increase was primarily due to the significant 220% increase in Asian revenues in
1993, as compared to 1992, combined with a 37% increase in European revenues.
The increase in Asian revenues was a result of the success of the relatively new
Japanese distributorships which were signed during 1992 and 1993.
International revenues also increased as a result of what Acuity believes were
slightly improved international economic conditions with regard to Acuity's
products during 1993, as compared to 1992.
The following table summarizes total revenues by geographic region:
70
<PAGE>
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------
December 31, December 31,
1993 1992
------------------ ------------------
$ % $ %
--- --- --- ---
<S> <C> <C> <C> <C>
North America 13,848 74 $13,872 83
Europe 2,898 15 2,117 13
Asia 1,988 11 621 4
------- ---- -------- ----
Total............ $18,734 100% $16,610 100%
------- ---- -------- ----
------- ---- -------- ----
</TABLE>
Total costs and expenses (excluding merger related costs), as a percentage
of revenue, decreased to 92% of revenue in 1993 from 95% of revenue in 1992. As
a percentage of revenue, the decrease in total costs and expenses consisted of
an approximate 6 percentage point decrease in the cost of goods sold and an
approximate 3 percentage point increase in the other costs and expenses in 1993
as compared to 1992. The decrease in the percentage of cost of goods sold was
the result of several factors as discussed below. As part of the overall growth
of Acuity during 1993 the headcount grew by 7% which contributed to the increase
in other costs and expenses. Headcount totaled 110 at the end of 1993 as
compared to 103 at the end of 1992.
Cost of goods sold, as a percentage of revenue, decreased 6 percentage
points to approximately 41% in 1993 from approximately 47% in 1992. The decrease
is attributable to a product mix change to higher gross margin products in 1993
as well as to cost reductions on many of the system components. In addition, in
1993, as compared to 1992, Acuity had decreased revenues from the relatively
lower margin robot related engineering service contracts including those for the
manufacture of robot controllers. Partially offsetting these decreases in cost
of goods sold was the decline in Customer Service and Training revenue, which
historically carries a higher gross margin than other product lines.
Research and development expenses increased 22% in 1993 as compared to
1992. The expense increase reflects the increased headcount, up 14% at the end
of 1993 as compared with the end of 1992. Salary, travel and employee
development expenses all increased in 1993 as compared to 1992. These increases
were partially offset by ongoing expense reduction programs in other
71
<PAGE>
expense categories.
Marketing and selling expenses increased 16% in 1993 as compared to 1992.
The increase is partially attributable to increased trade show and advertising
expenses in 1993 as compared to 1992. In addition, the headcount in marketing
and sales increased 15% by the end of 1993 as compared to the end of 1992 and
this contributed to increased expenses such as salary and travel costs. The
increase in revenues in 1993 as compared to 1992 also produced increased
commission expense.
General and administrative expenses increased 21% in 1993 as compared to
1992. The increase is attributable to an increased average headcount during
1993 as compared to 1992 and to slightly higher professional fees in 1993 as
compared to 1992. These increases were partially offset by ongoing cost control
programs in other expense categories and also to foreign exchange gains during
1992 as compared to no gains during 1993.
Merger related costs totaled $1,091,000 and were expensed in the fourth
quarter of 1993 and are included under "Other expenses." This amount primarily
consisted of fees to investment bankers, auditors, attorneys and transfer agents
to complete the merger.
Net interest expense increased 4% in 1993 as compared to 1992. This was
primarily a result of the continuing of the compounding of interest due on the
outstanding 10% subordinated notes. See Note 8 to Acuity's Consolidated
Financial Statements.
A provision for income taxes was made in 1993 as it was in 1992. Since
merger related costs are not deductible for tax purposes, the 1993 effective tax
rate is significantly greater than the 1992 rate. As more fully described in
Note 11 to Acuity's Consolidated Financial Statements, Acuity has significant
tax loss and tax credit carryovers both in the United States and the United
Kingdom, but these have certain limitations on their use.
"Discontinued Operations" represent the financial results for Cognition.
See Note 3 to Acuity's Consolidated Financial Statements. In 1992 Cognition had
revenues of $608,000 (through its date of sale) and a loss of $147,000 (through
its date of
72
<PAGE>
sale). On July 15, 1992 Acuity sold this 71% owned subsidiary. The gain
from the sale was $1,361,000 and is included in the 1992 statements of
operations under the caption "Discontinued Operations, Gain on Disposal."
There were no activities from this discontinued operation in 1993.
On August 14, 1992 Acuity retired its 12% subordinated notes (see Note 8 to
Acuity's Consolidated Financial Statements) which resulted in a gain on
extraordinary item of $46,000, net of taxes, for 1992. There was no such
extraordinary item in 1993.
The $30,000 net loss, or $.01 per share, for Acuity in 1993 consisted of a
loss from continuing operations, which included a charge of $1,091,000 of merger
related costs, with no activity from discontinued operations. This compares
with Acuity's 1992 net income of $1,711,000, or $.72 per share, which consisted
of income of $451,000 from continuing operations, income of $1,214,000 from
discontinued operations and income of $46,000 from an extraordinary item.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
For the twenty-six weeks ended July 1, 1995, Acuity estimates that it
incurred a loss of $640,000 on revenues of approximately $9,000,000. This loss
has resulted in a reduction of Acuity's liquidity, including reducing the
availability of funds under Acuity's line of credit.
For the year ended December 31, 1994, cash and cash equivalents decreased
77% from the 1993 year end amount. At the year end 1994 working capital totaled
$2,470,000 as compared to $353,000 at year end 1993.
For the twenty-six weeks ended July 1, 1995, cash and cash equivalents
decreased 27% from the 1994 year end amount. As of July 1, 1995, working capital
totaled $929,000 as compared to $2,470,000 at year end 1994. The significant
decline was primarily a result of Acuity's line of credit becoming a short term
liability as of April 1, 1995 and Acuity's six month estimated loss of $640,000.
In March 1995 Acuity secured, from a commercial bank, a long term $3.5
million line of credit carrying more favorable terms than its previous line from
another commercial bank. See Notes 7 and 8 to Acuity's Consolidated Financial
Statements. Acuity borrowed against this new line and immediately paid off and
terminated its previous line of credit which was scheduled to expire in May
1995. Since the new line of credit was for a long term commitment (expiration of
June 1, 1997) Acuity's December 31, 1994 loan payable on its bank line of credit
was classified as a long term liability in Acuity's audited December 31, 1994
Balance Sheet. However, since Acuity was in default of certain covenants under
this line of credit as of April 1, 1995, the then borrowings of $1,250,000 are
classified as a short term liability in Acuity's unaudited April 1, 1995 Balance
Sheet. Acuity continued to be in default as of July 1, 1995. Acuity has obtained
forbearance from such defaults from its bank until the earlier of (i) September
30, 1995 or (ii) any termination of Acuity's arrangement for its contemplated
merger with RVSI without such merger having
73
<PAGE>
been consummated. In the event that either of the two events occurs, Acuity
would need to enter into negotiations with its bank in an attempt to resolve the
termination of such forbearance. See Note 7 to Acuity's Consolidated Financial
Statements. As of July 1, 1995 borrowings of $1,300,000 were outstanding and
Acuity had approximately another $123,000 in available borrowings against its
line of credit.
During the first quarter of 1995 Acuity received $81,000 from the exercise
of stock options and borrowed an additional $235,000 on its line of credit.
During the first quarter of 1995 Acuity invested $246,000 in the purchase of
property and equipment. These costs were primarily for assets required for
product development and enhancement. As of April 1, 1995 Acuity had capitalized
$106,000 of merger related costs associated with the proposed RVSI merger and
such costs are classified in Acuity's April 1, 1995 Balance Sheet as other
assets. Such costs, combined with future merger related costs, are expected be
expensed in the quarter in which the merger is consummated.
Commencing in the second quarter of 1995, order to conserve its cash
resources and in an effort to improve its operating results, Acuity has reduced
previously planned purchases of capital assets, closely monitored its non-fixed
expenses, and offered discounts and otherwise endeavored to accelerate the
payment of its receivables.
If the Merger is not consummated, the forbearance of Acuity's bank lender
would terminate and Acuity would need to either renegotiate the terms of its
line of credit or obtain additional funds to repay its bank lender. In view of
Acuity's recent losses, no assurance can be given that Acuity could renegotiate
such line of credit or obtain additional funds on terms acceptable to Acuity.
In such event, Acuity would need to re-evaluate its business plan and
expenditures in order to significantly reduce its cash outflows.
Due to recent losses in 1995, Acuity revised downward its plans to purchase
capital assets during the current fiscal year. These costs are not expected to
have a material effect on Acuity's operations. Acuity presently has no material
commitments for capital expenditures. Inventory levels should remain somewhat
consistent with levels maintained during the past two years, other than possible
fluctuations caused by the timing of large orders.
74
<PAGE>
Acuity has incurred significant operating losses during its history and has
an accumulated deficit of approximately $60,000,000. In the past, Acuity
attempted to address the primary issues which led to its significant operating
losses in past years by changing its product lines, restructuring and merging
with Itran in January 1994. While Acuity completed four profitable quarters
during 1994 since the merger, each with increasing revenues, the first and
second quarters of 1995 showed a decline in revenues and a net loss. Acuity
reduced its headcount at the end of March 1995 in an attempt to bring its
expense level in line with its projected revenue levels. Such measures may again
be required if the booking and revenue trends experienced during the first and
second quarters of 1995 continue. There can be no assurance that these measures,
or any further measures Acuity may employ, will cause Acuity to experience
revenue growth or have profitable operations in the future. Acuity's future
liquidity and profitability are dependent upon Acuity's ability to effectively
market and manufacture its products, to develop new products to meet changing
customer demands and to expand its market share through a more diversified
customer base.
75
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF RVSI
The following selected historical financial data should be read in
conjunction with the historical financial statements of RVSI and the notes
thereto appearing elsewhere in this Proxy Statement/Prospectus. The selected
financial data of RVSI as of September 30, 1994 and 1993 and for each of the
three years in the period ended September 30, 1994 have been derived from the
financial statements of RVSI, which have been audited by Deloitte & Touche
LLP, independent public accountants, which are included elsewhere herein. The
selected financial data of RVSI as of September 30, 1992, 1991 and 1990 and
for each of the two years in the period ended September 30, 1991 have been
derived from the audited financial statements of RVSI, which are not included
herein.
STATEMENT OF OPERATIONS DATA (IN THOUSANDS, EXCEPT PER SHARE DATA):
<TABLE>
<CAPTION>
Six Months Ended
March 31,Year Ended September 30,
------------------ ----------------------------------------------------
1995(e) 1994(e) 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $16,600 $11,790 $24,613 $19,943 $13,335 $ 8,519 $11,256
Income (loss) before
Benefit (Provision) from
Income Taxes and
Extraordinary Items $ 3,222 $ 1,006 $ 2,710 $ 1,104 $( 983) $(2,428) $(5,523)(a)
Benefit from Income Taxes $ 2,060 $ 1,093 $ 401 $ 495 -- -- --
Income (Loss) before
Extraordinary Items $ 5,282 $ 2,099 $ 3,111 $ 1,599 $ (983) $(2,428) $(5,523)(a)
Extraordinary Items -- -- -- -- $1,210(b)(c) -- --
Net Income (Loss) $ 5,282 $ 2,099 $ 3,111 $ 1,599 $ 227(b)(c) $(2,428) $(5,523)(a)
Income (Loss) Per Share
before Extraordinary Items $ .38 $ .16 $ .24 $ .14 $( .13) $ (.38) $ (.87)
Net Income (Loss) Per Share $ .38 $ .16 $ .24 $ .14 $ .03 $ (.38) $ (.87)
Weighted Average Number of
Common Shares and
Equivalents 13,765(d) 12,830(d) 13,057(d) 12,534(d) 7,783 6,354 6,337
<FN>
- ----------
(a) Includes restructuring charges of $2,526,000.
(b) Includes an extraordinary credit of $1,138,000 (net of income tax provision of $97,000) relating to an agreement with General
Motors Corporation. See Note 12 of Notes to Financial Statements of RVSI.
(c) Includes extraordinary credits of $72,000 resulting from utilization of net operating loss carryforwards.
(d) Weighted average number of common shares and common share equivalents calculated using the modified treasury stock method.
See Note 1i of Notes to Financial Statements of RVSI.
(e) Derived from unaudited financial statements.
</TABLE>
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<PAGE>
BALANCE SHEET DATA (IN THOUSANDS):
<TABLE>
<CAPTION>
September 30,
----------------------------------------------
March 31, 1995(a) 1994 1993 1992 1991 1990
---------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total Assets $21,710 $14,988 $ 7,889 $ 4,515 $ 4,296 $ 5,963
Current Liabilities $ 6,936 $ 5,742 $ 6,215 $ 4,463 $ 5,899 $ 5,140
Total Liabilities $ 7,149 $ 5,952 $ 6,460 $ 4,798 $ 6,297 $ 5,564
Stockholders' Equity
(Deficiency) $14,561 $ 9,036 $ 1,429 $ (283) $(2,001) $ 399
Working Capital
(Deficiency) $ 8,311 $ 4,664 $ (766) $(1,326) $(2,474) $ (530)
<FN>
- -----------
(a) Derived from unaudited financial statements.
</TABLE>
Reference is made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations of RVSI" and the Notes to Financial
Statements of RVSI.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF RVSI
RESULTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1995 AND 1994
Revenues of $16,600,000 for the six months ended March 31, 1995 represent
an increase of $4,810,000, or 41%, in comparison to revenues of $11,790,000 for
the six months ended March 31, 1994. The increase in revenues was a result of
substantially increased shipments of RVSI's LS-2000 and LS-3000 Series
semiconductor lead inspection systems. Revenues relating to the LS-3000 Series,
which was introduced in July 1994, were $14,944,000 for the six-month period
ended March 31, 1995.
Gross profit margins for the six months ended March 31, 1995 and March 31,
1994 were 54% and 45%, respectively. The increase in gross profit margins was
primarily due to the improved profitability of the LS-2000 and LS-3000 Series
product lines.
RVSI-funded research and development expenditures for the six months ended
March 31, 1995 increased by $591,000 over the comparable 1994 level. The
increase is attributable to continued development of RVSI's lead scanning
systems and, in addition, research and development associated with RVSI's
aircraft wing ice detection product. Certain software development costs are
capitalized in accordance with the provisions of Statement of Financial
Accounting Standards No. 86. For the six months ended March 31, 1995, $273,000
of these costs were capitalized as compared to $246,000 for the comparable 1994
period.
RVSI's selling, general and administrative costs increased by $920,000, or
36% for the six months ended March 31, 1995 as compared to the six months ended
March 31, 1994. The increase is primarily as a result of increased marketing
and distribution costs associated with the lead scanning systems product line.
Net income for the six months ended March 31, 1995 was $5,282,000, or $.38
per share as compared to net income of $2,099,000, or $.16 for the six months
ended March 31, 1994. During the six months ended March 31, 1995 and 1994, RVSI
recorded benefits from income taxes in the amounts of $2,060,000 and $1,093,000,
respectively. Such benefits were primarily the result of decreases to the
valuation allowances against deferred tax assets, totaling $3,302,000 and
$1,143,000 during the six month periods ended March 31, 1995 and 1994,
respectively. These decreases in the valuation allowances emanated from RVSI's
profitable operations and the extent to which RVSI can substantiate projected
future earnings. Had these valuation allowances not been decreased, net income
for the six month periods ended March 31, 1995 and 1994 would have been
approximately $1,980,000 and $956,000, respectively.
The deferred tax assets (net of valuation allowances) at March 31, 1995 and
September 30, 1994 of $3,429,000 and $1,163,000, respectively, are equivalent to
the benefit to be derived from net operating loss carryforwards that were
expected to be utilized to offset future taxable income
78
<PAGE>
projected as of the respective balance sheet dates. The deferred tax assets
at March 31, 1995 and 1994 have been limited to the benefit to be derived
from projected future income, due to RVSI's limited history of earnings and
its projected future profitability currently being primarily dependent on one
existing product line. The valuation allowance as of March 31, 1995 was
approximately $4,860,000. RVSI is not able to predict whether this valuation
allowance will be changed in the foreseeable future.
YEARS ENDED SEPTEMBER 30, 1994 AND 1993
Revenues of $24,613,000 for the year ended September 30, 1994 represent an
increase of $4,670,000, or 23%, in comparison to revenues of $19,943,000 for
the year ended September 30, 1993. The increase in revenues was a result of
substantially increased shipments of RVSI's LS-2000 and LS-3000 Series
semiconductor lead inspection systems. The LS-3000 Series system, a more
advanced, high performance machine, was introduced in July 1994, and represents
the next generation lead scanning system designed to replace the LS-2000 Series
system. Sales of the LS-2000 and LS-3000 Series accounted for revenues of
$23,411,000 for the year ended September 30, 1994, representing an increase of
$5,095,000, or 28%, as contrasted with LS-2000 sales of $18,316,000 for the year
ended September 30, 1993. Sales of the LS-3000 Series were $4,783,000 for the
year ended September 30, 1994. Revenues related to U.S. Government business
during the fiscal year ended September 30, 1994 decreased by 32% from the prior
fiscal year, from $1,595,000 to $1,080,000.
Gross profit margins for the fiscal years ended September 30, 1994 and 1993
were 48% and 43%, respectively. The increase in gross profit margins during
fiscal 1994 was primarily due to the improved profitability of the LS-2000 and
LS-3000 Series product lines.
Continued development of the LS-2000 Series and the new LS-3000 Series of
lead scanning systems and RVSI's ID-1 aircraft wing ice detection systems
primarily accounted for $3,718,000 in RVSI funded research and development
expense, net of capitalized software development costs, during the year ended
September 30, 1994, as contrasted with $2,526,000 during fiscal 1993. In its
fiscal year ended September 30, 1994, RVSI capitalized $433,000 of its software
development costs as compared to $476,000 over the comparable 1993 period in
accordance with the provisions of Statement of Financial Accounting Standards
No. 86. RVSI also contracts to perform certain customer-funded research and
development efforts. Revenues and cost of revenues related to such contracts
were $468,000 and $155,000, respectively, during fiscal 1994 as compared to
$342,000 and $271,000, respectively, for fiscal 1993.
RVSI's selling, general and administrative costs increased by $687,000, or
14%, for the year ended September 30, 1994 as compared to the prior fiscal year,
primarily as a result of increased marketing and distribution costs associated
with the LS-2000 and LS-3000 Series products. For the year ended September 30,
1994 net interest income was $58,000 compared to net interest expense of $25,000
in the comparable 1993 period.
79
<PAGE>
Net income for the year ended September 30, 1994 was $3,111,000, or $.24
per share, as compared to net income of $1,599,000, or $.14 for the year ended
September 30, 1993.
During the fiscal years ended September 30, 1994 and 1993, RVSI recorded
benefits from income taxes in the amounts of $401,000 and $495,000,
respectively. Such benefits were primarily the result of decreases in the
valuation allowances which emanated from RVSI's profitable operations in fiscal
1994 and 1993, respectively, and the extent to which RVSI can substantiate
projected future earnings.
The deferred tax assets at September 30, 1994 and 1993 of $1,163,000 and
$584,000, respectively, are equivalent to the benefit to be derived from net
operating loss carryforwards that were expected to be utilized to offset future
taxable income projected as of the respective balance sheet dates. The deferred
tax assets at September 30, 1994 and 1993 have been limited to the benefit to be
derived from projected future income, due to RVSI's limited history of earnings
and its projected future profitability currently being primarily dependent on
one existing product line.
YEARS ENDED SEPTEMBER 30, 1993 AND 1992
Revenues of $19,943,000 for the year ended September 30, 1993 represented
an increase of $6,608,000, or 50%, in comparison to revenues of $13,335,000 for
the year ended September 30, 1992. The increase in revenues was a result of
substantially increased shipments of RVSI's LS-2000 Series semiconductor lead
inspection systems. Sales of the LS-2000 Series accounted for revenues of
$18,316,000 for the year ended September 30, 1993, representing an increase of
$7,745,000 or 73%, as contrasted with LS-2000 sales of $10,571,000 for the year
ended September 30, 1992. Revenues related to U.S. Government business during
the fiscal year ended September 30, 1993 decreased by 47% from the prior fiscal
year, from $3,021,000 to $1,595,000.
Gross profit margins for the fiscal years ended September 30, 1993 and 1992
were 43% and 26%, respectively. The increase in gross profit margins during
fiscal 1993 was primarily due to the improved profitability of the LS-2000
Series product line.
RVSI recorded an extraordinary item in the year ended September 30, 1992 in
the amount of $1,138,000 (net of income tax provision of $97,000) associated
with the satisfaction of approximately $1.3 million of indebtedness owed to
General Motors Corporation ("GM") at no significant cost to RVSI via the sale to
GM of certain inventory and spare parts previously utilized by RVSI in its
automotive robotic systems integration business which was discontinued by RVSI
during its fiscal year ended September 30, 1990. RVSI also executed a four year
service agreement with GM
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<PAGE>
under which RVSI, upon request by GM, will provide maintenance and repair
services at RVSI's standard rates for certain automotive systems previously
sold to GM.
Continued development of the LS-2000 Series of lead scanning systems and
RVSI's ID-1 aircraft wing ice detection systems primarily accounted for
$2,526,000 in RVSI funded research and development expense, net of capitalized
software development costs, during the year ended September 30, 1993 as
contrasted with $1,731,000 during the comparable 1992 period. In its fiscal year
ended September 30, 1993, RVSI capitalized $476,000 of its software development
costs as compared to $568,000 over the comparable 1992 period in accordance with
the provisions of Statement of Financial Accounting Standards No. 86. RVSI also
contracts to perform certain customer-funded research and development efforts.
Revenues and cost of revenues related to such contracts were $342,000 and
$271,000, respectively, during fiscal 1993 as compared to $107,000 and $133,000,
respectively, for fiscal 1992.
Selling, general and administrative expenses were $4,834,000 and
$2,766,000 for fiscal 1993 and 1992, respectively, or 24.2% and 20.7% of total
revenues, respectively. The increase was primarily due to the expansion of
sales efforts in various international markets, increased consulting expenses
relating to new products and markets, and increased employees, salaries and
related expenses to support the growing market for RVSI's products. For the year
ended September 30, 1993 interest expense net of interest income increased by
$6,000 over the comparable 1992 period.
Net income for the year ended September 30, 1993 was $1,599,000, or $.14
per share, as compared to net income of $227,000, or $.03 per share, for the
year ended September 30, 1992. Fiscal 1992 net income reflects the effects of
extraordinary items of $1,210,000 attributable to an agreement with GM and
utilization of net operating loss carryforwards.
During the fiscal year ended 1993, RVSI adopted the provision of Statement
of Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS
109"), which requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in RVSI's
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the differences between the financial
accounting and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
The adoption of SFAS 109 was made as of the beginning of the fiscal year on
a prospective basis. This accounting change had no effect on RVSI's financial
statements as of the date of adoption. However, the adoption of SFAS 109
resulted in an increase in the income tax benefit recognized in fiscal 1993 and,
therefore, an increase in income before extraordinary items of $584,000.
81
<PAGE>
The deferred tax benefit recognized during the fiscal year ended September
30, 1993 represents a decrease in the valuation allowance from the date of
adoption. This adjustment in the valuation allowance emanates from RVSI's
profitable operations in fiscal 1993 and the extent to which it could
substantiate projected future earnings. The adjustment in the valuation
allowance as of September 30, 1993 is equivalent to the benefit to be derived
from net operating loss carryforwards that are expected to be utilized to offset
projected future taxable income.
The deferred tax asset at September 30, 1993 has been limited to the
benefit to be derived from projected future income, due to RVSI's limited
history of earnings and its projected future profitability currently being
primarily dependent on one existing product line.
Prior to fiscal 1993, the provision for income taxes was based on revenue
and expenses included in RVSI's statement of operations. Where appropriate RVSI
provided deferred income taxes for the tax effects of transactions which were
recorded for different periods for financial accounting purposes than for income
tax purposes. At September 30, 1992, no deferred taxes were recorded because of
the existence of net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
SIX MONTHS ENDED MARCH 31, 1995
RVSI's operating, investing, and financing activities for the six months
ended March 31, 1995 utilized net cash and cash equivalents of $1,222,000 as
follows:
- Operating activities provided $216,000;
- $551,000 was used to purchase property and equipment, primarily
computer and demonstration equipment;
- $993,000 was invested primarily in U.S. Treasury Notes; and
- Financing activities provided $106,000 primarily through the issuance
of RVSI Common Stock upon the exercise of stock options and warrants.
RVSI's inventories at March 31, 1995 of $4,533,000 increased by $1,899,000
from $2,634,000 as of September 30, 1994 primarily to support higher production
volumes. Accounts receivable at March 31, 1995 of $5,691,000 increased by
$2,279,000 from $3,412,000 as of September 30, 1994 primarily due to higher
operating levels and increased sales to larger customers with longer payment
terms.
YEAR ENDED SEPTEMBER 30, 1994
RVSI's operating, investing and financing activities for the year ended
September 30, 1994 generated net cash and cash equivalents of $1,103,000 as
follows:
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<PAGE>
- Operating activities provided $566,000;
- $1,002,000 was used to purchase property and equipment, primarily
computer and demonstration equipment;
- $2,984,000 was invested primarily in U.S. Treasury Notes and U.S.
Treasury Bills; and
- Financing activities provided $4,523,000 primarily through the
issuance of RVSI Common Stock and warrants in a private equity
placement and the issuance of RVSI Common Stock upon the exercise of
stock options and warrants.
RVSI anticipates that its working capital needs for fiscal 1995 will be
satisfied by operating revenues and, if necessary, through borrowings under an
existing line of credit. RVSI, however, will consider the possibility of
additional debt and/or equity financing, if such financing can be arranged on
terms favorable to RVSI.
EXPORT SALES
Foreign export sales accounted for 62%, 74% and 54% of RVSI's revenues in
fiscal 1994, 1993 and 1992, respectively. RVSI's foreign export sales are
denominated in U.S. dollars and, therefore, RVSI's receivables are not exposed
to the risk of foreign currency fluctuations. However, to the extent foreign
currencies weaken relative to the U.S. dollar, RVSI's products could become more
expensive in these countries. This could affect both RVSI's sales volumes and
gross profitability.
EFFECT OF INFLATION
Management believes that the effect of inflation has not been material
during each of the years ended September 30, 1994, 1993 and 1992, respectively,
and the six months ended March 31, 1995.
PROPOSED ACQUISITION
On April 27, 1995, RVSI announced that it had entered into the Merger
Agreement with Acuity pursuant to which Acuity is to become a wholly owned
subsidiary of RSVI. Acuity designs, develops, manufactures and supplies 2-D
machine vision systems to a diversity of markets.
The Merger Agreement calls for RVSI to issue 0.766 of a share of its
common stock for each Acuity share (subject to possible adjustments to the
Exchange Ratio as a result of implementation of the Collars), or approximately
1,883,000 shares, in exchange for all of Acuity's outstanding Common Stock as
of March 31, 1995. If the price of shares of RVSI Common Stock averages more
than $14.50 or less than $10.00 per share during the 20 trading days ending on
(and including) the third day immediately prior to the RVSI Special Meeting,
the number of shares of RVSI Common Stock issuable to the Acuity Stockholders
would be proportionately adjusted. In no event, however, will the Exchange
Ratio be more than 0.925626 or less than 0.555375. In addition, Acuity's
outstanding stock options are to be exchanged for options upon RVSI's Common
Stock in the same 0.766 to one ratio.
PRIVATE PLACEMENT
On June 28, 1995, RVSI consummated a private sale of an aggregate of
1,110,000 shares of its Common Stock, at a price of $9.00 from which RVSI
derived net proceeds of approximately $9,500,000. RVSI has agreed to file a
registration statement under the Securities Act covering these shares for the
erespective accounts of the purchasers thereof no later than December 28,
1995. Arnhold and S. Bleichroeder, Inc. acted as RVSI's agent in connection
with RVSI's sales of these shares.
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<PAGE>
ACUITY AND RVSI
PRO FORMA COMBINED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma financial information sets forth the
combined financial position and the combined results of operations of RVSI
and Acuity assuming the merger will be accounted for using the "pooling of
interests" method and that the merger was consummated (i) on March 31, 1995,
for the pro forma combined balance sheets and (ii) as of the beginning of the
earliest period presented in the pro forma combined statements of operations.
For all prior periods presented in the pro forma combined statements of
operations, the weighted average number of common and common equivalent
shares gives effect to the proposed issuance of 0.766 of a share of RVSI Common
Stock in exchange for each outstanding share of Acuity Common Stock and the
issuance of 0.766 options to purchase RVSI common stock in exchange for each
option to purchase Acuity Common Stock (subject to possible adjustments to the
Exchange Ratio as a result of implementation of the Collars). If the price of
the RVSI Common Stock averages more than $14.50 or less than $10.00 per share
during the 20 trading days ending on (and including) the third day immediately
prior to the RVSI Special Meeting, the number of shares of the RVSI Common
Stock issuable to the Acuity Stockholders would be proportionately adjusted.
In no event, however, will the Exchange Ratio be more than 0.925626 or less
than 0.555375.
The unaudited pro forma information combines the historical balance sheets of
RVSI and Acuity at March 31, 1995 and April 1, 1995, respectively, and the
historical statements of operations of RVSI for the years ended September 30,
1994, 1993, and 1992, and for the six-months periods ended March 31, 1995 and
1994 with the historical statements of Acuity for the years ended December
31, 1994, 1993, and 1992, and for the six-month periods ended April 1, 1995
and April 2, 1994, respectively.
The following pro forma information is presented for illustrative purposes
only and is not necessarily indicative of the financial position or results
of operations which would actually have been reported had the merger been in
effect during those periods or which may be reported in the future. No
provision has been reflected in the unaudited pro forma combined financial
information for direct expenses related to the merger, which are expected to
be expensed as incurred in future periods. The statements should be read in
conjunction with the historical financial statements and notes thereto of
RVSI and Acuity which have been included elsewhere herein and incorporated by
reference in this Proxy Statement/Prospectus.
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED)
COMBINED SUMMARY OF STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
RVSI and Acuity Six Months Ended For Year Ended September 30,
------------------------ ---------------------------------
March 31, March 31,
1995 1994 1994 1993 1992
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
REVENUES $ 27,330 $ 21,996 $ 46,781 $ 38,677 $ 29,945
COST OF REVENUES 12,146 10,515 22,091 19,206 17,612
-------- --------- --------- -------- --------
GROSS PROFIT 15,184 11,481 24,690 19,471 12,333
-------- --------- --------- -------- --------
OPERATING COSTS AND EXPENSES:
Selling, general, and administrative 7,074 5,797 12,418 10,900 7,940
Research and development 4,435 3,660 7,629 6,008 4,593
Non-recurring costs 440 1,091 440 1,091 --
Interest expense (income), net (57) 143 77 301 284
-------- --------- --------- -------- --------
11,892 10,691 20,564 18,300 12,817
-------- --------- --------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
3,292 790 4,126 1,171 (484)
INCOME TAX BENEFIT (PROVISION)
ON CONTINUING OPERATIONS 2,067 1,059 291 398 (48)
-------- --------- --------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS 5,359 1,849 4,417 1,569 (532)
INCOME FROM DISCONTINUED
OPERATIONS, NET -- -- -- -- 1,214
-------- --------- --------- -------- --------
INCOME BEFORE EXTRAORDINARY
ITEMS 5,359 1,849 4,417 1,569 682
EXTRAORDINARY ITEMS, NET -- -- -- -- 1,256
-------- --------- --------- -------- --------
NET INCOME $ 5,359 $ 1,849 $ 4,417 $ 1,569 $ 1,938
-------- --------- --------- -------- --------
-------- --------- --------- -------- --------
INCOME (LOSS) PER SHARE:
Primary:
Continued operations $ .34 $ .13 $ .30 $ .13 $ (.06)
Discontinued operations -- -- -- -- .13
-------- --------- --------- -------- --------
Income before extraordinary items $ .34 $ .13 $ .30 $ .13 $ .07
Extraordinary items -- -- -- -- .13
-------- --------- --------- -------- --------
Net income $ .34 $ .13 $ .30 $ .13 $ .20
-------- --------- --------- -------- --------
Fully diluted:
Continuing operations $ .34 $ .13 $ .29 $ .12 $ (.06)
Discontinued operations -- -- -- -- $ .13
-------- --------- --------- -------- --------
Income before extraordinary items $ .34 $ .13 $ .29 $ .12 $ .07
Extraordinary items -- -- -- -- .13
-------- --------- --------- -------- --------
Net income $ .34 $ .13 $ .29 $ .12 $ .20
-------- --------- --------- -------- --------
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVA-
LENT SHARES OUTSTANDING
Primary: 15,615[a] 14,335[a] 14,858[a] 14,023[a] 9,608
Fully Diluted: 15,700[a] 14,450[a] 15,061[a] 14,023[a] 9,608
</TABLE>
See accompanying notes to unaudited pro forma financial information.
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<PAGE>
PRO FORMA COMBINED BALANCE SHEETS
MARCH 31, 1995 - UNAUDITED
(In thousands)
<TABLE>
<CAPTION>
RVSI Acuity
March 31, April 1, Combined
1995 1995 March 31,
ASSETS Historical Historical Adjustments 1995
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 346 $ 279 $ 625
Investments 1,500 1,500
Accounts receivable, net 5,691 3,228 $ (47)[b] 8,872
Inventories 4,533 1,781 (37)[c] 6,277
Deferred income taxes 2,923 2,923
Prepaid expenses and other 254 174 428
---------- --------- ------- ---------
Total current assets 15,247 5,462 (84) 20,625
FIXED ASSETS, Net 2,210 988 3,198
INVESTMENTS 2,487 2,487
OTHER ASSETS 1,260 20 1,280
DEFERRED INCOME TAXES 506 506
---------- --------- ------- ---------
TOTAL ASSETS $ 21,710 $ 6,470 $ (84) $ 28,096
---------- --------- ------- ---------
---------- --------- ------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,503 $ 1,807 $ (47)[b] $ 6,263
Accrued expenses 2,330 1,010 730 [e] 4,070
Advance contract payments 103 99 202
Loan payable 1,250 1,250
---------- --------- ------- ---------
Total current liabilities 6,936 4,166 683 11,785
OTHER LIABILITIES 213 213
---------- --------- ------- ---------
Total liabilities 7,149 4,166 683 11,998
---------- --------- ------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock - RVSI ($.01 par) 117 19 [d] 136
Common Stock - Acuity ($.01 par) 25 (25)[d]
Additional paid-in capital 33,047 61,161 6 [d] 94,214
Accumulated deficit (18,603) (59,029) (37)[c] (78,399)
(730)[e]
Cumulative translation adjustment 147 147
---------- --------- ------- ---------
Total stockholders' equity 14,561 2,304 (767) 16,098
---------- --------- ------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 21,710 $ 6,470 $ (84) $ 28,096
---------- --------- ------- ---------
---------- --------- ------- ---------
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1994 - UNAUDITED
(In thousands)
<TABLE>
<CAPTION>
RVSI Acuity
September 30, December 31, Combined
1994 1994 September 30,
Historical Historical 1994
------------ ----------- -------------
<S> <C> <C> <C>
REVENUES $ 24,613 $ 22,168 $ 46,781
COST OF REVENUES 12,722 9,369 22,091
---------- ---------- ----------
GROSS PROFIT 11,891 12,799 24,690
---------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 5,521 6,897 12,418
Research and development 3,718 3,911 7,629
Nonrecurring costs 440 440
Interest (income) expense, net (58) 135 77
---------- ---------- ----------
9,181 11,383 20,564
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 2,710 1,416 4,126
INCOME TAX BENEFIT (PROVISION) 401 (110) 291
---------- ---------- ----------
NET INCOME $ 3,111 $ 1,306 $ 4,417
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
85
<PAGE>
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1993 - UNAUDITED
(In thousands)
<TABLE>
<CAPTION>
RVSI Acuity
September 30, December 31, Combined
1993 1993 September 30,
Historical Historical 1993
-------------- ------------ -------------
<S> <C> <C> <C>
REVENUES $19,943 $18,734 $38,677
COST OF REVENUES 11,454 7,752 19,206
------- ------- -------
GROSS PROFIT 8,489 10,982 19,471
------- ------- -------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 4,834 6,066 10,900
Research and development 2,526 3,482 6,008
Nonrecurring costs 1,091 1,091
Interest expense, net 25 276 301
------- ------- -------
7,385 10,915 18,300
------- ------- -------
INCOME BEFORE INCOME TAXES 1,104 67 1,171
INCOME TAX BENEFIT (PROVISION) 495 (97) 398
------- ------- -------
NET INCOME (LOSS) $1,599 $(30) $1,569
------- ------- -------
------- ------- -------
</TABLE>
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1992 - UNAUDITED
(In thousands)
<TABLE>
<CAPTION>
RVSI Acuity
September 30, December 31, Combined
1992 1992 September 30,
Historical Historical 1992
----------- ----------- -------------
<S> <C> <C> <C>
REVENUES $ 13,335 $ 16,610 $ 29,945
COST OF REVENUES 9,802 7,810 17,612
--------- --------- ---------
GROSS PROFIT 3,533 8,800 12,333
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 2,766 5,174 7,940
Research and development 1,731 2,862 4,593
Interest expense, net 19 265 284
--------- --------- ---------
4,516 8,301 12,817
--------- --------- ---------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (983) 499 (484)
PROVISION FOR INCOME TAXES ON
CONTINUING OPERATIONS 48 48
--------- --------- ---------
INCOME (LOSS) FROM CONTINUING
OPERATIONS $ (983) $ 451 $ (532)
--------- --------- ---------
--------- --------- ---------
</TABLE>
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<PAGE>
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX-MONTHS ENDED MARCH 31, 1995 - UNAUDITED
(In thousands)
<TABLE>
<CAPTION>
RVSI Acuity
Six-Months Ended Six-Months Ended Combined
March 31, 1995 April 1, 1995 Six-Months Ended
Historical Historical Adjustments March 31, 1995
---------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
REVENUES $ 16,600 $10,777 $ (47)[c] $27,330
COST OF REVENUES 7,616 4,540 (10)[c] 12,146
-------- ------- ----- -------
GROSS PROFIT 8,984 6,237 (37) 15,184
-------- ------- ----- -------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 3,469 3,605 7,074
Research and development 2,389 2,046 4,435
Nonrecurring costs 440 440
Interest (income) expense, net (96) 39 (57)
-------- ------- ----- -------
5,762 6,130 11,892
-------- ------- ----- -------
INCOME BEFORE INCOME TAXES 3,222 107 (37) 3,292
INCOME TAX BENEFIT 2,060 7 2,067
-------- ------- ----- -------
NET INCOME $ 5,282 $ 114 $ (37) $ 5,359
-------- ------- ----- -------
-------- ------- ----- -------
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX-MONTHS ENDED MARCH 31, 1994 - UNAUDITED
(In thousands)
<TABLE>
<CAPTION>
RVSI Acuity
Six-Months Ended Six-Months Ended Combined
March 31, 1994 April 2, 1994 Six-Months Ended
Historical Historical March 31, 1994
---------- ---------- --------------
<S> <C> <C> <C>
REVENUES $ 11,790 $ 10,206 $ 21,996
COST OF REVENUES 6,439 4,076 10,515
--------- --------- ---------
GROSS PROFIT 5,351 6,130 11,481
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 2,549 3,248 5,797
Research and development 1,798 1,862 3,660
Nonrecurring costs 1,091 1,091
Interest (income) expense, net (2) 145 143
--------- --------- ---------
4,345 6,346 10,691
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES
1,006 (216) 790
INCOME TAX (PROVISION) BENEFIT
1,093 (34) 1,059
--------- --------- ---------
NET INCOME (LOSS) $ 2,099 $ (250) $ 1,849
--------- --------- ---------
--------- --------- ---------
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION
[a] Weighted average number of common shares and common share equivalents
calculated using the modified treasury stock method.
[b] The pro forma adjustment to accounts receivable, net and accounts payable
represents the elimination of intercompany balances.
[c] The pro forma adjustment to inventories, revenues and cost of revenues
represents the elimination of intercompany sales and the profit recorded on
such sales.
[d] The pro forma adjustment to common stock and additional paid-in capital
represents the exchange of Acuity common stock for RVSI common stock.
[e] The pro forma adjustment to accrued expenses and accumulated deficit
represents the estimated total expenses related to the Merger.
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<PAGE>
BUSINESS OF ACUITY
GENERAL
Acuity designs, manufactures, markets and services machine vision systems
for use in industrial automation. These products emulate many of the functions
performed by the human eye and are used for image processing within the
industrial and manufacturing processes to perform such functions as measurement,
flaw detection, verification of the presence and correctness of parts and
subassemblies, and inspection of manufactured products. Typically, this
equipment is utilized in applications where human inspection is not practical or
where the use of machine vision systems is faster, more reliable and more
economical than human inspection. Acuity's products utilize a combination of
software, an image processing computer and electronic cameras to perform their
functions.
Vision systems designed for the general purpose market comprise the largest
segment of Acuity's revenues, representing 69% of total Acuity revenues in 1994,
as compared to 64% in 1993 and 60% in 1992. Acuity believes that this market
will continue to be its largest market and Acuity expects to concentrate its
efforts on this market. Acuity's primary products for the general purpose
market are the Powervision 90-Registered Trademark-, Powervision 60-Registered
Trademark-, IVS-Registered Trademark- and Mentorvision-TM-. Vision systems
designed for niche (application specific) markets have comprised a smaller share
of Acuity's total revenue for the past several years. Specifically, in 1994
revenues from niche market products represented 17% of total Acuity revenues as
compared to 22% in 1993 and 24% in 1992. Acuity believes that this market will
continue to be an important part of its business but its percentage of total
revenue is expected to decrease as compared to the general purpose market
percentage of total revenues. Acuity's primary products for application
specific markets are the I-Pak-Registered Trademark- and the Data Matrix
Reader-TM-.
The average sales price of a configured system is approximately $20,000.
System prices range from $7,500 to $40,000 or more depending on additional
cameras, other options and customized application engineering (basically
software). Acuity markets and sells its products through a combination of a
direct sales force, a distribution channel, OEM's (original equipment
manufacturers) and system integrators.
BUSINESS AND PRODUCTS
Acuity's main business is the general purpose machine vision market for
automatic inspection of manufactured products, with emphasis on harsh
environments such as manufacturing facilities that require computers specially
designed to allow for operation in
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hot, dusty or dirty environments, such as those that may be found on a factory
floor.
Machine vision systems generally consist of one or more video cameras and
associated microcomputers and software that analyze images and extract
information about objects and their location in the field of view of the camera.
Acuity's primary application areas include:
- Assembly verification
- Date and lot code reading
- Flaw detection
- Gauging and measurement
- Label verification
- Product identification
Industries most frequently choosing Acuity's products are:
- Electronics and Semiconductor
- Medical instrumentation
- Pharmaceutical
- Transportation and vehicles
Acuity believes that the largest market for machine vision is found in
diverse automation applications arising in many manufacturing processes.
Acuity's products are designed to enable manufacturers to increase the quality
of their products. Acuity has focused on developing products that are easy to
use and provide superior performance and value for the markets served.
Acuity has developed many general purpose machine vision products that are
used in a wide variety of applications. In addition, Acuity has developed
specialized products with both vertical and horizontal applications. Vertical
application specific products such as Acuity's I-Pak-Registered Trademark- are
sold into specific industries to solve particular industry related problems (see
"I-PAK") while the horizontal application specific products such as Acuity's
Data Matrix Reader-TM- are designed to solve specific generic problems which are
not particular to any one industry (see "Data Matrix Reader").
Acuity's objective is to design products that continually improve the
productivity of its customers at a cost effective price. Acuity's use of
flexible product architecture allows it to offer products with a wide range of
price and performance characteristics so that its customers do not need to pay
for performance or features that are not required. Whatever the
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product or application, Acuity's strategy in the field of factory floor
automation encompasses the following elements:
- COMPATIBILITY WITH FACTORY STANDARDS Acuity's products are designed for
direct integration into standard manufacturing systems. The use of factory
standards allows Acuity's products to be viewed by its customers as a
complementary component to standard products already familiar to the customer.
- FLEXIBLE PRODUCT ARCHITECTURE The software and hardware components of
most of Acuity's products are designed so that the basic core technology can be
easily adapted to meet specific product requirements. This allows Acuity to
package products to meet varying market requirements, to minimize time to market
and to leverage its development costs.
- EASY TO USE PRODUCTS Acuity's products are designed for ease of use and
implementation by manufacturing engineers, distributors and systems integrators.
Acuity's products are set up, or programmed, for a specific application
utilizing either a standard PC compatible computer running Microsoft Windows or
an Apple Computer environment using Acuity's proprietary language, or the
standard X Windows/Motif environment. Set-up is accomplished with the use of
pull down menus and icons using everyday language. The fact that little or no
specialized knowledge of machine vision is required to set up these products
improves their market acceptance.
Acuity supplies vision systems based on its software products running stand
alone or in conjunction with a standard computer platform. Acuity's products
utilize proprietary and third-party image processing, I/O, and motion control
boards. The main computer platforms are an industrially hardened Apple-
Registered Trademark- computer and PLC's that run Acuity and other third-party
hardware and software.
Acuity's products are sold across a broad segment of industrial markets
including to automotive, consumer, electronics, manufacturing and pharmaceutical
customers. Acuity has established relationships with certain key manufacturers
and distributors of factory automation equipment when it perceives such
equipment to be complementary to its products (see "Marketing Alliances").
Approximately 19% of Acuity's 1994 revenues were international (outside North
America) as compared to 26% in 1993 and 17% in 1992. Acuity's business is not
considered to be seasonal and Acuity believes that its product lines are broad
enough so that prevailing economic conditions in any one particular industry do
not materially affect Acuity's overall revenues. For the purpose of segment
reporting, management considers Acuity to operate in one industry, the machine
vision industry.
Acuity sells to four types of customers: the end user solving a specific
problem (sold through distribution or directly); the
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internal integrator, an experienced vision engineer generally within a Fortune
500 company with the skills and resources to apply the machine vision
technology to various application problems within the many operations of the
engineer's company; the external systems integrator who services the end-user
market by providing engineering, software, and integration services; and OEM's
who embed Acuity's products in the OEM's equipment.
The average sales price of a configured system is approximately $20,000.
System prices range from $7,500 to $40,000 or more depending on additional
cameras, other options and customized application engineering (basically
software).
Acuity has concentrated, and expects to continue to concentrate, its
development and marketing efforts on the Powervision 90-Registered Trademark-,
Powervision 60-Registered Trademark-, IVS-Registered Trademark-, and
Mentorvision-TM- general purpose vision systems, and the Data Matrix Reader-TM-
and I-Pak-Registered Trademark- niche products. Acuity continues to support the
older Autovision-Registered Trademark- proprietary hardware/software vision
system, the MVP-Registered Trademark- general purpose vision system and several
niche products which collectively are not expected to represent a significant
part of Acuity's future revenue.
HARDWARE
Acuity supports and re-sells a wide variety of products that
complement its focus on machine vision and image analysis. As an authorized
Value Added Reseller, Acuity can recommend, sell, service and support certain
Apple computer products in addition to its own proprietary products. See
"Materials and Supply."
Acuity manufactures an industrially packaged version of various models of
computers sold by Apple-Registered Trademark- Computer and also resells certain
other standard Apple Computer products bundled with its software as
workstations. In addition, Acuity also sells proprietary equipment and other
third-party add-in hardware and software products.
SYSTEMS
Vision systems designed for the general purpose market comprise the largest
segment of Acuity's revenues, representing 69% of total Acuity revenues in 1994,
as compared to 64% in 1993 and 60% in 1992. Acuity believes that this market
will continue to be its largest market and Acuity expects to concentrate its
efforts on this market. Acuity's primary products for the general purpose
market are described below.
- POWERVISION 90 (PV90) is a high-resolution, gray scale machine vision
system featuring advanced image processing, analysis, and graphics tools to meet
demanding industrial vision needs. The Powervision 90 is an effective solution
for a wide range of measurement, inspection, assembly verification, and motion
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guidance applications. The system's architecture, which is based on the Apple's
Power Macintosh computer and Acuity's proprietary Image Analyst/Source software
package, offers performance and flexibility to meet the customers' requirements.
- POWERVISION 60 (PV60) is a more compact and lower cost version of the
Powervision 90 for applications that do not require options for expansion.
- IVS, an acronym for Intelligent Visual Sensors, is a high speed gray
scale machine vision system designed to address the broad general industrial
marketplace. Characteristics of IVS include high speed processing, ease of use
and high performance. Typical IVS system configurations address the low to
medium price ranges of the market. The system is designed on industry standards
including VME or ModBus Plus interfaces and standard 6U VME Eurocard format. It
is sold as either a board-level product or as a stand-alone unit with a
self-contained power supply and input/output control. IVS is also designed to
be easy to program and to appeal to the broad requirements of most industrial
customers who do not have machine vision expertise.
In recent years, Acuity has focused attention on the Powervision and IVS
product lines, including establishment of a worldwide distribution network.
Acuity believes that revenues from these product lines will increase.
- MENTORVISION is a new type of machine vision inspection system which
Acuity introduced to the vision market in the fourth quarter of 1994. Acuity
believes that Mentorvision represents an advancement in the commercial
application of electronic inspection products for the packaging industry for two
reasons: (1) Mentorvision learns without programming, by viewing "good" products
on the assembly line; and (2) Mentorvision can detect a wide variety of flaws in
product appearance that may be unpredictable as to size, cause, type or location
of the product. Acuity believes that Mentorvision is able to address some of
the most demanding, and previously un-addressable, requirements in the
packaging industry. Acuity has only had minimal sales of this product in 1995,
and has significantly decreased its original sales projections for this product
for the balance of 1995.
Acuity currently sells two other general purpose products: Autovision 100,
a high-speed, high-resolution, gray scale vision system; and MVP, a high
performance product utilized when a high degree of features and performance are
required in one product. Acuity does not anticipate any significant revenues
from these products in the future.
Vision systems designed for niche (application specific) markets have
comprised a smaller share of Acuity's total revenue for the past several years.
Specifically, in 1994 revenues from
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niche market products represented 17% of total Acuity revenues as compared to
22% in 1993 and 24% in 1992. Acuity believes that this market will continue
to be an important part of Acuity's business but its percentage of Acuity's
total revenue is expected to decrease as compared to the general purpose market
percentage of Acuity's total revenues. Acuity's products for application
specific markets are described below.
- I-PAK is a product designed to meet the needs of the pharmaceutical
industry to verify that the correct label has been applied to pharmaceutical
products and that the lot and date code printed on the label are legible. I-Pak
performs this function at manufacturing line speeds. I-Pak employs a customized
user interface that has been specifically designed to meet label inspection
needs of pharmaceutical customers. I-Pak requires minimum user programming and
has been designed for ease of use and integration into the manufacturing line.
Acuity recently released a new version of this product named the I-Pak V-100.
- DATA MATRIX READER began initial shipments in 1993. Unlike bar codes
which have rigid print tolerances, data matrix codes can be read more easily and
applied directly to the surfaces being marked. Data matrix codes allow large
amounts of coded information to be printed in a small space. In general,
manufacturers are requiring that more information be encoded on their products.
The Data Matrix Reader reads matrix-coded information at line speeds and permits
traceability of product, even with small, hard-to-mark products. Revenues from
this product's first year were encouraging and Acuity believes that the product
will experience revenue growth.
Acuity currently sells three other niche products: ICIS, a product designed
to inspect the final packaging of semiconductor devices; CLS-500, a precision
machine vision gauging system; and the Blister Pak Inspection Machine, a product
designed for the pharmaceutical industry to inspect blister packaged tablets and
capsules. Acuity does not anticipate any significant revenues from these
products in the future.
ENGINEERING SERVICES
Acuity has been awarded nine R&D contracts aggregating approximately $2
million during the past three years by various agencies of the U.S. Government
under the SBIR program. Work on several of these contracts continues and Acuity
plans to bid on new contracts in the future. Acuity believes that R&D under
the SBIR contracts may lead to products with possible commercial applications.
Revenues from the SBIR program represented 3% of total revenues in 1994, 4% in
1993 and 2% in 1992. R&D labor costs associated with the SBIR contracts are
included in Research and Development expenses in Acuity's financial statements.
These
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represented 4%, 7% and 3% of total Research and Development expenses for
1994, 1993 and 1992, respectively.
MARKETING, SALES AND SERVICE
Acuity markets its products worldwide through a direct marketing, sales and
sales application engineering force of 33 persons and through distributors,
OEM's and system integrators.
Acuity has approximately 50 distributors in 80 locations in North America,
Europe and Asia. Acuity believes that sales through distributors allows Acuity
to leverage its sales force and potentially sell to a larger customer base than
could be served on a direct sales basis. Acuity supports its distribution
channels with regional sales managers and sales application engineers who
support and interface directly with the distributors and end customers. In
addition, Acuity provides sales and product training to the distributors and end
customers as well as technical product support. Acuity intends to continue to
expand its distribution channels while also utilizing its direct sales force to
sell directly to strategic accounts.
Distributors are usually signed to a one year renewable contract covering a
defined territory. The distributors are required to purchase certain
demonstration equipment from Acuity and are prohibited from carrying vision
products which are competitive to those of Acuity. The contract is cancelable
upon 30 day written notice from either party. Sales to Acuity's distributors
are made at a percentage off of Acuity's standard list prices.
AEG/Modicon, GE Fanuc and Siemens, which are major manufacturers of factory
automation equipment, including programmable logic controllers (PLCs), have
allowed their independent distributors to carry Acuity products in order to
possibly increase sales of their own products. They compete directly with Allen
Bradley, a large company that manufactures and sells programmable logic
controllers as well as its own line of machine vision products. Since
AEG/Modicon, GE Fanuc and Siemens do not produce their own machine vision
products, the availability of Acuity products that directly interface with their
products can be an important component in enhancing sales of their PLCs.
Acuity believes that the features of its products, such as ease of use and
ability to interface directly with standard factory automation equipment,
facilitates acceptance of Acuity products by distributors of these PLCs.
Visits by customers to Acuity's facilities and demonstrations of its
systems are important elements in sales. Acuity's corporate facility is located
in Nashua, New Hampshire. In addition to this facility, Acuity maintains
regional sales offices in or near
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Cincinnati, Dallas, Detroit, Milwaukee, Philadelphia, Sacramento and Tampa.
Acuity has a wholly-owned subsidiary based in Coventry, United Kingdom (Acuity
Imaging Limited) for sales and application engineering in the United Kingdom
and Ireland. Sales to continental Europe and Asia/Pacific are serviced by
the Nashua corporate facility.
In 1994 Brown & Williamson was Acuity's largest customer accounting for 16%
of total revenues. These revenues were a result of a $3.6 million contract from
Brown and Williamson for 60 machine vision-based integrated package inspection
systems which Acuity completed in December 1994. In 1993 and 1992 Motorola,
Inc. was Acuity's largest customer, accounting for 12% and 15%, respectively, of
total revenues. Revenues by product line and by geographic location for the two
years ended December 31, 1994 are presented and discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Acuity." Historically, Acuity has had one or two customers which have accounted
for a large percentage of its total revenues for a given year. Acuity
recognizes the potential effects of reliance upon a few significant customers
and therefore continues to attempt to expand its market share through a
diversified customer base. As of year-end 1994 and also as of the date of this
Proxy Statement/Prospectus, Acuity did not have any order or contract in its
backlog that would compare with the size of the Brown & Williamson contract
which was booked in March 1994 and which accounted for a significant part of
Acuity's total 1994 revenues.
Management believes that comprehensive customer support and service are key
to customer satisfaction and loyalty. Major emphasis is placed on customer
service and support because of the importance of maintaining uninterrupted
operations in the customers' manufacturing process. Acuity has three programs
that address customer support: customer service, training and application
assistance. Customer service provides support to customers during the 90 day to
one-year product warranty period, and subsequently by providing various programs
designed to meet different customer needs after the warranty period. Field
service personnel are also available to assist on service calls, as required.
Training classes are provided for those customers who feel the need for
additional information regarding the installation or operation of Acuity
products. Application assistance is available in situations where customers may
desire on-site support during their installation. Acuity works with its
distributors or directly with its end customers on the above programs to ensure
that the end user of Acuity's products are given the best possible service and
support and to assure efficient product installation for those customers
requiring additional assistance. In 1994 service revenue, including spare parts
and training, was 8% of total revenues; the comparable amounts were 8% in 1993
and 9% in 1992.
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<PAGE>
MATERIALS AND SUPPLY
Acuity assembles all of its machine vision systems and also manufactures
several products. Acuity purchases the PowerPC computers used in the
Powervision 90 and Powervision 60 product lines. All components of a complete
product are integrated by Acuity and tested prior to shipment to customers for
integration into their manufacturing process.
Several of the components are purchased from single sources. Acuity
believes that alternative sources of supply could be obtained without major
interruption in production. However, the PowerPC, the key component of the PV90
and PV60, is only available from Apple Computer, Inc. Acuity has entered into
a Value Added Reseller Agreement with Apple Computer. This may be canceled
upon thirty days written notice by either party. Acuity believes that its
relationship with Apple Computer is good. Acuity believes that alternative
sources would probably charge higher prices than Acuity is currently charged
by Apple Computer.
COMPETITION
The machine vision industry is comprised of over 100 companies, many of
which are small companies serving different market segments. No one company is
recognized as the dominant force in the marketplace. Acuity believes that a
high level of competition will continue. While some of Acuity's current
competitors are larger and have greater financial resources than Acuity, many of
them are smaller and have less financial resources and smaller customer bases
than Acuity. However, the technological development barriers to entering the
machine vision market are not high. Therefore, companies which are
substantially larger and have greater financial resources than Acuity could
enter the field and become strong competitors. Foreign competition,
particularly from major companies in Western Europe and Japan, has also been a
major factor in many markets. Price competition has been substantial in all the
markets and Acuity believes such competition could become more intense.
Acuity's main competitors vary depending upon the particular product. The
primary competitors include Allen Bradley, PPT, Cognex and View Engineering.
However, for many of Acuity's products competition tends to be more widespread
with no primary competitor.
Acuity believes its products compete favorably in terms of total capability
provided, ease of use and integration, ability to upgrade, customer support and
other aspects of the total reason for purchase by a customer. Acuity believes
its products are priced competitively as compared to competitors' systems while
often offering greater total capability or performance than the competition.
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INTELLECTUAL PROPERTY
Acuity holds four U.S. patents relating to a vision system (#4,557,344)
expiring in March 2003, a vision inspection system (#4,581,762) expiring in
April 2003, an encoder interface (#4,597,081) expiring in June 2003, and a
symmetry calibration method for multiconfiguration robots (#4,841,762) expiring
in June 2006. Acuity does not believe that its present operations are
materially dependent upon the proprietary protection that may be available to
Acuity by reason of any one or more of such patents. Moreover, as its patent
position has not been tested, no assurance can be given as to the effectiveness
of the protection afforded by its patent rights.
Acuity has a number of U.S. and foreign registered trademarks including
"Acuity". Acuity claims a copyright in its software and, where it considers it
appropriate, the software is sought to be protected as a trade secret by means
of contractual undertakings by users of the software. There can be no assurance
that any of these measures will prove legally effective or commercially
valuable.
Acuity believes that it has significant trade secrets and know-how related
to its products, and it relies primarily on the common law protection of this
information as trade secrets and on confidentiality agreements with its
employees and customers to protect such advantages as such information may
represent. A number of Acuity's competitors develop, produce and market
products similar to those of Acuity and there is no reason to believe that
potential competitors cannot do the same if they so choose. There can be no
assurance that competitors, in both the United States and foreign countries,
many of which have substantially greater resources, will not seek to apply for
and obtain patents that will prevent, limit or interfere with Acuity's ability
to make and sell its products. Acuity has received various assertions of
infringement or threats of litigation along these lines from time to time in the
past and may again in the future.
RESEARCH AND DEVELOPMENT
Acuity continues to devote significant resources to product development in
the areas of image processing, computer hardware design and software
development. During the three years ended December 31, 1994, 1993, and 1992,
respectively, Acuity spent $3,911,000, $3,482,000, and $2,862,000 on research,
development, customer application activities and R&D under the SBIR contracts.
The industries in which Acuity operates are subject to rapid and continued
technological change especially as it relates to computer hardware platforms,
and while such change could render obsolete the present products, Acuity expects
to expend significant additional sums in the future, as it has in the past, to
improve and expand its product lines as its resources may allow. Acuity has not
experienced any material effects as a result of product obsolescence.
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ENVIRONMENTAL CONDITIONS
Acuity's facilities are subject to numerous laws and regulations of the
U.S. and U.K. governments, as well as state and local jurisdictions, designed to
protect the environment, particularly from plant wastes and emissions. In
management's opinion, it is complying with such laws and regulations, and
compliance has not had and is not expected to have a material adverse effect
upon Acuity's financial condition or results of operations.
EMPLOYEES
As of December 31, 1994, Acuity had 117 full-time employees, of whom 27
were engaged in manufacturing and customer service activities, 44 were involved
in research, development and home office customer application activities, 33
were performing marketing, sales and field sales application functions, and 13
were providing administrative services. Of these totals, Acuity Imaging Limited
(Acuity's wholly owned U.K. subsidiary) employed 5 in application engineering
and customer support, 4 in marketing and sales, and 1 in administrative
functions. The 1994 year-end headcount of 117 compares with a total of 110 at
the end of 1993 and 103 at the end of 1992. At the end of the first quarter of
1995 Acuity reduced its headcount to 113. The reduction consisted of 6 full
time employees and 4 full time sub-contractors.
None of Acuity's employees is represented by a labor organization. Acuity
considers its relations with its employees to be excellent. Acuity has
experienced reductions in staff during the past including the above referenced
reduction in the first quarter of 1995.
FACILITIES
Acuity leases 50,114 square feet in Nashua, New Hampshire for its corporate
office. The lease commenced in April, 1994 and carries a term of six years,
expiring in April, 2000. The square foot rental rate changes yearly as follows:
$4.45, $4.15, $4.20, $4.35, $4.45, and $4.75. Acuity believes this facility is
adequate to meet its needs for the foreseeable future without any material
renovations or improvements.
Acuity also leases sales and service facilities in or near Cincinnati,
Detroit, Milwaukee, Philadelphia and Sacramento in the United States and
Coventry in the United Kingdom. These leases are for short terms and the
amounts involved are not material. See Note 10 to Acuity's Consolidated
Financial Statements.
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<PAGE>
LEGAL PROCEEDINGS
To Acuity's knowledge, there are no material pending legal proceedings to
which Acuity is a party. Due to the nature of Acuity's business it may from
time to time become involved in various litigation including litigation relating
to patents and the ownership of intellectual property. The defense and
prosecution of patent suits is both costly and time-consuming, even if the
outcome is favorable. An adverse outcome in the defense of a patent suit could
subject Acuity to significant liabilities to third parties, require disputed
rights to be licensed from third parties, or require Acuity to cease selling
some of its products. Acuity has received various assertions of infringement or
threats of litigation along these lines from time to time in the past and may
again in the future.
COGNITION (DISCONTINUED OPERATIONS)
Included in the financial statements of Acuity for the years ended 1992,
1991 and 1990 under the caption "Discontinued Operations" are the results of
operations of its then partially owned subsidiary, SuperCads Inc. (known by its
trade name, Cognition). The subsidiary operated in the field of CAD/CAM,
selling primarily software packages. On July 15, 1992, after 4-1/2 years of
Cognition losses totaling $4.3 million, Acuity sold Cognition to Cadema
Corporation of Middletown, New York. Subsequently, Cadema disposed of Cognition
which now operates as an independent private company. Acuity has no equity, or
other, interest in Cognition. Cognition's products were the Advantage CAD/CAM
modules and the CAE offerings of Mechanical Advantage-Registered Trademark- and
Cost and Manufacturability Guide-Registered Trademark-. Net revenues for
Cognition were $608,000 (through the date of its sale) in 1992, $1,713,000 in
1991, and $1,338,000 in 1990. Net losses were $147,000 (through the date of its
sale) in 1992, $333,000 in 1991, and $1,188,000 in 1990.
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MANAGEMENT OF ACUITY
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of Acuity are as follows:
<TABLE>
<CAPTION>
NAME POSITION
----- ---------
<S> <C>
Ofer Gneezy President and Director
John E. Agapakis Vice President, R&D
Alvin Hubbard Vice President, Operations
William Riley Vice President, Engineering
John A. Rogers Vice President, Finance, Treasurer, and Chief
Financial Officer
Brian St. Pierre Vice President, Sales
R. Schorr Berman Director
Donald J. Kramer Chairman of the Board of Directors
C. William McDaniel Director
</TABLE>
Ofer Gneezy, age 43, President and a Director of Acuity since September
1990, Chief Executive Officer from September 1990 to January 1994, and Treasurer
from March 1991 until January 1992. General Manager of Acuity since April 1990
and previously Vice President of Software Development. Mr. Gneezy has been
employed full time by Acuity since January 1980.
John E. Agapakis, age 38, Vice President, Research and Development since
January 1992. Previously Director of Engineering, R&D Program Manager, Senior
Engineer, and Systems Engineer. Mr. Agapakis has been employed full time by
Acuity since August 1984.
Alvin Hubbard, age 50, Vice President, Operations since January 1994.
Previously Vice President of Operations of Itran Corp. from 1992 to January 1994
and previously its Director of Materials from 1984 to 1992. Mr. Hubbard has
been employed full time by Acuity (including time served with Itran) since May
1984.
William Riley, age 51, Vice President, Engineering since January 1994.
Previously Vice President, Engineering of Itran Corp. from 1989 to January 1994
and Vice President, Operations of Eikonix Digital Imaging from 1987 to 1989.
Mr. Riley has been
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<PAGE>
employed full time by Acuity (including time served with Itran) since May 1989.
John A. Rogers, age 37, Vice President, Finance since January 1992, Chief
Financial Officer and Treasurer from June 1994 and from January 1992 to January
1994, Chief Accounting Officer since January 1991. Mr. Rogers was previously
Controller and Treasury Manager. Mr. Rogers has been employed full time by
Acuity since April 1984.
Brian St. Pierre, age 38, Vice President, Sales since June 1994 and
previously Director of Sales from January to June 1994. Previously Director of
Sales of Itran Corp. from 1989 to 1993. Mr. St. Pierre was previously Product
Manager of Itran Corp. Mr. St. Pierre has been employed full time by Acuity
(including time served with Itran) since November 1984.
R. Schorr Berman, age 46, Director of Acuity since September 1986. Mr.
Berman is President of MDT Advisers, Inc., an asset management firm, which
primarily manages the investments of Memorial Drive Trust of which he is the
administrator. Memorial Drive Trust is the Trustee for the Arthur D. Little,
Inc. Employees' Retirement Plan. Memorial Drive Trust was the beneficial owner
of more than 5% of Acuity's Common Stock during part of 1994 and for several
previous years. Mr. Berman was previously an investment officer at MDT
Advisers, Inc. Mr. Berman is also a Director of Arch Communications Group, Inc.
and Helix Technology Corporation, and several privately held companies.
Donald J. Kramer, age 62, Chairman of the Board of Directors since January
1994. Mr. Kramer served as a Director of Itran Corp. from 1982 until its merger
with Acuity in January 1994. Mr. Kramer has been a private consultant and
special limited partner of TA Associates, a private equity capital firm located
in Boston, Massachusetts, since January 1990. For the previous five years, Mr.
Kramer was a general partner of TA Associates. Mr. Kramer is also a director of
Varitronic Systems, Inc. and Micro Component Technology, Inc., and several
privately held companies.
C. William McDaniel, age 54, Director of Acuity since January 1994. Mr.
McDaniel served as a Director of Itran Corp. from 1984 until its merger with
Acuity in January 1994. He was President and a director of CP Ventures, Inc.
from 1986 to March 1995. He serves as a director of several other public and
private companies, including Natural MicroSystems and UltraCision, Inc.
EXECUTIVE COMPENSATION
The following table sets forth certain compensation information for
services rendered during the last three completed fiscal years to Acuity with
respect to (1) the Chief Executive
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Officer, and (2) each of Acuity's four other
most highly compensated executive officers, based on salary and bonus earned
during 1994 (the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- ------------
NAME AND PRINCIPAL
POSITION NUMBER OF
- ------------------ SECURITIES ALL OTHER
UNDERLYING COMPENSATION
YEAR SALARY BONUS OPTIONS (1)
---- ------ ----- ---------- ------------
<S> <C> <C> <C> <C> <C>
John Pemble (2)
Former CEO 1994 $126,166 $ 35,000 10,000 $605
Ofer Gneezy (3) 1994 $115,003 $ 35,000 10,000 $605
President 1993 95,014 15,000 - 550
1992 90,002 3,500 9,187 498
Brian St. Pierre (4) 1994 $152,122 - 5,000 $518
V.P. Sales
John Agapakis (5) 1994 $102,003 $ 19,000 7,000 $590
V.P. R&D 1993 82,014 8,000 - 475
1992 75,005 2,000 6,532 435
William Riley (6) 1994 $103,926 $ 16,000 6,000 $605
V.P. Engineering
<FN>
- --------------
(1) Term life insurance premiums paid by Acuity on behalf of the named
individual. Coverage extends only for the period of employment and
there is no cash value or refunds, from the policy, to the named
individual.
(2) Mr. Pemble became Chief Executive Officer on January 26, 1994. The above
amounts reflect compensation earned from January 26, 1994 to December 31,
1994. Mr. Pemble resigned from Acuity effective January 27, 1995.
(3) Mr. Gneezy was the Chief Executive Officer of Acuity until January 26,
1994. He is currently the President of Acuity.
(4) Mr. St. Pierre became Vice President of Sales on June 27, 1994. The above
amounts reflect compensation earned from January 26, 1994 to December 31,
1994.
(5) Mr. Agapakis is the Vice President of R&D.
(6) Mr. Riley became the Vice President of Engineering on January 26, 1994 The
above amounts reflect compensation earned from January 26, 1994 to December
31, 1994.
</TABLE>
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------
PERCENT OF
NUMBER OF TOTAL OPTIONS
OPTIONS GRANTED TO PER SHARE
GRANTED EMPLOYEES IN EXERCISE OR EXPIRATION
NAME (1) FISCAL YEAR BASE PRICE DATE
- ---- -------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
John Pemble (2) 10,000 13.2% $9.82 01/27/95(2)
Ofer Gneezy 10,000 13.2% $9.82 04/13/04
Brian St. Pierre 5,000 6.6% $9.82 04/13/04
John Agapakis 7,000 9.2% $9.82 04/13/04
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<PAGE>
William Riley 6,000 7.9% $9.82 04/13/04
<FN>
- --------------
(1) Options to acquire Common Stock. All grants are under Acuity's 1991
Stock Option Plan, as amended. Such options are not transferable, other
than by will or the laws of descent and distribution. Such options were
granted on April 13, 1994 and will become exercisable at a rate of 25%
annually, beginning on the first anniversary of the grant.
(2) Mr. Pemble resigned from Acuity effective January 27, 1995 with none of
the above options exercisable.
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION> NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END FY-END (1)
-------------- -------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
John Pemble (2) 0 0 57,973/10,000 $383,202/$0
Ofer Gneezy 0 0 27,484/19,263 $145,146/$58,923
Brian St. Pierre 0 0 4,896/6,014 $32,363/$6,703
John Agapakis 0 0 5,921/10,266 $27,965/$20,315
William Riley 0 0 21,725/6,000 $143,602/$0
<FN>
- --------------
(1) Value is calculated based on the closing bid price of Acuity's Common
Stock as of Friday, December 30, 1994 ($7.50) minus the exercise price
multiplied by the number of shares to which the option relates.
(2) Mr. Pemble resigned from Acuity effective January 27, 1995. On March
21, 1995 Mr. Pemble exercised his options for 57,973 shares at a total
exercise price of $51,596.
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
On January 27, 1995 Mr. Pemble resigned as Chief Executive Officer and
Director of Acuity. In connection with his departure, Acuity paid Mr. Pemble
one year of salary and agreed to pay his health insurance premiums under
Acuity's sponsored health plan for up to one year.
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<PAGE>
COMPENSATION OF DIRECTORS
In January 1994, the Board of Directors approved compensation for outside
directors of $1,250 per meeting attended ($2,000 for the Chairman of the Board),
including any special meeting or committee meeting not held on the same day as a
regularly scheduled meeting of the Board of Directors. In 1993, compensation
for outside directors had been $500 per meeting attended.
In January 1994, Acuity adopted the Acuity Imaging, Inc. Non-Employee
Director Stock Option Plan under which members of the Board of Directors who are
not employees of Acuity are automatically granted non-qualified stock options on
the date of the first meeting of the Board in each calendar year to purchase the
lesser of (i) 1,550 shares or (ii) the number of shares determined by dividing
$25,000 by the fair market value of a share of Acuity's Common Stock as of the
date of the grant. The exercise price for such options will be equal to the
fair market value of Acuity's Common Stock on such date. The Plan provides that
options to purchase up to an aggregate of 50,000 shares of common stock may be
granted under the Plan. Each option is fully exercisable one year after the
grant date and expires at the end of ten years and one day after the grant date.
In January 1994, Acuity granted, pending stockholder approval, which was
subsequently granted, options for 6,200 shares of common stock at $8.50 per
share.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 15, 1992, the owners of all of the outstanding securities of
SuperCads Inc., including Automatix Incorporated (the predecessor to Acuity),
Michael Cronin, a former Chairman of the Board and Executive Officer of
Automatix, and Memorial Drive Trust and ABS Ventures III Limited Partnership,
each then the beneficial owners of more than 5% of the common stock of
Automatix, sold all of their interests in SuperCads Inc. to Cadema Corporation,
a publicly held company. At the time of the transaction, SuperCads Inc. was a
71% owned subsidiary of Automatix. In connection with this transaction,
Automatix received $300,000 in cash and an 8% note payable June 15, 1994 in the
principal amount of $540,000 (the "Automatix Cadema Note"). Each of Mr. Cronin,
Memorial Drive Trust, and ABS Ventures III Limited Partnership received five-
year interest free convertible notes in the face amount of $12,000, $300,000 and
$120,000 respectively (the "Interest-Free Cadema Notes").
On May 28, 1993, as a condition to the closing of a transaction in which a
group of investors led by Mr. Cronin acquired all of the outstanding securities
of SuperCads Inc. (which had since changed its name to Cognition Corporation)
from Cadema Corporation, Mr. Cronin purchased the Automatix Cadema Note
(together with all accrued and unpaid interest thereon) from
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<PAGE>
Automatix in exchange for (i) the transfer by Mr. Cronin to Automatix of 750,000
shares of Automatix common stock (pre 1 for 20 reverse stock split), and (ii)
the surrender by Mr. Cronin to Automatix of an option held by him to acquire
from Automatix 400,000 shares of Automatix common stock (pre 1 for 20 reverse
stock split) at a purchase price of $.39 per share (equivalent to $7.80 per
share with respect to Acuity Common Stock). In the subsequent acquisition of
Cognition Corporation: (a) Mr. Cronin transferred the Automatix Cadema Note to
Cadema Corporation in exchange for all the issued and outstanding common stock
of Cognition Corporation; (b) Mr. Cronin, Memorial Drive Trust and ABS Ventures
III Limited Partnership (among other investors) each exchanged the Interest-Free
Cadema Notes respectively held by them, and paid a small amount of cash, for
shares of a newly authorized Series A of preferred stock of Cognition
Corporation; and (c) Mr. Cronin (among other investors) purchased for cash
shares of a newly authorized Series B preferred stock of Cognition Corporation.
Memorial Drive Trust was the holder of $1,000,000 face value 10% unsecured
subordinated notes issued in 1986 in connection with a financing under which
Acuity was required to make a payment to Memorial Drive Trust and the other
noteholders in the aggregate of $3,502,123 on June 30, 1994. Acuity retired
such notes with a payment of $3,418,740 (including $1,590,111 to Memorial Drive
Trust) on April 1, 1994. In connection with its investment in these notes,
Memorial Drive Trust also received warrant rights to purchase 66,667 (adjusted
for a 1 for 20 reverse split) shares of Common Stock at an exercise price of
$8.00 (adjusted for a 1 to 20 reverse split) per share, which expired
unexercised on June 30, 1994. Memorial Drive Trust was the beneficial owner of
more than 5% of the Common Stock of Acuity during part of 1994 and several
previous years, and Mr. Berman, the President of MDT Advisers, Inc. which
primarily manages the investments of Memorial Drive Trust, is a Director of
Acuity.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of July 18, 1995 information concerning
the beneficial ownership of Acuity Common Stock and information concerning
beneficial ownership of RVSI Common Stock if the Merger is consummated by:
(i) those persons known to Acuity to own beneficially more than 5% of its
outstanding Common Stock, (ii) each director of Acuity, (iii) each of the Named
Executives and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT, NATURE AND
AMOUNT, NATURE AND PERCENTAGE OF BENEFICIAL
PERCENTAGE OF BENEFICIAL OWNERSHIP OF RVSI COMMON
NAME AND ADDRESS OF OWNERSHIP OF ACUITY COMMON STOCK IF THE MERGER IS
BENEFICIAL OWNER STOCK BEFORE THE MERGER(1) CONSUMMATED(1)
- ---------------------- -------------------------- ------------------------
<S> <C> <C> <C> <C>
R. Schorr Berman (2) 67,100 2.7% 51,398 *
Ofer Gneezy (3) 36,950 1.5% 28,303 *
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<PAGE>
William Riley (4) 23,225 * 17,790 *
John Agapakis (5) 10,747 * 8,232 *
Brian St. Pierre (6) 7,238 * 5,544 *
C. William McDaniel (7) 7,178 * 5,498 *
Donald J. Kramer (8) 6,458 * 4,946 *
All directors and 173,438 6.7% 132,853 *
executive officers as a
group (9 persons)
<FN>
- --------------
* Less than 1%
(1) The person or entity listed above has sole voting and investment power
with respect to shares shown, unless otherwise indicated. The shares
shown as beneficially owned also include shares representing options to
purchase Acuity's Common Stock that are currently exercisable or
exercisable within 60 days of July 18, 1995. Computed on the basis of an
Exchange Ratio of 0.766 of a share of RVSI Common Stock for each share of
Acuity Common Stock.
(2) Mr. Berman, a Director of Acuity, does not own any shares of Acuity
Common Stock in his own right. His beneficial ownership consists of
2,800 shares representing options under Acuity's stock option plans that
are currently exercisable or exercisable within 60 days, and 64,300
shares of Acuity Common Stock beneficially owned by Memorial Drive Trust
of all of which latter shares Mr. Berman disclaims beneficial ownership.
Mr. Berman is President of MDT Advisers, Inc., an asset management and
advisory firm, which primarily manages the investments of Memorial Drive
Trust of which he is the administrator. The business address of Mr.
Berman is MDT Advisers, Inc., 125 CambridgePark Drive, Cambridge, MA
02140.
(3) Mr. Gneezy is a Director and the President of Acuity. Mr. Gneezy's
beneficial ownership consists of 36,950 shares representing options to
purchase Acuity Common Stock that are currently exercisable or
exercisable within 60 days. The business address of Mr. Gneezy is 9
Townsend West, Nashua, NH 03063.
(4) Mr. Riley is the Vice President, Engineering of Acuity. Mr. Riley's
beneficial ownership consists of 23,225 shares representing options to
purchase Acuity Common Stock that are currently exercisable or
exercisable within 60 days. The business address of Mr. Riley is 9
Townsend West, Nashua, NH 03063.
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<PAGE>
(5) Mr. Agapakis is the Vice President, R&D of Acuity. Mr. Agapakis'
beneficial ownership consists of 1,443 shares of Acuity Common Stock held
directly and 9,304 shares representing options to purchase Acuity Common
Stock that are currently exercisable or exercisable within 60 days. The
business address of Mr. Agapakis is 9 Townsend West, Nashua, NH 03063.
(6) Mr. St. Pierre is the Vice President, Sales of Acuity. Mr. St. Pierre's
beneficial ownership consists of 1,092 shares of Acuity Common Stock held
directly and 6,146 shares representing options to purchase Acuity Common
Stock that are currently exercisable or exercisable within 60 days. The
business address of Mr. St. Pierre is 9 Townsend West, Nashua, NH 03063.
(7) Mr. McDaniel is a Director of Acuity. Mr. McDaniel's beneficial
ownership consists of 5,628 shares of Acuity Common Stock held directly
and 1,550 shares representing options to purchase Acuity Common Stock
that are currently exercisable or exercisable within 60 days. The
business address of Mr. McDaniel is 9 Townsend West, Nashua, NH 03063.
(8) Mr. Kramer is the Chairman of the Board of Directors of Acuity. Mr.
Kramer's beneficial ownership consists of 4,908 shares of Acuity Common
Stock held directly and 1,550 shares representing options to purchase
Acuity Common Stock that are currently exercisable or exercisable within
60 days. The address of Mr. Kramer is P.O. Box 497 West Falmouth, MA
02574.
</TABLE>
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<PAGE>
DESCRIPTION OF ACUITY'S SECURITIES
ACUITY COMMON STOCK
Acuity is currently authorized to issue up to 10,000,000 shares of its
Common Stock, $.01 par value. As of July 18, 1995 there were 2,486,937 shares
of its Common Stock issued and outstanding, held of record by approximately
3,600 persons.
Holders of shares of Acuity Common Stock are entitled to such dividends
as may be declared from time to time by the Board of Directors in its
discretion, on a ratable basis, out of funds legally available therefor, and to
a pro rata share of all assets available for distribution upon liquidation,
dissolution or the winding up of the affairs of Acuity. All of the outstanding
shares of Acuity Common Stock are fully paid and non-assessable.
TRANSFER AGENT
The transfer agent for Acuity Common Stock is American Stock
Transfer and Trust Company, 40 Wall Street, New York, New York 10005.
REPORTS TO STOCKHOLDERS
Acuity furnishes to its stockholders, after the close of each fiscal
year, an Annual Report which contains audited financial statements. Acuity has
not supplied such a report for the year ended December 31, 1994.
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<PAGE>
BUSINESS OF RVSI
HISTORY
The history of RVSI dates back to June 1960 with the founding of
Dynell Electronics Corporation, a manufacturer of large complex radar sets,
special purpose data processing equipment, underwater acoustic detection
equipment and target tracking equipment ("Dynell"). In December 1977, United
Technologies Corp. acquired Dynell for $22 million.
As part of the acquisition, United Technologies agreed to spin-off
RVSI, then a division of Dynell, as an independent publicly-held company to
develop a novel technology dealing with optical three-dimensional measurement
and replication techniques. RVSI operated as a developmental stage company
for the first four years of its existence.
Initially, RVSI applied its vision technology in a project for the
U.S. Navy. RVSI developed a turn-key system to aid the Navy in inspecting
propellers for the Navy's nuclear submarines. This project, along with
several other smaller government projects, provided revenues of approximately
$9.5 million over a period of time from 1980 to the end of 1984. To reflect
its concentrated focus on vision-based systems, RVSI changed its name to
Robotic Vision Systems, Inc. in July 1981.
Having built up a significant base of technology, RVSI began to
look to other industrial markets where it could commercially manufacture and
market vision-based systems. In late 1983, GM sought out RVSI to undertake
several major projects aimed at automating certain automobile manufacturing
processes, a strategic action which GM undertook in an attempt to achieve
worldwide competitiveness. Seeking to avoid the typical vendor-manufacturer
relationship of the automobile industry, RVSI agreed to pursue this direction
only if GM would acquire a significant equity interest in RVSI. In August
1984, GM purchased an approximately 18% equity interest in RVSI for $8.9
million, provided RVSI with $3.9 million for research and development and
contracted with RVSI to perform a specific $1.0 million vision related
project.
Following the establishment of its relationship with GM, RVSI grew
from 60 employees to 225 employees in 1986. RVSI's first project for GM was
the design, manufacturing and implementation of a vision guided robotic
sealant turn-key system. The first equipment purchase order from GM for two
of these systems aggregated $6.0 million. In the first year of its
relationship with RVSI, GM placed orders for projects worth approximately
$15.0 million.
Over the course of the next three years, GM dramatically reduced
its level of capital spending, particularly for high tech automation systems.
In view of this development, RVSI sought
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alternative markets to compensate for declining revenues in the automotive
industry. On an interim basis, RVSI pursued contract business in the robotic
welding systems market. RVSI viewed this step as an interim means of generating
cash flow to offset further declines in the automotive sector. Between 1987 and
1990, RVSI produced nine welding systems generating approximately $6.9 million
in revenues.
Concurrent with developing its welding systems operations and
deciding not to wait for GM to resume project spending, RVSI sought to apply
its core technology to new applications outside the turn-key robotic systems
industry. In particular, RVSI considered relevant markets to the machine
vision industry in light of its expertise and the advanced state of its
technology. RVSI focused on the electronics industry as having a significant
number of applications where its technology could be applied with
identifiable advantages over current equipment.
RVSI's first area of focus in the electronics industry addressed
the difficulties of manual and 2-dimensional ("2-D") inspection methods for
printed circuit boards. As a source of low-cost research, RVSI initially
undertook a U.S. Navy project, funded through IBM, to study the feasibility
of fully automating the highly labor intensive and error-prone circuit board
inspection process. This study ultimately resulted in RVSI's receipt of
approximately $3.0 million in development funding from IBM and the U.S. Navy
to develop automated solder joint inspection applications for vision
technology. Building on this research, RVSI successfully completed the
engineering and development of the HR-2000, a fully automated 3-D solder
joint inspection and process control system, by the spring of 1989. Over the
next two years, RVSI installed HR-2000 units at several defense electronics
manufacturing houses.
Subsequently, RVSI began to explore other applications in the
electronics industry for vision technology based inspection and quality
control equipment. Identifying both the competitive advantages of 3-D
inspection over traditional equipment while also recognizing the size of the
market, RVSI decided to pursue the development of a semiconductor
lead-inspection system in August 1990. Two months later, the LS-2000, an
automated high-speed 3-D semiconductor lead inspection system, was
introduced. In July 1994, RVSI introduced its advanced LS-3000 Series lead
inspection system. Since the initial introduction of the LS-2000 and through
March 31, 1995, RVSI has shipped a total of 238 LS-2000 and LS-3000 Series
units. It had an order backlog for an additional 40 units at March 31, 1995,
valued at approximately $11.6 million.
During the fiscal year ended September 30, 1990, RVSI withdrew from
its automotive robotic systems integration business because of extremely
aggressive price competition from a large Japanese robot manufacturer,
resulting in reduced margins and a diminishing backlog of orders. The sale of
its robotic welding systems
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integration business in fiscal 1990 marked the culmination of RVSI's
transition from being a supplier of turnkey systems to being a developer and
supplier of standard products having a wide array of commercial and military
applications in the area of electronics inspection.
VISION TECHNOLOGY
An important class of digital imaging systems is "machine vision,"
intelligent machines that "see" in order to perform tasks such as automated
inspection in factory environments. These systems operate at a sufficiently high
speed to work within a system's existing production rate and with sufficient
visual discrimination to adaptively react to the factory environment.
On a simple level, machine vision can be categorized into three
segments. In ascending order of sophistication, these systems are 2-D binary
imaging, stereovision and 3-D vision.
2-D imaging has been satisfactory for many applications of machine
vision to date. 2-D vision technology employs a technique known as
gray-scaling in which workpieces are illuminated, viewed and converted into
an image composed of many light points in varying shades of gray, much like a
black and white television picture. The image captures qualitative
information about the width and height of the object but provides no data as
to its depth characteristics. Consequently, 2-D vision is unable to
distinguish a three-inch sheetmetal hole positioned two feet away from a
six-inch hole placed four feet away.
Stereovision is an intermediate technology that, while more
sophisticated than 2-D vision, is less sophisticated and reliable than true
3-D vision. This technology is based on viewing an illuminated workpiece from
cameras poised at two different angles. Theoretically, the relative positions
of the two images seen by the cameras can be reconciled to determine the
object's location in three-dimensional space. While more powerful than 2-D
vision, stereovision requires copious surface detail on the object and
unambiguous and consistent recognition by both cameras. A further constraint
is that ambient lighting conditions found on the typical factory floor may
confuse a stereovision system by shadowing one camera's view more than the
other's view.
The highest level of machine vision sophistication is contained in
true 3-D vision. This technology, based on sophisticated structured light and
optical triangulation techniques, is at the heart of all of RVSI's systems.
With true 3-D vision technology, workpieces are first illuminated with a
known pattern of laser light. After illumination, a single camera views light
patterns reflected by the workpiece, thus eliminating the problem of
sensitivity to ambient lighting conditions inherent in two-camera systems.
Images are then
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digitized into a grid of precise data points. In the final stage, exact
three-dimensional coordinates of each of these data points are calculated,
and the position and orientation of the object in three-dimensional space and
its feature characteristics are known. Three-dimensional vision is the only
technique that can recognize depth characteristics of almost any arbitrary
workpiece.
On a broad level, machine vision applications in automated
manufacturing fall into two categories -- inspection and process guidance.
INSPECTION TASKS PROCESS GUIDANCE TASKS
---------------- ----------------------
Verification Positioning
Counting Control
Character Recognition Sorting
Identification Adaptive Control
Flaw Detection Seam Tracking
Inspection functions are ideally suited to machine vision
technology. Because inspection is largely performed on a random sampling
basis, human inspection results in information delays and requires continual
sampling to determine the extent and cause of any defects. Machine vision
eliminates information delay through real-time inspection. Machine-based
inspection also eliminates subjectivity and human errors that result from
fatigue and loss of concentration.
Process guidance, in most cases, represents the more sophisticated
application of machine vision. In these applications, robots, using optical
imaging, must first "find" the location, orientation and geometric features
of a part under manufacture, and then, once a work environment has become
"known" to the computer, guide a robot or other mechanical device to the
workpiece and adaptively control the operation of a specific process.
MARKETS AND PRODUCTS
Revenues derived by RVSI during the six months ended March 31, 1995
and its fiscal years ended September 30, 1994, 1993 and 1992 are described
below:
<TABLE>
<CAPTION>
% OF REVENUES
---------------------------------------------
FISCAL YEAR ENDED
SEPTEMBER 30,
SIX MONTHS ENDED -------------------------
MARCH 31, 1995 1994 1993 1992
---------------- ---- ---- ----
<S> <C> <C> <C> <C>
Semiconductor Lead Inspection 99% 95% 92% 79%
Systems (LS-2000 and LS-3000 Series)
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Contracts from U.S. Government(1) 1% 4% 8% 23%
Other (2) - % 1% - % ( 2%)
---- ---- ---- ----
100% 100% 100% 100%
---- ---- ---- ----
---- ---- ---- ----
<FN>
- ------------
(1) Includes, but is not limited to, programs relating to the advanced
inspection and machining of ship's propellers, and continued research
and development of RVSI's ID-1 Ice Detection Technology.
(2) RVSI provided for certain adjustments with respect to revenues
associated with two automotive contracts which were canceled in fiscal
1992.
</TABLE>
RVSI's domestic and foreign export sales during RVSI's six months
ended March 31, 1995 and its fiscal years ended September 30, 1994, 1993 and
1992 are described below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30,
SIX MONTHS ENDED --------------------------------
MARCH 31, 1995 1994 1993 1992
-------------- ---- ---- ----
<S> <C> <C> <C> <C>
North America $ 3,500 $ 9,258 $ 5,166 $ 6,074
Asia/Pacific Rim 10,800 14,103 12,608 5,838
Europe 2,300 1,252 2,169 1,423
------- ------- ------- -------
$16,600 $24,613 $19,943 $13,335
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
RVSI expects that foreign export sales will continue to account for a
significant portion of RVSI's revenues in the future. Foreign sales are subject
to certain inherent risks of global operations, including international monetary
conditions, tariffs, import licenses, trade policies, and domestic and foreign
tax policies.
SEMICONDUCTOR LEAD INSPECTION SYSTEMS
The semiconductor manufacturing process begins with the fabrication of
the semiconductor chip and ends with the final assembly, test/inspection and
marking of the ultimate product. The typical industry descriptions for these
areas are "front end" and "back end."
The front end is a "planar" process where devices are made in "wafer"
format (i.e., large flat surface where the main process concerns are x-y
alignment for various process tools). The trend toward very high density chips
has demanded more inspection and process control in the front end and,
consequently, has created the need for vision guided processes. This technology
advancement generated several large and profitable optical based companies all
of which used 2-D optical and vision technology. While the front
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end developed rapidly to utilize the new technology, the back end of the
manufacturing process did not yet involve such tiny part dimensions. The
back end had line separations of 0.1 inches and above, and pin counts were
seldom in excess of 40 leads. In addition, there was very little competitive
pressure to improve quality dramatically. Accordingly, automated inspections
were not yet required.
Today, the back end of the production process must deal with pin
counts as high as 500 leads and line spacings down to 0.004 inches. In
addition, manufacturers are seeing demands for quality levels as high as 3 or 4
failures per million. Unlike the front end, the height dimension is also
critical in assuring proper lead contact when mounted. Therefore, at this end
of the process, vision solutions must be "three-dimensional." This advancing
technology has created a significant market opportunity for RVSI's series lead
inspection products.
RVSI's LS-3000 Series Lead Scanning Systems are an outgrowth of its
prior LS-2000 Series. RVSI believes that the LS-2000, first introduced in
October 1990, is the only high-speed automated semiconductor lead inspection
system capable of inspecting devices while they remain in their protective
trays. The LS-2000 is an extension of RVSI's HR-2000 product, which was
originally introduced in 1989 for printed circuit board solder joint inspection.
In June 1992, RVSI introduced the LS-2000A which is a higher accuracy version of
the LS-2000. At the same time, RVSI also introduced the LS-2700, a significantly
faster version of the LS-2000, which also affords a greater level of accuracy.
RVSI formally introduced the LS-3000 Series at the Semicon West trade show in
July 1994. All of the models in the LS-3000 Series line are lighter and smaller
than the LS-2000A and the LS-2700. The flagship of the LS-3000 series, the LS-
3700, is also significantly faster than the LS-2700. RVSI received purchase
orders for 55 and 36 LS-3000 Series machines during the six months ended March
31, 1995 and the fiscal year ended September 31, 1994, respectively.
AIRCRAFT ICE DETECTION SYSTEM
In January 1993, RVSI announced the completion of the initial
development phase of its new ID-1 aircraft ice detection system. The ID-1 is
designed to make a major improvement in winter flight safety and to fulfill the
intent of strict new FAA regulations concerning the inspection of wing surfaces
in adverse weather conditions. The device is also anticipated to reduce winter
flying delays and their associated costs and to diminish the environmental
hazard posed by de-icing fluids.
The ID-1 is a full-wing electro-optical ice detection system that is
designed to provide a quick, clear, and reliable indication of the presence or
absence of ice, snow or frost. RVSI has filed patent applications for this
technology. The system can be mounted
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on the bucket of a de-icing truck or other vehicle and is designed to operate
under conditions where visual inspection can be ineffective or tactile
inspection difficult. Its compact size and high degree of mobility are also
designed to allow the ID-1 to detect ice on aircraft surfaces at any point
between the gate and runway.
Extensive field testing of the ID-1 was conducted at several
locations during the 1994-1995 winter ice season. The commercial viability of
the ID-1 has not as yet been proven nor can it be assured. Consequently, there
can be no assurance that the ID-1 can be commercially marketed at a profit at
any time in the proximate future, if ever.
MANUFACTURING
RVSI's production facilities are capable of fabricating and assembling
total electronic and electromechanical systems and subsystems. Facilities
include an assembly and wiring department that has the capability of producing
complex wiring harnesses, as well as intricate electronic subassemblies. RVSI
maintains a comprehensive test and inspection program to ensure that all systems
meet exacting customer requirements for performance and quality workmanship
prior to delivery. In addition, an in-house sheetmetal and machine shop allows
for the manufacture of both prototype and production hardware. To support its
internal operations and to extend its overall capacity, RVSI purchases a wide
variety of components, assemblies and services from proven outside
manufacturers, distributors and service organizations.
MARKETING
RVSI's marketing strategy focuses on cultivating long-term
relationships with the leading manufacturers of electronic and semiconductor
inspection and quality control equipment. As a result of its limited and focused
target market, RVSI's marketing efforts rely heavily on direct sales methods.
The selling cycle for the LS-2000 and LS-3000 Series products has proven to be
generally between six to nine months from initial customer contact. A lengthy
purchase process is often the case in the purchase of the initial unit of a
particular product sold by RVSI. Subsequent purchases require less time and
often result in multiple orders. Typically, potential purchasers visit RVSI's
headquarters to receive a full demonstration of the product and discuss the
merits of the product with RVSI's engineers before making a purchase decision.
Sales activities in the domestic market are handled by a combination
of direct sales personnel and independent sales representatives. Due to the
depth of analysis involved in the customer's purchase decision, management
emphasizes active
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interaction between the direct sales staff, its independent sales
representatives and the buyer throughout the selling process.
RVSI has also established distribution capabilities in both Europe and
the Far East, providing access to virtually all major markets for electronic and
semiconductor test equipment. Leveraging off management's experience and
contacts in the international markets, RVSI has negotiated agreements with four
independent representatives in the Far East and three independent
representatives in Europe to sell and service RVSI's products.
RVSI presently employs 6 persons primarily engaged in personal
selling. In addition, corporate management is committed to frequent
communications with customers, particularly those in higher, policy-making
positions. Lending further support to the sales effort is RVSI's 78 person
engineering and technical staff, which provides assistance in areas requiring
in-depth technical analysis.
Supporting the personal selling effort is a range of marketing
communications materials including brochures, video tapes and slide and overhead
presentations. Additionally, news coverage and trade articles are used to
enhance RVSI's reputation and image. RVSI also exhibits at selected trade shows.
CUSTOMERS
RVSI's sales have been historically concentrated in a small number of
customers at any time, although the specific customers change over time. Sales
to ASE and Anam accounted for approximately 11% and 10%, respectively, of RVSI's
revenues during the six months ended March 31, 1995. Sales to Intel Corporation
and Motorola Inc. accounted for approximately 15% and 10%, respectively, of
RVSI's revenues during the fiscal year ended September 30, 1994. Sales to
Samsung Corporation, Anam Corporation and Intel Corporation accounted for
approximately 15%, 13% and 13%, respectively, of RVSI's revenues during its
year ended September 30, 1993. Sales to the U.S. Government accounted for 4%,
8% and 23% of RVSI's total revenues for the fiscal years ended September 30,
1994, September 30, 1993 and 1992, respectively. No other customers accounted
for more than 10% of sales during such fiscal years and fiscal periods.
RESEARCH AND DEVELOPMENT
RVSI-sponsored research and development efforts over recent years have
been largely devoted to continued development of advanced three-dimensional
vision technology and applications software for use in various inspection and
process control automation systems. RVSI's primary research and development
efforts are focused on development of new electronic and semiconductor
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inspection and quality control products and improvements of existing products,
along with development of RVSI's ID-1 aircraft wing ice detection technology.
Research and development expenditures, net of capitalized software development
costs, aggregated $3,718,000, $2,526,000, and $1,731,000 for RVSI's fiscal years
ended September 30, 1994, 1993 and 1992, respectively, and $2,389,000 for its
six month fiscal period ended March 31, 1995. In its fiscal years ended
September 30, 1994, 1993 and 1992 and its six month fiscal period ended
March 31, 1995, RVSI capitalized $433,000, $476,000, $568,000 and $273,000,
respectively, of its software development costs in accordance with the
provisions of Statement of Financial Accounting Standards No. 86. RVSI also
contracts to perform certain customer-funded research and development efforts.
Revenues and cost of revenues related to such contracts were $468,000 and
$155,000, respectively, for fiscal 1994, compared to $342,000 and $271,000,
respectively, for fiscal 1993 and were $106,000 and $42,000, respectively, for
its six month fiscal period ended March 31, 1995.
SOURCES OF SUPPLY
The raw materials and components used in the development and
manufacture of RVSI's products are generally available from domestic suppliers
at competitive prices; fabrication of certain major components has been
subcontracted for on an as-needed basis. RVSI has not experienced any
significant difficulty in obtaining adequate supplies to perform under its
contracts.
During fiscal 1994, one of RVSI's major suppliers voluntarily filed
for protection under Chapter 11 of the bankruptcy code. This supplier has
advised RVSI that it expects to emerge successfully from bankruptcy. However, as
a protective measure to ensure a stable supply of this vendor's product, RVSI
has acquired a three month inventory and has negotiated an escrow arrangement
with this vendor that would afford RVSI access to the documentation required to
reprocure or manufacture this product in the event the vendor is no longer able
to furnish such product to RVSI.
BACKLOG
At March 31, 1995 RVSI's backlog was approximately $11.6 million as
contrasted with approximately $7.0 million, $7.3 million and $6.0 million at
September 30, 1994, 1993 and 1992, respectively. RVSI believes that most of its
backlog at March 31, 1995 will be completed prior to the close of calendar year
1995. RVSI does not believe that its backlog at any particular time is
necessarily indicative of its future business.
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CUSTOMER SERVICE AND SUPPORT
Given the high cost of downtime, it is imperative that any malfunction in
one of RVSI's systems, regardless of cause, be addressed in the shortest
possible time. RVSI therefore makes available a 24-hour a day "hot line" which
can be used to request service support. RVSI's service organization consists of
technicians, mechanics and engineers reporting to customer service managers who
not only are intimately familiar with its own vision sensors and processors, but
also with the other system components. Additionally, RVSI has made arrangements
with many of its component suppliers whereby they have agreed to provide service
specialists within 24 hours should the need arise. Such calls are coordinated
through RVSI's service manager who is assisted by a full-time service
administrator.
RVSI's service personnel have their formal training augmented by direct
participation in testing of systems at RVSI's facility and also in the
installation and acceptance tests at the customer's plant.
GOVERNMENT REGULATION
Approximately 1%, 4%, 8% and 23% of RVSI's sales during the six months
ended March 31, 1995 and the fiscal years ended September 30, 1994, 1993 and
1992 were related directly or indirectly to U.S. Government programs. Any
substantial overall reduction in government expenditures may adversely affect
RVSI's business. Orders under government prime contracts or subcontracts are
customarily subject to termination at the convenience of the government. In this
event, the contractor is normally entitled to reimbursement for allowable costs
and a reasonable allowance for profits, unless the termination was due to a
default on the part of the contractor. Government contracts are also subject to
audit by applicable government agencies prior to finalization.
PROPRIETARY PROTECTION
At March 31, 1995 RVSI owned 76 issued U.S. patents, with expiration dates
ranging from 1995 to 2011, relating to its three-dimensional vision technology.
RVSI also owns the rights to several U.S. patent applications relating to such
technology.
RVSI does not believe that its present operations are materially dependent
upon the proprietary protection that may be available to RVSI by reason of any
one or more of such patents. Moreover, as its patent position has not been
tested, no assurance can be given as to the effectiveness of the protection
afforded by its patent rights.
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COMPETITION
RVSI believes that machine vision has evolved into a new industry over the
past ten years in which a number of machine vision-based firms have developed
successful industrial applications for the technology. RVSI is aware that a
large number of companies, estimated to be upward of 100 firms, entered the
industry in the years 1980 through 1986 and that most of these were small
private concerns. Over the last several years the number of competitors has
narrowed to less than 25. RVSI believes this is attributable, to a large extent,
to a consolidation within the industry.
RVSI is not aware of any other entity having a three-dimensional vision
system capability as comprehensive and highly automated as that achieved by
RVSI. However, RVSI is aware of several competitors which might promote
substitute technologies. RVSI believes that there are other concerns, some of
which may be substantially larger and have substantially greater assets and
resources than RVSI, engaged in the development of technology and products
which would be competitive with those of RVSI should they choose to enter
the machine vision marketplace.
EMPLOYEES
At March 31, 1995 RVSI employed 149 persons, of whom 78 were engineering
and other technical personnel.
FACILITIES
RVSI leases approximately 50,000 square feet of office and factory space at
425 Rabro Drive East, Hauppauge, New York under a lease which extends to March
31, 2001. The lease requires RVSI to pay property taxes and certain operating
expenses and contains escalation clauses relating to property taxes.
LITIGATION
On or about October 22, 1992, RVSI instituted an action in the United
States District Court for the Eastern District of New York against defendant
Cybo Systems, Inc. ("Cybo"), entitled ROBOTIC VISION SYSTEMS, INC. V. CYBO
SYSTEMS, INC. A/K/A CYBOT SYSTEMS, INC., alleging that the defendant breached
certain agreements between the parties with respect to the sale by RVSI to the
defendant of all of the assets of its welding and cutting systems business.
On or about December 4, 1992, Cybo filed and served an answer
denying the substantive allegations of RVSI's complaint. In
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addition, Cybo asserted counterclaims against RVSI alleging, among other
things, breach of contract and warranties, fraud, bad faith, trespass and
conversion and is seeking aggregate damages in excess of $3.3 million.
Shortly thereafter, RVSI moved to dismiss certain of Cybo's counterclaims on
the ground that Cybo failed to plead fraud with the requisite particularity.
By Order dated March 20, 1993, the Court (i) granted RVSI's motion to
dismiss without prejudice, and (ii) granted Cybo leave to serve an amended
answer with amended counterclaims by April 19, 1993. Cybo has since served an
amended answer and counterclaims which purport to plead fraud with the
requisite particularity. Subsequent thereto, RVSI moved to dismiss Cybo's
claims for trespass and conversion, which motion is presently pending. RVSI,
upon the advice of its general counsel, believes Cybo's counterclaims are
without merit and that the ultimate outcome of this matter will not have a
material adverse effect on RVSI's financial position or results of
operations. RVSI plans to defend against such counterclaims vigorously.
Except for certain matters relating to the issue of damages, the parties have
completed discovery.
In addition, on October 21, 1993, RVSI instituted an action against Cybo
and Robert Rongo, a Cybo employee who had previously been employed by RVSI, in
the Supreme Court of the State of New York, County of Suffolk. The action,
entitled ROBOTIC VISION SYSTEMS, INC. V. ROBERT RONGO AND CYBO SYSTEMS, INC.
A/K/A CYBOT SYSTEMS, INC., alleges that Rongo, induced by Cybo, breached a
confidentiality agreement which he had entered into while in RVSI's employ.
Defendants have asserted an answer to RVSI's complaint, which answer
incorporates the counterclaims asserted by Cybo in the action previously filed
by RVSI against Cybo, discussed above. Mr. Rongo made a motion to dismiss the
action for lack of jurisdiction, but that motion was denied.
RVSI is a defendant in a recently filed proceeding instituted by one of
its competitors seeking (i) a declaration of the invalidity of one of RVSI's
patents ("Pertinent RVSI Patent"), (ii) a declaration that the plaintiff is not
infringing the Pertinent RVSI Patent and (iii) a restraining order or other
relief preventing RVSI from contacting customers of the plaintiff regarding the
Pertinent RVSI Patent. Such proceeding does not seek or assert damages. Based
upon the advice of its patent counsel, the Morrison Law Firm, RVSI believes this
suit is without merit. RVSI has filed an answer and counterclaim seeking (i) a
declaration that the Pertinent RVSI Patent is valid, (ii) a declaration that the
plaintiff has infringed a number of RVSI patents, including the Pertinent RVSI
Patent, (iii) the prohibition of further infringement by plaintiff of certain
patents of RVSI, including the Pertinent RVSI Patent, (iv) a denial of the
plaintiff's request for injunctive relief, (v) monetary damages for the
plaintiff's infringement of RVSI's patents, and (vi) a trebling of monetary
damages because of willful infringement by plaintiff of RVSI's patents.
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MANAGEMENT OF RVSI
EXECUTIVE OFFICERS AND DIRECTORS
PRIOR TO THE MERGER
The following table sets forth certain information with respect to those of
RVSI's executive officers who are not directors of RVSI:
NAME AGE POSITION(S) PRINCIPAL OCCUPATION
- ---- --- ----------- --------------------
Steven J. 36 Executive Vice Is and since
Bilodeau President December 1986 has
been Executive Vice
President of RVSI.
Prior thereto and
from April 1985 he
served RVSI in
various capacities,
most recently as
Vice President of
Operations.
Earl H. 48 Vice President Is and since
Rideout February 1989 has
been Vice Presi-
dent of the
Electronics Group
of RVSI. Prior
thereto and from
1986 he was Execu-
tive Vice President
of Vitronics
Corporation, a firm
engaged in the
manufacture and
distribution of
solder reflow ovens
for the electronics
industry. From 1984
to 1986 he was
President and Chief
Operating Officer
of Testamatic
Corporation, a
manufacturer of
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bare board test
equipment.
William E. 52 Vice President Is and since June
Yonescu 1991 has been Vice
President for New
Product Development
of RVSI. Prior
thereto and from
March 1984, he was
Research and
Development Manager
of RVSI.
Information with respect to RVSI's directors, including those who are also
executive officers of RVSI, is set forth on pps. 41-44 of this Proxy
Statement/Prospectus.
AFTER THE MERGER
At the Effective Time of the Merger and assuming they are elected,
Donald J. Kramer and Ofer Gneezy, the Chairman and President, respectively,
of Acuity, will become additional directors of RVSI. The executive officers
of RVSI prior to the Merger will continue as such after the Merger.
EXECUTIVE COMPENSATION
Set forth below is the aggregate compensation for services rendered in all
capacities to RVSI during its fiscal years ended September 30, 1994, 1993 and
1992 by its chief executive officer and each of its four most highly compensated
executive officers whose compensation exceeded $100,000 during its fiscal year
ended September 30, 1994:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------- -------------------- --------
OTHER RESTRIC- NUMBER OF LONG ALL
NAME AND ANNUAL TED SECURITIES TERM IN- OTHER
PRINCIPAL FISCAL COMPEN- STOCK UNDERLYING CENTIVE COMPEN-
POSITION YEAR SALARY BONUS SATION AWARDS OPTIONS PAYOUTS SATION
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pat V. Costa 1994 $176,702 $36,000 - - - - $52,310(1)(2)
Chief Executive 1993 $169,218 - - - 100,000 - $52,262(1)(2)
Officer 1992 $148,866 - - - 340,000 - -
Steven J. Bilodeau 1994 $139,260 $31,000 - - - - $ 2,686(2)
Executive Vice 1993 $133,426 $ 6,000 - - 50,000 - $ 2,096(2)
President 1992 $117,374 $ 1,800 - - 141,900 - -
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Earl H. Rideout 1994 $112,127 $13,500 - - - - -
Vice President 1993 $112,550 - - - 25,000 - -
1992 $ 99,008 $ 2,700 $3,808(3) - 70,000 - -
Howard Stern 1994 $117,787 $26,000 - - - - $ 2,347(2)
Senior Vice 1993 $112,805 - - - 45,000 - $ 1,699(2)
President 1992 $ 99,237 - - - 129,330 - $ 1,541(2)
Robert H. Walker 1994 $111,715 $26,000 - - - - $ 1,785
Executive Vice 1993 $102,082 $ 4,000 - - 41,113 - $ 1,598(2)
President 1992 $ 89,794 - - - 94,580 - $ 1,394(2)
<FN>
- ------------------
(1) During fiscal 1992, RVSI entered into a Stock Appreciation Rights Agreement
with Mr. Costa. Under this agreement, Mr. Costa will receive a cash payment
based on the appreciation in the market value of RVSI Common Stock. The
maximum cash payments which may be made under this agreement are $50,000
for the fiscal years ended September 30, 1993 and 1994, $75,000 for fiscal
year ending September 30, 1995 and $100,000 for fiscal year ending
September 30, 1996. However, the timing of these payments may be
accelerated by the RVSI Board. Payments of $50,000 have been made to Mr.
Costa for each of the years ended September 30, 1993 and 1994.
(2) Represents accrued and vested payments under RVSI's Stock Ownership Plan.
For Mr. Costa, this amount equaled $2,310 and $2,262 for the fiscal years
ended September 30, 1993 and 1994, respectively.
(3) Vacation pay in lieu of time.
</TABLE>
Set forth below is further information with respect to unexercised options
to purchase RVSI Common Stock under RVSI's Stock Option Plans:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF VALUE OF UNEXERCISED
SHARES SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT SEPTEMBER 30, 1994 AT SEPTEMBER 30, 1994
ON VALUE ------------------------------- --------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pat V. Costa 60,073 $253,295 219,927 160,000 $1,054,602 $ 670,475
Steven J. Bilodeau 44,900 $187,400 76,000 71,000 $ 358,992 $ 291,985
Earl H. Rideout 27,006 $115,826 24,244 43,750 $ 111,346 $ 190,025
Howard Stern 23,500 $104,160 86,580 64,250 $ 413,364 $ 265,930
Robert H. Walker 25,500 $110,654 56,858 53,335 $ 268,070 $ 216,997
</TABLE>
EMPLOYEE AGREEMENTS
Mr. Pat V. Costa is employed as Chief Executive Officer and President
of RVSI under an indefinite term agreement which currently provides for
annual base salary of $180,627. Pursuant to
123
<PAGE>
the terms of his employment agreement, Mr. Costa has been granted certain
rights in the event of the termination of his employment or a change in
control of RVSI. Specifically, in the event of termination for any reason
other than for cause and other than voluntarily, Mr. Costa will be entitled
to the continuance of salary and certain fringe benefits for a period of
twelve months and may exercise all outstanding stock options which are
exercisable during the twelve month period succeeding termination at any time
within such twelve month period. In the event of the occurrence of a change
in control of RVSI (as defined in his employment agreement) and, further, in
the event that Mr. Costa is not serving in the positions of Chief Executive
Officer, President and Chairman of RVSI (other than for cause) within one
year thereafter, Mr. Costa will be entitled to exercise all outstanding stock
options, regardless of when otherwise exercisable, during the six month
period following the termination date of his employment.
RVSI has also granted certain rights in the event of termination of
employment to Messrs. Bilodeau, Rideout, Stern, Walker and Yonescu. Specifically
in the event of involuntary termination other than for cause, each officer will
be given a termination package which provides for three months severance pay and
continued benefits, with the exception of Mr. Rideout whose employment agreement
allows for six months severance. In addition, RVSI has agreed to provide a
maximum of one hundred days' advance written notice to each of Messrs. Bilodeau,
Stern, and Walker in the event RVSI should desire to terminate their employment
other than for cause. In such event, each such officer shall be entitled to
exercise all outstanding stock options, regardless of when otherwise
exercisable, during a specified period following such termination.
DIRECTORS' COMPENSATION
During the fiscal year ended September 30, 1994, directors who were not
otherwise employees of RVSI were compensated at the rate of $1,000 for
attendance at each meeting of the RVSI Board or any committee thereof, $250 for
attendance at any second meeting held during the same day, and $100 for
participation at a telephonic meeting or execution of a consent in lieu of a
meeting.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of March 31, 1995, GM owned approximately 10.5% of the outstanding RVSI
Common Stock. Sales to GM accounted for less than 1% of RVSI's total sales for
the six-month periods ended March 31, 1995 and for RVSI's fiscal year ended
September 30, 1994.
Mr. Jay M. Haft, a Director of RVSI, is Of Counsel to Parker Duryee Rosoff
& Haft, RVSI's general counsel.
124
<PAGE>
PRINCIPAL STOCKHOLDERS OF RVSI
The following table sets forth, as of July 18, 1995, the number and
percentage of shares of RVSI Common Stock held by (a) all persons who, to the
knowledge of RVSI, are the beneficial owners of, or who otherwise exercise
voting or dispositive control over, more than 5% of outstanding RVSI Common
Stock within the meaning of Rule 13d-3 of the Exchange Act, (b) all directors of
RVSI and (c) all executive officers and directors of RVSI as a group:
NAME AND ADDRESS AMOUNT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- ------------------- ----------------------- ----------------
Pat V. Costa 326,647(2) 2.4%
Frank A. DiPietro 45,000(3) (13)
Donald F. Domnick 25,500(4) (13)
Jay M. Haft 516,546(5) 3.8%
Mark J. Lerner 100,411(6) (13)
Howard Stern 109,222(7) (13)
Robert H. Walker 69,983(8) (13)
General Motors Corporation 1,225,775 9.3%
767 Fifth Avenue
New York, New York 10153
Marie Cioti 1,100,000(9) 8.2%
408 Mamaroneck Road
Scarsdale, New York 10583
Robotic Vision Systems 897,865(10) 6.9%
Shareholder's Committee
and Robotic Vision Shareholder's
Group
c/o BEG Enterprises, Inc.
33493 14 Mile Road, #100
Farmington Hills, MI 48831
All current executive 1,321,018(11)(2) 9.3%
officers and directors as a
group (10 persons)
- -----------
125
<PAGE>
(1) Includes shares issuable pursuant to currently exercisable options and
warrants as well as those options and warrants which will become
exercisable within 60 days of July 18, 1995. Except as otherwise
indicated, the persons named herein have sole voting and dispositive power
with respect to the shares beneficially owned.
(2) Includes (i) 295,326 shares issuable to Mr. Costa upon exercise of
outstanding options and (ii) 1,321 vested shares held under the RVSI SOP
over which shares Mr. Costa has voting power, but does not have dispositive
control.
(3) Includes (i) 12,000 shares issuable to Mr. DiPietro upon exercise of
outstanding options and (ii) 28,000 shares owned of record by his spouse.
(4) Includes 12,000 shares issuable to Mr. Domnick upon exercise of outstanding
options.
(5) Includes (i) 52,000 shares issuable to Mr. Haft upon exercise of
outstanding options, (ii) 305,600 shares issuable upon exercise of
outstanding warrants, of which 286,100 are held by his spouse, (iii)
142,000 shares owned of record by his spouse and (iv) 7,666 shares held
indirectly in a retirement trust.
(6) Includes (i) 5,000 shares issuable to Mr. Lerner upon exercise of
outstanding options and (ii) 95,411 shares issuable to Morgen,
Evan & Company, Inc. of which Mr. Lerner is the principal owner, upon
exercise of outstanding warrants.
(7) Includes (i) 103,330 shares issuable to Mr. Stern upon exercise of
outstanding options and (ii) 5,892 vested shares held under the RVSI SOP
over which shares Mr. Stern has voting power, but does not have dispositive
control.
(8) Includes (i) 64,636 shares issuable to Mr. Walker upon exercise of
outstanding options and (ii) 5,347 vested shares held under the RVSI SOP
over which shares Mr. Walker has voting power, but does not have
dispositive control.
(9) Includes 400,000 shares issuable upon exercise of certain outstanding
warrants.
(10) Information obtained from amended Schedule 13D filed with the Commission on
November 18, 1994.
(11) Includes (i) 235,446 shares owned of record and beneficially and (ii)
1,063,642 shares issuable upon exercise of certain outstanding stock
options and warrants.
(12) Includes 21,930 vested shares held in the RVSI SOP for certain officers of
RVSI over which shares such officers have voting power, but do not have
dispositive control.
(13) Less than one percent.
126
<PAGE>
DESCRIPTION OF RVSI'S SECURITIES
COMMON STOCK
RVSI is currently authorized to issue up to 20,000,000 shares of its Common
Stock, $.01 par value. As of March 31, 1995, there were 11,671,615 shares of
RVSI Common Stock issued and outstanding, held of record by approximately 2,700
persons.
Holders of shares of RVSI Common Stock are entitled to such dividends as
may be declared from time to time by the Board of Directors in its discretion,
on a ratable basis, out of funds legally available therefor, and to a pro rata
share of all assets available for distribution upon liquidation, dissolution or
the winding up of the affairs of RVSI. All of the outstanding shares of RVSI
Common Stock are fully paid and non-assessable.
WARRANTS
As of March 31, 1995, there were 1,382,762 warrants issued and outstanding,
held of record by 37 persons, each allowing the holder thereof to acquire one
share of RVSI Common Stock at various dates through February 1999 at exercise
prices ranging from $1.00 to $6.56 per share. See "Management - Transactions
with Management and Other Related Persons."
RVSI Common Stock issuable upon exercise of all such warrants, when paid
for in accordance with their respective terms, will be fully paid and non-
assessable. The Warrants provide for adjustment of the exercise price to
protect the holders against dilution upon the occurrence of such events as stock
dividends an distributions, splits, recapitalizations, mergers and the like.
TRANSFER AGENT
The transfer agent for RVSI Common Stock is American Stock Transfer & Trust
Company, 40 Wall Street, New York, New York 10005. RVSI acts as its own warrant
agent.
REPORTS TO STOCKHOLDERS
The Company furnishes to its Stockholders, after the close of each fiscal
year, an Annual Report which contains audited financial statements.
127
<PAGE>
COMPARISON OF RIGHTS OF HOLDERS
OF ACUITY COMMON STOCK AND RVSI COMMON STOCK
If the Merger Agreement is approved and the Merger becomes effective,
Acuity Stockholders will become stockholders of RVSI, and their rights as
stockholders will be determined by the RVSI Certificate of Incorporation and the
RVSI Bylaws. Each of Acuity and RVSI is organized under the DGCL, and
consequently the differences in the rights of Acuity Stockholders subsequent
to consummation of the Merger, which are generally non-material in their nature,
arise from various provisions of the respective Certificates of Incorporation
and Bylaws of Acuity and RVSI, which are summarized below. This summary is not
intended to be complete and is qualified in its entirety by reference to the
Certificate of Incorporation and Bylaws of each of Acuity and RVSI.
AUTHORIZED SHARES OF CAPITAL STOCK
The Acuity Certificate of Incorporation, as amended, authorizes the
issuance of 10,000,000 shares of Acuity Common Stock of which 2,461,213 shares
were issued and outstanding as of the Acuity Record Date.
The RVSI Certificate of Incorporation, as amended, authorizes the issuance
of 20,000,000 shares of RVSI Common Stock, of which 11,734,374 shares were
issued and outstanding as of the RVSI Record Date. At the RVSI Special Meeting,
RVSI stockholders will be asked to consider and vote upon a proposal to approve
an amendment to the RVSI Certificate of Incorporation increasing RVSI's
authorized Common Stock from 20,000,000 shares to 30,000,000 shares.
MEETINGS
Pursuant to the Acuity Bylaws, annual meetings of Acuity Stockholders shall
be held on the second Tuesday in May if not a legal holiday, or at such other
date and at such other time as the Acuity Board may determine. At each annual
meeting, the Acuity Stockholders entitled to vote shall elect a Board of
Directors, and they may transact such other corporate business as may properly
be brought before the meeting. At the annual meeting any business may be
transacted, irrespective of whether the notice calling such meeting shall have
contained a reference thereto, except where notice is required by law, the
Acuity Certificate of Incorporation or the Acuity Bylaws. Special meetings of
Acuity Stockholders may be called for any purpose by the Acuity Board, the
Chairman of the Board, the Chief Executive Officer or the President. No
business may be transacted at such special meeting except that referred to in
said notice, or in a supplemental notice also given in compliance with the
Acuity Bylaws, or such other business as may be germane or supplementary to that
stated in such notice or notices. Written notice of any meeting of Acuity
Stockholders shall be mailed not less than ten nor more than sixty days before
such meeting to each Acuity Stockholder entitled to vote thereat.
128
<PAGE>
Special meetings of the Acuity Board may be called by the Chairman of the
Board, the Chief Executive Officer or the President on two days' notice to each
director, or such shorter period of time before the meeting as will be
sufficient for the convenient assembly of the directors so notified. Special
meetings shall be called by the Secretary in like manner and notice on the
written request of two or more directors.
Pursuant to the RVSI Bylaws, annual meetings of RVSI Stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting shall be held at such date as the RVSI Board shall determine and
as set forth in the notice of the meeting. At each annual meeting, the RVSI
Stockholders entitled to vote shall elect a Board of Directors and they may
transact such other corporate business as shall be stated in the notice of the
meeting. Special meetings of RVSI Stockholders may be called for any purpose by
the President or Secretary by resolution of the directors, or by a notice signed
by the registered holders of no less than 10% of RVSI's then issued and
outstanding capital stock. No business other than that stated in the notice
shall be transacted at any meeting without the unanimous consent of all RVSI
Stockholders entitled to vote thereat. Written notice shall be given to each
RVSI Stockholder entitled to vote thereat not less than ten nor more than fifty
days before the date of the meeting.
Special meetings of the RVSI Board may be called by the President or the
Secretary on the written request of any two directors on at least two days'
notice to each director.
DIRECTORS AND OFFICERS
Pursuant to the Acuity Bylaws, the Acuity Board may fix the number of
directors, but such number may not be less than three nor more than nine
persons. The Acuity Board has currently fixed the number of directors at four.
The officers of Acuity shall be a Chairman of the Board, a Chief Executive
Officer, a President, a Vice President, a Secretary and a Treasurer and there
may be one or more Vice Presidents, one or more Assistant Secretaries and one or
more Assistant Treasurers as the Acuity Board may elect.
Pursuant to the RVSI Bylaws, the number of directors comprising the RVSI
Board shall not be less than three nor more than eleven persons. The RVSI Board
has currently fixed the number of directors at seven. The officers of RVSI
shall be a President, a Treasurer and a Secretary. In addition, the RVSI Board
may elect a Chairman, one or more Vice Presidents and such Assistant Secretaries
and Assistant Treasurers as they may deem proper.
129
<PAGE>
LEGAL MATTERS
Matters relating to the legality of the shares of the securities offered by
this Prospectus are being passed upon by Parker Duryee Rosoff & Haft A
Professional Corporation, 529 Fifth Avenue, New York, New York 10017. Jay M.
Haft, of counsel to such Firm and a director of RVSI, beneficially owns 158,946
shares of RVSI Common Stock, as well as options and warrants to acquire an
additional 357,600 shares of such Common Stock. Members of Parker Duryee Rosoff
& Haft, other than Mr. Haft, beneficially own 149,625 shares of RVSI Common
Stock and warrants to acquire an additional 72,667 shares of RSVI Common Stock.
Matters relating to the litigation with View Engineering Inc. are being
passed upon by the Morrison Law Firm, 145 North Fifth Avenue, Mr. Vernon, NY
10550-1201.
EXPERTS
The financial statements of RVSI at September 30, 1994 and 1993 and for the
years ended September 30, 1994, 1993 and 1992 appearing in this Prospectus have
been audited by Deloitte & Touche LLP, independent auditors. These financial
statements are included in reliance upon the report of Deloitte & Touche LLP
given upon their authority as experts in accounting and auditing.
The financial statements of Acuity as of December 31, 1994 and 1993 and for
the years ended December 31, 1994, 1993 and 1992 included in this Prospectus and
elsewhere in this Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as set forth in their reports. In those
reports, that firm states that with respect to Automatix for 1993 and 1992, its
opinion is based on the reports of other independent public accountants, namely
Deloitte & Touche LLP. The financial statements referred to above have been
included herein in reliance upon the authority of those firms as experts in
giving said reports.
CHANGE IN ACUITY'S ACCOUNTANTS
On April 22, 1994 pursuant to the recommendation of Acuity's Audit
Committee, Acuity's Board of Directors voted to appoint Arthur Andersen LLP as
Acuity's independent accountants for fiscal 1994, replacing Deloitte & Touche
LLP who had served as Acuity's independent accountants since October 21, 1991.
Arthur Andersen LLP had served as the independent accountants of Itran Corp.,
with which Acuity merged on January 26, 1994, since 1982.
During the fiscal years ended December 31, 1993 and 1992, and any
subsequent interim periods, there were no disagreements between Acuity and
Deloitte & Touche LLP on any matter of accounting
130
<PAGE>
principles or practices, financial statement disclosures, or audit scope or
procedure, which disagreements if not resolved to the satisfaction of Deloitte
& Touche LLP would have caused them to make reference thereto in their report
on Acuity's financial statements for such years. None of the audit reports of
Deloitte & Touche LLP for any period, including the fiscal years ended December
31, 1993 and 1992, contained an adverse opinion or disclaimer of opinion, or
was qualified or modified as to uncertainty, audit scope or accounting
principles.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at RVSI's 1996 Annual
Meeting of Stockholders pursuant to the provisions of Rule 14a-8 of the
Commission, promulgated under the Exchange Act, must be received by RVSI at its
offices in Hauppauge, New York by for inclusion in RVSI's proxy statement
and form of proxy relating to such meeting.
131
<PAGE>
TABLE OF CONTENTS
-----------------
ROBOTIC VISION SYSTEMS, INC.
- ----------------------------
Independent Auditors' Report F-2
Balance Sheets at September 30, 1994 and 1993 F-3
Statements of Operations for the Years Ended
September 30, 1994, 1993, and 1992 F-4
Statements of Stockholders' Equity (Deficiency)
for the Years Ended September 30, 1994, 1993, and 1992 F-5
Statements of Cash Flows for the Years Ended
September 30, 1994, 1993, and 1992 F-6
Notes To Financial Statements for the Years Ended
September 30, 1994, 1993, and 1992 F-7
Condensed Balance Sheets At September 30, 1994 and
March 31, 1995 (Unaudited) F-18
Condensed Statements of Income For the Three and Six-Month
Periods Ended March 31, 1995 and 1994 (Unaudited) F-19
Condensed Statements of Cash Flows For the Six-Month Periods
Ended March 31, 1995 and 1994 (Unaudited) F-20
Notes To Condensed Financial Statements (Unaudited) F-21
ACUITY IMAGING, INC.
- --------------------
Report of Independent Public Accountants F-23
Independent Auditors' Report F-24
Consolidated Balance Sheets as of December 31, 1994, 1993
and April 1, 1995 (Unaudited) F-25
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1993, and 1992 and the Three-Month
Periods Ended April 1, 1995 and April 2, 1994 (Unaudited) F-26
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1994, 1993, and 1992 and the Three-Month
Periods Ended April 1, 1995 and April 2, 1994 (Unaudited) F-27
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993, and 1992 and the Three-Month
Periods Ended April 1, 1995 and April 2, 1994 (Unaudited) F-28
Notes to Consolidated Financial Statements F-29
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Robotic Vision Systems, Inc.:
We have audited the accompanying balance sheets of Robotic Vision Systems,
Inc. as of September 30, 1994 and 1993, and the related statements of
operations, stockholders' equity (deficiency), and cash flows for each of the
three years in the period ended September 30, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at September 30, 1994 and 1993,
and the results of its operations and its cash flows for each of the three years
in the period ended September 30, 1994 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Jericho, New York
December 14, 1994
F-2
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
BALANCE SHEETS
SEPTEMBER 30, 1994 AND 1993
<TABLE>
<CAPTION>
ASSETS (NOTE 8) NOTES 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................ 13 $ 1,568,000 $ 465,000
Investments.............................................. 13 1,495,000 --
Receivables -- net....................................... 2,13 3,412,000 2,157,000
Inventories.............................................. 3 2,634,000 2,136,000
Deferred income taxes.................................... 4 1,163,000 584,000
Prepaid expenses and other............................... 134,000 107,000
----------- -----------
Total current assets................................... 10,406,000 5,449,000
PLANT AND EQUIPMENT -- NET............................... 5 1,923,000 1,317,000
OTHER ASSETS............................................. 6 1,159,000 1,123,000
INVESTMENTS.............................................. 13 1,500,000 --
----------- -----------
TOTAL.................................................. $14,988,000 $ 7,889,000
----------- -----------
----------- -----------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Notes payable............................................ 8 $ 63,000 $ --
Accounts payable......................................... 2,717,000 2,579,000
Accrued expenses......................................... 7,9 2,243,000 2,742,000
Advance contract payments received....................... 719,000 894,000
----------- -----------
Total current liabilities.............................. 5,742,000 6,215,000
OTHER LIABILITIES........................................ 9 210,000 245,000
----------- -----------
TOTAL LIABILITIES...................................... 5,952,000 6,460,000
----------- -----------
COMMITMENTS AND CONTINGENCIES............................ 10
STOCKHOLDERS' EQUITY: 11
Common stock, $.01 par value; shares authorized,
20,000,000; shares issued and outstanding, 1994 --
11,583,602 and 1993 -- 9,651,285........................ 116,000 97,000
Additional paid-in capital............................... 32,805,000 28,328,000
Accumulated deficit...................................... (23,885,000) (26,996,000)
----------- -----------
Stockholders' equity..................................... 9,036,000 1,429,000
----------- -----------
TOTAL.................................................. $14,988,000 $ 7,889,000
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
NOTES 1994 1993 1992
----------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES............................................... 14 $ 24,613,000 $ 19,943,000 $ 13,335,000
COST OF REVENUES....................................... 12,722,000 11,454,000 9,802,000
-------------- -------------- --------------
GROSS PROFIT........................................... 11,891,000 8,489,000 3,533,000
-------------- -------------- --------------
OPERATING COSTS AND EXPENSES:
Research and development costs......................... 3,718,000 2,526,000 1,731,000
Selling, general and administrative expenses........... 5,521,000 4,834,000 2,766,000
Interest income........................................ (104,000) (2,000) (11,000)
Interest expense....................................... 46,000 27,000 30,000
-------------- -------------- --------------
9,181,000 7,385,000 4,516,000
-------------- -------------- --------------
INCOME (LOSS) BEFORE BENEFIT FROM INCOME TAXES AND
EXTRAORDINARY ITEMS................................... 2,710,000 1,104,000 (983,000)
BENEFIT FROM INCOME TAXES.............................. 4 401,000 495,000 --
-------------- -------------- --------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS............... 3,111,000 1,599,000 (983,000)
EXTRAORDINARY ITEMS:
Gain relating to agreement with General Motors
Corporation (net of income tax provision of
$97,000).............................................. 4,12 -- -- 1,138,000
Utilization of net operating loss carryforward......... 4 -- -- 72,000
-------------- -------------- --------------
NET INCOME............................................. $ 3,111,000 $ 1,599,000 $ 227,000
-------------- -------------- --------------
INCOME (LOSS) PER SHARE:
Income (loss) before extraordinary items............... $ .24 $ .14 $ (.13)
Extraordinary items.................................... -- -- .16
-------------- -------------- --------------
Net income............................................. $ .24 $ .14 $ .03
-------------- -------------- --------------
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- ADDITIONAL STOCKHOLDERS'
NUMBER PAID-IN ACCUMULATED EQUITY
NOTES OF SHARES AMOUNT CAPITAL DEFICIT (DEFICIENCY)
----- ---------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 1, 1991............... 6,357,480 $ 64,000 $26,757,000 $(28,822,000) $(2,001,000)
Shares issued to the Defined
Contribution Stock Ownership and
Deferred Compensation Plan............ 9 26,027 -- 22,000 -- 22,000
Shares and warrants issued in
connection with private equity
placement, net of offering costs...... 11 3,000,000 30,000 1,309,000 -- 1,339,000
Shares and warrant issued for
professional services rendered........ 11 230,000 2,000 128,000 -- 130,000
Net income............................. -- -- -- 227,000 227,000
---------- --------- ----------- ------------ ------------
Balance, September 30, 1992............ 9,613,507 96,000 28,216,000 (28,595,000) (283,000 )
Shares issued to the Defined
Contribution Stock Ownership and
Deferred Compensation Plan............ 9 16,250 -- 22,000 -- 22,000
Offering costs incurred in connection
with registration of shares and
warrants.............................. -- -- (80,000) -- (80,000 )
Shares issued in connection with the
exercise of stock options............. 21,528 1,000 20,000 -- 21,000
Warrants issued for professional
services rendered..................... 11 -- -- 125,000 -- 125,000
Warrants issued in connection with the
settlement of litigation.............. 11 -- -- 25,000 -- 25,000
Net income............................. -- -- -- 1,599,000 1,599,000
---------- --------- ----------- ------------ ------------
Balance, September 30, 1993............ 9,651,285 97,000 28,328,000 (26,996,000) 1,429,000
Shares issued to the Defined
Contribution Stock Ownership and
Deferred Compensation Plan............ 9 8,610 -- 36,000 -- 36,000
Shares and warrants issued in
connection with private equity
placement, net of offering costs...... 11 1,360,000 14,000 3,790,000 -- 3,804,000
Warrants issued for professional
services.............................. 11 -- -- 38,000 -- 38,000
Shares issued in connection with the
exercise of stock options............. 11 321,107 3,000 345,000 -- 348,000
Shares issued in connection with the
exercise of warrants.................. 11 242,600 2,000 268,000 -- 270,000
Net income............................. -- -- -- 3,111,000 3,111,000
---------- --------- ----------- ------------ ------------
Balance, September 30, 1994............ 11,583,602 $ 116,000 $32,805,000 $(23,885,000) $9,036,000
---------- --------- ----------- ------------ ------------
---------- --------- ----------- ------------ ------------
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Income (loss) before extraordinary items.......................... $ 3,111,000 $ 1,599,000 $ (983,000)
Adjustments to reconcile income (loss) before extraordinary items
to net cash provided by (used in) operating activities:
Deferred income taxes........................................... (579,000) (584,000) --
Depreciation and amortization................................... 620,000 425,000 322,000
Provision for doubtful accounts receivable...................... -- 82,000 20,000
Issuance of common stock and warrant for professional services
rendered....................................................... -- 125,000 130,000
Issuance of common stock -- Defined Contribution Stock
Ownership and Deferred Compensation Plan...................... 36,000 22,000 22,000
Warrants issued as settlement of litigation..................... -- 25,000 --
Other........................................................... 4,000 -- 3,000
Changes in assets and liabilities:
Receivables................................................... (1,255,000) (437,000) (123,000)
Inventories................................................... (498,000) (1,108,000) 392,000
Prepaid expenses and other current assets..................... (27,000) 25,000 (2,000)
Other assets.................................................. (275,000) (650,000) (483,000)
Accounts payable.............................................. 138,000 1,490,000 (122,000)
Accrued expenses.............................................. (499,000) 18,000 282,000
Advance contract payments received............................ (175,000) 244,000 (310,000)
Other liabilities............................................. (35,000) (90,000) (139,000)
-------------- -------------- --------------
Net cash provided by (used in) operating activities............... 566,000 1,186,000 (991,000)
-------------- -------------- --------------
INVESTING ACTIVITIES:
Additions to plant and equipment.................................. (1,002,000) (837,000) (347,000)
Purchase of Investments........................................... (2,984,000) -- --
-------------- -------------- --------------
Net cash used in investing activities............................. (3,986,000) (837,000) (347,000)
-------------- -------------- --------------
FINANCING ACTIVITIES:
Issuance of common stock and warrants -- private equity placement
(less offering costs)............................................ 3,842,000 (80,000) 1,339,000
Issuance of common stock in connection with the exercise of stock
options and warrants............................................. 618,000 21,000 --
Notes payable..................................................... 63,000 -- --
-------------- -------------- --------------
Net cash provided by (used in) financing activities............... 4,523,000 (59,000) 1,339,000
-------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............. 1,103,000 290,000 1,000
CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR................................................ 465,000 175,000 174,000
-------------- -------------- --------------
END OF YEAR...................................................... $ 1,568,000 $ 465,000 $ 175,000
-------------- -------------- --------------
SUPPLEMENTAL INFORMATION -- Interest paid......................... $ 46,000 $ 25,000 $ 137,000
-------------- -------------- --------------
-- Taxes paid................... $ 269,000 $ 11,000 $ --
-------------- -------------- --------------
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES
a. DESCRIPTION OF BUSINESS -- Robotic Vision Systems, Inc. (the "Company")
is principally engaged in the development, manufacture and marketing of
standard inspection and measurement products which have a variety of
commercial and military applications.
b. REVENUES AND COST OF REVENUES -- The Company recognizes revenue on its
standard electronic inspection and measurement products upon shipment.
The Company recognizes revenues and related cost of revenues associated
with the long-term contracts using the percentage-of-completion method of
accounting, measured by the percentage of total costs incurred in
relation to total estimated costs at completion. Contract costs include
material, direct labor, manufacturing overhead and other direct costs.
The degree of accuracy with which the Company is able to estimate the
profit to be realized on fixed-price long-term contracts is greater as
the contract approaches completion; accordingly, the Company reviews its
estimates periodically and records adjustments thereto as required. On
firm fixed-price contracts which are in the early stages of completion,
and for which estimates of profit cannot be reasonably determined, the
Company utilizes the percentage-of-completion method recognizing revenue
in amounts equal to costs incurred until such time that profit margins
can be reasonably estimated. If a loss is anticipated on a contract, the
entire amount of the estimated loss is accrued in the period in which the
loss becomes known.
Revenues are billed in accordance with the terms of each contract. The
Company estimates that all of its unbilled receivables at September 30,
1994 will become billable during the ensuing twelve months.
c. CASH AND CASH EQUIVALENTS -- Cash and cash equivalents includes money
market accounts with an original maturity of less than three months.
d. PLANT AND EQUIPMENT -- Plant and equipment is recorded at cost less
accumulated depreciation and amortization and includes the costs
associated with demonstration equipment and other equipment internally
developed by the Company. The cost of internally developed assets
includes direct material and labor costs and applicable factory overhead.
Depreciation is computed by the straight-line method over estimated lives
ranging from two to eight years. Leasehold improvements are amortized
over the lesser of their respective estimated useful lives or lease
terms.
e. INVENTORIES -- Inventories are stated at the lower of cost (using the
first-in, first-out cost flow assumption) or market.
f. SOFTWARE DEVELOPMENT COSTS -- Software development costs are capitalized
in accordance with Statement of Financial Accounting Standards No. 86.
Capitalized software development costs are amortized primarily over a
five-year period, which is the estimated useful life of the software.
Amortization begins in the period in which the related product is
available for general release to customers.
g. RESEARCH AND DEVELOPMENT COSTS -- The Company charges research and
development costs for Company-funded projects to operations as incurred.
Research and development costs which are reimbursable under
customer-funded contracts are treated as contract costs.
F-7
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES
(CONTINUED)
h. INCOME TAXES -- In fiscal 1993, the Company adopted the provision of
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"), which requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events
that have been included in the Company's financial statements or tax
returns. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial accounting and
tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
Prior to fiscal 1993, the provision for income taxes was based on revenue
and expenses included in the Company's statement of operations. Where
appropriate, the Company provided deferred income taxes for the tax
effects of transactions which were recorded for different periods for
financial accounting purposes than for income tax purposes. At September
30, 1992, no deferred taxes were recorded because of the existence of net
operating loss carryforwards.
i. INCOME (LOSS) PER SHARE -- Income (loss) before extraordinary items per
common share, extraordinary items per common share, and net income per
common share are computed by dividing each year's income (loss) before
extraordinary items, extraordinary items and net income by the respective
weighted average number of shares of common stock outstanding during the
period, after giving effect to dilutive options and warrants. For the
year ended September 30, 1994 and 1993, the effect of options and
warrants was calculated using the modified treasury stock method. The
average number of shares used in the computation of per common share
amounts for the year ended September 30, 1992 does not include shares
issuable pursuant to options and warrants since their effect was not
material. The weighted average number of common and common equivalent
shares outstanding for 1994, 1993 and 1992 was 13,057,000, 12,534,000 and
7,783,000, respectively.
j. RECLASSIFICATION -- Certain amounts in the 1992 and 1993 financial
statements have been reclassified to conform with the 1994 presentation.
2. RECEIVABLES
Receivables at September 30, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------------- -------------
<S> <C> <C>
Accounts billed and receivable from the United States
Government and its agencies............................. $ 351,000 $ 593,000
Accounts receivable from other customers................. 2,463,000 1,378,000
Unbilled receivables (including retainages on
contracts-in-progress).................................. 702,000 290,000
------------- -------------
Total.................................................. 3,516,000 2,261,000
Less allowance for doubtful accounts receivable.......... 104,000 104,000
------------- -------------
Receivables -- net....................................... $ 3,412,000 $ 2,157,000
------------- -------------
------------- -------------
</TABLE>
F-8
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
3. INVENTORIES
Inventories at September 30, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------------- -------------
<S> <C> <C>
Raw materials.......................................... $ 356,000 $ 348,000
Work-in-process........................................ 2,278,000 1,788,000
------------- -------------
Total................................................ $ 2,634,000 $ 2,136,000
------------- -------------
------------- -------------
</TABLE>
4. INCOME TAXES
The benefit from income taxes for the fiscal years ended September 30,
1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
-------------- --------------
<S> <C> <C>
Current:
Federal....................................................... $ 905,000 $ 653,000
State......................................................... 173,000 126,000
Utilization of net operating loss carryforwards............... (900,000) (690,000)
-------------- --------------
178,000 89,000
Deferred:
Federal....................................................... 891,000 --
State......................................................... 108,000 --
Adjustment of valuation allowance............................. (1,578,000) (584,000)
-------------- --------------
Total....................................................... $ (401,000) $ (495,000)
-------------- --------------
-------------- --------------
</TABLE>
The income tax provision relating to the extraordinary credit relating
to the agreement with General Motors Corporation for the fiscal year ended
September 30, 1992, consists of the following:
<TABLE>
<S> <C> <C>
Federal -- charge equivalent..................... $ 72,000
State -- current................................. 25,000
-----------
$ 97,000
-----------
-----------
</TABLE>
As described in Note 1, the Company adopted SFAS 109 during fiscal 1993.
The adoption of SFAS 109 was made as of the beginning of the fiscal year on
a prospective basis. This accounting change had no effect on the Company's
financial statements as of the date of adoption. However, the adoption of
SFAS 109 resulted in an increase in the income tax benefit recognized in
fiscal 1993 and, therefore, an increase in income before extraordinary items
of $584,000 ($.05 per common share).
The adjustments of the valuation allowance during fiscal 1994 and fiscal
1993 emanate from the Company's profitable operations during those years and
the extent to which the Company can substantiate projected future earnings.
The deferred tax assets as of September 30, 1994 and 1993 are equivalent to
the benefit to be derived from net operating loss carryforwards that were
expected to be utilized to offset future taxable income projected as of the
respective balance sheet dates. The deferred tax assets at September 30,
1994 and 1993 have been limited to the benefit to
F-9
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
4. INCOME TAXES (CONTINUED)
be derived from projected future income, primarily due to the Company's
limited history of earnings and its projected future profitability currently
being primarily dependent on one existing product line.
A reconciliation between the statutory U.S. Federal income tax rate and
the Company's effective tax rate for the years ended September 30, 1994 and
1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
U.S. Federal statutory rate.................................................. 34.0% 34.0%
Increases (reductions) due to:
State taxes -- net of Federal tax benefit.................................. 4.2 7.5
Utilization of net operating loss carryforwards............................ (31.9) (34.1)
Anticipated future utilization of net operating loss carryforwards......... (21.4) (52.9)
Other -- net............................................................... .3 .7
----- -----
Total.................................................................... (14.8)% (44.8)%
----- -----
----- -----
</TABLE>
The deferred tax assets at September 30, 1994 and 1993 are comprised of the
following:
<TABLE>
<CAPTION>
DEFERRED TAX ASSETS 1994 1993
- ------------------------------------------------------------------ -------------- --------------
<S> <C> <C>
Net operating loss carryforwards.................................. $ 7,743,000 $ 8,763,000
Tax credit carryforwards.......................................... 767,000 460,000
Accrued liabilities............................................... 462,000 451,000
Inventory......................................................... 269,000 196,000
Fixed assets...................................................... 47,000 122,000
Receivables....................................................... 40,000 40,000
-------------- --------------
9,328,000 10,032,000
Less valuation allowance.......................................... (8,165,000) (9,448,000)
-------------- --------------
Total........................................................... $ 1,163,000 $ 584,000
-------------- --------------
-------------- --------------
</TABLE>
As of September 30, 1994, the Company had Federal net operating loss
carryforwards of approximately $20,300,000. Such loss carryforwards expire
in the fiscal years 1995 through 2007 as follows:
Fiscal Year Ending September 30,
<TABLE>
<S> <C>
1995.......................................................... $ 33,000
1996.......................................................... 1,136,000
1997.......................................................... 797,000
1998.......................................................... 518,000
1999.......................................................... 1,030,000
2000-2004..................................................... 9,678,000
2005-2007..................................................... 7,108,000
-----------
Total....................................................... $20,300,000
-----------
-----------
</TABLE>
F-10
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
4. INCOME TAXES (CONTINUED)
Additionally, the Company had Federal income tax credits of
approximately $518,000 and state income tax credits of approximately
$377,000. The utilization of the carryforwards to offset future tax
liabilities is dependent upon the Company's ability to generate sufficient
taxable income during the carryforward periods.
5. PLANT AND EQUIPMENT
Plant and equipment at September 30, 1994 and 1993 consisted of the
following:
<TABLE>
<CAPTION>
1994 1993
------------- -------------
<S> <C> <C>
Machinery and equipment......................................... $ 1,581,000 $ 1,602,000
Furniture, fixtures and other equipment......................... 1,064,000 1,126,000
Demonstration equipment......................................... 469,000 418,000
Leasehold improvements.......................................... 112,000 45,000
------------- -------------
Total......................................................... 3,226,000 3,191,000
Less accumulated depreciation and amortization.................. 1,303,000 1,874,000
------------- -------------
Plant and equipment -- net...................................... $ 1,923,000 $ 1,317,000
------------- -------------
------------- -------------
</TABLE>
6. OTHER ASSETS
Other assets at September 30, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------------- -------------
<S> <C> <C>
Software development costs, net of accumulated amortization of
$413,000 and $174,000, respectively............................ $ 1,064,000 $ 870,000
Other........................................................... 95,000 253,000
------------- -------------
Total......................................................... $ 1,159,000 $ 1,123,000
------------- -------------
------------- -------------
</TABLE>
Certain software development costs totaling $433,000 and $476,000 have
been capitalized during the fiscal years ended September 30, 1994 and 1993,
respectively. Amortization expense relating to software development costs
for 1994, 1993 and 1992 was $239,000, $137,000 and $37,000, respectively.
7. ACCRUED EXPENSES
Accrued expenses at September 30, 1994 and 1993 consisted of the
following:
<TABLE>
<CAPTION>
1994 1993
------------- -------------
<S> <C> <C>
Accrued wages and related employee benefits..................... $ 857,000 $ 472,000
Accrued warranty and other product related costs................ 385,000 526,000
Accrued sales commissions....................................... 348,000 596,000
Accrued pension costs (Note 9).................................. 175,000 112,000
Other........................................................... 478,000 1,036,000
------------- -------------
Total......................................................... $ 2,243,000 $ 2,742,000
------------- -------------
------------- -------------
</TABLE>
8. NOTES PAYABLE TO BANK
The Company maintains a line of credit agreement with a bank under which
the Company may borrow up to $1,500,000 against certain customer accounts
receivable and inventory. Borrowings under this agreement bear interest at
the higher of the banks prime lending rate or the Federal funds rate plus
one-half of one percent. The interest rate for borrowings under this
agreement at September 30, 1994 was 8.75 percent. This agreement expires in
June 1995.
F-11
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
9. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PLAN
The Company has a noncontributory pension plan for employees who meet
certain minimum eligibility requirements. The level of retirement benefit is
based on a formula which considers both employee compensation and length of
credited service.
Plan assets are invested in pooled bank investment accounts, and the
fair value of such assets is based on the quoted market prices of underlying
securities in such accounts. The Company funds pension plan costs based on
minimum and maximum funding criteria as determined by independent actuarial
consultants.
The components of net pension cost for the fiscal years ended September
30, 1994, 1993 and 1992 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------ ---------- ----------
<S> <C> <C> <C>
Service cost -- benefits earned during the period...... $ 143,000 $ 91,000 $ 93,000
Interest on projected benefit obligations.............. 62,000 49,000 58,000
Estimated return on plan assets........................ (52,000) (43,000) (55,000)
Other -- amortization of actuarial gains and net
transition asset...................................... (30,000) (32,000) (35,000)
------------ ---------- ----------
Net pension cost....................................... $ 123,000 $ 65,000 $ 61,000
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
The funded status of the plan compared with the accrued expense included
in the Company's balance sheet at September 30, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
------------- ------------
<S> <C> <C>
Fair value of plan assets........................................ $ 724,000 $ 621,000
------------- ------------
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested benefits of
$636,000 and $491,000 in 1994 and 1993, respectively.......... 790,000 587,000
Effect of projected compensation increases..................... 226,000 137,000
------------- ------------
Projected benefit obligation for services rendered to date....... 1,016,000 724,000
------------- ------------
Projected benefit obligation in excess of plan assets............ (292,000) (103,000)
Unrecognized net loss (gain)..................................... 67,000 (85,000)
Remaining unrecognized net transition asset being amortized over
11 years........................................................ (122,000) (157,000)
Unrecognized prior service costs................................. 40,000 48,000
------------- ------------
Accrued pension cost............................................. $ (307,000) $ (297,000)
------------- ------------
------------- ------------
</TABLE>
F-12
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
9. EMPLOYEE BENEFIT PLANS (CONTINUED)
Accrued pension costs are included in the accompanying September 30,
1994 and 1993 balance sheets as follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Accrued expenses.................................................... $ 175,000 $ 112,000
Other liabilities................................................... 132,000 185,000
----------- -----------
$ 307,000 $ 297,000
----------- -----------
----------- -----------
</TABLE>
Significant assumptions used in determining net periodic pension cost
and related pension obligations are as follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Discount rate............................................................... 7.50% 8.25%
Rate of compensation increase............................................... 4.00% 4.00%
Expected long-term rate of return on assets................................. 8.25% 8.25%
</TABLE>
DEFINED CONTRIBUTION STOCK OWNERSHIP AND DEFERRED COMPENSATION PLAN
The Company has a defined contribution plan for all eligible employees,
as defined by the Plan. The Plan provides for employee cash contributions
ranging from two to ten percent of compensation and matching employer
contributions of Company stock at a rate of 25 percent of an employee's
contribution, limited to a maximum of six percent of a participant's
compensation. The Plan also provides for additional employer contributions
of Company stock at the discretion of the Company's Board of Directors. The
Company incurred $61,000, $36,000 and $22,000 for employer contributions to
the Plan in 1994, 1993 and 1992, respectively. In 1994, 1993 and 1992, the
Company issued 8,610, 16,250 and 26,027, respectively, shares of its common
stock to the Plan related to its prior year contribution.
STOCK APPRECIATION RIGHTS
During fiscal 1992, the Company entered into a stock appreciation rights
agreement with its President. Under the terms of the agreement, the
President will receive a cash payment equal to the appreciation in the
market value of a fixed number of shares of the Company's common stock if
certain conditions are met.
The Company records the compensation expense related to this agreement
at the date that the amount of payment to be made can be reasonably
estimated. The Company recorded compensation expense of $85,000 and $100,000
related to this agreement during fiscal 1994 and 1993, respectively. No
compensation expense was recorded relating to this agreement during fiscal
1992. The maximum future compensation which may be earned under this
agreement is $90,000.
F-13
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
10. COMMITMENTS AND CONTINGENCIES
a. OPERATING LEASES
The Company has entered into operating lease agreements for
equipment, manufacturing and office facilities. The minimum noncancelable
scheduled rentals under these agreements are as follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30: AMOUNT
- ------------------------------------------------------------------- -------------
<S> <C>
1995............................................................... $ 408,000
1996............................................................... 396,000
1997............................................................... 385,000
1998............................................................... 257,000
-------------
Total............................................................ $ 1,446,000
</TABLE>
Rent expense for 1994, 1993 and 1992 was $363,000, $347,000 and
$347,000, respectively.
b. LITIGATION
During fiscal 1992, the Company instituted an action against Cybo
Systems, Inc. ("Cybo"), alleging that Cybo breached certain agreements
between the parties with respect to the sale by the Company to Cybo of
all of the assets of its welding and cutting systems business.
In response to the action brought by the Company, Cybo asserted
claims against the Company alleging, among other things, breach of
contract and warranties, fraud, bad faith, and conversion. Cybo is
seeking aggregate damages in excess of $3.3 million. The Company believes
that Cybo's claims are without merit and plans to defend against them
vigorously. The Company's management, after discussion with legal
counsel, believes that the ultimate outcome of this matter will not have
a material adverse impact on the Company's financial position or results
of operations.
c. UNITED STATES GOVERNMENT CONTRACTS
Certain of the Company's contracts are subject to audit by applicable
United States governmental agencies. Until such audits are completed, the
ultimate profit on these contracts cannot be finally determined; however,
in the opinion of management, the final contract settlements will not
have a material adverse effect on the Company's financial position or
results of operations.
11. STOCKHOLDERS' EQUITY
PRIVATE EQUITY PLACEMENTS -- During fiscal 1994, the Company entered
into an agreement with a group of investors. Under the agreement the Company
received approximately $3,800,000, after expenses, in exchange for the
issuance of 1,360,000 shares of the Company's common stock. The Company also
issued warrants exerciseable through December 1999 to purchase 51,000 shares
of the Company's common stock at an exercise price of $3.75 per share.
During fiscal 1992, the Company entered into an agreement with a group
of investors which included a director of the Company. Under the agreement
the Company received approximately $1,300,000, after expenses, in exchange
for the issuance of 3,000,000 shares of the Company's common stock and
warrants exercisable through July 1996 to purchase an additional 1,000,000
F-14
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
11. STOCKHOLDERS' EQUITY (CONTINUED)
shares of the Company's common stock at an exercise price of $1.00 per
share. Additionally, the director included in the group of investors
received warrants exercisable through July 1997 to purchase 240,000 shares
of the Company's common stock at an exercise price of $1.00 per share.
SHARES AND WARRANTS ISSUED FOR SERVICES RENDERED -- During fiscal 1994,
the Company issued warrants for the purchase of 30,000 shares of the
Company's common stock at an exercise price of $4.69 per share as
compensation for professional services rendered. The Company recorded an
expense of approximately $38,000 related to the issuance of such warrants.
During fiscal 1993, the Company issued warrants under certain agreements
granting the holders thereof the right through June 1998 to purchase up to
227,004 shares of the Company's common stock at exercise prices ranging from
$0.88 to $3.00 per share as compensation for professional services rendered.
The Company recorded an expense of approximately $125,000 related to the
issuance of such warrants.
During fiscal 1992, the Company issued 230,000 shares of common stock
and a warrant expiring April 1996 to purchase 66,667 shares of the Company's
common stock at an exercise price of $1.00 per share to a law firm in
satisfaction of unpaid legal fees of $130,000. A director of the Company is
a partner in the law firm. The market value of the shares and the warrant on
the dates of issuance was $130,000.
WARRANT ISSUED IN SETTLEMENT OF LITIGATION -- During fiscal 1993, the
Company issued warrants in connection with the settlement of a lawsuit to
purchase up to 25,000 shares of the Company's common stock at an exercise
price of $4.37 per share. The expiration date of such warrants is November
1, 1996. The Company recorded an expense of approximately $25,000 related to
the issuance of such warrants.
WARRANTS EXERCISED -- During fiscal 1994, the Company received
approximately $270,000 in connection with the issuance of 242,600 shares of
its common stock upon the exercise of warrants to purchase such shares at
prices between $0.88 and $4.38 per share.
WARRANTS OUTSTANDING -- As of September 30, 1994, there were warrants
outstanding to purchase approximately 1,372,000 shares of the Company's
common stock with exercise prices of between $1.00 and $4.69 per share.
STOCK OPTION PLANS -- The Company has four stock option plans (the 1977,
1982, 1987 and 1991 plans) which provide for the granting of options to
employees or directors at prices and terms as determined by the Board of
Directors' Stock Option Committee (the "Committee"). With respect to the
1977 and 1987 plans, option prices may not be less than the fair market
value at date of grant. Any excess of the fair market value of shares under
option at the date of grant over the exercise price is charged to operations
over the period in which the stock options vest. All options issued by
the Company to date have exercise prices which were equal to market value
of the Company's common stock at the date of grant. No new options may be
granted under the 1977 and 1982 plans.
F-15
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
11. STOCKHOLDERS' EQUITY (CONTINUED)
The following table sets forth summarized information concerning the
Company's stock options:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE RANGE
----------- -----------------
<S> <C> <C>
Options outstanding for shares of common stock at October 1,
1991......................................................... 834,088 $ .75 - $7.06
Granted....................................................... 1,130,721 .53 - 1.63
Canceled or expired........................................... (649,323) .53 - 7.06
----------- -----------------
Options outstanding for shares of common stock at September
30, 1992..................................................... 1,315,486 .53 - 5.69
Granted....................................................... 470,963 .88 - 4.04
Canceled or expired........................................... (99,852) .53 - 5.69
Exercised..................................................... (21,528) .53 - 1.44
----------- -----------------
Options outstanding for shares of common stock at September
30, 1993..................................................... 1,665,069 .53 - 4.25
Granted....................................................... 257,416 3.63 - 6.81
Canceled or expired........................................... (23,478) .53 - 5.32
Exercised..................................................... (321,107) .53 - 4.19
----------- -----------------
Options outstanding for shares of common stock at September
30, 1994..................................................... 1,577,900 $ .53 - $6.81
----------- -----------------
----------- -----------------
Options exercisable at September 30, 1994..................... 725,845
-----------
-----------
Shares reserved for issuance at September 30, 1994............ 1,692,525
-----------
-----------
</TABLE>
12. GAIN RELATING TO AGREEMENT WITH GENERAL MOTORS CORPORATION
In September 1989, General Motors Corporation ("GM") and the Company
entered into an agreement whereby GM would lend the Company up to
$1,100,000. Loans under this agreement bore interest at two percentage
points above the prime rate and were collateralized by substantially all of
the Company's assets.
The Company recorded interest expense of approximately $22,000 for the
year ended September 30, 1992 relating to this note payable.
In fiscal 1992, the Company and GM entered into an agreement whereby GM
exchanged this debt and the related accrued interest thereon and released
the security interest held by GM in the Company's assets as full payment for
(i) certain automotive spare parts inventories held by the Company, (ii) the
execution of a service agreement under which the Company will provide
maintenance and repair services for a four-year period and (iii) execution
of an agreement by the Company and its officers and directors not to bring a
suit against GM.
During fiscal 1992, the Company recorded an extraordinary item relating
to the agreement from the sale of the inventory to GM. The inventory which
was sold to GM had been written off during fiscal 1990 as part of the
Company's restructuring decision. The Company is recognizing the revenue
related to the service agreement on a straight-line basis over the life of
the agreement, with $18,000, $18,000 and $14,000 recognized in fiscal 1994,
1993 and 1992, respectively. Costs related to the fulfillment of the service
agreement are expensed as incurred.
F-16
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
a. Cash and Cash Equivalents -- The carrying amounts approximate fair value
because of the short maturity of these instruments.
b. Investments -- Fair value equals quoted market value.
c. Receivables -- The carrying amount approximates fair value because of
the short maturity of these instruments.
As of September 30, 1994, investments consisted of certain debt
securities issued by the United States government with maturities through
November 1996. The Company's intention is to hold such investments until
their maturity, therefore, such investments are recorded at their amortized
cost. As of September 30, 1994, the aggregate fair value of investments
maturing within one year was approximately $1,478,000 and the fair value of
investments with maturities of longer than one year was approximately
$1,447,000. The aggregate unrealized losses as of September 30,1994 were
approximately $70,000.
14. SEGMENT AND PRINCIPAL CUSTOMER INFORMATION
For the purposes of segment reporting, management considers the Company
to operate in one industry, the machine vision industry.
During the years ended September 30, 1994, 1993 and 1992 the Company
recognized revenues on sales to major customers as set forth below:
PERCENT OF TOTAL REVENUES
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
United States Government and its agencies............................ 4 8 23
Major customers:
Customer A......................................................... 15 13 21
Customer B......................................................... 10 3 --
Customer C......................................................... 9 15 3
Customer D......................................................... 5 13 --
Customer E......................................................... -- -- 17
All other customers.................................................. 57 48 36
--- --- ---
Total.............................................................. 100 100 100
--- --- ---
--- --- ---
</TABLE>
Foreign export sales accounted for 62 percent, 74 percent and 54 percent
of the Company's revenues in fiscal 1994, 1993 and 1992, respectively.
The Company's domestic and foreign export sales during the years ended
September 30, 1994, 1993 and 1992 are set forth below:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ------------ -----------
<S> <C> <C> <C>
North America $ 9,258,000 $ 5,166,000 $ 6,074,000
Asia/Pacific Rim 14,103,000 12,608,000 5,838,000
Europe 1,252,000 2,169,000 1,423,000
----------- ------------ -----------
Total $24,613,000 $19,943,000 $13,335,000
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
* * * * * * *
F-17
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1995 1994
-------------- --------------
(UNAUDITED) (NOTE 1)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................................................... $ 346,000 $ 1,568,000
Investments (Note 2)........................................................... 1,500,000 1,495,000
Receivables -- net (including unbilled receivables of $678,000 at March 31,
1995 and $702,000 at September 30, 1994)...................................... 5,691,000 3,412,000
Inventories (Note 3)........................................................... 4,533,000 2,634,000
Deferred income taxes.......................................................... 2,923,000 1,163,000
Prepaid expenses and other current assets...................................... 254,000 134,000
-------------- --------------
Total Current Assets......................................................... 15,247,000 10,406,000
Machinery and equipment (at cost, less accumulated depreciation and
amortization)................................................................... 2,210,000 1,923,000
Deferred income taxes............................................................ 506,000 --
Other assets..................................................................... 1,260,000 1,159,000
Investments (Note 2)............................................................. 2,487,000 1,500,000
-------------- --------------
TOTAL........................................................................ $ 21,710,000 $ 14,988,000
-------------- --------------
-------------- --------------
<CAPTION>
LIABILITIES
<S> <C> <C>
Current Liabilities:
Accounts payable............................................................... $ 4,503,000 $ 2,717,000
Accrued expenses............................................................... 2,330,000 2,243,000
Advance contract payments received............................................. 103,000 719,000
Notes payable (Note 4)......................................................... -- 63,000
-------------- --------------
Total Current Liabilities.................................................... 6,936,000 5,742,000
Other liabilities................................................................ 213,000 210,000
-------------- --------------
Total Liabilities............................................................ 7,149,000 5,952,000
-------------- --------------
<CAPTION>
STOCKHOLDER'S EQUITY
<S> <C> <C>
Capital stock -- common -- authorized 20,000,000 shares, $.01 par value; issued
and outstanding 11,671,615 shares at March 31, 1995 and 11,583,602 shares at
September 30, 1994.............................................................. 117,000 116,000
Additional paid-in capital....................................................... 33,047,000 32,805,000
Accumulated deficit.............................................................. (18,603,000) (23,885,000)
-------------- --------------
Total Stockholder's Equity................................................... 14,561,000 9,036,000
-------------- --------------
TOTAL........................................................................ $ 21,710,000 $ 14,988,000
-------------- --------------
-------------- --------------
</TABLE>
F-18
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------------ ----------------------------
1995 1994 1995 1994
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues........................................... $ 16,600,000 $ 11,790,000 $ 9,071,000 $ 5,901,000
Cost of revenues................................... 7,616,000 6,439,000 4,054,000 3,101,000
-------------- -------------- ------------- -------------
Gross profit....................................... 8,984,000 5,351,000 5,017,000 2,800,000
Research and development costs..................... 2,389,000 1,798,000 1,270,000 968,000
Selling, general and administrative expenses....... 3,469,000 2,549,000 1,955,000 1,321,000
Interest (income) net.............................. (96,000) (2,000) (65,000) (9,000)
-------------- -------------- ------------- -------------
Income before income tax benefit................... 3,222,000 1,006,000 1,857,000 520,000
Income tax benefit................................. 2,060,000 1,093,000 2,606,000 1,123,000
-------------- -------------- ------------- -------------
Net income......................................... $ 5,282,000 $ 2,099,000 $ 4,463,000 $ 1,643,000
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
Net income per common share........................ $ .38 $ .16 $ .32 $ .13
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
</TABLE>
F-19
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................ $ 5,284,000 $ 2,099,000
Adjustments to reconcile net income to net cash from operating activities:
Deferred income taxes........................................................... (2,266,000) (1,143,000)
Depreciation and amortization................................................... 410,000 320,000
Issuance of common stock -- defined contribution stock ownership and deferred
compensation plan.............................................................. 60,000 36,000
Provision for doubtful receivable............................................... 20,000 --
Issuance of warrants for professional services rendered......................... 14,000 --
Asset and liability management:
Receivables................................................................... (2,299,000) (1,293,000)
Inventories................................................................... (1,899,000) (266,000)
Prepaid expenses and other current assets..................................... (121,000) (73,000)
Other assets.................................................................. (247,000) (166,000)
Accounts payable.............................................................. 1,786,000 95,000
Accrued expenses.............................................................. 87,000 281,000
Advanced contract payment received............................................ (616,000) (774,000)
Other liabilities............................................................. 3,000 (40,000)
-------------- --------------
Net cash provided by (used in) operating activities............................... 216,000 (924,000)
-------------- --------------
CASH FLOWS (USED IN) INVESTING ACTIVITIES:
Additions to property and equipment........................................... (551,000) (715,000)
Investments................................................................... (993,000) (3,000,000)
-------------- --------------
Net cash used in investing activities............................................. (1,544,000) (3,715,000)
-------------- --------------
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Issuance of common stock in connection with the exercise of stock option and
warrants..................................................................... 169,000 32,000
Notes payable................................................................. (63,000) 187,000
Proceeds/net of expenses related to issuance of common stock.................. -- 4,078,000
-------------- --------------
Net cash provided by financing activities......................................... 106,000 4,297,000
-------------- --------------
DECREASE IN CASH AND CASH EQUIVALENTS............................................. $ (1,222,000) $ (342,000)
-------------- --------------
-------------- --------------
</TABLE>
F-20
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED FINANCIAL STATEMENTS
The condensed balance sheet as of March 31, 1995, the condensed statements
of operations for the three and six month periods ended March 31, 1995 and 1994
and the condensed statements of cash flows for the six month periods ended March
31, 1995 and 1994 have been prepared by the Company, without audit. The balance
sheet as of September 30, 1994 was derived from the audited balance sheet
included in the Company's September 30, 1994 Annual Report on Form 10-K. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial condition, results of
operations and cash flows at March 31, 1995 and for all periods presented have
been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's September 30, 1994 Form 10-K. The results of
operations for the period ended March 31, 1995 are not necessarily indicative of
the operating results for the full year.
2. INVESTMENTS
At March 31, 1995 and September 30, 1994, investments consist primarily of
U.S. Treasury Notes and U.S. Treasury Bills.
3. INVENTORIES
As of March 31, 1995 and September 30, 1994 inventories consisted of the
following:
<TABLE>
<CAPTION>
MARCH 31, 1995 SEPTEMBER 30, 1994
-------------- ------------------
<S> <C> <C>
Raw Materials................................................................. $ 461,000 $ 356,000
Work-in-Process............................................................... 4,072,000 2,278,000
-------------- ------------------
Total....................................................................... $ 4,533,000 $ 2,634,000
-------------- ------------------
-------------- ------------------
</TABLE>
4. NOTES PAYABLE
The Company has an agreement with a bank under which the Company may borrow
up to $1,500,000. Loans under this agreement bear interest at a rate of prime
plus one percent per annum and are secured by all the assets of the Company. The
amount outstanding under this credit facility was $-0- at March 31, 1995 and
$63,000 at September 30, 1994. The agreement expires on June 7, 1995.
5. INCOME TAXES
The income tax benefit for the six months ended March 31, 1995 and 1994
consisted of the following:
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Current provision.................................................................. $ (206,000) $ (50,000)
Deferred provision................................................................. (1,036,000) --
Adjustment of valuation allowance.................................................. 3,302,000 1,143,000
-------------- -------------
Total............................................................................ $ 2,060,000 $ 1,093,000
-------------- -------------
-------------- -------------
</TABLE>
F-21
<PAGE>
ROBOTIC VISION SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
5. INCOME TAXES (CONTINUED)
The adjustments to the valuation allowance during the quarters ended March
31, 1995 and 1994 emanate from the Company's profitable operations and the
extent to which the Company can substantiate projected future earnings. The
deferred tax assets as of March 31, 1995 and September 30, 1994 are equivalent
to the benefit to be derived from net operating loss carryforwards and other tax
credits which are expected to be utilized to offset future taxable income
projected as of those dates. The deferred tax assets as of March 31, 1995 and
September 30, 1994 have been limited to the benefit to be derived from projected
future income, primarily due to the Company's limited history of earnings and
its projected future profitability currently being primarily dependent on one
existing product line.
6. SUBSEQUENT EVENT
(a) PROPOSED MERGER AGREEMENT
On April 27, 1995, the Company and Acuity Imaging, Inc. ("Acuity") signed a
definitive merger agreement. Upon consummation of the merger, Acuity Imaging
will become a wholly-owned subsidiary of RVSI.
The merger terms, as amended on July 11, 1995, contemplate that RVSI is
to issue 0.766 of a share of its common stock for each Acuity share (the
"Exchange Ratio") or approximately 1,883,000 shares of RVSI common stock in
exchange for all of Acuity's outstanding shares as of March 31, 1995. In
addition, Acuity's outstanding stock options are to be exchanged for options
upon RVSI's common stock in the same 0.766 to one ratio. If the price of the
RVSI Common Stock averages more then $14.50 or less than $10.00 per share
during the 20 business days preceding the consummation of the Merger, the
number of shares of the RVSI Common Stock issuable to the Acuity
Stockholders would be proportionately adjusted. In no event, however, will
the Exchange Ratio be more than .925626 or less than .555375.
Consummation of the merger, which is intended to be completed as a tax-free
reorganization and to be accounted for as a pooling of interests, is subject to
conditions customary for transactions of this nature, including approval by the
stockholders of each of RVSI and Acuity.
(b) PRIVATE EQUITY PLACEMENT
On June 28, 1995, the Company entered into an agreement with
a group of investors. Under the agreement, the Company received
approximately $9.5 million, after expenses, in exchange for the
issuance of 1,110,000 shares of the Company's common stock. The
Company also issued warrants exercisable through June 2000 to
purchase 33,300 shares of the Company's common stock at an exercise
price of $9.00 per share.
F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: Acuity Imaging, Inc.:
We have audited the accompanying consolidated balance sheets of Acuity
Imaging, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years ended December 31, 1994.
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 did not audit the financial statements of Automatix
Incorporated for 1993 and 1992, which reflect total assets and total revenues of
43 percent and 47 percent in 1993 and 42 percent and 51 percent in 1992,
respectively, of the consolidated totals. Those statements were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts included for those entities, is based solely on the
report of other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of Acuity Imaging, Inc. and subsidiaries at
December 31, 1994 and 1993, and the results of their operations and their cash
flows for each of the three years ended December 31, 1994, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 13, 1995 (except for the matters
discussed in Notes 7 and 13, as to which
the dates are July 19, 1995 and July 11, 1995,
respectively)
F-23
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Acuity Imaging, Inc.:
We have audited the consolidated balance sheets of Acuity Imaging, Inc.
(formerly Automatix Incorporated) and subsidiaries as of December 31, 1993, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the two years in the period ended December 31, 1993 (not
presented separately herein). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Acuity Imaging, Inc. (formerly
Automatix Incorporated) and subsidiaries at December 31, 1993, and the results
of their operations and their cash flows for each of the two years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Boston, Massachusetts
February 11, 1994
F-24
<PAGE>
ACUITY IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 1, December 31,
-------- ------------
Notes 1995 1994 1993
----- ---- ---- -----
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents 1 $ 279 $ 529 $ 2,324
Accounts receivable, net of allowance for doubtful accounts
of $178 and $140 in 1994 and 1993, respectively, and
$104 at April 1, 1995 3,228 3,605 3,007
Inventories 1,4 1,781 1,665 1,565
Other current assets 174 28 54
-------- -------- --------
Total current assets 5,462 5,827 6,950
PROPERTY AND EQUIPMENT - Net 1,5 988 873 652
OTHER ASSETS 20 20 20
-------- -------- --------
TOTAL ASSETS $ 6,470 $ 6,720 $ 7,622
-------- -------- --------
-------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,807 $ 1,573 $ 1,208
Loan payable 7 1,250 -- --
Advances from customers 99 193 194
Accrued expenses 6 1,010 1,591 1,860
Subordinated notes and related accrued interest 8 -- -- 3,335
-------- -------- --------
Total current liabilities 4,166 3,357 6,597
-------- -------- --------
LOAN PAYABLE 7 -- 1,015 --
-------- -------- --------
COMMITMENTS 10
STOCKHOLDERS' EQUITY: 1,9
Common stock, $.01 par value; authorized,
10,000,000 shares; issued, 2,389,532 and 2,428,845
shares at December 31, 1994 and 1993, respectively,
and 2,458,680 shares at April 1, 1995 25 24 24
Additional paid-in capital 61,161 61,081 61,479
Accumulated deficit (59,029) (58,888) (60,194)
Cumulative translation adjustment 147 131 137
Less treasury stock at cost (64,910 common shares in 1993) -- -- (421)
-------- -------- --------
Total stockholders' equity 2,304 2,348 1,025
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,470 $ 6,720 $ 7,622
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
F-25
<PAGE>
ACUITY IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 1, April 2, Year Ended December 31,
------- ------- -----------------------
Notes 1995 1994 1994 1993 1992
----- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
NET SALES AND SERVICE REVENUE 1,12 $ 4,895 $ 5,189 $ 22,168 $ 18,734 $ 16,610
------- ------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales and service revenue 2,121 2,101 9,369 7,752 7,810
Research and development (includes $172, $233 and $82
of costs associated with SBIR contracts in 1994, 1993
and 1992, respectively, and $63 and $49 in the three
months ended April 1, 1995 and April 2, 1994,
respectively. 1,089 938 3,911 3,482 2,862
Marketing and selling 1,469 1,250 5,317 4,614 3,977
General and administrative 337 373 1,580 1,452 1,197
Merger and restructuring costs 2 -- -- 440 1,091 --
------- ------- -------- -------- --------
Total costs and expenses 5,016 4,662 20,617 18,391 15,846
------- ------- -------- -------- --------
INCOME FROM OPERATIONS (121) 527 1,551 343 764
INTEREST INCOME 2 10 18 41 59
INTEREST EXPENSE 22 83 153 317 324
------- ------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES (141) 454 1,416 67 499
PROVISION FOR INCOME TAXES ON CONTINUING
OPERATIONS 11 -- 44 110 97 48
------- ------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS (141) 410 1,306 (30) 451
------- ------- -------- -------- --------
INCOME (LOSS) FROM DISCONTINUED OPERATIONS: 3
Loss from operations -- -- -- -- (147)
Gain on disposal -- -- -- -- 1,361
------- ------- -------- -------- --------
Total discontinued operations -- -- -- -- 1,214
------- ------- -------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM ($ 141) $ 410 $ 1,306 ($ 30) $ 1,665
------- ------- -------- -------- --------
EXTRAORDINARY ITEM-EXTINGUISHMENT OF
LONG-TERM DEBT (Net of taxes, $3) 8 -- -- -- -- 46
------- ------- -------- -------- --------
NET INCOME (LOSS) ($ 141) $ 410 $ 1,306 ($ 30) $ 1,711
------- ------- -------- -------- --------
------- ------- -------- -------- --------
INCOME (LOSS) PER SHARE: 1
Income (loss) from continuing operations ($ .06) $ .16 $ .51 ($ .01) $ .19
Discontinued operations -- -- -- -- .51
Extraordinary item -- -- -- -- .02
------- ------- -------- -------- --------
Net income (loss) ($ .06) $ .16 $ .51 ($ .01) $ .72
------- ------- -------- -------- --------
------- ------- -------- -------- --------
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 1 2,417 2,579 2,569 2,380 2,383
------- ------- -------- -------- --------
------- ------- -------- -------- --------
</TABLE>
See notes to consolidated financial statements.
F-26
<PAGE>
ACUITY IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
------------
Number Additional Cumulative
of $ .01 Par Paid-in Accumulated Translation Treasury
Shares Value Capital Deficit Adjustment Stock
------ --------- ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1992 2,410 $ 24 $61,463 ($61,828) $ 261 ($421)
Exercises of stock options 19 -- 16 -- -- --
Other -- -- -- (47) -- --
Translation adjustment -- -- -- -- (121) --
Net income -- -- -- 1,711 -- --
----- ---- ------- -------- ----- -----
BALANCE, DECEMBER 31, 1992 2,429 24 61,479 (60,164) 140 (421)
----- ---- ------- -------- ----- -----
Translation adjustment -- -- -- -- (3) --
Net loss -- -- -- (30) -- --
----- ---- ------- -------- ----- -----
BALANCE, DECEMBER 31, 1993 2,429 24 61,479 (60,194) 137 (421)
----- ---- ------- -------- ----- -----
Exercises of stock options 26 -- 23 -- -- --
Retirement of treasury stock (65) -- (421) -- -- 421
Translation adjustment -- -- -- -- (6) --
Net income -- -- -- 1,306 -- --
----- ---- ------- -------- ----- -----
BALANCE, DECEMBER 31, 1994 2,390 24 61,081 (58,888) 131 --
----- ---- ------- -------- ----- -----
Exercises of stock options 69 1 80 -- -- --
Translation adjustment -- -- -- -- 16 --
Net loss -- -- -- (141) -- --
----- ---- ------- -------- ----- -----
BALANCE, APRIL 1, 1995 2,459 $ 25 $61,161 ($59,029) $ 147 $ --
(Unaudited) ----- ---- ------- -------- ----- -----
----- ---- ------- -------- ----- -----
</TABLE>
See notes to consolidated financial statements.
F-27
<PAGE>
ACUITY IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 1, April 2 Year Ended December 31,
-------- ------- -----------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 141) $ 410 $ 1,306 ($ 30) $ 1,711
----- ------- ------- ------- -------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Extraordinary item-extinguishment of debt -- -- -- -- (46)
Gain on sale of subsidiary -- -- -- -- (1,361)
Depreciation and amortization 131 77 418 334 379
Interest expense -- 84 84 310 281
Increase (decrease) in cash resulting from:
Accounts receivable 377 (199) (598) 325 (676)
Inventories (116) 16 (100) (573) (109)
Accounts payable 234 (165) 365 156 565
Advances from customers (94) 1,179 (1) 71 30
Accrued expenses (581) (477) (269) 709 98
Other (146) (13) 26 7 55
----- ------- ------- ------- -------
Total adjustments (195) 502 (75) 1,339 (784)
----- ------- ------- ------- -------
Net cash provided by (used in) operating activities (336) 912 1,231 1,309 927
----- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (246) (209) (639) (390) (413)
Proceeds from sale of subsidiary, net of cost of disposal -- -- -- -- 247
----- ------- ------- ------- -------
Net cash used in investing activities (246) (209) (639) (390) (166)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt -- -- -- -- (671)
Proceeds from exercises of stock options 81 1 23 -- 16
Proceeds from bank loan 235 1,500 1,015 -- --
Payment of short-term debt and related accrued interest -- (3,419) (3,419) -- --
----- ------- ------- ------- -------
Net cash provided by (used in) financing activities 316 (1,918) (2,381) -- (655)
----- ------- ------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND EQUIVALENTS 16 (1) (6) (3) (121)
----- ------- ------- ------- -------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS (250) (1,216) (1,795) 916 (15)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 529 2,324 2,324 1,408 1,423
----- ------- ------- ------- -------
CASH AND EQUIVALENTS, END OF PERIOD $ 279 $ 1,108 $ 529 $ 2,324 $ 1,408
----- ------- ------- ------- -------
----- ------- ------- ------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 22 $ 1,269 $ 1,338 $ -- $ 43
----- ------- ------- ------- -------
----- ------- ------- ------- -------
Cash paid for taxes
$ 28 $ 56 $ 114 $ 49 $ 98
----- ------- ------- ------- -------
----- ------- ------- ------- -------
</TABLE>
See notes to consolidated financial statements.
F-28
<PAGE>
ACUITY IMAGING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the financial statements of Acuity Imaging, Inc. (formerly Automatix
Incorporated) and its subsidiaries (the Company). All significant
intercompany accounts and transactions have been eliminated in
consolidation. Certain amounts in the 1993 and 1992 financial statements
and notes thereto have been reclassified to conform to the 1994
presentation.
The consolidated financial statements of Acuity Imaging, Inc. have been
prepared to give retroactive effect to the combination with Itran Corp.
(Note 2), which occurred on January 26, 1994 and has been recorded as a
pooling of interest.
REVERSE STOCK SPLIT - All share and per share data have been retroactively
adjusted to reflect the one-for-twenty reverse stock split of the Company's
common stock effected on January 26, 1994.
REVENUE RECOGNITION - Revenue from equipment sales, which include a
software component, is recognized at the time of shipment provided that no
significant vendor or postcontract support obligations remain outstanding
and collection of the resulting receivable is deemed probable. Revenue
from equipment requiring significant field engineering, vendor or
postcontract support is deferred until such obligations are substantially
completed. In limited instances, the Company installs equipment at the
customer's site. The installation process is routine, and the costs to
install the equipment are accrued at shipment. The Company recognizes any
separately billable revenues from the installation of its products when the
installations are completed. Estimated warranty costs are accrued at the
time system sales are recognized as revenue. Revenue from government
research and development contracts is billed and recognized as the services
are provided and the reimbursement is earned during the period based on
actual labor, materials and overhead incurred, plus profit as allowed under
each contract. Other services revenues are recognized when rendered.
Service revenue, including spare parts and training, was $1,807,000,
$1,481,000 and $1,543,000 for the years ended December 31, 1994, 1993 and
1992, respectively, and $501,000 and $466,000 for the three months ended
April 1, 1995 and April 2, 1994, respectively.
SOFTWARE DEVELOPMENT COSTS - Software development costs are expensed as
incurred. Costs incurred after technological feasibility has been
determined have not been significant.
CASH AND EQUIVALENTS - Cash equivalents consist primarily of short-term
bank time deposits purchased with remaining maturities of three months or
less.
INVENTORIES - Inventories are stated at the lower of cost (first-in, first-
out method) or market. The Company makes provisions for obsolete, slow-
moving and/or nonsaleable inventories on a quarterly basis.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Additions, renewals and improvements are capitalized, and repair and
maintenance costs are expensed. Fully depreciated assets are removed from
the accounts. Depreciation is provided on a straight-line basis over the
estimated useful lives of the assets.
FOREIGN CURRENCY TRANSLATION - Assets and liabilities of the Company's
European subsidiary are translated at the exchange rate in effect at the
balance sheet date. Operating statement accounts are translated at the
average exchange rate for the year. The resulting translation adjustments
are excluded from operations and accumulated as a separate component of
stockholders' equity. Transaction gains are included in net income and
totaled $19,000, $0 and $45,000 in 1994, 1993 and 1992, respectively, and
$2,000 and $0 for the three months ended April 1, 1995 and April 2, 1994,
respectively.
F-29
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES - Deferred tax liabilities and assets are determined based on
the difference between the financial statement carrying amounts and the tax
basis of existing assets and liabilities using enacted tax rates in effect
in the year(s) in which the differences are expected to reverse.
INCOME (LOSS) PER SHARE - Income (loss) per share is computed using the
weighted average number of common and common equivalent shares outstanding
during each year. Fully diluted and primary income per common share are
not materially different for each of the periods presented.
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS - The Company has no obligation
for postretirement or postemployment benefits.
DERIVATIVE FINANCIAL INSTRUMENTS - In October 1994, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 119 (SFAS No. 119), DISCLOSURE ABOUT DERIVATIVE FINANCIAL
INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS, which is effective for
fiscal years ending after December 15, 1994. SFAS No. 119 requires certain
disclosures about derivative financial instruments including futures,
forward swap and option contracts and other financial instruments with
similar characteristics. As of December 31, 1994 and April 1, 1995, the
Company had no instruments requiring disclosure under SFAS No. 119.
FAIR VALUE FINANCIAL INSTRUMENTS - The following methods and assumptions
were used to estimate the fair value of each class of financial
instruments:
a. Cash and equivalents - the carrying amounts approximate fair
value because of the short maturity of those investments.
b. Receivables - the carrying amounts approximate fair value because
of the short maturity of those investments.
c. Debt - the carrying amounts approximate fair value because of the
relatively short maturity of those instruments.
INTERIM FINANCIAL STATEMENTS - The Company determines its quarterly
reporting periods based upon thirteen week periods. The accompanying
consolidated balance sheets as of April 1, 1995, the consolidated
statements of operations and cash flows for the thirteen-week periods ended
April 1, 1995 and April 2, 1994, and the consolidated statements of
stockholders' equity for the thirteen-week period ended April 1, 1995 are
unaudited but, in the opinion of management, include all adjustments
(consisting only of normal, recurring adjustments) necessary for a fair
presentation of the results for these interim periods. The results of
operations for the thirteen weeks ended April 1, 1995 are not
necessarily indicative of results to be expected for the entire year.
2. BUSINESS COMBINATION
On January 26, 1994, the Company merged with Itran Corp. (Itran) in a tax-
free exchange of 1,482,755 registered shares of Automatix common stock for
substantially all of Itran's outstanding common and preferred stock. Itran
was a developer and seller of computerized visual inspection equipment.
Automatix was the surviving corporation and, simultaneously with the
merger, changed its name to Acuity Imaging, Inc. Outstanding Itran stock
options were converted into options to purchase 161,750 shares of the
Company's common stock. The merger has been accounted for as a pooling of
interests. The Company incurred expenses of approximately $1,091,000
related to the merger, which are included in merger and restructuring costs
in the accompanying statement of operations in 1993. For the periods
presented there were no inter-company transactions which would require
eliminations. Unaudited pro forma condensed statement of operations data
for the years ended December 31, 1993 and 1992 are as follows:
F-30
<PAGE>
2. BUSINESS COMBINATION (CONTINUED)
<TABLE>
<CAPTION>
Automatix Itran Combined
--------- ----- --------
(Amounts in Thousands)
----------------------------------
<S> <C> <C> <C>
1993
Revenue $ 8,841 $ 9,893 $ 18,734
Net income (loss) 15 (45) (30)
1992
Revenue $ 8,548 $ 8,062 $ 16,610
Extraordinary item --
Extinguishment of long-term debt 46 -- 46
Net income 1,525 186 1,711
</TABLE>
The Company incurred restructuring costs in 1994 related to the merger
which are included in merger and restructuring costs for 1994. These costs
represented approximately $346,000 in severance and related benefits and
$94,000 related to a lease termination.
3. DISCONTINUED OPERATIONS
On July 15, 1992, the Company sold its 71% interest in SuperCads Inc.
(SuperCads) for cash of $300,000, resulting in a gain of $1,361,000,
comprised of the following:
<TABLE>
<S> <C>
Cash proceeds $ 300,000
Reversal of minority interest 987,000
Assumption of net liabilities by buyer 126,000
Less-legal expenses (52,000)
----------
Gain recognized $1,361,000
----------
----------
</TABLE>
The Company also received a note of $540,000, which bore interest at 8% and
was due on June 15, 1994. Because of uncertainty relating to the
collectibility of the note, the Company did not recognize any additional
gain upon receipt of the note. In May 1993, the Company sold the note to
its then Chairman of the Board of Directors in exchange for 37,500 shares
of the Company's common stock and options for 20,000 additional shares of
the Company's common stock transferred by the Chairman of the Company. The
37,500 shares of stock were added to the Company's treasury stock at the
value of the note sold (zero). Net sales of SuperCads were $608,000 for
the period from January 1, 1992 through July 15, 1992.
4. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
April 1, December 31,
-------- ------------
1995 1994 1993
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Raw materials $ 698,000 $ 589,000 $ 608,000
Work-in-process 532,000 626,000 279,000
Finished products 411,000 325,000 658,000
Field engineering parts and components 140,000 125,000 20,000
---------- ---------- ----------
$1,781,000 $1,665,000 $1,565,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Work-in-process and finished-goods inventories include materials, labor and
manufacturing overhead.
F-31
<PAGE>
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
April 1, December 31,
-------- ------------ Depreciable
1995 1994 1993 Lives in Years
----- ---- ---- --------------
(Unaudited)
<S> <C> <C> <C> <C>
Manufacturing, testing and other equipment $1,236,000 $1,157,000 $ 862,000 1-3
Marketing, demo and training equipment 677,000 531,000 369,000 1-3
Office furniture and fixtures 84,000 101,000 80,000 2-5
Leasehold improvements 172,000 162,000 17,000 (Lease term)
---------- ---------- ----------
2,169,000 1,951,000 1,328,000
Less-accumulated depreciation (1,181,000) (1,078,000) (676,000)
---------- ---------- ----------
$ 988,000 $ 873,000 $ 652,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
6. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
April 1, December 31,
-------- ------------
1995 1994 1993
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Installation and warranty costs $ 139,000 $ 144,000 $ 131,000
Employee compensation 559,000 890,000 598,000
Merger and restructuring costs 20,000 224,000 538,000
Other 292,000 333,000 593,000
---------- ---------- ----------
$1,010,000 $1,591,000 $1,860,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
7. LINE-OF-CREDIT AGREEMENT
On March 22, 1994, the Company obtained a line of credit from a bank, which
provided for borrowings of up to the lesser of $3,500,000 or 80% of
eligible accounts receivable, as defined. The available borrowings base as
of December 31, 1994 was approximately $2,022,000. Interest was payable
monthly at a rate of prime (8.5% at December 31, 1994) plus .5%.
Borrowings under the line were secured by substantially all of the assets
of the Company. In addition, the agreement required, among other
covenants, that the Company maintain minimum levels of profitability, net
worth, liquidity and limited the levels of leverage. The Company was in
compliance with all covenants as of December 31, 1994. At December 31,
1994, $1,015,000 was outstanding under the line of credit. This line of
credit was scheduled to expire on May 5, 1995. In March 1995, the Company
negotiated a long-term line of credit from another commercial bank carrying
more favorable terms than the above line. The Company borrowed against
this new line and immediately paid off and terminated the above line of
credit. Since the new line of credit was for a long-term commitment
(expiration of June 1, 1997), the Company's December 31, 1994 loan payable
on its bank line of credit was classified as a long-term liability in the
Company's audited December 31, 1994 balance sheet.
The Company's new line of credit is a revolving line of credit that
provides for borrowings up to the lesser of $3,500,000 or 80% of eligible
accounts receivable, as defined, plus 50% of unpledged domestic cash and
cash equivalents. Interest is payable monthly at a rate of prime plus .5%.
Borrowings under the line are secured by substantially all assets of the
Company. The agreement requires, among other covenants, that the Company
maintain minimum levels of profitability, current ratio, net worth and
limits the levels of leverage. At April 1, 1995, $1,250,000 was
outstanding under the line of credit, and the Company had another
approximately $593,000 in available borrowings against its line of credit.
As of April 1, 1995, the Company was in default of certain of its covenants
on its outstanding bank line-of-credit agreement, and as such, the loan
payable amount has been classified as a short-term liability in the
Company's unaudited April 1, 1995 balance sheet. The Company has obtained
forbearance from such defaults until the earlier of (i) September 30, 1995
or (ii) any termination of the Company's arrangement for its contemplated
merger with Robotic Vision Systems, Inc., ("RVSI"), without such merger
having been consummated. In the event that either of
F-32
<PAGE>
the two events occurs, the Company would need to enter into additional
negotiations with its bank in an attempt to resolve the termination of such
forbearance.
8. SUBORDINATED NOTES
Subordinated notes consisted of principal amounts totaling $2,150,000 at
December 31, 1993 and accrued interest at 10% totaling $1,185,000 at
December 31, 1993. Of these amounts, $1,551,000 was payable to a
stockholder of the Company at December 31, 1993. The subordinated notes
and accrued interest thereon were repaid on April 1, 1994.
The 10% noteholders received warrants to purchase 143,334 shares of the
Company's common stock at $8 per share until June 30, 1994, which expired
unexercised on that day.
In August 1992, the Company concluded an agreement with the holder of a
$689,000 note to repay the note for $640,000. The $49,000 difference
between the unpaid balance of the note and the payment, less applicable
income taxes of $3,000, is shown as an extraordinary item in the
consolidated statements of operations.
The Company made cash payments for interest related to these notes of
$1,269,000, $0 and $43,000 in 1994, 1993 and 1992, respectively.
F-33
<PAGE>
9. STOCK PLANS
The Company has the following stock plans:
1980 INCENTIVE STOCK OPTION PLAN - This plan provides for options to
purchase an aggregate of 100,481 shares of common stock by employees. The
options generally become exercisable ratably over a two-to four-year period
from the date of grant. The plan expired in 1990. The exercise price of
all options granted to date under the plan equaled the fair value of the
Company's common stock on the date of grant. Stock option activity
under the plan was as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Year Ended Year Ended
April 1, 1995 December 31, 1994 December 31, 1993
------------------------------------------------------------------------
(Unaudited)
Aggregate Aggregate Aggregate
Option Option Option
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of period 27,796 $307,899 27,977 $309,992 28,500 $314,000
Options granted, net of forfeitures -- -- (181) (2,093) (523) (4,008)
Options exercised (2,750) (21,450) -- -- -- --
------ -------- ------ -------- ------ --------
Options outstanding at end of period 25,046 $286,449 27,796 $307,899 27,977 $309,992
------ -------- ------ -------- ------ --------
------ -------- ------ -------- ------ --------
Options exercisable at end of period 25,046 $286,449 27,796 $307,899 27,940 $309,804
------ -------- ------ -------- ------ --------
------ -------- ------ -------- ------ --------
</TABLE>
1981 STOCK OPTION PLAN - This plan provides for nonstatutory options to
purchase an aggregate of 50,000 shares of common stock by employees,
directors and consultants. Options become exercisable ratably over a
two-to 10-year period from the date of grant. The exercise price of all
options granted to date under the plan equaled the fair value of the
Company's common stock on the date of grant. Stock option activity under
the plan was as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Year Ended Year Ended
April 1, 1995 December 31, 1994 December 31, 1993
------------------------------------------------------------------------
(Unaudited)
Aggregate Aggregate Aggregate
Option Option Option
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of period 19,333 $ 98,571 20,720 $114,874 40,600 $274,000
Options granted, net of forfeitures (50) (240) (1,337) (16,023) (19,880) (159,126)
Options exercised (13) (42) (50) (280) -- --
------ -------- ------ -------- ------- --------
Options outstanding at end of period 19,270 $ 98,289 19,333 $ 98,571 20,720 $114,874
------ -------- ------ -------- ------- --------
------ -------- ------ -------- ------- --------
Options exercisable at end of period 17,430 $ 94,380 16,116 $ 92,517 13,508 $ 98,731
------ -------- ------ -------- ------- --------
------ -------- ------ -------- ------- --------
Available for future grants 30,632 30,582 29,245
------ ------ -------
------ ------ -------
</TABLE>
F-34
<PAGE>
9. STOCK PLANS (CONTINUED)
1991 STOCK OPTION PLAN - This plan provides for incentive stock options or
nonstatutory stock options to purchase an aggregate of 350,000 shares of
common stock by employees, directors and consultants. Options become
exercisable ratably over a two-to 10-year period from the date of grant.
The exercise price of all options granted to date under the plan equaled the
fair value of the Company's common stock on the date of grant.
In connection with the merger with Itran (Note 2), all of Itran's common
stock options were converted into options to purchase Acuity common stock
under the 1991 Stock Option Plan.
Stock option activity under the plan was as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Year Ended Year Ended
April 1, 1995 December 31, 1994 December 31, 1993
------------------------------------------------------------------------
(Unaudited)
Aggregate Aggregate Aggregate
Option Option Option
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of period 227,671 $804,526 189,496 $180,143 188,189 $179,255
Options granted, net of forfeitures (10,877) (107,335) 63,722 647,114 1,307 888
Options exercised (66,408) (60,000) (25,547) (22,731) -- --
------- -------- ------- -------- ------- --------
Options outstanding at end of period 150,386 $637,191 227,671 $804,526 189,496 $180,143
------- -------- ------- -------- ------- --------
------- -------- ------- -------- ------- --------
Options exercisable at end of period 77,639 $ 77,154 138,234 $128,989 141,981 $129,160
------- -------- ------- -------- ------- --------
------- -------- ------- -------- ------- --------
Available for future grants 107,659 96,782 160,504
------- ------- -------
------- ------- -------
</TABLE>
On February 7, 1991, the Board of Directors of the Company voted to grant
to the then President and Chief Executive Officer nonstatutory options for
18,681 shares, exercisable at $1.00 per share, which was not less than the
fair market value on the date of grant. These options were not
granted pursuant to any of the above stock option plans. At December 31,
1994 and 1993, 14,011 and 9,341 options, respectively, were exercisable at
an aggregate option price of $14,011 and $9,341, respectively. At April 1,
1995, 18,681 options were exercisable at an aggregate option price of
$18,681.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
In January 1994, the Company adopted the Acuity Imaging, Inc. Non-Employee
Director Stock Option Plan (the "Plan") under which members of the Board of
Directors who are not employees of the Company are automatically granted
non-qualified stock options on the date of the first meeting of the Board
in each calendar year to purchase the lesser of (i) 1,550 shares or (ii)
the number of shares determined by dividing $25,000 by the fair market
value of a share of the Company's common stock as of the date of grant.
The exercise price for such options will be equal to the fair market value
of the Company's common stock on such date. The Plan provides that options
to purchase up to an aggregate of 50,000 shares of common stock may be
granted under the Plan. Each option is fully exercisable one year after
the grant date and expires at the end of 10 years and one day after the
grant date. In January 1994, the Company granted options for 6,200 shares
of common stock at $8.50 per share.
Stock option activity under the plan was as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Year Ended
April 1, 1995 December 31, 1994
------------------------------------------------------------
(Unaudited)
Aggregate Aggregate
Option Option
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Options outstanding at beginning of period 4,650 $39,525 -- $ --
Options granted, net of forfeitures 4,650 39,246 4,650 39,525
Options exercised -- -- -- --
------ ------- ------ -------
Options outstanding at end of period 9,300 $78,771 4,650 $39,525
------ ------- ------ -------
------ ------- ------ -------
Options exercisable at end of period 4,650 $39,525 -- $ --
------ ------- ------ -------
Available for future grants 40,700 45,350
------ ------
------ ------
</TABLE>
F-35
<PAGE>
9. STOCK PLANS (CONTINUED)
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
In April 1994, the Company adopted the 1994 Acuity Imaging, Inc. Employee
Qualified Stock Purchase Plan (the "1994 Stock Plan"). The 1994 Stock Plan
provides that the Company may grant options for not more than 100,000
shares of its common stock, subject to increase or decrease in the event of
subsequent stock splits or other capital changes. On the first business
day of each 12-month payment period, commencing July 1, 1994, subject to
the terms of the 1994 Stock Plan, the Company will grant to each eligible
employee who is then a participant in the 1994 Stock Plan an option to
purchase on the last day of such payment period at the option price (as
defined below) such number of shares of the common stock of the Company
reserved under the 1994 Stock Plan as such employees' accumulated payroll
deductions on the last day of such payment period will pay for at the
option price, or if less, that number of shares having a fair market value
(as of the first day of the payment period) equal to $12,500, provided and
on the condition that such employee remains eligible to participate in the
1994 Stock Plan throughout such payment period. In addition, no option
will be granted which will cause the optionee's right to purchase shares of
the Company's common stock under the 1994 Stock Plan to accrue at a rate
that exceeds $25,000 of fair market value of the stock in any calendar
year. The "option price" for each payment period is equal to the lesser of
(i) 85% of the fair market value per share of the Company's common stock on
the first day of the payment period or (ii) 85% of the fair market value
per share of the Company's common stock on the last day of the payment
period.
At April 1, 1995, the Company had 501,674 shares of common stock reserved
for issuance under Stock Option and Employee Qualified Stock Purchase
plans.
10. LEASES
The Company leases office and manufacturing facilities and equipment under
various operating leases. Future minimum lease payments, as of December
31, 1994, are as follows:
<TABLE>
<CAPTION>
Year Buildings Equipment Total
---- --------- --------- -----
<S> <C> <C> <C>
1995 $ 284,000 $ 79,000 $363,000
1996 257,000 63,000 320,000
1997 221,000 34,000 255,000
1998 222,000 6,000 228,000
1999 234,000 2,000 236,000
Thereafter 60,000 -- 60,000
----------- --------- --------
$1,278,000 $184,000 $1,462,000
----------- --------- --------
----------- --------- --------
</TABLE>
Total rent expense was $323,000, $285,000 and $306,000 during 1994, 1993
and 1992, respectively. Rent expense for the three months ended April 1,
1995 and April 2, 1994 was $77,000 and $72,000, respectively.
11. INCOME TAXES
Income (loss) from operations before income taxes was comprised of the
following:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Domestic $ 1,185,000 $ 98,000 $ 373,000
Foreign 231,000 (31,000) 126,000
----------- --------- ----------
Total $ 1,416,000 $ 67,000 $ 499,000
----------- --------- ----------
----------- --------- ----------
</TABLE>
F-36
<PAGE>
11. INCOME TAXES (CONTINUED)
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 19,000 $ 8,500 $ --
State 91,000 88,500 51,000
---------- -------- --------
$ 110,000 $ 97,000 $ 51,000
---------- -------- --------
---------- -------- --------
</TABLE>
Federal income taxes in 1994, 1993 and 1992 have been offset by net
operating loss carryforwards of $1,412,662, $1,215,000 and $373,000,
respectively, to the extent allowed by alternative minimum tax
requirements. Foreign taxes were offset by net operating loss
carryforwards of $239,000 in 1994.
The sources of deferred income tax and the related tax effect at December
31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Accounts receivable $ 70,000 $ 71,000
Warranty reserve 50,000 73,000
Vacation accrual 101,000 272,000
Depreciation and amortization 5,000 76,000
Other nondeductible amounts 345,000 227,000
Net operating loss carryforwards:
Domestic 3,460,000 3,902,000
Foreign 215,000 273,000
Credit carryforward 325,000 325,000
Valuation allowance (4,571,000) (5,219,000)
-------------- ------------
Total $ -- $ --
-------------- ------------
-------------- ------------
</TABLE>
The Company has recorded a valuation allowance equal to the full value of
the deferred tax assets, including net operating loss carryforwards,
because of the uncertainty of their future utilization.
A reconciliation between the Company's effective income tax rate and the
U.S. Federal statutory rate on income for the years ended December 31,
1994, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate 34.0 % 34.0 % 34.0 %
Benefit of net operating loss carryforwards (32.0) (21.0) (34.0)
Nondeductible merger costs -- 126.0 --
State taxes, net of federal benefit 6.4 6.0 9.6
Other (.6) -- --
----- ----- ------
7.8 % 145.0 % 9.6 %
----- ----- ------
----- ----- ------
</TABLE>
At December 31, 1994, the Company had U.S. Federal net operating loss
carryforwards of approximately $10,176,000, which expire commencing in
1995. The United Kingdom subsidiary had net operating loss carryforwards
that aggregate approximately $588,000 at December 31, 1994 and can be used
future taxable income in the United Kingdom. In addition, the Company has
to offset available approximately $325,000 of unused investment tax credits.
Because of the change in ownership, as defined in the Internal Revenue
Code, which occurred in January 1994 (Note 2), certain of the net
operating loss carryforwards and credits are subject to annual limitations
and may be further limited by the proposed transaction described in Note 13.
Because of the Company's net operating loss carryforward position, the
Company has recorded no benefit for the loss for the three months ended
April 1, 1995.
F-37
<PAGE>
12. SEGMENT INFORMATION
The following table summarizes the Company's operations in the referenced
geographic areas:
<TABLE>
<CAPTION>
US Europe Eliminations Total
-- ------ ------------ -----
(In Thousands)
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Revenues:
Net sales to unaffiliated customers $20,467 $ 1,701 $ -- $22,168
Transfers between geographic areas 248 -- (248) --
------- ------- ------ -------
Total revenues $20,715 $ 1,701 ($ 248) $22,168
------- ------- ------ -------
------- ------- ------ -------
Income from operations $ 1,059 $ 238 $ 9 $ 1,306
------- ------- ------ -------
------- ------- ------ -------
Identifiable assets $ 5,862 $ 551 ($ 8) $ 6,405
------- ------- ------ -------
------- ------- ------ -------
Year ended December 31, 1993:
Revenues:
Net sales to unaffiliated customers $17,863 $ 871 $ -- $18,734
Transfers between geographic areas 144 -- ( 144) --
------- ------- ------ -------
Total revenues $18,007 $ 871 ($144) $18,734
------- ------- ------ -------
------- ------- ------ -------
Income (loss) from operations ($ 9) ($ 33) $ 12 ($ 30)
------- ------- ------ -------
------- ------- ------ -------
Identifiable assets $ 7,232 $ 406 ($ 16) $ 7,622
------- ------- ------ --------
------- ------- ------ --------
Year ended December 31, 1992:
Revenues:
Net sales to unaffiliated customers $15,180 $1,430 $ -- $16,610
Transfers between geographic areas 228 -- ( 228) --
------- ------- ------ -------
Total revenues $15,408 $ 1,430 ($228) $16,610
------- ------- ------ -------
------- ------- ------ -------
Income from continuing operations $ 299 $ 124 $ 28 $ 451
------- ------- ------ -------
------- ------- ------ -------
Identifiable assets $ 6,109 $ 328 ($ 28) $ 6,409
------- ------- ------ -------
------- ------- ------ -------
Thirteen Weeks ended April 1, 1995 (unaudited):
Revenues:
Net sales to unaffiliated customers $ 4,389 $ 506 $ -- $ 4,895
Transfers between geographic areas 129 -- ( 129) --
------- ------- ------ -------
Total revenues $ 4,518 $ 506 ($129) $ 4,895
------- ------- ------ -------
------- ------- ------ -------
Income (loss) from operations ($ 226) $ 82 $ 3 ($ 141)
------- ------- ------ -------
------- ------- ------ -------
Identifiable assets $ 5,974 $ 502 ($ 6) $ 6,470
------- ------- ------ -------
------- ------- ------ -------
Thirteen Weeks ended April 2, 1994 (unaudited):
Revenues:
Net sales to unaffiliated customers $ 4,837 $ 352 $ -- $ 5,189
Transfers between geographic areas 64 -- (64) --
------- ------- ------ -------
Total revenues $ 4,901 $ 352 ($ 64) $ 5,189
------- ------- ------ -------
------- ------- ------ -------
Income from operations $ 392 $ 17 $ -- $ 409
------- ------- ------ -------
------- ------- ------ -------
Identifiable assets $ 6,238 $ 512 ($ 16) $ 6,734
------- ------- ------ -------
------- ------- ------ -------
</TABLE>
F-38
<PAGE>
12. SEGMENT INFORMATION (CONTINUED)
Revenues from export (outside the United States) sales from the Company's
US operations were $3,128,000, $3,909,000 and $1,991,000 for the years
ended December 31, 1994, 1993 and 1992, respectively, and $1,234,000 and
$629,000 for the thirteen weeks ended April 1, 1995 and April 2, 1994,
respectively.
During 1994 revenues from Brown & Williamson represented 16% of total
revenues, and during 1993 and 1992, revenues from Motorola, Inc.
represented 12% and 15%, respectively, of total revenues.
13. SUBSEQUENT EVENT
On July 11, 1995, the Company and Robotic Vision Systems, Inc. ("RVSI") of
Hauppauge, New York signed an Agreement and Plan of Merger and
Reorganization whereby RVSI would acquire all of Acuity's outstanding
stock. The transaction is intended to be completed as a tax free
reorganization and to be accounted for as a pooling of interests. To
effect the transaction, RVSI would issue 0.766 of a share of its common
stock in exchange for each outstanding share of Acuity common stock. In
addition, Acuity's outstanding stock options would be exchanged for options
of RVSI's common stock in the same 0.766-to-one ratio. Such Exchange
Ratio is subject to adjustment based upon the market value of RVSI's
Common Stock, but in no event will the Exchange Ratio be greater then
0.925626 or less than 0.555375. Consummation of the transaction
is subject to other conditions customary for transactions of this nature,
including stockholder approval. Other current assets of $174,000 at
April 1,1995 include $106,000 of prepaid merger-related expenses associated
with the proposed RVSI merger. For the quarter ended April 1, 1995,
revenues from RVSI totaled approximately $47,000.
* * * * * *
F-39
<PAGE>
EXHIBIT A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
dated as of
April 27, 1995, as amended and restated as of July 11, 1995
by and among
ROBOTIC VISION SYSTEMS, INC.,
RVSI ACQUISITION CORP.
and
ACUITY IMAGING, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.2 Effective Time of the Merger. . . . . . . . . . . . . . . . .
ARTICLE II
SURVIVING AND PARENT CORPORATIONS
SECTION 2.1 Certificate of Incorporation. . . . . . . . . . . . . . . . .
SECTION 2.2 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.3 Directors . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.4 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.5 Additional Director of Parent . . . . . . . . . . . . . . . .
SECTION 2.6 Further Action. . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1 Conversion of Company Shares in the Merger. . . . . . . . . .
SECTION 3.2 Conversion of Subsidiary Shares . . . . . . . . . . . . . . .
SECTION 3.3 Exchange of Certificates. . . . . . . . . . . . . . . . . . .
SECTION 3.4 No Fractional Shares. . . . . . . . . . . . . . . . . . . . .
SECTION 3.5 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Organization and Qualification. . . . . . . . . . . . . . . .
SECTION 4.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.4 Authority; Non-Contravention; Approvals . . . . . . . . . . .
SECTION 4.5 Reports and Financial Statements. . . . . . . . . . . . . . .
SECTION 4.6 Absence of Undisclosed Liabilities. . . . . . . . . . . . . .
SECTION 4.7 Absence of Certain Changes or Events. . . . . . . . . . . . .
SECTION 4.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.9 Registration Statement and Proxy Statement. . . . . . . . . .
SECTION 4.10 No Violation of Law . . . . . . . . . . . . . . . . . . . . .
SECTION 4.11 Compliance with Instruments . . . . . . . . . . . . . . . . .
SECTION 4.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.13 Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . .
SECTION 4.14 Certain Agreements. . . . . . . . . . . . . . . . . . . . . .
SECTION 4.15 Labor Controversies . . . . . . . . . . . . . . . . . . . . .
SECTION 4.16 Environmental Matters . . . . . . . . . . . . . . . . . . . .
<PAGE>
SECTION 4.17 Intentionally Left Blank. . . . . . . . . . . . . . . . . . .
SECTION 4.18 NASDAQ; No Appraisal Rights . . . . . . . . . . . . . . . . .
SECTION 4.19 Contracts, Etc. . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.20 Intellectual Property . . . . . . . . . . . . . . . . . . . .
SECTION 4.21 Customers . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.23 Books, Records and Accounts . . . . . . . . . . . . . . . . .
SECTION 4.24 Accounting Matters. . . . . . . . . . . . . . . . . . . . . .
SECTION 4.25 Brokers and Finders . . . . . . . . . . . . . . . . . . . . .
SECTION 4.26 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE V
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 5.1 Organization and Qualification. . . . . . . . . . . . . . . .
SECTION 5.2 Ownership of Subsidiary; No Prior Activities; Assets of
Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.3 Authority; Non-Contravention; Approvals . . . . . . . . . . .
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1 Conduct of Business Prior to Effective Time . . . . . . . . .
SECTION 6.2 Additional Covenants of the Company . . . . . . . . . . . . .
SECTION 6.3 Acquisition Transactions; Break-up Fees . . . . . . . . . . .
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Access to Information . . . . . . . . . . . . . . . . . . . .
SECTION 7.2 Registration Statement and Proxy Statement/Prospectus . . . .
SECTION 7.3 Stockholders' Approval. . . . . . . . . . . . . . . . . . . .
SECTION 7.4 Managed Offering of Affiliates' Shares. . . . . . . . . . . .
SECTION 7.5 NASDAQ National Market. . . . . . . . . . . . . . . . . . . .
SECTION 7.6 Agreement to Cooperate. . . . . . . . . . . . . . . . . . . .
SECTION 7.7 Public Statements . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.8 Corrections to the Proxy Statement/
Prospectus and Registration Statement . . . . . . . . . . . .
SECTION 7.9 Agreements of Affiliates. . . . . . . . . . . . . . . . . . .
SECTION 7.10 Assurances Relating to Tax Matters Certificate. . . . . . . .
SECTION 7.11 Disclosure Supplements. . . . . . . . . . . . . . . . . . . .
SECTION 7.12 Satisfaction of Conditions Precedent. . . . . . . . . . . . .
<PAGE>
ARTICLE VIII
CONDITIONS
SECTION 8.1 Conditions to Each Party's Obligations to Effect
the Merger. . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.2 Conditions to Obligations of the Company to Effect
the Merger. . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.3 Conditions to Obligations of Parent and Subsidiary
to Effect the Merger. . . . . . . . . . . . . . . . . . . . .
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . .
SECTION 9.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.4 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.5 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Non-Survival of Representations and Warranties. . . . . . . .
SECTION 10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.3 Interpretation. . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.4 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.6 Parties In Interest . . . . . . . . . . . . . . . . . . . . .
SECTION 10.7 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.8 Additional Defined Terms. . . . . . . . . . . . . . . . . . .
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION, dated as of April 27, 1995,
as amended and restated as of July 11, 1995
(this "Agreement"), by and among ROBOTIC
VISION SYSTEMS, INC., a Delaware
corporation ("Parent"), RVSI ACQUISITION
CORP., a Delaware corporation and a wholly
owned subsidiary of Parent ("Subsidiary"),
and ACUITY IMAGING, INC., a Delaware
corporation (the "Company").
--------------------
The Boards of Directors of Parent, Subsidiary and the Company have
approved the merger of Subsidiary with and into the Company pursuant to this
Agreement (the "Merger") and the transactions contemplated hereby upon the
terms and subject to the conditions set forth herein.
It is intended that the Merger shall qualify for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended.
It is intended that the Merger shall be recorded for accounting purposes
as a pooling of interests.
Parent, Subsidiary and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.2 below),
Subsidiary shall be merged with and into the Company in accordance with the
provisions of Section 251 of the Delaware General Corporation Law (the "DGCL")
and with the effect provided in Sections 259 - 261 of the DGCL, and the
separate existence of Subsidiary shall thereupon cease. The Company shall be
the surviving corporation in the Merger (hereinafter sometimes referred to as
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Delaware. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time of the Merger, (a) Surviving
<PAGE>
Corporation shall possess all assets and property of every description, and
every interest therein, wherever located, and the rights, privileges,
immunities, powers, franchises and authority, of a public as well as of a
private nature, of each of Subsidiary and the Company, (b) all obligations
belonging to or due each of Subsidiary and the Company shall be vested in, and
become the obligations of, Surviving Corporation without further act or deed,
(c) title to any real estate or any interest therein vested in either of
Subsidiary and the Company shall not revert or in any way be impaired by
reason of the Merger, (d) all rights of creditors and all liens upon any
property of any of Subsidiary and the Company shall be preserved unimpaired,
and (e) Surviving Corporation shall be liable for all of the obligations of
each of Subsidiary and the Company and any claim existing, or action or
proceeding pending, by or against either of Subsidiary and the Company may be
prosecuted to judgment with right of appeal, as if the Merger had not taken
place.
SECTION 1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at such time (the "Effective Time") as a Certificate of Merger, in
the form set forth as Exhibit I hereto, is filed with the Secretary of State
of the State of Delaware (the "Merger Filing"), such filing shall be made
simultaneously with or as soon as practicable after the closing of the
transactions contemplated by this Agreement in accordance with Section 3.5.
ARTICLE II
SURVIVING AND PARENT CORPORATIONS
SECTION 2.1 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of Subsidiary as in effect immediately prior to the Effective
Time shall be in the form of the attached Exhibit II and shall be the
Certificate of Incorporation of Surviving Corporation, until duly amended in
accordance with the terms thereof and of the DGCL.
SECTION 2.2 BY-LAWS. The By-laws of Subsidiary as in effect immediately
prior to the Effective Time shall be in the form of the attached Exhibit III
and shall be the By-laws of Surviving Corporation after the Effective Time,
and thereafter may be amended in accordance with their terms and as provided
by the Certificate of Incorporation of Surviving Corporation and the DGCL.
SECTION 2.3 DIRECTORS. The sole director of Subsidiary at the Effective
Time shall, from and after the Effective Time, be the sole director of
Surviving Corporation until his successor has been duly elected or appointed
and qualified or until his earlier death, resignation or removal in accordance
with Surviving Corporation's Certificate of Incorporation and By-laws.
SECTION 2.4 OFFICERS. The officers of the Company at the Effective Time
shall, from and after the Effective Time, be the officers of Surviving
Corporation until their
2
<PAGE>
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with Surviving Corporation's
Certificate of Incorporation and By-Laws.
SECTION 2.5 ADDITIONAL DIRECTOR OF PARENT. At the Effective Time, one
designee of the current directors of the Company, reasonably acceptable to
Parent (the "Company Designee"), shall be appointed a director of Parent, as an
addition to Parent's seven-member Board of Directors, to serve until Parent's
first annual meeting of stockholders next following the Effective Time (the
"1996 Annual Meeting") and until his successor has been duly elected or
appointed and qualified or until his earlier death, resignation or removal in
accordance with Parent's Certificate of Incorporation and By-Laws. At the sole
discretion of the Parent, an additional Company Designee may be appointed a
director of Parent to serve until the 1996 Annual Meeting and until his
successor has been duly elected or appointed and qualified or until his earlier
death, resignation or removal.
SECTION 2.6 FURTHER ACTION. If at any time after the Effective Time,
Parent shall consider that any further deeds, assignments, conveyances,
agreements, documents, instruments or assurances in law or any other things
are necessary or desirable to vest, perfect, confirm or record in Surviving
Corporation the title to any property, rights, privileges, powers and
franchises of the Company by reason of, or as a result of, the Merger, or
otherwise to carry out the provisions of this Agreement, the officers of the
Company shall execute and deliver, upon Parent's reasonable request, any
instruments or assurances, and do all other things necessary or proper to
vest, perfect, confirm or record title to such property, rights, privileges,
powers and franchises in Surviving Corporation, and otherwise to carry out the
provisions of this Agreement.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1 CONVERSION OF COMPANY SHARES IN THE MERGER. At the
Effective Time, by virtue of the Merger and without any action on the part of
any holder of any capital stock of the Company:
(a) each share of Common Stock, $.01 par value, of the Company ("Company
Common Stock"), issued and outstanding at the Effective Time, subject to the
terms and conditions of this Agreement, shall be converted (except as provided
in Section 3.1(b)), without any further action, into the right to receive, and
become exchangeable for, 0.766 of a share (as adjusted as provided below, the
"Exchange Ratio") of Common Stock, $.01 par value, of Parent ("Parent Common
Stock"), subject to the payment of cash adjustments in lieu of the issuance of
fractional shares as provided in Section 3.4 of this Agreement; PROVIDED,
HOWEVER, that if the average of the closing prices of Parent Common Stock on the
Nasdaq National Market for the 20 trading days ending on (and including) the
third trading day immediately prior to the date of the special meeting of the
Company's shareholders called to approve the Merger (the "Average Closing
Price") is greater than $14.50, then the Exchange Ratio shall be equal to an
amount determined as follows:
11.107/Average Closing Price = Exchange Ratio (PROVIDED that
in no event shall the Exchange Ratio be less than .555375)
3
<PAGE>
and if the Average Closing Price is less than $10.00 then the Exchange
Ratio shall be equal to an amount determined as follows:
7.66/Average Closing Price = Exchange Ratio (PROVIDED that
in no event shall the Exchange Ratio exceed .925626)
and PROVIDED, FURTHER, that if, prior to the Effective Time, Parent
should split, reclassify or combine Parent Common Stock, or pay or
grant to all stockholders of Parent a stock dividend or other stock
distribution in Parent Common Stock or rights to acquire Parent Common
Stock, or otherwise change Parent Common Stock into any other
securities, then the Exchange Ratio will be appropriately adjusted to
reflect such split, reclassification, combination, stock dividend or
other distribution or change;
(b) each share of Company Common Stock, if any, owned by Parent or
any subsidiary of Parent or the Company immediately prior to the
Effective Time shall be cancelled and shall cease to exist from and
after the Effective Time; and
(c) As of the Effective Time, Parent shall assume and thereafter
be solely responsible for satisfying, in accordance with their
respective terms (except as modified herein), the Company's obligations
with respect to each option to purchase shares of Company Common Stock
(a "Company Option") referred to in Section 4.2(b) of the Company's
Disclosure Schedule (including but not limited to the options there
referred to and granted under the Company's Employee Stock Purchase Plan
(the "ESPP")) and outstanding immediately prior to the Effective Time.
From and after the Effective Time, this Agreement shall be the sole
required evidence of such assumption, regardless of whether a new
instrument is issued by Parent in exchange for the instrument
representing any Company Option.
From and after the Effective Date, each Company Option shall entitle the
holder thereof to purchase from the Parent up to that number of shares of
Parent Common Stock determined by multiplying the number of shares of Company
Common Stock subject to such Company Option by the Exchange Ratio, at a price
per share of Parent Common Stock:
(i) determined, in the case of any Company Option other than one
granted under the ESPP, by dividing the exercise price per share of
Company Common Stock provided for in such Company Option by the Exchange
Ratio, and
(ii) equal to, in the case of any Company Option granted under
the ESPP, eighty-five percent of the lesser of (A) the "fair market
value" (as defined in the ESPP) of a share of Company Common Stock as of
the date of the grant of such Option, divided by the Exchange Ratio, and
(B) the fair market value of a share of Parent Common Stock on the date
of the exercise of such Option;
PROVIDED, HOWEVER, that no scrip or fractional shares shall be issued in
connection with the exercise of any Company Option. In lieu of any such
fractional share interests, each holder of a Company Option who would
otherwise be entitled to receive a fraction of a share of Parent Common Stock
upon exercise of such Company Option pursuant to this Section 3.1(c) shall be
paid an amount in cash therefor (without interest) equal to the fractional
interest of such holder in a share of Parent Common Stock multiplied by (i) in
the case of any such Company Option granted under the ESPP, the last reported
sale
4
<PAGE>
price of Parent Common Stock on the NASDAQ National Market on the date
such Company Option is exercised, or (ii) in the case of all other Company
Options, the average of the last reported sale prices of Parent Common Stock
on the NASDAQ National Market for the 20 consecutive trading days ending with
the third trading day prior to the Closing Date.
Except as otherwise specifically provided in this Section 3.1(c), each
Company Option shall remain subject after the Effective Time to the same terms
and conditions (including without limitation those with respect to the dates
on which, and with respect to each such date, the proportionate extent to
which, such Company Option may be exercised) as were applicable to such
Company Option immediately prior to the Effective Time.
As soon as is practicable following the Effective Time, Parent shall
prepare and file with the Securities and Exchange Commission ("SEC") a
registration statement on Form S-8 covering the issuance and sale by Parent of
the shares of Parent Common Stock subject to all Company Options, and shall
use its best efforts to cause such registration statement to remain effective
for so long as any Company Options remain outstanding.
SECTION 3.2 CONVERSION OF SUBSIDIARY SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of any
capital stock of Subsidiary, each issued and outstanding share of Common
Stock, $.01 par value, of Subsidiary ("Subsidiary Common Stock") shall be
converted into one share of Common Stock, $.01 par value, of Surviving
Corporation ("Surviving Corporation Common Stock").
SECTION 3.3 EXCHANGE OF CERTIFICATES.
(a) From and after the Effective Time, each holder of an
outstanding certificate which immediately prior to the Effective Time
represented shares of Company Common Stock (the "Company Certificates")
shall cease to have any right as a stockholder of the Company and such
holder's sole rights shall be to receive in exchange for such holder's
Company Certificates, upon surrender thereof to an exchange agent
selected by Parent (the "Exchange Agent"), a certificate or certificates
representing the number of whole shares of Parent Common Stock which
such holder is entitled to receive pursuant to Section 3.1 plus cash in
lieu of fractional shares, as provided in Section 3.4 hereof.
Notwithstanding any other provision of this Agreement, (i) until holders
of Company Certificates theretofore representing shares of Company
Common Stock have surrendered such certificates for exchange as provided
herein, (A) no dividends shall be paid by the Company with respect to
any shares represented by such Company Certificates and (B) no payment
for fractional shares shall be made, PROVIDED, in each case, that upon
surrender of such Company Certificates, the surrendering holder shall
receive all such dividends and payments for fractional shares and (ii)
without regard to when such Company Certificates are
5
<PAGE>
surrendered for exchange as provided herein, no interest shall be paid on
any such dividend or payment for fractional shares. If any certificate for
shares of Parent Common Stock is to be issued in a name other than that in
which the certificate for shares of Company Common Stock surrendered in
exchange therefor is registered, it shall be a condition of such
exchange that the person requesting such exchange shall pay any transfer
or other taxes required by reason of the issuance of certificates for
such shares of Parent Common Stock in a name other than that of the
registered holder of the certificate surrendered, or shall establish to
the satisfaction of Parent that such tax has been paid or is not
applicable. No transfers of Company Common Stock shall be made on the
stock transfer books of the Company after the close of business on the
day prior to the date of the Effective Time.
(b) At or before the Effective Time, Parent shall make available
to the Exchange Agent a sufficient number of certificates representing
shares of Parent Common Stock required to effect the exchange referred
to in Section 3.3(a).
(c) Promptly after the Effective Time, Parent shall cause the
Exchange Agent to mail to each holder of record of the Company
Certificates (i) a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon actual delivery of the Company
Certificates to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Company Certificates in exchange for
certificates representing shares of Parent Common Stock. Upon surrender
of the Company Certificates for cancellation to the Exchange Agent,
together with a duly executed letter of transmittal and such other
documents as the Exchange Agent shall reasonably require, the holder of
such Company Certificates shall be entitled to receive in exchange
therefor one or more certificates representing that number of whole
shares of Parent Common Stock into which the shares of Company Common
Stock theretofore represented by the Company Certificates so surrendered
shall have been converted pursuant to the provisions of Section 3.1, in
addition to payment for any fractional share of Parent Common Stock, and
the Company Certificates so surrendered shall forthwith be cancelled.
Until so surrendered, the Company Certificates shall represent solely
the right to receive the number of whole shares of Parent Common Stock
that shall be issued in exchange for Company Common Stock and any cash
in lieu of the fractional Parent Common Stock as contemplated by Section
3.4. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of shares of Company Common
Stock for any shares of Parent Common Stock delivered to a public
official as required by applicable abandoned property, escheat or
similar laws. The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to Parent Common Stock
held by it from time to time hereunder.
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(d) From and after the Effective Time, Parent shall be entitled to
treat outstanding certificates which immediately prior to the Effective
Time represented shares of Subsidiary Common Stock as evidencing the
ownership of the number of full shares of Surviving Corporation Common
Stock, which the holder of the shares of Subsidiary Common Stock
represented by such certificates is entitled to receive pursuant to
Section 3.2, and the holder of such certificates shall not be required
to surrender such certificates for exchange. Shares of Surviving
Corporation Common Stock which the holder of shares of Subsidiary Common
Stock is entitled to receive in the Merger shall be deemed to have been
issued at the Effective Time.
SECTION 3.4 NO FRACTIONAL SHARES. Notwithstanding any other provision
of this Agreement, no certificates or scrip for fractional shares of Parent
Common Stock shall be issued in the Merger and no Parent Common Stock
dividend, reclassification, stock split or interest shall be paid or have
effect with respect to any fractional interest in a share of Parent Common
Stock, and such fractional interests shall not entitle the owner thereof to
vote or to any other rights of a security holder. In lieu of any such
fractional shares, each holder of Company Common Stock who would otherwise
have been entitled to receive a fraction of a share of Parent Common Stock
upon surrender of the Company Certificates for exchange pursuant to this
Article III will be paid an amount in cash therefor (without interest) equal
to the average of the last reported sale prices of Parent Common Stock on the
National Association of Securities Dealers, Inc. Automated Quotation
System-National Market (the "NASDAQ National Market") for each of the twenty
consecutive trading days ending with the third trading day prior to the
Closing Date (as defined in Section 3.5) multiplied by the fractional interest
of such stockholder in a share of Parent Common Stock. For purposes of
determining whether and to what extent a particular stockholder is entitled to
receive cash adjustments pursuant to this Section 3.4, shares of record held
by such holder and represented by two or more Company Certificates shall be
aggregated.
SECTION 3.5 CLOSING. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Parker
Duryee Rosoff & Haft, 529 Fifth Avenue, New York, New York 10017, on the third
business day following the date on which the last of the conditions set forth
in Article VIII hereof is fulfilled or waived, or at such other time and place
as Parent and the Company shall agree (the date on which the closing occurs
being the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each of Parent and the Company hereby represents and warrants to the
other as follows (subject in each case to such exceptions as are set forth or
cross-referenced in the representing party's attached Disclosure Schedule in
the labeled section
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corresponding to the caption of the representation or warranty to which such
exceptions relate):
SECTION 4.1 ORGANIZATION AND QUALIFICATION.
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the
requisite corporate power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being
conducted.
(b) It is qualified to do business and is in good standing as a
foreign corporation in all jurisdictions set forth in Section 4.1(b) of
its Disclosure Schedule, and to its knowledge, such jurisdictions are
the only ones in which the properties owned, leased or operated by it or
the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified and in good
standing will not have a Material Adverse Effect on it.
(c) True, accurate and complete copies of its Certificate of
Incorporation and By-laws, in each case as in effect on the date hereof,
including all amendments thereto, have heretofore been delivered to the
other.
SECTION 4.2 CAPITALIZATION.
(a) Its authorized and outstanding capital stock are as set forth
in Section 4.2(a) of its Disclosure Schedule. All of its issued and
outstanding shares of capital stock are validly issued and are fully
paid, nonassessable and free of preemptive rights. All outstanding
shares of its capital stock and other securities were issued in
compliance with all applicable laws and regulations.
(b) Attached as Section 4.2(b) of its Disclosure Schedule is a
list of outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating it to
issue, deliver or sell or cause to be issued, delivered or sold,
additional shares of its capital stock or obligating it to grant, extend
or enter into any such agreement or commitment. There are no voting
trusts, proxies or other agreements or understandings to which it is a
party or by which it is bound with respect to the voting of any shares
of its capital stock. Subsequent to January 28, 1995, it has not (i)
issued any shares of its capital stock except upon exercise or
conversion of the above-described stock equivalents or (ii) issued any
additional stock equivalents.
SECTION 4.3 SUBSIDIARIES. Attached as Section 4.3 of its Disclosure
Schedule is a list of its subsidiaries. As used in this Agreement, the term
"subsidiary" shall mean
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any corporation or other entity of which the relevant party, directly or
indirectly, controls or which the relevant party owns, directly or indirectly,
50% or more of the stock or other voting interests, the holders of which are,
ordinarily or generally, in the absence of contingencies (which contingencies
have not occurred) or understandings (which understandings have not yet been
required to be performed) entitled to vote for the election of a majority of the
board of directors or any similar governing body. It is not a partner in any
partnership or joint venture and will not become one prior to the Effective
Time.
SECTION 4.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) It has full corporate power and authority to enter into this
Agreement and, subject to the Company Stockholders' Approval or the
Parent Stockholders' Approval, as the case may be, (each as defined in
Section 7.3 below) and the Required Statutory Approvals (as defined in
Section 4.4(c) below), to consummate the transactions contemplated
hereby. Its execution and delivery of this Agreement, and its
consummation of the transactions contemplated hereby, have been duly
authorized by its Board of Directors and no other corporate proceedings
on its part are necessary to authorize its execution and delivery of
this Agreement and its consummation of the transactions contemplated
hereby, except for the Company Stockholders' Approval or the Parent
Stockholders' Approval, as the case may be, and the obtaining of the
Required Statutory Approvals. This Agreement has been duly and validly
executed and delivered by it, and constitutes its valid and binding
agreement, enforceable against it in accordance with its terms, except
that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and (ii) general equitable
principles.
(b) Its execution and delivery of this Agreement do not, and its
consummation of the transactions contemplated hereby will not, violate,
conflict with or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of its
properties or assets under any of the terms, conditions or provisions of
(i) its Certificate of Incorporation or By-Laws, (ii) subject to
obtaining the Required Statutory Approvals and the receipt of the
Company Stockholders' Approval or the Parent Stockholders' Approval, as
the case may be, any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any
court or governmental authority applicable to it or any of its
properties or assets, or (iii) any note, bond, mortgage, indenture, deed
of trust, license, franchise, permit, concession, contract, lease or
other instrument, obligation or agreement of any kind to which it is now
a party or by which it or any of its properties or assets may be bound,
excluding from the foregoing clauses (ii) and (iii), such violations,
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conflicts, breaches, defaults, terminations, accelerations or creations
of liens, security interests, charges or encumbrances that would not, in
the aggregate, have a Material Adverse Effect on it.
(c) Except for (i) the filing of the Proxy Statement/Prospectus
(as defined in Section 4.9 below) with the SEC pursuant to the
Securities Act of 1933, as amended (the Securities Act"), and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii)
the declaration of the effectiveness thereof by the SEC and filings with
various state blue sky authorities, and (iii) the making of the Merger
Filing with the Secretary of State of the State of Delaware and the
Recorder of the County of New Castle, Delaware in connection with the
Merger (the filings and approvals referred to in clauses (i) through
(iii) are collectively referred to as the "Required Statutory
Approvals"), no declaration, filing or registration with, or notice to,
or authorization, consent or approval of, any governmental or regulatory
body or authority is necessary for its execution and delivery of this
Agreement or its consummation of the transactions contemplated hereby,
other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as
the case may be, would not, in the aggregate, have a Material Adverse
Effect on it.
SECTION 4.5 REPORTS AND FINANCIAL STATEMENTS.
(a) It has filed with the SEC all forms, statements, reports and
documents (including all exhibits, amendments and supplements thereto)
required to be filed by it under each of the Securities Act and the
Exchange Act and the respective rules and regulations thereunder, all of
which complied in all material respects with all applicable requirements
of the appropriate act and the rules and regulations thereunder, other
than such filings which if not made or not made in compliance with all
applicable requirements, would not, in the aggregate, have a Material
Adverse Effect on it. It has delivered to the other copies of its SEC
Reports. As of their respective dates, its SEC Reports did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Its audited consolidated financial statements and unaudited
interim consolidated financial statements included in its SEC Reports
(its "Financial Statements") have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
and fairly present its financial condition as of the dates thereof and
the results of its operations, cash flows and changes in financial
condition for the periods then ended, subject, in the case of the
unaudited interim financial statements, to the absence of notes thereto
and normal year-end audit adjustments. Upon filing thereof with the
SEC, (i) the Company shall deliver to Parent any Quarterly Report on
Form 10-QSB so filed by it, in each case together with a certificate
containing the representations and warranties contained in this Section
4.5(a) with respect to such Annual or Quarterly Report, and (ii) Parent
shall deliver to the Company
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a copy of any Quarterly Report on Form 10-Q so filed by it, in each case
together with a certificate containing the representations and warranties
contained in this Section 4.5(a) with respect to such Quarterly Report.
(b) All of its accounts receivable included in its Financial
Statements reflect actual transactions, have arisen in the ordinary
course of business, will not, to its knowledge, be subject to offset or
deduction and will, to its knowledge, be collectible at the aggregate
recorded amounts thereof net of any reserves established in a manner
consistent with its past practices, all as reflected in its Financial
Statements.
SECTION 4.6 ABSENCE OF UNDISCLOSED LIABILITIES. It did not have at
December 31, 1994 and has not incurred since that date any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any
nature, (a) except liabilities, obligations or contingencies (i) which are
accrued or reserved against in its Financial Statements as of such date or
reflected in the notes thereto or (ii) which were incurred after such date and
were incurred in the ordinary course of business and consistent with past
practices or in connection with the transactions hereby contemplated and (b)
except for any liabilities, obligations or contingencies which (i) would not,
in the aggregate, have, or be reasonably expected to have, a Material Adverse
Effect on it or (ii) have been discharged or paid in full prior to the date
hereof.
SECTION 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1994 there has not been any Material Adverse Effect, or any event which would
reasonably be expected to have a Material Adverse Effect, individually or in
the aggregate, with respect to it.
SECTION 4.8 LITIGATION. Except as disclosed in its SEC Reports, there
are no claims, suits, actions or proceedings pending or, to its knowledge,
threatened against, it before or by any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator, except
for such claims, suits, actions or proceedings which, alone or in the
aggregate, would reasonably be expected not to have, a Material Adverse Effect
on it. It is not subject to any judgment, decree, injunction, rule or order
specifically naming it of any court, governmental department, commission,
agency, instrumentality, authority, or arbitrator.
SECTION 4.9 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by it for inclusion in (a) the Registration
Statement on Form S-4 to be filed under the Securities Act with the SEC by
Parent in connection with the Merger for the purpose of registering the shares
of Parent Common Stock to be issued in the Merger (the "Registration
Statement") or (b) the proxy or information statement to be distributed in
connection with (i) the Company's meeting of stockholders or (ii) Parent's
meeting of stockholders, in either case to vote upon this Agreement and the
transactions contemplated hereby (collectively, the "Proxy Statement" and,
together with the prospectus included in the Registration Statement, the
"Proxy Statement/Prospec-
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tus") will, in the case of the Proxy Statement/Prospectus or any amendments
thereof or supplements thereto, at the time of the mailing of the Proxy
Statement/Prospectus and any amendments or supplements thereto, and at the time
of the meetings of each of the stockholders of the Company and of Parent to be
held in connection with the transactions contemplated by this Agreement, or, in
the case of the Registration Statement, as amended or supplemented, at the time
it becomes effective and at the time of such meetings, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
SECTION 4.10 NO VIOLATION OF LAW. It is not in violation of and has
not been given notice or been charged with any violation of, any law, statute,
order, rule, regulation, ordinance or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any governmental
or regulatory body or authority, except for violations which, in the
aggregate, do not have, and would not reasonably be expected to have, a
Material Adverse Effect on it. It has not received any written notice that
any investigation or review with respect to it by any governmental or
regulatory body or authority is pending or threatened, other than, in each
case, those the outcome of which, as far as reasonably can be foreseen, would
not reasonably be expected to have, a Material Adverse Effect on it. It has
all permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals necessary to conduct its
business as presently conducted (collectively its "Permits"), except for
permits, licenses, franchises, variances, exemptions, orders, authorizations,
consents and approvals the absence of which, alone or in the aggregate, would
not have a Material Adverse Effect on it. It (a) has duly and timely filed
all reports and other information required to be filed with any governmental
or regulatory authority in connection with its Permits, and (b) is not in
violation of the terms of any of its Permits, except for omissions or delays
in filings, reports or violations which, alone or in the aggregate, would not
have a Material Adverse Effect on it.
SECTION 4.11 COMPLIANCE WITH INSTRUMENTS. It is not in breach or
violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by
a third party, could result in a default under its Certificate of
Incorporation or By-Laws.
SECTION 4.12 TAXES.
(a) It has (i) duly and timely filed with the appropriate
governmental authorities all Tax Returns (as defined in subsection (c)
below) required to be filed by it, and has not filed for an extension to
file any Tax Returns and such Tax Returns are true, correct and complete
in all material respects, and (ii) duly paid in full or made adequate
provision for the payment of all Taxes (as defined in subsection (b)
below) shown to be due on such Tax Returns. Its Tax Returns referred to
in clause (i) hereinabove have been examined by the United States
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Internal Revenue Service (the "IRS") or the appropriate governmental
authority or the period of assessment of the Taxes in respect of which
such Tax Returns were required to be filed has expired, all deficiencies
asserted or assessments made as a result of such examinations have been
paid in full and no proceeding or examination by or in front of the
relevant governmental authority in connection with the examination of
any of the Tax Returns referred to in clause (i) hereinabove is
currently pending. No claim has been made in writing to it by any
authority in a jurisdiction where it does not file a Tax Return that it
is or may be subject to Tax in such jurisdiction. No waiver of statutes
of limitation have been given by or requested in writing to it with
respect to any Taxes. It has not agreed to any extension of time with
respect to any Tax deficiency. The liabilities and reserves for Taxes
reflected in its balance sheet as of December 31, 1994 will be adequate
to cover all Taxes for all periods ending on or prior to such respective
dates, except for the payment of such taxes which, alone or in the
aggregate, would not have a Material Adverse Effect on it, and there are
no liens for Taxes upon any property or asset of it, except for liens
for Taxes not yet due. There are no unresolved issues of law or fact
arising out of a notice of deficiency, proposed deficiency or assessment
from the IRS or any other governmental taxing authority with respect to
its Taxes which, if decided adversely, singly or in the aggregate, would
have a Material Adverse Effect on it. It is not a party to any
agreement providing for the allocation or sharing of Taxes with any
entity. It has not, with regard to any assets or property held, acquired
or to be acquired by it, filed a consent to the application of Section
341(f) of the Internal Revenue Code of 1986, as amended (the "Code"). It
has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party, except for such
taxes which, alone or in the aggregate, would not have a Material
Adverse Effect on it. No Tax is required to be withheld by it pursuant
to Section 1445 of the Code as a result of the transfer contemplated by
this Agreement. As a result of the Merger, it will not be obligated to
make a payment to an individual that would be a "parachute payment" to a
"disqualified individual" as those terms are defined in Section 28OG of
the Code without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the
future.
(b) For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including,
without limitation, income, gross receipts, excise, property, sales,
withholdings, social security, occupation, use, service, service use,
license, payroll, franchise, transfer and recording taxes, fees and
charges, imposed by the United States, or any state, local or foreign
government or subdivision or agency thereof whether computed on a
separate, consolidated, unitary, combined or any other basis; and such
term shall include any interest, fines, penalties or additional amounts
attributable or imposed or with respect to any such taxes, charges,
fees, levies or other assessments.
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(c) For purposes of this Agreement, the term "Tax Return" shall
mean any return, report or other document or information required to be
supplied to a taxing authority in connection with Taxes.
SECTION 4.13 EMPLOYEE BENEFIT PLANS; ERISA.
(a) At the date hereof, it does not maintain or contribute to any
employee benefit plans, programs, arrangements and practices (such
plans, programs, arrangements and practices being referred to as its
"Plans"), including employee benefit plans within the meaning set forth
in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, and all regulations promulgated thereunder, as in effect
from time to time ("ERISA"), or any written employment contracts
providing for an annual base salary in excess of $100,000 and having a
term in excess of one year, which contracts are not immediately
terminable without penalty or further liability, or other similar
arrangements for the provision of benefits (excluding any "Multiemployer
Plan" within the meaning of Section 3(37) of ERISA or a "Multiple
Employer Plan" within the meaning of Section 413(c) of the Code, and all
regulations promulgated thereunder, as in effect from time to time).
Section 4.13(a) of its Disclosure Schedule lists all Multiemployer Plans
and Multiple Employer Plans which it maintains or to which it makes
contributions. It does not have any obligation to create any additional
such plan or to amend any such plan so as to increase benefits
thereunder, except as required under the terms of its Plans, under
existing collective bargaining agreements or to comply with applicable
law.
(b) (i) There have been no prohibited transactions within the
meaning of Section 406 or 407 of ERISA or Section 4975 of the Code with
respect to any of its Plans that could result in penalties, taxes or
liabilities which, singly or in the aggregate, could have a Material
Adverse Effect on it, (ii) except for premiums due, there is no
outstanding liability in excess of $25,000, whether measured alone or in
the aggregate, under Title IV of ERISA with respect to any of its Plans,
(iii) neither the Pension Benefit Guaranty Corporation nor any plan
administrator has instituted proceedings to terminate any of its Plans
subject to Title IV of ERISA other than in a "standard termination"
described in Section 4041 (b) of ERISA, (iv) none of its Plans has
incurred any "accumulated funding deficiency" (as defined in Section 302
of ERISA and Section 412 of the Code), whether or not waived, as of the
last day of the most recent fiscal year of each of its Plans ended prior
to the date of this Agreement, (v) the current present value of all
projected benefit obligations under each of its Plans which is subject
to Title IV of ERISA did not, as of its latest valuation date, exceed
the then current value of the assets of such plan allocable to such
benefit liabilities by more than the amount, if any, disclosed in its
latest SEC Report (based upon reasonable actuarial assumptions currently
utilized for such Plan), (vi) each of its Plans has been operated and
administered in all material respects in accordance with applicable laws
during the period of time covered by the applicable statute of
limitations, (vii) each of its
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Plans which is intended to be "qualified" within the meaning of Section
401(a) of the Code has been determined by the IRS to be so qualified and
such determination has not been modified, revoked or limited by failure to
satisfy any condition thereof or by a subsequent amendment thereto or a
failure to amend, except that it may be necessary to make additional
amendments retroactively to maintain the "qualified" status of such Plan,
and the period for making any such necessary retroactive amendments has not
expired, (viii) with respect to Multiemployer Plans, it has not, since
December 31, 1982, made or suffered a "complete withdrawal" or a "partial
withdrawal," as such terms are respectively defined in Sections 4203, 4204
and 4205 of ERISA and, to its knowledge, no event has occurred or is
expected to occur which presents a material risk of a complete or partial
withdrawal under said Sections 4203, 4204 and 4205, (ix) there are no
pending or, to its knowledge, threatened or anticipated claims involving
any of its Plans other than claims for benefits in the ordinary course,
(x) it has no current liability in excess of $50,000, whether measured
alone or in the aggregate, for plan termination or withdrawal (complete or
partial) under Title IV of ERISA based on any plan to which any entity that
would be deemed one employer with it under Section 4001 of ERISA or Section
414 of the Code contributed during the period of time covered by the
applicable statute of limitations (its "Controlled Group Plans"), and it
does not reasonably anticipate that any such liability will be asserted
against it, none of its Controlled Group Plans has an "accumulated funding
deficiency" (as defined in Section 302 of ERISA and 412 of the Code), and
none of its Controlled Group Plans has an outstanding funding waiver which
could result in the imposition of liens, excise taxes or liability on it in
excess of $25,000 whether measured alone or in the aggregate, and (xi) none
of its Plans provide welfare benefits to employees and/or their dependents
subsequent to termination of employment except as required by Title I, Part
6 of ERISA or applicable state insurance laws.
SECTION 4.14 CERTAIN AGREEMENTS.
(a) As of the date hereof, it is not a party to any oral or
written (i) consulting or similar agreement with any present or former
director, officer or employee or any entity controlled by any such
person not terminable on thirty days' or less notice involving the
payment of not more than $100,000 per annum, (ii) agreement with any
executive officer or other key employee, the benefits of which are
contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving it of the nature contemplated by
this Agreement, (iii) agreement with respect to any executive officer or
other key employee of it providing any term of employment or
compensation guarantee extending for a period longer than one year and
for the payment in excess of $100,000 per annum, or (iv) agreement or
plan, including any stock option plan, stock appreciation right plan,
restricted stock plan or stock purchase plan, any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated
by this
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Agreement or the value of any of the benefits of which will be
calculated on the basis of the transactions contemplated by this
Agreement.
(b) It is not indebted for money borrowed, either directly or
indirectly, from any of its officers, directors, or any Affiliate (as
defined below), in any amount whatsoever, nor are any of its officers,
directors, or Affiliates indebted for money borrowed from it; nor are
there any transactions of a continuing nature between it and any of its
officers, directors, or Affiliates (other than by or through the regular
employment thereof by it) not subject to cancellation which will
continue beyond the Effective Time, including, without limitation, use
of its assets for personal benefit with or without adequate
compensation. For purposes of this Agreement, the term "Affiliate" shall
mean any person that, directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control
with, the person specified. As used in the foregoing definition, the
term (i) "control" shall mean the power through the ownership of voting
securities, contract or otherwise to direct the affairs of another
person and (ii) "person" shall mean an individual, firm, trust,
association, corporation, partnership, government (whether federal,
state, local or other political subdivision, or any agency, or bureau of
any of them) or other entity.
SECTION 4.15 LABOR CONTROVERSIES. It is not a party to any collective
bargaining agreements. There are no controversies pending or, to its
knowledge, threatened between it and any representatives of any of its
employees. To its knowledge, there are no organizational efforts presently
being made involving any of the presently unorganized employees of it. It has
complied in all material respects with all laws relating to the employment of
labor, including, without limitation, any provisions thereof relating to
wages, hours, collective bargaining, and the payment of social security and
similar taxes. No person has, to its knowledge, asserted that it is liable for
any arrears of wages or any taxes or penalties for failure to comply with any
of the foregoing.
SECTION 4.16 ENVIRONMENTAL MATTERS. It is and at all times has been in
compliance with all applicable requirements of Environmental Laws (as defined
below) in connection with the ownership, operation and conditions of its
business, except such instances of non-compliance that, both individually and
in the aggregate, would not have a Material Adverse Effect on it. To its
knowledge, there are no PCB's, underground storage tanks (as defined by
Environmental Laws), asbestos materials or asbestos containing materials in
any property leased, owned or operated by it. It has not released, transported
or arranged for the disposal of any hazardous substance at any facility,
location or site, except in material compliance with all applicable laws. To
its knowledge, no conditions exist or have occurred as a result of which or in
connection with which it could be held liable for damages, response or
remedial costs, fines, penalties, sanctions or equitable relief under any
Environmental Laws, except for such damages, costs, fines, penalties,
sanctions or relief which, alone or in the aggregate, would not have a
Material Adverse Effect on it. As used in this Section 4.16, "Environmental
Laws" means any federal, state or local statute, regulation, ordinance,
permit, order, judgment, decree or
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decision relating to health, safety or the environment. "Release" means any
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, active disposal or passive disposal (including the
abandonment or discarding of barrels, containers or other closed receptacles
containing any hazardous substances). "Hazardous substance" means (a) any
"hazardous substance" as defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, ("CERCLA") and any
implementing regulations, (b) any hazardous or toxic substance, waste or
material within the meaning of any other federal, state or local statute,
regulation, ordinance or decision, (c) any pollutant, contaminant or special
waste regulated by any Environmental Laws, or (d) petroleum, crude oil or any
fraction thereof.
SECTION 4.17 [Intentionally Left Blank]
SECTION 4.18 NASDAQ; NO APPRAISAL RIGHTS. Its Common Stock is, and at
the Effective Time will be, designated as a national market security on the
NASDAQ National Market, in the case of Parent, or designated for listing in
the NASDAQ Small-Cap Market System, in the case of the Company. None of its
(and in the case of Parent, none of Subsidiary's) stockholders will be
entitled to appraisal rights under Delaware law in connection with the Merger.
SECTION 4.19 CONTRACTS, ETC.
(a) Section 4.19(a) of its Disclosure Schedule hereto consists of
a true and complete list of all contracts, agreements, commitments and
other instruments (whether oral or written) to which it is a party that
(i) involve an expenditure by it or require the performance of services
or delivery of goods to, by, through, on behalf of or for the benefit of
it, which in each case, relates to a contract, agreement, commitment or
instrument that requires payments in excess of $100,000 per year and
(ii) involve an obligation for the performance of services or delivery
of goods by it that cannot, or in reasonable probability will not, be
performed within thirty days from the dates as of which these
representations are made.
(b) All of the contracts, agreements, commitments and other
instruments described in Section 4.19 of its Disclosure Schedule are
valid and binding upon it and, to its knowledge, the other parties
thereto and are in full force and effect and, to the knowledge of the
Company, enforceable in accordance with their terms, and neither it nor,
to its knowledge, any other party to any such contract, agreement,
commitment or other instrument has breached any provision of, and, to
its knowledge, no event has occurred,in each case, which, with the lapse
of time or action by a third party, could result in a default under the
terms thereof which, alone or in the aggregate, would provide the basis
for a claim against it in
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excess of $100,000, and, to its knowledge, there are no existing facts or
circumstances which would prevent its contracts and agreements for the sale
of goods by it from maturing in due course into fully collectible accounts
receivable. Neither it nor to its knowledge, any of its stockholders, has
received any payment from any contracting party in connection with or as an
inducement for entering into any contract, agreement, commitment or
instrument except for payment for actual services rendered or to be
rendered, or goods sold or to be sold, by it or such stockholder, as the
case may be.
SECTION 4.20 INTELLECTUAL PROPERTY
(a) Section 4.20(a) of its Disclosure Schedule hereto sets forth
a complete and correct list of all patents, material unpatented
inventions set forth or described in writing, trademarks, servicemarks,
service names, brand names and copyrights, registrations thereof and
applications therefor, material to its business, together with a
complete list of all licenses granted by or to it with respect to any of
the above. All such patents, material unpatented inventions,
trademarks, tradenames, servicemarks, service names, brand names and
copyrights are owned by, or licensed to, it, and in the case of such as
are owned by it, are free and clear of all liens, claims, security
interests and encumbrances of any nature whatsoever. It is not
currently in receipt of any written notice of any violation or
infringements by it of, and it is not knowingly violating or infringing,
the rights of others in any patent, unpatented invention, trademark,
tradename, servicemark, copyright, trade secret, know-how, design,
process or other intangible asset.
(b) (i) Section 4.20(b)(i) of its Disclosure Schedule contains a
complete and accurate list of all computer software owned by it (other
than "off-the-shelf" software that has not been customized for its use)
(its "Owned Software"). It has exclusive title to its Owned Software,
free and clear of all claims, including claims or rights of employees,
agents, consultants, customers, licensees or other parties involved in
the development, creation, documentation, marketing, maintenance,
enhancement or licensing of such computer software. Its Owned Software
is not dependent on any Licensed Software (as defined in subsection (ii)
below) in order to operate fully in the manner in which it is intended.
None of its Owned Software has been published or disclosed to any other
parties, except pursuant to contracts requiring such other parties to
keep such Owned Software confidential. To its knowledge, no such other
party has breached any such obligation of confidentiality.
(ii) Section 4.20(b)(ii) of its Disclosure Schedule contains
a complete and accurate list of all software under which it is a
licensee, lessee or otherwise has obtained the right to use software and
it pays a royalty for the use of such software (its "Licensed
Software"). Section 4.20(b)(ii) of its Disclosure Schedule also sets
forth a list of all license fees, rents, royalties or other charges that
it is
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required or obligated to pay with respect to Licensed Software.
It has the right and license to use its Licensed Software, free and
clear of any limitations or encumbrances, except as may be set forth in
its license agreement with respect thereto. It is in material
compliance with all provisions of any license, lease or other similar
agreement pursuant to which it has rights to use its Licensed Software.
None of its Licensed Software has been incorporated into or made a part
of its Owned Software or any other of its Licensed Software. It has not
published or disclosed any of its Licensed Software to any other party
except, in the case of its Licensed Software which it leases or markets
to others, in accordance with and as permitted by any license, lease or
similar agreement relating to such Licensed Software and except pursuant
to contracts requiring such other parties to keep such Licensed Software
confidential. To its knowledge, no party to whom it has disclosed
Licensed Software has breached such obligation of confidentiality.
(iii) The Owned Software and Licensed Software, together
with any "off-the-shelf" software that has not been customized for its
use, constitute all software material to its business (its "Software").
The transactions contemplated herein will not cause a breach of default
under any licenses, leases or similar agreements relating to its
Software or impair its ability to use its Software subsequent to the
Effective Time in the same manner as its Software is currently used. It
is not knowingly infringing any intellectual property rights of any
other person or entity with respect to its Software, and, to its
knowledge, no other person or entity is infringing any of its
intellectual property rights with respect to its Software.
SECTION 4.21 CUSTOMERS. Section 4.21 of its Disclosure Schedule
attached hereto sets forth a true and correct list of each of its customers
that, within the preceding twelve months, accounted for an aggregate amount of
its gross revenue equal to 5% or more of its revenues. It has not received any
written notice that any such customer has taken or contemplates taking any
steps which could disrupt the business relationship of it with such customer
and would result in the material diminution in the value of its business as a
going concern.
SECTION 4.22 INSURANCE. Section 4.22 of its Disclosure Schedule sets
forth a true and correct list of all insurance policies held by it (indicating
the insurer, type, amount and term of coverage, deductible, and additional
named insureds with respect to each such policy and identifies all claims
currently pending under any of such insurance policies. All of these policies
are in full force and effect and all premiums due thereon have been paid or
accrued and there are no retroactive experience-based premium adjustment
features in any policy.
SECTION 4.23 BOOKS, RECORDS AND ACCOUNTS. Its books, records and
accounts fairly and accurately in all material respects reflect its
transactions and dispositions of assets, and its system of internal accounting
controls is sufficient to
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assure that: (a) transactions are executed in accordance with management's
authorization; (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles, and to maintain accountability for assets; (c) access to assets is
permitted only in accordance with management's authorization; and (d) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
SECTION 4.24 ACCOUNTING MATTERS. Neither it nor, to its knowledge, any
of its Affiliates has, through the date of this Agreement, or will have as of
the Effective Time, taken or agreed to take any action that would prevent
Parent from accounting for the business combination to be effected by the
Merger as a pooling of interests.
SECTION 4.25 BROKERS AND FINDERS. Except for the fees and expenses
payable to its Financial Advisor, neither it nor, to its knowledge, any of its
Affiliates, has employed any investment banker, broker, finder, consultant or
intermediary in connection with the transactions contemplated by this
Agreement which would be entitled to any investment banking, brokerage,
finder's or similar fee or commission in connection with this Agreement or the
transactions contemplated hereby.
SECTION 4.26 DISCLOSURE. No statement contained herein or in any
certificate, schedule, list, exhibit or other instrument furnished to the
other pursuant to the provisions hereof contains or will contain any untrue
statement of any material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.
ARTICLE V
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to the Company as follows (subject
in each case to such exceptions as are set forth or cross-referenced in
Parent's attached Disclosure Schedule in the labeled section corresponding to
the caption of the representation or warranty to which such exceptions
relate):
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SECTION 5.1 ORGANIZATION AND QUALIFICATION
(a) Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
requisite corporate power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being
conducted.
(b) Subsidiary is qualified to do business and is in good standing
in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified and
in good standing will not have a material adverse effect on the
business, operations, properties, assets, condition (financial or
other), results of operations or prospects of Parent on a consolidated
basis.
(c) True, accurate and complete copies of Subsidiary's Certificate
of Incorporation and By-laws, in each case as in effect on the date
hereof, including all amendments thereto, have heretofore been delivered
to the Company.
SECTION 5.2 OWNERSHIP OF SUBSIDIARY; NO PRIOR ACTIVITIES; ASSETS OF
SUBSIDIARY.
(a) Subsidiary was formed by Parent solely for the purpose of
engaging in the transactions contemplated hereby. The authorized
capital stock of Subsidiary consists of 1,000 shares of Subsidiary
Common Stock, of which 1,000 shares are issued and outstanding, all of
which are owned beneficially and of record by Parent.
(b) As of the date hereof and the Effective Time, 100% of the
capital stock of Subsidiary is and will be owned directly by Parent.
Further, there are not as of the date hereof and there will not be at
the Effective Time any outstanding or authorized options, warrants,
calls, rights, commitments or any other agreements of any character to
which Subsidiary is a party, or by which Subsidiary may be bound,
requiring it to issue, transfer, sell, purchase, redeem or acquire any
shares of capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire,
any shares of capital stock of Subsidiary.
(c) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation
or organization and the transactions contemplated thereby and hereby,
Subsidiary has not and will not have incurred, directly or indirectly
through any subsidiary or affiliate, any obligations or liabilities or
engaged in any business or activities of any type or kind whatsoever or
entered into any agreements, instruments, commitments, or other
arrangements with any person or entity.
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(d) Parent will take all action necessary to ensure that
Subsidiary at no time prior to the Effective Time owns any asset other
than an amount of cash necessary to incorporate Subsidiary and to pay
the expenses of the Merger attributable to Subsidiary if the Merger is
consummated.
SECTION 5.3 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Subsidiary has full corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated
hereby. Subsidiary's execution and delivery of this Agreement, and the
consummation by Subsidiary of the transactions contemplated hereby, have
been duly authorized by Subsidiary's Board of Directors and sole
stockholder, respectively, and no other corporate proceedings on the
part of Subsidiary are necessary to authorize Subsidiary's execution and
delivery of this Agreement and consummation by Subsidiary of the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Subsidiary, and constitutes a valid
and binding agreement of Subsidiary enforceable against Subsidiary in
accordance with its terms, except that such enforcement may be subject
to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
(b) The execution and delivery of this Agreement by Subsidiary
does not, and the consummation by Subsidiary of the transactions
contemplated hereby will not, violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required
by, or result in a right of termination or acceleration under, or result
in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Subsidiary under any of the
terms, conditions or provisions of (i) Subsidiary's Certificate of
Incorporation or By-Laws, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license
of any court or governmental authority applicable to Subsidiary or any
of its properties or assets, or (iii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind
to which Subsidiary is now a party or by which Subsidiary or any of its
properties or assets may be bound, excluding from the foregoing clauses
(ii) and (iii), such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security interests,
charges or encumbrances that would not, in the aggregate, have a
Material Adverse Effect on Parent.
(c) No declaration, filing or registration with, or notice to,
or authorization, consent or approval of, any governmental or regulatory
body or authority is necessary for the execution and delivery of this
Agreement by Subsidiary or the consummation by Subsidiary of the
transactions contemplated
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hereby, other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as
the case may be, would not, in the aggregate, have a Material Adverse
Effect on Parent.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1 CONDUCT OF BUSINESS PRIOR TO EFFECTIVE TIME. Each of Parent
(for itself and the Subsidiary) and the Company hereby covenants and agrees as
follows, from and after the date of this Agreement and until the Effective
Time, except as otherwise specifically consented to in writing by the other
party:
(a) It shall conduct its business in the ordinary and usual course
of business and consistent with past practice;
(b) It shall not (i) split, combine or reclassify its outstanding
capital stock or declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise, (ii) spin-off any assets
or businesses, (iii) engage in any transaction for the purpose of
effecting a recapitalization, or (iv) engage in any transaction or
series of related transactions which has a similar effect to any of the
foregoing;
(c) It shall not issue, sell, pledge or dispose of, or agree to
issue, sell pledge or dispose of, any additional shares of, or any
options, warrants or rights of any kind to acquire any shares of its
capital stock of any class or any debt or equity securities convertible
into or exchangeable for such capital stock or amend or modify the terms
and conditions of any of the foregoing, except that it (i) may issue
shares upon exercise of outstanding options, warrants or stock purchase
rights and (ii) grant options, warrants and stock purchase rights, and
issue shares upon exercises thereof, in accordance with past practices
in numbers and exercise prices consistent therewith;
(d) It shall not (i) redeem, purchase, acquire or offer to
purchase or acquire any shares of its capital stock, other than as
required by the governing terms of such securities, (ii) take any action
(either before or after the Effective Time) which would jeopardize the
treatment of the Merger as a "reorganization" within the meaning of
Section 368(a) of the Code or as a "pooling of interests" for accounting
purposes, (iii) take or fail to take any action which action or failure
to take action would cause the Company or its stockholders (except to
the extent that any stockholders receive cash in lieu of fractional
shares) to recognize gain or loss for federal income tax purposes as a
result of the consummation of the Merger, (iv) make any acquisition of
any material assets (except in the ordinary course of business) or
businesses, (v) sell any material assets (except in the
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ordinary course of business) or businesses, or (vi) enter into any
contract, agreement, commitment or arrangement to do any of the foregoing;
(e) It shall use reasonable efforts to preserve intact its
business organization and goodwill, keep available the services of its
present officers and key employees, and preserve the goodwill and
business relationships with suppliers, distributors, customers, and
others having business relationships with it, and not engage in any
action, directly or indirectly, with the intent to impact adversely the
transactions contemplated by this Agreement;
(f) It shall confer on a regular basis with one or more
representatives of the other to report on material operational matters
and the general status of ongoing operations; and
(g) it shall file with the SEC all forms, statements, reports and
documents (including all exhibits, amendments and supplements thereto)
required to be filed by it pursuant to the Exchange Act.
SECTION 6.2 ADDITIONAL COVENANTS OF THE COMPANY. The Company hereby
covenants and agrees, from and after the date of this Agreement and until the
Effective Time, except as otherwise specifically consented to in writing by
Parent, the Company shall:
(a) not amend or propose to amend its Certificate of Incorporation
or By-Laws;
(b) not incur of become contingently liable with respect to any
indebtedness for borrowed money, except in the ordinary course of
business or pursuant to the revolving credit arrangements referred to in
Section 4.14(b) of its Disclosure Schedule or any successor arrangements
thereto;
(c) not enter into or amend in any material respect any material
employment, severance, or special pay arrangement with respect to
termination of employment or other similar material arrangements or
agreements with any directors, officers or key employees;
(d) not increase the rate of remuneration payable to any of its
directors or key officers, or, except in the ordinary course of business
consistent with past practices, to any other employees or other
representatives, or agree to do so;
(e) not adopt, enter into or amend in any material respect any
bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, health care, employment or other employee benefit
plan, agreement, trust, fund or arrangement for the benefit or welfare
of any employee or retiree, except as required to comply with changes in
applicable law; and
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(f) use its best efforts to maintain in force the insurance
coverage described in Section 4.22 of its Disclosure Schedule.
SECTION 6.3 ACQUISITION TRANSACTIONS; BREAK-UP FEES.
(a) After the date hereof and prior to the earlier of (i) the
Effective Time, (ii) termination of this Agreement as provided in
Article IX hereof or (iii) September 30, 1995, unless Parent shall other-
wise agree in writing, the Company shall not initiate, solicit, negotiate,
encourage, or provide confidential information to facilitate, and the
Company shall (A) use its best efforts to cause any officer, director or
employee of, or any attorney, accountant or other agent retained by, the
Company and (B) use its best efforts to cause any investment banker
retained by the Company, not to initiate, solicit, negotiate, encourage,
or provide confidential information to facilitate, any proposal or offer
to acquire all or substantially all of the business and properties of
the Company, or capital stock of the Company, whether by merger,
purchase of assets, tender offer or otherwise, whether for cash,
securities or any other consideration or combination thereof (such
transactions being referred to herein as "Acquisition Transactions");
provided, however, that the Company may furnish (on terms including
confidentiality terms, substantially similar to those set forth in that
certain Confidentiality Agreement between Parent and the Company (the
"Confidentiality Agreement")) information concerning its business,
properties or assets to a corporation, partnership, person or other
entity or group (a "Potential Acquirer") if (1) the Company's Board of
Directors is advised by its financial advisor that such Potential
Acquirer has the financial wherewithal to consummate an Acquisition
Transaction that would yield a higher value to the Company's
stockholders than will the Merger, (2) the Company's Board of Directors
determines that such Potential Acquirer is reasonably likely to submit a
bona fide offer to consummate an Acquisition Transaction on terms that
would yield such a higher value to the Company's stockholders if
provided with confidential information about the Company, and (3) after
consultation with counsel, the Company's Board of Directors determines
that the failure to provide such confidential information would
constitute a breach of its fiduciary duty to stockholders of the
Company. Following receipt of a bona fide offer from a Potential
Acquirer proposing an Acquisition Transaction which offer the Board of
Directors of the Company determines would likely yield a higher value to
the Company's stockholders than will the Merger, the Company may, with
respect to such Potential Acquirer, negotiate and take any of the
actions otherwise prohibited by this Section 6.3 if, in the opinion of
the Board of Directors of the Company after consultation with counsel,
the failure to negotiate with such Potential Acquirer would constitute a
breach by the Board of Directors of its fiduciary duty to the
stockholders of the Company. In the event the Company shall determine to
provide any information as described above, or shall receive any offer
relating to an Acquisition Transaction, it shall promptly notify Parent
(a "Notice of Proposal") as to the fact that information is to be
provided or that an offer relating
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to an Acquisition Transaction has been received and shall furnish to Parent
the identity of the recipient of such information or the proponent of such
offer or proposal, if applicable, and, if an offer or proposal has been
received, a description of the material terms thereof. The Company may
enter into a definitive agreement for an Acquisition Transaction with a
Potential Acquirer with which it is permitted to negotiate pursuant to this
Section 6.3; provided, however that, at least one business day prior to
the Company's execution thereof the Company shall have notified Parent
in writing (a "Notice of Agreement") indicating the Company's intent to
enter into such agreement and describing all of the material terms of
such agreement. Following the execution of such a definitive agreement,
Parent or the Company may terminate this Agreement in accordance with
Article IX hereof, subject to the following fee and expense
reimbursement provisions of this Section 6.3.
(b) If (1) the Company fails to effect a Merger within 156 days of
the date of this Agreement, other than as a result of a Parent
Notification, a Parent Adverse Change or a Parent Breach (each as
defined in Section 9.1 hereof), or any other condition set forth in
this Agreement required to be satisfied by Parent to effect the Merger
set forth in Article VIII of this Agreement, and (2) a proposal for an
Acquisition Transaction from other than Parent is accepted by the Board
of Directors of the Company or, if applicable, by the holders of 51% or
more of the outstanding Company Common Stock (irrespective of whether
or not such acceptance is then binding upon the initiator of the
Acquisition Transaction so long as it is ultimately so binding), in
each case prior to or within 90 days of the termination of this
Agreement, or if earlier, 246 days after the date of this Agreement, or
if such a proposal is so accepted after the expiration of such 90 or
246-day period, but resulted from the Company commencing to seek offers
for an Acquisition Transaction within 20 calendar days after the date
of termination of this Agreement, then the Company shall promptly (i)
issue to Parent a six-month option, which shall be immediately
exercisable, to acquire such number of shares of Company Common Stock
as shall equal 10% of the outstanding Company Common Stock as of the
date of such acceptance, after giving effect to the exercise of such
option, at an exercise price of $11.107 per share (subject to
proportionate adjustment in the event of any stock dividend, stock
split, reverse stock split, or other recapitalization or similar change
with respect to Company Common Stock) (the "Topping Option"), and (ii)
giving credit to the Company for any other payments to Parent made
pursuant to Section 9.1 hereof and/or this Section 6.3, pay Parent the
sum of $500,000 (the "Parent Breakup Fee"), together with up to
$450,000 of the reasonable outside legal, accounting and investment
banking fees and disbursements and printing expenses incurred in
connection with the preparation, execution and delivery of this
Agreement and the transactions contemplated hereby (subject to such
$450,000 maximum, "Transaction Expenses") by Parent; provided, however,
that if the aggregate value of the accepted Acquisition Transaction
proposal does not
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exceed $30,000,000, then, in such event, the Parent Breakup
Fee shall be $750,000 rather than $500,000. In the event a proposal
for an Acquisition Transaction is so accepted within such time periods
by the holders of 30% or more but less than 51% of the shares of
Company Common Stock (the "Tender Acceptance"), then, should Parent
elect not to proceed with the Merger, giving credit for any other
payments to Parent made pursuant to Section 9.1 and/or this Section
6.3, the Company shall promptly pay Parent the Parent Breakup Fee (but
in no event more than $500,000) and Parent's Transaction Expenses;
provided, however, that if within 12 months of the Tender Acceptance,
the person which initiated such Acquisition Transaction shall acquire
such additional number of shares of Company Common Stock as shall
increase such person's equity interest in the Company to at least 51%
or shall effectuate a transaction which, directly or indirectly, will
afford such person ownership or control of all or substantially all of
the assets or business of the Company, then the Company shall promptly
(i) issue to Parent the Topping Option (the number of shares covered by
which shall be computed as of the date of the Tender Acceptance), and
(ii) if the aggregate value of all consideration paid by such person
for all assets and interests of and in the Company acquired by it does
not exceed $30,000,000, pay to Parent an additional $250,000 of Parent
Breakup Fee.
(c) Notwithstanding the foregoing provisions of this Section 6.3
or any other provision hereof, in no event shall either party be
required to pay Transaction Expenses of the other party in excess of
$450,000.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 ACCESS TO INFORMATION. Each of Parent and the Company
shall afford to the other and the other's accountants, counsel, financial
advisors and other representatives full access during normal business hours
throughout the period prior to the Effective Time to all properties, books,
contracts, commitments and records (including, but not limited to, Tax
Returns) of it and, during such period, shall furnish promptly (a) a copy of
each report, schedule and other document filed or received by it during such
period pursuant to the requirements of federal or state securities laws or
filed by it during such period with the SEC in connection with the
transactions contemplated by this Agreement or which may have a material
effect on its business, properties or personnel and (b) such other information
concerning its business, properties and personnel as the other shall
reasonably request; provided, however, that, no investigation pursuant to this
Section 7.1 shall affect any representation or warranty made herein or the
conditions to the obligations of the respective parties to consummate the
Merger. All non-public documents and information furnished to Parent or to the
Company, as the case may be, in connection with the transactions contemplated
by this Agreement shall be deemed to have been received pursuant to and shall
be subject to the provisions of the Confidentiality Agreement, except that
Parent and the Company
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may disclose such information as may be necessary in connection with seeking
the Parent Required Statutory Approvals, the Parent Stockholders' Approval,
the Company Required Statutory Approvals and the Company Stockholders' Approval.
The Company shall promptly advise Parent, and Parent shall promptly advise the
Company, in writing, of any change or the occurrence of any event after the date
of this Agreement having, or which, insofar as can reasonably be foreseen, in
the future may have, any Material Adverse Effect on the Company or Parent, as
the case may be.
SECTION 7.2 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS.
Parent and the Company shall prepare and file with the SEC as soon as is
reasonably practicable after the date hereof the Proxy Statement/Prospectus
and shall use all reasonable efforts to have the Registration Statement
declared effective by the SEC as promptly as practicable. Parent shall also
take any action required to be taken under applicable state blue sky or
securities laws in connection with the issuance of Parent Common Stock.
Parent and the Company shall promptly furnish to each other all information,
and take such other actions, as may reasonably be requested in connection
with any action by any of them in connection with the preceding sentence and
shall cooperate with one another and use their respective best efforts to
facilitate the expeditious consummation of the transaction contemplated by
this Agreement. The Registration Statement shall contain a resale prospectus
covering all shares of Parent Common Stock to be acquired by Affiliates of
the Company. It shall be a condition to the obligation of either Parent or
the Company to mail the Proxy Statement/Prospectus to its stockholders that
Parent or the Company, as the case may be, have received the opinion of its
respective Financial Advisor to the effect that, as of the date of such
opinion (which shall be in no event earlier than July 11, 1995), the Exchange
Ratio is fair, from a financial point of view, to its stockholders. A copy
of such opinion shall be delivered to the other prior to the mailing of the
Proxy Statement/Prospectus.
SECTION 7.3 STOCKHOLDERS' APPROVAL. The Company shall use its best
efforts to obtain stockholder approval and adoption (the "Company
Stockholders' Approval") of this Agreement and the transactions contemplated
hereby as soon as practicable following the date upon which the Registration
Statement is declared effective by the SEC. Subject to the fiduciary duties of
the Board of Directors of the Company under applicable law, the Company shall,
through its Board of Directors, recommend to the holders of Company Common
Stock approval of this Agreement and the transactions contemplated by this
Agreement. Parent, in its capacity as the sole stockholder of Subsidiary, has
approved and adopted this Agreement and the transactions contemplated by this
Agreement upon its execution hereof. Parent shall use its best efforts to
obtain stockholder approval and adoption (the "Parent Stockholders' Approval")
of this Agreement and the transactions contemplated hereby as soon as
practicable following the date upon which the Registration Statement is
declared effective by the SEC. Subject to the fiduciary duties of the Board of
Directors of Parent under applicable law, Parent shall, through its Board of
Directors, recommend to the holders of Parent Common Stock approval of this
Agreement and the transactions contemplated by this Agreement.
SECTION 7.4 MANAGED OFFERING OF AFFILIATES' SHARES. Parent will exert
its best efforts, as soon as practicable subsequent to the Effective Time,
subject to then prevailing market conditions, to arrange for a managed
offering of all shares of Parent Common Stock received by Affiliates of the
Company as a result of the Merger through
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an underwriter to be selected by Parent and reasonably satisfactory to a
majority in interest of the Company's Affiliates so receiving Parent Common
Stock.
SECTION 7.5 NASDAQ NATIONAL MARKET. Parent use its best efforts to
effect, at or before the Effective Time, authorization for quotation on the
NASDAQ National Market, upon official notice of issuance, of the shares of
Parent Common Stock to be issued pursuant to the Merger.
SECTION 7.6 AGREEMENT TO COOPERATE. Subject to the terms and
conditions herein provided, each of the parties hereto shall cooperate and use
their respective best efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including using its reasonable
efforts to obtain all necessary or appropriate waivers, consents and approvals
and SEC "no-action" letters, to effect all necessary registrations, filings
and submissions and to lift any injunction or other legal bar to the Merger
(and, in such case, to proceed with the Merger as expeditiously as possible),
subject, however, to obtaining the Required Statutory Approvals and the
Company Stockholders' Approval and the Parent Stockholders' Approval; and
PROVIDED, that nothing in this Section 7.6 shall affect any responsibility or
obligation specifically allocated to any party in this Agreement.
SECTION 7.7 PUBLIC STATEMENTS. The parties shall consult with each
other prior to issuing any press release or any written public statement with
respect to this Agreement or the transactions contemplated hereby and shall
not issue any such press release or written public statement prior to such
consultation, except that prior review and approval shall not be required if,
in the reasonable judgment of the party seeking to issue such release or
public statement, prior review and approval would prevent the timely
dissemination of such release or statement in violation of applicable law,
rule, regulation or policy of the NASDAQ National Market.
SECTION 7.8 CORRECTIONS TO THE PROXY STATEMENT/PROSPECTUS AND
REGISTRATION STATEMENT. Prior to the date of approval of the Merger by
stockholders of the Company and by the stockholders of Parent, each of the
Company, Parent and Subsidiary shall correct promptly any information provided
by it to be used specifically in the Proxy Statement/Prospectus and
Registration Statement that shall have become false or misleading in any
material respect and shall take all steps necessary to file with the SEC and
have declared effective or cleared by the SEC any amendment or supplement to
the Proxy Statement/Prospectus or the Registration Statement so as to correct
the same and to cause the Proxy Statement/Prospectus as so corrected to be
disseminated to the stockholders of the Company and/or stockholders of Parent,
in each case to the extent required by applicable law.
SECTION 7.9 AGREEMENTS OF AFFILIATES. By July 22, 1995, each of the
Company and Parent shall identify in a letter to the other, after
consultation with outside counsel, all Persons who it believes may be deemed
to be
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"affiliates" of it (and/or, in the case of Parent, of Subsidiary), as that
term, in the case of the Company, is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 under the Securities Act or (ii) used in and for
purposes of Accounting Series, Releases 130 and 135, as amended, of the SEC,
and in the case of Parent and Subsidiary, is used in and for purposes of
Accounting Series Releases 130 and 135, as amended, of the SEC. Each of the
Company and Parent shall use its best commercially reasonable efforts to cause
each Person who is so identified by it as a possible Affiliate, to deliver to
it, at least 30 days prior to the Closing Date, an executed copy of an
Affiliate's Agreement substantially in the form of the attached Exhibit IV-1 or
IV-2, as applicable (each an "Affiliate's Agreement"), and shall promptly
provide a copy of each such Affiliate's Agreement to the other. Prior to the
Closing Date, each of the Company and Parent shall amend and supplement its
letter referred to above and shall use all reasonable efforts to cause each
additional person who is identified therein as a possible affiliate to execute
and deliver a copy of the applicable Affiliate's Agreement in accordance with
the foregoing.
SECTION 7.10 ASSURANCES RELATING TO TAX MATTERS CERTIFICATE. Each of
Parent and the Company shall use all reasonable efforts to obtain, as promptly
as is practicable following the date hereof and in any event prior to the
Effective Time, such oral or written assurances as it reasonably deems
sufficient to enable it to execute and deliver to the other a certificate
substantially in the form of that attached as an exhibit to the tax matters
opinion of the other party's tax counsel referred to in Sections 8.2(i) and
8.3(g) hereof.
SECTION 7.11 DISCLOSURE SUPPLEMENTS. From time to time prior to the
Effective Time, and in any event immediately prior to the Effective Time, each
of Parent and the Company shall promptly supplement or amend its Disclosure
Schedule with respect to any matter hereafter arising that, if existing,
occurring, or known at the date of this Agreement, would have been required to
be set forth or described in such Disclosure Schedule or that is necessary to
correct any information in such Disclosure Schedule that is or has become
inaccurate. Notwithstanding the foregoing, if any such supplement or
amendment discloses a Material Adverse Effect, the conditions to the other
party's obligations to consummate the Merger set forth in Article VIII hereof
shall be deemed not to have been satisfied.
SECTION 7.12 SATISFACTION OF CONDITIONS PRECEDENT. Each of the parties
shall use its best efforts to cause the satisfaction on or before September 30,
1995, of the conditions precedent contained in Article VIII of this Agreement
that impose obligations on it or require action on its part or on the part of
any of its stockholders or Affiliates.
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ARTICLE VIII
CONDITIONS
SECTION 8.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) The Company shall have obtained the Company Stockholders'
Approval;
(b) Parent shall have obtained the Parent Stockholders'
Approval;
(c) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in
effect;
(d) No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of
the Merger shall have been issued and remain in effect (each party
agreeing to use its reasonable efforts to have any such injunction,
order or decree lifted);
(e) No action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government
or governmental agency in the United States which would prevent the
consummation of the Merger, and
(f) All governmental and third party consents, orders and
approvals legally required for the consummation of the Merger and the
transactions contemplated hereby (including without limitation all
Required Statutory Approvals) shall have been obtained and be in effect
at the Effective Time without any material limitations or conditions.
(g) As of the Closing Date, all blue sky filings as may be
required in order for the offer, issuance and sale of all of the shares
of Parent Common Stock to be issued pursuant to Section 3.1(a) hereof,
all of the options and stock purchase rights to purchase Parent Common
Stock to be issued pursuant to Section 3.1(c) hereof, and all of the
shares of Parent Common Stock issuable upon exercise of such options and
stock purchase rights, respectively, to be in full compliance with all
applicable state securities laws and regulations shall have been made
and shall be in effect and not subject to any suspension, revocation, or
stop order, as may be required in order for the offer, issuance and sale
of all such securities to be legally permitted under all such laws and
regulations.
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SECTION 8.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE
MERGER. Unless waived by the Company, the obligation of the Company to effect
the Merger shall be subject to the fulfillment at or prior to the Closing Date
of the following additional conditions:
(a) Parent and Subsidiary shall have performed in all material
respects their agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of Parent and Subsidiary contained in this Agreement shall be
true and correct in all material respects on and as of (i) the date made
and (ii) the Closing Date (except in the case of representations and
warranties expressly made solely with reference to a particular date);
and the Company shall have received a certificate of the Chairman of the
Board and Chief Executive Officer, the President or a Vice President of
Parent and of the President and Chief Executive Officer or a Vice
President of Subsidiary to that effect;
(b) The Company shall have received an opinion from Parker Duryee
Rosoff & Haft, counsel to Parent and Subsidiary, dated the Closing Date,
substantially in the form set forth in Exhibit V hereto;
(c) The Company shall have received "comfort" letters from
Deloitte & Touche LLP, independent public accountants for Parent and
Subsidiary, dated the date of the Proxy Statement/Prospectus, the
effective date of the Registration Statement and the Closing Date (or
such other date reasonably acceptable to the Company) with respect to
certain financial statements and other financial information included in
the Registration Statement in customary form;
(d) The Company shall have received an opinion from each of
Deloitte & Touche LLP, independent public accountants for Parent, and
Arthur Andersen LLP, independent certified public accountants for the
Company, dated the Closing Date, addressed to the Company, each in form
and substance reasonably satisfactory to the Company, stating that the
Merger will qualify as a "pooling of interests" transaction under
generally accepted accounting principles;
(e) The Company shall have received all of the Affiliate's
Agreements contemplated by Section 7.9 to have been received by it.
(f) Parent shall have furnished to the Company such additional
certificates, opinions and other documents as the Company may have
reasonably requested as to any of the conditions set forth in this
Section 8.2.
(g) The Company shall have received an opinion of Fechtor
Detwiler & Co., Inc., or another nationally recognized investment
banking firm, dated as of the Closing Date, that the Exchange Ratio is
fair, from a financial point of view, to the Company's public stockholders;
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(h) All of the shares of Parent Common Stock to be issued or
issuable in connection with the Merger (including shares subject to
Company Options and Company Stock Purchase Rights pursuant to Section
3.1(c) hereof) shall have been authorized for listing on the NASDAQ
National Market upon official notice of issuance;
(i) The Company shall have received an opinion of Bingham Dana &
Gould, dated the Effective Time, to the effect that (i) the Merger will
be treated for federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code; (ii) each of Parent,
Subsidiary and the Company will be a party to the reorganization within
the meaning of Section 368(b) of the Code, (iii) no gain or loss will be
recognized by the Company as a result of the Merger, and (iv) no gain or
loss will be recognized by a stockholder of the Company as a result of
the Merger with respect to Company Common Stock converted solely into
Parent Common Stock. In rendering such opinion, Bingham Dana & Gould may
receive and rely upon representations contained in certificates of
Parent, Subsidiary, the Company and certain stockholders of the Company;
and
(j) Since the date of this Agreement there shall not have been
any Material Adverse Effect with respect to Parent, the likelihood of
which was not previously disclosed to the Company by the Parent.
(k) The Company shall have received from Parent an executed
original of a certificate substantially in the form of the attached
Exhibit VI.
(l) All proceedings in connection with the Merger and the other
transactions contemplated by this Agreement and all agreements,
instruments, certificates, and other documents delivered to the Company
by or on behalf of Parent or Subsidiary pursuant to this Agreement shall
be reasonably satisfactory to the Company and its counsel.
SECTION 8.3 CONDITIONS TO OBLIGATIONS OF PARENT AND SUBSIDIARY TO
EFFECT THE MERGER. Unless waived by Parent, the obligations of Parent and
Subsidiary to effect the Merger shall be subject to the fulfillment at or
prior to the Closing Date of the additional following conditions:
(a) The Company shall have performed in all material respects
its agreements contained in this Agreement required to be performed on
or prior to the Closing Date and the representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects on and as of (i) the date made and (ii) the Closing
Date (except in the case of representations and warranties expressly
made solely with reference to a particular date); and Parent shall have
received a Certificate of the President and Chief Executive Officer or
of a Vice President of the Company to that effect;
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(b) Parent shall have received an opinion from Bingham Dana &
Gould, counsel to the Company, dated the Closing Date, substantially in
the form set forth in Exhibit VII hereto;
(c) Parent shall have received "comfort" letters from Arthur
Andersen & Co., LLP, independent certified public accountants for the
Company, dated the date of the Proxy Statement/Prospectus, the effective
date of the Registration Statement and the Closing Date (or such other
date reasonably acceptable to Parent) with respect to certain financial
statements and other financial information included in the Registration
Statement in customary form;
(d) Parent shall have received an opinion from each of Deloitte
& Touche LLP, independent public accountants for Parent, and Arthur
Andersen LLP, independent certified public accountants for the Company,
dated the Closing Date, addressed to Parent, each in form and substance
reasonably satisfactory to Parent, stating that the Merger will qualify
as a "pooling of interests" transaction under generally accepted
accounting principles;
(e) Parent shall have received all of the Affiliate's Agreements
contemplated by Section 7.9 to have been received by it.
(f) Parent shall have received an opinion of Janney Montgomery
Scott Inc., or another nationally recognized investment banking firm,
dated as of the Closing Date, that the Exchange Ratio is fair, from a
financial point of view, to Parent's public stockholders.
(g) Parent shall have received an opinion of Parker Duryee
Rosoff & Haft, dated the Effective Time, to the effect that (i) the
Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code; (ii)
each of Parent, Subsidiary and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code; (iii)
no gain or loss will be recognized by the Company, Parent or Subsidiary
as a result of the Merger, and (iv) no gain or loss will be recognized
by a stockholder of the Company as a result of the Merger with respect
to Company Common Stock converted solely into Parent Common Stock. In
rendering such opinion, Parker Duryee Rosoff & Haft may receive and rely
upon representations contained in certificates of Parent, Subsidiary,
the Company, and certain stockholders of the Company, respectively;
(h) The Company shall have furnished to Parent such additional
certificates, opinions and other documents as Parent may have reasonably
requested as to any of the conditions set forth in this Section 8.3.
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(i) Since the date of this Agreement there shall not have been
any Material Adverse Effect with respect to the Company, the likelihood
of which was not previously disclosed to the Parent by the Company.
(j) Parent shall have received from the Company an executed
original of a certificate substantially in the form of the attached
Exhibit VIII.
(k) All proceedings in connection with the Merger and the other
transactions contemplated by this Agreement and all agreements,
instruments, certificates, and other documents delivered to Parent by or
on behalf of the Company pursuant to this Agreement shall be reasonably
satisfactory to Parent and its counsel.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval by the
stockholders of the Company and/or Parent:
(a) by mutual consent of Parent and the Company;
(b) unilaterally by Parent upon the occurrence of a Material
Adverse Effect with respect to the Company, the likelihood of which was
not previously disclosed to Parent by the Company prior to the date of
this Agreement, (a "Company Adverse Change"), whereupon absent the
Company's fraud or gross negligence in failing to disclose such to
Parent neither party shall have any obligation to the other for
Transaction Expenses;
(c) unilaterally by the Company upon the occurrence of a Material
Adverse Effect with respect to Parent, the likelihood of which was not
previously disclosed to the Company by Parent prior to the date of this
Agreement, (a "Parent Adverse Change"), whereupon absent Parent's fraud
or gross negligence in failing to disclose such to the Company neither
party shall have any obligation to the other for Transaction Expenses;
(d) unilaterally by Parent in the event of the Company's material
breach when made of any material representation or warranty of the
Company contained in this Agreement, or the Company's willful failure to
comply with or satisfy any material covenant or condition of Company
contained in this Agreement (each a "Company Breach"), or if the Company
fails to obtain the Company Stockholders' Approval;
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(e) unilaterally by the Company in the event of Parent's material
breach when made of any material representation or warranty contained in
this Agreement, or Parent's willful failure to comply with or satisfy
any material covenant or condition of Parent contained in this Agreement
(each a "Parent Breach"), or if Parent fails to obtain the Parent
Stockholders' Approval (the "Adverse Stockholders' Vote");
(f) unilaterally by the Company if at any time when the provisions
of this Agreement are in effect, the Company shall notify Parent (a
"Company Notification") that the Company elects not to proceed with the
Merger (other than as a result of a Parent Adverse Change or a Parent
Breach or the Company's failure to obtain the Company Stockholders'
Approval), in which event, subject to the provisions of Section 6.3(b),
the Company shall promptly pay Parent $500,000, together with Parent's
Transaction Expenses;
(g) unilaterally by Parent if at any time when the provisions of
this Agreement are in effect, the Parent shall notify the Company in
writing (a "Parent Notification") that Parent elects not to proceed with
the Merger Transaction (other than as a result of a Company Adverse
Change or a Company Breach or Parent's failure to obtain Parent
Stockholders' Approval), in which event Parent shall promptly pay the
Company $500,000, together with the Company's Transaction Expenses;
(h) unilaterally by either Parent or the Company if the Merger
Transaction is not consummated for any reason not specified or referred
to in the preceding provisions of this Section 9.1 by the close of
business on September 30, 1995 whereupon, subject to Section 6.3(b),
neither party shall have any obligation to the other for Transaction
Expenses.
Notwithstanding the provisions of Section 6.3 hereof or any other
provision hereof, in no event shall either party be required to pay
Transaction Expenses of the other in excess of $450,000.
SECTION 9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no further obligation
on the part of either the Company, Parent, Subsidiary (except as set forth in
this Section 9.2 and in Section 6.3 (with respect to certain fees, expense
reimbursement, options and rights due to Parent thereunder), the penultimate
sentence of Section 7.1 (with respect to confidential and non-public
information), and Sections 9.1 and 9.5, which shall survive such termination).
Nothing in this Section 9.2 shall relieve any party from liability for any
breach of this Agreement.
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SECTION 9.3 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto and in
compliance with applicable law.
SECTION 9.4 WAIVER. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
SECTION 9.5 EXPENSES. Except as otherwise provided in Section 9.1 and
Section 6.3, whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
respective representations, warranties, obligations, agreements, and promises
of the parties contained in this Agreement and in any schedule, certificate,
or other document delivered pursuant to this Agreement, other than those that
by their terms are to be performed or otherwise are to apply after the
Effective Time, shall terminate as of, and shall not survive, the Effective
Time.
SECTION 10.2 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally
(effective upon delivery), mailed by registered or certified mail (return
receipt requested) (effective three business days after mailing), sent by a
reputable overnight courier service for next business day delivery (effective
the next business day) or sent via facsimile (effective upon receipt of the
telecopy in complete, readable form) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(a) If to Parent or Subsidiary to:
Robotic Vision Systems, Inc.
425 Rabro Drive East
Hauppauge, New York 11788
Attention: Pat V. Costa, Chairman, President and CEO
FAX: (516) 273-1167
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with a copy to:
Parker, Duryee, Rosoff & Haft
529 Fifth Avenue
New York, New York 10017
Attention: Ira I. Roxland, Esq.
FAX: (212) 972-9487
(b) If to the Company, to:
Acuity Imaging, Inc.
9 Townsend West
Nashua, New Hampshire 03063
Attention: Ofer Gneezy, President
FAX: (603) 598-4684
with a copy to:
Bingham Dana & Gould
150 Federal Street
Boston, Massachusetts
Attention: David L. Engel, Esq.
FAX: (617) 951-8736
SECTION 10.3 INTERPRETATION. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.4 MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof (including without limitation a letter agreement dated as of January
31, 1995, as amended on March 30 and April 24, 1995, between Parent and the
Company, but excluding the Confidentiality Agreement); (ii) shall not be
assigned by operation of law or otherwise, and any attempt to do so shall be
void; and (iii) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Delaware (without
giving effect to the provisions thereof relating to conflicts of law).
SECTION 10.5 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement. In pleading or proving
this Agreement, it shall not be necessary to produce or account for more than
one fully executed original.
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SECTION 10.6 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 10.7 CAPTIONS. The captions of sections and subsections of
this Agreement are for reference only, and shall not affect the interpretation
or construction of this Agreement.
SECTION 10.8 ADDITIONAL DEFINED TERMS. As used in this Agreement, the
following defined terms have the respective meanings ascribed to them below.
"Financial Advisor" when used with respect to Parent or the Company,
means Janney Montgomery Scott Inc., in the case of Parent, and Fechtor,
Detwiler & Co., Inc., in the case of the Company.
"Material Adverse Effect" means, with respect to a party, a material
adverse effect on the business, operations, properties, assets, condition
(financial or otherwise), results of operations, or prospects of it and its
Subsidiaries, on a consolidated basis, or on its ability to consummate the
transactions contemplated hereby; PROVIDED that, as to the Company, a Material
Adverse Effect shall not be deemed to have occurred as a result of any facts or
circumstances disclosed on the Disclosure Schedule of the Company attached
hereto as Annex A or if (i) as to its first and second fiscal quarters of 1995,
its results of operations reflect an aggregate operating loss (without giving
effect to expenses of the Merger) of no more than $700,000 in both such quarters
and (ii) its results of operations or projected results of operations (as
projected in good faith by the Company) for its third fiscal quarter of 1995,
reflect or project (as applicable) an operating loss (without giving effect to
expenses of the Merger) of no more than $500,000 for such fiscal quarter; and a
Material Adverse Effect shall be deemed to have occurred (the likelihood of
which had not been previously disclosed to Parent by the Company prior to the
date of the Merger Agreement), if the Company's results of operations or
projected results of operations (as projected in good faith by the Company) for
its third fiscal quarter of 1995 reflect or project (as applicable) an operating
loss (without giving effect to expenses of the Merger) in excess of $500,000 for
such fiscal quarter.
"Person" means a natural person, corporation, an association, a
partnership, an organization, a business, a government or political
subdivision thereof, a governmental agency or any other entity.
"SEC Reports", when used with respect to Parent or the Company, means:
(i) in the case of Parent, (A) its Annual Reports on Form 10-K
for its fiscal years ended September 30, 1994, 1993 and 1992,
respectively, each as filed with the SEC, (B) its annual reports to
stockholders for the two most recent years, each as provided to its
stockholders, (C) all proxy and information statements relating to (1)
all meetings of its stockholders (whether annual or special) and (2) all
actions by written consent in lieu of a meeting of its stockholders, in
each case from December 31, 1991 until the date of this Agreement, (D)
its Quarterly Report on Form 10-Q for the quarter ended December 31,
1994, (E) all other reports or registration statements filed by Parent
with the SEC since December 31, 1991 (other than registration statements
on Form S-8), and (F) any Quarterly Report on Form 10-Q delivered to the
Company pursuant to the final sentence of Section 4.5(a) hereof, but in
each case only from and after the time of such delivery; and
(ii) in the case of the Company, (A) its Annual Reports on Form
10-K or KSB for its fiscal years ended December 31, 1994, 1993, 1992 and
1991, respectively, each as filed with the SEC, (B) its annual reports
to stockholders for the two most recent years, each as provided to its
stockholders, (C) all proxy and
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information statements relating to (1) all meetings of its stockholders
(whether annual or special) and (2) all actions by written consent in lieu
of a meeting of its stockholders, in each case from December 31, 1991 until
the date of this Agreement, (D) its Quarterly Reports on Form 10-QSB for
the quarters ended April 2, July 2 and October 1, 1994, respectively, (E)
all other reports or registration statements filed by the Company with the
SEC since December 31, 1991 (other than registration statements on Form
S-8), and (F) any Annual Report on Form 10-KSB and any Quarterly Report on
Form 10-QSB, in each case as delivered to Parent pursuant to the final
sentence of Section 4.5(a) hereof, but in each case only from and after the
time of such delivery.
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IN WITNESS WHEREOF, Parent, Subsidiary and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
ATTEST: ROBOTIC VISION SYSTEMS, INC.
/s/Robert H. Walker By: /s/Pat V. Costa
- --------------------------- ---------------------------
Name: Robert H. Walker Name: Pat V. Costa
Title: Secretary Title: Chairman,
ATTEST: RVSI ACQUISITION CORP.
/s/Robert H. Walker By: /s/Pat V. Costa
- --------------------------- ---------------------------
Name: Robert H. Walker Name: Pat V. Costa
Title: Secretary Title: President
ATTEST: ACUITY IMAGING INC.
/s/John A. Rogers By: /s/Ofer Gneezy
- --------------------------- ---------------------------
Name: John A. Rogers Name: Ofer Gneezy
Title: VP - Finance Title: President
<PAGE>
EXHIBIT B
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
SECTION 262 APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of
this section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in
a stock corporation and also a member of record of a nonstock corporation;
the words "stock" and "share" mean and include what is ordinarily meant by
those words and also membership or membership interest of a member of a
nonstock corporation.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to Section 251, Section 252, Section 254, Section 257,
Section 258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock which, at
the record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or (ii) held of record by more than 2,000 stockholders; and
further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did
not require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation;
b. Shares of stock of any other corporation which at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 stockholders;
<PAGE>
c. Cash in lieu of fractional shares of the corporations
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock and cash in lieu of
fractional shares described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this title is not
owned by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware
corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of his shares. Such demand will be sufficient if
it reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of his shares. A
proxy or vote against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied with
this subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or 253 of this title, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal rights
of the effective date of the merger or consolidation and that appraisal
rights are available for any or all of the shares of the constituent
corporation, and shall include in such notice a copy of this section. The
notice shall be sent by certified or registered mail, return receipt
requested, addressed to the stockholder at his address as it appears on the
records of the corporation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of the
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<PAGE>
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall
be entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under subsection
(d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications
at least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication
as the Court deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs thereof shall be borne
by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of
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<PAGE>
interest, if any, to be paid upon the amount determined to be the fair value.
In determining such fair value, the Court shall take into account all
relevant factors. In determining the fair rate of interest, the Court may
consider all relevant factors, including the rate of interest which the
surviving or resulting corporation would have had to pay to borrow money
during the pendency of the proceeding. Upon application by the surviving or
resulting corporation or by any stockholder entitled to participate in the
appraisal proceeding, the Court may, in its discretion, permit discovery or
other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or
resulting corporation pursuant to subsection (f) of this section and who has
submitted his certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
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<PAGE>
EXHIBIT C
[Letterhead of Janney Montgomery Scott Inc.]
July 20, 1995
Board of Directors
Robotic Vision Systems, Inc.
425 Rabro Drive, East
Hauppauge, New York 11788
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of outstanding shares of common stock ("Stockholders")
of Robotic Vision Systems, Inc. ("RVSI" or the "Company") of the exchange ratio
(the "Exchange Ratio") in the proposed merger pursuant to the Agreement and Plan
of Reorganization dated as of April 27, 1995 as last amended as of July 11,
1995 ("Merger Agreement") entered into by and among RVSI, Acuity Imaging, Inc.
("Acuity") an a wholly owned subsidiary of RVSI (the "Proposed Transaction").
The terms and conditions of the Proposed Transaction are more fully set forth
in the Merger Agreement.
Janney Montgomery Scott Inc. ("JMS"), as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with the preparation of fairness opinions, mergers and
acquisitions, rights offerings, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate, and other purposes.
In connection with our opinion, we have reviewed the Merger Agreement,
certain financial and other information of RVSI and Acuity, including certain
internal analyses, reports, forecasts and other information. We have held
discussions with senior management of RVSI and Acuity concerning the current
operations, financial condition and prospects of each of RVSI and Acuity and the
companies on a combined basis. We have also held discussions with senior
management of RVSI concerning the strategic and operating benefits anticipated
by RVSI in the Proposed Transaction. In addition, we have (i) reviewed the
price and trading histories of RVSI common stock and Acuity common stock and
compared those prices and trading histories with those of publicly traded
companies deemed relevant; (ii) compared the financial positions and operating
results of RVSI and Acuity with those of publicly traded companies we deemed
relevant; (iii) compared certain financial terms of the Proposed Transaction to
certain financial terms of
<PAGE>
Robotic Vision Systems, Inc.
Page 2
selected other business combinations we deemed relevant; (iv) analyzed the pro
forma financial effects of the Proposed Transaction; and, (v) conducted such
other financial studies, analyses and investigations, and reviewed such other
factors, as we deemed relevant.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for purposes of this
opinion. With respect to financial projections, we assumed that they have been
reasonably prepared on bases reflecting the best currently available information
and judgements of the future financial performance of RVSI and Acuity. We have
not made any independent valuation or appraisal of the assets or liabilities of
the Company, nor have we been furnished with such valuations or appraisals. We
have assumed the Proposed Transaction will be accounted for under the pooling-
of-interests method of accounting and will be treated as a tax free
reorganization.
Our opinion is necessarily based on financial, economic, market and other
conditions as they exist on, and information made available to us as of, the
date hereof. It should be understood that, although subsequent developments may
affect this opinion, we do not have any obligation to update, revise or reaffirm
this opinion. Furthermore, we express no opinion as to the price or trading
range at which the RVSI stock will trade subsequent to the date of our opinion.
Payment of JMS' fee is not contingent upon the conclusion reported.
It should be understood that this letter is for the information of the
Board of Directors only in connection with its consideration of the Proposed
Transaction and does not constitute a recommendation to any stockholder as to
how such stockholder should vote on the Proposed Transaction, and may not be
used for any other purpose without our prior written consent. We hereby
consent, however, to the inclusion of this opinion as an exhibit to any proxy or
registration statement distributed in connection with the Transaction.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, the Exchange Ratio is fair, from a financial point of view to the
Stockholders of RVSI.
Sincerely yours,
JANNEY MONTGOMERY SCOTT INC.
By: /s/ Herbert M. Gardner
-----------------------------------
Herbert M. Gardner
Senior Vice President
HMG:bb
<PAGE>
EXHIBIT D
[Letterhead of Fechtor, Detwiler & Co., Inc.]
July 17, 1995
Board of Directors
Acuity Imaging, Inc.
9 Townsend West
Nashua, New Hampshire 03063
Gentlemen:
As described in the Agreement and Plan of Merger and Reorganization dated as of
April 27, 1995, as amended as of July 11, 1995, between Robotic Vision Systems,
Inc. ("RVSI") and Acuity Imaging, Inc. ("Acuity"), RVSI and Acuity have proposed
to merge a wholly owned subsidiary of RVSI with and into Acuity and to convert
each Acuity share into 0.766 shares of RVSI Common Stock, subject to the payment
of cash adjustments in lieu of the issuance of fractional shares, with the
provision that, if the average closing price for RVSI shares for the 20 day
period preceding the special meeting of RVSI's shareholders exceeds $14.50 or is
less than $10.00, the Exchange Ratio will be adjusted as provided in
Section 1(b) of the First Amendment to Agreement and Plan of Merger and
Reorganization dated as of July 11, 1995.
You have asked Fechtor, Detwiler & Co., Inc. ("Fechtor, Detwiler") for its
opinion as investment bankers as to whether the Exchange Ratio as defined in the
First Amendment to the Agreement and Plan of Merger and Reorganization is fair,
from a financial point of view, to Acuity's shareholders. Fechtor, Detwiler,
as part of its investment banking business, is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, initial public offerings, private placements, and valuations of
estate, corporate and other purposes.
In forming our opinion, we have, among other things:
1) Reviewed the Agreement and Plan of Merger and Reorganization dated as
of April 27, 1995 and the First Amendment to Agreement and Plan of
Merger and Reorganization dated as of July 11, 1995;
2) Reviewed share price and trading volumes for Acuity's shares from
November 4, 1994 through July 14, 1995;
3) Reviewed Acuity's 1995 Business Plan dated February 13, 1995;
4) Reviewed with management Acuity's financial projections dated July 13,
1995 for the balance of the fiscal year ending December 31, 1995 and
fiscal year ending December 31, 1996;
5) Reviewed Acuity's Forms 10-KSB, as filed with the SEC,
<PAGE>
Board of Directors
Acuity Imaging, Inc.
July 17, 1995
Page 2
for 1993 and 1994;
6) Reviewed Acuity's Forms 10-QSB. as filed with the SEC for the
quarterly periods ending April 2, 1994, July 2, 1994, October 1, 1994
and April 1, 1995;
7) Reviewed with management of Acuity its operations, financial condition
and future prospects;
8) Visited Acuity's Nashua, New Hampshire facility;
9) Reviewed share price and trading volume for RVSI's shares from
November 4, 1994 through July 14, 1995;
10) Reviewed RVSI's Forms 10-K, as filed with the SEC, for the fiscal
years ended September 30, 1992 and September 30, 1993, and Form 10-K/A
for the fiscal year ended September 30, 1994;
11) Reviewed RVSI's Forms 10-Q, as filed with the SEC, for the quarterly
periods ending December 31, 1991, March 31, 1992, June 30, 1992,
December 31, 1992, March 31, 1993, June 30, 1993, December 31, 1993,
March 31, 1994, June 30, 1994, December 31, 1994 and March 31, 1995;
12) Reviewed RVSI's Form S-1, as filed with the SEC, dated March 11, 1994;
13) Reviewed with management of RVSI its operations, financial condition
and future prospects;
14) Reviewed with management RVSI's financial projections dated 6/19/95
for the balance of the fiscal year ending September 30, 1995;
15) Visited RVSI's Hauppauge, New York facility;
16) Reviewed the Merger Due Diligence Report prepared by Arthur Andersen;
17) Conducted such other studies, analyses, inquiries and investigations
as we deemed appropriate.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all information provided to us by
<PAGE>
Board of Directors
Acuity Imaging, Inc.
July 17, 1995
Page 3
Acuity and RVSI, and we have not assumed any responsibility for independent
verification of such information or any independent valuation or appraisal of
any of the assets of Acuity or RVSI.
Based on the foregoing, it is our opinion as investment bankers, that the
Exchange Ratio is fair, from a financial point of view, to the Acuity
shareholders.
This letter is solely for the information of the Acuity Board of Directors to
assist in the determination of the fairness of the merger and is not to be used,
circulated or quoted without our express consent.
Very truly yours,
FECHTOR, DETWILER & CO., INC.
By: /s/ Andre Daniel-Dreyfus
------------------------------------
Andre Daniel-Dreyfus
Senior Vice President
<PAGE>
Exhibit E
ROBOTIC VISION SYSTEMS, INC.
AMENDED AND RESTATED 1991 STOCK OPTION PLAN
Robotic Vision Systems, Inc. (the "Company") hereby amends and restates
the Robotic Vision Systems, Inc. 1991 Stock Option Plan in its entirety (the
Company's 1991 Stock Option Plan, as amended and restated, is hereinafter
referred to as the "Plan").
1. PURPOSE. The Plan is intended to amend and restate in its entirety
the Company's 1991 Stock Option Plan. The Plan is intended to recognize the
contributions made to the Company or an Affiliate by employees of the Company
or any Affiliate (as hereinafter defined), members of the Board of Directors
of the Company or an Affiliate, and certain consultants and advisors to the
Company or any Affiliate, to provide such persons with additional incentive to
devote themselves to the future success of the Company or an Affiliate, and to
improve the ability of the Company or an Affiliate to attract, retain, and
motivate individuals upon whom the Company's sustained growth and financial
success depend, by providing such persons with an opportunity to acquire or
increase their proprietary interest in the Company through receipt of rights
to acquire the Company's Common Stock, $.01 par value (the "Common Stock").
2. DEFINITIONS. Unless the context clearly indicates otherwise, the
following terms shall have the following meanings:
(a) "Affiliate" means a corporation which is a parent corporation or
a subsidiary corporation with respect to the Company within the meaning of
Section 424(e) or (f) of the Code.
(b) "Board of Directors" means the Board of Directors of the
Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Board of Directors or the committee
designated by the Board of Directors in accordance with the provisions set
forth in Section 3 of the Plan.
(e) "Company" means Robotic Vision Systems, Inc., a Delaware
corporation.
(f) "Disability" shall have the meaning set forth in Section
22(e)(3) of the Code.
(g) "Fair Market Value" shall have the meaning set forth in
Subsection 8(b) of the Plan.
(h) "ISO" means an Option granted under the Plan which is intended
to qualify as an "incentive stock option" within the meaning of Section
422(b) of the Code.
(i) "Non-qualified Stock Option" means an Option granted under the
Plan which is not intended to qualify, or otherwise does not qualify, as
an "incentive stock option" within the meaning of Section 422(b) of the
Code.
(j) "Option" means either an ISO or a Non-qualified Stock Option
granted under the Plan.
(k) "Optionee" means a person to whom an Option has been granted
under the Plan, which Option has not been exercised and has not expired or
terminated.
(l) "Option Document" means the document described in Section 8 of
the Plan which
<PAGE>
sets forth the terms and conditions of each grant of Options.
(m) "Option Price" means the price at which Shares may be purchased
upon exercise of an Option, as calculated pursuant to Subsection 8(b) of
the Plan.
(n) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended.
(o) "Shares" means the shares of Common Stock of the Company which
are the subject of Options.
3. ADMINISTRATION OF THE PLAN.
(a) COMMITTEE. The Plan shall be administered by a committee
composed of two or more of the members of the Company's Board of Directors.
The Company's Board of Directors in its sole discretion may elect ("Alternative
Administration") to have the Plan administered by either (i) providing that the
Committee be composed of directors who are not eligible to receive options under
the Plan, or (ii) designating two committees to operate and administer the Plan,
one of such committees composed of two or more directors who are not eligible to
receive Options under the Plan to operate and administer the Plan with respect
to each person who is a "Principal Officer" (as defined below), and the other
such committee composed of two or more directors (which may include directors
who are also employees, consultants or advisors of the Company) to operate and
administer the Plan with respect to each person other than a "Principal
Officer." Any of such committees designated by the Board of Directors is
referred to as the "Committee." As used herein, the term "Principal Officer"
means a person who is an "officer" of the Company, within the meaning of
Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any successor regulation.
(b) MEETINGS. The Committee shall hold meetings at such times and
places as it may determine. Acts approved at a meeting by a majority of the
members of the Committee or acts approved in writing by the unanimous consent
of the members of the Committee shall be the valid acts of the Committee.
(c) GRANTS. The Committee shall from time to time, in its
discretion, direct the Company to grant Options pursuant to the terms of the
Plan. The Committee shall have plenary authority to (i) determine the
Optionees to whom, the times at which, and the price at which Options shall be
granted, (ii) determine the type of Option to be granted and the number of
Shares subject thereto, and (iii) approve the form and terms and conditions of
the Option Documents; all subject, however, to the express provisions of the
Plan. In making such determinations, the Committee may take into account the
nature of the Optionee's services and responsibilities, the Optionee's present
and potential contribution to the Company's success and such other factors as
it may deem relevant. The interpretation and construction by the Committee of
any provisions of the Plan or of any Option granted under it shall be final,
binding and conclusive.
(d) EXCULPATION. No member of the Board of Directors shall be
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or the
granting of Options under the Plan, provided that this Subsection 3(c) shall
not apply to (i) any breach of such member's duty of loyalty to the Company or
its stockholders, (ii) acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law, (iii) acts or omissions
that would result in liability under Section 174 of the General Corporation
Law of the State of Delaware, as amended, and (iv) any transaction from which
the member derived an improper personal benefit.
(e) INDEMNIFICATION. Service on the Committee shall constitute
service as a member of the Board of Directors of the Company. Each member of
the Committee shall be entitled without further act on his part to indemnity
from the Company to the fullest extent provided by applicable law and the
Company's Certificate of Incorporation and/or By-laws in connection with or
arising out of any action, suit or proceeding with
2
<PAGE>
respect to the administration of the Plan or the granting of Options
thereunder in which he or she may be involved by reason of his or her being or
having been a member of the Committee, whether or not he or she continues to
be a member of the Committee at the time of the action, suit or proceeding.
(f) LIMITATIONS ON GRANTS OF OPTIONS TO CONSULTANTS AND ADVISORS.
With respect to the grant of Options to consultants and advisors, bona fide
services shall be rendered by consultants and advisors, and such services must
not be in connection with a capital raising transaction.
4. GRANTS UNDER THE PLAN. Grants under the Plan may be in the form of a
Non-qualified Stock Option, an ISO or a combination thereof, at the discretion
of the Committee.
5. ELIGIBILITY. All employees and members of the Board of Directors of,
and (subject to Section 4) consultants and advisors to, the Company or an
Affiliate shall be eligible to receive Options hereunder. The Committee, in
its sole discretion, shall determine whether an individual qualifies as an
employee, consultant or advisor.
6. SHARES SUBJECT TO PLAN. The aggregate maximum number of Shares for
which Options may be granted pursuant to the Plan is two million two hundred
thousand (2,200,000), subject to adjustment as provided in Section 9 of the
Plan. The Shares shall be issued from authorized and unissued Common Stock or
Common Stock held in or hereafter acquired for the treasury of the Company.
If an Option terminates or expires without having been fully exercised for any
reason, the Shares for which the Option was not exercised may again be the
subject of one or more Options granted pursuant to the Plan.
7. TERM OF THE PLAN. The Plan (as amended and restated) was approved by
the Board of Directors on December 14, 1994, and, provided it is approved on or
before December 13, 1995 by a majority of the votes cast at a duly called
meeting of the stockholders at which a quorum representing a majority of all
outstanding voting stock of the Company is, either in person or by proxy,
present and voting, shall be effective as of the date of approval by
stockholders. No Option may be granted under the Plan after December 11,
2001.
8. OPTION DOCUMENTS AND TERMS. Each Option granted under the Plan shall
be a Non-qualified Stock Option unless the Option shall be specifically
designated at the time of grant to be an ISO for federal income tax purposes.
If any Option designated as an ISO is determined for any reason not to qualify
as an incentive stock option within the meaning of Section 422 of the Code,
such Option shall be treated as a Non-qualified Stock Option for all purposes
under the provisions of the Plan. Options granted pursuant to the Plan shall
be evidenced by the Option Documents in such form as the Committee shall from
time to time approve, which Option Documents shall comply with and be subject
to the following terms and conditions and such other terms and conditions as
the Committee shall from time to time require which are not inconsistent with
the terms of the Plan.
(a) NUMBER OF OPTION SHARES. Each Option Document shall state the
number of Shares to which it pertains. An Optionee may receive more than
one Option, which may include Options which are intended to be ISO's and
Options which are not intended to be ISO's, but only on the terms and
subject to the conditions and restrictions of the Plan.
(b) OPTION PRICE. Each Option Document shall state the Option Price
which, for a Non-qualified Stock Option, may be less than, equal to, or
greater than the Fair Market Value of the Shares on the date the Option is
granted and, for an ISO, shall be at least 100% of the Fair Market Value
of the Shares on the date the Option is granted as determined by the
Committee in accordance with this Subsection 8(b); provided, however,
that if an ISO is granted to an Optionee who then owns, directly or by
attribution under Section 424(d) of the Code, shares possessing more than
ten percent of the total combined voting power of all classes of stock of
the Company or an Affiliate, then the Option Price shall be at least 110%
of the Fair Market Value of the Shares on
3
<PAGE>
the date the Option is granted. If the Common Stock is traded in a
public market, then the Fair Market Value per share shall be, if the
Common Stock is listed on a national securities exchange or included in
the NASDAQ National Market System, the last reported sale price thereof
on the relevant date, or, if the Common Stock is not so listed or
included, the mean between the last reported "bid" and "asked" prices
thereof on the relevant date, as reported on NASDAQ or, if not so
reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as
the Committee determines.
(c) EXERCISE. No Option shall be deemed to have been exercised
prior to the receipt by the Company of written notice of such exercise
and of payment in full of the Option Price for the Shares to be
purchased. Each such notice shall specify the number of Shares to be
purchased and shall (unless the Shares are covered by a then current and
effective registration statement or qualified Offering Statement under
Regulation A under the Securities Act of 1933, as amended (the "Act")),
contain the Optionee's acknowledgment in form and substance satisfactory
to the Company that (a) such Shares are being purchased for investment
and not for distribution or resale (other than a distribution or resale
which, in the opinion of counsel satisfactory to the Company, may be made
without violating the registration provisions of the Act), (b) the
Optionee has been advised and understands that (i) the Shares have not
been registered under the Act and are "restricted securities" within the
meaning of Rule 144 under the Act and are subject to restrictions on
transfer and (ii) the Company is under no obligation to register the
Shares under the Act or to take any action which would make available to
the Optionee any exemption from such registration, (c) such Shares may
not be transferred without compliance with all applicable federal and
state securities laws, and (d) an appropriate legend referring to the
foregoing restrictions on transfer and any other restrictions imposed
under the Option Documents may be endorsed on the certificates.
Notwithstanding the foregoing, if the Company determines that issuance of
Shares should be delayed pending (A) registration under federal or state
securities laws, (B) the receipt of an opinion of counsel satisfactory to
the Company that an appropriate exemption from such registration is
available, (C) the listing or inclusion of the Shares on any securities
exchange or an automated quotation system or (D) the consent or approval
of any governmental regulatory body whose consent or approval is
necessary in connection with the issuance of such
Shares, the Company may defer exercise of any Option granted hereunder
until any of the events described in this sentence has occurred.
(d) Medium of Payment. An Optionee shall pay for Shares (i) in
cash, (ii) by certified or cashier's check payable to the order of the
Company, (iii) by payment through a broker in accordance with procedures
permitted by Regulation T of the Federal Reserve Board or (iv) by such
other mode of payment as the Committee may approve. Furthermore, the
Committee may provide in an Option Document that payment may be made in
whole or in part in shares of the Company's Common Stock held by the
Optionee for at least six months. If payment is made in whole or in part
in shares of the Company's Common Stock, then the Optionee shall deliver
to the Company certificates registered in the name of such Optionee
representing the shares owned by such Optionee, free of all liens, claims
and encumbrances of every kind and having an aggregate Fair Market Value
on the date of delivery that is at least as great as the Option Price of
the Shares (or relevant portion thereof) with respect to which such
Option is to be exercised by the payment in shares of Common Stock,
endorsed in blank or accompanied by stock powers duly endorsed in blank
by the Optionee. In the event that certificates for shares of the
Company's Common Stock delivered to the Company represent a number of
shares in excess of the number of shares required to make payment for the
Option Price of the Shares (or relevant portion thereof) with respect to
which such Option is to be exercised by payment in shares of Common
Stock, the stock certificate issued to the Optionee shall represent (i)
the Shares in respect of which payment is made, and (ii) such excess
number of shares. Notwithstanding the foregoing, the Committee may
impose from
4
<PAGE>
time to time such limitations and prohibitions on the use of shares of
the Common Stock to exercise an Option as it deems appropriate.
(e) Termination of Options.
(i) No option shall be exercisable after the first to occur of
the following:
(A) Expiration of the Option term specified in the Option
Document, which shall occur on or before (1) ten years from the
date of grant, or (2) five years from the date of grant of an
ISO if the Optionee on the date of grant owns, directly or by
attribution under Section 424(d) of the Code, shares possessing
more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of an Affiliate;
(B) Expiration of three months from the date the Optionee's
employment or service with the Company or its Affiliates
terminates for any reason other than disability or death or as
otherwise specified in Subsection 8(e)(i)(D) or 8(e)(i)(E)
below;
(C) Expiration of one year from the date such employment or
service with the Company or its Affiliates terminates due to the
Optionee's Disability or death;
(D) A finding by the Committee, after full consideration of
the facts presented on behalf of both the Company and the
Optionee, that the Optionee has breached his employment or
service contract with the Company or an Affiliate, or has been
engaged in disloyalty to the Company or an Affiliate, including,
without limitation, fraud, embezzlement, theft, commission of a
felony or proven dishonesty in the course of his employment or
service, or has disclosed trade secrets or confidential
information of the Company or an Affiliate. In such event, in
addition to immediate termination of the Option, the Optionee
shall automatically forfeit all Shares for which the Company has
not yet delivered the share certificates upon refund by the
Company of the Option Price. Notwithstanding anything herein to
the contrary, the Company may withhold delivery of share
certificates pending the resolution of any inquiry that could
lead to a finding resulting in a forfeiture.
(E) The date, if any, set by the Board of Directors as an
accelerated expiration date in the event of the liquidation or
dissolution of the Company.
(ii) Notwithstanding the foregoing, the Committee may extend the
period during which all or any portion of an Option may be
exercised to a date no later than the Option term specified in
the Option Document pursuant to Subsection 8(e)(i)(A), provided
that any change pursuant to this Subsection 8(e)(ii) which would
cause an ISO to become a Non-qualified Stock Option may be made
only with the consent of the Optionee.
(f) TRANSFERS. No Option granted under the Plan may be transferred,
except by will or by the laws of descent and distribution. During the
lifetime of the person to whom an Option is granted, such Option may be
exercised only by him. Notwithstanding the foregoing, a
5
<PAGE>
Non-qualified Stock Option may be transferred pursuant to the terms of a
"qualified domestic relations order," within the meaning of Sections
401(a)(13) and 414(p) of the Code or within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, as amended.
(g) LIMITATION ON ISO GRANTS. In no event shall the aggregate fair
market value of the shares of Common Stock (determined at the time the ISO
is granted) with respect to which incentive stock options under all
incentive stock option plans of the Company or its Affiliates are
exercisable for the first time by the Optionee during any calendar year
exceed $100,000.
(h) OTHER PROVISIONS. Subject to the provisions of the Plan, the
Option Documents shall contain such other provisions including, without
limitation, provisions authorizing the Committee to accelerate the
exercisability of all or any portion of an Option granted pursuant to the
Plan, additional restrictions upon the exercise of the Option or
additional limitations upon the term of the Option, as the Committee
shall deem advisable.
(i) AMENDMENT. Subject to the provisions of the Plan, the Committee
shall have the right to amend Option Documents issued to an Optionee,
subject to the Optionee's consent if such amendment is not favorable to
the Optionee, except that the consent of the Optionee shall not be
required for any amendment made pursuant to Subsection 8(e)(i)(E) or
Section 9 of the Plan, as applicable.
9. ADJUSTMENTS ON CHANGES IN CAPITALIZATION. The aggregate number of
Shares and class of shares as to which Options may be granted hereunder, the
number and class or classes of shares covered by each outstanding Option and
the Option Price thereof shall be appropriately adjusted in the event of a
stock dividend, stock split, recapitalization or other change in the number or
class of issued and outstanding equity securities of the Company resulting
from a subdivision or consolidation of the Common Stock and/or, if
appropriate, other outstanding equity securities or a recapitalization or
other capital adjustment (not including the issuance of Common Stock on the
conversion of other securities of the Company which are convertible into
Common Stock) affecting the Common Stock which is effected without receipt of
consideration by the Company. The Committee shall have authority to determine
the adjustments to be made under this Section, and any such determination by
the Committee shall be final, binding and conclusive.
10. AMENDMENT OF THE PLAN. The Board of Directors of the Company may
amend the Plan from time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not change the class of
individuals eligible to receive an ISO or increase the maximum number of shares
as to which Options may be granted without obtaining approval, within twelve
months before or after such action, by vote of a majority of the votes cast at
a duly called meeting of the stockholders at which a quorum representing a
majority of all outstanding voting stock of the Company is, either in person or
by proxy, present and voting on the matter. No amendment to the Plan shall
adversely affect any outstanding Option, however, without the consent of the
Optionee.
11. NO COMMITMENT TO RETAIN. The grant of an Option pursuant to the Plan
shall not be construed to imply or to constitute evidence of any agreement,
express or implied, on the part of the Company or any Affiliate to retain the
Optionee in the employ of the Company or an Affiliate and/or as a member of the
Company's Board of Directors or in any other capacity.
12. WITHHOLDING OF TAXES. Whenever the Company proposes or is required
to deliver or transfer Shares in connection with the exercise of an Option, the
Company shall have the right to (a) require the recipient to remit or
otherwise make available to the Company an amount sufficient to satisfy any
federal, state and/or local withholding tax requirements prior to the delivery
or transfer of any certificate or certificates for such Shares or (b) take
whatever other action it deems necessary to protect its interests with respect
to tax liabilities. The
6
<PAGE>
Company's obligation to make any delivery or transfer of Shares shall be
conditioned on the Optionee's compliance, to the Company's satisfaction, with
any withholding requirement.
13. INTERPRETATION. It is the intent of the Company that, if Alternative
Administration is selected by the Company's Board of Directors, transactions
under the Plan with respect to directors and officers (within the meaning of
Section 16(a) under the Securities Exchange Act of 1934, as amended) satisfy
the conditions of Rule 16b-3. To the extent that any provision of the Plan
would result in a conflict with such conditions, such provision shall be
deemed null and void. This Section shall not be applicable if no class of the
Company's equity securities is then registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended.
14. GOVERNING LAW. The Plan shall be governed by, and all questions
arising hereunder shall be determined in accordance with, the laws of the State
of New York.
7
<PAGE>
[ALTERNATE COVER PAGE]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY , 1995
Shares
ROBOTIC VISION SYSTEMS, INC.
COMMON STOCK
-------------------
This Prospectus relates to shares of Common Stock ("Common
Stock") of Robotic Vision Systems, Inc., a Delaware corporation ("RVSI"),
offered for public sale by those persons identified elsewhere herein as
selling stockholders (the "Selling Stockholders"). RVSI will not receive any
of the proceeds from the sale of shares by the Selling Stockholders. See
"Selling Stockholders."
The Registration Statement, of which this Prospectus forms a part, also
related to the solicitation of proxies by the Boards of Directors of RVSI and
Acuity Imaging Inc., a Delaware corporation ("ACUT"), in connection with the
merger (the "Merger") of a wholly-owned subsidiary of RVSI with and into ACUT,
which Merger was consummated on , 1995. As a result of the Merger
and the transactions contemplated thereby, ACUT became a wholly-owned
subsidiary of RVSI.
Prior to the effective date of the Merger, each of the Selling
Stockholders named herein agreed to certain restrictions on the disposition of
their respective shares of RVSI Common Stock. RVSI has been advised by each
of the Selling Stockholders that there are no underwriting arrangements with
respect to the sale of their respective shares, that such shares will be sold
from time to time in public sales in the over-the-counter market at then
prevailing prices or in private transactions at negotiated prices, and that no
greater than usual and customary brokerage fees will be paid by the Selling
Stockholders in connection therewith. See "Selling Stockholders."
------------------
No person is authorized to give any information or to make any
representations other than those contained in this Prospectus, and if given or
made, such information or representations should not be relied upon as having
been authorized. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered by this
Prospectus, or the solicitation of a proxy, in any jurisdiction to or from any
person to whom or from whom it is unlawful to make such offer, solicitation of
an offer or proxy solicitation in such jurisdiction. Neither the delivery of
this Prospectus nor any distribution of securities pursuant to this Prospectus
shall, under any circumstances, create any implication that there has been no
change in the information set forth herein or in the affairs of RVSI since the
date of this Prospectus. However, if a material change occurs during the
period that this Prospectus is required to be delivered, this Prospectus will
be amended and supplemented accordingly.
------------------
See "Risk Factors" for certain information that should be considered by
purchasers of these securities.
------------------
THE SECURITIES TO WHICH THIS PROSPECTUS RELATE HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The last reported sales price of RVSI Common Stock on The Nasdaq
National Market on , 1995 was $ per share.
------------------
The date of this Prospectus is , 1995.
<PAGE>
[ALTERNATE PAGE]
SELLING STOCKHOLDERS
GENERAL
The table sets forth certain information with respect to the Selling
Stockholders. The shares set forth therein are being included in the
Registration Statement of which this Prospectus forms a part pursuant to
registration commitments afforded to the Selling Stockholders by contractual
obligations, who have also agreed as a condition to the inclusion of their
shares in this Registration Statement to certain restrictions on their
disposition of such shares. From time to time by post-effective amendment,
the identification of the Selling Stockholder and number of shares to be sold
will be set forth in this Prospectus. RVSI will not receive any proceeds from
the sale of the shares by the Selling Stockholders.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF OWNERSHIP OF
SHARES OF RVSI SHARES OF RVSI
RVSI COMMON COMMON COMMON STOCK AFTER
NAME OF STOCK OWNED STOCK GIVING EFFECT TO
SELLING RELATIONSHIP ON THE DATE OFFERED PROPOSED
STOCKHOLDER WITH RVSI HEREOF FOR SALE(1) SALE(1)(2)
- ----------- ------------ ----------- ----------- -------------------
<S> <C> <C> <C> <C>
----- ----- -----
===== ===== =====
</TABLE>
PLAN OF DISTRIBUTION
The shares of RVSI Common Stock to be received by the Selling
Stockholders as a result of the Merger or otherwise owned by such persons may
be offered for sale from time to time at market prices prevailing at the time
of sale or at negotiated prices, and without payment of any underwriting
discounts or commissions except for usual and customary selling commissions
paid to brokers or dealers. This Prospectus may be used from time to time by
each Selling Stockholder to offer the RVSI Common Stock registered hereby for
sale in transactions in which he, she or it is or may be deemed to be an
underwriter within the meaning of the Securities Act. Brokers, dealers and
agents participating in the distribution of the RVSI Common Stock offered by
Selling Stockholders may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of such
shares may be deemed to be underwriting discounts and commissions, under the
Securities Act.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Seventh of the Certificate of Incorporation of Robotic Vision
Systems, Inc. (the "Registrant") provides with respect to the indemnification of
directors and officers that the Registrant shall indemnify to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law, as amended
from time to time, each person that such Section grants the Registrant power to
indemnify. Article Tenth of the Certificate of Incorporation of the Registrant
also provides that no director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2), acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transactions from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the ability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of Delaware General Corporation Law, as
amended from time to time.
Section 145 of Delaware Corporation Law provides, INTER ALIA, that to
the extent a director, officer, employee or agent of a corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding, whether civil, criminal, administrative or investigative or in
defense of any claim, issue, or matter therein (hereinafter, a "Proceeding"), by
reason of the fact that he is or was a director, officer, employee or agent of a
corporation or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise (collectively an "Agent" of the
corporation), he shall be indemnified against expenses (including attorney's
fees) actually and reasonably incurred by him in connection therewith.
Section 145 also provides that a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened
Proceeding by reason of the fact that he is or was an Agent of the corporation,
against expenses (including attorney's fees) judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
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 believe his conduct was unlawful; provided, however, that in
an action by or in the right of the corporation, the corporation may not
indemnify such person in respect of any claim, issue, or matter as to which he
is adjudged to be liable to the corporation unless, and only to the extent that,
the Court of Chancery or the court in which such proceeding was brought
determines that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is reasonably entitled to indemnity.
Item 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) Exhibits
(I) ROBOTIC VISION SYSTEMS, INC.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
2.1 Agreement and Plan of Merger and Reorganization, dated as of
April 27, 1995, as amended and restated as of July 11, 1995, by
and among
II-1
<PAGE>
Registrant, RVSI Acquisition Corp. and Acuity Imaging, Inc.
(included as Exhibit A to the Joint Proxy Statement and
Prospectus which forms a part of the Registration Statement
(the "Proxy Statement"))
3.1 Registrant's Certificate of Incorporation, as amended to
date(1)
3.2 Registrant's By-Laws, as amended(2)
4.1 Stock and Warrant Purchase Agreement by and between
Registrant and General Motors Corporation dated as of
December 12, 1984(3)
4.2 Stock Purchase Warrant expiring December 12,1989 issued to
General Motors Corporation(3)
4.3 Form of warrant expiring December 14, 1988 (Exhibit 4(f))(4)
4.4 Amendment to Warrant issued to General Motors (Exhibit
4(d))(5)
5.1* Opinion of Parker Duryee Rosoff & Haft
8.1* Opinion of Parker Duryee Rosoff & Haft with respect to certain
Federal income tax aspects attendant to the Merger
10.1 Research and Development Master Agreement by and between
Registrant and General Motors Corporation dated as of
December 12, 1984(3)
10.2 Patent License and Technology Agreement by and between
Registrant and General Motors Corporation dated as of
December 12, 1984(3)
10.3 License Agreement by and between Registrant and Med-Bed
Technologies, Inc. dated as of January 24, 1984(3)
10.4 Employment Agreement, dated December 11, 1984 between
Registrant and Pat V. Costa(3)
10.5 Letter of Agreement dated December 21, 1984 between
Registrant and Howard Stern (Exhibit 10(f))(6)
10.6 Letter of Agreement dated July 14, 1983 between Registrant
and Robert H. Walker (Exhibit 10(g))(3)
10.7 Lease agreement dated May 2, 1990 between Registrant and
NM&J Investors covering the premises located at 425 Rabro
Drive east, Hauppauge, New York(7)
10.8 Mortgage between Registrant as Mortgagee and Earl H. Rideout
and Catherine Rideout as Mortgagors(5)
10.9 Loan Agreement dated September 13, 1989 between Registrant
and General Motors Corporation(5)
10.10 Asset Purchase Agreement dated as of September 30, 1990
between Registrant and Cybo Systems, Inc.(8)
11.1 Statement regarding computation of per share earnings
(included in Note 1i of the Notes to Financial Statements
of RVSI)
II-2
<PAGE>
22 Subsidiaries of Registrant(3)
23.1 Consent of Deloitte & Touche LLP
23.2* Consents of Parker Duryee Rosoff & Haft (included in Exhibits
5.1 and 8.1)
23.3 Consent of Janney Montgomery Scott Inc. (included in Exhibit C
to the Proxy Statement)
23.4 Consent of Ofer Gneezy
23.5 Consent of Donald J. Kramer
23.6 Consent of the Morrison Law Firm
24.1** Power of Attorney (included on the signature page of Part II
of this Registration Statement)
99.1 Form of Proxy to be used by Registrant
- -------------
* To be filed by Amendment.
** Previously filed with this Registration Statement
(1) Denotes document filed as Exhibit to Registrant's Annual Report on Form
10-K for its fiscal year ended September 30, 1987 and incorporated herein
by reference.
(2) Denotes document filed as Exhibit to Registrant's Registration Statement on
Form S-1 (File No. 2-75483) and incorporated herein by reference.
(3) Denotes document filed as Exhibit to Registrant's Annual Report on Form
10-K for its fiscal year ended September 30, 1984 and incorporated herein
by reference.
(4) Denotes document filed as Exhibit to Registrant's Annual Report on Form
10-K for its fiscal year ended September 30, 1985 and incorporated herein
by reference.
(5) Denotes document filed as Exhibit to Registrant's Annual Report on Form
10-K for its fiscal year ended September 30, 1989 and incorporated herein
by reference.
(6) Denotes document filed as Exhibit to Registrant's Annual Report on Form
10-K for its fiscal year ended September 30, 1986 and incorporated herein
by reference.
(7) Denotes document filed as Exhibit to Registrant's Annual Report on Form
10-K for its fiscal year ended September 30, 1990 and incorporated herein
by reference.
(8) Denotes document filed as Exhibit to Registrant's Current Report on Form
8-K for an event which occurred on October 1, 1990 and incorporated herein
by reference.
</TABLE>
(II) ACUITY IMAGING INC.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of April 27, 1995, as
amended and restated as of July 11, 1995, between Registrant
and Acuity Imaging Inc. ("Acuity") (included as Exhibit A to the
Prospectus)
2.2 Merger Agreement and Plan of Reorganization between Acuity and
Itran Corp.(23)
3.1 Certificate of Incorporation of Acuity(1)
II-3
<PAGE>
3.2 Certificate of Correction of Acuity(1)
3.3 Certificate of Amendment of Acuity(2)
3.4 Certificate of Amendment of Acuity(4)
3.5 Certificate of Amendment of Acuity(23)
3.6 Certificate of Amendment of Acuity(24)
3.7 By-laws of Acuity(24)
4.1 Specimen Certificate of Shares of Common Stock(1)
10.1 1980 Incentive Stock Option Plan(14)
10.2 Form of Option Agreement in connection with 1980 Incentive Stock
Option Plan(4)
10.3 1981 Stock Option Plan(14)
10.4 Form of Stock Option Agreement in connection with 1981 Stock
Option Plan(1)
10.5 Reorganization Agreement by and among Automatrix Incorporated,
S.M.T., and SuperCads Inc. dated July 8, 1987(11)
10.6 Material Agreements in connection with Acquisition and Licensing
of Assets of Cognition Inc.
(1) Agreement among Cognition Inc. SuperCads Inc. and Automatrix
Incorporated(13)
(2) First Amendment Agreement of December 29, 1989 and related
Promissory Note and related Escrow Amendment Agreement(15)
10.7 Material documents in connection with private equity financing in
December 1990 of subsidiary Cognition Corporation(18)
10.8 MML Controller Agreement with Yaskawa Electric Mfg. Co., Ltd.(17)
10.9 Material documents in connection with private equity financing in
December 1990 of subsidiary Cognition Corporation(18)
10.10 1991 Stock Option Plan(24)
10.11 Stock Purchase Agreement dated as of July 15, 1992, between
Automatrix Incorporated, Cadema Corporation, SuperCads, Inc.
and certain other stockholders of Cognition(22)
10.12 Forms of Option Agreements in connection with Automatrix
Incorporated 1991 Stock Option Plan(23)
10.13 Ofer Gneezy 1991 Special Stock Option Plan(24)
10.14 Lease of 9 Townsend West, Nashua, New Hampshire facility(27)
10.15 Contract between Acuity and Brown & Williamson dated
January 29, 1992(26)
II-4
<PAGE>
10.16 Line of Credit Agreement between Acuity and
Silicon Valley Bank(27)
10.17 [Intentionally Left Blank]
10.18 $3.5 Million Revolving Credit Facility provided for Acuity by
Fleet Bank of Massachusetts, N.A.
11.1 Computation of Per Share Earnings (28)
21.1 Subsidiaries of Acuity (28)
23.1 Consent of Independent Public Accountant (Arthur Andersen LLP)
23.2 Consent of Independent Accountant (Deloitte &
Touche LLP)
23.3 Consent of Fechtor, Detwiler & Co., Inc.
99.1 Form of Proxy to be used by Acuity
<FN>
- -----------
(1) The items listed are incorporated by reference herein to Acuity's
Registration Statement on Form S-1 (File No. 2-81449) as declared effective
March 1, 1983.
(2) The items listed are incorporated by reference herein to Acuity's annual
report on Form 10-K for the year ended December 31, 1984.
(4) The items listed are incorporated by reference herein to Acuity's
Registration Statement on Form S-8 (File No. 33-19925) effective February
28, 1988.
(5) The items listed are incorporated by reference herein to Acuity's annual
report on Form 10-K for the year ended December 31, 1985.
(11) The items listed are incorporated by reference herein to Acuity's report on
Form 8-K dated January 27, 1988.
(12) The items listed are incorporated by reference herein to Acuity's annual
report on Form 10-K for the year ended December 31, 1987.
(13) The items listed are incorporated by reference herein to Acuity's report on
Form 10-Q for the thirteen weeks ended July 1, 1989.
(14) The items listed are incorporated by reference herein to Acuity's annual
report on Form 10-K for the year ended December 31, 1988.
(15) The items listed are incorporated by reference herein to Acuity's annual
report on Form 10-K for the year ended December 31, 1989.
(17) The items listed are incorporated by reference herein to Acuity's report on
Form 10-Q for the thirteen weeks ended June 30, 1990.
(18) The items listed are incorporated by reference herein to Acuity's report on
Form 10-K for the year ended December 31, 1990.
(21) The items listed are incorporated by reference herein to Acuity's report on
Form 10-K for the year ended December 31, 1991.
(22) The items listed are incorporated by reference herein to Acuity's report on
Form 8-K dated July 15, 1992.
(23) The items listed are incorporated by reference herein to Acuity's
Registration Statement on Form S-8 (number 33-72022) effective December 15,
1993.
(24) The items listed are incorporated by reference herein to Acuity's
Registration Statement on Form S-8 (number 33-75208) effective February 14,
1994.
(26) The items listed are incorporated by reference herein to Acuity's
report on Form 10-QSB for the thirteen weeks ended April 2, 1994.
(27) The items listed are incorporated by reference herein to Acuity's
report on Form 10-KSBA/A Amendment #1 for the year ended December 31,
1993.
(28) The items listed are incorporated by reference herein to Acuity's report
on Form 10-KSB for the year ended December 31, 1994.
</TABLE>
II-5
<PAGE>
(b) Financial Statement Schedules
All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or not applicable, and therefore have
been omitted.
(c) Item 4(b) Information
Not applicable.
Item 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes as follows:
(1) that prior to any public offering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form; and
(2) that every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act, and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment of the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the questions 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.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Hauppauge, State of
New York, on the 21st day of July, 1995.
ROBOTIC VISION SYSTEMS, INC.
By: /s/ Pat V. Costa
--------------------------
Pat V. Costa, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Dated
--------- ----- -----
/s/ Pat V. Costa Chairman of the Board
- ---------------------- President and Director, July 21, 1995
Pat V. Costa (Principal Executive
Officer)
* Executive Vice President,
- ----------------------- Secretary/Treasurer and
Robert H. Walker Director (Principal Financial July 21, 1995
Officer and Principal
Accounting Officer)
<PAGE>
* Senior Vice President July 21, 1995
- ------------------------ and Director
Howard Stern
- ------------------------ Director
Donald F. Domnick
*
- ------------------------ Director July 21, 1995
Jay M. Haft
- ------------------------ Director
Frank A. DiPiatso
- ------------------------ Director
Mark J. Lerner
* Pat V. Costa, pursuant to Powers of Attorney (executed by each of the
officers and directors listed above and indicated as signing above, and
filed with the Securities and Exchange Commission), by signing his name
hereto does hereby sign and execute this Amendment to the Registration
Statement on behalf of each of the persons referenced above.
July 21, 1995 /s/ Pat V. Costa
-----------------
Pat V. Costa
<PAGE>
(I) ROBOTIC VISION SYSTEMS, INC.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
2.1 Agreement and Plan of Merger and Reorganization, dated as of
April 27, 1995, as amended and restated as of July 11, 1995, by
and among Registrant, RVSI Acquisition Corp. and Acuity Imaging,
Inc. (included as Exhibit A to the Joint Proxy Statement and
Prospectus which forms a part of the Registration Statement (the
"Proxy Statement"))
3.1 Registrant's Certificate of Incorporation, as amended to
date(1)
3.2 Registrant's By-Laws, as amended(2)
4.1 Stock and Warrant Purchase Agreement by and between
Registrant and General Motors Corporation dated as of
December 12, 1984(3)
4.2 Stock Purchase Warrant expiring December 12,1989 issued to
General Motors Corporation(3)
4.3 Form of warrant expiring December 14, 1988 (Exhibit 4(f))(4)
4.4 Amendment to Warrant issued to General Motors (Exhibit
4(d))(5)
5.1* Opinion of Parker Duryee Rosoff & Haft
8.1* Opinion of Parker Duryee Rosoff & Haft with respect to certain
Federal income tax aspects attendant to the Merger
10.1 Research and Development Master Agreement by and between
Registrant and General Motors Corporation dated as of
December 12, 1984(3)
10.2 Patent License and Technology Agreement by and between
Registrant and General Motors Corporation dated as of
December 12, 1984(3)
10.3 License Agreement by and between Registrant and Med-Bed
Technologies, Inc. dated as of January 24, 1984(3)
10.4 Employment Agreement, dated December 11, 1984 between
Registrant and Pat V. Costa(3)
10.5 Letter of Agreement dated December 21, 1984 between
Registrant and Howard Stern (Exhibit 10(f))(6)
10.6 Letter of Agreement dated July 14, 1983 between Registrant
and Robert H. Walker (Exhibit 10(g))(3)
10.7 Lease agreement dated May 2, 1990 between Registrant and
NM&J Investors covering the premises located at 425 Rabro
Drive east, Hauppauge, New York(7)
10.8 Mortgage between Registrant as Mortgagee and Earl H. Rideout
and Catherine Rideout as Mortgagors(5)
10.9 Loan Agreement dated September 13, 1989 between Registrant
and General Motors Corporation(5)
10.10 Asset Purchase Agreement dated as of September 30, 1990
between Registrant and Cybo Systems, Inc.(8)
11.1 Statement regarding computation of per share earnings
(included in Note 1i of the Notes to Financial Statements
of RVSI)
1
<PAGE>
22 Subsidiaries of Registrant(3)
23.1 Consent of Deloitte & Touche LLP
23.2* Consents of Parker Duryee Rosoff & Haft (included in Exhibits
5.1 and 8.1)
23.3 Consent of Janney Montgomery Scott Inc. (included in Exhibit C
to the Proxy Statement)
23.4 Consent of Ofer Gneezy
23.5 Consent of Donald J. Kramer
23.6 Consent of the Morrison Law Firm
24.1** Power of Attorney (included on the signature page of Part II
of this Registration Statement)
99.1 Form of Proxy to be used by Registrant
<FN>
- -------------
* To be filed by Amendment.
** Previously filed with this Registration Statement
(1) Denotes document filed as Exhibit to Registrant's Annual Report on Form
10-K for its fiscal year ended September 30, 1987 and incorporated herein
by reference.
(2) Denotes document filed as Exhibit to Registrant's Registration Statement on
Form S-1 (File No. 2-75483) and incorporated herein by reference.
(3) Denotes document filed as Exhibit to Registrant's Annual Report on Form
10-K for its fiscal year ended September 30, 1984 and incorporated herein
by reference.
(4) Denotes document filed as Exhibit to Registrant's Annual Report on Form
10-K for its fiscal year ended September 30, 1985 and incorporated herein
by reference.
(5) Denotes document filed as Exhibit to Registrant's Annual Report on Form
10-K for its fiscal year ended September 30, 1989 and incorporated herein
by reference.
(6) Denotes document filed as Exhibit to Registrant's Annual Report on Form
10-K for its fiscal year ended September 30, 1986 and incorporated herein
by reference.
(7) Denotes document filed as Exhibit to Registrant's Annual Report on Form
10-K for its fiscal year ended September 30, 1990 and incorporated herein
by reference.
(8) Denotes document filed as Exhibit to Registrant's Current Report on Form
8-K for an event which occurred on October 1, 1990 and incorporated herein
by reference.
</TABLE>
(II) ACUITY IMAGING INC.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of April 27, 1995, as
amended and restated as of July 11, 1995, between Registrant and
Acuity Imaging Inc. ("Acuity") (included as Exhibit A to the
Prospectus)
2.2 Merger Agreement and Plan of Reorganization between Acuity and
Itran Corp.(23)
3.1 Certificate of Incorporation of Acuity(1)
2
<PAGE>
3.2 Certificate of Correction of Acuity(1)
3.3 Certificate of Amendment of Acuity(2)
3.4 Certificate of Amendment of Acuity(4)
3.5 Certificate of Amendment of Acuity(23)
3.6 Certificate of Amendment of Acuity(24)
3.7 By-laws of Acuity(24)
4.1 Specimen Certificate of Shares of Common Stock(1)
10.1 1980 Incentive Stock Option Plan(14)
10.2 Form of Option Agreement in connection with 1980 Incentive Stock
Option Plan(4)
10.3 1981 Stock Option Plan(14)
10.4 Form of Stock Option Agreement in connection with 1981 Stock
Option Plan(1)
10.5 Reorganization Agreement by and among Automatrix Incorporated,
S.M.T., and SuperCads Inc. dated July 8, 1987(11)
10.6 Material Agreements in connection with Acquisition and Licensing
of Assets of Cognition Inc.
(1) Agreement among Cognition Inc. SuperCads Inc. and Automatrix
Incorporated(13)
(2) First Amendment Agreement of December 29, 1989 and related
Promissory Note and related Escrow Amendment Agreement(15)
10.7 Material documents in connection with private equity financing in
December 1990 of subsidiary Cognition Corporation(18)
10.8 MML Controller Agreement with Yaskawa Electric Mfg. Co., Ltd.(17)
10.9 Material documents in connection with private equity financing in
December 1990 of subsidiary Cognition Corporation(18)
10.10 1991 Stock Option Plan(24)
10.11 Stock Purchase Agreement dated as of July 15, 1992, between
Automatrix Incorporated, Cadema Corporation, SuperCads, Inc.
and certain other stockholders of Cognition(22)
10.12 Forms of Option Agreements in connection with Automatrix
Incorporated 1991 Stock Option Plan(23)
10.13 Ofer Gneezy 1991 Special Stock Option Plan(24)
10.14 Lease of 9 Townsend West, Nashua, New Hampshire facility(27)
10.15 Contract between Acuity and Brown & Williamson dated
January 29, 1992(26)
3
<PAGE>
10.16 Line of Credit Agreement between Acuity and
Silicon Valley Bank(27)
10.17 [Intentionally Left Blank]
10.18 $3.5 Million Revolving Credit Facility provided for Acuity by
Fleet Bank of Massachusetts, N.A.
11.1 Computation of Per Share Earnings (28)
21.1 Subsidiaries of Acuity (28)
23.1 Consent of Independent Public Accountant (Arthur Andersen LLP)
23.2 Consent of Independent Accountant (Deloitte &
Touche LLP)
23.3 Consent of Fechtor, Detwiler & Co., Inc.
99.1 Form of Proxy to be used by Acuity
<FN>
- ------------
(1) The items listed are incorporated by reference herein to Acuity's
Registration Statement on Form S-1 (File No. 2-81449) as declared effective
March 1, 1983.
(2) The items listed are incorporated by reference herein to Acuity's annual
report on Form 10-K for the year ended December 31, 1984.
(4) The items listed are incorporated by reference herein to Acuity's
Registration Statement on Form S-8 (File No. 33-19925) effective February
28, 1988.
(5) The items listed are incorporated by reference herein to Acuity's annual
report on Form 10-K for the year ended December 31, 1985.
(11) The items listed are incorporated by reference herein to Acuity's report on
Form 8-K dated January 27, 1988.
(12) The items listed are incorporated by reference herein to Acuity's annual
report on Form 10-K for the year ended December 31, 1987.
(13) The items listed are incorporated by reference herein to Acuity's report on
Form 10-Q for the thirteen weeks ended July 1, 1989.
(14) The items listed are incorporated by reference herein to Acuity's annual
report on Form 10-K for the year ended December 31, 1988.
(15) The items listed are incorporated by reference herein to Acuity's annual
report on Form 10-K for the year ended December 31, 1989.
(17) The items listed are incorporated by reference herein to Acuity's report on
Form 10-Q for the thirteen weeks ended June 30, 1990.
(18) The items listed are incorporated by reference herein to Acuity's report on
Form 10-K for the year ended December 31, 1990.
(21) The items listed are incorporated by reference herein to Acuity's report on
Form 10-K for the year ended December 31, 1991.
(22) The items listed are incorporated by reference herein to Acuity's report on
Form 8-K dated July 15, 1992.
(23) The items listed are incorporated by reference herein to Acuity's
Registration Statement on Form S-8 (number 33-72022) effective December 15,
1993.
(24) The items listed are incorporated by reference herein to Acuity's
Registration Statement on Form S-8 (number 33-75208) effective February 14,
1994.
(26) The items listed are incorporated by reference herein to Acuity's
report on Form 10-QSB for the thirteen weeks ended April 2, 1994.
(27) The items listed are incorporated by reference herein to Acuity's
report on Form 10-KSBA/A Amendment #1 for the year ended December 31,
1993.
(28) The items listed are incorporated by reference herein to Acuity's
report on Form 10-KSB for the year ended December 31, 1994.
</TABLE>
4
<PAGE>
Robotic Vision Systems, Inc.
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to the use in this Registration Statement of Robotic Vision
Systems, Inc. on Form S-4 of our report dated December 14, 1994, appearing
in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Historical
Financial Data of RVSI" and "Experts" in such Prospectus.
/s/ Deloitte & Touch LLP
Deloitte & Touche LLP
Jericho, New York
July 20, 1995
<PAGE>
Robotic Vision Systems, Inc.
Exhibit 23.4
CONSENT OF OFER GNEEZY
The undersigned hereby consents to being named as a nominee for director
in the Registration Statement on Form S-4 filed with the Securities and
Exchange Commission in connection with the merger of RVSI Acquisition Corp.,
a wholly-owned subsidiary of Robotic Vision Systems, Inc., with and into Acuity
Imaging, Inc.
/S/ OFER GNEEZY
----------------------------------------
Ofer Gneezy
July 19, 1995
<PAGE>
Robotic Vision Systems, Inc.
Exhibit 23.6
CONSENT
We hereby consent to the reference to our Firm under the caption
"Business of RVSI - Litigation" in the preliminary Proxy Statement/Prospectus
comprising a portion of that certain Registration Statement on Form S-4
(File No. 33-59637), as amended, of Robotic Vision Systems, Inc.
MORRISON LAW FIRM
By: /s/
------------------------------
A Member of the Firm
Mt. Vernon, New York
July 21, 1995
<PAGE>
Robotic Vision Systems
Exhibit 99.1
ROBOTIC VISION SYSTEMS, INC.
425 Rabro Drive East
Hauppauge, New York 11788
_____________________
This Proxy is Solicited on Behalf of the Board of Directors
_____________________
The undersigned hereby appoints Pat V. Costa and Howard Stern as Proxies,
each with the power to appoint his substitute, and hereby authorizes them, and
each of them, to represent and vote, as designated below, all the shares of
Common Stock of Robotic Vision Systems, Inc. ("RVSI") held of record by the
undersigned on July , 1995 at the Special Meeting of Stockholders to be held
on , September , 1995, or any adjournment thereof.
1. To consider and vote upon the approval and adoption of that certain
Agreement and Plan of Merger and Reorganization, dated as of April 27,
1995, as amended and restated as of July 11, 1995, by and among RVSI,
Acuity Imaging, Inc., a Delaware corporation ("Acuity"), and RVSI
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of RVSI ("Subsidiary"), pursuant to which, among other matters,
(i) Subsidiary will be merged with and into Acuity and Acuity will become
a wholly-owned subsidiary of RVSI, and (ii) each share of Common Stock,
$.01 par value, of Acuity will be converted into the right to receive,
and become exchangeable for, 0.766 of a share of Common Stock, $.01 par
value, of RVSI (the "RVSI Common Stock"); provided, however, that if the
average of the closing prices of RVSI Common Stock on The Nasdaq National
Market for the 20 trading days ending on (and including) the third trading
day immediately prior to the Special Meeting (the "Average Closing Price")
is greater than $14.50, then the Exchange Ratio shall be equal to the
quotient of $11.107 divided by the Average Closing Price (provided that in
no event shall the Exchange Ratio be less than 0.555375); and if the
Average Closing Price is less than $10.00, then the Exchange Ratio shall
be equal to the quotient of $7.66 divided by the Average Closing Price
(provided that in no event shall the Exchange Ratio be less than 0.925626),
all as more fully described in the accompanying Joint Proxy
Statement/Prospectus;
FOR / / AGAINST / / ABSTAIN / /
2. Election of Directors:
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for
(except as marked to the all nominees listed below
contrary below)
(Instruction: To withhold authority to vote for any individual nominee, strike
such nominee's name from the list below.)
Pat V. Costa Frank A. DiPietro Donald F. Domnick
Jay M. Haft Mark J. Lerner Howard Stern
Robert H. Walker Donald J. Kramer Ofer Gneezy
3. To consider and vote upon a proposal to approve RVSI's Amended and Restated
1991 Stock Option Plan:
FOR / / AGAINST / / ABSTAIN / /
4. To consider and vote upon a proposal to amend RVSI's Certificate of
Incorporation to increase the number of shares of RVSI Common Stock
authorized thereunder from 20,000,000 shares to 30,000,000 shares:
FOR / / AGAINST / / ABSTAIN / /
5. To ratify the selection of Deloitte & Touche LLP as RVSI's independent
auditors for the fiscal year ending September 30, 1995:
FOR / / AGAINST / / ABSTAIN / /
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting or any adjournment
or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3, 4 AND 5. A VOTE TO "ABSTAIN" WILL NOT BE COUNTED TOWARDS THE
REQUISITE AFFIRMATIVE VOTE TO APPROVE PROPOSAL 1.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
a corporation, please sign in full
corporate name by the President or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
_________________________________
Signature
_________________________________
Signature if held jointly
Dated: ______________, 1995
<PAGE>
Acuity Imaging, Inc.
Exhibit 10.18
ACUITY IMAGING, INC.
9 Townsend West
Nashua, NH 03063
March 29, 1995
Fleet Bank of Massachusetts, N.A.
75 State Street
Boston, MA 02109
Gentlemen:
This letter agreement will set forth certain understandings between Acuity
Imaging, Inc., a Delaware corporation (the "Borrower") and Fleet Bank of
Massachusetts, N.A. (the "Bank") with respect to Revolving Loans (hereinafter
defined) to be made by the Bank to the Borrower and with respect to letters of
credit which may hereafter be issued by the Bank for the account of the
Borrower. In consideration of the mutual promises contained herein and in the
other documents referred to below, and for other good and valuable
consideration, receipt and sufficiency of which are hereby acknowledged, the
Borrower and the Bank agree as follows:
I. AMOUNTS AND TERMS
1.1. REFERENCE TO DOCUMENTS. Reference is made to (i) that certain
$3,500,000 principal amount promissory note (the "Revolving Note") of even date
herewith made by the Borrower and payable to the order of the Bank, (ii) that
certain Inventory, Accounts Receivable and Intangibles Security Agreement and
that certain Supplementary Security Agreement - Security Interest in Goods and
Chattels, each of even date herewith, from the Borrower to the Bank
(collectively, the "Security Agreement") and (iii) assignments and notices of
assignment (collectively, the "Intellectual Property Assignments") from the
Borrower to the Bank relating to the Borrower's registered trademarks, patents
and copyrights, if any.
1.2. THE BORROWING; REVOLVING NOTE. Subject to the terms and conditions
hereinafter set forth, the Bank will make loans ("Revolving Loans") to the
Borrower, in such amounts as the
1
<PAGE>
Borrower may request, at the Principal Office of the Bank on any Business Day
prior to the first to occur of (i) the Expiration Date, or (ii) the earlier
termination of the within-described revolving financing arrangements pursuant to
Section 5.2 or Section 6.7; provided, however, that (1) the aggregate principal
amount of Revolving Loans outstanding shall at no time exceed the Maximum
Revolving Amount (hereinafter defined) and (2) the Aggregate Bank Liabilities
(hereinafter defined) shall at no time exceed the Borrowing Base (hereinafter
defined). Within such limits, and subject to the terms and conditions hereof,
the Borrower may obtain Revolving Loans, repay Revolving Loans and obtain
Revolving Loans again on one or more occasions. The Revolving Loans shall be
evidenced by the Revolving Note and interest thereon shall be payable at the
times and at the rate provided for in the Revolving Note. Overdue principal of
the Revolving Loans and, to the extent permitted by law, overdue interest shall
bear interest at a fluctuating rate per annum which at all times shall be equal
to the sum of (i) two (2%) percent per annum plus (ii) the per annum rate
otherwise payable under the Revolving Note (but in no event in excess of the
maximum rate from time to time permitted by then applicable law), compounded
monthly and payable on demand. The Borrower hereby irrevocably authorizes the
Bank to make or cause to be made, on a schedule attached to the Revolving Note
or on the books of the Bank, at or following the time of making each Revolving
Loan and of receiving any payment of principal, an appropriate notation
reflecting such transaction and the then aggregate unpaid principal balance of
the Revolving Loans. The amount so noted shall constitute presumptive evidence
as to the amount owed by the Borrower with respect to principal of the Revolving
Loans. Failure of the Bank to make any such notation shall not, however, affect
any obligation of the Borrower or any right of the Bank hereunder or under the
Revolving Note. All payments of interest, principal and any other sum payable
hereunder and/or under the Revolving Note shall be made to the Bank at its
Principal Office, in immediately available funds. All payments received by the
Bank after 2:00 p.m. on any day shall be deemed received as of the next
succeeding Business Day. All monies received by the Bank shall be applied first
to fees, charges, costs and expenses payable to the Bank under this letter
agreement, the Revolving Note and/or any of the other Loan Documents, next to
interest then accrued on account of any Revolving Loans or letter of credit
reimbursement obligations and only thereafter to principal of the Revolving
Loans and letter of credit reimbursement obligations. All interest and fees
payable hereunder and/or
2
<PAGE>
under the Revolving Note shall be calculated on the basis of a 360-day year for
the actual number of days elapsed.
1.3. REPAYMENT; RENEWAL. The Borrower shall repay in full all Revolving
Loans and all interest thereon upon the first to occur of: (i) the Expiration
Date or (ii) an acceleration under Section 5.2(a) following an Event of Default.
The Borrower may repay, at any time, without penalty or premium, the whole or
any portion of any Revolving Loan. In addition, if at any time the Borrowing
Base is in an amount which is less than the then outstanding Aggregate Bank
Liabilities, the Borrower will forthwith prepay so much of the Revolving Loans
as may be required (or arrange for the termination of such letters of credit as
may be required) so that the Aggregate Bank Liabilities will not exceed the
Borrowing Base. The Bank may, at its sole discretion, renew the financing
arrangements described in this letter agreement by extending the Expiration Date
in a writing signed by the Bank and accepted by the Borrower. Neither the
inclusion in this letter agreement or elsewhere of covenants relating to periods
of time after the Expiration Date, nor any other provision hereof, nor any
action (except a written extension pursuant to the immediately preceding
sentence), non-action or course of dealing on the part of the Bank will be
deemed an extension of, or agreement on the part of the Bank to extend, the
Expiration Date.
1.4. ADVANCES AND PAYMENTS. The proceeds of all Revolving Loans shall be
credited by the Bank to a general deposit account maintained by the Borrower
with the Bank. The proceeds of each Revolving Loan will be used by the Borrower
solely for working capital purposes.
The Bank may charge any general deposit account of the Borrower at the Bank
with the amount of all payments of interest, principal and other sums due, from
time to time, under this letter agreement and/or the Revolving Note and/or with
respect to any letter of credit; and will thereafter promptly notify the
Borrower of the amount so charged. The failure of the Bank so to charge any
account or to give any such notice shall not affect the obligation of the
Borrower to pay interest, principal or other sums as provided herein or in the
Revolving Note or with respect to any letter of credit.
Whenever any payment to be made to the Bank hereunder or under the
Revolving Note or with respect to any letter of credit shall be stated to be due
on a day which is not a Business Day,
3
<PAGE>
such payment may be made on the next succeeding Business Day, without penalty,
and interest payable on each such date shall include the amount thereof which
shall accrue during the period of such extension of time. All payments by the
Borrower hereunder and/or in respect of the Revolving Note and/or with respect
to any letter of credit shall be made net of any impositions or taxes and
without deduction, set-off or counterclaim, notwithstanding any claim which the
Borrower may now or at any time hereafter have against the Bank.
1.5. LETTERS OF CREDIT. At the request of the Borrower, the Bank may, from
time to time, in its sole discretion issue one or more letters of credit for the
account of the Borrower; provided that at the time of such issuance and after
giving effect thereto the Aggregate Bank Liabilities will in no event exceed the
lesser of (i) $3,500,000 or (ii) the then effective Borrowing Base. Any such
letter of credit will be issued for such fee and upon such terms and conditions
as may be agreed to by the Bank and the Borrower at the time of issuance. The
Borrower hereby authorizes the Bank, without further request from the Borrower,
to cause the Borrower's liability to the Bank for reimbursement of funds drawn
under any such letter of credit to be repaid from the proceeds of a Revolving
Loan to be made hereunder. The Borrower hereby irrevocably requests that such
Revolving Loans be made.
1.6. CONDITIONS TO ADVANCE. Prior to the making of the initial Revolving
Loan or the issuance of any letter of credit hereunder, the Borrower shall
deliver to the Bank duly executed copies of this letter agreement, the Security
Agreement, the Intellectual Property Assignments, if any, that the Bank
reasonably may have requested, the Revolving Note and the documents and other
items listed on the Closing Agenda delivered herewith by the Bank to the
Borrower, all of which, as well as all legal matters incident to the
transactions contemplated hereby, shall be reasonably satisfactory in form and
substance to the Bank and its counsel.
Without limiting the foregoing, any Revolving Loan or letter of credit
issuance (including the initial Revolving Loan or letter of credit issuance) is
subject to the further conditions precedent that on the date on which such
Revolving Loan is made or such letter of credit is issued (and after giving
effect thereto):
4
<PAGE>
(a) All statements, representations and warranties of the Borrower made in
this letter agreement and/or the Security Agreement shall continue to be correct
in all material respects as of the date of such Revolving Loan or the date of
issuance of such letter of credit, as the case may be.
(b) All covenants and agreements of the Borrower contained herein and/or
in any of the other Loan Documents shall have been complied with in all material
respects on and as of the date of such Revolving Loan or the date of issuance of
such letter of credit, as the case may be.
(c) No event which constitutes, or which with notice or lapse of time or
both would constitute, an Event of Default shall have occurred and be
continuing.
(d) No material adverse change shall have occurred in the financial
condition of the Borrower from that disclosed in the financial statements then
most recently furnished to the Bank.
Each request by the Borrower for any Revolving Loan or letter of credit
issuance, and each acceptance by the Borrower of the proceeds of any Revolving
Loan or delivery of a letter of credit, will be deemed a representation and
warranty by the Borrower that at the date of such Revolving Loan or the date of
issuance of such letter of credit, as the case may be, and after giving effect
thereto all of the conditions set forth in the foregoing clauses (a)-(d) of this
Section 1.6 will be satisfied. Each request for a Revolving Loan or letter of
credit issuance will be accompanied by a borrowing base certificate on a form
satisfactory to the Bank, executed by the chief financial officer of the
Borrower, unless such a certificate shall have been previously furnished setting
forth the Borrowing Base as at the immediately preceding fiscal quarter-end.
II. REPRESENTATIONS AND WARRANTIES
2.1. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this letter agreement and to make Revolving Loans hereunder and/or issue
letters of credit hereunder, the Borrower warrants and represents to the Bank as
follows:
(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of Delaware. The Borrower has full corporate power
to own its property and conduct
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its business as now conducted and as contemplated to be conducted, to grant the
security interests contemplated by the Security Agreement and the Intellectual
Property Assignments and to enter into and perform this letter agreement and the
other Loan Documents. The Borrower is duly qualified to do business and in good
standing in New Hampshire, in each other jurisdiction in which the Borrower
maintains any facility, sales office, warehouse or other location and in each
other jurisdiction where such qualification is required by the nature of the
Borrower's business, all such jurisdictions being listed on item 2.1(a) of the
attached Disclosure Schedule. At the date hereof, the Borrower has no
Subsidiaries, except as shown on item 2.1(a) of the attached Disclosure
Schedule. The Borrower is not a member of any partnership or joint venture.
(b) Each record (and, to the best of the Borrower's knowledge, each
beneficial) owner of 5% or more of the outstanding capital stock of the Borrower
is disclosed on item 2.1(b) of the attached Disclosure Schedule. The Borrower
owns 100% of the capital stock of each of its Subsidiaries.
(c) The execution, delivery and performance by the Borrower of this letter
agreement and each of the other Loan Documents have been duly authorized by all
necessary corporate and other action and do not and will not:
(i) violate any provision of, or require any filings (other than
filings under the Uniform Commercial Code and the Assignment of Claims Act
and filings of the Intellectual Property Assignments with the United States
Patent and Trademark Office and/or the United States Copyright Office),
registration, consent or approval under, any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award presently in
effect having applicability to the Borrower;
(ii) violate any provision of the charter or by-laws of the Borrower,
or result in a breach of or constitute a default or require any waiver or
consent under any indenture or loan or credit agreement or any other
material agreement, lease or instrument to which the Borrower is a party or
by which the Borrower or any of its properties may be bound or affected or
require any other consent of any Person; or
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(iii) result in, or require, the creation or imposition of any lien,
security interest or other encumbrance (other than in favor of the Bank),
upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower.
(d) This letter agreement and each of the other Loan Documents has been
duly executed and delivered by the Borrower and each is a legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its respective terms.
(e) Except as described in item 2.1(e) of the attached Disclosure
Schedule, there are no actions, suits, proceedings or investigations pending or,
to the knowledge of the Borrower, threatened, by or against the Borrower or any
Subsidiary of the Borrower before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
could hinder or prevent the consummation of the transactions contemplated hereby
or call into question the validity of this letter agreement or any of the other
Loan Documents or any action taken or to be taken in connection with the
transactions contemplated hereby or thereby or which in any single case or in
the aggregate might result in any material adverse change in the business,
prospects, condition, affairs or operations of the Borrower and its
Subsidiaries, on a consolidated basis.
(f) The Borrower is not in violation of any term of its charter or by-laws
as now in effect. Neither the Borrower nor any Subsidiary of the Borrower is in
material violation of any term of any mortgage, indenture or judgment, decree or
order, or any other material instrument, contract or agreement to which it is a
party or by which any of its property is bound.
(g) The Borrower has filed (and has caused each Subsidiary of the Borrower
to file) all federal, state and local tax returns, reports and estimates
required to be filed by the Borrower (or by any such Subsidiary, as the case may
be) or has obtained valid extensions thereof. All such filed returns, reports
and estimates are proper and accurate in all material respects and the Borrower
(or the Subsidiary concerned, as the case may be) has paid all taxes,
assessments, impositions, fees and other governmental charges required to be
paid in respect of the periods covered by such returns, reports or estimates.
No
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deficiencies for any tax, assessment or governmental charge have been asserted
or assessed, and the Borrower knows of no material tax liability or basis
therefor not adequately reserved against in the management-generated financial
statements as at December 31, 1994 referred to in Subsection 2.1(i) below.
(h) The Borrower is in compliance (and each Subsidiary of the Borrower is
in compliance) with all requirements of law, federal, state and local, and all
requirements of all governmental bodies or agencies having jurisdiction over it,
the conduct of its business, the use of its properties and assets, and all
premises occupied by it, failure to comply with any of which could (singly or in
the aggregate with all other such failures) have a material adverse effect upon
the assets, business, financial condition or prospects of the Borrower and its
Subsidiaries, on a consolidated basis. Without limiting the foregoing, the
Borrower has all the franchises, licenses, leases, permits, certificates and
authorizations needed for the conduct of its business and the use of its
properties and all premises occupied by it, as now conducted, owned and used and
as proposed to be conducted, owned and used.
(i) The audited consolidated financial statements of the Borrower as at
December 31, 1993 and the management-generated consolidated statements of the
Borrower as at December 31, 1994, each heretofore delivered to the Bank, fairly
present the financial condition of the Borrower and its Subsidiaries on a
consolidated basis as at the respective dates thereof and for the periods
covered thereby, except that the management-generated statements do not have
footnotes and thus do not present the information which would normally be
contained in footnotes to financial statements and are subject to normal end-of-
period adjustments, the effect of which, both individually and in the aggregate,
will not be materially adverse to the condition (financial or otherwise),
business or properties of the Borrower and its Subsidiaries, on a consolidated
basis. The Borrower has no liability, contingent or otherwise, not disclosed in
the aforesaid financial statements or in any notes thereto that could materially
affect the financial condition of the Borrower. Since December 31, 1993, there
has been no material adverse development in the business, condition or prospects
of the Borrower and the Borrower has not entered into any material transaction
(other than in connection with the Merger and/or in connection with the prior
merger of Itran Corp. into the Borrower) other than in the ordinary course.
8
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(j) The principal place of business and chief executive offices of the
Borrower are located at 9 Townsend West, Nashua, NH 03063 (the "Premises"). All
of the books and records of the Borrower are located at the Premises. Except as
described in item 2.1(j) of the attached Disclosure Schedule, no assets of the
Borrower are located at any other address. Said item 2.1(j) of the attached
Disclosure Schedule sets forth the names and addresses of all record owners of
the Premises.
(k) The Borrower owns or has a valid right to use all of the patents,
licenses, copyrights, trademarks, trade names and franchises ("Intellectual
Property") now being used or necessary to conduct its business, all of which
that are material to the Borrower's business (other than "off-the-shelf"
software that has not been customized for the Borrower's use) are described on
Item 2.1(k) of the attached Disclosure Schedule. None of the Intellectual
Property owned by the Borrower is represented by a registered copyright,
trademark, patent or other federal or state registration, except as shown on
said Item 2.1(k). The conduct of the Borrower's business as now operated does
not infringe any valid patents, licenses, copyrights, trademarks, trade names or
franchises of others in any manner that could materially adversely affect the
business, prospects, assets or condition, financial or otherwise, of the
Borrower.
(l) None of the executive officers or key employees of the Borrower is
subject to any agreement in favor of anyone other than the Borrower which limits
or restricts that person's right to engage in the type of business activity
conducted or proposed to be conducted by the Borrower or which grants to anyone
other than the Borrower any rights in any inventions or other ideas susceptible
to legal protection developed or conceived by any such officer or key employee.
(m) The Borrower is not a party to any contract or agreement which now has
or, as far as can be foreseen by the Borrower at the date hereof, is reasonably
likely to have a material adverse effect on the financial condition, business,
prospects or properties of the Borrower.
III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
9
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Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Revolving Loan
or any of the other Obligations shall be outstanding or any letter of credit
issued hereunder shall be outstanding:
3.1. LEGAL EXISTENCE; QUALIFICATION; COMPLIANCE. The Borrower will
maintain (and will cause each Subsidiary of the Borrower to maintain) its
corporate existence and good standing in the jurisdiction of its incorporation.
The Borrower will remain qualified and in good standing in New Hampshire and the
Borrower will qualify to do business and will remain qualified and in good
standing (and the Borrower will cause each Subsidiary of the Borrower to qualify
and remain qualified and in good standing) in each jurisdiction where the
Borrower or such Subsidiary, as the case may be, maintains any facility, sales
office, warehouse or other location and in each other jurisdiction in which the
failure so to qualify could (singly or in the aggregate with all other such
failures) have a material adverse effect on the financial condition, business or
prospects of the Borrower and its Subsidiaries, on a consolidated basis. The
Borrower will comply (and will cause each Subsidiary of the Borrower to comply)
with its charter documents and by-laws and, in all material respects, with all
material contractual requirements by which it or any of its properties may be
bound. The Borrower will comply with (and will cause each Subsidiary of the
Borrower to comply with) all applicable laws, rules and regulations (including,
without limitation, ERISA and those relating to environmental protection) other
than (i) laws, rules or regulations the validity or applicability of which the
Borrower or such Subsidiary shall be contesting in good faith by proceedings
which serve as a matter of law to stay the enforcement thereof and (ii) those
laws, rules and regulations the failure to comply with any of which could not
(singly or in the aggregate) reasonably be expected to have a material adverse
effect on the financial condition, business or prospects of the Borrower and its
Subsidiaries, on a consolidated basis.
3.2. MAINTENANCE OF PROPERTY; INSURANCE. The Borrower will maintain and
preserve (and cause each Subsidiary of the Borrower to maintain and preserve)
all of its properties in good working order and condition, ordinary wear and
tear excepted, making all necessary repairs thereto and replacements thereof.
The Borrower
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<PAGE>
will maintain all such insurance as may be required under the Security Agreement
and will also maintain, with financially sound and reputable insurers, insurance
with respect to its property and business against such liabilities, casualties
and contingencies and of such types and in such amounts as shall be reasonably
satisfactory to the Bank from time to time and in any event all such insurance
as may from time to time be customary for companies conducting a business
similar to that of the Borrower in similar locales.
3.3. PAYMENT OF TAXES AND CHARGES. The Borrower will pay and discharge
(and will cause each Subsidiary of the Borrower to pay and discharge) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or property, including, without limitation, taxes, assessments, charges
or levies relating to real and personal property, franchises, income,
unemployment, old age benefits, withholding, or sales or use, prior to the date
on which penalties would attach thereto, and all lawful claims (whether for any
of the foregoing or otherwise) which, if unpaid, might give rise to a lien upon
any property of the Borrower or any such Subsidiary, except any of the foregoing
which is being contested in good faith and by appropriate proceedings which
serve as a matter of law to stay the enforcement thereof and for which the
Borrower has established and is maintaining adequate reserves. The Borrower
will pay, and will cause each of its Subsidiaries to pay, in a timely manner,
all lease obligations, all trade debt, purchase money obligations, equipment
lease obligations and all of its other Indebtedness; provided, however, that
neither the Borrower nor any such Subsidiary will be required by this sentence
to pay any such Indebtedness if the obligation to pay same is being contested by
the Borrower (or the Subsidiary concerned) in good faith and by appropriate
proceedings which effectively prevent any jeopardy to the ownership or use of
any assets which
11
<PAGE>
are material to the business, properties or condition (financial or otherwise)
of the Borrower and its Subsidiaries, on a consolidated basis. The Borrower
will perform and fulfill all material covenants and agreements under any leases
of real estate, agreements relating to purchase money debt, equipment leases and
other material contracts; provided, however, that the Borrower will not be
required by this sentence to perform or fulfill any such covenants or agreements
if the obligation to perform or fulfill same is being contested by the Borrower
in good faith and by appropriate proceedings which effectively prevent any
jeopardy to the ownership or use of any assets which are material to the
business, properties or condition (financial or otherwise) of the Borrower and
its Subsidiaries, on a consolidated basis. The Borrower will maintain in full
force and effect, and comply with the terms and conditions of, all permits,
permissions and licenses necessary or desirable for its business, except for any
such permits, permissions or licenses as to which the Borrower's failure to
maintain same and/or failure to comply with same would not, singly or in the
aggregate with all other such failures and/or noncompliances, have a material
adverse effect on the condition (financial or otherwise), business or properties
of the Borrower and its Subsidiaries, on a consolidated basis.
3.4. ACCOUNTS. The Borrower will maintain its principal depository and
operating accounts with the Bank.
3.5. CONDUCT OF BUSINESS. The Borrower will conduct, in the ordinary
course, the business in which it is presently engaged. The Borrower will not,
without the prior written consent of the Bank, directly or indirectly enter into
any other lines of business, businesses or ventures.
3.6. REPORTING REQUIREMENTS. The Borrower will furnish to the Bank:
(i) Within 90 days after the end of each fiscal year of the Borrower,
a copy of the annual audit report for such fiscal year for the Borrower,
including therein consolidated balance sheets of the Borrower and
Subsidiaries as at the end of such fiscal year and related consolidated
statements of income, stockholders' equity and cash flow for the fiscal
year then ended. The annual consolidated financial statements shall be
certified by nationally recognized independent public accountants selected
by the Borrower and reasonably acceptable to the Bank, such certification
to be in such form as is generally recognized as "unqualified".
(ii) Within 45 days after the end of each fiscal quarter, consolidated
balance sheets of the Borrower and its Subsidiaries and related
consolidated statements of income and cash flow, unaudited but prepared in
accordance with generally accepted accounting principles consistently
applied (except that such quarterly statements need not contain footnotes)
and certified as accurate (subject to normal year-end audit adjustments,
which shall not be
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<PAGE>
material) by the chief financial officer of the Borrower, such balance
sheets to be as at the end of such fiscal quarter and such statements of
income and cash flow to be for such fiscal quarter and for the year to
date.
(iii) At the time of delivery of each annual and quarterly
statement of the Borrower, a certificate executed by the chief financial
officer of the Borrower stating that he or she has reviewed this letter
agreement and the other Loan Documents and has no knowledge of any default
by the Borrower in the performance or observance of any of the provisions
of this letter agreement or of any of the other Loan Documents or, if he or
she has such knowledge, specifying each such default and the nature
thereof. Each financial statement given as at the end of any fiscal
quarter of the Borrower will also set forth the calculations necessary to
evidence compliance with Sections 3.7-3.10.
(iv) Quarterly, within 20 days after the end of each fiscal quarter,
(A) an aging report in form satisfactory to the Bank covering all
Receivables of the Borrower outstanding as at the end of such fiscal
quarter, and (B) a certificate of the chief financial officer of the
Borrower setting forth the Borrowing Base as at the end of such fiscal
quarter, all in form reasonably satisfactory to the Bank.
(v) Promptly after receipt, a copy of all audits or reports submitted
to the Borrower by independent public accountants in connection with any
annual, special or interim audits of the books of the Borrower and any
letter of comments directed by such accountants to the management of the
Borrower.
(vi) As soon as possible, and in any event within five days, after the
occurrence of any Event of Default or any event which, with the giving of
notice or passage of time or both, would constitute an Event of Default,
the statement of the Borrower setting forth details of each such Event of
Default or event and the action which the Borrower proposes to take with
respect thereto.
(vii) Promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency
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<PAGE>
or instrumentality, domestic or foreign, to which the Borrower or any
Subsidiary of the Borrower is a party; provided, however, that the Borrower
will not be required by this clause (vii) to give notice with respect to
any such action, suit or proceeding which seeks monetary damages only and
in an amount which is less than $250,000.
(viii) Promptly upon applying for, or being granted, a federal or
state registration for any copyright, trademark or patent or purchasing any
registered copyright, trademark or patent, written notice to the Bank
describing same, together with all such documents as may be required to
give the Bank a fully perfected first priority security interest in each
such copyright, trademark or patent.
(ix) Promptly after the Borrower has knowledge thereof, written
notice of any development or circumstance which may reasonably be expected
to have a material adverse effect on the Borrower or its business,
properties, assets or condition, financial or otherwise.
(x) Promptly upon request, such other information respecting
the financial condition, operations, Receivables, inventory, machinery or
equipment of the Borrower or any Subsidiary as the Bank may from time to
time reasonably request.
3.7. DEBT TO WORTH. The Borrower will maintain as at the end of each
fiscal quarter (commencing with its results as at December 31, 1994) on a
consolidated basis a Leverage Ratio of not more than the following: not more
than 2.0 to 1 as at December 31, 1994; not more than 1.75 to 1 as at the fiscal
quarter-end occurring on or about March 31, 1995; not more than 1.5 to 1 as at
the fiscal quarter-end occurring on or about June 30, 1995; not more than 1.25
to 1 as at the fiscal quarter-end occurring on or about September 30, 1995; and
not more than 1.0 to 1 as at December 31, 1995 and as at the end of each fiscal
quarter thereafter. As used herein, "Leverage Ratio" means, as at any date when
same is to be determined, the ratio of (x) the outstanding Senior Liabilities of
the Borrower and/or its Subsidiaries to (y) the Borrower's consolidated Capital
Base.
3.8. CAPITAL BASE. The Borrower will maintain as at the end of each fiscal
quarter (commencing with its results as at December 31, 1994) a consolidated
Capital Base of not less than the then effective Capital Base Requirement. The
Capital Base
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<PAGE>
Requirement is deemed to have been $2,000,000 as at the fiscal quarter-end
occurring on or about September 30, 1994; and as at the last day of each fiscal
quarter thereafter (beginning with the Borrower's results as at December 31,
1994) the Capital Base Requirement will be deemed to have become or to become an
amount equal to the sum of: (i) the Capital Base Requirement in effect on the
last day of the immediately preceding fiscal quarter, plus (ii) 75% of the net
proceeds of any equity securities sold by the Borrower during the fiscal quarter
then ended (shares of the Borrower's common stock converted into stock of RVSI
pursuant to the Merger not being deemed to be securities "sold" by the Borrower
within the meaning of this clause) and 75% of the proceeds of any Subordinated
Debt issued by the Borrower and/or its Subsidiaries during such fiscal quarter
(nothing contained herein being deemed to approve the issuance of any such
Subordinated Debt), plus (iii) 75% of the consolidated Net Income of the
Borrower and Subsidiaries during said fiscal quarter then ended (but without
giving effect to any Net Income which is less than zero for any fiscal quarter).
3.9. PROFITABILITY. The Borrower's results for its fiscal quarter ended
December 31, 1994 will show a consolidated Adjusted Net Income of at least
$300,000. For its fiscal quarter ending on or about March 31, 1995, the
Borrower will not incur a consolidated Net Loss in excess of $100,000.
Commencing with its fiscal quarter ending on or about June 30, 1995, the
Borrower will achieve quarterly consolidated Net Income of at least $1.00 per
fiscal quarter. For the six-month fiscal period ending on or about March 31,
1995, the Borrower will achieve consolidated Adjusted Net Income of at least
$400,000. As used herein, the term "Determination Date" means the last day of
each fiscal quarter of the Borrower, commencing with the quarter-end occurring
on or about June 30, 1995. For each six-month fiscal period ending on a
Determination Date, the Borrower will achieve consolidated Net Income of not
less than the following: not less than $500,000 for the six-month fiscal period
ending on or about June 30, 1995; not less than $600,000 for the six-month
fiscal period ending on or about September 30, 1995; and not less than $750,000
for the six-month fiscal period ending December 31, 1995 and for each six-month
period ending on each subsequent Determination Date. The Borrower's results for
its fiscal year ended December 31, 1994 will show a consolidated Adjusted Net
Income of at least $1,250,000. The Borrower will achieve annual consolidated
Net Income of not less than $1,250,000 for each subsequent fiscal year,
commencing with its fiscal year ending
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December 31, 1995. As used herein, "Adjusted Net Income" for any fiscal period
means the total of (i) the consolidated Net Income (or, if applicable,
consolidated Net Loss, expressed as a negative number) of the Borrower and
Subsidiaries for such fiscal period PLUS (ii) that amount (not in excess of
$345,000) representing the 1994 Restructuring Charge and actually deducted on
the consolidated books of the Borrower in order to determine Net Income (or Net
Loss, as the case may be) for the fiscal period in question. As used herein,
"1994 Restructuring Charge" means the restructuring charge taken by the Borrower
on its financial statements during the fiscal quarter ended December 31, 1994.
3.10. CURRENT RATIO. The Borrower will maintain as at the end of each
fiscal quarter of the Borrower (commencing with its results as at December 31,
1994) a ratio of Current Assets to Current Liabilities, which ratio shall be not
less than the following: not less than 1.2 to 1 as at December 31, 1994; not
less than 1.25 to 1 as at the fiscal quarter-end occurring on or about March 31,
1995; not less than 1.35 to 1 as at the fiscal quarter-end occurring on or about
June 30, 1995; and not less than 1.5 to 1 as at the fiscal quarter-end occurring
on or about September 30, 1995 and as at the end of each fiscal quarter
thereafter.
3.11. BOOKS AND RECORDS. The Borrower will maintain (and cause each of
its Subsidiaries to maintain) complete and accurate books, records and accounts
which will at all times accurately and fairly reflect all of its transactions in
accordance with generally accepted accounting principles consistently applied.
Subject to reasonable confidentiality restrictions, the Borrower will, at any
reasonable time and from time to time upon reasonable notice and during normal
business hours (and at any time and without any necessity for notice following
the occurrence and during the continuance of an Event of Default), permit the
Bank, and any agents or representatives thereof, to examine and make copies of
and take abstracts from the records and books of account of, and visit the
properties of the Borrower and any of its Subsidiaries, and to discuss its
affairs, finances and accounts with its managers, officers or directors and
independent accountants, all of whom are hereby authorized and directed to
cooperate with the Bank in carrying out the intent of this Section 3.11. Each
financial statement of the Borrower hereafter delivered pursuant to this letter
agreement will fairly present the financial condition of the Borrower as at the
date thereof
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<PAGE>
and for the periods covered thereby, subject, in the case of interim financial
statements, to the absence of footnote disclosure and to normal end-of-period
adjustments.
3.12. LANDLORD'S WAIVER. Prior to the Bank making the first Revolving
Loan, the Borrower will obtain, and will thereafter maintain in effect at all
time, waivers from the owners of all premises in which any material amount of
Collateral is located, such waivers to be in form and substance satisfactory to
the Bank.
3.13. GOVERNMENTAL RECEIVABLES. The Borrower will make all such filings
(and will obtain all such acknowledgements from applicable governmental
officials) as may be necessary from time to time in order to ensure that the
Bank has a fully perfected first priority security interest in all material
contracts of the Borrower with the United States government or any agency or
department thereof and in any material Receivables arising therefrom.
IV. NEGATIVE COVENANTS.
Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Revolving Loan
or any of the other Obligations shall be outstanding or any letter of credit
issued hereunder shall be outstanding:
4.1. INDEBTEDNESS. The Borrower will not, without the Bank's prior
written consent, create, incur, assume or suffer to exist any Indebtedness (nor
allow any of its Subsidiaries to create, incur, assume or suffer to exist any
Indebtedness), except for:
(i) Indebtedness owed to the Bank, including, without limitation, the
Indebtedness represented by the Revolving Note and any Indebtedness in
respect of letters of credit issued by the Bank;
(ii) Indebtedness of the Borrower or any Subsidiary for taxes,
assessments and governmental charges or levies not yet due and payable;
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(iii) unsecured current liabilities of the Borrower or any
Subsidiary (other than for money borrowed or the deferred purchase price of
property) incurred upon customary terms in the ordinary course of business
or unsecured liabilities of the Borrower incurred in connection with the
Merger, including any fees payable to RVSI pursuant to Sections 5(d), 5(f)
or 5(h) of the RVSI Letter of Intent;
(iv) purchase money Indebtedness (including, without limitation,
Indebtedness in respect of capitalized equipment leases) owed to equipment
vendors and/or lessors for equipment purchased or leased by the Borrower
for use in the Borrower's business, provided that the total of Indebtedness
permitted under this clause (iv) plus presently-existing equipment
financing permitted under clause (vi) of this Section 4.1 will not exceed
$500,000 in the aggregate outstanding at any one time;
(v) Subordinated Debt hereafter incurred; provided that the financial
terms and the subordination provisions thereof are approved by the Bank in
its discretion;
(vi) other Indebtedness existing at the date hereof, but only to the
extent set forth on item 4.1 of the attached Disclosure Schedule; and
(vii) any guaranties or other contingent liabilities expressly
permitted pursuant to Section 4.3.
This Section 4.1 will not be deemed to prohibit or limit in any way the
incurrence by the Borrower of rental obligations under non-capitalized operating
leases.
4.2. LIENS. The Borrower will not, without the Bank's prior written
consent, create, incur, assume or suffer to exist (nor allow any of its
Subsidiaries to create, incur, assume or suffer to exist) any mortgage, deed of
trust, pledge, lien, security interest, or other charge or encumbrance
(including the lien or retained security title of a conditional vendor) of any
nature (collectively, "Liens"), upon or with respect to any of its property or
assets, now owned or hereafter acquired, except that the foregoing restrictions
shall not apply to:
(i) Liens for taxes, assessments or governmental charges or levies on
property of the Borrower or any of its
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Subsidiaries if the same shall not at the time be delinquent or thereafter
can be paid without interest or penalty;
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar Liens arising in the ordinary course of
business for sums not yet due or which are being contested in good faith
and by appropriate proceedings which serve as a matter of law to stay the
enforcement thereof and as to which adequate reserves have been made;
(iii) pledges or deposits under workmen's compensation laws,
unemployment insurance, social security, retirement benefits or similar
legislation;
(iv) Liens in favor of the Bank;
(v) Liens in favor of equipment vendors and/or lessors securing
purchase money Indebtedness to the extent permitted by clause (iv) of
Section 4.1; provided that no such Lien will extend to any property of the
Borrower other than the specific items of equipment financed; or
(vi) other Liens existing at the date hereof, but only to the extent
and with the relative priorities set forth on item 4.2 of the attached
Disclosure Schedule.
4.3. GUARANTIES. The Borrower will not, without the prior written consent
of the Bank, assume, guarantee, endorse or otherwise become directly or
contingently liable (including, without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in any debtor or otherwise to assure any creditor
against loss) in connection with any indebtedness of any other Person (nor will
it permit any Subsidiary to do so), except (i) guaranties by endorsement for
deposit or collection in the ordinary course of business and (ii) guaranties
existing at the date hereof and described on item 4.3 of the attached Disclosure
Schedule.
4.4. DIVIDENDS. The Borrower will not, without the prior written consent
of the Bank, make any distributions to its shareholders, pay any dividends
(other than dividends payable solely in capital stock of the Borrower) or
redeem, purchase or
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otherwise acquire, directly or indirectly any of its capital stock.
4.5. LOANS AND ADVANCES. The Borrower will not, without the Bank's prior
written consent, make (and will not permit any Subsidiary to make) any loans or
advances to any Person, except advances to officers or employees with respect to
expenses incurred by them in the ordinary course of their duties and advances
against salary, all of which advances will not exceed, in the aggregate,
$100,000 outstanding at any one time. In no event will any loan or advance be
made by the Borrower to RVSI.
4.6. INVESTMENTS. The Borrower will not, without the Bank's prior written
consent, invest in, hold or purchase any stock or securities of any Person (nor
will the Borrower permit any of its Subsidiaries to invest in, purchase or hold
any such stock or securities) except (i) readily marketable direct obligations
of, or obligations guarantied by, the United States of America or any agency
thereof, (ii) other investment grade debt securities, (iii) mutual funds, the
assets of which are primarily invested in items of the kind described in the
foregoing clauses (i) and (ii) of this Section 4.6, (iv) deposits with or
certificates of deposit issued by the Bank and any other obligations of the Bank
or the Bank's parent, (v) deposits in any other bank organized in the United
States having capital in excess of $100,000,000, (vi) bank accounts maintained
by the Borrower's English Subsidiary in one or more English banks, (vii)
securities of RVSI acquired by the Borrower pursuant to Section 5(g) or Section
5(h) of the RVSI Letter of Intent (including securities acquired upon the
exercise of any warrants issued pursuant to said RVSI Letter of Intent), and
(viii) investments in any Subsidiaries now existing or hereafter created by the
Borrower pursuant to Section 4.7 below; provided that in any event the Tangible
Net Worth of the Borrower alone (exclusive of its investment in Subsidiaries and
any debt owed by any Subsidiary to the Borrower) will not be less than 80% of
the consolidated Tangible Net Worth of the Borrower and Subsidiaries.
4.7. SUBSIDIARIES; ACQUISITIONS. The Borrower will not, without the prior
written consent of the Bank, form or acquire any new Subsidiary or make any
other acquisition of the stock of any other Person or of all or substantially
all of the assets of any other Person. The Borrower will not become a partner
in any partnership.
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4.8. MERGER. The Borrower will not, without the prior written consent of
the Bank, merge or consolidate with any Person, or sell, lease, transfer or
otherwise dispose of any material portion of its assets (whether in one or more
transactions), other than sale of inventory in the ordinary course. Nothing
contained in this Section 4.8 will be deemed to prevent the Merger, so long as
the Borrower is maintained as a separate corporate entity and is otherwise in
compliance with all of the terms of this letter agreement.
4.9. AFFILIATE TRANSACTIONS. The Borrower will not, without prior written
consent of the Bank, enter into any transaction, including, without limitation,
the purchase, sale or exchange of any property or the rendering of any service,
with any affiliate of the Borrower, except in the ordinary course of and
pursuant to the reasonable requirements of the Borrower's business and upon fair
and reasonable terms no less favorable to the Borrower than would be obtained in
a comparable arms'-length transaction with any Person not an affiliate; provided
that nothing in this Section 4.9 shall be deemed to prohibit the payment of
salary or other similar payments to any officer or director of the Borrower at a
level consistent with the salary and other payments being paid at the date of
this letter agreement and heretofore disclosed in writing to the Bank, nor to
prevent the hiring of additional officers at a salary level consistent with
industry practice, nor to prevent reasonable periodic increases in compensation.
For the purposes this letter agreement "affiliate" means any Person which,
directly or indirectly, controls or is controlled by or is under common control
with the Borrower; any officer or director or former officer or director of the
Borrower; any Person owning of record or beneficially, directly or indirectly,
5% or more of any class of capital stock of the Borrower or 5% or more of any
class of capital stock or other equity interest having voting power (under
ordinary circumstances) of any of the other Persons described above; and any
member of the immediate family of any of the foregoing. "Control" means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of any Person, whether through ownership
of voting equity, by contract or otherwise. Nothing contained in this Section
4.9 will be deemed to prevent the Merger, so long as the Borrower is maintained
as a separate corporate entity and is otherwise in compliance with all of the
terms of this letter agreement. However, the Borrower will not engage in any
other transaction with RVSI (whether before or after the Merger),
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except on terms no less favorable to the Borrower than would be obtained in any
comparable arms'-length transaction.
4.10. CHANGE OF ADDRESS, ETC. The Borrower will not change its name or
legal structure, nor will the Borrower move its chief executive office or
principal place of business from the address described in the first sentence of
Section 2.1(j) above, nor will the Borrower remove any books or records from
such address, nor will the Borrower keep any Collateral at any location other
than the Premises (except (i) salesmen's samples, products at trade shows and
the like, (ii) equipment temporarily removed from the Premises for repairs and
(iii) obsolete or worn-out items disposed of by the Borrower in the ordinary
course of business and items consumed in the ordinary course of the Borrower's
business) without, in each instance, giving the Bank at least 30 days' prior
written notice and providing all such financing statements, certificates and
other documentation as the Bank may request in order to maintain the perfection
and priority of the security interests granted or intended to be granted
pursuant to the Security Agreement. The Borrower will not change its fiscal
year or methods of financial reporting unless, in each instance, prior written
notice of such change is given to the Bank and prior to such change the Borrower
enters into amendments to this letter agreement in form and substance
satisfactory to the Bank in order to preserve unimpaired the rights of the Bank
and the obligations of the Borrower hereunder. The Bank specifically
acknowledges that the Borrower may change its fiscal year to a year ending
September 30; provided that the Borrower enters into an amendment to this letter
agreement satisfactory to the Bank which will modify Sections 3.7, 3.8, 3.9
and/or 3.10 above as may be appropriate in order to carry out the intent of the
financial tests set forth in those Sections.
4.11. HAZARDOUS WASTE. Except as provided below, the Borrower will not
dispose of or suffer or permit to exist any hazardous material or hazardous
waste on any site or vessel owned, occupied or operated by the Borrower or any
Subsidiary of the Borrower, nor shall the Borrower store (or permit any
Subsidiary to store) on any site or vessel owned, occupied or operated by the
Borrower or any such Subsidiary, or transport or arrange the transport of, any
hazardous material or hazardous waste (the terms "hazardous material" and
"hazardous waste", respectively, being used herein with the meanings given those
terms in New Hampshire Revised Statutes Annotated Chapter 147-B or any
comparable terms in any comparable statute in effect in
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any other relevant jurisdiction). The Borrower shall provide the Bank with
written notice of (i) the intended storage or transport of any hazardous
material or hazardous waste by the Borrower or any Subsidiary of the Borrower,
(ii) any potential or known release or threat of release of any hazardous
material or hazardous waste at or from any site or vessel owned, occupied or
operated by the Borrower or any Subsidiary of the Borrower, and (iii) any
incurrence of any expense or loss by any government or governmental authority in
connection with the assessment, containment or removal of any hazardous material
or hazardous waste for which expense or loss the Borrower or any Subsidiary of
the Borrower may be liable. Notwithstanding the foregoing, the Borrower and its
Subsidiaries may use, store and transport, and need not notify the Bank of the
use, storage or transportation of, (x) oil in reasonable quantities, as fuel for
heating of their respective facilities or for vehicles or machinery used in the
ordinary course of their respective businesses and (y) hazardous materials that
are solvents, cleaning agents or other materials used in the ordinary course of
the respective business operations of the Borrower and its Subsidiaries, in
reasonable quantities, as long as in any case the Borrower or the Subsidiary
concerned (as the case may be) has obtained and maintains in effect any
necessary governmental permits, licenses and approvals, complies with all
requirements of applicable federal, state and local law relating to such use,
storage or transportation, follows the protective and safety procedures that a
prudent businessperson conducting a business the same as or similar to that of
the Borrower or such Subsidiary (as the case may be) would follow, and disposes
of such materials (not consumed in the ordinary course) only through licensed
providers of hazardous waste removal services.
4.12. NO MARGIN STOCK. No proceeds of any Revolving Loan shall be used
directly or indirectly to purchase or carry any margin security.
4.13. SUBORDINATED DEBT. The Borrower will not, without the Bank's prior
written consent, directly or indirectly make any optional or voluntary
prepayment or purchase of Subordinated Debt nor modify, alter or add any
provisions with respect to any Subordinated Debt. Further, the Borrower will
not make any payment in respect of Subordinated Debt in violation of the
subordination agreement relating thereto. In any event, the Borrower will not
make any payment on account of Subordinated
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Debt if any Event of Default then exists or would result from such payment.
V. DEFAULT AND REMEDIES
5.1. EVENTS OF DEFAULT. The occurrence of any one of the following events
shall constitute an Event of Default hereunder:
(a) The Borrower shall fail to make any payment of principal of or
interest on the Revolving Note on or before the date when due; or the Borrower
shall fail to pay when due any amount owed to the Bank in respect of any letter
of credit now or hereafter issued by the Bank; or
(b) Any representation or warranty of the Borrower contained herein shall
at any time prove to have been incorrect in any material respect when made or
any representation or warranty made by the Borrower in connection with the
execution and delivery of this letter agreement or in connection with any
Revolving Loan or letter of credit shall at any time prove to have been
incorrect in any material respect when made; or
(c) The Borrower shall default in the performance or observance of any
agreement or obligation under any of Sections 3.1, 3.3, 3.6, 3.7, 3.8, 3.9 or
3.10 or Article IV; or
(d) The Borrower shall default in the performance of any other term,
covenant or agreement contained in this letter agreement and such default shall
continue unremedied for 30 days after written notice thereof shall have been
given to the Borrower; or
(e) Any default on the part of the Borrower or any Subsidiary of the
Borrower shall exist, and shall remain unwaived or uncured beyond the expiration
of any applicable notice and/or grace period, under any other contract,
agreement or undertaking now existing or hereafter entered into with or for the
benefit of the Bank (or any affiliate of the Bank); or
(f) Any default shall exist and remain unwaived or uncured with respect to
any Indebtedness of the Borrower or any Subsidiary of the Borrower in excess of
$100,000 in aggregate principal amount or with respect to any instrument
evidencing, guaranteeing, securing or otherwise relating to any such
Indebtedness, or any such Indebtedness shall not have been paid
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when due, whether by acceleration or otherwise, or shall have been declared to
be due and payable prior to its stated maturity, or any event or circumstance
shall occur which permits, or with the lapse of time or giving of notice or both
would permit, the acceleration of the maturity of any such Indebtedness by the
holder of holders thereof; or
(g) The Borrower shall be dissolved, or the Borrower or any Subsidiary of
the Borrower shall become insolvent or bankrupt or shall cease paying its debts
as they mature or shall make an assignment for the benefit of creditors, or a
trustee, receiver or liquidator shall be appointed for the Borrower or any
Subsidiary of the Borrower or for a substantial part of the property of the
Borrower or any such Subsidiary, or bankruptcy, reorganization, arrangement,
insolvency or similar proceedings shall be instituted by or against the Borrower
or any such Subsidiary under the laws of any jurisdiction (except for an
involuntary proceeding filed against the Borrower or any Subsidiary of the
Borrower which is dismissed within 60 days following the institution thereof);
or
(h) Any attachment, execution or similar process shall be issued or levied
against any of the property of the Borrower or any Subsidiary and such
attachment, execution or similar process shall not be paid, stayed, released,
vacated or fully bonded within 10 days after its issue or levy; or
(i) Any final uninsured judgment in excess of $100,000 shall be entered
against the Borrower or any Subsidiary of the Borrower by any court of competent
jurisdiction; or
(j) The Borrower or any Subsidiary of the Borrower shall fail to meet its
minimum funding requirements under ERISA with respect to any employee benefit
plan (or other class of benefit which the PBGC has elected to insure) or any
such plan shall be the subject of termination proceedings (whether voluntary or
involuntary) and there shall result from such termination proceedings a
liability of the Borrower or any Subsidiary of the Borrower to the PBGC which in
the reasonable opinion of the Bank may have a material adverse effect upon the
financial condition of the Borrower and its Subsidiaries, on a consolidated
basis; or
(k) The Security Agreement or any other Loan Document shall for any reason
(other than due to payment in full of all amounts secured or evidenced thereby
or due to discharge in writing by
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the Bank or due to any other action or inaction on the part of the Bank) not
remain in full force and effect; or
(l) The security interests and liens of the Bank in and on any of the
Collateral (other than any Collateral moved or disposed of as expressly
permitted by Section 4.10 above) shall for any reason (other than due to payment
in full of all amounts secured thereby or due to written release by the Bank or
due to any other action or inaction on the part of the Bank) not be fully
perfected liens and security interests, subject in priority only to the matters
set forth in Section 4.2 above; or
(m) There shall occur any other material adverse change in the condition
(financial or otherwise), operations, properties, assets, liabilities or
earnings of the Borrower.
5.2. RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any Event of
Default, in addition to any other rights and remedies available to the Bank
hereunder or otherwise, the Bank may exercise any one or more of the following
rights and remedies (all of which shall be cumulative):
(a) Declare the entire unpaid principal amount of the Revolving Note then
outstanding, all interest accrued and unpaid thereon and all other amounts
payable under this letter agreement, and all other Indebtedness of the Borrower
to the Bank, to be forthwith due and payable, whereupon the same shall become
forthwith due and payable, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrower.
(b) Terminate the revolving financing arrangements provided for by this
letter agreement.
(c) Exercise all rights and remedies hereunder, under the Revolving Note,
under the Security Agreement, under the Intellectual Property Assignments and
under each and any other agreement with the Bank; and exercise all other rights
and remedies which the Bank may have under applicable law.
5.3. SET-OFF. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, the Bank is hereby authorized at any time or
from time to time, without presentment, demand, protest or other notice of any
kind
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to the Borrower or to any other Person, all of which are hereby expressly
waived, to set off and to appropriate and apply any and all deposits and any
other Indebtedness at any time held or owing by the Bank or any affiliate
thereof to or for the credit or the account of the Borrower against and on
account of the obligations and liabilities of the Borrower to the Bank under
this letter agreement or otherwise, irrespective of whether or not the Bank
shall have made any demand hereunder and although said obligations, liabilities
or claims, or any of them, may then be contingent or unmatured and without
regard for the availability or adequacy of other collateral. As further
security for the Obligations, the Borrower also grants to the Bank a security
interest with respect to all its deposits and all securities or other property
in the possession of the Bank or any affiliate of the Bank from time to time,
and, upon the occurrence of any Event of Default, the Bank may exercise all
rights and remedies of a secured party under the Uniform Commercial Code.
5.4. LETTERS OF CREDIT. Without limitation of any other right or remedy of
the Bank, (i) if an Event of Default shall have occurred and the Bank shall have
accelerated the Revolving Loans or (ii) if this letter agreement and/or the
revolving financing arrangements described herein shall have expired or shall
have been earlier terminated by either the Bank or the Borrower for any reason,
the Borrower will forthwith deposit with the Bank in cash a sum equal to the
total of all then undrawn amounts of all outstanding letters of credit issued by
the Bank for the account of the Borrower.
VI. MISCELLANEOUS
6.1. COSTS AND EXPENSES. The Borrower agrees to pay on demand all
reasonable costs and expenses (including, without limitation, reasonable legal
fees) of the Bank in connection with the preparation, execution and delivery of
this letter agreement, the Security Agreement, the Revolving Note and all other
instruments and documents to be delivered in connection with any Revolving Loan
or any letter of credit issued hereunder and any amendments or modifications of
any of the foregoing, as well as the reasonable costs and expenses (including,
without limitation, the reasonable fees and expenses of legal counsel) incurred
by the Bank in connection with preserving, enforcing or exercising, upon
default, any rights or remedies under this letter agreement, the Security
Agreement, the Revolving Note and all other instruments and documents delivered
or to be delivered hereunder
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or in connection herewith, all whether or not legal action is instituted. In
addition, the Borrower shall be obligated to pay any and all stamp and other
taxes payable or determined to be payable in connection with the execution and
delivery of this letter agreement, the Security Agreement, the Revolving Note
and all other instruments and documents to be delivered in connection with any
Obligation. Any fees, expenses or other charges which the Bank is entitled to
receive from the Borrower under this Section shall bear interest from the date
of any demand therefor until the date when paid at a rate per annum equal to the
sum of (i) two (2%) percent plus (ii) the per annum rate otherwise payable under
the Revolving Note (not including, for this purpose, any increment payable under
the Revolving Note by reason of late payment) (but in no event in excess of the
maximum rate permitted by then applicable law).
6.2. CAPITAL ADEQUACY. If the Bank shall have determined that the adoption
or phase-in after the date hereof of any applicable law, rule or regulation
regarding capital requirements for banks or bank holding companies, or any
change therein after the date hereof, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Bank with any request or directive of such entity regarding capital
adequacy (whether or not having the force of law) has or would have the effect
of reducing the return on the Bank's capital with respect to the Revolving
Loans, the within-described revolving loan facility and/or letters of credit
issued for the account of the Borrower to a level below that which the Bank
could have achieved (taking into consideration the Bank's policies with respect
to capital adequacy immediately before such adoption, phase-in, change or
compliance and assuming that the Bank's capital was then fully utilized) but for
such adoption, phase-in, change or compliance by any amount deemed by the Bank
to be material: (i) the Bank shall promptly after its determination of such
occurrence give notice thereof to the Borrower; and (ii) the Borrower shall pay
forthwith to the Bank as an additional fee such amount as the Bank certifies to
be the amount that will compensate it for such reduction with respect to the
Revolving Loans, the within-described revolving loan facility and/or such
letters of credit.
A certificate of the Bank claiming compensation under this Section shall be
conclusive in the absence of manifest error.
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Such certificate shall set forth the nature of the occurrence giving rise to
such compensation, the additional amount or amounts to be paid to it hereunder
and the method by which such amounts were determined. In determining such
amounts, the Bank may use any reasonable averaging and attribution methods. No
failure on the part of the Bank to demand compensation on any one occasion shall
constitute a waiver of its right to demand such compensation on any other
occasion and no failure on the part of the Bank to deliver any certificate in a
timely manner shall in any way reduce any obligation of the Borrower to the Bank
under this Section.
6.3. FACILITY FEES. With respect to the Revolving Loans, the Borrower will
pay to the Bank, on the date of execution of this letter agreement and on the
first day of each calendar quarter thereafter as long as the within-described
revolving loan arrangements are in effect, a non-refundable quarterly facility
fee, payable in advance in the amount of $4,375 per quarter (appropriately pro-
rated for any partial calendar quarter, including the calendar quarter ending
March 31, 1995, in respect of which the facility fee payable upon execution
hereof shall be $145.83). The fees described in this Section are in addition to
any balances and fees required by the Bank or any of its affiliates in
connection with any other services made available to the Borrower.
6.4. OTHER AGREEMENTS. The provisions of this letter agreement are not in
derogation or limitation of any obligations, liabilities or duties of the
Borrower under any of the other Loan Documents or any other agreement with or
for the benefit of the Bank. No inconsistency in default provisions between
this letter agreement and any of the other Loan Documents or any such other
agreement will be deemed to create any additional grace period or otherwise
derogate from the express terms of each such default provision. No covenant,
agreement or obligation of the Borrower contained herein, nor any right or
remedy of the Bank contained herein, shall in any respect be limited by or be
deemed in limitation of any inconsistent or additional provisions contained in
any of the other Loan Documents or any such other agreement.
6.5. GOVERNING LAW. This letter agreement and the Revolving Note shall be
governed by, and construed and enforced in accordance with, the laws of The
Commonwealth of Massachusetts.
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6.6. ADDRESSES FOR NOTICES, ETC. All notices, requests, demands and other
communications provided for hereunder shall be in writing and shall be mailed or
delivered to the applicable party at the address indicated below:
If to the Borrower:
Acuity Imaging, Inc.
9 Townsend West
Nashua, NH 03063
Attention: John A. Rogers, Chief Financial Officer
If to the Bank:
Fleet Bank of Massachusetts, N.A.
High Technology Group
75 State Street
Boston, MA 02109
Attention: Thomas W. Davies, Vice President
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall be deemed delivered on the earlier of (i) the date received
or (ii) the date of delivery, refusal or non-delivery indicated on the return
receipt if deposited in the United States mails, sent postage prepaid, certified
or registered mail, return receipt requested, addressed as aforesaid.
6.7. BINDING EFFECT; ASSIGNMENT; TERMINATION. This letter agreement shall
be binding upon the Borrower, its successors and assigns and shall inure to the
benefit of the Borrower and the Bank and their respective permitted successors
and assigns. The Borrower may not assign this letter agreement or any rights
hereunder without the express written consent of the Bank. The Bank may, in
accordance with applicable law, from time to time assign or grant participations
in this letter agreement, the Revolving Loans, the Revolving Note and/or the
letters of credit issued hereunder; provided, however, that the Bank will not
assign this letter agreement, the Revolving Loans, the Revolving Note and/or any
right or obligation in respect of any letter of credit issued hereunder without
at least 30 days' prior written notice to the Borrower, except that no such
notice shall be required in the case of an assignment to a Bank Affiliate or an
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assignment to a Federal Reserve Bank as security. The Borrower may terminate
this letter agreement and the financing arrangements made herein by giving
written notice of such termination to the Bank; provided that no such
termination will release or waive any of the Bank's rights or remedies or any of
the Borrower's obligations under this letter agreement or any of the other Loan
Documents unless and until the Borrower has paid in full the Revolving Loans and
all interest thereon and all fees and charges payable in connection therewith
and all letters of credit issued hereunder have been terminated.
6.8. CONSENT TO JURISDICTION. The Borrower irrevocably submits to the
non-exclusive jurisdiction of any Massachusetts court or any federal court
sitting within The Commonwealth of Massachusetts over any suit, action or
proceeding arising out of or relating to this letter agreement and/or the
Revolving Note. The Borrower irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of venue
of any such suit, action or proceeding brought in such a court and any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. The Borrower agrees that final judgment in any such suit, action or
proceeding brought in such a court shall be enforced in any court of proper
jurisdiction by a suit upon such judgment, provided that service of process in
such action, suit or proceeding shall have been effected upon the Borrower in
one of the manners specified in the following paragraph of this Section 6.8 or
as otherwise permitted by law.
The Borrower hereby consents to process being served in any suit, action or
proceeding of the nature referred to in the preceding paragraph of this Section
6.8 either (i) by mailing a copy thereof by registered or certified mail,
postage prepaid, return receipt requested, to it at its address set forth in
Section 6.6 or (ii) by serving a copy thereof upon it at its address set forth
in Section 6.6.
6.9. SEVERABILITY. In the event that any provision of this letter
agreement or the application thereof to any Person, property or circumstances
shall be held to any extent to be invalid or unenforceable, the remainder of
this letter agreement, and the application of such provision to Persons,
properties or circumstances other than those as to which it has been held
invalid and unenforceable, shall not be affected thereby, and
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each provision of this letter agreement shall be valid and enforced to the
fullest extent permitted by law.
VII. DEFINED TERMS
7.1. DEFINITIONS. In addition to terms defined elsewhere in this letter
agreement, as used in this letter agreement, the following terms have the
following respective meanings:
"Aggregate Bank Liabilities" - At any time, the sum of (i) the
principal amount of all Revolving Loans then outstanding, plus (ii) all
then undrawn amounts of letters of credit issued by the Bank for the
account of the Borrower, plus (iii) all amounts then drawn on any such
letter of credit which at said date shall not have been reimbursed to the
Bank by the Borrower.
"Bank Affiliate" - Any Person which controls, is controlled by or is
under common control with the Bank.
"Borrowing Base" - At any time, the sum of (1) 80% of the aggregate
principal amount of the Qualified Receivables of the Borrower then
outstanding, PLUS (2) 50% of the cash and cash-equivalents then held by the
Borrower within the United States and not pledged to any other Person,
subject to any other lien or otherwise restricted as to use.
"Business Day" - Any day which is not a Saturday, nor a Sunday nor a
public holiday under the laws of the United States of America or The
Commonwealth of Massachusetts applicable to a national bank.
"Capital Base" - At any time, the sum of (i) the consolidated Tangible
Net Worth of the Borrower and Subsidiaries then existing, PLUS (ii) the
principal amount of Subordinated Debt of the Borrower then outstanding
(nothing contained herein being deemed to authorize the incurrence of any
additional Subordinated Debt), PLUS (iii) interest accrued and unpaid on
any Subordinated Debt of the Borrower to the extent that such interest is
taken into account as a liability for the purposes of determining
consolidated Tangible Net Worth of the Borrower and Subsidiaries.
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"Collateral" - All property now or hereafter owned by the Borrower or
in which the Borrower now or hereafter has any interest which is described
as "Collateral" in the Security Agreement or in Section 7.2(b) below.
"Current Assets" - All assets of the Borrower which are properly shown
as current assets on a balance sheet of the Borrower prepared in accordance
with generally accepted accounting principles; excluding, however, (i)
assets which have been pledged, assigned, mortgaged, hypothecated or
otherwise encumbered to secure any Indebtedness which is not included in
Current Liabilities and (ii) any and all amounts due from affiliated
entities.
"Current Liabilities" - All liabilities of the Borrower which are
properly shown as current liabilities on a balance sheet of the Borrower
prepared in accordance with generally accepted accounting principles,
including, without limitation, all capitalized lease payments and fixed
prepayments of, and sinking fund payments with respect to, Indebtedness
required to be made within one year from the date of determination.
"Current Liabilities" shall also and in any event be deemed to include the
Revolving Loans. Notwithstanding the foregoing, "Current Liabilities" shall
not be deemed to include Subordinated Debt.
"ERISA" - The Employee Retirement Income Security Act of 1974, as
amended.
"Expiration Date" - June 1, 1997, unless extended by the Bank and the
Borrower pursuant to Section 1.3 above.
"Indebtedness" - All obligations of a Person, whether current or
long-term, senior or subordinated, which in accordance with generally
accepted accounting principles would be included as liabilities upon such
Person's balance sheet at the date as of which Indebtedness is to be
determined, and shall also include guaranties, endorsements (other than for
collection in the ordinary course of business) or other arrangements
whereby responsibility is assumed for the obligations of others, whether by
agreement to purchase or otherwise acquire the obligations of others,
including any agreement, contingent or otherwise, to furnish funds through
the purchase of goods, supplies or services for the purpose of payment of
the obligations of others.
33
<PAGE>
"Loan Documents" - Each of this letter agreement, the Revolving Note,
the Security Agreement, the Intellectual Property Assignments, and each
other instrument, document or agreement evidencing, securing, guaranteeing
or relating in any way to any of the Revolving Loans or any of the letters
of credit issued hereunder, all whether now existing or hereafter arising
or entered into.
"Maximum Revolving Amount" - At any date as of which same is to be
determined, the amount by which (x) $3,500,000 exceeds (y) the sum of
(i) all then undrawn amounts of letters of credit issued by the Bank for
the account of the Borrower plus (ii) all amounts then drawn on any such
letter of credit which at said date shall not have been reimbursed to the
Bank by the Borrower.
"Merger" - The merger of a Subsidiary of RVSI with and into the
Borrower, together with the other transactions in connection therewith
contemplated by the RVSI Letter of Intent.
"Net Income" (or "Net Loss") - The book net income (or book net loss,
as the case may be) of a Person for any period, after all taxes actually
paid or accrued and all expenses and other charges determined in accordance
with generally accepted accounting principles consistently applied.
"Obligation" - As defined in the Security Agreement.
"PBGC" - The Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" - An individual, corporation, partnership, joint venture,
trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Principal Office" - The principal place of business of the Bank, now
located at 75 State Street, Boston, MA 02109.
"Qualified Receivables" - Only those Receivables of the Borrower which
arise out of BONA FIDE sales made to customers of the Borrower (which
customers are located in the United States and are not Subsidiaries of or
otherwise controlled by the Borrower) in the ordinary course of the
34
<PAGE>
Borrower's business and which remain unpaid no more than 90 days past the
respective dates of invoice of such sales, the payment of which is not in
dispute. (Notwithstanding the foregoing, any Receivable owed by a customer
of the Borrower which is not located in the United States will also be
deemed to be a Qualified Receivable if both of the following conditions are
satisfied: (i) such Receivable meets all of the requirements of this
definition other than the location of such customer and (ii) payment of
such Receivable is secured by a letter of credit or credit insurance with
terms satisfactory to the Bank and issued by a bank or other credit
enhancer satisfactory to the Bank.) Unless the Bank in its sole discretion
otherwise determines with respect to any Receivable, a Receivable which
would otherwise be a Qualified Receivable shall be deemed not to be a
Qualified Receivable (i) if the Bank does not have a fully perfected first
priority security interest in such Receivable; (ii) if such Receivable is
not free and clear of all adverse interests in favor of any Person other
than the Bank; (iii) if such Receivable is subject to any deduction,
off-set, contra account, counterclaim or condition; (iv) if a field
examination made by the Bank fails to confirm that such Receivable exists
and satisfies all of the criteria set forth herein to be a Qualified
Receivable; (v) if such Receivable is not invoiced within such period of
time as is consistent with the Borrower's normal practices at the date
hereof; (vi) if the customer or account debtor has disputed liability or
made any claim with respect to the Receivable or the merchandise covered
thereby or with respect to any other Receivable due from said customer to
the Borrower; (vii) if the customer or account debtor has filed a petition
for bankruptcy or any other application for relief under the Bankruptcy
Code or has effected an assignment for the benefit of creditors, or if any
petition or any other application for relief under the Bankruptcy Code has
been filed against said customer or account debtor, or if the customer or
account debtor has suspended business, become insolvent, ceased to pay its
debts as they become due, or had or suffered a receiver or trustee to be
appointed for any of its assets or affairs; (viii) if the customer or
account debtor has failed to pay other Receivables so that an aggregate of
25% of the total Receivables owing to the Borrower by such customer or
account debtor has been outstanding for more than 90 days past their
respective due dates; (ix) if such Receivable is owed by the United States
35
<PAGE>
government or any agency or department thereof (unless assigned to the Bank
under the Federal Assignment of Claims Act); or (x) if the Bank believes,
in its reasonable judgment, that collection of such Receivable is insecure
or that it may not be paid by reason of financial inability to pay or
otherwise, or that such Receivable is not for any reason suitable for use
as a basis for borrowing hereunder.
"Receivables" - All of the Borrower's present and future accounts,
accounts receivable and notes, drafts, acceptances and other instruments
representing or evidencing a right to payment for goods sold or for
services rendered.
"RVSI" - Robotic Vision Systems, Inc.
"RVSI Letter of Intent" - That certain letter agreement dated January
31, 1995 between RVSI and the Borrower relating to the terms of the Merger.
"Senior Liabilities" - All Indebtedness of the Borrower and/or any
Subsidiary of the Borrower which does not constitute Subordinated Debt.
"Subordinated Debt" - Any Indebtedness of the Borrower which is
expressly subordinated, pursuant to a subordination agreement in form and
substance satisfactory to the Bank, to all Indebtedness now or hereafter
owed by the Borrower to the Bank.
"Subsidiary" - Any corporation or other entity of which the Borrower
and/or any of its Subsidiaries, directly or indirectly, owns, or has the
right to control or direct the voting of, fifty (50%) percent or more of
the outstanding capital stock or other ownership interest having general
voting power (under ordinary circumstances).
"Tangible Net Worth" - An amount equal to the total assets of any
Person (excluding (i) the total intangible assets of such Person and
(ii) any assets representing amounts due from any officer or employee of
such Person or from any Subsidiary of such Person) minus the total
liabilities of such Person. Total intangible assets shall be deemed to
include, but shall not be limited to, the excess of cost over book value of
acquired businesses accounted for by the purchase method, formulae,
trademarks,
36
<PAGE>
trade names, patents, patent rights and deferred expenses (including, but
not limited to, unamortized debt discount and expense, organizational
expense, capitalized software costs and experimental and development
expenses).
Any defined term used in the plural preceded by the definite article shall
be taken to encompass all members of the relevant class. Any defined term used
in the singular preceded by "any" shall be taken to indicate any number of the
members of the relevant class.
7.2. SECURITY AGREEMENT. (a) The Borrower acknowledges and agrees that
the "Obligations" described in and secured by the Security Agreement, include,
without limitation, all of the obligations of the Borrower under the Revolving
Note and/or this letter agreement and/or with respect to any letter of credit
which may be issued by the Bank for the account of the Borrower.
(b) The Security Agreement is hereby modified to provide as follows:
(i) That the "Collateral" subject thereto includes, without
limitation and in addition to the Collateral described therein, all of the
Borrower's files, books and records (including, without limitation, all
electronically recorded data) relating to any other items of Collateral or
necessary or desirable in order to collect or realize on any Collateral,
all whether owned or existing or hereafter acquired, created or arising.
The Borrower hereby grants to the Bank a security interest in all such
Collateral in order to secure the full and prompt payment and performance
of all of the Obligations.
(ii) That, upon the occurrence and during the continuance of any Event
of Default (as defined in Section 5.1 of this letter agreement), the Bank
may, at any time, notify account debtors that the Collateral has been
assigned to the Bank and that payments by such account debtors shall be
made directly to the Bank. At any time after the occurrence and during the
continuance of an Event of Default, the Bank may collect the Borrower's
Receivables, or any of same, directly from account debtors and may charge
the reasonable collection costs and expenses to the Borrower.
37
<PAGE>
This letter agreement is executed, as an instrument under seal, as of the
day and year first above written.
Very truly yours,
ACUITY IMAGING, INC.
By
-------------------------------
Its
Accepted and agreed:
FLEET BANK OF MASSACHUSETTS, N.A.
By
------------------------------
Its
By
------------------------------
Its
38
<PAGE>
DISCLOSURE SCHEDULE
Item 2.1(a) Jurisdictions in which Borrower is qualified; Subsidiaries
Item 2.1(b) Stock ownership
Item 2.1(e) Litigation
Item 2.1(j) Location of Collateral; record owners of Premises
Item 2.1(k) Intellectual Property
Item 4.1 Existing Indebtedness
Item 4.2 Existing Liens
Item 4.3 Existing Guaranties
<PAGE>
[LETTERHEAD - ARTHUR ANDERSEN LLP]
Acuity Imaging Inc.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 21, 1995
<PAGE>
Acuity Imaging Inc.
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Robotic Vision
Systems, Inc. on Form S-4 of our report on the consolidated financial
statements of Acuity Imaging, Inc. (formerly Automatix Incorporated) (not
presented separately herein) dated February 11, 1994 appearing in the
Proxy Statement/Prospectus, which is part of this Registration Statement,
and to the reference to us under the heading "Experts" in the Proxy
Statement/Prospectus, which is also part of this Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Boston, Massachusetts
July 21, 1995
<PAGE>
Acuity Imaging, Inc.
Exhibit 23.3
[Letterhead - Fechtor, Detwiler & Co., Inc.]
We hereby consent to the inclusion of our opinion letter, dated July 17,
1995 and addressed to the Board of Directors of Acuity Imaging, Inc., in the
Joint Proxy Statement/Prospectus which forms a part of the Registration
Statement on Form S-4 relating to the proposed merger of Acuity Imaging, Inc.
with and into Robotic Vision Systems, Inc. In giving such consent, we do not
admit and we hereby disclaim that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we hereby admit and we hereby disclaim that we are experts
with respect to any part of the term "experts" as used in the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Fechtor, Detwiler & Co., Inc.
By: /S/ ANDRE DANIEL-DREYFUS
-------------------------
Andre Daniel-Dreyfus
Senior Vice President
July 19, 1995
<PAGE>
Acuity Imaging Inc.
Exhibit 99.1
ACUITY IMAGING INC.
9 TOWNSEND WEST
NASHUA, NEW HAMPSHIRE 03063
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Ofer Gneezy and John A. Rogers, as Proxies,
each with the power to appoint his substitute, and hereby authorizes them, and
each of them, to represent and vote, as designated below, all the shares of
Common Stock of Acuity Imaging Inc. ("Acuity") held of record by the undersigned
on July , 1995 at the Special Meeting of Stockholders to be held on ,
September , 1995 or any adjournment thereof.
1. To consider and vote upon the approval and adoption of that
certain Agreement and Plan of Merger and Reorganization,
dated as of April 27, 1995, as amended and restated as of
July 11, 1995, by and among Acuity, Robotic Vision Systems,
Inc., a Delaware corporation ("RVSI"), and RVSI Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary
of RVSI ("Subsidiary"), pursuant to which, among other
matters, (i) Subsidiary will be merged with and into Acuity
and Acuity will become a wholly-owned subsidiary of RVSI, and
(ii) each share of Common Stock, $.01 par value, of Acuity
will be converted into the right to receive, and become
exchangeable for, 0.766 share of Common Stock, $.01 par value,
of RVSI (the "RVSI Common Stock"); provided, however, that if
the average of the closing prices of RVSI Common Stock on The
Nasdaq National Market for the 20 trading days ending on (and
including) the third trading day immediately prior to the
Special Meeting (the "Average Closing Price") is greater than
$14.50, then the Exchange Ratio shall be equal to the quotient
of $11.107 divided by the Average Closing Price (provided that
in no event shall the Exchange Ratio be less than 0.555375); and
if the Average Closing Price is less than $10.00, then the
Exchange Ratio shall be equal to the quotient of $7.66 divided
by the Average Closing Price (provided that in no event shall
the Exchange Ratio be less than 0.925626), all as more fully
described in the accompanying Joint Proxy Statement/Prospectus;
FOR / / AGAINST / / ABSTAIN / /
2. In their discretion, the Proxies are authorized to vote upon such
other business incidental to the Special Meeting as may properly come
before such meeting or any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1. A VOTE TO "ABSTAIN" WILL NOT BE COUNTED TOWARDS THE
REQUISITE AFFIRMATIVE VOTE TO APPROVE PROPOSAL 1.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
a corporation, please sign in full
corporate name by the President or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
_________________________________
Signature
_________________________________
Signature if held jointly
Dated: ______________, 1995
