<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1997
REGISTRATION NO. 333-30601
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
CIMETRIX INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 73 87-0439107
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
CLASSIFICATION CODE NO.)
</TABLE>
100 NORTH TAMPA STREET
TAMPA, FLORIDA 33602
(813) 277-9199
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------------
DAVID L. REDMOND
CIMETRIX INCORPORATED
100 NORTH TAMPA STREET
TAMPA, FLORIDA 33602
(813) 277-9199
(NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPY TO:
ROBERT C. RASMUSSEN, ESQ.
DAVID S. FELMAN, ESQ.
GLENN RASMUSSEN & FOGARTY, P.A.
100 SOUTH ASHLEY DRIVE, SUITE 1300
TAMPA, FLORIDA 33602
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ ]
If the registrant elects to deliver its latest annual report to
security holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number and the 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 number of the earlier effective registration statement for the
same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
--------------------
THE REGISTRANT 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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
SUBJECT TO COMPLETION, DATED AUGUST 25, 1997.
PROSPECTUS
$10,000,000
CIMETRIX INCORPORATED
10% SENIOR NOTES DUE 2002
WARRANTS FOR 2,500,000 SHARES OF COMMON STOCK
---------------
Cimetrix Incorporated ("Cimetrix" or the "Company") is offering a
minimum of $3,000,000 and a maximum of $10,000,000 aggregate principal amount of
its 10% Senior Notes Due 2002 (the "Senior Notes") at 100% of face value, in
denominations of $5,000 and additional whole multiples of $1,000 or any
integral multiple thereof. The minimum purchase is $5,000. The Senior Notes
will be unsecured obligations of the Company. Interest on the Senior Notes is
payable semiannually on April 1 and October 1 of each year commencing April 1,
1998. The Senior Notes are redeemable at the Company's option at any time after
September 30, 1999, at the redemption prices set forth in this Prospectus, plus
accrued interest. No sinking fund is provided for the Senior Notes. See
"Description of the Senior Notes."
Each purchaser of a Senior Note will also receive for no additional
consideration one common stock purchase warrant (a "Warrant") for each $1,000
principal amount of Senior Notes purchased. Each Warrant will entitle the
holder to purchase 250 shares of the Company's common stock ("Common Stock")
for $2.50 per share. The Warrants are exercisable any time after October 31,
1998, and on or before September 30, 2002, as a whole, in part, or in
increments, but only if the shares of Common Stock issuable upon exercise of
the Warrants are registered with the Securities and Exchange Commission
pursuant to a current and effective registration statement and qualified for
sale under the securities laws of the various states where the Warrantholders
reside. The Company will use its best efforts to register the shares issuable
pursuant to the Warrants before November 1, 1998. The exercise price of the
Warrants is payable at the holder's option, either in cash or by the surrender
of Senior Notes at their face amount plus accrued interest. The Warrants will
first be transferable separately from the Senior Notes on October 1, 1999. On
August 22, 1997, the trading price for the Common Stock on the OTC Bulletin
Board was $2.25 per share. See "Description of the Warrants."
The Company's offering (the "Offering") of the Senior Notes and
accompanying Warrants (together, the "Securities") is being made directly by
the Company on a best efforts basis, and there is no assurance that all the
Securities will be sold. The Offering is not underwritten, but the Company
will sell a portion of the Securities to or through one or more broker-dealers
that will act as the Company's agent in its selling efforts and receive
compensation equal to seven percent of the price of the securities. Each
broker-dealer will be required to take and pay for only those securities that
it sells to the public. No Securities will be sold in the Offering unless the
Company receives commitments to purchase at least $3,000,000 principal amount
of the Senior Notes at face value before the expiration date of the Offering,
unless extended. Officers, directors, and employees of the Company might
purchase Securities in the Offering, although they will not purchase Securities
to ensure satisfaction of the minimum condition. Pending closing, funds
received from investors will be deposited and held in a separate bank account
of the Company that is not an escrow account. If the minimum sales condition is
not satisfied, funds received from the investors will be promptly refunded,
without interest or deduction. There is no established trading market for the
Securities, and the Company does not intend to apply to list the Senior Notes
or the Warrants for trading on any securities exchange or to list them for
quotation on the NASDAQ National or Small Cap Markets. See "Terms of Offering
and Plan of Distribution."
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION
DISCUSSED UNDER THE CAPTION "RISK FACTORS" AT PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1) COMPANY(2)
-------- ------------- ------------
<S> <C> <C> <C>
Per Senior Note and
Warrant (3)........ $1,000 (1) $1,000
Total minimum(3)..... $3,000,000 (1) $3,000,000
Total maximum(3)...... $10,000,000 (1) $10,000,000
============================================================================================================
</TABLE>
(1) The Offering is not underwritten, but the Company will pay compensation of
up to seven percent of the offering price of the securities to
broker-dealers that act as the Company's agent in selling the Offering.
See "Terms of Offering and Plan of Distribution."
(2) Before deducting estimated expenses of $130,000 payable by the
Company and compensation equal to seven percent of the selling
price payable to broker-dealers that act as the Company's
agent in selling the Offering.
(3) Excludes the sale of shares of Common Stock for $2.50 per share on the
exercise of the Warrants, which would yield proceeds to the Company of
$625 for each Warrant and $6,250,000 for all the Warrants.
THIS OFFERING WILL EXPIRE AT 5:00 P.M. EASTERN STANDARD TIME
ON OCTOBER 31, 1997, UNLESS EXTENDED.
The date of this Prospectus is ,1997.
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified entirely by the detailed information
and financial statements appearing elsewhere in this Prospectus or incorporated
by reference in this Prospectus. This Prospectus contains certain
forward-looking statements involving risks and uncertainties. The Company's
actual results could differ materially from the results anticipated in these
forward-looking statements as a result of certain of the factors set forth under
"Risk Factors" and elsewhere in this Prospectus.
THE COMPANY
Cimetrix is the developer of the world's first open architecture,
standards-based, personal computer (PC) software for controlling machine tools,
industrial robots and electronics industry automation equipment that operates on
the factory floor. The Cimetrix Open Development Environment ("CODE") software
products are based on standard computer platforms (Intel Pentium CPU with
ISA/PCI bus and Motorola PowerPC with VME bus) and run on standard operating
systems (UNIX and Microsoft Windows NT). Cimetrix software is currently
operational in production installations on a variety of general industrial
robots, specialized electronics industry assembly and surface mount technology
(SMT) machines, and to a limited extent, CNC machine tools.
Cimetrix also has developed two additional software products, GEM
Equipment Manager and GEM Host Manager. These software products enable
compliance with Generic Equipment Model ("GEM"), which is a standard for
communications between manufacturing equipment and the factory's host computer.
The GEM software products are designed to run on PCs and UNIX workstations.
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Securities Offered..................$10,000,000 principal amount of Senior Notes Due 2002 and Warrants to purchase
2,500,000 shares of Common Stock at $2.50 per share.
Maturity Date.......................September 30, 2002
Interest Payment Dates..............April 1 and October 1 of each year, beginning April 1, 1998.
Optional Redemption.................Nonredeemable before October 1, 1999. Redeemable in whole or in part, at any
time after September 30, 1999, at an initial redemption price equal to 105% of
the principal amount on October 1, 1999 (declining annually to par on
September 30, 2002), plus accrued interest. See "Description of the Senior
Notes - Optional Redemption."
Change of Control...................Upon a Change in Control (as defined), the Company will be required, at the
election of any holder of a Senior Note, to redeem all the holder's
outstanding Senior Notes at a price equal to 100% of their principal amount
plus accrued interest. See "Description of the Senior Notes - Change of
Control."
Ranking.............................The Senior Notes will be unsecured senior obligations of the Company, will
rank pari passu in right of payment with all existing and any future senior
indebtedness of the Company, and will rank senior in right of payment to any
subordinated indebtedness of the Company. The Company is restricted in its
ability to incur additional indebtedness. See "Description of the Senior
Notes - Certain Covenants." As of August 22, 1997, the Company did not have any
secured indebtedness and its outstanding unsecured senior indebtedness
consisted of approximately $270,000 payable to Brigham Young University and
approximately
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
$550,000 of trade payables. See "Description of the Senior Notes - Ranking."
Restrictive Covenants...............The Indenture under which the Senior Notes will be issued (the "Indenture") will
contain certain covenants that, among other things, will limit the ability of the Company to (i)
incur additional indebtedness, (ii) pay dividends or make certain other restricted payments,
(iii) enter into transactions with affiliates, and (iv) merge or consolidate with, or transfer
substantially all of its assets to, another person. These limitations and prohibitions are
subject to a number of important qualifications. See "Description of the Senior Notes - Certain
Covenants."
Use of Proceeds.....................Working capital and general corporate purposes.
OTC Bulletin Board
Symbol of Common Stock.........."CMXX."
</TABLE>
2
<PAGE> 5
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------------- ------------------
1996 1995 1994 1993 1992 1997 1996
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues . . . . . . . . $ 2,396 $ 664 $ 463 $ 1,142 $ 330 $ 1,053 $ 458
Operating expenses:
Cost of revenues . . . 1,342 446 297 727 124 549 287
Sales and marketing . . 1,494 947 217 115 59 583 592
Research and development 1,179 930 198 507 316 922 711
General and
administration . . . 1,577 1,231 1,217 857 710 1,065 649
Compensation - stock
option . . . . . . . 685 - - - - - 693
--------- ------- ------- -------- ------ ------- -------
Total operating . .
expenses . . . . . 6,277 3,554 1,929(a) 2,206 1,209 3,119 2,932
--------- ------- ------- -------- ------ ------- -------
Net loss . . . . . . . . $ (3,455) $(2,544) $(1,145) $ (1,074) $ (881) $(2,054) $(2,431)
========= ======= ======= ======== ====== ======= =======
Loss per common share . $ (.19) $ (.16) $ (.08) $ (.07) $ (.05) $ (.10) $ (.13)
========= ======= ======= ======== ====== ======= =======
Weighted average shares
outstanding . . . . . 18,517 16,265 14,208 16,335 16,110 21,143 18,708
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------
BALANCE SHEET DATA: ACTUAL AS ADJUSTED(B)
------ --------------
(UNAUDITED)
<S> <C> <C>
Current assets .................. $2,162 $12,032
Current liabilities ............. 879 879
Working capital (deficit) ....... 1,283 11,153
Total assets .................... 7,192 17,192
10% Senior Notes ................ -- 10,000
Total long-term debt (excluding
$41,000 of current maturities) 261 10,261
Stockholders' equity ............ $6,052 $ 6,052
</TABLE>
- ----------
(a) Includes the effect (net of taxes) of extraordinary items of $188,000
resulting from the cancellation of indebtedness.
(b) Gives effect to the sale of the Senior Notes and the application of the net
proceeds therefrom. See "Use of Proceeds" and "Capitalization." Excludes
the effect of exercise of the Warrants offered by this Prospectus.
3
<PAGE> 6
RISK FACTORS
In connection with an investment in the Securities offered by this
Prospectus, prospective investors should consider carefully the following
factors that could affect the Company's current position and future prospects,
in addition to the other information set forth in this Prospectus. The following
factors and other information set forth in this Prospectus contain certain
forward-looking statements involving risks and uncertainties. The Company's
actual results could differ materially from the results anticipated in these
forward-looking statements as a result of certain factors set forth in this
section and elsewhere in this Prospectus.
LACK OF PROFITABILITY; INTEREST COVERAGE
The Company has incurred operating losses from inception to June 30,
1997, of approximately $12,597,000, including net losses of $3,455,000,
$2,544,000, and $1,145,000 during 1996, 1995, and 1994, respectively, and a net
loss of approximately $2,054,000 during the six months ended June 30, 1997. Net
cash used by operations amounted to approximately $2,002,000, $2,944,000, and
$1,8174,000 during 1996, 1995, and 1994, respectively, and approximately
$2,134,000 during the six months ended June 30, 1997. The Company has never
operated at a profit. There is no assurance that the Company will operate
profitably in the future.
The Company had available at December 31, 1996, unused tax operating
loss carryforwards of approximately $10,558,000 that may be applied against
future taxable income and expire in various years beginning 2004 through 2011.
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes (FASB 109) requires the Company to provide a net deferred tax asset or
liability equal to the expected future tax benefit or expense of temporary
reporting differences between book and tax accounting and any available
operating loss or tax credit carryforwards. At December 31, 1996, the total of
all deferred tax assets was approximately $4,315,000 and the total of all
deferred tax liabilities was approximately $342,000. Because of the
uncertainty about whether the Company will generate sufficient future taxable
income to realize the deferred tax assets, the Company has established a
valuation allowance of $3,973,000 to offset all its deferred tax assets.
Given its lack of profitability, the Company historically has not
generated positive cash flow sufficient to cover fixed charges. The coverage
deficiency was approximately $3.5 million, $2.6 million, and $1.3 million in
1996, 1995, and 1994, respectively. There is no assurance that the Company will
generate future positive cash flow sufficient to cover the interest on the
Senior Notes. If the Company does not generate positive cash flow, its ability
to repay interest and principal on the Senior Notes would be adversely
affected.
LACK OF SALES, LENGTHY SALES AND IMPLEMENTATION CYCLES FOR OEM CUSTOMERS
The Company had sales of less than $2,500,000 in 1996. Until late 1994,
the Company did not have products for sale that were commercially viable. Prior
to that time, the Company's revenues were generated by sales of prototype
products. There is no assurance that the Company will ever generate significant
sales of its products. If the Company fails to do so, its prospects will be
materially adversely affected.
The Company's sales process for original equipment manufacture ("OEM")
customers is typically between three and twelve months from initial contact to
purchase commitment, and is subject to delays over which the Company has little
or no control. The extended sales process in this market segment is due to the
need to educate the customer regarding the use and benefits of its products and
the testing process with the customer's equipment before implementation. Any
delay in the sale or customer implementation of a large project or a number of
projects in this segment of the Company's market could have a material adverse
effect on the Company.
DEPENDENCE ON A SIGNIFICANT CUSTOMER
Fuji Machine Mfg. Co., Ltd. ("Fuji") accounted for approximately 34%
and 37% of the Company's sales in 1996 and the first half of 1997, respectively,
and is expected to account for approximately 20% of its sales in 1997. The loss
of Fuji's business could have a material adverse effect on the Company.
Additionally, the quantity of Fuji's business with the Company depends
substantially on market acceptance of Fuji's Surface Mount Technology ("SMT")
equipment that utilizes the Company's software products. The Company could be
materially adversely affected by a downturn in Fuji's equipment sales or Fuji's
failure to meet sales expectations. The Company will likely from time to time
have other customers that account for a significant portion of its business.
4
<PAGE> 7
DEPENDENCE ON RELATIVELY NEW PRODUCTS
The Company has only recently begun to install and implement its
products with customers. The Company's CODE software system was introduced
commercially in October 1995, and its GEM software product suite has been
developed during the past two years and was commercially introduced during 1997.
As a result, the Company has only limited history with these products, and there
can be little assurance that they will achieve market acceptance. The Company's
future success will depend on sales of these products, and the failure of these
products to achieve market acceptance would have a materially adverse affect on
the Company. In addition, the Company has limited experience with the
installation, implementation and operation of its products at customer sites.
There is no assurance that the Company's products will not require substantial
modifications to satisfy performance requirements or to fix previously
undetected errors. If customers were to experience significant problems with the
Company's products, or if the Company's customers were dissatisfied with the
products' functionality, performance, or support, the Company would be
materially adversely affected. The Company does not have any current plans to
develop any significant new products.
PRODUCT LIFE CYCLE; NEED TO DEVELOP NEW PRODUCTS AND ENHANCEMENTS
The markets for the Company's products are new and emerging. As such,
these markets are characterized by rapid technological change, evolving
requirements, developing industry standards, and new product introductions. The
dynamic nature of these markets can render existing products obsolete and
unmarketable within a short period of time. Accordingly, the life cycle of the
Company's products is difficult to estimate. The Company's future success will
depend in large part on its ability to enhance its products and develop and
introduce, on a timely basis, new products that keep pace with technological
developments and emerging industry standards. The success of the Company's
software development efforts will depend on various factors, including its
ability to integrate these products with third-party products. If a competitor
succeeds in duplicating or surpassing the Company's technological advances, the
Company's prospects might be materially adversely affected.
COMPETITION
The motion controller market is extremely competitive. Management
believes that most, if not all, of the Company's competitors currently have
greater financial resources and market presence than it does. Accordingly, these
competitors may be able to compete very effectively on pricing and to develop
technology to increase the flexibility of their products. Further, manufacturers
of industrial robots, machine tools, and other automation equipment which use
their own proprietary controllers and software have already established a share
of the market for their products and may find it easier to limit market
penetration by the Company because of the natural tie-in of their controllers
and software to their mechanisms. Management is uninformed as to whether any of
these competitors are presently developing additional technology that will
directly compete with the Company's product offerings. See "Business
- --Competition -CODE" and "-- Competition - GEM".
INTERNATIONAL SALES
International sales accounted for approximately 43% of the Company's
business in 1996. To service the needs of these customers, the Company must
provide worldwide sales and product support services, and the Company is in the
process of establishing a sales office in Japan. There are a number of risks
inherent in international expansion, including currency risks, increased risk of
software piracy, unexpected changes in regulatory requirements, tariffs and
other trade barriers, costs and risks of localizing products for foreign
companies, longer account receivable cycles and increased collection risks,
potentially adverse tax consequences, difficulty in repatriating earnings, and
the burdens of complying with a wide variety of foreign laws. Thus far, all the
Company's export sales have been payable in United States dollars.
5
<PAGE> 8
NEED FOR ADDITIONAL FINANCING
Management expects that the proceeds of the Offering will be adequate
to address the foreseeable capital needs of the Company for 12 to 15 months, if
the minimum proceeds of $3,000,000 are realized, and for at least 36 months, if
the maximum proceeds of $10,000,000 are realized. There is no assurance,
however, that the amount of its capital will be adequate or that additional
funds will be available to the Company on acceptable terms, if needed. The
source of any additional capital could be further public or private equity or
debt financings, collaborative arrangements with corporate partners or funds
from other sources. Further, any additional financing might involve substantial
dilution to the Company's stockholders. The Indenture restricts the ability of
the Company to raise additional funds through the sale of senior debt, which
could limit the Company's ability to secure financing. If adequate funds are not
available from operations or additional sources of financing, the Company's
ability to sustain and expand its business would be adversely affected.
DEPENDENCE ON CERTAIN INDIVIDUALS
The Company is highly dependent on the services of its key
managerial and engineering personnel, including Paul A. Bilzerian, Paul A.
Johnson, David L. Redmond, David P. Faulkner, and Robert H. Reback. Any
material change in the Company's senior management team could adversely
affect the Company's profitability and business prospects. The Company does not
maintain key man insurance for any of its key management and engineering
personnel.
COPYRIGHT PROTECTION AND PROPRIETARY INFORMATION.
The Company's software innovations are proprietary in nature, and the
Company has obtained copyright protection for them. It is possible, however, for
infringement to occur. Although the Company intends to prosecute diligently any
infringement of its proprietary technology, copyright litigation can be
extremely expensive and time-consuming, and the results of litigation are
generally uncertain. Further, the use by a competitor of the Company's
proprietary software to create similar software through "reverse engineering"
may not constitute an infringing use. The Company relies on confidentiality and
nondisclosure agreements with employees and customers for additional protection
against infringements, and the Company's software is encoded to further protect
it from unauthorized use.
CONTROL
Investors in the Common Stock (through exercise of the Warrants) will
be entitled to vote in the election of the Company's directors, but will not be
entitled to separate board representation. Investors purchasing Common Stock
through exercise of the Warrants will own no more than 10% of the Common Stock
if the maximum amount of Securities are sold in the Offering. Therefore,
purchasers of Common Stock through exercise of the Warrants will not be able to
control the business decisions of the Company and will have only a limited
voice in management.
The executive officers and directors of the Company have the power to
vote approximately 28.2% of the outstanding shares of Common Stock for the
election of directors and on other ordinary shareholder matters, after giving
effect to voting proxies and the exercise of options held by those individuals
as of June 27, 1996. Paul A. Bilzerian, a director, President and Chief
Executive Officer of the Company, has the sole or shared power to vote
approximately 22% of these shares. The voting power represented by the officers
and directors' shares, though not an absolute majority, is probably sufficient
to provide these persons with effective control over most affairs of the
Company. See "Management".
MARKETABILITY OF SENIOR NOTES AND COMMON STOCK
There is not any public trading market for the Securities, and there is
no assurance that one will develop in the future. Consequently, there can be no
assurance regarding the ability of holders of the Securities to sell them, or
the price at which they will be able to sell them. If a public trading market
were to develop, the Senior Notes could trade at prices that might be higher or
lower than the initial offering price depending on many factors, including
prevailing interest rates, the Company's operating results and
6
<PAGE> 9
the market for similar securities. The Company does not intend to apply for
listing or quotation of the Notes on any securities exchange or automated
interdealer quotation system.
The Common Stock is currently traded through 13 market makers, but is
not listed on any securities exchange or quoted on an automated interdealer
quotation system, which would provide automated quotations of the stock's price.
Trading through market makers tends to limit the volume of sales and can cause
wide fluctuations in a stock's price, based on the available supply and demand
for the stock at any particular time.
REGISTRATION OF WARRANT SHARES
The exercise of the Warrants, and the Company's issuance of shares of
Common Stock pursuant thereto, are subject to registration of those shares
under an effective registration statement filed with the Securities and
Exchange Commission (the "SEC" or "Commission") and to registration or
qualification of those shares for sale or exemption under applicable state
securities laws of the jurisdictions where the various Warrantholders reside.
Although the Company will use its best efforts to register the Warrant shares
before November 1, 1998, there is no assurance that it will do so or succeed in
qualifying the Warrant shares in all applicable jurisdictions. The Company in
its sole discretion may determine not to register or qualify the Warrant shares
in any jurisdiction where the time and expense do not justify the registration
or qualification. A Warrantholder may be deprived of any value of the Warrants
if the Company does not, or cannot, register or qualify the Warrant shares for
offer and sale in the jurisdiction where the Warrantholder resides, in which
case the Warrantholder's alternatives would be limited to either selling the
Warrants or allowing them to expire unexercised. See "Description of the
Warrants."
PAYMENT OF DIVIDENDS
The Company anticipates that it will not pay cash dividends for the
foreseeable future. In addition, the Indenture prohibits the payment of cash
dividends. See "Dividend Policy."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Nevada General Corporation Law have
anti-takeover effects and may inhibit a non-negotiated merger or other business
combination. These provisions are intended to encourage any person interested in
acquiring the Company to negotiate with, and to obtain the approval of, the
Company's Board of Directors in connection with such a transaction. However,
certain of these provisions may discourage a future acquisition of the Company,
including an acquisition in which the shareholders might otherwise receive a
premium for their shares. As a result, shareholders who might desire to
participate in such a transaction may not have the opportunity to do so. See
"Description of Common Stock - Certain Provisions of Nevada Law."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have a total of
24,143,928 shares of Common Stock outstanding. Of these shares, approximately
17,686,103 shares of Common Stock will be freely tradable by persons other than
directors, officers and affiliates of the Company, without restriction or need
for registration under the Securities Act of 1933, as amended (the "Securities
Act"). All of the remaining shares of Common Stock are "restricted securities"
as defined by Rule 144 promulgated under the Securities Act ("Rule 144"). Those
shares are eligible for sale, subject to the manner of sale, volume, notice, and
information requirements of Rule 144. Sales of substantial amounts of Common
Stock in the public market, or the availability of a substantial amount of
Common Stock for future sale, could adversely affect the market price of the
shares of Common Stock issuable on exercise of the Warrants. See "Shares
Eligible for Future Sale."
7
<PAGE> 10
USE OF PROCEEDS
The net proceeds of the Company from the sale of the Senior Notes
offered by this Prospectus (after deducting estimated offering expenses) are
estimated to be approximately $9,870,000 if the maximum amount of Senior Notes
is sold and $2,870,000 if the minimum amount of Senior Notes is sold. The
Company currently intends to use the net proceeds for working capital and
general corporate purposes, including operating losses and its anticipated
growth in accounts receivable and inventories.
The following table illustrates the principal intended uses of the
estimated net proceeds of the Offering:
<TABLE>
<CAPTION>
USE OF PROCEEDS MINIMUM OFFERING MAXIMUM OFFERING
--------------- ------------------- -------------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C>
Fund increases in inventory $ 200,000 7.0% $ 200,000 2.0%
Fund increases in accounts 300,000 10.4% 300,000 3.0%
receivable
Fund research and
development and sales and
marketing support 2,370,000 82.6% 9,370,000 95.0%
---------- ----- ---------- ------
TOTAL $2,870,000 100% $9,870,000 100%
========== ===== ========== ======
</TABLE>
See "Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock of the Company is quoted on the National Association
of Securities Dealers, Inc.'s OTC Electronic Bulletin Board (the "OTC Bulletin
Board") under the symbol "CMXX." The table below sets forth the high and low bid
quotations of the Common Stock on the OTC Bulletin Board for each quarter during
1995 and 1996 and for the first two quarters in 1997. The quotations presented
reflect interdealer prices, without retail markup, markdown or commissions, and
do not necessarily represent actual transactions in the Common Stock.
<TABLE>
<S> <C> <C>
FISCAL YEAR 1995 HIGH BID LOW BID
First Quarter $ 6.37 $ 4.25
Second Quarter 6.25 3.50
Third Quarter 6.12 3.75
Fourth Quarter 10.25 4.37
FISCAL YEAR 1996
First Quarter 15.75 9.75
Second Quarter 11.25 6.50
Third Quarter 7.63 5.25
Fourth Quarter 8.38 5.50
FISCAL YEAR 1997
First Quarter 7.38 5.50
Second Quarter 5.88 3.25
Third Quarter
(through August 22) 4.06 1.50
</TABLE>
On August 22, 1997, the closing bid quotation for the Common Stock on
the OTC Bulletin Board was $2.25 per share. Potential investors should be
aware that the price of the Common Stock in the trading market can change
dramatically over short periods as a result of factors unrelated to the earnings
and business activities of the Company. On August 22, 1997 there were 24,143,928
shares of Common Stock issued and outstanding, held by approximately 2,500
beneficial shareholders.
The Company has not paid dividends with respect to the Common Stock.
Management expects that any future earnings will be retained for working capital
and growth and expansion of its business and does not anticipate paying
dividends on the Common Stock in the foreseeable future. Covenants in the
Indenture prohibit the payment of dividends. See "Description of the Senior
Notes - Certain Covenants."
CAPITALIZATION
The table below sets forth the actual capitalization of the Company at
June 30, 1997, and as adjusted as of that date to give effect to the sale of
$10,000,000 aggregate principal amount of the Senior Notes and the application
of the estimated net proceeds therefrom, which are estimated to be $9,870,000
after deducting estimated Offering expenses. The information set forth in the
table should be read in
8
<PAGE> 11
conjunction with the unaudited financial statements of the Company as of and
for the quarterly period ended June 30, 1997, and the related notes thereto
that are included elsewhere in this Prospectus or incorporated by reference in
it.
<TABLE>
<CAPTION>
June 30, 1997
---------------------------------------
Actual As Adjusted (1)
------- ---------------
(unaudited)
(in thousands)
<S> <C> <C>
Long-term debt(1):
Long-term debt ....................................... $ 261 $ 261
Senior Notes offering ................................ -- 10,000
-------- --------
Total long-term debt .............................. 261 10,261
-------- --------
Shareholders' equity:
Common Stock, $.0001 par value, 100,000,000 shares
authorized; 18,151,428 shares issued and
outstanding at March 31, 1997(2) ................... 2 2
Additional paid-in capital(2) ........................ 18,881 18,881
Accumulated deficit .................................. (12,597) (12,597)
Unearned compensation - stock options ................ (234) (234)
-------- --------
Net shareholders' equity .......................... 6,052 6,052
-------- --------
Total Capitalization .............................. $ 6,313 $ 16,313
======== ========
</TABLE>
(1) See Note 6 of Notes to Financial Statements for the year ended December
31, 1996, and Note 4 of Notes to Financial Statements for the six month
period ended June 30, 1997.
(2) Excludes the effect of exercise of the Warrants offered by this
Prospectus, which would yield $6,250,000 (before expenses of
registration), if all the Senior Notes are sold.
9
<PAGE> 12
SELECTED FINANCIAL DATA
The selected financial data set forth below are derived from the
financial statements of the Company. The selected financial data for the six
months ended June 30, 1997 and 1996, are derived from the unaudited financial
statements of the Company, which in the opinion of management reflect all
adjustments (consisting of only normal recurring adjustments) necessary for a
fair presentation of that data. The selected financial data for the six months
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the entire fiscal year. The Selected Financial Data should be read
in conjunction with the Company's financial statements, related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------------- -----------------
1996 1995 1994 1993 1992 1997 1996
---- ---- ---- ---- ---- ---- ----
(in thousands, except per share data) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA(1):
Net Revenues . . . . . . $ 2,396 $ 664 $ 463 $ 1,142 $ 330 $ 1,053 $ 458
Operating expenses:
Cost of revenues . . . 1,342 446 297 727 124 549 287
Selling, marketing
and customer support. 1,494 947 217 115 59 583 592
Research and development 1,179 930 198 507 316 922 711
General and
administrative . . . 1,577 1,231 1,217 857 710 1,065 649
Compensation - stock
options . . . . . . . 685 - - - - - 693
-------- -------- ------- ------- ------ -------- --------
Total operating . .
expenses . . . . . 6,277 3,554 1,929 2,206 1,209 3,119 2,932
-------- -------- ------- ------- ------ -------- --------
Loss from operations (3,881) (2,890) (1,466) (1,064) (879) (2,066) (2,474)
-------- -------- ------- ------- ------ -------- --------
Net loss . . . . . . . . $ (3,455) $ (2,544) $(1,145) $(1,074) $ (881) $ (2,054) $ (2,431)
======== ======== ======= ======= ====== ======= ========
Loss per common share . $ (.19) $ (.16) $ (.08) $ (.07) $ (.05) $ (.10) $ (.13)
======== ======== ======= ======= ====== ======== ========
Weighted average shares
outstanding . . . . . 18,517 16,265 14,208 16,335 16,110 21,143 18,708
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
------------------------------------------------- ----------------
1996 1995 1994 1993 1992 1997 1996
---- ---- ---- ---- ---- ---- ----
(in thousands) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets . . . . . $ 4,220 $ 3,268 $3,835 $ 230 $ 69 $2,162 $2,618
Current liabilities . . . 1,344 338 1,451 857 479 879 371
Working capital (deficit) 2,876 2,930 2,384 (627) (410) 1,283 2,247
Total assets . . . . . . 9,227 9,722 5,632 356 223 7,192 8,889
Total long-term debt . . 296 338 44 41 41 261 287
Stockholders' equity
(deficit) . . . . . . . $ 7,631 $ 9,070 $3,613 $ (535) $ (297) $6,052 $8,214
</TABLE>
- ------------------------
(1) Omits the ratio of earnings to fixed charges. The Company did not have any
earnings in the relevant years and, therefore, earnings did not cover fixed
charges by approximately the amount of the net losses in each period. See
"Risk Factors - Lack of Profitability - Interest Coverage."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
OVERVIEW
This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Company's
Condensed Financial Statements and Notes thereto. The ensuing discussion and
analysis contains both statements of historical fact and forward-looking
statements. Forward-looking statements generally are identified by the words
"expects," "believes" and "anticipates" or words of similar import. Examples
of forward-looking statements include: (a) projections regarding sales,
revenue, liquidity, capital expenditures and other financial items; (b)
statements of the plans, beliefs and objectives of the Company or its
management; (c) statements of future economic performance, and (d) assumptions
underlying statements regarding the Company or its business. Forward-looking
statements are subject to certain factors and uncertainties that could cause
actual results to differ materially from the forward-looking statements,
including, but not limited to, those factors and uncertainties described below
under "Liquidity and Capital Resources" and "Factors Affecting Future Results."
10
<PAGE> 13
RESULTS OF OPERATIONS FOR THREE AND SIX MONTHS ENDED JUNE 30, 1997, AND 1996
The following table sets forth the percentage of costs and expenses to
net revenues derived from the Company's Statements of Operations for the three
and six months ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET REVENUES 100% 100% 100% 100%
------- -------- -------- --------
OPERATING EXPENSES
Cost of revenues, including customer
support 62.8 69.5 52.1 62.7
Sales and marketing 54.2 165.5 55.4 129.3
Research and development 92.0 238.4 87.6 155.2
General and administrative 117.4 187.6 101.1 141.7
Compensation expense - stock options - - - 151.3
------- -------- -------- --------
Total operating expenses 326.4 661.0 296.2 640.2
------- -------- -------- --------
LOSS FROM OPERATIONS (226.4) (561.0) (196.2) (540.2)
------- -------- -------- --------
Interest income, net of expense (0.8) 12.4 1.1 9.4
------- -------- -------- --------
NET LOSS (227.2%) (548.6%) (195.1%) (530.8%)
======= ======== ======== ========
</TABLE>
NET REVENUES
Net revenues for the second quarters of 1997 and 1996 were
approximately $541,000 and $177,000, respectively. Net revenues for the second
quarter of 1997 included approximately $268,000, or 49.6%, from custom
applications and programming and system integration projects primarily with
original equipment manufacturers ("OEMs"), approximately $210,000, or 38.8%,
from the sale of software products, approximately $46,000, or 8.5%, from
customer support and approximately $17,000, or 3.1%, from the sale of hardware
products. Net revenues for the second quarter of 1996 included approximately
$69,000, or 39%, from the sale of hardware products, approximately $46,000, or
26%, from the sale of software products and approximately $62,000, or 35%, from
training, support services and custom applications and systems integration
projects.
Net revenues for the first half of 1997 and 1996 were approximately
$1,053,000 and $458,000, respectively. Net revenues for the first half of 1997
included approximately $308,000, or 29.3%, from custom applications and
programming and system integration projects primarily with OEMs, approximately
$627,000, or 59.5%, from the sale of software products, approximately $82,000,
or 7.8%, from customer support, and approximately $36,000, or 3.4%, from the
sale of hardware products. Net revenues for the first half of 1996 included
approximately $204,000, or 44.5%, from the sale of hardware products,
approximately $122,000, or 26.6%, from the sale of software products and
approximately $132,000, or 28.9%, from training, customer support and custom
applications and systems integration projects.
The increase in net revenues for the second quarter and first half of
1997 compared to the comparable periods in 1996 are primarily attributable to
increased revenues from the sale of software products ($210,000 and $627,000
for the second quarter and first half of 1997, respectively, compared to
$46,000 and $122,000 for the second quarter and first half of 1996,
respectively) and to increased revenues from custom applications and
programming and systems integration projects primarily for OEMs ($268,000 and
$308,000 for the second quarter and first half of 1997, respectively, compared
to $62,000 and $132,000 for the second quarter and first half of 1996,
respectively). The increased revenues in 1997 reflect the Company's marketing
strategy of increased software sales and increased custom applications and
system integration projects with OEMs to help them integrate the Company's
software products with their equipment and a significantly reduced amount of
hardware sales because most of the hardware necessary for the software products
is available through other normal distribution channels. The increases in
revenues were primarily attributable to volume and did not include any
significant price increases.
Fuji Machine Mfg. Co., Ltd. ("Fuji") accounted for approximately 53.5%
and 36.9% of the Company's net revenue for the second quarter and first half of
1997, respectively. On June 25, 1997, the Company announced that Fuji had
selected the Company's CODE software suite of products as the control standard
for Fuji's surface mount technology ("SMT") equipment. The Company has
expended significant time and resources working with Fuji during the past year,
and the Company expects Fuji to continue to be a significant customer, although
the Company does not expect its revenues from Fuji, as a percentage of the
Company's net revenues, to continue at the levels reflected during the second
quarter and first half of 1997 as it adds more customers and other customers
account for more revenue. Aries, Inc. ("Aries"), the Company's distributor in
Japan, accounted for approximately 4.8% and 13.7% of the Company's net revenues
in the second quarter and first half of 1996, respectively. Aries accounted
for approximately 7% of the Company's net revenues in both the second quarter
and first half of 1997.
COST OF REVENUES
Cost of revenues as a percentage of net revenues was 62.8% in the
second quarter of 1997 compared to 69.5% in the second quarter of 1996, and
52.1% in the first half of 1997 versus 62.7% in the first half of 1996. The
decrease in cost of revenues was primarily attributable to the increased
percentage of revenues from custom applications and systems integration
projects primarily with OEMs and a reduction in sales of hardware products.
The profit margin on custom applications and systems integration projects is
higher than the profit margin on sales of hardware products.
SALES AND MARKETING
Sales and marketing expenses were approximately $293,000 in both the
second quarter of 1997 and the second quarter of 1996 and were approximately
$583,000 in the first half of 1997 compared to approximately $592,000 in the
first half of 1996. Sales and marketing expenses as a percentage of net
revenues were 54.2% and 165.5% in the second quarters of 1997 and 1996,
respectively, and were 55.4% and 129.3% in the first half of 1997 and 1996,
respectively. The number of sales personnel and related sales and marketing
expenses have been relatively constant, but the percentage of these expenses to
net revenues has decreased as revenues have increased.
11
<PAGE> 14
RESEARCH AND DEVELOPMENT
Research and development expenses increased approximately 18% to
$498,000, or 92% of net revenues in the second quarter of 1997 from
approximately $422,000, or 238% of net revenues in the second quarter of 1996.
Research and development expenses during the first half of 1997 were
approximately $922,000 compared to approximately $711,000 during the first half
of 1996. The Company's extensive effort to develop its products for WindowsNT
and the continued development of the Company's GEM software products
represented most of the increase in research and development expenditures. The
Company plans to continue to make significant investments in research and
development and expects to incur research and development expenses of
approximately $1,500,000 to $2,000,000 per year during 1997 and 1998.
GENERAL AND ADMINISTRATIVE
General and administrative expenses have increased from approximately
$332,000 in the second quarter of 1996 to approximately $635,000 in the second
quarter of 1997. General and administrative expenses increased 62.7% to
approximately $1,065,000, or 101% of net revenues, in the first half of 1997
compared to approximately $649,000, or 141.7% of net revenues, in the first
half of 1996. The primary increases in general and administrative expenses are
approximately $80,000 in rent and related costs associated with the new offices
in Midvale, Utah and Tampa, Florida, approximately $90,000 in legal expenses
related primarily to the Seolas litigation, approximately $66,000 in increased
recruiting costs, and approximately $100,000 of increased payroll for
administrative officers and employees. The Company expects its quarterly legal
expenses related to the Seolas litigation to be less than this amount in
approaching quarters.
COMPENSATION - STOCK OPTIONS
During the six months ended June 30, 1996, the Company recorded in
accordance with APB 25 the compensation cost related to all options granted
during 1996 and any currently outstanding options that had been previously
granted to employees. Additionally, the Company expensed that portion of the
compensation cost related to employee services rendered during 1996. Employee
services are assumed to be rendered over the two-year vesting period of the
options. Compensation expense recorded during the six months ended June 30
,1996 was approximately $693,000. The Company did not incur compensation cost
related to options in the six months ended June 30, 1997.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), which is effective for the Company's fiscal year
ending December 31, 1996. FAS 123 encourages, but does not require, companies
to recognize compensation expense based on the fair value of grants of stock,
stock options and other equity investments to employees. Although expense
recognition for employee stock-based compensation is not mandatory, FAS 123
requires that companies not adopting must disclose the pro forma effect on net
income and earnings per share. The Company will continue to apply prior
accounting rules and make pro forma disclosures in 1997.
12
<PAGE> 15
RESULTS OF OPERATIONS FOR FISCAL YEARS 1996, 1995 AND 1994
The following table sets forth the percentage of costs and expenses to
net revenues derived from the Company's Statement of Operations for 1996, 1995,
and 1994.
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1994 1995 1996
<S> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0%
----- ----- -----
Operating expenses:
Cost of revenues 64.1 67.2 56.0
Selling, marketing and customer support 46.9 142.6 62.3
Research and development 42.8 140.0 49.3
General and administrative 262.8 185.4 65.8
Compensation - stock options -- -- 28.6
----- ----- -----
Total operating expenses 416.6 535.2 262.0
----- ----- -----
Loss from operations (316.6) (435.2) (162.0)
Interest income, net of expense 7.8 22.0 2.3
Other income (expenses) (0.7) 0.1 15.5
----- ----- -----
Loss before minority interest and extraordinary item (309.5) (413.1) (144.2)
Minority interest in loss 21.6 30.0 -.
----- ----- -----
Loss before extraordinary item (287.9)% (383.1)% (144.2)%
Extraordinary item 21.6 -- --
----- ----- -----
Net loss (247.3)% (383.1)% (144.2)%
===== ===== =====
</TABLE>
NET REVENUES
Net revenues for the three fiscal years ended December 31, 1996, 1995,
and 1994 were approximately $2,396,000, $664,000 and $463,000, respectively. The
increase in net revenues for the comparative periods was primarily attributable
to increases in the amount of goods and services sold and not to price
increases. Net revenues for 1996 included approximately $1,400,000 of software
revenues, $680,000 of hardware revenues and the remainder from applications
engineering and support agreements. Revenues for 1995 represented sales of
products to customers for testing and evaluation, and approximately 56% of
revenues during 1995 were from the sale of hardware products. Revenues for 1994
represented periodic purchases of "beta site" prototype by a few selected
customers. The Company expects that the percentage of its revenues derived from
sales of hardware products will decrease as its sales of software products
increase. For the year ended December 31, 1994, the Company was a "development
stage" enterprise as defined by generally accepted accounting principles.
The Company's software products have been commercially available for a
relatively short time, and, consequently, the Company has limited experience
with the commercial use and acceptance of the products. The Company's ability
to generate a level of future revenues sufficient to cover all its operating
expenses will depend on sales of these products. A number of factors will
affect the sales of the Company's products, including the following: the
market acceptance of the Company's products; the extent of modifications (if
any) that are required to satisfy performance requirements or fix previously
undetected errors or deficiencies; the extent to which the users and
manufacturers of machine tools, industrial robots, and industrial automation
equipment will desire to use the Company's technology instead of the
proprietary technology of the manufacturers; the new product cycle of
manufacturers of machine tools, industrial robots, and industrial automation
machines that are potential users of the Company's software products; changes
in external competitive market factors, including the development of
competitive products; the Company's ability to distinguish its products from
competitive products; changes in technology that require adaptation or
enhancement of the Company's products or that enhance or diminish the use of
machine tools, industrial robots, and industrial automation machines that use
computerized motion control; and changes in international trade policies that
adversely affect export sales to Japan and other foreign countries where
prospective customers are based.
COST OF REVENUES
The Company's cost of revenues as a percentage of net revenues for the
years ended December 31, 1996, 1995, and 1994 were approximately 56%, 67% and
65%, respectively. The cost of revenues decreased significantly in 1996 because
the revenues from software products as a percentage of total revenues increased
from approximately 27% of revenues during 1995 to approximately 58% of revenues
during 1996. The percentage of hardware sales to total revenues decreased from
approximately 56% during 1995 to approximately 28% during 1996. The cost of
revenues from software revenue is less than 25%, while the cost of revenues from
hardware sales varies from 50% to 80%. The cost of revenues for
13
<PAGE> 16
1995 and 1994 also reflect management's decision to keep gross profit margins
narrow in order to encourage potential buyers to become acquainted with the
products offered.
SELLING, MARKETING AND CUSTOMER SUPPORT
Selling, marketing and customer support expenses have increased
significantly each year from approximately $217,000 in 1994, to approximately
$947,000 in 1995 and approximately $1,494,000 in 1996. Selling, marketing and
customer support expenses in 1996 and 1995 include approximately $1,300,000 and
$725,000 respectively, for the hiring and related travel expenses of full-time
marketing and sales personnel, approximately $80,000 and $75,000, respectively,
for the development of product brochures and other marketing material and
approximately $80,000 and $150,000, respectively, for the costs related to the
Company's representation at trade shows.
RESEARCH AND DEVELOPMENT
Research and development expenses have continued to increase from
approximately $198,000 in 1994 to approximately $930,000 in 1995 and
approximately $1,179,000 in 1996. The Company's extensive effort to develop its
products for Microsoft Windows NT and the continued development of GEM
represented the majority of the research and development expenditures during
1996. The Company plans to continue to make significant investments in research
and development and expects to incur research and development expenses of
approximately $1,500,000 to $2,000,000 per year during 1997 and 1998, subject to
the availability of funds for that purpose.
14
<PAGE> 17
GENERAL AND ADMINISTRATIVE
General and administrative expenses have increased from approximately
$1,200,000 per year during 1995 and 1994 to approximately $1,600,000 during
1996. The primary increases in general and administrative expenses in 1996 when
compared to 1995 and 1994 are approximately $263,000 in legal expense related
primarily to the Seolas litigation, approximately $150,000 in investment banking
fees paid to Cowen & Company and amortization of goodwill related to the merger
of Cimetrix (USA) Incorporated into Cimetrix effective August 31, 1995, which
amortization was approximately $217,000 during 1996 compared to approximately
$72,000 during 1995.
COMPENSATION - STOCK OPTIONS
During 1996, the Company recorded, in accordance with APB 25, the
compensation cost related to all options granted during 1996 and any outstanding
options that had been previously granted to employees. Additionally, the Company
expensed that portion of the compensation cost related to employee services
rendered during 1996. Employee services are assumed to be rendered over the two
year vesting period of the options. Compensation expense recorded during 1996
was approximately $685,000.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation
("FAS 123"), which is effective for the Company's fiscal year ending December
31, 1996. FAS 123 encourages, but does not require, companies to recognize
compensation expense based on the fair value of grants of stock, stock options
and other equity investments to employees. Although expense recognition for
employee stock-based compensation is not mandatory, FAS 123 requires that
companies not adopting must disclose the pro forma effect on net income and
earnings per share. The Company will continue to apply prior accounting rules
and make pro forma disclosures in 1997.
GAIN ON DISPOSITION OF ASSETS
The Company sold its facility in Provo, Utah, in September 1996 and
recognized a gain of approximately $352,000. The Company had gains from the sale
of various other assets of approximately $8,000 during 1996.
MINORITY INTEREST IN LOSS FROM OPERATIONS OF SUBSIDIARY
The Company's loss in the operations of its subsidiary, Cimetrix (USA)
Incorporated was reduced by $199,000 in 1995 and $100,000 in 1994 to reflect the
share of the loss attributable to the minority interest of Cimetrix (USA)
Incorporated. Cimetrix (USA) Incorporated was merged into Cimetrix effective
August 31, 1995.
EXTRAORDINARY ITEM
The Company recorded an extraordinary item of $188,000 in 1994 relating
to the forgiveness of debt owed by the Company, net of taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company had approximately $1,283,000 of working capital at June
30, 1997, compared with approximately $2,876,000 at December 31, 1996. The
decrease in working capital from December 31, 1996, to June 30, 1997, was
primarily attributable to the $2,134,000 of cash used to fund the Company's net
loss during the six months ended June 30, 1997.
15
<PAGE> 18
The Company had negative cash flow from operating activities of
approximately $2,134,000 for the six months ended June 30, 1997 compared to
approximately $1,421,000 for the six months ended June 30, 1996. The Company's
negative cash flow from operations for the six months ended June 30, 1997 was
approximately equal to the net loss for the period. Negative cash flow from
operations for the six months ended June 30, 1996 was approximately equal to
the Company's net loss for the period, minus depreciation, amortization and
compensation expense for stock options.
The Company's future liquidity is subject to significant uncertainty.
The Company has incurred operating losses since its inception and remains
primarily dependent on external financing for liquidity. Management does not
believe that the Company's existing working capital is sufficient to maintain
its foreseeable short-term or long-term levels of operations in the absence of
the offering.
The Company's future liquidity is dependent on its proposed offering
of the Senior Notes, its future operating cash flow and its management of trade
receivables, inventories and payables. Management expects that, if the offering
of the Senior Notes is successful, the Company's working capital will be
sufficient to maintain its current and foreseeable levels of operations for 12
to 15 months, if the minimum proceeds of $3,000,000 are realized, and for at
least 36 months, if the maximum proceeds of $10,000,000 are realized. The
Company's ability to continue to operate would be jeopardized if its offering
of the Senior Notes were unsuccessful and it were unable to find alternative
sources of working capital. The Company currently does not have an alternative
plan to provide for its future liquidity.
The Company anticipates that capital expenditures for fiscal year 1997,
primarily for computer equipment, will be approximately $400,000-$600,000.
Management does not believe that the Company currently has sufficient funds to
meet its capital expenditure requirements for 1997.
INFLATION
The Company has not been adversely affected by inflation as
technological advances and competition within the software industry have
generally caused prices of the products sold by the Company to decline.
Management believes that any price increases could be passed on to its
customers, as prices charged for hardware by the Company are not set by
long-term contracts.
FOREIGN TRADE
Sales to foreign customers accounted for approximately 43% of the
Company's revenues in 1996. Thus far, all the Company's international sales
are payable in United States dollars, so foreign currency exchange rates have
not had any effect on the Company's liquidity or results of operations.
Nevertheless, the Company is subject to the economic and political risks
inherent in foreign trade, including currency controls, expropriation of
property, foreign taxation of sales, air transportation disruptions, changes in
currency exchange rates, changes in tax, tariff and freight rates, and
governmental regulations that establish other trade barriers.
FACTORS AFFECTING FUTURE RESULTS
The Company's future operating results and financial condition are
difficult to predict and will be affected by a number of factors, including the
following:
# The level of market acceptance of the Company's products and
technology;
# Delays or difficulties encountered in customer testing,
evaluation and integration of the Company's software products;
# The ability and willingness of manufacturers of automated
manufacturing devices to substitute the Company's technology for
their own proprietary technology;
# The willingness of industrial users of robots, machine tools and
other automated manufacturing equipment to acquire new or more
advanced models;
# General business and economic conditions in the United States and
international markets;
# External competitive factors, such as price pressures and the
development of substitute or competitive technology;
# The economic and political risks inherent in foreign trade,
including currency controls, expropriation of property, foreign
taxation of sales, changes in currency exchange rates and laws,
taxes, tariffs, and governmental policies that restrict,
prohibit, or adversely affect foreign trade, particularly with
respect to Japan;
# Technological changes that adversely affect the life cycle of the
Company's products, that require adaptation or enhancement of the
Company's products or that enhance or diminish industrial use of
automated manufacturing devices that use computerized motion
control;
# Fluctuations in sales attributable to the extended sales process
for the Company's products, changes in customer order patterns or
the new product cycle for manufacturers of automated
manufacturing devices; and
# The loss of, or a significant reduction in purchases by,
significant customers, such as Fuji.
The markets for the Company's products are emerging and specialized, and the
Company's technology has been commercially available for a relatively short
time. Accordingly, the Company has limited experience with the commercial use
and acceptance of its products and the extent of the modifications, adaptations
and custom applications that are required to integrate its products and satisfy
customer performance requirements. There can be no assurance that the emerging
markets for industrial motion control that are served by the Company will
continue to grow or that the Company's existing and new products will satisfy
the requirements of those markets and achieve a successful level of customer
acceptance.
Because of these and other factors, past financial performance is not
necessarily indicative of future performance, historical trends should not be
used to anticipate future operating results, and the trading price of the
Company's common stock may be subject to wide fluctuations in response to
quarter-to-quarter variations in operating results and market conditions.
16
<PAGE> 19
BUSINESS
The ensuing description of the Company's business might contain both
statements of historical fact and forward-looking statements. Examples of
forward-looking statements include: (i) projections of revenue, earnings,
capital structure and other financial items, (ii) statements of the plans and
objectives of the Company or its management, (iii) statements of future economic
performance, and (iv) assumptions underlying statements regarding the Company or
its business. See "Risk Factors" for additional information regarding
forward-looking statements, including a list of important factors, risks, and
uncertainties that could cause actual results to differ materially from any
forward-looking statements.
Cimetrix Incorporated ("Cimetrix" or the "Company") was incorporated
under the laws of the State of Utah on December 23, 1985. In September 1990,
Cimetrix merged into a newly incorporated Nevada company to change its domicile
to Nevada.
In October 1989, Cimetrix began developing and marketing software
products that control the motion of automated manufacturing devices by entering
into an exclusive license agreement with Brigham Young University ("BYU"). The
license agreement granted Cimetrix the rights to develop and market robot
inaccuracy compensation techniques developed in conjunction with an off-line
programming system known as ROBLINE and an accuracy enhancing calibration
technique known as ROBCAL. Effective July 5, 1995, the Company purchase the
ROBCAL and ROBLINE technology that was licensed from BYU.
ROBLINE and ROBCAL, together with other technology developed by the
Company, have enabled the Company to develop the Cimetrix Open Development
Environment ("CODE") operating software system, which includes "open
architecture" standards-based, operating systems software and controller
hardware that allow manufacturing engineers to replace cumbersome proprietary
systems with open systems when designing automated workcells. The Company's
products are designed to allow the customer to select "best of class" automation
components and to help reduce costs and time involved in designing, implementing
and maintaining automation systems.
On June 7, 1994, Cimetrix formed a subsidiary, Cimetrix (USA)
Incorporated, which was organized under the laws of the State of Florida. In
July 1994, Cimetrix acquired 20,000,000 shares of the common stock of Cimetrix
(USA) Incorporated in exchange for the transfer of substantially all of the
assets of Cimetrix and the assumption of $635,000 of convertible promissory
notes. Cimetrix (USA) Incorporated subsequently sold shares of its common stock
to private investors resulting in an approximate 12% minority interest.
Effective August 31, 1995, Cimetrix (USA) Incorporated was merged into Cimetrix
and each share of Cimetrix (USA) Incorporated common stock held by the minority
shareholders was converted into one share of Cimetrix.
The Company signed an OEM Agreement with Fuji Machine Mfg. Co., Ltd.
on September 25, 1996. The Agreement provides for Fuji Machine to purchase a
minimum number of copies of the Company's CIM Control CODE software. On June
25, 1997, the Company announced that it had been selected by Fuji to supply its
CODE software products as the control standard for Fuji's Surface Mount
Technology (SMT) equipment.
GENERAL
Cimetrix is the developer of the world's first open architecture,
standards-based, personal computer (PC) software for controlling machine tools,
industrial robots and electronic industry automation equipment that operate on
the factory floor. Its CODE software products are based on standard computer
platforms (Intel Pentium CPU with ISA/PCI bus and Motorola PowerPC and VME bus)
and run on standard operating systems (UNIX and Microsoft Windows NT). Cimetrix
believes that manufacturing companies will increasingly demand open
architecture, PC-based controllers on the equipment that they purchase,
transforming the worldwide controller market from proprietary solutions to open
architecture, PC-based solutions.
Cimetrix CODE software is currently operational in production
installations on a variety of general industrial robots, specialized electronics
industry assembly and surface mount technology (SMT) machines, and to a limited
extent, CNC machine tools.
17
<PAGE> 20
Cimetrix also has developed two additional software products, GEM
Equipment Manager and GEM Host Manager. These software products enable
compliance with Generic Equipment Model ("GEM"), which is a standard for
communications between manufacturing equipment and the factory's host computer.
The GEM software products are designed to run on PCs and UNIX workstations.
THE INDUSTRIAL MOTION CONTROLLER MARKET
The worldwide market for industrial motion control is comprised of four
distinct segments: electronics, machine tools, industrial robots and high-end
programmable logic controllers (PLCs). All four segments utilize some form of
computerized motion controller technology to run automated mechanisms.
Electronics Industry
The electronics industry is one of the largest and fastest growing
industrial sectors using automated manufacturing technology. The electronics
market consists of a variety of vertical niches, including semiconductor wafer
fabrication, semiconductor back end, printed circuit board assembly (Surface
Mount Technology), and electronic component and disk drive assembly. The
products of the companies involved in these processes represent "leading edge"
technology and many manufacturers have had to develop specialized, proprietary
equipment that operates in "clean room" environments. Automation equipment
developed by the electronics industry is very expensive, with individual
mechanisms costing up to $500,000 each, versus $30,000 to $100,000 for general
industrial robots.
Since many electronics assembly end-users have been forced to develop
"in-house" manufacturing technology for specialized applications, they have
typically used internally developed, PC-based or UNIX-based controllers written
in C/C++ code. The Company believes that end-users are in need of a standard,
low-cost, open-architecture set of tools to enable them to efficiently develop
specialized control applications quickly. Responding to this, the United States
segment of the industry has formed an association known as NEMI (National
Electronics Manufacturing Initiative). On May 29, 1997, NEMI issued a press
release announcing the completion of Version 1.1 of its Specification for a Low
Cost Controller Application interface suitable for use in a variety of
electronics manufacturing applications (the "NEMI Specification"). The NEMI
Specification is aimed at defining an industry standard for open architecture
application programming interface ("API"). Cimetrix has been significantly
involved in the development of the NEMI Specification and complies with
substantially all of the NEMI Specification. As worldwide applications for
computer chip technology continue to expand, the variety and volume of
automation equipment in the electronics assembly industry is expected to
continue to grow rapidly.
Machine Tool Industry (CNC Controllers)
Machine tools consist of metal cutting machines, such as lasers,
lathes, milling machines machining centers and grinders, and also include metal
forming equipment, such as press brakes, turret punches and tube benders. These
tools are used by a wide variety of manufacturers. Machine tools utilize a
computer numerical control, or CNC-type, controller. Despite the PC revolution
that has taken place over the past decade, the underlying technology and
software for machine tool controllers has changed very little during the same
period. Most major machine tool manufacturers purchase proprietary controllers
from several CNC controller vendors. The interest level of tool manufacturers in
open architecture CNCs is very high. The proprietary CNC manufacturers are
developing ways to configure the graphical user interface of the CNCs so they
appear to be open. However, none of the CNC manufacturers has developed a true
open architecture controller that runs on a PC.
Robotics Industry
18
<PAGE> 21
Industrial robots are used for tasks that are tedious, repetitive and
exhausting for humans and typically are employed to reduce the costs and improve
the quality of highly labor-intensive tasks. Industrial robots are multi-axis
manipulators used for welding, painting and material handling applications. The
automotive industry is the primary end-user of robots. Other end-users include
the steel, aerospace, heavy equipment and electronics industries. To date,
attempts by robot manufacturers to diversify sales outside the automotive sector
have been only moderately successful, principally because the early products
have been costly and difficult to use.
Driven by its high labor costs, Japan is the dominant user of robots in
manufacturing, with the United States second. Few industries outside of Japan
and the automotive sector have adopted robot technology, because it is currently
expensive to implement. Nearly all robot controllers are proprietary devices
manufactured by the major industrial robot vendors, which use their own robot
systems as a complete, proprietary solution. These robot controllers are only
compatible with robots supplied by the same vendor, and in many cases, are only
compatible with specific robot models of that vendor. These systems represent an
enormous technology investment "legacy," and are difficult and time consuming to
program, configure, implement and modify.
Programmable Logic Controllers (PLC)
Discrete control units, such as those that run conveyers or equipment
using sensors and on/off controls, were historically controlled by bulky
mechanical relays that lacked reliability in the dusty environment of the
factory floor. Over time, PLCs replaced banks of relays. The growth of the PLC
industry is driven by increasing product functionality and better
price/performance to the end-user.
THE MOVEMENT TOWARDS AN OPEN ARCHITECTURE CONTROLLER
Over the past 15 years, the primary driver for the revolution and
proliferation regarding office technology was the standardization of the PC
operating system, processors and buses. Expensive hardware components became
commodities, with powerful software applications delivering value to the system.
The Company believes this movement to standards-based systems is beginning in
manufacturing.
Currently, the automation control industry consists of a complex,
heterogeneous environment of vendor-specific machines and proprietary control
systems that are limited in function and expensive to use. Motion controllers
were originally developed without the benefit of the powerful PCs available
today. Robot and controller vendors were forced to develop motion controllers
internally, creating an environment in which each vendor's system remains
incompatible with the programming and interface methods of the others. As a
result, companies today have factory floors with islands of automation,
including robots, machine tools and sensors, each separated by vendor-specific
hardware peripherals, operating systems and programming languages. The
proprietary nature of these systems constrains the design of optimal workcells
and prevents end-users from managing the factory floor as a coordinated and
unified technology platform. The current environment significantly constrains
overall flexibility, responsiveness and productivity. Proprietary control
systems create numerous constraints for end-users including:
- High initial cost for the equipment, high maintenance costs and high
training costs
- Inability to deploy, redeploy and easily integrate
components (no "mixing and matching")
- Duplicative development and implementation programming required by
each vendor
- Inflexible technology development dictated by vendors (legacy
technology)
19
<PAGE> 22
Management believes that Cimetrix is positioned to become a leading
provider of software for both the general manufacturing industries that
currently use machine tool CNC controllers, robot controllers, and certain
"high-end" PLC controllers, as well as the electronic industries that are
currently using in-house developed controllers. Manufacturers are taking a
proactive role in demanding a switch from proprietary controllers to standard,
open architecture solutions.
ENABLING TECHNOLOGIES DRIVE THE SOLUTION
The current environment of multiple, vendor-specific technology
platforms emerged from the machine tool industry at a time when PCs were too
slow and lacked the power and flexibility required for motion control
operations. Vendors developed motion controllers with proprietary hardware
platforms, operating systems and assembly code programming languages that often
locked end-users into older, slower processors. The software tools on these
controllers are constrained by older, legacy hardware and proprietary operating
platforms. Hardware upgrades for simple items, such as expanded memory, can cost
ten times that of equivalent PC upgrades.
- PC technology has now advanced so significantly that today's low
cost PCs have several times more processing power than many
higher cost proprietary controllers.
- The rapid growth and acceptance of PC technology has facilitated
a similar increase in the development of software applications.
- Modern operating systems such as UNIX and Microsoft Windows NT
offer features, such as multi-tasking, multi-threading,
prioritized processing, symmetrical multi-processors and
real-time capabilities, that set the stage for a common software
solution for machine motion control.
- New and advanced motion control servo cards, machine vision
processor cards and input/output (I/O) cards are now available
from a variety of vendors for use on standard hardware platforms
in the industrial environment.
THE CIMETRIX SOLUTION
Cimetrix software currently provides all of the following advantages:
1. Lower Hardware Costs. Because Cimetrix software products are
based on standard computer platforms (Intel Pentium CPU with
ISA/PCI bus and Motorola PowerPC with VME bus) and run on
standard operating systems (UNIX and Microsoft Windows NT),
Cimetrix customers benefit from the tremendous
price/performance advantage of the PC platform. In addition,
the open architecture of Cimetrix software enables Cimetrix
customers to "mix and match" components to obtain the optimal
motion card, I/O subsystem and vision system for the
application.
2. Reduced Application Development Time. The Cimetrix CIMServer
utilizes an extensive library of APIs to access the underlying
Cimetrix motion control algorithms, which enable application
developers to program at very high levels using the
programming languages of their choice. Cimetrix customers
estimate this reduces development efforts for new applications
by approximately 50%.
20
<PAGE> 23
3. Reduced Time to Market. The Cimetrix CIMServer contains
two nearly identical versions: (i) an off-line simulation
version with output to a video driver (ClMulation), and (ii)
an on-line version with output to motion control equipment
(CIMControl). Simulation and control are achieved with the
same application software and API set, enabling concurrent
engineering and reduced time to market. Cimetrix customers
estimate the ability to develop, test and debug an entire
application in simulation mode prior to any hardware becoming
available reduces the overall time to market by approximately
50%.
4. Customers control their own destiny. Cimetrix software
provides all of the software source code hooks for Cimetrix
customers to implement their own custom software or
algorithms. This ensures that Cimetrix customers control their
own destiny and are able to develop specialized or proprietary
software to differentiate their products.
STRATEGY AND CUSTOMERS
Cimetrix has targeted three key audiences for the commercialization of
its products:
1. End-user production installations
2. OEM customers through pilot projects
3. Systems integrators to service additional end-users
The first step of the Cimetrix strategy was the installation of
Cimetrix software to continuous (i.e., 24 hours a day, seven days a week)
production environments across a wide variety of applications. Cimetrix targeted
strategic end-users promoting open architecture standards for their own
manufacturing and production systems. Cimetrix obtained contracts to provide
open architecture controller solutions for specific projects for end-user
customers. These initial end-user installations, which typically range from one
to 25 controllers, provide valuable reference accounts that can validate the
benefits of Cimetrix's open architecture technology. These end-user customers
also provide strong recommendations and endorsements to their strategic
equipment suppliers to make arrangements with the Company to utilize Cimetrix
software.
The second step of the Cimetrix strategy is to work closely with
strategic OEM customers that build CNC machine tools, industrial robots and
electronics assembly/SMT equipment. Cimetrix has identified the leading machine
suppliers in these markets that produce over one thousand machines per year and
represent the highest volume sales channel for Cimetrix. The control software
for these customers is a critical decision that affects the future of their
companies. Accordingly, Cimetrix has developed an OEM customer sales cycle that
involves a pilot project undertaken in cooperation with the OEM customer to
validate that Cimetrix software can effectively control the OEM customer's
machine, as well as provide the anticipated benefits. Cimetrix is currently in
various stages of the OEM sales cycle with several leading OEM customers in the
CNC machine tool, industrial robots and electronic assembly/SMT markets. The
sales cycle is typically between three and twelve months. See "Risk Factors -
Product Life Cycle; Need to Develop New Products and Enhancements."
The third step of the Cimetrix strategy is to use systems integrators
to meet the needs of additional end-user customers. Cimetrix is utilizing this
approach to re-direct the Cimetrix systems integration staff to work directly
with leading OEM customers. Cimetrix has now established a small, but growing
network of
21
<PAGE> 24
systems integrators across the United States and Canada with expertise in
machine tools, industrial robotics and electronics assembly.
CODE PRODUCT LINE OVERVIEW
The Company's primary product suite - the CIMETRIX OPEN DEVELOPMENT
ENVIRONMENT (CODE) - is an integrated suite of software tools designed to run on
PCs that enables rapid off-line controller programming, applications
development, simulation and debugging of automated workcells, as well as the
seamless implementation of workcell control. CODE runs on the Microsoft Windows
NT platform as well as several variations of the UNIX operating system,
including Lynx, a hard real-time operating system. CODE makes concurrent
engineering possible because simulation and control are accomplished using the
same application program, thereby dramatically reducing application development
and implementation times. CODE's multi-platform capability enables users to
choose from the entire spectrum of computer suppliers, resulting in "best of
class" hardware and software configurations.
The core component of the CODE architecture is the CIMSERVER. There are
two nearly identical versions of the CIMServer, an off-line simulation version
with output to a video drive (CIMULATION) and an online control version with
output to motion control and I/O control card drivers for controlling machines
(CIMCONTROL). In both versions, the CIMServer communicates with and coordinates
application programs, communicates with the actual or simulated physical
devices, performs motion planning, maintains the workcell model and provides I/O
services between the controller and the workcell sensors and actuators. Unlike
existing systems, simulation and control are achieved with the same software,
enabling concurrent engineering and reduced implementation time. This technology
has been packaged into a set of standard products consisting of the core
products and a variety of supporting products.
- CIMULATION. A version of the CIMServer in which workcell
operation is simulated on a graphical workstation. The
graphical simulation provides the programmer with an off-line,
virtual workcell, viewed as a three-dimensional solid or wire
frame graphical model with fully functional kinematics. All
application programs can be directly transported for use with
CIM Control. ClMulation includes CODE API which is a standard
C/C++ library of over 400 function calls used for automation
application development. Functions are provided for motion
control, machine vision, I/O control, off-line collision
checking and other common workcell operations. Also included
is CIMTools, which is a collection of general purpose
applications which provide the standard user interface to the
CODE System. In addition to C/C++, the CODE API is provided
for Visual Basic and Borland's Delphi, two popular rapid
application development environments for Windows NT.
- CIMCONTROL. A version of the CIMServer that allows on-line
mechanism and I/O control through off-the-shelf servo and I/O
control cards. It turns any standards-based computer (PC or
VME) into an open architecture controller. Unlike competing,
proprietary workcell controller software, CIMControl's
client/server architecture simultaneously can drive several,
dissimilar types of mechanisms, such as robots and machine
tools, manufactured by different vendors. CIMControl also
includes the CODE API and CIMTooIs.
CIMulation and CIMControl are separate versions of the same CODE
server. Applications developed using the CODE API run the same with either
server seamlessly. No complex translation is
22
<PAGE> 25
required from workcell design and simulation to workcell control because
applications run in the native CODE environment.
CODE SUPPORT TOOLS
CODE Support Tools is a set of high productivity software tools
designed to increase the speed of deployment of systems based on CODE.
- CIMTOOLS. A point-and-click tool that provides access to the
shared CODE database model used in both CIMulation and
CIMControl. CIMTools allows developers to create and edit new
mechanisms and workcell geometries, teach points and paths,
manipulate graphical views and examine the state of the
machine or workcell. CIMTools includes a software teach
pendant and signal monitoring feature.
- CIMBUILDER. A rapid application development (RAD) environment
based around the Tcl/Tk language. It is an alternative to
mass-market development environments, such as Visual Basic,
Visual C++ and Borland Delphi, and has been designed to
simplify and accelerate the development of robotic and machine
applications. CIMBuilder encapsulates the CODE API, a
comprehensive set of functions for workcell and machine
control and provides sophisticated graphical user interface
(GUI) development tools.
- CIMTUNE. A software utility that simplifies the process of
setting up CODE based servo systems. CIMTune provides a
GUI-based, point-and-click environment for defining servo card
parameters, servo tuning and system de-bugging. Versions are
available for Delta Tau, PMAC and Motion Engineering, Inc.
servo cards. CODE also supports the use of the motion card
vendor's own tuning package.
- CIMVISION. A collection of vision tools that simplify the
development of machine vision guidance applications for
CODE-based systems. Based on the popular Cognex vision
hardware, CIMVision provides two ways of integrating machine
vision functionality. For users of CIMBuilder, command
templates encapsulate key features of the vision system and
its functions into convenient fill-in-the-blank panels.
Alternatively, an application programming interface (API) is
provided for developers using C/C++.
- CIMCAL. A collection of software interfaces that provide two
significant enhancements to a CODE-based system. First, CIMCal
allows system developers to determine mechanism tool and
sensor (e.g. camera) pose (position & orientation) relative to
each other and to other system locations. Second, CIMCal
provides patented algorithms for improving the accuracy of
mechanisms.
The Company continues to invest heavily in research and development to
continue to build its position in open architecture controllers and open systems
automation products. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation - Research and Development." Cimetrix's goal
is to build its API set into the most complete and robust open architecture API
available. New product developments are prioritized and scheduled based on
customer input and ongoing evaluations
23
<PAGE> 26
of new software technologies as they apply to the Cimetrix business model. After
end-user or OEM requirements are documented, manpower estimates are established
and new products are scheduled for release. This process is documented in the
Cimetrix Software Quality Standards. Major new developments for 1997 are to
improve the motion and I/O interface to allow easier integration of new servo
cards and tuning packages, to upgrade to Microsoft Windows NT 4.0 and to further
adapt Cimetrix APIs to conform to and drive worldwide standards. In addition,
Cimetrix is aggressively developing the GEM product line to enable customers to
integrate even more third party, open architecture components into their
controllers.
GEM PRODUCT LINE OVERVIEW
Cimetrix offers two GEM products, GEM Equipment Manager and GEM Host
Manager, for implementing GEM (Generic Model for Communications and Control of
SEMI Equipment) for communications and control of equipment. GEM is a worldwide
communications standard developed by the semiconductor industry (Semiconductor
Equipment and Materials International (SEMI) Standard E30), which is used
extensively throughout semiconductor wafer fabs and is spreading into SMT and
general electronics. Equipment builders have been reluctant to provide
GEM-compliant technology because of the difficulty in obtaining GEM compliance.
Without GEM Equipment Manager, it can take between three and six months to
modify a piece of equipment to be GEM compliant. Recognizing the need to
simplify this process, several of the Company's customers urged Cimetrix to
develop a comprehensive tool set for implementing the GEM standard. The
resulting products, GEM Equipment Manager and GEM Host Manager, have broad
application not only for CODE-based controllers but for many other types of
factory equipment. These products facilitate rapid GEM compliance and equipment
to host interfacing in a matter of weeks.
GEM Equipment Manager makes the process of GEM implementation practical
and easy. Prior to Cimetrix's release of its GEM products, the process for
becoming GEM compliant was long and tedious. Now the developer of the GEM
interface can achieve immediate results because 95% of what is needed for GEM
communications comes ready to use from Cimetrix. The remaining 5% is machine
specific information that can be easily incorporated into Cimetrix's GEM
products using its graphical user interface. This allows the developer to focus
its effort towards building a better application. The GEM products are designed
to run on PCs and UNIX workstations.
GEM Equipment Manager is a development package for equipment
manufacturers seeking to attain GEM compliance quickly and easily. Immediately
after installation, the software is able to communicate with any GEM capable
host system and respond to all GEM SECS-II messages. Easy to use tools and API
functions enable developers to quickly and easily customize the GEM interface
for the intended equipment.
GEM Host Manager is a development package for users of GEM compliant
equipment seeking to create a host interface to the equipment. Immediately after
installation, the software is able to communicate with multiple GEM compliance
pieces of equipment and verify most GEM capabilities. Powerful API functions and
a graphical user interface tool enable developers to quickly and easily develop
a host system that utilizes the extensive line management features made possible
by the GEM standard.
<TABLE>
<CAPTION>
- --------------------------------------------- -----------------------------------------------------------
FEATURES BENEFITS
- --------------------------------------------- -----------------------------------------------------------
<S> <C>
Fully functional GEM compliant communication Enables quicker system startup Easy
to use API enables high level programming Slashes system development costs by reducing programming
time
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
<S> <C>
Robust on-line monitoring and diagnostic tools Minimizes downtime by quickly verifying
functionality and identifying problems.
- ---------------------------------------------- -----------------------------------------------------
</TABLE>
COMPETITION -- CODE
The manufacture and sale of automation technology is a highly
competitive industry. Cimetrix believes that its competition is divided into
four groups: robot manufacturers, machine tool controller manufacturers,
simulation developers, and electronics assembly equipment manufacturers.
There are several robot manufacturers who design and sell proprietary
controllers and software for their robots. Most of these companies, including
Adept Technologies, Asea Brown Boveri Group (ABB), Fanuc, Kawasaki, Kuka
Welding, Mitsubishi Electric, Nachi, Panasonic, Sankyo, Seiko, Sony, Staubli,
Yamaha, and Yaskawa Electric (Motorman), are much larger than Cimetrix and have
significantly greater resources than Cimetrix. Although their hardware is
generally considered very good, management believes that these manufacturers'
software and controllers are limited in their applications because of their
closed, proprietary design. While the Company will not be manufacturing robot
devices in direct competition with these companies, its controllers and software
will directly compete with their proprietary controllers. Management believes
the Company's products are generally less expensive than the competing products.
Some of these manufacturers of robot controllers claim to have an "open
architecture" design. However, management believes that they are not "open
architecture" designs because they use a closed, proprietary computer language
that, in most cases, is not translatable into other proprietary languages, and
are not easily expandable. This can make modification of the controller's
functions difficult. Additionally, management understands that it is difficult
for Adept's controllers to interface across a local area network.
Machine tools consist of metal-forming equipment, such as press brakes,
turret punches and tube benders, and metal cutting machines, such as lasers,
lathes, milling machines and machine center grinders equipment, and are used by
a wide variety of manufacturers. Machine tools utilize a computer numerical
control, or CNC-type, controller. Despite the PC revolution that has taken place
over the past decade, the underlying technology and software for machine tool
controllers has changed very little during the same period. Most major machine
tool manufacturers purchase proprietary controllers from several CNC control
system vendors, including Allen-Bradley, Fanuc, Mitsubishi, Siemens and Toshiba.
Cimetrix has identified at least three major competitors in the field
of robot software simulation development and robot accuracy correction:, Deneb
Robotics, Inc;., Silma (a subsidiary of Adept Technologies); and Technomatics.
Although these three companies market systems that are competitive on a
stand-alone basis for simulation, management believes they are unable to match
the Company's ability to achieve both simulation and control with the same
program, enabling concurrent engineering and reduced implementation time.
Management also believes that other simulation companies products do not have
the same flexibility of off-line programming or precision robot control as
compared to the Company's products.
The final group of competitors is composed of electronics assembly
equipment manufacturers who supply controllers with their electronics assembly
equipment. This group includes Fuji Machine, Panasonic, Siemens, Universal
Instruments, and numerous others.
In addition, Hewlett-Packard recently announced an open architecture
machine tool controller that will be in direct competition with the Company.
Hewlett-Packard's product will incorporate motion controller software technology
it acquired in its acquisition of Trellis Software & Controls, Inc.
Hewlett-Packard `s fundamental business is selling hardware, and it has
established a hardware group for this
25
<PAGE> 28
purpose. Cimetrix believes that major OEM customers and distribution partners
will want to develop their own hardware solutions.
Management believes that most, if not all, of the competitors for the
Company's CODE software products currently have greater financial resources and
market presence than Cimetrix does. Accordingly, these competitors may be able
to compete very effectively on pricing and to develop technology to increase the
flexibility of their products. Further, each of these competitors has already
established a share of the market for their products, and those manufacturers of
machine tools, industrial robots and electronics assembly equipment which use
their own proprietary controllers and software may find it easier to limit
market penetration by the Company because of the natural tie-in of their
controllers and software to their mechanisms. Management is uninformed as to
whether any of these competitors are presently developing additional technology
that will directly compete with the Company's product offerings.
COMPETITION - GEM
The GEM market in the SMT segment is relatively new and emerging. The
Company believes it has a significant opportunity to sell its GEM software
products in this new market. There is not presently a market leader in this
segment of the GEM market and the Company hopes to become the leading supplier
of GEM software to the SMT segment.
The GEM market is relatively mature in the semiconductor segment and
presently dominated by several suppliers. The leading supplier of equipment-side
tools to build GEM applications is GW Associates. GW Associates supplies
callable C program libraries that support SEC-II communications, which is the
communications underpinning of the GEM communications model. This approach
forces the developer to build its own GEM communications program to initiate
equipment communications, error handling routines and even call-back routines.
GW Associates supports many operating systems and has a large installed base of
users. Other competitors include US Data, Real Time Performance, and a number of
small companies.
The main competitor for the host-side tools is FASTech Integration
with their WinSECS and Tool Object Model products. WinSECS is Windows NT based,
object oriented and provides OLE custom control. Tool Object Model is still in
beta testing and will not be commercially available until next year. This
approach is flexible and powerful and Cimetrix may eventually have to upgrade
its products to include an Active X interface to enable its offerings to remain
competitive.
Management believes that most, if not all, of the Company's
competitors for its GEM software products currently have greater financial
resources and market presence than Cimetrix. Accordingly, these competitors may
be able to compete very effectively on pricing and to develop technology to
increase the flexibility of their products. Management is uninformed as to
whether any of these competitors are presently developing additional technology
that will directly compete with the Company's product offerings.
SALES AND MARKETING
The Company's sales and marketing team targets three primary CODE
markets: Electronics Assembly/SMT, Robotics, and CNC Machine Tools. In addition,
the sales and marketing team targets key GEM opportunities. The sales and
marketing team is responsible for identifying key end-user customers and the
top-tier OEM machine suppliers in each primary market. The Company's direct
sales force is coordinated by an Executive Vice President of Sales and two
supporting regional sales managers. Each salesperson is responsible for pursuing
potential customer leads in his or her territory and for qualifying customer
relationships. The Company's sales offices are located in Boston, Los Angeles
and Milwaukee.
CUSTOMER PROGRAMS
The Customer Programs team is responsible for the initial integration
of Cimetrix software with an OEM's mechanism. Working closely with sales
professionals, this term verifies the OEM's requirements and design and
integrates Cimetrix software using standard products in a defined period.
Skillsets on this
26
<PAGE> 29
team include servo tuning, inverse kinematics design, vision, software,
interface board design, wiring, systems integration and program management.
SOFTWARE DEVELOPMENT
The Software Development team is responsible for producing quality
software products on time. All products are managed by releases and follow the
Cimetrix Software Quality Standards. Skillsets on this team include computer
science and mechanical engineering. The functionality included in new releases
is jointly established by the Marketing and Sales teams, the Chief Engineer, and
the Executive Vice President of Software Development.
The Technical Services team supports Cimetrix customers and development
engineers and performs some minor manufacturing activities. Their activities
include:
- Twenty-four hour technical support on the entire Cimetrix
product line.
- Customer training, including monthly training sessions in Utah as
well as customer-site training. The Company's comprehensive
training modules are typically two to three-day courses,
depending on the product. In 1996, 24 training sessions were held
for various Cimetrix products. This schedule will grow to
approximately 50 courses in 1997. Typical attendees include
technical and evaluation personnel from end-users, OEMs and
systems integrators.
- Full documentation of all applications, which will be available
on CD-ROM in the fourth quarter of 1997.
- Software quality and systems testing so that the Technical
Services team is the "first customer" of any new products or
releases. A comprehensive configuration management system ensures
proper release methods.
INTELLECTUAL PROPERTY RIGHTS
The open architecture controller technology on which the Company's
software is based was developed from 1984 to 1989 by a team of BYU engineers
led by Dr. W. Edward Red, Dr. Steven Sorensen and Dr. Xuguang Wang. In 1989,
Cimetrix signed an exclusive license with BYU for the development of these
technologies for commercial purposes. Shortly thereafter, Dr. Sorensen
and Dr. Wang joined Cimetrix. Effective July 5, 1995, Cimetrix purchased
from BYU all the rights, title, interest and benefit to this intellectual
property. To date, more than 260 man-years have been invested in the
development of Cimetrix's open architecture software technology.
The technology purchased from BYU, along with other technology
developed internally, is proprietary in nature. The Company has obtained two
patents on certain aspects of the technology, issued in May 1989 and March 1994,
respectively. In addition, the Company has registered its entire CODE software
system with the Copyright Office of the United States, and will continue to
timely register any updates to current products or any new products. For the
most part, other than the two patents and the copyright registrations, the
Company relies on confidentiality and non-disclosure agreements with its
employees and customers, appropriate security measures and the encoding of its
software to protect the proprietary nature of its technology. Although the
Company capitalizes certain software development costs, no cost has been
capitalized with respect to the patents, and they are not considered material to
the Company's business.
27
<PAGE> 30
MAJOR CUSTOMERS, BACKLOG AND FOREIGN SALES, AND CLASSES OF PRODUCTS
Approximately 34% and 14% of the Company's revenues during 1996 were
from Fuji Machine Mfg. Co., Ltd. and Sandia National Labs, respectively. No
other single customer accounted for more than 10% of the Company's revenues
during 1996. The Company had four customers, AT&T (16%), Cybex Technologies
(10%), Hewlett-Packard (26%) and Motorola (29%), which individually were 10% or
more of the Company's revenues during 1995 and which together accounted for
approximately 81% of the Company's total revenue during 1995. Loss of the
Company's relationship with Fuji could materially adversely affect the Company.
See "Risk Factors - Dependence on a Significant Customer."
At August 22, 1997, the Company's backlog of orders from customers for
products to be shipped or application engineering services to be performed
during the remainder of 1997 and through 2001 was approximately $2,500,000. The
Company fulfilled during the first six months of 1997 substantially all of its
approximately $450,000 backlog of orders at December 31, 1996. In addition, at
August 22, 1997, the Company has signed support service agreements that are
expected to generate approximately $100,000 in revenues during the next six
months. During the year, approximately 43% of the Company's revenues were from
sales to companies companies based in foreign countries, principally Japan. The
Company is in the process of establishing a sales office in Japan. The Company
did not have any significant foreign sales in 1994 or 1995.
The Company's revenues in 1996 from the sale of hardware, software and
software support services were 28%, 58%, and 14%, respectively. The Company's
hardware, software and software support service segments accounted for 56%, 27%
and 17%, respectively, of the Company's revenues in 1995. The Company's sales in
1994 consisted mostly of prototype software products.
PERSONNEL
The Company currently has 51 employees, 32 of which are involved in the
technical development of products, two in manufacturing, eight in sales and
marketing, and nine in clerical and administrative positions. None of the
employees of the Company is represented by a union or subject to a collective
bargaining agreement, and Cimetrix considers its relations with its employees to
be generally satisfactory.
PROPERTIES
The Company sold its 18,500 square foot facility in Provo, Utah in
September 1996 and leased the space back from the purchaser until February 28,
1997. Effective March 1, 1997, Cimetrix moved to a facility at 6979 S. High Tech
Drive in Midvale, Utah (about six miles south of Salt Lake City), which it
leases pursuant to a five-year lease. The new facility consists of 32,000 square
feet, of which approximately 20,000 square feet is office and engineering space
and approximately 12,000 square feet is manufacturing and storage space.
The Company leases 4,754 square feet of office space in Tampa, Florida,
for its principal executive office pursuant to a lease that expires on June 30,
2000. The Company also leases approximately 300 square feet for its sales
offices in Los Angeles pursuant to a short-term lease expiring within the next
six months. The Company also subleases 881 square feet of space in San
Francisco for an application engineering office pursuant to a sublease that
expires on June 30, 1998. Management of the Company considers the existing
manufacturing facilities and non-manufacturing facilities to be sufficient to
accommodate the anticipated growth of the Company for the immediate future.
28
<PAGE> 31
LEGAL PROCEEDINGS
The Company filed a lawsuit on February 8, 1996 and an amended
complaint on March 7, 1997 against W. Keith Seolas ("Seolas"), a former
director of the Company, and members of his family. The lawsuit, styled
Cimetrix Incorporated v. Waldron Keith Seolas et al., is pending in the Fourth
Judicial District Court of Utah County, Utah, and seeks declaratory relief and
a determination of the validity of the issuance of approximately 2,000,000
shares of the Company's common stock to Seolas and his family members, which
represents all of the shares of the Company's Common Stock that they still own,
following their return of approximately 1,000,000 shares to the Company in 1994.
Seolas filed a separate lawsuit against the Company on April 26, 1996
and an amended complaint on March 17, 1997 in the United States District Court
for Utah. In his lawsuit, styled Waldron Keith Seolas et al. v. Cimetrix
Incorporated, Seolas alleges fraud by the Company in connection with his return
of approximately 200,000 of the approximately 1,000,000 shares returned to the
Company in 1994. The Company believes that it has strong defenses to Seolas'
claims and intends to vigorously defend them. The Company's counsel believes
the claims against the Company are without merit.
Other than as stated in the preceding paragraphs, the Company is not a
party to any material pending legal proceedings and, to the knowledge of its
management, no such proceedings by or against the Company have been threatened.
To the knowledge of the Company's management, there are no material proceedings
pending or threatened against any director or executive officer of the Company,
whose position in any such proceeding would be adverse to that of the Company.
MANAGEMENT
OFFICERS AND DIRECTORS
The officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Paul A. Bilzerian........................... 47 President, Chief Executive Officer, and Director
Paul A. Johnson............................. 40 Executive Vice President of Software Development and
Director
David L. Redmond............................ 46 Executive Vice President, Chief Financial Officer and
Director
David P. Faulkner........................... 42 Executive Vice President of Marketing and Customer
Programs
Robert H. Reback............................ 37 Executive Vice President of Sales
Andrea J. Berry............................. 41 Vice President of Human Resources
Ronald E. Hair.............................. 41 Vice President of Technical Services
Norman J. Ibrahim........................... 43 Vice President of Sales
Dr. Steven Sorensen......................... 38 Vice President and Chief Engineer
Dr. Xuguang Wang............................ 34 Vice President of Strategic Programs
Douglas A. Davidson......................... 58 Director
Dr. Ron Lumia............................... 46 Director
</TABLE>
Paul A. Bilzerian, President, Chief Executive Officer and a Director, has been
involved in the Company in various capacities since 1994. Mr. Bilzerian has
been the President of Bicoastal Holding Company, a private investment company,
since 1993. Mr. Bilzerian has been involved in more than $10 billion dollars of
corporate finance transactions. He has a B.S. degree in Political Science from
Stanford University and an M.B.A. degree from Harvard University. In 1989, Mr.
Bilzerian was convicted of two counts of federal securities fraud in connection
with his sales and purchases of Cluett Peabody and Hammermill Paper Company
stock, for which
29
<PAGE> 32
he served a prison term of 20 months and paid a $1.5 million fine.
Mr. Bilzerian also is subject to a civil injunction secured by the Commission
as a result of his conviction.
On August 5, 1991, Mr. Bilzerian filed for personal bankruptcy in the
Middle District of Florida, Case Number 91-10466-8P7. The case remains
pending. Sixteen claims were timely filed in Mr. Bilzerian's case. Nine claims
remain outstanding, six of which are disputed by Mr. Bilzerian. The claims
against Mr. Bilzerian total approximately $100 million, most of which is
represented by claims by the Commission and HSSM #7 Limited Partnership
(HSSM").
Five creditors have brought actions to bar Mr. Bilzerian's general
discharge in bankruptcy, including the Department of Justice and the SEC. The
actions by four of the creditors have been dismissed. The remaining action was
initially filed by a creditor which has since withdrawn its claim and which
voluntarily dismissed its action against Mr. Bilzerian. The Department of
Justice was substituted as the party plaintiff in the action. The complaint
was dismissed and the Department of Justice filed an amended complaint which
was also dismissed. The Department of Justice appealed the dismissal of its
complaint but later dismissed its appeal. After the Department of Justice
dismissed its appeal, the SEC was also substituted as the party plaintiff in
that action. The original complaint consisted of nine counts. Seven counts
have been dismissed and two are still pending.
Five creditors also brought actions to seek to except their individual
claims from discharge. The actions by three creditors were dismissed, however
actions by HSSM and the SEC remain pending. HSSM initially filed a thirteen
count complaint. The Bankruptcy Court dismissed eleven counts and granted
summary judgment in Mr. Bilzerian's favor with respect to the other two counts.
HSSM appealed the summary judgment in favor of Mr. Bilzerian with respect to
one count and prevailed on appeal, which rendered HSSM's rescission claim
against Mr. Bilzerian for fraudulent inducement nondischargeable. Mr.
Bilzerian's appeal of the reversal of the Bankruptcy Court's judgment in his
favor remains pending. The SEC brought a one count complaint which was
dismissed by the Bankruptcy Court and reversed on appeal. On remain, the
Bankruptcy Court, sua sponte, granted summary judgment in Mr. Bilzerian's
favor. On appeal, the District Court reversed and granted judgment in favor of
the SEC, which rendered the SEC's disgorgement judgment nondischargeable. Mr.
Bilzerian's appeal remains pending. Unless reversed on appeal, the claims held
by HSSM and the SEC, totaling approximately $100 million, will be
nondischargeable in Mr. Bilzerian's bankruptcy.
Paul A. Johnson, Executive Vice President of Software Development and a
Director, joined Cimetrix in May 1997. He had been a director of the Company
since January 1997. Before joining the Company, he had been the Director of
Consulting for Object Space, Inc. since January 1996. He was a Vice
President-Project Director for Citibank, N.A. during 1995 and a Senior
Consultant with Rothwell International during 1994. From 1992-1994, he was a
Director of Software Development with Thesis, Inc., and from 1985-1992 was a
Staff Engineer with Martin Marietta Astronautics. Mr. Johnson has a B.S. degree
in Physics from the United States Military Academy in West Point, New York and
M.S. degree in Mechanical Engineering from Georgia Institute of Technology.
David L. Redmond, Executive Vice President, Chief Financial Officer and a
Director, joined Cimetrix as Executive Vice President and Chief Financial
Officer in February 1997. He has been a Director of the Company since September
20, 1995. Mr. Redmond was Executive Vice President and Chief Financial Officer
of Pharmacy Corporation of America ("PCA") from 1995-1997. From 1991-1995, he
was Senior Vice President and Chief Financial Officer of Pharmacy Management
Services, Inc., a publicly-held company which was acquired by PCA in June 1995.
Mr. Redmond was formerly a partner with KPMG Peat Marwick, including six years
as Partner in Charge of KPMG's High Technology Practice in Florida. Mr. Redmond
is a certified public accountant and has a B.S. degree in Accounting from the
University of North Dakota.
David P. Faulkner, Executive Vice President of Marketing and Customer Programs,
joined the Company in August 1996. Mr. Faulkner was previously employed from
1986-1996 as the Manager of PLC Marketing, Manager of Automotive Operations and
District Sales Manager for GE Fanuc Automation, a global supplier of factory
automation computer equipment specializing in programmable logic controllers,
factory software and computer numerical controls. Mr. Faulkner has a B.S. degree
in Electrical Engineering and an M.B.A. degree from Rensselaer Polytechnic
Institute.
Robert H. Reback, Executive Vice President of Sales, jointed the Company as Vice
President of Sales in January 1996 and was promoted to Executive Vice President
of Sales in January 1997. Mr. Reback was the District Manager of Fanuc Robotics'
West Coast business unit from 1994-1995. From 1985-1993 he was Director of
Sales/Account Executives for Thesis, Inc., a privately-owned supplier of factory
automation software and was previously a Senior Automation Engineer for Texas
Instruments. Mr. Reback has a B.S. degree in Mechanical Engineering and a M.S.
degree in Industrial Engineering from Purdue University.
Andrea J. Berry, Vice President of Human Resources, joined the Company in
November 1996. From 1990 to 1993, Ms. Berry was a consultant with Organizational
Dynamics, Inc., an international company which assisted organizations with
continuous quality and self-managed work team implementation. She was previously
employed for several years by TEAC America, Inc., as Corporate Manager, Human
Resources and Organization Development. Ms. Berry has a B.A. degree in History
from the University of California at Irvine and a M.A. degree in Human Resources
and Organization Development from the University of San Francisco.
Ronald E. Hair, Vice President of Technical Services, joined the Company in
March 1996. Mr. Hair served as the Director of Information Systems at Evans and
Sutherland Computer Corporation, where he worked from 1982-1996. Mr. Hair has a
B.S. degree in Computer Graphics from BYU.
Norman J. Ibrahim, Vice President of Sales, joined the Company in June 1996 as
Midwest Manager of Sales. He was promoted to Vice President of Sales in January
1997. Mr. Ibrahim was the Vice President of Sales for Framework Technologies, an
Allan Bradley Technology spin-off, from 1994-1996. From 1993-1994 he was East
Coast Sales Manager of Thesis, Inc. His previous responsibilities include
various
30
<PAGE> 33
marketing and sales positions at Honeywell, Measurex Systems and Mentor
Graphics. Mr. Ibrahim has a B.S. degree in Chemical Engineering from the
University of Washington.
Dr. Steven Sorensen, Vice President and Chief Engineer, has worked for Cimetrix
the past six years. Prior to joining the Company, Dr. Sorensen was an Associate
Professor at BYU, where he received his Ph.D. degree in Mechanical Engineering.
Dr. Sorensen has been working to develop the Cimetrix technology for the past
ten years and is one of the principal architects of many of the Company's most
important products.
Dr. Xuguang Wang, Vice President of Strategic Programs, has worked for the
Company during the past six years and has been working to develop the Cimetrix
technology for the past ten years. He received his Ph.D. degree in Mechanical
Engineering from BYU and is an expert in computer graphics, robot kinematics,
control tool and sensor calibration and robot accuracy enhancement compensation.
Douglas A. Davidson, a Director, is Chairman of the Board of PubNetics, Inc., an
electronic publishing software company, and since 1991 has been managing partner
of Pensar, a consulting company that provides executive and consulting services
to information and technology companies. During 1993-1994, he served initially
as a consultant and later as Executive Vice President for XVT Software, Inc. of
Boulder, Colorado, a leader in cross-platform GUI building tools. From
1989-1991, Mr. Davidson served as President and Vice Chairman for Network
Management, Inc., a privately-held systems integration and services company
specializing in network management for local and wide area networks. Prior to
1989, Mr. Davidson had other similar executive experiences with Honeywell
Information Systems, Mohawk Data Sciences, Display Data Corporation, and Science
Management Corporation for over 20 years. He received a B.A. degree in Business
Administration and Economics from Colby College.
Dr. Ron Lumia, a Director, has been a Professor in the Mechanical Engineering
Department of the University of New Mexico since October 1994. From 1986 through
September 1994, Dr. Lumia served as Group Leader at the National Institute of
Standards and Technology (NIST), performing research in the areas of advanced
automation, robotics, machine vision, and systems integration. Previously, he
taught at ESIEE (Paris, France), Virginia Tech, and the National University of
Singapore, where he consulted for a variety of companies. Dr. Lumia received a
B.S. from Cornell University and M.S. and Ph.D. degrees from the University of
Virginia, all in electrical engineering. He is the author of over 100 technical
papers.
TERMS OF OFFERING AND PLAN OF DISTRIBUTION
Subject to the conditions described below, the Company is offering a
minimum of $3,000,000 and a maximum of $10,000,000 of its 10% Senior Notes due
2002 at an offering price of 100% of face value. The Senior Notes will be sold
and issued in minimum denominations of $5,000 and additional whole multiples of
$1,000. Each subscriber will also receive for no additional consideration a
Warrant to purchase 250 shares of the Common Stock at $2.50 per share for
each $1,000 principal amount of Senior Notes purchased.
The Offering is not underwritten and is being made directly by the
Company on a best efforts basis through its officers, directors and regular
employees (other than Paul A. Bilzerian), who will not receive any sales
commissions. The Company will also sell the Securities to or through one or more
broker-dealers that will act as the Company's agent in its selling efforts. The
Company will pay compensation to each broker-dealer equal to seven percent of
the offering price of the Securities. Each broker-dealer will be required to
take and pay for only those Securities that it sells to the public.
All closing and funding procedures will be governed by the Subscription
Agreement executed by the Company and each subscriber. Copies of the
Subscription Agreement have been furnished to each prospective purchaser with
this Prospectus and should be read with care.
The Company may cancel, modify or terminate the Offering at any time
without notice and reserves the right to refuse or reject any subscription,
entirely or in part, for any reason or to waive the $5,000 minimum purchase
requirement. In addition, none of the Senior Notes will be sold in the Offering
31
<PAGE> 34
unless executed Subscription Agreements for at least $3,000,000 aggregate
principal amount of the Senior Notes, and full payment therefor, have been
received by the Company before the expiration date of the Offering. Until the
minimum sales condition of the Offering ($3,000,000) is satisfied, all payments
from subscribers will be deposited and held in a separate bank account of the
Company with Barnett Bank of Tampa, N.A., Tampa, Florida, that is not an escrow
account. If the minimum sales condition of the Offering ($3,000,000) is not
satisfied before the expiration date of the Offering, or if a Subscription
Agreement is rejected, or if the Offering is cancelled or otherwise not
consummated for any reason, the subscription payments received from subscribers
will be refunded promptly, without interest or deduction.
Any person desiring to purchase Senior Notes should execute in
duplicate and deliver to the Company at the address stated below a Subscription
Agreement in the form supplied by the Company and a counterpart signature page
to the Note Agreement, together with payment for the principal amount of
Senior Notes to be purchased:
Cimetrix Incorporated
Attention: David L. Redmond
100 North Tampa Street, Suite 3550
Tampa, Florida 33602
Payment for the Senior Notes is due in full when the Subscription Agreement is
tendered to the Company and must be paid by check or bank draft made payable to
the Company. A Subscription Agreement for any Senior Notes will be irrevocable,
but a subscriber's obligations under a Subscription Agreement will terminate if
it is rejected or not accepted by the Company on or before the expiration date
of the Offering. A Subscription Agreement will be accepted by the Company only
when it has been signed on behalf of the Company by a duly authorized executive
officer. The Company may reject any subscription. If a Subscription Agreement
is accepted by the Company, one countersigned copy will be returned to the
subscriber.
Each subscriber is responsible for selecting the method of delivering
to the Company her or his Subscription Agreement and payment and bears the risks
associated with the selected delivery method, including the risk of delays in
delivery or in delivery not being made for any reason. The Company suggests that
Express Mail or similar overnight carrier be used to ensure timely delivery. If
delivery of the Subscription Agreement and payment is made by regular mail, the
use of insured, registered or certified mail, return receipt requested, is
recommended.
The Offering will expire on October 31, 1997, subject to the Company's
right to extend the expiration date of the Offering one or more times until no
later than December 31, 1997. At any time before the closing of the sale of the
Senior Notes, the principal amount of Senior Notes that subscribers have agreed
to purchase may be reduced by the Company. Any such reduction will be on a pro
rata basis among all subscribers and the aggregate purchase price will be
reduced accordingly. Any excess purchase price received from a subscriber will
be refunded promptly, without interest.
If the terms of the Offering are amended in any material respect
(including an extension of the expiration date of the Offering), the Company
will provide supplemental disclosure, in the form of a post-effective amendment
to the Prospectus, to all subscribers and will provide subscribers a right to
cancel their subscription within a specified period of time.
The closing of the sale of the Senior Notes will occur promptly after
the expiration date of the Offering or, if sooner, the date when the Offering
is fully subscribed, subject to satisfaction of the minimum sales condition.
The Senior Notes and Warrants purchased by subscribers will be mailed or
delivered to them as soon as practicable following the Closing of the Offering.
32
<PAGE> 35
DESCRIPTION OF THE SENIOR NOTES
GENERAL
The Senior Notes will be issued under an Indenture among the
Company and each holder of a Senior Note. A copy of the Indenture in
substantially the form that it will be executed is filed as an exhibit to the
Registration Statement of which this Prospectus is a part and is incorporated
by reference in this Prospectus. See "Available Information." The Indenture and
the Senior Notes will be governed by and construed in accordance with the laws
of the State of Florida. The ensuing statements summarize certain provisions of
the Senior Notes and the Indenture, do not purport to be complete and are
qualified entirely by reference to the Indenture. Wherever particular sections
or defined terms of the Indenture are referenced, it is intended that those
sections or defined terms will be incorporated by reference. Capitalized terms
not defined below have the meanings assigned to those terms in the Indenture.
The Senior Notes will be issued only in fully registered form, without
coupons, in minimum denominations of $5,000 and additional whole multiples of
$1,000. The Senior Notes will mature on September 30, 2002, will be unsecured
obligations of the Company and will be limited to $10,000,000 aggregate
principal amount. There will not be a sinking fund for the Senior Notes. The
Senior Notes will bear interest from the date of issuance at the annual rate of
10% payable semi-annually on April 1 and October 1, commencing April 1, 1998,
to the registered holders at the close of business on the preceding March 15 or
September 15, as the case may be. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. Unless other arrangements are
made, payments of principal and interest will be made by Company check mailed
to the address of the registered owner of a Senior Note, as shown in the Senior
Note Register maintained by the Registrar. Initially, the Company will act as
Registrar and Paying Agent. The Company may change a Paying Agent, Registrar or
Co-Registrar without notice to the holders of the Senior Notes. The Senior
Notes can be presented for payment exchange, transfer or registration at the
principal office of the Company.
RANKING
The Senior Notes will be unsecured obligations of the Company and will
rank on parity with all outstanding senior indebtedness of the Company. The
Senior Notes will also be effectively subordinated to all senior secured
indebtedness of the Company to the extent of the value of the assets securing
that indebtedness.
OPTIONAL REDEMPTION
The Senior Notes are not redeemable by the Company before October 1,
1999. Beginning October 1, 1999, the Senior Notes will be redeemable at the
Company's option, as a whole or in part, in increments of $1,000, at any time or
from time to time, at the redemption prices stated below plus accrued interest,
upon not fewer than 30 or more than 60 days' advance notice mailed by
first-class mail to the holder's registered address as shown in the Senior Notes
Register. The redemption prices (expressed in percentages of principal amount)
for the 12-month period commencing on October 1 of each year indicated are as
follows:
Period Redemption Price
------ ----------------
1999 105%
2000 103%
2001 101%
The Company will select the Senior Notes to be redeemed in a manner
complying with the requirements of any securities exchange or automated
interdealer quotation system on which the Senior
33
<PAGE> 36
Notes are traded or quoted and otherwise pro rata by lot. On and after the
redemption date, interest ceases to accrue on the Senior Notes or the portions
of them called for redemption.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control") every holder of Senior Notes shall have the right to require the
Company to repurchase all or any portion of the holder's Senior Notes at a cash
price equal to 100% of their principal amount, plus accrued interest (if any) to
the date of repurchase (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date):
(i) any "person" (as that term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934) is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Securities Exchange Act of 1934, except that for purposes
of this clause a person will be deemed to be a "beneficial
owner" of all shares that the person has the right to acquire,
whether that right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50%
of the total voting power of the then outstanding voting stock
of the Company;
(ii) the persons who constituted the Board of Directors of the
Company on the original issuance date of the Senior Notes
(together with any new directors whose election by the
directors or whose nomination for election by the shareholders
of the Company was approved by a vote of two-thirds of the
directors of the Company then still in office who were either
directors at the beginning of that period or whose election or
nomination for election was previously so approved) cease for
any reason to constitute a majority of the Company's Board of
Directors then in office; or
(iii) a merger or consolidation of the Company with or into
another person or the merger of another person with or into
the Company, or the sale of all or substantially all the
assets of the Company to another person, and, in the case of
any merger or consolidation, the securities of the Company
that are outstanding immediately before the transaction and
represent at least 100% of the aggregate voting power of the
voting stock of the Company are changed into, or exchanged
for, cash, securities or other property, unless pursuant to
the transaction those securities are changed into or exchanged
for, in addition to any other consideration, securities of the
surviving corporation or a parent corporation that owns all of
the capital stock of such corporation that represent,
immediately after the transaction, at least 50% of the
aggregate voting power of the voting stock of the surviving
corporation or its parent corporation, as the case may be.
Within 30 days following any Change of Control, unless notice of redemption of
the Senior Notes has been given pursuant to the provisions of the Indenture,
the Company shall mail a notice to each holder of the Senior Notes stating: (1)
that a Change of Control has occurred and holder of Senior Notes has the right
to require the Company to repurchase the holder's Senior Notes at a price in
cash equal to 100% of the principal amount thereof, plus accrued interest (if
any) to the date of repurchase (subject to the right of holders of record on
the relevant record date to receive interest on the relevant interest payment
date); (2) the circumstances and relevant facts regarding the Change of
Control; (3) the repurchase date (which shall not be sooner than 30 days or
later than 60 days after the date the notice is mailed); and (4) the
instructions determined by the Company that a holder must follow for the
repurchase of his Senior Notes.
34
<PAGE> 37
If a Change of Control occurs, there is no assurance that the Company
will have sufficient funds available to pay the repurchase price for all of the
Senior Notes that might be delivered by the holders who elect to redeem their
Senior Notes pursuant to the Change of Control. The failure of the Company to
make or consummate a repurchase offer as a result of a Change of Control or pay
the purchase price when due will constitute an Event of Default. The existence
of mandatory repurchase rights upon a Change of Control may deter a third party
from acquiring the Company in a transaction that constitutes a Change of
Control.
Further indebtedness of the Company may prohibit certain events that
would constitute a Change of Control or require that indebtedness to be repaid
or repurchased upon a Change of Control. Moreover, the exercise by the holders
of Senior Notes of their right to require the Company to repurchase the Senior
Notes could cause a default under that indebtedness, even if the Change of
Control itself does not, due to the financial effect of the repurchase on the
Company. Finally, the Company's ability to pay cash to the holders of the Senior
Notes following a Change of Control might be limited by the Company's then
existing financial resources. There is no assurance that sufficient funds will
be available when necessary to make any requisite repurchase of the Senior
Notes. The provisions under the Indenture relating to the Company's obligation
to repurchase the Senior Notes as a result of a Change of Control may be waived
or modified with the written consent of the holders of a majority in principal
amount of the outstanding Senior Notes.
CERTAIN COVENANTS
The Indenture contains affirmative and negative covenants that
require, restrict or prohibit various actions by the Company.
Limitation on Indebtedness. The Company is prohibited from incurring
total Indebtedness (as defined in the Indenture) in excess of $10,000,000.
This limitation does not apply to indebtedness incurred for capital lease
obligations or for the purpose of financing all or part of the purchase price of
assets or property acquired or constructed in the ordinary course of business
after the original issuance date of the Senior Notes.
Limitation on Liens. The Company is prohibited from creating or
permitting to exist any Lien (as defined in the Indenture) on its original
property or assets to secure any Indebtedness, unless concurrently with the
creation of the Lien provision is made to secure the Senior Notes equally and
ratably with the indebtedness for as long as the other Indebtedness is secured.
This limitation does not apply to (a) Liens existing on the original issuance
date of the Senior Notes; (b) Permitted Liens (as defined in the Indenture); and
(c) existing or future Liens to secure Indebtedness incurred for the capital
lease obligations or for the purpose of financing all or part of the purchase
price of assets or property acquired or constructed in the ordinary course of
business.
Limitation on Restricted Payments. The Company is prohibited from
paying any dividends with respect to the Common Stock, repurchasing shares of
the Common Stock, or repurchasing or redeeming subordinated obligations of the
Company before scheduled scheduled repayment or scheduled maturity. This
limitation does not apply to such payments made from the proceeds of sales of
the Company's debt, capital stock or capital contributions, repurchases of
capital stock from directors, officers, and employees of the Company pursuant
to the terms of an employee benefit plan or employment agreement, provided that
the aggregate amount of the repurchases does not exceed $1,000,000 in any one
year and $2,000,000 cumulatively, and other repurchases of capital stock that
do not exceed $500,000 in the aggregate.
Limitation on Affiliate Transactions. The Company is prohibited from
entering into any transaction (including the sale, lease, purchase or exchange
of any property or the rendering of any service) with any affiliate of the
Company (an "Affiliate Transaction") unless the terms thereof (1) are no less
favorable to the Company than those that could be obtained at the time in a
comparable arm's-length transaction with a person who is not an affiliate of the
Company and (2) if an Affiliate Transaction involves an amount in excess of
$1,000,000, (i) are set forth in writing and (ii) have been approved by a
majority of the members of the Board of Directors having no material personal
financial stake in the Affiliate Transaction.
Merger or Consolidation. The Company is prohibited from engaging in a
merger, consolidation or a sale of all or substantially all its assets unless:
(a) the resulting or transferee person assumes,
35
<PAGE> 38
the obligations of the Company under the Senior Notes and the Indenture and,
(b) immediately after giving effect to the transaction, no Event of Default has
occurred.
HOLDERS' AGENT
The Indenture does not provide for a trustee. The Company at any
time may designate a person (the "Holders' Agent") to act as agent for the
holders in accordance with the provisions of the Indenture. Any person
appointed by the Company must have corporate trust powers that satisfy the
requirements of the Trust Indenture Act.
If the Company fails to appoint a Holders' Agent within 20 days
following its receipt of a request to do so signed by the holders of at least
25% in principal amount of the Senior Notes, the holders may proceed to appoint
a Holders' Agent, pursuant to a meeting of the holders described below or by
written consent signed by a majority in principal amount of the Senior Notes.
At any time there is a not a Holders' Agent, the Secretary of the Company may,
and on the written request of the holders of 25% in principal amount of the
Senior Notes shall, within 20 days, call a meeting of the holders for the
purpose of having the Senior Note holders designate a Holders' Agent. At any
such meeting, the presence in person or by proxy of the holders of at least 50%
in principal amount of the Senior Notes will constitute a quorum of the holders.
The vote of a majority in principal amount of the Senior Notes present in person
or by proxy at the meeting will be sufficient to designate the Holders' Agent.
A Holders' Agent appointed by the holders may be removed by the affirmative
votes of an absolute majority in principal amount of the Senior Notes, either
by written consent or at a meeting of the holders. A Holders' Agent appointed by
the holders need not have corporate trust powers that satisfy the requirements
of the Trust Indenture Act.
EVENTS OF DEFAULT
If an Event of Default (other than the bankruptcy, insolvency or
reorganization of the Company) occurs and is continuing, the Holders' Agent or
the holders of at least 25% in principal amount of the outstanding Senior Notes
may declare the principal of and accrued but unpaid interest on all the Senior
Notes to be due and payable. If an Event of Default relating to the bankruptcy,
insolvency or reorganization of the Company occurs and is continuing, the
principal of and interest on all the Senior Notes will ipso facto become due
and payable without any declaration or other act on the part of the Holders'
Agent or any holders. Under certain circumstances, the holders of a majority in
principal amount of the outstanding Senior Notes may rescind and annul any
declaration of acceleration of the maturity of the Senior Notes and its
consequences.
An "Event of Default" means: (i) a default in the payment of interest on the
Senior Notes when due that continues for 30 days, (ii) a default in the payment
of any Senior Notes when it becomes due, whether at maturity, upon redemption,
or pursuant to acceleration of maturity; (iii) the failure by the Company to
comply with its obligations described under "Certain Covenants" and "--Merger
and Consolidation" above, (iv) the failure by the Company to comply for 30 days
after it receives written notice with any of its obligations under the
Indenture upon a Change of Control or under "--Certain Covenants--Limitation on
Indebtedness," "--Limitation on Liens," or "--Limitation on Restricted
Payments"; (v) the failure by the Company to comply for 60 days after it
receives written notice with any other provision of the Indenture; (vi) the
failure by the Company to pay any indebtedness within any applicable grace
period after final maturity or acceleration by the holders thereof because of a
default, and the total amount of such indebtedness exceeds $500,000 (the
"cross-acceleration provisions"); (vii) certain events of bankruptcy,
insolvency or reorganization of the Company or (viii) the rendering of any
judgment or decree for the payment of money in excess of $250,000 against the
Company if such judgment remains outstanding for a period of 60 days and is not
discharged, waived or stayed within 30 days after notice (the "judgment default
provision"). However, a default under clause (iv) or (v) will not constitute an
Event of Default until the Holders' Agent or the Holders of 25% in principal
amount of the outstanding Senior Notes notify the Company of the default and
the Company does not cure such default within the time specified after receipt
of such notice.
Subject to its duty during an Event of Default to act with the
requisite standard of care, the Holders' Agent may require indemnification or
other security against any loss, liability or expense before proceeding to
exercise any right or powers under the Indenture at the request or direction of
the holders of the Senior Notes. Except to enforce the right to receive payment
of principal, premium (if any) or interest when due, if a Holders' Agent has
been appointed, no holder of a Senior Note may pursue any remedy with respect
to the Indenture or the Senior Notes unless (i) the holder has previously given
the Holders' Agent written notice that an Event of Default is continuing, (ii)
the holders of at least 25% in principal amount of the outstanding Senior Notes
have requested in writing that the Holders' Agent pursue the remedy, (iii)
those holders of Senior Notes have offered the Holders' Agent reasonable
security or indemnity against any loss, liability or expense, (iv) the Holders'
Agent has not complied with the request within 60 days after receiving it and
the offer of security or indemnity and (v) the holders of a majority in
principal amount of the outstanding Senior Notes have not given the Holders'
Agent a direction inconsistent with the request within that 60-day period.
Subject to certain restrictions, the holders of a majority in principal amount
of the outstanding Senior Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Holders' Agent or
exercising any trust or power conferred on the Holders' Agent. The Holders'
Agent, however, may refuse to follow any direction that conflicts with law or
the Indenture or that the Holders' Agent determines is unduly prejudicial to the
rights of any other holder of the Senior Notes or that would subject the
Holders' Agent to personal liability. The holders of a majority in principal
amount of the outstanding Senior Notes, on behalf of all holders of Senior
Notes, may waive any existing default or Event of Default, except a default in
payment on any of the Senior Notes (other than non-payment of principal and
accrued interest under the Senior Notes that becomes due solely because of
acceleration).
36
<PAGE> 39
The Holders' Agent is required, within 90 days after an Event of Default that
is continuing and known to the Holders' Agent, to mail to each holder of Senior
Notes notice of the Event of Default.
MODIFICATION OF INDENTURE
Subject to certain exceptions, the Company, with the consent of the
holders of a majority in principal amount of the outstanding Senior Notes
(including consents obtained in connection with a tender offer or exchange for
the Senior Notes), may amend or modify the Indenture in any respect, except
that the consent of the holder of each affected Senior Note is required to do
any of the following: (i) reduce the foregoing amount of Senior Notes whose
holders consent is required to amend or modify the Indenture; (ii) change the
stated maturity, interest rate or interest payment dates of any Senior Note;
(iii) reduce the principal, premium or interest on any Senior Note; (iv) make
any Senior Note payable in money other than that stated in the Senior Note; (v)
eliminate or change the amount or timing of any mandatory redemption; or (vii)
affect the ranking of the Senior Notes in any material respect.
The Company may amend the Indenture to cure any ambiguity, omission or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture, to provide for uncertificated
Senior Notes in addition to or in place of certificated Senior Notes (provided
that the uncertificated Senior Notes are issued in registered form for purposes
of Section 163(f) of the Code, or in a manner so that the uncertificated Senior
Notes are described in Section 163(f)(2)(13) of the Code), to add guarantees
with respect to the Senior Notes, to secure the Senior Notes, to add to the
covenants of the Company for the benefit of the holders, to surrender any right
or power conferred upon the Company or to make any other change that does not
adversely affect the rights of any holder of the Senior Notes. The consent of
the holders of Senior Notes is not necessary under the Indenture to approve the
particular form of any proposed amendment. It is sufficient if the consent
approves the substance of the proposed amendment.
DESCRIPTION OF THE WARRANTS
The Company is issuing up to an aggregate of 10,000 Warrants, each of
which represents the right to subscribe to purchase 250 shares of the Common
Stock at a price of $2.50 per share, subject to adjustment. A total of
2,500,000 shares of Common Stock will be subject to the Warrants. The Warrants
will first be transferable separately from the Senior Notes on October 1, 1999.
Warrants may be exercised after October 31, 1998 and on or before October 1,
2002, by paying the exercise price of $2.50 per share, subject to adjustment,
and may be exercised in whole or in part, provided that no fractional shares of
Common Stock will be issued. The exercise price of Warrants may be paid by the
surrender of the Senior Notes at the face amount of the Senior Notes plus
accrued interest. The number of shares of Common Stock that may be purchased
upon exercise of the Warrants, and the exercise price for those shares, will be
adjusted to reflect the effect of any issuance of Common Stock to the
shareholders as a stock dividend or distribution or as a result of a
combination, subdivision or certain reclassifications of the Common Stock. As a
result, the number of shares that may be purchased upon exercise of a Warrant
may be more or less than 250 and the exercise price may be higher or lower than
$2.50. No fractional Warrants will be issued upon transfer or exercise of
Warrants. The Warrants do not convey on their holders voting or other rights as
a shareholder of the Company. The exercise price of the Warrants is wholly
arbitrary, and there is not any assurance that the price of the Common Stock
will ever rise to a level where exercise of the Warrants would be of economic
value.
A Warrant may be exercised on surrender of the Warrant Certificate
before the expiration of the Warrant exercise period, with the form of "Election
to Purchase" on the reverse side of the Warrant Certificate executed as
indicated, and accompanied by payment of the full exercise price for the shares
of Common Stock being purchased. The Company will act as transfer agent and
registrar for the Warrants.
37
<PAGE> 40
In order for a holder to exercise his Warrants, the shares of Common
Stock issuable on exercise of the Warrants must be registered with the
Commission pursuant to a current and effective registration statement under the
Securities Act and registered or qualified for sale or exemption under the
securities laws of the states where the Warrantholder resides. The Company will
use its best efforts to register with the Commission the shares of Common Stock
issuable on exercise of the Warrants before November 1, 1998, but there is no
assurance that it will succeed in registering the Warrant shares with the
Commission. The Company will make commercially reasonable efforts to qualify
the shares of Common Stock underlying the Warrants for sale in those states
where the Senior Notes are offered for sale. However, the Company could be
denied registration or qualification or may determine in its sole discretion
not to register or qualify the shares of Common Stock issuable pursuant to the
Warrants in any jurisdiction where the time and expense of doing so is not
justified. A Warrant holder may be deprived of any value of the Warrants, if the
shares issuable on exercise of the Warrants are not registered with the
Commission or not registered or qualified for offer and sale in the state in
which the Warrantholder resides, in which case the Warrantholder may not be
able to sell the Warrants or the Warrants may expire unexercised.
It may be expected that a Warrant will be exercised only if it is
advantageous to the holder of the Warrant. It may also be expected that if the
Warrant is exercised, the value of the Common Stock held by the then existing
public investors will be diluted if the value of the stock immediately prior to
the exercise of the Warrant exceeds the exercise price, with the extent of
dilution depending upon the excess. Therefore, for the term of the Warrant, the
holder of a Warrant has the opportunity to profit from a rise in the market
price of the Common Stock. The terms upon which the Company could obtain
additional capital during the period the Warrants are outstanding might be
adversely affected. The holder of a Warrant might be expected to exercise it at
a time when the Company would, in all likelihood, be able to obtain any
additional needed capital on terms more favorable than those provided for in the
Warrant.
DESCRIPTION OF COMMON STOCK
The Company's authorized capital consists of 100,000,000 shares of
Common Stock, par value $.0001 per share, which are entitled to one vote per
share on all matters. There were outstanding as of August 22, 1997, 24,143,928
shares of Common Stock. As of August 22, 1997, the Company had outstanding
unexercised options to purchase 1,910,888 shares of Common Stock under Company's
Stock Option Plan. The Common Stock is quoted on the OTC Bulletin Board under
the symbol "CMXX." The transfer agent and registrar for the Common Stock is
Chase Mellon Shareholder Services, L.L.C.
The holders of the Common Stock are entitled to share ratably in all
dividends declared by the Company's Board of Directors out of funds legally
available therefor and, upon liquidation, in all the assets of the Company, if
any, remaining after the payment of liabilities of the Company. Under Nevada
law, no dividend or other distribution to shareholders is permitted if, after
giving effect to the distribution, the Company would not be able to pay its
debts as they become due in the usual course of business, or if the Company's
total liabilities would exceed its total assets. See "Dividend Policy." The
Common Stock does not have redemption rights, conversion rights, cumulative
voting rights, or preemptive or other subscription rights.
CERTAIN PROVISIONS OF NEVADA LAW
Nevada's "Combination with Interested Stockholders Statute" and
"Control Share Acquisition Statute" may have the effect of delaying or making it
more difficult to effect a change in control of the Company. See "Risk Factors -
Anti-Takeover Provisions."
The Combination with Interested Stockholders Statute prevents an
"interested stockholder" and an applicable Nevada corporation from entering into
a "combination," unless certain conditions are met. A combination is defined to
mean, among other things, (i) any merger or consolidation with an "interested
38
<PAGE> 41
stockholder"; (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition, in one transaction or a series of transactions with an
"interested stockholder" having an aggregate market value equal to 5% or more of
the aggregate market value of the assets of a corporation, 5% or more of the
aggregate market value of all outstanding shares of a corporation, or
representing 10% or more of the earning power or net income of the corporation;
(iii) the adoption of a plan or proposal for the liquidation or dissolution of a
corporation proposed by an "interested stockholder"; (iv) any reclassification,
recapitalization, merger, or consolidation proposed by an "interested
stockholder"; or (v) any receipt by an "interested stockholder" of any loan,
advancement, guarantee, pledge, or other financial assistance or any tax credit
or other tax advantage provided by or through a corporation. An "interested
stockholder" is defined to mean the beneficial owner of 10% or more of the
voting shares of a corporation, or an affiliate or associate thereof. A
corporation may not engage in a "combination" with an "interested stockholder"
for a period of three years from the date of the acquisition by the "interested
stockholder" of its shares in the corporation unless the combination or purchase
of shares made by the interested stockholder is approved by the Board of
Directors before the interested stockholder acquired such shares. If such
approval is not obtained, after the expiration of the three-year period, the
business combination may be consummated with the approval of the Board of
Directors or a majority of the voting power held by disinterested stockholders,
or if the consideration to be paid by the interested stockholder is at least
equal to the highest of (i) the highest price per share paid by the interested
stockholder within the three years immediately preceding the date of the
announcement of the combination or in the transaction in which he became an
interested stockholder, whichever is higher; or (i) the market value per common
share on the date of announcement of the combination or the date the interested
stockholder acquired the shares, whichever is higher.
Nevada's Control Share Acquisition Statute prohibits an acquirer, under
certain circumstances, form voting shares of a target corporation's stock after
crossing certain threshold ownership percentages, unless the acquirer first
obtains approval therefor from the target corporation's stockholders. The
Control Share Acquisition Statute specifies the following three thresholds for
which such approval is required (i) one-fifth or more but less than one-third;
(ii) one-third or more but less than a majority; and (iii) a majority or more,
of the voting power of the corporation in the election of directors. Once an
acquirer crosses one of the above thresholds, such shares so acquired, along
with those shares acquired within the preceding 90 days, become "control
shares," which shares are deprived of the right to vote until such time as the
disinterested stockholders of the corporation restore such right. The Control
Share Acquisition Statute also provides that in the event "control shares" are
accorded full voting rights and the acquiring person has acquired a majority or
more of all voting power of the corporation, any stockholder of record who has
not voted in favor of authorizing voting rights for the "control shares" may
demand payment for the fair value of such stockholder's shares. In such case,
the corporation is required to comply with the demand within 30 days of the
delivery thereof to the corporation.
INDEMNIFICATION AND LIMITATION OF LIABILITY
Pursuant to the Articles, Bylaws and indemnification agreements between
the Company and each of its officers and directors, the Company is obligated to
indemnify each of its directors and officers to the fullest extent permitted by
law with respect to all liability and loss suffered, and reasonable expense
incurred, by the person in any action, suit or proceeding in which the person is
or was a director or officer of the Company. The Company could be obligated to
advance the reasonable expenses of indemnified directors or officers in
defending such proceedings if the indemnified party agrees to repay all amounts
advanced if it is ultimately determined that such person is not entitled to
indemnification.
The Nevada General Corporation Law (the "Nevada Act") authorizes Nevada
corporations to indemnify any person who was or is a party to any proceeding
(other than an action by, or in the right of, the corporation), by reason of the
fact that he or she is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation or other entity,
against liability incurred in connection with such proceeding, including any
appeal thereof, if he or she acted in good faith and in a manner he or she
reasonably believed
39
<PAGE> 42
to be in, or not opposed to, the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. In the case of an action by or on behalf of a
corporation, indemnification may not be made if the person seeking
indemnification is adjudged liable, unless the court in which such action was
brought determines such person is fairly and reasonably entitled to
indemnification. The indemnification provisions of the Nevada Act require
indemnification if a director of officer has been successful on the merits or
otherwise in defense of any action, suit, or proceeding to which he or she was a
party by reason of the fact that he or she is or was a director of officer of
the corporation. The indemnification authorized under Nevada law is not
exclusive and is in addition to any other rights granted to officers and
directors under the Articles of Incorporation or Bylaws of the corporation or
any agreement between officers and directors and the corporation. A corporation
may purchase and maintain insurance or furnish similar protection on behalf of
any officer or director against any liability asserted against the officer or
director and incurred by the officer or director in such capacity, or arising
out of the status, as an officer or director, whether or not the corporation
would have the power to indemnify him or her against such liability under the
Nevada Act.
The Company's Bylaws provide for the indemnification of directors and
executive officers of the Company to the maximum extent permitted by Nevada law
and for the advancement of expenses incurred in connection with the defense of
any action, suit, or proceeding that the director of executive officer was a
party to by reason of the fact that he or she is or was a director or executive
officer of the Company upon the receipt of an undertaking to repay such amount,
unless it is ultimately determined that such person is not entitled to
indemnification.
Under provisions of the Company's Articles of Incorporation that are
authorized by the Nevada Act, a director is not personally liable for monetary
damages to the Company or any other person for acts or omissions in his or her
capacity as a director except in certain limited circumstances such as certain
violations of criminal law and transactions in which the director derived an
improper person benefit. As a result, shareholders may be unable to recover
monetary damages against directors for actions taken by them which constitute
negligence or gross negligence or which are in violation of their fiduciary
duties, although injunctive or other equitable relief may be available.
The Company also has entered into agreements with each of its current
directors and executive officers pursuant to which it is obligated to indemnify
those persons to the fullest extent authorized by law and to advance payments to
cover defense costs against an unsecured obligation to repay such advances if it
is ultimately determined that the recipient of the advance is not entitled to
indemnification. The Company is not required to indemnify a director or officer
if the indemnified loss results from any of the following: (a) a violation of
Section 16(b) of the Securities and Exchange Act of 1934, as amended; (b) a
violation of criminal law; (c) a transaction from which the officer or director
received an improper personal benefit; (d) willful misconduct or a conscious
disregard for the Company's best interests; or (e) a transaction for which the
director is liable pursuant to Section 78.300.2 of the Nevada Act for certain
distributions from the corporation to its shareholders.
The foregoing provisions of the Nevada Act and the Company's Articles
of Incorporation and Bylaws could have the effect of preventing or delaying a
person from acquiring or seeking to acquire a substantial equity interest in, or
control of, the Company.
The Company maintains an insurance policy covering directors and
officers under which the insurer agrees to pay, subject to certain exclusions,
for any claim made against the directors and officers of the Company for a
wrongful act for which they may become legally obligated to pay or for which the
Company is required to indemnify its directors or officers.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is therefore unenforceable.
40
<PAGE> 43
SHARES ELIGIBLE FOR FUTURE SALE
The Company has 24,143,928 shares of Common Stock outstanding, of which
approximately 17,686,103 shares are freely tradable without restriction or
further registration under the Securities Act. All the remaining outstanding
shares of Common Stock are "restricted securities," as that term is defined in
Rule 144 promulgated by the Commission under the Securities Act.
In general, under Rule 144 as currently in effect, any affiliate of the
Company or any person (or persons whose shares are aggregated in accordance with
the Rule) who has beneficially owned restricted securities for at least one year
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of 1% of the outstanding shares of Common Stock
(approximately 240,000 shares based upon the number of shares outstanding) or
the reported average weekly trading volume as reported on the OTC Bulletin Board
for the four weeks preceding the sale. Sales under Rule 144 are also subject to
certain manner of sale restrictions and notice requirements and to the
availability of current public information concerning the Company. Persons who
have not been affiliates of the Company for at least three months and who have
held their shares for more than two years are entitled to sell Restricted
Securities without regard to the volume, manner of sale, notice and public
information requirements of Rule 144.
TAXES
The following discussion summarizes certain Federal income tax
consequences to purchasers of the Senior Notes and Warrants under existing
Federal income tax law, which is subject to change, possibly retroactively. This
summary does not discuss all aspects of Federal income taxation that may be
relevant to a particular investor in light of such investor's specific
investment circumstances or to investors subject to special treatment under the
Federal income tax laws and it does not discuss any aspects of state, local or
foreign tax laws. This summary assumes that investors will hold their Senior
Notes and Warrants as "capital assets" (generally property held for investment)
under the Internal Revenue Code of 1986. Prospective investors are advised to
consult their tax advisors as to the specific tax consequences of purchasing,
holding, and disposing of the Senior Notes and Warrants on their own personal
tax situation.
Upon the exercise of a Warrant, a holder will not recognize gain or
loss and will have a tax basis in the Common Stock received equal to the tax
basis of the Warrant (if any) plus the exercise price. The holding period for
the Common Stock will begin on the day after the date of exercise.
A holder will recognize capital gain or loss upon the sale, exchange or
other disposition of a Senior Note, Warrant or share of Common Stock equal to
the difference between the amount realized from such sale and the holder's tax
basis in the security that was sold. This gain or loss will be long-term if the
security disposed of has been held for more than 18 months. In the event that a
Warrant lapses unexercised, a holder will recognize a capital loss in an amount
equal to his basis in the Warrant (if any). That loss will be long-term if the
Warrant has been held for more than 18 months.
LEGAL MATTERS
The validity of the issuance of the Senior Notes and the Warrants will
be passed upon for the Company by Glenn Rasmussen & Fogarty, P.A., Tampa,
Florida.
EXPERTS
The financial statements of the Company for the three years ended 1996,
1995, and 1994, respectively, included in this Prospectus and the Registration
Statement have been audited by Pritchett, Siler & Hardy, P.C., independent
certified public accountants, as indicated in their reports thereon
41
<PAGE> 44
appearing elsewhere in this Prospectus, and have been so included in reliance
upon the authority of that firm as experts in auditing and accounting.
AVAILABLE INFORMATION
Cimetrix is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith, files reports, proxy
statements, and other information with the Commission. Reports, proxy
statements, and other information filed by the Company with the Commission may
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following Regional Offices of the Commission: Northeast Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048; and Midwest Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Also, copies of such material can be obtained upon payment of 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
(http://www.sec.gov) that contains reports, proxy, and information statements
and other information regarding registrants that file electronically with the
Commission.
The Company has filed with the Commission a Registration Statement on
Form S-2 under the Securities Act of 1933 with respect to the Senior Notes and
Warrants offered by this Prospectus. As permitted by the rules and regulations
of the Commission, this Prospectus, which is a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement. For further information with respect to the Company and the
Securities offered by this Prospectus, reference is made to the Registration
Statement, including the exhibits and financial schedules to it, copies of which
can be inspected and copied at prescribed rates at the public reference
facilities maintained by the Commission at the address set forth above and
obtained at prescribed rates from the Public Reference Section of the Commission
at the same address. Statements contained in this Prospectus concerning the
provisions or contents of any contract, agreement, or any other document
referred to herein are not necessarily complete with respect to each such
contract, agreement, or document filed as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description of
the matters involved, and each statement shall be deemed qualified in its
entirety by such reference to the copy of the applicable document filed with the
Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference in this Prospectus:
(a) Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1997; and
(c) Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1997.
Any statement contained in a document incorporated by reference in this
Prospectus will be deemed to be modified or superseded for all purposes to the
extent that a statement contained in this Prospectus, or in any other
subsequently filed document that also is incorporated by reference in this
Prospectus, modifies or replaces the statement.
A copy (excluding exhibits) of any document incorporated by reference
in this Prospectus will be provided by the Company, without charge, to each
person to whom this Prospectus is delivered, upon oral or written request
directed to the Company at its executive office, as follows: David L. Redmond,
Executive Vice President and Chief Financial Officer, Cimetrix Incorporated, 100
North Tampa Street, Tampa, Florida 33602 (telephone: (813) 277-9199).
GLOSSARY OF TERMS
CODE - the Company's software product suite, Cimetrix Open
Development Environment
GEM - acronym for Generic Model for Communications and control of
semiconductor equipment
SMT - surface mount technology
I/O - input/output
API - application programming interface
OEM - original equipment manufacturers
CNC - computer numerical control
PC - personal computer
ROBLINE - acronym for Company's off-line programming system used prior
to CODE
ROBCAL - acronym for Company's accuracy enhancing calibration
technique used prior to CODE
42
<PAGE> 45
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
FINANCIAL STATEMENTS OF CIMETRIX INCORPORATED
Unaudited Condensed Statement of Operations for the three and six
months ended June 30, 1997, and June 30, 1996....................................... F-2
Unaudited Condensed Balance Sheets as of June 30, 1997,
and December 31, 1996 (audited).................................................... F-3
Unaudited Condensed Statement of Cash Flows for the six
months ended June 30, 1997, and June 30, 1996....................................... F-4
Notes to Condensed Financial Statements (unaudited) .................................... F-5
Independent Auditors' Report............................................................ F-11
Balance Sheets as of December 31, 1996 and 1995.........................................
Statement of Operations for the years ended December 31, 1996,
1995, and 1994...................................................................... F-13
Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1996, 1995, and 1994................................................... F-14
Statements of Cash Flows for the years ended December 31, 1996,
1995, and 1994...................................................................... F-17
Notes to Financial Statements........................................................... F-20
</TABLE>
F-1
<PAGE> 46
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CIMETRIX INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -----------------------
1997 1996 1997 1996
----- ---- ---- ----
<S> <C> <C> <C> <C>
NET REVENUES $ 541 $ 177 $ 1,053 $ 458
---------- ---------- ---------- ----------
OPERATING EXPENSES
Cost of revenues, including customer support 340 123 549 287
Sales and marketing 293 293 583 592
Research and development 498 422 922 711
General and administrative 635 332 1,065 649
Compensation expense - stock options - - - 693
---------- ---------- ---------- ----------
-
Total operating expenses 1,766 1,170 3,119 2,932
----------- ---------- ---------- ----------
LOSS FROM OPERATIONS (1,225) (993) (2,066) (2,474)
----------- ---------- ---------- ----------
OTHER INCOME (EXPENSES)
Interest income 12 23 33 46
Interest expense (16) (1) (21) (3)
----------- ---------- ---------- ----------
Total other income (expense) (4) 22 12 43
----------- ---------- ---------- ----------
LOSS BEFORE INCOME TAXES (1,229) (971) (2,054) (2,431)
CURRENT INCOME TAX EXPENSE
(BENEFIT) - - - -
DEFERRED INCOME TAX EXPENSE
(BENEFIT) - - - -
NET LOSS $ (1,229) $ (971) $ (2,054) $ (2,431)
========== ========= ========== ==========
LOSS PER COMMON SHARE $ (.05) $ (.05) $ (.10) $ (.13)
========== ========= ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 22,438,428 18,813,095 21,142,678 18,707,986
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements(unaudited).
F-2
<PAGE> 47
ITEM 1. FINANCIAL STATEMENTS (CONT.)
CIMETRIX INCORPORATED
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS
JUNE 30, DECEMBER 31,
CURRENT ASSETS: 1997 1996
-------- -----------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalenets $ 758 $ 2,785
Accounts receivable, net 803 617
Inventories 401 533
Prepaid expenses and other current assets 200 285
-------- -------
Total current assets 2,162 4,220
PROPERTY AND EQUIPMENT, net 871 614
CAPITALIZED SOFTWARE COSTS, net 609 707
TECHNOLOGY, net 688 715
GOODWILL, net 2,862 2,971
-------- -------
Total Assets $ 7,192 $ 9,227
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt 41 $ 44
Accounts payable 584 671
Accrued expenses 143 459
Customer deposits 111 170
-------- -------
Total current liabilities 879 1,344
LONG TERM DEBT, net of current portion 261 252
-------- -------
Total Liabilities 1,140 1,596
-------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.0001 par value: 100,000,000 shares
authorized; 24,143,928 and 18,096,428 shares issued
and outstanding, respectively 2 2
Additional paid-in capial 18,881 18,406
Accumulated deficit (12,597) (10,543)
Unearned compensation - stock options (234) (234)
-------- --------
Net Stockholders' Equity 6,052 7,631
$ 7,192 $ 9,227
======== ========
</TABLE>
The accompanying notes are an integral part of these
financial statements (unaudited).
F-3
<PAGE> 48
ITEM 1. FINANCIAL STATEMENTS (CONT.)
CIMETRIX INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS TO OPERATING ACTIVITIES:
Net Loss $ (2,054) $ (2,431)
Adjustments to reconcile net loss to net cash used by --------- ---------
operating activities:
Amortization and depreciation 351 321
Compensation related to stock options 693
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (186) (17)
(Increase) decrease in inventory 132 (30)
(Increase) decrease in prepaid expenses 85 10
Increase (decrease) in accounts payable (87) 50
Increase (decrease) in accrued expenses (316) (17)
Increase (decrease) in customer deposits (59) --
--------- ---------
Total adjustments (80) 1,010
--------- ---------
Net Cash Flow Used by Operating Activities (2,134) (1,421)
--------- ---------
CASH FLOWS TO INVESTING ACTIVITIES:
Payments for capitalized software costs -- (72)
Purchase of property and equipment, net of retirements (358) (68)
--------- ---------
Net Cash Flow Used by Investing Activities (358) (140)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 475 881
Payments for capital lease obligations, net (10) (9)
--------- ---------
Net Cash Flow Provided by Financing Activities 465 872
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,027) (689)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 2,785 2,345
--------- ---------
CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 785 1,656
--------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 10 $ 3
Income taxes $ -- $ --
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Compensation expense - stock options $ -- 693
Issuance of stock upon exercise of non-qualified
options or warrant, net of repurchase 475 881
======== ========
</TABLE>
The accompanying notes are an integral part of these
financial statements(unaudited).
F-4
<PAGE> 49
ITEM 1. FINANCIAL STATEMENTS (CONT.)
CIMETRIX INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The accompanying unaudited condensed financial
statements of Cimetrix Incorporated have been prepared in accordance with
the Securities and Exchange Commission's instructions to Form 10-Q and,
therefore, omit or condense footnotes and certain other information
normally included in financial statements prepared in accordance with
generally accepted accounting principles. The accounting policies followed
for quarterly financial reporting conform with generally accepted
accounting policies disclosed in Note 1 to the Notes to Financial
Statements included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996. In the opinion of management, all
adjustments of a normal recurring nature that are necessary for a fair
presentation of the financial information for the interim periods reported
have been made. Certain amounts for the three and six-month periods ended
June 30, 1996 have been reclassified to conform to the June 30, 1997
classification. The results of operations for the three and six-month
periods ended June 30, 1997 are not necessarily indicative of the results
that can be expected for the entire year ending December 31, 1997. The
unaudited condensed financial statements should be read in conjunction
with the financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
CASH AND CASH EQUIVALENTS - For purposes of the statements of cash flows,
the Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. At June 30, 1997,
the Company had cash equivalents of $757,866 invested in money market
accounts, which are readily convertible into cash and are not subject to
significant risk from fluctuation in interest rates. There were cash
equivalents of approximately $1,656,527 at June 30, 1996. The carrying
value of the cash equivalents approximates their fair value because of the
short maturity of the investments.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost
is determined by the first-in, first-out method. Inventories at June 30,
1997 and December 31, 1996 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Parts and supplies $ 156 $ 211
Work in process 36 128
Finished goods 209 194
------ ------
$ 401 $ 533
====== ======
</TABLE>
PROPERTY AND EQUIPMENT - Property and equipment is stated at cost and
depreciated using the straight-line method over the estimated useful lives
of the related assets. The estimated lives are as follows: buildings, 40
years; leasehold improvements, the lease term; computer equipment and
other, three to seven years.
F-5
<PAGE> 50
ITEM 1. FINANCIAL STATEMENTS (CONT.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
SOFTWARE DEVELOPMENT COSTS - Certain software development costs are
capitalized when incurred in accordance with Financial Accounting
Standards Board (FASB) Statement No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed."
Capitalization of software development costs begins upon the establishment
of technological feasibility. Costs incurred prior to the establishment of
technological feasibility are expensed as incurred. The Company also
expenses hardware design and prototype expenses as incurred as research
and product development costs. The establishment of technological
feasibility and the ongoing assessment of recoverability of capitalized
software development costs requires considerable judgment by management
with respect to certain external factors, including, but not limited to,
technological feasibility, anticipated future gross revenues, estimated
economic life and changes in software and hardware technologies.
Amortization of capitalized software development costs is provided on a
product-by-product basis at the greater of the amount computed using (a)
the ratio of current gross revenues for a product to the total of current
and anticipated future gross revenues or (b) the straight-line method over
the remaining estimated economic life of the product. As of June 30, 1997,
the unamortized portion of capitalized software development costs was
approximately $609,000. Amortization of software development costs was
approximately $49,000 and $43,000 for the three months ended June 30, 1997
and 1996, respectively. Amortization of software development costs was
approximately $98,000 and $86,000 for the six months ended June 30, 1997
and 1996, respectively.
GOODWILL - Goodwill reflects the excess of the costs of purchasing the
minority interest of Cimetrix (USA) Incorporated over the fair value of
the related net assets at the date of acquisition (August 31, 1995) and is
being amortized on the straight line basis over 15 years. Amortization
expense charged to operations for both the periods ended June 30, 1997 and
1996 was approximately $54,300. At June 30, 1997, the accumulated
amortization was approximately $398,530. The Company evaluates the
impairment of long-lived assets, such as goodwill, in accordance with
Statement of Financial Accounting Standards No. 121. The Company evaluates
on a quarterly basis the projected undiscounted cash flows to determine,
when indicators of impairment are present, whether or not there has been
permanent impairment of its long-lived assets and accrues expenses for the
amount, if any, determined to be permanently impaired. Management of the
Company does not believe any impairment exists as of June 30, 1997.
INCOME TAXES - The Company records income taxes in accordance with
Statement of Financial Account Standards No. 109, "Accounting for Income
Taxes." Under the asset and liability method of accounting for income
taxes of Statement 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. Because of uncertainty about whether the
Company will generate sufficient future taxable income to realize its
deferred tax assets, the Company has established a valuation allowance to
offset all its deferred tax assets. 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 Statement
F-6
<PAGE> 51
ITEM 1. FINANCIAL STATEMENTS (CONT.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
NET LOSS PER COMMON SHARE - The Company has adopted Financial Accounting
Standards Board (FASB) Statement No. 128, "Earnings Per Share." All loss
per share amounts for 1997 and 1996 have been calculated in accordance
with FASB Statement No. 128. Loss per share of common stock is computed on
the basis of the weighted average number of common shares outstanding
during the periods presented. Fully diluted loss per share is not
presented because the effect is anti-dilutive.
ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosures of contingent assets
and liabilities at the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Actual
results could differ from those estimated.
RECLASSIFICATIONS - Certain reclassifications have been made for
consistent presentation.
NOTE 2 - PREPAID LICENSE AGREEMENTS
Pursuant to an agreement dated July 26, 1995, which incorporated
provisions of a 1994 agreement, the Company entered into a license/royalty
agreement with a provider of real-time development licenses which allowed
the Company to resell real-time development licenses to its customers. The
Company has prepaid for development licenses and this prepayment will be
amortized until licenses and services from the provider have been
consumed. At June 30, 1997 and December 31, 1996, the unamortized
prepayment was $122,235 and $130,235, respectively, and is included in
"Prepaid expenses and other current assets" on the Company's Balance
Sheets. The agreement also provides the Company with the option, expiring
on July 25, 1998, to purchase all existing development operating system
source code from the provider.
NOTE 3 - TECHNOLOGY
Effective July 5, 1995, the Company purchased the technology that was then
being licensed from Brigham Young University (BYU) and referred to as
ROBLINE and ROBCAL. The Company purchased all rights, title, interest and
benefit in and to the intellectual property for cash payments of $50,000
per year for ten years, which were discounted using an incremental
borrowing rate of 9.5% per annum and recorded as a note payable of
$343,765, plus 120,000 shares of previously unissued, restricted common
stock of the Company valued at $3.75 per share, for a total purchase value
of $793,765. The technology is being amortized on a straight-line basis
over 15 years. Amortization expense was approximately $13,500 during both
the three-month periods ended June 30, 1997 and 1996 and was approximately
$27,000 during both the six-month periods ended June 30, 1997 and 1996.
F-7
<PAGE> 52
ITEM 1. FINANCIAL STATEMENTS (CONT.)
NOTE 4 - LONG-TERM DEBT
Long-term debt at June 30, 1997 and December 31, 1996 consisted of the
following ( in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Note payable to BYU $ 272 $ 272
Capital lease obligations 30 24
------ ------
302 296
Less current maturities 41 44
------ ------
Net long-term debt $ 261 $ 252
====== ======
</TABLE>
In connection with the purchase of the technology from BYU discussed in
Note 3, the Company agreed to make payments of $50,000 per year for ten
years. This stream of payments was discounted using an incremental
borrowing rate of 9.5% per annum and was recorded as a note payable with a
beginning balance of $343,765.
NOTE 5 - SIGNIFICANT CUSTOMERS
Approximately 53.5% and 36.9% of the Company's net revenues during the
three and six-month periods ended June 30, 1997, respectively, were
attributable to Fuji Machine Mfg. Co., Ltd. ("Fuji"). The Company did not
have any revenues from Fuji during the three and six-month periods ended
June 30, 1996. Aries, Inc. ("Aries"), the Company's distributor in Japan,
accounted for approximately 4.8% and 13.7% of the Company's net revenues
for the three and six month periods ended June 30, 1996, respectively.
Aries accounted for approximately 7% of the Company's net revenues during
both the three and six-month periods ended June 30, 1997.
NOTE 6 - STOCK OPTIONS AND WARRANTS
On December 21, 1994, the Company's Board of Directors adopted effective
immediately, subject to shareholder approval at the annual meeting of
shareholders held in July 1995, a stock option plan under which options
may be granted to officers, employees, directors and others. The plan
specifically replaced all prior option agreements between the Company, its
employees and its consultants. A total of 1,993,816 shares of common stock
had been reserved for issuance under the plan. On May 31, 1997, the
shareholders of the Company approved an amendment to the Cimetrix
Incorporated 1994 Stock Option Plan to increase the number of shares of
the Company's common stock reserved for issuance thereunder by 506,184
shares to an aggregate of 2,500,000 shares. Options granted under the plan
are exercisable at a price not less than the fair market value of the
shares at the date of the grant, and one-half of the granted options vest
on the first anniversary of the date of grant, with the remaining one half
vesting on the second anniversary of the date of grant. The option period
and exercise price will be specified for each option granted, as
determined by the Board of Directors, but in no case shall the option
period exceed five years from the date of grant, and the exercise price
cannot be less than one-half the market price of the Company's common
shares on the date of grant.
F-8
<PAGE> 53
NOTE 6 - STOCK OPTIONS AND WARRANTS [CONTINUED]
On March 21, 1994, the Company entered into a separate consulting
agreement with its current President, granting him warrants to purchase
6,000,000 restricted shares of the Company's common stock for a cash
payment of $1,000,000. The warrants were assignable, irrevocable and
exercisable for a period of five years. On April 15, 1997, these warrants
were exercised, and the Company concurrently repurchased 200,000 of the
6,000,000 shares from Bicoastal Holding Company, an affiliate of the
President, for $1,000,000. On May 31, 1997, the shareholders of the
Company ratified an agreement with Bicoastal Holding Company providing for
the services of Paul Bilzerian as an officer, director, and management
consultant of the Company and for the exercise of the warrants and stock
repurchase described above.
During July 1994, in connection with conversion of three notes payable
into common shares of the subsidiary, the Company issued warrants to
purchase up to an aggregate of 317,500 shares of its common stock for
$2.00 per share. The warrants were exercisable until April 29, 1997.
Warrants for 125,000 shares were exercised during 1996, and the remaining
warrants for 192,500 shares were exercised during April 1997.
On September 12, 1994, the Board of Directors approved the issuance of
stock warrants to members of its advisory panel. Each panel member was
granted warrants to purchase 50,000 restricted shares of the Company's
common stock at an exercise price of $3.00 per share for a period of five
years. At the time of the grant, there was no trading market for either
the warrants or the Company's common shares, although the Company had
received a price of $2.00 per share for common stock of the Company's
privately-owned, sole subsidiary. Consequently, no compensation has been
recorded in connection with the granting of these warrants. As of December
31, 1996, none of the warrants granted to members of the advisory panel
have been exercised.
NOTE 7 - VOTING RIGHTS ASSIGNED TO PRESIDENT
The President of the Company has an irrevocable proxy agreement with W.
Keith Seolas, a former director of the Company, and members of his family
wherein they assigned the voting rights of their common stock
(approximately 2,000,000 shares) to the President. The proxy agreement has
a term expiring on December 31, 1998. (See Note 8, "Litigation.")
NOTE 8 - COMMITMENTS AND CONTINGENCIES
PRODUCT WARRANTIES - The Company provides certain product warranties to
customers including repair or replacement for defects in materials and
workmanship of hardware products. The Company also warrants that software
and firmware products will conform to published specifications and not
fail to execute the Company's programming instructions due to defects in
materials and workmanship. In addition, if the Company is unable to repair
or replace any product to a condition warranted, within a reasonable time,
the Company will provide a refund to the customer. As of June 30, 1997, no
provision for warranty claims has been established since the Company has
not incurred substantial sales from which to develop reliable estimates.
Also, no refunds have been paid to any customer as of June 30, 1997.
Management believes that any allowance for warranty would be currently
immaterial to the financial condition of the Company.
F-9
<PAGE> 54
NOTE 8 - COMMITMENTS AND CONTINGENCIES [CONTINUED]
LITIGATION - The Company filed a lawsuit on February 8, 1996 and an
amended complaint on March 7, 1997 against W. Keith Seolas ("Seolas"), a
former director of the Company, and members of his family. The lawsuit,
styled Cimetrix Incorporated v. Waldron Keith Seolas, et al., is pending
in the Fourth Judicial District Court of Utah County, Utah, and seeks
declaratory relief and a determination of the validity of the issuance of
approximately 2,000,000 shares of stock to Seolas and his family members.
Seolas filed a separate lawsuit against the Company on April 26, 1996 and
an amended complaint on March 17, 1997 in the United States District Court
for Utah. In his lawsuit, styled Waldron Keith Seolas et al. v. Cimetrix
Incorporated, Seolas alleges fraud by the Company in connection with his
return of approximately 200,000 shares to the Company in 1994. The Company
believes that it has strong defenses to Seolas' claims and intends to
vigorously defend them. The Company's counsel believes the claims against
the Company are without merit.
Other than as stated above, the Company is not a party to any material
pending legal proceedings and, to the knowledge of the Company's
management, no such proceedings by or against the Company have been
threatened. To the knowledge of the Company's management, there are no
material proceedings pending or threatened against any director or
executive officer of the Company, whose position in such proceeding would
be adverse to that of the Company.
NOTE 9 - SUBSEQUENT EVENT
On July 2, 1997, the Company filed a registration statement with the
Securities and Exchange Commission for an offering of a minimum of
$3,000,000 and a maximum of $10,000,000 aggregate principal amount of its
unsecured 10% Senior Notes Due 2002 at 100% of face value, coupled with
warrants to purchase 100 shares of the Company's common stock for each
$1,000 principal amount of Senior Notes purchased. The offering will be
made directly by the Company on best efforts basis and will not be
underwritten. Accordingly, there is no assurance that any or all of the
Senior Notes will be sold. The proceeds of the offering would be used for
working capital and other general corporate purposes.
F-10
<PAGE> 55
INDEPENDENT AUDITORS' REPORT
Board of Directors
CIMETRIX INCORPORATED
We have audited the accompanying balance sheets of Cimetrix
Incorporated at December 31, 1996 and 1995 and the related statements of
operations, stockholders' equity (deficit) and cash flows for the years ended
December 31, 1996, 1995, and 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements audited by us present fairly,
in all material respects, the financial position of Cimetrix Incorporated as of
December 31, 1996 and 1995 and the results of its operations and its cash flows
for the years ended December 31, 1996, 1995 and 1994 in conformity with
generally accepted accounting principles.
PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
February 26, 1997
F-11
<PAGE> 56
CIMETRIX INCORPORATED
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,785 $ 2,345
Accounts receivable, net 617 68
Inventories 533 619
Prepaid expenses and other current assets 285 236
-------- --------
Total current assets 4,220 3,268
PROPERTY AND EQUIPMENT, net 614 1,732
CAPITALIZED SOFTWARE COSTS, NET 707 758
TECHNOLOGY, NET 715 767
GOODWILL, NET 2,971 3,188
OTHER ASSETS -- 9
-------- --------
Total Assets $ 9,227 $ 9,722
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 44 $ 42
Accounts payable 671 174
Accrued expenses 459 122
Customer deposits 170 --
-------- --------
Total current liabilities 1,344 338
DEFERRED TAX LIABILITY, net -- 18
LONG-TERM DEBT, net of current portion 252 296
-------- --------
Total Liabilities 1,596 652
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock; 100,000,000 shares
authorized, $.0001 par value; 18,121,428
and 18,456,103 shares issued and
outstanding, respectively 2 2
Additional paid-in capital 18,406 16,156
Accumulated deficit (10,543) (7,088)
Unearned compensation - stock options (234) --
-------- --------
Total Stockholders' Equity 7,631 9,070
-------- --------
$ 9,227 $ 9,722
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-12
<PAGE> 57
CIMETRIX INCORPORATED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
NET REVENUE $ 2,396 $ 664 $ 463
---------- ---------- ----------
OPERATING EXPENSES:
Cost of revenues 1,342 446 297
Selling, marketing and customer support 1,494 947 217
Research and development 1,179 930 198
General and administrative 1,577 1,231 1,217
Compensation expense 685 -- --
---------- ---------- ----------
Total operation expense 6,277 3,554 1,929
---------- ---------- ----------
LOSS FROM OPERATIONS (3,881) (2,890) (1,466)
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest income 108 172 68
Interest expense (52) (26) (32)
Other income (expense) 10 1 (3)
Gain (Loss) on disposition of asset 360 -- --
---------- ---------- ----------
Total other income (expense) 426 147 33
---------- ---------- ----------
LOSS BEFORE MINORITY INTEREST, INCOME
TAXES AND EXTRAORDINARY ITEMS (3,455) (2,743) (1,433)
LESS MINORITY INTEREST IN LOSS FROM
OPERATIONS OF SUBSIDIARY -- (199) (100)
---------- ---------- ----------
LOSS BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (3,455) (2,544) (1,333)
CURRENT INCOME TAX EXPENSE (BENEFIT) -- -- --
DEFERRED INCOME TAX EXPENSE (BENEFIT) -- -- --
---------- ---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (3,455) (2,544) (1,333)
EXTRAORDINARY ITEM:
Gain on debt forgiveness net of
income taxes -- -- 188
---------- ---------- ----------
NET LOSS $ (3,455) $ (2,544) $ (1,145)
========== ========== ==========
LOSS PER COMMON SHARE:
Loss from operations $ (.19) (.16) (.09)
Extraordinary item -- -- .01
---------- ---------- ----------
LOSS PER COMMON SHARE: $ (.19) $ (.16) $ (.08)
========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 18,516,791 16,264,682 14,207,648
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-13
<PAGE> 58
CIMETRIX INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Common Stock Additional
----------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 16,578,876 $ 2 $ 2,861 $(3,399) $ (536)
Net effect of subsidiary's capitalization,
including contributions by minority
shareholders -- -- 5,041 -- 5,041
Cancellation of shares previously issued
during 1991, valued at $14,812 (2,963) -- (15) -- (15)
Shares issued to employees per service
agreement, valued at $.0001 per share 116,667 -- -- -- --
Shares issued for cash, $5.00 per share 53,566 -- 268 -- 268
Issuance of shares to shareholders who
previously paid $5.00 per share 558,761 -- -- -- --
Cancellation of shares previously issued
to former officers, directors and other
related parties (2,798,223) -- -- -- --
Net loss for the year ended December 31, 1994 (1,145) (1,145)
---------- ------- ------- ------ -------
BALANCE, December 31, 1994 14,506,684 2 8,155 (4,544) 3,613
</TABLE>
[Continued]
F-14
<PAGE> 59
CIMETRIX INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE ACCOUNTS)
[Continued]
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- -------- ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
Shares issued for technology, valued
at $3.75 per share 120,000 -- 450 -- 450
Shares issued to acquire minority
interest in former subsidiary
2,829,419 -- 4,067 -- 4,067
Net effect of merger of minority
interest -- -- (487) -- (487)
Stock issued through private placement
memorandum, $4.00 per share, net of
offering costs of $28,553 1,000,000 -- 3,971 -- 3,971
Net loss for the year ended
December 31, 1995 (2,544) (2,544)
---------- ------- -------- ------- ------
BALANCE, December 31, 1995 18,456,103 $ 2 $ 16,156 $(7,088) $9,070
</TABLE>
[Continued]
F-15
<PAGE> 60
CIMETRIX INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE ACCOUNTS)
[Continued]
<TABLE>
<CAPTION>
Common Stock Additional Unearned
---------------------- Paid-in Accumulated Compensation
Shares Amount Capital Deficit Stock Options Total
------ ------ ---------- ----------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Stock options exercised, at $2 - $5 per share 340,325 -- 1,081 -- -- 1,081
Warrants exercised at $2.00 per share 125,000 -- 250 -- -- 250
Cancellation of shares returned by
former directors (800,000) -- -- -- -- --
Compensation - Stock Options 919 (234) 685
Net loss for the year ended December 31, 1996 -- -- -- (3,455) -- (3,455)
---------- ------- -------- --------- --------- -------
BALANCE, December 31, 1996 18,121,428 $ 2 $ 18,406 $ (10,543) $ (234) $ 7,631
========== ======= ======== ========= ========= =======
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-16
<PAGE> 61
CIMETRIX INCORPORATED
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(in thousands)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
--------------------------------------------------
1996 1995 1994
---------------- ------------------- -----------
<S> <C> <C> <C>
CASH FLOWS TO OPERATING ACTIVITIES:
Net Loss $(3,455) $(2,544) $(1,145)
Adjustments to reconcile net loss to net
cash used by operating activities:
Amortization and depreciation 635 390 72
Loss (gain) on disposition of assets (360) 3 3
Compensation related to stock options 685 -- --
Extraordinary items - debt forgiveness -- -- (188)
Minority interest in operation of subsidiary -- (199) (100)
Non-cash expense -- 24
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (549) (22) 61
(Increase) decrease in inventory 86 (321) (250)
(Increase) decrease in prepaid expenses (57) (110) (108)
(Increase) decrease in other assets 9 1 --
Increase (decrease) in accounts payable 497 (174) 50
Increase (decrease) in accrued expenses 337 32 (236)
Increase (decrease) in customer deposits 170 -- --
----------- ----------- -----------
Total Adjustments 1,453 (400) (672)
----------- ----------- -----------
Net Cash Flow Used by Operating
Activities (2,002) (2,944) (1,817)
----------- ----------- -----------
CASH FLOWS TO INVESTING ACTIVITIES:
Payments for capitalized software costs (122) (341) (520)
Purchase of real estate property (198) -- --
Proceeds from disposal of real estate property 453 -- --
Purchase of property and equipment, net of retirements (134) (638) (1,213)
Payments for other assets, net (20) (4) (2)
Proceeds from disposal of property 1,174 -- --
----------- ----------- -----------
Net Cash Flow Used by Investing Activities 1,153 (983) (1,735)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capitalization of subsidiary -- -- 5,000
Proceeds from issuance of common stock 1,331 4,000 268
Payments of stock offering costs - (29) --
Payments for capital lease obligations, net (20) (10) (9)
Proceeds from notes payable (22) -- 1,745
Payments for notes payable - (1,052) (130)
Proceeds from payable - related party - -- 42
Decrease in deferred tax liability - -- --
----------- ----------- -----------
Net Cash Flow Provided by
Financing Activities 1,289 2,907 6,916
----------- ----------- -----------
</TABLE>
(continued)
F-17
<PAGE> 62
CIMETRIX INCORPORATED
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Continued)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-----------------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 440 (1,020) 3,364
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 2,345 3,365 1
------- --------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,785 $ 2,345 $3,365
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 52 $ 26 $ 10
Income taxes $ -- -- $ --
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
FOR THE YEAR ENDED DECEMBER 31, 1996:
Compensation Expense of approximately $685,000 was recognized for all
currently outstanding and unexercised options.
FOR THE YEAR ENDED DECEMBER 31, 1995:
In July, 1995, the Company purchased the technology it had been licensing
from Brigham Young University by issuing 120,000 shares of common stock
valued at $3.75 per share, and signing an agreement to make 10 annual
payments of $50,000 cash. A note payable of $343,765 was recorded to
reflect the discounted present value of the 10 annual payments.
Effective August 31, 1995, the Company purchased the interest held by
minority shareholders in the Company's subsidiary by issuing 2,829,419
restricted shares of Cimetrix in exchange for an equal number of shares of
the subsidiary, Cimetrix (USA) Incorporated, held by those minority
shareholders. The subsidiary was then merged into the Cimetrix, effective
August 31, 1995. The effect of the purchase of the minority interest was to
create "excess cost over acquired net assets" in the amount of $3,260,646
that was recorded by the Company. This amount is being amortized on a
straight line basis over 15 years.
FOR THE YEAR ENDED DECEMBER 31, 1994:
In accordance with the terms of a settlement agreement, the Company
canceled 2,963 shares of common stock previously issued for services
rendered.
The Company issued 116,667 shares of common stock to employees for services
rendered, valued at $.0001 per share .
The Company issued 558,761 shares valued at $.0001 per share to
shareholders who had previously paid $5.00 per share, in order to give
those shareholders an average $2.00 per share basis.
F-18
<PAGE> 63
CIMETRIX INCORPORATED
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Continued)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES (CONTINUED):
FOR THE YEAR ENDED DECEMBER 31, 1994 (CONTINUED):
Related party accounts payable of $242,270 net of related party accounts
receivable of $120,068 were forgiven. Automobiles accounted for as capital
leases with a net book value of $3,651 were assumed by former officers.
Trade payables amounting to $62,334 were forgiven by vendors.
The Company entered into a lease for telephone equipment costing $53,127.
$635,000 of notes payable with their related interest of $23,834 were
converted into common shares of the subsidiary.
Former officers, directors and other related parties returned 2,798,223
common shares valued at $.0001 per share for cancellation.
F-19
<PAGE> 64
CIMETRIX INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION - Cimetrix Incorporated
("Cimetrix" or the "Company") was organized under the laws of the State of
Utah on December 23, 1985. In September, 1990, Cimetrix merged with a newly
incorporated Nevada company, effectively changing its domicile to that
state. Cimetrix (USA) Incorporated, a former wholly-owned subsidiary of
Cimetrix, was organized under the laws of the State of Florida on June 7,
1994. In July, 1994, Cimetrix acquired 20,000,000 shares of the common
stock of Cimetrix (USA) Incorporated in exchange for the transfer of
substantially all of the assets of Cimetrix, and the assumption of
$635,000 of convertible promissory notes payable. Cimetrix (USA)
Incorporated subsequently sold shares of its common stock to private
investors resulting in an approximate 12% minority interest. Effective
August 31, 1995, Cimetrix purchased the minority interest in Cimetrix
(USA) Incorporated by exchanging one share of Cimetrix common stock for
one share of Cimetrix (USA) Incorporated stock held by the minority
shareholders. In all, 2,829,419 common shares of Cimetrix were issued to
the minority shareholders in exchange for their stock in Cimetrix (USA)
Incorporated. Simultaneously, Cimetrix (USA) Incorporated was merged into
Cimetrix, effective August 31, 1995, leaving Cimetrix as the surviving
single entity. From June 7, 1994 to August 31, 1995, the financial
statements included the results of Cimetrix and Cimetrix (USA)
Incorporated, adjusted for minority interests.
REVENUE RECOGNITION - Revenue from sales to distributors, OEMs, and
end-users is recognized when related products are shipped. Revenue from
software maintenance, service, and support contracts is recognized ratably
over the contract period. Provisions are recorded for returns. The Company
has had no bad debt experience; therefore, no allowance for doubtful
accounts has been established.
TELEPHONE SUPPORT - Telephone support costs are included in sales and
marketing.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows,
the Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. At December 31,
1996, the Company had cash equivalents of $1,493,388 invested in commercial
paper maturing in January, 1997, which are readily convertible into cash
and are not subject to significant risk from fluctuation in interest rates;
there were cash equivalents of approximately $2,019,927 at December 31,
1995. At December 31, 1996 and 1995, the Company and cash of $58,459 and
$98,855, respectively, in excess of federally insured amounts in its bank
accounts.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost
is determined by the first-in, first-out method. Inventories at December
31, 1996 and 1995 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Parts and supplies $ 211 $ 226
Work in process 128 108
Finished goods 194 285
------ ------
$ 533 $ 619
====== ======
</TABLE>
Inventories are pledged as collateral for the Company's revolving line of
credit.
F-20
<PAGE> 65
CIMETRIX INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
PROPERTY AND EQUIPMENT - Property and equipment is stated at cost and
depreciated using the straight-line method over the estimated useful
lives of the related assets. The estimated lives are as follows:
Buildings, 30 years; leasehold improvements, the lease term; computer
equipment and other, three to seven years.
SOFTWARE DEVELOPMENT COSTS - Certain software development costs are
capitalized when incurred in accordance with Financial Accounting
Standards Board (FASB) Statement No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed."
Capitalization of software development costs begins upon the
establishment of technological feasibility. Costs incurred prior to
the establishment of technological feasibility are expensed as
incurred. The Company also expenses hardware design and prototype
expenses as incurred as research and product development costs. The
establishment of technological feasibility and the ongoing assessment
of recoverability of capitalized software development costs requires
considerable judgment by management with respect to certain external
factors, including, but not limited to, technological feasibility,
anticipated future gross revenues, estimated economic life and changes
in software and hardware technologies.
Amortization of capitalized software development costs is provided on
a product-by-product basis at the greater of the amount computed using
(a) the ratio of current gross revenues for a product to the total of
current and anticipated future gross revenues or (b) the straight-line
method over the remaining estimated economic life of the product. As
of December 31, 1996, the unamortized portion of capitalized software
development costs was $707,264. Amortization of software development
costs was $172,400, $104,000, and $0 for the fiscal years ended
December 31, 1996, 1995, and 1994.
GOODWILL - Goodwill reflects the excess of the costs of purchasing
the minority interest of Cimetrix (USA) Incorporated over the fair
value of the related net assets at the date of acquisition (August 31,
1995), and is being amortized on the straight line basis over 15
years. Amortization expense charged to operations for 1996 and 1995
was 217,380 and $72,460, respectively. At December 31, 1996, the
accumulated amortization is $289,840.
F-21
<PAGE> 66
CIMETRIX INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
INCOME TAXES - The Company records income taxes in accordance with
Statement of Financial Account Standards No. 109, "Accounting for
Income Taxes." Under the asset and liability method of accounting for
income taxes of Statement 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 Statement 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.
NET LOSS PER COMMON SHARE - Loss per share of common stock is computed
on the basis of the weighted average number of common shares
outstanding during the periods presented. Fully diluted loss per share
is not presented, except for extraordinary items, because its effect
is anti-dilutive. Dilutive common equivalent shares consist of stock
options and warrants.
ACCOUNTING ESTIMATES - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosures of contingent
assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimated.
RECLASSIFICATIONS - Certain reclassifications have been made for
consistent presentation.
F-22
<PAGE> 67
CIMETRIX INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1995 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Land $ -- $ 155
Buildings and improvements -- 752
Office equipment 227 213
Furniture and fixtures 208 203
Software 78 42
Equipment 495 426
Automobiles 13 --
Residential Real Estate -- 203
------ ------
$1,021 $1,994
Accumulated depreciation 407 262
------ ------
$ 614 $1,732
====== ======
</TABLE>
Depreciation expense for the years ended December 31, 1996, 1995 and
1994 was approximately $189,000, $187,000 and $72,000, respectively.
On various occasions, the Company has entered into various leases
for office equipment. Based on the provisions of Statement No. 13,
issued by the Financial Accounting Standards Board, many of these
leases meet the criteria of a capital lease. At December 31, 1996 and
1995 the cost of the assets amounted to $63,114, with accumulated
depreciation of $27,789 and $15,166, respectively. Depreciation expense
for the year ended December 31, 1996 and 1995 was $12,623 and $12,419,
respectively.
Future minimum lease payments under the capital lease obligations as of
December 31, 1996, for each of the next five years and in the aggregate
are as follows:
<TABLE>
<S> <C>
1997 $ 21,060
1998 2,865
1999 -
2000 -
2001 -
Thereafter -
--------
Total 23,925
Less: Amount representing interest (2,162)
--------
Present value of future minimum lease payments 21,763
Less: Current portion (19,104)
--------
Long-term portion $ 2,659
========
</TABLE>
F-23
<PAGE> 68
NOTE 3 - PREPAID LICENSE AGREEMENTS
Pursuant to an agreement dated July 26, 1995, which incorporated
provisions of a 1994 agreement , the Company entered into a
license/royalty agreement with a provider of real-time development
licenses which allowed the Company to resell real-time development
licenses to its customers. The Company has prepaid for development
licenses and this prepayment will be amortized until licenses and
services from the provider have been consumed. At December 31, 1996
and 1995, the amortized prepayment was $130,235 and $164,829,
respectively, and is included in Prepaid Expenses and Other Current
Assets on the Company's Balance Sheet. The agreement also provides
the Company with the option, expiring on July 25, 1998, to purchase
all existing development operating system source code from the
provider.
NOTE 4 - TECHNOLOGY
Effective July 5, 1995, the Company purchased the technology that was
then being licensed from Brigham Young University (BYU), referred to as
ROBLINE and ROBCAL. The Company purchased all rights, title, interest
and benefit in and to the intellectual property for cash payments of
$50,000 per year for ten years which were discounted using an
incremental borrowing rate of 9.5% per annum and has been recorded as a
note payable of $343,765, plus 120,000 shares of previously unissued,
restricted common stock of the Company valued at $3.75 per share , for
a total purchase value of $793,765. The technology is being amortized
on a straight-line basis over 15 years. Amortization expense was
$52,800 and $26,459 for the years ended December 31, 1996 and 1995,
respectively.
NOTE 5 - PATENTS AND COPYRIGHTS
The technology purchase from BYU, along with other technology developed
internally, is proprietary in nature. The Company has obtained two
patents on certain of the technology, issued in May 1989, and March
1994, respectively. In addition, the Company has registered its entire
CODE software system products with the Copyright Office of the United
States, and will continue to timely register any updates to current
products or any new products. For the most part, other than the two
patents and the copyright registrations, the Company relies on
confidentiality and nondisclosure agreements with its employees and
customers, appropriate security measures, and the encoding of its
software in order to protect the proprietary nature of its technology.
No cost has been capitalized with respect to the patents.
NOTE 6 - LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Note payable to BYU................................... $272 $294
Capital lease obligations.............................. 24 44
--- ----
296 338
--- ----
Less current maturities............................... 44 42
--- ----
Total................................................. $252 $296
==== ====
</TABLE>
In connection with the purchase of the technology from BYU discussed in
Note 4, the Company agreed to make payments of $50,000 each year for
ten years. This stream of payments was discounted using an incremental
borrowing rate of 9.5% per annum, and was recorded as a note payable
with a beginning balance of $343,765.
The Company entered into a $5,000,000, variable rate revolving line of
credit with a bank on October 3, 1996. The terms of this line of credit
are substantially the same as the line of credit existing at December
31, 1995 and which expired on October 31, 1996. The line provides
for interest at the rate of one half of one percent over the prime
rate of the bank. The line expires on April 30, 1997. Interest
payments are to be paid monthly, and any outstanding principal
balance is to be paid in full on April 30, 1997. At December 31, 1996,
no funds have been borrowed against the line. The amount available
under the revolving line of credit is calculated based upon a formula
of eligible current assets, including cash, receivables and
inventories which serve as collateral for amounts borrowed.
F-24
<PAGE> 69
CIMETRIX INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No.
109 Accounting for Income Taxes [FASB 109] during 1993. FASB 109
requires the Company to provide a net deferred tax asset or liability
equal to the expected future tax benefit or expense of temporary
reporting differences between book and tax accounting and any
available operating loss or tax credit carryforwards. At December
31, 1996 and 1995, the total of all deferred tax assets was
approximately $4,315,000 and $3,309,000 and the total of the deferred
tax liabilities was approximately $342,000 and $347,000. The amount
of and ultimate realization of the benefits from the deferred tax
assets for income tax purposes is dependent, in part, upon the tax
laws in effect, the Company's future earnings, and other future
events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the deferred tax assets,
the Company has established a valuation allowance of $3,973,000 and
$2,962,000 as of December 31, 1996 and 1995, which has been offset
against the deferred tax assets. The net change in the valuation
allowance during the year ended December 31, 1996, was $1,012,000.
The Company has available at December 31, 1996, unused tax operating
loss carryforwards of approximately $10,558,000 which may be applied
against future taxable income and which expire in various years
beginning 2004 through 2011.
The components of income tax expense from continuing operations for
the years ended December 31, 1996 and 1994 consist of the following
(in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1996 1995 1994
--------- ---------- ---------
<S> <C> <C>
Current income tax expense:
Federal $ - $ - $ -
State - - -
----------- ----------- ----------
Net current tax expense - - -
----------- ----------- ----------
Deferred tax expense (benefit) arising from:
Excess of tax over financial accounting depreciation $ (6) $ 120 228
Deferred income (68) -
Accrual of vacation wages payable (6) (18) -
Net operating loss carryforwards (932) (1,159) (722)
Valuation allowance 1,012 1,057 494
----------- ----------- ----------
Net deferred tax expense $ - $ - $ -
----------- ----------- ----------
</TABLE>
F-25
<PAGE> 70
CIMETRIX INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - INCOME TAXES [CONTINUED]
Deferred income tax expense results primarily from the reversal of
temporary timing differences between tax and financial statement
income. There is no portion of current or deferred tax expense that is
required to be allocated to the extraordinary item.
A reconciliation of income tax expense at the federal statutory rate
to income tax expense at the Company's effective rate is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed tax at the expected federal statutory rate 34.00% 34.00% 34.00%
Excess of tax over financial accounting depreciation (2.42) (1.24) (.87)
State income taxes, net of federal income tax benefits 6.00 6.00 6.00
Other (.60) (.22) 1.93
Compensation (7.93) - -
Forgiveness of debt - - 4.04
Net operating loss carry forward .22 (.02) (5.37)
Valuation allowance (29.27) (38.52) (39.73)
------- ------ ------
Effective income tax rates 00.00% 00.00% 00.00%
======= ====== ======
</TABLE>
The temporary differences gave rise to the following deferred tax
asset (liability) at December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
------------ ----------
<S> <C> <C>
Excess of book over tax accounting depreciation (342) $ (348)
Deferred income 68 -
Accrual of vacation wages payable 24 18
NOL carryforwards 4,223 3,291
</TABLE>
The deferred taxes are reflected in the balance sheet as follows
(in thousands):
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------
1996 1995
---- ----
<S> <C> <C>
Short term asset (liability) $ - $ 18
Long term asset (liability) $ - $ (18)
</TABLE>
F-26
<PAGE> 71
CIMETRIX INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - MINORITY INTEREST
On July 31, 1994, the Company's subsidiary, Cimetrix (USA)
Incorporated, sold (by private placement memorandum) 2,500,000 shares
of its common stock at $2.00 per share for total cash proceeds of
$5,000,000. The sale of the common stock, along with the conversion of
$635,000 of convertible notes payable to the subsidiary's common
stock, created a 12.4% minority interest in the subsidiary.
In July, 1995, the shareholders of the Company's subsidiary approved a
merger of the subsidiary into the Cimetrix through the exchange of one
share of the Company's restricted common stock for each of the
2,829,419 shares of the subsidiary's common stock held by the minority
interest shareholders. The merger was effective August 31, 1995, and
left Cimetrix as the sole surviving entity. The purchase of the
minority interest by Cimetrix created "excess of cost over acquired
net assets" of $3,260,646 which is being amortized over 15 years.
NOTE 9 - BENEFIT PLAN
The Company has a defined contribution 401(k) Retirement Savings Plan
covering substantially all of the Company's employees who are at least
21 years old and who have completed 3 months of service. Employees may
contribute at least 1%, but not more than 15% of their salary to the
plan. The Company will match 50% of the employee's contribution to the
plan up to a maximum of 2% of the employees annual pay. The employees
will vest in the employer's contribution over a five year period. For
the years ended December 31, 1996, 1995 and 1994, the Company
contributed $19,006, $16,284 and $5,685, respectively, to the plan.
NOTE 10 - EXTRAORDINARY ITEM
The Company negotiated a forgiveness of certain related party payables
and receivables during 1994. Related party payables forgiven exceeded
related party receivables forgiven by approximately $126,000.
Additionally, new management succeeded in negotiating forgiveness of
approximately $62,000 in lease, royalty, and other trade payables. The
net forgiveness of payables has been treated as an extraordinary item
in these financial statements.
NOTE 11 - SIGNIFICANT CUSTOMERS
Approximately 34% and 14% of the Company's revenues during the
year ended December 31, 1996 were attributable to a Japanese OEM and
Sandia National Labs, respectively. No other single customer accounted
for more than 10% of the Company's revenues during 1996. During the
year ended December 31, 1995, the Company had four significant
customers, AT&T (16%), Cybex Technologies (10%), Hewlett-Packard (26%)
and Motorola (29%), which individually were 10% or more of the
Company's revenues during the year ended December 31, 1995 and which
together accounted for approximately 81% of the Company's total
revenue during 1995. During 1994, 90% of the Company's total revenues
came from four significant customers. Although the Company values its
relationships with all of its customers, the Company does not believe
the loss of any single customer would have a material adverse impact
on the Company.
F-27
<PAGE> 72
CIMETRIX INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 12 - CONTINUING OPERATIONS
During its existence, the Company has incurred operating losses from
inception totaling of approximately $10,543,000 including
$(3,455,000), $(2,544,000), and $(1,145,000) during the years ended
December 31, 1996, 1995 and 1994, respectively. Net cash used by
operations amounted to approximately $2,021,000, $2,944,000 and
$1,817,000 during the same periods.
Historically, the Company has raised the required financing for
its activities through the sale of the Company's common shares and
from short-term borrowing. During 1996, the Company used these same
methods in raising what management believes will be sufficient cash
funds to finance the projected cash requirements through 1997 when
accompanied by projected sales revenues. In March, 1995, the Company
sold 1,000,000 of its common shares at a price of $4.00 per share
raising a total of approximately $3,971,000 in cash. Additionally,
the Company has arranged with a financial institution a
$5,000,000 line of credit. Borrowings against this line are secured by
certain current assets of the Company including cash. Management of
the Company believes that at December 31, 1996, the Company is capable
of financially meeting the demands inherent as normal sales continue
to develop during 1996.
Because of the cash position of the Company at December 31, 1996, the
accompanying financial statements do not contain any adjustments
relating to the recoverability and classification of recorded asset
amounts or the amount and classification of liabilities that might be
necessary, should the Company be unable to achieve profitable
operations and generate sufficient working capital to fund operations
and pay or refinance its current obligations.
NOTE 13 - STOCK OPTIONS AND WARRANTS
On December 21, 1994 the Board of Directors adopted effective
immediately, subject to shareholder approval at the annual meeting of
shareholders conducted in July, 1995, a stock option plan under which
options may be granted to officers, employees, directors and others.
The plan specifically replaces all prior option agreements between the
Company, its employees and its consultants. A total of 1,993,816
shares of common stock have been reserved for issuance under the plan.
Options granted under the plan are exercisable at a price not less
than the fair market value of the shares at the date of the grant, one
half of the options granted will vest on the first anniversary date of
the date of grant, and the remaining one half will vest on the second
anniversary date of grant. The option period and exercise price will
be specified for each option granted, as determined by the Board of
Directors, but in no case shall the option period exceed five years
from the date of grant, and the exercise price cannot be less than one
half the market price of the Company's common shares on the date of
grant.
F-28
<PAGE> 73
CIMETRIX INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 13 - STOCK OPTIONS AND WARRANTS [CONTINUED]
On March 21, 1994 the Company entered into a separate consulting
agreement with its current President, granting him warrants to
purchase 6,000,000 restricted common shares for a cash payment of
$1,000,000. The warrants are irrevocable and exercisable for a
period of five years. At December 31, 1996, none of the warrants
have been exercised.
During July, 1994, in connection with conversion of three notes
payable into common shares of the subsidiary, the Company issued
warrants to purchase up to an aggregate of 317,500 shares of common
stock of the Company upon payment of $2.00 per share. The warrants are
exercisable until April 29, 1997. During 1996, warrants for 125,00
shares were exercised. The remaining warrants to purchase 192,500 are
outstanding at December 31, 1996.
On September 12, 1994, the Board of Directors approved the issuance
of stock warrants to members of its advisory panel. Each panel
member was granted warrants to purchase 50,000 restricted shares at an
exercise price of $3.00 per share for a period of five years. At the
time of the grant, there was no trading marker for either the
Company's common shares or for warrants on those shares, although the
Company had received a price of $2.00 per share for common stock of
the Company's privately-owned, sole subsidiary. Consequently, no
compensation has been recorded in connection with the granting of
these warrants. As of December 31, 1996, none of the warrants granted
to members of the advisory panel have been exercised.
During the periods presented in the accompanying financial statements
the Company has granted options under the 1994 Employee Stock Option
Plan (the Plan). The Corporation has adopted the disclosure-only
provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no
compensation cost has been recognized under SFAS No. 123 for the Plan
in the accompanying financial statements. Had compensation cost for
the Company's stock option plan and agreements been determined based
on the fair value at the grant date for awards in 1996 and 1995
consistent with the provisions of SFAS No. 123, the Company's net
earnings and earnings per share would have been reduced to the pro
forma amounts indicated below (in thousands, except per share data):
<TABLE>
<CAPTION>
1996 1995
--------------- --------------
<S> <C> <C> <C>
Net Loss As reported $ (3,455) $ (2,544)
Proforma $ (3,514) $ (2,551)
Loss per As reported $ (.19) $ (.16)
common share Proforma $ (.19) $ (.16)
</TABLE>
The fair value of each option granted is estimated on the date granted
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants during the period ended
December 31, 1996 and 1995: risk-free interest rates of 6.0% and 6.4%,
expected dividend yield of zero, expected life of 5 and 5 years, and
expected volatility 89% and 94%.
A summary of the status of the options granted under the Company's
Plan and other agreements granting stock warrants at December 31,
1996, 1995 and 1994, and changes during the years then ended is
presented below:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995 December 31, 1994
---------------------------- ------------------------- ----------------------------
Weighted Average Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------ -------------- ------ -------------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of
period 8,493,166 $ 1.03 8,121,166 $ .82 - -
Granted 669,500 $ 7.83 543,000 $ 4.89 8,121,166 $ .82
Exercised (465,325) $ 2.86 - - - -
Forfeited (593,453) $ 3.36 (171,000) $ (2.42) - -
Expired - - - - - -
--------- ---------- --------- ---------- --------- --------
Outstanding at
end of period 8,103,888 $ 1.32 8,493,166 $ 1 .03 8,121,166 $ .82
--------- ---------- --------- ---------- --------- --------
Weighted average
fair value of
options granted
during the year 669,500 $ .73 543,000 $ .42 N/A N/A
--------- ---------- --------- ---------- --------- --------
</TABLE>
A summary of the status of the options outstanding under the Company's
stock option plans and other agreements granting stock warrants at
December 31, 1996 is presented below:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- ----------------------------
Range of Weighted-Average Weighted-Average Weighted-Average
Exercise Number Remaining Exercise Number Exercise
Prices Outstanding Contractual Life Price Exercisable Price
- -------------- ----------- ---------------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
$0.17 6,000,000 2.2 years $ 0.17 6,000,000 $ 0.17
$2.00 - $ 3.00 1,196,388 2.5 years $ 2.84 1,196,388 $ 2.84
$4.00 - $ 5.00 315,000 3.7 years $ 4.81 85,000 $ 4.94
$7.00 - $10.00 592,000 4.5 years $ 8.05 - $ -
- --------------- --------- --------- --------- --------- --------
8,103,388 7,281,388
</TABLE>
The stock options outstanding under the 1994 Employee Stock Option
Plan at December 31, 1996 are 1,460,888. A total of 340,325 shares
have been exercised under the Plan. Shares available for grant under
the Plan are 192,603 at December 31, 1996.
F-29
<PAGE> 74
CIMETRIX INCORPORATED
NOTES TO FINANCIAL STATEMENTS
A summary of the status of the options outstanding under the Company's
stock option plan and other agreements granting stock warrants at
December 31, 1996 is presented below:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- ----------------------------
Range of Weighted-Average Weighted-Average Weighted-Average
Exercise Number Remaining Exercise Number Exercise
Prices Outstanding Contractual Life Price Exercisable Price
- -------------- ----------- ---------------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
$0.17 6,000,000 2.2 years $ 0.17 6,000,000 $ 0.17
$2.00 - $ 3.00 1,196,388 2.5 years $ 2.84 1,196,388 $ 2.84
$4.00 - $ 5.00 315,000 3.7 years $ 4.81 85,000 $ 4.94
$7.00 - $10.00 592,000 4.5 years $ 8.05 - $ -
- --------------- --------- --------- --------- --------- --------
8,103,388 7,281,388
</TABLE>
NOTE 14 - STOCKHOLDERS' EQUITY
In August, 1996, two former directors returned 800,00 shares of issued
and outstanding common stock to the Company.
On August 11, 1995, the Board of Directors of the Company gave final
approval to a merger between Cimetrix Incorporated, and its majority
owned subsidiary, Cimetrix (USA) Incorporated, which was completed
effective August 31, 1995. Under the merger, the minority interest
shareholders of the subsidiary received one share of common stock of
the Company for each share of subsidiary common stock that they own.
This resulted in the issuance of 2,829,419 shares of restricted common
stock of the Company and the recording of excess of cost over acquired
net assets of $3,260,646. Subsequent to the merger, all business of the
Company is being conducted through Cimetrix Incorporated, a Nevada
corporation.
Effective July 5, 1995, the Company issued 120,00 shared of previously
unissued restricted common stock valued at $3.75 per share for the
purchase of technology from BYU.
On March 31, 1995, the Company closed a private placement offering in
which 1,000,000 shares of restricted common stock were sold at $4.00
per share for gross proceeds of $4,000,000. Attorneys' fees and
brokerage commissions associated with the offering totaled
approximately $28,553.
In February, 1994, the Company issued to three of its employees a total
of 116,667 shares of previously unissued restricted common stock valued
at $.0001 per share pursuant to a previous action of the Board of
Directors in 1993.
During 1994, the Company sold 53,566 restricted common shares at $5.00
per share for total cash proceeds of $267,830. Subsequently, the Board
of Directors approved the issuance of 558,761 additional restricted
shares to all shareholders who had previously purchase shares from the
Company at $5.00 per share during the periods from 1990 through 1994.
The additional issuance was intended to reduce the average cost of a
share to $2.00 per share for those who had previously paid $5.00 per
share.
Pursuant to agreements with the Company in 1994, certain former
officers and directors agreed to return 2,2798,223 shares held by them
for cancellation.
F-30
<PAGE> 75
CIMETRIX INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 15 - VOTING RIGHTS ASSIGNED TO PRESIDENT
On March 21, 1994, and later amended in June, 1994 and August, 1995,
certain former officers and directors of the Company entered into a
proxy agreement wherein they assigned the voting rights of their common
stock (current voting control of approximately 26.0%) to the current
President of the Company. The proxy agreement has a term expiring on
December 31, 1998 and is irrevocable.
NOTE 16 - RELATED PARTY TRANSACTIONS
During the years ended December 31, 1996 and 1995, the Company paid
consulting fees of approximately $50,000 each year and provided the
use of a furnished home to a corporation controlled by the current
President of the Company.
On July 31, 1994, the Company purchased a building contract for a cash
payment of $75,000. The contract provided for the construction of the
new facility now occupied by the Company. The purchase price was paid
to a partnership in which the current President of the Company was a
partner.
In connection with the voting rights of the former officers and
directors being assigned by proxy to the President of the Company, the
Company entered into agreements with certain former officers and
directors wherein 2,798,223 shares of the Company's common stock were
returned and cancelled. The former officers and directors released the
Company from obligations payable to them totaling $242,270. The Company
indemnified the former officers and directors for their past services
rendered, and released them from certain obligations payable to the
Company totaling $120,068. Prior to this simultaneous release of
obligations, a relative of one of the directors made non-interest
bearing cash advances to the Company totaling $32,900. All related
party payables and receivables were forgiven by the action noted above,
and as of December 31, 1994, the balance of related party receivables
and payables was zero.
NOTE 17 - COMMITMENTS AND CONTINGENCIES
F-31
<PAGE> 76
CIMETRIX INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 17 - CONTINGENCIES [CONTINUED]
PRODUCT WARRANTIES - The Company provides certain product warranties
to customers including repair or replacement for defects in materials
and workmanship of hardware products. The Company also warrants that
software and firmware products will conform to published
specifications and not fail to execute the Company's programming
instructions due to defects in materials and workmanship. In addition,
if the Company is unable to repair or replace any product to a
condition warranted, within a reasonable time, the Company will
provide a refund to the customer. As of December 31, 1996 and 1995, no
provision for warranty claims has been established since the Company
has not incurred substantial sales from which to develop reliable
estimates. Also, no refunds have been paid to any customer as of
December 31, 1996. Management believes that any allowance for warranty
would be currently immaterial to the financial condition of the
Company.
LITIGATION - The Company filed a lawsuit on February 8, 1996 and an
amended complaint on March 7, 1997 against W. Keith Seolas ("Seolas"),
a former director of the Company, and members of his family. The
lawsuit, styled Cimetrix Incorporated v. Waldron Keith Seolas, et al.,
pending in the Fourth Judicial Court of Utah County, Utah seeks
declaratory relief and a determination of the validity of the issuance
of approximately 2,000,000 shares of stock to Seolas and his family
members.
Seola filed a separate action on April 26, 1996 and an amended
complaint on March 17, 1997 in the United States District Court for
Utah, against the Company. In his lawsuit, styled Waldron Keith Seolas
et al. v. Cimetrix Incorporated, Seolas alleges fraud by the Company
in connection with the return of approximately 200,000 shares by
Seolas to the Company in 1994. The Company believes that it has strong
defenses to Seolas' claims and intends to vigorously defend them.
Counsel believes the claims against the Company are without merit.
Other than as stated above, the Company is not a party to any material
pending legal proceedings and, to the best of its knowledge no such
proceedings by or against the Company have been threatened. To the
knowledge of the Company's management, there are no material
proceedings
COMMON STOCK ISSUANCES - Subsequent to year-end, an additional
30,000 shares of common stock were issued pursuant to employee stock
options exercised at $3 per share.
OPERATING LEASES AGREEMENTS - The Company signed a five year lease
effective March 1, 1997 for its office and engineering space in Utah.
The lease requires monthly lease payments of $20,078 during the
term of the lease. The Company also signed a lease for the
administrative space in Tampa, Florida effective April, 1997 and
expiring June 30, 2000. This Florida lease requires monthly payments
of $6,933. The minimum monthly payments under these leases for the
next five years are as follows (in thousands):
1997 $ 263
1998 324
1999 324
2000 283
2001 241
Thereafter 40
------
$1,475
======
F-32
<PAGE> 77
===============================================================================
No person is authorized in connection with any offering made hereby to give any
information or to make any representation not contained in this Prospectus, and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company. this Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any security other than the
Senior Notes and Warrants (and underlying Common Stock) offered hereby, nor does
it constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby to any person in any jurisdiction in which it is
unlawful to make such an offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create any
implication that the information contained herein is correct as of any date
subsequent to the date hereof.
--------------
TABLE OF CONTENTS
Page
Prospectus Summary.......................... 1
Risk Factors................................ 4
Use of Proceeds............................. 8
Price Range of Common Stock and Dividend
Policy.................................... 8
Capitalization.............................. 8
Selected Financial Data..................... 10
Management's Discussion and Analysis
of Financial Condition and Results of
Operations................................ 10
Business.................................... 17
Management.................................. 29
Terms of Offering and Plan of Distribution.. 31
Description of the Senior Notes............. 33
Description of the Warrants................. 37
Description of Common Stock................. 38
Shares Eligible for Future Sale............. 41
Taxes....................................... 41
Legal Matters............................... 41
Experts..................................... 41
Available Information....................... 42
Incorporation of Certain Information
by Reference............................. 42
Glossary of Terms........................... 42
Index to Financial Statements............... F-1
--------------
===============================================================================
$10,000,000
CIMETRIX INCORPORATED
10% SENIOR NOTES
COMMON STOCK WARRANTS
---------------
PROSPECTUS
---------------
Further information regarding the Offering may be obtained from:
David L. Redmond
Cimetrix Incorporated
100 North Tampa Street, Suite 3550
Tampa, Florida 33602
(813) 277-9199
, 1997
===============================================================================
<PAGE> 78
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses of the Offering (excluding broker-dealer
discounts and commissions) are as follows:
<TABLE>
<CAPTION>
ITEM AMOUNT
---- ------
<S> <C>
SEC Registration Fee................................................... $ 3,030
Printing and Engraving Expenses........................................ 25,000
Legal Fees and Expenses................................................ 75,000
Accounting Fees and Expenses........................................... 1,000
Blue Sky Qualification Fees and Expenses (including legal fees)........ 25,000
Miscellaneous.......................................................... 970
========
Total......................................................... $ 130,000
========
</TABLE>
- --------------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 6.1 of the Company's Bylaws provides for the indemnification of
the Company's directors and executive officers to the fullest effect permitted
by law. Pursuant to the Nevada General Corporation Law, the Company may, and in
some cases, shall, indemnify its directors and executive officers against
certain liabilities. In addition, the Company has entered into an indemnity
agreement with each of its current directors and executive officers pursuant to
which it is obligated to indemnify those persons to the fullest extent
authorized by law and to advance payments to cover defense costs against an
unsecured obligation to repay such advances if it is ultimately determined that
the recipient of the advance is not entitled to indemnification. Reference is
made to the form of Indemnification Agreement filed as Exhibit 10.7 to the
Registration Statement.
ITEM 16. EXHIBIT 5.
The following exhibits are filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<S> <C>
2.1 Articles of Merger of Cimetrix (USA) Incorporated with and into Cimetrix Incorporated and related Agreement
and Plan of Merger dated June 28, 1995, between Cimetrix Incorporated and Cimetrix (USA) Incorporated (6)
3.1 Articles of Incorporation (1)
3.2 Bylaws, as amended*
4.1 Indenture among the Company and the initial holders of the Senior Notes
4.2 Specimen Senior Note
4.3 Common Stock Purchase Warrant (Series 1997)
5.1 Form of Opinion of Glenn Rasmussen & Fogarty, P.A., regarding the validity of issuance of the
</TABLE>
II-1
<PAGE> 79
<TABLE>
<S> <C>
securities being registered
10.1 Proxy Agreements dated March 21, 1994, between Paul A. Bilzerian and Waldron Keith Seolas, Lincoln M.
Dastrup, and Shirlee Dastrup and related Three Year Irrevocable Proxies executed as of March 21, 1994,
by W. Keith Seolas, Robert K. Seolas, Suzette Seolas, Helene S. Seolas, and Shirlee Dastrup, transferring
voting rights to Bilzerian (4)
10.2 Lease dated November 22, 1996 between Capitol Properties Four,
L.C. and Cimetrix Incorporated*
10.3 Agreement dated April 15, 1997, between Cimetrix Incorporated and Bicoastal Holding Company for the services of
Paul A. Bilzerian and Terri L. Steffen, his wife*
10.4 Sale and Purchase Agreement dated June 8, 1995, between Cimetrix (USA), Inc. and Brigham
Young University (6)
10.5 Stock Option Plan of Cimetrix Incorporated (2)
10.6 Amendment No. 1 to the Cimetrix Incorporated Stock Option Plan*
10.7 Form of Indemnity Agreement between the Company and each of its executive officers*
10.8 Sublease Agreement dated June 30, 1997, between Cimetrix Incorporated and Just in time solutions, Incorporated
10.9 Stock Purchase Warrant dated April 15, 1997 issued by Cimetrix Incorporated to David L. Redmond (3)
10.10 Amendment to Proxy Agreement dated August 9, 1995 between Paul A. Bilzerian and W. Keith Seolas, Lincoln M. Dastrup,
Shirlee Dastrup, Helene S. Berry, Robert K. Seolas and Suzette Seolas (6)
10.11 Consulting Agreement dated May 15, 1997 between Cimetrix Incorporated and PAJ Software Development for the services
of Paul A. Johnson (5)
10.12 Letter dated June 26, 1997 from Paul A. Bilzerian to Shirlee Dastrup, Linda Dastrup and Lincoln Dastrup, releasing
irrevocable proxies previously granted to Mr. Bilzerian (5)
10.13 Settlement Agreement and Mutual Release dated February 24, 1997 between Cimetrix Incorporated and Claude O.
Goldsmith, settling litigation over the validity of certain stock issuances and a stock option exercised by Mr.
Goldsmith (5)
10.14 Lease Agreement dated January 29, 1997 between Cimetrix Incorporated and Plaza IV Associates, Ltd. (5)
10.15 OEM Agreement dated September 25, 1996 between Cimetrix Incorporated and Fuji Machine Mfg. Co., Ltd.
10.16 Agreement dated May 1994 between Cimetrix Incorporated, Waldron Keith Seolas, Robert K. Seolas, Suzette Seolas,
Helene S. Berry, W. Edward Red, Shirlee Dastrup, Lincoln M. Dastrup and Linda Dastrup providing for surrender to the
corporation of previously issued shares, restrictions against competition and disclosure of confidential information,
settlement of certain liabilities owed by and to the corporation, and corporate indemnification from liability by
reason of action as a former officer, director, promoter, control person, or shareholder of the corporation (4)
23.1 Independent Auditors' Consent
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Powers of Attorney relating to subsequent amendments*
28.1 Forms of Subscription Agreement
</TABLE>
- ------------
* Previously filed with the Registration Statement on Form S-2.
(1) Incorporated by reference to Annual Report on Form 10-K for the fiscal
year ended December 31, 1993.
(2) Incorporated by reference to Annual Report on Form 10-K for the fiscal
year ended December 31, 1994.
(3) Incorporated by reference from Proxy Statement dated May 2, 1997
pertaining to the 1997 Annual Meeting of Shareholders.
(4) Incorporated by reference to Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1994.
(5) Incorporated by reference from the Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1997.
(6) Incorporated by reference to Quarterly Report on Form 10-QSB for the
quarterly period ended September 30, 1995.
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 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) 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 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
II-2
<PAGE> 80
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE> 81
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Tampa,
State of Florida, on August 25, 1997.
CIMETRIX INCORPORATED
By:/s/ David L. Redmond
----------------------------
David L. Redmond
Executive Vice President and
Chief Financial Officer
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ PAUL A. BILZERIAN President and Chief Executive Officer and August 25, 1997
- ------------------------- Director (as Director and Principal
PAUL A. BILZERIAN Executive Officer)
/s/ DAVID L. REDMOND Executive Vice President, Chief Financial August 25, 1997
- ------------------------- Officer and Director (as Director and
DAVID L. REDMOND Principal Financial and Accounting Officer)
/s/ DOUGLAS A. DAVIDSON Director August 25, 1997
- -------------------------
DOUGLAS A. DAVIDSON
</TABLE>
II-4
<PAGE> 82
<TABLE>
<S> <C> <C>
/s/ PAUL A. JOHNSON Director August 25, 1997
- -------------------------
PAUL A. JOHNSON
/s/ RON LUMIA Director August 25, 1997
- -------------------------
DR. RON LUMIA
* By: /s/ DAVID L. REDMOND
---------------------------
David L. Redmond
Attorney in fact
</TABLE>
II-5
<PAGE> 83
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<S> <C>
2.1 Articles of Merger of Cimetrix (USA) Incorporated with and into Cimetrix Incorporated and related
Agreement and Plan of Merger dated June 28, 1995 between Cimetrix Incorporated and Cimetrix (USA)
Incorporated*
3.1 Articles of Incorporation*
3.2 Bylaws, as amended*
4.1 Indenture among the Company and the initial holders of the Senior Notes
4.2 Specimen Senior Note
4.3 Common Stock Purchase Warrant (Series 1997)
5.1 Form of Opinion of Glenn Rasmussen & Fogarty, P.A., regarding the validity of issuance of the
securities being registered
10.1 Proxy Agreements dated March 21, 1994, between Paul A. Bilzerian and Waldron Keith Seolas, Lincoln M.
Dastrup, and Shirlee Dastrup and related Three Year Irrevocable Proxies executed as of March 21, 1994,
by W. Keith Seolas, Robert K. Seolas, Suzette Seolas, Helene S. Seolas, and Shirlee Dastrup, transferring voting
rights to Bilzerian*.
10.2 Lease dated November 22, 1996 between Capitol Properties Four, L.C. and Cimetrix Incorporated.*
10.3 Agreement dated April 15, 1997, between Cimetrix Incorporated and Bicoastal Holding Company for the services of
Paul A. Bilzerian and Terri L. Steffen, his wife*
10.4 Sale and Purchase Agreement dated June 8, 1995, between Cimetrix (USA), Inc. and Brigham
Young University*
10.5 Stock Option Plan of Cimetrix Incorporated*
10.6 Amendment No. 1 to the Cimetrix Incorporated Stock Option Plan*
10.7 Form of Indemnity Agreement between the Company and each of its executive officers*
10.8 Sublease Agreement dated June 30, 1997, between Cimetrix Incorporated and Just in Time Solutions,
Incorporated*
10.9 Stock Purchase Warrant dated April 15, 1997 issued by Cimetrix Incorporated to David L. Redmond*
10.10 Amendment to Proxy Agreement dated August 9, 1995 between Paul A. Bilzerian and W. Keith Seolas, Lincoln
M. Dastrup, Shirlee Dastrup, Helene S. Berry, Robert K. Seolas and Suzette Seolas*
10.11 Consulting Agreement dated May 15, 1997 between Cimetrix Incorporated and PAJ Software Development for the services
of Paul A. Johnson*
10.12 Letter dated June 26, 1997 from Paul A. Bilzerian to Shirlee Dastrup, Linda Dastrup and Lincoln Dastrup, releasing
irrevocable proxies previously granted to Mr. Bilzerian*
10.13 Settlement Agreement dated January 29, 1997 between Cimetrix Incorporated and Plaza by Mr. Goldsmith*
10.14 Lease Agreement dated January 29, 1997 between Cimetrix Incorporated and Plaza IV Associates, Ltd.*
10.15 OEM Agreement dated September 25, 1996 between Cimetrix Incorporated and Fuji Machine Mfg. Co., Ltd.
10.16 Agreement dated May 1994 between Cimetrix Incorporated, Waldron Keith Seolas, Robert K. Seolas, Suzette Seolas,
Helene S. Berry, W. Edward Red, Shirlee Dastrup, Lincoln M. Dastrup and Linda Dastrup providing for surrender to the
corporation of previously issued shares, restrictions against competition and disclosure of confidential information,
settlement of certain liabilities owed by and to the corporation, and corporate indemnification from liability by
reason of action as a former officer, director, promoter, control person, or shareholder of the corporation.*
23.1 Independent Auditors' Consent
23.2 Consent of Counsel (Included in Exhibit 5.1)
24.1 Power of Attorney relating to subsequent amendments *
28.1 Form of Subscription Agreement
</TABLE>
* Previously filed.
<PAGE> 1
EXHIBIT 4.1
================================================================================
CIMETRIX INCORPORATED
________________________
INDENTURE
DATED AS OF __________, 1997
_________________________
$____________
10% SENIOR NOTES DUE 2002
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION HEADING PAGE
- ------- ----
ARTICLE 1: DEFINITIONS AND
INCORPORATION BY REFERENCE
<S> <C> <C>
1.01 Definitions ........... ..........................1
1.02 Other Definitions ...............................10
1.03 Incorporation by Reference of Trust
Indenture Act .................................10
1.04 Rules of Construction . .........................11
ARTICLE 2: THE SECURITIES
2.01 Form and Dating .................................11
2.02 Execution and Issuance............ ..............11
2.03 Registrar and Paying Agent ......................12
2.04 Paying Agent to Hold Money in Trust .............12
2.05 Securityholder Lists ............................12
2.06 Transfer and Exchange ...........................12
2.07 Replacement Securities ..........................12
2.08 Outstanding Securities ..........................13
2.09 Treasury Securities .............................13
2.10 Temporary Securities ............................13
2.11 Cancellation . ..................................13
2.12 Defaulted Interest ..............................13
ARTICLE 3: REDEMPTION
3.01 Generally...................... .................14
3.02 Selection of Securities to be Redeemed ..........14
3.03 Notice of Redemption ............................14
3.04 Effect of Notice of Redemption ..................14
3.05 Deposit of Redemption Price .....................15
3.06 Securities Redeemed in Part .....................15
</TABLE>
i
<PAGE> 3
ARTICLE 4: COVENANTS
<TABLE>
<S> <C> <C>
4.01 Payment of Securities . .........................15
4.02 Omitted..........................................
4.03 Limitation on Indebtedness ......................15
4.04 Limitation on Restricted Payments ...............16
4.05 Limitation on Affiliate Transactions ............16
4.06 Change of Control ...............................17
4.07 Compliance Certificate ..........................17
4.08 Omitted..........................................
4.09 Limitation on Liens .............................19
4.10 Payment of Taxes and Other Claims ...............20
4.11 Corporate Existence .............................20
ARTICLE 5: SUCCESSORS
5.01 When Company May Merge, Etc......................21
ARTICLE 6: DEFAULTS AND REMEDIES
6.01 Events of Default ...............................21
6.02 Acceleration ....................................23
6.03 Other Remedies ..................................23
6.04 Waiver of Past Defaults .........................23
6.05 Control by Majority . ...........................23
6.06 Limitation on Suits . ...........................24
6.07 Rights of Holders to Receive Payment ............24
6.08 Collection Suit by Holders' Agent ...............24
6.09 Holders' Agent May File Proofs of Claim .........24
6.10 Priorities ......................................25
6.11 Undertaking for Costs ...........................25
ARTICLE 7: HOLDERS' AGENT
7.01 Generally .......................................25
7.02 Procedure for Appointment .......................25
7.03 Procedure for Removal ...........................26
7.04 Duties of Holders' Agent.........................27
7.05 Rights of Holders' Agent.........................28
7.06 Individual Rights of Holders' Agent .............28
7.07 Reports by Company to Holders ...................28
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
7.08 Compensation and Indemnity ......................28
7.09 Successor Holders' Agent by Merger, Etc. ........29
ARTICLE 8: DISCHARGE OF INDENTURE
8.01 Termination of Company's Obligations ............29
8.02 Application of Trust Money ......................30
8.03 Repayment to Company ............................30
ARTICLE 9: AMENDMENTS
9.01 Without Consent of Holders . ....................30
9.02 With Consent of Holders .. ......................31
9.03 Revocation and Effect of Consents ...............32
9.04 Notation on or Exchange of Securities ...........32
ARTICLE 10: MISCELLANEOUS
10.01 Notices .........................................32
10.02 Communications by Holders With Other
Holders ........................................33
10.03 Omitted .........................................
10.04 Statements Required in Certificate
or Opinion .....................................33
10.05 Rules by Holders' Agent and Agents...............33
10.06 Legal Holidays ..................................33
10.07 No Recourse Against Others . ....................34
10.08 Duplicate Originals .............................34
10.09 Variable Provisions .............................34
10.10 Governing Law ...................................34
</TABLE>
SIGNATURES
EXHIBIT A - FORM OF SECURITY
iii
<PAGE> 5
This INDENTURE dated as of __________, 1997, is among CIMETRIX
INCORPORATED (the "Company"), a Nevada corporation, and each Holder of the
Company's 10% Senior Notes Due 2002 (the "Securities"). For the benefit of
each other and for the equal and ratable benefit of initial and subsequent
Holders, the Company and the initial Holders agree as follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 DEFINITIONS. As used in this Indenture, the following
defined capitalized terms have the respective meanings ascribed to them:
"AFFILIATE" means any person directly or indirectly
controlling, or controlled by, or under direct or indirect common
control with, the Company.
"AGENT" means any Registrar, Paying Agent, or co-registrar.
"ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback
Transaction means, as at the time of determination, the present
value (discounted at the interest rate borne by the Securities,
compounded annually) of the total minimum obligations of the
lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period
for which such lease has been extended).
"BOARD OF DIRECTORS" means the Board of Directors of the
Company or any duly authorized committee of that Board of
Directors.
"CAPITAL LEASE OBLIGATION" means an obligation that is
required to be classified and accounted for as a capital lease for
financial reporting purposes in accordance with GAAP, and the
amount of Indebtedness represented by such obligation shall be the
capitalized amount of such obligation determined in accordance
with GAAP; and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by
the lessee without payment of a penalty.
"CAPITAL STOCK" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations
or other equivalents of or interests in (however designated)
equity of such Person, but excluding any debt securities convertible
into such equity.
<PAGE> 6
"CHANGE OF CONTROL" means the occurrence of any of the
following events with respect to the Company:
(i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or
becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that
for purposes of this clause (i) such person shall be
deemed to have "beneficial ownership" of all shares
that such person has the right to acquire, whether
such right is exercisable immediately or only after
the passage of time), directly or indirectly, of
more than 50% of the total voting power of the then
outstanding Voting Stock of the Company;
(ii) the persons who constituted the Board of
Directors on the Issue Date (together with any new
directors whose election by such Board of Directors
or whose nomination for election by the shareholders
of the Company was approved by a vote of 66-2/3% of
the directors of the Company then still in office
who were either directors at the beginning of such
period or whose election or nomination for election
was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then
in office; or
(iii) the merger or consolidation of the
Company with or into another Person or the merger of
another Person with or into the Company, or the sale
of all or substantially all the assets of the
Company to another Person, and, in the case of any
such merger or consolidation, the securities of the
Company that are outstanding immediately prior to
such transaction and which represent 100% of the
aggregate voting power of the Voting Stock of the
Company are changed into or exchanged for cash,
securities or property, unless pursuant to such
transaction such securities are changed into or
exchanged for, in addition to any other
consideration, securities of the surviving
corporation or a parent corporation that owns all of
the capital stock of such corporation that represent
immediately after such transaction, at least 50% of
the aggregate voting power of the Voting
-2-
<PAGE> 7
Stock of the surviving corporation or such parent
corporation, as the case may be.
"COMPANY" means Cimetrix Incorporated, a Nevada corporation
and the issuer of the Securities, and, from the effective date of
succession, includes each successor which replaces it under this
Indenture in accordance with Article 5.
"CURRENCY AGREEMENT" means in respect to a Person any foreign
exchange contract, currency swap agreement or other similar
agreement to which such Person is a party or a beneficiary.
"DEFAULT" means any event that is, or after notice or passage
of time would be, an Event of Default as defined in section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Issue Date,
including those set forth (i) in the opinions and pronouncements
of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (ii) in statements and
pronouncements of the Financial Accounting Standards Board, (iii)
in such other statements by such other entity as approved by a
significant segment of the accounting profession, and (iv) in the
rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in
periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff
accounting bulletins and similar written statements from the
accounting staff of the SEC. For the purposes of Section 4.2,
"GAAP" shall mean GAAP as of the date of the relevant financial
statements.
"GUARANTEE" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of
any Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness of
such Person (whether arising by virtue of agreements to keep-well,
to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner
the obligee of such Indebtedness of the payment thereof or to
protect such obligee
-3-
<PAGE> 8
against loss in respect thereof (in whole or in part); provided,
however, that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning. The
term "Guarantor" shall mean any Person Guaranteeing any
obligation.
"HEDGING OBLIGATIONS" of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement or Currency
Agreement.
"HOLDER" or "SECURITYHOLDER" means a person in whose name a
Security is registered.
"HOLDERS' AGENT" means the agent appointed by the Company or
the Holders pursuant to Article 7 to act on the Holders' behalf.
"INCUR" means issue, assume, Guarantee, incur or otherwise
become liable for Indebtedness; provided, however, that any
Indebtedness of a Person existing at the time such Person becomes
a Subsidiary (whether by merger, consolidation, acquisition or
otherwise) shall be deemed to be Incurred by such Subsidiary at
the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of
principal in a non-interest bearing or other discount security
shall be deemed the Incurrence of Indebtedness.
"INDEBTEDNESS" means, with respect to any Person on any date
of determination (without duplication), (i) the principal of and
premium (if any) in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of
which such Person is responsible or liable; (ii) all Capital Lease
Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all
obligations of such Person issued or assumed as the deferred
purchase price of property (which purchase price is due more than
one year after taking title of such property), all conditional
sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (iv) all
obligations of such Person for the reimbursement of any obligor on
any letter of credit, banker's acceptance, or similar credit
transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in
clauses (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of
-4-
<PAGE> 9
credit are not drawn upon, or, if and to the extent drawn upon,
such drawing is reimbursed no later than the tenth Business Day
following receipt by such Person of a demand for reimbursement
following payment on the letter of credit); (v) all obligations of
the type referred to in clauses (i) through (iv) of other Persons
and all dividends of other Persons for the payment of which, in
either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means
of any Guarantee; (vi) (all obligations of the type referred to in
clauses (i) through (v) of other Persons secured by any Lien on
any property or asset of such Person (whether or not such
obligation is assumed by other Person), the amount of such
obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured; and
(vii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of
any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such
date.
"INDENTURE" means this Indenture as amended and supplemented
from time to time.
"INTEREST RATE AGREEMENT" means any interest rate swap
agreement, interest rate cap agreement, or other financial
agreement or arrangement designed solely to protect the Company or
any Restricted Subsidiary against fluctuations in interest rates.
"INVESTMENT" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary
course of business that are recorded as accounts receivable on the
balance sheet of the Person making the advance or loan), or other
extensions of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of any transfer
of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person.
"ISSUE DATE" means the date of original issuance of the
Securities.
"LIEN" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional
sale or other title retention agreement or lease in the nature
thereof).
-5-
<PAGE> 10
"MOODY'S" means Moody's Investors Service, Inc.
"OFFICER" means any officer or assistant officer of the
Company assigned by the Company to administer its matters under
this Indenture.
"OPINION OF COUNSEL" means a written opinion from legal
counsel acceptable to the Holders' Agent. The counsel may be an
employee of, or counsel to, the Company or the Holders' Agent.
See sections 10.04 and 10.05.
"PERMITTED INVESTMENT" means an Investment by the Company or
any Restricted Subsidiary in (i) a Restricted Subsidiary or a
Person that will, upon the making of such Investment, become a
Restricted Subsidiary; provided, however, that the primary
business of such Restricted Subsidiary is a Related Business; (ii)
another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys
all or substantially all of its assets to, the Company or a
Restricted Subsidiary; provided, however, that such Person's
primary business is a Related Business; (iii) Temporary Cash
Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with
customary trade terms; provided, however, that such trade terms
may include such concessionary trade terms as the Company or any
such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately
to be treated as expenses for accounting purposes and that are
made in the ordinary course of business; (vi) loans or advances to
employees permitted under Section 4.05; (vii) stock, obligations
or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments; and (viii)
payments, including without limitation, security deposits, made to
utilities or landlords in the ordinary course of business; and
(ix) any Person to the extent such Investment represents the
non-cash portion of the consideration received for an asset
disposition.
"PERMITTED LIENS" means, with respect to any Person, (a)
pledges or deposits by such Person under workers' compensation
laws, unemployment insurance laws or similar legislation, or good
faith deposits in connection with bids, tenders, contracts (other
than for the payment of Indebtedness) or leases to which such
Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits or cash or United States
-6-
<PAGE> 11
government bonds to secure surety or appeal bonds to which such
Person is a party, or deposits as security for contested taxes or
import duties or for the payment of rent, in each case incurred in
the ordinary course of business; (b) Liens imposed by law, such as
carriers', warehousemen's and mechanics' Liens, in each case for
sums not yet due or being contested in good faith by appropriate
proceedings; (c) Liens arising out of judgments or awards against
such Person with respect to which such Person shall then be
proceeding with an appeal or other proceedings for review or time
for appeal has not yet expired; (d) Liens for taxes, assessments
or other governmental charges not yet subject to penalties for
non-payment or which are being contested in good faith by
appropriate proceedings; (e) Liens in favor of issuers of surety
bonds or letters of credit issued pursuant to the request of and
for the account of such Person in the ordinary course of its
business; provided, however, that such letters of credit do not
constitute Indebtedness; (f) survey exceptions, encumbrances,
easements or reservations of, or rights of others for licenses,
rights of way, sewers, electric lines, telegraph and telephone
lines and other similar purposes, or zoning or other restrictions
as to the use of real properties or Liens incidental to the
conduct of the business of such Person or to the ownership of its
properties which were not incurred in connection with Indebtedness
and which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the
operation of the business of such Person; (g) Liens securing an
Interest Rate Agreement so long as the related Indebtedness is,
and is permitted to be under this Indenture, secured by a Lien on
the same property securing the Interest Rate Agreement; and (h)
leases and subleases of real property which do not interfere with
the ordinary conduct of the business of such Person, and which are
made on customary and usual terms applicable to similar
properties.
"PERSON" means any individual, corporation, limited liability
company, limited or general partnership, joint venture,
association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision
thereof or any other entity.
"PRINCIPAL" of a Security means the principal of the Security
plus the premium, if any, payable on the Security which is due or
overdue or is to become due at the relevant time.
"REFINANCE" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease
or retire, or to issue other Indebtedness in exchange or
replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
-7-
<PAGE> 12
"RELATED BUSINESS" means any business related, ancillary or
complementary to the business of the Company on the Issue Date.
"RESTRICTED PAYMENT" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions
of any sort in respect of its Capital Stock (including any payment
in connection with any merger or consolidation involving such
Person), other than dividends or distributions payable solely in
its Capital Stock, (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the
Company held by any Person, including the exercise of any option
to exchange any Capital Stock (other than into Capital Stock of
the Company), or (iii) the purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within
one year of the date of acquisition).
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company.
"SALE/LEASEBACK TRANSACTION" means an arrangement relating to
property now owned or hereafter acquired whereby the Company
transfers such property to a Person and the Company leases it from
such Person.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the Securities described above under this
Indenture.
"STATED MATURITY" means, with respect to any security, the
date specified in such security as the fixed date on which the
final payment of principal of such security is due and payable,
including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of
any contingency unless such contingency has occurred).
"SUBORDINATED OBLIGATION" means any Indebtedness of the
Company (whether outstanding on the Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to
the Securities pursuant to a written agreement to that effect.
-8-
<PAGE> 13
"SUBSIDIARY" means, in respect of any Person, any
corporation, association, limited liability company, limited or
general partnership or other business entity of which more than
50% of the total voting power of shares of Capital Stock or other
interests (including partnership interests) entitled (without
regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person, or
(iii) one or more Subsidiaries of such Person.
"S&P" means Standard and Poor's Ratings Service.
"TEMPORARY CASH INVESTMENT" means any of the following: (i)
any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the
United States of America or any agency thereof, (ii) investments
in time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any
foreign country recognized by the United States, and which bank or
trust company has capital, surplus and undivided profits
aggregating in excess of 410.0 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A"
for such similar equivalent rating) or higher by at lest one
nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act) or any money market fund
sponsored by a registered broker, dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more
than 30 days from underlying securities of the types described in
clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) investments in
commercial paper, maturing not more than six months after the date
of acquisition, issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the
United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to
Moody's or "A-1" (or higher) according to S&P, and (v) investments
in securities with maturities of six months or less from the date
of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by
any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or "A" by Moody's.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) as in effect on the date of this Indenture.
-9-
<PAGE> 14
"TRUSTEE" means a Person appointed by the Company pursuant to
Article 8.
"VOTING STOCK" of a Person means all classes of Capital Stock
or other interests (including partnership interests) of such
Person then outstanding and normally entitled (without regard to
the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof.
SECTION 1.02 OTHER DEFINITIONS. As used in this Indenture, (a) the
"principal" of a debt security includes any premium payable on the security;
(b) the word "or" is not exclusive; (c) the word "including" is always without
limitation; (d) the phrase "majority in principal amount," means the smallest
dollar amount greater than one-half the principal amount of Securities
outstanding; and (e) the following capitalized terms have the respective
meanings ascribed to them in the sections specified:
<TABLE>
<CAPTION>
TERM DEFINED IN SECTION
---- ------------------
<S> <C>
"BANKRUPTCY LAW" 6.01
"COMMON STOCK" 10.01
"CUSTODIAN" 6.01
"DEBT" 11.02
"EVENT OF DEFAULT" 6.01
"LEGAL HOLIDAY" 12.07
"OFFICER" 12.10
"PAYING AGENT" 2.03
"REGISTRAR" 2.03
"U.S. GOVERNMENT OBLIGATIONS" 8.01
</TABLE>
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in this Indenture and made a part of it.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Securities;
"INDENTURE SECURITY HOLDER" means a Securityholder; and
"OBLIGOR" on the indenture securities means the Company.
-10-
<PAGE> 15
All other terms used in this Indenture that are defined by the TIA, or defined
by TIA reference to another statute, or defined by SEC rule under the TIA, have
the meanings assigned to them by the TIA or the applicable statute or SEC rule.
SECTION 1.04 RULES OF CONSTRUCTION. Unless the context otherwise
requires: (a) a capitalized term has the meaning assigned to it in this
Indenture; (b) an accounting term not otherwise defined in this Indenture has
the meaning accorded it under generally accepted accounting principles; (c)
words in the singular number include words in the plural number and vice versa;
(d) provisions apply to successive events and transactions; (e) masculine words
should be construed to include correlative neuter and feminine words; (f)
unless otherwise expressly stated, all references in this Indenture to a
section or exhibit are to a section or exhibit of this Indenture; (g) all
exhibits referred to in this Indenture are an integral part of it and are
incorporated by reference in it; (h) the headings preceding the text of the
articles and sections of this Indenture are solely for convenient reference and
neither constitute a part of this Indenture nor affect its meaning,
interpretation, or effect; and (i) all references to a particular "principal
amount of the Securities," such as a "majority" or "66-2/3%," are to the
principal amount of the Securities outstanding (as determined pursuant to
section 2.08) at the time the determination is permitted or required to be
made.
ARTICLE 2
THE SECURITIES
SECTION 2.01 FORM AND DATING. The Securities will be in substantially
the form of Exhibit A. The Company may imprint on the Securities legends,
notations, or endorsements as required to conform to usage or to comply with
any law or stock exchange rule. Each Security will be dated the date of its
issuance. The terms of the Securities set forth in Exhibit A are part of the
terms of this Indenture and, to the extent applicable, the Company and the
initial Holders, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and agree to be bound.
SECTION 2.02 EXECUTION AND ISSUANCE. Two Officers must sign the
Securities for the Company by manual or facsimile signature. The Company's
seal will be reproduced on the Securities. If an Officer who signs a Security
no longer holds that office at the time the Security is issued, the Security
remains valid.
A Security is not valid until issued by the Company by the manual
signature of an Officer. The signature will be conclusive evidence that the
Security has been issued under this Indenture.
-11-
<PAGE> 16
The Company shall originally issue Securities up to the aggregate
principal amount stated in paragraph 4 of Exhibit A. The aggregate principal
amount of Securities outstanding at any time is limited to that amount, except
as provided in sections 2.07 and 2.08.
SECTION 2.03 REGISTRAR AND PAYING AGENT. The Company shall maintain an
office or agency where Securityholders may present Securities for exchange or
registration of transfer (a "Registrar") and an office or agency where
Securityholders may present Securities for payment (a "Paying Agent"). The
Registrar shall keep a register of the Securities and of their exchange and
transfer. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional
paying agent. The Company or any of its Subsidiaries may act in any such
capacity.
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall
require each Paying Agent to agree in writing that the Paying Agent will hold
in trust for the benefit of the Securityholders all money held by the Paying
Agent for the payment of principal of or interest on the Securities. If the
Company acts as Paying Agent, it shall segregate and hold as a separate trust
fund all money held by it as Paying Agent.
SECTION 2.05 SECURITYHOLDER LISTS. The Company shall preserve in as
current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Securityholders.
SECTION 2.06 TRANSFER AND EXCHANGE. Where Securities are presented to
the Registrar or a co-registrar with a request to register a transfer or to
exchange them for an equal principal amount of Securities of other
denominations, the Registrar shall register the transfer or make the exchange
if its requirements for the transactions are satisfied. The Company may charge
a reasonable fee for any registration of transfer or exchange but not for any
exchange pursuant to section 2.10, 3.06, or 9.05. The Registrar need not
transfer or exchange any Security selected for Redemption, and at the request
of the Company, the Registrar shall not transfer or exchange any Security for a
period of 15 days before the Company selects Securities to be redeemed. Prior
to the due presentation for registration of transfer of any Security, the
Company, the Paying Agent, the Registrar or any co-registrar may deem and treat
the person in whose name a Security is registered as the absolute owner of such
Security for the purpose of receiving payment of principal of and interest on
such Security and for all other purposes whatsoever, whether or not such
Security is overdue, and none of the Company, the Paying Agent, the Registrar
or any co-registrar shall be affected by notice to the contrary.
SECTION 2.07 REPLACEMENT SECURITIES. If the Holder of a Security claims
that the Security has been lost, destroyed, or wrongfully taken, the Company
shall issue a replacement Security, if the Company's reasonable requirements
are satisfied. If required
-12-
<PAGE> 17
by the Company, an indemnity bond must be sufficient in the judgment of both to
protect the Company, any Agent, or any authenticating agent from any loss that
any of them might suffer if a Security is replaced. The Company may charge for
its expenses in replacing a Security. Every replacement Security is an
additional obligation of the Company.
SECTION 2.08 OUTSTANDING SECURITIES. The Securities outstanding at any
time are all the Securities issued by the Company, except for those cancelled
by it, those delivered to it for cancellation, and those described in this
section as not outstanding. A Security that is replaced pursuant to section
2.07 ceases to be outstanding, unless the Company receives proof satisfactory
to it that the replaced Security is held by a bona fide purchaser. If
Securities are considered paid under section 4.01, they cease to be outstanding
and interest on them ceases to accrue. A Security does not cease to be
outstanding because the Company or an Affiliate holds the Security.
SECTION 2.09 TREASURY SECURITIES. In determining whether the Holders of
the required principal amount of Securities have concurred in any waiver,
consent, or direction, Securities owned by the Company or an Affiliate will be
disregarded, except that only Securities that the Company knows are so owned
will be disregarded for the purposes of determining whether the Company is
protected in relying on any waiver, consent, or direction of Securityholders.
SECTION 2.10 TEMPORARY SECURITIES. Until definitive Securities are ready
for delivery, the Company may prepare and issue temporary Securities.
Temporary Securities must be substantially in the form of definitive
Securities, with variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare
and issue definitive Securities in exchange for temporary Securities.
SECTION 2.11 CANCELLATION. The Registrar and Paying Agent shall forward
to the Company any Securities surrendered to them for registration of transfer,
exchange, or payment. The Company shall cancel all Securities surrendered for
registration of transfer, exchange, payment, or cancellation. The Company
shall not issue new Securities to replace Securities that it has cancelled.
SECTION 2.12 DEFAULTED INTEREST. If the Company defaults in a payment of
interest on the Securities, it shall pay the defaulted interest in any lawful
manner. It may pay the defaulted interest, plus any interest payable on the
defaulted interest, to the persons who are Securityholders on a subsequent
special record date. The Company shall fix the record date and payment date.
At least 15 days before the record date, the Company shall mail to
Securityholders a notice that states the record date, payment date, and amount
of interest to be paid.
-13-
<PAGE> 18
ARTICLE 3
REDEMPTION
SECTION 3.01 GENERALLY. If the Company elects to redeem Securities
pursuant to paragraph 5 of the Securities, it shall comply with the
requirements set forth in this section.
SECTION 3.02 SELECTION OF SECURITIES TO BE REDEEMED. If less than all
the Securities are to be redeemed, the Company shall select the Securities to
be redeemed by a method that complies with the requirements of any stock
exchange on which the Securities are listed and otherwise pro rata or by lot.
The Company shall make the selection not more than 75 days before the
redemption date from outstanding Securities not previously called for
redemption. The Company may select for redemption portions of the principal of
Securities that have denominations larger than $1,000. Securities and portions
of them that the Company selects for redemption must be in the principal amount
of $1,000 or whole multiples of $1,000. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of Securities
called for redemption.
SECTION 3.03 NOTICE OF REDEMPTION. At least 30 days but not more than 60
days before a redemption date, the Company shall mail a notice of redemption to
each Holder whose Securities are to be redeemed. The notice shall identify the
Securities to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption
price; and
(e) that interest on Securities called for redemption
ceases to accrue on and after the redemption date.
The Company also shall publish the notice of redemption in any manner necessary
to comply with the requirements of any stock exchange on which the Securities
are listed.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption
is mailed, Securities called for redemption become due and payable on the
redemption date at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Securities shall be paid at the redemption price
stated in the notice, plus accrued interest to the redemption date. Such
notice if mailed in the manner herein provided shall be
-14-
<PAGE> 19
conclusively presumed to have been given, whether or not the Holder receives
such notice. Failure to give notice or any defect in the notice to any Holder
shall not affect the validity of the notice to any other Holder.
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE. On or before the redemption
date, the Company shall deposit with the Paying Agent (or if the Company is the
paying agent, shall segregate and hold in trust) money sufficient to pay the
redemption price of and accrued interest on all Securities to be redeemed on
that date.
SECTION 3.06 SECURITIES REDEEMED IN PART. Upon surrender of a Security
that is redeemed in part, the Company shall issue for the Holder a new Security
equal in principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE 4
COVENANTS
SECTION 4.01 PAYMENT OF SECURITIES. The Company shall pay the principal
of and interest on the Securities on the dates and in the manner provided in
the Securities. Principal and interest will be considered paid on the date due
if the Paying Agent holds on that date money sufficient to pay all principal
and interest then due. The Company shall pay interest on overdue principal at
the interest rate borne by the Securities; it shall pay interest on overdue
installments of interest at the same interest rate to the extent lawful.
SECTION 4.02 Omitted.
SECTION 4.03 LIMITATION ON INDEBTEDNESS.
(a) The Company will not Incur, directly or indirectly, any
Indebtedness unless, after such Incurrence, the aggregate
principal amount of Indebtedness of the Company (including the
Securities) does not exceed $10,000,000.
(b) Notwithstanding section 4.03(a), the Company may Incur
Indebtedness for Capital Lease Obligations and Indebtedness
Incurred to finance all or part of the purchase price of assets or
property acquired or constructed in the ordinary course of
business.
(c) For purposes of determining compliance with this Section
4.03, (i) in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described
above, the Company, in its sole discretion, will classify such
item of Indebtedness and only be required
-15-
<PAGE> 20
to include the amount and type of such Indebtedness in one of the above
clauses and (ii) an item of Indebtedness may be divided and classified in
more than one of the types of Indebtedness described above.
SECTION 4.04 LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, make a Restricted Payment.
(b) The provisions of section 4.04(a) will not prohibit:
(i) any purchase or redemption of Capital Stock
or Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of
the Company or out of the proceeds of a
substantially concurrent capital contribution to the
Company;
(ii) any purchase, repurchase, redemption,
defeasance or other acquisition or retirement for
value of Subordinated Obligations made by exchange
for, or out of the net proceeds of the substantially
concurrent sale of, Indebtedness of the Company
which is permitted to be Incurred pursuant to
Section 4.03;
(iii) the repurchase of Capital Stock of the
Company from directors, officers or employees of the
Company pursuant to the terms of an employee benefit
plan or employment or other agreement; provided that
the aggregate amount of all such repurchases shall
not exceed $1 million in any fiscal year, and $2
million in total; and
(iv) the repurchase of Capital Stock of the
Company for any other reason, provided that the
aggregate amount of such repurchases (excluding
repurchases pursuant to part (iii) above) shall not
exceed $500,000 in total.
SECTION 4.05 LIMITATION ON AFFILIATE TRANSACTIONS.
(a) The Company will not enter into any transaction
(including the purchase, sale, lease or exchange of any property,
or rendering of any service) with any Affiliate of the Company (an
"Affiliate Transaction")
-16-
<PAGE> 21
unless the terms of such transaction (i) are no less favorable to the
Company or such Restricted Subsidiary than those that could be obtained
at the time of such transaction in a comparable transaction in
arm's-length dealings with a Person who is not such an Affiliate, (2) if
such Affiliate Transaction involves an amount in excess of $1.0 million,
(i) are set forth in writing and (ii) have been approved by a majority of
the members of the Board of Directors having no material personal
financial stake in such Affiliate Transaction.
(b) The foregoing provisions of section 4.05(a) shall not
prohibit (i) any Permitted Investment or Restricted Payment
permitted to be made pursuant to section 4.04, or any payment or
transaction specifically excepted from the definition of
Restricted Payment, (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise and
the performance of any other obligations of the Company pursuant
to, or the funding of, employment arrangements, collective
bargaining agreements, employee benefit plans, health and life
insurance plans, deferred compensation plans, directors' and
officers' indemnification agreements, retirement or savings plans,
stock options and stock ownership plans or any other similar
arrangement heretofore or hereafter entered into in the ordinary
course of business or consistent with past practice, (iii) the
grant of stock options or similar rights to employees and
directors pursuant to plans approved by the Board of Directors,
(iv) loans or advance to officers, directors or employee
heretofore or hereafter entered into in the ordinary course of
business or consistent with past practice, (v) the payment of
reasonable fees to directors of the Company who are not employees
of the Company, (vi) any Affiliate Transaction between the Company
and a Wholly Owned Subsidiary or between Wholly-Owned
Subsidiaries, or (vii) the purchase of or the payment of
Indebtedness of or monies owed by the Company for goods or
materials purchased, or services received, in the ordinary course
of business.
SECTION 4.06 CHANGE OF CONTROL.
(a) Upon a Change of Control, each Holder shall have the
right to require that the Company repurchase all or any part of
such Holder's Securities at a purchase price in cash equal to 100%
of the principal amount thereof, plus accrued and unpaid interest,
if any, to the date of repurchase (subject to the right of Holders
of record on the relevant record date to receive interest due on
the related interest payment date), in accordance with the terms
contemplated in section 4.06(b).
-17-
<PAGE> 22
(b) Within 30 days following any Change of Control, unless
notice of redemption of the Securities has been given pursuant to
paragraph 5 of exhibit A, the Company shall mail a notice to each
Holder stating:
(1) that a Change of Control has occurred and
that such Holder has the right to require the
Company to purchase such Holder's Securities at a
purchase price in cash equal to 100% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase (subject
to the right of Holders of record on a record date
to receive interest on the relevant interest payment
date);
(2) the circumstances and relevant facts
regarding such Change of Control;
(3) the repurchase date (which shall be no
earlier than 30 days nor later than 60 days from the
date such notice is mailed); and
(4) the instructions determined by the Company,
consistent with this Section, that a Holder must
follow in order to have its Securities repurchased.
(c) Holders electing to have a Security purchased will be
required to surrender the Security, together with all necessary
endorsements and other appropriate materials duly completed, to
the Company at the address specified in the notice at least three
Business Days prior to the purchase date. Holders will be
entitled to withdraw their election if the Company receives not
later than one Business Day prior to the purchase date, a
facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Security which was delivered
for purchase by the Holder as to which such notice of withdrawal
is being submitted, and a statement that such Holder is
withdrawing his election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the
Company under this Section shall be delivered to the Company for
cancellation, and the Company shall pay the purchase price plus
accrued and unpaid interest, if any, to the Holders entitled
thereto.
(e) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any
other
-18-
<PAGE> 23
securities laws or regulations in connection with the repurchase
of Securities pursuant to this Section. To the extent that the
provisions of any securities laws or regulations conflict with
provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed
to have breached its obligations under this Section by virtue
thereof.
(f) Notwithstanding the occurrence of a Change of Control,
the Company shall not be obligated to repurchase the Securities or
otherwise comply with this Section if the Company has irrevocably
elected to redeem all the Securities in accordance with Article
Three; provided that the Company does not default in its
redemption obligations pursuant to such election.
SECTION 4.07 COMPLIANCE CERTIFICATES. The Company shall deliver to the
Securityholders within 120 days after the end of each fiscal year of the
Company an officer's certificate stating whether or not the signers know of any
Default that occurred during the fiscal year. If they do, the certificate
shall describe the Default and its status. The certificate need not comply
with section 10.05.
SECTION 4.08 Omitted.
SECTION 4.09 LIMITATION ON LIENS. The Company will not, directly or
indirectly, create or permit to exist any Lien on any of its property or
assets, now owned or hereafter acquired, securing any obligation unless
concurrently with the creation of such Lien effective provision is made to
secure the Securities equally and ratably with such obligation for so long as
such obligation is so secured; provided, that if such obligation is a
Subordinated Obligation, the Lien securing such obligation shall be
subordinated and junior to the Lien securing the Securities with the same or
lesser relative priority as such Subordinated Obligation shall have been with
respect to the Securities. The preceding restriction shall not require the
Company to secure the Securities if the Lien consists of the following:
(a) Liens created by the Indenture and Liens existing as of
the Issue date;
(b) Permitted Liens;
(c) Liens to secure Indebtedness issued by the Company for
the purpose of financing all or a part of the purchase price of
assets or property acquired or constructed in the ordinary course
of business after the Issue Date; provided, however, that (a) the
aggregate principal amount (or
-19-
<PAGE> 24
accreted value in the case of Indebtedness issued at a discount)
of Indebtedness so issued shall not exceed the lesser of the cost
or fair market value, as determined in good faith by the Board of
Directors of the Company, of the assets or property so acquired or
construed, (b) the Indebtedness secured by such Liens shall have
been permitted to be Incurred under Section 4.03, and (c) such
Liens shall not encumber any other assets or property of the
Company other than such assets or property or any improvement on
such assets or property and shall attach to such assets or
property within 90 days of the construction or acquisition of such
assets or property;
(d) Liens securing Capital Lease Obligations Incurred in
accordance with Section 4.03;
(e) Liens securing Indebtedness issued to Refinance
Indebtedness which have been secured by a Lien permitted under the
Indenture and is permitted to be Refinanced under the Indenture;
provided, however, that such Liens do not extend to or cover any
property or assets of the Company not securing the Indebtedness so
Refinanced.
SECTION 4.10 PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall, and
shall cause each of its Subsidiaries to, pay or discharge or cause to be paid
or discharged, before the same shall become delinquent, all taxes, assessments
and governmental charges levied or imposed upon its or its Subsidiaries'
income, profits or property; provided, however, that neither the Company nor
any of its Subsidiaries shall be required to pay or discharge or cause to be
paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
negotiations or proceedings and for which disputed amounts adequate reserves
have been made in accordance with GAAP.
SECTION 4.11 CORPORATE EXISTENCE. Subject to Article 5, the Company
shall do or cause to be done, at its own cost and expense, all things necessary
to preserve and keep in full force and effect the corporate or partnership
existence and rights (charter and statutory), licenses and/or franchises of the
Company; provided, however, that the Company shall not be required to preserve
any such rights, licenses or franchises if the Board of Directors shall
reasonably determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and the Subsidiaries, taken as a
whole.
-20-
<PAGE> 25
ARTICLE 5
SUCCESSORS
SECTION 5.01 WHEN COMPANY MAY MERGE, ETC. The Company shall not
consolidate with or merge into, or transfer or lease all or substantially all
its assets to, any person unless:
(a) the person is a corporation or limited partnership;
(b) the person assumes by supplemental indenture all the
obligations of the Company under the Securities and this
Indenture; and
(c) no Default exists immediately after the transaction.
The surviving, transferee or lessee corporation will be the successor Company,
but the predecessor Company, in the case of a transfer or lease, will not be
released from the obligation to pay the principal of and interest on the
Securities, without the written consent of the Holders of at least a majority
in principal amount of the Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT. An "Event of Default" occurs if:
(a) the Company does not pay interest on any Security when
the same becomes due and payable and the Default continues for
a period of 30 days;
(b) the Company does not pay the principal of any Security
when the same becomes due and payable at Stated Maturity, upon
redemption, upon acceleration, or otherwise;
(c) the Company fails to comply with section 5.01;
(d) the Company fails to comply with section 4.03, 4.04,
4.06, or 4.08 and such failure continues for 30 days after the
notice specified below;
(e) the Company fails to comply with any of its other
agreements in either the Securities or this Indenture (other
than those specified in (a), (b), (c), or (d) above) and the
Default continues for 60 days after the Company's receipt of
the notice specified below;
-21-
<PAGE> 26
(f) the Company fails to pay any Indebtedness within any
applicable grace period after final maturity or acceleration of any
such Indebtedness by the holders thereof because of a default and the
total amount of such Indebtedness exceeds $500,000 or its foreign
currency equivalent at the time;
(g) the Company, pursuant to or within the meaning of any
Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for
relief against it in an involuntary case;
(iii) consents to the appointment of a
Custodian of it or for all or substantially all
its property; or
(iv) makes a general assignment for the
benefit of its creditors;
(h) a court of competent jurisdiction enters under any
Bankruptcy Law an order or decree that:
(i) is for relief against the Company in an
involuntary case;
(ii) appoints a Custodian of the Company or
for all or substantially all its property; or
(iii) orders the liquidation of the Company;
and the order or decree remains unstayed and in effect for 60
days; or
(i) the rendering of any judgment or decree for the payment
of money in excess of $250,000 or its foreign currency equivalent
at the time against the Company if such judgment remains unpaid
and outstanding for a period of 60 days following such judgment
and is not discharged, waived or stayed within 30 days after
notice thereof.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
state or federal law involving insolvency or providing for the relief of
debtors. The term
-22-
<PAGE> 27
"Custodian" means any assignee, receiver, trustee, liquidator, or
similar official under any Bankruptcy Law.
If a Default occurs, is continuing, and is known to the Company, the
Company shall mail to Securityholders a notice of the Default within 90 days
after it occurs.
A Default under clause (d) or (e) above is not an Event of Default until
the Holders' Agent or the Holders of at least 25% in principal amount of the
Securities notify the Company of the Default. The notice must specify the
Default, demand that it be remedied, and state that the notice is a "Notice of
Default."
SECTION 6.02 ACCELERATION. If an Event of Default occurs and is
continuing, the Holders' Agent by notice to the Company, or the Holders of at
least 25% in principal amount of the Securities by notice to both the Company
and the Holders' Agent (if any), may declare the principal of and accrued
interest on all the Securities due and payable. Upon this declaration, the
principal and interest will be due and payable immediately. The Holders of a
majority in principal amount of the Securities, by notice to the Company, may
rescind an acceleration of the due date of any principal or interest and its
consequences if the rescission would not conflict with any decree or judgment
and if all existing Events of Default have been cured or waived, except for the
nonpayment of principal or interest due solely because of the acceleration.
SECTION 6.03 OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Holders or, if one has been appointed, the Holders' Agent on
behalf of all Holders may pursue any available remedy to collect the payment of
principal of or interest on the Securities or to enforce the performance of any
provision of the Securities or this Indenture. The Holders' Agent may maintain
a proceeding even if it does not possess any of the Securities or does not
produce any of them in the proceeding. A delay or omission by the Holders'
Agent or any Securityholder in exercising any right or remedy accruing upon an
Event of Default will not impair the right of remedy or constitute a waiver of,
or an acquiescence in, the Event of Default. All remedies are cumulative to
the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS. The Holders of a majority in
principal amount of the Securities, by notice to the Company and the Holders'
Agent, may waive an existing Default and its consequences, except for a Default
in the payment of the principal of or interest on any Security.
SECTION 6.05 CONTROL BY MAJORITY. The Holders of a majority in principal
amount of the Securities may direct the time, method, and place of conducting
any proceeding for any remedy available to the Holders' Agent or exercising any
trust or power conferred on the Holders' Agent. However, the Holders' Agent
may refuse to follow any direction that
-23-
<PAGE> 28
conflicts with law or this Indenture, is unduly prejudicial to the rights of
other Securityholders, or would involve the Holders' Agent in personal
liability.
SECTION 6.06 LIMITATION ON SUITS. If a Holders' Agent has been
appointed, a Securityholder may pursue a remedy with respect to this Indenture
or the Securities only if:
(a) the Holder gives the Holders' Agent notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
Securities make a written request to the Holders' Agent to
pursue the remedy;
(c) the Holders making the request offer indemnity to the
Holders' Agent satisfactory to the Holders' Agent against any
loss, liability, or expense;
(d) the Holders' Agent does not comply with the Holders'
request within 60 days after the date when it has received both
the request and an offer of indemnity satisfactory to it; and
(e) during that 60-day period, the Holders of a majority
in principal amount of the Securities do not give the Holders'
Agent a direction inconsistent with the request.
A Securityholder is not entitled to use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference over another
Securityholder.
SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any
other provision of this Indenture, the right of any Securityholder to receive
payment of principal and interest on a Security on or after the respective due
dates specified in the Security, or to bring suit for the enforcement of any
such payment on or after those respective dates, will not be impaired or
affected without the consent of the Holder.
SECTION 6.08 COLLECTION SUIT BY HOLDERS' AGENT. If an Event of Default
specified in section 6.01(a) or (b) occurs and is continuing, the Holders'
Agent may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount of principal and interest remaining
unpaid.
SECTION 6.09 HOLDERS' AGENT MAY FILE PROOFS OF CLAIM. The Holders' Agent
may file proofs of claim and other papers or documents necessary or advisable
in order to have the
-24-
<PAGE> 29
claims of the Holders' Agent and the Securityholders allowed in any judicial
proceedings relative to the Company, its creditors, or its property.
SECTION 6.10 PRIORITIES. If it collects any money pursuant to this
article, the Holders' Agent shall pay out the money in the following order:
First: to the Holders' Agent for amounts due under
section 7.08;
Second: to Securityholders for amounts due and unpaid on
the Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Securities for principal and interest,
respectively; and
Third: to the Company.
The Holders' Agent may fix a record date and payment date for any payment to
Securityholders.
SECTION 6.11 UNDERTAKING FOR COSTS. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Holders'
Agent for any action taken or omitted by it as Holders' Agent, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any
party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant. This section does not apply
to a suit by the Holders' Agent, a suit by a Holder pursuant to section 6.07,
or a suit by Holders of more than 10% in principal amount of the Securities.
ARTICLE 7
HOLDERS' AGENT
SECTION 7.01 GENERALLY. The Company or the Holders may designate and
appoint one Person to act as the Holders' Agent pursuant to this Agreement in
accordance with the provisions of this section. The Holders' Agent may, but
need not, be a Holder. Each Holder authorizes the Holders' Agent to exercise
and perform the duties that are expressly delegated to the Holders' Agent under
this Agreement, together with the other powers that are reasonably incidental
to those duties.
SECTION 7.02 PROCEDURE FOR APPOINTMENT. At any time while there is not
already a Holders' Agent, the Company may appoint as a Holders' Agent a Person
that satisfies the requirements of TIA section 310(a)(1) by notice to the
Holders.
-25-
<PAGE> 30
Further, if the Company fails to appoint a Holders' Agent within 20 days
following its receipt of a request to do so signed by Holders of at least 25% in
principal amount of the Securities, the Holders may proceed to appoint a
Holders' Agent, pursuant to a meeting of the Holders described below or without
prior notice to the Company or the other Holders, by a written consent executed
by Holders of a majority in principal amount of the Securities. At any time
that there is not an appointed Holders' Agent, the Secretary of the Company may,
and on the written request of the Holders of 25% in principal amount of the
Securities shall, within 20 days, by notifying each Holder, call a meeting of
the Holders for the purpose of having the Senior Note holders designate a
Holders' Agent. Any such meeting will be held on a date between 30 and 45 days
after the date of the notice, at the location specified by the Company in the
notice. At any meeting of the Holders for the purpose of appointing the
Holders' Agent, the presence in person or by proxy of the Holders of at least
50% in principal amount of the Securities will constitute a quorum of the
Holders. The vote of a majority in principal amount of the Holders present at
the meeting in person or by proxy will be sufficient to designate the Holders'
Agent. Following its selection, the Holders' Agent shall deliver to the Company
a written acceptance of its appointment. Thereupon the appointment of the
Holders' Agent will become effective, and the Holders' Agent will have all the
rights, powers, and duties of the Holders' Agent under this Agreement. A
Holders' Agent appointed by the Holders need not have corporate trust powers
that satisfy the requirements of the Trust Indenture Act.
The Company shall promptly mail to the Securityholders a notice of the
appointment of a Holders' Agent. The Holders' Agent will hold office until
resignation or removal from office pursuant to section 7.03.
SECTION 7.03 PROCEDURE FOR REMOVAL. A Holders' Agent that the Holders
have elected may be removed at any time, with or without cause, by, and only
by, the affirmative votes of the Holders of a majority in principal amount of
the Securities by written consent or at a meeting of the Holders. A meeting to
consider removal of the Holders' Agent, and the filling of the vacancy created
by the removal, shall be called by the Secretary of the Company within ten days
after receipt of a written request signed by the Holders of at least ten
percent of the Securities. Any such meeting will be held on a date between 30
and 45 days after the date of the notice, at the location specified by the
Company in the notice. Removal of the Holders' Agent at the meeting will
require the affirmative vote of an absolute majority in principal amount of the
outstanding Securities. Any successor must be appointed in accordance with
section 7.02. The successor Holders' Agent shall deliver to the Company a
written acceptance of its appointment. Thereupon the appointment of the
successor Holders' Agent will become effective, and the successor Holders'
Agent will have all the rights, powers, and duties of the Holders' Agent under
this Agreement, and the Company shall mail a notice of the appointment to the
Securityholders.
-26-
<PAGE> 31
SECTION 7.04 DUTIES OF HOLDERS' AGENT. The Holders' Agent's duties under
this Indenture are subject to the following:
(a) If an Event of Default has occurred and is continuing, the Holders'
Agent shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent man would
use or exercise under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Holders' Agent need perform only the duties
specifically set forth in this Indenture and no others; and
(ii) in the absence of bad faith on its part, the
Holders' Agent may rely conclusively, as to the truth of the
statements and the correctness of the opinions expressed in
them, upon certificates or opinions furnished to the Holders'
Agent and conforming to the requirements of this Indenture,
except that the Holders' Agent shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Holders' Agent is not, and will not be, relieved from liability
for its own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this section;
(ii) the Holders' Agent is not liable for any error of
judgment made in good faith; and
(iii) the Holders' Agent is not liable for any action
that it takes or omits in good faith in accordance with a
direction received by it pursuant to section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Holders' Agent is subject to paragraphs (a), (b), and (c) of this section.
(e) The Holders' Agent may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it against any
loss, liability, or expense.
(f) The Holders' Agent is not liable for interest on any money received by
it, except as the Holders' Agent may agree with the Company. Money held in
trust by the
-27-
<PAGE> 32
Holders' Agent need not be segregated from other funds, except to the extent
required by law.
SECTION 7.05 RIGHTS OF HOLDERS' AGENT. The Holders' Agent has the
following rights:
(a) The Holders' Agent may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Holders' Agent need not investigate any fact or matter stated in the document.
(b) Before it acts or refrains from acting, the Holders' Agent may require
an Officers' Certificate or an Opinion of Counsel. The Holders' Agent will not
be liable for any action it takes or omits to take in good faith in reliance on
the certificate or opinion.
(c) The Holders' Agent may act through agents and is not responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Holders' Agent is not liable for any action that it takes or omits
in good faith and that it believes to be authorized or within its rights or
powers.
SECTION 7.06 INDIVIDUAL RIGHTS OF HOLDERS' AGENT. The Holders' Agent, in
its individual or other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company or an Affiliate with the same rights it
would have if it were not Holders' Agent. Any Agent may do the same with like
rights.
SECTION 7.07 REPORTS BY COMPANY TO HOLDERS. Within 60 days after the
reporting date stated in section 10.10, the Company shall mail to
Securityholders a brief report dated as of that reporting date that complies
with TIA section 313(a). The Company also shall comply with TIA section
313(b)(2). The Company shall mail to the SEC and each stock exchange on which
the Securities are listed a copy of each report to Securityholders,
concurrently with its mailing to Securityholders. The Company shall notify the
Securityholders when the Securities are listed on any stock exchange.
SECTION 7.08 COMPENSATION AND INDEMNITY. The Company shall pay to the
Holders' Agent from time to time reasonable compensation for its services. The
Holders' Agent's compensation is not limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Holders' Agent
upon request for all reasonable out-of-pocket expenses incurred by it,
including the reasonable compensation and out-of-pocket expenses of the
Holders' Agent's agents and counsel.
The Company shall indemnify the Holders' Agent against any loss or
liability incurred by it. The Holders' Agent shall notify the Company promptly
of any claim for
-28-
<PAGE> 33
which it may seek indemnity. The Company shall defend the claim, and the
Holders' Agent shall cooperate in the defense. The Holders' Agent may have
separate counsel, and the Company shall pay the reasonable fees and expenses of
that counsel. The Company need not pay for any settlement made without its
consent, and it need not reimburse any expense, or indemnify against any loss
or liability, incurred by the Holders' Agent through negligence or bad faith.
To secure the Company's payment obligations in this section, the Holders'
Agent is granted a lien prior to the Securities on all money or property held
or collected by the Holders' Agent, except that held in trust to pay principal
and interest on particular Securities.
When the Holders' Agent incurs expenses or renders services after the
occurrence of an Event of Default specified in section 6.01(d) or (e), the
expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
SECTION 7.09 SUCCESSOR HOLDERS' AGENT BY MERGER, ETC. If the Holders'
Agent consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business to, another association or
corporation, the successor association or corporation without any further act
will be the successor Holders' Agent.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01 TERMINATION OF COMPANY'S OBLIGATIONS. The Company may
terminate all of its obligations under this Indenture if:
(a) the Securities mature within one year or all of them
are to be called for redemption within one year; and
(b) the Company irrevocably deposits in trust with a
Trustee who satisfies the requirements of TIA section 310(a)(1)
(and which may be the Holders' Agent if it qualifies) money or
U.S. Government Obligations sufficient to pay principal of and
interest on the Securities to maturity or redemption, as the
case might be. The Company may make the deposit only during
the one-year period and only if Article 11 permits it.
After a deposit pursuant to clause (b) above, the Holders' Agent, upon request
of the Company, shall acknowledge in writing the discharge of the Company's
obligations under
-29-
<PAGE> 34
this Indenture, except for those surviving obligations specified above.
However, the Company's obligations in sections 2.03, 2.04, 2.05, 2.06, 2.07,
4.01, 7.09, and 8.03, will survive until the Securities are no longer
outstanding. Thereafter, only the Company's obligations in sections 7.09 and
8.03 will survive.
In order to have money available on a payment date to pay principal or
interest on the Securities, the U.S. Government Obligations deposited with the
Trustee pursuant to clause (b) above must be payable as to principal or
interest on or before that payment date in such amounts as will provide the
necessary money. In addition, the U.S. Government Obligations must not be
callable at the issuer's option.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged.
SECTION 8.02 APPLICATION OF TRUST MONEY. The Trustee shall hold in trust
all money or U.S. Government Obligations deposited with it pursuant to section
8.01. It shall apply the deposited money and the money from U.S. Government
Obligations, through the Paying Agent and in accordance with this Indenture, to
the payment of principal of and interest on the Securities.
SECTION 8.03 REPAYMENT TO COMPANY. The Trustee and the Paying Agent
promptly shall pay to the Company upon request any excess money or securities
held by them at any time. The Trustee and the Paying Agent shall pay to the
Company upon request any money held by them for the payment of principal or
interest that remains unclaimed for two years. After payment to the Company,
Securityholders entitled to the money must look to the Company for payment as
general creditors, unless an applicable abandoned property law designates
another person.
ARTICLE 9
AMENDMENTS
SECTION 9.01 WITHOUT CONSENT OF HOLDERS. The Company may amend this
Indenture or the Securities without the consent of any Securityholder:
(a) to cure any defect, ambiguity, or inconsistency;
(b) to comply with section 5.01;
(c) to provide for uncertificated Securities in addition
to, or in place of, certificated Securities (provided that the
uncertificated
-30-
<PAGE> 35
Securities are issued in registered form for purposes of
Section 163(f) of the Internal Revenue Code of 1986, or in a
manner so that the uncertificated Securities are described in
Section 163(f)(2)(13) of the Code);
(d) to add guarantees with respect to the Securities;
(e) to secure the Securities;
(f) to add to the covenants of the Company for the benefit
of the Holders;
(g) to surrender any right or power conferred upon the
Company; or
(h) to make any change that does not adversely affect the
rights of any Securityholder.
SECTION 9.02 WITH CONSENT OF HOLDERS. The Company may amend this
Indenture or the Securities with the written consent of the Holders of at least
a majority in principal amount of the Securities. However, without the consent
of each Securityholder affected, an amendment of this Indenture will not be
effective:
(a) to reduce the percentage amount of Securities the
Holders of which must consent to an amendment;
(b) to reduce the rate of, or change the time for payment
of, interest on any Security;
(c) to reduce the principal of, or extend the Stated
Maturity of, any Security;
(d) to reduce the premium payable upon the redemption of
any Security or change the time at which any Security may be
redeemed in accordance with Article 3;
(e) to make any Security payable in money other than that
stated in the Security;
(f) to impair the right of any Securityholder to receive
payment of principal of and interest on such Securityholder's
Securities
-31-
<PAGE> 36
on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's
Securities;
(g) to make any change in Section 6.04, 6.07, or 9.02
(second sentence); or
(h) to affect the ranking of the Securities in any
material respect.
After an amendment under this section becomes effective, the Company shall mail
to Securityholders a notice briefly describing the amendment.
SECTION 9.03 REVOCATION AND EFFECT OF CONSENTS. Until a waiver or
amendment becomes effective, a consent to it by a Holder of a Security is a
continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to his
Security or portion of a Security if the Company receives the notice of
revocation before the date the waiver or amendment becomes effective. A waiver
or amendment becomes effective in accordance with its terms and thereafter
binds every Securityholder.
SECTION 9.04 NOTATION ON OR EXCHANGE OF SECURITIES. The Company may
place an appropriate notation about a waiver or amendment on any Security
thereafter issued. The Company in exchange for all Securities may issue new
Securities that reflect the waiver or amendment.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01 NOTICES. Each notice, demand, consent, request, or
approval required or permitted to the Company to the other will be valid and
duly given only if it is (a) in writing (or sent by telex, telegram, or
telecopy and promptly confirmed in writing) and (b) hand delivered or mailed by
first-class mail to the address stated in section 10.10 (or to such other
address as the Company designates by notice). Any notice to a Securityholder
will be valid and duly given only if it is in writing and mailed by first-class
mail to his address shown on the register kept by the Registrar. Failure to
mail a notice to a Securityholder or any defect in it will not affect its
sufficiency with respect to other Securityholders. If the Company mails a
notice to Securityholders, it concurrently shall mail a copy to the Holders'
Agent and each Agent.
-32-
<PAGE> 37
If a notice, demand, consent, request, or approval is given in the manner
provided above, it will be effective when delivered or postmarked and will be
duly given, whether or not the addressee receives it.
All other notices prescribed in this Indenture must be in writing.
SECTION 10.02 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities.
SECTION 10.03 Omitted.
SECTION 10.04 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
opinion or certificate with respect to compliance with a condition or covenant
in this Indenture must include:
(a) a statement that the person making the opinion or
certificate has read the covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the opinion or
statement contained in the opinion or certificate is based;
(c) a statement that, in the opinion of the person, he has
made the examination or investigation to enable him to express an
informed opinion as to whether or not the covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of
such person, the condition or covenant has been satisfied.
SECTION 10.05 RULES BY HOLDERS' AGENT AND AGENTS. The Company may make
reasonable rules governing any action by, or any meeting of, Securityholders.
The Registrar or Paying Agent may make reasonable rules and set reasonable
requirements for its functions.
SECTION 10.06 LEGAL HOLIDAYS. A "LEGAL HOLIDAY" is a Saturday, a Sunday,
or a day on which banking institutions are not required to be open. If a
payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding day that is not a Legal Holiday, and no
interest will accrue for the intervening period.
-33-
<PAGE> 38
SECTION 10.07 NO RECOURSE AGAINST OTHERS. All liability described in the
Securities of any director, officer, employee, or stockholder, as such, of the
Company is waived and released.
SECTION 10.08 DUPLICATE ORIGINALS. The parties may execute any number of
duplicate counterparts of this Indenture. One signed counterpart is sufficient
to prove this Indenture.
SECTION 10.09 VARIABLE PROVISIONS.
The Company initially will serve as Registrar and Paying Agent.
The first certificate pursuant to section 4.03 shall be for the fiscal
year ending December 31, 1997.
The reporting date for section 7.07 is April 1 of each year. The first
reporting date is April 1, 1998.
The Company's address is:
Cimetrix Incorporated
100 North Tampa Street, Suite 3550
Tampa, Florida 33602
Attention: Chief Financial Officer
SECTION 10.10 GOVERNING LAW. The validity, construction, interpretation,
and enforcement of both this Indenture and the Securities are governed by the
laws of the State of Florida, excluding the laws of that state relating to
resolution of conflicts with laws of other jurisdictions.
SIGNATURES
DATED: , 1997 CIMETRIX INCORPORATED
ATTEST: By:_________________________(SEAL)
Name:__________________________
Title:_________________________
_________________________
Secretary
-34-
<PAGE> 39
INDENTURE EXECUTION PAGE - PURCHASER
Date: ____________________, 1997 ____________________________________
Type or Print Name of Subscriber
______________________________ By:____________________________________
Type or Print name of Signature of
Authorized Representative Authorized Representative
____________________________________
Title of Authorized Representative
Principal amount of Senior Notes: $_____________
NOTICE ADDRESS
___________________________________________
Mailing Address
___________________________________________
City State Zip Code
___________________________________________
Telephone Number
___________________________________________
Telecopier (FAX) Number
Attention: __________________________________
-35-
<PAGE> 40
EXHIBIT A
(FACE OF SECURITY)
No. $
CUSIP _________
CIMETRIX INCORPORATED
10% SENIOR NOTE DUE 2002
Cimetrix Incorporated, a Nevada corporation, promises to pay to _______________
___________________ or registered assigns, the principal sum of _______________
Dollars on _________, 2002, and to pay interest on the unpaid principal sum
from the date, at the rate, and on the dates specified in this certificate.
Interest Payment dates: April 1 and October 1
Record Dates: March 15 and September 15
Additional provisions of this Security are
set forth on the reverse side of this certificate
Dated: , 1997
CIMETRIX INCORPORATED
By
By
(SEAL)
<PAGE> 41
(Reverse of Security)
CIMETRIX INCORPORATED
10% Senior Note Due 2002
This Security is one of a duly authorized issue of senior notes of
Cimetrix Incorporated (the "Company"), a Nevada corporation, designated as its
10% Senior Notes Due 2002 (the "Securities"), limited to an aggregate principal
amount determined pursuant to paragraph 4 below, except for Securities issued
in exchange for transferred Securities or in substitution for lost, destroyed,
or wrongfully taken Securities, all issued or to be issued under an Indenture
dated as of __________, 1997 (the "Indenture"), between the Company and the
initial holders of the Securities, to which Indenture and all indentures
supplemental to it reference is made for a further description of the duties,
rights, obligations, and immunities of the Company and the holders of the
Securities.
1. INTEREST. The Company shall pay interest on the unpaid
principal amount of this Security, from the date of this Security until
maturity, at the annual rate shown above, payable in arrears on April 1 and
October 1 of each year, beginning April 1, 1998. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay interest on the
Securities (except defaulted interest) to the persons who are registered
holders of Securities at the close of business on the record date for the next
interest payment date even though Securities are cancelled after the record
date and on or before the interest payment date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. However, the
Company may pay principal and interest by check payable in such money, and it
may mail an interest check to a holder's registered address.
3. PAYING AGENT, REGISTRAR. Initially, the Company will act as
Registrar and Paying Agent. The Company may change any Registrar, Paying Agent,
or co-registrar without notice. The Company may act in any such capacity.
4. INDENTURE. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code, Sections 77aaa-77bbb), as in effect on the
date of the Indenture (the "Act"). The Securities are subject to all those
terms, and Securityholders are referred to the Indenture and the Act for a
statement of those terms. The Securities are unsecured general obligations of
the Company limited to $[add amount] in aggregate principal amount.
A-2
<PAGE> 42
5. OPTIONAL REDEMPTION. The Company may redeem at its option all
the Securities at any time or some of the Securities from time to time (subject
to the provisions of the Indenture), on not less than 30 nor more than 60 days'
prior notice given as provided in the Indenture, at the following redemption
prices, expressed in percentages of principal amount, if redeemed during the
twelve-month period beginning on October 1 of each year indicated:
PERIOD REDEMPTION PRICE
1999 105%
2000 103%
2001 101%
in each case together with accrued interest to the redemption.
6. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
holder of Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 can be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after the redemption
date, interest ceases to accrue on Securities or portions of them called for
redemption. If a notice or communication is sent in the manner provided in the
Indenture, it is duly given, whether or not the addressee receives it. Failure
to send a notice or communication to a Securityholder or any defect in it shall
not affect is sufficiency with respect to other Securityholders.
7. CHANGE OF CONTROL. Upon a change of Control, each Holder of
Securities will have the right to require the Company to repurchase all or any
part of the Securities of such Holder at a repurchase price in cash equal to
100% of the principal amount of the Securities to be repurchased plus accrued
and unpaid interest to the date of repurchase (subject to the right of Holders
of record on the relevant record date to receive interest due on the related
interest payment date) as provided in, and subject to the terms of, the
Indenture.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in
registered form without coupons in denominations of $1,000 and whole multiples
of $1,000. The transfer of Securities can be registered and Securities can be
exchanged as provided in the Indenture. Securities indorsed to the order of
bearer will not be registered for transfer. The Registrar may require a
holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any fees and taxes required by law or permitted by the
Indenture. The Registrar need not exchange or register the transfer of any
Security or portion of a Security selected for redemption. Also, it need not
exchange
A-3
<PAGE> 43
or register the transfer of any Securities for a period of 15 days before the
Trustee's selection of Securities to be redeemed.
9. PERSONS DEEMED OWNERS. The registered holder of a Security
will be treated as its owner for all purposes.
10. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Paying Agent shall pay the money
back to the Company at its written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the
money must look only to the Company for payment.
11. DISCHARGE. Subject to certain conditions, the Company at any
time may terminate some or all of its obligations under the Securities and the
Indenture if the Company deposits with a trustee money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.
12. AMENDMENTS AND WAIVERS. Subject to certain exceptions set
forth in the Indenture, the Indenture or the Securities can be amended with the
consent of the holders of at least a majority in principal amount of the
Securities and any existing default can be waived with the consent of the
holders of a majority in principal amount of the Securities. Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Indenture or the Securities can be amended to cure any
defect, ambiguity, or inconsistency, to comply with Article 5 of the Indenture,
to provide for uncertificated Securities in addition to or in place of
certificated Securities, to add guarantees with respect to the Securities, to
secure the Securities, to add additional covenants or surrender rights and
powers conferred on the Company, or to make any change that does not adversely
affect the rights of any Securityholder.
13. DEFAULTS AND REMEDIES. The following constitute an Event of
Default: (a) the Company does not pay any interest on the Securities for 30
days after it is due; (b) the Company does not pay any principal of the
Securities when due at its Stated Maturity, (c) upon redemption; (d) failure by
the Company to comply with Article 5 of the Indenture, (e) failure by the
Company to comply with any of its other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time; (f) failure
by the Company to pay any Indebtedness within any applicable grace period after
final maturity or acceleration by the Holders thereof because of a default and
the total amount of the Indebtedness unpaid or accelerated exceeds $250,000,
(g) certain events of bankruptcy or insolvency of the Company, or (h) the
rendering of any judgments or decrees for the payment of money in excess of
$100,000.
If an Event of Default occurs and is continuing, the Holders' Agent
(as defined in the Indenture) or the holders of at least 25% in principal amount
of the Securities may declare all the Securities to be due and payable
immediately. Securityholders are not entitled to enforce the Indenture or the
Securities except as
A-4
<PAGE> 44
provided in the Indenture. The Holders' Agent may require indemnity
satisfactory to it before it enforces the Indenture or the Securities. Subject
to certain limitations, holders of a majority in principal amount of the
Securities may direct the Holders' Agent in its exercise of any trust or power.
14. HOLDERS' AGENT DEALINGS WITH COMPANY. Subject to certain
limitations imposed by the TIA, the Holders' Agent under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal
with the Company or its Affiliates as if it were not Holders' Agent.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee, or
stockholder, as such, of the Company is not liable for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of, or by reason of those obligations or their creation. By accepting
a Security, each Securityholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the
Securities.
16. ISSUANCE AND GOVERNING LAW. This Security is valid only
if it has been validly issued by the Company. This Security is governed by
the laws of the State of Florida.
17. ABBREVIATIONS. Customary abbreviations can be used in the
name of a Security holder or an assignee, such as the following: TEN COM (=
tenants in common); TEN ENT (= tenants by the entireties); JT TEN (= joint
tenants with right of survivorship and not as tenants in common); CUST (=
Custodian); and U/G/M/A (= Uniform Gifts to Minors Act).
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture, that has in it the text of this
security in larger type. Requests should be made to: Chief Financial Officer,
Cimetrix Incorporated, 100 North Tampa Street, Suit 3550, Tampa, Florida 33602.
A-5
<PAGE> 45
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to:
______________________________________________________
(insert assignee's Soc. Sec. or tax I.D. no.)
______________________________________________________
______________________________________________________
______________________________________________________
(print or type assignee's name, address, and zip code)
and irrevocably appoint ______________________________ as agent to transfer
this Security on the books of the Company. The agent may substitute another to
act for him.
___________________
Date: ______________ Your Signature: ___________________________
___________________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:
- -------------------
A-6
<PAGE> 1
EXHIBIT 4.2
(FACE OF SECURITY)
No. $
CUSIP _________
CIMETRIX INCORPORATED
10% SENIOR NOTE DUE 2002
Cimetrix Incorporated, a Nevada corporation, promises to pay to ______________
___________________ or registered assigns, the principal sum of _______________
Dollars on _________, 2002, and to pay interest on the unpaid principal sum
from the date, at the rate, and on the dates specified in this certificate.
Interest Payment dates: April 1 and October 1
Record Dates: March 15 and September 15
Additional provisions of this Security are
set forth on the reverse side of this certificate
Dated: , 1997
CIMETRIX INCORPORATED
By
By
(SEAL)
<PAGE> 2
(Reverse of Security)
CIMETRIX INCORPORATED
10% Senior Note Due 2002
This Security is one of a duly authorized issue of senior notes of
Cimetrix Incorporated (the "Company"), a Nevada corporation, designated as its
10% Senior Notes Due 2002 (the "Securities"), limited to an aggregate principal
amount determined pursuant to paragraph 4 below, except for Securities issued in
exchange for transferred Securities or in substitution for lost, destroyed, or
wrongfully taken Securities, all issued or to be issued under an Indenture dated
as of __________, 1997 (the "Indenture"), between the Company and the initial
holders of the Securities, to which Indenture and all indentures supplemental to
it reference is made for a further description of the duties, rights,
obligations, and immunities of the Company and the holders of the Securities.
1. INTEREST. The Company shall pay interest on the unpaid principal
amount of this Security, from the date of this Security until maturity, at the
annual rate shown above, payable in arrears on April 1 and October 1 of each
year, beginning April 1, 1998. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay interest on the Securities
(except defaulted interest) to the persons who are registered holders of
Securities at the close of business on the record date for the next interest
payment date even though Securities are cancelled after the record date and on
or before the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal and interest by check payable in such money, and it may mail an
interest check to a holder's registered address.
3. PAYING AGENT, REGISTRAR. Initially, the Company will act as
Registrar and Paying Agent. The Company may change any Registrar, Paying Agent,
or co-registrar without notice. The Company may act in any such capacity.
4. INDENTURE. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code, Sections 77aaa-77bbb), as in effect on the
date of the Indenture (the "Act"). The Securities are subject to all those
terms, and Securityholders are referred to the Indenture and the Act for a
statement of those terms. The Securities are unsecured general obligations of
the Company limited to $[add amount] in aggregate principal amount.
A-2
<PAGE> 3
5. OPTIONAL REDEMPTION. The Company may redeem at its option all the
Securities at any time or some of the Securities from time to time (subject to
the provisions of the Indenture), on not less than 30 nor more than 60 days'
prior notice given as provided in the Indenture, at the following redemption
prices, expressed in percentages of principal amount, if redeemed during the
twelve-month period beginning on October 1 of each year indicated:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
------ ----------------
<S> <C>
1999 105%
2000 103%
2001 101%
</TABLE>
in each case together with accrued interest to the redemption.
6. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each holder of
Securities to be redeemed at his registered address. Securities in denominations
larger than $1,000 can be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued interest
on all Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after the redemption date, interest
ceases to accrue on Securities or portions of them called for redemption. If a
notice or communication is sent in the manner provided in the Indenture, it is
duly given, whether or not the addressee receives it. Failure to send a notice
or communication to a Securityholder or any defect in it shall not affect is
sufficiency with respect to other Securityholders.
7. CHANGE OF CONTROL. Upon a change of Control, each Holder of
Securities will have the right to require the Company to repurchase all or any
part of the Securities of such Holder at a repurchase price in cash equal to
100% of the principal amount of the Securities to be repurchased plus accrued
and unpaid interest to the date of repurchase (subject to the right of Holders
of record on the relevant record date to receive interest due on the related
interest payment date) as provided in, and subject to the terms of, the
Indenture.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in registered
form without coupons in denominations of $1,000 and whole multiples of $1,000.
The transfer of Securities can be registered and Securities can be exchanged as
provided in the Indenture. Securities indorsed to the order of bearer will not
be registered for transfer. The Registrar may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any fees and taxes required by law or permitted by the Indenture. The Registrar
need not exchange or register the transfer of any Security or portion of a
Security selected for redemption. Also, it need not exchange
A-3
<PAGE> 4
or register the transfer of any Securities for a period of 15 days before the
Trustee's selection of Securities to be redeemed.
9. PERSONS DEEMED OWNERS. The registered holder of a Security will be
treated as its owner for all purposes.
10. UNCLAIMED MONEY. If money for the payment of principal or interest
remains unclaimed for two years, or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company for payment.
11. DISCHARGE. Subject to certain conditions, the Company at any time
may terminate some or all of its obligations under the Securities and the
Indenture if the Company deposits with a trustee money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.
12. AMENDMENTS AND WAIVERS. Subject to certain exceptions set forth in
the Indenture, the Indenture or the Securities can be amended with the consent
of the holders of at least a majority in principal amount of the Securities and
any existing default can be waived with the consent of the holders of a majority
in principal amount of the Securities. Subject to certain exceptions set forth
in the Indenture, without the consent of any Securityholder, the Indenture or
the Securities can be amended to cure any defect, ambiguity, or inconsistency,
to comply with Article 5 of the Indenture, to provide for uncertificated
Securities in addition to or in place of certificated Securities, to add
guarantees with respect to the Securities, to secure the Securities, to add
additional covenants or surrender rights and powers conferred on the Company, or
to make any change that does not adversely affect the rights of any
Securityholder.
13. DEFAULTS AND REMEDIES. The following constitute an Event of
Default: (a) the Company does not pay any interest on the Securities for 30 days
after it is due; (b) the Company does not pay any principal of the Securities
when due at its Stated Maturity, (c) upon redemption; (d) failure by the Company
to comply with Article 5 of the Indenture, (e) failure by the Company to comply
with any of its other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (f) failure by the Company to pay any
Indebtedness within any applicable grace period after final maturity or
acceleration by the Holders thereof because of a default and the total amount of
the Indebtedness unpaid or accelerated exceeds $250,000, (g) certain events of
bankruptcy or insolvency of the Company, or (h) the rendering of any judgments
or decrees for the payment of money in excess of $100,000.
If an Event of Default occurs and is continuing, the Holders' Agent
(as defined in the Indenture) or the holders of at least 25% in principal
amount of the Securities may declare all the Securities to be due and payable
immediately. Securityholders are not entitled to enforce the Indenture or the
A-4
<PAGE> 5
Securities except as provided in the Indenture. The Holders' Agent may require
indemnity satisfactory to it before it enforces the Indenture or the Securities.
Subject to certain limitations, holders of a majority in principal amount of the
Securities may direct the Holders' Agent in its exercise of any trust or power.
14. HOLDERS' AGENT DEALINGS WITH COMPANY. Subject to certain
limitations imposed by the TIA, the Holders' Agent under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates as if it were not Holders' Agent.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee, or
stockholder, as such, of the Company is not liable for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of, or by reason of those obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
16. ISSUANCE AND GOVERNING LAW. This Security is valid only if
it has been validly issued by the Company. This Security is governed by the
laws of the State of Florida.
17. ABBREVIATIONS. Customary abbreviations can be used in the name of a
Security holder or an assignee, such as the following: TEN COM (= tenants in
common); TEN ENT (= tenants by the entireties); JT TEN (= joint tenants with
right of survivorship and not as tenants in common); CUST (= Custodian); and
U/G/M/A (= Uniform Gifts to Minors Act).
The Company will furnish to any Securityholder upon written request and
without charge a copy of the Indenture, that has in it the text of this security
in larger type. Requests should be made to: Chief Financial Officer, Cimetrix
Incorporated, 100 North Tampa Street, Suit 3550, Tampa, Florida 33602.
A-5
<PAGE> 6
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to:
-----------------------------------------------------
(insert assignee's Soc. Sec. or tax I.D. no.)
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
(print or type assignee's name, address, and zip code)
and irrevocably appoint ______________________________ as agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
-------------------
Date: Your Signature:
-------------- ----------------------------
----------------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:
A-6
<PAGE> 1
EXHIBIT 4.3
THE WARRANTS EVIDENCED BY THIS WARRANT CERTIFICATE ARE NOT TRANSFERABLE
SEPARATELY FROM THE 10% SENIOR NOTES DUE 2002 OF CIMETRIX INCORPORATED THAT
WERE ORIGINALLY SOLD IN CONNECTION WITH THE ISSUANCE OF THE WARRANTS UNTIL
OCTOBER 1, 1999.
THE SHARES ISSUABLE ON EXERCISE OF THE WARRANT EVIDENCED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE. THIS WARRANT CANNOT BE EXERCISED AT ANY
TIME, AS A WHOLE OR IN PART, ABSENT REGISTRATION OF THE SHARES ISSUABLE ON
EXERCISE OF THIS WARRANT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
EVERY APPLICABLE STATE SECURITIES LAW.
WARRANT CERTIFICATE
NO.[ ___________] [_____________] SHARES
CIMETRIX INCORPORATED
COMMON STOCK PURCHASE WARRANT
Void after 5:00 P.M. on October 1, 2002
CIMETRIX INCORPORATED (the "Company"), a Florida corporation,
certifies that [____________________________________________________________]
or registered assigns (the "Registered Owner") is entitled to purchase from the
Company pursuant to the provisions of this Warrant Certificate [__________
_________________________] (_____) shares of Common Stock of the Company, at
a purchase price of $2.50 per share (the "Warrant Price"). The warrant
evidenced by this Warrant Certificate (this "Warrant") expires at 5:01 P.M.,
New York time, on October 1, 2002 (the "Expiration Date"), and is subject to
the terms and conditions set forth in this Warrant Certificate. The Warrant
Price and the amount and character of securities issuable upon exercise of this
Warrant are subject to adjustment as provided in this Warrant Certificate.
1. EXERCISE OF WARRANT. This Warrant is exercisable by the Registered
Owner, as a whole, in part, or in increments of 250 shares of Common Stock, at
any time or from time to time during the period after the October 31, 1998, and
before the Expiration Date. To validly exercise this Warrant, the Registered
Owner must deliver to the Company at its principal office at 100 North Tampa
Street, Tampa, Florida 33602, this Warrant Certificate, a Subscription Notice
in substantially the form appended to this Warrant Certificate, duly executed
by the Registered Owner or his duly authorized attorney-in-fact, and full
payment by certified or official bank check payable to the order of the Company
for the aggregate Warrant Price for the number of shares of Common Stock
subscribed for purchase. The date when the Registered Owner has satisfied all
the preceding requirements will constitute the exercise date. If this Warrant
is exercised partially and has not expired, the Company promptly shall reissue
and deliver to the Registered Owner at the Company's sole expense a new Warrant
Certificate of like tenor in the name of the Registered Owner that specifies on
its face the number of shares of Common Stock that remain issuable pursuant to
this Warrant.
2. SERIES OF WARRANTS. This Warrant is one of a duly authorized series
of Common Stock Purchase Warrants of the Company that are designated as
"Cimetrix Incorporated Common Stock Purchase
<PAGE> 2
Warrants, Series 1997" (the "Series 1997 Warrants") and were issued in
connection with the issuance of the Company's 10% Senior Notes due September
30, 2002 (the "Senior Notes") and collectively evidence as of the date when
this Warrant was originally issued, as stated at the end of this Warrant
Certificate (the "Original Issue Date"), the right to purchase up to
[_________] shares of Common Stock at the Warrant Price.
3. ATTACHMENT AND SEPARATION OF WARRANTS AND SENIOR NOTES. The Series
1997 Warrants were issued in connection with the Senior Notes, with a Warrant
for 250 shares of Common Stock issued for each $1,000 principal amount of
Senior Notes. The Warrants are not separately transferable from the Senior
Notes until October 1, 1999 (the "Separation Date"). Until the Separation Date,
the Registered Owner may sell, assign, or otherwise transfer this Warrant to
any person, as a whole or in part, only if the Registered Owner simultaneously
transfers to the same person $1,000 aggregate principal amount of Senior Notes
for each Warrant to purchase 250 shares of Common Stock. In addition, until the
Separation Date every Warrant Certificate representing the Series 1997 Warrants
will bear the following legend:
THE WARRANTS EVIDENCED BY THIS WARRANT CERTIFICATE ARE NOT
TRANSFERABLE SEPARATELY FROM THE 10% SENIOR NOTES DUE 2002 OF CIMETRIX
INCORPORATED THAT WERE ORIGINALLY SOLD IN CONNECTION WITH THE ISSUANCE
OF THE WARRANTS UNTIL OCTOBER 1, 1999.
After the Separation Date, the Registered Owner or his duly authorized attorney
in fact may surrender this Warrant Certificate to the Company at its principal
office in exchange and substitution for one or more new Warrant Certificates
that does not contain the foregoing legend.
4. RESERVATION AND LISTING OF STOCK. The Company shall reserve and
keep available until the Expiration Date, solely for issuance and delivery upon
exercise of this Warrant, the total number of shares of Common Stock issuable
from time to time pursuant to this Warrant, taking into account the
anti-dilution and other adjustment rights of the Registered Owner. In addition,
the Company shall take all necessary or appropriate action to assure that it
validly and legally may issue fully paid, nonassessable shares of Common Stock
upon the exercise of this Warrant. If the Common Stock is listed for trading on
a national securities exchange and registered under the Securities Exchange Act
of 1934, as amended, the Company, at its sole expense, shall list on that
national securities exchange, upon official notice of issuance pursuant to the
exercise of this Warrant, all shares of Common Stock issued or issuable upon
the exercise of this Warrant, and the Company shall maintain that listing until
this Warrant expires.
5. TRANSFER RESTRICTIONS. The shares of Common Stock issuable upon
exercise of this Warrant were not registered under the Securities Act of 1933,
as amended, or the securities laws of any state on the Original Issue Date.
Consequently, this Warrant cannot be exercised until the Warrant Shares are
registered under the Securities Act of 1933, as amended, and either registered
or qualified for an exemption under any applicable state securities law. Each
Warrant Certificate issued in exchange or substitution for this Warrant
Certificate will bear a legend substantially identical to the one appearing on
the face of this Warrant Certificate until the Warrant Shares have been so
registered.
The Company may require, as a condition to allowing any exercise,
exchange, or transfer of either this Warrant or any shares of Common Stock
previously issued upon exercise of this Warrant (and not registered under the
Securities Act of 1933, as amended, when issued) that the transferee or the
Registered Owner (as the case might be) deliver to the Company either (a)
evidence that the exercise, exchange, or transfer has been registered under the
Securities Act of 1933, as amended, and every applicable state securities
-2-
<PAGE> 3
law or (b) a satisfactory opinion of legal counsel to the effect that
registration of the transaction is not required under those laws.
6. REGISTRATION OF WARRANT SHARES. The Company shall use its best
efforts to (a) prepare and file with the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended, a
Registration Statement on Form S-3 to register the shares of Common stock
issuable upon exercise of the Series 1997 Warrants (the "Warrant Shares"), (b)
cause that Registration Statement to be declared effective by the SEC before
November 1, 1998, and (c) cause that Registration Statement to remain effective
through the Expiration Date or, if earlier, the date when all the Series 1997
Warrants have been fully exercised.
7. DELIVERY OF STOCK CERTIFICATES. Within ten calendar days after the
exercise date of this Warrant, the Company shall issue and deliver to the
Registered Owner one or more certificates in the name of the Registered Owner
for that number of fully paid and nonassessable shares of Common Stock that the
Registered Owner purchased pursuant to the exercise of this Warrant, plus,
instead of any fractional share of Common Stock to which the Registered Owner
otherwise would be entitled, a cash sum equal to the product of (a) that
fraction, multiplied by (b) the "Market Value" of one full share of Common
Stock as of the exercise date of this Warrant. The Company shall pay all costs
and taxes (excluding income taxes) associated with the issuance of every
stock certificate.
For purposes of this Warrant, the "Market Value" of one full share of
Common Stock will be (i) the last reported sale price of a share of Common
Stock on the principal national securities exchange on which this Common Stock
is traded on the exercise date of this Warrant, or (ii) if the Common Stock is
not traded on a national securities exchange but is quoted in the Nasdaq
National Market System, the last sale price of a share of Common Stock quoted
in the Nasdaq National Market System on the exercise date of this Warrant, or
(iii) if the Common Stock is not quoted in the Nasdaq National Market System,
the mean arithmetic average of the high bid and the low asked quotations for a
share of Common Stock in the Nasdaq System or the OTC Bulletin Board,
"over-the-counter" market on the exercise date of this Warrant. If a sale price
or bid and asked quotations for the Common Stock are unavailable on the
exercise date of this Warrant, the "Market Value" will be based on the closing
sale price or the bid and asked quotations (as the case may be) of a share of
Common Stock for the next preceding day for which a closing sale price or bid
and asked quotations for the Common Stock are available.
8. EXCHANGE OR TRANSFER. This Warrant is transferable at any time as a
whole or in part, but only on the books of the Company, only by the Registered
Owner or his duly authorized attorney-in-fact. The Company may treat the
Registered Owner as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary. If the Registered Owner properly
indorses and surrenders this Warrant Certificate to the Company for exchange,
the Company shall issue and deliver to, or upon the order of, the Registered
Owner one or more new Warrant Certificates of like tenor in the name of the
Registered Owner (or as the Registered Owner otherwise directs) that specify on
their face the aggregate number of shares of Common Stock then issuable
pursuant to this Warrant. The Company shall pay all costs and taxes (excluding
income taxes) associated with the exchange or transfer of this Warrant.
9. ANTI-DILUTION. If the Company does any of the following (a
"Dilutive Event"), with or without consideration, at any time after the
Original Issue Date and before the Expiration Date: (a) becomes a subsidiary of
any other entity pursuant to a tender offer or exchange offer; (b) merges into,
consolidates with, effects a share exchange with, or transfers all or
substantially all its assets to, any other entity; (c) makes any distribution
of its assets to holders of its Common Stock as a liquidation or partial
liquidation or return of capital; (d) changes, divides, contracts, increases,
or otherwise reclassifies its Common Stock into the same or a different number
of shares, with or without par value, or into shares of any class or classes;
or (e) declares or distributes to the holders of Common Stock, without their
payment therefor, (i) a noncash dividend payable in
-3-
<PAGE> 4
any property or securities of the Company, or (ii) cash, property, or
securities in connection with a spin-off, split-up, reclassification,
recapitalization, combination of shares, or similar rearrangement of the
Company's capital stock; then, upon the exercise of this Warrant after the
record date or occurrence of each Dilutive Event, the Registered Owner will be
entitled to receive in exchange for the Warrant Price, in addition to, or in
substitution for, each share of Common Stock otherwise issuable upon exercise
of this Warrant, the additional or different amount of shares of Common Stock
and other securities and property (including cash) that the Registered Owner
would have been entitled to receive if the Registered Owner had (A) exercised
this Warrant immediately before the record date or occurrence of the first
Dilutive Event and had been the record owner of one share of Common Stock
during the period beginning on that date and ending on the actual exercise date
of this Warrant, and (B) had participated in every ensuing Dilutive Event and
retained all shares of Common Stock and all other or additional securities and
property (including cash) receivable during that period as a result of those
Dilutive Events. Whenever there is an adjustment in the number or kind of
securities and other property (including cash) issuable upon exercise of this
Warrant, the Company promptly shall deliver to the Registered Owner a notice
describing in reasonable detail the facts requiring the adjustment and the
number and kind of securities and other property (including cash) issuable upon
exercise of this Warrant after the adjustment.
10. NOTICE OF DILUTIVE EVENTS. The Company shall give the Registered
Owner at least 15 days' advance notice of any proposed action that would
require an adjustment to the amount of Common Stock (or other securities or
property) issuable upon exercise of this Warrant, stating in the notice the
proposed record or issue date for the action, although any failure to notify
the Registered Owner of a proposed action or any defect in the notice will not
affect the validity of the action. Upon the occurrence of a Dilutive Event, the
Company, at its sole expense, shall cause its chief financial officer or
independent certified public accountants to promptly compute the requisite
adjustment the amount of Common Stock (or other securities or property)
issuable upon exercise of this Warrant in accordance with the terms of this
Warrant and deliver to the Registered Owner a certificate stating the amount
and nature of the adjustment, the facts on which the adjustment is based, and
the number of shares of Common Stock outstanding, or considered to be
outstanding, for purposes of the adjustment computation.
11. REPLACEMENT OF WARRANT CERTIFICATE. Upon its receipt of reasonable
evidence of the loss, theft, destruction, or mutilation of any Warrant
Certificate and (in the case of any loss, theft, or destruction) a written
indemnity agreement from the Registered Owner in favor of the Company, or (in
the case of any mutilation) upon surrender and cancellation of the mutilated
Warrant Certificate, the Company shall execute and deliver to the Registered
Owner at the Company's sole expense a new Warrant Certificate of like tenor in
exchange or substitution for the Warrant Certificate that has been lost,
stolen, destroyed, or mutilated.
12. ANTI-AVOIDANCE. The Company shall not avoid or seek to avoid (by
merger, dissolution, reorganization, consolidation, sale of assets, amendment
of its Articles of Incorporation, or any other voluntary act, deed, or means)
the performance or observance of any covenant, condition, or stipulation to be
performed or observed by it under this Warrant Certificate, but shall act in
good faith at all times to carry out all provisions of this Warrant
Certificate. In particular, and without limiting the generality of the
foregoing, the Company shall not do any of the following after the Original
Issue Date: (a) increase the par value of the Common Stock to a per share
amount that exceeds the Warrant Price; (b) authorize without the approval of
the Company's shareholders any shares of another class of capital stock that
has the right, in the absence of contingencies, to elect a majority of the
directors of the Company (even if those voting rights have been suspended by
the occurrence of a contingency) or to receive all or any portion of the
current dividends and liquidating distributions of the Company after the
payment of dividends and distributions in respect of any shares of capital
stock entitled to preferences; or (c) sell, exchange, or transfer all or
substantially all the assets of the Company to any other person or entity or
effect a share exchange with any other entity, unless the acquiring party
expressly assumes in writing and agrees to be bound by all of the terms of this
Warrant Certificate or unless adequate provision is made in connection with the
sale, exchange, or transfer to assure
-4-
<PAGE> 5
that the Registered Owner of this Warrant receives upon exercise of this
Warrant the securities and property (including cash) to which it, he, or she is
entitled pursuant to this Warrant. Notwithstanding the foregoing, this section
is not to be construed to preclude the Company from entering into a transaction
(including without limitation a merger, sale of assets, share exchange,
reorganization or any other transaction) that would result in a transfer of
some or all of the stock or assets of the Company, unless the transaction is
entered into merely to avoid the performance of this Warrant Certificate.
13. NOTICES. The Company promptly shall notify the Registered Owner of
any change in its principal office address and of every record date established
by the Company for any Dilutive Event or otherwise determining shareholders
entitled to vote at any meeting or to receive payment of any dividend or other
distribution, whether made in cash, property, or securities. Every notice or
other communication that the Company is required or permitted to give to the
Registered Owner pursuant to this Warrant will be valid only if it is in
writing, addressed to the Registered Owner at the address listed at the end of
this Warrant Certificate, or at the address that the Registered Owner has most
recently furnished in writing to the Company, and delivered personally or by
commercial courier or first class, postage prepaid, certified or registered,
United States mail. A validly given notice or communication by the Company will
be effective upon its receipt.
14. COMMON STOCK DEFINITION. As used in this Warrant Certificate,
"Common Stock" means all the authorized capital stock of the Company (however
classified or designated and whether authorized on or after the Original Issue
Date) that is registered under Section 12 of the Securities Exchange Act of
1934, as amended, is traded on a national securities exchange, quoted in any
automated quotation system of the National Association of Securities Dealers,
Inc., or publicly traded in an over-the-counter market, and confers on the
holders of it, as a class, the following rights: (a) the right to all or a
portion of the current dividends and liquidating distributions of the Company,
without limitation as to amount, but after the payment of dividends and
distributions on any shares of capital stock entitled to preference; and (b) in
the absence of contingencies, the right to vote for the election of a majority
of the directors of the Company (even if those voting rights have been
suspended by the occurrence of a contingency). On the Original Issue Date, the
Common Stock consisted of the Company's .0001 par value common stock.
15. MISCELLANEOUS. The validity, construction, interpretation, and
enforcement of this Warrant are governed by the laws of the State of Florida
and the federal laws of the United States of America, excluding the laws of
those jurisdictions pertaining to the resolution of conflicts with laws of
other jurisdictions. A waiver, amendment, modification, or termination of this
Warrant will be valid and effective only if it is in writing and signed by the
Company and the Registered Owner of this Warrant. The headings of the sections
of this Warrant Certificate are solely for convenient reference and do not
constitute part of the terms and conditions of this Warrant.
ORIGINAL ISSUE DATE: ________________, 1997.
CIMETRIX INCORPORATED
ATTEST: By: (SEAL)
------------------------
Authorized Officer
- --------------------------------
Secretary
-5-
<PAGE> 6
NAME AND ADDRESS OF REGISTERED OWNER:
- --------------------------------
Full Name
- --------------------------------
Street Address
- --------------------------------
City State Zip Code
-6-
<PAGE> 7
SUBSCRIPTION NOTICE
(To be executed by the Registered Owner)
TO: CIMETRIX INCORPORATED
The undersigned registered owner of the accompanying Common Stock
Purchase Warrant (the "Warrant") exercises the right to purchase the number of
shares of Common Stock set forth below pursuant to the terms and conditions of
the Warrant and tenders with this Subscription Notice, by certified or official
bank check or bank draft payable to CIMETRIX INCORPORATED, the sum stated below
in full payment of the purchase price for those shares. Please issue and
register in the name or names stated below, and deliver to the address listed
below, a certificate or certificates representing the number of shares of
Common Stock to be issued pursuant to this subscription. If the number of
shares of Common Stock to be issued pursuant to this subscription is fewer than
all the shares of Common Stock that can be purchased pursuant to the Warrant,
please reissue to the undersigned at the address listed below a new Warrant of
like tenor for the remaining shares of Common Stock that can be purchased under
the Warrant.
No. of Shares: _____________ Amount Enclosed: $___________
DATE: __________________________
EXECUTION CLAUSE - CORPORATE
----------------------------------
Name of Corporation
By:
------------------------------
Name:
-------------------------
Title:
------------------------
ATTEST: (CORPORATE SEAL)
-7-
<PAGE> 8
- ------------------------------- ----------------------------------
Secretary Street Address
----------------------------------
City State Zip Code
( )
----------------------------------
Area Code Telephone Number
----------------------------------
Employer I.D. Number
-8-
<PAGE> 9
EXECUTION CLAUSE - INDIVIDUAL
JOINT SUBSCRIBER SUBSCRIBER
(IF APPLICABLE)
- --------------------------- ----------------------------------
Full Name (please print) Full Name (please print)
- --------------------------- ----------------------------------
Signature Signature
- --------------------------- ----------------------------------
Social Security Number Social Security Number
----------------------------------
Street Address
----------------------------------
City State Zip Code
( )
----------------------------------
Area Code Telephone Number
FORM OF OWNERSHIP: ___ Individual ___ Tenants in common
___ Tenants by the entirety ___ Joint tenants with right of survivorship
REGISTER STOCK CERTIFICATE REGISTER WARRANT CERTIFICATE
IN THE FOLLOWING NAME(S): IN THE FOLLOWING NAME(S):
- ----------------------------- ----------------------------------
- ----------------------------- ----------------------------------
DELIVER STOCK CERTIFICATE DELIVER WARRANT CERTIFICATE
TO THE FOLLOWING ADDRESS: TO THE FOLLOWING ADDRESS:
- ----------------------------- ----------------------------------
- ----------------------------- ----------------------------------
-9-
<PAGE> 10
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned sells, assigns, and transfers unto
____________________________ the rights to purchase up to _________ shares of
the Common Stock of CIMETRIX INCORPORATED that are represented by the foregoing
Common Stock Purchase Warrant and appoints __________________________ as the
undersigned's agent and attorney-in-fact, with full power of substitution, to
transfer those rights on the books of that corporation.
DATE:
----------------------
SIGNATURE GUARANTEED:
------------------------------------
Signature
------------------------------------
Full Name (please print)
WITNESSES:
- ---------------------------
Name:
---------------------
- ---------------------------
Name:
---------------------
-10-
<PAGE> 1
EXHIBIT 5.1
[GLENN RASMUSSEN & FOGARTY LETTERHEAD]
Board of Directors
Cimetrix Incorporated
100 North Tampa Street, Suite 3550
Tampa, FL 33602
Gentlemen:
We have acted as counsel to Cimetrix Incorporated (the "Company") in
connection with the Registration Statement on Form S-2, No. 30601, that was
filed by it with the Securities and Exchange Commission on July 2, 1997 (the
"Registration Statement"), for the purpose of registering under the Securities
Act of 1933 a public offering by the Company of up to $10 million of the
Company's 10% Senior Notes due 2002 (the "Notes") and warrants for 2,500,000
shares of common stock (the "Warrants").
In rendering the opinion expressed below, we have examined certificates
of public officials, copies of the bylaws and articles of incorporation of the
Company, written consents and minutes of meetings of the shareholders and Board
of Directors of the Company, and such other documents and corporate records of
the Company as we considered necessary to form a basis for that opinion. In our
examination of the foregoing documents and certificates, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, and the conformity with the original documents of all documents
submitted to us as copies.
Based on the foregoing, and subject to the assumptions and limitations
stated in this letter, we are of the opinion that the Notes, when issued and
sold for the consideration specified in the Registration Statement, will be
legally issued and valid and binding obligations of the Company. We are also of
the opinion that the Warrants, when issued and sold for the consideration
specified in the Registration Statement, will be legally issued.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the prospectus included in the Registration Statement.
Very truly yours,
GLENN RASMUSSEN & FOGARTY, P.A.
/s/ Glenn Rasmussen & Fogarty
--------------------------------------------
<PAGE> 1
EXHIBIT 10.15
OEM AGREEMENT
This OEM Agreement (hereinafter, this "Agreement") is made and entered
into as of this 25th day of September, 1996 (hereinafter, the "Effective Date"),
by and between Cimetrix Incorporated, a Nevada corporation, with its principal
offices at 2222 South 950 East, Provo, Utah 84606 (hereinafter "Cimetrix") and
Fuji Machine Mfg. Co., Ltd. a Japanese corporation, with its principal offices
at 19 Chausuyama, Yamamachi, Chiryu, Aichi Pref.472, Japan (hereinafter "Fuji
Machine").
RECITALS
A. Cimetrix is the developer and sole owner of certain
proprietary simulation and mechanism control software for the control of
automation equipment and industrial machines, known and trademarked under the
name of CIMControl (hereinafter the "Licensed Software").
B. Fuji Machine manufactures machines for the electronics
industry and desires to use the Licensed Software in connection and combination
with its robots and machines more particularly described in Exhibit A hereto
(the "Fuji Machine Products").
Now, therefore, in consideration of the promises contained in this
Agreement, the parties agree as follows:
1. DEFINITION OF TERMS
(a) Bundled Products means Fuji Machine Products that are combined
with a copy of the Licensed Software.
<PAGE> 2
(b) Customer means any end user of any Bundled Products to whom
Fuji Machine sublicenses an executable copy of the Licensed Software for use on
such Fuji Machine Products.
(c) Documentation means the user manuals for the Licensed
Software.
(d) Enhancements means modifications or improvements to the
Licensed Software, or new extensions or components of the Licensed Product made
by Cimetrix.
(e) Fuji Applications means the graphical user interface screens
created by Cimetrix or Fuji Machine 'to integrate the Licensed Software with
Fuji Products.
(f) Fuji Enhancements means modifications or improvements to the
Licensed Software, or new extensions or components of the Licensed Product made
by Fuji or made by Cimetrix specifically for Fuji and paid for by Fuji.
(g) Licensed Software means any copy of the object or executable
code version of the proprietary computer software known as CIMControl software,
which includes CIMServer (CIMControl version), CIMTools and the CODE API, and/or
any copy of the object or executable code version of the proprietary computer
software known as GEM Manager (run time version).
(h) Number of Copies means the number of Fuji Machine Products
that contain a copy of the Licensed Software. In the event a single Fuji Machine
product is sold with multiple copies of CIMControl software, the multiple copies
shall be counted, for purposes of Paragraph 4(a) below, as a single copy of
CIMControl software.
(i) Sublicense Agreement means a contract between Fuji Machine and
a Customer whereby the Customer is granted the right to use all or part of an
object or executable code version of the Licensed Software.
2
<PAGE> 3
2. GRANT OF LICENSE
(a) Cimetrix hereby grants to Fuji Machine a non-transferable,
nonexclusive license to use and copy the Licensed Software and Documentation
solely for use in combination with the Bundled Products.
(b) Cimetrix grants Fuji Machine a non-exclusive, non-transferable
license to sublicense Customers to use an object or executable version of the
Licensed Software and to use the Documentation, provided that the Licensed
Software is incorporated as part of a Bundled Product, defined in Paragraph
1(a).
(c) Fuji Machine agrees to require its distributors and dealers to
comply with the relevant provisions in this Agreement, and to take all action
necessary to ensure compliance by its dealers and distributors with the relevant
terms of this Agreement.
(d) Cimetrix reserves all rights to the Licensed Software
not expressly granted to Fuji Machine in this Agreement. Without limiting the
generality of the foregoing, Cimetrix reserves the unrestricted right to
market, distribute, sell and license the Licensed Software in Japan and the
rest of the world, including without limitation, to or through other original
equipment manufacturers, value-added resellers, distributors, dealers,
resellers and end users. However, notwithstanding the aforesaid, Cimetrix
agrees: (1) not to provide any Fuji Machine specific software, such as the
Fuji Applications and the Fuji Enhancements, to any other party without Fuji
Machines specific prior written consent; ***
(e) Within thirty (30) days of a written request by Fuji Machine,
Cimetrix will deliver to Fuji Machine reproducible master copies of the Licensed
Software and Documentation. Cimetrix reserves the right to update or revise the
content and performance of the Licensed Software from time to time.
3. TERM OF AGREEMENT
The term of this Agreement shall commence on the effective date hereof
and extend for a period of five years. This Agreement shall automatically be
renewed for subsequent five-year periods unless either party, within ninety (90)
days prior the expiration of the original or any renewal term, gives written
notice to the other party that
3
<PAGE> 4
it does not desire to renew this Agreement. The terms and conditions applicable
to the initial period of this Agreement shall continue for the succeeding
renewal period unless changed by the mutual agreement of the parties.
4. PRICING AND PAYMENT TERMS
(a) Fuji Machine agrees to make an initial purchase of *** copies
of CIMControl Software for *** per copy. Cimetrix will include, at no
additional charge, *** copies of Lynx OS runtime software (VME or PC),
documentation not included. Thereafter, Cimetrix agrees to charge Fuji Machine
a sum not to exceed *** per copy for each additional copy of Lynx OS runtime
software. Fuji Machine shall make a prepayment of *** at the time that this
Agreement is executed by both parties, and shall thereafter pay *** for each of
the next *** copies of CIMControl Software sold by Fuji Machine. Thereafter,
Fuji Machine may purchase additional copies of CIMControl for *** per copy.
Fuji Machine shall also have the right to purchase copies of Cimetrix's GEM
Manager software product, runtime version, for *** per copy. Payment shall be
made within 45 days after the completion of each month that Bundled Products are
sold. For example, for Bundled Products sold by Fuji Machine during the month
of March, payment shall be due by May 15.
(b) Any payments not received when due shall be subject to a
service charge of one percent (1) per month.
(c) Except for Cimetrix's income tax liability, Fuji Machine
agrees to pay any and all sales, use, value-added, withholding, excise and
similar taxes on payments under this Agreement.
(d) Records and Audits. Fuji Machine shall send with each monthly
payment a statement certifying the number of Bundled Products sold, the type of
Bundled Product sold, the identity of each Customer that purchased a Bundled
Product, and the amount remitted to Cimetrix. Fuji Machine shall maintain
accurate records relating to the copying, distribution, and sublicensing of the
Licensed Software so as to establish the payments due to Cimetrix hereunder, to
identify all Sublicenses, and to otherwise verify Fuji Machine's compliance with
the terms of this Agreement. Such books and records shall be available at Fuji
Machine's principal place of business in Japan for inspection by an independent
auditor chosen and paid for by Cimetrix for determining whether the correct
Sublicense Fees have been paid and Fuji Machine has otherwise complied with the
terms of this Agreement. Fuji Machine shall immediately pay any overdue
payments revealed by such audit(s). Except as set forth below, such audit(s)
may be conducted no more than once in any twelve (12) month period. Cimetrix
shall bear the costs of the audit; provided, however, if the audit reveals
overdue payments in excess of five percent (5%) of the payments owed for any six
(6) month period, Fuji Machine shall pay the costs of such audit(s) and Cimetrix
shall have the right to conduct another audit during the same twelve (12) month
period. All information obtained by Cimetrix (or its independent third party
representative) during any such audit shall be treated as Confidential
Information in accordance with Section 13 below.
(e) Cimetrix agrees to provide Fuji Machine with its best OEM
pricing terms, for comparable Cimetrix OEM customers for all of its software and
hardware products, during the term of this Agreement.
5. FUJI MACHINE'S RESPONSIBILITIES
(a) Fuji Machine, at its own expense, will be responsible for
installing the Licensed Software as part of the Bundled Product.
(b) Fuji Machine agrees to submit to Cimetrix for review a written
summary describing the manner in which the Licensed Software is incorporated
into each separate Bundled Product and describing the operation of the Bundled
Product. Cimetrix agrees to keep all such summaries confidential.
(c) Fuji Machine agrees not to decompile, disassemble or otherwise
reverse engineer or modify the Licensed Software in any way without the prior
written consent Cimetrix, which may be withheld in its sole discretion.
(d) Fuji Machine agrees not to directly or indirectly sell the
Bundled Products to any country prohibited by the export control laws of the
United States Government without authorization of Cimetrix or the United States
Government.
(e) During the term of this Agreement, and for three years
thereafter, Fuji Machine agrees that it will not engage in the business of
developing, promoting, marketing, or licensing any computer software that
directly competes with the Licensed Software. Notwithstanding the aforesaid,
Fuji Machine shall have the right to,
4
<PAGE> 5
at any time, independently create software for use with its own machines,
whether for internal purposes or for resale, which right shall include licensing
other third party software for use with Fuji Machine's products, whether for
internal purposes or for resale.
6. PROPRIETARY RIGHTS IN SOFTWARE
Title to the Licensed Software and Enhancements are reserved to
Cimetrix. Fuji Machine acknowledges and agrees that Cimetrix is and shall remain
the owner of the Licensed Software and Enhancements thereto. Fuji Machine shall
retain all rights to Fuji Applications and Fuji Enhancements. Fuji Machine shall
have the right to translate the Licensed Software and Enhancements into Japanese
or the language 6f other countries into which the Bundled Products shall be
sold; provided that Fuji Machine shall provide Cimetrix with copies of all such
translations, and by this Agreement assigns all rights of any kind to such
translations to Cimetrix. However, in the event that Cimetrix either gives or
resells said translations to any other third party, Cimetrix agrees to either
reimburse Fuji Machine for its translation costs or pay Fuji Machine a
reasonable fee, whichever is less. Fuji Machine agrees that it will not use,
copy, distribute, or transfer the Licensed Software or Enhancements except as
permitted by this Agreement.
7. ADVERTISING AND TRADEMARK USAGE/PROTECTION
(a) Cimetrix hereby grants, and Fuji Machine hereby accepts, a
limited nonexclusive license to use Cimetrix's trademarks, trade names and logos
associated with the Licensed Software ("Cimetrix Trademarks") solely for the
purpose of marketing and distributing the Licensed Software as part of the
Bundled Products in accordance with this Agreement. Title to the Cimetrix
Trademarks and any goodwill arising out of Fuji Machine's use of the Cimetrix
Trademarks shall remain with and belong to Cimetrix and
5
<PAGE> 6
its licensors. At no time during or after the term of this Agreement shall Fuji
Machine challenge or assist others to challenge the Cimetrix Trademarks or the
registration thereof or attempt to use or register any trademarks, marks or
trade names confusingly similar t', those of Cimetrix.
(b) Cimetrix agrees that it will not identify Fuji Machine in any
of its advertisements or promotional materials until after Fuji Machine has
released the first Fuji Machine Product containing the Licensed Software to the
SMT marketplace.
(c) In order to ensure proper use of Cimetrix's trademarks, trade
names and/or logos on Bundled Products and in Fuji Machine's advertisements and
promotional materials, Fuji Machine agrees to provide Cimetrix with copies of
advertisements and promotional materials that refer to the inclusion or
availability of the Licensed Software or that include any Cimetrix Trademarks.
If Cimetrix identifies any improper usage of its trademarks in its review of
such materials, Fuji Machine agrees to make those changes reasonably requested
by Cimetrix.
8. PROPRIETARY RIGHTS INDEMNITY
(a) Cimetrix represents and warrants that (i) Cimetrix is the sole
author of the Licensed Software and has full and exclusive right to grant all
licenses and rights granted therein; (ii) that the Licensed Software has not
been published under circumstances that have caused loss of copyright therein;
(ii) that the Licensed Software does not infringe any patent, copyright, trade
secret or other proprietary right (including trade secrets of any third party);
and (iv) no claim, regardless of whether embodied in an action past or present,
of infringement of any patent, copyright, trademark or other intellectual
property
6
<PAGE> 7
right, has been made or is pending against Cimetrix with respect to the Licensed
Software or any enhancements.
(b) Fuji Machine agrees that Cimetrix has the right to defend, or
at its option to settle, any claim, suit or proceeding (collectively, "Claim")
brought against Fuji Machine on the issue of infringement of any United States
patent, United States copyright or United States trademarks by the Licensed
Software. Cimetrix shall have sole control of the defense of the Claim, and
Cimetrix agrees to pay, subject to the limitations hereinafter set forth, any
final judgment entered against Fuji Machine on such Claim. Fuji Machine agrees
that Cimetrix at its sole option shall be relieved of the foregoing obligations
unless Fuji Machine notifies Cimetrix promptly in writing of such Claim and
gives Cimetrix authority to proceed as contemplated herein, and, at Cimetrix's
expense, gives Cimetrix proper and full information and assistance to settle
and/or defend any such Claim. If the Licensed Software is the subject of any
Claim for infringement of another party's copyright, and the distribution or use
of the Licensed Software is or may be enjoined, then Cimetrix may: at its option
and expense (i) procure for Fuji Machine and its customers the right under such
copyright to distribute or use, as appropriate, the Licensed Software or part
thereof; (ii) suitably modify the Licensed Software or part thereof; or (iii) if
the use of the Licensed Software, or part thereof, is prevented by injunction,
terminate this Agreement.
(c) Notwithstanding the provisions of Paragraph 8(b) above,
Cimetrix assumes no liability for (i) any infringement claims with respect to
Fuji Machine's portion of the Bundled Products, or (ii) the modification of the
Licensed Software by Fuji Machine.
7
<PAGE> 8
(d) The foregoing provisions of this Section 8 state the entire
liability and obligation of Cimetrix and the exclusive remedy of Fuji Machine
and its customers, with respect to any alleged infringement of copyrights or
other intellectual property rights by the Licensed Software, the Cimetrix
Trademarks or any part thereof.
(e) Fuji Machine shall promptly notify Cimetrix in writing upon
its discovery of any unauthorized use or infringement of the Licensed Software
or Cimetrix's patent, copyright, trademark or other intellectual property rights
with respect thereto. Cimetrix shall have the sole and exclusive right to bring
an infringement action or proceeding against a third party and to recover
damages therefor, and, in the event that Cimetrix brings such an action or
proceeding, Fuji Machine shall cooperate and provide full information and
assistance to Cimetrix and its counsel in connection with any such action or
proceeding.
9. FUJI MACHINE'S WARRANTIES AND INDEMNITIES
Fuji Machine will indemnify Cimetrix for, and hold it harmless from,
any loss, expense (including reasonable attorneys' fees), damage or liability
arising out of any claim, demand, suit or action against Cimetrix resulting from
Fuji Machine's distribution of the Licensed Software or the Bundled
Products(subject to Section 8 above), provided that (i) Cimetrix promptly
informs Fuji Machine in writing of any such claim, demand or suit, (ii) Fuji
Machine is given control over the defense thereof and Cimetrix cooperates in the
defense, (iii) Cimetrix will not agree to the settlement of any such claim,
demand or suit prior to a final judgment thereon without the consent of Fuji
Machine, whose consent will not be unreasonably withheld, and (iv) provided that
the claim is not caused by Cimetrix or its products.
8
<PAGE> 9
10. TERMINATION
(a) Both parties shall have the right to terminate this Agreement
upon thirty (30 days' prior written notice if the other party is in breach of
any terms of this Agreement, including without limitation the payment of money,
and the breaching party fails to remedy such breach within the thirty (30) day
notice period.
(b) Except as specifically set forth below, upon any termination
or expiration of this Agreement all rights granted to Fuji Machine hereunder
shall terminate and Fuji Machine shall immediately cease all marketing and
distribution of the Licensed Software and, within fifteen (15) days of such
termination or expiration, shall (i) return all copies of the Licensed Software,
including without limitation master diskettes and user manuals, (ii) permanently
remove the Licensed Software from all unsold Bundled Products, (iii) pay to
Cimetrix any and all sums due under this Agreement, and (iv) certify to Cimetrix
that all of the foregoing has been completed. Any termination or expiration
shall not affect any Cimetrix Sublicenses of the Licensed Software previously
sublicensed by Fuji Machine or its distributors or dealers in accordance with
this Agreement.
(c) In the event if termination by either party in accordance with
any of the provisions of this Agreement, neither party shall be liable to the
other, because of such termination, for compensation, reimbursement or damages
on account of the loss of prospective profits or anticipated sales or on account
of expenditures, inventory, investments, leases or commitments in connection
with. the business or goodwill of Cimetrix or Fuji Machine. Termination shall
not, however, relieve either party of obligations incurred prior to the
termination.
9
<PAGE> 10
(d) The provisions of Sections 4, 5, 6, 7, 8, 9, 10, 11, 12, 13,
14 and 15 shall survive the termination of this Agreement for any reason. All
other rights and obligations of the parties shall cease upon termination of this
Agreement.
11. SOFTWARE ESCROW AGREEMENT
In the event of a material default of this OEM Agreement by Cimetrix,
which default remains uncured for more than thirty (30) days, Cimetrix shall be
required to immediately execute a Software Escrow Agreement in the form
attached hereto as exhibit B. Cimetrix represents and warrants that it
presently maintains, and will continue to maintain at all times, a current
version of the source code for each of the Licensed Software products
(specifically including, but not limited to, CIMControl and GEM Manager) in a
physically secure, off-site location that is updated within ten (10) working
days of any new software release. Cimetrix agrees that in the event of a
default by Cimetrix of any portion of this paragraph, Fuji Machine may be
irreparably harmed and, therefore, shall be entitled to seek preliminary and
permanent injunctive relief and specific performance, in addition to any other
remedies that it may have by law.
12. WARRANTY; DISCLAIMER OF WARRANTIES
(a) Fuji Machine shall be responsible for replacing any faulty
diskette or disk provided to the customers of the Bundled Products except for
diskettes or disks included in any Licensed Software package obtained directly
from Cimetrix and for correcting any faulty reproduction of the Licensed
Software by Fuji Machine.
(b) Any faulty diskette or disk provided by Cimetrix to Fuji (the
"Defective Software") shall be returned to Cimetrix for replacement along with
appropriate documentation as required. Upon inspection and verification of the
Defective Software, Cimetrix shall, at its option, ship a replacement Software
copy to Fuji Machine or its Customer at no charge or refund the amount paid by
Fuji Machine to Cimetrix for such Defective Software. The foregoing sets forth
the entire liability and obligation of Cimetrix and the exclusive remedy of Fuji
Machine and its customers with respect to any Defective Software.
13. NONDISCLOSURE AND RESTRICTED USE
In the course of performing this Agreement, both parties may. disclose
to the other party trade secrets and confidential and proprietary information of
the disclosing party ("Confidential Information"). Such Confidential Information
includes without
10
<PAGE> 11
limitation the terms and conditions of this Agreement, the trade secrets and
technology embodied in the Licensed Software and to the extent it is reasonably
identified as confidential information, any other technical and/or internal
specifications of the disclosing party's products, marketing plans, future
products and other business information. All Confidential Information shall
remain the sole property of the disclosing party and the receiving party shall
have no interest in or right to such Confidential Information except as
expressly set forth in this Agreement. Both parties agree that all Confidential
Information of the other party shall be held in strict confidence, will not be
disseminated or disclosed to any third party and will not be used by the
receiving party for any purpose other than performing its obligations under this
Agreement without the express written consent of the disclosing party. Both
parties agree to use at least the same degree of diligence to protect the other
party's Confidential Information as it uses to protect any of its own trade
secrets and other confidential information. The provisions of this Section shall
not apply to any information or materials which (i) are in the public domain at
the time of disclosing to the receiving party or which thereafter enter the
public domain through no action or inaction by the receiving party or its
employees; (ii) were in the possession of, or known by, the receiving party
prior to its receipt from the disclosing party; or (iii) are rightfully
disclosed to the receiving party by another person not in violation of the
proprietary or other rights of the disclosing party, or any other person or
entity.
14. LIMITATION OF LIABILITY
THE LIABILITY OF CIMETRIX AND ITS SUPPLIERS ARISING OUT OF THIS
AGREEMENT OR RELATED TO ANY CIMETRIX SOFTWARE SHALL NOT
11
<PAGE> 12
EXCEED THE AMOUNT PAID BY FUJI MACHINE TO CIMETRIX FOR THE APPLICABLE SOFTWARE
PRODUCT. IN NO EVENT SHALL CIMETRIX OR ITS SUPPLIERS BE LIABLE FOR COSTS OF
PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES. IN NO EVENT SHALL CIMETRIX OR ITS
SUPPLIERS BE LIABLE FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR INDIRECT
DAMAGES ARISING OUT OF THIS AGREEMENT, HOWEVER CAUSED, WHETHER FOR BREACH OF
CONTRACT, NEGLIGENCE OR OTHERWISE, AND WHETHER OR NOT CIMETRIX HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGE. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING
ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED OR EXCLUSIVE REMEDY.
15. GENERAL
(a) In the event of disputes between the parties that they are
unable to resolve through discussion, they may file suit in the federal or state
courts of Utah. The rights and obligations of the parties under this Agreement
shall be governed by and construed under the laws of the State of Utah, without
reference to conflict of laws principles. The federal and state courts within
the State of Utah shall have exclusive jurisdiction to adjudicate any dispute
arising out of this Agreement. Fuji Machine hereby expressly consents to (i) the
personal jurisdiction of these federal and state courts within Utah and (ii)
service of process being effected upon it by certified mail sent to the address
set forth in Paragraph 15(d) below. In the event of any such litigation, the
prevailing party shall be entitled to recover its costs and reasonable attorneys
fees, including such costs and fees on appeal.
12
<PAGE> 13
(b) This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter herein and merges
all prior discussions between them. No modification of or amendment to this
Agreement or the Exhibits attached hereto, nor any waiver of any rights under
this Agreement, shall be effective unless in writing signed by both parties.
(c) No delay, omission, or failure to exercise any right or remedy
provided for in this Agreement shall be deemed to be a waiver of the event
giving rise to such remedy, but every such right or remedy may be exercised,
from time to time, as may be deemed expedient; by the party exercising such
right or remedy.
(d) Any notice required or permitted by this Agreement shall be in
writing and shall be sent by prepaid registered or certified mail, return
receipt requested, or a nationally recognized one-day express courier service
addressed as follows:
To Cimetrix:
Paul A. Bilzerian
President
Cimetrix Incorporated
2222 South 950 East
Provo, UT 84606
Tel: 801/344-7000
Fax: 801/344-7077
To Fuji Machine:
Koichi Asai
Managing Director
Research and Development
Fuji Machine Mfg. Co., LTD.
19 Chausuyama, Yamamachi
Chiryu, Aichi Pref.472,
Japan
13
<PAGE> 14
Tel: (0566) 81-2111
Fax: (0566) 84-1010
In addition the parties shall send a separate copy of each and every notice by
facsimile to the foregoing fax numbers:
(e) Nonperformance of either party, except for the making of
payments, shall be excused to the extent that performance is rendered impossible
by strike, fire, flood, earthquakes, governmental acts or orders or
restrictions, or any other reason where failure to perform is beyond the control
and not caused by the negligence of the non-performing party.
(f) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one instrument.
(g) The relationship of Cimetrix and Fuji Machine established by
this Agreement is that of independent contractors and nothing contained in this
Agreement shall be construed to (i) give either party the power to direct and
control the day-to-day activities of the other, (ii) constitute the parties as
partners, joint venturers, co-owners or otherwise as participants in a joint or
common undertaking, or (iii) allow Fuji Machine to create or assume any
obligation on behalf of Cimetrix for any purpose whatsoever. All financial
obligations associated with Fuji Machine's business are the sole responsibility
of Fuji Machine. All sales and other agreements between Fuji Machine and its
customers
14
<PAGE> 15
are Fuji Machine's exclusive responsibility and shall have no effect on Fuji
Machine's obligations under this Agreement.
(h) The parties shall each be solely responsible for, and shall
indemnify and hold the other party free and harmless from any and all claims,
damages or lawsuits (including such other party's attorneys' fees) arising or
alleged to arise out of the acts of the indemnifying party, its employees or its
agents.
16. ASSIGNMENT
Fuji Machine shall not transfer or assign its rights or obligations
under this Agreement without the prior written consent of Cimetrix. Cimetrix
shall be entitled to assign this agreement, provided, however, that Cimetrix
shall not be relieved of any of its obligations under this Agreement. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto, their successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
CIMETRIX INCORPORATED
By:
-------------------------------------
Paul A. Bilzerian, President
FUJI MACHINE MFG. CO., LTD.
By:
-------------------------------------
Koichi Asai, Managing Director
Research and Development
15
<PAGE> 16
EXHIBIT A
Description of Fuji Machine Products
[here insert description, model numbers, etc., of each Fuji Machine Product into
which the Licensed Software will be bundled]
<PAGE> 17
EXHIBIT B
SOFTWARE ESCROW AGREEMENT
This Software Escrow Agreement (hereinafter, this "Escrow Agreement")
is made and entered into as of this ____ day of __________, 199__ (hereinafter,
the "Effective Date") by and between Cimetrix Incorporated, a Nevada
corporation, with its principal offices at 2222 South 950 East, Provo, Utah
84606 (hereinafter "Cimetrix") and Fuji Machine Mfg. Co., Ltd., a Japanese
corporation, with its principal offices at 19 Chausuyama, Yamachi, Chiryu,
Aichi Pref. 472, Japan (hereinafter "Fuji Machines").
RECITALS
A. Cimetrix and Fuji Machine have previously entered into an OEM
Agreement with respect to the purchase, sale and distribution of certain
software products owned by Cimetrix, more particularly described in the OEM
Agreement as the Licensed Software.
Now, therefore, in consideration of the promises contained in this
Agreement, the parties agree as follows:
1. Deposits In Escrow
(a) Within thirty (30) days after the Effective Date of
this Software Escrow Agreement, Cimetrix will deposit with Escrow Agent all
machine processable and printed materials, data and information constituting
the Source Listings and any documentation for the Licensed Software as
installed pursuant to the OEM Agreement (all of the foregoing hereinafter
referred to as the "Material") which shall include, but not be limited to, all
existing user manuals, control procedures, record layouts for all files and
program listings-source codes. Cimetrix shall send written confirmation to
Fuji Machine that said deposit has been made. Cimetrix hereby represents and
warrants that it is the sole owner of all right, title, and interest in the
Material.
(b) In the event of any improvement of modification made
to the Source Listings by or on behalf of Cimetrix, Cimetrix shall within one
hundred twenty (120) days after such improvement or modification is released to
the general public, deposit with Escrow Agent a complete revision of the
Material encompassing all such improvements and/or modifications. It is
understood that this deposit requirement does not require Cimetrix to make any
improvements or modification it is not otherwise obligated to make. At such
time as such additional information or documentation is deposited with Escrow
Agent, Cimetrix will give written notices of such deposits to Fuji Machine.
Copies of the revised Material and the Material prior to revision shall be
maintained in escrow as provided hereunder.
<PAGE> 18
2. Access To Escrowed Material In The Event Of Default
(a) Fuji Machine shall give written notice to Escrow
Agent and Cimetrix of the occurrence of a material default by Cimetrix in the
performance of its obligations under the OEM Agreement to maintain or support
the operability and standards of the Licensed Software. Such notice shall
specify with particularity the nature of such default.
(b) Unless within fifteen (15) days after receipt by
Escrow Agent and Cimetrix of the notice referred to in Section 2(a) above,
Cimetrix shall file with Escrow Agent its affidavit executed by a person
believed by the Escrow Agent to a responsible executive officer of Cimetrix
that no event referred to in Section 2(a) above has occurred, or that such
event has been cured, Escrow Agent shall thereupon on the sixteenth (16) day
deliver to Fuji Machine in accordance with Fuji Machine's instructions the
entire Material. Escrow Agent shall notify Cimetrix within five (5) days after
receipt of Fuji Machine's notice pursuant to Section 2(a).
(c) In the event Cimetrix files an affidavit referred to
in Section 2(b) above disputing the fact that an event of default specified in
Section 2(a) has occurred, then Escrow Agent shall not deliver the Material
either to Fuji Machine or Cimetrix until directed to do so by Fuji Machine and
Cimetrix jointly, or until Escrow Agent is ordered to do so by a court of
competent jurisdiction.
3. Use of Escrowed Material.
Fuji Machine and Cimetrix agree that Fuji Machine's right to use the
Material after delivery pursuant to the terms thereof shall be limited solely
to the maintenance and support of the operability and standards of the Licensed
Software as described in the OEM Agreement and that no other rights to or
interest in the Material or Source Listings shall be transferred to Fuji
Machine hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
CIMETRIX INCORPORATED:
By_______________________
FUJI MACHINE MFG. CO., LTD.:
By________________________
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation of our report dated February 26, 1997,
appearing in the Annual Report on Form 10-K of Cimetrix Incorporated for the
year ended December 31, 1996, in the Company's Registration Statement on Form
S-2 and to all references to our firm in the Registration Statement.
PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
August 25, 1997
<PAGE> 1
EXHIBIT 28.1
CIMETRIX INCORPORATED
$10,000,000 SENIOR NOTES AND COMMON STOCK WARRANTS
FORM OF SUBSCRIPTION AGREEMENT
(TO BE USED IN STATES WHERE STATE REGISTRATION IS EFFECTIVE)
Cimetrix Incorporated
100 North Tampa Street
Suite 3550
Tampa, Florida 33602
Gentlemen:
You have informed the undersigned ("Investor") that Cimetrix
Incorporated (the "Corporation") is a Nevada corporation engaged in the
business of developing, marketing, and selling software for controlling
industrial robots, machine tools, and similar manufacturing equipment, and that
$10,000,000 of the Corporation's 10% Senior Notes, due September 30, 2002, (the
"Notes") and 2,500,000 detachable warrants to purchase the Corporation's common
stock (the "Warrants") are available for purchase. The undersigned acknowledges
that the minimum purchase price of the Notes is $5,000.00, that Notes may be
purchased in additional increments of $1,000.00, and that purchasers of the
Notes will receive for no additional consideration a warrant to purchase 250
shares of the Corporation's common stock for each $1,000 principal amount of
Notes purchased. The undersigned acknowledges that he has received and fully
read a copy of the Corporation's Prospectus, dated August ___, 1997 (the
"Prospectus").
1. General. This Subscription Agreement sets forth the terms
under which the Investor will invest in Notes and Warrants of the Corporation.
Investor hereby subscribes for and agrees to purchase $________________ in
principal amount of Notes, together with Warrants to purchase 250 shares of the
Corporation's common stock for each $1,000.00 in principal amount of Notes
purchased. Execution of this Subscription Agreement shall constitute an offer
by the Investor to subscribe to Notes and Warrants on the terms and conditions
herein specified. Investor understands that this Subscription may be rejected
by the Corporation in whole or in part. If this Subscription is accepted, the
Corporation will execute a counterpart hereof and return it to the Investor.
Investor has received and signed a copy of the Indenture provided to Investor
and the signature page of the Indenture is attached hereto.
2. Revocation. Investor understands that it may not cancel,
revoke, or terminate this Subscription Agreement, and this Subscription
Agreement shall survive Investor's death, disability, or bankruptcy.
3. Governing Law. This Subscription Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of
Nevada, excluding those provisions relating to the conflict of laws of
different jurisdictions it the effect of the application of the laws of a
jurisdiction other than Nevada.
4. Headings. The section headings contained herein are solely for
convenience of
<PAGE> 2
reference, are not a part hereof, and shall not affect the meaning or
interpretation of any terms hereof.
5. Binding Effect; Assignment. This Subscription Agreement shall
bind and inure to the benefit of the parties hereto and their heirs, legal
representatives, successors, and permitted assignees, but this Subscription
Agreement shall not be assignable by either party without the prior written
consent of the other party.
6. Entire Agreement; Amendment. This Subscription Agreement
contains the entire understanding of the parties with respect to matters
contained herein; supersedes all prior negotiations, letters, and
understandings relating to the subject matter hereof; and cannot be amended,
supplemented, or modified, except by a written instrument signed by the party
against whom enforcement of any amendment, supplement, or modification is
sought.
7. Invalid Provision. The invalidity or unenforceability of any
provision of this Subscription Agreement shall not affect the validity or
enforceability of the remainder.
8. Failure to Enforce Not Waiver. No waiver of any breach of any
provision of this Subscription Agreement shall be deemed a waiver of any
subsequent breach, whether similar or dissimilar to that waived.
9. Construction. As used herein, the masculine gender shall be
deemed to include the feminine and the neuter, and the singular number shall be
deemed to include the plural, and vice-versa.
10. Title. Investor desires to take title to the Notes and
Warrants as follows (print name exactly as you wish the title to read and add
any necessary information, e.g., "X and Y as Joint Tenants" or "Z, as trustee
of the ABC Trust"):
_________________________________________
_________________________________________
11. No Waiver. Notwithstanding any of the representations,
warranties, acknowledgments or agreements made herein, Investor does not
thereby or in any other manner waive any rights granted under federal or state
securities laws.
<PAGE> 3
12. Miscellaneous. All notices or other communications given or
made hereunder shall be in writing and shall be delivered or mailed by
registered or certified mail, return receipt requested, postage prepaid, to the
respective parties at the addresses set forth in this Agreement. Each party may
change its address by notice given in accordance with this paragraph.
WHEREFORE, subject to acceptance by the Corporation, the undersigned
has completed this Subscription Agreement to evidence his subscription to Notes
and Warrants.
DATED:__________________________ ________________________________________
Signature of Investor
________________________________________
________________________________________
________________________________________
Name and Address of Investor
________________________________________
Social Security or Tax ID Number
________________________________________
Principal Amount of Notes Subscribed
ACCEPTED AT TAMPA, FLORIDA:
CIMETRIX INCORPORATED
Date:______________________________ By:_____________________________________
STATE OF ________________________________
COUNTY OF _______________________________
BEFORE ME, the undersigned authority, personally appeared ____________
_______________________, who on oath, acknowledged that s/he executed said
Subscription Agreement for the purposes stated therein, and acknowledged the
truth of all matters therein contained.
________________________________________
Notary Public, State of ________________
Name (Print):
My Commission Expires:
<PAGE> 4
CIMETRIX INCORPORATED
$10,000,000 SENIOR NOTES AND COMMON STOCK WARRANTS
FORM OF SUBSCRIPTION AGREEMENT
(TO BE USED IN STATES WHERE NO STATE REGISTRATION IS EFFECTIVE)
Cimetrix Incorporated
100 North Tampa Street
Suite 3550
Tampa, Florida 33602
Gentlemen:
You have informed the undersigned ("Investor") that Cimetrix
Incorporated (the "Corporation") is a Nevada corporation engaged in the
business of developing, marketing, and selling software for controlling
industrial robots, machine tools, and similar manufacturing equipment, and that
$10,000,000 of the Corporation's 10% Senior Notes, due September 30, 2002, (the
"Notes") and 2,500,000 detachable warrants to purchase the Corporation's common
stock (the "Warrants") are available for purchase. The undersigned acknowledges
that the minimum purchase price of the Notes is $5,000.00, that Notes may be
purchased in additional increments of $1,000.00, and that purchasers of the
Notes will receive for no additional consideration a warrant to purchase 250
shares of the Corporation's common stock for each $1,000 principal amount of
Notes purchased. The undersigned acknowledges that he has received and fully
read a copy of the Corporation's Prospectus, dated August ___, 1997 (the
"Prospectus").
1. General. This Subscription Agreement sets forth the terms
under which the Investor will invest in Notes and Warrants of the Corporation.
Investor hereby subscribes for and agrees to purchase $________________ in
principal amount of Notes, together with Warrants to purchase 250 shares of the
Corporation's common stock for each $1,000.00 in principal amount of Notes
purchased. Execution of this Subscription Agreement shall constitute an offer
by the Investor to subscribe to Notes and Warrants on the terms and conditions
herein specified. Investor understands that this Subscription may be rejected
by the Corporation in whole or in part. If this Subscription is accepted, the
Corporation will execute a counterpart hereof and return it to the Investor.
Investor has received and signed a copy of the Indenture provided to Investor
and the signature page of the Indenture is attached hereto.
2. Representations and Warranties. The Investor hereby
represents, warrants, and covenants to Corporation that, unless crossed out and
initialed, each of the following statements is true and correct:
(a) The Investor (1)(i) is an Accredited Investor, as
that term is defined in Rule 501(a) of the Securities and Exchange Commission;
(ii) has a net worth of at least $1,000,000 and has and expects to continue to
have annual gross income of at least $200,000; and (2)(i) can bear the economic
risk of losing its entire investment in the Notes; (ii) has, either alone or
together with its Purchaser Representative (as herein defined), if any, such
knowledge and experience in financial and business matters that it is capable
of evaluating the risks and merits of an investment in the Notes;
<PAGE> 5
(iii) am acquiring the Notes and Warrants for its own account, for investment
purposes only, and not with a view toward the resale or distribution thereof;
and (iv) has adequate means of providing for its present needs and has no need
for liquidity in its investment in the Notes and Warrants.
(b) The person or persons named in the Investor's
Confidential Purchaser Questionnaire, if any, has or have acted as the
Investor's Purchaser Representative (as defined in Rule 501(h) of the
Securities and Exchange Commission) and (i) in evaluating its investment in the
Notes, the Investor has been advised by its Purchaser Representative as to the
merits and risks of the investment in general and as to the suitability of the
investment for the Investor, in particular; and (ii) the Purchaser
Representative has confirmed to Investor in writing (a copy of which instrument
shall be attached to this Subscription Agreement) any past, present, or future
material relationship, actual or contemplated, between the Purchaser
Representative or its affiliates, and the Corporation or an affiliate of the
Corporation (including, but not limited to, the receipt by the Purchaser
Representative of any selling commissions in connection with the purchase of
the Notes subscribed for herein); and if no Purchaser Representative is named
in the Investor's Confidential Purchaser Questionnaire, no person has acted as
Investor's Purchaser Representative in connection with this Subscription.
(c) Investor understands that, as set forth in the
Prospectus, there is a high degree of risk associated with an investment in the
Notes; and Investor confirms that it has been informed that all documents,
records, and books pertaining to this investment have been made available for
inspection by Investor and its Purchaser Representative, if any.
(d) Investor or its Purchaser Representative, if any, has
had opportunities to ask questions of, and receive answers from the Corporation
or a person or persons acting on its behalf, including its directors,
concerning (i) the terms and conditions of this Subscription Agreement, the
transactions contemplated hereby, and the business affairs of the Corporation
and related matters; (ii) any arrangement or proposed arrangements between the
Corporation and any of its security holders that are not identical with respect
to all of its security holders; and (iii) the matters set forth in the
Prospectus or referred to therein.
(e) Investor, together with its Purchaser Representative,
if any, has had an opportunity to obtain additional information necessary to
verify the accuracy of the information referred to in subparagraph (d) hereof.
(f) Investor has received, completed, and returned to the
Corporation a questionnaire (the "Confidential Purchaser Questionnaire")
relating to its general ability to bear the risks of an investment in the
Shares and its suitability as an investor in the Notes and Warrants, and
Investor hereby affirms the correctness of its answers to the Confidential
Purchaser Questionnaire.
(g) Investor is acquiring the Notes and Warrants for its
own account, for investment purposes only, and not with a view to or for
resale, distribution, or fractionalization. Investor has no present intention
to offer for sale, sell, or otherwise transfer any Notes or Warrants subscribed
by Investor, and Investor agrees not to sell any Notes or Warrants, except in
compliance with all applicable securities laws.
<PAGE> 6
(h) Investor understands and acknowledges being advised
that the Notes and warrants have not been and will not be registered under
applicable state securities laws, and that the Notes and Warrants will be
issued pursuant to an exemption from registration, which exemption is based in
part on the warranties, representations, and covenants made herein.
(i) Investor understands and acknowledges being advised
that the Notes and Warrants may not be offered for sale, sold, or transferred
unless they are subsequently registered under applicable state securities laws,
or unless an exemption from registration is available under those laws.
(j) Investor acknowledges the placement on all
instruments representing the Notes and Warrants the legend stating that the
Notes and Warrants have not been registered under applicable state securities
laws and the Notes and Warrants may not be sold or otherwise transferred unless
registered under all applicable laws or pursuant to an exemption from
registration.
(l) Investor is aware that (i) the Corporation will be
managed by the directors, and the holders of Notes and Warrants will have no
control or management rights with respect thereto; (ii) the Notes and Warrants
are a speculative investment; (iii) the Corporation is not required to register
the Notes and Warrants under any applicable securities laws; and (iv) there may
not be any market for the Notes and Warrants and Investor may have to hold the
Notes until their maturity.
(m) Neither the Corporation nor anyone acting on its
behalf has guaranteed or represented that I will realize a minimum return on my
investment, and I understand that I may lose my entire investment in the Notes
and Warrants.
3. Indemnification. Investor agrees to indemnify and hold
harmless the Corporation, its officers, directors, and agents, its and their
affiliates, and employees of all of the foregoing from and against all losses,
damage, liability, or expense, including attorneys' fees and costs that they
may incur by reason of or in connection with any misrepresentation by the
Investor or any breach of its warranties or covenants under this Subscription
Agreement.
4. Revocation. Investor understands that it may not cancel,
revoke, or terminate this Subscription Agreement, and this Subscription
Agreement shall survive Investor's death, disability, or bankruptcy.
5. Governing Law. This Subscription Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of
Nevada, excluding those provisions relating to the conflict of laws of
different jurisdictions it the effect of the application of the laws of a
jurisdiction other than Nevada.
6. Headings. The section headings contained herein are solely for
convenience of reference, are not a part hereof, and shall not affect the
meaning or interpretation of any terms hereof.
7. Binding Effect; Assignment. This Subscription Agreement shall
bind and inure to the benefit of the parties hereto and their heirs, legal
representatives, successors, and permitted
<PAGE> 7
assignees, but this Subscription Agreement shall not be assignable by either
party without the prior written consent of the other party.
8. Entire Agreement; Amendment. This Subscription Agreement
contains the entire understanding of the parties with respect to matters
contained herein; supersedes all prior negotiations, letters, and
understandings relating to the subject matter hereof; and cannot be amended,
supplemented, or modified, except by a written instrument signed by the party
against whom enforcement of any amendment, supplement, or modification is
sought.
9. Invalid Provision. The invalidity or unenforceability of any
provision of this Subscription Agreement shall not affect the validity or
enforceability of the remainder.
10. Failure to Enforce Not Waiver. No waiver of any breach of any
provision of this Subscription Agreement shall be deemed a waiver of any
subsequent breach, whether similar or dissimilar to that waived.
11. Construction. As used herein, the masculine gender shall be
deemed to include the feminine and the neuter, and the singular number shall be
deemed to include the plural, and vice-versa.
12. Title. Investor desires to take title to the Notes and
Warrants as follows (print name exactly as you wish the title to read and add
any necessary information, e.g., "X and Y as Joint Tenants" or "Z, as trustee
of the ABC Trust"):
_________________________________________
_________________________________________
13. No Waiver. Notwithstanding any of the representations,
warranties, acknowledgments or agreements made herein, Investor does not
thereby or in any other manner waive any rights granted under federal or state
securities laws.
14. Transferability. Investor agrees not to transfer or assign
this Agreement, or any of my interest herein, and further agree that the
assignment and transferability of the Notes and Warrants acquired pursuant
hereto shall be made only in accordance with applicable law.
15. Miscellaneous. All notices or other communications given or
made hereunder shall be in writing and shall be delivered or mailed by
registered or certified mail, return receipt requested, postage prepaid, to the
respective parties at the addresses set forth in this Agreement. Each party may
change its address by notice given in accordance with this paragraph.
THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER
APPLICABLE STATE LAW. THESE SECURITIES MUST BE ACQUIRED FOR INVESTMENT PURPOSES
ONLY AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND, EXCEPT AS SPECIFICALLY
PROVIDED IN THIS SUBSCRIPTION AGREEMENT, MAY NOT BE MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR
<PAGE> 8
SOLD WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER ANY
APPLICABLE STATE LAW.
WHEREFORE, subject to acceptance by the Corporation, the undersigned
has completed this Subscription Agreement to evidence his subscription to Notes
and Warrants.
DATED:__________________________ ________________________________________
Signature of Investor
________________________________________
________________________________________
________________________________________
Name and Address of Investor
________________________________________
Social Security or Tax ID Number
________________________________________
Principal Amount of Notes Subscribed
ACCEPTED AT TAMPA, FLORIDA:
CIMETRIX INCORPORATED
Date:______________________________ By:_____________________________________
STATE OF ________________________________
COUNTY OF _______________________________
BEFORE ME, the undersigned authority, personally appeared ____________
_______________________, who on oath, acknowledged that s/he executed said
Subscription Agreement for the purposes stated therein, and acknowledged the
truth of all matters therein contained.
________________________________________
Notary Public, State of ________________
Name (Print):
My Commission Expires:
