<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1997
REGISTRATION NO. 33-69734
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 6 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
KULICKE AND SOFFA INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
PENNSYLVANIA 23-1498399
(I.R.S. EMPLOYER IDENTIFICATION
(STATE OR OTHER JURISDICTION OF NUMBER)
INCORPORATION OF ORGANIZATION)
2101 BLAIR MILL ROAD
WILLOW GROVE, PENNSYLVANIA 19090
(215) 784-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
C. SCOTT KULICKE
KULICKE AND SOFFA INDUSTRIES, INC.
2101 BLAIR MILL ROAD
WILLOW GROVE, PENNSYLVANIA 19090
(215) 784-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JEFFREY C. MOORE, ESQ. JOHN C. BENNETT, JR., ESQ. JEFFREY D. SAPER, ESQ.
KULICKE AND SOFFA SCOTT A. BLANK, ESQ. JOHN T. SHERIDAN, ESQ.
INDUSTRIES, INC. DRINKER BIDDLE & REATH LLP WILSON SONSINI GOODRICH &
2101 BLAIR MILL ROAD PHILADELPHIA NATIONAL ROSATI
WILLOW GROVE, BANK BUILDING PROFESSIONAL CORPORATION
PENNSYLVANIA 19090 1345 CHESTNUT STREET 650 PAGE MILL ROAD
(215) 784-6000 PHILADELPHIA, PENNSYLVANIA PALO ALTO, CALIFORNIA
19107 (215) 988-2700 94304-1050
(415) 493-9300
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective and the
Underwriting Agreement is executed.
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. [_]
---------------
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 BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A)
OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 29, 1997
3,000,000 SHARES
[LOGO OF KULICKE & SOFFA APPEARS HERE]
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by Kulicke
and Soffa Industries, Inc. ("K&S" or the "Company"). The Company's Common Stock
is traded on the Nasdaq National Market under the symbol KLIC. On April 28,
1997, the last reported sale price of the Common Stock on the Nasdaq National
Market was $27.25 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share..................................... $ $ $
Total(3)...................................... $ $ $
</TABLE>
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- --------------------------------------------------------------------------------
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company, estimated at $350,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
450,000 additional shares of Common Stock solely to cover over-allotments,
if any. If the Underwriters exercise this option in full, the Price to
Public will total $ , the Underwriting Discount will total $ and the
Proceeds to Company will total $ . See "Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1997.
----------
MONTGOMERY SECURITIES
LEHMAN BROTHERS
SMITH BARNEY INC.
, 1997
<PAGE>
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549-1004 and at the regional offices of the Commission
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such materials may also be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-1004
at prescribed rates. The Commission maintains a web site at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding registrants, like the Company, that file electronically with the
Commission. The Company's Common Stock is quoted on the Nasdaq National
Market, and reports and other information concerning the Company may be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006-1500.
This Prospectus constitutes a part of a Registration Statement on Form S-3
filed by the Company with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus omits certain of the
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement and related exhibits for further
information with respect to the Company and the securities offered hereby. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and, in such instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been previously filed by the Company with the
Commission (Commission File No. 0-121) and are hereby incorporated by
reference in this Prospectus as of their respective dates: (a) Annual Report
on Form 10-K for the fiscal year ended September 30, 1996; (b) Quarterly
Reports on Form 10-Q for the quarterly periods ended December 31, 1996 and
March 31, 1997; and (c) Form 8-A12G/A dated September 8, 1995 (as amended by a
Form 8-A12G/A dated September 11, 1995).
Additionally, all documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent
to the date of this Prospectus and prior to the termination of the offering
made hereby shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the date of filing of such documents. Any
statement or information contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement or information contained herein
modifies or replaces such a statement or such information. Any such statement
or information so modified or replaced shall not be deemed, except as so
modified or replaced, to constitute a part of this Prospectus. Such
incorporation by reference shall not be deemed specifically to incorporate by
reference the information referred to in Item 402(a)(8) of Regulation S-K
under the Securities Act.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request, a copy of any and all of the information that has been incorporated
by reference in this Prospectus, other than exhibits to such information,
unless such exhibits are specifically incorporated by reference into the
information that this Prospectus incorporates. Requests should be submitted by
telephone to (215) 784-6750 or in writing to Kulicke and Soffa Industries,
Inc., 2101 Blair Mill Road, Willow Grove, Pennsylvania 19090, Attention:
Director --Investor Relations.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING THE ENTRY OF STABILIZING BIDS, SYNDICATE COVERING
TRANSACTIONS OR THE IMPOSITION OF PENALTY BIDS. FOR A DISCUSSION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
Kulicke and Soffa Industries, Inc. is a THE
leading supplier of semiconductor assembly [ARTWORK
solutions. The Company offers systems that APPEARS SEMICONDUCTOR
address a broad range of applications in the HERE]
assembly process including wire bonding MANUFACTURING
systems, wafer dicing saws and die, TAB and
flip-chip bonders. Through its American Fine PROCESS
Wire, Micro-Swiss and Semitec subsidiaries,
the Company offers a range of packaging
materials, including bonding wire, capillaries, .
wedges, die collets and saw blades. .
.
\ /
----------------------------------------------------
WAFER FABRICATION
The manufacture of ICs requires complex and
precise steps which can be broadly grouped into
wafer fabrication, assembly and test. Wafer
fabrication, the first step in the semiconductor
manufacturing process, starts with raw silicon
wafers and ends with finished devices in the form
of die on a wafer. After fabricated wafers are
tested, they typically are shipped to assembly
facilities located primarily in the Asia/Pacific
Rim.
----------------------------------------------------
.
.
.......................................
.
. WAFER DICING DIE BONDING WIRE BONDING
.
.\ [PICTURE OF ..\ [PICTURE OF ..\ [PICTURE OF
/ WAFER DICING / DIE BONDING / WIRE BONDING .....
APPEARS HERE] APPEARS HERE] APPEARS HERE] .
.
A finished wafer is The cut wafer, still The package with its .
mounted onto a carrier. mounted on its carrier, bonded die is moved to .
After precise automatic is next moved to a die a wire bonder. Very .
positioning of the bonder. The die bonder fine gold or aluminum .
wafer, a dicing saw cuts picks each good die off wire (typically 0.001 .
the wafer into individual the carrier and bonds inches in diameter) is .
die using diamond it to a package, which bonded between specific .
embedded saw blades. Saw is typically a stamped bond pads on the die .
blades are matched to the metal leadframe, a and corresponding leads .
material being diced and laminate-based package on the package, in .
are replaced at periodic or ceramic package, order to create the .
intervals. depending on the die and electrical connections .
the application in which necessary for the .
it will be used. device to function. The .
Individual die are wire passes through a .
handled delicately with fine bonding tool .
pick-up tools and/or die called a capillary, the .
collets which must shape of which .
conform to the shape of determines the .
the die. configuration of the .
bond. .
.
.
.
.......................................................
.
.
\/
- ---------------------------------------------------- ----------------------
ENCAPSULATION TEST
After wire bonding, the package is encapsulated. For After encapsulation,
leadframe-based packages, plastic is molded around devices are re-tested,
the package and the leads are then trimmed and and are then marked
formed. For ceramic packages, encapsulation is ...\ and prepared for
accomplished by mounting a lid over the die. For / shipment.
laminate-based packages, plastic is molded on the
laminate and balls are attached.
- ---------------------------------------------------- ----------------------
.
.
.
[ARTWORK APPEARS HERE] /...........................
\
FINISHED
SEMICONDUCTOR
DEVICES
<PAGE>
KULICKE AND SOFFA ASSEMBLY EQUIPMENT
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A Scanning Electron Microscope (SEM) Photo of Diced Wafer
[PHOTO OF DICED WAFER APPEARS HERE]
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DICING [PHOTO OF DICING SAW APPEARS HERE]
SAWS Model 7500
Fully Automated
Dicing Saw
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SEM Photo of Die Bonded to Leadframe
[PHOTO OF DIE BONDED TO LEADFRAME APPEARS HERE]
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DIE [PHOTO OF MULTI-PROCESS [PHOTO OF DIE ATTACH
BONDERS ASSEMBLY SYSTEM APPEARS MACHINE APPEARS HERE]
HERE]
Model 6900 Model 5408
Automatic Automatic
Multi-Process Die Attach
Assembly System Machine
--------------------------------------------------------
SEM Photo of Aluminum Wedge Bond
WIRE
BONDERS [PHOTO OF ALUMINUM WEDGE BOND APPEARS HERE]
--------------------------------------------------------
[PHOTO OF WEDGE BONDER
APPEARS HERE]
Model 1474fp
Wedge Bonder
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SEM Photo of Gold Ball Bond
[PHOTO GOLD BALL BOND APPEARS HERE]
- --------------------------------------------------------------------------------
[PHOTO OF GOLD BALL
BONDER APPEARS HERE]
Model 1488 plus
Gold Ball Bonder
- --------------------------------------------------------------------------------
SEM Photo of Wire and Die Bonded Device
[PHOTO OF WIRE AND DIE BONDED DEVICE APPEARS HERE]
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS SUMMARY
This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results could differ materially. In evaluating such
statements, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth under
the captions "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," as well as those discussed
elsewhere in this Prospectus and in the documents incorporated by reference
herein.
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus and other information
incorporated by reference herein, including the Company's Consolidated
Financial Statements and notes thereto. Unless otherwise noted, all information
in this Prospectus assumes no exercise of the Underwriters' over-allotment
option. As used in this Prospectus, the terms "K&S" and the "Company" include
Kulicke and Soffa Industries, Inc. and its subsidiaries, unless the context
otherwise indicates. The Company's fiscal year ends September 30.
THE COMPANY
The Company designs, manufactures and markets capital equipment, related
spare parts and packaging materials used to assemble semiconductor devices
("semiconductors" or "ICs"). The Company also services, maintains, repairs and
upgrades assembly equipment. According to VLSI Research, Inc. ("VLSI"), as of
December 31, 1995, K&S was the world's largest supplier of semiconductor
assembly equipment. The Company offers systems that address a broad range of
applications in the assembly process including wire bonding systems, wafer
dicing saws and die, TAB and flip-chip bonders. Through its American Fine Wire
Corporation ("AFW"), Micro-Swiss Ltd. ("Micro-Swiss") and Semitec subsidiaries,
the Company offers packaging materials including bonding wire, capillaries,
wedges, die collets and saw blades. The Company's customers consist of leading
semiconductor manufacturers and subcontract assemblers of semiconductors,
including Advanced Semiconductor Engineering, Anam Electronics, Hyundai, Intel,
Micron, Motorola, National Semiconductor, Orient Semiconductor Electronics,
Philips and SGS-Thomson.
According to VLSI, the worldwide market for semiconductors exceeded $137
billion in 1996 and is expected to reach approximately $340 billion by 2001.
The market for semiconductor assembly equipment is expected to continue to be
driven by the demand for ICs, as well as the proliferation of different package
types and technological advances in IC packages. Different types of devices
such as microprocessors, logic devices and memory devices often require
different assembly and packaging solutions. In addition, current-generation
semiconductors are more complex, more densely fabricated and more highly
integrated than those of prior generations. To package these newer devices,
assembly equipment must be able to handle smaller, more complex packages with
higher pin counts. In addition, device manufacturers and assemblers continue to
demand equipment with faster throughput, greater reliability, more automated
manufacturing support and lower cost of ownership. The market for the packaging
materials used in the semiconductor assembly process is similarly driven by IC
unit volume and increased technological demands. These demands typically
include package size reduction and greater consistency or uniformity of
materials.
K&S believes it is the world's leading supplier of wire bonders. The
Company's wire bonders, which represented approximately 60% of the Company's
net sales in the six-month period ended March 31, 1997, are used to connect
extremely fine wires, typically made of gold or aluminum, between the bonding
pads on a die and the leads on the package to which the die has been bonded.
The Company's principal
3
<PAGE>
wire bonders are its Model 1488 plus ball bonder and Model 1474fp wedge bonder.
The Company believes that its wire bonders offer competitive advantages based
on high throughput and superior process control, enabling fine pitch bonding
and long, low wire loops, which are needed to assemble advanced IC packages.
The Company's principal strategy is to improve and broaden the range of
products and services it offers to its customers. The Company intends to
enhance its leadership position in the wire bonder market and is currently
devoting substantial resources to develop its next generation of wire bonders,
the 8000 family. This family is being designed to enhance the technical
performance and further reduce the cost of ownership of K&S' wire bonder
products. The first product of this family, the Model 8020, is currently
scheduled to be introduced in the second half of calendar 1997. The Company
also intends to broaden its existing equipment product lines, expand its
packaging materials business, focus on service and spare parts opportunities
and pursue alternative packaging technologies. The Company sells its packaging
materials for use with competitors' assembly equipment as well as its own
equipment. The Company has recently expanded its packaging materials business
through its acquisitions of AFW, a manufacturer of gold and aluminum bonding
wire, in October 1995, and Semitec, a manufacturer of saw blades, in October
1996.
The Company was founded in 1951 and is a Pennsylvania corporation. Its
principal offices are located at 2101 Blair Mill Road, Willow Grove,
Pennsylvania 19090, and its telephone number is (215) 784-6000.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company... 3,000,000 shares
Common Stock to be outstanding after
the Offering......................... 22,642,487 shares(1)
Use of Proceeds....................... For repayment of outstanding bank and
other debt obligations, and for working
capital and other general corporate
purposes. See "Use of Proceeds."
Nasdaq National Market symbol......... KLIC
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------- -----------------
1994 1995 1996 1996 1997
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales.................. $ 173,302 $ 304,509 $ 381,176 $242,563 $203,335
Gross profit............... 71,968 137,052 141,685 97,573 74,016
Income from operations..... 13,930 55,440 17,418 38,898 16,588
Net income................. 10,418 42,822 11,847 27,042 9,721
Net income per share, fully
diluted................... $ 0.63 $ 2.22 $ 0.60 $ 1.36 $ 0.48
Weighted average shares
outstanding, fully
diluted................... 16,665 19,693 19,773 19,854 20,072
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------
AS
ACTUAL ADJUSTED(2)
-------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................ $108,041 $135,354
Total assets............................................... 282,886 305,499
Short-term debt............................................ 5,196 496
Long-term debt, less current portion....................... 50,553 553
Shareholders' equity....................................... 158,086 235,399
</TABLE>
- --------
(1) Based upon the shares of Common Stock outstanding as of March 31, 1997.
Excludes 1,370,724 shares of Common Stock reserved for issuance upon
exercise of outstanding options, and an additional 1,241,226 shares
reserved for issuance pursuant to future option grants under the Company's
stock option plans, as of March 31, 1997.
(2) Adjusted to reflect the sale of 3,000,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $27.25 per share,
after deducting the estimated underwriting discount and offering expenses,
and the anticipated application of the proceeds thereof. See "Use of
Proceeds."
5
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following risk factors,
in addition to the other information contained in this Prospectus and
incorporated herein by reference concerning the Company and its business,
before purchasing the shares of Common Stock offered hereby. This Prospectus
contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act that involve certain risks
and uncertainties. Discussions containing such forward-looking statements may
be found in the material set forth under "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," as well as in the Prospectus generally, including the documents
incorporated by reference herein. The Company's actual results could differ
materially from those anticipated in such forward-looking statements as a
result of certain factors, including those set forth in the following risk
factors and appearing elsewhere in this Prospectus and in the documents
incorporated by reference herein. These forward-looking statements are made as
of the date of this Prospectus and the Company assumes no obligation to update
such forward-looking statements or to update the reasons why actual results
could differ materially from those anticipated in such forward-looking
statements.
FLUCTUATIONS IN OPERATING RESULTS; LIMITED SYSTEM SALES
The Company has experienced and expects to continue to experience
significant fluctuations in its operating results. The Company's operating
results will depend upon a variety of factors, including the timing of
significant orders, the mix of products sold, changes in pricing by the
Company, its competitors, customers or suppliers, lengthy sales cycles for the
Company's systems, timing of new product announcements and releases by the
Company or its competitors, market acceptance of new products and enhanced
versions of the Company's existing products, capital spending patterns by
customers, manufacturing difficulties or inefficiencies associated with
existing products or new product introductions and the ability to produce
systems in volume and meet customer requirements, product discounts,
volatility in the Company's targeted markets, political and economic
instability, natural disasters, regulatory changes, possible disruptions of
operations caused by expanding existing facilities or moving into new
facilities, expenses associated with acquisitions and alliances and various
competitive factors, including price-based competition and competition from
vendors employing other technologies. The Company's gross margins on system
sales have varied and will vary based on a variety of factors, including the
mix of products sold and significant purchases by customers with volume
purchase arrangements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company derives a substantial portion of its revenues from the sale of a
relatively small number of systems which typically range in purchase price
from approximately $60,000 to over $375,000. As a result, the sale of a
limited number of systems could have a material effect on the Company's net
sales and operating results in a particular period. In addition, the Company's
backlog at the beginning of a quarter typically does not include all orders
required to achieve the Company's sales objectives for that quarter. Moreover,
virtually all customer purchase orders are subject to cancellation or
rescheduling by the customer with limited or no penalties, and, therefore,
backlog at any particular date is not necessarily representative of actual
sales for any succeeding period. The Company's net sales and operating results
for a quarter typically will depend upon the Company obtaining orders for
systems to be shipped in the same quarter that the order is received and could
be materially adversely affected if anticipated orders for a limited number of
systems are not received in time to permit shipment during such period.
Furthermore, a substantial portion of net sales may be realized near the end
of each quarter. A delay or reduction in shipments near the end of a
particular quarter, due, for example, to unanticipated shipment reschedulings,
cancellations or deferrals by customers, to customer credit issues, to
unexpected manufacturing difficulties experienced by the Company or to delays
in deliveries by suppliers, could cause net sales in a particular quarter to
fall significantly below the Company's expectations and may materially
adversely affect the Company's operating results for such quarter.
6
<PAGE>
During the past several years, the Company has increased its operating
expense levels to support the recent growth of its business and intends to
continue to make significant investments in research and development, capital
equipment and customer service and support capabilities worldwide. These
investments may make it difficult for the Company to reduce its operating
expenses in a particular period if the Company's net sales goals for that
period are not met. There can be no assurance that the Company will achieve a
rate of growth or maintain a level of sales in any future period commensurate
with its increased level of operating expenses.
The impact of the factors described above on the Company's sales and
operating results in any future period cannot be forecast with certainty. The
Company, for example, experienced declining sequential net sales and operating
income in the second, third and fourth quarters of fiscal 1996. Revenues
declined from $127.2 million in the first quarter of fiscal 1996 to $61.7
million in the fourth quarter of fiscal 1996 while net income declined from
$16.3 million in the first quarter of fiscal 1996 to a net loss of $12.7
million in the fourth quarter of fiscal 1996. There can be no assurance that
the impact of any of the factors described above on the Company's future
operating results and financial condition will not be material and adverse.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
VOLATILITY OF SEMICONDUCTOR INDUSTRY
The operating results of the Company's largest business segment, equipment
manufacturing, depend primarily upon the capital expenditures of semiconductor
manufacturers and subcontract assemblers worldwide, which, in turn, depend on
the current and anticipated market demand for semiconductors and products
utilizing semiconductors. The semiconductor industry has historically been
highly volatile and experienced periodic downturns and slowdowns, which have
had a severe negative effect on the semiconductor industry's demand for
semiconductor capital equipment, including assembly equipment manufactured and
marketed by the Company and, to a lesser extent, packaging materials such as
those sold by the Company. These downturns and slowdowns have also adversely
affected the Company's operating results. There can be no assurance that the
semiconductor industry will achieve its historical growth rates in the future.
Any future downturn or slowdown in the semiconductor industry would have a
material adverse effect on the Company's business, financial condition and
operating results.
While semiconductor consumption continues to grow, the Company's equipment
segment was adversely affected in fiscal 1996 by industry wide overinvestment
in assembly capacity in fiscal 1995 and early fiscal 1996. During the third
and fourth quarters of fiscal 1996, the rate of new customer orders booked
into backlog was lower than each of the previous four quarters. Declining
orders resulted in a reduction in net sales of the Company's equipment
products during the second, third and fourth quarters of fiscal 1996 and
contributed significantly to the $12.7 million net loss by the Company in the
fourth quarter of fiscal 1996. There can be no assurance that overinvestment
in assembly capacity will not occur in the future or, if it does occur, that
the effect on the Company's future operating results and financial condition
will not be material and adverse. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
TECHNOLOGICAL CHANGE; IMPORTANCE OF TIMELY PRODUCT INTRODUCTIONS; PRODUCT
TRANSITIONS
The semiconductor and semiconductor equipment industries are subject to
rapid technological change and frequent new product introductions and
enhancements. The Company believes that its continued success will depend on
its ability to continuously develop and manufacture new products and product
enhancements and to introduce them into the market in response to demands for
higher performance assembly equipment. There can be no assurance that the
Company's competitors will not develop enhancements to or future generations
of competitive products that will offer superior performance and features and
render the Company's products noncompetitive. Furthermore, there can
7
<PAGE>
be no assurance that competitive technologies, such as flip-chip assembly, or
future technologies will not render the Company's wire bonding products
obsolete or that the Company will be able to develop and introduce products
incorporating such technologies in a timely manner that will satisfy future
customers needs or achieve market acceptance. Failure to develop and introduce
new products and product enhancements or to gain customers' acceptance of such
products in a timely fashion would harm the Company's competitive position.
The Company is in the process of developing a new generation of wire bonder,
the 8000 family, which will be based on an entirely new platform and has
required the development of new software and many subassemblies not part of
the Company's current wire bonders. The Company has experienced delays in the
development of the first product in the 8000 family, the Model 8020. The
delays in the development of the Model 8020 have been due to a variety of
reasons typical to the development of new technological products, including
hardware, software and process related issues and changes in functional
specifications based on input from customers. While development and technical
risks exist which have the potential to further affect the introduction of the
Model 8020, the Company currently expects that the product will be released in
the second half of calendar 1997. However, no assurance can be given that its
scheduled introduction in the second half of calendar 1997 will not be
delayed. The Company also may incur substantial costs during the customer
evaluation and qualification process to ensure the functionality and
reliability of the product. The Company's inability to complete the
development of and introduce the Model 8020 or other new products, or its
inability to manufacture and ship these products in volume and on a timely
basis, could adversely affect the Company's competitive position.
Furthermore, the Company's planned transition to the Model 8020 platform
involves numerous risks, including the possibility that customers will defer
purchases of Model 1488 plus wire bonders in anticipation of the availability
of the Model 8020 or that the Model 8020 will fail to meet customer needs or
achieve market acceptance. To the extent that the Company fails to accurately
forecast demand in volume and configuration for both its current and next-
generation wire bonders and generally to manage product transitions
successfully, it could experience reduced orders, delays in product shipments
and increased risk of inventory obsolescence. There can be no assurance that
the Company will successfully develop and manufacture new products, including
the Model 8020, that new products introduced by the Company will be accepted
in the marketplace or that the Company will manage its product transitions
successfully. The Company's failure to do any of the foregoing could
materially adversely affect the Company's business, financial condition and
operating results.
CUSTOMER CONCENTRATION
The semiconductor manufacturing industry is highly concentrated, with a
relatively small number of large semiconductor manufacturers and subcontract
assemblers accounting for a substantial portion of the purchases of
semiconductor assembly equipment and packaging materials. Sales to the
Company's five largest customers accounted for approximately 51.5%, 55.7%,
42.0% and 45.7% of its net sales for the fiscal years ended September 30,
1994, 1995 and 1996 and the six months ended March 31, 1997, respectively. In
fiscal 1994, sales to Anam, Intel and Motorola accounted for 14.2%, 11.5% and
10.8%, respectively, of the Company's net sales. In fiscal 1995, sales to
Intel and Anam accounted for 19.8% and 16.3%, respectively, of the Company's
net sales. During fiscal 1996, Anam and Intel accounted for approximately
14.3% and 11.2%, respectively, of the Company's net sales. For the six months
ended March 31, 1997, sales to Anam and Intel accounted for 17.9% and 11.6%,
respectively, of the Company's net sales. Additionally, the top five customers
in the Company's packaging materials segment accounted for over 40% of the
Company's net sales for the segment for fiscal 1996 and the six months ended
March 31, 1997. The Company expects that sales of its products to a limited
number of customers will continue to account for a high percentage of net
sales for the foreseeable future. The loss or reduction of orders from a
significant customer, including losses or reductions due to
8
<PAGE>
manufacturing, reliability or other difficulties associated with the Company's
products, changes in customer buying patterns or market, economic or
competitive conditions in the semiconductor or subcontract assembly
industries, could adversely affect the Company's business, financial condition
and operating results. See "Business -- Customers."
PRODUCT CONCENTRATION
The Company's wire bonders have historically represented a substantial
portion of the Company's net sales. During the fiscal years ended September
30, 1994, 1995 and 1996 and the six months ended March 31, 1997, sales of wire
bonders, primarily fully automatic ball bonders and wedge bonders, comprised
68%, 74%, 57% and 60% of net sales, respectively. Should the demand for, or
pricing of, these products decline due to the introduction of superior or
lower cost systems by competitors, changes in the semiconductor industry or
other factors, the Company's business, operating results and financial
condition would be materially adversely affected. While the Company's strategy
is to diversify its products and services, no assurance can be given that the
Company will be able to develop, acquire, introduce or market new products in
a timely or cost-effective manner or that any new products or improvements
will achieve market acceptance.
The Company's wire bonder product concentration also subjects the Company to
risks from the emergence of alternate assembly technologies. The Company's
primary products employ traditional die and wire bonding methods used in
conventional semiconductor device assembly. However, alternate assembly
technologies have emerged which may offer superior device performance or
reduce the size of an IC package. These technologies, including TAB, flip-chip
and chip-scale packaging, eliminate the need for wires to establish the
electrical connections between a die and its package. While most ICs currently
incorporate traditional die and wire bonding technologies, there can be no
assurance that the semiconductor industry will not, in the future, shift a
significant part of its volume into these or other alternate assembly
technologies and eliminate the need for certain of the Company's products,
including its die and wire bonders and related packaging materials utilized by
these assembly processes. See "Business."
MANAGEMENT OF GROWTH
The Company has significantly expanded its operations in recent years. This
expansion has included, and is expected to continue to include hiring
additional management and other critical personnel, adding manufacturing
equipment and capacity and expanding its domestic and international
operations. In addition, the Company plans to relocate AFW's Singapore
operations to a new facility and has constructed a new Micro-Swiss facility in
Israel, either of which could result in short-term manufacturing disruptions.
The Company's acquisitions and alliances over the last several years have
further increased the complexity, scope and geographic distribution of its
operations. The Company's expansion has placed and is expected to continue to
place increased demands on the Company's management, financial resources and
information and internal control systems. The Company's financial results
depend in significant part on its ability to manage its expanded operations
and to continue to implement, improve and expand its systems, procedures and
controls. Any failure to implement, improve and expand such systems,
procedures and controls in an efficient manner at a pace consistent with the
Company's business could have a material adverse effect on the Company's
business, financial condition and operating results.
MANUFACTURING DIFFICULTIES; DEPENDENCE ON SUBCONTRACTORS; SINGLE OR LIMITED
SOURCES OF SUPPLY
The manufacture of the Company's products involves highly complex and
precise components, subassemblies, materials and processes. Changes in the
Company's or its suppliers' manufacturing processes or the inadvertent use of
defective or contaminated materials by the Company or its suppliers could
adversely affect the Company's ability to achieve acceptable product quality
and reliability. The
9
<PAGE>
Company has experienced such problems from time to time, with varying degrees
of severity, which on occasion have adversely affected its ability to deliver
products in a timely manner to its customers. To the extent the Company does
not maintain acceptable product quality or reliability in the future, its
business, financial condition and operating results could be materially and
adversely affected.
As a part of its strategy, the Company relies on subcontractors to
manufacture to the Company's specifications many of the materials, components
and subassemblies used in its products. Certain of the Company's products
require materials, components and subassemblies of an exceptionally high
degree of reliability, accuracy, performance and purity. Currently there are a
number of such items for which there are only a single or limited number of
suppliers which have been accepted by the Company as a qualified supplier. The
Company generally does not maintain long-term contracts with its
subcontractors and suppliers. While the Company does not believe that the
Company's business is substantially dependent on any contract or arrangement
with any of its subcontractors or suppliers, the Company's reliance on
subcontractors and single source suppliers involves a number of significant
risks, including the loss of control over the manufacturing process, the
potential absence of adequate capacity and the reduced control over delivery
schedules, manufacturing yields, quality and costs. Further, certain of the
Company's subcontractors and suppliers are relatively small operations and
have limited financial and manufacturing resources. In the event that any
significant subcontractor or single source supplier were to become unable or
unwilling to continue to manufacture or sell subassemblies, components or
parts to the Company in required volumes and of acceptable quality levels and
prices, the Company would have to identify and qualify acceptable
replacements. The process of qualifying subcontractors and suppliers could be
lengthy, and no assurance can be given that any additional sources would be
available to the Company on a timely basis. The Company has experienced, from
time to time, reliability and quality problems with certain key subassemblies
provided by single source and other suppliers. The Company also has
experienced delays in the delivery of subassemblies from these and other
subcontractors in the past, which caused delays in Company shipments. If
supplies of such items were not available from any such source at acceptable
quality levels and prices and a relationship with an alternative supplier
could not be developed, shipments of the Company's products could be
interrupted and re-engineering of the affected product could be required with
resulting delays. In addition, from time to time, the Company has experienced
manufacturing difficulties and problems in its own operations which have
caused delays and have required remedial measures. Such delays, interruption
and re-engineering could damage the Company's relationships with its customers
and could have a material adverse effect on the Company's business, financial
condition and operating results. See "Business -- Manufacturing."
INTENSE COMPETITION
The semiconductor equipment and packaging materials businesses are intensely
competitive. Significant competitive factors in the semiconductor equipment
market include process capability and repeatability, quality and flexibility,
and cost of ownership, including throughput, reliability and automation,
customer support and price. The Company's major equipment competitors include
Shinkawa, Kaijo and ESEC in wire bonders; ESEC, Nichiden, ASM Pacific
Technology and Alphasem in die bonders; and Disco Corporation in dicing saws.
Competitive factors in the semiconductor packaging materials industry include
price, delivery and quality. Significant competitors in the packaging
materials line include Gaiser Tool Co., Small Precision Tools, Inc. and Disco
Corporation with respect to expendable tools and Tanaka Electronic Industries
and Sumitomo Metal Mining in the bonding wire market. In each of the markets
it serves, the Company faces competition and the threat of competition from
established competitors and potential new entrants, some of which may have
greater financial, engineering, manufacturing and marketing resources than the
Company. Some of these competitors are Japanese companies that have had and
may continue to have an advantage over the Company in supplying products to
Japan-based companies due to their preferences to purchase equipment from
Japanese suppliers. The Company expects its competitors to continue to improve
the performance of their current products and to introduce new products with
improved price and performance
10
<PAGE>
characteristics. New product introductions by the Company's competitors or by
new market entrants could cause a decline in sales or loss of market
acceptance of the Company's existing products. If a particular semiconductor
manufacturer or subcontract assembler selects a competitor's product for a
particular assembly operation, the Company may experience difficulty in
selling a product to that company for a significant period of time. Increased
competitive pressure could also lead to intensified price-based competition,
resulting in lower prices which could adversely affect the Company's business,
financial condition and operating results. The Company believes that to remain
competitive it must invest significant financial resources in new product
development and expand its customer service and support worldwide. There can
be no assurance that the Company will be able to compete successfully in the
future.
INTERNATIONAL OPERATIONS
Approximately 74%, 78%, 79% and 80% of the Company's net sales for fiscal
1994, 1995 and 1996 and the six months ended March 31, 1997, respectively,
were attributable to sales to customers for delivery outside of the United
States. The Company expects sales outside of the United States to continue to
represent a substantial portion of its future revenues. The future performance
of the Company will depend, in significant part, upon its ability to continue
to compete in foreign markets which, in turn, will depend, in part, upon a
continuation of current trade relations between the United States and foreign
countries in which semiconductor manufacturers or subcontractors have assembly
operations. A change toward more protectionist trade legislation in either the
United States or such foreign countries, such as a change in the current
tariff structures, export compliance or other trade policies, could adversely
affect the Company's ability to sell its products in foreign markets.
Because most of the Company's foreign sales are denominated in United States
dollars, the Company believes that the increase in value of the United States
dollar against foreign currencies during the past 18 months, particularly the
Japanese yen, is making the Company's products more expensive than those
offered by certain of its foreign competitors. The Company's ability to
compete overseas in the future could be adversely affected by a continuing
strengthening of the United States dollar against foreign currencies.
In addition, the Company maintains substantial manufacturing operations in
countries other than the United States, including operations located in Israel
and Singapore. Risks associated with the Company's international operations
include risks of war and civil disturbances or other events which may limit or
disrupt markets, expropriation, international exchange restrictions and
currency fluctuations, changing political conditions and monetary policies of
foreign governments. If such operations were interrupted by war, terrorism or
other factors beyond the Company's control, the Company's business, operating
results and financial condition could be materially adversely affected. See
"Business -- Manufacturing."
ENVIRONMENTAL REGULATIONS; POSSIBLE FINANCIAL EXPOSURE TO ENVIRONMENTAL CLAIMS
Federal, state, local and foreign regulations impose various controls on the
use, storage, discharge, handling, emission, generation, manufacture and
disposal of toxic or other hazardous substances used in the Company's
operations. The Company believes that its activities conform in all material
respects to current environmental and land use regulations applicable to its
operations and its current facilities and that it has obtained environmental
permits necessary to conduct its business. Nevertheless, the failure to comply
with current or future regulations could result in substantial fines being
imposed on the Company, suspension of production, alteration of its
manufacturing process or cessation of operations. Such regulations could
require the Company to acquire expensive remediation equipment or to incur
substantial expenses to comply with environmental regulations. Any failure by
the Company to control the use, disposal or storage of, or adequately restrict
the discharge of, hazardous or toxic substances could subject the Company to
significant liabilities.
11
<PAGE>
INTELLECTUAL PROPERTY PROTECTION; NOTICES OF ALLEGED PATENT INFRINGEMENT
Although the Company attempts to protect its proprietary technology through
patents, copyrights, trade secrets and other measures, there can be no
assurance that these measures will be adequate or that competitors will not be
able to develop similar technology independently. Further, there can be no
assurance that the claims allowed on any patent issued to the Company will be
sufficiently broad to protect the Company's technology, that any patent will
be issued from any pending application or that foreign intellectual property
laws will protect the Company's intellectual property rights. Litigation may
be necessary to enforce or determine the validity and scope of the Company's
proprietary rights or to defend against infringement claims. Such litigation
could result in substantial costs and diversion of resources and could have a
material adverse effect on the Company's business, financial condition and
operating results, regardless of the outcome of the litigation. In addition,
there can be no assurance that any of the patents issued to the Company will
not be challenged, invalidated or circumvented or that the rights granted
thereunder will provide competitive advantages to the Company.
Although the Company is not aware of any pending lawsuits against the
Company regarding infringement claims with respect to any existing patent or
any other intellectual property right of third parties, the Company has at
times been notified of claims that equipment it has supplied may be infringing
intellectual property rights of third parties. Certain of the Company's
customers have received notices of infringement from Jerome H. Lemelson,
alleging that equipment supplied by the Company, and processes performed by
such equipment, infringe on patents held by Mr. Lemelson. Mr. Lemelson is the
holder of numerous patents with purported broad application across various
industry lines. The Company's situation in this respect is similar to numerous
other companies in the semiconductor, electronics and other industries, whose
customers have received notices of infringement from Mr. Lemelson. He has
brought suit against a number of both domestic and foreign companies,
including those in the automotive and semiconductor industries, and reportedly
has obtained large settlements in certain instances. A number of the Company's
customers have been sued by Mr. Lemelson. Under and subject to the terms of
its agreements with customers, the Company could be required to reimburse
customers for certain damages resulting from these matters and to defend its
customers in patent infringement suits. Certain customers have requested that
the Company defend and indemnify them against the claims of Mr. Lemelson, but,
to date, no customer who has settled with Mr. Lemelson has sought contribution
from the Company. The Company has received opinions from its outside patent
counsel with respect to certain of the Lemelson patents. The Company is not
aware that any equipment marketed by the Company or processes performed by
such equipment infringe on the Lemelson patents in question and does not
believe that such matters will have a material adverse effect on its business,
financial condition and operating results. However, the ultimate outcome of
any infringement claim affecting the Company is uncertain and there can be no
assurances that the resolution of these matters will not have a material
adverse effect on the Company's business, financial condition and operating
results.
The Company also believes that much of its important technology resides in
its proprietary software and trade secrets. Insofar as the Company relies on
trade secrets and unpatented knowledge, including software, to maintain its
competitive position, there is no assurance that others may not independently
develop similar technologies. In addition, although the Company enters into
non-disclosure and non-competition agreements with certain of its employees,
customers, consultants, selected vendors and others, there is no assurance
that such agreements will not be breached. See "Business -- Intellectual
Property."
ACQUISITIONS AND ALLIANCES
As part of its strategy to complement or expand its existing business and
product offerings, the Company has recently entered into several acquisition
and alliance agreements with third parties. In October 1995, the Company
consummated the acquisition of AFW, a manufacturer of bonding wire; and, in
October 1996, completed the acquisition of Semitec, a manufacturer of saw
blades. There can be no assurance that these operations will be profitable or
that the anticipated benefits of either acquisition will be realized. In
February 1996, the Company entered into a joint venture with Delco Electronics
Corporation providing for the formation of Flip Chip Technologies, L.L.C.
("FCT"). FCT, which was formed to provide wafer bumping services on a contract
basis and to license related
12
<PAGE>
technologies, has experienced losses since its inception. There can be no
assurance that FCT will ever become profitable. See "--Investment in Flip Chip
Technologies, L.L.C." In February 1997, the Company and PRI Automation Inc.
("PRI") signed a non-binding memorandum of understanding to cooperate in the
development of technology to integrate and automate equipment used in
semiconductor assembly. The transaction contemplated by the memorandum of
understanding is subject to the negotiation of definitive agreements by the
parties. The Company expects to continue to pursue acquisitions of, and
alliances with, other companies with potentially complementary product lines,
technologies and businesses. Although the Company currently has no agreement,
understanding or arrangement with respect to any additional acquisitions or
alliances, the Company evaluates potential strategic business opportunities
which may be material in size and scope on an ongoing basis.
Acquisitions and alliances, including those entered into by the Company to
date, involve a number of risks and difficulties, including technology
acceptance, expansion into new geographic markets and business areas, the
requirement to understand local business practices, the diversion of
management's attention, the assimilation of the operations and personnel of
acquired companies and the integration of acquired companies' business and
financial reporting systems with those of the Company. There can be no
assurance that the Company will successfully integrate the operations of AFW,
Semitec or other business acquisitions, or that the FCT or PRI alliances or
any future alliances will be successful. If any such acquisition or alliance
were to be unsuccessful, the Company's business, financial condition and
operating results could be materially adversely affected. Further, possible
future acquisitions or alliances by the Company could result in dilutive
issuances of debt or equity securities, the incurrence of additional debt and
contingent liabilities and additional amortization expenses related to
goodwill and other intangible assets, which could materially adversely affect
the Company's business, financial condition and operating results.
INVESTMENT IN FLIP CHIP TECHNOLOGIES, L.L.C.
In February 1996, the Company entered into a joint venture agreement with
Delco Electronics Corporation providing for the formation and management of
FCT. FCT was formed to provide wafer bumping services on a contract basis and
to license related technologies, and has recently completed construction of
its manufacturing facility in Phoenix, Arizona. FCT is currently working with
its customers to have its manufacturing process qualified. This qualification
process is expected to continue at least through fiscal 1997. The Company has
experienced losses with respect to its interest in FCT since its inception,
including a $2.6 million loss during the first six months of fiscal 1997. The
Company expects it will incur losses in excess of this amount during the
remainder of fiscal 1997.
Pursuant to the terms of the joint venture agreement, the Company is
obligated to contribute to FCT an aggregate of $16.8 million, of which K&S had
funded $16.1 million through the end of the second quarter of fiscal 1997. In
addition to this obligation, the Company has agreed to loan FCT $5.0 million
and may agree to provide further loans in the future. The joint venture is
subject to numerous risks common to transactions of this nature. See "--
Acquisitions and Alliances." There can be no assurance that FCT will ever
become profitable, that the Company will not make additional capital
contributions and loans to FCT or that the anticipated benefits of the joint
venture will ever be realized. If the joint venture were to not realize such
benefits, the Company's business, financial condition and operating results
could be materially adversely affected.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon the continued service of its key executive
management and technical personnel, who are generally not bound by employment
agreements requiring them to perform services for the Company. The loss of key
personnel could have a material adverse effect on the Company's business,
financial condition and operating results. In addition, the Company's future
operating results will depend in significant part upon its ability to attract
and retain highly skilled managerial, technical and marketing personnel. The
Company believes there is only a limited number of personnel with the
requisite skills to serve in these positions. Competition for such personnel
is intense, and there can be no assurance that the Company will be successful
in attracting or retaining
13
<PAGE>
such personnel. The Company's inability to attract and retain the executive
management and other personnel it requires could have a material adverse
effect on the Company's business, financial condition and operating results.
VOLATILITY OF STOCK PRICE
The stock market in general and the market for shares of technology
companies in particular recently have experienced extreme price fluctuations,
which have often been unrelated to the operating performance of the affected
companies. Many companies in the semiconductor and semiconductor equipment
industries, including the Company, experienced dramatic volatility in the
market prices of their common stock during the last two years. The Company
believes that factors such as announcements of developments related to the
Company's business or its competitors' or customers' businesses, fluctuations
in the Company's financial results, general conditions or developments in the
semiconductor and semiconductor equipment industries and the worldwide
economy, sales of the Company's Common Stock into the marketplace, the number
of market makers for the Company's Common Stock, announcements of
technological innovations or new or enhanced products by the Company or its
competitors or customers, a shortfall in revenue, gross margin, earnings or
other financial results from or changes in analysts' expectations and
developments in the Company's relationships with its customers and suppliers,
or a variety of factors beyond the Company's control could cause the price of
the Company's Common Stock to fluctuate, perhaps substantially. There can be
no assurance that the market price of the Company's Common Stock will not
experience significant fluctuations in the future, including fluctuations that
are material, adverse and unrelated to the Company's performance. See "Price
Range of Common Stock."
DISCRETION OF MANAGEMENT CONCERNING FUNDS
A substantial portion of the net proceeds from this Offering will be
invested in short-term, investment-grade, interest-bearing securities, pending
application of such proceeds for working capital and other general corporate
purposes or for future acquisitions or alliances. See "Use of Proceeds." Such
proceeds, together with the Company's existing working capital and funds that
may be available to the Company under its revolving credit facilities, will
represent a significant amount of capital over which management will have
substantial discretion.
FUTURE CAPITAL NEEDS
In order to remain competitive, the Company must continue to make
significant investments in capital equipment, facilities, computer systems,
sales, service, training and support capabilities, procedures, controls,
operations and research and development, among other items. The Company
believes that its cash flows from operations, its working capital, amounts
expected to be available under its revolving credit facilities and the net
proceeds of this Offering will be sufficient to meet the Company's liquidity
and capital requirements for at least the next 12 months. To the extent that
such financial resources are insufficient to fund the Company's activities,
additional funds will be required. There can be no assurance, however, that
additional financing will be available on reasonable terms or at all. See "--
Acquisitions and Alliances," "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
EFFECTS OF CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Articles of Incorporation and By-laws
and Pennsylvania law may discourage certain transactions involving a change in
control of the Company. For example, the Company's Articles of Incorporation
and By-laws contain provisions which (i) classify the Board of Directors into
four classes, with one class being elected each year, (ii) permit the Board to
issue "blank check" preferred stock without shareholder approval and (iii)
prohibit the Company from engaging in certain business combinations with a
holder of 20% or more of the Company's voting securities without supra-
majority board or shareholder approval. Further, under the Pennsylvania
Business Corporation Law, because the Company's By-laws provide for a
classified Board of Directors, shareholders may only remove directors for
cause. These provisions and certain provisions of the Pennsylvania Business
Corporation Law could have the effect of delaying, deferring or preventing a
change in control of the Company and may adversely affect the voting and other
rights of holders of Common Stock. See "Description of Capital Stock."
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered hereby are estimated to be $77.3 million ($89.0 million
if the Underwriters' over-allotment option is exercised in full), based on an
assumed public offering price of $27.25 per share, after deduction of the
underwriting discount and estimated offering expenses.
The Company expects to use the majority of the net proceeds to repay the
$50.0 million outstanding balance on its existing revolving credit facility
with PNC Bank, N.A. and a $4.7 million obligation relating to the Semitec
acquisition. The $50.0 million revolving credit facility expires March 30,
2001 and presently bears interest at LIBOR plus 40 basis points (5.93% at
April 28, 1997). The $4.7 million obligation relating to the Semitec
acquisition must be paid in cash or registered shares of the Company's Common
Stock by June 2, 1997, and currently bears interest at 12% per annum until
paid. The remaining proceeds are expected to be used for working capital and
other general corporate purposes.
The Company may use a portion of the net proceeds for acquisitions of
businesses, products or technologies complementary to the Company's business
and for joint ventures or other strategic alliances entered into for similar
purposes. The Company evaluates potential strategic business opportunities on
an ongoing basis. However, except for the non-binding memorandum of
understanding with PRI, the Company currently has no agreement, understanding
or arrangement with respect to any acquisitions or alliances. See "Risk
Factors -- Acquisitions and Alliances."
Pending the application of the net proceeds for the uses described above,
the net proceeds will be invested in short-term, investment-grade, interest-
bearing securities. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
PRICE RANGE OF COMMON STOCK
The Company's Common Stock trades on the Nasdaq National Market under the
symbol KLIC. The following table sets forth for the periods indicated the high
and low sale prices for the Common Stock as reported on the Nasdaq National
Market, which prices reflect the effect of a two-for-one split of the Common
Stock which occurred in July 1995.
<TABLE>
<CAPTION>
HIGH LOW
--------- -------
<S> <C> <C>
FISCAL 1995:
First Quarter........................................... $10 31/32 $ 7 1/2
Second Quarter.......................................... 14 7/8 9 1/8
Third Quarter........................................... 33 3/8 13 1/4
Fourth Quarter.......................................... 45 3/8 32 7/8
FISCAL 1996:
First Quarter........................................... 36 3/4 22
Second Quarter.......................................... 25 1/2 15 1/8
Third Quarter........................................... 20 1/2 13 1/4
Fourth Quarter.......................................... 14 5/8 8 3/4
FISCAL 1997:
First Quarter........................................... 22 1/4 10 1/2
Second Quarter.......................................... 30 18 3/4
Third Quarter (through April 28, 1997).................. 28 1/4 20 3/4
</TABLE>
On April 28, 1997, the last reported sale price of the Common Stock on the
Nasdaq National Market was $27.25 per share. As of April 28, 1997, there were
approximately 850 holders of record of the shares of outstanding Common Stock.
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) at
March 31, 1997 and (ii) as adjusted to reflect the sale by the Company of
3,000,000 shares of Common Stock pursuant to this Offering at an assumed
public offering price of $27.25 and the application of the estimated net
proceeds therefrom, after deducting the estimated underwriting discount and
offering expenses.
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------
AS
ACTUAL ADJUSTED
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt(1)......................................... $ 5,196 $ 496
======== ========
Long-term debt, less current portion(1).................... $ 50,553 $ 553
-------- --------
Shareholders' equity:
Preferred stock, without par value, 5,000,000 shares
authorized, no shares outstanding....................... -- --
Common stock, without par value, 50,000,000 shares
authorized; 19,642,487 shares outstanding actual; and
22,642,487 shares outstanding as adjusted(2)............ 50,338 127,651
Retained earnings........................................ 110,806 110,806
Treasury stock........................................... (216) (216)
Cumulative translation adjustment........................ (2,842) (2,842)
-------- --------
Total shareholders' equity............................. 158,086 235,399
-------- --------
Total capitalization................................. $208,639 $235,952
======== ========
</TABLE>
- --------
(1) The Company's short-term and long-term debt primarily reflect obligations
of the Company relating to the Semitec acquisition and its $50.0 million
revolving bank credit facility, respectively. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(2) Excludes 1,370,724 shares of Common Stock reserved for issuance upon
exercise of outstanding options, and an additional 1,241,226 shares
reserved for issuance pursuant to future option grants under the Company's
stock option plans, as of March 31, 1997.
DIVIDEND POLICY
The Company currently does not pay cash dividends on its Common Stock. The
Company presently intends to retain any future earnings for use in its
business and does not anticipate paying any cash dividends on the Common Stock
in the foreseeable future.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below should be read in
conjunction with the Company's Consolidated Financial Statements and notes
thereto, which are incorporated herein by reference, and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this Prospectus. The consolidated statement of
operations data set forth below with respect to the fiscal years ended
September 30, 1994, 1995 and 1996 and the consolidated balance sheet data at
September 30, 1996 have been derived from, and are qualified by reference to,
the audited consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1996, which report is incorporated by reference herein, and should be read in
conjunction with such Annual Report on Form 10-K. The consolidated statement
of operations data for the six-month periods ended March 31, 1996 and 1997 and
the consolidated balance sheet data at March 31, 1997 have been derived from,
and are qualified by reference to, the unaudited consolidated financial
statements included in the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1997. The unaudited consolidated financial
statements have been prepared on the same basis as the audited consolidated
financial statements and, in the opinion of management, contain all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation of the results of operations for such periods. The results
of operations for the six-month period ended March 31, 1997 are not
necessarily indicative of results to be expected for any subsequent period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
--------------------------- ------------------
1994 1995(1) 1996(2) 1996 1997
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................... $173,302 $304,509 $381,176 $242,563 $203,335
Cost of goods sold........... 101,334 167,457 239,491 144,990 129,319
-------- -------- -------- -------- --------
Gross profit................. 71,968 137,052 141,685 97,573 74,016
Selling, general and
administrative.............. 36,752 50,728 71,863 35,244 34,963
Research and development,
net......................... 21,286 30,884 52,404 23,431 22,465
-------- -------- -------- -------- --------
Income from operations....... 13,930 55,440 17,418 38,898 16,588
Interest income (expense),
net......................... (907) 173 (164) (132) (457)
Equity in loss of joint
venture..................... -- -- (994) (48) (2,629)
Other expense (3)............ -- -- (630) (630) --
-------- -------- -------- -------- --------
Income before income taxes... 13,023 55,613 15,630 38,088 13,502
Provision for income tax
expense..................... 2,605 12,791 3,783 11,046 3,781
-------- -------- -------- -------- --------
Net income................... $ 10,418 $ 42,822 $ 11,847 $ 27,042 $ 9,721
======== ======== ======== ======== ========
Net income per share:
Primary.................... $ 0.63 $ 2.38 $ 0.60 $ 1.36 $ 0.48
Fully diluted.............. $ 0.63 $ 2.22 $ 0.60 $ 1.36 $ 0.48
Pro forma net income per
share (4)................... -- -- $ 0.63 -- $ 0.49
Weighted average shares
outstanding:
Primary.................... 16,665 18,028 19,773 19,854 20,072
Fully diluted.............. 16,665 19,693 19,773 19,854 20,072
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1996(2) 1997
------------- ---------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital......................................... $113,804 $108,041
Total assets............................................ 249,554 282,886
Short-term debt......................................... 491 5,196
Long-term debt, less current portion.................... 50,712 50,553
Shareholders' equity.................................... 147,489 158,086
</TABLE>
- --------
(1) During fiscal 1995, the Company called for redemption its 8% Convertible
Subordinated Debentures, as a result of which $26.2 million of such
debentures were converted into approximately 2,463,000 shares of Common
Stock.
(2) Includes the results of operations of AFW which was acquired in October
1995. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(3) In fiscal 1996, other expense includes the write-off of $630,000 of costs
incurred in connection with a proposed public offering of Common Stock.
(4) Pro forma net income per share gives effect to the sale by the Company of
that number of shares of Common Stock sufficient to generate net assets
equal to the amount of debt to be repaid by proceeds of this Offering, and
the repayment of such debt as if the Offering and debt repayment had
occurred at the beginning of the period. See "Use of Proceeds."
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and related notes which are incorporated by reference in
this Prospectus. This Prospectus contains certain forward-looking statements
that involve risks and uncertainties. The Company's actual results could
differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those set
forth under "Risk Factors" and elsewhere in this Prospectus and in the
documents incorporated by reference herein.
INTRODUCTION
Since the 1970s, the Company has focused its efforts primarily on developing
its leadership position in the semiconductor assembly equipment market and, to
a lesser extent, on expanding its position in the packaging materials
business. The Company substantially increased its packaging materials business
with the acquisitions of AFW, a manufacturer of bonding wire, in October 1995,
and Semitec, a manufacturer of saw blades, in October 1996. The Company has
$50.0 million outstanding under its revolving credit facility, which was used
for financing the AFW acquisition, and a $4.7 million obligation relating to
the financing of the Semitec acquisition. The Company intends to pay these
obligations in full with a portion of the net proceeds of this Offering.
In addition to its assembly equipment and packaging materials product lines,
the Company is focusing on service and parts opportunities in order to reduce
its customers' cost of ownership. Further, the Company continuously pursues
investments in alternative packaging technologies. To that end, in February
1996, the Company entered into a joint venture agreement with Delco
Electronics Corporation to provide wafer bumping services on a contract basis
and to license related technologies through FCT. The Company owns a 51% equity
interest in FCT and recognizes its share of the operating results of the joint
venture on the basis of its ownership interest. FCT has recently completed
construction of its manufacturing facility in Phoenix, Arizona and is
currently working with its customers to have its manufacturing process
qualified. This qualification process is expected to continue through at least
fiscal 1997. The Company has experienced losses with respect to its interest
in FCT since its inception, including a $2.6 million loss during the first six
months of fiscal 1997. The Company expects it will incur losses in excess of
this amount during the remainder of fiscal 1997.
Pursuant to the terms of the joint venture agreement, the Company is
obligated to contribute to FCT an aggregate of $16.8 million, of which K&S had
funded $16.1 million through the end of the second quarter of fiscal 1997. In
addition to this obligation, the Company has agreed to loan FCT an additional
$5.0 million and may agree to provide additional loans in the future. There
can be no assurance that FCT will ever become profitable, that the Company
will not make additional capital contributions and loans to FCT or that the
anticipated benefits of the joint venture will ever be realized.
International sales (i.e., shipments of the Company's products with ultimate
foreign destinations) comprised 74%, 78%, 79% and 80% of the Company's net
sales during the fiscal years ended 1994, 1995 and 1996 and the six-month
period ended March 31, 1997, respectively. Sales to customers in the
Asia/Pacific region (including Korea, Taiwan, Malaysia, the Philippines,
Japan, Singapore, Thailand and Hong Kong) accounted for 72%, 72% and 73% of
the Company's net sales during the fiscal years ended 1995 and 1996 and the
six-month period ended March 31, 1997, respectively. The Company's
international sales are primarily denominated in United States dollars. To
date, transactions conducted in currencies other than United States dollars
have not presented significant currency exchange exposure to the Company.
18
<PAGE>
The Company's historical operating results for each of the three years ended
September 30, 1994, 1995 and 1996 and for the six-month periods ended March
31, 1996 and 1997, as a percentage of net sales, are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
------------------- ------------------
1994 1995 1996 1996 1997
----- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.................... 58.5 55.0 62.8 59.8 63.6
----- ----- ----- -------- --------
Gross profit.......................... 41.5 45.0 37.2 40.2 36.4
Selling, general and administrative... 21.2 16.7 18.9 14.5 17.2
Research and development, net......... 12.3 10.1 13.7 9.7 11.0
----- ----- ----- -------- --------
Income from operations................ 8.0 18.2 4.6 16.0 8.2
Interest expense, net................. (0.5) 0.1 -- (0.1) (0.2)
Equity in loss of joint venture....... -- -- (0.3) -- (1.4)
Other expense......................... -- -- (0.2) (0.2) --
----- ----- ----- -------- --------
Income before income taxes............ 7.5 18.3 4.1 15.7 6.6
Provision for income tax expense...... 1.5 4.2 1.0 4.6 1.8
----- ----- ----- -------- --------
Net income............................ 6.0% 14.1% 3.1% 11.1% 4.8%
===== ===== ===== ======== ========
</TABLE>
RESULTS OF OPERATIONS
Six-Month Periods Ended March 31, 1997 and March 31, 1996
Demand for semiconductor assembly equipment declined throughout fiscal 1996.
In the first half of fiscal 1997, the Company saw a resurgence in demand for
its automatic wire bonders and recorded bookings totaling $243.0 million, or
$19.0 million higher than the $224.0 million booked during the comparable
period of the prior fiscal year. Fiscal 1997 second quarter bookings totaled
$138.0 million, which represented a $33.0 million improvement over the $105.0
million booked during the fiscal 1997 first quarter. The backlog of customer
orders increased by $17.0 million, or 18%, to $110.0 million at March 31, 1997
compared to $93.0 million at December 31, 1996. Since the timing of deliveries
may vary and orders generally are subject to delay or cancellation, the
Company's backlog as of any date may not be indicative of sales for any
succeeding period.
Net sales increased $39.6 million from the first quarter of fiscal 1997 to
$121.5 million in the second quarter of fiscal 1997. For the six-month period
ended March 31, 1997, net sales totaled $203.3 million, or $39.3 million lower
than the $242.6 million reported for the comparable fiscal 1996 period. This
difference primarily reflected the effect of the Company's highest sales level
to date in the first quarter of fiscal 1996 followed by the decline in the
second quarter which continued for the balance of the 1996 fiscal year.
Equipment segment revenues declined by $40.0 million in the first half of
fiscal 1997 compared to the same period of the prior fiscal year, principally
reflecting differences of approximately $34.5 million attributable to reduced
demand for the Company's machines, primarily automatic wire bonders, and
approximately $5.2 million related to lower sales of machine accessories,
upgrade kits and spare parts. Specifically, shipments of 1488 turbo and plus
ball bonders declined by 316 machines, or $26.3 million, and shipments of
1474fp wedge bonders declined by 10 machines, or $1.3 million from first half
of fiscal 1996 levels. Sales of packaging materials increased by $757,000 in
the first half of fiscal 1997 from the corresponding period of the prior
fiscal year, primarily reflecting $3.2 million of incremental sales of Semitec
which was acquired in October 1996, which was partially offset by a $2.6
million reduction in sales of Micro-Swiss products. In addition, increased
gold and aluminum wire sales volumes were offset by lower gold prices and
lower pricing on certain aluminum wire sales in fiscal 1997.
19
<PAGE>
Gross profit as a percentage of net sales decreased to 36.4% in the first
half of fiscal 1997 compared to 40.2% during the same period of the prior
fiscal year. This decline reflects lower gross profit margins in both the
equipment and packaging materials segments and a shift in the overall mix of
product sales from higher margin equipment products to lower margin packaging
materials, due to the disproportionate decline in equipment sales, as set
forth below.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Equipment sales.......................................... 79.3% 74.9%
Packaging materials sales................................ 20.7 25.1
-------- --------
Total net sales........................................ 100.0% 100.0%
======== ========
</TABLE>
Equipment segment gross profit margin decreased to 42.5% from 44.9%
primarily due to reduced sales of machine accessories, upgrade kits and spare
parts. The packaging materials segment gross profit margin dropped to 18.3%
from 22.2% due principally to costs associated with the relocation of the
Micro-Swiss manufacturing facility and excess manufacturing capacity of Micro-
Swiss and to a shift in product mix from higher margin expendable tools to
lower margin wire products.
Selling, general and administrative ("SG&A") expenses totaled $35.0 million
for the first half of fiscal 1997 compared to $35.2 million in the same period
of the prior fiscal year, reflecting lower equipment segment and corporate
expenses resulting from cost reduction initiatives implemented in August 1996.
These savings were partially offset by higher expenses in the packaging
materials segment due to incremental operating costs associated with the
Semitec business, severance and relocation related charges approximating $1.1
million in the packaging materials segment and increased expense levels due to
expansion of the packaging materials marketing and distribution organizations.
As a percentage of net sales, however, SG&A expenses increased to 17.2% in the
first half of fiscal 1997 from 14.5% in the first half of fiscal 1996 due
primarily to the lower level of net sales in the fiscal 1997 first quarter.
Net research and development ("R&D") costs decreased to $22.5 million in the
first half of fiscal 1997, compared to $23.4 million for the same period of
the prior fiscal year. The decline in fiscal 1997 R&D spending was principally
in the equipment segment, and reflects reduced outside contract development
costs and lower expenditures for prototype materials. As a percentage of net
sales, however, R&D costs increased to 11.0% in the first half of fiscal 1997
from 9.7% in the first half of fiscal 1996 due primarily to the lower level of
net sales in the first half of fiscal 1997. The Company continues to invest
heavily in the development of the 8000 Series wire bonders and the enhancement
of many of its existing products, including, but not limited to, the Model
1488 plus ball bonder and Model 1474fp wedge bonder, to enable them to meet
customer requirements for higher lead count devices with finer pitch
requirements at faster bonding speeds. The Company also continues to invest in
new technologies which may eventually lead to improved and alternative
semiconductor assembly technologies.
Operating income totaled $16.6 million for the first half of fiscal 1997
compared to $38.9 million for the same period in fiscal 1996 due to the
factors discussed above. The equipment segment operating income declined from
$38.5 million in fiscal 1996 to $20.8 million in fiscal 1997, and the
packaging materials segment changed from $4.2 million of operating income in
fiscal 1996 to a $939,000 operating loss in fiscal 1997.
Interest expense incurred during the first half of fiscal 1997 resulted from
borrowings under the Company's $50.0 million revolving credit facility to fund
the October 1995 acquisition of AFW and the $4.7 million obligation incurred
in connection with the October 1996 acquisition of Semitec. Interest income
during the first half of fiscal 1997 was lower than the same period of the
prior fiscal year primarily due to interest earned on a note receivable from a
customer in fiscal 1996. Non-operating costs of $2.6 million
20
<PAGE>
in the first half of fiscal 1997 reflect the Company's equity interest in the
loss from its joint venture investment in FCT. Fiscal 1996 first half results
included the write-off of approximately $630,000 of costs incurred in
connection with a proposed public offering of the Company's Common Stock.
The fiscal 1997 effective tax rate is expected to approximate 28%. The
fiscal 1996 effective tax rate was 24%, due largely to the loss reported in
the fiscal fourth quarter which was primarily attributable to the Company's
United States-based operations.
Net income declined to $9.7 million for the six-month period ended March 31,
1997 as compared to $27.0 million for the six-month period ended March 31,
1996 due to the factors previously enumerated.
Fiscal Years Ended September 30, 1996 and September 30, 1995
During the fiscal year ended September 30, 1996, the Company recorded
bookings totaling $358.4 million, including approximately $66.0 million
related to AFW, compared to $342.4 million during fiscal 1995 which excluded
AFW's operating results. The $50.0 million decline in fiscal 1996 equipment
bookings primarily reflected a significant reduction in demand for
semiconductor assembly equipment, principally ball and wedge bonders, in the
latter half of fiscal 1996 compared to the record levels experienced
throughout fiscal 1995 and the first several months of fiscal 1996. The
Company believes that this decline reflected a high level of uncertainty and
concern among the Company's customers about then forecasted declines in
personal computer sales, a significant drop in the selling prices of memory
chips and, with regard to the Company's Taiwan-based customers, geopolitical
uncertainty regarding China's reaction to elections in Taiwan. At September
30, 1996, total backlog of customer orders approximated $69.0 million,
including $6.7 million relating to AFW, compared to $84.7 million at September
30, 1995.
Net sales for the fiscal year ended September 30, 1996 increased by $76.7
million to $381.2 million compared to $304.5 million in fiscal 1995. The
acquisition of AFW contributed $66.9 million to fiscal 1996 net sales.
Equipment segment net sales increased to $287.2 million in fiscal 1996
compared to $283.8 million in fiscal 1995. Total unit sales in fiscal 1996
were essentially flat compared to unit sales for fiscal 1995. However, sales
of ball bonders, non-semiconductor dicing saws and wire bonder upgrade kits
increased in fiscal 1996, while sales of wedge bonders declined in relation to
the amounts sold in fiscal 1995. During fiscal 1996, slightly improved selling
prices were realized on the Model 1488 ball bonder line compared to the
average selling prices realized on ball bonders during fiscal 1995. Packaging
materials segment net sales increased to $93.9 million in fiscal 1996 from
$20.7 million in fiscal 1995. The increase was due to $66.9 million of sales
of bonding wire products following the AFW acquisition and $6.4 million due to
increased sales volumes of expendable tools.
International sales (shipments of the Company's products with ultimate
foreign destinations) comprised 79% and 78% of the Company's net sales during
fiscal 1996 and 1995, respectively. Sales to customers in the Asia/Pacific
region (including Korea, Taiwan, Malaysia, the Philippines, Japan, Singapore,
Thailand and Hong Kong) accounted for approximately 72% of the Company's net
sales in both fiscal 1996 and 1995. In fiscal 1996, sales to customers located
in Malaysia, Korea and the Philippines increased compared to fiscal 1995
levels, while sales to Taiwan-based customers declined significantly in fiscal
1996. The decline in Taiwan in part reflected the impact of geopolitical
uncertainty concerning China's reaction to the 1996 elections in Taiwan.
Gross profit as a percentage of net sales declined to 37.2% in fiscal 1996
compared to 45.0% in fiscal 1995. Gross margin declines were experienced in
both the equipment segment and the packaging materials segment. As a result of
the rapid and substantial decline in customer demand for the Company's
equipment in the second half of fiscal 1996, the Company experienced
unfavorable overhead absorption during the third and fourth quarters of fiscal
1996. Provisions for excess and obsolete inventory totaled $4.5 million in
fiscal 1996 compared to $2.8 million in the prior year. The rapid decline in
customer demand in fiscal 1996, particularly for the Model 1488 turbo ball
bonders, and the anticipated transition to the new generation Model 8020 ball
bonders in the second half of calendar 1997, caused the Company to recognize
approximately $2.8 million of the 1996 provision for excess and
21
<PAGE>
obsolete inventory in the fourth quarter. Thus, equipment segment gross profit
as a percentage of net sales decreased to 42.5% for fiscal 1996 compared to
45.3% for fiscal 1995. Gross profit as a percentage of net sales in the
packaging materials segment decreased to 19.6% for fiscal 1996 compared to
40.7% for fiscal 1995. The decrease principally reflects the effect of the AFW
acquisition, as sales of bonding wire products have historically had a
substantially lower gross profit margin than the Company's other products.
SG&A expenses increased to $71.9 million in fiscal 1996 compared to $50.7
million in fiscal 1995. The increase of $21.2 million consisted of
approximately $9.4 million related to the equipment segment, $10.6 million
related to the packaging materials segment and $1.1 million of incremental
corporate costs. In the equipment segment, higher employment and travel
related costs, primarily in connection with the Company's worldwide customer
support activities during the first half of fiscal 1996, contributed to the
increase. Incremental goodwill amortization of $2.1 million and other SG&A
costs of $5.8 million associated with the AFW operation accounted for the
majority of the increase in the packaging materials segment. Higher sales
commissions related to increased sales of packaging materials, increased
travel costs related to AFW integration activities and increased
administrative costs to support the expanded worldwide activities of the
packaging materials segment also contributed to the fiscal 1996 increase.
Corporate costs grew principally as a result of implementation activities
related to a new worldwide computer system.
In response to the rapid decline in customer demand for the Company's
products during the latter half of fiscal 1996, the Company reduced its
worldwide work force, primarily in the equipment segment, suspended the
planned expansion of its Willow Grove, Pennsylvania facility and deferred the
implementation of a new worldwide integrated computer system. As a result of
these actions, in the fourth quarter of fiscal 1996, the Company incurred
severance costs totaling $1.2 million and a $1.8 million charge to write-off
costs incurred in connection with the suspended Willow Grove facility
expansion.
R&D costs increased to $52.4 million in fiscal 1996 compared to $30.9
million for the prior fiscal year. The majority of the R&D costs incurred were
in the equipment segment. Approximately $13.0 million of the increase was due
to engineering activities associated with the 8000 family of products,
principally the Model 8020 development program. The fiscal 1996 increase also
included approximately $1.0 million related to the write-down of certain
engineering prototype machines to their net realizable value. The remaining
R&D spending increases related to development activities for other products
and continuous improvements of existing products. Packaging materials segment
R&D costs increased to $1.0 million as compared to fiscal 1995 levels.
Substantially all of the R&D spending in the packaging materials segment
related to continuous improvement activities for existing products. Gross R&D
expenditures were partially offset by funding received from customers and
governmental subsidies totaling $2.5 million in fiscal 1996 compared to $2.8
million in fiscal 1995.
Operating income declined to $17.4 million in fiscal 1996 from $55.4 million
in fiscal 1995. The decline largely resulted from higher operating costs in
the equipment segment and to the decline in equipment segment gross profits
during the latter half of fiscal 1996. Most of the decline in operating income
was realized in the United States as the United States operation incurred the
majority of the Company's R&D expenses and corporate costs and recognized the
majority of the fiscal 1996 fourth quarter charges.
The increase in interest expense in fiscal 1996 was primarily attributable
to borrowings of $50.0 million under the Company's bank credit facility
related to the financing of the Company's October 1995 AFW acquisition. Fiscal
1996 first quarter results included the write-off of approximately $630,000 of
costs incurred in connection with a proposed public offering of the Company's
Common Stock. Also, during fiscal 1996, the Company contributed $2.6 million
of capital to FCT, and recognized $1.0 million as its proportionate share of
the joint venture's operating loss.
22
<PAGE>
The Company's effective tax rate increased to 24% for fiscal 1996 compared
to 23% in fiscal 1995. The increase was due primarily to the amount and
geographic distribution of taxable income in fiscal 1996. In connection with
the AFW acquisition, the Company acquired a $7.1 million United States federal
net operating loss ("NOL") carryforward. During fiscal 1996, AFW's United
States manufacturing operation experienced a small loss. Since the Company
cannot reasonably forecast sufficient future United States earnings by this
subsidiary to fully utilize the acquired NOL during the carryforward period, a
valuation allowance was established for the full amount of this potential tax
benefit. If realized, such tax benefits would reduce the recorded amount of
AFW goodwill.
Net income declined to $11.8 million in fiscal 1996 as compared to $42.8
million in fiscal 1995 due to the factors previously enumerated.
Fiscal Years Ended September 30, 1995 and September 30, 1994
The Company recorded bookings totaling $342.4 million during the fiscal year
ended September 30, 1995 compared to $178.0 million during fiscal 1994. The
increase in customer orders was primarily attributable to the following
factors. First, growing end-user demand for semiconductor devices resulted in
industry-wide expansion both in wafer fabrication capacity and semiconductor
assembly capacity in 1995. In addition, certain semiconductor manufacturers
replaced older assembly capital equipment with newer, higher throughput
machines capable of handling more complex semiconductor devices for a wider
variety of applications. Finally, enhanced versions of the Company's ball
bonder (Model 1488 turbo -- introduced in late fiscal 1994) and wedge bonder
(Model 1474fp --introduced in the second quarter of fiscal 1995) offered
significant performance advantages compared to the Company's earlier models,
including greater throughput, finer pitch capabilities and improved
programmability to handle a wider variety of applications. Favorable customer
acceptance of these enhanced models contributed to the Company's increased
volume of orders during fiscal 1995. At September 30, 1995, the backlog of
customer orders totaled approximately $84.7 million compared to $46.8 million
at September 30, 1994.
Net sales for the fiscal year ended September 30, 1995 increased 76% to
$304.5 million compared to $173.3 million during fiscal 1994. Approximately
$123.6 million of this increase was due to higher unit volume, primarily of
the Company's Model 1488 turbo ball bonders and 1474fp wedge bonders, and, to
a lesser extent, to increased sales of expendable tools. Higher selling prices
for the Model 1488 turbo ball bonder and Model 1474fp wedge bonder contributed
approximately $7.6 million to net sales in fiscal 1995, over the amounts
reported in fiscal 1994. In addition, approximately $6.1 million of the volume
increase was attributable to sales of products added from the July 1994
acquisition of Assembly Technologies ("AT"), a manufacturer of die bonders. By
geographic region, increases in net sales in fiscal 1995 as compared to fiscal
1994 were primarily attributable to customers located in the Asia/Pacific
region and, to a lesser extent, to customers located in the United States.
Sales to customers in the Asia/Pacific region and the United States accounted
for more than 90% of the Company's net sales in fiscal 1995.
Gross profit as a percentage of net sales increased to 45.0% for fiscal 1995
compared to 41.5% for fiscal 1994. The increase in the gross profit percentage
resulted principally from improved manufacturing overhead absorption
associated with higher sales volumes, improved gross profit margins on the
ball and wedge bonder products largely due to the higher selling prices
realized on the new enhanced models and a shift in sales mix toward higher
margin wedge bonders. During fiscal 1994, the wedge bonder product line
comprised 14% of net sales; in fiscal 1995, wedge bonder products accounted
for 20% of net sales. Partially offsetting the above factors were additional
inventory reserves established for slower selling products during fiscal 1995.
SG&A totaled $50.7 million during fiscal 1995 compared to $36.8 million
during fiscal 1994. This increase was primarily attributable to higher
employment levels required to support the higher volume
23
<PAGE>
of business, increased sales incentives and commissions resulting from the
higher sales levels, increased management incentives associated with improved
earnings and higher outside contractor costs associated with ongoing internal
management information systems development efforts. Of the total increase in
SG&A costs, $1.5 million was related to the incremental costs incurred by the
Company to market and support die bonder products added through the July 1994
acquisition of AT.
Net R&D costs increased to $30.9 million for the fiscal year ended September
30, 1995 compared to $21.3 million for the prior fiscal year. Of the $9.6
million increase in fiscal 1995, $2.0 million resulted from incremental
expenditures related to development of the Company's next generation of die
bonders and enhancements to die bonder products. The remainder consisted
primarily of personnel related costs, outside contractor costs and prototype
materials related to new product development. Gross R&D expenses were
partially offset by funding received from customers and governmental subsidies
totaling $2.8 million in fiscal 1995 and $2.0 million in fiscal 1994.
Operating income totaled $55.4 million for fiscal 1995 compared to $13.9
million for the same period in fiscal 1994. This improvement resulted
principally from the higher net sales and improved gross profit margins,
offset in part by the increased operating expenses noted above. The majority
of the increase in operating profit was realized in the United States, where
the Company maintains its principal manufacturing operations, and in Hong Kong
where the Company's Asia/Pacific sales activities are centered.
During fiscal 1995, all of the Company's remaining 8% Convertible
Subordinated Debentures were converted into Common Stock or redeemed. As a
result, interest expense during fiscal 1995 was lower than the amount reported
in fiscal 1994. The increase in the effective tax rate to 23% in fiscal 1995
compared to the fiscal 1994 rate of 20% was due primarily to utilization of
remaining NOL carryforwards in fiscal 1994, utilization in the United States
of R&D tax credits not previously used due to the effects of net operating
losses, and the amount and geographic distribution of taxable income in fiscal
1995.
Net income increased to $42.8 million in fiscal 1995 as compared to $10.4
million in fiscal 1994 due to the factors previously enumerated.
24
<PAGE>
Quarterly Operating Results
The following table presents the Company's historical unaudited quarterly
results of operations for the Company's most recent nine fiscal quarters. This
data is derived from the Company's annual and quarterly financial statements
which are incorporated into this Prospectus by reference. In the opinion of
management, such quarterly financial information has been prepared on the same
basis as the Company's annual financial statements and includes all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial results set forth therein. Results of operations
for any previous quarter are not necessarily indicative of results for any
future period. The following discussion is qualified by the more detailed
discussion of these quarterly results by management which are contained in the
Company's quarterly filings for the respective periods.
<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1996 FISCAL 1997
----------------------------------- -------------------------------------- -----------------
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31
------- ------- ------- -------- -------- -------- ------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $51,459 $64,785 $87,296 $100,969 $127,189 $115,374 $76,912 $ 61,701 $81,844 $121,491
Cost of goods sold...... 29,414 35,628 47,456 54,959 75,113 69,877 49,111 45,390 53,063 76,256
------- ------- ------- -------- -------- -------- ------- -------- ------- --------
Gross profit............ 22,045 29,157 39,840 46,010 52,076 45,497 27,801 16,311 28,781 45,235
Selling, general and
administrative......... 10,655 11,668 13,153 15,252 16,988 18,256 18,192 18,427 16,227 18,736
Research and
development, net....... 6,160 6,546 8,316 9,862 11,276 12,155 12,937 16,036 10,693 11,772
------- ------- ------- -------- -------- -------- ------- -------- ------- --------
Income (loss) from
operations............. 5,230 10,943 18,371 20,896 23,812 15,086 (3,328) (18,152) 1,861 14,727
Interest income
(expense), net......... (197) (223) 93 500 (172) 40 16 (48) (180) (277)
Equity in loss of joint
venture................ -- -- -- -- -- (48) (192) (754) (1,083) (1,546)
Other expense........... -- -- -- -- (630) -- -- -- -- --
------- ------- ------- -------- -------- -------- ------- -------- ------- --------
Income (loss) before
income taxes........... 5,033 10,720 18,464 21,396 23,010 15,078 (3,504) (18,954) 598 12,904
Income tax provision
(benefit).............. 1,309 2,466 4,431 4,585 6,673 4,373 (1,016) (6,247) 179 3,602
------- ------- ------- -------- -------- -------- ------- -------- ------- --------
Net income (loss)....... $ 3,724 $ 8,254 $14,033 $ 16,811 $ 16,337 $ 10,705 $(2,488) $(12,707) $ 419 $ 9,302
======= ======= ======= ======== ======== ======== ======= ======== ======= ========
AS A PERCENTAGE OF NET
SALES:
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold...... 57.2 55.0 54.4 54.4 59.1 60.6 63.9 73.6 64.8 62.8
------- ------- ------- -------- -------- -------- ------- -------- ------- --------
Gross profit............ 42.8 45.0 45.6 45.6 40.9 39.4 36.1 26.4 35.2 37.2
Selling, general and
administrative......... 20.7 18.0 15.1 15.1 13.4 15.8 23.7 29.9 19.8 15.4
Research and
development, net....... 11.9 10.1 9.5 9.8 8.9 10.5 16.8 26.0 13.1 9.7
------- ------- ------- -------- -------- -------- ------- -------- ------- --------
Income (loss) from
operations............. 10.2 16.9 21.0 20.7 18.6 13.1 (4.4) (29.5) 2.3 12.1
Interest income
(expense), net......... (0.4) (0.4) 0.2 0.5 (0.1) -- -- (0.1) (0.3) (0.2)
Equity in loss of joint
venture................ -- -- -- -- -- -- (0.2) (1.2) (1.3) (1.3)
Other expense........... -- -- -- -- (0.5) -- -- -- -- --
------- ------- ------- -------- -------- -------- ------- -------- ------- --------
Income (loss) before
income taxes........... 9.8 16.5 21.2 21.2 18.0 13.1 (4.6) (30.8) 0.7 10.6
Income tax provision
(benefit).............. 2.5 3.8 5.1 4.6 5.2 3.8 (1.3) (10.1) 0.2 2.9
------- ------- ------- -------- -------- -------- ------- -------- ------- --------
Net income (loss)....... 7.3% 12.7% 16.1% 16.6% 12.8% 9.3% (3.3)% (20.7)% 0.5% 7.7%
======= ======= ======= ======== ======== ======== ======= ======== ======= ========
</TABLE>
The Company's quarterly operating results have fluctuated significantly in
the past and may fluctuate significantly in the future depending upon a variety
of factors, including the timing of significant orders, the mix of products
sold, changes in pricing by the Company, its competitors, customers or
suppliers, lengthy sales cycles for the Company's systems, timing of new
product announcements and releases by the Company or its competitors, market
acceptance of new products
25
<PAGE>
and enhanced versions of the Company's existing products, capital spending
patterns by customers, manufacturing difficulties or inefficiencies associated
with existing products or new product introductions and the ability to produce
systems in volume and meet customer requirements, product discounts,
volatility in the Company's targeted markets, political and economic
instability, natural disasters, regulatory changes, possible disruptions of
operations caused by expanding existing facilities or moving into new
facilities, expenses associated with acquisitions and alliances and various
competitive factors, including price-based competition and competition from
vendors employing other technologies.
See "Risk Factors-- Fluctuations in Operating Results; Limited System Sales"
and "-- Volatility of Semiconductor Industry."
Throughout fiscal 1995, net sales increased in each successive quarter and
peaked in the first quarter of fiscal 1996, primarily reflecting increased
unit sales of the Company's ball and wedge bonders. This growth was
attributable both to increased customer acceptance of enhanced models of wire
bonders and to industry-wide demand for increased assembly capacity. In
October 1995, the Company acquired AFW which contributed approximately $66.9
million to fiscal 1996 net sales. Commencing in the second quarter of fiscal
1996, quarterly net sales began to decline due to industry-wide softening in
demand for semiconductor capital equipment. However, demand for capital
equipment, primarily the Company's wire bonders, rebounded in the first
quarter of fiscal 1997 and continued to increase in the second quarter,
growing by 48% over the prior quarter.
Gross profit as a percentage of net sales increased during fiscal 1995
principally due to improved manufacturing overhead absorption associated with
higher unit sales volumes and a shift in product mix to newer model wire
bonders with higher selling prices. Fiscal 1996 gross profit margins declined
primarily due to the rapid decrease in unit volume of equipment sales which
led to unfavorable manufacturing overhead absorption and the write-down of
excess inventories in the fourth quarter of fiscal 1996, and to an increase in
the proportion of total sales represented by lower margin AFW bonding wire
products. As a result of inventory write-downs in the fourth quarter of fiscal
1996 and of the growth in equipment sales in the first quarter of fiscal 1997,
gross margin increased to 35.2% in the first quarter of fiscal 1997 compared
to 26.4% in the fiscal 1996 fourth quarter.
SG&A expenses grew steadily throughout the fiscal 1995 and 1996 quarterly
periods, principally reflecting increases in employment-related costs as the
Company expanded its sales, marketing and customer support capabilities to
support the higher volume of business activities. In addition, SG&A costs
increased in fiscal 1996 as a result of the AFW acquisition. Lower SG&A costs
in the fiscal 1997 first quarter primarily reflect the effect of certain cost
reduction efforts implemented in the fiscal 1996 fourth quarter. SG&A expenses
increased in the second quarter of fiscal 1997 compared to the first quarter
of fiscal 1997 due primarily to severence and relocation related charges in
the packaging materials segment and a company-wide annual merit increase
effective January 1997. The Company expects the dollar amount of its SG&A
expenditures to increase in the future, although such expenses may vary as a
percentage of net sales from quarter to quarter.
R&D expenses have also risen significantly over the periods presented
through fiscal 1996 as the Company has increased its development activities,
both for continuous improvements and enhancements of existing platforms
(leading to enhanced versions of existing products such as the Model 1488 plus
ball bonder and the Model 1474fp wedge bonder) and toward the development of
new generations of machines, including the 8000 family of wire bonders. The
decline in R&D costs during the first quarter of fiscal 1997 was primarily
caused by reduced outside contract development costs and lower expenditures
for prototype materials in the Company's equipment segment. The Company
expects the dollar amount of its R&D expenditures to increase in the future,
although such expenses may vary as a percentage of sales from quarter to
quarter.
Operating income increased steadily throughout fiscal 1995 and the first
quarter of fiscal 1996, due largely to the increased sales and gross profits
related to the Company's equipment segment. The rapid
26
<PAGE>
decline in quarterly net sales and gross profits in fiscal 1996 without
significant reductions in operating costs contributed to the quarterly losses
during the latter half of fiscal 1996. Primarily as a result of the recent
growth in demand for the Company's wire bonding equipment, operating income
increased to $1.9 million in the first quarter of fiscal 1997 and $14.7
million in the second quarter of fiscal 1997 from an operating loss of $18.2
million in the fourth quarter of fiscal 1996.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-based Compensation" ("SFAS 123"), was issued. The
statement requires the recognition of the fair value of stock options and
other stock-based compensation to be reflected as compensation expense in the
income statement, or disclosure of the pro-forma effect on net income and
earnings per share of such compensation expense in the footnotes to the
Company's financial statements commencing with the 1997 fiscal year. The
Company expects to adopt SFAS 123 on a disclosure basis only. Accordingly,
implementation of SFAS 123 is not expected to impact the Company's
consolidated balance sheet or income statement.
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"), was issued. The statement specifies the
computation, presentation, and disclosure requirements for earnings per share.
The Company will implement SFAS 128 commencing with the first quarter of
fiscal 1998, at which time all earnings per share data for prior periods will
be restated to conform the provisions of the statement. The principal effect
of SFAS 128 will be to replace the current "Primary income per share"
calculation with "Basic income per share."
LIQUIDITY AND CAPITAL RESOURCES
During the past three fiscal years and the six-month period ended March 31,
1997, the Company has financed its operations principally through cash flows
from operating activities, while its acquisitions of AFW in October 1995 and
Semitec in October 1996 were financed with borrowings. Cash generated by
operating activities totaled $1.4 million during the first half of fiscal 1997
compared to $16.9 million during the first half of fiscal 1996. Cash and total
investments decreased to $40.7 million at March 31, 1997 from the $58.9
million at September 30, 1996. Reduced cash flows from operating activities in
the first half of fiscal 1997 as compared to the first half of fiscal 1996
primarily resulted from lower sales and profitability in the first half of
fiscal 1997.
At March 31, 1997, working capital decreased to $108.0 million compared to
$113.8 million at September 30, 1996. The accounts receivable balance at March
31, 1997 increased by $44.6 million compared to the September 30, 1996
balance. This increase resulted from increased sales volume in the fiscal 1997
second quarter compared to the fiscal 1996 fourth quarter. Inventory decreased
by $4.0 million at March 31, 1997, primarily due to the effect of higher sales
in the first six months of fiscal 1997 and the Company's efforts to more
effectively manage inventory levels in light of anticipated product
transitions later in calendar 1997.
Trade accounts payable and accrued expenses increased by approximately $18.3
million at March 31, 1997 compared to their September 30, 1996 balances. The
increase primarily reflects the effect of increased inventory purchases on
trade accounts payable as a result of the higher customer order rate.
During the first half of fiscal 1997, the Company invested approximately
$6.8 million in property and equipment, primarily to complete the construction
of its Micro-Swiss manufacturing facility in Yokneam, Israel and to upgrade
equipment used in the Company's manufacturing and R&D activities. The Company
presently expects fiscal 1997 capital spending to approximate $18.0 million.
In addition, the Company intends to make capital contributions and loans to
FCT. See "--Introduction." The
27
<PAGE>
Company's principal capital projects planned for fiscal 1997 include the
purchase of tooling and equipment necessary for the manufacture of new
products, including the 8000 family of wire bonders, relocation of its
Singapore-based AFW manufacturing operation into a new location scheduled to
occur in late calendar 1997, the purchase of equipment necessary to expand
manufacturing capacity, primarily in the United States and Israel, and
continued investments in a new global management information system.
Relocation of AFW's manufacturing operation to a new facility in Singapore is
not expected to have a material adverse effect on the Company's results of
operations, cash flows or liquidity.
The Company has a $10.0 million revolving credit facility expiring February
28, 1998 and a $50.0 million revolving credit facility expiring March 30,
2001. There were no borrowings under the $10.0 million credit line during
fiscal 1996 or the first half of fiscal 1997. The Company had outstanding the
entire amount of the $50.0 million revolving credit facility at March 31, 1997
and intends to repay the amount in full with the proceeds of this Offering.
After such repayment, the Company intends to retain both of its revolving
credit facilities.
A significant portion of the Company's consolidated earnings are
attributable to undistributed earnings of certain of its foreign subsidiaries.
Deferred income taxes have not been provided on that portion of undistributed
foreign earnings which is expected to be indefinitely reinvested in foreign
operations. If funds were required to be repatriated to fund the Company's
operations or other financial obligations, substantial additional United
States federal income tax expense could be required to be recognized.
The Company believes that anticipated cash flows from operations, its
working capital and amounts expected to be available under its revolving
credit facilities and the net proceeds of this Offering will be sufficient to
meet the Company's liquidity and capital requirements for at least the next 12
months. However, the Company may seek, as required, equity or debt financing
to provide capital for corporate purposes and/or to fund strategic business
opportunities, including possible acquisitions, joint ventures, alliances or
other business arrangements which could require substantial capital outlays.
The timing and amount of such potential capital requirements cannot be
determined at this time and will depend on a number of factors, including
demand for the Company's products, semiconductor and semiconductor capital
equipment industry conditions and competitive factors and the nature and size
of strategic business opportunities which the Company may elect to pursue.
28
<PAGE>
BUSINESS
This Prospectus contains certain forward-looking statements within the
meaning of the federal securities laws. Actual results and the timing of
certain events could differ materially from those projected in the forward-
looking statements due to a number of factors, including those set forth under
"Risk Factors" and elsewhere in this Prospectus and in the documents
incorporated by reference herein.
The Company designs, manufactures and markets capital equipment, related
spare parts and packaging materials used to assemble semiconductor devices.
The Company also services, maintains, repairs and upgrades assembly equipment.
According to VLSI, as of December 31, 1995, K&S was the world's largest
supplier of semiconductor assembly equipment. The Company offers systems that
address a broad range of applications in the assembly process including wire
bonding systems, wafer dicing saws and die, TAB and flip-chip bonders. Through
its AFW, Micro-Swiss and Semitec subsidiaries, the Company offers packaging
materials, including bonding wire, capillaries, wedges, die collets and saw
blades.
INDUSTRY BACKGROUND
The worldwide market for semiconductors exceeded $137 billion in 1996 and
VLSI projects this market to reach approximately $340 billion by 2001. The
market for semiconductor assembly equipment is expected to continue to be
driven by the demand for ICs, as well as the proliferation of different
package types and technological advances in IC packages. Different types of
devices such as microprocessors, logic devices and memory devices often
require different assembly and packaging solutions. In addition, current
generation semiconductors are more complex, more densely fabricated and more
highly integrated than those of prior generations. To package these newer
devices, assembly equipment must be able to handle smaller, more complex
packages with higher pin counts. Furthermore, device manufacturers and
assemblers continue to demand equipment with faster throughput, greater
reliability, more automated manufacturing support and lower cost of ownership.
The market for the packaging materials used in the semiconductor assembly
process is similarly driven by IC unit volume and increased technological
demands. These demands typically include package size reduction and greater
consistency or uniformity of materials.
As demand for ICs grows, semiconductor manufacturers increase capacity by
expanding and updating existing fabs and constructing new fabs. This expansion
has historically exhibited strong cyclical characteristics and continues to do
so. For example, in late 1995 and throughout most of 1996, many semiconductor
manufacturers experienced a reduction in order growth and, in a few instances,
a reduction in overall orders. These events caused certain semiconductor
manufacturers to postpone or cancel equipment deliveries to previously planned
expansion or new fab construction projects, providing evidence of the
continuing cyclical nature of this industry. However, as new fabrication
facilities come on line and existing facilities are expanded and upgraded, the
Company anticipates that the semiconductor industry will need to add capacity
to assemble the increased output of processed wafers. According to VLSI, sales
of semiconductor assembly equipment totaled approximately $2.1 billion in 1996
and are projected to grow to approximately $5.0 billion by 2001. Sales of
semiconductor packaging materials were approximately $7.3 billion in 1995 and
are expected to grow to approximately $9.4 billion by 1998 according to Rose
Associates.
Semiconductor Manufacturing Process
The manufacture of semiconductors requires complex and precise steps which
can be broadly grouped into wafer fabrication, assembly and test. Wafer
fabrication, the first step in the semiconductor manufacturing process, starts
with raw silicon wafers and ends with finished devices in the form of die on
wafers. After fabricated wafers are tested, they typically are shipped to
assembly facilities located
29
<PAGE>
primarily in the Asia/Pacific region. Set forth below is a diagram of some of
the major steps in the semiconductor manufacturing process:
[DIAGRAM OF SEMICONDUCTOR MANUFACTURING PROCESS SHOWING A SILICON WAFER FINISHED
SEMICONDUCTOR DEVICE MOVING THROUGH WAFER FABRICATION, ASSEMBLY AND TEST PROCESS
TO RESULT IN A FINISHED IC DEVICE. THE DIAGRAM FURTHER ILLUSTRATES THE ASSEMBLY
PROCESS STEPS OF WAFER DICING, DIE BONDING, WIRE BONDING AND ESCAPSULATION.]
Semiconductor devices are small and fragile and must be packaged to protect
them and facilitate their connection to electronic systems. "Assembly" refers
to those process steps required to package semiconductor devices. The packages
are typically based on either a stamped metal leadframe or a piece of
laminate, which is subsequently molded with plastic, or on ceramic, depending
on the device and the application in which it will be used.
The semiconductor assembly process begins with the mounting of a finished,
tested wafer onto a carrier, after which a dicing saw cuts the wafer into
individual die. The cut wafer is then moved to a die bonder which picks each
good die off the wafer and bonds it to a package. Next, the device is wire
bonded. Very fine gold or aluminum wire (typically 0.001 inches in diameter)
is bonded between specific locations called bond pads on the die and
corresponding leads on the package in order to create the electrical
connections necessary for the device to function. After wire bonding, the
package is encapsulated. For leadframe-based packages, plastic is molded
around the package and the leads are then trimmed and formed; for laminate-
based packages, plastic is molded on the laminate and balls are then attached.
For ceramic packages, encapsulation is accomplished by mounting a lid over the
die. After encapsulation, devices are re-tested and are then marked and
prepared for shipment.
COMPANY STRATEGY
The Company's principal strategy is to improve and broaden the range of
products and services it offers to its customers. To implement this strategy,
the Company continues to pursue the following objectives:
Enhance Leadership Position in Wire Bonders. The Company believes it is
the world's leading supplier of wire bonders. In addition to the technical
capabilities of its products, the Company believes its leadership position
in the wire bonder market derives, in part, from a high level of customer
support. The Company intends to enhance its worldwide market leadership by
continuing to improve the technical performance of its wire bonders while
reducing their cost of ownership. The Company's ongoing product development
strategy includes continuous improvement of its existing wire bonding
products, as well as the development of a next-generation family of wire
bonders. The Company is currently developing its next generation of wire
bonders, the 8000 family, which is based on a new control platform. The
Company's 8000 family is being designed to enhance the technical
performance and further reduce the cost of ownership of K&S' wire bonder
products. The first product of this family, the Model 8020, is currently
scheduled to be released in the second
30
<PAGE>
half of calendar 1997. The Company also has developed modules that allow
the Company's wire bonders to be integrated with automatic material
handling systems and with factory controlled networks in response to the
trend of certain assemblers to increase factory automation.
Broaden Assembly Equipment Product Lines. The Company continues to
leverage its significant investment in customer relationships by offering
its customers a broader range of assembly equipment. The Company intends to
increase the market penetration of its current product lines and to broaden
its assembly product offerings through acquisitions, strategic alliances
and internal development. To that end, the Company entered into a
Manufacturing License and Supply Agreement with Tokyo Seimitsu Co. Ltd.
("TSK") in October 1995. Under the terms of this agreement, the Company
manufactures and distributes TSK's automatic dicing saw as the Company's
Model 7500 and manufactures that saw for sale to, and for distribution by,
TSK as TSK's Model 5000. In addition, in February 1997, the Company and PRI
signed a non-binding memorandum of understanding to cooperate in the
development of technology to integrate and automate equipment used in
semiconductor assembly. The Company also continues to focus internal
development efforts on alternate assembly technologies.
Expand Packaging Materials Product Offerings. The Company is adding to
its packaging materials and product offerings in an effort to increase its
revenues related to the manufacture of ICs as opposed to the expansion of
IC manufacturing capacity. The Company's packaging materials include a
broad range of ceramic, carbide and metal tools used in die and wire
bonding, such as die collets, capillaries and wedges. In October 1995, the
Company acquired AFW which significantly increased the size of its
packaging materials business by adding gold and aluminum bonding wire to
its product offerings. In addition, in October 1996, the Company acquired
Semitec, a manufacturer of semiconductor dicing saw blades.
Focus on Service and Spare Parts Opportunities. The Company seeks to
capture additional revenue opportunities from its installed base of
assembly equipment through sales of spare parts, repair and maintenance,
training services and the reconfiguring and upgrading of systems. The
Company has established relationships with certain key customers whereby
the Company performs repair and maintenance and provides equipment upgrades
and training, enabling these customers to outsource these functions to the
Company. The Company intends to establish similar relationships with other
key customers. The Company plans to expand its revenue in these areas by
offering more comprehensive services designed to reduce its customers' cost
of ownership.
Pursue Other Semiconductor Packaging Technologies. The Company
continuously pursues the development of additional semiconductor packaging
technologies through internal research and development efforts and the
evaluation of potential acquisitions and alliances with third parties. For
example, in February 1996, the Company entered into a joint venture
agreement with Delco Electronics Corporation providing for the formation
and management of FCT. FCT was formed to provide wafer bumping services on
a contract basis and to license related technologies, and has recently
completed construction of its manufacturing facility in Phoenix, Arizona.
FCT is currently working with its customers to have its manufacturing
process qualified.
31
<PAGE>
PRODUCTS
K&S offers a broad range of semiconductor assembly equipment, packaging
materials and complementary services and spare parts used in the semiconductor
assembly process. Set forth below is a table listing the approximate
percentage of the Company's net sales by principal product area for its fiscal
years ended September 30, 1994, 1995 and 1996 and the six months ended March
31, 1997.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS
SEPTEMBER 30, ENDED
--------------------- MARCH 31,
1994 1995 1996 1997
----- ----- ----- ----------
<S> <C> <C> <C> <C>
Wire bonders............................ 68% 74% 57% 60%
Additional assembly equipment........... 10 9 10 8
Packaging materials..................... 8 7 25 25
Services and spare parts................ 14 10 8 7
----- ----- ----- ---
100% 100% 100% 100%
===== ===== ===== ===
</TABLE>
In October 1995, the Company acquired AFW which significantly increased the
size of its packaging materials business by adding gold and aluminum bonding
wire to its product offerings. In addition, in October 1996, the Company
acquired Semitec, a manufacturer of semiconductor dicing saw blades.
Wire Bonders
The Company's principal product line is its family of wire bonders, which
are used to connect extremely fine wires, typically made of gold or aluminum,
between the bonding pads on the die and the leads on the package to which the
die has been bonded. The Company offers both ball and wedge bonders in
automatic and manual configurations. Ball bonders typically are used for
leadframe-based and laminate-based packages while wedge bonders typically are
used for ceramic packages. The Company's principal wire bonders are its Model
1488 plus ball bonder and Model 1474fp wedge bonder. The Company believes that
its wire bonders offer competitive advantages based on high throughput and
superior process control enabling fine pitch bonding and long, low wire loops,
which are needed to assemble advanced IC packages. The selling prices for the
Company's automatic wire bonders range from $60,000 to over $200,000 and from
$8,000 to $40,000 for manual wire bonders, in each case depending upon system
configuration and purchase volume.
The Company is in the process of developing a new generation of wire bonder,
the 8000 family, which will be based on an entirely new platform and has
required the development of new software and many subassemblies not part of
the Company's current wire bonders. The Company has experienced delays in the
development of the first product in the 8000 family, the Model 8020. The
delays in the development of the Model 8020 have been due to a variety of
reasons typical to the development of new technological products, including
hardware, software and process related issues and changes in functional
specifications based on input from customers. While development and technical
risks exist which have the potential to further affect the introduction of the
Model 8020, the Company currently expects that the product will be released in
the second half of calendar 1997. However, no assurance can be given that its
scheduled introduction in the second half of calendar 1997 will not be
delayed. The Company also may incur substantial costs during the customer
evaluation and qualification process to ensure the functionality and
reliability of the product. The Company's inability to complete the
development of and introduce the Model 8020 or other new products, or its
inability to manufacture and ship these products in volume and on a timely
basis, could adversely affect the Company's competitive position.
Furthermore, the Company's planned transition to the Model 8020 platform
involves numerous risks, including the possibility that customers will defer
purchases of Model 1488 plus wire bonders in anticipation of the availability
of the Model 8020 or that the Model 8020 will fail to meet customer needs
32
<PAGE>
or achieve market acceptance. To the extent that the Company fails to
accurately forecast demand in volume and configuration for both its current
and next generation wire bonders and generally to manage product transitions
successfully, it could experience reduced orders, delays in product shipments
and increased risk of inventory obsolescence. There can be no assurance that
the Company will successfully develop and manufacture new products, including
the Model 8020, that new products introduced by the Company will be accepted
in the marketplace or that the Company will manage its product transitions
successfully. The Company's failure to do any of the foregoing could
materially adversely affect the Company's business, financial condition and
operating results.
Additional Semiconductor Assembly Equipment
In addition to wire bonders, the Company produces other types of
semiconductor assembly equipment, including dicing saws, die bonders, TAB
bonders and flip-chip bonders, which allows the Company to leverage its
significant investment in customer relationships by offering its customers a
broad range of assembly equipment. In addition to wire bonders, principal
products offered by the Company consist of the following:
Dicing Saws. After precise automatic positioning of the wafer, a dicing
saw is used to cut it into individual die using diamond-embedded saw
blades. Dicing saws range in price from $60,000 to more than $230,000. In
October 1995, the Company entered into a Manufacturing License and Supply
Agreement with TSK. Under the terms of this agreement, the Company
manufactures and distributes TSK's automatic dicing saw as the Company's
Model 7500 and manufactures that saw for sale to, and for distribution by,
TSK as TSK's Model 5000. This product is produced in the Company's Israeli
machine manufacturing facility.
Die Bonders. Die bonders are used to attach a semiconductor die to a
leadframe or other package before wire bonding. The Company's product line
includes the Model 6900, an automatic multi-process assembly system which
can be configured to support either conventional die bonding applications
or alternate semiconductor assembly technologies, and Models 4206 and 5408
machines. Die bonders range in price from $100,000 to more than $300,000.
Tape Automated Bonding (TAB). TAB is an alternate assembly method which
uses a thin, flexible film of laminated copper and polyamide in place of a
conventional package. In a TAB assembled device, the die is bonded directly
to copper leads, thereby eliminating the need for wire bonding. The
Company's principal TAB bonder is the Model SP2100. The selling price for
TAB bonders typically exceeds $375,000.
Flip-Chip Assembly Systems. Flip-chip is an alternate assembly technique
in which the die is mounted face down in a package or other electronic
system using conductive bumps, thereby eliminating the need for either
conventional die or wire bonding. The Company's Model 6900 can be
configured to support flip-chip applications. Selling prices for flip-chip
assembly systems typically exceed $300,000.
The Company also offers different configurations of certain of its products
for non-semiconductor applications, including the Company's Model 980 saw for
use in cutting and grinding hard and brittle materials, such as ceramic, glass
and ferrite, for applications such as the fabrication of chip capacitors or
disk drive heads. Similarly, a variant of the Model 2100 TAB bonder is used to
assemble ink jet printer cartridges.
Packaging Materials
The Company currently offers a range of packaging materials to semiconductor
device assemblers which it sells under the brand names "American Fine Wire,"
"Micro-Swiss" and "Semitec." The Company intends to expand this business in an
effort to increase its revenues related to the manufacture of ICs as opposed
to the expansion of IC manufacturing capacity. The Company sells its packaging
33
<PAGE>
materials for use with competitors' assembly equipment as well as its own
equipment. The Company's principal packaging materials products consist of the
following:
Bonding Wire. AFW is a manufacturer of very fine (typically 0.001 inches
in diameter) gold and aluminum wire used in the wire bonding process. AFW
produces wire to a wide range of specifications, which can satisfy most
wire bonding applications. Gold bonding wire is generally priced based on a
fabrication charge per 1,000 feet of wire, plus the value of the gold. To
minimize AFW's financial exposure to gold price fluctuations, AFW obtains
gold for fabrication pursuant to a contract with its gold supplier and only
purchases the gold upon shipment and sale of the finished product to the
customer. Accordingly, fluctuations in the price of gold are generally
absorbed by its gold supplier or passed on to AFW's customers.
Expendable Tools. The Micro-Swiss family of expendable tools includes
capillaries, wedges, die collets and saw blades. Capillaries and wedges are
used to feed out, attach and cut the wires used in wire bonding. Die
collets are used to pick up, place and bond die to packages. Saw blades are
used for cutting hard and brittle materials. Through its October 1996
acquisition of Semitec, the Company became a manufacturer of hub blades
which are used to cut silicon wafers into semiconductor die.
Services and Spare Parts
The Company believes that its knowledge and experience have positioned it to
deliver innovative, customer-specific services that reduce the customer's cost
of ownership associated with the Company's equipment. Historically, the
Company's offerings in this area were limited to spare parts, customer
training and extended warranty contracts. In response to customer trends in
outsourcing equipment-related services, the Company is focusing on providing
repair and maintenance services, a variety of equipment upgrades, machine and
component rebuild activities and expanded customer training. These services
are generally priced on a time and materials basis. The service and
maintenance arrangements are typically subject to annual or multi-year
contracts.
CUSTOMERS
The Company's customers include large semiconductor manufacturers and
subcontract assemblers worldwide. The following list sets forth certain
customers who have purchased in excess of $3.0 million of the Company's
products since the beginning of fiscal 1996.
Advanced Micro Devices Micron Technology
Advanced Semiconductor Engineering Motorola
Anam Electronics National Semiconductor
AT&T/Lucent Technologies Orient Semiconductor Electronics
Caesar Technology Philips Electronics
Fujitsu Samsung Pacific
Hyundai Electronics Industries SGS-Thomson Microelectronics
IBM Siemens
Intel Siliconware
Lexmark International
Sales to a relatively small number of customers historically have accounted
for a significant percentage of the Company's net sales. In fiscal 1994, sales
to Anam, Intel and Motorola accounted for 14.2%, 11.5% and 10.8%,
respectively, of the Company's net sales. In fiscal 1995, sales to Intel and
Anam accounted for 19.8% and 16.3%, respectively, of the Company's net sales.
During fiscal 1996, sales to Anam and Intel accounted for approximately 14.3%
and 11.2%, respectively, of the Company's net sales. For the six months ended
March 31, 1997, sales to Anam and Intel accounted for approximately 17.9% and
11.6%, respectively, of the Company's net sales.
34
<PAGE>
The Company believes that developing long-term relationships with its
customers is critical to its success. By establishing these relationships with
semiconductor manufacturers and subcontract assemblers, the Company gains
insight to its customers' future IC packaging strategies. This information
assists the Company in its efforts to develop process and equipment solutions
that address its customers' future assembly requirements.
The Company expects that sales of its products to a limited number of
customers will continue to account for a high percentage of net sales for the
foreseeable future. The loss or reduction of orders from a significant
customer, including losses or reductions due to manufacturing, reliability or
other difficulties associated with the Company's products, changes in customer
buying patterns, or market, economic or competitive conditions in the
semiconductor or subcontract assembly industries, could adversely affect the
Company's business, financial condition and operating results. See "Risk
Factors--Customer Concentration."
SALES AND CUSTOMER SUPPORT
The Company sells its products to semiconductor manufacturers and
subcontract assemblers, who are primarily located or have operations in the
Asia/Pacific region. Approximately 74%, 78%, 79% and 80% of the Company's net
sales for fiscal 1994, 1995 and 1996 and the first six months of fiscal 1997,
respectively, were to customers for delivery outside of the United States.
The Company markets its semiconductor assembly equipment and its packaging
materials through separate sales organizations. With respect to semiconductor
assembly equipment, the Company's direct sales force, consisting of
approximately 100 individuals at March 31, 1997, is principally responsible
for sales of major product lines to customers in the United States and the
Asia/Pacific region, including Japan. Lower volume product lines, as well as
all equipment sales to customers in Europe, are sold through a network of
manufacturer's representatives. The Company sells its packaging materials
product lines through a separate direct sales force and through manufacturers'
representatives.
The Company believes that providing comprehensive worldwide sales, service
and customer support are important competitive factors in the semiconductor
equipment industry. In order to support its United States and foreign
customers whose semiconductor assembly operations are located in the
Asia/Pacific region, the Company maintains a significant presence in the
region, with sales facilities in Hong Kong, Japan, Korea, Taiwan, Malaysia and
Singapore, a technology center in Japan and an applications lab in Singapore.
The Company supports its assembly equipment customers worldwide with over 100
customer service and support personnel at March 31, 1997, located in Hong
Kong, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and
the United States. The Company's local presence in the Asia/Pacific countries
enables it to provide more timely customer service and support and affords
customers the ability to place orders locally and to deal with service and
support personnel who speak the same language and are familiar with local
country practices.
BACKLOG
At March 31, 1997, the Company's backlog was approximately $110.0 million,
as compared to approximately $93.0 million at December 31, 1996 and
approximately $74.0 million at March 31, 1996. The Company's backlog consists
of product orders for which confirmed purchase orders have been received and
which are scheduled for shipment within 12 months. In addition, the Company
may allocate production capacity to customers for anticipated purchases for
which a confirmed purchase order has not yet been received. Virtually all
orders are subject to cancellation, deferral or rescheduling by the customer
with limited or no penalties. Because of the possibility of customer changes
in delivery schedules or cancellations and potential delays in product
shipments, the Company's backlog as of any particular date may not be
indicative of revenues for any succeeding quarterly period.
35
<PAGE>
MANUFACTURING
The Company's assembly equipment manufacturing activities consist primarily
of integrating components and subassemblies to create finished systems
configured to customer specifications. The Company performs system design,
assembly and testing in-house at its Willow Grove, Pennsylvania and Haifa,
Israel facilities, but utilizes an outsourcing strategy for the manufacture of
many of its major subassemblies. K&S believes that outsourcing enables it to
minimize its fixed costs and capital expenditures and allows the Company to
focus on product differentiation through system design and quality control.
The Company's just-in-time inventory management strategy has reduced
manufacturing cycle times and has limited on-hand inventory. The Company has
obtained ISO 9001 registration for most operations in its Willow Grove,
Pennsylvania facility and for both of its Israeli manufacturing facilities.
The Company manufactures its Micro-Swiss expendable tools at its facility in
Israel and its AFW product line, consisting of gold and aluminum bonding wire,
at facilities in Alabama, Singapore and Switzerland. The Company has
constructed a new facility for its Micro-Swiss operations in Israel. Semitec
dicing blades are manufactured in Santa Clara, California.
The Company relies on subcontractors to manufacture to the Company's
specifications many of the materials, components or subassemblies used in its
products. Certain of the Company's products require materials, components or
subassemblies of an exceptionally high degree of reliability, accuracy,
performance and purity. Currently there are a number of such items for which
there are only a single or limited number of suppliers which have been
accepted by the Company as a qualified supplier. The Company generally does
not maintain long-term contracts with its subcontractors and suppliers. While
the Company does not believe that its business is substantially dependent on
any contract or arrangement with any of its subcontractors or suppliers, the
Company's reliance on subcontractors and single source suppliers involves a
number of significant risks, including the loss of control over the
manufacturing process, the potential absence of adequate capacity and the
reduced control over delivery schedules, manufacturing yields, quality and
costs. Further, certain of the Company's subcontractors and suppliers are
relatively small operations and have limited finances and manufacturing
resources. In the event that any significant subcontractor or single source
supplier were to become unable or unwilling to continue to manufacture or sell
subassemblies, components or parts to the Company in required volumes and of
acceptable quality levels and prices, the Company would have to identify and
qualify acceptable replacements. The process of qualifying subcontractors and
suppliers could be lengthy, and no assurance can be given that any additional
sources would be available to the Company on a timely basis.
The Company has experienced, from time to time, reliability and quality
problems with certain key subassemblies provided by single source and other
suppliers. The Company also has experienced delays in the delivery of
subassemblies from these and other subcontractors in the past, which caused
delays in Company shipments. If supplies of such items were not available from
any such source at acceptable quality levels and prices and a relationship
with an alternative supplier could not be developed, shipments of the
Company's products could be interrupted and re-engineering of the affected
product could be required with resulting delays. In addition, from time to
time, the Company has experienced manufacturing difficulties and problems in
its own operations which have caused delays and have required remedial
measures. Such delays, interruption and re-engineering could damage the
Company's relationships with its customers and have a material adverse effect
on the Company's business, financial condition and operating results. See
"Risk Factors--Manufacturing Difficulties; Dependence on Subcontractors;
Single or Limited Sources of Supply."
RESEARCH AND PRODUCT DEVELOPMENT
Because technological change occurs rapidly in the semiconductor industry,
the Company devotes substantial resources to its research and development
programs to maintain its competitiveness. The
36
<PAGE>
Company employed approximately 370 individuals in research and development at
March 31, 1997. The Company pursues the continuous improvement and enhancement
of existing products while simultaneously developing next generation products.
For example, while the performance of current generation wire bonders is being
enhanced in accordance with a specific continuous improvement plan, the
Company is simultaneously developing the 8000 family of next generation wire
bonders, the first models of which are currently scheduled to be introduced in
the second half of calendar 1997. Most of the next generation equipment
presently being developed by the Company is expected to be based on modular,
interchangeable subsystems, including the 8000 control platform, which
management believes will promote more efficient and cost-effective
manufacturing operations, lower inventory levels, improved field service
capabilities and shorter product development cycles, which will allow the
Company to introduce new products more quickly.
The Company's net expenditures for research and development totaled
approximately $21.3 million, $30.9 million, $52.4 million and $22.5 million
during the fiscal years ended September 30, 1994, 1995 and 1996 and the six-
month period ended March 31, 1997, respectively. The Company has received
funding from certain customers and government agencies pursuant to contracts
or other arrangements for the performance of specified research and
development activities. Such amounts are recognized as a reduction of research
and development expense when specified activities have been performed. During
the fiscal years ended September 30, 1994, 1995 and 1996 and the six-month
period ended March 31, 1997, such funding totaled approximately $2.0 million,
$2.8 million, $2.5 million and $370,000, respectively.
COMPETITION
The semiconductor equipment and packaging materials businesses are intensely
competitive. Significant competitive factors in the semiconductor equipment
market include process capability and repeatability, quality and flexibility,
and cost of ownership, including throughput, reliability and automation,
customer support and price. The Company's major equipment competitors include
Shinkawa, Kaijo and ESEC in wire bonders; ESEC, Nichiden, ASM Pacific
Technology and Alphasem in die bonders; and Disco Corporation in dicing saws.
Competitive factors in the semiconductor packaging materials industry include
price, delivery and quality. Significant competitors in the packaging
materials line include Gaiser Tool Co., Small Precision Tools, Inc. and Disco
Corporation with respect to expendable tools and Tanaka Electronic Industries
and Sumitomo Metal Mining in the bonding wire market.
In each of the markets it serves, the Company faces competition and the
threat of competition from established competitors and potential new entrants,
some of which may have greater financial, engineering, manufacturing and
marketing resources than the Company. Some of these competitors are Japanese
companies that have had and may continue to have an advantage over the Company
in supplying products to Japan-based companies due to their preferences to
purchase equipment from Japanese suppliers. The Company expects its
competitors to continue to improve the performance of their current products
and to introduce new products with improved price and performance
characteristics. New product introductions by the Company's competitors or by
new market entrants could cause a decline in sales or loss of market
acceptance of the Company's existing products. If a particular semiconductor
manufacturer or subcontract assembler selects a competitor's product for a
particular assembly operation, the Company may experience difficulty in
selling a product to that company for a significant period of time. Increased
competitive pressure could also lead to intensified price-based competition,
resulting in lower prices which could adversely affect the Company's business,
financial condition and operating results. The Company believes that to remain
competitive it must invest significant financial resources in new product
development and expand its customer service and support worldwide. There can
be no assurance that the Company will be able to compete successfully in the
future.
37
<PAGE>
INTELLECTUAL PROPERTY
Where circumstances warrant, the Company seeks to obtain patents on
inventions governing new products and processes developed as part of its
ongoing research, engineering and manufacturing activities. The Company
currently holds a number of United States patents, some of which have foreign
counterparts. The Company believes that the duration of its patents generally
exceeds the life cycles of the technologies disclosed and claimed therein.
Although the patents it holds and may obtain in the future may be of value,
the Company believes that its success will depend primarily on its
engineering, manufacturing, marketing and service skills.
Although the Company is not aware of any pending lawsuits against the
Company regarding infringement claims with respect to any existing patent or
any other intellectual property right of third parties, the Company has at
times been notified of claims that equipment it has supplied may be infringing
intellectual property rights of third parties. Certain of the Company's
customers have received notices of infringement from Jerome H. Lemelson,
alleging that equipment supplied by the Company, and processes performed by
such equipment, infringe on patents held by Mr. Lemelson. Mr. Lemelson is the
holder of numerous patents with purported broad application across various
industry lines. The Company's situation in this respect is similar to numerous
other companies in the semiconductor, electronics and other industries, whose
customers have received notices of infringement from Mr. Lemelson. He has
brought suit against a number of both domestic and foreign companies,
including those in the automotive and semiconductor industries, and reportedly
has obtained large settlements in certain instances. A number of the Company's
customers have been sued by Mr. Lemelson. Under and subject to the terms of
its agreements with customers, the Company could be required to reimburse
customers for certain damages resulting from these matters and to defend its
customers in patent infringement suits. Certain customers have requested that
the Company defend and indemnify them against the claims of Mr. Lemelson, but,
to date, no customer who has settled with Mr. Lemelson has sought contribution
from the Company. The Company has received opinions from its outside patent
counsel with respect to certain of the Lemelson patents. The Company is not
aware that any equipment marketed by the Company, or processes performed by
such equipment infringe on the Lemelson patents in question and does not
believe that such matters will have a material adverse effect on its business,
financial condition or operating results. However, the ultimate outcome of any
infringement claim affecting the Company is uncertain and there can be no
assurances that the resolution of these matters will not have a material
adverse effect on the Company's business, financial condition and operating
results.
The Company also believes that much of its important technology resides in
its proprietary software and trade secrets. Insofar as the Company relies on
trade secrets and unpatented knowledge, including software, to maintain its
competitive position, there is no assurance that others may not independently
develop similar technologies. In addition, although the Company executes non-
disclosure and non-competition agreements with certain of its employees,
customers, consultants, selected vendors and others, there is no assurance
that such secrecy agreements will not be breached. See "Risk Factors--
Intellectual Property Protection; Notices of Alleged Patent Infringement."
EMPLOYEES
At March 31, 1997, K&S had approximately 2,000 permanent employees, 50
temporary employees and 60 contract personnel worldwide. The only Company
employees represented by a labor union are AFW's approximately 55 employees in
Singapore. K&S considers its employee relations to be good. Competition in the
recruiting of personnel in the semiconductor and semiconductor equipment
industry is intense, particularly with respect to certain engineering
disciplines. The Company believes that its future success will depend in part
on its continued ability to hire and retain qualified management, marketing
and technical employees.
38
<PAGE>
FACILITIES
The Company's major facilities are described in the table below:
<TABLE>
<CAPTION>
LEASE
PRODUCTS EXPIRATION
FACILITY APPROXIMATE SIZE FUNCTION MANUFACTURED DATE
- -------- ---------------- -------- ------------ ----------
<S> <C> <C> <C> <C>
Willow Grove, 214,000 sq.ft.(1) Corporate headquarters, Wire bonders, die N/A
Pennsylvania manufacturing, bonders and TAB
technology center, sales bonders
and service
Yokneam, Israel 48,400 sq.ft (1) Manufacturing, Micro- Capillaries, wedges N/A
Swiss operations and die collets
Haifa, Israel 46,100 sq.ft.(2) Manufacturing, Manual wire bonders, April 2002
technology center, dicing saws and
assembly systems automatic multi-
process assembly
systems
Hong Kong 19,600 sq. ft.(2) Sales and service N/A November 1998
Tokyo, Japan 10,700 sq. ft.(2) Technology center, sales N/A November 1998
and service
Singapore 22,900 sq. ft.(2) Manufacturing, AFW Bonding wire November 1997
operations
Selma, Alabama 25,600 sq. ft.(2) Manufacturing, AFW Bonding wire October 2017
operations
Thalwil, Switzerland 15,100 sq. ft.(2) Manufacturing, AFW Bonding wire Cancelable upon
operations six months' notice
Santa Clara, California 13,600 sq. ft.(2) Manufacturing, Semitec Dicing saw blades October 2003
operations
</TABLE>
- --------
(1) Owned.
(2) Leased.
The Company relocated its Micro-Swiss operations to its newly constructed
facility in Yokneam, Israel in February 1997 from another facility in Israel.
The Company is planning to relocate AFW's Singapore manufacturing facility.
The Company also rents space for sales and service offices in Santa Clara,
California; Mesa, Arizona; Zug, Switzerland; Korea; Taiwan; and Singapore. The
Company believes that its facilities are generally in good condition.
39
<PAGE>
MANAGEMENT
The following table sets forth information regarding the directors and
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
C. Scott Kulicke 47 Chairman of the Board of Directors and Chief
Executive Officer
James W. Bagley 58 Director
Frederick W. Kulicke, Jr. 79 Director
John A. O'Steen 53 Director
Allison F. Page 74 Director
MacDonell Roehm, Jr. 57 Director
Larry D. Striplin, Jr. 67 Director
C. William Zadel 53 Director
Moshe O. Jacobi 54 Senior Vice President and President, Packaging
Materials Group
Morton K. Perchick 59 Executive Vice President
Asuri Raghavan 44 Senior Vice President and President, Equipment
Group
Clifford G. Sprague 53 Senior Vice President and Chief Financial
Officer
Walter Von Seggern 57 Senior Vice President, Marketing
</TABLE>
C. Scott Kulicke has been Chief Executive Officer since 1979 and Chairman of
the Board since 1984. Prior to that, he held a number of executive positions
with the Company. Mr. Kulicke is the son of Frederick W. Kulicke, Jr., a
member of the Board of Directors.
James W. Bagley has been a director of the Company since 1993. He is
Chairman of the Board and Chief Executive Officer of OnTrak Systems, Inc., a
developer and marketer of semiconductor wafer processing equipment. Prior to
joining OnTrak Systems, Inc. in June 1996, Mr. Bagley was Vice Chairman of the
Board of Directors of Applied Materials, Inc., a leading supplier of wafer
fabrication systems to the semiconductor industry. Mr. Bagley also serves on
the Board of Directors of Tencor Instruments and Teradyne, Inc.
Frederick W. Kulicke, Jr. co-founded the Company in 1951, served as its
Chief Executive Officer until his retirement in 1979 and has been a director
since 1956.
John A. O'Steen has been a director of the Company since 1988 and is
Chairman and Chief Executive Officer of Cinmar, L.P., a mail order catalog
company. Prior to joining Cinmar in 1991, he was President, Chief Executive
Officer and a Director of Cincinnati Microwave, Inc., a manufacturer of
electronic products. Mr. O'Steen also serves on the Board of Directors of
International Cornerstone Group Inc. and Bill's Dollar Stores, Inc.
Allison F. Page, a director of the Company since 1962, is a retired partner
of the Philadelphia law firm of Pepper, Hamilton & Scheetz.
MacDonell Roehm, Jr. has been a director of the Company since 1984 and has
been Chairman, President and Chief Executive Officer of Bill's Dollar Stores,
Inc., a chain of retail convenience stores, since 1994. Prior to that, he
served for approximately nine years as Managing Director of AEA Investors,
Inc., a private investment firm.
Larry D. Striplin, Jr. has been a director of the Company since 1995 and is
Chairman of the Board and Chief Executive Officer of Nelson-Brantley Glass
Contractors, Inc., a glass contractor, and Clearview
40
<PAGE>
Properties, a real estate rental company. He was Chairman of the Board of
Circle "S" Industries, Inc. and AFW prior to their acquisition by the Company.
Mr. Striplin also serves on the Board of Directors of Capstone Capital
Corporation and Med Partners, Inc.
C. William Zadel, a director of the Company since 1989, is President and
Chief Executive Officer of Millipore Corporation, a global manufacturer of
filtration and purification products. Prior to joining Millipore Corporation
in 1996, he was President and Chief Executive Officer of Ciba-Corning
Diagnostics Corp., a manufacturer and distributor of medical diagnostic
products. Mr. Zadel also serves on the Board of Directors of Matritech, Inc.
and Zoll Medical Corporation.
Moshe O. Jacobi has served as the Company's Senior Vice President and
President, Packaging Materials Group since July 1995. Prior to that, he served
as Vice President of the Company and Managing Director of Micro-Swiss Ltd., a
wholly-owned subsidiary of the Company since November 1992. He was Division
Director and General Manager of the Micro-Swiss Division from July to November
1992, and from August 1986 to July 1992, he was Deputy Managing Director of
Kulicke and Soffa (Israel) Ltd., a wholly-owned subsidiary of the Company.
Morton K. Perchick joined the Company in 1980 and has served in various
executive positions, most recently as Senior Vice President, prior to his
being appointed Executive Vice President in July 1995.
Asuri Raghavan was promoted to Senior Vice President and President,
Equipment Group in November 1996, having served as Vice President, Marketing
since July 1995 and Vice President of the Wire Bonder Business since December
1993. Prior to that, he served as Vice President, Strategic Development from
June 1991 to 1993, and in various other management capacities since joining
the Company in 1980, except for the period from December 1985 until November
1987 when he was Director, Research and Technology of American Optical.
Clifford G. Sprague joined the Company in March 1989 as Vice President and
Chief Financial Officer and was promoted to Senior Vice President in 1990.
Prior to joining the Company, he served for more than five years as Vice
President and Controller of the Oilfield Equipment Group of NL Industries,
Inc., an oilfield equipment and service company.
Walter Von Seggern joined the Company in September 1992 as Vice President,
Engineering and Technology and was promoted to Senior Vice President,
Engineering and Technology in 1996. Mr. Von Seggern was appointed as Senior
Vice President, Marketing in April 1997. From April 1988 to April 1992, he
worked for M/A-Com, Inc. He was General Manager of M/A-Com's ANZAC, RGH and
Eurotec Divisions from 1990 to 1992 and from 1988 to 1990, he was General
Manager of M/A-Com's Radar Products Division.
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, without par value, and 5,000,000 shares of preferred stock,
without par value. As of April 28, 1997, there were 19,646,307 shares of
Common Stock and no shares of preferred stock outstanding. The following
description of the capital stock of the Company is qualified in its entirety
by reference to the Company's Articles of Incorporation and By-laws, each as
amended, previously filed with the Commission and incorporated by reference
herein.
The holders of the Common Stock are entitled to one vote per share for each
share held of record on all matters submitted to a vote of shareholders.
Subject to preferential rights with respect to any series of preferred stock
that may be issued, holders of the Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors on the
Common Stock out of funds legally available therefor and, in the event of a
liquidation, dissolution or winding-up of the affairs of the Company, are
entitled to share equally and ratably in all remaining assets and funds of the
Company. In the election of directors, the holders of the Common Stock may
multiply the number of votes the shareholder is entitled to cast by the total
number of directors to be elected at a meeting of shareholders and cast the
whole number of votes for one candidate or distribute them among some or all
candidates. The holders of the Common Stock have no preemptive rights or
rights to convert shares of the Common Stock into any other securities and are
not subject to future calls or assessments by the Company. All outstanding
shares of the Common Stock are fully paid and nonassessable by the Company.
The Company, by resolution of the Board of Directors and without any further
vote or action by the shareholders, has the authority to issue preferred stock
in one or more series and to fix from time to time the number of shares to be
included in each such series and the designations, preferences,
qualifications, limitations, restrictions and special or relative rights of
the shares of each such series. The ability of the Company to issue preferred
stock, while providing flexibility in connection with possible acquisitions
and other corporate purposes, could adversely affect the voting power of the
holders of the Common Stock and could have the effect of making it more
difficult for a person to acquire, or of discouraging a person from acquiring,
control of the Company. The Company has no present plans to issue any of the
preferred stock.
Certain provisions of the Company's Articles of Incorporation and By-laws
and Pennsylvania law may discourage certain transactions involving a change in
control of the Company. For example, the Company's Articles of Incorporation
and By-laws contain provisions which (i) classify the Board of Directors into
four classes, with one class being elected each year, (ii) permit the Board to
issue "blank check" preferred stock without shareholder approval and (iii)
prohibit the Company from engaging in certain business combinations with a
holder of 20% or more of the Company's voting securities without supra-
majority board or shareholder approval. Further, under the Pennsylvania
Business Corporation Law, because the Company's By-laws provide for a
classified Board of Directors, shareholders may only remove directors for
cause. These provisions and certain provisions of the Pennsylvania Business
Corporation Law could have the effect of delaying, deferring or preventing a
change in control of the Company and may adversely affect the voting and other
rights of holders of Common Stock.
American Stock Transfer and Trust Company is the transfer agent and
registrar for the Company's Common Stock with offices in New York, New York.
42
<PAGE>
UNDERWRITING
Montgomery Securities, Lehman Brothers Inc. and Smith Barney Inc. (the
"Underwriters") have agreed, subject to the terms and conditions contained in
the Underwriting Agreement (the "Underwriting Agreement") by and among the
Company and the Underwriters, to purchase from the Company the number of
shares of Common Stock as indicated below opposite their respective names at
the public offering price less the underwriting discount set forth on the
cover page of this Prospectus. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent
and that the Underwriters are committed to purchase all of such shares of
Common Stock if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Montgomery Securities..............................................
Lehman Brothers Inc................................................
Smith Barney Inc...................................................
---------
Total............................................................ 3,000,000
=========
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Common Stock to the public on the terms set forth on the cover page
of this Prospectus. The Underwriters may allow to selected dealers a
concession of not more than $ per share, and the Underwriters may allow, and
such dealers may reallow, a concession of not more than $ per share to
certain other dealers. After the shares of Common Stock are released for sale
to the public, the offering price and other selling terms may be changed by
the Underwriters. The Common Stock is offered subject to receipt and
acceptance by the Underwriters, and to certain other conditions, including the
right to reject orders in whole or in part.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a
maximum of 450,000 additional shares of Common Stock to cover over-allotments,
if any, at the same price per share as the initial 3,000,000 shares to be
purchased by the Underwriters. To the extent that the Underwriters exercise
this option, the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with this Offering.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.
Each individual executive officer and director of the Company has agreed
that, subject to certain exceptions, for a period of 75 days after the date of
this Prospectus, he will not, without the prior consent of Montgomery
Securities, offer for sale, sell, transfer or otherwise dispose of any shares
of Common Stock of the Company. In addition, the Company has agreed that,
subject to certain exceptions, for a period of 90 days after the date of this
Prospectus, it will not, without the prior written consent of Montgomery
Securities, directly or indirectly issue, offer to sell, sell, distribute or
otherwise dispose of any shares of its Common Stock or securities convertible
into or exchangeable for its Common Stock or other equity security.
The Underwriters have advised the Company that pursuant to rules promulgated
by the Commission, certain persons participating in this Offering may engage
in transactions, including stabilizing bids, syndicate covering transactions
or the imposition of penalty bids, which may have the effect of stabilizing or
maintaining the market price of the Common Stock at a level above that which
43
<PAGE>
might otherwise prevail in the open market. A "stabilizing bid" is a bid for
or the purchase of the Common Stock on behalf of the Underwriters for the
purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with the Offering. A "penalty bid" is an
arrangement permitting the Underwriters to reclaim the selling concession
otherwise accruing to an Underwriter or syndicate member in connection with
the Offering if the Common Stock originally sold by such Underwriter or
syndicate member is repurchased by the Underwriters in syndicate covering
transactions, in stabilization transactions or otherwise. The Underwriters
have advised the Company that such transactions may be effected on the Nasdaq
National Market or otherwise and, if commenced, may be discontinued at any
time.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Drinker Biddle & Reath LLP, Philadelphia,
Pennsylvania, counsel for the Company. Certain legal matters relating to the
offering of the Common Stock will be passed upon for the Underwriters by
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California, who may rely on the opinion of Drinker Biddle & Reath LLP as to
certain matters relating to the laws of Pennsylvania.
EXPERTS
The consolidated financial statements of the Company as of September 30,
1995 and 1996, and for each of the three fiscal years ended September 30, 1996
incorporated in this Prospectus by reference to the Annual Report on Form 10-K
for the year ended September 30, 1996, except as they relate to the results of
operations and cash flows for the fiscal year ended September 30, 1994, of
Kulicke and Soffa (Israel) Ltd., a wholly-owned subsidiary of the Company,
have been audited by Price Waterhouse LLP, independent accountants, and
insofar as they relate to the results of operations and cash flows of Kulicke
and Soffa (Israel) Ltd. for the fiscal year ended September 30, 1994, have
been audited by Luboshitz, Kasierer & Co., independent accountants, as set
forth in their respective reports thereon incorporated herein by reference.
Such consolidated financial statements have been so incorporated in reliance
on the reports of such independent accountants given on authority of such
firms as experts in accounting and auditing.
44
<PAGE>
Wedge Used to Feed Wire Through Wedge Bonders
[ART WORK APPEARS HERE]
Pick-up Tool Used to Handle Individual Die
[ART WORK APPEARS HERE]
Capillary Used to Feed Wire Through Ball Bonders
[ART WORK APPEARS HERE]
PACKAGING MATERIALS
Kulicke and Soffa currently offers a range of packaging materials to
semiconductor device assemblers which it sells under the brand name American
Fine Wire, Micro-Swiss and Semitec. The Micro-Swiss family of expendable
tools includes die collets, capillaries and wedges. Die collets are used to
pick up, place and bond the die to the package on which it is mounted during
die bonding. Capillaries and wedges are used to feed out, attach and cut the
wires used in wire bonding. American Fine Wire is a leading supplier of very
fine (typically 0.001 inches in diameter) gold and aluminum wire used in the
wire bonding process. AFW produces wire to a wide range of specifications,
which can satisfy many wire bonding applications. Semitec manufactures saw
blades used in the wafer dicing process.
Aluminum Bonding Wire
[ART WORK APPEARS HERE]
Gold Bonding Wire
[ART WORK APPEARS HERE]
Saw Blade
[ART WORK APPEARS HERE]
[LOGOS OF MICRO-SWISS, SEMITEC AND AMERICAN FINE WIRE CORPORATION APPEARS
HERE]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this of-
fering other than those contained or incorporated by reference in this Prospec-
tus, and, if given or made, such information or representations must not be re-
lied upon as having been authorized by the Company or any of the Underwriters.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the shares of Common Stock to which it
relates or an offer to, or a solicitation of, any person in any jurisdiction
where such an offer or solicitation would be unlawful. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the Com-
pany or that the information contained herein is correct as of any time subse-
quent to the date hereof.
-------------------
TABLE OF CONTENTS
-------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Additional Information................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 15
Price Range of Common Stock.............................................. 15
Capitalization........................................................... 16
Dividend Policy.......................................................... 16
Selected Consolidated Financial Data..................................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 29
Management............................................................... 40
Description of Capital Stock............................................. 42
Underwriting............................................................. 43
Legal Matters............................................................ 44
Experts.................................................................. 44
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,000,000 SHARES
[LOGO OF KULICKE & SOFFA APPEARS HERE]
COMMON STOCK
----------------
PROSPECTUS
----------------
MONTGOMERY SECURITIES
LEHMAN BROTHERS
SMITH BARNEY INC.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses of the sale and
distribution of the securities being registered, all of which are being borne
by the Company. All of such expenses are estimates, except the SEC
registration fee, NASD filing fee and Nasdaq listing fee.
<TABLE>
<S> <C>
SEC registration fee(1)....................................... $ 3,546
NASD filing fee............................................... 1,170
Nasdaq listing fee............................................ --
Legal fees and expenses....................................... 125,000
Accounting fees and expenses.................................. 50,000
Printing expenses............................................. 100,000
Blue Sky fees and expenses.................................... 3,000
Transfer Agent and Registrar fees and expenses................ 15,000
Miscellaneous expenses........................................ 52,284
--------
Total....................................................... $350,000(2)
========
</TABLE>
(1) Excludes $15,226.79 that was paid with earlier filings of this
Registration Statement.
(2) In connection with the original filing of this Registration Statement and
the amendments filed prior to Amendment No. 4 thereto, the Company
incurred approximately $630,000 of expenses, all of which were written off
by the Company in the first quarter of fiscal 1996. The expenses listed in
the above table do not include the $630,000 that was previously expensed.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's By-laws require the Company to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed proceeding by reason of the fact that he or she is or was a director
or officer of the Company or is or was serving at the request of the Company
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such proceeding if he or
she acted in good faith and in a manner he or she reasonably believed to be
in, or not opposed to, the best interests of the Company, and, with respect to
any criminal proceeding, had no reasonable cause to believe his or her conduct
was unlawful. Such indemnification as to expenses is mandatory to the extent
the individual is successful on the merits or otherwise in defense of the
matter or in defense of any claim, issue or matters therein. In addition,
Pennsylvania law permits the Company to provide similar indemnification to
employees and agents who are not directors or officers. The determination of
whether an individual meets the applicable standard of conduct may be made by
the disinterested directors, independent legal counsel or the shareholders.
Pennsylvania law also permits indemnification in connection with a proceeding
brought by or in the right of the Company to procure a judgment in its favor.
Reference is made to Section 11 of the form of Underwriting Agreement filed as
Exhibit 1.1 to this Registration Statement for certain provisions relating to
indemnification of the directors and certain officers of the Company. Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed 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.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM
------- ----
<C> <S>
*1.1 Form of Underwriting Agreement.
*5.1 Opinion of Drinker Biddle & Reath LLP.
*23.1 Consent of Price Waterhouse LLP (Independent Accountants).
*23.2 Consent of Luboshitz, Kasierer & Co. (Independent Accountants).
23.3 Consent of Drinker Biddle & Reath LLP (included in Exhibit 5.1).
24.1 Powers of Attorney of James W. Bagley, Frederick W. Kulicke, Jr., John
A. O'Steen, Allison F. Page, MacDonell Roehm, Jr., Larry D. Striplin,
Jr. and C. William Zadel.
</TABLE>
- --------
* Filed herewith. All other exhibits have been previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities Act
of 1933, as amended (the "Securities Act"), the information omitted from the
form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) That, insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, 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.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, HEREUNTO DULY AUTHORIZED IN WILLOW GROVE, COMMONWEALTH OF
PENNSYLVANIA, ON THE 29TH DAY OF APRIL, 1997.
KULICKE AND SOFFA INDUSTRIES, INC.
By: /s/ C. Scott Kulicke
---------------------------------
C. SCOTT KULICKECHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ C. Scott Kulicke Chairman of the April 29, 1997
- ------------------------------------- Board, Director and
C. SCOTT KULICKE Chief Executive
(PRINCIPAL EXECUTIVE OFFICER) Officer
/s/ Clifford G. Sprague Senior Vice April 29, 1997
- ------------------------------------- President and Chief
CLIFFORD G. SPRAGUE Financial Officer
(PRINCIPAL FINANCIAL OFFICER)
/s/ Curtis A. Massey Vice President and April 29, 1997
- ------------------------------------- Corporate
CURTIS A. MASSEY Controller
(PRINCIPAL ACCOUNTING OFFICER)
* Director April 29, 1997
- -------------------------------------
JAMES W. BAGLEY
* Director April 29, 1997
- -------------------------------------
FREDERICK W. KULICKE, JR.
* Director April 29, 1997
- -------------------------------------
JOHN A. O'STEEN
* Director April 29, 1997
- -------------------------------------
ALLISON F. PAGE
* Director April 29, 1997
- -------------------------------------
MACDONELL ROEHM, JR.
* Director April 29, 1997
- -------------------------------------
LARRY D. STRIPLIN, JR.
* Director April 29, 1997
- -------------------------------------
C. WILLIAM ZADEL
*/s/ C. Scott Kulicke April 29, 1997
- -------------------------------------
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
1.1 Form of Underwriting Agreement.
5.1 Opinion of Drinker Biddle & Reath LLP.
23.1 Consent of Price Waterhouse LLP (Independent Accountants).
23.2 Consent of Luboshitz, Kasierer & Co. (Independent Accountants).
</TABLE>
<PAGE>
EXHIBIT 1.1
3,000,000 Shares
KULICKE AND SOFFA INDUSTRIES, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
_______, 1997
MONTGOMERY SECURITIES
LEHMAN BROTHERS INC.
SMITH BARNEY INC.
As Representatives of the several Underwriters
c/o MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
SECTION 1
INTRODUCTORY
------------
Kulicke and Soffa Industries, Inc., a Pennsylvania corporation (the
"Company"), proposes to issue and sell an aggregate of 3,000,000 shares (the
"Firm Common Shares") of its authorized but unissued Common Stock, without par
value (the "Common Stock"), to the several underwriters named in Schedule A
annexed hereto (the "Underwriters"), for whom you are acting as Representatives.
In addition, the Company proposes to grant to the Underwriters an option to
purchase up to an aggregate of 450,000 additional shares of Common Stock (the
"Optional Common Shares"), as provided in Section 5 hereof. The Firm Common
Shares and, to the extent such option is exercised, the Optional Common Shares
are hereinafter collectively referred to as the "Common Shares."
<PAGE>
You have advised the Company that the Underwriters propose to make a public
offering of the Common Shares on the effective date of the registration
statement hereinafter referred to, or as soon thereafter as in your judgment is
advisable.
The Company hereby confirms its agreement with respect to the purchase of
the Common Shares by the Underwriters as follows:
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to the several Underwriters that:
(a) Amendment No. 4 to a registration statement on Form S-3 (File No. 33-
69734) with respect to the Common Shares has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and has been
filed with the Commission. The Company has prepared and has filed or proposes to
file prior to the effective date of such registration statement an amendment or
amendments to such registration statement, which amendment or amendments have
been or will be similarly prepared. There have been delivered to you three
copies of Amendment No. 4 to such registration statement and all subsequent
amendments, together with three copies of each exhibit filed therewith, as filed
with the Commission. Conformed copies of Amendment No. 4 to such registration
statement and all subsequent amendments (but without exhibits) and of the
related preliminary prospectus have been delivered to you in such reasonable
quantities as you have requested for each of the Underwriters. The Company will
next file with the Commission one of the following: (i) prior to effectiveness
of such registration statement, a further amendment thereto, including the form
of final prospectus, (ii) a final prospectus in accordance with Rules 430A and
424(b) of the Rules and Regulations, or (iii) if and only if so requested by
you, a term sheet (the "Term Sheet") as described in and in accordance with
Rules 434 and 424(b) of the Rules and Regulations. As filed, such amendment and
form of final prospectus, such final prospectus or such Term Sheet shall include
all Rule 430A Information (as hereinafter defined) and, except to the extent
that you shall agree in writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the date and time that this
Agreement was executed and delivered by the parties hereto, or, to the extent
not completed at such date and time, shall contain only such specific additional
information and other changes (beyond that contained in the latest preliminary
prospectus) as the Company shall have previously advised you in writing would be
included or made therein.
The term "Registration Statement" as used in this Agreement shall mean such
registration statement at the time such registration statement becomes effective
and, in the event any post-effective
-2-
<PAGE>
amendment thereto becomes effective prior to the First Closing Date (as
hereinafter defined), shall also mean such registration statement as so amended;
provided, however, that such term shall also include all Rule 430A Information
deemed to be included in such registration statement at the time such
registration statement becomes effective as provided by Rule 430A of the Rules
and Regulations. The term "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in the preceding paragraph and any preliminary prospectus
included in the Registration Statement at the time it becomes effective that
omits Rule 430A Information. The term "Prospectus" as used in this Agreement
shall mean (i) the prospectus relating to the Common Shares in the form in which
it is first filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations or (ii) if a Term Sheet is not used and no filing pursuant to Rule
424(b) of the Rules and Regulations is required, the form of final prospectus
included in the Registration Statement at the time such registration statement
becomes effective or (iii) if a Term Sheet is used, the Term Sheet in the form
in which it is first filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations, together with the Preliminary Prospectus included in the
Registration Statement at the time it becomes effective. The term "Rule 430A
Information" means information with respect to the Common Shares and the
offering thereof permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A of the Rules and Regulations. Any
reference herein to any Preliminary Prospectus or the Prospectus shall be deemed
to refer to and include the documents incorporated by reference therein (the
"Incorporated Documents") pursuant to Form S-3 under the Act, as of the date of
such Preliminary Prospectus or Prospectus, as the case may be.
(b) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus, and each Preliminary Prospectus has conformed
in all material respects to the requirements of the Act and the Rules and
Regulations and, as of its date, has not included 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; and at the time the Registration Statement becomes
effective, and at all times subsequent thereto up to and including each Closing
Date hereinafter mentioned, the Registration Statement and the Prospectus, and
any amendments or supplements thereto, will contain all material statements and
information required to be included therein by the Act and the Rules and
Regulations and will in all material respects conform to the requirements of the
Act and the Rules and Regulations, and neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, will 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;
provided, however, no representation or warranty contained in this subsection
2(b) shall be applicable to information contained in or omitted from any
Preliminary Prospectus, the Registration Statement, the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter,
directly or through the Representatives, specifically for use in the preparation
thereof. The documents incorporated by reference in the Prospectus, when they
were filed with the Commission, conformed in all material respects to the
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations of the Commission thereunder, and none of
such documents contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
-3-
<PAGE>
(c) The Company does not own or control, directly or indirectly, any
significant subsidiary (within the meaning of Rule 1-02 of Regulation S-X)
corporation, association or other entity which holds assets or properties
(including intangible rights) or through which sales are made that could
reasonably be expected to be material to its business other than the
subsidiaries listed on Schedule B to this Agreement (the "Material
Subsidiaries"). The Company and each of its Material Subsidiaries have been duly
incorporated and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation, with full power and
authority (corporate and other) to own and lease their properties and conduct
their respective businesses as described in the Prospectus; the Company owns
directly or indirectly all of the outstanding capital stock of its Material
Subsidiaries free and clear of all claims, liens, charges and encumbrances; the
Company and each of its Material Subsidiaries are in possession of and operating
in compliance with all authorizations, licenses, permits, consents, certificates
and orders material to the conduct of their respective businesses, all of which
are valid and in full force and effect; the Company and each of its Material
Subsidiaries are duly qualified to do business and in good standing as foreign
corporations in each jurisdiction in which the ownership or leasing of
properties or the conduct of their respective businesses requires such
qualification, except for jurisdictions in which the failure to so qualify would
not have a material adverse effect upon the Company and its subsidiaries taken
as a whole; and no proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification.
(d) The Company has an authorized and outstanding capital stock as set
forth under the heading "Capitalization" in the Prospectus; the issued and
outstanding shares of Common Stock have been duly authorized and validly issued,
are fully paid and nonassessable, are duly listed on the Nasdaq National Market,
have been issued in compliance with all federal and state securities laws, were
not issued in violation of or subject to any preemptive rights or other rights
to subscribe for or purchase securities, and conform to the description thereof
contained in the Prospectus, including in the Incorporated Documents. All issued
and outstanding shares of capital stock of each Material Subsidiary of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable, and are owned directly or indirectly beneficially by the Company
free and clear of all liens, encumbrances, equities, claims, security interests,
voting trusts or other defects of title whatsoever. Except as disclosed in or
contemplated by the Prospectus and the financial statements of the Company, and
the related notes thereto, included in or incorporated by reference in the
Prospectus, neither the Company nor any Material Subsidiary has outstanding any
options to purchase, or any preemptive rights or other rights to subscribe for
or to purchase, any securities or obligations convertible into, or any contracts
or commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations. The description of the
Company's stock option, stock bonus and other stock plans or arrangements, and
the options or other rights granted and exercised thereunder, set forth in or
incorporated by reference in the Prospectus accurately and fairly presents the
information required to be shown with respect to such plans, arrangements,
options and rights.
(e) The Common Shares to be sold by the Company have been duly authorized
and, when issued, delivered and paid for in the manner set forth in this
Agreement, will be duly authorized, validly
-4-
<PAGE>
issued, fully paid and nonassessable, and will conform to the description
thereof contained in the Prospectus, including in the Incorporated Documents. No
preemptive rights or other rights to subscribe for or purchase exist with
respect to the issuance and sale of the Common Shares by the Company pursuant to
this Agreement. No shareholder of the Company has any right to require the
Company to register the sale of any shares owned by such shareholder under the
Act in the public offering contemplated by this Agreement. No further approval
or authority of the shareholders or the Board of Directors of the Company will
be required for the issuance and sale of the Common Shares to be sold by the
Company as contemplated herein.
(f) The Company has full legal right, power and authority to enter into
this Agreement and perform the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Company and constitutes
a valid and binding obligation of the Company in accordance with its terms. The
making and performance of this Agreement by the Company and the consummation of
the transactions herein contemplated will not violate any provision of the
articles of incorporation or bylaws, or other organizational documents, of the
Company or any of its subsidiaries, and will not conflict with, result in the
breach or violation of, or constitute, either by itself or upon notice or the
passage of time or both, a default under any agreement, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or any of its respective properties may be bound or affected,
any statute or any authorization, judgment, decree, order, rule or regulation of
any court or any regulatory body, administrative agency or other governmental
body applicable to the Company or any of its subsidiaries or any of their
respective properties. No consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental body is
required for the execution and delivery of this Agreement or the consummation of
the transactions contemplated by this Agreement, except for compliance with the
Act, the Blue Sky laws applicable to the public offering of the Common Shares by
the several Underwriters and the clearance of such offering with the National
Association of Securities Dealers, Inc. (the "NASD").
(g) Price Waterhouse LLP and Luboshitz, Kaiserer & Co., who have expressed
their opinions with respect to the financial statements and schedules of the
Company on a consolidated basis and Kulicke and Soffa (Israel) Ltd.,
respectively, included in or incorporated by reference in the Prospectus and in
the Registration Statement, are independent accountants as required by the Act
and the Rules and Regulations.
(h) The financial statements and schedules of the Company and its
subsidiaries and the related notes thereto, included in or incorporated by
reference in the Registration Statement and the Prospectus, present fairly the
financial position of the Company and its subsidiaries
-5-
<PAGE>
as of the respective dates of such financial statements and schedules, and the
results of operations and cash flows of the Company and its subsidiaries for the
respective periods covered thereby. Such statements, schedules and related notes
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis as certified by the independent accountants named
in subsection 2(g). No other financial statements or schedules are required to
be included in or incorporated by reference in the Registration Statement. The
selected financial data set forth in the Prospectus under the captions
"Prospectus Summary -- Summary Consolidated Financial Data," "Capitalization"
and "Selected Consolidated Financial Data" fairly present the information set
forth therein on the basis stated in the Registration Statement.
(i) Except as disclosed in the Prospectus, and except as to defaults which
individually or in the aggregate would not be material to the Company and its
subsidiaries taken as a whole, neither the Company nor any of its subsidiaries
is in violation or default of any provision of its articles of incorporation or
bylaws, or other organizational documents, or is in breach of or default with
respect to any provision of any agreement, judgment, decree, order, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument
to which it is a party or by which it or any of its properties are bound; and
there does not exist any state of facts which constitutes such an event of
default on the part of the Company or any such subsidiary as defined in such
documents or which, with notice or lapse of time or both, would constitute such
an event of default.
(j) There are no contracts or other documents required to be described in
the Registration Statement or to be filed as exhibits to the Registration
Statement by the Act or by the Rules and Regulations or to the Incorporated
Documents by the Exchange Act or the rules and regulations thereunder which have
not been described or filed as required. The contracts so described in the
Prospectus are in full force and effect on the date hereof; and neither the
Company nor any of its subsidiaries, nor to the best of the Company's knowledge,
any other party is in breach of or default under any of such contracts.
(k) Except as disclosed in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or threatened to which the
Company or any of its subsidiaries is or may be a party or of which property
owned or leased by the Company or any of its subsidiaries is or may be the
subject, or related to environmental or discrimination matters, which actions,
suits or proceedings might, individually or in the aggregate, prevent or
adversely affect the transactions contemplated by this Agreement
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<PAGE>
or result in a material adverse change in the condition (financial or
otherwise), properties, business, results of operations or prospects of the
Company and its subsidiaries taken as a whole; and no labor disturbance by the
employees of the Company or any of its subsidiaries exists or is imminent or has
been threatened which might be expected to affect adversely such condition,
properties, business, results of operations or prospects. Neither the Company
nor any of its subsidiaries is a party or subject to the provisions of any
material injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body.
(l) The Company has good and marketable title to all the properties and
assets reflected as owned in the financial statements hereinabove described (or
elsewhere in the Prospectus), and is subject to no lien, mortgage, pledge,
charge or encumbrance of any kind except (i) those, if any, reflected in such
financial statements (or elsewhere in the Prospectus), or (ii) those which are
not material in amount and do not adversely affect the use made or proposed to
be made of such property by the Company and its subsidiaries. The Company holds
its leased properties under valid and binding leases, with such exceptions as
are not materially significant in relation to the business of the Company.
Except as disclosed in the Prospectus, the Company owns or leases all such
properties as are necessary to its operations as now conducted or as proposed to
be conducted.
(m) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus: (i) the Company and its
subsidiaries have not incurred any material liabilities or obligations,
indirect, direct or contingent, or entered into any material verbal or written
agreement or other transaction which is not in the ordinary course of business
or which could result in a material reduction in the future earnings of the
Company and its subsidiaries taken as a whole; (ii) the Company and its
subsidiaries have not sustained any material loss or interference with their
respective businesses or properties from fire, flood, windstorm, accident or
other calamity, whether or not covered by insurance; (iii) the Company has not
paid or declared any dividends or other distributions with respect to its
capital stock and the Company and its subsidiaries are not in default in the
payment of principal or interest on any outstanding debt obligations; (iv) there
has not been any change in the capital stock (other than upon the sale of the
Common Shares hereunder or the exercise of outstanding stock options) or
indebtedness material to the Company and its subsidiaries taken as a whole
(other than in the ordinary course of business); and (v) there has not been any
material adverse change in the condition (financial or otherwise), business,
properties, results of operations or prospects of the Company and its
subsidiaries taken as a whole.
(n) Except as disclosed in the Prospectus: (i) the Company and its
subsidiaries have sufficient trademarks, trade names, patent rights, mask works,
copyrights, licenses, approvals and governmental authorizations to conduct their
businesses as now conducted; (ii) the expiration of any trademarks, trade names,
patent rights, mask works, copyrights, licenses, approvals or governmental
authorizations would not have a material adverse effect on the condition
(financial or otherwise), business, results of operations or prospects of the
Company and its subsidiaries taken as a whole; and (iii) the Company has no
knowledge of any material infringement by it or its subsidiaries of any
trademark, trade name right, patent right, mask work, copyright, license, trade
secret or other similar rights of others, and there is no claim being made
against the Company or its subsidiaries regarding trademark, trade name, patent,
mask work, copyright, license, trade secret or other infringement that could
have a material adverse effect on the
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<PAGE>
condition (financial or otherwise), business, results of operations or prospects
of the Company and its subsidiaries taken as a whole.
(o) The Company has not been advised, and has no reason to believe,
that either it or any of its subsidiaries is not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and regulations, except
where failure to be so in compliance would not materially adversely affect the
condition (financial or otherwise), business, results of operations or prospects
of the Company and its subsidiaries taken as a whole. No property which is
owned, leased or occupied by the Company has been designated as a Superfund site
pursuant to the Comprehensive Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. (S) 9601, et seq.), or otherwise designated as a
contaminated site under applicable state or local law.
(p) The Company and its subsidiaries have filed all required federal,
state and foreign income and franchise tax returns and have paid all taxes shown
as due thereon; and the Company has no knowledge of any tax deficiency which has
been or might be asserted or threatened against the Company or its subsidiaries
which could materially and adversely affect the business, operations or
properties of the Company and its subsidiaries taken as a whole.
(q) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(r) The Company has not distributed and will not distribute prior to
the First Closing Date or any Subsequent Closing Date any offering material in
connection with the offering and sale of the Common Shares other than the
Prospectus, the Registration Statement and the other materials permitted by the
Act .
(s) The Company and its subsidiaries maintain insurance of the types
and in the amounts generally deemed adequate for its business, all of which
insurance is in full force and effect.
(t) Neither the Company nor any of its subsidiaries has, directly or
indirectly, at any time during the last five years (i) made any unlawful
contribution to any candidate for foreign office, or failed to disclose fully
any contribution in violation of law, or (ii) made any payment to any federal or
state governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by the
laws of the United States or any jurisdiction thereof.
(u) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which might be
reasonably expected to cause or result in stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of the Common Shares.
(v) Each officer and director of the Company listed in the
Registration Statement under the caption "Management," has agreed in writing
that such person will not, for a period of seventy-five (75) days after the date
of the Prospectus, offer to sell, contract to sell, or otherwise dispose of any
shares of Common Stock or securities convertible into or exchangeable for shares
of Common Stock now
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<PAGE>
owned or hereafter acquired directly by such person or with respect to which
such person has or hereafter acquires the power of disposition, otherwise than
by will, pursuant to the laws of descent and distribution, the surrender of
shares in payment of the exercise price of options under the Company's option
plans, or with the prior written consent of Montgomery Securities, which consent
may be withheld at the sole discretion of Montgomery Securities.
(w) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(x) 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 to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them
required to be disclosed in the Registration Statement or Prospectus, that are
not so disclosed.
(y) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba.
(z) The Common Shares have been reserved for inclusion, subject to
official notice of issuance, in the Nasdaq National Market.
SECTION 3
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[THIS SECTION IS INTENTIONALLY LEFT BLANK.]
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS
--------------------------------------------------
The Representatives, on behalf of the several Underwriters, represent
and warrant to the Company that the information set forth (i) on the cover page
of the Prospectus with respect to price, underwriting discounts and commissions
and terms of offering and (ii) under "Underwriting" in the Prospectus was
furnished to the Company by and on behalf of the Underwriters for use in
connection with the preparation of the Registration Statement and the Prospectus
and is correct in all material respects. The Representatives represent and
warrant that they have been authorized by each of the other Underwriters as the
Representatives to enter into this Agreement on its behalf and to act for it in
the manner herein provided.
SECTION 5
PURCHASE, SALE AND DELIVERY OF COMMON SHARES
--------------------------------------------
On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to the Underwriters 3,000,000 of the Firm Common
Shares. The Underwriters agree, severally and not jointly, to purchase from the
Company the number of Firm Common Shares described below. The purchase price per
share to be paid by the several Underwriters to the Company shall be $_____ per
share.
The obligation of each Underwriter to the Company shall be to purchase
from the Company that number of shares which is set forth opposite the name of
such Underwriter in Schedule A.
Delivery of certificates for the Firm Common Shares to be purchased by
the Underwriters and payment therefor shall be made at the offices of Montgomery
Securities, 600 Montgomery Street, San
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Francisco, California (or such other place as may be agreed upon by the Company
and the Representatives) at such time and date, not later than the third full
business day following the first date that any of the Common Shares are released
by you for sale to the public, as you shall designate by at least 48 hours prior
notice to the Company (or at such other time and date, not later than one week
after such third full business day, as may be agreed upon by the Company and the
Underwriters) (the "First Closing Date"); provided, however, that if the
Prospectus is at any time prior to the First Closing Date recirculated to the
public, the First Closing Date shall occur upon the later of the third full
business day following the first date that any of the Common Shares are released
by you for sale to the public or the date that is 48 hours after the date that
the Prospectus has been so recirculated.
Delivery of certificates for the Firm Common Shares shall be made by or
on behalf of the Company to you, for the respective accounts of the Underwriters
with respect to the Firm Common Shares to be sold by the Company against payment
by you, for the accounts of the several Underwriters, of the purchase price
therefor by certified or official bank checks payable in next day funds or by
wire transfer to the order of the Company. The certificates for the Firm Common
Shares shall be registered in such names and denominations as you shall have
requested at least two full business days prior to the First Closing Date, and
shall be made available for checking and packaging on the business day preceding
the First Closing Date at a location in New York, New York, as may be designated
by you. 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.
Not later than 12:00 p.m. on the second business day following the date
the Common Shares are released by the Underwriters for sale to the public, the
Company shall deliver or cause to be delivered to the Underwriters copies of the
Prospectus in such quantities and at such places as the Representatives shall
request.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of 450,000 Optional
Common Shares at the purchase price per share to be paid for the Firm Common
Shares, for use solely in covering any over-allotments made by you for the
account of the Underwriters in the sale and distribution of the Firm Common
Shares. The option granted hereunder may be exercised at any time on or before
the thirtieth (30th) day after the first date that any of the Common Shares are
released by you for sale to the public, upon notice by you to the Company
setting forth the aggregate number of Optional Common Shares as to which the
Underwriters are exercising the option, the names and denominations in which the
certificates for such shares are to be registered and the time and place at
which such certificates will be delivered. The time of any delivery of Optional
Common Shares (which may not be earlier than the First Closing Date), being
herein referred to as a "Subsequent Closing Date," shall be determined by you,
but if at any time other than the First Closing Date shall be three business
days after delivery of such notice of exercise. The number of Optional Common
Shares to be purchased by each Underwriter shall be determined by multiplying
the number of Optional Common Shares to be sold by the Company pursuant to such
notice of exercise by a fraction, the numerator of which is the
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number of Firm Common Shares to be purchased by such Underwriter as set forth
opposite its name in Schedule A and the denominator of which is the total number
of Firm Common Shares (subject to such adjustments to eliminate any fractional
share purchases as you in your discretion may make). Certificates for the
Optional Common Shares will be made available for checking and packaging on the
business day preceding a Subsequent Closing Date at a location in New York, New
York, as may be designated by you. The manner of payment for and delivery of the
Optional Common Shares shall be the same as for the Firm Common Shares purchased
from the Company as specified in the two preceding paragraphs. At any time
before lapse of the option, you may cancel such option by giving written notice
of such cancellation to the Company. If the option is canceled or expires
unexercised in whole or in part, the Company will deregister under the Act the
number of Optional Common Shares as to which the option has not been exercised.
You have advised the Company that each Underwriter has authorized you to
accept delivery of its Common Shares, to make payment and to evidence receipt
therefor. You, individually and not as the Representatives of the Underwriters,
may (but shall not be obligated to) make payment for any Common Shares to be
purchased by any Underwriter whose funds shall not have been received by you by
the First Closing Date or a Subsequent Closing Date, as the case may be, for the
account of such Underwriter, but any such payment shall not relieve such
Underwriter from any of its obligations under this Agreement.
Subject to the terms and conditions hereof, the Underwriters propose to
make a public offering of their respective portions of the Common Shares as soon
after the effective date of the Registration Statement as in the judgment of the
Representatives is advisable and at the public offering price set forth on the
cover page of and on the terms set forth in the Prospectus.
SECTION 6
COVENANTS OF THE COMPANY
------------------------
The Company covenants and agrees that:
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(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective. If the Registration Statement has become or becomes effective
pursuant to Rule 430A of the Rules and Regulations, or the filing of the
Prospectus is otherwise required under Rule 424(b) of the Rules and Regulations,
the Company will file the Prospectus, properly completed, pursuant to the
applicable paragraph of Rule 424(b) of the Rules and Regulations within the time
period prescribed and will provide evidence satisfactory to you of such timely
filing. The Company will promptly advise you in writing (i) of the receipt of
any comments of the Commission, (ii) of any request of the Commission for
amendment of or supplement to the Registration Statement (either before or after
it becomes effective), any Preliminary Prospectus or the Prospectus or for
additional information, (iii) when the Registration Statement shall have become
effective and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the institution
of any proceedings for that purpose. If the Commission shall enter any such stop
order at any time, the Company will use its best efforts to obtain the lifting
of such order at the earliest possible moment. The Company will not file any
amendment or supplement to the Registration Statement (either before or after it
becomes effective), any Preliminary Prospectus or the Prospectus of which you
have not been furnished with a copy a reasonable time prior to such filing or to
which you reasonably object or which is not in compliance with the Act and the
Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon your request, any amendments or supplements to the Registration Statement
or the Prospectus which in your judgment may be necessary or advisable to enable
the several Underwriters to continue the distribution of the Common Shares and
will use its best efforts to cause the same to become effective as promptly as
possible. The Company will fully and completely comply with the provisions of
Rule 430A of the Rules and Regulations with respect to information omitted from
the Registration Statement in reliance upon such Rule.
(c) If at any time within the nine-month period referred to in Section
10(a)(3) of the Act during which a prospectus relating to the Common Shares is
required to be delivered under the Act any event occurs, as a result of which
the Prospectus, including any amendments or supplements, would 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 is necessary at any time to amend the Prospectus, including any amendments or
supplements, to comply with the Act or the Rules and Regulations, the Company
will promptly advise you thereof and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will correct
such statement or omission or an amendment or supplement which will effect such
compliance and will use its best efforts to cause the same to become effective
as soon as possible; and, in case any Underwriter is required to deliver a
prospectus after such nine-month period, the Company upon request, but at the
expense of such Underwriter, will promptly prepare such amendment or amendments
to the Registration Statement and such Prospectus or Prospectuses as may be
necessary to permit compliance with the requirements of Section 10(a)(3) of the
Act.
(d) As soon as practicable, but not later than 45 days after the end
of the first quarter ending after one year following the "effective date of the
Registration Statement" (as defined in Rule 158(c) of the Rules and
Regulations), the Company will make generally available to its security holders
an earnings
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<PAGE>
statement (which need not be audited) covering a period of 12 consecutive months
beginning after the effective date of the Registration Statement which will
satisfy the provisions of the last paragraph of Section 11(a) of the Act.
(e) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the Company, at
its expense, but only for the nine-month period referred to in Section 10(a)(3)
of the Act, will furnish to you or mail to your order copies of the Registration
Statement, the Prospectus, the Preliminary Prospectus and all amendments and
supplements to any such documents in each case as soon as available and in such
quantities as you may request, for the purposes contemplated by the Act.
(f) The Company shall cooperate with you and your counsel in order to
qualify or register the Common Shares for sale under (or obtain exemptions from
the application of) the Blue Sky laws of such jurisdictions as you designate,
will comply with such laws and will continue such qualifications, registrations
and exemptions in effect so long as reasonably required for the distribution of
the Common Shares. The Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified or where it would be subject to
taxation as a foreign corporation. The Company will advise you promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Common Shares for offering, sale or trading in any jurisdiction
or any initiation or threat of any proceeding for any such purpose, and in the
event of the issuance of any order suspending such qualification, registration
or exemption, the Company, with your cooperation, will use its best efforts to
obtain the withdrawal thereof.
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request of the Representatives, to each
of the other Underwriters: (i) 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 for the year then ended and the
opinion thereon of the Company's independent public accountants; (ii) 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, Report on Form 8-K or other
report filed by the Company with the Commission, the NASD or any securities
exchange; and (iii) as soon as available, copies of any report or communication
of the Company mailed generally to holders of its Common Stock.
(h) During the period of 90 days after the date of the Prospectus,
without the prior written consent of Montgomery Securities (which consent may be
withheld at the sole discretion of Montgomery Securities), the Company will not
issue, offer, sell, grant options to purchase or otherwise dispose of any of the
Company's equity securities or any other securities convertible into or
exchangeable with its Common Stock or other equity security ("Securities") other
than (i) pursuant to outstanding stock options and warrants, (ii) pursuant to
stock option and employee benefit plans in effect as of the date hereof and
(iii) Securities issued as consideration for an acquisition (A) if the party
being issued such Securities agrees to similar lock-up provisions or (B) if
such Securities are "restricted securities" under the Act, provided
that the Company agrees that it will not register such Securities under the Act
during the period of 90 days after the date of the Prospectus.
(i) The Company will apply the net proceeds of the sale of the Common
Shares sold by it substantially in accordance with its statements under the
caption "Use of Proceeds" in the Prospectus.
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<PAGE>
(j) The Company will use its best efforts to qualify or register its
Common Stock for sale in non-issuer transactions under (or obtain exemptions
from the application of) the Blue Sky laws of the State of California (and
thereby permit market making transactions and secondary trading in the Company's
Common Stock in California), will comply with such Blue Sky laws and will
continue such qualifications, registrations and exemptions in effect for a
period of five years after the date hereof.
(k) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock.
(l) If at any time during the period after the Registration Statement
becomes effective that a Prospectus is required to be delivered, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Common Stock 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 written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of, and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(m) The Company further agrees that, if it commences engaging in
business with the government of Cuba or with any person or affiliate located in
Cuba after the date the Registration Statement becomes or has become effective
with the Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported in the
Prospectus, if any, concerning the Company's business with Cuba or with any
person or affiliate located in Cuba changes in any material way, the Company
will provide the Department notice of such business or change, as appropriate,
in a form acceptable to the Department.
You, on behalf of the Underwriters, may, in your sole discretion, waive
in writing the performance by the Company of any one or more of the foregoing
covenants or extend the time for their performance.
SECTION 7
PAYMENT OF EXPENSES
-------------------
Whether or not the transactions contemplated hereunder are consummated or
this Agreement becomes effective or is terminated, the Company agrees to pay all
costs, fees and expenses incurred in connection with the performance of its
obligations hereunder and in connection with the transactions contemplated
hereby, including without limiting the generality of the foregoing, (i) all
expenses incident to the issuance and delivery of the Common Shares (including
all printing and engraving costs), (ii) all fees and expenses of the registrar
and transfer agent of the Common Stock, (iii) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Common Shares
to the Underwriters, (iv) all fees and expenses of the Company's counsel
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and the Company's independent accountants, (v) all costs and expenses incurred
in connection with the preparation, printing, filing, shipping and distribution
of the Registration Statement, each Preliminary Prospectus and the Prospectus
(including all exhibits and financial statements) and all amendments and
supplements provided for herein, this Agreement, the Agreement Among
Underwriters, the Selected Dealers Agreement, the Underwriters' Questionnaire,
the Underwriters' Power of Attorney and the Blue Sky memorandum, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriters
in connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Common Shares for offer
and sale under the state or Canadian Blue Sky laws, (vii) the filing fee of the
National Association of Securities Dealers, Inc., and (viii) all other fees,
costs and expenses referred to in Item 14 of the Registration Statement. Except
as provided in this Section 7, Section 9 and Section 11 hereof, the Underwriters
shall pay all of their own expenses, including the fees and disbursements of
their counsel (excluding those relating to qualification, registration or
exemption under the Blue Sky laws and the Blue Sky memorandum referred to
above).
SECTION 8
CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS
-------------------------------------------------
The obligations of the several Underwriters to purchase and pay for the
Firm Common Shares on the First Closing Date and the Optional Common Shares on
any Subsequent Closing Date shall be subject to the accuracy of the
representations and warranties on the part of the Company herein set forth as of
the date hereof and as of the First Closing Date or the Subsequent Closing Date,
as the case may be, to the accuracy of the statements of Company officers made
pursuant to the provisions hereof, to the performance by the Company of its
respective obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m. (or, in the case of a registration statement filed pursuant to
Rule 462(b) of the Rules and Regulations relating to the Common Shares, not
later than 10:00 p.m.), Washington, D.C. time, on the date of this Agreement, or
at such later time as shall have been consented to by you; if the filing of the
Prospectus, or any supplement thereto, is required pursuant to Rule 424(b) of
the Rules and Regulations, the Prospectus
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<PAGE>
shall have been filed in the manner and within the time period required by Rule
424(b) of the Rules and Regulations; and prior to such Closing Date, no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or, to the knowledge of the Company or you, shall be contemplated by
the Commission; and any request of the Commission for inclusion of additional
information in the Registration Statement, or otherwise, shall have been
complied with to your satisfaction.
(b) You shall be satisfied that since the respective dates as of which
information is given in the Registration Statement and Prospectus, (i) there
shall not have been any change in the capital stock of the Company (other than
upon the exercise of outstanding stock options) or any of its subsidiaries or
any material change in the indebtedness (other than in the ordinary course of
business) of the Company and its subsidiaries taken as a whole, (ii) except as
set forth or contemplated by the Registration Statement or the Prospectus, no
material verbal or written agreement or other transaction shall have been
entered into by the Company or any of its subsidiaries, which is not in the
ordinary course of business, (iii) no loss or damage (whether or not insured) to
the property of the Company or any of its subsidiaries shall have been sustained
which materially and adversely affects the condition (financial or otherwise),
business, results of operations or prospects of the Company and its subsidiaries
taken as a whole, (iv) no legal or governmental action, suit or proceeding
affecting the Company or any of its subsidiaries which is material to the
Company and its subsidiaries taken as a whole or which affects or may affect the
transactions contemplated by this Agreement shall have been instituted or
threatened and (v) there shall not have been any material change in the
condition (financial or otherwise), business, management, results of operations
or prospects of the Company and its subsidiaries taken as a whole which makes it
impractical or inadvisable in the judgment of the Representatives to proceed
with the public offering or purchase the Common Shares as contemplated hereby.
(c) There shall have been furnished to you, as Representatives of the
Underwriters, on each Closing Date, in form and substance satisfactory to you,
except as otherwise expressly provided below:
(i) An opinion of Drinker Biddle & Reath LLP, counsel for the
Company, addressed to the Underwriters and dated the First Closing Date or a
Subsequent Closing Date, as the case may be, to the effect that:
(1) The Company and each of the Material Subsidiaries has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation. Each of the Company and
Kulicke and Soffa Investments, Inc. and American Fine Wire Corporation (the
"U.S. Material Subsidiaries") is duly qualified to do business as a foreign
corporation and is in good standing in all other jurisdictions where the
ownership or leasing of properties or the conduct of its business requires such
qualification, except for jurisdictions in which the failure to so qualify could
not reasonably be expected to have a material adverse effect on the Company and
its
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subsidiaries taken as a whole, and has full corporate power and authority to own
its properties and conduct its business as described in the Registration
Statement;
(2) The authorized issued and outstanding capital stock of the
Company is as set forth under the caption "Capitalization" in the Prospectus (as
of the date thereof); all of the Firm Shares, when issued and paid for in
accordance with this Agreement will be, duly authorized and validly issued,
fully paid and nonassessable and will not have been issued in violation of or
subject to any preemptive rights or other rights set forth in the Company's
articles of incorporation or bylaws to subscribe for or purchase any securities;
without limiting the foregoing, to the best of such counsel's knowledge there
are no preemptive or other rights to subscribe for or purchase any of the Common
Shares to be sold by the Company hereunder;
(3) All of the issued and outstanding shares of the U.S. Material
Subsidiaries have been duly and validly authorized and issued, are fully paid
and nonassessable and are owned beneficially by the Company free and clear of
all liens, encumbrances or security interests and such counsel has no knowledge
of any adverse claim with respect to such shares;
(4) The certificates evidencing the Common Shares to be delivered
hereunder are in due and proper form under Pennsylvania law;
(5) Other than pursuant to the Company's employee benefit plan as in
effect as of the date of the Prospectus and except as disclosed in the
Prospectus as of the date of the Prospectus, to the best of such counsel's
knowledge there are no outstanding options, warrants or other rights calling for
the issuance of, and no commitments to issue, any shares of capital stock of the
Company or any security convertible into or exchangeable for capital stock of
the Company;
(6) (a) The Registration Statement has become effective under the
Act, and no stop order suspending the effectiveness of the Registration
Statement or preventing the use of the Prospectus has been issued and no
proceedings for that purpose have been instituted or are pending or, to the best
of such counsel's knowledge, contemplated by the Commission; any required
filing of the Prospectus and any supplement thereto pursuant to Rule 424(b) of
the Rules and Regulations has been made in the manner and within the time period
required by such Rule 424(b);
(b) The Registration Statement, each Preliminary Prospectus, the
Prospectus and each amendment or supplement thereto (except for the financial
statements and schedules included therein as to which such counsel need express
no opinion) comply as to form in all material respects with the requirements of
the Act and the Rules and Regulations;
(c) The information in the Prospectus under the caption
"Description of Capital Stock," to the extent that it constitutes matters of law
or legal
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conclusions, has been reviewed by such counsel and is a fair summary of such
matters and conclusions;
(d) The description in the Registration Statement and the
Prospectus of the articles of incorporation and bylaws of the Company and of
statutes are accurate and fairly present the information required to be
presented by the Act and the applicable Rules and Regulations;
(e) To the best of such counsel's knowledge, there are no
franchises, leases, contracts, agreements or documents of a character required
to be disclosed in the Registration Statement or Prospectus or to be filed as
exhibits to the Registration Statement which are not disclosed or filed, as
required;
(f) To the best of such counsel's knowledge, there are no legal
or governmental actions, suits or proceedings pending or threatened against the
Company which are required to be described in the Prospectus which are not
described as required; and
(g) The documents incorporated by reference in the Prospectus
(except for any financial statements and schedules included in such documents as
to which such counsel need express no opinion), when they were filed with the
Commission, complied as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations of the Commission thereunder;
and nothing has come to the attention of such counsel which leads them to
believe that any of such documents (except for any financial statements and
schedules included in such documents as to which such counsel need express no
opinion), when they were so filed, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made
when such documents were so filed, not misleading.
(7) The Company has full right, power and authority to enter into
this Agreement and to sell and deliver the Firm Common Shares to the several
Underwriters; this Agreement has been duly and validly authorized by all
necessary corporate action by the Company, has been duly and validly executed
and delivered by and on behalf of the Company, and, assuming due and valid
execution and delivery of this Agreement by the Underwriters, is a valid and
binding agreement of the Company enforceable in accordance with its terms,
except as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and except as to those provisions relating to
indemnity or contribution for liabilities arising under the Act as to which no
opinion need be expressed; and no approval, authorization, order, consent,
registration, filing, qualification, license or permit of or with any court,
regulatory, administrative or other governmental body is required for the
execution and delivery of this Agreement by the Company or the consummation of
the transactions contemplated by this Agreement,
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except such as have been obtained and are in full force and effect under the Act
and such as may be required under applicable Blue Sky laws in connection with
the purchase and distribution of the Common Shares and the clearance of such
offering with the NASD as to which such counsel need express no opinion;
(8) The execution and performance of this Agreement and the
consummation of the transactions herein contemplated will not conflict with,
result in the breach of, or constitute, either by itself or upon notice or the
passage of time or both, a default under any agreement, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument filed as an
exhibit to the Registration Statement or violate any of the provisions of the
articles of incorporation or bylaws, or other organizational documents, of the
Company or any of its Material Subsidiaries or, so far as is known to such
counsel, violate any statute, judgment, decree, order, rule or regulation of any
court or governmental body having jurisdiction over the Company or any of its
Material Subsidiaries or any of its or their property;
(9) To the best knowledge of such counsel, neither the Company nor
any U.S. Material Subsidiary is in violation of its articles of incorporation or
bylaws, or other organizational documents, or to the best of such counsel's
knowledge, in breach of or default with respect to any provision of any
agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit
or other instrument filed or required to be filed as an exhibit to the
Registration Statement, except where such default would not materially adversely
affect the Company and its subsidiaries taken as a whole;
(10) To the best knowledge of such counsel, no holders of securities
of the Company have rights which have not been waived to the registration of
shares of Common Stock or other securities, because of the filing of the
Registration Statement by the Company or the offering contemplated hereby;
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(11) No transfer taxes are required to be paid in connection with the
sale and delivery of the Common Shares to the Underwriters hereunder.
In addition, such counsel shall state that 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 to them to believe that, at the time the Registration
Statement became effective, the Registration Statement (other than the
consolidated financial statements including supporting schedules and financial
data derived therefrom, as to which such counsel need express no comment)
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,
in the light of the circumstances under which they were made, not misleading, or
at the First Closing Date or any Subsequent Closing Date, as the case may be,
the Registration Statement or the Prospectus (except as aforesaid) 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, in light of
the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely, as to matters other
than Pennsylvania law, Delaware corporate law, federal law, on opinions of local
or foreign counsel, and as to matters of fact, on certificates of officers of
the Company and of governmental officials, in which case their opinion is to
state that they are so doing and that the Underwriters are justified in relying
on such opinions or certificates and copies of said opinions or certificates are
to be attached to the opinion;
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(ii) An opinion of Orrick, Herrington and Sutcliffe LLP, patent
counsel for the Company, addressed to the Underwriters and dated the First
Closing Date or any Subsequent Closing Date, as the case may be, to the effect
that the statements stating that as to the matters described in the Prospectus
under the captions "Risk Factors -- Intellectual Property Protection; Notices of
Alleged Patent Infringement" and "Business--Intellectual Property", in each
case, in the second paragraph thereof, nothing has come to their attention that
causes them to believe that the statements in said paragraphs contain any untrue
statements of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(iii) Such opinion or opinions of Wilson Sonsini Goodrich &
Rosati, P.C., counsel for the Underwriters dated the First Closing Date or any
Subsequent Closing Date, as the case may be, with respect to the incorporation
of the Company, the sufficiency of all corporate proceedings and other legal
matters relating to this Agreement, the validity of the Common Shares, the
Registration Statement and the Prospectus and other related matters as you may
reasonably require, and the Company shall have furnished to such counsel such
documents and shall have exhibited to them such papers and records as they may
reasonably request for the purpose of enabling them to pass upon such matters.
In connection with such opinions, such counsel may rely on representations or
certificates of officers of the Company and governmental officials.
(iv) A certificate of the Company executed by the Chief
Executive Officer and the Chief Financial Officer of the Company, dated the
First Closing Date or any Subsequent Closing Date, as the case may be, to the
effect that:
(1) The representations and warranties of the Company
set forth in Section 2 of this Agreement are true and correct, in all
material respects, as of the date of this Agreement and as of the
First Closing Date or such Subsequent Closing Date, as the case may
be, and the Company has, in all material respects, complied with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied on or prior to such Closing Date;
(2) The Commission has not issued any order preventing
or suspending the use of the Prospectus or any Preliminary Prospectus
filed as a part of the Registration Statement or any amendment
thereto; no stop order suspending the effectiveness of the
Registration Statement has been issued; and to the best of the
knowledge of the respective signers, no proceedings for that purpose
have been instituted or are pending or contemplated under the Act;
(3) Each of the respective signers of the certificate
has carefully examined the Registration Statement and the Prospectus,
and, in his opinion and to the best of his knowledge, (a) the
Registration Statement and the Prospectus and any amendments or
supplements thereto contain all statements required to be stated
therein regarding the Company and its subsidiaries; and (b) neither
the Registration Statement nor the Prospectus nor any amendment or
supplement thereto includes any untrue statement
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<PAGE>
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(4) Since the initial date on which the Registration Statement was
filed, no agreement, written or oral, transaction or event has occurred which
should have been set forth in an amendment to the Registration Statement or in a
supplement to or amendment of any prospectus which has not been disclosed in
such a supplement or amendment;
(5) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, and except as disclosed in or
contemplated by the Prospectus: there has not been any material adverse change
or a development involving a material adverse change in the condition (financial
or otherwise), business, properties, results of operations, management or
prospects of the Company and its subsidiaries taken as a whole; and, to the best
of his knowledge, no legal or governmental action, suit or proceeding is pending
or threatened against the Company or any of its subsidiaries which is material
to the Company and its subsidiaries taken as a whole, whether or not arising
from transactions in the ordinary course of business, or which may adversely
affect the transactions contemplated by this Agreement; since such dates and
except as so disclosed, neither the Company nor any of its subsidiaries has (i)
entered into any material verbal or written agreement or other transaction which
is not in the ordinary course of business or which could result in a material
reduction in the future earnings of the Company, (ii) incurred any material
liability or obligation, direct, contingent or indirect other than in the
ordinary course of business, (iii) made any change in its capital stock (other
than upon exercise of outstanding stock options), (iv) made any material change
in its short-term debt, or (v) funded debt or repurchased or otherwise acquired
any of the Company's capital stock; and the Company has not declared or paid any
dividend, or made any other distribution, upon its outstanding capital stock
payable to shareholders of record on a date prior to the First Closing Date or
Subsequent Closing Date; and
(6) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus and except as disclosed in or
contemplated by the Prospectus, the Company and its Material Subsidiaries have
not sustained a material loss or damage by strike, fire, flood, windstorm,
accident or other calamity (whether or not insured).
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<PAGE>
(v) On the date before this Agreement is executed and also on the First
Closing Date and any Subsequent Closing Date a letter addressed to you, as
Representatives of the Underwriters, from Price Waterhouse LLP, independent
accountants, the first one to be dated the day before or the date of this
Agreement, the second one to be dated the First Closing Date and thereafter (in
the event of a Subsequent Closing) to be dated such Subsequent Closing Date, in
form and substance satisfactory to you.
(vi) On or before the First Closing Date, signed agreements from each
director and executive officer of the Company, in form and substance
satisfactory to you, confirming that for a period of seventy-five (75) days
after the date of the Prospectus, such person will not directly or indirectly
sell or offer to sell or otherwise dispose of any shares of Common Stock or any
right to acquire such shares (other than by will, pursuant to the laws of
descent and distribution or the surrender of shares in payment of the exercise
price of options under the Company's option plans) without the prior written
consent of Montgomery Securities, which consent may be withheld at the sole
discretion of Montgomery Securities.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you and
to Wilson Sonsini Goodrich & Rosati, P.C., counsel for the Underwriters. The
Company shall furnish you with such manually signed or conformed copies of such
opinions, certificates, letters and documents as you request. Any certificate
signed by any officer of the Company and delivered to the Representatives or to
counsel for the Underwriters shall be deemed to be a representation and warranty
by the Company to the Underwriters as to the statements made therein.
If any condition to the Underwriters' obligations hereunder to be satisfied
prior to or at the First Closing Date is not so satisfied, this Agreement at
your election will terminate upon notification by you as Representatives to the
Company without liability on the part of any Underwriter or the Company except
for the expenses to be paid or reimbursed by the Company pursuant to Sections 7
and 9 hereof and except to the extent provided in Section 11 hereof.
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SECTION 9
REIMBURSEMENT OF UNDERWRITERS' EXPENSES
---------------------------------------
Notwithstanding any other provisions hereof, if this Agreement shall
be terminated by you pursuant to Section 8, or if the sale to the Underwriters
of the Common Shares at the First Closing is not consummated because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof, the Company agrees to
reimburse you and the other Underwriters upon demand for all out-of-pocket
expenses that shall have been reasonably incurred by you and them in connection
with the proposed purchase and the sale of the Common Shares, including but not
limited to fees and disbursements of counsel, printing expenses, travel
expenses, postage, telegraph charges and telephone charges relating directly to
the offering contemplated by the Prospectus. Any such termination shall be
without liability of any party to any other party except that the provisions of
this Section, Section 7 and Section 11 shall at all times be effective and shall
apply.
SECTION 10
EFFECTIVENESS OF REGISTRATION STATEMENT
---------------------------------------
You and the Company will use your and its best efforts to cause the
Registration Statement to become effective, to prevent the issuance of any stop
order suspending the effectiveness of the Registration Statement and, if such
stop order be issued, to obtain as soon as possible the lifting thereof.
SECTION 11
INDEMNIFICATION
---------------
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of the
Act against any losses, claims, damages, liabilities or expenses, joint or
several, to which such Underwriter or such controlling person may become
subject, under the Act, the Exchange Act or other federal or state statutory law
or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, any Preliminary Prospectus, the Prospectus, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state in any of them a material fact required to
be stated therein or necessary to make the statements in any of them not
misleading, or arise out of or are based in whole or in part on any
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<PAGE>
inaccuracy in the representations and warranties of the Company contained herein
or any failure of the Company to perform their respective obligations hereunder
or under law; and will reimburse each Underwriter and each such controlling
person for any documented legal and other expenses as such expenses are
reasonably incurred by such Underwriter or such controlling person in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that (i) the
Company will not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with the
information furnished to the Company pursuant to Section 4 hereof and (ii) the
indemnity provided in this Section 11(a) with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter with respect to any
person asserting any loss, claim, charge, liability or litigation based upon any
untrue statement or alleged untrue statement of any material fact or omission or
alleged omission to state therein a material fact, if a copy of the Prospectus
in which such untrue statement or alleged untrue statement or omission was
corrected was required to be delivered to such person by the Underwriter and was
not sent or given to such person within the time required by the Act and the
Rules and Regulations thereunder, unless such failure is the result of
noncompliance by the Company with Section 6(e) hereof. In addition to its other
obligations under this Section 11(a), the Company agrees that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, or any inaccuracy in the representations and
warranties of the Company herein or failure to perform its obligations
hereunder, all as described in this Section 11(a), it will reimburse each
Underwriter on a quarterly basis for all reasonable legal or other documented
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse each Underwriter for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, each Underwriter shall
promptly return it to the Company together with interest, compounded daily,
determined on the basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) announced from time to time by Bank of
America NT&SA, San Francisco, California (the "Prime Rate"). Any such interim
reimbursement payments which are not made to an Underwriter within 30 days of a
request for reimbursement shall bear interest at the Prime Rate from the date of
such request. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each
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person, if any, who controls the Company within the meaning of the Act, against
any losses, claims, damages, liabilities or expenses to which the Company, or
any such director, officer or controlling person may become subject, under the
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any untrue or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment 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 not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with the information
furnished to the Company pursuant to Section 4 hereof; and will reimburse the
Company, or any such director, officer or controlling person for any legal and
other documented expense reasonably incurred by the Company, or any such
director, officer, or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. In addition to its other obligations under this
Section 11(b), each Underwriter severally agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 11(b) which relates to
information furnished to the Company pursuant to Section 4 hereof, it will
reimburse the Company (and, to the extent applicable, each officer, director or
controlling person) on a quarterly basis for all reasonable legal or other
documented expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and enforceability
of the Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director or controlling person) for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company (and, to the
extent applicable, each officer, director or controlling person) shall promptly
return it to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section or to the
extent it is not prejudiced as a proximate result of such failure. In case any
such action is brought against any indemnified party and such indemnified party
seeks or intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to
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participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party; provided, however, if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be a conflict between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the next
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel, approved
by the Representatives in the case of paragraph (a), representing the
indemnified parties who are parties to such action) or (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of commencement of the action, in each of which cases the reasonable fees and
expenses of counsel shall be at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 11 is required
by its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a), (b) or
(c) in respect of any losses, claims, damages, liabilities or expenses referred
to herein, then each applicable indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Underwriters from the offering of the Common Shares or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Underwriters in connection with the statements or omissions or inaccuracies
in the representations and warranties herein which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company and the Underwriters shall be deemed to be in the same proportion, in
the case of the Company as the total price paid to the Company for the Common
Shares sold by them to the Underwriters (net of underwriting commissions but
before deducting expenses), and in the case of the Underwriters as the
underwriting commissions received by them bears to the total of such amounts
paid to the Company and received by the Underwriters as underwriting
commissions. The relative fault of the Company and the Underwriters 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 or the inaccurate or the alleged inaccurate representation
and/or warranty relates to information supplied by the Company
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<PAGE>
or the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in subparagraph (c) of this Section 11, any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The provisions set forth in
subparagraph (c) of this Section 11 with respect to notice of commencement of
any action shall apply if a claim for contribution is to be made under this
subparagraph (d); provided, however, that no additional notice shall be required
with respect to any action for which notice has been given under subparagraph
(c) for purposes of indemnification. The Company and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 11
were determined solely 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 in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
11, no Underwriter shall be required to contribute any amount in excess of the
amount of the total underwriting commissions received by such Underwriter in
connection with the Common Shares underwritten by it and distributed to the
public. 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. The Underwriters'
obligations to contribute pursuant to this Section 11 are several in proportion
to their respective underwriting commitments and not joint.
(e) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 11(a) and 11(b)
hereof, including the amounts of any requested reimbursement payments and the
method of determining such amounts, shall be settled by arbitration conducted
under the provisions of the Constitution and Rules of the Board of Governors of
the New York Stock Exchange, Inc. or pursuant to the Code of Arbitration
Procedure of the NASD. Any such arbitration must be commenced by service of a
written demand for arbitration or written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in such
demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an arbitration would be limited to the operation of
the interim reimbursement provisions contained in Sections 11(a) and 11(b)
hereof and would not resolve the ultimate propriety or enforceability of the
obligation to reimburse expenses which is created by the provisions of such
Sections 11(a) and 11(b) hereof).
SECTION 12
DEFAULT OF UNDERWRITERS
-----------------------
It shall be a condition to this Agreement and the obligation of the
Company to sell and deliver the Common Shares hereunder, and of each Underwriter
to purchase the Common Shares in the manner as described herein, that, except as
hereinafter in this paragraph provided, each of the Underwriters shall purchase
and pay for all the Common Shares agreed to be purchased by such Underwriter
hereunder upon tender to the Representatives of all such shares in accordance
with the
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terms hereof. If any Underwriter or Underwriters default in their obligations to
purchase Common Shares hereunder on either the First or Second Closing Date and
the aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase on such Closing Date does not exceed
10% of the total number of Common Shares which the Underwriters are obligated to
purchase on such Closing Date, the non-defaulting Underwriters shall be
obligated severally, in proportion to their respective commitments hereunder, to
purchase the Common Shares which such defaulting Underwriters agreed but failed
to purchase on such Closing Date. If any Underwriter or Underwriters so default
and the aggregate number of Common Shares with respect to which such default
occurs is more than the above percentage and arrangements satisfactory to the
Representatives and the Company for the purchase of such Common Shares by other
persons are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company except for the expenses to be paid by the Company pursuant to Section 7
hereof and except to the extent provided in Section 11 hereof.
In the event that Common Shares to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First or
Second Closing Date, as the case may be, for not more than three business days
in order that the necessary changes in the Registration Statement, Prospectus
and any other documents, as well as any other arrangements, may be effected. As
used in this Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
SECTION 13
EFFECTIVE DATE
--------------
This Agreement shall become effective immediately as to Sections 7, 9,
11, 14 and 15 and, as to all other provisions, (i) if at the time of execution
of this Agreement the Registration Statement has not become effective, at 2:00
p.m., California time, on the first full business day following the
effectiveness of the Registration Statement, or (ii) if at the time of execution
of this Agreement the Registration Statement has been declared effective, at
2:00 p.m., California time, on the first full business day following the date of
execution of this Agreement; but this Agreement shall nevertheless become
effective at such earlier time after the Registration Statement becomes
effective as you may determine on and by notice to the Company or by release of
any of the Common Shares for sale to the public. For the purposes of this
Section 13, the Common Shares shall be deemed to have been so released upon the
release for publication of any newspaper advertisement relating to the Common
Shares or upon the release by you of telegrams (i) advising Underwriters that
the Common Shares are released for public offering, or (ii) offering the Common
Shares for sale to securities dealers, whichever may occur first.
SECTION 14
TERMINATION
-----------
-31-
<PAGE>
Without limiting the right to terminate this Agreement pursuant to any
other provision hereof:
(a) This Agreement may be terminated by the Company by notice to you
or by you by notice to the Company at any time prior to the time this Agreement
shall become effective as to all its provisions, and any such termination shall
be without liability on the part of the Company to any Underwriter (except for
the expenses to be paid or reimbursed by the Company pursuant to Sections 7 and
9 hereof and except to the extent provided in Section 11 hereof) or of any
Underwriter to the Company(except to the extent provided in Section 11 hereof).
(b) This Agreement may also be terminated by you prior to the First
Closing Date by notice to the Company (i) if additional material governmental
restrictions, not in force and effect on the date hereof, shall have been
imposed upon trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange or on the
American Stock Exchange or in the over-the-counter market by the NASD, or
trading in securities generally shall have been suspended on either such
Exchange or in the over-the-counter market by the NASD, or a general banking
moratorium shall have been established by federal, New York or California
authorities, (ii) if an outbreak of major hostilities or other national or
international calamity or any substantial change in political, financial or
economic conditions shall have occurred or shall have accelerated or escalated
to such an extent, as, in the judgment of the Representatives, to affect
adversely the marketability of the Common Shares, (iii) if any adverse event
shall have occurred or shall exist which makes untrue or incorrect in any
material respect any statement or information contained in the Registration
Statement or Prospectus or which is not reflected in the Registration Statement
or Prospectus but should be reflected therein in order to make the statements or
information contained therein not misleading in any material respect, or (iv) if
there shall be any action, suit or proceeding pending or threatened, or there
shall have been any development or prospective development involving
particularly the business or properties or securities of the Company or any of
its subsidiaries or the transactions contemplated by this Agreement, which, in
the reasonable judgment of the Representatives, may materially and adversely
affect the Company's business or earnings and makes it impracticable or
inadvisable to offer or sell the Common Shares. Any termination pursuant to
this subsection (b) shall without liability on the part of any Underwriter to
the Company or on the part of the Company to any Underwriter (except for
expenses to be paid or reimbursed by the Company pursuant to Sections 7 and 9
hereof and except to the extent provided in Section 11 hereof).
SECTION 15
-32-
<PAGE>
REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY
---------------------------------------------------
The respective indemnities, agreements, representations, warranties
and other statements of the Company, of its officers and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter or the Company or any of its or their partners, officers or
directors or any controlling person and will survive delivery of and payment for
the Common Shares sold hereunder and any termination of this Agreement.
SECTION 16
NOTICES
-------
All communications hereunder shall be in writing and, if sent to the
Representatives shall be mailed, delivered or telegraphed and confirmed to you
at 600 Montgomery Street, San Francisco, California 94111, Attention: Mr. Clark
L. Gerhardt; and if sent to the Company shall be mailed, delivered or
telegraphed and confirmed to the Company at 2101 Blair Mill Road, Willow Grove,
Pennsylvania 19090, Attention: C. Scott Kulicke, Chief Executive Officer, with
a copy to Drinker, Biddle & Reath, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107-3496, Attention: John C.
Bennett, Jr., Esquire. The Company or you may change the address for receipt of
communications hereunder by giving notice to the others.
SECTION 17
SUCCESSORS
----------
This Agreement will inure to the benefit of and be binding upon the
parties hereto, including any substitute Underwriters pursuant to Section 12
hereof, and to the benefit of the officers and directors and controlling persons
referred to in Section 11, and in each case their respective successors,
personal representatives and assigns, and no other person will have any right or
obligation hereunder. No such assignment shall relieve any party of its
obligations hereunder. The term "successors" shall not include
-33-
<PAGE>
any purchaser of the Common Shares as such from any of the Underwriters merely
by reason of such purchase.
SECTION 18
REPRESENTATION OF UNDERWRITERS
------------------------------
You will act as Representatives for the several Underwriters in
connection with all dealings hereunder, and any action under or in respect of
this Agreement taken by you jointly or by Montgomery Securities, on behalf of
you, will be binding upon all the Underwriters.
SECTION 19
PARTIAL UNENFORCEABILITY
------------------------
The invalidity or unenforceability of any Section, paragraph or
provision of this Agreement shall not affect the validity or enforceability of
any other Section, paragraph or provision hereof. If any Section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, there shall be deemed to be made such minor changes (and only
such minor changes) as are necessary to make it valid and enforceable.
SECTION 20
APPLICABLE LAW
--------------
This Agreement shall be governed by and construed in accordance with
the internal laws (and not the laws pertaining to conflicts of laws) of the
State of California.
SECTION 21
GENERAL
-------
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. This Agreement may be executed in several counterparts, each one of
which shall be an original, and all of which shall constitute one and the same
document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
-34-
<PAGE>
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and you.
-35-
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon it
will become a binding agreement among the Company and the several Underwriters
including you, all in accordance with its terms.
Very truly yours,
KULICKE AND SOFFA INDUSTRIES, INC.
By:
---------------------------------------
Title:
------------------------------------
The foregoing Underwriting Agreement
is hereby confirmed and accepted by us in
San Francisco, California as of the date
first above written.
MONTGOMERY SECURITIES
LEHMAN BROTHERS INC.
SMITH BARNEY INC.
Acting as Representatives of the
several Underwriters named in the
attached Schedule A.
By: MONTGOMERY SECURITIES
By:
----------------------------------
-36-
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Firm
Common Shares
Name of Underwriter to be Purchased
- ----------------------- ---------------
<S> <C>
Montgomery Securities ..................
Lehman Brothers Inc. ...................
Smith Barney Inc. ......................
------------
TOTAL 3,000,000
============
</TABLE>
A-1
<PAGE>
SCHEDULE B
Material Subsidiaries
---------------------
Kulicke and Soffa (Asia) Ltd.
Kulicke and Soffa (Israel) Ltd.
Micro Swiss Ltd.
Kulicke and Soffa Investments, Inc.
American Fine Wire Corporation
American Fine Wire Ltd.
B-1
<PAGE>
SCHEDULE C
Foreign Material Subsidiaries
-----------------------------
Kulicke and Soffa (Asia) Ltd.
Kulicke and Soffa (Israel) Ltd.
Micro Swiss Ltd.
American Fine Wire Ltd.
C-1
<PAGE>
LAW OFFICES
DRINKER BIDDLE & REATH LLP
PHILADELPHIA NATIONAL BANK BUILDING
1345 CHESTNUT STREET
PHILADELPHIA, PA 19107-3496
TELEPHONE: 215( 988-2700
TELEX: 834684
FAX: (215) 988-2757
Direct Dial Number:
(215) 988-2700
April 29, 1997
Kulicke and Soffa Industries, Inc.
2101 Blair Mill Road
Willow Grove, PA 19090
Ladies and Gentlemen:
We have acted as counsel to Kulicke and Soffa Industries, Inc., a
Pennsylvania corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission of a registration statement
on Form S-3 (No. 33-69734) under the Securities Act of 1933, as amended (the
"Registration Statement"), covering (i) 3,000,000 shares of the Company's Common
Stock, without par value (the "Common Stock") which are being sold by the
Company and (ii) up to 450,000 shares of Common Stock which the underwriters
will have an option to purchase from the Company solely to cover overallotments.
All of the shares will be sold by the underwriters for whom Montgomery
Securities, Lehman Brothers Inc. and Smith Barney Inc. are acting as
representatives (collectively, the "Underwriters").
In this connection, we have examined the originals or copies,
certified or otherwise identified to our satisfaction, of the Articles of
Incorporation and By-laws of the Company as amended through the effective date
of the Registration Statement, resolutions of the Company's Board of Directors
and such other documents and corporate records relating to the Company and the
issuance of the Common Stock as we have deemed appropriate for the purpose of
rendering this opinion. We express no opinion concerning the laws of any
jurisdiction other
<PAGE>
Kulicke and Soffa Industries, Inc
April 29, 1997
Page 2
than the federal law of the United States and the Business Corporation Law of
the Commonwealth of Pennsylvania.
On the basis of the foregoing, it is our opinion that (i) appropriate
corporate action has been taken to authorize the sale and issuance of up to
3,450,000 shares of Common Stock to be sold by the Company to the Underwriters
(including up to 450,000 shares to be issued pursuant to the over-allotment
option) and (ii) when issued and sold pursuant to the terms of the Underwriting
Agreement, such shares of Common Stock will be legally issued, fully paid and
nonassessable by the Company.
We hereby consent to the reference to our firm under the caption
"Legal Matters" in the prospectus included in the Registration Statement and to
the filing of this opinion as an exhibit to the Registration Statement. This
does not constitute a consent under Section 7 of the Securities Act of 1933, as
amended, as we have not certified any part of the Registration Statement and do
not otherwise come within the categories of persons whose consent is required
under Section 7 or the rules and regulations of the Securities and Exchange
Commission.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
DRINKER BIDDLE & REATH
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 (No. 33-69734) of
our report dated November 15, 1996 which appears on page 20 of Kulicke and
Soffa Industries, Inc.'s Annual Report on Form 10-K for the year ended
September 30, 1996. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Philadelphia, Pennsylvania
April 28, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated November 3, 1994, which appears on page 2 of the 1994 Annual Report to
Shareholders of Kulicke and Soffa (Israel) Ltd. which is incorporated by
reference in Kulicke and Soffa Industries, Inc.'s Annual Report on Form 10-K
for the year ended September 30, 1994. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
/s/ Luboshitz, Kasierer & Co.
Certified Public Accountants (Isr.)
Haifa, Israel
April 28, 1997
