<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ANALYTICAL SURVEYS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
COLORADO 84-0846389
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
941 NORTH MERIDIAN STREET
INDIANAPOLIS, IN 46204-1061
(317) 634-1000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
--------------------------
SIDNEY V. CORDER
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ANALYTICAL SURVEYS, INC.
941 NORTH MERIDIAN STREET
INDIANAPOLIS, IN 46204-1061
(317) 634-1000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES F. WOOD, ESQ. KAREN A. ANDERSEN, ESQ.
LESLIE A. NICHOLS, ESQ. MARK F. WORTHINGTON, ESQ.
SHERMAN & HOWARD L.L.C. SUMMIT LAW GROUP PLLC
633 SEVENTEENTH STREET, SUITE 3000 1505 WESTLAKE AVENUE NORTH, SUITE 300
DENVER, CO 80202 SEATTLE, WA 98109
(303) 297-2900 (206) 281-9881
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
--------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
/ /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) PRICE(1)(2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
Common Stock, no par value..................... 2,587,500 Shares $32.125 $83,123,437.50 $24,522
</TABLE>
(1) Includes 337,500 shares of Common Stock that may be purchased by the
Underwriters solely to cover over-allotments, if any.
(2) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(c), based upon the average of the high and low
sales prices of the Common Stock on the NASDAQ National Market System on
June 22, 1998.
(3) Calculated pursuant to Rule 457(o).
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 26, 1998
2,250,000 SHARES
[LOGO]
COMMON STOCK
OF THE 2,250,000 SHARES OF COMMON STOCK OFFERED HEREBY, 1,750,000 SHARES ARE
BEING SOLD BY ANALYTICAL SURVEYS, INC. ("ASI" OR THE "COMPANY") AND 500,000
SHARES ARE BEING SOLD BY CERTAIN OF THE COMPANY'S SHAREHOLDERS (THE "SELLING
SHAREHOLDERS"). THE COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE
OF SHARES BY THE SELLING SHAREHOLDERS. SEE "PRINCIPAL AND SELLING SHAREHOLDERS."
THE COMPANY'S COMMON STOCK IS QUOTED ON THE NASDAQ NATIONAL MARKET UNDER THE
SYMBOL "ANLT." ON JUNE 25, 1998, THE LAST REPORTED SALE PRICE OF THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET WAS $37.00 PER SHARE. SEE "PRICE RANGE OF
COMMON STOCK."
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING
ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
<S> <C> <C> <C> <C>
PER SHARE............... $ $ $ $
TOTAL(3)................ $ $ $ $
</TABLE>
(1) SEE "UNDERWRITING" FOR INFORMATION CONCERNING INDEMNIFICATION OF THE
UNDERWRITERS AND OTHER MATTERS.
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY, ESTIMATED AT $600,000.
(3) THE COMPANY AND THE SELLING SHAREHOLDERS HAVE GRANTED THE UNDERWRITERS A
30-DAY OPTION TO PURCHASE UP TO 337,500 ADDITIONAL SHARES OF COMMON STOCK
SOLELY TO COVER OVER-ALLOTMENTS, IF ANY. IF THE UNDERWRITERS EXERCISE THIS
OPTION IN FULL, THE PRICE TO PUBLIC WILL TOTAL $ , THE UNDERWRITING
DISCOUNT WILL TOTAL $ , THE PROCEEDS TO COMPANY WILL TOTAL $ ,
AND THE PROCEEDS TO SELLING SHAREHOLDERS WILL TOTAL $ . SEE
"UNDERWRITING."
THE SHARES OF COMMON STOCK ARE OFFERED BY THE SEVERAL UNDERWRITERS NAMED
HEREIN, SUBJECT TO RECEIPT AND ACCEPTANCE BY THEM AND SUBJECT TO THEIR RIGHT TO
REJECT ANY ORDER IN WHOLE OR IN PART. IT IS EXPECTED THAT DELIVERY OF THE
CERTIFICATES REPRESENTING SUCH SHARES WILL BE MADE AGAINST PAYMENT THEREFOR AT
THE OFFICE OF NATIONSBANC MONTGOMERY SECURITIES LLC ON OR ABOUT ,
1998.
-------------------
NationsBanc Montgomery Securities LLC Dain Rauscher Wessels
a division of Dain Rauscher
Incorporated
, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON
STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. 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 OF
THE COMPANY ON NASDAQ IN ACCORDANCE WITH RULE 103 UNDER REGULATION M. SEE
"UNDERWRITING."
INSIDE FRONT COVER
The inside front cover of the prospectus features nine photographs broken into
three sets, with each set running horizontally under a block of text. At the top
of the page, the following paragraph describes a geographic information system:
"A geographic information system is a high-resolution, large scale
(e.g., one inch = 100 feet), richly detailed `intelligent map'
that allows users to input, update, query, analyze and display
information about a geographic area. A GIS integrates database
operations, such as query and statistical analyses, with the
unique visualization and geographic analyses offered by paper
maps."
The first set of photographs is of the GIS data gathering process and runs under
the following text:
"The Company provides an experienced field inventory staff to
collect and verify information in the field and uses computerized
and manual techniques to verify and digitize data from paper
sources."
Image #1 is an aerial photograph of streets and homes within a neighborhood.
Image #2 is a photograph of two men near a fire hydrant working with global
positioning equipment. Image #3 is a photograph of a man viewing a series of
maps spread out on a light table.
The second set of photographs depicts the GIS data conversion process and runs
under the following text:
"The Company offers a full range of services to create the digital
base maps and databases of related geo-referenced information used
in geographic information systems. The base maps are created using
one of three technologies, depending on the needs of the customer:
photogrammetric mapping, digital orthophotography or cadastral
mapping."
Image #4 is a photograph of a man working on a computer while looking into a
viewing device. Image #5 is of a man sitting and working among several
specialized computer terminals and scanning devices. Image #6 is of a man
working at a computer and performing conversion work on a digitized aerial
photograph.
The third and final set of photographs is of on-screen GIS images and runs under
the following text:
"Once the base map is produced, links to tabular databases are
created and other geo-referenced data, such as buildings,
telephone poles and zoning restrictions, are collected, verified,
converted into digital format and added to the base map to create
a GIS. Once a GIS is completed, the user can view the base map and
any or all of the layers of data on a computer screen and can
retrieve selected data concerning any desired location appearing
on the screen or all data matching one or more variables."
Image #7 shows property lines and street locations of a neighborhood. Image #8
is an aerial photograph of a highway and the surrounding buildings. Colored,
computerized lines in the image show the location of various utilities and
property boundaries. Image #9 is a digital map that includes lines depicting
contours, roads, buildings and other features.
<PAGE>
TWO-PAGE GATEFOLD
Page one of this two-page gatefold features four digital images taken from a GIS
developed for the New York City Department of the Environment.
The following text accompanies the images:
"The images on this page are from a GIS pilot project Analytical
Surveys completed for the New York City Department of the
Environment. The images depict various features -- such as water
mains, road edges and buildings -- within lower Manhattan. To
create the images, ASI collected extensive data on the physical
characteristics of various features and then converted the
information into multiple layers of digital data.
"Image #1 depicts the location of water mains and manholes. In
Image #2, road edges and centerlines have been layered on top of
the waterline information. A river and piers have been added in
Image #3, and in Image #4, a digital orthophoto has been draped
over the information from the three previous images."
"The GIS serves a variety of functions, including management of
sewer and water data, emergency repair management and maintenance
scheduling."
All four images feature the same 2- to 3-square-block area as well as part of
the shore line of the East River. However, each image features a different
"layer" of geo-referenced information. The images appear to be floating above
one another, visually emphasizing the idea of each image being a distinct layer.
Image #1, which appears as the bottom layer of the four images, shows the
locations of water lines and manholes. Image #2 shows all road edges, as well as
the features from image #1. Image #3 shows the shore of the East River and two
piers stretching into the river, as well as all of the information from the
first two images. Image #4 adds an overhead aerial photograph of the area mapped
in the first three images.
Also on the page is a 3-D model of the lower east side of Manhattan as if viewed
from a distance.
Page two of the gatefold features another set of four digital images layered in
the same fashion as was used on page one of the gatefold. These images were
taken from a GIS project conducted for Illinois Power.
The following text accompanies the images:
"This series of images is from a utility mapping project conducted
by the Company for Illinois Power. Aerial photographs were taken
of the project area and served as the base on which the GIS was
built.
"Image #1 includes various landbase features such as
rights-of-way, streets and property lines. Image #2 adds primary
electric features such as conductors, transformers and
substations. Features associated with the gas distribution
network, such as mains, valve fittings and services, have been
added in Image #3. Finally, in Image 4, secondary electric
features are overlaid, including ducts, manholes, vaults and
poles."
"Uses of this GIS range from outage identification and management
to maintenance scheduling to mapping new service areas."
As described in the text that accompanies the imaging, Image #1 is of various
landbase features such as rights-of way, streets and property lines. Image #2
adds primary electric features such as conductors and transformers. Image #3
adds features from the gas distribution network. Image #4 adds secondary
electric features such as manholes, vaults and poles.
<PAGE>
PROSPECTUS SUMMARY
THE SUMMARY SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES
THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE STATEMENTS
CONTAINED IN THIS PROSPECTUS THAT ARE NOT PURELY HISTORICAL ARE 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"). WHEN USED IN THIS PROSPECTUS, OR IN
THE DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS, THE WORDS
"ANTICIPATE," "BELIEVE," "ESTIMATE," "INTEND" AND "EXPECT" AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. SUCH
FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS RELATING TO
COMPETITION, FUTURE ACQUISITIONS, MANAGEMENT OF GROWTH, INTERNATIONAL SALES, THE
COMPANY'S STRATEGY, FUTURE SALES, FUTURE EXPENSES AND FUTURE LIQUIDITY AND
CAPITAL RESOURCES. ALL FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS ARE BASED
UPON INFORMATION AVAILABLE TO THE COMPANY ON THE DATE OF THIS PROSPECTUS, AND
THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING
INFORMATION. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED IN THIS PROSPECTUS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS"
AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. UNLESS
OTHERWISE INDICATED, ALL INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.
THE COMPANY
Analytical Surveys, Inc. ("ASI" or the "Company") is a leading provider of
customized data conversion and digital mapping services for the geographic
information systems market. A geographic information system ("GIS") is a
high-resolution, large-scale, richly detailed "intelligent map" that allows
users to input, update, query, analyze and display detailed information about a
geographic area. Geographic information systems are widely used by utilities,
state and local governments, federal agencies and commercial businesses to
manage massive infrastructures effectively, to improve operating efficiencies
and to analyze future demand for facilities. The Company primarily targets
utilities and state and local governments, and its current customers include the
New York City Department of the Environment, Florida Power & Light, Michigan
Consolidated Gas, Southern New England Telephone, U S WEST, British Telecom and
FirstEnergy Corp. (formerly known as Ohio Edison).
The Company believes that the market for geographic information systems is
experiencing substantial growth due to a number of factors, including: growing
awareness of the benefits of GIS technology; significant reductions in computer
hardware prices; increased capability and reliability of hardware and software;
deregulation and consolidation in the utility industry; and increased demand for
geographic information systems in growing communities. In addition, the Company
believes that GIS users are increasingly outsourcing their data conversion and
other GIS services projects to large third-party providers such as ASI. The
Company provides its customers with a single source for all data conversion
services necessary in the production of a customized GIS.
Frost & Sullivan, an industry research firm, estimates that the global GIS
market will grow from $4.5 billion in 1997 to $8.1 billion by 2002. Frost &
Sullivan identifies five segments within the GIS market: software for personal
computers; software for work stations; software for mainframes; data; and
services (which includes consulting, systems integration, database design, data
collection and data conversion). The Company competes primarily in the data
conversion and collection portions of the GIS services industry. Frost &
Sullivan estimates that the GIS services market, which represents approximately
70% of the global GIS market, will grow from $3.2 billion in 1997 to $5.5
billion in 2002.
The GIS services business is very competitive and highly fragmented. The
Company's competitors include small regional firms, large independent firms,
large companies with GIS services divisions, customer in-house operations and
international providers of data conversion services. The Company
3
<PAGE>
believes that many of the businesses in the GIS services industry do not have
adequate access to capital for expansion, lack the capacity to complete large,
long-term projects and do not have the technical expertise or experience that
customers increasingly require of their GIS services vendors. As a result, the
Company believes that the industry is poised for consolidation.
In 1995, ASI embarked on its current growth strategy, which includes
consolidation of the fragmented GIS services industry. To date, the Company has
completed four strategic acquisitions that have expanded the Company's
geographical scope, capacity, customer base, product offerings, proprietary
technology and operational expertise. The Company acquired Intelligraphics, Inc.
("Intelligraphics") located in Wisconsin in December 1995; Westinghouse Landmark
GIS, Inc. ("ASI Landmark") located in North Carolina in July 1996; MSE
Corporation ("MSE") located in Indiana in July 1997; and Cartotech, Inc.
("Cartotech") located in Texas in June 1998. The Company intends to continue
consolidating the highly fragmented GIS services industry by targeting similar
businesses for acquisition.
ASI has production facilities in Indianapolis, Indiana; Colorado Springs,
Colorado; Cary, North Carolina; Waukesha, Wisconsin; San Antonio, Texas; and
Mumbai, India. The Company was incorporated in 1981 under the laws of the State
of Colorado. The executive office of the Company is located at 941 North
Meridian Street, Indianapolis, Indiana 46204, and its telephone number is (317)
634-1000.
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Common Stock offered by the Company...................................... 1,750,000 shares
Common Stock offered by the Selling Shareholders......................... 500,000 shares
Common Stock to be outstanding after this offering....................... 8,437,327 shares(1)
Use of proceeds.......................................................... To repay indebtedness and for working
capital, business and technology
acquisitions and other general
corporate purposes. See "Use of
Proceeds."
Nasdaq National Market symbol............................................ ANLT
</TABLE>
- ------------------------
(1) Based on shares outstanding as of June 26, 1998. Excludes (i) 1,688,929
shares of Common Stock reserved for issuance upon the exercise of options
outstanding at June 26, 1998, at a weighted average exercise price of $21.19
per share, and (ii) 1,134,000 additional shares reserved for future issuance
pursuant to the Company's stock option plans. See "Capitalization," "Shares
Eligible for Future Sale" and Note 7 of Notes to the Consolidated Financial
Statements.
THE NAMES OF THE COMPANY AND ITS SUBSIDIARIES ARE TRADEMARKS OF THE COMPANY.
THIS PROSPECTUS ALSO INCLUDES TRADEMARKS OF COMPANIES OTHER THAN THE COMPANY.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
--------------------------------- --------------------
1995 1996(1)(2) 1997(3) 1997 1998
--------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Sales..................................................... $ 13,538 $ 22,669 $ 40,799 $ 16,160 $ 37,353
Earnings from operations.................................. 2,019 3,405 6,213 2,291 6,394
Net earnings.............................................. 1,184 1,913 3,331 1,255 3,357
Diluted earnings per share................................ $ 0.27 $ 0.38 $ 0.60 $ 0.24 $ 0.50
Weighted average common shares outstanding-- diluted...... 4,408 5,033 5,562 5,226 6,671
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31, 1998
--------------------------------- -------------------------
1995 1996(1)(2) 1997(3) ACTUAL AS ADJUSTED(4)
--------- ----------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital....................................... $ 5,738 $ 9,986 $ 21,085 $ 27,013 $ 74,226
Total assets.......................................... 10,048 21,988 50,146 64,159 102,472
Long-term debt, less current maturities............... 408 4,528 14,145 13,439 387
Total stockholders' equity............................ 6,654 10,926 23,831 30,977 91,242
</TABLE>
- ------------------------
(1) In December 1995 the Company acquired Intelligraphics for $3.5 million in
cash and 345,000 shares of restricted Common Stock valued at $891,000.
(2) In July 1996 the Company acquired ASI Landmark for $2.0 million in cash.
(3) In July 1997 the Company acquired MSE for $12.5 million in cash and 925,000
shares of restricted Common Stock valued at $7.3 million.
(4) Adjusted to reflect the sale and issuance of the 1,750,000 shares of Common
Stock offered by the Company hereby at the public offering price of $37.00
per share, after deduction of the underwriting discount and estimated
offering expenses payable by the Company and the application of net proceeds
to repay outstanding debt. See "Use of Proceeds."
5
<PAGE>
RISK FACTORS
THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A HIGH DEGREE OF RISK.
IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, THE RISK
FACTORS DESCRIBED BELOW SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN
INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
A major component of the Company's strategy is the acquisition of
complementary GIS services businesses. The Company acquired Intelligraphics in
December 1995; ASI Landmark in July 1996; MSE in July 1997; and Cartotech in
June 1998. Acquisitions involve a number of special risks, including, but not
limited to, potential adverse short-term effects on the Company's operating
results, diversion of management's attention, the loss of key personnel, risks
associated with the assimilation of the operations and personnel of the acquired
companies, unanticipated business problems or legal liabilities and amortization
of acquired intangible assets. In addition, when the Company acquires another
business, it assumes the obligation to complete the acquired company's contracts
that are in process. The Company's results of operations following any
acquisition will depend, in part, on the ability of the Company to profitably
complete such contracts, which could be adversely affected by the acquired
company's underestimation of the cost or amount of work required to complete the
project as well as additional costs necessary to correct problems associated
with the acquired company's prior performance. The success of the Cartotech
acquisition in particular may depend to a substantial degree on the ability of
the Company to profitably complete a project for the largest customer of
Cartotech. There is no assurance that the Company will be able to integrate
Cartotech or other acquired businesses into the Company without substantial
costs, delays or other operational or functional difficulties, or to obtain the
synergies expected from such acquisitions. Some or all of these risks could have
a material adverse effect on the Company. In addition, there can be no assurance
that the Company will be able to identify and acquire additional strategic
businesses, and, to the extent that consolidation becomes more prevalent in the
GIS services industry, the prices for attractive acquisition candidates may
reach unacceptably high levels. The inability of the Company to implement and
manage its acquisition strategy successfully for the reasons set forth above or
for other reasons would have an adverse effect on the Company. See "--Risks
Associated with Terms of Customer Contracts," "Business--Strategy" and
"Business--Recent Acquisitions."
ABILITY TO MANAGE GROWTH
The Company has grown substantially since 1996 and, in particular, since its
acquisition of MSE in July 1997. An integral part of the Company's strategy is
to continue its growth, primarily as a result of acquisitions and increased
sales by the Company to new and existing clients. To the extent that the Company
is able to continue to grow, its ability to manage any such growth will be
critical to its success and will require the establishment of financial controls
and accounting procedures at the acquired companies and the control of
acquisition-related overhead generally, the continued enhancement of
operational, financial and information systems, and the attraction and retention
of additional management and trained personnel. There can be no assurance that
the Company will be able to manage expanded operations effectively, and its
failure to do so would have a material adverse effect on the Company. See
"--Risks Associated with Acquisition Strategy" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
COMPETITION
The GIS services business is very competitive and highly fragmented. The
Company's competitors include small regional firms, independent firms, large
companies with GIS services divisions, customer in-house operations and
international low-cost providers of data conversion services. Additionally, as
the GIS services industry evolves, additional competitors with greater resources
than the Company may enter the industry. Several large companies with
substantial financial resources are in the process of launching
6
<PAGE>
satellites with imagery technology that provides much more detailed photographs
than have been available with such technology in the past. Although current
commercially available satellite imagery does not provide the degree of
resolution required by most of the Company's customers, if such technology
becomes commercially available, satellite companies may attempt to enter the GIS
services business or could form strategic alliances with the Company's
competitors, and thereby could pose a substantial competitive threat to the
Company. In addition, other improvements in technology could provide competitors
or customers with tools to perform the services provided by the Company and
lower the cost of entry into the GIS services industry. A number of the
Company's competitors or potential competitors have capabilities and resources
greater than those of the Company. See "--Dependence on Business Alliances" and
"Business--Competition."
RISKS ASSOCIATED WITH TERMS OF CUSTOMER CONTRACTS
Virtually all of the Company's revenue is earned under long-term,
fixed-price contracts. The Company's contractual obligations typically include
several large projects that will extend over one to four years. The Company's
ability to estimate its costs accurately when negotiating the overall price of a
project is critical to ensuring the profitability of such project. The Company
must also control the costs of performance under such fixed-price contracts. As
the Company increases its marketing efforts to obtain larger projects, the needs
to estimate costs accurately and to control costs of performance become more
important. Schedule delays resulting from a customer's lack of available funding
or schedule compressions required by customers may place additional strains on
management to hire and train the personnel required for project completion. The
Company's contracts with its customers are generally terminable by the customer
on relatively short notice, and customers may request that the Company slow down
or scale back the scope of a project in order to satisfy the customer's budget
or cash flow requirements. In addition, the Company could experience material
contract terminations or slowdowns. Long-term, fixed-price contracts for larger
projects generally increase the Company's risk due to inflation. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Customer Contracts."
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; VOLATILITY OF STOCK PRICE
The Company has experienced and expects to continue to experience quarterly
variations in sales and operating income as a result of many factors, including
the effects of acquisitions, timing of customers' budget processes, slowdowns or
acceleration of work by customers, the number of operating days in each quarter
and the impact of weather conditions on the ability of subcontractors to obtain
satisfactory aerial photography. In addition, the Company has in the past
experienced lower sales in its first fiscal quarter (ended December 31) due to
certain customers' year-end funding constraints, seasonal limitations on
obtaining aerial photography and seasonal slowdowns associated with the year-end
holidays. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Quarterly Results."
The Common Stock has experienced, and is likely to continue to experience
significant price and trading volume fluctuations. The trading price of the
Common Stock has been and may continue to be subject to significant fluctuations
in response to actual or anticipated variations in the Company's quarterly
operating results and other factors, such as: the introduction of new services
or technologies by the Company or its competitors; changes in other conditions
in the GIS industry or in the industries of any of the Company's customers;
changes in governmental regulation, government spending levels or budgetary
procedures; changes in securities analysts' estimates of the future performance
of the Company, its competitors or the industry generally; or general market
conditions. The trading price of the Common Stock may vary without regard to the
operating performance of the Company. General market price declines or market
volatility in the future, or future declines or volatility in the prices of
stock for companies in the GIS industry, also could affect the market price of
the Common Stock. See "Price Range of Common Stock."
7
<PAGE>
RELIANCE ON TECHNOLOGY; LIMITED PROTECTION OF PROPRIETARY RIGHTS
The Company has devoted significant resources to developing and acquiring
specialized data conversion hardware and software. In order to remain
competitive, it will be necessary for the Company to continue to select, invest
in, acquire and develop new and enhanced technology on a timely basis. There can
be no assurance that the Company will be successful in these efforts or in
anticipating developments in data conversion technology. Although the Company
believes that its operating procedures and proprietary software have been
important factors in its success, the technology used by the Company in
developing its proprietary software is readily available to, or could legally be
duplicated by, its competitors. The Company does not have any patent protection
for its products or technology. Although the Company relies to a great extent on
trade secret protection for much of its technology and has obtained
confidentiality agreements from most of its employees, third parties could
independently develop similar technology, obtain unauthorized access to the
Company's proprietary technology or misappropriate technology to which the
Company has granted access. See "Business--Strategy" and "Business--Research and
Development."
DEPENDENCE ON CERTAIN CUSTOMER MARKETS
The Company derives its revenues primarily from two core markets, utilities
and state and local governments, and also serves federal agencies and commercial
businesses. The ongoing consolidation of the utility industry could increase
competition for the GIS services projects of the utilities that remain. Also, to
the extent that utilities remain regulated, legal, financial and political
considerations may constrain the ability of utilities to fund geographic
information systems. Many state and municipal entities are subject to legal
constraints on spending, and a multi-year contract with any such entity may be
subject to termination in any subsequent year if the entity does not choose to
appropriate funds for such contracts in that year. Moreover, fundamental changes
in the business practices or capital spending policies of any of these
customers, whether due to budgetary, regulatory, technological or other
developments or changes in the general economic conditions in the industries in
which they operate, could cause a material reduction in demand by such customers
for the services offered by the Company. Any such reduction in demand could have
a material adverse effect on the Company. See "Business--Customers."
DEPENDENCE ON INTERNAL LABOR FORCE
The Company's business is labor-intensive and requires trained employees. In
order to support additional growth, if any, the Company must increase production
capacity by the addition of more employees. There can be no assurance that the
Company will be able to continue to hire, train and retain sufficient numbers of
qualified employees. A significant portion of the Company's costs consists of
wages to hourly workers. An increase in hourly wages, costs of employee benefits
or employment taxes could have a material adverse effect on the Company.
Although the Company believes that its employee turnover rate is at an
acceptable level, turnover could increase for any of several reasons, including
the disruption that is sometimes associated with the acquisition of businesses
and increased competition for labor in any geographic area where the Company
operates. A higher turnover rate among the Company's employees would increase
the Company's recruiting and training costs, could affect the Company's ability
to perform services and earn revenues on a timely basis, and could decrease
operating efficiencies and productivity. See "Business--Personnel."
DEPENDENCE ON SUBCONTRACTORS
ASI employs certain selected subcontractors for tasks outside its expertise,
such as aerial photography and ground survey. The Company also uses
subcontractors for work similar to that performed by ASI employees in order to
expand capacity, meet deadlines, reduce production costs, manage work load and
encourage businesses owned by women and minorities. The inability to obtain
services of such subcontractors when needed or at all could have a material
adverse effect on the Company. See "Business-- Subcontractors."
8
<PAGE>
RISKS RELATING TO INTERNATIONAL SALES
In fiscal 1997, revenues from international sales represented approximately
6.3% of the Company's total revenues. The Company intends to continue expanding
its operations outside the United States and to enter additional international
markets, which will require management's attention and financial resources. If
foreign sales become a more significant component of the Company's net sales,
the Company's business will become more vulnerable to the inherent risks of
doing business internationally, including increased difficulties in collection
of accounts receivable, unexpected changes in regulatory requirements, tariffs
and other trade barriers, fluctuations in currency exchange rates, potentially
adverse tax consequences and political instability. The existence or occurrence
of any one of these factors could have a material adverse effect on the Company.
See "Business--Strategy" and "Business--Sales and Marketing."
DEPENDENCE ON BUSINESS ALLIANCES
A significant portion of the Company's sales is the result of referrals
derived, either directly or indirectly, from consultants in the GIS industry.
The Company believes that its continued success in the GIS services market is
dependent, in part, on its ability to maintain current relationships and to
cultivate additional relationships with other leading consultants. Such
consultants could independently acquire a GIS data collection or data conversion
business or businesses or form other relationships with the Company's
competitors. There can be no assurance that relationships with GIS consultants
will continue to be a source of business for the Company. The inability of the
Company to maintain such relationships or to form new relationships could have a
material adverse effect on the Company. See "Business--Sales and Marketing."
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends in large part upon the continued service
of its executive officers and other key employees. While the Company has
employment agreements with certain of its key personnel, there is no assurance
that the Company will be able to retain the services of such key personnel. The
Company does not maintain any key person life insurance policies. Moreover, in
order to support additional growth, if any, the Company will be required to
recruit, develop and retain additional qualified management personnel. The loss
of key personnel or the inability to obtain additional key personnel could have
a material adverse effect on the Company.
DEPENDENCE ON OFFSHORE OPERATIONS
The Company utilizes operations in Mumbai, India to perform certain data
capture tasks at lower costs than could be achieved in the United States. These
operations were acquired in May 1998. Expenses incurred by these operations
represented approximately 7% of subcontractor expenses for the three-month
period ended March 31, 1998. Although the Company believes that it could replace
the personnel in India, and while the amounts paid for the performance of
services overseas have not, to date, been material, the ability of the Company
to perform services under some existing contracts on a profitable basis is
dependent upon the continued availability of its overseas operations. In the
past, India has experienced significant inflation as well as civil unrest and
regional conflicts. India's recent testing of nuclear devices has resulted in
the imposition of economic sanctions by the United States, and it is not known
what effect these events might have on the attitude of the Indian government
toward U.S. businesses in India. Moreover, the Indian government has exercised
and continues to exercise significant influence over many aspects of the Indian
economy. Events or governmental actions that would impede or prohibit the
operations of the Company's Mumbai facility could have a material adverse effect
on the Company. See "Business--Personnel" and "Business-- Subcontractors."
9
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market after this
offering could adversely affect the market price of the Common Stock. Upon
completion of this offering, there will be 8,437,327 shares of Common Stock
outstanding. Of these shares, 7,196,116 will be freely tradeable without
restriction. On June 27, 1999 and June 27, 2000, an aggregate of 238,743 and
115,424 shares, respectively, will become eligible for sale in the public market
upon the expiration of certain lock-up agreements entered into in connection
with the Cartotech acquisition. In addition, the holders of an aggregate of
887,044 shares of Common Stock have agreed, pursuant to certain lock-up
agreements entered into in connection with this offering, not to offer or sell
any shares of Common Stock of the Company for a period of 90 days following the
date of this Prospectus without the prior written consent of NationsBanc
Montgomery Securities LLC. Upon the expiration of these lock-up agreements with
NationsBanc Montgomery Securities LLC and subject in each case to provisions of
Rule 144 under the Securities Act, (i) 262,044 of these shares will be eligible
for sale in the public market, and (ii) the remaining 625,000 shares will be
eligible for sale on July 2, 1999 upon the expiration of a lock-up agreement
entered into in connection with the MSE acquisition. Holders of approximately
863,743 shares of "Restricted Securities " (as such term is defined in the
Securities Act) are entitled to certain incidental and demand registration
rights with respect to registration of such shares for offer or sale to the
public. To the extent that such registration rights are exercised, the number of
shares freely tradeable in the public market will increase, which could
adversely affect the market price of the Common Stock. See "Principal and
Selling Shareholders" and "Shares Eligible for Future Sale."
The Company has registered for issuance or resale the 2,878,000 shares of
Common Stock reserved for issuance under the Company's stock option plans. As of
May 31, 1998, options to purchase 1,744,000 shares had been granted and were
outstanding under the Company's stock option plans, of which options to purchase
513,000 shares were currently exercisable. Options to purchase the remaining
1,231,000 shares become exercisable at varying times thereafter.
DISCRETIONARY USE OF PROCEEDS OF OFFERING
The Company has no current specific plans for use of the net proceeds of
this offering, other than approximately $31.5 million that the Company intends
to use to repay the amounts outstanding under the Company's term loan and lines
of credit. As a consequence, the Company's management will have the ability to
allocate the remainder of the net proceeds of this offering in its discretion.
There can be no assurance that the net proceeds will be utilized in a manner
that the shareholders deem optimal or that the net proceeds can or will be
invested to yield a significant return following the completion of this
offering. See "Use of Proceeds."
EFFECT OF PREFERRED STOCK PROVISIONS
The Company's articles of incorporation allow the Board of Directors to
issue up to 2,500,000 shares of preferred stock and to fix the rights,
privileges and preferences of those shares without any further vote or action by
the shareholders. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued by the Company in the future. Although the Company has
no present intention to issue any preferred stock, any such issuance could be
used to discourage an unsolicited acquisition proposal by a third party.
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,750,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$60.3 million, assuming a public offering price of $37.00 per share, after
deduction of the underwriting discount and estimated offering expenses payable
by the Company. Approximately $31.5 million of the net proceeds of the offering
is expected to be used to repay the amounts outstanding under the Company's term
loan and lines of credit. At June 26, 1998 there was approximately $16.0 million
outstanding under the term loan, which expires June 2003; $8.3 million under the
acquisition line of credit, which expires June 2003; and $7.2 million under the
working capital line of credit, which expires June 2001. These credit facilities
bear interest at a rate equal to, at the Company's option; either the London
Interbank Offering Rate plus a margin of between 1.25% to 2.25%; or the lender's
prime rate. The Company incurred $12.5 million in borrowed funds in connection
with the acquisition of MSE in July 1997 and approximately $8.3 million in
connection with the acquisition of Cartotech in June 1998. The remaining net
proceeds of the offering are expected to be used for working capital and other
general corporate purposes. A portion of the net proceeds may also be used for
strategic acquisitions of businesses and technologies complementary to those of
the Company. The Company has no present agreements or commitments and is not
currently engaged in any negotiations with respect to any acquisition. See "Risk
Factors--Discretionary Use of Proceeds of Offering" and "Management's Discussion
and Analysis of the Results of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Pending the uses described above, the Company intends to invest the net
proceeds from this offering in short-term, interest bearing, investment-grade
securities. The Company will not receive any proceeds from the sale of shares of
Common Stock by the Selling Shareholders.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has traded publicly under the symbol "ANLT" on
Nasdaq since November 1986 and on the Nasdaq National Market System since April
1995. The table below sets forth the range of the per share high and low sale
prices of the Common Stock for each quarterly period for the fiscal years ended
September 30, 1996 and 1997 and for the current fiscal year, as reported by
Nasdaq. The Company's Board of Directors authorized a three-for-two stock split
on June 27, 1996, and the prices in the following table have been adjusted for
such stock split. These prices reflect inter-dealer quotations without
adjustments for retail markup, markdown or commission, and do not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1996:
First Quarter................................................................................ $ 6.83 $ 4.59
Second Quarter............................................................................... 10.33 6.00
Third Quarter................................................................................ 16.00 8.08
Fourth Quarter............................................................................... 17.50 8.75
FISCAL YEAR ENDED SEPTEMBER 30, 1997:
First Quarter................................................................................ $ 13.00 $ 8.62
Second Quarter............................................................................... 13.38 9.50
Third Quarter................................................................................ 14.25 10.25
Fourth Quarter............................................................................... 24.62 13.75
FISCAL YEAR ENDED SEPTEMBER 30, 1998:
First Quarter................................................................................ $ 36.00 $ 18.75
Second Quarter............................................................................... 54.50 9.75
Third Quarter (through June 25, 1998)........................................................ 53.00 22.00
</TABLE>
On June 25, 1998, the last reported sale price of the Company's Common Stock
on the Nasdaq National Market was $37.00 per share. As of June 25, 1998 there
were approximately 400 shareholders of record and 6,333,160 shares of Common
Stock outstanding.
11
<PAGE>
CAPITALIZATION
The table below sets forth (i) the actual capitalization of the Company as
of March 31, 1998 and (ii) the capitalization of the Company as adjusted to give
effect to the sale and issuance of the 1,750,000 shares of Common Stock offered
by the Company hereby at an assumed public offering price of $37.00 per share,
after deduction of the underwriting discount and estimated offering expenses
payable by the Company and the application of the net proceeds to repay
outstanding debt. See "Use of Proceeds." The information in the table below is
qualified in its entirety by, and should be read in conjunction with, the
Company's consolidated financial statements and the related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Lines of credit with bank................................................................. $ 5,990 $ --
Current portion of long-term debt......................................................... 3,251 341
--------- -----------
Total current debt................................................................ $ 9,241 $ 341
--------- -----------
--------- -----------
Long term debt, less current portion...................................................... $ 13,439 $ 387
--------- -----------
Stockholders' equity:
Preferred stock, no par value, 2,500,000 shares authorized; none issued and
outstanding actual and as adjusted.................................................. -- --
Common stock, no par value, 100,000,000 shares authorized; 6,312,647 shares issued and
outstanding actual; 8,062,647 shares issued and outstanding as adjusted(1).......... 19,058 79,323
Retained earnings..................................................................... 11,919 11,919
--------- -----------
Total stockholders' equity........................................................ 30,977 91,242
--------- -----------
Total capitalization.......................................................... $ 44,416 $ 91,629
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) Based on shares outstanding as of March 31, 1998. Excludes (i) 1,499,642
shares of Common Stock reserved for issuance upon the exercise of options
outstanding at March 31, 1998 at a weighted average exercise price of $19.60
per share and (ii) 1,343,800 additional shares reserved for future issuance
pursuant to the Company's stock option plans.
DIVIDEND POLICY
No dividends have ever been paid with respect to the Common Stock, and the
Company expects to retain earnings to finance the expansion and development of
its business for the foreseeable future. In addition, the Company's current bank
loans prohibit the payment of any dividends without the bank's consent.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of and for the fiscal
years ended September 30, 1993, 1994, 1995, 1996 and 1997 are derived from
consolidated financial statements of the Company which have been audited by KPMG
Peat Marwick LLP, independent accountants. The Company's historical consolidated
financial statements as of September 30, 1996 and 1997 and for the years ended
September 30, 1995, 1996, and 1997 are contained elsewhere in this Prospectus.
The selected consolidated financial data as of March 31, 1998 and for the six
months ended March 31, 1997 and 1998 are derived from unaudited consolidated
financial statements included elsewhere in this Prospectus. The unaudited
consolidated financial statements have been prepared by the Company on a basis
consistent with the Company's audited consolidated financial statements and, in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such information.
The results of operations for the six months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the entire fiscal year.
The following selected consolidated financial data should be read in conjunction
with the Company's consolidated financial statements and the related notes
thereto and with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------------------------------------- --------------------
1993 1994 1995 1996(1)(2) 1997(3) 1997 1998
--------- --------- --------- ----------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Sales................................ $ 9,107 $ 11,176 $ 13,538 $ 22,669 $ 40,799 $ 16,160 $ 37,353
Costs and expenses:
Salaries, wages and related
benefits......................... 4,099 4,475 5,247 10,501 19,792 7,587 18,405
Subcontractor costs................ 1,357 2,628 3,244 3,898 5,899 3,028 4,345
Other general and administrative... 1,918 1,834 2,243 3,681 7,115 2,601 6,601
Depreciation and amortization...... 750 759 785 1,184 1,780 653 1,608
--------- --------- --------- ----------- --------- --------- ---------
8,124 9,696 11,519 19,264 34,586 13,869 30,959
--------- --------- --------- ----------- --------- --------- ---------
Earnings from operations............. 983 1,480 2,019 3,405 6,213 2,291 6,394
Other expense, net................... 200 184 119 339 770 259 853
--------- --------- --------- ----------- --------- --------- ---------
Earnings before income taxes......... 783 1,296 1,900 3,066 5,443 2,032 5,541
Income tax expense................... 298 492 716 1,153 2,112 777 2,184
--------- --------- --------- ----------- --------- --------- ---------
Net earnings......................... $ 485 $ 804 $ 1,184 $ 1,913 $ 3,331 $ 1,255 $ 3,357
--------- --------- --------- ----------- --------- --------- ---------
--------- --------- --------- ----------- --------- --------- ---------
Diluted earnings per share........... $ 0.12 $ 0.20 $ 0.27 $ 0.38 $ 0.60 $ 0.24 $ 0.50
--------- --------- --------- ----------- --------- --------- ---------
--------- --------- --------- ----------- --------- --------- ---------
Weighted average common shares
outstanding--diluted............... 4,005 4,010 4,408 5,033 5,562 5,226 6,671
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1998
SEPTEMBER 30, ----------------------
------------------------------------------------------- AS
1993 1994 1995 1996(1)(2) 1997(3) ACTUAL ADJUSTED(4)
--------- --------- --------- ----------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital..................... $ 2,879 $ 3,693 $ 5,738 $ 9,986 $ 21,085 $ 27,013 $ 74,226
Total assets........................ 7,158 8,016 10,048 21,988 50,146 64,159 102,472
Long-term debt, less current
maturities........................ 907 391 408 4,528 14,145 13,439 387
Total stockholders' equity.......... 3,758 4,597 6,654 10,926 23,831 30,977 91,242
</TABLE>
- ------------------------
(1) In December 1995 the Company acquired Intelligraphics for $3.5 million in
cash and 345,000 shares of restricted Common Stock valued at $891,000.
(2) In July 1996 the Company acquired ASI Landmark for $2.0 million in cash.
(3) In July 1997 the Company acquired MSE for $12.5 million in cash and 925,000
shares of restricted Common Stock valued at $7.3 million.
(4) Adjusted to reflect the sale and issuance of the 1,750,000 shares of Common
Stock offered by the Company hereby at the public offering price of $37.00
per share, after deduction of the underwriting discount and estimated
offering expenses payable by the Company and the application of the net
proceeds to repay outstanding debt. See "Use of Proceeds."
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE
COMPANY SET FORTH BELOW SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISK AND UNCERTAINTIES. THE STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE NOT
PURELY HISTORICAL ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. WHEN USED IN THIS
PROSPECTUS, OR IN THE DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS,
THE WORDS "ANTICIPATE," "BELIEVE," "ESTIMATE," "INTEND" AND "EXPECT" AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. SUCH
FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS RELATING TO
COMPETITION, FUTURE ACQUISITIONS, MANAGEMENT OF GROWTH, INTERNATIONAL SALES, THE
COMPANY'S STRATEGY, FUTURE SALES, FUTURE EXPENSES AND FUTURE LIQUIDITY AND
CAPITAL RESOURCES. ALL FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS ARE BASED
UPON INFORMATION AVAILABLE TO THE COMPANY ON THE DATE OF THIS PROSPECTUS, AND
THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.
THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN
THIS PROSPECTUS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW, IN "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
ASI, a leading provider of data conversion and digital mapping services to
users of customized geographic information systems, was founded in 1981 by its
current Chief Technical Officer, John A. Thorpe. From 1981 to 1990, the Company
experienced steady growth in revenues with periodic fluctuations in financial
results. After the hiring of the Company's current Chief Executive Officer and
Chief Financial Officer in 1990, the Company implemented a controlled growth
strategy, including improving and standardizing operating controls and
procedures, investing in infrastructure, upgrading the Company's proprietary
software and establishing capital sources.
In 1995, the Company embarked on a more aggressive growth strategy,
including consolidation of the fragmented GIS services industry. The Company
acquired substantially all of the assets of Wisconsin-based Intelligraphics,
Inc. ("Intelligraphics") in December 1995 for $3.5 million in cash and 345,000
shares of restricted Common Stock valued at $891,000. Intelligraphics, with over
200 employees, significantly expanded the Company's capacity to perform large
projects, added utility industry expertise, and established ASI's presence in
the midwestern United States. The acquisition contributed over 25 new customers
and $12.3 million in "backlog," which represents the amount of revenue that has
not been recognized on signed contracts.
In July 1996, the Company expanded its services to state and local
governments by acquiring substantially all of the assets of Westinghouse
Landmark GIS, Inc. ("ASI Landmark") for $2.0 million in cash. Based in North
Carolina, ASI Landmark's primary business is land base and cadastral mapping.
Prior to this acquisition, ASI had utilized subcontractors for certain of these
services. ASI Landmark also provided the Company with additional capacity for
photogrammetry, and a presence in the eastern and southeastern United States.
The acquisition contributed approximately 20 new customers, $9.1 million in
backlog and 105 employees to the Company.
The Company acquired MSE Corporation ("MSE") in July 1997 for $12.5 million
in cash and 925,000 shares of restricted Common Stock valued at $7.3 million.
The acquisition of Indiana-based MSE gave the Company greater capacity to serve
the utility market and further enhanced ASI's presence in the midwestern United
States. In addition, the acquisition of MSE contributed over 200 customers and
$43.0 million of backlog to the Company. Over 325 employees joined the ASI
workforce as a result of the MSE acquisition, including the Company's current
Chief Operations Officer and Chief Administrative Officer.
15
<PAGE>
The Company acquired Texas-based Cartotech, Inc. ("Cartotech") in June 1998
for approximately $7.7 million in cash, net of cash acquired, and 354,167 shares
of restricted Common Stock valued at approximately $8.3 million. The Cartotech
acquisition extended ASI's presence in the utility market, enhanced the
Company's field inventory operations and provided the Company with a strong
presence in the southwestern United States. The Cartotech acquisition
contributed over 50 new customers and 270 employees to the Company. One of
Cartotech's customers, FirstEnergy Corp. (formerly known as Ohio Edison),
accounted for approximately 46.0% of Cartotech's revenues in calendar 1997.
In conjunction with the above acquisitions, the Company has recorded
goodwill, which represents the excess of the purchase price over the fair value
of the net assets acquired in business combinations. As of March 31, 1998,
goodwill, net of accumulated amortization, was $11.9 million. The Company
expects to record approximately $15.0 million of goodwill in connection with the
Cartotech transaction. The Company will amortize the value of the intangible
assets acquired in its recent business acquisitions over a period of 15 years,
representing the expected period of benefit from the acquisitions. The Company
believes this amortization period to be appropriate based on the historical and
forecasted operating results of the acquired businesses.
The Company recognizes revenue using the percentage of completion method of
accounting on a cost-to-cost basis. For each contract, an estimate of total
production costs is determined. At each accounting period and for each of the
Company's contracts, the percentage of completion is based on production costs
incurred to date as a percentage of total estimated production costs. This
percentage is then multiplied by the contract's total value to calculate the
sales revenue to be recognized.
Production costs consist of internal costs, primarily salaries and wages,
and external costs, primarily subcontractor costs. Internal and external
production costs may vary considerably among projects and during the course of
completion of each project. As a result, the Company experiences yearly and
quarterly fluctuations in production costs, in salaries, wages and related
benefits and in subcontractor costs. These costs may vary as a percentage of
sales from period to period. Since 1995 the Company has relied less on
subcontractors and more on employees. The Company anticipates that, as a
percentage of sales, salaries, wages and related benefits will continue to
increase, with a corresponding decrease in subcontractor costs, due, in part, to
the Company's May 1998 purchase of Interra Technologies, an India-based company
that had been a provider of subcontractor services to the Company. The following
table illustrates the relationship of salaries, wages and related benefits and
subcontractor costs:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
MARCH 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PERCENTAGE OF SALES:
Salaries, wages and related benefits.................................... 38.8% 46.3% 48.5% 47.0% 49.3%
Subcontractor costs..................................................... 23.9 17.2 14.5 18.7 11.6
--- --- --- --- ---
Total production costs................................................ 62.7% 63.5% 63.0% 65.7% 60.9%
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
The Company recognizes losses on contracts in the period such loss is
determined. From the beginning of fiscal 1995 through the six month period
ending March 31, 1998, the Company has recognized aggregate losses on contracts
of approximately $922,000. Over the same period, the Company recognized sales of
$114.4 million. Sales and marketing expenses associated with obtaining contracts
are expensed as incurred.
Backlog increases when new contracts are signed and decreases as revenue is
recognized. As of March 31, 1998, backlog was $99.0 million. Recently, the
number of large projects awarded to the Company has increased. Contracts for
larger projects generally increase the Company's risk due to inflation as well
as changes in customer expectations and funding availability. The Company's
contracts are
16
<PAGE>
generally terminable on short notice, and while in the Company's experience such
termination is rare, there is no assurance that the Company will receive all of
the revenue anticipated under signed contracts. See "Risk Factors--Risks
Associated with Terms of Customer Contracts" and "Business--Customer Contracts."
The Company engages in significant research and development activities. The
majority of these activities occur as the Company develops software or designs a
product for a particular contract, so that the costs of such efforts are
included as an integral part of the Company's services. Such custom-designed
software can often be applied to projects for other customers. These amounts
expended by the Company are not included in research and development expenses,
although the Company retains ownership of such proprietary software or products.
The Company, through its Advanced Technology Division, also engages in research
and development activities independently of the Company's work on particular
customer projects. For fiscal 1997 and for the six months ended March 31, 1998,
the Company expended $275,000 and $120,000, respectively, on such independent
research and development activities.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
consolidated statement of operations data expressed as a percentage of sales:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PERCENTAGE OF SALES:
Sales............................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Salaries, wages and related benefits........................... 38.8 46.3 48.5 47.0 49.3
Subcontractor costs............................................ 23.9 17.2 14.5 18.7 11.6
Other general and administrative............................... 16.6 16.3 17.4 16.1 17.7
Depreciation and amortization.................................. 5.8 5.2 4.4 4.0 4.3
--------- --------- --------- --------- ---------
Earnings from operations......................................... 14.9 15.0 15.2 14.2 17.1
Other expense, net............................................... 0.9 1.5 1.9 1.6 2.3
--------- --------- --------- --------- ---------
Earnings before income taxes..................................... 14.0 13.5 13.3 12.6 14.8
Income tax expense............................................... 5.3 5.1 5.1 4.8 5.8
--------- --------- --------- --------- ---------
Net earnings..................................................... 8.7% 8.4% 8.2% 7.8% 9.0%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
SALES. The Company's sales consist of revenue recognized for services
performed. Sales increased $21.2 million or 131.1% to $37.4 million for the six
months ended March 31, 1998 from $16.2 million for the six months ended March
31, 1997. This increase was due to an increase in the number and size of
customer contracts with the Company (including MSE) as well as the impact of the
acquisition of MSE in July 1997. Prior to its acquisition by the Company, MSE's
sales for the six months ended March 31, 1997 were $11.7 million.
SALARIES, WAGES AND RELATED BENEFITS. Salaries, wages and related benefits
includes employee compensation for production, marketing, selling,
administrative and executive employees. Salaries, wages and related benefits
increased 142.6% to $18.4 million for the six months ended March 31, 1998 from
$7.6 million for the six months ended March 31, 1997. This increase was
primarily due to the addition of over 325 employees as a result of the MSE
acquisition in July 1997, as well as the hiring of additional
17
<PAGE>
employees to support the Company's increased business. As a percentage of sales,
salaries, wages and related benefits increased to 49.3% for the six months ended
March 31, 1998 from 47.0% for the six months ended March 31, 1997. This
increase, and the corresponding decrease in subcontractor costs, was primarily
attributable to the Company's increased capability to perform more tasks
internally as well as a decrease in the number of projects which required
subcontractor services. The Company anticipates that, as a percentage of sales,
salaries, wages and related benefits will continue to increase, with a
corresponding decrease in subcontractor costs, due, in part, to the Company's
May 1998 purchase of Interra Technologies, an India-based company that had been
a provider of subcontractor services to the Company.
SUBCONTRACTOR COSTS. Subcontractor costs includes production costs incurred
through the use of third parties for production tasks such as data conversion
services to meet contract requirements, aerial photography and ground and
airborne survey services. Subcontractor costs increased 43.5% to $4.3 million
for the six months ended March 31, 1998 from $3.0 million for the six months
ended March 31, 1997, but decreased as a percentage of sales to 11.6% for the
six months ended March 31, 1998 from 18.7% for the six months ended March 31,
1997.
OTHER GENERAL AND ADMINISTRATIVE COSTS. Other general and administrative
costs includes rent, maintenance, travel, supplies, utilities, insurance and
professional services. Such costs increased 153.8% to $6.6 million for the six
months ended March 31, 1998 from $2.6 million for the six months ended March 31,
1997, primarily due to increased travel and other expenses related to the
integration of MSE. As a percentage of sales, other general and administrative
costs increased to 17.7% for the six months ended March 31, 1997 from 16.1% for
the six months ended March 31, 1997.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization consists
primarily of amortization of goodwill incurred in connection with the Company's
acquisitions, as well as depreciation of certain of the Company's operating
assets. For the six months ended March 31, 1998, depreciation and amortization
increased 146.2% to $1.6 million from $653,000 for the six months ended March
31, 1997. This increase was primarily attributable to the increased goodwill
recorded as a result of the MSE acquisition. As a percentage of sales,
depreciation and amortization increased slightly to 4.3% for the six months
ended March 31, 1998 from 4.0% for the six months ended March 31, 1997. The
Company expects amortization expense to increase substantially as a result of
the Cartotech acquisition.
OTHER EXPENSE, NET. Other expense, net is comprised primarily of net
interest expense. Net interest expense increased 240.0% to $884,000 for the six
months ended March 31, 1998 from $260,000 for the six months ended March 31,
1997. This increase was primarily due to increased term debt incurred in
connection with the acquisition of MSE in July 1997 and increased utilization of
the Company's lines of credit for working capital.
INCOME TAX EXPENSE. Income tax expense was $2.2 million for the six months
ended March 31, 1998 compared to $777,000 for the six months ended March 31,
1997. The Company's effective income tax rate for the six months ended March 31,
1998 was 39.4%, an increase from 38.2% for the six months ended March 31, 1997,
due to the change in the mix of state tax rates as a result of the MSE
acquisition.
NET EARNINGS. Due to the factors discussed above, net earnings increased
167.5% to $3.4 million for the six months ended March 31, 1998 from $1.3 million
for the six months ended March 31, 1997.
FISCAL YEARS ENDED SEPTEMBER 30, 1997 AND 1996
SALES. The Company's sales increased $18.1 million or 80.0% to $40.8
million for fiscal 1997 from $22.7 million for fiscal 1996. This increase was
due to an increase in the number and size of customer contracts with the Company
as well as the impact of the MSE acquisition in July 1997. MSE's sales from July
2, 1997 (its date of acquisition) through September 30, 1997 were $6.8 million.
18
<PAGE>
SALARIES, WAGES AND RELATED BENEFITS. Salaries, wages and related benefits
increased 88.5% to $19.8 million for fiscal 1997 from $10.5 million for fiscal
1996. As a percentage of sales, salaries, wages and related benefits increased
to 48.5% in fiscal 1997 from 46.3% in fiscal 1996, primarily due to a greater
proportion of production costs being incurred as salaries and wages as opposed
to subcontractor costs in fiscal 1997.
SUBCONTRACTOR COSTS. Subcontractor costs increased 51.3% to $5.9 million
for fiscal 1997 from $3.9 million for fiscal 1996 but decreased as a percentage
of sales to 14.5% for fiscal 1997 from 17.2% for fiscal 1996. This shift in
production expenses from subcontractor costs to salaries, wages and related
benefits resulted from the normal fluctuation between internally and externally
incurred production costs and from acquisitions. These acquisitions enabled the
Company to perform more tasks internally and reduce its use of subcontractors.
OTHER GENERAL AND ADMINISTRATIVE COSTS. Other general and administrative
costs increased 93.3% to $7.1 million for fiscal 1997 from $3.7 million for
fiscal 1996. As a percentage of sales, other general and administrative costs
increased slightly to 17.4% in fiscal 1997 from 16.3% for fiscal 1996, due
primarily to increased travel and other expenses related to the integration of
newly acquired businesses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
50.3% to $1.8 million for fiscal 1997 from $1.2 million for fiscal 1996. This
increase was primarily attributable to the increased goodwill recorded as a
result of the MSE acquisition. As a percentage of sales, depreciation and
amortization decreased slightly to 4.4% in fiscal 1997 from 5.2% in fiscal 1996.
OTHER EXPENSE, NET. Net interest expense increased 120.0% to $772,000 for
fiscal 1997 from $351,000 for fiscal 1996. This increase was primarily due to
the increased term debt incurred in connection with the acquisition of MSE in
July 1997, as well as increased utilization of the Company's lines of credit for
working capital.
INCOME TAX EXPENSE. Income tax expense was $2.1 million in fiscal 1997
compared to $1.2 million in fiscal 1996. The effective income tax rate for 1997
was approximately 38.8%, an increase from 37.6% in 1996 due to the change in the
mix of state tax rates as a result of the MSE acquisition in the fourth quarter
of fiscal 1997.
NET EARNINGS. Due to the factors discussed above, net earnings increased
74.1% to $3.3 million for fiscal 1997 from $1.9 million for fiscal 1996.
FISCAL YEARS ENDED SEPTEMBER 30, 1996 AND 1995
SALES. The Company's sales increased $9.1 million or 67.4% to $22.7 million
for fiscal 1996 from $13.5 million for fiscal 1995. This increase was primarily
due to the acquisitions of Intelligraphics and ASI Landmark in fiscal 1996 as
well as an increase in the number and size of contracts.
SALARIES, WAGES AND RELATED BENEFITS. Salaries, wages and related benefits
increased 100.1% to $10.5 million for fiscal 1996 from $5.2 million for fiscal
1995. As a percentage of sales, salaries, wages and related benefits increased
to 46.3% for fiscal 1996 from 38.8% for fiscal 1995. This increase reflects a
greater proportion of production costs being incurred as salaries, as opposed to
subcontractor costs, primarily as a result of the higher mix of internal
production costs at the two acquired businesses.
SUBCONTRACTOR COSTS. Subcontractor costs increased 20.2% to $3.9 million
for fiscal 1996 from $3.2 million for fiscal 1995 but decreased as a percentage
of sales to 17.2% for fiscal 1996 from 23.9% for fiscal 1995.
OTHER GENERAL AND ADMINISTRATIVE COSTS. Other general and administrative
costs increased 64.1% to $3.7 million for fiscal 1996 from $2.2 million for
fiscal 1995. As a percentage of sales, other general and administrative costs
decreased slightly to 16.3% for fiscal 1996 from 16.6% in fiscal 1995.
19
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
50.8% to $1.2 million for fiscal 1996 from $785,000 for fiscal 1995, due
primarily to the depreciation of newly acquired capital equipment. As a
percentage of sales, depreciation and amortization decreased slightly to 5.2% in
fiscal 1996 from 5.8% in fiscal 1995.
OTHER EXPENSE, NET. Net interest expense increased 195.0% to $351,000 for
fiscal 1996 from $119,000 for fiscal 1995, due to the increased debt incurred to
complete the Intelligraphics and ASI Landmark acquisitions.
INCOME TAX EXPENSE. Income tax expense was $1.2 million in fiscal 1996
compared to $716,000 in fiscal 1995. The effective income tax rate for 1996 was
approximately 37.6%, a slight decrease from 37.7% in 1995.
NET EARNINGS. Due to the factors discussed above, net earnings increased
61.6% to $1.9 million for fiscal 1996 from $1.2 million for fiscal 1995.
QUARTERLY RESULTS
The Company has experienced and expects to continue to experience quarterly
variations in sales and operating income as a result of many factors, including
the effect of acquisitions, the timing of customers' budget processes, slowdowns
or acceleration of work by customers, the number of operating days in each
quarter and the impact of weather conditions on the ability of subcontractors to
obtain satisfactory aerial photography. In addition, the Company has in the past
experienced lower sales in its first fiscal quarter (ended December 31) due to
certain customers' year-end funding constraints, seasonal limitations on
obtaining aerial photography and seasonal slowdowns associated with the year-end
holidays. See "Risk Factors--Fluctuations in Quarterly Operating Results" and
"Risk Factors--Volatility of Stock Price."
20
<PAGE>
The following table presents the selected consolidated quarterly statement
of income data for the most recent ten fiscal quarters. This quarterly
information is unaudited but, in the opinion of the Company's management,
reflects all adjustments that the Company considers necessary for a fair
presentation of these data in accordance with generally accepted accounting
principles.
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995(1) 1996 1996 1996(2) 1996 1997 1997
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales........................ $ 3,649 $ 5,685 $ 5,963 $ 7,372 $ 7,609 $ 8,550 $ 8,484
Costs and expenses:
Salaries, wages and related
benefits................. 1,447 2,884 2,747 3,423 3,675 3,866 3,983
Subcontractor costs........ 935 747 971 1,245 1,227 1,802 1,391
Other general and
administrative........... 574 967 961 1,179 1,303 1,344 1,382
Depreciation and
amortization............. 217 294 291 382 338 314 320
----------- ----------- ----------- ----------- ----------- ----------- -----------
3,173 4,892 4,970 6,229 6,543 7,326 7,076
----------- ----------- ----------- ----------- ----------- ----------- -----------
Earnings from operations..... 476 793 993 1,143 1,066 1,224 1,408
Other expense, net........... 28 95 79 137 128 130 116
----------- ----------- ----------- ----------- ----------- ----------- -----------
Earnings before income
taxes...................... 448 698 914 1,006 938 1,094 1,292
Income tax expense........... 173 263 346 371 360 417 490
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net earnings................. $ 275 $ 435 $ 568 $ 635 $ 578 $ 677 $ 802
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Diluted earnings per share... $ 0.06 $ 0.09 $ 0.11 $ 0.12 $ 0.11 $ 0.13 $ 0.15
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Weighted average common
shares
outstanding--diluted....... 4,656 5,012 5,220 5,242 5,262 5,190 5,409
Effective income tax rate.... 38.6% 37.7% 37.8% 36.9% 38.4% 38.1% 37.9%
<CAPTION>
SEPT. 30, DEC. 31, MAR. 31,
1997(3) 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Sales........................ $ 16,156 $ 17,402 $ 19,951
Costs and expenses:
Salaries, wages and related
benefits................. 8,268 8,822 9,583
Subcontractor costs........ 1,479 1,611 2,735
Other general and
administrative........... 3,086 3,174 3,426
Depreciation and
amortization............. 808 778 830
----------- ----------- -----------
13,641 14,385 16,574
----------- ----------- -----------
Earnings from operations..... 2,515 3,017 3,377
Other expense, net........... 396 422 431
----------- ----------- -----------
Earnings before income
taxes...................... 2,119 2,595 2,946
Income tax expense........... 845 1,039 1,145
----------- ----------- -----------
Net earnings................. $ 1,274 $ 1,556 $ 1,801
----------- ----------- -----------
----------- ----------- -----------
Diluted earnings per share... $ 0.20 $ 0.23 $ 0.27
----------- ----------- -----------
----------- ----------- -----------
Weighted average common
shares
outstanding--diluted....... 6,389 6,629 6,713
Effective income tax rate.... 39.9% 40.0% 38.9%
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995(1) 1996 1996 1996(2) 1996 1997 1997
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF SALES:
Sales........................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost and expenses:
Salaries, wages and related
benefits................. 39.7 50.7 46.1 46.4 48.3 45.2 46.9
Subcontractor costs........ 25.6 13.1 16.3 16.9 16.1 21.1 16.4
Other general and
administrative........... 15.8 17.0 16.1 16.0 17.2 15.7 16.2
Depreciation and
amortization............. 5.9 5.2 4.9 5.2 4.4 3.7 3.8
----- ----- ----- ----- ----- ----- -----
87.0 86.0 83.3 84.5 86.0 85.7 83.3
----- ----- ----- ----- ----- ----- -----
Earnings from operations..... 13.0 14.0 16.6 15.5 14.0 14.3 16.7
Other expense, net........... 0.8 1.7 1.3 1.9 1.7 1.5 1.4
----- ----- ----- ----- ----- ----- -----
Earnings before income
taxes...................... 12.2 12.3 15.3 13.6 12.3 12.8 15.3
Income tax expense........... 4.7 4.6 5.8 5.0 4.7 4.9 5.8
----- ----- ----- ----- ----- ----- -----
Net earnings................. 7.5% 7.7% 9.5% 8.6% 7.6% 7.9% 9.5%
----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- -----
<CAPTION>
SEPT. 30, DEC. 31, MAR. 31,
1997(3) 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
AS A PERCENTAGE OF SALES:
Sales........................ 100.0% 100.0% 100.0%
Cost and expenses:
Salaries, wages and related
benefits................. 51.2 50.7 48.0
Subcontractor costs........ 9.2 9.3 13.7
Other general and
administrative........... 19.0 18.2 17.2
Depreciation and
amortization............. 5.0 4.5 4.2
----- ----- -----
84.4 82.7 83.1
----- ----- -----
Earnings from operations..... 15.6 17.3 16.9
Other expense, net........... 2.5 2.4 2.2
----- ----- -----
Earnings before income
taxes...................... 13.1 14.9 14.7
Income tax expense........... 5.2 6.0 5.7
----- ----- -----
Net earnings................. 7.9% 8.9% 9.0%
----- ----- -----
----- ----- -----
</TABLE>
- ------------------------------
(1) In December 1995 the Company acquired Intelligraphics, Inc. for $3.5 million
in cash and 345,000 shares of restricted Common Stock valued at $891,000.
(2) In July 1996 the Company acquired ASI Landmark for $2.0 million in cash.
(3) In July 1997 the Company acquired MSE Corporation for $12.5 million in cash
and 925,000 shares of restricted Common Stock valued at $7.3 million.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's principal source of liquidity has consisted of
cash flow from operations supplemented by secured lines of credit. As of March
31, 1998, the Company's outstanding balance on its
21
<PAGE>
lines of credit was $6.0 million. On June 3, 1998, the Company replaced its
existing lines of credit with a three-year, $11.0 million secured working
capital line of credit and a $10.0 million line of credit for acquisitions
(which is due in quarterly installments over a five-year period), and the
Company refinanced $16.0 million of term debt. Borrowings under the new credit
facilities bear interest at a rate per annum equal to, at the Company's option,
(i) the agent bank's prime rate or (ii) an adjusted London Interbank Offering
Rate (LIBOR) plus a margin ranging from 1.25% to 2.25%. The agent bank's prime
rate was 8.25% on June 3, 1998. The Company borrowed approximately $8.3 million
under the new acquisition line of credit to fund the cash portion of the
acquisition of Cartotech. The Company expects to pay off all outstanding
balances under the three credit facilities with proceeds from this offering. See
"Use of Proceeds."
The Company's cash flow is significantly affected by three contract-related
accounts: accounts receivable; revenues in excess of billings; and billings in
excess of revenues. Under the percentage of completion method of accounting, an
"account receivable" is created when an amount becomes due from a customer,
which typically occurs when an event specified in the contract triggers a
billing. "Revenues in excess of billings" occur when the Company has performed
under a contract even though a billing event has not been triggered. "Billings
in excess of revenues" occur when the Company receives an advance or deposit
against work yet to be performed. These accounts, which represent a significant
investment by ASI in its business, affect the Company's cash flow as projects
are signed, performed, billed and collected.
Net cash provided by the Company's operating activities was $594,000,
$772,000 and $2.7 million for fiscal years 1995, 1996 and 1997, respectively.
Approximately $3.9 million in cash was used in operating activities for the
first six months of fiscal 1998, compared to $2.1 million in cash generated for
the first six months of fiscal 1997. The change in operating cash flows is
primarily attributable to normal fluctuations in the investment in
contract-related accounts. At March 31, 1998, the working capital in
contract-related accounts was equivalent to 189 days sales outstanding, up from
170 days at September 30, 1997 and 184 days at December 31, 1997. The Company
believes that this level of investment is consistent with its normal operating
range of days sales outstanding.
Cash used by investing activities for fiscal years 1995, 1996 and 1997 was
$704,000, $6.4 million and $12.5 million, respectively. For the six months ended
March 31, 1998, $1.9 million was used in investing activities compared to
$339,000 for the six months ended March 31, 1997. Such investing activities
principally consisted of payments for net assets acquired in business
combinations and purchases of equipment and leasehold improvements.
Cash provided by financing activities for fiscal years 1995, 1996 and 1997
was $223,000, $6.0 million and $10.3 million, respectively. For the six months
ended March 31, 1998, cash provided by financing activities was $5.3 million
compared to $458,000 in cash used for the six months ended March 31, 1997.
Financing activities consisted primarily of net borrowings and payments under
lines of credit for working capital purposes and net borrowings and payments of
long-term debt used for business combinations and the purchase of equipment and
leasehold improvements.
The Company believes that funds available under its lines of credit,
proceeds from this offering and cash flow from operations are adequate to
finance its operations for at least the next 18 months.
RECENT ACCOUNTING PRONOUNCEMENTS
For the quarter ended March 31, 1998, the Company has adopted Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"). SFAS
128 requires the restatement of all prior-period earnings per share ("EPS")
data. SFAS 128 replaces the presentation of the primary EPS with a presentation
of "basic EPS" and "diluted EPS." Under SFAS 128, basic EPS excludes dilution
for common stock equivalents and is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock are exercised or converted
into
22
<PAGE>
common stock or result in the issuance of common stock that then share in the
earnings of the entity. Under SFAS 128, the Company's diluted EPS is the same as
the income per share reported by the Company prior to the adoption of SFAS 128,
while the Company's basic EPS is greater than the income per share as previously
reported.
YEAR 2000 ISSUES
The "Year 2000" issue concerns the potential exposures related to the
automated generation of business and financial misinformation resulting from the
application of computer programs that have been written using two digits, rather
than four, to define the applicable year. The Company and the third parties with
which it does business rely on numerous computer programs in their daily
operations. The Company has assessed its internal exposure to this issue and is
in the process of upgrading or replacing systems where necessary. The Company
does not believe that the costs to upgrade or replace such systems will be
material, and such costs will be expensed as incurred. The Company's customers
specify database designs, including date fields, and the Company's delivery of
data conforms to such specifications. Accordingly, the Company has not formally
evaluated the Year 2000 issue as it relates to the computer systems used by its
customers and potential customers.
23
<PAGE>
BUSINESS
OVERVIEW
Analytical Surveys, Inc. is a leading provider of customized data conversion
and digital mapping services for the geographic information systems market. A
geographic information system ("GIS") is a high-resolution, large-scale, richly
detailed "intelligent map" that allows users to input, update, query, analyze
and display detailed information about a geographic area. Geographic information
systems are widely used by utilities, state and local governments, federal
agencies and commercial businesses to manage massive infrastructures
effectively, to improve operating efficiencies and to analyze future demand for
facilities. The Company primarily targets utilities and state and local
governments, and its current customers include the New York City Department of
the Environment, Florida Power & Light, Michigan Consolidated Gas, Southern New
England Telephone, U S WEST, British Telecom and FirstEnergy Corp.
The Company believes that the market for geographic information systems is
experiencing substantial growth due to numerous factors, including: growing
awareness of the benefits of GIS technology; significant reductions in computer
hardware prices; increased capability and reliability of hardware and software;
deregulation and consolidation in the utility industry; and increased demand for
geographic information systems in growing communities. In addition, the Company
believes that GIS users are increasingly outsourcing their data conversion and
other GIS services projects to large third-party providers such as ASI. The
Company provides its customers with a single source for all data conversion
services necessary in the production of a customized GIS.
In 1995, ASI embarked on its current growth strategy, which includes
consolidation of the fragmented GIS services industry. To date, the Company has
completed four strategic acquisitions that have expanded the Company's
geographical scope, capacity, customer base, product offerings, proprietary
technology and operational expertise. The Company acquired Intelligraphics
located in Wisconsin in December 1995; ASI Landmark located in North Carolina in
July 1996; MSE located in Indiana in July 1997; and Cartotech located in Texas
in June 1998.
Through internal growth and acquisitions, the Company has increased its
sales from $9.1 million for fiscal 1993 to $40.8 million for fiscal 1997, an
annual compound average growth rate of 45.5%. In addition, the Company's net
income has increased from $485,000 to $3.3 million over the same period, an
annual compound average growth rate of 61.5%. As of March 31, 1998, ASI's
backlog, which represents the amount of revenue that has not been recognized on
signed contracts, was $99.0 million.
INDUSTRY BACKGROUND
Large organizations, such as utility companies, local governments, federal
agencies and businesses, often need tools with which they can monitor complex
networks of assets and infrastructure, forecast trends, analyze present and
future demands on facilities, and manage daily operations. Central to many of
these processes are the availability and integration of accurate geo-referenced
information.
Historically, geo-referenced information, such as the location of utility
facilities and infrastructure, tax data, property assessments and zoning
restrictions, has been available only in paper-based form, such as maps, aerial
photographs and property records, or in tabular databases. Geo-referenced
information in these forms is difficult to integrate into useful information
systems and offers few opportunities to leverage information into additional
uses in a timely and effective manner. The advent of more powerful, reliable and
less expensive computer hardware and software, greater standardization of
operating systems such as Windows NT, and more cost-effective means of
delivering a GIS, such as CD-ROM or electronic distributions via the Internet,
have made geographic information systems an affordable and widely-utilized tool
in many organizations. As a result, more organizations are implementing
geographic information systems in order to manage previously overwhelming
amounts of information and are expanding both the access to and applications for
geographic information systems.
24
<PAGE>
GEOGRAPHIC INFORMATION SYSTEMS
A geographic information system is a high-resolution, large-scale (E.G., one
inch = 100 feet), richly detailed "intelligent map" that allows users to input,
update, query, analyze and display information about a geographic area. A GIS
integrates database operations, such as query and statistical analyses, with the
unique visualization and geographic analyses offered by paper maps. The
capabilities of a GIS make it a valuable tool for a wide range of organizations
for complex analysis and planning.
A GIS is produced by converting high-resolution aerial photography or paper
maps into a digital form to create a digital base map. Once a digital base map
has been created, additional geo-referenced data (E.G., water and sewer lines,
power lines and property boundaries) are converted into digital form and added
as additional layers of information onto the base map. The map can then be
linked to existing or newly created tabular databases, such as property records
and billing and usage history. The resulting GIS is used to perform the specific
analyses and functions required by users. New or changed data can then be added
easily, allowing users to maintain records that are more accurate, detailed and
current than paper maps, and can be accessed simultaneously by multiple users
within an organization.
USERS OF GEOGRAPHIC INFORMATION SYSTEMS
Geographic information systems are most widely used by utilities, state and
local governments, federal agencies and commercial businesses to manage massive
infrastructures more effectively, to improve operating efficiencies and to
analyze future demand for facilities. Typical customers and applications for
geographic information systems are illustrated below.
<TABLE>
<CAPTION>
CUSTOMER TYPE SAMPLE USES
<S> <C>
Gas and electric utilities/ - dispatch service crews
Telephone companies - monitor capital equipment replacement and
maintenance
- evaluate and select rights-of-way corridors
- analyze environmental impacts
State and local governments - dispatch emergency vehicles
- analyze crime or traffic patterns
- determine tax assessments
- analyze future demand for roads or recreational
facilities
Federal agencies - manage forests
- measure soil and water pollution levels
- create and maintain navigation systems
- analyze population statistics to determine voting
districts
Commercial businesses - manage natural resources
- design civil engineering projects
- develop aircraft terrain avoidance systems
</TABLE>
THE GIS MARKET
Frost & Sullivan, an industry research firm, estimates that the global GIS
market will grow from $4.5 billion in 1997 to $8.1 billion by 2002. Frost &
Sullivan identifies five segments within the GIS market: software for personal
computers; software for work stations; software for mainframes; data; and
services
25
<PAGE>
(which includes consulting, systems integration, database design, data
collection and data conversion). The Company competes primarily in the data
conversion and collection segments of the GIS services industry. Frost &
Sullivan estimates that the GIS services market, which represents approximately
70% of the global GIS market, will grow from $3.2 billion in 1997 to $5.5
billion in 2002.
The GIS services business is very competitive and highly fragmented.
Participants in the industry include small regional firms, large independent
firms, large companies with GIS services divisions, in-house operations and
international low-cost providers of data conversion services. The Company
believes that many of the businesses in the GIS services industry do not have
adequate access to capital for expansion, lack the capacity to complete large,
long-term projects and do not have the technical expertise or experience that
customers increasingly require of their GIS services vendors. As a result, the
Company believes that the industry is poised for consolidation.
FACTORS DRIVING MARKET GROWTH
Several factors are driving the growth of the GIS services market:
- INCREASED AWARENESS OF THE BENEFITS OF GIS. As GIS technology is
implemented and becomes an integral part of the planning and
decision-making processes throughout organizations, such as utilities and
governments, an increased awareness of the benefits of geographic
information systems is driving greater demand.
- ADVANCES IN TECHNOLOGY. Significant reductions in computer hardware and
software prices, as well as increased processing power and reliability of
information systems, have made geographic information systems more
technologically feasible and economically viable for organizations to
implement and maintain. As a result, GIS technology is available for more
users within organizations, thereby increasing access and applications for
geographic information systems.
- DEREGULATION AND CONSOLIDATION IN THE UTILITY INDUSTRY. Increased
competition in the utility industry, brought about by deregulation and
consolidation, has fueled demand for geographic information systems as
utilities seek the benefits of geographic information systems in order to
market more effectively, increase operating efficiencies and manage larger
infrastructures.
- NEEDS OF GROWING COMMUNITIES. Rapid population growth has increased the
requirements of certain state and local governments for geographic
information systems to assist in building and managing infrastructures,
including resources such as roads, utilities and fire departments.
- TREND TOWARDS OUTSOURCING. The Company believes that GIS users are
increasingly outsourcing their data conversion and collection projects,
recognizing the numerous benefits of leveraging the expertise and capacity
of third-party vendors. In addition, outsourcing allows customers to
continue to focus on their core businesses and avoid the significant
investments in personnel and infrastructure required to implement and
maintain a GIS.
ANALYTICAL SURVEYS, INC.
The Company serves as a single-source provider for all data conversion and
collection services necessary to create a customized GIS. Through internal
development and strategic acquisitions, the Company has developed significant
resources and capacity to perform the wide range of data conversion and
collection tasks necessary in the successful completion of large, complex
projects for a wide range of industries. The Company has also developed and
acquired industry-leading expertise and proprietary technology essential to
accurately and timely satisfy the unique requirements of each GIS project. In
addition, ASI's completion of four strategic acquisitions since 1995 has
established it as one of the industry's leading consolidators.
26
<PAGE>
STRATEGY
The Company's objective is to maintain and enhance its leadership position
in the data conversion and digital mapping industry. This objective is reflected
in the Company's strategy:
- EXPAND BUSINESS IN EXISTING MARKETS. The Company believes that there is
significant potential within its existing customer base for expanded
services and products and intends to add to the breadth of services it
offers to such customers. The Company also intends to capitalize on the
increasing number of GIS users in its core markets of utilities and state
and local governments by marketing to new customers in these markets and
increasing capacity in order to meet the demands of an expanded customer
base.
- CONSOLIDATE INDUSTRY EXPERTISE AND "BEST PRACTICES" THROUGH STRATEGIC
ACQUISITIONS. In 1995, ASI embarked on a strategy to acquire companies
with demonstrated records of performance, proven operating methods, solid
management teams and complementary technologies and customer bases. To
date, the Company has completed four strategic acquisitions that have
expanded the Company's geographical scope, capacity, customer base,
product offerings, proprietary technology and operational expertise. By
retaining the core management teams at these acquired companies, the
Company believes that it is able to take advantage of the "best practices"
of each acquired company. The Company intends to continue consolidating
the highly fragmented GIS services industry by targeting similar
businesses for acquisition. See "--Recent Acquisitions" and "Risk
Factors--Risks Associated with Acquisition Strategy."
- CONTINUE TO MAINTAIN AND DEVELOP TECHNOLOGICAL AND OPERATIONAL
LEADERSHIP. The Company believes that its past success has been largely
due to its technological expertise and operating procedures. The Company
has developed and acquired proprietary software and procedures that
automate portions of otherwise labor-intensive data conversion processes,
enabling the Company to provide cost-effective and high-quality services
on a timely basis. The Company intends to continue its efforts to develop
new technology and to improve its existing technology and procedures,
thereby enhancing its ability to expand into additional markets and
further improve its production capacity and productivity. See "--Research
and Development."
- EXPAND INTO INTERNATIONAL MARKETS. In fiscal 1997 and for the six months
ended March 31, 1998, revenues from international sales represented
approximately 6.3% and 8.3% of the Company's total revenues, respectively.
The Company intends to increase its share of the international GIS
services market by targeting international GIS users within its core
markets. The Company believes that alliances with local businesses or
individuals may be important to successful entry into certain
international markets. The Company intends to continue to seek out such
relationships and to continue to market directly to international GIS
users. See "--Sales and Marketing."
ASI SERVICES
DESIGN OF A GIS PROJECT
Data conversion and collection services comprise an important part of the
process of developing a geographic information system. The development of a GIS
typically involves multiple vendors, each of whom may participate in one or more
portions of the overall project. Such vendors, which include consultants,
hardware and software vendors and data conversion and collection providers, are
generally evaluated on the basis of experience, expertise, reputation,
production capacity and price. The typical phases of a GIS project are:
planning/bidding; contract award; data collection; data conversion; and
maintenance and updating.
27
<PAGE>
A description of the tasks performed during each phase of a typical project
is set forth below. These tasks, from planning/bidding through data conversion,
generally take between one to four years to complete. Services provided by the
Company are highlighted in italicized boldface type.
<TABLE>
<S> <C>
PROJECT PHASE ACTIVITIES
Planning/Bidding - select consultant, if desired
- conduct needs assessment
- determine scope and functions of GIS
- prepare technical specifications
- design database
- distribute requests for proposal
Contract Award - select hardware and software vendors
- select data conversion vendor
Data Collection - CONVERT PAPER MAPS TO DIGITAL FORMAT
- OBTAIN AERIAL PHOTOGRAPHS
- CONDUCT FIELD INVENTORY
- OBTAIN OTHER DATA--PAPER OR DIGITAL
- VERIFY ACCURACY OF DATA
Data Conversion - CREATE DIGITAL LAND-BASE MAP
-- DIGITAL ORTHOPHOTOGRAPHY
-- PHOTOGRAMMETRIC MAPPING
-- CADASTRAL MAPPING
- CONVERT OTHER GEO-REFERENCED DATA INTO DIGITAL
FORM TO CREATE INFORMATION "LAYERS"
Maintenance and Updating - GATHER AND CONVERT UPDATED DATA
</TABLE>
SPECIALIZED SERVICES OF ASI
The Company offers a full range of services to create the digital base maps
and databases of related geo-referenced information used in geographic
information systems.
DIGITAL LAND BASE MAPS. ASI uses specialized computers and internally
developed proprietary software to create digital land base maps from paper maps,
aerial photographs, land surveys and legal descriptions. The base maps are
created using one of three technologies, depending on the needs of the customer:
photogrammetric mapping, digital orthophotography or cadastral mapping.
- PHOTOGRAMMETRIC MAPPING. Photogrammetric mapping produces a digital land
base map using data that is extracted from aerial photographs. The process
uses an analytical stereoplotter (a three-dimensional viewing and data
recording device), specialized computer equipment and proprietary software
and operating procedures to draw, with lines, a highly precise map of
visible ground features. Photogrammetric mapping may include contour and
elevation information.
- DIGITAL ORTHOPHOTOGRAPHY. Digital orthophotography is used to create
richly detailed digital maps that have the appearance of, and are based
on, aerial photographs. Aerial photographs are scanned
28
<PAGE>
into a computer, and the resulting image is corrected (orthorectified) to
delete distortions in order to produce a highly precise map. Vector lines
can be superimposed onto the map to enable users to determine the precise
location of any particular feature or to measure distances from one
feature to another. Digital orthophotographs also can be used as base maps
for the layering of additional geo-referenced data.
- CADASTRAL MAPPING. Cadastral maps illustrate property lines and are
prepared by digitizing existing paper maps or converting the legal
property descriptions into map coordinates.
OTHER GEO-REFERENCED INFORMATION. Once the base map is produced, links to
tabular databases are created, and other geo-referenced data, such as buildings,
telephone poles and zoning restrictions, are collected, verified, converted into
digital format and added to the base map to create a GIS. The Company provides
an experienced field inventory staff to collect and verify information and uses
computerized and manual techniques to verify and digitize data from paper
sources. Once a GIS is completed, users can view the base map and any or all of
the layers of data on a computer screen and can retrieve selected data
concerning any desired location appearing on the screen or all data matching one
or more variables. A GIS map with layered geo-referenced information is
illustrated below.
This graphic is titled "GIS Data Layers" and features a black and white
graphical representation of multiple layers of GIS data. Down the center of the
page are seven stacked map images. In a column running down the left side of the
page under the title "Data Layer," each of the seven images to the right is
identified in the following order, from top to bottom: telephone, electric,
water, sewer, gas, deeds research and base map. An arrow points from the
verbiage in the left column to the image it identifies in the center of the
page. On the right side of the page, under the title "Uses," a sample usage for
each data layer is listed. Additionally, each usage includes a representative
icon. An arrow points from each of the data layers in the center to the
corresponding usage on the right. The usages are identified in the following
order: billing records (folder icon), load analysis (computer hard-drive icon)
hydrology modeling (water drop icon), maintenance records (computer diskette
icon), usage records (stacked paper icon) and tax assessment (open folder icon).
29
<PAGE>
RECENT ACQUISITIONS
In 1995, the Company embarked on its current growth strategy, including
consolidation of the fragmented GIS services industry. The Company acquired
substantially all of the assets of Intelligraphics, based in Wisconsin, in
December 1995. Intelligraphics, with over 200 employees, significantly expanded
the Company's capacity to perform large projects, added utility industry
expertise and established ASI's presence in the midwestern United States. The
acquisition contributed over 25 new customers and $12.3 million in backlog to
the Company.
In July 1996, the Company expanded its services to state and local
governments by acquiring substantially all of the assets of ASI Landmark. Based
in North Carolina, ASI Landmark's primary business is land base and cadastral
mapping. Prior to this acquisition, ASI had utilized outside subcontractors for
certain of these services. ASI Landmark also provided the Company with
additional capacity for photogrammetry and a presence in the eastern and
southeastern United States. The acquisition contributed approximately 20 new
customers, $9.1 million in backlog and 105 employees to the Company.
The Company acquired MSE in July 1997. The acquisition of Indiana-based MSE
gave the Company greater capacity to serve the utility market and further
enhanced ASI's presence in the midwestern United States. In addition, the
acquisition of MSE contributed over 200 new customers and $43.0 million of
backlog to the Company. Over 325 employees joined the ASI workforce as a result
of the MSE acquisition, including the Company's current Chief Operations Officer
and Chief Administrative Officer.
The Company acquired Texas-based Cartotech in June 1998. The Cartotech
acquisition extended ASI's presence in the utility market, enhanced the
Company's field inventory operations and provided the Company with a strong
presence in the southwestern United States. The Cartotech acquisition
contributed over 50 new customers and 270 employees to the Company. One of
Cartotech's customers, FirstEnergy Corp. (formerly known as Ohio Edison),
accounted for approximately 46.0% of Cartotech's revenues in 1997.
With all of its acquisitions to date, the Company has retained the core
management teams and most employees in order to capitalize on their
understanding of their respective markets and to provide continuity with
existing customer relationships. As a result, the acquired businesses continue
to operate somewhat independently while the Company has taken steps to
assimilate the businesses on a gradual basis. The Company believes that this
approach avoids disrupting existing customer relationships, promotes initiative
and responsibility by such management and personnel and avoids the disruption
that can accompany rapid assimilation. This approach also enables the Company to
promote use of the "best practices" of the acquired businesses throughout the
Company in such areas as bid preparation, production processes and utilization
of proprietary software.
Acquisitions involve a number of special risks, including, but not limited
to, potential adverse short-term effects on the Company's operating results,
diversion of management's attention, the loss of key personnel, risks associated
with the assimilation of the operations and personnel of the acquired companies,
unanticipated business problems or legal liabilities and amortization of
acquired intangible assets. In addition, when the Company acquires another
business, it assumes the obligation to complete the acquired company's contracts
that are in process. The Company's results of operations following any
acquisition will depend, in part, on the ability of the Company to profitably
complete such contracts, which could be adversely affected by the acquired
company's underestimation of the cost or amount of work required to complete the
project as well as additional costs necessary to correct problems associated
with the acquired company's prior performance. There is no assurance that the
Company will be able to integrate Cartotech or other acquired businesses into
the Company without substantial costs, delays or other operational or functional
difficulties, or to obtain the synergies expected from such acquisitions. Some
or all of these risks could have a material adverse effect on the Company. See
"Risk Factors--Risks Associated with Acquisition Strategy" and "Risk Factors--
Ability to Manage Growth."
30
<PAGE>
CUSTOMERS
The Company derives its revenues primarily from two core markets, utilities
and state and local governments, and also serves federal agencies and commercial
businesses. From time to time, the revenues earned on a specific contract may
exceed 10% of total Company revenues earned in a fiscal year. The only customer
that accounted for more than 10% of the Company's revenues in fiscal 1996 was
Southern New England Telephone, which accounted for approximately 10% of
revenues in that year. No customer accounted for more than 10% of the Company's
revenues in fiscal 1997. See "Risk Factors--Dependence on Certain Customer
Markets."
Set forth below are certain of ASI's customers in these markets.
UTILITIES
American Electric Power
Boston Edison Company
FirstEnergy Corp. (formerly Ohio Edison)
Florida Power & Light
Helix Water District
Illinois Power Company
Michigan Consolidated Gas
MidAmerican Energy Corporation
Mississippi Power
Niagara Mohawk
Southern California Gas
Southern New England Telephone
U S WEST
UtiliCorp United
Virginia Power
FEDERAL AGENCIES
National Imagery Mapping Agency
U.S. Army Corps of Engineers
U.S. Geological Survey
COMMERCIAL BUSINESSES
Allied Signal
Jeppesson Sanderson
STATE AND LOCAL GOVERNMENTS
Baltimore County, MD
Cambridge, MA
Capital Area Planning Council, Austin, TX
Davidson County, NC
DeKalb County, GA
Gwinnett County, GA
Johnson County, KS
Knoxville, TN
Montgomery County, MD
New York City Department of Environment, NY
Norfolk, VA
Summit County, OH
INTERNATIONAL
Auckland City (New Zealand)
British Telecom (United Kingdom)
Centra Gas Company (Ontario, Canada)
China Light & Power (Hong Kong)
Mercury Energy (New Zealand)
SaskPower (Saskatchewan, Canada)
Union Gas Company (Ontario, Canada)
Yorkshire Electricity Board (United Kingdom)
SALES AND MARKETING
The Company markets its products and services in its domestic and
international markets primarily through an internal sales force. The Company
augments its direct sales efforts by maintaining memberships in professional and
trade associations and by actively participating in industry conferences.
A significant portion of the Company's sales is the result of referrals
derived, either directly or indirectly, from consultants in the GIS industry.
The Company believes that its continued success in the GIS services market is
dependent, in part, on its ability to maintain current relationships and to
cultivate additional relationships with other leading consultants. Such
consultants could independently acquire a GIS data collection or data conversion
business or businesses or form other relationships with the Company's
competitors. There can be no assurance that relationships with GIS consultants
will continue to be a source of business for the Company. See "Risk
Factors--Dependence on Business Alliances."
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<PAGE>
The Company believes that alliances with local businesses or individuals may
be important to successful entry into certain international markets and intends
to continue to seek out such relationships and to market directly to
international customers.
The Company's sales cycle is generally lengthy, as customers normally take
several months to go through the bidding/planning and award phases of a GIS
project. Once awarded, it generally takes 30 to 60 days until the final contract
is signed. Most contracts take from six to 48 months to complete.
SUBCONTRACTORS
ASI employs certain selected subcontractors for tasks outside its expertise,
such as aerial photography and ground survey. The Company also uses
subcontractors when necessary to expand capacity, meet deadlines, reduce
production costs, manage work load and encourage businesses owned by women and
minorities. The inability to obtain the services of such subcontractors when
needed or at all could have a material adverse effect on the Company. In May
1998, the Company acquired Interra Technologies, a 280-employee India-based
company, for $430,000. Interra Technologies had been a provider of subcontractor
services to the Company. See "Risk Factors--Dependence on Subcontractors," "Risk
Factors-- Dependence on Offshore Operations" and "Business--Personnel."
RESEARCH AND DEVELOPMENT
The Company believes that its past success has been largely due to its
technological expertise and operating procedures. The Company has developed and
acquired proprietary software and procedures that automate portions of otherwise
labor-intensive data conversion processes, enabling the Company to provide
cost-effective and high-quality services on a timely basis. The Company intends
to continue its efforts to develop new technology and to improve its existing
technology and procedures, thereby enhancing its ability to expand into
additional markets and further improve its production capacity and productivity.
The Company engages in significant research and development activities. The
majority of these activities occur as the Company develops software or designs a
product for a particular contract, so that the costs of such efforts are
included as an integral part of the Company's services. Such custom designed
software can often be applied to projects for other customers. These amounts
expended by the Company are not included in research and development expenses,
although the Company retains ownership of such proprietary software or products.
The Company, through its Advanced Technology Division, also engages in research
and development activities independently of the Company's work on particular
customer projects. For fiscal 1997 and for the six months ended March 31, 1998,
the Company expended $275,000 and $120,000, respectively, on such independent
research and development activities.
The Company employs six full-time employees for research and development
activities in its Advanced Technology Division in Colorado Springs, Colorado. In
addition, the Company employs two individuals in Indianapolis, Indiana to
continue the development of certain of its proprietary software. Approximately
50 additional employees are substantially engaged in research and development
efforts as an integral part of the Company's services to its customers. See
"Risk Factors--Reliance on Technology; Limited Protection of Proprietary
Rights."
COMPETITION
The GIS services business is very competitive and highly fragmented. The
Company's competitors include small regional firms, independent firms, large
companies with GIS services divisions, customer in-house operations and
international low-cost providers of data conversion services. Additionally, as
the GIS services industry evolves, additional competitors with greater resources
than the Company may enter the industry. Several large companies with
substantial financial resources are in the process of launching satellites with
imagery technology that provides much more detailed photographs than have been
available
32
<PAGE>
with such technology in the past. Although current commercially available
satellite imagery does not provide the degree of-resolution required by most of
the Company's customers, if such technology becomes commercially available,
satellite companies may attempt to enter the GIS services business or could form
strategic alliances with the Company's competitors, and thereby could pose a
substantial competitive threat to the Company. In addition, other improvements
in technology could provide competitors or customers with readily available
tools to perform the services provided by the Company and lower the cost of
entry into the GIS services industry. A number of the Company's competitors or
potential competitors have capabilities and resources greater than those of the
Company.
ASI seeks to compete on the basis of the quality of its products and the
accuracy, responsiveness and efficiency with which it can provide services to
customers. The Company uses its internally-developed proprietary production
software as well as commercially available software to automate much of the
otherwise labor-intensive GIS production process. The Company believes that its
automated approach enables it to achieve more consistent quality and greater
efficiencies than it could if it used more manually-intensive methods. The
Company also believes that the retention of highly qualified managers and
executive officers is critical to its ability to compete in the GIS data
conversion industry. See "Risk Factors--Competition" and "Dependence on Key
Personnel."
CUSTOMER CONTRACTS
Virtually all of the Company's revenue is earned under long-term,
fixed-price contracts. The Company's contractual obligations typically include
several large projects that will extend over one to four years. The Company's
ability to estimate its costs accurately when negotiating the overall price of a
project is critical to ensuring the profitability of such project. The Company
must also control the costs of performance under such fixed-price contracts. As
the Company increases its marketing efforts to obtain larger projects, the needs
to estimate costs accurately and to control costs of performance become more
important. Schedule delays resulting from a customer's lack of available funding
or schedule compressions required by customers may place additional strains on
management to hire and train the personnel required for project completion. The
Company's contracts with its customers are generally terminable by the customer
on relatively short notice, and customers may request that the Company slow down
or scale back the scope of a project in order to satisfy the customer's budget
or cash flow requirements. In addition, the Company could experience material
contract terminations or slowdowns. Long-term, fixed-price contracts for larger
projects generally increase the Company's risk due to inflation. See "Risk
Factors-- Risks Associated with Terms of Customer Contracts."
PERSONNEL
As of June 26, 1998, ASI had approximately 1,745 employees, virtually all of
whom are full-time. ASI does not have a collective bargaining agreement with any
of its employees and generally considers relations with its employees to be
good.
The Company's business is labor intensive and requires specially trained
employees. Each new data conversion technician receives on-the-job training and
is generally considered to be fully trained after approximately four to six
months. Management constantly tracks performance under existing contracts and
projects staffing needs for continuing and new contracts. The increased capacity
from its four recent acquisitions has given the Company added flexibility to
allocate its personnel resources to meet customer demand. The Company has kept
the management teams from its recent acquisitions essentially intact and has
retained most of the employees.
In order to support additional growth, if any, the Company must increase
production capacity by the addition of more employees. There can be no assurance
that the Company will be able to continue to hire, train and retain sufficient
numbers of qualified employees. A significant portion of the Company's costs
33
<PAGE>
consists of wages to hourly workers. An increase in hourly wages, costs of
employee benefits or employment taxes could have a material adverse effect on
the Company. Although the Company believes that its employee turnover rate is at
an acceptable level, turnover could increase for any of several reasons,
including the disruption that is sometimes associated with the acquisition of
businesses and increased competition for labor in any geographic area where the
Company operates. A higher turnover rate among the Company's employees would
increase the Company's recruiting and training costs, could affect the Company's
ability to perform services and earn revenues on a timely basis, and could
decrease operating efficiencies and productivity. See "Risk Factors--Dependence
on Internal Labor Force."
PROPERTIES
The Company's office and production facilities are described in the table
below. All properties are leased.
<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE LEASE TERMINATION
- ------------------------------------------------------------------------------ --------------- --------------------
<S> <C> <C>
Colorado Springs, Colorado.................................................... 32,000 2004
Cary, North Carolina.......................................................... 23,400 2000
Waukesha, Wisconsin........................................................... 25,300 1999
Indianapolis, Indiana......................................................... 100,000 2002*
San Antonio, Texas............................................................ 23,500 2003
Mumbai, India................................................................. 5,000 2001
</TABLE>
- ------------------------
*Two five-year options are available to ASI.
The Company believes that these facilities are in generally good condition
and adequate for its current needs. ASI also operates sales offices in Denver,
Colorado; Sterling, Virginia (near Washington, D.C.); Mt. Laurel, New Jersey
(near Philadelphia, Pennsylvania); and West Palm Beach, Florida.
LEGAL PROCEEDINGS
Neither the Company nor any of its properties are the subject of any
material pending legal proceedings.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of
May 31, 1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- -------------------------------------------------------------
<S> <C> <C>
Sidney V. Corder............... 55 Chairman of the Board, President and Chief Executive Officer
Randal J. Sage................. 41 Chief Operations Officer
Scott C. Benger................ 48 Secretary/Treasurer and Senior Vice President, Finance
John J. Dillon................. 38 Chief Administrative Officer
John A. Thorpe................. 63 Director and Chief Technical Officer
Willem H. J. Andersen.......... 56 Director
Robert H. Keeley............... 57 Director
Richard P. MacLeod............. 60 Director
Sol C. Miller.................. 60 Director
James T. Rothe................. 54 Director
</TABLE>
Sidney V. Corder has been the President of the Company since August 1990 and
the Chief Executive Officer since 1993. He has served as a director of the
Company since November 1992 and has been the Chairman of the Board of the
Company since March 1997. From 1979 until joining the Company in 1990, Mr.
Corder was employed by Cubic Corporation, a design/build manufacturer of
automated fare collection systems for mass transit, serving in various
capacities including as Vice President of Operations and as President of its
Western Data division.
Randal J. Sage has been the Chief Operations Officer of the Company since
July 1997. From January 1997 until its acquisition by the Company in July 1997,
Mr. Sage was the President of MSE Corporation. Prior to January 1997, since 1980
Mr. Sage served in various positions of increasing responsibility with MSE
Corporation's GIS Division, including, project manager, director of technical
services, Vice President of Contracts and Vice President of Operations.
Scott C. Benger has been the Senior Vice President, Finance of the Company
since November 1993. From January 1991 through October 1993 he was Vice
President, Finance, and has been Secretary/ Treasurer since January 1991. Mr.
Benger joined the Company in September 1990 as Controller. Prior to joining the
Company, Mr. Benger served as the administrator of two private law firms.
John J. Dillon has been the Chief Administrative Officer of the Company
since July 1997. From January 1997 until its acquisition by the Company in July
1997, Mr. Dillon was Senior Vice President of MSE Corporation. From July 1993
until January 1997, Mr. Dillon served as the Director of the Indiana State
Lottery. From January 1993 until July 1993 he served as a legislative liaison to
the Governor of Indiana.
John A. Thorpe, the founder of ASI, has served as a director of the Company
since February 1981. He served as Chairman of the Board of the Company from
February 1981 until March 1997. Prior to founding the Company, Mr. Thorpe owned
and operated Photosurveys (Pty.) Ltd., an aerial survey company located in
Johannesburg, South Africa. Since 1993, Mr. Thorpe has also devoted part of his
time as the Chief Technical Officer of the Company. Mr. Thorpe is a certified
photogrammetrist.
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<PAGE>
Willem H. J. Andersen has served as a director of the Company since October
1995. Since February 1995, he has been a consultant with the National
Semiconductor Corporation. From 1992 to February 1995, he served as President
and Chief Executive Officer of Comlinear Corporation, a subisidiary of National
Semiconductor Corporation. From 1970 until his retirement in 1992, Mr. Andersen
held various positions with a number of divisions of Phillips N.V. of the
Netherlands, including President and Chief Executive Officer of Laser Magnetic
Storage International Company, a North American Phillips company.
Dr. Robert H. Keeley has served as a director of the Company since December
1992. Since September 1992, Dr. Keeley has been the El Pomar Professor of
Business Finance at the College of Business and Administration, University of
Colorado at Colorado Springs, where he also is associated with the Colorado
Institute for Technology Transfer and Implementation. Dr. Keeley also currently
serves on the boards of directors of Simtek Corporation, a developer of
high-performance nonvolatile semiconductor memories, and Molecular Dynamics,
Inc., a developer of systems that accelerate genetic discovery and analysis.
Richard P. MacLeod has served as a director of the Company since December
1987. From May 1985 until his retirement in April 1997, Mr. MacLeod was
President of the United States Space Foundation, a private foundation. He served
24 years in the U.S. Air Force, most recently as Chief of Staff, North American
Aerospace Defense Command, and as the first Air Force Space Command Chief of
Staff.
Sol C. Miller has served as a director of the Company since August 1997. He
was a co-founder of MSE Corporation and was Chairman of the Board from 1960
until its acquisition by the Company in July 1997.
Dr. James T. Rothe has served as a director of the Company since December
1987. Dr. Rothe has been a Professor of Business at the College of Business and
Administration, University of Colorado at Colorado Springs since August 1986,
where he served as Dean until June 1994. Since 1988, Dr. Rothe has been a
principal in Phillips-Smith Specialty Retail, Inc., a venture capital firm. He
is a director of Medlogic Global Corporation, which develops medical devices for
the wound-management market. He is also a trustee of the Janus Funds.
36
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth as of June 26, 1998 and as adjusted to
reflect the sale of the shares of Common Stock offered by this Prospectus,
certain information with respect to the ownership of the Common Stock of the
Company by (i) each person (or group of affiliated persons) known by the Company
to be the beneficial owner of more than 5% of the Company's outstanding Common
Stock, (ii) each director of the Company, (iii) each of the Company's executive
officers named under "Management-- Executive Officers and Directors," (iv) all
executive officers and directors of the Company as a group, and (v) each Selling
Shareholder. Each person or group identified possesses sole voting and
investment power with respect to such shares, subject to community property
laws, where applicable, and the address of such shareholder is c/o Analytical
Surveys, Inc., 941 North Meridian Street, Indianapolis, Indiana 46204.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO THE SHARES BENEFICIALLY
OWNED AFTER THE
OFFERING NUMBER OF OFFERING
----------------------- SHARES -----------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT OFFERED SHARES PERCENT
- ------------------------------------------ --------- ------------ ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
Sol C. Miller(1).......................... 925,000 13.8% 300,000 625,000 7.4%
John A. Thorpe(2)......................... 468,519 7.0% 200,000 268,519 3.2%
Sidney V. Corder(3)....................... 74,775 1.1% -- 74,775 *
Willem H. J. Andersen(4).................. 28,513 * -- 28,513 *
Robert H. Keeley(5)....................... 18,000 * -- 18,000 *
Richard P. MacLeod(6)..................... 56,102 * -- 56,102 *
James T. Rothe(7)......................... 43,404 * -- 43,404 *
Randal J. Sage(8)......................... 44,655 * -- 44,655 *
Scott C. Benger(9)........................ 66,950 1.0% -- 66,950 *
John J. Dillon(10)........................ 5,875 * -- 5,875 *
All directors and executive officers as a
group (10 persons)(11).................. 1,731,793 24.6% 500,000 1,231,793 14.0%
</TABLE>
- ------------------------
* Less than 1%
(1) Does not include 9,000 shares of Common Stock underlying options which are
not exercisable within 60 days of June 26, 1998. Includes 20,000 shares
held by the SCM Family Limited Partnership of which Mr. Miller and his wife
are the sole general partners. In the event the Underwriters' over-
allotment is exercised in full, Mr. Miller will sell an additional 45,000
shares and after the offering will beneficially own 580,000 shares (7.0%).
(2) Includes 31,875 shares of Common Stock underlying options which are
exercisable within 60 days of June 26, 1998. Does not include 15,750 shares
of Common Stock underlying options which are not exercisable within 60 days
of June 26, 1998. In the event the Underwriters' over-allotment is
exercised in full, Mr. Thorpe will sell an additional 30,000 shares and
after the offering will beneficially own 238,519 shares (2.9%).
(3) Includes 66,375 shares of Common Stock underlying options which are
exercisable within 60 days of June 26, 1998; does not include 275,625
shares of Common Stock underlying options which are not exercisable within
60 days of June 26, 1998.
(4) Includes 23,063 shares of Common Stock underlying options which are
exercisable within 60 days of June 26, 1998; does not include 19,687 shares
of Common Stock underlying options which are not exercisable within 60 days
of June 26, 1998.
(5) Includes 13,500 shares of Common Stock underlying options which are
exercisable within 60 days of June 26, 1998; does not include 15,750 shares
of Common Stock underlying options which are not exercisable within 60 days
of June 26, 1998.
37
<PAGE>
(6) Includes 54,002 shares of Common Stock underlying options which are
exercisable within 60 days of June 26, 1998; does not include 15,750 shares
of Common Stock underlying options which are not exercisable within 60 days
of June 26, 1998.
(7) Includes 41,154 shares of Common Stock underlying options which are
exercisable within 60 days of June 26, 1998; does not include 15,750 shares
of Common Stock underlying options which are not exercisable within 60 days
of June 26, 1998.
(8) Includes 44,655 shares of Common Stock underlying options which are
exercisable within 60 days of June 26, 1998; does not include 104,655
shares of Common Stock underlying options which are not exercisable within
60 days of June 26, 1998.
(9) Includes 64,250 shares of Common Stock underlying options which are
exercisable within 60 days of June 26, 1998; does not include 115,750
shares of Common Stock underlying options which are not exercisable within
60 days of June 26, 1998.
(10) Includes 5,875 shares of Common Stock underlying options which are
exercisable within 60 days of June 26, 1998; does not include 70,875
shares of Common Stock underlying options which are not exercisable within
60 days of June 26, 1998.
(11) Includes 344,749 shares of Common Stock underlying options which are
exercisable within 60 days of June 26, 1998; does not include 658,592
shares of Common Stock underlying options which are not exercisable within
60 days of June 26, 1998.
38
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market after this
offering could adversely affect the market price of the Common Stock. Upon
completion of this offering, there will be 8,437,327 shares of Common Stock
outstanding. Of these shares, 7,196,116 will be freely tradeable without
restriction. On June 27, 1999 and June 27, 2000, an aggregate of 238,743 and
115,424 shares, respectively, will become eligible for sale in the public market
upon the expiration of certain lock-up agreements entered into in connection
with the Cartotech acquisition. In addition, the holders of an aggregate of
887,044 shares of Common Stock have agreed, pursuant to certain lock-up
agreements entered into in connection with this offering, not to offer or sell
any shares of Common Stock of the Company for a period of 90 days following the
date of this Prospectus without the prior written consent of NationsBanc
Montgomery Securities LLC. Upon the expiration of these lock-up agreements with
NationsBanc Montgomery Securities LLC and subject in each case to provisions of
Rule 144 under the Securities Act, (i) 262,044 of these shares will be eligible
for sale in the public market, and (ii) the remaining 625,000 shares will be
eligible for sale on July 2, 1999 upon the expiration of a lock-up agreement
entered into in connection with the MSE acquisition. Holders of approximately
863,743 shares of "Restricted Securities " (as such term is defined in the
Securities Act) are entitled to certain incidental and demand registration
rights with respect to registration of such shares for offer or sale to the
public. To the extent that such registration rights are exercised, the number of
shares freely tradeable in the public market will increase, which could
adversely affect the market price of the Common Stock. See "Principal and
Selling Shareholders" and "Shares Eligible for Future Sale."
The Company has registered for issuance or resale the 2,878,000 shares of
Common Stock reserved for issuance under the Company's stock option plans. As of
May 31, 1998, options to purchase 1,744,000 shares had been granted and were
outstanding under the Company's stock option plans, of which options to purchase
513,000 shares were currently exercisable. Options to purchase the remaining
1,231,000 shares become exercisable at varying times thereafter.
In general, under Rule 144 as currently in effect, a shareholder who has
beneficially owned for at least one year shares privately acquired directly or
indirectly from the Company or from an affiliate of the Company, and persons who
are affiliates of the Company who have acquired the shares in registered
transactions, will be entitled to sell within any three-month period a number of
shares that does not exceed the greater of: (i) 1% of the outstanding shares of
the Common Stock (approximately 84,373 shares immediately after consummation of
the offering); or (ii) the average weekly trading volume in the Common Stock
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also subject to certain requirements relating to the manner and notice of sale
and the availability of current public information about the Company.
The Company has agreed with the Underwriters not to offer, sell or otherwise
dispose of Common Stock or securities convertible into or exercisable or
exchangeable for such shares for a period of 90 days after the offering without
the prior written consent of NationsBanc Montgomery Securities LLC, except that
the Company may grant options or issue stock upon exercise of new or outstanding
options pursuant to its stock option plans without such consent.
39
<PAGE>
UNDERWRITING
NationsBanc Montgomery Securities LLC and Dain Rauscher Wessels, a division
of Dain Rauscher Incorporated ("Dain Rauscher Wessels"), (collectively, the
"Underwriters") have severally agreed, subject to the terms and conditions
contained in the Underwriting Agreement (the "Underwriting Agreement") by and
among the Company, the Selling Shareholders and the Underwriters, to purchase
from the Company and the Selling Shareholders the number of shares of Common
Stock indicated below opposite their respective names, at the public offering
price less the underwriting discount set forth on the cover page of this
Prospectus. The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters are committed to purchase all of such shares of Common Stock, if
any are purchased.
<TABLE>
<CAPTION>
NationsBanc Montgomery Securities LLC............................
<S> <C>
Dain Rauscher Wessels............................................
---------
Total........................................................ 2,250,000
---------
---------
</TABLE>
The Underwriters have advised the Company and the Selling Shareholders that
the Underwriters propose initially to offer the shares of Common Stock to the
public on the terms set forth on the cover page of this Prospectus. The
Underwriters may allow to selected dealers a concession of not more than $
per share, and the Underwriters may allow, and such dealers may reallow, a
concession of not more than $ per share to certain other dealers. After
this offering, the offering price and other selling terms may be changed by the
Underwriters. The Common Stock is offered subject to receipt and acceptance by
the Underwriters, and to certain other conditions, including the right to reject
orders in whole or in part.
The Company and the Selling Shareholders have granted the Underwriters an
option exercisable during the 30-day period after the date of this Prospectus to
purchase up to a maximum of 337,500 additional shares of Common Stock to cover
over-allotments, if any, at the same price per share as the initial 2,250,000
shares to be purchased by the Underwriters. To the extent that the Underwriters
exercise this overallotment option, the Underwriters will be committed, subject
to certain conditions, to purchase such additional shares in approximately the
same proportion as set forth in the above table.
The Company, the Selling Shareholders and the Company's directors and
executive officers have agreed that, until 90 days after the date of this
Prospectus, they will not, without the prior written consent of NationsBanc
Montgomery Securities LLC, offer, sell or otherwise dispose of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for any shares of Common Stock, except that the Company, without such consent,
may grant options or issue stock upon exercise of new or outstanding options
pursuant to the Company's stock option plans.
The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments the Underwriters may be required to make in respect thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an
exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Stock. If the Underwriters create a short position in
the Common Stock in connection with the offering, i.e., if they sell
40
<PAGE>
more shares of Common Stock than are set forth on the cover page of this
Prospectus, the Underwriters may reduce that short position by purchasing Common
Stock in the open market. The Underwriters may also elect to reduce any short
position by exercising all or part of the over-allotment option described above.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters purchase shares of
Common Stock in the open market to reduce the Underwriters' short position or to
stabilize the price of the Common Stock, they may reclaim the amount of the
selling concession from the Underwriters and selling group members who sold
those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it
discourages resales of the security. Neither the Company nor any of the
Underwriters makes any representation or predictions as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Common Stock. In addition, neither the Company nor any of the
Underwriters makes any representation that the Underwriters will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
The Underwriters have advised the Company that the Underwriters and dealers
may engage in passive market making transactions in the Common Stock in
accordance with rules promulgated by the Commission. In general, a passive
market maker may not bid for or purchase the Common Stock at a price that
exceeds the highest independent bid. In addition, the net daily purchases made
by any passive market maker generally may not exceed 30% of its average daily
trading volume in the Common Stock during a specified two-month prior period or
200 shares, whichever is greater. A passive market maker must identify passive
market making bids as such on the Nasdaq electronic inter-dealer reporting
system. Passive market making may have the effect of stabilizing or maintaining
the market price of the Common Stock at a level above that which might otherwise
prevail in the open market. Underwriters and dealers are not required to engage
in passive market making and may discontinue such activities at any time.
LEGAL MATTERS
The validity of the shares of Common Stock offered by this Prospectus will
be passed upon for the Company by Sherman & Howard L.L.C., Denver, Colorado.
Certain legal matters relating to this offering will be passed upon for the
Selling Shareholders by Locke Reynolds Boyd & Weisell, Indianapolis, Indiana.
Certain legal matters relating to this offering will be passed upon for the
Underwriters by Summit Law Group, PLLC, Seattle, Washington.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries as
of September 30, 1996 and 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended September 30, 1997 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 information requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission. The Registration Statement, its exhibits and
schedules and the reports, proxy statements and other information filed by the
Company with the Commission in accordance with the Exchange Act can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1204, Judiciary Plaza, 450 Fifth
41
<PAGE>
Street, N.W., Washington, D.C. 20549, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants who file with the Commission and certain of the Company's filings
are available at such web site (http://www.sec.gov). In addition, the Common
Stock is quoted on the Nasdaq National Market and such information can be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, Washington, D.C. 20006.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, referred to in this
Prospectus as the "Registration Statement") filed by the Company under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the regulations of the Commission. For further information
concerning the Company and the Common Stock offered hereby, reference is made to
the Registration Statement and exhibits and schedules filed therewith, which may
be inspected without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of which may be obtained from the
Commission at prescribed rates. Any statements contained in this Prospectus
concerning the provisions of any documents are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 0-13111) are
incorporated by reference in this Prospectus: (a) the Company's Annual Report on
Form 10-K for the year ended September 30, 1997; (b) the Company's Quarterly
Reports on Form 10-Q for the quarters ended December 31, 1997 and March 31,
1998; (c) the Company's Current Reports on Form 8-K dated July 2, 1997, as
amended, and June 26, 1998; (d) the description of the Company's Common Stock
contained in a registration statement filed under the Exchange Act, including
any amendment or report filed for the purpose of updating such description; and
(e) all documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the documents that have been or may be incorporated by reference
in this Prospectus (not including exhibits to the information that is
incorporated by reference unless such exhibits are specifically incorporated by
reference into the documents that this Prospectus incorporates). Copies of this
Prospectus, as amended or supplemented from time to time, and any other
documents (or parts of documents) that constitute part of this Prospectus under
Section 10(a) of the Securities Act also will be provided without charge to each
such person, upon written or oral request. Requests for the foregoing materials
should be made to the Corporate Secretary, 941 North Meridian Street,
Indianapolis, Indiana 46204, telephone number: (317) 634-1000.
42
<PAGE>
ANALYTICAL SURVEYS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................... F-2
Financial Statements:
Consolidated Balance Sheets.............................................................................. F-3
Consolidated Statements of Operations.................................................................... F-4
Consolidated Statements of Stockholders' Equity.......................................................... F-5
Consolidated Statements of Cash Flows.................................................................... F-6
Notes to Consolidated Financial Statements............................................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Analytical Surveys, Inc.:
We have audited the accompanying consolidated balance sheets of Analytical
Surveys, Inc. and subsidiaries as of September 30, 1996 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended September 30, 1997.
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 audits 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 Analytical
Surveys, Inc. and subsidiaries as of September 30, 1996 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1997 in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
October 31, 1997
F-2
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------- MARCH 31,
1996 1997 1998
--------- --------- -----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS (note 4)
Current assets:
Cash......................................................................... $ 1,022 $ 1,559 $ 1,040
Accounts receivable, net of allowance for doubtful accounts of $164 and $60
in 1997 and 1996, respectively (notes 3 and 10)............................ 5,781 8,991 10,745
Revenue in excess of billings (note 3)....................................... 9,329 21,613 32,631
Deferred income taxes (note 6)............................................... 105 136 308
Prepaid expenses and other................................................... 215 545 1,733
--------- --------- -----------
Total current assets....................................................... 16,452 32,844 46,457
--------- --------- -----------
Equipment and leasehold improvements, at cost:
Equipment.................................................................... 7,544 7,983 9,468
Furniture and fixtures....................................................... 957 1,151 1,380
Leasehold improvements....................................................... 162 499 508
--------- --------- -----------
8,663 9,633 11,356
Less accumulated depreciation and amortization............................... (6,049) (5,483) (6,204)
--------- --------- -----------
2,614 4,150 5,152
--------- --------- -----------
Deferred income taxes.......................................................... -- 41 131
Goodwill, net of accumulated amortization of $368 and $141 in 1997 and 1996,
respectively (note 2)........................................................ 2,881 12,353 11,922
Other assets, net of accumulated amortization of $130 in 1997.................. 41 758 497
--------- --------- -----------
Total assets............................................................... $ 21,988 $ 50,146 $ 64,159
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines-of-credit with banks (note 4).......................................... $ 500 $ 1,473 $ 5,990
Current portion of long-term debt (note 4)................................... 1,247 3,051 3,251
Billings in excess of revenue (note 3)....................................... 1,091 789 1,411
Accounts payable and other accrued liabilities............................... 2,288 3,693 5,919
Accrued payroll and related benefits......................................... 1,340 2,753 2,873
--------- --------- -----------
Total current liabilities.................................................. 6,466 11,759 19,444
--------- --------- -----------
Long-term debt, less current portion (note 4).................................. 4,528 14,145 13,439
Deferred compensation payable.................................................. 68 411 299
--------- --------- -----------
Total liabilities.......................................................... 11,062 26,315 33,182
--------- --------- -----------
Stockholders' equity (note 7):
Preferred stock, no par value. Authorized 2,500 shares; none issued or
outstanding................................................................ -- -- --
Common stock, no par value. Authorized 100,000 shares; 6,114 and 4,887 shares
issued and outstanding in 1997 and 1996, respectively...................... 5,695 15,269 19,058
Retained earnings.............................................................. 5,231 8,562 11,919
--------- --------- -----------
Total stockholders' equity................................................. 10,926 23,831 30,977
--------- --------- -----------
Commitments and contingencies (notes 5 and 7)
Total liabilities and stockholders' equity................................. $ 21,988 $ 50,146 $ 64,159
--------- --------- -----------
--------- --------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
AND SIX MONTHS ENDED MARCH 31, 1997 AND 1998 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales................................................ $ 13,538 $ 22,669 $ 40,799 $ 16,160 $ 37,353
--------- --------- --------- --------- ---------
Costs and expenses:
Salaries, wages and related benefits............... 5,247 10,501 19,792 7,587 18,405
Subcontractor costs................................ 3,244 3,898 5,899 3,028 4,345
Other general and administrative................... 2,243 3,681 7,115 2,601 6,601
Depreciation and amortization...................... 785 1,184 1,780 653 1,608
--------- --------- --------- --------- ---------
11,519 19,264 34,586 13,869 30,959
--------- --------- --------- --------- ---------
Earnings from operations......................... 2,019 3,405 6,213 2,291 6,394
Other income (expense):
Interest expense, net.............................. (119) (351) (772) (260) (884)
Other.............................................. -- 12 2 1 31
--------- --------- --------- --------- ---------
(119) (339) (770) (259) (853)
--------- --------- --------- --------- ---------
Earnings before income taxes..................... 1,900 3,066 5,443 2,032 5,541
Income tax expense (note 6).......................... 716 1,153 2,112 777 2,184
--------- --------- --------- --------- ---------
Net earnings..................................... $ 1,184 $ 1,913 $ 3,331 $ 1,255 $ 3,357
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings per common share:
Basic.............................................. $ .29 $ .41 $ .64 $ .25 $ .54
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Diluted............................................ $ .27 $ .38 $ .60 $ .24 $ .50
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average common shares outstanding:
Basic.............................................. 4,035 4,659 5,244 4,923 6,163
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Diluted............................................ 4,408 5,033 5,562 5,226 6,671
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
AND SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
BALANCES AT OCTOBER 1, 1994............................................. 3,835 $ 2,462 $ 2,134 $ 4,596
Exercise of stock options............................................... 447 562 -- 562
Tax benefit relating to exercise of stock options....................... -- 437 -- 437
Purchase and retirement of common stock................................. (35) (125) -- (125)
Net earnings............................................................ -- -- 1,184 1,184
----- --------- --------- ---------
BALANCES AT SEPTEMBER 30, 1995.......................................... 4,247 3,336 3,318 6,654
Common stock issued in connection with business combination (note 2).... 345 891 -- 891
Exercise of stock options............................................... 295 583 -- 583
Tax benefit relating to exercise of stock options....................... -- 885 -- 885
Net earnings............................................................ -- -- 1,913 1,913
----- --------- --------- ---------
BALANCES AT SEPTEMBER 30, 1996.......................................... 4,887 5,695 5,231 10,926
Common stock issued in connection with business combination (note 2).... 925 7,313 -- 7,313
Exercise of stock options............................................... 302 954 -- 954
Tax benefit relating to exercise of stock options....................... -- 1,307 -- 1,307
Net earnings............................................................ -- -- 3,331 3,331
----- --------- --------- ---------
BALANCES AT SEPTEMBER 30, 1997.......................................... 6,114 15,269 8,562 23,831
Exercise of common stock options........................................ 199 1,280 -- 1,280
Tax benefit relating to exercise of stock options....................... -- 2,509 -- 2,509
Net earnings............................................................ -- -- 3,357 3,357
----- --------- --------- ---------
BALANCES AT MARCH 31, 1998 (unaudited).................................. 6,313 $ 19,058 $ 11,919 $ 30,977
----- --------- --------- ---------
----- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
AND SIX MONTHS ENDED MARCH 31, 1997 AND 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------- ---------------------
1995 1996 1997 1997 1998
--------- --------- ---------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings............................................ $ 1,184 $ 1,913 $ 3,331 $ 1,255 $ 3,357
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization......................... 785 1,184 1,780 653 1,608
Gain on sale of assets................................ -- (12) (2) (3) (15)
Deferred income tax benefit........................... (108) (163) (55) (13) (346)
Tax benefit relating to exercise of stock options..... 437 885 1,307 713 2,509
Changes in operating assets and liabilities, net of
effect of business combinations:
Accounts receivable, net............................ (1,226) (481) 951 (154) (1,754)
Revenue in excess of billings....................... (717) (2,820) (4,746) 10 (11,018)
Prepaid expenses and other.......................... (67) (18) 9 (781) (1,104)
Billings in excess of revenue....................... (243) 163 (302) (170) 622
Accounts payable and other accrued liabilities...... 466 (9) (111) 721 2,227
Accrued payroll and related benefits................ 83 130 555 (107) 7
--------- --------- ---------- --------- ----------
Net cash provided by operating activities......... 594 772 2,717 2,124 (3,907)
--------- --------- ---------- --------- ----------
Cash flows from investing activities:
Purchase of equipment and leasehold improvements...... (704) (919) (1,596) (495) (1,924)
Proceeds from sale of equipment....................... -- 12 159 157 21
Payments for net assets acquired in business
combinations, net of cash acquired.................. -- (5,541) (11,092) -- --
--------- --------- ---------- --------- ----------
Net cash used by investing activities............. (704) (6,448) (12,529) (338) (1,903)
--------- --------- ---------- --------- ----------
Cash flows from financing activities:
Net borrowings (payments) under lines-of-credit with
bank................................................ -- 500 (2,027) (500) 4,517
Proceeds from issuance of long-term debt.............. 521 5,765 12,714 214 1,000
Principal payments on long-term debt.................. (735) (815) (1,292) (630) (1,506)
Proceeds from exercise of stock options............... 562 583 954 -- --
Purchase and retirement of common shares.............. (125) -- -- 458 1,280
--------- --------- ---------- --------- ----------
Net cash provided by financing activities......... 223 6,033 10,349 (458) 5,291
--------- --------- ---------- --------- ----------
Net increase in cash.............................. 113 357 537 1,328 (519)
Cash at beginning of year................................. 552 665 1,022 1,022 1,559
--------- --------- ---------- --------- ----------
Cash at end of year....................................... $ 665 $ 1,022 $ 1,559 $ 2,350 $ 1,040
--------- --------- ---------- --------- ----------
--------- --------- ---------- --------- ----------
Supplemental disclosures of cash flow information:
Cash paid for interest................................ $ 112 $ 344 $ 815 $ 260 $ 886
--------- --------- ---------- --------- ----------
--------- --------- ---------- --------- ----------
Cash paid for income taxes............................ $ 765 $ 376 $ 888 $ 738 $ 1,042
--------- --------- ---------- --------- ----------
--------- --------- ---------- --------- ----------
Common stock issued for net assets acquired in business
combinations............................................ $ -- $ 891 $ 7,313 $ -- $ --
--------- --------- ---------- --------- ----------
--------- --------- ---------- --------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1997
AND MARCH 31, 1998 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS AND BASIS OF FINANCIAL STATEMENT PRESENTATION
Analytical Surveys, Inc. (ASI or the Company) is a Colorado corporation
formed in 1981. ASI's primary business is the production of precision
computerized maps and information files used in Geographic Information Systems
(GIS). Federal, state and local government agencies and commercial companies use
GIS to manage information relating to utilities, natural resources, streets,
land use and property taxation.
The consolidated financial statements include the accounts of the Company
and its wholly and majority owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Unaudited interim financial information as of March 31, 1998 and for the six
months ended March 31, 1997 and 1998 has been prepared by the Company on a basis
consistent with the annual financial statements and, in the opinion of
management, includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such information. The results
of operations for the six months ended March 31, 1998 are not necessarily
indicative of the results to be expected for the entire fiscal year.
The preparation of the 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(B) EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are recorded at cost. Depreciation and
amortization are provided using the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
3 to 10
Equipment..................................................... years
5 to 10
Furniture and fixtures........................................ years
5 to 10
Leasehold improvements........................................ years
</TABLE>
Maintenance, repairs and renewals which do not add to the value of an asset
or extend its useful life are charged to expense as incurred.
(C) REVENUE RECOGNITION
The Company recognizes revenue using percentage of completion accounting
based on the cost-to-cost method, whereby the percentage complete is based on
costs incurred in relation to total estimated costs. Costs associated with
obtaining contracts are expensed as incurred. The Company does not combine
contracts for purposes of recognizing revenue and, generally, does not segment
contracts.
F-7
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996 AND 1997
AND MARCH 31, 1998 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue in excess of billings represents revenue related to services
completed but not billed. The Company bills customers based upon the terms
included in the contract, which is generally upon delivery. When billed, such
amounts are recorded as accounts receivable. Billings in excess of revenue
represent billings in advance of services performed.
The Company recognizes losses on contracts in the period such losses are
determined. The Company does not believe warranty obligations on completed
contracts are significant.
(D) GOODWILL
Goodwill represents the excess of the purchase price over net assets
acquired in business combinations and is being amortized over a fifteen-year
period using the straight-line method.
(E) INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109).
SFAS 109 requires the use of the asset and liability method of accounting for
income taxes. Under the asset and liability method of SFAS 109, 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. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under SFAS 109, 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.
(F) STOCK-BASED COMPENSATION
The Company accounts for its stock-based employee compensation plans using
the intrinsic value based method prescribed by Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations (APB 25). The Company has provided pro forma disclosures of net
income as if the fair value based method of accounting for the plans, as
prescribed by Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation (SFAS 123), had been applied. Pro forma disclosures
include the effects of employee stock options granted during the years ended
September 30, 1997 and 1996.
(G) IMPAIRMENT OF LONG-LIVED ASSETS
Effective October 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of (SFAS 121) which requires that
long-lived assets and certain identifiable intangibles held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. An
impairment loss is recognized when estimated undiscounted future cash flows
expected to be generated by an asset are less than its carrying value.
Measurement of the impairment loss is based on the fair value of the asset,
which is generally determined using valuation
F-8
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996 AND 1997
AND MARCH 31, 1998 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
techniques such as the discounted present value of expected future cash flows or
independent appraisal. The adoption of SFAS 121 on October 1, 1996 had no effect
on the consolidated financial statements of the Company.
(H) RESEARCH AND DEVELOPMENT COSTS
The Company expenses research and development costs as they are incurred.
Research and development costs, which are included in general and administrative
expenses in the consolidated statements of operations, totaled $274,905,
$283,872 and $347,321 for the years ended September 30, 1997, 1996 and 1995,
respectively.
(I) EARNINGS PER SHARE
Earnings per share has been presented in accordance with the provisions of
Statement of Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS
128). SFAS 128 requires the presentation of basic earnings per share (EPS) and
diluted EPS. Basic EPS excludes dilution for potential common stock and is
computed by dividing earnings available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock. The Company's diluted EPS for prior periods was
the same as primary EPS previously reported while the Company's basic EPS is
greater than the primary EPS previously reported.
(J) FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments at September 30,
1997 and 1996 approximate estimated fair values. The fair value of a financial
instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties. The carrying amounts of cash and cash
equivalents, receivables, accounts payable and accrued liabilities approximate
fair value due to the short maturity of these instruments. The carrying amounts
of debt approximate fair value due to the variable nature of the interest rates
of these instruments.
(K) RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
(2) BUSINESS COMBINATIONS
In July 1997, the Company acquired all of the issued and outstanding common
stock of MSE Corporation for cash of $12,500,000 and 925,000 shares of
restricted common stock valued at $7,313,000, for total consideration of
$19,813,000.
In July 1996, the Company, through its wholly owned subsidiary, ASI
Landmark, Inc., acquired substantially all of the assets and assumed certain
liabilities of Westinghouse Landmark GIS, Inc. which
F-9
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996 AND 1997
AND MARCH 31, 1998 (UNAUDITED)
(2) BUSINESS COMBINATIONS (CONTINUED)
provides photogrammetric mapping and data conversion services to the municipal
and county markets for cash of $1,992,598.
In December 1995, the Company acquired substantially all of the assets and
assumed certain liabilities of Intelligraphics, Inc. which provides data
conversion services primarily to the utilities market, for $3,548,019 cash and
345,000 shares of restricted common stock valued at $891,250, for total
consideration of $4,439,269.
All of the acquisitions were accounted for using the purchase method of
accounting and, accordingly, the accompanying consolidated financial statements
include the results of operations of the acquired businesses since the date of
acquisition. The aggregate purchase prices of the acquisitions were allocated
based on fair values as follows (amounts in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER
30,
--------------------
<S> <C> <C>
1996 1997
--------- ---------
Current Assets........................................................... $ 4,286 $ 13,463
Equipment................................................................ 1,245 1,500
Other assets, including Goodwill......................................... 3,022 10,996
Current liabilities...................................................... (2,121) (5,526)
Non-current liabilities.................................................. -- (620)
--------- ---------
$ 6,432 $ 19,813
--------- ---------
--------- ---------
</TABLE>
The following unaudited pro forma information presents the results of
operations of the Company as if the acquisitions of MSE Corporation,
Intelligraphics, Inc. and Westinghouse Landmark GIS, Inc. had occurred on
October 1, 1995 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER
30,
--------------------
<S> <C> <C>
1996 1997
--------- ---------
Sales................................................................... $ 50,256 $ 58,861
--------- ---------
--------- ---------
Net earnings............................................................ $ 1,044 $ 4,342
--------- ---------
--------- ---------
Earnings per share...................................................... $ .18 $ .69
--------- ---------
--------- ---------
</TABLE>
The pro forma information is based on historical results and does not
necessarily reflect the actual operating results that would have occurred nor is
it necessarily indicative of future results of operations of the combined
enterprises.
F-10
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996 AND 1997
AND MARCH 31, 1998 (UNAUDITED)
(3) ACCOUNTS RECEIVABLE, REVENUE IN EXCESS OF BILLINGS AND BILLINGS IN EXCESS OF
REVENUE
At September 30, 1997, and March 31, 1998, the estimated period to complete
contracts in process ranges from one to forty-eight months, and the Company
expects to collect substantially all related accounts receivable and revenue in
excess of billings within one year.
Contracts in process at September 30, 1996 and 1997 and March 31, 1998
(unaudited) are summarized as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
--------------------- -----------
1996 1997 1998
--------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Costs incurred on uncompleted contracts.................. $ 39,007 $ 73,344 $ 71,339
Estimated earnings....................................... 19,464 30,911 30,982
--------- ---------- -----------
58,471 104,255 102,321
Less billings to date.................................... (50,233) (83,431) 71,101
--------- ---------- -----------
$ 8,238 $ 20,824 $ 31,220
--------- ---------- -----------
--------- ---------- -----------
Included in the accompanying balance sheets as follows:
Revenue in excess of billings.......................... $ 9,329 $ 21,613 $ 32,631
Billings in excess of revenue.......................... (1,091) (789) (1,411)
--------- ---------- -----------
$ 8,238 $ 20,824 $ 31,220
--------- ---------- -----------
--------- ---------- -----------
</TABLE>
(4) DEBT
The Company had two revolving lines-of-credit with banks which provided for
total borrowings of $4,850,000, expiring in February 1999, and bore interest at
0.25% over the prime rate (8.75% at September 30, 1997) and the prime rate
(8.50% at September 30, 1997). The lines-of-credit were collateralized by
substantially all of the assets of the Company. Borrowings of $500,000,
$1,473,000 and $5,990,000 were outstanding under the lines-of-credit as of
September 30, 1996 and 1997 and March 31, 1998, respectively.
In February 1997 the Company entered into an additional $1,000,000 revolving
line-of-credit with a bank bearing interest at 8.25%. The line-of-credit is
collateralized by all equipment and general intangibles and expires February
2003. No borrowings were outstanding under the line-of-credit as of September
30, 1997 or March 31, 1998.
On June 3, 1998, the Company replaced its existing lines-of-credit with a
three-year $11,000,000 secured line of credit and a $10,000,000 line of credit
for acquisitions (which is due in quarterly installments over a five-year
period), and the Company refinanced $16,000,000 of term debt. Borrowings under
the new credit facilities bear interest at either the prime rate or LIBOR plus
1.25% to 2.25%.
F-11
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996 AND 1997
AND MARCH 31, 1998 (UNAUDITED)
(4) DEBT (CONTINUED)
Long-term debt consists of the following at September 30, 1996 and 1997 and
March 31, 1998 (unaudited):
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
-------------------- -----------
1996 1997 1998
--------- --------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Note payable to a bank payable in monthly installments with
interest at 8.09% through June 1998, and based on LIBOR
or the prime rate plus applicable margins ranging from
.25% to 2.5% thereafter (8.09% at September 30, 1997),
final payment in June 2002, secured by substantially all
assets of the Company(a)................................. $ -- $ 12,109 $ 11,328
Note payable to a bank payable in monthly installments
ranging from $74,028 to $88,834 at .5% over the base rate
(9% at September 30, 1997), final payment in November
2001, secured by accounts receivable and
work-in-process.......................................... 4,962 4,117 3,635
Notes payable to a bank under a $1,250,000 equipment
draw-down term loan, bearing interest at effective rates
ranging from 8.15% to 11.83% at September 30, 1997,
payable in monthly installments through August 1999,
secured by certain equipment(a).......................... 810 595 1,417
Other...................................................... 3 375 310
--------- --------- -----------
5,775 17,196 16,690
Less current portion................................... (1,247) (3,051) (3,251)
--------- --------- -----------
$ 4,528 $ 14,145 $ 13,439
--------- --------- -----------
--------- --------- -----------
</TABLE>
F-12
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996 AND 1997
AND MARCH 31, 1998 (UNAUDITED)
(4) DEBT (CONTINUED)
Maturities of long-term debt as of September 30, 1997, are as follows (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30:
- -------------------------------------------------------------------------
<S> <C>
1998..................................................................... $ 3,051
1999..................................................................... 2,953
2000..................................................................... 3,189
2001..................................................................... 3,566
2002..................................................................... 4,437
---------
$ 17,196
---------
---------
</TABLE>
(a) These loan agreements contain restrictive covenants which require, among
other things, the maintenance of certain financial ratios and include certain
limitations on capital expenditures and dividend payments.
(5) LEASES
The Company leases its facilities and certain equipment under operating
leases. Amounts due under noncancelable operating leases with terms of one year
or more at September 30, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30:
- -------------------------------------------------------------------------
<S> <C>
1998..................................................................... $ 3,028
1999..................................................................... 2,550
2000..................................................................... 2,138
2001..................................................................... 1,703
2002..................................................................... 1,394
Thereafter............................................................... 791
---------
Total minimum operating lease payments................................... $ 11,604
---------
---------
</TABLE>
Rent expense totaled $302,303, $535,203 and $1,345,310 for the years ended
September 30, 1995, 1996 and 1997, respectively.
F-13
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996 AND 1997
AND MARCH 31, 1998 (UNAUDITED)
(6) INCOME TAXES
Income tax expense (benefit) for the years ended September 30, 1996 and 1997
and the six months ended March 31, 1997 and 1998 (unaudited) is as follows (in
thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal................................... $ 713 $ 1,148 $ 1,847 $ 685 $ 2,057
State and local........................... 111 168 320 105 473
--------- --------- --------- --------- ---------
824 1,316 2,167 790 2,530
--------- --------- --------- --------- ---------
Deferred:
Federal................................... (94) (141) (42) (11) (269)
State and local........................... (14) (22) (13) (2) (77)
--------- --------- --------- --------- ---------
(108) (163) (55) (13) (346)
--------- --------- --------- --------- ---------
$ 716 $ 1,153 $ 2,112 $ 777 $ 2,184
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The exercise of non-qualified stock options results in state and federal
income tax deductions to the Company related to the difference between the
market price at the date of exercise and the option exercise price. The benefit
of such deductions is recorded as an increase to stockholders' equity and
totaled $437,000, $885,000 and $1,307,000 in 1995, 1996 and 1997, and $713,000
and $2,509,000 for the six months ended March 31, 1997 and 1998 (unaudited),
respectively.
Actual income tax expense differs from the amount computed using the federal
statutory rate of 34% for the years ended September 30, 1995, 1996 and 1997 and
the six months ended March 31, 1997 and 1998 (unaudited) as follows (in
thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Computed "expected" income tax expense..... $ 646 $ 1,042 $ 1,851 $ 691 $ 1,884
State income taxes, net of federal tax
effect................................... 63 96 203 76 293
Other...................................... 7 15 58 10 7
--------- --------- --------- --------- ---------
Actual income tax expense................ $ 716 $ 1,153 $ 2,112 $ 777 $ 2,184
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
F-14
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996 AND 1997
AND MARCH 31, 1998 (UNAUDITED)
(6) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at September 30, 1996 and
1997 and March 31, 1998 (unaudited), are presented below (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
-------------------- -------------
1996 1997 1998
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Current deferred tax assets and liabilities:
Accounts receivable, primarily due to allowance for doubtful accounts............ $ 22 $ 22 $ 46
Accrued liabilities, primarily due to accrued compensated absences for financial
statement purposes............................................................. 99 143 234
Prepaid expenses, primarily due to marketing commissions expensed for income tax
purposes....................................................................... (21) (34) 23
Other............................................................................ 5 5 5
--------- --------- -----
Total net current deferred tax asset........................................... $ 105 $ 136 $ 308
--------- --------- -----
--------- --------- -----
Noncurrent deferred tax assets and liabilities:
Deferred compensation accrued for financial statement purposes only.............. $ 24 $ 24 $ 20
Equipment and leasehold improvements, primarily due to differences in
depreciation................................................................... (24) 17 111
--------- --------- -----
Total net noncurrent deferred tax asset........................................ $ -- $ 41 $ 131
--------- --------- -----
--------- --------- -----
</TABLE>
Management believes that it is more likely than not that future operations
will generate sufficient taxable income to realize the deferred tax assets.
(7) STOCKHOLDERS' EQUITY AND STOCK OPTIONS
The Board of Directors may issue preferred stock with rates of dividends,
voting rights, redemption prices, liquidation prices, liquidation premiums,
conversion rights and other requirements without a vote of the shareholders.
The Company currently has six nonqualified stock option plans under which
the Board of Directors may grant options to purchase approximately 267,000
shares of the Company's common stock to officers, directors and key employees.
The exercise price of the options is established by the Board of Directors on
the date of grant. Employees may vest in their options either 100% on date of
grant or 25% six months from date of grant and 25% on the anniversary of date of
grant thereafter, as determined by the Board of Directors. The options are
exercisable in whole or in part for a period of up to ten years from date of
grant.
As discussed in note 1, the Company applies APB Opinion 25 and related
interpretations in accounting for its stock option plans. Accordingly, because
the Company grants its options at or above market value at date of grant, no
compensation cost has been recognized under the plans. Had compensation cost for
the Company's stock-based compensation plans been determined based upon the fair
value of options on the grant dates, consistent with the provisions of SFAS 123,
the Company's 1996 and 1997 pro
F-15
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996 AND 1997
AND MARCH 31, 1998 (UNAUDITED)
(7) STOCKHOLDERS' EQUITY AND STOCK OPTIONS (CONTINUED)
forma net income and diluted earnings per share would have been approximately
$1.8 million and $2.8 million and $.35 and $.50, respectively. The weighted
average fair value of options granted during 1996 and 1997 was $4.99 and $5.49
per share, respectively. The weighted average remaining contractual life of all
options at September 30, 1997 and March 31, 1998 was approximately three years.
The fair value of each option grant was estimated at the date of grant using
the Black-Scholes option-pricing model with the following assumptions: no
expected dividends, expected life of the options of three years, 60% volatility
and a risk-free interest rate of 6.00%.
Stock option activity for the plans for the years ended September 30, 1995,
1996 and 1997 and the six months ended March 31, 1998 (unaudited) is summarized
as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
NUMBER OF PRICE
OPTIONS PER SHARE
----------- -------------
<S> <C> <C>
BALANCES AT OCTOBER 1, 1994........................................ 1,117 $ 1.51
Granted............................................................ 426 4.39
Exercised.......................................................... (447) 1.26
Canceled........................................................... (29) 2.52
-----
BALANCES AT SEPTEMBER 30, 1995..................................... 1,067 2.73
Granted............................................................ 238 11.07
Exercised.......................................................... (295) 1.99
Canceled........................................................... (21) 3.17
-----
BALANCES AT SEPTEMBER 30, 1996..................................... 989 4.95
Granted............................................................ 641 13.06
Exercised.......................................................... (302) 3.16
Canceled........................................................... (40) 10.64
-----
BALANCES AT SEPTEMBER 30, 1997..................................... 1,288 9.23
-----
-----
Exercised.......................................................... (199) 6.61
Issued............................................................. 410 45.88
-----
BALANCES AT MARCH 31, 1998 (unaudited)............................. 1,499 19.60
-----
-----
Options Exercisable at March 31, 1998 (unaudited).................. 361
-----
-----
Available for Grant at March 31, 1998 (unaudited).................. 400
-----
-----
</TABLE>
(8) EMPLOYEE BENEFIT PLAN
The Company sponsors a qualified tax deferred savings plan in accordance
with the provisions of section 401(k) of the Internal Revenue Code. Employees
may defer up to 15% of their compensation, subject to certain limitations. The
Company matches 50% of the employee contributions up to 4% of their
F-16
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996 AND 1997
AND MARCH 31, 1998 (UNAUDITED)
(8) EMPLOYEE BENEFIT PLAN (CONTINUED)
compensation. The Company contributed $60,494, $65,756 and $185,602 to the plan
in 1995, 1996 and 1997, respectively.
(9) MAJOR CUSTOMERS
Sales to individual customers amounting to more than 10% of total sales were
as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30:
- -----------------------------------------------------------------
<S> <C>
1995............................................................. Customer A 12%
1996............................................................. Customer B 10%
</TABLE>
There were no sales to individual customers amounting to more than 10% of
total sales for the year ended September 30, 1997 or the six months ended March
31, 1997 and 1998.
(10) CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to concentrations
of credit risk, as defined by Financial Accounting Standards Board's Statement
No. 105, Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentration of Credit
Risk, consist primarily of accounts receivable with the Company's various
customers.
Historically, the Company's customers have included cities, counties,
engineering companies, utility companies and federal government agencies.
Substantially more than 50% of revenues have historically been derived from
state and local government contracts. In addition, a significant portion of the
Company's revenues are generated from utility clients, both commercial and
municipal.
The Company's accounts receivable are due from a variety of organizations
throughout the United States. The Company provides for uncollectible amounts
upon recognition of revenue and when specific credit and collection issues
arise. Management's estimates of uncollectible amounts have been adequate in
prior years, and management believes that all significant credit and collection
risks have been identified and adequately provided for at September 30, 1997 and
March 31, 1998.
F-17
<PAGE>
INSIDE BACK COVER
This page features a map of the United States. Miniature versions of ASI's
corporate logo indicate locations of ASI's business units (Colorado Springs, CO;
Cary, NC; Waukesha, WI; Indianapolis, IN; and San Antonio, TX). Dozens of yellow
dots indicate the locations of ASI's current GIS customers/projects throughout
the country.
Beneath the U.S. map, in text format, there is a listing of all of ASI's
international GIS customers/projects.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SHARES OF COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO, OR A
SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY........................................................ 3
RISK FACTORS.............................................................. 6
USE OF PROCEEDS........................................................... 11
PRICE RANGE OF COMMON STOCK............................................... 11
CAPITALIZATION............................................................ 12
DIVIDEND POLICY........................................................... 12
SELECTED CONSOLIDATED FINANCIAL DATA...................................... 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.............................................................. 15
BUSINESS.................................................................. 24
MANAGEMENT................................................................ 35
PRINCIPAL AND SELLING SHAREHOLDERS........................................ 37
SHARES ELIGIBLE FOR FUTURE SALE........................................... 39
UNDERWRITING.............................................................. 40
LEGAL MATTERS............................................................. 41
EXPERTS................................................................... 41
AVAILABLE INFORMATION..................................................... 41
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 42
INDEX TO FINANCIAL STATEMENTS............................................. F-1
</TABLE>
2,250,000 SHARES
[LOGO]
COMMON STOCK
-----------------
PROSPECTUS
--------------
NationsBanc Montgomery
Securities LLC
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14.OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the issuance and distribution of
the securities being registered, other than underwriting discounts and
commissions, are set forth in the following table. All of the amounts shown are
estimates, except the fees to the Securities and Exchange Commission, the
National Association of Securities Dealers, Inc. and the Nasdaq National Market.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 24,522
---------
National Association of Securities Dealers, Inc. filing fee....... 8,812
---------
Nasdaq National Market listing fees............................... 17,500
---------
Legal fees and expenses........................................... 175,000
---------
Accountants' fees and expenses.................................... 65,000
---------
Printing expenses................................................. 150,000
---------
Transfer agent and registrar fees and expenses.................... 3,000
---------
Miscellaneous..................................................... 156,166
---------
---------
TOTAL....................................................... $ 600,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 7-108-402 of the Colorado Business Corporation Act (the "Act")
provides, generally, that the articles of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the corporation
or its shareholders for monetary damages for breach of fiduciary duty as a
director; except that any such provision may not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its shareholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) acts
specified in Section 7-108-403, or (iv) any transaction from which a director
directly or indirectly derived an improper personal benefit. Such provision may
not eliminate or limit the liability of a director for any act or omission
occurring prior to the date on which such provision becomes effective. The
Company's articles of incorporation contain such a provision.
Section 7-109-103 of the Act provides, that a corporation organized under
Colorado law shall be required to indemnify a person who is or was a director of
the corporation or an individual who, while serving as a director of the
corporation, is or was serving at the corporation's request as a director,
officer, partner, trustee, employee or fiduciary or agent of another corporation
or other entity or of any employee benefit plan (a "Director") or officer of the
corporation and who was wholly successful, on the merits or otherwise, in
defense of any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative and whether formal or
informal (a "Proceeding"), in which he was a party, against reasonable expenses
incurred by him in connection with the Proceeding, unless such indemnity is
limited by the corporation's articles of incorporation.
Section 7-109-102 of the Act provides, generally, that a corporation may
indemnify a person made a party to a Proceeding because the person is or was a
Director against any obligation incurred with respect to a Proceeding to pay a
judgment, settlement, penalty, fine (including an excise tax assessed with
respect to an employee benefit plan) or reasonable expenses incurred in the
Proceeding if the person conducted himself or herself in good faith and the
person reasonably believed, in the case of conduct in an official capacity with
the corporation, the person's conduct was in the corporation's best interests
and, in all other
II-1
<PAGE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (CONTINUED)
cases, his or her conduct was at least not opposed to the corporation's best
interests and, with respect to any criminal proceedings, the person had no
reasonable cause to believe that his or her conduct was unlawful. A corporation
may not indemnify a Director in connection with any Proceeding by or in the
right of the corporation in which the Director was adjudged liable to the
corporation or, in connection with any other Proceeding charging the Director
derived an improper personal benefit, whether or not involving actions in an
official capacity, in which Proceeding the Director was judged liable on the
basis that he or she derived an improper personal benefit. Any indemnification
permitted in connection with a Proceeding by or in the right of the corporation
is limited to reasonable expenses incurred in connection with such Proceeding.
Under Section 7-109-107 of the Act, unless otherwise provided in the articles of
incorporation, a corporation may indemnify an officer, employee, fiduciary, or
agent of the corporation to the same extent as a Director and may indemnify an
officer, employee, fiduciary, or agent who is not a Director to a greater
extent, if not inconsistent with public policy and if provided for by its
bylaws, general or specific action of its board of directors or shareholders, or
contract.
In addition, the Company's articles of incorporation provide that each
person who was or is made a party or is threatened to be made a party to or is
otherwise involved in any Proceeding by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a director,
officer or employee of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans (an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the corporation to
the fullest extent authorized by the Colorado Corporation Code against all
expense, liability and loss (including attorney's fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such indemnitee in connection therewith. Such
indemnification shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators; provided, however, that,
except as provided in Paragraph (B) hereof with respect to proceedings to
enforce rights to indemnification, the Company shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the Board
of Directors of the Company.
The Company's articles require that the Company maintain insurance to
protect itself and any director, officer, employee or agent of the corporation
or another corporation, partnership. joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense, liability or
loss under the Act.
The Company's articles of incorporation provide that the Company shall
indemnify any director or officer, or former director or officer, or any person
who may have served at its request as a director or officer of another
corporation in which it owns shares of capital stock, or of which it is a
creditor, and the personal representative of all such persons, against expenses
actually and necessarily incurred by him in connection with the defense of any
action, suit or proceeding in which he is made a party by reason of being or
having been such director or officer, except in relation to matters as to which
he shall be adjudged in such action, suit or proceedings, to be liable for
negligence or misconduct in the performance of duty; but such indemnification
shall not be deemed exclusive of any other rights to which such director or
officer may be entitled, under any by-law, agreement vote of shareholders, or
otherwise nor shall anything herein contained restrict the right of the
corporation to indemnify or reimburse such person in any proper case, even
though not specifically herein provided for. The Company, its directors,
officers, employees and agents shall be fully protected in taking any action or
making any payment under this provision, or in refusing so to do, in reliance
upon the advice of counsel.
II-2
<PAGE>
ITEM 16. EXHIBITS.
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
2.1 Specimen Stock Certificate
5.1 Opinion of Sherman & Howard L.L.C.*
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Olive LLP
23.3 Consent of Sherman & Howard L.L.C. (included in Exhibit 5)
24.1 Power of Attorney (included on the signature page to the Registration Statement)
</TABLE>
(b) Financial Statement Schedules
None
- ------------------------
* to be filed by amendment
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Indianapolis, State of Indiana, on June 26, 1998.
<TABLE>
<S> <C> <C>
ANALYTICAL SURVEYS, INC.
By: /s/ SIDNEY V. CORDER
-----------------------------------------
Sidney V. Corder
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
</TABLE>
II-4
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Sidney V. Corder
and Scott C. Benger, and each of them, his true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or either
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
Chairman of the Board,
/s/ SIDNEY V. CORDER President and Chief
- ------------------------------ Executive Officer June 26, 1998
Sidney V. Corder (PRINCIPAL EXECUTIVE
OFFICER)
/s/ SCOTT C. BENGER Senior Vice President,
- ------------------------------ (PRINCIPAL FINANCIAL AND June 26, 1998
Scott C. Benger ACCOUNTING OFFICER)
/s/ WILLEM H. J. ANDERSEN
- ------------------------------ Director June 26, 1998
Willem H. J. Andersen
- ------------------------------ Director June , 1998
Robert H. Keeley
- ------------------------------ Director June , 1998
Richard P. MacLeod
/s/ SOL C. MILLER
- ------------------------------ Director June 26, 1998
Sol C. Miller
/s/ JAMES T. ROTHE
- ------------------------------ Director June 26, 1998
James T. Rothe
- ------------------------------ Director June , 1998
John A. Thorpe
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
- -------------
<C> <S>
1.1 Form of Underwriting Agreement
2.1 Specimen Stock Certificate
5.1 Opinion of Sherman & Howard L.L.C.*
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Olive LLP
23.3 Consent of Sherman & Howard L.L.C. (included in Exhibit 5)
24 Power of Attorney (included on the signature pages to the Registration Statement)
</TABLE>
- ------------------------
* to be filed by amendment
<PAGE>
Draft of June 26, 1998
2,250,000 SHARES
ANALYTICAL SURVEYS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
DATED _____, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INTRODUCTORY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . 2
A. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . . 2
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS. . . . . . . . . . . . . . 2
(b) OFFERING MATERIALS FURNISHED TO UNDERWRITERS.. . . . . . . . . . . . 3
(c) DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY.. . . . . . . . . . 3
(d) THE UNDERWRITING AGREEMENT.. . . . . . . . . . . . . . . . . . . . . 3
(e) AUTHORIZATION OF THE COMMON. . . . . . . . . . . . . . . . . . . . . 3
(f) NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS.. . . . . . . . . 4
(g) NO MATERIAL ADVERSE CHANGE.. . . . . . . . . . . . . . . . . . . . . 4
(h) INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . . 4
(i) PREPARATION OF THE FINANCIAL STATEMENTS. . . . . . . . . . . . . . . 4
(j) INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS
SUBSIDIARIES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(k) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS.. . . . . . . . . . . 5
(l) STOCK EXCHANGE LISTING.. . . . . . . . . . . . . . . . . . . . . . . 6
(m) NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER
AUTHORIZATIONS OR APPROVALS REQUIRED.. . . . . . . . . . . . . . . . 6
(n) NO MATERIAL ACTIONS OR PROCEEDINGS.. . . . . . . . . . . . . . . . . 6
(o) INTELLECTUAL PROPERTY RIGHTS.. . . . . . . . . . . . . . . . . . . . 7
(p) ALL NECESSARY PERMITS, ETC.. . . . . . . . . . . . . . . . . . . . . 7
(q) TITLE TO PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . 7
(r) TAX LAW COMPLIANCE.. . . . . . . . . . . . . . . . . . . . . . . . . 7
(s) COMPANY NOT AN "INVESTMENT COMPANY". . . . . . . . . . . . . . . . . 8
(t) INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(u) NO PRICE STABILIZATION OR MANIPULATION.. . . . . . . . . . . . . . . 8
(v) RELATED PARTY TRANSACTIONS.. . . . . . . . . . . . . . . . . . . . . 8
(w) NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS. . . . . . . . . . . . . 8
(x) COMPLIANCE WITH ENVIRONMENTAL LAWS.. . . . . . . . . . . . . . . . . 8
(y) ERISA COMPLIANCE.. . . . . . . . . . . . . . . . . . . . . . . . . . 9
(z) EXCHANGE ACT COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . .10
B. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS.. . . . . . .10
(a) THE UNDERWRITING AGREEMENT.. . . . . . . . . . . . . . . . . . . . .10
(b) THE CUSTODY AGREEMENT AND POWER OF ATTORNEY. . . . . . . . . . . . .10
(c) TITLE TO COMMON SHARES TO BE SOLD; ALL AUTHORIZATIONS OBTAINED.. . .11
(d) DELIVERY OF THE COMMON SHARES TO BE SOLD.. . . . . . . . . . . . . .11
(e) NON-CONTRAVENTION; NO FURTHER AUTHORIZATIONS OR
APPROVALS REQUIRED.. . . . . . . . . . . . . . . . . . . . . . . . .11
(f) NO REGISTRATION OR OTHER SIMILAR RIGHTS. . . . . . . . . . . . . . .11
(g) NO FURTHER CONSENTS, ETC.. . . . . . . . . . . . . . . . . . . . . .12
(h) DISCLOSURE MADE BY SUCH SELLING SHAREHOLDER IN THE PROSPECTUS. . . .12
(i) NO PRICE STABILIZATION OR MANIPULATION.. . . . . . . . . . . . . . .12
(j) CONFIRMATION OF COMPANY REPRESENTATIONS AND WARRANTIES.. . . . . . .12
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE COMMON SHARES.. . . . . . . .13
A. THE FIRM COMMON SHARES.. . . . . . . . . . . . . . . . . . . . . . .13
B. THE FIRST CLOSING DATE.. . . . . . . . . . . . . . . . . . . . . . .13
C. THE OPTIONAL COMMON SHARES; THE SECOND CLOSING DATE. . . . . . . . .13
D. PUBLIC OFFERING OF THE COMMON SHARES.. . . . . . . . . . . . . . . .14
E. PAYMENT FOR THE COMMON SHARES. . . . . . . . . . . . . . . . . . . .14
F. DELIVERY OF THE COMMON SHARES. . . . . . . . . . . . . . . . . . . .15
G. DELIVERY OF PROSPECTUS TO THE UNDERWRITERS.. . . . . . . . . . . . .15
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 3. ADDITIONAL COVENANTS OF THE COMPANY AND THE SELLING
SHAREHOLDERS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
A. COVENANTS OF THE COMPANY.. . . . . . . . . . . . . . . . . . . . . .15
(a) REPRESENTATIVES' REVIEW OF PROPOSED AMENDMENTS AND SUPPLEMENTS.. . .15
(b) SECURITIES ACT COMPLIANCE. . . . . . . . . . . . . . . . . . . . . .15
(c) AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS AND OTHER
SECURITIES ACT MATTERS.. . . . . . . . . . . . . . . . . . . . . . .16
(d) COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS.. . . . .16
(e) BLUE SKY COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . .16
(f) USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . .17
(g) TRANSFER AGENT.. . . . . . . . . . . . . . . . . . . . . . . . . . .17
(h) EARNINGS STATEMENT.. . . . . . . . . . . . . . . . . . . . . . . . .17
(i) PERIODIC REPORTING OBLIGATIONS.. . . . . . . . . . . . . . . . . . .17
(j) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES.. . . . . . . .17
(k) FUTURE REPORTS TO THE REPRESENTATIVES. . . . . . . . . . . . . . . .18
(l) EXCHANGE ACT COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . .18
B. COVENANTS OF THE SELLING SHAREHOLDERS.. . . . . . . . . . . . . . . . . .18
(a) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES.. . . . . . . .18
(b) DELIVERY OF FORMS W-8 AND W-9. . . . . . . . . . . . . . . . . . . .18
SECTION 4. PAYMENT OF EXPENSES. . . . . . . . . . . . . . . . . . . . . . .19
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. . . . . . . .19
(a) ACCOUNTANTS' COMFORT LETTER. . . . . . . . . . . . . . . . . . . . .20
(b) COMPLIANCE WITH REGISTRATION REQUIREMENTS; NO STOP ORDER;
NO OBJECTION FROM NASD.. . . . . . . . . . . . . . . . . . . . . . .20
(c) NO MATERIAL ADVERSE CHANGE OR RATINGS AGENCY CHANGE. . . . . . . . .20
(d) OPINION OF COUNSEL FOR THE COMPANY.. . . . . . . . . . . . . . . . .20
(e) OPINION OF COUNSEL FOR THE UNDERWRITERS. . . . . . . . . . . . . . .21
(f) OFFICERS' CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . .21
(g) BRING-DOWN COMFORT LETTER. . . . . . . . . . . . . . . . . . . . . .21
(h) OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS. . . . . . . . . . .21
(i) SELLING SHAREHOLDERS' CERTIFICATE. . . . . . . . . . . . . . . . . .22
(j) SELLING SHAREHOLDERS' DOCUMENTS. . . . . . . . . . . . . . . . . . .22
(k) LOCK-UP AGREEMENT FROM CERTAIN SHAREHOLDERS OF THE COMPANY
OTHER THAN SELLING SHAREHOLDERS. . . . . . . . . . . . . . . . . . .22
(l) ADDITIONAL DOCUMENTS.. . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. . . . . . . . . . . . .23
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT. . . . . . . . . . . . . . . . .23
SECTION 8. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . .23
(a) INDEMNIFICATION OF THE UNDERWRITERS. . . . . . . . . . . . . . . . .23
(b) INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND OFFICERS.. . . . .26
(c) NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES.. . . . . . . . .26
(d) SETTLEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 9. CONTRIBUTION.. . . . . . . . . . . . . . . . . . . . . . . . . .28
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITER.. . . . . . .29
SECTION 11. TERMINATION OF THIS AGREEMENT.. . . . . . . . . . . . . . . . .29
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY.. . . . . .30
SECTION 13. NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . . .30
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 14. SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . . .31
SECTION 15. PARTIAL UNENFORCEABILITY. . . . . . . . . . . . . . . . . . . .32
SECTION 16. LEGAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
(a) GOVERNING LAW PROVISIONS . . . . . . . . . . . . . . . . . . . . . .32
(b) CONSENT TO JURISDICTION. . . . . . . . . . . . . . . . . . . . . . .32
(c) WAIVER OF IMMUNITY.. . . . . . . . . . . . . . . . . . . . . . . . .32
SECTION 17. FAILURE OF ONE OR MORE OF THE SELLING SHAREHOLDERS TO SELL
AND DELIVER COMMON SHARES. . . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 18. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . .33
</TABLE>
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UNDERWRITING AGREEMENT
_______, 1998
NATIONSBANC MONTGOMERY SECURITIES LLC
DAIN RAUSCHER WESSELS, a division of Dain Rauscher Incorporated
As Representatives of the several Underwriters
c/o NATIONSBANC MONTGOMERY SECURITIES LLC
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
INTRODUCTORY.
Analytical Surveys, Inc., a Colorado corporation (the "Company), proposes
to issue and sell to the several underwriters named in SCHEDULE A (the
"Underwriters") an aggregate of 1,750,000 shares of its Common Stock, no par
value per share (the "Common Stock"); and the shareholders of the Company named
on SCHEDULE B (collectively, the "Selling Shareholders") severally propose to
sell to the Underwriters an aggregate of 500,000 shares of Common Stock. The
1,750,000 shares of Common Stock to be sold by the Company and the 500,000
shares of Common Stock to be sold by the Selling Shareholders are collectively
called the "Firm Common Shares". In addition, the Company has granted to the
Underwriters an option to purchase up to an additional 262,500 shares of Common
Stock and the Selling Shareholders have severally granted to the Underwriters an
option to purchase up to an additional 75,000 shares of Common Stock, each
Selling Shareholder selling up to the amount set forth opposite such Selling
Shareholder's name on SCHEDULE B, all as provided in Section 2. The additional
262,500 shares to be sold by the Company and the additional 75,000 shares to be
sold by the Selling Shareholders pursuant to such option are collectively called
the "Optional Common Shares". The Firm Common Shares and, if and to the extent
such option is exercised, the Optional Common Shares are collectively called the
"Common Shares". NationsBanc Montgomery Securities LLC ("NMSI") and Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated, have agreed to act
as representatives of the several Underwriters (in such capacity, the
"Representatives") in connection with the offering and sale of the Common
Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File
No. 333-[___]), which contains a form of prospectus to be used in connection
with the public offering and sale of the Common Shares. Such registration
statement, as amended, including the financial statements, exhibits and
schedules thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933 and the rules and regulations
promulgated thereunder (collectively, the "Securities Act"), including all
documents incorporated or deemed incorporated by reference therein, any
information deemed to be a part thereof at the time of effectiveness pursuant to
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Rule 430A or Rule 434 under the Securities Act or the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder (collectively, the
"Exchange Act"), is called the "Registration Statement". Any registration
statement filed by the Company pursuant to Rule 462(b) under the Securities Act
is called the "Rule 462(b) Registration Statement", and from and after the date
and time of filing of the Rule 462(b) Registration Statement the term
"Registration Statement" shall include the Rule 462(b) Registration Statement.
Such prospectus, in the form first used by the Underwriters to confirm sales of
the Common Shares, is called the "Prospectus"; PROVIDED, HOWEVER, if the Company
has, with the consent of NMSI, elected to rely upon Rule 434 under the
Securities Act, the term "Prospectus" shall mean the Company's prospectus
subject to completion (each, a "preliminary prospectus") dated ______, 1998
(such preliminary prospectus is called the "Rule 434 preliminary prospectus"),
together with the applicable term sheet (the "Term Sheet") prepared and filed by
the Company with the Commission under Rules 434 and 424(b) under the Securities
Act and all references in this Agreement to the date of the Prospectus shall
mean the date of the Term Sheet. All references in this Agreement to the
Registration Statement, the Rule 462(b) Registration Statement, a preliminary
prospectus, the Prospectus or the Term Sheet, or any amendments or supplements
to any of the foregoing, shall include any copy thereof filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
System ("EDGAR").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such financial statements and
schedules and other information which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case may be;
and all references in this Agreement to amendments or supplements to the
Registration Statement or the Prospectus shall be deemed to mean and include the
filing of any document under the Exchange Act which is or is deemed to be
incorporated by reference in the Registration Statement or the Prospectus, as
the case may be.
The Company and each of the Selling Shareholders hereby confirm their
respective agreements with the Underwriters as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
A. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents, warrants and covenants to each Underwriter
as follows:
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS.
The Registration Statement and any Rule 462(b) Registration Statement
have been declared effective by the Commission under the Securities Act.
The Company has complied to the Commission's satisfaction with all requests
of the Commission for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement or any
Rule 462(b) Registration Statement is in effect and no proceedings for such
purpose have been instituted or are pending or, to the best knowledge of the
Company, are contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR
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<PAGE>
(except as may be permitted by Regulation S-T under the Securities Act), was
identical to the copy thereof delivered to the Underwriters for use in
connection with the offer and sale of the Common Shares. Each of the
Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto, at the time it became effective and at all
subsequent times, complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading. The Prospectus,
as amended or supplemented, as of its date and at all subsequent times, did
not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
The representations and warranties set forth in the two immediately
preceding sentences do not apply to statements in or omissions from the
Registration Statement, any Rule 462(b) Registration Statement, or any
post-effective amendment thereto, or the Prospectus, or any amendments or
supplements thereto, made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing
by the Representatives expressly for use therein. There are no contracts or
other documents required to be described in the Prospectus or to be filed as
exhibits to the Registration Statement which have not been described or
filed as required.
(b) OFFERING MATERIALS FURNISHED TO UNDERWRITERS.
The Company has delivered to each of the Representatives one complete
manually signed copy of the Registration Statement and of each consent and
certificate of experts filed as a part thereof, and conformed copies of the
Registration Statement (without exhibits) and preliminary prospectuses and
the Prospectus, as amended or supplemented, in such quantities and at such
places as the Representatives have reasonably requested for each of the
Underwriters.
(c) DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY.
The Company has not distributed and will not distribute, prior to the
later of the Second Closing Date (as defined below) and the completion of
the Underwriters' distribution of the Common Shares, any offering material
in connection with the offering and sale of the Common Shares other than a
preliminary prospectus, the Prospectus or the Registration Statement.
(d) THE UNDERWRITING AGREEMENT.
This Agreement has been duly authorized, executed and delivered by, and
is a valid and binding agreement of, the Company, enforceable in accordance
with its terms, except as rights to indemnification hereunder may be limited
by applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(e) AUTHORIZATION OF THE COMMON.
The Common Shares to be purchased by the Underwriters from the Company
have been duly authorized for issuance and sale pursuant to this Agreement
and, when issued and
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<PAGE>
delivered by the Company pursuant to this Agreement, will be validly issued,
fully paid and nonassessable.
(f) NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS.
There are no persons with registration or other similar rights to have
any equity or debt securities registered for sale under the Registration
Statement or included in the offering contemplated by this Agreement other
than the Selling Shareholders with respect to the Common Shares included in
the Registration Statement, except for such rights as have been exercised or
duly and validly waived.
(g) NO MATERIAL ADVERSE CHANGE.
Except as otherwise disclosed in the Prospectus, subsequent to the
respective dates as of which information is given in the Prospectus: (i)
there has been no material adverse change, or any development that could
reasonably be expected to result in a material adverse change, in the
condition, financial or otherwise, or in the earnings, business, operations
or prospects, whether or not arising from transactions in the ordinary
course of business, of the Company and its subsidiaries, considered as one
entity (any such change is called a "Material Adverse Change"); (ii) the
Company and its subsidiaries, considered as one entity, have not incurred
any material liability or obligation, indirect, direct or contingent, not in
the ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; and (iii) there has been
no dividend or distribution of any kind declared, paid or made by the
Company or, except for dividends paid to the Company or other subsidiaries,
any of its subsidiaries on any class of capital stock or repurchase or
redemption by the Company or any of its subsidiaries of any class of capital
stock.
(h) INDEPENDENT ACCOUNTANTS.
KPMG Peat Marwick LLP, who have expressed their opinion with respect to
the financial statements (which term as used in this Agreement includes the
related notes thereto) and supporting schedules filed with the Commission as
a part of the Registration Statement and included in the Prospectus, are
independent public or certified public accountants as required by the
Securities Act and the Exchange Act.
(i) PREPARATION OF THE FINANCIAL STATEMENTS.
The financial statements filed with the Commission as a part of the
Registration Statement and included in the Prospectus present fairly the
consolidated financial position of the Company and its subsidiaries as of
and at the dates indicated and the results of their operations and cash
flows for the periods specified. The supporting schedules included in the
Registration Statement present fairly the information required to be stated
therein. Such financial statements and supporting schedules have been
prepared in conformity with generally accepted accounting principles applied
on a consistent basis throughout the periods involved, except as may be
expressly stated in the related notes thereto. No other financial
statements or supporting schedules are required to be included in the
Registration Statement. The financial data set forth in the Prospectus
under the captions "Prospectus Summary--Summary Selected Financial Data",
"Selected Financial Data" and "Capitalization" fairly present the
information set forth therein on a basis consistent with that of the audited
financial statements contained in the Registration Statement.
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<PAGE>
(j) INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS
SUBSIDIARIES.
Each of the Company and its subsidiaries has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and, in the case of the Company, to enter into
and perform its obligations under this Agreement. The Company is duly
qualified as a foreign corporation to transact business and is in good
standing in Indiana, North Carolina, Texas and Wisconsin and each of the
Company and each subsidiary is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify or to be in good standing
would not, individually or in the aggregate, result in a Material Adverse
Change. All of the issued and outstanding capital stock of each subsidiary
has been duly authorized and validly issued, is fully paid and nonassessable
and is owned by the Company, directly or through subsidiaries, free and
clear of any security interest, mortgage, pledge, lien, encumbrance or
claim. The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed
in Exhibit 22i to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1997, Cartotech, Inc. and Interra Technologies.
(k) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS.
The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization" (other
than for subsequent issuances, if any, pursuant to employee benefit plans
described in the Prospectus or upon exercise of outstanding options or
warrants described in the Prospectus). The Common Stock (including the
Common Shares) conforms in all material respects to the description thereof
contained in or incorporated by reference into the Prospectus. All of the
issued and outstanding shares of Common Stock (including the shares of
Common Stock owned by Selling Shareholders) have been duly authorized and
validly issued, are fully paid and nonassessable and have been issued in
compliance with federal and state securities laws. None of the outstanding
shares of Common Stock were issued in violation of any preemptive rights,
rights of first refusal or other similar rights to subscribe for or purchase
securities of the Company. There are no authorized or outstanding options,
warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company or any of its subsidiaries
other than those accurately described in the Prospectus. The description of
the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder, set forth
in or incorporated by reference into the Prospectus accurately and fairly
presents the information required to be shown with respect to such plans,
arrangements, options and rights.
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<PAGE>
(l) STOCK EXCHANGE LISTING.
The Common Stock (including the Common Shares) is registered pursuant
to Section 12(g) of the Exchange Act and is listed on the Nasdaq National
Market, and the Company has taken no action designed to, or likely to have
the effect of, terminating the registration of the Common Stock under the
Exchange Act or delisting the Common Stock from the Nasdaq National Market
nor has the Company received any notification that the Commission or the
National Association of Securities Dealers, Inc. (the "NASD") is
contemplating terminating such registration or listing.
(m) NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER
AUTHORIZATIONS OR APPROVALS REQUIRED.
Neither the Company nor any of its subsidiaries is in violation of its
charter or by-laws or is in default (or, with the giving of notice or lapse
of time, would be in default) ("Default") under any indenture, mortgage,
loan or credit agreement, note, contract, franchise, lease or other
instrument to which the Company or any of its subsidiaries is a party or by
which it or any of them may be bound (including, without limitation, the
Company's term loan and lines of credit with BankOne Colorado N.A., or to
which any of the property or assets of the Company or any of its
subsidiaries is subject (each, an "Existing Instrument"), except for such
Defaults as would not, individually or in the aggregate, result in a
Material Adverse Change. The Company's execution, delivery and performance
of this Agreement and consummation of the transactions contemplated hereby
and by the Prospectus (i) have been duly authorized by all necessary
corporate action and will not result in any violation of the provisions of
the charter or by-laws of the Company or any subsidiary, (ii) will not
conflict with or constitute a breach of, or Default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its subsidiaries pursuant to, or require
the consent of any other party to, any Existing Instrument, except for such
conflicts, breaches, Defaults, liens, charges or encumbrances as would not,
individually or in the aggregate, result in a Material Adverse Change, and
(iii) will not result in any violation of any law, administrative regulation
or administrative or court decree applicable to the Company or any
subsidiary. No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental or regulatory
authority or agency, is required for the Company's execution, delivery and
performance of this Agreement and consummation of the transactions
contemplated hereby and by the Prospectus, except such as have been obtained
or made by the Company and are in full force and effect under the Securities
Act, applicable state securities or blue sky laws and from the NASD.
(n) NO MATERIAL ACTIONS OR PROCEEDINGS.
There are no legal or governmental actions, suits or proceedings
pending or, to the best of the Company's knowledge, threatened (i) against
or affecting the Company or any of its subsidiaries, (ii) which has as the
subject thereof any officer or director of, or property owned or leased by,
the Company or any of its subsidiaries, or (iii) relating to environmental
or discrimination matters, where in any such case (A) there is a reasonable
possibility that such action, suit or proceeding might be determined
adversely to the Company or such subsidiary and (B) any such action, suit or
proceeding, if so determined adversely, would reasonably be expected to
result in a Material Adverse Change or adversely affect the consummation of
the transactions contemplated by this Agreement. No material labor
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<PAGE>
dispute with the employees of the Company or any of its subsidiaries exists
or, to the best of the Company's knowledge, is threatened or imminent.
(o) INTELLECTUAL PROPERTY RIGHTS.
The Company and its subsidiaries own or possess sufficient trademarks,
trade names, patent rights, copyrights, licenses, approvals, trade secrets
and other similar rights (collectively, "Intellectual Property Rights")
reasonably necessary to conduct their businesses as now conducted, and the
expected expiration of any of such Intellectual Property Rights would not
result in a Material Adverse Change. Neither the Company nor any of its
subsidiaries has received any notice of infringement or conflict with
asserted Intellectual Property Rights of others, which infringement or
conflict, if the subject of an unfavorable decision, would result in a
Material Adverse Change.
(p) ALL NECESSARY PERMITS, ETC.
The Company and each subsidiary possess such valid and current
certificates, authorizations or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct their
respective businesses, and neither the Company nor any subsidiary has
received any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate, authorization
or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could result in a Material Adverse
Change.
(q) TITLE TO PROPERTIES.
The Company and each of its subsidiaries has good and marketable title
to all the properties and assets reflected as owned in the financial
statements referred to in Section 1(A) (i) above (or elsewhere in the
Prospectus), in each case free and clear of any security interests,
mortgages, liens, encumbrances, equities, claims and other defects, except
such as do not materially affect the value of such property so as to cause a
Material Adverse Change and do not interfere with the use made or proposed
to be made of such property by the Company or such subsidiary so as to cause
a Material Adverse Change. The real property, improvements, equipment and
personal property held under lease by the Company or any subsidiary are held
under valid and enforceable leases, with such exceptions as are not material
and do not interfere with the use made or proposed to be made of such real
property, improvements, equipment or personal property by the Company or
such subsidiary so as to cause a Material Adverse Change.
(r) TAX LAW COMPLIANCE.
The Company and its subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns or have properly
requested extensions thereof and have paid all taxes required to be paid by
any of them and, if due and payable, any related or similar assessment, fine
or penalty levied against any of them, except such as would not result in a
Material Adverse Change. The Company has made adequate charges, accruals and
reserves in the applicable financial statements referred to in Section 1(A)
(i) above in respect of all federal, state and foreign income and franchise
taxes for all periods as to which the tax liability of the Company or any of
its subsidiaries has not been finally determined, except such as would not
result in a Material Adverse Change.
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(s) COMPANY NOT AN "INVESTMENT COMPANY".
The Company has been advised of the rules and requirements under the
Investment Company Act of 1940, as amended (the "Investment Company Act").
The Company is not, and after receipt of payment for the Common Shares will
not be, an "investment company" within the meaning of Investment Company Act
and will conduct its business in a manner so that it will not become subject
to the Investment Company Act.
(t) INSURANCE.
Each of the Company and its subsidiaries are insured by recognized,
financially sound and reputable institutions with policies in such amounts
and with such deductibles and, in the reasonable judgement of the Company,
covering such risks as are generally deemed adequate and customary for their
businesses including, but not limited to, policies covering real and
personal property owned or leased by the Company and its subsidiaries
against theft, damage, destruction, acts of vandalism and earthquakes. The
Company has no reason to believe that it or any subsidiary will not be able
(i) to renew its existing insurance coverage as and when such policies
expire or (ii) to obtain comparable coverage from similar institutions as
may be necessary or appropriate to conduct its business as now conducted and
at a cost that would not result in a Material Adverse Change. Since January
1, 1993, neither the Company nor any subsidiary has been denied any
insurance coverage which it has sought or for which it has applied.
(u) NO PRICE STABILIZATION OR MANIPULATION.
The Company has not taken and will not take, directly or indirectly,
any action designed to or that might be reasonably expected to cause or
result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Common Shares.
(v) RELATED PARTY TRANSACTIONS.
There are no business relationships or related-party transactions
involving the Company or any subsidiary or any other person required to be
described in the Prospectus which have not been described as required.
(w) NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS.
Neither the Company nor any of its subsidiaries nor, to the best of the
Company's knowledge, any employee or agent of the Company or any subsidiary,
has made any contribution or other payment to any official of, or candidate
for, any federal, state or foreign office in violation of any law or of the
character required to be disclosed in the Prospectus.
(x) COMPLIANCE WITH ENVIRONMENTAL LAWS.
Except as would not, individually or in the aggregate, result in a
Material Adverse Change (i) neither the Company nor any of its subsidiaries
is in violation of any federal,
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state, local or foreign law or regulation relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum and petroleum products (collectively,
"Materials of Environmental Concern"), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environment Concern (collectively,
"Environmental Laws"), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations required
for the operation of the business of the Company or its subsidiaries under
applicable Environmental Laws, or noncompliance with the terms and
conditions thereof, nor has the Company or any of its subsidiaries received
any written communication, whether from a governmental authority, citizens
group, employee or otherwise, that alleges that the Company or any of its
subsidiaries is in violation of any Environmental Law; (ii) there is no
claim, action or cause of action filed with a court or governmental
authority, no investigation with respect to which the Company has received
written notice, and no written notice by any person or entity alleging
potential liability for investigatory costs, cleanup costs, governmental
responses costs, natural resources damages, property damages, personal
injuries, attorneys' fees or penalties arising out of, based on or resulting
from the presence, or release into the environment, of any Material of
Environmental Concern at any location owned, leased or operated by the
Company or any of its subsidiaries, now or in the past (collectively,
"Environmental Claims"), pending or, to the best of the Company's knowledge,
threatened against the Company or any of its subsidiaries or any person or
entity whose liability for any Environmental Claim the Company or any of its
subsidiaries has retained or assumed either contractually or by operation of
law; and (iii) to the best of the Company's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge, presence or
disposal of any Material of Environmental Concern, that reasonably could be
expected to result in a violation of any Environmental Law or form the basis
of a potential Environmental Claim against the Company or any of its
subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has retained or
assumed either contractually or by operation of law.
(y) ERISA COMPLIANCE.
The Company and its subsidiaries and any "employee benefit plan" (as
defined under the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, its
subsidiaries or their "ERISA Affiliates" (as defined below) are in
compliance with ERISA except for such instances that singly or in the
aggregate would not result in a Material Adverse Change. "ERISA Affiliate"
means, with respect to the Company or a subsidiary, any member of any group
of organizations described in Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company or such
subsidiary is a member. No "reportable event" (as defined under ERISA) has
occurred or is reasonably expected to occur with respect to any "employee
benefit plan" established or maintained by the Company, its subsidiaries or
any of their ERISA Affiliates except for such instances that singly or in
the aggregate would not result in a Material Adverse Change. No "employee
benefit plan" established or maintained by the Company, its subsidiaries or
any of their ERISA Affiliates, if such "employee benefit plan" was
terminated, would have any "amount
9
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of unfunded benefit liabilities" (as defined under ERISA), except for such
instances that singly or in the aggregate would not result in a Material
Adverse Change. Neither the Company, its subsidiaries nor any of their
ERISA Affiliates has incurred or reasonably expects to incur any liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal
from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B
of the Code, except for such instances that singly or in the aggregate would
not result in a Material Adverse Change. Each "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their
ERISA Affiliates that is intended to be qualified under Section 401(a) of
the Code is so qualified and nothing has occurred, whether by action or
failure to act, which would cause the loss of such qualification.
(z) EXCHANGE ACT COMPLIANCE.
The documents incorporated or deemed to be incorporated by reference in
the Prospectus, at the time they were or hereafter are filed with the
Commission, complied and will comply in all material respects with the
requirements of the Exchange Act, and, when read together with the other
information in the Prospectus, at the time the Registration Statement and
any amendments thereto become effective and at the First Closing Date and
the Second Closing Date, as the case may be, 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 fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Any certificate signed by an officer of the Company and delivered to
the Representatives or to counsel for the Underwriters shall be deemed to be
a representation and warranty by the Company to each Underwriter as to the
matters set forth therein.
B. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS.
Each Selling Shareholder severally represents, warrants and covenants to
each Underwriter as follows:
(a) THE UNDERWRITING AGREEMENT.
This Agreement has been duly authorized, executed and delivered by or
on behalf of such Selling Shareholder and is a valid and binding agreement
of such Selling Shareholder, enforceable in accordance with its terms,
except as rights to indemnification and contribution hereunder may be
limited by applicable law and except as the enforcement hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors
or by general equitable principles.
(b) THE CUSTODY AGREEMENT AND POWER OF ATTORNEY.
Each of the (i) Custody Agreement signed by such Selling Shareholder
and American Securities Transfer Inc., as custodian (the "Custodian"),
relating to the deposit of the Common Shares to be sold by such Selling
Shareholder (the "Custody Agreement") and (ii) Power of Attorney appointing
certain individuals named therein as such Selling Shareholder's
attorneys-in-fact (each, an "Attorney-in-Fact") to the extent set forth
therein relating to the transactions contemplated hereby and by the
Prospectus (the "Power of Attorney"), of such Selling Shareholder has been
duly authorized, executed and delivered by
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such Selling Shareholder and is a valid and binding agreement of such
Selling Shareholder, enforceable in accordance with its terms, except as
rights to indemnification thereunder may be limited by applicable law and
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(c) TITLE TO COMMON SHARES TO BE SOLD; ALL AUTHORIZATIONS OBTAINED.
Such Selling Shareholder has, and on the First Closing Date and the
Second Closing Date (as defined below) will have, good and valid title to
all of the Common Shares which may be sold by such Selling Shareholder
pursuant to this Agreement on such date and the legal right and power
required by law to enter into this Agreement and its Custody Agreement and
Power of Attorney, to sell, transfer and deliver all of the Common Shares
which may be sold by such Selling Shareholder pursuant to this Agreement and
to comply with its other obligations hereunder and thereunder.
(d) DELIVERY OF THE COMMON SHARES TO BE SOLD.
Delivery of and payment for the Common Shares which are sold by such
Selling Shareholder pursuant to this Agreement will pass good and valid
title to such Common Shares, free and clear of any security interest,
mortgage, pledge, lien, encumbrance or other claim, assuming that the
purchaser of such Common Stock acquires such Common Stock with due power and
authority.
(e) NON-CONTRAVENTION; NO FURTHER AUTHORIZATIONS OR APPROVALS
REQUIRED.
The execution and delivery by such Selling Shareholder of, and the
performance by such Selling Shareholder of its obligations under, this
Agreement, the Custody Agreement and the Power of Attorney will not
contravene or conflict with, result in a breach of, or constitute a Default
under, or require the consent of any other party to, the charter or by-laws,
partnership agreement, trust agreement or other organizational documents of
such Selling Shareholder or any other agreement or instrument to which such
Selling Shareholder is a party or by which it is bound or under which it is
entitled to any right or benefit (other than the consents and waivers
referred to in section 1(B) (g) hereof), any provision of applicable law or
any judgment, order, decree or regulation applicable to such Selling
Shareholder of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over such Selling
Shareholder. No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or
agency, is required for the consummation by such Selling Shareholder of the
transactions contemplated in this Agreement, except as provided in Section
1(B)(g) hereof and except for the registration of the Common Shares under
the Securities Act and such approvals, authorizations, registrations or
qualifications as may be required under the Securities Act, applicable state
securities or blue sky laws and from the NASD.
(f) NO REGISTRATION OR OTHER SIMILAR RIGHTS.
Such Selling Shareholder does not have any registration or other
similar rights to have any equity or debt securities registered for sale by
the Company under the Registration
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Statement or included in the offering contemplated by this Agreement, except
for such rights as are described in the Prospectus under "Shares Eligible
for Future Sale".
(g) NO FURTHER CONSENTS, ETC.
Except for the (i) exercise by Sol C. Miller of certain registration
rights pursuant to that Registration Rights Agreement dated as of July 2,
1997 (the "Miller Registration Rights Agreement"), (ii) consent of such
Selling Shareholder to the respective number of Common Shares to be sold by
each of the Selling Shareholders pursuant to this Agreement and (iii)
waiver by the Company of certain provisions contained in the Miller
Registration Rights Agreement as to the number of Common Shares to be sold
by Sol C. Miller in the offering, no consent, approval or waiver is required
under any instrument or agreement to which such Selling Shareholder is a
party or by which it is bound or under which it is entitled to any right or
benefit, in connection with the offering, sale or purchase by the
Underwriters of any of the Common Shares which may be sold by such Selling
Shareholder under this Agreement or the consummation by such Selling
Shareholder of any of the other transactions contemplated hereby.
(h) DISCLOSURE MADE BY SUCH SELLING SHAREHOLDER IN THE PROSPECTUS.
All information furnished by or on behalf of such Selling Shareholder
in writing to the Company expressly for use in the Registration Statement
and Prospectus is, and on the First Closing Date and the Second Closing Date
will be, true, correct, and complete in all material respects, and does not,
and on the First Closing Date and the Second Closing Date will not, contain
any untrue statement of a material fact or omit to state any material fact
necessary to make such information not misleading. Such Selling Shareholder
confirms as accurate the number of shares of Common Stock set forth opposite
such Selling Shareholder's name in the Prospectus under the caption
"Principal and Selling Shareholders" (both prior to and after giving effect
to the sale of the Common Shares).
(i) NO PRICE STABILIZATION OR MANIPULATION.
Such Selling Shareholder has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to
cause or result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Common
Shares.
(j) CONFIRMATION OF COMPANY REPRESENTATIONS AND WARRANTIES.
Such Selling Shareholder has no reason to believe that the
representations and warranties of the Company contained in Section 1(A)
hereof are not true and correct in all material respects, is familiar with
the Registration Statement and the Prospectus and has no knowledge of any
material fact, condition or information not disclosed in the Registration
Statement or the Prospectus which has had or may have a Material Adverse
Change and is not prompted to sell shares of Common Stock by any information
concerning the Company which is not set forth in the Registration Statement
and the Prospectus.
Any certificate signed by or on behalf of any Selling Shareholder and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by such Selling Shareholder to each
Underwriter as to the matters covered thereby.
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SECTION 2. PURCHASE, SALE AND DELIVERY OF THE COMMON SHARES.
A. THE FIRM COMMON SHARES.
Upon the terms herein set forth, (i) the Company agrees to issue and sell
to the several Underwriters an aggregate of 1,750,000 Firm Common Shares and
(ii) the Selling Shareholders agree to sell to the several Underwriters an
aggregate of 500,000 Firm Common Shares, each Selling Shareholder selling the
number of Firm Common Shares set forth opposite such Selling Shareholder's name
on SCHEDULE B. On the basis of the representations, warranties and agreements
herein contained, and upon the terms but subject to the conditions herein set
forth, the Underwriters agree, severally and not jointly, to purchase from the
Company and the Selling Shareholders the respective number of Firm Common Shares
set forth opposite their names on SCHEDULE A. The purchase price per Firm
Common Share to be paid by the several Underwriters to the Company and the
Selling Shareholders shall be $[___] per share.
B. THE FIRST CLOSING DATE.
Delivery of certificates for the Firm Common Shares to be purchased by the
Underwriters and payment therefor shall be made at the offices of NMSI, 600
Montgomery Street, San Francisco, California (or such other place as may be
agreed to by the Company and the Representatives) at 6:00 a.m. San Francisco
time, on [4TH BUSINESS DAY AFTER DATE OF THIS AGREEMENT] ______, 1998 or such
other time and date not later than 10:30 a.m. San Francisco time, on [10
BUSINESS DAYS AFTER THE 1ST CLOSING] ____, 1998 as the Representatives shall
designate by notice to the Company (the time and date of such closing are called
the "First Closing Date"). The Company and the Selling Shareholders hereby
acknowledge that circumstances under which the Representatives may provide
notice to postpone the First Closing Date as originally scheduled include, but
are in no way limited to, any determination by the Company, the Selling
Shareholders or the Representatives to recirculate to the public copies of an
amended or supplemented Prospectus or a delay as contemplated by the provisions
of Section 10.
C. THE OPTIONAL COMMON SHARES; THE SECOND CLOSING DATE.
In addition, on the basis of the representations, warranties and agreements
herein contained, and upon the terms but subject to the conditions herein set
forth, the Company and the Selling Shareholders hereby grant an option to the
several Underwriters to purchase, severally and not jointly, up to an aggregate
of 337,500 Optional Common Shares from the Company and the Selling Shareholders
at the purchase price per share to be paid by the Underwriters for the Firm
Common Shares. The option granted hereunder is for use by the Underwriters
solely in covering any over-allotments in connection with the sale and
distribution of the Firm Common Shares. The option granted hereunder may be
exercised at any time (but not more than once) upon notice by the
Representatives to the Company and the Selling Shareholders, which notice may be
given at any time within 30 days from the date of this Agreement. Such notice
shall set forth (i) the aggregate number of Optional Common Shares as to which
the Underwriters are exercising the option, (ii) the names and denominations in
which the certificates for the Optional Common Shares are to be registered and
(iii) the time, date and place at which such certificates will be delivered
(which time and date may be simultaneous with, but not earlier than, the First
Closing Date; and in such case the term "First Closing Date" shall refer to the
time and date of delivery of certificates for the Firm Common Shares and the
Optional Common Shares). Such time and date of delivery, if subsequent to the
First Closing Date, is called the "Second Closing
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Date" and shall be determined by the Representatives and shall not be earlier
than three nor later than five full business days after delivery of such notice
of exercise. If any Optional Common Shares are to be purchased, (a) each
Underwriter agrees, severally and not jointly, to purchase the number of
Optional Common Shares (subject to such adjustments to eliminate fractional
shares as the Representatives may determine) that bears the same proportion to
the total number of Optional Common Shares to be purchased as the number of Firm
Common Shares set forth on SCHEDULE A opposite the name of such Underwriter
bears to the total number of Firm Common Shares and (b) the Company and each
Selling Shareholder agrees, severally and not jointly, to sell the number of
Optional Common Shares (subject to such adjustments to eliminate fractional
shares as the Representatives may determine) that bears the same proportion to
the total number of Optional Common Shares to be sold as the number of Optional
Common Shares set forth in SCHEDULE B opposite the name of such Selling
Shareholder (or, in the case of the Company, as the number of Optional Common
Shares to be sold by the Company as set forth in the paragraph "Introductory" of
this Agreement) bears to the total number of Optional Common Shares. The
Representatives may cancel the option at any time prior to its expiration by
giving written notice of such cancellation to the Company and the Selling
Shareholders.
D. PUBLIC OFFERING OF THE COMMON SHARES.
The Representatives hereby advise the Company and the Selling Shareholders
that the Underwriters intend to offer for sale to the public, as described in
the Prospectus, their respective portions of the Common Shares as soon after
this Agreement has been executed and the Registration Statement has been
declared effective as the Representatives, in their sole judgment, have
determined is advisable and practicable.
E. PAYMENT FOR THE COMMON SHARES.
Payment for the Common Shares to be sold by the Company shall be made at
the First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer of immediately available funds to the order of the Company. Payment
for the Common Shares to be sold by the Selling Shareholders shall be made at
the First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer of immediately available funds to the order of the Custodian.
It is understood that the Representatives have been authorized, for their
own accounts and the accounts of the several Underwriters, to accept delivery of
and receipt for, and make payment of the purchase price for, the Firm Common
Shares and any Optional Common Shares the Underwriters have agreed to purchase.
NMSI, individually and not as the Representative of the Underwriters, may (but
shall not be obligated to) make payment for any Common Shares to be purchased by
any Underwriter whose funds shall not have been received by the Representatives
by the First Closing Date or the Second Closing Date, as the case may be, for
the account of such Underwriter, but any such payment shall not relieve such
Underwriter from any of its obligations under this Agreement.
Each Selling Shareholder hereby agrees that (i) it will pay all stock
transfer taxes, stamp duties and other similar taxes, if any, payable upon the
sale or delivery of the Common Shares to be sold by such Selling Shareholder to
the several Underwriters, or otherwise in connection with the performance of
such Selling Shareholder's obligations hereunder and (ii) the Custodian is
authorized to deduct for such payment any such amounts from the proceeds to such
Selling Shareholder hereunder and to hold such amounts for the account of such
Selling Shareholder with the Custodian under the Custody Agreement.
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F. DELIVERY OF THE COMMON SHARES.
The Company and the Selling Shareholders shall deliver, or cause to be
delivered, to the Representatives for the accounts of the several Underwriters
certificates for the Firm Common Shares to be sold by them at the First Closing
Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company and
the Selling Shareholders shall also deliver, or cause to be delivered, to the
Representatives for the accounts of the several Underwriters, certificates for
the Optional Common Shares the Underwriters have agreed to purchase from them at
the First Closing Date or the Second Closing Date, as the case may be, against
the irrevocable release of a wire transfer of immediately available funds for
the amount of the purchase price therefor. The certificates for the Common
Shares shall be in definitive form and registered in such names and
denominations as the Representatives shall have requested at least two full
business days prior to the First Closing Date (or the Second Closing Date, as
the case may be) and shall be made available for inspection on the business day
preceding the First Closing Date (or the Second Closing Date, as the case may
be) at a location in New York City as the Representatives may designate. Time
shall be of the essence, and delivery at the time and place specified in this
Agreement is a further condition to the obligations of the Underwriters.
G. DELIVERY OF PROSPECTUS TO THE UNDERWRITERS.
Not later than 12:00 p.m. on the second business day following the date the
Common Shares of released by the Underwriters for sale to the public, the
Company shall deliver or cause to be delivered copies of the Prospectus in such
quantities and at such places as the Representatives shall request.
SECTION 3. ADDITIONAL COVENANTS OF THE COMPANY AND THE SELLING SHAREHOLDERS.
A. COVENANTS OF THE COMPANY.
The Company further covenants and agrees with each Underwriter as follows:
(a) REPRESENTATIVES' REVIEW OF PROPOSED AMENDMENTS AND SUPPLEMENTS.
During such period beginning on the date hereof and ending on the later
of the First Closing Date or such date, as in the opinion of counsel for the
Underwriters, the Prospectus is no longer required by law to be delivered in
connection with sales by an Underwriter or dealer (the "Prospectus Delivery
Period"), prior to amending or supplementing the Registration Statement
(including any registration statement filed under Rule 462(b) under the
Securities Act) or the Prospectus including any amendment or supplement
through incorporation by reference of any report filed under the Exchange
Act, the Company shall furnish to the Representatives for review a copy of
each such proposed amendment or supplement, and the Company shall not file
any such proposed amendment or supplement to which the Representatives
reasonably object.
(b) SECURITIES ACT COMPLIANCE.
After the date of this Agreement, the Company shall promptly advise the
Representatives in writing (i) of the receipt of any comments of, or
requests for additional or
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supplemental information from, the Commission, (ii) of the time and date of
any filing of any post-effective amendment to the Registration Statement or
any amendment or supplement to any preliminary prospectus or the Prospectus,
(iii) of the time and date that any post-effective amendment to the
Registration Statement becomes effective and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or of any
order preventing or suspending the use of any preliminary prospectus or the
Prospectus, or of any proceedings to remove, suspend or terminate from
listing or quotation the Common Stock from any securities exchange upon
which the it is listed for trading or included or designated for quotation,
or of the threatening or initiation of any proceedings for any of such
purposes. If the Commission shall enter any such stop order at any time,
the Company will use its best efforts to obtain the lifting of such order at
the earliest possible moment. Additionally, the Company agrees that it
shall comply with the provisions of Rules 424(b), 430A and 434, as
applicable, under the Securities Act and will use its reasonable efforts to
confirm that any filings made by the Company under such Rule 424(b) were
received in a timely manner by the Commission.
(c) AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS AND OTHER SECURITIES
ACT MATTERS.
If, during the Prospectus Delivery Period, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement
the Prospectus in order to make a statement or statements as to material
facts made therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if in the opinion of the
Representatives or counsel for the Underwriters it is otherwise necessary to
amend or supplement the Prospectus to comply with law, the Company agrees to
promptly prepare (subject to Section 3(A)(a) hereof), file with the
Commission and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Prospectus so that the statement
or statements as to material facts in the Prospectus as so amended or
supplemented will not, in the light of the circumstances when the Prospectus
is delivered to a purchaser, be misleading or so that the Prospectus, as
amended or supplemented, will comply with law.
(d) COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS.
The Company agrees to furnish the Representatives, without charge,
during the Prospectus Delivery Period, as many copies of the Prospectus and
any amendments and supplements thereto (including any documents incorporated
or deemed incorporated by reference therein) as the Representatives may
request.
(e) BLUE SKY COMPLIANCE.
The Company shall cooperate with the Representatives and counsel for the
Underwriters to qualify or register the Common Shares for sale under (or
obtain exemptions from the application of) the state securities or blue sky
laws or Canadian provincial Securities laws of those jurisdictions
designated by the Representatives, shall comply with such laws and shall
continue such qualifications, registrations and exemptions in effect so long
as required for the distribution of the Common Shares. The Company shall
not be required to qualify as a foreign corporation or to take any action
that would subject it to general service of process in any such jurisdiction
where it is not presently qualified or where it would be subject to taxation
as a foreign corporation. The Company will advise the Representatives
promptly of the suspension of the qualification or registration of (or any
such exemption
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relating to) the Common Shares for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company shall use its best
efforts to obtain the withdrawal thereof at the earliest possible moment.
(f) USE OF PROCEEDS.
The Company shall apply the net proceeds from the sale of the Common
Shares sold by it in the manner described under the caption "Use of
Proceeds" in the Prospectus.
(g) TRANSFER AGENT.
The Company shall engage and maintain, at its expense, a registrar and
transfer agent for the Common Stock.
(h) EARNINGS STATEMENT.
As soon as practicable, the Company will make generally available to its
security holders and to the Representatives an earnings statement (which
need not be audited) covering the twelve-month period ending [___] that
satisfies the provisions of Section 11(a) of the Securities Act.
(i) PERIODIC REPORTING OBLIGATIONS.
During the Prospectus Delivery Period the Company shall file, on a
timely basis, with the Commission and the Nasdaq National Market all reports
and documents required to be filed under the Exchange Act.
(j) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES.
During the period of 90 days following the date of the Prospectus, the
Company will not, without the prior written consent of NMSI (which consent
may be withheld at the sole discretion of NMSI), directly or indirectly,
sell, offer, contract or grant any option to sell, pledge, transfer or
establish an open "put equivalent position" within the meaning of Rule
16a-1(h) under the Exchange Act, or otherwise dispose of or transfer, or
announce the offering of, or file any registration statement under the
Securities Act in respect of, any shares of Common Stock, options or
warrants to acquire shares of the Common Stock or securities exchangeable or
exercisable for or convertible into shares of Common Stock (other than as
contemplated by this Agreement with respect to the Common Shares); PROVIDED,
HOWEVER, that the Company may issue, and file registration statements on
Form S-8 with respect to, shares of its Common Stock or options to purchase
its Common Stock, or Common Stock upon exercise of options, pursuant to any
stock option, stock bonus or other stock plan or arrangement described in or
incorporated by reference into the Prospectus.
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(k) FUTURE REPORTS TO THE REPRESENTATIVES.
During the period of five years hereafter the Company will furnish to
the Representatives at 600 Montgomery Street, San Francisco, CA 94111,
Attention: David Ketsdever (i) as soon as practicable after the end of each
fiscal year, copies of the Annual Report of the Company containing the
balance sheet of the Company as of the close of such fiscal year and
statements of income, shareholders' equity and cash flows for the year then
ended and the opinion thereon of the Company's independent public or
certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report
filed by the Company with the Commission, the NASD or any securities
exchange; and (iii) as soon as available, copies of any report or
communication of the Company mailed generally to holders of its capital
stock.
(l) EXCHANGE ACT COMPLIANCE.
During the Prospectus Delivery Period, the Company will file all
documents required to be filed with the Commission pursuant to Section 13,
14 or 15 of the Exchange Act in the manner and within the time periods
required by the Exchange Act.
B. COVENANTS OF THE SELLING SHAREHOLDERS.
Each Selling Shareholder further covenants and agrees with each
Underwriter:
(a) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES.
Such Selling Shareholder will not, without the prior written consent of
NMSI (which consent may be withheld in its sole discretion), directly or
indirectly, sell, offer, contract or grant any option to sell (including
without limitation any short sale), pledge, transfer, establish an open "put
equivalent position" within the meaning of Rule 16a-1(h) under the Exchange
Act, or otherwise dispose of any shares of Common Stock, options or warrants
to acquire shares of Common Stock, or securities exchangeable or exercisable
for or convertible into shares of Common Stock currently or hereafter owned
either of record or beneficially (as defined in Rule 13d-3 under Securities
Exchange Act of 1934, as amended) by the undersigned, or publicly announce
the undersigned's intention to do any of the foregoing, for a period
commencing on the date hereof and continuing through the close of trading on
the date 90 days after the date of the Prospectus.
(b) DELIVERY OF FORMS W-8 AND W-9.
To deliver to the Representatives prior to the First Closing Date a
properly completed and executed United States Treasury Department Form W-8
(if the Selling Shareholder is a non-United States person) or Form W-9 (if
the Selling Shareholder is a United States Person).
NMSI, on behalf of the several Underwriters, may, in its sole discretion,
waive in writing the performanc}e by the Company or any Selling Shareholder of
any one or more of the foregoing covenants or extend the time for their
performance.
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SECTION 4. PAYMENT OF EXPENSES.
The Company agrees to pay all costs, fees and expenses incurred in
connection with the performance of its obligations hereunder and in connection
with the transactions contemplated hereby, including without limitation (i) all
expenses incident to the issuance and delivery of the Common Shares (including
all printing and engraving costs), (ii) all fees and expenses of the registrar
and transfer agent of the Common Stock, (iii) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Common Shares
to the Underwriters, (iv) all fees and expenses of the Company's counsel,
independent public or certified public accountants and other advisors, (v) all
costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of the Registration Statement (including
financial statements, exhibits, schedules, consents and certificates of
experts), each preliminary prospectus and the Prospectus, and all amendments and
supplements thereto, and this Agreement, (vi) all reasonable filing fees,
attorneys' fees and expenses incurred by the Company or the Underwriters in
connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Common Shares for offer
and sale under the state securities or blue sky laws or the provincial
securities laws of Canada, and, if requested by the Representatives, preparing
and printing a "Blue Sky Survey" or memorandum, and any supplements thereto,
advising the Underwriters of such qualifications, registrations and exemptions,
(vii) the filing fees incident to, and the reasonable fees and expenses of
counsel for the Underwriters in connection with, the NASD's review and approval
of the Underwriters' participation in the offering and distribution of the
Common Shares, (viii) the fees and expenses associated with including the Common
Shares on the Nasdaq National Market, (ix) fees and expenses of the Custodian,
(x) expenses and taxes incident to the sale and delivery of the Common Shares to
be sold by such Selling Shareholders to the Underwriters hereunder (which taxes,
if any, may be deducted by the Custodian under the provisions of Section 2 of
this Agreement) and (xi) all other fees, costs and expenses referred to in Item
14 of Part II of the Registration Statement. Except as provided in this
Section 4, Section 6, Section 8 and Section 9 hereof, the Underwriters shall pay
their own expenses, including the fees and disbursements of their counsel.
The Selling Shareholders further agree with each Underwriter to pay
(directly or by reimbursement) all fees and expenses incident to the performance
of their obligations under this Agreement which are not otherwise specifically
provided for herein, including but not limited to fees and expenses of counsel
and other advisors for such Selling Shareholders.
This Section 4 shall not affect or modify any separate, valid agreement
relating to the allocation of payment of expenses between the Company, on the
one hand, and the Selling Shareholders, on the other hand.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS.
The obligations of the several Underwriters to purchase and pay for the
Common Shares as provided herein on the First Closing Date and, with respect to
the Optional Common Shares, the Second Closing Date, shall be subject to the
accuracy of the representations and warranties on the part of the Company and
the Selling Shareholders set forth in Section 1 hereof as of the date hereof and
as of the First Closing Date as though then made and, with respect to the
Optional Common Shares, as of the Second Closing Date as though then made, to
the timely performance
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by the Company and the Selling Shareholders of their respective covenants and
other obligations hereunder, and to each of the following additional conditions:
(a) ACCOUNTANTS' COMFORT LETTER.
On the date hereof, the Representatives shall have received from KPMG
Peat Marwick LLC, independent public or certified public accountants for the
Company, a letter dated the date hereof addressed to the Underwriters, in
form and substance satisfactory to the Representatives, containing
statements and information of the type ordinarily included in accountant's
"comfort letters" to underwriters, delivered according to Statement of
Auditing Standards No. 72 (or any successor bulletin), with respect to the
audited and unaudited financial statements and certain financial information
contained in the Registration Statement and the Prospectus (and the
Representatives shall have received an additional conformed copy of such
accountants' letter for each of the several Underwriters).
(b) COMPLIANCE WITH REGISTRATION REQUIREMENTS; NO STOP ORDER; NO
OBJECTION FROM NASD.
For the period from and after effectiveness of this Agreement and prior
to the First Closing Date and, with respect to the Optional Common Shares,
the Second Closing Date:
(i) the Company shall have filed the Prospectus with the Commission
(including the information required by Rule 430A under the Securities Act)
in the manner and within the time period required by Rule 424(b) under the
Securities Act; or the Company shall have filed a post-effective amendment
to the Registration Statement containing the information required by such
Rule 430A, and such post-effective amendment shall have become effective;
or, if the Company elected to rely upon Rule 434 under the Securities Act
and obtained the Representatives' consent thereto, the Company shall have
filed a Term Sheet with the Commission in the manner and within the time
period required by such Rule 424(b);
(ii) no stop order suspending the effectiveness of the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment to the Registration Statement, shall be in effect and no
proceedings for such purpose shall have been instituted or threatened by
the Commission; and
(iii) the NASD shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(c) NO MATERIAL ADVERSE CHANGE.
For the period from and after the date of this Agreement and prior to
the First Closing Date and, with respect to the Optional Common Shares, the
Second Closing Date in the judgment of the Representatives there shall not
have occurred any Material Adverse Change.
(d) OPINION OF COUNSEL FOR THE COMPANY.
On each of the First Closing Date and the Second Closing Date, the
Representatives shall have received the favorable opinion of Sherman &
Howard L.L.C., counsel for the
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Company, dated as of such Closing Date, the form of which is attached as
EXHIBIT A (and the Representatives shall have received an additional
conformed copy of such counsel's legal opinion for each of the several
Underwriters).
(e) OPINION OF COUNSEL FOR THE UNDERWRITERS.
On each of the First Closing Date and the Second Closing Date, the
Representatives shall have received the favorable opinion of Summit Law
Group, P.L.L.C., counsel for the Underwriters, dated as of such Closing
Date, with respect to the matters set forth in paragraphs (i), (vii) (with
respect to subparagraph (i) only), (viii), (ix), (x) (xi) and (xiii) (with
respect to the caption "Underwriting" under subparagraph (i) only), and the
next-to-last paragraph of EXHIBIT A (and the Representatives shall have
received an additional conformed copy of such counsel's legal opinion for
each of the several Underwriters).
(f) OFFICERS' CERTIFICATE.
On each of the First Closing Date and the Second Closing Date, the
Representatives shall have received a written certificate executed by the
Chief Executive Officer and President of the Company and the Chief Financial
Officer of the Company, dated as of such Closing Date, to the effect set
forth in subsections (b)(ii) and (c)(ii) of this Section 5, and further to
the effect that:
(i) for the period from and after the date of this Agreement and
prior to such Closing Date, there has not occurred any Material Adverse
Change;
(ii) the representations, warranties and covenants of the Company
set forth in Section 1(A) of this Agreement are true and correct with the
same force and effect as though expressly made on and as of such Closing
Date; and
(iii) the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at or prior to
such Closing Date.
(g) BRING-DOWN COMFORT LETTER.
On each of the First Closing Date and the Second Closing Date, the
Representatives shall have received from KPMG Peat Marwick L.L.C.,
independent public or certified public accountants for the Company, a letter
dated such date, in form and substance satisfactory to the Representatives,
to the effect that they reaffirm the statements made in the letter furnished
by them pursuant to subsection (a) of this Section 5, except that the
specified date referred to therein for the carrying out of procedures shall
be no more than three business days prior to the First Closing Date or
Second Closing Date, as the case may be (and the Representatives shall have
received an additional conformed copy of such accountants' letter for each
of the several Underwriters.)
(h) OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS.
On each of the First Closing Date and the Second Closing Date, the
Representatives shall have received the favorable opinion of Locke Reynolds
Boyd & Weisell, counsel for the Selling Shareholders, dated as of such
Closing Date, the form of which is attached as EXHIBIT
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B (and the Representatives shall have received an additional conformed copy
of such counsel's legal opinion for each of the several Underwriters.)
(i) SELLING SHAREHOLDERS' CERTIFICATE.
On each of the First Closing Date and the Second Closing Date, the
Representatives shall have received a written certificate executed by the
Attorney-in-Fact of each Selling Shareholder, dated as of such Closing Date,
to the effect that:
(i) the representations, warranties and covenants of such Selling
Shareholder set forth in Section 1(B) of this Agreement are true and
correct with the same force and effect as though expressly made by such
Selling Shareholder on and as of such Closing Date; and
(ii) such Selling Shareholder has complied with all the agreements
and satisfied all the conditions on its part to be performed or satisfied
at or prior to such Closing Date.
(j) SELLING SHAREHOLDERS' DOCUMENTS.
On the date hereof, the Company and the Selling Shareholders shall have
furnished for review by the Representatives copies of the Powers of Attorney
and Custody Agreements executed by each of the Selling Shareholders and such
further information, certificates and documents as the Representatives may
reasonably request.
(k) LOCK-UP AGREEMENT FROM CERTAIN SHAREHOLDERS OF THE COMPANY.
On the date hereof, the Company shall have furnished to the
Representatives an agreement in the form of EXHIBIT C hereto from each
director, officer and Selling Shareholder, and such agreement shall be in
full force and effect on each of the First Closing Date and the Second
Closing Date.
(l) ADDITIONAL DOCUMENTS.
On or before each of the First Closing Date and the Second Closing Date,
the Representatives and counsel for the Underwriters shall have received
such information, documents and opinions as they may reasonably require for
the purposes of enabling them to pass upon the issuance and sale of the
Common Shares as contemplated herein, or in order to evidence the accuracy
of any of the representations and warranties, or the satisfaction of any of
the conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company and the Selling Shareholders at any
time on or prior to the First Closing Date and, with respect to the Optional
Common Shares, at any time prior to the Second Closing Date, which termination
shall be without liability on the part of any party to any other party, except
that Section 4, Section 6, Section 8 and Section 9 shall at all times be
effective and shall survive such termination.
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SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES.
If this Agreement is terminated by the Representatives pursuant to
Section 5, Section 7, Section 10, Section 11 or Section 17, or if the sale to
the Underwriters of the Common Shares on the First Closing Date is not
consummated because of any refusal, inability or failure on the part of the
Company or the Selling Shareholders to perform any agreement herein or to comply
with any provision hereof, the Company agrees to reimburse the Representatives
and the other Underwriters (or such Underwriters as have terminated this
Agreement with respect to themselves), severally, upon demand for all
out-of-pocket expenses that shall have been reasonably incurred by the
Representatives and the Underwriters in connection with the proposed purchase
and the offering and sale of the Common Shares, including but not limited to
fees and disbursements of counsel, printing expenses, travel expenses, postage,
facsimile and telephone charges.
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT.
This Agreement shall not become effective until the later of (i) the
execution of this Agreement by the parties hereto and (ii) notification by the
Commission to the Company and the Representatives of the effectiveness of the
Registration Statement under the Securities Act.
Prior to such effectiveness, this Agreement may be terminated by any party
by notice to each of the other parties hereto, and any such termination shall be
without liability on the part of (a) the Company or the Selling Shareholders to
any Underwriter, except that the Company shall be obligated to reimburse the
expenses of the Representatives and the Underwriters pursuant to Sections 4
and 6 hereof, (b) of any Underwriter to the Company or the Selling Shareholders,
or (c) of any party hereto to any other party except that the provisions of
Section 8 and Section 9 shall at all times be effective and shall survive such
termination.
SECTION 8. INDEMNIFICATION.
(a) Indemnification of the Underwriters by the Company.
The Company agrees to indemnify and hold harmless each Underwriter, its
officers and employees, and each person, if any, who controls any
Underwriter within the meaning of the Securities Act and the Exchange Act
against any loss, claim, damage, liability or expense, as incurred, to which
such Underwriter or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based
(i) upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, or any amendment thereto, including
any information deemed to be a part thereof pursuant to Rule 430A or
Rule 434 under the Securities Act, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading; or (ii) upon any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in whole
or in part upon any inaccuracy in the representations and warranties of the
Company contained herein;
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or (iv) in whole or in part upon any failure of the Company to perform its
obligations hereunder or under law; or (v) any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Common Stock or the offering contemplated
hereby, and which is included as part of or referred to in any loss, claim,
damage, liability or action arising out of or based upon any matter covered
by clause (i) or (ii) above, PROVIDED that the Company shall not be liable
under this clause (v) to the extent that a court of competent jurisdiction
shall have determined by a final judgment that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to act
undertaken or omitted to be taken by such Underwriter through its bad faith
or willful misconduct; and to reimburse each Underwriter and each such
controlling person for any and all expenses (including the reasonable fees
and disbursements of counsel chosen by NMSI) as such expenses are reasonably
incurred by such Underwriter or such controlling person in connection with
investigating, defending, settling (pursuant to Section 8(e)), compromising
or paying any such loss, claim, damage, liability, expense or action;
PROVIDED, HOWEVER, that the foregoing indemnity agreement shall not apply to
any loss, claim, damage, liability or expense to the extent, but only to the
extent, arising out of or based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by the
Representatives expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and PROVIDED, FURTHER, that with respect to any preliminary
prospectus, the foregoing indemnity agreement shall not inure to the benefit
of any Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Common Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been delivered, at
or prior to the written confirmation of the sale of the Common Shares to
such person, and if the Prospectus (as so amended or supplemented) would
have cured the defect giving rise to such loss, claim, damage, liability or
expense. The indemnity agreement set forth in this Section 8(a) shall be in
addition to any liabilities that the Company may otherwise have.
(b) INDEMNIFICATION OF THE UNDERWRITERS BY THE SELLING SHAREHOLDERS.
Each of the Selling Shareholders, severally and not jointly, agrees to
indemnify and hold harmless each Underwriter, its officers and employees,
and each person, if any, who controls any Underwriter within the meaning of
the Securities Act and the Exchange Act against any loss, claim, damage,
liability or expense, as incurred, to which such Underwriter or such
controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Selling
Shareholder), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based
(i) upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, or any amendment thereto, including
any information deemed to be a part thereof pursuant to Rule 430A or
Rule 434 under the Securities Act, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished
to the Company or the Representatives, directly or through such
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Selling Shareholder's representatives, specifically for inclusion therein;
or (ii) upon any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company or the
Representatives, directly or through such Selling Shareholder's
representatives, specifically for inclusion therein; or (iii) in whole or in
part upon any inaccuracy in the representations and warranties of such
Selling Shareholder contained herein; or (iv) in whole or in part upon any
failure of such Selling Shareholder to perform their respective obligations
hereunder or under law; or (v) any act or failure to act or any alleged act
or failure to act by any Underwriter in connection with, or relating in any
manner to, the Common Stock or the offering contemplated hereby, and which
is included as part of or referred to in any loss, claim, damage, liability
or action arising out of or based upon any matter covered by clause (i) or
(ii) above, PROVIDED that such Selling Shareholder shall not be liable under
this clause (v) to the extent that a court of competent jurisdiction shall
have determined by a final judgment that such loss, claim, damage, liability
or action resulted directly from any such acts or failures to act undertaken
or omitted to be taken by such Underwriter through its bad faith or willful
misconduct; and to reimburse each Underwriter and each such controlling
person for any and all expenses (including the reasonable fees and
disbursements of counsel chosen by NMSI) as such expenses are reasonably
incurred by such Underwriter or such controlling person in connection with
investigating, defending, settling (pursuant to Section 8(e)), compromising
or paying any such loss, claim, damage, liability, expense or action;
PROVIDED, HOWEVER, that the foregoing indemnity agreement shall not apply to
any loss, claim, damage, liability or expense to the extent, but only to the
extent, arising out of or based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by the
Representatives expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and PROVIDED, FURTHER, that with respect to any preliminary
prospectus, the foregoing indemnity agreement shall not inure to the benefit
of any Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Common Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been delivered, at
or prior to the written confirmation of the sale of the Common Shares to
such person, and if the Prospectus (as so amended or supplemented) would
have cured the defect giving rise to such loss, claim, damage, liability or
expense; and PROVIDED, FURTHER, that with respect to any untrue statement or
omission made in the Registration Statement, the Prospectus or any
supplement or amendment thereto, the liability of each Selling Shareholder
under this paragraph shall be limited to an amount equal to the net proceeds
received by the Selling Shareholders from the sale of the Common Shares sold
by such Selling Shareholder to the Underwriters pursuant to the terms
hereof. The indemnity agreement set forth in this Section 8(b) shall be in
addition to any liabilities that the Selling Shareholders may otherwise
have.
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(c) INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND OFFICERS BY THE
UNDERWRITERS.
Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, the Selling Shareholders and each person,
if any, who controls the Company or any Selling Shareholder within the
meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer, Selling Shareholder or controlling person may become
subject, under the Securities Act, the Exchange Act, or other federal or
state statutory law or regulation, or at common law or otherwise (including
in settlement of any litigation, if such settlement is effected with the
written consent of such Underwriter), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated below)
arises out of or is based upon any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or
arises out of or is based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, any
preliminary prospectus, the Prospectus (or any amendment or supplement
thereto), in reliance upon and in conformity with written information
furnished to the Company and the Selling Shareholders by the Representatives
expressly for use therein; and to reimburse the Company, or any such
director, officer, Selling Shareholder or controlling person for any and all
expenses (including the reasonable fees and disbursements of counsel chosen
by the Company and the Selling Shareholders) as such expenses are reasonably
incurred by the Company, the Selling Shareholders or such controlling person
in connection with investigating, defending, settling (pursuant to Section
8(e)), compromising or paying any such loss, claim, damage, liability,
expense or action. The Company and each of the Selling Shareholders, hereby
acknowledges that the only information that the Underwriters have furnished
to the Company and the Selling Shareholders expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) are the statements set forth (A) as the
last two paragraphs on the inside front cover page of the Prospectus
concerning stabilization and passive market making by the Underwriters and
(B) in the table following the first paragraph and as the second and last
paragraphs under the caption "Underwriting" in the Prospectus; and the
Underwriters confirm that such statements are correct. The indemnity
agreement set forth in this Section 8(c) shall be in addition to any
liabilities that each Underwriter may otherwise have.
(d) NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES.
Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
this Section 8, 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 the indemnity agreement contained in this Section 8, for contribution
under Section 9 or otherwise, except to the extent it is prejudiced as a
proximate result of such failure. In case any such action is brought
against any indemnified party and such indemnified party seeks or intends to
seek indemnity from an indemnifying party, the indemnifying party will be
entitled
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to participate in, and, to the extent that it shall elect, jointly with all
other indemnifying parties similarly notified, 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 party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party
and the indemnified party in conducting the defense of any such action or
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified
party or parties. Upon receipt of notice from the indemnifying party to
such indemnified party of such indemnifying party's 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 8 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 (together with local counsel), approved by the
indemnifying party (NMSI in the case of Section 8(b) and Section 9),
representing the indemnified parties who are parties to such action) or
(ii) the indemnifying party shall not have employed counsel satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, in each of which cases the
fees and expenses of counsel shall be at the expense of the indemnifying
party.
(e) SETTLEMENTS.
The indemnifying party under this Section 8 shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party against any
loss, claim, damage, liability or expense by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by
Section 8(d) hereof, the indemnifying party agrees that it shall be liable
for any settlement of any proceeding effected without its written consent if
(i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement and (iii) the indemnified party
gives the indemnifying party three business days prior notice of any
proposed settlement. In any event, no indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement,
compromise or consent to the entry of judgment in any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or
could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding.
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SECTION 9. CONTRIBUTION.
If the indemnification provided for in Section 8 is for any reason held to
be unavailable to or otherwise insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then (subject to the first sentence of Section 8(a)) each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party, as incurred, as a result of any losses, claims, damages,
liabilities or expenses referred to therein in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Selling
Shareholders, on the one hand, and the Underwriters, on the other hand, from the
offering of the Common Shares pursuant to this Agreement and the relative fault
of the Company and the Selling Shareholders, on the one hand, and the
Underwriters, on the other hand, in connection with the statements or omissions
or inaccuracies in the representations and warranties herein which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Selling Shareholders, on the one hand, and the Underwriters, on
the other hand, in connection with the offering of the Common Shares pursuant to
this Agreement shall be deemed to be in the same respective proportions as the
total net proceeds from the offering of the Common Shares pursuant to this
Agreement (before deducting expenses) received by the Company and the Selling
Shareholders, and the total underwriting discount received by the Underwriters,
in each case as set forth on the front cover page of the Prospectus (or, if
Rule 434 under the Securities Act is used, the corresponding location on the
Term Sheet) bear to the aggregate initial public offering price of the Common
Shares as set forth on such cover. The relative fault of the Company and the
Selling Shareholders, on the one hand, and the Underwriters, on the other hand,
shall be determined by reference to, among other things, whether any such untrue
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact or any such inaccurate or alleged inaccurate
representation or warranty relates to information supplied by the Company or the
Selling Shareholders, on the one hand, or the Underwriters, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 8(d), any reasonable legal or
other fees or expenses incurred by such party in connection with investigating
or defending any action or claim. The provisions set forth in Section 8(d) with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 9; PROVIDED, HOWEVER, that no
additional notice shall be required with respect to any action for which notice
has been given under Section 8(d) for purposes of indemnification.
The Company, the Selling Shareholders and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 9 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 9.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 9 are several,
and not joint, in proportion to their respective underwriting commitments as set
forth opposite their names in SCHEDULE A. Each Selling Shareholder's obligation
to contribute
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pursuant to this Section 9 are several, and not joint, in proportion to the net
proceeds to be received by such Selling Shareholder pursuant to the sale of
Common Shares hereunder. For purposes of this Section 9, each officer and
employee of an Underwriter and each person, if any, who controls an Underwriter
within the meaning of the Securities Act and the Exchange Act shall have the
same rights to contribution as such Underwriter, and each director of the
Company, each officer of the Company who signed the Registration Statement, and
each person, if any, who controls the Company with the meaning of the Securities
Act and the Exchange Act shall have the same rights to contribution as the
Company.
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITER.
If, on the First Closing Date or the Second Closing Date, as the case may
be, any one or more of the several Underwriters shall fail or refuse to purchase
Common Shares that it or they have agreed to purchase hereunder on such date,
and the aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of the
aggregate number of the Common Shares to be purchased on such date, the other
Underwriters shall be obligated, severally, in the proportions that the number
of Firm Common Shares set forth opposite their respective names on SCHEDULE A
bears to the aggregate number of Firm Common Shares set forth opposite the names
of all such non-defaulting Underwriters, or in such other proportions as may be
specified by the Representatives with the consent of the non-defaulting
Underwriters, to purchase the Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date. If, on the
First Closing Date or the Second Closing Date, as the case may be, any one or
more of the Underwriters shall fail or refuse to purchase Common Shares and the
aggregate number of Common Shares with respect to which such default occurs
exceeds 10% of the aggregate number of Common Shares to be purchased on such
date, and arrangements satisfactory to the Representatives and the Company for
the purchase of such Common Shares are not made within 48 hours after such
default, this Agreement shall terminate without liability of any party to any
other party (other than the defaulting Underwriter or Underwriters) except that
the provisions of Section 4, Section 8 and Section 9 shall at all times be
effective and shall survive such termination. In any such case either the
Representatives or the Company shall have the right to postpone the First
Closing Date or the Second Closing Date, as the case may be, but in no event for
longer than seven days in order that the required changes, if any, to the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this
Section 10. Any action taken under this Section 10 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
SECTION 11. TERMINATION OF THIS AGREEMENT.
Prior to the First Closing Date this Agreement maybe terminated by the
Representatives by notice given to the Company and the Selling Shareholders if
at any time (i) trading or quotation in any of the Company's securities shall
have been suspended or limited by the Commission or by the Nasdaq Stock Market,
or trading in securities generally on either the Nasdaq Stock Market or the New
York Stock Exchange shall have been suspended or limited, or minimum or maximum
prices shall have been generally established on any of such stock exchanges by
the Commission or the NASD; (ii) a general banking moratorium shall have been
declared by any of federal, New York, Colorado or California authorities;
(iii) there shall have
29
<PAGE>
occurred any outbreak or escalation of national or international hostilities or
any crisis or calamity, or any change in the United States or international
financial markets, or any substantial change or development involving a
prospective substantial change in United States' or international political,
financial or economic conditions, as in the judgment of the Representatives is
material and adverse and makes it impracticable to market the Common Shares in
the manner and on the terms described in the Prospectus or to enforce contracts
for the sale of securities; (iv) in the judgment of the Representatives there
shall have occurred any Material Adverse Change; or (v) the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as in the judgment of the Representatives may interfere
materially with the conduct of the business and operations of the Company
regardless of whether or not such loss shall have been insured. Any termination
pursuant to this Section 11 shall be without liability on the part of (a) the
Company or the Selling Shareholders to any Underwriter, except that the Company
and the Selling Shareholders shall be obligated to reimburse the expenses of the
Representatives and the Underwriters pursuant to Sections 4 and 6 hereof, (b)
any Underwriter to the Company or the Selling Shareholders, or (c) of any party
hereto to any other party except that the provisions of Section 8 and Section 9
shall at all times be effective and shall survive such termination.
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties and
other statements of the Company, of its officers, of the Selling Shareholders
and of the several Underwriters set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by or
on behalf of any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person, or the Selling Shareholders, as
the case may be, and will survive delivery of and payment for the Common Shares
sold hereunder and any termination of this Agreement.
SECTION 13. NOTICES.
All communications hereunder shall be in writing and shall be mailed, hand
delivered or telecopied and confirmed to the parties hereto as follows:
If to the Representatives:
NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: 415-249-5558
Attention: Richard A. Smith
with a copy to:
NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: (415) 249-5553
Attention: David A. Baylor, Esq.
If to the Company:
30
<PAGE>
Analytical Surveys, Inc.
941 North Meridian Street
Indianapolis, IN 46204-1061
Facsimile: (317) 634-7600
Attention: Sidney V. Corder
with a copy to:
Sherman & Howard L.L.C.
633 17th Street, Suite 3000
Denver, CO 80202
Facsimile: (303) 298-0940
Attention: James F. Wood, Esq.
If to the Selling Shareholders:
American Securities Transfer, Inc.
938 Quail Street, Suite 101
Lakewood, CO 80215
Facsimile: [___]
Attention: [___]
with a copy to:
Locke Reynolds Boyd & Weisell
201 N. Illinois Street
1000 Capital Center South
Indianapolis, IN 46204
Facsimile: (317) 237-3900
Attention: Michael J. Schneider, Esq.
Any party hereto may change the address for receipt of communications by
giving written notice to the others.
SECTION 14. SUCCESSORS.
This Agreement will inure to the benefit of and be binding upon the parties
hereto, including any substitute Underwriters pursuant to Section 10 hereof, and
to the benefit of the employees, officers and directors and controlling persons
referred to in Section 8 and Section 9, and in each case their respective
successors, and personal representatives, and no other person will have any
right or obligation hereunder. The term "successors" shall not include any
purchaser of the Common Shares as such from any of the Underwriters merely by
reason of such purchase.
31
<PAGE>
SECTION 15. PARTIAL UNENFORCEABILITY.
The invalidity or unenforceability of any Section, paragraph or provision
of this Agreement shall not affect the validity or enforceability of any other
Section, paragraph or provision hereof. If any Section, paragraph or provision
of this Agreement is for any reason determined to be invalid or unenforceable,
there shall be deemed to be made such minor changes (and only such minor
changes) as are necessary to make it valid and enforceable.
SECTION 16. LEGAL.
(a) GOVERNING LAW PROVISIONS.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED IN SUCH STATE.
(b) CONSENT TO JURISDICTION.
Any legal suit, action or proceeding arising out of or based upon this
Agreement or the transactions contemplated hereby ("Related Proceedings") may be
instituted in the federal courts of the United States of America located in the
City and County of San Francisco or the courts of the State of California in
each case located in the City and County of San Francisco (collectively, the
"Specified Courts"), and each party irrevocably submits to the exclusive
jurisdiction (except for proceedings instituted in regard to the enforcement of
a judgment of any such court (a "Related Judgment"), as to which such
jurisdiction is non-exclusive) of such courts in any such suit, action or
proceeding. Service of any process, summons, notice or document by mail to such
party's address set forth above shall be effective service of process for any
suit, action or other proceeding brought in any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any suit, action or other proceeding in the Specified Courts and irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such suit, action or other proceeding brought in any such court has been brought
in an inconvenient forum.
(c) WAIVER OF IMMUNITY.
With respect to any Related Proceeding, each party irrevocably waives, to
the fullest extent permitted by applicable law, all immunity (whether on the
basis of sovereignty or otherwise) from jurisdiction, service of process,
attachment (both before and after judgment) and execution to which it might
otherwise be entitled in the Specified Courts, and with respect to any Related
Judgment, each party waives any such immunity in the Specified Courts or any
other court of competent jurisdiction, and will not raise or claim or cause to
be pleaded any such immunity at or in respect of any such Related Proceeding or
Related Judgment, including, without limitation, any immunity pursuant to the
United States Foreign Sovereign Immunities Act of 1976, as amended.
32
<PAGE>
SECTION 17. FAILURE OF ONE OR MORE OF THE SELLING SHAREHOLDERS TO SELL AND
DELIVER COMMON SHARES.
If one or more of the Selling Shareholders shall fail to sell and deliver
to the Underwriters the Common Shares to be sold and delivered by such Selling
Shareholders at the First Closing Date pursuant to this Agreement, then the
Underwriters may at their option, by written notice from the Representatives to
the Company and the Selling Shareholders, either (i) terminate this Agreement
without any liability on the part of any Underwriter or, except as provided in
Sections 4, 6, 8 and 9 hereof, the Company or the Selling Shareholders, or
(ii) purchase the shares which the Company and other Selling Shareholders have
agreed to sell and deliver in accordance with the terms hereof. If one or more
of the Selling Shareholders shall fail to sell and deliver to the Underwriters
the Common Shares to be sold and delivered by such Selling Shareholders pursuant
to this Agreement at the First Closing Date or the Second Closing Date, then the
Underwriters shall have the right, by written notice from the Representatives to
the Company and the Selling Shareholders, to postpone the First Closing Date or
the Second Closing Date, as the case may be, but in no event for longer than
seven days in order that the required changes, if any, to the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected.
SECTION 18. GENERAL PROVISIONS.
This Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all contemporaneous oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may be executed in two or more counterparts, each one of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement may not be amended or
modified unless in writing by all of the parties hereto, and no condition herein
(express or implied) may be waived unless waived in writing by each party whom
the condition is meant to benefit. The Table of Contents and the Section
headings herein are for the convenience of the parties only and shall not affect
the construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a sophisticated business
person who was adequately represented by counsel during negotiations regarding
the provisions hereof, including, without limitation, the indemnification
provisions of Section 8 and the contribution provisions of Section 9, and is
fully informed regarding said provisions. Each of the parties hereto further
acknowledges that the provisions of Sections 8 and 9 hereto fairly allocate the
risks in light of the ability of the parties to investigate the Company, its
affairs and its business in order to assure that adequate disclosure has been
made in the Registration Statement, any preliminary prospectus and the
Prospectus (and any amendments and supplements thereto), as required by the
Securities Act and the Exchange Act.
33
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company and the Custodian the enclosed copies
hereof, whereupon this instrument, along with all counterparts hereof, shall
become a binding agreement in accordance with its terms.
Very truly yours,
ANALYTICAL SURVEYS, INC.
By:
--------------------------------
Sidney V. Corder,
President and Chief Executive Officer
SELLING SHAREHOLDERS NAMED ON SCHEDULES B & C
By:
--------------------------------
(Attorney-in-fact)
The foregoing Underwriting Agreement is hereby confirmed and accepted by
the Representatives in San Francisco, California as of the date first above
written.
NATIONSBANC MONTGOMERY SECURITIES LLC
DAIN RAUSCHER WESSELS, A DIVISION OF DAIN RAUSCHER INCORPORATED
Acting as Representatives of the several Underwriters named in the attached
Schedule A.
By NATIONSBANC MONTGOMERY SECURITIES LLC
By:
------------------------
Name:
Title:
34
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
FIRM COMMON
UNDERWRITERS SHARES
TO BE PURCHASED
<S> <C>
NationsBanc Montgomery Securities LLC ....
Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated ....................
[___] ....................................
[___] ....................................
[___] ....................................
Total ............................... 2,250,000
</TABLE>
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
<S> <C> <C>
SELLING SHAREHOLDER NUMBER OF MAXIMUM NUMBER
FIRM COMMON OF OPTIONAL
SHARES COMMON SHARES
TO BE SOLD TO BE SOLD
<S> <C> <C>
Sol C. Miller
C/o Analytical Surveys, Inc.
941 North Meridian Street
Indianapolis, IN 46204.................. 300,000 45,000
John A. Thorpe
C/o Analytical Surveys, Inc.
941 North Meridian Street
Indianapolis, IN 46204.................. 200,000 30,000
------- ------
Total............................... 500,000 75,000
</TABLE>
<PAGE>
EXHIBIT A
[THE FINAL OPINION IN DRAFT FORM WILL BE ATTACHED AS EXHIBIT A AT THE TIME THIS
AGREEMENT IS EXECUTED.]
Opinion of counsel for the Company to be delivered pursuant to
Section 5(e) of the Underwriting Agreement.
References to the Prospectus in this EXHIBIT A include any supplements
thereto at the Closing Date.
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Colorado.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the
Underwriting Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in the States of Indiana, North Carolina,
Texas and Wisconsin in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except for such jurisdictions (other than the States of
Indiana, North Carolina, Texas and Wisconsin) where the failure to so qualify
or to be in good standing would not, individually or in the aggregate, result
in a Material Adverse Change.
(iv) Each significant subsidiary (as defined in Rule 405 under the
Securities Act) has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Prospectus
and, to the best knowledge of such counsel, is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction
in which such qualification is required, whether by reason of the ownership
or leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify or to be in good standing would
not, individually or in the aggregate, result in a Material Adverse Change.
(v) All of the issued and outstanding capital stock of each such
significant subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance or, to the best knowledge of such counsel, any pending or
threatened claim.
(vi) The authorized, issued and outstanding capital stock of the
Company (including the Common Stock) conform to the descriptions thereof set
forth or incorporated by reference in the Prospectus. All of the outstanding
shares of Common Stock (including the shares of Common Stock owned by Selling
Shareholders) have been duly authorized and validly issued, are fully paid
and nonassessable and, to the best of such counsel's knowledge,
A-1
<PAGE>
have been issued in compliance with the registration and qualification
requirements of federal and state securities laws. The form of certificate
used to evidence the Common Stock is in due and proper form and complies with
all applicable requirements of the charter and by-laws of the Company and the
General Corporation Law of the State of Colorado. The description of the
Company's stock option, stock bonus and other stock plans or arrangements,
and the options or other rights granted and exercised thereunder, set forth
in the Prospectus accurately and fairly presents the information required to
be shown with respect to such plans, arrangements, options and rights.
(vii) No shareholder of the Company or any other person has any
preemptive right, right of first refusal or other similar right to subscribe
for or purchase securities of the Company arising (i) by operation of the
charter or by-laws of the Company, (ii) or the General Corporation Law of the
State of Colorado, or (iii) to the best knowledge of such counsel, otherwise.
(viii) The Underwriting Agreement has been duly authorized, executed and
delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to indemnification
thereunder may be limited by applicable law and except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors' rights generally or
by general equitable principles.
(ix) The Common Shares to be purchased by the Underwriters from the
Company have been duly authorized for issuance and sale pursuant to the
Underwriting Agreement and, when issued and delivered by the Company pursuant
to the Underwriting Agreement against payment of the consideration set forth
therein, will be validly issued, fully paid and nonassessable.
(x) Each of the Registration Statement and the Rule 462(b)
Registration Statement, if any, has been declared effective by the Commission
under the Securities Act. To the best knowledge of such counsel, no stop
order suspending the effectiveness of either of the Registration Statement or
the Rule 462(b) Registration Statement, if any, has been issued under the
Securities Act and no proceedings for such purpose have been instituted or
are pending or are contemplated or threatened by the Commission. Any
required filing of the Prospectus and any supplement thereto pursuant to Rule
424(b) under the Securities Act has been made in the manner and within the
time period required by such Rule 424(b).
(xi) The Registration Statement, including any Rule 462(b) Registration
Statement, the Prospectus, including any document incorporated by reference
therein, and each amendment or supplement to the Registration Statement and
the Prospectus including any document incorporated by reference therein, as
of their respective effective or issue dates (other than the financial
statements and supporting schedules included or incorporated by reference
therein or in exhibits to or excluded from the Registration Statement, as to
which no opinion need be rendered) comply as to form in all material respects
with the applicable requirements of the Securities Act and the Exchange Act.
(xii) The Common Stock is listed on the Nasdaq National Market, and to
the best knowledge of such counsel, the Company has taken no action designed
to, or likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act or delisting the Common Stock from the
Nasdaq National Market nor has the Company
A-2
<PAGE>
received any notification that the Commission or the National Association of
Securities Dealers LLC (the "NASD") is contemplating terminating such
registration or listing.
(xiii) The statements (i) in the Prospectus under the captions "Risk
Factors--Risks Associated with Terms of Customer Contracts; --Shares Eligible
for Future Sale; and --Effect of Certain Charter and Bylaw Provisions,"
"Business--Customer Contracts," "Business--Intellectual Property," "Shares
Eligible for Future Sale," and "Underwriting" and (ii) in Items 14 and 15 of
the Registration Statement, insofar as such statements constitute matters of
law, summaries of legal matters, the Company's charter or by-law provisions,
documents or legal proceedings, or legal conclusions, has been reviewed by
such counsel and fairly present and summarize, in all material respects, the
matters referred to therein.
(xiv) To the best knowledge of such counsel, there are no legal or
governmental actions, suits or proceedings pending or threatened which are
required to be disclosed in the Registration Statement, other than those
disclosed therein.
(xv) To the best knowledge of such counsel, there are no Existing
Instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits
thereto; and the descriptions thereof and references thereto are correct in
all material respects.
(xvi) No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or
agency, is required for the Company's execution, delivery and performance of
the Underwriting Agreement and consummation of the transactions contemplated
thereby and by the Prospectus, except as required under the Securities Act,
applicable state securities or blue sky laws and from the NASD.
(xvii) The execution and delivery of the Underwriting Agreement by the
Company and the performance by the Company of its obligations thereunder
(other than performance by the Company of its obligations under the
indemnification section of the Underwriting Agreement, as to which no opinion
need be rendered) (i) have been duly authorized by all necessary corporate
action on the part of the Company; (ii) will not result in any violation of
the provisions of the charter or by-laws of the Company or any subsidiary;
(iii) will not constitute a breach of, or Default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its subsidiaries pursuant to, [(A) LIST
DEBT INSTRUMENTS] or (B) to the best knowledge of such counsel, any other
material Existing Instrument; or (iv) to the best knowledge of such counsel,
will not result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or any subsidiary.
(xviii) The Company is not, and after receipt of payment for the
Common Shares will not be, an "investment company" within the meaning of
Investment Company Act.
(xix) Except as disclosed in the Prospectus, to the best knowledge of
such counsel, there are no persons with registration or other similar rights
to have any equity or debt securities registered for sale under the
Registration Statement or included in the offering contemplated by the
Underwriting Agreement, other than the Selling Shareholders, except for such
rights as have been duly and validly waived.
A-3
<PAGE>
(xx) To the best knowledge of such counsel, neither the Company nor any
subsidiary is in violation of its charter or by-laws or any law,
administrative regulation or administrative or court decree applicable to the
Company or any subsidiary or is in Default in the performance or observance
of any obligation, agreement, covenant or condition contained in any material
Existing Instrument, except in each such case for such violations or Defaults
as would not, individually or in the aggregate, result in a Material Adverse
Change.
(xxi) Each document filed pursuant to the Exchange Act (other than the
financial statements and supporting schedules included therein, as to which
no opinion need be rendered) and incorporated or deemed to be incorporated by
reference in the Prospectus complied when so filed as to form in all material
respects with the Exchange Act.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Underwriters at which the contents
of the Registration Statement and the Prospectus, and any supplements or
amendments thereto, and related matters were discussed and, 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
Registration Statement or the Prospectus (other than as specified above), and
any supplements or amendments thereto, on the basis of the foregoing, nothing
has come to their attention which would lead them to believe that either the
Registration Statement or any amendments thereto, at the time the Registration
Statement or such amendments became effective, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus, as of its date or at the First Closing Date or the Second Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no belief as to
the financial statements or schedules or other financial or statistical data
derived therefrom, included or incorporated by reference in the Registration
Statement or the Prospectus or any amendments or supplements thereto).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Law of the State of Delaware, the General Corporation Law of the
State of Colorado or the federal law of the United States, to the extent they
deem proper and specified in such opinion, upon the opinion (which shall be
dated the First Closing Date or the Second Closing Date, as the case may be,
shall be satisfactory in form and substance to the Underwriters, shall expressly
state that the Underwriters may rely on such opinion as if it were addressed to
them and shall be furnished to the Representatives) of other counsel of good
standing whom they believe to be reliable and who are satisfactory to counsel
for the Underwriters; PROVIDED, HOWEVER, that such counsel shall further state
that they believe that they and the Underwriters are justified in relying upon
such opinion of other counsel, and (B) as to matters of fact, to the extent they
deem proper, on certificates of responsible officers of the Company and public
officials.
A-4
<PAGE>
EXHIBIT B
THE FINAL OPINION IN DRAFT FORM WILL BE ATTACHED AS EXHIBIT B AT THE TIME THIS
AGREEMENT IS EXECUTED.
The opinion of such counsel pursuant to Section 5(h) shall be rendered to
the Representatives at the request of the Company and shall so state therein.
References to the Prospectus in this EXHIBIT B include any supplements thereto
at the Closing Date.
(i) The Underwriting Agreement has been duly authorized, executed and
delivered by or on behalf of, and is a valid and binding agreement of, such
Selling Shareholder, enforceable in accordance with its terms, except as
rights to indemnification and contribution thereunder may be limited by
applicable law and except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles.
(ii) The execution and delivery by such Selling Shareholder of, and the
performance by such Selling Shareholder of its obligations under, the
Underwriting Agreement, Custody Agreement and Power of Attorney will not to
the best of such counsel's knowledge, (a) violate or contravene any provision
of applicable law or regulation, or (b) violate, result in a breach of or
constitute a default under the terms of any other agreement or instrument to
which such Selling Shareholder is a party or by which it is bound, or any
judgment, order or decree applicable to such Selling Shareholder of any
court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over such Selling Shareholder.
(iii) Such Selling Shareholder has the legal right and power to enter
into the Underwriting Agreement, Custody Agreement and Power of Attorney, to
sell, transfer and deliver all of the Common Shares which may sold by such
Selling Shareholder under the Underwriting Agreement and to comply with its
other obligations under the Underwriting Agreement, Custody Agreement and
Power of Attorney.
(iv) Each of the Custody Agreement and Power of Attorney of such
Selling Shareholder has been duly authorized, executed and delivered by such
Selling Shareholder and is a valid and binding agreement of such Selling
Shareholder, enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles.
B-1
<PAGE>
(v) Assuming that the Underwriters purchase the Common Shares which
are sold by such Selling Shareholder pursuant to the Underwriting Agreement
for value, in good faith and without notice of any adverse claim, the
delivery of such Common Shares pursuant to the Underwriting Agreement will
pass good and valid title to such Common Shares, free and clear of any
security interest, mortgage, pledge, lieu encumbrance or other claim.
(vi) To the best of such counsel's knowledge, no consent, approval,
authorization or other order of, or registration or filing with, any court or
governmental authority or agency, is required for the consummation by such
Selling Shareholder of the transactions contemplated in the Underwriting
Agreement, except as required under the Securities Act, applicable state
securities or blue sky laws, and from the NASD.
In rendering such opinion, such counsel may rely as to matters of fact, to
the extent they deem proper, on certificates of the Selling Shareholders and
public officials
B-2
<PAGE>
EXHIBIT C
[Date]
NationsBanc Montgomery Securities LLC
Dain Rauscher Incorporated
As Representatives of the Several Underwriters
c/o NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
RE: ANALYTICAL SURVEYS, INC. (THE "COMPANY")
----------------------------------------
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company ("Common Stock") or securities convertible into or
exchangeable or exercisable for Common Stock. The Company proposes to carry out
a public offering of Common Stock (the "Offering") for which you will act as the
representative[s] of the underwriters. The undersigned recognizes that the
Offering will be of benefit to the undersigned and will benefit the Company by,
among other things, raising additional capital for its operations. The
undersigned acknowledges that you and the other underwriters are relying on the
representations and agreements of the undersigned contained in this letter in
carrying out the Offering and in entering into underwriting arrangements with
the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not, without the prior written consent of NMSI (which consent
may be withheld in its sole discretion), directly or indirectly, sell, offer,
contract or grant any option to sell (including without limitation any short
sale), pledge, transfer, establish an open "put equivalent position" within the
meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934, or otherwise
dispose of any shares of Common Stock, options or warrants to acquire shares of
Common Stock, or securities exchangeable or exercisable for or convertible into
shares of Common Stock currently or hereafter owned either of record or
beneficially (as defined in Rule 13d-3 under Securities Exchange Act of 1934, as
amended) by the undersigned, or publicly announce the undersigned's intention to
do any of the foregoing, for a period commencing on the date hereof and
continuing through the close of trading on the date 90 days after the date of
the Prospectus. The undersigned also agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent and registrar against
the transfer of shares of Common Stock or securities convertible into or
exchangeable or exercisable for Common Stock held by the undersigned except in
compliance with the foregoing restrictions.
With respect to the Offering only, the undersigned waives any
registration rights relating to registration under the Securities Act of any
Common Stock owned either of record or beneficially by the undersigned,
including any rights to receive notice of the Offering.
<PAGE>
This agreement is irrevocable and will be binding on the undersigned and the
respective successors, heirs, personal representatives, and assigns of the
undersigned.
- ----------------------------------
Printed Name of Holder
By:
-------------------------------
Signature
- ----------------------------------
Printed Name of Person Signing
(AND INDICATE CAPACITY OF PERSON SIGNING IF
SIGNING AS CUSTODIAN, TRUSTEE, OR ON BEHALF
OF AN ENTITY)
<PAGE>
NUMBER [LOGO] SHARES
ANALYTICAL SURVEYS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO
CUSIP 032683 30 2
COMMON STOCK - NO PAR VALUE
SEE REVERSE
FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
ANALYTICAL SURVEYS, INC.
TRANSFERABLE ONLY ON THE BOOKS OF THE CORPORATION IN PERSON OR BY ATTORNEY
UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED. THIS CERTIFICATE IS
NOT VALID UNLESS COUNTERSIGNED BY THE TRANSFER AGENT.
IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE
TO BE ENDORSED BY THE FACSIMILE SIGNATURES OF ITS DULY AUTHORIZED OFFICERS
AND TO BE SEALED WITH THE FACSIMILE SEAL OF THE CORPORATION.
DATED:
/s/ Scott C. Benger /s/ S.V. Corder
SECRETARY CHAIRMAN
COUNTERSIGNED AND REGISTERED:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
P.O. Box 1596
Denver, Colorado 80201
By
------------------------------------------------------------
Transfer Agent & Registrar Authorized Signature
[SEAL]
<PAGE>
ANALYTICAL SURVEYS, INC.
TRANSFER FEE: $20.00 PER NEW CERTIFICATE ISSUED
The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT-..........Custodian...........
TEN ENT -as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act.........................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
- --------------------------------------------------------------------------------
For Value Received,_______________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------- attorney-in-fact
to transfer the said stock on the books of the within-named Corporation, with
full power of substitution in the premises.
Dated ________________________
-------------------------------------------------------------------
-------------------------------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATSOEVER.
Signature(s) Guaranteed:
- ----------------------------------------
The signature(s) must be guaranteed by an eligible guarantor institution
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with
membership in an approved signature guarantee Medallion Program), pursuant to
S.E.C. Rule 17Ad-15.
<PAGE>
Exhibit 23.1
The Board of Directors
Analytical Surveys, Inc.:
We consent to the use of our report included and incorporated by reference
herein and to the references to our firm under the headings "Selected
Consolidated Financial Data" and "Experts" in the prospectus.
KPMG Peat Marwick LLP
Denver, Colorado
June 24, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation in a Registration Statement on Form S-3 of our
report dated February 14, 1997, on the audit of the financial statements of MSE
Corporation for the years ended December 31, 1996 and 1995.
Olive LLP
Indianapolis, Indiana
June 24, 1998
