<PAGE> 1
As filed with the Securities and Exchange Commission on July 31, 1996
Registration No. 333-08663
- --------------------------------------------------------------------------------
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 11-2400145
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3827
(Primary Standard Industrial
Classification Code Number)
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. STEVEN R. LONDON, ESQ.
PARKER DURYEE ROSOFF & HAFT BROWN, RUDNICK, FREED & GESMER
529 FIFTH AVENUE ONE FINANCIAL CENTER
NEW YORK, NEW YORK 10017 BOSTON, MASSACHUSETTS 02111
(212) 599-0500 (617) 856-8200
FAX: (212) 972-9487 FAX: (617) 856-8201
-------------
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> 2
COMPUTER IDENTICS CORPORATION
5 SHAWMUT ROAD
CANTON, MA 02021
TELEPHONE: (617) 821-0830
[COMPANY LOGO]
August 1, 1996
Dear Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Computer Identics Corporation ("CI") to be held at 10:00
a.m., local time, on August 29 at the offices of CI at 5 Shawmut Road, Canton,
MA 02021.
At the Special Meeting, you will be asked to approve the proposed merger
(the "Merger") of CI with a subsidiary of Robotic Vision Systems, Inc., a
Delaware corporation ("RVSI"). If the proposed Merger is consummated, each share
of Common Stock, $.10 par value per share, of CI (the "CI Common Stock") will be
converted into shares of Common Stock, $.01 par value per share, of RVSI (the
"RVSI Common Stock"), at an exchange ratio determined within specified limits
according to the price of RVSI Common Stock (the "Exchange Ratio"), as described
in the attached Proxy Statement/Prospectus.
PLEASE REVIEW CAREFULLY THE ACCOMPANYING PROXY STATEMENT/ PROSPECTUS. This
document contains a detailed description of the Agreement and Plan of Merger and
Reorganization among CI, RVSI and the RVSI subsidiary and the transactions
contemplated thereby.
Your Board of Directors believes that the proposed Merger is in the best
interests of the stockholders of CI and has unanimously approved the Merger. In
arriving at its decision, your Board of Directors considered a number of
factors, including the opinion of CI's financial advisor, Fechtor, Detwiler &
Co., Inc., as to the fairness of the Exchange Ratio, from a financial point of
view, to the CI stockholders.
We appreciate the loyalty and support our stockholders have demonstrated
over the years. We hope that you will continue this support by voting FOR the
proposed Merger now. Together with the other members of the Board of Directors,
we intend to vote FOR the Merger, and recommend that all stockholders do the
same. Regardless of the number of shares you may own, it is important that your
shares be represented at the Special Meeting. Accordingly, please promptly sign
and return your proxy card in the pre-addressed envelope whether or not you plan
to attend the Special Meeting. If you attend the Special Meeting, you may vote
in person whether or not you have previously returned your proxy.
Sincerely,
<TABLE>
<S> <C>
RICHARD C. CLOSE TOMAS KOHN
President and Chief Executive Officer Chairman of the Board
</TABLE>
NOTE: PLEASE DO NOT SEND IN YOUR
STOCK CERTIFICATES AT THE PRESENT TIME
<PAGE> 3
COMPUTER IDENTICS CORPORATION
5 SHAWMUT ROAD
CANTON, MASSACHUSETTS 02021
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 29, 1996
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Special
Meeting") of Computer Identics Corporation, a Massachusetts corporation ("CI"),
will be held on Thursday, August 29, 1996, commencing at 10:00 A.M., local time,
at the offices of CI, 5 Shawmut Road, Canton, Massachusetts 02021, for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger and Reorganization, dated as of July 23, 1996
(the "Merger Agreement"), by and among CI, Robotic Vision Systems, Inc., a
Delaware corporation ("RVSI"), and RVSI Third 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
CI (the "Merger") and CI will become a wholly-owned subsidiary of RVSI, and
(ii) each share of Common Stock, $.10 par value, of CI (the "CI Common
Stock") will be converted into the right to receive, and become
exchangeable for, 0.177805207 of a share of Common Stock, $.01 par value,
of RVSI (the "Exchange Ratio"); provided, however, that if the average of
the closing prices of RVSI Common Stock on the Nasdaq National Market for
the 25 trading days ending on (and including) the second trading day
immediately prior to the Special Meeting (the "Average Closing Price") is
greater than $20.75, then the Exchange Ratio shall be adjusted to an amount
equal to the quotient of $20.75 divided by the Average Closing Price times
the former Exchange Ratio (but in no event shall such adjusted Exchange
Ratio be less than 0.160024686); and if the Average Closing Price is less
than $17.00, then the Exchange Ratio shall be adjusted to an amount equal
to the quotient of $17.00 divided by the Average Closing Price times the
former Exchange Ratio (but in no event shall such adjusted Exchange Ratio
exceed 0.195585727), all as more fully described in the accompanying Proxy
Statement/Prospectus.
2. To transact such other business incidental to the Special Meeting
that may properly come before such meeting or any adjournment or
adjournments thereof.
A copy of the Merger Agreement is attached as Exhibit A to the accompanying
Proxy Statement/Prospectus and is incorporated herein by reference.
The Board of Directors of CI has fixed the close of business on August 1,
1996 as the record date for the determination of stockholders entitled to notice
of and to vote at the Special Meeting and any adjournments thereof. Only
stockholders of record at the close of business on that date will be entitled to
vote. The affirmative vote of holders of a majority of all outstanding CI Common
Stock entitled to vote at the Special Meeting is necessary to approve and adopt
the Merger Agreement.
If the proposed Merger is approved by the stockholders at the Special
Meeting and the Merger is effected by RVSI and CI, any stockholder (i) who files
with CI, before the taking of the vote on approval of the Merger, written
objection to the proposed action stating that he or she intends to demand
payment for his or her shares if the action is taken, and (ii) whose shares are
not voted in favor of the Merger, has or may have the right to demand in writing
from CI, within 20 days after the date of mailing of notice to him or her that
the Merger has become effective, payment for his or her shares and an appraisal
of the value thereof. CI and any such stockholder shall in such case have the
rights and duties and shall follow the procedures set forth in Sections 88 to
98, inclusive, of the Massachusetts Business Corporation Law, the text of which
is attached as Exhibit B to the accompanying Proxy Statement/Prospectus. It is
not enough to simply vote against the Merger; you must also follow the other
procedures in order to perfect your appraisal rights.
BY ORDER OF THE BOARD OF DIRECTORS
STEVEN R. LONDON
Clerk
<PAGE> 4
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOUR
PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED BY SIGNING AND RETURNING A
LATER DATED PROXY WITH RESPECT TO THE SAME SHARES, BY FILING WITH THE CLERK OF
CI A WRITTEN REVOCATION BEARING A LATER DATE, OR BY ATTENDING AND VOTING AT THE
SPECIAL MEETING.
Canton, Massachusetts
August 1, 1996
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE, AND
RETURN THE ENCLOSED PROXY CARD.
<PAGE> 5
PROXY STATEMENT
OF
COMPUTER IDENTICS CORPORATION
FOR SPECIAL MEETING OF HOLDERS OF SHARES OF COMMON STOCK,
$.10 PAR VALUE, OF COMPUTER IDENTICS CORPORATION
------------------------
PROSPECTUS
OF
ROBOTIC VISION SYSTEMS, INC.
SHARES OF
COMMON STOCK, $.01 PAR VALUE
------------------------
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being
furnished by Robotic Vision Systems, Inc., a Delaware corporation ("RVSI"), and
by Computer Identics Corporation, a Massachusetts corporation ("CI"), to holders
of shares of Common Stock, $.10 par value, of CI (the "CI Common Stock"), in
connection with the solicitation of proxies by the Board of Directors of CI for
use at the Special Meeting of Stockholders of CI, to be held at 10:00 a.m.,
local time, on August 29, 1996, at the principal offices of CI, at 5 Shawmut
Road, Canton, MA 02021 for the purposes set forth in the accompanying Notice of
Special Meeting of Stockholders or any adjournment or adjournments thereof (the
"Special Meeting").
At the Special Meeting, the stockholders of CI will consider and vote upon
a proposal to approve and adopt that certain Agreement and Plan of Merger and
Reorganization, dated as of July 23, 1996 (the "Merger Agreement"), by and among
RVSI, RVSI Third Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of RVSI ("Subsidiary"), and CI. 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, CI will become a wholly-owned
subsidiary of RVSI through the merger of Subsidiary with and into CI (the
"Merger"), and each outstanding share of CI Common Stock, other than shares held
by CI stockholders who properly exercise their appraisal rights (the "Dissenting
Shares") under Sections 85 through 98 of the Massachusetts Business Corporation
Law ("MBCL"), will be converted into the right to receive, and become
exchangeable for, 0.177805207 of a share of RVSI Common Stock (the "Exchange
Ratio"); provided, however, that if the average of the closing prices of RVSI
Common Stock on the Nasdaq National Market for the 25 trading days ending on
(and including) the second trading day immediately prior to the Special Meeting
(the "Average Closing Price") is greater than $20.75, then the Exchange Ratio
shall be adjusted to an amount equal to the quotient of $20.75 divided by the
Average Closing Price times the former Exchange Ratio (but in no event shall
such adjusted Exchange Ratio be less than 0.160024686) (the "Maximum Collar");
and if the Average Closing Price is less than $17.00, then the Exchange Ratio
shall be adjusted to an amount equal to the quotient of $17.00 divided by the
Average Closing Price times the former Exchange Ratio (but in no event shall
such adjusted Exchange Ratio be more than 0.195585727) (the "Minimum Collar",
and collectively with the Maximum Collar, the "Collars").
Under the MBCL, CI stockholders have certain dissenters' rights of
appraisal in connection with the Merger.
------------------------
This Proxy Statement/Prospectus also constitutes the prospectus of RVSI
with respect to a maximum of 2,354,000 shares (less the aggregate amount of
fractional shares that are paid in cash) of RVSI Common Stock to be issued in
exchange for the CI Common Stock in connection with the Merger. This Proxy
Statement/Prospectus does not cover any resales of RVSI Common Stock that will
be received by affiliates of CI 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.
On July 30, 1996 the reported closing price of a share of RVSI Common Stock
on The Nasdaq National Market was $13.94. CI 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 "RISK FACTORS" COMMENCING ON PAGE 1 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN RVSI COMMON STOCK.
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 AUGUST 1, 1996, AND IT IS
FIRST BEING MAILED TO CI STOCKHOLDERS ON OR ABOUT AUGUST 5, 1996.
<PAGE> 6
AVAILABLE INFORMATION
RVSI and CI 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, Suite 1300, New York, New York 10048 and
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661-2511. 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 Common Stock and the CI Common Stock are each
traded on The Nasdaq National Market. Reports and other information concerning
RVSI or CI may be inspected at the National Association of Securities Dealers,
Inc., 1735 K Street, N.W. Washington, DC 20006.
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 does not contain all the information set forth in the
Registration Statement and the exhibits and schedules filed therewith. For
further information with respect to RVSI, CI and the shares of RVSI Common Stock
offered hereby, reference is hereby made to such Registration Statement and to
the exhibits and schedules filed therewith. Statements made in this Proxy
Statement/Prospectus as to the terms of any agreement or other document referred
to herein are not necessarily complete, and in each instance reference is made
to the copy of such agreement or document filed as an exhibit to the
Registration Statement, each such statement being qualified by such reference.
Such Registration Statement and the exhibits and schedules 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 and in the manner 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 CI 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 CI IN THIS PROXY
STATEMENT/PROSPECTUS HAS BEEN SUPPLIED BY CI.
2
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY............................................................................... i
THE PROPOSED MERGER................................................................. i
General.......................................................................... i
Special Meeting of CI Stockholders............................................... i
The Parties...................................................................... i
RVSI........................................................................... i
CI............................................................................. ii
Subsidiary..................................................................... ii
Required Vote of Stockholders of CI.............................................. ii
No Vote Required of RVSI Stockholders............................................ iii
Conversion of Shares............................................................. iii
Conversion of Options and Warrant................................................ iii
Effective Time................................................................... iii
Exchange of Stock Certificates................................................... iii
Background....................................................................... iv
Recommendation of the CI Board of Directors and Reasons for the Merger........... iv
Opinion of CI Financial Advisor.................................................. iv
Conflicts of Interests........................................................... iv
Rights to Terminate and Amendments............................................... iv
Comparison of Rights Under Applicable Law........................................ v
Conditions to the Merger......................................................... v
Accounting Treatment............................................................. v
Certain Federal Income Tax Consequences of the Merger............................ v
Appraisal Rights................................................................. vi
Absence of Regulatory Filings and Approvals...................................... vi
Comparative Per Share Data of RVSI Common Stock and CI Common Stock.............. vi
No Resale Restriction............................................................ vi
Risk Factors..................................................................... vii
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION............................... viii
RVSI............................................................................. viii
CI............................................................................... ix
Selected Pro Forma Financial Information.............................................. x
Comparative Per Share Information..................................................... xi
RECENT DEVELOPMENTS................................................................... xii
RISK FACTORS.......................................................................... 1
Risks Relating to the Merger........................................................ 1
Risks Associated with Exchange Ratio............................................. 1
Uncertainties of Post-Merger Operations.......................................... 1
Dilution; Shares Eligible for Future Sales....................................... 1
Absence of Dividends............................................................. 2
Volatility of Stock Price........................................................ 2
Risks Relating to CI................................................................ 2
History of Losses................................................................ 2
Cash Position Needs.............................................................. 3
Dependence on Key Personnel...................................................... 3
Dependence on Single Source of Supply............................................ 3
Technological Advances........................................................... 3
Competition...................................................................... 3
Foreign Sales.................................................................... 3
Risks Relating to RVSI.............................................................. 4
Fluctuations in the Semiconductor Market......................................... 4
Concentration of Revenues........................................................ 4
Competition...................................................................... 4
Pending Litigation............................................................... 4
Uncertainty of Patent Protection................................................. 5
Proprietary Protection; Export Sales............................................. 5
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
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<S> <C>
INTRODUCTION.......................................................................... 6
THE SPECIAL MEETING................................................................... 6
Purpose of the Meeting.............................................................. 6
Date, Time and Place; Record Date................................................... 6
Voting Rights....................................................................... 6
THE PROPOSED MERGER................................................................... 8
General............................................................................. 8
Closing; Effective Time............................................................. 9
Exchange of Stock Certificates...................................................... 9
No Fractional Shares................................................................ 10
Background of Merger................................................................ 10
Recommendation of the CI Board of Directors and Reasons for the Merger.............. 13
Opinion of CI Financial Advisor..................................................... 14
Comparable Companies Analysis....................................................... 15
Comparable Transaction Analysis..................................................... 16
Merger Pricing Analysis............................................................. 16
Accretion/Dilution Analysis......................................................... 16
Contribution Analysis............................................................... 17
Financial and Liquidity Ratio Analysis.............................................. 17
Comparative Trading History......................................................... 17
The Merger Agreement................................................................ 18
General.......................................................................... 18
Exchange of CI Common Stock for RVSI Common Stock................................ 18
Conversion of Options and Warrant................................................ 19
Representations and Warranties................................................... 19
Certain Covenants and Agreements................................................. 20
No Solicitation of Other Transactions............................................ 21
Conditions to the Merger......................................................... 22
Termination and Expense Reimbursement............................................ 23
Other Transaction Payment and Expense Reimbursement.............................. 24
Amendment and Waiver............................................................. 24
Conflicts of Interests.............................................................. 24
Expenses............................................................................ 25
Absence of Regulatory Filings and Approvals......................................... 25
Restrictions on Sales by Affiliates................................................. 25
Accounting Treatment................................................................ 25
Listing on The Nasdaq National Market............................................... 25
Appraisal Rights of Dissenting Stockholders......................................... 26
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS............................................. 27
COMPARATIVE PER SHARE PRICES AND DIVIDENDS OF RVSI COMMON STOCK AND CI COMMON STOCK... 29
SELECTED HISTORICAL FINANCIAL DATA OF CI.............................................. 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF CI............................................................................... 31
Results of Operations............................................................... 31
Liquidity and Capital Resources..................................................... 32
Subsequent Results -- Three and Six Months ended June 30, 1996...................... 33
SELECTED HISTORICAL FINANCIAL DATA OF RVSI............................................ 34
</TABLE>
4
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<TABLE>
<CAPTION>
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<S> <C>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF RVSI............................................................................. 36
Recent Developments................................................................. 36
Results of Operations............................................................... 36
Liquidity and Capital Resources..................................................... 38
Export Sales........................................................................ 39
Private Equity Placements........................................................... 39
Foreign Currency Transaction........................................................ 39
Recent Financial Accounting Standards Board Statements.............................. 39
Effect of Inflation................................................................. 39
Proposed Acquisition................................................................ 40
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION.......................... 40
BUSINESS OF CI........................................................................ 49
General............................................................................. 49
Bar Code Technology................................................................. 49
Products............................................................................ 49
Customers; Marketing Arrangements; Exports.......................................... 50
Manufacturing and Supply............................................................ 50
Competition......................................................................... 51
Patents and Licenses................................................................ 51
Backlog; Working Capital............................................................ 51
Product Development................................................................. 51
Government Regulation............................................................... 52
Employees........................................................................... 52
Facilities.......................................................................... 52
Legal Proceedings................................................................... 52
MANAGEMENT OF CI...................................................................... 53
Executive Officers and Directors.................................................... 53
Executive Compensation.............................................................. 54
Bonus Plan.......................................................................... 55
Stock Option Plans.................................................................. 55
Employment Agreements............................................................... 56
Indemnification of Officers and Directors........................................... 56
Compensation Committee Interlocks................................................... 57
PRINCIPAL STOCKHOLDERS OF CI.......................................................... 58
DESCRIPTION OF CI's SECURITIES........................................................ 59
CI Common Stock..................................................................... 59
Transfer Agent...................................................................... 59
BUSINESS OF RVSI...................................................................... 60
History............................................................................. 60
Principal Products and Product Development.......................................... 62
Acuity.............................................................................. 63
I.D. Matrix......................................................................... 64
Manufacturing....................................................................... 64
Marketing and Sales................................................................. 64
Customers........................................................................... 65
Research and Development............................................................ 65
Sources of Supply................................................................... 66
Backlog............................................................................. 66
Customer Service and Support........................................................ 66
Proprietary Protection.............................................................. 66
Competition......................................................................... 67
Employees........................................................................... 67
Facilities.......................................................................... 67
Environmental Regulation............................................................ 67
Litigation.......................................................................... 67
</TABLE>
5
<PAGE> 10
<TABLE>
<CAPTION>
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<S> <C>
MANAGEMENT OF RVSI.................................................................... 69
Executive Officers and Directors.................................................... 69
After the Merger.................................................................... 70
Executive Compensation.............................................................. 71
Employee Agreements................................................................. 72
Directors' Compensation............................................................. 72
Certain Relationships and Related Transactions...................................... 72
PRINCIPAL STOCKHOLDERS OF RVSI........................................................ 73
DESCRIPTION OF RVSI's SECURITIES...................................................... 75
Common Stock........................................................................ 75
Warrants............................................................................ 75
Transfer Agent...................................................................... 75
Reports to Stockholders............................................................. 75
COMPARATIVE RIGHTS OF STOCKHOLDERS.................................................... 75
Authorized Shares of Capital Stock.................................................. 75
Special Meetings of Stockholders.................................................... 76
Inspection Rights................................................................... 76
Action by Consent of Stockholders................................................... 76
Dividends and Repurchases of Stock.................................................. 76
Classification of the Board of Directors............................................ 76
Removal of Directors and Officers................................................... 77
Filling Vacancies of the Board of Directors......................................... 77
Indemnification and Exculpation of Directors........................................ 77
Loans to Directors, Officers and Employees.......................................... 77
Interested Director or Officer Transactions......................................... 78
Merger, Sale, Lease or Exchange of Assets........................................... 78
Amendments to Charter............................................................... 78
Appraisal Rights.................................................................... 78
"Anti-takeover" Statutes............................................................ 79
LEGAL MATTERS......................................................................... 79
EXPERTS............................................................................... 79
INDEX TO FINANCIAL STATEMENTS......................................................... F-1
EXHIBITS
EXHIBIT A AGREEMENT AND PLAN OF MERGER AND REORGANIZATION............................ A-1
EXHIBIT B MASSACHUSETTS BUSINESS CORPORATION LAW SECTIONS 85 THROUGH 98.............. B-1
EXHIBIT C OPINION OF FECHTOR, DETWILER & CO., INC.................................... C-1
</TABLE>
6
<PAGE> 11
SUMMARY
The following summary is qualified in its entirety by the detailed
information appearing elsewhere in this Proxy Statement/Prospectus and the
Exhibits thereto. 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.
THE PROPOSED MERGER
GENERAL
This Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of RVSI Third Acquisition Corp. ("Subsidiary"), a recently organized
Delaware corporation and a wholly-owned subsidiary of Robotic Vision Systems,
Inc., a Delaware corporation ("RVSI"), with and into Computer Identics
Corporation, a Massachusetts corporation ("CI"), pursuant to that certain
Agreement and Plan of Merger and Reorganization, dated as of July 23, 1996 (the
"Merger Agreement"), by and among RVSI, Subsidiary and CI. At such time as (i)
Articles of Merger required under Massachusetts law are filed with the Secretary
of State of the Commonwealth of Massachusetts and (ii) the Certificate of Merger
required under Delaware law is filed with the Secretary of State of the State of
Delaware (the "Effective Time"), each share of Common Stock, $.10 par value, of
CI (the "CI Common Stock") outstanding immediately prior to the Merger, other
than shares held by CI stockholders who properly exercise their appraisal rights
(the "Dissenting Shares") under Sections 85 through 98 of the Massachusetts
Business Corporation Law ("MBCL"), will be converted into the right to receive,
and become exchangeable for (the "Exchange Ratio"), 0.177805207 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 25 trading days ending on (and including) the
second trading day immediately prior to the Special Meeting (the "Average
Closing Price") is greater than $20.75, then the Exchange Ratio shall be
adjusted to an amount equal to the quotient of $20.75 divided by the Average
Closing Price times the former Exchange Ratio (but in no event shall such
adjusted Exchange Ratio be less than 0.160024686) (the "Maximum Collar"); and if
the Average Closing Price is less than $17.00, then the Exchange Ratio shall be
adjusted to an amount equal to the quotient of $17.00 divided by the Average
Closing Price times the former Exchange Ratio (but in no event shall such
adjusted Exchange Ratio be more than 0.195585727) (the "Minimum Collar", and
collectively with the Maximum Collar, the "Collars"). See "Risk Factors -- Risks
Relating to the Merger -- Exchange Ratio."
SPECIAL MEETING OF CI STOCKHOLDERS
At the Special Meeting, or any adjourned session thereof (the "Special
Meeting"), the stockholders of CI (the "CI Stockholders") will be asked to
consider and vote upon a proposal to approve and adopt the Merger Agreement and
the transactions contemplated thereby. The Special Meeting is scheduled to be
held at 10:00 A.M., local time, on August 29, 1996, at the offices of CI, 5
Shawmut Road, Canton, Massachusetts 02021. The Board of Directors of CI (the "CI
Board") has fixed the close of business on August 1, 1996 as the record date
(the "Record Date") for the determination of holders of CI Common Stock entitled
to notice of and to vote at the Special Meeting. See "The Special Meeting."
THE BOARD OF DIRECTORS OF CI BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF CI AND THE CI STOCKHOLDERS, HAS UNANIMOUSLY APPROVED THE MERGER AND
RECOMMENDS THAT THE CI STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO APPROVE AND ADOPT
THE MERGER. SEE "THE PROPOSED MERGER -- RECOMMENDATION OF THE CI BOARD OF
DIRECTORS AND REASONS FOR THE MERGER."
THE PARTIES
RVSI. RVSI produces automated 2-D and 3-D machine vision-based products
and systems for inspection, measurement, and identification, and is a leader in
advanced electro-optical technology.
(i)
<PAGE> 12
RVSI's core business is its Electronics Division which supplies inspection
equipment to the semiconductor industry. The Electronics Division's LS-Series
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 ("intray scanning"). The systems use 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 in 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 also has an Aircraft Safety Division which is developing an ice
detection system for the aviation industry, which the Federal Aviation
Administration recently approved as an acceptable means of compliance with the
inspection requirements of a major air carrier's de-icing plan.
On September 20, 1995, RVSI consummated a merger with Acuity Imaging Inc.,
a publicly owned company located in Nashua, New Hampshire ("Acuity"), pursuant
to which Acuity became a wholly owned subsidiary of RVSI. Acuity designs,
develops, manufactures and supplies machine vision systems to a diversity of
markets.
On October 23, 1995, RVSI consummated a merger with International Data
Matrix, Inc., a privately owned company then located in Clearwater, Florida
("I.D. Matrix"), pursuant to which I.D. Matrix became a wholly owned subsidiary
of RVSI (the "I.D. Matrix Merger"). I.D. Matrix markets a line of 2-D Data
Matrix(TM) code readers for use in the emerging high-density 2-D bar code
segment of the bar code industry.
RVSI Common Stock is currently listed, and following consummation of the
Merger will continue to be listed, on The Nasdaq National Market under the
trading symbol "ROBV."
RVSI has never paid any cash dividends on the RVSI Common Stock and does
not anticipate paying any cash dividends in the foreseeable future. See
"Comparative Per Share Prices and Dividends of RVSI Common Stock and CI Common
Stock."
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.
CI. CI designs, manufactures, markets and services standard bar code
products, data collection networks, and systems for the data collection and
material handling/industrial markets. CI markets its products in the United
States through its direct sales organization and through distributors, system
integrators and value added resellers. As an international organization, CI and
its foreign subsidiaries have sales and service offices located in Belgium,
France, Germany and the United Kingdom, as well as a network of distributors and
systems integrators in locations throughout the world.
CI Common Stock is listed on the Nasdaq National Market under the trading
symbol "CIDN." If the Merger is consummated, CI Common Stock will be delisted
from the Nasdaq National Market and the registration of the CI Common Stock
under the Exchange Act will be terminated.
CI's executive offices are located at 5 Shawmut Road, Canton, Massachusetts
02021 and its telephone number is (617) 821-0830.
Subsidiary. Subsidiary is a recently-organized Delaware corporation and a
wholly-owned subsidiary of RVSI. Subsidiary was organized for the sole purpose
of merging with and into CI.
REQUIRED VOTE OF STOCKHOLDERS OF CI
Pursuant to the MBCL and CI's Restated Articles of Organization, as amended
(the "CI Articles of Organization"), the affirmative vote of the holders of at
least a majority of the shares of CI Common Stock outstanding as of the Record
Date is required to approve the Merger. At the Record Date, there were
10,878,293 shares of CI Common Stock outstanding. The presence, either in person
or represented by proxy, of the holders of a majority of the shares of CI Common
Stock outstanding as of the Record Date is necessary to constitute a quorum at
the Special Meeting. As of the Record Date, CI's directors and executive
officers as
(ii)
<PAGE> 13
a group held shares representing approximately 9.48% of the votes entitled to be
cast by CI Stockholders at the CI Special Meeting. See "The Special
Meeting -- Voting Rights."
NO VOTE REQUIRED OF RVSI STOCKHOLDERS
No vote of RVSI stockholders is required to approve the Merger.
Conversion of Shares. All issued and outstanding shares of CI Common Stock
will be converted into shares of RVSI Common Stock upon completion of the
Merger, other than those shares, if any, as to which rights of appraisal have
been established pursuant to Sections 85 through 98 of the MBCL. See "The
Proposed Merger -- Appraisal Rights." At the Effective Time, each then
outstanding share of CI Common Stock will be converted into the right to
receive, and become exchangeable for, 0.177805207 of a share of RVSI Common
Stock, subject to possible adjustments to the Exchange Ratio as a result of
implementation of the Collars. See "-- General," "Risk Factors -- Risks Relating
to the Merger" and "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 CI 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 and Warrant. As a consequence of the Merger, options
to purchase up to 982,350 shares of CI Common Stock ("CI Options") at various
exercise prices and a warrant to purchase 200,000 shares of CI Common Stock ("CI
Warrant") at an exercise price of $1.50 will be converted at the Effective Time
into options to purchase up to 174,667 shares of RVSI Common Stock and a warrant
to purchase 35,561 shares of RVSI Common Stock at exercise prices determined by
dividing the respective exercise price per share of CI Common Stock provided for
in such CI Options and CI Warrant by the Exchange Ratio (without giving effect
to possible adjustments to the Exchange Ratio as a result of implementation of
the Collars). Under the terms of the plans under which the CI Options were
issued, CI Options held by most CI employees, including CI's officers, will
become fully exercisable as of the Effective Time. Assuming that the Effective
Time had been July 1, 1996, these CI Options and CI Warrant would have a value
of approximately $1,561,857, based upon the difference between the closing price
of RVSI Common Stock on July 1, 1996, ($17.25) and the respective exercise
prices, as converted at the Exchange Ratio (without giving effect to possible
adjustments to the Exchange Ratio as a result of implementation of the Collars).
See "The Proposed Merger -- The Merger Agreement -- Conversion of Options and
Warrant."
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 (i)
Articles of Merger required under the MBCL are accepted for filing by the
Secretary of State of the Commonwealth of Massachusetts and (ii) the Certificate
of Merger required under the Delaware General Corporation Law ("DGCL") is
accepted for filing by the Secretary of State of the State of Delaware. Such
filings will be made simultaneously with or as soon as practicable after the
closing of the transactions contemplated by the Merger Agreement. Assuming all
the conditions to the Merger are fulfilled, it is expected that the Merger will
become effective on August 29, 1996 or as soon thereafter as practicable. 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
CI Common Stock (the "CI Certificates") shall cease to have any rights as a
stockholder of CI and each holder's sole right shall be to receive in exchange
for such holder's CI 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
practicable after the Effective Time, the Exchange Agent will send transmittal
instructions to each CI
(iii)
<PAGE> 14
Stockholder describing the procedure for surrendering the CI Certificates for
the RVSI Certificates. See "The Proposed Merger -- Exchange of Stock
Certificates."
BACKGROUND
The terms of the Merger Agreement resulted from arm's length negotiations
between representatives of RVSI and CI. See "The Proposed Merger -- Background
of Merger."
RECOMMENDATION OF THE CI BOARD OF DIRECTORS AND REASONS FOR THE MERGER
On July 1, 1996, the Board of Directors of CI unanimously approved the
Merger and the Merger Agreement. The CI Board recommends that the CI
Stockholders vote "FOR" approval and adoption of the Merger.
The recommendation of the CI Board is based upon its belief that the Merger
and the terms of the Merger Agreement are fair and in the best interests of CI
and the CI Stockholders. For a discussion of the factors considered by the CI
Board in making its recommendation, see "The Proposed Merger -- Recommendation
of the CI Board of Directors and Reasons for the Merger."
OPINION OF CI FINANCIAL ADVISOR
Fechtor, Detwiler & Co. Inc. ("Fechtor, Detwiler") has rendered an opinion
to the CI Board, a copy of which is attached hereto as Exhibit C (the "Fechtor,
Detwiler Opinion"), 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 CI 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. CI's obligation to
consummate the Merger is conditioned upon the receipt from Fechtor, Detwiler of
an opinion to the same effect as the Fechtor, Detwiler Opinion and dated the
Closing Date. CI has the right to waive this condition but it currently does not
intend to do so. 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 C. CI
Stockholders are urged to read the Fechtor, Detwiler Opinion carefully and in
its entirety. Fechtor, Detwiler will receive a fee of $50,000 for its opinions
and an investment banking fee of one and one half percent of the Merger
consideration (which would have been $553,725 based upon the July 1, 1996
closing price of RVSI Common Stock without taking into account any adjustment of
the Exchange Ratio resulting from implementation of the Collars). See "The
Proposed Merger -- Opinion of CI Financial Advisor" and Exhibit C hereto.
CONFLICTS OF INTERESTS
In considering the recommendation of the CI Board with respect to the
Merger Agreement and the transactions contemplated thereby, holders of CI Common
Stock should be aware that management of CI have certain interests in the Merger
that are in addition to the interests of CI Stockholders generally, including,
without limitation, the execution of an employment agreement by Richard C.
Close, President of CI and a member of the CI Board, and RVSI's agreement to
guarantee CI's performance of pre-existing rights of indemnification for the
officers, directors and an employee of CI. See "The Proposed Merger -- Conflicts
of Interest."
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, whether before or after approval by the CI Stockholders. If the
Merger Agreement is terminated, under certain circumstances, (i) either RVSI or
CI may be obligated to reimburse the other for up to $250,000 in documented
transaction expenses, and (ii) CI may be obligated to pay RVSI a $750,000
termination fee and, if not previously done, reimburse RVSI for up to $250,000
in documented transaction expenses if CI, prior to January 24, 1997, enters into
a merger or business
(iv)
<PAGE> 15
combination with a company other than the Subsidiary. See "The Proposed
Merger -- The Merger Agreement -- Termination and Expense Reimbursement" and
"-- Other Transaction Payment and Expense 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 CI Stockholders by a written agreement executed by RVSI,
Subsidiary and CI. It is a condition to the Merger that the number of Dissenting
Shares shall not exceed a total of 9% of the number of shares of CI Common Stock
outstanding immediately prior to the Effective Time. See "The Proposed
Merger -- The Merger Agreement -- Amendment and Waiver" and "-- The Merger
Agreement -- Conditions to the Merger."
COMPARISON OF RIGHTS UNDER APPLICABLE LAW
The rights of CI Stockholders are currently governed by the MBCL, CI's
Articles of Organization and CI's Bylaws (the "CI Bylaws"). Holders of CI Common
Stock at 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 certain
differences between the rights of CI Stockholders under the MBCL, the CI
Articles of Organization and the CI Bylaws and the rights of the RVSI
Stockholders under the DGCL, the RVSI Certificate of Incorporation and the RVSI
Bylaws. See "Comparative Rights of Stockholders."
CONDITIONS TO THE MERGER
The obligations of RVSI and CI 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 CI Common Stock. See "The Proposed Merger -- The Merger
Agreement -- Conditions to the Merger."
ACCOUNTING TREATMENT
The Merger is intended to qualify as a "pooling of interests" transaction
for accounting and financial reporting purposes in accordance with generally
accepted accounting principles. It is a condition to the consummation of the
Merger that RVSI's independent accountants will have determined that RVSI is
entitled to account for the Merger as a pooling of interests and CI's
independent accountants shall have delivered to CI a letter regarding the
appropriateness of pooling of interests accounting for the Merger, as it relates
to CI, under Accounting Principles Board Opinion No. 16, based upon the
assumption that the Merger is closed and consummated in accordance with the
Merger Agreement. See "The Proposed Merger -- Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
It is expected that the Merger will constitute a tax-free reorganization
for federal income tax purposes and, accordingly, that no gain or loss will be
recognized by CI Stockholders upon the exchange of CI Common Stock solely for
shares of RVSI Common Stock and no taxable gain or loss will be recognized by
RVSI or CI. No ruling has been or will be requested from the Internal Revenue
Service with respect to the Merger. Each of CI's and RVSI's respective
obligation to consummate the Merger is conditioned upon receipt of an opinion of
their counsel to the effect that the Merger will qualify as a tax-free
reorganization. Each of CI and RVSI has the right to waive this condition but
neither currently intends to do so. CI stockholders perfecting their appraisal
rights may recognize taxable gain or loss. See "Certain Federal Income Tax
Considerations." BECAUSE CERTAIN FEDERAL TAX CONSEQUENCES OF THE MERGER MAY VARY
DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF EACH CI 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.
(v)
<PAGE> 16
APPRAISAL RIGHTS
If the Merger is approved by the CI Stockholders at the Special Meeting and
effected by RVSI and CI, any CI Stockholder (i) who files with CI, before the
taking of the vote on the approval of the Merger, a written objection to the
Merger stating that he or she intends to demand payment for his or her shares if
the Merger is consummated and (ii) whose shares are not voted in favor of the
Merger, has or may have the right to demand in writing from CI, within 20 days
after the date of mailing to him or her of notice in writing that the Merger has
become effective, payment for his or her shares of CI Common Stock and an
appraisal of the value thereof. CI and any such CI Stockholders shall in such
cases have the rights and duties and shall follow the procedures set forth in
Sections 88 through 98, inclusive, of the MBCL. See "The Proposed Merger --
Appraisal Rights of Dissenting Stockholders" and Exhibit B which contains the
full text of Sections 85 through 98 of the MBCL.
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 CI COMMON STOCK
<TABLE>
<CAPTION>
RVSI CI
- ----------------------- -------------------------
AVERAGE EQUIVALENT
HISTORICAL CLOSING HISTORICAL PER SHARE
BASIS(1) PRICE(2) BASIS(1) BASIS(2)
- ---------- -------- ---------- ----------
<S> <C> <C> <C>
$18.75 $13.9375 $ 2.25 $ 2.73
</TABLE>
- ---------------
(1) Both the RVSI Common Stock and the CI Common Stock are quoted on The Nasdaq
National Market under the symbols "ROBV" and "CIDN," respectively. On June
10, 1996 (the last trading day prior to the public announcement that RVSI
and CI proposed to enter into the Merger), the closing prices of the RVSI
Common Stock and CI Common Stock were $18.75 and $2.25, respectively.
(2) On an equivalent per share basis calculated by multiplying the closing price
of RVSI Common Stock on The Nasdaq National Market on June 10, 1996 by
0.177805207, the Exchange Ratio (without giving effect to possible
adjustments to the Exchange Ratio as a result of implementation of the
Collars and assuming the closing price on June 10, 1996 is equal to the
Average Closing Price), the value of shares of RVSI Common Stock to be
received by CI Stockholders was $3.33 per share of CI Common Stock. On July
30, 1996, the closing price of the RVSI Common Stock was $13.9375 per share;
therefore, as of that date, the value of the shares of RVSI Common Stock to
be received by CI Stockholders was $2.73 per share of CI Common Stock on
such date (given the assumption regarding the Average Closing Price stated
above but assuming adjustment of the Exchange Ratio giving effect to the
Minimum Collar).
CI 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 "RISK FACTORS" AND "COMPARATIVE PER
SHARE PRICES AND DIVIDENDS OF RVSI COMMON STOCK AND CI COMMON STOCK."
NO RESALE RESTRICTION
The shares of RVSI Common Stock to be issued to CI Stockholders in
connection with the Merger have been registered under the Securities Act and
will be freely transferable, except for shares held by any person who may be
deemed to control, be controlled by, or be under common control with CI at the
time of the Special Meeting ("Affiliates"). Affiliates of CI who currently hold
in the aggregate approximately 3,985,016 shares of CI Common Stock may not sell
their shares of RVSI Common Stock acquired in the Merger except
(vi)
<PAGE> 17
pursuant to an effective Registration Statement under the Securities Act
covering the sale of such shares or in compliance with Rule 145 promulgated
under the Securities Act of 1933, as amended (the "Securities Act") or another
applicable exemption under the Securities Act. RVSI has agreed to maintain a
Registration Statement on Form S-3 for three years to cover resales by
Affiliates, thereby permitting Affiliates to resell shares of RVSI Common Stock
without restriction.
RISK FACTORS
In considering whether to approve the Merger Agreement and the transactions
contemplated thereby, CI Stockholders should consider the following:
Risks Relating to the Merger
-- Risks Associated with Exchange Ratio
-- Uncertainties of Post-Merger Operations
-- Dilution; Shares Eligible for Future Sale
-- Absence of Dividends
-- Volatility of Stock Price
Risks Relating to CI
-- History of Losses
-- Cash Position Needs
-- Dependence on Key Personnel
-- Dependence upon Single Source of Supply
-- Technological Advances
-- Competition
-- Foreign Sales
Risks Relating to RVSI
-- Fluctuations in the Semiconductor Market
-- Concentration of Revenues
-- Competition
-- Pending Litigation
-- Uncertainty of Patent Protection
-- Proprietary Protection; Export Sales
See "Risk Factors."
(vii)
<PAGE> 18
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following annual information for RVSI for the years ended September 30,
1995, 1994 and 1993 has been derived from financial statements audited by
Deloitte & Touche LLP and the following annual information for CI for 1995 and
1994 has been derived from financial statements audited by Ernst & Young LLP and
for 1993 by Deloitte & Touche LLP. The selected financial information as of
March 31, 1996 and 1995 and for the six month period and three month period
ended March 31, 1996 and 1995 for RVSI and CI, respectively, and as of December
31, 1992 and 1991 and for the years then ended for RVSI is derived from
unaudited financial statements, but in the respective opinion of each of RVSI
and CI reflect all adjustments (consisting only of normal, recurring
adjustments) necessary for a fair presentation of its respective financial
condition as of that date and of its results of operations. The results of the
six month period and three month period ended March 31, 1996 and 1995 for RVSI
and CI, respectively are not necessarily indicative of the results to be
expected for the entire year. The selected annual and interim financial
information which does not give effect to the Merger should be read in
conjunction with the Consolidated Financial Statements of RVSI and with the
Consolidated Financial Statements of CI appearing elsewhere in this Proxy
Statement/Prospectus. The selected pro forma combined financial information of
RVSI and CI are derived from the unaudited pro forma combined financial
statements included elsewhere herein and should be read in conjunction with such
pro forma combined financial statements and notes thereto. The pro forma
information is presented for illustrative purposes only and is not necessarily
indicative of the operating results or financial position that would have
occurred if the Merger had been consummated, nor is it necessarily indicative of
future operating results or financial position.
SELECTED HISTORICAL FINANCIAL INFORMATION
RVSI
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, FISCAL YEAR ENDED SEPTEMBER 30,
------------------- --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................................... $41,460 $28,168 $65,260 $47,839 $39,640 $30,408 $23,926
Income (loss) before (provision) benefit from
income taxes, discontinued operations and
extraordinary items......................... $ 8,233 $ 2,999 $ 8,184 $ 3,390 $ 763 $(1,270) $(2,394)
(Provision) benefit from income taxes......... $ (342) $ 2,067 $ 649 $ 291 $ 398 $ (48) $ (37)
Income (loss) before discontinued operations
and extraordinary items..................... $ 7,891 $ 5,066 $ 8,833 $ 3,681 $ 1,161 $(1,318) $(2,431)
Discontinued operations....................... $ -- $ -- $ -- $ -- $ -- $ 1,214 $ (333)
Income (loss) before extraordinary items...... $ 7,891 $ 5,066 $ 8,833 $ 3,681 $ 1,161 $ (104)(a) $(2,764)
Extraordinary items........................... $ -- $ -- $ -- $ -- $ -- $ 1,256(a) $ --
Net Income (loss)............................. $ 7,891 $ 5,066 $ 8,833 $ 3,681 $ 1,161 $ 1,152 $(2,764)
Income (loss) per common share before
discontinued operations and extraordinary
items:
Primary..................................... $ 0.45 $ 0.33 $ 0.55 $ 0.25 $ 0.10 $ (0.14) $ (0.31)
Fully diluted............................... $ 0.45 $ 0.33 $ 0.53 $ 0.25 $ 0.10 $ (0.14) $ (0.31)
Income (loss) per common share before
extraordinary items:
Primary..................................... $ 0.45 $ 0.33 $ 0.55 $ 0.25 $ 0.10 $ (0.01) $ (0.35)
Fully diluted............................... $ 0.45 $ 0.33 $ 0.53 $ 0.25 $ 0.10 $ (0.01) $ (0.35)
Net income (loss) per common share:
Primary..................................... $ 0.45 $ 0.33 $ 0.55 $ 0.25 $ 0.10 $ 0.12 $ (0.35)
Fully diluted............................... $ 0.45 $ 0.33 $ 0.53 $ 0.25 $ 0.10 $ 0.12 $ (0.35)
Weighted average number of common shares and
equivalents:
Primary..................................... 17,643 15,389(b) 16,199 14,593(b) 13,750(b) 9,349 7,903
Fully diluted............................... 17,643 15,474(b) 16,572 14,795(b) 13,750(b) 9,349 7,903
</TABLE>
- ---------------
(a) Includes an extraordinary item of $1,138,000 (net of income tax provision of
$97,000) relating to an agreement with General Motors Corporation, and an
extraordinary item of $72,000 resulting from the utilization of net
operating loss carryforwards, and an extraordinary item of $46,000 resulting
from the extinguishment of long-term debt.
(b) Weighted average number of common and common equivalent shares is calculated
using the Modified Treasury Stock method. See Note 1L of Notes to
Consolidated Financial Statements of RVSI.
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
MARCH 31, -------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Total assets.............................................. $58,255 $48,378 $22,408 $15,927 $11,318 $11,044
Current liabilities....................................... $15,915 $16,194 $10,384 $13,520 $ 7,121 $ 8,227
Total liabilities......................................... $16,126 $16,272 $11,615 $13,819 $10,481 $13,048
Stockholders' equity (deficiency)......................... $42,129 $32,106 $10,793 $ 2,108 $ 837 $(2,004)
Working capital........................................... $33,703 $24,302 $ 6,178 $ (947) $ 1,972 $ 897
</TABLE>
Reference is made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations of RVSI" and to the Notes to the
Consolidated Financial Statements of RVSI.
(viii)
<PAGE> 19
SELECTED HISTORICAL FINANCIAL INFORMATION
CI
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------- YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, -----------------------------------------------
1996(A) 1995(A) 1995 1994 1993 1992 1991
--------- --------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................ $ 7,266 $ 6,780 $27,745 $26,026 $21,890 $21,973 $20,641
Cost of Revenue................ 3,942 3,310 14,065 13,485 11,713 10,827 10,619
Selling, General and
Administrative Expense....... 2,578 2,473 10,433 10,295 8,775 8,642 8,047
Research and Development
Expenses..................... 629 715 2,545 2,242 1,861 1,470 994
Separation Costs............... -- 469 541 -- --
Provision for Income Taxes..... 6 30 14 64 63 177 234
Net Income (loss).............. 105 257 683 (510) (1,026) 875 760
Net Income (loss) per Share.... 0.01 0.02 0.06 (0.05) (0.10) 0.09 0.08
Weighted Average Number of
Common and Common Equivalent
Shares Outstanding........... 11,071 10,707 10,977 10,339 9,893 10,261 9,824
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
MARCH 31, ----------------------------------------------------
1996(A) 1995 1994 1993 1992 1991
--------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Working Capital.................... $ 6,258 $ 6,335 $ 5,299 $ 5,143 $ 5,831 $ 4,721
Total Assets....................... 13,685 12,748 10,986 10,203 9,930 9,163
Long-Term Debt..................... 53 57 72 20 51 79
Accumulated Deficit................ (17,784) (17,889) (18,572) (18,062) (17,036) (17,911)
Stockholder's Equity............... 7,295 7,207 5,986 5,921 6,806 5,671
</TABLE>
- ---------------
(a) Derived from unaudited information.
(ix)
<PAGE> 20
SELECTED PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED FOR THE YEAR ENDED SEPTEMBER
----------------------- 30,
MARCH 31, MARCH 31, ------------------------------
1996 1995 1995(A) 1994(A) 1993(A)
--------- --------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues.............................. $56,090 $42,596 $93,005 $73,865 $61,530
Income (loss) Before Income Taxes..... $ 8,366 $ 3,803 $ 8,881 $ 2,944 $ (200)
Income Tax Benefit (Provision)........ $ (310) $ 2,046 $ 635 $ 227 $ 335
Net Income............................ $ 8,056 $ 5,849 $ 9,516 $ 3,171 $ 135
NET INCOME PER SHARE:
Primary............................. $ 0.41 $ 0.34 $ 0.52 $ 0.19 $ 0.03
======= ======= ======= ======= =======
Fully diluted....................... $ 0.41 $ 0.34 $ 0.51 $ 0.19 $ 0.02
======= ======= ======= ======= =======
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING:
Primary............................. 19,692 17,193(b) 18,156 16,433(b) 15,385(b)
======= ======= ======= ======= =======
Fully diluted....................... 19,692 17,298(b) 18,620 16,636(b) 15,385(b)
======= ======= ======= ======= =======
</TABLE>
- ---------------
(a) The fiscal year ended 1995, 1994 and 1993 was September 30, 1995, 1994 and
1993 for RVSI and was December 31, 1995, 1994 and 1993 for CI, respectively.
(b) Weighted average number of common and common equivalent shares was
calculated using the Modified Treasury Stock method.
UNAUDITED PRO FORMA BALANCE SHEET DATA
<TABLE>
<CAPTION>
MARCH 31,
1996
--------------
(IN THOUSANDS)
<S> <C>
Total Assets........................................................... $ 71,940
Current Liabilities.................................................... $ 23,652
Total Liabilities...................................................... $ 23,916
Stockholders' Equity................................................... $ 48,024
Working Capital........................................................ $ 38,561
</TABLE>
(x)
<PAGE> 21
COMPARATIVE PER SHARE INFORMATION
<TABLE>
<CAPTION>
RVSI CI
UNAUDITED UNAUDITED
RVSI CI PRO FORMA EQUIVALENT
HISTORICAL HISTORICAL COMBINED(A) PRO FORMA(A)
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Book Value Per Share as of March 31, 1996.... $ 2.55 $ 0.67 $2.68 $ 0.48
Book Value Per Share as of September 30, 1995(d)... $ 2.12 $ 0.66 $2.30 $ 0.41
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Net Income (Loss) Per Share:
Six Months Ended March 31, 1996:
Primary................................. $ 0.45 $ 0.01 $0.41 $ 0.07
Fully Diluted........................... $ 0.45 $ 0.01 $0.41 $ 0.07
Fiscal Year Ended 1995:(b)
Primary................................. $ 0.55 $ 0.06 $0.52 $ 0.09
Fully Diluted........................... $ 0.53 $ 0.06 $0.51 $ 0.09
Fiscal Year Ended 1994:(b)
Primary................................. $ 0.25 $(0.05) $0.19 $ 0.03
Fully Diluted........................... $ 0.25 $(0.05) $0.19 $ 0.03
Fiscal Year Ended 1993:(b)
Primary................................. $ 0.10 $(0.10) $0.03 $ 0.00
Fully Diluted........................... $ 0.10 $(0.10) $0.02 $ 0.00
Dividends Per Share(c).......................
</TABLE>
- ---------------
(a) RVSI unaudited pro forma combined per share amounts and the CI unaudited
equivalent pro forma per share amounts represent the historical information
of RVSI and the historical information of CI effected by the Exchange Ratio
for the Merger.
(b) The fiscal year ended 1995, 1994 and 1993 was September 30, 1995, 1994 and
1993 for RVSI and was December 31, 1995, 1994 and 1993 for CI, respectively.
(c) RVSI and CI did not pay any dividends during the periods presented.
(d) The book value per share for CI was $.66 as of December 31, 1995.
(xi)
<PAGE> 22
RECENT DEVELOPMENTS
For the three and nine months ended June 30, 1996, RVSI reported revenues
of $21,455,000 and $62,916,000, respectively, as compared with revenues of
$17,361,000 and $45,529,000 for the same periods ended June 30, 1995. RVSI also
reported net income for the three and nine months ended June 30, 1996 of
$3,850,000 ($.22 per share, fully diluted) and $11,741,000 ($.66 per share,
fully diluted), respectively, as compared with net income of $948,000 ($.06 per
share, fully diluted) and $6,014,000 ($.38 per share, fully diluted) for the
same periods ended June 30, 1995. See "Risk Factors -- Risks Relating to RVSI --
Fluctuations in the Semiconductor Market."
For the three and six months ended June 30, 1996, CI reported revenues of
$6,484,000 and $13,750,000, respectively, as compared with revenues of
$6,760,000 and $13,540,000 for the corresponding periods ended June 30, 1995.
For the three and six months ended June 30, 1996, CI reported a loss of $97,000
and net income of $8,000, respectively, as compared with net income of $244,000
and $501,000 for the corresponding periods ended June 30, 1995. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of CI -- Subsequent Results -- Three and Six Months Ended June 30,
1996", and "Risk Factors -- Risks Relating to CI -- History of Losses".
(xii)
<PAGE> 23
RISK FACTORS
As a result of the Merger, CI Stockholders will become stockholders of
RVSI. In addition to the other information contained in this Proxy
Statement/Prospectus, CI Stockholders should review carefully the following
factors in evaluating the Merger and the business of CI and RVSI.
RISKS RELATING TO THE MERGER
Risks Associated with Exchange Ratio. The Merger Agreement provides that
upon consummation of the Merger, each share of CI Common Stock will be exchanged
for 0.177805207 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 25 trading days ending on (and including) the second trading day
immediately prior to the Special Meeting (the "Average Closing Price") is
greater than $20.75, then the Exchange Ratio shall be equal to the quotient of
$20.75 divided by the Average Closing Price times the former Exchange Ratio
(provided that in no event shall such adjusted Exchange Ratio be less than
0.160024686); and if the Average Closing Price is less than $17.00, then the
Exchange Ratio shall be equal to the quotient of $17.00 divided by the Average
Closing Price times the former Exchange Ratio (provided that in no event shall
such adjusted Exchange Ratio be more than 0.195585727). However, the Exchange
Ratio is not subject to adjustment if the Average Closing Price per share of
RVSI Common Stock is (i) between $17.00 and $20.75, (ii) below approximately
$15.45 or (iii) above approximately $23.06. Therefore, the Exchange Ratio does
not protect the aggregate value of the shares of RVSI Common Stock to be
received by CI Stockholders in the Merger if the market price of RVSI Common
Stock falls below $15.45 per share. The market price of RVSI Common Stock is
subject to fluctuations due to changes in the business, operations and prospects
of RVSI, general market and economic conditions, and other factors. As a result,
the market value of the shares of RVSI Common Stock CI Stockholders will receive
in the Merger may be more or less than the market value of such RVSI Common
Stock as of the date of the Merger Agreement or as based upon the Average
Closing Price. See "-- Volatility of Stock Price," "The Merger
Agreement -- Exchange Ratio."
Uncertainties of Post-Merger Operations. The Merger involves the
integration of two companies that have operated independently. There can be no
assurance that RVSI will not encounter difficulties in integrating the
operations of CI with those of RVSI or that the benefits expected from the
integration will be realized. Any delays or unexpected costs incurred in
connection with such integration could have a material adverse effect on RVSI.
Furthermore, there can be no assurance that the operations, management and
personnel of the two companies will be compatible or that RVSI or CI will not
experience loss of key personnel. 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
CI -- Employees."
Dilution; Shares Eligible for Future Sales. The issuance of shares of RVSI
Common Stock pursuant to the Merger will dilute the equity interest of RVSI's
existing stockholders and will increase the number of shares of RVSI Common
Stock eligible for resale in the public market. 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 Statement/Prospectus, shares of RVSI Common Stock are unrestricted
and freely tradable. There are currently restricted shares of RVSI
Common Stock, as such term is defined under Rule 144 of the Securities Act, of
which shares are currently eligible for sale.
Upon consummation of the Merger, an additional 1,934,217 shares of RVSI
Common Stock (the "Merger Shares") will be outstanding after giving effect to
the implementation of the Exchange Ratio assuming no adjustment as a result of
implementation of the Collars, and assuming no CI Stockholders exercise their
appraisal rights. Merger Shares beneficially owned by nonaffiliates of CI
(approximately 6,866,277 shares) will be eligible for sale immediately upon
consummation of the Merger. Merger Shares beneficially owned by affiliates of CI
(approximately 395,016 shares) may not be sold until after the results
1
<PAGE> 24
covering 30 days of post-Merger combined operations of RVSI and CI have been
filed with the Securities and Exchange Commission, sent to stockholders of RVSI
or otherwise publicly disclosed. After such public disclosure, affiliates of CI
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 additional outstanding
options and a warrant to purchase 210,583 additional shares of RVSI Common
Stock. RVSI has agreed to use all reasonable efforts to register such shares for
re-sale under the Securities Act. 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 -- The Merger Agreement -- Conversion of
Options" and "Principal Stockholders of CI" and "Principal Stockholders of
RVSI."
Absence of Dividends. Neither CI nor RVSI has paid cash dividends on its
respective Common Stock, and RVSI does not anticipate paying cash dividends on
its Common Stock in the foreseeable future. The terms of RVSI's current
revolving line of credit agreement and the terms of CI's bank lines of credit
prohibit the payment of cash dividends. 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 Per Share Prices and
Dividends of RVSI Common Stock and CI Common Stock" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations of RVSI."
Volatility of Stock Price. The market prices for shares of RVSI Common
Stock and CI Common Stock have been highly volatile. If the Merger is not
consummated the market prices of shares of CI Common Stock will continue to be
highly volatile. Whether or not the Merger is consummated, the market prices of
shares of RVSI Common Stock will continue to be highly volatile. The market
price of RVSI Common Stock ranged from $12.55 to $27.75 from July 1, 1995
through June 30, 1996 and CI's stock price ranged from $1.88 to $4.00 for the
same period. 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 CI Common Stock."
RISKS RELATING TO CI
History of Losses. Although CI recognized income of $105,000 and $683,000
for the three months ended March 31, 1996 and the year ended December 31, 1995,
respectively, CI sustained net losses of $97,000 for the three months ended June
30, 1996, and $510,000 and $1,026,000 in the years ended December 31, 1994 and
1993, respectively. As of March 31, 1996, CI had an accumulated deficit of
$17,784,000. As of June 30, 1996, the accumulated deficit had increased to
$17,882,000. CI's losses during 1994 were attributable primarily to selling,
general and administrative expenses rising more rapidly than revenues. CI's
losses during 1993 were attributable to, among other things, the recession and
economic uncertainty in both the United States and Western Europe, which
resulted in delays or cancellations of capital investments by customers, and
insufficient investment in CI's research and development which resulted in an
inadequate flow of new products. In addition, CI's 1994 and 1993 losses were
increased by $469,000 and $541,000 in expenses, respectively, related to work
force reductions. The $541,000 in expense incurred in 1993 was related to the
former President's severance package. As part of its strategic plan to adapt to
present economic conditions and market demands, CI restructured in 1994 its
internal operations, including a reduction in CI's work force effected in the
second quarter of 1994, increasing its research and development activities, and
expediting the introduction of new products to the market. Although CI believes
that it has properly addressed the issues giving rise to the losses in 1993 and
1994, CI sustained an additional loss for the three months ended June 30, 1996.
The loss for the three months ended June 30, 1996 is a result primarily of
revenues not meeting CI's expectations, higher costs from the implementation of
a new cell manufacturing strategy and a new MIS/MRP system, a higher percentage
of lower margin sales from Rest of World, lower margin sales in North America
resulting from the change in distribution strategy from direct to indirect
channels, and foreign currency fluctuations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations of CI." There can be
no assurances that CI will not incur additional losses in the future.
2
<PAGE> 25
Cash Position Needs. Although CI believes that its existing resources,
including its currently available bank line of credit and its anticipated cash
flow from operations, will be sufficient to fund its working capital needs
through at least the end of 1996, there can be no assurance that additional
sources of capital will not be required. CI's cash position at March 31, 1996
was $2,200,000, an increase of $448,000 from December 31, 1995. CI's cash
position decreased to $1,668,000 at June 30, 1996. There can be no assurance
that CI will have sufficient cash flow from operations in the future. See "Risk
Factors -- History of Losses." CI currently has two bank lines of credit
available for an aggregate of approximately $2,170,000. As of March 31, 1996 and
June 30, 1996, there was $974,000 and $813,000, respectively, outstanding under
such lines of credit. In the event CI were to require additional capital, no
assurance can be given that financing would be available to CI on favorable
terms, if at all. If additional capital is not available when needed, CI's
business would be adversely affected.
Dependence on Key Personnel. CI's success depends in large part upon its
ability to hire and retain qualified technical and management personnel. The
inability to hire and retain such personnel could have a material adverse effect
on CI.
Dependence on Single Source of Supply. CI currently chooses to purchase
certain parts and components used in its products from single sources. CI
reduces its exposure associated with these single sources by maintaining a
surplus inventory of such components. All of the single source components, other
than the galvo assembly used in CI's ScanStar 10, ScanStar 15, CiPro 710 and
CiPro 715, are available from other sources. The galvo assembly is supplied by
Laser Scanning Products, a California private company which CI believes is owned
solely by one individual. To date, CI has been able to obtain adequate supplies
of the galvo assembly in a timely manner. Although CI has no reason to believe
that Laser Scanning Products will discontinue manufacturing the galvo assembly,
if for any reason there is a delay or discontinuance of deliveries of the galvo
assembly, CI's ability to deliver the ScanStar and CiPro products would be
severely limited, its customer relationships would be threatened and there would
be a material adverse effect on CI's business and operating results. Further, a
significant increase in the price of the galvo assembly components could
adversely affect CI's operating results.
Technological Advances. The future success of CI will depend, to a
significant extent, on its ability to enhance, develop, manufacture profitably
and deliver on a timely basis, technologically advanced, quality products and
its ability to achieve market acceptance for such products. There can be no
assurance that CI will be successful in introducing products or product
enhancements on a timely basis, if at all, that CI will be able to market
successfully these products and product enhancements once developed or that CI's
products will not be rendered obsolete by new industry standards or changing
technology.
Competition. The market for CI's products is extremely competitive. Many
of CI's competitors are more established and have greater financial,
technological, production and marketing resources than CI. Many also have
significantly broader product lines. Competition could intensify if new
companies enter the market or if existing competitors expand their product
lines. An increase in competition could have a material adverse effect on CI's
business and operating results. Maintaining its competitive position will
require continued investment by CI in research and development and sales and
marketing. There can be no assurance that CI will have sufficient resources to
make such investments. See "Business of CI -- Competition."
Foreign Sales. Foreign sales accounted for approximately 64%, 60% and 52%
of CI's revenues for the three months ended March 31, 1996, and for the years
ended 1995 and 1994, respectively. As a result, a significant portion of CI's
revenues is subject to risks associated with foreign sales. These risks include
United States and foreign regulatory requirements, currency fluctuations, policy
changes, political and economic instability, difficulties in managing foreign
distributors and representatives and difficulties associated with the
repatriation of earnings. Changes in the value of the United States dollar in
relation to foreign currencies may also adversely affect CI's sales to foreign
customers. CI engages in hedging transactions from time to time in order to
attempt to lessen the risk of currency fluctuations. CI's hedging activities
have involved only entering into forward contracts with respect to foreign
currencies. CI has not engaged in any hedging transactions during the preceding
twelve month period. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of CI".
3
<PAGE> 26
RISKS RELATING TO RVSI
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 both revenues and
earnings of manufacturers of semiconductor capital equipment. The future
financial results of RVSI may, therefore, depend significantly on the market
demand for integrated circuit devices. In recent months prior to June 1996, the
"book-to-bill" ratio, a recognized barometer of the near term prospects of the
semiconductor industry, has declined, suggesting a reduced demand for
semiconductor products and a downturn in revenues for industry participants. As
an example, Motorola Inc., a leading industry participant, reported a
substantial decline in earnings (in large part based on reduced semiconductor
sales, and sales prices) for the three months ended June 29, 1996 from the
comparable prior year period, and also announced a reduction in its planned
remainder of 1996 investment in fixed assets including semiconductor capital
equipment. See "Business of CI" and "Business of 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 Intel Corporation accounted for
approximately 13% and 16% of RVSI's revenues for the six months ended March
31,1996 and the year ended September 30, 1995, respectively. No other customers
accounted for more than 10% of sales during the fiscal years ended September 30,
1995, 1994 and 1993. The loss of such customer or any significant reduction in
its 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 have
been export sales to the Far East. For the six months ended March 31, 1996 and
for the fiscal years ended September 30, 1995, 1994 and 1993, export sales
accounted for approximately 65%, 64%, 41% and 52%, respectively, of RVSI's
revenues. See "Business of RVSI."
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 2-D and 3-D vision systems 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 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 $10.0 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 certain of the assets of RVSI's former welding and cutting systems business.
RVSI has moved for summary judgment to dismiss all of the fraud counterclaims,
to limit damages to the amount of money paid by defendant under the agreement,
and to eliminate any claims based on lost business opportunities with third
parties. The motion has been fully briefed, and has been before the court for a
decision for three months. RVSI, upon advice of its counsel, 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, given the inherent
uncertainties of litigation, an adverse outcome to RVSI in the counterclaim
could materially adversely affect RVSI's financial viability.
RVSI is a party to three separate lawsuits, two of which were commenced by
RVSI, with a company that competes with RVSI in the assembly and distribution of
3-D machine vision-based products. The lawsuits involve the questions of whether
the competitor is infringing a number of RVSI patents in the assembly and
distribution of its own 3-D machine vision-based products. In one of the
lawsuits, the trial court held that RVSI's patents were not infringed and in a
second lawsuit the trial court held that one claim of one of RVSI's
4
<PAGE> 27
patents was invalid. RVSI is appealing both decisions. The third action is in
its early stages at this time. RVSI believes that the ultimate outcome of these
proceedings will not have a material adverse effect upon RVSI. See "Business of
RVSI -- Litigation."
Uncertainty of Patent Protection. At June 30, 1996, RVSI owned 85 issued
U.S. patents relating to its 3-D vision technology, and other products. 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 RVSI's patent position
has not been tested with the exception of the litigation referred to above under
"Pending Litigation", there can be no assurance given as to the effectiveness of
the protection afforded by its patent rights. See "Business of
RVSI -- Proprietary Protection."
Proprietary Protection; Export Sales. RVSI relies primarily on a
combination of patent registrations, trade secrets, confidentiality procedures,
contractual provisions and copyright and trademark laws to protect its
proprietary rights. RVSI seeks to protect its software and other written
materials under trade secret and copyright laws, which afford only limited
protection. Despite RVSI's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of RVSI's products or to obtain
and use information that RVSI regards as proprietary. A majority of RVSI's
revenues are derived from export sales. The laws of some foreign countries may
not protect RVSI's proprietary rights to as great an extent as do the laws of
the United States. There can be no assurance that RVSI's means of protecting its
proprietary rights will be adequate or that RVSI's competitors will not
independently develop comparable or superior technologies. Third parties may
assert that RVSI's products infringe their proprietary rights. Should litigation
with respect to any such claims commence, such litigation could be expensive and
time consuming and could materially and adversely affect RVSI's results of
operations regardless of the outcome of the litigation. See "Business of RVSI --
Proprietary Protection" and "Litigation."
5
<PAGE> 28
INTRODUCTION
This Proxy Statement/Prospectus is provided to the CI Stockholders in
connection with the Special Meeting. The Special Meeting will be held on August
29, 1996, at the time and in the location, set forth under the caption "The
Special Meeting," below. At the Special Meeting, CI stockholders will be asked
to consider and approve the Merger. The CI Board is soliciting proxies hereby
for use at the Special Meeting. A form of proxy is being provided to the CI
Stockholders with this Proxy Statement/Prospectus. Information with respect to
the execution and revocation of proxies is provided under "The Special
Meeting -- Voting Rights."
THE SPECIAL MEETING
PURPOSE OF THE MEETING
At the Special Meeting, the CI 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 CI and CI will become a wholly-owned
subsidiary of RVSI, and (ii) each share of CI Common Stock will be converted
into the right to receive, and become exchangeable for, 0.177805207 of a share
of RVSI Common Stock (subject to possible adjustments to the Exchange Ratio in
accordance with the Merger Agreement).
THE BOARD OF DIRECTORS OF CI BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF CI AND THE CI STOCKHOLDERS, HAS UNANIMOUSLY APPROVED THE MERGER AND
RECOMMENDS THAT THE CI STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO APPROVE AND ADOPT
THE MERGER. SEE "THE PROPOSED MERGER -- RECOMMENDATION OF THE CI BOARD OF
DIRECTORS AND REASONS FOR THE MERGER."
DATE, TIME AND PLACE; RECORD DATE
The Special Meeting is scheduled to be held at 10:00 A.M., local time, on
August 29, 1996, at the offices of CI, 5 Shawmut Road, Canton, Massachusetts
02021. The CI Board has fixed the Record Date as the close of business on August
1, 1996 for the determination of CI Stockholders entitled to notice of and to
vote at the Special Meeting. Only holders of record of CI Common Stock at the
close of business on the Record Date will be entitled to notice of, and to vote
at, the Special Meeting. At the Record Date, there were outstanding and entitled
to vote 10,878,293 shares of CI Common Stock held by 461 holders of record.
VOTING RIGHTS
Pursuant to the MBCL and the CI Articles of Organization, the affirmative
vote of the holders of at least a majority of the shares of CI Common Stock
outstanding as of the Record Date is required to approve and adopt the Merger.
Holders of record of CI Common Stock outstanding as of the Record Date are
entitled to one vote per share at the Special Meeting. The presence, either in
person or represented by proxy, of the holders of a majority of the shares of CI
Common Stock outstanding as of the Record Date is necessary to constitute a
quorum at the Special Meeting. As of the Record Date, CI's directors and
executive officers as a group held shares representing approximately 9.48% of
the votes entitled to be cast by CI Stockholders at the Special Meeting.
The CI Board is soliciting proxies so that each CI Stockholder on the
Record Date has the opportunity to vote on the proposal to be considered at the
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 CI Stockholder does not return a signed proxy card, his or
her shares will not be voted and thus will have the effect of a vote against the
Merger.
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 non-vote. Shares of CI Common Stock which
abstain from voting and broker non-votes will be counted for purposes of
determining the existence of a quorum at the Special Meeting. However, since the
proposal to be considered at the Special
6
<PAGE> 29
Meeting requires the affirmative vote of at least a majority of the shares of CI
Common Stock outstanding as of the Record Date, abstentions and broker non-votes
will have the effect of a negative vote. CI Stockholders are urged to mark the
box on the proxy card to indicate how their shares will be voted. If a CI
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 CI Board and named on the proxy card to vote the shares
represented thereby in accordance with their judgment on any other matter
incidental to the Special Meeting that is properly presented for action at such
meeting or at any adjourned session thereof.
Any CI 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 Clerk of
CI, at 5 Shawmut Road, Canton, Massachusetts 02021, (ii) granting a subsequent
proxy or (iii) appearing in person and voting at the Special Meeting. Attendance
at the Special Meeting will not in and of itself constitute revocation of a
proxy.
The costs of solicitation of CI Stockholder proxies will be borne by CI. CI
will reimburse 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 beneficial owners of CI Common Stock. CI
Stockholder proxies may be solicited by directors, executive officers or regular
employees of CI (who will not be entitled to any extra compensation therefor),
in person, by letter or by telephone or telegram. CI has also retained Georgeson
& Company Inc. to assist in the solicitation of proxies. CI expects to pay such
firm a fee of approximately $6,000 plus reimbursement of reasonable costs and
expenses.
It is expected that this Proxy Statement/Prospectus and the accompanying
proxy card will be mailed to CI Stockholders on or about August 5, 1996.
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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 CI, and
Subsidiary will cease to exist as a corporation. CI 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 CI Common Stock,
other than shares held by CI Stockholders who properly exercise their appraisal
rights (the "Dissenting Shares") under Sections 85 through 98 of the
Massachusetts Business Corporation Law (the "MBCL") will be converted into the
right to receive, and become exchangeable for, 0.177805207 of a share of RVSI
Common Stock (the "Exchange Ratio"); provided, however, that if the average of
the closing prices of RVSI Common Stock on the Nasdaq National Market for the 25
trading days ending on (and including) the second trading day immediately prior
to the Special Meeting (the "Average Closing Price") is greater than $20.75,
then the Exchange Ratio shall be adjusted to an amount equal to the quotient of
$20.75 divided by the Average Closing Price times the former Exchange Ratio (but
in no event shall such adjusted Exchange Ratio be less than 0.160024686) (the
"Maximum Collar"); and if the Average Closing Price is less than $17.00, then
the Exchange Ratio shall be adjusted to an amount equal to the quotient of
$17.00 divided by the Average Closing Price times the former Exchange Ratio (but
in no event shall such adjusted Exchange Ratio be more than 0.195585727) (the
"Minimum Collar", and collectively with the Maximum Collar, the "Collars"). No
fractional shares of RVSI Common Stock will be issued in the Merger, and CI
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."
Assuming (i) the number of shares of CI Common Stock outstanding at the
Effective Time is the same as the number of shares outstanding as of June 30,
1996 (10,872,293 shares), (ii) the average of the last sale prices of RVSI
Common Stock as reported by the Nasdaq National Market for the 25 trading days
ending on the second trading day prior to the Closing Date is the same as the
closing price at July 30, 1996 ($13.9375 per share), and (iii) implementation of
the Minimum Collar to adjust the Exchange Ratio, an aggregate of approximately
2,354,000 shares of RVSI Common Stock (inclusive of the 231,251 shares issuable
upon exercise of the options and warrant referred to in the following paragraph)
would be issued in the Merger and each share of CI Common Stock would be
converted into 0.195585727 of a share of RVSI Common Stock.
As a consequence of the Merger (given the assumptions stated in the
preceding paragraph), options to purchase 982,350 shares of CI Common Stock (the
"CI Options") and a warrant to purchase 200,000 shares of CI Common Stock (the
"CI Warrant") at exercise prices ranging from $0.875 to $3.00 per share will be
converted at the Effective Time into options and a warrant to purchase 231,251
shares of RVSI Common Stock at exercise prices ranging from $4.47 to $15.34 per
share. See "Management of CI."
Under the terms of CI plans pursuant to which the CI Options were issued,
the vesting schedule of all CI Options held by participants in such plans,
including officers of CI, will accelerate in full at the Effective Time, such
that the options held by certain employees and officers of CI will be fully
exercisable immediately following the Effective Time. As a result of this
provision, CI Options to purchase an aggregate of approximately 307,650 shares
of CI Common Stock held by employees and officers of CI which would otherwise
not yet be exercisable will be fully exercisable immediately following the
Effective Time. Assuming that the Effective Time had been July 1, 1996, these CI
Options would have had an economic value of $479,150 (without giving effect to
possible adjustment as a result of the implementation of the Collars).
No vote of RVSI's stockholders is required to approve the Merger Agreement.
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 shares of outstanding Common Stock of RVSI
after the Merger.
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A description of the relative rights, privileges and preferences of RVSI
Common Stock, including certain significant differences between RVSI Common
Stock and CI Common Stock, is set forth under "Description of RVSI's Securities"
and "Comparative Rights of Stockholders."
CLOSING; EFFECTIVE TIME
The closing of the transactions contemplated by the Merger Agreement (the
"Closing") will take place on the second 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 CI may agree ("Closing
Date"). The Merger will become effective on the date that both (i) the Articles
of Merger required under Massachusetts law are accepted for filing by the
Secretary of State of the Commonwealth of Massachusetts and (ii) the Certificate
of Merger required under Delaware law 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.
EXCHANGE OF STOCK CERTIFICATES
From and after the Effective Time, CI Stockholders of record immediately
prior to the Effective Time will be entitled to receive .177805207 of a share of
RVSI Common Stock in exchange for each share of CI Common Stock held immediately
prior to the Effective Time (subject to possible adjustments to the Exchange
Ratio as a result of implementation of the Collars). 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 a CI Stockholder immediately
prior to the Effective Time. The transmittal instructions will describe the
procedures for surrendering the certificates that prior to the Merger
represented CI Common Stock (the "CI Certificates") 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 CI
Certificates to the Exchange Agent. Upon surrender of the CI 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 CI Certificates will be canceled and the holder of such CI
Certificates will receive an RVSI Certificate representing that number of whole
shares of RVSI Common Stock to which the former CI 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.
CI STOCKHOLDERS SHOULD NOT SUBMIT THEIR CI CERTIFICATES FOR EXCHANGE UNLESS
AND UNTIL THEY HAVE RECEIVED THE TRANSMITTAL INSTRUCTIONS AND A FORM OF LETTER
OF TRANSMITTAL FROM THE EXCHANGE AGENT.
CI 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 CI 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 CI Stockholder surrenders his or
her CI 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 will exist at the Effective
Time. See "Comparative Per Share Prices and Dividends of RVSI Common Stock and
CI Common Stock."
If any RVSI Certificate is to be issued in a name other than that in which
the corresponding CI Certificate is registered, it is a condition to the
exchange of the CI Certificate that the former CI 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 CI Common Stock will be made
on the stock transfer books of CI after the close of business on the day prior
to the Effective Time.
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Neither the Exchange Agent nor any party to the Merger Agreement will be
liable to any former CI 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 CI Stockholders and thereafter any such holders which have not remitted
their CI 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 CI 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 CI Stockholder who would otherwise have been entitled to a
fraction of a share of RVSI Common Stock upon surrender of CI 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 Closing Price.
BACKGROUND OF MERGER
The terms of the Merger Agreement resulted from arm's length negotiations
between representatives of RVSI and CI. The following is a brief discussion of
the background of these negotiations.
In April 1993, CI's senior management determined that there were market
opportunities for 2-D products in the bar code industry and that CI should begin
developing 2-D products for this emerging market. At that time CI was upgrading
its laser scanners and CI believed it did not have sufficient financial
resources to develop the machine based technologies necessary to provide a
competitive array of 2-D products. Accordingly, CI began to investigate
strategic relationships to acquire the capability to produce 2-D products.
In March 1994, CI first retained Fechtor, Detwiler to assist in identifying
potential strategic partners. Prior to commencing negotiations with RVSI, CI
explored other opportunities which did not come to fruition. Subsequently, on
April 11, 1996, the CI Board formed a Mergers and Acquisition Committee
comprised of the following CI Board members: Edward J. Stewart, III, Tomas Kohn
and John M. Hill.
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
limiting its expansion to 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.
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
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-- stage of development and competitive position of the candidate's
products
-- ability of the candidate to operate as an independent entity
Following RVSI's acquisition of I.D. Matrix in October 1995, the RVSI Board
authorized Mr. Costa to seek out potential acquisition candidates whose products
and services would enhance the capability of RVSI, including its Acuity and I.D.
Matrix subsidiaries, to offer "one-stop" shopping to purchasers of 2-D and 3-D
automated vision systems. CI, with its expertise in integrating 1-D and 2-D bar
code readers and customized software applications for data collection systems
and networks, appeared to satisfy the criteria, particularly as they related to
I.D. Matrix's 2-D Data Matrix(TM) code readers. CI's presence in Europe and
experienced management satisfied other acquisition criteria. RVSI also believed
that synergies between the respective sales organizations of CI and I.D. Matrix
would generate additional sales and provide operational savings.
RVSI made its initial contact with CI in July, 1995 when Mr. Costa met
Richard C. Close, CI's President and Chief Executive Officer, briefly at the
SemiCon West Trade Show in San Francisco, California. Mr. Close inquired whether
RVSI had an interest in holding business combination discussions with CI. They
agreed to meet later to continue the discussion.
On August 11, 1995, Mr. Costa toured CI's offices and received a detailed
presentation of CI's business. On August 30, 1995, Mr. Close visited RVSI for a
presentation of RVSI's business. On September 12, 1995, in RVSI's Nashua, New
Hampshire office, Stephen L. Abbey, CI's Vice President of Sales and Marketing,
North America and Mr. Close met with Mr. Costa, Ofer Gneezy, President of
Acuity, Brian St. Pierre and Robert Welch, Acuity's Vice Presidents of Sales and
Operations, respectively, to discuss the impact of the Starnode(TM) Data
Collection Network on their business. At the conclusion of the meetings it was
agreed that discussions should continue.
There were no subsequent discussions between RVSI and CI in these regards
until April 27, 1996, when Mr. Costa telephoned Mr. Close to again discuss a
possible merger, and they decided to meet.
On April 30, 1996, Mr. Costa met with Mr. Close, John Pemble, a former
chief executive officer of Acuity, and Edward J. Stewart, III, in Lexington,
Massachusetts and began more detailed discussions regarding a potential merger.
The CI Board met on May 14, 1996 after CI's Annual Meeting of Stockholders.
Andre Daniel-Dreyfus, a representative of Fechtor, Detwiler, made a presentation
analyzing the relative values of CI and RVSI. The CI Board discussed the
advantages and disadvantages of a merger with RVSI and strategies for pursuing
merger negotiations. The Board authorized the Mergers and Acquisition Committee
to continue the RVSI merger negotiations.
On May 17, 1996, Mr. Close, Mr. Pemble and Mr. Stewart visited RVSI in
Hauppauge, New York, and met with Mr. Costa and other senior RVSI officers. Mr.
Close presented CI's financial projections for 1996, and outlined synergies
which he believed could be achieved in a merger with RVSI. He placed a valuation
of CI at 2.5 million shares of RVSI stock (or $44,687,500 based on the closing
price of RVSI stock at such date). Mr. Costa dismissed the valuation as too
high, but agreed to continue discussions.
On May 29, 1996, Mr. Costa and Robert Walker, RVSI's chief financial
officer, visited CI in Canton, Massachusetts. On May 30, Steve Bilodeau, Earl
Rideout and Howard Stern, all executive officers of RVSI, also visited CI.
On May 30, 1996, RVSI and CI entered into reciprocal non-disclosure
agreements.
Subsequent to this, and continuing over a period of approximately five
weeks, RVSI and CI had several exchanges of information and documents with the
objective of providing each other with insight into, among other things, each
other's products, capabilities, performance history and prospects.
On June 3, 1996, Mr. Costa telephoned Mr. Close and offered 1.9 million
shares of RVSI stock for CI (or $36,337,500 based on the closing price of RVSI
Common Stock on such date). The offer was neither accepted nor rejected. On June
3, 1996, CI held a telephonic board meeting to discuss the offer.
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RVSI held a telephonic board meeting on June 5, 1996 at which point the
RVSI Board specifically authorized Mr. Costa to continue to pursue CI as an
acquisition candidate. Later that day Mr. Costa and Mr. Walker spoke to Mr.
Stewart and Mr. Daniel-Dreyfus, at which point Mr. Stewart countered with an
asking price of 2.25 million RVSI shares for CI (or $45,000,000 based on the
closing price of RVSI Common Stock on such date). Mr. Costa responded that the
parties were within hailing distance of reaching an agreement on price, and also
had reached agreement on most other issues, so that the likelihood of concluding
the merger was high. It was further agreed that RVSI's counsel would draft a
letter of intent for review by CI's counsel and the respective officers and
directors of both companies. As Mr. Costa had previous commitments for the next
three days, the parties agreed to resume discussions on June 9.
A draft of the letter of intent was prepared and distributed by RVSI's
counsel to CI and its counsel on June 7, 1996.
On June 9, 1996, Mr. Costa and Mr. Close spoke several times with each
other, as well as with their respective company officers and board members. Also
on that date, Mr. Costa, Mr. Walker and Parker Duryee Rosoff & Haft, counsel to
RVSI, spoke with Mr. Close, Mr. Stewart and Mr. Daniel-Dreyfus and agreed upon a
price of 2.14 million shares of RVSI common stock in exchange for all of CI's
outstanding Common Stock, options and warrants. RVSI's closing stock price on
June 7, 1996 was $18 7/8, and CI's was $2 1/4, which equated to an equivalent CI
stock price of $3.345, or a $40.4 million total valuation. Collars were
specified at $17 and $20 3/4 for RVSI stock, with a maximum adjustment outside
that range of +/-10% of the number of RVSI shares offered. A break-up fee of
$750,000 was also specified.
The RVSI Board held a telephonic meeting on June 10, 1996 to resolve any
remaining open issues. On the same day, the CI Board held a telephonic meeting
to discuss CI's offer and the letter of intent. The Mergers and Acquisition
Committee discussed the course of the merger negotiations with the CI Board. Mr.
Daniel-Dreyfus of Fechtor, Detwiler was invited to participate in the meeting
and discussion of the terms of the proposed merger with the Board. Brown,
Rudnick, Freed & Gesmer, CI's counsel, reviewed the letter of intent with the CI
Board. After completion of these discussions, the CI Board voted to authorize
CI's management to execute the letter of intent, subject to Mr. Close and Mr.
Stewart making any further changes to the letter of intent which they deemed to
be in the best interests of CI and its stockholders and consistent with the
discussion of the CI Board.
The letter of intent was finalized and executed by RVSI and CI on Monday
evening, June 10, 1996. A joint press release announcing the signing was issued
before the market opened on Tuesday, June 11, 1996.
Subsequent to the execution of the letter of intent, counsel for RVSI
prepared and distributed to both CI and its counsel a first draft of the Merger
Agreement on June 14, 1996.
Following discussions and negotiations among the parties and their
respective counsel, revised drafts of the Merger Agreement were prepared and
distributed on June 25, 1996 and July 3, 1996, respectively.
After the letter of intent was signed, the "due diligence" process
commenced. At the outset, RVSI and CI exchanged requests for documents needed
for that purpose.
On June 7, 1996, Mr. Close forwarded a list of likely questions and
concerns of CI employees regarding the Merger, which had been developed by the
CI management team. A telephonic meeting was held on June 11, 1996 between RVSI
and CI officers to address these questions and concerns.
Mr. Costa, accompanied by RVSI employees Michael Abrams, Carl Muscari and
Dennis Priddy, and Maxwell Morton, a machine vision industry consultant retained
by RVSI, visited CI on June 12, 1996 to meet with CI employees. Later that day
Mr. Close traveled to Nashua, New Hampshire to meet with employees of RVSI's
subsidiary companies: Acuity, I.D. Matrix, and Northeast Robotics, Inc.
Mr. Close traveled to RVSI in Hauppauge, New York, on June 18, 1996 in
order to participate in a meeting with officers of Symbol Technologies, Inc.
regarding RVSI and Symbol's previously announced 2-D bar code
co-development/marketing effort.
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Mr. Close was invited to attend RVSI's regularly scheduled Board meeting in
Islandia, New York on June 25, 1996. At the meeting, Mr. Close gave a brief
presentation detailing his own background and CI's history and product lines.
Fechtor, Detwiler visited RVSI on June 29, 1996 to discuss RVSI's
operations and prospects with Messrs. Costa and Walker.
Parker Duryee Rosoff & Haft, RVSI's counsel, visited CI on June 19, 1996 as
part of the due diligence process.
On July 1, 1996, the CI Board met again to discuss the Merger and the
Merger Agreement, authorized the Merger and authorized Mr. Close and Mr. Weber
to enter into the Merger Agreement subject to such changes and modifications
deemed by Mr. Close and Mr. Weber to be in the best interests of CI and its
stockholders and within the Board's parameters.
On July 2, 1996, Mr. Walker visited CI to discuss certain financial matters
as part of RVSI's due diligence process.
Subsequently, on July 11, 1996, counsel for RVSI distributed a revised
draft of the definitive Merger Agreement to CI. On July 12, 1996, the RVSI Board
authorized execution of the definitive Merger Agreement.
On July 12, 1996, the CI Board met. Mr. Costa was invited to make a
presentation about RVSI and answer questions of the Board. After Mr. Costa
departed the meeting, representatives of Fechtor, Detwiler presented to the CI
Board the analysis underlying Fechtor, Detwiler's opinion that the Exchange
Ratio was fair from a financial point of view to the CI Stockholders.
The Merger Agreement was signed on July 23, 1996, at which time a joint
press release announcing its execution was issued.
RECOMMENDATION OF THE CI BOARD OF DIRECTORS AND REASONS FOR THE MERGER
The CI Board has unanimously adopted the Merger Agreement and approved the
Merger. It recommends to the CI Stockholders that they vote FOR the adoption of
the Merger.
CI senior management, in consultation with the CI Board, has been
evaluating the possibility of engaging in potential strategic relationships with
third parties. In March 1994, CI first retained Fechtor, Detwiler as its
exclusive financial advisor to assist in identifying, evaluating and pursuing
these relationships. In the course of these evaluations, senior management
concluded that there were a limited number of parties engaged in the bar coding
and data collection industries with which a strategic relationship would be in
the interests of CI and its stockholders. Consequently, in May, 1996, senior
management recommended to the CI Board that discussions with RVSI concerning a
proposed strategic relationship were in the best interests of CI and its
stockholders.
Following meetings regarding the issue held on May 14, 1996 and June 10,
1996, on July 1, 1996, the CI Board unanimously approved the Merger and the
Merger Agreement, subject to the receipt of the fairness opinion from Fechtor,
Detwiler, and concluded that the Merger was fair to, and in the best interests
of, the CI Stockholders.
In reaching its determination, the CI Board considered the following
factors:
The CI Board, on the basis of its familiarity with, and review of, the
business, operations, earnings and financial condition of CI, on both an
historical and a prospective basis (this included a review of CI's recent
operating performance and its need for significant additional capital to
market its products effectively), concluded that CI would perform more
effectively as part of a larger, better capitalized company than as a
"stand-alone" corporation;
The CI Board, after an assessment of the present state of CI's
technology in relation to the marketplace and of the capital and other
resources which would be required to develop appropriate
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channels of distribution for its present and planned products and to
develop further products to remain competitive in a rapidly changing market
environment, concluded that CI would perform more effectively as part of a
larger, better capitalized company than as a "stand-alone" corporation;
The CI Board believes significant benefits could be derived from a
combination of CI's bar code and data collection technology with RVSI's
machine vision and 2-D bar code technology, including the ability to
provide a more complete solution to a wider range of customer needs into
the future;
The CI Board considered the much greater basic technology and
financial resources of RVSI which would enable the combined company to
develop and market the CI products more effectively;
The CI Board reviewed possible alternatives to the Merger (including
business combinations with other businesses, joint marketing arrangements,
strategic alliances, OEM or other arrangements), and the range of values of
CI Stockholders and the timing and likelihood of actually receiving, and
the risks and rewards associated with seeking to obtain, those values;
The CI Board considered the terms negotiated with RVSI, including the
price and other financial terms, as well as some of the more negative
terms, including the termination fee and the limited nature of the
adjustments in the Exchange Ratio permitted under the Collars; and
The CI Board considered the structure of the transaction, which
provides the CI Stockholders with a security which has a larger stock
market float and greater liquidity on a tax free basis.
The Board concluded that most of these factors argued strongly in favor of
the Merger. The principal factors weighing against the Merger were (i) the risk
that the potential benefits of the Merger would not be realized, and (ii)
certain terms of the Merger Agreement with RVSI, including the termination fee
and the limitations (by virtue of the terms of the Collars) on adjustments to
the Exchange Ratio resulting from changes in the market price of RVSI Common
Stock. While the CI Board recognized the risks these provisions created for CI
and its stockholders, it ultimately concluded that all of the terms of the
proposed Merger, when taken together, were fair and in the best interests of the
CI Stockholders. In view of the wide variety of factors considered, the CI Board
did not attempt to quantify or assign relative weights to the specific factors
considered in reaching this conclusion.
In reaching its conclusions, the CI Board considered (i) information
concerning the financial performance, condition, business operations and
prospects of each of RVSI and CI, (ii) the proposed terms and structure of the
transaction, (iii) the terms of the Merger Agreement and (iv) the opinion of
Fechtor, Detwiler.
OPINION OF CI FINANCIAL ADVISOR
In its role as financial advisor to CI, Fechtor, Detwiler was asked by CI
to render its opinion to the CI Board as to the fairness to the public
stockholders of CI, from a financial point of view, of the Exchange Ratio.
On July 12, 1996, Fechtor, Detwiler orally advised the CI Board that, as of
such date, the Exchange Ratio was fair, from a financial point of view, to the
CI Stockholders. Fechtor, Detwiler subsequently confirmed its oral opinion by
delivery of a written opinion dated July 12, 1996.
In rendering such opinion in regard to the Merger, Fechtor, Detwiler (1)
reviewed the draft of the proposed Agreement and Plan of Merger and
Reorganization dated July 3, 1996, (2) reviewed historical financial and
business information about CI, (3) met with management of CI to discuss its
operations, financial condition and future prospects, (4) visited CI's Canton,
Massachusetts 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) compared the market valuations, financial
condition and performance of CI and RVSI with those of other publicly traded
companies (the "CI Comparable Companies" and the "RVSI Comparable Companies"),
(9) compared certain financial terms of the Merger to certain financial terms of
selected other business combinations deemed relevant, (10) compared the
valuation of the CI shares in the Merger to the closing price of CI shares prior
to the announcement of the Merger, (11) considered the potential for accretion
or
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dilution in operating income, earnings before taxes and earnings per share for
the CI shareholders which may result from the Merger, (12) analyzed the pro
forma contribution of each of CI and RVSI to the combined company's revenues,
operating income, earnings before taxes, and net income 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 CI and RVSI prior to the Merger and (14) reviewed the trading histories
of CI and RVSI common stock.
CI and RVSI furnished certain material non-public information to Fechtor,
Detwiler including operating budgets through December 1997 for CI and September
1997 for RVSI. In rendering its opinion, Fechtor, Detwiler has assumed and
relied upon the accuracy and completeness of all information provided to it by
CI and RVSI, and has not assumed any responsibility for independent verification
of such information or any independent valuation or appraisal of any of the
assets of CI or RVSI.
CI did not place any limitations on Fechtor, Detwiler's report. CI 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 CI on July 12,
1996.
Comparable Companies Analysis: Fechtor, Detwiler compared certain
financial information of CI with a group of publicly traded comparable companies
in the electronic data collection and related industries that, in Fechtor,
Detwiler's judgment, were comparable to CI (the "CI Comparable Companies").
Fechtor, Detwiler compared certain financial information of RVSI 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 (the
"RVSI Comparable Companies"). The CI and RVSI Comparable Companies were chosen
by Fechtor, Detwiler as companies which possess general business, operational,
and financial characteristics representative of companies in the industries in
which CI and RVSI operate, although Fechtor, Detwiler recognized that each of
the CI and RVSI Comparable Companies differs from CI and RVSI in certain
respects. The CI Comparable Companies consist of Electromagnetic Sciences, Inc.,
Imtec, Inc., Metrologic Instruments, Inc., Norand Corporation, Paxar
Corporation, PSC Inc., Peak Technologies Group, Symbol Technologies, Inc.,
Telxon Corporation and Zebra Technologies Corporation. The RVSI Comparable
Companies consist of Cognex Corporation, KLA Instruments Corporation, Medar,
Inc., Orbotech, Ltd., Perceptron, Inc. and PPT Vision, Inc.
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 CI
and RVSI Comparable Companies were as follows: the multiple of enterprise value
to revenues (1.09x for CI Comparable Companies and 3.20x for RVSI Comparable
Companies), the multiple of enterprise value to operating income (15.2x for CI
Comparable Companies and 12.0x for RVSI Comparable Companies), the multiple of
the stock price to trailing earnings per share (23x for CI Comparable Companies
and 18x for RVSI Comparable Companies), the multiple of the stock price to the
estimated earnings per share for the current fiscal year (19x for CI Comparable
Companies and 19x for RVSI Comparable Companies), and the multiple of the stock
price to the estimated earnings per share for the next fiscal year (15x for CI
Comparable Companies and 14x for RVSI Comparable Companies).
Based upon an average closing price for RVSI common stock for the 25
trading days ending on (and including) July 10, 1996 of $17.36 per share,
Fechtor, Detwiler determined that the Exchange Ratio would be 0.177252932. Based
upon this Exchange Ratio and a closing price for RVSI of $16.375 as of July 10,
1996, Fechtor, Detwiler calculated a Merger valuation for CI of $35,042,000.
This Merger valuation compares to CI's actual and estimated results as follows:
the multiple of Merger value to revenues (1.24x), the multiple of Merger value
to operating income (65.26x), the multiple of the merger value per share ($2.90)
to trailing earnings per share (60x), the multiple of the Merger value per share
to the estimated earnings per share for the current fiscal year (32x), and the
multiple of the Merger value per share to the estimated earnings per share for
the next fiscal year (12x). Multiples of revenue, operating income and trailing
earnings per share were calculated based upon the reported results for the four
quarters ending March 31, 1996. Fechtor,
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Detwiler concluded that the multiple values associated with CI after the Merger
were above the median for those of the CI Comparable Companies, with the
exception of the multiple of Merger value per share to estimated earnings per
share for the next fiscal year, which was below the median but above the low end
of the range for the CI Comparable Companies.
Based upon RVSI's common stock price of $16.375 on July 10, 1996, Fechtor,
Detwiler calculated the following values for RVSI: the multiple of enterprise
value to revenues (3.29x), the multiple of enterprise value to operating income
(18.75x), the multiple of the stock price to trailing earnings per share (25x),
the multiple of the stock price to the estimated earnings per share for the
current fiscal year (20x), and the multiple of the stock price to the estimated
earnings per share for the next fiscal year (17x). Multiples of revenues,
operating income and trailing earnings per share were calculated based upon the
reported results for the four quarters ending March 31, 1996.
Fechtor, Detwiler noted that for the period examined, RVSI traded at
valuation multiples that were generally higher than the median valuation
multiples for the RVSI 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 1995 and its
gross margins for the four quarters ended March 1996 exceeded the median of the
RVSI Comparable Companies as a group. Companies with comparable growth rates and
profit margins to RVSI include Cognex, KLA Instruments and Perceptron. For these
three companies, the median valuation multiples were as follows: the multiple of
enterprise value to revenues (5.15x), the multiple of enterprise value to
operating income (11.95x), the multiple of the stock price to trailing earnings
per share (23x), the multiple of the stock price to the estimated earnings per
share for the current fiscal year (17x), and the multiple of the stock price to
the estimated earnings per share for the next fiscal year (14x). Fechtor,
Detwiler concluded that the multiples for RVSI were in line with those of
Cognex, KLA Instruments, and Perceptron.
Comparable Transaction Analysis: Fechtor, Detwiler examined certain
completed merger and acquisition transactions of electronic data collection and
machine-vision related companies. Fechtor, Detwiler calculated the multiples of
revenue and earnings paid by the acquiring firm in each transaction and compared
it with the multiples of revenue and earnings being offered to CI by RVSI based
upon an Exchange Ratio of 0.177252932 and a closing price for RVSI of $16.375 as
of July 10, 1996. The comparable transactions examined, and the multiples of
revenue and earnings paid in each transaction were as follows: RVSI's merger
with Acuity Imaging (1.2x revenue and 35x earnings), Itran's merger with
Automatix (0.8x revenue and 15x earnings), PSC's pending acquisition of
Spectra-Physics Data Capture Group (1.2x revenue, earnings not available), PSC's
acquisition of LazerData (0.9x revenue, earnings not available), Litton's
acquisition of Intermec (1.0x revenue and 24x earnings) and Fairey Group's
acquisition of Randomat (3.1x revenue and 17x earnings). Fechtor, Detwiler
concluded that these multiples were in line with RVSI's offer to merge with CI
at multiples of 1.2x revenues and 60x earnings, based upon the Exchange Ratio of
0.177252932 and a closing price for RVSI of $16.375 as of July 10, 1996.
Merger Pricing Analysis: Based upon the Exchange Ratio of 0.177252932 and
a closing price for RVSI of $16.375 as of July 10, 1996, Fechtor, Detwiler
calculated a Merger valuation for CI of $35,042,000, and an equivalent share
price of $2.90. Fechtor, Detwiler determined that this equivalent price of $2.90
per share represented a 29% premium to CI's closing price on June 10, 1996, one
day prior to the announcement of the Merger. Based upon an Exchange Ratio of
0.177252932 and RVSI's closing price of $18.75 on June 10, 1996, which was one
day prior to the announcement of the Merger, Fechtor, Detwiler calculated an
equivalent share price of $3.32 for CI, which represented a 48% premium to CI's
closing price on June 10, 1996. Fechtor, Detwiler determined that these premiums
were in line with the premiums paid in acquisitions of other publicly traded
companies, as reported in the January/February 1995 and January/February 1996
issues of Mergers & Acquisitions magazine.
Accretion/Dilution Analysis: Fechtor, Detwiler also considered the
potential for accretion or dilution in operating earnings and earnings per share
for the CI shareholders which may result from the Merger. Fechtor, Detwiler took
into account each company's reported performance through March 31, 1996 and
operating budgets through September 1997. Based upon this information, Fechtor,
Detwiler determined whether the
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Merger would be accretive or dilutive to the CI shareholders for the trailing
four quarters ending in March 1996, September 1996 and September 1997, on an
operating income, earnings before taxes, and earnings per share basis.
For the four quarters ending in March 1996, Fechtor, Detwiler calculated
that the Merger would be accretive on an operating basis (168%), on an earnings
before taxes basis (169%), and on an earnings per share basis (131%). For the
four quarters ending in September 1996, Fechtor, Detwiler calculated that the
Merger would be accretive on an operating income basis (214%), on an earnings
before taxes basis (284%), and on an earnings per share basis (261%).
For the four quarters ending September 1997, Fechtor, Detwiler determined
that the Merger would be accretive on an operating income and earnings before
taxes basis (10% and 15%, respectively), and would be dilutive (10%) on an
earnings per share basis. Fechtor, Detwiler concluded that this dilution would
be attributable to a forecasted improvement in CI's performance in 1997 and the
impact of a higher effective tax rate on RVSI's reported earnings per share in
fiscal 1997.
Contribution Analysis: Using financial information supplied to it by CI
and RVSI, Fechtor, Detwiler analyzed the pro forma contribution, on a historical
basis, of each of CI and RVSI to the combined company's revenues, operating
income, earnings before taxes and net income if the Merger were to be
consummated. Based on the Exchange Ratio of 0.177252932, CI shareholders would
own 10% of the combined companies after the Merger. Fechtor, Detwiler calculated
that on a trailing four quarters pro forma basis ended March 31, 1996, CI would
have contributed 26% of revenues, 4% of operating income, 4% of earnings before
taxes, and 4% of net income for the combined companies. On a trailing four
quarters pro forma basis ending December 31, 1995, CI would have contributed 28%
of revenues, 6% of operating income, 6% of earnings before taxes, and 5% of net
income. On trailing four quarters pro forma basis ending September 30, 1995, CI
would have contributed 30% of revenues, 11% of operating income, 13% of earnings
before taxes and 12% of net income. On a trailing four quarters pro forma basis
ending June 30, 1995, CI would have contributed 35% of revenue, 16% of operating
income, 18% of earnings before taxes and 16% of net income. Fechtor, Detwiler
determined that CI's contribution to pro forma combined revenues, operating
income, earnings before taxes and net income has trended downward on a rolling
four quarters basis since June 30, 1995. Fechtor, Detwiler attributed this
decline to the fact RVSI's revenues, operating income, earnings before taxes and
net income grew more rapidly than those of CI during the period. Fechtor,
Detwiler noted that, as of March 31, 1996, CI's contribution to the pro forma
combined tangible book value was 15%.
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, 1996, RVSI had a
current ratio of 3.1 and a quick ratio of 2.1 while CI had a current ratio of
2.0 and a quick ratio of 1.3. The pro forma effect of the Merger would result in
a current ratio of 2.8 and a quick ratio of 1.9, an increase of 0.8 in the
current ratio and an increase of 0.6 in the quick ratio to the benefit of the CI
stockholders. Additionally, Fechtor, Detwiler noted that, as of March 31, 1996,
RVSI had a debt to equity ratio of 0.4 while CI had a debt to equity ratio of
0.9. The pro forma effect of the Merger would result in a debt to equity ratio
of 0.5, representing a benefit to CI stockholders.
Comparative Trading History: Fechtor, Detwiler examined trading volumes in
the common stock of CI and RVSI over the past year. Trading volume on the NASDAQ
National Market for CI common stock exceeded 6,500,000 shares between June 1995
and May 1996. Trading volume on the NASDAQ National Market for RVSI common stock
exceeded 61,400,000 shares between June 1995 and May 1996. Fechtor, Detwiler
calculated that the trading volume, expressed in shares, of RVSI was 9.4 times
that of CI common stock during that period.
Fechtor, Detwiler examined the trading volume, expressed in dollars, in the
common stock of CI and RVSI over the past year. Fechtor, Detwiler calculated
that the trading volume, expressed in dollars, of RVSI was 69.5 times that of CI
between June 1995 and May 1996.
Based on this history, Fechtor, Detwiler concluded that the CI stockholders
may experience improvement in the liquidity of the market for their shares as a
result of the Merger.
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In light of the above considerations, Fechtor, Detwiler concluded that the
Exchange Ratio is fair, from a financial point of view, to the CI stockholders.
See Exhibit C to the Proxy Statement/Prospectus for the complete text of
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 1994, 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 shareholders, from a financial point of view, of the
proposed merger between those parties. Fechtor, Detwiler also acted as financial
advisor to the Board of Directors of Acuity Imaging, Inc. with respect to the
merger of Acuity Imaging, Inc. and RVSI. Fechtor, Detwiler's role was limited to
passing upon the fairness to Acuity's shareholders, from a financial point of
view, of the exchange ratio associated with that merger. Fechtor, Detwiler
currently makes a market in the common stock of CI. 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 CI. 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 CI and/or RVSI.
For its work in formulating its opinions, CI will pay Fechtor, Detwiler a
fee of $50,000, none of which has been paid to date. Additionally, on April 26,
1995, CI extended its engagement of Fechtor, Detwiler to advise CI with respect
to potential acquisitions or combinations. Fechtor, Detwiler will be paid an
investment banking fee of 1.5% of the consideration received by equity holders
of CI in the Merger. Additionally, CI will reimburse Fechtor, Detwiler for its
out-of-pocket expenses incurred in connection with this engagement. CI 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 CI.
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 herein by reference.
Exchange of CI Common Stock for RVSI Common Stock. The Merger Agreement
provides that, at the Effective Time, each then outstanding share of CI Common
Stock will be converted into the right to receive, and become exchangeable for,
0.177805207 of a share of RVSI Common Stock(subject to possible adjustments to
the Exchange Ratio as a result of implementation of the Collars); provided,
however, that if the average of the closing prices of RVSI Common Stock on the
Nasdaq National Market for the 25 trading days ending on (and including) the
second trading day immediately prior to the Special Meeting (the "Average
Closing Price") is greater than $20.75, then the Exchange Ratio shall be
adjusted to an amount equal to the quotient of $20.75 divided by the Average
Closing Price times the former Exchange Ratio (but in no event shall such
adjusted Exchange Ratio be less than 0.160024686); and if the Average Closing
Price is less than $17.00, then the Exchange Ratio shall be adjusted to an
amount equal to the quotient of $17.00 divided by the Average Closing Price
times the former Exchange Ratio (but in no event shall such adjusted Exchange
Ratio exceed 0.195585727). Such exchange ratio was established through
arms-length negotiations between RVSI and CI. 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 shares of RVSI Common Stock 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 CI
Stockholder to be used in forwarding his or her CI 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 CI Stockholder should
surrender his or her CI Certificates to the Exchange Agent in accordance with
the transmittal instructions. See "-- Exchange of Stock Certificates" and "-- No
Fractional Shares."
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After the Effective Time, each CI 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 CI 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
CI Certificates will not be entitled to receive any dividends or other
distributions payable by RVSI until such CI 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 CI
Stockholder surrenders his or her CI Certificates to the Exchange Agent, all
such accrued and unpaid dividends and distributions, together with any cash
payment in lieu of a fractional share of RVSI Common Stock, will be paid without
interest.
Conversion of Options and Warrant. As a consequence of the Merger, options
to purchase up to 982,350 shares of CI Common Stock ("CI Options") and a warrant
to purchase 200,000 shares of CI Common Stock ("CI Warrant") at various exercise
prices will be converted at the Effective Time into options and a warrant to
purchase up to 210,228 shares of RVSI Common Stock ("Conversion Options") at
exercise prices determined by dividing the exercise price per share of CI Common
Stock provided for in such CI Option and in such CI Warrant by the Exchange
Ratio (without giving effect to possible adjustments to the Exchange Ratio as a
result of implementation of the Collars). RVSI shall reserve for issuance a
sufficient number of shares of RVSI Common Stock for delivery upon exercise of
the Conversion Options. Assuming that the Effective Time had been July 1, 1996,
these CI Options and CI Warrant would have a value of approximately $1,561,867,
based upon the difference between the closing price of RVSI Common Stock on July
1, 1996, ($17.25) and the respective exercise prices, as converted at the
Exchange Ratio (without giving effect to possible adjustment as a result of
implementation of the Collars). See "The Proposed Merger -- The Merger
Agreement -- Conversion of Options and Warrant." RVSI has agreed to file and use
reasonable efforts to maintain the effectiveness of a Registration Statement on
Form S-8 under the Securities Act with respect to all of the shares of RVSI
Common Stock subject to the Conversion Options.
Under the terms of CI's 1987 and 1994 stock plans, the vesting schedule of
all CI Options held by participants in such plans, including employees and
officers of CI, will accelerate in full at the Effective Time, such that the
options held by certain employees and officers of CI will be fully exercisable
immediately following the Effective Time. As a result of this provision, CI
Options to purchase an aggregate of approximately 307,650 shares of CI Common
Stock held by employees and officers of CI which would otherwise not yet be
exercisable will be fully exercisable immediately following the Effective Time.
Assuming that the Effective Time had been July 1, 1996, these CI Options would
have had an economic value of $479,150.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of RVSI and CI, 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, in the case of CI, its
Articles of Organization, and 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 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 or,
in the case of CI, its Articles of Organization, and 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) receipt of fairness
opinion; (xix) properties and condition of assets; (xx) status of material
contracts; (xxi) intellectual property; (xxii) customers and suppliers; (xxiii)
insurance; (xxiv) accuracy of books and records; (xxv) absence of requirement
for pre-Merger notification under the Hart-Scott-Rodino Anti-Trust Improvements
Act of 1976; (xxvi) brokers' and
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finders' fees with respect to the Merger; and (xxvii) accuracy of the
information contained in the Merger Agreement and schedules thereto.
Certain Covenants and Agreements. Pursuant to the Merger Agreement, CI has
agreed that, during the period from the date of the Merger Agreement until the
Effective Time or the earlier termination of the Merger Agreement, CI and (where
applicable) each of its subsidiaries will, among other things (except as
permitted by the Merger Agreement or as consented to in writing by RVSI): (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, except it may issue shares upon exercise of options and warrants
outstanding at the date of the Merger Agreement; (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 CI or its
stockholders (except to the extent that any CI 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 and consistent with past
practice); (ix) not sell any material assets (other than in the ordinary course
of business and consistent with past practice); (x) use its best 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 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 RVSI 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 RVSI and RVSI'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 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 concerning its business, properties and personnel as RVSI 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 all reasonable 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 all
reasonable efforts to obtain CI Stockholders' approval and adoption of the
Merger Agreement and the transactions contemplated thereby; (xvii) obtain and
deliver to RVSI certain letters from its "affiliates" as defined under Rule 145
under the Securities Act, or used in Commission Accounting Series Releases 130
and 135, agreeing to certain restrictions on resale of RVSI Common Stock
received in the Merger in exchange for CI Common Stock; and (xviii) subject to
the fiduciary duties of its Board of Directors and receipt of a fairness opinion
from Fechtor, Detwiler referred to in the Merger Agreement, recommend to the
holders of CI Common Stock approval of the Merger Agreement and the Merger.
Pursuant to the Merger Agreement, CI has further agreed that CI and each of
its subsidiaries will, among other things: (i) not amend or propose to amend the
CI Articles of Organization or CI 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
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Agreement); (iii) not enter into or amend in any respect any 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; (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 agreed to (i) not 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)
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;
(iii) not take or fail to take any action which would cause CI or its
stockholders (except to the extent that any CI Stockholders receive cash in lieu
of fractional shares) to recognize gain or loss for federal income tax purposes
as a result of the Merger; (iv) afford to CI and CI'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 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 concerning its business, properties and
personnel as CI may reasonably request; (v) until the Closing Date, on a
confidential basis, from time to time, advise senior management of CI as to any
material acquisitions or disposition of assets or businesses outside of the
ordinary course of business contemplated to be effected by RVSI within the next
three months from the time of notice; (vi) 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; (vii) 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; (viii) as soon as reasonably 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; (ix) use all reasonable efforts to keep effective for a
period of no less than three years after the Effective Time a registration
statement covering the resale of share of RVSI Common Stock acquired by
affiliates of CI as a consequence of the Merger; and (x) take no action and use
all reasonable efforts to preclude any action that would adversely affect the
indemnification obligations of CI to its officers, directors and agents under
CI's charter documents or indemnification contracts and to guarantee CI's
performance thereunder.
No Solicitation of Other Transactions. The Merger Agreement provides that,
prior to the earlier of the Effective Time or 120 days from the date of the
Merger Agreement, CI and the subsidiaries of CI (the "CI Subsidiaries") shall
not give authorization or permission to any of their respective directors,
officers, employees, agents or representatives to, and each shall use all
reasonable efforts to see that such persons do not, directly or indirectly,
solicit, initiate, knowingly facilitate or encourage (including by way of
furnishing or disclosing information) any merger, consolidation, other business
combination involving CI or any CI Subsidiary, acquisition of all or any
substantial portion of the assets or capital stock of CI and the CI Subsidiaries
taken as a whole, or inquiries or proposals concerning or which would reasonably
be expected to lead to, any of the foregoing (an "Acquisition Transaction") or
negotiate, explore or otherwise knowingly communicate in any way with any third
party (other than RVSI or its affiliates) with respect to any Acquisition
Transaction or enter into any agreement, arrangement or understanding requiring
it to abandon, terminate or fail to consummate the Merger or any other
transactions expressly contemplated by the Merger Agreement, or contemplated to
be a material part thereof. The Merger Agreement states that CI shall advise
RVSI in writing of any inquiries or proposals relating to an Acquisition
Transaction, within one day following CI's receipt of any such inquiry or
proposal.
21
<PAGE> 44
The Merger Agreement provides that in the event there is an unsolicited
written proposal for an Acquisition Transaction from a bona fide financially
capable third party that contains no financing contingency, CI, in its
discretion, shall be permitted to furnish to and communicate with any such party
all publicly available information requested by such party. CI thereafter shall
promptly advise RVSI in writing of the identity of such party. In the event that
such party requests information in addition to that which is publicly available,
the Merger Agreement provides that CI may furnish to and communicate with such
third party non-public information only if (i) two business days' written notice
shall have been given to RVSI; and (ii)(A) CI's Board of Directors shall have
been advised in writing by its investment banker that such third party is
financially capable, without any financing contingency, of consummating an
Acquisition Transaction that would yield a higher value to CI's Stockholders
than will the Merger, (B) CI's Board of Directors shall have been advised, by
the written opinion of outside counsel to CI, that any failure to provide such
non-public information to such party would constitute a breach of the fiduciary
responsibilities of the CI Board of Directors to the stockholders of CI and (C)
the CI Board of Directors, after weighing such advice, determines that taking
such action is more likely than not to lead to an Acquisition Transaction with
such third party that would yield a higher value to CI's Stockholders than will
the Merger and that failing to furnish such information would constitute a
breach of the CI Board's fiduciary duties.
Conditions to the Merger. The respective obligations of RVSI and CI to
effect the Merger are subject to fulfillment of a number of conditions,
including among others, that: (i) the Merger Agreement and the transactions
contemplated thereby shall have been approved and adopted by the holders of CI
Common Stock, and the holders of no more than nine per cent (9%) of the
outstanding shares of CI Common Stock shall have established the right to demand
payment for their shares and an appraisal thereof in accordance with the
provisions of Section 86 of the MBCL; (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) an employment agreement, in the form annexed to the
Merger Agreement, shall have been entered into by RVSI and Richard C. Close, the
President and Chief Executive Officer of CI.
In addition to the conditions set forth above, the obligations of CI to
effect the Merger are subject to a number of conditions including, but not
limited to, the following: (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 on and as of the date made and the
Closing Date and CI shall have received a certificate from an executive officer
of RVSI 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 "comfort" letters from Deloitte & Touche LLP,
RVSI's and Subsidiary's independent public accountants, dated the effective date
of the Registration Statement and the Closing Date, with respect to RVSI's
financial statements and other RVSI financial information included in the
Registration Statement; (iv) the receipt of a certificate from RVSI as to
certain tax matters; (v) the receipt of an opinion of Fechtor, Detwiler & Co.,
Inc., or another nationally recognized investment banking firm, that the
Exchange Ratio is fair from a financial point of view to CI'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 opinion from Brown
Rudnick Freed & Gesmer, counsel to CI, dated the Effective Time, with respect to
certain tax matters; and (viii) since the date of the Merger Agreement, there
shall not have been any Material Adverse Effect with respect to RVSI, the
likelihood of which was not previously disclosed to CI.
22
<PAGE> 45
In addition to the conditions set forth in the first paragraph of this
subsection, the obligations of RVSI to cause the Subsidiary to effect the Merger
are subject to several conditions including, but not limited to, the following:
(i) CI 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 CI contained in the Merger Agreement,
with certain exceptions, shall be true and correct on and as of the date made
and the Closing Date and RVSI shall have received a certificate from an
executive officer of CI to such effect; (ii) the receipt of a written legal
opinion from Brown, Rudnick, Freed & Gesmer, counsel to CI and opinions of
counsel to the CI Subsidiaries, as to certain legal matters; (iii) the receipt
of "comfort" letters from Ernst & Young LLP, CI's independent auditors, dated
the effective date of the Registration Statement and the Closing Date, with
respect to CI's financial statements and other CI financial information included
in the Registration Statement; (iv) RVSI shall have received an opinion from
Deloitte & Touche LLP, dated the Closing Date, stating that, as it relates to
RVSI, the Merger will qualify as a "pooling of interests" transaction under
generally accepted accounting principles; (v) Ernst & Young LLP shall have
delivered to CI a letter dated the Closing Date regarding the appropriateness of
pooling of interests accounting for the Merger, as it relates to CI, under
Accounting Principles Board Opinion No. 16 based upon the assumption that the
Merger is closed and consummated in accordance with the Merger Agreement; (vi)
the receipt by RVSI of letters from affiliates of CI 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; (vii) RVSI shall have received an opinion of Alex. Brown, 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 RVSI's
public stockholders; (viii) RVSI shall have received a written opinion of Parker
Duryee Rosoff & Haft, counsel to RVSI, dated the Effective Time, with respect to
certain tax matters; (ix) RVSI shall have received a certificate of CI as to
certain tax matters; and (x) since the date of the Merger Agreement, there shall
not have been a Material Adverse Effect with respect to CI, the likelihood of
which was not previously disclosed to RVSI.
Termination and Expense Reimbursement. The Merger Agreement may be
terminated at any time prior to the Closing Date, whether before or after
approval by the CI Stockholders: (i) by mutual consent of RVSI and CI; (ii)
unilaterally by either RVSI or CI upon the occurrence of a Material Adverse
Effect (as defined in the Merger Agreement) with respect to the other, the
likelihood of which was not previously disclosed prior to the date of the Merger
Agreement, in which event neither party shall have any liability to the other
for Transaction Expenses (as hereinafter defined); (iii) unilaterally by RVSI:
(a) if CI materially breaches any representation or warranty of CI set forth in
the Merger Agreement, (b) upon CI's willful failure to comply with or satisfy
any material covenant or condition of CI contained in the Merger Agreement or
(c) if CI's stockholders at the Special Meeting fail to approve the Merger or,
if so approved, the holders of more than nine per cent (9%) of the outstanding
CI Common Shares establish the right to demand payment for their CI Common
Shares and an appraisal thereof pursuant to Section 86 of the MBCL (the
"Stockholder Approval Condition"), in which event CI shall promptly pay to RVSI
an amount equal to the sum of all Transaction Expenses of RVSI (but not to
exceed $250,000); (iv) unilaterally by CI: (a) if RVSI materially breaches any
representation or warranty of RVSI set forth in the Merger Agreement, or (b)
upon RVSI's willful failure to comply with or satisfy any material covenant or
condition of RVSI contained in the Merger Agreement, in which event RVSI shall
promptly pay to CI an amount equal to the sum of all Transaction Expenses of CI
(but not to exceed $250,000); (v) unilaterally by either RVSI or CI upon
notification to the other that the notifying party elects not to proceed with
the Merger (other than (i) by reason of a Material Adverse Effect or a Parent or
Company Breach (as defined in the Merger Agreement) by the other and (ii) in the
case of a notice to CI, a failure to meet the Stockholder Approval Condition),
in which event the notifying party shall promptly pay the other party the other
party's Transaction Expenses (but not to exceed $250,000); and (vi) by either
RVSI or CI after October 31, 1996, 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 CI as
provided above, the Merger Agreement will become void and, except as set forth
above in the preceding paragraph, and under "-- Other Transaction Payment and
Expense Reimbursement" in the following paragraph, there will be no further
obligation on the part of either RVSI or CI or the Subsidiary.
23
<PAGE> 46
Other Transaction Payment and Expense Reimbursement. In the event the
Merger does not take place, and within six months from the date of the Merger
Agreement CI enters into, or becomes subject to, an Acquisition Transaction
(which results in a higher value being received by the CI Stockholders than
would have been received in the Merger) with any person or party to whom CI
furnished information, or communicated with, regarding CI (pursuant to the
exception set forth above under "No Solicitation of Other Transactions"), within
five days of consummation of the Acquisition Transaction CI shall pay RVSI by
wire transfer of immediately available funds to an account specified by RVSI, an
amount equal to the sum of (i) all documented fees and expenses (including the
fees and expenses of counsel, accountants, investment bankers, consultants and
advisors ("Transaction Expenses")) incurred by RVSI in connection with the
letter of intent entered into in anticipation of the Merger Agreement, the
Merger Agreement and the transactions contemplated thereby (unless previously
paid to RVSI pursuant to the termination provisions of the Merger Agreement) in
an aggregate amount not to exceed $250,000 and (ii) a termination or "break-up"
fee of seven hundred fifty thousand dollars ($750,000).
Amendment and Waiver. At any time prior to the Effective Time, RVSI and CI
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 CI. Under applicable law, neither RVSI nor CI may
amend the Merger Agreement subsequent to obtaining approval of the CI
Stockholders if such amendment 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 CI Common Stock, or (ii) alter or change any of the terms or
conditions of the Merger Agreement if such alteration or change would adversely
affect the CI Stockholders.
CONFLICTS OF INTERESTS
In considering the recommendation of the CI Board with respect to the
Merger Agreement and the transactions contemplated thereby, holders of CI Common
Stock should be aware that management of CI have certain interests in the Merger
that are in addition to the interests of CI Stockholders generally, including,
without limitation, the execution of an employment agreement by Richard C.
Close, President of CI and a member of the CI Board, and RVSI's agreement to
guarantee CI's performance of pre-existing rights of indemnification for the
officers and directors of CI.
The proposed employment agreement with Mr. Close provides for Mr. Close's
employment for a period of two years as chief operating officer of CI with
annual base salary of $150,000, annual bonus entitlement of at least $30,000 and
up to $60,000 per year based on the attainment of specified individual and
corporate performance objectives, the granting of options to purchase 60,000
shares of RVSI Common Stock at the Effective Time of the Merger, expense
reimbursement provisions and participation in all benefit programs available to
senior managerial employees of RVSI's operating subsidiaries.
The Merger Agreement provides that, as of and after the Effective Time,
RVSI shall refrain from taking any action that would reduce the exculpation for,
or the indemnification obligations of, CI to its officers, directors or other
agents under CI's Articles of Organization, Bylaws and indemnification
agreements, as they exist as of the date of the Merger Agreement. Further, RVSI
shall guarantee the performance by CI of such indemnification obligations.
Under the terms of existing indemnification agreements between CI and each
of its directors, executive officers and an employee, CI undertakes to indemnify
such persons from and against any and all losses, costs and expenses of claims,
litigation or other proceedings against such person on account of his position
with, or acts on behalf, of CI, to the maximum extent permitted by applicable
law, for a period equal to the greater of (i) ten years after any such person
ceases to serve as a director, officer or employee of CI or (ii) the termination
of any proceedings commenced during such ten year period.
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<PAGE> 47
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 "Termination and Expense
Reimbursement" and "-- Other Transaction Payment and Expense Reimbursement." In
no event, shall either party be required to pay Transaction Expenses of the
other party in excess of $250,000.
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 CI. 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 CI have been filed with the Commission, sent to stockholders of RVSI or
otherwise publicly disclosed (the "Requisite Pooling Period"). CI has agreed to
obtain written agreements ("Affiliate Agreements") from 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.
The Registration Statement of which this Proxy Statement/Prospectus forms a
part includes a resale prospectus which covers the resale by Affiliates of CI of
shares of RVSI Common Stock issued to such Affiliates pursuant to the Merger,
which eliminates certain resale restrictions otherwise applicable to Affiliates
under Rule 145. Therefore, shares of RVSI Common Stock received by such
Affiliates shall be freely tradeable by such Affiliates following the Requisite
Pooling Period.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a "pooling of interests" transaction
for accounting and financial reporting purposes in accordance with generally
accepted accounting principles. It is a condition to the consummation of the
Merger that RVSI's independent accountants will have determined that RVSI is
entitled to account for the Merger as a pooling of interests and that CI's
independent auditor shall have delivered a letter regarding the appropriateness
of pooling of interests accounting for the Merger under Accounting Principles
Board Opinion No. 16, based upon the assumption that the Merger is closed and
consummated in accordance with the Merger Agreement.
LISTING ON THE NASDAQ NATIONAL MARKET
RVSI has agreed to use all reasonable 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 CI Common Stock will be delisted from
The Nasdaq National Market and will be deregistered under the Exchange Act.
25
<PAGE> 48
APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS
Under Massachusetts Business Corporation Law ("MBCL"), stockholders of
Massachusetts corporations have the right to dissent from a merger, and demand
payment for their shares of stock and an appraisal thereof, by complying with
the provisions of Sections 85 through 98, inclusive, of the MBCL (the "Appraisal
Statute"), a copy of which is attached hereto as Exhibit B.
If the proposed Merger is approved by the CI Stockholders, any CI
Stockholder (i) who files with CI, before the taking of the vote on the approval
of the Merger, written objection to the proposed action stating that he or she
intends to demand payment for his or her shares if the action is taken, and (ii)
whose shares are not voted in favor of such action, has or may have the right to
demand in writing from CI within 20 days after the date of mailing to him or her
of notice that the corporate action has become effective, payment for his or her
shares and an appraisal of the value thereof. CI and any such CI Stockholder
shall in such case have the rights and duties and shall follow the procedure set
forth in Sections 88 to 98, inclusive, of the Appraisal Statute.
A CI Stockholder intending to exercise his or her dissenter's right to
receive payment for his or her shares (i) must file with CI written objection to
the Merger before the taking of the vote by the CI Stockholders on the Merger,
and (ii) must not vote in favor of the Merger at the Special Meeting. Such
objection will be deemed timely filed if mailed to CI at 5 Shawmut Road, Canton,
Massachusetts 02021; Attention: Clerk by registered or certified mail not later
than the third business day before the date of taking of the vote or by personal
delivery to the Clerk of CI at the above office or at the Special Meeting before
the taking of the vote. A vote in favor of the Merger will waive the right to
exercise dissenter's rights. Failure to vote, abstention or voting against shall
constitute not voting in favor of the Merger. The written objection must state
that the CI Stockholder intends to demand payment for his or her shares if the
Merger is consummated. Within 10 days after the Effective Time, CI will give
written notice of the consummation of the Merger by registered or certified mail
to each CI Stockholder who filed a written objection and who did not vote in
favor of the Merger. Within 20 days after the date of mailing of such notice,
any CI Stockholder to whom CI was required to give that notice may make written
demand for payment of his or her shares from CI and CI will be required to pay
to him or her the fair value of his or her shares within 30 days after the
expiration of the 20-day period.
If during the 30-day period CI and the dissenting CI Stockholder do not
agree as to the fair value of the shares, CI or the dissenting CI Stockholder
may, within four months after the end of the 30-day period, have the fair value
of shares of Common Stock of all dissenting CI Stockholders determined by
judicial proceedings by filing a bill in equity with the Massachusetts Superior
Court in accordance with the procedures set forth in Sections 90 and 91 of the
Appraisal Statute. If no dissenting stockholder files a bill in equity within
the four month period, CI may cause such a bill to be filed in the Superior
Court for Middlesex County on or before the last day of the period. For the
purposes of the Superior Court's determination, the value of the shares of CI
Common Stock is determined as of the day preceding the date of the vote of the
CI Stockholders approving the Merger, and is exclusive of any element of value
arising from the expectation or accomplishment of the Merger. Upon making
written demand for payment, the dissenting CI Stockholder will not thereafter be
entitled to notices of meetings of CI Stockholders, to vote, or to dividends
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the date of the vote approving the proposed Merger)
unless no suit is filed pursuant to Section 90 of the Appraisal Statute within
four months to determine the value of the stock, any such suit is dismissed as
to that CI Stockholder, or the CI Stockholder, with the written approval of CI,
withdraws his or her objection in writing.
The enforcement of any objecting CI Stockholder of his or her appraisal
rights as set forth in the Appraisal Statute shall be an exclusive remedy except
for the right of any such objecting CI Stockholder to bring or maintain an
appropriate proceeding to obtain relief on the ground that the Merger will be or
is illegal or fraudulent as to such objecting CI Stockholder.
The provisions of the Appraisal Statute are technical in nature and are
complex. Any CI Stockholder desiring to exercise his or her appraisal rights
should consult legal counsel for assistance because the failure to comply
strictly with the provisions may nullify such appraisal rights.
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<PAGE> 49
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
As a condition to the obligation of CI to consummate the Merger CI will
receive a written opinion from Brown, Rudnick, Freed & Gesmer, counsel for CI,
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 CI as a result of the Merger and
(iii) no gain or loss will be recognized by a CI Stockholder as a result of the
Merger with respect to his receipt of RVSI Common Stock in exchange for his
shares of CI Common Stock. Similarly, as a condition to the obligation of RVSI
to consummate the Merger, RVSI will receive a written opinion to the same effect
from Parker Duryee Rosoff & Haft, counsel for RVSI and Subsidiary, and also an
opinion 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 CI, RVSI and Subsidiary and
certain stockholders of CI and RVSI. The effects 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 CI's options are discussed below.
CI 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
CI Stockholders in the Merger will be the same, in each instance, as the
adjusted tax basis of the CI 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 CI Stockholders will include the period
during which the shares of CI Common Stock surrendered in exchange therefor were
held, provided that such shares of CI Common Stock were held as capital assets
at the Effective Time.
CI 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 CI Common Stock allocable
to such fractional share. Such gain or loss will be capital gain or loss,
provided that such share of CI 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 CI
Common Stock has been held for more than one year.
A CI Stockholder who exercises his or her rights of appraisal with respect
to his or her shares of CI Common Stock pursuant to the MBCL will be subject to
tax on the receipt of the payments pursuant to Section 302 of the Code (taking
into account the application of the stock attribution rules of Section 318 of
the Code). In general, if the shares of CI Common Stock are held by the CI
Stockholders as a capital asset at the Effective Time and such CI Stockholder
owns, actually or constructively, no other shares which will be converted into
RVSI Common Stock, the CI Stockholder will recognize capital gain or loss
measured by the difference between the amount of cash received by CI Stockholder
and the basis for his or her shares. This capital gain or loss will be "long
term" if the CI shares have been held for one year or longer, and "short term"
otherwise.
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 CI, RVSI or
Subsidiary. However, in that event exchanges of CI 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 CI 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 CI 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 CI 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 CI 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 AD-
27
<PAGE> 50
DRESSED HEREIN AND NEITHER THIS SUMMARY NOR THE LEGAL OPINIONS DESCRIBED ABOVE
ARE BINDING ON THE IRS. 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 CI 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 CI 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 CI STOCK OPTIONS (INCLUDING OPTIONS ISSUED UNDER CI'S 1987, 1994
AND 1996 STOCK PLANS, AS AMENDED). AS NOTED PREVIOUSLY, THE OPINIONS OF COUNSEL
ARE BASED ON REPRESENTATIONS OF CI, RVSI AND SUBSIDIARY, AND CERTAIN
STOCKHOLDERS OF CI AND RVSI. IF THESE REPRESENTATIONS ARE NOT CORRECT THEN THE
TAX RESULTS DESCRIBED HEREIN AND IN THE OPINIONS OF COUNSEL COULD BE DIFFERENT.
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. CI STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE FEDERAL AND ANY STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE MERGER.
28
<PAGE> 51
COMPARATIVE PER SHARE PRICES AND DIVIDENDS
OF RVSI COMMON STOCK AND CI COMMON STOCK
Both the RVSI Common Stock and the CI Common Stock are quoted on The Nasdaq
National Market. The following table sets forth, for the calendar periods
indicated, the high and low closing prices of RVSI Common Stock and CI 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.
<TABLE>
<CAPTION>
RVSI CI
COMMON STOCK(1) COMMON STOCK
----------------- -----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
Three Months Ended:
March 31, 1994(1)................................... $ 7.13 $ 4.63 $ 1.31 $ 1.13
June 30, 1994....................................... 6.75 4.75 1.56 1.06
September 30, 1994.................................. 6.25 4.38 1.59 1.06
December 31, 1994................................... 8.13 5.50 2.00 1.13
March 31, 1995...................................... 7.63 5.50 2.44 1.63
June 30, 1995....................................... 15.25 6.63 3.75 1.75
September 30, 1995.................................. 23.75 12.55 4.00 2.63
December 31, 1995................................... 27.75 18.13 3.06 2.63
March 31, 1996...................................... 24.88 12.50 2.56 1.88
June 30, 1996....................................... 20.75 13.88 3.25 1.94
September 30, 1996 (through July 30, 1996).......... 18.38 12.38 2.88 1.81
</TABLE>
- ---------------
(1) Quotations for RVSI Common Stock commenced on The Nasdaq National Market on
January 5, 1994. The prices shown prior to such date represent quotations on
The Nasdaq Small-Cap Market.
On June 10, 1996 (the last trading day prior to the public announcement
that RVSI and CI had entered into a letter of intent), the closing prices of the
RVSI Common Stock and the CI Common Stock were $18.75 and $2.25, respectively.
On July 23, 1996 (the last trading day prior to the public announcement that
RVSI and CI had entered into the Merger Agreement), the closing prices of the
RVSI Common Stock and the CI Common Stock were $14.13 and $2.13, respectively.
On July 30, 1996, the closing prices of the RVSI Common Stock and the CI Common
Stock were $13.94 and $2.38, respectively. As of June 30, 1996, there were
approximately 475 holders of record of CI Common Stock and approximately 5,800
holders of record of RVSI Common Stock. Neither CI nor RVSI has ever paid any
cash dividends on its Common Stock and neither anticipates paying any cash
dividends in the foreseeable future.
Under the terms of RVSI's revolving line of credit agreement, RVSI is
prohibited from paying cash dividends on its Common Stock. Under the terms of
CI's bank lines of credit, CI is also prohibited from paying cash dividends on
its Common Stock. Stockholders are urged to obtain current market quotations.
See "Risk Factors."
29
<PAGE> 52
SELECTED HISTORICAL FINANCIAL DATA OF CI
The following consolidated selected financial data as of December 31, 1995,
1994, 1993, 1992 and 1991 and for each of the years then ended are derived from
the audited consolidated financial statements of CI. The financial statements
for the two years ended December 31, 1995 have been audited by Ernst & Young
LLP, independent auditors. The financial statements for the year ended December
31, 1993 have been audited by Deloitte & Touche LLP, independent auditors. The
financial data for the three month periods ended March 31, 1996 and 1995 are
derived from unaudited financial statements. The unaudited financial statements
include all adjustments, consisting of normal recurring accruals, which CI
considers necessary for a fair presentation of the financial position and the
results of operations for these periods. Operating results for the three months
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1996. The data should be read
in conjunction with the consolidated financial statements, related notes, and
other financial information included herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------- YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, -----------------------------------------------
1996(A) 1995(A) 1995 1994 1993 1992 1991
--------- --------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue......................... $ 7,266 $ 6,780 $27,745 $26,026 $21,890 $21,973 $20,641
Cost of Revenue................. 3,942 3,310 14,065 13,485 11,713 10,827 10,619
Selling, General and
Administrative Expense........ 2,578 2,473 10,433 10,295 8,775 8,642 8,047
Research and Development
Expenses...................... 629 715 2,545 2,242 1,861 1,470 994
Separation Costs................ -- -- -- 469 541 -- --
Provision for Income Taxes...... 6 30 14 64 63 177 234
Net Income (loss)............... 105 257 683 (510) (1,026) 875 760
Net Income (loss) per Share..... 0.01 0.02 0.06 (0.05) (0.10) 0.09 0.08
Weighted Average Number of
Common and Common Equivalent
Shares Outstanding............ 11,071 10,707 10,977 10,339 9,893 10,261 9,824
</TABLE>
- ---------------
(a) Derived from unaudited information.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
MARCH 31, -----------------------------------------------------
1996(A) 1995 1994 1993 1992 1991
--------- --------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Working Capital.................... $ 6,258 $ 6,335 $ 5,299 $ 5,143 $ 5,831 $ 4,721
Total Assets....................... 13,685 12,748 10,986 10,203 9,930 9,163
Long-Term Debt..................... 53 57 72 20 51 79
Accumulated Deficit................ (17,784) (17,889) (18,572) (18,062) (17,036) (17,911)
Stockholders' Equity............... 7,295 7,207 5,986 5,921 6,806 5,671
</TABLE>
- ---------------
(a) Derived from unaudited information.
CI has never paid cash dividends on shares of its Common Stock.
30
<PAGE> 53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CI
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 and 1995
Revenue for the first three months of 1996 was 7% above the comparable 1995
period. The 1996 revenue gains were reflected in all three geographic areas of
the Company, North America, Europe and Rest of World. First quarter bookings
decreased 3% for 1996 compared to the same quarter in the prior year. Backlog
decreased from $3.5 million at December 31, 1995, to $3.3 million at March 31,
1996. The $3.3 million in backlog is lower than the comparable first quarter
1995 total of $3.8 million.
Sales by CI's four European subsidiaries, the Canadian subsidiary and
exports to Rest of World were 64% of the total revenue for the first quarter of
1996 compared to 65% for 1995. Since over half of CI's revenue was derived from
foreign sources, its operating results can be sensitive to foreign currency
fluctuations. In the first quarter, these foreign currency fluctuations did not
work in CI's favor. CI does have available a program to hedge its foreign
denominated accounts receivable in an effort to minimize foreign currency
exposure. At March 31, 1996, CI did not have any hedging contracts outstanding.
CI may utilize limited hedging in the future should it foresee the need.
Gross Margin from product and services was 46% compared to 51% for the
first quarters of 1996 and 1995, respectively. Product gross margin decreased
from 50% in 1995 to 43% in 1996 primarily reflecting a higher mix of lower
margin non-CI manufactured product sales in Europe, a change in distribution
strategy in North America from direct to lower margin indirect channels, and the
unfavorable foreign currency impact due to a stronger dollar. This trend will
continue unless CI can achieve further material and labor cost reductions in
manufacturing which more than offset the effect of the larger mix of
international revenues with lower margins and the change in distribution
strategy in North America. Service gross margin decreased in 1996 to 60% from
62% in 1995. Selling, General and Administrative expenses as a percentage of
revenue were 35% in the first quarter of 1996 versus 36% in the comparable 1995
period, reflecting a continued emphasis on controlling gross spending while
increasing revenue.
Research and Development expenses were 9% and 11% of revenues in the first
quarter of 1996 and 1995, respectively, as CI continued its planned program to
invest in its future by improving performance of existing products, expanding
its overall product line, and exploring new technology.
At a result of the foregoing, net income for the first quarter of 1996 and
1995 was $105,000 and $257,000, respectively.
Years Ended December 31, 1995, 1994 and 1993
Net income for 1995 was $683,000 and represents CI's first profitable year
since 1992. The last two years, 1994 and 1993, reflected significant changes
within CI. A new President and Chief Executive Officer was appointed in 1993 and
a cost savings and reduction in work force program was accomplished in 1994.
These efforts resulted in one-time separation charges of $469,000 and $541,000
for 1994 and 1993, respectively. The net loss was $510,000 and $1,026,000 for
1994 and 1993, respectively.
Revenues for 1995 were 7% above 1994 results. European and Rest of World
revenues in 1995 increased by 24% and 22%, respectively. North America revenue
declined by 11% in 1995 as compared to 1994. Revenues for 1994 were 19% above
1993 results and, excluding the substantial 1993 Canada Post contract, revenue
would have increased 30% on a year-to-year comparative basis. The 1994 revenue
gains were reflected in all three geographic areas of CI. Bookings increased 10%
for 1995 and 1994 compared to the prior year. Backlog at December 31 was $3.5,
$3.1 and $3.7 million for 1995, 1994 and 1993, respectively. Revenue growth is
primarily attributable to several factors including a broader product line;
recovery of the European economy; increased penetration in the Far East/Asia
market; and improved sales productivity in North America in 1994. Service
revenue increased 8% in 1995 as compared to 1994. Service revenue in 1994 was
26% below 1993 levels primarily due to two factors: first, a 20% one-time
increase in service revenues in 1993
31
<PAGE> 54
due to the Canada Post contract and second, the elimination from the service
base of those older products that have been removed from CI's product line.
Sales by CI's four European subsidiaries, the Canadian subsidiary, and
exports to the Rest of World were 60%, 52% and 57% of total revenue for the
years ended December 31, 1995, 1994, and 1993, respectively. The high 1993 level
is due to the Canada Post contract, which accounted for almost 10% of the total
worldwide revenue. The significantly high 1995 level is due to the 20% plus
revenue growth in Europe and Rest of World coupled with a softening in the North
American market. Since more than half of CI's revenue is derived from foreign
sources, its operating results can be sensitive to foreign currency
fluctuations. In 1995, these foreign currency fluctuations worked in CI's favor.
CI has available through a domestic commercial bank a program available to hedge
its foreign denominated accounts receivable in an effort to minimize foreign
currency exposure. These hedging activities are basic, straightforward
arrangements and do not involve the use of any other unusual forms of
derivatives. At December 31, 1995, CI did not have any hedging contracts
outstanding.
Gross margin from product and services was 49%, 48% and 46% for 1995, 1994
and 1993, respectively. Product gross margin was 50%, 48% and 47% for 1995,
1994, and 1993, respectively. The increase in 1995 product gross margin to 50%
reflects manufacturing efficiencies, primarily due to subcontracting components
such as circuit boards on a complete turn-key basis. Service gross margin in
1995 and 1994 was 45% and 46%, respectively. These two years were both higher
than the 44% level in 1993 and reflect two factors: first, the elimination from
the service base of those older products that have been removed from CI's
product line, and second, cost reductions from the 1994 restructuring program.
CI has implemented a change in distribution strategy in the North American
business from direct to lower margin indirect channels. To achieve CI's goals of
a continued positive gross margin trend will require further material and labor
cost reductions in manufacturing which must more than offset the effect of the
larger mix of international revenues with lower margins and the change in
distribution strategy in North America.
Selling, General and Administrative expenses as a percentage of revenue
were 38%, 40% and 40% in 1995, 1994 and 1993, respectively. Gross spending for
these expenses in 1995 were held constant while revenue increased by 7%.
Research and development expenses were 9% of revenue in 1995, 1994 and
1993, respectively, as CI continued its planned program of spending on new
product development.
CI's provisions for income taxes were $14,000, $64,000, and $63,000 in
1995, 1994 and 1993, respectively. Due to CI's ability to use its U.S. net
operating loss carryforwards, the provision for income taxes is comprised
primarily of state and foreign income taxes for which net operating loss
carryforwards are not available.
CI's revenue reflects no significant inflationary impact during the period
since prices have either been constant or slightly reduced. While the exact
impact is not quantifiable, inflation has increased labor costs as a component
of sales and selling costs and general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
Management believes that cash generated from operations and the current
level of working capital are sufficient to finance its needs through 1996. From
a capital expenditures viewpoint, in the first quarter of 1996, CI completed the
acquisition of a new management information system which cost approximately
$200,000. The liquidity results over the periods under discussion are:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Working Capital.................. $6,258,000 $6,335,000 $5,299,000 $5,143,000
Current Ratio.................... 2.0 to 1 2.2 to 1 2.1 to 1 2.2 to 1
Total Liability to
Net Worth Ratio................ .9 to 1 .8 to 1 .8 to 1 .7 to 1
</TABLE>
Each of the liquidity factors listed have remained relatively stable
through the dates listed. Working capital decreased by $77,000 during the first
three months of 1996 compared to December 31, 1995, primarily
32
<PAGE> 55
resulting from increases in cash of $448,000, accounts receivable of $142,000,
accounts payable of $707,000, and deferred revenue of $207,000. Working capital
increased by $1 million in 1995 compared to 1994, primarily resulting from an
increase in inventory of $521,000 and a decrease in other current liabilities of
$495,000.
CI currently has two bank lines of credit available. A small line of credit
is held with a Belgium bank for 5 million Belgium Francs (approximately
$170,000). The principal line of credit, in the amount of $2 million, is held
with a commercial bank. As of March 31, 1996, Computer Identics GmbH, a wholly
owned German subsidiary, had $1 million in DM of this line of credit
outstanding. Therefore, CI still has available $1 million under this credit
line. The loan is a demand note at an interest rate of 7%. CI also has available
a program to hedge its foreign denominated accounts receivable in an effort to
minimize foreign currency exposure. At March 31, 1996, CI did not have any
hedging contracts outstanding, but may utilize limited hedging in the future
should CI foresee the need.
SUBSEQUENT RESULTS -- THREE AND SIX MONTHS ENDED JUNE 30, 1996
CI recently announced its results for the three and six months ended June
30, 1996. Revenues for the three months ended June 30, 1996 were $6,484,000, a
decrease of 4% compared to $6,760,000 for the same quarter in the prior year.
Revenues for the six months ended June 30, 1996 were $13,750,000, an increase of
2% compared to $13,540,000 for the comparable period in the prior year. Revenues
for the second quarter did not meet CI's expectations. International revenues,
which represented 60% of total revenues, were 3% higher than the second quarter
in the prior year, while North American revenues decreased by 13% compared to
the comparable quarter.
CI sustained a net loss of $97,000, or ($.01) per share, for the three
months ended June 30, 1996 compared to net income of $244,000, or $.02 per
share, for the second quarter in 1995. For the six months ended June 30, 1996,
CI had net income of $8,000 compared with net income of $501,000, or $.05 per
share, for the same period in 1995.
Gross margin decreased to 48% in the second quarter of 1996 from 54% for
the comparable quarter in the prior year resulting primarily from higher costs
from the implementation of a new cell manufacturing strategy and a new MIS/MRP
system, a higher percentage of lower margin sales from Rest of World, lower
margin sales in North America resulting from the change in distribution strategy
from direct to indirect channels and the lack of a favorable foreign currency
impact from a stronger dollar. Gross margin decreased to 47% for the six months
ended June 30, 1996 compared to 52% for the comparable period in 1995 for the
same reasons. Despite the declines in gross margin between 1996 and 1995, gross
margin increased in the second quarter of 1996 compared to 46% in the first
quarter of 1996.
CI intends to continue to pursue its indirect distribution strategy in
North America despite the short-term adverse impact on revenues. However, it
will continue to control costs strictly to improve financial performance.
33
<PAGE> 56
SELECTED HISTORICAL FINANCIAL DATA OF RVSI
The following selected consolidated financial data as of September 30,
1993, 1992 and 1991 and March 31, 1996 and for the years ended September 30,
1992 and 1991 and for the six month periods ended March 31, 1996 and 1995 are
derived from the unaudited consolidated financial statements of RVSI. In the
opinion of management, the unaudited consolidated financial statements have been
prepared on the same basis as the audited consolidated financial statements and
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial position and results of
operations for these periods. The results of the interim periods are not
necessarily indicative of the results for the full fiscal year. The selected
consolidated financial data as of September 30, 1995 and 1994 and for each of
the three years in the period ended September 30, 1995 have been derived from
the audited consolidated financial statements of RVSI and the report of Deloitte
& Touche LLP, independent auditors, on such consolidated financial statements is
included elsewhere herein. The selected consolidated financial data should be
read in conjunction with, and is qualified in its entirety by, the consolidated
financial statements of RVSI and the notes thereto and the other financial
information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, FISCAL YEAR ENDED SEPTEMBER 30,
------------------- --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................. $41,460 $28,168 $65,260 $47,839 $39,640 $30,408 $23,926
Income (loss) before (provision) benefit
from income taxes, discontinued
operations
and extraordinary items................. $ 8,233 $ 2,999 $ 8,184 $ 3,390 $ 763 $(1,270) $(2,394)
(Provision) benefit from income taxes..... $ (342) $ 2,067 $ 649 $ 291 $ 398 $ (48) $ (37)
Income (loss) before discontinued
operations and extraordinary items...... $ 7,891 $ 5,066 $ 8,833 $ 3,681 $ 1,161 $(1,318) $(2,431)
Discontinued operations................... $ -- $ -- $ -- $ -- $ -- $ 1,214 $ (333)
Income (loss) before extraordinary
items................................... $ 7,891 $ 5,066 $ 8,833 $ 3,681 $ 1,161 $ (104)(a) $(2,764)
Extraordinary items....................... $ -- $ -- $ -- $ -- $ -- $ 1,256(a) $ --
Net Income (loss)......................... $ 7,891 $ 5,066 $ 8,833 $ 3,681 $ 1,161 $ 1,152 $(2,764)
Income (loss) per common share before
discontinued operations and
extraordinary items:
Primary............................... $ 0.45 $ 0.33 $ 0.55 $ 0.25 $ 0.10 $ (0.14) $ (0.31)
Fully diluted......................... $ 0.45 $ 0.33 $ 0.53 $ 0.25 $ 0.10 $ (0.14) $ (0.31)
Income (loss) per common share before
extraordinary items:
Primary............................... $ 0.45 $ 0.33 $ 0.55 $ 0.25 $ 0.10 $ (0.01) $ (0.35)
Fully diluted......................... $ 0.45 $ 0.33 $ 0.53 $ 0.25 $ 0.10 $ (0.01) $ (0.35)
Net income (loss) per common share:
Primary............................... $ 0.45 $ 0.33 $ 0.55 $ 0.25 $ 0.10 $ 0.12 $ (0.35)
Fully diluted......................... $ 0.45 $ 0.33 $ 0.53 $ 0.25 $ 0.10 $ 0.12 $ (0.35)
Weighted average number of common shares
and equivalents:
Primary............................... 17,643 15,389(b) 16,199 14,593(b) 13,750(b) 9,349 7,903
Fully diluted......................... 17,643 15,474(b) 16,572 14,795(b) 13,750(b) 9,349 7,903
</TABLE>
RVSI did not pay any cash dividends for the periods presented.
- ---------------
(a) Includes an extraordinary item of $1,138,000 (net of income tax provision of
$97,000) relating to an agreement with General Motors Corporation, and an
extraordinary item of $72,000 resulting from the utilization of net
operating loss carryforwards, and an extraordinary item of $46,000 resulting
from the extinguishment of long-term debt.
(b) Weighted average number of common and common equivalent shares is calculated
using the Modified Treasury Stock method. See Note 1L of Notes to
Consolidated Financial Statements of RVSI.
34
<PAGE> 57
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
MARCH 31, ---------------------------------------------------
1996 1995 1994 1993 1992 1991
--------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Total assets....................... $58,255 $48,378 $22,408 $15,927 $11,318 $11,044
Current liabilities................ $15,915 $16,194 $10,384 $13,520 $ 7,121 $ 8,227
Total liabilities.................. $16,126 $16,272 $11,615 $13,819 $10,481 $13,048
Stockholders' equity
(deficiency)..................... $42,129 $32,106 $10,793 $ 2,108 $ 837 $(2,004)
Working capital.................... $33,703 $24,302 $ 6,178 $ (947) $ 1,972 $ 897
</TABLE>
- ---------------
Reference is made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations of RVSI" and to the Notes to the
Consolidated Financial Statements of RVSI for a complete discussion of the
financial data presented above.
35
<PAGE> 58
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF RVSI
RECENT DEVELOPMENTS
For the three and nine months ended June 30, 1996, RVSI reported revenues
of $21,455,000 and $62,916,000, respectively, as compared with revenues of
$17,361,000 and $45,529,000 for the same periods ended June 30, 1995. RVSI also
reported net income for the three and nine months ended June 30, 1996 of
$3,850,000 ($.22 per share, fully diluted) and $11,741,000 ($.66 per share,
fully diluted), respectively, as compared with net income of $948,000 ($.06 per
share, fully diluted) and $6,014,000 ($.38 per share, fully diluted) for the
same periods ended June 30, 1995. See "Risk Factors -- Risks Relating to RVSI --
Fluctuations in the Semiconductor Market."
RESULTS OF OPERATIONS
Six Months Ended March 31, 1996 and 1995
Revenues of $41,460,000 for the six months ended March 31, 1996 represent
an increase of $13,292,000, or approximately 47%, in comparison to revenues of
$28,168,000 for the six months ended March 31, 1995. The increase in revenues
was a result of substantially increased shipments of the RVSI's LS-3000 Series
semiconductor lead inspection systems.
Gross profit margins for the six months ended March 31, 1996 and March 31,
1995 were 58% and 56%, respectively. The increase in gross profit margins during
fiscal 1996 was primarily due to the improved profitability of the LS-3000
Series product lines.
Continued development of the LS-3000 Series of lead scanning systems, the
ID-1 aircraft wing ice detection systems, and computerized visual inspection
equipment primarily accounted for $6,213,000 in research and development expense
during the six months ended March 31, 1996 as contrasted with $4,671,000 during
the comparable period in fiscal 1995. 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, 1996, $473,000
of these costs were capitalized as compared to $273,000, for the comparable
period in fiscal 1995.
Selling, general and administrative costs increased by $2,233,000, or
approximately 29%, for the six months ended March 31, 1996 as compared to the
prior comparable period, primarily as a result of increased marketing and
distribution costs. RVSI incurred $226,000 for merger expenses for the six
months ended March 31, 1996 relating to the acquisition of I.D. Matrix by RVSI
on October 23, 1995.
Net income for the six months ended March 31, 1996 was $7,891,000, or $.45
per share as compared to net income of $5,066,000, or $.33 per share (inclusive
of a tax benefit of $.21 per share related to the anticipated future utilization
of net operating loss carryforwards and other deferred tax assets) for the six
months ended March 31, 1995.
Years Ended September 30, 1995 and 1994
Revenues of $65,260,000 for the year ended September 30, 1995 represent an
increase of $17,421,000, or 36%, in comparison to revenues of $47,839,000 for
the year ended September 30, 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. Sales of the LS-2000 and LS-3000 Series
accounted for revenues of $44,298,000 for the year ended September 30, 1995,
representing an increase of $20,887,000, or 89%, as contrasted with LS-2000
sales of $23,411,000 for the year ended September 30, 1994. Acuity revenues of
$19,153,000 for the year ended September 30, 1995 represent a decrease of
$3,015,000, or 14%, in comparison to revenues of $22,168,000 for the year ended
September 30, 1994. The decrease in revenues was primarily as a result of
Acuity's lack of securing orders from one or two customers which have
traditionally accounted for a significant percentage of Acuity's revenues.
36
<PAGE> 59
Gross profit margins for the fiscal years ended September 30, 1995 and 1994
were 56% and 53%, respectively. The increase in gross profit margins during
fiscal 1995 was primarily due to the improved profitability of the LS-2000 and
LS-3000 Series product lines.
Continued development of the LS-3000 Series of lead scanning systems, the
ID-1 aircraft wing ice detection systems, and computerized visual inspection
equipment primarily accounted for $10,435,000 in research and development
expense, net of capitalized software development costs, during the year ended
September 30, 1995, as contrasted with $8,013,000 during fiscal 1994. In its
fiscal year ended September 30, 1995, RVSI capitalized $535,000 of its software
development costs, as compared to $433,000 over the comparable 1994 period, in
accordance with the provisions of Statement of Financial Accounting Standards
No. 86.
Selling, general and administrative costs increased by $2,952,000, or 21%,
for the year ended September 30, 1995 as compared to the prior fiscal year,
primarily as a result of increased marketing and distribution costs for the year
ended September 30, 1995. RVSI incurred $1,305,000 for merger expenses relating
to the acquisition of Acuity and I.D. Matrix by RVSI on September 20, 1995 and
October 23, 1995, respectively. For the year ended September 30, 1995, net
interest income was $278,000 as compared to net interest expense of $109,000 in
the comparable period in 1994. The increase is as a result of investing
additional available funds.
Net income for the year ended September 30, 1995 was $8,833,000, or $.53
per share (fully diluted), as compared to net income of $3,681,000, or $.25 per
share (fully diluted), for the year ended September 30, 1994.
During the fiscal years ended September 30, 1995 and 1994, RVSI recorded
benefits from income taxes in the amounts of $649,000, and $291,000,
respectively. Such benefits were primarily the result of decreases in the
valuation allowances relating to deferred tax assets which emanated from RVSI's
profitable operations in fiscal 1995 and 1994, respectively, and the extent to
which RVSI can substantiate projected future earnings.
The deferred tax assets at September 30, 1995 and 1994 of $2,375,000 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 projected as of the respective balance sheet dates. The deferred
tax assets at September 30, 1995 and 1994 have been limited to the benefit to be
derived from projected future income, due to RVSI's projected future
profitability currently being primarily dependent on one existing product line.
Years Ended September 30, 1994 and 1993
Revenues of $47,839,000 for the year ended September 30, 1994 represented
an increase of $8,199,000, or 21%, in comparison to revenues of $39,640,000 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 design to replace the LS-2000 Series
system. Sales of 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 the LS-2000 sales of $18,316,000 for the
year ended September 30, 1993. Sales of the LS-3000 were $5,826,000 for the year
ended September 30, 1994. Acuity 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 and Williamson for 60
machine vision-based integrated package inspection systems.
Gross profit margins for the fiscal years ended September 30, 1994 and 1993
were 53% and 51%, 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 line.
Continued development of the LS-2000 and the LS-3000 Series of lead
scanning systems, the ID-1 aircraft wing ice detection systems, and computerized
visual inspection equipment, primarily accounted for $8,013,000 in research and
development expense, net of capitalized software development cost, during the
year ended September 30, 1994, as contrasted with $6,425,000 during fiscal 1993.
In its fiscal year ended
37
<PAGE> 60
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.
Selling, general and administrative costs increased by $2,392,000, or 21%,
for the year ended September 30, 1994 as compared to the prior fiscal year,
primarily as a result of increased marketing and distribution costs. For the
year ended September 30, 1994, net interest expense was $109,000 compared to net
interest expense of $324,000 in the comparable 1993 period.
Net income for the year ended September 30, 1994 was $3,681,000, or $.25
per share (fully diluted), as compared to net income of $1,161,000, or $.10 per
share (fully diluted), 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 amount of $291,000 and $398,000, respectively.
Such benefits were primarily the result of decreases in the valuation allowances
relating to deferred tax assets 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 asset at September 30, 1994 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.
LIQUIDITY AND CAPITAL RESOURCES
Six Months Ended March 31, 1996
RVSI's operating, investing, and financing activities for the six months
ended March 31, 1996 generated net cash and cash equivalents of $1,161,000 as
follows:
-- Operating activities utilized $240,000 during the six months ended March
31, 1996;
-- $1,000,000 was generated from the maturity of short-term investments;
-- $2,203,000 was used to purchase property and equipment, primarily
leasehold improvements and office furniture and equipment, during the
six months ended March 31, 1996;
-- $2,151,000 was generated through the issuance of common stock upon the
exercise of stock options and warrants;
-- $270,000 was used to repay notes payable;
-- $743,000 was provided through borrowings under a line of credit
facility;
-- The effect of exchange rate changes reduced cash and cash equivalents by
$20,000.
Year Ended September 30, 1995
RVSI's operating, investing and financing activities for the year ended
September 30, 1995 generated net cash and cash equivalents of $14,634,000 as
follows:
-- Operating activities provided $4,308,000 during the fiscal year ended
September 30, 1995;
-- $2,521,000 was used to purchase property and equipment, primarily
computer and demonstration equipment;
-- $1,484,000 was invested primarily in U.S. Treasury Notes;
-- $1,500,000 was received from the maturity of investments;
-- $2,807,000 was received from proceeds of issuance of notes and a bank
loan;
-- $1,551,000 was used to repay a bank loan and related interest;
38
<PAGE> 61
-- Other financing activities provided $11,572,000 primarily through the
issuance of Common Stock and warrants in a private equity placement and
the issuance of Common Stock upon the exercise of stock options and
warrants;
-- The effect of exchange rate changes on cash and cash equivalents was
$3,000.
RVSI's inventories at September 30, 1995 of $8,461,000 increased by
$4,045,000 from $4,416,000 as of September 30, 1994 primarily to support high
production volumes. Accounts receivable at September 30, 1995 of $12,082,000
increased by $4,861,000 from $7,221,000 as of September 30, 1994 primarily due
to higher operating levels and increased sales to larger customers with longer
payment terms.
On November 20, 1995, RVSI obtained a revolving line of credit from a bank
that provides for maximum borrowings of $6,000,000. The agreement expires on
January 31, 1999. Borrowings under the agreement are secured by all accounts
receivable of RVSI and will bear interest at the adjusted LIBOR rate, as
defined, plus two percent. RVSI will pay a commitment fee of one quarter of one
percent per annum on any unused portion of the credit facility. The terms of the
agreement, among other matters, require RVSI to maintain certain tangible net
worth, debt to equity, working capital, and earnings before depreciation and
amortization to long-term debt ratios and prohibit the payment of cash
dividends.
RVSI anticipates that its working capital needs for fiscal 1996 will be
satisfied by operating revenues and, if necessary, through borrowings under the
existing line of credit.
EXPORT SALES
Foreign export sales accounted for 64%, 41% and 52% of RVSI's revenues in
fiscal 1995, 1994 and 1993, respectively.
PRIVATE EQUITY PLACEMENTS
During fiscal year 1995, RVSI entered into an agreement with a group of
investors pursuant to which RVSI received approximately $9,386,000, after
expenses, in exchange for the issuance of 1,110,000 shares of RVSI's Common
Stock. RVSI also issued warrants exercisable through June 2000 to purchase
approximately 68,000 shares of RVSI's Common Stock at exercise prices ranging
from $8.75 to $9.00 per share.
During fiscal year 1995, I.D. Matrix entered into an agreement with a group
of investors and certain then existing stockholders. Under the agreement, I.D.
Matrix received approximately $1,765,000 after expenses, in exchange for 46,447
shares of I.D. Matrix's common stock (approximately 119,000 equivalent shares of
RVSI common stock). I.D. Matrix used approximately $785,000 of the net proceeds
to satisfy certain notes payable and related accrued interest and $60,000 of the
net proceeds to satisfy certain accounts payable.
FOREIGN CURRENCY TRANSACTION
RVSI does not currently engage in international currency hedging
transactions to mitigate its foreign currency exposure. To the extent RVSI is
unable to match revenue received in foreign currencies with expenses paid in the
same currency, it is exposed to possible losses on international currency
transactions.
RECENT FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENTS
Recent pronouncements of the Financial Accounting Standards Board, which
are not required to be adopted at this date, include Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting For the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and SFAS No. 123,
"Accounting for Stock Based Compensation." These pronouncements are not expected
to have a material impact on the Company's financial statements.
EFFECT OF INFLATION
Management of RVSI believes that the effect of inflation has not been
material during each of the years ended September 30, 1995, 1994, and 1993,
respectively, and the six months ended March 31, 1996.
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<PAGE> 62
PROPOSED ACQUISITION
On July 23, 1996, RVSI announced that it had entered into the Merger
Agreement with CI pursuant to which CI is to become a wholly owned subsidiary of
the Company. CI designs, manufactures, markets and services standard bar code
products, data collection networks, and systems for the data collection and
material handling/industrial markets.
The Merger Agreement calls for RVSI to issue 0.177805207 shares of its
common stock for each CI share, or approximately 1,929,416 shares, in exchange
for all of CI's outstanding common stock. In addition, CI's outstanding stock
options and warrant are to be exchanged for options upon RVSI's Common Stock in
the same 0.177805207 to one ratio. Such exchange ratio is subject to adjustment
(plus or minus 10%) in accordance with the terms of the Merger Agreement.
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
The following unaudited condensed combined financial information sets forth
the combined financial position and combined results of operations of RVSI and
CI assuming the Merger will be accounted for using the "pooling of interests"
method and that the Merger was consummated (i) as of March 31, 1996, for the
unaudited pro forma condensed combined balance sheets and (ii) as of the
beginning of the earliest period presented in the unaudited pro forma condensed
combined statements of operations.
For all periods presented in the unaudited pro forma condensed combined
statements of operations, the weighted average number of common and common
equivalent shares gives effect to the proposed issuance of 0.177805207 of a
share of RVSI common stock in exchange for each outstanding share of CI 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 $20.75 or less than $17.00 per share during the 25 trading days ending
on (and including) the second trading day immediately prior to the date of the
Special Meeting, the number of shares of RVSI common stock issued to CI
stockholders would be proportionately adjusted. In no event, however, will the
Exchange Ratio be more than 0.195585727 or less than 0.160024686.
The unaudited pro forma information combines the historical balance sheets
of RVSI and CI as of March 31, 1996 and the historical statements of operations
of RVSI for the years ended September 30, 1995, 1994 and 1993, and for the six
month periods ended March 31, 1996 and 1995 with the historical statements of CI
for the years ended December 31, 1995, 1994 and 1993, and for the six month
periods March 31, 1996 and 1995, respectively.
The following pro forma information is presented for illustration 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 condensed 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 CI which have been included elsewhere herein and incorporated by reference
into this Proxy Statement/Prospectus.
40
<PAGE> 63
SUMMARY OF UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED FOR THE YEAR ENDED
----------------------- SEPTEMBER 30,
MARCH 31, MARCH 31, -------------------------------
1996 1995 1995 1994 1993
--------- --------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
REVENUES................................ $56,090 $42,596 $93,005 $73,865 $61,530
COST OF REVENUES........................ 25,151 19,455 42,791 35,876 31,206
------- ------- ------- ------- -------
GROSS PROFIT............................ 30,939 23,141 50,214 37,989 30,324
------- ------- ------- ------- -------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative... 15,372 12,964 27,321 24,231 20,319
Research and development.............. 7,441 5,983 12,980 10,255 8,286
Non-recurring costs................... 226 440 1,305 469 1,632
Interest (income) expense, net........ (466) (49) (273) 90 287
------- ------- ------- ------- -------
22,573 19,338 41,333 35,045 30,524
------- ------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES....... 8,366 3,803 8,881 2,944 (200)
INCOME TAX BENEFIT
(PROVISION)........................... (310) 2,046 635 227 335
------- ------- ------- ------- -------
NET INCOME.............................. $ 8,056 $ 5,849 $ 9,516 $ 3,171 $ 135
======= ======= ======= ======= =======
NET INCOME PER SHARE:
Primary............................... $ 0.41 $ 0.34 $ 0.52 $ 0.19 $ 0.03
======= ======= ======= ======= =======
Fully diluted......................... $ 0.41 $ 0.34 $ 0.51 $ 0.19 $ 0.02
======= ======= ======= ======= =======
WEIGHTED AVERAGE NUMBER
OF COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING:
Primary............................... 19,692 17,193(a) 18,156 16,433(a) 15,385(a)
======= ======= ======= ======= =======
Fully diluted......................... 19,692 17,298(a) 18,620 16,636(a) 15,385(a)
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
41
<PAGE> 64
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
MARCH 31, 1996
<TABLE>
<CAPTION>
RVSI CI
MARCH 31, MARCH 31, COMBINED
1996 1996 MARCH 31,
HISTORICAL HISTORICAL ADJUSTMENTS 1996
---------- ---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................... $ 17,585 $ 2,200 $ 19,785
Investments..................................... 1,000 -- 1,000
Accounts receivable, net........................ 14,744 6,204 20,948
Inventories..................................... 13,386 3,745 17,131
Deferred income taxes........................... 2,375 -- 2,375
Prepaid expenses and other current assets....... 528 446 974
-------- -------- ------- --------
Total current assets.................... 49,618 12,595 -- 62,213
PROPERTY, PLANT AND EQUIPMENT, Net................ 5,584 1,090 6,674
INVESTMENTS....................................... 992 -- 992
OTHER ASSETS...................................... 2,061 -- 2,061
-------- -------- ------- --------
Total Assets............................ $ 58,255 $ 13,685 $ -- $ 71,940
======== ======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loan payable.................................... $ 2,128 $ 974 $ 3,102
Accounts payable................................ 8,606 3,109 11,715
Accrued expenses and other current
liabilities.................................. 4,666 2,254 1,400(b) 8,320
Advance contract payments received.............. 515 -- 515
-------- -------- ------- --------
Total current liabilities............... 15,915 6,337 1,400 23,652
OTHER LIABILITIES................................. 211 53 264
-------- -------- ------- --------
Total liabilities....................... 16,126 6,390 1,400 23,916
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock -- RVSI ($0.01 par value).......... 165 -- 19(c) 184
Common stock -- CI ($0.10 par value)............ -- 1,087 (1,087)(c) --
Additional paid-in capital...................... 111,973 24,013 1,068(c) 137,054
Deferred compensation........................... -- (53) (53)
Accumulated deficit............................. (70,132) (17,784) (1,400)(b) (89,316)
Cumulative translation adjustment............... 123 32 -- 155
-------- -------- ------- --------
Total stockholders' equity.............. 42,129 7,295 (1,400) 48,024
-------- -------- ------- --------
Total Liabilities and Stockholders'
Equity................................ $ 58,255 $ 13,685 $ -- $ 71,940
======== ======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
42
<PAGE> 65
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
RVSI CI
SEPTEMBER 30, DECEMBER 31, COMBINED
1995 1995 SEPTEMBER 30,
HISTORICAL HISTORICAL 1995
------------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES............................................. $65,260 $ 27,745 $93,005
COST OF REVENUES..................................... 28,726 14,065 42,791
------- ------- -------
GROSS PROFIT......................................... 36,534 13,680 50,214
------- ------- -------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative................ 16,888 10,433 27,321
Research and development........................... 10,435 2,545 12,980
Non-recurring costs................................ 1,305 -- 1,305
Interest (income) expense, net..................... (278) 5 (273)
------- ------- -------
28,350 12,983 41,333
------- ------- -------
INCOME BEFORE INCOME TAXES........................... 8,184 697 8,881
INCOME TAX BENEFIT (PROVISION)....................... 649 (14) 635
------- ------- -------
NET INCOME........................................... $ 8,833 $ 683 $ 9,516
======= ======= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
43
<PAGE> 66
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
RVSI CI
SEPTEMBER 30, DECEMBER 31, COMBINED
1994 1994 SEPTEMBER 30,
HISTORICAL HISTORICAL 1994
------------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES............................................. $47,839 $ 26,026 $73,865
COST OF REVENUES..................................... 22,391 13,485 35,876
------- ------- -------
GROSS PROFIT......................................... 25,448 12,541 37,989
------- ------- -------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative................ 13,936 10,295 24,231
Research and development........................... 8,013 2,242 10,255
Non-recurring costs................................ -- 469 469
Interest (income) expense, net..................... 109 (19) 90
------- ------- -------
22,058 12,987 35,045
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES.................... 3,390 (446) 2,944
INCOME TAX BENEFIT (PROVISION)....................... 291 (64) 227
------- ------- -------
NET INCOME (LOSS).................................... $ 3,681 $ (510) $ 3,171
======= ======= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
44
<PAGE> 67
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1993
<TABLE>
<CAPTION>
RVSI CI
SEPTEMBER 30, DECEMBER 31, COMBINED
1993 1993 SEPTEMBER 30,
HISTORICAL HISTORICAL 1993
------------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES............................................. $39,640 $ 21,890 $61,530
COST OF REVENUES..................................... 19,493 11,713 31,206
------- ------- -------
GROSS PROFIT......................................... 20,147 10,177 30,324
------- ------- -------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative................ 11,544 8,775 20,319
Research and development........................... 6,425 1,861 8,286
Non-recurring costs................................ 1,091 541 1,632
Interest (income) expense, net..................... 324 (37) 287
------- ------- -------
19,384 11,140 30,524
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES.................... 763 (963) (200)
INCOME TAX BENEFIT (PROVISION)....................... 398 (63) 335
------- ------- -------
NET INCOME (LOSS).................................... $ 1,161 $ (1,026) $ 135
======= ======= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
45
<PAGE> 68
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
RVSI CI
SIX MONTHS ENDED SIX MONTHS ENDED COMBINED
MARCH 31, 1996 MARCH 31, 1996 SIX MONTHS ENDED
HISTORICAL HISTORICAL MARCH 31, 1996
---------------- ---------------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES................................... $ 41,460 $ 14,630 $ 56,090
COST OF REVENUES........................... 17,267 7,884 25,151
------- ------- -------
GROSS PROFIT............................... 24,193 6,746 30,939
------- ------- -------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative...... 9,999 5,373 15,372
Research and development................. 6,213 1,228 7,441
Non-recurring costs...................... 226 -- 226
Interest (income) expense, net........... (478) 12 (466)
------- ------- -------
15,960 6,613 22,573
------- ------- -------
INCOME BEFORE INCOME TAXES................. 8,233 133 8,366
INCOME TAX BENEFIT (PROVISION)............. (342) 32 (310)
------- ------- -------
NET INCOME................................. $ 7,891 $ 165 $ 8,056
======= ======= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
46
<PAGE> 69
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
RVSI CI
SIX MONTHS ENDED SIX MONTHS ENDED COMBINED
MARCH 31, 1995 MARCH 31, 1995 SIX MONTHS ENDED
HISTORICAL HISTORICAL MARCH 31, 1995
---------------- ---------------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES................................... $ 28,168 $ 14,428 $ 42,596
COST OF REVENUES........................... 12,335 7,120 19,455
------- ------- -------
GROSS PROFIT............................... 15,833 7,308 23,141
------- ------- -------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative...... 7,766 5,198 12,964
Research and development................. 4,671 1,312 5,983
Non-recurring costs...................... 440 -- 440
Interest (income) expense, net........... (43) (6) (49)
------- ------- -------
12,834 6,504 19,338
------- ------- -------
INCOME BEFORE INCOME TAXES................. 2,999 804 3,803
INCOME TAX BENEFIT (PROVISION)............. 2,067 (21) 2,046
------- ------- -------
NET INCOME................................. $ 5,066 $ 783 $ 5,849
======= ======= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
47
<PAGE> 70
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
(a) Weighted average number of common and common share equivalents are
calculated using the Modified Treasury Stock method.
(b) The pro forma adjustment to accrued expenses and accumulated deficit
represents the estimated total expenses related to the Merger.
(c) The pro forma adjustment to common stock and additional paid-in capital
represents the exchange of CI common stock for RVSI common stock.
48
<PAGE> 71
BUSINESS OF CI
GENERAL
Founded in 1968, CI designs, manufactures, markets and services standard
bar code products, data collection networks, and systems for the data collection
and material handling/industrial markets. CI markets its products in the United
States through its direct sales organization and through distributors, system
integrators and value added resellers. As an international organization, CI and
its foreign subsidiaries have sales and service offices located in Belgium,
France, Germany and the United Kingdom, as well as a network of distributors and
systems integrators in locations throughout the world. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of CI,"
for additional discussion of developments for the year ended December 31, 1995,
and the three months ended March 31, 1996.
BAR CODE TECHNOLOGY
A bar code label consists of bars printed on a contrasting background. By
varying the width of the printed bars as well as the spaces between them, a bar
code label can be encoded with information such as identification number,
origin, composition or destination of the product to which the label is
attached. Bar code scanners read bar codes with high intensity light and convert
the reflected light patterns into electrical impulses. These impulses are
transmitted to a decoding unit which translates them to conventional digital
information for use by a customer in accordance with specific application
requirements. Scanning and decoding units, as well as other data entry
terminals, can be grouped into a network for high speed data transmission
between the units and a larger host computer system.
PRODUCTS
CI designs, manufactures or purchases for resale, and services a broad line
of bar code data collection products, both hardware and software, all of which
are within one industry segment. For discussion purposes, however, CI
categorizes its product line into four different product groups:
Material Handling Data Identification Products
CI manufactures a series of fixed position laser scanners for automation
and material handling applications found in warehousing, distribution and
manufacturing control environments. In 1995, CI introduced the CiMAX(TM) 7500
scanner. The CiMAX 7500 is an intelligent, fixed position laser scanner with
Ethernet networking capabilities. It is designed specifically for material
handling applications where high reading rates, high throughput, and local or
networked distributed processing and control are important to application
success. The CiMAX 7500 combines the capabilities of a scanner, decoder, PC and
PLC in one product. The OMNI CIX(TM), an omnidirectional fixed position laser
scanner designed specifically for material handling applications where the bar
code label or labeled item can be rotated at any angle, was introduced in 1994.
The Scanstar(TM) 10/15 miniature bar code scanner and the Scanstar 80/85 high
performance scanner are utilized in factories, warehouses and distribution
centers to identify, count, sort or direct objects as they move throughout a
facility on a conveyor system. These series of scanners are available with a
range of sophisticated operational features whose physical characteristics and
built-in options address a wide variety of customer requirements.
Factory Data Collection Terminals and Networks
For factory data collection applications, which includes scanners,
terminals and workstations, as well as networks to provide data communications
between the various units, CI manufactures the Starnode(TM) Data Collection
Network. These products are used in a wide range of applications such as
production accounting, labor reporting and work-in-process tracking where
accurate data collection and management is essential. The heart of the Starnode
Data Collection Network is an intelligent network controller which, when
connected to a series of bar code data collection terminals and scanning
devices, provides the necessary components for a turn-key data collection system
for a host computer. The Starnode(TM) Data Collection Network also includes
49
<PAGE> 72
software to operate the system and assist in various applications. In 1995, CI
introduced the CiMAX 6000, an open system based data collection terminal. The
CiMAX 6000 is suitable for applications such as quality control, work in process
and shipping and receiving. It interfaces to any host computer using the
established TCP/IP connectivity protocol and Ethernet transport hardware.
Additionally, the CiMAX 6000 is supported by CI's Starnode(TM) Data Collection
Network enabling users to select the computing environment that best suits their
requirements.
Customer Support Services
CI's service organization offers its customers a variety of support
services including custom software and systems, field or depot repair, site
installation services, training and technical support.
Bar Code Tools
CI also manufactures or purchases for resale a range of bar code data
collection tools. Included in this category are bar code label printers,
decoders, hand held scanning devices and portable bar code terminals.
CUSTOMERS; MARKETING ARRANGEMENTS; EXPORTS
CI's customers encompass a wide cross-section of businesses and
institutions, including postal services, freight companies, and manufacturers of
electronics, pharmaceuticals, consumer goods, textiles and automobiles.
During 1993, one customer, Canada Post, accounted for approximately 10% of
CI's revenue. During 1995 and 1994, no one customer accounted for more than 10%
of revenue.
CI's product line is sold by its direct sales organizations in the United
States and its foreign subsidiaries in Belgium, France, Germany and the United
Kingdom. It also distributes its products in these areas and other parts of the
world through distributors, value added resellers and systems integrators.
CI also sells products and components to original equipment manufacturers
("OEMs"), including materials handling equipment manufacturers and system
integration firms. These firms combine CI's products with other hardware and
software to create customized information and control systems for sale to
end-users.
CI offers a six month to one year warranty on its products. Warranty claims
have not been significant in the last 10 years.
Sales by CI's Canadian subsidiary, its four European subsidiaries and other
export sales, principally to Korea, Australia, New Zealand, and other
non-European countries, accounted for approximately 64%, 60%, 52%, and 57% of
CI's revenue for the three months ended March 31, 1996 and for the years ended
December 31, 1995, 1994, and 1993, respectively. See Note 9 to the Consolidated
Financial Statements of CI.
MANUFACTURING AND SUPPLY
CI designs and manufactures the majority of the items in its product line.
CI's manufacturing operations consist primarily of assembling electrical and
mechanical components that have been purchased from vendors, testing the
resulting products, and shipping finished products to customers.
Some suppliers are CI's sole source for certain components. Should products
become unavailable from existing suppliers, other sources would be available,
although added costs and manufacturing delays might result. In particular, CI
purchases the galvo assembly used in CI's ScanStar 10, ScanStar 15, CiPro 710
and CiPro 715 products from Laser Scanning Products, a private company believed
by CI to be owned solely by one individual. CI is currently undertaking a
development effort to provide an alternative to the galvo assembly. If CI were
unable to obtain a sufficient supply of the galvo assembly from Laser Scanning
Products, it is likely that CI would experience a significant delay and
additional costs in developing an alternative source. See "Risk
Factors -- Dependence on Single Source Supplier." From time to time, CI
experiences difficulty in obtaining product components during periods when there
is a general shortage of parts in the electronics industry resulting in
production and shipping delays.
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<PAGE> 73
CI's Service Division provides repair and maintenance for all product
lines. Most service activities are performed on a return-to-factory basis.
COMPETITION
The bar code industry is highly competitive. Several of the firms with
which CI competes directly have greater financial, technical and marketing
resources and may have more extensive product lines than CI. In the area of
information and control systems, CI also competes with OEMs and end-users who
act as their own system assemblers and integrators. CI faces the possibility of
changes in market share due to technological innovation, shifting product
emphasis among existing competitors and new entrants into the marketplace.
CI also faces competition in some applications from companies offering
automatic identification equipment and systems not based on bar code technology.
Examples of such alternative technologies include 2-D matrix bar coding, optical
character recognition, magnetic character recognition and radio frequency data
collection and transmission.
CI competes primarily on the basis of the quality, price and performance of
its products and services and continuing product innovation in a rapidly
changing environment.
PATENTS AND LICENSES
CI relies primarily on a combination of copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect its
proprietary rights. CI seeks to protect is software, documentation and other
written materials under trade secret and copyright laws, which may afford only
limited protection. CI also holds 14 domestic and 12 foreign patents, but relies
for its success primarily on the quality of its products and services and
continuing product innovations. Despite CI's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of CI's technology or
to obtain and use information that CI regards as proprietary. The laws of some
foreign countries do not protect CI's proprietary rights to as great an extent
as do the laws of the United States, and, because of CI's significant
international presence, there can be no assurance that CI will be able to
protect its proprietary rights in the jurisdictions in which it conducts
business or in which products incorporating its technology are sold. There can
be no assurance that CI's means of protecting its proprietary rights will be
adequate or that CI's competitors will not independently develop similar
technology.
BACKLOG; WORKING CAPITAL
As of March 31, 1996, CI had a backlog of firm orders of approximately $3.3
million. This backlog is scheduled to be shipped within the next 12 months. At
March 31, 1995, backlog was approximately $3.8 million, and substantially all
was shipped within 12 months thereafter. CI's business is influenced by capital
spending patterns of its customers which have in some years a greater impact on
sales in the fourth quarter.
CI has significant working capital requirements in order to stock an
adequate number of standard products to fill orders on short notice and to
produce and complete systems. Domestic sales of standard products are generally
on 30 day open account terms and credit terms for foreign sales are 30 days,
subject to a letter of credit where credit risk considerations warrant. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital Resources of CI."
PRODUCT DEVELOPMENT
CI expended approximately $.6, $2.5, $2.2 and $1.9 million for Company
sponsored research and development, both hardware and software, during the three
months ended March 31, 1996 and the fiscal years 1995, 1994 and 1993,
respectively. Software is becoming a greater portion of the total development
effort as the complexity of CI's products increase with the use of integrated
circuits and microprocessors.
CI's current efforts are directed at improving and enhancing its product
line through the introduction of successor models with higher performance
levels, greater capacity and more attractive packaging and lower costs through
miniaturization and the increased use of integrated circuitry.
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<PAGE> 74
CI is developing several new product offerings for introduction in 1996 or
shortly thereafter. These include the OMNI-CIX-M(TM), a mini omni directional
scanner currently under development, and the CiMAX 7800, a high performance
fixed position laser scanner with auto focus capabilities, is currently being
tested. There can be no assurance that these products will be completed on a
timely basis, if at all, or that they will be commercially successful. Two
significant product introductions in 1995 were the CiMAX 7500, an intelligent,
fixed position laser scanner, and the CiMAX 6000, an open systems based data
collection terminal.
GOVERNMENT REGULATION
The Center for Devices of Radiological Health (CDRH) of the Food and Drug
Administration has promulgated regulations applicable to manufacturers of laser
products. Such regulations classify laser products by assessable radiation
levels and establish standards for protective housing, safety interlocks and the
affixing of labels alerting users not to stare into the laser beam.
CDRH also requires manufacturers to file annual laser product reports. CI
believes that it has complied with these regulations. While the nature and scope
of these regulations could change in the future, CI does not expect the same to
have a material effect on capital expenditures, earnings or competitive
position.
EMPLOYEES
As of June 30, 1996, CI had 138 full-time employees and 9 part-time
employees. There are no collective bargaining agreements with CI. CI considers
its relations with its employees to be excellent.
FACILITIES
CI's principal executive office and manufacturing facilities occupy 60,000
square feet leased in a building in Canton, Massachusetts near the junction of
Massachusetts Route 128 and Interstate 95. CI occupies the premises under a
lease expiring in July, 1998. The European subsidiaries lease sales offices. CI
considers its present facilities to be adequate for its present business and any
expansion in its business which may occur in the foreseeable future.
CI also leases sales and service facilities in or near Detroit, Atlanta,
San Jose, Dallas and Chicago in the United States. These leases are for short
terms and the amounts involved are not material. See Note 4 to Consolidated
Financial Statements of CI.
LEGAL PROCEEDINGS
CI is not a party to any material pending legal proceedings.
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<PAGE> 75
MANAGEMENT OF CI
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of CI are as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
----------------------------------- ---- ----------------------------------- --------
<S> <C> <C> <C>
Richard C. Close................... 53 President, Chief Executive Officer 1992
and Director
Jeffrey A. Weber................... 49 Senior Vice President -- Operations
and Finance, Treasurer
Thomas J. Chisholm................. 46 Vice President -- Research and
Development
Stephen L. Abbey................... 43 Vice President -- Sales and
Marketing, North America
John M. Hill(1).................... 58 Director 1992
Tomas Kohn(2)...................... 55 Chairman of the Board, Director 1987
Jan A. Smolders(1)(2).............. 56 Director 1993
Edward J. Stewart, III(2).......... 50 Director 1995
Richard S. Wilcox(1)............... 66 Director 1969
</TABLE>
- ---------------
(1) Member of CI's Audit Committee.
(2) Member of CI's Stock Incentive, Nominations and Compensation Committee.
Mr. Close has been President and Chief Executive Officer of CI since May
1993. From 1987 to 1993, Mr. Close served as President of Kodak Electronic
Printing Systems, Inc., a manufacturer of digital pre-press equipment for the
printing and publishing industries. See "Executive Compensation -- Employment
Agreement."
Mr. Weber joined CI in June 1994 as Senior Vice President -- Operations and
Finance, and Treasurer. From 1991 to 1994, Mr. Weber was first Vice
President -- Finance and Chief Operating Officer, and then President and Chief
Executive Officer of Geo. E. Keith Company, a shoe manufacturer.
Mr. Chisholm joined CI in 1983 as Manager of Engineering, and served as
Vice President of Engineering from 1986 to 1991, and Vice President -- Material
Handling from 1991 to 1993. Mr. Chisholm became Vice President -- Research and
Development in 1993.
Mr. Abbey joined CI in February 1995 as Vice President -- Sales and
Marketing, North America. From 1993 to 1995, Mr. Abbey was Vice
President -- Sales and Marketing for Howtek, Inc., an electronic imaging company
for the graphic arts industry. From 1989 to 1993, Mr. Abbey was Vice President
and General Manager of Professional Color Systems for Kodak Electronic Printing
Systems, Inc., a manufacturer of digital pre-press equipment for the printing
and publishing industries.
Mr. Hill has been a self-employed management consultant in strategic
planning and business development in material handling, warehousing and
distribution since 1990. From 1989 to 1990, Mr. Hill was Vice President of
Control Module, Inc., a manufacturer of automatic identification and data
collection systems. From 1988 to 1989, Mr. Hill was an independent consultant
and was affiliated with Tompkins Associates, a material handling consulting
firm. From 1985 to 1988, Mr. Hill served as President of Logisticon, Inc., a
supplier of material management systems.
Mr. Kohn has been a Professor at Boston University since 1988. He has been
a Director of Conduit del Ecuador, a steel tubing manufacturer, since 1974, and
a Director of the steel wire manufacturer, Ideal-Alambrec, since 1971. Mr. Kohn
serves as a Director of CI as a designee of N.V. Bekaert S.A. ("Bekaert"), a
manufacturer of steel and wire products. See "Principal Stockholders of CI."
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<PAGE> 76
Mr. Smolders has been the President of Bekaert Corporation, the United
States affiliate of Bekaert, since 1992. From 1989 through 1991, Mr. Smolders
was the Vice President and General Manager of the steel cord division of Bekaert
Corporation. Mr. Smolders serves on the Board of Directors of CI as a designee
of Bekaert. See "Principal Stockholders of CI."
Mr. Stewart has been the General Partner of Kestrel Venture Management for
two years and of Corning Venture Management since 1983, both venture capital
firms. From 1982 to 1992, Mr. Stewart served as the President of Corning Capital
Corporation, a private investment firm. Mr. Stewart has been a Director of
Corning Capital Corporation since 1982 and a Director of MicroTouch Systems,
Inc., a manufacturer of touch-sensitive computer screens, since 1984.
Mr. Wilcox, is a private investor. Mr. Wilcox has also served for more than
five years as a Director of Sheldahl, Inc., a manufacturer of flexible printed
circuits and composite materials for the electronics industry.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation during
the last three fiscal years of the Chief Executive Officer and each of the other
most highly compensated executive officers of CI whose annual salary and
incentive compensation, if any, exceeded $100,000 for services in all capacities
to CI during the last fiscal year ended December 31, 1995. The executive
officers listed in the Summary Compensation Table are collectively referred to
as the "Named Executive Officers." No other executive officer of CI received an
annual salary and bonus in excess of $100,000 for services in all capacities to
CI during the last fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
------------------------------------- ------------------------------------------
OTHER RESTRICTED SECURITIES
FISCAL ANNUAL STOCK UNDERLYING ALL OTHER
YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION ENDED ($) ($) ($) ($) (#)(16) ($)(1)
- --------------------------- ------ -------- ------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard C. Close........... 1995 $150,000 $ 0 $ 0 $ 0(2) 150,000(3) $2,640
President and Chief 1994 150,000 0 0 0 0 2,640
Executive Officer 1993 98,077 0 1,167(4) 144,000(5) 200,000(6) 2,640
Jeffrey A. Weber........... 1995 115,000 10,000 0 0 0 1,826
Senior Vice President 1994 65,512(7) 14,583 -- 31,875(8) 100,000(9) 1,513
Operations & Finance 1993 -- -- -- -- -- --
Stephen L. Abbey........... 1995 98,578(10) 18,333 0 28,125(11) 75,000(12) 1,518
Vice President, 1994 -- -- -- -- -- --
North American 1993 -- -- -- -- -- --
Sales & Marketing
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas J. Chisholm......... 1995 102,827 6,167 0 0 30,000(13) 1,739
Vice President, Research
& 1994 99,890 2,125 0 0 25,000(14) 1,712
Development 1993 93,797 0 0 0 25,000(15) 1,481
</TABLE>
- ---------------
(1) Consisting of $1,200 of matching contributions by CI to its 401K plan for
employees plus the income value of term life insurance premiums paid by CI.
(2) As of December 29, 1995, Mr. Close held 72,000 shares of restricted stock
having a value of $175,500 based upon a market price of $2.4375 on such
date.
(3) These options vest at the rate of 33.3% per year, commencing April 6, 1996.
(4) Consisting of fees paid to Mr. Close as a Nonemployee Director prior to his
becoming President and Chief Executive Officer of CI.
(5) In 1993, CI granted Mr. Close 96,000 shares of Restricted Stock under its
1993 Stock Incentive Plan. These shares vest at the rate of 25% per year
commencing on May 1, 1993.
(6) These options vest at the rate of 25% per year, commencing May 1, 1994.
(7) Mr. Weber commenced employment with CI on June 1, 1994 at an annual salary
of $115,000. Salary reported is from such date.
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<PAGE> 77
(8) In 1994, CI granted Mr. Weber 30,000 shares of Restricted Stock under its
1993 Stock Incentive Plan. These shares are currently fully vested.
(9) These options are currently exercisable for 70,000 shares and the remaining
30,000 shares will become exercisable on June 1, 1997.
(10) Mr. Abbey commenced employment with CI on February 1, 1995 at an annual
salary of $110,000. Salary reported is from such date.
(11) In 1995, CI granted Mr. Abbey 15,000 shares of Restricted Stock under its
1993 Stock Incentive Plan. These shares are currently fully vested.
(12) These options are currently exercisable for 45,000 shares and the remaining
30,000 shares will become exercisable on February 3, 1997.
(13) These options vest 33.3% per year commencing on January 1, 1997.
(14) These options are currently exercisable for 15,000 shares and the remaining
10,000 shares will become exercisable on December 9, 1996.
(15) These options are currently exercisable for 17,500 shares and the remaining
7,500 shares will become exercisable on October 7, 1996.
(16) All unvested options will vest upon consummation of the Merger. See "The
Merger Agreement -- Conversion of Options and Warrant."
BONUS PLAN
CI maintains an informal bonus program for certain employees, including
executive officers, under which such employees may be awarded discretionary cash
bonuses based upon an evaluation of individual performance and the performance
of the Company during the year.
STOCK OPTION PLANS
The following table sets forth certain information regarding grants of
stock options during the fiscal year ended December 31, 1995 to the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SHARES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ------------------------------ ---------- ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Richard C. Close.............. 150,000 51% $1.8125 4/5/05 $170,980 $433,299
Jeffrey A. Weber.............. -- -- -- -- -- --
Stephen L. Abbey.............. 75,000 26% $ 1.875 2/2/05 88,438 224,120
Thomas J. Chisholm............ 30,000 10% $ 2.625 12/12/05 49,526 125,507
</TABLE>
55
<PAGE> 78
The following table sets forth certain information with respect to the
aggregate number and value of exercisable and unexercisable options held by the
Named Executive Officers during the fiscal year ended December 31, 1995.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF
OF COMMON STOCK UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT 12/31/95 12/31/95(2)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------------- ------------------------- -------------------------
<S> <C> <C>
Richard C. Close................................. 100,000/250,000 $131,250/$225,000
Jeffrey A. Weber................................. 40,000/ 60,000 55,000/ 82,500
Stephen L. Abbey................................. 15,000/ 60,000 8,438/ 33,750
Thomas J. Chisholm............................... 54,500/ 47,500 70,182/ 18,590
</TABLE>
- ---------------
(1) Messrs. Close, Weber, Abbey and Chisholm did not exercise any stock options
during 1995.
(2) Based upon the closing price of CI's Common Stock on December 29, 1995 on
the Nasdaq National Market of $2.4375 minus the respective option exercise
prices.
EMPLOYMENT AGREEMENTS
In April 1993, CI entered into an employment agreement with Richard C.
Close, its President and Chief Executive Officer. The Agreement, which has a
four-year term, entitles Mr. Close to an annual salary of $150,000.00. Pursuant
to the Agreement, CI granted Mr. Close 96,000 shares of Common Stock and
incentive stock options for 200,000 shares of Common Stock at an exercise price
of $1.125 per share, subject to a four year vesting schedule (with immediate
vesting upon a change of control such as the Merger). In the event of the
termination of Mr. Close's employment without cause, the Agreement entitles Mr.
Close to his salary for six months. The employment agreement also entitles Mr.
Close to receive such employment benefits as may be generally available to CI's
employees, and prohibits Mr. Close from directly or indirectly competing with CI
for so long as he is an employee of CI and for a period of two years thereafter.
Upon consummation of the Merger, this employment agreement will be terminated
and Mr. Close will enter into a new employment agreement with RVSI. See
"Conflicts of Interest."
CI entered into an employment agreement with Jeffrey A. Weber, its Senior
Vice President, Operations and Finance, in May 1994. The Agreement, which has a
three-year term, entitles Mr. Weber to an annual salary of $115,000 and such
employment benefits as may be generally available to CI's employees. Pursuant to
the Agreement, CI granted Mr. Weber 30,000 shares of Common Stock and incentive
stock options to purchase 100,000 shares of CI's Common Stock at an exercise
price of $1.0625 per share, subject to a three year vesting schedule (with
immediate vesting upon a change of control such as the Merger). If Mr. Weber's
employment is terminated without cause, the Agreement entitles Mr. Weber to
severance equal to four months' salary. The employment agreement also entitles
Mr. Weber to receive such employment benefits as may be generally available to
CI's employees, and prohibits Mr. Weber from directly or indirectly competing
with CI for so long as he is an employee of CI and for a period of two years
thereafter.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
CI's Articles of Organization and Bylaws include provisions (i) to
eliminate the personal liability of CI's directors for monetary damages
resulting from breaches of their fiduciary duty and (ii) to permit CI to
indemnify its directors and officers to the fullest extent permitted by
Massachusetts law. CI has entered into indemnification agreements with each of
its directors, officers and an employee. Generally, each indemnification
agreement attempts to provide the maximum protection permitted by Massachusetts
law with respect to indemnification.
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<PAGE> 79
The indemnification agreements provide that CI will pay certain amounts
incurred by a director, officer or employee in connection with any civil or
criminal action or proceeding and specifically including actions by or in the
name of CI (derivative suits) where the individual's involvement is by reason of
the fact that he is or was a director, officer or employee. Such amounts
include, to the maximum extent permitted by law, attorney's fees, judgments,
civil or criminal fines, settlement amounts and other expenses customarily
incurred in connection with legal proceedings. Under the indemnification
agreements, a director, officer or employee will not receive indemnification if
he is found not to have acted in good faith in the reasonable belief that his
action was in the best interests of CI.
Pursuant to the Merger Agreement, RVSI has agreed to refrain from taking
any action that would reduce the exculpation for, or the indemnification
obligations of, CI to its officers, directors or other agents under CI's
Articles of Organization, By-laws and indemnification agreements. Further, RVSI
will guarantee the performance by CI of such indemnification obligations.
CI also carries directors' and officers' liability insurance.
COMPENSATION COMMITTEE INTERLOCKS
CI has no compensation committee interlocks.
57
<PAGE> 80
PRINCIPAL STOCKHOLDERS OF CI
The following table sets forth certain information as of June 30, 1996 with
respect to the beneficial ownership of CI's Common Stock by each Director, the
named executive officers in the Summary Compensation Table under "Executive
Compensation" below, all executive officers and Directors as a group, and each
person known by CI to be the beneficial owner of 5% or more of CI's Common
Stock. This information is based upon information received from or on behalf of
the named individuals.
<TABLE>
<CAPTION>
PERCENT OF
PERCENT RVSI
AMOUNT OF OF CLASS COMMON STOCK
BENEFICIAL PRIOR TO AFTER THE
NAME OWNERSHIP(1) MERGER MERGER(12)
- -------------------------------------------------------- ------------ -------- ------------
<S> <C> <C> <C>
Richard C. Close(2)..................................... 352,500 3.2% *
John M. Hill(3)......................................... 15,750 * *
Tomas Kohn(4)........................................... 243,380 2.2% *
Jan A. Smolders......................................... 17,100 * *
Edward J. Stewart, III(5)............................... 158,600 1.5% *
Richard S. Wilcox(6).................................... 388,728 3.6% *
Jeffrey A. Weber(7)..................................... 100,000 * *
Stephen L. Abbey(8)..................................... 60,000 * *
Thomas J. Chisholm(9)................................... 54,500 * *
All executive officers and
directors as a group (9 persons)
(2)(3)(4)(5)(6)(7)(8)(9).............................. 1,390,558 12.4% 1.3%
Frank J. Wezniak(10).................................... 722,925 6.5% *
5 Arlington Street
Boston, MA 02116
N.V. Bekaert S.A. ...................................... 2,431,033 22.4% 2.3%
Bekaertstratt 2
B-8550 Zwevegem
Belgium
The Wilcox Group(11).................................... 951,667 8.8% *
c/o Richard S. Wilcox, Jr.
119 South Main Street
Stillwater, MN 55082
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
(1) Unless otherwise noted, each person possesses sole voting and investment
power with respect to the shares listed.
(2) Includes 200,000 shares issuable pursuant to immediately exercisable stock
options and stock options exercisable within 60 days.
(3) Includes 1,150 shares held jointly with Mr. Hill's wife.
(4) Includes 29,700 shares held by Mr. Kohn's sister-in-law, brother-in-law and
mother as to which he disclaims beneficial ownership. Includes 3,500 shares
held by Mr. Kohn's spouse.
(5) Includes 55,000 shares held jointly with Mr. Stewart's spouse and 30,000
shares held by two of Mr. Stewart's adult children.
(6) Includes 159,436 shares held by a trust for which Mr. Wilcox serves as a
Trustee. Mr. Wilcox disclaims beneficial ownership of such shares. See also
Note 11, below.
(7) Includes 70,000 shares issuable pursuant to immediately exercisable stock
options.
(8) Includes 45,000 shares issuable pursuant to immediately exercisable stock
options.
(9) Includes 44,500 shares issuable pursuant to immediately exercisable stock
options.
(10) Includes 200,000 shares issuable pursuant to immediately exercisable
warrants.
(11) Includes the 388,728 shares held by Richard S. Wilcox. The Wilcox Group
consists of Richard S. Wilcox, and a number of his relatives. Richard S.
Wilcox does not have any voting or investment power with respect to the
562,939 shares held by his relatives and disclaims beneficial ownership of
such shares.
(12) Assumes (i) that 18,721,003 shares of RVSI Common Stock are outstanding
upon the consummation of the Merger (calculated after giving effect to the
conversion of all shares of CI Common Stock into shares of RVSI Common
Stock, assuming no adjustment due to implementation of the Collars); and
(ii) the immediate vesting of the CI Options and the CI Warrant to purchase
shares of CI Common Stock held by all individuals referred to in the table.
58
<PAGE> 81
DESCRIPTION OF CI'S SECURITIES
CI COMMON STOCK
CI is currently authorized to issue up to 25,000,000 shares of its Common
Stock, $.10 par value and 600,000 shares of Non-Voting Common Stock, $.01 par
value. As of June 30, 1996 there were 10,872,393 shares of its Common Stock
issued and outstanding, held of record by approximately 475 persons and no
shares of Non-Voting Common Stock issued and outstanding.
Holders of shares of CI 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 CI. All of the outstanding shares of CI Common
Stock are fully paid and non-assessable.
TRANSFER AGENT
The transfer agent for the CI Common Stock is Chase Mellon Shareholder
Services, 85 Challenger Road, Overpeck Centre, Ridgefield Park, NJ 07660.
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<PAGE> 82
BUSINESS OF RVSI
HISTORY
RVSI produces automated 3-dimensional ("3-D") vision-based systems for
inspection and measurement and is a leader in advanced electro-optical sensor
technology.
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, General Motors Corporation ("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 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
60
<PAGE> 83
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, 1996, RVSI has shipped a total of 480 LS-2000 and
LS-3000 Series units.
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 integration business in fiscal 1990 marked the culmination of RVSI's
transition from being a supplier of turn-key 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.
RVSI's core business is its Electronics Division which supplies inspection
equipment to the semiconductor industry. The Electronics Division's LS-Series
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 systems use 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 in 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 also has an Aircraft Safety Division which is developing an ice
detection product for the aviation industry which the Federal Aviation
Administration recently approved as an acceptable means of compliance with the
inspection requirements of a major air carrier's de-icing plan.
On September 20, 1995, RVSI consummated a merger with Acuity, a publicly
owned company located in Nashua, New Hampshire, pursuant to which Acuity became
a wholly owned subsidiary of RVSI. Acuity designs, develops, manufactures and
supplies machine vision systems to a diversity of markets. The Acuity merger was
structured as a tax-free reorganization and accounted for as a pooling of
interests. As a consequence of the Acuity merger, RVSI issued 1,448,424 shares
of its Common Stock in exchange for all of the outstanding shares of Acuity
Common Stock.
On October 23, 1995, RVSI consummated a merger with I.D. Matrix, a
privately owned company located in Clearwater, Florida, pursuant to which I.D.
Matrix became a wholly owned subsidiary of RVSI (the "I.D. Matrix Merger"). I.D.
Matrix markets a line of 2-D Data Matrix(TM) code readers for use in the
emerging high-density 2-D bar code segment of the bar code industry. The I.D.
Matrix Merger was structured as a tax-free organization and accounted for as a
pooling of interests. As a consequence of the I.D. Matrix Merger, RVSI issued
369,856 shares of its Common Stock in exchange for all of the outstanding shares
of I.D. Matrix common stock.
On May 30, 1996, RVSI consummated a merger with Northeast Robotics, Inc.
("NER"), a privately owned company located in New Boston, New Hampshire,
pursuant to which NER became a wholly owned subsidiary of RVSI (the "NER
Merger"). NER markets a line of patented illumination products to perform
reliably in difficult imaging applications involving highly reflective or uneven
surfaces. The NER Merger was structured as a tax-free reorganization and
accounted for as a purchase. As a consequence of the NER Merger, RVSI issued
139,037 shares of its common stock (which had a market value of approximately
$2,676,000 on the date the NER Merger was consummated) to the shareholders of
NER in exchange for all of the outstanding shares of NER common stock.
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PRINCIPAL PRODUCTS AND PRODUCT DEVELOPMENT
RVSI Electronics and Aircraft Safety Divisions
Revenues derived by RVSI during its fiscal years ended September 30, 1995,
1994 and 1993 result primarily from sales of its semiconductor lead inspection
systems, the LS-2000 and LS-3000 Series.
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",
respectively.
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 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 are more likely "three-dimensional." This advancing
technology has created a significant market opportunity for the Electronics
Division's lead inspection products.
The Electronics Division's LS-3000 Series lead scanning systems are an
outgrowth of its prior LS-2000 Series. The LS-2000, was introduced in October
1990, as the only reliable high-speed automated semiconductor lead inspection
system capable of inspecting devices while they remain in their protective
trays. The LS-2000 was an extension of the Electronics Division's HR-2000
product, which was originally introduced in 1989 for printed circuit board
solder joint inspection. In June 1992, the Electronic Division introduced the
LS-2000A which was a higher accuracy version of the LS-2000. At the same time,
the Electronic Division also introduced the LS-2700, a significantly faster
version of the LS-2000, which also afforded a greater level of accuracy. The
Electronic Division 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 LS3700, is also significantly faster than the LS-2700. The
Company subsequently introduced the LS-3700DB at the Semicon West show in July
1995. The LS-3700DB is considerably faster than the LS-3700. The Electronic
Division received purchase orders for a total of 167 LS-2000 and LS-3000 Series
machines during the fiscal year ended September 30, 1995.
Aircraft Ice Detection System. In January 1993, the Aircraft Safety
Division 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. The Aircraft Safety Division has been awarded one
patent and has additional patent applications pending for this technology. The
ID-1 system can be mounted 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.
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Extensive engineering testing of the ID-1 took place at several field
locations during the 1994-1995 winter ice season. Operational tests took place
during the 1995-1996 winter ice season. Recently, the Federal Aviation
Administration approved the ID-1 as an acceptable means of compliance with the
inspection requirements of a major air carrier's de-icing plan. 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.
Acuity
Acuity's main business is the general purpose 2-D 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 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 and
product identification.
Vision systems designed for the general purpose market comprise the largest
segment of Acuity's revenues, representing 62% of total Acuity revenues in 1995,
as compared to 69% in 1994 and 64% in 1993, respectively. 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 guidance applications. The system's architecture,
which is based on 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.
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 extensive
programming, by viewing "good" products on the assembly line; and (2)
Mentorvision has the capability to 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 has the
potential to address some of the most demanding, and previously un-
addressable, requirements in the packaging industry. Acuity only had
minimal sales of this product in 1995.
Vision systems designed for niche (application specific) markets comprise a
smaller share of Acuity's total revenue. Specifically, in 1995, revenues from
niche market products represented 19% of total Acuity revenues as compared to
17% in 1994 and 22% in 1993. Acuity's products for application specific markets
are described below.
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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.
I.D. Matrix
I.D. Matrix markets a line of 2-D Data Matrix(TM) code readers for use in
the emerging high-density 2-D barcode segment of the well established barcode
market. As a subsidiary of RVSI, I.D. Matrix will focus the strengths of the
RVSI Electronics Division and Acuity Imaging in laser and charge coupled device
(CCD) technology in the field of 2-D barcode.
I.D. Matrix is the inventor of the Data Matrix(TM) code -- a 2-D code which
resembles a scrambled checkerboard. This code has recently been recommended for
small part identification by the Automotive Industry Action Group (AIAG). The
Semiconductor Equipment and Materials International (SEMI) has adopted Data
Matrix(TM) as its standard for coding silicon wafers and for wafer box labels,
and the Electronics Industry Association (EIA) is in the process of finalizing
similar recommendations regarding standardization. Recent articles in various
business and industry publications highlight the fact that 2-D coding technology
is one of the most promising as well as the fastest growing, segments of the
barcode industry. In the industrial sector, the Data Matrix(TM) code is quickly
becoming the 2-D code of choice because of its ability to be printed or marked
directly on parts and components, thereby eliminating the need for paper labels
and the high cost of labeling equipment. The small size of the Data Matrix(TM)
code allows its use in industries and on applications that were previously
impossible to satisfy with machine readable codes. Serialization and therefore
traceability is now possible in industries such as semiconductor, which have
recently seen a surge in the theft of memory chips and other high priced
computer components.
MANUFACTURING
RVSI's production facilities in Hauppauge, New York and Nashua, New
Hampshire are capable of fabricating and assembling total electronic and
electromechanical systems and subsystems. Facilities include assembly and wiring
departments that have 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 in Hauppauge 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 AND SALES
RVSI Electronics Division
RVSI's Electronics Division's marketing strategy focuses on cultivating
long-term relationships with the leading manufacturers of electronic and
semiconductor inspection and quality control equipment. 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
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purchase process is often the case in the purchase of the initial unit 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 direct sales
personnel. Due to the depth of analysis involved in the customer's purchase
decision, management emphasizes active interaction between the direct sales
staff and the buyer throughout the selling process.
RVSI has also established distribution capabilities in both Europe and the
Far East, providing access to 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 six independent
representatives in the Far East and two independent representatives in Europe to
sell and service RVSI's products. RVSI recently established an office in
Singapore.
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 91 person engineering and
technical staff, which provides assistance in areas requiring in-depth technical
analysis.
Acuity
Acuity markets its products worldwide through a direct marketing, sales and
sales application engineering force of 33 persons and through distributors and
system integrators.
Acuity has approximately 50 distributors in 80 locations in North America,
Europe and Asia. Sales through distributors allows Acuity to leverage its sales
force and sell to a larger customer base than could be served cost effectively
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. In addition, Acuity provides sales and product
training to the distributors as well as technical product support. RVSI intends
to continue to expand its distribution channels.
Acuity sells to four types of customers: the end user solving a specific
problem (sold through distribution or directly); the 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 (original equipment
manufacturers) who embed Acuity's products in the OEM's equipment.
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 Intel Corporation accounted for approximately 13% and 16% of RVSI's revenues
during the six months ended March 31, 1996 and the fiscal year ended September
30, 1995, respectively. No other customers accounted for more than 10% of sales
during the fiscal years ended September 30, 1995, 1994 and 1993.
RESEARCH AND DEVELOPMENT
RVSI-sponsored research and development efforts over recent years have been
largely devoted to continued development of advanced 2-D and 3-D vision
technology and applications software for use in various inspection and process
control automation systems. Research and development expenditures, net of
capitalized software development costs, aggregated approximately $6,213,000,
$10,435,000, $8,013,000 and $6,425,000 for RVSI's six month fiscal period ended
March 31, 1996 and its fiscal years ended September 30, 1995, 1994 and 1993,
respectively. In its fiscal years ended September 30, 1995, 1994 and 1993
respectively, RVSI capitalized $535,000, $433,000 and $476,000, respectively, of
its software development costs in accordance with the provisions of Statement of
Financial Accounting Standards No. 86.
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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 Federal Bankruptcy Code. This supplier has
advised RVSI that it has since emerged successfully from bankruptcy. Several of
RVSI's components and sub-systems are purchased from single sources. RVSI
believes that alternative sources of supply could be obtained, if necessary,
without major interruption in production.
BACKLOG
At June 30, 1996 RVSI's backlog was approximately $8.1 million as
contrasted with approximately $16.0 million, $8.1 million and $9.5 million at
September 30, 1995, 1994 and 1993, respectively. RVSI believes that most of its
backlog at June 30, 1996 will be completed prior to the close of calendar year
1996. RVSI does not believe that its backlog at any particular time is
necessarily indicative of its future business.
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 their 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.
PROPRIETARY PROTECTION
At June 30, 1996 RVSI owned 85 issued U.S. patents, with expiration dates
ranging from 1995 to 2011, relating to its 2-D and 3-D vision technology. RVSI
also owns the rights to several U.S. patent applications relating to such
technology. Acuity has a number of U.S. and Foreign registered Trade Marks
including "Acuity."
RVSI relies primarily on a combination of patent registrations, trade
secrets, confidentiality procedures, contractual provisions and copyright and
trademark laws to protect its proprietary rights. RVSI seeks to protect its
software and other written materials under trade secret and copyright laws,
which afford only limited protection. A majority of RVSI's revenues in recent
years has been derived from export sales to the Far East. For the six months
ended March 31, 1996 and for the fiscal years ended September 30, 1995 and 1994,
export sales accounted for approximately 65%, 64% and 41%, respectively, of
RVSI's revenues. The laws of some foreign countries may not protect RVSI's
proprietary rights to as great an extent as do the laws of the United States.
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, with the exception of the litigation referred to under "Litigation,"
below, 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 several 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 1980's 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. Based upon the breadth of its product lines, its customer
base and its level of revenues, RVSI believes that it is a significant factor in
the machine vision 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 June 30, 1996 RVSI employed 365 persons, of whom 160 were engineering
and other technical personnel.
FACILITIES
RVSI leases approximately 65,000 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.
RVSI leases approximately 2,000 square feet of sales, service and training
space in Singapore under a lease which extends to November 1998.
RVSI leases 50,114 square feet in Nashua, New Hampshire for its Acuity and
I.D. Matrix operations under a lease which extends to April 2000.
ENVIRONMENTAL REGULATION
RVSI believes that compliance with Federal, state, local and, where
applicable, foreign environmental regulations does not have any material effect
on its capital expenditures, earnings or competitive position.
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 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 $10.0 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. In June 1995, RVSI made a motion for summary judgment to dismiss all of
the fraud counterclaims and to limit Cybo's
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damages to the amount of money paid by Cybo under the agreement, and to
eliminate any claims based on lost business opportunities with third parties.
The motion has been fully briefed and has been before the court for a decision
for three months. 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.
RVSI is a party to three separate law suits, two of which were commenced by
RVSI, in the United States District Court for the Central District of California
with View Engineering, Inc. ("View"), a company that competes with RVSI in the
assembly and distribution of 3-D machine vision-based products. The law suits
involve the question of whether View is infringing a number of RVSI patents in
the assembly and distribution of its own 3-D machine vision-based products.
The first action was commenced by View seeking a declaratory judgment that
it was not infringing one of RVSI's patents. On June 26, 1996, the court granted
View's motion for summary judgment and held that View's machines did not
infringe three of RVSI's patents. RVSI has moved for reargument of this
decision. The second action was commenced by RVSI against View alleging
infringement by View of another one of RVSI's patents. In March 1996, the court
dismissed the action holding that one of the claims of the pertinent RVSI patent
is invalid. RVSI has appealed this decision. The third action was recently
commenced by RVSI against View alleging infringement by View of another one of
RVSI's patents. This action is in its early stages. RVSI believes that the
ultimate outcome of the three proceedings will not have a material adverse
effect upon RVSI.
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MANAGEMENT OF RVSI
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of RVSI are as follows:
<TABLE>
<CAPTION>
PRESENTLY HELD DIRECTOR
NAME AGE WITH THE COMPANY SINCE
----------------------------------- ---- ----------------------------------- --------
<S> <C> <C> <C>
Pat V. Costa....................... 52 Chairman of the Board, President, 1984
Chief Executive Officer
Howard Stern....................... 58 Senior Vice President and Director 1981
Robert H. Walker................... 60 Executive Vice President, 1990
Secretary, Treasurer and Director
Steven J. Bilodeau................. 36 Executive Vice President
Earl H. Rideout.................... 48 Vice President
William E. Yonescu................. 52 Vice President
Frank A. DiPietro.................. 69 Director 1992
Donald F. Domnick.................. 74 Director 1988
Jay M. Haft........................ 60 Director 1977
Donald J. Kramer................... 63 Director 1995
Mark J. Lerner..................... 43 Director 1994
</TABLE>
Pat V. Costa has served as President, Chief Executive Officer and Chairman
of the RVSI Board 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 manufacturing of various electronic
instrumentation equipment and systems.
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.
Steven J. Bilodeau, is, and since 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. Rideout is, and since February 1989 has been, Vice President of
the Electronics Group of RVSI. Prior thereto and from 1986 he was Executive 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 bare board test equipment.
William E. Yonescu is, and since June 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.
Frank A. Dipietro began his career with GM in 1944. During his forty-six
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 also 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.
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Jay M. Haft has been interim Chief Executive Officer of Noise Cancellation
Technologies Inc., a noise attenuation and vibration control company ("NCT"),
since November 1994. Since January 1994, Mr. Haft has been of counsel to the law
firms of Ruden, McClosky, Smith, Schuster & Russell, P.A. in Fort Lauderdale,
Florida and Parker Duryee Rosoff & Haft, RVSI's counsel, in New York, New York.
Prior thereto, Mr. Haft was a partner of Parker Duryee Rosoff & Haft from
September 1991 through December 1994 and a partner in the New York law firm of
Rivkin, Radler, Dunne & Bayh from 1988 to August 1991. Mr. Haft currently serves
as a member of the Board of Directors of NCT, Extech, Inc., a hotel management
company, CAS Medical Systems, a medical devices company, Nova Technologies,
Inc., a patient care equipment company, Viragen, Inc., a proprietary drug
company, and Oryx Technology Corporation, a materials sciences company.
Donald J. Kramer, prior to RVSI's acquisition of Acuity in September 1995,
was Chairman of the Board of Directors of Acuity from January 1994 to September
1995. Mr. Kramer served as a Director of Itran Corp. from 1982 until its merger
with Automatix Incorporated, the predecessor of 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 several privately held companies.
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.
After the Merger
The executive officers of RVSI prior to the Merger will continue as such
after the Merger.
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EXECUTIVE COMPENSATION
Set forth below is the aggregate compensation for services rendered in all
capacities to RVSI during its fiscal years ended September 30, 1995, 1994 and
1993 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, 1995 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------------------------
AWARDS
----------------------- PAYOUTS
ANNUAL COMPENSATION NUMBER OF -------------------------
----------------------------------- RESTRICTED SECURITIES LONG TERM
NAME AND PRINCIPAL FISCAL OTHER ANNUAL STOCK UNDERLYING INCENTIVE ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
- --------------------- ------ -------- ------- ------------ ---------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pat V. Costa......... 1995 $180,494 $55,300 -- -- -- -- $ 77,250(1)(2)
Chief Executive 1994 $176,702 $36,000 -- -- -- -- $ 52,310(1)(2)
Officer 1993 $169,218 -- -- -- 100,000 -- $ 52,262(1)(2)
Steven J. Bilodeau... 1995 $142,312 $45,000 -- -- -- -- $ 2,250(2)
Executive Vice 1994 $139,260 $31,000 -- -- -- -- $ 2,686(2)
President 1993 $133,426 $ 6,000 -- -- 50,000 -- $ 2,096(2)
Earl H. Rideout...... 1995 $124,080 $19,000 -- -- -- -- $ 751(2)
Vice President 1994 $112,127 $13,500 -- -- -- -- --
1993 $112,550 -- -- -- 25,000 -- --
Howard Stern......... 1995 $120,322 $33,500 -- -- -- -- $ 2,250(2)
Senior Vice 1994 $117,787 $26,000 -- -- 45,000 -- $ 2,347(2)
President 1993 $112,805 -- -- -- 129,330 -- $ 1,699(2)
Robert H. Walker..... 1995 $116,165 $36,000 -- -- -- -- $ 2,250(2)
Executive Vice 1994 $111,715 $26,000 -- -- 41,113 -- $ 1,785(2)
President 1993 $102,082 $ 4,000 -- -- 94,580 -- $ 1,598(2)
</TABLE>
- ---------------
(1) During fiscal 1992, RVSI entered into a Stock Appreciation Rights Agreement
with Mr. Costa. Under this agreement, Mr. Costa receives a cash payment
based on the appreciation in the market value of RVSI's Common Stock. The
maximum cash payments which may be made under this agreement were $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 were made to Mr. Costa for each of the years
ended September 30, 1993 and 1994, and payments for the years ended
September 30, 1995 and 1996, which aggregated $175,000, were made during
fiscal 1995. No further payments will be made against this agreement.
(2) Represents accrued and vested payments under RVSI's Stock Ownership Plan.
For Mr. Costa, this amount equaled $2,262, $2,310 and $2,250 for the fiscal
years ended September 30, 1993, 1994 and 1995 respectively.
Set forth below is further information with respect to unexercised options
to purchase RVSI's Common Stock under RVSI's 1987 and 1991 Stock Option Plans:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED SEPTEMBER 30, 1995 SEPTEMBER 30, 1995
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Pat V. Costa................. 34,601 $315,602 295,326 50,000 $ 6,466,532 $ 1,019,750
Steven J. Bilodeau........... 51,000 $507,375 71,000 25,000 $ 1,531,757 $ 511,400
Earl H. Rideout.............. 20,000 $182,500 25,494 22,500 $ 545,462 $ 479,725
Howard Stern................. 25,000 $224,828 103,330 22,500 $ 2,257,933 $ 461,175
Robert H. Walker............. 25,000 $228,125 64,636 20,557 $ 1,400,894 $ 422,140
</TABLE>
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<PAGE> 94
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 $235,000. Pursuant to 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, 1995, directors who were not
otherwise employees of RVSI were compensated at the rate of $1,500 for
attendance at each meeting of the Board of Directors or any committee thereof,
$750 for attendance at any second meeting held during the same day, and $200 for
participation at a telephonic meeting or execution of a consent in lieu of a
meeting.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of June 30, 1996, GM owned approximately 7.3% of RVSI's outstanding
Common Stock. Sales to GM accounted for less than 1% of RVSI's total sales for
RVSI's fiscal year ended September 30, 1995.
Mr. Jay M. Haft, a Director of the Company, is Of Counsel to Parker Duryee
Rosoff & Haft, RVSI's general counsel.
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<PAGE> 95
PRINCIPAL STOCKHOLDERS OF RVSI
The following table sets forth, as of June 30, 1996, 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, [(c) all Named Executive Officers] and (d) all executive officers and
directors of RVSI as a group:
<TABLE>
<CAPTION>
PERCENT PERCENT
AMOUNT OF OF CLASS OF CLASS
NAME AND ADDRESS BENEFICIAL PRIOR TO AFTER
OF BENEFICIAL OWNER OWNERSHIP(1) MERGER MERGER(15)
---------------------------------------------- ------------ -------- ----------
<S> <C> <C> <C>
Pat V. Costa.................................. 293,760(2) 2.0% 1.6%
Frank A. DiPietro............................. 40,000(3) * *
Donald F. Domnick............................. 22,700(4) * *
Jay M. Haft................................... 486,546(5) 2.9% 2.6%
Donald J. Kramer.............................. 4,654(6) * *
Mark J. Lerner................................ 91,863(7) * *
Howard Stern.................................. 80,586(8) * *
Robert H. Walker.............................. 55,373(9) * *
Steven J. Bilodeau............................ 35,077(10) * *
Earl H. Rideout............................... 16,886(11) * *
General Motors Corporation.................... 1,225,775 7.3% 6.5%
767 Fifth Avenue
New York, New York 10153
Marie Cioti................................... 1,100,000 6.6% 5.9%
408 Mamaroneck Road
Scarsdale, New York 10583
Robotic Vision Systems........................ 897,865(12) 5.4% 4.8%
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 officers and directors
as a group (12 persons)..................... 1,149,444(13)(14) 6.6% 6.0%
</TABLE>
- ---------------
* Less than 1%
(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 June 30, 1996. Except as otherwise indicated,
the persons named herein have sole voting and dispositive power with
respect to the shares beneficially owned.
(2) Includes (i) 262,326 shares issuable to Mr. Costa upon exercise of
outstanding options and (ii) 1,434 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 4,000 shares issuable to Mr. Domnick upon exercise of outstanding
options.
(5) Includes (i) 47,000 shares issuable to Mr. Haft upon exercise of
outstanding options, (ii) 398,100 shares owned of record by his spouse and
(iii) 7,666 shares held indirectly in a retirement trust.
(6) Includes 1,802 shares issuable to Mr. Kramer upon exercise of outstanding
options.
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<PAGE> 96
(7) Includes (i) 86,863 shares issuable to Morgen, Evan & Company, Inc. of
which Mr. Lerner is the principal owner, upon exercise of outstanding
warrants and (ii) 5,000 shares issuable to Mr. Lerner upon exercise of
outstanding options.
(8) Includes (i) 62,580 shares issuable to Mr. Stern upon exercise of
outstanding options and (ii) 6,006 vested shares held under the RVSI SOP
over which shares Mr. Stern has voting power, but does not have dispositive
control.
(9) Includes (i) 42,914 shares issuable to Mr. Walker upon exercise of
outstanding options and (ii) 5,459 vested shares held under the RVSI SOP
over which shares Mr. Walker has voting power, but does not have
dispositive control.
(10) Includes (i) 8,750 shares issuable to Mr. Bilodeau upon exercise of
outstanding options and (ii) 5,577 vested shares held under the SOP over
which shares Mr. Bilodeau has voting power, but does not have dispositive
control.
(11) Includes (i) 16,744 shares issuable to Mr. Rideout upon exercise of
outstanding options and (ii) 142 vested shares held under the SOP over
which shares Mr. Rideout has voting power, but does not have dispositive
control.
(12) Information obtained from amended Schedule 13D filed with the Commission on
November 9, 1994.
(13) Includes (i) 581,370 shares owned of record and beneficially and (ii)
568,074 shares issuable upon exercise of certain outstanding stock options
and warrants.
(14) Includes 22,522 vested shares held in the RVSI SOP for certain officers of
the Company over which shares such officers have voting power, but do not
have dispositive control.
(15) Assumes that 18,721,003 shares of RVSI Common Stock are outstanding upon
the consummation of the Merger calculated after giving effect to the
conversion of all shares of CI Common Stock into RVSI Common Stock
(assuming no adjustment due to implementation of the Collars).
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<PAGE> 97
DESCRIPTION OF RVSI'S SECURITIES
COMMON STOCK
RVSI is currently authorized to issue up to 30,000,000 shares of its Common
Stock, $.01 par value. As of June 30, 1996, there were 16,791,586 shares of RVSI
Common Stock issued and outstanding, held of record by approximately 5,800
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 the
Company Common Stock are fully paid and non-assessable.
WARRANTS
As of June 30, 1996, there were 195,432 warrants issued and outstanding,
held of record by 9 persons, each allowing the holder thereof to acquire one
share of RVSI Common Stock at various dates through June 2000 at exercise prices
ranging from $1.00 to $25.00 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 and 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.
COMPARATIVE RIGHTS OF STOCKHOLDERS
If the Merger Agreement is approved and the Merger becomes effective, CI
stockholders will become stockholders of RVSI and their rights as stockholders
will be determined by the RVSI Certificate of Incorporation and By-laws. The
following is a summary of certain of the material differences between the rights
of holders of RVSI Common Stock and the rights of holders of CI Common Stock. As
CI is organized under the laws of Massachusetts and RVSI is organized under the
laws of Delaware, some of these differences arise from differences between
various provisions of the corporate laws of those states. Others arise from
differences in the provisions of the articles of organization and certificates
of incorporation and by-laws of CI and RVSI, respectively. This summary is not
intended to be complete and is qualified in its entirety by reference to the
Certificate of Incorporation and By-laws of each of CI and RVSI and the DGCL and
the MBCL.
AUTHORIZED SHARES OF CAPITAL STOCK
The CI Articles of Organization authorize the issuance of 25,000,000 shares
of CI Common Stock of which 10,872,293 shares were issued and outstanding as of
the CI Record Date and 600,000 shares of Non-Voting Common Stock of which none
was outstanding as of the CI Record Date.
The RVSI Certificate of Incorporation authorizes the issuance of 30,000,000
shares of RVSI Common Stock, of which 16,791,586 shares were issued and
outstanding as of June 30, 1996.
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<PAGE> 98
SPECIAL MEETINGS OF STOCKHOLDERS
The DGCL provides that special meetings of stockholders may be called by
the board of directors or by such person as the certificate of incorporation or
by-laws authorize. RVSI's By-laws provide that meetings also may be called 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. The MBCL provides that
special meetings of stockholders of a corporation with a class of voting stock
registered under the Exchange Act may be called by the president or by the
directors and, unless otherwise provided in the articles of organization or
By-laws, shall be called by the clerk upon written application of one or more
stockholders who hold at least 40% in interest of the capital stock entitled to
vote. CI's By-laws provide that owners of at least 10% of the capital stock may
call a special meeting of the stockholders. Written notice of any meeting of
stockholders must be given to each stockholder entitled to vote at least 7 days
before the meeting by personal delivery or by mail.
INSPECTION RIGHTS
Under the DGCL, a corporation's stockholders, upon written demand under
oath stating the purpose of the demand, have the right to inspect the
corporation's stock ledger, stockholder list and its other books and records for
any proper purpose. Under the MBCL, a corporation's stockholders have the right
to inspect the corporation's articles of organization, By-laws, records of all
meetings of directors and stockholders and stock and transfer records for any
proper purpose. The DGCL also requires that a complete list of the stockholders
entitled to vote at a meeting be prepared and open to the examination of any
stockholder for ten days prior to the meeting. The MBCL has no comparable
requirement.
ACTION BY CONSENT OF STOCKHOLDERS
Under the DGCL, unless the certificate of incorporation provides otherwise,
any action to be taken by stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent in writing is signed by those
stockholders holding not less than the minimum number of votes necessary to
authorize such action at a meeting. Under the MBCL, any action to be taken by
stockholders may be taken without a meeting only if all stockholders entitled to
vote on the matter consent to the action in writing.
DIVIDENDS AND REPURCHASES OF STOCK
Under the DGCL, subject to any restrictions in the certificate of
incorporation, a corporation's directors may declare and pay dividends either
(i) out of the corporation's surplus, the excess of net assets of the
corporation over the aggregate par value of all issued shares (the corporation's
"capital"), or (ii) in case there is no such surplus, out of the corporation's
net profits for the fiscal year in which the dividend is declared or the
preceding fiscal year. Subsection (ii) is limited to instances where the capital
of the corporation has not been diminished by depreciation in the value of the
corporation's property, losses or otherwise to an amount less than the aggregate
amount of capital represented by the outstanding stock having a distribution
preference. Under the MBCL, the payment of dividends and the repurchase of a
corporation's stock are generally permissible if such payment is not made when
the corporation is insolvent, does not render the corporation insolvent and does
not violate the corporation's charter.
CLASSIFICATION OF THE BOARD OF DIRECTORS
Publicly held Massachusetts corporations must have a classified board of
directors consisting of three classes as nearly equal in size as possible. Once
the corporation is subject to the classified board provisions of this statute,
directors may be removed by a majority vote of the stockholders only for cause.
A corporation may elect to be exempt from the classified board provisions by a
vote of its directors. CI has elected to be
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<PAGE> 99
exempt from the classified board provisions of this statute. The DGCL permits,
but does not require, classification of a corporation's board of directors.
RVSI's Bylaws do not provide for a classified board.
REMOVAL OF DIRECTORS AND OFFICERS
Unlike the MBCL, the DGCL does not permit directors to remove other
directors. Under both the DGCL and the MBCL (when the corporation has elected to
be exempt from the classified board provisions, as has CI), stockholders may
remove a director without cause. Under the DGCL, an officer elected or appointed
by the directors may be removed, with or without cause, by a vote of a majority
of the directors then in office. Under the MBCL, a director or officer may be
removed for cause only after reasonable notice and an opportunity to be heard is
held before the body proposing to remove such director or officer.
FILLING VACANCIES OF THE BOARD OF DIRECTORS
Under the DGCL, vacancies and newly created directorships may be filled by
a majority of directors then in office, unless otherwise provided in the
corporation's certificate of incorporation or by-laws, provided that if, at the
time of filling any vacancy or newly created directorship, the directors then in
office constitute less than a majority of the entire board as constituted
immediately prior to any increase, the Delaware Court of Chancery may, upon
application of any stockholder or stockholders holding at least 10% of the total
number of shares at all times outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies or
newly created directorships or to replace the directors chosen by the directors
then in office.
Under the MBCL, any vacancy in the board of directors of a publicly held
corporation which has opted out of the classified board statute, however,
occurring, including a vacancy resulting from enlargement of the board, may be
filled in the manner prescribed in the by-laws or, in the absence of such bylaw,
by the directors.
INDEMNIFICATION AND EXCULPATION OF DIRECTORS
The DGCL has fairly detailed provisions relating to indemnification of
directors and officers. Under the DGCL, in derivative suits, the corporation may
indemnify the person if he or she acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation or its stockholders and such person was not found liable to the
corporation (if the person was found liable, he or she may still apply to the
court for indemnification). The DGCL specifically includes attorney's fees in
those expenses covered and covers costs for administrative and investigative as
well as civil and criminal actions. Under the MBCL, while the basic standard is
similar, the statute is less detailed. Both CI and RVSI have detailed charter
provisions implementing the statutory indemnification provisions. With respect
to exculpation (which is the ability of a corporation to eliminate or limit the
personal liability of a director or an officer of the corporation or its
stockholders for monetary damages for breaches of fiduciary duty or otherwise),
the DGCL and the MBCL differ in certain respects. Both CI and RVSI have adopted
charter provisions providing for exculpation to the maximum extent permitted by
law.
In addition, CI and each of the executive officers and directors and an
employee have entered into separate indemnification agreements providing for
implementation of the indemnification provisions set forth in CI's Articles of
Organization, and granting explicit rights to indemnification for a period equal
to the longer of (i) ten years after each such person no longer serves as an
officer, director or employee of CI or (ii) the termination of any proceeding or
litigation brought against any such person on account of his service as an
officer, director or employee during such ten year period. RVSI has agreed to
guarantee these agreements. See "Business of CI -- Management."
LOANS TO DIRECTORS, OFFICERS AND EMPLOYEES
Under the DGCL, a corporation may make loans to, or guarantee the
obligations of, or otherwise assist, the officers or employees of the
corporation or its subsidiaries (including directors who are also officers or
employees) without stockholder approval if such action, in the judgment of the
directors, may reasonably be expected to benefit the corporation. Under the
MBCL, directors who vote for, and officers who knowingly
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<PAGE> 100
participate in, loans to officers or directors are jointly and severally liable
to the corporation for any part of the loan which is not repaid, unless (i) a
majority of the directors who are not direct or indirect recipients of such
loans, or (ii) the holders of a majority of the shares entitled to vote for such
directors, which holders are not direct or indirect recipients of such loans,
have approved or ratified the loan as one which in their judgment will benefit
the corporation.
INTERESTED DIRECTOR OR OFFICER TRANSACTIONS
The DGCL provides that a transaction or contract between a corporation and
its directors or between a corporation and another corporation or entity in
which one or more of its officers or directors have a financial interest is not
void or voidable if (i) the material facts as to the director's relationship or
interest are disclosed and the board of directors (or a committee thereof) in
good faith authorizes the contract or transaction by the affirmative vote of a
majority of disinterested directors, (ii) the material facts are disclosed to
the stockholders entitled to vote thereon and the contract or transaction is
specifically approved in good faith by a vote of the stockholders or (iii) the
contract is fair as to the corporation as of the time it is authorized, approved
or ratified by the board, the board committee or the stockholders. Massachusetts
has no comparable statute.
MERGER, SALE, LEASE OR EXCHANGE OF ASSETS
The DGCL provides that a corporation may at a meeting of its board of
directors vote to merge or sell, lease or exchange all or substantially all of
its property and assets when and as authorized by the vote of a majority of
stockholders of the corporation entitled to vote. The DGCL allows the board to
abandon the proposed merger or sale, lease or exchange without further action by
the stockholders. The MBCL and the CI Articles of Organization provide that the
vote of not less than a majority of the outstanding shares of each class of
stock is required to authorize a merger or the sale, lease or exchange of all or
substantially all of a corporation's property and assets. The articles of
organization may also provide that all outstanding classes of stock shall vote
as a single class; provided, however, that the separate vote of any class of
stock, the rights of which would be adversely affected by the transaction is
also required.
AMENDMENTS TO CHARTER
Under the DGCL, a majority vote of the stockholders of the corporation is
required for most charter amendments. Under the MBCL, amendments to a
corporation's articles of organization which relate to changes in the
corporation's authorized capital stock or in the corporation's name require the
vote of a majority of each class of the capital stock outstanding and entitled
to vote thereon. Amendments relating to other matters require a vote of at least
two-thirds of each class outstanding and entitled to vote thereon, or if the
articles of organization so provide, a greater or lesser proportion but not less
than a majority of the outstanding shares of each class.
APPRAISAL RIGHTS
Under the MBCL, dissenting stockholders who follow prescribed statutory
procedures are entitled to dissenter's rights in connection with any merger or
sale of substantially all of the assets of a corporation and in connection with
certain amendments to the articles of organization, reclassifications, and other
transactions which may adversely affect the rights or preferences of
stockholders. The DGCL provides similar rights in the case of a merger or
consolidation of a corporation except that such rights are not provided as to
shares of a corporation listed on a national securities exchange or held of
record by more than 2,000 stockholders. The DGCL does not provide dissenter's
rights in connection with sales of all or substantially all of the assets of a
corporation, reclassification of stock, or other amendments to the certificate
of incorporation which adversely affect a class of stock. For a more detailed
discussion of dissenter's rights of CI stockholders under the MBCL in connection
with the Merger, see "Appraisal Rights of Dissenting Stockholders" above.
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<PAGE> 101
"ANTI-TAKEOVER" STATUTES
Massachusetts has adopted a "control share" statute (Chapter 110D of the
Massachusetts General Laws) under which a person who acquires voting stock of a
Massachusetts corporation which results in such person's voting power exceeding
certain specified amounts (20%, 33 1/3% and 50%, respectively) would be stripped
of the right to vote such stock unless the stockholders of the corporation so
authorize. Any person making such a control share acquisition may file a
statement with the corporation demanding that such corporation call a
stockholders' meeting to vote on whether to reinstate that person's voting
rights. Stockholders who vote not to reinstate such voting rights may demand
certain appraisal rights in the event such voting rights are reinstated.
In the absence of an affirmative election to opt out by amending its
articles of organization or by-laws, the control share statute applies to a
Massachusetts corporation which has (i) 200 stockholders of record, (ii) its
principal executive officer or substantial assets within Massachusetts and (iii)
either more than 10% of its stockholders of record in Massachusetts or more than
10% of its issued and outstanding shares held by Massachusetts residents. CI has
opted out of the control share statute. Delaware does not have a control share
statute.
Both Massachusetts and Delaware have adopted a "business combination"
statute, designed to regulate hostile takeovers of domestic corporations by
restricting certain transactions involving persons who acquire more than a
certain percentage of a corporation's stock. (The Massachusetts statute also
applied to foreign corporations which meet the three tests described above for
the control share statute). Absent the consent of the corporation, such persons
are prohibited from engaging in business combinations (such as mergers and
consolidations, sales, leases, exchanges or other dispositions of assets) with
the corporation for a three-year period. Both statutes contain complex
definitions of the transactions to which they do or do not apply. While they
differ in certain respects, the Delaware and Massachusetts business combination
statutes are generally similar in scope. However, in Delaware one does not
become an interested stockholder triggering the business combination statute
until one exceeds the 15% ownership threshold, while in Massachusetts the
threshold is only 5%. In addition, the percentage of stock which a bidder must
acquire in order to avoid the three year prohibition on business combination is
85% in Delaware, whereas it is 90% in Massachusetts.
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 41,446
shares of Common Stock of RVSI, as well as options to acquire another 47,000
shares of such Common Stock. Members of Parker Duryee Rosoff & Haft, other than
Mr. Haft, beneficially own 170,009 shares of Common Stock of RVSI.
Certain legal matters related to the merger are being passed upon for CI by
Brown, Rudnick, Freed & Gesmer, One Financial Center, Boston, Massachusetts
02111.
EXPERTS
The financial statements of RVSI and its consolidated subsidiaries included
in this Prospectus as of September 30, 1995 and 1994 and for each of the three
years in the period ended September 30, 1995, except Acuity Imaging, Inc. and
subsidiaries for the years ended September 30, 1995 and December 31, 1994, and
except Itran Corporation for the year ended December 31, 1993 have been audited
by Deloitte & Touche LLP as stated in their report appearing herein. The
financial statements of Acuity Imaging, Inc. and subsidiaries and Itran
Corporation for the periods indicated above (consolidated with those of RVSI)
have been audited by Arthur Andersen LLP as stated in their reports, which are
included herein. Such financial statements of RVSI and its consolidated
subsidiaries are included herein in reliance upon the respective reports of such
firms given upon their authority as experts in accounting and auditing. Both of
the foregoing firms are independent auditors.
79
<PAGE> 102
The consolidated financial statements of CI at December 31, 1995 and 1994,
and for each of the two years in the period ended December 31, 1995, included in
the Proxy Statement/Prospectus, which is referred to and made a part of this
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports appearing elsewhere herein and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing. The financial statements of CI for the year
ended December 31, 1993 included in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and have been included in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
It is expected that representatives of Ernst & Young LLP, will be present
at the Special Meeting and will be available to respond to questions.
80
<PAGE> 103
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
ROBOTIC VISION SYSTEMS, INC.
Independent Auditors' Reports....................................................... F-2
Consolidated Balance Sheets at September 30, 1995 and 1994.......................... F-5
Consolidated Statements of Income for the Years Ended September 30, 1995, 1994 and
1993............................................................................. F-6
Consolidated Statements of Stockholders' Equity for the Years Ended September 30,
1995,
1994 and 1993.................................................................... F-7
Consolidated Statements of Cash Flows for the Years Ended September 30, 1995, 1994
and 1993......................................................................... F-8
Notes To Consolidated Financial Statements for the Years Ended September 30, 1995,
1994 and 1993.................................................................... F-9
Condensed Balance Sheets At September 30, 1995 and March 31, 1996 (Unaudited)....... F-21
Condensed Statements of Income For the Three and Six-Month Periods Ended March 31,
1996 (Unaudited)................................................................. F-22
Condensed Statements of Cash Flows For the Six-Month Periods Ended March 31, 1996
(Unaudited)...................................................................... F-23
Notes To Condensed Financial Statements (Unaudited)................................. F-24
COMPUTER IDENTICS CORPORATION
Report of Independent Auditors...................................................... F-27
Independent Auditors' Reports....................................................... F-28
Consolidated Balance Sheets as of December 31, 1995 and 1994........................ F-29
Consolidated Statements of Operations for the Years Ended December 31, 1995, 1994
and 1993......................................................................... F-30
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1995,
1994 and 1993.................................................................... F-31
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994
and 1993......................................................................... F-32
Notes to Consolidated Financial Statements.......................................... F-33
Valuation and Qualifying Accounts for the Years Ended December 31, 1995, 1994 and
1993............................................................................. F-39
Consolidated Balance Sheets at December 31, 1995 and March 31, 1996 (Unaudited)..... F-40
Consolidated Statements of Operations for the Three Months Ended March 31, 1996
and 1995 (Unaudited)............................................................. F-41
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1996
and 1995 (Unaudited)............................................................. F-42
Notes to Consolidated Financial Statements (Unaudited).............................. F-43
</TABLE>
F-1
<PAGE> 104
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Robotic Vision Systems, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Robotic
Vision Systems, Inc. and subsidiaries (the "Company") as of September 30, 1995
and 1994, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended September
30, 1995. 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
Acuity Imaging, Inc. and subsidiaries ("Acuity"), a wholly-owned subsidiary, for
the years ended September 30, 1995 and December 31, 1994 and 1993, respectively,
which statements reflect total assets constituting 12% and 30% of consolidated
total assets as of September 30, 1995 and 1994, respectively, and total revenues
constituting 29%, 46%, and 47% of consolidated total revenues for the years
ended September 30, 1995, 1994 and 1993, respectively. Those financial
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 Acuity, is
based solely on the report of such other auditors, with the exception that in
1993, we audited the financial statements of a subsidiary of Acuity, which
statements reflect total revenues constituting 22% of consolidated total
revenues of the Company for the year ended September 30, 1993.
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, based on our audits and the reports of the other auditors,
such consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company at September 30, 1995
and 1994, and the results of their operations and their cash flows for each of
the three years in the period ended September 30, 1995 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Jericho, New York
December 15, 1995
F-2
<PAGE> 105
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Acuity Imaging, Inc.:
We have audited the consolidated balance sheets of Acuity Imaging, Inc. (a
Delaware corporation and a wholly owned subsidiary of Robotic Vision Systems,
Inc.) and subsidiaries as of September 30, 1995 and December 31, 1994, and the
related consolidated statements of operations and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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
accessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Acuity
Imaging, Inc. and subsidiaries at September 30,1995 and December 31, 1994, and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
On September 20, 1995, Robotic Vision Systems, Inc. acquired Acuity
Imaging, Inc.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 6, 1995
F-3
<PAGE> 106
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Itran Corporation:
We have audited the balance sheets of Itran Corporation (a Delaware
corporation) as of December 31, 1993, and the related statements of operations,
stockholders' investment and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Itran Corporation as of
December 31, 1993, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
On January 24, 1994, Itran Corporation merged with Automatix, Incorporated
with Automatix as the surviving corporation. The surviving corporation was
renamed Acuity Imaging, Inc.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 4, 1994
F-4
<PAGE> 107
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
NOTES ------------ ------------
------ RESTATED RESTATED
(NOTE 2) (NOTE 2)
<S> <C> <C> <C>
ASSETS 9
CURRENT ASSETS:
Cash and cash equivalents........................... $ 16,424,000 $ 2,104,000
Investments......................................... 1,000,000 1,495,000
Receivables -- net.................................. 3 12,082,000 7,221,000
Inventories......................................... 4 8,461,000 4,416,000
Deferred income taxes............................... 5 2,375,000 1,163,000
Prepaid expenses and other.......................... 154,000 163,000
------------ ------------
Total current assets........................ 40,496,000 16,562,000
PLANT AND EQUIPMENT -- NET............................ 6 4,145,000 2,863,000
OTHER ASSETS.......................................... 7 1,748,000 1,483,000
INVESTMENTS........................................... 1,989,000 1,500,000
------------ ------------
$ 48,378,000 $ 22,408,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable....................................... 10 $ 270,000 $ 649,000
Loan payable........................................ 9 1,385,000 --
Accounts payable.................................... 7,988,000 4,669,000
Accrued expenses and other current liabilities...... 8 5,473,000 4,154,000
Advance contract payments received.................. 1,078,000 912,000
------------ ------------
Total current liabilities................... 16,194,000 10,384,000
LOAN PAYABLE.......................................... -- 1,015,000
OTHER LIABILITIES..................................... 78,000 216,000
------------ ------------
TOTAL LIABILITIES..................................... 16,272,000 11,615,000
------------ ------------
COMMITMENTS AND CONTINGENCIES......................... 12, 15
STOCKHOLDERS' EQUITY:................................. 13
Common stock, $.01 par value; shares authorized,
30,000,000; shares issued and outstanding,
1995 -- 15,175,000 and 1994 -- 13,224,000........ 152,000 132,000
Additional paid-in capital.......................... 109,834,000 97,285,000
Accumulated deficit................................. (78,023,000) (86,755,000)
Cumulative translation adjustment................... 143,000 131,000
------------ ------------
Total stockholders' equity.................. 32,106,000 10,793,000
------------ ------------
$ 48,378,000 $ 22,408,000
============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 108
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
NOTES ----------- ----------- -----------
----- RESTATED RESTATED RESTATED
(NOTE 2) (NOTE 2) (NOTE 2)
<S> <C> <C> <C> <C>
REVENUES.................................... 14 $65,260,000 $47,839,000 $39,640,000
COST OF REVENUES............................ 28,726,000 22,391,000 19,493,000
----------- ----------- -----------
GROSS PROFIT................................ 36,534,000 25,448,000 20,147,000
----------- ----------- -----------
OPERATING COSTS AND EXPENSES:
Research and development costs............ 10,435,000 8,013,000 6,425,000
Selling, general and administrative
expenses............................... 16,888,000 13,936,000 11,544,000
Merger expenses........................... 2 1,305,000 -- 1,091,000
Interest income........................... (431,000) (123,000) (44,000)
Interest expense.......................... 153,000 232,000 368,000
----------- ----------- -----------
28,350,000 22,058,000 19,384,000
----------- ----------- -----------
INCOME BEFORE BENEFIT FROM INCOME TAXES..... 8,184,000 3,390,000 763,000
BENEFIT FROM INCOME TAXES................... 5 649,000 291,000 398,000
----------- ----------- -----------
NET INCOME.................................. $ 8,833,000 $ 3,681,000 $ 1,161,000
=========== =========== ===========
NET INCOME PER SHARE:
Primary................................... $ 0.55 $ 0.25 $ 0.10
=========== =========== ===========
Fully diluted............................. $ 0.53 $ 0.25 $ 0.10
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING:
Primary................................... 16,199,000 14,593,000 13,750,000
----------- ----------- -----------
Fully diluted............................. 16,572,000 14,795,000 13,750,000
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 109
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ADDITIONAL CUMULATIVE
NUMBER PAID-IN ACCUMULATED TRANSLATION STOCKHOLDERS'
NOTES OF SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT EQUITY
----- ---------- -------- ------------ ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance October 1, 1992 (as
previously reported)........... 10,987,000 $110,000 $ 89,284,000 $(88,759,000) $ 140,000 $ 775,000
Changes resulting from
acquisition accounted for as
pooling-of-interests.......... 2 192,000 2,000 2,898,000 (2,838,000) -- 62,000
---------- -------- ------------ ------------ -------- -----------
Balance, October 1, 1992
(Restated).................... 11,179,000 112,000 92,182,000 (91,597,000) 140,000 837,000
Shares issued to the Defined
Contribution Stock Ownership
and Deferred Compensation
Plan.......................... 11 16,000 -- 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....................... 13 22,000 1,000 20,000 -- -- 21,000
Warrants issued for professional
services rendered............. 13 -- -- 125,000 -- -- 125,000
Warrants issued in connection
with the settlement of
litigation.................... 13 -- -- 25,000 -- -- 25,000
Translation adjustment.......... -- -- -- -- (3,000) (3,000)
Net income...................... -- -- -- 1,161,000 -- 1,161,000
---------- -------- ------------ ------------ -------- -----------
Balance, September 30, 1993
(Restated).................... 11,217,000 113,000 92,294,000 (90,436,000) 137,000 2,108,000
Shares issued to the Defined
Contribution Stock Ownership
and Deferred Compensation
Plan.......................... 11 9,000 -- 36,000 -- -- 36,000
Shares and warrants issued in
connection with private equity
placement, net of offering
costs......................... 13 1,360,000 14,000 3,790,000 -- -- 3,804,000
Shares issued in connection with
private placement of
subsidiary, net of offering
costs......................... 13 59,000 -- 491,000 -- -- 491,000
Warrants issued for professional
services...................... 13 -- -- 38,000 -- -- 38,000
Shares issued in connection with
the exercise of stock
options....................... 13 336,000 3,000 368,000 -- -- 371,000
Shares issued in connection with
the exercise of warrants...... 13 243,000 2,000 268,000 -- -- 270,000
Translation adjustment.......... -- -- -- -- (6,000) (6,000)
Net income...................... -- -- -- 3,681,000 -- 3,681,000
---------- -------- ------------ ------------ -------- -----------
Balance, September 30, 1994
(Restated).................... 13,224,000 132,000 97,285,000 (86,755,000) 131,000 10,793,000
Shares issued to the Defined
Contribution Stock Ownership
and Deferred Compensation
Plan.......................... 11 12,000 -- 60,000 -- -- 60,000
Shares and warrants issued in
connection with private equity
placement, net of offering
costs......................... 13 1,110,000 11,000 9,375,000 -- -- 9,386,000
Shares issued in connection with
private placement of
subsidiary, net of offering
costs......................... 13 119,000 2,000 1,763,000 -- -- 1,765,000
Warrants issued for professional
services...................... 13 -- -- 92,000 -- -- 92,000
Shares issued in connection with
the exercise of stock
options....................... 13 386,000 4,000 770,000 -- -- 774,000
Shares issued in connection with
the exercise of warrants...... 13 324,000 3,000 489,000 -- -- 492,000
Change in year end of pooled
companies..................... 2 -- -- -- (101,000) -- (101,000)
Translation adjustment.......... -- -- -- -- 12,000 12,000
Net income...................... -- -- -- 8,833,000 -- 8,833,000
---------- -------- ------------ ------------ -------- -----------
Balance, September 30, 1995
(Restated).................... 15,175,000 $152,000 $109,834,000 $(78,023,000) $ 143,000 $ 32,106,000
========== ======== ============ ============ ======== ===========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 110
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
RESTATED RESTATED RESTATED
(NOTE 2) (NOTE 2) (NOTE 2)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................................. $ 8,833,000 $ 3,681,000 $ 1,161,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred income taxes.................................................... (1,212,000) (579,000) (584,000)
Depreciation and amortization............................................ 1,575,000 1,065,000 791,000
Interest expense......................................................... -- 84,000 310,000
Provision for doubtful accounts receivable............................... 80,000 -- 82,000
Issuance of common stock and warrants for professional services
rendered............................................................... 92,000 38,000 125,000
Issuance of common stock -- Defined Contribution Stock Ownership and
Deferred Compensation Plan............................................. 60,000 36,000 22,000
Warrants issued as settlement of litigation.............................. -- -- 25,000
Other.................................................................... 39,000 32,000 7,000
Changes in assets and liabilities:
Receivables............................................................ (5,027,000) (1,959,000) (155,000)
Inventories............................................................ (4,366,000) (684,000) (1,672,000)
Prepaid expenses and other current assets.............................. 39,000 (28,000) 25,000
Other assets........................................................... (640,000) (369,000) (677,000)
Accounts payable....................................................... 3,723,000 805,000 1,687,000
Accrued expenses and other current liabilities......................... 1,613,000 (758,000) 908,000
Advance contract payments received..................................... (365,000) (176,000) 315,000
Other liabilities.......................................................... (136,000) (35,000) (90,000)
----------- ---------- ----------
Net cash provided by operating activities......................... 4,308,000 1,153,000 2,280,000
----------- ---------- ----------
INVESTING ACTIVITIES:
Additions to plant and equipment........................................... (2,521,000) (1,689,000) (1,243,000)
Purchase of investments.................................................... (1,484,000) (2,984,000) --
Proceeds from maturity of investments...................................... 1,500,000 -- --
----------- ---------- ----------
Net cash used in investing activities............................. (2,505,000) (4,673,000) (1,243,000)
----------- ---------- ----------
FINANCING ACTIVITIES:
Issuance of common stock and warrants -- private equity placements
(less offering costs).................................................... 10,306,000 4,068,000 (80,000)
Issuance of common stock in connection with the exercise of
stock options and warrants............................................... 1,266,000 641,000 21,000
Notes payable.............................................................. 837,000 563,000 208,000
Proceeds from bank loan.................................................... 1,970,000 1,015,000 --
Payment of short-term debt and related accrued interest.................... (1,551,000) (3,491,000) --
----------- ---------- ----------
Net cash provided by financing activities......................... 12,828,000 2,796,000 149,000
----------- ---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS......................................................... 3,000 (6,000) (3,000)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... 14,634,000 (730,000) 1,183,000
CASH AND CASH EQUIVALENTS:
Beginning of year........................................................ 1,790,000 2,834,000 1,651,000
----------- ---------- ----------
End of year.............................................................. $ 16,424,000 $ 2,104,000 $ 2,834,000
=========== ========== ==========
SUPPLEMENTAL INFORMATION -- Interest paid.................................. $ 157,000 $ 1,390,000 $ 29,000
=========== ========== ==========
-- Taxes paid........................ $ 581,000 $ 386,000 $ 92,000
=========== ========== ==========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired under capital leases..................... $ 9,000 $ 16,000 $ --
=========== ========== ==========
Notes payable and accrued interest satisfied by private offering of
common stock of subsidiary............................................. $ 785,000 $ 227,000 $ --
=========== ========== ==========
Accounts payable satisfied by private offering of common stock of
subsidiary............................................................. $ 60,000 $ -- $ --
=========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE> 111
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES
a. Description of Business -- Robotic Vision Systems, Inc. and subsidiaries
(the "Company") is principally engaged in the development, manufacture and
marketing of automated two dimensional and three dimensional vision-based
systems for inspection and measurement products which have a variety of
commercial and military applications.
b. Principles of Consolidation -- The consolidated financial statements
include the financial statements of Robotic Vision Systems, Inc., Acuity
Imaging, Inc. and subsidiaries (a wholly-owned subsidiary) ("Acuity"), and
International Data Matrix, Inc. (a wholly-owned subsidiary) ("IDM"). All
significant intercompany transactions and balances have been eliminated in
consolidation.
The consolidated financial statements of the Company have been prepared to
give retroactive effect to the business combination with IDM (Note 2) which
occurred on October 23, 1995 and has been accounted for as a pooling of
interests.
c. Revenues and Cost of Revenues -- The Company recognizes revenue on its
standard electronic inspection and measurement products upon shipment. Revenue
from the licensing of software is recognized when the software is delivered if
collectibility is probable and there are no significant vendor obligations.
Engineering service and support revenue is recognized when such services are
rendered. 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, 1995
will become billable during the ensuing twelve months.
d. Cash and Cash Equivalents -- Cash and cash equivalents includes money
market accounts and certain debt securities issued by the United States
government with an original maturity of three months or less.
e. Investments -- Investments consist of certain debt securities issued by
the United States government with maturities through November 1997. 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, 1995,
the aggregate fair value of investments maturing within one year was
approximately $993,000 and the fair value of investments with maturities of
longer than one year was approximately $2,020,000. The aggregate unrealized gain
as of September 30, 1995 was approximately $24,000. 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 investment with maturities of
longer than one year was approximately $1,447,000. The aggregate unrealized loss
as of September 30, 1994 was approximately $70,000.
f. 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
F-9
<PAGE> 112
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
ranging from two to eight years. Leasehold improvements are amortized over the
lesser of their respective estimated useful lives or lease terms.
g. Inventories -- Inventories are stated at the lower of cost (using the
first-in, first-out cost flow assumption) or market.
h. 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.
i. 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.
j. Income Taxes -- 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.
k. 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. Income 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 $4,000, $19,000 and $0
in 1995, 1994 and 1993, respectively.
l. Income Per Share -- Net income per common share is computed by dividing
each year's 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. The effect of options and warrants was calculated using
the modified treasury stock method for the years ended September 30, 1994 and
1993.
m. 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.
d. Debt -- The carrying amounts approximate fair value because of the
relatively short maturity of those instruments.
n. Reclassification -- Certain amounts in the 1993 and 1994 financial
statements have been reclassified to conform with the 1995 presentation.
2. ACQUISITIONS
a. International Data Matrix, Inc. -- On October 23, 1995, the Company
acquired the outstanding shares of IDM for approximately 370,000 shares of the
Company's common stock, having a market value at the date of the merger of
approximately $8,183,000. IDM is a developer and seller of computerized visual
inspection equipment. This acquisition has been accounted for as a pooling of
interests and accordingly, the consolidated financial statements have been
restated to include the accounts of IDM for all periods presented. The
accompanying September 30, 1994 and 1993 consolidated financial statements
include IDM's amounts
F-10
<PAGE> 113
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
for the years ended December 31, 1994 and 1993. The accompanying consolidated
financial statement for the year ended September 30, 1995 include the operations
of IDM on a common fiscal year. IDM's net loss for the period October 1, 1994
through December 31, 1994 of $154,000, included twice in the accompanying
consolidated statements of income as a result of conforming fiscal years, has
been included as an adjustment to consolidated accumulated deficit. As of
September 30, 1995, $145,000 of expense have been incurred related to this
merger.
The following is a reconciliation of certain restated amounts with amounts
previously reported:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
As previously reported.................... $63,644,000 $46,781,000 $38,677,000
Effect of IDM pooling of interests........ 1,616,000 1,058,000 963,000
----------- ----------- -----------
As restated............................... $65,260,000 $47,839,000 $39,640,000
=========== =========== ===========
Net income (loss):
As previously reported.................... $ 9,956,000 $ 4,417,000 $ 1,569,000
Effect of IDM pooling of interests........ (1,123,000) (736,000) (408,000)
----------- ----------- -----------
As restated............................... $ 8,833,000 $ 3,681,000 $ 1,161,000
=========== =========== ===========
Net income (loss) per share:
Primary:
As previously reported................. $ 0.63 $ 0.31 $ 0.13
Effect of IDM pooling of interests..... (0.08) (0.06) (0.03)
----------- ----------- -----------
As restated............................ $ 0.55 $ 0.25 $ 0.10
=========== =========== ===========
Fully diluted:
As previously reported................. $ 0.61 $ 0.30 $ 0.13
Effect of IDM pooling of interests..... (0.08) (0.05) (0.03)
----------- ----------- -----------
As restated............................ $ 0.53 $ 0.25 $ 0.10
=========== =========== ===========
</TABLE>
b. Acuity Imaging, Inc. and Subsidiaries -- On September 20, 1995, the
Company acquired the outstanding shares of Acuity for approximately 1,448,000
shares of the Company's common stock, having a market value at the date of the
merger of approximately $31,141,000. Acuity is a developer and seller of
computerized visual inspection equipment. Outstanding Acuity stock options were
converted into options to purchase approximately 114,000 shares of the Company's
common stock. This acquisition has been accounted for as a pooling of interests.
The accompanying September 30, 1994 and 1993 consolidated financial statements
include Acuity's amounts for the years ended December 31, 1994 and 1993. The
accompanying consolidated financial statement for the year ended September 30,
1995 include the operations of Acuity on a common fiscal year. Acuity's net
income for the period October 1, 1994 through December 31, 1994 of $255,000,
included twice in the accompanying consolidated statements of income as a result
of conforming fiscal years, has been included as an adjustment to consolidated
accumulated deficit. Included in the operating results of the Company for the
year ended September 30, 1995 are approximately $19,153,000 of revenues and
$1,188,000 of net loss of Acuity prior to the date of acquisition (September 20,
1995). Expenses of $1,160,000 have been incurred related to this merger.
c. Merger of Acuity (Formerly Automatix Incorporated) With Itran
Corp. -- On January 26, 1994, Acuity (formerly Automatix Incorporated
["Automatix"]) merged with Itran Corp. ("Itran") in a tax-free
F-11
<PAGE> 114
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
exchange of approximately 1,483,000 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 approximately 162,000 shares of Acuity's
common stock. The merger has been accounted for as a pooling of interests.
Expenses of approximately $1,091,000 were incurred related to this merger.
3. RECEIVABLES
Receivables at September 30, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Billed accounts receivable................................. $11,078,000 $6,801,000
Unbilled accounts receivable............................... 1,298,000 702,000
----------- ----------
Total............................................ 12,376,000 7,503,000
Less allowance for doubtful accounts receivable............ 294,000 282,000
----------- ----------
Receivables -- net......................................... $12,082,000 $7,221,000
=========== ==========
</TABLE>
Unbilled receivables primarily relate to sales recorded on standard
products which have been shipped, but have not yet been finally accepted by the
customer. The Company has no significant remaining obligations relating to these
unbilled receivables and collectibility is probable.
4. INVENTORIES
Inventories at September 30, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Raw materials............................................... $2,223,000 $ 994,000
Work-in-process............................................. 5,515,000 2,904,000
Finished goods.............................................. 533,000 393,000
Field engineering parts and components...................... 190,000 125,000
---------- ----------
Total............................................. $8,461,000 $4,416,000
========== ==========
</TABLE>
F-12
<PAGE> 115
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
5. INCOME TAXES
The benefit from income taxes for the fiscal years ended September 30,
1995, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ---------
<S> <C> <C> <C>
Current:
Federal.................................... $ 3,676,000 $ 1,377,000 $ 676,000
State...................................... 677,000 264,000 214,000
Utilization of net operating loss
carryforwards........................... (3,790,000) (1,353,000) (704,000)
----------- ----------- ---------
563,000 288,000 186,000
----------- ----------- ---------
Deferred:
Federal.................................... 1,983,000 891,000 --
State...................................... 371,000 108,000 --
Adjustment of valuation allowance.......... (3,566,000) (1,578,000) (584,000)
----------- ----------- ---------
(1,212,000) (579,000) (584,000)
----------- ----------- ---------
Total.............................. $ (649,000) $ (291,000) $(398,000)
=========== =========== =========
</TABLE>
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("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 net income of $584,000 ($0.04 per common share for both primary and fully
diluted).
The adjustments of the valuation allowance during fiscal 1995, 1994 and
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, 1995 and 1994 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, 1995 and 1994 have
been limited to the benefit to be derived from projected future income,
primarily due to the Company's 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, 1995, 1994 and
1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
U.S. Federal statutory rate................................. 34.0% 34.0% 34.0%
Increases (reductions) due to:
State taxes -- net of Federal tax benefit................... 5.5 6.0 11.3
Utilization of net operating loss carryforwards............. (43.0) (38.9) (51.2)
Anticipated future utilization of net operating loss
carryforwards............................................. (14.8) (17.1) (76.5)
Nondeductible merger expenses............................... -- -- 11.1
Net operating loss not producing current tax benefits....... 9.5 7.4 18.1
Other -- net................................................ .9 -- 1.0
----- ----- -----
Total............................................. (7.9)% (8.6)% (52.2)%
===== ===== =====
</TABLE>
F-13
<PAGE> 116
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
The net deferred tax asset at September 30, 1995, 1994 and 1993 is
comprised of the following:
<TABLE>
<CAPTION>
DEFERRED TAX ASSETS (LIABILITIES) 1995 1994 1993
----------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Net operating loss carryforwards......... $ 9,975,000 $ 12,355,000 $ 13,578,000
Tax credit carryforwards................. 1,708,000 1,129,000 810,000
Accrued liabilities...................... 1,047,000 760,000 807,000
Inventories.............................. 524,000 460,000 423,000
Property and equipment................... (101,000) 78,000 227,000
Receivables.............................. 137,000 130,000 111,000
------------ ------------ ------------
13,290,000 14,912,000 15,956,000
Less valuation allowance................. (10,915,000) (13,749,000) (15,372,000)
------------ ------------ ------------
Total.......................... $ 2,375,000 $ 1,163,000 $ 584,000
============ ============ ============
</TABLE>
As of September 30, 1995, Robotic Vision Systems, Inc. ("RVSI") had Federal
net operating loss carryforwards of approximately $11,997,000. Such loss
carryforwards expire in the fiscal years 2001 through 2007. Additionally, RVSI
had Federal income tax credits of approximately $847,000 and state income tax
credits of approximately $499,000. 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.
As of September 30, 1995, Acuity had Federal net operating loss
carryforwards of approximately $11,851,000 and foreign net operating loss
carryforwards relating to its United Kingdom subsidiary of approximately
$349,000. Such loss carryforwards expire in the fiscal years 1996 through 2010.
In addition, Acuity has available approximately $325,000 of unused investment
tax credits. Because of the changes in ownership, as defined in the Internal
Revenue Code, which occurred in January 1994 and September 1995 (Note 2),
certain of the net operating loss carryforwards and credits are subject to
annual limitations.
As of September 30, 1995, IDM had Federal net operating loss carryforwards
of approximately $3,400,000. Such loss carryforwards expire in the fiscal years
2006 through 2010. In addition, IDM has available approximately $37,000 of
unused general business tax credits. Because of the changes in ownership, as
defined in the Internal Revenue Code, which occurred in October 1995 (Note 2),
certain of the net operating loss carryforwards and credits are subject to
annual limitations.
6. PLANT AND EQUIPMENT
Plant and equipment at September 30, 1995 and 1994 consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Machinery and equipment..................................... $2,208,000 $1,970,000
Furniture, fixtures and other equipment..................... 2,215,000 1,185,000
Demonstration equipment..................................... 2,633,000 1,875,000
Leasehold improvements...................................... 457,000 274,000
---------- ----------
Total............................................. 7,513,000 5,304,000
Less accumulated depreciation and amortization.............. 3,368,000 2,441,000
---------- ----------
Plant and equipment -- net.................................. $4,145,000 $2,863,000
========== ==========
</TABLE>
F-14
<PAGE> 117
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
7. OTHER ASSETS
Other assets at September 30, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Software development costs, net of accumulated amortization
of $738,000 and $413,000, respectively.................... $1,274,000 $1,064,000
Other....................................................... 474,000 419,000
---------- ----------
Total............................................. $1,748,000 $1,483,000
========== ==========
</TABLE>
Certain software development costs totaling $535,000 and $433,000 have been
capitalized during the fiscal years ended September 30, 1995 and 1994,
respectively. Amortization expense relating to software development costs for
1995, 1994 and 1993 was $325,000, $239,000 and $137,000, respectively.
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities at September 30, 1995 and
1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Accrued wages and related employee benefits................. $1,622,000 $1,663,000
Accrued sales commissions................................... 1,827,000 540,000
Accrued warranty and other product related costs............ 675,000 575,000
Other....................................................... 1,349,000 1,376,000
---------- ----------
Total............................................. $5,473,000 $4,154,000
========== ==========
</TABLE>
9. LOAN PAYABLE
In March 1995, Acuity obtained a revolving line of credit that provided for
borrowings up to the lesser of $3,500,000 or 80 percent of eligible accounts
receivable, as defined, plus 50 percent of unpledged domestic cash and cash
equivalents. Interest was payable monthly at a rate of prime plus .5 percent.
Borrowings under the line were secured by substantially all assets of Acuity.
The agreement required, among other covenants, that Acuity maintain minimum
levels of profitability, current ratio, net worth and limits the levels of
leverage.
After the merger with RVSI, the line of credit balance of $1,375,000 was
repaid with the proceeds from a 90-day note payable from a new bank, guaranteed
by RVSI. The note is collateralized by certain investments and cash equivalents
of RVSI. The note has a maturity date of December 28, 1995. At September 30,
1995, the outstanding balance under the note was $1,385,000, bearing interest at
8.25 percent.
10. NOTES PAYABLE
RVSI had a line of credit agreement with a bank under which RVSI could
borrow up to $1,500,000 against certain customer accounts receivable and
inventory. $63,000 was outstanding under this agreement at September 30, 1994.
Borrowings under the agreement bore interest at the higher of the bank's prime
rate or the Federal funds rate plus one-half of one percent. The agreement
expired in June 1995.
At September 30, 1994, IDM had several short-term notes payable outstanding
totaling approximately $236,000 to certain of its then existing stockholders at
interest rates ranging from 7 to 10 percent. All outstanding balances were
either repaid or satisfied through the issuance of shares of IDM common stock
sold in IDM's 1995 private placement (Note 13). IDM also had outstanding
$350,000 of loans representing bridge financing from three institutional
investors (the "Investors"). These loans bore interest at the rate of 8 percent.
F-15
<PAGE> 118
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
In January and February 1995, IDM obtained additional bridge financing
totaling $280,000 from the Investors. All amounts owed to the Investors were
satisfied through the 1995 private placement of IDM's common stock (Note 13). In
addition, in June through September 1995, these Investors, as well as a former
stockholder of IDM common stock, loaned IDM a total of $270,000 for working
capital purposes. Such loans bore interest at the rate of 10 percent and were
secured by certain accounts receivable, inventory, and equipment. Such amounts
were repaid in October 1995.
11. 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,
1995, 1994 and 1993 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost -- benefits earned during the
period........................................... $158,000 $143,000 $ 91,000
Interest on projected benefit obligations.......... 83,000 62,000 49,000
Estimated return on plan assets.................... (56,000) (52,000) (43,000)
Other -- amortization of actuarial gains and net
transition asset................................. (20,000) (30,000) (32,000)
-------- -------- --------
Net pension cost................................... $165,000 $123,000 $ 65,000
======== ======== ========
</TABLE>
The funded status of the plan compared with the accrued expense included in
the Company's consolidated balance sheet at September 30, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Fair value of plan assets................................... $ 810,000 $ 724,000
---------- ----------
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested benefits
of $754,000 and $636,000 in 1995 and 1994,
respectively........................................... 933,000 790,000
Effect of projected compensation increases................ 340,000 226,000
---------- ----------
Projected benefit obligation for services rendered to
date...................................................... 1,273,000 1,016,000
---------- ----------
Projected benefit obligation in excess of plan assets....... (463,000) (292,000)
Unrecognized net loss....................................... 217,000 67,000
Remaining unrecognized net transition asset being amortized
over 11 years............................................. (86,000) (122,000)
Unrecognized prior service costs............................ 34,000 40,000
---------- ----------
Accrued pension cost........................................ $ (298,000) $ (307,000)
========== ==========
</TABLE>
F-16
<PAGE> 119
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
Significant assumptions used in determining net periodic pension cost and
related pension obligations are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Discount rate.......................................................... 8.00% 7.50%
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 $83,000, $60,000 and $36,000
for employer contributions to the Plan in 1995, 1994 and 1993, respectively. In
1995, 1994 and 1993, the Company issued 12,000, 9,000 and 16,000 shares,
respectively, 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 $90,000 and $85,000 related to this
agreement during fiscal 1995 and 1994, respectively. No compensation expense was
recorded relating to this agreement during fiscal 1993. No additional
compensation may be earned under this agreement.
12. COMMITMENTS AND CONTINGENCIES
Operating Leases -- The Company has entered into operating lease agreements
for equipment, and manufacturing and office facilities. The minimum
noncancelable scheduled rentals under these agreements are as follows:
<TABLE>
<CAPTION>
FACILITIES EQUIPMENT TOTAL
---------- --------- ----------
<S> <C> <C> <C>
Year Ending September 30:
1996.......................................... $ 919,000 $ 99,000 $1,018,000
1997.......................................... 800,000 87,000 887,000
1998.......................................... 791,000 54,000 845,000
1999.......................................... 817,000 20,000 837,000
2000.......................................... 705,000 4,000 709,000
Thereafter.................................... 341,000 -- 341,000
---------- -------- ----------
Total................................. $4,373,000 $ 264,000 $4,637,000
========== ======== ==========
</TABLE>
Rent expense for 1995, 1994 and 1993 was $798,000, $755,000 and $694,000,
respectively.
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.
F-17
<PAGE> 120
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
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, trespass and conversion. Cybo is seeking aggregate
damages in excess of $10,000,000. 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
consolidated financial position or results of operations.
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
consolidated financial position or results of operations.
13. STOCKHOLDERS' EQUITY
Private Equity Placements -- During fiscal 1995, the Company entered into
an agreement with a group of investors. Under the agreement, the Company
received approximately $9,386,000, 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 approximately 68,000 shares
of the Company's common stock at exercise prices ranging from $8.75 to $9.00 per
share.
During fiscal 1995, IDM entered into an agreement with a group of investors
and certain then existing stockholders. Under the agreement, IDM received
approximately $1,765,000 after expenses, in exchange for 46,447 shares of IDM's
common stock (approximately 119,000 equivalent shares of RVSI common stock). IDM
used approximately $785,000 of the net proceeds to satisfy certain notes payable
and related accrued interest and $60,000 of the net proceeds to satisfy certain
accounts payable.
During fiscal 1994, the Company entered into an agreement with a group of
investors. Under the agreement the Company received approximately $3,804,000,
after expenses, in exchange for the issuance of 1,360,000 shares of the
Company's common stock. The Company also issued warrants exercisable 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 1994, IDM entered into an agreement with an investor and
certain existing stockholders. Under the agreement, IDM received approximately
$491,000, after expenses, in exchange for 22,796 shares of IDM's common stock
(approximately 59,000 equivalent shares of RVSI common stock). IDM used
approximately $227,000 of the net proceeds to satisfy certain notes payable and
related accrued interest.
Warrants Issued for Services Rendered -- During fiscal 1995, the Company
issued warrants under certain agreements granting the holders thereof the right
through July 1999 to purchase up to approximately 82,000 shares of the Company's
common stock at exercise prices ranging from $5.81 to $23.38 per share as
compensation for professional services rendered. The Company recorded an expense
of approximately $92,000 related to the issuance of such warrants.
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
approximately 227,000 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.
F-18
<PAGE> 121
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
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 1995, the Company received
approximately $492,000 in connection with the issuance of approximately 324,000
shares of its common stock upon the exercise of warrants to purchase such shares
at prices ranging between $1.00 and $4.38 per share.
During fiscal 1994, the Company received approximately $270,000 in
connection with the issuance of approximately 243,000 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, 1995, there were warrants
outstanding to purchase approximately 1,198,000 shares of the Company's common
stock with exercise prices ranging between $1.00 and $23.38 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.
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, 1992......................................... 1,475,862 $0.53 - $38.72
Granted................................................... 471,486 0.88 - 9.29
Canceled or expired....................................... (111,472) 0.53 - 17.43
Exercised................................................. (21,528) 0.53 - 1.44
--------- ------------
Options outstanding for shares of common stock at
September 30, 1993...................................... 1,814,348 0.53 - 38.72
Granted................................................... 305,074 3.63 - 15.06
Canceled or expired....................................... (32,285) 0.53 - 21.51
Exercised................................................. (335,982) 0.53 - 17.43
--------- ------------
Options outstanding for shares of common stock at
September 30, 1994...................................... 1,751,155 0.53 - 38.72
Granted................................................... 246,699 4.25 - 22.50
Canceled or expired....................................... (52,924) 0.53 - 17.43
Exercised................................................. (380,574) 0.53 - 17.43
--------- ------------
Options outstanding for shares of common stock at
September 30, 1995...................................... 1,564,356 $0.53 - $38.72
========= ============
Options exercisable at September 30, 1995................. 888,492
=========
Shares reserved for issuance at September 30, 1995........ 2,140,021
=========
</TABLE>
F-19
<PAGE> 122
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
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 1995, revenues from a single customer represented 16 percent of
total revenues. No other customer accounted for more than 10 percent of total
revenues for fiscal 1995, 1994 and 1993.
Foreign export sales accounted for 64 percent, 41 percent and 52 percent of
the Company's revenues in fiscal 1995, 1994 and 1993, respectively.
The Company's domestic and foreign export sales during the years ended
September 30, 1995, 1994 and 1993 are set forth below:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
North America............................... $23,727,000 $28,034,000 $19,485,000
Asia/Pacific Rim............................ 34,133,000 17,528,000 15,959,000
Europe...................................... 7,400,000 2,277,000 4,196,000
----------- ----------- -----------
Total............................. $65,260,000 $47,839,000 $39,640,000
=========== =========== ===========
</TABLE>
15. SUBSEQUENT EVENT
On November 20, 1995, the Company obtained a revolving line of credit from
a bank that provides for maximum borrowings of $6,000,000. The agreement expires
on January 31, 1999. Borrowings under the agreement are secured by all accounts
receivable of the Company and will bear interest at the adjusted LIBOR rate, as
defined, plus two percent. The Company will pay a commitment fee of one quarter
of one percent per annum on any unused portion of the credit facility. The terms
of the agreement, among other matters, require the Company to maintain certain
tangible net worth, debt to equity, working capital, and earnings before
depreciation and amortization to long-term debt ratios and restrict the payment
of cash dividends.
F-20
<PAGE> 123
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER
30,
1995
RESTATED
(NOTE 2)
MARCH 31, ------------
1996
------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................................... $ 17,585,000 $ 16,424,000
Investments (Note 3).......................................... 1,000,000 1,000,000
Receivable -- net (including unbilled receivables of
$1,928,000 at March 31, 1996 and $1,298,000 at September
30, 1995).................................................. 14,744,000 12,082,000
Inventories (Note 4).......................................... 13,386,000 8,461,000
Deferred income taxes......................................... 2,375,000 2,375,000
Prepaid expenses and other current assets..................... 528,000 154,000
------------ ------------
Total current assets.................................. 49,618,000 40,496,000
Plant equipment -- net........................................ 5,584,000 4,145,000
Other assets.................................................. 2,061,000 1,748,000
Investments (Note 3).......................................... 992,000 1,989,000
------------ ------------
TOTAL................................................. $ 58,255,000 $ 48,378,000
=========== ===========
LIABILITIES
Current Liabilities:
Accounts payable.............................................. $ 8,606,000 $ 7,988,000
Loan payable (Note 6)......................................... 2,128,000 1,385,000
Accrued Expenses and Other Current Liabilities................ 4,666,000 5,473,000
Note Payable.................................................. -- 270,000
Advance Contract Payments Received............................ 515,000 1,078,000
------------ ------------
Total Current Liabilities............................. 15,915,000 16,194,000
Other Liabilities............................................. 211,000 78,000
------------ ------------
Total Liabilities..................................... 16,126,000 16,272,000
STOCKHOLDERS' EQUITY
Common stock, authorized 30,000,000 shares, $.01 par value;
issued and outstanding 16,497,000 shares at March 31, 1996
and 15,175,000 shares at September 30, 1995................... 165,000 152,000
Additional paid-in capital...................................... 111,973,000 109,834,000
Accumulated deficit............................................. (70,132,000) (78,023,000)
Cumulative translation adjustment............................... 123,000 143,000
------------ ------------
Total Stockholders' Equity............................ 42,129,000 32,106,000
------------ ------------
TOTAL................................................. $ 58,255,000 $ 48,378,000
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
F-21
<PAGE> 124
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
RESTATED RESTATED
(NOTE 2) (NOTE 2)
<S> <C> <C> <C> <C>
Revenues.............................. $41,460,000 $28,168,000 $20,998,000 $14,483,000
Cost of Revenues...................... 17,267,000 12,335,000 8,506,000 6,339,000
----------- ----------- ----------- -----------
Gross Profit................ 24,193,000 15,833,000 12,492,000 8,144,000
Research and Development Costs........ 6,213,000 4,671,000 3,183,000 2,487,000
Selling, General and Administrative
Expenses............................ 9,999,000 7,766,000 5,387,000 4,158,000
Merger Expenses....................... 226,000 440,000 2,000 --
Interest Income -- Net................ (478,000) (43,000) (252,000) (41,000)
----------- ----------- ----------- -----------
Income Before Provision for
Income taxes.............. 8,233,000 2,999,000 4,172,000 1,540,000
Provision (Benefit) for Income
Taxes............................... 342,000 (2,067,000) 167,000 (2,606,000)
----------- ----------- ----------- -----------
Net Income............................ $ 7,891,000 $ 5,066,000 $ 4,005,000 $ 4,146,000
=========== =========== =========== ===========
Net Income Per Common Share........... $ .45 $ .33 $ .23 $ .27
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
F-22
<PAGE> 125
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
-----------------------------
1996 1995
----------- -----------
RESTATED
(NOTE 2)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income...................................................... $ 7,891,000 $ 5,066,000
Adjustments to reconcile net income to cash used in operating
activities:
Deferred income taxes........................................... -- (2,266,000)
Depreciation and amortization................................... 959,000 698,000
Issuance of common stock -- defined contribution stock ownership
and deferred compensation plan................................ -- 60,000
Provision for doubtful receivable............................... -- 20,000
Issuance of warrants for professional services rendered......... -- 14,000
Other........................................................... (25,000) (80,000)
Changes in assets and liabilities:
Receivables................................................... (2,644,000) (2,068,000)
Inventories................................................... (4,925,000) (2,623,000)
Prepaids and other current assets............................. (352,000) (121,000)
Other assets.................................................. (508,000) (290,000)
Accounts payable.............................................. 600,000 2,528,000
Accrued expenses.............................................. (647,000) (231,000)
Advanced contract payments received........................... (563,000) (1,241,000)
Other liabilities............................................. (26,000) 3,000
----------- -----------
Net cash used in operating activities........................... (240,000) (531,000)
----------- -----------
INVESTING ACTIVITIES:
Additions to plant and equipment................................ (2,203,000) (1,005,000)
Investments..................................................... -- (993,000)
Proceeds from the maturities investments........................ 1,000,000 --
----------- -----------
Net cash used in investing activities........................... (1,203,000) (1,998,000)
----------- -----------
FINANCING ACTIVITIES:
Issuance of Common Stock and warrants -- private equity
placement (less offering costs)............................... -- 920,000
Options and warrants............................................ 2,151,000 249,000
Notes payable -- other.......................................... (270,000) 567,000
Proceeds from bank loan......................................... 743,000 450,000
Payment of S.T. debt and related accrued interest............... -- (163,000)
----------- -----------
Net cash used in financing activities........................... 2,624,000 2,023,000
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS.... (20,000) 8,000
----------- -----------
NET INCREASE/DECREASE IN CASH................................... 1,161,000 (498,000)
CASH -- BEGINNING OF YEAR....................................... 16,424,000 1,790,000
----------- -----------
CASH -- END OF YEAR............................................. $17,585,000 $ 1,292,000
=========== ===========
SUPPLEMENTAL INFORMATION:
Interest paid................................................... $ 81,000 $ 65,000
=========== ===========
Taxes paid...................................................... $ 158,000 $ 277,000
=========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Notes payable and accrued interest satisfied by private offering
of common stock............................................... $ -- $ 785,000
=========== ===========
Accounts payable satisfied by private offering of common
stock......................................................... $ -- $ 60,000
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
F-23
<PAGE> 126
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of March 31, 1996, the
condensed consolidated statements of operations for the three and six month
periods ended March 31, 1996 and 1995 and the condensed consolidated statements
of cash flows for the six month periods ended March 31, 1996 and 1995 have been
prepared by the Company, without audit. 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, 1996 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
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's September 30,
1995 Form 10-K. The results of operations for the period ended March 31, 1996
are not necessarily indicative of the operating results for the full year.
2. ACQUISITIONS
On September 20, 1995, the Company acquired the outstanding shares of
Acuity Imaging, Inc. ("Acuity") for approximately 1,448,000 shares of the
Company's common stock, having a market value at the date of the merger of
approximately $31,141,000. Acuity is a developer, manufacturer and seller of
machine vision systems. Outstanding Acuity stock options were converted into
options to purchase approximately 114,000 shares of the Company's common stock.
On October 23, 1995, the Company acquired the outstanding shares of
International Data Matrix, Inc. ("IDM") for approximately 370,000 shares of the
Company's common stock, having a market value at the date of the merger of
approximately $8,183,000. IDM is a developer, manufacturer and seller of
high-density bar code reading products.
Both acquisitions were accounted for as poolings of interests and
accordingly, the consolidated financial statements have been retroactively
restated to include the accounts of Acuity and IDM for all periods presented.
The following is a reconciliation of certain restated amounts with amounts
previously reported.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
MARCH 31, 1995 MARCH 31, 1995
-------------- --------------
<S> <C> <C>
Revenues:
As previously reported................................ $ 9,071,000 $ 16,600,000
Effect of Acuity and IDM poolings of interests........ 5,412,000 11,568,000
----------- -----------
As restated............................................. $ 14,483,000 $ 28,168,000
=========== ===========
Net Income:
As previously reported................................ $ 4,463,000 $ 5,282,000
Effect of Acuity and IDM poolings of interests........ (317,000) (216,000)
----------- -----------
As restated............................................. $ 4,146,000 $ 5,066,000
=========== ===========
Net income per share:
As previously reported................................ $ 0.32 $ 0.38
Effect of Acuity and IDM poolings of interests........ (0.05) (0.05)
----------- -----------
As restated............................................. $ 0.27 $ 0.33
=========== ===========
</TABLE>
F-24
<PAGE> 127
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
3. INVESTMENTS
At March 31, 1996 and September 30, 1995, investments consisted of certain
debt securities issued by the United States government with maturities through
November 1997.
4. INVENTORIES
Inventories at March 31, 1996 and September 30, 1995 consisted of the
following:
<TABLE>
<CAPTION>
MARCH 31, 1996 SEPTEMBER 30, 1995
-------------- ------------------
<S> <C> <C>
Raw Materials........................................ $ 4,561,000 $2,223,000
Work-in-Process...................................... 8,307,000 5,515,000
Finished Goods....................................... 518,000 533,000
Field Engineering Parts and Components............... -- 190,000
----------- ----------
Total...................................... $ 13,386,000 $8,461,000
=========== ==========
</TABLE>
5. INCOME TAXES
The provision for income taxes for the six months ended March 31, 1996 and
1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
-------- -----------
<S> <C> <C>
Current provision........................................... $342,000 $ 199,000
Deferred provision.......................................... -- 1,036,000
Adjustment of valuation allowance........................... -- (3,302,000)
-------- -----------
Total............................................. $342,000 $(2,067,000)
======== ===========
</TABLE>
6. LOAN PAYABLE
The Company has a revolving line of credit from a bank that provides for
maximum borrowings of $6,000,000. The agreement expires on January 31, 1999.
Borrowings under the agreement are secured by all accounts receivable of the
Company and bear interest at the adjusted LIBOR rate, as defined, plus two
percent. The Company is required to pay a commitment fee of one quarter of one
percent per annum on any unused portion of the credit facility. The terms of the
agreement, among other matters, require the Company to maintain certain tangible
net worth, debt to equity, working capital, and earnings before depreciation and
amortization to long-term debt ratios and restrict the payment of cash
dividends.
7. SUBSEQUENT EVENTS
On May 30, 1996, RVSI consummated a merger with Northeast Robotics, Inc.
("NER"), a privately owned company located in New Boston, New Hampshire,
pursuant to which NER became a wholly owned subsidiary of RSVI (the "NER
Merger"). NER markets a line of patented illumination products to perform
reliably in difficult imaging applications involving highly reflective or uneven
surfaces. The NER Merger was structured as a tax-free reorganization and
accounted for as a purchase. As a consequence of the NER Merger, RSVI issued
139,037 shares of its common stock (which had a market value of approximately
$2,676,000 on the date the NER Merger was consummated) to the shareholders of
NER in exchange for all of the outstanding shares of NER common stock.
On June 11, 1996, RVSI announced that it had entered into a letter of
intent to consummate a merger transaction pursuant to which RVSI would acquire
all of the outstanding common stock of Computer Identics
F-25
<PAGE> 128
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
Corporation ("CI"). The transaction is intended to be completed as a tax-free
reorganization and is to be accounted for as a pooling of interests. To effect
the merger transaction, RVSI would issue 0.177805207 shares of its common stock
for each share of outstanding CI common stock, or approximately 1,929,000 shares
of RVSI's common stock. In addition, CI's outstanding stock options and warrants
would be exchanged for stock options or warrants to purchase RVSI's common stock
in the same 0.177805207 to one ratio.
CI designs, manufactures and services automatic data collection products,
networks, solutions and systems for factory data collection and material
handling/automation applications in manufacturing, warehousing and distribution
environments.
Consummation of the merger transaction is subject to conditions customary
for transactions of this nature, including completion of due diligence,
negotiation of definitive documentation and approval by CI's stockholders. There
can be no assurances that this merger transaction will be successfully
consummated.
F-26
<PAGE> 129
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Computer Identics Corporation:
We have audited the accompanying consolidated balance sheets of Computer
Identics Corporation and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the two years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Computer
Identics Corporation and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations, and their cash flows for each of the
two years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
February 8, 1996
F-27
<PAGE> 130
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Computer Identics Corporation:
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Computer Identics Corporation and its
subsidiaries for the year ended December 31, 1993. These financial statements
are the responsibility of the Company's management. Our audit also included the
financial statement schedule listed in the Index on page F-1. Our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of Computer
Identics Corporation and subsidiaries for the year ended December 31, 1993, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 28, 1994
F-28
<PAGE> 131
CONSOLIDATED BALANCE SHEETS
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................ $ 1,752 $ 755
Accounts receivable (less allowance of $225 in 1995 and $321 in 1994
for doubtful accounts)............................................ 6,062 6,130
Inventory............................................................ 3,625 3,104
Other................................................................ 380 238
------- --------
Total current assets......................................... 11,819 10,227
------- --------
Property and equipment:
Equipment............................................................ 3,674 3,086
Furniture and fixtures............................................... 324 256
Leasehold improvements............................................... 64 59
------- --------
Total property and equipment................................. 4,062 3,401
------- --------
Less accumulated depreciation and amortization....................... (3,133) (2,646)
------- --------
Net property and equipment................................... 929 755
------- --------
Other assets........................................................... 0 4
------- --------
Total........................................................ $ 12,748 $ 10,986
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank................................................ $ 1,002 --
Obligation under capital lease....................................... 15 30
Accounts payable..................................................... 2,402 2,334
Accrued compensation and related benefits............................ 1,063 998
Accrued income taxes................................................. 29 32
Other current liabilities............................................ 684 1,179
Deferred revenue..................................................... 289 355
------- --------
Total current liabilities.................................... 5,484 4,928
------- --------
Long-term capital lease obligation..................................... 57 72
------- --------
Stockholders' equity :
Nonvoting common stock $.01 par value, authorized 600,000 shares,
issued and outstanding; 0 shares in 1995, 135,431 shares in
1994.............................................................. -- 1
Common stock, $.10 par value, authorized 14,000,000 shares, issued
and outstanding 10,856,793 in 1995 and 10,390,562 shares in
1994.............................................................. 1,086 1,039
Additional paid-in capital........................................... 24,005 23,585
Deferred compensation................................................ (60) (54)
Accumulated deficit.................................................. (17,889) (18,572)
Cumulative translation adjustments................................... 65 (13)
------- --------
Total stockholders' equity................................... 7,207 5,986
------- --------
Total........................................................ $ 12,748 $ 10,986
======= ========
</TABLE>
See notes to consolidated financial statements.
F-29
<PAGE> 132
CONSOLIDATED STATEMENTS OF OPERATIONS
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Revenues:
Net product sales........................................... $24,390 $22,918 $17,710
Customer support services................................... 3,355 3,108 4,180
------ ------ ------
Total............................................... 27,745 26,026 21,890
====== ====== ======
Cost and expenses:
Cost of products sold....................................... 12,217 11,820 9,368
Cost of customer support services........................... 1,848 1,665 2,345
Selling, general and administrative......................... 10,433 10,295 8,775
Research and development.................................... 2,545 2,242 1,861
Separation costs............................................ -- 469 541
------ ------ ------
Total............................................... 27,043 26,491 22,890
------ ------ ------
Income (loss) from operations................................. 702 (465) (1,000)
Interest income............................................... 38 26 48
Interest expense.............................................. (43) (7) (11)
------ ------ ------
Income (loss) before provision for income taxes............... 697 (446) (963)
Provision for income taxes.................................... 14 64 63
------ ------ ------
Net income (loss)............................................. $ 683 $ (510) $(1,026)
------ ------ ------
Net income (loss) per share................................... $ 0.06 $ (0.05) $ (0.10)
====== ====== ======
Weighted average number of common and
common equivalent shares outstanding........................ 10,977 10,339 9,893
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
F-30
<PAGE> 133
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
(ALL AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NONVOTING
COMMON STOCK COMMON STOCK ADDITIONAL CUMULATIVE
--------------- --------------- PAID-IN DEFERRED ACCUMULATED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT ADJUSTMENT TOTAL
------ ------ ------ ------ ---------- ------------ ----------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993... 325 $ 3 9,459 $ 946 $ 22,909 $ (13) $ (17,036) $ (2) $ 6,807
Conversion of stock........ (100) (1) 100 10 (9) 0
Exercise of stock
options.................. 203 20 132 152
Issuance of common stock... 96 10 134 (144) 0
Compensation expense
recognized............... 44 44
Net loss................... (1,026) (1,026)
Translation adjustment..... (56) (56)
---- --- ------ ------ ------- ----- -------- ---- -------
Balance, December 31,
1993..................... 225 2 9,858 986 23,166 (113) (18,062) (58) 5,921
Conversion of stock........ (90) (1) 90 9 (8) 0
Exercise of stock options
and other employee
awards................... 93 9 92 101
Issuance of common stock
and exercise of warrant
by former President...... 350 35 335 370
Compensation expense
recognized............... 59 59
Net loss................... (510) (510)
Translation adjustment..... 45 45
---- --- ------ ------ ------- ----- -------- ---- -------
Balance, December 31,
1994..................... 135 1 10,391 1,039 23,585 (54) (18,572) (13) 5,986
Conversion of stock........ (135) (1) 135 14 (13) 0
Exercise of stock
options.................. 183 18 217 235
Issuance of common stock... 148 15 216 (83) 148
Compensation expense
recognized............... 77 77
Net income................. 683 683
Translation adjustment..... 78 78
---- --- ------ ------ ------- ----- -------- ---- -------
Balance, December 31,
1995..................... 0 $ -- 10,857 $1,086 $ 24,005 $ (60) $ (17,889) $ 65 $ 7,207
==== === ====== ====== ======= ===== ======== ==== =======
</TABLE>
See notes to consolidated financial statements.
F-31
<PAGE> 134
CONSOLIDATED STATEMENTS OF CASH FLOWS
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
(ALL AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1994 1993
------ ------ -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................... $ 683 $ (510) $(1,026)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization.............................. 454 440 498
Other...................................................... -- -- (19)
Non-cash compensation...................................... 106 80 44
Non-cash seperation costs.................................. -- -- 384
Increase (decrease) in cash from:
Accounts receivable........................................ 108 (1,531) (643)
Inventory.................................................. (312) (364) (209)
Other current assets....................................... (171) (6) 73
Accounts payable........................................... 49 922 706
Accrued compensation and related benefits.................. 38 216 127
Accrued income taxes....................................... (3) (39) (31)
Other current liabilities.................................. (530) 141 (53)
Deferred revenue........................................... (73) (153) 70
------ ------ ------
Total adjustments..................................... (334) (294) 947
------ ------ ------
Net cash provided by (used for) operating activities............ 349 (804) (79)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment........................... (619) (293) (292)
Decrease in other assets...................................... 4 -- 11
------ ------ ------
Net cash used for investing activities.......................... (615) (293) (281)
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable to bank........................................... 1,002 -- --
Principal payments under capital lease obligations............ (15) (34) (29)
Proceeds from exercise of stock options....................... 235 81 153
Proceeds from exercise of warrant............................. -- 105 --
------ ------ ------
Net cash provided by financing activities..................... 1,222 152 124
Effect of exchange rate changes on cash and cash
equivalents................................................ 41 26 (33)
------ ------ ------
Net increase(decrease) in cash and cash equivalents............. 997 (919) (269)
Cash and cash equivalents, beginning of year.................... 755 1,674 1,943
------ ------ ------
Cash and cash equivalents, end of year.......................... $1,752 $ 755 $ 1,674
SUPPLEMENTAL INFORMATION
Cash paid for interest.......................................... $ 44 $ 7 $ 11
Cash paid for income taxes...................................... $ 36 $ 44 $ 147
Supplemental disclosure of noncash activity:
Acquisition of assets by capital leasing...................... $ -- $ 88 $ --
</TABLE>
See notes to consolidated financial statements.
F-32
<PAGE> 135
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business -- Computer Identics Corporation, designs,
manufactures, markets and services standard bar code products and systems for
the data collection and material handling/industrial markets. The Company
markets its products in the United States through its direct sales organization
and through system integrators and value added resellers. As an international
organization, the Company and its foreign subsidiaries have sales and service
offices located in Belgium, France, Germany and the United Kingdom as well as a
network of distributors and systems integrators in locations throughout the
world. Credit is extended to customers based on an evaluation of the customer's
financial condition, and generally collateral is not required. Credit losses are
provided for in the financial statements and consistently have been within
management's expectations.
Principles of Consolidation -- The consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant
intercompany transactions and accounts are eliminated in consolidation.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. The significant estimates that effect the financial
statements include the realizability of deferred tax assets, warranty accruals,
and allowances for doubtful accounts.
Cash equivalents -- Cash equivalents are defined as highly liquid
investments with maturities of three months or less at date of purchase.
Inventory valuation -- Inventory is recorded at the lower of cost
(first-in, first-out method) or market.
Property and equipment and depreciation -- Property and equipment are
stated at cost. Depreciation is computed principally on the straight-line method
over the assets' estimated useful lives. Leasehold improvements are amortized
over the shorter of the lease term or the estimated useful lives of the assets.
Foreign currency translation -- Assets and liabilities of the Company's
foreign subsidiaries are translated at current exchange rates. Revenues, costs,
and expenses are translated at the average exchange rates for the period.
Translation adjustments resulting from changes in exchange rates are reported as
a separate component of stockholders' equity. Foreign currency transaction gains
and (losses) are included in the determination of net income and were $163,
($91) and ($95) in 1995, 1994 and 1993, respectively.
Revenue -- Revenue from product sales is recognized upon shipment. Revenues
from services are recognized ratably over the contract period or as services are
performed.
Research and Development -- Expenditures for research and development are
charged to expense as incurred.
Income taxes -- The Company accounts for income taxes in accordance with
FASB Statement No. 109 "Accounting for Income Taxes" ("Statement 109"). Tax
provisions and credits are recorded at statutory rates for taxable items
included in the consolidated statements of income regardless of the period for
which such items are reported for tax purposes. Deferred income taxes are
recognized for temporary differences between financial statement and income tax
bases of assets and liabilities for which income tax benefits will be realized
in future years.
New Accounting Standards -- The Company has not yet adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived
F-33
<PAGE> 136
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Assets to be Disposed of" which will require adoption in 1996. The adoption of
this statement is not expected to have a material impact on the Company's
consolidated financial statements.
Stock Compensation Arrangements -- The Company accounts for its stock
compensation arrangements under the provisions of APB Opinion No. 25, Accounting
for Stock Issued to Employees, and intends to continue to do so.
Net Income per common share -- Net income (loss) per common share is
computed based on the weighted average number of common and the dilutive effect
of common equivalent shares outstanding for the period.
Reclassification -- Certain amounts in prior years have been reclassified
to conform to the 1995 presentation.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
------- -------
<S> <C> <C>
Raw materials.............................................. $ 1,821 $ 1,422
Work in process............................................ 336 230
Finished goods............................................. 1,468 1,452
------ ------
$ 3,625 $ 3,104
====== ======
</TABLE>
3. CREDIT ARRANGEMENTS AND CAPITAL LEASE OBLIGATIONS
The Company has an unsecured line of credit arrangement with a domestic
bank which provide borrowings up to $1,000. In 1995 the entire line of credit
was borrowed in DM and transferred to the Company's German subsidiary to reduce
intercompany payables. The borrowings at year end amounted to $1,002, accrue
interest at a rate of 7.0%, and are payable on demand. The carrying amount
approximates its fair market value. The Company's Belgium subsidiary has a 5
million Belgium Franc (approximately $170) line of credit with a Belgium bank.
There were no borrowings outstanding on this facility in 1995. Interest is
payable quarterly at the bank's base rate less .25%. Borrowings are guaranteed
by the Company.
Payments under the capital lease obligation are due as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
----------------------------------------------------------------------
<S> <C>
1996.................................................................. $ 24
1997.................................................................. 24
1998.................................................................. 24
1999.................................................................. 22
2000.................................................................. --
----
Total................................................................. $ 94
Less portion representing interest.................................... (22)
----
Total obligation under capital lease.................................. $ 72
====
</TABLE>
The carrying amounts of the capital leases were $72 in 1995 and $102 in
1994.
F-34
<PAGE> 137
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
4. LEASING ARRANGEMENTS
The Company leases its office facilities under operating lease agreements
expiring through September 2001. In addition to the minimum rent, which is
subject to certain escalation provisions, the Company is responsible for all
taxes, insurance and operating costs. Minimum future lease payments under
non-cancelable operating leases total approximately $636 in 1996, $499 in 1997,
$261 in 1998, $92 in 1999, $80 in 2000, and $59 after 2000. Total rent expense
was approximately $672, $640, and $607, for 1995, 1994 and 1993 respectively.
5. EMPLOYEE BENEFIT PLAN
The Company has a 401K plan covering substantially all of its domestic
employees. The Company matches 100% of employee's contribution up to the first
$1.2 contributed by the employee. Employee contributions vest immediately, while
employer contributions vest ratably over a period of five years. The Company may
decide to make an additional discretionary profit sharing contribution, the
amount of which is to be determined by the Board of Directors, to all eligible
employees on the last day of the plan year. To date the Board has not elected to
make any profit sharing contribution. The Company contributed approximately
$100, $103, and $110, in 1995, 1994 and 1993 respectively.
6. STOCKHOLDERS' EQUITY
Stock Plans -- In 1993, the Company discontinued the granting of stock
options under its 1987 Stock Option Plan (1987 Plan) and established the 1993
Stock Incentive Plan (1993 Plan). A total of 600,000 shares of common stock have
been reserved for issuance under the 1993 Plan. The 1993 Plan provides for
grants of stock options, restricted stock and other incentive stock awards.
The following is a summary of all stock option activity under the 1987 and
1993 plans:
<TABLE>
<CAPTION>
EXERCISE PRICE
SHARES PER SHARE
-------- --------------
<S> <C> <C>
Outstanding January 1, 1993................................. 959,000 $ .70 - 3.00
Granted..................................................... 531,000 .89 - 1.50
Exercised................................................... (202,500) .70 - 1.00
Canceled.................................................... (385,000) .70 - 1.50
-------- --------------
Outstanding December 31, 1993............................... 902,500 .81 - 3.00
Granted..................................................... 312,500 1.06 - 1.75
Exercised................................................... (81,250) .81 - 3.00
Canceled.................................................... (178,500) .81 - 3.00
-------- --------------
Outstanding December 31, 1994............................... 955,250 .81 - 3.00
Granted..................................................... 240,000 1.82 - 3.06
Exercised................................................... (183,400) .81 - 1.75
Canceled.................................................... (49,250) .81 - 3.00
-------- --------------
Outstanding December 31, 1995............................... 962,600 $ .81 - 3.06
======== ==============
Exercisable at December 31, 1995............................ 457,050 $ .81 - 3.06
-------- --------------
</TABLE>
In 1993, the Company granted 96,000 shares of restricted stock under the
1993 Plan, which vest over a three year period. Compensation expense, which
accrues as the shares vest, was approximately $54 in 1995, $54 in 1994 and $36
in 1993.
F-35
<PAGE> 138
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
In March 1994, the Company established a Nonemployee Director Restricted
Stock Plan and, pursuant to the plan, have issued 64,800 shares of common stock
to nonemployee directors. Compensation expense, which accrues as the shares
vest, was $23 in 1995.
Warrants -- During 1988, in connection with the guarantee of a note payable
to a bank, the former President of the Company was issued a warrant to purchase
200,000 shares of common stock at $1.50 per share. The former President was also
issued a warrant to purchase 150,000 shares of common stock at $.70 per share.
Pursuant to the terms of a separation agreement (Note 7), the expiration dates
of the warrants were extended to December 31, 1996 (200,000 shares) and December
31, 1994 (150,000 shares). The December 31, 1994 warrants were exercised in
December, 1994. The December 31, 1996 warrants are fully exercisable.
7. SEPARATION COSTS
The Company implemented a cost savings program, which resulted in a
reduction in its work force, in June, 1994. As part of this program, a charge of
$469 was recorded in the second quarter. The charge consisted principally of
employee severance and related benefit costs.
In April 1993, the Company entered into a separation agreement with its
former President. The agreement provided for the termination of the former
President's employment contract with the Company and for certain transition and
consulting services and an extended period of non-competition. As consideration,
the former President received a grant of 200,000 shares of common stock, salary
continuation for the balance of 1993 and the extension of the expiration dates
of two warrants. (See Note 6.)
8. INCOME TAXES
The components of income (loss) before provision for income taxes are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Domestic................................................... $ 896 $(114) $(497)
Foreign.................................................... (199) (332) (466)
----- ----- -----
Total............................................ $ 697 $(446) $(963)
===== ===== =====
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal........................................................ $ 17 -- --
State.......................................................... (45) $26 $ 7
Foreign........................................................ 42 38 56
---- --- ---
Total................................................ $ 14 $64 $63
==== === ===
</TABLE>
F-36
<PAGE> 139
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Income taxes (benefit) computed at the federal statutory rate differ from
amounts provided as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Statutory rate.............................................. 35.0% (35.0)% (35.0)%
State taxes, less federal benefit........................... (2.6) 3.8 0.5
Domestic losses for which no benefit was provided/(benefit)
of net operating loss carryforwards utilized.............. (46.4) 11.0 18.3
Net foreign losses for which no benefit was provided........ 15.9 34.6 22.7
----- ----- -----
Total.................................................. 1.9% 14.4% 6.5%
===== ===== =====
</TABLE>
Deferred taxes are attributable to the following temporary differences at
December 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................................. $ 3,359 $ 3,500
Tax credit carryforwards......................................... 943 600
Other deductible amounts......................................... 657 650
------- -------
Total deferred tax assets........................................ $ 4,959 $ 4,750
Valuation allowance.............................................. (4,959) (4,750)
------- -------
Deferred tax assets -- net....................................... $ -- $ --
======= =======
</TABLE>
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $450 at December 31, 1995. Those earnings are considered to be
indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes has been provided thereon. Upon distribution of those
earnings in the form of dividends or otherwise, the Company would be subject to
both U.S. income taxes (subject to an adjustment for foreign tax credits) and
withholding taxes payable to the various foreign countries. Determination of the
amount of U.S. income tax liability that would be incurred is not practicable
because of the complexities associated with its hypothetical calculation.
The Company has at December 31, 1995 net operating loss carryforwards
available for federal income tax purposes of approximately $4,900 expiring
through 2009 and investment and other tax credit carryforwards of approximately
$943, which may be used to offset future federal and state income taxes, if any,
expiring through 2009. The Company also has net operating loss carryforwards of
$4,900 attributable to its non-U.S. operations which can be carryforwarded
indefinitely. The difference between the Company's net operating loss
carryforwards and its accumulated deficit at December 31, 1995 is the result of
both the expiration of certain loss carryforwards and the utilization of certain
previous years' losses in the consolidated tax return of the Company's former
parent.
Effective January 1, 1993, the Company adopted Statement 109. Under
Statement 109, the liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. As permitted by Statement 109, the
Company has elected not to restate the financial statements of any prior years.
The effect of the change on net income for 1993 was not material. Prior to
adoption of Statement 109, income tax expense was determined using the liability
method prescribed by Statement 96, which was superseded by Statement 109.
Statement 109 changes the recognition and measurement criteria included in
Statement 96 for deferred tax assets.
F-37
<PAGE> 140
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
9. FINANCIAL INFORMATION BY GEOGRAPHIC AREA
Geographic area information is as follows:
<TABLE>
<CAPTION>
NORTH AMERICA EUROPE ELIMINATIONS CONSOLIDATED
------------- ------- ------------ ------------
(ALL AMOUNTS IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
1995:
Sales to unaffiliated customers................ $12,903 $14,842 -- $ 27,745
Intercompany transfers......................... 4,656 110 (4,766) --
------- ------- ------- -------
Total Sales.................................... $17,559 $14,952 $ (4,766) $ 27,745
------- ------- ------- -------
Operating income (loss)........................ $ 901 $ (54) $ (145) $ 702
------- ------- ------- -------
Identifiable assets at December 31, 1995....... $12,845 $ 6,885 $ (6,982) $ 12,748
------- ------- ------- -------
1994:
Sales to unaffiliated customers................ $14,025 $12,001 -- $ 26,026
Intercompany transfers......................... 3,039 97 (3,136) --
------- ------- ------- -------
Total Sales.................................... $17,064 $12,098 $ (3,136) $ 26,026
------- ------- ------- -------
Operating income (loss)........................ $ (154) $ (82) $ (229) $ (465)
------- ------- ------- -------
Identifiable assets as December 31, 1994....... $11,869 $ 5,993 $ (6,876) $ 10,986
------- ------- ------- -------
1993:
Sales to unaffiliated customers................ $12,614 $ 9,276 -- $ 21,890
Intercompany transfers......................... 2,737 71 (2,808) --
------- ------- ------- -------
Total Sales.................................... $15,351 $ 9,347 $ (2,808) $ 21,890
------- ------- ------- -------
Operating income (loss)........................ $ (668) $ (382) $ 50 $ (1,000)
------- ------- ------- -------
Identifiable assets at December 31, 1993....... $10,710 $ 4,862 $ (5,369) $ 10,203
------- ------- ------- -------
</TABLE>
During 1993, one customer accounted for 10% of the Company's revenue.
F-38
<PAGE> 141
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO AT
BEGINNING COST AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
---------- ---------- ---------- --------
(ALL AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Year Ended December 31:
1993........................................ $259 $ 74 $ 16 $317
=== === === ===
1994........................................ $317 $ 77 $ 73 $321
=== === === ===
1995........................................ $321 $ 5 $101 $225
=== === === ===
RESERVE FOR WARRANTY EXPENSE
Year Ended December 31:
1993........................................ $172 $ 51 $ 79 $144
=== === === ===
1994........................................ $144 $102 $100 $146
=== === === ===
1995........................................ $146 $119 $152 $113
=== === === ===
</TABLE>
F-39
<PAGE> 142
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................................... $ 2,200 $ 1,752
Accounts receivable (less allowance for doubtful accounts of
$245 in 1996 and $225 in 1995).................................. 6,204 6,062
Inventory.......................................................... 3,745 3,625
Other.............................................................. 446 380
-------- --------
Total current assets....................................... 12,595 11,819
-------- --------
Property and equipment:
Equipment.......................................................... 3,348 3,674
Furniture and fixtures............................................. 313 324
Leasehold improvements............................................. 46 64
-------- --------
Total property and equipment............................... 3,707 4,062
Less accumulated depreciation and amortization..................... (2,617) (3,133)
-------- --------
Net property and equipment................................. 1,090 929
-------- --------
Total assets......................................................... $ 13,685 $ 12,748
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank.............................................. 974 1,002
Obligation under capital lease..................................... 16 15
Accounts payable................................................... 3,109 2,402
Accrued compensation and related benefits.......................... 1,099 1,063
Accrued income taxes............................................... 22 29
Other current liabilities.......................................... 621 684
Deferred revenue................................................... 496 289
-------- --------
Total current liabilities.................................. 6,337 5,484
-------- --------
Long-term capital lease obligation................................... 53 57
-------- --------
Stockholders' equity:
Common stock, $.10 par value -- authorized 14,000,000 shares,
10,866,793 shares at March 31, 1996 and 10,856,793 shares at
December 31, 1995............................................... 1,087 1,086
Additional paid-in capital......................................... 24,013 24,005
Deferred compensation.............................................. (53) (60)
Accumulated deficit................................................ (17,784) (17,889)
Cumulative translation adjustments................................. 32 65
-------- --------
Total stockholders' equity................................. 7,295 7,207
-------- --------
Total liabilities and stockholders' equity........................... $ 13,685 $ 12,748
======== ========
</TABLE>
See notes to consolidated financial statements.
F-40
<PAGE> 143
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-----------------
1996 1995
------ ------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Revenues:
Net product sales........................................................ $6,136 $5,969
Customer support services................................................ 1,130 811
------- -------
Total revenues................................................... 7,266 6,780
------- -------
Cost and expenses:
Cost of products sold.................................................... 3,493 3,001
Cost of customer support services........................................ 449 309
Selling, general and administrative...................................... 2,578 2,473
Research and development................................................. 629 715
------- -------
Total costs and expenses......................................... 7,149 6,498
------- -------
Income from operations..................................................... 117 282
Interest income............................................................ -- 8
Interest expense........................................................... 6 3
------- -------
Income before provision for income taxes................................... 111 287
Provision for income taxes................................................. 6 30
------- -------
Net income................................................................. $ 105 $ 257
======= =======
Net income per share....................................................... $ 0.01 $ 0.02
======= =======
Weighted average number of common and common equivalent
shares outstanding....................................................... 11,071 10,707
======= =======
</TABLE>
See notes to consolidated financial statements.
F-41
<PAGE> 144
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-----------------
1996 1995
------ ------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income................................................................. $ 105 $ 257
Adjustments to reconcile net income to net cash provided by (used for)
operating activities:
Depreciation and amorization............................................. 154 91
Non-cash compensation.................................................... 7 14
Increase (decrease) in cash from:
Accounts receivable................................................... (144) 1,047
Inventory............................................................. (167) (439)
Other current assets.................................................. (71) (14)
Accounts payable...................................................... 705 (349)
Accrued compensation and related benefits............................. 51 (97)
Accrued income taxes.................................................. (6) 47
Other current liabilities............................................. (36) (189)
Deferred revenue...................................................... 209 146
------ ------
Total adjustments................................................ 702 257
------ ------
Cash provided by operating activities...................................... 807 514
------ ------
INVESTING ACTIVITIES:
Acquisition of property and equipment...................................... (319) (147)
Decrease in other assets................................................... -- 3
------ ------
Net cash used for investing activities..................................... (319) (144)
------ ------
FINANCING ACTIVITIES:
Principal payments under capital lease obligations......................... (4) (11)
Proceeds from exercise of stock options.................................... 8 88
------ ------
Net cash provided by financing activities.................................. 4 77
------ ------
Effect of exchange rate changes on cash and cash equivalent................ (44) 75
------ ------
Net increase in cash and cash equivalents.................................. 448 522
------ ------
Cash and cash equivalents, beginning of year............................... 1,752 755
------ ------
Cash and cash equivalents, end of period................................... $2,200 $1,277
====== ======
Supplemental information:
Cash paid for interest..................................................... $ 22 $ 4
------ ------
Cash paid for income taxes................................................. $ 13 $ 3
====== ======
</TABLE>
See notes to consolidated financial statements.
F-42
<PAGE> 145
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Notes to the Consolidated Financial Statements included on pages F-34
through F-40 hereof contain information pertinent to the accompanying financial
statements. There has been no material change in the information contained in
such notes except as set forth below. The Balance Sheet at March 31, 1996, the
Statements of Operations for the three months ended March 31, 1996 and 1995 and
the Statements of Cash Flows for the three months ended March 31, 1996 and 1995,
are unaudited. However, in the opinion of management, all adjustments
(consisting only of normal recurring accrual entries) necessary for a fair
presentation of such financial results have been included.
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Computer
Identics Corporation (the Company) and its wholly-owned subsidiaries, Computer
Identics N.V./S.A. (CINV), Computer Identics Ltd., Computer Identics GmbH,
Computer Identics S.A., and Computer Identics, Inc.
2. RECLASSIFICATION
Certain amounts in the prior year have been reclassified to conform to the
1996 presentation.
3. NET INCOME (LOSS) PER SHARE
Net income (loss) per common share is computed based on the weighted
average number of common and the dilutive effect of common equivalent shares
outstanding for the period.
4. INVENTORY
Inventory is recorded at the lower of cost (first in, first out method) or
market.
At March 31, 1996 and December 31, 1995, inventory consisted of the
following:
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Raw Materials......................................... $1,862 $ 1,821
Work-In-Process....................................... 95 336
Finished Goods........................................ 1,788 1,468
------ ------
Total............................................ $3,745 $ 3,625
====== ======
</TABLE>
5. INCOME TAXES
The provisions for income taxes for the first quarter in 1996 were $6
versus a provision of $30 in 1995. Due to the Company's ability to use its U.S.
net operating loss carryforwards, the provision for income taxes is comprised
primarily of state and foreign income taxes for which net operating loss
carryforwards are not available.
6. SUBSEQUENT EVENTS
RVSI (Robotic Vision Systems, Inc.) and Computer Identics Corporation
jointly announced on June 11, 1996 that they have signed a letter of intent to
consummate a merger transaction whereby RVSI would acquire all of Computer
Identics' 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 merger transaction RVSI would issue 0.177805207 shares of its common
stock for each Computer Identics share or approximately 1,929 shares of RVSI
common stock in exchange for all Computer Identics' outstanding shares. In
addition, Computer Identics' outstanding stock options and warrants would be
exchanged for options on RVSI's common stock in the same 0.177805207 to one
ratio. Consummation of the merger transaction is subject to conditions customary
for transactions of this nature, including completion of due diligence,
negotiation of definitive documentation and Computer Identics' stockholder
approval.
F-43
<PAGE> 146
EXHIBIT A
AGREEMENT AND PLAN
OF
MERGER AND REORGANIZATION
DATED AS OF JULY 23, 1996
BY AND AMONG
ROBOTIC VISION SYSTEMS, INC.,
RVSI THIRD ACQUISITION CORP.
AND
COMPUTER IDENTICS CORPORATION
<PAGE> 147
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
ARTICLE I THE MERGER............................................................. 1
SECTION 1.1 The Merger............................................. 1
SECTION 1.2 Effective Time of the Merger........................... 1
SECTION 1.3 Disclosure Schedules................................... 1
ARTICLE II SURVIVING AND PARENT CORPORATIONS...................................... 2
SECTION 2.1 Articles of Organization............................... 2
SECTION 2.2 By-Laws................................................ 2
SECTION 2.3 Directors.............................................. 2
SECTION 2.4 Officers............................................... 2
SECTION 2.5 Further Action......................................... 2
ARTICLE III CONVERSION OF COMPANY SHARES IN THE MERGER............................. 2
SECTION 3.1 Shares of the Constituent and the Surviving
Corporations........................................... 2
SECTION 3.2 Conversion of Subsidiary Shares........................ 4
SECTION 3.3 Exchange of Certificates............................... 4
SECTION 3.4 Closing................................................ 5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................... 5
SECTION 4.1 Organization and Standing.............................. 5
SECTION 4.2 Capitalization......................................... 5
SECTION 4.3 Subsidiaries........................................... 6
SECTION 4.4 Authority.............................................. 6
SECTION 4.5 Company's SEC Reports.................................. 7
SECTION 4.6 Contracts; No Default.................................. 7
SECTION 4.7 Litigation............................................. 7
SECTION 4.8 Taxes.................................................. 7
SECTION 4.9 No Violation of Law.................................... 8
SECTION 4.10 Environmental Matters.................................. 9
SECTION 4.11 Insurance.............................................. 9
SECTION 4.12 Properties............................................. 9
SECTION 4.13 Condition of Assets.................................... 10
SECTION 4.14 No Breaches............................................ 10
SECTION 4.15 Employees.............................................. 10
SECTION 4.16 Financial Statements................................... 10
SECTION 4.17 Absence of Certain Changes or Events................... 10
SECTION 4.18 Employee Benefit Plans; ERISA.......................... 11
SECTION 4.19 Business Locations..................................... 12
SECTION 4.20 Customers and Suppliers................................ 12
SECTION 4.21 Intellectual Property; Software........................ 12
SECTION 4.22 Transactions with Affiliates........................... 13
SECTION 4.23 Opinion of Financial Advisor........................... 14
SECTION 4.24 Books, Records and Accounts............................ 14
SECTION 4.25 Disclosure Schedule Complete........................... 14
SECTION 4.26 Brokers and Finders.................................... 14
SECTION 4.27 Tax Matters............................................ 14
SECTION 4.28 Hart-Scott-Rodino...................................... 14
SECTION 4.29 No Omissions or Untrue Statements...................... 14
</TABLE>
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<TABLE>
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT............................... 15
SECTION 5.1 Organization and Standing of Parent.................... 15
SECTION 5.2 Capitalization......................................... 15
SECTION 5.3 The Subsidiaries....................................... 15
SECTION 5.4 Parent's Authority..................................... 16
SECTION 5.5 The Subsidiary's Authority............................. 16
SECTION 5.6 Contracts; No Default.................................. 16
SECTION 5.7 Litigation............................................. 16
SECTION 5.8 Taxes.................................................. 17
SECTION 5.9 No Violation of Law.................................... 17
SECTION 5.10 Environmental Matters.................................. 17
SECTION 5.11 Properties............................................. 18
SECTION 5.12 Condition of Assets.................................... 18
SECTION 5.13 No Breaches............................................ 18
SECTION 5.14 Financial Statements................................... 18
SECTION 5.15 Books, Records and Accounts............................ 19
SECTION 5.16 Employee Benefit Plans, ERISA.......................... 19
SECTION 5.17 Absence of Certain Changes or Events................... 20
SECTION 5.18 Parent's SEC Reports................................... 20
SECTION 5.19 Opinion of Financial Advisor........................... 20
SECTION 5.20 Disclosure Schedule Complete........................... 20
SECTION 5.21 Registration Statement and Proxy
Statement/Prospectus................................... 20
SECTION 5.22 Brokers and Finders.................................... 21
SECTION 5.23 Tax Matters............................................ 21
SECTION 5.24 Hart-Scott-Rodino...................................... 21
SECTION 5.25 Absence of Intention................................... 21
SECTION 5.26 Customers and Suppliers................................ 21
SECTION 5.27 Intellectual Property.................................. 21
SECTION 5.28 No Omissions or Untrue Statements...................... 21
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER................................. 21
SECTION 6.1 Conduct of Business by Company Prior to Effective
Time................................................... 21
SECTION 6.2 No Solicitation........................................ 22
SECTION 6.3 Other Transaction Payment.............................. 23
ARTICLE VII ADDITIONAL AGREEMENTS.................................................. 23
SECTION 7.1 Access to Information.................................. 23
SECTION 7.2 Registration Statement and Proxy
Statement/Prospectus................................... 24
SECTION 7.3 Stockholder Approval................................... 24
SECTION 7.4 NASDAQ National Market................................. 24
SECTION 7.5 Undertaking of Parent Prior to Effective Time.......... 24
SECTION 7.6 Agreement to Cooperate................................. 25
SECTION 7.7 Public Statements...................................... 25
SECTION 7.8 Corrections to the Proxy Statement/Prospectus
and Registration Statement............................. 25
SECTION 7.9 Agreements of Affiliates............................... 25
SECTION 7.10 Assurances Relating to Tax Matters Certificate......... 25
SECTION 7.11 Disclosure Supplements................................. 26
SECTION 7.12 Satisfaction of Conditions Precedent................... 26
SECTION 7.13 Continuing Indemnification............................. 26
</TABLE>
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<TABLE>
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ARTICLE VIII CONDITIONS............................................................. 26
SECTION 8.1 Conditions to Each Party's Obligations to Effect the
Merger................................................. 26
SECTION 8.2 Conditions to Obligations of the Company to Effect
the Merger............................................. 27
SECTION 8.3 Conditions to Obligations of Parent and the Subsidiary
to Effect the Merger................................... 28
ARTICLE IX TERMINATION AND ABANDONMENT............................................ 29
SECTION 9.1 Termination............................................ 29
SECTION 9.2 Effect of Termination.................................. 29
SECTION 9.3 Amendment.............................................. 30
SECTION 9.4 Waiver................................................. 30
SECTION 9.5 Expenses............................................... 30
ARTICLE X MISCELLANEOUS.......................................................... 30
SECTION 10.1 Non-Survival of Representations and Warranties......... 30
SECTION 10.2 Succession and Assignments; Third Party
Beneficiaries.......................................... 30
SECTION 10.3 Notices................................................ 30
SECTION 10.4 Construction........................................... 31
SECTION 10.5 Counterparts........................................... 31
SECTION 10.6 No Implied Waiver; Remedies............................ 31
SECTION 10.7 Entire Agreement....................................... 31
SECTION 10.8 Headings............................................... 31
SECTION 10.9 Severability........................................... 31
</TABLE>
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LIST OF EXHIBITS
<TABLE>
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EXHIBIT I Certificate of Merger
EXHIBIT II Articles of Merger
EXHIBIT III-A Tax Matters Certificate of the Company
EXHIBIT III-B Tax Matters Certificate of Parent
EXHIBIT IV-1 Affiliate's Agreement of Company
EXHIBIT IV-2 Affiliate's Agreement of Parent
EXHIBIT V Opinion of Parker Duryee Rosoff & Haft, counsel to Parent
and Subsidiary
EXHIBIT VI Opinion of Brown, Rudnick, Freed & Gesmer, counsel to the
Company
</TABLE>
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of July 23, 1996
(the "Agreement"), by and among ROBOTIC VISION SYSTEMS, INC., a Delaware
corporation ("Parent"), RVSI THIRD ACQUISITION CORP., a Delaware corporation and
a wholly owned subsidiary of Parent (the "Subsidiary"), and COMPUTER IDENTICS
CORPORATION, a Massachusetts corporation (the "Company").
------------------------
The Boards of Directors of Parent, the Subsidiary and the Company have
approved the merger of the 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 (the "Code"), and that the Merger
shall be recorded for accounting purposes as a pooling of interests.
Parent 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), the
Subsidiary shall be merged with and into the Company in accordance with the
provisions of Section 252 of the Delaware General Corporation Law (the "DGCL")
and of Section 79 of the Massachusetts Business Corporation Law (the "MBCL"),
with the effect provided in Sections 259-261 of the DGCL and Section 80 of the
MBCL, and the separate existence of the Subsidiary shall thereupon cease. The
Company shall be the surviving corporation in the Merger (hereinafter sometimes
referred to as the "Surviving Corporation") and shall continue to be governed by
the laws of the Commonwealth of Massachusetts. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time of the Merger, (a)
the Surviving 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 the Subsidiary and the Company, (b) all
obligations belonging to or due each of the Subsidiary and the Company shall be
vested in, and become the obligations of, the Surviving Corporation without
further act or deed, (c) title to any real estate or any interest therein vested
in either of the 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 the Subsidiary and the Company shall be preserved
unimpaired, and (e) the Surviving Corporation shall be liable for all of the
obligations of each of the Subsidiary and the Company and any claim existing, or
action or proceeding pending, by or against either of the 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) 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, and (b) Articles of Merger, in the form set forth as
Exhibit II hereto, are filed with the Secretary of State of the Commonwealth of
Massachusetts (collectively, the "Merger Filings").
SECTION 1.3 Disclosure Schedules. Simultaneously with the execution of
this Agreement, (a) the Company shall deliver a schedule relating to the Company
and the Company Subsidiaries (the "Company Disclosure Schedule"), and (b) Parent
shall deliver a schedule relating to Parent and the Parent Subsidiaries (the
"Parent Disclosure Schedule" and collectively, with the Company Disclosure
Schedule, the "Disclosure
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Schedules") setting forth the matters required to be set forth in the Disclosure
Schedules as described elsewhere in this Agreement. The Disclosure Schedules
shall be deemed to be part of this Agreement.
ARTICLE II
SURVIVING AND PARENT CORPORATIONS
SECTION 2.1 Articles of Organization. The Articles of Organization of the
Company as in effect immediately prior to the Effective Time shall be the
Articles of Organization of the Surviving Corporation, until duly amended in
accordance with the terms thereof and of the MBCL.
SECTION 2.2 By-Laws. The By-laws of the Company as in effect immediately
prior to the Effective Time shall be the By-laws of the Surviving Corporation
until duly amended in accordance with their terms and as provided by the
Articles of Organization of the Surviving Corporation and the MBCL.
SECTION 2.3 Directors. The sole director of the Subsidiary at the
Effective Time shall, from and after the Effective Time, be the sole director of
the Surviving Corporation until his successor has been duly elected or appointed
and qualified or until his earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Organization 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 the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Organization and By-Laws.
SECTION 2.5 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
reasonably necessary or desirable to vest, perfect, confirm or record in the
Surviving Corporation the title to any property, rights, privileges, powers and
franchises of the Subsidiary by reason of, or as a result of, the Merger, or
otherwise to carry out the provisions of this Agreement, the officers of the
Subsidiary shall execute and deliver, upon Parent's request, any instruments or
assurances, and do all other things reasonably necessary or proper to vest,
perfect, confirm or record title to such property, rights, privileges, powers
and franchises in the Surviving Corporation, and otherwise to carry out the
provisions of this Agreement.
ARTICLE III
CONVERSION OF COMPANY SHARES IN THE MERGER
SECTION 3.1 Shares of the Constituent and the Surviving Corporations. 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, $.10 par value, of the Company ("Company
Common Stock"), issued and outstanding at the Effective Time (other than shares
as to which appraisal rights have been perfected in accordance with Section 86
of the MBCL), subject to the terms and conditions of this Agreement, shall be
converted into the right to receive and become exchangeable for (the "Exchange
Ratio") .177805207 of a share of common stock, $.01 par value, of the Parent
("Parent Common Stock"); provided, however, that if the average of the closing
prices of Parent Common Stock on The Nasdaq National Market for the 25 trading
days ending on (and including) the second trading day immediately prior to the
date of the special meeting of the Company's stockholders hereinafter
contemplated to be called to approve the Merger Transaction (the
2
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"Average Closing Price") is greater than $20.75 or less than $17.00, then the
Exchange Ratio shall be adjusted in the manner set forth below ("Adjusted
Exchange Ratio"):
If the Average Closing Price is more than $20.75, then the Adjusted
Exchange Ratio shall be equal to an amount determined as follows:
20.75/Average Closing Price times Exchange Ratio = Adjusted Exchange
Ratio (provided that in no event shall the Adjusted Exchange Ratio be less
than .160024686)
and if the Average Closing Price is less than $17.00, then the
Adjusted Exchange Ratio shall be equal to an amount determined as follows:
17.00/Average Closing Price times Exchange Ratio = Adjusted Exchange
Ratio (provided that in no event shall the Adjusted Exchange Ratio exceed
.195585727)
and provided, further, that if, prior to the Closing Date, 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 or the Adjusted Exchange
Ratio (as applicable) will be proportionately adjusted in a manner acceptable to
the parties hereto to reflect such split, reclassification, combination, stock
dividend or other distribution or change ("Capital Stock Change"). Parent has no
present intention to implement any such Capital Stock Change.
(b) In addition, each of the options to acquire up to an aggregate of
1,006,350 shares of Company Common Stock granted under the Company's 1987, 1993
and 1996 Stock Incentive Plans (collectively, the "Company Plans") that were
issued and outstanding on May 31, 1996, as well as each of the warrants to
acquire up to an aggregate of 200,000 shares of Company Common Stock that were
issued and outstanding on May 31, 1996 (collectively, "Company Purchase
Rights"), all of which are referred to in Schedule 4.2 of the Company Disclosure
Schedule (to the extent not exercised prior to the Effective Time), shall be
assumed by Parent and converted into like rights to purchase shares of Parent
Common Stock with the respective number of shares issuable upon exercises of
Company Purchase Rights and the respective exercise prices thereof being
appropriately adjusted in accordance with the Exchange Ratio or the Adjusted
Exchange Ratio (as applicable); provided, however, that in the case of options
intended to qualify as "incentive stock options" pursuant to Section 422 of the
Code, any such adjustment shall be made in such a manner as not to disqualify
such options as "incentive stock options". 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 Purchase Right. As soon as reasonably
practicable after the Effective Time, Parent shall deliver to the holders of
Options and Warrants appropriate notices setting forth such holders' rights
pursuant to such Options and Warrants, as amended by this Section 3.1(b), and
the agreements evidencing such Options and Warrants shall continue in effect on
the same terms and conditions (subject to the amendments provided for in this
Section 3.1(b) and such notice).
Parent shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery upon exercise of
the Options assumed in accordance with this Section 3.1(b). As soon as
reasonably practicable after the Effective Time, Parent shall file a
registration statement on Form S-8 (or any successor form) under the Securities
Act of 1933 (as amended, the "Securities Act") with respect to all shares of
Parent Common Stock subject to such Options that may be registered on a Form
S-8, and shall use all reasonable efforts to maintain the effectiveness of such
registration statement for so long as such Options remain outstanding.
(c) Prior to the Effective Time, the Company shall (i) obtain any consents
from holders of outstanding options to purchase Company Common Stock granted
under the Company Plans and (ii) make any amendments to the terms of the Company
Plans or any award granted thereunder that, in the case of either (i) or (ii),
are necessary to give effect to the transactions contemplated by this Section
3.1; provided, however, that any such consents and amendments shall not change
the vesting of such options in accordance with their current terms.
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<PAGE> 154
(d) No rights to receive fractional shares of or interests in fractional
Parent Common Stock shall arise under this Agreement, and no certificates or
scrip representing fractional Parent Common Stock shall be issued hereunder.
Upon surrender of a certificate or certificates previously evidencing Company
Common Stock, any fractional share interest or interests in Parent Common Stock
which the holder of such certificate or certificates would otherwise be entitled
to receive shall be paid by Parent to such holder by check based upon a value
equal to the Average Closing Price for each full share of Parent Common Stock.
In the event the Exchange Agent determines that a holder of Company Common Stock
has not tendered all his certificates for exchange, the Exchange Agent shall
carry forward any fractional shares until all certificates of that holder have
been presented for exchange such that payment for fractional shares to any one
person shall not exceed the number of fractional shares of Parent Common Stock
to which the holder would have been entitled if all certificates of that holder
had been presented for exchange at one time.
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 the Subsidiary ("Subsidiary Common Stock") shall be converted
into one share of Common Stock, $.10 par value, of the 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, which shall be American Stock Transfer & Trust Company (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(a) plus cash in lieu of fractional shares, as provided in Section
3.1(d) 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 Parent 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 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
4
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pursuant to the provisions of Section 3.1(a), in addition to payment for any
fractional share or dividend 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 fractional Parent Common Stock as
contemplated by Section 3.1(d). 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.
(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 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 second
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 OF THE COMPANY
The Company represents and warrants to Parent and Subsidiary as follows,
with the knowledge and understanding that Parent and Subsidiary each is relying
materially upon such representations and warranties:
SECTION 4.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts. The Company has the requisite corporate power to
carry on its business as it is now being conducted and is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
set forth in Schedule 4.1 of the Company Disclosure Schedule, and to the
knowledge of the Company, such jurisdictions are the only ones in which the
properties owned, leased or operated by the Company or the nature of the
business conducted by the Company makes such qualification necessary, except
where the failure to qualify (individually or in the aggregate) will not have
any Material Adverse Effect. As used in this Agreement, "Material Adverse
Effect" means, with respect to the Company or Parent, as applicable, 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. The copies of the Articles of Organization and
By-laws of the Company, as amended to date and delivered to Parent, are true and
complete copies of these documents as now in effect. The minute books of the
Company and the Company Subsidiaries (as hereinafter defined) are accurate in
all material respects.
SECTION 4.2 Capitalization. The authorized capital stock of the Company,
the number of shares of capital stock which are issued and outstanding, the par
value thereof and the record and "non-objecting" beneficial holders thereof are
as set forth in the Company Disclosure Schedule, as of the dates indicated
thereon. All of such shares of capital stock that are issued and outstanding are
duly authorized, validly issued and outstanding, fully paid and nonassessable,
and were not issued in violation of the preemptive rights of any person. Except
as set forth in the Company Disclosure Schedule or as otherwise disclosed
therein and herein, there are no subscriptions, options, warrants, rights or
calls or other commitments or agreements to which the Company is a party or by
which it is bound, calling for any issuance, transfer, sale or other disposition
of any class of securities of the Company. Other than as set forth in the
Company Disclosure Schedule, there are no
5
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outstanding securities issued by the Company or by any Company Subsidiary
convertible or exchangeable, actually or contingently, into Company Common Stock
or any other securities of the Company.
SECTION 4.3 Subsidiaries. Each subsidiary of the Company is set forth in
the Company Disclosure Schedule (collectively, the "Company Subsidiaries"). As
used herein, the term "Company Subsidiary" shall mean any corporation or other
entity of which the Company, directly or indirectly, controls or which the
Company 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. Except as set forth in the Company Disclosure Schedule, the Company does
not own any capital stock in any other corporation or similar business entity
nor is the Company a partner in any partnership or joint venture. The Company
Disclosure Schedule describes the state or other jurisdiction of incorporation
or organization. The Company owns the percentage of capital stock of each
Subsidiary as set forth in the Company Disclosure Schedule. Each Company
Subsidiary is a corporation duly organized, validly existing and, if applicable,
in good standing under the laws of its state or other jurisdiction of
incorporation or organization. Each Company Subsidiary has the requisite
corporate power to carry on its business as it is now being conducted and is
duly qualified to do business as a foreign corporation and, if applicable, is in
good standing in each jurisdiction where such qualification is necessary under
applicable law except where the failure to qualify (individually or in the
aggregate) will not have any Material Adverse Effect. The copies of the
Certificate of Incorporation and By-laws (or comparable governing documents in
the case of Company Subsidiaries organized under the laws of countries other
than the United States) of each Company Subsidiary (certified by the Secretary
or other appropriate officer of the respective Company Subsidiary), as amended
to date and delivered to Parent, are true and complete copies of these documents
as now in effect. All of the outstanding shares of capital stock or, if
applicable, other ownership interests of each of the Company Subsidiaries have
been duly authorized, validly issued and are fully paid and non-assessable (or
the specific foreign jurisdiction equivalent), and were not issued in violation
of the preemptive rights of any person. Except as set forth in the Company
Disclosure Schedule or as otherwise disclosed therein and herein, there are no
subscriptions, options, warrants, rights or calls or other commitments or
agreements to which any Company Subsidiary is a party or by which it is bound,
calling for any issuance, transfer, sale or other disposition of any class of
securities of such Company Subsidiary. Other than as set forth in the Company
Disclosure Schedule, there are no outstanding securities convertible or
exchangeable, actually or contingently, into common stock or any other
securities of any Company Subsidiary.
SECTION 4.4 Authority. (a) The Company has the corporate power and
authority to enter into this Agreement and, subject to the Company Stockholders'
Approval (as defined in Section 7.3 below), the receipt of a fairness opinion to
the effect set forth in Section 8.2(h), and the Required Statutory Approvals (as
defined in Section 4.4(b) 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, the receipt of a fairness opinion to the effect set forth in Section
8.2(h), and the obtaining of the Required Statutory Approvals. This Agreement
has been duly and validly executed and delivered by the Company, 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) Except for (i) the filing of the Proxy Statement/Prospectus (as defined
in Section 4.28 below) with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Act and the Securities Exchange Act of 1934, as
amended ("Exchange Act") seeking the Company Stockholders' approval, and the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities (ii) the making of the Merger Filings in connection
with the Merger, and (iii) filings with governmental authorities in France and
such other foreign jurisdictions as may be necessary with respect to the Company
Subsidiaries on
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account of the Merger and the transactions contemplated by this Agreement (the
filings and approvals referred to in clauses (i), (ii) and (iii) and the action
referred to in Section 7.4 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 or other person is necessary for the execution and delivery of
this Agreement by the Company or the consummation by the Company 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 Company's SEC Reports. Since December 31, 1993, the Company
has filed with the SEC all reports, registrations and other documents, together
with any amendments or supplements thereto, required to be filed under the
Securities Act and the Exchange Act (all such reports, registrations and
documents filed with the SEC since December 31, 1993 are collectively referred
to as the "Company's SEC Reports"). As of their respective dates, the Company's
SEC Reports complied in all material respects with all rules and regulations
promulgated by the SEC and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company has provided to Parent a true
and complete copy of all of the Company's SEC Reports filed on or prior to the
date hereof.
SECTION 4.6 Contracts; No Default.
(a) Schedule 4.6(a) of the Company Disclosure Schedule consists of a true
and complete list of all contracts, agreements, commitments and other
instruments to which the Company or any Company Subsidiary is a party that (i)
involve a receipt or an expenditure by the Company or a Company Subsidiary or
require the performance of services or delivery of goods to, by, through, on
behalf of or for the benefit of the Company or a Company Subsidiary, which in
each case, relates to a contract, agreement, commitment or instrument that
either (A) requires payments or receipts in excess of $25,000 per year or (B) is
not terminable by the Company or a Company Subsidiary on notice of ninety (90)
days or less without penalty or the Company or a Company Subsidiary being liable
for damages, or (ii) involve an obligation for the performance of services or
delivery of goods by the Company or a Company Subsidiary that cannot, or in
reasonable probability will not, be performed within ninety (90) days from the
dates as of which these representations are made.
(b) All of the contracts, agreements, commitments and other instruments
described in Schedule 4.6(a) of the Company Disclosure Schedule (individually, a
"Contract" and collectively, the "Contracts") are valid and binding upon the
Company or a Company Subsidiary, as applicable, and to the knowledge of the
Company, the other parties thereto and are in full force and effect and
enforceable in accordance with their terms, and neither the Company nor any
Company Subsidiary, nor to the knowledge of the Company, any other party to any
Contract has breached any provision of, and no event has occurred which, with
the lapse of time or action by a third party, would result in a material default
under, the terms of any material Contract. To the knowledge of the Company, no
stockholder of the Company has received any payment from any contracting party
in connection with or as an inducement for causing the Company or a Company
Subsidiary to enter into any Contract.
SECTION 4.7 Litigation. Except as set forth in Schedule 4.7 of the
Company Disclosure Schedule, there is no claim, action, proceeding, or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or a Company Subsidiary before or by any court, arbitrator
or governmental agency or authority which, in the reasonable judgment of the
Company, would have a Material Adverse Effect on it. There is no strike or, to
the knowledge of the Company, unresolved labor dispute relating to the employees
of the Company or of any Company Subsidiary which, in the reasonable judgment of
the Company, would have a Material Adverse Effect on it. There are no decrees,
injunctions or orders of any court, governmental department, agency or
arbitration outstanding against the Company or any Company Subsidiary.
SECTION 4.8 Taxes. (a) For purposes of this Agreement, (A) the term
"Taxes" shall mean all taxes, duties, levies and other similar assessments,
including, without limitation, income, gross receipts, excise,
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property, sales, withholdings, social security, occupation, use, service,
service use, license, payroll, franchise, transfer and recording taxes, and any
other assessment in the nature of a tax, 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, duties, levies and
other similar assessments; and (B) 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.
(b) The Company and each Company Subsidiary has duly and timely filed with
the appropriate governmental authorities all Tax Returns required to be filed by
it other than Tax Returns where the failure to file (individually and in the
aggregate) would not have a Material Adverse Effect. All such Tax Returns, to
the knowledge of the Company, were, when filed and are, accurate and complete in
all material respects and were prepared in conformity with applicable laws and
regulations, and the Company and each Company Subsidiary has duly paid in full
or made adequate provision for the payment of all Taxes shown to be due on such
Tax Returns. Except as set forth in Schedule 4.8(b) of the Company Disclosure
Schedule, its Tax Returns referred to in clause (i) hereinabove have not been
examined by the United States Internal Revenue Service (the "IRS") or other
relevant 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 governmental 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 the Company or a Company Subsidiary with respect to any
Taxes. Neither the Company nor any Company Subsidiary has agreed to any
extension of time with respect to any Tax deficiency. The liabilities and
reserves for Taxes reflected in the Company's consolidated balance sheet as of
March 31, 1996 contained in the Company Financial Statements (as hereinafter
defined) are adequate to cover all Taxes for all periods ending on or prior to
such date, except for the payment of such Taxes which, alone or in the
aggregate, would not have a Material Adverse Effect, and there are no liens for
Taxes upon any property or asset of the Company or a Company Subsidiary, except
for liens for Taxes not yet due. To the knowledge of the Company, 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. Neither the Company nor any
Company Subsidiary is a party to any agreement providing for the allocation or
sharing of Taxes with any entity. Neither the Company nor any Company Subsidiary
has, 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 Code. To the
knowledge of the Company, the Company and each Company Subsidiary 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 the payment of such Taxes which,
alone or in the aggregate, would not have a Material Adverse Effect. No Tax is
required to be withheld by the Company pursuant to Section 1445 of the Code as a
result of the transfer contemplated by this Agreement. As a result of the
Merger, neither the Company nor any Company Subsidiary will 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.
SECTION 4.9 No Violation of Law. To the knowledge of the Company, the
Company and each Company Subsidiary is not in violation of and has not been
given notice or been charged with any violation of, any law, statute, code,
directive, mandate, ordinance, permit, order, rule, regulation, judgment, decree
or decision (including, without limitation, any Environmental Laws (as
hereinafter defined) of any governmental or regulatory body or authority, except
for violations which, in the aggregate, do not have, and for violations and
notices or charges of violations which would not reasonably be expected to have,
a Material Adverse Effect. Neither the Company nor any Company Subsidiary has
received any written notice that any investigation or review with respect to it
by any governmental or regulatory body or authority is pending or
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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. The Company and each Company Subsidiary has all permits,
licenses, franchises, variances, exemptions, orders and other governmental
authorizations, consents and approvals necessary to conduct its business as
presently conducted (collectively, "Permits"), except for such 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. The Company and each Company Subsidiary (a) has duly
and timely filled all reports and other information required to be filed with
any governmental or regulatory authority in connection with its Permits, and (b)
to the knowledge of the Company is not in violation of the terms of any of its
Permits, except for such omissions or delays in filings, reports or violations
which, alone or in the aggregate, would not have a Material Adverse Effect. The
Company Disclosure Schedule contains a list of Permits.
SECTION 4.10 Environmental Matters. To its knowledge, the Company and
each Company Subsidiary is and at all times has been in compliance in all
material respects with all applicable requirements of Environmental Laws in
connection with the ownership, operation and conditions of the business of the
Company and the Company Subsidiaries. To its knowledge, there are no PCBs,
underground storage tanks (as defined by Environmental Laws), asbestos materials
or asbestos containing materials (in the case of asbestos or asbestos containing
materials or underground heating oil tanks in a condition which is in violation
of Environmental Laws) in any leased premises or property owned or operated by
the Company or a Company Subsidiary. To their knowledge, neither the Company nor
any Company Subsidiary has 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 the knowledge of the Company, no
conditions exist or have occurred as a result of which or in connection with
which the Company or a Company Subsidiary 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. As used in this Agreement, "Environmental Laws" means any
federal, state, local or foreign statute, code, directive, mandate, ordinance,
permit, order, rule, regulation, judgment, decree or 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
(including, without limitation, the Massachusetts Hazardous Waste Management
Act, as amended), 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 4.11 Insurance. The Company and each Company Subsidiary is
covered by insurance policies, or renewals thereof, as identified in the Company
Disclosure Schedule. Neither the Company nor any Company Subsidiary has received
notice from any insurer or agent of such insurer that material improvements or
expenditures will have to be made in order to continue such insurance and, so
far as known to the Company, no such improvements or expenditures are required
(other than premium payments). To the knowledge of the Company, there is no
material liability under any insurance policy in the nature of a retroactive
rate adjustment or loss sharing or similar arrangement except as set forth on
the Company Disclosure Schedule.
SECTION 4.12 Properties. Except as set forth in the Company Disclosure
Schedule, the Company and each Company Subsidiary has good and marketable title
to all of the assets and properties which it purports to own as reflected on the
most recent balance sheet comprising a portion of the Company Financial
Statements, or thereafter acquired. The Company and each Company Subsidiary has
a valid leasehold interest in all properties of which it is the lessee and each
such lease is valid, binding and enforceable against the Company or a Company
Subsidiary as applicable, and, to the knowledge of the Company, the other
parties thereto in accordance with its terms. Neither the Company nor any
Company Subsidiary nor to the knowledge of the Company, the other parties
thereto are in default in the performance of any material provision under
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any such leases (exclusive of leases of offices of sales representatives in
states of the United States other than the Commonwealth of Massachusetts).
Neither the whole nor any material portion of the assets of the Company or any
Company Subsidiary is subject to any governmental decree or order to be sold or
is being condemned, expropriated or otherwise taken by any public authority with
or without payment of compensation therefor, nor, to the knowledge of the
Company, has any such condemnation, expropriation or taking been proposed.
Except as set forth in the Company Disclosure Schedule, none of the material
assets of the Company or any Company Subsidiary is subject to any restriction
which would prevent continuation of the use currently made thereof or materially
adversely affect the value thereof.
SECTION 4.13 Condition of Assets. The material equipment, fixtures and
other personal property of the Company and each Company Subsidiary are in an
operating condition adequate for the conduct of its respective business as
presently being conducted.
SECTION 4.14 No Breaches. The making and performance of this Agreement
and the other agreements contemplated hereby by the Company will not (i)
conflict with or violate the Articles of Organization or the By-laws of the
Company, (ii) to the Company's knowledge, violate any statute, code, directive,
mandate, ordinance, permit, rule, or regulation, or any order, writ, injunction
or decree to which the Company or any Company Subsidiary is a party or by which
the Company or any Company Subsidiary or any of their respective material
assets, businesses, or operations may be bound or affected or (iii) to the
Company's knowledge, result in any breach or termination of, or constitute a
default under, or constitute an event which, with notice or lapse of time, or
both, would become a default under, or result in the creation of any encumbrance
upon any material asset of the Company or any Company Subsidiary under, or
create any rights of termination, cancellation or acceleration in any person
under, any material Contract.
SECTION 4.15 Employees. Except as set forth on the Company Disclosure
Schedule, none of the employees of the Company or any Company Subsidiary is
represented by any labor union or collective bargaining unit and the Company is
not aware of any organizational efforts taking place with respect to such
representation.
SECTION 4.16 Financial Statements. The consolidated financial statements
of the Company included in the Company's SEC Reports (collectively, the "Company
Financial Statements") present fairly, in all material respects, the
consolidated financial position of the Company and the Company Subsidiaries as
of the respective dates and the results of its operations for the respective
years and periods covered in accordance with generally accepted accounting
principles ("GAAP") consistently applied and in accordance with Regulation S-X
of the SEC (subject, in the case of unaudited interim period financial
statements, to normal and recurring year-end adjustments which, individually or
collectively, are not material). Without limiting the generality of the
foregoing, (i) except as set forth in the Company Disclosure Schedule, to the
knowledge of the Company there is no basis for any assertion against the Company
or any Company Subsidiary as of the date of the most recent balance sheet
comprising a portion of the Company Financial Statements of any material debt,
liability or obligation of any nature not fully reflected or reserved against in
the Company Financial Statements or in the notes thereto; and (ii) there are no
assets of the Company or any Company Subsidiary, the value of which (in the
reasonable judgment of the Company) is materially overstated in the Company
Financial Statements. Except as disclosed therein or in the Company Disclosure
Schedule or as incurred in the ordinary course of business since March 31, 1996,
neither the Company nor any Company Subsidiary has any known material contingent
liabilities (including liabilities for taxes). Except as disclosed in the
Company Disclosure Schedule, the Company is not a party to any contract or
agreement for the forward purchase or sale of any foreign currency and has not
invested in any "derivatives".
SECTION 4.17 Absence of Certain Changes or Events. Except as set forth in
the Company's SEC Reports or in the Company Disclosure Schedule, since March 31,
1996 there has not been:
(a) any material adverse change in the financial condition,
operations, properties, assets, liabilities or business of the Company and
the Company Subsidiaries considered as one enterprise;
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(b) any damage, destruction or loss of any properties of the Company
or any Company Subsidiary, whether or not covered by insurance except for
such, as would not, individually or in the aggregate, have a Material
Adverse Effect;
(c) any material change in the manner in which the business of the
Company and the Company Subsidiaries considered as one enterprise has been
conducted;
(d) any material change in the treatment and protection of trade
secrets or other confidential information of the Company or any Company
Subsidiary; and
(e) any occurrence not included in paragraphs (a) through (d) of this
Section which has resulted, or which the Company has reason to believe,
would be expected to result, in a Material Adverse Effect on the Company.
SECTION 4.18 Employee Benefit Plans; ERISA.
(a) Except as set forth in the Company Disclosure Schedule, at the date
hereof neither the Company nor any Company Subsidiary maintains or contributes
to any employee benefit plans, programs, arrangements and practices (such plans,
programs, arrangement and practices of the Company and the Company Subsidiaries
being hereinafter collectively referred to as the "Company Benefit 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). The Company Disclosure
Schedule lists all Multiemployer Plans and Multiple Employer Plans which the
Company or any Company Subsidiary maintains or to which it makes contributions.
Neither the Company nor any Company Subsidiary has 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 the Company Benefit Plans,
under existing collective bargaining agreements or to comply with applicable
law.
(b) Except as set forth in the Company Disclosure Schedule, (i) to the
knowledge of the Company there have been no prohibited transactions within the
meaning of Section 406 and 407 of ERISA or Section 4975 of the Code, with
respect to any of the Company Benefit Plans that could result in penalties,
taxes or liabilities which, singly or in the aggregate, would have a Material
Adverse Effect on the Company, (ii) except for premiums due, there is no
outstanding liability in excess of $10,000, whether measured alone or in the
aggregate, under Title IV of ERISA with respect to any of the Company Benefit
Plans, (iii) neither the Pension Benefit Guaranty Corporation nor any plan
administrator has instituted proceedings to terminate any of the Company Benefit
Plans subject to Title IV of ERISA other than in a "standard termination"
described in Section 4041(b) of ERISA, (iv) none of the Company Benefit 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 the Company Benefit Plans ended prior to
the date of this Agreement, (v) the current present value of all projected
benefit obligations under each of the Company Benefit 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 the Financial Statements as of
March 31, 1996 (based upon reasonable actuarial assumptions currently utilized
for such Company Benefit Plan), (vi) to the knowledge of the Company, each of
the Company Benefit 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 the Company Benefit 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, to the knowledge of
the Company, 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
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retroactively to maintain the "qualified" status of such Company Benefit Plans,
and the period for making any such necessary retroactive amendments has not
expired, (viii) with respect to Multiemployer Plans, neither the Company nor any
Company Subsidiary has 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 the knowledge of the Company, 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 the knowledge of the Company, threatened or anticipated claims involving
any of the Company Benefit Plans other than claims for benefits in the ordinary
course, and (x) neither the Company nor any Company Subsidiary has a current
liability in excess of $10,000, 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 the
Company under Section 4001 of ERISA or Section 414 of the Code contributed
during the period of time covered by the applicable statute of limitations (the
"Company Controlled Group Plans"), and the Company does not anticipate that any
such liability will be asserted against the Company or any Company Subsidiary.
None of the Company Controlled Group Plans has an "accumulated funding
deficiency" (as defined in Section 302 of ERISA and 412 of the Code), and no
Company Controlled Group Plan has an outstanding funding waiver which would
result in the imposition of liens, excise taxes or liability against the Company
in excess of $10,000 whether measured alone or in the aggregate.
SECTION 4.19 Business Locations. Neither the Company nor any Company
Subsidiary owns or leases any real or material personal property in any state or
country except as set forth on the Company Disclosure Schedule. Neither the
Company nor any Company Subsidiary has executive offices or places of business
except as otherwise set forth on the Company Disclosure Schedule.
SECTION 4.20 Customers and Suppliers. Except as set forth in the Company
Disclosure Schedule, the Company has no knowledge that, either as a result of
the transactions contemplated hereby or for any other reason (inclusive of
expiration of a contract upon the passage of time), any customer (which
accounted for an aggregate amount of 5% or more of the Company's consolidated
gross revenues within the preceding 12 months) or material supplier of the
Company or any Company Subsidiary will not continue to conduct business with the
Company or a Company Subsidiary after the Effective Time in substantially the
same manner as it has conducted business with the Company and the Company
Subsidiaries in the past.
SECTION 4.21 Intellectual Property; Software. (a) Schedule 4.21(a) of the
Company Disclosure Schedule sets forth a complete and correct list of all
patents, material unpatented inventions set forth in or described in writing,
trademarks, tradenames, service marks, service names, brand names and
copyrights, registrations thereof and applications therefore used in the
business of the Company and the Company Subsidiaries, together with a complete
list of all licenses granted by or to the Company or a Company Subsidiary with
respect to any of the above. To the knowledge of the Company, all such patents,
material unpatented inventions, trademarks, tradenames, service marks, service
names, brand names and copyrights are owned by the Company or by a Company
Subsidiary, free and clear of all liens, claims, security interests and
encumbrances of any nature whatsoever. Except as set forth in Schedule 4.21(a),
the Company is not currently in receipt of any notice of any violation or
infringement of, and neither the Company nor any Company Subsidiary is knowingly
violating or infringing the rights of others in any patent, unpatented
invention, trademark, tradename, service mark, copyright, trade secret,
know-how, design, process or other intangible asset.
(b) (i) Schedule 4.21(b)(i) of the Company Disclosure Schedule contains a
complete and accurate list of all computer software owned by the Company or by a
Company Subsidiary (other than "off-the-shelf" software that has not been
customized for its use) (the "Owned Software"). Except as set forth on Schedule
4.21(b)(i) of the Company Disclosure Schedule, the Company or a Company
Subsidiary, as applicable, has exclusive title to the 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, excluding licenses granted to third parties in the
ordinary course of business. The 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.
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The source code for Owned Software has not been published or otherwise knowingly
disclosed. To the knowledge of the Company, no such other party has breached any
obligation of confidentiality.
(ii) Schedule 4.21(b)(ii) of the Company Disclosure Schedule contains a
complete and accurate list of all software (other than "off-the-shelf" software
that has not been customized for use by the Company or a Company Subsidiary)
under which the Company or a Company Subsidiary is a licensee, lessee or
otherwise has obtained the right to use software and the Company or a Company
Subsidiary pays a royalty for the use of such software (the "Licensed
Software"). Schedule 4.21(b)(ii) of the Company Disclosure Schedule also sets
forth a list of all license fees, rents, royalties or other charges that the
Company or a Company Subsidiary is required or obligated to pay with respect to
Licensed Software. The Company or a Company Subsidiary, as applicable, has the
right and license to use, sublicense, modify and copy Licensed Software, free
and clear of any limitations or encumbrances, except as may be set forth in
Schedule 4.21(b)(ii) of the Company Disclosure Schedule. The Company and each
Company Subsidiary is in material compliance with all provisions of each
license, lease or other similar agreement pursuant to which it has rights to use
the Licensed Software. Except as disclosed on Schedule 4.21(b)(ii) of the
Company Disclosure Schedule, none of the Licensed Software has been incorporated
into or made a part of any Owned Software or any other Licensed Software.
Neither the Company nor any Company Subsidiary has published or knowingly
disclosed any Licensed Software to any other party except, in the case of
Licensed Software which the Company or a Company Subsidiary leases or markets to
others, in accordance with and as permitted by any license, lease or similar
agreement relating to the Licensed Software and except pursuant to contracts
requiring such other parties to keep the Licensed Software confidential. To the
knowledge of the Company, no party to whom the Company or a Company Subsidiary
has disclosed Licensed Software has breached such obligation of confidentiality.
(iii) The Owned Software and Licensed Software constitute all material
software used in the respective businesses of the Company and the Company
Subsidiaries (collectively, the "Company Software"). To the knowledge of the
Company, Schedule 4.21(b)(iii) of the Company Disclosure Schedule sets forth a
list of all contract programmers, independent contractors, nonemployee agents
and persons or other entities (other than employees) who have performed material
computer programming services for the Company or a Company Subsidiary at any
time since December 31, 1993 and identifies all contracts and agreements
pursuant to which such services were performed. Except as set forth in Schedule
4.21(b)(iii) of the Company Disclosure Schedule, the transactions contemplated
herein will not cause a breach or default under any licenses, leases or similar
agreements relating to the Company Software or impair the ability of Parent and
the Company and the Company Subsidiaries to use the Company Software subsequent
to the Effective Time in the same manner as the Company Software is currently
used by the Company and the Company Subsidiaries. Except as set forth in
Schedule 4.21(a), neither the Company nor any Company Subsidiary is knowingly
infringing any intellectual property rights of any other person or entity with
respect to the Company Software, and, to the knowledge of the Company, no other
person or entity is infringing any intellectual property rights of the Company
and the Company Subsidiaries with respect to the Company Software.
SECTION 4.22 Transactions with Affiliates. Except as set forth in the
Company SEC Reports or in the Company Disclosure Schedule, neither the Company
nor any Company Subsidiary is 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 the Company or any Company
Subsidiary; nor are there any transactions of a continuing nature between the
Company or any Company Subsidiary and any of its officers, directors, or
Affiliates (other than by or through the regular employment thereof by the
Company or a Company Subsidiary) not subject to cancellation which will continue
beyond the Effective Time, including, without limitation, use of the assets of
the Company or a Company Subsidiary for personal benefit with or without
adequate compensation. For purposes of this Section, 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,
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association, corporation, partnership, government (whether federal, state,
local, foreign or other political subdivision of any thereof, or any agency or
bureau of any of them) or other entity.
SECTION 4.23 Opinion of Financial Advisor. The Company has received the
opinion of Fechtor, Detwiler & Co., Inc. ("Fechtor, Detwiler") to the effect
that, as of the date hereof, the Exchange Ratio or Adjusted Exchange Ratio (as
applicable) is fair, from a financial point of view, to the Company's public
stockholders. Such opinion (a copy of which has been delivered to Parent) has
not been withdrawn, revoked or modified.
SECTION 4.24 Books, Records and Accounts. The Company's books, records
and accounts fairly and accurately reflect transactions and dispositions of
assets by the Company and the Company Subsidiaries, and the system of internal
accounting controls of the Company and the Company Subsidiaries is sufficient to
assure that: (a) transactions are executed in accordance with management's
general or specific authorization; (b) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP, and to
maintain accountability for assets; (c) access to assets is permitted only in
accordance with management's general or specific 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 4.25 Disclosure Schedule Complete. The Company shall promptly
supplement the Company Disclosure Schedule if events occur prior to the Closing
Date that would have been required to be disclosed had they existed at the time
of executing this Agreement. The Company Disclosure Schedule, as supplemented
prior to the Closing, will contain a true, correct and complete list and
description of all items required to be set forth therein. The Company
Disclosure Schedule is expressly incorporated herein by reference.
Notwithstanding the foregoing, any such supplement to the Company Disclosure
Schedule following the date hereof shall not in any way affect Parent's right
not to consummate the transactions contemplated hereby as set forth in Section
8.3 hereof.
SECTION 4.26 Brokers and Finders. Except for the fees and expenses
payable to Fechtor, Detwiler, which fees and expenses will be paid by the
Company, the Company has not 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 4.27 Tax Matters. The representations set forth in the form of
Tax Matters Certificate of the Company, in the form set forth in Exhibit III-A
hereto (the "Company Tax Matters Certificate"), are true and correct in all
material respects, and such representations are hereby incorporated herein by
reference with the same effect as if set forth herein in their entirety.
SECTION 4.28 Hart-Scott-Rodino. To the knowledge of the Company, no
person or entity (i) holds fifty per cent (50%) or more of the outstanding
voting securities of the Company or (ii) has the contractual power presently to
designate fifty per cent (50%) or more of the directors of the Company. The
Company does not have either annual net sales or total assets of $100,000,000 or
more, as such net sales and total assets are measured in accordance with Rule
801.11 of the rules promulgated by the Federal Trade Commission pursuant to the
Hart-Scott-Rodino Anti-Trust Improvements Act of 1976 (the "HSR Act").
SECTION 4.29 No Omissions or Untrue Statements. No representation or
warranty made by the Company to Parent in this Agreement, the Company Disclosure
Schedule or in any certificate of a Company officer required to be delivered to
Parent pursuant to the terms of this Agreement contains any untrue statement of
a material fact, or omits to state a material fact necessary to make the
statements contained herein or therein not misleading as of the date hereof and
as of the Closing Date. None of the information relating to the Company and the
Company Subsidiaries, supplied in writing by the Company specifically for
inclusion in the Registration Statement, at the respective times that the
Registration Statement becomes effective, the Proxy Statement/Prospectus (as
used herein, such term means the Proxy Statement/Prospectus set forth as part of
the Registration Statement at the time of effectiveness) is first mailed to the
Company's stockholders and the Meeting takes place, as the case may be, contains
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
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therein, in light of the circumstances under which they were made, not
misleading. Parent shall give notice to the Company in advance of the dates of
such effectiveness sufficient to permit the Company to fulfill its obligations
under the second sentence of this Section.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows, with the
knowledge and understanding that the Company is relying materially on such
representations and warranties:
SECTION 5.1 Organization and Standing of Parent. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Parent has all requisite corporate power to carry on its
business as now conducted and is duly qualified to do business as a foreign
corporation and is in good standing as a foreign corporation in the jurisdiction
set forth in Section 5.1 of the Parent Disclosure Schedule, and to its
knowledge, such jurisdiction is the only one 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 (individually or in the aggregate) will not have a Material
Adverse Effect. The copies of the Certificate of Incorporation and By-laws of
Parent, as amended to date and delivered to the Company, are true and complete
copies of these documents as now in effect.
SECTION 5.2 Capitalization. The authorized capital stock of Parent
consists of 30,000,000 shares of Parent Common Stock. As of July 8, 1996, there
were 16,798,536 shares of Parent Common Stock issued and outstanding. As of July
8, 1996, there were 195,432 shares of Parent Common Stock reserved for issuance
upon the exercise of outstanding common stock purchase warrants of the Parent
("Warrants"), and 2,486,527 shares of Parent Common Stock reserved for issuance
upon the exercise of outstanding options and options or restricted stock which
may be granted under the stock incentive plans of Parent ("Parent Plans").
Except for the Warrants and the options and other rights granted under the
Parent Plans, there are not as of the date of this Agreement any existing
options, warrants, calls, subscriptions or other rights or agreements or
commitments obligating Parent to issue or transfer shares of its capital stock
or any other securities convertible into or evidencing the right to subscribe
for any such shares. All issued and outstanding shares of Parent Common Stock
are, and all shares of Parent Common Stock to be issued at the Effective Time
shall be, when issued, duly authorized and validly issued, fully paid,
non-assessable and free of pre-emptive rights with respect thereto.
SECTION 5.3 The Subsidiaries. Each subsidiary of Parent is set forth in
the Parent Disclosure Schedule (collectively, the "Parent Subsidiaries"). As
used herein, the term "Parent Subsidiary" shall mean any corporation or other
entity of which Parent, directly or indirectly, controls or which Parent 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. Except as
set forth in the Parent Disclosure Schedule, Parent does not own any capital
stock in any other corporation or similar business entity nor is Parent a
partner in any partnership or joint venture. The Parent Disclosure Schedule
describes the state or other jurisdiction of incorporation or organization of
each Parent Subsidiary. Parent owns the percentage of capital stock of each
Parent Subsidiary as set forth in the Parent Disclosure Schedule. Each Parent
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its state or other jurisdiction of incorporation or
organization. Each Parent Subsidiary has all requisite corporate power to carry
on its business as it is now being conducted and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary under applicable law except where the
failure to qualify (individually or in the aggregate) will not have any Material
Adverse Effect. 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
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other arrangements with any person or entity. Parent owns directly all of the
outstanding capital stock of Subsidiary.
SECTION 5.4 Parent's Authority. (a) Parent has the corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. Parent's Board of Directors has duly approved and adopted
this Agreement and the Merger. No approval of this Agreement or the Merger is
required of Parent's stockholders and no other corporate proceedings on its part
are necessary to authorize its execution and delivery and the consummation of
the transactions contemplated hereby, including the issuance of Parent Common
Stock in accordance with Section 3.1(a) other than obtaining the Required
Statutory Approvals. This Agreement has been duly and validly executed and
delivered by the Parent and constitutes the valid and binding obligation of
Parent, enforceable 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) Except for 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 the execution and
delivery of this Agreement by Parent or the consummation by Parent of the
transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approval which, if not made
or obtained, as the case may be, would not, in the aggregate, have a Material
Adverse Effect on it.
SECTION 5.5 The Subsidiary's Authority. (a) The Subsidiary has the
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The Subsidiary's Board of Directors and sole
stockholder have duly approved and adopted this Agreement and the Merger 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. This Agreement has been duly and validly executed and
delivered by the Subsidiary and constitutes the valid and binding obligation of
the Subsidiary, enforceable 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) Except for 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 the execution and
delivery of this Agreement by the Subsidiary or the consummation by the
Subsidiary of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approval which, if not made or obtained, as the case may be, would not, in the
aggregate, have a Material Adverse Effect.
SECTION 5.6 Contracts; No Default. All material contracts, agreements,
licenses, leases, easements, permits, rights of way, commitments, and
understandings, written or oral, connected with or relating in any respect to
the present operations of Parent and the Parent Subsidiaries considered as one
enterprise (except employment or other agreements terminable at will) are, with
the exception of this Agreement, described in Parent's SEC Reports (as
hereinafter defined) and listed as exhibits thereto (collectively, the "Parent
Contracts"). The Parent Contracts are in full force and effect and are valid,
binding and enforceable upon Parent or a Parent Subsidiary, as applicable, and
to the knowledge of Parent, against the other parties thereto in accordance with
their terms. Neither Parent nor any of the Parent Subsidiaries, as applicable,
nor, to the knowledge of Parent, any other party to any Parent Contract has
breached any provision of, and no event has occurred which, with the lapse of
time or action by a third party, would result in a material default or breach of
any provision of any Parent Contract. To the knowledge of Parent, no
stockholder, officer or director of the Parent has received any payment from any
contracting party in connection with or as an inducement for causing Parent to
enter into any Parent Contract.
SECTION 5.7 Litigation. Except as set forth in Parent's SEC Reports and
in Schedule 5.7 of the Parent Disclosure Schedule, there is no claim, action,
proceeding, or investigation pending or, to the knowledge of Parent, threatened
against or affecting Parent or any Parent Subsidiary before or by any court,
arbitrator or governmental agency or authority which, in the reasonable judgment
of Parent, would have a
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Material Adverse Effect on it. There is no strike or unresolved labor dispute
relating to the employees of Parent or any Parent Subsidiary which, in the
reasonable judgment of Parent, could have a Material Adverse Effect on it. There
are no decrees, injunctions or orders of any court, governmental department,
agency or arbitration outstanding against Parent or any Parent Subsidiary.
SECTION 5.8 Taxes. Parent and each Parent Subsidiary has duly and timely
filed with the appropriate governmental authorities all Tax Returns required to
be filed other than Tax Returns where the failure to file (individually and in
the aggregate) would have no Material Adverse Effect. All such Tax Returns, to
the knowledge of Parent, were, when filed and are, accurate and complete in all
material respects and were prepared in conformity with applicable laws and
regulations. Parent has paid in full or has adequately reserved against all
Taxes otherwise assessed against it through the date hereof or otherwise shown
to be due on such Tax Returns. Parent is not a party to any pending action or
proceeding by any governmental authority for the assessment of any Tax, and, to
the knowledge of Parent, no claim for assessment or collection of any Tax has
been asserted against Parent that has not been paid. There are no Tax liens upon
the assets of Parent (other than the lien of property taxes not yet due and
payable). There is no valid basis, to Parent's knowledge, for any assessment,
deficiency, notice, 30-day letter or similar intention to assess any Tax to be
issued to Parent by any governmental authority. The liabilities and reserves for
Taxes reflected in the Parent's consolidated balance sheet as of March 31, 1996
contained in the Parent Financial Statements (as hereinafter defined) are
adequate to cover all Taxes for all periods ending on or prior to such date,
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 Parent or a Parent Subsidiary, except for liens for Taxes
not yet due. To the knowledge of Parent, 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. Neither Parent nor any Parent Subsidiary is a party to
any agreement providing for the allocation or sharing of Taxes with any entity.
Neither Parent nor any Parent Subsidiary has, 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 Code. To the knowledge of Parent, Parent
and each Parent Subsidiary 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
the payment of such Taxes which, alone or in the aggregate, would not have a
Material Adverse Effect. No Tax is required to be withheld by Parent pursuant to
Section 1445 of the Code as a result of the transfer contemplated by this
Agreement.
SECTION 5.9 No Violation of Law. Parent and each Parent Subsidiary is not
in violation of and has not been given notice or been charged with any violation
of, any law, statute, code, directive, mandate, ordinance, permit, order, rule,
regulation, judgment, decree or decision (including, without limitation, any
Environmental Laws) 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. Neither Parent nor any Parent
Subsidiary has received any written notice that any investigation or review with
respect to Parent or any Parent Subsidiary 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. Parent and each Parent Subsidiary
have all Permits necessary to conduct its business as presently conducted,
except for such 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. Parent and each Parent
Subsidiary (a) has duly and timely filed all reports and other information
required to filed with any governmental or regulatory authority in connection
with its Permits, and (b) to the knowledge of Parent is not in violation of the
terms of any of its Permits, except for such omissions or delays in filings,
reports or violations which, alone or in the aggregate, would not have a
Material Adverse Effect.
SECTION 5.10 Environmental Matters. To its knowledge, Parent and each
Parent Subsidiary are and at all times have been in compliance in all material
respects with all applicable requirements of Environmental Laws in connection
with the ownership, operation and conditions of the business of Parent and the
Parent Subsidiaries. To its knowledge, there are no PCBs, underground storage
tanks (as defined by
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Environmental Laws), asbestos materials or asbestos containing materials (in the
case of asbestos or asbestos containing materials or underground heating oil
tanks in a condition which is in violation of Environmental Laws) in any leased
premises or property owned or operated by Parent or a Parent Subsidiary. To
their knowledge, neither Parent nor any Parent Subsidiary has 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 the knowledge of Parent, no conditions exist or have occurred as a
result of which or in connection with which Parent or a Parent Subsidiary 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.
SECTION 5.11 Properties. Except as set forth in the Parent Disclosure
Schedule, Parent and each Parent Subsidiary has good and marketable title to all
of the assets and properties which it purports to own as reflected on the most
recent balance sheet comprising a portion of the Parent Financial Statements, or
thereafter acquired. Parent and each Parent Subsidiary has a valid leasehold
interest in all properties of which it is the lessee and each such lease is
valid, binding and enforceable against Parent or a Parent Subsidiary as
applicable, and, to the knowledge of Parent, the other parties thereto in
accordance with its terms. Neither Parent nor any Parent Subsidiary nor to the
knowledge of Parent, the other parties thereto are in default in the performance
of any material provision under any such leases (exclusive of leases of offices
of sales representatives in states of the United States other than New York).
Neither the whole nor any material portion of the assets of Parent or any Parent
Subsidiary is subject to any governmental decree or order to be sold or is being
condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor, to the knowledge of Parent, has
any such condemnation, expropriation or taking been proposed. Except as set
forth in the Parent Disclosure Schedule, none of the material assets of Parent
or any Parent Subsidiary is subject to any restriction which would prevent
continuation of the use currently made thereof or materially adversely affect
the value thereof.
SECTION 5.12 Condition of Assets. The material equipment, fixtures and
other personal property of Parent and each Parent Subsidiary are in an operating
condition adequate for the conduct of its respective business as presently being
conducted.
SECTION 5.13 No Breaches. The making and performance of this Agreement
and the other agreements contemplated hereby will not (i) conflict with the
Certificate of Incorporation or the By-laws of Parent or of the Subsidiary, (ii)
violate any statute, code, directive, mandate, ordinance, permit, rule, or
regulation, or any order, writ, injunction or decree to which Parent or any
Parent Subsidiary is a party or by which the respective material assets,
business, or operations of Parent or any Parent Subsidiary may be bound or
affected or (iii) result in any breach or termination of, or constitute a
default under, or constitute an event which, with notice or lapse of time, or
both, would become a default under, or result in the creation of any encumbrance
upon any material asset of Parent or any Parent Subsidiary under, or create any
rights of termination, cancellation, or acceleration in any person under, any
Parent Contract.
SECTION 5.14 Financial Statements. The consolidated financial statements
of Parent included in Parent's SEC Reports (collectively, the "Parent Financial
Statements") present fairly, in all material respects, the consolidated
financial position of Parent as of the respective dates and the results of its
operations for the fiscal years and periods covered in accordance with GAAP
consistently applied and in accordance with Regulation S-X of the SEC (subject,
in the case of unaudited interim period financial statements, to normal and
recurring year-end adjustments which, individually or collectively, are not
material). Without limiting the generality of the foregoing, (i) except as set
forth in Parent Disclosure Schedule, there is no basis for any assertion against
Parent or any Parent Subsidiary as of the date of the most recent balance sheet
comprising a portion of the Parent Financial Statements of any material debt,
liability or obligation of any nature not fully reflected or reserved against in
the Parent Financial Statements or in the notes thereto; and (ii) there are no
assets of Parent or any Parent Subsidiary, the value of which (in the reasonable
judgment of Parent) is materially overstated in the Parent Financial Statements.
Except as disclosed therein or in the Parent Disclosure Schedule or as incurred
in the ordinary course of business since March 31, 1996, neither Parent nor any
Parent Subsidiary has any known material contingent liabilities (including
liabilities for taxes). Parent is
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not a party to any contract or agreement for the forward purchase or sale of any
foreign currency and has not invested in any "derivatives".
SECTION 5.15 Books, Records and Accounts. Parent's books, records and
accounts fairly and accurately reflect transactions and dispositions of assets
by Parent and the Parent Subsidiaries, and the system of internal accounting
controls of Parent and the Parent Subsidiaries is sufficient to assure that: (a)
transactions are executed in accordance with management's general or specific
authorization; (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP, and to maintain accountability
for assets; (c) access to assets is permitted only in accordance with
management's general or specific 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 5.16 Employee Benefit Plans, ERISA. To the knowledge of Parent
there (i) have been no prohibited transactions within the meaning of Section 406
and 407 of ERISA or Section 4975 of the Code, with respect to any of the Parent
Benefit Plans (as hereinafter defined) that could result in penalties, taxes or
liabilities which, singly or in the aggregate, could have a Material Adverse
Effect on Parent, (ii) except for premiums due, there is no outstanding
liability in excess of $10,000, whether measured alone or in the aggregate,
under Title IV of ERISA with respect to any of the Parent Benefit Plans, (iii)
neither the Pension Benefit Guaranty Corporation nor any plan administrator has
instituted proceedings to terminate any of the Parent Benefit Plans subject to
Title IV of ERISA other than in a "standard termination" described in Section
4041(b) of ERISA, (iv) none of the Parent Benefit 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 the Parent Benefit Plans ended prior to the date of this
Agreement, (v) the current present value of all projected benefit obligations
under each of the Parent Benefit 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 the Parent Financial Statements as of March 31,
1996 (based upon reasonable actuarial assumptions currently utilized for such
Parent Benefit Plan), (vi) to the knowledge of Parent, each of the Parent
Benefit 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 the Parent Benefit 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, to the knowledge of
Parent, 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 Parent Benefit Plans,
and the period for making any such necessary retroactive amendments has not
expired, (viii) with respect to Multiemployer Plans, neither Parent nor any
Parent Subsidiary has 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 the knowledge of Parent, 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 the knowledge of Parent, threatened or anticipated claims involving any
of the Parent Benefit Plans other than claims for benefits in the ordinary
course, and (x) neither Parent nor any Parent Subsidiary has a current liability
in excess of $10,000, 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 Parent under
Section 4001 of ERISA or Section 414 of the Code contributed during the period
of time covered by the applicable statute of limitations (the "Parent Controlled
Group Plans"), and Parent does not anticipate that any such liability will be
asserted against Parent or any Parent Subsidiary. None of the Parent Controlled
Group Plans has an "accumulated funding deficiency" (as defined in Section 302
of ERISA and 412 of the Code), and no Parent Controlled Group Plan has an
outstanding funding waiver which could result in the imposition of liens, excise
taxes or liability against Parent in excess of $10,000 whether measured alone or
in the aggregate. Parent Benefit Plans means and includes any employee benefit
plans, programs, arrangements and practices of Parent and the Parent
Subsidiaries, including employee benefit plans within the meaning set forth in
Section 3(3) of the ERISA.
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SECTION 5.17 Absence of Certain Changes or Events. Except as set forth in
Parent's SEC Reports or in the Parent Disclosure Schedule, since March 31, 1996
there has not been:
(a) any material adverse change in the financial condition,
operations, properties, assets, liabilities or business of Parent and the
Parent Subsidiaries considered as one enterprise;
(b) any damage, destruction or loss of any properties of Parent or any
Parent Subsidiary, whether or not covered by insurance except for such, as
would not individually, or in the aggregate, have a Material Adverse
Effect;
(c) any material change in the manner in which the business of Parent
and the Parent Subsidiaries considered as one enterprise has been
conducted;
(d) any material change in the treatment and protection of trade
secrets or other confidential information of Parent or any Parent
Subsidiary; and
(e) any occurrence not included in paragraphs (a) through (d) of this
Section 5.13 which has resulted, or which Parent has reason to believe,
would be expected to result, in a Material Adverse Effect on Parent.
SECTION 5.18 Parent's SEC Reports. Since October 1, 1993, Parent has
filed with the SEC all reports, registrations and other documents, together with
any amendments and supplements thereto, required to be filed under the
Securities Act and the Exchange Act (all such reports, registrations and
documents filed with the SEC since October 1, 1993 are collectively referred to
as "Parent's SEC Reports"). As of their respective dates, Parent's SEC Reports
complied in all material respects with all rules and regulations promulgated by
the SEC and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Parent has provided to the Company a true and complete
copy of all of Parent's SEC Reports filed on or prior to the date hereof.
SECTION 5.19 Opinion of Financial Advisor. Parent has received the
opinion of Alex. Brown & Sons Incorporated ("Alex. Brown") to the effect that,
as of the date hereof, the Exchange Ratio or Adjusted Exchange Ratio, as
applicable, is fair, from a financial point of view, to the Parent's public
stockholders. Such opinion (a copy of which has been delivered to the Company)
has not been withdrawn, revoked or modified.
SECTION 5.20 Disclosure Schedule Complete. Parent shall promptly
supplement the Parent Disclosure Schedule if events occur prior to the Closing
Date that would have been required to be disclosed had they existed at the time
of executing this Agreement. The Parent Disclosure Schedule, as supplemented
prior to the Closing, will contain a true, correct and complete list and
description of all items required to be set forth therein. The Parent Disclosure
Schedule is expressly incorporated herein by reference. Notwithstanding the
foregoing, any such supplement to the Parent Disclosure Schedule following the
date hereof shall not in any way affect the Company's right not to consummate
the transactions contemplated hereby as set forth in Section 8.2 hereof.
SECTION 5.21 Registration Statement and Proxy Statement/Prospectus. None
of the information to be supplied by Parent for inclusion or incorporation by
reference in (a) the Registration Statement or (b) the Proxy
Statement/Prospectus 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 meeting of stockholders of the Company 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 meeting of the stockholders of the Company,
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. The Proxy Statement/Prospectus will comply as to form in all
material respects with all applicable laws, including the provisions of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by Parent or Subsidiary with
respect to information supplied by the Company for inclusion therein.
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SECTION 5.22 Brokers and Finders. Except for the fees and expenses
payable to Alex. Brown, which fees and expenses will be paid by Parent, Parent
has not 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 5.23 Tax Matters. The representations set forth in the form of
Tax Matters Certificate of Parent, in the form set forth in Exhibit III-B hereto
(the "Parent Tax Matters Certificate"), are true and correct in all material
respects, and such representations are hereby incorporated herein by reference
with the same effect as if set forth herein in their entirety.
SECTION 5.24 Hart-Scott-Rodino. To the knowledge of Parent, no person or
entity (i) holds fifty per cent (50%) or more of the outstanding voting
securities of Parent or (ii) has the contractual power presently to designate
fifty per cent (50%) or more of the directors of Parent. Parent does not have
either annual net sales or total assets of $100,000,000 or more, as such net
sales and total assets are measured in accordance with Rule 801.11 of the rules
promulgated by the Federal Trade Commission pursuant to the HSR Act.
SECTION 5.25 Absence of Intention. Parent has no present intention to
cause the Company, following the Effective Time, to take any action which would
require notice to employees under the Worker Adjustment and Retraining
Notification Act.
SECTION 5.26 Customers and Suppliers. Except as set forth in the Parent
Disclosure Schedule, Parent has no knowledge that, either as a result of the
transactions contemplated hereby or for any other reason (inclusive of
expiration of a contract upon the passage of time), any customer (which
accounted for an aggregate amount of 5% or more of Parent's consolidated gross
revenues within the preceding 12 months) or material supplier of Parent or any
Parent Subsidiary will not continue to conduct business with Parent or a Parent
Subsidiary after the Effective Time in substantially the same manner as it has
conducted business with Parent and the Parent Subsidiaries in the past.
SECTION 5.27 Intellectual Property. Parent and each Parent Subsidiary
owns or has the right to use the patents, unpatented inventions, trademarks,
tradenames, servicemarks, servicenames, copyrights, trade secrets, know-how,
design, process and other intangible assets used in the business of Parent and
the Parent Subsidiaries free and clear of liens, claims and encumbrances created
outside of the ordinary course of business, or as identified in agreements
referred to in Parent's SEC Reports. Neither Parent nor any Parent Subsidiary is
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.
SECTION 5.28 No Omissions or Untrue Statements. No representation or
warranty made by Parent to the Company in this Agreement, in Parent Disclosure
Schedule or in any certificate of a Parent officer required to be delivered to
the Company pursuant to the terms of this Agreement contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements contained herein or therein not misleading as of the date
hereof and as of the Closing Date.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1 Conduct of Business by Company Prior to Effective Time. The
Company (which for the purpose of this Section 6.1 shall be deemed to include
the Company and the Company Subsidiaries) 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 Parent, the
Company shall:
(a) not amend or propose to amend its Articles of Organization,
Certificate of Incorporation or similar organizational documentation or
By-Laws;
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(b) not incur or 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
4.6(a) of the Company Disclosure Schedule or any successor arrangements
thereto;
(c) not enter into or amend in any respect any 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 officers, or, except in the ordinary course of business and
consistent with past practices, to any other employees or other
representatives, or agree to do so;
(e) 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;
(f) use its best efforts to maintain in force the insurance coverage
described in Section 4.11 of the Company Disclosure Schedule;
(g) conduct its business in the ordinary and usual course of business
and consistent with past practice;
(h) 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;
(i) 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 may issue shares upon exercise of outstanding
Company Purchase Rights referred to in Section 4.2 of the Company
Disclosure Schedule;
(j) 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 and consistent with past practices), (v) sell any material
assets (except in the ordinary course of business and consistent with past
practices), or (vi) enter into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(k) use its best 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; and
(l) confer on a regular basis with one or more representatives of
Parent to report on material operational matters and the general status of
ongoing operations.
SECTION 6.2 No Solicitation. (a) The Company agrees that, prior to the
earlier of the Effective Time or 120 days from the date of this Agreement, the
Company and the Company Subsidiaries shall not give authorization or permission
to any of their respective directors, officers, employees, agents or
representatives
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to, and each shall use all reasonable efforts to see that such persons do not,
directly or indirectly, solicit, initiate, knowingly facilitate or encourage
(including by way of furnishing or disclosing information) any merger,
consolidation, other business combination involving the Company or any Company
Subsidiary, acquisition of all or any substantial portion of the assets or
capital stock of the Company and the Company Subsidiaries taken as a whole, or
inquiries or proposals concerning or which would reasonably be expected to lead
to, any of the foregoing (an "Acquisition Transaction") or negotiate, explore or
otherwise knowingly communicate in any way with any third party (other than
Parent or its affiliates) with respect to any Acquisition Transaction or enter
into any agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the Merger or any other transactions expressly
contemplated by this Agreement, or contemplated to be a material part thereof.
The Company shall advise Parent in writing of any inquiries or proposals
relating to an Acquisition Transaction, within one day following the Company's
receipt of any such inquiry or proposal.
(b) Notwithstanding the foregoing, in the event that there is an
unsolicited written proposal for an Acquisition Transaction from a bona fide
financially capable third party that contains no financing contingency, the
Company, in its discretion, shall be permitted to furnish to and communicate
with any such party all publicly available information requested by such party.
The Company thereafter, shall promptly advise Parent in writing of the identity
of such party. In the event that such party requests information in addition to
that which is publicly available, the Company may furnish to and communicate
with such third party non-public information only if (i) two business days'
written notice shall have been given to Parent; and (ii)(A) the Company's Board
of Directors shall have been advised in writing by its investment banker that
such third party is financially capable, without any financing contingency, of
consummating an Acquisition Transaction that would yield a higher value to the
Company's stockholders than will the Merger, (B) the Company's Board of
Directors shall have been advised, by the written opinion of outside counsel to
the Company, that any failure to provide such non-public information to such
party would constitute a breach of the fiduciary responsibilities of the Board
of Directors to the stockholders of the Company and (C) the Board of Directors,
after weighing such advice, determines that taking such action is more likely
than not to lead an Acquisition Transaction with such third party that would
yield a higher value to the Company's stockholders than will the Merger and that
failing to furnish such information would constitute a breach of the Board's
fiduciary duties.
SECTION 6.3 Other Transaction Payment. In the event the Merger does not
take place, and within six months from the date of this Agreement the Company
enters into, or becomes subject to, an Acquisition Transaction (which results in
a higher value being received by the Company's stockholders than would have been
received in the Merger) with any person or party to whom it furnished
information, or communicated with, regarding the Company (as permitted by
Section 6.2(b) above and the corresponding provision of that certain letter of
intent dated June 10, 1996 (the "Letter of Intent") between Parent and the
Company entered into in anticipation of this Agreement), then the Company,
within five days of consummation of the Acquisition Transaction, shall pay
Parent by wire transfer of immediately available funds to an account specified
by Parent, an amount equal to the sum of (i) all documented fees and expenses
(including the fees and expenses of counsel, accountants, investment bankers,
consultants and advisors ("Transaction Expenses")) incurred by Parent in
connection with the Letter of Intent, this Agreement and the transactions
contemplated hereby (unless previously paid to Parent pursuant to the provision
of Section 9.1 hereof) and (ii) a termination or "break-up" fee of seven hundred
fifty thousand dollars ($750,000); provided, however, that in no event shall the
Company be obligated to pay Parent more than one million dollars ($1,000,000)
pursuant to the provisions of this Section 6.3.
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
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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 reciprocal confidentiality and non-disclosure
agreements heretofore entered into between Parent and the Company (the
"Confidentiality Agreement"), except that Parent and the Company may, with the
prior consent of the other, disclose such information as may be necessary in
connection with seeking the Required Statutory Approvals and the Company
Stockholders' Approval, and with the prior consent of the other. 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. Until the Closing Date, on a confidential basis, Parent will from time to
time advise senior management of the Company as to any material acquisitions or
dispositions of assets or businesses outside of the ordinary course of business
contemplated to be effected within the next three months from the time of notice
by Parent (either directly or indirectly). Parent represents that it has so
advised senior management of the Company as to all such material acquisitions or
dispositions contemplated as of the date of this Agreement.
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 registering under the
Securities Act the Parent Common Stock to be issued at the Effective Time (such
registration statement as amended by any amendments thereto being referred to
herein as 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, respectively, use
all reasonable efforts to facilitate the expeditious consummation of the
transactions 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 as a consequence of the Merger. Parent
covenants to use all reasonable efforts to keep such Registration Statement (or
a successor registration statement) effective for a period of no less than three
years after the Effective Time. Parent shall keep the Company informed of all
developments related to the Registration Statement and shall permit Company's
outside counsel, upon request by the Company, to participate in telephone
conferences with the staff of the SEC in connection with the Registration
Statement.
SECTION 7.3 Stockholder 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.
SECTION 7.4 Nasdaq National Market. Parent shall 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 issuable pursuant to Section 3.1(a) hereof.
SECTION 7.5 Undertaking of Parent Prior to Effective Time. Parent (for
itself and the Subsidiary) hereby covenants and agrees as follows, from and
after the date of this Agreement and until the Effective
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Time, except as otherwise specifically consented to in writing by the Company,
that 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, or (iv) enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
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 reasonably 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 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 the stockholders of
the Company, each of the Company and Parent 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 (in the case of the Parent) 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 Registration Statement so as to
correct the same and (in the case of the Company) to cause the Proxy
Statement/Prospectus as so corrected to be disseminated to the stockholders of
the Company, in each case to the extent required by applicable law.
SECTION 7.9 Agreements of Affiliates. Within fifteen days after the date
of this Agreement, 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 "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 cause each Person who is so identified by it as
a possible Affiliate, to deliver to it, at least 20 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
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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(e)
and 8.3(e) 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 all reasonable efforts to cause the satisfaction on or before October
31, 1996, 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.
SECTION 7.13 Continuing Indemnification. From and after the Effective
Time, Parent shall take no action and shall use all reasonable efforts to
preclude any action that would reduce or adversely affect the exculpation for or
the indemnification obligations (the "Indemnification Obligations") of the
Company to the Company's officers, directors or other agents (the "Indemnified
Parties") under the Company's Articles of Organization and Bylaws and
indemnification contracts referred to in Schedule 4.6(a) of the Company
Disclosure Schedule as they exist as of the date of this Agreement. Parent shall
guarantee the performance by the Company of the Indemnification Obligations to
the Indemnified Parties. The provisions of this Section shall survive the
consummation of the Merger and the Effective Time.
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, and holders of no more than nine per cent (9%) of the outstanding
shares of Company Common Stock shall have established the right to demand
payment for their shares and an appraisal thereof in accordance with the
provisions of Section 86 of the MBCL ("Stockholder Approval Condition");
(b) 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;
(c) 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);
(d) 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
(e) 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.
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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 the 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 contained in this Agreement shall be true and correct
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 the President or a Vice President of Parent
to that effect;
(b) The Company shall have received an opinion from Parker Duryee
Rosoff & Haft ("Parker Duryee"), 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, dated 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) All of the shares of Parent Common Stock to be issued or issuable
in connection with the Merger shall have been authorized for listing on the
NASDAQ National Market upon official notice of issuance; and
(e) The Company shall have received an opinion of Brown, Rudnick,
Freed & Gesmer ("Brown, Rudnick"), counsel to the Company, 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, Brown Rudnick may receive and rely upon
representations contained in certificates of Parent, Subsidiary and the
Company, including the Company Tax Matters Certificate and the Parent Tax
Matters Certificate.
(f) The Company shall have received from the Parent an executed
original of the Parent Tax Matters Certificate;
(g) Since the date of this Agreement there shall not have been any
Material Adverse Effect with respect to the Parent, the likelihood of which
was not previously disclosed to the Company by Parent in the Parent
Disclosure Schedule.
(h) The Company shall have received an opinion of Fechtor, Detwiler or
another nationally recognized investment banking firm, dated as of the
Closing Date, that the Exchange Ratio or adjusted Exchange Ratio, as
applicable, is fair, from a financial point of view, to the Company's
public stockholders.
(i) An employment agreement, containing the compensation and other
provisions set forth in Schedule 8.21(i) hereof, effective as of the
Effective Time, between Parent and Richard C. Close, the Company's chief
executive officer (the "New Employment Agreement"), shall have been entered
into.
(j) 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 the Parent pursuant to this Agreement shall be reasonably
satisfactory to the Company and its counsel.
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SECTION 8.3 Conditions to Obligations of Parent and the Subsidiary to
Effect the Merger. Unless waived by Parent, the obligations of Parent to cause
the 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 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;
(b) Parent shall have received an opinion from Brown Rudnick, counsel
to the Company, dated the Closing Date, substantially in the form set forth
in Exhibit VI hereto;
(c) Parent shall have received "comfort" letters from Ernst & Young
LLP, independent certified public accountants for the Company, dated 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 Ernst & Young
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 GAAP;
(e) Parent shall have received an opinion of Parker Duryee, 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 may receive and rely
upon representations contained in certificates of Parent, Subsidiary and
the Company, including the Company Tax Matters Certificates and the Parent
Tax Matters Certificates, respectively.
(f) Parent shall have received all of the Affiliate's Agreements
contemplated by Section 7.9 to have been received by it.
(g) 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.
(h) Parent shall have received from the Company an executed original
of the Company Tax Matters Certificate.
(i) Parent shall have received an opinion of Alex. Brown or another
nationally recognized investment banking firm, dated as of the Closing
Date, that the Exchange Ratio or Adjusted Exchange Ratio, as applicable, is
fair, from a financial point of view, to the Parent's public stockholders.
(j) The New Employment Agreement shall have been entered into.
(k) Parent shall have received opinions of counsel or other evidence
reasonably satisfactory to it of the Company's ownership of the capital
stock or other equity interests in each of the Company Subsidiaries (as
such ownership is reflected in Schedule 4.3 of the Company Disclosure
Schedule), and, as to the jurisdictions in which the Company Subsidiaries
are incorporated or otherwise formed, describing any filings with
governmental authorities as may be necessary with respect to the Company
Subsidiaries on account of the Merger and the transactions contemplated by
this Agreement.
28
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(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 Parent by or on
behalf of the Company pursuant to this Agreement shall be reasonably
satisfactory to Parent and its counsel.
ARTICLE IX
TERMINATION AND ABANDONMENT
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:
(a) by mutual consent of the Boards of Directors 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 in the Company Disclosure Schedule (a "Company Adverse Change"),
whereupon 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 in the Parent Disclosure Schedule (a "Parent Adverse Change"),
whereupon 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 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 Stockholder Approval
Condition is not met, in which event the Company shall promptly pay to
Parent the Parent's Transaction Expenses;
(e) unilaterally by the Company in the event of Parent's material
breach when made of any 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", in which event Parent shall promptly pay to the Company
the Company's Transaction Expenses);
(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), in
which event, the Company shall promptly pay to Parent the 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 in the event the Stockholder Approval Condition is not
met), in which event Parent shall promptly pay to the Company 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
October 31, 1996 whereupon, subject to Section 6.3, neither party shall
have any obligation to the other for Transaction Expenses.
In no event however shall either party be required to pay Transaction
Expenses of the other in excess of $250,000.
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 any of the Company, Parent or Subsidiary except as set forth in
this Section
29
<PAGE> 180
9.2 and in Section 6.3 (with respect to payments that may become 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.
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
MISCELLANEOUS
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 Succession and Assignments; Third Party Beneficiaries. This
Agreement may not be assigned (either voluntarily or involuntarily) by any party
hereto without the express written consent of the other party. Any attempted
assignment in violation of this Section shall be void and ineffective for all
purposes. In the event of an assignment permitted by this Section, this
Agreement shall be binding upon the heirs, successors and assigns of the parties
hereto. There shall be no third party beneficiaries of this Agreement.
SECTION 10.3 Notices. All notices, requests, demands, or other
communications with respect to this Agreement shall be in writing and shall be
(i) sent by facsimile transmission, (ii) sent by the United States Postal
Service, registered or certified mail, return receipt requested, or (iii)
personally delivered by a nationally recognized express overnight courier
service, charges prepaid, to the following addresses (or such other addresses as
the parties may specify from time to time in accordance with this Section):
(a) To Parent:
Robotic Vision Systems, Inc.
425 Rabro Drive East
Hauppauge, New York 11788
Attn: President
Fax No.: (516) 273-1167
With a copy to:
Parker Duryee Rosoff & Haft
529 Fifth Avenue
New York, New York 10017
Attn: Ira I. Roxland, Esq.
Fax No.: (212) 972-9488
30
<PAGE> 181
(b) To the Company:
Computer Identics Corporation
5 Shawmut Road
Canton, Massachusetts 02021
Attn: President
Fax No.: (617) 828-8942
With a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attn: Steven R. London, Esq.
Fax No.: (617) 856-8201
Any such notice shall, when sent in accordance with the preceding sentence, be
deemed to have been given and received on the earliest of (i) the day delivered
to such address or sent by facsimile transmission, (ii) the fifth business day
following the date deposited with the United States Postal Service, or (iii) 24
hours after shipment by such courier service.
SECTION 10.4 Construction. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of New York without giving
effect to the principles of conflicts of law thereof except that the
effectiveness of the Merger and the rights of shareholders of the Company upon
effectiveness of the Merger shall be governed by the MBCL.
SECTION 10.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
SECTION 10.6 No Implied Waiver; Remedies. No failure or delay on the part
of the parties hereto to exercise any right, power, or privilege hereunder or
under any instrument executed pursuant hereto shall operate as a waiver nor
shall any single or partial exercise of any right, power, or privilege preclude
any other or further exercise thereof or the exercise of any other right, power,
or privilege. All rights, powers, and privileges granted herein shall be in
addition to other rights and remedies to which the parties may be entitled at
law or in equity.
SECTION 10.7 Entire Agreement. This Agreement, including the Exhibits and
Disclosure Schedules attached hereto and the documents and instruments referred
to herein, and the Confidentiality Agreement of June, 1996 between Parent and
the Company, sets forth the entire understandings of the parties with respect to
the subject matter hereof, and it incorporates and merges any and all previous
communications, understandings, oral or written including the Letter of Intent,
as to the subject matter hereof, and cannot be amended or changed except in
writing, signed by the parties.
SECTION 10.8 Headings. The headings of the Sections of this Agreement,
where employed, are for the convenience of reference only and do not form a part
hereof and in no way modify, interpret or construe the meanings of the parties.
SECTION 10.9 Severability. To the extent that any provision of this
Agreement shall be invalid or unenforceable, it shall be considered deleted
hereof and the remainder of such provision and of this Agreement shall be
unaffected and shall continue in full force and effect.
31
<PAGE> 182
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
ROBOTIC VISION SYSTEMS, INC.
By: /s/ PAT V. COSTA
------------------------------------
Name: Pat V. Costa
Title: President
RVSI THIRD ACQUISITION CORP.
By: /s/ PAT V. COSTA
------------------------------------
Name: Pat V. Costa
Title: President
COMPUTER IDENTICS CORPORATION
By: /s/ RICHARD C. CLOSE
------------------------------------
Name: Richard C. Close
Title: President
By: /s/ JEFFERY A. WEBER
------------------------------------
Name: Jeffery A. Weber
Title: Treasurer
32
<PAGE> 183
EXHIBIT B
MASSACHUSETTS BUSINESS CORPORATION LAW SECTIONS 85 THROUGH 98
85 Dissenting Stockholders; Right to Demand Payment for Stock;
Exemption. -- A stockholder in any corporation organized under the laws of
Massachusetts which shall have duly voted to consolidate or merge with another
corporation or corporations under the provisions of sections seventy-eight or
seventy-nine who objects to such consolidation or merger may demand payment for
his stock from the resulting or surviving corporation and an appraisal in
accordance with the provisions of sections eighty-six to ninety-eight,
inclusive, and such stockholder and the resulting or surviving corporation shall
have the rights and duties and follow the procedure set forth in those sections.
This section shall not apply to the holders of any shares of stock of a
constituent corporation surviving a merger if, as permitted by subsection(c) of
section seventy-eight, the merger did not require for its approval a vote of the
stockholders of the surviving corporation.
86 Selections Applicable to Appraisal; Prerequisites. -- If a corporation
proposes to take a corporate action as to which any section of this chapter
provides that a stockholder who objects to such action shall have the right to
demand payment for his shares and an appraisal thereof, sections eighty-seven to
ninety-eight, inclusive, shall apply except as otherwise specifically provided
in any section of this chapter. Except as provided in sections eighty-two and
eighty-three, no stockholder shall have such right unless (1) he files with the
corporation before the taking of the vote of the shareholders on such corporate
action, written objection to the proposed action stating that he intends to
demand payment for his shares if the action is taken and (2) his shares are not
voted in favor of the proposed action.
87 Statements of Rights of Objecting Stockholders in Notice of Meeting;
Form. -- The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting
and effected by the corporation, any stockholder (1) who files with the
corporation before the taking of the vote on the approval of such action,
written objection to the proposed action stating that he intends to demand
payment for his shares if the action is taken and (2) whose shares are not
voted in favor of such action has or may have the right to demand in
writing from the corporation (or, in the case of a consolidation or merger,
the name of the resulting or surviving corporation shall be inserted),
within twenty days after the date of mailing to him of notice in writing
that the corporate action has become effective, payment for his shares and
an appraisal of the value thereof. Such corporation and any such
stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of
the General Laws of Massachusetts."
88 Notice of Effectiveness of Action Objected To. -- The corporation
taking such action, or in the case of a merger or consolidation the surviving or
resulting corporation, shall, within ten days after the date on which such
corporate action became effective, notify each stockholder who filed (a) written
objection meeting the requirements of section eighty-six and whose shares were
not voted in favor of the approval of such action, that the action approved at
the meeting of the corporation of which he is a stockholder has become
effective. The giving of such notice shall not be deemed to create any rights in
any stockholder receiving the same to demand payment for his stock. The notice
shall be sent by registered or certified mail, addressed to the stockholder at
his last known address as it appears in the records of the corporation.
89 Demand for Payment; Time for Payment. -- If within twenty days after
the date of mailing of a notice under subsection (e) of section eighty-two,
subsection (f) of section eighty-three, or section eighty-
<PAGE> 184
eight, any stockholder to whom the corporation was required to give such notice
shall demand in writing from the corporation taking such action, or in the case
of a consolidation or merger from the resulting or surviving corporation,
payment for his stock, the corporation upon which such demand is made shall pay
to him the fair value of his stock within thirty days after the expiration of
the period during which such demand may be made.
90 Demand for Determination of Value; Bill in Equity; Venue. -- If during
the period of thirty days provided for in section eighty-nine the corporation
upon which such demand is made and any such objecting stockholder fail to agree
as to the value of such stock, such corporation or any such stockholder may
within four months after the expiration of such thirty-day period demand a
determination of the value of the stock of all such objecting stockholders by a
bill in equity filed in the superior court in the county where the corporation
in which such objecting stockholder held stock had or has its principal office
in the commonwealth.
91 Parties to Suit to Determine Value; Service. -- If the bill is filed by
the corporation, it shall name as parties respondent all stockholders who have
demanded payment for their shares and with whom the corporation has not reached
agreement as to the value thereof. If the bill is filed by a stockholder, he
shall bring the bill in his own behalf and in behalf of all other stockholders
who have demanded payment for their shares and with whom the corporation has not
reached agreement as to the value thereof, and service of the bill shall be made
upon the corporation by subpoena with a copy of the bill annexed. The
corporation shall file with its answer a duly verified list of all such other
stockholders, and such stockholders shall thereupon be deemed to have been added
as parties to the bill. The corporation shall give notice in such form and
returnable on such date as the court shall order to each stockholder party to
the bill by registered or certified mail, addressed to the last known address of
such stockholder as shown in the records of the corporation, and the court may
order such additional notice by publication or otherwise as it deems advisable.
Each stockholder who makes demand as provided in section eighty-nine shall be
deemed to have consented to the provisions of this section relating to notice,
and the giving of notice by the corporation to any such stockholder in
compliance with the order of the court shall be a sufficient service of process
on him. Failure to give notice to any stockholder making demand shall not
invalidate the proceedings as to other stockholders to whom notice was properly
given, and the court may at any time before the entry of a final decree make
supplementary orders of notice.
92 Decree Determining Value and Ordering Payment; Valuation Date. -- After
hearing the court shall enter a decree determining the fair value of the stock
of those stockholders who have become entitled to the valuation of and payment
for their shares, and shall order the corporation to make payment of such value,
together with interest, if any, as hereinafter provided, to the stockholders
entitled thereto upon the transfer by them to the corporation of the
certificates representing such stock if certificated or, if uncertificated, upon
receipt of an instruction transferring such stock to the corporation. For this
purpose, the value of the shares shall be determined as of the day preceding the
date of the vote approving the proposed corporate action and shall be exclusive
of any element of value arising from the expectation or accomplishment of the
proposed corporate action.
93 Reference to Special Master. -- The court in its discretion may refer
the bill or any question arising thereunder to a special master to hear the
parties, make findings and report the same to the court, all in accordance with
the usual practice in suits in equity in the superior court.
94 Notation on Stock Certificates as Pendency of Bill. -- On motion the
court may order stockholder parties to the bill to submit their certificates of
stock to the corporation for the notation thereon of the pendency of the bill
and may order the corporation to note such pendency in its records with respect
to any uncertificated shares held by such stockholder parties, and may on motion
dismiss the bill as to any stockholder who fails to comply with such order.
95 Costs; Interests. -- The costs of the bill, including the reasonable
compensation and expenses of any master appointed by the court, but exclusive of
fees of counsel or of experts retained by any party, shall be determined by the
court and taxed upon the parties to the bill, or any of them, in such manner as
appears to be equitable, except that all costs of giving notice to stockholders
as provided in this chapter shall be paid by the corporation. Interest shall be
paid upon any award from the date of the vote approving the proposed corporate
2
<PAGE> 185
action, and the court may on application of any interested party determine the
amount of interest to be paid in the case of any stockholder.
96 Dividends & Voting Rights After Demand for Payment. -- Any stockholder
who had demanded payment for his stock as provided in this chapter shall not
thereafter be entitled to notice of any meeting of stockholders or to vote such
stock for any purpose and shall not be entitled to the payment of dividends or
other distribution on the stock (except dividends or other distributions payable
to stockholders of record at a date which is prior to the date of the vote
approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section
ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the
corporation, or in the case of a consolidation or merger, the resulting or
surviving corporation, deliver to it a written withdrawal of his objections
to and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
97 Status of Shares Paid For. -- The shares of the corporation paid for by
the corporation pursuant to the provisions of this chapter shall have the status
of treasury stock, or in the case of a consolidation or merger, the shares or
the securities of the resulting or surviving corporation into which the shares
of such objecting stockholder would have been converted had he not objected to
such consolidation or merger shall have the status of treasury stock or
securities.
98 Exclusive Remedy; Exception. -- The enforcement by a stockholder of his
right to receive payment for his shares in the manner provided in this chapter
shall be an exclusive remedy except that this chapter shall not exclude the
right of such stockholder to bring or maintain an appropriate proceeding to
obtain relief on the ground that such corporate action will be or is illegal or
fraudulent as to him.
3
<PAGE> 186
EXHIBIT C
[FECHTOR, DETWILER & CO., INC. LETTERHEAD]
JULY 12, 1996
Board of Directors
Computer Identics Corporation
5 Shawmut Road
Canton, Massachusetts 02021
Gentlemen:
As described in the July 3, 1996 draft of the proposed Agreement and Plan
Of Merger and Reorganization between Robotic Vision Systems, Inc. ("RVSI") and
Computer Identics Corporation ("CIDN"), RVSI and CIDN have proposed to merge a
wholly owned subsidiary of RVSI with and into CIDN and to convert each CIDN
share into 0.177805207 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 25 day
trading period preceding the day before the special meeting of RVSI's
shareholders exceeds $20.75 or is less than $17.00, the Exchange Ratio will be
adjusted as provided in Section 3.1 of the Merger Agreement.
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
July 3, 1996 draft of the proposed Agreement and Plan Of Merger and
Reorganization is fair, from a financial point of view, to CIDN'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 for estate, corporate and other purposes.
In forming our opinion, we have, among other things:
(1) Reviewed the July 3, 1996 draft of the proposed Agreement and Plan
Of Merger and Reorganization between Robotic Vision Systems, Inc. and
Computer Identics Corporation;
(2) Reviewed share price and trading volumes for CIDN's shares from
May 12, 1995 through July 10, 1996;
(3) Reviewed with management CIDN's operating budgets for the balance
of the fiscal year ending December 31, 1996 and fiscal year ending December
31, 1997;
(4) Reviewed CIDN's Forms 10-K, as filed with the SEC, for fiscal
years 1993, 1994 and 1995;
(5) Reviewed CIDN's consecutive Forms 10-Q, as filed with the SEC, for
the quarterly periods ending March 31, 1993 through March 31, 1996;
(6) Reviewed with management of CIDN its operations, financial
condition and future prospectus;
(7) Visited CIDN's Canton, Massachusetts facility;
(8) Reviewed share price and trading volume for RVSI's shares from May
12, 1995 through July 10, 1996;
(9) Reviewed RVSI's Forms 10-K, as filed with the SEC, for the fiscal
years ended September 30, 1993 and September 30, 1995 and Form 10-K/A for
the fiscal year ended September 30, 1994;
(10) Reviewed RVSI's Forms 10-Q/A/2, as filed with the SEC, for the
quarterly periods ending March 31, 1993 and June 30, 1993, and Forms 10-Q
as filed for the quarterly periods ending December 31, 1993, March 31,
1994, June 30, 1994, December 31, 1994, March 31, 1995, June 30, 1995,
December 31, 1995, and March 31, 1996;
(11) Reviewed with management of RVSI its operations, financial
condition and future prospects;
<PAGE> 187
(12) Reviewed with management RVSI's operating budgets for the balance
of the fiscal year ending September 30, 1996 and fiscal year 1997;
(13) Visited RVSI's Hauppauge, New York facility; and
(14) 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 CIDN 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 CIDN or RVSI.
Based on the foregoing, it is our opinion as investment bankers that as of
this date the Exchange Ratio is fair, from a financial point of view, to
Computer Identics Corporation's shareholders.
This letter is solely for the information of Computer Identics
Corporation's 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
2
<PAGE> 188
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
[ALTERNATE COVER PAGE]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY , 1996
SHARES
ROBOTIC VISION SYSTEMS, INC.
COMMON STOCK
------------------------
This Prospectus related 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 Board of Directors of Computer
Identics Corporation, a Massachusetts corporation ("CI"), in connection with the
merger (the "Merger") of a wholly-owned subsidiary of RVSI with and into CI
which Merger was consummated on August , 1996. As a result of the Merger and
the transactions contemplated thereby, CI 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
representation other than those contained in this Prospectus, and if given or
made, such information or representation should not be relied upon as having
been authorized. This Prospectus does not constitute an offer to sell, or a
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 , 1996 was $ per share.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 189
[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>
OWNERSHIP OF
SHARES OF
NUMBER OF RVSI COMMON
SHARES OF SHARES OF STOCK
RVSI COMMON RVSI COMMON AFTER GIVING
NAME OF RELATIONSHIP STOCK OWNED STOCK EFFECT TO
SELLING WITH ON THE DATE OFFERED FOR PROPOSED
STOCKHOLDER RVSI HEREOF SALE SALE
- ---------------------------------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
0
0
0
0
0
0
0
-
----------- -----------
0
========= =========== =========
</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> 190
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) 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 Agreement and Plan of Merger and Reorganization, dated as of
July 23, 1996, by and among
</TABLE>
II-1
<PAGE> 191
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
Registrant, RVSI Third Acquisition Corp. and Computer Identics
Corporation (included as Exhibit A to the Proxy Statement/
Prospectus which forms a part of the Registration Statement (the
"Proxy Statement"))
3(a)* Registrant's Restated Certificate of Incorporation
3(b) Registrant's By-Laws, as amended(2)
4(a) Stock and Warrant Purchase Agreement by and between Registrant and
General Motors Corporation dated as of December 12, 1984(3)
4(b) Stock Purchase Warrant expiring December 12, 1989 issued to General
Motors Corporation(3)
4(c) Form of warrant expiring December 14, 1988 (Exhibit 4(f))(4)
4(d) Amendment to Warrant issued to General Motors (Exhibit 4(d))(5)
5.1* Opinion of Parker Duryee Rosoff & Haft
10(a) Research and Development Master Agreement by and between Registrant
and General Motors Corporation dated as of December 12, 1984(3)
10(b) Patent License and Technology Agreement by and between Registrant
and General Motors Corporation dated as of December 12, 1984(3)
10(c) License Agreement by and between Registrant and Med-Bed
Technologies, Inc. dated as of January 24, 1984(3)
10(d) Employment Agreement, dated December 11, 1984 between Registrant and
Pat V. Costa(3)
10(e) Letter of Agreement dated December 21, 1984 between Registrant and
Howard Stern (Exhibit 10(f))(6)
10(f) Letter of Agreement dated July 14, 1983 between Registrant and
Robert H. Walker (Exhibit 10(g))(3)
10(g) 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(h) Mortgage between Registrant as Mortgagee and Earl H. Rideout and
Catherine Rideout as Mortgagors(5)
10(i) Loan Agreement dated September 13, 1989 between Registrant and
General Motors Corporation(5)
10(j) Asset Purchase Agreement dated as of September 30, 1990 between
Registrant and Cybo Systems, Inc.(8)
11 Statement regarding computation of per share earnings
</TABLE>
II-2
<PAGE> 192
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
22* Subsidiaries of Registrant
23.1* Consent of Deloitte & Touche LLP
23.2* Consent of Arthur Andersen & Co. LLP
23.3* Consent of Parker Duryee Rosoff & Haft (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature page of Part II of this
Registration Statement)
</TABLE>
- -----------------
* Filed with Amendment No. 1 to 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.
(II) Computer Identics Corporation
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of July 23, 1996, between
Registrant and Computer Identics Corporation ("CI") (included as
Exhibit A to the Proxy Statement).
3.1 Restated Articles of Organization effective December 31, 1984 and
Amendments thereto effective June 1, 1987 and June 12, 1996.
3.2 By-laws of CI (filed as Exhibit 3.4 to Registration Statement No.
2-85807, and incorporated herein by reference).
4.1 Copy of Common Stock certificate (filed as Exhibit 4.3 to
Registration Statement No. 2-85807, and incorporated herein by
reference).
10.1 Lease dated August 9, 1991 by and between CI and ARW #1
Corporation (filed as Exhibit 10.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, and incorporated
herein by reference).
10.2 Exchange Agreement dated September 25, 1980 by and between CI and
The First National Bank of Boston (filed as Exhibit 10.7 to
Registration Statement No. 2-85807, and incorporated herein by
reference).
10.3 Agreement dated November 30, 1990 with Hutton/PRC Technology
Partners 1 (filed as Exhibit 10.5 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1990, and incorporated
herein by reference).
10.4 Shareholder Agreement dated December 5, 1984, with N.V. Bekaert,
S.A. (filed as Exhibit 10.6 to CI's Annual Report on Form 10-K for
the year ended December 31, 1990, and incorporated herein by
reference).
10.5 Stock Option Agreement dated December 23, 1986 by and between CI and
N.V. Bekaert S.A. (filed as Exhibit 2.2 to CI's Current Report on
Form 8-K dated December 24, 1986, and incorporated herein by
reference).
10.6 Amendment and Stock Purchase Agreement dated May 30, 1986 between CI
and N.V. Bekaert S.A. (filed as Exhibit 2.3 to CI's Current Report
on Form 8-K dated December 24, 1986, and incorporated herein by
reference).
10.7 Amendment No. 2 to Shareholder Agreement dated December 23, 1986 by
and between CI and N.V. Bekaert S.A. (filed as Exhibit 2.4 to CI's
Current Report on Form 8-K dated December 24, 1984, and incorporated
herein by reference).
10.8 Stock Option Agreement dated December 23, 1986 by and between CI and
The Profit Sharing Plan of Eberstadt Fleming, Inc., Equity-Venture
Associates and Eagle Management Company (filed as Exhibit 2.6 to
CI's Current Report on Form 8-K dated December 24, 1986, and
incorporated herein by reference).
10.9 Amendment No. 1 to Stock Option Agreement dated March 12, 1987 by
and between CI and The Profit Sharing Plan of Eberstadt Fleming,
Inc., Equity-Venture Associates and Eagle Management Company (filed
as Exhibit 5 to Form 12(d)(1) filed by Eberstadt Fleming, Inc. on
March 20, 1987, and incorporated herein by reference).
10.10 Amendment No. 3 to Shareholder Agreement dated January 9, 1987 by
and between CI and N.V. Bekaert S.A. (filed as Exhibit 4 to Form
13(d)(1) filed by N.V. Bekaert S.A. on January 14, 1987 (SEC File
No. S-34008), and incorporated herein by reference).
10.11 Amendment No. 4 to Shareholder Agreement dated March 12, 1987 by and
between CI and N.V. Bekaert S.A. (filed as Exhibit 5 to Form
13(d)(1) by N.V. Bekaert S.A. on March 13, 1987, and incorporated
herein by reference).
10.12 Amendment No. 1 to Stock Option Agreement dated March 13, 1987 by
and between CI and N.V. Bekaert S.A. (filed as Exhibit AA to Form
13(d)(1) filed by N.V. Bekaert S.A. on March 13, 1987, and
incorporated herein by reference).
10.13 Loan Agreement and Stock Option Agreement dated March 23, 1987 by
and between CI and R.J. Hirshman, W.P. Hirshman and Fairfield Lease
Corporation Profit Sharing Trust (filed as Exhibit 10.31 to CI's
Annual Report on Form 10-K for the year ended December 31, 1986, and
incorporated herein by reference).
10.14 Loan Agreement and Stock Option Agreement dated November 19, 1987,
by and between CI and C.O. Henriksson, T. Kohn, C.W. Wilcox
(filed as Exhibit 10.30 to CI's Annual Report on Form 10-K for the
year ended December 31, 1987, and incorporated herein by reference).
10.15 Offer to Convert Notes dated December 1, 1987, by CI to the holders
of Subordinated Notes (filed as Exhibit 10.31 to CI's Annual
Report on Form 10-K for the year ended December 31, 1987, and
incorporated herein by reference).
10.16 Employment Agreement dated December 30, 1988, between CI and Frank
J. Wezniak (filed as Exhibit 10.25 to CI's Annual Report on
Form 10-K for the year ended December 31, 1989, and incorporated
herein by reference).
10.17 CI's 1987 incentive Stock Option Plan, as amended (filed as Exhibit
1 to CI's Proxy Statement for the Annual Meeting of Stockholders
held on May 16, 1989, and incorporated herein by reference).
10.18 Second Stock Purchase Agreement and Amendment No. 5 to Shareholder
Agreement dated November 16, 1987, by and between CI and N.V.
Bekaert S.A. (filed as Exhibit 10.36 to CI's Annual Report on Form
10-K for the year ended December 31, 1987, and incorporated herein
by reference).
10.19 Restricted Stock Plan for Non-Employee Directors (filed as Exhibit
10.21 to CI's Annual Report on Form 10-K for the year ended December
31, 1990, and incorporated herein by reference).
10.20 Separation and Transition Agreement dated as of April 2, 1993
between CI and Frank J. Wezniak (filed as Exhibit 19.1 to CI's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993
and incorporated herein by reference).
10.21 Employment Agreement dated as of April 6, 1993 between CI and
Richard C. Close (filed as Exhibit 19.2 to CI's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993 and
incorporated herein by reference).
10.22 Employment Agreement dated as of May 26, 1993 between CI and John C.
Shoemaker (filed as Exhibit 19.3 to CI's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993 and incorporated herein by
reference).
10.23 CI's 1995 Stock Incentive Plan (filed as Exhibit 1 to CI's
Proxy Statement for the Annual Meeting of Stockholders held on May
18, 1993, and incorporated herein by reference).
10.24 Employment Agreement dated as of May 10, 1994, between CI and
Jeffrey A. Weber (filed as Exhibit 19.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994 and
incorporated herein by reference).
10.25 CI's 1994 Restricted Stock Plan for Nonemployee Directors (filed
as Exhibit I to CI's Proxy Statement for Special Meeting in
lieu of Annual Meeting for Stockholders held on May 10, 1994 and
incorporated herein by reference).
11 Statement regarding computation of per share earnings. (See footnote
1 to Notes to Audited and Unaudited Consolidated Financial
Statements of CI).
21.1 Subsidiaries of Computer Identics Corporation (filed as Exhibit 21.1
to CI's Annual Report on Form 10-K for the year ended December 31,
1995).
23.1* Consent of Ernst & Young LLP.
23.2* Consent of Deloitte & Touche LLP (included as part of Exhibit 23.1
for RVSI).
23.3* Consent of Fechter, Detwiler & Co., Inc.
23.4* Consent of Brown, Rudnick, Freed & Gesmer.
99.1 Form of Proxy to be used by CI.
</TABLE>
- -----------------
* Filed with Amendment No. 1 to Registration Statement.
II-3
<PAGE> 193
(b) Financial Statement Schedules
(1) Robotic Vision Systems, Inc.
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.
(2) Computer Identics Corporation
The following Financial Statement Schedule for the years ended
December 31, 1995, 1994 and 1993 is included in this Registration Statement:
(i) Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable
or the required information is shown in the Consolidated Financial Statements of
CI or the Notes thereto.
(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-4
<PAGE> 194
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement or amendment thereto to be signed
on its behalf by the undersigned, thereunto duly authorized, in the Village of
Hauppauge, State of New York, on the 30th day of July, 1996.
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 or amendment thereto has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Chairman of the Board
President and
/s/ Pat V. Costa Director (Principal
- --------------------------- Executive Officer) July 30, 1996
Pat V. Costa
Executive Vice President,
Secretary/Treasurer and
Director (Principal
Financial Officer and
/s/ Robert H. Walker Principal Accounting
- --------------------------- Officer) July 30, 1996
Robert H. Walker
</TABLE>
<PAGE> 195
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Howard Stern Senior Vice President
- -------------------------- and Director July 30, 1996
Howard Stern
- -------------------------- Director , 1996
Frank A. DiPietro
- -------------------------- Director , 1996
Donald F. Domnick
/s/ Jay M. Haft
- -------------------------- Director July 30, 1996
Jay M. Haft
- -------------------------- Director , 1996
Donald J. Kramer
/s/ Mark J. Lerner
- -------------------------- Director July 30, 1996
Mark J. Lerner
</TABLE>
Pat V. Costa, pursuant to the 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.
Dated: July 30, 1996 /s/ Pat V. Costa
------------------------------
Pat V. Costa
<PAGE> 196
EXHIBIT INDEX
-------------
(I) Robotic Vision Systems, Inc.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
2 Agreement and Plan of Merger and Reorganization, dated as of
July 23, 1996, by and among Registrant, RVSI Third Acquisition
Corp. and Computer Identics Corporation (included as Exhibit A to
the Proxy Statement/Prospectus which forms a part of the
Registration Statement (the "Proxy Statement"))
3(a)* Registrant's Restated Certificate of Incorporation
3(b) Registrant's By-Laws, as amended(2)
4(a) Stock and Warrant Purchase Agreement by and between Registrant and
General Motors Corporation dated as of December 12, 1984(3)
4(b) Stock Purchase Warrant expiring December 12, 1989 issued to General
Motors Corporation(3)
4(c) Form of warrant expiring December 14, 1988 (Exhibit 4(f))(4)
4(d) Amendment to Warrant issued to General Motors (Exhibit 4(d))(5)
5.1* Opinion of Parker Duryee Rosoff & Haft
10(a) Research and Development Master Agreement by and between Registrant
and General Motors Corporation dated as of December 12, 1984(3)
10(b) Patent License and Technology Agreement by and between Registrant
and General Motors Corporation dated as of December 12, 1984(3)
10(c) License Agreement by and between Registrant and Med-Bed
Technologies, Inc. dated as of January 24, 1984(3)
10(d) Employment Agreement, dated December 11, 1984 between Registrant and
Pat V. Costa(3)
10(e) Letter of Agreement dated December 21, 1984 between Registrant and
Howard Stern (Exhibit 10(f))(6)
10(f) Letter of Agreement dated July 14, 1983 between Registrant and
Robert H. Walker (Exhibit 10(g))(3)
10(g) 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(h) Mortgage between Registrant as Mortgagee and Earl H. Rideout and
Catherine Rideout as Mortgagors(5)
10(i) Loan Agreement dated September 13, 1989 between Registrant and
General Motors Corporation(5)
10(j) Asset Purchase Agreement dated as of September 30, 1990 between
Registrant and Cybo Systems, Inc.(8)
11 Statement regarding computation of per share earnings
</TABLE>
<PAGE> 197
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
22* Subsidiaries of Registrant
23.1* Consent of Deloitte & Touche LLP
23.2* Consent of Arthur Andersen LLP
23.3* Consent of Parker Duryee Rosoff & Haft (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature page of Part II of this
Registration Statement)
</TABLE>
- -----------------
* Filed with Amendment No. 1 to 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.
<PAGE> 198
(II) Computer Identics Corporation
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of July 23, 1996, between
Registrant and Computer Identics Corporation ("CI") (included as
Exhibit A to the Proxy Statement).
3.1 Restated Articles of Organization effective December 31, 1984 and
Amendments thereto effective June 1, 1987 and June 12, 1996.
3.2 By-laws of CI (filed as Exhibit 3.4 to Registration Statement No.
2-85807, and incorporated herein by reference).
4.1 Copy of Common Stock certificate (filed as Exhibit 4.3 to
Registration Statement No. 2-85807, and incorporated herein by
reference).
10.1 Lease dated August 9, 1991 by and between CI and ARW #1
Corporation (filed as Exhibit 10.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, and incorporated
herein by reference).
10.2 Exchange Agreement dated September 25, 1980 by and between CI and
The First National Bank of Boston (filed as Exhibit 10.7 to
Registration Statement No. 2-85807, and incorporated herein by
reference).
10.3 Agreement dated November 30, 1990 with Hutton/PRC Technology
Partners 1 (filed as Exhibit 10.5 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1990, and incorporated
herein by reference).
10.4 Shareholder Agreement dated December 5, 1984, with N.V. Bekaert,
S.A. (filed as Exhibit 10.6 to CI's Annual Report on Form 10-K for
the year ended December 31, 1990, and incorporated herein by
reference).
10.5 Stock Option Agreement dated December 23, 1986 by and between CI and
N.V. Bekaert S.A. (filed as Exhibit 2.2 to CI's Current Report on
Form 8-K dated December 24, 1986, and incorporated herein by
reference).
10.6 Amendment and Stock Purchase Agreement dated May 30, 1986 between CI
and N.V. Bekaert S.A. (filed as Exhibit 2.3 to CI's Current Report
on Form 8-K dated December 24, 1986, and incorporated herein by
reference).
10.7 Amendment No. 2 to Shareholder Agreement dated December 23, 1986 by
and between CI and N.V. Bekaert S.A. (filed as Exhibit 2.4 to CI's
Current Report on Form 8-K dated December 24, 1984, and incorporated
herein by reference).
10.8 Stock Option Agreement dated December 23, 1986 by and between CI and
The Profit Sharing Plan of Eberstadt Fleming, Inc., Equity-Venture
Associates and Eagle Management Company (filed as Exhibit 2.6 to
CI's Current Report on Form 8-K dated December 24, 1986, and
incorporated herein by reference).
10.9 Amendment No. 1 to Stock Option Agreement dated March 12, 1987 by
and between CI and The Profit Sharing Plan of Eberstadt Fleming,
Inc., Equity-Venture Associates and Eagle Management Company (filed
as Exhibit 5 to Form 12(d)(1) filed by Eberstadt Fleming, Inc. on
March 20, 1987, and incorporated herein by reference).
10.10 Amendment No. 3 to Shareholder Agreement dated January 9, 1987 by
and between CI and N.V. Bekaert S.A. (filed as Exhibit 4 to Form
13(d)(1) filed by N.V. Bekaert S.A. on January 14, 1987 (SEC File
No. S-34008), and incorporated herein by reference).
10.11 Amendment No. 4 to Shareholder Agreement dated March 12, 1987 by and
between CI and N.V. Bekaert S.A. (filed as Exhibit 5 to Form
13(d)(1) by N.V. Bekaert S.A. on March 13, 1987, and incorporated
herein by reference).
</TABLE>
<PAGE> 199
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.12 Amendment No. 1 to Stock Option Agreement dated March 13, 1987 by
and between CI and N.V. Bekaert S.A. (filed as Exhibit AA to Form
13(d)(1) filed by N.V. Bekaert S.A. on March 13, 1987, and
incorporated herein by reference).
10.13 Loan Agreement and Stock Option Agreement dated March 23, 1987 by
and between CI and R.J. Hirshman, W.P. Hirshman and Fairfield Lease
Corporation Profit Sharing Trust (filed as Exhibit 10.31 to CI's
Annual Report on Form 10-K for the year ended December 31, 1986, and
incorporated herein by reference).
10.14 Loan Agreement and Stock Option Agreement dated November 19, 1987,
by and between CI and C.O. Henriksson, T. Kohn, C.W. Wilcox
(filed as Exhibit 10.30 to CI's Annual Report on Form 10-K for the
year ended December 31, 1987, and incorporated herein by reference).
10.15 Offer to Convert Notes dated December 1, 1987, by CI to the holders
of Subordinated Notes (filed as Exhibit 10.31 to CI's Annual
Report on Form 10-K for the year ended December 31, 1987, and
incorporated herein by reference).
10.16 Employment Agreement dated December 30, 1988, between CI and Frank
J. Wezniak (filed as Exhibit 10.25 to CI's Annual Report on
Form 10-K for the year ended December 31, 1989, and incorporated
herein by reference).*
10.17 CI's 1987 incentive Stock Option Plan, as amended (filed as Exhibit
1 to CI's Proxy Statement for the Annual Meeting of Stockholders
held on May 16, 1989, and incorporated herein by reference).
10.18 Second Stock Purchase Agreement and Amendment No. 5 to Shareholder
Agreement dated November 16, 1987, by and between CI and N.V.
Bekaert S.A. (filed as Exhibit 10.36 to CI's Annual Report on Form
10-K for the year ended December 31, 1987, and incorporated herein
by reference).
10.19 Restricted Stock Plan for Non-Employee Directors (filed as Exhibit
10.21 to CI's Annual Report on Form 10-K for the year ended December
31, 1990, and incorporated herein by reference).*
10.20 Separation and Transition Agreement dated as of April 2, 1993
between CI and Frank J. Wezniak (filed as Exhibit 19.1 to CI's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993
and incorporated herein by reference).*
10.21 Employment Agreement dated as of April 6, 1993 between CI and
Richard C. Close (filed as Exhibit 19.2 to CI's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993 and
incorporated herein by reference).*
10.22 Employment Agreement dated as of May 26, 1993 between CI and John C.
Shoemaker (filed as Exhibit 19.3 to CI's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993 and incorporated herein by
reference).*
10.23 CI's 1995 Stock Incentive Plan (filed as Exhibit 1 to CI's
Proxy Statement for the Annual Meeting of Stockholders held on May
18, 1993, and incorporated herein by reference).*
10.24 Employment Agreement dated as of May 10, 1994, between CI and
Jeffrey A. Weber (filed as Exhibit 19.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994 and
incorporated herein by reference).*
10.25 CI's 1994 Restricted Stock Plan for Nonemployee Directors (filed
as Exhibit I to CI's Proxy Statement for Special Meeting in
lieu of Annual Meeting for Stockholders held on May 10, 1994 and
incorporated herein by reference).*
11 Statement regarding computation of per share earnings. (See footnote
1 to Notes to Audited and Unaudited Consolidated Financial
Statements of CI).
21.1 Subsidiaries of Computer Identics Corporation (filed as Exhibit 21.1
to CI's Annual Report on Form 10-K for the year ended December 31,
1995).
23.1* Consent of Ernst & Young LLP.
23.2* Consent of Deloitte & Touche LLP (included as part of Exhibit 23.1
for RVSI).
23.3 Consent of Fechter, Detwiler & Co., Inc.
23.4* Consent of Brown, Rudnick, Freed & Gesmer.
99.1 Form of Proxy to be used by CI.
</TABLE>
- ----------
* Filed with Amendment No. 1 to Registration Statement.
<PAGE> 1
EXHIBIT 3(a)
RESTATED CERTIFICATE OF INCORPORATION
OF
ROBOTIC VISION SYSTEMS, INC.
Under Section 245 of the
Delaware General Corporation Law
We, the undersigned, President and Secretary, respectively, of ROBOTIC
VISION SYSTEMS, INC., a corporation existing under the laws of the State of
Delaware, DO HEREBY CERTIFY as follows:
FIRST: That the name of the corporation is ROBOTIC VISION SYSTEMS, INC.
The corporation's original name, SOLID PHOTOGRAPHY, INC. was changed to ROBOTIC
VISION SYSTEMS, INC. by amendment to the Certificate of Incorporation of the
corporation filed with the Secretary of State of the State of Delaware on July
31, 1981.
SECOND: That the Certificate of Incorporation of the corporation was
filed with the Secretary of State of the State of Delaware on December 7, 1977.
THIRD: That this Restated Certificate of Incorporation only restates
and integrates, and does not further amend the provisions of the corporation's
certificate of incorporation as heretofore amended and supplemented, and has
been duly adopted by the Board of Directors of the corporation. There is no
discrepancy between the provisions of this Restated Certificate of Incorporation
and those of the original Certificate of Incorporation, as heretofore amended
and supplemented.
<PAGE> 2
F0URTH: That the text of the Certificate of Incorporation of Robotic
Vision Systems, Inc., as amended, is hereby restated to read in full, as
follows:
FIRST: The name of the corporation is
ROBOTIC VISION SYSTEMS, INC.
SECOND: The registered office of the corporation is to be located at
c/o United Corporate Services, Inc., 26 The Green, in the City of Dover, County
of Kent, State of Delaware. The name of its registered agent at that address is
United Corporate Services, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH: The corporation shall be authorized to issue thirty million
(30,000,000) shares with a par value of one cent ($0.01) per share.
FIFTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation, and for further
definition, limitation and regulation of the powers of the corporation and of
its directors and stockholders:
(1) The number of directors of the corporation shall be such as from
time to time shall be fixed by, or in the manner provided in, the By-laws.
Election of directors need not be by ballot unless the By-laws so provide.
(2) The Board of Directors shall have power, without the assent or vote
of the stockholders:
2
<PAGE> 3
(a) To make, alter, amend, change, add to or repeal the
By-laws of the corporation; to fix and vary the amount to be reserved for any
proper purpose; to authorize and cause to be executed mortgages and liens upon
all or any part of the property of the corporation; to determine the use and
disposition of any surplus or net profits; and to fix the times for the
declaration and payment of dividends.
(b) To determine from time to time whether, and to what
extent, and at what times and places, and under what conditions the accounts and
books of the corporation (other than the stock ledger) or any of them, shall be
open to the inspection of the stockholders.
(3) The directors in their discretion may submit any contract or act
for approval or ratification at any annual meeting of the stockholders or at any
meeting of the stockholders called for the purpose of considering any such act
or contract, and any contract or act that shall be approved or be ratified by
the vote of the holders of a majority of the stock of the corporation which is
represented in person or by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of stockholders be there represented in person or
by proxy) shall be valid and as binding upon the corporation and upon all the
stockholders as though it had been approved or ratified by every stockholder of
the corporation, whether or not the contract or act would otherwise be open to
legal attack because of directors' interest, or for any other reason.
(4) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the corporation; subject, nevertheless, to the provisions of the
statutes of Delaware, of this certificate, and to any By-laws from time to time
made by the stockholders; provided, however, that no By-laws so made shall
3
<PAGE> 4
invalidate any prior act of the directors which would have been valid if such
by-law had not been made.
SIXTH: The corporation shall, to the full extent permitted by Section
145 of the Delaware General Corporation Law, as amended, from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as may be, agree to any compromise or arrangement and to any
reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of
4
<PAGE> 5
Incorporation in the manner now or hereafter prescribed by law, and all rights
and powers conferred herein on stockholders, directors and officers are subject
to this reserved power.
NINTH: No director of the corporation shall be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability: (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of the Delaware General Corporation
Law; or (iv) for any transaction from which the director derived an improper
personal benefit. Neither the amendment nor repeal of this ARTICLE NINTH, nor
the adoption of any provision of the certificate of incorporation inconsistent
with this ARTICLE NINTH, shall eliminate or reduce the effect of this Article
NINTH in respect of any matter occurring, or any cause of action, suit or claim
that but for this Article NINTH would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision.
IN WITNESS WHEREOF, we have signed this certificate and caused the
corporate seal of the corporation is to be hereunto affixed this 1st day of
November, 1995.
/s/ Pat V. Costa
------------------------
Pat V. Costa, President
ATTEST:
/s/ Robert H. Walker
- -------------------------------
Robert H. Walker, Secretary
[Seal]
5
<PAGE> 1
EXHIBIT 5.1
[Letterhead of Parker Duryee Rosoff & Haft]
July 30, 1996
Robotic Vision Systems, Inc.
425 Rabro Drive East
Hauppauge, New York 11788
Re: Registration Statement on Form S-4
Under the Securities Act of 1933
File No. 333-08663
Ladies and Gentlemen:
In our capacity as counsel to Robotic Vision Systems, Inc., a
Delaware corporation (the "Company"), we have been asked to render this opinion
in connection with a Registration Statement on Form S-4, heretofore filed by the
Company with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Registration Statement"), covering an aggregate of up to
2,354,000 shares of common stock, $.01 par value, of the Company (the "RVSI
Merger Stock") to be issued to holders of common stock, and, upon exercise, to
holders of options and a warrant to purchase shares of common stock, of Computer
Identics Corporation, a Massachusetts Corporation ("CI"), in connection with the
merger of a wholly owned subsidiary of the Company ("Subsidiary") with and into
CI (the "Merger") pursuant to the terms of that certain Agreement and Plan of
Merger and Reorganization, dated as of July 23, 1996 (the "Merger Agreement"),
by and among the Company, Subsidiary and CI.
In that connection, we have examined the Restated Certificate
of Incorporation and the By-Laws, as amended, of the Company, the Registration
Statement, the Merger Agreement, corporate proceedings of the Company relating
to the issuance of the RVSI Merger Stock, and such other instruments and
documents as we have deemed relevant under the circumstances.
In making the aforesaid examinations, we have assumed the
genuineness of all signatures and the conformity to original documents of all
copies furnished to us as original or photostatic copies. We have also assumed
that the corporate records furnished to us by the Company include all corporate
proceedings taken by the Company to date.
<PAGE> 2
Robotic Vision Systems, Inc.
July 30, 1996
Page 2
Based upon and subject to the foregoing, we are of the opinion
that:
1. The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State
of Delaware.
2. The RVSI Merger Stock has been duly and validly authorized and, when
issued as provided in the Merger Agreement, will be duly and validly
issued, fully paid and non-assessable.
We hereby consent to the use of our opinions as herein set
forth as an exhibit to the Registration Statement and to the use of our name
under the caption "Legal Matters" in the proxy statement/prospectus forming a
part of the Registration Statement.
Very truly yours,
PARKER DURYEE ROSOFF & HAFT
By: /s/ Harris S. Jaffe
------------------------
A Member of the Firm
<PAGE> 1
EXHIBIT 11
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
COMPUTATION OF PER SHARE AMOUNTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
PRIMARY:
Net income $ 8,833,000 $ 3,681,000 $ 1,161,000
Income related to the assumed purchase of U.S.
government securities (net of income taxes) -- -- 229,000
----------- ----------- -----------
Adjusted net income $ 8,833,000 $ 3,681,000 $ 1,390,000
=========== =========== ===========
Weighted average number of common shares 13,796,000 12,573,000 11,202,000
Assumed number of shares issued
from common share equivalents 2,403,000 2,020,000 2,548,000
----------- ----------- -----------
Weighted average number of common and
common equivalent shares 16,199,000 14,593,000 13,750,000
=========== =========== ===========
Net income per share:
Primary $ 0.55 $ 0.25 $ 0.10
=========== =========== ===========
FULLY DILUTED:
Net income $ 8,833,000 $ 3,681,000 $ 1,161,000
Income related to the assumed purchase of U.S.-
government securities (net of income taxes) -- -- 149,000
----------- ----------- -----------
Adjusted net income $ 8,833,000 $ 3,681,000 $ 1,310,000
=========== =========== ===========
Weighted average number of common shares 13,796,000 12,573,000 11,202,000
Assumed number of shares issued
from common share equivalents 2,776,000 2,222,000 2,548,000
----------- ----------- -----------
Weighted average number of common and
common equivalent shares 16,572,000 14,795,000 13,750,000
=========== =========== ===========
Net income per share:
Fully diluted $ 0.53 $ 0.25 $ 0.10
=========== =========== ===========
</TABLE>
NOTE: The effect of options and warrants was calculated using the modified
treasury stock method for the years ended September 30, 1994 and 1993.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-08663 of Robotic Vision Systems, Inc. on Form S-4 of our report dated
December 15, 1995 on the consolidated financial statements of Robotic Vision
Systems, Inc. and subsidiaries as of September 30, 1995 and 1994 and for each of
the three years in the period ended September 30, 1995, appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the use in this Amendment No. 1 to Registration Statement of
Robotic Vision Systems, Inc. on Form S-4 of our report dated January 28, 1994 on
the consolidated statements of operations, stockholders' equity, and cash flows
of Computer Identics Corporation and subsidiaries for the year ended December
31, 1993, 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," "Selected Historical Financial Data of CI" and
"Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Jericho, New York
July 29, 1996
<PAGE> 1
EXHIBIT 23.2
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
Boston, Massachusetts
July 29, 1996
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
--------------------------
State or
Jurisdiction of
Name of Subsidiary Incorporation
- ------------------ -------------
Acuity Imaging, Inc. Delaware
International Data Matrix, Inc. Florida
(does business under name:
I.D. Matrix)
Northeast Robotics Inc. New Hampshire
RVSI Third Acquisition Corp. Delaware
Acuity Imaging Limited United Kingdom
<PAGE> 1
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 8, 1996, with respect to the 1995 and 1994
consolidated financial statements of Computer Identics Corporation included in
the Proxy Statement of Computer Identics Corporation that is made a part of
this Registration Statement (Form S-4 No. 333-08663, Amendment No. 1) and
Prospectus of Robotic Vision Systems, Inc.
Our audits also included the financial statement schedule-Valuation and
Qualifying Accounts, for the years ended December 31, 1995 and 1994 of
Computer Identics Corporation. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Boston, Massachusetts
July 29, 1996
<PAGE> 1
EXHIBIT 23.3
[FECHTOR, DETWILER & CO., INC. LETTERHEAD]
July 29, 1996
We hereby consent to the use of our opinion dated July 12, 1996
regarding the proposed merger of Computer Identics Corporation with a
subsidiary of Robotic Vision Systems, Inc. ("RVSI") in the proxy statement for
the Special Meeting of the Stockholders incorporated in the Amendment No. 1 to
Form S-4 Registration Statement to be filed with the Securities and Exchange
Commission (the "SEC") by RVSI. We have been provided with copies of such proxy
materials to be filed with the SEC.
Fechtor, Detwiler & Co., Inc.
/s/ Andre Daniel-Dreyfus
----------------------------------
Andre Daniel-Dreyfus
Senior Vice President
<PAGE> 1
EXHIBIT 23.4
CONSENT OF BROWN, RUDNICK, FREED & GESMER, P.C.
We hereby consent to the reference to our firm whenever it appears in
this Registration Statement, including the Proxy Statement/Prospectus contained
as a part hereof, and any amendments thereto.
BROWN, RUDNICK, FREED & GESMER, P.C.
By: /s/ Steven R. London
------------------------------------
Steven R. London
a member duly authorized
July 31, 1996
<PAGE> 1
EXHIBIT 99.1
COMPUTER IDENTICS CORPORATION
The undersigned hereby appoints Richard C. Close, Jeffrey A. Weber and Steven
R. London, and each of them, acting singly, with full power of substitution,
attorneys and proxies to represent the undersigned at the Special Meeting of
Stockholders of Computer Identics Corporation, to be held on August 29, 1996,
and at any adjournment or adjournments thereof, with all power which the
undersigned would possess if personally present, and to vote all shares of
stock which the undersigned may be entitled to vote at said Special Meeting
upon the matters set forth in the Notice of and Proxy Statement for the Special
Meeting in accordance with the instructions on the reverse side and with
discretionary authority upon such other matters as may come before the Special
Meeting. All previous proxies are hereby revoked.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT WILL BE VOTED
AS DIRECTED BY THE UNDERSIGNED AND IF NO DIRECTION IS INDICATED, IT WILL BE
VOTED FOR THE PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION.
Continued, and to be signed, on reverse side.
(Please fill in the reverse side and mail in the enclosed envelope.)
<PAGE> 2
The Board of Directors recommends a vote FOR the Merger.
To approve the Agreement and Plan of Merger and Reorganization.
FOR / / AGAINST / / ABSTAIN / /
MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT
(Signatures should be the same as the name
printed hereon. Executors, administrators, trustees,
guardians, attorneys and officers of corporations
should add their titles when signing.)
Date: ___________________________________________
Signature: ______________________________________
Date: ___________________________________________
Signature: ______________________________________
