<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1997
REGISTRATION NO. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
CIMETRIX INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<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. [ ]
--------------------
CALCULATION OF REGISTRATION FEE
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- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH AMOUNT MAXIMUM MAXIMUM AMOUNT OF
CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE (1) FEE
- ---------------------------------------------------------------------------------------------------------------------------------
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- ---------------------------------------------------------------------------------------------------------------------------------
10% Senior Notes Due 2002 . . . . . . . . $10,000,000 $1000 $10,000,000 $3,030
- ---------------------------------------------------------------------------------------------------------------------------------
Warrants, each of which entitle the holder
to purchase 100 shares of Common Stock . . 10,000 $-0- $-0-
=================================================================================================================================
</TABLE>
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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 JULY 2, 1997.
PROSPECTUS
$10,000,000
CIMETRIX INCORPORATED
10% SENIOR NOTES DUE 2002
WARRANTS FOR 1,000,000 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 $10,000 and additional whole multiples of $1,000 or any
integral multiple thereof. The minimum purchase is $10,000. 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 100 shares of the Company's common stock ("Common Stock") for $5.25
per share. The Warrants are exercisable any time 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 intends to file a registration
statement for the shares issuable pursuant to the Warrants within 30 days after
the closing trading price of the Common Stock equals or exceeds $5.25 per share
for 20 consecutive trading days. 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 June 26, 1997, the
trading price for the Common Stock on the OTC Bulletin Board was $4.44 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
reserves the option to sell the Securities to or through one or more
broker-dealers, consistently with applicable law. Any compensation or
indemnification arrangements with broker-dealers will be disclosed by amendment
to this Prospectus. 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. Pending closing, funds received from investors will be held
separately in a segregated account established by the Company. 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 admit them for quotation on the NASDAQ National or Small Cap Markets.
See "Terms of Offering."
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.
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============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Senior Note and
Warrant (3)........ $1,000 NONE $1,000
Total minimum(3)..... $3,000,000 NONE $3,000,000
Total maximum(3)...... $10,000,000 NONE $10,000,000
============================================================================================================
</TABLE>
(1) The Offering is not underwritten. Each Senior Note will be sold directly to
investors by the Company at the Senior Note's face value of $1,000.
(2) Before deducting estimated expenses of $80,000 payable by the Company.
(3) Excludes the sale of shares of Common Stock for $5.25 per share on the
exercise of the Warrants, which would yield proceeds to the Company of $525
for each Warrant and $5,250,000 for all the Warrants.
THIS OFFERING WILL EXPIRE AT 5:00 P.M. EASTERN STANDARD TIME
ON ,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>
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THE OFFERING
<S> <C>
Securities Offered..................$10,000,000 principal amount of Senior Notes Due 2002 and Warrants to purchase
1,000,000 shares of Common Stock at $5.25 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 June 26, 1997, the Company did not have any
secured indebtedness and its outstanding unsecured senior indebtedness
consisted of approximately $250,000 payable to Brigham Young University and
approximately
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<PAGE> 4
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<S> <C>
$500,000 of trade payables. See "Description of the Senior Notes - Ranking."
Restrictive Covenants...............The trust 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>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------ -----------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
STATEMENT OF
OPERATIONS DATA:
Revenues ........................ $ 330 $ 1,142 $ 463 $ 664 $ 2,396 $ 281 $ 512
Operating expenses:
Cost of revenues .............. 124 727 297 446 1,342 140 209
Selling, marketing and
customer support ............ 59 115 217 947 1,494 323 290
Research and development ...... 316 507 198 930 1,179 289 435
General and administration .... 710 857 1,217 1,231 1,577 317 419
Compensation - stock option ... -- -- -- -- 685 693 --
-------- -------- -------- -------- -------- -------- --------
Total operating expenses ... 1,209 2,206 1,929(a) 3,554 6,277 1,762 1,353
-------- -------- -------- -------- -------- -------- --------
Net loss ....................... $ (881) $ (1,074) $ (1,145) $ (2,544) $ (3,455) $ (1,460) $ ( 825)
======== ======== ======== ======== ======== ======== ========
Loss per common share .......... $ (.05) $ (.07) $ (.08) $ (.16) $ (.19) $ (.08) $ (.05)
======== ======== ======== ======== ======== ======== ========
Weighted average shares
outstanding .................. 16,110 16,335 14,208 16,265 18,517 18,551 18,136
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------
BALANCE SHEET DATA: ACTUAL AS ADJUSTED(B)
------ --------------
(UNAUDITED)
<S> <C> <C>
Current assets .................. $2,887 $12,807
Current liabilities ............. 779 779
Working capital (deficit) ....... 2,108 12,028
Total assets .................... 7,921 17,921
10% Senior Notes ................ -- 10,000
Total long-term debt (excluding
$44,000 of current maturities) 246 10,246
Stockholders' equity ............ $6,896 $ 6,896
</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. Also
excludes the effect of the exercise in April 1997 of Warrants to purchase
6,192,500 shares of Common Stock that yielded the Company net proceeds of
$1,385,000, and the Company's concurrent repurchase of 200,000 shares of
Common Stock for $1,000,000.
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 March 31,
1997, of approximately $11,368,000, 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 $825,000 during the three months ended March 31, 1997. Net
cash used by operations amounted to approximately $2,002,000, $2,944,000, and
$1,817,000 during 1996, 1995, and 1994, respectively, and approximately
$1,300,000 during the three months ended March 31, 1997. The Company has never
operated at a profit. There is no assurance that the Company will operate
profitably in the future.
Given its lack of profitability, the Company historically has not
generated earnings that would cover the interest on the Notes. There is no
assurance that the Company will do so in the future. If the Company does not
generate earnings, its ability to repay interest and principal on the 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. accounted for approximately 34% of the
Company's sales in 1996 and is expected to account for approximately 20% of its
sales in 1997. The loss of a significant portion of Fuji's business would 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 would 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 other products have been introduced since
then. 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.
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 believes that the proceeds of the Offering will be adequate
to address the foreseeable capital needs of the Company. 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.
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 4% 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 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 intends to register and
qualify the Warrant shares for offer and sale when the closing trading price for
the Common Stock equals or exceeds $5.25 per share for 20 consecutive trading
days, there is no assurance that it will do so or succeed in doing so. 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 $9,920,000 if the maximum amount of Senior Notes
is sold and $2,920,000 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. 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
(through June 26) 5.88 3.25
</TABLE>
On June 26, 1997, the closing bid quotation for the Common Stock on the
OTC Bulletin Board was $4.44 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 June 27, 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
March 31, 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 $9,920,000
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 March 31, 1997, and the related notes thereto
that are included elsewhere in this Prospectus or incorporated by reference in
it.
<TABLE>
<CAPTION>
March 31, 1997
-----------------------------------------------
Actual As Adjusted (1)
------- -----------
(unaudited)
(in thousands)
<S> <C> <C>
Long-term debt(1):
Long-term debt ....................................... $ 246 $ 246
Senior Notes offering ................................ -- 10,000
-------- --------
Total long-term debt .............................. 246 10,246
-------- --------
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) ........................ 18,496 18,496
Accumulated deficit .................................. (11,368) (11,368)
Unearned compensation - stock options ................ (234) (234)
-------- --------
Net shareholders' equity .......................... 6,896 6,896
-------- --------
Total Capitalization .............................. $ 7,142 $ 17,142
======== ========
</TABLE>
(1) See Note 6 of Notes to Financial Statements.
(2) Excludes the effect of exercise of the Warrants offered by this
Prospectus, which would yield $5,250,000 (before expenses of
registration), if all the Senior Notes are sold. Also, excludes the effect
of the exercise of warrants to purchase 6,192,500 shares of the Company's
Common Stock in April 1997 that yielded the Company net proceeds of
$1,385,000 and the Company's concurrent repurchase of 200,000 shares of
Common Stock for $1,000,000.
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 three
months ended March 31, 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 three months
ended March 31, 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>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------------- -----------------
STATEMENT OF 1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
OPERATIONS DATA (1): (in thousands, except per share data) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues .................... $ 330 $ 1,142 $ 463 $ 664 $ 2,396 $ 281 $ 512
Operating expenses:
Cost of revenues ............ 124 727 297 446 1,342 140 209
Selling, marketing and
customer support ........ 59 115 217 947 1,494 323 290
Research and development .... 316 507 198 930 1,179 289 435
General and administrative .. 710 857 1,217 1,231 1,577 317 419
Compensation-stock options .. -- -- -- -- 685 693 --
-------- -------- -------- -------- -------- -------- --------
Total operating expenses ........ 1,209 2,206 1,929 3,554 6,277 1,762 1,353
-------- -------- -------- -------- -------- -------- --------
Loss from operations ............ (879) (1,064) (1,466) (2,890) (3,881) (1,481) (841)
-------- -------- -------- -------- -------- -------- --------
Net loss ........................ $ (881) $ (1,074) $ (1,145) $ (2,544) $ (3,455) $ (1,460) $ (825)
======== ======== ======== ======== ======== ======== ========
Loss per common share ........... $ (.05) $ (.07) $ (.08) $ (.16) $ (.19) $ (.08) $ (.05)
======== ======== ======== ======== ======== ======== ========
Weighted average shares
outstanding .............. 16,110 16,335 14,208 16,265 18,517 18,551 18,136
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
------------------------------------------ --------------
BALANCE SHEET DATA: 1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
(in thousands) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets .................. $ 69 $ 230 $3,835 $3,268 $4,220 $3,139 $2,887
Current liabilities ............. 479 857 1,451 338 1,344 266 779
Working capital (deficit) ....... (410) (627) 2,384 2,930 2,876 2,873 2,108
Total assets .................... 223 356 5,632 9,722 9,227 9,508 7,921
Total long-term debt ............ 41 41 44 338 296 290 246
Stockholders' equity (deficit) .. $(297) $(535) $3,613 $9,070 $7,631 $8.935 $6,896
</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. See "Risk Factors - Lack of Profitability - Interest Coverage."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
OVERVIEW
The ensuing Management's Discussion and Analysis of Financial Condition
and Results of Operations might contain both statements of historical fact and
forward-looking statements. Examples of
10
<PAGE> 13
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 risks,
factors, and uncertainties that could cause actual results to differ materially
from any forward-looking statements.
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 1997, AND
MARCH 31, 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
months ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------------
1996 1997
---- ----
<S> <C> <C>
Net revenues 100.0% 100.0%
Operating expenses:
Cost of revenues 49.8 40.8
Selling, marketing and customer support 115.0 56.6
Research and development 102.9 85.0
General and administrative 112.8 81.8
Compensation - stock options 246.6 --
------ -----
Total operating expenses 627.1 264.2
------ -----
Loss from operations (527.1) (164.2)
Interest income, net of expense 7.5
------ 3.0
Net loss (519.6)% (161.2)%
====== =====
</TABLE>
NET REVENUES
Net revenues for the three months ended March 31, 1997 and 1996, were
approximately $512,000 and $281,000, respectively. Net revenues for the three
months ended March 31, 1997, included approximately $350,000 of software
revenues. Net revenues for the three months ended March 31, 1996 included
approximately $137,000 from the sale of hardware products.
COST OF REVENUES
The Company's cost of revenues as a percentage of net revenues for the
three months ended March 31, 1997 and 1996 was approximately 41% and 50%,
respectively. The cost of revenues decreased because the revenues from software
products as a percentage of total revenues increased from approximately 27% of
revenues during the three months ended March 31, 1996, to approximately 68% of
revenues during the three months ended March 31, 1997.
SELLING AND MARKETING
Selling and marketing expenses were approximately $323,000 during the
three-month period ended March 31, 1996, and approximately $290,000 during the
three months ended March 31, 1997.
11
<PAGE> 14
Selling and marketing expenses in 1997 and 1996 reflect the hiring and
related travel expenses of full-time marketing and sales personnel, the
development of product brochures and other marketing material and the costs
related to the Company's representation at trade shows.
RESEARCH AND DEVELOPMENT
Research and development expenses have increased from approximately
$289,000 during the three months ended March 31, 1996, to approximately $435,000
during the three months ended March 31, 1997. 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.
GENERAL AND ADMINISTRATIVE
General and administrative expenses have increased from approximately
$317,000 during the three months ended March 31, 1996, to approximately $419,000
during the three months ended March 31, 1997. The primary increases in general
and administrative expenses are approximately $75,000 in legal expenses related
primarily to the Seolas litigation and approximately $40,000 of increased
recruiting costs.
COMPENSATION - STOCK OPTIONS
During the three months ended March 31, 1996, the Company recorded, in
accordance with APB 25, the compensation cost related to all options granted
during 1995 and any then 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 three months ended March 31, 1996 was
approximately $693,000.
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.
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. 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. For the
year ended December 31, 1994, the Company was a "development stage" enterprise
as defined by generally accepted accounting principles.
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 reflect the hiring and related travel
expenses of full-time marketing and sales personnel, the development of product
brochures and other marketing material and 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.
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 $2,108,000 of working capital at March
31, 1997, compared with approximately $2,876,000 at December 31, 1996. The
decrease in working capital from December 31, 1996, to March 31, 1997, was
primarily attributable to the cash used to fund the Company's net loss during
the three months ended March 31, 1997. The Company's future liquidity will
continue to be dependent on its operating cash flow, increased revenues and
management of trade receivables and
15
<PAGE> 18
inventories. Management believes that following completion of the Offering, the
Company's working capital will be sufficient to maintain its current and
foreseeable levels of operations.
The Company had negative cash flow from operating activities of
approximately $1,300,000 for the three months ended March 31, 1997, compared to
approximately $757,000 for the three months ended March 31, 1996. The Company's
negative cash flow from operations for the three months ended March 31, 1997,
was approximately equal to the net loss for the period less depreciation and
amortization plus a reduction of approximately $600,000 in accounts payables and
accrued liabilities. Negative cash flow from operations for the three months
ended March 31, 1996, was approximately equal to the Company's net loss minus
depreciation and amortization and the compensation expense for stock options.
The Company anticipates that capital expenditures for fiscal year 1997,
primarily for computer equipment, will be approximately $200,000-$300,000.
Management believes that the Company 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.
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.
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%.
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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
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<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
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<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
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<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 other new product features 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>
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<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
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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 is relatively mature 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
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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.
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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 June 26, 1997, the Company's backlog of orders from customers for
products to be shipped or application engineering services to be performed
during 1997 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, atJune 26, 1997, the
Company has signed support service agreements that are expected to generate
approximately $75,000 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.
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LEGAL PROCEEDINGS
The Company filed a lawsuit in 1996, in Utah state court against W.
Keith Seolas, a former director of the Company, and members of his family. The
lawsuit seeks to invalidate the issuance by the Company of approximately
2,000,000 shares of Common Stock. If the Company prevails in this litigation,
the outstanding shares of Common Stock will be reduced by approximately 8%.
After the Company filed its lawsuit, Mr. Seolas filed a separate
lawsuit against the Company in 1996 in the United States District Court for
Utah. In his lawsuit, Mr. Seolas alleges fraud by the Company in connection with
his return to the Company in 1994 of approximately 200,000 shares of Common
Stock.. The Company believes that it has strong defenses to Mr. Seolas' claims
and intends to vigorously defend them. The Company's counsel believes that Mr.
Seolas' claims against the Company are without merit.
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 several counts of federal securities fraud in
connection with his sales and purchases of several companies' stock, for which
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<PAGE> 32
he served a prison term of 20 months and paid a fine. Mr. Bilzerian also is
subject to a civil injunction secured by the Commission in the same case.
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
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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
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 $10,000 and additional whole multiples of
$1,000. Each subscriber will also receive for no additional consideration a
separate Warrant to purchase 100 shares of the Common Stock at $5.25 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 has not employed any brokers, dealers or underwriters
in connection with the Offering, but reserves the option to sell the Securities
to or through one or more broker-dealers, consistently with applicable law.
Any compensation or indemnification arrangements with broker-dealers will be
disclosed by amendment to this Prospectus.
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 $10,000 minimum purchase
requirement. In addition, none of the Senior Notes will be sold in the Offering
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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 by the Company in a separate deposit or money
market account withBarnett Bank, Tampa, Florida. 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, 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. 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 __________, 1997, subject to the Company's
right to extend the expiration date of the Offering one or more times until no
later than ________, 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 Note and Warrants purchased by subscribers will be mailed or delivered to
them as soon as practicable following the Closing of the Offering.
DESCRIPTION OF THE SENIOR NOTES
GENERAL
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The Senior Notes will be issued under the Indenture between the Company
and Chase Mellon (the "Trustee"). 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. The Indenture and the Senior Notes will be governed by and
construed in accordance with the laws of the State of Florida. See "Available
Information." 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 $10,000 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 Trustee will act as
Registrar and the Company will act as Paying Agent. The Company may change a
Paying Agent, Registrar or Co-Registrar without notice to the holders of the
Senior Notes, and the Company may act as Paying Agent, Registrar or
Co-Registrar. The Trustee may also act as a depository of funds or make loans to
and perform other services for the Company or its affiliates in the ordinary
course of business in the future. The corporate trust office of the Trustee is
located at Chase Mellon Transfer Services L.L.C., San Francisco, California. The
Senior Notes can be presented for payment at the principal office of the Paying
Agent (initially the Company) and for exchange, transfer or registration at the
office of the Trustee in San Francisco.
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 Trustee 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
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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 redemption (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 80% 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 the Trustee and 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 redeem 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 redemption (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 redemption 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
redemption of his Senior Notes.
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<PAGE> 37
If a Change of Control occurs, there is no assurance that the Company
will have sufficient funds available to pay the redemption 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 redemption 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 redemption 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 redeem 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 redemption 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 redemption of the Senior Notes.
The provisions under the Indenture relating to the Company's obligation to
redeem 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 Dividends and Stock Repurchases. The Company is
prohibited from paying any dividends with respect to the Common Stock or
repurchasing shares of the Common Stock.
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, in a form
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<PAGE> 38
satisfactory to the Trustee, the obligations of the Company under the Senior
Notes and the Indenture, (b) immediately after giving effect to the transaction,
no Event of Default has occurred, and (c) the Company delivers to the Trustee an
officer's certificate and an opinion of counsel, each stating that the merger,
consolidation, or transfer comply with the Indenture.
EVENTS OF DEFAULT
If an Event of Default (other than the bankruptcy, insolvency or
reorganization of the Company) occurs and is continuing, the Trustee 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 Trustee 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 Controlor under "--Certain Covenants--Limitation
on Indebtedness," "--Limitation on Liens," or "--Limitation on Dividends and
Stock Repurchases"; (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 $250,000 (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 $100,000 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 Trustee 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 Trustee 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, 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 Trustee 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 Trustee pursue
the remedy, (iii) those holders of Senior Notes have offered the Trustee
reasonable security or indemnity against any loss, liability or expense, (iv)
the Trustee 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 Trustee 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 Trustee or exercising any trust or
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other holder of the Senior
Notes or that would subject the Trustee 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).
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The Trustee is required, within 90 days after an Event of Default that
is continuing and known to the Trustee, to mail to each holder of Senior Notes
notice of the Event of Default. Except in the case of an Event of Default in the
payment of principal or interest on any Senior Note, however, the Trustee may
withhold notice of an Event of Default if the Trustee's board of directors,
executive committee or a committee of its trust officers determines in good
faith that withholding the notice is in the interest or not opposed to the
interest of the holders of Senior Notes.
MODIFICATION OF INDENTURE
Subject to certain exceptions, the Company and the Trustee,
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 and the Trustee 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 100 shares of the
Common Stock at a price of $5.25 per share, subject to adjustment. They will
first be transferable separately from the Senior Notes on October 1, 1999.
Warrants may be exercised on or beforeOctober 1, 2002, by paying the exercise
price of $5.25 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 100 and the
exercise price may be higher or lower than $5.25. 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 transfer agent and registrar for the
Warrants is Chase Mellon Shareholder Services, L.L.C.
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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
Securities and Exchange Commission (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 intends to file with the Commission a
Registration Statement covering the shares of Common stock issuable on exercise
of the Warrants within 30 days after the date when the closing trading price of
the Common Stock equals or exceeds the exercise price of the Warrants for 20
consecutive trading days, but there is no assurance that it will do so or be
able to do so. 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 sois not
justified. A Warrantholder 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 June 26, 1997, 24,143,928
shares of Common Stock. As of June 23, 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 one year. 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 one year.
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 Company's Annual Report on Form 10-K for the year ended December
31, 1996, and its Quarterly Report on Form 10-Q for the three months ended March
31, 1997, which previously were filed with the Commission, are incorporated by
reference in this Prospectus. In addition, all documents filed by the Company
pursuant to sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act
of 1934, after the date of this Prospectus and before the termination of the
offering described in this Prospectus, will be incorporated by reference in this
Prospectus and shall constitute a part of it from their respective dates of
filing. 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).
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
months ended March 31, 1997, and March 31, 1996..................................... F-2
Unaudited Condensed Balance Sheets as of March 31, 1997,
and December 31, 1996 (audited)..................................................... F-3
Unaudited Condensed Statement of Cash Flows for the three
months ended March 31, 1997, and March 31, 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
CIMETRIX INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
NET REVENUES $ 512 $ 281
------------ ------------
OPERATING EXPENSES:
Cost of revenues, including customer support 209 140
Selling and marketing 290 315
Research and development 361 229
General and administrative 330 226
Depreciation and amortization 163 159
Compensation expense - stock options -- 693
------------ ------------
Total operating expenses 1,353 1,762
------------ ------------
LOSS FROM OPERATIONS (841) (1,481)
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 21 23
Interest expense (5) (2)
------------ ------------
Total other income (expense) 16 21
------------ ------------
LOSS BEFORE INCOME TAXES (825) (1,460)
CURRENT INCOME TAX EXPENSE (BENEFIT) -- --
DEFERRED INCOME TAX EXPENSE (BENEFIT) -- --
------------ ------------
NET LOSS $ (825) $ (1,460)
============ ============
LOSS PER COMMON SHARE: $ (.05) $ (.08)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 18,136,428 18,551,266
============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements (unaudited).
F-2
<PAGE> 47
CIMETRIX INCORPORATED
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
--------- ------------
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,379 $ 2,785
Accounts receivable, net 721 617
Inventories 532 533
Prepaid expenses and other current assets 255 285
-------- --------
Total current assets 2,887 4,220
PROPERTY AND EQUIPMENT, net 759 614
CAPITALIZED SOFTWARE COSTS, net 658 707
TECHNOLOGY, net 701 715
GOODWILL, net 2,916 2,971
-------- --------
Total Assets $ 7,921 $ 9,227
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 44 $ 44
Accounts payable 459 671
Accrued expenses 86 459
Customer deposits 190 170
-------- --------
Total current liabilities 779 1,344
LONG-TERM DEBT, net of current portion 246 252
-------- --------
Total Liabilities 1,025 1,596
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock; 100,000,000 shares
authorized, $.0001 par value; 18,151,428
and 18,121,428 shares issued and
outstanding, respectively 2 2
Additional paid-in capital 18,496 18,406
Accumulated deficit (11,368) (10,543)
Unearned compensation - stock options (234) (234)
-------- --------
Net Stockholders' Equity 6,896 7,631
-------- --------
$ 7,921 $ 9,227
======== ========
</TABLE>
The accompanying notes are an integral part of these
financial statements (unaudited).
F-3
<PAGE> 48
CIMETRIX INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1996 1997
---- ----
<S> <C> <C>
CASH FLOWS TO OPERATING ACTIVITIES:
Net Loss $ (825) $(1,460)
------- -------
Adjustments to reconcile net loss to net
cash used by operating activities:
Amortization and depreciation 163 159
Compensation related to stock options -- 693
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (104) (124)
(Increase) decrease in inventory 1 67
(Increase) decrease in prepaid expenses 30 (21)
Increase (decrease) in accounts payable (212) (44)
Increase (decrease) in accrued expenses (373) (27)
Increase (decrease) in customer deposits 20 --
------- -------
Total Adjustments (475) 703
------- -------
Net Cash Flow Used by Operating
Activities (1,300) (757)
------- -------
CASH FLOWS TO INVESTING ACTIVITIES:
Payments for capitalized software costs -- (34)
Purchase of property and equipment, net of retirements (190) (40)
------- -------
Net Cash Flow Used by Investing Activities (190) (74)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 90 631
Payments for capital lease obligations, net (6) (6)
------- -------
Net Cash Flow Provided by
Financing Activities 84 625
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,406) (206)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 2,785 2,345
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,379 $ 2,139
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 6 $ 2
Income taxes $ -- $ --
======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Compensation expense - stock options $ -- $ 693
Issuance of stock upon exercise of non-
qualified options $ 90 $ 631
======= =======
</TABLE>
The accompanying notes are an integral part of these
financial statements (unaudited).
F-4
<PAGE> 49
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
month period ended March 31, 1996 have been reclassified to conform to
the March 31, 1997 classification. The results of operations for the
three months ended March 31, 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 March 31, 1997, the Company had cash equivalents of
$1,028,982 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 $2,019,927 at March 31, 1996.
INVENTORIES - Inventories are stated at the lower of cost or market.
Cost is determined by the first-in, first-out method. Inventories at
March 31, 1997 and December 31, 1996 are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Parts and supplies $266 $211
Work in process 57 128
Finished goods 209 194
---- ----
$532 $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
CIMETRIX INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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
March 31, 1997, the unamortized portion of capitalized software
development costs was approximately $658,000. Amortization of software
development costs was approximately $49,000 and $43,000 for the three
months ended March 31, 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 three months
ended March 31, 1997 and 1996 was approximately $54,300. At March 31,
1997, the accumulated amortization was approximately $344,000.
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.
F-6
<PAGE> 51
CIMETRIX INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
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 March 31, 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 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 3 - 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
approximately $14,000 during both the three month periods ended March
31, 1997 and 1996.
F-7
<PAGE> 52
CIMETRIX INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - LONG-TERM DEBT
Long-term debt at March 31, 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 18 24
---- ----
290 296
Less current maturities 44 44
---- ----
Net long-term debt $246 $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 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 line provides for interest
at the rate of one half of one percent over the prime rate of the bank.
The line expired on April 30, 1997 and the Company has not sought to
renew the line of credit.
NOTE 5 - SIGNIFICANT CUSTOMERS
Approximately 19% and 15% of the Company's revenues during the three
month period ended March 31, 1997 were attributable to a Japanese OEM
and a domestic United States OEM, respectively. No other single
customer accounted for more than 10% of the Company's revenues during
the three month period ended March 31, 1997. During the three month
period ended March 31, 1996, approximately 18% of the Company's
revenues were to a Japanese distributor, approximately 17% of the
Company's revenues were to a domestic United States OEM, approximately
17% of the Company's revenues were to a domestic United States
end-user and approximately 14% of the Company's revenues were to a
domestic United States end-user. 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-8
<PAGE> 53
CIMETRIX INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 - 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.
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. On April 15, 1997, these warrants were exercised and the Company
purchased 200,000 shares from Mr. Bilzerian's entities for $1,000,000.
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 of 192,500 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 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.
F-9
<PAGE> 54
CIMETRIX INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 - 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 19.9%) to the current
President of the Company. The proxy agreement has a term expiring on
December 31, 1998 and is irrevocable.
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 March 31, 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 March 31, 1997. 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.
Seolas 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 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.
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........................... 31
Description of the Senior Notes............. 32
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
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 underwriting
discounts and commissions) are as follows:
<TABLE>
<CAPTION>
ITEM AMOUNT
---- ------
<S> <C>
SEC Registration Fee................................................... $-----
OTC Bulletin Board Filing Fee.......................................... *
Listing Fees........................................................... *
Transfer Agent and Registrar Fees...................................... *
Printing and Engraving Expenses........................................ *
Legal Fees and Expenses................................................ *
Accounting Fees and Expenses........................................... *
Blue Sky Qualification Fees and Expenses (including legal fees)........ *
Miscellaneous.......................................................... *
Total......................................................... *
========
*
========
</TABLE>
- --------------
* To be completed by amendment.
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.
Additionally, the Company maintains a director and officer liability
insurance policy in the face amount of $1,000,000, that insures its officers and
directors against certain liabilities incurred in their capacities as officers
and directors of the Company.
ITEM 16. EXHIBIT.
The following exhibits are filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<S> <C>
3.1 Articles of Incorporation (1)
3.2 Bylaws, as amended
4.1 Trust Indenture between the Company and [trustee to be named]*
4.2 Specimen Senior Note*
4.3 Specimen Warrant*
4.4 Warrant Agreement*
5.1 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 between Dastrup, Seolas and family, and
Bilzerian transferring voting rights to Bilzerian (4)
10.2 Lease dated November 22, 1996 between Capitol Properties Four,
L.C. and Cimetrix Inc.
10.3 Agreement dated May 1994, between Cimetrix and former officers, directors, and family
members of Cimetrix for return of shares, indemnification, noncompete covenant, and release
from related payables/receivables
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 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 the Company and Just in Time Solutions,
Incorporated
23.1 Independent Auditors' Consent
23.2 Consent of Counsel*
24.1 Power of Attorney relating to subsequent amendments (included in the signature page of this
Registration Statement)
28.1 Form of Subscription Agreement*
</TABLE>
- ------------
* To be filed by amendment.
(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 to Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.
(4) Incorporated by reference to Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1994.
(5) Incorporated by reference to Quarterly Report on Form 10-QSB for the
quarter ended June 30, 1994.
(6) Incorporated by reference to Quarterly Report on Form 10-QSB for the
quarter 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 July 1, 1997.
CIMETRIX INCORPORATED
By:/s/ David L. Redmond
----------------------------
David L. Redmond
Executive Vice President and
Chief Financial Officer
POWER OF ATTORNEY
Pursuant to section 6(a) of the Securities Act of 1933, each of the
undersigned hereby appoints and constitutes Paul A. Bilzerian and David L.
Redmond, and each of them (with full power to act alone), his true and lawful
agents and attorneys-in-fact, with full power of substitution and
resubstitution, for him and on his behalf and in his name, place and stead, in
any and all capacities, to sign, execute, and file with the Securities and
Exchange Commission and any state securities regulatory board or commission any
documents relating to the proposed issuance and registration of the securities
offered pursuant to this Registration Statement on Form S-2 under the Securities
Act of 1933, as amended, including any and all pre-effective and post-effective
amendments relating thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority, and
including any registration statement for the same offering covered by this
registration statement that is to be effective upon filing pursuant to Rule
462(b) of the Securities Act, granting unto said attorney, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as he might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes or substitute, may lawfully do or cause to be
done.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ PAUL A. BILZERIAN President and Chief Executive Officer and June 30, 1997
- ------------------------- Director (as Director and Principal
PAUL A. BILZERIAN Executive Officer)
/s/ DAVID L. REDMOND Executive Vice President, Chief Financial June 30, 1997
- ------------------------- Officer and Director (as Director and
DAVID L. REDMOND Principal Financial and Accounting Officer)
/s/ DOUGLAS A. DAVIDSON Director June 30, 1997
- -------------------------
DOUGLAS A. DAVIDSON
</TABLE>
II-4
<PAGE> 82
<TABLE>
<S> <C> <C>
/s/ PAUL A. JOHNSON Director June 30, 1997
- -------------------------
PAUL A. JOHNSON
/s/ DR. RON LUMIA Director June 30, 1997
- -------------------------
DR. RON LUMIA
</TABLE>
II-5
<PAGE> 83
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<S> <C>
3.1 Articles of Incorporation**
3.2 Bylaws, as amended
4.1 Trust Indenture between the Company and [trustee to be named]*
4.2 Specimen Senior Note*
4.3 Specimen Warrant*
4.4 Warrant Agreement*
5.1 Opinion of Glenn Rasmussen & Fogarty, P.A., regarding the validity of issuance of the
securities being registered*
10.1 Proxy Agreements between Dastrup, Seolas and family, and Bilzerian transferring voting
rights to Bilzerian**
10.2 Lease dated November 22, 1996 between Capitol Properties Four, L.C. and Cimetrix Inc.
10.3 Agreement dated April 1994, between Cimetrix and former officers, directors, and family
members of Cimetrix for return of shares, indemnification, noncompete covenant, and release
from related payables/receivables
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 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 the Company and Just in Time Solutions,
Incorporated
23.1 Independent Auditors' Consent
23.2 Consent of Counsel*
24.1 Power of Attorney relating to subsequent amendments (included in the signature page of this
Registration Statement)
28.1 Form of Subscription Agreement*
</TABLE>
* To be filed by amendment.
** Previously filed.
<PAGE> 1
EXHIBIT 3.2
CIMETRIX INCORPORATED
BY-LAWS
ARTICLE I--OFFICES
Section 1.1 Office
The principal office of the corporation within the state of Nevada shall
be located at The Corporation Trust Company, One East First Street, Washoe
County, Reno, NV 89501.
Section 1.2 Other Offices
The corporation may also have such other offices, either within or without
the state of Nevada, as the Board of Directors may from time to time determine
or the business of the corporation may require.
ARTICLE II--STOCKHOLDERS
Section 2.1 Annual Meeting
An annual meeting of the stockholders, for the selection of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at a location designated
by the Board of Directors on a date selected by the Board of Directors during
the month of May each year.
Section 2.2 Special Meetings
Special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called by the Board of
Directors, the President, the chief executive officer, or their holders of not
less than one-tenth of all the shares entitled to vote at the meeting, and
shall be held at such place, on such date, and at such time as they or he shall
fix.
Section 2.3 Notice of Meetings
Written notice of the place, date and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time
by the laws of the state of Nevada or the Articles of Incorporation).
1
<PAGE> 2
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date,
and time of the adjourned meeting shall be given in conformity herewith. At
any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 2.4 Quorum
At any meeting of the stockholders, the holders of a majority of all of
the shares of the stock entitled to vote at the meeting, present in person or
by proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law.
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of the stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to another place,
date or time.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 2.5 Organization
Such person as the Board of Directors may have designated or, in the
absence of such a person, the highest ranking officer of the corporation who is
present shall call to order any meeting of the stockholders and act as chairman
of the meeting. In the absence of the Secretary of the corporation, the
secretary of the meeting shall be such person as the chairman appoints.
Section 2.6 Conduct of Business
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him in order.
2
<PAGE> 3
Section 2.7 Proxies and Voting
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting.
Each stockholder shall have one vote for every share of stock entitled to
vote which is registered in his name on the record date for the meeting, except
as otherwise provided herein or required by law.
All voting, except on the election of directors and where otherwise
required by law, may be by a voice vote; provided, however, that upon demand
therefor by a stockholder entitled to vote or his proxy, a stock vote shall be
taken. Every stock vote shall be taken by ballots, each of which shall state
the name of the stockholder or proxy voting and such other information as may
be required under the procedure established for the meeting. Every vote taken
by ballots shall be counted by an inspector or inspectors appointed by the
chairman of the meeting.
If a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the stockholders, unless the vote of a greater number or voting by
class is required by law, the Articles of Incorporation, or these By-laws.
Section 2.8 Stock List
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares
registered in his name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 2.9 Participation in Meetings by Conference Telephone
Any action, except the election of directors, which may be taken by the
vote of the stockholders at a meeting, may be taken without a meeting if
authorized by the written consent of stockholders holding at least a majority
of the voting power; provided:
3
<PAGE> 4
(a) That if any greater proportion of voting power is required
for such action at a meeting, then such greater proportion of
written consents shall be required; and
(b) That this general provision shall not supersede any specific
provision for action by written consent required by law.
ARTICLE III--BOARD OF DIRECTORS
Section 3.1 Number and Term of Office
The number of directors who shall constitute the whole board shall be such
number not less than three (3) nor more than nine (9) as the Board of Directors
shall at the time have designated. Each director shall be selected for a term
of one year and until his successor is elected and qualified, except as
otherwise provided herein or required by law.
Whenever the authorized number of directors is increased between annual
meetings of the stockholders, a majority of the directors then in office shall
have the power to elect such new directors for the balance of a term and until
their successors are elected and qualified. Any decrease in the authorized
number of directors shall not become effective until the expiration of the term
of the directors then in office unless, at the time of such decrease, there
shall be vacancies on the board which are being eliminated by the decrease.
Section 3.2 Vacancies
If the office of any director becomes vacant by reason of death,
resignation, disqualification, removal or other cause, a majority of the
directors remaining in office, although less than a quorum, may elect a
successor for the unexpired term and until his successor is elected and
qualified.
Section 3.3 Regular Meetings
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 3.4 Special Meetings
Special meetings of the Board of Directors may be called by one-third of
the directors then in office or by the chief executive officer and shall be
held at such place, on such date and at such time as they or he shall fix.
Notice of the place, date and time of
4
<PAGE> 5
each such special meeting shall be given by each director by whom it is not
waived by mailing written notice not less than three days before the meeting or
by telegraphing the same not less than eighteen hours before the meeting.
Unless otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting.
Section 3.5 Quorum
At any meeting of the Board of Directors, a majority of the total number
of the whole board shall constitute a quorum for all purposes. If a quorum
shall fail to attend any meeting, a majority of those present may adjourn the
meeting to another place, date or time, without further notice or waiver
thereof.
Section 3.6 Participation in Meetings by Conference Telephone
Members of the Board of Directors or of any committee thereof, may
participate in a meeting of such board or committee by means of conference
telephone or similar communications equipment that enables all persons
participating in the meting to hear each other. Such participation shall
constitute presence in person at such meeting.
Section 3.7 Conduct of Business
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 3.8 Powers
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(a) To declare dividends from time to time in accordance with
law;
(b) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(c) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind,
negotiable or non-negotiable, secured or unsecured, and to do all
things necessary in connection therewith;
5
<PAGE> 6
(d) To remove any officer of the corporation with or without
cause, and from time to time to devolve the powers and duties of
any officer upon any other person for the time being;
(e) To confer upon any officer of the corporation the power to
appoint, remove and suspend subordinate officers and agents;
(f) To adopt from time to time such stock option, stock
purchase, bonus or other compensation plans for directors,
officers and agents of the corporation and its subsidiaries as it
may determine;
(g) To adopt from time to time such insurance, retirement and
other benefit plans for directors, officers and agents of the
corporation and its subsidiaries as it may determine; and
(h) To adopt from time to time regulations, not inconsistent with
these By-laws, for the management of the corporation's
business and affairs.
Section 3.9 Compensation of Directors
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of
the directors.
Section 3.10 Interested Directors
Directors and officers shall exercise their powers in good faith and with
a view to the interests of the corporation. No contract or other transaction
between the corporation and one or more of its directors or officers, or
between the corporation and any corporation, firm or association in which one
or more of its directors or officers are directors or officers are financially
interested, is either void or voidable solely for this reason or solely because
any such director or officer is present at the meeting of the Board of
Directors or a committee thereof which authorizes or approves the contract or
transaction, or because the vote or votes of common or interested directors are
counted for such purpose, if the circumstances specified in any of the
following paragraphs exist:
(a) The fact of the common directorship or financial interest is
disclosed or known to the Board of Directors or committee and noted
in the minutes, and the board or committee authorizes, approves or
ratifies the contract or transaction in good faith by a vote
sufficient for the purpose without counting the vote or votes of
such director or directors.
(b) The fact of the common directorship or financial interest is
disclosed or known to the stockholders, and they approve or ratify
the contract or transaction in good faith by a majority vote or
written consent of
6
<PAGE> 7
stockholders holding a majority of the shares entitled to vote;
the vote of the common or interested directors or officers shall
be counted in any such vote of stockholders.
(c) The contract or transaction is fair as to the corporation at
the time it is authorized or approved.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or a committee thereof which
authorizes, approves or ratifies a contract or transaction, and if the votes of
the common or interested are not counted at such meeting, then a majority of
the disinterested directors may authorize, approve or ratify a contract or
transaction.
ARTICLE IV--COMMITTEES
Section 4.1 Committees of the Board of Directors
The Board of Directors, by a vote of a majority of the whole board, may
from time to time designate committees of the board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the board and shall, for those committees and any other provided for herein,
elect a director or directors to serve as the member or members, designating,
if it desires, other directors as alternative members who may replace any
absent or disqualified member at any meeting of the committee. Any committee
so designated may exercise the power and authority of the Board of Directors to
declare a dividend or to authorize the issuance of stock if the resolution
which designates the committee or a supplemental resolution of the Board of
Directors shall so provide. In the absence or disqualification of any member
of any committee and any alternate member in his place, the member or members
of the committee present at the meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may by unanimous vote
appoint another member of the Board of Directors to act at the meeting in the
place of the absent or disqualified member.
Section 4.2 Conduct of Business
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; a majority of the members shall
constitute a quorum unless the committee shall consist of one or two members,
in which event one member shall constitute a quorum; and all matters shall be
determined by a majority vote of the members present. Action may be taken by
any committee without a meeting if all members thereof consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of such committee.
7
<PAGE> 8
ARTICLE V--OFFICERS
Section 5.1 Generally
The officers of the corporation shall consist of a president, one or more
vice-presidents, a secretary, a treasurer and such other subordinate officers
as may from time to time be appointed by the Board of Directors. Officers
shall be elected by the Board of Directors, which shall consider that subject
at its first meeting after every annual meeting of stockholders. Each officer
shall hold his office until his successor is elected and qualified or until his
earlier resignation or removal. Any number of offices may be held by the same
person, except that the offices of president and secretary shall not be held by
the same person.
Section 5.2 President
The president shall have the responsibility for the general management and
control of the affairs and business of the corporation and shall perform all
duties and have all powers which are commonly incident to the office of chief
executive or which are delegated to him by the Board of Directors. He shall
have power to sign all stock certificates, contracts and other instruments of
the corporation which are authorized. He shall have general supervision and
direction of all of the other officers and agents of the corporation.
Section 5.3 Vice-President
Each vice-president shall perform such duties as the Board of Directors
shall prescribe. In the absence or disability of the President, the
vice-president who has served in such capacity for the longest time shall
perform the duties and exercise the powers of the president.
Section 5.4 Treasurer
The treasurer shall have the custody of the monies and securities of the
corporation and shall keep regular books of account. He shall make such
disbursements of the funds of the corporation as are proper and shall render
from time to time an account of all such transactions and of the financial
condition of the corporation.
Section 5.5 Secretary
The secretary shall issue all authorized notices from, and shall keep
minutes of, all meetings of the stockholders and the Board of Directors. He
shall have charge of the corporate books.
8
<PAGE> 9
Section 5.6 Delegation of Authority
The Board of Directors may, from time to time, delegate the powers or
duties of any officer to any other officers or agents, notwithstanding any
provision hereof.
Section 5.7 Removal
Any officer of the corporation may be removed at any time, with or without
cause, by the Board of Directors.
Section 5.8 Action with Respect to Securities of Other Corporation
Unless otherwise directed by the Board of Directors, the president shall
have power to vote and otherwise act on behalf of the corporation, in person or
by proxy, at any meeting of stockholders of or with respect to any action of
stockholders of any other corporation in which this corporation may hold
securities and otherwise to exercise any and all rights and powers which this
corporation may possess by reason of its ownership of securities in such other
corporation.
ARTICLE VI--INDEMNIFICATION OF DIRECTORS,
OFFICERS AND OTHERS
Section 6.1 Generally
The corporation shall have the power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he 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, partnership, joint
venture, trust or other enterprise, against expenses (including attorney's
fees), judgments, fines and amount paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed 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 conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NON LO CONTENDERE or items
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was lawful.
The corporation shall have the power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action
9
<PAGE> 10
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he 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,
partnership, joint venture, trust or other enterprise against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the corporation unless and only to the extent that the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
Section 6.2 Expenses
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 6.1 of this Article, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorney's fees) actually and reasonably incurred by him in
connection therewith. Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding as authorized in the
manner provided in Section 6.3 of this Article upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent to repay such
amount unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation as authorized in this Article.
Section 6.3 Determination by Board of Directors
Any indemnification under Section 6.1 of this Article (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Section 6.1 of this Article. Such determination shall
be made by the Board of Directors by a majority vote of a quorum of the
disinterested directors, by the shareholders, or by independent legal counsel
in a written opinion.
Section 6.4 Not Exclusive of Other Rights
The indemnification provided by this Article shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any
by-law, agreement, vote of shareholders or interested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office and shall continue
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as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Section 6.5 Insurance
The corporation shall have power to purchase and maintain insurance on
behalf of any person who 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, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article.
The corporation's indemnity of any person who 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, partnership, joint venture, trust or other enterprise, shall be
reduced by any amounts such person may collect as indemnification (i) under any
policy of insurance purchased and maintained on his behalf by the corporation
or (ii) from such other corporation, partnership, joint venture, trust or other
enterprise.
Section 6.6 Violation of Law
Nothing contained in this Article, or elsewhere in these By-laws, shall
operate to indemnify any director or officer if such indemnification is for any
reason contrary to law, either as a matter of public policy, or under the
provisions of the Federal Securities Act of 1933, the Securities Exchange Act
of 1934, or any other applicable state or federal law.
Section 6.7 Coverage
For the purposes of this Article, references to "the corporation" include
all constituent corporations absorbed in a consolidation or merger as well as
the resulting or surviving corporation so that any person who is or was a
director, officer, employee or agent of such a constituent corporation or is or
was serving at the request of such a constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
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ARTICLE VII--STOCK
Section 7.1 Certificates of Stock
Each stockholder shall be entitled to a certificate signed by, or in the
name of the corporation by, the President or a Vice-president, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer, certifying the number of shares owned by him. Any of or all the
signatures on the certificate may be facsimile.
Section 7.2 Transfers of Stock
Transfers of stock shall be made only upon the transfer books of the
corporation kept at an office of the corporation or by transfer agents
designated to transfer shares of the stock of the corporation. Except where a
certificate is issued in accordance with Section 7.4 of Article VII of these
By-laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 7.3 Record Date
The Board of Directors may fix a record date, which shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for the other
action hereinafter described, as of which there shall be determined the
stockholders who are entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof; to express consent to corporate action
in writing without a meeting; to receive payment of any dividend or other
distribution or allotment of any rights; or to exercise any rights with respect
of any change, conversion or exchange of stock or with respect to any other
lawful action.
Section 7.4 Lost, Stolen or Destroyed Certificates
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 7.5 Regulations
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
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ARTICLE VIII--NOTICES
Section 8.1 Notices
Whenever notice is required to be given to any stockholder, director,
officer, or agent, such requirement shall not be construed to mean personal
notice. Such notice may in every instance be effectively given by depositing
a writing in a post office or letter box, in a postpaid, sealed wrapper, or by
dispatching a prepaid telegram, addressed to such stockholder, director,
officer, or agent at his or her address as the same appears on the books of the
corporation. The time when such notice is dispatched shall be the time of the
giving of the notice.
Section 8.2 Waivers
A written waiver of any notice, signed by a stockholder, director, officer
or agent, whether before or after the time of the event for which notice is
given, shall be deemed equivalent to the notice required to be given to such
stockholder, director, officer or agent. Neither the business nor the purpose
of any meeting need be specified in such a waiver.
ARTICLE IX--MISCELLANEOUS
Section 9.1 Facsimile Signatures
In addition to the provisions for the use of facsimile signatures
elsewhere specifically authorized in these By-laws, facsimile signatures of any
officer or officers of the corporation may be used whenever and as authorized
by the Board of Directors of a committee thereof.
Section 9.2 Corporate Seal
The Board of Directors may provide a suitable seal, containing the name of
the corporation, which seal shall be in the charge of the secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates
of the seal may be kept and used by the treasurer or by the assistant secretary
or assistant treasurer.
Section 9.3 Reliance Upon Books Reports and Records
Each director, each member of any committee designated by the Board of
Directors, and each officer of the corporation shall, in the performance of his
duties, be fully protected in relying in good faith upon the books of account
or other records of the corporation, including reports made to the corporation
by any of its officers, by an independent certified public accountant, or by an
appraiser selected with reasonable care.
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<PAGE> 14
Section 9.4 Fiscal Year
The fiscal year of the corporation shall be as fixed by the Board of
Directors.
Section 9.5 Time Periods
In applying any of these By-laws which require that an act be done or not
done a specified number of days prior to an event or that an act be done during
a period of a specified number of days prior to an event, calendar days shall
be used, the day of the doing of the act shall be excluded and the day of the
event shall be included.
ARTICLE X--AMENDMENTS
Section 10.1 Amendments
These By-laws may be amended or repealed by the Board of Directors at any
meeting or by the stockholders at any meeting.
CERTIFICATE OF SECRETARY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby certify that the undersigned is the secretary
of Cimetrix Incorporated, a corporation duly organized and existing under and
by virtue of the laws of the state of Nevada; that the above and foregoing
By-laws of said corporation were duly and regularly adopted as such by the
Board of Directors of said corporation at a meeting of said board, which was
duly held on the ____ day of __________, 1990; and that the above and foregoing
By-laws are now in full force and effect.
Dated this day of 1990.
------------------------------------
Secretary
DIRECTOR'S CONSENT RESOLUTION
The undersigned, being the sole director of Cimetrix Incorporated,
a Nevada corporation, hereby adopts the following resolution of the Board of
Directors of the corporation:
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<PAGE> 15
RESOLVED, that the text of Article VI of the Bylaws of the corporation is
hereby deleted and replaced with the following:
Section 6.1 Right to Indemnification. Each person who was or is a party
or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative ("Proceeding"), by reason of the fact that he
or she, or a person of whom he or she is the legal representative, is or was a
director or officer of the Corporation or, as a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such Proceeding is alleged action in an official
capacity as a director, officer, trustee, employee or agent or in any other
capacity as a director, officer, trustee, employee or agent or in any other
capacity, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by law, including but not limited to applicable state
corporate law, as the same exists or may hereafter be amended (but, in the case
of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than applicable law
permitted the Corporation to provide prior to such amendment), against all
expenses, liability and loss (including attorney's fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith;
provided, however, that the Corporation shall indemnify any such person seeking
indemnity in connection with an action, suit or proceeding (or part thereof)
initiated by such person only if such action, suit or proceeding (or part
thereof) initiated by such person was authorized by the board of directors of
the Corporation. Such right shall include the right to be paid by the
Corporation expenses, including attorney's fees, incurred in defending any such
Proceeding in advance of its final disposition; provided, however, that the
payment of such expenses in advance of the final disposition of such Proceeding
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, in which such director or officer agrees to
repay all amounts so advanced if it should be ultimately determined that such
person is not entitled to be indemnified under this Bylaw or otherwise.
Section 6.2 Right of Claimant to Bring Suit.
(i) If a claim under paragraph (a) is not paid in full by the
Corporation within thirty days after a written claim therefor has been received
by the Corporation, the claimant may any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking
has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the applicable law for the
corporation to indemnify the
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claimant for the amount claimed, but the burden of proving such defense shall
be on the Corporation.
(ii) Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its shareholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
shareholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met he applicable standard of conduct.
Section 6.3 Contractual Rights; Applicability. The right to be
indemnified or to the reimbursement or advancement of expenses pursuant hereto
(i) is a contract right based upon good and valuable consideration, pursuant to
which the person entitled thereto may bring suit as if the provisions hereof
were set forth in a separate written contract between the Corporation and the
director or officer, (ii) is intended to be retroactive and shall be available
with respect to events occurring prior to the adoption hereof, and (iii) shall
continue to exist after the rescission or restrictive modification hereof with
respect to events occurring prior thereto.
Section 6.4 Requested Service. Any director or officer of the
Corporation serving, in any capacity, (i) another corporation of which a
majority of the shares entitled to vote in the election of its directors is
held by the Corporation, or (ii) any employee benefit plan of the Corporation
or of any corporation referred to in clause (i), shall be deemed to be doing so
at the request of the Corporation.
Section 6.5 Non-Exclusivity of Rights. The rights conferred on any
person by paragraphs (a) and (b) shall not be exclusive of and shall be in
addition to any other right which such person may have or may hereafter acquire
under any statute, provision of the Articles of Incorporation, bylaw,
agreement, vote of shareholders or disinterested directors, or otherwise.
Section 6.6 Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any such director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under applicable state corporate law.
The undersigned executes this written consent in accordance with the
provisions of Section 78.315 of the Nevada Revised Statutes, to have the force
and effect of a unanimous vote of the Board of Directors of the corporation at
a duly called and convened meeting of the Board.
DATED: September 14, 1994
--------------------
CLAUDE O. GOLDSMITH
16
<PAGE> 1
EXHIBIT 10.2
LEASE
THIS LEASE, made this 22nd day of November, 1996 between CAPITOL
PROPERTIES FOUR, L.C. a Utah limited liability company, hereinafter called
"Lessor" and CIMETRIX INC., a Nevada Corporation, hereinafter called "Lessee."
WITNESSETH:
Lessor hereby lets to Lessee, and Lessee hereby leases from Lessor the
following described premises:
<TABLE>
<S> <C>
Approximate address: 6979 South 185 West
Midvale, UT 84047
Approximate size: Office 22,300 square feet
Assembly 8,400 square feet
Warehouse 1,300 square feet
Term of lease: Five (5) Years
Beginning date: April 1, 1997
Ending date: March 31, 2002
Monthly rent: $20,078.00
Prepaid rent: $40,156.00
</TABLE>
1. RENT. Lessee hereby agrees to pay to Lessor, as rent for said premises
TWENTY THOUSAND SEVENTY EIGHT and NO/100 DOLLARS ($20,078.00) per month during
the term of this lease, payable in advance on or before the first day of each
and every month, with the last two month's rent paid upon execution of this
lease ($40,156.00) and the first month's rent shall be paid upon Lessees
occupancy.
In the event Lessee shall fail to pay said rentals on the due date or
within ten (10) days thereafter, a late charge of five (5) percent of the
monthly rental shall be added to the rental and paid to the Lessor for each
such late payment; provided, however, that the total late charges in any year
shall not exceed eighteen (18) percent of the annual rental due hereunder.
2. CONSTRUCTION AND CONDITION OF PREMISES. Lessor, at its own expense,
will complete the space in the building on the premises in accordance with the
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<PAGE> 2
approved floor plan and outlined specifications therein, which is attached
hereto as Exhibit "A", and will deliver possession of said premises to Lessee
on or before the beginning of the term in good condition and repair, ready for
occupancy by Lessee, and free of all tenancies and occupancies, subject,
however, to delays occasioned by strikes, adverse weather conditions, acts of
God and other causes beyond the control of Lessor. In the event of such
delays, the effective beginning date of this lease will be the first day of the
month following completion of the building; provided, however, that the Lessee
may take possession immediately upon completion of the building and pay rent
pro-rated from such date until the first day of the following month.
3. USE OF PREMISES. The leased premises shall be used for offices and
for any other lawful purpose involved in the normal business of Lessee not in
violation of this lease.
4. UTILITIES. Lessee shall pay for all utilities.
5. LESSEE'S EQUIPMENT, ALTERATIONS AND SIGNS. Lessee shall have the
right to erect such partitions and install electrical or mechanical equipment
or fixtures desirable for use in Lessee's business and may at any time before
the end of this lease remove all of the same, even though attached to the
premises, providing only that in making such removal, Lessee shall repair any
damage caused to the premises. Lessee shall have the right to erect on the
premises such signs as may be reasonably necessary to identify and advertise
the Lessee and its business upon condition that Lessor gives written consent
to any such improvements, signs or alterations and that any such meet
zoning/code requirements.
6. MAINTENANCE OF PREMISES AND MECHANICAL EQUIPMENT.
(a) Lessor shall keep the premises and roof in good structural condition
and repair during the term of the lease and shall be responsible for
maintaining the building mechanical, electrical and plumbing equipment in good
condition, for the first year of occupancy in said space.
(b) Lessee shall be responsible for and pay for all janitorial services
and after the first year of occupancy in said space, Lessee shall be
responsible for minor repairs, routine servicing and maintenance of the
mechanical equipment, including but not limited to Exhibit C. Lessor shall be
responsible for major repairs to the mechanical equipment except where damages
are due to the negligence of the Lessee, its employees, agents or
representatives. Lessee shall also be responsible for maintenance of
electrical, and plumbing equipment. Servicing and maintenance shall include,
but not be limited to, proper lubrication, replacement of belts, filters,
refrigerant, fuses and light bulbs, fluorescent tubes and ballasts. Lessee
shall also be responsible for all alterations, modifications and special
equipment installed by Lessee.
(c) Lessor, upon reasonable notice to Lessee, shall have the right to
enter into and upon the premises during the usual business hours for the
purpose of inspecting the same and
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<PAGE> 3
making such repairs or alterations as may be necessary for the safety and
preservation thereof, provided the same does not interfere with Lessee's
business.
(d) Lessee agrees to furnish and maintain such fire extinguishers as are
recommended or required by the fire department and/or insurance underwriters.
(e) Lessee shall reimburse Lessor for any costs incurred for replacement
of any and all broken glass in and about the premises, except glass broken by
Lessor or its agents.
(f) Where carpeting is provided over pad, chair mats shall be used under
all chairs used with desks. Where carpeting is glued down, chair mats are
recommended, but not required.
(g) Lessee shall reimburse Lessor for their pro-rata share of the
maintenance of landscaping and parking lot snow removal.
(h) Lessee shall be responsible for sweeping and snow removal of their
entrance walkway.
(i) Lessee is permitted to change any locks after notifying Lessor, AND
PROVIDED LESSEE SHALL GIVE LESSOR TWO KEYS FOR EACH NEW LOCK.
(j) If Lessor fails to perform any of its duties pursuant to this
paragraph as soon as reasonably possible after receipt of written notice of
such need from Lessee, Lessor agrees that Lessee may have the necessary work
done by a responsible contractor, selected after receiving three bona fide bids
for the required work, and deduct the cost of said work from the monthly rent.
(k) Lessee shall be responsible for its share of property management
expenses, which shall not exceed 1% of the lease gross income.
7. TAXES AND INSURANCE. Lessee shall pay for its portion of the property
taxes and fire insurance which is based on the ratio that its leased space
bears to the total leasable area in said premises (100%). This tax shall be
pro-rated from the date of entry and based on the taxes due in the tax years
(January 1 through December 31) of each year of occupancy. Lessee agrees to
pay this tax within ten (10) days after receipt of notice. Lessee further
agrees to pay any increase in the property taxes occasioned by any improvements
made by Lessee under Paragraph 5 above, and all taxes, assessments, license
fees and charges incidental to it's use of the premises. In the event the
taxes exceed the real market value, Lessor agrees to protest the taxes.
Lessee shall be solely responsible for all its property kept on the
premises and insurance coverage of Lessee's personal property and office
equipment.
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Lessee shall pay any special improvement district assessments levied
against the premises and shall provide fire insurance for the building during
the term of the lease.
8. DESTRUCTION OF PREMISES OR LOSS BY EMINENT DOMAIN. If the leased
premises are totally destroyed by fire or other casualty, or if all or
substantially all of the premises shall be taken under any condemnation or
eminent domain proceeding, then this lease shall terminate and the unearned
portion of the rent heretofore paid shall be returned to Lessee; provided,
however, that in the event of destruction by fire or other casualty, Lessor
shall have the right, with the consent of Lessee, to reconstruct or repair the
premises within a reasonable time, but no rent shall accrue or be payable
during the period that Lessee is deprived of the beneficial use of the
premises.
If the premises are partially destroyed by fire or other casualty or if
part of the premises are taken under condemnation or eminent domain proceeding,
and the remainder, in the judgment of Lessee, either is or is not reasonably
suitable for its business, then this lease shall either terminate or Lessee may
at its discretion continue to lease the remainder at a reduced rent determined
by the proportional loss of beneficial use of the premises. In the case of
fire or casualty, Lessor shall have the right to repair, within a reasonable
time, any damage, but no rent shall accrue or be payable on the damaged area
until repairs are completed.
9. LIABILITY INSURANCE AND INDEMNITY. Lessee agrees to indemnify and
hold harmless the Lessor from any and all claims of any kind or nature arising
from Lessee's use of the premises during the term hereof, and Lessee hereby
waives all claims against Lessor for damage to goods, wares or merchandise or
for injury to persons in and upon the premises from any cause whatsoever except
as might result from the negligence of Lessor or Lessor's representatives or
from failure of Lessor to perform its obligations hereunder within a reasonable
time after notice in writing by Lessee requiring such performance by Lessor.
Lessee shall at all times during the term hereof keep in effect in responsible
companies liability insurance in the name of and for the benefit of the Lessee
and Lessor with limits as follows:
<TABLE>
<S> <C>
Bodily Injury/Property Damage $2,000,000.00
Single Limit Coverage $2,000,000.00
</TABLE>
Such insurance may, at Lessee's election, be carried under a general
blanket policy. A renewal policy shall be procured not less than ten (10) days
prior to the expiration of any policy. A satisfactory certificate of the
insurer evidencing insurance carried, with proof of payment of the premium,
shall be deposited with Lessor at his request. Lessee shall have the right to
settle and adjust all liability claims against the insuring companies, without
subjecting Lessor to any liability or obligation.
10. RIGHT OF LESSOR TO SHOW PREMISES. Lessee, upon reasonable notice from
Lessor, shall permit inspection of the premises during the three (3) months
next
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preceding the expiration of this lease, by or in behalf of prospective Lessees,
providing that such inspection does not interfere with the conduct of Lessee's
business. Lessee shall permit, during the month preceding the expiration of
this lease, signs and notices indicating that the premises are to be let or for
sale to be posted and remain upon the premises.
11. ASSIGNMENT OF LEASE AND SUBLETTING. Lessee shall not assign this lease
or any part thereof or sublet all or part of the premises without Lessor's
written consent, which shall not be unreasonably conditioned, withheld or
delayed. However it shall not be necessary for Lessor's consent of assignment
to one of Lessee's subsidiary or affiliated companies. In any event of
assignment or subletting, Lessee shall remain liable for the performance of all
terms of this lease.
12. NOTICE OR DEMAND. Any notice, demand or communication under or in
connection with this lease may be served upon the parties hereto by mailing to
same by registered mail as follows:
<TABLE>
<S> <C>
Lessor: 2880 South Main Street #100
Salt Lake City, UT 84115
Lessee: 6979 South High Tech Drive (185 West)
Midvale, UT 84047
</TABLE>
or at such other address as may be designated in writing by the Lessor or
Lessee.
13. DEFAULT AND TERMINATION. Lessee shall be in default under the terms of
this lease if Lessee:
(1) fails to pay any rent of other amounts due hereunder within ten (10)
days after the same becomes due;
(2) fails to perform or observe any other of the terms, covenants, or
conditions of this lease for more than ten (10) days after written notice
thereof from Lessor;
(3) becomes bankrupt or insolvent, or any voluntary or involuntary
proceedings under any bankruptcy or debtor relief law are initiated by Lessee,
or Lessee makes any general assignment for the benefit of creditors; or
(4) abandons the premises and ceases to pay rent.
In each of the above events Lessor shall have a right of re-entry and is
entitled to recovery of the leased premises and/or to recover judgment for any
and all delinquent installments of rent or other amounts including court and
other costs and attorney fees. The parties agree that payment by Lessee and
acceptance by Lessor of past due rents or other amounts shall not operate as a
waiver of any other right arising because of any other default by Lessee.
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<PAGE> 6
In addition, Lessor shall have the right to continue this lease and
collect all rents and other amounts as and when due, and this lease shall
continue in full force and effect until Lessor gives Lessee written notice of
intent to terminate Lessee's right to possession. On written notice of
termination, on account of default, Lessee shall immediately and peacefully
surrender possession to Lessor and Lessor shall be entitled to recover from
Lessee all damages sustained by Lessor by reason of such default and all unpaid
rents and other amounts due under the lease to the date of termination.
As security for payment of all sums payable by Lessee under the terms of
this lease, Lessee hereby grants to Lessor a Landlord's lien and security
interest in and to all trade fixtures, equipment, furnishings and other
personal property now or hereafter owned by Lessee and located in or upon the
premises during the term of this lease, equivalent to the amount owed at the
time of default. Lessee shall have no right to remove any of said property
unless and until all defaults are cured and Lessor shall have a lien on all
such property even though removed from the premises. All exemption laws are
hereby waived and such security interest shall be in addition to any statutory
lien or other lien or security interest given or which may be given to Lessor.
So long as Lessee is not in default under the terms of this lease, Lessee shall
have the right to remove from the leased premises all machinery, office
equipment, appliances, and any and all other trade fixtures and equipment
installed, whether or not attached to walls, floors, ceilings or woodwork, or
other part of said premises. All damages to the leased premises caused by such
removal shall be repaired by and at Lessee's sole cost and expense.
The rights and remedies of each party hereunder and those provided by
law shall be construed as cumulative and no one of them is exclusive of any
other right or remedy hereunder or allowed by law, and shall be continuing
rights, none of which shall be exhausted by being exercised on one or more
occasions. Waiver of any one default shall not be considered a waiver of any
other. Each party shall be entitled in a proper case to an injunction to
enforce any part or parts of this lease, or to prevent or terminate any
violation or default.
In the event the leased premises become vacated and Lessee ceases to pay
rent, during the term of this lease, Lessor or its representatives may re-enter
said premises using such force as may be necessary therefor, without being
liable therefor, and in addition to any other remedy provided by law or by this
lease, may at its option re-let said premises on behalf of Lessee, applying any
monies collected first to the payment of expenses and fees incurred in assuming
or obtaining possession, second to the payment of rent due hereunder, and third
to the payment of any other charges due to Lessor. Any surplus shall be paid
to Lessee, and Lessee shall remain liable for any deficiency in rent and costs.
14. Parking shall be provided according to the attached Exhibit B.
15. COVENANTS OF PARTIES. Lessor covenants that Lessee upon paying the
rents and keeping the covenants of this lease, shall lawfully, peaceably and
quietly hold and enjoy the premises for the aforesaid term. Lessee covenants
that it will not commit, or suffer
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to be committed, any waste of the leased premises. It is further understood
and agreed that the covenants and agreements contained herein are binding on
the parties hereto and their legal representatives, heirs and successors.
16. OPTION TO RENEW LEASE. If Lessee is not then in default under the
terms of this lease, Lessee shall have the option to renew this lease for one
five (5) year option period. Lessee shall notify Lessor of its intent to
exercise its option hereunder by written notice of such election no later than
90 days prior to the end of the initial term. The rental option period shall
be in proportion to the increase in the Department of Labor's Consumer Price
Index for Urban Wage Earners & Clerical Workers all items for all cities
Average Statistical Area on the basis of 1967 = 100%. The increase in the
Index which has occurred between the first and last month of the five year
lease term shall be the basis for the rent adjustment. Said rentals shall in
no event be less than the rental during the initial term of the lease.
17. HOLD OVER PROVISION. Should Lessee hold over the leased premises or
any part thereof after the expiration of the term of this lease, unless
otherwise agreed in writing, such holding over shall constitute a tenancy from
month to month only, and Lessee shall pay as monthly rental the then reasonable
value of the use and occupation of the leased premises, which shall not be
less, however, than the rent to be paid for the last month under this lease.
Upon expiration of this lease, thirty (30) days written notice to vacate from a
rent due date shall be required by either Lessee to Lessor, or Lessor to
Lessee, of either party's desire to have the space vacated.
Lessor and Lessee agree that if either defaults in any of the conditions
and terms of this lease, the defaulting party shall pay all costs and expenses,
including attorney fees, which may arise or accrue from enforcing this lease or
in obtaining possession of the premises or in pursuing any remedy provided by
the laws of the State of Utah whether by filing suit or otherwise.
IN WITNESS WHEREOF, Lessor and Lessee have hereunto respectively executed
duplicate originals of this Lease as of the day and year first above written.
WITNESS CAPITOL PROPERTIES FOUR, L.C.
- ------------------------------- -----------------------------------
Lessor
CIMETRIX, INC.
- ------------------------------- -----------------------------------
Lessee
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<PAGE> 8
EXHIBIT "C"
Service and maintenance of mechanical equipment to include the following:
ROOFTOP UNITS, FAN COILS W/CONDENSERS, FURNACES AND UNIT HEATERS:
1. Lubricate moving parts.
2. Inspect air filter, and replace as needed.
3. Adjust belts and replace if necessary.
4. Inspect all valves.
5. Install new batteries in thermostats if necessary.
6. Inspect and clean burner, ignitors and pilots.
7. Inspect flue and diverter.
8. Visually inspect heat exchanger.
9. Inspect refrigerant system and controls. (cost of refrigerant included)
10. Inspect safety controls.
11. Inspect and clean condensate pans and drains.
12. Brush clean air cooled condensers.
AIR FILTER CHANGING:
Four times a year including material and labor.
EVAPORATIVE COOLERS:
1. Inspect electrical connections.
2. Lubricate.
3. Inspect and adjust belts, replace when necessary.
4. Inspect fan and motor bearings.
5. Inspect reservoir pan, clean as needed.
6. Inspect controls.
7. Inspect water distribution system, adjust and clean as needed.
8. Inspect pads, replace as needed, including material and labor.
9. Install covers.
10. Provide seasonal startup and shut down.
9
<PAGE> 1
EXHIBIT 10.3
AGREEMENT
THIS AGREEMENT is made effective this 15th day of April, 1997, between
Bicoastal Holding Company, a Cayman Islands corporation (hereinafter
"BICOASTAL"), and CIMETRIX Incorporated, a Nevada corporation located at 100
North Tampa Street, Suite 3550, Tampa, Florida 33602 (hereinafter "CIMETRIX").
RECITALS
Whereas, BICOASTAL employs Paul A. Bilzerian (hereinafter "Bilzerian")
under that certain employment agreement, dated January 1, 1993; and
Whereas, CIMETRIX desires to utilize Bilzerian from time to time as an
officer, director, and/or management consultant to CIMETRIX; and
Whereas, CIMETRIX desires to utilize other BICOASTAL employees for
various tasks and projects.
NOW, THEREFORE, in consideration of the mutual covenants and promises of
the parties, BICOASTAL and CIMETRIX covenant and agree as follows:
1. BICOASTAL agrees to exercise its warrants to purchase six hundred
thousand shares of Cimetrix stock and BICOASTAL hereby represents that the
present owners of the remaining warrants to purchase five million four hundred
thousand shares of Cimetrix common stock have agreed to exercise their
warrants for a collective exercise price of one million dollars.
2. CIMETRIX agrees to purchase from BICOASTAL two hundred thousand
(200,000) shares of Cimetrix stock for $5.00 per share.
3. BICOASTAL agrees to give Cowen & Company, Cimetrix's investment
advisor, one hundred thousand (100,000) shares of Cimetrix common stock.
4. BICOASTAL agrees to provide the full-time services of Bilzerian for a
fee of $10,000 per month, and/or Terri L. Steffen for a fee of $4,000 per
month, both of which shall be subject to the unilateral termination by Cimetrix
on a month-to-month basis. This written Agreement contains the sole and entire
agreement between the parties and shall supersede any and all other agreements
between the parties. The parties acknowledge and agree that none of them
has made any representation with respect to the subject matter of this
Agreement or any representations inducing its execution and delivery except
such representations as are specifically set forth in this writing and the
parties acknowledge that they have relied on their own judgment in entering
into the same. The parties further acknowledge that any statements or
representations
<PAGE> 2
that may have been made by any of them to the other are void and of no effect
and that none of them has relied on such statements or representations in
connection with its dealings with the other.
5. It is agreed that no waiver or modification of this Agreement or of any
covenant, condition, or limitation contained in it shall be valid unless it is
in writing and duly executed by the party to be charged with it, and that no
evidence of any waiver or modification shall be offered or received in evidence
in any proceeding, arbitration, or litigation between the parties arising out
of or affecting this Agreement, or the rights or obligations of any party under
it, unless such waiver or modification is in writing, duly executed as above.
The parties agree that the provisions of this paragraph may not be waived
except in writing.
6. The parties agree that it is their intention and covenant that this
Agreement and performance under it and all suits and special proceedings
relating to it be construed in accordance with and under and pursuant to the
laws of the State of Florida and that in any action, or other proceeding that
may be brought arising out of, in connection with, or by reason of this
Agreement, the laws of the State of Florida shall be applicable and shall
govern to the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be instituted.
7. The Agreement shall be binding on and inure to the benefit of the
respective parties and their executors, administrators, heirs, personal
representatives, successors and assigns.
8. This Agreement shall expire on March 21, 1999. There shall be no right
to terminate this Agreement for any reason by either party hereto unless both
parties agree in writing.
9. This Agreement is not assignable by either party without the written
consent of the other party.
10. The parties hereto irrevocably agree that any legal action or
proceeding hereunder, arising out of or in any manner relating to this
Agreement, will be brought in the Federal District Court for the Middle
District of Florida. The prevailing party of any such legal action or
proceeding shall be entitled to reasonable attorneys fees and costs, including
any appeals.
11. If at any time subsequent to the date hereof, any provision of this
Agreement shall be held by any court of competent jurisdiction to be illegal,
void or unenforceable, such provision shall have no effect upon and shall not
impair the enforceability of any other provision of this Agreement.
12. The parties hereto warrant and represent that each has the legal
capacity to enter into this Agreement and CIMETRIX further represents that its
Board of Directors has authorized CIMETRIX to enter this Agreement.
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<PAGE> 3
13. All of the terms of this Agreement and the Agreement itself are subject
to the approval of the Cimetrix shareholders not later than June 1, 1997. In
the event the Cimetrix shareholders fail to approve this Agreement, all of the
transactions described herein shall be deemed rescinded.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement on the
dates set forth below.
BICOASTAL HOLDING COMPANY:
By
------------------------------ ----------------------------
Paul A. Bilzerian, President Date
CIMETRIX, INC.:
By
------------------------------ ----------------------------
David L. Redmond, Vice President Date
3
<PAGE> 1
EXHIBIT 10.6
AMENDMENT NO.1 TO THE
CIMETRIX INCORPORATED
STOCK OPTION PLAN
This Amendment No.1 to the Cimetrix Incorporated Stock Option Plan is made
as of March 21, 1997, by Cimetrix Incorporated, a Nevada corporation for the
benefit of each person who becomes a participant in the Plan.
WHEREAS, Cimetrix Incorporated created a Stock Option Plan for the benefit
of Eligible Participants; and
WHEREAS, the Company believes that it is in the best interests of the
Company and the participants in the Plan to amend the Plan;
NOW, THEREFORE, Section 5 (a) of the Plan is hereby amended to read as
follows:
(a) Option Pool. The aggregate number of shares of Option Stock
that may be issued pursuant to the exercise of Options granted under
this Plan will not exceed Two Million Five Hundred Thousand (2,500,000)
shares of Stock (the "Option Pool"), provided that such number will be
increased by the number of shares of Option Stock that the Company
subsequently may reacquire through repurchase or otherwise. Shares of
Option Stock that would have been issuable pursuant to Options, but that
are no longer issuable because all or a part of those Options have
terminated or expired, will be deemed not to have been issued for purposes
of computing the number of shares of Option Stock remaining in the Option
Pool and available for issuance.
Date Amendment adopted by Board of Directors: March 21, 1997
Date Amendment approved by Shareholders: May 31, 1997
-1-
<PAGE> 1
EXHIBIT 10.7
[FORM OF]
INDEMNITY AGREEMENT
This Indemnity Agreement is executed on ____________________, by
_________________ ("Executive"), who resides at ____________________________,
and CIMETRIX INCORPORATED, a Nevada corporation with its principal executive
office at 2222 South 950 East, Provo, Utah 84606, to record their agreement
regarding the indemnification by the Company of Executive in certain
circumstances. Executive and the Company have executed this Indemnity
Agreement in connection with Executive's service as a Director of the Company.
The parties agree as follows:
1. INTERPRETATION. As used in this Agreement, the capitalized terms
defined below have the respective meanings ascribed to them:
"AGREEMENT" means this Indemnity Agreement, as originally
executed by Executive and the Company and as subsequently amended
or modified by them in accordance with its terms.
"BOARD" means the Board of Directors of the Company.
"BYLAWS" means the Bylaws of the Company and its subsidiaries
in effect on the execution date of this Agreement.
"COMPANY" means Cimetrix Incorporated, a Nevada corporation
and a party to this agreement, and includes its subsidiaries, and
their respective assignees and successors (by operation of law or
otherwise)
"EXECUTIVE" means the officer or director of the Company
named above who is a party to this Agreement, and includes his or
her estate, heirs, guardian, and personal representative.
"INDEMNIFIED LOSS" means all actual cost, loss, damage,
expense, and liability that Executive incurs or suffers pursuant
to, or in connection with defending, settling, prosecuting,
investigating, or participating in (as a witness or otherwise) any
Proceeding that arises out of, or is connected in any way with,
the following: (a) Executive's enforcement of his rights under the
Liability Insurance; (b) Executive's enforcement of the Company's
obligations to him under this Agreement; or (c) Executive's past,
present, or future service as an agent, officer, director, or
employee of the Company or any subsidiary, as a trustee or
fiduciary of any employee benefit plan or trust sponsored by the
Company or and subsidiary, or (at the Company's request) as an
agent, officer, director, trustee, employee, or fiduciary of
another corporation, partnership, joint venture, business trust,
limited liability company, or other enterprise; and includes all
fines, taxes, interest, monetary penalties, premiums for
<PAGE> 2
supersedeas bonds, and fees, costs, and expenses of experts,
lawyers, mediators, arbitrators, witnesses, accountants,
consultants, and investigators, whether incurred before or after
demand or commencement of a Proceeding.
"LIABILITY INSURANCE" means the Directors and Officers
Liability Insurance effective August 25, 1995, issued to the
Company by Agricultural Excess and Surplus Insurance Company and
includes any similar additional policies or substitute policies
issued to replace that policy.
"PROCEEDING" means any claim, action, demand, inquiry,
lawsuit, proceeding, or investigation, whether formal or
informal, pending, threatened, or completed, or civil, criminal,
administrative, or investigative, and includes mediation,
arbitration, appellate, bankruptcy, and judgment-execution
proceedings
In addition, as used in this Agreement, (a) the word "including" is always
without limitation, (b) the word "days" refers to calendar days, Including
Saturdays, Sundays, and holidays, (c)words in the singular number include words
of the plural number and vice versa, (d) the word "order" includes an order,
decree, ruling, judgment, or injunction, (e) the word "law" includes a code,
rule, statute, ordinance, or regulation and the common law arising from final,
nonappealable decisions of governmental authorities and state or federal courts
in the United States, and (f) the word "person" includes, in addition to a
natural person, a group, trust, syndicate, corporation, cooperative,
association, partnership, business trust, joint venture, limited liability
company, unincorporated organization, and a government, governmental authority,
a public body or authority, and any governmental body, agency, authority,
department, or subdivision, whether domestic or foreign or local, state,
regional, or national. The headings preceding the text of the sections of this
Agreement have been inserted solely for convenient reference and neither
constitute a part of this agreement nor affect its meaning, interpretation, or
effect.
2. PURPOSE. Executive is a Director of the Company. Both Executive and
the Company recognize and acknowledge that Executive's service as a director
exposes Executive to significant risks of personal liability arising from
proceedings pertaining to Executive's participation in the management of the
Company. To mitigate those risks, the Company has purchased the Liability
Insurance, which provides limited coverage on a "claims made basis." However,
the Liability Insurance is insufficient (in amount and coverage) to fully
reimburse Executive for the potential amount of personal liability and
attendant expenses that Executive might incur in a Proceeding arising out of
Executive's service as a Director of the Company.
In addition to the Liability Insurance provided by the Company, the Bylaws
permit the Company to indemnify Executive, to the fullest extent allowed by
law, for all
2
<PAGE> 3
fees, losses, damages, expenses, and liability that Executive incurs because of
Executive's service as a Director of the Company. The indemnification of
Executive pursuant to the Bylaws is uncertain because the Board or the
shareholders of the Company may amend the Bylaws at any time to limit or
diminish that indemnification. The possibility of an amendment or modification
of the Bylaws to diminish the indemnification currently afforded to Executive
would increase following a "change in control" of the Company, when Executive
might need the benefit of that protection the most.
The Company recognizes that the indemnification provided to Executive
pursuant to the Bylaws and the Liability Insurance is insufficient to attract
and retain capable and responsible business persons as officers and directors.
The Company also recognizes that increased protection against personal
liability will enhance Executive's ability to serve the best interests of the
corporation, its shareholders, and its other corporate constituencies by
permitting Executive to make difficult decisions without the fear of personal
economic risk. The Bylaws and the Nevada Business Corporation Act permit the
Company to enhance the indemnification already afforded to Executive pursuant
to the Bylaws and the Liability Insurance. In consideration of Executive's
willingness to serve as a Director of the Company, and in recognition of
Executive's need for substantial protection against personal liability arising
from Executive' service as a Director of the Company, the Company is entering
into this Agreement to supplement the indemnification available to Executive
3. INDEMNIFICATION. The Company shall indemnify and hold harmless
Executive from every Indemnified Loss. The obligation of the Company under
this Agreement is absolute and unconditional, is not conditioned in any way on
any attempt by Executive to collect from an insurer any amount under a
liability insurance policy, and is not subject to any setoff, defense,
deduction, or counterclaim that the Company might have against Executive.
However, the Company will not have any liability or obligation to Executive
under this Agreement for any Indemnified Loss that is excluded pursuant to
section 7 or that Executive voluntarily pays, settles, compromises, confesses
judgment for, or admits liability with respect to, without the approval of the
Company or before Executive requests the Company to pay or perform the
Indemnified Loss. The Company will not unreasonably withhold its approval of
Executive's proposed settlement or resolution. If Executive is entitled to
indemnification under the Agreement for only a portion of the Indemnified Loss,
the Company shall indemnify Executive for that portion of the Indemnified Loss.
If Executive pays an Indemnified Loss with the Company's approval, or if
Executive becomes legally obligated to pay an Indemnified Loss, the Company
shall reimburse Executive for the Indemnified Loss, or pay it on behalf of
Executive, in accordance with this agreement within 20 days after the date when
Executive notifies the Company of his request for payment or reimbursement of
the Indemnified Loss. Each notice from Executive requesting payment or
reimbursement of an Indemnified Loss must be accompanied by evidence of the
Indemnified Loss.
3
<PAGE> 4
4. LIABILITY INSURANCE. The Company shall pay all premiums and otherwise
maintain in full force and effect while Executive is employed by the Company or
any of its subsidiaries a policy of directors' and officers' liability
insurance that insures and provides coverage of up to $1,000,000 for claims
made against all officers and directors, including Executive in all capacities
for which he serves or served the Company. The Company promptly shall notify
Executive of any lapse, amendment, termination, or cancellation of this
insurance coverage.
5. REIMBURSEMENT OF EXPENSES. The Company shall promptly pay and
reimburse Executive for all costs incurred by Executive in connection with a
Proceeding that constitutes an Indemnified Loss.
6. NOTICE OF CLAIMS. Within fourteen days after Executive receives notice
of a Proceeding that will or might give rise to an Indemnified Loss, Executive
shall notify the Company of the Proceeding. Without limiting what might be
materially prejudicial to the Company, the failure of Executive to notify the
Company of a lawsuit within fourteen days after the date when Executive is
served with a copy of the complaint, petition, or other pleading that asserts a
claim that is or might give rise to an Indemnified Loss will be presumed to be
materially prejudicial to the Company, unless the Company also was served with
a copy of the same complaint, petition, or other pleading. The Company may
participate at its own expense in the Proceeding, or, with the consent of
Executive, it may elect within a reasonable time to assume the defense of the
Proceeding at its sole cost. If the Company assumes the defense of the
Proceeding with Executive's consent, Executive may employ separate legal
counsel and participate in the defense of the Proceeding at his sole cost, and
the Company will not have any obligation to pay or advance costs incurred or to
be incurred by Executive's further participation in the defense of the
Proceeding. If the Company does not assume the defense of the Proceeding,
Executive must obtain the Company's advance approval of the legal counsel to be
engaged by Executive to defend the Proceeding. The Company shall not
unreasonably withhold its approval of any legal counsel selected by Executive.
Executive shall not settle, compromise, or admit civil liability with respect
to a Proceeding that constitutes or might give rise to an Indemnified Loss
without the advance approval of the Company, which approval the Company shall
not unreasonably withhold from Executive. The Company shall notify Executive
whether or not it will approve a proposed settlement within 20 days after the
date when Executive gives it notice of the proposed settlement that summarizes
all the settlement terms and conditions. The Company's failure to notify
Executive within the 20-day period as to whether it will approve the proposed
settlement will constitute its approval of the proposed settlement. Except as
provided in this paragraph, Executive is not entitled to any indemnification
for amounts paid or payable by Executive pursuant to a settlement that is made
by Executive without the Company's approval.
7. INDEMNITY EXCLUSIONS. Nothing in this agreement requires or permits the
Company to indemnify Executive for an Indemnified Loss, if any final,
nonappealable order of a court establishes that Executive's actions or
omissions constitute a violation of section 16(b) of the Securities Exchange
Act of 1934, as amended, or were material to the cause of action adjudicated
and constitute
4
<PAGE> 5
(a) A violation of criminal law, unless Executive had
reasonable cause to believe that the conduct was lawful or had no
reasonable cause to believe that the conduct was unlawful;
(b) A transaction from which Executive received an improper
personal benefit;
(c) If Executive is a director, a circumstance under which
Executive is liable under section 78.300.2 of the Nevada Business
Corporation Act; or
(d) Willful misconduct or a conscious disregard for the best
interests of the Company, which is established in a Proceeding by
or in the right of the Company to procure a judgment in its favor
or in a Proceeding by or in the right of a shareholder.
The termination of any criminal proceeding or investigation by entry of a
consent decree or a plea of nolo contendere or its equivalent will not
constitute a final, nonappealable order of a court that establishes that
Executive's actions or omissions were a violation of criminal law and will not
establish any presumption that Executive lacked reasonable cause to believe
that his conduct was lawful.
8. SHAREHOLDER NOTIFICATION. The Company shall deliver to each
record shareholder of the Company who is entitled to vote for the election of
the Board a written statement of every payment to or on behalf of Executive
pursuant to this Agreement. The Company shall mail that statement to its
shareholders on or before the date when it mails to its shareholders notice of
the next annual meeting of shareholders of the Company that succeeds the date
of payment (unless that meeting is held within three months after the date of
the payment), but in any event within 15 months after the date of the payment.
The statement must specify the name of Executive, the amount paid by the
Company, and the nature and the status at the time of the payment of any
pending or threatened litigation relating to the payment.
9. SUBROGATION AND DUPLICATION OF PAYMENTS. To the extent of any
payment by the Company to or on behalf of Executive for an Indemnified Loss,
the Company will be subrogated to all rights of Executive to recover or obtain
reimbursement for the payment from any third party. At the request of the
Company at any time and from time to time, Executive shall execute and deliver
to the Company any document (and do all such other acts) as are reasonably
necessary to enable the Company to obtain or realize the benefit of that
subrogation, including the prosecution by Executive or the Company of a legal
proceeding to enforce those rights of Executive. However, if the Company
requests Executive to institute a legal proceeding to recover or obtain
reimbursement from a third party of any amount paid by the Company to or on
behalf of Executive for an Indemnified Loss, that Proceeding will be covered by
the indemnification and expense advancement provisions of this Agreement, and
the
5
<PAGE> 6
Company shall pay, reimburse, indemnify, and hold harmless Executive from all
cost, expense, damage, and liability arising out of, or in any way connected
with, that Proceeding to the same extent that it is obligated to do for any
Indemnified Loss. The Company is not liable for, and Executive is not entitled
to, any payment with respect to an Indemnified Loss to the extent Executive has
received payment for the Indemnified Loss from any person other than the
Company, such as the insurer under the Liability Insurance.
10. LEGAL MATTERS. The validity, construction, enforcement, and
interpretation of this Agreement are governed by the laws of the State of
Nevada and the United States of America, excluding the laws of those
jurisdictions pertaining to the resolution of conflicts with laws of other
jurisdictions.
Executive and the Company (a) consent to the personal jurisdiction of the
state and federal courts having jurisdiction over Utah County, Utah, (b)
stipulate that the proper, exclusive, and convenient venue for any legal
proceeding arising out of this Agreement is Utah County, Utah, and (c)waive any
defense, whether asserted by a motion or pleading, that Utah County, Utah, is
an improper or inconvenient venue.
In any legal proceeding arising out of this Agreement, the losing party
shall reimburse the prevailing party, on demand, for all reasonable costs
incurred by the prevailing party in enforcing, defending, or prosecuting any
claim arising out of this Agreement, including fees, costs, and expenses of
agents, experts, lawyers, mediators, witnesses, accountants, consultants,
arbitrators, investigators and supersedeas bonds, whether incurred before or
after demand or commencement of legal proceedings, and whether incurred
pursuant to trial, appellate, bankruptcy, or judgment-execution proceedings.
The Company shall pay to Executive, on demand, interest on any amount owed to
Executive under this Agreement that is not paid in full, at the annual rate
then provided by Nevada law for the payment of interest on judgments generally.
11. NOTICES. Every notice, demand, request, or approval required or
permitted under this Agreement will be valid only if it is in writing and
delivered personally or by telecopy, commercial courier, or first class,
postage prepaid United States mail and addressed by the sender to the intended
recipient at the party's address set forth in this Agreement or to such other
address as the intended recipient has previously designated to the sender by
notice given in accordance with this section. A validly given notice, demand,
request, or approval will be effective on the earlier of its receipt, if
delivered personally or by telecopy, commercial courier, or the fifth day after
it is postmarked by the United States Postal Service, if it is delivered by
first class, postage prepaid, United States mail. Each party to this Agreement
promptly shall notify the other of any change in its mailing address
12. SEVERABILITY AND NONEXCLUSIVITY. Whenever possible, each provision of
this Agreement should be construed and interpreted so that it is valid and
enforceable under applicable law on the date of its execution. However, if a
provision of this Agreement, or the application of it, is held by a court of
competent jurisdiction to be
6
<PAGE> 7
invalid or unenforceable, that provision will be deemed severable from the
remaining provisions of this Agreement and will not affect the validity,
interpretation, or effect of the other provisions of this Agreement or the
application of that provision to other circumstances in which it is valid and
enforceable. The rights, duties, and obligations of Executive an the Company
under this Agreement do not limit, diminish, or supersede the rights, duties,
and obligations of Executive and the Company with respect to the
indemnification afforded to Executive under the Liability Insurance, the Nevada
Business Corporation Act, or the Bylaws and Articles of Incorporation of the
Company. In addition, Executive's rights under this Agreement will not be
limited or diminished in any respect by any amendment to the Bylaws or the
Articles of Incorporation of the Company or by any other corporate action of
the Company
13. WAIVER AND MODIFICATION. A waiver, discharge, amendment, termination,
cancellation, or modification of this Agreement will be valid and effective
only if evidenced by a writing signed by or on behalf of both parties to this
Agreement. Except as expressly provided herein no course of dealing or delay
by any party to this Agreement in exercising any right, power, remedy, or
benefit under this Agreement will operate as a waiver of any right, power,
remedy, or benefit of that party, except to the extent expressly manifested in
writing by that party. The failure at any time of either party to require
performance by the other party of any provisions of this Agreement will not
operate as a waiver of any right, except to the extent expressly manifested in
writing by that party. The failure at any time of either party to require
performance by the other party of any provision of this Agreement will in no
way affect the party's right to later enforce that provision or this Agreement.
In addition, the waiver by either party of a breach of any provision of this
Agreement will not constitute a waiver of any succeeding breach of the
provision or a waiver of the provision itself.
14. RIGHTS OF THIRD PARTIES. Nothing in this Agreement, whether express or
implied, is intended or should be construed to confer upon, or to grant, any
person, except Executive, the Company, and their respective authorized
assignees and successors, any claim, right, remedy, or benefit under or because
of this Agreement or any provision of it. This Agreement is binding on every
assignee or successor of the Company, including any successor corporation
resulting from a merger, consolidation, recapitalization, reorganization, sale
of all or substantially all the assets of the Company, or any other transaction
resulting in the successor corporation assuming the liabilities of the Company
under this Agreement (by operation of law or otherwise). The Company shall
require any assignee or successor of the Company, by written Agreement in form
and substance acceptable to Executive and the Company, to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if an assignment or succession had
not occurred but no assumption of the Agreement by any successor or assignee
shall relieve the Company from its obligations hereunder. This Agreement is
not assignable by Executive, and any attempted assignment by Executive will be
invalid and ineffective against Company.
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<PAGE> 8
15. TERM. The term of this Agreement shall commence on the date of
execution as stated herein and this Agreement shall continue in effect
regardless of whether Executive continues to serve as an officer or director of
the Company
16. NON COMPETE. Executive agrees that he will not compete with Cimetrix
in any material way nor will he work for any entity that competes with Cimetrix
in any material way throughout the term of his service as an officer or
director of the company, plus a period of three (3) years thereafter
17. COMPLETE AGREEMENT; EXECUTION; EFFECTIVE DATE. This Agreement records
the final, complete, and exclusive understanding between the parties with
respect to the obligations created under it and supersedes any prior or
contemporaneous Agreement, understanding, or representation, oral or written,
by either of them. In particular, this Agreement cancels and supersedes any
previous written Agreement between the Company and Executive regarding the
Company's indemnification of Executive from liability in connection with
Executive's service as an officer or director of the Company. Executive and
the company may execute this Agreement in counterparts. Each executed
counterpart will constitute an original document, and all executed
counterparts, together, will constitute the same Agreement. This Agreement
will become effective, as of its stated execution date, when each party has
executed and delivered to the other party a counterpart of it.
WITNESSES: CIMETRIX INCORPORATED
By:
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Name Title
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WITNESSES: EXECUTIVE:
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8
<PAGE> 1
EXHIBIT 10.8
SUBLEASE AGREEMENT
STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
THIS SUBLEASE AGREEMENT is entered into effective the 30th day of June, 1997, by
and between Just In Time Solutions, Incorporated, a California Corporation
("Sublessor") and Cimetrix, Incorporated, a Nevada Corporation ("Sublessee").
WHEREAS, Sublessor executed a Lease Agreement dated February 14, 1996 and
Amended November 7, 1996 (First Amendment to Lease), May 8, 1997 (Second
Amendment to Lease) and June 18, 1997 (Third Amendment to Lease), between
Western Can Ltd., a California limited partnership; dba: 444 De Haro; by:
Consolidated Capital Equity Partners, L.P., a California limited partnership,
its general partner; by: ConCap Holdings, Inc., a Texas corporation
("Landlord"), and Just In Time Solutions, Incorporated, a California
Corporation, formerly Just In Time Marketing, Incorporated ("Tenant") by the
terms in which Suites #124, #126, #130, and #132, consisting of approximately
9,532 square feet as measured by Pace Compumetrics October 18, 1994, in the
building known as 444 De Haro Street in San Francisco (the "demised premises")
was leased to Just In Time Solutions, Incorporated as Tenant for a term
commencing March 1, 1996 and ending on June 30, 2000. A true and correct copy of
such Lease Agreement, as amended, if any (the "Lease"), is attached hereto as
Exhibit "A" and made apart hereof for all purposes. Whereas, the Sublessor now
desires to sublease a portion of the leased premises to Cimetrix, Incorporated
("Sublessee") and Sublessee desires to accept the Sublease thereof.
NOW, THEREFORE, for good and valuable consideration, with the agreement of the
Sublessee, hereinafter set forth, the Sublessor hereby subleases to the
Sublessee the demised premises described as Suite 124 being approximately 881
rentable square feet until Sublessor vacates Suite 126 at which time Sublessee
shall give up possession of Suite 124 and relocate to Suite 126 being
approximately 947 rentable square feet. The term of the sublease shall commence
on June 23, 1997, and end on June 30, 1998. Sublessee shall accept the premises
in its "as is" condition except that Sublessor shall provide and install two
220-amp, three phase electrical outlets to Suite 124 and subsequently to Suite
126 as agreed between Sublessor and Sublessee and Landlord. Sublessor also
agrees to replace carpet in Suite 126 upon its vacancy of such and prior to
Sublessee's occupancy of such. Neither Sublessee nor Landlord shall have any
obligations to perform other than the aforementioned improvements to the
Premises except for standard carpet spot cleaning and window cleaning. The
Sublessee warrants it will comply with all of the terms and provisions of the
Lease attached hereto as Exhibit "A," and it is expressly provided that the
monthly rental payments for the said subleased premises shall be as follows:
Suite 124 (881 rsf @ $1.50 per month) $1,322
Suite 126 (947 rsf @ $1.50 per month) $1,421
Plus other charges as outlined in the lease. Sublessee shall make all rental
payments to Sublessor no later than the first day of the month for which payment
is due. Sublessee shall incur all late charges under lease if any payment is
late.
UPON SIGNATURE OF SUBLEASE, payment will be made by Sublessee to the Sublessor
in the amount of $1,421 representing Sublessee's security deposit to Sublessor.
Upon delivery of keys on June 30, 1997, payment will be made by Sublessee to the
Sublessor in the amount of $1,322.00 representing the full monthly rent
obligation for July, 1997.
IN THE EVENT OF LITIGATION RELATING TO THIS LEASE, the prevailing party shall be
entitled to recover from the other party all litigation costs and reasonable
attorneys' fees, incurred by the prevailing party in connection with such
litigation. If Sublessor utilizes the services of any attorney to enforce any of
Sublessor's rights hereunder which does not result in the filing of an action,
Sublessor shall immediately pay to Sublessee upon demand therefor the amount of
attorneys' fees and costs incurred by Sublessor.
SUBLESSEE SHALL USE THE PREMISES only for the express purchase set forth in the
Lease. Sublessor agrees to continue to be bound by the provision of said Lease.
This Agreement shall be binding on and inure to benefit of the parties hereto,
their successors and assigns.
SUBLESSOR: SUBLESSEE:
Just In Time Solutions, Inc., Cimetrix, Inc.,
a California Corporation a Nevada Corporation
By: By:
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Printed Name: Printed Name:
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Title: Title:
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Date: Date:
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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.
PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
June 24, 1997
