<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 19, 2000
FILE NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ROBOTIC VISION SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 11-2400145
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
5 SHAWMUT ROAD
CANTON, MASSACHUSETTS 02021
(781) 821-0830
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PAT V. COSTA
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ROBOTIC VISION SYSTEMS, INC.
5 SHAWMUT ROAD
CANTON, MASSACHUSETTS 02021
(781) 821-0830
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
IRA I. ROXLAND, ESQ. JAY L. BERNSTEIN, ESQ.
JOSEPH H. SCHMITT, ESQ. KATHLEEN L. WERNER, ESQ.
COOPERMAN LEVITT WINIKOFF LESTER & NEWMAN, P.C. CLIFFORD CHANCE ROGERS & WELLS LLP
800 THIRD AVENUE 200 PARK AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10166
TEL: (212) 688-7000 TEL: (212) 878-8000
FAX: (212) 755-2839 FAX: (212) 878-8375
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: From time to time after
the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.01 par value........................... $76,906,250 $20,303.25
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 19, 2000
PROSPECTUS
[ROBOTIC VISION SYSTEMS, INC. LOGO]
5,000,000 SHARES
ROBOTIC VISION SYSTEMS, INC.
COMMON STOCK
------------------------
We are offering 5,000,000 shares of our common stock.
Our common stock is quoted on the Nasdaq National Market under the symbol
"ROBV." On January 18, 2000, the last reported sale price on the Nasdaq National
Market was $13 13/16 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
PER SHARE TOTAL
- ----------------------------------------------------------------------------------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds, Before Expenses................................... $ $
- ----------------------------------------------------------------------------------
</TABLE>
The underwriters may also purchase up to an additional 750,000 shares from
us at the public offering price, less the underwriting discounts, within 30 days
from the date of this prospectus, to cover any over-allotments. The underwriters
expect to deliver the shares to purchasers on or about , 2000
------------------------
ING BARINGS
PRUDENTIAL VOLPE TECHNOLOGY
A UNIT OF PRUDENTIAL SECURITIES
MCDONALD INVESTMENTS INC.
, 2000
<PAGE> 3
[Artwork]
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information contained or
incorporated by reference in this prospectus. Except as otherwise indicated, all
information in this prospectus assumes no exercise of the underwriters'
over-allotment option. The discussion of our business in this prospectus
includes the operations of our subsidiaries and the operations of any companies
we acquired, unless we tell you otherwise.
THE COMPANY
Robotic Vision Systems designs, manufactures and markets machine vision,
automatic identification and related products for the semiconductor capital
equipment, electronics, automotive, aerospace, pharmaceutical and other
industries. Founded in 1976, we use advanced technology including vision-enabled
process equipment, high-performance optics, lighting and advanced hardware and
software to offer a full range of automation solutions. In 1991, we introduced
the first generation of our current principal product, the lead scanner, a
three-dimensional machine vision system which inspects the physical
characteristics of packaged semiconductors. We believe we currently have the
dominant share of lead scanners used by the semiconductor industry. More
recently, we have become a leader in designing and manufacturing products which
utilize machine vision technology to interpret one- and two-dimensional bar
codes.
We operate through two divisions -- the Semiconductor Equipment Group and
the Acuity CiMatrix Division.
- - The Semiconductor Equipment Group's primary business is the design,
manufacture and marketing of systems that inspect assembled chip packages,
transfer integrated circuits from one medium to another and attach solder
balls to ball grid array semiconductors. This group serves the semiconductor
capital equipment market.
- - The Acuity CiMatrix Division designs, manufactures and markets two primary
product lines:
-- vision systems used in the general purpose machine vision market for a
variety of industrial applications; and
-- one- and two-dimensional bar code reading systems and related products
used in the automatic identification and data collection market to track
the manufacture and distribution of industrial and consumer products.
We were pioneers in the development of machine vision and have utilized our
technology to enter the emerging market for two-dimensional bar code readers. We
developed the technology and own the patents to Data Matrix, a two-dimensional
bar code symbology which can be marked directly onto parts and components. We
placed the Data Matrix symbology into the public domain in order to encourage
the widespread adoption of this coding system and the sale of our
two-dimensional bar code readers. In addition, we design and manufacture
high-speed bar code scanning equipment for traditional one-dimensional reading
applications such as sorting devices commonly used in e-commerce infrastructure,
logistics, material handling and warehousing applications.
Our goal is to grow by continuing to work with leaders in each of our
served markets, anticipating their needs and offering them the most advanced
products and technology. To accomplish this objective, we intend to:
- - Leverage our leading position in selected semiconductor capital equipment
market niches;
- - Further develop the two-dimensional bar code market as the inventor of Data
Matrix symbology; and
- - Capitalize upon the convergence of the machine vision and bar code industries.
1
<PAGE> 5
By incorporating our expertise in machine vision with our innovations in
bar code technologies, we are uniquely positioned to offer integrated solutions
for a variety of automation needs.
We were incorporated in New York in 1976 and reincorporated in Delaware in
1977. Our executive offices are located at 5 Shawmut Road, Canton, Massachusetts
02021. Our telephone number is (781) 821-0830, and our website is located at
www.rvsi.com. The information on our website is not part of this prospectus.
RECENT DEVELOPMENTS
We define bookings during a fiscal period as incoming orders deliverable to
customers in the next twelve months less cancellations. Our bookings for the
three months ended December 31, 1999 were $55.9 million, representing an
increase of $8.3 million, or 17.4%, from $47.6 million for the quarter ended
September 30, 1999, and an increase of $24.4 million, or 77.5%, from $31.5
million for the quarter ended December 31, 1998.
On December 27, 1999, we reported that Pratt & Whitney, an engine
manufacturer, has adopted the Data Matrix two-dimensional symbology for on-parts
marking of its critical engine components and will use our MXi hand-held imager
to read those parts. Pratt & Whitney is a United Technologies Corporation
company.
On November 29, 1999, we announced that we received an order for our new
WS-1000 Wafer Inspection System. The WS-1000 is being used as a front-end
inspection system in the manufacturing of flip chips, integrated circuits used
in wireless communication products. The system has since been installed by a
major U.S. manufacturer of integrated circuits for computer and communications
products. We believe that our WS-1000 is the only product currently capable of
providing semiconductor companies the large number of inspections they desire at
volume manufacturing levels.
In December 1998, we introduced the MXi, a hand-held imager that resulted
from a joint development and marketing arrangement with Polaroid Corporation. In
November 1999, we acquired Polaroid's interest in the MXi, including all
relevant intellectual property rights, for $2.0 million. We will pay Polaroid a
royalty based on net sales of the MXi.
THE OFFERING
Common stock offered................ 5,000,000 shares
Common stock to be outstanding after
this offering....................... 32,438,304 shares(1)
Use of proceeds..................... To repay approximately $35.3 million of
remaining outstanding indebtedness
under our bank credit facility, to fund
product development and capital
expenditures and to provide working
capital.
- ---------------
(1) Does not include, as of December 31, 1999, (a) 4,082,393 shares of common
stock issuable upon exercise of stock options outstanding with a weighted
average exercise price of $5.21 per share, (b) 1,739,431 shares of common
stock reserved for future issuance under our stock option plans, (c)
2,777,778 shares of common stock issuable upon exercise of outstanding
prepaid warrants for which we have already received proceeds based on an
average exercise price of $3.96 per share, (d) 5,820,055 shares of common
stock issuable upon exercise of outstanding warrants, with a weighted
average exercise price of $4.32 per share and (e) 250,000 shares of common
stock issuable upon the conversion of a subordinated convertible note.
2
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................... $128,230 $169,007 $169,342 $153,975 $145,415
Income (loss) before income taxes(1)....................... (9,258) (40,505) 1,393 (319) 12,092
Provision (benefit) for income taxes....................... -- -- 745 (1,154) (56)
Net income (loss).......................................... (9,258) (40,505) 648 835 12,148
Premium on prepaid warrants................................ 463 -- -- -- --
Net income (loss) attributable to common stockholders...... $ (9,721) $(40,505) $ 648 $ 835 $ 12,148
Net income (loss) per share
Basic.................................................... $ (0.38) $ (1.65) $ 0.03 $ 0.04 $ 0.65
Diluted.................................................. $ (0.38) $ (1.65) $ 0.03 $ 0.04 $ 0.58
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
SEPT. 30, JUNE 30, MAR. 31, DEC. 31, SEPT. 30, JUNE 30, MAR. 31, DEC. 31,
1999 1999 1999 1998 1998 1998 1998 1997
--------- -------- -------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $40,271 $31,260 $27,294 $29,405 $ 28,402 $ 39,090 $47,727 $53,788
Income (loss) before income taxes(2).... 287 (3,161) (4,112) (2,272) (23,051) (15,433) (5,672) 3,651
Provision (benefit) for income taxes.... -- -- -- -- (108) -- -- 108
Net income (loss)....................... 287 (3,161) (4,112) (2,272) (22,943) (15,433) (5,672) 3,543
Premium on prepaid warrants............. 193 193 77 -- -- -- -- --
Net income (loss) attributable to common
stockholders.......................... $ 94 $(3,354) $(4,189) $(2,272) $(22,943) $(15,433) $(5,672) $ 3,543
Net income (loss) per share
Basic................................. $ 0.00 $ (0.13) $ (0.17) $ (0.09) $ (0.92) $ (0.63) $ (0.23) $ 0.14
Diluted............................... $ 0.00 $ (0.13) $ (0.17) $ (0.09) $ (0.92) $ (0.63) $ (0.23) $ 0.14
OTHER DATA:
Bookings................................ $47,647 $36,740 $30,852 $31,548 $ 20,473 $ 23,690 $44,527 $53,788
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1999
-------------------------
AS
ACTUAL ADJUSTED(3)
-------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 4,385 $ 68,649
Total assets................................................ 123,201 147,140
Long-term debt and other.................................... 2,855 2,855
Notes payable and current portion of long-term debt......... 35,627 302
Total liabilities........................................... 76,106 35,781
Prepaid warrants............................................ 9,105 9,105
Stockholders' equity........................................ 37,990 102,254
</TABLE>
- ---------------
(1) Net of inventory provisions, merger expenses and severance and other charges
of $255,000, $23,800,000, $1,504,000, $5,713,000 and $1,305,000 in fiscal
years 1999, 1998, 1997, 1996 and 1995.
(2) Net of inventory provisions, merger expenses and severance and other charges
of $255,000, $13,073,000, $6,920,000, $3,184,000 and $623,000 for the three
months ended June 30, 1999, September 30, 1998, June 30, 1998, March 31,
1998 and December 31, 1997.
(3) Adjusted to reflect the sale of the 5,000,000 shares of common stock offered
by us in this offering at an assumed public offering price of $13 13/16 per
share which was the last reported sales price of our common stock as of
January 18, 2000 and after deducting the underwriting discounts and
estimated offering expenses and giving effect to the application of the net
proceeds. See "Use of Proceeds" and "Capitalization."
3
<PAGE> 7
RISK FACTORS
Prospective investors should consider carefully the risk factors set forth
below as well as the other information contained or incorporated by reference in
this prospectus prior to making an investment in our common stock.
OUR PRINCIPAL MARKET IS THE HIGHLY CYCLICAL SEMICONDUCTOR INDUSTRY WHICH CAUSES
A CYCLICAL IMPACT ON OUR FINANCIAL RESULTS
We sell capital equipment to companies that design, manufacture, assemble
and test semiconductor devices. The semiconductor industry is highly cyclical,
causing in turn a cyclical impact on our financial results. Any significant
downturn in the markets for our customers' semiconductor devices or in general
economic conditions would likely result in a reduction in demand for our
products and would hurt our business.
Most recently, our revenue and operating results declined in fiscal years
1998 and 1999 as a result of a sudden and severe downturn in the semiconductor
industry precipitated by a recession in Asian countries. Downturns in the
semiconductor capital equipment industry have been characterized by diminished
product demand, excess production capacity and accelerated erosion of selling
prices. In the past, we have experienced delays in commitments, delays in
collecting accounts receivable and significant declines in demand for our
product during these downturns, and we cannot be certain that we will be able to
maintain or exceed our current level of sales. Additionally, as a capital
equipment provider, our revenues are driven by the spending patterns of our
customers who often delay expenditures or cancel orders in reaction to
variations in their businesses. Because a high proportion of our costs are
fixed, we are limited in our ability to reduce expenses quickly in response to
revenue short-falls. In a contraction, we may not be able to reduce our
significant fixed costs, such as continued investment in research and
development and capital equipment requirements.
During a downturn, we may experience delays in collecting receivables,
which may impose constraints on our working capital. In addition, a downturn in
industry demand for our products that we are unable to anticipate may place us
in a position of excessive inventories, which would further constrain cash flow.
By way of illustration, we were compelled to reduce our inventory carrying value
by approximately $16.6 million for the fiscal year ended September 30, 1998 as a
consequence of an industry downturn which unexpectedly began in March 1998.
OUR RETURN TO SUSTAINED PROFITABILITY CANNOT BE ASSURED
We incurred net losses of $9.7 million and $40.5 million for the fiscal
years ended September 30, 1999 and 1998, respectively, primarily attributable to
the worldwide downturn in demand for semiconductor capital equipment which began
in March 1998 and continued through the first half of calendar year 1999. While
we reported net income of $287,000 on revenues of $40.3 million for the three
month period ended September 30, 1999, our return to sustained profitable
operations will depend upon our ability to maintain this quarterly revenue level
or make further reductions in our costs. We can give no assurance that we will
return to sustained profitability.
THE MARKET FOR SEMICONDUCTOR CAPITAL EQUIPMENT IS HIGHLY CONCENTRATED
The semiconductor industry is highly concentrated, and a small number of
semiconductor device manufacturers and contract assemblers account for a
substantial portion of purchases of semiconductor capital equipment. Sales to
our ten largest customers accounted for 33.3% of total revenues in fiscal year
1999 and 41.1% in fiscal year 1998. No single customer accounted for more than
10% of revenues in fiscal year 1999. However, Intel Corporation accounted for
20.0% of our revenues in
4
<PAGE> 8
fiscal year 1998. A loss of or decrease in purchases by one of these customers
could materially and adversely affect our sales.
ECONOMIC DIFFICULTIES ENCOUNTERED BY CERTAIN OF OUR FOREIGN CUSTOMERS HAVE
RESULTED IN ORDER CANCELLATIONS AND REDUCED COLLECTIONS OF OUTSTANDING ACCOUNTS
RECEIVABLE
International sales, primarily to Asia and Western Europe, accounted for
approximately 56% and 64% of our revenues for the fiscal years ended September
30, 1999 and 1998, respectively. In particular, sales to Taiwan, Korea and other
Asian countries accounted for approximately 41% and 54% of our revenues for the
fiscal years ended September 30, 1999 and 1998, respectively. While our sales in
Asia are generally denominated in U.S. dollars, our international business may
be affected by changes in demand resulting from fluctuations in currency
exchange rates, trade restrictions, duties and other political and economic
factors. The recent Asian economic crisis led to significant order cancellations
from customers in Taiwan, Korea, Malaysia and the Philippines as currency
devaluations prevented these customers from acquiring U.S. dollars at favorable
exchange rates, thereby adversely affecting both our revenue levels and
profitability.
DEVELOPMENT OF OUR PRODUCTS REQUIRES SIGNIFICANT LEAD TIME AND WE MAY FAIL TO
CORRECTLY ANTICIPATE THE TECHNICAL NEEDS OF OUR MARKETS
We must anticipate industry trends and develop products in advance of the
commercialization of semiconductor capital equipment. We are required to make
capital investments to develop new products before they are commercially
accepted by our customers. In addition, if we are not successful in developing
enhancements or new generations of products, we may not be able to recover the
costs of these investments or may incur significant losses. If we are not able
to develop new products which meet the needs of our markets, our competitive
position in our industries may be diminished and our relationships with our
customers may be impaired.
INADEQUATE CASH FLOW AND RESTRICTIONS IN OUR BANKING ARRANGEMENTS MAY IMPEDE OUR
PRODUCTION AND PREVENT US FROM INVESTING SUFFICIENT FUNDS IN RESEARCH AND
DEVELOPMENT
The markets for our products are extremely competitive. Our near-term
competitive position is dependent upon our ability to satisfy orders received in
a timely manner. To do so, we need access to capital to rapidly increase our
production capabilities. Maintaining our long-term competitive position will
require our continued investment in research and product development. Our
ability to make such investment may be limited by our cash flow availability and
by our need to comply with covenants in our banking arrangements that may limit
our production, research and product development expenditures.
WE WILL BE IN DEFAULT IF WE DO NOT REPAY OR REPLACE OUR BANKS BY MARCH 17, 2000
We owed approximately $35.3 million to our banks as of September 30, 1999.
This indebtedness is secured by substantially all of our assets. We periodically
requested waivers of financial covenants or amendments to the agreement with our
banks because we were not able to comply with the requirements of the agreement.
While our financing agreement has recently been amended to conform its financial
covenants to reflect our current operating plans and we are currently in
compliance with its provisions, we cannot be certain that we will remain in
compliance for the balance of its term. We must either repay our total bank
indebtedness prior to March 17, 2000, negotiate an extension of our bank credit
facility or obtain replacement financing. In the event that we do not obtain
alternative financing or if a default is declared by our banks, it is likely
that our
5
<PAGE> 9
cash resources will be severely constrained. We intend to use the proceeds of
this offering to repay the remaining outstanding indebtedness under this credit
facility.
OUR SUCCESS IS DEPENDENT ON OUR ABILITY TO HIRE AND RETAIN QUALIFIED PERSONNEL
Our success depends in large part upon our ability to hire and retain
qualified personnel in technical and managerial positions. We have a limited
number of employment agreements with our technical and managerial personnel. The
market for employees with the combination of skills and attributes required to
carry out our needs is extremely competitive. Our inability to hire and retain
such personnel could adversely affect our growth and profitability.
THE LARGE NUMBER OF SHARES AVAILABLE FOR FUTURE SALE COULD ADVERSELY AFFECT THE
PRICE OF OUR COMMON STOCK
As of December 31, 1999, we had outstanding:
- 4,082,393 shares of common stock issuable upon exercise of stock options
with a weighted average exercise price of $5.21 per share; and
- 250,000 shares of common stock issuable upon the conversion of a
subordinated convertible note.
In addition, we had a total of 8.6 million warrants outstanding, of which
6.4 million were exercisable as of December 31, 1999, of which 2.2 million will
or may become exercisable by December 31, 2000. A table detailing these warrants
follows.
<TABLE>
<CAPTION>
EXERCISABLE WEIGHTED AVERAGE EXERCISE PRICE
---------------------------- -------------------------------
OUTSTANDING CURRENTLY BY DEC. 31, 2000 CURRENTLY BY DEC. 31, 2000
----------- --------- ---------------- --------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
- - Warrants Issued Prior to Fiscal 1999........ 254 254 0 $10.77 --
- - Incentive Warrants Issued in Fiscal 1999.... 1,247 1,247 0 $ 3.96 --
- - Prepaid Warrants Issued in Fiscal 1999...... 2,778 1,389 1,389 $ 3.96 $3.96
- - Other Warrants Issued in Fiscal 1999........ 4,319 3,492 827 $ 4.06 $3.96
----- ----- ----- ------ -----
Total....................................... 8,598 6,382 2,216
</TABLE>
Except for approximately 327,000 shares, all of the shares underlying these
warrants have been registered for resale and none of them is subject to any
contractual restrictions on resale.
Future sales of any of these shares, or the anticipation of such sales,
could adversely affect the market price of our common stock and could materially
impair our future ability to raise capital through an offering of equity
securities. Further, any issuance of a substantial number of these shares could
result in increased volatility in the price of our common stock.
6
<PAGE> 10
OUR STOCK PRICE IS VOLATILE
In the past twelve months, the closing price of our common stock has ranged
from a low of $1 15/16 to a high of $13 13/16. The price of our common stock has
been and likely will continue to be subject to wide fluctuations in response to
a number of events and factors, such as:
- quarterly variations in operating results;
- differences between our quarterly results of operations and securities
analysts' estimates;
- announcements of technological innovations, new products or strategic
alliances;
- the announcement of the results of existing or new litigation; and
- news reports relating to companies or trends in our markets.
SYSTEM FAILURES OR MISCALCULATIONS ATTRIBUTABLE TO THE YEAR 2000 ISSUE COULD
DISRUPT OUR FUTURE OPERATIONS
The Year 2000 issue is the result of computer programs only being able to
use two digits rather than four to define the applicable year. Thus,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. Although we believe that we have adequately addressed the
Year 2000 issue, having experienced no failures or disruptions in our internal
operating systems or our products or in those of our third party vendors or
suppliers either on or after January 1, 2000, it is possible that future
failures or disruptions stemming from Year 2000 issues may yet result in our
inability to process transactions, send invoices, accept customer orders or
timely provide customers with products and services.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements including statements
regarding, among other items, business strategy, growth strategy and anticipated
trends in our business, which are made pursuant to the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995. The words "believe,"
"expect" and "anticipate" and similar expressions identify forward-looking
statements, which speak only as of the date the statement is made. These
forward-looking statements are based largely on our expectations and are subject
to a number of risks and uncertainties, some of which cannot be predicted or
quantified and are beyond our control. Future events and actual results could
differ materially from those set forth in, contemplated by, or underlying the
forward-looking statements. Statements in this prospectus, including those set
forth in "Risk Factors," describe factors, among others, that could contribute
to or cause such differences. In light of these risks and uncertainties, there
can be no assurance that the forward-looking information contained in this
prospectus will in fact transpire or prove to be accurate.
7
<PAGE> 11
USE OF PROCEEDS
The net proceeds to us from the sale of our common stock are estimated to
be approximately $64.3 million, assuming a public offering price of $13 13/16
per share, after deducting the underwriting discounts and estimated offering
expenses. We plan to use the net proceeds to repay approximately $35.3 million
of outstanding remaining indebtedness under our bank credit facility, to fund
product development and capital expenditures and to provide working capital.
As of December 31, 1999, $35.3 million was outstanding under our bank
credit facility. Borrowings thereunder currently bear interest at the prime
rate, plus two percent. We are obligated to repay all borrowings under this
facility by March 17, 2000. You should read the discussion under "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" for additional information about our bank
credit facility.
PRICE RANGE OF COMMON STOCK
Our common stock is quoted on the Nasdaq National Market under the symbol
"ROBV." The following table sets forth the high and low closing prices for our
common stock for the periods indicated:
<TABLE>
<CAPTION>
FISCAL QUARTER
ENDED
--------------
HIGH LOW
------ -----
<S> <C> <C>
December 31, 1999.......................................... $ 9 7/8 $ 3 9/13
September 30, 1999......................................... 5 3/4 3 5/16
June 30, 1999.............................................. 3 25/32 1 15/16
March 31, 1999............................................. 3 15/16 2 5/16
December 31, 1998.......................................... 4 9/16 2 1/8
September 30, 1998......................................... 5 1/8 2 9/16
June 30, 1998.............................................. 12 9/16 3 13/16
March 31, 1998............................................. 14 1/16 10
</TABLE>
As of December 31, 1999, there were approximately 3,400 holders of record
and approximately 30,000 beneficial owners of our common stock. The closing sale
price of our common stock on the Nasdaq National Market on January 18, 2000 was
$13 13/16 per share.
DIVIDEND POLICY
We have never paid any cash dividends and intend, for the foreseeable
future, to retain any future earnings for the development of our business. Our
existing bank credit agreement currently restricts our ability to pay dividends.
Our future dividend policy will be determined by our board of directors on the
basis of various factors, including our results of operations and financial
condition.
8
<PAGE> 12
CAPITALIZATION
The following table sets forth our notes payable, long-term debt, prepaid
warrants and stockholders' equity at September 30, 1999 and as adjusted to
reflect the sale of the 5,000,000 shares of common stock offered by us in this
offering at an assumed public offering price of $13 13/16 per share which was
the last reported sales price of our common stock as of January 18, 2000, after
deducting the underwriting discounts and estimated offering expenses that we
will pay and giving effect to our receipt and application of the net proceeds:
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1999
------------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Notes payable........................................... $ 35,325 $ --
========= =========
Long-term debt, including current portion............... $ 3,157 $ 3,157
========= =========
Prepaid warrants........................................ $ 9,105 $ 9,105
========= =========
Stockholders' equity:
Common stock, $0.01 par value; 75,000 shares
authorized; 27,354 shares issued and outstanding,
actual; shares issued and outstanding, as
adjusted(1)........................................ 274 324
Additional paid-in capital............................ 179,466 243,680
Accumulated deficit................................... (141,683) (141,683)
Accumulated other comprehensive income................ (67) (67)
--------- ---------
Total stockholders' equity......................... $ 37,990 $ 102,254
========= =========
Total capitalization.......................... $ 85,577 $ 114,516
========= =========
</TABLE>
- ---------------
(1) Excludes the following:
- 4,082,393 shares of common stock issuable upon exercise of stock options
outstanding as of December 31, 1999, with a weighted average exercise
price of $5.21 per share;
- 1,739,431 shares of common stock reserved for future issuance under our
stock option plans;
- 2,777,778 shares of common stock issuable upon exercise of outstanding
prepaid warrants for which we have already received proceeds based on an
exercise price of $3.96 per share;
- 5,820,055 shares of common stock issuable upon exercise of outstanding
warrants, with a weighted average exercise price of $4.32 per share; and
- 250,000 shares of common stock issuable upon the conversion of a
subordinated convertible note.
For a discussion of our benefit plans, see Note 9 to our Consolidated
Financial Statements.
9
<PAGE> 13
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements including the
accompanying notes and Management's Discussion and Analysis of Financial
Condition and Results of Operations, both elsewhere in this prospectus. The data
as of September 30, 1999 and 1998 and for each of the three years in the period
ended September 30, 1999 have been derived from, and should be read in
conjunction with, our audited consolidated financial statements and accompanying
notes, which are contained elsewhere in this prospectus. The Statement of
Operations Data for each of the two years in the period ended September 30, 1996
and 1995 and the Balance Sheet Data at September 30, 1997, 1996 and 1995 have
been derived from our audited financial statements which are not contained in
this prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $128,230 $169,007 $169,342 $153,975 $145,415
Cost of revenues(1)..................... 71,526 113,005 93,847 85,160 77,267
-------- -------- -------- -------- --------
Gross profit............................ 56,704 56,002 75,495 68,815 68,148
Research and development expenses....... 20,533 28,121 25,465 21,834 16,164
Selling, general and administrative
expenses.............................. 44,599 58,877 48,259 44,861 38,528
Merger expenses......................... -- 623 69 2,661 1,305
Severance and other charges............. 255 6,615 -- -- --
-------- -------- -------- -------- --------
Income (loss) from operations........... (8,683) (38,234) 1,702 (541) 12,151
Gain on sale of assets.................. (2,985) -- -- -- --
Interest (income) expense, net.......... 3,560 2,271 309 (222) 59
-------- -------- -------- -------- --------
Income (loss) before income taxes....... (9,258) (40,505) 1,393 (319) 12,092
Provision (benefit) for income taxes.... -- -- 745 (1,154) (56)
-------- -------- -------- -------- --------
Net income (loss)....................... (9,258) (40,505) 648 835 12,148
Premium on prepaid warrants............. 463 -- -- -- --
-------- -------- -------- -------- --------
Net income (loss) attributable to common
stockholders.......................... $ (9,721) $(40,505) $ 648 $ 835 $ 12,148
======== ======== ======== ======== ========
Net income (loss) per share
Basic................................. $ (0.38) $ (1.65) $ 0.03 $ 0.04 $ 0.65
Diluted............................... $ (0.38) $ (1.65) $ 0.03 $ 0.04 $ 0.58
</TABLE>
- ---------------
(1) Includes $16.6 million, $1.4 million and $3.1 million of inventory
write-offs in the fiscal years 1998, 1997 and 1996, respectively.
10
<PAGE> 14
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)............... $ 4,385 $ (9,488) $ 55,159 $ 45,751 $ 34,590
Total assets............................ 123,201 121,571 139,923 107,471 83,520
Long-term debt and other................ 2,855 3,059 6,414 492 1,242
Notes payable and current portion of
long-term debt........................ 35,627 38,038 10,623 10,558 6,316
Total liabilities....................... 76,106 84,774 64,346 43,858 39,171
Prepaid warrants........................ 9,105 -- -- -- --
Stockholders' equity.................... 37,990 36,797 75,577 63,613 44,349
</TABLE>
11
<PAGE> 15
BUSINESS
GENERAL
Robotic Vision Systems designs, manufactures and markets machine vision,
automatic identification and related products for the semiconductor capital
equipment, electronics, automotive, aerospace, pharmaceutical and other
industries. Founded in 1976, we use advanced technology including vision-enabled
process equipment, high-performance optics, lighting and advanced hardware and
software to offer a full range of automation solutions. In 1991, we introduced
the first generation of our current principal product, the lead scanner, a
three-dimensional machine vision system which inspects the physical
characteristics of packaged semiconductors. We believe we currently have the
dominant share of lead scanners used by the semiconductor industry. More
recently, we have become a leader in designing and manufacturing products which
utilize machine vision technology to interpret one- and two-dimensional bar
codes.
We operate through two divisions -- the Semiconductor Equipment Group and
the Acuity CiMatrix Division.
- - The Semiconductor Equipment Group's primary business is the design,
manufacture and marketing of systems that inspect assembled chip packages,
transfer integrated circuits from one medium to another and attach solder
balls to ball grid array semiconductors. This group serves the semiconductor
capital equipment market.
- - The Acuity CiMatrix Division designs, manufactures and markets two primary
product lines:
-- vision systems used in the general purpose machine vision market for a
variety of industrial applications; and
-- one- and two-dimensional bar code reading systems and related products
used in the automatic identification and data collection market to track
the manufacture and distribution of industrial and consumer products.
We were pioneers in the development of machine vision and have utilized our
technology to enter the emerging market for two-dimensional bar code readers. We
developed the technology and own the patents to Data Matrix, a two-dimensional
bar code symbology which can be marked directly onto parts and components. We
placed the Data Matrix symbology into the public domain in order to encourage
the wide spread adoption of this coding system and the sale of our
two-dimensional bar code readers. In addition, we design and manufacture
high-speed bar code scanning equipment for traditional one-dimensional reading
applications such as sorting devices commonly used in e-commerce infrastructure,
logistics, material handling and warehousing applications.
INDUSTRY OVERVIEW
Machine vision refers to the technology using optical sensors and digital
image processing hardware and software to identify, guide, inspect and measure
objects. Machine vision is important for applications in which human vision is
inadequate due to fatigue, visual acuity or speed. In addition, machine vision
is increasingly used to achieve substantial cost savings and improve product
quality. Many types of manufacturing equipment require machine vision because of
the increasing demands for speed and accuracy in manufacturing processes, as
well as the decreasing size and increasing complexity of items being
manufactured.
The semiconductor capital equipment market represents the largest
application for machine vision products. Machine vision is also extensively used
in general industrial applications such as the
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<PAGE> 16
manufacture of electronics, automotive, aerospace, pharmaceutical and consumer
products. Increasingly, machine vision is being utilized in the automatic
identification and data collection market as a complementary or alternative
technology to traditional laser scanning devices for reading bar codes.
SEMICONDUCTOR CAPITAL EQUIPMENT MARKET
Semiconductor capital equipment is sold primarily to companies engaged in
the manufacture of semiconductor devices in order to expand the capacity of
existing facilities as well as to enable the production of more complex, higher
density and smaller designs. Semiconductors, which are also known as chips, ICs,
or integrated circuits, are critical components used to create an increasing
variety of electronic products and systems. The semiconductor manufacturing
process is divided into the front-end fabrication of semiconductor wafers and
the back-end packaging process which involves the assembly, test and inspection
of the integrated circuits. Our semiconductor capital equipment is used
primarily in the back-end of the semiconductor manufacturing process.
According to the Semiconductor Industry Association, the semiconductor
market expanded from approximately $50.5 billion in 1990 to an estimated $144.1
billion in 1999, representing a compounded annual growth rate of approximately
12.4% during this period. We believe that this growth resulted primarily from
two factors. The first factor is the proliferation of semiconductor applications
due to the rapidly expanding end-user demand for faster, smaller and more
efficient electronic devices with greater functionality and reliability coupled
with an increasingly broad range of applications. The second factor is the
increasing importance of semiconductors in electronic systems. We believe that
these trends will continue to drive the long-term growth of semiconductors.
However, the semiconductor market can be cyclical as a result of periodic
reductions in the demand for integrated circuits. This was evident during the
1996 through 1998 period when the Asian economic crisis led to significantly
lower worldwide demand for semiconductor products and resulted in industry
overcapacity. During this period, semiconductor manufacturers greatly reduced
their capital expenditures causing significantly lower sales for capital
equipment suppliers. In 1999, semiconductor sales rebounded with worldwide
shipments increasing to an estimated $144.1 billion compared to approximately
$125.6 billion in 1998 and approximately $137.2 billion in 1997 according to the
Semiconductor Industry Association. With the semiconductor industry rebound in
1999, we anticipate that manufacturers will need to add capacity to meet
increased demand. According to Cahners In-Stat Group, the worldwide
semiconductor industry is expected to grow at an annual compound rate of 25.5%
for the period of 2000 to 2003, resulting in an anticipated 22.9% increase in
capital spending. With this recovery, semiconductor capital equipment
manufacturers are expected to experience additional increases in orders for
their products.
We believe the requirement for machine vision within the semiconductor
industry, especially in the back-end packaging process, may grow faster than the
overall market for capital equipment, owing to several factors, including:
- the general proliferation of advanced package types, such as ball grid
array and chip-scale packages, and trend towards miniaturization of
semiconductor devices;
- the desire of semiconductor manufacturers to replace slower, older
inspection technology with newer, faster generations of equipment;
- the desire to maximize capacity and improve efficiencies by minimizing
floor space requirements and reducing the total number of systems
employed;
- the emerging need to inspect previously uninspected classes of
semiconductor devices, such as memory chips, due to their increasing
package complexity; and
13
<PAGE> 17
- the requirement to inspect semiconductors at additional steps within the
manufacturing process, most notably wafer-scale inspection during the
application of solder balls for flip-chip packages and package visual
inspection during the transfer of assembled chips from trays to tubes or
tape prior to shipment.
Semiconductor manufacturers are increasingly outsourcing their packaging
requirements to subcontractors. We believe that subcontractors will account for
an increasing percentage of semiconductor capital equipment orders as they
establish new and expand existing packaging facilities. In addition, we believe
that such subcontractors could expand the overall market for semiconductor
capital equipment as they increase their capacity and enhance their production
capabilities.
GENERAL PURPOSE MACHINE VISION MARKET
The electronics industry, including board-level manufacturing, is the
second largest user of machine vision behind the semiconductor industry. General
purpose machine vision is also actively employed in the automotive, aerospace,
pharmaceutical and consumer products markets. A general purpose machine vision
system usually consists of a personal computer equipped with special vision
processing software and a vision board connected to a solid-state video camera.
The camera is used to acquire a digital image of the subject in computer memory.
The vision processing hardware and software is used to extract features from the
image, verify the identity of the subject, detect its location or orientation,
inspect for surface defects and perform non-contact measurements.
Growth in the general purpose machine vision market is driven by the need
to guide high-speed automated assembly equipment and inspect manufactured
products. For example, in pharmaceutical manufacturing, machine vision is
employed to inspect and verify packaging, labeling and quantities. In the
automotive industry, machine vision is used in parts identification, component
inspection, assembly verification and robot guidance. We believe that the
utilization of general purpose machine vision products will continue to increase
as products become smaller and more complex, requiring more accurate
measurements.
AUTOMATIC IDENTIFICATION AND DATA COLLECTION MARKET
The automatic identification and data collection market encompasses
products that mark, read and interpret one-dimensional and two-dimensional bar
codes. Bar code scanners and readers are an integral part of the automatic
identification and data collection market which, according to the Venture
Development Corporation, is an approximate $14.7 billion annual market in 1999
which is estimated to grow to approximately $23.8 billion by 2002, representing
a projected compound annual growth rate of approximately 17.3% over this period.
We believe that the scanning portion of the automated identification and data
collection market will be increasingly penetrated by machine vision
manufacturers, especially in high density applications such as printed circuit
board manufacturing and parts marking and tracking.
The scanning segment of the automatic identification and data collection
market addresses the interpretation of bar codes through a laser scanning or
optical recognition process. According to the Venture Development Corporation,
the stationary or fixed-position one-dimensional bar code scanner market totaled
approximately $825.0 million in 1998 and is projected to grow at approximately
10% per year. We believe that the industry growth rate is representative of
traditional applications for these products such as fixed position scanners used
for retail point of sale. We believe that certain applications will exceed
industry growth rates, particularly those which address sorting needs associated
with package delivery and e-commerce distribution. Within this market, critical
products include high-speed scanning tunnels that are able to read bar code
labels on packages from multiple
14
<PAGE> 18
perspectives as they move rapidly through the sorting line. We believe that the
development of e-commerce infrastructure and the related increased capital
expenditures by shipping companies should stimulate increased demand for fixed
position scanners and ancillary products.
We believe that increasingly, the bar code scanning industry is converging
with the machine vision industry. Bar codes, most notably in the form of
Universal Product Codes, have been in use since the early 1970s. Traditionally,
bar codes are read with lasers, which measure the width of the lines that make
up a bar code. One-dimensional bar codes are typically limited to storing
sixteen alphanumeric characters, can be read in a limited range of orientations
and require high-contrast labels. The advent of two-dimensional bar codes in the
mid-1980s significantly altered the application of bar codes. Two-dimensional
bar codes can store hundreds of alphanumeric characters, can be read in any
orientation and can be marked directly on manufactured parts. These advantages
are critical in providing a high degree of traceability, making two-dimensional
bar codes more flexible than traditional one-dimensional alternatives.
There are three principal two-dimension symbologies, all of which are in
the public domain, including our Data Matrix, Symbol Technologies Inc.'s PDF417
format and United Parcel Services' MaxiCode. We believe that the Data Matrix
symbology is well suited for the component marking market due to its ability to
be inscribed on virtually any surface, including curved, low-reflectivity and
matte surfaces, and can be produced in a fraction of the space of an alternative
bar code.
According to the Venture Development Corporation, the market for
two-dimensional bar codes is expected to grow from an estimated $158.0 million
of sales in 1999 to approximately $657.0 million in annual sales in 2000,
representing an annual growth rate in excess of 50%. A fundamental growth factor
of two-dimensional symbology is the trend among manufacturers to mark discrete
components, particularly in compliance driven industries such as semiconductor,
aerospace and automotive manufacturing.
While basic camera-based scanners are capable of reading high contrast and
high quality Data Matrix images, we believe that the broad application of Data
Matrix symbology on parts and components requires the imaging and processing
technology typically associated with machine vision.
STRATEGY
Our goal is to grow by continuing to work with leaders in each of our
served markets, anticipating their needs and offering them the most advanced
products and technology. To accomplish this objective, we intend to:
- Leverage our leading position in selected semiconductor capital equipment
market niches. We believe we have the largest installed base of products
in several segments of the semiconductor capital equipment market, such
as lead scanners, tape and reel packaging equipment and ball grid array
assembly machinery. Through our commitment to research and product
development, we intend to continue to set the industry standard for each
of these product lines. We intend to capitalize upon our large installed
base of products and reputation for quality to provide new applications
within the semiconductor capital equipment market for our machine vision
technology. As an example, we have already begun to leverage our strong
relationships with semiconductor manufacturers by introducing them to new
products from our Acuity CiMatrix Division.
- Further develop the two-dimensional bar code market as the inventor of
Data Matrix symbology. Anticipating that manufacturers will increasingly
identify and track individual components in order to comply with
standards, improve product traceability and
15
<PAGE> 19
manage inventories, we placed Data Matrix into the public domain to
facilitate its adoption as an international standard. We believe markets
such as the semiconductor, electronics, aerospace and automotive
industries will be among the earliest users of Data Matrix. We intend to
capitalize upon our knowledge of both Data Matrix and machine vision by
working with the leaders in our targeted markets to encourage the use of
our MXi family of readers.
- Capitalize upon the convergence of the machine vision and bar code
industries. We believe that emerging applications, especially those for
e-commerce infrastructure, will require both one-dimensional laser-based
products and two-dimensional machine vision products. As two-dimensional
bar code systems are adopted for new applications, we believe machine
vision will increasingly complement traditional laser-based technology.
As a supplier of both product families, we believe we are uniquely
positioned to offer fully integrated automatic identification and data
collection systems.
PRINCIPAL PRODUCTS
We sell our products to the semiconductor capital equipment, general
purpose machine vision and automatic identification and data collection markets.
Within the semiconductor capital equipment market, our products are used in the
final stages of the back-end semiconductor manufacturing process. Within the
industrial machine vision market, our products are used to inspect the physical
characteristics of industrial and consumer components from discrete components
to assembled products. Within the automated identification and data collection
market, our machine vision and complementary scanning products are used to scan
one-dimensional and two-dimensional bar codes as a means for identifying and
tracking the movement of components and packages. Our state-of-the-art products
range from board-level machine vision systems priced at under $5,000 to
fully-automated wafer inspection systems priced at approximately $500,000.
SEMICONDUCTOR EQUIPMENT GROUP
Our Semiconductor Equipment Group is comprised of our Electronics division,
as well as our wholly-owned subsidiaries, Systemation Engineered Products and
Vanguard Automation, Inc.
The Electronics division supplies inspection equipment to the semiconductor
industry. Our lead scanning systems, which can be found in most back-end
semiconductor manufacturing lines, generally perform the final inspection of
semiconductor packages prior to their preparation for shipment to the end-user.
Our lead scanning systems offer automated, high-speed, three-dimensional
semiconductor package lead inspection with the added feature of non-contact
scanning of the packages in their shipping trays which is known as in-tray
scanning. The systems use a laser-based, non-contact, three-dimensional
measurement technique to inspect and sort a wide variety of semiconductor
package types, such as quad flat packs, thin quad flat packs, chip scale
packages, wafer scaled products, ball grid arrays and thin small outline packs
in their carrying trays. The system measurements captured by our systems include
coplanarity, total package height, true position spread and span, as well as
lead angle, width, pitch and gap.
The development of a new kind of integrated circuit, used primarily in the
wireless communications industry, has created a new requirement for high-speed
wafer inspection equipment. These ICs, called flip chips, necessitate ball grid
arrays to be applied and inspected during the front-end fabrication process, as
well as the back-end packaging process. Recognizing this need, we introduced the
WS-1000, a three-dimensional machine vision-based inspection system. We believe
that our WS-1000 is the only product currently capable of providing
semiconductor companies the large number of inspections they desire -- more than
1,000 inspections per second -- at the speeds they require -- processing from
four to six eight-inch wafers per hour.
16
<PAGE> 20
Systemation offers semiconductor handling systems, including tape and reel
component processing systems, designed to transfer and inspect a variety of
integrated circuit packages. Systemation's tape and reel packaging product can
be integrated into our lead scanners to collect acceptable products and place
them into packaging media as required by different customers. We believe that
Systemation's expertise in designing and manufacturing systems that transfer
semiconductors between media while providing camera-based machine vision
inspection enables us to further expand the breadth of our product offerings to
the semiconductor market.
Vanguard is a supplier of ball attach equipment used in ball grid array and
chip scale package assembly for the semiconductor and connection industries.
These devices attach solder balls to the integrated circuit in order to generate
a medium which, when heated, will connect the package to the printed circuit
board. Vanguard's products are deployed on the back-end manufacturing line prior
to our lead scanner testing device.
We believe that we are the leading supplier of three-dimensional lead and
ball grid array inspection systems, tape and reel handling systems and ball grid
array ball attach systems; which are three operations at the final stages of the
back-end packaging process. This enables us to supply our customers with
integrated solutions to meet their packaging needs and should prove to be a
significant competitive advantage.
ACUITY CIMATRIX DIVISION
The Acuity CiMatrix Division designs, manufactures and markets
two-dimensional machine vision systems and lighting products as well as
one-dimensional and two-dimensional data collection products and bar code
reading systems. These products are used by a broad range of businesses,
including customers in the semiconductor, electronics, automotive,
pharmaceutical, consumer products, postal services and material handling
industries. The Acuity CiMatrix Division also supplies certain machine vision
products to our Semiconductor Equipment Group.
Our Acuity CiMatrix machine vision systems use an image processing
computer, software and solid-state video cameras to perform functions such as
measurement, flaw detection and inspection of manufactured products. These
products examine an image of a manufactured product in order to ascertain
physical characteristics, identify deviations and check for identification. For
the general-purpose machine vision market, our Acuity CiMatrix Division offers
single-board machine vision systems, which can be tailored to the needs of
specific industries via software modules. Vertical industries currently served
include semiconductor, electronics, automotive and packaging/pharmaceutical.
Acuity CiMatrix's principal machine vision product, Visionscape, was introduced
in September 1998. Visionscape is our first machine vision product platform on a
single printed circuit board for the Pentium/Windows PC. This product family is
designed to meet the needs of original equipment manufacturers, which
incorporate vision products into their systems, as well as for direct use by
manufacturers on their factory floor.
Our Acuity CiMatrix data collection and bar code reading systems use
machine vision to read and collect data from one- and two-dimensional bar codes
for purposes such as sorting, manufacturing quality control, traceability and
security. Our product offerings also include fixed position one-dimensional
scanners using laser-based technology, principally used in sorting, as well as
both fixed and hand-held two-dimensional camera-based readers.
In two-dimensional applications, we have concentrated our efforts on
scanning systems compatible with Data Matrix, a symbology which we believe has a
number of advantages over other two-dimensional bar codes in the public domain.
We believe that the smaller size of the Data Matrix symbology enables it to be
used in miniaturized applications. Data Matrix is read using machine
17
<PAGE> 21
vision as compared to traditional laser scanning systems. The machine vision
scanning process enables Data Matrix to exhibit a wider span of character
integrity and, hence, enables Data Matrix to be applied to a variety of
surfaces. We believe that these characteristics make Data Matrix the preferred
symbology for applications in which components need to be marked directly, such
as in parts identification. For example, as part of a move to a paperless
manufacturing process, one of our customers, Pratt & Whitney, an aircraft engine
manufacturer, is starting to apply two-dimensional bar codes to critical engine
components. We believe that these systems will become increasingly common due to
the trend toward reducing electronic component sizes and the desire to improve
the traceability of each component.
In December 1998, Acuity CiMatrix introduced the MXi, the first hand-held
imager for reading digital direct part marks, one-dimensional bar codes and new,
digital two-dimensional symbologies, such as the Data Matrix code. The MXi
resulted from a joint development and marketing arrangement with Polaroid
Corporation. In November 1999, we acquired Polaroid's interest in the MXi,
including all relevant intellectual property rights, for $2.0 million. We will
pay Polaroid a royalty based on net sales of the MXi and concurrently entered
into an agreement with Polaroid for it to manufacture this product on our
behalf. We believe we are uniquely positioned in the emerging two-dimensional
bar code market by virtue of our expertise in machine vision and the advantages
that such technology can afford over traditional laser scanning systems.
By incorporating our expertise in machine vision with our innovations in
bar code technologies, we are uniquely positioned to offer integrated solutions
for a variety of automation needs. We can combine our semiconductor inspection
capabilities with our Data Matrix symbology to serialize semiconductor wafer
chips. We have designed integrated systems with our bar code scanning equipment
and two-dimensional machine vision to automate package and material handling.
Collectively, these capabilities give computers the power of sight.
MANUFACTURING
Our manufacturing strategy is to produce internally only those components
which possess a critical technology and subcontract all other components. Our
production facilities are capable of fabricating and assembling total electronic
and electromechanical systems and subsystems. Facilities include assembly and
wiring operations that have the ability to produce intricate electronic
subassemblies, as well as complex wiring harnesses.
We manufacture products for the Semiconductor Equipment Group in Hauppauge,
New York, Tucson, Arizona and New Berlin, Wisconsin. We manufacture products for
the Acuity CiMatrix Division in Canton, Massachusetts and Weare, New Hampshire.
We maintain comprehensive test and inspection programs to ensure that all
systems meet exacting customer requirements for performance and quality
workmanship prior to delivery.
MARKETING AND SALES
Our Semiconductor Equipment Group's marketing strategy focuses on
cultivating long-term relationships with the leading manufacturers of electronic
and semiconductor inspection and quality control equipment. Its marketing
efforts rely heavily on direct sales and supporting those sales with a world
wide service and support organization which consisted of 92 people as of
December 31, 1999. Due to the capital commitment involved in the purchase of our
systems and their importance in the semiconductor manufacturing process, the
selling cycle for our Semiconductor Equipment Group's products, generally, is
between six to nine weeks from initial customer contact to closing of a sale. A
lengthier process is often the case in the purchase of an initial unit.
Subsequent purchases require less time and often result in multiple orders. This
group's sales activities in the domestic market are
18
<PAGE> 22
handled by direct sales personnel, which consisted of 42 people as of December
31, 1999. The Semiconductor Equipment Group also maintains sales capabilities in
both Europe and the Far East through independent sales representatives and
distributors, providing access to all major markets for electronic and
semiconductor test equipment. Sales and technical support offices are maintained
in the Philippines, Singapore and Taiwan.
The Acuity CiMatrix Division markets its products through a combination of
direct sales personnel, which consisted of 44 people as of December 31, 1999, as
well as distributors, value added resellers and system integrators. Our direct
sales force is supported by a service organization which consisted of 48 people
as of December 31, 1999. For sales made through distributors, the Acuity
CiMatrix Division supports these activities with direct sales management and
technical support personnel. The Acuity CiMatrix Division maintains sales and
technical support offices in various locations in the United States, as well as
in the United Kingdom, France and Germany.
ENGINEERING, PRODUCT DEVELOPMENT AND RESEARCH
We believe that our engineering, product development and research functions
are critical to our ability to maintain our leadership position in our current
markets and to develop new products. As of December 31, 1999 we employed 200
people who are dedicated to engineering, product development and research
functions. As of December 31, 1999, we owned approximately 100 issued U.S.
patents, with expiration dates ranging from August 2000 to June 2018.
Our research and development efforts over recent years have been largely
devoted to continued development of advanced two-dimensional and
three-dimensional vision technology and applications software for use in various
inspection and process control automation. Research and development
expenditures, net of capitalized software development costs, were $20.5 million,
$28.1 million and $25.5 million for the years ended September 30, 1999, 1998 and
1997, respectively. In the fiscal years ended September 30, 1999, 1998 and 1997,
we capitalized $4.9 million, $7.4 million and $4.8 million, respectively, of our
software development costs in accordance with the provisions of Statement of
Financial Accounting Standards No. 86.
SOURCES OF SUPPLY
To support our internal operations and to extend our overall capacity, we
purchase a wide variety of components, assemblies and services from outside
manufacturers, distributors and service organizations. We have not experienced
any significant difficulty in obtaining adequate supplies to perform under our
contracts. We are not dependent upon any supplier for more than 10% of our
purchases in the fiscal year ended September 30, 1999.
A number of our components and sub-systems are purchased from single
sources. We believe that alternative sources of supply could be obtained, if
necessary, without major interruption in production. In addition, certain
products or sub-systems developed and marketed by the Acuity CiMatrix Division
are incorporated into the Semiconductor Equipment Group's product offerings.
CUSTOMERS
No customers accounted for more than 10% of sales during the fiscal year
ended September 30, 1999. Intel Corporation accounted for 20% and 23% of our
revenues during the fiscal years ended September 30, 1998 and 1997,
respectively. No other customer accounted for more than 10% of sales during
these fiscal years. For the fiscal year ended September 30, 1999, the top five
customers for our Semiconductor Equipment Group were Amkor Technology, Inc.,
Intel Corporation, International Business Machines Corporation, Motorola, Inc.
and STMicroelectronics N.V. During the same
19
<PAGE> 23
period, the top five customers of our Acuity CiMatrix Division were
DaimlerChrysler AG, Minnesota Mining and Manufacturing Company and three system
integrators, Crisplant, Inc., Saddlebrook Controls and Sandvik Sorting Systems,
Inc.
BOOKINGS AND BACKLOG
We define our bookings during a fiscal period as incoming orders
deliverable to customers in the next twelve months less cancellations. For the
three months ended December 31, 1999, bookings were $55.9 million. This compares
to bookings of $47.6 million for the three months ended September 30, 1999 and
$31.5 million for the three months ended December 31, 1998. We generally ship
more than 50% of our bookings within the quarter in which the order is received.
We believe that our increase in bookings is reflective of the recovery and
continued strength in the markets we serve.
We define our backlog as customer orders available for shipment in the next
twelve months as of the end of the fiscal period. As of September 30, 1999, our
backlog was $35.3 million, compared to $16.9 million and $43.2 million at
September 30, 1998 and September 30, 1997, respectively. The increase in backlog
is primarily reflective of higher bookings during the second half of fiscal year
1999.
COMPETITION
We believe 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. We are aware
that a large number of companies, estimated to be more than 100 firms, entered
the industry in the 1980's and that most of these were small, private companies.
Over the last several years, we believe that the number of competitors has
narrowed to less than 25. We believe this is attributable, to a large extent, to
consolidation within the industry. Our principal competitor is ICOS Vision
Systems NV in semiconductor inspection, Ismeca Europe S.A. in tape and reel
handlers, Accu-Sort Systems, Inc. in one-dimensional bar code scanning and
Cognex Corporation in general purpose machine vision. The two dimensional bar
code reader market is in its infancy and we are not aware of any established
competitors. We believe that we are a significant competitor in the machine
vision industry based upon the breadth of our product lines, our established
customer base, our technical knowledge and our applications engineering
expertise. The pricing of our semiconductor inspection systems is somewhat
higher, generally, than those of our competitors, but we do not regard this
factor as a significant competitive disadvantage as customers have historically
demonstrated their willingness to pay for features that are unavailable in our
competitors' product offerings.
EMPLOYEES
As of December 31, 1999 we employed 737 persons, of whom 340 were
engineering and other technical personnel. None of our employees is a member of
a labor union.
20
<PAGE> 24
PROPERTIES
We lease all of our facilities, which include the following:
<TABLE>
<CAPTION>
SIZE ANNUAL
LOCATION USE (SQ. FT.) RENT LEASE EXPIRATION
- -------- --------------------------- --------- -------- ------------------
<S> <C> <C> <C> <C>
Corporate
Headquarters
Canton, Massachusetts Corporate headquarters, 60,000 $471,000 July 2003
Acuity CiMatrix Group
manufacturing and sales
Other Locations
New Berlin, Wisconsin Systemation manufacturing 90,000 $605,000 September 2012
and sales
Hauppauge, New York Electronics division 65,000 $586,000 March 2001
manufacturing and sales
Nashua, New Hampshire Acuity CiMatrix Group 50,000 $355,000 March 2000
engineering and design
Tucson, Arizona Vanguard manufacturing and 38,000 $201,000 February 2002
sales
Weare, New Hampshire Acuity CiMatrix Group 12,000 $32,000 December 2000
lighting manufacturing
and sales
Redditch, England Sales and technical support 11,000 $213,000 September 2017
Singapore Sales and technical support 5,000 $294,000 September 2000
Huntsville, Alabama Symbology research center 2,600 $33,000 March 2000
</TABLE>
We also maintain sales offices in France, Germany, Japan, the Philippines
and Taiwan.
LEGAL PROCEEDINGS
In October 1995, we initiated an action against View Engineering, Inc., now
a subsidiary of GSI Lumonics Inc., which was formerly known as General Scanning,
Incorporated, in the United States District Court for the Central District of
California alleging infringement of our patent relating to full tray scanning.
We are seeking both injunctive relief and monetary damages. A trial was
completed in November 1999, with final briefs submitted in January 2000. The
Court's decision is expected during the first half of 2000.
In April 1996, we initiated another action against View Engineering in the
United States District Court for the Central District of California, alleging
infringement by View Engineering of a number of our patents in connection with
their assembly and distribution of three-dimensional machine vision products. In
June 1998, the District Court found infringement by View Engineering and issued
an injunction against View Engineering for the remaining 13 year life of the
patent. This ruling has been appealed to the United States Court of Appeals for
the Federal Circuit.
In conjunction with the settlement of previously outstanding litigation, in
June 1998 General Scanning granted us an exclusive license to all General
Scanning technology relating to two-dimensional and three-dimensional laser
scanning and furthermore agreed not to engage in business related to inspection
of semiconductor packages for a period of ten years. For the exclusive license
and this agreement, General Scanning received compensation of approximately $3.8
million.
21
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL YEARS ENDED SEPTEMBER 30, 1999 AND 1998
Our revenues were $128.2 million for the fiscal year ended September 30,
1999, compared to $169.0 million for the fiscal year ended September 30, 1998, a
decline of 24.1%. The lower revenues year-to-year largely reflect the effect of
the severe semiconductor industry downturn which began in March 1998. Revenues
for our Semiconductor Equipment Group were down 32.4% and revenues for our
Acuity CiMatrix Division were down 2.3% from the prior year. Semiconductor
equipment revenues declined because of a significant decline in orders and
cancellations of previously placed orders for semiconductor inspection and
handling equipment. The weak semiconductor industry conditions were largely a
result of the Asian economic crisis and excess industry capacity. The year-
to-year decline in revenues for our Acuity CiMatrix Division primarily resulted
from lower revenues from European customers due to our decision to transition
our marketing efforts away from higher dollar value products towards a new
generation of less expensive but higher margined products. This decline was
partially offset by higher revenues from U.S. customers.
Our gross profit margin, as a percentage of revenues, was 44.2% for the
fiscal year ended September 30, 1999, compared to a gross profit margin of 33.1%
of revenues for the fiscal year ended September 30, 1998. Our gross profit
margin for the fiscal year ended September 30, 1998 was reduced by a provision
for excess and obsolete inventories of $16.6 million, or 9.8% of revenues.
Exclusive of the inventory provisions, gross profit margin was 42.9% for the
fiscal year ended September 30, 1998. The gross profit margin increased in the
fiscal year ended September 30, 1999, as result of a higher mix of sales of
Acuity CiMatrix product as a percentage of total sales for the current year.
In the third and fourth quarters of fiscal year 1998, we recorded
provisions of $4.5 million and $12.1 million, respectively, primarily for excess
and obsolete inventories, related principally to our semiconductor inspection
and handling equipment. These provisions were necessary to reduce the carrying
value of inventories to their appropriate net realizable value and largely
reflected reduced demand for older generation products as a result of the severe
semiconductor industry downturn. The inventory balances at September 30, 1998,
net of inventory provisions, contained older generation products of
approximately $4.5 million. Substantially all of the older generation products
were sold or disposed of in fiscal year 1999. However, there can be no assurance
that we will not have to take additional inventory provisions in the future
based upon a number of factors including changing business conditions, shortened
product life cycles, the introduction of new products and the effect of new
technologies.
The gross profit margin, as a percentage of revenues, for our Semiconductor
Equipment Group increased to 39.3% of revenues in the fiscal year ended
September 30, 1999, compared to 28.6% of revenues for the fiscal year ended
September 30, 1998. Also, gross profit margin, as a percentage of revenues,
increased for our Acuity CiMatrix Division to 48.9%, compared to 38.2% for the
prior fiscal year. The majority of the increase was due to the inventory
provisions recorded in fiscal year 1998.
Our research and development expenses were $20.5 million, or 16.0% of
revenues, in fiscal year 1999, compared to $28.1 million, or 16.6% of revenues,
in fiscal year 1998. The lower level of expenses reflects the combination of
workforce reductions and other expense reductions that we implemented primarily
in the latter half of fiscal year 1998. We are continuing to invest significant
resources into new product development in both our Semiconductor Equipment Group
and our
22
<PAGE> 26
Acuity CiMatrix Division. New product development efforts include expansion of
our new machine vision platform, Visionscape, as well as next generation
semiconductor inspection and component handling equipment. During fiscal year
1999, we capitalized $4.9 million of software development costs, in accordance
with SFAS No. 86, compared to $7.4 million in fiscal year 1998.
Our selling, general and administrative expenses were $44.6 million, or
34.8% of revenues, in fiscal year 1999, compared to $58.9 million, or 34.8% of
revenues, in fiscal year 1998. The lower level of expenses largely reflects the
combination of the cost reduction steps taken by us primarily in the latter half
of fiscal year 1998, lower variable selling costs on the decreased level of
revenues and the absence of significant litigation costs which were incurred in
the prior year.
During fiscal year 1998, we took multiple steps to reduce our expenses and
to lower the level of revenues necessary for break-even results of operations.
These steps included a 10% workforce reduction in April 1998, a 15% workforce
reduction in June 1998 and an additional 16% workforce reduction in September
1998, as well as curtailing discretionary spending and capital expenditures. In
June 1998, we combined our Acuity CiMatrix two-dimensional machine vision
operations with our CiMatrix one-dimensional and two-dimensional bar code
reading and data collection operations.
Primarily as a result of these steps, we took a total charge of $6.6
million in charges in fiscal year 1998, of which $3.8 million was recorded for
severance payments to employees, $1.5 million was recorded for costs associated
with changing distributions in Asia, $1.1 million was related to a non-cash
write-off of previously capitalized software development costs and $0.2 million
was recorded for costs associated with the consolidation of the Acuity and
CiMatrix operations.
Severance and other charges were $0.3 million for fiscal year 1999,
compared to $6.6 million in the prior fiscal year. The current charges relate to
reductions in personnel, particularly in Europe. The prior year spending relates
to the cost reduction steps taken to lower our operating expenses. Amounts
remaining from the prior year severance and other charges are shown below:
<TABLE>
<CAPTION>
LIABILITY AT CASH LIABILITY AT
SEPTEMBER 30, 1998 EXPENDITURES SEPTEMBER 30, 1999
------------------ ------------ ------------------
<S> <C> <C> <C>
Severance payments to employees.... $1,384 $1,384 $ --
Costs for changes in Asia
distributors....................... 500 245 255
Costs to consolidate
Acuity/CiMatrix.................. 215 215 --
------ ------ ----
Total.................... $2,099 $1,844 $255
====== ====== ====
</TABLE>
The 1999 severance and other charges were paid out in fiscal year 1999. No
amounts were accrued as of September 30, 1999.
Net interest expense was $3.6 million in fiscal year 1999, compared to $2.3
million in fiscal year 1998. The increase in interest expense is a result of the
significantly higher level of bank borrowings in fiscal year 1998 as well as
amortization of $100,000 of value of warrants issued to the banks. Proceeds from
bank borrowings during fiscal year 1998 were primarily used to fund working
capital requirements and operating losses.
The gain on sale of assets of $3.0 million for fiscal year 1999 primarily
relates to the sale of our Aircraft Safety Division.
There was no tax provision in fiscal years 1999 and 1998 as a result of the
loss for the periods.
For fiscal year 1999, we had a net loss of $9.7 million, or a loss of $0.38
per share, of which $0.5 million relates to the premiums accrued on our prepaid
warrants. In fiscal year 1998, we had a
23
<PAGE> 27
net loss of $40.5 million, or a loss of $1.65 per share. The net loss for fiscal
year 1998 included inventory provisions of $16.6 million and unusual charges of
$6.6 million.
FISCAL YEARS ENDED SEPTEMBER 30, 1998 AND 1997
Our revenues were $169.0 million for the fiscal year ended September 30,
1998, compared to $169.3 million for the fiscal year ended September 30, 1997.
Primarily as a result of a severe downturn in the semiconductor capital
equipment industry, our revenues declined from $53.8 million in the first
quarter of fiscal year 1998 to $28.4 million in the fourth quarter of fiscal
year 1998. Our Semiconductor Equipment Group's operations were adversely
affected by a significant decline in orders and cancellations of previously
placed orders for semiconductor inspection and handling equipment. The weak
semiconductor industry conditions were largely a result of the Asian economic
crisis and excess industry capacity. In addition, revenues for our Acuity
CiMatrix Division declined approximately 10% year-to-year, largely as a result
of lower revenues from customers in Asia and Europe.
Our gross profit margin, as a percentage of revenues, was 33.1% for the
fiscal year ended September 30, 1998, compared to a gross profit margin of 44.6%
of revenues for the fiscal year ended September 30, 1997. Our gross profit
margin for the fiscal years ended September 30, 1998 and 1997 was reduced by a
provision for excess and obsolete inventories of $16.6 million and $1.4 million,
respectively. Exclusive of these inventory provisions, gross profit margin was
42.9% for the fiscal year ended September 30, 1998 and 45.4% for fiscal year
1997. The gross profit margin declined sequentially in fiscal year 1998 as
result of proportionately high fixed manufacturing costs relative to lower
shipment levels, as well as the effect of a lower margin product mix.
During fiscal year 1998, we took multiple steps to reduce our expenses and
to lower the level of revenues necessary for break-even results of operations.
Primarily as a result of these steps, we took a total charge of $6.6 million in
charges in fiscal year 1998, of which $3.8 million was recorded for severance
payments to employees, $1.5 million was recorded for costs associated with
changing distributions in Asia, $1.1 million was related to a non-cash write-off
of previously capitalized software development costs and $0.2 million was
recorded in costs associated with the consolidation of the Acuity and CiMatrix
operations.
Our research and development expenses were $28.1 million, or 16.6% of
revenues, in fiscal year 1998, compared to $25.5 million, or 15.0% of revenues,
in fiscal year 1997. The higher level of research and development expenses
reflected our continued investment in new products, including new semiconductor
inspection and component handling systems, as well as new visual inspection and
data collection products. During fiscal year 1998, we capitalized $7.4 million
of software development costs, in accordance with SFAS No. 86, compared to $4.8
million in fiscal year 1997.
Our selling, general and administrative expenses were $58.9 million, or
34.8% of revenues, in fiscal year 1998, compared to $48.3 million, or 28.5% of
revenues, in fiscal year 1997. The year-to-year increase in expenses was largely
related to legal costs of $4.5 million associated with patent infringement and
fraud litigation which we initiated against General Scanning, now known as GSI
Lumonics, and its View Engineering subsidiary. Part of the increase was
attributable to personnel additions to our sales and marketing organizations,
primarily in the first half of fiscal year 1998.
We incurred merger costs of $0.6 million in the first quarter of fiscal
year 1998 related to our acquisition of Vanguard Automation.
Net interest expense was $2.3 million in fiscal year 1998, compared to $0.3
million in fiscal year 1997. The increase in interest expense was a result of
the significantly higher level of bank borrowings
24
<PAGE> 28
in fiscal year 1998. Proceeds from bank borrowings during fiscal year 1998 were
primarily used to fund working capital requirements and results of operations.
There was no tax provision in fiscal year 1998 as a result of the loss for
the period. In fiscal year 1997, we had a tax provision of $0.7 million relating
to minimum federal and state income taxes.
For fiscal year 1998, we had a net loss of $40.5 million, or a loss of
$1.65 per share. The net loss for fiscal year 1998 included inventory provisions
of $16.6 million and unusual charges of $6.6 million. In fiscal year 1997, we
had net income of $0.6 million, or $0.03 per share.
QUARTERLY RESULTS
The following table presents our unaudited quarterly operating results for
each of the eight quarters ended September 30, 1999, both in dollars and as a
percentage of our total revenue for each quarter. This information has been
derived from our consolidated financial statements. You should read this
information in conjunction with our Consolidated Financial Statements and notes
thereto appearing elsewhere in this prospectus. You should not draw any
conclusions about our future results from the results of operations for any
quarter.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
SEPT. 30, JUNE 30, MAR. 31, DEC. 31, SEPT. 30, JUNE 30, MAR. 31, DEC. 31,
1999 1999 1999 1998 1998 1998 1998 1997
--------- -------- -------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues.............................. $40,271 $31,260 $27,294 $29,405 $ 28,402 $ 39,090 $47,727 $53,788
Cost of revenues...................... 22,242 17,017 15,433 16,834 30,403 28,171 26,686 27,745
------- ------- ------- ------- -------- -------- ------- -------
Gross profit.......................... 18,029 14,243 11,861 12,571 (2,001) 10,919 21,041 26,043
Research and development expenses..... 5,257 4,804 4,882 5,590 6,594 7,508 7,390 6,629
Selling, general and administrative
expenses............................ 11,494 11,235 10,654 11,216 12,664 15,662 15,657 14,894
Merger expenses....................... -- -- -- -- -- -- -- 623
Severance and other charges........... -- 255 -- -- 1,011 2,420 3,184 --
------- ------- ------- ------- -------- -------- ------- -------
Income (loss) from operations......... 1,278 (2,051) (3,675) (4,235) (22,270) (14,671) (5,190) 3,897
(Gain) loss on sale of assets......... -- 63 (250) (2,798) -- -- -- --
Interest (income) expense, net........ 991 1,047 687 835 781 762 482 246
------- ------- ------- ------- -------- -------- ------- -------
Income (loss) before income taxes..... 287 (3,161) (4,112) (2,272) (23,051) (15,433) (5,672) 3,651
Provision (benefit) for income
taxes............................... -- -- -- -- (108) -- -- 108
------- ------- ------- ------- -------- -------- ------- -------
Net income (loss)..................... 287 (3,161) (4,112) (2,272) (22,943) (15,433) (5,672) 3,543
Premium on prepaid warrants........... 193 193 77 -- -- -- -- --
------- ------- ------- ------- -------- -------- ------- -------
Net income (loss) attributable to
common stockholders................. $ 94 $(3,354) $(4,189) $(2,272) $(22,943) $(15,433) $(5,672) $ 3,543
======= ======= ======= ======= ======== ======== ======= =======
Net income (loss) per share
Basic............................... $ 0.00 $ (0.13) $ (0.17) $ (0.09) $ (0.92) $ (0.63) $ (0.23) $ 0.14
Diluted............................. $ 0.00 $ (0.13) $ (0.17) $ (0.09) $ (0.92) $ (0.63) $ (0.23) $ 0.14
Weighted average shares:
Basic............................... 27,069 25,837 24,885 24,876 24,847 24,609 24,517 24,476
Diluted............................. 31,442 25,837 24,885 24,876 24,847 24,609 25,517 25,444
OTHER DATA:
Bookings.............................. $47,647 $36,740 $30,852 $31,548 $ 20,473 $ 23,690 $44,527 $53,788
</TABLE>
25
<PAGE> 29
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
SEPT. 30, JUNE 30, MAR. 31, DEC. 31, SEPT. 30, JUNE 30, MAR. 31, DEC. 31,
1999 1999 1999 1998 1998 1998 1998 1997
--------- -------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUES
Revenues.............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues...................... 55.2 54.4 56.5 57.2 107.0 72.1 55.9 51.6
------- ------- ------- ------- -------- -------- ------- -------
Gross profit.......................... 44.8 45.6 43.5 42.8 (7.0) 27.9 44.1 48.4
Research and development expenses..... 13.1 15.4 17.9 19.0 23.2 19.2 15.5 12.3
Selling, general and administrative
expenses............................ 28.5 35.9 39.0 38.1 44.6 40.1 32.8 27.7
Merger expenses....................... -- -- -- -- -- -- -- 1.2
Severance and other charges........... -- 0.8 -- -- 3.6 6.2 6.7 --
------- ------- ------- ------- -------- -------- ------- -------
Income (loss) from operations......... 3.2 (6.6) (13.5) (14.4) (78.4) (37.5) (10.9) 7.2
(Gain) loss on sale of assets......... -- 0.2 (0.9) (9.5) -- -- -- --
Interest (income) expense, net........ 2.5 3.3 2.5 2.8 2.7 1.9 1.0 0.5
------- ------- ------- ------- -------- -------- ------- -------
Income (loss) before income taxes..... 0.7 (10.1) (15.1) (7.7) (81.2) (39.5) (11.9) 6.8
Provision for income taxes............ -- -- -- -- (0.4) -- -- 0.2
------- ------- ------- ------- -------- -------- ------- -------
Net income (loss)..................... 0.7 (10.1) (15.1) (7.7) (80.8) (39.5) (11.9) 6.6
Premium on prepaid warrants........... 0.5 0.6 0.3 -- -- -- -- --
------- ------- ------- ------- -------- -------- ------- -------
Net income (loss) attributable to
common stock holders................ 0.2% (10.7)% (15.3)% (7.7)% (80.8)% (39.5)% (11.9)% 6.6%
======= ======= ======= ======= ======== ======== ======= =======
</TABLE>
FISCAL QUARTERS BEGINNING DECEMBER 31, 1997 AND ENDED SEPTEMBER 30, 1999
Primarily as a result of a severe downturn in the semiconductor capital
equipment industry, our revenues declined from $53.8 million in the first
quarter of fiscal year 1998 to $28.4 million in the fourth quarter of fiscal
year 1998. Our revenues continued to be impacted in the first half of fiscal
year 1999. Our Semiconductor Equipment Group's operations were adversely
affected by a significant decline in orders and cancellations of previously
placed orders for semiconductor inspection and handling equipment. The weak
semiconductor industry conditions were largely a result of the Asian economic
crisis and excess industry capacity. In addition, revenues for our Acuity
CiMatrix Division declined largely as a result of lower revenues from customers
in Asia and Europe. In addition, our revenues increased $13.0 million from $27.3
million in the second quarter of fiscal year 1999 to $40.3 million in the fourth
quarter of fiscal year 1999. The increase in revenues was primarily associated
with increased levels of orders and shipments for semiconductor inspection and
handling equipment.
Our revenue trend was precipitated by a reduction in bookings which
declined to $20.5 million in the fourth quarter of fiscal year 1998 from $53.8
million in the first quarter of that fiscal year. Primarily due to the rebound
in the semiconductor industry, our bookings increased to $47.6 million in the
fourth quarter of fiscal year 1999.
As a percentage of revenues, our gross profit margin was 48.4% for the
quarter ended December 31, 1997, declining to a negative gross profit margin of
7.0%. Exclusive of inventory write-down provisions, our gross profit margin
would have been 35.6% for the quarter ended September 30, 1998. With increasing
bookings and the resulting increase in revenues, our gross profit margin as a
percentage of revenues increased to 44.8% in the quarter ended September 30,
1999.
The gross profit margin declined during fiscal year 1998 as a result of
proportionately high fixed manufacturing costs relative to lower shipment
levels, as well as the effect of a lower margin product mix. Our gross profit
increased slightly during fiscal year 1999 as a result of cost reductions taken
in the second half of fiscal year 1998 and a higher mix of Acuity CiMatrix
products as a percentage of total revenues.
Research and development spending is generally tied to product development
cycles, rather than to revenues. During fiscal year 1998, we were required to
fund the concurrent development of multiple products serving both semiconductor
capital equipment and machine vision markets. These product developments were
generally completed by the quarter ended September 30, 1998.
26
<PAGE> 30
Beginning in the quarter ended March 31, 1998, selling, general and
administrative expenses declined relative to each preceding quarter. The decline
was generally due to our efforts to match selling, general and administrative
expense to revenue levels. Spending increased beginning in the period ended
September 30, 1999 with the recovery of the semiconductor industry and our
revenues. Other factors contributing to the lower spending included lower
variable selling costs on the decreased level of revenues and the absence of the
significant litigation costs which were incurred during fiscal year 1998.
In response to the downturn in the semiconductor industry, we took multiple
steps to reduce our expenses and to lower the level of revenues necessary for
break-even results of operations, including a 10% workforce reduction in April
1998, a 15% workforce reduction in June 1998 and an additional 16% workforce
reduction in September 1998, as well as a reduction in discretionary spending
and capital expenditures. The charges associated with these workforce reductions
resulted in the recording of $6.6 million in severance and other charges during
the last three quarters of fiscal year 1998. In addition, during the third
quarter of fiscal year 1999, we incurred approximately $0.3 million of severance
costs to restructure our sales effort in Europe.
LIQUIDITY AND CAPITAL RESOURCES
Our cash balance increased $3.9 million, to $6.3 million, as of September
30, 1999, from $2.4 million as of September 30, 1998. This cash balance reflects
$16.9 million of cash provided by financing activities, $4.2 million of cash
provided by the sale of assets, net of $7.8 million of cash used for additions
to plant and equipment and software development costs and $9.6 million of cash
used in operating activities.
The $9.6 million of net cash used in operating activities was largely a
result of the operating loss for the period, after non-cash depreciation and
amortization charges, combined with the increase in accounts receivable and
reduction in accounts payable and accrued expenses.
Accounts receivable at September 30, 1999 increased by $5.1 million to
$37.5 million from $32.4 million at September 30, 1998, due to increased
revenues in the second half of fiscal year 1999.
Inventories were $32.6 million at September 30, 1999, compared to $36.2
million at September 30, 1998, a reduction of $3.6 million, as we continued to
consume short-term excess levels, particularly in our semiconductor equipment
group.
Additions to plant and equipment were $2.9 million in the fiscal year ended
September 30, 1999, which were substantially below depreciation charges of $6.9
million in the period. Additions to software development costs were $4.9 million
in the fiscal year ended September 30, 1999. The additions to plant and
equipment were primarily for equipment used in research and development
activities, as well as customer support activities. Total depreciation and
amortization charges for the year ended September 30, 1999 were $10.8 million,
compared to $8.8 million in fiscal year 1998. This increase was primarily due to
increases in depreciation of capital equipment.
Accounts payable and accrued expenses were $37.6 million at September 30,
1999, compared with $43.7 million at September 30, 1998. The reductions in the
combination of accounts payable and accrued expenses of $6.1 million in the
fiscal year ended September 30, 1999, reflects lower purchases, cash paid for
severance and other charges, as well as some reduction of past due vendor
balances. As a result of our negative cash flow from operations during fiscal
years 1998 and 1999, we had a substantial portion of our accounts payable
balances which were beyond normal vendor payment terms at September 30, 1999.
We have a revolving credit agreement with three domestic banks which is
collateralized by substantially all of our domestic tangible and intangible
assets. Borrowings under the agreement currently bear interest at the prime
rate, plus two percent. At September 30, 1999, we had borrowings
27
<PAGE> 31
of $35.3 million outstanding under our revolving credit agreement with our
domestic banks, compared to $37.5 million in borrowings outstanding at September
30, 1998. During the third quarter of fiscal year 1999, we amended our credit
agreement with our banks to waive compliance with certain financial covenants
through March 31, 1999 and to establish new financial covenants for the balance
of the term of the loan. We were in compliance with the new covenants at
September 30, 1999. We must either repay our total bank indebtedness prior to
March 17, 2000, negotiate an extension of our bank credit facility or obtain
replacement financing. We plan to use a portion of the net proceeds from this
offering to repay in full our outstanding indebtedness under our bank credit
facility. In addition, we are currently engaged in preliminary negotiations to
obtain a new bank credit facility. We cannot assure investors that we will be
able to do so. In conjunction with the amendment to the credit agreement, we
issued warrants to our lending banks covering 750,000 shares, at an exercise
price of $4.02 per share, of which 250,000 warrants are immediately exercisable.
All, or a portion, of the remaining 500,000 warrants are exercisable only if the
lending banks extend the credit agreement beyond the original maturity date for
pre-determined periods.
During fiscal year 1999, we completed three private placements of shares of
common stock and warrants to purchase common stock which provided net proceeds
of $19.4 million.
We believe that through a combination of proceeds from additional external
capital and existing receivables and inventories and either the renegotiation of
our bank credit facility or its replacement with alternative bank financing, we
will have significant liquidity to fund our cash requirements for at least the
next 12 months. Given the significant upturn in both revenues and bookings
experienced by our Semiconductor Equipment Group in the latter months of fiscal
year 1999 and the continuation of this trend into the first quarter of fiscal
2000 and, we anticipate, for the balance of fiscal year 2000, we believe that
our banks will forebear from initiating any default declaration for a reasonable
period of time if we are unable to either renegotiate or replace our current
bank credit facility prior to its expiration on March 17, 2000 in order to
permit us to continue our renegotiation or replacement efforts. However, in the
absence of such forebearance and if a default is declared by our banks, it is
likely that our cash resources would be severely constrained, which may affect
our ability to acquire raw materials and supplies to satisfy orders for our
products, thereby reducing the likelihood that we could sustain our operations
at their pre-default levels. We believe the completion of this offering will
enable us to repay remaining outstanding indebtedness under our bank credit
facility and facilitate in the renegotiation or replacement of that facility.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1999, the FASB issued Statement of Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of FASB Statement No. 133." SFAS No. 137 delays the
implementation of SFAS No. l33 until our fiscal year ending September 30, 2001.
We have not completed our evaluation of the effects of SFAS 133.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements." The
SAB summarizes certain of the SEC's views in applying revenue recognition in
financial statements. The provisions of SAB No. 101 are effective for our fiscal
year beginning October 1, 2000. We have not yet completed our evaluation of the
effects of SAB No. 101.
EFFECT OF INFLATION
We believe that the effect of inflation has not been material during each
of the fiscal years ended September 30, 1999, 1998 and 1997, respectively.
28
<PAGE> 32
YEAR 2000 STATUS
We are aware of the potential for business disruption due to the Year 2000
issue, and have taken steps to assess and address this issue. We believe that we
have adequately addressed Year 2000 compliance in three major areas: internal
operating systems, including sales, purchasing, production, engineering, and
finance; products, including installed base and new products; and third parties
and vendors.
In order to assess Year 2000 compliance in our internal operating systems,
we first took an inventory of all such systems and identified those which were
critical to our operations. All such systems were tested for Year 2000
compliance by September 30, 1999. We believe that we brought all of our
non-compliant systems into compliance through repair, upgrading and/or
replacement, as we experienced no Year 2000 disruptions on or after January 1,
2000. However, due to the uncertainties that are inherent in Year 2000
remediation, we can give no assurances that our efforts will prevent future
business disruptions.
Although we believe that we have adequately addressed the Year 2000 issue,
having experienced no failures or disruptions in our internal operating systems
or our products or in those of our third party vendors or suppliers either on or
after January 1, 2000, it is possible that future failures or disruptions
stemming from Year 2000 issues may yet result in our ability to process
transactions, send invoices, accept customer orders or timely provide customers
with products and services.
MARKET RISK
Financial instruments that potentially subject us to concentrations of
credit-risk consist principally of cash equivalents and trade receivables. We
place our cash equivalents with high-quality financial institutions, limit the
amount of credit exposure to any one institution and have established investment
guidelines relative to diversification and maturities designed to maintain
safety and liquidity. Our trade receivables result primarily from sales to
semiconductors manufacturers located in North America, Japan, the Pacific Rim
and Europe. Receivables are mostly from major corporations, distributors or are
supported by letters of credit. We maintain reserves for potential credit losses
and historically such losses have been immaterial.
We are exposed to the impact of fluctuation in interest rates, primarily
through our borrowing activities. Our policy has been to use U.S. dollar
denominated borrowings to fund our working capital requirements. The interest
rates on our current borrowings fluctuate with current market rates. The extent
of risk associated with an increase in the interest rate on our borrowings is
not quantifiable or predictable because of the variability of future interest
rates and our future financing requirements. At September 30, 1999, we had bank
borrowings outstanding of $35.3 million which had a variable interest rate and
long-term note payables of $2.9 million with fixed interest rates. Using a yield
to maturity analysis and assuming an increase in the interest rate on these
borrowings of 78 basis points (10% fluctuation in the rate), interest rate
variability on these borrowings would not have a material effect on our
financial results.
Approximately 73% of our international revenues for fiscal year 1999 were
derived from sales to Asia, which were denominated in U.S. dollars. However, we
are exposed to the impact of foreign currency fluctuations, primarily in our
sales to Europe. During fiscal year 1999, most local currencies of our European
subsidiaries weakened against the U.S. dollar. Since we translate foreign
currencies into U.S. dollars for reporting purposes, these weakened currencies
had a negative, though immaterial, impact on our results. We also believe that
our exposure to currency exchange fluctuation risk is insignificant because our
European subsidiaries sell to customers, and satisfy their financial
obligations, almost exclusively in their local currencies. During fiscal year
1999, we did not engage in foreign currency hedging activities. Based on a
hypothetical ten percent adverse movement in foreign
29
<PAGE> 33
currency exchange rates, the potential losses in future earnings, fair value of
risk-sensitive instruments, and cash flows are immaterial, although the actual
effects may differ materially from the hypothetical analysis.
We estimate the fair value of our notes payable and long-term liabilities
based on quoted market prices for the same or similar issues or on current rates
offered to us for debt of the same remaining maturities. For all other balance
sheet financial instruments, the carrying amount approximates fair value.
30
<PAGE> 34
MANAGEMENT
Set forth below is information concerning each of our directors and
executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
- ---- --- -------------
<S> <C> <C>
Pat V. Costa............................ 56 Chairman of the Board, President, and
Chief Executive Officer
Howard Stern............................ 61 Senior Vice President and Director
Frank D. Edwards........................ 45 Chief Financial Officer and Secretary
Curtis W. Howes......................... 49 Vice President
John S. O'Brien......................... 45 Vice President
Earl H. Rideout......................... 53 Senior Vice President
Neal H. Sanders......................... 50 Vice President
Frank A. DiPietro....................... 73 Director
Jay M. Haft............................. 64 Director
Tomas Kohn.............................. 58 Director
Donald J. Kramer........................ 67 Director
Mark J. Lerner.......................... 47 Director
Robert H. Walker........................ 65 Director
</TABLE>
Pat V. Costa has served as our president, chief executive officer and
chairman of our board of directors since 1984. Previously and from 1977, Mr.
Costa was employed by GCA Corporation, most recently in the capacity of
executive vice president. GCA was engaged in the manufacturing of various
electronic instrumentation equipment and systems.
Howard Stern has been our senior vice president and technical director
since 1984. Previously and from 1981, he was a vice president. Mr. Stern has
been a director since 1981.
Frank D. Edwards joined us in March 1999 as our corporate vice president of
finance, secretary and chief financial officer. Prior to joining us and since
1986, he was employed by Electronic Designs, Inc. Most recently, until that
company's merger with Bowmar Instrument Corporation in October 1998, he was
senior vice president and chief financial officer and a member of its board.
Curtis W. Howes joined us in May 1997 as corporate vice president of
automatic identification. From 1991 to 1997, he was employed by Intermec
Corporation, most recently as general manager of Intermec's imaging systems
division, which designed, manufactured and sold vision-based products for
symbology reading.
John S. O'Brien joined us in February 1997 as corporate vice president of
human resources. Previously and from 1990, he was vice president, human
resources and chief financial officer of Charles River Data Systems, an imbedded
systems developer and manufacturer.
Earl H. Rideout has been corporate senior vice president of our
semiconductor equipment group since January 1997. Previously and from 1989 he
was vice president/general manager of our electronics division.
Neal H. Sanders joined us in February 1999 as corporate vice president of
corporate communications and investor relations and is vice president of
corporate development. From 1980 through 1998, he held comparable positions at
Analog Devices, Inc., Bolt Beranek and Newman, Inc., Information Analysis, Inc.
and Microdyne Corporation.
Frank A. DiPietro has been a director since 1992. Mr. Dipietro began his
career with General Motors Corporation in 1944. During his forty-six year career
with General Motors, 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, most recently for the
University of
31
<PAGE> 35
Michigan in evaluating laser applications in the global auto industry. At the
time of his retirement, Mr. DiPietro held the position of director of
manufacturing engineering, Chevrolet-Pontiac-Canada car group for General
Motors. In 1996, he was elected to the position of director-at-large for the
Society of Manufacturing Engineers.
Jay M. Haft has been a practicing attorney for over 30 years and a
strategic and financial consultant for growth stage companies. Mr. Haft, who has
been a director since 1977, also serves as chairman of NCT Group, Inc., a
publicly traded company. He is a managing general partner of GenAm "1" Venture
Fund, an international venture capital fund. Mr. Haft is also a director of
numerous other public and private corporations. From 1989 until 1994, he was a
partner of Parker Duryee Rosoff & Haft in New York, New York. He is currently of
counsel to such firm.
Tomas Kohn, a director since 1997, has been a professor of management at
Boston University's School of Management in the undergraduate, MBA, and
executive MBA programs since 1988. Dr. Kohn is the chairman of Conduit del
Ecuador, a steel tubing manufacturer, and a member of the board of
Ideal-Alambrec, a steel wire manufacturer, both in Quito, Ecuador. He has held
these positions since 1974 and 1972, respectively. From 1987 until our
acquisition of Computer Identics in 1996, Dr. Kohn was a member of Computer
Identics' board, and its chairman since 1992. From 1986 until 1995, Dr. Kohn was
a member of the board of N.V. Bekaert S.A., the world's largest independent
steel wire manufacturer. N.V. Bekaert was a major shareholder of Computer
Identics.
Donald J. Kramer was chairman of Acuity from 1994 until our acquisition of
Acuity in 1995, at which time he became one of our directors. Mr. Kramer served
as a director of Itran Corp. from 1982 until its merger with Automatix in 1994,
at which time the merger survivor assumed the Acuity name. Mr. Kramer is a
private investor and was a special limited partner of TA Associates, a private
equity capital firm located in Boston, Massachusetts, from January 1990 to March
1996. For the previous five years, Mr. Kramer was a general partner of TA
Associates. In January 1997, Mr. Kramer was elected to the board of
publicly-owned Micro Component Technology, Inc.
Mark J. Lerner, a director since 1994, has been president of Morgen, Evan &
Company, Inc., an investment banking firm which focuses on Japanese-U.S.
transactions, since 1992. Previously 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.
Robert H. Walker, a director since 1990, was, before his retirement in
March 1998, our executive vice president and secretary-treasurer, a position he
had held since 1986. From 1984 to 1986 he was our senior vice president. From
1983 to 1985 he also served as our treasurer. Mr. Walker is also a director of
Tel Instrument Electronics Corporation, a publicly-owned company.
32
<PAGE> 36
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
dated as of February , 2000, the underwriters named below have severally
agreed to purchase, and we have agreed to sell to them, the aggregate number of
shares set forth opposite their respective names:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------ ----------------
<S> <C>
ING Barings LLC.............................................
Prudential Securities Incorporated..........................
McDonald Investments Inc....................................
Total.......................................................
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to the approval of certain legal matters by counsel and
various other conditions. The nature of the underwriters' obligations is such
that they are committed to purchase all of the above shares if any are
purchased.
The underwriters propose to offer the shares in part directly to the public
at the public offering price set forth on the cover page of this prospectus and
in part to certain dealers at such price less a concession not in excess of
$ per share. The underwriters may allow, and such dealers may re-allow, a
concession not in excess of $ per share to certain other dealers. After the
offering, the offering price and other selling terms may be changed by the
underwriters.
The following table shows the fees to be paid to the underwriters by us in
connection with this offering. These amounts are shown assuming both no exercise
and full exercise of the underwriters' option to purchase additional shares of
common stock.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share................................................... $ $
Total....................................................... $ $
</TABLE>
Other expenses of this offering to be paid by us are expected to be
approximately $1.0 million.
We have granted the underwriters an option exercisable for 30 days after
the date of this prospectus to purchase up to an aggregate of 750,000 additional
shares of common stock to cover over-allotments, if any. If the underwriters
exercise the over-allotment option, the underwriters have severally agreed,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares to be purchased by each of them, as shown in
the foregoing table, bears to the shares of common stock offered.
In connection with this offering, certain underwriters may engage in
passive market making transactions in the common stock on the Nasdaq National
Market immediately prior to the commencement of sales in this offering in
accordance with Rule 103 of Regulation M. Passive market making consists of
displaying bids on the Nasdaq National Market limited by the bid prices of
independent market makers and making purchases limited by such prices and
effected in response to order flow. Net purchases by a passive market maker on
each day are limited to a specified percentage of the passive market maker's
average daily trading volume in the common stock during a specified period and
must be discontinued when such limit is reached. Passive market making may
stabilize the market price of the common stock at a level above that which might
otherwise prevail and, if commenced, may be discontinued at any time.
Certain persons participating in the offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the shares of common stock at levels above those which might otherwise prevail
in the open market, including by entering stabilizing bids or effecting
33
<PAGE> 37
syndicate covering transactions. A stabilizing bid means the placing of any bid
or the effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the shares of common stock. A syndicate covering
transaction means the placing of any bid on behalf of the underwriting syndicate
or the effecting of any purchase to reduce a short position created in
connection with the offering. Such transactions may be effected on the Nasdaq
National Market, in the over-the-counter market, or otherwise. Such stabilizing,
if commenced, may be discontinued at any time.
We have agreed that, for 180 days following the date of this prospectus, we
will not, without the prior written consent of ING Barings LLC, directly or
indirectly, offer for sale, sell, contract to sell, or grant any option to
purchase or otherwise dispose of any shares of common stock, except that we may
grant options under our stock option plan, issue shares of common stock pursuant
to the exercise of outstanding options and warrants and issue shares of common
stock (or options or other rights to purchase shares of common stock) in
connection with any acquisitions we may complete during such 180 day period.
We have agreed to indemnify the underwriters against certain liabilities,
including under the Securities Act of 1933, or to contribute to payments that
the underwriters may be required to make in respect thereof.
Our common stock is listed for trading on the Nasdaq National Market under
the symbol "ROBV."
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Cooperman Levitt Winikoff Lester & Newman, P.C., New York, New York. Certain
legal matters relating to this offering will be passed upon for the underwriters
by Clifford Chance Rogers & Wells LLP, New York, New York.
EXPERTS
The consolidated financial statements and the related financial statement
schedule of Robotic Vision Systems, Inc. and subsidiaries as of September 30,
1999 and 1998, and for each of the three years in the period ended September 30,
1999, included and incorporated by reference in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports which are included and incorporated by reference herein, and have been
so included in reliance upon the report(s) of such firm given upon their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 with the Securities and
Exchange Commission relating to the common stock offered hereby. This prospectus
does not contain all of the information set forth in the registration statement
and the exhibits and schedules to the registration statement. Statements
contained in this prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance we refer
you to the copy of the contract or other document filed as an exhibit to the
registration statement, each such statement being qualified in all respects by
such reference.
For further information with respect to Robotic Vision Systems, Inc. and
the common stock offered by this prospectus, we refer you to the registration
statement, exhibits and schedules. A copy of the registration statement may be
inspected by anyone without charge at the public reference facilities maintained
by the SEC in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549;
34
<PAGE> 38
the Chicago Regional Office, Suite 1400, 500 West Madison Street, Citicorp
Center, Chicago, Illinois 60661; and the New York Regional Office, Suite 1300, 7
World Trade Center, New York, New York 10048. Copies of all or any part of the
registration statement may be obtained from the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the
prescribed fees. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The registration
statement is also available through the SEC's Web site at the following address:
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus and information we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made by us with the SEC under
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until
the sale of all of the shares of common stock that are part of this offering.
The documents we are incorporating by reference are as follows:
- our Annual Report on Form 10-K for the year ended September 30, 1999;
- the description of our common stock contained in our registration
statement on Form 8-A (Registration No. 0-8623) and in our Current Report
on Form 8-K dated May 20, 1998, including any amendments or reports filed
for the purpose of updating that description; and
- our Proxy Statement, filed on May 5, 1999.
Any statement contained in a document that is incorporated by reference
will be modified or superseded for all purposes to the extent that a statement
contained in this prospectus (or in any other document that is subsequently
filed with the SEC and incorporated by reference) modifies or is contrary to
that previous statement. Any statement so modified or superseded will not be
deemed a part of this prospectus except as so modified or superceded.
You may request a copy of these filings at no cost by writing or
telephoning our investor relations department at the following address and
number:
Robotic Vision Systems, Inc.
5 Shawmut Road
Canton, Massachusetts 02021
(781) 821-0830
35
<PAGE> 39
ROBOTIC VISION SYSTEMS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets at September 30, 1999 and
September 30, 1998.......................................... F-3
Consolidated Statements of Operations for the Years Ended
September 30, 1999, 1998 and 1997......................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended September 30, 1999, 1998 and 1997............. F-5
Consolidated Statements of Comprehensive Income (Loss) for
the Years Ended September 30, 1999, 1998 and 1997......... F-6
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1999, 1998 and 1997......................... F-7
Notes to Consolidated Financial Statements.................. F-8
Schedule II -- Valuation and Qualifying Accounts and
Reserves.................................................. F-28
</TABLE>
F-1
<PAGE> 40
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Robotic Vision Systems, Inc.
Canton, MA
We have audited the accompanying consolidated balance sheets of Robotic
Vision Systems, Inc. and subsidiaries (the "Company") as of September 30, 1999
and 1998, and the related consolidated statements of operations, comprehensive
income (loss), stockholders' equity, and cash flows for each of the three years
in the period ended September 30, 1999. Our audits also included the financial
statement schedule listed in the Index on Page F-1. These financial statements
and financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Robotic Vision Systems, Inc.
and subsidiaries at September 30, 1999 and 1998, and the results of their
operations, and their cash flows for each of the three years in the period ended
September 30, 1999 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 27, 1999
F-2
<PAGE> 41
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 6,293 $ 2,421
Accounts receivable, net.................................. 37,502 32,367
Inventories............................................... 32,553 36,213
Prepaid expenses and other current assets................. 1,288 1,226
--------- ---------
Total current assets.............................. 77,636 72,227
Plant and equipment, net.................................. 12,281 17,591
Deferred income taxes..................................... 8,820 8,820
Goodwill, net of accumulated amortization of $1,434 and
$840................................................... 5,250 5,847
Software development costs, net........................... 13,965 11,812
Other assets.............................................. 5,249 5,274
--------- ---------
$ 123,201 $ 121,571
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of long-term debt....... $ 35,627 $ 38,038
Accounts payable.......................................... 21,093 21,388
Accrued expenses and other current liabilities............ 16,531 22,289
--------- ---------
Total current liabilities......................... 73,251 81,715
Long-term debt............................................ 2,855 3,059
--------- ---------
Total liabilities................................. 76,106 84,774
Commitments and contingencies (Note 10)...................
Prepaid warrants.......................................... 9,105 --
Stockholders' Equity:
Common stock, $0.01 par value; shares authorized
1999 -- 75,000 shares and 1998 -- 50,000; issued and
outstanding 1999 -- 27,354 and 1998 -- 24,870.......... 274 249
Additional paid-in capital................................ 179,466 168,493
Accumulated deficit....................................... (141,683) (131,962)
Accumulated other comprehensive income.................... (67) 17
--------- ---------
Total stockholders' equity........................ 37,990 36,797
--------- ---------
$ 123,201 $ 121,571
========= =========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 42
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues.................................................. $128,230 $169,007 $169,342
Cost of revenues.......................................... 71,526 113,005 93,847
-------- -------- --------
Gross profit.............................................. 56,704 56,002 75,495
-------- -------- --------
Operating costs and expenses:
Research and development expenses......................... 20,533 28,121 25,465
Selling, general and administrative expenses.............. 44,599 58,877 48,259
Merger expenses........................................... -- 623 69
Severance and other charges............................... 255 6,615 --
-------- -------- --------
Income (loss) from operations............................. (8,683) (38,234) 1,702
Gain on sale of assets.................................... (2,985) -- --
Interest expense.......................................... 3,959 2,363 1,076
Interest income........................................... (399) (92) (767)
-------- -------- --------
Income (loss) before income taxes......................... (9,258) (40,505) 1,393
Provision (benefit) for income taxes...................... -- -- 745
-------- -------- --------
Net income (loss)......................................... (9,258) (40,505) 648
Premium on prepaid warrants............................... 463 -- --
-------- -------- --------
Net income (loss) attributable to common stockholders..... $ (9,721) $(40,505) $ 648
======== ======== ========
Net income (loss) per share:
Basic................................................... $ (0.38) $ (1.65) $ 0.03
Diluted................................................. $ (0.38) $ (1.65) $ 0.03
Weighted Average shares:
Basic................................................... 25,669 24,613 23,718
Diluted................................................. 25,669 24,613 23,967
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE> 43
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------ ACCUMULATED
NUMBER ADDITIONAL UNREALIZED OTHER TOTAL
OF PAID-IN ACCUMULATED GAIN ON COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT INVESTMENTS INCOME EQUITY
--------- ------ ---------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 1, 1996......... 23,332 $233 $157,607 $ (94,549) $ 147 $ 175 $ 63,613
Shares issued in connection with
the exercise of stock options
and warrants.................... 384 4 1,839 -- -- -- 1,843
Other stock transactions......... (104) (1) (488) -- -- -- (489)
Shares issued in connection with
private placement, net of
offering costs.................. 826 8 7,665 -- -- -- 7,673
Change in year end of pooled
companies....................... -- -- -- 2,444 -- -- 2,444
Change in net unrealized holding
gains........................... -- -- -- -- (147) -- (147)
Translation adjustment........... -- -- -- -- -- (8) (8)
Net income....................... -- -- -- 648 -- -- 648
------ ---- -------- --------- ----- ----- --------
BALANCE, SEPTEMBER 30, 1997...... 24,438 244 166,623 (91,457) -- 167 75,577
Shares issued in connection with
the exercise of stock options
and warrants.................... 161 2 373 -- -- -- 375
Shares issued in connection with
license agreement and non-
competition agreement........... 271 3 1,497 -- -- -- 1,500
Translation adjustment........... -- -- -- -- -- (150) (150)
Net loss......................... -- -- -- (40,505) -- -- (40,505)
------ ---- -------- --------- ----- ----- --------
BALANCE, SEPTEMBER 30, 1998...... 24,870 249 168,493 (131,962) -- 17 36,797
Shares issued in conjunction with
the exercise of stock options
and warrants.................... 111 1 168 -- -- -- 169
Shares issued in connection with
private placement, net of
offering costs.................. 2,373 24 5,807 -- -- -- 5,831
Warrants issued in connection
with private placement, net of
offering costs.................. -- -- 4,898 -- -- -- 4,898
Warrants issued for professional
services........................ -- -- 100 -- -- -- 100
Amortization of warrant
premium......................... -- -- -- (463) -- -- (463)
Translation adjustment........... -- -- -- -- -- (84) (84)
Net loss......................... -- -- -- (9,258) -- -- (9,258)
------ ---- -------- --------- ----- ----- --------
BALANCE, SEPTEMBER 30, 1999...... 27,354 $274 $179,466 $(141,683) $ -- $ (67) $ 37,990
====== ==== ======== ========= ===== ===== ========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE> 44
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
------- -------- ----
<S> <C> <C> <C>
Net income (loss)........................................... $(9,258) $(40,505) $648
Foreign currency translation adjustment..................... (84) (150) (8)
------- -------- ----
Comprehensive net income (loss)............................. $(9,342) $(40,655) $640
======= ======== ====
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE> 45
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $(9,721) $(40,505) $ 648
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Deferred income taxes..................................... -- -- (93)
Depreciation and amortization............................. 10,771 8,769 5,895
Gain on sale of assets.................................... (2,985) -- (812)
Other..................................................... -- (164) (218)
Changes in operating assets and liabilities (net of
effects of business acquired):
Accounts receivable..................................... (5,135) 18,196 (20,084)
Inventories............................................. 3,660 2,882 (14,093)
Prepaid expense and other current assets................ (62) 203 (514)
Other assets............................................ (57) 373 31
Accounts payable........................................ (295) (1,932) 10,709
Accrued expenses and other current liabilities.......... (5,758) 850 4,722
Other liabilities....................................... -- -- (82)
------- -------- --------
Net cash used in operating activities................... (9,582) (11,328) (13,891)
------- -------- --------
INVESTING ACTIVITIES:
Proceeds from maturity of investments....................... -- -- 2,319
Additions to plant and equipment, net....................... (2,885) (9,137) (7,915)
Additions to software development costs..................... (4,927) (7,397) (4,842)
Proceeds from sale of assets................................ 4,229 -- 952
Payment for purchase of business............................ -- -- (3,144)
------- -------- --------
Net cash used in investing activities................... (3,583) (16,534) (12,630)
------- -------- --------
FINANCING ACTIVITIES:
Proceeds from the issuance of common stock and
warrants -- private equity placement (less offering
costs).................................................... 19,372 -- 7,673
Proceeds from the exercise of stock options and warrants.... 168 375 1,271
Purchase of treasury stock.................................. -- -- (650)
Net proceeds from (payments of) short-term borrowings....... (2,411) 28,911 (2,833)
Proceeds from long-term borrowings.......................... -- -- 8,000
Repayment of long-term borrowings........................... (204) (7,828) (1,864)
------- -------- --------
Net cash provided by financing activities............... 16,925 21,458 11,597
------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS............................................... 112 14 189
------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 3,872 (6,390) (14,735)
CASH AND CASH EQUIVALENTS:
Beginning of year......................................... 2,421 8,811 23,546
------- -------- --------
End of year............................................... $ 6,293 $ 2,421 $ 8,811
======= ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................................... $ 2,937 $ 2,311 $ 1,027
======= ======== ========
Taxes paid.................................................. $ -- $ 244 $ 218
======= ======== ========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock and subordinated note payable in
connection with technology license agreement and
non-competition agreement................................. -- $ 3,750 --
======= ======== ========
Income tax benefit relating to the exercise of stock
options................................................... -- $ 16 $ 572
======= ======== ========
Liabilities incurred in connection with acquisition of
business.................................................. -- -- $ 902
======= ======== ========
Property and equipment acquired under capital leases........ -- -- $ 22
======= ======== ========
</TABLE>
See notes to consolidated financial statements
F-7
<PAGE> 46
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
A. DESCRIPTION OF BUSINESS
Robotic Vision Systems, Inc. ("RVSI") and subsidiaries (the "Company")
designs, manufactures, markets and sells automated one dimensional ("1-D"), two
dimensional ("2-D") and three dimensional ("3-D") machine vision based products
and systems for inspection, measurement and identification and is a leader in
advanced electro-optical sensor technology.
B. OPERATIONS
The Company incurred net losses of $9.3 million and $40.5 million for the
fiscal years ended September 30, 1999 and 1998, respectively, primarily
attributable to the worldwide downturn in demand for semiconductor capital
equipment which began in March 1998 and continued through the first half of
calendar 1999. Primarily during fiscal 1998, management took a series of steps
to reduce expenses and restructure operations in response to this downturn.
At September 30, 1999, the Company owed $35.3 million to its bank lenders.
The indebtedness is collateralized by substantially all of the Company's assets.
The Company has not been in compliance with certain of the financial covenants
contained in the agreement with the banks. This has required the Company to
periodically request waivers of these covenants or amendments of the agreement.
In March 1999, the agreement was amended to conform the financial covenants to
the Company's operating plans. Through September 30, 1999, the Company was in
compliance with the revised covenants. The bank agreement expires on March 17,
2000 and the Company must either repay or replace this indebtedness or negotiate
an extension of the agreement.
Management is continuing to control expenses, inventory levels and capital
expenditures and is pursuing a number of new debt and/or equity financing
alternatives. Management believes that through a combination of new financings
and/or extension of the existing loan agreement, the Company will have
sufficient liquidity at least through September 30, 2000 to fund its cash
requirements.
C. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of
RVSI and its subsidiaries, all of which are wholly-owned. All significant
intercompany transactions and balances have been eliminated in consolidation.
The effects of changes in fiscal years of pooled companies (Vanguard Automation,
Inc. in fiscal 1998 and Systemation Engineered Products, Inc. and Computer
Identics Corporation in fiscal 1996) are recorded as adjustments to accumulated
deficit.
D. REVENUES AND COST OF REVENUES
The Company recognizes revenue upon shipment. Warranty costs associated
with products sold with warranty protection, as well as other post-contract
support obligations, are estimated based on the Company's historical experience
and recorded in the period the product is sold.
F-8
<PAGE> 47
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
E. CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes money market accounts and certain debt
securities issued by the United States government purchased with an original
maturity of three months or less.
F. INVENTORIES
Inventories are stated at the lower of cost (using the first-in, first-out
cost flow assumption) or market.
G. PLANT AND EQUIPMENT
Plant and equipment is recorded at cost less accumulated depreciation and
amortization. Depreciation is computed by the straight-line method over
estimated lives ranging from two to eight years. Leasehold improvements are
amortized over the lesser of their respective estimated useful lives or lease
terms.
H. INTANGIBLE ASSETS
Goodwill is being amortized over 15 years; a technology license and
non-competition agreement are being amortized over 10 years. The Company reviews
its long-lived assets, including goodwill and other identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be fully recoverable. A review for
impairment includes comparing the carrying value of an asset to an estimate of
the undiscounted net future cash inflows over the life of the asset. An asset is
considered to be impaired when the carrying value exceeds the calculation of the
undiscounted net future cash inflows or fair market value. An impairment loss is
defined as the amount of the excess of the carrying value over the fair market
value of the asset.
I. SOFTWARE DEVELOPMENT COSTS
Software development costs are capitalized in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 86. Such costs are capitalized only
to the extent of costs of producing product masters subsequent to the
establishment of their technological feasibility and capitalization ends when
the product is available for general release to customers. Capitalized software
development costs are amortized over the estimated useful lives (generally five
years) on a straight-line basis or the ratio of current revenues to total
expected revenues in a product's expected life, if greater. Amortization begins
in the period in which the related product is available for general release to
customers. The Company reviews the unamortized capitalized costs of its
underlying products to the net realizable value of these products. An impairment
loss is recorded in an amount by which the unamortized capitalized costs of a
computer software product exceeds the net realizable value of that asset.
Certain software development costs totaling $4,927, $7,397 and $4,842 have been
capitalized during the fiscal years ended September 30, 1999, 1998 and 1997
respectively. Amortization expense relating to software development costs for
the fiscal years ended September 30, 1999, 1998, and 1997 was $2,775, $2,072,
and $962, respectively.
F-9
<PAGE> 48
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
J. RESEARCH AND DEVELOPMENT COSTS
The Company charges research and development costs for Company-funded
projects to operations as incurred.
K. INCOME TAXES
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes," which requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have
been included in the Company's consolidated financial statements or tax returns.
Under this method, deferred tax assets and liabilities are determined based on
the differences between the financial accounting and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
L. FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's European subsidiaries 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 (losses) are
included in net income and totaled $(163), $106 and $(267) in 1999, 1998 and
1997, respectively.
M. NET INCOME (LOSS) PER COMMON SHARE
Basic income (loss) per common share is computed using the weighted average
number of common shares outstanding during each year. Diluted net income per
common share reflects the effect of the Company's outstanding options and
warrants (using the treasury stock method), except where such options would be
anti-dilutive.
N. 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) Receivables -- The carrying amount approximates fair value because of
the short maturity of these instruments.
c) Debt -- The carrying amounts approximate fair value based on borrowing
rates currently available to the Company for loans with similar terms.
d) Prepaid warrant -- At September 30, 1999, the value of the shares into
which the prepaid warrant was exercisable was $12,311.
O. 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
F-10
<PAGE> 49
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
of assets and liabilities and disclosure of contingent 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.
P. RECLASSIFICATIONS
Certain amounts in the 1997 and 1998 financial statements have been
reclassified to conform with the 1999 presentation.
Q. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" as amended, and is effective for the Company
in the first quarter of fiscal year 2001. SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including derivative
instruments embedded in other contracts, and for hedging activities. The Company
is evaluating the effects of adoption of SFAS No. 133 on its consolidated
financial statements.
2. ACQUISITIONS
A. VANGUARD AUTOMATION, INC.
On December 9, 1997, the Company acquired the outstanding shares of
Vanguard Automation, Inc. ("Vanguard") for approximately 3,391 shares of the
Company's common stock, having a market value at the date of the merger of
approximately $45,776. Outstanding Vanguard stock options were converted into
stock options to purchase approximately 152 shares of the Company's common
stock. Outstanding Vanguard warrants were converted into warrants to purchase
approximately 182 shares of the Company's common stock. Vanguard produces and
markets automated manufacturing equipment used in the assembly of certain types
of semiconductor packaging processes, including ball grid array and chip scale
packages. 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 Vanguard for all periods presented. Expenses of $623, relating
primarily to investment banking, legal and accounting fees, were incurred
relating to this merger and charged to expense in fiscal 1998.
Detailed below is the effect on the Company's results of operations for
fiscal 1997 as a result of the Company's acquisition of Vanguard.
<TABLE>
<CAPTION>
AS PREVIOUSLY
REPORTED VANGUARD ELIMINATION COMBINED
------------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues............................. $152,103 $18,218 $(979) $169,342
Net income (loss).................... 8,245 (7,511) (86) 648
Net income per share -- diluted...... 0.38 0.03
</TABLE>
B. TRIGON
On June 30, 1997, the Company acquired Trigon Technologies, Inc.
("Trigon"), a privately owned company located in Farmington Hills, Michigan.
Trigon markets a line of 2-D machine vision
F-11
<PAGE> 50
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. ACQUISITIONS -- (CONTINUED)
products for the semiconductor industry. The purchase price was $3,000 in cash
plus contingent consideration based upon the sales level of certain products
sold by Trigon, over a five-year period.
This acquisition has been accounted for as a purchase and, accordingly, the
results of Trigon are included in the consolidated statements of operations of
the Company since the date of acquisition and the purchase price (including
acquisition costs) has been allocated to net assets acquired based upon their
fair values. Goodwill relating to the acquisition of $2,997 is being amortized
over 15 years. The historical results of operations of Trigon were not material
to the operations of the Company.
C. SYSTEMATION ENGINEERED PRODUCTS, INC.
On October 1, 1996, the Company acquired the outstanding shares of
Systemation Engineered Products, Inc. ("Systemation") for 1,740 shares of the
Company's common stock, having a market value at the date of the merger of
approximately $22,838. Systemation designs manufactures, markets and sells
specialized high speed production machinery for the electronics component
industry. Systemation's product lines include tape and reel packaging equipment
and automatic optical inspection systems. This acquisition has been accounted
for as a pooling of interests. Expenses of $904 were incurred related to this
merger were included in the Consolidated Statement of Operations for fiscal
1997.
3. ACCOUNTS RECEIVABLE
Accounts receivable at September 30, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Total accounts receivable................................... $38,394 $33,367
Less allowance for doubtful accounts receivable............. (892) (1,000)
------- -------
Accounts receivables, net................................... $37,502 $32,367
======= =======
</TABLE>
As of September 30, 1999 and 1998, the Company had $1,053 and $2,444
respectively, of unbilled receivables primarily relating 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. All
unbilled receivables owed to the Company as of September 30, 1998 have been
collected. The Company believes that all of its unbilled receivables at
September 30, 1999 will be billed and collected during the next twelve months.
F-12
<PAGE> 51
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. INVENTORIES
Inventories at September 30, 1999 and 1998 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Raw materials............................................... $16,817 $17,124
Work in process............................................. 7,360 10,429
Finished goods.............................................. 8,376 8,660
------- -------
Total.................................................. $32,553 $36,213
======= =======
</TABLE>
INVENTORY PROVISIONS -- During the third and fourth quarters of fiscal
1998, the Company took provisions of $4.5 million and $12.1 million,
respectively, primarily for excess and obsolete inventories related principally
to its semiconductor inspection and handling equipment. These provisions largely
reflected reduced demand of older generation products as a result of the severe
semiconductor industry downturn. The Company believes that the inventory
provisions taken in fiscal 1998 reduced the carrying value of inventories to
their appropriate net realizable value. These amounts have been recorded in cost
of sales in the accompanying consolidated financial statements. The inventory
balances at September 30, 1998, net of inventory provisions, contain older
generation products of approximately $4.5 million. Substantially all of the
older generation products were sold or disposed of in fiscal 1999.
5. INCOME TAXES
The components of income (loss) before income tax provision (benefit), for
the fiscal years ended September 30, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- -------- ------
<S> <C> <C> <C>
Domestic............................................. $(7,496) $(36,758) $2,114
Foreign.............................................. (1,762) (3,747) $ (721)
------- -------- ------
Total........................................... $(9,258) $(40,505) $1,393
======= ======== ======
</TABLE>
F-13
<PAGE> 52
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. INCOME TAXES -- (CONTINUED)
The income tax provision (benefit) for the fiscal years ended September 30,
1999, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1999 1998 1997
------- -------- -------
<S> <C> <C> <C>
Current:
Federal........................................... $ -- $ -- $ 737
State............................................. -- -- 110
Foreign........................................... -- -- (9)
------- -------- -------
-- -- 838
------- -------- -------
Deferred:
Federal........................................... (4,042) (18,044) 1,187
State............................................. (476) (2,140) 246
Change in valuation allowance..................... 4,518 20,184 (1,526)
------- -------- -------
-- -- (93)
------- -------- -------
Total.......................................... $ -- $ -- $ 745
======= ======== =======
</TABLE>
The income tax benefits related to the exercise of stock options reduces
taxes currently payable or increases net deferred tax assets, and is credited to
additional paid-in capital.
A reconciliation between the statutory U.S. Federal income tax rate and the
Company's effective tax rate for the fiscal years ended September 30, 1999, 1998
and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<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............... (4.0) (4.0) 13.7
Anticipated future utilization of net operating loss
carryforwards......................................... -- -- (88.9)
Net operating loss not producing current tax benefits... 34.0 34.6 203.5
Exempt income of foreign sales corporation.............. -- -- (55.1)
Worthless stock deduction relating to liquidation of
foreign subsidiaries.................................. -- -- (55.1)
Other -- net............................................ 4.0 3.4 1.4
----- ----- -----
Total.............................................. 0.0% 0.0% 53.5%
===== ===== =====
</TABLE>
The net deferred tax asset at September 30, 1999, 1998 and 1997 is
comprised of the following:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
DEFERRED TAX ASSETS (LIABILITIES):
Net operating loss carryforwards.................. $ 37,632 $ 27,257 $ 17,021
Tax credit carryforwards.......................... 2,109 2,315 2,655
Accrued liabilities............................... 1,257 2,754 2,277
Inventories....................................... 3,325 6,899 2,427
Receivables....................................... 372 418 1,078
</TABLE>
F-14
<PAGE> 53
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. INCOME TAXES -- (CONTINUED)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Property and equipment............................ 885 361 (129)
Merger expenses................................... -- 329 271
Software development costs........................ (4,293) (3,538) (2,043)
Other............................................. 30 4 176
-------- -------- --------
41,317 36,799 23,733
Less valuation allowance........................ (32,497) (27,979) (14,913)
-------- -------- --------
Total........................................ $ 8,820 $ 8,820 $ 8,820
======== ======== ========
</TABLE>
As of September 30, 1999, the Company had U.S. Federal net operating loss
carryforwards of approximately $95,327 of which $29,972 are subject to annual
limitations because of the changes in ownership, as defined in the Internal
Revenue Code. Such loss carryforwards expire in the fiscal years 2000 through
2014. 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. The Company has recorded a valuation allowance
to reduce the net deferred tax asset to an amount that management believes is
more likely than not to be realized. The change in the valuation allowance in
fiscal 1999 relates primarily to the fiscal 1999 operating loss.
6. PLANT AND EQUIPMENT
Plant and equipment at September 30, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Land........................................................ $ -- $ 490
Machinery and equipment..................................... 12,584 10,475
Furniture, fixtures and other equipment..................... 13,043 13,163
Demonstration equipment..................................... 4,880 7,531
Leasehold improvements...................................... 2,595 2,492
-------- --------
Total.................................................. 33,102 34,151
Less accumulated depreciation and amortization.............. (20,821) (16,560)
-------- --------
Plant and equipment -- net................................ $ 12,281 $ 17,591
======== ========
</TABLE>
F-15
<PAGE> 54
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities at September 30, 1999 and
1998 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Accrued wages and related employee benefits................. $ 4,285 $ 5,948
Accrued sales commissions................................... 3,538 5,468
Advance contract payments received.......................... 2,705 1,216
Accrued warranty and other product related costs............ 1,448 2,826
Accrued severance and other charges......................... 255 2,099
Other....................................................... 4,300 4,732
------- -------
Total.................................................. $16,531 $22,289
======= =======
</TABLE>
SEVERANCE AND OTHER CHARGES -- During fiscal 1998, the Company took
multiple steps to reduce its expenses and to lower the level of revenues
necessary for break-even results of operations. As a result of these steps, the
Company recorded a total of $6.6 million in charges in fiscal 1998.
The Company terminated approximately 350 employees at a cost of $3.8
million. Of the $3.8 million, approximately $2.4 million was paid in cash to
employees prior to September 30, 1998. An additional $1.5 million was recorded
for costs associated with changing distributors in Asia. The charge was recorded
in the quarter ended March 31, 1998. Of this charge, $1.0 million represents the
write-off of the Company's investment in its bankrupt Korean distributor. The
Company terminated its business relationship with the distributor after such
distributor could no longer meet its commitment to service the Company's
existing installed base of customers in Korea nor meet the Company's sales
goals. The remaining charge represents termination of the distributor of the
Company's product in Japan. The terms of an agreement to end the Company's
business relationship with the Japanese distributor were reached at the end of
the Company's second fiscal quarter. Under this agreement, the Company was to
repurchase from the distributor certain demonstration equipment used in selling
the Company's product and settle outstanding commitments of the distributor. The
approximately $0.5 million charge represents the Company's liability under the
agreement, net of the realizable value of assets recovered from the Japanese
distributor.
The charges also included a $1.1 million non-cash write-down of previously
capitalized software costs associated with currently inactive products and $0.2
million in costs associated with the consolidation of Acuity and CiMatrix
operations.
The components of the severance and other charges, related fiscal 1998
expenditures and remaining liability at September 30, 1999 are detailed below:
<TABLE>
<CAPTION>
ACCRUED ACCRUED
SEPTEMBER 30, CASH SEPTEMBER 30,
1998 EXPENDITURES 1999
------------- ------------ -------------
<S> <C> <C> <C>
Severance payments to employees........... $1,384 $1,384 $ --
Costs for changes in Asia distributors.... 500 245 255
Costs to consolidate Acuity CiMatrix
operations.............................. 215 215 --
------ ------ ----
Total................................ $2,099 $1,844 $255
====== ====== ====
</TABLE>
F-16
<PAGE> 55
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES -- (CONTINUED)
The Company expects that the remaining balance at September 30, 1999 will
be paid in cash during fiscal 2000. Severance and other charges were $0.3
million for the year ended September 30, 1999. These charges relate to
reductions in personnel, particularly in Europe. The 1999 severance and other
charges were paid out in fiscal 1999, no amount were accrued as of September 30,
1999.
8. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt at September 30, 1999 and 1998 consisted
of the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Lines of credit with domestic banks(a)...................... $ 35,325 $ 37,500
Subordinated note payable(b)................................ 2,250 2,250
Other borrowings............................................ 907 1,347
-------- --------
Total notes payable and long-term debt................. 38,482 41,097
Less notes payable and current portion of long-term debt.... (35,627) (38,038)
-------- --------
Long-term debt.............................................. $ 2,855 $ 3,059
======== ========
</TABLE>
- -------------------------
a. In March 1998, the Company entered into a $37,500 revolving credit
agreement with three domestic banks, which replaced $19,500 in existing
lines of credit and $6,900 outstanding under a term loan. In the third
quarter of fiscal 1999, the agreement was amended to waive compliance
with certain financial covenants of the agreement through March 31, 1999
and establish new financial covenants for the balance of the term of the
agreement. The amended agreements expires on March 17, 2000 and
borrowings under the agreement bears interest at prime rate plus 2% or
10.25% as of September 30, 1999. Borrowings are collateralized by
substantially all of the domestic tangible and intangible assets of the
Company. The amended agreement, among other things, contains certain
financial covenants, including minimum levels of profitability, liquidity
and net worth, with which the Company was in compliance at September 30,
1999. Borrowings under the agreement at September 30, 1999, have been
classified as current. Average borrowings during fiscal 1999 were
$36,420. The average interest rate on borrowings was approximately 10.0%
during fiscal 1999. The Company is working to replace the revolving
credit agreement.
b. The subordinated note matures in June 2003, bears interest at prime
(8.25% at September 30, 1999) and is payable in equal quarterly
installments of $281 commencing September 12, 2001.
9. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PLAN -- The Company has a noncontributory pension plan for
certain employees hired prior to September 1996, and 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 mutual
funds, 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.
F-17
<PAGE> 56
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
The components of net pension cost for the fiscal years ended September 30,
1999, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Service cost -- benefits earned during the period......... $ 257 $ 286 $ 272
Interest on projected benefit obligations................. 164 164 135
Estimated return on plan assets........................... (128) (167) (117)
Other -- amortization of actuarial gains and net
transition asset........................................ 23 (12) (15)
----- ----- -----
Net pension cost.......................................... $ 316 $ 271 $ 275
===== ===== =====
</TABLE>
The funded status of the plan compared with the accrued expense included in
the Company's consolidated balance sheet at September 30, 1999 and 1998 is as
follows:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Reconciliation of benefit obligation
Obligation at October 1................................... $2,157 $2,186
Service cost.............................................. 257 286
Interest cost............................................. 164 164
Plan amendment............................................ 68 0
Actuarial (gain) loss..................................... 5 279
Benefit payments.......................................... (535) (27)
Curtailments.............................................. -- (33)
Settlements............................................... -- (698)
------ ------
Obligation at September 30................................ $2,166 $2,157
====== ======
Reconciliation of fair value of plan assets
Fair value of plan assets at October 1.................... $1,548 $1,861
Actual return on plan assets.............................. 199 153
Employer contributions.................................... 42 259
Benefit payments.......................................... (535) (27)
Settlements............................................... 0 (698)
------ ------
Fair value of plan assets at September 30................. $1,254 $1,548
====== ======
Funded status
Funded status at September 30............................. (912) (609)
Unrecognized transition (assets) obligation............... 0 0
Unrecognized prior service cost........................... 73 14
Unrecognized (gain) loss.................................. 277 307
------ ------
Net amount recognized, before additional minimum
liability.............................................. $ (562) $ (288)
====== ======
</TABLE>
F-18
<PAGE> 57
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
Significant assumptions used in determining net periodic pension cost and
related pension obligations are as follows:
<TABLE>
<CAPTION>
1999 1998
----- -----
<S> <C> <C>
Discount rate............................................... 7.25% 7.25%
Rate of compensation increase............................... 4.00% 4.00%
Expected long-term rate of return on assets................. 8.25% 8.25%
</TABLE>
DEFINED CONTRIBUTION PLANS -- The Company has four defined contribution
plans (the "Plans") for all eligible employees, as defined by the Plans. The
Company made matching employer contributions at various percentages in
accordance with the respective plan documents. The Company incurred $645, $747
and $604 for matching employer contributions to the Plans in 1999, 1998 and
1997, respectively.
10. 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>
FISCAL YEAR ENDING SEPTEMBER 30: FACILITIES EQUIPMENT TOTAL
-------------------------------- ---------- --------- -------
<S> <C> <C> <C>
2000............................................... $ 2,886 $367 $ 3,253
2001............................................... 1,894 263 2,157
2002............................................... 1,403 67 1,470
2003............................................... 1,210 4 1,214
2004............................................... 818 3 821
Thereafter......................................... 7,613 -- 7,613
------- ---- -------
Total......................................... $15,824 $704 $16,528
======= ==== =======
</TABLE>
Rent expense for the fiscal years ended September 30, 1999, 1998 and 1997
was $3,400, $3,305 and $3,015, respectively.
F-19
<PAGE> 58
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
LITIGATION -- In June 1998, RVSI and General Scanning Inc, now known as GSI
Lumonics, Inc. ("GSI"), executed a settlement agreement of RVSI's claims arising
out of GSI's acquisition of View Engineering, Inc. ("View"). In August 1996,
RVSI claimed that GSI used improperly obtained information in connection with
the acquisition. GSI denied all such claims. Under the settlement agreement, GSI
has agreed not to compete for ten years in the inspection of interconnect leads
of semiconductor packages. Under the settlement, GSI licensed to RVSI its 2-D
and 3-D vision technology solely and exclusively for RVSI's use in the
interconnection leads. In consideration for the technology license and
non-competition agreement, RVSI agreed to pay GSI $3.75 million, of which $1.50
million represented approximately 271 shares of the Company's common stock and
$2.25 million in a subordinated note payable with a maturity date of five years.
The Company, as plaintiff, was a party to two actions in the United States
District Court for the Central District of California against View, alleging
infringement by View of a number of the Company's patents relating to View's
assembly and distribution of View's own 3-D machine vision products. In June
1998, the Court, in the first of these actions, involving the coplanarity
inspection of ball grid array semiconductor package substrates, found
infringement by View and granted the Company's request for injunctive relief
against View. This ruling has been appealed by View to the United States Appeals
Court for the Federal Circuit. The second of these actions, in which GSI was
also a defendant, involving the "in-tray" inspection of semiconductor packages
came to trial in November 1999 and is awaiting decision.
The Company is presently involved in other litigation matters in the normal
course of business. Based upon discussion with Company's legal counsel,
management does not expect that these matters will have a material adverse
impact on the Company's consolidated financial statements.
11. STOCKHOLDERS' EQUITY
WARRANTS OUTSTANDING -- As of September 30, 1999, there were warrants
outstanding to purchase approximately 9,078 shares of the Company's common stock
as described below:
<TABLE>
<CAPTION>
PROCEEDS
ON
DATE ISSUED QUANTITY EXERCISE EXPIRATION DATE
- ----------- -------- ----------- ----------------------------
<S> <C> <C> <C>
COMMON STOCK PURCHASE WARRANTS
December 1999--September
a. December 1993--September 1998........... 284 $ 2,852 2002
b. February 1999........................... 1,247 4,938 February 2004
c. April 1999.............................. 750 2,970 April 2004
d. April 1999.............................. 327 1,297 April 2004
e. July 1999............................... 3,091 12,425 July 2004
f. July 1999............................... 150 750 July 2004
----- -------
5,849 $25,232
=======
<CAPTION>
PREPAID WARRANTS
- ----------------
<S> <C> <C> <C>
b. February 1999........................... 3,229 February 2004
-----
9,078
=====
</TABLE>
- -------------------------
a. Warrants issued in various transactions having an exercise price of between
$2.57 and $24.43.
b. The Company issued in February 23, 1999 private placement of its equity,
prepaid common stock purchase warrants and common stock purchase warrants.
See "Prepaid and incentive warrants" for more details.
F-20
<PAGE> 59
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. STOCKHOLDERS' EQUITY -- (CONTINUED)
c. During the third quarter of fiscal 1999, the Company amended the credit
agreement with its banks and issued warrants to its lending banks covering
750 shares, at an exercise price of $3.96 per share, of which 250 warrants
are immediately exercisable. All, or a portion, of the remaining 500
warrants are only exercisable if the lending banks extend the credit
agreement beyond the original maturity date for pre-determined periods.
Using a Black-Scholes valuation model the Company valued the warrants at
approximately $600 which will be charged to income pro-rata over the term
of the credit agreement with respect to the 250 shares immediately
exercisable and over the extension, if any, with respect to the remaining
500 shares.
d. In April 1999, in conjunction with the sale of common stock, the Company
issued 5-year incentive warrants for approximately 327 shares of the
Company's common stock at an exercise price of $3.96 per share, subject to
anti-dilution adjustments. The incentive warrants are exercisable,
beginning 18 months after closing, at any time during their 5-year term.
e. In July 1999, the Company sold warrants to purchase approximately 3,090
shares of the Company's common stock at an exercise price of $4.02 per
share for proceeds of $4,250, in a private placement.
f. Warrants issued to placement agent in connection with the sale of warrants
and common stock.
PREPAID AND INCENTIVE WARRANTS -- On February 23, 1999, the Company
completed a private placement of its equity securities consisting of 5-year
prepaid common stock purchase warrants ("prepaid warrants") with a stated value
of $11,000 and 5-year incentive common stock purchase warrants ("incentive
warrants") to purchase approximately 592 shares of the Company's common stock
upon payment of an exercise price of $3.96 per share. These securities were sold
to four institutional investors. At the closing, the Company received gross
proceeds of $11,000 from the issuance of the prepaid warrants and incentive
warrants, and net proceeds of $9,763 after placement agent fees and other
expenses of the transaction. The Company also issued to the placement agent
5-year incentive warrants to purchase 630 shares of common stock at an exercise
price of $3.96 per share. The market price of the Company's common stock on the
placement closing date was $3.03 per share. As of September 30, 1999, there were
issued and outstanding $11,000 in stated value of prepaid warrants, plus accrued
premium of $463, and incentive warrants to purchase a total of approximately
1,222 shares of common stock.
Each prepaid warrant is exercisable at the lower of $3.96 per share or 95%
of the average of the three lowest closing bid prices of the Company's common
stock during the 20-day trading period ending on the date of notice of exercise.
On September 30, 1999, the exercise price would have been $3.55. The prepaid
warrants bear an annual premium of 7% per annum, payable in cash or, at the
Company's option, in shares of the Company's common stock, and are initially
exercisable, to the extent of 25% of the total number of shares issuable,
commencing on the 180th day (August 19, 1999) following their issuance,
increasing by increments of 25% every 90 days thereafter so that after the
passage of 450 days following the date of original issuance, the prepaid
warrants will have become fully exercisable. The incentive warrants are
exercisable at any time during their 5-year term.
The holders of the prepaid warrants can require that the Company redeem the
prepaid warrants in cash in the event of default by the Company under the
warrant agreement. An event of default as defined under the warrant agreement
includes failure to keep the Company's stock listed on a major exchange, failure
to file registration statements and to have such registration statements
declared effective, failure to make the shares underlying the warrants available
for exercise, merger into another entity where the Company is not the surviving
entity, bankruptcy proceedings, and failure to follow other material provisions
of the agreement.
F-21
<PAGE> 60
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. STOCKHOLDERS' EQUITY -- (CONTINUED)
In the event of a default the Company may be required to pay the greater of
105% of the stated value of the prepaid warrants inclusive of accrued but unpaid
premium or an amount based on the highest closing bid price of the Company's
common stock during the default period.
The prepaid warrants are subject to call at the Company's option if both,
during the 20-day trading day period immediately preceding the date of the
Company's notice of redemption the average closing bid price, and on the date of
the Company's notice of redemption the closing bid price, of the Company's
common stock is less than $3.96 per share, subject to anti-dilution adjustment,
at a cash price equal to 120% of the exercise amount of the prepaid warrants,
inclusive of earned premium, called for redemption. Such call right may be
exercised by the Company up to four times during the term of the prepaid
warrants. The prepaid warrants are also subject to redemption by the Company, at
the Company's option, if their exercise price falls below $2.50 per share. The
prepaid warrants have been recorded outside of stockholder's equity because the
warrant holders can require the Company to redeem the prepaid warrants under
certain circumstances outside the Company's control.
The incentive warrants have been included in stockholders' equity in the
amount of $1,120, which reflects their estimated fair value. The prepaid
warrants have been recorded at $8,643, which reflects the amount of the net
proceeds received for the issuance of the prepaid warrants and incentive
warrants, less the value assigned to the incentive warrants. The premium of $463
for the year ended September 30, 1999, on the prepaid warrant is included in the
net loss attributable to all common stockholders. Under accounting literature in
effect at the date of issue of the prepaid warrants, the exercise terms of the
prepaid warrants were not considered to be a beneficial conversion feature.
Had the accounting requirements of EITF 98-5, "Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios" ("EITF 98-5"), which is effective for instruments issued
after May 20, 1999, been in effect at the time of issuance of the prepaid
warrants, the exercise terms of the prepaid warrants would have been considered
a beneficial conversion feature and valued at approximately $1,120. This amount
would have been recorded as a discount to the amount recorded as prepaid
warrants and amortized over the period to initial exerciseability of the prepaid
warrants resulting in an increase of approximately $807 for the year ended
September 30, 1999 in net loss attributable to common shareholders.
STOCK OPTION PLANS -- The Company has several stock option 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. Such
options vest over a period of three to five years. 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.
Shares granted and canceled during fiscal 1998 include a stock option
re-pricing offered by the Company to existing stock option holders of
unexercised options of each of the Company's stock option plans, excluding
members of the Board of Directors and certain corporate officers. Options
granted prior to June 26, 1998 were eligible for replacement under the terms of
the stock option re-pricing. At their election, stock option holders could
surrender their unexercised stock options for a proportionately lower amount of
stock options, based on a formula, at an exercise price of $4.13 per share, the
fair value of the Company's common stock on June 26, 1998. A total of
approximately
F-22
<PAGE> 61
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. STOCKHOLDERS' EQUITY -- (CONTINUED)
2,169 options, with exercise prices ranging from $5.19 per share to $19.50 per
share, were canceled, and approximately 1,446 options were reissued at an
exercise price of $4.13 per share. Reissued stock options vest 40% on the
six-month anniversary of the replacement date and 60% on the date specified in
the original option grant. The expiration date of these reissued options are as
specified in the original option grant. The options were priced in excess of
market value on the measurement date and accordingly, no compensation was
recognized.
The following table sets forth summarized information concerning the
Company's options to purchase common stock:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE RANGE
--------- ------------
<S> <C> <C>
Options outstanding at October 1, 1996.................. 2,961 $0.53-$38.72
Granted............................................... 2,660 7.71- 19.00
Canceled or expired................................... (1,636) 0.81- 38.72
Exercised............................................. (293) 0.53- 15.34
------ ------------
Options outstanding at September 30, 1997............... 3,692 0.75- 34.42
Granted............................................... 2,943 3.19- 16.94
Canceled or expired................................... (2,926) 2.20- 34.42
Exercised............................................. (138) 0.75- 10.00
------ ------------
Options outstanding at September 30, 1998............... 3,571 1.00-19.38
Granted............................................... 1,424 2.00- 4.38
Canceled or expired................................... (1,038) 1.53-18.25
Exercised............................................. (48) 1.00- 3.75
------
Options outstanding at September 30, 1999............... 3,909 1.00-19.38
======
Options exercisable at September 30, 1999............... 1,211
======
September 30, 1998............. 548
======
Shares reserved for issuance at September 30, 1999...... 966
======
</TABLE>
Weighted average option exercise price information for the fiscal years
ended September 30, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----- ------ ------
<S> <C> <C> <C>
Outstanding at beginning of year......................... $6.94 $11.08 $12.14
Granted during the year.................................. 2.61 6.68 12.86
Exercised during the year................................ 2.19 2.36 4.14
Canceled, terminated and expired......................... 8.64 11.88 16.51
Exercisable at year end.................................. 4.74 7.12 5.86
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
For Stock Issued To Employees", and related interpretations in accounting for
its option plans. Accordingly, as all options have been granted at exercise
prices greater than or equal to fair market value on the date of grant, no
compensation expense has been recognized by the Company in connection with its
stock-
F-23
<PAGE> 62
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. STOCKHOLDERS' EQUITY -- (CONTINUED)
based compensation plans. Had compensation cost for the Company's stock option
plans been determined based upon the fair value at the grant date for awards
under these plans consistent with the methodology prescribed under Statement of
Financial Accounting Standards No. 123, "Accounting For Stock-Based
Compensation", the Company's net income (loss) and earnings per share would have
been reduced (increased) by approximately $(4,485), $(5,961) and $5,032 or
$(0.17), $(0.24) and $0.21 per share in fiscal 1999, 1998 and 1997,
respectively. The weighted average fair value of the options granted during
fiscal 1999, 1998 and 1997 is estimated at $2.01, $3.99 and $7.44 on the date of
grant (using Black-Scholes option pricing model) with the following weighted
average assumptions for fiscal 1999, 1998 and 1997, respectively: volatility of
95%, 70% and 64%, risk-free interest rate of 6.02%, 4.30% and 5.83%, and an
expected life of five years in fiscal 1999, 1998 and 1997.
12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1999 AND 1998:
<TABLE>
<CAPTION>
1999
---------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues.................................. $29,405 $27,294 $ 31,260 $ 40,271
Gross profit.............................. 12,571 11,861 14,243 18,029
Net income (loss) attributable to common
stockholders............................ (2,272) (4,189) (3,354) 94
Net income (loss) per share:
Basic and diluted....................... (0.09) (0.17) (0.13) 0.00
</TABLE>
<TABLE>
<CAPTION>
1998
---------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues.................................. $53,788 $47,727 $ 39,090 $ 28,402
Gross profit.............................. 26,043 21,041 10,919 (2,001)
Net income (loss)......................... 3,543 (5,672) (15,433) (22,943)
Net income (loss) per share:
Basic and diluted....................... 0.14 (0.23) (0.63) (0.92)
</TABLE>
During fiscal 1998, the Company recorded inventory provisions of $4,500 in
the third quarter and $12,062 in the fourth quarter, which reduced gross profit.
The Company also recorded severance and other charges of $3,184 in the second
quarter, $2,420 in the third quarter and $1,011 in the fourth quarter of fiscal
1998.
F-24
<PAGE> 63
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. CUSTOMERS, GEOGRAPHIC AND SEGMENT INFORMATION
MAJOR CUSTOMERS AND CREDIT CONCENTRATIONS
During fiscal 1999, no customer accounted for more than 10% of total
revenues. In fiscal 1998 and 1997, revenues from a single customer represented
20% and 23% of total revenues, respectively. No other customer accounted for
more than 10% of total revenues for fiscal 1998 and 1997.
GEOGRAPHIC OPERATIONS
For the purposes of segment reporting, management considers the Company to
operate in two segments of the machine vision industry. Operations by geographic
area are summarized as follows:
<TABLE>
<CAPTION>
FISCAL YEAR UNITED
ENDED SEPTEMBER 30, 1999 STATES EUROPE ELIMINATIONS CONSOLIDATED
------------------------ -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated
customers............................. $117,924 $10,306 $ -- $128,230
Transfers between geographic areas.... 4,405 (4,405) --
-------- ------- ------- --------
Total revenues................... $122,329 $10,306 $(4,405) $128,230
======== ======= ======= ========
Income (loss) before income tax
provision........................... $ (7,511) $(1,747) $ -- $ (9,258)
======== ======= ======= ========
Identifiable assets................... $125,911 $ 6,821 $(9,531) $123,201
======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR UNITED
ENDED SEPTEMBER 30, 1998 STATES EUROPE ELIMINATIONS CONSOLIDATED
------------------------ -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated
customers............................. $154,451 $14,556 -- $169,007
Transfers between geographic areas.... 4,852 -- $(4,852) --
-------- ------- ------- --------
Total revenues................... $159,303 $14,556 $(4,852) $169,007
======== ======= ======= ========
Income (loss) before income tax
provision (benefit)................. $(36,529) $(3,747) $ (229) $(40,505)
======== ======= ======= ========
Identifiable assets................... $123,312 $ 7,979 $(9,720) $121,571
======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR UNITED
ENDED SEPTEMBER 30, 1997 STATES EUROPE ELIMINATIONS CONSOLIDATED
------------------------ -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated
customers............................. $152,530 $16,812 $ -- $169,342
Transfers between geographic areas.... 4,611 -- (4,611) --
-------- ------- ------- --------
Total revenues................... $157,141 $16,812 $(4,611) $169,342
======== ======= ======= ========
Income (loss) before income tax
provision........................... $ 2,120 $ (721) $ (6) $ 1,393
======== ======= ======= ========
Identifiable assets................... $136,448 $ 8,451 $(4,976) $139,923
======== ======= ======= ========
</TABLE>
Total revenues to customers outside the U.S. were $71,352, $108,711 and
$115,854 for the fiscal years ended September 30, 1999, 1998 and 1997,
respectively.
F-25
<PAGE> 64
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. CUSTOMERS, GEOGRAPHIC AND SEGMENT INFORMATION -- (CONTINUED)
Export sales from the Company's United States operations to unaffiliated
customers, which are generally denominated in U.S. dollars, for the fiscal years
ended September 30, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Europe...................................................... $ 6,686 $ 7,501 $16,413
Asia/Pacific Rim............................................ 52,724 84,606 80,714
Other....................................................... 1,636 2,048 1,915
------- ------- -------
Total.................................................. $61,046 $94,155 $99,042
======= ======= =======
</TABLE>
SEGMENT INFORMATION
The Company operates in two reportable segments servicing the machine
vision industry. The Company has determined segments primarily based on the
nature of the products offered. The Semiconductor Equipment Group is comprised
of our Electronics division, as well as wholly-owned subsidiaries, Systemation
Engineered Products ("Systemation") and Vanguard Automation, Inc, ("Vanguard").
The Electronics division supplies inspection equipment to the semiconductor
industry; Systemation offers tape and reel component processing systems designed
to handle and inspect chip scale packages ("CSP") and ball grid array ("BGA")
packages; and, Vanguard is a supplier of BGA and CSP equipment for the
semiconductor and connection industries. The Company's other segment is the
Acuity CiMatrix division. The Acuity CiMatrix division designs, manufactures and
markets 1-D and 2-D data collection products and barcode reading systems, as
well as 2-D machine vision systems and lighting products for use in industrial
automation.
The accounting policies of each segment are the same as those described in
Note 1. Sales between segments are determined based on an intercompany price
that is consistent with external customers. Intersegment sales by the Acuity
CiMatrix division were $1,300, $2,900 and $600 for fiscal 1999, 1998 and 1997,
respectively. Other income (loss) is comprised of corporate general and
administrative expenses. Other assets are comprised primarily of deferred taxes
and corporate accounts. Although certain research activities are conducted by
the Acuity CiMatrix division for the Semiconductor Equipment Group, research and
development expenses are reported in the segment where the costs are incurred.
The Company's strategy is to maximize the synergies between the segments. As
such, the Company generally manages its resources on an enterprise-wide basis,
taking into account segment information along with information about resources
shared in cooperative programs among the segments. The following table presents
information about the Company's reportable segments for the years ended
September 30:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Semiconductor Equipment........................... $ 82,793 $122,003 $118,182
Acuity CiMatrix................................... 45,437 47,004 51,160
-------- -------- --------
Total Revenues............................... $128,230 $169,007 $169,342
======== ======== ========
</TABLE>
F-26
<PAGE> 65
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. CUSTOMERS, GEOGRAPHIC AND SEGMENT INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
INCOME (LOSS) FROM OPERATIONS:
Semiconductor Equipment........................... $ 41 $(16,867) $ 4,973
Acuity CiMatrix................................... (1,464) (12,856) (3,271)
Other............................................. (7,260) (8,511) --
-------- -------- --------
Total income (loss) from operations.......... $ (8,683) $(38,234) $ 1,702
======== ======== ========
DEPRECIATION AND AMORTIZATION:
Semiconductor Equipment........................... $ 7,375 $ 5,943 $ 4,009
Acuity CiMatrix................................... 3,396 2,826 1,886
-------- -------- --------
Total depreciation and amortization.......... $ 10,771 $ 8,769 $ 5,895
======== ======== ========
TOTAL ASSETS
Semiconductor Equipment........................... $ 79,800 $ 78,441
Acuity CiMatrix................................... 32,286 35,415
Other............................................. 11,115 7,715
-------- --------
Total Assets................................. $123,201 $121,571
======== ========
</TABLE>
14. EARNINGS PER SHARE
The calculations for earnings per share for the fiscal years ended
September 30, 1999, 1998 and 1997 are as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
1999 1998 1997
------- -------- -------
<S> <C> <C> <C>
Net income (loss)................................... $(9,721) $(40,505) $ 648
======= ======== =======
Weighted average number of common shares -- basic... 25,669 24,613 23,718
Assumed number of shares issued from common share
equivalents....................................... -- -- 249
------- -------- -------
Weighted average number of common and common
equivalent shares -- diluted...................... 25,669 24,613 23,967
======= ======== =======
Net income (loss) per share -- basic................ $ (0.38) $ (1.65) $ 0.03
======= ======== =======
Net income (loss) per share -- diluted.............. $ (0.38) $ (1.65) $ 0.03
======= ======== =======
</TABLE>
For the years ended September 30, 1999 and 1998, the Company had potential
common shares equivalents excluded from the earnings per shares calculation of
2,500 and 594 respectively as they were considered anti-dilutive.
F-27
<PAGE> 66
SCHEDULE II -- VALUATION AND
QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN C
----------
COLUMN A COLUMN B ADDITIONAL COLUMN E
---------- ---------- CHARGES TO COLUMN D ---------
BALANCE AT CHARGES TO OTHER ------------ BALANCE
BEGINNING COST AND ACCOUNTS-- DEDUCTIONS-- AT END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
----------- ---------- ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Year Ended September 30, 1999:
Allowance for doubtful
accounts..................... $ 1,000 $ 202 $-- $ 310(1) $ 892
------- ------- --- ------ -------
Reserve for excess and obsolete
inventory.................... $14,741 $ 418 $-- $8,405(1) $ 6,754
------- ------- --- ------ -------
Year Ended September 30, 1998:
Allowance for doubtful
accounts..................... $ 2,716 $ 329 $-- $2,045(1) $ 1,000
======= ======= === ====== =======
Reserve for excess and obsolete
inventory.................... $ 3,836 $16,562 $-- $5,657(1) $14,741
======= ======= === ====== =======
Year Ended September 30, 1997:
Allowance for doubtful
accounts..................... $ 1,400 $ 1,924 $-- $ 608(1) $ 2,716
------- ------- --- ------ -------
Reserve for excess and obsolete
inventory.................... $ 3,960 $ 1,435 $-- $1,559(1) $ 3,836
------- ------- --- ------ -------
</TABLE>
- -------------------------
(1) Amounts written off.
F-28
<PAGE> 67
------------------------------------------------------
------------------------------------------------------
YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE
HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
THAT IS DIFFERENT. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE ON THE
DATE OF THIS DOCUMENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL TO SELL
THESE SECURITIES.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 1
Risk Factors........................ 4
Cautionary Statement Regarding
Forward-Looking Statements........ 7
Use of Proceeds..................... 8
Price Range of Common Stock......... 8
Dividend Policy..................... 8
Capitalization...................... 9
Selected Consolidated Financial
Information....................... 10
Business............................ 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 22
Management.......................... 31
Underwriting........................ 33
Legal Matters....................... 34
Experts............................. 34
Where You Can Find More
Information....................... 34
Incorporation of Certain Documents
by Reference...................... 35
Index to Consolidated Financial
Statements and Financial Statement
Schedule.......................... F-1
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
5,000,000 SHARES
ROBOTIC VISION SYSTEMS, INC.
[ROBOTIC VISION SYSTEMS LOGO]
------------------------
PROSPECTUS
, 2000
------------------------
ING BARINGS
PRUDENTIAL VOLPE TECHNOLOGY
A UNIT OF PRUDENTIAL SECURITIES
MCDONALD INVESTMENTS INC.
------------------------------------------------------
------------------------------------------------------
<PAGE> 68
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth various expenses, other than underwriting
discounts, which will be incurred in connection with this offering:
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee........................................ $ 20,303
NASD filing fee............................................. 8,442
Blue sky fees and expenses.................................. *
Printing expenses........................................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Miscellaneous expenses...................................... *
----------
$1,000,000
==========
</TABLE>
- -------------------------
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Except as set forth in this Item 15, there is no statute, charter
provision, by-law, contract or other arrangement under which any controlling
person, director or officer of registrant is insured or indemnified in any
manner against liability which he may incur in his capacity as such.
Article SIXTH of the Restated Certificate of Incorporation of the
registrant provides that registrant shall, to the full extent permitted by
Section 145 of the Delaware General Corporation Law, as amended, from time to
time ("DGCL"), indemnify all persons whom it may indemnify pursuant thereto.
Section 145 of the DGCL grants the registrant the power to indemnify
existing and former directors, officers, employees and agents of the registrant
who are sued or threatened to be sued because they are or were directors,
officers, employees and agents of the registrant.
Reference is also made to Section 6(b) of the underwriting agreement filed
as Exhibit 1.1 to the registration statement for information concerning the
underwriters' obligation to indemnify the registrant and its officers and
directors in certain circumstances.
II-1
<PAGE> 69
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement between registrant and the
underwriters
4.1 Specimen certificate representing registrant's common stock
4.2 Registrant's Restated Certificate of Incorporation(1)
4.3 Amendments to registrant's Restated Certificate of
Incorporation of registrant(2)
4.4 Registrant's Bylaws, as amended(3)
4.5 Rights Agreement, dated as of May 14, 1998, between
Registrant and American Stock Transfer & Trust Company(3)
5.1* Opinion of Cooperman Levitt Winikoff Lester & Newman, P.C.
23.1 Consent of Deloitte & Touche LLP
23.2* Consent of Cooperman Levitt Winikoff Lester & Newman, P.C.
(contained in their opinion included under Exhibit 5.1)
24.1 Power of Attorney (comprises a portion of the signature page
to this registration statement)
</TABLE>
- -------------------------
* To be filed by amendment
(1) Filed as an exhibit to registrant's registration statement on Form S-4, File
No. 333-08633.
(2) Filed as an exhibit to registrant's registration statement on Form S-1, File
No. 333-76927.
(3) Filed as an exhibit to registrant's current report on Form 8-K dated May 20,
1998.
ITEM 17. UNDERTAKINGS.
The undersigned the registrant hereby undertakes:
(1) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) That for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
registrant pursuant to Item 15 of Part II of the registration statement, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question 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.
II-2
<PAGE> 70
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Canton, Commonwealth of Massachusetts, on January 19,
2000.
ROBOTIC VISION SYSTEMS, INC.
By: /s/ PAT V. COSTA
------------------------------------
Pat V. Costa
Chairman, President and
Chief Executive Officer
Each of the undersigned officers and directors of Robotic Vision Systems,
Inc. hereby constitutes and appoints each of Pat V. Costa and Frank D. Edwards
as true and lawful, attorney-in-fact and agent with full power of substitution
and resubstitution, for him in his name in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission and to
prepare any and all exhibits thereto, and other documents in connection
therewith, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done to enable Robotic Vision Systems, Inc. to comply with the provisions
of the Securities Act of 1933, as amended, and all requirements of the
Securities and Exchange Commission, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ PAT V. COSTA Chairman, President and Chief Executive January 19, 2000
- ------------------------------------ Officer (Principal Executive Officer)
Pat V. Costa
/s/ FRANK D. EDWARDS Chief Financial Officer and Treasurer January 19, 2000
- ------------------------------------ (Principal Financial and Accounting
Frank D. Edwards Officer)
/s/ HOWARD STERN Director January 19, 2000
- ------------------------------------
Howard Stern
/s/ FRANK DIPIETRO Director January 19, 2000
- ------------------------------------
Frank DiPietro
/s/ JAY M. HAFT Director January 19, 2000
- ------------------------------------
Jay M. Haft
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ TOMAS KOHN Director January 19, 2000
- ------------------------------------
Tomas Kohn
/s/ DONALD J. KRAMER Director January 19, 2000
- ------------------------------------
Donald J. Kramer
Director
- ------------------------------------
Mark J. Lerner
Director
- ------------------------------------
Robert H. Walker
</TABLE>
<PAGE> 1
EXHIBIT 1.1
Draft 1/19/00
ROBOTIC VISION SYSTEMS, INC.
Five Million Shares of Common Stock
(par value $.01 per share)
UNDERWRITING AGREEMENT
New York, New York
February [_], 2000
ING Barings LLC
As Representative of the several Underwriters
c/o ING Barings LLC
55 East 52nd Street
New York, New York 10055
Ladies and Gentlemen:
Each of Robotic Vision Systems, Inc., a Delaware company (the
"Company"), and the shareholders named in Schedule I hereto (collectively, the
"Selling Shareholders") confirms its agreement (the "Agreement") with each of
the Underwriters named in Schedule II hereto (collectively, the "Underwriters,"
which term shall also include any underwriter substituted as hereinafter
provided in Section 9 hereof), for whom ING Barings LLC is acting as
representative (in such capacity, the "Representative"), with respect to the
sale by the Selling Shareholders, acting severally and not jointly, and the
purchase by the Underwriters, acting severally and not jointly, of the
respective number of common shares (the "Initial Shares"), par value $.01 per
share, of the Company (the "Common Shares") set forth in said Schedule II. The
Company also grants to the several Underwriters the option (the "Option") to
purchase up to an aggregate of not more than 750,000 additional Common Shares
(the "Option Shares," and together with the Initial Shares, the "Shares").
1. Representations and Warranties.
(a) The Company represents and warrants to and agrees with
each of the Underwriters that:
(i) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form
S-3 (No. 333- ), for the registration of the Shares under the
Securities Act of 1933, as amended (the "Act"). Such registration
statement, including the prospectus, financial statements and
schedules,
<PAGE> 2
exhibits and all other documents filed as a part thereof, as amended
through the time of effectiveness of the registration statement,
including any information deemed to be a part thereof as of the time of
effectiveness pursuant to Rule 430A or Rule 434 of the Rules and
Regulations of the Commission under the Act (the "Regulations"), is
herein called the "Registration Statement". Any registration statement
filed by the Company pursuant to Rule 462(b) under the Act is herein
called the "Rule 462(b) Registration Statement", and from and after the
date and time of filing of the Rule 462(b) Registration Statement the
term "Registration Statement" shall include the Rule 462(b)
Registration Statement. The prospectus, in the form first filed with
the Commission pursuant to Rule 424(b) of the Regulations or filed as
part of the Registration Statement at the time of effectiveness if no
Rule 424(b) or Rule 434 filing is required, is herein called the
"Prospectus". The term "preliminary prospectus" as used herein means a
preliminary prospectus as described in Rule 430A of the Regulations;
provided, however, if the Company has, with the consent of ING Barings
LLC, elected to rely upon Rule 434 under the Act, the term "Prospectus"
shall mean the Company's prospectus subject to completion (each, a
"preliminary prospectus") dated February [_ ], 2000 (such preliminary
prospectus is herein called the "Rule 434 - preliminary prospectus"),
together with the applicable term sheet (the "Term Sheet") prepared and
filed by the Company with the Commission under Rules 434 and 424(b)
under the Act and all references in this Agreement to the date of the
Prospectus shall mean the date of the Term Sheet. All references in
this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a preliminary prospectus, the Prospectus or the
Term Sheet, or any amendments or supplements to any of the foregoing,
shall include any copy thereof filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR").
References in this Agreement to things being "described", "included" or
"disclosed" in the Registration Statement or the Prospectus shall be
deemed to include documents incorporated by reference in the
Registration Statement or the Prospectus.
(ii) Each preliminary prospectus and the Prospectus, if filed
by electronic transmission pursuant to EDGAR (except as may be
permitted by Regulation S-T under the Securities Act), was identical to
the copy thereof delivered to the Underwriters for use in connection
with the offer and sale of the Shares. At the time of the effectiveness
of the Registration Statement or the effectiveness of any Rule 462(b)
Registration Statement and any post-effective amendment thereto, when
the Prospectus is first filed with the Commission pursuant to Rule
424(b) or Rule 434 of the Regulations, when any supplement to or
amendment of the Prospectus is filed with the Commission and at the
Closing Date and the Additional Closing Date, if any (as defined in
Section 2), the Registration Statement and the Prospectus and any
amendments thereof and supplements thereto complied and will comply in
all material respects with the applicable provisions of the Act and the
Regulations, did not and will not contain an untrue statement of a
material fact and did not and will not omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading. When any related preliminary
prospectus was first filed with the Commission (whether filed as part
of the Registration Statement for the registration of the Shares or any
amendment thereto or pursuant to Rule 424(a) of the Regulations) and
when any amendment thereof or supplement thereto was first filed with
the Commission, such preliminary prospectus and any amendments thereof
and supplements thereto complied in all material respects with the
applicable provisions of the Act and the Regulations and did not
contain an untrue
2
<PAGE> 3
statement of a material fact and did not omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading. No representation and warranty is
made in this subsection (b), however, with respect to any information
contained in or omitted from the Registration Statement or the
Prospectus or any related preliminary prospectus or any amendment
thereof or supplement thereto in reliance upon and in conformity with
information relating to the Underwriters furnished in writing to the
Company by or on behalf of any Underwriter through you expressly for
use in connection with the preparation thereof. If Rule 434 is used,
the Company will comply with the requirements of Rule 434.
(iii) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with full power and authority to own, lease and operate
its properties and engage in the business in which it is engaged or in
which it proposes to engage as described in the Registration Statement,
the preliminary prospectus and the Prospectus. The Company is duly
registered and qualified to do business as a foreign corporation in
good standing in each jurisdiction where the character, location,
ownership or leasing of its properties (owned, leased or licensed) or
the nature or conduct of its business requires such registration or
qualification.
(iv) The Company has no subsidiaries (as defined in the
Regulations), other than those listed on Schedule III hereto (the
"Subsidiaries"), which are wholly-owned subsidiaries of the Company.
The Company does not own or control, directly or indirectly, any shares
of stock or any other equity or long-term debt securities of any
corporation or have any equity interest in any firm, partnership, joint
venture, association, or other entity other than the Subsidiaries. All
the outstanding shares of capital stock of the Subsidiaries have been
duly and validly authorized and issued and are fully paid and
nonassessable, are owned solely by the Company and are free and clear
of any security interest, pledge, claim (legal or equitable), lien,
charge, equity, mortgage, encumbrance or other restriction (each a
"Lien"), shareholders' agreements, voting trusts or defects of title.
The Subsidiaries have been duly organized and are validly existing as
corporations in good standing under the laws of their jurisdictions of
organization, with full power and authority to own, lease and operate
their properties and conduct the business in which they are engaged or
in which they propose to engage. The Subsidiaries are duly registered
and qualified as foreign corporations in good standing in each
jurisdiction where the character, location, ownership or leasing of
their properties or the nature or conduct of their business requires
such registration or qualification. The Subsidiaries are not currently
prohibited, directly or indirectly, from paying any dividends to the
Company, from making any other distribution on their capital stock,
from repaying to the Company any loans or advances to them from the
Company or from transferring any of their property or assets to the
Company or any other Subsidiaries of the Company.
(v) Deloitte & Touche LLP, the accountants who have expressed
their opinion with respect to the consolidated financial statements
(including the related notes and supporting schedules) of the Company
and the Subsidiaries filed with Commission as a part of the
Registration Statement, the preliminary prospectus and the Prospectus,
are, with respect to the Company and the Subsidiaries, independent
public accountants as required by the Act, the Regulations, the
Securities and Exchange Act of 1934 (the
3
<PAGE> 4
"Exchange Act") and the Rules and Regulations of the Commission under
the Exchange Act (the "Exchange Act Rules").
(vi) The Company has an authorized capitalization as of
September 30, 1999 as set forth in the Registration Statement, the
preliminary prospectus and the Prospectus and there has been no
material change in its capitalization since that date. All outstanding
shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable, have been issued
in compliance with all federal and state securities laws and were not
issued in violation of any preemptive right, resale right, right of
first refusal or similar right. The authorized and outstanding capital
stock of the Company conforms to the description thereof contained in
the Registration Statement, the preliminary prospectus and the
Prospectus (and such description correctly states the substance of the
provisions of the instruments defining the capital stock of the
Company). Except as described in the Registration Statement, the
preliminary prospectus and the Prospectus, there are no authorized or
outstanding rights (including, without limitation, preemptive rights,
co-sale rights, resale rights, rights of first refusal or similar
rights), warrants or options to acquire, or instruments convertible
into or exercisable or exchangeable for, any share of capital stock or
other equity interest or ownership interest in the Company or the
Subsidiaries or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock
or other equity interest or ownership interest in the Company or the
Subsidiaries or any such convertible or exercisable or exchangeable
securities or instruments or any such rights, warrants or options. The
Shares to be issued pursuant to this Agreement will not be issued in
violation of any preemptive right, co-sale right, resale right, right
of first refusal or similar right. The description of the Company' s
stock option, stock bonus and other stock plans or arrangements, and
the options or other rights granted thereunder, set forth in the
Registration Statement, the preliminary prospectus and the Prospectus
accurately and fairly presents the information required to be shown
with respect to such plans, arrangements, options and rights. The
Shares have been duly authorized for issuance and, when issued and
delivered to and paid for by the Underwriters pursuant to this
Agreement, will be validly issued, fully paid and nonassessable, good
title to the Shares will be transferred to the Underwriters free and
clear of any Liens and the certificates representing the Shares will be
in valid and sufficient form.
(vii) There is (A) no action, suit, proceeding or
investigation before or by any court, arbitrator or governmental
agency, body or official, domestic or foreign, pending, threatened or
contemplated, as to which the Company or the Subsidiaries will be a
party or as to which the business, assets or property of the Company or
the Subsidiaries are or will be subject, (B) no statute, rule,
regulation or order that has been enacted, adopted or issued by any
governmental agency, body or official, and (C) no injunction,
restraining order or order of any nature that has been issued by a
federal or state court or foreign court of competent jurisdiction to
which the Company or the Subsidiaries are or will be subject or
affecting the business, assets or property of the Company or the
Subsidiaries, that could (in the case of clauses (A), (B) and (C)),
individually or in the aggregate, whether or not arising from
transactions in the ordinary course of business, result in a material
adverse effect on or affecting the business, operations, assets,
properties, condition (financial or other), Shareholders' equity,
prospects or results of operations (a "Material Adverse Effect") of the
Company and its subsidiaries taken as a whole, be
4
<PAGE> 5
required to be disclosed in the Registration Statement, the preliminary
prospectus or the Prospectus and is not so disclosed or adversely
affect the ability of the Company to perform its obligations under this
Agreement or be otherwise important in the context of the sale of the
Shares. There are no legal or administrative proceedings, statutes,
Contracts (as defined below) or documents concerning the Company or the
Subsidiaries of a character that would be required to be described in
or filed as an exhibit to a registration statement on Form S-3 under
the Act that are not described or filed, as required, in the
Registration Statement, the preliminary prospectus and the Prospectus.
(viii) The consolidated financial statements of the Company
and the Subsidiaries, together with the related notes thereto, which
are a part of the Registration Statement, the preliminary prospectus
and the Prospectus, present fairly the consolidated financial position
and the consolidated results of operations, changes in Shareholders'
equity and changes in cash flows of the Company and the Subsidiaries as
of the respective dates and for the respective periods specified
therein. All of such financial statements and related notes have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved and
comply as to form with the applicable accounting requirements included
in Regulation S-X under the Act. The supporting schedules, the "Summary
Selected Financial Data", the "Selected Consolidated Financial and
Other Data" and the tables included in the Registration Statement, the
preliminary prospectus and the Prospectus fairly present the
information purported to be shown thereby at the respective dates
thereof and for the respective periods covered thereby and have been
presented on a basis consistent with that of the audited financial
statements therein. No other financial statements or supporting
schedules are required by the Act or Regulation S-X to be included
therein.
(ix) Subsequent to the respective dates as of which
information is given in the Registration Statement, the preliminary
prospectus and the Prospectus, there has not been (A) any loss or
adverse change, or any development which may result in a loss or
adverse change, in or affecting the business, properties, management,
assets, prospects, Shareholders' equity, operations, condition
(financial or other), or results of operations of the Company and its
subsidiaries taken as a whole, (B) any transaction entered into by the
Company or the Subsidiaries, except transactions in the ordinary course
of business; (C) any obligation, direct or contingent, incurred by the
Company or the Subsidiaries which is material to the Company and the
Subsidiaries taken as a whole, except for liabilities or obligations
which are reflected in the Registration Statement, the preliminary
prospectus and the Prospectus, (D) any change in the capital stock or
outstanding indebtedness of the Company, or (E) any dividend or
distribution of any kind declared, paid or made on the capital stock of
the Company, which in any case described in clauses (A), (B), (C), (D)
or (E) above, could, individually or in the aggregate, have a Material
Adverse Effect on the Company and its subsidiaries taken as a whole or
adversely affect the ability of the Company to perform its obligations
under this Agreement or be otherwise important in the context of the
sale of the Shares.
(x) The Company and the Subsidiaries have good and marketable
title to all properties and assets described in the Registration
Statement, the preliminary prospectus and the Prospectus as being owned
by them, free and clear of Liens, except, individually and in the
aggregate, Liens for taxes not yet due and payable. The Company and the
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<PAGE> 6
Subsidiaries have valid and enforceable leases for the properties
leased by them, the Company and the Subsidiaries enjoy peaceful and
undisturbed possession under all such leases with such exceptions as do
not materially interfere with the use thereof made by the Company and
the Subsidiaries, and such leases conform in all material respects to
the descriptions thereof, if any, set forth in the Registration
Statement, the preliminary prospectus and the Prospectus. The Company
and the Subsidiaries, own, lease or otherwise have rights to use all
properties and assets as are important to their respective operations
as now conducted and as proposed to be conducted.
(xi) The Company and the Subsidiaries have all requisite power
and authority (corporate and other), and all licenses, certificates,
approvals, consents, concessions, qualifications, orders,
registrations, authorizations and permits from all federal, state,
foreign and other governmental and regulatory agencies, bodies and
authorities ("Permits") that are material to the conduct of the
business of the Company and the Subsidiaries as such business is
currently conducted. The Company reasonably believes that it will be
able to obtain Permits that are material to the conduct of the business
of the Company and the Subsidiaries as such business is proposed to be
conducted as described in the Registration Statement, the preliminary
prospectus and the Prospectus. All such Permits are valid and in full
force and effect (and there is no proceeding pending or, to the best
knowledge of the Company, threatened which may cause any such Permit to
be withdrawn, canceled, suspended or not renewed). The Company and the
Subsidiaries are not in violation of, or in default under, and have
fulfilled and performed all their obligations with respect to such
Permits. No event has occurred which allows or would allow revocation
or termination of any such Permit or result in any material impairment
of the rights of the holder of any such Permit. The Contracts (as
defined below) to which the Company or the Subsidiaries is a party are
valid and binding agreements, enforceable against the Company and the
Subsidiaries in accordance with their terms and, to the best of the
Company's knowledge, the other contracting party or parties thereto are
not in material breach or default under any of such Contracts.
(xii) The Company and the Subsidiaries are not (A) in
violation of their respective certificates of incorporation, as
amended, or bylaws, as amended or (B) in breach of or default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, franchise, joint venture, deed of trust, bond, note, lease,
Permit or other agreement or instrument to which the Company or the
Subsidiaries is a party or by which the Company or the Subsidiaries may
be bound or to which any of the property or assets of the Company or
the Subsidiaries is subject (each a "Contract"), or in violation of any
law, order, rule, regulation, writ, injunction or decree of any court
or governmental agency, body or authority, except in the case of this
clause (B) for such breaches, defaults or violations that could not,
individually or in the aggregate, have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole or adversely affect the
ability of the Company to perform its obligations under this Agreement
or be otherwise important in the context of the sale of the Shares.
(xiii) The Company and the Subsidiaries own, possess or
license or have other rights to use all patents, patent applications,
trademarks, trademark applications, service marks, service mark
applications, tradenames, inventions, copyrights, manufacturing
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<PAGE> 7
processes, formulae, trade secrets, know-how, franchises, and other
unpatented and/or unpatentable proprietary or confidential information,
collaborative research agreements, systems or procedures and material
intangible property and assets (collectively, "Intellectual Property")
necessary to the conduct of their business as currently conducted and
as proposed to be conducted. The Company reasonably believes that the
Company and the Subsidiaries will be able to own or possess adequate
licenses or other rights to use all Intellectual Property necessary to
the conduct of their business as proposed to be conducted as described
in the Registration Statement, the preliminary prospectus and the
Prospectus. The Company has no knowledge that it lacks or will be
unable to obtain any rights or licenses to use any of such Intellectual
Property. The Registration Statement, the preliminary prospectus and
the Prospectus fairly and accurately describe the Company's rights with
respect to Intellectual Property. Neither the Company nor any of the
Subsidiaries have received any notice of, and otherwise has any
knowledge of, any infringement or of conflict with asserted rights or
claims of others with respect to any Intellectual Property and the
Company is unaware of any fact which could form a reasonable basis for
any such claim. Specifically, and without limitation, the Company is
the sole owner of patent applications filed in the United States and
any corresponding foreign applications (collectively, the "Patent
Applications"). Rights that any other party may have in the Patent
Rights will not have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole or adversely affect the ability of the
Company to perform its obligations under this Agreement or be otherwise
important in the context of the sale of the Shares. There are no
outstanding licenses or other agreements that relate to or restrict the
Company's use of the Patent Rights. With regard to the Patent Rights,
the Company has no knowledge of unpaid maintenance fees, patents that
have lapsed, or abandonment of applications, and knows of no reason why
any patent applications should not be allowed. There are no claims,
actions, or proceedings, pending or to the Company's best knowledge,
threatened, challenging the validity of any of its claims in any of the
Intellectual Property. The commercial embodiments of the [LS and GS
Models 5700, 7100 and 7700] as currently marketed and as proposed to be
marketed are covered by the Patent Rights. There is no prior art that
may render any Patent Right invalid or a Patent Application
unpatentable.
(b) The Company has no knowledge of the existence of patents
or patent applications owned by third parties that may have a Material Adverse
Effect on the Company and its subsidiaries taken as a whole or adversely affect
the ability of the Company to perform its obligations under this Agreement or be
otherwise important in the context of the sale of the Shares.
(i) The Company is the sole and exclusive owner of all right,
title and interest in the United States registered trademarks and
service marks, and in any corresponding foreign registered trademarks
and service marks (collectively, "Registered Marks"). The Company has
applied for United States trademarks and service marks, and for
corresponding foreign registered trademarks and service marks for
[_____] (collectively, the "Applied Marks"). The Company has not
allowed any Applied Marks or Registered Marks to be abandoned,
canceled, or to lapse. The Company has no knowledge of claims, actions,
or proceedings, pending or threatened, challenging the validity of any
of the Registered Marks or the registration of any Applied Marks.
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<PAGE> 8
(ii) The Company has no knowledge of the existence of
trademarks or service marks, or trademark or service mark applications,
owned by third parties that may have, individually or in the aggregate,
a Material Adverse Effect on the Company and its subsidiaries taken as
a whole or adversely affect the ability of the Company to perform its
obligations under this Agreement or otherwise be important in the
context of the sale of the Shares.
(iii) The Company has registered with Network Solutions, Inc.
the internet domain names RVSI.com, ACUIT.com and CIMATRIX.com (the
"Internet Domain Names"), and has administrative control over all such
Internet Domain Names. The Company has no knowledge of a registered
trademark held by a third party that may be used to prevent the Company
from using the Internet Domain Names.
(iv) The Company has taken all economically reasonable steps
to secure, protect, and maintain the Registered Marks, the Applied
Marks, and the three Internet Domain Names.
(v) The Company and the Subsidiaries have filed on a timely
basis with the appropriate taxing authorities (or have received an
extension for filing with respect to) all necessary federal, state and
foreign income and franchise tax returns, reports and other information
required to be filed by them. Each such tax return, report or other
information was, when filed, accurate and complete. The Company and the
Subsidiaries have duly paid, or have made adequate charges, accruals
and reserves in the financial statements for, all such taxes required
to be paid by them and any other assessment, fine or penalty levied
against them, for all periods as to which the tax liability of the
Company or the Subsidiaries has not been finally determined. No tax
deficiency has been or, to the best of the Company's knowledge, might
be asserted or contemplated against the Company or the Subsidiaries.
(vi) The Company and the Subsidiaries are insured by
recognized, financially sound and reputable institutions with policies
in such amounts and with such deductibles and covering such risks as
are generally deemed adequate and customary for their business
including, but not limited to, policies covering real and personal
property owned or leased by the Company and the Subsidiaries against
theft, damage, destruction, acts of vandalism and earthquakes, general
liability and directors and officers liability, all of which insurance
is in full force and effect. The Company has no reason to believe that
it or the Subsidiaries will not be able to (A) renew its existing
insurance coverage as and when such policies expire or (B) obtain
comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that
would not result in a Material Adverse Effect on the Company and its
subsidiaries taken as a whole or adversely affect the ability of the
Company to perform its obligations under this Agreement or be otherwise
important in the context of the sale of the Shares. Neither of the
Company nor the Subsidiaries has been denied any insurance coverage
which it has sought or for which it has applied.
(vii) Neither the Company nor any of the Subsidiaries is
involved in any labor dispute, disturbance, lockout, slowdown or
stoppage of employees, and, to the best knowledge of the Company, no
such dispute or disturbance is threatened or imminent.
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<PAGE> 9
The Company is not aware of any existing or imminent labor disturbance
by the employees of any of its principal suppliers, subassemblers,
value added resellers, subcontractors, original equipment
manufacturers, authorized dealers or international distributors that
could result in a Material Adverse Effect on the Company and its
subsidiaries taken as a whole or adversely affect the ability of the
Company to perform its obligations under this Agreement or be otherwise
important in the context of the sale of the Shares.
(viii) In the ordinary course of its business, the Company
periodically reviews the effect of Environmental Laws on the business,
operations and properties of the Company and the Subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws (as defined below), or any Permit, any related
constraints on operating activities and any potential liabilities to
third parties). On the basis of such review, the Company has reasonably
concluded that the Company and the Subsidiaries (A) are in compliance
with all applicable foreign, United States federal, state and local
environmental laws, rules, regulations, treaties, statutes and codes
relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (B) have received all Permits required of them
under applicable Environmental Laws to conduct their business as
currently conducted, (C) are in compliance with all terms and
conditions of any such Permit and (D) have not received notice of any
actual or potential liability for the investigation or remediation of
any disposal or release of hazardous or toxic substances or wastes,
pollutants or contaminants. No action, proceeding, revocation
proceeding, writ, injunction or claim is pending or threatened relating
to the Environmental Laws or to the Company's or the Subsidiaries'
activities involving Hazardous Materials. "Hazardous Materials" means
any material or substance (A) that is prohibited or regulated by any
Environmental Law or (B) that has been designated or regulated by any
governmental body or authority as radioactive, toxic, hazardous or
otherwise a danger to health, reproduction or the environment. Neither
the Company nor any of the Subsidiaries has been named as a
"potentially responsible party" under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
(ix) Neither the Company nor any of the Subsidiaries has
engaged in the generation, use, manufacture, transportation or storage
of any Hazardous Materials on any of the Company's or the Subsidiaries'
properties or former properties. No Hazardous Materials have been
treated or disposed of on any of the Company's or the Subsidiaries'
properties or on properties formerly owned or leased by the Company or
the Subsidiaries during the time of such ownership or lease, except in
compliance with Environmental Laws.
(x) No payments or inducements have been made or given,
directly or indirectly, to any federal or local official or candidate
for, any federal or state office in the United States or foreign
offices by the Company or the Subsidiaries, by any of their officers,
directors, employees or agents or, to the best knowledge of the
Company, by any other person in connection with any opportunity,
Contract, Permit, certificate, consent,
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<PAGE> 10
order, approval, waiver or other authorization relating to the business
of the Company or the Subsidiaries, except for such payments or
inducements as were lawful under applicable written laws, rules and
regulations. Neither the Company nor any of the Subsidiaries, nor any
director, officer, agent, employee or other person associated with or
acting on behalf of the Company or the Subsidiaries, (A) has used any
corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expense relating to political activity; (B) made any
direct or indirect unlawful payment to any government official or
employee from corporate funds; (C) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or (D) made any
bribe, unlawful rebate, payoff, influence payment, kickback or other
unlawful payment in connection with the business of the Company or the
Subsidiaries.
(xi) Neither the Company nor any of the Subsidiaries has any
liability for any prohibited transaction (within the meaning of Section
4975(c) of the Internal Revenue Code of 1986, as amended (the "Code")
or Part 4 of Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (or an accumulated funding deficiency
within the meaning of Section 412 of the Code or Section 302 of ERISA)
or any complete or partial withdrawal liability (within the meaning of
Section 4201 of ERISA), with respect to any pension, profit sharing or
other plan which is subject to ERISA, to which the Company and the
Subsidiaries make or ever have made a contribution and in which any
employee of the Company and Subsidiaries is or has ever been a
participant. With respect to such plans, the Company and the
Subsidiaries are in compliance in all material respects with all
applicable provisions of ERISA.
(xii) The Company and the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with
management's general or specific authorization, (B) transactions are
appropriately recorded to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets, (C) access to assets is permitted
only in accordance with management's general or specific authorization,
(D) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences and (E) assets are properly accounted for
and safeguarded against loss from unauthorized use. The Company has not
received from its independent public accountants a letter describing or
been informed by them of, a substantial or material deficiency in the
Company's internal accounting controls in connection with their audit
of the Company's financial statements included in the Registration
Statement, the preliminary prospectus and the Prospectus.
(xiii) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company or the Subsidiaries to or for
the benefit of any of the officers or directors or shareholders of the
Company or the Subsidiaries or any of the members of the families of
any of them, except as disclosed in the Registration Statement, the
preliminary prospectus and the Prospectus.
(xiv) No consent, approval, registration, authorization,
filing, qualification, Permit or order of or with any court or
supervisory, regulatory, administrative or
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<PAGE> 11
governmental agency, body or authority, arbitrator or others (including
security holders) is required in connection with the execution and
delivery of this Agreement, the issuance, sale or delivery of the
Shares to be issued, sold and delivered by the Company hereunder, or
the consummation of any other of the transactions contemplated herein
or the fulfillment of the terms hereof, except the registration under
the Act of the Shares and such consents, approvals, registrations,
authorizations, filings, qualifications, Permits or orders, as may be
required under the state securities or "blue sky" laws or the bylaws
and rules of the National Association of Securities Dealers, Inc. (the
"NASD") or as have been obtained and which are in full force and effect
in connection with the offer, purchase and distribution by the
Underwriters of the Shares.
(xv) The execution, delivery and performance by the Company of
this Agreement and the issuance and sale of the Shares and the
consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate action. Neither the issuance,
offer, sale or delivery of the Shares, the execution, delivery and
performance by the Company of this Agreement nor the compliance by the
Company with all the provisions hereof nor the consummation of the
transactions contemplated hereby (A) conflicts with or will conflict
with, or constitutes or will constitute a breach or violation of or a
default under (or an event that, with notice or lapse of time or both,
would constitute such a breach, violation or default), or results in or
will result in the imposition of a Lien upon any property or assets of
the Company or the Subsidiaries, under, any of the terms or provisions
of the certificate of incorporation or by-laws or other organizational
or constitutive documents of the Company or the Subsidiaries, nor (B)
conflicts with or will conflict with or constitutes or will constitute
a breach or violation of, or a default under (or an event that with
notice or the lapse of time or both would constitute a default) or the
loss of any material benefit under, or the termination of, or results
in or will result in the creation or imposition of any Lien upon any
property or assets of the Company or the Subsidiaries pursuant to, any
Contract, nor (C) violates or conflicts with or will violate or
conflict with any law, statute, rule or regulation applicable to the
Company or the Subsidiaries or any judgment, decree or order applicable
to the Company or the Subsidiaries of any court or supervisory,
regulatory, administrative or governmental agency, body or authority,
or arbitrator having jurisdiction over the Company or the Subsidiaries
or any of their respective properties or assets.
(xvi) The Company has full power and authority to enter into
this Agreement and to perform the transactions contemplated hereby.
This Agreement and the transactions contemplated herein have been duly
and validly authorized, executed and delivered by the Company and this
Agreement constitutes the legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as the enforceability thereof may be limited by (A) applicable
bankruptcy, insolvency, reorganization, moratorium or other laws now or
hereafter in effect relating to or affecting creditors' rights
generally and (B) general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at law) and
except to the extent that the provisions of Section 6 hereof may be
limited by applicable federal or state securities laws or unenforceable
as against public policy.
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<PAGE> 12
(xvii) The Company has duly and validly authorized the
issuance and sale of the Shares. The description of the Shares in the
Registration Statement, the preliminary prospectus and the Prospectus
is accurate in all material respects.
(xviii) The Company is not now, and as a result of the offer
and sale of the Shares in the manner contemplated in this Agreement,
the Registration Statement, the preliminary prospectus and the
Prospectus and the application of the net proceeds of such sale as
described in the Registration Statement, the preliminary prospectus and
the Prospectus, will not be, an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended (the "Investment Company Act"), without taking
account of any exemption arising out of the number or type of holders
of the Company's securities.
(xix) The Company has not incurred any liability for a fee,
commission, or other compensation on account of the employment of a
broker or finder in connection with the transactions contemplated by
this Agreement other than the discount contemplated hereby.
(xx) Neither the Company nor any of the Subsidiaries nor, to
the Company's best knowledge, any of its or their officers, directors
or affiliates (as defined in Rule 501(b) of Regulation D ("Regulation
D") under the Act) has taken or will take, directly or indirectly, any
action designed to cause or to result in or that has constituted, or
might reasonably be expected to cause or result in or constitute, under
the Exchange Act, the Exchange Act Rules or otherwise, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares.
(xxi) The Company has not distributed and will not distribute
prior to the later of (A) the Additional Closing Date and (B) the
completion of the distribution of the Shares by the Underwriters and
dealers, any offering material (including, without limitation, content
on its Website, if any, that may be deemed to be offering material) in
connection with the offering and sale of the Shares other than the
preliminary prospectus and the Prospectus.
(xxii) There are no holders of securities of the Company which
by reason of the filing of the Registration Statement or otherwise in
connection with the sale of the Shares contemplated hereby, have the
right to request or demand that the Company register under the Act any
of their securities in connection with the Registration Statement .
(xxiii) There is no tax, duty, levy, impost, deduction, charge
or withholding imposed by any political subdivision or taxing authority
by virtue of the execution, delivery, performance or enforcement, or to
ensure the legality, validity or admissibility into evidence, of this
Agreement, and neither is it necessary that the Shares be submitted to,
or filed or recorded with, any court or other authority to ensure such
legality, validity, enforceability or admissibility into evidence.
There are no transfer taxes or other similar fees or charges under
federal law or the laws of any state, or any political subdivision
thereof, required to be paid in connection with the execution and
delivery of this Agreement or the issuance and sale by the Company of
the Shares.
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<PAGE> 13
(xxiv) All necessary actions, authorizations, conditions and
things required to be taken, given, fulfilled and done by the Company
and the Subsidiaries on or prior to the date of this Agreement, have
been, or on the Closing Date or the Additional Closing Date, if any,
will have been taken, given, fulfilled and done in connection with (A)
the issue of the Prospectus, (B) the execution and delivery of this
Agreement, (C) the execution, delivery and issuance of the Shares and
(D) the compliance with all provisions of this Agreement to be
performed or complied with by such date.
(xxv) There are no issues related to the Company's or the
Subsidiaries' preparedness for the Year 2000 that (A) are of a
character required to be described or referred to in the Registration
Statement, the preliminary prospectus or Prospectus which have not been
accurately described therein or (B) could result in any Material
Adverse Effect on the Company and its subsidiaries taken as a whole or
that might materially affect their properties, assets or rights. All
internal computer systems and each Constituent Component of those
systems and all computer-related products and each Constituent
Component of those products of the Company and the Subsidiaries fully
comply with Year 2000 Qualification Requirements. "Year 2000
Qualification Requirements" means that the internal computer systems
and each Constituent Component of those products of the Company and the
Subsidiaries (A) have been reviewed to confirm that they store, process
(including sorting and performing mathematical operations, calculations
and computations), input and output data containing date and
information correctly regardless of whether the date contains dates and
times before, on or after January 1, 2000, (B) have been designed to
ensure date and time entry recognition and calculations, and date data
interface values that reflect the century, (C) accurately manage and
manipulate data involving dates and times, including single century
formulas and multi-century formulas, and will not cause an abnormal
ending scenario within the application or generate incorrect values or
invalid results involving such dates, (D) accurately process any date
rollover and (E) accept and respond to two-digit year date input in a
manner that resolves any ambiguities as to the century. "Constituent
Component" means all software (including operating systems, programs,
packages and utilities), firmware, hardware, networking components, and
peripherals provided as part of the configuration. The Company and the
Subsidiaries have inquired of all their material vendors as to their
preparedness for the Year 2000 and the Company has disclosed in the
Registration Statement, the preliminary prospectus or Prospectus any
issues that could result in a Material Adverse Effect on the Company
and its subsidiaries taken as a whole or adversely affect the ability
of the Company to perform its obligations under this Agreement or be
otherwise important in the context of the sale of the Shares.
(xxvi) No statement, representation, warranty or covenant made
by the Company in this Agreement or made in any certificate or document
required by this Agreement to be delivered to you was or will be, when
made, inaccurate, untrue or incorrect.
(xxvii) The Shares are registered pursuant to Section 12(g) of
the Exchange Act and are listed on the Nasdaq National Market, and the
Company has taken no action designed to, or likely to have the effect
of, terminating the registration of the Shares under the Exchange Act
or delisting the Shares from the Nasdaq National Market, nor has
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<PAGE> 14
the Company received any notification that the Commission or the NASD
is contemplating terminating such registration or listing.
(xxviii) Except as described in the Registration Statement,
the preliminary prospectus and the Prospectus, the Company has not sold
or issued any shares of capital stock within the six month period
preceding the date of the Prospectus, all of which sales and issuances
were made in compliance with the Act and the Regulations.
(xxix) Each officer and director of the Company and each
beneficial owner of [one or more] percent of the outstanding issued
share capital of the Company has agreed to sign an agreement
substantially in the form attached hereto as Exhibit A (the "Lock-up
Agreements"). The Company has provided to counsel for the Underwriters
a complete and accurate list of all securityholders of the Company and
the number and type of securities held by each securityholder. The
Company also has provided to counsel for the Underwriters true,
accurate and complete copies of all of the Lock-up Agreements presently
in effect or effected hereby. The Company has given "no transfer"
instructions to its transfer agent and registrar with respect to such
securities.
(xxx) Neither the Company nor any of the Subsidiaries nor any
of its or their properties or assets has any immunity from the
jurisdiction of any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of
execution or otherwise) under the laws of Delaware.
(c) Any certificate signed by an officer of the Company or any
of the Subsidiaries and delivered to the Representative or to counsel for the
Underwriters shall be deemed to be a representation and warranty by the Company
to each Underwriter as to the matters set forth therein.
(d) Each Selling Shareholder severally and not jointly
covenants and agrees with each of the Underwriters that:
(i) Such Selling Shareholder has full legal right, power and
authority to enter into the Agreement and the Agency and Custody
Agreement, dated February [_], 2000 (the "Agency and Custody
Agreement"), between the Selling Shareholders, (collectively, the
"Agent"), in the form heretofore delivered to counsel to the
Underwriters. The Agency and Custody Agreement has been duly executed
and delivered by or on behalf of such Selling Shareholder.
(ii) None of the execution, delivery or performance of this
Agreement and the Agency and Custody Agreement and the consummation of
the transactions herein and therein contemplated, will conflict with or
result in a breach of, or default under, any indenture, mortgage, deed
of trust, voting trust agreement, Shareholders' agreement, note
agreement, or other agreement or instrument to which such Selling
Shareholder is a party or by which such Selling Shareholder is or may
be bound or to which any of its or his property is or may be subject,
or any statute, judgment, decree, order, rule or regulation applicable
to such Selling Shareholder of any government, arbitrator, court,
regulatory body or administrative agency or other governmental agency
or body, domestic or
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<PAGE> 15
foreign, having jurisdiction over such Selling Shareholder or any of
its or his activities or properties.
(iii) At the date hereof such Selling Shareholder has, and at
the time of delivery of the Shares to be sold by such Selling
Shareholder to the several Underwriters, such Selling Shareholder will
have, full right, power and authority to sell, assign, transfer and
deliver the Shares to be sold by such Selling Shareholder hereunder. At
the date hereof such Selling Shareholder is, and at the time of
delivery of the Shares to be sold by such Selling Shareholder, such
Selling Shareholder will be, the lawful owner of and has and will have,
good and marketable title to such Shares free and clear of any liens,
encumbrances, security interests, claims, community property rights,
restrictions on transfer or other defects in title. Upon delivery of
and payment for the Shares to be sold by such Selling Shareholder
hereunder, good and marketable title to such Shares will pass to the
Underwriters, free and clear of any liens, encumbrances, security
interests, claims, community property rights, restrictions on transfer
or other defects in title. Except as described in the Registration
Statement and the Prospectus or created hereby, there are no
outstanding options, warrants, rights, or other agreements or
arrangements requiring such Selling Shareholder at any time to transfer
any Common Shares to be sold hereunder by such Selling Shareholder.
(iv) At the Effective Date, and at all times subsequent
thereto up to and including the Closing Date (and if any Option Shares
are purchased, the Option Closing Date), the Registration Statement and
any amendments thereto did not and will not contain any untrue
statement of a material fact regarding such Selling Shareholder or omit
to state a material fact regarding such Selling Shareholder required to
be stated therein or necessary in order to make the statements therein
regarding such Selling Shareholder not misleading, and the Prospectus
did not and will not contain any untrue statement of a material fact
regarding such Selling Shareholder or omit to state a material fact
regarding such Selling Shareholder required to be stated therein or
necessary in order to make the statements therein regarding such
Selling Shareholder, in light of the circumstances under which they
were made, not misleading.
(v) Such Selling Shareholder has not taken, directly or
indirectly, any action designed to stabilize or manipulate the price of
any security of the Company, or which has constituted or which might in
the future reasonably be expected to cause or result in stabilization
or manipulation of the price of any security of the Company, to
facilitate the sale or resale of the Shares or otherwise.
(vi) There is not pending or, to the knowledge of such Selling
Shareholder, threatened against such Selling Shareholder any action,
suit or proceeding which (A) questions the validity of this Agreement
or of any action taken or to be taken by such Selling Shareholder
pursuant to or in connection with this Agreement or (B) is required to
be disclosed in the Registration Statement or the Prospectus.
(vii) Except as created hereby, there are no outstanding
rights, warrants or options to acquire any of the Shares to be sold by
such Selling Shareholder.
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<PAGE> 16
(viii) This Agreement has been duly executed and delivered by
or on behalf of such Selling Shareholder. This Agreement is a valid and
binding agreement of such Selling Shareholder enforceable against such
Selling Shareholder in accordance with its terms, except as enforcement
hereof may be limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally and subject to
the qualifications that equitable remedies may be granted in the
discretion of a court of competent jurisdiction and rights of
indemnity, contribution and waiver and the ability to sever
unenforceable terms may be limited by applicable law.
(ix) The execution and delivery of this Agreement by or on
behalf of such Selling Shareholder and the performance by such Selling
Shareholder of the transactions contemplated herein do not and will not
require the consent, license, order, approval, authorization,
registration or qualification of or decree of any court or any
governmental agency or body, stock exchange (including, for greater
certainty, the Nasdaq National Market) or other third party, except (A)
such as have been obtained, and (B) such as may be required (and shall
be obtained as provided in this Agreement) under U.S. Securities Laws
and such as may be required under U.S. state securities or Blue Sky
laws or the by-laws and rules of the Nasdaq National Market.
(x) To the best of such Selling Shareholder's knowledge, the
Shares to be sold by such Selling Shareholder have been validly issued
as fully paid and non-assessable shares.
(xi) Except as provided herein, there is no person, firm or
company which has been engaged by such Selling Shareholder to act for
such Selling Shareholder and which is entitled to any brokerage or
finder's fee in connection with this Agreement or any of the
transactions contemplated hereunder, and in the event any such person,
firm or company establishes a claim for any fee from the Underwriters,
such Selling Shareholder covenants to indemnify and hold harmless the
Underwriters with respect thereto and with respect to all costs
reasonably incurred in the defense thereof.
(xii) At the Closing Date (and if any Option Shares are
purchased, the Option Closing Date), all stock transfer or other taxes,
if any (other than income taxes), which are required to be paid in
connection with the sale and transfer of the Shares to be sold by such
Selling Shareholder to the several Underwriters hereunder will have
been fully paid or provided for by such Selling Shareholder and all
laws imposing such taxes will have been fully complied with by such
Selling Shareholder.
(xiii) Such Selling Shareholder has no knowledge of any
material fact or condition not set forth in the Prospectus and the
Registration Statement which has adversely affected, or may adversely
affect, the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company, and
the sale of the Shares proposed to be sold by such Selling Shareholder
is not prompted by any such knowledge.
(xiv) Certificates in negotiable form (or some other document
or documents in written form as may be mutually agreed upon by or on
behalf of the Representative and such Selling Shareholder) representing
all of the Shares to be sold by such Selling
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<PAGE> 17
Shareholder hereunder have been placed in custody under the Agency and
Custody Agreement, duly executed and delivered by such Selling
Shareholder to the Agent, as custodian, and such Selling Shareholder
has, pursuant to the Agency and Custody Agreement, appointed the Agent
as its or his agent and attorney in fact with authority to execute and
deliver this Agreement on behalf of such Selling Shareholder, to
determine the purchase price to be paid by the Underwriters to the
Selling Shareholders as provided in Section 2 hereof, and to authorize
the delivery of the Shares to be sold by such Selling Shareholders in
connection with the transactions contemplated by this Agreement and the
Agency and Custody Agreement.
(xv) The Shares represented by the certificates (or some other
document or documents in written form as may be mutually agreed upon by
or on behalf of the Representative and such Selling Shareholder) held
in custody for such Selling Shareholder under the Agency and Custody
Agreement are subject to the interests of the Underwriters hereunder;
the arrangements made by such Selling Shareholder for such custody, and
the appointment by such Selling Shareholder of the Agent by the Agency
and Custody Agreement, are to that extent irrevocable and not subject
to termination by such Selling Shareholder or by operation of law; the
obligations of such Selling Shareholders hereunder shall not be
terminated by operation of law, whether by the death or incapacity of
such Selling Shareholder, if an individual, or, in the case of an
estate or trust, by the death or incapacity of any executor or trustee
or the termination of such estate or trust or, in the case of a
partnership or corporation, by the dissolution of such partnership or
corporation, or by the occurrence of any other event; if such Selling
Shareholder, if an individual, or any such executor or trustee should
die or become incapacitated, or if any such estate or trust should be
terminated, or if any such partnership or corporation should be
dissolved, or if any other such event should occur, before the delivery
of the Shares hereunder, certificates representing the Shares shall be
delivered by or on behalf of such Selling Shareholder in accordance
with the terms and conditions of this Agreement and of the Agency and
Custody Agreement and all other actions required to be taken hereunder
or under the Agency and Custody Agreement shall be taken; and actions
taken by the Agent pursuant to the Agency and Custody Agreement shall
be as valid as if such death, incapacity, termination, dissolution or
other event had not occurred, regardless of whether or not, the Agent
shall have received notice of such death, incapacity, termination,
dissolution or other event.
2. Purchase, Sale and Delivery of the Shares.
(a) The Company and the Selling Shareholders agree to issue
and sell to the several Underwriters the Firm Shares upon the terms
herein set forth. On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Underwriters, severally and not
jointly, agree to purchase from the Company and the Selling
Shareholders, at a purchase price per share of $[ ], the number of Firm
Shares set forth opposite the respective names of the Underwriters in
Schedule II hereto plus an additional number of Firm Shares which such
Underwriter may become obligated to purchase pursuant to the provisions
of Section 9 hereof.
(b) Payment of the purchase price for, and delivery of, the
Firm Shares and the Option Shares (if the option provided for in
Section 2(c) below shall have been exercised on or
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<PAGE> 18
before the third full business day prior to the Closing Date) shall be
made at the offices of Clifford Chance Rogers & Wells LLP, 200 Park
Avenue, New York, New York, or at such other place as shall be agreed
upon by ING Barings LLC and the Company, at 10:00 A.M. on the third
full business day (as permitted under Rule 15c6-1 of the Exchange Act
Rules) (unless postponed in accordance with the provisions of Section 9
hereof) following the date of the effectiveness of the Registration
Statement (or, if the Company or the Selling Shareholders have elected
to rely upon Rule 430A of the Regulations, the third or fourth full
business day (as permitted under Rule 15c6-1 under the Exchange Act
Rules) after the determination of the initial public offering price of
the Firm Shares), or such other time not later than five business days
after such date as shall be agreed upon by you and the Company and the
Selling Shareholders (such time and date of payment and delivery being
herein called the "Closing Date"); provided, however, that if the
Company and the Selling Shareholders have not made available to the
Underwriters copies of the Prospectus in such quantities and at such
places requested by the Underwriters, no later than noon on the
business day following the execution of this Agreement, ING Barings LLC
may, in its sole discretion, postpone the Closing Date until no later
than two full business days following the delivery of such copies of
the Prospectus. Payment shall be made to the Company and the Selling
Shareholders by wire transfer in immediately available funds to the
order of the Company and the Selling Shareholders, against delivery to
you for the respective accounts of the Underwriters of the Firm Shares
to be purchased by them. The Company and the Selling Shareholders shall
deliver, or cause to be delivered, a credit representing the Firm
Shares to an account or accounts at The Depository Trust Company, as
designated by ING Barings LLC for the accounts of ING Barings LLC and
the several Underwriters on the Closing Date, against the irrevocable
release of a wire transfer of immediately available funds for the
amount of the purchase price therefor. Certificates for the Firm Shares
shall be registered in such name or names and in such authorized
denominations as you may request on or before noon on the business day
prior to the Closing Date. The Company and the Selling Shareholders
will permit you to examine and package such certificates at or before
noon on the business day prior to the Closing Date. ("Business day"
shall mean any day other than a Saturday, Sunday or a legal holiday or
a day on which banking institutions or trust companies are authorized
or obligated by law to close in New York City.")
(c) In addition, the Company hereby grants to the Underwriters
the option to purchase, severally and not jointly, up to 750,000 Option
Shares at the same purchase price per share to be paid by the
Underwriters to the Company for the Firm Shares as set forth in this
Section 2, for the sole purpose of covering over-allotments in the sale
of Firm Shares by the Underwriters. This option may be exercised from
time to time and at any time, in whole or in part, on or before the
thirtieth day following the date of the Prospectus, by notice from ING
Barings LLC to the Company. Such notice shall set forth the aggregate
number of Option Shares as to which the option is being exercised and
the date and time, as reasonably determined by ING Barings LLC, when
the Option Shares are to be delivered (such date and time being herein
sometimes referred to as the "Additional Closing Date"); provided,
however, that the Additional Closing Date shall not be earlier than the
Closing Date or earlier than the second full business day after the
date on which the option shall have been exercised nor later than the
fifth full business day after the date on which the option shall have
been exercised (unless such time and date are postponed in accordance
with the provisions of Section 9 hereof). The Company shall deliver, or
cause to be delivered, a credit representing the Option Shares to an
account or accounts at The Depository Trust Company, as designated by
ING Barings LLC for the accounts of ING Barings LLC and the several
Underwriters on the Additional Closing Date, against the irrevocable
release of a wire transfer of immediately available funds for the
amount of the purchase price therefor.
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<PAGE> 19
Certificates for the Option Shares shall be registered in such name or names and
in such authorized denominations as ING Barings LLC may request at or before
noon on the business day prior to the Additional Closing Date. The Company will
permit you to examine and package such certificates for delivery at or before
noon on the business day prior to the Additional Closing Date.
The number of Option Shares to be sold to each Underwriter
shall be the number which bears the same ratio to the aggregate number of Option
Shares being purchased as the number of Firm Shares set forth opposite the name
of such Underwriter in Schedule II hereto (or such number increased as set forth
in Section 9 hereof) bears to the total number of Firm Shares being purchased
from the Company, subject, however, to such adjustments to eliminate any
fractional shares as ING Barings LLC in its sole discretion shall make.
Payment for the Option Shares shall be made by wire transfer
in immediately available funds to the order of the Company as noted above, at
the offices of Clifford Chance Rogers & Wells LLP or such other location as may
be mutually acceptable, upon delivery of the Option Shares to you for the
respective accounts of the Underwriters.
The Company shall deliver, or cause to be delivered a credit
representing the Option Shares the Underwriters have agreed to purchase on the
Additional Closing Date to an account or accounts at The Depository Trust
Company as designated by ING Barings LLC for the accounts of ING Barings LLC and
the several Underwriters against the irrevocable release of a wire transfer of
immediately available funds for the amount of the purchase price therefor.
(d) Time shall be of the essence and delivery at the time and
place specified in this Agreement is a further condition to the obligations of
the Underwriters.
3. Offering. It is understood that the several Underwriters
propose to offer the Shares for sale to the public upon the terms set forth in
the Prospectus.
4. Covenants of the Company and the Selling Shareholders.
(a) The Company covenants and agrees with each Underwriter
that:
(i) If the Registration Statement has not been declared
effective at the time of the execution of this Agreement, the Company
will use its best efforts to cause the Registration Statement and any
amendments thereto to become effective as promptly as possible. If Rule
430A is used or the filing of the Prospectus is otherwise required
under Rule 424(b) or Rule 434, the Company will file the Prospectus
(properly completed if Rule 430A has been used) pursuant to Rule 424(b)
or Rule 434 within the prescribed time period and will provide evidence
satisfactory to you of such timely filing. If the Company elects to
rely on Rule 434, the Company will prepare and file a term sheet that
complies with the requirements of Rule 434. If the Company elects to
rely on Rule 462(b) under the Act, the Company shall file a Rule 462(b)
Registration Statement with the Commission in compliance with Rule
462(b) under the Act prior to the time confirmations are sent or given,
as specified by Rule 462(b)(2) under the Act, and shall pay the
applicable fees in accordance with Rule 111 under the Act.
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<PAGE> 20
The Company will notify you immediately (and, if requested by
you, will confirm such notice in writing) (A) when the Registration Statement
and any amendments thereto become effective, (B) of any request by the
Commission for any amendment of or supplement to the Registration Statement, any
preliminary prospectus or the Prospectus or for additional information, (C) of
the mailing or the delivery to the Commission for filing of any amendment of or
supplement to the Registration Statement or the Prospectus, (D) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or of the
initiation, or the threatening, of any proceedings therefor, (E) of the receipt
of any comments from the Commission, and (F) of the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for that purpose. If a stop order or suspension of qualification is
proposed at any time, the Company will use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain the lifting thereof as
soon as possible. The Company will not file any amendment to the Registration
Statement or any amendment of or supplement to, any preliminary prospectus or
the Prospectus (including the prospectus required to be filed pursuant to Rule
424(b) or Rule 434) that differs from the prospectus on file at the time of the
effectiveness of the Registration Statement before or after the effective date
of the Registration Statement to which you shall reasonably object in writing
after being timely furnished in advance a copy thereof.
(ii) If at any time when a prospectus relating to the Shares
is required to be delivered under the Act by an Underwriter or dealer any event
shall have occurred as a result of which the Prospectus as then amended or
supplemented would, in the judgment of ING Barings LLC, counsel to the
Underwriters or the Company, include an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, not misleading or if it shall be necessary at any
time to amend or supplement the Registration Statement, the preliminary
prospectus or the Prospectus to comply with any law, the Company promptly will
prepare and file with the Commission and furnish at its own expense to the
Underwriters and dealers, an appropriate amendment or supplement (in form and
substance satisfactory to ING Barings LLC) which will correct such untrue
statement or omission or so that the Registration Statement, any preliminary
prospectus and the Prospectus will comply with the law and will use its best
efforts to have any amendment to the Registration Statement declared effective
as soon as possible. If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in the
opinion of ING Barings LLC the market price of the Shares has been or is likely
to be materially affected (regardless of whether such rumor, publication or
event necessitates a supplement to or amendment of the Prospectus), the Company
will, after notice from ING Barings LLC advising the Company to the effect set
forth above, forthwith prepare, consult with ING Barings LLC concerning the
substance of and disseminate a press release or other public statement,
reasonably satisfactory to ING Barings LLC, responding to or commenting on such
rumor, publication or event.
(iii) As soon as practicable, but not later than 45 days after
the end of its fiscal quarter in which the first anniversary date of
the effective date of the Registration
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<PAGE> 21
Statement occurs, the Company will make generally available (within the
meaning of Section 11(a) of the Act) to its securityholders and to you
an earnings statement or statements of the Company which will satisfy
the provisions of Section 11(a) of the Act and Rule 158 of the
Regulations, covering a period of at least twelve consecutive months
beginning after the effective date of the Registration Statement; and
will, during the period of five years from the date of the Prospectus,
make generally available (within the meaning of Section 11(a) of the
Act) to its securityholders as soon as practicable after the end of
each fiscal year, an annual report (including a balance sheet and
statements of financial condition, operations, cash flows and changes
in Shareholders' equity of the Company, certified by the Company's
independent public accountants) and, as soon as practicable after the
end of each of the first three quarters of each fiscal year (beginning
with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of
the Company for such quarter in reasonable detail
(iv) The Company will furnish without charge to you and
counsel to the Underwriters two complete, signed copies of the
Registration Statement (including exhibits thereto), and to each other
Underwriter a copy of the Registration Statement (without exhibits
thereto) and, so long as, in the opinion of counsel to the
Underwriters, delivery of a prospectus by an Underwriter or dealer may
be required by the Act, as many copies of each preliminary prospectus
and the Prospectus and any amendment or supplement thereto as you may
request.
(v) The Company will arrange for the qualification of the
Shares for sale under the laws of such jurisdictions (both national and
foreign) as ING Barings LLC may designate and will make such
applications, file such documents and furnish such information as may
be required for that purpose and will maintain such qualifications in
effect for so long as required for the distribution of the Shares;
provided, however, that in no event shall the Company be required to
qualify to do business in any such jurisdiction in which it is not
already qualified or to file a general consent to service of process in
any jurisdiction in which it is not now so required, other than in
respect of suits arising out of the offering or sale of the Shares. The
Company will, from time to time, prepare and file such statements,
reports and other documents, as are or may be required to continue such
qualifications in effect for so long a period as ING Barings LLC may
request for the distribution of the Shares. The Company will cooperate
with ING Barings LLC and counsel to the Underwriters in connection with
the filings required to be made by ING Barings LLC with the NASD and
will pay the fee of the NASD in connection with its review of the
offering of the Shares and will use its best efforts to cause the
Shares to be quoted on the Nasdaq National Market System.
(vi) During the period of five years from the effective date
of the Registration Statement, the Company will furnish to you and,
upon request, to each of the several Underwriters, without charge,
copies of, in such quantities as you or the Underwriters may request
from time to time, (A) as soon as available, all reports or other
communications (financial or other) furnished generally by the Company
to its securityholders, (B) as soon as practicable after the end of
each fiscal year, copies of the Annual Report of the Company containing
the balance sheet of the Company as of the close of such fiscal year
and statements of income, Shareholders' equity and cash flows
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<PAGE> 22
for the year then ended and the opinion thereon of the Company's
independent public or certified public accountants; and (C) as soon as
practicable after the filing thereof, copies of each proxy statement,
Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current
Report on Form 8-K or other report filed by the Company with the
Commission, the NASD, any other supervisory, regulatory, administrative
or governmental agency, body or authority whether pursuant to the
Exchange Act or otherwise or any national securities exchange or system
on which any class of securities of the Company is listed or quoted.
(vii) For a period of 180 days from the date of the Prospectus
(the "Lock-Up Period"), without the prior written consent of ING
Barings LLC, the Company shall not, directly or indirectly: (A) issue,
offer for sale, contract to sell, sell, pledge or otherwise dispose of
(or enter into any transaction or device which is designed to, or could
be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise) by any person at any time in the future of) any shares of
Common Stock or securities convertible into, exercisable or
exchangeable for, or represent the right to receive, Common Stock or
sell or grant options, rights or warrants with respect to any shares of
Common Stock or any of the foregoing or announce the offering of or
register for sale any of the foregoing or any outstanding shares of
Common Stock; provided however, that the Company may grant options and
issue and sell Common Stock pursuant to or in connection with (i) any
directors' and/or employees' stock plan, stock ownership plan or
dividend reinvestment plan of the Company in effect at the effective
date of the Registration Statement, (ii) the exercise of any
outstanding options or warrants and (iii) any acquisitions the Company
may complete during such 180 day period; or (B) enter into any swap,
repurchase agreement, pledge, transfer or other transaction that
transfers to another, in whole or in part, any of the economic benefits
or risks of ownership of such shares of Common Stock or other
securities, whether any such transaction described in clause (A) or (B)
above is to be settled by delivery of Common Stock or other securities,
in cash or otherwise. In addition, during such period, the Company also
agrees not to file any registration statement (other than a Form S-8
registration statement filed in connection with shares of Common Stock
received under a Company directors' and employees' stock plan, stock
ownership plan, employment agreement or dividend reinvestment plan)
with respect to the registration of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common
Stock without the prior written consent of ING Barings LLC.
(viii) During the period when, in the opinion of counsel to
the Underwriters, the delivery of a Prospectus by an Underwriter or
dealer may be required by the Act, the Company will comply, at its own
expense, with all requirements imposed upon it by the Commission, the
Act, the Exchange Act, the Regulations or the Exchange Act Rules, so
far as necessary to permit the continuance of sales of or dealing in
the Shares during such period in accordance with the provisions hereof
and the Prospectus. In addition, during such period the Company shall
file, on a timely basis, with the Commission and the Nasdaq National
Market all reports and documents required to be filed under the
Exchange Act.
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<PAGE> 23
(ix) Each of the Company and the Subsidiaries will conduct its
business in compliance with all applicable laws, rules, regulations,
decisions, directives and orders. The Company will do and perform all
things required or necessary to be done and performed under this
Agreement by the Company on or prior to the Closing Date and to comply
or cause to be satisfied, to the extent such are within its control,
the conditions precedent to the several obligations of the Underwriters
specified in Section 8 hereof.
(x) Neither the Company nor any of its affiliates (as defined
in Regulation D under the Act), will take, directly or indirectly, any
action designed to cause or result in, or which constitutes or which
might reasonably be expected to cause, result in, or constitute, under
the Exchange Act, or otherwise, stabilization or manipulation of the
price of the shares of Common Stock of the Company to facilitate the
offering and distribution of the Shares or any other action prohibited
by Regulation M under the Exchange Act.
(xi) The Company will apply the net proceeds from the offering
and sale of the Shares to be sold by the Company in the manner set
forth in the Prospectus under "Use of Proceeds."
(xii) The Company shall take all economically reasonable steps
to enforce the Patent Rights and all other Intellectual Property
against potential infringers.
(xiii) The Company shall engage and maintain, at its expense,
a registrar and transfer agent for the Shares.
(xiv) The Company shall (A) obtain directors' and officers'
liability insurance in the minimum amount of [$25] million which shall
apply to the offering contemplated hereby and (B) shall cause ING
Barings LLC to be added as an additional insured to such policy in
respect of the offering contemplated hereby. - - PENDING REVIEW OF THE
COMPANY'S EXISTING INSURANCE POLICIES.]
(xv) The Company shall cause to be prepared and delivered, at
its expense, within one business day from the date hereof, to the
Underwriters an "electronic Prospectus" to be used by the Underwriters
in connection with the offering and sale of the Shares. As used herein,
the term "electronic Prospectus" means a form of Prospectus, and any
amendment or supplement thereto, that meets each of the following
conditions: (A) it shall be encoded in an electronic format,
satisfactory to you, that may be transmitted electronically by the
Underwriters to offerees and purchasers of the Shares for at least
during the period when, in the opinion of counsel to the Underwriters,
the Prospectus is required to be delivered under the Act or the
Exchange Act; (B) it shall disclose the same information as the paper
Prospectus and Prospectus filed pursuant to EDGAR, except to the extent
that graphic and image material cannot be disseminated electronically,
in which case such graphic and image material shall be replaced in the
electronic Prospectus with a fair and accurate narrative description or
tabular representation of such material, as appropriate; and (C) it
shall be in or convertible into a paper format or an electronic format,
satisfactory to you, that will allow investors to store and have
continuously ready access to the Prospectus at any future time, without
charge to investors (other than any fee charged for subscription to the
system as a whole and for
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<PAGE> 24
on-line time). The Company hereby confirms that it has included or will
include in the Prospectus filed pursuant to EDGAR or otherwise with the
Commission and in the Registration Statement at the effective date of
the Registration Statement an undertaking that, upon receipt of a
request by an investor or his or her representative during the period
when, in the opinion of counsel to the Underwriters, delivery of a
Prospectus by an Underwriter or dealer may be required by the Act, the
Company shall transmit or cause to be transmitted promptly, without
charge, a paper copy of the Prospectus.
(b) Each Selling Shareholder severally and not jointly
covenants and agrees with each of the Underwriters that:
(i) [Such Selling Shareholder will not, for a period of 180
days after the date hereof, directly or indirectly, without the prior
written consent of ING Barings LLC, offer for sale, sell, contract to
sell, grant any option to purchase or otherwise dispose (or announce
any offer, sale, grant of any option to purchase or other disposition)
of any Common Shares or any securities convertible into, or
exchangeable or exercisable for, Common Shares owned by such Selling
Shareholder on the date hereof, except pursuant to this Agreement.]
(ii) Such Selling Shareholder consents to the use of the
Prospectus and any amendment or supplement thereto by the Underwriters
and all dealers to whom the Shares may be sold, both in connection with
the offering or sale of the Shares and for such period of time
thereafter as the Prospectus are required by law to be delivered in
connection therewith.
(iii) Such Selling Shareholder will not at any time, directly
or indirectly, take any action intended, or which might reasonably be
expected, to cause or result in, or which will constitute,
stabilization of the price of the Common Shares to facilitate the sale
or resale of any of the Shares.
(iv) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the U.S. Tax Equity and
Fiscal Responsibility Act of 1982 with respect to transactions herein
contemplated, such Selling Shareholder will deliver to the
Representative prior to or at the Closing Date a properly completed and
executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department
regulations in lieu thereof).
5. Payment of Expenses.
(a) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will pay,
or reimburse ING Barings LLC if paid by the Underwriters, all costs, fees and
expenses incident to the performance of the obligations of the Company and the
Selling Shareholders under this Agreement, including but not limited to costs,
fees and expenses of or relating to (i) the preparation by the Company and the
Selling Shareholders, printing and filing of the Registration Statement and
exhibits to it, each preliminary prospectus, the Prospectus and any amendment or
supplement to the Registration Statement or the Prospectus (including, without
limitation, the fees and expenses of the Company's and the Selling Shareholders'
counsel, accountants and other advisors), (ii) the
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preparation and delivery of certificates representing the Shares, (iii) the
printing of this Agreement and Underwriter's Questionnaires, Underwriter's
Powers of Attorney, Blue Sky Memoranda, Master Agreements Among Underwriters and
Master Selling Agreements, and all other documents relating to the public
offering of the Shares (including those documents supplied to the Underwriters
in quantities as hereinabove stated) and furnishing (including costs of shipping
and mailing) such copies of the Registration Statement, the Prospectus and any
preliminary prospectus, and all exhibits, schedules, consents, certificates of
experts, amendments and supplements thereto, as may be requested for use in
connection with the offering and sale of the Shares by the Underwriters or by
dealers to whom Shares may be sold, (iv) the quotation of the Shares on the
Nasdaq National Market, (v) any filings required to be made with, and the review
by, the NASD and the fees, disbursements and other charges of the Underwriters'
counsel in connection therewith, (vi) the registration or qualification (or
obtaining exemptions from such registration or qualification) of the Shares for
offer and sale under the securities or Blue Sky laws of such jurisdictions
designated pursuant to Section 4(e), including the fees, disbursements and other
charges of the Underwriters' counsel in connection therewith, and the
preparation and printing of preliminary, supplemental and final Blue Sky
memoranda, (vii) the issuance, transfer and delivery of the Shares to the
Underwriters, including any issue, transfer, stamp or other taxes payable
thereon, (viii) the transfer agent or registrar for the Shares, (ix) all costs
and expenses incident to the preparation and undertaking of "road show"
preparations to be made to prospective investors, and (x) all other fees, costs
and expenses referred to in Part II of the Registration Statement.
(b) If this Agreement shall be terminated by the Company or
the Selling Shareholders or if for any reason the Company or the Selling
Shareholders shall fail to perform its or their obligations hereunder, if any
condition to the obligations of the Underwriters set forth in Section 8 hereof
is not satisfied, or if this Agreement shall be terminated by ING Barings LLC
pursuant to Section 8, Section 9 or Section 11, or if the sale to the
Underwriters of the Shares on the Closing Date is not consummated because of any
refusal, inability or failure on the part of the Company or the Selling
Shareholders to perform any agreement herein or to comply with any provision
hereof, the Company and the Selling Shareholders agree to reimburse ING Barings
LLC and the other Underwriters (or such Underwriters as have terminated this
Agreement with respect to themselves), jointly and severally, upon demand for
all out-of-pocket expenses that shall have been incurred by ING Barings LLC and
the Underwriters in connection with the proposed purchase and the offering and
sale of the Shares, including but not limited to fees and disbursements of
counsel, printing expenses, travel expenses, postage, facsimile and telephone
charges.
6. Indemnification.
(a) The Company and the Selling Shareholders jointly and
severally agree to indemnify and hold harmless each Underwriter, its directors,
officers, employees, and agents and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all losses, liabilities, claims, damages, actions
and expenses whatsoever, as incurred (including but not limited to attorneys'
fees and any and all expenses whatsoever incurred in investigating, preparing,
compromising or defending against any litigation, commenced or threatened, or
any claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other federal or state statutory law or
regulation, or at
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<PAGE> 26
common law or otherwise, insofar as such losses, liabilities, claims, damages or
expenses (or actions in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement for the registration of the Shares, as originally filed
or any amendment thereof, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; or (ii) upon any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or the omission or alleged
omission to state therein a material fact necessary in order to make statements
therein, in the light of the circumstances in which they were made, not
misleading; or (iii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company and the Selling Shareholders
contained herein; or (iv) in whole or in part upon any failure of the Company or
the Selling Shareholders to perform its obligations hereunder or under law; or
(v) any act or failure to act or any alleged act or failure to act by an
Underwriter in connection with, or relating in any manner to, the Shares or the
offering contemplated hereby, and which is included as part of or referred to in
any loss, claim, damage, liability or action arising out of or based upon any
matter covered by clause (i), (ii), (iii) or (iv) above, provided that neither
the Company nor the Selling Shareholders will be liable under this clause (v) to
the extent that a court of competent jurisdiction shall have determined by a
final judgment that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be taken
by such Underwriter through its bad faith or willful misconduct; and provided,
however, that neither the Company nor the Selling Shareholders will be liable in
any such case covered by clauses (i), (ii), (iii), (iv) or (v) above to the
extent but only to the extent that any such loss, liability, claim, damage,
action or expense arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information relating to an
Underwriter furnished to the Company or the Selling Shareholders by or on behalf
of any Underwriter through you expressly for use therein. This indemnity
agreement will be in addition to any liability which the Company or the Selling
Shareholders may otherwise have, including under this Agreement.
(b) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, each of the directors of the Company,
each of the officers of the Company and the Selling Shareholders who shall have
signed the Registration Statement, and each other person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any losses, liabilities, claims, damages and expenses
whatsoever as incurred (including but not limited to attorneys' fees and any and
all expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement for the registration of the Shares, as originally filed
or any amendment thereof, or any related preliminary prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading, in each
case to the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in
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conformity with written information relating to an Underwriter furnished to the
Company or the Selling Shareholders by or on behalf of any Underwriter through
you expressly for use therein; provided, however, that in no case shall any
Underwriter be liable or responsible for any amount in excess of the
underwriting discounts and commissions applicable to the Shares purchased by
such Underwriter hereunder. This indemnity will be in addition to any liability
which any Underwriter may otherwise have, including under this Agreement. The
Company and the Selling Shareholders acknowledge that the statements set forth
in the first and second paragraphs under the caption "Underwriting" in the
Prospectus constitute the only information furnished in writing relating to an
Underwriter by or on behalf of any Underwriter expressly for use in the
Registration Statement relating to the Shares as originally filed or in any
amendment thereof, any related preliminary prospectus or the Prospectus or in
any amendment thereof or supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability or obligation which it may have under this Section 6 or otherwise (i)
unless the failure to notify shall result in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not in any event relieve
the indemnifying party from any obligations other than the indemnification
obligation provided in paragraph (a) or (b) above). In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified parties promptly after receiving the aforesaid notice from an
indemnified party, to assume the defense thereof with counsel satisfactory to
such indemnified parties. Notwithstanding the foregoing, the indemnified party
or parties shall have the right to employ its or their own separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by one of the indemnifying parties in connection with the defense of
such action, (ii) the indemnifying parties shall not have employed counsel to
have charge of the defense of such action within a reasonable time after notice
of commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that a conflict may arise between the positions of the
indemnifying party or parties in conducting the defense of any such action or
that there may be one or more legal defenses available to it or them which are
different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying party or parties shall not
have the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses shall be borne
by the indemnifying parties, it being understood, however, that the indemnifying
party or parties shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (plus separate local
counsel, if retained by the indemnified party or parties) at any time for all
such indemnified parties. An indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld.
Notwithstanding the foregoing, if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for fees and
expenses of
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counsel as contemplated in this Section 6, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent is for money damages only and includes (i) an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
Any losses, claims, damages, liabilities, expenses or actions
for which an indemnified party is entitled to indemnification or contribution
under this Section 6 or under Section 7 below shall be paid by the indemnifying
party to the indemnified party as such losses, claims, damages, liabilities or
expenses are incurred, but in all cases, no later than thirty (30) days of
invoice to the indemnifying party.
The indemnity and contribution agreements contained in this
Section 6 and in Section 7 below and the representation and warranties of the
Company and the Selling Shareholders set forth in this Agreement shall remain
operative and in full force and effect, regardless of (i) any investigation made
by or on behalf of any Underwriter or any director, officer or employee of or
person controlling any Underwriter, the Company, its directors or officers or
any persons controlling the Company or the Selling Shareholders, (ii) acceptance
of any Shares and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter, or to the Company or the Selling
Shareholders, shall be entitled to the benefits of the indemnity, contribution
and reimbursement agreements contained in this Section 6 and Section 7 below.
The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 6 and Section 7 below and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 6 and Section 7 below fairly allocate the risks in light of the ability
of the parties to investigate the Company and the Selling Shareholders and its
and their business in order to assure that adequate disclosure is made in the
Registration Statement, the preliminary prospectus and Prospectus as required by
the Act and the Exchange Act.
7. Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 6 hereof is
for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Company, the
Selling Shareholders and the Underwriters shall severally contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
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suffered by the Company or the Selling Shareholders any contribution received by
the Company or the Selling Shareholders from persons, other than the
Underwriters, who may also be liable for contribution, including persons who
control the Company within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act, officers of the Company who signed the Registration
Statement and directors of the Company or the Selling Shareholders) as incurred
to which the Company, the Selling Shareholders and one or more of the
Underwriters may be subject, in such proportions as is appropriate to reflect
the relative benefits received by the Company, the Selling Shareholders and the
Underwriters from the offering of the Shares or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 6
hereof, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company or the
Selling Shareholders on the one hand and the Underwriters, severally, on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company or the
Selling Shareholders on the one hand and the Underwriters, severally, on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and the Selling Shareholders bears to the
underwriting discounts and commissions received by the Underwriters,
respectively. The relative fault of the Company or the Selling Shareholders on
the one hand and of the Underwriters, severally, on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or one or more
Selling Shareholders or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Selling Shareholders and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this Section 7, (i) in no
case shall any Underwriter be liable or responsible for any amount in excess of
the underwriting discounts and commissions applicable to the Shares purchased by
such Underwriter hereunder, and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. Further notwithstanding the provisions of this Section 7 and
the preceding sentence, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. For purposes of this Section 7, each director, officer,
employee and agent of an Underwriter and each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, each officer of the Company who
shall have signed the Registration Statement and each director of the Company
shall have the same rights to contribution as the Company and the Selling
Shareholders, subject in each case to clauses (i) and (ii) of this Section 7.
Any party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties,
notify each party or
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parties from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom contribution
may be sought from any obligation it or they may have under this Section 7 or
otherwise. No party shall be liable for contribution with respect to any action
or claim settled without its consent, provided that such consent was not
unreasonably withheld.
The Underwriters' obligations in this Section 7 to contribute
are several in proportion to their respective underwriting obligations and not
joint. The remedies provided for in this Section 7 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
8. Conditions to the Obligations of the Underwriters. The
several obligations of the Underwriters to purchase and pay for the Firm Shares
and the Option Shares, as provided herein, shall be subject to the accuracy of
the representations and warranties on the part of the Company and the Selling
Shareholders contained herein as of the date hereof, the Closing Date and any
Additional Closing Date, to the absence from any certificates, opinions, written
statements or letters furnished to you or to Underwriters' counsel pursuant to
this Section 8 of any misstatement or omission, to the timely performance by the
Company and the Selling Shareholders of its and their covenants and other
obligations hereunder and to each of the following additional conditions:
(a) The Registration Statement shall have become effective not
later than, if pricing pursuant to Rule 430A, 5:30 P.M., New York time on the
date of this Agreement, and if pricing pursuant to a pricing amendment, 12:00
P.M., New York time on the date an amendment to the Registration Statement
containing the public offering price has been filed with the Commission, or at
such later time and date as shall have been consented to in writing by ING
Barings LLC; if the Company shall have elected to rely upon Rule 430A or Rule
434 of the Regulations, the Prospectus shall have been filed with the Commission
in a timely fashion in accordance with Section 4(a) hereof; and, at or prior to
the Closing Date no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof shall have been issued and no
proceedings for such purpose shall have been initiated or threatened by the
Commission; no order suspending the qualification or registration of the Shares
under the securities or Blue Sky laws of any jurisdiction shall be in effect and
no proceeding for such purpose shall be pending before or threatened or
contemplated by the authorities of any such jurisdiction; any request for
additional information on the part of the staff of the Commission or any such
authorities shall have been complied with to the satisfaction of the staff of
the Commission or such authorities and to the satisfaction of counsel to the
Underwriters; after the date hereof no amendment or supplement to the
Registration Statement or the Prospectus shall have been filed unless a copy
thereof was first submitted to you and you did not reasonably object thereto;
and the NASD, upon review of the terms of the public offering of the Shares,
shall not have raised any objection to the fairness or reasonableness of the
underwriting terms and arrangements.
(b) The Company shall have furnished to you the opinion of
Cooperman Levitt Winikoff Lester & Newman, PC, counsel for the Company, dated
the Closing Date and the Additional Closing Date, if applicable, addressed to
the Underwriters and in form and substance satisfactory to Clifford Chance
Rogers & Wells LLP, Underwriters' counsel, to the effect that:
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(i) Each of the Company and the Subsidiaries has been duly
organized and is validly existing and in good standing under the laws
of Delaware or Wisconsin, as the case may be, with full power and
authority to own, lease and operate its properties and engage in the
business in which it is engaged or proposes to engage as described in
the Registration Statement, the preliminary prospectus and the
Prospectus. Each of the Company and the Subsidiaries is duly registered
and qualified to do business as a foreign corporation in good standing
in each jurisdiction where the character or location of its properties
(owned, leased or licensed) or the nature or conduct of its business
requires such registration or qualification, except where the failure
to so register or qualify, individually or in the aggregate, could not
have a Material Adverse Effect on the Company and its subsidiaries
taken as a whole. To such counsel's knowledge, except as set forth in
the Registration Statement, the preliminary prospectus and the
Prospectus, the Company does not own or control, directly or
indirectly, any shares of stock or any other equity or long-term debt
securities of any corporation or have an equity interest in any firm,
partnership, association, joint venture or other entity, other than the
Subsidiaries.
(ii) All the outstanding shares of capital stock of the
Subsidiaries have been duly authorized and validly issued, are fully
paid and nonassessable, are owned by the Company, free and clear of any
Liens, shareholders' agreements, voting trusts or defects of title, and
were not issued in violation of statutory or, to such counsel's best
knowledge, other preemptive rights, co-sale rights, resale rights,
rights of first refusal, or similar rights.
(iii) The Company's authorized equity capitalization is as set
forth in the Registration Statement, the preliminary prospectus and the
Prospectus; the Common Stock, the Firm Shares, the Option Shares and
all others shares of capital stock of the Company conform to the
description thereof contained in the Registration Statement, the
preliminary prospectus and the Prospectus. The outstanding shares of
capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. The Shares to be issued
and sold to the Underwriters pursuant to the Underwriting Agreement
have been duly authorized, and when issued and delivered to and paid
for by the Underwriters pursuant to the Underwriting Agreement, will be
validly issued and fully paid and nonassessable, and transferred to the
Underwriters free and clear of any Liens and will not have been issued
in violation of or subject to any statutory or, to such counsel's best
knowledge, other preemptive rights, resale rights, co-sale rights,
rights of first refusal, or similar rights. The certificates for the
Shares are in valid and sufficient form. The holders of outstanding
shares of capital stock of the Company are not entitled to statutory
or, to such counsel's best knowledge, other preemptive rights, co-sale
rights, rights of first refusal, resale rights or similar rights in
respect of the Shares. Except as described in the Registration
Statement, the preliminary prospectus and the Prospectus, to such
counsel's best knowledge, there are no authorized or outstanding
rights, warrants or options to acquire, or instruments convertible into
or exercisable or exchangeable for, any share of capital stock or other
equity interest or ownership interest in the Company or the
Subsidiaries or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock
or other equity interest or ownership interest in the Company or the
Subsidiaries or any such convertible or exercisable or exchangeable
securities or instruments or any such rights, warrants or options. The
description of the Company's stock option, stock bonus and
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<PAGE> 32
other stock plans or arrangements, and the options or other rights
granted thereunder, set forth in the Registration Statement, the
preliminary prospectus and the Prospectus, accurately and fairly
presents the information required to be shown with respect to such
plans, arrangements, options and rights. No holder of securities of the
Company has any rights to the registration of securities of the Company
because of the filing of the Registration Statement or otherwise in
connection with the sale of the Shares contemplated by the Underwriting
Agreement.
(iv) To the best knowledge of such counsel, there is (A) no
action, suit, proceeding or investigation before or by any court,
arbitrator or governmental agency, body or official, domestic or
foreign, pending, threatened or contemplated as to which the Company or
the Subsidiaries will be a party or as to which the business, assets or
property of the Company or the Subsidiaries is or will be, subject, (B)
no statute, rule, regulation or order that has been enacted, adopted or
issued by any governmental agency, body or official, and (C) no
injunction, restraining order or order of any nature that has been
issued by a federal or state court or foreign court of competent
jurisdiction to which the Company or the Subsidiaries is or will be
subject or affecting the business, assets or property of the Company or
the Subsidiaries, in each case that is of a character required to be
disclosed in the Registration Statement, the preliminary prospectus or
the Prospectus which has not been properly disclosed therein or that
might, in the case of clauses (A), (B) and (C), individually or in the
aggregate, result in a Material Adverse Effect on the Company and its
subsidiaries taken as a whole, or adversely affect the ability of the
Company to perform its obligations under this Agreement or be otherwise
important in the context of the sale of the Shares. To such counsel's
best knowledge, there are no legal or administrative proceedings,
actions, suits, investigations pending or threatened, or statutes, or
franchises, Contracts, Permits or other documents concerning the
Company or the Subsidiaries, of a character that would be required to
be described in or filed as an exhibit to a registration statement on
Form S-3 under the Act that are not described in the Registration
Statement, the preliminary prospectus and the Prospectus or so filed as
required. The statements in the Registration Statement, the preliminary
prospectus and the Prospectus relating to pending litigation or actions
taken by the courts or taken or requested by regulatory bodies fairly
summarize, in all material respects, the matters referred to therein.
(v) The Registration Statement has become effective under the
Act; all filings required by Rule 424(b) of the Regulations have been
made in the manner and within the time period required by Rule 424(b).
To the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or threatened. The
Registration Statement, the preliminary prospectus and the Prospectus
and each supplement thereto comply as to form in all material respects
with the applicable requirements of the Act and the Regulations.
(vi) The Underwriting Agreement has been duly authorized,
executed and delivered by the Company and is the legal, valid and
binding agreement of the Company. The Company has full power and
authority to enter into the Underwriting Agreement and to perform the
transactions contemplated thereby.
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(vii) The Company and the Subsidiaries have all requisite
corporate power and authority, and all Permits that are material to the
conduct of the business of the Company and the Subsidiaries as such
business is conducted or as is proposed to be conducted as described in
the Registration Statement, the preliminary prospectus or the
Prospectus (and there is no proceeding pending or, to the best
knowledge of such counsel, threatened, which may cause any such Permit
to be withdrawn, canceled, suspended or not renewed). The Company's and
the Subsidiaries' Contracts and Permits are legal, valid and binding
and in full force and effect. To the best knowledge of such counsel,
(a) the Company and the Subsidiaries are not in violation of, or in
default under, and have fulfilled and performed all their obligations
with respect to their Contracts and Permits, and (b) no event has
occurred which allows or would allow revocation or termination of any
such Contract or Permit or result in any material impairment of the
rights of the holder of any such Contract or Permit.
(viii) The Company and the Subsidiaries are not (A) in
violation of their respective certificates of incorporation, as
amended, or bylaws, as amended or (B) to the best knowledge of such
counsel, in breach of or default under (or an event has occurred that
with notice or the lapse of time or both would constitute such a
breach, violation or default) the performance or observance of any
Contract or Permit or in violation of any law, order, rule, regulation
or writ, injunction or decree of any court or governmental agency, body
or authority, except in the case of this clause (B) for such breaches,
defaults or violations that could not, individually or in the
aggregate, have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole or adversely affect the ability of the
Company to perform its obligations under the Underwriting Agreement or
be otherwise important in the context of the sale of the Shares.
(ix) Neither the issuance, offer, sale or delivery of the
Shares, the execution, delivery and performance by the Company of the
Underwriting Agreement nor the compliance by the Company with all the
provisions thereof nor the consummation of the transactions
contemplated thereby, (A) conflicts with or will conflict with, or
constitutes or will constitute a breach or violation of or a default
(or an event that with notice or the lapse of time or both would
constitute such a breach, violation or default) under, any of the terms
or provisions of the certificate of incorporation or by-laws or other
organizational or constitutive documents of the Company or the
Subsidiaries, (B) conflicts with or will conflict with or constitutes
or will constitute a breach or violation of, or a default (or an event
that with notice or the lapse of time or both would constitute such a
breach, violation or default) or the loss of any material benefit
under, or the termination of, or will result in the creation or
imposition of any Lien upon any property or assets of the Company or
the Subsidiaries pursuant to, any Contract or Permit, nor (C) violates
or conflicts with or will violate or conflict with any law, statute,
rule or regulation applicable to the Company or the Subsidiaries or any
judgment, decree or order known to such counsel and applicable to the
Company or the Subsidiaries of any court or supervisory, regulatory,
administrative or governmental agency, body or authority, or arbitrator
having jurisdiction over the Company or the Subsidiaries or any of
their property or assets, the default under or the breach or violation
of which, in the case of clauses (B) and (C) above, individually or in
the aggregate, could have a Material Adverse Effect on the Company and
the Subsidiaries taken as a whole or adversely affect
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the ability of the Company to perform its obligations under the
Underwriting Agreement or be otherwise important in the context of the
sale of the Shares.
(x) To the best knowledge of such counsel, (A) the Company and
the Subsidiaries have conducted and are conducting their businesses in
compliance in all material respects with all applicable laws, rules or
regulations and all decisions, directives and orders to which the
Company and its subsidiaries is a party or by which, to such counsel's
knowledge, any of them or their property is bound or affected, the
failure to comply with, individually or in the aggregate, could have a
Material Adverse Effect on the Company and the Subsidiaries taken as a
whole or adversely affect the ability of the Company to perform its
obligations under the Underwriting Agreement or be otherwise important
in the context of the sale of the Shares, and (B) are not subject to
any directive or order from any agency, body, authority, court or
arbitrator or competent jurisdiction to make any material change in the
method of conducting their businesses.
(xi) The descriptions in the Registration Statement, the
preliminary prospectus and the Prospectus which purport to summarize
the provisions of statutes, regulations, Contracts and other documents
are accurate summaries in all material respects and such descriptions
fully and fairly present the information shown. To the best knowledge
of such counsel, there is no law, statute, regulation, Contract or
other document applicable to the Company or the Subsidiaries of a
character required to be described in the Registration Statement, the
preliminary prospectus or the Prospectus or required to be filed as an
exhibit to the Registration Statement which is not described or filed
as required. The descriptions in the Registration Statement, the
preliminary prospectus and the Prospectus that concern matters of law
or legal conclusions that have been prepared or reviewed by such
counsel are accurate and fairly summarize the matters therein
described.
(xii) Except as otherwise set forth in the Registration
Statement, the preliminary prospectus and the Prospectus, the Company
and the Subsidiaries own or possess adequate licenses or other rights
to use the Intellectual Property necessary to the conduct of their
business as currently conducted and as proposed to be conducted as
described in the Registration Statement, the preliminary prospectus and
the Prospectus. Such counsel is not aware of any claim to the contrary
with respect to any Intellectual Property which could, individually or
in the aggregate, have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole.
(xiii) To the best of such counsel's knowledge, the Company
and the Subsidiaries have filed on a timely basis with the appropriate
taxing authorities (or have received an extension for filing with
respect to) all necessary federal, state and foreign income and
franchise tax returns, reports and other information required to be
filed by it. Each such tax return, report or other information was,
when filed, accurate and complete. Except as described in the
Registration Statement, the preliminary prospectus and the Prospectus,
each of the Company and the Subsidiaries has duly paid, or has made
adequate charges, accruals and reserves in the financial statements
for, all such taxes required to be paid by it and any other assessment,
fine or penalty levied against it, for all periods as to which the tax
liability of the Company or the Subsidiaries has not been
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<PAGE> 35
finally determined. No tax deficiency has been, or such to such
counsel's best knowledge, may be asserted or contemplated against the
Company or the Subsidiaries.
(xiv) To the best of such counsel's knowledge, the Company and
the Subsidiaries (A) are in compliance with all applicable
Environmental Laws, (B) have received all Permits required of them
under applicable Environmental Laws to conduct their business as
currently conducted, and (C) are in compliance with all terms and
conditions of any such Permit, except where such noncompliance with
Environmental Laws, or the failure to receive required Permits, could
not, individually or in the aggregate, have a Material Adverse Effect
on the Company and its subsidiaries taken as a whole. To the best of
such counsel's knowledge, no action, proceeding, revocation proceeding,
writ, injunction or claim is pending or threatened relating to the
Environmental Laws or to the Company's or the Subsidiaries' activities
involving Hazardous Materials. To the best of such counsel's knowledge,
neither the Company nor any of the Subsidiaries has engaged in the
generation, use, manufacture, transportation or storage of any
Hazardous Materials on any of the Company's or any of the Subsidiaries'
properties or former properties, except where such use, manufacture,
transportation or storage is in compliance with Environmental Laws, or
to the extent such activity would not, individually or in the
aggregate, have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole. To the best of such counsel's knowledge,
no Hazardous Materials have been treated or disposed of on any of the
Company's or any of the Subsidiaries' properties or on properties
formerly owned or leased by the Company or the Subsidiaries during the
time of such ownership or lease, except in compliance with
Environmental Laws, or those that could not, individually or in the
aggregate, have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole.
(xv) To the best of such counsel's knowledge, no payments or
inducements were made or given, directly or indirectly, to any federal
or local official or candidate for any federal or state office in the
United States or foreign office by the Company or by any Subsidiaries,
by any of their officers, directors, employees or agents or by any
other person in connection with any opportunity, Contract, Permit,
certificate, consent, order, approval, waiver or other authorization
relating to the business of the Company or the Subsidiaries, except for
such payments or inducements as were lawful under applicable written
laws, rules and regulations. Neither the Company nor any of the
Subsidiaries, nor any director, officer, agent, employee or other
person associated with or acting on behalf of the Company or the
Subsidiaries, (A) has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; (B) made any direct or indirect unlawful payment to
any government official or employee from corporate funds; (C) violated
or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or (D) made any bribe, unlawful rebate, payoff, influence
payment, kickback or other unlawful payment in connection with the
business of the Company or the Subsidiaries.
(xvi) To the best of such counsel's knowledge, neither of the
Company nor any of the Subsidiaries or any of its or their officers,
directors or affiliates (as defined in Regulation D) has taken,
directly or indirectly, any action designed to cause or to result in or
that has constituted, or might reasonably be expected to cause or
result in or constitute,
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<PAGE> 36
under the Exchange Act, or otherwise, the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Securities.
(xvii) The Company is not now, and as a result of the offer
and sale of the Shares in the manner contemplated in the Underwriting
Agreement, the Registration Statement, the preliminary prospectus and
the Prospectus and the application of the net proceeds of such sale as
described in the Registration Statement, the preliminary prospectus and
the Prospectus, will not be, an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an
"investment company" within the meaning of the Investment Company Act,
without taking account of any exemption arising out of the number or
type of holders of the Company's securities.
(xviii) No consent, approval, authorization, filing,
qualification, Permit or order of any court or supervisory, regulatory,
administrative or governmental agency, body or authority, arbitrator or
others (including securityholders) is required for the Company's
execution, delivery and performance of the Underwriting Agreement, the
issuance, sale or delivery of the Shares thereunder or the consummation
of any other of the transactions contemplated in the Underwriting
Agreement or the fulfillment of the terms thereof, except such as have
been obtained under the Act and the Exchange Act and such as may be
required under the blue sky laws of any jurisdiction in connection with
the purchase and distribution of the Shares by the Underwriters and
such other approvals (specified in such opinion) as have been obtained
and which are in full force and effect.
(xix) The Shares to be sold under the Underwriting Agreement
to the Underwriters are designated for inclusion on the National
Association of Securities Dealers Automated Quotation National Market
System, subject only to official notice of issuance.
(xx) Any securities of the Company issued or sold within the
period of one year prior to the date of the Underwriting Agreement were
issued and sold in compliance with the registration requirements of the
Act and the Regulations. To the best of such counsel's knowledge,
neither the Company, the Subsidiaries nor any of its or their
affiliates (as defined in Regulation D), nor any person acting on its
or their behalf has, directly or indirectly, made offers or sales of
any security or solicited offers to buy, or otherwise negotiated in
respect of, any "security", as defined in the Act, under circumstances
that would require the registration of such securities under the Act.
(xxi) Except as otherwise set forth in the Registration
Statement, the preliminary prospectus and the Prospectus, there are no
holders of securities of the Company which by reason of the
consummation of the transactions contemplated by the Underwriting
Agreement have the right to request or demand that the Company register
any of its securities under the Act.
In addition, such opinion shall also contain a statement that such
counsel has participated in conferences with officers and representatives of the
Company, representatives of the independent public accountants for the Company
and the Underwriters at which the contents of the Prospectus and related matters
were discussed and no facts have come to the attention of such counsel which
would lead such counsel to believe that either the Registration Statement at the
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<PAGE> 37
time it became effective (including all information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A, Rule
462 or Rule 434, if applicable), or any amendment thereof made prior to the
Closing Date as of the date of such amendment, contained an untrue statement of
a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus as of its date (or any amendment thereof or supplement thereto made
prior to the Closing Date as of the date of such amendment or supplement) and as
of the Closing Date contained or contains an untrue statement of a material fact
or omitted or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (it being understood that such counsel need
express no belief or opinion with respect to the financial statements and
schedules and other financial data included therein).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the States of
New York and Delaware, or the United States, to the extent they deem proper and
specified in such opinion, upon the opinion of other counsel of good standing
whom they believe to be reliable and who are satisfactory to counsel for the
Underwriters and (B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of the
Company and the Subsidiaries, provided that copies of any such statements or
certificates shall be delivered to Underwriters' counsel. The opinion of such
counsel for the Company shall state that they are so relying, that they have no
knowledge of any material misstatement or inaccuracy in any such opinion or
certificate, that the opinion of any such other counsel is in form satisfactory
to such counsel and, in their opinion, you and they are justified in relying
thereon.
(c) The Company shall have furnished to the Underwriters the
opinion of [ ], counsel for [the Agent and] the Selling Shareholders,
dated the Closing Date (and the Additional Closing Date, if applicable), as to
the matters set forth in Exhibit C hereto, and in form and substance
satisfactory to Clifford Chance Rogers & Wells LLP, counsel to the Underwriters.
(d) The Company shall have furnished to the Underwriters the
opinion of [ ], Intellectual Property counsel for the Company, dated the
Closing Date (and the Additional Closing Date, if applicable), in form and
substance satisfactory to Clifford Chance Rogers & Wells LLP, counsel to the
Underwriters.
(e) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement, preliminary
prospectus or Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares as herein contemplated shall be satisfactory in form and
substance to you and to Underwriters' counsel. The Underwriters shall have
received from Clifford Chance Rogers & Wells LLP, Underwriters' counsel, a
favorable opinion, dated the Closing Date (and the Additional Closing Date, if
applicable), with respect to the issuance and sale of the Shares, the
Registration Statement, the Prospectus and other related matters as you may
reasonably require, and the Company, the Selling Shareholders and the
Subsidiaries shall have furnished to Underwriters' counsel such documents as
they request for the purpose of enabling them to pass upon the matters referred
to in this Section.
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(f) At the Closing Date (and the Additional Closing Date, if
applicable) you shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of the Company, dated the Closing Date (and the
Additional Closing Date, if applicable), to the effect that (i) the condition
set forth in subsection (a) of this Section 8 has been satisfied, (ii) as of the
date hereof and as of the Closing Date (and the Additional Closing Date, if
applicable) all the representations and warranties of the Company set forth in
this Agreement are accurate with the same force and effect as if made on each of
such dates, (iii) as of the Closing Date (and the Additional Closing Date, if
applicable) the agreements and obligations of the Company to be performed
hereunder on or prior thereto have been duly performed, (iv) when the
Registration Statement became effective and at all times subsequent thereto up
to the delivery of such certificate, the Registration Statement and the
Prospectus, and any amendments or supplements thereto, contained the information
required to be included therein by the Act and the applicable rules and
regulations of the Commission thereunder, and conformed to the requirements of
the Act and the applicable rules and regulations of the Commission thereunder;
the Registration Statement and the Prospectus, and any amendments or supplements
thereto, did not and does not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; and since the effective date of the
Registration Statement, there has occurred no event required to be set forth in
an amended or supplemented Prospectus which has not been so set forth; and (v)
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, the Company and the Subsidiaries have
not sustained any material loss or interference with their respective business
or properties from fire, flood, hurricane, accident or other calamity, whether
or not covered by insurance, or from any labor dispute or any legal or
governmental proceeding, and there has not been any material adverse change, or
any development involving a prospective material adverse change, in the
business, management, properties, operations, prospects, condition (financial or
otherwise), or results of operations of the Company and the Subsidiaries taken
as a whole, or any transaction that is material to the Company and its
subsidiaries taken as a whole, except transactions entered into in the ordinary
course of business, or any obligation, direct or contingent, that is material to
the Company and its subsidiaries, taken as a whole, incurred by the Company or
its subsidiaries, except obligations incurred in the ordinary course of
business, or any change in the capital stock or outstanding indebtedness of the
Company or any of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or any of its
subsidiaries. [NOTE: A PARALLEL PROVISION IN RE A SIMILAR CERTIFICATE FROM THE
SELLING SHAREHOLDERS SHALL BE ADDED IF NECESSARY.]
(g) At the time this Agreement is executed and at the Closing
Date (and the Additional Closing Date, if applicable), Delloite & Touche LLP
shall have furnished to you a letter or letters, dated respectively as of the
time this Agreement is executed and as of the Closing Date (and the Additional
Closing Date, if applicable), addressed to you and based upon the procedures
described in such letter, but carried out to a date not more than five (5) days
prior to the Closing Date or the Additional Closing Date, as the case may be,
and otherwise in form and substance satisfactory to you, confirming that they
are independent public accountants with respect to the Company within the
meaning of the Act and Regulation S-X, stating that the answer to item 10 of the
Registration Statement is correct as it relates to them and that:
(i) in their opinion the audited consolidated financial
statements, the audited consolidated financial statement schedules and
the audited financial statements of the
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<PAGE> 39
Company included in the Registration Statement and the Prospectus and
reported on by them comply in form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and the
Subsidiaries; carrying out certain specified procedures (but not an
examination in accordance with generally accepted auditing standards)
which would not necessarily reveal matters of significance with respect
to the comments set forth in such letter; a reading of the minutes of
the meetings of the Shareholders and the board of directors of the
Company and the Subsidiaries; and inquiries of certain officials of the
Company and the Subsidiaries who have responsibility for financial and
accounting matters of the Company and the Subsidiaries as to
transactions and events subsequent to September 30, 1999, nothing came
to their attention which caused them to believe that:
(1) any unaudited financial statements included in the
Registration Statement and the Prospectus do not comply as to
form in all material respects with the applicable accounting
requirements of the Act and with the published rules and
regulations of the Commission with respect to registration
statements on Form S-3; and said unaudited financial
statements are not in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with that of the audited financial statements
included in the Registration Statement and the Prospectus;
(2) with respect to the period subsequent to September
30, 1999 there were any changes, at a specified date not more
than five days prior to the date of the letter, in the
long-term debt of the Company and its Subsidiaries or capital
stock of the Company or decreases in the Shareholders' equity
of the Company, as compared with the amounts shown on the
September 30, 1999 consolidated balance sheet included in the
Registration Statement and the Prospectus or the period from
, 19 to such specified date there were any
decreases, as compared with in [net revenues or income
before income taxes or in total or per share amounts of net
income of the Company and its subsidiaries], except in all
instances for changes or decreases set forth in such letter,
in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof
unless said explanation is not deemed necessary by ING Barings
LLC;
(3) the information included in the Registration
Statement and Prospectus in response to Regulation S-K, Item
301 (Selected Financial Data), Item 302 (Supplementary
Financial Information), Item 402 (Executive Compensation) and
Item 503(d) (Ratio of Earnings to Fixed Charges) is not in
conformity with the applicable disclosure requirements of
Regulation S-K;
(4) for the period from [date], to [date], there were, as
compared to the corresponding period in the preceding year,
any decrease in consolidated net revenues or increase in
excess of [ ]in the total amount of loss from continuing
operations and total net loss in excess of [ ], except
in all
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instances for changes, increases, or decreases that the
Registration Statement and the Prospectus discloses have
occurred or may occur.
(iii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
Interim financial information as described in Statement of Auditing
Standards No. 71 ("SAS 71"), Interim Financial Information, on the
unaudited financial statements included in the Registration Statement
and the Prospectus and are providing their report as described in SAS
71 on such financial statements;
(iv) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and the Subsidiaries) set
forth in the Registration Statement and the Prospectus, which have been
specified by you prior to the date of such letter, agrees with the
accounting records of the Company and its subsidiaries, excluding any
questions of legal interpretation.
(v) they have performed an SSAE 8 examination of the
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in the Registration Statement and the
Prospectus and have determined that:
(1) the presentation includes, in all material respects,
the required elements of the applicable rules and regulations
under the Act;
(2) the historical financial amounts have been accurately
derived in all material respects from the Company's audited
financial statements; and
(3) the underlying information, determinations, estimates
and assumptions of the Company provide a reasonable basis for
the disclosures contained therein.
In addition, ING Barings LLC shall have received from Delloite & Touche
LLP a letter addressed to the Company and made available to you for the use of
the Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's consolidated financial statements as
of September 30, 1999, did not disclose any weaknesses in internal controls that
they considered to be substantial or material weaknesses.
In the event that the letters to be delivered referred to above set
forth note any changes, decreases or increases in the financial information
included in the Registration Statement and the Prospectus, it shall be a further
condition to the obligations of the Underwriters hereunder that ING Barings LLC
shall have determined in its sole judgment, that such changes, decreases or
increases as are set forth in such letters do not reflect a material adverse
change in the Shareholders' equity or long-term debt of the Company as compared
with the amounts shown in the latest balance sheet of the Company included in
the Prospectus, or a material adverse change in total net revenues or net income
of the Company, in each case as compared with the corresponding period of the
prior year.
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(h) Subsequent to the date this Agreement is executed or, if
earlier, the dates as of which information is given in the Registration
Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of
any supplement thereto), there shall not have been (i) any change or decrease
specified in the letter or letters referred to in paragraph (f) of this Section
8 or (ii) any change, or any development involving a prospective change, in or
affecting the condition (financial or other), earnings, business or properties
of the Company and the Subsidiaries, whether or not arising in the ordinary
course of business, the effect of which, in any case referred to in clause (i)
or (ii) above, is, in ING Barings LLC's sole judgment, material and adverse and
that makes it impracticable or inadvisable to proceed with the offering or
delivery of the Shares as contemplated by the Registration Statement (exclusive
of any amendment thereof) and the Prospectus (exclusive of any supplement
thereto).
(i) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) there shall not have
been a material adverse change, or any development involving a prospective
material adverse change, in the general affairs, business, prospects,
properties, management, key personnel, condition (financial or other) or results
of operations of the Company and the Subsidiaries, whether or not arising from
transactions in the ordinary course of business, in each case other than as set
forth in the Registration Statement and the Prospectus (or, in the case of a
prospective change, other than as contemplated by the Registration Statement and
the Prospectus), and (ii) the Company shall not have sustained any material loss
or interference with its business or properties from fire, explosion, flood,
hurricane or other casualty or calamity, whether or not covered by insurance, or
from any labor dispute or any court or legislative or other governmental action,
order or decree, which is not set forth in the Registration Statement and the
Prospectus, if in your judgment any such development makes it impracticable or
inadvisable to consummate the sale and delivery of the Shares at the public
offering price.
(j) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of its
officers or directors in their capacities as such, before or by any federal,
state, or local court, commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, in which litigation or proceeding
an unfavorable ruling, decision or finding could have a Material Adverse Effect
on the Company and its subsidiaries taken as a whole.
(k) At the time of execution of this Agreement, the Company
shall have furnished to you a letter addressed to you from each officer and
director of the Company and each shareholder or other person heretofore
designated by you, in which each such person agrees not to (1) offer for sale,
contract to sell, sell, pledge or otherwise dispose of (or enter into any
transaction or device which is designed to, or could be expected to, result in
the disposition by any person at any time in the future of) any shares of Common
Stock or securities convertible into, exercisable or exchangeable for, or
represent the right to receive, Common Stock or sell or grant options, rights or
warrants with respect to any shares of Common Stock or register for sale any
outstanding shares of Common Stock; or (2) enter into any swap or other
derivatives transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of ownership of such shares of Common Stock or
securities, whether any such transaction described in clause (1) or (2) above is
to be settled by delivery of Common Stock or other securities, in cash or
otherwise for a period of 180 days following the time of execution of this
Agreement without
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your prior written consent, other than shares of Common Stock disposed of as
gifts or transfers to immediate family members or trusts or partnerships, the
beneficiaries and sole partners of which are immediate family members, provided
that the donee or transferee agrees in writing to be bound in the same manner.
(l) The Shares shall be qualified for sale in such
jurisdictions as you shall have requested, each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing Date
and the Additional Closing Date, if applicable.
(m) The Shares shall have been authorized for quotation on the
Nasdaq National Market, subject to official notice of issuance.
(n) You shall not have advised the Company or the Selling
Shareholders that the Registration Statement, the preliminary prospectus or the
Prospectus, or any amendment or any supplement thereto, contains an untrue
statement of fact which, in your judgment, is material, or omits to state a fact
which, in your judgment, is material and is required to be stated therein or
necessary to make the statements therein not misleading and the Company and the
Selling Shareholders shall not have cured such untrue statement of fact or
omission of such statement of fact.
(o) The Company and the Selling Shareholders shall have
furnished to you such certificates, in addition to those specifically mentioned
herein, as you may have requested as to the accuracy and completeness at the
Closing Date and the Additional Closing Date, if applicable, of any statement in
the Registration Statement, the preliminary prospectus or the Prospectus, as to
the accuracy at the Closing Date and the Additional Closing Date, if applicable,
of the representations, warranties and covenants of the Company and the Selling
Shareholders herein, as to the performance by the Company and the Selling
Shareholders of its and their obligations hereunder, or as to the fulfillment of
the conditions concurrent and precedent to your obligations hereunder.
(p) Prior to the Closing Date and the Additional Closing Date,
if applicable, the Company and the Selling Shareholders shall have furnished to
the Underwriters such further information and documents as you may reasonably
request.
(q) There shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as such term is defined
for purposes of Rule 436(g)(2) under the Act.
(r) The Lock-up Agreements shall have been duly and validly
executed and delivered to the Underwriters.
If any of the conditions specified in this Section shall not
have been fulfilled in all respects when and as required to be satisfied, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be satisfactory in form and substance to you and counsel for
the Underwriters, this Agreement and all obligations of the Underwriters
hereunder may be terminated at, or at any time on or prior to, the Closing Date
(and Additional
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Closing Date, if applicable) by ING Barings LLC. Notice of such termination
shall be given to the Company and the Selling Shareholders promptly in writing
or by telephone confirmed in writing.
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its or
their obligations to purchase Firm Shares or Option Shares hereunder, and if the
Firm Shares or Option Shares with respect to which such default relates do not
(after giving effect to arrangements, if any, made by you pursuant to subsection
(b) below) exceed in the aggregate 10% of the number of Firm Shares or Option
Shares, the Shares to which the default relates shall be purchased by the
non-defaulting Underwriters in proportion to the respective proportions which
the numbers of Firm Shares set forth opposite their respective names in Schedule
II hereto bear to the aggregate number of Firm Shares set forth opposite the
names of the non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of
the Firm Shares or Option Shares, as the case may be, you may in your discretion
arrange for yourself or for another party or parties (including any
non-defaulting Underwriter or Underwriters who so agree) to purchase such Firm
Shares or Option Shares, as the case may be, to which such default relates on
the terms contained herein. In the event that within 5 calendar days after such
a default you do not arrange for the purchase of the Firm Shares or Option
Shares, as the case may be, to which such default relates as provided in this
Section 9, this Agreement or, in the case of a default with respect to the
Option Shares, the obligations of the Underwriters to purchase and of the
Company to sell the Option Shares shall thereupon terminate, without liability
on the part of the Company with respect thereto (except in each case as provided
in Section 5, 6(a) and 7 hereof) or the Underwriters, but nothing in this
Agreement shall relieve a defaulting Underwriter or Underwriters of its or their
liability, if any, to the other Underwriters and the Company for damages
occasioned by its or their default hereunder.
(c) In the event that the Firm Shares or Option Shares to
which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
you or the Company shall have the right to postpone the Closing Date or
Additional Closing Date, as the case may be, for a period not exceeding five
business days, in order to effect whatever changes may thereby be made necessary
in the Registration Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment or
supplement to the Registration Statement or the Prospectus which, in the opinion
of Underwriters' counsel, may thereby be made necessary or advisable. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 9 with like effect as if it had originally been a party to
this Agreement with respect to such Firm Shares and Option Shares.
10. Survival of Representations and Agreements. All
representations and warranties, covenants and agreements of the Underwriters,
the Company and the Selling Shareholders contained in this Agreement, including
the agreements contained in Section 4 and Section 5, the indemnity agreements
contained in Section 6 and the contribution agreements contained in Section 7,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling person
thereof or by or on behalf of the Company, any of its officers and directors or
any controlling person thereof and
43
<PAGE> 44
the Selling Shareholders, and shall survive delivery of and payment for the
Shares to and by the Underwriters. The representations contained in Section 1
and the agreements contained in Sections 5, 6, 7 and 11(d) hereof also shall
survive the termination of this Agreement, including termination pursuant to
Section 9 or 11 hereof.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective, upon the later of
when (i) you and the Company shall have received notification of the
effectiveness of the Registration Statement or (ii) the execution of this
Agreement. If either the initial public offering price or the purchase price per
Share has not been agreed upon prior to 5:00 P.M., New York time, on the fifth
full business day after the Registration Statement shall have become effective,
this Agreement shall thereupon terminate without liability to the Company, the
Selling Shareholders or the Underwriters except as herein expressly provided.
Until this Agreement becomes effective as aforesaid, it may be terminated by the
Company by notifying you or by you notifying the Company. Notwithstanding the
foregoing, the provisions of this Section 11 and of Sections 1, 5, 6 and 7
hereof shall at all times be in full force and effect.
(b) ING Barings LLC shall have the right to terminate this
Agreement at any time on or prior to the Closing Date, or the obligations of the
Underwriters to purchase the Option Shares at any time on or prior to the
Additional Closing Date, as the case may be (but in any event prior to delivery
of and payment for the Shares), if (A) any domestic or international event or
act or occurrence has materially disrupted, or in your opinion will in the
immediate future materially disrupt, the market for the Company's securities or
securities in general; or (B) trading on the Nasdaq National Market shall have
been suspended, or limited, minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been
required, on the Nasdaq National Market or by order of the Commission or any
other governmental authority having jurisdiction; or (C) if a banking moratorium
has been declared by a state or federal authority or if any new restriction
materially adversely affecting the distribution of the Firm Shares or the Option
Shares, as the case may be, shall have become effective; or (D)(i) there shall
have occurred any outbreak or escalation of hostilities or there is an outbreak
or escalation of national or international hostilities or there is a declaration
by the United States of a national emergency or war or (ii) if there has been
any crisis or calamity or any change or development in United States' or
international political, financial or economic conditions, if the effect of any
such event in (D)(i) or (D)(ii), in the sole judgment of ING Barings LLC makes
it impracticable or inadvisable to proceed with the offering, sale and delivery
of the Firm Shares or the Option Shares, as the case may be, on the terms
contemplated by the Prospectus (exclusive of any supplement thereto) or to
enforce contracts for the sale of securities; or (E) in the sole judgment of ING
Barings LLC there shall have occurred any Material Adverse Effect on the Company
and its subsidiaries taken as a whole or (F) the Company shall have sustained a
loss by strike, fire, flood, earthquake, accident or other calamity of such
character as in the sole judgment of ING Barings LLC may interfere materially
with the conduct of the business and operations of the Company regardless of
whether or not such loss shall have been insured. Any termination pursuant to
this Section shall be without liability on the part of (a) the Company and the
Selling Shareholders to any Underwriter, except that the Company and the Selling
Shareholders shall be obligated to reimburse the expenses of ING Barings LLC and
the underwriters pursuant to Sections 5, 6 and 7 hereof, (b) any Underwriter to
the Company and the
44
<PAGE> 45
Selling Shareholders or (c) of any party hereto to any other party except that
the provisions of Sections 5, 6 and 7 shall at all times be effective and shall
survive such termination.
(c) Any notice of termination pursuant to this Section 11
shall be by telephone or facsimile and confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 11(a) hereof or (ii) Section 9(b) or 11(b) hereof), or if
the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the
Company or the Selling Shareholders to perform any agreement herein or comply
with any provision hereof, the Company or the Selling Shareholders will, subject
to demand by you, reimburse the Underwriters for all out-of-pocket expenses
(including the fees and expenses of their counsel), incurred by the Underwriters
in connection herewith.
12. Notices. Any notice or notification in any form to be
given hereunder shall be in writing and shall be delivered in person or sent by
telephone or facsimile transmission (but in the case of a notification by
telephone, with subsequent confirmation by letter or facsimile transmission).
Any notice or notification to you shall be addressed to:
ING Barings LLC
55 East 52nd Street
New York, New York 10055
Attention: Linda Chow
with a copy to:
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10106
Attention: Jay L. Bernstein
45
<PAGE> 46
Any notice or notification to the Company shall be addressed
to the Company at:
Robotic Vision Systems, Inc.
5 Shawmut Road
Canton, MA 02021
Attention: Pat V. Costa
and any notice or notification to the Selling Shareholders
shall be addressed to the Agent at:
[Agent]
[address]
[city, state, zip]
Attention: [name]
in either case, with a copy to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Attention: Ira Roxland
Any notice or notification shall (subject to confirmation when
required) take effect at the time of receipt.
13. Parties. This Agreement shall insure solely to the benefit
of, and shall be binding upon, the Underwriters, the Company and the Selling
Shareholders and the controlling persons, directors, officers, employees and
agents referred to in Section 6 and 7, and their respective successors and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provision herein contained. The term "successors and assigns"
shall not include a purchaser, in its capacity as such, of Shares from any of
the Underwriters. Notwithstanding the foregoing, this Agreement and the terms
and provisions hereof are, unless otherwise specified herein, for the sole
benefit of only those persons, except that (a) the representations, warranties,
indemnities and agreements of the Company and the Selling Shareholder contained
in this Agreement shall also be deemed to be for the benefit of each Purchaser
Indemnified Party and (b) the indemnity agreement of the Underwriters contained
in Section 6 hereof shall be deemed to be for the benefit of each Company
Indemnified Party.
14. Consent to Jurisdiction. Any legal suit, action or
proceeding arising out of or based upon this Agreement or the transactions
contemplated hereby ("Related Proceedings") may be instituted in the federal
courts of the United States of America located in the City and County of New
York or the courts of the State of New York in each case located in the City and
County of New York (collectively, the "Specified Courts"), and each party
irrevocably submits to the exclusive jurisdiction (except for proceedings
instituted in regard to the enforcement of a judgment of any such court (a
"Related Judgment"), as to which such jurisdiction is non-exclusive) of such
courts in any such suit, action or proceeding. Service of any process, summons,
notice or document by mail to such party's address set forth above shall be
effective
46
<PAGE> 47
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT Corporation System, which currently
maintains an office at 111 Eighth Avenue, 13th Floor, New York, New York 10011,
United States of America, as its agent to receive service of process or other
legal summons for purposes of any such suit, action or proceeding that may be
instituted in any state or federal court in the City and County of New York.
With respect to any Related Proceeding, each party irrevocably
waives, to the fullest extent permitted by applicable law, all immunity (whether
on the basis of sovereignty or otherwise) from jurisdiction, service of process,
attachment (both before and after judgment) and execution to which it might
otherwise be entitled in the Specified Courts or any other court of competent
jurisdiction, and will not raise or claim or cause to be pleaded any such
immunity at or in respect of any such Related Proceeding or Related Judgment,
including, without limitation, any immunity pursuant to the United States
Foreign Sovereign Immunities Act of 1976, as amended.
15. Miscellaneous. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to contracts made and to be performed within the State of New York.
This Agreement may be executed in one or more counterparts, and if executed in
more than one counterpart, the executed counterparts shall together constitute a
single instrument. The descriptive headings in this Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.
Time shall be of the essence of this Agreement.
This Agreement constitutes the entire agreement of the parties
to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.
If any provision or portion of any provision of the Agreement,
or the application of any such provision or any portion thereof to any party or
circumstances, shall be held invalid or unenforceable, the remaining portion of
such provision and the remaining portion of such provision and the remaining
provisions of this agreement, and the application of such provision or portion
of such provision as is held invalid or unenforceable to any parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and such remaining portion of such provision and
the remaining provisions of this Agreement shall continue to be valid and in
full force and effect.
If the foregoing is in accordance with the Underwriters'
understanding of our agreement, kindly sign and return to us one of the
counterparts hereof, whereupon it will become a binding agreement between the
Company, the Selling Shareholders and the Underwriters in accordance with its
terms.
47
<PAGE> 48
This Agreement may be signed in counterparts which together
shall constitute one and the same instrument.
<TABLE>
<S> <C>
Very truly yours,
By:
------------------------------------
Name:
Title:
The foregoing Underwriting Agreement is The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the hereby confirmed and accepted as of the
date first above written. date first above written.
ING Barings LLC [Agent]
By: By:
------------------------------------ ------------------------------------
Name: Name:
Title: Title:
For itself and the other several For itself and the other several Selling
Underwriters named in Schedule II to the Shareholders named in Schedule I to the
foregoing Underwriting Agreement. foregoing Underwriting Agreement.
</TABLE>
48
<PAGE> 49
SCHEDULE I
[LIST OF SELLING SHAREHOLDERS]
49
<PAGE> 50
SCHEDULE II
Participating Underwriters
<TABLE>
<CAPTION>
NUMBER OF FIRM
SHARES TO BE
UNDERWRITERS PURCHASED
- ------------ --------------
<S> <C>
ING Barings LLC.....................................
Prudential Securities Incorporated..................
McDonald Investments, Inc...........................
---------
Total............................................... =========
</TABLE>
50
<PAGE> 51
SCHEDULE III
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
- ------------------ -----------------------------
<S> <C>
Vanguard Automation Inc..................... Delaware
CiMatrix LLC................................ Delaware
Acuity Imaging LLC.......................... Delaware
Northeast Robotics LLC...................... Delaware
Systemation Engineered Products, Inc........ Wisconsin
</TABLE>
<PAGE> 52
EXHIBIT A
MATTERS TO BE COVERED IN THE OPINION OF
INTELLECTUAL PROPERTY COUNSEL
Such counsel are familiar with the technology used by the
Company in its business and the manner of its use thereof and have read the
Registration Statement, the preliminary prospectus and the Prospectus, including
particularly the portions of the Registration Statement, the preliminary
prospectus and the Prospectus referring to patents, trade secrets, trademarks,
service marks or other proprietary information or materials and:
(i) The Company is listed in the records of the United States
Patent and Trademark Office as the holder of record of the patents listed on a
schedule to such opinion (the "Patents") and each of the applications listed on
a schedule to such opinion (the "Applications"). To the best knowledge of such
counsel, there are no claims of third parties to any ownership interest or lien
with respect to any of the Patents or Applications. Such counsel is not aware of
any material defect in form in the preparation or filing of the Applications on
behalf of the Company. To the best knowledge of such counsel, the Applications
are being pursued by the Company. To the best knowledge of such counsel, the
Company owns as its sole property the Patents and pending Applications.
(ii) The Company is listed in the records of the appropriate
foreign offices as the sole holder of record of the foreign patents listed on a
schedule to such opinion (the "Foreign Patents") and each of the applications
listed on a schedule to such opinion (the "Foreign Applications"). Such counsel
knows of no claims of third parties to any ownership interest or lien with
respect to the Foreign Patents or Foreign Applications. Such counsel is not
aware of any material defect in form in the preparation or filing of the Foreign
Applications on behalf of the Company. To the best knowledge of such counsel,
the Foreign Applications are being pursued by the Company. To the best knowledge
of such counsel, the Company owns as its sole property the Foreign Patents and
pending Foreign Applications.
(iii) Such counsel knows of no reason why the Patents or
Foreign Patents are not valid as issued. Such counsel has no knowledge of any
reason why any patent to be issued as a result of any Application or Foreign
Application would not be valid or would not afford the Company useful patent
protection with respect thereto.
(iv) The Registration Statement, the preliminary prospectus
and the Prospectus fairly and accurately describe the Company's rights with
respect to the Patents, Foreign Patents, Applications, Foreign Applications and
other Intellectual Property. Nothing has come to the attention of such counsel
which caused them to believe that the above-mentioned sections of the
Registration Statement, at the time the Registration Statement became effective
and at all times subsequent thereto up to and on the Closing Date and on any
later date on which Option Shares are to be purchased, the Registration
Statement and any amendment or supplement thereto contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
(v) Such counsel knows of no material action, suit, claim or
proceeding relating to patents, patent rights or licenses, trademarks or
trademark rights, copyrights,
A-1
<PAGE> 53
collaborative research, licenses or royalty arrangements or agreements or trade
secrets, know-how or proprietary techniques, including processes and substances,
owned by or affecting the business or operations of the Company which are
pending or threatened against the Company or any of its officers or directors.
A-2
<PAGE> 54
SUPPLEMENTS
EXHIBIT B
LOCK-UP AGREEMENT
ING Barings LLC
As Representative of the Several Underwriters
c/o ING Barings LLC
55 East 52nd Street
New York, New York 10055
Re: Robotic Vision Systems, Inc.
Dear Sirs:
The undersigned is the record owner of shares of common stock,
par value $.01 per share, shares of preferred stock, par value $.01 per share
and/or warrants or options representing shares of common stock (such shares of
common stock, shares of preferred stock, warrants and options herein referred to
as the "Securities"), of Robotic Vision Systems, Inc., a Delaware corporation
(the "Company"). The undersigned understands that the Company currently intends
to file with the Securities and Exchange Commission a Registration Statement on
Form S-3 (the "Registration Statement"), for the registration of the Company's
common stock, which will be underwritten by a group of underwriters for whom ING
Barings LLC ("ING Barings") will act as representative.
The undersigned agrees that the undersigned will not, without
the prior consent of ING Barings, directly or indirectly for a period of 180
days from the date the Registration Statement has been declared effective: (1)
offer for sale, contract to sell, sell, pledge or otherwise dispose of (or enter
into any transaction or device which is designed to, or could be expected to,
result in the disposition by any person at any time in the future of) any
Securities or securities convertible into, exercisable or exchangeable for, or
represent the right to receive, Securities or sell or grant options, rights or
warrants with respect to any Securities or register for sale any outstanding
Securities; or (2) enter into any swap or other derivatives transaction that
transfers to another, in whole or in part, any of the economic benefits or risks
of ownership of such Securities or securities, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Securities
or other securities, in cash or otherwise.
Notwithstanding the foregoing, (i) gifts or (ii) transfers to
(A) the undersigned's immediate family or (B) a trust or partnership the
beneficiaries and sole partners of which are members of the undersigned's
immediate family and/or the undersigned, shall not be prohibited by this
agreement if the donee or transferee agrees in writing to be bound by the
foregoing in the same manner as it applies to the undersigned. "Immediate
family" shall mean spouse, lineal descendants, father, mother, brother or sister
to the transferor. This agreement shall not prohibit the exercise of any stock
options, except that the Securities obtained upon any such exercise shall be
subject to the limitations on disposition herein.
Very truly yours,
______________________________ By:___________________________
Printed Name of Stockholder Name:
Exactly as it Appears on Stock Title:
Certificate
B-1
<PAGE> 55
SUPPLEMENTS
EXHIBIT C
MATTERS TO BE COVERED IN THE
OPINION OF SELLING SHAREHOLDERS' COUNSEL
(i) The Underwriting Agreement has been duly authorized, executed and
delivered by or on behalf of, and is a valid and binding agreement of, such
Selling Stockholder, enforceable in accordance with its terms, except as rights
to indemnification thereunder may be limited by applicable law and except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles.
(ii) The execution and delivery by such Selling Stockholder of, and the
performance by such Selling Stockholder of its obligations under, the
Underwriting Agreement and its Agency and Custody Agreement [and its Power of
Attorney] will not contravene or conflict with, result in a breach of, or
constitute a default under, the charter or by-laws, partnership agreement, trust
agreement or other organization documents, as the case may be, of such Selling
Stockholder, or, to the best of such counsel" knowledge, violate, result in a
breach of or constitute a default under the terms of any other agreement or
instrument to which such Selling Stockholder is a party or by which it is bound,
or any judgment, order or decree applicable to such Selling Stockholder of any
court, regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over such Selling Stockholder.
(iii) Such Selling Stockholder has good and valid title to all of the
Common Shares which may be sold by such Selling Stockholder under the
Underwriting Agreement and has the legal right and power, and all authorization
and approvals required [under it charter and by-laws,] [partnership agreement,]
[trust agreement] [or other organization documents, as the case may be,] to
enter into the Underwriting Agreement and its Agency and Custody Agreement [and
its Power of Attorney] to sell, transfer and deliver all of the Common Shares
which may be sold by such Selling Stockholder under the Underwriting Agreement
and to comply with its other obligations under the Underwriting Agreement, its
Agency and Custody Agreement[ and its Power of Attorney].
(iv) [Each of] the Agency and Custody Agreement [and Power of Attorney]
of such Selling Stockholder has been duly authorized, executed and delivered by
such Selling Stockholder and is a valid and binding agreement of such Selling
Stockholder, enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles.
(v) Assuming that the Underwriters purchase the Shares which are sold
by such Selling Stockholder pursuant to the Underwriting Agreement for value, in
good faith and without notice of any adverse claims, the delivery of such Shares
pursuant to the Underwriting Agreement will pass good and valid title to such
Shares, free and clear of any security interest, mortgage, pledge, lieu
encumbrance or other claim.
(vi) To the best of such counsel's knowledge, no consent, approval,
authorization or other order of, or registration or filing with, any court or
governmental
B-2
<PAGE> 56
SUPPLEMENTS
authority or agency, is required for the consummation by such Selling
Stockholder of the transactions contemplated in the Underwriting Agreement,
except as required under the Securities Act, applicable state securities or blue
sky laws, and from the National Association of Securities Dealers.
B-3
<PAGE> 57
SUPPLEMENTS
MATTERS TO BE COVERED IN THE OPINION OF UNDERWRITERS' COUNSEL
(i) The Firm Shares have been duly authorized and, upon
issuance and delivery and payment therefor in accordance with the terms
of the Underwriting Agreement, will be validly issued, fully paid and
non-assessable.
(ii) The Registration Statement complied as to form in all
material respects with the requirements of the Act; the Registration
Statement has become effective under the Act and, to such counsel's
knowledge, no stop order proceedings with respect thereto have been
instituted or threatened or are pending under the Act.
(iii) The Underwriting Agreement has been duly authorized,
executed and delivered by the Company.
(iv) The Underwriting Agreement has been duly authorized,
executed and delivered by the Selling Shareholders.
In addition, such counsel shall state that such counsel has participated in
conferences with officials and other representatives of the Company, the
Representative, Company Counsel and the independent certified public accountants
of the Company, at which such conferences the contents of the Registration
Statement and Prospectus and related matters were discussed, and although they
have not verified the accuracy or completeness of the statements contained in
the Registration Statement or the Prospectus, nothing has come to the attention
of such counsel which leads them to believe that, at the time the Registration
Statement became effective and at all times subsequent thereto up to and on the
Closing Date, the Registration Statement and any amendment or supplement thereto
(other than the financial statements including supporting schedules and other
financial and statistical information included in such Registration Statement
and Prospectus, as to which such counsel need express no opinion) contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein no misleading,
or at the Closing Date, the Registration Statement, the Prospectus and any
amendment or supplement thereto (except as aforesaid) contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
B-4
<PAGE> 1
Exhibit 4.1
ROBOTIC VISION SYSTEMS, INC.
Number INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
KA COMMON STOCK Shares
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT CUSIP 771074 10 1
[SPECIMEN Watermark on page]
FULL PAID AND NON-ASSESSABLE SHARES, $.01 PAR VALUE, OF THE COMMON STOCK OF
ROBOTIC VISION SYSTEMS, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed.
This certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Certificate of Incorporation, as
amended, of the Corporation (a copy of which is on file at the office of the
Corporation) to all of which the holder of this certificate, by acceptance
hereof, assents. This certificate is not valid until countersigned and
registered by the Transfer Agent and Registrar.
Witness the seal of the Corporation and the signatures of its duly authorized
officers.
Dated:
(SEAL) /s/ Frank D. Edwards /s/ Pat V. Costa
SECRETARY PRESIDENT
AMERICAN STOCK TRANSFER
AGENT REGISTRAR
AUTHORIZED SIGNATURE
<PAGE> 2
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C> <C> <C>
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- ------------ Custodian ------------
(Cust) (Minor)
under Uniform Gifts to Minors
Act ------------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ----------------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
- --------------------------------------------------
------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
- --------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM
PURSUANT TO S.E.C. RULE 17Ad-15.
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement dated as of May 14, 1998 between
Robotic Vision Systems, Inc. and the Rights Agent thereunder (the "Rights
Amendment"), the terms of which are hereby incorporated herein by reference and
a copy of which is on file at the principal executive offices of Robotic Vision
Systems, Inc. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. Robotic Vision Systems, Inc. will mail to the
holder of this certificate a copy of the Rights Agreement, as in effect on the
date of mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights Agreement, Rights
issued to or held by any Person who is, was or becomes an Acquiring Person or
any Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Robotic Vision Systems, Inc. (the "Company") on Form S-3 of our report dated
December 27, 1999, included in the Annual Report on Form 10-K of the Company
for the year ended September 30, 1999, and to the use of our report dated
December 27, 1999, appearing in the Prospectus, which is part of this
Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 19, 2000
