<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 9, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ADE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MASSACHUSETTS
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
3829 04-2441829
(PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
CLASSIFICATION CODE NUMBER) NUMBER)
80 WILSON WAY
WESTWOOD, MA 02090
(617) 467-3500
FAX: (617) 467-0500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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ROBERT C. ABBE,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ADE CORPORATION
80 WILSON WAY
WESTWOOD, MA 02090
(617) 467-3500
FAX: (617) 467-0500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
WILLARD G. MCGRAW, JR., ESQ. KEITH F. HIGGINS, ESQ.
TIMOTHY B. BANCROFT, ESQ. ROPES & GRAY
WARNER & STACKPOLE LLP ONE INTERNATIONAL PLACE
75 STATE STREET BOSTON, MA 02110
BOSTON, MA 02109 (617) 951-7000
(617) 951-9000 FAX: (617) 951-7050
FAX: (617) 951-9151
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING PRICE REGISTRATION
REGISTERED REGISTERED (1) PER SHARE (2) (2) FEE
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<S> <C> <C> <C> <C>
Common Stock, par value 2,840,500 shares $26.56 $75,443,680 $22,862
$.01 per share.........
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</TABLE>
(1) Includes 370,500 shares of Common Stock which may be purchased by the
Underwriters to cover over-allotments, if any.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933 on the basis of
the average of the high and low prices of the Registrant's Common Stock on
July 3, 1997 as reported by Nasdaq.
----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT 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.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
JULY 9, 1997
2,470,000 Shares
LOGO
Common Stock
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Of the 2,470,000 shares of Common Stock offered hereby, 2,000,000 shares are
being sold by ADE Corporation ("ADE" or the "Company") and 470,000 shares are
being sold by the Selling Stockholders. See "Principal and Selling
Stockholders." The Company will not receive any proceeds from the sale of
shares by the Selling Stockholders. The Company's Common Stock is quoted on the
Nasdaq National Market under the symbol "ADEX." On July 8, 1997, the last
reported sale price of the Company's Common Stock was $26.75 per share.
--------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
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Total(3).......................... $ $ $ $
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</TABLE>
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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting expenses of the offering estimated at $450,000, all of
which are payable by the Company.
(3) The Company and certain Selling Stockholders have granted to the
Underwriters a 30-day option to purchase up to 370,500 additional shares of
Common Stock solely to cover over-allotments, if any. To the extent that
the option is exercised, the Underwriters will offer the additional shares
to the public at the Price to Public shown above. If the option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company and Proceeds to Selling Stockholders will
be $ , $ , $ and $ , respectively. See
"Underwriting."
--------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject
to the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the
offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1997.
Alex. Brown & Sons
INCORPORATED
Montgomery Securities
Adams, Harkness & Hill, Inc.
Sutro & Co. Incorporated
Needham & Company, Inc.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
[DIAGRAM OF CERTAIN OF ADE CORPORATION'S SYSTEMS
AND MARKETPLACE APPLICATION APPEARS HERE]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK IN
CONNECTION WITH THE OFFERING, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-
COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF PENALTY BIDS.
IN ADDITION, CERTAIN UNDERWRITERS (AND SELLING GROUP MEMBERS, IF ANY) MAY ALSO
ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET IN ACCORDANCE WITH RULE 103 UNDER THE SECURITIES EXCHANGE ACT
OF 1934. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the Company with
the Securities and Exchange Commission (the "Commission") (Commission File No.
0-26714) are hereby incorporated by reference in this Prospectus: (a) Annual
Report on Form 10-K for the fiscal year ended April 30, 1996; (b) Quarterly
Reports on Form 10-Q for the quarters ended July 31, 1996, October 31, 1996
and January 31, 1997; and (c) the description of the Company's Common Stock
which is contained in its Registration Statement on Form 8-A filed with the
Commission on August 30, 1995. The consolidated financial statements of the
Company as of April 30, 1997 and 1996 and for each of the three years in the
period ended April 30, 1997 included elsewhere in this Prospectus have been
retroactively restated to reflect the acquisition by the Company of all of the
outstanding capital stock of Digital Measurement Systems, Inc. ("DMS"), which
was accounted for as a pooling-of-interests. Accordingly, such financial
statements and other financial information included herein supersede in their
entirety the financial statements included in the Company's Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q referred to above.
All reports and other documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act"), subsequent to the date of the
original filing of the Registration Statement of which this Prospectus is a
part and prior to the termination of the offering made hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained in a
document, all or a portion of which is incorporated by reference herein, shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained or incorporated by reference herein modifies
or supersedes such statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents or portion of documents which are incorporated by reference in
this Prospectus (other than exhibits to such documents or portions of
documents), unless such exhibits are specifically incorporated by reference
into the documents or portions of documents that this Prospectus incorporates.
Requests should be submitted by telephone to (617) 467-3500 or in writing to:
ADE Corporation, 80 Wilson Way, Westwood, MA 02090, Attention: Mark D.
Shooman, Vice President and Chief Financial Officer.
ADE, UltraGage, UltraScan, WaferCheck and WIS are registered trademarks of
the Company, and the ADE logo is a trademark of the Company.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus.
THE COMPANY
ADE Corporation is a leader in the design, manufacture, marketing and service
of metrology and inspection systems for the semiconductor wafer manufacturing
industry. The Company is also a growing supplier of metrology systems to the
semiconductor device and computer hard disk industries. The Company's systems
analyze and report product quality at critical manufacturing process steps,
sort wafers and disks and provide manufacturers with quality certification
data. Semiconductor wafer and device and computer hard disk manufacturers use
the Company's systems to improve yield and capital productivity. The Company's
products have evolved from single instruments used in off-line engineering
analysis to multi-function systems for automated in-line monitoring of process-
induced defects throughout the wafer and disk manufacturing processes. The
Company's systems are designed to deliver the high throughput, reliability and
information delivery and analysis necessary to meet the demands of increasingly
complex and time-sensitive manufacturing processes. The Company has over 35
major products currently in use by the semiconductor wafer and device and hard
disk manufacturing industries and has shipped more than 1,700 systems.
As the performance of semiconductors has increased and their size and cost
have decreased, the demand for semiconductors has expanded beyond the primary
market in computer systems to include applications in telecommunications,
automotive products, consumer goods and industrial automation and control. New
geographic markets for semiconductors have also emerged, particularly in the
Pacific Rim. VLSI Research Inc., an independent semiconductor industry research
organization, estimates that the semiconductor market will be $155 billion in
1997 and will grow to $356 billion in the year 2002. Peripherals Research, an
independent computer disk industry research organization, estimates that in the
hard disk market demand will be 411 million disks in 1997 and will exceed 639
million disks in the year 1999. To meet this expected strong growth, wafer,
device and disk manufacturers are currently making significant investments in
capital equipment for new facilities and the expansion of capacity at existing
facilities.
Semiconductor devices are becoming more complex, requiring finer line widths
and more sophisticated manufacturing processes. Key factors in improving the
yields of these processes are the flatness of wafers and the absence of
particles on the surface of the wafers. Wafer manufacturers use the Company's
equipment to measure and identify flatness, shape, resistivity, conductivity
type, particles and other surface defects. The measurement information derived
from the Company's metrology and inspection systems enables wafer manufacturers
to control their processes continuously. Device manufacturers currently use the
Company's metrology products to perform incoming quality control and various
other significant measurement functions. Key opportunities for the Company
include the growing demand for epitaxial ("Epi") wafers and the increasing use
of chemical mechanical planarization ("CMP"), an advanced wafer flattening
procedure, as well as yield management software solutions in the wafer and
device industries.
The recent introduction of highly sensitive Magneto-Resistive ("MR")
recording head technology has significantly increased the potential data
capacity of hard disks and has placed rigorous new demands on magnetic data
storage disk specifications. Manufacturers of hard disks use the Company's
automated in-line equipment to measure taper and thickness. In addition,
through its acquisition of Digital Measurement Systems, Inc. ("DMS") in
February 1997, the Company has broadened its product line of metrology
4
<PAGE>
solutions for hard disk manufacturers to include automated in-line equipment
that measures the magnetic properties of the disk recording surfaces. The
Company believes these products are the only commercially available automated
high speed in-line magnetic properties measurement tools available to the disk
manufacturing industry. The measurement information derived from the Company's
metrology systems enables hard disk manufacturers to continuously monitor and
control their processes and to improve yields.
ADE's strategy is to build on its leading technological and market position
in providing metrology and inspection systems to wafer manufacturers and to
increase its penetration in the device fabrication and hard disk industries.
The Company also plans to increase the number and type of metrology and
inspection functions that its products perform, in part by continuing to
automate functions currently performed by human inspectors. The Company is
committed to providing software solutions which increase its customers' yield
management and capital productivity. In addition, the Company plans to continue
developing information management software tools to integrate further its
systems with its customers' management information systems. ADE expects to be
able to deliver benefits to the semiconductor device and hard disk industries
by leveraging its measurement and automation technology and worldwide sales and
service organizations.
ADE markets and sells its products through a direct sales force in the United
States, Europe and Malaysia, through distributors in Japan and through third
party representatives in the remainder of Asia. The Company's customers include
all of the leading semiconductor wafer manufacturers such as SEH, MEMC, Wacker,
Siltec and Sumitomo Sitix and many of the world's semiconductor device
manufacturers such as IBM, Intel, Lucent Technologies, Motorola and Texas
Instruments, as well as many of the leading manufacturers of hard disks and
disk drives, including HMT, IBM, Komag, Seagate Technology and Western Digital.
The Company was incorporated in Massachusetts in 1967. The Company's
principal executive offices and manufacturing facility are located at 80 Wilson
Way, Westwood, Massachusetts 02090, and its telephone number is (617) 467-3500.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company. 2,000,000 shares
Common Stock offered by the Selling 470,000 shares
Stockholders.......................
Common Stock to be outstanding after 10,604,160 shares(1)
the offering.......................
Use of proceeds..................... For general corporate purposes, including
research and development, and for
acquisitions of complementary businesses
and technologies.
Nasdaq National Market symbol....... ADEX
</TABLE>
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(1) Based upon the number of shares outstanding as of April 30, 1997. Excludes
(i) 774,216 shares of Common Stock issuable upon the exercise of options
outstanding as of April 30, 1997 at a weighted average exercise price of
$8.14 per share, of which options to purchase 199,316 shares were then
exercisable and (ii) 76,590 shares of Common Stock to be issued upon the
exercise of options and sold in this offering by certain Selling
Stockholders.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-----------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue............................. $27,564 $32,828 $46,152 $67,339 $101,403
Gross profit........................ 13,286 15,967 22,859 36,204 56,565
Income (loss) from operations....... 412 (273) 5,244 11,478 18,442
Net income (loss)................... 451 (353) 3,131 7,805 13,165
Net income (loss) per share......... $ 0.07 $ (0.05) $ 0.47 $ 0.98 $ 1.48
Weighted average common and common
equivalent shares outstanding...... 6,609 6,524 6,651 7,965 8,880
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1997
----------------------
ACTUAL AS ADJUSTED(1)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................... $19,374 $ 69,548
Working capital..................................... 45,769 95,943
Total assets........................................ 88,417 138,591
Long-term debt, less current portion................ 5,091 5,091
Total stockholders' equity.......................... 61,388 111,562
</TABLE>
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(1) Adjusted to give effect to the sale of 2,000,000 shares of Common Stock
offered by the Company hereby at an assumed public offering price of $26.75
per share and the application of the net proceeds therefrom. See "Use of
Proceeds" and "Capitalization."
Except as otherwise noted, all financial information included in this
Prospectus has been restated to reflect the Company's acquisition of Digital
Measurement Systems, Inc., which was accounted for as a pooling-of-interests.
See Note 3 of Notes to Consolidated Financial Statements. Except as otherwise
noted, all information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option. See "Underwriting."
6
<PAGE>
RISK FACTORS
In addition to the other information included in this Prospectus, the
following risk factors should be considered carefully in evaluating an
investment in the shares of Common Stock offered by this Prospectus. Certain
statements in this Prospectus are forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such forward-looking statements may be found in the material set forth
under the headings, "Prospectus Summary," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," as
well as elsewhere in this Prospectus, including the documents incorporated by
reference herein. The Company's actual results could differ materially from
those anticipated in such forward-looking statements as a result of certain
factors, including those discussed below and elsewhere in this Prospectus and
in the documents incorporated by reference herein. Any forward-looking
statements are made as of the date of this Prospectus and the Company assumes
no obligation to update any such forward-looking statements or to update the
reasons why actual results could differ materially from those anticipated in
such forward-looking statements.
Cyclicality of the Company's Business. The Company's business depends in
large part upon the capital expenditures of semiconductor wafer and device and
computer hard disk and disk drive manufacturers, which in turn depend on the
current and anticipated market demand for integrated circuits, products
utilizing integrated circuits and systems requiring hard disk drives,
respectively. The semiconductor and hard disk industries are cyclical and have
historically experienced periodic downturns, which have had a severe effect on
the demand for capital equipment. Two of the principal companies in the disk
drive industry have recently announced less than expected demand for their
disk drive products. Prior semiconductor and hard disk industry downturns and
construction of excess capacity by the industry have adversely affected the
Company's revenues, gross margin and net income and have also adversely
affected the market price for the Company's Common Stock. No assurance can be
given that the Company will continue to achieve the revenue growth it has
experienced in recent years. In addition, the need for continued investment in
research and development and extensive customer service and support capability
worldwide will limit the Company's ability to reduce expenses in the event of
a downturn in the industry.
Fluctuations of Quarterly Operating Results. The Company's quarterly
operating results have varied and may continue to vary significantly. The
Company's quarterly revenues typically are derived from a relatively small
number of customer orders. These customer orders often consist of multiple
systems, each of which are priced between approximately $100,000 and $750,000.
As a result, the timing of significant orders or a reduction in the number of
systems shipped in a quarter could have a material effect on the Company's
revenues and results of operations for that quarter. The results for a
particular quarter may also vary due to a number of factors, including
economic conditions in the semiconductor and hard disk industries, the timing
of shipments of orders to major customers, the mix of products sold by the
Company, competitive pricing pressures and the Company's ability to design,
introduce and manufacture new products on a cost effective and timely basis.
Moreover, customers may cancel or reschedule shipments, and production
difficulties or the inability to obtain critical components could delay
shipments. In addition, the Company's product sales have fluctuated, and are
likely to continue to fluctuate, based on seasonal factors, such as customers'
capital budget approval cycles, among others. These factors could have a
material adverse effect on the Company's results of operations. The Company
has increased its research and development spending in recent periods, in part
to support its development of systems for next-generation 300 millimeter
semiconductor wafers. The Company's expense levels are fixed in advance and
based in part on its expectations as to future revenues. As a consequence, any
material shortfall in revenue in a given quarter could have a material adverse
effect on the Company's earnings.
Rapid Technological Change and Introduction of New Products. The market for
semiconductor wafer and device and computer hard disk metrology and inspection
equipment is characterized by rapid
7
<PAGE>
technological advances, changing customer requirements, evolving industry
standards and frequent new product introductions and enhancements. The
Company's future success will depend in large part on the Company's ability to
enhance its current products and to develop and introduce new products that
keep pace with technological developments, achieve market acceptance and
respond to customer requirements that are constantly evolving. New product
introductions may contribute to fluctuations in quarterly operating results,
as customers may defer ordering products from the Company's existing product
lines. If new products have reliability or quality problems, then reduced
orders, higher manufacturing costs, delays in collecting accounts receivable
and additional service and warranty expense may result. Responding to rapid
technological change and the need to develop and introduce new products to
meet customers' expanding needs and evolving industry standards will require
the Company to make substantial investments in research and product
development. Any failure by the Company to anticipate or respond adequately to
technological developments and customer requirements or any significant delays
in product development or introduction could result in a loss of
competitiveness and could materially adversely affect the Company's operating
results. There can be no assurance that the Company will successfully develop
and manufacture new products or that any product enhancements or new products
developed by the Company will gain market acceptance. The semiconductor wafer
industry is currently undergoing a gradual evolution from 200 millimeter to
300 millimeter wafers. Wafer manufacturers are beginning to establish pilot
production lines and specifications for the manufacture of 300 millimeter
wafers. The Company is currently developing product enhancements and new
products designed to meet increasing demand for metrology and inspection
equipment for 300 millimeter wafers. One of the Company's competitors recently
began shipping an optical inspection product for 300 millimeter wafers. Until
the Company begins shipping its next generation product, the Company's sales
of its wafer inspection systems could be adversely affected. There can be no
assurance that the Company will be able to develop enhancements and new
products successfully or in time to meet emerging demand, or that enhancements
and new products developed by the Company will be accepted by the Company's
customers.
Competition. The semiconductor and computer hard disk equipment industries
are highly competitive. There can be no assurance that companies with
complementary technologies and greater financial resources will not enter
these industries and develop products that are superior to the Company's
products or achieve market acceptance. In the market for optical defect
inspection equipment, the Company competes directly with Hitachi Electronics
Engineering Co., Ltd. and KLA-Tencor Corporation, both of which have
significantly greater financial resources than the Company. In the metrology
area of the device industry, the Company has encountered, and expects to
encounter in the future, competition from companies offering similar and
competing technologies, some of which have significantly greater financial
resources than the Company or an existing market presence in the device
industry, or both. The Company also expects to encounter intense competition
in the areas of metrology and inspection for the hard disk industry. The
Company's competitors can be expected to continue to improve the design and
performance of their products and to introduce new products with competitive
price/performance characteristics. Competitive pressures often necessitate
price reduction which can adversely affect operating results. In order to
remain competitive, the Company must maintain a high level of investment in
research and development and sales, marketing and service. There can be no
assurance that the Company will have sufficient resources to continue to make
such investment or that the Company will be able to make the technological
advances necessary to remain competitive. Currently, the Company's lead times
for the delivery of products to its customers are longer than the industry
average, and, as a consequence, the Company has in a limited number of cases
failed to obtain customer orders. Although the Company is taking steps to
reduce lead times, there can be no assurance that the Company will be
successful in sufficiently reducing its lead times. The failure to
sufficiently reduce lead times may result in lost business in the future and
may have an adverse impact on the Company's business and results of
operations.
KLA Corporation recently acquired a competitor of the Company in the market
for optical defect inspection equipment, Tencor Corporation, to form KLA-
Tencor Corporation. The Company expects that similar acquisitions and business
combinations by competitors and potential competitors of the Company,
8
<PAGE>
in the metrology as well as in the defect inspection markets, may continue in
the future. Acquisitions by the Company's competitors and potential
competitors could allow them to offer new products without the lengthy time
delays typically associated with internal product development, which could
afford such competitors and potential competitors an advantage in meeting
customers' demands. Such acquisitions by others could also have the effect of
limiting the Company's access to commercially significant technologies. The
greater resources, including financial and marketing and support resources, of
competitors engaged in these acquisitions could permit them to accelerate the
development and commercialization of new competitive products and the
marketing of existing competitive products to their larger installed bases.
Accordingly, such business combinations and acquisitions by competitors and
potential competitors could have an adverse impact on both the Company's
market share and the pricing of its products, which could have a material
adverse effect on the Company's business and results of operations.
The Company relies upon a combination of internal product development and
partnerships with certain other companies to broaden its product line to meet
customer demand. The increasing competitiveness within the industry, together
with acquisitions by the Company and its competitors of businesses possessing
complementary technologies, could materially limit the Company's ability to
continue to partner with other companies for new or complementary products,
which could have a material adverse effect upon the Company's ability to offer
in a timely manner products that meet customers' needs.
Management of Growth. The Company has been experiencing a period of
significant growth that could place a strain on its management and other
resources. To support the Company's growth, the Company will need to hire more
engineering, manufacturing, sales and marketing, and support and
administrative personnel, expand customer service capabilities, and update or
expand management information systems, procedures and controls. Competition
for the necessary personnel in the Company's industries is high. There can be
no assurance that the Company will be able to attract and retain the necessary
personnel to accomplish its growth strategies or that it will be able to
satisfy customer demand in a timely fashion and satisfactorily support its
customers and operations or that its information systems, procedures and
controls will be adequate to support the Company's operations. If the
Company's management is unable to manage growth effectively, the Company's
business, operating results and financial condition could be materially
adversely affected.
Customer and Industry Concentration. A relatively limited number of
customers have historically accounted for a substantial portion of the
Company's revenues in each year. In fiscal years 1995, 1996 and 1997, sales to
the Company's top five customers in each period, all of which are in the
semiconductor wafer industry, accounted for approximately 51%, 45% and 50%,
respectively, of the Company's revenue. In fiscal 1997, one of the Company's
customers accounted for 16% of the Company's revenue. The loss of or any
reduction in orders by any of these customers, including reductions due to
market, economic or competitive conditions in the semiconductor industry or in
other industries that manufacture products utilizing semiconductors, could
adversely affect the Company's business, financial condition and results of
operations. In each of the last three fiscal years the Company has derived
over 70% of its revenue, including approximately 77% in fiscal 1997, from
customers in the semiconductor wafer industry. While the Company is focusing
on expanding the level of its business in the device and hard disk industries,
there can be no assurance that the Company's efforts will be successful. The
Company's ability to maintain or increase its sales levels in the future will
depend in part upon its ability to obtain orders from new customers as well as
the financial condition and success of its existing customers and the general
economy. There can be no assurance that the Company will be able to maintain
or continue to increase the level of its revenues in the future or that the
Company will be able to retain existing customers or to attract new customers.
In addition, given the limited number of customers, any delay in collecting,
or inability to collect, accounts receivable could have a material adverse
effect on the Company's financial results. See Note 11 of Notes to
Consolidated Financial Statements.
9
<PAGE>
Dependence on Suppliers. Certain of the components and subassemblies,
including certain systems controllers and robotics components, incorporated in
the Company's systems are obtained from a single source or a limited group of
suppliers. The Company has not qualified a second source for these products
and the partial or complete loss of certain of these sources could have an
adverse effect on the Company's results of operations and damage customer
relationships. Further, a significant increase in the price of one or more of
these components could adversely affect the Company's results of operations.
Risks Associated with International Operations. International sales
accounted for 53%, 59% and 60% of the Company's revenues for the fiscal years
1995, 1996 and 1997, respectively. See Note 11 of Notes to Consolidated
Financial Statements. The Company expects that international sales will
continue to represent a significant percentage of revenues. The Company's
international business may be affected by changes in demand resulting from
fluctuations in interest and currency exchange rates as well as by factors
such as the risk of government financed competition, changes in trade
policies, tariff regulations and difficulties in obtaining U.S. export
licenses.
Patents and Other Intellectual Property. The Company's success depends in
part on its proprietary technology. The Company attempts to protect its
proprietary technology through patents, copyrights, trademarks, trade secrets
and license agreements. The Company believes, however, that its success will
depend to a greater extent upon innovation, technological expertise and
distribution strength. There can be no assurance that the Company will be able
to protect its technology or that competitors will not be able to develop
similar technology independently. No assurance can be given that the claims
allowed on any patents held by the Company will be sufficiently broad to
protect the Company's technology. In addition, no assurance can be given that
any patents issued to the Company will not be challenged, invalidated or
circumvented or that the rights granted thereunder will provide competitive
advantages to the Company. In addition, effective patent, copyright and trade
secret protection may be unavailable or limited in certain foreign countries.
As is typical in the Company's industry, the Company and its customers from
time to time receive letters from third parties, including some of the
Company's competitors, alleging infringement of such parties' patent rights by
the Company's products. There can be no assurance that the Company would
prevail in any litigation seeking damages or expenses from the Company or to
enjoin the Company from selling its products on the basis of such alleged
infringement or that the Company would be able to license any infringed
patents on reasonable terms.
Some customers using certain products of the Company have received a notice
of infringement from Technivision Corporation and Jerome H. Lemelson, alleging
that equipment used in the manufacture of semiconductor products infringes
patents issued to Mr. Lemelson relating to "computer image analysis" or
"digital signal generation and analysis." Certain of these customers have
notified the Company that they may seek indemnification from the Company for
any damages and expenses resulting from this matter. Neither the Company nor
any of its products has been identified by Mr. Lemelson as infringing his
patents. There can be no assurance, however, that Mr. Lemelson would not bring
a claim against the Company for infringement or that the Company would prevail
in any such action. If Mr. Lemelson were to prevail in any such action, the
Company might be required to pay license fees or royalties to Mr. Lemelson,
which could have an adverse impact on the Company's profitability.
Risks Associated with Acquisitions and Alliances. The Company has addressed
the need to offer new products, in part, through the acquisition of technology
and other businesses. The acquisition of other businesses involves numerous
risks, including the difficulty of assimilating the operations, technologies
and products of the acquired business, the diversion of management's attention
from other business concerns, the risks of entering markets in which the
Company has no or limited direct prior experience and must compete with
competitors having stronger market positions, and the potential loss of key
employees of the acquired business. The integration of other businesses into
ADE requires, among other things, integration of product offerings and
coordination of sales, marketing, research, development, and
10
<PAGE>
management organizations. There can be no assurance that such integration will
be accomplished smoothly or successfully. The difficulties of such integration
may be increased by the necessity of coordinating organizations which are
separated geographically. The inability of management to successfully
integrate the operations of such acquired businesses could have a material
adverse effect on the business and results of operations of the Company.
Control By Existing Stockholders. The Company's directors and executive
officers and members of their immediate families will beneficially own
approximately 34% of the Company's outstanding shares of Common Stock upon
completion of this offering. Accordingly, these stockholders acting together
will have the ability to significantly influence corporate actions requiring
stockholder approval, including the election of the Company's directors. This
concentration of ownership may also have the effect of delaying or preventing
a change of control of the Company. See "Management" and "Principal and
Selling Stockholders."
Volatility of Stock Price. The stock market in general and the market for
shares of technology companies in particular recently have experienced extreme
price fluctuations, which have often been unrelated to the operating
performance of the affected companies. Many companies in the semiconductor and
semiconductor equipment industries, including the Company, experienced
dramatic volatility in the market prices of their common stock during the last
two years. The Company believes that factors such as announcements of
developments related to the Company's business or its competitors' or
customers' businesses, fluctuations in the Company's financial results,
general conditions or developments in the semiconductor and semiconductor
equipment industries and the worldwide economy, sales of the Company's Common
Stock into the market, the number of market makers for the Company's Common
Stock, announcements of technological innovations or new or enhanced products
by the Company or its competitors or customers, a shortfall in revenue, gross
margin, earnings or other financial results from or changes in analysts'
expectations and developments in the Company's relationships with its
customers and suppliers, or a variety of factors beyond the Company's control
could cause the price of the Company's Common Stock to fluctuate, perhaps
substantially. There can be no assurance that the market price of the
Company's Common Stock will not experience significant fluctuations in the
future, including fluctuations that are material, adverse and unrelated to the
Company's performance.
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby are estimated to be $50,174,000
($57,768,000 if the Underwriters' over-allotment option is exercised in full),
assuming a public offering price of $26.75 and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses. The
Company will not receive any proceeds from the sale of shares by the Selling
Stockholders. See "Principal and Selling Stockholders."
The Company intends to use the net proceeds from this offering for general
corporate purposes, including research and development, and for acquisitions
of complementary businesses and technologies. The amounts actually expended by
the Company for each purpose and the timing thereof may vary depending upon a
number of factors, including future revenue growth, the amount of cash
generated by the Company's products and the progress of the Company's product
development efforts.
Pending such uses, the net proceeds of this offering will be invested in
interest-bearing bank accounts or short-term, investment grade, interest-
bearing securities.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock trades on the Nasdaq National Market under the
symbol "ADEX." The following table sets forth the high and low sale prices for
each fiscal quarter for the Common Stock as reported by Nasdaq for the periods
indicated.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR ENDED APRIL 30, 1996:
Second quarter (beginning October 18, 1995)............... $18.50 $14.13
Third quarter............................................. 18.25 12.00
Fourth quarter............................................ 16.00 12.50
FISCAL YEAR ENDED APRIL 30, 1997:
First quarter............................................. $22.25 $ 8.75
Second quarter............................................ 11.63 8.25
Third quarter............................................. 20.63 8.38
Fourth quarter............................................ 20.75 16.50
FISCAL YEAR ENDED APRIL 30, 1998:
First quarter (through July 8, 1997)...................... $30.25 $18.25
</TABLE>
The last sale price of the Common Stock on July 8, 1997, as reported by
Nasdaq, was $26.75 per share. As of June 27, 1997 there were 121 holders of
record of the Common Stock. The Company believes that there are more than 300
beneficial holders of its Common Stock.
DIVIDEND POLICY
The Company has never paid or declared any cash dividends on its Common
Stock. The Company currently intends to retain all future earnings for its
business and, therefore, does not anticipate paying cash dividends in the
foreseeable future. Future dividends, if any, will depend on, among other
things, the Company's results of operations, capital requirements,
restrictions in loan agreements and on such other factors as the Company may,
in its discretion, consider relevant.
12
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of April 30, 1997 and as adjusted to reflect the issuance and sale by the
Company of the 2,000,000 shares of Common Stock offered hereby (at an assumed
public offering price of $26.75 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses) and
receipt of the net proceeds therefrom. See "Use of Proceeds." This table
should be read in conjunction with the Company's Consolidated Financial
Statements and the Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
APRIL 30, 1997
--------------------
AS
ACTUAL ADJUSTED
-------- ----------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Long-term debt, less current portion...................... $ 5,091 $ 5,091
-------- ---------
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000 shares
authorized, none issued................................ -- --
Common stock, $.01 par value, 25,000,000 shares
authorized, 8,604,160 shares issued and outstanding;
10,604,160 shares issued and outstanding as
adjusted(1)............................................ 86 106
Capital in excess of par value.......................... 28,660 78,814
Retained earnings....................................... 32,846 32,846
Deferred compensation................................... (204) (204)
-------- ---------
Total stockholders' equity............................ 61,388 111,562
-------- ---------
Total capitalization.................................. $66,479 $ 116,653
======== =========
</TABLE>
- --------
(1) Excludes (i) 774,216 shares of Common Stock issuable upon the exercise of
options outstanding as of April 30, 1997, at a weighted average price of
$8.14 per share, of which options to purchase 199,316 shares were then
exercisable and (ii) 76,590 shares of Common Stock to be issued upon the
exercise of options and sold in this offering by certain Selling
Stockholders.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial data of the Company for
and as of the fiscal years ended April 30, 1993, 1994, 1995, 1996 and 1997.
The selected financial data as of April 30, 1996 and 1997 and for the three
years ended April 30, 1997 have been derived from the Company's consolidated
financial statements which appear elsewhere in this Prospectus and which have
been audited by Price Waterhouse LLP, independent accountants. The selected
financial data as of April 30, 1993, 1994 and 1995 and for the two years ended
April 30, 1994 have been derived from the Company's audited consolidated
financial statements, together with the unaudited financial statements of DMS
as of March 31, 1993, 1994 and 1995 and for the two years ended March 31,
1994. The selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto
included elsewhere in this Prospectus. No cash dividends were declared or paid
in any of the periods presented.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue........................... $27,564 $32,828 $46,152 $67,339 $101,403
Cost of revenue................... 14,278 16,861 23,293 31,135 44,838
------- ------- ------- ------- --------
Gross profit...................... 13,286 15,967 22,859 36,204 56,565
------- ------- ------- ------- --------
Operating expenses:
Research and development....... 5,532 6,073 6,318 7,798 17,012
Marketing and sales............ 4,389 5,981 6,842 10,169 13,665
General and administrative..... 2,953 4,186 4,455 6,759 7,446
------- ------- ------- ------- --------
Total operating expenses..... 12,874 16,240 17,615 24,726 38,123
------- ------- ------- ------- --------
Income (loss) from operations..... 412 (273) 5,244 11,478 18,442
------- ------- ------- ------- --------
Other income (expense):
Interest income (expense), net. (88) (392) (404) 331 329
Gain on sale of land and
building...................... 376 229 -- -- --
------- ------- ------- ------- --------
Total other income (expense). 288 (163) (404) 331 329
------- ------- ------- ------- --------
Income (loss) before provision
(benefit) for income taxes and
equity in net earnings of
affiliated companies............. 700 (436) 4,840 11,809 18,771
Provision (benefit) for income
taxes............................ 249 (83) 1,709 4,004 5,705
------- ------- ------- ------- --------
Income (loss) before equity in net
earnings of affiliated companies. 451 (353) 3,131 7,805 13,066
Equity in net earnings of
affiliated companies............. -- -- -- -- 99
------- ------- ------- ------- --------
Net income (loss)................. $ 451 $ (353) $ 3,131 $ 7,805 $ 13,165
======= ======= ======= ======= ========
Net income (loss) per share....... $ 0.07 $ (0.05) $ 0.47 $ 0.98 $ 1.48
======= ======= ======= ======= ========
Weighted average common and common
equivalent shares outstanding.... 6,609 6,524 6,651 7,965 8,880
======= ======= ======= ======= ========
<CAPTION>
APRIL 30,
-------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......... $ 2,259 $ 1,870 $ 3,277 $21,513 $19,374
Working capital................... 12,223 11,856 15,415 39,828 45,769
Total assets...................... 22,796 25,758 28,763 61,978 88,417
Long-term debt, less current
portion.......................... 1,474 2,121 2,166 677 5,091
Total stockholders' equity........ 13,523 13,200 16,205 46,502 61,388
</TABLE>
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides an analysis of the Company's financial
condition and results of operations and should be read in conjunction with the
"Selected Consolidated Financial Data" and the Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus.
OVERVIEW
The Company was founded in 1967 to develop and market certain advanced
concepts and designs in capacitive and other measurement technologies suitable
for industrial applications requiring precise, reliable, damage-free and
repeatable measurements. The Company's products have evolved from single
instruments used in off-line engineering analysis to multi-function systems
for automated in-line monitoring of process-induced defects throughout the
wafer and disk manufacturing processes. The Company operates in two major
business areas, the Semiconductor Group and the Computer Disk Group. The
Semiconductor Group manufactures multifunctional semiconductor metrology and
automation systems and optical wafer defect inspection equipment used to
detect particles and other defects on wafer surfaces. The Computer Disk Group
is primarily engaged in the production of metrology systems for the computer
hard disk industry.
A relatively limited number of customers have accounted for a substantial
portion of the Company's revenue. Moreover, during the past fiscal year
approximately 77% of the Company's revenue was derived from sales made to
wafer manufacturers, with the remainder of the revenue derived principally
from sales to manufacturers of semiconductor devices and computer hard disks.
The Company derives a substantial portion of its revenue from a relatively
small number of customer orders. These customer orders often consist of
multiple systems, which can range in price from approximately $100,000 to
$750,000. As a result, the timing of significant orders or a reduction in the
number of systems shipped in a quarter could have a material effect on the
Company's revenue and results of operations for that quarter.
The Company records revenue from product sales upon shipment to the
customer. The Company accrues for warranty costs upon shipment and recognizes
service revenue when the service is performed. Revenue under certain long-term
contracts containing custom engineering is recognized under the percentage of
completion method.
In February 1997, the Company acquired all of the outstanding stock of and a
building used by Digital Measurement Systems, Inc. ("DMS") of Burlington,
Massachusetts. DMS provides magnetic measurement equipment and systems to the
computer hard disk manufacturing industry. This transaction has been accounted
for as a pooling-of-interests and, therefore, the accompanying financial
information has been retroactively restated to reflect the financial position
and results of operations and cash flows of the Company and DMS for all
periods presented.
RESULTS OF OPERATIONS
For the periods indicated, the following table sets forth the percentage of
total revenue represented by the respective line items in the Company's
consolidated statement of income.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Revenue........................................... 100.0% 100.0% 100.0%
Cost of revenue................................... 50.5 46.2 44.2
Gross profit...................................... 49.5 53.8 55.8
Operating expenses:
Research and development........................ 13.7 11.6 16.8
Marketing and sales............................. 14.8 15.1 13.5
General and administrative...................... 9.7 10.0 7.3
Income from operations............................ 11.4 17.0 18.2
Other income (expense)............................ (0.9) 0.5 0.3
Net income........................................ 6.8% 11.6% 13.0%
</TABLE>
15
<PAGE>
FISCAL YEAR ENDED APRIL 30, 1997 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1996
Revenue. Revenue increased 50.6% to $101.4 million in fiscal 1997 from $67.3
million in fiscal 1996. The increase was primarily due to increased unit sales
of the Company's products. The increase in unit sales resulted primarily from
strong demand for capital equipment in the semiconductor industry and
increased demand for gaging equipment in the computer disk drive industry. In
fiscal 1997, $6.3 million of revenue was provided by the operations of DMS
versus $1.7 million in fiscal 1996. The Company is currently developing
product enhancements and new products designed to meet increasing demand for
metrology and inspection equipment for 300 millimeter wafers. A competitor of
the Company has recently begun shipping an optical inspection product for 300
millimeter wafers. The Company believes that its next generation product,
which has not yet been shipped to customers, will be technologically superior
to the competitor's new product. Until the Company begins shipping its next
generation product, the Company's sales of its wafer inspection systems could
be adversely affected.
Gross Margin. Gross margin increased to 55.8% in fiscal 1997 from 53.8% in
fiscal 1996. The increase was primarily due to distributing relatively fixed
overhead costs over increased sales. Gross margins were higher in the first
and second quarters of fiscal 1997, as the Company operated near capacity in
its facilities, as compared to the third and fourth quarters of fiscal 1997.
During the third and fourth quarters of the fiscal year, the Company increased
capacity and overhead by moving into a new facility in Westwood, Massachusetts
and by increasing the capacity of its existing facility in Charlotte, North
Carolina. Gross margins in the immediate future are expected to be consistent
with the margins experienced during the third and fourth quarters of fiscal
1997.
Research and Development. Research and development expense in fiscal 1997
increased 118.2% to $17.0 million from $7.8 million in fiscal 1996 and
increased as a percent of revenue to 16.8% from 11.6%. This increase was
primarily due to increased spending on next generation products and expenses
recognized during the fourth quarter for products under development, a portion
of which had been capitalized during the previous three quarters. While future
research and development expenses are expected to increase over previous
quarters as the Company continues development of next generation products, the
Company expects that expenses as a percent of revenue should return to levels
experienced during the first three quarters of fiscal 1997.
Marketing and Sales. Marketing and sales expense increased 34.4% to $13.7
million in fiscal 1997 from $10.2 million in fiscal 1996, but decreased as a
percentage of revenue to 13.5% in fiscal 1997 from 15.1% in fiscal 1996.
General and Administrative. General and administrative expenses increased
10.2% to $7.4 million in fiscal 1997 from $6.8 million in fiscal 1996 and
decreased as a percent of revenue to 7.3% from 10.0%. General and
administrative expenses increased at a lower rate than revenue growth, as
these expenses are relatively stable compared to revenue growth.
Other Income (Expense). Net interest income was $329,000 in fiscal 1997
versus net interest income of $331,000 in fiscal 1996. Interest income was
offset by interest expense associated with an Industrial Development Bond used
to finance the acquisition and renovation of the Westwood manufacturing
facility.
Provision for Income Taxes. The effective tax rates for fiscal 1997 and 1996
were 30.4% and 33.9%, respectively, and differed from the federal statutory
rate primarily because of benefits from the use of a foreign sales corporation
by the Company and state income taxes. The fiscal 1997 rate was lower than the
fiscal 1996 rate due to the benefit of investment tax credits resulting from
increased capital spending in fiscal 1997 and the benefit from federal and
state research and development tax credits realized in the fourth quarter of
fiscal 1997.
16
<PAGE>
FISCAL YEAR ENDED APRIL 30, 1996 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1995
Revenue. Revenue increased 45.9% to $67.3 million in fiscal 1996 from $46.2
million in fiscal 1995. The increase was due to increased unit sales of the
Company's products and a price increase announced in January 1995. The
increase in unit sales resulted primarily from strong demand for capital
equipment in the semiconductor industry and increased demand for gaging
equipment in the computer disk drive industry.
Gross Margin. Gross margin increased to 53.8% in fiscal 1996 from 49.5% in
fiscal 1995. The increase was primarily due to distributing relatively fixed
overhead costs over increased sales and a price increase announced in January
1995, the impact of which occurred during fiscal 1996.
Research and Development. Research and development expense in fiscal 1996
increased 23.4% to $7.8 million from $6.3 million in fiscal 1995, but
decreased as a percentage of revenue to 11.6% in fiscal 1996 from 13.7% in
fiscal 1995, as revenue increased at a rate greater than the increase in
research and development expense. Total expense for research and development
increased as the Company made significant investments in next generation
products.
Marketing and Sales. Marketing and sales expense increased 48.6% to $10.2
million in fiscal 1996 from $6.8 million in fiscal 1995, and increased as a
percentage of revenue to 15.1% in fiscal 1996 from 14.8% in fiscal 1995. This
increase in expenditures was due to additions in staffing required to support
increased demand for the Company's products.
General and Administrative. General and administrative expenses increased
51.7% to $6.8 million in fiscal 1996 from $4.5 million in fiscal 1995. The
increase was due to higher bonus expenses associated with improved
performance, higher employee benefit costs, increased legal fees associated
with various legal matters and additional expenses associated with being a
public company.
Other Income (Expense). Net interest income was $331,000 in fiscal 1996
versus net interest expense of $404,000 in fiscal 1995. The increase in income
resulted from interest earned on the proceeds of the initial public offering
of the Company's Common Stock completed in October 1995, repayment in full of
the outstanding balance of the Company's line of credit in fiscal 1995 and the
cancellation of subordinated debt related to the exercise of warrants in
connection with the initial public offering.
Provision for Income Taxes. The effective tax rates for fiscal 1996 and 1995
were 33.9% and 35.3% respectively, and differed from the federal statutory
rate primarily because of benefits from the use of a foreign sales corporation
by the Company and state income taxes.
17
<PAGE>
SELECTED CONSOLIDATED QUARTERLY OPERATING RESULTS
The following tables set forth consolidated statement of income data for
each of the eight quarters in the period beginning May 1, 1995 and ending
April 30, 1997. This information has been derived from the Company's unaudited
financial statements. The unaudited financial statements have been prepared on
the same basis as the audited financial statements contained herein and
include all adjustments, consisting only of normal recurring adjustments, that
the Company considers necessary to present fairly this information when read
in conjunction with the Company's annual audited financial statements and
notes thereto appearing elsewhere in this Prospectus. The Company's operating
results for any one quarter are not necessarily indicative of results for any
future period.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30,
1995 1995 1996 1996 1996 1996 1997 1997
-------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenue................ $13,559 $15,525 $18,693 $19,562 $19,991 $22,882 $26,193 $32,337
Cost of revenue........ 6,332 7,242 8,670 8,891 8,685 9,882 11,898 14,373
------- ------- ------- ------- ------- ------- ------- -------
Gross profit........... 7,227 8,283 10,023 10,671 11,306 13,000 14,295 17,964
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development.......... 1,712 1,858 1,768 2,460 3,221 3,783 3,757 6,251
Marketing and sales... 2,214 2,258 3,056 2,641 2,977 2,868 3,272 4,548
General and
administrative....... 1,373 1,590 1,699 2,097 1,421 1,676 1,738 2,611
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses........... 5,299 5,706 6,523 7,198 7,619 8,327 8,767 13,410
------- ------- ------- ------- ------- ------- ------- -------
Income from operations. 1,928 2,577 3,500 3,473 3,687 4,673 5,528 4,554
Interest income
(expense), net........ (62) (46) 247 192 151 79 (14) 113
------- ------- ------- ------- ------- ------- ------- -------
Income before provision
for income taxes and
equity in net earnings
(loss) of affiliated
companies............. 1,866 2,531 3,747 3,665 3,838 4,752 5,514 4,667
Provision for income
taxes................. 684 915 1,339 1,066 1,290 1,650 1,851 914
------- ------- ------- ------- ------- ------- ------- -------
Income before equity in
net earnings (loss) of
affiliated companies.. 1,182 1,616 2,408 2,599 2,548 3,102 3,663 3,753
Equity in net earnings
(loss) of affiliated
companies............. -- -- -- -- -- 15 156 (72)
------- ------- ------- ------- ------- ------- ------- -------
Net income............. $ 1,182 $ 1,616 $ 2,408 $ 2,599 $ 2,548 $ 3,117 $ 3,819 $ 3,681
======= ======= ======= ======= ======= ======= ======= =======
Net income per share... $ 0.17 $ 0.22 $ 0.27 $ 0.29 $ 0.29 $ 0.36 $ 0.43 $ 0.41
======= ======= ======= ======= ======= ======= ======= =======
Weighted average common
and common equivalent
shares outstanding.... 6,810 7,323 8,884 8,843 8,864 8,772 8,871 9,012
======= ======= ======= ======= ======= ======= ======= =======
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30,
1995 1995 1996 1996 1996 1996 1997 1997
-------- -------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE OF REVENUE:
Revenue................ 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenue........ 46.7 46.6 46.4 45.5 43.4 43.2 45.4 44.4
Gross profit........... 53.3 53.4 53.6 54.5 56.6 56.8 54.6 55.6
Operating expenses:
Research and
development.......... 12.6 12.0 9.5 12.6 16.1 16.5 14.3 19.3
Marketing and sales... 16.3 14.5 16.3 13.5 14.9 12.5 12.5 14.1
General and
administrative....... 10.1 10.2 9.1 10.7 7.1 7.3 6.6 8.1
Income from operations. 14.2 16.6 18.7 17.8 18.4 20.4 21.1 14.1
Interest income
(expense), net........ (0.5) (0.3) 1.3 1.0 0.8 0.3 (0.1) 0.3
Net income............. 8.7% 10.4% 12.9% 13.3% 12.7% 13.6% 14.6% 11.4%
</TABLE>
The Company's quarterly operating results have varied and may continue to
vary significantly due to a number of factors, including economic conditions
in the semiconductor and computer hard disk industries, the timing of
shipments of orders to major customers, the mix of products sold by the
Company and competitive pricing. Customers may cancel or reschedule shipments.
Production difficulties or the inability to obtain critical components could
delay shipments. These factors could have a material
18
<PAGE>
adverse effect on the Company's results of operations. As cost of revenue
includes manufacturing overhead, which is relatively constant from quarter to
quarter, gross margins can vary significantly from quarter to quarter due to
varying levels of production and revenue. There can be no assurance that the
Company will be profitable in any future period. Marketing and sales expenses
can vary from quarter to quarter based on a number of factors, including mix
of sales channels, geographic mix and timing of marketing events.
LIQUIDITY AND CAPITAL RESOURCES
As of April 30, 1997, the Company had cash and cash equivalents of $19.4
million and working capital of $45.8 million. Net cash provided by operating
activities was $6.6 million. Net income was $13.2 million. This amount was
offset by a $4.4 million increase in accounts receivable resulting from
increased sales and a $8.6 million increase in inventory. Management believes
that inventory levels are larger than necessary for current sales volumes and
has instituted a number of programs to improve inventory turnover in all
facilities. Depreciation and amortization for fiscal 1997 was $1.6 million.
During fiscal 1997, the Company increased its ownership in its Japanese
distributor, Japan ADE Ltd. ("JAL"), from 3.0% to 50.0%. Consequently, in
fiscal 1997, $2.7 million in gross profit from sales to JAL have been deferred
rather than included in income from operations.
During fiscal 1997, $15.0 million of cash was used in investing activities.
Purchases of fixed assets represented $10.4 million of this amount. During the
next fiscal year, the Company does not anticipate investing in fixed assets to
the extent of fiscal 1997. Investments in three companies used an additional
$3.1 million.
Net cash provided by financing activities was $6.3 million. The primary
source of this cash was a $5.5 million Industrial Development Bond used to
finance the purchase and renovation of the manufacturing facility in Westwood,
Massachusetts.
Since inception, the Company has satisfied its cash requirements primarily
through cash flow from operations, private placements and an initial public
offering of the Company's Common Stock, bank borrowings and equipment
financing.
The Company may use a portion of the net proceeds from this offering for
acquisitions of complementary businesses and technologies. The Company
believes that cash from operations, existing cash resources and bank
borrowings, together with the net proceeds of the sale of Common Stock by the
Company in this offering, will be adequate to fund operations for at least the
next 18 months.
The Company's long-term capital requirements will be affected by many
factors, including the success of the Company's current product offerings, the
Company's ability to enhance its current products and to develop and introduce
new products that keep pace with technological developments and general trends
in the semiconductor wafer and device industries. The Company plans to finance
its long-term capital needs with the net proceeds of this offering, together
with existing cash reserves and interest earned thereon, revenue from product
sales, bank loans, leases and debt financings. To the extent that such funds
are insufficient to finance the Company's activities, the Company will have to
raise additional funds through the issuance of additional equity or debt
securities or through other means. There can be no assurance that additional
financing will be available on acceptable terms.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." This statement establishes and simplifies standards for computing and
presenting earnings per share. SFAS No. 128 will be effective beginning with
the Company's quarter ended January 31, 1998 and requires the restatement of
all previously reported
19
<PAGE>
earnings per share data that are presented. Early adoption of SFAS No. 128 is
not permitted. SFAS No. 128 replaces primary and fully diluted earnings per
share with basic and diluted earnings per share. Pro forma earnings per share
under SFAS No. 128 would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------
1993 1994 1995 1996 1997
----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
Pro forma basic net income (loss) per share. $0.07 $(0.05) $0.48 $1.04 $1.55
Pro forma diluted net income (loss) per
share...................................... 0.07 (0.05) 0.47 0.98 1.48
</TABLE>
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." The statement establishes standards for the reporting and display of
comprehensive income and its components. Comprehensive income is defined as
the change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources. It
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners. This standard will require
that an enterprise display an amount representing total comprehensive income
for the period. SFAS No. 130 will be effective for the Company's fiscal year
ending April 30, 1998. Adoption of SFAS No. 130 is not expected to
significantly impact the Company's financial position or results of
operations.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which supersedes SFAS No. 14. This
statement changes the way that public business enterprises report segment
information, including financial and descriptive information about their
operating segments, in annual financial statements and would require that
those enterprises report selected segment information in interim financial
reports to stockholders. Operating segments are defined as revenue-producing
components of the enterprise which are generally used internally for
evaluating segment performance. SFAS No. 131 will be effective for the Company
beginning with the Company's fiscal year ending April 30, 1998. Adoption of
SFAS No. 131 will not impact the Company's financial position or results of
operations.
INFLATION
To date, inflation has not had a significant impact on the Company's
operations.
20
<PAGE>
BUSINESS
OVERVIEW
ADE Corporation is a leader in the design, manufacture, marketing and
service of metrology and inspection systems for the semiconductor wafer
manufacturing industry. In addition, the Company is a growing supplier of
metrology systems to the semiconductor device and computer hard disk
industries. The Company's systems analyze and report product quality at
critical manufacturing process steps, sort wafers and disks and provide
manufacturers with quality certification data. Semiconductor wafer and device
and computer hard disk manufacturers use the Company's systems to improve
yield and capital productivity. The Company's products have evolved from
single instruments used in off-line engineering analysis to multi-function
systems for automated in-line monitoring of process-induced defects throughout
the wafer and disk manufacturing processes. The Company's systems are designed
to deliver the high throughput, reliability and information delivery and
analysis necessary to meet the demands of increasingly complex and time-
sensitive manufacturing processes. The Company has over 35 major products
currently in use by the wafer, device and disk manufacturing industries and
has shipped more than 1,700 systems.
INDUSTRY BACKGROUND
Semiconductor Wafer Manufacturing
The manufacture of a semiconductor device, or "chip", begins with the
production of a semiconductor wafer by a wafer manufacturer and is followed by
the fabrication of integrated circuits on the surface of the wafer by a
semiconductor device manufacturer. Wafer manufacturing is a highly
competitive, commodity business in which facilities operate 24 hours per day,
seven days per week. Any interruption in the supply of wafers to a device
customer can cause that customer to suffer substantial losses.
The wafer manufacturing process is largely mechanical. Measurements are
taken at various stages of the process to identify defects induced by the
manufacturing process, to eliminate unsatisfactory wafer materials from the
process stream and to sort the wafers into batches of uniform thickness to
increase productivity in the next process steps. Use by the wafer manufacturer
of advanced metrology and inspection equipment is essential to maintaining an
uninterrupted flow of ultra-flat, high-quality wafers. Advanced metrology and
inspection equipment provides data to wafer manufacturers which allow them to
identify sources of defects on wafers and to determine methods for controlling
such defect sources in a manner which optimizes productivity, quality and,
ultimately, wafer manufacturing profitability. This equipment must be reliable
and accurate and meet the demanding resolution and repeatability performance
requirements of the industry. As the industry moves to larger wafer sizes and
more advanced technologies, including the use of Epi wafers, the demand for
metrology and inspection systems meeting the above criteria is increasing.
Contamination of the wafer by dust, bacteria, metal particles from the
process or other foreign materials must be monitored and controlled because it
can damage or ruin the wafer. Any steps in the process which involve human
contact increase the level of contamination. The wafer manufacturing industry
seeks to use automated systems wherever possible to reduce this contamination.
The Company believes that semiconductor wafer manufacturers will continue to
further automate existing measurement processes, to improve accuracy and
repeatability over that offered by human operators. In addition, automating
the visual inspection steps at the end of both the Epi and prime processes, as
depicted in the chart below, could reduce manufacturing costs. Automating this
step requires new types of surface defect monitoring systems and enhancements
to existing measurement and inspection systems.
21
<PAGE>
The following is a summary of the steps in a typical wafer manufacturing
process.
[DIAGRAM OF THE STEPS IN A TYPICAL WAFER
MANUFACTURING PROCESS APPEARS HERE]
Semiconductor Device Fabrication
In order to facilitate commercial transactions between the wafer
manufacturer and the device manufacturer, Semiconductor Equipment and
Materials International ("SEMI"), an industry standards organization, has
developed the Silicon Wafer Order Form ("SWOF"), which identifies more than 40
independent parameters that may be specified, controlled and certified.
Incoming wafers are generally sample inspected to ensure that they comply with
the SWOF parameters specified by the device manufacturer. This inspection is
typically done using automated systems of the same type used by the wafer
manufacturer for outgoing inspection.
Following inspection, multiple layers are created on the surface of the
wafer through repeated photolithographic cycles. Multiple processing cycles
result in microtopographical variations which may significantly interfere with
photolithography. Successful photolithography requires extreme wafer flatness
and freedom from optical surface defects. The CMP process, recently adopted by
many leading device manufacturers, reflattens the wafer prior to many of the
photolithographic cycles. CMP may be used multiple times during the device
fabrication process. CMP, however, can leave process-induced defects on the
wafer surface. Measurements are made to ensure that the flatness of the wafers
entering each process cycle is suitable and to control other optical defect-
related trends during processing which, if
22
<PAGE>
unchecked, lead to reduced yield and higher per-unit costs. Finally,
measurement and control of the "backgrind" process used to produce thinner
chips for notebook computers, PCMCIA devices and "smart" cards is critical to
device yield.
Yield management is an area of growing importance in the device fabrication
process. As a consequence, yield management software tools are emerging which
integrate and analyze data produced by automated defect classification and
particle inspection tools.
Computer Hard Disk Manufacturing
Computer hard disk drives consist of a spindle, on which one or more hard
disks are mounted, and read-write "flying heads" (generally, two per disk)
which write data onto the surface of the disk and, thereafter, read back the
data for use in the computer. MR head technology has placed rigorous new
demands on magnetic data storage disk specifications. Higher density disks are
more vulnerable to variability in manufacturing processes. Process variations,
which in the past had negligible effects on disk yield, can render disks
intended for advanced MR technology data storage useless.
The computer hard disk manufacturing process, like the semiconductor wafer
manufacturing process, is largely mechanical. Hard disks, like wafers, are
delicate, flat, round and thin. They are commodity products made in very large
volumes, and are subject to many of the same yield loss problems that result
from manufacturing process variations. Disk manufacturing lines operate all
over the world, 24 hours per day, seven days a week, placing a premium on
equipment up-time and worldwide support. As the pace of disk drive technology
has continued to accelerate, hard disk manufacturers, who had previously used
internally developed solutions, are instead looking to outside vendors of
automated in-line metrology and inspection equipment.
Off-line, quality control lab measurements are taken at various stages of
the process in order to qualify and manage the process. These measurements are
moving in-line, as normal process variations lead to unacceptable yield loss
in the manufacture of disks for the latest MR technology disk drives. These
in-line measurements are utilized to identify defects induced by the
manufacturing process, to eliminate unsatisfactory disks from the process
stream and to sort the disks into batches of uniform thickness to increase
productivity in the next process step. Contamination of the disk by dust,
metal particles from the process or other foreign materials must be monitored
and controlled because it can damage or ruin the disk. Any steps in the
process which involve human contact increase the level of contamination. The
disk manufacturing industry seeks to use automated systems wherever possible
to reduce this contamination.
23
<PAGE>
THE ADE STRATEGY
The Company intends to maintain its leadership position in the design,
manufacture, marketing and service of metrology and inspection systems for the
wafer manufacturing industry. The Company also recognizes an increasing need
for metrology and inspection equipment in the computer hard disk and
semiconductor device manufacturing industries and intends to increase its
penetration in these areas. In order to achieve these objectives, the Company
is pursuing the following strategies:
Broaden and Integrate Metrology and Inspection. Through internal development
and acquisitions, the Company continues to increase the number and type of
metrology and inspection functions that its products perform. The Company also
intends to automate functions currently performed by human inspectors and to
integrate them with existing automated functions into fully automated
workcells. These product line goals are intended to maximize yields and reduce
costs by eliminating process steps, replacing human inspectors and reducing
contamination.
Leverage Automated Metrology Capability into Device and Hard Disk Markets.
The Company believes that its existing technologies are well-suited for
emerging metrology and inspection requirements in the device fabrication and
computer hard disk manufacturing processes. The Company is developing software
to enable its existing measurement tools to support new applications in the
device fabrication process. In the hard disk industry, the Company is
broadening the functions its products perform and developing automated, in-
line production capacity systems.
Provide Yield Management Software Solutions. The Company is committed to
providing software solutions which increase its customers' yield management
and capital productivity. The Company's MicroSpec Automated Defect
Classification System is well-suited to meet the device manufacturing
industry's growing need to replace human classification of patterned wafer
defects with automatic defect classification. In addition, the Company
continues to develop information management software tools to further
integrate its systems with manufacturers' information systems.
Leverage Strong Customer Relationships and Emphasize Worldwide Service and
Support. The Company's product development plans are driven by an intimate
knowledge of its customers' development plans and process requirements, which
is developed through frequent contact between the customers and the Company's
technology, engineering, marketing, sales and management personnel. In
addition, the Company makes uninterrupted, uniform worldwide service available
to support its customers' requirements for extreme reliability and continuous
equipment up-time. The Company's dedicated service and applications staff and
affiliated distributors in Japan and the Far East provide timely and efficient
customer service and support worldwide. The Company believes that its
worldwide service organization is an important competitive advantage.
Maintain Technological Leadership. The Company intends to maintain its
technological leadership position by continuing its research and product
development activities and acquiring complementary businesses and
technologies. The Company seeks to protect its intellectual property through a
strong patent program. Technological innovation in the areas of non-contact
capacitive metrology, laser/optical based surface metrology and automation
systems has been critical to the Company's success. The Company intends to
expand its proprietary model-based design methodology and to continue adding
key technologists.
24
<PAGE>
PRODUCTS
ADE's product strategy is to develop versatile, modular instrumentation and
automation sub-systems that can be assembled to form a number of integrated
products. These products support multiple metrology and inspection functions
and sorting in the semiconductor wafer and device and hard disk fabrication
processes. The Company has over 35 major products currently in use by the
semiconductor wafer and device and hard disk manufacturing industries and has
shipped more than 1,700 systems. During the past fiscal year, semiconductor
equipment sales to wafer manufacturers have generated approximately 77% of the
Company's annual revenues. The Company, however, must continue to develop and
introduce new products and product enhancements to keep pace with
technological developments and changing customer requirements. See "Risk
Factors--Rapid Technological Change and Introduction of New Products."
The Company's principal products in the semiconductor wafer, semiconductor
device and computer hard disk and disk drive industries and OEM automation are
described below. All metrology and inspection systems have the capability to
record, print and store measurement data locally, as well as distribute the
data via a network for yield and process management, future analysis and SWOF
quality certification.
Semiconductor Industry Products
WAFERCHECK 7000 SERIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
MODEL # PRICE RANGE TARGET MARKET MEASUREMENT APPLICATIONS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7000 $160K to Wafer Thickness, Thickness Variation, Sorting, Process Control
$475K Flatness, Shape, Resistivity, Type,
Fiducial Verification, Mark Reading
--------------------- ---------------------------------------------------------------------
7200 $200K to Thickness, Thickness Variation, Flatness, Final Inspection
$750K Shape, Resistivity, Type, Fiducial
Verification, Mark Reading
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The WaferCheck 7000 series of products are flexible, modular systems capable
of automatically characterizing, inspecting and sorting semiconductor wafers.
The WaferCheck 7000, the first large-scale, automated metrology system for the
wafer manufacturing market, was introduced by the Company in 1983. To meet the
industry's increasing demand for the manufacture of 200 millimeter wafers, the
Company introduced the WaferCheck 7200 in 1987. These systems measure
thickness, flatness, shape, conductivity type, and resistivity on as-cut and
etched wafers and provide high speed sorting. The products combine an
automated transfer belt module with one or more customer selected measurement
modules into a single, floor mounted system. These systems, which are capable
of operating in a class 1000 cleanroom environment, provide a non-destructive
in-line sorting capability and precise wafer classification at submicron
accuracies.
ULTRASCAN 9000 SERIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
MODEL # PRICE RANGE TARGET MARKET MEASUREMENT APPLICATIONS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9300 $250K to
9350 $500K Wafer and Thickness, Thickness Variation, Flatness, Sorting, Process Control,
- ----------------------- Device Shape, Resistivity, Type, Fiducial Incoming Inspection,
9600 $360K to Verification, Mark Reading Final Inspection
9650 $590K
- --------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
The UltraScan 9000 series of products are high throughput, in-line
production systems that perform metrology and sorting at various stages of the
wafer manufacturing and device fabrication processes. The 9300 and 9350
systems, introduced in 1990, employ the Company's E station measurement module
to measure thickness down to an accuracy of 0.5 microns. The 9600 and 9650
systems, introduced in 1994 and based on the more advanced E-Plus station,
measure thickness down to an accuracy of 0.25 microns. The 9350 and 9650
systems have a smaller footprint than their larger counterparts, making them
more suitable for applications in the device fabrication process, including
photolithography, thermal processing, CMP and thin film deposition. The
UltraScan 9000 systems are capable of being operated in a class 10 cleanroom
environment. The UltraScan 9000 systems measure wafer thickness, flatness,
shape, conductivity type and resistivity and can be integrated with factory
automation systems using industry standard protocols.
ULTRAGAGE 9000 SERIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
MODEL # PRICE RANGE TARGET MARKET MEASUREMENT APPLICATIONS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9500 $150K to
$220K Wafer and Thickness, Thickness Variation, Process Control,
- --------------------- Device Flatness, Shape, Stress, Fiducial Incoming Inspection,
9700 $210K to Verification Final Inspection
$260K
- -------------------------------------------------------------------------------------------------
</TABLE>
The UltraGage 9000 series of products are benchtop metrology systems
containing a single measurement module, which is capable of making selected
measurements, including flatness, thickness and stress. The UltraGage 9500
system, introduced in 1992, is based on the Company's E station measurement
module. The UltraGage 9700 system, introduced in 1995, is based on the E-Plus
station measurement module. The UltraGage 9000 systems are capable of being
operated in a class 10 cleanroom environment. These systems were designed to
operate together with applications software to be used by device manufacturers
in applications such as CMP and thermal processing.
DCS AUTOMATIC DEFECT CLASSIFICATION SERIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
MODEL # PRICE RANGE TARGET MARKET MEASUREMENT APPLICATIONS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DCS-II $160K to Device Automatic Patterned Wafer Process Control for Memory
$220K Defect Classification and Yield and Logic Device Fabrication
Management
- -------------------------------------------------------------------------------------------------------
</TABLE>
The MicroSpec DCS-II series is a fully integrated in-line automatic defect
classification (ADC) system. The OpenADC(TM) approach to yield management of
the DCS-II tool allows device process engineers to mix and match automated
defect inspection, yield management and defect review tools for their
inspection strategies. The DCS-II streamlines and strengthens the yield
enhancement process, providing greater accuracy and repeatability than
previously possible and eliminating the need for human operators.
WIS SERIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
MODEL # PRICE RANGE TARGET MARKET MEASUREMENT APPLICATIONS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WIS-CR81 $300K to Wafer Surface Defects (Particles, Sorting, Process Control,
WIS-CR82 $450K Scratches, Haze, Dimples, Inspection
Slip and Various Visual Defects)
- ----------------------------------------------------------------------------------------------------
</TABLE>
The WIS series products are high throughput, in-line production systems that
are used to detect, measure and characterize particles and other defects on
wafer surfaces and provide process analysis and control information for the
wafer manufacturer. The first of these optical-based systems was introduced in
26
<PAGE>
1981. Based on the Company's existing CR80 production tool design, the WIS-
CR81 and WIS-CR82, introduced in 1997, detect particles down to 0.1 microns on
wafers up to 200 millimeters in diameter. The WIS systems can be integrated
with factory automation systems using industry standard protocols. A variety
of software packages are available from the Company to tailor the system to
specific customer requirements. The WIS systems are capable of being operated
in a class 10 cleanroom environment.
Disk Industry Products
VIBRATING SAMPLE AND TORQUE LABORATORY MAGNETOMETERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
MODEL # PRICE RANGE MEASUREMENT APPLICATION
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
880 $110K to Measurement of Magnetic Properties and R&D Tool for Basic Analysis
990 $275K Temperature and Directional Variations of Magnetic Materials
1660
- ----------------------------------------------------------------------------------------------
</TABLE>
These computerized systems are used for the magnetic characterization of a
broad range of materials (i.e. disks, tapes, powders, crystals, magneto-optic
materials and superconducting materials). Since only a small piece of a
magnetic material can be measured in these laboratory systems, a magnetic disk
must be cut in order to be measured in such systems.
Model 1660 is the only magnetometer which combines Vibrating Sample
Magnetometer (VSM) and torque measurements in a single tool.
ROBOTIC KERR-EFFECT AND MRT MAGNETOMETERS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
MODEL # PRICE RANGE MEASUREMENT APPLICATIONS
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
660-KEM $185K to Yield Management, Quality Control, High Speed, Fully Automated
670-KEM $300K and Process Control of Computer Mapping of Magnetic and Other
775-MRT Hard Disk Manufacturing Lines Properties of Computer
780-MRT Hard Disks
785-KM
790-KM
- -------------------------------------------------------------------------------------------
</TABLE>
These are fully automated in-line robotic systems used for fast and accurate
mapping of the important magnetic properties of computer hard disks. The
systems have the capability to record, store, process and print measurement
results locally, as well as to transmit the data to a network for process
tune-up, quality control, certification, and subsequent sorting of the disks.
The Company believes these robotic systems are the only commercially
available automated high speed in-line magnetic properties measurement tools
available for the disk manufacturing industry.
AUTOGAGER 1500 SERIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
MODEL # PRICE RANGE MEASUREMENT APPLICATIONS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
1500 $250K to Thickness, Thickness Variation Sorting, Process Control
$350K
- ----------------------------------------------------------------------------------
</TABLE>
The Autogager 1500 series of products are modular systems capable of
automatically characterizing, inspecting and sorting hard disks. The Autogager
1500, the first large-scale, automated dimensional metrology system for the
hard disk market, was introduced by the Company in 1996 to meet the industry's
increasing demand for the manufacture of MR quality hard disks. These systems
measure thickness and thickness variation on advanced hard disks and provide
high speed sorting. The products combine an industrial robot with the
company's capacitive dimensional metrology into a single, floor-mounted
system. These systems, which are capable of operating in a class 1000
cleanroom environment, provide a non-destructive in-line sorting capability
and precise disk classification at submicron accuracies.
27
<PAGE>
OEM Automation Components
The Company has developed a series of robots, prealigners and wafer
elevators for use in its automated systems. The Company also markets and sells
these automation components to semiconductor equipment manufacturers. These
automation components range in price from $7,000 to $29,000. The Company's OEM
product revenues accounted for approximately 3% of revenues in fiscal 1997.
PRODUCTS IN DEVELOPMENT
In order to maintain its technology leadership, the Company continues to
introduce new products. Among those products under development are the
Company's Galaxy 10000 Series, specifically designed for 300 millimeter
wafers, and the EpiScan 9900 Series.
GALAXY 10000 SERIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
MODEL # PRICE RANGE TARGET MARKET MEASUREMENT APPLICATIONS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AFS-300 $650K to Wafer and Thickness, Thickness Variation, Sorting,
$1,000K Device Flatness, Shape, Resistivity, Type, Process Management,
Fiducial Verification, Mark Reading Incoming Inspection,
Final Inspection
- -------------------------------------------------------------------------------------------------------
AWIS-300 $650K to Wafer and Front and Backside Surface Sorting,
$1,000K Device Inspection for Particles, Crystal Process Management,
Defects, and Visual Defects Incoming Inspection,
Final Inspection
- -------------------------------------------------------------------------------------------------------
</TABLE>
The Galaxy series of products are modular, high throughput, in-line
production systems that perform metrology and sorting at various stages of the
wafer manufacturing and device fabrication processes. A key feature of the
systems is their unique ability to measure both the front and back surface of
the wafer, holding the wafer gently and only by the edges, so as not to
introduce any damage or contamination on either the front or the back surface
of the wafer. The AFS-300 and the AWIS-300 systems employ the identical wafer
handling platform.
The AFS-300 series systems, introduced in 1997, are generally operated in a
class 10 cleanroom environment, and are based on ADE's advanced E-Plus
station, measure thickness down to an accuracy of 0.25 microns. The AFS-300
series systems measure wafer thickness, flatness, shape, conductivity type and
resistivity and can be integrated with factory automation systems using
industry standard protocols. The Company has delivered beta units to certain
customers.
The AWIS-300 series systems, currently in the final stages of development,
are based on ADE's proprietary ARS (Angle Resolved Scatter) technologies for
the optical inspection of bare and film wafer surfaces, and are intended for
use in a class 1 or better cleanroom environment. The AWIS-300 is designed to
provide the combination of front and backside measurement, sensitivity,
throughput and sorting capabilities required by wafer manufacturers.
EPISCAN 9900 SERIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
MODEL # PRICE RANGE TARGET MARKET MEASUREMENT APPLICATIONS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9900 $150K to Wafer and Epi Thickness, Thickness Variation, Incoming Inspection,
$220K Device Dopant Profile Final Inspection,
Process Control
- -------------------------------------------------------------------------------------------------------
</TABLE>
The EpiScan 9900 series of products are benchtop metrology systems
containing a single measurement module, which is capable of making selected
measurements, including Epi thickness, thickness variation and dopant profile.
The EpiScan 9900 system, introduced in 1997, is based on advanced, model-based
FTIR (Fourier Transform Infrared Spectroscopy) technology licensed to the
Company by On-Line Technologies, Inc. The UltraGage 9900 system is capable of
being operated in a class 10 cleanroom environment.
28
<PAGE>
TECHNOLOGY
The Company's metrology and inspection products use its proprietary non-
contact capacitive, magnetic and optical technologies to measure the
dimensional, magnetic and surface characteristics of semiconductor wafers and
devices and hard disks.
Dimensional Technology
The Company's non-contact capacitive gaging technology, which is the subject
of a series of patents, is used to measure the dimensional parameters
(thickness, flatness, shape) of semiconductor wafers, computer hard disks and
other objects. Non-contact technology has largely displaced traditional
contact gages, which can damage the wafer through physical contact.
The Company's capacitive dimensional gaging technology is based on the
measurement of the capacitance between a measurement probe and the surface of
the object. The capacitance varies as a precise function of the distance
between the probe and the object being measured, permitting the distance to be
measured with a precision of better than 0.01 microns. For example, in the
measurement of a semiconductor wafer, two probes, one on each side of the
wafer, map both wafer surfaces simultaneously. Electronic circuitry converts
the probe capacitance signal into distance signals which are translated by the
Company's software to produce information concerning the wafer's thickness,
flatness and shape.
ADE's capacitive dimensional technology has a number of advantages over
other non-contact measurement methods. Unlike optical, magnetic or acoustic
technologies, capacitive gaging is not significantly affected by environmental
conditions such as temperature and humidity or by the optical properties and
material characteristics of the wafer. As a result, the Company believes that
its capacitive dimensional technology provides a superior combination of
accuracy, precision and stability, greater bandwidth and a broader range of
potential applications than these other technologies.
Surface Inspection Technology
The Company uses optical methods to detect microscopic surface defects. A
finely focused laser beam is scanned over the surface of the wafer. Surface
particles or defects cause some of the beam's energy to scatter. Sensitive
detectors quantify this scattering signal, which is translated by the
Company's software to produce information about particles, microscratches,
haze and other process induced defects on the wafer surface. Although the
principles of the Company's optical technology are similar to those used by
other manufacturers, the Company believes its theoretical modeling and
patented optical engineering and proprietary software result in products
having a superior combination of high sensitivity and throughput.
Fourier Transform Infrared Spectroscopy Technology
Fourier Transform Infrared Spectroscopy Technology ("FTIR") is used in a
broad range of laboratory applications for examining various technical
properties of materials and chemicals. On-Line Technologies, Inc., a
Connecticut-based technology company, has licensed its FTIR technology to ADE
for incorporation into metrology tools for the wafer market.
ADE is integrating this technology, which primarily has been confined to
laboratory devices, as a metrology module into its automated in-line metrology
tools in order to provide the increasing precision and accuracy needed to
support the SWOF in the face of ever-tightening Epi specifications.
Magnetics Characterization Technology
The Company's products for characterizing magnetic materials use a variety
of non-contact measurement technologies including lasers (the Kerr effect),
vibrating sample and torque-effect inductive sensing techniques. The Company
believes its theoretical modeling and magnetics engineering enable it to offer
automated products with superior sensitivity, speed, accuracy, and
reproducibility.
29
<PAGE>
Proprietary Software
ADE's proprietary software analyzes and transforms the large amounts of data
generated by ADE's metrology and inspection systems to produce information
about process induced defects that aids in process control. The flexible
design of the software permits reconfiguration of the Company's products to
serve new applications with a minimum of hardware or software redesign or
development. The Company's software is designed to integrate the Company's
various metrology functions with one another and to implement industry
standards for integrating the Company's products with the manufacturing
facility's information systems. The Company currently is seeking patent
protection on certain features of its software.
MARKETING, SALES AND CUSTOMER SUPPORT
The Company markets and sells its semiconductor metrology and inspection
products through its direct sales force, distributors and independent sales
representatives. The Company markets and sells its metrology and inspection
products in the United States, Europe and Malaysia through full-time
salespersons located in Milpitas, Dallas, Portland and Boston, in the United
States, in the United Kingdom, in Germany, and in Malaysia. During the past
fiscal year, approximately 50% of the Company's revenues were derived through
its direct sales organization. The Company's direct sales force is supported
by applications engineers in selected field offices and in its manufacturing
locations.
Sales of dimensional systems in Japan are supported by Japan ADE Limited, a
joint venture of the Company and Kanematsu Electronics, Ltd. Sales of optical
surface inspection products are provided in Japan by a separate distributor.
The Company also sells its semiconductor metrology and inspection products in
Israel, South Korea, Singapore, Taiwan, India and the People's Republic of
China through independent sales representatives. The Company markets and sells
its computer hard disk products in the United States through two full-time
salespersons and internationally through distributors and sales
representatives. The Company's gaging products are sold worldwide through
distributors and independent sales representatives.
The selling process for the Company's products frequently involves
participation by sales, marketing and customer support personnel. Customers
and potential customers often evaluate the Company's products by sending
semiconductor wafers to the Company for measurement or by installing
demonstration equipment at their facilities. The Company maintains
demonstration equipment at its manufacturing sites and some of its sales
offices for this purpose. The Company plans to increase its investment in
demonstration equipment to accelerate the introduction of products. The
Company's marketing activities also include participation in international
standards organizations, trade shows, publication of articles in trade
journals, participation in industry forums and distribution of sales
literature.
The Company believes that its strong commitment to service is essential,
based on the growing complexity of the equipment used in the semiconductor
manufacturing process. This complexity makes it difficult for semiconductor
wafer and device manufacturers to maintain an internal workforce sufficiently
skilled and specialized to support the disparate equipment and technologies
used in their processes. ADE has customer support centers in Boston,
Charlotte, Austin, Dallas, Milpitas, Portland, Milton Keynes, England, Munich,
Germany and Kuala Lumpur, Malaysia. The Company's customer support and service
staff currently consists of 74 persons. In addition, the Company's
distributors and sales representatives provide customer support. ADE also
offers training programs and maintenance contracts for its customers. The
Company offers warranties of up to twelve months covering the performance and
reliability of its products. In each of the past four years, the Company was
selected as one of the "ten-best" semiconductor measurement equipment
manufacturers in the world in customer surveys conducted by VLSI Research Inc.
30
<PAGE>
CUSTOMERS
The Company's customers include all of the leading semiconductor wafer
manufacturers and many of the leading semiconductor device and computer hard
disk and disk drive manufacturers throughout the world. Historically, a
relatively limited number of customers have accounted for a substantial
portion of the Company's revenues. In fiscal years 1995, 1996 and 1997, sales
to the Company's top five customers accounted for approximately 51%, 45% and
50%, respectively, of the Company's revenue. During fiscal year 1997, one of
the Company's customers accounted for 16% of the Company's revenue. See "Risk
Factors--Customer and Industry Concentration." During the past fiscal year,
approximately 77% of the Company's revenues were derived from sales made to
wafer manufacturers, with the remainder of the Company's revenues derived from
sales to manufacturers of semiconductor devices, and computer hard disks and
disk drives and semiconductor equipment. The Company's principal customers are
as follows:
SEMICONDUCTOR WAFER MANUFACTURERS
Komatsu
LG Silicon
MEMC Electronic Materials
Mitsubishi International Corporation
Posco Huls Company
Shin-Etsu Handotai Co.
Sumitomo Sitix Silicon
Toshiba Corporation
Wacker Siltronic Corporation
SEMICONDUCTOR DEVICE MANUFACTURERS
IBM Corporation
Intel Corporation
Lucent Technologies
Motorola
SGS Thomson
Texas Instruments
Winbond Electronic Corporaton
COMPUTER HARD DISK AND DISK DRIVE MANUFACTURERS
Akashic Memories
HMT Corporation
Hyundai Electronics
IBM Corporation
Komag
Seagate Technology
Trace
Western Digital
RESEARCH AND DEVELOPMENT
The market for semiconductor wafer and device and computer hard disk and
disk drive equipment is characterized by rapid technological change and
product innovation. The Company's research and development efforts are
designed to enhance the Company's current products and develop and introduce
new products to keep pace with technological developments and respond to
constantly evolving customer requirements. The Company devotes significant
resources to programs directed towards developing new and enhanced products,
as well as developing new applications for existing products.
As of April 30, 1997, the Company employed a full-time research and
development staff of 131 persons. In fiscal years 1995, 1996 and 1997, the
Company's research and development expenditures
31
<PAGE>
were $6.3 million, $7.8 million and $17.0 million respectively, representing
13.7%, 11.6% and 16.8% of revenues. Research and development expenditures
consist primarily of salaries, project materials and other costs associated
with the Company's ongoing research and development efforts. See "Risk
Factors--Rapid Technological Change and Introduction of New Products."
Industry standards organizations, such as SEMI and American Standards for
Testing and Materials ("ASTM"), are pivotal in defining the test methods,
measurement parameters and specifications governing commercial transactions
within the semiconductor industry. The Company maintains a significant
presence on standards committees of SEMI, ASTM and other international
standards organizations. The Company believes that its involvement with these
organizations has helped to ensure that the Company's new products conform to
industry standards.
BACKLOG
At April 30, 1997, the Company's backlog was approximately $61 million. The
Company schedules production based on firm customer commitments and
anticipated orders during the planning cycle. The Company includes in its
backlog only those customer orders for which it has accepted written purchase
orders against which it expects to ship within the following twelve months.
All orders are subject to cancellation or delay by the customer with limited
or no penalty. The Company does not believe that the level of backlog is an
accurate indicator of the Company's future performance. See "Risk Factors--
Fluctuations of Quarterly Operating Results."
MANUFACTURING
The Company's principal manufacturing activities take place at its ISO 9001-
registered facility near Boston, Massachusetts, where dimensional metrology
systems are manufactured, and Charlotte, North Carolina, where optical surface
inspection equipment is manufactured. Certain of the Company's gaging products
for the computer disk and disk drive and other industries are manufactured in
Milpitas, California. Manufacturing activities consist primarily of assembling
and testing components and subassemblies which are supplied by third party
vendors and then integrated into the Company's finished products. Many of the
components and subassemblies are standard products, although certain items are
made to Company specifications. The Company manufactures its semiconductor
metrology and inspection systems in a cleanroom environment.
Certain components and subassemblies, including certain system controllers
and robotics components incorporated into the Company's systems, are obtained
from a single source or a limited group of suppliers. Management routinely
monitors single or limited source supply parts, and the Company endeavors to
ensure that adequate inventory is available to maintain manufacturing
schedules should the supply of any part be interrupted. Although the Company
seeks to reduce its dependence on sole and limited source suppliers, it has
not qualified a second source for these products and the partial or complete
loss of certain of these sources could have an adverse effect on the Company's
results of operations and damage customer relationships. See "Risk Factors--
Dependence on Suppliers." Further, a significant increase in the list price of
one or more of these components could adversely affect the Company's results
of operations.
COMPETITION
The semiconductor and computer hard disk equipment industries are highly
competitive. While the Company believes that it does not presently have
significant established competitors in the metrology area of the semiconductor
wafer equipment industry, there can be no assurance that companies with
complementary technologies and greater financial resources will not enter the
industry and develop products that are superior to the Company's products or
achieve market acceptance. In the market for optical defect inspection
equipment, the Company competes directly with Hitachi Electronics Engineering
32
<PAGE>
Co., Ltd. and KLA-Tencor Corporation, both of which have significantly greater
financial resources than the Company. In the metrology area of the device
industry, the Company has encountered, and expects to encounter in the future,
competition from companies offering similar and competing technologies, some
of which have significantly greater financial resources than the Company or an
existing market presence in the device industry, or both. The Company also
expects to encounter intense competition in the areas of metrology and
inspection for the hard disk industry. The Company's competitors can be
expected to continue to improve the design and performance of their products
and to introduce new products with competitive price/performance
characteristics. Competitive pressures can necessitate price reduction which
can adversely affect operating results. Although the Company believes that it
has certain technical and other advantages over its competitors, maintaining
such advantages will require a continued high level of investment by the
Company in research and development and sales, marketing and service. There
can be no assurance that the Company will have sufficient resources to
continue to make such investment or that the Company will be able to make the
technological advances necessary to maintain such competitive advantages.
PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS
The Company relies on a combination of patent, copyright, trademark and
trade secret laws and license agreements to establish and protect its
proprietary rights in its products. The Company believes, however, that its
success depends to a greater extent upon innovation, technological expertise
and distribution strength. The Company requires each of its employees,
including its executive officers, to enter into standard employee agreements
pursuant to which the employee agrees to keep confidential all proprietary
information of the Company and to assign to the Company all rights in any
proprietary information or technology made or contributed by the employee
during his or her employment or made thereafter as a result of any inventions
conceived or work done during such employment. Despite these precautions, it
may be possible for a third party to copy or otherwise obtain and use the
Company's products or technology without authorization or to develop similar
technology independently. In addition, effective patent, copyright and trade
secret protection may be unavailable or limited in certain foreign countries.
The Company currently holds 26 United States patents and 15 foreign patents
covering existing and potential products and has applied for 4 additional
patents in the United States and 14 additional foreign patents.
The Company has licensed its prealigner patents to a number of companies
following the settlement of a patent infringement suit brought by the Company.
The Company is actively pursing similar licensing arrangements with a number
of other companies.
As is typical in the Company's industry, the Company and its customers from
time to time receive letters from third parties, including some of the
Company's competitors, alleging infringement of such parties' patent rights by
the Company's products. There can be no assurance that the Company would
prevail in any litigation seeking damages or expenses from the Company or to
enjoin the Company from selling its products on the basis of such alleged
infringement or that the Company would be able to license any valid and
infringed patents on reasonable terms. See "Risk Factors--Patents and Other
Intellectual Property."
EMPLOYEES
As of April 30, 1997, the Company employed a total of 538 persons at all of
its locations, including 227 in manufacturing, 131 in research and
development, 50 in marketing and sales, 74 in customer service and 56 in
administration.
Management believes that the Company's ongoing success depends on its
continued ability to attract and retain highly skilled employees. There can be
no assurance that the Company will be successful in attracting or retaining
such personnel. None of the Company's employees is represented by a labor
union,
33
<PAGE>
and the Company has experienced no work stoppages. The Company considers its
employee relations to be good.
FACILITIES
The Company's principal operations are located in an approximately 117,000
square foot company-owned building in Westwood, Massachusetts; a 46,000 square
foot building in Newton, Massachusetts under a five-year lease that expires in
May 2002; and a 38,000 square foot building in Charlotte, North Carolina under
a ten-year lease that expires in September 2004. The Company also owns a
14,400 square foot building in Burlington, Massachusetts and leases space for
sales and customer support offices in various other locations.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
34
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
July 1, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert C. Abbe................................. 59 President, Chief Executive
Officer and Director
E. Fred Schiele................................ 45 Vice President and General
Manager, ADE Semiconductor
Systems
Mark D. Shooman................................ 50 Vice President and Chief
Financial Officer
Noel S. Poduje................................. 52 Vice President of Strategic
Technology Development
William H. Ohm................................. 50 Vice President and General
Manager of ADE Technologies,
Inc.
Barry Glasgow.................................. 51 Vice President of Worldwide
Sales and Customer Support
Landon T. Clay(1).............................. 71 Chairman of the Board
Harris Clay(2)................................. 70 Director
Francis B. Lothrop, Jr.(1)(2).................. 69 Director
H. Kimball Faulkner(2)......................... 66 Director
Kendall Wright(1).............................. 71 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Robert C. Abbe founded the Company in 1967. Since that time, he has served
as President, Chief Executive Officer and a director of the Company. Mr. Abbe
received an A.B. in Physics from Harvard College.
E. Fred Schiele joined the Company in 1996 and serves as the Vice President
and General Manager of the ADE Semiconductor Systems, which consists of the
Dimensional Systems in Westwood and the Optical Systems in Charlotte. Prior to
joining ADE, Mr. Schiele was a Vice President at Electro Scientific
Industries, Inc. and has held senior level positions at Xerox Corporation,
Inmos Corporation, RTE Corporation and UVC Corporation. Mr. Schiele holds a
B.S. in Physics from Principia College and an M.B.A. from the University of
Wisconsin.
Mark D. Shooman joined the Company in April 1992 and has served as Vice
President and Chief Financial Officer since May 1994. From January 1991 to
March 1992, Mr. Shooman served as President of Asbury Associates, Inc., a
management consulting firm he founded in 1988. From 1989 to January 1991, he
served as a Vice President and the Chief Financial Officer of the retail sales
division of Fidelity Investments. Mr. Shooman received a B.S. in Electrical
Engineering from Renesselaer Polytechnic Institute and an M.B.A. from The Ohio
State University. Mr. Shooman is a Certified Public Accountant.
Noel S. Poduje joined the Company in 1972 and has served as Vice President
of Strategic Technology Development since 1985. Mr. Poduje received a B.S. in
Electrical Engineering from the Massachusetts Institute of Technology.
35
<PAGE>
William H. Ohm joined the Company in 1994 and serves as Vice President and
General Manager of ADE Technologies, Inc. From 1992 through 1994, Mr. Ohm
served as Director of Sales and Marketing for Holographix, Inc. From 1990 to
1991, Mr. Ohm was Marketing Manager for Presstek, Inc. and from 1976 to 1990,
Product Line Manager and Engineering Manager for Agfa Compugraphic, a Division
of Agfa Corporation. Mr. Ohm received a B.S. in Electrical Engineering from
the Massachusetts Institute of Technology and an M.B.A. from Harvard Business
School.
Barry Glasgow joined the Company in 1997 as Vice President of Worldwide
Sales and Customer Support. From July 1995 to June 1997, he served as Director
of Worldwide Sales for Semiconductor Systems Group of Electro Scientific
Industries, Inc. From May 1987 to July 1995, he served as Vice President of
Sales and Marketing of XRL, Inc. Mr. Glasgow received a B.S. in Physics and
Psychology from University of Massachusetts, and studied experimental
psychology in the Ph.D. programs at Indiana University and University of
Minnesota.
Landon T. Clay has been a director of the Company since 1970 and Chairman of
the Board since 1979. Since 1971, he has served as Chairman of Eaton Vance
Corp., a mutual fund management and distribution company. Mr. Clay is also a
director of Dakota Mining Corp. Mr. Clay received an A.B. from Harvard
College. Mr. Clay and Harris Clay are brothers.
Harris Clay has been a director of the Company since 1970. He has been self-
employed as a private investor during the past five years. Mr. Clay received
an A.B. from Harvard College.
Francis B. Lothrop, Jr. has been a director of the Company since 1972. Since
1985, he has served as Chairman of Tech-Ceram Corporation, a manufacturer of
electronic ceramic packaging. Mr. Lothrop received an A.B. from Harvard
College and a M.B.A. from Northeastern University.
H. Kimball Faulkner has been a director of the Company since 1970, and has
been a self-employed small business consultant during the past five years. Mr.
Faulkner received an A.B. from Harvard College and an M.B.A. from the
University of Virginia.
Kendall Wright has been a director of the Company since 1983 and has been a
business, marketing and operations management consultant during the past five
years. Mr. Wright received a B.S. from the Massachusetts Institute of
Technology.
36
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of June 27, 1997 and as
adjusted to reflect the sale of the shares of Common Stock offered hereby by
(i) each person or entity known to the Company to own beneficially more than
5% of the outstanding shares of Common Stock, (ii) each of the Company's
directors and executive officers, (iii) the Selling Stockholders, and (iv) all
directors and executive officers as a group. Unless otherwise indicated below,
to the knowledge of the Company, all persons listed below have sole voting and
investment power with respect to their shares of Common Stock, except to the
extent authority is shared by spouses under applicable law.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) NUMBER OF OFFERING(1)
----------------- SHARES -----------------
BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
---------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Landon T. Clay(2)................ 1,791,918 20.8% 150,000 1,641,918 15.4%
Harris Clay(3)................... 930,602 10.8% 43,478 887,124 8.3%
Robert C. Abbe(4)................ 538,052 6.2% 43,478 494,574 4.6%
H. Kimball Faulkner(5)........... 120,000 1.4% 20,781 99,219 *
Francis B. Lothrop, Jr. ......... 60,000 * -- 60,000 *
Noel S. Poduje(6)................ 37,288 * 2,800 34,488 *
Kendall Wright(7)................ 34,372 * 17,391 16,981 *
Mark D. Shooman(8)............... 33,600 * -- 33,600 *
William H. Ohm(9)................ 14,500 * 2,700 11,800 *
Barry Glasgow.................... -- * -- -- *
E. Fred Schiele.................. -- * -- -- *
All directors and executive
officers
as a group (11 persons) (10).... 3,560,332 40.9% 280,628 3,279,704 30.7%
David C. Bono(11)................ 380,000 4.4% 86,956 293,044 2.7%
Michael J. Ellsworth(12)......... 102,400 1.2% 57,199 45,201 *
Elias Speliotis(13).............. 100,250 1.2% 43,478 56,772 *
Alan P. Sliski(14)............... 40,000 * 1,739 38,261 *
</TABLE>
- --------
*Less than one percent.
(1) The number of shares of Common Stock deemed outstanding prior to this
offering includes (i) 8,617,660 shares of Common Stock outstanding as of
June 27, 1997 and (ii) shares issuable pursuant to options held by the
respective person or group which may be exercised within 60 days after
June 27, 1997. The number of shares of Common Stock deemed outstanding
after this offering assumes no exercise of the Underwriters' over-
allotment option and includes an additional (i) 2,000,000 shares of Common
Stock which are being offered for sale by the Company in this offering and
(ii) 76,590 shares of Common Stock to be issued by the Company upon
exercise of options held and offered by the Selling Stockholders in this
offering.
(2) Includes 305,358 shares held in various trusts for the benefit of Mr.
Clay's children, and 5,560 shares held by Mr. Clay's children, as to which
Mr. Clay disclaims beneficial ownership. If the Underwriters' over-
allotment option is exercised, Mr. Clay will sell up to an additional
22,500 shares of Common Stock to the Underwriters in order to satisfy a
portion of the over-allotment option.
37
<PAGE>
(3) If the Underwriters' over-allotment option is exercised, Mr. Clay will sell
up to an additional 6,522 shares of Common Stock to the Underwriters in
order to satisfy a portion of the over-allotment option.
(4) Includes 149,900 shares of Common Stock held by Dr. Elizabeth Baker, Mr.
Abbe's wife, as to which Mr. Abbe disclaims beneficial ownership. If the
Underwriters' over-allotment option is exercised, Mr. Abbe will sell up to
an additional 6,522 shares of Common Stock to the Underwriters in order to
satisfy a portion of the over-allotment option.
(5) If the Underwriters' over-allotment option is exercised, Mr. Faulkner will
sell up to an additional 3,117 shares of Common Stock to the Underwiters in
order to satisfy a portion of the over-allotment option.
(6) Includes 8,000 shares of Common Stock issuable upon exercise of stock
options. If the Underwriters' over-allotment option is exercised, Mr.
Poduje will sell up to an additional 420 shares of Common Stock to the
Underwriters in order to satisfy a portion of the over-allotment option.
(7) Includes 30,000 shares of Common Stock issuable upon exercise of stock
options. If the Underwriters' over-allotment option is exercised, Mr.
Wright will sell up to an additional 2,609 shares of Common Stock to the
Underwriters in order to satisfy a portion of the over-allotment option.
(8) Consists solely of shares of Common Stock issuable upon exercise of stock
options.
(9) Includes 13,800 shares of Common Stock issuable upon exercise of stock
options. If the Underwriters' over-allotment option is exercised, Mr. Ohm
will sell up to an additional 405 shares of Common Stock to the
Underwriters in order to satisfy a portion of the over-allotment option.
(10) Includes an aggregate of 85,400 shares of Common Stock issuable upon
exercise of stock options.
(11) If the Underwriters' over-allotment option is exercised, Mr. Bono will
sell up to an additional 13,043 shares of Common Stock to the Underwriters
in order to satisfy a portion of the over-allotment option.
(12) Includes 16,484 shares of Common Stock held by Barbara Ellsworth, Mr.
Ellsworth's wife, as to which Mr. Ellsworth disclaims beneficial ownership
and 85,916 shares of Common Stock issuable upon exercise of stock options.
If the Underwriters' over-allotment option is exercised, Mr. Ellsworth
will sell up to an additional 8,580 shares of Common Stock to the
Underwriters in order to satisfy a portion of the over-allotment option.
(13) Includes 5,250 shares of Common Stock to which Mr. Speliotis is entitled
when his interest in a trust fully vests. If the Underwriters' over-
allotment option is exercised, Mr. Speliotis will sell up to an additional
6,522 shares of Common Stock to the Underwriters in order to satisfy a
portion of the over-allotment option.
(14) If the Underwriters' over-allotment option is exercised, Mr. Sliski will
sell up to an additional 260 shares of Common Stock to the Underwriters in
order to satisfy a portion of the over-allotment option.
38
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, Montgomery Securities, Adams, Harkness & Hill,
Inc., Sutro & Co. Incorporated and Needham & Company, Inc., have severally
agreed to purchase from the Company and the Selling Stockholders the following
respective numbers of shares of Common Stock at the public offering price less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------ ---------
<S> <C>
Alex. Brown & Sons Incorporated.......................................
Montgomery Securities.................................................
Adams, Harkness & Hill, Inc...........................................
Sutro & Co. Incorporated..............................................
Needham & Company, Inc................................................
---------
Total............................................................. 2,470,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares
are purchased.
The Company and the Selling Stockholders have been advised by the
Representatives of the Underwriters that the Underwriters propose to offer the
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
certain dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After the public offering, the offering price and other
selling terms may be changed by the Representatives of the Underwriters.
The Company and the Selling Stockholders have granted to the Underwriters an
option, exercisable not later than 30 days after the date of this Prospectus,
to purchase up to 370,500 additional shares of Common Stock at the public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus. To the extent that the Underwriters exercise
such option, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage thereof that the number of shares of Common
Stock to be purchased by it shown in the above table bears to 2,470,000 and the
Company and the Selling Stockholders will be obligated, pursuant to the option,
to sell such shares to the Underwriters. The Underwriters may exercise such
option only to cover over-allotments made in connection with the sale of Common
Stock hereby. If purchased, the Underwriters will offer such additional shares
on the same terms as those on which the 2,470,000 shares are being offered.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
The Company, the Selling Stockholders, and all executive officers and
directors of the Company, who in the aggregate will hold 3,468,356 shares of
Common Stock and options to purchase 307,926 shares of Common Stock after this
offering, have agreed not to, directly or indirectly, offer, sell, contract to
sell or otherwise dispose of any shares of Common Stock beneficially owned by
them for a period of 90 days after the date of this Prospectus without the
prior written consent of Alex. Brown & Sons Incorporated.
In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions, "passive" market making and purchases to cover
syndicate short positions created in connection with the Offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or
39
<PAGE>
retarding a decline in the market price of the Common Stock. Syndicate short
positions involve the sale by the Underwriters of a greater number of shares
of Common Stock than they are required to purchase from the Company in the
Offering. The Underwriters also may impose a penalty bid, whereby the
syndicate may reclaim selling concessions allowed to syndicate members or
other broker-dealers in respect of the Common Stock sold in the Offering for
their account if the syndicate repurchases the shares in stabilizing or
covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Common Stock, which may be higher than the
price that might otherwise prevail in the open market. These activities, if
commenced, may be discontinued at any time. These transactions may be effected
on the Nasdaq National Market, in the over-the-counter market or otherwise.
As permitted by Rule 103 under the Exchange Act, Underwriters or prospective
Underwriters that are market makers (passive market makers) in the Common
Stock may make bids for or purchases of shares of Common Stock in the Nasdaq
National Market until such time, if any, when a stabilizing bid for such
securities has been made. Rule 103 generally provides that (1) a passive
market maker's net daily purchases of the Common Stock may not exceed 30% of
its average daily trading volume in such securities for the two full
consecutive calendar months (or any 60 consecutive days ending within the 10
days) immediately preceding the filing date of the registration statement of
which this Prospectus forms a part, (2) a passive market maker may not effect
transactions or display bids for the Common Stock at a price that exceeds the
highest independent bid for shares of Common Stock by persons who are not
passive market makers and (3) bids made by passive market makers must be
identified as such.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Warner & Stackpole LLP,
Boston, Massachusetts. Certain legal matters in connection with this offering
will be passed upon for the Underwriters by Ropes & Gray, Boston,
Massachusetts. Willard G. McGraw, Jr., the Clerk of the Company and a partner
of Warner & Stackpole LLP, owns 9,000 shares of Common Stock of the Company.
EXPERTS
The consolidated financial statements as of April 30, 1996 and 1997 and for
each of the three years in the period ended April 30, 1997 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549-1004 and at the regional offices of the Commission located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials may also be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-1004 at prescribed
rates. The Commission maintains a web site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants, like the Company, that file electronically with the Commission.
The Company's Common Stock is quoted on the Nasdaq National Market, and
reports and other information concerning the Company may be inspected at the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006-1500.
40
<PAGE>
This Prospectus constitutes a part of a Registration Statement on Form S-3
filed by the Company with the Commission under the Securities Act. This
Prospectus omits certain of the information contained in the Registration
Statement, and reference is hereby made to the Registration Statement and
related exhibits for further information with respect to the Company and the
securities offered hereby. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and, in such
instance, reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission. Each
such statement is qualified in its entirety by such reference.
41
<PAGE>
ADE CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheet at April 30, 1996 and 1997..................... F-3
Consolidated Statement of Income for the three years ended April 30, 1997. F-4
Consolidated Statement of Stockholders' Equity for the three years ended
April 30, 1997........................................................... F-5
Consolidated Statement of Cash Flows for the three years ended April 30,
1997..................................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of ADE Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of ADE
Corporation and its subsidiaries at April 30, 1996 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended April 30, 1997, in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
July 1, 1997
F-2
<PAGE>
ADE CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
APRIL 30,
----------------
1996 1997
------- -------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................... $21,513 $19,374
Accounts receivable:
Trade, less allowance for doubtful accounts of $476 and $577
at April 30, 1996 and 1997, respectively..................... 15,872 19,248
Affiliate..................................................... -- 1,083
Inventories..................................................... 13,525 22,160
Prepaid expenses and other current assets....................... 327 310
Deferred income taxes........................................... 2,954 5,348
------- -------
Total current assets........................................ 54,191 67,523
Fixed assets, net................................................. 7,260 15,735
Deferred income taxes............................................. 329 234
Investments....................................................... 13 3,162
Other assets...................................................... 185 1,763
------- -------
$61,978 $88,417
======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Note payable to related party................................... $ 577 $ --
Current portion of long-term debt............................... 44 899
Accounts payable................................................ 4,717 5,535
Accrued expenses................................................ 8,736 10,744
Deferred income on sales to affiliate........................... -- 2,661
Income taxes payable............................................ 289 1,915
------- -------
Total current liabilities................................... 14,363 21,754
------- -------
Long-term debt.................................................... 677 5,091
------- -------
Excess of net assets acquired over cost........................... 436 184
------- -------
Stockholders' equity:
Preferred stock, $1.00 par value; 1,000,000 shares authorized;
none issued or outstanding..................................... -- --
Common stock, $.01 par value; 25,000,000 shares authorized;
8,439,716 and 8,604,160 shares issued and outstanding at April
30, 1996 and 1997, respectively................................ 84 86
Capital in excess of par value.................................. 27,104 28,660
Retained earnings............................................... 19,573 32,846
------- -------
46,761 61,592
Deferred compensation........................................... (259) (204)
------- -------
46,502 61,388
------- -------
Commitments (Note 14).............................................
------- -------
$61,978 $88,417
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
ADE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Revenue............................................. $46,152 $67,339 $89,218
Revenue from affiliate.............................. -- -- 12,185
------- ------- -------
Total revenue..................................... 46,152 67,339 101,403
------- ------- -------
Cost of revenue..................................... 23,293 31,135 39,762
Cost of revenue from affiliate...................... -- -- 5,076
------- ------- -------
Total cost of revenue............................. 23,293 31,135 44,838
------- ------- -------
Gross profit.................................... 22,859 36,204 56,565
------- ------- -------
Operating expenses:
Research and development.......................... 6,318 7,798 17,012
Marketing and sales............................... 6,842 10,169 13,665
General and administrative........................ 4,707 7,011 7,698
Amortization of excess of net assets acquired over
cost............................................. (252) (252) (252)
------- ------- -------
Total operating expenses........................ 17,615 24,726 38,123
------- ------- -------
Income from operations.............................. 5,244 11,478 18,442
Other income (expense):
Interest income................................... 24 535 752
Interest expense.................................. (428) (204) (423)
------- ------- -------
Income before provision for income taxes and equity
in net earnings of affiliated companies............ 4,840 11,809 18,771
Provision for income taxes.......................... 1,709 4,004 5,705
------- ------- -------
Income before equity in net earnings of affiliated
companies.......................................... 3,131 7,805 13,066
Equity in net earnings of affiliated companies...... -- -- 99
------- ------- -------
Net income...................................... $ 3,131 $ 7,805 $13,165
======= ======= =======
Net income per share................................ $ 0.47 $ 0.98 $ 1.48
======= ======= =======
Weighted average common and common equivalent shares
outstanding........................................ 6,651 7,965 8,880
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
ADE CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- CAPITAL IN TOTAL
NUMBER PAR EXCESS OF RETAINED TREASURY DEFERRED STOCKHOLDERS'
OF SHARES VALUE PAR VALUE EARNINGS STOCK COMPENSATION EQUITY
--------- ----- ---------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30,
1994................... 6,416,554 $ 64 $ 4,739 $ 8,637 $(240) $13,200
Board of Director fees.. 1 11 12
Exercise of common stock
options................ (15) 29 14
Repurchase of 34,430
shares of common stock. (152) (152)
Compensation related to
the grant of common
stock options.......... 251 $(251) --
Net income.............. 3,131 3,131
--------- ---- ------- ------- ----- ----- -------
Balance at April 30,
1995................... 6,416,554 64 4,976 11,768 (352) (251) 16,205
Exercise of warrants.... 241,578 2 702 352 1,056
Sale of common stock in
connection with initial
public offering in
October 1995, net of
issuance costs of
$2,315................. 1,617,600 16 20,315 20,331
Exercise of common stock
options................ 163,984 2 660 662
Compensation related to
the grant of common
stock options.......... 58 (58) --
Amortization of deferred
compensation........... 50 50
Tax benefit related to
exercise of common
stock options.......... 393 393
Net income.............. 7,805 7,805
--------- ---- ------- ------- ----- ----- -------
Balance at April 30,
1996................... 8,439,716 84 27,104 19,573 -- (259) 46,502
Exercise of common stock
options................ 154,400 2 660 662
Sale of common stock
pursuant to the
Employee Stock Purchase
Plan................... 10,044 -- 102 102
Amortization of deferred
compensation........... 55 55
Tax benefit related to
exercise of common
stock options.......... 794 794
Net income.............. 13,165 13,165
Net income of Digital
Measurement Systems,
Inc. for the one month
ended April 30, 1997
(Note 3)............... 108 108
--------- ---- ------- ------- ----- ----- -------
Balance at April 30,
1997................... 8,604,160 $ 86 $28,660 $32,846 $ -- $(204) $61,388
========= ==== ======= ======= ===== ===== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
ADE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------
1995 1996 1997
------ ------- -------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
Net income......................................... $3,131 $ 7,805 $13,165
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 1,318 1,052 1,646
Equity in net earnings of affiliated companies... -- -- (99)
Deferred income taxes............................ (743) (1,275) (2,299)
Amortization of deferred compensation............ -- 50 55
Change in assets and liabilities:
Accounts receivable, trade..................... (2,105) (6,192) (3,329)
Accounts receivable, affiliate................. -- -- (1,083)
Costs and estimated earnings in excess of
billings on uncompleted contracts............. 500 -- --
Inventories.................................... 95 (3,382) (8,626)
Prepaid expenses and other current assets...... 6 (102) 18
Accounts payable............................... 844 862 833
Accrued expenses............................... 937 4,751 2,044
Deferred income on sales to affiliate.......... -- -- 2,661
Income taxes payable........................... 966 (1,278) 1,626
------ ------- -------
Net cash provided by operating activities.... 4,949 2,291 6,612
------ ------- -------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
Purchases of fixed assets.......................... (935) (5,337) (10,363)
Equity investments................................. -- -- (3,050)
Decrease (increase) in other assets................ 13 6 (1,578)
------ ------- -------
Net cash used in investing activities........ (922) (5,331) (14,991)
------ ------- -------
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Repayments of line of credit, net.................. (2,750) -- --
Proceeds from (repayment of) note payable to
related party..................................... 228 69 (577)
Proceeds from issuance of long-term debt........... -- -- 5,500
Repayments of long-term debt....................... (74) (179) (231)
Proceeds from issuance of common stock............. 14 20,993 764
Tax benefit related to the exercise of common stock
options........................................... -- 393 794
Repurchase of common stock......................... (38) -- --
------ ------- -------
Net cash provided by (used in) financing
activities.................................. (2,620) 21,276 6,250
------ ------- -------
Adjustment for DMS activity for the one month ended
April 30, 1997
(Note 3)............................................ -- -- (10)
------ ------- -------
Net increase (decrease) in cash and cash equivalents. 1,407 18,236 (2,139)
Cash and cash equivalents, beginning of year......... 1,870 3,277 21,513
------ ------- -------
Cash and cash equivalents, end of year............... $3,277 $21,513 $19,374
====== ======= =======
</TABLE>
See supplemental disclosures of cash flow information (Note 15)
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. NATURE OF BUSINESS
ADE Corporation (the "Company") designs, manufactures, markets and services
highly precise, automated measurement, defect detection and handling equipment
with current applications in the production of semiconductor wafers,
integrated circuits and computer memory disks. The predominant market for the
Company consists of semiconductor wafer and device manufacturing concerns
located in the United States, Japan, Europe and the Far East.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies followed in the preparation of
the financial statements follows:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. Effective February 28, 1997, the Company
acquired all of the outstanding shares of common stock of Digital Measurement
Systems, Inc. ("DMS") in exchange for 821,000 shares of common stock of the
Company. This transaction has been accounted for as a pooling-of-interests
and, therefore, the accompanying financial statements have been retroactively
restated to reflect the financial position and results of operations and cash
flows of the Company and DMS for all periods presented (Note 3). All material
intercompany transactions and balances have been eliminated.
Investments in 50% or less owned companies over which the Company has the
ability to exercise significant influence are accounted for using the equity
method. Investments in 20% or less owned companies are accounted for using the
cost method. (Note 4)
Revenue Recognition
Revenue from product sales is recorded upon shipment. The Company accrues
for anticipated warranty costs upon shipment. Service revenue is recognized as
the services are performed. The Company does not provide the right to return
products.
Revenue under certain long-term contracts containing custom engineering is
recognized under the percentage-of-completion method. The percentage of
completion is determined by relating the actual cost of the work performed to
date to the estimated total cost of the respective contracts. Contract costs
include all direct material and labor costs as well as an allocated share of
indirect costs incurred. Actual costs incurred and estimated earnings on
contracts in progress at year end are included in operations for the year.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The Company
invests its excess cash in money market accounts. These investments are
subject to minimal credit and market risks. At April 30, 1996 and 1997, the
Company has classified its cash equivalent investments totaling $18,092 and
$10,465, respectively, as available for sale. The carrying amount of these
investments approximates fair market value.
F-7
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Inventories
Inventories are stated at the lower of cost or market, cost being determined
on a first-in, first-out basis.
Fixed Assets
Fixed assets are stated at cost. Additions and betterments, unless of a
relatively minor amount, are capitalized. Expenditures for normal maintenance
and repairs are charged to expense as incurred. Depreciation is provided by use
of the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the shorter of their useful life or
the remaining life of the lease.
Excess of Net Assets Acquired Over Cost
The excess of net assets acquired over cost represents the unamortized excess
of the fair market value of the net assets acquired determined at the date ADE
Optical Systems, Inc. ("AOS") was acquired over the purchase price of AOS,
after reducing the basis in noncurrent assets acquired to zero. The original
amount of the excess of net assets acquired over cost is being amortized using
the straight-line method over five years.
Concentrations
Credit Risk
Financial instruments which potentially expose the Company to concentration
of credit risk include cash, cash equivalents and trade accounts receivable. A
significant amount of the Company's cash and cash equivalents are held by four
financial institutions. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100. Uninsured cash balances totaled
approximately $2,859 and $8,117 at April 30, 1996 and 1997, respectively. The
Company does not believe that such deposits are subject to any unusual credit
risk associated with operating its business.
The Company's customer base primarily consists of semiconductor wafer,
semiconductor device and computer hard disk manufacturers. Accounts receivable
from two customers accounted for approximately 42% and 36% of total accounts
receivable at April 30, 1996 and 1997, respectively. The Company performs
ongoing credit evaluations of customers' financial condition, although
collateral is not required. In addition, the Company maintains reserves for
potential credit losses and such losses, in aggregate, have not exceeded
management expectations.
Suppliers
Certain of the components and subassemblies incorporated into the Company's
systems are obtained from a single source or a limited group of suppliers. The
Company seeks to reduce the impact from its dependence on those sole and
limited source suppliers by considering alternate sources of supply, alternate
designs for its products and by maintaining an adequate supply of the
components and subassemblies. However, the loss of one or more of the sole or
limited suppliers could cause a delay in manufacturing and a potential loss of
sales, which could affect operating results adversely.
Financial Instruments
The carrying amount of the Company's financial instruments, which include
cash, cash equivalents, accounts receivable, accounts payable, accrued
expenses, and long-term debt, approximates their fair value at the balance
sheet dates. It was not practicable to estimate the fair value of the Company's
long-term investments as the stock of the related investees is not publicly
traded.
F-8
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Stock-Based Compensation
Stock-based compensation awards to employees under the Company's stock plans
are accounted for using the intrinsic value method prescribed in Accounting
Principles Board Opinion ("APB") No.25, Accounting for Stock Issued to
Employees and related interpretations. The Company has adopted the disclosure
requirements of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation."
Earnings Per Share
Earnings per share are determined by dividing net income by the weighted
average number of common shares and common share equivalents outstanding
during the year. Common share equivalents consist of common stock which may be
issuable upon exercise of outstanding stock options and warrants using the
treasury stock method. Common stock, warrants and options issued or granted at
prices below the initial public offering price per share during the twelve-
month period prior to the initial filing of the Company's registration
statement on Form S-1 have been included in the calculation as if outstanding
for all periods presented through July 31, 1995 using the treasury stock
method and the initial public offering price of $14.00 per share.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingencies at April 30, 1996 and 1997, and the reported
amounts of revenues and expenses during the three year period ended April 30,
1997. Actual results could differ from those estimates.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share." This statement establishes and simplifies
standards for computing and presenting earnings per share. SFAS No. 128 will
be effective beginning with the Company's quarter ended January 31, 1998 and
requires the restatement of all previously reported earnings per share data
that are presented. Early adoption of SFAS No. 128 is not permitted. SFAS No.
128 replaces primary and fully diluted earnings per share with basic and
diluted earnings per share. Pro forma earnings per share under SFAS No. 128
would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL
30,
-----------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Pro forma basic net income per share................... $0.48 $1.04 $1.55
Pro forma diluted net income per share................. 0.47 0.98 1.48
</TABLE>
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." The statement establishes standards for the reporting and display of
comprehensive income and its components. Comprehensive income is defined as
the change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources. It
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners. This standard will require
that an enterprise display an amount representing total comprehensive income
for
F-9
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
the period. SFAS No. 130 will be effective for the Company's fiscal year
ending April 30, 1998. Adoption of SFAS No. 130 is not expected to
significantly impact the Company's financial position or results of
operations.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which supersedes SFAS No. 14. This
statement changes the way that public business enterprises report segment
information, including financial and descriptive information about their
operating segments, in annual financial statements and would require that
those enterprises report selected segment information in interim financial
reports to stockholders. Operating segments are defined as revenue-producing
components of the enterprise which are generally used internally for
evaluating segment performance. SFAS No. 131 will be effective for the Company
beginning with the Company's fiscal year ending April 30, 1998. Adoption of
SFAS No. 131 will not impact the Company's financial position or results of
operations.
3. ACQUISITION OF SUBSIDIARY; POOLING-OF-INTERESTS
On February 28, 1997, pursuant to an Agreement and Plan of Merger (the "DMS
Agreement"), the Company, through its wholly-owned subsidiary ADE
Technologies, Inc. ("ATI"), acquired Digital Measurement Systems, Inc.
("DMS"), a Massachusetts corporation, and a building which is integral to the
operations of DMS and which was controlled by a significant stockholder of
DMS. DMS designs, manufactures, markets and services magnetic measurement
devices with current applications in the production of computer memory disks.
Pursuant to the DMS Agreement, each outstanding share of DMS capital stock was
converted into 759.73 shares of the Company's common stock. Immediately prior
to the acquisition, there were 1,000 shares of DMS Class A common stock and 53
shares of DMS Class B common stock outstanding. Pursuant to the terms of the
DMS Agreement, the Company also issued 21,000 shares in connection with the
acquisition of the building. In total, 821,000 shares of the Company's common
stock were issued in this transaction. This transaction has been accounted for
as a pooling-of-interests and, therefore, all prior period financial
statements presented have been restated as if the acquisition took place at
the beginning of such periods.
DMS had a March 31 year end and, accordingly, the results of operations for
DMS for the three years ended March 31, 1997 have been combined with the
results of operations for the Company's three years ended April 30, 1997.
Additionally, the financial position of DMS as of March 31, 1996 has been
combined with the Company's financial position as of April 30, 1996. In order
to conform DMS to the Company's fiscal year end, the financial position of DMS
and the Company have been combined as of April 30, 1997. Accordingly, an
adjustment has been made to retained earnings in fiscal 1997 to record the net
income of DMS for the one month period ended April 30, 1997 totaling $108.
Other results of operations for such one month period of DMS included revenues
of $684 and operating costs and expenses of $527.
There were no material transactions between the Company and DMS during any
of the periods presented prior to the DMS Agreement. All material intercompany
transactions and balances subsequent to the DMS Agreement have been
eliminated. No material adjustments to net assets or the results of operations
were necessary to conform the accounting practices of DMS to those of the
Company.
F-10
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Separate results of operations for the periods prior to the acquisition of
DMS by the Company were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
APRIL 30, ENDED
--------------- JANUARY 31,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
ADE Corporation............................ $45,070 $65,616 $64,749
DMS, Inc................................... 1,082 1,723 4,317
------- ------- -------
Combined................................... $46,152 $67,339 $69,066
======= ======= =======
Net income (loss):
ADE Corporation............................ $ 3,107 $ 7,832 $ 8,448
DMS, Inc................................... 24 (27) 1,036
------- ------- -------
Combined................................... $ 3,131 $ 7,805 $ 9,484
======= ======= =======
</TABLE>
4. INVESTMENTS
The Company's investments of 50% or less owned companies over which the
Company has the ability to exercise significant influence are accounted for
using the equity method. Investments carried at equity consist of Japan ADE
Ltd. ("JAL"), a Japanese corporation, and Microspec Technologies Ltd.
("Microspec"), an Israeli corporation.
In July 1996, the Company acquired 1,410 shares of JAL for $1,300, which
increased the Company's investment in JAL from 3% to 50%. JAL has been the
exclusive distributor of ADE dimensional products in Japan since 1986. In
connection with this investment, JAL and the Company also agreed to reduce the
discount provided on sales to JAL. Sales to JAL which have not in turn been
sold to unrelated third parties at April 30, 1997 have been eliminated, and the
related profit on such sales is recorded as deferred income on sales to
affiliate.
In July 1996, the Company acquired a 25.1% interest in Microspec for $1,250.
In connection with this investment, the Company also executed an exclusive
five-year agreement to distribute Microspec products, subject to certain
performance criteria. During fiscal year 1997, there were no material purchases
from or sales to Microspec.
F-11
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The summarized unaudited financial information below for fiscal year 1997
represents an aggregation of the Company's nonsubsidiary affiliates:
<TABLE>
<CAPTION>
YEAR
ENDED
APRIL
30,
1997
-------
<S> <C>
Revenue........................................................... $26,933
Gross profit...................................................... 9,820
Net income........................................................ 419
<CAPTION>
APRIL
30,
1997
-------
<S> <C>
Current assets.................................................... $16,664
Noncurrent assets................................................. 1,381
Current liabilities............................................... 14,832
Noncurrent liabilities............................................ 418
</TABLE>
The Company's share of undistributed earnings of one affiliated company and
the Company's share of the losses of the other affiliated company included in
consolidated retained earnings was $507 and $136 at April 30, 1997,
respectively. The Company has received no dividends from affiliated companies
during fiscal year 1997. At April 30, 1997, the Company's investment exceeds
the underlying net assets of affiliated companies by $1,476, which is being
amortized by decreasing the equity in net earnings of affiliated companies
using the straight-line method over five years. Related amortization expense of
$273 was recorded in fiscal 1997.
Pro forma revenue, net income and net income per share as though the
investments in affiliated companies were made at the beginning of fiscal year
1996, including the effect of eliminating the profit on affiliated sales in
beginning and ending inventory for the period, have not been included as they
are not materially different from actual revenue, net income and net income per
share for the two years ended April 30, 1997.
The Company also has a less than 20% investment in a company in the amount of
$500 that is accounted for using the cost method.
F-12
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
5. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
---------------
1996 1997
------- -------
<S> <C> <C>
Raw materials and purchased parts........................ $ 6,380 $ 9,867
Work-in-process.......................................... 6,926 11,464
Finished goods........................................... 219 829
------- -------
$13,525 $22,160
======= =======
</TABLE>
6. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
USEFUL LIFE ---------------
IN YEARS 1996 1997
----------- ------- -------
<S> <C> <C> <C>
Land......................................... $ 1,288 $ 1,288
Building and improvements.................... 15-25 3,475 8,967
Machinery and equipment...................... 3-10 9,994 6,976
Office equipment............................. 3-10 4,100 2,370
Leasehold improvements....................... 5 278 1,374
Construction-in-progress..................... 263 414
------- -------
19,398 21,389
Less--accumulated depreciation and
amortization................................ 12,138 5,654
------- -------
$ 7,260 $15,735
======= =======
</TABLE>
Depreciation expense for the years ended April 30, 1995, 1996 and 1997 was
$1,570, $1,304 and $1,912, respectively. Fully depreciated assets with a
historical cost of $8,396 were written off during fiscal 1997.
7. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
--------------
1996 1997
------ -------
<S> <C> <C>
Accrued commissions....................................... $2,560 $ 1,852
Accrued salaries, wages, vacation pay and bonuses......... 2,489 2,972
Accrued warranty costs.................................... 1,151 1,832
Accrued loss on abandonment of facilities................. 911 671
Other..................................................... 1,625 3,417
------ -------
$8,736 $10,744
====== =======
</TABLE>
The Company purchased a building in February 1996 in which it relocated its
headquarters and one of its manufacturing facilities. Upon the purchase of the
building, the Company recorded a charge of $911 for the estimated future costs
of the abandoned facility for the period subsequent to the relocation.
F-13
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
8. BORROWINGS
Note Payable to Related Party
At April 30, 1996, the Company had a $577 note payable due to a company
affiliated with a principal stockholder of DMS, which bore interest at an
annual rate of 15%. Interest expense for the years ended April 30, 1995, 1996
and 1997 totaled $48, $88 and $87, respectively. During the year ended April
30, 1997, DMS repaid the entire principal on the note.
Long-term Debt
In June 1994, the Company entered into an agreement with a former executive
to purchase 34,430 shares of the Company's common stock by paying cash of $38
and issuing a promissory note payable for $114. The note bears interest at the
prime rate (8.5% at April 30, 1997) and the remaining principal balance of $38
at April 30, 1997 is payable on August 1, 1997.
Under the terms of the DMS Agreement, the Company assumed a mortgage loan
which was secured by the acquired building. The principal balance outstanding
totaled $645 and $639 at April 30, 1996 and 1997, respectively. The Company
paid the remaining principal balance in full in June 1997; accordingly, the
balance has been included in the current portion of long-term debt at April
30, 1997.
In June 1996, the Company issued a $5.5 million tax exempt Industrial
Development Bond through the Massachusetts Industrial Finance Agency. The bond
carries a 5.74% interest rate for 10 years with amortization of 50% of the
principal and with the remaining 50% due in June 2006. Monthly payments
consisting of principal and interest total $43. The proceeds of the bond were
used to fund the acquisition and renovation of the manufacturing facility in
the Company's new headquarters site. The Company secured the issuance of the
bond with a standby letter of credit from a financial institution. The standby
letter of credit, bearing a fee of 1.25% of the outstanding bond balance, is
secured by a mortgage on the building and land. Under the terms of the letter
of credit, the Company is required to comply with certain financial covenants.
Future maturities of this bond are as follows:
<TABLE>
<S> <C>
Year ending April 30,
1998............................ $ 222
1999............................ 235
2000............................ 249
2001............................ 264
2002............................ 279
Thereafter...................... 4,064
------
$5,313
======
</TABLE>
In December 1992, the Company entered into a $1,250 unsecured, Subordinated
Note and Warrant Purchase Agreement (the "Agreement") with a financial
institution. The subordinated note bore interest at 10% and was scheduled to
mature in November 1999. As part of the Agreement, the Company issued a
warrant for 325,000 shares of the Company's common stock at an exercise price
of $3.25 per share. Upon the closing of the Company's initial public offering,
the financial institution exercised the warrant through the cancellation of
$1,056 of related debt. The remaining outstanding principal of the note
totaling $131 was paid by the Company during fiscal 1996.
F-14
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
9. EMPLOYEE COMPENSATION PLANS
In 1982, the Company adopted the 1982 Stock Option Plan (the "1982 Plan")
which provided for the granting of incentive stock options and non-qualified
stock options through 1992 and was administered by a committee of the Board of
Directors (the "Compensation Committee"). The Company had reserved 900,000
shares of common stock for grant to employees under the 1982 Plan. In April
1992, the Company adopted the 1992 Stock Option Plan (the "1992 Plan").
The1992 Plan provides for the issuance to employees of options to purchase
479,000 shares of common stock plus any expired or cancelled options granted
pursuant to the 1982 Plan. In August 1995, the Company adopted the 1995 Stock
Option Plan (the "1995 Plan"). The 1995 Plan provides for the issuance to
employees of stock options or stock awards to purchase 400,000 shares of
common stock. At April 30, 1997, 27,290 shares and 80,000 shares were
available for future grants under the 1992 Plan and the 1995 Plan,
respectively. Options are granted under the 1992 and 1995 Plan as either
incentive stock options or non-qualified stock options and at exercise prices
not less than the fair value of the stock on the date of grant or less than
110% of the fair value in the case of optionees holding more than 10% of the
total combined voting power of all classes of stock of the Company. The terms
of the options generally may not exceed ten years or five years in the case of
optionees holding more than 10% of the total combined voting power of all
classes of stock of the Company. The options are exercisable over periods
determined by the Compensation Committee, generally at the rate of 20% per
year, on a cumulative basis, beginning with the first anniversary of the date
of grant.
In October 1992, the Company granted non-qualified, fully vested stock
options to purchase 30,000 shares of the Company's common stock at an exercise
price of $4.15 per share. These options were not granted pursuant to either
the 1992 Plan or the 1982 Plan. These options are exercisable from the date of
grant through October 2002.
In October 1996, the Board of Directors adopted the Employee Stock Purchase
Plan (the "Purchase Plan") effective as of October 1, 1996. The Purchase Plan
provides its full-time employees, nearly all of whom are eligible to
participate, the opportunity to purchase common shares, on a quarterly basis,
at 85% of the fair market value of the shares on either the first or last day
of the applicable quarter, whichever is lower. The term of the Purchase Plan
is for five years, and the Company has authorized 1,000,000 shares of the
Company's common stock for issuance under the Purchase Plan. Under the
Purchase Plan, the Company sold 10,044 shares to employees in fiscal year
1997.
F-15
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The Company applies APB No. 25 and related interpretations in accounting for
stock-based compensation. During fiscal years 1995 and 1996, the Company
recorded deferred compensation of $251 and $58, respectively, which is
equivalent to the difference between the fair market value of the underlying
securities and the exercise price of the related options granted. Such
compensation is being amortized over the vesting periods of the related
options. The Company has recognized no compensation expense in fiscal year 1995
and has recognized $50 and $55 in fiscal years 1996 and 1997, respectively, for
all of its stock-based compensation. Had compensation cost for the stock-based
compensation been determined based on the fair value at the grant dates of
awards consistent with the provisions of SFAS No. 123, the Company's net income
and earnings per share would have been reduced to the pro forma amounts as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
APRIL 30,
--------------
1996 1997
------ -------
<S> <C> <C>
Net income
As reported.............................................. $7,805 $13,165
Pro forma................................................ 7,768 12,840
Net income per share
As reported.............................................. $ 0.98 $ 1.48
Pro forma................................................ 0.98 1.46
</TABLE>
The fair value of each option and purchase right grant was estimated on the
grant date using the Black-Scholes option-pricing model with the following
weighted average assumptions for fiscal years 1996 and 1997: no dividend yield;
risk free interest rate of 5.7% and 6.4% in fiscal 1996 and 1997, respectively;
expected option term of 6 years and expected purchase right term of three
months; no volatility for options granted prior to the initial filing of the
Company's registration statement on Form S-1 in August 1995 and 50% for options
and purchase rights granted subsequent to August 1995. The weighted average
fair value per option for options granted with option exercise prices equal to
the fair value of the underlying common stock in fiscal years 1996 and 1997 was
$8.09 and $7.25, respectively. The weighted average fair value per option for
options granted with exercise prices below the fair value of the underlying
common stock in fiscal year 1996 was $9.08. The weighted average fair value per
purchase right for purchase rights granted in fiscal year 1997 was $2.82.
Because options vest over several years and additional option and purchase
right grants are expected to be made in subsequent years, the pro forma impact
on fiscal years 1996 and 1997 is not necessarily representative of the pro
forma effects of reported net income and earnings per share for future years.
F-16
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
NUMBER WEIGHTED
OF AVERAGE
SHARES EXERCISE PRICE
-------- --------------
<S> <C> <C>
Options outstanding at April 30, 1994............ 669,400 $ 3.99
Granted........................................ 226,000 4.43
Exercised...................................... (7,010) 2.00
Canceled....................................... (91,390) 3.63
--------
Options outstanding at April 30, 1995............ 797,000 4.17
Granted........................................ 137,500 14.23
Exercised...................................... (163,984) 4.04
Canceled....................................... (8,000) 3.25
--------
Options outstanding at April 30, 1996............ 762,516 6.02
Granted........................................ 211,500 12.94
Exercised...................................... (154,400) 4.24
Canceled....................................... (45,400) 8.21
--------
Options outstanding at April 30, 1997............ 774,216 $ 8.14
========
</TABLE>
The number and weighted average exercise price of options exercisable at
April 30, 1995, 1996 and 1997 is 206,800 and $3.93; 190,916 and $4.11; and
199,316 and $5.40, respectively.
The following table summarizes information about stock options outstanding at
April 30, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- --------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 3.25-
3.88 22,000 3.87 $ 3.73 22,000 $ 3.73
4.13-
5.88 433,216 6.94 4.27 153,816 4.21
9.38-
11.25 129,000 9.49 10.51 -- --
14.75-
17.63 190,000 9.27 15.85 23,500 14.75
------- ------ ------- ------
774,216 $ 8.14 199,316 $ 5.40
======= ====== ======= ======
</TABLE>
10. STOCKHOLDERS' EQUITY
Common Stock
On August 17, 1995, the stockholders of the Company increased the number of
authorized shares of common stock from 6,000,000 to 25,000,000 shares. On the
same date, the Board of Directors approved a 2-for-1 split of the common shares
to be effected in the form of a stock dividend on all issued stock which was
distributed on October 2, 1995. Accordingly, all share and per share data have
been restated for all periods presented to reflect the increase in the
authorized shares and the split. The par value of the additional shares of
common stock issued in connection with the stock split was credited to common
stock and a like amount was charged to capital in excess of par value.
F-17
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
In October 1995, the Company completed an initial public offering of
1,617,600 shares of its common stock. The net proceeds to the Company were
$20,331.
Reserved Shares
At April 30, 1997, the Company has reserved 1,871,462 shares of common stock
for issuance upon the exercise of outstanding and available common stock
options and for issuance to employees under the Purchase Plan.
Preferred Stock
The Company has 1,000,000 shares of $1.00 par value preferred stock
authorized. Shares of preferred stock may be issued at the discretion of the
Board of Directors of the Company with such designation, rights and
preferences as the Board may determine from time to time. The preferred stock
may have voting rights, preferences as to dividends and liquidation,
conversion and redemption rights and sinking fund provisions which are more
expansive than those of the holders of the common stock.
11. EXPORT SALES AND MAJOR CUSTOMERS
Revenue by geographic area is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
United States.................................... $21,771 $27,635 $40,600
Far East......................................... 9,891 21,582 27,098
Japan............................................ 7,653 11,404 24,199
Europe........................................... 6,837 6,718 9,506
------- ------- --------
$46,152 $67,339 $101,403
======= ======= ========
</TABLE>
Revenue from JAL in fiscal years 1995, 1996 and 1997 totaled $7,519 (17%),
$8,380 (13%) and $12,185 (12%), respectively. Revenue from another foreign
distributor in fiscal year 1997 totaled $9,823 (10%). Revenue from this
distributor in fiscal years 1995 and 1996 was less than 10%. In fiscal 1995,
revenue approximating $5,816 (13%) and $5,032 (11%) was attributable to two
separate customers. In fiscal year 1996, revenue approximating $7,703 (12%)
and $6,759 (10%) was attributable to two separate customers. In fiscal 1997,
revenue approximating $16,269 (16%) was attributable to one customer.
F-18
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
12. INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------
1995 1996 1997
------ ------- -------
<S> <C> <C> <C>
Current tax expense:
Federal....................................... $2,069 $ 4,540 $ 7,037
State......................................... 383 739 967
------ ------- -------
2,452 5,279 8,004
------ ------- -------
Deferred tax benefit:
Federal....................................... (667) (1,131) (2,046)
State......................................... (76) (144) (253)
------ ------- -------
(743) (1,275) (2,299)
------ ------- -------
$1,709 $ 4,004 $ 5,705
====== ======= =======
</TABLE>
Deferred tax assets consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
--------------
1996 1997
------ ------
<S> <C> <C>
Deferred tax assets:
Inventories, due to reserves and additional costs
inventoried for tax purposes.......................... $1,353 $2,332
Accrued expenses....................................... 1,263 1,625
Deferred profit on sales to affiliates................. -- 1,038
ATI net operating loss carryforwards................... 421 409
Depreciation........................................... 223 140
Bad debt reserve....................................... 187 225
Other.................................................. 182 159
------ ------
Gross deferred tax assets.............................. 3,629 5,928
Deferred tax valuation allowance....................... (346) (346)
------ ------
$3,283 $5,582
====== ======
</TABLE>
ATI net operating loss carryforwards remaining at April 30, 1996 and 1997,
not limited in their use due to ownership changes, totaled $195 and $164,
respectively. These carryforwards expire in years 2000 through 2007. A
valuation allowance of $346, equal to the ATI net operating carryforwards which
will expire before they can be used due to ownership change limitations, was
recorded at April 30, 1996 and 1997. There have been no changes in the
valuation allowance during fiscal 1995, 1996 and 1997.
The Company does not provide for taxes which would be payable if
undistributed earnings of its foreign affiliates were remitted because the
Company either considers these earnings to be invested for an indefinite period
or anticipates that if such earnings were distributed, the U.S. income taxes
payable would be substantially offset by foreign tax credits.
F-19
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following is a reconciliation between the amount of reported income tax
expense and the amount computed using the U.S. Federal Statutory rate of 34%
for 1995 and 35% for 1996 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-----------------------
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Statutory federal rate........................... $1,637 $4,133 $ 6,570
State taxes, net of federal benefit.............. 202 449 415
Foreign sales corporation benefit................ (264) (601) (1,117)
Research and development credits................. -- -- (389)
Other............................................ 134 23 226
------ ------ -------
$1,709 $4,004 $ 5,705
====== ====== =======
</TABLE>
The income tax benefits related to the exercise and certain disqualifying
dispositions of stock options reduces taxes currently payable and is credited
to additional paid-in capital. Such amount approximated $393 and $794 for the
years ended April 30, 1996 and 1997, respectively. No such tax benefits were
realized in the year ended April 30, 1995.
13. INCENTIVE SAVINGS AND PROFIT SHARING PLAN
The Company has an incentive savings and profit sharing plan covering
substantially all employees who wish to participate and meet minimum age and
service requirements. Annual Company contributions are determined by the Board
of Directors and are limited to the maximum amount deductible under the
Internal Revenue Code. Company contributions for fiscal 1995, 1996 and 1997
were approximately $125, $196 and $325, respectively.
14. COMMITMENTS
Operating Leases
The Company leases land and certain buildings, machinery and equipment under
operating leases which expire through 2004. Under the terms of the leases, the
Company is responsible for normal maintenance and utility expenses and taxes
and pays a monthly property management fee on certain leases.
Future minimum lease payments under operating leases, including management
fees, are as follows:
<TABLE>
<S> <C>
Year ending April 30,
1998............................ $1,276
1999............................ 1,147
2000............................ 723
2001............................ 642
2002............................ 522
Thereafter...................... 809
------
Total minimum lease payments.... $5,119
======
</TABLE>
Total rent expense under noncancelable operating leases was approximately
$1,188, $1,150, and $1,266 for the years ended April 30, 1995, 1996 and 1997,
respectively.
F-20
<PAGE>
ADE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
15. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Cash paid during the year
Interest.......................................... $ 429 $ 221 $ 423
Income taxes, net of refunds received............. 1,484 6,164 5,584
</TABLE>
Non-Cash Investing and Financing Activities
During fiscal 1996, $1,056 of long-term debt was cancelled as consideration
for the exercise of a warrant to purchase 325,000 shares of the Company's
common stock (Note 8).
During fiscal 1995, the Company repurchased 34,430 shares of the Company's
common stock by paying cash of $38 and issuing a promissory note payable for
approximately $114 (Note 8). In addition, 2,856 shares of treasury stock with a
cost of $11 were issued in lieu of $12 of board of directors fees included in
accrued expenses.
F-21
<PAGE>
[MAP DEPICTING ADE'S WORLDWIDE NETWORK OF CUSTOMER SUPPORT APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THE PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDERS
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by Reference .......................... 3
Prospectus Summary ....................................................... 4
Risk Factors ............................................................. 7
Use of Proceeds .......................................................... 12
Price Range of Common Stock .............................................. 12
Dividend Policy........................................................... 12
Capitalization ........................................................... 13
Selected Consolidated Financial Data ..................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations .............................................................. 15
Business ................................................................. 21
Management ............................................................... 35
Principal and Selling Stockholders ....................................... 37
Underwriting.............................................................. 39
Legal Matters ............................................................ 40
Experts .................................................................. 40
Additional Information ................................................... 40
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,470,000 Shares
LOGO
ADE CORPORATION
Common Stock
------------
PROSPECTUS
------------
Alex. Brown & Sons
INCORPORATED
Montgomery Securities
Adams, Harkness & Hill, Inc.
Sutro & Co. Incorporated
Needham & Company, Inc.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the
sale of the Common Stock being registered. All of the amounts shown are
estimates except the Securities and Exchange Commission Registration fee, the
NASD Regulation filing fee and the Nasdaq National Market additional listing
fee.
<TABLE>
<S> <C>
Registration fee................................................ $ 22,862
NASD Regulation filing fee...................................... 8,045
Nasdaq National Market additional listing fee................... 17,500
Legal fees and expenses......................................... 125,000
Accounting fees and expenses.................................... 125,000
Transfer agent and registrar fees............................... 3,500
Printing and engraving expenses................................. 125,000
Blue Sky fees and expenses (including counsel fees)............. 1,500
Miscellaneous................................................... 21,593
--------
Totals...................................................... $450,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Restated Articles of Organization of the Registrant provide that no
director of the Registrant shall be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Such paragraph provides further, however, that to the extent provided by
applicable law, it will not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the Registrant or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for distributions
made in violation of the Registrant's Restated Articles of Organization or
which are made when the Registrant is insolvent or which renders it insolvent,
(iv) for loans made to officers or directors of the Registrant which are not
repaid if the director has voted for such loans and they have not been
approved or ratified as loans reasonably expected to benefit the Registrant,
by a majority of directors who are not recipients of such loans or the holders
of a majority of voting shares, which holders are not recipients of such
loans, or (v) for any transactions from which the director derived an improper
personal benefit.
Article VI of the Registrant's By-laws provides that the Registrant shall
indemnify each of its directors and officers (including persons who serve at
the Registrant's request as directors, officers or trustees of another
organization in which the Registrant has any interest, direct or indirect, as
a stockholder, creditor or otherwise or who serve at the Registrant's request
in any capacity with respect to any employee benefit plan) against all
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise, or as fines and penalties, and counsel fees reasonably incurred
by such person in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, in which such person may
be involved or with which such person may be threatened, while in office or
thereafter, by reason of such person's being or having been such a director,
officer or trustee, except with respect to any matter as to which such person
shall have been adjudicated in any proceeding not to have acted in good faith
in the reasonable belief that such person's action was in the best interest of
the Registrant or, to the extent that such matter relates to service with
respect to an employee benefit plan, in the best interests of the participants
or beneficiaries of such employee benefit plan.
As to any matter disposed of by a compromise payment by any such person,
pursuant to a consent decree or otherwise, Article VI of the Registrant's By-
laws provides that no indemnification shall be
II-1
<PAGE>
provided to such person for such payment or for any other expenses unless such
compromise has been approved as in the best interests of the Registrant, after
notice that it involves such indemnification (i) by a disinterested majority
of the directors then in office or (ii) by a majority of directors then in
office, provided that there has been obtained an opinion in writing of
independent legal counsel to the effect that such director or officer appeared
to have acted in good faith in the reasonable belief that such person's action
was in the best interests of the Registrant or (iii) by the holders of a
majority of the outstanding stock at the time entitled to vote for directors,
voting as a single class, exclusive of any stock owned by any interested
director or officer.
Article VI of the Registrant's By-laws provides that expenses, including
counsel fees, reasonably incurred by any director or officer in connection
with the defense or disposition of any such action, suit or other proceeding
may be paid by the Registrant, at the discretion of a majority of the
disinterested directors then in office, in advance of the final disposition
thereof, upon receipt of an undertaking by such director or officer to repay
to the Registrant the amounts so paid if it is ultimately determined that
indemnification for such expenses is not authorized under Article VI of the
By-laws, which undertaking may be accepted by the Registrant without reference
to the financial ability of such director or officer to make repayment.
Article VI of the Registrant's By-laws gives the Board of Directors of the
Registrant the power to authorize the purchase and maintenance of insurance,
in such amounts as the Board of Directors may from time to time deem
appropriate, on behalf of any person who is or was a director, officer or
agent of the Registrant, or who is or was serving at the request of the
Registrant as a director, officer or agent of another organization in which
the Registrant has any interest, direct or indirect, as a stockholder,
creditor or otherwise, or with respect to any employee benefit plan, against
any liability incurred by such person in any such capacity, or arising out of
such person's status as such agent, whether or not such person is entitled to
indemnification by the Registrant pursuant to Article VI or otherwise and
whether or not the Registrant would have the power to indemnify the person
against such liability.
Section 13(b) (1 1/2) of the Massachusetts Business Corporation Law, Chapter
156B of the General Laws of Massachusetts (the "MBCL") authorizes the
provisions, described above, contained in the Articles of Organization, as
amended, of the Registrant.
Section 67 of the MBCL authorizes the provisions, described above, contained
in Article VI of the By-laws of the Registrant.
Section 65 of the MBCL provides that performance by a director, officer or
incorporator of his duties in good faith and in a manner he reasonably
believes to be in the best interests of the corporation, and with such care as
an ordinary prudent person in a like position would use under similar
circumstances, shall be a complete defense to any claim asserted against such
director, officer or incorporator, except as otherwise expressly provided by
statute, by reason of his being or having been a director, officer or
incorporator of the corporation.
Pursuant to Section 8 of the Underwriting Agreement, the Underwriters have
agreed to indemnify each director of the Registrant, each officer of the
Registrant who has signed the Registration Statement and any person who
controls the Registrant within the meaning of the Securities Act against
certain liabilities, including liabilities under the Securities Act.
II-2
<PAGE>
ITEM 16. EXHIBITS
(a) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
1 Form of Underwriting Agreement (filed herewith)
5 Opinion of Warner & Stackpole LLP (filed herewith)
23.1 Consent of Price Waterhouse LLP (filed herewith)
23.2 Consent of Warner & Stackpole LLP (included in Exhibit 5)
24 Power of Attorney (included in the signature page hereto)
27 Financial Data Schedule
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULE:
Schedule II--Valuation and Qualifying Accounts and Reserves.
ITEM 17. UNDERTAKINGS.
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 person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant undertakes that: (i) for purposes of determining
any liability under the Securities Act, the information omitted from the form
of prospectus as filed as part of the registrant statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of the registration statement as of the time it was declared
effective and (ii) for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Westwood, Commonwealth of Massachusetts, on the day
of , 1997.
ADE Corporation
/s/ Robert C. Abbe
By: _________________________________
ROBERT C. ABBE PRESIDENT AND CHIEF
EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below on this Registration Statement hereby constitutes and appoints Robert C.
Abbe and Mark D. Shooman and each of them, with full power to act without the
other, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign any and all amendments to this Registration
Statement (including post-effective amendments and amendments thereto) and any
registration statement relating to the same offering as this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing,
ratifying and confirming all that said attorneys-in-fact and agents or any of
them or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement on Form S-3 has been signed by the following persons in
the capacities and on the dates stated.
SIGNATURE TITLE DATE
/s/ Robert C. Abbe President, Chief July 9, 1997
- ------------------------------------- Executive Officer
ROBERT C. ABBE and Director
(Principal
Executive Officer)
/s/ Mark D. Shooman Vice President and July 9, 1997
- ------------------------------------- Chief Financial
MARK D. SHOOMAN Officer (Principal
Financial Officer)
/s/ Joseph E. Rovatti Controller July 9, 1997
- ------------------------------------- (Principal
JOSEPH E. ROVATTI Accounting Officer)
II-4
<PAGE>
SIGNATURE TITLE DATE
/s/ Landon T. Clay Director July 9, 1997
- -------------------------------------
LANDON T. CLAY
/s/ Harris Clay Director July 9, 1997
- -------------------------------------
HARRIS CLAY
/s/ Francis B. Lothrop, Jr. Director July 9, 1997
- -------------------------------------
FRANCIS B. LOTHROP, JR.
/s/ H. Kimball Faulkner Director July 9, 1997
- -------------------------------------
H. KIMBALL FAULKNER
/s/ Kendall Wright
- ------------------------------------- Director July 9, 1997
KENDALL WRIGHT
II-5
<PAGE>
ADE CORPORATION
FINANCIAL STATEMENT SCHEDULE
(IN THOUSANDS)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
CHARGED TO BALANCE AT
BALANCE AT COSTS AND CHARGED TO DEDUCTIONS/ APRIL 30,
DESCRIPTION MAY 1, 1994 EXPENSES OTHER ACCOUNTS WRITE-OFFS 1995
----------- ----------- ---------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $ 57 $125 -- $44 $138
Inventory obsolescence.. 259 413 -- -- 672
Deferred tax asset valu-
ation allowance........ 346 -- -- -- 346
</TABLE>
<TABLE>
<CAPTION>
CHARGED TO BALANCE AT
BALANCE AT COSTS AND CHARGED TO DEDUCTIONS/ APRIL 30,
DESCRIPTION MAY 1, 1995 EXPENSES OTHER ACCOUNTS WRITE-OFFS 1996
----------- ----------- ---------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $138 $338 -- -- $476
Inventory obsolescence.. 672 295 -- -- 967
Deferred tax asset valu-
ation allowance........ 346 -- -- -- 346
</TABLE>
<TABLE>
<CAPTION>
CHARGED TO BALANCE AT
BALANCE AT COSTS AND CHARGED TO DEDUCTIONS/ APRIL 30,
DESCRIPTION MAY 1, 1996 EXPENSES OTHER ACCOUNTS WRITE-OFFS 1997
----------- ----------- ---------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $476 $ 112 -- $ 11 $ 577
Inventory obsolescence.. 967 1,034 -- 370 1,631
Deferred tax asset valu-
ation allowance........ 346 -- -- -- 346
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
1 Form of Underwriting Agreement (filed herewith)................
5 Opinion of Warner & Stackpole LLP (filed herewith).............
23.1 Consent of Price Waterhouse LLP (filed herewith)...............
23.2 Consent of Warner & Stackpole LLP (included in Exhibit 5)......
24 Power of Attorney (included in the signature page hereto)......
27 Financial Data Schedule........................................
</TABLE>
<PAGE>
EXHIBIT 1
2,840,500 Shares
ADE CORPORATION
Common Stock
($.01 Par Value)
UNDERWRITING AGREEMENT
----------------------
[__________], 1997
Alex. Brown & Sons Incorporated
Montgomery Securities
Adams, Harkness & Hill, Inc.
Sutro & Co. Incorporated
Needham & Company, Inc.
As Representatives of the Several Underwriters
c/o Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Gentlemen:
ADE Corporation, a Massachusetts corporation (the "Company"), and certain
shareholders of the Company (the "Selling Shareholders") propose to sell to the
several underwriters (the "Underwriters") named in Schedule I hereto for whom
you are acting as representatives (the "Representatives") an aggregate of
2,470,000 shares of the Company's Common Stock, $.01 par value (the "Firm
Shares"), of which 2,000,000 shares will be sold by the Company and 470,000
shares will be sold by the Selling Shareholders. The respective amounts of the
Firm Shares to be so purchased by the several Underwriters are set forth
opposite their names in Schedule I hereto, and the respective amounts to be sold
by the Selling Shareholders are set forth opposite their names in Schedule II
hereto. The Company and the Selling Shareholders are sometimes referred to
herein collectively as the "Sellers." The Company and certain Selling
Shareholders also propose to sell at the Underwriters' option an aggregate of up
to 370,500 additional shares of the Company's Common Stock (the "Option Shares")
as set forth below.
As the Representatives, you have advised the Company and the Selling
Shareholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata portion
of the Option Shares if you elect to exercise the over-allotment option in whole
or in part for the accounts
<PAGE>
of the several Underwriters. The Firm Shares and the Option Shares (to the
extent the aforementioned option is exercised) are herein collectively called
the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company and the Selling Shareholders.
--------------------------------------------------------------------------
(a) The Company represents and warrants to each of the Underwriters as
follows:
(i) A registration statement on Form S-3 (File No. [333- ]) with
respect to the Shares has been carefully prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the Rules and Regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") thereunder and
has been filed with the Commission. The Company has complied with the
conditions for the use of Form S-3 in connection with the offering. Copies
of such registration statement, including any amendments thereto, the
preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered
by the Company to you and, to the extent applicable, were identical to the
electronically transmitted copies thereof filed with the Commission on the
Commission's Electronic Data Gathering, Analysis and Retrieval System
("EDGAR"), except to the extent permitted by Regulation S-T. Such
registration statement, together with any registration statement filed by
the Company pursuant to Rule 462(b) under the Act, herein referred to as
the "Registration Statement," which shall be deemed to include all
information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of
the date of this Agreement. "Prospectus" means (a) the form of prospectus
first filed with the Commission pursuant to Rule 424(b) under the Act, (b)
if no filing pursuant to Rule 424(b) is required and a term sheet in
accordance with Rules 434 and 424(b)(7) is not used, the form of prospectus
included in the Registration Statement at the time of effectiveness or (c)
if a term sheet is used, the form of preliminary prospectus included in the
Registration Statement at the time of effectiveness that is delivered by
the Company to the Underwriters for delivery to purchasers of the Shares,
together with the term sheet or abbreviated term sheet filed with the
Commission in accordance with the provisions of Rule 434 and Rule 424(b)(7)
under the Act. Each preliminary prospectus included in the Registration
Statement prior to the time it becomes effective is herein referred to as a
"Preliminary Prospectus." Any reference herein to the Registration
Statement, any Preliminary Prospectus or the Prospectus shall be deemed to
include the documents incorporated therein by reference, and any
supplements or amendments thereto filed with the Commission after the date
of filing of the Prospectus under Rules 424(b) or 430A and prior to the
termination of the offering of the Shares by the Underwriters. Any
reference herein to the Registration Statement, any Preliminary Prospectus,
the Prospectus or any amendment or supplement to any of the foregoing,
shall be deemed to include the respective copies thereof filed with the
Commission on EDGAR.
-2-
<PAGE>
(ii) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the Commonwealth of
Massachusetts, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement. Each of the subsidiaries of the Company as listed in Exhibit 21
to Item 16(a) of the Registration Statement (collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement. The Subsidiaries are the only subsidiaries, direct or indirect,
of the Company. The Company and each of the Subsidiaries are duly
qualified to transact business in all jurisdictions in which the conduct of
their business requires such qualification, except where the failure so to
qualify would not have a material adverse effect on the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and of the Subsidiaries taken as a
whole (a "Material Adverse Effect"). The outstanding shares of capital
stock of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and non-assessable and are owned by the Company or
another Subsidiary free and clear of all liens, encumbrances and equities
and claims; and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interests in the
Subsidiaries are outstanding.
(iii) The outstanding shares of Common Stock of the Company,
including all shares to be sold by the Selling Shareholders, have been duly
authorized and validly issued and are fully paid and non-assessable; the
portion of the Shares to be issued and sold by the Company have been duly
authorized and when issued and paid for as contemplated herein will be
validly issued, fully paid and non-assessable; and no preemptive rights of
stockholders exist pursuant to the Company's Restated Articles of
Organization (the "Charter"), its by-laws (the "By-Laws") or any other
agreement to which the Company is a party with respect to any of the Shares
or the issue and sale thereof. Neither the filing of the Registration
Statement nor the offering or sale of the Shares as contemplated by this
Agreement gives rise to any rights, other than those which have been waived
or satisfied, for or relating to the registration of any shares of Common
Stock.
(iv) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. All of the Shares conform to the
description thereof contained in the Registration Statement. The form of
certificates for the Shares conforms to the corporate law of the
jurisdiction of the Company's incorporation.
(v) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares
nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements which are required to be stated therein by, and
will conform, to the requirements of the Act and the Rules and Regulations.
The Registration Statement and any amendment thereto do not contain, and
will not contain, any untrue statement of a material fact and do not omit,
and will not omit, to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
-3-
<PAGE>
The Prospectus and any amendments and supplements thereto do not contain,
and will not contain, any untrue statement of material fact and do not
omit, and will not omit, to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company by or on
behalf of any Underwriter through the Representatives, specifically for use
in the preparation thereof.
(vi) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly in all material respects the
financial position and the results of operations and cash flows of the
Company and the Subsidiaries, at the indicated dates and for the indicated
periods. Such financial statements and related schedules have been
prepared in accordance with generally accepted principles of accounting,
consistently applied throughout the periods involved, except as disclosed
herein, and all adjustments necessary for a fair presentation of results
for such periods have been made. The summary financial data included in
the Registration Statement presents fairly the information shown therein
and such data has been compiled on a basis consistent with the financial
statements presented therein and the books and records of the Company.
(vii) Price Waterhouse LLP, who have certified certain of the
financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and
the Rules and Regulations.
(viii) There is no action, suit, claim or proceeding pending or, to
the knowledge of the Company, threatened or contemplated against the
Company or any of the Subsidiaries before any court or administrative
agency or otherwise which if determined adversely to the Company or any of
its Subsidiaries might result in any Material Adverse Effect or prevent the
consummation of the transactions contemplated hereby, except as set forth
in the Registration Statement.
(ix) The Company and the Subsidiaries have good and marketable title
to all of the properties and assets reflected in the financial statements
(or as described in the Registration Statement) hereinabove described,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except those reflected in such financial statements (or as described in the
Registration Statement) or which are not material in amount. The Company
and the Subsidiaries occupy their leased properties under valid and binding
leases conforming in all material respects to the description thereof set
forth in the Registration Statement.
(x) The Company and the Subsidiaries have filed all Federal, State,
local and foreign income tax returns which have been required to be filed
and have paid all taxes indicated by said returns and all assessments
received by them or any of them to the extent
-4-
<PAGE>
that such taxes have become due and are not being contested in good faith.
All tax liabilities have been adequately provided for in the financial
statements of the Company.
(xi) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has
not been any change or any development involving a prospective change that
has had or would have a Material Adverse Effect, whether or not occurring
in the ordinary course of business, and there has not been any material
transaction entered into or any material transaction that is probable of
being entered into by the Company or the Subsidiaries, other than
transactions in the ordinary course of business and changes and
transactions described in the Registration Statement, as it may be amended
or supplemented. The Company and the Subsidiaries have no material
contingent obligations which are not disclosed in the Company's financial
statements which are included in the Registration Statement.
(xii) Neither the Company nor any of the Subsidiaries is or with the
giving of notice or lapse of time or both, will be, in violation of or in
default under its Charter or By-Laws or under any agreement, lease,
contract, indenture or other instrument or obligation to which it is a
party or by which it, or any of its properties, is bound and which default
would have a Material Adverse Effect. The execution and delivery of this
Agreement and the consummation of the transactions herein contemplated and
the fulfillment of the terms hereof will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust or other agreement or instrument to
which the Company or any Subsidiary is a party, or of the Charter or By-
laws of the Company or any order, rule or regulation applicable to the
Company or any Subsidiary of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(xiii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions
herein contemplated (except such additional steps as may be required by the
Commission, the National Association of Securities Dealers, Inc. (the
"NASD") or such additional steps as may be necessary to qualify the Shares
for public offering by the Underwriters under state securities or Blue Sky
laws) has been obtained or made and is in full force and effect.
(xiv) The Company and each of the Subsidiaries holds all material
licenses, certificates and permits from governmental authorities which are
necessary to the conduct of their businesses.
(xv) The Company or a Subsidiary owns or possesses adequate licenses
or other rights to use all patents, patent applications, trademarks,
trademark applications, service marks, service mark applications,
tradenames, copyrights, manufacturing processes, formulae, trade secrets
and know-how or other information (collectively, "Intellectual Property")
described in the Prospectus as owned by or used by them or which is
necessary to the conduct of their business as described in the Prospectus,
except where the failure to
-5-
<PAGE>
own or possess any such licenses or rights would not have a Material
Adverse Effect. To the knowledge of the Company, none of the patent rights
owned or licensed by the Company are unenforceable or invalid. The Company
is not aware of any infringement of or conflict with the rights or claims
of others with respect to any of the Company's products or Intellectual
Property where such infringement or conflict would have a Material Adverse
Effect. The Company is not aware of any ongoing infringement of any of the
Company's Intellectual Property rights by any third party which would have
a Material Adverse Effect. The Company has duly and properly filed or
caused to be filed with the United States Patent and Trademark Office all
United States patent applications described or referred to in the
Prospectus. The Company has clear title to its patent and patent
applications referenced in the Prospectus.
(xvi) No contract or document of a character required to be described
in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement is not so described or filed as
required.
(xvii) Neither the Company, nor to the Company's best knowledge, any
of its affiliates, has taken or may take, directly or indirectly, any
action designed to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the
sale or resale of the Shares.
(xviii) Neither the Company nor any Subsidiary is an "investment
company" within the meaning of such term under the Investment Company Act
of 1940 and the rules and regulations of the Commission thereunder (the
"1940 Act").
(xix) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(xx) The Company and each of its Subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their
respective properties and as is customary for companies engaged in similar
industries.
(xxi) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA
with respect to termination of,
-6-
<PAGE>
or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act,
which would cause the loss of such qualification.
(xxii) The Company has filed in a timely manner each document or
report required to be filed by it pursuant to the Securities Exchange Act
of 1934 (the "Exchange Act"); each such document or report at the time it
was filed conformed to the requirements of the Exchange Act and the rules
and regulations thereunder; and none of such documents or reports contained
any untrue statement of material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading.
(xxiii) The Shares have been listed on the Nasdaq National Market
System, subject to notice of issuance.
(b) Each of the Selling Shareholders severally represents and warrants as
follows:
(i) Such Selling Shareholder now has and at the Closing Date (as
such date is hereinafter defined) will have good and marketable title
to the Shares to be sold by such Selling Shareholder, free and clear
of any liens, encumbrances, equities and claims, and full right, power
and authority to effect the sale and delivery of such Shares; and upon
the delivery of, against payment for, such Shares pursuant to this
Agreement, the Underwriters will acquire good and marketable title
thereto, free and clear of any liens, encumbrances, equities and
claims.
(ii) Such Selling Shareholder has full right, power and authority
to execute and deliver this Agreement, the Power of Attorney referred
to below, and the Custodian Agreement referred to below and to perform
its obligations under such Agreements. The execution and delivery of
this Agreement and the consummation by such Selling Shareholder of the
transactions herein contemplated and the fulfillment by such Selling
Shareholder of the terms hereof will not require any consent,
approval, authorization, or other order of any court, regulatory body,
administrative agency or other governmental body (except as may be
required under the Act, state securities laws or Blue Sky laws) and
will not result in a breach of any of the terms and provisions of, or
constitute a default under, organizational documents of such Selling
Shareholder, if not an individual, or any indenture, mortgage, deed of
trust or other agreement or instrument to which such Selling
Shareholder is a party, or of any order, rule or regulation applicable
to such Selling Shareholder of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(iii) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or which has
constituted, or which might reasonably be expected to cause or result
in the stabilization or manipulation of the
-7-
<PAGE>
price of the Common Stock of the Company and, other than as permitted
by the Act, the Selling Shareholder will not distribute any prospectus
or other offering material in connection with the offering of the
Shares.
(iv) Without having undertaken to determine independently the
accuracy or completeness of either the representations and warranties
of the Company contained herein or the information contained in the
Registration Statement, such Management Selling Shareholder (defined
as the Selling Shareholders marked with an "*" in the attached
Schedule of Selling Shareholders) has no reason to believe that the
representations and warranties of the Company contained in this
Section 1 are not true and correct, is familiar with the Registration
Statement and has no knowledge of any material fact, condition or
information not disclosed in the Registration Statement which has
adversely affected or may adversely affect the business of the Company
or any of the Subsidiaries; and
(v) The sale of the Shares by such Selling Shareholder pursuant
hereto is not prompted by any information concerning the Company or
any of the Subsidiaries which is not set forth in the Registration
Statement. The information pertaining to such Selling Shareholder
under the caption "Principal and Selling Stockholders" in the
Prospectus is complete and accurate in all material respects.
2. Purchase, Sale and Delivery of the Firm Shares.
----------------------------------------------
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the
Sellers agree to sell to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of [$______] per share,
the number of Firm Shares set forth opposite the name of each Underwriter
in Schedule I hereof, subject to adjustments in accordance with Section 9
hereof. The number of Firm Shares to be purchased by each Underwriter from
each Seller shall be as nearly as practicable in the same proportion to the
total number of Firm Shares being sold by each Seller as the number of Firm
Shares being purchased by each Underwriter bears to the total number of
Firm Shares to be sold hereunder. The obligations of the Company and of
each of the Selling Shareholders shall be several and not joint.
(b) Payment for the Firm Shares to be sold hereunder is to be made by
wire transfer of same-day funds to an account of the Company for the Shares
to be sold by it and to an account of American Stock Transfer & Trust
Company "as Custodian" for the Shares to be sold by the Selling
Shareholders, in each case against delivery of certificates therefor to the
Representatives for the several accounts of the Underwriters. Such payment
and delivery are to be made at the offices of Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland, at 10:00
a.m., Baltimore time, on the fourth business day after the date of this
Agreement or at such other time and date not later than five business days
thereafter as you and the Company shall agree upon, such time and date
being herein referred to as the "Closing Date." (As used herein, "business
day" means a day on which the New York Stock Exchange is open for trading
and on which banks in New York are open for business and not permitted by
law or executive order to be closed.) The certificates for
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<PAGE>
the Firm Shares will be delivered in such denominations and in such
registrations as the Representatives request in writing not later than the
second full business day prior to the Closing Date, and will be made
available for inspection by the Representatives at least one business day
prior to the Closing Date.
(c) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth,
the Company and certain Selling Shareholders (marked with an "+" in
Schedule II) hereby grant an option to the several Underwriters to purchase
the Option Shares at the price per share as set forth in the first
paragraph of this Section 2. The option granted hereby may be exercised in
whole or in part by giving written notice (i) at any time before the
Closing Date and (ii) only once thereafter within 30 days after the date of
this Agreement, by you, as Representatives of the several Underwriters, to
the Company and such certain Selling Shareholders, setting forth the number
of Option Shares as to which the several Underwriters are exercising the
option, the names and denominations in which the Option Shares are to be
registered and the time and date at which such certificates are to be
delivered. The time and date at which certificates for Option Shares are to
be delivered shall be determined by the Representatives but shall not be
earlier than three nor later than 10 full business days after the exercise
of such option, nor in any event prior to the Closing Date (such time and
date being herein referred to as the "Option Closing Date"). If the date of
exercise of the option is three or more days before the Closing Date, the
notice of exercise shall set the Closing Date as the Option Closing Date.
The number of Option Shares to be purchased by each Underwriter shall be in
the same proportion to the total number of Option Shares being purchased as
the number of Firm Shares being purchased by such Underwriter bears to the
total number of Firm Shares, adjusted by you in such manner as to avoid
fractional shares. The option with respect to the Option Shares granted
hereunder may be exercised only to cover over-allotments in the sale of the
Firm Shares by the Underwriters. You, as Representatives of the several
Underwriters, may cancel such option at any time prior to its expiration by
giving written notice of such cancellation to the Company. To the extent,
if any, that the option is exercised, payment for the Option Shares shall
be made on the Option Closing Date by wire transfer of same-day funds to an
account of the Company for the Option Shares to be sold by it and to an
account of American Stock Transfer & Trust Company "as Custodian" for the
Option Shares to be sold by the Selling Shareholders, in each case against
delivery of certificates therefor at the offices of Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland.
(d) Certificates in negotiable form or option certificates in
exercisable form for the total number of the Shares to be sold hereunder by
the Selling Shareholders have been placed in custody with American Stock
Transfer & Trust Company as custodian (the "Custodian") pursuant to a
Custodian Agreement executed by each Selling Shareholder for delivery of
all Shares to be sold hereunder by the Selling Shareholders (the "Custodian
Agreement"). Each of the Selling Shareholders specifically agrees that the
Shares represented by the certificates held in custody for the Selling
Shareholders under the Custodian Agreement are subject to the interests of
the Underwriters hereunder, that the arrangements made by the Selling
Shareholders for such custody are to that extent irrevocable, and that the
obligations of the Selling Shareholders hereunder shall not be
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terminable by any act or deed of the Selling Shareholders (or by any other
person, firm or corporation including the Company, the Custodian or the
Underwriters) or by operation of law (including the death of an individual
Selling Shareholder or the dissolution of a corporate Selling Shareholder)
or by the occurrence of any other event or events, except as set forth in
the Custodian Agreement. If any such event should occur prior to the
delivery to the Underwriters of the Shares hereunder, certificates for the
Shares shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such event has not occurred. The
Custodian is authorized to receive and acknowledge receipt of the proceeds
of sale of the Shares held by it against delivery of such Shares.
(e) If on the Closing Date any Selling Shareholder fails to sell the
Shares which such Selling Shareholder has agreed to sell on such date as
set forth in Schedule II hereto, the Company agrees that it will sell or
-----------
arrange for the sale of that number of shares of Common Stock to the
Underwriters which represents Shares which such Selling Shareholder has
failed to so sell, as set forth in Schedule II hereto, or such lesser
-----------
number as may be requested by the Representatives.
3. Offering by the Underwriters.
----------------------------
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Shares in accordance with a Master
Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company and the Selling Shareholders.
-----------------------------------------------------
(a) The Company covenants and agrees with the several Underwriters that:
(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule
430A of the Rules and Regulations is followed, to prepare and timely file
with the Commission under Rule 424(b) of the Rules and Regulations a
Prospectus in a form approved by the Representatives containing information
previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rule 430A of the Rules and Regulations, and (B)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which the Representatives shall not previously have been
advised and furnished with a copy or to which the Representatives shall
have reasonably objected in writing or which is not in compliance with the
Rules and Regulations. To the extent applicable, the copies of the
Registration Statement (including all exhibits filed therewith), any
Preliminary Prospectus or Prospectus furnished to the Underwriters shall be
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<PAGE>
identical to the copies thereof electronically filed with the Commission on
EDGAR, except to the extent permitted by Regulation S-T.
(ii) The Company will advise the Representatives promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have
become effective, (B) of receipt of any comments from the Commission, (C)
of any request of the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional
information, and (D) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of
the Prospectus or of the institution of any proceedings for that purpose.
The Company will use its best efforts to prevent the issuance of any such
stop order preventing or suspending the use of the Prospectus and to obtain
as soon as possible the lifting thereof, if issued.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of
such jurisdictions as the Representatives may reasonably have designated in
writing and will make such applications, file such documents, and furnish
such information as may be reasonably required for that purpose, provided
the Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction where it
is not now so qualified or required to file such a consent. The Company
will, from time to time, prepare and file such statements, reports, and
other documents, as are or may be required to continue such qualifications
in effect for so long a period as the Representatives may reasonably
request for distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company will
deliver to, or upon the order of, the Representatives during the period
when delivery of a Prospectus is required under the Act, as many copies of
the Prospectus in final form, or as thereafter amended or supplemented, as
the Representatives may reasonably request. The Company will deliver to the
Representatives, at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits
filed therewith, and will deliver to the Representatives such number of
copies of the Registration Statement (including such number of copies of
the exhibits filed therewith that may reasonably be requested), and of all
amendments thereto, as the Representatives may reasonably request.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Exchange Act, and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution
of the Shares as contemplated in this Agreement and the Prospectus. If
during the period in which a prospectus is required by law to be delivered
by an Underwriter or dealer, any event shall occur as a result of which, in
the judgment of the Company or in the reasonable opinion of the
Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
existing at the time the Prospectus is delivered to a purchaser, not
misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and
file with the
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<PAGE>
Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the
law.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later
than 15 months after the effective date of the Registration Statement, an
earning statement (which need not be audited) in reasonable detail,
covering a period of at least 12 consecutive months beginning after the
effective date of the Registration Statement, which earning statement shall
satisfy the requirements of Section 11(a) of the Act and Rule 158 of the
Rules and Regulations and will advise you in writing when such statement
has been so made available.
(vii) The Company will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and copies of
all other documents, reports and information furnished by the Company to
its stockholders or filed with any securities exchange pursuant to the
requirements of such exchange or with the Commission pursuant to the Act or
the Exchange Act. The Company will deliver to the Representatives similar
reports with respect to significant subsidiaries, as that term is defined
in the Rules and Regulations, which are not consolidated in the Company's
financial statements. To the extent applicable, such reports and documents
shall be identical to the copies thereof electronically filed with the
Commission on EDGAR, except to the extent permitted by Regulation S-T.
(viii) The Company will not sell or otherwise dispose of, directly or
indirectly, any shares of Common Stock or other securities convertible into
or exchangeable or exercisable for shares of Common Stock or derivative of
Common Stock (or enter into any agreement for such) for a period of 90
days after the date of this Agreement otherwise than hereunder or with the
prior written consent of Alex. Brown & Sons Incorporated except that the
Company may, without such consent, (A) issue shares upon the exercise of
options outstanding on the date of this Agreement issued pursuant to its
[1982 Stock Option Plan, as amended, the 1992 Stock Option Plan and the
1995 Stock Option Plan] and (B) grant options and offer to sell shares of
Common Stock to its employees and directors pursuant to the plans listed in
clause (A). The Company will not file a registration statement on Form S-8
under the Act until 90 days after the date of this Agreement.
(ix) The Company will use its best efforts to list, subject to notice
of issuance, the Shares on the NASDAQ National Market.
(x) The Company has caused each officer and director and specific
shareholders of the Company to furnish to you, on or prior to the date of
this agreement, a letter or letters, in form and substance satisfactory to
the Underwriters, pursuant to which each such person shall agree not to
offer to sell, contract to sell, transfer or otherwise dispose of, directly
or indirectly, any shares of Common Stock, any options, rights or warrants
to purchase any shares of Common Stock (including any stock appreciation
right, or similar right with an exercise or conversion privilege at a price
related to, or derived from, the market price of the
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<PAGE>
Common Stock) or any securities convertible into or exchangeable for shares
of Common Stock or engage in any hedging transactions with respect to the
Common Stock that may have an impact on the market price of the Common
Stock for a period of 90 days after the date of this Agreement, directly or
indirectly, except with the prior written consent of Alex. Brown & Sons
Incorporated ("Lockup Agreements").
(xi) The Company shall apply the net proceeds of its sale of the
Shares substantially as set forth in the Prospectus.
(xii) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as
would require the Company or any of the Subsidiaries to register as an
investment company under the 1940 Act.
(xiii) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Common Stock.
(xiv) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably
be expected to constitute, the stabilization or manipulation of the price
of any securities of the Company in violation of the Act or the Rules and
Regulations or the Exchange Act and the rules and regulations of the
Commission thereunder.
(b) Each of the Selling Shareholders covenants and agrees with the
several Underwriters that:
(i) Such Selling Shareholder will not offer to sell, contract to sell,
transfer or otherwise dispose of, directly or indirectly, any shares of Common
Stock, any options, rights or warrants to purchase any shares of Common Stock
(including any stock appreciation right, or similar right with an exercise or
conversion privilege at a price related to, or derived from, the market price of
the Common Stock) or any securities convertible into or exchangeable for shares
of Common Stock or engage in any hedging transactions with respect to the Common
Stock that may have an impact on the market price of the Common Stock for a
period of 90 days after the date of this Agreement, otherwise than hereunder or
with the prior written consent of Alex. Brown & Sons Incorporated.
(ii) In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 and the Interest and Dividend Tax Compliance Act of 1983 with respect to
the transactions herein contemplated, each of the Selling Shareholders agrees to
deliver to you prior to or at the Closing Date a properly completed and executed
United States Treasury Department Form W-9 (or other applicable form or
statement specified by Treasury Department regulations in lieu thereof).
(iii) Such Selling Shareholder will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company in
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<PAGE>
violation of the Act or the Rules and Regulations or the Exchange Act and
the rules and regulations of the Commission thereunder.
5. Costs and Expenses.
------------------
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Sellers under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting
fees of the Company; the fees and disbursements of counsel for the Company; the
cost of printing and delivering to, or as requested by, the Underwriters copies
of the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the Underwriters' Invitation Letter, the Listing Application, the
Blue Sky Survey and any supplements or amendments thereto; the filing fees of
the Commission; the filing fees incident to securing any required review by the
NASD of the terms of the sale of the Shares; the Listing Fee of the Nasdaq
National Market; and the expenses, including the fees and disbursements of
counsel for the Underwriters, incurred in connection with the qualification of
the Shares under State securities or Blue Sky laws. The Company shall not,
however, be required to pay for any of the Underwriters expenses (other than
those related to qualification under NASD regulation and State securities or
Blue Sky laws) except that, if this Agreement shall not be consummated because
the conditions in Section 6 hereof are not satisfied, or because this Agreement
is terminated by the Representatives pursuant to Section 11 hereof , or by
reason of any failure, refusal or inability on the part of the Company or the
Selling Shareholders to perform any undertaking or satisfy any condition of this
Agreement or to comply with any of the terms hereof on their part to be
performed, unless such failure to satisfy said condition or to comply with said
terms be due to the default or omission of any Underwriter, then the Company
shall reimburse the several Underwriters for reasonable out-of-pocket expenses,
including fees and disbursements of counsel, reasonably incurred in connection
with investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder; but the Company shall
not in any event be liable to any of the several Underwriters for damages on
account of loss of anticipated profits from the sale by them of the Shares.
6. Conditions of Obligations of the Underwriters.
---------------------------------------------
The several obligations of the Underwriters to purchase the Firm Shares on
the Closing Date and the Option Shares, if any, on the Option Closing Date are
subject to the accuracy, as of the Closing Date or the Option Closing Date, as
the case may be, of the representations and warranties of the Company and the
Selling Shareholders contained herein, and to the performance by the Company and
the Selling Shareholders of their covenants and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by
Rule 424 and Rule 430A of the Rules and Regulations shall have been made,
and any request of the Commission for additional information (to be
included in the Registration Statement or otherwise) shall have been
disclosed to the Representatives and complied with to their reasonable
satisfaction. No stop order suspending the effectiveness of the
Registration Statement, as amended from time to time, shall have been
issued and no proceedings for that purpose shall have been taken or,
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<PAGE>
to the knowledge of the Company, shall be contemplated by the Commission
and no injunction, restraining order, or order of any nature by a Federal
or state court of competent jurisdiction shall have been issued as of the
Closing Date which would prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinions of Warner &
Stackpole, counsel for the Company, dated the Closing Date or the Option
Closing Date, as the case may be, addressed to the Underwriters (and
stating that it may be relied upon by counsel to the Underwriters) to the
effect that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the Commonwealth
of Massachusetts, with corporate power and authority to own or lease
its properties and conduct its business as described in the
Registration Statement; each of the Subsidiaries has been duly
organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, with
corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement; the
Company and each of the Subsidiaries are duly qualified to transact
business in all jurisdictions in which the conduct of their business
requires such qualification, or in which the failure to qualify would
have a Material Adverse Effect; and the outstanding shares of capital
stock of each of the Subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable and are owned by
the Company or a Subsidiary; and, to the best of such counsel's
knowledge, the outstanding shares of capital stock of each of the
Subsidiaries is owned free and clear of all liens, encumbrances and
equities and claims, and no options, warrants or other rights to
purchase, agreements or other obligations to issue or other rights to
convert any obligations into any shares of capital stock or of
ownership interests in the Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of the Company's Common Stock have been duly
authorized; the outstanding shares of the Company's Common Stock,
including the Shares to be sold by the Selling Shareholders, have been
duly authorized and validly issued and are fully paid and non-
assessable; all of the Shares conform to the description thereof
contained in the Prospectus; the certificates for the Shares, assuming
they are in the form filed with the Commission, are in due and proper
form; the shares of Common Stock, including the Option Shares, if any,
to be sold by the Company pursuant to this Agreement have been duly
authorized and will be validly issued, fully paid and non-assessable
when issued and paid for as contemplated by this Agreement; and no
statutory preemptive rights of stockholders or, to the knowledge of
such counsel, similar contractual rights exist with respect to any of
the Shares or the issue or sale thereof.
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<PAGE>
(iii) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, there are no outstanding securities
of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the
Company and there are no outstanding or authorized options, warrants
or rights of any character obligating the Company to issue any shares
of its capital stock or any securities convertible or exchangeable
into or evidencing the right to purchase or subscribe for any shares
of such stock; and except as described in the Prospectus, to the
knowledge of such counsel, no holder of any securities of the Company
or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to
sell or otherwise issue to them, or to permit them to underwrite the
sale of, any of the Shares or the right to have any Common Shares or
other securities of the Company included in the Registration Statement
or the right, as a result of the filing of the Registration Statement,
to require registration under the Act of any shares of Common Stock or
other securities of the Company.
(iv) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order
proceedings with respect thereto have been instituted or are pending
or threatened under the Act.
(v) The Registration Statement, the Prospectus and each amendment
or supplement thereto comply as to form in all material respects with
the requirements of the Act and the Rules and Regulations (except that
such counsel need express no opinion as to the financial statements
and related schedules therein) and that the documents incorporated by
reference in the Registration Statement and Prospectus complied as to
form when filed in all material respects with the requirements of the
Exchange Act.
(vi) The statements under the captions "[_____________]" and
"Shares Eligible for Future Sale" in the Prospectus, insofar as such
statements constitute a summary of documents referred to therein or
matters of law, fairly summarize in all material respects the
information called for with respect to such documents and matters.
(vii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus which are
not so filed or described as required, and such contracts and
documents as are summarized in the Registration Statement or the
Prospectus are fairly summarized in all material respects.
(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries except as set forth in the Prospectus.
(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will
not conflict with or result in
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<PAGE>
a breach of any of the terms or provisions of, or constitute a default
under, the Charter or By-laws of the Company, or any agreement or
instrument known to such counsel to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the
Subsidiaries may be bound.
(x) This Agreement has been duly authorized, executed and
delivered by the Company.
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution
and delivery of this Agreement and the consummation of the
transactions herein contemplated (other than as may be required by the
NASD or as required by State securities and Blue Sky laws as to which
such counsel need express no opinion) except such as have been
obtained or made, specifying the same.
(xii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement,
and application of the net proceeds therefrom as described in the
Prospectus, required to register as an investment company under the
1940 Act.
(xiii) This Agreement has been duly authorized, executed and
delivered on behalf of the Selling Shareholders.
(xiv) Each Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than as required by
State securities and Blue Sky laws as to which such counsel need
express no opinion), to sell, assign, transfer and deliver the portion
of the Shares to be sold by such Selling Shareholder.
(xv) The Custodian Agreement and the Power of Attorney executed
and delivered by each Selling Shareholder are valid, irrevocable
instruments legally sufficient for the purposes intended.
(xvi) Upon registration of the Shares to be sold by the Selling
Shareholders hereunder in the names of the Underwriters in the stock
records of the Company, and assuming the Underwriters purchased such
Shares in good faith and without notice of any adverse claim within
the meaning of Section 8-302 of the Uniform Commercial Code as in
effect in the Commonwealth of Massachusetts, the Underwriters will
have acquired all rights of the Selling Shareholders in such Shares
free of any adverse claim, any lien in favor of the Company, and any
restrictions on transfer imposed by the Company; and the owner of such
Shares, if other than such Selling Shareholder, is precluded from
asserting against the Underwriters the ineffectiveness of any
unauthorized endorsement.
In rendering such opinion, Warner & Stackpole may rely as to matters
governed by the laws of states other than Massachusetts or Federal laws on
local counsel in such
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jurisdictions and as to the matters set forth in subparagraphs (xiii),
(xiv) and (xv) on opinions of other counsel representing the respective
Selling Shareholders, provided that in each case Warner & Stackpole shall
state that they believe that they and the Underwriters are justified in
relying on such other counsel. In addition to the matters set forth above,
such opinion shall also include a statement to the effect that nothing has
come to the attention of such counsel which leads them to believe that (i)
the Registration Statement, at the time it became effective under the Act
(but after giving effect to any modifications incorporated therein pursuant
to Rule 430A under the Act) and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii)
the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the
Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to
make the statements, in the light of the circumstances under which they are
made, not misleading and (iii) any of the documents incorporated by
reference in the Propsectus, as of the respective dates when such documents
were filed with the Commission contained any untrue statement of material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein). With respect to such statement, Warner &
Stackpole may state that their belief is based upon the procedures set
forth therein, but is without independent check and verification.
(c) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of patent and
trademark counsel for the Company, dated the Closing Date or the Option
Closing Date, as the case may be, addressed to the Underwriters that is in
form and substance reasonably satisfactory to them and their counsel.
In rendering such opinion, such counsel may, to the extent stated
therein, rely as to matters of fact on certificates of officers of the
Company, copies of which shall be attached to the opinion. In rendering
such opinion, such counsel need not have conducted any independent
investigation or conducted searches to locate any third party patents, mask
works, copyrights or other intellectual property rights that might impact
the Company's activities.
(d) The Representatives shall have received from Ropes & Gray, counsel
for the Underwriters, an opinion dated the Closing Date or the Option
Closing Date, as the case may be, substantially to the effect specified in
subparagraphs (ii), (iv), (x) and (xiii) of Paragraph (b) of this Section
6. In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of
such counsel which leads them to believe that (i) the Registration
Statement, or any amendment thereto, as of the time it became effective
under the Act (but after giving effect to any modifications incorporated
therein pursuant to Rule 430A under the Act) contained an untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and (ii) the Prospectus, or any supplement
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<PAGE>
thereto, on the date it was filed pursuant to the Rules and Regulations and
as of the Closing Date contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements,
in the light of the circumstances under which they are made, not misleading
(except that such counsel need express no view as to financial statements,
schedules and statistical information therein). With respect to such
statement, may state that their belief is based upon the procedures set
forth therein, but is without independent check and verification.
(e) The Representatives shall have received at or prior to the Closing
Date from Ropes & Gray a memorandum or summary, in form and substance
satisfactory to the Representatives, with respect to the qualification for
offering and sale by the Underwriters of the Shares under the State
securities or Blue Sky laws of such jurisdictions as the Representatives
may reasonably have designated to the Company.
(f) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the
date hereof, the Closing Date or the Option Closing Date, as the case may
be, in form and substance satisfactory to you, of Price Waterhouse LLP
confirming that they are independent public accountants within the meaning
of the Act and the applicable published Rules and Regulations thereunder
and stating that in their opinion the financial statements and schedules
examined by them and included in the Registration Statement comply in form
in all material respects with the applicable accounting requirements of the
Act and the related published Rules and Regulations; and containing such
other statements and information as is ordinarily included in accountants'
"comfort letters" to Underwriters with respect to the financial statements
and certain financial and statistical information contained in the
Registration Statement, the Prospectus and the documents incorporated by
reference therein.
(g) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of
the Chief Executive Officer and the Chief Financial Officer of the Company
to the effect that, as of the Closing Date or the Option Closing Date, as
the case may be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the Act
and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have
been taken or are, to his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company contained
in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
(iv) He has carefully examined the Registration Statement and the
Prospectus and, in his opinion, as of the effective date of the
Registration Statement,
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<PAGE>
the statements contained in the Registration Statement were true and
correct, and such Registration Statement and Prospectus did not omit
to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, and since the
effective date of the Registration Statement, no event has occurred
which should have been set forth in a supplement to or an amendment of
the Prospectus which has not been so set forth in such supplement or
amendment; and
(v) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole or the
earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the
Company and the Subsidiaries taken as a whole, whether or not arising
in the ordinary course of business.
(h) The Company and the Selling Shareholders shall have furnished to
the Representatives such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein
and related matters as the Representatives may reasonably have requested.
(i) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on The Nasdaq National Market.
(j) The Lockup Agreements are in full force and effect.
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Representatives and to Ropes & Gray, counsel for
the Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representatives by notifying the Company and the Selling Shareholders of such
termination in writing or by telegram at or prior to the Closing Date or the
Option Closing Date, as the case may be.
In such event, the Selling Shareholders, the Company and the Underwriters
shall not be under any obligation to each other (except to the extent provided
in Sections 5 and 8 hereof).
7. Conditions of the Obligations of the Sellers.
--------------------------------------------
The obligations of the Sellers to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of
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<PAGE>
the Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. Indemnification.
---------------
(a) The Company agrees, and each Selling Shareholder severally agrees,
to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of the Act, against any
losses, claims, damages or liabilities to which such Underwriter or any
such controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any act
or failure to act or any alleged act or failure to act by any Underwriter
in connection with, or relating in any manner to, the shares or the
offering contemplated hereby, and which is included as part of or referred
to in any loss, claim, damage, liability or action arising out of or based
upon matters covered by clause (i) or (ii) above (provided that the Company
and the Selling Shareholders shall not be liable under this clause (iii) to
the extent that it is determined in a final judgment by a court of
competent jurisdiction that such loss, claim, damage, liability or action
resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its gross negligence or
willful misconduct); and will reimburse each Underwriter and each such
controlling person upon demand for any legal or other expenses reasonably
incurred by such Underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Shares, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided that,
with respect to the indemnity of each Selling Shareholder, other than the
Management Selling Shareholders, the indemnity shall, in each case, apply
only to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement, or
omission or alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with written information
furnished by such Selling Shareholder specifically for use in the
preparation thereof; and provided further that the Company and the Selling
Shareholders will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement, or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by or through
the Representatives specifically for use in the preparation thereof. In no
event, however, shall the liability of any Selling Shareholder for
indemnification under this Section 8(a) exceed the proceeds received by
such Selling Shareholder from the Underwriters hereunder. This indemnity
agreement will be in addition to any liability which the Company or the
Selling Shareholders may otherwise have. Neither the Underwriters nor any
such controlling person shall seek indemnification from the Selling
Shareholders for any
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<PAGE>
losses, claims, damages, expenses, or liabilities suffered by them unless
either: (i) they have first reduced their indemnification claims against
the Company to judgment and exhausted all collection remedies against the
Company in respect of such claims and such claims remain unsatisfied; or
(ii) the Company is then bankrupt, in which event the Underwriters and any
such controlling person shall be entitled to seek indemnification from the
Selling Shareholders for the unsatisfied portion of such losses, claims,
damages, liabilities or expenses. The Company agrees that the Selling
Shareholders may implead the Company in any action in which the
Underwriters or any such controlling person is seeking indemnification from
the Selling Shareholders. The Company also agrees that to the extent that
the Management Selling Shareholders satisfy any indemnification claims of
Underwriters or such controlling persons hereunder (for which claims they
would not be liable but for their status as Management Selling
Shareholders) such Management Selling Shareholders shall be subrogated to
the rights against the Company of the Underwriter and such controlling
persons.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, the Selling Shareholders, and each
person, if any, who controls the Company or the Selling Shareholders within
the meaning of the Act, against any losses, claims, damages or liabilities
to which the Company or any such director, officer, Selling Shareholder or
controlling person may become subject under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto, or (ii) the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made; and will reimburse any legal or
other expenses reasonably incurred by the Company or any such director,
officer, Selling Shareholder or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action
or proceeding; provided, however, that each Underwriter will be liable in
each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission has been made
in the Registration Statement, any Preliminary Prospectus, the Prospectus
or such amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by or through the
Representatives specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to this Section 8, such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought
(the "indemnifying party") in writing. No indemnification provided for in
Section 8(a) or (b) shall be available to any party who shall fail to give
notice as provided in this Section 8(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related
and was materially prejudiced by the failure to give such notice, but the
failure to give such notice shall not
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<PAGE>
relieve the indemnifying party or parties from any liability which it or
they may have to the indemnified party for contribution or otherwise than
on account of the provisions of Section 8(a) or (b). In case any such
proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such
indemnified party and shall pay as incurred the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel at its own
expense. Notwithstanding the foregoing, the indemnifying party shall pay as
incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention
of such counsel, (ii) the named parties to any such proceeding (including
any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests
between them or (iii) the indemnifying party shall have failed to assume
the defense and employ counsel acceptable to the indemnified party within a
reasonable period of time after notice of commencement of the action. It is
understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees and expenses of more than one separate firm for all
such indemnified parties. Such firm shall be designated in writing by you
in the case of parties indemnified pursuant to Section 8(a) and by the
Company and the Selling Shareholders in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent but
if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment. In addition, the indemnifying party will not, without the prior
written consent of the indemnified party, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action or
proceeding of which indemnification may be sought hereunder (whether or not
any indemnified party is an actual or potential party to such claim, action
or proceeding) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) in
such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Shareholders on the one hand and the
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<PAGE>
Underwriters on the other from the offering of the Shares. If, however,
the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute
to such amount paid or payable by such indemnified party in such proportion
as is appropriate to reflect not only such relative benefits but also the
relative fault of the Company and the Selling Shareholders on the one hand
and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities,
(or actions or proceedings in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Selling Shareholders on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the
Company and the Selling Shareholders bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Selling Shareholders on the one hand or the Underwriters on
the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
(e) The Company, the Selling Shareholders and the Underwriters agree
that it would not be just and equitable if contributions pursuant to
Section 8(d) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in Section 8(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) referred to
above in Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of subsection (d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation, and (iii) no
Selling Shareholder shall be required to contribute any amount in excess of
the proceeds received by such Selling Shareholder from the Underwriters in
the Offering. The Underwriters' obligations in Section 8(d) to contribute
are several in proportion to their respective underwriting obligations and
not joint.
(f) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process issuing
from such court may be served upon him or it by any other contributing
party and consents to the service of such process and agrees that any other
contributing party may join him or it as an additional defendant in any
such proceeding in which such other contributing party is a party.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement
shall
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<PAGE>
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A
successor to any Underwriter, or to the Company, its directors or officers,
or any person controlling the Company, shall be entitled to the benefits of
the indemnity, contribution and reimbursement agreements contained in this
Section 8.
9. Default by Underwriters.
-----------------------
If on the Closing Date or the Option Closing Date, as the case may be, any
Underwriter shall fail to purchase and pay for the portion of the Shares which
such Underwriter has agreed to purchase and pay for on such date (otherwise than
by reason of any default on the part of the Company or a Selling Shareholder),
you, as Representatives of the Underwriters, shall use your reasonable efforts
to procure within 36 hours thereafter one or more of the other Underwriters, or
any others, to purchase from the Company and the Selling Shareholders such
amounts as may be agreed upon and upon the terms set forth herein, the Firm
Shares or Option Shares, as the case may be, which the defaulting Underwriter or
Underwriters failed to purchase. If during such 36 hours you, as such
Representatives, shall not have procured such other Underwriters, or any others,
to purchase the Firm Shares or Option Shares, as the case may be, agreed to be
purchased by the defaulting Underwriter or Underwriters, then (a) if the
aggregate number of shares with respect to which such default shall occur does
not exceed 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby, the other Underwriters shall be obligated, severally, in proportion to
the respective numbers of Firm Shares or Option Shares, as the case may be,
which they are obligated to purchase hereunder, to purchase the Firm Shares or
Option Shares, as the case may be, which such defaulting Underwriter or
Underwriters failed to purchase, or (b) if the aggregate number of shares of
Firm Shares or Option Shares, as the case may be, with respect to which such
default shall occur exceeds 10% of the Firm Shares or Option Shares, as the case
may be, covered hereby, the Company or you as the Representatives of the
Underwriters will have the right, by written notice given within the next 36-
hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriters or of the
Company or of the Selling Shareholders except to the extent provided in Section
8 hereof. In the event of a default by any Underwriter or Underwriters, as set
forth in this Section 9, the Closing Date or Option Closing Date, as the case
may be, may be postponed for such period, not exceeding seven days, as you, as
Representatives, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
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<PAGE>
10. Notices.
-------
All communications hereunder shall be in writing and, except as otherwise
provided herein, will be mailed, delivered, telecopied or telegraphed and
confirmed as follows: if to the Underwriters, to Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202, Attention:
Syndicate; with a copy to Alex. Brown & Sons Incorporated, 135 East Baltimore
Street, Baltimore, Maryland 21202. Attention: General Counsel; if to the Company
or the Selling Shareholders, to ADE Corporation, 80 Wilson Way, Westwood,
Massachusetts 02090; Attention: Chief Executive Officer; with a copy to Warner
& Stackpole, 75 State Street, Boston, MA 02109, Attention: Timothy B. Bancroft,
Esq.
11. Termination.
-----------
This Agreement may be terminated by you by notice to the Sellers as
follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m.
on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse
change or any development involving a prospective material adverse change
in or affecting the condition, financial or otherwise, of the Company and
its Subsidiaries taken as a whole or the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise)
or prospects of the Company and its Subsidiaries taken as a whole, whether
or not arising in the ordinary course of business, (ii) any outbreak or
escalation of hostilities or declaration of war or national emergency or
other national or international calamity or crisis or change in economic or
political conditions if the effect of such outbreak, escalation,
declaration, emergency, calamity, crisis or change on the financial markets
of the United States would, in your reasonable judgment, make it
impracticable to market the Shares or to enforce contracts for the sale of
the Shares, or (iii) suspension of trading in securities generally on the
New York Stock Exchange or the American Stock Exchange or limitation on
prices (other than limitations on hours or numbers of days of trading) for
securities on either such Exchange, (iv) the enactment, publication, decree
or other promulgation of any statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects or may materially and adversely affect the business or
operations of the Company, (v) declaration of a banking moratorium by
United States or New York State authorities, (vi) any downgrading in the
rating of the Company's debt securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g)
under the Exchange Act); (vii) the suspension of trading of the Company's
common stock by the Commission on The Nasdaq National Market or (viii) the
taking of any action by any governmental body or agency in respect of its
monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
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<PAGE>
12. Successors.
----------
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any right or obligation hereunder. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign merely because of such
purchase.
13. Information Provided by Underwriters.
------------------------------------
The Company, the Selling Shareholders and the Underwriters acknowledge and
agree that the only information furnished or to be furnished by any Underwriter
to the Company for inclusion in any Prospectus or the Registration Statement
consists of the information set forth in the last paragraph on the front cover
page (insofar as such information relates to the Underwriters), legends required
by Item 502(d) of Regulation S-K under the Act and the information under the
caption "Underwriting" in the Prospectus.
14. Miscellaneous.
-------------
The reimbursement, indemnification and contribution agreements contained in
this Agreement and the representations, warranties and covenants in this
Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of
any Underwriter or controlling person thereof, or by or on behalf of the Company
or its directors or officers and (c) delivery of and payment for the Shares
under this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Selling Shareholders, the
Company and the several Underwriters in accordance with its terms.
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<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Shareholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing and
binding Power of Attorney (the "Power of Attorney") which authorizes such
Attorney-in-Fact to take such action.
Very truly yours,
ADE CORPORATION
By_______________________________
President
Selling Shareholders listed on Schedule II
By_______________________________
Attorney-in-Fact
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written.
Alex. Brown & Sons Incorporated
Montgomery Securities
Adams, Harkness & Hill, Inc.
Sutro & Co. Incorporated
Needham & Company, Inc.
As Representatives of the several
Underwriters listed on Schedule I
By: Alex. Brown & Sons Incorporated
By_____________________________
Authorized Officer
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<PAGE>
SCHEDULE I
SCHEDULE OF UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER FIRM SHARES
TO BE PURCHASED
<S> <C>
Alex. Brown & Sons Incorporated
Montgomery Securities
Adams, Harkness & Hill, Inc.
Sutro & Co. Incorporated
Needham & Company, Inc.
---------------
TOTAL UNDERWRITERS ( )
</TABLE>
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<PAGE>
SCHEDULE II
SCHEDULE OF SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
FIRM SHARES OPTIONAL SHARES
SELLING SHAREHOLDER TO BE SOLD TO BE SOLD
- --------------------- ---------- ----------
<S> <C> <C>
</TABLE>
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<PAGE>
SCHEDULE II
SCHEDULE OF SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
FIRM SHARES OPTIONAL SHARES
SELLING SHAREHOLDER TO BE SOLD TO BE SOLD
- --------------------- ---------- ----------
<S> <C> <C>
TOTAL 0
</TABLE>
- ---------------
* Management Selling Shareholders. See Section 1(b)(iv).
+ Selling Shareholders who have granted an option to the Underwriters for the
sale of Option Shares. See Section 2(c).
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<PAGE>
EXHIBIT 5
(LETTERHEAD)
July 8, 1997
ADE Corporation
80 Wilson Way
Westwood, MA 02090
Ladies and Gentlemen:
We have acted as your counsel in connection with the preparation and filing
with the Securities and Exchange Commission of a Registration Statement on
Form S-3 (the "Registration Statement") with respect to the public offering of
up to 2,840,500 shares of the Common Stock, $.01 par value per share, of ADE
Corporation, a Massachusetts corporation (the "Company"), of which up to
2,300,000 shares are being sold by the Company (the "Company Shares") and up
to 540,500 shares are being sold by certain stockholders of the Company (the
"Selling Stockholder Shares" and, together with the Company Shares, the
"Shares").
We have examined (i) the Registration Statement, (ii) the form of
Underwriting Agreement between the Company and Alex. Brown & Sons
Incorporated, Montgomery Securities, Adams, Harkness & Hill, Inc., Sutro & Co.
Incorporated and Needham & Company, Inc. as Representatives of the several
underwriters named in Schedule A thereto (the "Underwriting Agreement"), (iii)
the Restated Articles of Organization of the Company, as amended to date, and
such other documents and records of the Company as we have deemed necessary
for purposes of this opinion.
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity of
the originals of such latter documents.
We are members of the bar of the Commonwealth of Massachusetts and we
express no opinion as to any matters insofar as any laws other than Federal
laws and the laws of the Commonwealth of Massachusetts may be applicable.
Based upon the foregoing, we are of the opinion that (a) the Selling
Stockholder Shares, other than any Shares to be issued after the date hereof
pursuant to option exercises, were validly issued and are fully paid and non-
assessable, (b) the Shares, if any, to be included in the Selling Stockholder
Shares following the exercise of options outstanding as of the date hereof are
duly authorized and upon issuance will be validly issued, fully paid, and non-
assessable, and (c) the Company Shares are duly authorized and upon (i) the
effectiveness of the Registration Statement, (ii) the execution and delivery
of the Underwriting Agreement by the parties thereto, (iii) payment for the
Shares in accordance with the terms of the Underwriting Agreement, and (iv)
the issuance of the certificates therefor by the Company, will be validly
issued, fully paid and non-assessable.
We hereby consent to the reference to this firm under the heading "Legal
Matters" in the prospectus which is part of the Registration Statement and to
the filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Warner & Stackpole LLP
Warner & Stackpole LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of our report dated July 1, 1997 relating
to the financial statements of ADE Corporation, which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedule for the three years ended April 30, 1997 listed under Item
16(b) of this Registration Statement when such schedule is read in conjunction
with the financial statements referred to in our report. The audits referred
to in such report also included this schedule. We also consent to the
references to us under the headings "Experts" and "Selected Financial Data" in
such Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Financial Data."
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
July 8, 1997
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
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0
0
<COMMON> 86
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<TOTAL-LIABILITY-AND-EQUITY> 88,417
<SALES> 101,403
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<CGS> 44,838
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<OTHER-EXPENSES> 37,794
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<INCOME-PRETAX> 18,771
<INCOME-TAX> 5,705
<INCOME-CONTINUING> 13,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,165
<EPS-PRIMARY> 1.48
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