<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1997
REGISTRATION NO. 333-41445
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SPIRE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2457335
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
</TABLE>
ONE PATRIOTS PARK
BEDFORD, MASSACHUSETTS 01730-2396
(781) 275-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROGER G. LITTLE,
CHIEF EXECUTIVE OFFICER
SPIRE CORPORATION
ONE PATRIOTS PARK
BEDFORD, MA 01730-2396
(781) 275-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
LAUREN JENNINGS, ESQ. PAUL D. BROUDE, ESQ.
GOLDSTEIN & MANELLO, P.C. STROOCK & STROOCK & LAVAN LLP
265 FRANKLIN STREET 100 FEDERAL STREET
BOSTON, MA 02110 BOSTON, MA 02110
(617) 439-8900 (617) 482-6800
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, 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 THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
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 DECEMBER 23, 1997
PROSPECTUS
1,500,000 SHARES
[SPIRE LOGO]
COMMON STOCK
Of the 1,500,000 shares of Common Stock offered hereby, 1,000,000 shares
are being sold by Spire Corporation ("Spire" or the "Company") and 500,000
shares are being sold by certain stockholders of the Company (the "Selling
Stockholders"). See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of the shares by the Selling
Stockholders. The Common Stock is quoted on the Nasdaq National Market under the
symbol "SPIR." On December 22, 1997, the last reported sale price for the Common
Stock, as reported on the Nasdaq National Market, was $15.88 per share. See
"Price Range of Common Stock."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
------------------------
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 PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=======================================================================================
PROCEEDS
PRICE TO UNDERWRITING PROCEEDS TO TO SELLING
PUBLIC DISCOUNTS(1) COMPANY(2) STOCKHOLDERS(2)
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<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
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Total(3)..................... $ $ $ $
=======================================================================================
</TABLE>
(1) The Company has agreed to reimburse the Underwriters for up to $100,000 of
their expenses in connection with the offering. The Company and the Selling
Stockholders have also agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company estimated
at $447,000 (including up to $100,000 of the Underwriters' expenses) and
payable by the Selling Stockholders estimated at $3,000.
(3) The Company and a Selling Stockholder have each granted the Underwriters a
30-day option to purchase up to a maximum of 180,000 and 45,000 additional
shares of Common Stock, respectively, for a total maximum of 225,000 shares
of Common Stock, to cover over-allotments, if any. If such options are
exercised in full, the total "Price to Public," "Underwriting Discounts,"
"Proceeds to Company" and "Proceeds to Selling Stockholders" will be
$ , $ , $ and $ ,
respectively. See "Underwriting."
------------------------
The shares of Common Stock are being offered by the Underwriters, subject
to prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the certificates representing the shares of Common Stock will be
made in Boston, Massachusetts, on or about January 28, 1998.
------------------------
TUCKER ANTHONY
INCORPORATED
FIRST ALBANY CORPORATION
ADVEST, INC.
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE> 3
[SPIRE LOGO]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING OVER-ALLOTMENTS, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. SUCH TRANSACTIONS, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK
OFFERED HEREBY ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE
"UNDERWRITING."
A time line using pictures and captions detailing key technology and
product development milestones in the photovoltaics, optoelectronics and
biomedical areas.
2
<PAGE> 4
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Consolidated Financial Statements
and Notes thereto, appearing elsewhere in this Prospectus or incorporated herein
by reference. The discussion in this Prospectus contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act") that involve risks and uncertainties. The
Company's actual results and the timing of certain events may differ materially
from the results discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business." Except as otherwise noted,
all information in this Prospectus assumes no exercise of the Underwriters'
over-allotment options to purchase up to 225,000 shares of Common Stock and does
not reflect the exercise after November 30, 1997 of options issued under the
Company's stock option plans.
THE COMPANY
Spire develops, manufactures and markets highly-engineered photovoltaic
module manufacturing equipment and optoelectronic products and provides
biomedical processing services. Spire is the world's leader in the design and
manufacture of specialized equipment for the production of terrestrial
(land-based) photovoltaic modules from solar cells, with its equipment installed
in over 130 factories and in more than 30 countries. The Company also offers
certain optoelectronic products and is continuing to develop additional advanced
optoelectronic products for telecommunications, biomedical and electronics
applications, including solar cells used to power satellites. Spire's
value-added biomedical processing services offer surface treatments to enhance
the durability or antimicrobial characteristics of orthopedic and other medical
devices.
Photovoltaics, the technology of using solar cells to convert sunlight
directly into electricity, is a growing alternative energy production method and
an increasingly important component of world energy production, particularly in
the wireless telecommunications sector. With this technology, electricity is
produced from sunlight by using photovoltaic modules, which consist of a number
of solar cells connected to each other and laminated in reliable and durable
support structures. The Company believes that it is the only company that
manufactures each piece of equipment necessary for a complete production line
that fabricates photovoltaic solar cells into modules. The Company's module
manufacturing equipment and production line configurations offer its customers a
range of manufacturing processes, from relatively labor intensive to fully
automated systems. Spire's products include solar cell testers, cell tabbing and
stringing assemblers, laminators and sun simulator module testers, as well as
turnkey module production lines complete with comprehensive technology, training
and service support.
Spire's market leadership and international reputation for quality
manufacturing and process technology position the Company to capitalize further
on the expanding global photovoltaic market. In the past five years, global
usage of terrestrial photovoltaic power has increased substantially, due to such
factors as rural electrification in the developing world, the accelerated growth
of wireless telecommunications, with its need for wireless power, and increased
environmental concerns encouraging the use of renewable energy sources.
Awareness and acceptance of photovoltaics as an energy source are growing as a
result of receiving significant support from initiatives such as the PV Rooftop
Program in Japan, the Building Integration Program in Germany and the Clinton
Administration's recently announced "Million Solar Roofs Initiative."
Projections by industry experts of growth in worldwide demand for
photovoltaic modules range from 25% to 50% per year through the year 2002. In
order to meet this increasing demand, manufacturers of photovoltaic modules must
increase their manufacturing capacity by adding capital equipment, including the
types of capital equipment offered by the Company. Industry experts estimate
that in 1997 annual worldwide module production capacity increased by at least
34%, or 44 megawatts, over 1996 capacity. Photovoltaic module manufacturers
already have announced plans to expand worldwide module production capacity by
100 megawatts in 1998, which would be a 58% increase over 1997 production
capacity. The Company believes that the 1998 market for photovoltaic module
manufacturing equipment will be approximately $25 million to $40 million,
compared to a 1997 market of approximately $20 million for such equipment.
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3
<PAGE> 5
In addition to projected growth in the terrestrial photovoltaic market, the
proliferation of satellites resulting from the increasing need for
telecommunications bandwidth has created demand for specialized photovoltaic
cells to power satellites. According to industry experts, telecommunications
companies worldwide plan to launch more than 500 satellites in the next five
years. Based upon published reports, the Company believes there may be
insufficient manufacturing capacity in the industry to meet the increasing
demand for space solar cell production. The Company has developed extensive
technology and expertise as a result of more than 25 years of solar cell
contract research for the U.S. government and commercial customers, and the
Company believes these capabilities provide it with the opportunity to enter the
market for space solar cells.
Spire is a leading U.S. provider of surface treatments for medical devices,
utilizing its ion implantation and ion beam assisted deposition (IBAD)
technologies. Spire's surface processing technologies have evolved from the
Company's silicon wafer ion implantation technology for solar cell applications.
These surface treatments improve the durability or antimicrobial characteristics
of invasive medical devices such as orthopedic implants and catheters. The aging
of the U.S. population has contributed to greater demand for joint replacement
procedures; longer and more active lives have led to the demand for enhanced
device durability and performance. Medical industry initiatives aimed at
lowering costs have focused efforts on reducing the incidence of infection,
which has created demand for antimicrobial treatment of catheters and other
invasive medical devices.
Spire's advanced research in photovoltaics and optoelectronics has resulted
in a strong array of proprietary technologies. These technologies have led to
the Company's current product and service offerings in photovoltaics and in
medical device treatments, and have further potential commercial applications in
terrestrial and space solar cell production, in other optoelectronic products
and in enhancing the performance of additional medical devices. Much of the
Company's development of its core technologies and the application of these
technologies to commercial products has been funded by the U.S. government under
contracts providing that the Company retains proprietary rights to all
developments. The Company anticipates that much of its future development
efforts will continue to be funded by the U.S. government and other outside
sources.
The Company was incorporated in 1969 in Massachusetts. As used in this
Prospectus, the terms "Spire" and the "Company" include Spire and its
wholly-owned subsidiary, Spire International Sales Corporation. Spire's
executive offices are located at One Patriots Park, Bedford, Massachusetts
01730-2396. The Company's telephone number is (781) 275-6000.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company.............. 1,000,000 Shares
Common Stock Offered by the Selling
Stockholders................................... 500,000 Shares
Common Stock Outstanding Before the Offering..... 3,197,347 Shares(1)
Common Stock to be Outstanding After the
Offering....................................... 4,197,347 Shares(1)
Net Proceeds to the Company from the Offering.... $14,386,719(2)
Use of Proceeds.................................. To invest in capital expenditures to
expand manufacturing capacity and
semiconductor production facilities,
primarily for the production of space
solar cells; to invest in capital
equipment and marketing to support
biomedical service offerings; to upgrade
information and communications systems;
and to contribute to working capital and
general corporate purposes. See "Use of
Proceeds."
NASDAQ National Market Symbol.................... SPIR
</TABLE>
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(1) Based upon 3,197,347 shares of Common Stock of the Company outstanding as of
November 30, 1997. Excludes 240,928 shares of Common Stock issuable upon the
exercise of options granted to employees and directors of the Company at a
weighted average exercise price of $3.71 per share as of November 30, 1997.
(2) Estimated based on an assumed public offering price of $15.88 per share.
4
<PAGE> 6
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SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data presented below under the captions
"Statements of Operations Data" and "Balance Sheet Data" for, and as of the end
of, each of the years in the five-year period ended December 31, 1996, are
derived from, and are qualified by reference to, the Company's Consolidated
Financial Statements, which financial statements have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. Such data should be read
in conjunction with the Company's Consolidated Financial Statements and Notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included or incorporated by reference in this Prospectus.
The consolidated financial statements as of December 31, 1995 and 1996, and for
each of the years in the three-year period ended December 31, 1996, and the
independent auditors' report thereon, are included elsewhere in this Prospectus.
The statements of operations data for the nine months ended September 30, 1996
and 1997, and the balance sheet data as of September 30, 1997, are derived from
unaudited consolidated financial statements that include, in the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the information set forth therein. The
results of operations for the nine months ended September 30, 1997 or any other
period are not necessarily indicative of future results.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales and revenues............................. $17,318 $20,135 $18,400 $17,452 $17,388 $12,539 $17,060
Gross profit....................................... 4,076 6,271 4,790 4,427 4,139 2,660 5,947
Earnings (loss) from operations.................... (1,430) 1,215 (121) (11) (608) (718) 1,663
Net earnings (loss)................................ $(1,571) $ 671 $ (182) $ 1 $ (599) $ (712) $ 1,577
Net earnings (loss) per share of common stock...... $ (0.51) $ 0.22 $ (0.06) $ 0.00 $ (0.20) $ (0.24) $ 0.48
Weighted average number of common and common
equivalent shares outstanding.................... 3,065 3,076 3,065 3,084 3,029 3,031 3,275
<CAPTION>
AS OF SEPTEMBER 30, 1997
--------------------------
ACTUAL AS ADJUSTED(1)
------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................. $1,403 $ 15,790
Working capital....................................................................... 4,878 19,265
Total assets.......................................................................... 11,807 26,194
Long-term debt........................................................................ -- --
Stockholders' equity.................................................................. 9,770 24,157
</TABLE>
- ---------------
(1) Adjusted to reflect the sale of the 1,000,000 shares of Common Stock offered
by the Company hereby at an assumed public offering price of $15.88 per
share and the initial application of the estimated net proceeds to the
Company as described under "Use of Proceeds."
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5
<PAGE> 7
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should consider the following risk factors inherent in and affecting
the business of the Company. The discussion in 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 risks and uncertainties.
Such statements include market size, market growth rates and market share
estimates, about which the Company cannot provide any assurances of accuracy.
The Company's actual results and the timing of certain events may differ
materially from the results discussed in the forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed below and in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business."
DEPENDENCE ON MARKET GROWTH. The ability of the Company to sustain or
expand its business depends substantially on the stability and growth of the
various markets for the Company's products and services.
The growth of the photovoltaic market is tied to the continued growth of
worldwide need for wireless power, especially in the developing world, and on
domestic and international government funding of initiatives to promote solar
energy as an alternative to the burning of fossil fuels and other energy
production methods. There can be no assurance that government funding for such
initiatives will continue to be available, or that solar energy will prove to be
a cost-effective alternative to other energy sources and gain acceptance where
traditional energy sources continue to be available. Most of the Company's
revenues from its optoelectronics activities are generated by research and
development contracts with the U.S. government. There can be no assurance that
the U.S. government will continue to fund research and development projects at
the same or higher levels than it has in the past. The growth of the Company's
biomedical business depends on the condition of the health care system and the
industry sectors serving that system. The health care system recently has been
characterized by pricing pressures and consolidations which could reduce or
eliminate demand for the Company's processing services. The merger or
consolidation of manufacturers of orthopedic and other medical devices could
reduce the number of customers for the Company's biomedical processing services.
See "Risk Factors -- Dependence on Outside Funding for Research and Development"
and "Business -- Growth Strategy."
COMPETITION. The Company sells its products and services in competitive
markets. Entities now operating in related markets may enter the Company's
markets. Some of the Company's current and potential competitors have financial
and technical resources greater than those of the Company. Competitive factors
for the Company in its various markets include the amount and pace of
technological innovation, financial resources, product quality, timely delivery,
service and price. Although the Company believes that there are considerable
barriers to entry into the markets it serves, including a significant investment
in specialized capital equipment and product design and development, and the
need for a staff with sophisticated scientific and technological knowledge,
there can be no assurance that new or existing entities will not seek to enter
the Company's markets.
The Company faces competition from various companies in the terrestrial
photovoltaic module manufacturing equipment market, particularly in Japan. The
Company's more technologically sophisticated and highly automated photovoltaic
module manufacturing equipment competes with more labor intensive, lower priced
alternatives. Furthermore, the Company competes in foreign countries where there
may be a preference for doing business with local companies. In addition, large
manufacturers may from time to time produce certain items of equipment for their
own internal use, eliminating the purchase of such equipment from commercial
vendors. With respect to its optoelectronics and biomedical products and
services, the Company competes on the basis of overall quality of service and
price, and at times on the basis of value added. The Company's products and
services also compete against products based on alternate technologies. In the
space solar cell market, which the Company anticipates entering, the Company
will face competition from larger, established companies with greater financial
resources than the Company. The expansion of this market may attract more
companies to enter the market, and may cause companies already in the market to
expand capacity, which may affect the ability of the Company to compete
effectively. In addition, the Company faces competition from numerous other
businesses, particularly small businesses throughout the United States, for
contracts for
6
<PAGE> 8
research and development funded by the U.S. government and other outside
sources. See "Business -- Sales and Marketing" and "-- Competition."
DEPENDENCE ON OUTSIDE FUNDING FOR RESEARCH AND DEVELOPMENT. Substantially
all of the Company's research and development work is funded by the U.S.
government and other outside sources. Loss of outside funding may materially
adversely affect the Company's ability further to develop its proprietary
technologies and applications of these technologies to its current products and
products under development. If the Company is unable to maintain its current
level of such funding for any reason, the Company would need to generate funds
for such research from other sources, reduce its research and development effort
or increase its internal research and development. An increase in internally
funded research and development would have a negative impact on profitability.
U.S. government contracts are cancelable without the Company's consent.
Furthermore, all companies that are parties to cost-plus contracts with the U.S.
government are subject to annual government audit and possible recapture of
payments. While the Company has not incurred significant losses as a result of
government audits to date, the Defense Contract Audit Agency has not yet audited
the Company's contracts for 1996, and any such audit may affect payments
received for work performed by the Company and the rates at which the Company is
reimbursed for future government contracts. Loss of a number of U.S. government
or other research and development contracts could have a material adverse effect
on the Company's business, results of operations or financial condition. See
"Risk Factors -- Risk of Backlog" and "-- Government Regulation" and "Business
- -- Research and Development."
DEPENDENCE ON EXPORT SALES. For the fiscal years ended December 31, 1995
and 1996 and the nine month period ended September 30, 1997, export sales from
the United States accounted for approximately 17%, 19% and 36%, respectively, of
the Company's net sales and revenues. Substantially all of the Company's
international revenues are derived from sales of its photovoltaic module
manufacturing equipment. The Company anticipates that international sales will
continue to account for a significant portion of net sales and revenues. The
Company intends to continue to expand its export sales and to enter additional
international markets, which may require significant management attention and
financial resources. The Company's operating results are subject to the risks
inherent in international sales, including, but not limited to, regulatory
requirements, political and economic changes and disruptions, transportation
delays, national preferences for locally manufactured products and import duties
or other taxes which may affect the prices of the Company's products in other
countries relative to competitors' products. In addition, present or future U.S.
government trade restrictions relating to sales to certain countries may limit
the Company's ability to sell its products in the affected foreign countries.
The Company currently sells its products only in U.S. dollars. As a result,
the Company's sales could be adversely affected to the extent that its customers
have limited access to U.S. dollars and to the extent that fluctuations in
exchange rates may render the Company's prices less competitive relative to
competitors' prices. If the Company chooses to accept payment for its products
in other currencies, it may be subject to reduced profits from adverse changes
in exchange rates. These factors could have a material adverse effect on the
Company's business, results of operations or financial condition. See "Risk
Factors -- Competition," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Sales and Marketing."
RELIANCE ON SALES REPRESENTATIVES. The Company markets its photovoltaic
manufacturing equipment products through a network of non-exclusive commissioned
sales representatives, as well as through its internal staff. While the Company
believes it has good relationships with its sales representatives, there can be
no assurance that the Company will be able to retain such representatives. In
addition, under the Company's agreements with Marubeni Corporation of Nagoya,
Japan, Marubeni will distribute, and in some cases manufacture under a
technology license, certain Spire photovoltaic module manufacturing equipment
under Spire's name in Japan, and has rights to market this equipment line
throughout certain countries in Southeast Asia and the Pacific Rim. The loss of
a significant number of the Company's commissioned sales representatives or the
inability of Marubeni to market and distribute the Company's products
effectively in Japan, Southeast Asia and the Pacific Rim could adversely affect
the Company's ability to market its photovoltaic products and could have a
material adverse effect on the Company's business, results of operations or
financial condition. See "Business -- Sales and Marketing."
7
<PAGE> 9
RECENT INCREASE IN PROFITABILITY; FLUCTUATIONS IN OPERATING RESULTS. While
the Company reported net earnings of $1,577,000 for the nine months ended
September 30, 1997, the Company experienced a net loss in two out of its prior
three full fiscal years, and a loss from operations in all three of such fiscal
years. There can be no assurance that the Company will sustain profitability.
Furthermore, the Company's revenues and operating results may vary significantly
from quarter to quarter as a result of a number of factors, many of which are
outside of management's control. These factors include, among others, timing of
capital expenditures by customers, changes in demand for the Company's products,
long business procurement cycles, changes in pricing policies by the Company and
its competitors, cancellation or delay by customers of contracts with the
Company and access to U.S. currency by the Company's customers. The Company
intends to use a significant portion of the proceeds of this offering for
capital expenditures, including funds to expand the Company's manufacturing
capacity. These expenditures will result in increased depreciation and
amortization expenses, which may negatively affect the Company's operating
results in future periods. See "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
RISK OF BACKLOG. The Company's backlog as of September 30, 1997 (including
equipment, services, license agreements and contract research and development)
was $11,639,000, compared to $9,424,000 as of September 30, 1996. The Company
believes it will fill approximately 51% of this backlog in 1997. Approximately
$6,893,000 of the backlog at September 30, 1997, as compared to $8,152,000 at
September 30, 1996, is represented by contracts with the U.S. government that
are cancelable without the Company's consent, subject to reimbursement of the
Company's expenses. While the Company has not experienced any material
cancellations of such contracts in the past, there can be no assurance that
contracts representing anticipated revenues will not be canceled in the future.
Cancellations of significant amounts of these contracts could have a material
adverse effect on the Company's business, results of operations or financial
condition. See "Risk Factors -- Dependence on Outside Funding for Research and
Development" and "-- Government Regulation" and "Business -- Backlog."
TECHNOLOGICAL ADVANCES; DEPENDENCE ON FUTURE PRODUCT DEVELOPMENT AND MARKET
ACCEPTANCE. Each of the areas in which the Company maintains a proprietary
technology position, particularly photovoltaics and optoelectronics, is
characterized by rapid technological advances and improvements in manufacturing
efficiencies. The Company's ability to operate profitably depends in large part
on its timely access to, or development of, technological advances, and on its
ability to use those advances to improve existing products, develop new products
and manufacture those products efficiently. In addition, there can be no
assurance that the Company will be able to attain market acceptance for
commercial products based on these technologies. The failure to introduce new or
enhanced products on a timely and cost competitive basis, or to attain market
acceptance for commercial products, could have a material adverse effect on the
Company's business, results of operations or financial condition. See "Risk
Factors -- Expansion into New Markets" and "-- Protection of Proprietary
Technology."
EXPANSION INTO NEW MARKETS. The Company has developed, and intends to use
a substantial portion of the proceeds of this offering to increase manufacturing
and marketing of, space solar cells used to power communications satellites. The
Company has not yet manufactured such products in commercial quantities. No
assurance can be given that the Company will be able to manufacture space solar
cells in commercial quantities or that sales of such products, if any, will
economically justify the Company's development, manufacturing and marketing
efforts in this area. The Company is also considering the development and market
introduction of new combinations of photovoltaic manufacturing equipment and
related services and new optoelectronic products, as well as proprietary medical
product offerings. The Company's expansion plans into these potential markets
will subject the Company to all of the risks incident to the expansion of a
small business, particularly the possible adverse impact associated with the
integration of a new line of products into the Company's existing operations and
the potential diversion of management time and attention from the Company's
existing lines of business. Companies that establish new product lines directed
toward new markets frequently encounter unforeseen expenses, difficulties,
complications and delays, and no assurance can be given that the Company will be
successful in meeting its business objectives. See "Risk Factors --
Competition," "-- Reliance on Sales Representatives," "-- Difficulties of
Expanding Capacity" and "-- Need to Manage Growth" and "Business
- -- Growth Strategy."
8
<PAGE> 10
DIFFICULTIES OF EXPANDING CAPACITY. In order to accommodate its
anticipated growth, the Company is planning to expand and reconfigure its
manufacturing and laboratory facilities in Bedford, Massachusetts, and to lease
additional space. There can be no assurance that these planned changes will not
cause the Company to experience delays in product development and manufacturing,
a decrease in production yields or other inefficiencies that can accompany the
expansion of manufacturing facilities, or that adequate equipment and personnel
will be available to operate these facilities. The completion of the Company's
planned expansion will require substantial funds. The Company anticipates that a
significant portion of the net proceeds from this offering will be used to fund
the expansion. If, however, adequate funds are not available, the Company may be
required to scale down or abandon the planned expansion. If the Company
experiences significant delays or problems in implementing its capacity
expansion, such delays or problems could have a material adverse effect on the
Company's business, results of operations or financial condition. See "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Business --
Properties."
PROTECTION OF PROPRIETARY TECHNOLOGY. The Company actively protects
certain of its intellectual property and technological advances as trade
secrets, in part through confidentiality agreements with employees, consultants
and third parties. The Company also seeks and enforces patents as it deems
appropriate. The Company currently has 40 U.S. patents, two of which are jointly
owned, four patents pending in the United States and two foreign patents
pending, all of which cover elements of its materials and processing
technologies. There can be no assurance that the Company will be able to assert
its intellectual property rights successfully against allegedly infringing
competitors, and the inability to assert its rights successfully may have a
negative impact on the Company's competitive position and financial condition.
Furthermore, there can be no assurance that the Company's intellectual property
rights will deter others from developing substantially equivalent or competitive
products or from reverse-engineering the Company's products. Even if a third
party's products infringe upon the Company's patents or other intellectual
property, it may be costly to enforce such rights, and such enforcement efforts
may divert management attention from the operations of the Company. In addition,
the foreign legal protection afforded intellectual property rights, including
patents, if issued, may be different from that afforded under U.S. laws. To the
extent the Company relies on non-disclosure agreements to protect its rights,
there can be no assurance that such information will not be disclosed in breach
of these agreements or, if disclosed, that the Company will be able to recover
amounts sufficient to compensate it for any damage such disclosure may cause.
Further, although no such claims are currently outstanding against the
Company, there can be no assurance that the Company will not be subject to
patent or other intellectual property rights infringement claims asserted by
others, or if asserted, that the Company will be successful in defending its
position or challenging such claims. In the event that the Company were to be
adjudged to infringe patents or other intellectual property rights of others,
the Company might be required to pay damages, and might be enjoined from making,
using or selling the infringing product or service, or might be required to
obtain a royalty-bearing license, if available on acceptable terms.
Alternatively, in the event a license is not offered or is not available on
commercially acceptable terms, the Company may be required to re-engineer the
affected products or processes to avoid such infringement. There can be no
assurance that any such re-engineering will be successful or will result in
commercially acceptable alternatives, and any such re-engineering may entail
significant or prohibitive expense to the Company.
In addition to the foregoing, the U.S. government retains the right to
obtain a patent on any invention developed under contract as to which patent
protection is not sought and obtained by the contractor, or to require the
contractor to grant a third party license of such invention if steps to achieve
practical application of the invention have not been taken. The Company has not
sought, and will not seek, patent protection for each of its inventions under
U.S. government contracts, either due to the nature of the invention or the cost
of applying for and obtaining a patent. This practice subjects the Company to
the potential of losing patent rights to the U.S. government. The Company also
may not achieve practical application of an invention in each instance, or in a
timely manner, thus leading to the possibility of a mandatory third party
license. Furthermore, the U.S. government retains a non-exclusive, royalty-free,
non-transferable license to all technology developed under government contracts,
whether or not patented, for government use, including use by other parties to
9
<PAGE> 11
U.S. government contracts. See "Risk Factors -- Dependence on Key Personnel" and
"Business -- Proprietary Rights."
DEPENDENCE ON SINGLE MANUFACTURING FACILITY. The Company has only one
manufacturing facility, and the Company's revenues are dependent upon the
continued operation of such facility. The operation of a manufacturing plant
involves many risks, including potential damage from fire or natural disasters.
In addition, the Company has obtained certain permits to conduct its business as
currently operated at its facility. There can be no assurance that such permits
would continue to be effective at the current location if the facility were
destroyed and rebuilt, or that the Company will be able to obtain similar
permits to operate at another location. While the Company maintains insurance
covering certain of such risks, including business interruption coverage, there
can be no assurance that the occurrence of these or any other operational
problems at the Company's facility would not materially adversely affect the
Company's business, results of operations or financial condition. See "Business
- -- Manufacturing and Quality Control" and "-- Properties."
NEED TO MANAGE GROWTH. The future success of the Company will depend upon,
among other factors, the ability of the Company to identify and exploit new
product and service opportunities, to recruit, hire, train and retain highly
educated, skilled and experienced management and technical personnel, to
generate capital from operations and to manage the effects of growth on all
aspects of its business, including research, development, manufacturing,
distribution, sales and marketing, administration and finance. Any failure by
the Company to identify and exploit new product and service opportunities,
attract or retain necessary personnel, generate adequate revenues or conduct its
expansion or manage growth effectively could have a material adverse effect on
the Company's business, results of operations or financial condition. See "Risk
Factors -- Expansion into New Markets" and "-- Difficulties of Expanding
Capacity" and "Business -- Growth Strategy."
DEPENDENCE ON KEY PERSONNEL. The Company's long-term success and its
growth strategy depend on the efforts and abilities of its senior management,
particularly Roger G. Little, the Company's founder and its Chairman, Chief
Executive Officer and President, and on its technical staff. The loss of
services of Mr. Little or one or more of the Company's technical staff, or an
inability of the Company to attract and motivate highly educated and skilled
employees, could result in the Company's inability to continue certain product
offerings, and could have a material adverse effect on the Company's business,
results of operations or financial condition. The Company has recently appointed
Vice Presidents for its photovoltaics and biomedical areas, to replace two
former Vice Presidents who resigned during the fourth quarter of 1997. While the
Company believes that the two new Vice Presidents are highly qualified senior
managers, there can be no assurance that these management changes will not have
an adverse effect on the Company's operations. Further, there can be no
assurance that the former employees will not compete with the Company or
disclose Company confidential information, whether or not in violation of any
agreements. While the Company would seek to enforce its rights, any such
competition or disclosure could have a material adverse effect on the Company's
business, results of operations or financial condition. See "Recent
Developments," "Business -- Employees" and "Management -- Executive Officers and
Directors."
CONTROL BY PRINCIPAL STOCKHOLDER. After this offering, Roger G. Little,
the Chairman of the Board, Chief Executive Officer and President of the Company,
will control approximately 27.5% of the Company's outstanding Common Stock. In
addition, as one of three Trustees of the Company's 401(k) Plan, Mr. Little may
exercise control over shares of Common Stock held by the Plan. As a result, Mr.
Little will be in a position to exert significant influence over actions of the
Company which require stockholder approval and generally to direct the affairs
of the Company, including potential acquisitions, sales and changes in control
of the Company. See "Risk Factors -- Shares Available for Future Sale,"
"Principal and Selling Stockholders" and "Description of Securities to be
Registered."
GOVERNMENT REGULATION. The process of bidding for, obtaining, retaining
and performing U.S. government contracts is subject to a large number of U.S.
government regulations and oversight requirements. Compliance with these
government regulations requires extensive record keeping and the maintenance of
complex policies and procedures relating to all aspects of the Company's
business, as well as to work performed for the Company by any subcontractors.
Any failure by the Company to comply with applicable regulations, or to require
its subcontractors so to comply, could result in a variety of adverse
consequences,
10
<PAGE> 12
ranging from remedial requirements to termination of contracts, reimbursement of
fees, reduction of fees on a going forward basis and prohibition from obtaining
future U.S. government contracts. While the Company believes that it has put in
place systems and personnel to ensure compliance with all U.S. government
regulations relating to contracting, there can be no assurance that it will at
all times be in compliance or that any failure to comply will not have a
material adverse effect on the Company's business, results of operations or
financial condition. Furthermore, the Company's U.S. government contracts
include provisions prohibiting the Company from granting exclusive rights to use
or sell any inventions unless such grantee agrees that any product using the
invention will be manufactured substantially in the United States.
The Company is subject to export control regulations, which govern the
export of Company products to certain countries, as well as the release of
technical information to non-U.S. individuals and entities. It also is subject
to the federal Occupational Safety and Health Act ("OSHA"). While the Company
has a full-time compliance officer monitoring compliance with these laws and
regulations, there can be no assurance that it will at all times be in
compliance. Failure to comply with these laws and regulations could result in
penalties to the Company, including fines and requirements to take remedial
action, which could have a material adverse effect on the Company's business,
results of operations or financial condition.
The Company is also subject to a number of federal, state and local
government regulations relating to the use, storage, discharge and disposal of
toxic, volatile or otherwise hazardous chemicals used in its business. Any
failure to comply with present or future regulations could result in the
imposition of fines and the suspension of production or a cessation of
operations. In addition, such regulations could restrict the Company's ability
to expand, or could require the Company to acquire costly equipment or incur
other significant expenses to comply with environmental regulations or to
remediate any pollution.
The introduction by the Company's customers of certain new biomedical
products depends on such products' passage through various stages of review by
the United States Food and Drug Administration ("FDA"). The process of obtaining
regulatory approvals involves lengthy and detailed laboratory and clinical
testing and other costly and time-consuming procedures. There can be no
assurance as to the timely or positive outcome of any such review process. The
inability of the Company's customers to obtain such approvals in a timely
manner, or at all, could impede or prevent the introduction of these biomedical
products into the marketplace, and could adversely affect the Company's revenues
from its biomedical processing services.
The extent of government regulation that may arise from future legislative
or administrative action cannot be predicted. See "Business -- Government
Regulation."
RISK OF UNINSURED LOSS. The use of orthopedic and other medical devices
may entail a risk of physical injury to patients. To the extent the Company has
been involved in the manufacturing of these products, it may be exposed to
potential product liability and other damage claims. Furthermore, the use of the
Company's photovoltaic module manufacturing equipment could result in operator
injury. To date, no product liability or other damage claim has been initiated
against the Company. The Company maintains product liability and umbrella
insurance coverage; however, there can be no assurance that any product
liability claim assessed against the Company would not exceed its insurance
coverage, or that insurance coverage will continue to be available. While the
Company typically obtains agreements of indemnity from manufacturers of
biomedical products for which the Company provides services, there can be no
assurance that any such indemnity agreements will be enforceable or that such
manufacturers will have adequate funds to meet their obligations under such
agreements. The cost of defending a product liability, negligence or other
action, and/or the assessment of damages in excess of insurance coverage, could
have a material adverse effect on the Company's business, results of operations
or financial condition.
FLUCTUATIONS IN STOCK PRICE. The Company's Common Stock has recently
experienced price and volume fluctuations and may experience such fluctuations
in the future. Factors such as announcements of technological innovations or new
products by the Company or its competitors, changes in domestic or foreign
governmental regulations or regulatory approval processes and fluctuations in
quarterly operating results, have and may continue to have a significant impact
on the market price of the Common Stock. Moreover, the stock market (and in
particular the securities of technology companies such as the Company) has
experienced and could in the future experience extreme price and volume
fluctuations. These fluctuations may be unrelated to
11
<PAGE> 13
operating performance and could have a significant impact on the market price of
the Common Stock. See "Price Range of Common Stock."
SHARES AVAILABLE FOR FUTURE SALE. Sales of a substantial number of shares
of Common Stock in the public market following the offering (pursuant to Rule
144 under the Securities Act, or otherwise), as well as the issuance of shares
upon exercise of stock options granted to employees and Directors, could
adversely affect the prevailing market price of the Common Stock and impair the
Company's ability to raise additional capital through the sale of equity
securities. Approximately 1,162,650 shares held by the Company's officers and
Directors after completion of this offering will be eligible for sale under Rule
144. In addition, following the offering, shares of Common Stock will continue
to be held by the Company's 401(k) Plan, and additional shares will be purchased
in open market transactions from time to time thereafter to fund the Company's
contributions to the Plan. The Company's officers, Directors and Selling
Stockholders have agreed not to sell or transfer any shares held by them for a
period of 180 days following the date of this Prospectus without the prior
written approval of Tucker Anthony Incorporated, with certain exceptions (the
"Lock-Up Agreements"). The Company has reserved 382,428 shares of Common Stock
for issuance to officers, Directors, employees and consultants pursuant to the
Company's stock option plans, of which options to purchase 240,928 shares have
been granted and are outstanding as of November 30, 1997. The shares underlying
the stock option plans have been registered under the Securities Act and
generally may be resold upon exercise. However, 93,000 shares issuable upon
exercise of outstanding stock options will be subject to Lock-Up Agreements. See
"Risk Factors -- Control by Principal Stockholder" and "Shares Available for
Future Sale."
NO DIVIDENDS. The Company has paid no dividends since its inception. The
Company anticipates retaining any future earnings for operations and does not
anticipate that dividends will be paid in the foreseeable future. Under its
credit agreement with Silicon Valley Bank, the Company is prevented from paying
dividends without the prior written consent of the Bank. See "Dividend Policy."
12
<PAGE> 14
RECENT DEVELOPMENTS
On March 31, 1997, the Company entered into two agreements with Marubeni
Corporation of Nagoya, Japan, by which Marubeni will distribute, and in some
cases manufacture under a technology license, certain of the Company's
photovoltaic module manufacturing equipment under the Company's name in Japan,
and has rights to market this equipment line throughout certain countries in
Southeast Asia and the Pacific Rim. Marubeni's Japanese office is headed by
Spire's long-time photovoltaic equipment sales representative in Japan.
Management believes that this Japanese office will give the Company the
in-country presence it needs to grow its already established photovoltaics
module manufacturing equipment business in Japan. See "Risk Factors -- Reliance
on Sales Representatives" and "Business -- Sales and Marketing."
At the Special Meeting in lieu of the 1997 Annual Meeting held on June 3,
1997, the Company's stockholders authorized a plan of restructuring of the
Company, which would include a transfer of a substantial portion of the
Company's respective property and assets relating to its photovoltaics,
optoelectronics and biomedical operations to three wholly owned operating
subsidiaries (the "Transfer"). The Company's Board of Directors (the "Board")
sought approval for the Transfer because the Board believed it would permit the
new operating subsidiaries to obtain public or private financing and to engage
in transactions such as strategic alliances, joint ventures and mergers and
acquisitions on terms more attractive to such subsidiaries than the Company
could achieve on its own. The Transfer was anticipated to occur within
approximately ten months of approval by stockholders, subject to certain
conditions; however, Company management or the Board could elect, within one
year from stockholder approval, to abandon the Transfer, in whole or in part.
While the Company has no plans to complete the Transfer at this time, or to
engage in any of the financings or other considered transactions, neither
management nor the Board formally has elected to abandon the Transfer in whole
or in part, and any one or more contemplated transactions under the Transfer
could be completed at any time deemed appropriate by the Company in the future.
On August 27, 1997, the Board elected Michael T. Eckhart as a new Director,
filling a vacancy on the Board. See "Management -- Executive Officers and
Directors."
On November 10, 1997, the Company announced the establishment of an office
in Denver, Colorado, to support the Company's activities in the Western and
Midwestern regions of the United States, with particular focus on customers
building complete photovoltaic module manufacturing facilities. The Denver
office is headed by Dr. David Mooney, who joined the Company after serving as
vice president of a telecommunications hardware company for the previous two
years. Prior to that, Dr. Mooney served in several research and management
positions at the National Renewable Energy Laboratory and worked directly with
the Secretary of Energy to help develop domestic and international renewable
energy policies. See "Business -- Sales and Marketing."
On November 25, 1997, the Board elected Stephen J. Hogan Vice President and
General Manager, Photovoltaics. Mr. Hogan has been with the Company since 1984,
when he joined the Company as Manager of Process Development. Mr. Hogan has
served the Company in various capacities, most recently as Director of
Photovoltaic Business Development. See "Risk Factors -- Dependence on Key
Personnel" and "Management -- Executive Officers and Directors."
Also on November 25, 1997, the Board authorized the Company to hire Ronald
S. Scharlack as Vice President and General Manager, Biomedical. Mr. Scharlack is
scheduled to join the Company on January 5, 1998. Previously, Mr. Scharlack was
the manager of advanced technology at Chiron Diagnostics, Medfield,
Massachusetts, a manufacturer of biomedical instruments. See "Risk Factors --
Dependence on Key Personnel" and "Management -- Executive Officers and
Directors."
13
<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock offered hereby by the Company are estimated to be $14.4 million
($17 million if the Underwriters' over-allotment options are exercised in full),
at an assumed public offering price of $15.88 per share and after deducting the
underwriting discounts and estimated offering expenses payable by the Company.
The Company will not receive any proceeds from the sale of Common Stock by the
Selling Stockholders.
The Company intends to use the net proceeds from this offering (i) to
invest approximately $5 million to $7 million in capital expenditures over the
next two years to expand manufacturing capacity and semiconductor production
facilities, primarily for the manufacture of space photovoltaic solar cells;
(ii) to invest approximately $1 million to $2 million for capital equipment,
marketing and related expenses to support its biomedical service offerings;
(iii) to invest approximately $1 million to $2 million for facility enhancements
and to upgrade and improve information and communication systems; and (iv) to
contribute to working capital and general corporate purposes, which may include
joint ventures or acquisitions. The Company currently has no commitments with
respect to any joint ventures or acquisitions.
The allocation of the net proceeds of this offering set forth above
represents the Company's best estimate based upon its present plans and certain
assumptions regarding general economic and industry conditions and the Company's
future revenues and expenditures. If any of these factors change, the Company
may find it necessary or advisable to reallocate some of the proceeds within the
above-described categories or to other purposes. Proceeds not immediately
utilized for the purposes described above will be invested principally in
short-term, high-grade, interest-bearing securities.
Management estimates, based on currently proposed plans and assumptions
relating to its operations, that the net proceeds from this offering together
with projected cash flow from operations will be sufficient to satisfy the
Company's anticipated cash requirements for at least 12 months following the
offering.
14
<PAGE> 16
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "SPIR." The following table sets forth the high and low closing sale
prices for the Common Stock for the periods shown as reported on the Nasdaq
National Market. These prices do not reflect retail mark-ups, mark-downs or
commissions.
<TABLE>
<CAPTION>
HIGH LOW
---- -----
<S> <C> <C>
1995
First Quarter................................. $2 5/8 $2 1/8
Second Quarter................................ 2 5/8 2
Third Quarter................................. 3 1/4 2
Fourth Quarter................................ 3 1/8 2
1996
First Quarter................................. 2 1/2 2
Second Quarter................................ 6 3/4 2 1/2
Third Quarter................................. 3 1/2 2 3/4
Fourth Quarter................................ 2 3/4 2 1/4
1997
First Quarter................................. 4 1/4 2 1/4
Second Quarter................................ 5 3/8 4
Third Quarter................................. 16 5/8 5 1/8
Fourth Quarter (through December 22, 1997).... 23 14 9/16
</TABLE>
On December 22, 1997, the closing price of the Common Stock, as reported on
the Nasdaq National Market, was $15.88, and on that date there were
approximately 220 holders of record of the Company's Common Stock.
DIVIDEND POLICY
Since its inception the Company has not paid any cash dividends on the
Common Stock and does not intend to pay cash dividends in the foreseeable
future. The Company expects that any earnings will be retained to finance the
Company's business. Future dividends, if any, will depend upon the Company's
earnings, financial condition, cash requirements, future prospects and other
factors deemed relevant by the Company's Board of Directors. Under its credit
agreement with Silicon Valley Bank, the Company is prevented from paying
dividends without the prior written consent of the Bank.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 and as adjusted to reflect the issuance and sale of 1,000,000
shares of Common Stock offered by the Company hereby at an assumed public
offering price of $15.88 and the initial application of the estimated net
proceeds to the Company therefrom as described under "Use of Proceeds." This
table should be read in conjunction with, and is qualified in its entirety by,
the Company's Consolidated Financial Statements and the Notes thereto included
elsewhere or incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt......................................................... $ -- $ --
Stockholders' equity:
Common stock, $.01 par value, 20,000,000 shares
authorized; 3,715,466 shares issued; 4,163,306
shares issued and outstanding as adjusted(1)......................... 37 42
Additional paid-in capital............................................. 9,410 22,573
Retained earnings...................................................... 1,542 1,542
------- ------
10,990 24,157
Treasury stock at cost, 552,160 shares; no shares as adjusted(2)..... (1,220) --
------- ------
Total stockholders' equity........................................... 9,770 24,157
------- ------
Total capitalization................................................. $ 9,770 $24,157
======= ======
</TABLE>
- ---------------
(1) Excludes 287,719 shares of Common Stock subject to options granted to
employees and directors of the Company as of September 30, 1997 at a
weighted average exercise price of $3.64 per share.
(2) All of the 552,160 shares of Common Stock held as treasury stock are being
sold as part of the offering.
16
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below under the captions
"Statements of Operations Data" and "Balance Sheet Data" for, and as of the end
of, each of the years in the five-year period ended December 31, 1996, are
derived from, and are qualified by reference to, the Company's Consolidated
Financial Statements, which financial statements have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. Such data should be read
in conjunction with the Company's Consolidated Financial Statements and Notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included or incorporated by reference in this Prospectus.
The consolidated financial statements as of December 31, 1995 and 1996, and for
each of the years in the three-year period ended December 31, 1996, and the
independent auditors' report thereon, are included elsewhere in this Prospectus.
The statements of operations data for the nine months ended September 30, 1996
and 1997, and the balance sheet data as of September 30, 1997, are derived from
unaudited consolidated financial statements that include, in the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the information set forth therein. The
results of operations for the nine months ended September 30, 1997 or any other
period are not necessarily indicative of future results.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales and revenues.................... $17,318 $20,135 $18,400 $17,452 $17,388 $12,539 $17,060
Cost of sales and revenues................ 13,242 13,864 13,610 13,025 13,250 9,879 11,112
Selling, general and administrative
expenses................................ 5,147 5,056 4,911 4,438 4,746 3,378 4,285
Loss on sale of product line.............. 359 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Total cost and expenses................... 18,748 18,920 18,521 17,463 17,996 13,257 15,397
------- ------- ------- ------- ------- ------- -------
Earnings (loss) from operations........... (1,430) 1,215 (121) (11) (608) (718) 1,663
Interest income (expense)................. (308) (242) (82) (20) 9 13 14
------- ------- ------- ------- ------- ------- -------
Earnings (loss) before income taxes....... (1,738) 973 (203) (31) (599) (705) 1,677
------- ------- ------- ------- ------- ------- -------
Net earnings (loss)....................... $(1,571) $ 671 $ (182) $ 1 $ (599) $ (712) $ 1,577
======= ======= ======= ======= ======= ======= =======
Net earnings (loss) per share of Common
Stock................................... $ (0.51) $ 0.22 $ (0.06) $ 0.00 $ (0.20) $ (0.24) $ 0.48
======= ======= ======= ======= ======= ======= =======
Weighted average number of common and
common equivalent shares outstanding.... 3,065 3,076 3,065 3,084 3,029 3,031 3,275
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1997
AS OF DECEMBER 31, ----------------------
--------------------------------------------------- AS
1992 1993 1994 1995 1996 ACTUAL ADJUSTED(1)
------- ------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....................... $ 2,536 $ 2,156 $ 1,697 $ 2,430 $ 2,020 $4,878 $19,265
Total assets.......................... 13,251 11,627 11,740 10,944 10,566 11,807 26,194
Long-term debt........................ 1,850 34 10 -- -- -- --
Stockholders' equity.................. 7,534 8,205 8,024 7,894 7,293 9,770 24,157
</TABLE>
- ---------------
(1) Adjusted to reflect the sale of the 1,000,000 shares of Common Stock offered
by the Company hereby at an assumed public offering price of $15.88 per
share and the initial application of the estimated net proceeds to the
Company as described under "Use of Proceeds."
17
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations section and other parts of this Prospectus contain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act that involve risks and uncertainties.
The Company's actual results and the timing of certain events may differ
significantly from the results discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed below and in "Risk Factors" and "Business." The
following discussion is qualified in its entirety by, and should be read in
conjunction with, the detailed information and Consolidated Financial
Statements, including the Notes thereto, appearing elsewhere or incorporated by
reference in this Prospectus.
OVERVIEW
Spire develops, manufactures and markets highly-engineered photovoltaic
module manufacturing equipment and optoelectronic products and provides
biomedical processing services. Spire is the world's leader in the design and
manufacture of specialized equipment for the production of terrestrial
photovoltaic modules from solar cells, with its equipment installed in over 130
factories and in more than 30 countries. The Company also offers certain
optoelectronic products and is continuing to develop additional advanced
optoelectronic products for telecommunications, biomedical and electronics
applications, including solar cells used to power satellites. Spire's
value-added biomedical processing services offer surface treatments to enhance
the durability or the antimicrobial characteristics of orthopedic and other
medical devices.
The Company's net sales and revenues for the nine months ended September
30, 1997 increased 36%, compared to the nine months ended September 30, 1996.
All of the Company's three areas of business have contributed to the growth in
net sales and revenues. The most significant contribution has been from the
Company's photovoltaic module manufacturing equipment line. The photovoltaic
industry has experienced increased demand for solar module capacity, which has
resulted in the Company's recent growth in its manufacturing equipment sales.
The Company's ability to maintain the growth rate in this area is directly tied
to the industry's continued demand for solar power. The Company continues to
rely on funding from the U.S. government for its research and development
activities. For the nine months ended September 30, 1997, revenues from U.S.
government research and development contracts represented 35% of net sales and
revenues, compared to 39% for the nine months ended September 30, 1996. The
Company believes that such contracts are likely to represent a decreasing
percentage of net sales and revenues as sales of the Company's commercial
products and services continue to grow.
The Company's strategy is to concentrate on growing its commercial products
and services. Operating results in any particular quarter will depend upon
product mix, as well as the timing of shipments of higher priced products from
its equipment line. Export sales, which amounted to 36% of net sales and
revenues for the nine months ended September 30, 1997, continue to constitute a
significant portion of the Company's net sales and revenues. Export sales are
expected to continue to grow as worldwide demand for photovoltaic energy
continues to increase. The Company intends to use a significant portion of the
proceeds of this offering for capital expenditures. These expenditures will
result in increased depreciation and amortization expenses, which may negatively
affect the Company's operating results in future periods.
During 1997, the Company expects to utilize a significant portion of its
available net operating loss and tax credit carryforwards. As a result, the
Company's financial results for future periods are expected to reflect increased
tax expense.
18
<PAGE> 20
RESULTS OF OPERATIONS
The following table sets forth certain items as a percentage of net sales
and revenues for the periods presented:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales and revenues.......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales and revenues...................... 74.0 74.6 76.2 78.8 65.1
----- ----- ----- ----- -----
Gross profit.................................... 26.0 25.4 23.8 21.2 34.9
Selling, general and administrative expenses.... 26.7 25.5 27.3 26.9 25.1
----- ----- ----- ----- -----
Earnings (loss) from operations................. (0.7) (0.1) (3.5) (5.7) 9.8
Earnings (loss) before income taxes............. (1.1) (0.2) (3.4) (5.6) 9.8
Income tax expense (benefit).................... (0.1) (0.2) -- 0.1 0.6
----- ----- ----- ----- -----
Net earnings (loss)............................. (1.0)% --% (3.4)% (5.7)% 9.2%
===== ===== ===== ===== =====
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Net Sales and Revenues
Net sales and revenues increased $4,521,000 or 36% for the nine months
ended September 30, 1997 to $17,060,000, compared to $12,539,000 for the nine
months ended September 30, 1996. The increase is due to increased demand for
commercial products and services, increased contract research and development
revenues, and receipt of a $600,000 one-time license fee. Manufacturing
equipment sales increased $2,132,000 or 51% to $6,286,000 for the first nine
months of 1997, compared to $4,154,000 in the same period of 1996, due to
increased sales of photovoltaic equipment resulting from increased demand for
photovoltaic energy. The following table sets forth certain items regarding the
Company's net sales and revenues for the periods presented:
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997 CHANGE
------------- ------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Contract research, service and license revenues............ $ 8,385 $10,774 28%
Manufacturing equipment sales.............................. 4,154 6,286 51%
------- -------
Net sales and revenues..................................... $12,539 $17,060 36%
======= =======
</TABLE>
Cost of Sales and Revenues
The cost of sales and revenues increased $1,233,000 to $11,112,000, but
decreased to 65% of net sales and revenues, for the nine months ended September
30, 1997, compared to $9,879,000 or 79% of net sales and revenues for the nine
months ended September 30, 1996.
The cost of contract research, service and license revenues increased
$997,000 to $6,899,000, but decreased to 64% of related revenues, for the nine
months ended September 30, 1997, compared to $5,902,000 or 70% of related
revenues for the nine months ended September 30, 1996. Cost of manufacturing
equipment sales increased $236,000 to $4,213,000, but decreased to 67% of
related sales, for the nine months ended September 30, 1997, compared to
$3,977,000 or 96% of related sales, for the nine months ended September 30,
1996. The decrease in total cost of sales and revenues as a percentage of
related sales and revenues is due to increased efficiencies in the manufacturing
process, product mix and higher volume.
19
<PAGE> 21
The following table sets forth certain items regarding the Company's cost
of sales and revenues for the periods presented, stated in dollars and as a
percentage of related sales and revenues:
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 % 1997 %
------------- ----- ------------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Contract research, service and license revenues........ $ 5,902 70% $ 6,899 64%
Manufacturing equipment sales.......................... 3,977 96% 4,213 67%
------- -------
Total cost of sales and revenues....................... $ 9,879 79% $11,112 65%
======= =======
</TABLE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the nine months ended
September 30, 1997 increased $907,000 to $4,284,000, but decreased to 25% of
sales and revenues, compared to $3,377,000 or 27% of sales and revenues for the
nine months ended September 30, 1996. Selling, general and administrative
expenses increased primarily due to increases in commissions, marketing and
travel costs related to increased sales of products and services, but decreased
as a percentage of net sales and revenues due to an increase in the sales and
revenues base.
Depreciation and Amortization Expenses
Depreciation and amortization expenses for the nine months ended September
30, 1997 increased $21,000 or 3% to $845,000, compared to $824,000 for the nine
months ended September 30, 1996. Expenditures for capital equipment increased
$65,000 or 12% to $612,000 for the nine months ended September 30, 1997,
compared to $547,000 for the nine months ended September 30, 1996.
Interest
The Company earned $14,000 in interest income in the first nine months of
both 1997 and 1996. The Company incurred insignificant interest expense during
both nine-month periods.
Income Taxes
The Company recorded tax expense of $100,000 for the nine months ended
September 30, 1997, compared to an expense of $6,773 for the nine months ended
September 30, 1996. The tax expense for the nine months ended September 30, 1997
benefited from a $300,000 realization of the Company's deferred tax asset. The
Company recorded this benefit because it believes that the tax effects of
existing deductible temporary differences or carryforwards of $300,000 are more
likely than not to be realized through the generation of sufficient future
taxable income. At September 30, 1997, the Company had a remaining valuation
allowance of $330,000 against its net deferred tax asset that consisted
primarily of credit carryforwards of $1,093,000 offset by net deferred tax
liabilities for timing differences of $809,000.
Net Earnings (Loss)
The Company reported net earnings for the nine months ended September 30,
1997 of $1,577,000, compared to a loss of $712,000 for the nine months ended
September 30, 1996. The improvement in the Company's profitability resulted in
large part from increased net sales and revenues in all areas of the Company's
business, particularly in manufacturing equipment sales, where the Company's
profit margins are generally higher. In addition, the Company received a
$600,000 one-time license fee.
20
<PAGE> 22
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Sales and Revenues
Net sales and revenues decreased $64,000 or less than 1% for the year ended
December 31, 1996 to $17,388,000, compared to $17,452,000 for the year ended
December 31, 1995. This decrease is due to decreased government contract
revenues, partially offset by an increase in photovoltaic equipment sales.
Contract research, service and license revenues decreased $1,437,000 or 11% in
1996 to $11,447,000, compared to $12,884,000 in 1995, due to decreased
government contract revenues. Government contract revenues also constituted a
lesser percentage of overall revenues as the percentage of revenues represented
by the Company's commercial activities increased. Manufacturing equipment sales
increased $1,373,000 or 30% to $5,941,000, compared to $4,568,000 in 1995, due
to increased sales of photovoltaic module manufacturing equipment resulting from
increased demand for photovoltaic energy. The following table sets forth certain
items regarding the Company's net sales and revenues for the periods presented:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996 CHANGE
------------ ------------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Contract research, service and license revenues............. $12,884 $11,447 (11%)
Manufacturing equipment sales............................... 4,568 5,941 30%
------- -------
Net sales and revenues...................................... $17,452 $17,388 (less than 1%)
======= =======
</TABLE>
Cost of Sales and Revenues
The cost of sales and revenues increased $225,000 to $13,250,000 or 76% of
net sales and revenues for the year ended December 31, 1996, compared to
$13,025,000 or 75% of net sales and revenues for the year ended December 31,
1995. The cost of contract research, service and license revenues decreased
$249,000 to $8,938,000, but increased to 78% of related revenues, for the year
ended December 31, 1996, compared to $9,187,000 or 71% for the same period in
1995. The increase in cost of revenues as a percentage of related revenues was
due to a reduction in sales volume and resulting underutilization of fixed
costs. Cost of manufacturing equipment sales increased $474,000 to $4,312,000,
but decreased to 73% of related sales in 1996, compared to $3,838,000 or 84% of
related sales in 1995. The decrease in cost of sales as a percentage of related
sales was due to improved product mix and increased manufacturing efficiencies.
The following table sets forth certain items regarding the Company's cost
of sales and revenues for the periods presented, stated in dollars and as a
percentage of related sales and revenues:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 % 1996 %
------------ -------- ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Contract research, service and license revenues..... $ 9,187 71% $ 8,938 78%
Manufacturing equipment sales....................... 3,838 84% 4,312 73%
------- -------
Total cost of sales and revenues.................... $13,025 75% $13,250 76%
======= =======
</TABLE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $307,000 to
$4,746,000 or 27% of net sales and revenues for 1996, as compared to $4,439,000
or 25% of net sales and revenues for 1995. The increase in selling, general and
administrative expenses as a percentage of net sales and revenues is
attributable to increased selling activities and a decrease in net sales and
revenues.
Depreciation and Amortization Expenses
Depreciation and amortization expenses decreased $53,000 or 4% in 1996 to
$1,240,000 from $1,293,000 in 1995. The decrease was due to a reduction in
expenditures for capital equipment during prior years and items becoming fully
depreciated. Expenditures for capital equipment increased $553,000 or 142% to
$943,000 in 1996, compared to $390,000 in 1995. During 1996 the Company made a
major investment in its MIS systems.
21
<PAGE> 23
Interest
The Company earned $17,000 in interest income in 1996, compared to $18,000
in 1995. The Company incurred interest expense in the amount of $11,000 in 1996
and $39,000 in 1995, of which $2,000 was capitalized in 1996 and $1,000 in 1995.
The decline in interest expense was due to the Company's reduction of debt. As
of December 31, 1996, the Company had no outstanding indebtedness.
Income Taxes
The Company recorded no tax expense for the year ended December 31, 1996,
compared to a tax benefit of $32,000 for the year ended December 31, 1995.
Net Earnings (Loss)
The Company reported a net loss for the year ended December 31, 1996 of
$599,000, compared to net earnings of $1,000 for the year ended December 31,
1995. The net loss in 1996 resulted primarily from increased selling, general
and administrative expenses and cost of sales and revenues, coupled with a
decrease in net sales and revenues.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Sales and Revenues
Net sales and revenues decreased $948,000 or 5% for the year ended December
31, 1995 to $17,452,000, compared to $18,400,000 for the year ended December 31,
1994. This decrease is due to decreased contract research, service and license
revenues, partially offset by an increase in photovoltaic equipment sales.
Contract research, service and license revenues decreased $1,653,000 or 11% in
1995 to $12,884,000, compared to $14,537,000 in 1994, due to decreased U.S.
government contract and orthopedic product line revenues. The decline in
contract revenues was largely the result of the U.S. government's move toward
programs requiring significant cost sharing, which management elected to pursue
cautiously and selectively. The orthopedic processing service business
experienced pricing pressures due to competition and changes in the health care
market, which negatively affected revenues and margins. Manufacturing equipment
sales increased $705,000 or 18% to $4,568,000 in 1995, compared to $3,863,000 in
1994, due to increased demand for photovoltaic manufacturing equipment. The
following table sets forth certain items regarding the Company's net sales and
revenues for the periods presented:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995 CHANGE
------------ ------------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Contract research, service and license revenues........... $ 14,537 $ 12,884 (11%)
Manufacturing equipment sales............................. 3,863 4,568 18%
------------ ------------
Net sales and revenues.................................... $ 18,400 $ 17,452 (5%)
========== ==========
</TABLE>
Cost of Sales and Revenues
The cost of sales and revenues decreased $585,000 to $13,025,000, but
increased to 75% of net sales and revenues, for the year ended December 31,
1995, compared to $13,610,000 or 74% of net sales and revenues for the year
ended December 31, 1994. The cost of contract research, service and license
revenues decreased $1,313,000 to $9,187,000 or 71% of related revenues for the
year ended December 31, 1995, compared to $10,500,000 or 72% for the same period
in 1994. The decrease was due to reduced indirect expenses. Cost of
manufacturing equipment sales increased $728,000 to $3,838,000 or 84% of related
sales in 1995, compared to $3,110,000 or 81% of related sales in 1994. The
increase was due to changes in product mix.
22
<PAGE> 24
The following table sets forth certain items regarding the Company's cost
of sales and revenues for the periods presented, stated in dollars and as a
percentage of related sales and revenues:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 % 1995 %
------------ --------- ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Contract research, service and license
revenues..................................... $ 10,500 72% $ 9,187 71%
Manufacturing equipment sales.................. 3,110 81% 3,838 84%
------- -------
Total cost of sales and revenues............... $ 13,610 74% $ 13,025 75%
======= =======
</TABLE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $472,000 to
$4,439,000 or 25% of net sales and revenues for 1995, compared to $4,911,000 or
27% of net sales and revenues for 1994. The decrease in selling, general and
administrative expenses as a percentage of net sales and revenues was
attributable to cost cutting measures implemented by the Company, such as
reduced staffing.
Depreciation and Amortization Expenses
Depreciation and amortization expenses decreased $99,000 or 7% in 1995 to
$1,293,000 from $1,392,000 in 1994. The decrease was due to a reduction in
expenditures for capital equipment during prior years and to certain items
becoming fully depreciated. Expenditures for capital equipment decreased
$1,043,000 or 73%, totaling $390,000 in 1995, compared to $1,433,000 in 1994.
The capital expenditures in 1994 included significant expenditures to fabricate
a Class 100 Cleanroom, whereas capital expenditures were significantly reduced
in 1995 to conserve resources.
Interest
The Company earned $18,000 in interest income in 1995, compared to no
interest income in 1994. The Company incurred interest expense in the amount of
$39,000 in 1995 and $112,000 in 1994, of which $1,000 was capitalized in 1995
and $29,000 in 1994. The decline in interest expense was due to the Company's
reduction of debt. As of December 31, 1995, the Company had no outstanding
indebtedness.
Income Taxes
The Company recorded a tax benefit of $32,000 for the year ended December
31, 1995, compared to a tax benefit of $21,000 for the year ended December 31,
1994.
Net Earnings (Loss)
The Company reported net earnings for the year ended December 31, 1995 of
$1,000, compared to a net loss of $182,000 for the year ended December 31, 1994.
The Company reduced its net loss despite a decrease in net sales and revenues,
due to reduced selling, general and administrative expenses and cost of sales
and revenues, as well as a reduction in interest expense.
23
<PAGE> 25
QUARTERLY INFORMATION
The following table sets forth certain unaudited quarterly results of
operations data of the Company for each of the four quarters in the years ended
December 31, 1995 and 1996 and for the three quarters ended September 30, 1997.
The Company believes that the following selected quarterly information has been
prepared on the same basis as the audited Consolidated Financial Statements and
that all necessary adjustments, consisting only of normal recurring adjustments,
have been included to present fairly the selected quarterly information when
read in conjunction with the audited Consolidated Financial Statements and the
Notes thereto included elsewhere or incorporated by reference in this
Prospectus. Results for any particular quarter are not necessarily indicative of
results for any future period. See "Risk Factors."
<TABLE>
<CAPTION>
1995 1996 1997
--------------------------------- --------------------------------- ------------------------
QTR. 1 QTR. 2 QTR. 3 QTR. 4 QTR. 1 QTR. 2 QTR. 3 QTR. 4 QTR. 1 QTR. 2 QTR. 3
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales and revenues......... $4,583 $4,659 $4,275 $3,935 $3,838 $4,489 $4,213 $4,848 $4,451 $6,433 $6,176
Gross profit................... 1,127 1,095 1,181 1,024 832 1,148 680 1,478 1,520 2,226 2,202
Earnings (loss) from
operations................... 20 22 101 (154) (272) 22 (468) 110 147 802 714
Net earnings (loss)............ 3 2 61 (65) (266) 33 (479) 113 150 702 725
Net earnings (loss) per
share........................ $ 0.00 $ 0.00 $ 0.02 $(0.02) $(0.09) $ 0.01 $(0.16) $ 0.04 $ 0.05 $ 0.22 $ 0.22
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has been able to fund its liquidity requirements using cash
from operations and available lines of credit. On April 4, 1997, the Company
amended and extended its revolving credit agreement with Silicon Valley Bank.
This agreement provides for a $2 million revolving credit facility, based upon
eligible accounts receivable requirements. This line of credit has been
established to provide the Company with resources for general working capital
purposes and Standby Letter of Credit Guarantees for foreign customers. The line
is secured by all assets of the Company. Interest on the line is at the Bank's
prime rate plus one-half of one percent. The line contains covenants including
provisions relating to profitability and net worth. As of September 30, 1997,
the Company had no outstanding debt under this revolving credit facility.
The Company believes it has sufficient resources to finance its current
operations for the foreseeable future through working capital, its existing line
of credit and available lease arrangements. The Company will use portions of the
proceeds of this offering to execute its growth strategy. Net increase
(decrease) in cash and cash equivalents for the years ended December 31, 1994,
1995, and 1996, amounted to $120,000, $964,000, ($159,000), respectively, and
$432,000 for the nine months ended September 30, 1997. Capital expenditures for
the same periods amounted to $1,433,000, $390,000, $943,000 and $612,000,
respectively. To date there are no material commitments by the Company for
capital expenditures. However it is anticipated with this offering that the
Company will make significant capital investments for future product expansion.
At September 30, 1997, the Company's retained earnings were $1,542,000, compared
to a $35,000 accumulated deficit as of December 31, 1996. Working capital as of
September 30, 1997 increased 141% to $4,878,000, compared to $2,020,000 as of
December 31, 1996.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS
128 establishes a different method of computing net income per share than is
currently required under the provisions of Accounting Principles Board Opinion
No. 15. Under SFAS 128, the Company will be required to present both basic net
income per share and diluted net income per share. Basic net income per share is
expected to be higher than the currently presented net income per share as the
effect of dilutive stock options will not be considered in computing basic net
income per share. The impact on diluted net income per share is not expected to
be material. The Company plans to adopt SFAS 128 in its fiscal quarter ending
December 31, 1997 and at that time all historical net income per share data
presented will be restated to conform to the provisions of SFAS 128.
In June 1997, the Financial Accounting Standards Board issued SFAS 130,
"Reporting Comprehensive Income," which establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. Under this concept, all revenues,
expenses, gains and
24
<PAGE> 26
losses recognized during the period are included in income, regardless of
whether they are considered to be results of operations of the period. SFAS 130,
which becomes effective for the Company in its year ending December 31, 1998, is
not expected to have a material impact on the Consolidated Financial Statements
of the Company.
In June 1997, the Financial Accounting Standards Board issued SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes standards for the way that public business enterprises report
selected information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports to stockholders. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. SFAS 131, which becomes effective for the Company in its
year ending December 31, 1998, is not expected to have a material impact on the
Company's results of operations.
IMPACT OF INFLATION AND CHANGING PRICES
Historically, the Company's business has not been materially impacted by
inflation. Manufacturing equipment sales are generally quoted, manufactured and
shipped within a cycle of approximately six months, allowing for orderly pricing
adjustments to the cost of labor and purchased parts. The Company has not
experienced any negative effects from the impact of inflation on long-term
contracts. The Company's service business is not expected to be seriously
affected by inflation because its procurement-production cycle typically ranges
from two weeks to several months, and prices generally are not fixed for more
than one year. Research and development contracts usually include cost
escalation provisions.
FOREIGN EXCHANGE FLUCTUATION
The Company sells only in U.S. dollars, generally against an irrevocable
confirmed letter of credit through a major U.S. bank. Therefore the Company is
not directly affected by foreign exchange fluctuations on its current orders.
However, fluctuations in foreign exchange rates do have an effect on the
Company's customers' access to U.S. dollars and on the pricing competition on
certain pieces of equipment that the Company sells in selected markets.
25
<PAGE> 27
BUSINESS
The discussion in 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 risks and uncertainties. The Company's actual results
and the timing of certain events may differ materially from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below and in "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
GENERAL
Spire develops, manufactures and markets highly-engineered photovoltaic
module manufacturing equipment and optoelectronic products and provides
biomedical processing services. Spire is the world's leader in the design and
manufacture of specialized equipment for the production of terrestrial
photovoltaic modules from solar cells, with its equipment installed in over 130
factories and in more than 30 countries. The Company also offers certain
optoelectronic products and is continuing to develop additional advanced
optoelectronic products for telecommunications, biomedical and electronics
applications, including solar cells used to power satellites. Spire's
value-added biomedical processing services offer surface treatments to enhance
the durability or antimicrobial characteristics of orthopedic and other medical
devices.
Photovoltaics, the technology of using solar cells to convert sunlight
directly into electricity, is a growing alternative energy production method and
an increasingly important component of world energy production, particularly in
the wireless telecommunications sector. With this technology, electricity is
produced by using photovoltaic modules, which consist of a number of solar cells
connected to each other and laminated in reliable and durable support
structures. The Company believes that it is the only company that manufactures
each piece of equipment necessary for a complete production line that fabricates
photovoltaic solar cells into modules. The Company's module manufacturing
equipment and production line configurations offer its customers a range of
manufacturing processes, from relatively labor intensive to fully automated
systems. Spire's products include solar cell testers, cell tabbing and stringing
assemblers, laminators and sun simulator module testers, as well as turnkey
module production lines complete with comprehensive technology, training and
service support.
Spire's market leadership and international reputation for quality
manufacturing and process technology position the Company to capitalize further
on the expanding global photovoltaic market. In the past five years, global
usage of terrestrial photovoltaic power has increased substantially, due to such
factors as rural electrification in the developing world, the accelerated growth
of wireless telecommunications, with its need for wireless power, and increased
environmental concerns encouraging the use of renewable energy sources.
Awareness and acceptance of photovoltaics as an energy source are growing as a
result of receiving significant support from initiatives such as the PV Rooftop
Program in Japan, the Building Integration Program in Germany and the Clinton
Administration's recently announced "Million Solar Roofs Initiative."
Projections by industry experts of growth in worldwide demand for
photovoltaic modules range from 25% to 50% per year through the year 2002. In
order to meet this increasing demand, manufacturers of photovoltaic modules must
increase their manufacturing capacity by adding capital equipment, including the
types of capital equipment offered by the Company. Industry experts estimate
that in 1997 annual worldwide module production capacity increased by at least
34%, or 44 megawatts. Photovoltaic module manufacturers already have announced
plans to expand worldwide module production capacity by 100 megawatts in 1998,
which would be a 58% increase over 1997 production capacity. The Company
believes that the 1998 market for photovoltaic module manufacturing equipment
will be approximately $25 million to $40 million, compared to a 1997 market of
approximately $20 million for such equipment. See "Risk Factors -- Dependence on
Market Growth" and "-- Technological Advances; Dependence on Future Product
Development and Market Acceptance."
In addition to projected growth in the terrestrial photovoltaic market, the
proliferation of satellites resulting from the increasing need for
telecommunications bandwidth has created demand for specialized photovoltaic
cells to power satellites. According to industry experts, telecommunications
companies worldwide plan to launch more than 500 satellites in the next five
years. Based upon published reports, the Company
26
<PAGE> 28
believes there may be insufficient manufacturing capacity in the industry to
meet the increasing demand for space solar cell production. The Company has
developed extensive technology and expertise as a result of more than 25 years
of solar cell contract research for the U.S. government and commercial
customers, and the Company believes these capabilities provide it with the
opportunity to enter the market for space solar cells.
Spire is a leading U.S. provider of surface treatments for medical devices,
utilizing its ion implantation and ion beam assisted deposition (IBAD)
technologies. Spire's surface processing technologies have evolved from the
Company's silicon wafer ion implantation technology for solar cell applications.
These surface treatments improve the durability or antimicrobial characteristics
of invasive medical devices such as orthopedic implants and catheters. The aging
of the U.S. population has contributed to greater demand for joint replacement
procedures; longer and more active lives have led to the demand for enhanced
device durability and performance. Medical industry initiatives aimed at
lowering costs have focused efforts on reducing the incidence of infection,
which has created demand for antimicrobial treatment of catheters and other
invasive medical devices.
Spire's advanced research in photovoltaics and optoelectronics has resulted
in a strong array of proprietary technologies. These technologies have led to
the Company's current product and service offerings in photovoltaics and in
medical device treatments, and have further potential commercial applications in
terrestrial and space solar cell production, in other optoelectronic products
and in enhancing the performance of additional medical devices. Much of the
Company's development of its core technologies and the application of these
technologies to commercial products has been funded by the U.S. government under
contracts providing that the Company retains proprietary rights to all
developments. The Company anticipates that much of its future development
efforts will continue to be funded by the U.S. government and other outside
sources.
HISTORY
From its founding by Roger G. Little in 1969 through the end of the 1970s,
substantially all of the Company's revenues were generated by its research,
development and engineering activities, generally through contracts with the
U.S. government. During that period, the Company began to research methods of
producing higher efficiency solar cells. The Company developed expertise in
various photovoltaic technologies and received funding to develop its
metalorganic chemical vapor deposition (MOCVD) technology to make advanced solar
cells from compound semiconductor materials such as gallium arsenide (GaAs). The
Company is continuing to apply its MOCVD process to different types of compound
semiconductor materials aimed at developing advanced solar cells, primarily for
space applications, as well as other compound semiconductor materials, devices
and components for medical and other applications. As the Company improved its
technique to develop higher efficiency solar cells, it also developed a line of
equipment aimed at manufacturing solar modules from cells. In 1981 the Company
introduced its first terrestrial photovoltaic module production equipment and is
currently the leading supplier of such equipment worldwide.
In 1984, the Company received U.S. government funding to apply its ion beam
technologies to metal surface applications for potential improvement of surface
properties. From this research effort, the Company developed its ion
implantation process. Since 1988, the Company has applied this process to the
medical industry by using its ion implantation process to improve the wear
resistance of orthopedic devices. Most recently the Company has developed its
IBAD technology, which combines implantation technology and deposition
technology to add antimicrobial properties to the surfaces of certain medical
devices.
27
<PAGE> 29
CHRONOLOGY OF KEY SPIRE TECHNOLOGY DEVELOPMENTS
<TABLE>
<S> <C>
- 1970 -- Spire builds its first SPI-PULSE(TM) electron beam generator to support
research in radiation effects testing
- 1974 -- U. S. government contract brings Spire into space solar cell research, which
leads to ion implantation and advanced silicon solar cell technologies
- 1980 -- Spire receives contract to use pulsed electron beams to improve
GaAs-on-silicon solar cells grown by metalorganic chemical vapor deposition
(MOCVD)
-- Spire builds its first MOCVD reactor, which starts development of Spire's
expertise in using compound semiconductors for solar cells as well as other
applications
- 1981 -- Spire makes its photovoltaic module manufacturing equipment commercially
available for the first time
- 1982 -- Spire begins offering advanced compound semiconductor wafers and devices for
a broad range of optoelectronic technology
- 1983 -- Spire produces a 15% efficient photovoltaic module using ion implantation, a
milestone for the photovoltaic industry
- 1985 -- Ongoing Spire development of very high efficiency solar cells yields several
world record efficiency GaAs concentrator cells
-- Spire applies high current ion implantation technology developed for solar
cells to metal materials processing
- 1988 -- Spire begins development of its MOCVD processes utilizing indium phosphide
growth for application in the space solar cell telecommunications industry
-- Spire receives first commercial order for treatment of orthopedic components
by ion implantation
- 1992 -- Spire advances the state of the art in high throughput, high reliability
module manufacturing with new concepts in automated module fabrication
- 1993 -- Spire develops new MOCVD reactor designs for high uniformity growth of
advanced device structures
-- Spire introduces diode laser arrays providing reliable, efficient pumping of
energy into solid state lasers
- 1994 -- Spire begins using its proprietary IBAD system providing for high quality
coatings deposited at low temperatures to modify surfaces of medical polymers
and other materials
-- Spire develops thermophotovoltaic cells to generate electricity from thermal
sources
- 1996 -- Spire's solar cell and MOCVD expertise make possible advanced indium
phosphide solar cells for use in powering future generations of
communications satellites
</TABLE>
INDUSTRY/MARKET
Photovoltaics
Photovoltaics is the direct conversion of light into electricity. Certain
materials exhibit a property known as the photoelectric effect, which causes
them to absorb photons of light and to release electrons. The photovoltaic
industry processes semiconductor materials (most commonly silicon) into thin
semiconductor wafers to make solar cells, which are specially treated to form an
internal electric field, positive on one side and negative on the other. When
light strikes the solar cell, electrons are released from the atoms in the cell,
and electrical conductors attached to the positive and negative sides of the
cell collect an electric current. A typical four-inch diameter silicon solar
cell produces approximately one and one-half watts of electricity in bright noon
sunshine. These individual cells are connected together to form a photovoltaic
module, which can be designed to supply electricity at a certain voltage.
Photovoltaic modules are then wired together in arrays. Generally, the larger
the area of a module or array, the more electricity will be produced.
28
<PAGE> 30
Photovoltaic modules are manufactured by a number of different entities,
many of whom use Spire equipment. These entities range from multinational
corporations to small private companies. Depending on their intended
application, the modules are sold to telecommunications companies, domestic and
foreign governmental agencies and utilities, among others.
Projections by industry experts of growth in worldwide demand for
photovoltaic modules range from 25% to 50% per year through the year 2002. In
order to meet this increasing demand, manufacturers of photovoltaic modules must
increase their manufacturing capacity by adding capital equipment, including the
types of capital equipment offered by the Company. Industry experts estimate
that in 1997 annual worldwide module production capacity increased by
approximately 34%, or 44 megawatts, over 1996 capacity. Photovoltaic module
manufacturers already have announced plans to expand worldwide module production
capacity by 100 megawatts in 1998, which would be a 58% increase over 1997
production capacity. The Company believes that the 1998 market for photovoltaic
module manufacturing equipment will be approximately $25 million to $40 million,
compared to a 1997 market of approximately $20 million for such equipment. See
"Risk Factors -- Dependence on Market Growth" and "-- Technological Advances;
Dependence on Future Product Development and Market Acceptance."
In non-industrialized areas photovoltaics is used for basic power
generation. In such places as developing countries or remote areas of the world
where power grids are not currently in place, photovoltaics has been an
economical way to electrify rural areas. Photovoltaic modules are also used for
power in various applications, such as water pumping, vaccine refrigeration and
telecommunications. According to industry analysts, developing countries now
account for about 30% of global energy use; with continued economic growth they
are projected to account for over one-half of the increase in global energy
consumption over the next three decades. Industry analysts believe that
approximately 75% of the population of the developing world (nearly two billion
people) are without electric power today. As developing countries become more
industrialized, photovoltaic usage is expected to expand as demand for electric
power grows.
In industrialized areas such as the United States, Europe and Japan,
photovoltaics has a number of specialized applications. Photovoltaic modules are
integrated into building facades, used on roof tops of homes, or as substitutes
for windows in large buildings, to supplement conventional power supplies.
Photovoltaic generated power is an increasingly important component of the
telecommunications infrastructure, as the growth in demand for wireless
communications increases. The expanding worldwide use of cellular telephones has
required an expansion of radio transmission systems, many of which use
photovoltaic modules for power. Photovoltaic modules complement existing power
plants by expanding the plants' energy production capabilities through an
environmentally friendly energy source. Photovoltaics produces no gaseous
emissions during operation and offers an environmentally benign alternative to
fossil and nuclear sources of energy. Finally, the economics of photovoltaic
applications in the industrialized world are improving. Photovoltaic energy is
not currently price competitive with existing means for generating power for
central power stations. However, continued efforts to reduce the costs of
photovoltaic modules, as measured in cost per peak watt, have resulted in a 50%
decrease in such costs since the 1980s.
The Japanese government has expanded its "PV Rooftop Program," under which
40,000 homes are to be equipped with photovoltaic modules. Photovoltaic module
manufacturers in Japan have already begun increasing capacity to meet the
expectations of this program by expanding facilities, including additions of
capital equipment. In 1997, the Company sold photovoltaic module manufacturing
equipment to customers in Japan in connection with such expansion. The Building
Integration Program in Germany has evolved from a recognition that
environmentally friendly energy sources should be included in the design of
newly constructed buildings. In 1997, the Company also sold photovoltaic module
manufacturing equipment to customers in Germany, who are increasing capacity to
meet the anticipated increase in demand for photovoltaic modules.
In the United States, President Clinton has announced the "Million Solar
Roofs Initiative," which aims to encourage greater use of photovoltaic energy in
residential and commercial buildings. Similarly, the European Commission
recently adopted a "White Paper on Renewables," which calls for photovoltaic
installations on half a million roofs in Europe and the export of 500,000 solar
systems to the developing world. While the Company cannot attribute any sales to
date to either of these initiatives, it believes that the awareness and
acceptance of photovoltaics as a viable energy source are increasing.
29
<PAGE> 31
As a worldwide leader in the manufacture of equipment to produce
photovoltaic modules, Spire is poised to take advantage of the growing
applications and acceptance of photovoltaics. The Company believes that many of
its photovoltaic customers in the United States, Europe, Japan, India, China,
the Middle East, other areas of Asia and Africa are adding capacity to take
advantage of the increased demand for photovoltaic energy. See "Risk Factors --
Dependence on Market Growth," "-- Competition" and "-- Dependence on Export
Sales."
Optoelectronics
Optoelectronics involves the conversion of light to electricity, like
photovoltaics, and/or the conversion of electricity to light. Optoelectronics
uses thin film technology, such as MOCVD, to create semiconductor devices for
telecommunications, biomedical and electronics applications. In an MOCVD
reactor, specialized semiconductor materials are deposited onto substrate wafers
as single-crystal thin films. These wafers are then further processed into
various semiconductor devices.
Optoelectronics technology is used, among other things, to create
specialized types of solar cells to power space satellites; to create components
for biomedical instruments, such as semiconductor diode lasers, flat panel
displays and digital radiography; and to produce semiconductor wafers necessary
for electronic instruments such as cellular telephones. The Company believes
that the market for MOCVD deposited films and other optoelectronics technology
is expanding rapidly, driven in part by the growth in the telecommunications
industry (which will require additional satellites powered by solar cells) and
the medical industry. Spire's processing facilities now include seven MOCVD
reactors, housed in a Class 100 Cleanroom.
The Company currently produces several products based on its
optoelectronics technology, including diode lasers and compound semiconductor
wafers. The Company also has certain products under development using its
proprietary technologies. The Company believes that its current products, as
well as those under development, may have significant commercial potential. See
"Risk Factors -- Technological Advances; Dependence on Future Product
Development and Market Acceptance" and "-- Expansion into New Markets" and
"Business -- Product Development."
Biomedical
The Company uses its ion beam technology to provide processing services to
the medical industry by treating the surfaces of products, such as orthopedic
devices and catheters, that are used in the human body. The Company's surface
treatment technologies include ion implantation and the Company's proprietary
ion beam assisted deposition (IBAD). The Company uses its ion implantation
technology, such as its IONGUARD(R) service, to bombard the surface of certain
titanium and cobalt-chromium alloy medical devices with ions to enhance their
mechanical and chemical surface properties. This process reduces friction and
improves wear, fatigue and corrosion resistance of the devices. The Company's
proprietary IBAD technology is used in its family of IONCIDE(TM)
infection-resistant treatments applied to metal, polymers and ceramics for
medical applications.
The Company believes that the two main factors leading to the growth of the
orthopedic implant segment of the medical device industry are the aging of the
U.S. population and the trend toward more active lifestyles later in life. These
factors have led to the need for a greater number of artificial joints, such as
knees and hips, as well as the need for these devices to last longer and resist
wear. Currently, only a small percentage of orthopedic devices are treated with
the Company's proprietary processing technologies. However, the Company believes
that there will be a growing demand for its orthopedic device processing
services.
The Company targets its IONGUARD(R) service to the orthopedic market and
its IONCIDE(TM) processes to manufacturers of devices such as catheters. The
Company's strategy is to be a value-added vendor to the manufacturer, thereby
offering an improved product to the medical industry. See "Risk Factors --
Dependence on Market Growth," "-- Expansion into New Markets" and "-- Government
Regulation."
30
<PAGE> 32
GROWTH STRATEGY
Management believes the Company can achieve additional growth by:
- Capitalizing on growth in the photovoltaics market and the
anticipated demand for terrestrial solar cell module manufacturing
equipment;
- Developing and commercializing photovoltaic solar cells for space
applications based on its established expertise in semiconductor
technologies using silicon, gallium arsenide (GaAs) and indium
phosphide (InP);
- Building on its established optoelectronics product offerings and
technical expertise;
- Broadening market acceptance for its antimicrobial and wear
improvement coatings for orthopedic implants, catheters and other
invasive medical devices; and
- Continuing to develop new products and technologies by utilizing
government and third party research and development funding
consistent with the commercial objectives of the Company.
Growth in Photovoltaics Market. As worldwide demand for energy produced by
photovoltaics increases, demand for solar cell modules will increase. The
Company's goal is to maintain or increase its market share for manufacturing
equipment that is used by its customers to produce solar cell modules. In order
to achieve this goal the Company intends to (i) increase its production
capacity, (ii) enhance its worldwide sales and marketing organization, in part
by establishing sales offices in strategic geographic areas, and (iii) extend
its product lines to meet the needs of its customers. In addition, the Company
is evaluating the business potential of entering into strategic alliances with
certain U.S. utility companies by marketing its "Spire Solar Business," which
includes manufacturing systems, integration services and proprietary software.
The Company is considering extending its current product line by developing a
line of specialized manufacturing equipment for production of terrestrial
photovoltaic cells. See "Risk Factors -- Dependence on Market Growth," "--
Technological Advances; Dependence on Future Product Development and Market
Acceptance," "-- Expansion into New Markets," "-- Difficulties of Expanding
Capacity" and "-- Need to Manage Growth."
Photovoltaic Products for Space Applications. The Company has established
technological expertise in the production of photovoltaic components using the
MOCVD process. The Company intends to apply this expertise to commercialize
space solar cells for powering satellites, to be used primarily by
telecommunications companies and for government applications. According to
industry experts, telecommunications companies worldwide plan to launch more
than 500 satellites in the next five years. Each satellite will require space
solar cells producing on the average more than four kilowatts of energy. Based
on the space solar cell requirements of these satellites, as well as other
customer needs, the Company believes that annual worldwide demand for space
solar cell energy production will be 500 kilowatts by the end of 1998, which the
Company estimates to be a $200 million market based on current market pricing.
The Company believes that the two largest manufacturers of space solar cells
currently can produce approximately 260 kilowatts of space solar cells per year,
and all other manufacturers can produce approximately 30 kilowatts of space
solar cells per year. The Company believes there may be insufficient
manufacturing capacity in the industry to meet the increasing demand for space
solar cell production. The Company currently possesses all of the necessary
expertise, technology and equipment to produce space solar cells in small
quantities, and has sold customized gallium arsenide space solar cells to a
limited number of its customers. The Company currently is planning to expand the
manufacturing capacity of its space solar cell facility, including installation
of dedicated multi-wafer MOCVD reactor capacity required to support the
commercialization of these products. See "Risk Factors -- Competition," "--
Technological Advances; Dependence on Future Product Development and Market
Acceptance" and "-- Expansion into New Markets" and "Use of Proceeds."
31
<PAGE> 33
Building on Established Component Manufacturing Capability. The Company's
semiconductor component processing facilities currently include seven MOCVD
reactors housed in a Class 100 Cleanroom environment. The Company intends to
build on this capacity, together with its proprietary technologies and
experienced technical personnel, to expand its product offerings of
semiconductor components. Products under consideration for development and
potential commercialization include indium phosphide solar cells for satellites,
radiation detectors for medical instrumentation and vertical cavity diode lasers
for imaging, laser printing and communications. See "Risk Factors --
Technological Advances; Dependence on Future Product Development and Market
Acceptance" and "-- Expansion into New Markets."
Market Acceptance of Biomedical Products. The Company seeks increased
sales of its biomedical processing services by broadening the market acceptance
and demand for medical implants and components treated with its proprietary
processes. In the orthopedic device area, where the Company currently provides
processing services on a commercial basis, the Company hopes to broaden
understanding that use of surface treated orthopedic devices provides an
improved, longer-lasting product for patients and is a cost-effective choice.
With respect to non-orthopedic devices, the Company offers surface treatment for
catheters and heart valve cuffs on a small-scale commercial basis, and has
several other ion beam surface treatment processes under development. The
Company intends to increase acceptance of surface treated devices as a
cost-effective improvement over untreated devices. In order to achieve its goals
in this area, the Company intends to expand its sales and marketing staff and to
increase the surface treatment services it offers. The Company believes that
such efforts will lead to an increased number of customers for the Company's
proprietary processes and, if FDA approval is received, to eventual
commercialization of niche medical devices that include the Company's
antimicrobial coatings. See "Risk Factors -- Dependence on Market Growth," "--
Technological Advances; Dependence on Future Product Development and Market
Acceptance," "-- Expansion into New Markets" and "-- Government Regulation" and
"Use of Proceeds."
Sponsored Research Activity. Throughout its history, the Company has
aggressively sought to develop its proprietary technologies and apply such
technologies to commercial products through sponsored research activities. While
the bulk of such research is supported by grants and contracts from the U.S.
government, the Company has received research funding from other outside
sources. The Company intends to continue its efforts to obtain such funding to
enhance existing product lines and introduce new products where it perceives
that such opportunities are consistent with its commercial objectives. See "Risk
Factors -- Competition,"
"-- Dependence on Outside Funding for Research and Development" and "--
Government Regulation."
PRODUCTS AND SERVICES
The Company offers a number of highly-engineered products, devices and
services aimed at meeting the varied requirements of its diverse customer base.
The photovoltaic manufacturing equipment product lines offered by the
Company bring terrestrial solar cells through each step of the process for
module manufacturing. The Company's SPI CELL(TM) tester first tests and sorts
each solar cell based on its electrical performance; the Company's
SPI-STRINGER(TM) then interconnects the cells into strings; the Company's SPI
VAC PIK(TM) transfers the cells to a board and prepares them for lamination; the
strings are then laminated using the Company's SPI LAMINATOR(TM); and the
Company's SPI-SUN SIMULATOR(TM) then tests the entire module for efficiency.
Prices for individual items of the Company's photovoltaic manufacturing
equipment range from $25,000 to $1 million, and complete lines of equipment
range from $500,000 to $3 million. The price of a piece of equipment depends on
its size, function and on the degree of custom engineering required by a
customer. The price of a complete line of equipment depends upon a customer's
production requirements. The Company constantly seeks to reduce the cost of
photovoltaic module manufacturing by developing more sophisticated equipment to
make photovoltaics more cost effective. The Company's customers for photovoltaic
manufacturing equipment include Siemens Solar Industries, Shell Oil Company,
Solarex Corporation USA, Sharp Corporation, Sanyo Electric Co., Ltd., BP Solar
(British Petroleum) and Pilkington Solar International GmbH.
32
<PAGE> 34
Products produced using the Company's MOCVD technology include diode lasers
used for medical equipment, electronic devices, photocopiers and printers;
compound semiconductor wafers used for cellular telephones and other
communications devices; laser power converters, which change light into
electricity to power electric devices; and thermophotovoltaic cells, which
generate electrical energy directly from relatively low temperature heat
sources.
The Company offers surface treatment services to manufacturers of
orthopedic and other medical devices. The Company's IONGUARD(R) surface
treatment enhances the surface properties of medical devices, increasing their
durability and longevity. The Company also offers a family of antimicrobial
surface coating treatments utilizing the Company's IBAD technology under the
name IONCIDE(TM). The IONCIDE(TM) processes employ proprietary equipment that
uses IBAD technologies to deposit thin microscopic coatings of various
semiconductor materials onto medical devices such as catheters. These processes
modify the functional surface properties by adding antimicrobial capabilities.
The Company believes that its IONCIDE(TM) processes represent an opportunity for
expansion, as infection has become a growing concern in the invasive medical
device industry.
33
<PAGE> 35
The following table describes a portion of the Company's current products,
devices and services, their applications and target customers:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
CURRENT OFFERINGS APPLICATIONS TARGET CUSTOMERS
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Photovoltaic Manufacturing Equipment
- -------------------------------------------------------------------------------------------------
SPI CELL TEST(TM) 150 Tests the electrical
performance of photovoltaic
cells under simulated
sunlight
- ----------------------------------------------------------------
SPI CELL TEST(TM) 1000 Automatically performs
testing of up to 1000 cells
per hour; sorts cells by
output power
- ----------------------------------------------------------------
SPI CELL TEST(TM) QC6 Self-contained
semi-automatic system for
testing and grading
photovoltaic cells.
Measures current voltage
characteristics and assigns
a bin number so an operator
can quickly sort cells by
output power
- ----------------------------------------------------------------
SPI-GLASS WASHER(TM) 500 A family of systems for
SPI-GLASS WASHER(TM) 1000 automatically washing glass
used in photovoltaic
production
- ----------------------------------------------------------------
Hi-Voltage Tester Safety testing of finished
modules
- ----------------------------------------------------------------
SPI ASSEMBLER(TM) 5000 Automatically interconnects All of the Company's
cells by soldering flat photovoltaic equipment is
metal leads, or tabs, to marketed to solar module
solar cell contacts manufacturers,
- ---------------------------------------------------------------- telecommunications
SPI-STRINGER(TM) 500 A group of semi-automated companies, power companies,
SPI-TAB(TM) 500 production machines that public utilities and U.S.
interconnect solar cells by and foreign government
soldering flat metal leads, agencies
or tabs, to solar cell
contacts
- ----------------------------------------------------------------
SPI VAC PIK(TM) Transfers interconnected
photovoltaic module
circuits from alignment
board to a stack of
encapsulation materials
prior to lamination
- ----------------------------------------------------------------
SPI LAMINATOR(TM) 240 A family of automated
SPI LAMINATOR(TM) 350 photovoltaic module
SPI LAMINATOR(TM) 460 laminators that laminate
SPI LAMINATOR(TM) 580 cell strings and glass
SPI LAMINATOR(TM) 660 lay-up with controlled
heat, vacuum and pressure
- ----------------------------------------------------------------
SPI-SUN SIMULATOR(TM) 130i A family of photovoltaic
SPI-SUN SIMULATOR(TM) 240A module testers that test
SPI-SUN SIMULATOR(TM) 460 the electrical performance
SPI-SUN SIMULATOR(TM) 460i of photovoltaic modules
SPI-SUN SIMULATOR(TM) 660
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
CURRENT OFFERINGS APPLICATIONS TARGET CUSTOMERS
- ---------------------------------------------------------------------------------------------
Photovoltaic Manufacturing Equipment
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
SPI-ARRAY TESTER(TM) 750 A family of portable
SPI-ARRAY TESTER(TM) 800 photovoltaic array testers All of the Company's
SPI-ARRAY TESTER(TM) 1000 capable of measuring and photovoltaic equipment is
recording the current and marketed to solar module
voltage characteristics of manufacturers,
photovoltaic modules or telecommunications
groups of modules companies, power companies,
- --------------------------------------------------------------- public utilities and U.S.
SPI LINES(TM) turn-key factory A family of semi-automated and foreign government
SPI LINE(TM) 100MSU to fully-automated agencies
SPI LINE(TM) 500M production lines for the
SPI LINE(TM) 1000M manufacture of photovoltaic
SPI LINE(TM) 1000TFM modules from cells
- ---------------------------------------------------------------------------------------------
Optoelectronic Materials and Devices
- ---------------------------------------------------------------------------------------------
Diode Lasers Medical equipment, Equipment manufacturers for
electronic devices, the photovoltaic,
photocopiers and printers biomedical and
optoelectronics industries
- ---------------------------------------------------------------------------------------------
Compound Semiconductor Wafers Cellular telephones and Telecommunications compa-
communications devices; nies; manufacturers of high
high speed electronics speed electronic devices;
U.S. government
- ---------------------------------------------------------------------------------------------
Laser Power Converters Change light into Electronic equipment
electricity to power manufacturers;
electric devices telecommunications
companies
- ---------------------------------------------------------------------------------------------
Thermophotovoltaic Cells Generate electrical energy U.S. government
directly from relatively
low temperature heat
sources
- ---------------------------------------------------------------------------------------------
Biomedical Processing Services
- ---------------------------------------------------------------------------------------------
IONGUARD(R) for Orthopedics A family of processing
services using ion beam
technologies to enhance the
mechanical and chemical
surface properties of
orthopedic and other
medical devices Manufacturers of orthopedic
- --------------------------------------------------------------- and other medical devices
IONGUARD(R) I For titanium alloy devices
IONGUARD(TM) II For cobalt chromium devices
- ---------------------------------------------------------------------------------------------
IONJOIN(TM) Enhances bond strength of Manufacturers of orthopedic
bone cement to orthopedic devices
device material for longer
life and increased joint
stability
- ---------------------------------------------------------------------------------------------
IONCIDE(TM) A family of antimicrobial Manufacturers of medical
surface treatments devices such as catheters
- ---------------------------------------------------------------------------------------------
</TABLE>
PRODUCT DEVELOPMENT
Spire's more than 25 years of advanced research in the photovoltaics and
optoelectronics areas have resulted in a variety of proprietary technologies
with potential commercial applications in terrestrial and space solar cell
production, in enhancing the performance of medical devices, and for
semiconductor products. Much of this development effort has been funded by the
U.S. government and is anticipated to continue to be
<PAGE> 37
funded by U.S. government grants, including Small Business Innovation Research
grants, and by funding from other outside sources. The Company's biomedical
product offerings have evolved from Spire's photovoltaic technology of silicon
solar cell ion implantation, originally developed for high volume, low cost
photovoltaic module production. In addition to new product development and
commercialization, Spire also intends to pursue further enhancements in its
photovoltaic product lines, to permit its customers to reduce their costs of
solar cell module manufacturing and to increase yields.
The Company has several additional products under development utilizing its
optoelectronics technology. These products include indium phosphide solar cells
for satellites, radiation detectors for medical instrumentation and vertical
cavity diode lasers (VCSELs) for imaging, laser printing and communications.
Some engineering prototypes of these products have been built, while others are
still in the laboratory testing stage. In addition, the Company plans to expand
the manufacturing capacity of its space solar cell facility to achieve
commercial production of its gallium arsenide solar cells. While the Company
believes that these products, as well as others that it may develop from its
proprietary technologies, may have significant commercial potential, no
assurance can be given that any of these products will reach a commercial
production stage or that sales of such products, if any, will economically
justify the Company's development, manufacturing and marketing efforts in this
area. See "Risk Factors -- Dependence on Outside Funding for Research and
Development," "-- Technological Advances; Dependence on Future Market
Development and Market Acceptance" and
"-- Expansion into New Markets."
The following table describes certain products that the Company has under
development, their applications and target customers:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
PRODUCTS UNDER DEVELOPMENT APPLICATIONS TARGET CUSTOMERS
- ---------------------------------------------------------------------------------------------
Products Under Development
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Gallium Arsenide Solar Cells Space photovoltaics for Telecommunications companies;
satellite power systems U.S. and foreign governments
- ---------------------------------------------------------------------------------------------
Indium Phosphide Solar Cells Space photovoltaics for Telecommunications companies;
satellites operating in U.S. and foreign governments
earth's radiation belt where
standard silicon and GaAs
solar cells degrade rapidly
- ---------------------------------------------------------------------------------------------
Lightweight Flexible Silicon For wing mounting on unmanned U.S. and foreign governments;
Photovoltaic Modules ultra-light aircraft aircraft manufacturers
- ---------------------------------------------------------------------------------------------
Heterojunction Bipolar Used in cellular telephones, Electronic equipment
Transistor Epitaxial Wafers amplifiers and other high manufacturers;
frequency electronics telecommunications companies
- ---------------------------------------------------------------------------------------------
III-V Custom Photodiodes Near infrared detection and Optical equipment
imaging manufacturers; U.S. and
foreign governments
- ---------------------------------------------------------------------------------------------
Solar-Blind Ultra-Violet A low cost ultraviolet Analytic equipment
Detectors detector with little or no manufacturers; U.S. and
response to visible and foreign governments
infrared light; can be used
for fire detection and other
applications
- ---------------------------------------------------------------------------------------------
CdZnTe Flat Panel Display To make x-ray images without Medical device manufacturers;
Imager for X-ray Fluoroscopy film baggage scanner manufacturers
- ---------------------------------------------------------------------------------------------
Vertical Cavity Diode Lasers For use in photocopiers, Office equipment
printers and optical data manufacturers; LAN and
links computer manufacturers
- ---------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 38
RESEARCH AND DEVELOPMENT
The Company's policy is to support as much of its research and development
as possible through government contract funding, which it recognizes as revenue.
Revenues from the Company's research and development contracts funded by the
U.S. government were $8,806,000 in 1994, $8,232,000 in 1995, $6,705,000 in 1996
and $5,950,000 for the first nine months of 1997, accounting for 48%, 48%, 39%
and 35%, respectively, of the Company's net sales and revenues for these
periods. As of September 30, 1997, the Company was performing 37 contracts for
the U.S. government. All contracts with U.S. government agencies have been
audited and settled through December 1995. The audit for the year ended December
31, 1996 has not yet been performed.
The Company's contracts with the U.S. government grant to the Company
proprietary rights in any technology developed pursuant to such contracts and
grant to the U.S. government a non-exclusive license to utilize the technology
for its benefit. The U.S. government retains the right to obtain the patent on
any inventions made under these contracts as to which patent protection is not
sought and obtained by the Company. The Company's rights to technology developed
under contracts with private companies vary, depending upon negotiated terms.
See "Risk Factors -- Dependence on Outside Funding for Research and
Development," "-- Protection of Proprietary Technology" and "-- Government
Regulation."
The Company's internally funded research and development expenditures were
$124,000 in 1994, $59,000 in 1995, $84,000 in 1996, and $126,000 for the first
nine months of 1997.
SALES AND MARKETING
The Company builds its photovoltaic module manufacturing equipment only to
order, and generally requires 35% of the total purchase price on order, 55% on
shipment and the final 10% upon acceptance of the equipment by the customer. The
Company receives progress payments under its research and development contracts
on a cost reimbursement or per deliverable basis. Biomedical processing services
and optoelectronic devices generally are sold on a net 30 day basis.
The Company markets its products and services through a network of
non-exclusive commissioned sales representatives, as well as through its
internal staff. The Company had 19 sales representatives as of November 30,
1997. These outside sales representatives are responsible for making initial
contacts with potential customers, after which the representatives work in
conjunction with the Company's internal staff to consummate sales. The Company
believes that use of outside sales representatives is particularly important in
facilitating access into certain foreign countries. Most of the Company's sales
representatives have had long term relationships with the Company, and work with
the Company without written agency agreements. Sales initiated through the
Company's internal staff arise from a number of sources, including trade shows,
printed advertisements and telephone campaigns.
The Company recently entered into two agreements with Marubeni Corporation
of Nagoya, Japan, relating to the manufacture and distribution of certain Spire
photovoltaic module manufacturing equipment in Japan. Under the agreements,
Marubeni will distribute, and in some cases manufacture under a technology
license, certain of Spire's photovoltaic module manufacturing equipment under
the Company's name in Japan, and has rights to market this equipment line
throughout certain countries in Southeast Asia and the Pacific Rim. Marubeni's
Japanese office established on behalf of the Company is headed by the Company's
long-time photovoltaic equipment sales representative in Japan. Management
believes that this office will give the Company the in-country presence it needs
to grow its already established photovoltaic module manufacturing equipment
business in Japan. The Company also has recently opened an office in Denver,
Colorado, to support the Company's marketing activities in the Western and
Midwestern regions of the United States. See "Recent Developments."
In the biomedical area, the Company concentrates on identifying and serving
the leading U.S. manufacturers of orthopedic and other medical devices. Where
possible, the Company seeks to be the sole provider of surface processing
services to its biomedical customers. The Company is expanding its marketing
program in this area to include physicians and hospitals who utilize such
devices.
37
<PAGE> 39
The Company's scientists are responsible for submitting proposals to the
U.S. government and other outside sources for sponsored research and development
work, particularly in the optoelectronics area. The Company has been increasing
its efforts to commercialize its extensive optoelectronics technology, by
focusing on marketing new optoelectronic products and forming relationships for
exploitation of the Company's optoelectronics technology, both domestically and
internationally. See "Risk Factors -- Dependence on Outside Funding for Research
and Development," "-- Reliance on Sales Representatives" and "-- Technological
Advances; Dependence on Future Product Development and Market Acceptance," and
"Business -- Growth Strategy."
BACKLOG
The Company's backlog believed to be firm as of September 30, 1997
(including equipment, services, license agreements and contract research and
development) was $11,639,000, compared to $9,424,000 as of September 30, 1996.
The Company believes it will fill approximately 51% of this backlog in 1997.
Approximately $6,893,000 of the backlog at September 30, 1997, as compared to
$8,152,000 at September 30, 1996, is represented by contracts with the U.S.
government that are cancelable without the Company's consent, subject to
reimbursement of the Company's expenses. The Company has not experienced any
material cancellations of such contracts. See "Risk Factors -- Risk of Backlog"
and "Business -- Research and Development."
MANUFACTURING AND QUALITY CONTROL
The Company manufactures all of its products and performs all of its
biomedical processing services in a single facility. The fulfillment of each
customer order for the Company's photovoltaic module manufacturing equipment
requires customized engineering and systems design. While the time required to
fill orders is slightly different for each item of equipment, it generally takes
approximately six months from date of order to delivery to the customer. The
first few months of this process are devoted to customizing the design of the
item of equipment to meet the customer's requirements. The balance of the time
is spent on internal assembly, wiring and testing of the equipment. The Company
maintains quality control measures throughout each step of the manufacturing
process. Employees are responsible for reviewing incoming materials, conducting
interim testing throughout the Company's processing of the materials, and
servicing and testing final products before shipment to the Company's customers.
The Company's MOCVD reactors produce wafers with layers of semiconductor
materials, some of which are further processed into semiconductor devices. All
the Company's semiconductor wafers and semiconductor devices are tested in the
Company's measuring lab for quality control before shipment to the customer. The
Company currently produces semiconductor wafers only to order. In the biomedical
area, customers ship medical devices to be surface-processed to the Company.
These devices are reviewed for surface defects prior to undergoing the Company's
surface processing, and are reviewed again for defects upon completion of the
processing. The devices are then shipped back to the customer.
The Company assembles its photovoltaic module manufacturing equipment from
a combination of components purchased from a variety of suppliers and
self-fabricated components. The Company has not experienced any major price
instability, or lack of availability, of its components. For many items,
alternate sources are available. The Company believes that the loss of any
supplier would not be material due to the ability to use alternate suppliers or
to substitute other items with minimal re-engineering. The Company anticipates
that it will be able to manufacture and procure all such parts and materials in
sufficient quantities to meet its needs. See "Risk Factors -- Difficulties of
Expanding Capacity," "-- Dependence on Single Manufacturing Facility" and "--
Need to Manage Growth."
PROPRIETARY RIGHTS
Over the course of more than 25 years of research and development, the
Company has accumulated extensive scientific and technological expertise. The
Company actively protects certain of its technological advances as trade
secrets, in part through confidentiality agreements with employees, consultants
and third parties. The Company also seeks and enforces patents as appropriate.
The Company currently has 40 U.S.
38
<PAGE> 40
patents, of which two are jointly owned, four patents pending in the United
States and two foreign patents pending, all of which cover elements of its
materials and processing technologies.
Substantially all of the Company's research and development work is funded
by the U.S. government and other entities. The U.S. government retains the right
to obtain a patent on any invention developed under government contracts as to
which the Company does not seek and obtain a patent, and may require the Company
to grant a third party license of such invention if steps to achieving practical
application of the invention have not been taken. The U.S. government also
retains a non-exclusive, royalty-free, non-transferable license to all
technology developed under government contracts, whether or not patented, for
government use, including use by other parties to U.S. government contracts.
Furthermore, the Company's U.S. government contracts prohibit the Company from
granting exclusive rights to use or sell any inventions unless the grantee
agrees that any product using the invention will be manufactured substantially
in the United States. See "Risk Factors -- Protection of Proprietary Technology"
and "Government Regulation."
COMPETITION
The Company sells its products and services in competitive markets.
Entities now operating in related markets may enter the Company's markets. Some
of the Company's current and potential competitors have financial and technical
resources greater than those of the Company. Competitive factors for the Company
in its various markets include the amount and pace of technological innovation,
financial resources, product quality, timely delivery, service and price. The
Company believes that there are considerable barriers to entry into the markets
it serves, including a significant investment in specialized capital equipment
and product design and development, and the need for a staff with sophisticated
scientific and technological knowledge.
The Company faces competition from various companies in the terrestrial
photovoltaic module manufacturing equipment market, particularly in Japan. As an
industry leader, the Company has been subject to pricing pressures on certain
components of its photovoltaic module manufacturing equipment product line. The
Company's more technologically sophisticated and highly automated equipment
competes with more labor intensive, lower priced alternatives. Furthermore, the
Company competes in foreign countries where there may be a preference for doing
business with local companies. In addition, large manufacturers may from time to
time produce certain items of equipment for their own internal use, eliminating
the purchase of such equipment from commercial vendors.
With respect to its optoelectronics and biomedical products and services,
the Company competes on the basis of overall quality of service and price, and
at times on the basis of value added. The Company's products and services also
compete against products based on alternate technologies. In addition, the
Company faces competition from numerous other businesses, particularly small
businesses throughout the United States, for contracts for research and
development funded by the U.S. government and other outside sources.
In the space solar cell market, which the Company anticipates entering, the
Company will face competition from larger, established companies with greater
financial resources than the Company. Furthermore, the space solar cells the
Company anticipates offering may compete with space solar cells of other
manufacturers, which use different technologies. In addition, the expansion of
the space solar cell market may attract more companies to enter the market, and
may cause companies already in the market to expand capacity, which may affect
the ability of the Company to compete effectively.
Because the Company often markets its photovoltaic products to governmental
agencies or financiers in foreign countries, it faces certain risks inherent in
international sales, such as regulatory requirements, political and economic
changes and disruptions and transportation delays. The Company also faces
competition from government or private companies in these countries. The Company
addresses these issues by working with local commissioned sales representatives,
seeking to establish a local presence, such as through its agreements with
Marubeni, maintaining technological leadership, and quoting prices and accepting
payment only in U.S. dollars, generally against letters of credit. Because the
Company sells its products only in U.S. dollars, the Company's sales could be
adversely affected to the extent that its customers have limited access to U.S.
dollars and to the extent that fluctuations in exchange rates may render the
Company's prices less competitive relative to competitors' prices. See "Risk
Factors -- Competition" and "-- Dependence on Export Sales."
39
<PAGE> 41
EMPLOYEES
As of October 31, 1997, the Company employed 141 people, of whom 133 were
full-time. Twelve of the Company's employees hold Ph.D.'s. The Company has 41
employees on its technical staff and 10 on its manufacturing staff. The Company
has never experienced a work stoppage and considers its relationship with its
employees to be good.
PROPERTIES
The Company leases 74,000 square feet in a building located at One Patriots
Park, Bedford, Massachusetts. The production facilities and substantially all of
the Company's offices are located in the building. All of the Bedford space is
subleased from Millipore Corporation on what the Company believes are
commercially reasonable terms. Millipore leases the building from a trust of
which Roger G. Little, Chairman, Chief Executive Officer and President of the
Company, is sole trustee and principal beneficiary. The 1985 sublease originally
was for a period of ten years. The Company has exercised its option to extend
the sublease for an additional five-year period expiring on November 30, 2000
and has an option for an additional five-year extension.
The Company believes that its facilities are suitable for their present
intended purposes and adequate for the Company's current level of operations;
however, certain activities of the Company are operating at close to existing
capacity levels. In order to implement its growth plan, the Company intends to
use a portion of the net proceeds from the offering over the next 12 months for
additional equipment and facilities to expand manufacturing capacity. The
Company plans to lease additional space and believes that suitable facilities
for future use will be available to it on commercially competitive terms. See
"Risk Factors -- Difficulties of Expanding Capacity," "-- Dependence on Single
Manufacturing Facility" and "-- Need to Manage Growth" and "Use of Proceeds."
GOVERNMENT REGULATION
The Company's government contracting activities are subject to a large
number of federal regulations and oversight requirements. Compliance with the
array of government regulations requires extensive record keeping and the
maintenance of complex policies and procedures relating to all aspects of the
Company's business, as well as to work performed for the Company by any
subcontractors. The Company believes that it has put in place systems and
personnel to ensure compliance with all U.S. government regulations relating to
contracting.
The Company also is subject to export control regulations that govern the
export of Company products to certain countries, as well as the release of
technical information to non-U.S. individuals and entities. Further, the Company
is subject to federal, state and local governmental environmental regulations
and to federal OSHA regulations. The Company believes that it has complied in
all material respects with all applicable environmental and safety regulations
and has all permits necessary to conduct its business. The Company employs a
full-time Environmental and Safety Engineer to manage its compliance efforts.
The cost of such compliance has not been material to the Company.
The introduction by the Company's customers of certain new biomedical
products depends on passage of these products through various stages of review
by the FDA. The process of obtaining regulatory approvals involves lengthy and
detailed laboratory and clinical testing and other costly and time-consuming
procedures. The Company continues to refine its interaction with its customers
in the regulatory approval process in an effort to streamline its customers'
application process. See "Risk Factors -- Government Regulation."
LEGAL PROCEEDINGS
There are no material legal actions currently pending against the Company.
40
<PAGE> 42
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, their ages and
positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- ----------
<S> <C>
Roger G. Little 57 Chairman of the Board, Chief Executive
Officer and President
Richard S. Gregorio 42 Vice President, Chief Financial Officer,
Principal Accounting Officer, Treasurer
and Clerk
Stephen J. Hogan 46 Vice President and General Manager,
Photovoltaics
Everett S. McGinley, Ph.D. 39 Vice President and General Manager,
Optoelectronics
Ronald S. Scharlack 52 Vice President and General Manager,
Biomedical (effective January 5, 1998)
Michael T. Eckhart 49 Director
A. John Gale(1) 82 Director
Udo Henseler, Ph.D.(1)(2) 58 Director
Roger W. Redmond(2) 44 Director
John A. Tarello(1) 66 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
ROGER G. LITTLE is the founder of the Company and Chairman of the Board of
Directors, Chief Executive Officer and President. Mr. Little has been the
President and a Director of the Company since its founding in 1969. He is a
member of the U.S. Secretary of Energy's Advisory Board and the Chairman of the
Solar Energy Industries Association. Mr. Little holds a B.A. in Physics from
Colgate University and an M.Sc. in Physics from the Massachusetts Institute of
Technology.
RICHARD S. GREGORIO joined the Company in 1977 and has served in a number
of accounting and finance positions. He was named Principal Accounting Officer
in 1983, Treasurer in 1989, Vice President and Chief Financial Officer in 1993
and Clerk in 1996. Mr. Gregorio holds a B.S. in Accounting from Bentley College,
and a Certificate of Management from the Harvard Business School Extension
Program.
STEPHEN J. HOGAN joined the Company in 1984 as Manager, Process
Development. He was named Sales Manager, Photovoltaic Equipment in 1988,
Manager, Engineering and Manufacturing in 1990 and Director of Photovoltaic
Business Development in March 1997. He was elected Vice President and General
Manager, Photovoltaics, of the Company in November 1997. Prior to joining the
Company, Mr. Hogan was a scientist at the Solar Energy Research Institute in
Golden, Colorado, now known as the National Renewable Energy Laboratory. Mr.
Hogan holds a B.S. in Electrical Engineering from the University of Notre Dame
and an M.S. in Electrical Engineering from the University of Colorado.
EVERETT S. MCGINLEY, PH.D. has been Vice President and General Manager,
Optoelectronics of the Company since August 1997. From January 1997 through June
1997, Dr. McGinley was a consultant providing business development consulting
services to energy related clients, including the Company. From 1993 until 1997,
he was vice president of Axios Limited, an international business development,
venture capital, and consulting firm in optoelectronics for alternative energy
technologies. From 1991 to 1993, he was product manager for Balzers, Inc., a
semiconductor production equipment and instrumentation manufacturer. Dr.
McGinley holds a B.S. from the University of Lowell and a Ph.D. from the
University of Wisconsin.
RONALD S. SCHARLACK is joining the Company as Vice President and General
Manager, Biomedical on January 5, 1998. Mr. Scharlack was previously manager of
advanced technology at Chiron Diagnostics, Medfield, Massachusetts, a
manufacturer of biomedical instruments. Mr. Scharlack previously had worked for
Thermo Electron Corporation for five years, first as the manager of solar
systems, during which time he
41
<PAGE> 43
established a new business area in the development of photovoltaic components
and systems, and subsequently as manager, modular cogeneration marketing and
controls. Mr. Scharlack holds a B.S. in Mechanical Engineering from the
Massachusetts Institute of Technology and an M.S. in Mechanical Engineering from
Stanford University.
MICHAEL T. ECKHART is a project director of Solar Bank Project, a planned
finance entity that will be a source of secondary lending for solar photovoltaic
markets. From 1989 to 1996, he served as president of United Power Systems, an
independent power development company. Mr. Eckhart was elected to the Board of
Directors of the Company in August 1997. Mr. Eckhart is a member of the
Institute of Electrical and Electronic Engineers, the American Solar Energy
Society and the International Solar Energy Society. Mr. Eckhart holds a B.S. in
Electrical Engineering from Purdue University and an M.B.A. from Harvard
Business School.
A. JOHN GALE was president of Ion Optics, Incorporated of Stoneham,
Massachusetts, a high technology materials processing firm, until his retirement
in 1994. He now consults for Ion Optics, Incorporated. Mr. Gale has been a
Director of the Company since 1969 and was Chairman of the Board of Directors of
the Company from 1969 to 1983. Mr. Gale received his B.S.C. from King's College,
London University in 1936, with special honors in physics.
UDO HENSELER, PH.D. is vice president and chief financial officer of
Qualicon Corporation, a DuPont company, of Wilmington, Delaware. Qualicon is a
manufacturer of analytical instruments for testing of biologically-derived
products. He is the owner of MSI Management Services International, a financial
and business advisory firm, and was until 1996 senior vice president, chief
financial officer and a director of Andrx Corporation, a pharmaceutical company
in Fort Lauderdale, Florida. Dr. Henseler was elected to the Board of Directors
of the Company in 1992. Dr. Henseler holds a B.A. from Academy of Commerce and
Administration, Cologne, Germany, an M.B.A. from Fairleigh Dickinson University
and an M.A. and Ph.D. from Claremont Graduate School.
ROGER W. REDMOND is president and chief executive officer of Teletraining
Systems, Inc., which trains and educates employees by means of data base and
video systems. From 1984 until 1997, Mr. Redmond was an officer and managing
director of Piper Jaffray, Inc., an investment banking firm. Mr. Redmond was
designated a Chartered Financial Analyst in 1988. He was elected a Director of
the Company in 1991. Mr. Redmond holds a B.S. in Chemistry from the University
of Arizona and an M.B.A. in Finance from the University of Minnesota.
JOHN A. TARELLO has been senior vice president of Analogic Corporation of
Peabody, Massachusetts, a publicly held manufacturer of diagnostic and
measurement instruments and medical, industrial, and other electronics
equipment, since 1980 and was elected treasurer and chief financial officer of
Analogic in 1985. Mr. Tarello has been a Director of the Company since 1970, and
a director of Analogic Corporation since 1979. Mr. Tarello attended Burdett
College.
Mr. Hogan, Vice President of Photovoltaics, and Mr. Scharlack, Vice
President of Biomedical, were recently appointed to their positions to replace
two former employees who resigned during the past few months. Each of the former
employees has continued a relationship with the Company through consulting
arrangements. The former Vice President of Photovoltaics has agreed to act as a
consultant to the Company commencing January 1, 1998 for up to six months with
respect to the development of a specific business opportunity. The former Vice
President of Biomaterials has agreed to consult with the Company on various
matters, for a certain total number of hours. His agreement will end on January
8, 1998.
Each Director is elected at the Company's annual meeting of stockholders
and serves until the next annual meeting of stockholders and until his successor
has been elected and qualified. In general, vacancies and newly created
directorships resulting from any increase in the authorized number of Directors
may be filled by the stockholders or, in certain circumstances, by the
Directors.
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<PAGE> 44
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth the beneficial ownership of the Company's
Common Stock as of November 30, 1997 (except as otherwise specified herein) and
as adjusted to reflect the sale of the Common Stock being offered hereby
(assuming no exercise of the Underwriters' over-allotment options) by (i) each
person or entity who is known by the Company to own beneficially more than 5% of
the outstanding securities of the Company, (ii) each Director and executive
officer of the Company, (iii) each Selling Stockholder and (iv) all Directors
and executive officers of the Company as a group. The information as to each
person has been furnished by such person, and each person has sole voting power
and sole investment power with respect to all shares beneficially owned by such
person, except as otherwise indicated and subject to community property laws
where applicable. Unless otherwise indicated, each person or entity listed
maintains a mailing address c/o Spire Corporation, One Patriots Park, Bedford,
Massachusetts 01730-2396.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1)(2) AFTER OFFERING(1)(2)
------------------------- -------------------------
NUMBER OF NUMBER OF NUMBER OF
SHARES OF PERCENT OF SHARES TO BE SHARES OF PERCENT OF
COMMON COMMON SOLD IN COMMON COMMON
NAME STOCK STOCK OFFERING STOCK STOCK
---- ---------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Michael T. Eckhart.................... 0(3) 0% 0 0(3) 0%
A. John Gale.......................... 7,250(4) * 0 7,250(4) *
Richard S. Gregorio................... 11,000(5) * 0 11,000(5) *
Udo Henseler.......................... 4,750(6) * 0 4,750(6) *
Stephen J. Hogan...................... 6,000(7) * 0 6,000(7) *
Roger G. Little....................... 1,455,450(8) 45.5% 300,000 1,155,450(8) 27.5%
Everett S. McGinley................... 0(9) 0% 0 0(9) 0%
Roger G. Redmond...................... 4,950(10) * 0 4,950(10) *
Ronald S. Scharlack................... 0(11) * 0 0(11) *
John A. Tarello....................... 4,750(6) * 0 4,750(6) *
Dimensional Fund Advisors, Inc........ 160,400(12) 5.0% 0 160,400(12) 3.8%
Spire Corporation 401(k) Profit
Sharing Plan(13).................... 229,014 7.2% 200,000 29,014 0.7%
Directors and Officers as a group (9
persons on November 30, 1997)....... 1,494,150(14) 46.7% 300,000 1,194,150(14) 28.5%
</TABLE>
- ---------------
* Denotes ownership of less than 1% of the Company's outstanding Common
Stock.
(1) Based on 3,197,347 shares of Common Stock outstanding as of November 30,
1997 and 4,197,347 shares of Common Stock to be outstanding after this
offering. Shares of Common Stock which an individual or group has a right
to acquire within 60 days are deemed to be outstanding for purposes of
computing the percentage ownership of such individual or group, but are not
deemed to be outstanding for purposes of computing the percentage ownership
of any other person shown on the table.
(2) Beneficial stock ownership shown for employees excludes in all cases shares
of Common Stock that may be held by the Spire Corporation 401(k) Profit
Sharing Plan on behalf of such employees.
(3) Does not include 5,000 shares of Common Stock subject to options not
exercisable within 60 days.
(4) Includes 1,250 shares of Common Stock subject to options exercisable within
60 days. Does not include 3,750 shares of Common Stock subject to options
not exercisable within 60 days.
(5) Includes 11,000 shares of Common Stock subject to options exercisable
within 60 days. Does not include 14,000 shares of Common Stock subject to
options not exercisable within 60 days.
(6) Includes 4,750 shares of Common Stock subject to options owned by each of
Dr. Henseler and Mr. Tarello exercisable within 60 days. Does not include
1,250 shares of Common Stock subject to options owned by each of Dr.
Henseler and Mr. Tarello not exercisable within 60 days.
(7) Includes 5,000 shares of Common Stock subject to options exercisable within
60 days. Does not include 15,000 shares of Common Stock subject to options
not exercisable within 60 days.
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<PAGE> 45
(8) Includes 1,454,000 shares of Common Stock held in a trust of which Mr.
Little is the primary beneficiary. If the over-allotment options are
exercised in full, Mr. Little will beneficially own 1,110,450 shares of
Common Stock or 26.5%, after the Offering. Mr. Little is the Chairman of
the Board of Directors, Chief Executive Officer and President of the
Company.
(9) Does not include 20,000 shares of Common Stock subject to options not
exercisable within 60 days.
(10) Includes 200 shares of Common Stock held by Mr. Redmond as guardian for his
minor children and 4,750 shares of Common Stock subject to options
exercisable within 60 days. Does not include 1,250 shares of Common Stock
subject to options not exercisable within 60 days.
(11) Does not include 20,000 shares of Common Stock subject to options expected
to be granted in 1998 and which will not be exercisable within 60 days. Mr.
Scharlack was not an employee of the Company on November 30, 1997 but is
scheduled to commence employment on January 5, 1998.
(12) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 160,400 shares of Common
Stock as of October 31, 1997, all of which shares are held in portfolios of
DFA Investment Dimensions Group Inc., a registered open-end investment
company; or in series of the DFA Investment Trust Company, a Delaware
business trust; or the DFA Group Trust and DFA Participating Group Trust,
investment vehicles for qualified employee benefit plans; all of which
Dimensional serves as investment manager. Dimensional disclaims beneficial
ownership of all shares of the Company's Common Stock. Dimensional's
address is 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.
(13) Trustees of the Plan, which was established in 1985, are Messrs. Little,
Gregorio and Tarello, each of whom disclaims beneficial ownership of shares
held by the Plan. In this offering, 200,000 shares held by the Plan are
being sold. Messrs. Little, Gregorio and Tarello are respectively the
Chairman of the Board of Directors, Chief Executive Officer and President;
a Vice President, Chief Financial Officer, Treasurer and Clerk; and a
Director of the Company. Some of the shares being sold are shares held by
the Plan for the benefit of Messrs. Little and Gregorio.
(14) Includes 31,500 shares of Common Stock subject to options exercisable
within 60 days. Does not include 61,500 shares of Common Stock subject to
options not exercisable within 60 days.
As of November 30, 1997, the Spire Corporation 401(k) Profit Sharing Plan,
a qualified plan under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Plan"), held in the aggregate 229,014 shares of the Company's
Common Stock. Of those shares, 225,772 shares represented contributions made by
the Company to match elective salary deferrals by employees of the Company, and
are subject to voting and investment decisions by the Trustees of the Plan. The
remaining shares were held in ten separate elective deferral accounts of
individual participants and are not within the investment control of the
Trustees of the Plan. It is anticipated that the Plan will offer 200,000 shares
of the Company's Common Stock pursuant to the offering, none of which would
include shares held in the elective deferral accounts. Messrs. Little, Gregorio
and Tarello are the Trustees of the Plan (the "Plan Trustees") and are,
respectively, Chairman of the Board, Chief Executive Officer and President; Vice
President, Chief Financial Officer and Treasurer; and a Director of the Company.
See "Management."
It is anticipated that 300,000 of the 500,000 shares of Common Stock being
offered by the Selling Stockholders will be sold by Roger G. Little, as Trustee
and primary beneficiary of the Roger G. Little Family Trust (the "Trust"). In
the event the over-allotment options are exercised in full, the Underwriters may
purchase up to an additional 45,000 shares of Common Stock from the Trust.
44
<PAGE> 46
DESCRIPTION OF SECURITIES TO BE REGISTERED
GENERAL
The following description of the capital stock of the Company and certain
provisions of the Company's Restated Articles of Organization, as amended (the
"Articles") and By-Laws (the "By-Laws") is a summary of and is qualified in its
entirety by the provisions of the Articles and the By-Laws.
COMMON STOCK
The Company's authorized capital stock consists of 20,000,000 shares of
common stock, par value $.01 per share (the "Common Stock").
Holders of Common Stock are entitled to cast one vote for each share held
of record on each matter submitted to a vote of the stockholders, including the
election of Directors. There is no cumulative voting for the election of
Directors. Holders of Common Stock are entitled to receive ratably any dividends
when, as and if declared by the Board of Directors out of funds legally
available therefor and upon liquidation or dissolution, and are entitled to
share ratably in the assets of the Company legally available for distribution to
stockholders after the payments of all debts and other liabilities. Holders of
Common Stock have no preemptive rights and have no rights to convert their
Common Stock into any other securities. The outstanding Common Stock is, and the
shares of Common Stock offered hereby will be, validly authorized and issued,
fully paid and nonassessable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer and Trust Company, New York, New York.
INDEMNIFICATION
The Company's By-Laws require the Company to indemnify all officers,
Directors, employees and agents of the Company against all liabilities and
expenses they may incur on account of all actions threatened or brought against
them by reason of their services to the Company or to another entity at the
request of the Company. No indemnification is provided for any person with
respect to any matter as to which such person has been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Company. In addition, the Company and
the Selling Stockholders have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act, and to
contribute to certain payments that the Underwriters may be required to make in
respect thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to Directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company 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.
45
<PAGE> 47
SHARES AVAILABLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 4,197,347 shares of
Common Stock outstanding based on 3,197,347 shares of Common Stock outstanding
as of November 30, 1997. Of such shares of Common Stock, 3,034,697 shares will
be freely tradable without restriction or further registration under the
Securities Act unless purchased by "affiliates" of the Company, as that term is
defined in Rule 144 under the Securities Act. The remaining 1,162,650 shares are
held by persons who may be deemed affiliates of the Company or are "restricted
securities" under Rule 144 and are eligible for sale on the date of this
Prospectus subject to the restrictions of Rule 144. In addition, following the
offering, shares of Common Stock will continue to be held by the Plan, and
additional shares will be purchased in open market transactions from time to
time thereafter to fund the Company's contributions to the Plan. The Trustees of
the Plan are Messrs. Little, Gregorio and Tarello.
The Company, its executive officers and Directors, who in the aggregate
will hold 1,162,650 shares of Common Stock and options to purchase 93,000 shares
of Common Stock following the offering, and the Plan, have agreed for a period
of 180 days after the date of this Prospectus not to sell or otherwise dispose
of any shares of Common Stock without the prior written consent of Tucker
Anthony Incorporated except for: (i) the sale of the shares hereunder; (ii) the
issuance by the Company of Common Stock pursuant to the exercise of options
under the Company's equity based plans; (iii) the grant by the Company of stock
options after the date of this Prospectus under the Company's equity based
plans; (iv) sales by the Plan Trustees pursuant to the provisions of the Plan;
or (v) transfers by gift, will or intestacy or to immediate family members,
provided that the transferee agrees to the same limitations (the "Lock-Up
Agreements").
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
within the meaning of Rule 144 for at least one year is entitled to sell within
any three-month period a number of shares that does not exceed the greater of
(i) 1% of the then outstanding shares of the Company's Common Stock
(approximately 42,000 shares after the offering) or (ii) the average weekly
trading volume of the Company's Common Stock during the four calendar weeks
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission. Sales under Rule 144 are also subject to certain manner of
sale provisions, notice requirements and the availability of current public
information about the Company. Any person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days preceding a sale, and who owns shares within the
definition of "restricted securities" under Rule 144 that were purchased from
the Company (or any affiliate ) at least two years previously, will be entitled
to sell such shares under Rule 144(k) without regard to the volume limitations,
manner of sale provisions, public information requirements or notice
requirements. In meeting the one- and two-year holding periods described above,
a holder of restricted securities can include the holding periods of a prior
owner who was not an affiliate. The one- and two-year holding periods do not
begin to run until the full purchase price or other consideration is paid by the
person acquiring the restricted securities from the Company or an affiliate.
The Company's 1996 Equity Incentive Plan (the "1996 Plan") allows the
Company to issue to its non-employee Directors, employees and consultants
options and other awards covering up to an aggregate of 300,000 shares of Common
Stock. As of November 30, 1997, options to purchase 154,206 shares of Common
Stock were issued and outstanding under the 1996 Plan, and options to purchase
86,722 shares of Common Stock were issued and outstanding under the Company's
1985 Incentive Stock Option Plan and Directors Stock Option Plan (the "Prior
Plans"). No further grants of options can be made under the Prior Plans. The
Company has filed registration statements under the Securities Act covering in
the aggregate approximately 520,000 shares of Common Stock reserved for issuance
under the Prior Plans, and 300,000 shares of Common Stock under the 1996 Plan.
Shares registered under such registration statements are, subject to Rule 144
volume limitations applicable to affiliates, available for sale in the open
market, except to the extent that such shares are subject to vesting
restrictions with the Company and the Lock-Up Agreements.
No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price of
the Common Stock prevailing from time to time. Sales of significant amounts of
the Common Stock in the public market could adversely affect the market price of
the Common Stock. See "Risk Factors -- Control by Principal Stockholder" and "--
Shares Available for Future Sale."
46
<PAGE> 48
UNDERWRITING
The Underwriters named below, acting through Tucker Anthony Incorporated,
First Albany Corporation and Advest, Inc., as Representatives, have agreed,
subject to the terms and conditions of the Underwriting Agreement, to purchase
from the Company and the Selling Stockholders, and the Company and the Selling
Stockholders have agreed to sell to the Underwriters, the number of shares of
Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Tucker Anthony Incorporated.....................
First Albany Corporation........................
Advest, Inc.....................................
---------
Total................................. 1,500,000
</TABLE>
The Underwriters will purchase all shares of Common Stock offered hereby,
including any over-allotment shares. The Underwriting Agreement provides that
the obligations of the several Underwriters are subject to conditions precedent
specified therein. In the event of a default by an Underwriter, the commitment
set forth above of the non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Company and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock to the public at the offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. Such dealers may re-allow a concession of not in excess of $ per
share to certain other dealers. After the public offering, the offering price,
concession and re-allowance to dealers may be changed by the Underwriters.
The Company and Roger G. Little, as Trustee of the Trust, have each granted
to the Underwriters an option, exercisable by the Underwriters not later than 30
days after the effective date of this Prospectus, to purchase up to 180,000 and
45,000 additional shares of Common Stock, respectively, at the public offering
price, less the underwriting discount set forth on the cover page of this
Prospectus. The Underwriters may exercise either of such options, or both, in
whole or in part, only to cover over-allotments made in connection with the sale
of the shares of Common Stock offered hereby. To the extent that the
Underwriters exercise such options, each Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares of Common Stock to be purchased by it shown in
the above table bears to the total shown, and the Company and the Trust will be
obligated, pursuant to the options, to sell such shares to the Underwriters.
In connection with this offering, certain Underwriters and selling group
members may engage in passive market making transactions in the Common Stock on
the Nasdaq National Market immediately prior to the commencement of sales in
this offering, in accordance with Rule 103 of Regulation M under the Exchange
Act. Passive market making consists of displaying bids on the Nasdaq National
Market limited by the bid prices of independent market makers and purchases
limited by such prices and effected in response to order flow. Net purchases by
a passive market maker on each day are limited to a specified percentage of the
passive market maker's average daily trading volume in the Common Stock during a
specified period and must be discontinued when such limit is reached. Passive
market making may stabilize the market price of the Common Stock at a level
above that which might otherwise prevail and, if commenced, may be discontinued
at any time.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to certain payments that the Underwriters may
be required to make in respect thereof. The Company has also agreed to reimburse
the Underwriters for certain expenses incurred by the Underwriters in connection
with this offering up to a maximum reimbursement of $100,000.
47
<PAGE> 49
The Company, its executive officers, Directors and the Selling Stockholders
have agreed not to offer, sell or otherwise dispose of any shares of Common
Stock or any equity securities or securities convertible into or exchangeable
for equity securities or any options, rights or warrants with respect to any
equity securities for a period of 180 days after the date of this Prospectus
without the prior written consent of Tucker Anthony Incorporated except for: (i)
the sale of the shares hereunder; (ii) the issuance by the Company of Common
Stock pursuant to the exercise of options under the Company's equity based
plans; (iii) the grant by the Company of stock options after the date of this
Prospectus under the Company's equity based plans; (iv) sales by the Plan
Trustees pursuant to the provisions of the Plan; or (v) transfers by gift, will
or intestacy or to immediate family members, provided that the transferee agrees
to the same limitations. See "Shares Available for Future Sale."
LEGAL MATTERS
The legality of the shares of Common Stock of the Company offered hereby
will be passed upon for the Company by Goldstein & Manello, P.C., 265 Franklin
Street, Boston, Massachusetts 02110. Stephen M. Honig, a member of Goldstein &
Manello, P.C., previously served as Clerk, and is currently Assistant Clerk, of
the Company. Certain legal matters in connection with the offering will be
passed upon for the Underwriters by Stroock & Stroock & Lavan LLP, 100 Federal
Street, Boston, Massachusetts 02110.
EXPERTS
The consolidated financial statements as of December 31, 1996 and 1995, and
for each of the years in the three-year period ended December 31, 1996 have been
included herein and in the Registration Statement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information may be inspected and copied at the Public Reference Room of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; and at
the Regional Offices of the Commission at 7 World Trade Center, Suite 1300, New
York, N.Y. 10048; and at Citicorp Center, 500 West Madison Street, 14th Floor,
Chicago, Illinois 60661-2511. Copies of such materials may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding the Company; the address of such site is http://www.sec.gov. The
Company's Common Stock is traded on the Nasdaq National Market and such reports,
proxy statements and other information can be inspected at the offices of
Nasdaq, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-2 (including all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act, with respect to the Common Stock offered
hereby. This Prospectus, which constitutes a part of the Registration Statement,
omits certain of the information contained in the Registration Statement and the
exhibits and schedules thereto on file with the Commission pursuant to the
Securities Act and the rules and regulations of the Commission thereunder. For
further information with respect to the Company and its Common Stock, reference
is made to such Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus regarding the contents of any agreement
or other document filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance reference is made to the copy of such
agreement filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. The Registration Statement,
including the exhibits and schedules thereto, can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at certain of its Regional Offices at 7
World Trade Center, Suite 1300, New York, N.Y. 10048; and at Citicorp Center,
500 West Madison Street, 14th Floor, Chicago, Illinois 60661-2511.
48
<PAGE> 50
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated by reference in this Prospectus: (i) the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1996; (ii) the Company's
Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1997, June 30,
1997 and September 30, 1997 and (iii) the Company's Proxy Statement dated April
21, 1997. All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the initial filing
of the Registration Statement and prior to the termination of this offering
shall be deemed to be incorporated by reference in this Prospectus and to be
part hereof from the respective dates of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for all purposes to the extent that a statement contained in this Prospectus or
any other subsequently filed document that is also incorporated by reference
herein modifies or supersedes such statement. The Company hereby undertakes to
provide without charge to each person to whom a copy of this Prospectus has been
delivered, on the written or oral request of any such person, including any
beneficial owner of Common Stock, a copy of any or all of the documents referred
to above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into the documents that the Prospectus incorporates.
Requests for such copies should be directed to Richard S. Gregorio, Chief
Financial Officer, Spire Corporation, One Patriots Park, Bedford, Massachusetts
01730-2396. Mr. Gregorio's telephone number is (781) 275-6000.
49
<PAGE> 51
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.................................................. F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1995 and 1996 and
(Unaudited) September 30, 1997.......................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1995 and 1996 and (Unaudited) for the Nine
Months Ended September 30, 1996 and 1997................................ F-4
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1994, 1995 and 1996 and (Unaudited) for the
Nine Months Ended September 30, 1997.................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996 and (Unaudited) for the Nine
Months Ended September 30, 1996 and 1997................................ F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 52
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Spire Corporation:
We have audited the consolidated financial statements of Spire Corporation
and subsidiary as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1996, as listed in the
accompanying index. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Spire
Corporation and subsidiary as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
February 28, 1997
F-2
<PAGE> 53
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents......................... $ 1,130,428 $ 970,997 $ 1,402,548
Accounts receivable, trade (Note 3):
Amounts billed................................. 2,401,536 2,333,588 1,807,393
Retainage...................................... 97,350 130,215 120,964
Unbilled costs................................. 449,188 650,345 1,247,063
----------- ----------- -----------
2,948,074 3,114,148 3,175,420
Less allowance for doubtful accounts........... 95,000 100,000 85,000
----------- ----------- -----------
Net accounts receivable................... 2,853,074 3,014,148 3,090,420
----------- ----------- -----------
Inventories (Note 4).............................. 1,126,734 1,020,928 1,667,631
Deferred income taxes (Note 9).................... -- -- 300,000
Prepaid expenses and other current assets......... 369,483 287,513 454,544
----------- ----------- -----------
Total current assets................. 5,479,719 5,293,586 6,915,143
----------- ----------- -----------
Property and equipment (Note 6)..................... 21,980,123 22,919,385 23,559,710
Less accumulated depreciation and amortization.... 17,330,271 18,299,072 19,021,715
----------- ----------- -----------
Net property and equipment................ 4,649,852 4,620,313 4,537,995
----------- ----------- -----------
Computer software costs (less accumulated
amortization, $786,862 in 1995, $791,846 in 1996
and $806,916 in 1997)............................. 36,719 31,735 54,685
Patents (less accumulated amortization, $434,490 in
1995, $697,119 in 1996 and $528,607 in 1997)...... 518,087 385,245 274,511
Other assets........................................ 260,053 235,230 25,087
----------- ----------- -----------
814,859 652,210 354,283
----------- ----------- -----------
$10,944,430 $10,566,109 $11,807,421
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.................................. $ 1,494,877 $ 1,233,548 $ 1,148,725
Accrued liabilities (Note 5)...................... 789,153 654,232 770,689
Advances on contracts in progress................. 755,756 1,385,462 118,124
Current portion of capital lease obligation....... 10,401 -- --
----------- ----------- -----------
Total current liabilities................. 3,050,187 3,273,242 2,037,538
----------- ----------- -----------
Stockholders' equity (Note 8)
Common stock, $.01 par value; shares authorized
6,000,000 in 1995 and 1996, and 20,000,000
shares in 1997; issued 3,560,360 shares in
1995, 3,567,185 shares in 1996 and 3,715,466
shares in 1997................................. 35,604 35,672 37,155
Additional paid-in capital........................ 8,468,903 8,491,066 9,410,327
Retained earnings (deficit)....................... 564,424 (34,808) 1,542,089
----------- ----------- -----------
9,068,931 8,491,930 10,989,571
Treasury stock at cost, 537,160 shares in 1995,
547,160 shares in 1996 and 552,160 shares in
1997........................................... (1,174,688) (1,199,063) (1,219,688)
----------- ----------- -----------
Total stockholders' equity................ 7,894,243 7,292,867 9,769,883
----------- ----------- -----------
$10,944,430 $10,566,109 $11,807,421
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 54
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales and revenues
Contract research, service and license
revenues................................ $14,537,201 $12,883,770 $11,447,000 $ 8,384,894 $10,773,933
Sales of manufacturing equipment.......... 3,863,284 4,568,426 5,941,319 4,154,583 6,285,648
----------- ----------- ----------- ----------- -----------
Total sales and revenues.............. 18,400,485 17,452,196 17,388,319 12,539,477 17,059,581
----------- ----------- ----------- ----------- -----------
Costs and expenses
Cost of contract research, services and
licenses................................ 10,499,727 9,187,422 8,938,034 5,902,490 6,899,334
Cost of manufacturing equipment........... 3,110,296 3,837,536 4,311,774 3,977,156 4,213,078
Selling, general and administrative
expenses................................ 4,911,127 4,438,578 4,746,235 3,377,481 4,284,212
----------- ----------- ----------- ----------- -----------
Total costs and expenses.............. 18,521,150 17,463,536 17,996,043 13,257,127 15,396,624
----------- ----------- ----------- ----------- -----------
Earnings (loss) from operations............... (120,665) (11,340) (607,724) (717,650) 1,662,957
Interest income (expense), net (Note 6)....... (82,654) (19,539) 8,492 12,514 13,940
----------- ----------- ----------- ----------- -----------
Earnings (loss) before income taxes........... (203,319) (30,879) (599,232) (705,136) 1,676,897
Income tax expense (benefit) (Note 9)......... (21,299) (32,010) -- 6,773 100,000
----------- ----------- ----------- ----------- -----------
Net earnings (loss)........................... $ (182,020) $ 1,131 $ (599,232) $ (711,909) $ 1,576,897
=========== =========== =========== =========== ===========
Earnings (loss) per share of common stock..... $ (0.06) $ 0.00 $ (0.20) $ (0.24) $ 0.48
=========== =========== =========== =========== ===========
Weighted average number of common and common
equivalent shares outstanding............... 3,065,026 3,084,067 3,028,850 3,031,260 3,275,147
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 55
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK RETAINED
------------------- PAID-IN --------------------- EARNINGS
SHARES AMOUNT CAPITAL SHARES AMOUNT (DEFICIT) TOTAL
--------- ------- ---------- ------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993....... 3,559,860 $35,599 $8,467,658 495,160 $(1,044,063) $ 745,313 $8,204,507
Exercise of stock options.... 500 5 1,245 -- -- -- 1,250
Net loss..................... -- -- -- -- -- (182,020) (182,020)
--------- ------- ---------- ------- ----------- ---------- ----------
Balance, December 31, 1994....... 3,560,360 35,604 8,468,903 495,160 (1,044,063) 563,293 8,023,737
Repurchase of treasury
stock...................... -- -- -- 42,000 (130,625) -- (130,625)
Net earnings................. -- -- -- -- -- 1,131 1,131
--------- ------- ---------- ------- ----------- ---------- ----------
Balance, December 31, 1995....... 3,560,360 35,604 8,468,903 537,160 (1,174,688) 564,424 7,894,243
Exercise of stock options.... 6,825 68 22,163 -- -- -- 22,231
Repurchase of treasury
stock...................... -- -- -- 10,000 (24,375) -- (24,375)
Net loss..................... -- -- -- -- -- (599,232) (599,232)
--------- ------- ---------- ------- ----------- ---------- ----------
Balance, December 31, 1996....... 3,567,185 35,672 8,491,066 547,160 (1,199,063) (34,808) 7,292,867
Exercise of stock options.... 148,281 1,483 541,498 -- -- -- 542,981
Tax benefit of disqualifying
dispositions of stock
option exercises........... -- -- 377,763 -- -- -- 377,763
Repurchase of treasury
stock...................... -- -- -- 5,000 (20,625) -- (20,625)
Net earnings................. -- -- -- -- -- 1,576,897 1,576,897
--------- ------- ---------- ------- ----------- ---------- ----------
Balance, September 30, 1997
(Unaudited).................... 3,715,466 $37,155 $9,410,327 552,160 $(1,219,688) $1,542,089 $9,769,883
========= ======= ========== ======= =========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 56
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ --------------------------
1994 1995 1996 1996 1997
----------- ---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)......................... $ (182,020) $ 1,131 $ (599,232) $ (711,909) $ 1,576,897
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization........... 1,392,181 1,293,114 1,240,215 824,457 845,425
Deferred income taxes................... -- -- -- -- (300,000)
Changes in assets and liabilities:
Accounts receivable................... 627,616 1,083,552 (161,074) 174,021 (76,272)
Inventories........................... (425,882) (237,987) 105,806 181,688 (646,703)
Prepaid expense and other current
assets.............................. 59,410 15,103 81,970 (290,095) (167,031)
Refundable income tax................. -- 27,230 -- -- --
Accounts payable and accrued
liabilities......................... 305,673 (394,717) (396,250) (328,402) 31,634
Federal and state taxes payable....... (19,856) -- -- -- --
Advances on contracts in progress..... 217,440 526,046 629,706 18,710 (1,267,338)
----------- ---------- ----------- ---------- -----------
Net cash provided by (used in)
operating activities............ 1,974,562 2,313,472 901,141 (131,530) (3,388)
----------- ---------- ----------- ---------- -----------
Cash flows from investing activities:
Additions to property and equipment......... (1,432,747) (389,647) (943,053) (547,029) (611,724)
Increase in patent costs.................... (70,387) (100,090) (129,797) (11,975) (29,370)
Increase in software production costs....... (10,292) -- -- -- (34,229)
Other assets................................ (132,687) 67,823 24,823 (188,259) 210,143
----------- ---------- ----------- ---------- -----------
Net cash used in investing
activities...................... (1,646,113) (421,914) (1,048,027) (747,263) (465,180)
----------- ---------- ----------- ---------- -----------
Cash flows from financing activities:
Net borrowings (payments) on short-term
debt...................................... 750,000 (750,000) (10,401) -- --
Payments on long-term borrowings............ (959,675) (47,072) -- (7,619) --
Tax benefit of disqualifying dispositions of
stock option exercises.................... -- -- -- -- 377,763
Exercise of stock options................... 1,250 -- 22,231 22,231 542,981
Repurchase of common stock.................. -- (130,625) (24,375) (24,375) (20,625)
----------- ---------- ----------- ---------- -----------
Net cash provided by (used in)
financing activities............ (208,425) (927,697) (12,545) (9,763) 900,119
----------- ---------- ----------- ---------- -----------
Net increase (decrease) in cash
and cash equivalents............ 120,024 963,861 (159,431) (888,556) 431,551
Cash and cash equivalents, beginning of
period...................................... 46,543 166,567 1,130,428 1,130,428 970,997
----------- ---------- ----------- ---------- -----------
Cash and cash equivalents, end of period...... $ 166,567 $1,130,428 $ 970,997 $ 241,872 1,402,548
=========== ========== =========== ========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest expense...................... $ 112,000 $ 43,567 $ 4,084 $ 2,790 $ 5,118
=========== ========== =========== ========== ===========
Income taxes.......................... $ 138,000 $ -- $ -- $ 6,773 $ 75,895
=========== ========== =========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 57
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
(1) NATURE OF THE BUSINESS
Spire develops, manufactures, and markets highly engineered photovoltaic
manufacturing equipment and optoelectronic products and provides biomedical
processing services. Spire designs and manufactures specialized equipment for
the production of terrestrial photovoltaic modules from solar cells. The Company
offers certain optoelectronic products and is continuing to develop additional
advanced optoelectronic products for telecommunications, biomedical and
electronics applications, including solar cells used to power satellites. In
addition, Spire's value-added service offerings to biomedical customers provide
surface treatments to enhance the performance of medical products.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Spire International Sales Corporation. All
significant intercompany balances and transactions have been eliminated in
consolidation.
(b) Revenue Recognition
Revenue for equipment sales is recognized upon shipment. Revenue for
service contracts is recognized upon performance of the service. Revenue on
government research contracts is recorded as costs are incurred and includes a
pro rated portion of the estimated profit.
(c) Inventories
Inventories are stated at the lower of cost or market, cost being
determined by the average cost method, on a first-in, first-out (FIFO) basis.
(d) Property and Equipment
Property and equipment is stated at cost. Depreciation and amortization are
provided using the straight-line method over the estimated useful lives of the
respective assets, as follows:
Machinery and equipment......... 7 years
Furniture and fixtures.......... 5 years
Leasehold improvements.......... Lesser of 10 years or remaining
life of facility lease
Maintenance and repairs are charged to expense as incurred. Major renewals
and betterments are added to property and equipment accounts at cost.
(e) Patent Costs
Patent costs are capitalized and amortized over the patents' useful lives
using the straight-line method.
(f) Computer Software Costs
Capitalized computer software costs are amortized by the straight-line
method over the estimated economic life of the product. The amount of
amortization charged to expense was $48,000, $10,000 and $9,000 for 1994, 1995
and 1996, respectively, and $9,000 and $11,000 for the nine months ended
September 30, 1996 and 1997 (unaudited), respectively. The recoverability of
such costs is reviewed on an ongoing basis.
(g) Income Taxes
The Company accounts for income taxes under the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using
F-7
<PAGE> 58
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(h) Research and Development Costs
Research and development costs are charged to operations as incurred,
except where such costs are reimbursable under customer funded contracts. During
the years ended December 31, 1994, 1995 and 1996, unfunded research and
development costs were $124,000, $59,000 and $84,000, respectively, and $61,000
and $126,000 for the nine months ended September 30, 1996 and 1997 (unaudited),
respectively.
(i) Earnings Per Share
Earnings per share of common stock are based on the weighted average number
of common shares outstanding, including the dilutive effect of stock options and
warrants.
(j) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(k) Financial Instruments
Financial instruments of the Company consist of cash and cash equivalents,
accounts receivable and accounts payable. The carrying amounts of these
financial instruments approximate their fair value.
(l) Stock-Based Compensation
Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 123, Accounting for Stock-Based Compensation, which permits
entities to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income (loss) and pro forma earnings (loss) per share disclosures
for employee stock option grants made in 1995 and future years as if the fair-
value-based method defined in SFAS No. 123 had been applied. The Company has
elected to continue to apply the provisions of APB Opinion No. 25 and provide
the pro forma disclosure provisions of SFAS No. 123.
(3) ACCOUNTS RECEIVABLE
Unbilled costs on contracts in progress represent revenues recognized on
contracts for which billings have not been presented to customers as of each
balance sheet date. These amounts are billed and generally collected within one
year.
Retainage represents revenues on certain United States Government sponsored
research and development contracts. These amounts, which usually represent 15%
of the Company's research fee on each applicable contract, are not collectible
until a final cost review has been performed by government auditors. Included in
retainage are amounts expected to be collected after one year and were $97,000
and $130,000 at December 31, 1995 and 1996, respectively and $121,000 at
September 30, 1997 (unaudited). All other accounts receivable are expected to be
collected within one year.
F-8
<PAGE> 59
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
All contracts with United States Government agencies have been audited and
settled through December 1995. To date, the Company has not incurred significant
losses as a result of government audits.
(4) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials........................ $ 487,255 $ 572,309 $ 802,403
Work in process...................... 639,479 448,619 865,228
---------- ---------- ----------
$1,126,734 $1,020,928 $1,667,631
========== ========== ==========
</TABLE>
(5) ACCRUED LIABILITIES
Accrued liabilities include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1995 1996 1997
--------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Accrued payroll and payroll taxes.... $382,916 $289,078 $448,448
Accrued other........................ 406,237 365,154 322,241
-------- -------- --------
$789,153 $654,232 $770,689
======== ======== ========
</TABLE>
(6) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment.............. $18,671,001 $19,118,037 $19,359,701
Furniture and fixtures............... 2,172,269 2,603,296 2,774,023
Leasehold improvements............... 1,109,098 1,193,782 1,195,465
Construction in progress............. 27,755 4,270 230,521
----------- ----------- -----------
$21,980,123 $22,919,385 $23,559,710
=========== =========== ===========
</TABLE>
Interest costs of $112,000, $39,000 and $11,000 were incurred of which
$29,000, $1,000 and $2,000 were capitalized in 1994, 1995 and 1996,
respectively, and $1,000 and none in the first nine months of September 30, 1996
and 1997 (unaudited), respectively. In connection with the construction of
equipment for internal use, the Company has capitalized overhead costs of
$352,000, $41,000 and $50,000 for the years ended December 31, 1994, 1995 and
1996, respectively and $38,000 and $47,000 for the first nine months ended
September 30, 1996 and 1997 (unaudited), respectively.
(7) LONG-TERM DEBT AND CREDIT ARRANGEMENTS
On April 4, 1997, the Company amended and extended its revolving credit
agreement with Silicon Valley Bank. This agreement established a $2 million
revolving credit facility, with availability limited to 80% of eligible accounts
receivable. This line of credit has been established to provide the Company with
resources for general working capital purposes and Standby Letter of Credit
Guarantees for foreign customers. The line has been secured by all assets of the
Company. Interest on the line is at the Bank's prime rate plus one-half of one
percent. The line contains restrictive covenants including provisions relating
to profitability and net worth. As of September 30, 1997, the Company had no
outstanding debt under this revolving credit line.
F-9
<PAGE> 60
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
(8) STOCKHOLDERS' EQUITY
The Company has two employee stock option plans: the 1985 Incentive Stock
Option Plan, and the 1996 Equity Incentive Plan. These plans provide that the
Board of Directors may grant options to purchase the Company's common stock to
key employees of the Company. Incentive options must be granted at the fair
market value of the common stock or, in the case of certain optionees, at 110%
of such fair market value at the time of the grant. The exercise price of
options is determined by the Board of Directors. The options may be exercised,
subject to certain vesting requirements, for periods up to ten years from the
date of issue.
Through December 31, 1996, the Company issued under its Directors Stock
Option Plan 20,000 non-qualified stock options and under its 1996 Equity
Incentive Plan 5,000 non-qualified stock options to the unaffiliated directors
of the Company for the purchase of common stock at an average price of $3.22 per
share, and through September 30, 1997, the Company issued under its Directors
Stock Option Plan 24,250 non-qualified stock options and under its 1996 Equity
Incentive Plan 5,000 non-qualified stock options to the unaffiliated directors
of the Company for the purchase of common stock at an average price of $4.95 per
share. The options may be exercised, subject to certain vesting requirements,
for periods up to ten years from the date of issue. The Company may no longer
award options under any plans except the 1996 Equity Incentive Plan.
A summary of the activity of these plans follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES OPTION PRICE
--------- ----------------
<S> <C> <C>
Outstanding, December 31, 1993........................ 308,862 $3.49
Granted.......................................... 52,888 $3.32
Exercised........................................ (500) $2.50
Terminated....................................... (39,500) $3.16
-------- -----
Outstanding, December 31, 1994........................ 321,750 $3.51
Granted.......................................... 1,325 $2.25
Exercised........................................ -- --
Terminated....................................... (33,000) $3.38
-------- -----
Outstanding, December 31, 1995........................ 290,075 $3.51
Granted.......................................... 99,425 $2.63
Exercised........................................ (6,825) $3.26
Terminated....................................... (23,500) $3.40
-------- -----
Outstanding, December 31, 1996........................ 359,175 $3.28
Granted.......................................... 76,825 $5.36
Exercised........................................ (148,281) $3.66
Terminated....................................... -- --
-------- -----
Outstanding, September 30, 1997 (unaudited)........... 287,719 $3.64
======== =====
Shares exercisable at September 30, 1997
(unaudited)......................................... 108,541 $3.30
======== =====
</TABLE>
F-10
<PAGE> 61
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
There were 566,250 and 454,469 shares reserved for issuance under all plans
at December 31, 1996 and September 30, 1997, respectively. The per share
weighted-average fair value of stock options granted during 1995, 1996 and the
first nine months of 1997 was $1.19, $1.39 and $5.36, respectively, on the date
of grant using the Black Scholes option-pricing model with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
EXPECTED RISK-FREE EXPECTED EXPECTED
PERIOD DIVIDEND YIELD INTEREST RATE OPTION LIFE VOLATILITY FACTOR
------ -------------- ------------- ----------- -----------------
<S> <C> <C> <C> <C>
1995................................... 0% 5.05% 5 years 54.7%
1996................................... 0% 5.07% 5 years 54.7%
Nine months ended September 30, 1997... 0% 5.78% 5 years 66.2%
</TABLE>
The Company applies APB Opinion No. 25 in accounting for its plans and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based on
the fair value at the grant date for its options under SFAS No. 123, the
Company's net earnings (loss) would have been reduced (increased) to the pro
forma amounts indicated below.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1995 1996 1997
-------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Net earnings (loss) as reported........... $ 1,131 $(599,232) $ 1,576,897
Net earnings (loss) pro forma............. (20,331) (649,724) 1,514,993
</TABLE>
Pro forma net earnings (loss) reflect only options granted in 1995 and
1996. Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net earnings (loss)
amounts presented above because compensation cost is reflected over the options'
vesting period of five years and compensation cost for options granted prior to
January 1, 1995 is not considered.
(9) INCOME TAXES
Total Federal and State income tax expense (benefit) for the years ended
December 31, 1994, 1995 and 1996 and for the nine months ended September 30,
1996 and 1997, consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------ --------------------
1994 1995 1996 1996 1997
-------- -------- ---- ------ ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
State............................... $(21,229) $(32,010) $ -- $6,773 $ 62,280
Federal............................. -- -- -- -- 337,720
-------- -------- ---- ------ ---------
(21,299) (32,010) -- 6,773 400,000
-------- -------- ---- ------ ---------
Deferred:
State............................... -- -- -- -- (46,710)
Federal............................. -- -- -- -- (253,290)
-------- -------- ---- ------ ---------
-- -- -- -- (300,000)
-------- -------- ---- ------ ---------
$(21,299) $(32,010) $ -- $6,773 $ 100,000
======== ======== ==== ====== =========
</TABLE>
F-11
<PAGE> 62
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
The actual income tax expense (benefit) for 1994, 1995 and 1996 and for the
nine months ended September 30, 1996 and 1997, differs from the "expected"
income tax expense (benefit) for the year (computed by applying the U.S. Federal
corporate income tax rate of 34% to earnings (loss) before income taxes) as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
----------------------------------- -----------------------
1994 1995 1996 1996 1997
-------- -------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Computed "expected" income tax
expense (benefit).............. $(69,128) $(10,499) $(201,436) $(239,746) $ 570,145
State tax, net of federal
benefit........................ (12,748) (1,936) (34,327) (22,776) 105,141
Increase (decrease) in valuation
allowance...................... (112,260) 55,354 298,686 290,000 (612,291)
Permanent differences............ 11,695 10,470 15,289 12,000 10,000
(Increase) decrease in tax credit
carryforwards.................. 136,441 (36,172) (15,300) (15,000) 21,446
Recovery of prior year
estimate....................... 24,701 -- (62,912) -- --
Other............................ -- (49,227) -- (17,705) 5,559
--------- -------- --------- --------- ---------
$(21,299) $(32,010) $ -- $ 6,773 $ 100,000
========= ======== ========= ========= =========
</TABLE>
The amount recorded as a deferred income tax asset as of September 30, 1997
represents the amount of tax benefits of existing deductible temporary
differences or carryforwards that are more likely than not to be realized
through the generation of sufficient future taxable income within the
carryforward period. At September 30, 1997, based on the Company's level of net
income and projected earnings, the Company reduced the valuation allowance by
$612,291. The Company continually re-evaluates the recoverability of deferred
tax assets.
The tax effects of temporary differences that give rise to significant
portions of net deferred tax assets at December 31, 1995 and 1996 and September
30, 1997 (unaudited) are presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Charitable contributions.................... $ -- $ 4,168 $ --
Accounts receivable......................... 38,257 40,270 34,230
Accruals.................................... 142,242 96,278 83,770
Inventory................................... 51,733 112,784 164,700
Federal net operating loss carryforwards.... 102,039 281,651 --
General business credit carryforwards....... 752,998 752,998 752,998
Alternative minimum tax credit
carryforwards............................. 340,416 340,416 340,416
State net operating loss and investment
tax credit................................ 41,205 84,293 62,847
--------- ---------- ----------
Total gross deferred tax assets........ 1,468,890 1,712,858 1,438,961
Less: valuation allowance.............. (643,594) (942,280) (329,989)
--------- ---------- ----------
Net deferred tax assets................ 825,296 770,578 1,108,972
--------- ---------- ----------
Property and equipment...................... (786,610) (725,815) (766,297)
Capitalized software........................ (5,573) (9,436) (25,380)
Patents..................................... (3,975) (15,080) (13,587)
Research agreements......................... (29,138) (20,247) (3,708)
--------- ---------- ----------
Total gross deferred tax liabilities... (825,296) (770,578) (808,972)
--------- ---------- ----------
Net deferred tax assets..................... $ -- $ -- $ 300,000
========= ========== ==========
</TABLE>
F-12
<PAGE> 63
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
The valuation allowance for deferred tax assets as of December 31, 1996 and
September 30, 1997 (unaudited) was $942,280 and $329,989, respectively. The net
change in the total valuation allowance for the year ended December 31, 1996 and
nine months ended September 30, 1997 was an increase of $298,686 and a decrease
of $612,291, respectively.
At December 31, 1996 and September 30, 1997, the Company has approximately
$753,000 of general business tax credits available to offset future taxable
income which expire through 2001. The Company also has approximately $340,000 of
alternative minimum tax credits to offset future taxable income. However, if
changes in the Company's stock ownership exceed 50% of the value of the
Company's stock during any three-year period, the utilization of credit
carryforwards may be subject to limitations.
(10) COMMITMENTS
The Company subleases its facilities from a company who leases the building
from a trust; the principal beneficiary of the trust is the principal
stockholder of the Company. The sublease originally was for a period of ten
years, for which the Company exercised its option to extend for an additional
five-year period expiring on November 30, 2000 and has an option for an
additional five-year extension period. The agreement provides for minimum rental
payments plus annual increases linked with the consumer price index. Total rent
expense under this lease was $817,000, $853,000 and $922,000 in 1994, 1995 and
1996, respectively, and $665,000 for the nine months ended September 30, 1997.
The Company has also entered into other noncancelable operating leases.
Total rent expense charged to these noncancelable leases was $138,000, $51,000,
and $90,000 in 1994, 1995 and 1996, respectively and $138,000 for the nine
months ended September 30, 1997.
At December 31, 1995 the cost of assets held under capital lease was
$115,000. At December 31, 1996 there were no future lease payments due under
capital lease. Future minimum lease payments under operating leases are as
follows:
<TABLE>
<S> <C>
October 1, 1997 to December 31, 1997............ $ 278,359
1998............................................ 997,449
1999............................................ 992,566
2000............................................ 869,619
----------
$3,137,993
==========
</TABLE>
(11) CASH OR DEFERRED PROFIT SHARING PLANS
In 1985, the Company adopted a profit sharing plan under Section 401(k) of
the Internal Revenue Code. This plan allows employees to defer up to 17.5% of
their income on a pretax basis through contributions to the plan. The Company
contributes its Common Stock in an amount equal to 40% of the employee's
contribution up to a maximum of 15% of the employee's cash compensation. Expense
recognized under the plan in 1994, 1995 and 1996 was $162,000, $148,000 and
$145,000, respectively, and $117,000 and $155,000 for the nine months ended
September 30, 1996 and 1997 (unaudited), respectively.
(12) SIGNIFICANT CUSTOMERS AND EXPORT REVENUES
Revenues from contracts with United States Government agencies for the
years ended
December 31, 1994, 1995 and 1996 were $8,806,000, $8,232,000 and $6,705,000 or
48%, 48% and 39% of net sales and revenues, respectively, and $4,918,000 or 39%
and $5,950,000 or 35% of net sales and revenues for the nine months ended
September 30, 1996 and 1997 (unaudited), respectively.
In 1994, 1995 and 1996, export revenues were $3,383,000, $2,894,000 and
$3,330,000, respectively, or 18%, 17% and 19% of net sales and revenues,
respectively, and $2,879,000 or 23% and $6,061,000 or 36% of net sales and
revenues for the nine months ended September 30, 1996 and 1997 (unaudited),
respectively.
F-13
<PAGE> 64
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
(13) QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the consolidated quarterly results for the
years ended December 31, 1995 and 1996 and for the nine months ended September
30, 1997:
<TABLE>
<CAPTION>
1995
THREE MONTHS ENDED
----------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales and revenues................... $4,583,221 $4,658,630 $4,275,124 $ 3,935,221
Costs and expenses....................... 4,562,783 4,635,927 4,174,000 4,090,826
Earnings (loss) before income taxes...... 2,804 2,163 108,592 (144,438)
Income tax expense (benefit)............. -- -- 47,700 (79,710)
Net earnings (loss)...................... 2,804 2,163 60,892 (64,728)
Net earnings (loss) per share............ 0.00 0.00 0.02 (0.02)
</TABLE>
<TABLE>
<CAPTION>
1996
THREE MONTHS ENDED
----------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales and revenues................... $3,837,899 $4,489,053 $4,212,525 $ 4,848,842
Costs and expenses....................... 4,109,847 4,466,404 4,680,876 4,738,916
Earnings (loss) before income taxes...... (266,441) 33,062 (471,757) 105,904
Income tax expense (benefit)............. -- -- 6,773 (6,773)
Net earnings (loss)...................... (266,441) 33,062 (478,530) 112,677
Net earnings (loss) per share............ (0.09) 0.01 (0.16) 0.04
</TABLE>
<TABLE>
<CAPTION>
1997
THREE MONTHS ENDED
------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30
---------- ---------- ------------
<S> <C> <C> <C>
Net sales and revenues................... $4,450,699 $6,432,848 $6,176,034
Costs and expenses....................... 4,304,022 5,631,200 5,461,402
Earnings before income taxes............. 150,294 801,677 724,926
Income tax expense....................... -- 100,000 --
Net earnings............................. 150,294 701,677 724,926
Net earnings per share................... 0.05 0.22 0.22
</TABLE>
F-14
<PAGE> 65
Flow chart depicting items in the Company's photovoltaic module manufacturing
equipment product line, with captions describing the function of each item.
<PAGE> 66
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary................... 3
Risk Factors......................... 6
Recent Developments.................. 13
Use of Proceeds...................... 14
Price Range of Common Stock.......... 15
Dividend Policy...................... 15
Capitalization....................... 16
Selected Consolidated Financial
Data............................... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 18
Business............................. 26
Management........................... 41
Principal and Selling Stockholders... 43
Description of Securities to be
Registered......................... 45
Indemnification...................... 45
Shares Available for Future Sale..... 46
Underwriting......................... 47
Legal Matters........................ 48
Experts.............................. 48
Available Information................ 48
Incorporation of Certain Documents by
Reference.......................... 49
Index to Consolidated Financial
Statements......................... F-1
------------------------
NO DEALER, SALESPERSON OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY
THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY, THE SELLING STOCKHOLDERS OR
THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS NOT
BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
</TABLE>
================================================================================
================================================================================
1,500,000 SHARES
[SPIRE LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
, 1998
TUCKER ANTHONY
INCORPORATED
FIRST ALBANY CORPORATION
ADVEST, INC.
================================================================================
<PAGE> 67
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be borne by the
Company in connection with the offering of the securities registered hereby:
<TABLE>
<CAPTION>
EXPENSE COST
------- --------
<S> <C>
SEC Registration Fee(1)............................................. $ 9,017
NASD Filing Fee..................................................... 3,500*
Nasdaq Listing Fee.................................................. 17,500
Blue Sky Qualifications and Expenses (including Counsel Fees)....... 7,500*
Legal Fees and Expenses............................................. 175,000*
Accounting Fees and Expenses........................................ 55,000*
Printing, Engraving and Mailing Expenses............................ 55,000*
Transfer Agent and Registrar Fees................................... 3,700*
Underwriters' Expenses.............................................. 100,000
Miscellaneous....................................................... 23,783*
--------
Total.......................................................... $450,000*
========
</TABLE>
- ---------------
* Estimated
(1) The Selling Stockholders will pay 31.6% of the SEC Registration Fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 67 of the Massachusetts Business Corporation Law sets forth certain
circumstances under which directors, officers, employees and agents may be
indemnified against liability that they may incur in their capacity as such.
Section 67 of the Massachusetts Business Corporation Law provides as follows:
Indemnification of directors, officers, employees and other agents of
a corporation, and persons who serve at its request as directors,
officers, employees or other agents of another organization, or who
serve at its request in any capacity with respect to any employee
benefit plan, may be provided by it to whatever extent shall be
specified in or authorized by (i) the articles of organization or (ii)
a by-law adopted by the stockholders or (iii) a vote adopted by the
holders of a majority of the shares of stock entitled to vote on the
election of directors. Except as the articles of organization or
by-laws otherwise require, indemnification of any persons referred to
in the preceding sentence who are not directors of the corporation may
be provided by it to the extent authorized by the directors. Such
indemnification may include payment by the corporation of expenses
incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, upon
receipt of an undertaking by the person indemnified to repay such
payment if he shall be adjudicated to be not entitled to
indemnification under this section which undertaking may be accepted
without reference to the financial ability of such person to make
repayment. Any such indemnification may be provided although the
person to be indemnified is no longer an officer, director, employee
or agent of the corporation or of such other organization or no longer
serves with respect to any such employee benefit plan.
No indemnification shall be provided for any person with respect to any
matter as to which he shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his action was in the best
interest of the corporation or, to the extent that such matter relates to
service with respect to an employee benefit plan, in the best interests of the
participants or beneficiaries of such employee benefit plan.
The absence of any express provision for indemnification shall not limit
any right of indemnification existing independently of this section.
II-1
<PAGE> 68
A corporation shall have power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or other agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or other agent of another organization or with
respect to any employee benefit plan, against any liability incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability.
The Company's Articles of Organization provide that a director is not
liable to the Company or its shareholders for monetary damages for breach of
fiduciary duty except for: (a) any breach of the director's duty of loyalty to
the Company or its shareholders, (b) acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (c) under the
Massachusetts Business Corporation Law provisions imposing joint and several
liability for improper distributions to shareholders or loans to officers or
directors, (d) transactions from which a director derived an improper personal
benefit or (e) for any act or omission occurring prior to the effective date of
such provision.
The Company's By-Laws require the Company to indemnify all officers,
directors, employees and agents of the Company against all liabilities and
expenses they may incur on account of all actions threatened or brought against
them by reason of their services to the Company or to another entity at the
request of the Company. No indemnification is provided for any person with
respect to any matter as to which such person has been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Company. The Company maintains a
directors' and officers' liability insurance policy in the aggregate amount of
$5,000,000 on behalf of its directors and officers.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1 Form of Underwriting Agreement
5 Opinion of Goldstein & Manello, P.C. regarding legality
10.1 Equipment Manufacturing License Agreement with Marubeni Corporation(1)
10.2 Distribution Agreement with Marubeni Corporation(1)
23(a) Consent of KPMG Peat Marwick LLP(1)
23(b) Consent of Goldstein & Manello, P.C. (included in Exhibit 5)
24 Power of Attorney(1)
</TABLE>
- ---------------
(1) Previously filed
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
A. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 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 Act and will
be governed by the final adjudication of such issue.
B. (1) For determining any liability under the Securities Act, to treat
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 under Rule 424(b)(1), or (4) or 497(h) under
the Securities Act as part of this registration statement as of the time the
Commission declares it effective.
(2) For determining any liability under the Securities Act, to treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-2
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Town of Bedford, Commonwealth of
Massachusetts, on the 23rd day of December, 1997.
SPIRE CORPORATION
By: /s/ ROGER G. LITTLE
------------------------------------
ROGER G. LITTLE
PRESIDENT, CHIEF EXECUTIVE
OFFICER AND CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney have been signed below by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROGER G. LITTLE Chairman of the Board of December 23, 1997
- ---------------------------------------- Directors, President and Chief
ROGER G. LITTLE Executive Officer (Principal
Executive Officer)
/s/ RICHARD S. GREGORIO Vice President, Chief Financial December 23, 1997
- ---------------------------------------- Officer, Treasurer, Principal
RICHARD S. GREGORIO Accounting Officer
/s/ MICHAEL T. ECKHART* Director December 23, 1997
- ----------------------------------------
MICHAEL T. ECKHART
/s/ A. JOHN GALE* Director December 23, 1997
- ----------------------------------------
A. JOHN GALE
/s/ UDO HENSELER, PH.D.* Director December 23, 1997
- ----------------------------------------
UDO HENSELER, PH.D.
/s/ ROGER W. REDMOND* Director December 23, 1997
- ----------------------------------------
ROGER W. REDMOND
/s/ JOHN A. TARELLO* Director December 23, 1997
- ----------------------------------------
JOHN A. TARELLO
*By: /s/ RICHARD S. GREGORIO
- ----------------------------------------
RICHARD S. GREGORIO
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE> 1
EXHIBIT 1
SPIRE CORPORATION COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
UNDERWRITING AGREEMENT
Boston, Massachusetts
________ __, 1998
TUCKER ANTHONY INCORPORATED
FIRST ALBANY CORPORATION
ADVEST, INC.
As Representatives of the
Several Underwriters
c/o Tucker Anthony Incorporated
One Beacon Street
Boston, Massachusetts 02108
Ladies and Gentlemen:
Spire Corporation, a Massachusetts corporation (the "Company"), and The
Roger G. Little Family Trust (the "Trust") and the Spire Corporation 401(k)
Profit Sharing Plan (the "Plan") (collectively the Trust and the Plan are
referred to herein as the "Selling Stockholders") confirm their agreement with
Tucker Anthony Incorporated ("Tucker Anthony"), First Albany Corporation ("First
Albany") and Advest, Inc. ("Advest"), and each of the other underwriters, if
any, named in Schedule A hereto (collectively, the "Underwriters," which term
shall also include any underwriter substituted as hereinafter provided in
Section 11), for whom Tucker Anthony, First Albany and Advest are acting as
representatives (in such capacity, Tucker Anthony, First Albany and Advest are
herein called the "Representatives"), with respect to the sale by the Company
and the Selling Stockholders and the purchase by the Underwriters, acting
severally and not jointly, of an aggregate of 1,500,000 shares of the Common
Stock, $0.01 par value per share, of the Company ("Common Stock"), of which
1,000,000 shares are to be sold by the Company and 500,000 shares are to be sold
by the Selling Stockholders (collectively, the "Firm Shares"), and with respect
to the grant by the Company to the Underwriters, acting severally and not
jointly, of the option described in Section 2(b) hereof to purchase therefrom
all or any part of 225,000 additional shares of Common Stock for the purpose of
covering over-allotments, if any. The Firm Shares and all or any part of the
shares of Common Stock subject to the option described in Section 2(b) hereof
(the "Option Shares") are hereinafter collectively referred to as the "Shares."
The words "you" and "your" refer to the Representatives of the Underwriters.
1
<PAGE> 2
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING STOCKHOLDERS.
I. The Company represents and warrants to, and agrees with, each of the
Underwriters as of the date hereof, and as of the Closing Date, as defined
in Section 2(c) hereof, and the Option Closing Date, as defined in Section
2(b) hereof, if any, as follows:
(a) A registration statement on Form S-2 (File No. 333-41445) with
respect to the Shares, including a prospectus subject to completion,
has been prepared by the Company in conformity with the requirements
of the Securities Act of 1933, as amended (the "Act"), and the
applicable Rules and Regulations ( as defined below) of the Securities
and Exchange Commission (the "Commission") and has been filed with the
Commission; such amendments to such registration statement, and such
amended prospectuses subject to completion, as may have been required
prior to the date hereof have been similarly prepared and filed with
the Commission; and the Company will file such additional amendments
to such registration statement, and such amended prospectuses subject
to completion, as may hereafter be required. Copies of such
registration statement and each such amendment, each such related
prospectus subject to completion (collectively, the "Preliminary
Prospectuses" and individually, a "Preliminary Prospectus"), each
document incorporated by reference therein and each exhibit thereto
have been delivered to you. For purposes hereof, "Rules and
Regulations" means the rules and regulations adopted by the Commission
under either the Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as applicable. If the registration
statement has been declared effective under the Act by the Commission,
the Company will prepare and promptly file with the Commission,
pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations under the Act or as part of a post-effective amendment to
the registration statement (including a final form of prospectus), the
information omitted from the registration statement pursuant to Rule
430A(a) of the Rules and Regulations under the Act. If the
registration statement has not been declared effective under the Act
by the Commission, the Company will prepare and promptly file a
further amendment to the registration statement, including a final
form of prospectus. The term "Registration Statement" as hereinafter
used in this Agreement shall mean such registration statement,
including financial statements, schedules and exhibits in the form in
which it became or becomes effective (including, if the Company
omitted information from the registration statement pursuant to Rule
430A(a) of the Rules and Regulations under the Act, the information
deemed to be a part of the registration statement at the time it
became effective pursuant to Rule 430A(b) of the Rules and Regulations
under the Act) and, in the event of any amendment thereto after the
effective date of such registration statement, shall also mean (from
and after the effectiveness of such amendment) such registration
statement as so amended, together with any registration statement
filed by the Company pursuant to Rule 462(b) under the Act. The term
"Prospectus" as used in this Agreement shall mean the prospectus
relating to the Shares as included in
2
<PAGE> 3
such registration statement at the time it became or becomes
effective, except that if any revised prospectus shall be provided to
the Underwriters by the Company for use in connection with the
offering of the Shares that differs from the Prospectus on file with
the Commission at the time the registration statement became or
becomes effective (whether or not such revised prospectus is required
to be filed with the Commission pursuant to Rule 424(b)(3) of the
Rules and Regulations under the Act), the term "Prospectus" shall
refer to such revised prospectus from and after the time it is first
provided to the Underwriters for such use, together with the term
sheet or abbreviated term sheet filed with the Commission pursuant to
Rule 424(b)(7) under the Act. Any reference herein to the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
Preliminary Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein, and any reference herein
to the terms "amend," "amendment" or "supplement" with respect to the
Registration Statement or Prospectus shall be deemed to refer to and
include the filing of any document with the Commission deemed to be
incorporated by reference therein.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary
Prospectus, at the time of filing thereof, or instituted proceedings
for that purpose, and each such Preliminary Prospectus, at the time of
filing thereof, has conformed in all material respects to the
requirements of the Act and the Rules and Regulations and, at the time
of filing thereof, has not included any untrue statement of a material
fact or omitted to state any material fact necessary to make the
statements therein not misleading and at the time the Registration
Statement became or becomes effective and at all times subsequent
thereto up to and including the Closing Date (as hereinafter defined)
and any Option Closing Date (as hereinafter defined), and during such
longer period as the Prospectus may be required to be delivered in
connection with sales by an Underwriter or a dealer, (i) the
Registration Statement and Prospectus, and any amendments or
supplements thereto, contained and will contain all material
information required to be included therein by the Act and the Rules
and Regulations and conformed and will conform in all material
respects to the requirements of the Act and the Rules and Regulations,
and (ii) neither the Registration Statement nor the Prospectus, nor
any amendment or supplement thereto included or will include any
untrue statement of a material fact or omitted or will omit to state
any material fact required to be stated therein or necessary to make
the statements therein in light of the circumstances under which they
were made not misleading. The documents incorporated by reference in
the Registration Statement, the Prospectus, any amendment or
supplement thereto or any Preliminary Prospectus, when they became or
become effective under the Act or were or are filed with the
Commission under the Exchange Act conformed or will conform in all
material respects with the requirements of the Act or the Exchange
Act, as applicable, and the Rules and Regulations, and as of the date
any such document was or is filed with the Commission under the
Exchange Act such document did not, and on the Closing Date and on any
Option Closing Date
3
<PAGE> 4
will not, omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
(c) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the Commonwealth of
Massachusetts. Each of the subsidiaries of the Company (collectively,
the "Subsidiaries" and individually, a "Subsidiary") has been duly
organized and is validly existing in good standing under the laws of
its jurisdiction of organization. The Company and each of the
Subsidiaries are duly qualified and licensed as a foreign corporation
and in good standing in each jurisdiction in which their respective
operations requires such qualification or licensing, except where the
failure to be so qualified would not have a material adverse effect on
the condition, financial or otherwise, or on the business affairs,
position, prospects, value, operation, properties, business or results
of operation of the Company and the Subsidiaries taken as a whole
whether or not arising in the ordinary course of business (a "Material
Adverse Effect"). The Company and each of the Subsidiaries have all
requisite power and authority, and have obtained any and all necessary
authorizations, approvals, orders, licenses, certificates, franchises
and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, the United States Environmental
Protection Agency and those other officials and bodies having
jurisdiction over similar matters), to own or lease their respective
properties and conduct their respective businesses as described in the
Prospectus (collectively, "Government Approvals"), except where the
failure to so obtain any such Government Approval would not have a
Material Adverse Effect; the Company and each of the Subsidiaries are
and have been doing business in compliance with all such Government
Approvals, except where the failure to so comply would not have a
Material Adverse Effect; and neither the Company nor any of the
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Government Approvals. All of
the outstanding shares of capital stock of each of the Subsidiaries
have been duly authorized and validly issued, are fully paid and
non-assessable and are owned by the Company free and clear of all
liens, encumbrances and security interests, and no options, warrants
or other rights to purchase, agreements or other obligations to issue
or other rights to convert any obligations into, or exchange any
securities for shares of capital stock of or ownership interests in
any of the Subsidiaries are outstanding.
(d) The Company has the duly authorized, issued and outstanding
capitalization set forth in the Prospectus under "Capitalization"
based upon the assumptions set forth therein and would have had the as
adjusted capitalization set forth therein based upon the assumptions
set forth therein, and the Company is not a party to or bound by any
instrument, agreement or other arrangement (except as disclosed in the
Prospectus) providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement. The
Shares and all other securities issued or issuable by the Company
conform in all material
4
<PAGE> 5
respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding
shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable and were not
issued in violation of any preemptive rights or other rights to
subscribe for or purchase securities. The Shares have been duly
authorized and, when issued, paid for and delivered in accordance with
the terms hereof, will be validly issued, fully paid and
non-assessable and are not and will not be subject to any preemptive
or other rights to subscribe for or purchase securities; the holders
thereof will not be subject to any liability solely as such holders;
and the certificates representing the Shares will be in due and proper
form as previously authorized by the Company.
(e) The audited and unaudited consolidated financial statements of
the Company, together with the notes and schedules thereto, included
in the Registration Statement, each Preliminary Prospectus and the
Prospectus fairly present the financial position and the results of
operations, changes in cash flows and changes in stockholders' equity
of the Company at the respective dates and for the respective periods
to which they apply; and each of such audited consolidated financial
statements has been prepared in conformity with generally accepted
accounting principles and the Rules and Regulations, consistently
applied throughout the periods involved, all adjustments necessary for
a fair presentation of results for such periods have been made and
such unaudited consolidated financial statements have been prepared on
a basis substantially consistent with that of such audited
consolidated financial statements. Except as described in the
Prospectus, there has been no change or development involving a
Material Adverse Effect since the date of the consolidated financial
statements included in any of the Preliminary Prospectuses, the
Prospectus and the Registration Statement, and the outstanding debt,
the property, both tangible and intangible, and the business of the
Company and each of the Subsidiaries conform in all material respects
to the descriptions thereof contained in the Registration Statement
and the Prospectus. The summary and selected consolidated financial
and statistical data included in the Registration Statement and the
Prospectus present fairly the information shown therein or
incorporated by reference and have been compiled on a basis consistent
with the unaudited and audited consolidated financial statements
included therein. The Company's internal accounting controls are
sufficient to cause the Company to comply with the Foreign Corrupt
Practices Act of 1977, as amended. Neither the Company nor any of the
Subsidiaries has any material contingent obligation which is not
disclosed in the Registration Statement.
(f) KPMG Peat Marwick LLP ("KPMG"), whose reports are filed with the
Commission as a part of the Registration Statement, are independent
certified public accountants as required by the Act and the Rules and
Regulations.
5
<PAGE> 6
(g) (i) the Company and each of the Subsidiaries have paid all
material federal, state, local and foreign taxes for which they are
respectively liable and which are due and payable, including, but not
limited to, withholding taxes and amounts payable under Chapters 21
through 24 of the Internal Revenue Code of 1986, as amended, and (ii)
none of the Company or any Subsidiary has any tax deficiency or claims
outstanding, assessed or, to its knowledge, proposed against it.
(h) No transfer tax, stamp duty or other similar tax is payable by or
on behalf of the Underwriters in connection with (i) the issuance by
the Company of the Shares, (ii) the purchase by the Underwriters of
the Shares, or (iii) the consummation by the Company and the Selling
Stockholders of any of their respective obligations under this
Agreement.
(i) The Company and each of the Subsidiaries maintain insurance of
the types and in the amounts which the Company reasonably believes to
be adequate for their respective businesses, all of which insurance is
in full force and effect.
(j) Except as disclosed in the Prospectus, there is no action, suit,
proceeding, inquiry, investigation, litigation or governmental
proceeding, domestic or foreign, pending or, to the Company's
knowledge, threatened against (or currently existing or previously
occurring facts or circumstances that provide a basis for the same),
or involving the properties or business of the Company or any of the
Subsidiaries, that (i) questions the validity of the capital stock of
the Company or this Agreement or of any action taken or to be taken by
the Company pursuant to or in connection with this Agreement, (ii) is
required to be disclosed in the Registration Statement that is not so
disclosed (and such proceedings, if any, as are summarized in the
Registration Statement are accurately summarized in all material
respects), (iii) would have a Material Adverse Effect or (iv) relates
to or affects the Company or processes or products which the Company
designed, developed, licenses, uses, manufactures or markets which, if
adversely determined, would have a Material Adverse Effect.
(k) The Company has full legal right, power and authority to enter
into this Agreement and to consummate the transactions provided for
herein and therein; and this Agreement has been duly authorized,
executed and delivered by the Company. This Agreement, assuming it has
been duly authorized, executed and delivered by the Underwriters,
constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms (except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or
equitable, and except as rights to indemnify or contribution may be
limited by applicable law), and none of the Company's execution or
delivery of this Agreement, its performance hereunder,
6
<PAGE> 7
its consummation of the transactions contemplated herein or the
conduct of its business and that of each of the Subsidiaries as
described in the Registration Statement, the Prospectus and any
amendments or supplements thereto conflicts with or will conflict with
in any material respect or results, or will result, in any breach or
violation of any of the material terms or provisions of, or
constitutes, or will constitute, a default under, or result in the
creation or imposition of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction on equity of
any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company or any of the Subsidiaries, pursuant to the
terms of (i) the corporate charter, operating agreement or by-laws of
the Company or any of the Subsidiaries, (ii) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other
agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which any of them is or may be bound or
to which any of their respective properties or assets (tangible or
intangible) is or may be subject or (iii) any statute, judgment,
decree, order, rule or regulation applicable to the Company or any of
the Subsidiaries of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body, domestic
or foreign, having jurisdiction over the Company or any of the
Subsidiaries or any of their respective activities or properties.
(l) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Shares
pursuant to the Prospectus and the Registration Statement, or the
performance of this Agreement and the transactions contemplated
hereby, except such as have been or may be obtained under the Act, the
Exchange Act or the Rules and Regulations or may be required under
state securities or Blue Sky laws in connection with the Underwriters'
purchase and distribution of the Shares.
(m) All executed agreements or copies of executed agreements filed as
exhibits to the Registration Statement to which the Company or any of
the Subsidiaries is a party or by which any of them may be bound or to
which any of their respective assets, properties or businesses may be
subject have been duly and validly authorized, executed and delivered
by the Company or such Subsidiaries, and, assuming due authorization,
execution and delivery by the other parties thereto, constitute the
legal, valid and binding agreements of the Company and such
Subsidiaries enforceable against the Company and such Subsidiaries in
accordance with their respective terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as
rights to indemnity or contribution may be limited by applicable law).
The descriptions in the Registration Statement of contracts and other
documents are accurate in all material respects and fairly present the
information required to
7
<PAGE> 8
be shown with respect thereto by Form S-2, and there are no contracts
or other documents that are required by the Act to be described in the
Registration Statement or filed as exhibits to the Registration
Statements that are not described or filed as required, and the
exhibits that have been filed are complete and correct copies of the
documents of which they purport to be copies.
(n) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, neither the
Company nor any of the Subsidiaries has (i) issued any securities or
incurred any liability or obligation, direct or contingent, for
borrowed money (except for borrowings made pursuant to the Company's
and the Subsidiaries' existing credit agreements), (ii) entered into
any transaction which could reasonably be expected to have a Material
Adverse Effect or (iii) declared or paid any dividend or made any
other distribution on or in respect of its capital stock.
(o) Except as disclosed in the Registration Statement, no material
default exists in the due performance and observance of any term,
covenant or condition of any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement or
any other agreement or instrument evidencing an obligation for
borrowed money, or any other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which the Company
or any of the Subsidiaries may be bound or to which any of the
property or assets (tangible or intangible) of the Company or any of
the Subsidiaries is subject or affected.
(p) The Company and each of the Subsidiaries have a generally
satisfactory employer-employee relationship with their respective
employees and are in compliance with all federal, state, local, and,
where applicable, foreign, laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages
and hours, except where the failure to so comply would not have a
Material Adverse Effect. To the Company's knowledge, there are no
pending investigations involving the Company or any of the
Subsidiaries by the United States Department of Labor or any other
governmental agency responsible for the enforcement of such federal,
state, local or foreign laws and regulations. To the Company's
knowledge, there is no unfair labor practice charge or complaint
against the Company or any of the Subsidiaries pending before the
National Labor Relations Board or any strike, picketing, boycott,
dispute, slowdown or stoppage pending or threatened against or
involving the Company or any of the Subsidiaries, and no such strike,
picketing, boycott, dispute, slowdown or stoppage has ever occurred.
No representation question exists respecting the employees of the
Company or any of the Subsidiaries, and no collective bargaining
agreement or modification thereof is currently being negotiated by the
Company or any of the Subsidiaries. There are no expired or
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<PAGE> 9
existing collective bargaining agreements of the Company or any of the
Subsidiaries.
(q) Neither the Company nor any of the Subsidiaries has incurred any
liability arising under or as a result of any breach of the provisions
of the Act.
(r) Except as disclosed in the Prospectus or Exhibit 1 hereto,
neither the Company nor any of the Subsidiaries maintains, sponsors or
contributes to any program or arrangement that is an "employee pension
benefit plan", an "employee welfare benefit plan", or a "multiemployer
plan" (collectively, the "ERISA Plans") as such terms are defined in
Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). With
respect to any ERISA Plan that the Company or any of the Subsidiaries,
now or at any time previously, maintains or contributes to, all
applicable federal laws and regulations have been complied with,
except for such instances of noncompliance which, either singly or in
the aggregate, would not have a Material Adverse Effect. Neither the
Company nor any of the Subsidiaries has ever completely or partially
withdrawn from a "multiemployer plan".
(s) The Company and its Subsidiaries are in compliance with all
applicable existing federal, state, local and foreign laws and
regulations relating to the protection of human health or the
environment or imposing liability or requiring standards of conduct
concerning any Hazardous Materials ("Environmental Laws"), except for
such instances of noncompliance which, either singly or in the
aggregate, would not have a Material Adverse Effect. The term
"Hazardous Material" means (i) any "hazardous substance" as defined by
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, (ii) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act, as amended, (iii) any
petroleum or petroleum product, (iv) any polychlorinated biphenyl and
(v) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material, waste or substance regulated under or within the
meaning of any other Environmental Law.
(t) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorization; (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.
(u) The Company has not distributed and will not distribute (within
the meaning of Rule 140 of the Rules and Regulations under the Act)
any offering
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<PAGE> 10
material in connection with the offering and sale of the Shares, other
than the Prospectus, any Preliminary Prospectus, the Registration
Statement and other materials permitted by the Act.
(v) No holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the
Company exercisable for or convertible or exchangeable for securities
of the Company have the right, except as may have been waived, to
include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company
within 180 days of the date hereof or to require the Company to file a
registration statement under the Act during such 180 day period.
(w) The Company has not taken and will not take, directly or
indirectly (except for any action that may be taken by the
Underwriters), any action designed to or which has constituted or
which might reasonably be expected to cause or result in, under the
Exchange Act or otherwise, stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
Shares or otherwise.
(x) Except to the extent disclosed in the Prospectus, (i) the Company
and each of the Subsidiaries own or possess, or have a license or
other right to use, the patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems
or procedures), technology, trademarks, service marks and trade names,
together with all applications for any of the foregoing, currently
used or held for use by them in connection with their respective
businesses, except where the failure to own or possess, alone or in
aggregate, would not have a Material Adverse Effect on the Company,
(ii) neither the Company nor any of the Subsidiaries has received any
notice of infringement of or conflict with asserted rights of others
with respect to any of the foregoing which has not been finally
resolved and (iii) except as set forth in the Registration Statement,
neither the Company nor any of the Subsidiaries is obligated or under
any liability whatsoever to make any material payments by way of
royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any patent, patent right, license, invention, trademark,
service mark, trade name, copyright, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), technology or other intangible
asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(y) The Company and each of the Subsidiaries have good and marketable
title to, or valid and enforceable leasehold estates in, all items of
real and personal property stated in the Prospectus (including the
financial statements included or incorporated by reference therein) to
be owned or leased by them, free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects or
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<PAGE> 11
other restrictions on equity of any kind whatsoever, other than (i)
those referred to in the Prospectus (including such financial
statements), (ii) liens for taxes not yet due and payable and (iii)
mechanics, materialmen, warehouse and other statutory liens arising in
the ordinary course of business which, either individually or in the
aggregate, do not have a Material Adverse Effect.
(z) Except as described in the Prospectus under "Underwriting" and on
the cover page thereof, there are no claims, payments, issuances,
arrangements or understandings for services in the nature of a
finder's or origination fee with respect to the sale of the Shares
hereunder or any other arrangements, agreements, understandings,
payments or issuance with respect to the Company or any of the
Subsidiaries or any of their respective officers, directors, employees
or affiliates that may affect the Underwriters' compensation, as
determined by the National Association of Securities Dealers, Inc.
("NASD").
(aa) Quotations and last sale data with respect to the Company's
Common Stock are and will be reported on the National Association of
Securities Dealers Automated Quotation National Market (the
"NASDAQ-NM") under the symbol "SPIR" and the Company knows of no
currently existing reason or set of facts which is likely to result in
the inability or refusal to so quote the Common Stock or the Shares.
(ab) The Company is not an "investment company" or an "affiliated
person" or "promoter" of, or "principal underwriter" for, an
"investment company", as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), or subject to
regulation under the 1940 Act.
(ac) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to the Underwriters' Counsel (as
hereinafter defined) shall be deemed a representation and warranty by
the Company to the Underwriters as to the matters covered thereby.
(ad) The Company has delivered to the Representatives written
agreements (collectively, the "Lock-Up Agreements"), in form and
substance satisfactory to the Representatives, with each of its
directors and executive officers and each of the Selling Stockholders
(each such person is named in Schedule C hereto), to the effect that,
among other things, such person will not, for a period ending 180 days
after the date of the Prospectus, directly or indirectly, offer, sell,
assign, transfer, encumber, contract to sell, grant an option to
purchase or otherwise sell or dispose of shares of Common Stock or
other capital stock of the Company, any options, rights or warrants to
purchase shares of Common Stock or other capital stock of the Company
or any securities convertible into or exchangeable or exercisable for
shares of Common Stock or other capital stock of the Company now owned
by such person or subsequently acquired (or as to which such person
now or hereafter has the right to direct the disposition of) otherwise
than hereunder or with the
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<PAGE> 12
prior written consent of Tucker Anthony; provided, however, that such
agreements may contain an exception providing that such persons
during such period may, without such consent, exercise options
outstanding as of the date of the Prospectus or convey shares of
Common Stock by gift to immediate family members or by will or
intestacy to immediate family members, provided in both cases that
such persons or transferees enter into agreements for the benefit of
the Underwriters containing all of the restrictions set forth in this
Section 1.I.(ad) with respect to such shares of Common Stock; and
further provided that the Trustees of the Plan may cause the Plan to
sell such shares of Common Stock as may be required pursuant to the
terms of the Plan consistent with prior practice.
II. Each Selling Stockholder represents and warrants to, and agrees with,
each of the Underwriters and the Company as of the date hereof and as of
the Closing Date, as defined in Section 2(c) hereof, that:
(a) Such Selling Stockholder as of the Closing Date will have valid
marketable title to such of the Shares as are to be sold by such
Selling Stockholder, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest other than pursuant
to this Agreement; such Selling Stockholder has full right, power and
authority to sell, assign, transfer and deliver the Shares to be sold
by such Selling Stockholder hereunder; and upon delivery of such
Shares and payment of the purchase price as herein contemplated, each
of the Underwriters will obtain valid marketable title to the Shares
purchased by it from such Selling Stockholder, free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable
interest.
(b) Such Selling Stockholder has duly authorized, executed and
delivered, in the form heretofore furnished to the Representatives, a
Power of Attorney (the "Power of Attorney") appointing Roger G.
Little and Richard S. Gregorio as attorneys-in-fact (collectively, the
"Attorneys" and individually, an "Attorney") and a Custody Agreement
(the "Custody Agreement") with American Stock Transfer and Trust
Company named therein, as custodian (the "Custodian"); each of the
Power of Attorney and such Custody Agreement constitutes a valid and
binding agreement of the Selling Stockholder, enforceable in
accordance with its terms, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as
rights to indemnity or contribution may be limited by applicable law;
and each of such Attorneys approved by such Selling Stockholder,
acting alone, is authorized to execute and deliver this Agreement and
the Certificate referred to in Section 6(j) hereof on behalf of such
Selling Stockholder, to determine the purchase price to be paid by the
several Underwriters to such Selling Stockholder as provided in
Section 2 hereof, to authorize the delivery of the Shares as are to be
sold by such Selling Stockholder under this Agreement and to duly
endorse (in
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<PAGE> 13
blank or otherwise) the certificate or certificates representing such
Shares or a stock power or powers with respect thereto, to accept
payment therefor and otherwise to act on behalf of such Selling
Stockholder in connection with this Agreement and to pay all expenses
in connection therewith.
(c) All authorizations, approvals, consents and orders necessary for
the execution and delivery on behalf of each Selling Stockholder of
the Power of Attorney and the Custody Agreement, the execution and
delivery on behalf of such Selling Stockholder of this Agreement, and
the sale and delivery of the Shares as are to be sold by such Selling
Stockholder under this Agreement (other than, at the time of the
execution hereof (if the Registration Statement has not yet been
declared effective by the Commission), the issuance of the order of
the Commission declaring the Registration Statement effective and
such authorizations, approvals or consents as may be necessary under
state or other securities or Blue Sky laws) have been obtained and
are in full force and effect; and the Selling Stockholder has full
right, power and authority to enter into and perform its obligations
under the Power of Attorney and Custody Agreement and this Agreement,
to sell, assign, transfer and deliver the Shares to be sold by such
Selling Stockholder under this Agreement.
(d) Such Selling Stockholder will not, for a period ending 180 days
after the effective date of the Registration Statement, offer, sell,
assign, transfer, encumber, contract to sell, grant an option to
purchase, or otherwise sell or dispose of any shares of Common Stock,
any options or warrants to purchase any shares of Common Stock, or
any securities convertible into or exchangeable for shares of Common
Stock, owned directly by such Selling Stockholder or with respect to
which such Selling Stockholder has the power of disposition,
otherwise than hereunder or with the prior written consent of Tucker
Anthony, except as may otherwise be provided in the Lock-Up Agreement
signed by each such Selling Stockholder; provided, however, that the
Trustees of the Plan may cause the Plan to sell such shares of Common
Stock as may be required pursuant to the terms of the Plan. Such
Selling Stockholder agrees and consents to the entry of stop transfer
instruction with the Company's transfer agent against the transfer of
shares of Common Stock held by such Selling Stockholder except in
compliance with the foregoing restrictions.
(e) Certificates in negotiable form for all Shares to be sold by such
Selling Stockholder under this Agreement, together with a stock power
or powers duly endorsed in blank by such Selling Stockholder, have
been placed in custody with the Custodian for the purpose of effecting
delivery of such Shares hereunder.
(f) This Agreement has been duly executed and delivered by or on
behalf of such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder, enforceable in accordance with
its terms, except as the indemnification and contribution provisions
hereunder may be limited by
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<PAGE> 14
applicable law and except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any
action, legal or equitable; and the performance of this Agreement and
the consummation of the transactions herein contemplated will not
result in a breach of or default under any bond, debenture, note or
other evidence of indebtedness, or any contract, indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument
to which such Selling Stockholder is a party or by which such Selling
Stockholder or any Shares as are to be sold by such Selling
Stockholder hereunder may be bound or result in any violation of any
law, order, rule, regulation, writ, injunction or decree of any court
or governmental agency or body.
(g) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to, or which might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale
or resale of the Shares.
(h) Such Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection
with the offering and sale of the Shares.
(i) All information furnished by or on behalf of such Selling
Stockholder in the capacity as Selling Stockholder relating to such
Selling Stockholder and the Shares as are to be sold by such Selling
Stockholder that is contained in such representations and warranties
of such Selling Stockholder, in the Selling Stockholder's Power of
Attorney or set forth in the Registration Statement and the Prospectus
is, and on the Closing Date and on the Option Closing Date, as
applicable, will be, true, correct and complete, and does not, and on
the Closing Date and on the Option Closing Date, as applicable, will
not, contain an 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.
(j) Such Selling Stockholder will review the Prospectus and will
comply with all agreements and satisfy all conditions on its part to
be complied with or satisfied pursuant to this Agreement on or prior
to the Closing Date or the Option Closing Date, as applicable, and
will advise one of its Attorneys prior to the Closing Date or Option
Closing Date, as applicable, if any statement to be made on behalf of
the Selling Stockholder in the certificate contemplated by Section
6(j) would be inaccurate if made as of the Closing Date or the Option
Closing Date, as applicable.
(k) The Selling Stockholder does not have any preemptive right,
co-sale right or right of first refusal or other similar right to
purchase any of the Shares that are to be sold by the Company to the
Underwriters pursuant to this Agreement.
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<PAGE> 15
2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, and subject to the terms and conditions
herein set forth, the Company agrees to sell 1,000,000 Firm Shares
and the Option Shares to the several Underwriters and the Selling
Stockholders agree to sell to the several Underwriters the number of
the Firm Shares set forth on Schedule B opposite the name of each
Selling Stockholder, and each Underwriter, severally and not jointly,
agrees to purchase that number of Firm Shares set forth in Schedule A
opposite its name plus any additional number of Firm Shares that such
Underwriter may become obligated to purchase pursuant to the
provisions of Section 11 hereof. As of the Closing Date, certificates
in negotiable form for the total number of Shares to be sold
hereunder by the Selling Stockholders will have been placed in
custody with the Custodian pursuant to the Custody Agreements
executed by the Selling Stockholders for delivery of all Shares to be
sold hereunder by the Selling Stockholders. The Selling Stockholders
specifically agree that the Shares represented by the certificates
held and to be held in custody for the Selling Stockholders under the
Custody Agreements are subject to the interests of the Underwriters
hereunder, and that the obligations of the Selling Stockholders
hereunder shall not be terminable by any act or deed of such Selling
Stockholders (or by any other person, firm or corporation including
the Company, the Custodian or the Underwriters) or by operation of
law (including without limitation, the bankruptcy, insolvency,
dissolution, liquidation or termination of the Selling Stockholders)
or by the occurrence of any other event or events, except as set
forth in the Custody Agreements. If any such event should occur prior
to the delivery to the Underwriters of the Shares hereunder,
certificates for the Shares shall be delivered by the Custodian in
accordance with the terms and conditions of this Agreement as if such
event has not occurred, regardless of whether or not the Custodian
shall have received notice of such event.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained and upon not less than two
business days' notice from the Representatives of the Underwriters,
for a period of thirty days from the effective date of this Agreement,
the Company grants to the Underwriters an option to purchase up to
225,000 Option Shares. Such option is granted solely for the purpose
of covering over-allotments in the sale of Firm Shares and is
exercisable as provided in Section 4 hereof. Option Shares shall be
purchased severally for the account of the Underwriters in proportion
to the number of Firm Shares set forth opposite the name of such
Underwriters in Schedule A hereto. The time and date of delivery of
any of the Option Shares is herein called the "Option Closing Date".
The respective purchase obligations of each Underwriter with respect
to the Option Shares may be adjusted by the Representatives so that no
Underwriter shall be obligated to purchase Option Shares other than in
100 share increments. The price of both the Firm Shares and any Option
Shares shall be $_____ per share.
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<PAGE> 16
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Shares and the Option Shares shall be made on each of
the Closing Date and the Option Closing Date, respectively, by wire
transfer of immediately available funds, payable to the order of the
Company and the Custodian, as applicable, at the offices of Tucker
Anthony at One Beacon Street, Boston, Massachusetts, or at such other
place as shall be agreed upon by the Representatives, the Company and
the Selling Stockholders or, if mutually agreed to by the Company and
the Representatives, by wire transfer, upon delivery of certificates
(in form and substance satisfactory to the Representatives)
representing such securities to the Representatives. Delivery and
payment for the Firm Shares shall be made at 10:00 a.m. (Eastern Time)
on the third business day following the public offering, or at such
other time and date as shall be agreed upon by the Representatives and
the Company. The time and date of payment for and delivery of the Firm
Shares is herein called the "Closing Date." In the event that any or
all of the Option Shares are purchased by the Underwriters, the date
and time at which certificates for Option Shares are to be delivered
shall be determined by the Representatives and the Company but shall
not be earlier than three nor later than ten full business days after
the exercise of such option, nor in any event prior to the Closing
Date. Certificates for the Firm Shares and the Option Shares, if any,
shall be in definitive, fully registered form, shall bear no
restrictive legends and shall be in such denominations and registered
in such names as the Representatives may request in writing at least
two (2) business days prior to the Closing Date or the Option Closing
Date, as applicable. The certificates for the Firm Shares and the
Option Shares, if any, shall be made available to the Representatives
at such office or such other place as the Representatives may
designate for inspection and packaging not later than 9:30 a.m.
(Eastern Time) on the last business day prior to the Closing Date or
the Option Closing Date, as applicable.
3. PUBLIC OFFERING OF THE SHARES.
As soon after the Registration Statement becomes effective as the
Representatives deem advisable, the Underwriters shall make a public offering of
the Shares at the price and upon the other terms set forth in the Prospectus.
4. COVENANTS OF THE COMPANY AND THE SELLING STOCKHOLDERS.
I. The Company agrees with each of the Underwriters as follows:
(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 as promptly as possible; it will notify the Representatives, promptly
after it shall receive notice thereof, of the time when the Registration
Statement or any subsequent amendment to the Registration Statement has become
effective or any supplement to the Prospectus has been filed; if the Company
omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule
16
<PAGE> 17
430A(a), the Company will provide evidence satisfactory to the Representatives
that the Prospectus contains such information and has been filed, within the
time period prescribed, with the Commission pursuant to subparagraph (1) or (4)
of Rule 424(b) of the Rules and Regulations under the Act or as part of a
post-effective amendment to such Registration Statement as originally declared
effective which is declared effective by the Commission; if for any reason the
filing of the final form of Prospectus is required under Rule 424(b)(3) of the
Rules and Regulations under the Act, it will provide evidence satisfactory to
the Representatives that the Prospectus contains such information and has been
filed with the Commission within the time period prescribed; it will notify the
Representatives promptly of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for additional
information; promptly upon the Representatives' request, it will prepare and
file with the Commission any amendments or supplements to the Registration
Statement or Prospectus which, in the opinion of counsel for the several
Underwriters ("Underwriters' Counsel"), may be necessary or advisable so as to
comply with all applicable laws and regulations (including, without limitation,
Section 11 under the Act and Rule 10b-5 under the Exchange Act) in connection
with the distribution of the Shares by the Underwriters; it will promptly
prepare and file with the Commission, and promptly notify the Representatives
of the filing of, any amendments or supplements to the Registration Statement
or Prospectus which may be necessary to correct any statements or omissions,
if, at any time when a prospectus relating to the Shares is required to be
delivered under the Act, any event shall have occurred as a result of which the
Prospectus or any other prospectus relating to the Shares as then in effect
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; in case any
Underwriter is required so as to comply with all applicable laws and
regulations (including, without limitation, Section 11 under the Act and Rule
10b-5 under the Exchange Act) to deliver a prospectus nine months or more after
the effective date of the Registration Statement in connection with the sale of
the Shares, it will prepare promptly upon request, but at the expense of such
Underwriter, 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; and it will file no amendment
or supplement to the Registration Statement or Prospectus (other than any
document required to be filed under the Exchange Act that upon filing is deemed
incorporated therein by reference) which shall not previously have been
submitted to the Representatives a reasonable time prior to the proposed filing
thereof or to which you shall reasonably object in writing or which is not in
compliance with the Act and the Rules and Regulations under the Act. Until the
distribution of the Shares pursuant to the Prospectus has been completed, the
Company will furnish to the Representatives at or prior to the filing thereof a
copy of any document that upon filing is deemed to be incorporated by reference
in the Registration Statement or Prospectus.
(b) The Company will advise the Representatives, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of the Registration
Statement or of the initiation or threat of any proceeding for that purpose; and
it will promptly use its best efforts to prevent the issuance of any stop order
or to obtain its withdrawal at the earliest possible moment if such stop order
should be issued.
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<PAGE> 18
(c) The Company will use its best efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as the
Representatives may designate and to continue such qualifications in effect for
so long as may be required for the purposes of the distribution of the Shares,
except that the Company shall not be required in connection therewith or as a
condition thereof to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction. In each jurisdiction in which
the Shares shall have been qualified as above provided, the Company will make
and file such statements and reports in each year as are or may be reasonably
required by the laws of such jurisdiction.
(d) The Company will furnish to each of the Underwriters, as soon as
available, copies of the Registration Statement (three of which, to be delivered
to the Representatives, will be manually signed and which will include all
exhibits), each Preliminary Prospectus, the Prospectus and any amendment or
supplements to such documents, including any prospectus prepared to permit
compliance with Section 10(a)(3) of the Act, all in such quantities as you may
from time to time reasonably request.
(e) The Company will make generally available to its stockholders as
soon as practicable, but in any event not later than the 45th day following the
end of the fiscal quarter first occurring after the first anniversary of the
effective date of the Registration Statement, an earnings statement (which will
be in reasonable detail but need not be audited) complying with the provisions
of Section 11(a) of the Act and covering a twelve-month period beginning after
the effective date of the Registration Statement.
(f) During a period of five years after the date hereof, the Company
will furnish to its stockholders, to the extent required by applicable laws or
the Rules and Regulations, as soon as practicable after the end of each
respective period, annual reports (including financial statements audited by
independent certified public accountants) and unaudited quarterly reports of
operations for each of the first three quarters of the fiscal year, and will
furnish to you and each of the Underwriters, upon written request (i)
concurrently with furnishing to its stockholders, statements of operations of
the Company for each of the first three quarters in the form furnished to the
Company's stockholders; (ii) concurrently with furnishing to its stockholders, a
balance sheet of the Company as of the end of such fiscal year, together with
statements of operations, cash flows and stockholders' equity of the Company for
such fiscal year, accompanied by a copy of the certificate or report thereon of
independent certified public accountants; (iii) as soon as they are available,
copies of all reports (financial or other) mailed to stockholders; (iv) as soon
as they are available, copies of all reports and financial statements furnished
to or filed with the Commission, any securities exchange or the NASD; (v) every
material press release and every material news item or article in respect of the
Company or its affairs which was released or prepared by the Company or any of
the Subsidiaries; and (vi) any additional information of a public nature
concerning the Company or any of the Subsidiaries, or their respective
businesses, which you may reasonably request. During such five year period the
foregoing financial statements shall be on a consolidated basis to the extent
that the accounts of the Company and the Subsidiaries are consolidated, and
shall be accompanied by similar financial statements for any Subsidiary which is
not so consolidated.
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(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) 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.
(i) The Company will cause the transfer agent for the Common Stock to
register the transfer of the Shares upon their presentation in proper form for
transfer by the Selling Stockholders and to have certificates representing the
Shares available to you as required hereunder; provided, that the Company shall
not be required to take any action unless the Registration Statement is then
effective under the Act.
(j) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company or the
Selling Stockholders to perform any agreement on its part to be performed
hereunder or to fulfill any condition of the Underwriters' obligations
hereunder, or if the Company shall terminate this Agreement under Section 10(a),
the Company will reimburse the several Underwriters for all reasonable
out-of-pocket expenses up to $75,000 including reasonable fees and disbursements
of Underwriters' Counsel incurred by the Underwriters in investigating,
preparing to market and marketing the Shares.
(k) If at any time during the 90-day period after the Registration
Statement becomes effective, any 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 publication or event necessitates a supplement to or amendment of
the Prospectus), the Company will, after written notice from the Representatives
advising the Company to the effect set forth above, forthwith prepare, consult
with the Representatives concerning the substance of and disseminate a press
release or other public statement, reasonably satisfactory to the
Representatives, responding to or commenting on such publication or event,
consistent with past practice.
(l) For a period ending 180 days from the date of the Prospectus, the
Company will not, without your prior written consent, issue, sell, offer or
agree to sell, or otherwise dispose of, directly or indirectly, any Common
Stock, any options, rights or warrants with respect to any shares of Common
Stock or any securities convertible into, exercisable for or exchangeable for
Common Stock other than the sale of the Shares and the Option Shares to be sold
by the Company hereunder, and the Company's issuance of shares of Common Stock
pursuant to the exercise of currently outstanding stock options and warrants or
grants of options under the Company's 1985 Incentive Stock Option Plan,
Directors Stock Option Plan and 1996 Equity Incentive Plan.
II. The Selling Stockholders agree with each of the Underwriters and the
Company that in order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with
respect to the transactions herein contemplated, the Selling
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<PAGE> 20
Stockholders shall deliver to you prior to or on the Closing Date a properly
completed and executed United States Treasury Department Form W-9 or Form W-8
(or other applicable form or statement specified by Treasury Department
regulations in lieu thereof).
5. PAYMENT OF EXPENSES.
(a) The Company and the Selling Stockholders hereby agree to pay on
each of the Closing Date and the Option Closing Date (to the extent not paid on
the Closing Date) all expenses and fees (other than fees of Underwriters'
Counsel, except as provided in (iii), (v) and (vii) below) up to a maximum of
$100,000 incident to the performance of the obligations of the Company and the
Selling Stockholders under this Agreement (provided that as between the Company
and the Selling Stockholders their relative obligations to pay shall be in such
a manner as the Company and the Selling Stockholders have agreed or shall
agree), including, without limitation, (i) the fees and expenses of accountants
and counsel for the Company and the Selling Stockholders, (ii) all costs and
expenses incurred in connection with the preparation, duplication, printing,
filing (including the filing fees of the Commission), mailing (including postage
with respect thereto) and delivery of the Registration Statement, the
Preliminary Prospectuses and the Prospectus and any amendments and supplements
thereto, including the cost of all copies thereof supplied to the Underwriters
in quantities as hereinabove stated, (iii) all costs and expenses incurred in
connection with the printing, mailing and delivery of this Agreement, the
Selected Dealer Agreements, the Agreement Among Underwriters, Underwriters'
Questionnaires, Underwriters' Powers of Attorney, the Selling Stockholders'
Powers of Attorney and Custody Agreements and related documents, including the
cost of all copies thereof supplied to the Underwriters in quantities as
hereinabove stated, (iv) the printing, engraving, issuance and delivery of the
Shares, including any transfer or other taxes payable thereon, (v) the
qualification of the Shares under state or foreign securities or Blue Sky laws,
including the costs of printing and mailing a Blue Sky Memorandum and any
supplements or amendments thereto and disbursements and fees of Underwriters'
Counsel, in connection therewith, (vi) fees and expenses of the Company's
transfer agent, (vii) fees and expenses incurred in connection with the review
by the NASD of certain of the matters set forth in this Agreement, and (viii)
the fees and expenses incurred in connection with the listing of the Shares on
the NASDAQ-NM and any other exchange.
(b) If this Agreement is terminated by the Representatives in
accordance with the provisions of Section 6, Section 10(b) or Section 12, unless
the basis upon which the Representatives terminate this Agreement results from
the default or omission of any Underwriter, the Company shall reimburse and
indemnify the Underwriters for (i) all of their reasonable out-of-pocket
expenses up to $75,000 (provided that as between the Company and the Selling
Stockholders their relative obligations to pay shall be in such a manner as the
Company and the Selling Stockholders have agreed or shall agree), including the
fees and disbursements of Underwriters' Counsel, plus (ii) the Blue Sky fees and
expenses identified in Section 5(a)(v) above.
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<PAGE> 21
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS.
The obligations of the Underwriters hereunder shall be subject to the
continuing accuracy of the representations and warranties of the Company and the
Selling Stockholders herein as of the date hereof and as of the Closing Date and
the Option Closing Date, if any, as if they had been made on and as of the
Closing Date or the Option Closing Date, as the case may be; the accuracy on and
as of the Closing Date or Option Closing Date, if any, of the statements of
officers of the Company made pursuant to the provisions hereof; and the
performance by the Company and the Selling Stockholders on and as of the Closing
Date and the Option Closing Date, if any, of their respective covenants and
obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m., Eastern Time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the
Representatives, and, at the Closing Date and the Option Closing Date,
if any, 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 contemplated by the
Commission and any request on the part of the Commission for
additional information shall have been complied with to the
satisfaction of Underwriters' Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations under the Act, the
price of the Shares and any other information previously omitted from
the effective Registration Statement pursuant to such Rule 430A shall
have been transmitted to the Commission for filing pursuant to Rule
424(b) of the Rules and Regulations under the Act within the
prescribed time period, and, prior to the Closing Date, the Company
shall have provided evidence satisfactory to the Representatives of
such timely filing, or a post-effective amendment providing such
information shall have been promptly filed and declared effective in
accordance with the requirements of Rule 430A of the Rules and
Regulations under the Act.
(b) The Representatives shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue
statement of fact that, in the Representatives' opinion or in the
opinion of Underwriters' Counsel, is material, or omits to state a
fact that, in the Representatives' opinion or in the opinion of
Underwriters' Counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading,
or that the Prospectus, or any supplement thereto, contains an untrue
statement of fact that, in the Representatives' opinion or in the
opinion of Underwriters' Counsel, is material, or omits to state a
fact that, in the Representatives' opinion or in the opinion of
Underwriters' Counsel, is material and is required to be stated
therein or is necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
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<PAGE> 22
(c) On the Closing Date and the Option Closing Date, if any, the
Representatives shall have received from Underwriters' Counsel the
favorable opinion to the effect that:
(i) the capital stock of the Company, including, without
limitation, the Common Stock, conforms in all material
respects to the description thereof contained in the
Prospectus;
(ii) the Registration Statement is effective under the Act,
and if applicable, the filing of all pricing and other
information has been timely made in the appropriate
form under Rule 430A of the Rules and Regulations, and,
to such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has
been issued, and no proceedings for that purpose have
been instituted or threatened by the Commission. Such
counsel shall state that such counsel has participated
in conferences with officers and other representatives
of the Company, counsel for the Company,
representatives of the independent certified public
accountants for the Company and the Representatives, at
which conferences the contents of the Registration
Statement and the Prospectus and related matters were
discussed and, although such counsel is not passing
upon and does not assume any responsibility for, nor
has such counsel independently verified, the accuracy,
completeness or fairness of the statements contained in
the Registration Statement and Prospectus (except as to
matters referred to in subparagraph (i) above of this
Section 6(c), no facts have come to the attention of
such counsel (relying as to materiality to a large
extent upon the opinions of officers and other
representatives of the Company) that lead them to
believe that either the Registration Statement or any
amendment thereto, at the time such Registration
Statement or amendment became effective or any
Preliminary Prospectus (other than information omitted
pursuant to Rule 430A) or the Prospectus or any
amendment or supplement thereto as of the date of such
opinion contained or contains any untrue statement of a
material fact or omitted or omits to state a material
fact required to be stated therein or necessary to make
the statements therein not misleading (it being
understood that such counsel need express no view with
respect to the financial statements and schedules and
other financial and statistical data included in any
Preliminary Prospectus, the
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<PAGE> 23
Registration Statement (including any exhibit thereto)
or the Prospectus or any amendment or supplement
thereto);
(iii) each of the Preliminary Prospectuses, the Registration
Statement and the Prospectus and any amendments or
supplements thereto (other than the financial
statements and schedules, related notes and other
financial and statistical data included therein, as to
which no opinion need be rendered) comply as to form in
all material respects with the requirements of the Act
and the Rules and Regulations; and
(iv) this Agreement has been duly authorized, executed and
delivered by the Company.
The opinion of Underwriters' Counsel to be dated the Option Closing
Date, if any, may confirm as of the Option Closing Date the statements
made by such counsel in their opinion delivered on the Closing Date.
(d) On the Closing Date and the Option Closing Date, if any, the
Underwriters shall have received the favorable opinion of Goldstein &
Manello, P.C., counsel to the Company, dated the Closing Date and the
Option Closing Date, if any, addressed to the Underwriters and in form
and substance reasonably satisfactory to Underwriters' Counsel, to the
effect that:
(i) (A) the Company and each of the Subsidiaries are
duly organized and validly existing as corporations in
good standing under the laws of the jurisdiction of
their organization, and (B) the Company is duly
qualified as a foreign corporation and in good
standing in listed jurisdictions; all of the
outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly
issued and are fully-paid and non-assessable and are
owned of record by the Company; the outstanding shares
of capital stock of the Subsidiaries are owned by the
Company free and clear of all liens, encumbrances and
security interests (except as described in the
Prospectus), and, to such counsel's knowledge, no
options, warrants or other rights to purchase,
agreements or other obligations to issue or other
rights to convert any obligations into, or exchange
any securities for, any shares of capital stock of or
ownership interests in any of the Subsidiaries are
outstanding;
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<PAGE> 24
(ii) the Company and each of the Subsidiaries have the
corporate power to own, lease and operate their
respective properties and to conduct their respective
businesses as described in the Prospectus;
(iii) the authorized and outstanding capital stock of the
Company is as set forth in the Prospectus under the
heading "Capitalization," subject to the assumptions
set forth therein, and, except as provided for in this
Agreement and as described in the Prospectus, to such
counsel's knowledge, the Company is not a party to or
bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights,
warrants, options or other securities. All shares of
Common Stock of the Company issued and outstanding on
the date hereof prior to the issuance of the Shares
have been duly authorized and validly issued and are
fully paid and non-assessable; and to such counsel's
knowledge, none of such shares were issued in violation
of any preemptive rights under the Massachusetts
Business Corporation Law, or similar statutory rights;
and the capital stock of the Company, including,
without limitation, the Common Stock, conforms in all
material respects to the description thereof contained
in the Prospectus. To such counsel's knowledge, the
Firm Shares and the Option Shares are not and will not
be subject to any preemptive rights under the
Massachusetts Business Corporation Law or similar
statutory rights. The Firm Shares and the Option Shares
being sold by the Company have been duly authorized and
(with respect to the Shares being sold by the Company),
when issued, paid for and delivered in accordance with
the terms hereof, will be validly issued, fully paid
and non-assessable; and the certificates representing
the Shares are in due and proper form. To such
counsel's knowledge, no holders of any securities of
the Company or of any options, warrants or other
convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for
securities of the Company have the right, except as
have been waived, to include any securities as issued
by the Company in the Registration Statement or any
registration statement to be filed by the Company
within 180 days of the date hereof or to require the
Company to file a registration statement under the Act
during such 180 day period;
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<PAGE> 25
(iv) the Registration Statement is effective under the Act,
and, if applicable, the filing of all pricing and other
information has been timely made in the appropriate
form under Rule 430A of the Rules and Regulations under
the Act, and, to the best of such counsel's knowledge,
no stop order suspending the effectiveness of the
Registration Statement has been issued, and no
proceedings for that purpose have been instituted or,
to such counsel's knowledge, threatened by the
Commission;
(v) the Registration Statement and the Prospectus and any
amendment or supplement thereto (other than the
financial statements and schedules, related notes and
other financial and statistical data included therein,
as to which no opinion need be rendered) comply as to
form in all material respects with the requirements of
the Act and the Rules and Regulations under the Act.
(vi) (A) to such counsel's knowledge, there is not pending
or threatened against the Company or any of the
Subsidiaries, or involving any of their respective
properties or businesses, any action, suit, proceeding,
inquiry, investigation, litigation or governmental
proceeding, domestic or foreign, that (y) is required
to be disclosed in the Registration Statement and is
not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately
summarized in all material respects), or (z) questions
the validity of the capital stock of the Company, this
Agreement, or any action taken or to be taken by the
Company pursuant to or in connection with this
Agreement and (B) no statute or regulation or legal or,
to such counsel's knowledge, governmental proceeding
required to be described in the Prospectus is not
described as required;
(vii) the Company has the corporate power and authority to
enter into this Agreement and to consummate the
transactions provided for herein; and this Agreement
has been duly authorized, executed and delivered by the
Company. None of the Company's execution or delivery of
this Agreement, its performance hereunder or its
consummation of the transactions contemplated herein
results or will result in any breach or violation of
any of the material terms or provisions of, or
constitutes or will constitute a default under, or
result in the creation or imposition of any lien,
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<PAGE> 26
charge, claim, pledge, security interest, or other
encumbrance upon, any property or assets (tangible or
intangible) of the Company or any of the Subsidiaries
pursuant to the terms of (A) the corporate charter,
operating agreement or by-laws or other governing
instrument of the Company or any of the Subsidiaries,
(B) to such counsel's knowledge, any voting trust
agreement or any stockholders agreement, or any
indenture, mortgage, deed of trust, note, loan or
credit agreement or other agreement or instrument known
to such counsel to which the Company or any of the
Subsidiaries is a party or by which any of them is or
may be bound or to which any of their respective
properties or assets (tangible or intangible) is or may
be subject, or (C) any statute, rule or regulation or,
to such counsel's knowledge, any judgment, decree or
order applicable to the Company or any of the
Subsidiaries of any arbitrator, court, regulatory body
or administrative agency or other governmental agency
or body having jurisdiction over the Company or any of
the Subsidiaries or any of their respective activities
or properties, the violation of which would have a
Material Adverse Effect;
(viii) no consent, approval, authorization or order, and no
filing with, any federal or state court, regulatory
body, government agency or other body (other than such
as have been effected under the Act and the Exchange
Act and such as may be required under Blue Sky or state
securities laws or the rules of the NASD in connection
with the purchase and distribution of the Shares by the
Underwriters, as to which no opinion need be rendered)
is required in connection with the issuance of the
Shares pursuant to the Prospectus and the Registration
Statement, the performance of this Agreement and the
transactions contemplated hereby;
(ix) to such counsel's knowledge neither the Company nor any
of the Subsidiaries is in violation of any term or
provision of its corporate charter, operating
agreement, or by-laws or other governing instrument;
(x) the statements in the Prospectus under the captions
"DIVIDEND POLICY," "BUSINESS-GOVERNMENT REGULATION,"
"DESCRIPTION OF SECURITIES TO BE REGISTERED" and
"SHARES ELIGIBLE FOR FUTURE SALE" have been reviewed by
such counsel, and
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<PAGE> 27
insofar as they refer to statements of law,
descriptions of statutes, written contracts, or rules
or regulations are correct in all material respects;
and
(xi) the Company is not an "investment company" or an
"affiliated person" or "promoter" of, or "principal
underwriter" for, an "investment company," as defined
in the 1940 Act or subject to regulation under the 1940
Act.
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the
Company and representatives of the independent certified public
accountants for the Company, at which conferences the contents of
the Registration Statement and the Prospectus and related matters
were discussed, and, although such counsel is not passing upon
and does not assume any responsibility for, nor has such counsel
independently verified, the accuracy, completeness or fairness of
the statements contained in the Registration Statement and
Prospectus, no facts have come to the attention of such counsel
that lead them to believe that either the Registration Statement
or any amendment thereto, at any time such Registration Statement
or amendment became effective or any Preliminary Prospectus
circulated by the Underwriters (other than information omitted
pursuant to Rule 430A as of the date of such Preliminary
Prospectus) or the Prospectus or any amendment or supplement
thereto as of the date of such opinion contained or contains any
untrue statement of a material fact or omitted or omits to state
a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances under which they were made (it being understood
that such counsel need express no view with respect to the
financial statements and schedules, related notes, and other
financial and statistical data included or incorporated by
reference in any Preliminary Prospectus circulated by the
Underwriters, the Registration Statement (including any exhibit
thereto) or the Prospectus or any amendment or supplement
thereto). In addition, such counsel shall state that they know of
no contracts, leases or other documents of a character required
to be described in the Registration Statement or Prospectus or to
be filed or incorporated by reference as exhibits to the
Registration Statement which are not described or filed or
incorporated by reference as required.
The foregoing opinions may be limited to the laws of the
Commonwealth of Massachusetts, the laws of the jurisdictions of
incorporation of the Subsidiaries and applicable United States
federal law. In rendering the foregoing opinions, counsel may
rely, to the extent they deem such reliance proper, on the
opinions of other counsel as to matters governed by the laws of
jurisdictions other than the United States and the Commonwealth
of Massachusetts. In rendering such opinions, such
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<PAGE> 28
counsel may rely as to matters of fact, to the extent they deem
proper, on certificates and written statements of responsible
officers of the Company and the Subsidiaries and certificates or
other written statements of officers of departments of various
jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company and the
Subsidiaries, provided that copies of any such statements or
certificates shall be delivered to Underwriters' Counsel if
requested. For purposes of any of the opinions to be rendered by
such counsel pursuant to this subsection (d) of Section 6, the
term "to such counsel's knowledge" shall mean, to the extent that
such opinion relates to a factual issue or to a mixed question of
law and fact, that after examination of documents in such
counsel's files relating to the Offering and considering the
actual knowledge of the individual attorneys in such counsel's
firm who have given substantive attention to matters on behalf of
the Company, such counsel finds no reason to believe that any of
such opinions is factually incorrect.
The opinion of counsel to the Company, to be dated the Option
Closing Date, if any, may confirm as of the Option Closing Date
the statements made by such counsel in their opinion delivered on
the Closing Date.
(e) The Underwriters shall have received, on the Closing Date the
favorable opinion of Goldstein & Manello, P.C., counsel to the Selling
Stockholders, dated the Closing Date, addressed to the Underwriters
and in form and substance satisfactory to Underwriters' Counsel, to
the effect that:
(i) The Power of Attorney and the Custody Agreement of such
Selling Stockholder have been duly authorized, executed
and delivered on behalf of such Selling Stockholder and
are valid instruments legally sufficient for the
purposes intended;
(ii) Such Selling Stockholder has full right, power and
authority to enter into and to perform its obligations
under this Agreement and to sell, transfer, assign and
deliver the Shares to be sold by such Selling
Stockholder hereunder;
(iii) This Agreement has been duly authorized, executed and
delivered on behalf of the Selling Stockholder;
(iv) Upon the delivery of and payment for the Shares as
contemplated in this Agreement, and upon registration
of the Shares in the names of the Underwriters, the
Underwriters will have acquired good and valid title to
the Shares being sold by such Selling Stockholder free
of any
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pledge, lien, security interest, encumbrance, claim or
equitable interest, including any lien in favor of the
Company or any restriction on transfer imposed by the
Company; and the owner of the Shares being sold by such
Selling Stockholder hereunder, if other than the
Selling Stockholder, is precluded from asserting
against such Underwriters the ineffectiveness of any
unauthorized endorsement.
(f) On the Closing Date and the Option Closing Date, if any, the
Underwriters shall have received the favorable opinion of patent
counsel to the Company, dated the Closing Date and the Option Closing
Date, if any, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
(i) to the best of such counsel's knowledge, none of the
Company's listed patents is invalid;
(ii) to the best of such counsel's knowledge, no valid
patent is infringed by the activities of the Company
described in the Prospectus;
(iii) to the best of such counsel's knowledge, there are no
material defects in the formal papers relating to the
preparation or filing of patent applications relating
to the listed patents;
(iv) to the best of such counsel's knowledge, there are no
material pending or threatened actions, suits,
proceedings or claims by others that the Company is
infringing or otherwise violating any patents,
trademarks, trade secrets, know-how or other
proprietary rights;
(v) except as specifically disclosed in the Prospectus, to
the best of such counsel's knowledge, there are no
pending or threatened actions, suits, proceedings, or
claims by others challenging the validity or scope of
the listed patents held by or licensed to the Company;
(vi) according to such counsel's records, the Company is
listed or is in the process of being listed in the
records of the appropriate foreign office as the sole
holder of record of the foreign patents and foreign
patent applications set forth in a schedule of such
opinion. Such counsel knows of no
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claims of third parties to any ownership interest or
lien with respect to any of such patents or patent
applications.
Such counsel shall also state that since at least ____ it has
represented the Company in the prosecution of the listed patents
and that such counsel has participated in conferences with
employees of the Company regarding the listed patents. Although
such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the sections of the Registration
Statement entitled "Risk Factors -- Protection of Proprietary
Technology" and "Business -- Proprietary Rights" (except as to
matters referred to in subparagraph (vi) of this Section 6(f)),
on the basis of such representation of the Company, nothing has
come to the attention of such counsel which leads them to believe
that such sections of the Registration Statement or any amendment
thereto, at the time such Registration Statement or amendment
became effective, and such portion of the Prospectus or any
amendment or supplement thereto, on the date such Prospectus or
amendment or supplement thereto was filed pursuant to Rule
424(b), and such sections of the Registration Statement and the
Prospectus, or any amendment or supplement thereto, as of the
date of such opinion contained or contains any untrue statement
of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading. For purposes of any of the opinions to be
rendered by such counsel pursuant to this subsection (f) of
Section 6, the term "to the best of such counsel's knowledge"
shall have the meaning mutually acceptable to such counsel and
the Representatives.
The favorable opinion of patent counsel to the Company, to be
dated the Option Closing Date, if any, may confirm as of the
Option Closing Date the statements made in their opinion
delivered on the Closing Date.
(g) On or prior to each of the Closing Date and the Option Closing
Date, if any, Underwriters' Counsel shall have been furnished such
customary documents, certificates and opinions as they may reasonably
require for the purpose of enabling them to review or pass upon the
matters referred to in subsection (c) of this Section 6, or in order
to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions of the Company or the
Selling Stockholders herein contained.
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(h) Prior to each of the Closing Date and the Option Closing Date, if
any, (i) from the respective dates as of which information is set
forth in the Registration Statement and Prospectus, there shall have
been no developments that, individually or in the aggregate, have had
a Material Adverse Effect; (ii) there shall have been no transaction,
not in the ordinary course of business, entered into by the Company or
any of the Subsidiaries, from the latest date as of which the
financial condition of the Company and the Subsidiaries is set forth
in the Registration Statement and Prospectus, that, individually or in
the aggregate, has had a Material Adverse Effect; (iii) neither the
Company nor any of the Subsidiaries shall be in default under any
provision of any instrument relating to any of their respective
outstanding indebtedness; (iv) no material amount of the assets of the
Company or any of the Subsidiaries shall have been pledged or
mortgaged, except as set forth in the Registration Statement and
Prospectus (including the exhibits to the Registration Statement); (v)
no action, suit or proceeding, at law or in equity, shall have been
pending or, to the knowledge of the Company, threatened against the
Company or any of the Subsidiaries, or affecting any of their
respective properties or businesses before or by any court or federal,
state or foreign commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding would have a
Material Adverse Effect; and (vi) no stop order shall have been issued
under the Act and no proceedings therefor shall have been initiated,
or, to the Company's knowledge, threatened or contemplated by the
Commission.
(i) At each of the Closing Date and the Option Closing Date, if any,
the Underwriters shall have received a certificate of the Company
signed by the principal executive officer and by the chief financial
officer of the Company, dated the Closing Date or Option Closing Date,
as the case may be, to the effect that each of such persons has
carefully examined the Registration Statement, the Prospectus and this
Agreement and that:
(i) the representations and warranties of the Company in
this Agreement are true and correct, as if made on and
as of the Closing Date or the Option Closing Date, as
the case may be, and the Company has complied with all
agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be performed
or satisfied at or prior to such Closing Date or Option
Closing Date, as the case may be;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no
proceedings for that purpose have been instituted or
are pending or, to the knowledge of such officer, are
threatened under the Act;
(iii) none of the Registration Statement, the Prospectus nor
any amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any
material
31
<PAGE> 32
fact required to be stated therein or necessary to make
the statements therein not misleading and neither the
Preliminary Prospectus nor any supplement thereto
included any untrue statement of a material fact or
omitted to state any material fact required to be
stated therein or necessary to make the statements
therein, in light of the circumstances under which they
were made, not misleading; and
(iv) subsequent to the respective dates as of which
information is given in the Registration and the
Prospectus, neither the Company nor any of the
Subsidiaries has incurred up to and including the
Closing Date or the Option Closing Date, as the case
may be, other than in the ordinary course of their
respective businesses, any material liabilities or
obligations, direct or contingent; the Company has not
paid or declared any dividends or other distributions
on its capital stock; neither the Company nor any of
the Subsidiaries has entered into any transactions not
in the ordinary course of business; and there has not
been any material change in the capital stock or
long-term debt or any material increase in the
short-term borrowings of the Company or any of the
Subsidiaries; neither the Company nor any of the
Subsidiaries has sustained any material loss or damage
to its property or assets, whether or not insured;
there is no litigation that is pending or, to the
knowledge of such officers, threatened against the
Company or any of the Subsidiaries that is required to
be set forth in an amended or supplemented Prospectus
that has not been set forth; and there has occurred no
event required to be set forth in an amended or
supplemented Prospectus that has not been set forth.
References to the Registration Statement and the Prospectus in this
subsection (i) are to such documents as amended and supplemented at
the date of such certificate.
(j) At the Closing Date, the Underwriters shall have received a
certificate of each Selling Stockholder dated the Closing Date to the
effect that the representations and warranties of such Selling
Stockholder in this Agreement are true and correct, as if made on and
as of the Closing Date or the Option Closing Date, as applicable, and
such Selling Stockholder has complied with all agreements and
covenants and satisfied all conditions contained in this Agreement on
its part to be performed or satisfied at or prior to the Closing Date.
32
<PAGE> 33
(k) On the date of this Agreement, the Representatives shall have
received a letter in form and substance satisfactory to the
Underwriters and the Underwriters' Counsel addressed to the
Underwriters and dated the date of this Agreement from KPMG and signed
by such firm with respect to such matters as shall have been specified
to such firm by the Representatives prior to the date hereof. At the
Closing Date and the Option Closing Date, if any, the Underwriters
shall have received from KPMG a letter, dated as of the Closing Date
or the Option Closing Date, as the case may be, reaffirming the
statements made in the letter furnished by KPMG to the Underwriters
concurrently with the execution of this Agreement, each such
reaffirming letter to be in form and substance satisfactory to the
Underwriters and the Underwriters' Counsel.
(l) On each of the Closing Date and the Option Closing Date, if any,
there shall have been duly tendered to the Representatives for the
several Underwriters' accounts the appropriate number of Shares.
(m) No order suspending the sale of the Shares in any jurisdiction
designated by the Representatives pursuant to subsection I.(c) of
Section 4 hereof shall have been issued on either the Closing Date or
the Option Closing Date, if any, and no proceedings for that purpose
shall have been instituted or to the knowledge of the Representatives
or the Company shall be contemplated.
(n) The Underwriters shall have received the written agreements of
the persons referred to in Section 1.I. (ad) hereof.
(o) The Shares delivered on the Closing Date or the Option Closing
Date shall have been duly listed, subject to notice of official
issuance, on the NASDAQ-NM.
If any condition to the Underwriters' obligations hereunder to be fulfilled
prior to or at the Closing Date or the relevant Option Closing Date, as the case
may be, is not so fulfilled, the Representatives may terminate this Agreement
or, if the Representatives so elect, they may waive any such conditions that
have not been fulfilled or extend the time for their fulfillment.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to defend, indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any breach of
any representation, warranty, agreement or covenant of the Company herein
contained or 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
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were
made, not
33
<PAGE> 34
misleading; and agrees to reimburse each Underwriter subject to subsection
(d) for any legal or other expenses reasonably incurred by it in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement, such
Preliminary Prospectus or the Prospectus, or any such amendment or
supplement, in reliance upon and in strict conformity with written
information furnished with respect to any Underwriter by such Underwriter
expressly for use in the Registration Statement, any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, provided that
such written information or omissions only pertain to disclosures in the
Registration Statement, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto directly relating to the transactions
effected by the Underwriters in connection with this offering, and provided
further that the foregoing indemnity with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or to the
benefit of any person controlling such Underwriter) if such untrue
statement or omission or alleged untrue statement or omission made in any
Preliminary Prospectus is eliminated or remedied in the Prospectus and a
copy of the Prospectus has not been furnished to the person asserting any
such loss, claim, damage or liability at or prior to the written
confirmation of the sale of such Shares to such person.
The indemnity agreement in this Section 7(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of each
person, if any, who controls any Underwriter within the meaning of the Act.
This indemnity agreement shall be in addition to any liabilities which the
Company may otherwise have.
(b) Each Selling Stockholder agrees to defend, indemnify and hold harmless
each Underwriter against any losses, claims, damages or liabilities to
which such Underwriter may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any breach of any
representation, warranty, agreement or covenant of such Selling Stockholder
contained in Section 1.II, or any untrue statement or alleged untrue
statement of any material fact concerning such Selling Stockholder
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 concerning such Selling Stockholder required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading if made regarding such Selling
Stockholder or in reliance upon information supplied to the Company by such
Selling Stockholder; and agrees to reimburse, subject to subsection (d),
each Underwriter for any legal or other expenses reasonably incurred by it
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Selling Stockholder shall
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such
34
<PAGE> 35
Preliminary Prospectus or the Prospectus, or any such amendment or
supplement, in reliance upon and in conformity with written information
furnished with respect to any Underwriter by such Underwriter expressly for
use in the Registration Statement, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, provided that such
written information or omissions only pertain to disclosures in the
Registration Statement, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto directly relating to the transactions
effected by the Underwriters in connection with this offering, and provided
further that the foregoing indemnity with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or to the
benefit of any person controlling such Underwriter) if such untrue
statement or omission or alleged untrue statement or omission made in any
Preliminary Prospectus is eliminated or remedied in the Prospectus and a
copy of the Prospectus has not been furnished to the person asserting any
such loss, claim, damage or liability at or prior to the written
confirmation of the sale of such Shares to such person.
The indemnity agreement in this Section 7(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of each
person, if any, who controls any Underwriter within the meaning of the Act.
This indemnity agreement shall be in addition to any liabilities which the
Selling Stockholders may otherwise have.
(c) Each Underwriter, severally and not jointly, agrees to indemnify and
hold harmless the Company and each Selling Stockholder to the same extent
as the foregoing indemnity from the Company to the Underwriters but only
with respect to statements or omissions, if any, made in the Registration
Statement, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto made in reliance upon, and in strict conformity with,
written information furnished with respect to any Underwriter by such
Underwriter expressly for use in the Registration Statement, any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, provided that such written information or omissions only pertain
to disclosures in the Registration Statement, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto directly relating to
the transactions effected by the Underwriters in connection with this
offering.
The indemnity agreement in this Section 7(c) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each
officer and director of the Company who has signed the Registration
Statement, each Selling Stockholder and each person, if any, who controls
the Company or such Selling Stockholder within the meaning of the Act. This
indemnity agreement shall be in addition to any liabilities which each
Underwriter may otherwise have. For purposes of this Agreement, the Company
and each Selling Stockholder acknowledge that the statements with respect
to the public offering of the Shares set forth under the heading
"UNDERWRITING" and the stabilization legend in the Prospectus and the last
paragraph on the outside front cover page of the Prospectus have been
furnished by the Underwriters expressly for use
35
<PAGE> 36
therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus.
(d) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 7, 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 under this Section 7 (except to the extent that the omissions of such
notice causes actual prejudice to the indemnifying party), or otherwise
than under this Section 7. In case any such action is brought against any
indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent that it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, 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
parties and the indemnifying party and counsel for the indemnified party
shall have reasonably concluded 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 reasonably
satisfactory to the indemnifying party or parties 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 7 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 separate counsel 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 indemnifying
party, representing all the indemnified parties under Section 7(a), 7(b) or
7(c) hereof who are parties to such action), (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, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. In no event shall any indemnifying party
be liable in respect of any amounts paid in settlement of any action unless
the indemnifying party shall have approved the terms of such settlement;
provided however that such consent shall not be unreasonably withheld.
(e) In order to provide for just and equitable contribution in any action
in which a claim for indemnification is made pursuant to this Section 7 but
it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal)
36
<PAGE> 37
that such indemnification may not be enforced in such case notwithstanding
the fact that this Section 7 provides for indemnification in such case, all
the parties hereto shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that, except as set forth in Section
7(f) hereof, the Underwriters are responsible pro rata for the portion
represented by the percentage that the underwriting discount bears to the
public offering price, and the Company and each Selling Stockholder are
responsible for the remaining portion, provided, however, that (i) no
Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Shares purchased by such
Underwriter, and (ii) no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to a
contribution from any person who is not guilty of such fraudulent
misrepresentation.
(f) The liability of each Selling Stockholder under the representations
and warranties contained in Section 1 hereof and under the indemnity
agreements contained in the provisions of this Section 7 shall be limited
in the aggregate to an amount equal to the public offering price of the
Shares sold by such Selling Stockholder to the Underwriters minus the
amount of the underwriting discount paid thereon to the Underwriters by the
Selling Stockholder. The Company and the Selling Stockholders may agree, as
between themselves and without limiting the rights of the Underwriters
under this Agreement, as to the respective amounts of such liability for
which they each shall be responsible.
(g) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including without limitation
the provisions of this Section 7, and are fully informed regarding such
provisions. They further acknowledge that the provisions of this Section 7
fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required
by the Act and the Exchange Act. The parties are advised that federal or
state public policy, as interpreted by the courts in certain jurisdictions,
may be contrary to certain of the provisions of this Section 7, and the
parties hereto hereby expressly waive and relinquish any right or ability
to assert such public policy as a defense to a claim under this Section 7
and further agree not to attempt to assert any such defense.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements contained in this Agreement
or contained in certificates of officers of the Company submitted pursuant
thereto shall be deemed to be representations, warranties and agreements at the
Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements, and the indemnity and
37
<PAGE> 38
contribution agreements contained in Section 7 hereof, shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Underwriter, the Company, the Selling Stockholders or any
controlling person, and shall survive termination of this Agreement or the
issuance or sale and delivery of the Shares to the Underwriters.
9. EFFECTIVE DATE.
This Agreement shall become effective at 9:30 a.m., Eastern Time, on the
date hereof, or at such earlier time after the Registration Statement becomes
effective as the Representatives, in their sole discretion, shall release the
Shares for the sale to the public, provided, however that the provisions of
Sections 5, 7 and 9 of this Agreement shall at all times be effective. For
purposes of this Section 9, the Shares to be purchased hereunder shall be deemed
to have been so released upon the earlier of dispatch by the Representatives of
telegrams to securities dealers releasing such Shares for offering or the
release by the Representatives for publication of the first newspaper
advertisement that is subsequently published relating to the Shares.
10. TERMINATION.
(a) Subject to subsection (d) of this Section 10, the Company may at
any time before this Agreement becomes effective in accordance with
Section 9, terminate this Agreement.
(b) Subject to subsection (d) of this Section 10, the Representatives
shall have the right to terminate this Agreement, (i) if any
calamitous domestic or international event or act or occurrence has
materially disrupted, or in the Representatives' opinion will in the
immediate future materially disrupt, general securities markets in the
United States; or (ii) if trading on the New York Stock Exchange, the
NASDAQ-NM or in the over-the-counter market shall have been suspended,
or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required on
the over-the-counter market by the NASD or by order of the Commission
or any other government authority having jurisdiction; or (iii) if the
United States shall have become involved in a war or major
hostilities; or (iv) if a banking moratorium has been declared by the
State of New York, the Commonwealth of Massachusetts or any federal
authority; or (v) if a moratorium in foreign exchange trading has been
declared; or (vi) if the Company shall have sustained a loss material
or substantial to the Company by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act that,
whether or not such loss shall have been insured, will, in the
Representatives' reasonable opinion, make it inadvisable to proceed
with the delivery of the Shares; or (vii) if there shall have been a
Material Adverse Effect.
(c) If any party hereto elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this
Section 10, such party
38
<PAGE> 39
shall notify, on the same day as such election is made, the other
parties hereto in accordance with the provisions of Section 13 hereof.
(d) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 11 and 12
hereof), and whether or not this Agreement is otherwise carried out,
the provisions of Sections 5, 7 and 9 shall not be in any way affected
by such election or termination or failure to carry out the terms of
this Agreement or any part thereof.
11. SUBSTITUTION OF THE UNDERWRITERS.
If one or more of the Underwriters shall fail (otherwise than for a reason
sufficient to justify the termination of this Agreement under the provisions of
Section 6, Section 10 or Section 12 hereof) to purchase the Shares that it or
they are obligated to purchase on such date under this Agreement (the "Defaulted
Securities"), the Representatives shall use their best efforts within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24 hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Firm Shares to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full
amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Firm Shares and arrangements satisfactory to the
Representatives for the purchase of the Defaulted Securities are not
made within 36 hours, this Agreement shall terminate without liability
on the part of any non-defaulting Underwriters. The Company or any
Selling Stockholder may assist the Representatives in making such
arrangements by procuring another party satisfactory to the
Representatives to purchase the Defaulted Securities on the terms set
forth herein.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default that does not result in a termination of
this Agreement, the Representatives shall have the right to postpone the Closing
Date for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements.
39
<PAGE> 40
12. DEFAULT BY THE COMPANY OR THE SELLING STOCKHOLDERS.
If the Company or either of the Selling Stockholders, as applicable, shall
fail at the Closing Date or the Option Closing Date, as applicable, to sell and
deliver the number of Shares that it is obligated to sell hereunder on such
date, then this Agreement shall terminate (or, if such default shall occur with
respect to any Option Shares to be purchased on the Option Closing Date, the
Underwriters may at the Representatives' option, by notice from the
Representatives to the Company, terminate the Underwriters' several obligations
to purchase Shares from the Company on such date) without any liability on the
part of any non-defaulting party other than pursuant to Section 5 and Section 7
hereof. No action taken pursuant to this Section shall relieve the Company or
the Selling Stockholders from liability, if any, in respect of such default.
13. NOTICES.
All notices and communications hereunder may be mailed or transmitted by
any standard form of telecommunication and, except as herein otherwise
specifically provided, shall be in writing and shall be deemed to have been duly
given when delivered to a notice party hereto at the address specified herein or
at the address subsequently communicated in writing to the notice parties.
Notices to the Underwriters shall be directed to the Representatives c/o Tucker
Anthony Incorporated, One Beacon Street, Boston, Massachusetts 02108, Attention:
Robert Cramer, Vice President, with a copy to Paul D. Broude, Esq., c/o Stroock
& Stroock & Lavan LLP, 100 Federal Street, Boston, Massachusetts 02110. Notices
to the Company shall be directed to Spire Corporation, One Patriots Park,
Bedford, Massachusetts 01730, Attention: Chairman, with a copy to Lauren
Jennings, Esq., c/o Goldstein & Manello, P.C., 265 Franklin Street, Boston,
Massachusetts 02110. Notices to the Trust shall be directed to The Roger G.
Little Family Trust, Attention: Roger G. Little, Trustee, with a copy to Richard
S. Gregorio. Notices to the Plan shall be directed to The Spire 401(k) Profit
Sharing Plan, c/o Spire Corporation, One Patriots Park, Bedford, Massachusetts
01730, Attention: Trustees, with a copy to Richard S. Gregorio. In each case a
notice party may change its address for notice hereunder by a written
communication to the other notice parties.
14. PARTIES.
This Agreement shall inure solely to the benefit of and shall be binding
upon, the Underwriters, the Selling Stockholders, the Company and the
controlling persons, directors and officers referred to in Section 7 hereof, and
their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein contained. No purchaser of Shares from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.
15. CONSTRUCTION.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
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<PAGE> 41
MASSACHUSETTS WITHOUT GIVING EFFECT TO THE CHOICE OF LAW OR CONFLICT OF LAWS
PRINCIPLES.
16. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, and all of which taken together shall be
deemed to be one and the same instrument.
17. ENTIRE AGREEMENT.
This Agreement and the Schedules hereto contain the entire agreement
between the parties hereto in connection with the subject matter hereof and
supersede all prior agreements, written or oral, with respect to such subject
matter.
18. AMENDMENT.
This Agreement and the Schedules hereto may not be amended, modified or
altered without the written agreement of the Company, the Selling Stockholders
and the Representatives. If the foregoing correctly sets forth the understanding
between the Underwriters and the
[THIS SPACE INTENTIONALLY LEFT BLANK]
41
<PAGE> 42
Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
SPIRE CORPORATION
By:
--------------------------------------
Name:
Title: Chairman
SELLING STOCKHOLDERS LISTED ON
SCHEDULE B HERETO
THE ROGER G. LITTLE FAMILY TRUST
By:
--------------------------------------
Roger G. Little, as Trustee and
not Individually
THE SPIRE CORPORATION 401(k) PROFIT
SHARING PLAN
By:
--------------------------------------
Roger G. Little, as Trustee and
not Individually
By:
--------------------------------------
Richard S. Gregorio, as Trustee and
not Individually
CONFIRMED AND ACCEPTED AS OF THE DATE
FIRST ABOVE WRITTEN
TUCKER ANTHONY INCORPORATED,
FIRST ALBANY CORPORATION
ADVEST, INC.
By: TUCKER ANTHONY INCORPORATED
By:
---------------------------------------
Title:
For themselves and on behalf of and as the
Representatives of the other Underwriters
named in Schedule A hereto.
42
<PAGE> 43
SCHEDULE A
----------
<TABLE>
<CAPTION>
NAME NUMBER OF FIRM SHARES
- ---- ---------------------
<S> <C>
Tucker Anthony Incorporated
First Albany Corporation
Advest, Inc.
---------
Total 1,500,000
</TABLE>
43
<PAGE> 44
SCHEDULE B
----------
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
NAME FIRM SHARES OPTION SHARES
- ---- ----------- -------------
<S> <C> <C>
SELLING STOCKHOLDERS
The Roger G. Little Family Trust 0
------
The Spire Corporation 401(k)
Profit Sharing Plan 0
------
</TABLE>
44
<PAGE> 45
SCHEDULE C
----------
NAME
- ----
Roger G. Little
Richard S. Gregorio
Stephen J. Hogan
Everett S. McGinley
Ronald S. Scharlack
Michael T. Eckhart
A. John Gale
Udo Henseler
Roger W. Redmond
John A. Tarello
The Roger G. Little Family Trust
The Spire Corporation 401(k) Profit Sharing Plan
45
<PAGE> 46
EXHIBIT 1
---------
[ERISA PLANS]
46
<PAGE> 1
Exhibit 5
[GOLDSTEIN & MANELLO, P.C. LETTERHEAD]
December 23, 1997
Spire Corporation
One Patriots Park
Bedford, MA 01730
Gentlemen:
This opinion is furnished to you in connection with the filing on
December 3, 1997 of a Registration Statement on Form S-2 with the Securities and
Exchange Commission (the "SEC"), as amended by the filing on December 23, 1997
of Amendment No. 1 to the Registration Statement (as so amended, the
"Registration Statement") for the purpose of registering 1,725,000 shares (the
"Shares") of common stock, par value $.01 per share (the "Common Stock"), of
Spire Corporation (the "Company").
Of the Shares to be registered, 500,000 Shares (the "Selling Stockholder
Shares") will be offered and sold by the Selling Stockholders (as defined in the
Registration Statement), and 1,000,000 Shares will be offered and sold by the
Company. The remaining 225,000 Shares may be sold in the offering upon the
exercise of over allotment options granted to the Underwriters by the Company
and a Selling Stockholder. Of the Shares to be offered and sold by the Company,
552,160 are held in the Company's treasury (the "Treasury Shares") and the
remainder will be newly issued shares of Common Stock (the "New Shares").
In rendering this opinion, we have examined and relied on:
1. A copy of the Articles of Organization of the Company, as
amended to date, certified by the Secretary of State of The Commonwealth of
Massachusetts (the "Secretary") on December 16, 1997;
2. Minutes of the meetings of the Board of Directors of the Company
on November 25, 1997, certified to be true, correct and complete by the Clerk of
the Company;
3. The corporate minute books of the Company;
<PAGE> 2
GOLDSTEIN & MANELLO, P.C.
Counsellors at Law
Spire Corporation
December 23, 1997
Page 2
4. The Registration Statement;
5. A Certificate issued by the Secretary dated December 16, 1997
attesting to the legal existence of the Company;
6. A Certificate of the Treasurer of the Company;
7. The index of the United States Bankruptcy Court for the District
of Massachusetts (Boston) as reported by the Public Access to Court Electronic
Records system online with said Court as updated through the close of business
on December 18,1997, which indicated that no bankruptcy proceedings were pending
in said Court by or against the Company as of the close of business on December
18, 1997; and
8. Such case and statutory laws of The Commonwealth of
Massachusetts as we have deemed relevant.
We have assumed in our examination of documents and in the issuance of
our opinion, both as of the date hereof and as of the date of sale of the Shares
by the Company:
1. The completeness and authenticity of all documents submitted to
us as originals;
2. The genuineness of all signatures;
3. The completeness and conformity to original documents of
documents submitted to us as certified or copies;
4. The legal capacity of each individual, and the power, authority
and due authorization of each corporate signatory of a document, other than the
Company, to execute said document;
5. That prior to the issuance of the New Shares the Company will
receive the consideration for the Shares stated in the Registration Statement;
6. That upon the issuance of the New Shares, the Company will issue
to each of the Underwriters named in the Registration Statement (the
"Underwriters") a stock certificate representing the number of Shares purchased
by each such Underwriter, which stock certificate will comply with the
requirements of Section 27 of Chapter 156B of the Massachusetts General Laws;
<PAGE> 3
GOLDSTEIN & MANELLO, P.C.
Counsellors at Law
Spire Corporation
December 23, 1997
Page 3
7. That the Company did not and will not make any distribution to
any of the Underwriters that would cause any of them to be held liable therefor
under Section 45 of Chapter 156B of the Massachusetts General Laws;
8. That the Company, at any time relevant hereto, is not subject to
receivership or bankruptcy proceedings; and
9. That the Shares being registered will be offered and sold in
compliance with applicable state and federal securities laws.
Except as specifically set forth hereinabove, we have made no
independent factual investigation.
We opine only as to the laws of The Commonwealth of Massachusetts.
Based upon and subject to the foregoing, we are of the opinion that the
sale of the Shares by the Company to the Underwriters has been duly authorized
by the Company, that the Treasury Shares have been legally issued and that,
upon the issuance of the New Shares and the sale of the Treasury Shares and the
New Shares to the Underwriters as set forth in the Prospectus which is most
recently included in the Registration Statement, the Shares will be legally
issued, fully paid and non-assessable. The Selling Stockholder Shares have been
legally issued and are fully paid and non-assessable.
We consent to the filing of this letter with the SEC as an Exhibit to
the Registration Statement and we further consent to the reference to our firm
contained in the Registration Statement and in the Prospectus filed as a part
thereof.
Very truly yours,
Goldstein & Manello, P.C.
By: /s/ Stephen M. Honig
-------------------------------
Duly Authorized
