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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-22250
3D SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-4431352
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
26081 Avenue Hall
Valencia, California 91355
(Address of principal executive offices and zip code)
(661) 295-5600
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
Preferred Stock Purchase Rights
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this 10-K or any Amendment to this Form
10-K. |_|
At February 29, 2000, there were outstanding 11,602,633 shares of the Common
Stock of Registrant, and the aggregate market value of the shares held on that
date by non-affiliates of Registrant, based on the closing price ($11.6562 per
share) of the Registrant's Common Stock on the Nasdaq National Market on that
date, was $90,806,356. For purposes of this computation, it has been assumed
that the shares beneficially held by directors and officers of Registrant were
"held by affiliates"; this assumption is not to be deemed to be an admission by
such persons that they are affiliates of Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Proxy Statement with respect to its 2000 Annual Meeting
of Shareholders, currently scheduled to be held May 2, 2000, are incorporated by
reference into Part III of this Report.
Exhibit index is located on page 28.
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3D SYSTEMS CORPORATION
Annual Report on Form 10-K for the
Year Ended December 31, 1999
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<S> <C>
PART I....................................................................................................3
Item 1. Business......................................................................................3
Item 2. Properties...................................................................................15
Item 3. Legal Proceedings............................................................................15
Item 4. Submission of Matters to a Vote of Security Holders..........................................16
Item 4a. Executive Officers of the Registrant.........................................................16
PART II..................................................................................................18
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........................18
Item 6. Selected Financial Data......................................................................19
Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition........20
Item 7a. Quantitative and Qualitative Disclosures About Market Risk...................................26
Item 8. Financial Statements and Supplementary Data..................................................26
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures........26
PART III.................................................................................................27
Item 10. Directors and Executive Officers of the Registrant...........................................27
Item 11. Executive Compensation.......................................................................27
Item 12. Security Ownership of Certain Beneficial Owners and Management...............................27
Item 13. Certain Relationships and Related Transactions...............................................27
PART IV..................................................................................................28
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K..............................28
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PART I
Item 1. Business
- - ----------------
For a discussion of certain material factors which may affect the Company, see
"Cautionary Statements and Risk Factors" commencing on page 10 of this Report.
General
3D Systems Corporation (the "Company," "We," or "Us") develops, manufactures
and markets worldwide solid imaging systems. Solid imaging systems are
designed to produce physical objects rapidly from digital data using computer
aided design and manufacturing ("CAD/CAM") software utilities and related
computer applications. Our hardware products include SLA-Registered
Trademark- industrial systems and ThermoJet(TM) solid object printers. In
addition, we market and distribute consumable materials used in these
systems. Our growing installed base of systems requires an ongoing supply of
materials as well as service support. ThermoJet printers use proprietary
materials developed, manufactured and sold exclusively by us. For SLA
systems, we are the exclusive worldwide distributor (except for Japan) of
Ciba Specialty Chemicals, Inc.'s ("CSC") stereolithography photopolymer
resins ("resins"), which we developed in conjunction with CSC.
SLA industrial systems use our proprietary stereolithography ("SL") technology,
a solid imaging process which uses a laser beam to expose and solidify
successive layers of photosensitive epoxy resin until the desired object is
formed to precise specifications in epoxy or acrylic resin. SL-produced parts
can be used for concept models, engineering prototypes, patterns and masters for
molds, consumable tooling or short-run manufacturing of final product, among
other applications. SL technology can provide users with significant product
development time savings, cost reductions and improved quality, compared to
traditional modeling, tooling and pattern-making techniques. In addition,
material functionality can produce more durable parts, which can be used for
rapid manufacturing. We provide, either directly or through our network of
authorized distributors, a variety of on-site maintenance services and
processing materials.
ThermoJet solid object printers employ hot melt ink jet technology to build
models in successive layers using our proprietary thermoplastic material. These
printers, about the size of an office copier, are designed for operation in
engineering and design office environments. Designers, engineers, and other
users of CAD/CAM utilities can incorporate the printers into office networks as
a shared resource, to rapidly produce models of products under development for
design concept communication and validation. In addition, the ThermoJet solid
object printer output can be used as patterns and molds and, when combined with
other secondary processes, can produce parts with representative end use
properties. We provide, either directly or through our network of authorized
distributors, on-site maintenance services.
We market directly and through secondary distribution channels to customers in
the United States, Europe and Asia, and through distributors in other countries.
We sold our first SLA system in 1988, our first solid object printer in the
fourth quarter of 1996, and as of December 31, 1999, had sold 1,546 machines to
customers in over 80 countries. Our customers include major corporations
throughout the world in a broad range of industries including manufacturers of
automotive, aerospace, computer, electronic, consumer and medical products. We
also sell SLA systems and ThermoJet printers to independent service bureaus,
which, for a fee, provide stereolithographic and 3D printing services to their
customers.
As of December 31, 1999, we held 197 patents related to solid imaging: 93 United
States; 61 European; 8 Japanese; and 35 other foreign patents. We continue to
develop improvements in our product lines as well as new products to expand the
applications of solid imaging. In conjunction with CSC, we continue to develop
materials for our SLA systems with different and improved characteristics to
expand SL applications. CSC is a Swiss-based multinational manufacturer and
distributor of specialty chemicals, a 14.9% beneficial shareholder of the
Company, and our partner in photopolymer resin development.
Solid imaging is a relatively new field embodying the use of computers and
computer automated equipment to rapidly produce prototypes, models and even
low-volume production quantities of physical objects that traditionally have
been produced by machining and other methods. We believe that stereolithography
and solid imaging hot melt ink jet technologies, which we have developed and
patented, represent the most significant developments in this field. While
alternative technologies exist and significant research and development efforts
are currently being undertaken by corporations and universities around the world
in an attempt to develop additional alternative technologies and techniques, we
remain the leader in the solid imaging field on the basis of total revenue and
systems installed.
Unless otherwise indicated, all references to "CSC" include Ciba Specialty
Chemicals, Inc. and its affiliates, including Ciba Specialty Chemicals Holding
and its wholly-owned subsidiaries in Canada, through which CSC holds its
interest in the Company, and the United States ("CSC US"), through which CSC
conducts its United States operations. On December 14, 1999, CSC announced it
would sell its Performance Polymer Division, the division with which we
primarily
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do business, to Morgan Grenfell Private Equity ("MGPE"). The announcement stated
that the transaction is expected to close in the first quarter of 2000. On
February 7, 2000, CSC advised us that the operations of the division will be run
by the present management in a newly created Swiss company headquartered in
Basel, Switzerland and that CSC will assign to the new company its rights and
obligations under all contracts related to the Performance Polymers Division.
MGPE is ultimately owned by Deutsch Bank AG.
Corporate Structure
The Company is a Delaware corporation, and is the sole shareholder of 3D Canada
Company, a Nova Scotia unlimited liability company (formerly 3D Systems (Canada)
Inc., a British Columbia corporation) ("3D Canada"). The Company and 3D Canada
jointly own 3D Holdings LLC, which is the sole shareholder of 3D Systems, Inc.,
a California corporation ("3D California"), which directly and through its
direct and indirect subsidiaries conducts substantially all of the Company's
business. 3D California's direct subsidiaries include 3D Systems Europe Ltd., a
United Kingdom company, which, beginning January 1, 2000, serves as the
headquarters for the Company's European operations.
Unless otherwise indicated, all references in this document to the Company, we,
or us include 3D Systems Corporation, 3-D Systems Inc., its British Columbia
predecessor ("3-D Canada"), 3D Canada Company and its predecessor, 3D Systems
(Canada), Inc. and 3D Systems, Inc. and its subsidiaries.
Products and Services
For an analysis of revenues attributable to our product and service groups, see
"Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition - Results of Operations" on page 21.
SLA Systems and Related Equipment. We currently manufacture and market five SLA
industrial systems-- the SLA 250 Series 50; the SLA 250/50 HR ("High
Resolution"); the SLA 3500; the SLA 5000; and the SLA 7000. All models use SL
technology. The models vary in their capabilities including the resolution and
accuracy of part building, the maximum size of objects that can be produced,
object building speed, and system price.
Each SLA system consists of an ultraviolet laser, an optical scanning system
that controls the position of the laser beam, a vat of photosensitive epoxy
resin, an elevator assembly and a central controller, which work together to
control the exposure of the resin to ultraviolet radiation, thereby curing it in
a defined pattern to create solid objects. SLA systems are capable of making
multiple objects at the same time; however, each SLA system is limited in the
size of the objects that it can make during a single build session. Therefore,
the system can make only scale models of very large objects or, alternatively,
full-scale portions of large objects which are then joined together. The SLA 250
system, for example, can create a model, section of a model or other object with
maximum size of 10 inches x 10 inches x 10 inches (250 mm x 250 mm x 250 mm). On
the other hand, the maximum size model, section of a model or other object that
can be created using the SLA 7000 system is 20 inches x 20 inches x 24 inches
(500 mm x 500 mm x 600 mm).
SLA systems are installed in many of the largest manufacturing organizations in
the world and are used in a wide variety of applications, varying from
prototyping automobile parts to creating new designs for testing in consumer
focus groups. SLA systems are designed to build communication models to enable
users to share ideas and evaluate concepts; perform form, fit and function
testing on working prototypes; build master patterns for investment casting; or
quickly produce parts for direct use in working prototypes.
We also market ultraviolet curing devices ("PCAs") used in conjunction with SLA
systems. The PCA provides uniform long wave ultraviolet illumination. When the
SLA system has completed a typical object, a small amount of the resin has not
been fully cured. Full curing requires an additional one to two hours of
exposure to ultraviolet illumination through the use of our PCAs. The Company is
currently offering three PCA models, the PCA 250, PCA 350 and PCA 500.
Approximately 70% of all SLA systems sold by us have been purchased with a PCA.
Solid object printers. The ThermoJet printer is a network-ready system, about
the size of an office copier, that uses a hot melt ink jet technology to print
models in successive layers using a proprietary thermoplastic solid imaging
material ("SIM") and a print head with hundreds of jets oriented in a linear
array. The print head scans back and forth, similar to desktop ink jet printers,
depositing layer upon layer of material to form the physical model. The printers
offer a part building capacity of 10 inches x 7.8 inches x 8 inches (250 mm x
195 mm x 200 mm).
The ThermoJet printer creates concept models used for design reviews, form and
fit checking, styling, ergonomics evaluation and CAD-model verification. By
printing a three-dimensional object, designs that appear complex on a
two-dimensional presentation are more easily understood by both technical and
non-technical people.
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Materials. We develop and manufacture the SIM used by the ThermoJet printer.
Currently we market three types of SIM, in several shades. We anticipate, based
upon our research and development efforts, that we will market additional SIM
types with differing material properties. We are the exclusive worldwide
distributor (other than Japan), to users of stereolithographic systems, of CSC
photopolymers (photosensitive resins) for stereolithography (see "Marketing and
Customers - Photopolymer Distribution Agreement," on page 7, below). Currently,
we market a total of 14 different resins, which vary in building speed,
accuracy, surface finish and mechanical properties. Depending upon results
obtained under our Photopolymer Research Agreement (described under "Research
and Development," on page 6, below), we anticipate that we will market
additional types of resins with varying properties. Most of our customers
purchase material from us at the time of initial purchase of equipment (SLA
system or ThermoJet printer). We also sell material necessary for ongoing
operation of the machines. During 1999, 1998 and 1997 revenues from materials
sales were $15.6 million, $18.6 million and $13.5 million, respectively.
Approximately three-quarters of our material revenue is from ongoing operation
of the machines.
Software. We develop and market part preparation software for personal computers
and engineering workstations. The software is designed to enhance the interface
between CAD/CAM utilities and our solid imaging products. Solid CAD/CAM data is
converted to the STL format within the CAD/CAM utility. Depending on the
specific software package, the object is typically viewed, rotated, scaled, and
model structures added. The software then generates the information that will be
used by the SLA or ThermoJet machine for creation of the solid images.
QuickCast(TM) Technology. Our QuickCast build style consists of a special
process for making precision investment casting patterns using SL technology.
Investment casting is a process whereby a foundry uses wax patterns to generate
molds into which liquid metal is poured to form the part. Each wax pattern can
be used only once to produce a mold. Similarly, the QuickCast process uses our
SLA systems to produce foundry-useable mold patterns suitable for limited-run
investment casting. While not cost-competitive for high-capacity manufacturing,
the ability to rapidly produce prototypes and short run production quantities of
fully functional complex metal parts, in a wide variety of metals, is a major
technological improvement in SL. All of the SLA systems we sell include the
software capability to use the QuickCast process.
Maintenance. All of the SLA systems we sell include on-site hardware and
software maintenance service, during a warranty period (typically one year) at
no additional charge. All ThermoJet printers include at least a 90-day warranty
period at no additional charge. After the warranty period, we offer customers
optional maintenance contracts, which are available on a monthly and annual
basis. Approximately three-quarters of the services we provide are for
post-warranty maintenance contracts. Although purchasers are not required to
enter into maintenance contracts with us, a majority of our United States, Asia
Pacific and European SLA system customers are parties to these contracts, and
many others obtain our maintenance services on a time and material basis.
Customers acquiring systems from some of our overseas distributors are offered
maintenance contracts by the distributors. During 1999, 1998 and 1997, revenues
from maintenance contracts and maintenance services were approximately $26.7
million, $28.1 million, and $25.0 million, respectively. As of December 31,
1999, we had a staff of 98 full-time employees who provide on-site remedial and
preventive maintenance services necessary to keep the equipment in good
operating condition. To date, warranty expenses and product returns have not
been significant.
3D Systems Technology Centers. The Company provides services from its Technology
Centers at its Valencia, California headquarters and at its office located near
Frankfurt, Germany. The 3D Systems Technology Centers utilize SLA systems
together with CAD/CAM and other data supplied by customers to produce models,
prototypes, mold patterns and other parts on a contract basis. The price for
services offered by the Technology Centers varies on the basis of the nature of
the services requested. The Technology Centers also focus their efforts on the
development of new applications and techniques in SL and the development of new
markets in which the advantages of SL can be demonstrated. The Technology
Centers also enable us to keep abreast of developments in the applications of
rapid prototyping and serve as a means to introduce prospective buyers to our
technology.
3D Keltool(R) Process. The 3D Keltool process uses master patterns to produce
highly accurate steel tool core and cavity inserts for use in plastic injection
molding machines. In 1998, we began licensing this technology to our customers
for their direct use. Since acquiring the 3D Keltool assets and operations in
September 1996 and through 1998, we produced 3D Keltool inserts for our
customers, using the 3D Keltool process, out of our St. Paul, Minnesota
facility. In the first quarter of 1999, we sold the St. Paul operations to Rapid
Tooling Technologies ("RTT"). As part of the agreement to purchase the St. Paul
operations, RTT obtained a license for the use of the 3D Keltool process.
Recent Product Introductions. In order to improve and expand the capabilities of
our systems and related software and materials, as well as to enhance our
portfolio of proprietary intellectual properties, we have historically devoted a
significant portion of our resources to research and development activities.
Recent product introductions include:
SL5530HT resin was announced in December 1998. Designed specifically for use
with the SLA 350, 3500, 5000 and 7000 systems, SL5530HT resin is a breakthrough
in materials development. Depending on the hardware platform, SL5530HT
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can resist temperatures in excess of 200(degree) C/392(degree) F - twice the
heat resistance of any other resin today. It also possesses optical clarity
useful for flow visualization and build accuracy that mirrors the dimensions of
the part design.
3D Lightyear(TM) part preparation software was released in the second quarter of
1999. 3D Lightyear software fully exploits the power of the Windows NT operating
system, delivering functionality that extends beyond the capabilities of its
predecessor, Unix-based Maestro. An accompanying release of control software for
the SLA 350/3500/500/5000/7000 systems also incorporated new functions for
customers who owned these large-frame SLA machines.
SLA 7000 system, the Company's new SLA machine introduced in the first quarter
of 1999, is faster (depending upon part geometry and layer thickness) than our
next fastest solid imaging system. The SLA 7000 system gains its speed advantage
from a dual-spot high power laser, high speed scanning software and a new high
photosensitivity material. In addition to its speed, the SLA 7000 system can
produce parts at 0.001 inch (0.025 mm) layers thickness (depending on part size
and geometry).
SL 7510 high photosensitivity material was initially released for the SLA 7000
machine. It was also released during 1999 for the SLA 3500 and SLA 5000 systems.
Final material properties are machine-dependent, but generally the SL 7510
material offers excellent durability, fast build speed, accuracy and humidity
resistance.
SL 5430 material for the SLA 500 system was released in January 2000. It
combines excellent productivity and clarity, with high temperature resistance -
up to 250(degree) C/482(degree) F.
SL 7540 material was released in March 2000, on all three solid-state platforms
(the SLA 3500/5000/7000 systems). It is a leap ahead in material properties,
offering exceptional durability and surface quality. Along with this material,
we released new versions of our Lightyear and Buildstation software (1.1 and
5.1, respectively). The software releases enable a new method of supporting SL
parts, which result in better part surface finish and better part building
yield. In combination, the software and material are an important step ahead in
part building and part versatility.
ThermoJet solid object printer is the successor to the Actua(TM) 2100 office
modeler, offering a significant improvement in speed and reliability. It is up
to 300% faster than its predecessor. In addition, the ThermoJet printer,
introduced in the first quarter of 1999, uses a new material, TJ-88, with
improved part durability. Along with the hardware and materials release, a new
version of part preparation and control software was introduced, which further
improved the ease of use of the ThermoJet software.
Research and Development
Our ability to compete successfully depends, among other things, on our ability
to design and develop new machines, materials and applications, and to refine
existing products. For the foreseeable future, we anticipate that our research
and development efforts will be focused on system design and material
functionality improvements for the ThermoJet solid object printer and SLA
systems, and developing software to facilitate the interface between our solid
imaging systems and CAD/CAM programs. Research and development expenses
decreased in 1999 to $8.9 million, down from $9.4 million in 1998. The decrease
in research and development expenses in 1999 was primarily a result of
significant investment in 1998 in new product introduction (ThermoJet solid
object printer and SLA 7000 system). Based on our historical expenditures
related to research and development and our current development goals, we
anticipate, for the foreseeable future, research and development expenses will
be equal to approximately 8% of sales. This is a forward-looking statement,
however, and, as with any such statement, is subject to risk. For example, if
our total sales for any particular period do not meet our anticipated sales for
that period, research and development expenses as a percentage of sales may
exceed 8%. As of December 31, 1999, 50 employees or contractors were devoting
substantially all of their time to research and development activities for the
Company, compared to 66 employees at December 31, 1998.
We believe that further refinements in stereolithography will depend upon
improvements not only in our SLA products, but also in the chemical makeup of
the resins used in the fabrication process. To this end, we have dedicated a
significant amount of time to the development of new resins. To pursue this
goal, we are a party to a Research and Development Agreement with CSC (the
"Photopolymer Research Agreement") providing for the development of
photopolymers, photopolymerizable monomers, photoinitiators and other resins for
use with our SLA systems. Subject to certain conditions, the Photopolymer
Research Agreement will remain in effect until either party gives the other six
months notice of intent to terminate the agreement. Pursuant to the Photopolymer
Research Agreement, the two companies work jointly, with each company funding
its own portion of the research. Ownership of any inventions or know-how,
whether patented or not, will accrue to CSC if they are chemical in nature, and
to us if they relate to the stereolithographic process. CSC has announced that
it will sell its Performance Polymer Division, the division that engages in
photopolymer research with us. We believe that the Photopolymer Research
Agreement will be transferred to the new company, and we have consented to the
assignment. This is a forward-looking statement and, as such, is subject to
risk. For example, management of the acquiring company may decide not to assume
the obligations under the contract or may decide to negotiate a new contract
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with less favorable terms. If the Photopolymer Research Agreement is not
assigned, or if it is otherwise terminated, we may be unable to develop
improvements in the chemical makeup of the resins used in the SL fabrication
process, which could result in a material adverse effect on our revenues,
results of operations, liquidity and financial position.
We believe that further refinements in solid object printing will come as a
result of investment in the areas of material development, solid imaging
processes and the printing mechanism. In 1999, 3D Systems began an aggressive
material development program with an outside consulting firm to develop SIM
ingredients and chemical compounds with properties optimized for the ink jet
solid imaging process. We believe these synthetic specialty chemicals will allow
future SIM formulations to demonstrate significant improvement in the material
durability and other mechanical properties, and that investment in the solid
imaging build processes will result in improvements in the quality of the model
output from the build process. We believe these improvements will include faster
model build times, higher resolution and smaller layer steps, more accurate
geometry representation and smoother and more uniform surface finish on all
surfaces of the finished model. Investment in the printer system design and
mechanism is expected to result in substantial cost savings, an increase in
reliability and improvements in ease of use.
The foregoing discussion relating to the Company's research and development
activities includes statements that involve risks and uncertainties. For a
discussion of the factors associated with such forward-looking statements which
could cause actual results to differ materially from those projected in the
statements, see "Cautionary Statements and Risk Factors--We Must Keep Pace with
Rapid Technological Change and Introduce New Products to Remain Competitive" on
page 11 and "Our New Products May Not Be Commercially Accepted" on page 11.
Marketing and Customers
Our sales and marketing strategy focuses on an internal sales organization,
which is responsible for overseeing worldwide sales and value-added resellers,
as well as the utilization of knowledgeable international distributors. We
employ a direct sales force consisting of sales persons and application
specialists that provide technical sales support. At December 31, 1999, our
worldwide sales and support staff consisted of 61 employees that were primarily
located in the United States and Europe. We have sales offices in the United
States in California, Michigan, Minnesota, Indiana, Ohio, North Carolina, South
Carolina and Massachusetts; our European offices are located near Frankfurt,
London, Paris, Barcelona and Milan, and our Hong Kong office serves the Asia
Pacific region.
International Sales. International sales, the majority of which are to Europe,
accounted for 47.5%, 44.1% and 41.5% of total sales in the years ended December
31, 1999, 1998, and 1997, respectively. (See "Note 16 of Notes to Consolidated
Financial Statements" on page F-8.) On September 17, 1999, we announced the
formation of a new management team for our European operations, which will have
a pan-European vision, rather than a fragmented country-by-country focus. Our
European operations finished 1999 with a 17.8% growth over 1998. Platform sales
to automotive and Formula One customers are still the strongest, but sales to
the consumer electronics industry also showed a large percentage of growth year
over year.
As of December 31, 1999, we had entered into agreements with three independent
distributors in the Pacific Rim, five in greater Europe and one in Latin
America. International distributors are responsible for marketing, sales, system
installation, service and support to their customers. For a discussion of risks
associated with international operations, see "Cautionary Statements and Risk
Factors - There are Many Risks Associated with International Business" on page
12.
Customers. Our customers include major companies in a broad range of industries
throughout the world, including manufacturers of automotive, aerospace,
computer, electronic, consumer and medical products. Purchasers of our systems
include original equipment manufacturers ("OEMs") such as AMP, Inc., Apple
Computer, Inc., Audi AG, Benetton F1, Boeing Company, BMW Group, Canstar Sports,
Inc., DaimlerChrysler Corp., Eastman Kodak Company, The Electrolux Group,
General Electric Company, General Motors Corporation, Delphi Automotive Systems,
Hasbro, Inc., Jordan Grand Prix, International Business Machines Corporation,
Johnson & Johnson, Motorola, Inc., Navistar International Corporation, Nike,
Inc., Pratt & Whitney, Raytheon Company and Texas Instruments, Inc. We also sell
our products to government agencies and universities, which generally use our
machines for research activities, and to independent service bureaus, including
Arrk Creative Network, the largest rapid prototype manufacturer in the world,
General Pattern, Moehler Design and INCS, Inc., which for a fee provide
stereolithographic services to their customers.
Photopolymer Distribution Agreement. Pursuant to an agreement with CSC US, and
subject to conditions set forth in the agreement, we are the exclusive worldwide
distributor to users of SL processes of all Ciba Specialty Chemicals SL
photopolymers. At our request, an affiliate of CSC US currently sells such
photopolymers in Japan to our Japanese distributor. Subject to certain
conditions, so long as CSC US provides adequate supplies, we are required to
fill all of our requirements for our photopolymers through purchases from CSC
US. Subject to certain conditions, the agreement will remain in effect until
either party gives the other six months advance notice of termination. There can
be no assurance that this agreement will remain in place. Though we believe we
can obtain alternate agreements from other manufacturers, the
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termination of this agreement or interruption of supply could have a material
adverse effect on our revenues, results of operations, liquidity and financial
position. (See "Cautionary Statements and Risk Factors - We Depend on a Single
or Limited Suppliers for Certain of our Components" on page 11). CSC has
announced that it will sell its Performance Polymer Division, the division with
which we have the agreement. We believe that the Photopolymer Distribution
Agreement will be transferred to the new company, and we have consented to the
assignment. This is a forward-looking statement and, as such, is subject to
risk. For example, management of the acquiring company may decide not to assume
the obligations under the contract or may decide to negotiate a new contract
with less favorable terms.
Customer Support and Service. Before installation of an SLA system, a new
purchaser typically receives training at our facilities. During the first
several days after installation, an applications engineer remains at the
customer location to ensure that the customer is able to operate the SLA system
effectively and to answer any questions that may arise. We also make available
to our customers, for a fee, additional training courses in SLA system features
and applications.
No training is necessary in connection with the purchase of a ThermoJet printer.
We offer maintenance contracts to our customers, which generate recurring
revenue. (See "Products and Services," on page 4, above.) We also make
available, in the United States, a hotline to all of our users with maintenance
contracts. The hotline is staffed with technical representatives who answer
questions and arrange for on-site remedial services if necessary. The hotline is
available Monday through Friday, local holidays excepted, 5:00 a.m. to 5:00 p.m.
Pacific time. In addition, customer service, troubleshooting and answers to
frequently asked questions ("FAQs") are available through our website,
www.3dsystems.com. Customers may also reach us through e-mail, 24 hours a day.
We co-founded and currently participate in both domestic and international SL
User Groups, which currently include a substantial number of our customers. The
User Groups organize annual conferences in both the United States and Europe, at
which we make presentations relating to updates in stereolithography, changes we
have implemented in our systems and related equipment, materials and software
and future ideas and programs we intend to pursue in the upcoming years.
Backlog. At December 31, 1999, the Company had orders (with scheduled delivery
dates) for 12 systems aggregating approximately $4.4 million, as compared to
systems aggregating approximately $8.9 million at December 31, 1998 and $3.5
million at December 31, 1997. It is anticipated that all orders included in the
current backlog will be shipped by June 30, 2000. As a matter of policy, we
afford our customers the right to cancel any system order at any time prior to
its scheduled delivery date. Historically, the number of system orders canceled
has not been significant. Nonetheless, no assurance can be given that all orders
in backlog will be shipped. Backlog may not be indicative of future expected
sales.
Production and Supplies
All of our systems are assembled and SIM is produced at our 67,000 square foot
facility in Grand Junction, Colorado. We purchase the major component parts for
our systems and materials for SIM from outside sources and arrange with contract
manufacturers for the manufacture of subassemblies. We integrate the
subassemblies and effect final assembly of all systems at our production
facility. We perform numerous diagnostic tests and quality control procedures on
each system to assure its operability and reliability.
Although there is more than one potential supplier for many material components
parts, subassemblies and materials, several of the critical components,
materials, and subassemblies, including lasers, materials, and certain ink jet
components, are currently provided by a single or limited sources. Resins for
the Company's SLA systems are supplied exclusively by CSC under the Photopolymer
Distribution Agreement, described above, and either party has the right to
terminate this agreement with six months notice. Our reliance on sole or limited
source vendors involves risks, including the possibility of shortages of certain
key components, product performance shortfalls, and reduced control over
delivery schedules, manufacturing capability, quality and costs. Business
disruptions, financial difficulties, or any significant change in the condition
of or our relationship with a sole or limited source supplier of any particular
component could have a material and adverse effect on our revenues, results of
operations, liquidity and financial condition by increasing the cost of goods
sold or reducing the availability of such components. An unanticipated change in
the source of supply of these components or unanticipated supply limitations
could adversely affect our short-term ability to meet our product orders. (See
"Cautionary Statements and Risk Factors - We Depend on a Single or Limited
Suppliers for Certain of our Components" on page 11.)
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Competition and Patent Rights
We believe there are no products technologically similar to our SLA systems
being sold in significant quantities in the United States; however, products
similar to our SLA systems are manufactured and sold by other companies in the
Pacific Rim. In addition, we believe that there are other companies researching,
designing, developing and marketing other types of solid imaging equipment in
the United States and in foreign markets, and additional companies may announce
plans to enter the solid imaging business, either with equipment similar to
ours, or with other types of equipment. (See "Cautionary Statements and Risk
Factors -- We are Subject to Intense Competition" on page 14.)
Although it is estimated that there are approximately 19 companies currently
manufacturing rapid prototyping equipment, the following is a brief description
of competing products or technologies of the companies that we believe are our
current primary competitors in the SL area. DTM, Inc. markets systems based on a
technology called Selective Laser Sintering, which uses a powdered material that
is sintered (solidified by heating) by energy supplied by a laser. Helisys, Inc.
markets systems based on a technology called Laminated Object Manufacturing,
which builds parts from sheets of paper or other material that are laminated
together with cross-sectional patterns being laser cut into each sheet of paper.
Stratasys, Inc. ("Stratasys") markets a Fused Deposition Modeling process that
builds objects by dispensing individual layers of thermoplastic material through
a temperature controlled head.
NTT Data and D-MEC market products similar to our SL products in Japan. During
1998, we signed patent cross-license agreements with NTT Data and NTT Data CMET
(marketed by NTT Data) and with Sony Corporation (marketed by D-MEC). Under
these agreements, Sony and NTT Data each obtained a non-exclusive license to
produce and sell SL systems in the Asia Pacific area. In addition, E.I. du Pont
de Nemours and Company ("DuPont") has licensed certain SL technology to Teijin
Seiki of Japan and Aaroflex of the United States. We believe that other Japanese
companies are also developing and marketing products similar to ours; however,
we do not have reliable data with respect to these efforts. During 1996,
Aaroflex, Inc. ("Aaroflex"), headquartered in Virginia, publicly announced the
availability and claimed that it has sold in the United States, although not
delivered, equipment that offers the same functions as our SLA systems. (See
"Item 3. Legal Proceedings" on page 15.)
We believe that currently available alternatives to SL generally are not able to
produce models having the dimensional accuracy and fine surface finish of models
provided by our SL process. However, competitors have successfully marketed
their products to our existing and potential customers. Furthermore, in many
cases, the existence of these competitors extends the purchasing time while
customers investigate alternative systems. We compete primarily on the basis of
the quality of our products and the advanced state of our technology. Although
we do not rely totally on our patents to compete, we believe that our patents
will help us maintain our leading position in the SL field in the United States
and Europe. (See "Proprietary Protection," on page 10, below and "Cautionary
Statements and Risk Factors -- Patents and Proprietary Information are Critical
to our Success" on page 13.)
A number of companies, including DSM Desotech Inc. ("DSM"), which acquired the
SOMOS solid imaging business of DuPont in April 1999, are currently selling SL
resins, which either complement or compete with those we distribute. We believe
that we currently supply resins to owners of a majority of the SLA systems
currently installed worldwide.
With respect to our solid object printers, we believe that the following
companies are our current primary competitors. Stratasys, described above, is
also a competitor in the 3D-printer area. Sanders Prototyping markets
ModelMaker, a technology that deposits wax material using an ink jet print head.
Z Corporation makes a printer that produces models using a starch-based powder
material and a water-based liquid binder.
We believe that currently available alternatives to our solid object printers
generally are not able to produce models having the dimensional accuracy, fine
detail or smooth surface finish of models provided by our printers. We do not
have the level of patent protection for the solid object printers that we have
for our SL technology; however, during 1999 we acquired two patents for
dot-on-dot printing technology from Dataproducts Corporation in order to help us
maintain our position in this field.
We believe that we do not currently have any significant competition for our
maintenance services, although some of our customers perform their own
maintenance in-house and some use other providers of service contracts and time
and materials arrangements. We offer software and hardware maintenance contracts
to our customers (see "Products and Services," on page 4, above). Maintenance
for some SLA systems sold internationally is offered by our distributors (see
"Marketing and Customers," on page 7, above).
Future competition is expected to arise both from the development of new
technologies or techniques not encompassed by the patents held by or licensed to
us, and through improvements to existing technologies, such as automated
machining. We have determined to follow a strategy of continuing product
development and aggressive patent prosecution to protect ourselves to the extent
possible in these areas.
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Proprietary Protection
Charles W. Hull, the Company's founder and Chief Technology Officer developed
the stereolithography technology used in our SLA products, while employed by
UVP, Inc. This technology was originally patented by UVP, Inc. and subsequently
licensed to us in 1986. We acquired the patent in 1990.
In the case of our ThermoJet printers, the ink jet technology employed by the
printers has been primarily developed elsewhere and is subject to license
agreements. The thermoplastic material used and the application of the ink jet
technology to solid imaging have been developed by us. During 1999, we acquired
two patents from Dataproducts Corporation for dot-on-dot printing technology in
order to increase our patent protection in this area.
At December 31, 1999, we had 197 patents which include 93 in the United States,
61 in Europe, 8 in Japan and 35 in other foreign countries. At that date, we had
54 pending patent applications with the United States, 49 in the Pacific Rim, 15
in Europe, 8 in Canada and 2 in Latin America. As new developments and
components to the technology are discovered, we intend to apply for additional
patents.
In 1997, we filed patent infringement lawsuits against Aaroflex, Inc. and Teijin
Seiki. The Aaroflex lawsuit seeks compensation from Aaroflex for utilizing
certain SL technology which we allege is incorporated in six of our United
States patents, and we seek other damages and attorneys' fees as well as an
injunction barring Aaroflex from marketing its products using technology
incorporated in our patents. The Teijin Seiki lawsuit, which is in the early
stages of prosecution, alleges infringement of our Japanese patents, and seeks
damages and injunctive relief. Teijin Seiki has filed an invalidation action
against one of our patents, and we have appealed an unfavorable decision in that
action. (See "Item 3. Legal Proceedings" on page 15.)
Application for a patent offers no assurance that a patent will be issued as
applied for. Issuance of a patent offers no assurance that the patent can be
protected against any claims of invalidation or that the patent can be enforced
against any infringement. In addition, litigation of patent issues can be costly
and time-consuming. (See "Cautionary Statements and Risk Factors -- Patents and
Proprietary Protection are Critical to our Success" on page 13.)
Employees
At December 31, 1999, we had 422 full-time employees, including 5 members of
executive management supplied pursuant to an agreement with Regent Pacific
Management Corporation ("Regent Pacific") (see "Item 13. Certain Relationships
and Related Transactions" on page 27 for further information on the Regent
Pacific Agreement). In addition, at that same date we utilized the services of
14 independent contractors. None of these employees or independent contractors
is covered by labor agreements. We consider our relations with our employees and
independent contractors to be satisfactory.
CAUTIONARY STATEMENTS AND RISK FACTORS
The risks and uncertainties described below are not the only risks and
uncertainties we face. Additional risks and uncertainties not presently known to
us or that we currently deem immaterial also may impair our business operations.
If any of the following risks actually occur, our business, results of
operations and financial condition could suffer. In that event the trading price
of our common stock could decline, and our stockholders may lose all or part of
their investment in our common stock. The risks discussed below also include
forward-looking statements and our actual results may differ substantially from
those discussed in these forward-looking statements.
Fluctuations in Quarterly Results - Our Operating Results Vary From Quarter to
Quarter Which Could Impact Our Stock Price
Our operating results fluctuate from quarter to quarter and may continue to
fluctuate in the future. We believe that quarter to quarter or annual
comparisons of our operating results are not a good indication of our future
performance. In some quarters it is possible that results could be below
expectations of analysts and investors. If so, the price of our common stock may
fall.
Many factors, some of which are beyond our control, may cause these fluctuations
in operating results. These factors include:
Acceptance and reliability of new products in the market
Size and timing of product shipments
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General world economic conditions
Changes in the mix of products and services sold
Currency and economic fluctuations in foreign markets and other factors
affecting international sales
Delays in the introduction of new services/products
Price competition
Impact of changing technologies
In addition, certain components we use require an order lead time of three
months or longer. Other components that currently are readily available may
become more difficult to obtain in the future. We cannot assure you that we will
not experience delays in the receipt of certain key components. To meet
forecasted production levels, we may be required to commit to certain long lead
time items prior to receiving orders for our products. If our forecasts exceed
actual orders, we may hold large inventories of slow moving or unusable parts,
which could have an adverse effect on our cash flows and results of operations.
Because of all of these and other factors, we cannot assure you that we will
achieve or sustain quarterly or annual profitability in the future.
The Mix of Products Sold Affects Our Overall Profit Margins
We continuously expand our product offerings and work to increase the number of
geographic markets in which we operate and the distribution channels we use in
order to reach the various markets and customers. This variety of products,
markets and channels results in a range of gross margins and operating income
which can cause substantial quarterly fluctuations depending on the mix of
product shipments quarter to quarter. We may experience significant quarterly
fluctuations in gross margins or net income due to the impact of the mix of
products, channels, or geographic markets utilized from period to period. Also,
the changing mix of products sold over time may result in lower average gross
margins and returns.
We Must Keep Pace with Technological Change and Introduce New Products to Remain
Competitive
To remain competitive, we must continue to enhance and improve the functionality
and features of our products, services and technologies. The solid imaging
industry is characterized by rapid technological change, changes in user and
customer requirements and preferences, frequent new product and service
introductions embodying new technologies and the emergence of new industry
standards and practices. These developments could render our existing products
and proprietary technology and systems obsolete. Our success will depend, in
part, on our ability to:
Obtain leading technologies useful in our business
Enhance our existing products
Develop new products and technology that address the increasingly
sophisticated and varied needs of prospective customers
Respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis
Retain key technology employees
Also, our competitors may develop new technologies that render our existing
products and services obsolete. We believe that our future success will depend
on our ability to deliver products that meet changing technology and customer
needs.
Our New Products May Not Be Commercially Accepted
During 1999, we introduced a significant number of new products to the
market, including equipment, software and materials. These products undergo
thorough quality assurance testing. However, problems have arisen in
connection with the use of certain new products, which we have worked to
rectify. We believe that the problems have been addressed, but we cannot
assure you that we will be able to fix any new problems that arise in a
timely manner, or at all. Also, we cannot assure you that any new products we
develop will be commercially accepted. If there are many problems with our
new products, or if the marketplace does not accept these products, our
results of operations and financial condition could be materially and
adversely affected.
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We Depend on a Single or Limited Suppliers for Certain of our Components
There are several potential suppliers of the material components, parts and
subassemblies for our products. However, we currently use only one or a
limited number of suppliers for several of the critical components, parts and
subassemblies, including our lasers, materials and certain ink jet
components. CSC supplies us with the resins we distribute pursuant to the
Photopolymer Distribution Agreement, which either party has the right to
terminate with six months advance notice. CSC has announced that it will sell
its Performance Polymer Division, the division with which we have the
Agreement. We believe that the Agreement will be transferred to the new
company, and we have consented to the assignment. If our Photopolymer
Distribution Agreement is not assigned, or if it is otherwise terminated, we
may be unable to locate an alternate source of resins, which would result in
a material adverse effect on our revenues, results of operations, liquidity
and financial position. Our reliance on a limited number of vendors involves
many risks including:
Shortages of certain key components
Product performance shortfalls
Reduced control over delivery schedules, manufacturing capabilities,
quality and costs
If any of our suppliers suffers business disruptions, financial difficulties, or
if there is any significant change in condition of our relationship with the
supplier, our costs of goods sold may increase or we may be unable to obtain
these key components for our products. In either event, our revenues, results of
operations, liquidity and financial condition would be adversely affected. While
we believe that we can obtain most of the components necessary for our products
from other manufacturers, any unanticipated change in the source of our
supplies, or unanticipated supply limitations, could adversely affect our
ability to meet our product orders.
The Downturn in the Service Bureau Industry Affects the Market for Our Product
The service bureau market has become highly competitive, which has lead to
the demise of some service bureaus that have, historically, been a large part
of our customer base. The demise of a number of large service bureaus has
lead to the introduction of used machines into the market at prices lower
than the price of a new machine. Competition has lead to lower part prices,
which may impact our marketing efforts in two ways. First, lower margins may
cause existing service bureaus to reduce their expenditures for new machines.
Second, lower prices offered by services bureaus may influence a potential
purchaser of our machines to buy parts from a service bureau rather than
purchase a machine for its own use. While we believe that the service bureau
market has stabilized, our results of operations and financial condition may
be adversely impacted by additional changes in the industry and continued
dependence on the service bureau market. We believe that our future success
depends, in part, on developing additional customers outside of the service
bureau market segment, thus diminishing our reliance on service bureaus.
We Rely on Regent Pacific Management Corporation for our Executive Management
Regent Pacific Management Corporation ("Regent Pacific") provides management
services for us. The management services provided under our agreement with
Regent Pacific include the services of Brian K. Service as President and Chief
Executive Officer, and four other Regent Pacific personnel as part of our
management team. This agreement is due to expire on September 8, 2000, but may
be canceled any time after March 17, 2000 at the option of the Board of
Directors. If the agreement with Regent Pacific were canceled or not renewed,
the loss of the Regent Pacific personnel could have a material adverse effect on
our operations, especially during any transition phase to new management after
such cancellation or non-renewal. Similarly, if any adverse change in our
relationship with Regent Pacific occurs, it could hinder management's ability to
direct our business and materially and adversely affect our results of
operations and financial condition. (See "Item 13. Certain Relationships and
Related Transactions" on page 27 for further information on the Regent Pacific
Agreement.)
There are Many Risks Associated with International Business
A material portion of our sales is to customers in foreign countries. Revenues
from international customers accounted for approximately 47.5% of total revenues
in 1999, 44.1% of total revenues in 1998 and 41.5% of total revenues in 1997.
There are many risks inherent in our international business activities. Our
foreign operations could be adversely affected by:
Unexpected changes in regulatory requirements
Export controls, tariffs and other barriers
Social and political risks
Fluctuations in currency exchange rates
Seasonal reductions in business activity in certain parts of the world,
particularly during the summer months in Europe
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Reduced protection for intellectual property rights in some countries
Difficulties in staffing and managing foreign operations
Taxation
Other factors, depending on the country in which an opportunity arises
Although we are exposed to risks associated with fluctuations in foreign
currency exchange rates, we have not entered into hedging transactions to
protect against such risks. Given our growing export base, we are evaluating the
possibility of entering into protective hedging transactions in the future.
Adverse fluctuations in currency exchange rates could have a material adverse
effect on our revenues, results of operations, liquidity and financial position.
In addition to the general risks associated with our international sales and
operations, we are subject to risks specific to the individual countries in
which we do business. In recognition of our exposure to such risks in Europe,
which represents the vast majority of our international operations, we have
adopted a new European organizational structure, headquartered in the United
Kingdom. This organization is expected to have a pan-European rather than an
individual-country focus. We have created a new executive-management level
position, which reports directly to the Company's Chief Executive Officer, and
appointed a United States vice president to this position to oversee our
European operations. The management team reporting to this vice president
consists of European managers representing the countries in which we do the
majority of our business: Germany, United Kingdom, France, Italy and Spain. We
believe that this new emphasis on our ties to Europe will serve us in handling
the identified risks; however, there can be no assurance that this plan will be
successful. For example, the new structure may result in cross-cultural conflict
or lack of acceptance from non-headquarter country customers.
There have been significant financial problems in Asia which have impacted the
international markets. The continuing effects of the economic downturn and
ongoing competition in the Asian markets could have a substantial adverse impact
on our ability to sell our high-margin products in the Pacific Rim.
The Adoption of the Euro Presents Uncertainties
In January 1999, the New "Euro" currency was introduced in certain European
countries that are part of the European Monetary Union ("EMU"). Beginning in
2003, all EMU countries are expected to be operating with the Euro as their
single currency. A significant amount of uncertainty exists as to the effect the
Euro will have on the marketplace generally. Some of the rules and regulations
relating to the governance of the currency have not yet been defined and
finalized.
We believe that our internal systems and financial institution vendors can
handle the Euro conversion, and we are examining current marketing and pricing
policies and strategies that we may put in place upon conversion to the Euro.
The cost of our effort is not expected to materially affect our results of
operations or financial condition. However, we cannot assure you that we have
identified all issues related to the Euro conversion and that any additional
issues would not materially hurt our results of operations or financial
condition. For example, the conversion to the Euro may have competitive
implications on our pricing and marketing strategies, and we may be at risk to
the extent our principal European customers are unable to deal effectively with
the impact of the Euro conversion.
We Face Year 2000 Risks
We believe that our current products are Year 2000 compliant. We evaluated all
products sold since inception for Year 2000 readiness, and provided necessary
software and hardware upgrade pathways to our customers. Based upon responses to
date, we believe that all of our products meet basic functionality requirements;
however, since we cannot anticipate all possible specific customer situations
and uses, we may see an increase in warranty and other claims as a result of the
Year 2000 transition. Any increase in customer claims could have a material
adverse impact on our results of operations and financial condition.
Patents and Proprietary Rights are Critical to Our Success
We regard our copyrights, service marks, trademarks, trade secrets, patents
and similar intellectual property as critical to our success. At December 31,
1999, we have 197 patents, which includes 93 in the United States, 61 in
Europe, 8 in Japan, and 35 in other foreign jurisdictions. At that date, we
had 54 pending patent applications with the United States, 49 in the Pacific
Rim, 15 in Europe, 8 in Canada and 2 in Latin America. As we discover new
developments and components to the technology, we intend to apply for
additional patents. Effective trademark, service mark, copyright, patent and
trade secret protection may not be available in every country in which our
products and services are made available. We cannot be certain that the
pending patent applications will be granted or that we have taken adequate
steps to protect our proprietary rights, especially in countries where the
laws may not protect our rights as fully as in the United States. Moreover,
our
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competitors may independently develop or initiate technologies that are
substantially similar or superior to ours. We cannot be certain that we will be
able to maintain a meaningful technological advantage over our competitors.
Third parties may infringe or misappropriate our proprietary rights, and we
intend to pursue enforcement and defense of our patents and other proprietary
rights. We could incur significant expenses in preserving our proprietary rights
and these costs could have a material adverse effect on our results of
operations, liquidity and financial condition and could cause significant
fluctuations in results from quarter to quarter. We are currently pursuing
patent infringement actions in the central District of California against
Aaroflex, Inc., and in Japan against Teijin Seiki Co. Ltd. (See "Item 3. Legal
Proceedings" on page 15.)
We are Subject to Intense Competition
The solid imaging industry is highly competitive and subject to technological
change, innovation, and new product introductions. Certain of our existing and
potential competitors are researching, designing, developing and marketing other
types of equipment. A few of these competitors have financial, marketing,
manufacturing, distribution and other resources substantially greater than ours.
In many cases, the existence of these competitors extends the purchase decision
time as customers investigate the alternative products and solutions. Also,
these competitors have marketed these products successfully to our existing and
potential customers. In addition, a number of companies currently sell
stereolithography materials, which both complement and compete with the
materials we distribute.
We expect future competition may arise from the development of allied or related
techniques that are not encompassed by our patents, the issuance of patents to
other companies that inhibit our ability to develop certain products, and the
improvement to existing technologies. Increased competition could result in
price reductions for our products, reduced margins, and loss of market share,
any of which could adversely impact our business. We have determined to follow a
strategy of continuing product development and aggressive patent prosecution to
protect out competitive position to the extent practicable. We cannot assure you
that we will be able to maintain our leading position in the field of rapid
prototyping or continue to compete successfully against current and future
sources of competition. These competitive pressures may adversely affect our
profitability and financial performance. (See "Business - Competition and Patent
Rights" on page 9.)
Volatility of Stock Price
Historically, our stock price has been volatile. The prices of the common stock
have ranged from $4.25 to $11.9375 during the 52-week period ended February 29,
2000. (See "Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters" on page 18.)
Factors that may have significant impact on the market price of our common stock
include:
Future announcements concerning our developments or those of our
competitors, including the receipt of substantial orders for products
Quality deficiencies in services or products
Results of technological innovations
New commercial products
Changes in recommendations of securities analysts
Proprietary rights or product or patent litigation
Sales or purchase of substantial blocks of stock
Our future earnings and stock price may be subject to significant volatility,
particularly on a quarterly basis. Shortfalls in our revenues or earnings in any
given period relative to the levels expected by securities analysts could
immediately, significantly and adversely affect the trading price of our common
stock.
We are Subject to Anti-Takeover Provisions
The Board of Directors is authorized to issue up to 5 million shares of
preferred stock. The Board also is authorized to determine the price, rights,
preferences and privileges of those shares without any further vote or action by
the stockholders. The rights of the holders of any preferred stock may adversely
affect the rights of holders of common stock. Our ability to issue preferred
stock gives us flexibility concerning possible acquisitions and financings, but
it could make it more difficult for a third party to acquire a majority of our
outstanding voting stock. In addition, any preferred stock to be issued may have
other rights, including economic rights, senior to the common stock, which could
have a material adverse effect on the market value of the common stock.
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We are subject to Delaware laws that could have the effect of delaying,
deterring or preventing a change in control of the Company. One of these laws
prohibits us from engaging in a business combination with any interested
stockholder for a period of three years from the date that the person became an
interested stockholder, unless some conditions are met. In addition, provisions
of our Certificate of Incorporation and Bylaws could have the effect of
discouraging potential takeover attempts or making it more difficult for
stockholders to change management.
In addition, we have adopted a Shareholders Rights Plan (see "Note 12(b) of
Notes to Consolidated Financial Statements" on page F-15). Under the Rights
Plan, we distributed a dividend of one right for each outstanding share of our
common stock. These rights will cause substantial dilution to the ownership of a
person or group that attempts to acquire us on terms not approved by our Board
of Directors and may have the effect of deterring hostile takeover attempts.
Item 2. Properties
Our principal administrative functions, sales and marketing, product
development, Technology Center and training facilities are located in a 78,320
square foot building in Valencia, California under a lease that expires on
December 31, 2002. We also lease sales and service offices in seven other states
(North Carolina, South Carolina, Ohio, Massachusetts, Minnesota, Indiana, and
Michigan). The space leased for sales and service offices is generally for one
or two occupants and for terms of a year or less. Three other lease obligations,
all of which are sublet, are for properties whose use has been discontinued in
California, Georgia, and Texas. Sales and service offices are also located in
five countries in the European Community (France, Spain, Germany, the United
Kingdom and Italy).
All of our manufacturing and United States customer support operations are
located in a 67,000 square foot facility located in Grand Junction, Colorado
(the "Colorado Facility"). The construction cost of the Colorado Facility has
been financed through a $4.9 million variable rate industrial development bond.
In connection with the asset acquisition of Keltool, Inc. in September 1996, we
assumed Keltool's obligations under an existing lease for approximately 6,000
square feet located in St. Paul, Minnesota. In the first quarter of 1999, we
completed the sale of our St. Paul operations and assigned this lease to the
acquirer. In addition, we leased approximately 21,000 square feet in Valencia,
California for the 3D Keltool operations. The lease for this facility was
terminated in 1999, with the Company acting as a guarantor for the new tenant
until the lease expiration on June 30, 2000.
For information concerning obligations of the Company under its leases, see
"Note 18(a) of Notes to Consolidated Financial Statements" on page F-23. For
information concerning our Colorado Facility, see Note 11 on page F-15.
We believe that the facilities described above will be adequate to meet our
needs for the immediate future.
Item 3. Legal Proceedings
3D Systems, Inc. v. Aaroflex et al. On January 13, 1997, we filed a complaint in
the United States District Court, Central District of California, against
Aarotech Laboratories, Inc. ("Aarotech"), Aaroflex, Inc. ("Aaroflex") and Albert
C. Young ("Young"). Aaroflex is the parent corporation of Aarotech. Young is the
Chairman of the Board and Chief Executive Officer of both Aarotech and Aaroflex.
The complaint alleges that stereolithography equipment manufactured by Aaroflex
infringes on six of our patents. We seek damages and injunctive relief from the
defendants, who have threatened to sue us for trade libel. To date, the
defendants have not filed such a suit.
The defendants filed a motion to dismiss the complaint or transfer the case to
their home district in Virginia. The Court granted the motion to dismiss for
lack of personal jurisdiction. The Federal Circuit Court of Appeals reversed the
District Court's decision insofar as it relates to Aaroflex and the action
against Aaroflex is proceeding in the District Court. Motions for summary
judgment by Aaroflex on multiple counts contained in our complaint and on
Aaroflex's counterclaims have been dismissed and the case is in discovery.
3D Systems, Inc. v. Teijin Seiki Co. Ltd. On March 21, 1997, we filed a patent
infringement action in District Court in Osaka, Japan under one of our Japanese
patents, alleging infringement, and seeking damages from the defendant and
injunctive relief. The action is in the early stages of prosecution. As
described below, Teijin Seiki has filed an invalidation action against one of
our patents, and we have appealed an unfavorable decision in that action.
Centuri Corp., dba Estes Indus., Cox Acquisition Corp., dba Cox v. 3D Systems
Corp., Rogers Tool & Die (the "Centuri Litigation"). In January 1997, we entered
into two contracts with Centuri Corp., dba Estes Indus., Cox Acquisition Corp.,
dba Cox ("Centuri") under which we were to create certain tooling for Centuri.
On September 16, 1997, Centuri initiated a lawsuit against us in Los Angeles
Superior Court for Breach of Oral Contract, Fraud, Negligent Misrepresentation,
Conversion, Money Had and Received, and an Accounting. At a settlement hearing
on July 1, 1999 the parties agreed to
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settle the case pursuant to an agreement which provides for the confidentiality
of the settlement terms. No liability of any party was admitted.
Patent Opposition and Invalidation Proceedings. We have received eight patents
in Japan. One of these patents had an opposition submitted against it, but the
opposition was dismissed, and the patent has been maintained as originally
issued. Furthermore, one of the eight patents has had three invalidation trials
filed against it. These invalidation trials were decided against us. We have
responded by appealing the decision in the third trial. Based on this opposition
and our response, the trial may result in maintaining the patent with present or
modified protection, or may result in revocation of the patent.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote by security holders during the fourth
quarter of fiscal 1999.
Item 4a. Executive Officers of the Registrant
The following table sets forth certain information concerning the executive
officers of the Company:
Age at Position
Name February 29, 2000 with the Company
- - ---- ----------------- ----------------
Brian K. Service 52 President and Chief Executive Officer
Charles W. Hull 60 Vice President, Chief Technology
Officer
H. Michael Hogan III 37 Vice President, Chief Financial
Officer
A. Sidney Alpert 61 Vice President, General Counsel and
Secretary
Clark A. Hardesty 50 Vice President, Sales & Marketing
Martin E. McGough 50 Vice President & World Wide
Operations Manager
Grant R. Flaharty 38 Vice President & General Manager,
Europe
The principal occupations of our executive officers are as follows:
Brian K. Service: Mr. Service has served as President and Chief Executive
Officer of the Company since September 1999 and, since October 1999, has also
served as President and Chief Executive Officer of 3D California. Mr. Service is
a Principal of Regent Pacific Management Corporation ("Regent Pacific"), and he
provides services to the Company pursuant to an agreement between the Company
and Regent Pacific. (See "Item 13. Certain Relationships and Related
Transactions" on page 27.) Prior to Regent Pacific, Mr. Service served as Chief
Executive Officer of Salmond Smith Biolab, Ltd. Prior to Salmond, he was Chief
Executive Officer of Milk Products, Inc. Mr. Service holds a Bachelor's degree
in Chemical Engineering from Canterbury University of New Zealand and has
completed the Stanford Executive Program from Stanford University Business
School.
Charles W. Hull: Mr. Hull has served as Vice President, Chief Technology Officer
since April 1997, from August 1993 to April 1997 as Chief Operating Officer and
President of the Company, and from March 1986 to October 1999 as President of 3D
California; prior thereto, he was Vice President of UVP, Inc. from January 1980
to March 1986. Mr. Hull developed the Company's stereolithography technology
while employed by UVP, Inc., a systems manufacturing company. As of February 28,
1999, Mr. Hull had retired from the Company and he served as Vice Chairman and a
member of the Board of Directors and as a consultant to the Company from March
1999 through May 1999. In June 1999, Mr. Hull rejoined the Company as Vice
President, Chief Technology Officer.
H. Michael Hogan III: Mr. Hogan has served as Vice President, Chief Financial
Officer since September 1999 when he joined the Company as part of the
management team provided by Regent Pacific. (See "Item 13. Certain Relationships
Page 16
<PAGE>
and Related Transactions"). Mr. Hogan is a Principal of Regent Pacific. Prior
to Regent Pacific, Mr. Hogan was with the turnaround management firm of Jay
Alix and Associates. Mr. Hogan holds a Bachelor's degree from Colgate
University and is a Certified Insolvency Reorganization Accountant and a
Certified Turnaround Professional.
A. Sidney Alpert: Mr. Alpert became Vice President, General Counsel of the
Company in January 1996 after serving on the Board from 1993 to 1996, and has
served as Secretary of the Company since May 1996. Effective June 1, 1999,
Mr. Alpert and the Company agreed to amend his employment agreement, whereby
he became a part-time employee, devoting approximately 40% of his time to the
Company. Prior thereto, from January 1994 through December 1995, Mr. Alpert
was an intellectual property consultant. From July 1988 through December
1993, Mr. Alpert served as Chairman of the Board and Chief Executive Officer
of University Patents, Inc. (currently known as Competitive Technologies,
Inc.), a corporation listed on the American Stock Exchange which handles
patent management and technology transfer activities primarily for
universities and colleges.
Clark A. Hardesty: Mr. Hardesty has served as Vice President, Sales & Marketing
since September 1999 when he joined 3D Systems as part of the management team
provided to the Company by Regent Pacific. (See "Certain Relationships and
Related Transactions"). Mr. Hardesty is a Principal of Regent Pacific. Prior to
Regent Pacific, Mr. Hardesty was the owner of White Hawk Holding Company, a
manufacturing company serving the aerospace industry. Mr. Hardesty holds a
Bachelor's degree from Northeastern University, a Master's degree from Harvard
University, and an MBA from Case Western Reserve University.
Martin E. McGough: Mr. McGough has served as Vice President and Worldwide
Operations Manager since September 1997 after joining the Company in January of
1997 and is responsible for manufacturing and operations, as well as worldwide
field service. He was formerly with Maxtor Corporation where he held the
position of Senior Director of Strategic Commodities. Prior to Maxtor, he held
management positions in Operations, Marketing, Program Management and other
manufacturing and materials positions. Mr. McGough received his Bachelor's
degree from California State University, Northridge in Business Administration
and earned his Master's in Business Management also from CSUN.
Grant R. Flaharty: Mr. Flaharty has served as Vice President and General
Manager, 3D Systems Europe, since September 1999 after joining the Company in
April of 1998 and is responsible for European operations. He was formerly with
Qualcomm, Inc., a developer of wireless communications products, as Director of
Manufacturing Finance. Prior to Qualcomm, he was with Motorola, Inc. as
Operations Controller. Mr. Flaharty received his Bachelor's degree from Regis
College in Accounting and is also a Certified Public Accountant.
Subject to the Agreement between the Company and Regent Pacific, all officers
serve at the pleasure of the Board of Directors of the Company.
Page 17
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The following table sets forth, for the periods indicated, the high and
low closing sales prices of our common stock (symbol: TDSC) on the Nasdaq
National Market.
Historic Prices
---------------
Year Period High Low
--------------------------------------------------------------------
2000 First Quarter (through February 29) 11-15/16 7-1/2
1999 First Quarter 7-15/16 5-15/16
Second Quarter 6-1/4 5
Third Quarter 5-11/16 4-1/4
Fourth Quarter 8-23/32 4-1/2
1998 First Quarter 11-7/8 5-3/4
Second Quarter 11-11/16 9
Third Quarter 10-1/4 5-1/2
Fourth Quarter 8-1/2 5-1/2
1997 First Quarter 16-1/4 9-3/8
Second Quarter 9-3/4 6
Third Quarter 10-1/4 8
Fourth Quarter 10-3/4 6
As of February 29, 2000, the outstanding common stock was held of record
by 553 stockholders.
Dividends
We have not paid any dividends on our common stock and currently intend to
retain any future earnings for use in our business. Therefore, you should not
expect that any dividends will be declared on the common stock in the
foreseeable future. Any dividend payment will be at the discretion of our Board
of Directors and will be dependent upon our earnings, operating and financial
condition and capital requirements, as well as general business conditions.
Page 18
<PAGE>
Item 6. Selected Financial Data
The following summary of selected financial data for the periods set forth below
has been derived from the Consolidated Financial Statements of 3D Systems
Corporation. Such information with respect to 1999 to 1997 should be read in
conjunction with Management's Discussion and Analysis of Results of Operations
and Financial Condition and with the Consolidated Financial Statements appearing
elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
Statements of Operations Data: (in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Sales:
Products(1) $ 66,806 $ 65,434 $ 59,149 $ 53,229 $ 43,544
Services(2) 30,143 32,683 31,108 26,403 19,038
-------- -------- -------- -------- --------
Total sales 96,949 98,117 90,257 79,632 62,582
-------- -------- -------- -------- --------
Cost of sales:
Products(1) 35,938 33,477 35,463 24,893 19,328
Services(2) 20,975 22,062 21,745 16,906 11,936
-------- -------- -------- -------- --------
Total cost of sales 56,913 55,539 57,208 41,799 31,264
-------- -------- -------- -------- --------
Gross profit 40,036 42,578 33,049 37,833 31,318
Operating expenses:
Selling, general and administrative 35,273 30,448 29,653 24,748 20,302
Research and development 8,931 9,425 10,991 7,665 6,109
Other 3,384 -- -- -- --
-------- -------- -------- -------- --------
Total operating expenses 47,588 39,873 40,644 32,413 26,411
-------- -------- -------- -------- --------
Income (loss) from operations (7,552) 2,705 (7,595) 5,420 4,907
Interest income 415 949 1,202 1,541 1,257
Interest and other expense (404) (467) (356) (129) (42)
-------- -------- -------- -------- --------
Income (loss) before income taxes (7,541) 3,187 (6,749) 6,832 6,122
Income tax expense (benefit) (3) (2,240) 1,055 (2,160) 2,233 (2,795)
-------- -------- -------- -------- --------
Net income (loss) (5,301) $ 2,132 $ (4,589) $ 4,599 $ 8,917
======== ======== ======== ======== ========
Shares used to calculate basic net income
(loss) per share 11,376 11,348 11,398 11,323 10,246
Basic net income (loss) per share $ (.47) $ .19 $ (.40) $ .41 $ .87
======== ======== ======== ======== ========
Shares used to calculate diluted net income
(loss) per share 11,376 11,594 11,398 11,742 10,708
Diluted net income (loss) per share $ (.47) $ .18 $ (.40) $ .39 $ .83
======== ======== ======== ======== ========
System Data:
Systems shipped (unaudited) 303 222 274 157 120
Cumulative number of systems
shipped (unaudited) 1,546 1,243 1,021 747 590
</TABLE>
<TABLE>
<CAPTION>
At December 31,
-----------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital $31,219 $38,305 $38,310 $49,764 $50,022
Total assets 90,658 95,103 91,340 92,239 81,551
Current portion of long-term
debt 110 100 95 100 --
Long-term liabilities,
excluding current portion 9,168 6,090 6,197 6,273 1,622
Stockholders' equity 59,608 66,557 64,595 68,703 62,950
</TABLE>
(1) Includes systems and related equipment, material, software and other
component parts as well as rentals of equipment.
(2) Includes maintenance services provided by the Company's Technology Centers
and training services.
(3) Includes the recognition of deferred tax assets, in accordance with SFAS
No. 109, of $3.0 million in 1995.
Page 19
<PAGE>
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Except for historical information, the following discussion contains
forward-looking statements that involve risks and uncertainties. Our future
results could differ materially from those discussed here. Factors that could
cause or contribute to such differences include, but are not specifically
limited to: the ability to develop and introduce cost-effective new products in
a timely manner; developments in current or future litigation; our ability to
successfully manufacture and sell significant quantities of equipment on a
timely basis; as well as the other risks detailed in this section and in the
sections entitled Results of Operations, Liquidity and Capital Resources, and
Cautionary Statements and Risk Factors.
Overview
We develop, manufacture and market worldwide solid imaging systems designed to
rapidly produce physical objects from the digital output of solid or surface
data from computer aided design and manufacturing ("CAD/CAM") and related
computer systems. Our systems include SLA(TM) stereolithography apparatus
equipment and ThermoJet(TM) solid object printers.
SLA industrial systems use our proprietary stereolithography ("SL") technology,
a solid imaging process which uses a laser beam to expose and solidify
successive layers of photosensitive epoxy resin until the desired object is
formed to precise specifications in epoxy or acrylic resin. SL-produced parts
can be used for concept models, engineering prototypes, patterns and masters for
molds, consumable tooling or short-run manufacturing of final product, among
other applications. SL technology can provide users with significant product
development time savings, cost reductions and improved quality, compared to
traditional modeling, tooling and pattern-making techniques. In addition,
material functionality can produce more durable parts, which can be used for
rapid manufacturing. We provide a majority of our SLA system customers, either
directly or through our network of authorized distributors, with a variety of
on-site maintenance services and processing materials.
ThermoJet solid object printers employ hot melt ink jet technology to build
models in successive layers using our proprietary thermoplastic material. These
printers, about the size of an office copier, are designed for operation in
engineering and design office environments. Designers, engineers, and other
users of CAD/CAM utilities can incorporate the printers into office networks as
a shared resource, to rapidly produce models of products under development for
design concept communication and validation. In addition, the ThermoJet solid
object printer output can be used as patterns and molds and, when combined with
other secondary processes, can produce parts with representative end use
properties. We provide a majority of our ThermoJet printer customers, either
directly or through our network of authorized distributors, with on-site
maintenance services.
We have sold 1,546 systems since 1988 and our customers include major
corporations in a broad range of industries including manufacturers of
automotive, aerospace, computer, electronic, consumer and medical products. Our
revenues are generated by product and service sales. Product sales are comprised
of the sale of systems and related equipment, materials, software, and other
component parts, as well as rentals of systems. Service sales include revenues
from a variety of on-site maintenance services, customer training, services
provided by our Technology Centers and licensing of 3D Keltool (R) process and
support services.
Recent Developments
During 1999, we introduced several new products to expand the use and
applications of our solid imaging systems. At the top of the product line, we
launched the SLA 7000 system in early 1999, a premium priced high performance
SLA industrial system. This system increases the speed of producing solid images
and provides for high quality resolution. The ThermoJet solid object printer was
also introduced late in the first quarter, as a replacement for the Actua(TM)
2100. The ThermoJet printer produces solid images significantly faster than its
predecessor with improved reliability and has a list price 20% below that of the
former model. In addition, we launched a series of new materials to support our
new and existing systems (see "Part I, Item 1. Business, Products and Services,
Recent Product Introductions" on page 5). As part of our strategy to expand the
use of solid object printing and to improve the returns from recurring revenue
streams from materials, we commenced manufacturing of our own proprietary
materials for the ThermoJet printer at our facility in Grand Junction, Colorado.
During the first two quarters of 1999, we incurred substantial net losses and
our revenue did not increase compared to the same period in 1998. During this
period, our President also resigned. In addition, difficulties were encountered
in the launch of the SLA 7000 system along with other operational issues which
led to certain actions by management late in the second quarter of
1999. These actions included realignment of several management positions,
exiting facilities and legal structure reorganization. (See "Note 19 of Notes to
Consolidated Financial Statements" on page F-25.) In August 1999, we retained an
outside firm, Regent Pacific Management Corporation ("Regent Pacific"), to
review our operations and strategic direction. Also during the third quarter,
our Chief Executive Officer and Chief Financial Officer
Page 20
<PAGE>
resigned. Upon completion of the review by Regent Pacific, we undertook certain
operational changes and replaced certain key executives (see "Note 14 of Notes
to Consolidated Financial Statements" on page F-19). In conjunction with this
program, executives of Regent Pacific filled certain key executive
positions including Chief Executive Officer, Chief Financial Officer, and Vice
President of Sales and Marketing (see "Part III, Item 13. Certain Relationships
and Related Transactions" on page 27). Additionally, Regent Pacific took
additional steps to assist us in further developing and implementing an
operating plan to improve our overall performance. Implementation of major
components of this operating plan, including measures designed to result in
margin improvements, operating savings and workforce reductions were initiated
in the fourth quarter of 1999, with the initial impact of these reductions
occurring in the first quarter of 2000. This is a forward-looking statement and
is subject to uncertainties. For example, the plan may not be completely
implemented in the expected timeframe, or may not be as effective as
anticipated.
Results of Operations
The following table sets forth the percentage relationship of certain items from
the Company's Statements of Operations to Total Revenues:
Percent of Total Revenues
Years Ended December 31,
1999 1998 1997
------ ------ ------
Sales:
Products 68.9% 66.7% 65.5%
Services 31.1% 33.3% 34.5%
------ ------ ------
Total sales 100.0% 100.0% 100.0%
------ ------ ------
Cost of sales:
Products 37.1% 34.1% 39.3%
Services 21.6% 22.5% 24.1%
------ ------ ------
Total cost of sales 58.7% 56.6% 63.4%
------ ------ ------
Total gross profit 41.3% 43.4% 36.6%
Gross profit - products 46.2% 48.8% 40.0%
Gross profit - services 30.4% 32.5% 30.1%
Selling, general and
administrative expenses 36.4% 31.0% 32.8%
Research and development expenses 9.2% 9.6% 12.2%
Other 3.5% - -
------ ------ ------
Income (loss) from operations (7.8%) 2.8% (8.4%)
Other income and expense 0.0% 0.5% 0.9%
Income tax benefit (expense) 2.3% (1.1%) 2.4%
------ ------ ------
Net income (loss) (5.5%) 2.2% (5.1%)
====== ====== ======
The following table sets forth, for the periods indicated, total revenues
attributable to each of the Company's major products and services groups:
1999 1998 1997
--------- --------- ---------
(in thousands)
Products:
Systems and related equipment $ 45,225 $ 44,580 $ 40,859
Materials 18,560 15,614 13,548
Other 3,021 5,240 4,742
--------- --------- ---------
Total products 66,806 65,434 59,149
--------- --------- ---------
Services:
Maintenance 26,655 28,140 25,010
Other 3,488 4,543 6,098
--------- --------- ---------
Total services 30,143 32,683 31,108
--------- --------- ---------
Total sales $ 96,949 $ 98,117 $ 90,257
========= ========= =========
Products:
Systems and related equipment 46.7% 46.0% 45.3%
Material 19.1% 15.9% 15.0%
Other 3.1% 4.8% 5.2%
--------- --------- ---------
Total products 68.9% 66.7% 65.5%
--------- --------- ---------
Services:
Maintenance 27.5% 28.7% 27.7%
Other 3.6% 4.6% 6.8%
--------- --------- ---------
Total services 31.1% 33.3% 34.5%
--------- --------- ---------
Total sales 100.0% 100.0% 100.0%
========= ========= =========
Page 21
<PAGE>
1999 Compared to 1998
Sales. Sales in 1999 were $96.9 million, a decrease of 1.2% from the $98.1
million recorded in 1998. Sales consist of SLA systems and ThermoJet printers,
related equipment, software, related component parts, system rentals, materials,
and the ongoing servicing of systems.
System sales in 1999 increased $0.6 million or 1.4% to $45.2 million compared to
$44.6 million in 1998. The increase in sales relates primarily to a higher level
of ThermoJet printers sold. The sales of SLA machines showed a nominal increase
in 1999 due to problems associated with the introduction of the SLA 7000 system
early in the year which initially created some confusion in the marketplace
relative to customers' needs and whether the SLA 7000 system or other systems
would better suit our customers' requirements. These issues were addressed in
the latter half of the year and resulted in a higher number of SLA units being
sold relative to the first half of the year. The issues relating to the
introduction of the SLA 7000 system have been reduced, and we believe that
continued improvements in hardware, software and materials will support market
acceptance of this product in the future at a level consistent with that
experienced in the latter half of 1999. This is a forward-looking statement and
is subject to uncertainties. For instance, demand for competitors' products may
negatively impact sales of our systems. We sold a total of 303 systems in 1999
versus 222 systems in 1998.
In 1999, our total revenue from Europe increased to $40.3 million from $35.4
million in 1998. This represents 41.6% and 36.0% of our total revenue for
1999 and 1998, respectively. We attribute this higher rate of growth relative
to the rest of the world to a less mature market for our systems in Europe
versus the United States and the benefit realized from the acquisition of a
major competitor in 1997. It is expected that this higher growth level in
Europe versus the United States will continue into 2000. This is a
forward-looking statement and as with other such statements is subject to
uncertainties. For instance, economic or competitive conditions in Europe
could negatively impact our prospects for future growth in the region.
System sales may also fluctuate on a quarterly basis as a result of a number of
other factors, including the acceptance and reliability of new products in the
market, status of world economic conditions, fluctuations in foreign currency
exchange rates, impact of changing technology, and the timing of product
shipments. Due to the high price and gross margin of certain systems, the
acceleration or delay of a small number of shipments from one quarter to another
can significantly affect the results of operations for the quarters involved.
Material sales in 1999 increased $3.0 million to $18.6 million versus $15.6 in
1998. This is due primarily to higher material sales for both the SLA systems
and ThermoJet printers. Approximately three-quarters of our revenue from sales
of material is derived from post-installation sales. As the overall installed
base of our machines increases for both types of products and as new and
improved materials are developed for both machines, we expect that the revenue
growth rate associated with materials will exceed that of machine sales on a
percentage basis. This is a forward-looking statement and as with other such
statements is subject to uncertainties. For instance, the total number of
systems sold may decrease, leading to a decrease in the total materials sold in
the future. Also, continued competitive pricing pressure or negative customer
acceptance of our products may impact the total revenue level.
Service sales in 1999 decreased $2.5 million, or 7.8%, compared to 1998,
primarily due to increased competition from other providers of service contracts
and time and material arrangements, and due to the introduction of tiered
pricing plans offered to our customers. Technology Center revenues remained at
lower levels throughout the year relative to 1998 due to a strategic shift in
focus to sales support. Also, we sold the St. Paul, Minnesota 3D Keltool inserts
business, causing a decline in insert revenues in 1999 versus 1998. In the
future, we expect service revenue to increase, due to the growing installed
customer base. However, we believe that competitive forces will continue to
limit service revenue growth in the future. This is a forward-looking statement
and as with other such statements is subject to uncertainties. For instance,
increased competition may cause our service revenue to decrease further, even
though we are servicing a larger number of systems but at a lower level of
revenue per system.
Cost of sales. Cost of sales increased to $56.9 million or 58.7% of sales in
1999 compared to $55.5 million or 56.6% of sales in 1998.
Product cost of sales (including systems and materials) as a percentage of
product sales increased from 51.2% in 1998 to 53.8% in 1999. This increase was
the result of a change in sales mix resulting from selling a higher number of
ThermoJet printers which have a lower gross margin than SLA systems. This was
mitigated slightly by a higher overall level of sales in Europe which has
historically had a higher average selling price for SLA systems than elsewhere
and a higher level of material sales, some of which have a relatively high gross
margin relative to other products.
Page 22
<PAGE>
Though we continue to strive to reduce manufacturing costs and expect costs per
unit to decrease as our volume increases, these cost improvements may be offset
by continued pricing pressure from competitors. These are forward-looking
statements, and as such, are subject to risks and uncertainties. For example,
the acceptance and reliability of new products in the market may result in
inventory adjustments and increased factory costs, and the impact of competition
on changing economic conditions in the United States and Europe may dramatically
impact average selling prices. In addition, we cannot assure you that we will
not experience significant quarterly fluctuations due to the impact of mix of
products, channels, and markets, or that a changing mix over time will not
result in a higher average percentage of cost of sales to product sales.
Service cost of sales as a percentage of service sales increased slightly to
69.6% in 1999 from 67.5% in 1998 primarily due to continued competitive pricing
pressure relating to longer term maintenance contracts and time and materials
services. In addition, field service revenue is decreasing as a result of
increased reliability of our systems. While we continue to contain costs related
to field service operations and operate with improved efficiency, we cannot
assure you that service cost of sales as a percentage of service revenue will
not increase further. This is a forward-looking statement, however, and as such
includes certain risks. For example, the reliability of new products in the
market or a further decline in the demand or continued competitive pricing
pressures could cause an increase in service costs of sales.
Selling, general and administrative expenses. Selling, general and
administrative ("SG&A") expenses increased by $4.8 million or 15.8% to $35.3
million in 1999 versus $30.4 million in 1998. This is primarily due to an
increase of $1.5 million in marketing expenses in 1999 over 1998 resulting from
the marketing and communication programs undertaken for the introduction of the
SLA 7000 system and the ThermoJet printer in early 1999. This was in addition to
an overall buildup of the sales and marketing department that occurred during
late 1998 and continued into early 1999. General and administrative expenses
increased $2.4 million to $12.7 million in 1999 versus $10.3 million in 1998.
Higher costs were incurred relating to general and administrative expenses as a
result of management changes during the year and the lack of strict policies and
procedures governing expenditures, which subsequently have been established in
connection with the new operating plan implemented during the fourth quarter of
1999, as well as costs associated with the sale of the 3D Keltool insert
operations and legal expenses associated with the protection of certain of our
patents. As part of the new operating plan which was implemented in the fourth
quarter of 1999, it is expected that costs associated with SG&A will decrease in
2000 in both dollar amounts and as a percentage of sales. However, this is a
forward-looking statement and, as such, includes certain risks. For example, the
acceptance and reliability of new products, or changing economic conditions in
the United States and Europe may dramatically impact total sales for any
particular period, and result in an increase in SG&A expenses as a percentage of
sales. Additionally, we may not realize the benefits of the new operating plan
in the expected timeframe, or the plan may not be completely implemented in the
expected timeframe, or may not be as effective as anticipated.
Research and development expenses. Research and development expenses decreased
in 1999 to $8.9 million, down from $9.4 million in 1998. The decrease in
research and development expenses in 1999 was primarily a result of significant
investment in 1998 in new product introduction (SLA 7000 system and ThermoJet
solid object printer). Based on our historical expenditures related to research
and development and our current development goals, we anticipate for the
foreseeable future, research and development expenses will be equal to
approximately 8% of sales. This is a forward-looking statement, however, and, as
with any such statement, is subject to risk. For example, if our total sales for
any particular period do not meet our anticipated sales for that year, research
and development expenses as a percentage of sales may exceed 8%.
Other operating expenses. During 1999, we incurred $3.4 million relating to
non-recurring charges associated with actions taken by management involving
certain employee related costs and costs associated with the litigation and
settlement costs for the Centuri Litigation (see "Note 18(e) of Notes to
Consolidated Financial Statements" on page F-23).
Operating income (loss). The operating loss in 1999 was $7.6 million or 7.8% of
revenue versus operating income of $2.7 million or 2.8% of revenue in 1998. The
1999 loss relates to lower average gross margins, additional operating expenses
associated with realigning our operations, and higher marketing costs
incurred relative to 1998.
Interest and other income and expense. Interest and other income and expense
decreased by $0.7 million in 1999 compared to 1998. This decrease is primarily
due to lower interest income as a result of lower investment levels in 1999.
Provision for (benefit from) income taxes. For 1999, our tax benefit was $2.2
million or 29.7% of the pre-tax loss, compared to a tax expense of $1.1 million
on pre-tax income of $3.2 million in 1998. Our effective tax rate was favorably
impacted primarily by research credits and the effects of foreign operations.
1998 Compared to 1997
Sales. Sales in 1998 were $98.1 million, an increase of 8.7% over the $90.3
million recorded during 1997.
Page 23
<PAGE>
Product sales in 1998 increased $6.3 million or 10.6% to $65.4 million compared
to $59.1 million in 1997. The dollar increase was primarily due to improved
average selling prices in Europe as a result of the EOS acquisition, and an
improved product mix as the demand for our SLA 3500 and 5000 systems, launched
in late 1997, caused a shift to high end stereolithography systems. A total of
222 systems were sold in 1998 compared to 274 systems in 1997. Orders for our
systems in 1998 compared to 1997 increased significantly in Europe and were up
in the United States, while orders were down slightly in Asia Pacific.
In 1997, the United States market was impacted by inefficiencies caused by the
changes in our domestic sales organization.
Service sales in 1998 increased $1.6 million, or 5.1%, compared to 1997,
primarily as a result of increased maintenance revenues due to the larger
installed base of SLA systems in the United States and Europe. This increase was
offset, in part, by a decline in revenues from our Technology Centers.
Cost of sales. Cost of sales decreased to $55.5 million or 56.6% of sales in
1998 compared to $57.2 million or 63.4% of sales in 1997.
Product cost of sales as a percentage of product sales improved in 1998,
decreasing from 60.0% in 1997 to 51.2% in 1998. This improvement was the result
of increased average selling prices in Europe, improved product mix to higher
end SLA systems, continued reductions in overall cost of factory operations, and
revenues related to certain royalty agreements. In addition, 1997 cost of sales
included inventory adjustments totaling approximately $1.8 million that were
primarily associated with the transition to new products, the EOS acquisition,
and field service inventories.
Service cost of sales as a percentage of service sales decreased to 67.5% in
1998 from 69.9% in 1997 primarily due to the fact that 1997 included certain
hardware upgrade costs associated with our NT version system software. In
addition, field service costs improved as a result of increased reliability of
our systems. This was offset, in part, by declining revenues in our Technology
Center, increasing costs of sales as a percentage of sales.
Selling, general and administrative expenses. Selling, general and
administrative expenses improved, as a percentage of sales, to 31.0% of total
sales in 1998 from 32.9% in 1997. SG&A expense increased $0.8 million or 2.7%
from 1998 to 1997, due primarily to increased commissions and sales bonuses
resulting from higher sales and profits, costs associated with selling and
distributor incentive programs in 1998, and costs related to expanded marketing
and communications programs.
Research and development expenses. Research and development ("R&D") expenses in
1998 decreased approximately $1.6 million or 14.2% compared to 1997. The
decrease in R&D expenses in 1998 was due primarily to the fact that 1997
included a write-off of acquired in-process technology valued at approximately
$2.1 million in connection with the EOS acquisition (see "Note 7 of Notes to
Consolidated Financial Statements" on page F-13), offset in part by increased
personnel and experimental material costs related to certain development
projects.
Operating income (loss). Operating income in 1998 was 2.8% of total sales
compared to operating loss of (8.4%) of total sales in 1997. The improvement in
1998 is primarily attributable to inventory write-offs and costs associated with
the EOS acquisition included in 1997, improved average selling prices and
product mix, and improving product and service cost of sales, as described
above.
Interest and other income and expense. Interest and other income and expense
decreased by $0.1 million in 1998 compared to 1997. This decrease is primarily
due to lower interest income. Other expense increased by $0.2 million in 1998
compared to 1997 due to various non-operating expenses.
Provision for (benefit from) income taxes. For 1998 our provision for income
taxes was $1.1 million or 33.1% of pre-tax income, compared to a tax benefit of
$2.2 million in 1997. The effective tax rate was favorably impacted primarily as
a result of research credits and the effects of foreign operations.
Foreign Operations
International sales, primarily from Europe, accounted for 47.5%, 44.1%, and
41.5% of total sales in 1999, 1998 and 1997, respectively. For information with
respect to allocation of sales among the Company's foreign operations, see "Note
17 of Notes to Consolidated Financial Statements" on page F-22.
During 1999, our European operations continued to grow and are expected to
provide an increasing percentage of our total revenue. However, this is a
forward-looking statement and, as with any such statement, is subject to
uncertainties. For example, we may be negatively impacted by foreign currency
movements which would limit our growth prospects or put
Page 24
<PAGE>
us at a disadvantage relative to other competitors in the European market. We
also receive a limited portion of our total revenue from Asia through
distributors and an established sales office. Due to continued economic problems
in Asia and competitive pressures, we expect our sales to these areas to
continue to be limited.
To date, we have not entered into hedging transactions to protect against
changes in foreign currency exchange rates, but we are considering doing so
for transactions in the future. However, this is a forward-looking statement
and, as with any such statement, is subject to uncertainties. For example, we
may determine that it is not appropriate for us to enter into hedging
transactions or develop alternative methods to limit our foreign currency
exposure.
Liquidity and Capital Resources
<TABLE>
<CAPTION>
As of and for the Years Ended
December 31
--------------------------------
1999 1998 1997
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Cash and cash equivalents $ 12,553 $ 15,912 $ 12,695
Short-term investments ------ 3,485 3,498
Working capital 31,219 38,306 38,310
Cash provided by (used for) operating activities 1,589 7,563 (4,978)
Cash used for investing activities (5,999) (4,234) (8,202)
Cash provided by (used for) financing activities 250 (853) 1,059
</TABLE>
Net cash provided by (used for) operating activities in 1999, 1998 and 1997 was
$1.6 million, $7.6 million, and $(5.0) million, respectively. The cash flow from
operations in 1999 was comprised primarily of a net loss of $5.3 million
adjusted for non-cash items including depreciation and amortization of $6.1
million. In the first quarter of 1999, we sold a portion of our lease portfolio,
resulting in a reduction in our lease receivables of $4.8 million.
Net cash used for investing activities in 1999 totaled $6.0 million primarily
for property and equipment relating particularly to demonstration equipment
for new products, computers and manufacturing equipment required for
expansion, license and patent costs.
Net cash provided by financing activities in 1999 totaling $0.3 million was the
result of cash provided from the exercise of stock options net of long-term debt
repayments.
In August 1999, we allowed our credit facility with Silicon Valley Bank
("SVB") (the "Credit Facility") to expire. The credit facility was not
utilized during 1999 and no amounts were due under the facility at the time
of its expiration. Currently, we are in the process of establishing a new
facility to provide for working capital requirements in 2000 and beyond. We
expect that the new facility will finance future sales growth and be
collateralized by a percentage of inventory and accounts receivable. This is
a forward-looking statement and is subject to uncertainties. For example,
significant changes in interest rates could have an adverse impact on our
ability to secure our primary choice of credit facility alternatives.
We believe that funds generated from operations and existing working capital
will be sufficient to satisfy our anticipated operating requirements for at
least the next 12 months. From time to time, we consider the acquisition of
businesses, products or technologies complementary to our current business,
although we have no current commitments or agreements with respect to any
such transactions. Should we decide to pursue such a transaction, we may need
to borrow additional funds.
On May 6, 1997, we announced that our Board of Directors had authorized the
purchase of up to 1.5 million shares of our own common stock in the open
market and through private transactions. During 1997, we purchased 25,000
shares for approximately $165,000. During the first quarter of 1998, we
purchased 200,000 shares for approximately $1.4 million. Currently, it is not
anticipated that the Company will acquire any additional shares under this
program.
There were no significant inflationary trends that affected us in 1999.
We assigned a team to address the issues raised by the introduction of the
Single European Currency ("Euro") for initial implementation as of January 1,
1999 and the transition period through to January 1, 2002. We have substantially
completed the modifications to our internal systems that will be affected by the
initial introduction of the Euro during 1999. We do not expect that the
introduction and use of the Euro will materially affect our foreign exchange
position nor result in any material increase in cost to us.
Page 25
<PAGE>
Year 2000 Compliance. We took several steps to ensure that our computer-based
systems that require date/time calculations were not negatively impacted by
miscalculations and system failures on and after the year 2000. We evaluated all
products sold since inception for Year 2000 readiness, and provided the results
of the analysis and potential impacts and resolutions to our customers. The
necessary upgrade pathways to our customers were completed, and we believe that
all products meet basic functionality requirements. No significant issues have
been encountered relating to our products, our internal operating systems, or
with any of our suppliers. There have been no known increases in warranty or
other claims by customers as a result of the Year 2000 transition. There was no
additional impact on prior cost estimates or significant additional costs
incurred subsequent to December 31, 1999 relating to this matter and no impact
on results of operations, deferred spending, third party relationships,
remaining contingencies or legal proceedings. Our cost incurred to prepare for
Y2K issues totaled approximately $1.3 million.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to the impact of interest rate changes and foreign currency
fluctuations.
Interest Rate Risk. Our exposure to market rate risk for changes in interest
rates relates primarily to our cash investments and long-term debt. We invest
our excess cash in debt instruments with companies with high quality investment
ratings or other high quality investments. We protect and preserve our invested
funds by limiting default, market and reinvestment risk.
Investments in both fixed rate and floating rate interest-earning instruments
carry a degree of interest rate risk. Fixed rate securities may have their fair
market value adversely impacted due to a rise in interest rates, while floating
rate securities may produce less income than expected if interest rates fall.
Due in part to these factors, our future investment income may fall short of
expectations due to changes in interest rates or we may suffer losses in
principal if forced to sell securities that have declined in market value due to
changes in interest rates.
We are exposed to interest rate risk on the industrial development bond for our
Colorado facility, which has a variable interest rate. We have not entered into
any hedging instruments to protect ourselves against future increases in
interest rates, which would negatively impact the amount of interest we are
required to pay. However, we do not feel that this risk is significant and we do
not plan to attempt to hedge to mitigate this risk in the foreseeable future.
Foreign Currency Risk. International revenues accounted for 47.5% of our total
revenue in 1999. International sales are made primarily from our foreign sales
subsidiaries in their respective countries and are denominated in United States
dollars or the local currency of each country. These subsidiaries also incur
most of their expenses in the local currency. Accordingly, all foreign
subsidiaries use the local currency as their functional currency.
Our international business is subject to risks typical of an international
business, including, but not limited to differing economic conditions, changes
in political climate, differing tax structures, other regulations and
restrictions, and foreign exchange rate volatility. Accordingly, our future
results could be materially adversely impacted by changes in these or other
factors.
Our exposure to foreign exchange rate fluctuations arises in part from
inter-company accounts in which costs incurred in the United States are charged
to our foreign sales subsidiaries. These inter-company accounts are typically
denominated in the local currency of the foreign subsidiary. We are also exposed
to foreign exchange rate fluctuations as the financial results of foreign
subsidiaries are translated into United States dollars in consolidation. As
exchange rates vary, these results, when translated, may vary from expectations
and adversely impact overall expected profitability. The realized effect of
foreign exchange rate fluctuations in 1999 resulted in a $342,000 loss.
Item 8. Financial Statements and Supplementary Data
Consolidated financial statements as of December 31, 1999 and 1998 and for each
of the three years in the period ended December 31, 1999 and the report of
Independent Accountants are included on pages F-1 to F-27 of this Annual Report
on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
Page 26
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to executive officers of the Registrant required by
Item 401(b) of Regulation S-K is presented at the end of Part I of this Form
10-K. Information regarding Directors of the Registrant required by Item 401 of
Regulation S-K and information regarding Directors and Executive Officers of
Registrant required by Item 405 of Regulation S-K will be presented under the
caption "Election of Directors" in the definitive Proxy Statement for the
Company's 2000 Annual Meeting of Shareholders, and is incorporated herein by
reference.
Item 11. Executive Compensation
The information required by Item 402 of Regulation S-K will be presented under
the captions "Election of Directors" and "Executive Compensation" in the
definitive Proxy Statement for the Company's 2000 Annual Meeting of
Shareholders, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 403 of Regulation S-K will be presented under
the caption "Principal Shareholders" in the definitive Proxy Statement for the
Company's 2000 Annual Meeting of Shareholders, and is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
The information required by Item 404 of Regulation S-K will be presented under
the caption "Transactions with Executive Officers and Directors" in the
definitive Proxy Statement for the Company's 2000 Annual Meeting of
Shareholders, and is incorporated herein by reference.
Page 27
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
a The following Consolidated Financial Statements, Financial Statement
Schedule and Exhibits are filed as part of this Annual Report on Form
10-K as listed on page F1 of this document.
b Reports on Form 8-K
None.
c Exhibits
The following exhibits are included as part of this Annual Report on
Form 10-K and incorporated herein by this reference:
1.1 Arrangement Agreement (and related exhibits) among Registrant, 3-D
Canada and Avenue Hall Holding Corporation, dated as of May 19, 1993.
Incorporated by reference to Exhibit 1.1 to Form 8-B filed August 16,
1993 and the amendment thereto filed on Form 8-B/A filed on February 4,
1994.
1.2 Exchange Agreement among Registrant, 3-D Canada, Avenue Hall Holding
Corporation and Montreal Trust Company of Canada, dated as of May 19,
1993. Incorporated by reference to Exhibit 1.2 to Form 8-B filed August
16, 1993 and the amendment thereto filed on Form 8-B/A filed February
4, 1994.
2.1 Material captioned "United States Domestication of the Company" set
forth in the Information Circular (Proxy Statement) dated May 21, 1993,
for the Annual Meeting of Shareholders of 3-D Canada, held on June 25,
1993, filed with the Securities and Exchange Commission on May 24,
1993.
2.2 Asset Purchase Agreement entered into as of December 31, 1990 by and
between Spectra-Physics GmbH and 3D Systems GmbH. Incorporated by
reference to Exhibit 2.1 to 3-D Canada's Current Report on Form 8-K
filed January 14, 1991 and the amendments thereto.
2.3 Agreement for transfer of a business entered into as of December 31,
1990 by and between Spectra-Physics (France) and 3D Systems France.
Incorporated by reference to Exhibit 2.2 to 3-D Canada's Current Report
on Form 8-K filed January 14, 1991 and the amendments thereto.
2.4 Asset Purchase Agreement entered into as of December 31, 1990 by and
between Spectra-Physics Limited and 3D Systems, Inc. Limited (England).
Incorporated by reference to Exhibit 2.3 to 3-D Canada's Current Report
on Form 8-K filed January 14, 1991 and the amendments thereto.
2.5 Amendment dated August 28, 1991 to Asset Purchase Agreement between 3D
Systems GmbH and Spectra-Physics GmbH dated December 29, 1990.
Incorporated by reference to Exhibit 2.4 to 3-D Canada's Current Report
on Form 8-K filed September 11, 1991.
3.1 Certificate of Incorporation of Registrant. Incorporated by reference
to Exhibit 3.1 to Form 8-B filed August 16, 1993 and the amendment
thereto filed on Form 8-B/A filed on February 4, 1994.
3.2 Bylaws of Registrant. Incorporated by reference to Exhibit 3.2 to Form
8-B filed August 16, 1993 and the amendment thereto filed on Form 8-B/A
filed on February 4, 1994.
4.1* 1989 Employee and Director Incentive Plan. Incorporated by reference to
Exhibit 4.1 to Form 8-B filed August 16, 1993 and the amendment thereto
filed on Form 8-B/A filed on February 4, 1994.
4.2* Form of Director Option Contract pursuant to the 1989 Employee and
Director Incentive Plan. Incorporated by reference to Exhibit 4.2 to
Form 8-B filed August 16, 1993 and the amendment thereto filed on Form
8-B/A filed on February 4, 1994.
- - --------
* Management contract or compensatory plan or arrangement.
Page 28
<PAGE>
4.3* Form of Officer Option Contract pursuant to the 1989 Employee and
Director Incentive Plan. Incorporated by reference to Exhibit 4.3 to
Form 8-B filed August 16, 1993 and the amendment thereto filed on Form
8-B/A filed on February 4, 1994.
4.4* Form of Employee Option Contract pursuant to the 1989 Employee and
Director Incentive Plan. Incorporated by reference to Exhibit 4.4 to
Form 8-B filed August 16, 1993 and the amendment thereto filed on Form
8-B/A filed on February 4, 1994.
4.5* Form of Director Option Contract pursuant to the 1996 Non-Employee
Director Stock Option Plan.
4.6* Form of Incentive Stock Option Contract for Executives pursuant to the
1996 Stock Incentive Plan.
4.7* Form of Non-statutory Stock Option Contract for Executives pursuant to
the 1996 Stock Incentive Plan.
4.8* Form of Employee Incentive Stock Option Contract pursuant to the 1996
Stock Incentive Plan.
4.9* Form of Employee Non-statutory Stock Option Contract pursuant to the
1996 Stock Incentive Plan.
10.1 Lease with respect to Valencia property dated as of July 12, 1988, by
and between 3D California and Valencia Tech Associates. Incorporated by
reference to Exhibit 3.1 to 3-D Canada's annual Report on Form 20-F for
the year ended December 31, 1987 (Reg. No. 0-16333).
10.2 Amendment No. 1 to Lease Agreement between 3D California and Katell
Valencia Associates, a California limited partnership, dated May 28,
1993. Incorporated by reference to Exhibit 10.2 to Form 8-B filed
August 16, 1993 and the amendment thereto filed on Form 8-B/A filed on
February 4, 1994.
10.3 Agreement dated as of July 19, 1988, by and among 3D California, UVP,
Cubital, Ltd. and Scitex Corporation Ltd. Incorporated by reference to
Exhibit 3.10 to 3-D Canada's Annual Report on Form 20-F for the year
ended December 31, 1987 (Reg. No. 0-16333).
10.4 Exclusive License Agreement dated as of May 16, 1986, by and between 3D
California and UVP. Incorporated by reference to Exhibit 5 to 3-D
Canada's Registration Statement on Form 20-F (Reg. No. 0-16333).
10.5 Form of Subscription Agreement made as of the 18th day of April, 1989
between 3-D Canada and placees pursuant to the private placement of
special warrants completed on April 27, 1989, together with all
Schedules thereto, and form of Confirmation of Agreement. Incorporated
by reference to Exhibit 2.6 to 3-D Canada's Annual Report on Form 20-F
for the year ended December 31, 1988.
10.6 Patent Purchase Agreement dated January 5, 1990 by and between 3D
California and UVP. Incorporated by reference to Exhibit 10.28 to 3-D
Canada's Registration Statement on Form S-1 (Reg. No. 33-31789).
10.7 Security Agreement dated as of the 5th day of January, 1990 by and
between UVP and 3D California relating to security interest in UVP
Patent. Incorporated by reference to Exhibit 10.29 to 3-D Canada's
Registration Statement on Form S-1 (Reg. No. 33-31789).
10.8 Assignment of UVP Patent dated January 12, 1990 by UVP to 3D
California. Incorporated by Reference to Exhibit 10.30 to 3-D Canada's
Registration Statement on Form S-1 (Reg. No. 33-31789).
10.9 Exchange Agreement dated July 23, 1990 by and among 3-D Canada, 3D
California, CIBA-GEIGY Capital Corporation, Raymond S. Freed, Charles
W. Hull, Bethany Griffiths, Virginia Hiramatsu, Paul B. Warren and
Edwin J. Kaftal, together with all Exhibits thereto. Incorporated
herein by reference to Exhibit 10.30 to 3-D Canada's Registration
Statement on Form S-1 (Reg. No. 33-31789).
10.10 Research and Development Agreement entered into as of August 15, 1990
by and between 3D California and Ciba-Geigy Limited. Incorporated
herein by reference to Exhibit 10.32 to 3-D Canada's Current Report on
Form 8-K filed August 21, 1990 and the amendments thereto.
10.11 Distribution Agreement entered into as of July 1, 1990 by and between
3D California and Ciba-Geigy Limited. Incorporated herein by reference
to Exhibit 10.33 to 3-D Canada's Current Report on Form 8-K filed
August 21, 1990 and the amendments thereto.
Page 29
<PAGE>
10.12 Severance agreements: 10.12(a) Severance Agreement dated April 5, 1991
by and between 3-D Canada and Mr. Raymond S. Freed; and 10.12(b)
Severance Agreement dated May 15, 1991 by and between 3-D Canada and
Mr. Edwin J. Kaftal. Incorporated by reference to 3-D Canada's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, and
the amendments thereto.
10.13* Employment Agreement dated of as September 4, 1991, between 3D
California and Arthur B. Sims. Incorporated herein by reference to
Exhibit 10.14 to 3-D Canada's Annual Report on Form 10-K for the year
ended December 31, 1992, and the amendments thereto.
10.14 Form of Indemnification Agreement between Registrant and certain of its
executive officers and directors. Incorporated by reference to Exhibit
10.18 to Form 8-B filed August 16, 1993 and the amendment thereto filed
on Form 8-B/A filed on February 4, 1994.
10.15 Amendment No.1 to a Shareholders' Agreement, such Shareholders'
Agreement being dated as of April 10, 1991, among 1726 Holdings Ltd., a
British Columbia corporation ("1726"), Lionheart Capital Corp., a
British Columbia corporation ("Lionheart"), 3-D Canada, and Raymond S.
Freed, Charles W. Hull, Bethany Griffiths, Virginia Hiramatsu, Paul B.
Warren and Edwin J. Kaftal (Freed, Hull, Griffiths, Hiramatsu, Warren
and Kaftal are collectively referred to as the "Founders"), dated as of
May 5, 1993, by and among 1726, Lionheart, 3-D Canada, the Founders and
Registrant. Incorporated by reference to Exhibit 10.19 to Form 8-B
filed August 16, 1993 and the amendment thereto filed on Form 8-B/A
filed on February 4, 1994.
10.16 Loan and Security Agreement, as amended, dated as of June 2, 1993, by
and between 3D California, 3D Systems Inc. Limited (England), 3D
Systems France SARL, 3D Systems GmbH, 3D Systems Japan, Ltd. and
Silicon Valley Bank. Incorporated by reference to Exhibit 10.20 to Form
8-B filed August 16, 1993 and the amendment thereto filed on Form 8-B/A
filed on February 4, 1994.
10.17 Cross-Corporate Continuing Guaranty dated as of August 12, 1993,
executed by Registrant, 3D Systems Inc. Limited (England), 3D Systems
France SARL, 3D Systems GmbH, 3D Systems Japan, Ltd. and 3D California
in favor of Silicon Valley Bank. Incorporated by reference to Exhibit
10.21 to Form 8-B filed August 16, 1993 and the amendment thereto filed
on Form 8-B/A filed on February 4, 1994.
10.18 Antidilution Agreement dated as of August 12, 1993, by and between
Registrant and Silicon Valley Bank. Incorporated by reference to
Exhibit 10.23 to Form 8-B filed August 16, 1993 and the amendment
thereto filed on Form 8-B/A filed on February 4, 1994.
10.19 Assumption Agreement dated as of August 12, 1993, by and between 3D
Systems (Canada) Inc. and Silicon Valley Bank. Incorporated by
reference to Exhibit 10.25 to Form 8-B filed August 16, 1993 and the
amendment thereto filed on Form 8-B/A filed on February 4, 1994.
10.20 Letter Agreement dated July 31, 1993 by and among 3D California,
Silicon Valley Bank, and UVP, Inc. Incorporated by reference to Exhibit
10.26 to Form 8-B filed August 16, 1993 and the amendment thereto filed
on Form 8-B/A filed on February 4, 1994.
10.21 Standby Share Purchase Agreement dated as of May 26, 1992, by and among
3-D Canada and Invesco MIM, C&S Investment Management, Ltd., Noland
Carter, Prudential Portfolio Managers Limited, Fred C. Goad, Jr., The
Clark Estates, Inc., Foreign & Colonial Smaller Companies PLC.
Incorporated by reference to Exhibit 1.2 to 3-D Canada's Registration
Statement on Form S-2 (Reg. No. 33-46823).
10.22 Stock Purchase Agreement, as amended, dated as of September 30, 1986,
by and among 3D California, Lionheart Resources Corporation, a British
Columbia corporation, and 3-D Canada. Incorporated by reference to
Exhibit 4 to 3-D Canada's annual report on Form 20-F for the year ended
December 31, 1987 (Reg. No. 0-16333).
10.23 Security Agreement dated as of August 12, 1993, by and between
Registrant and Silicon Valley Bank. Incorporated by reference to
Exhibit 10.29 to Form 8-B filed August 16, 1993 and the amendment
thereto filed on Form 8-B/A filed on February 4, 1994.
10.24 Letter of Understanding with respect to Loan and Security Agreement, as
amended, dated August 12, 1993, by and between 3D California, 3D
Systems Inc. Limited (England), 3D Systems France SARL, 3D Systems
- - --------
* Management contract or compensatory plan or arrangement.
Page 30
<PAGE>
GmbH, 3D Systems Japan, Ltd. and Silicon Valley Bank. Incorporated by
reference to Exhibit 10.30 to Form 8-B filed August 16, 1993 and the
amendment thereto filed on Form 8-B/A filed on February 4, 1994.
10.25 Termination Agreement entered into as of January 1, 1990 by and among
3D California, The Japan Steel Works, Ltd. and 3D Systems Japan, Ltd.
Incorporated by reference to Exhibit 10.27 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1989.
10.26 Amendment to Termination Agreement dated April 13, 1993 by and among 3D
California, The Japan Steel Works, Ltd. and 3D Systems Japan, Ltd.
Incorporated by reference to Exhibit 10.33 to Form 8-B filed August 16,
1993 and the amendment thereto filed on Form 8-B/A filed on February 4,
1994.
10.27* Employment Agreement dated March 1, 1994, by and among Registrant, 3D
Systems, Inc., a California corporation and Charles W. Hull.
Incorporated by reference to Exhibit 10.1 to Registrant's Form 10-Q for
the quarterly period ended July 1, 1994 filed on August 9, 1994.
10.28 Amendment to Loan Agreement dated as of August 3, 1994, by and between
3D Systems, Inc., 3D Systems Inc. Limited, 3D Systems France SARL, 3D
Systems GmbH and Silicon Valley Bank. Incorporated by reference to
Exhibit 10.36 to Registrant's Form 10-Q for the quarterly period ended
September 30, 1994 filed on November 4, 1994.
10.29 Amended Schedule to Loan and Security Agreement dated as of August 3,
1994, by and between 3D Systems, Inc., 3D Systems Inc. Limited, 3D
Systems France SARL, 3D Systems GmbH and Silicon Valley Bank.
Incorporated by reference to Exhibit 10.37 to Registrant's Form 10-Q
for the quarterly period ended September 31, 1994 filed on November 4,
1994.
10.30 Collateral Assignment, Patent Mortgage and Security Agreement dated as
of August 3, 1991, by and between 3D Systems, Inc., 3D Systems Inc.
Limited, 3D Systems France SARL, 3D Systems GmbH, 3D Systems
Corporation, 3D Systems (Canada) Inc. and Silicon Valley Bank.
Incorporated by reference to Exhibit 10.38 to Registrant's Form 10-Q
for the quarterly period ended September 30, 1994 filed on November 4,
1994.
10.31* Employment Agreement dated October 31, 1994, by and among Registrant,
3D Systems, Inc., a California corporation and Arthur B. Sims.
Incorporated by reference to Exhibit 10.39 to Form 10-K for the year
ended December 31, 1994.
10.32 Letter of intent dated March 7, 1995 by and between 3D Systems, Inc., a
California corporation and CIBA-GEIGY Corporation, a New York
corporation. Incorporated by reference to Exhibit 10.40 to Form 10-K
for the year ended December 31, 1994.
10.33 Agreement dated October 4, 1995 between Registrant and Mesa County
Economic Development Council, inc., a Colorado non-profit Corporation.
Incorporated by reference to Exhibit 10.1 to Registrant's Form 10-Q for
the quarterly period ended September 29, 1995 filed November 13, 1995.
10.34 Amendment No. 1 to Distribution Agreement dated May 5, 1995 between
Ciba Specialty Chemicals and Registrant. Incorporated by reference to
Exhibit 10.40 to Amendment No. 1 to Registration Statement on
Form S-2 filed on May 25, 1995.
10.35 Registration and Indemnification Agreement dated June 1995 between
Registrant and 1726 Holdings Canada, Inc. Incorporated by reference to
Exhibit 10.41 to Amendment No. 2 to Registration Statement of Form S-2
filed on June 13, 1995.
10.36* Employment Agreement dated as of December 27, 1995 between Registrant
and A. Sidney Alpert. Incorporated by reference to Exhibit 10.43 to
Registrant's 10-K for the year ended December 31, 1995 filed on April
1, 1996.
10.37 Amendment dated July 5, 1995 to Loan and Security Agreement dated June
2, 1993, as previously amended, by and between Registrant, 3D
California, 3D Systems, Inc. Limited, 3D Systems France SARL, 3D
Systems GmbH and Silicon Valley Bank. Incorporated by reference to
Exhibit 10.44 to Form 10-K for the year ended December 31, 1995.
10.38 License, Development, and OEM Agreement dated March 31, 1995 between
Spectra, Inc. and 3D Systems, Inc. Incorporated by reference to Exhibit
10.45 to Registrant's 10-K for the year ended December 31, 1995
- - --------
* Management contract or compensatory plan or arrangement.
Page 31
<PAGE>
filed on April 1, 1996. [Portions of the exhibit have been omitted and
filed separately with the SEC pursuant to a grant of confidential
treatment].
10.39* Employment letter dated April 11, 1996 between Registrant and Mark R.
Bell. Incorporated by reference to exhibit 10.1 to Registrant's 10-Q
for the quarterly period ended March 29, 1996 filed on May 7, 1996.
10.40 Asset Purchase Agreement dated as of August 30, 1996 by and between 3D
Systems, Inc., a California corporation, Keltool, Inc. a Minnesota
corporation and Wayne Duescher. Incorporated by reference to Exhibit
10.1 to Registrant's 10-Q for the quarterly period ended September 27,
1996 filed on November 12, 1996.
10.41 Non-Competition Agreement dated September 9, 1996 by and between 3D
Systems, Inc., a California corporation and Wayne O. Duescher.
Incorporated by reference to Exhibit 10.3 to Registrant's 10-Q for the
quarterly period ended September 27, 1996 filed on November 12, 1996.
10.42* Employment Agreement dated as of February 6, 1996 between Registrant
and Eugen J. Geyer. Incorporated by reference to Exhibit 10.50 to
Form 10-K for the year ended December 31, 1996.
10.43* Employment Agreement dated October 28, 1996 between Registrant and
Richard D. Balanson. Incorporated by reference to Exhibit 10.51 to
Form 10-K for the year ended December 31, 1996.
10.44 Amendment dated July 5, 1996 to Loan and Security Agreement dated June
2, 1993, as previously amended, by and between Registrant and Silicon
Valley Bank. Incorporated by reference to Exhibit 10.52 to
Form 10-K for the year ended December 31, 1996.
10.45 Amendment, dated August 18, 1997, to Loan Agreement and Amended
Schedule to Loan and Security Agreement dated June 2, 1993 between
Silicon Valley Bank and 3D Systems, Inc., 3D Systems Inc. Limited, 3D
Systems France SARL and 3D Systems GmbH. Incorporated by reference
to Exhibit 10.53 to Form 10-K for the year ended December 31, 1997.
10.46* Employment Agreement effective November 17, 1997 between Registrant and
Mr. Frank J. Spina. Incorporated by reference to Exhibit 10.54 to
Form 10-K for the year ended December 31, 1997.
10.47* Employment letter effective January 7, 1997 between Registrant and Mr.
Martin E. McGough. Incorporated by reference to Exhibit 10.55 for
the year ended December 31, 1997.
10.48* Employment letter effective September 17, 1999 between Registrant and
Mr. Grant R. Flaharty.
10.49* Agreement effective September 9, 1999, between Registrant and Regent
Pacific Management Corporation. Incorporated by reference to Exhibit
10.1 to Registrant's Current Report on Form 8-K filed February 17,
2000.
10.50* Employment Agreement effective May 1, 1999 between Registrant and Mr.
G. Walter Loewenbaum II.
10.51* Employment Agreement effective September 9, 1999 between Registrant and
Mr. Gary J. Sbona.
10.52 Patent License Agreement dated December 16, 1998 by and between 3D
Systems, Inc., NTT Data CMET, Inc. and NTT Data Corporation.
[Confidential Treatment Requested].
10.53* Employment Agreement dated September 9, 1999 between Registrant and Mr.
Arthur B. Sims.
10.54* Stock Option Agreement dated May 20, 1999 between Registrant and Mr.
Arthur B. Sims.
10.55* Letter dated October 19, 1999 from Registrant to Mr. Arthur B. Sims.
22.1 Subsidiaries of Registrant.
23.1 Consent of Independent Accountants - PricewaterhouseCoopers LLP.
27.1 Financial Data Schedule.
- - --------
* Management contract or compensatory plan or arrangement.
Page 32
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
Consolidated Financial Statements
<S> <C>
Report of Independent Accountants..........................................................................F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998...............................................F-3
Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997.................F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1999, 1998 and 1997.......F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997.................F-6
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 1999, 1998 and 1997.......F-7
Notes to Consolidated Financial Statements for the Years Ended December 31, 1999, 1998 and 1997............F-8
<CAPTION>
Consolidated Financial Statement Schedule
<S> <C>
Report of Independent Accountants on Financial Statement Schedule.........................................F-27
Schedule II - Valuation and Qualifying Accounts...........................................................F-28
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
3D Systems Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity, cash flows and
comprehensive income present fairly, in all material respects, the financial
position of 3D Systems Corporation and its subsidiaries (the "Company") at
December 31, 1999 and 1998, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States. 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 auditing standards generally accepted in the United States 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.
PricewaterhouseCoopers LLP
Woodland Hills, California
February 14, 2000
F-2
<PAGE>
3D SYSTEMS CORPORATION
Consolidated Balance Sheets
At December 31, 1999 and 1998
(in thousands)
<TABLE>
<CAPTION>
ASSETS 1999 1998
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,553 $ 15,912
Short-term investments -- 3,485
Accounts receivable, less allowances for
Doubtful accounts of $2,912 (1999) and $944 (1998) 26,772 24,487
Current portion of lease receivables 607 2,069
Inventories 8,786 10,829
Deferred tax assets 2,355 2,063
Prepaid expenses and other current assets 2,028 1,916
-------- --------
Total current assets 53,101 60,761
Property and equipment, net 16,245 16,327
Licenses and patent costs, net 9,135 5,121
Deferred tax assets 7,658 5,070
Lease receivables 2,436 5,802
Other assets 2,083 2,022
-------- --------
$ 90,658 $ 95,103
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,838 $ 4,850
Accrued liabilities 8,741 8,162
Current portion of long-term debt 110 100
Customer deposits 345 330
Deferred revenues 6,848 9,014
-------- --------
Total current liabilities 21,882 22,456
Other liabilities 4,673 1,485
Long-term debt, less current portion 4,495 4,605
-------- --------
31,050 28,546
-------- --------
Commitments and contingencies (Note 18) -- --
Stockholders' equity:
Preferred stock, authorized 5,000 shares; none issued
Common stock, authorized 25,000 shares; issued 11,658 and
Outstanding 11,433 (1999); and issued 11,614 and
Outstanding 11,389 (1998) 12 12
Capital in excess of par value 75,064 74,834
Notes receivable from officers (240) (360)
Accumulated deficit (12,066) (6,765)
Accumulated other comprehensive income (loss) (1,622) 376
Treasury stock, at cost, 225 shares (1,540) (1,540)
-------- --------
Total stockholders' equity 59,608 66,557
-------- --------
$ 90,658 $ 95,103
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
3D SYSTEMS CORPORATION
Consolidated Statements of Operations
Years ended December 31, 1999, 1998 and 1997
(in thousands except per share amounts)
1999 1998 1997
-------- -------- --------
Sales:
Products $ 66,806 $ 65,434 $ 59,149
Services 30,143 32,683 31,108
-------- -------- --------
Total sales 96,949 98,117 90,257
-------- -------- --------
Cost of sales:
Products 35,938 33,477 35,463
Services 20,975 22,062 21,745
-------- -------- --------
Total cost of sales 56,913 55,539 57,208
-------- -------- --------
Gross profit 40,036 42,578 33,049
-------- -------- --------
Operating expenses:
Selling, general and administrative 35,273 30,448 29,653
Research and development 8,931 9,425 10,991
Other 3,384 -- --
-------- -------- --------
Total operating expenses 47,588 39,873 40,644
-------- -------- --------
Income (loss) from operations (7,552) 2,705 (7,595)
Interest income 415 949 1,202
Interest and other expense (404) (467) (356)
-------- -------- --------
Income (loss) before income taxes (7,541) 3,187 (6,749)
Provision for (benefit from) income taxes (2,240) 1,055 (2,160)
-------- -------- --------
Net income (loss) $ (5,301) $ 2,132 $ (4,589)
======== ======== ========
Shares used to calculate basic net income
(loss) per share 11,376 11,348 11,398
======== ======== ========
Basic net income (loss) per share $ (.47) $ .19 $ (.40)
======== ======== ========
Shares used to calculate diluted net income
(loss) per share 11,376 11,594 11,398
======== ======== ========
Diluted net income (loss) per share $ (.47) $ .18 $ (.40)
======== ======== ========
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
3D SYSTEMS CORPORATION
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1999, 1998 and 1997
(in thousands)
<TABLE>
<CAPTION>
Common Notes
Stock Capital in Receivable Cumulative Total
Par Value Excess of Par From Accumulated Translation Treasury Stockholders'
Shares $0.001 Value Officers Deficit Adjustment Stock Equity
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 11,359 $ 11 $ 72,528 -- $ (4,308) $ 472 -- 68,703
Exercise of stock options 91 (a) 418 -- -- -- -- 418
Tax benefit related to non-
qualified stock options -- -- 184 -- -- -- -- 184
Issuance of warrants related to
EOS acquisition -- -- 727 -- -- -- -- 727
Net loss -- -- -- -- (4,589) -- -- (4,589)
Cumulative translation
adjustment -- -- -- -- -- (683) -- (683)
Purchase of treasury stock (25) -- -- -- -- -- (165) (165)
-----------------------------------------------------------------------------------------------
Balance at December 31, 1997 11,425 11 73,857 -- (8,897) (211) (165) 64,595
Exercise of stock options 59 (a) 366 -- -- -- -- 366
Employee stock purchase plan 38 -- 192 -- -- (a) -- 192
Officer loans 67 1 419 (420) --
Repayment of officer loans -- -- -- 60 -- -- -- 60
Net income -- -- -- -- 2,132 -- -- 2,132
Cumulative translation
adjustment -- -- -- -- -- 587 -- 587
Purchase of treasury stock (200) -- -- -- -- -- (1,375) (1,375)
-----------------------------------------------------------------------------------------------
Balance at December 31, 1998 11,389 12 74,834 (360) (6,765) 376 (1,540) 66,557
Exercise of stock options 6 (a) 32 -- -- -- -- 32
Employee stock purchase plan 57 (a) 256 -- -- -- -- 256
Cancellation of officer loans (19) (a) (120) 120 -- -- -- --
Stock based compensation -- -- 62 -- -- -- -- 62
Net loss -- -- -- -- (5,301) -- -- (5,301)
Cumulative translation
adjustment -- -- -- -- -- (1,998) -- (1,998)
-----------------------------------------------------------------------------------------------
Balance at December 31, 1999 11,433 $ 12 $ 75,064 $ (240) $(12,066) $ (1,622) $ (1,540) $ 59,608
===============================================================================================
</TABLE>
(a) Amounts not shown due to rounding
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
3D SYSTEMS CORPORATION
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
(in thousands)
<TABLE>
<CAPTION>
Cash flows from operating activities: 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net income (loss) $ (5,301) $ 2,132 $ (4,589)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Deferred income taxes (2,881) 158 (2,511)
Depreciation of property and equipment 4,561 4,083 3,756
Provision for doubtful accounts 2,062 339 35
Amortization of licenses and patent costs 991 1,003 733
Amortization of software development costs 436 504 495
Amortization of intangibles 80 223 162
Changes in operating assets and liabilities:
Accounts receivable (6,338) (909) (4,973)
Lease receivables 4,828 (2,733) (440)
Inventories 995 1,160 (60)
Prepaid expenses and other current assets (112) 389 (38)
Other assets (576) (542) (1,404)
Accounts payable 1,229 (176) 1,266
Accrued liabilities 579 158 1,318
Customer deposits 14 92 (656)
Deferred revenues (2,165) 1,688 1,858
Other liabilities 3,187 (6) 70
-------- -------- --------
Net cash provided by (used for) operating activities 1,589 7,563 (4,978)
-------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment (7,719) (5,822) (8,356)
Disposition of property and equipment 3,241 2,234 2,382
Increase in licenses and patent costs (5,005) (659) (2,489)
Purchase of short term investments (498) (6,648) (3,498)
Proceeds from short term investments 3,982 6,661 3,759
-------- -------- --------
Net cash used for investing activities (5,999) (4,234) (8,202)
-------- -------- --------
Cash flows from financing activities:
Exercise of stock options 350 557 418
Repayment of note payable (100) (95) (100)
Repayment of officer loans -- 60 --
Tax benefit related to non-qualified stock options -- -- 184
Restricted cash -- -- 722
Purchase of treasury stock -- (1,375) (165)
-------- -------- --------
Net cash provided by (used for) financing activities 250 (853) 1,059
-------- -------- --------
Effect of exchange rate changes on cash 801 741 460
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (3,359) 3,217 (11,661)
Cash and cash equivalents at the beginning of the period 15,912 12,695 24,356
-------- -------- --------
Cash and cash equivalents at the end of the period $ 12,553 $ 15,912 $ 12,695
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest $ 212 $ 249 $ 346
======== ======== ========
Income taxes $ (137) $ (410) $ 275
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
3D SYSTEMS CORPORATION
Consolidated Statements of Comprehensive Income (Loss)
Years ended December 31, 1999, 1998 and 1997
(in thousands)
1999 1998 1997
------- ------- -------
Net income (loss) $(5,301) $ 2,132 $(4,589)
Other comprehensive income (loss):
Foreign currency translation adjustments (1,998) 587 (683)
------- ------- -------
Comprehensive income (loss) $(7,299) $ 2,719 $(5,272)
======= ======= =======
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(1) Organization and Business
3D Systems Corporation, a Delaware corporation (the "Company"), develops,
produces and markets SLA(TM) industrial systems and ThermoJet(TM) solid
object printers and related materials, parts and services. 3D Systems,
Inc., a California corporation ("3D California"), an indirect wholly-owned
subsidiary of the Company, directly and through its subsidiaries, conducts
substantially all of the Company's business.
(2) Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All inter-company
accounts and transactions have been eliminated in consolidation.
Certain reclassifications have been made to the prior year
consolidated financial statements to conform to the current year
presentation.
(b) Sales and Concentration of Credit Risk
Revenues from the sale of the Company's systems and related products
are recognized upon shipment. The Company provides end users with up
to one year of maintenance and warranty services, and defers a
portion of its revenues at the time of sale based on the relative
fair value of such services. After the initial maintenance period,
the Company offers these customers optional maintenance contracts;
revenue related to these contracts is deferred and recognized
ratably over the period of the contract. To date, the Company has
not experienced any significant warranty claims or product returns.
Credit is extended based on an evaluation of each customer's
financial condition. To reduce credit risk in connection with sales
of SLA systems, the Company may, depending upon the circumstances,
require significant deposits prior to shipment and may retain a
security interest in the SLA systems until fully paid. The Company
often requires international customers to furnish letters of credit.
The Company invests its excess cash in interest bearing deposits
with major banks, commercial paper and money market funds. Although
a majority of the cash accounts exceed the federally insured deposit
amount, management does not anticipate non-performance by the
financial institutions. Management reviews the stability of these
institutions on a periodic basis.
(c) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased
with an original maturity at the time of purchase of three months or
less to be cash equivalents. The carrying value of these instruments
approximates market value because of their short maturity.
(d) Investments
The Company's short-term investments are classified as held to
maturity and recorded at amortized cost under the provisions of
Statement of Financial Accounting Standards (SFAS) No. 115.
F-8
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(e) Leases
At the inception of a lease, the gross lease receivable, the reserve
for potential losses, the estimated residual value of the leased
equipment and the unearned lease income are recorded. The unearned
lease income represents the excess of the gross lease receivable
plus the estimated residual value over the cost of the equipment
leased and is recorded as deferred revenue.
(f) Inventories
Inventories are stated at the lower of cost (determined by the
first-in, first-out method) or market value.
(g) Property and Equipment
Property and equipment is carried at cost and depreciated on a
straight-line basis over the estimated useful lives of the related
assets, generally three to thirty years. Leasehold improvements are
amortized on a straight-line basis over their estimated economic
useful lives, or the lives of the leases, whichever is shorter.
Realized gains and losses are recognized upon disposal or retirement
of the related assets and are reflected in results of operations.
Repair and maintenance charges are expensed as incurred.
(h) Licenses and Patent Costs
Licenses and patent costs are being amortized on a straight-line
basis over their estimated useful lives, which are approximately
eight to eighteen years, or on a units of production basis,
depending on the nature of the license or patent.
(i) Long Term Assets
The carrying value of long term assets is periodically reviewed by
management, and impairment losses, if any, are recognized when the
expected nondiscounted future operating cash flow derived from such
assets is less than their carrying value. Impairment losses are
recorded at an amount equal to the excess of the assets carrying
value over its fair value.
(j) Capitalized Software Costs
Certain software development and production costs are capitalized
upon a product's reaching technological feasibility. As of December
31, 1999 and 1998, the Company had cumulatively capitalized software
development costs of $4.3 million and $3.8 million, respectively.
Costs capitalized in 1999 and 1998 were $483,000 and $420,000,
respectively. Amortization of software development costs begins when
the related products are available for market. Amortization expense
amounted to $436,000, $504,000 and $495,000 for 1999, 1998 and 1997,
respectively, based on the straight-line method using estimated
useful lives of two years. Net capitalized costs aggregated $494,000
and $447,000 at December 31, 1999 and 1998, respectively, and are
included in other assets in the accompanying consolidated balance
sheets.
(k) Foreign Currency Translation
The assets and liabilities of the Company's foreign operations are
translated at the end of the period exchange rates; revenues and
expenses are translated at the average exchange rates prevailing
during the period. The effect of the unrealized exchange rate
fluctuations on translating foreign currency assets and liabilities
into U.S. dollars is accumulated as a separate component of
stockholders' equity. Gains and losses resulting from foreign
currency transactions are included in current operations. The
aggregate foreign exchange gains (losses) included in operations
were $(342,000), $276,000 and $(479,000) for 1999, 1998 and 1997,
respectively. To date, the Company has not entered into hedging
transactions to protect against changes in foreign currency
exchange rates.
F-9
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(l) Research and Development Costs
Research and development costs are expensed as incurred.
(m) Earnings Per Share
Basic net income (loss) per share is computed by dividing net income
(loss) by the weighted average number of shares of common stock
outstanding during the period. Diluted net income (loss) per share
is computed by dividing net income (loss) by the weighted average
number of shares of common stock outstanding plus the number of
additional common shares that would have been outstanding if all
dilutive potential common shares had been issued. Potential common
shares related to stock options and stock warrants are excluded from
the computation when their effect is antidilutive.
(n) Advertising Costs
Advertising costs are expensed as incurred. Advertising expenses
were approximately $3.0 million, $2.3 million, and $2.9 million for
the years ended 1999, 1998 and 1997, respectively.
(o) Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those
estimates.
(p) Stock-Based Compensation
The Company grants stock options for shares to employees with an
exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance
with APB Opinion No. 25, "Accounting for Stock Issued to Employees."
(q) Income Taxes
The Company accounts for income taxes using the liability method as
required by SFAS No. 109, "Accounting for Income Taxes." Under SFAS
No. 109, deferred income taxes are determined based on the
differences between the financial statement and tax basis of assets
and liabilities, using enacted tax rates in effect for the year.
Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amounts expected to be realized.
(r) Comprehensive Income
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income," and accordingly has included separate Statements of
Comprehensive Income (Loss). Comprehensive income generally
represents all changes in shareholders' equity during the period
except those resulting from investments by, or distributions to,
shareholders.
F-10
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(s) Segment Information
In 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of a Business Enterprise and Related Information." SFAS No.
131 supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise," replacing the "industry segment" approach with
the "management" approach. The management approach designates the
internal organization that is used by management for making
operating decisions and assessing performance as the source of the
Company's reportable segments. SFAS No. 131 also requires
disclosures about products and services, geographic areas, and major
customers. The adoption of SFAS No. 131 did not affect results of
operations or financial position but did affect the disclosure of
segment information (Note 17).
(t) The Company's financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, and notes
payable are carried at cost, which approximates their fair market
value because of the short term maturity of these instruments and
the relatively stable interest rate environment.
(3) Leases
The Company provides lease financing for qualified customers. The leases
are accounted for as sales-type leases where the present value of minimum
lease payments, net of costs, are recorded as sales. The components of
lease receivables are as follows (in thousands):
1999 1998
------- -------
Total minimum lease payment receivable $ 2,377 $ 7,086
Estimated unguaranteed residual value 666 785
------- -------
Gross investment in leases 3,043 7,871
Unearned income (317) (1,220)
------- -------
Total investment in leases $ 2,726 $ 6,651
======= =======
Short-term interest in leases $ 53 $ 1,547
Long-term interest in leases $ 2,673 $ 5,104
Future minimum lease payments to be received as of December 31, 1999:
2000 $ 891
2001 784
2002 535
2003 120
2004 47
------
$2,377
======
In March 1999 leases receivables totalling $2.8 million were sold to an
outside party. No gain or loss was recognized on the transaction.
(4) Inventories
Components of inventories at December 31, 1999 and 1998 are as follows (in
thousands):
1999 1998
------- -------
Raw materials $ 1,633 $ 1,138
Work in process 778 819
Finished goods 6,375 8,872
------- -------
$ 8,786 $10,829
======= =======
F-11
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(5) Property and Equipment
Property and equipment at December 31, 1999 and 1998 are summarized as
follows (in thousands):
1999 1998
-------- --------
Land and building $ 4,637 $ 4,637
Machinery and equipment 20,420 18,416
Office furniture and equipment 3,083 2,889
Leasehold improvements 2,836 2,517
Rental equipment 1,014 452
Construction in progress 97 1,186
-------- --------
32,087 30,097
Less accumulated depreciation and
Amortization (15,842) (13,770)
-------- --------
$ 16,245 $ 16,327
======== ========
(6) Licenses and Patent Costs
Licenses and patent costs at December 31, 1999 and 1998 are summarized as
follows (in thousands):
1999 1998
-------- --------
Licenses, at cost $ 2,333 $ 3,608
Patent costs 13,214 6,934
-------- --------
15,547 10,542
Less accumulated amortization (6,412) (5,421)
-------- --------
$ 9,135 $ 5,121
======== ========
(a) In 1999 and 1998, the Company incurred and capitalized $5,005,000
and $643,000, respectively, of costs to acquire, develop and extend
patents in the United States, Japan, Europe and certain other
countries, and expensed previously developed capitalized patent
costs of $621,000 and $365,000, respectively.
F-12
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(b) Effective January 5, 1990, 3D California acquired from UVP, Inc.
("UVP") UVP's patents for stereolithography technology in exchange
for $9,075,000, $500,000 of which was paid in cash and $350,000 in
offsets of costs incurred by the Company on behalf of UVP. The
initial payment and offsets ($850,000) have been capitalized and are
being amortized over the remaining life of the patents
(approximately three years at December 31, 1999). The agreement
further provided for payment deferrals during 1990 through 1992
aggregating $950,000 and annual payments based upon the sales levels
of SLA machines up to a maximum of $8,225,000. The Company records
the annual payments as royalty expense. In 1999, 1998 and 1997,
royalty expense aggregated $678,000, $711,000 and $668,000,
respectively, and is included in Cost of Sales: Products in the
accompanying consolidated statements of operations. Royalty
obligations at December 31, 1999 and 1998 are $1,742,000 and
$1,745,000, respectively, and are included in the accompanying
consolidated balance sheets. In the event the Company licenses the
acquired technology to a third party, the Company is required to
make additional accelerated payments to UVP of 50% of the royalties
it receives up to an aggregate maximum of $8,225,000 including the
Company's payments based on sales levels of its SLA machines. In
1999, the Company made additional accelerated payments totaling
$603,000. UVP has retained a security interest in the purchased
technology until the purchase price is fully paid. At December 31,
1999, $4.2 million remained to be paid to UVP under this agreement.
(c) The excess of the cost of the Company's investment in 3D California
over the related underlying equity in the net assets of the
subsidiary at the date of acquisition ($2.0 million) has been
attributed to the licenses and patents of 3D California and is being
amortized on the same basis as the underlying licenses and patents.
(7) Acquisitions
a) On September 22, 1997, the Company completed the acquisition of the
rapid prototyping "Stereos" product line assets and business from
EOS GmbH of Germany, formerly the Company's major European
competitor. Under the terms of the agreement, the Company paid $3.25
million, issued a warrant to buy 150,000 of the Company's common
shares at $8.00 per share, exercisable within the three-year period
following the closing (valued at $727,000), and granted EOS
exclusive licenses to the Company's patents related to laser
sintering. Additionally, the Company agreed to settle all pending
patent infringement and unfair competition lawsuits brought against
EOS and an EOS customer.
In accordance with the purchase method of accounting, the purchase
price has been allocated to the underlying assets and liabilities
based on their respective fair values at the date of acquisition.
The in-process research and development was expensed in the quarter
ended September 26, 1997 as a nonrecurring cost after determining
that it had not reached technological feasibility and that it had no
alternative future use.
The total purchase price was $4,075,000 and was allocated as follows
(in thousands):
In-process research and development projects $2,045
Inventory 360
Patents 395
Intangible assets 1,275
------
$4,075
======
F-13
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(8) Credit Facility
In August 1999, the Company's credit facility expired. The credit facility
was not utilized during 1999 and no amounts were due under the facility at
the time of its expiration. The Company is currently evaluating its
options with regard to establishing a new credit facility.
(9) Accrued Liabilities
Accrued liabilities at December 31, 1999 and 1998 are as follows (in
thousands):
1999 1998
------ ------
Employee related benefits $2,393 $2,090
Payroll and related taxes 995 931
Rent 256 329
Commissions 381 464
Product royalties 1,654 825
Sales tax 1,248 577
EOS acquisition costs -- 443
Other 1,814 2,503
------ ------
$8,741 $8,162
====== ======
(10) Other Liabilities
Other liabilities at December 31, 1999 and 1998 are as follows (in
thousands):
1999 1998
------ ------
Royalty payable $1,150 $ 950
Amounts due under licensing
agreement 1,600 --
Retirement plan 548 535
Employee termination costs 995 --
Other 380 --
------ ------
$4,673 $1,485
====== ======
F-14
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(11) Long-Term Debt
On August 20, 1996, the Company completed a $4.9 million variable rate
industrial development bond financing of its Colorado facility. Interest
on the bonds is payable monthly (the interest rate at December 31, 1999
was 5.65%). Principal payments are payable in semi-annual installments
beginning in February 1997 through August 2016. The bonds are
collateralized by an irrevocable standby letter of credit issued by
Norwest Bank Minnesota, N.A. which is further collateralized by the
building and related machinery and equipment as well as a standby letter
of credit issued by Silicon Valley Bank in the amount of approximately
$1.4 million. The terms of the letters of credit require the Company to
maintain specific levels of minimum tangible net worth, debt to equity
ratio and quick ratio. Annual maturities of long-term debt are as follows
(in thousands):
2000 $ 110
2001 120
2002 135
2003 150
2004 165
Later years 3,925
-------
Total 4,605
Less current portion 110
-------
Long-term debt $ 4,495
=======
(12) Stockholders' Equity and Stockholders' Rights Plan
On May 23, 1996, the Company's stockholders approved the 1996 Stock Incentive
Plan (the "1996 Plan") and the 1996 Stock Option Plan for Non-Employee Directors
(the "Director Plan"). The maximum number of shares of common stock that may be
issued pursuant to options granted under the 1996 Plan and Director Plan is 2.1
million and 200,000, respectively. Both the 1996 Plan and the Director Plan
expire on March 21, 2006, and no further options will be granted after that
date. The 1996 Plan also provides for "reload options," which are options to
purchase additional shares if a grantee uses already-owned shares to pay for an
option exercise. The Company also had a 1989 Plan in which options for
substantially all common shares had been previously issued. The 1989 Plan
expired in 1999. The option price per share under all plans is equal to the fair
market value on the date of grant. The vesting and exercise periods for all
plans, except the Director Plan, are determined at the discretion of the
Compensation Committee of the Board of Directors. The majority of options issued
under the 1996 Plan and the 1989 Plan vest 25% annually, commencing one year
from the date of grant and expiring between six and ten years from the date of
grant. Under the Director Plan, each non-employee director ("outside director")
of the Company will automatically be granted annually non-statutory stock
options to purchase 7,500 shares of common stock. Each option issued under the
Director Plan vests in equal annual installments over a three-year period
beginning on the first anniversary, and expires ten years from the date of
grant. Prior to the adoption of the Director Plan, each outside director was
automatically granted annually non-statutory stock options to purchase 3,333
shares of common stock under the 1989 Plan, as amended, beginning in 1993.
F-15
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
A summary of the status of the Company's stock options is summarized below
(shares in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------------------------------
Wgtd. Wgtd. Wgtd.
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,867 $ 9.18 1,673 $ 10.30 1,549 $ 11.91
Granted 1,390 5.94 517 7.01 525 8.86
Exercised (6) 6.38 (59) 6.17 (98) 4.85
Lapsed or canceled (844) 8.84 (264) 13.33 (303) 17.48
------- ------- -------
Outstanding at year end 2,407 7.33 1,867 9.18 1,673 10.30
======= ======= =======
Options exercisable at year end 765 842 650
Options available for future grant 926 238 496
Weighted average fair value of
Options granted during the year: $ 2.23 $ 3.77 $ 4.75
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999 (shares in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- -------------------------------
Wgtd. Avg. Weighted Weighted
Number Remaining Average Number Average
Outstanding Contractual Exercise Outstanding Exercise
Range: At 12/31/99 Life Price At 12/31/99 Price
--------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
$3.00 to 4.99 275 3.27 $ 4.87 200 $ 4.87
5.00 to 9.99 1,796 7.20 6.24 299 6.44
10.00 to 14.99 218 6.53 10.52 172 10.59
15.00 to 19.99 7 5.39 17.63 7 17.63
20.00 to 24.50 111 4.16 24.18 87 24.18
------------- -------------
2,407 765
============= =============
</TABLE>
(a) As of December 31, 1999, options for 804,101 shares and 121,856
shares of common stock were available for grant under the 1996 Plan
and 1996 Director Plan, respectively (925,957 shares in the
aggregate). The 1996 Plan and 1989 Plan also provide for the
issuance of Stock Appreciation Rights (SARs) and Limited Stock
Appreciation Rights (LSARs). As of December 31, 1999, no SARs or
LSARs have been issued.
F-16
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(b) In December 1995, the Company's Board of Directors adopted a
Shareholders Rights Plan (the "Plan"). Under the provisions of the
Plan, the Company distributed to its stockholders, rights entitling
the holders to purchase one-hundredth of a share of Series A
Preferred Stock for each share of Common Stock then held at an
exercise price of $75. Upon the occurrence of certain "triggering
events," each right entitles its holder to purchase, at the rights
then-current exercise price, a number of shares of common stock of
the Company having a market value equal to twice the exercise price.
A triggering event occurs ten days following the date a person or
group (other than an "Exempt Person"), without the consent of the
Company's Board of Directors, acquires 15% or more of the Company's
common stock or upon the announcement of a tender offer or an
exchange offer, the consummation of which would result in the
ownership by a person or group of 15.1% or more of the Company's
common stock. An Exempt Person includes Ciba Specialty Chemicals
Holdings, Inc. (formerly Ciba-Geigy Limited) ("CSC Holdings"), which
beneficially owned approximately 15.1% of the issued and outstanding
common stock of the Company at December 31, 1999. The Plan permits
CSC Holdings to increase its ownership position in the Company up to
28.7% of the issued and outstanding common stock of the Company
without losing its status as an Exempt Person. The rights will
expire on December 3, 2005.
(c) On May 6, 1997, the Company announced that its Board of Directors
had authorized the Company to buy up to 1.5 million of its shares in
the open market and through private transactions. During 1997 and
1998 the Company purchased 25,000 and 200,000 of its own shares for
approximately $165,000 and $1.4 million, respectively. Currently, it
is not anticipated that the Company will acquire any additional
shares under this program.
(d) In the second quarter 1998, the Company established the 1998
Employee Stock Purchase Plan ("ESPP") to provide eligible employees
the opportunity to acquire limited amounts of the Company's common
stock. The exercise price of each option will be the lesser of (i)
85% of the fair market value of the shares on the date the option is
granted or (ii) 85% of the fair market value of the shares on the
last day of the period during which the option is outstanding. An
aggregate of 600,000 shares of common stock has been reserved for
issuance under the plan.
During 1999, 57,367 shares were purchased under the Company's ESPP
at a weighted average price of $4.47. At December 31, 1999 there
were 504,946 shares available for future grants. The weighted
average fair value of ESPP shares issued in 1999 was $2.15.
(e) In November 1999, the exercise prices of selected stock options to
purchase 147,000 shares were adjusted to reflect the then lower
market value of the Company's common stock.
(f) Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company
had accounted for the Plans under the fair value method of the
Statement. The fair value of options issued under the Plans was
estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions: no dividend
yield; volatility factor of the expected market price of the
Company's common stock of 0.59, 0.60, and 0.58 for 1999, 1998 and
1997, respectively; a forfeiture rate of zero, 0.05, and zero for
1999, 1998 and 1997, respectively; a weighted-average expected life
of the options of 3.8, 3.9 and 3.9 for 1999, 1998 and 1997,
respectively; and a risk-free interest rate of 5.50%, 5.95%, and
6.28% for 1999, 1998, and 1997, respectively. For purposes of pro
forma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period. The Company's
pro forma net income (loss), net income (loss) per common share and
net income (loss) per common share assuming dilution would
approximate the following (in thousands except per share amounts):
F-17
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
As Reported Pro Forma
----------- ---------
<S> <C> <C>
Year Ended December 31, 1999:
Net loss $ (5,301) $ (7,853)
Basic net loss per share (.47) (.69)
Diluted net loss per share (.47) (.69)
Year Ended December 31, 1998:
Net income (loss) $ 2,132 $ (368)
Basic net income (loss) per share .19 (.03)
Diluted net income (loss) per share .18 (.03)
Year Ended December 31, 1997:
Net loss $ (4,589) $ (6,943)
Basic net loss per share (.40) (.61)
Diluted net loss per share (.40) (.61)
</TABLE>
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior
to 1995, and additional awards in future years are anticipated.
(13) Computation of Earnings Per Share
The following is a reconciliation of the numerator and denominator of the
basic and diluted earnings per share (EPS) computations for the years
ended December 31, 1999, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Numerator:
Net income (loss) - numerator for basic net income
(loss) per share and dilutive net income
(loss) per share $ (5,301) $ 2,132 $ (4,589)
Denominator:
Denominator for basic net income (loss) per
Share -weighted average shares 11,376 11,348 11,398
Effect of dilutive securities:
Stock options and warrants -- 246 --
-------- -------- --------
Denominator for dilutive net income (loss) per
Share 11,376 11,594 11,398
======== ======== ========
</TABLE>
Common shares related to stock options and stock warrants that are
antidilutive amounted to approximately 2,574,000, 1,437,000 and 1,873,000
for the years ended December 31, 1999, 1998, and 1997, respectively.
F-18
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(14) Related Party Transactions
(a) The Company purchased materials from an indirect wholly-owned
subsidiary of CSC Holdings, Inc. (a 15.1% beneficial stockholder of
the Company) aggregating $10.1 million, $8.8 million and $8.8
million in 1999, 1998 and 1997, respectively. Sales to the
subsidiary amounted to $542,000, $87,000 and $131,000 in 1999, 1998
and 1997, respectively. Net accounts payable of $1.1 million and
$403,000 due to the subsidiary are included in the accompanying
consolidated balance sheet at December 31, 1999 and 1998,
respectively.
(b) At December 31, 1999, the Company has remaining notes receivable
totaling $240,000 from certain executive officers of the Company
pursuant to the Executive Long-Term Stock Incentive Plan (which was
adopted under the 1996 Stock Incentive Plan). The original loans of
$420,000, of which $120,000 have been canceled (and shares returned
and canceled) in 1999 and $60,000 have been repaid in 1998, were
used to purchase an aggregate of 67,333 shares of the Company's
common stock at the fair market value on the date of offer. These
notes bear an interest rate of 6% per annum and mature in the year
2003. The plan calls for the loans to be forgiven, in part or whole,
if certain profitability targets are met. The notes receivable are
shown on the balance sheet as a reduction of stockholders' equity.
(c) In 1999, the Company issued to the Chairman of the Board 150,000
options to purchase common stock of the Company. These options have
an exercise price of $6.61 per share, which exceeded fair value at
date of grant, vest six months from the date of grant, and expire
ten years from the date of issue.
(d) In September 1999, the Company entered into an agreement with Regent
Pacific Management Corporation ("Regent Pacific"), to provide
management services to the Company for a period of one year. Five
principals of Regent Pacific are currently employees of the Company
including its Chief Executive Officer and Chief Financial Officer.
The agreement has a one-year term and can be extended by mutual
agreement of the parties. The agreement requires that the Company
cover Regent Pacific under its directors and officers' insurance
coverage for certain liabilities arising out of the performance of
services under the agreement. Under the terms of the agreement,
Regent Pacific provides services to the Company at a fee of $50,000
per week.
In connection with his services as an employee of the Company, the
Company's Board granted to Mr. Gary J. Sbona, the President of
Regent Pacific, options to purchase 350,000 shares of the Company's
common stock, at an exercise price of $6.00 per share, which exceeds
fair value at date of grant. These options will vest over a
three-year period or sooner upon certain change in control
transactions or upon the termination of Regent Pacific's management
agreement.
(15) Income Taxes
The components of the Company's pretax income (loss) are as follows (in
thousands):
1999 1998 1997
------- ------- -------
Domestic $(8,870) $ 552 $(5,693)
Foreign 1,329 2,635 (1,056)
------- ------- -------
Total $(7,541) $ 3,187 $(6,749)
======= ======= =======
F-19
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
The components of the Company's net deferred tax assets at December 31 are
as follows (in thousands):
1999 1998
-------- --------
Deferred tax assets:
Research tax credits $ 3,148 $ 2,968
Alternative minimum tax credits 340 340
California manufacturer credit 226 226
Net operating loss carryforwards 6,061 4,556
Inventory reserves 295 152
Accrued liabilities 1,616 1,550
Allowance for doubtful accounts 360 182
Patents and licenses 834 818
Other reserves 575 --
-------- --------
Total deferred tax assets 13,455 10,792
Valuation allowance (1,603) (1,163)
-------- --------
Net deferred tax assets 11,852 9,629
-------- --------
Deferred tax liabilities:
Deferred lease revenue 1,263 1,606
Software development 327 309
Property and equipment (excess book
basis over tax basis) 249 581
-------- --------
Total deferred tax liabilities 1,839 2,496
-------- --------
Net deferred tax assets $ 10,013 $ 7,133
======== ========
The valuation allowance for deferred taxes relates primarily to foreign
deferred tax assets and was increased by $440,000 during 1999 primarily
due to the continuing loss position of the Company. Although realization
is not assured, management believes it is more likely than not that the
Company will realize the benefit of the net deferred tax assets. The
amount of the net deferred tax asset considered realizable, however, could
be reduced in the near term if estimates of future taxable income during
the carryforward period are reduced.
F-20
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
The components of income tax expense (benefit) for the years ended
December 31, 1999, 1998 and 1997 are as follows (in thousands):
Current: 1999 1998 1997
------- ------- -------
U.S. federal $ -- $ 4 $ 292
State 52 71 30
Foreign 589 822 61
------- ------- -------
Total current 641 897 383
------- ------- -------
Deferred:
U.S. federal (2,470) 4 (2,121)
State (411) 154 (422)
------- ------- -------
Total deferred (2,881) 158 (2,543)
------- ------- -------
Total income tax expense (benefit) $(2,240) $ 1,055 $(2,160)
======= ======= =======
The overall effective tax rate differs from the statutory federal tax rate
for the years ended December 31, 1999, 1998 and 1997 as follows:
% of Pretax Income (Loss)
----------------------------
1999 1998 1997
------ ------ ------
Tax provision based on the federal statutory rate (34.0)% 34.0% (34.0)%
State taxes, net of federal benefit (3.1) 4.7 (3.9)
Utilization of net operating losses -- (5.3) --
Foreign net operating losses with no benefit 0.8 -- 6.1
Research tax credits (2.4) (7.1) --
Foreign taxes 4.0 3.0 0.9
Change in valuation reserve 4.2 2.1 --
Foreign sales corporation benefit -- -- (1.4)
Other 0.8 1.7 0.3
------ ------ ------
(29.7)% 33.1% (32.0)%
====== ====== ======
As of December 31, 1999, the Company has net operating loss carryforwards
for United States federal and foreign income tax purposes of approximately
$15.7 million and $2.0 million, respectively. The United States federal
net operating loss carryforwards begin to expire in 2019, and the foreign
net operating loss carryforwards expire through 2003, except for certain
operating losses which do not expire. Ultimate utilization of these loss
carryforwards is dependent on future taxable earnings of the Company.
F-21
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
The Company has research and experimentation tax credit carryforwards for
United States federal and state income tax purposes of $2.3 million and
$850,000, respectively, which are available through 2010. In addition, the
Company has alternative minimum tax credit carryforwards for United States
federal and state income tax purposes at December 31, 1999 of $310,000 and
$29,000, respectively.
(16) Employee Benefit Plan
In 1989, 3D California adopted a defined contribution 401(k) plan (the
"Plan") for its employees. Employees must be at least 21 years of age and
must have at least six consecutive months of service with the Company to
be eligible for the Plan. Participants may contribute between 1% and 15%
of their compensation to the Plan. The Company may make discretionary
profit sharing contributions or discretionary matching contributions.
Matching contributions are limited to 50% of the employee contribution up
to a maximum of 3-1/2% of the employee's compensation. Participants are
fully and immediately vested in employee contributions. Company profit
sharing contributions vest over a four-year period. Company matching
contributions vest immediately. Because the Company incurred a loss in
1997, the Company did not make a profit sharing contribution for the year.
For the year ended December 31, 1998, the Company accrued profit sharing
contributions of $150,000 related to 3D California's profit sharing plan.
During 1999, the Company contributed $376,000 to match employee
contributions.
The Company's European subsidiaries have adopted employee benefit plans
pursuant to the rules and regulations of their country of origin. As of
December 31, 1999 and 1998, the Company had accrued $548,000 and $535,000,
primarily related to contributions payable to these plans.
(17) Geographic Segment Information
All of the Company's assets are devoted to the manufacture and sale of
Company systems, together with related supplies and services. The Company
attributes revenues to geographic areas based on shipment in the country
of origination.
Summarized data for the Company's operations is as follows (in thousands):
<TABLE>
<CAPTION>
USA Europe Asia Eliminations Total
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1999:
Sales to unaffiliated customers $50,935 40,283 5,731 -- $96,949
Inter-area sales $21,577 3,057 -- (24,634) --
Income (loss) from operations $(8,203) 1,356 -- (705) $(7,552)
Long-lived assets at December 31, 1999 $21,943 4,730 211 198 $27,082
For the year ended December 31, 1998:
Sales to unaffiliated customers $54,842 34,202 9,073 -- $98,117
Inter-area sales $13,693 1,164 -- (14,857) --
Income (loss) from operations $ (429) 2,741 -- 393 $ 2,705
Long-lived assets at December 31, 1998 $20,762 2,528 180 -- $23,470
For the year ended December 31, 1997:
Sales to unaffiliated customers $52,830 28,817 8,610 -- $90,257
Inter-area sales $17,671 887 -- (18,558) --
Income (loss) from operations $(6,481) (874) -- (240) $(7,595)
Long-lived assets at December 31, 1997 $21,266 3,117 183 -- $24,566
</TABLE>
Inter-area sales to the Company's foreign subsidiaries are recorded at
amounts consistent with prices charged to distributors, which are above
cost.
F-22
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(18) Commitments and Contingencies
(a) The Company leases its facilities under noncancelable operating
leases expiring through December 2002. The leases are generally on a
net-rent basis, whereby the Company pays taxes, maintenance and
insurance. Leases that expire are expected to be renewed or replaced
by leases on other properties. Rental expense for the years ended
December 31, 1999, 1998 and 1997 aggregated $1.8 million, $2.4
million and $2.6 million, respectively.
Minimum annual rental commitments under the leases at December 31,
1999 are as follows (in thousands):
Year ending December 31:
2000 $ 1,970
2001 1,762
2002 1,591
2003 1,395
2004 654
Later years 417
--------
$ 7,789
========
These minimum annual rental commitments exclude future rent
escalations, which may be between three and six percent annually.
(b) 3D California is a party to an agreement with Ciba Specialty
Chemicals Inc. ("CSC") and certain of its subsidiaries (the
"Photopolymer Research Agreement"), dated August 15, 1990, relating
to the research and development of photopolymers, photopolymerizable
monomers and photoinitiators for use with stereolithography
technology. The agreement obligates each of the parties to cooperate
in the development of photopolymers, photopolymerizable monomers and
photoinitiators. The agreement provides that the parties shall deal
exclusively with each other in the development of stereolithographic
products except that: (a) 3D California may recommend to its
customers products produced by suppliers other than CSC in the event
that another supplier produces products suitable for
stereolithography and CSC cannot produce a product with similar
performance parameters, (b) 3D California may pursue the development
of certain products developed pursuant to the agreement if CSC
determines it has no capabilities or interest in such products, (c)
CSC may cooperate in developing competing products if such products
involve new fields of technology in which 3D California does not
have and is not able within a reasonable time to develop expertise.
As part of the Photopolymer Research Agreement, the parties have
agreed that if a change in control of the Company or 3D California
should occur, then at the option of CSC, 3D California will be
required to pay CSC an amount equal to CSC's "deferred research and
development costs," up to $10 million. A "change in control" is
defined to have occurred only if a person, or group of related
persons, becomes the beneficial owner of in excess of 31.4% of the
Company's outstanding voting securities (such percentage to be
ratably increased in the event of any sale by a CSC affiliate of any
of its shares of the Company's common stock), unless approved by
CSC, or its indirect nominees to the Board of Directors of the
Company. "Deferred Research and Development Costs" means all costs
incurred by CSC during the five full fiscal years immediately
preceding the occurrence of a change in control, multiplied by two.
The existence of this provision may deter potential acquirers from
seeking to acquire the Company, or a significant interest in the
equity securities of the Company.
In connection with the Photopolymer Research Agreement, 3D
California entered into a Photopolymer Distribution Agreement with a
subsidiary of CSC, dated as of July 1, 1990, pursuant to which 3D
California is the exclusive worldwide distributor (except Japan) of
photopolymers manufactured by CSC. At the request of 3D California,
an affiliate of CSC currently sells such photopolymers in Japan to
3D California's Japanese distributor. Subject to certain conditions,
so long as CSC provides adequate supplies, 3D California is required
to fill all of its requirements for its photopolymers through
purchases from CSC. In order to maintain its exclusive distribution
rights, 3D California must meet certain quotas
F-23
<PAGE>
based on the dollar value of products purchased from CSC on an
annual basis as set forth in the agreement. 3D California had in the
past failed to meet quotas established under the agreement and, in
May 1995, 3D California and CSC mutually agreed to reduce the
quotas. Subject to certain conditions, the agreement will remain in
effect unless terminated by either party upon six months advance
notice.
On December 14, 1999, CSC announced it would sell its Performance
Polymer Division, the division with which we primarily do business,
to Morgan Grenfell Private Equity ("MGPE"). On February 7, 2000, CSC
advised the Company that the operations of the division will be run
by the present management in a newly created Swiss company
headquartered in Basel, Switzerland and that CSC will assign to the
new company its rights and obligations under all contracts related
to the Performance Polymers Division.
(c) On January 13, 1997, 3D California filed a complaint in the United
States District Court, Central District of California, against
Aarotech Laboratories, Inc. ("Aarotech"), Aaroflex, Inc.
("Aaroflex") and Albert C. Young ("Young"). Aaroflex is the parent
corporation of Aarotech. Young is the Chairman of the Board and
Chief Executive Officer of both Aarotech and Aaroflex. The complaint
alleges that stereolithography equipment manufactured by Aaroflex
infringes six of 3D California's patents. 3D California seeks
damages and injunctive relief from the defendants. The defendants
have threatened to sue 3D California for trade libel. To date, the
defendants have not filed such a suit.
The defendants filed a motion to dismiss the complaint or transfer
the case to their home district in Virginia. The Court granted this
motion to dismiss on the agenda of lack of personal jurisdiction.
The Federal Circuit Court of Appeals has reversed this district
court's decision insofar as it relates to Aaroflex and the action
against Aaroflex is proceeding in the District Court. Motions for
summary judgment by Aaroflex on multiple counts in the Company's
complaint and on Aaroflex's counterclaims have been dismissed and
the case is in discovery.
(d) 3D Systems, Inc. v. Teijin Seiki Co. Ltd. On March 21, 1997, the
Company filed a patent infringement action in District Court in
Osaka, Japan under one of its Japanese patents, alleging
infringement, and seeking damages and injunctive relief from the
defendant. The action is in the early stages of prosecution. As
described below, Teijin Seiki has filed an invalidation action
against one of the Company's patents and an unfavorable decision in
that action has been appealed by the Company.
(e) Centuri Corp., dba Estes Indus., Cox Acquisition Corp., dba Cox v.
3D Systems Corp., Rogers Tool & Die (the "Centuri Litigation"). In
January 1997, 3D California entered into two contracts with Centuri
Corp., dba Estes Indus., Cox Acquisition Corp., dba Cox ("Centuri")
under which 3D California was to create certain tooling for Centuri.
On September 16, 1997, Centuri initiated a lawsuit against 3D
California for Breach of Oral Contract, Fraud, Negligent
Misrepresentation, Conversion, Money Had and Received, and an
Accounting. At a settlement hearing on July 1, 1999 the parties
agreed to settle the case pursuant to an agreement which provides
for the confidentiality of the settlement terms. No liability of any
party was admitted.
(e) Patent Opposition and Invalidation Proceedings. The Company has
received eight patents in Japan. One of these patents had an
opposition submitted against the allowed patent, but the opposition
was dismissed and the patent has been maintained as originally
issued. Furthermore, one of the eight patents has had three
invalidation trials filed against it. These invalidation trials were
decided against the Company. The Company has responded by appealing
the decision in the third trial. Based on this opposition and the
Company's response, the trial may result in maintaining the patent
with present or modified protection, or may result in revocation of
the patent.
(f) The Company is engaged in certain additional legal actions arising
in the ordinary course of business. On the advice of legal counsel,
the Company believes it has adequate legal defenses and that the
ultimate outcome of these actions will not have a material adverse
effect on the Company's consolidated financial position, results of
operations or cash flows.
F-24
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(19) Other Operating Expenses
Other operating expenses for the year ended December 31, 1999 are
comprised of the following non-recurring charges (in thousands):
Provision Costs Accrual as of
Recorded Incurred December 31, 1999
-------- -------- -----------------
Litigation and settlement
costs $ 407 $ 407 $ --
Employee related costs 1,769 466 1,303
Other costs 1,208 993 215
------ ------ ------
Total $3,384 $1,866 $1,518
====== ====== ======
The litigation and settlement costs of $407,000 relate to a complaint
filed against the Company by Centuri Corp., (see Note 18(e)).
During May 1999, the Company completed a review of its operations to
identify opportunities to improve operating effectiveness. As a result of
this review, management initiated certain actions, including realigning
various management positions and domestic and foreign operations. With the
concurrence of the Board of Directors, the Company recorded a pretax
charge to operations of $1.8 million. The employee related costs reflect
the costs associated with the realignment of several management positions
totaling $573,000. Other costs include $650,000 related to the writeoff
of noncurrent assets, $281,000 of legal structure exit costs, and $277,000
of estimated net losses on sublease or lease cancellation penalties.
Management's plans specifically identified five facilities to be closed,
including one operations facility and four sales operations worldwide. The
Company expects to complete implementation of the plan by the end of 2000.
In September 1999, the Company recorded an additional $1.2 million of
non-recurring expense associated with the realignment of another
management position. The costs are reflected in the Employee Related Costs
noted above. Payments to the former executive will be made over a
five-year period ending in 2004 as the result of an underlying employment
agreement.
(20) Subsequent Events (unaudited)
In February 2000, 9,619 shares of common stock owned by a former officer
of the Company were returned to and canceled by the Company. The Company
forgave the Promissory Note in the amount of $60,000 that had been used
by the former officer to purchase those shares of stock.
F-25
<PAGE>
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(21) Selected Quarterly Financial Data (unaudited)
(in thousands except per share information)
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------------------------------
Dec. 31, Oct. 1, July 2, Apr. 2, Dec. 31, Sept. 25, June 26, Mar. 27,
1999 1999 1999 (1) 1999 1998 1998 1998 1998
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total sales $ 28,905 $ 23,898 $ 21,462 $ 22,684 $ 27,266 $ 23,342 $ 24,673 $ 22,836
Gross profit 12,886 10,108 7,848 9,194 12,355 10,082 10,751 9,389
Total operating expenses 10,002 11,579 13,334 12,673 11,369 9,506 10,048 8,950
Income (loss) from operations 2,884 (1,471) (5,486) (3,479) 987 576 703 439
Income tax expense (benefit) 760 (394) (1,533) (1,073) 357 224 283 191
Net income (loss) 1,941 (1,013) (3,949) (2,280) 775 477 526 354
Basic income(loss) per share .17 (.09) (.35) (.20) .07 .04 .05 .03
Diluted income (loss) per share .17 (.09) (.35) (.20) .07 .04 .04 .03
</TABLE>
(1) Information previously reported in the Company's 10-Q filings has been
restated.
Per share amounts for each of the quarterly periods presented do not
necessarily add up to the total presented for the year because each amount
is independently calculated.
The Company presents its quarterly results on a 13 week basis ending the
last Friday of each quarter and reports its annual financial information
through the calendar year ended December 31.
F-26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Stockholders and Board of Directors
3D Systems Corporation
Our report on the consolidated financial statements of 3D Systems Corporation
and Subsidiaries is included on page F-2 of this Form 10-K. In connection with
our audits of such financial statements, we have audited the related financial
statement schedule as of December 31, 1999, 1998 and 1997 and for each of the
three years in the period ended December 31, 1999, as listed on the index on
page F-1 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
PricewaterhouseCoopers LLP
Woodland Hills, California
February 14, 2000
F-27
<PAGE>
SCHEDULE II
3D SYSTEMS CORPORATION
Valuation and Qualifying Accounts
Years ended December 31, 1999, 1998 and 1997
(in thousands)
<TABLE>
<CAPTION>
Balance at Additions Balance at
beginning charged to end of
Year Ended Item of year expenses Deductions year
- - -------------- -------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1999 Inventory obsolescence reserve $ 620 $ 3,099 $ (826) $ 2,893
============ ============ ============ ============
1998 Inventory obsolescence reserve $ 549 $ 2,197 $ (2,126) $ 620
============ ============ ============ ============
1997 Inventory obsolescence reserve $ 251 $ 981 $ (683) $ 549
============ ============ ============ ============
1999 Allowance for doubtful accounts $ 944 $ 2,596 $ (628) $ 2,912
============ ============ ============ ============
1998 Allowance for doubtful accounts $ 441 $ 1,450 $ (947) $ 944
============ ============ ============ ============
1997 Allowance for doubtful accounts $ 406 $ 351 $ (316) $ 441
============ ============ ============ ============
1999 Deferred tax valuation allowance $ 1,163 $ 440 $ -- $ 1,603
============ ============ ============ ============
1998 Deferred tax valuation allowance $ 2,114 $ -- $ (951) $ 1,163
============ ============ ============ ============
1997 Deferred tax valuation allowance $ 1,763 $ 351 $ -- $ 2,114
============ ============ ============ ============
</TABLE>
F-28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
3D SYSTEMS CORPORATION
By: /s/ H. Michael Hogan III
---------------------------------
H. Michael Hogan III
Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
Date:
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Date Title
<S> <C> <C>
/s/ Brian K. Service March 30, 2000 President and Chief Executive Officer
- - ---------------------------- -------------- (Principal Executive Officer)
/s/ H. Michael Hogan III March 30, 2000 Vice President, Chief Financial Officer
- - ---------------------------- -------------- (Principal Financial Officer and
Principal Accounting Officer)
/s/ Charles W. Hull March 30, 2000 Chief Technology Officer and Director
- - ---------------------------- --------------
/s/ G. Walter Loewenbaum II March 30, 2000 Chairman of the Board of Directors
- - ---------------------------- --------------
/s/ Gary J. Sbona March 30, 2000 Director
- - ---------------------------- --------------
/s/ Miriam V. Gold March 30, 2000 Director
- - ---------------------------- --------------
/s/ Jim D. Kever March 30, 2000 Director
- - ---------------------------- --------------
/s/ Kevin S. Moore March 30, 2000 Director
- - ---------------------------- --------------
</TABLE>
F-29
<PAGE>
OPTION CERTIFICATE
(Non-Statutory Stock Option)
THIS IS TO CERTIFY that 3D Systems Corporation, a Delaware corporation
(the "Company"), has granted to the Non-Employee Director named below a
non-statutory stock option (the "Option") to purchase shares of the Company's
Common Stock (the "Shares") upon the terms and conditions as follows:
Name of Optionee:
Address of Optionee:
Number of Shares:
Option Exercise Price: $ per share
Date of Grant:
Option Expiration Date:
Exercise Schedule: The Option shall become exercisable in three annual
installments of $2,500 shares of Common Stock each (or the number of adjusted or
substituted shares, described below), on the first, second and third
anniversaries of the Date of Grant. Installments shall be cumulative, and the
Option may be exercised as to any and all shares of Common Stock covered by an
installment at any time after the installment becomes exercisable and prior to
the expiration or termination of the Option.
Summary of Other Terms: This Option is defined in the Stock Option
Agreement (Non-Statutory Stock Option) (the "Option Agreement") which is
attached to this Option Certificate (the "Certificate") as Annex I. This
Certificate summarizes certain of the provisions of the Option Agreement for
your information, but is not complete. Your rights are governed by the Option
Agreement, not by this summary. The Company strongly suggests that you carefully
review the full Option Agreement prior to signing this Certificate or exercising
the Option.
Among the terms of the Option Agreement are the following:
<PAGE>
Cessation of Service as a Director: While the Option terminates on the
Option Expiration Date, it will terminate earlier if you cease to be a Director
of the Company. If your directorship ends due to any reason other than
resignation, removal for cause or death, the Option is exercisable at any time
prior to the earlier to occur of the Option Expiration Date or three years from
the date of such termination. If your directorship terminates due to resignation
or removal for cause, any outstanding portion of the Option which is not
exercisable immediately prior to such resignation or removal shall terminate
immediately upon such resignation or removal. If your directorship terminates
due to death while serving on the Board, any outstanding portion of this Option
shall become exercisable in full at any time prior to the earlier to occur of
the Expiration Date or three years after the date of death. If your directorship
terminates due to death after ceasing to serve as a Director, and during such
period when the Option is exercisable, the Option will be exercisable at any
time prior to the earlier to occur of (i) the Option Expiration Date or (ii) the
later of (a) three years following the date you cease serving as a Director and
(b) one year following the date of death. See Paragraph 5 of the attached Option
Agreement.
Transfer: The Option is personal to you, and cannot be sold,
transferred, assigned or otherwise disposed of to any other person, except on
your death. See Paragraph 16(d) of the attached Option Agreement.
Exercise: You can exercise the Option (once it is exercisable), in
whole or in part, by delivering to the Company a Notice of Exercise identical to
Exhibit "A" attached to the Option Agreement, accompanied by payment of the
Exercise Price for the Shares to be purchased. The Company may require you to
submit certain written reassurances to the Company with respect to your status
as a shareholder. The Company will then issue a certificate to you for the
Shares you have purchased. You are under no obligation to exercise the Option.
See Paragraph 4 of the attached Option Agreement.
Adjustments upon Recapitalization: The Option contains provisions which
affect your rights in the event of stock splits, stock dividends, mergers and
other major corporate reorganizations. See Paragraph 7 of the attached Option
Agreement.
Waiver: By signing this Certificate, you will be agreeing to all of the
terms of the Option Agreement, including those not summarized in this
Certificate. You will waive your rights to options or stock which may otherwise
have been promised to you. See Paragraph 9 of the attached Option Agreement.
Withholding: The Company may require you to make any arrangements
necessary to insure the proper withholding of any amount of tax, if any,
required to be withheld by the Company as a result of the exercise of the
Option. See Paragraph 14 of the attached Option Agreement.
<PAGE>
AGREEMENT
3D Systems Corporation, a Delaware corporation (the "Company"), and the
above-named person (the "Optionee") each hereby agrees to be bound by all of the
terms and conditions of the Stock Option Agreement (Non-Statutory Stock Option)
which is attached hereto as Annex I and incorporated herein by this reference as
if set forth in full in this document.
DATED:
----------------------
3D SYSTEMS CORPORATION
By:
Its: Vice President and General Counsel
OPTIONEE
Name:
(Please print your name exactly as you
wish it to appear on any stock certificates
issued to you upon exercise of the
Option)
<PAGE>
ANNEX I
STOCK OPTION AGREEMENT
(Non-Statutory Stock Option)
This STOCK OPTION AGREEMENT (this "Option Agreement") is made and
entered into as of the execution date of the Option Certificate to which it is
attached (the "Certificate") by and between 3D Systems Corporation, a Delaware
corporation (the "Company"), and ____________________ ("Optionee").
Pursuant to the 3D Systems Corporation 1996 Non-Employee Director's
Stock Option Plan (the "Plan"), the Compensation Committee (the "Committee") of
the Board of Directors of the Company has authorized the grant to Optionee of a
non-statutory stock option to purchase shares of the Company's Common Stock (the
"Common Stock"), subject to approval by the Company's shareholders and upon the
terms and subject to the conditions set forth in this Option Agreement and in
the Plan.
The Company and Optionee agree as follows:
1. Grant of Option.
The Company hereby grants to Optionee the right and option
(the "Option"), upon the terms and subject to the conditions set forth in this
Option Agreement, to purchase in whole or in part, that number of shares of the
Common Stock (the "Shares") set forth in the Certificate at the Option Exercise
Price set forth in the Certificate (the "Exercise Price").
2. Term of Option.
The Option shall terminate and expire on the Option Expiration
Date set forth in the Certificate, unless sooner terminated as provided herein.
In no event shall the Option be exercisable after the expiration of ten years
from the date it was granted.
3. Exercise Period.
(a) Subject to the provisions of Sections 3(b) and 5 of this
Option Agreement, the Option shall become exercisable (in whole or in part) upon
and after the dates set forth under the caption "Exercise Schedule" in the
Certificate. The installments shall be cumulative; i.e., the Option may be
exercised, as to any or all Shares covered by an installment, at any time or
times after the installment first becomes exercisable and until expiration or
termination of the Option.
<PAGE>
(b) Notwithstanding anything to the contrary contained in this
Option Agreement, the Option may not be exercised, in whole or in part, unless
and until any then-applicable requirements of all federal, state and local laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Company and its counsel.
4. Exercise of Option.
There is no obligation to exercise the Option, in whole or in
part. The Option may be exercised, in whole or in part, only by delivery to the
Company of:
(a) written Notice of Exercise identical to Exhibit "A"
attached to the Option Agreement stating the number of shares of Common Stock
then being purchased (the "Purchased Shares");
(b) payment of the Exercise Price of the Purchased Shares,
either (1) in cash (including check, bank draft or money order) at the time the
Option is exercised, (2) delivery to the Company of other shares of Common Stock
having a fair market value on the date of exercise equal to the Option Exercise
Price for the Shares being purchased; except that (A) any portion of the Option
Exercise Price representing a fraction of a Share shall in any event be paid in
cash and (B) no shares of the Common Stock which have been held for less than
six months may be delivered in payment of the Option Exercise Price, or (3) by
use of a broker or other agent, or (4) any combination thereof; and
(c) if requested by the Company, a letter of investment intent
in such form and containing such provisions as the Company may require.
The exercise of the Option shall not be deemed to occur and no
shares of Common Stock will be issued by the Company upon exercise of the Option
until the Company has received payment of the Option Exercise Price in full. The
date of the exercise of a stock option shall be determined under procedures
established by the Committee, and, as of the date of exercise, the person
exercising the Option shall be considered for all purposes to be the owner of
the Shares with respect to which the Option has been exercised.
This Option shall not be exercisable during the first six
months of its term except in case of death as provided in Paragraphs 5 and 7(b).
Subject to Paragraph 5, each stock option shall be exercisable for ten years
from the Date of Grant.
Fair market value of the Common Stock shall be the mean
between the following prices, as applicable, for the date as of which fair
market value is to be determined as quoted in The Wall Street Journal (or in
such other reliable publication as the Committee, in its discretion, may
determine to rely upon): (i) if the Common Stock is listed on a United States
securities exchange, the highest and lowest sales prices per share of Common
Stock for such date on the principal United States securities exchange on which
the Common Stock is listed, or (ii) if the
<PAGE>
Common Stock is not listed on any such exchange, the highest and lowest sales
prices per share of the Common Stock for such date on the Nasdaq National Market
or any successor system then in use. If there are no such sale price quotations
for the date as of which fair market value is to be determined but there are
such sale price quotations within a reasonable period both before and after such
date, then fair market value shall be determined by taking an average of the
means between the highest and lowest sales prices per share of the Common Stock
as so quoted on the nearest date before and the nearest date after the date as
of which fair market value is to be determined. If there are no such sale price
quotations on or within a reasonable period both before and after the date as of
which fair market value is to be determined, then fair market value of the
Common Stock shall be the mean between the bona fide bid and asked prices per
share of Common Stock as so quoted for such date on Nasdaq, or if none, the
average of the means between such bid and asked prices on the nearest trading
date before and the nearest trading date after the date as of which fair market
value is to be determined, if both such dates are within a reasonable period. If
the fair market value of the Common Stock cannot be determined on the basis set
forth above, the Committee shall in good faith determine the fair market value
of the Common Stock as of such date.
Following receipt of the notice and payment referred to above,
the Company shall issue and deliver to Optionee a stock certificate or stock
certificates evidencing the Purchased Shares; provided, however, that the
Company shall not be obligated to issue a fraction or fractions of a share of
its Common Stock, and may pay to Optionee, in cash or by check, the fair market
value of any fraction or fractions of a share exercised by Optionee, which fair
market value shall be determined as set forth in the preceding paragraph.
5. Termination of Services.
(a) If Optionee ceases to be a Director of the Company for any
reason other than resignation, removal for cause, or death, any outstanding
portion of this Option held by Optionee shall be exercisable by Optionee (but
only if and to the extent exercisable by Optionee immediately prior to ceasing
to be a Director) at any time prior to the expiration date of this Option or
within three years after the date Optionee ceases to be a Director, whichever is
the shorter period;
(b) If, during his or her term of office as a Director,
Optionee resigns from the Board or is removed from office for cause, any
outstanding portion of this Option held by Optionee which is not exercisable by
Optionee immediately prior to resignation or removal shall terminate as of the
date of resignation or removal, and any outstanding portion of this Option held
by Optionee which is exercisable by Optionee immediately prior to resignation or
removal shall, to the extent then exercisable, be exercisable by Optionee at any
time prior to the expiration date of this Option or within three months after
the date of resignation or removal of Optionee, whichever is the shorter period;
<PAGE>
(c) Following the death of Optionee during service as a
Director of the Company, any outstanding portion of this Option held by Optionee
at the time of death (whether or not exercisable by Optionee immediately prior
to death) shall be exercisable in full, and without regard to the provisions of
the Exercise Schedule, by the person entitled to do so under the will of
Optionee, or, if Optionee shall fail to make testamentary disposition of this
Option or shall die intestate, by the legal representative of Optionee at any
time prior to the expiration date of this Option or within three years after the
date of death of Optionee, whichever is the shorter period;
(d) Following the death of Optionee after ceasing to be a
Director and during a period when this Option is exercisable under clause (i)
above, this Option shall be exercisable by such person entitled to do so under
the will of Optionee or by such legal representative at any time during the
shorter of the following two periods: (A) until the expiration date of this
Option or (B) until three years after Optionee ceased being a Director or one
year after the date of death of Optionee (whichever is longer); and
(e) Following the death of Optionee after ceasing to be a
Director and during a period when this Option is exercisable under clause (ii)
above, this Option shall, to the extent exercisable on the date the person
ceased to be a Director, be exercisable by such person entitled to do so under
the will of Optionee or by such legal representative at any time prior to the
expiration date of this Option or within one year after the date of death,
whichever is the shorter period.
6. Restrictions on Purchased Shares.
None of the Purchased Shares shall be transferred (with or
without consideration), sold, offered for sale, assigned, pledged, hypothecated
or otherwise disposed of (each a "Transfer") and the Company shall not be
required to register any such Transfer and the Company may instruct its transfer
agent not to register any such Transfer, unless and until all of the following
events shall have occurred:
(a) the Purchased Shares are Transferred pursuant to and in
conformity with an effective registration statement filed with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Act of
1933, as amended (the "Act"), and any applicable securities laws of any state of
the United States, or there exists a valid exemption from registration under the
Act and compliance with all relevant state securities laws; and
(b) Optionee has, prior to the Transfer of such Purchased
Shares, provided all relevant information to Company's counsel so that upon
Company's request, Company's counsel is able to, and actually prepares and
delivers to the Company a written opinion that the proposed Transfer (i) (x) is
pursuant to a registration statement which has been filed with the Commission
and is then effective, or (y) is exempt from registration under the Act as then
in effect, and the Rules and Regulations of the Commission thereunder; and (ii)
is either qualified or registered
<PAGE>
under any applicable state securities laws, or exempt from such qualification or
registration. The Company shall bear all reasonable costs of preparing such
opinion.
Any attempted Transfer which is not in full compliance
with this Section 6 shall be null and void ab initio, and of no force or effect.
7. Adjustments upon Recapitalization.
(a) Subject to the provisions of Section 7(b), if any change
is made in the Common Stock subject to the Option without receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company) the Option will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Option
pursuant to Section 1, and the outstanding Option will be appropriately adjusted
in the class(es) and number of shares and price per share of stock subject to
such outstanding Option. Such adjustments shall be made by the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction of not involving the receipt of consideration by the Company".)
(b) Notwithstanding any other provision contained in the Plan,
in case any "Paragraph 7 Event" occurs all outstanding stock options shall
become immediately and fully exercisable whether or not otherwise exercisable by
their terms.
(c) For purposes of this Paragraph 7, a specified percentage
of "Voting Power" of a company shall mean such number of the Voting Shares as
shall enable the holders thereof to cast such percentage of all the votes which
could be cast in an annual election of directors (without consideration of the
rights of any class of stock other than the common stock of the company to elect
directors by a separate class vote); and "Voting Shares" shall mean all
securities of a company entitling the holders thereof to vote in an annual
election of directors (without consideration of the rights of any class of stock
other than the common stock of the company to elect directors by a separate
class of vote).
(d) A "Paragraph 7 Event" shall mean the date upon which the
stockholders of the Company shall approve a merger, consolidation, share
exchange, division or sale or other disposition of assets of the Company as a
result of which the stockholders of the Company immediately prior to such
transaction shall not hold, directly or indirectly, immediately following such
transaction a majority of the Voting Power of (i) in the case of a merger or
consolidation, the surviving or resulting corporation, (ii) in the case of a
share exchange, the acquiring corporation or (iii) in the case of a division or
a sale or other disposition of assets, each surviving, resulting or acquiring
corporation which, immediately following the transaction, holds more than 10% of
the consolidated assets of the Company immediately prior to the transaction.
<PAGE>
8. No Rights as Director.
Nothing in this Agreement shall confer any right to any person
to continue as a Director of the Company, or interfere in any way with the
rights of the stockholders of the Company or the Board of Directors to elect or
remove Directors.
9. Waiver of Rights to Purchase Stock.
By signing this Option Agreement, Optionee acknowledges and
agrees that neither the Company nor any other person or entity is under any
obligation to sell or transfer to Optionee any option or equity security of the
Company, other than the shares of Common Stock subject to the Option and any
other right or option to purchase Common Stock which was previously granted in
writing to Optionee by the Committee. By signing this Option Agreement, Optionee
specifically waives all rights which he or she may have had prior to the date of
this Option Agreement to receive any option or equity security of the Company.
10. Investment Intent.
Optionee represents and agrees that if he or she exercises the
Option in whole or in part, and if at the time of such exercise the Plan and\or
the Purchased Shares have not been registered under the Act, he or she will
acquire the Shares upon such exercise for the purpose of investment and not with
a view to the distribution of such Shares issued upon their conversion, and that
upon each exercise of the Option he or she will furnish to the Company a written
statement to such effect.
11. Legend on Stock Certificates.
Optionee agrees that all certificates representing the
Purchased Shares will be subject to such stock transfer orders and other
restrictions (if any) as the Company may deem advisable under the rules,
regulations and other requirements of the Commission, any stock exchange upon
which the Common Stock of the Company is then listed and any applicable federal
or state securities laws, and the Company may cause a legend or legends to be
put on such certificates to make appropriate reference to such restrictions.
12. No Rights as Shareholder.
Except as provided in Section 7 of this Option Agreement,
Optionee shall have no rights as a shareholder with respect to the Shares until
the date of the issuance to Optionee of a stock certificate or stock
certificates evidencing such Shares. Except as may be provided in Section 7 of
this Option Agreement, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued.
<PAGE>
13. Modification.
The Committee (or a committee thereof, excluding the Optionee)
may modify, extend or renew the Option or accept the surrender of, and authorize
the grant of a new option in substitution for, the Option (to the extent not
previously exercised). No modification of the Option shall be made which,
without the consent of Optionee, would alter or impair any rights of the
Optionee under the Option.
14. Withholding.
The Company shall be entitled to require as a condition of
delivery of any Purchased Shares upon exercise of any Option that the Optionee
agree to remit, at the time of such delivery or at such later date as the
Company may determine, an amount sufficient to satisfy all federal, state and
local withholding tax requirements relating thereto, and Optionee agrees to take
such other action required by the Company to satisfy such withholding
requirements.
15. Character of Option.
The Option is not intended to qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.
16. General Provisions.
(a) Further Assurances. Optionee shall promptly take all
actions and execute all documents requested by the Company which the Company
deems to be reasonably necessary to effectuate the terms and intent of this
Option Agreement.
(b) Notices. All notices, requests, demands and other
communications under this Option Agreement shall be in writing and shall be
given to the parties hereto as follows:
(i) If to the Company, to:
3D Systems Corporation
26081 Avenue Hall
Valencia, CA 91355
(ii) If to Optionee, to the address set
forth in the records of the Company,
or at such other address or addresses as may have been furnished by such either
party in writing to the other party hereto. Any such notice, request, demand or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the
<PAGE>
mail by first-class certified mail, return receipt requested, postage prepaid,
addressed as aforesaid, or (ii) if given by any other means, when delivered at
the address specified in this subparagraph (b).
(c) Transfer of Rights under this Option Agreement. The
Company may at any time transfer and assign its rights and delegate its
obligations under this Option Agreement to any other person, corporation, firm
or entity, including its officers, directors and stockholders, with or without
consideration.
(d) Option Non-Transferable. Optionee may not sell, transfer,
assign or otherwise dispose of the Option except by will or the laws of descent
and distribution and the Option may be exercised during the lifetime of the
Optionee only by the Optionee or by his or her guardian or legal representative.
(e) Market Stand-Off. In the event of an underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
including the Company's initial public offering. Optionee shall not sell, make
any short sale of, loan, hypothecate, pledge, grant any option for the
repurchase of, or otherwise dispose or Transfer for value or otherwise agree to
engage in any of the foregoing transactions with respect to any Shares or Common
Stock without the prior written consent of the Company or its underwriters, for
such period of time from and after the effective date of such registration
statement as may be requested by the Company or such underwriters (the "Market
Stand-Off"); provided, however, that in no event shall such period exceed one
hundred-eighty (180) days. The Market Stand-Off shall terminate following the
expiration of the two-year period immediately following the effective date of
the Company's initial public offering.
(f) Successors and Assigns. Except to the extent specifically
limited by the terms and provisions of this Option Agreement, this Option
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns, heirs and personal representatives.
(g) Governing Law. THIS OPTION AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE
TO CONTRACTS MADE IN, AND TO BE PERFORMED WITHIN, THAT STATE.
(h) The Plan. This Option Agreement is made pursuant to the
Plan, and it is intended, and shall be interpreted in a manner, to comply
therewith. Any provision of this Option Agreement inconsistent with the Plan
shall be superseded and governed by the Plan.
(i) Miscellaneous. Titles and captions contained in this
Option Agreement are inserted for convenience of reference only and do not
constitute a part of this Option
<PAGE>
Agreement for any other purpose. Except as specifically provided herein, neither
this Option Agreement nor any right pursuant hereto or interest herein shall be
assignable by any of the parties hereto without the prior written consent of the
other party hereto.
The Signature Page to this Option Agreement consists of the last page
of the Certificate.
<PAGE>
Exhibit "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
TO: 3D Systems Corporation
The undersigned, the holder of the enclosed Stock Option Agreement
(Non-Statutory Stock Option), hereby irrevocably elects to exercise the purchase
rights represented by the Option and to purchase thereunder _________ * shares
of Common Stock of 3D Systems Corporation (the "Company"), and herewith encloses
payment of $__________ and/or _________ shares of the Company's Common Stock in
full payment of the purchase price of such shares being purchased.
Dated:
-----------
-------------------------------------------
(Signature must conform in all respects
to name of holder as specified on the face
of the Option)
-------------------------------------------
(Please Print Name)
-------------------------------------------
(Address)
* Insert here the number of Shares called for on the face of the Option
(or, in the case of a partial exercise, the number of Shares being exercised),
in either case without making any adjustment for additional Shares or other
securities or property which, pursuant to the adjustment provisions of the
Option, may be deliverable upon exercise.
<PAGE>
OPTION CERTIFICATE
(Incentive Stock Option for Executives)
THIS IS TO CERTIFY that 3D Systems Corporation, a Delaware corporation
(the "Company"), has granted to the employee named below an incentive stock
option (the "Option") to purchase shares of the Company's Common Stock (the
"Shares"), under its 1996 Stock Incentive Plan (the "Plan"), and upon the terms
and conditions determined by the Compensation Committee (the "Committee") of the
Board of Directors of the Company (the "Board"), as follows:
Name of Employee:
Address of Employee:
------------------------
------------------------
Number of Shares:
Option Exercise Price: $___________________ per share
Date of Grant: _________________ ___, ______
Option Expiration Date: _________________ ___, 200_
Exercise Schedule: The Option shall become exercisable with respect to
25% of the number of shares subject to this Option (rounded up or down to the
nearest whole number) on each of the first four anniversaries of the Date of
Grant. Installments shall be cumulative, and the Option may be exercised as to
any and all shares of Common Stock covered by an installment at any time after
the installment becomes exercisable and prior to the expiration of termination
of the Option.
Summary of Other Terms: This Option is defined in the Stock Option
Agreement (Incentive Stock Option) (the "Option Agreement") which is attached to
this Option Certificate (the "Certificate") as Annex I. This Certificate
summarizes certain of the provisions of the Option Agreement for your
information, but is not complete. Your rights are governed by the Option
Agreement, not by this summary. The Company strongly suggests that you carefully
review the full Option Agreement prior to signing this Certificate or exercising
the Option.
Among the terms of the Option Agreement are the following:
Termination of Employment: While the Option terminates on the Option
Expiration Date, it will terminate earlier if you cease to be employed by the
Company or the direct or indirect subsidiary of the Company with whom you are
employed (transfer of employment from one subsidiary to another will not
constitute termination of employment). If your
<PAGE>
employment ends due to death, the Option terminates eighteen months after the
date of death, and is exercisable during such eighteen-month period as to the
portion of the Option which had vested prior to the date of death. If your
employment ends due to disability, the Option terminates twelve months after the
date of disability, and is exercisable during such twelve-month period as to the
portion of the Option which had vested prior to the date of disability. If your
employment ends primarily as a result of an act of misconduct described in
Section 4(g) of the Plan, or during the period when your rights under the Option
have been suspended by the Company pursuant to that Section, the Option will
terminate immediately. In all other cases, including retirement, the Option
terminates ninety days after the date of termination of employment, and is
exercisable during such time period as to the portion of the Option which had
vested prior to the date of termination of employment. See Section 5 of the
attached Option Agreement.
Transfer: The Option is personal to you, and cannot be sold,
transferred, assigned or otherwise disposed of to any other person, except upon
your death. See Section 13(d) of the attached Option Agreement.
Exercise: You can exercise the Option (while it is exercisable), in
whole or in part, by delivering to the Company a Notice of Exercise identical to
Exhibit "A" attached to the Option Agreement, accompanied by payment of, or
provision pursuant to the Option Agreement for the payment of, the Exercise
Price for the Shares to be purchased. The Company may require you to submit
certain written reassurances to the Company with respect to your status as a
shareholder. The Company will then issue a certificate to you for the Shares you
have purchased. You are under no obligation to exercise the Option. See Section
4 of the attached Option Agreement.
Reload Option: If and to the extent that the Exercise Price is paid by
delivery of shares of the Company's Common Stock (see Section 4(b) of the
attached Option Agreement), you will automatically be granted a new option (a
"Reload Option") for a like number of shares, with an exercise price equal to
the market value of a share of Common Stock on the date of exercise, and a term
equal to the term of the Option. See Section 4(d) of the attached Option
Agreement.
Adjustments upon Recapitalization: The Option contains provisions which
affect your rights in the event of stock splits, stock dividends, mergers and
other major corporate reorganizations. See Section 6 of the attached Option
Agreement.
Waiver: By signing this Certificate, you will be agreeing to all of the
terms of the Option Agreement, including those not summarized in this
Certificate. You will waive your rights to options or stock which may otherwise
have been promised to you. See Section 7 of the attached Option Agreement.
Withholding: The Company may require you to make any arrangements
necessary to insure the proper withholding of any amount of tax, if any,
required to be withheld by the
<PAGE>
Company as a result of the exercise of the Option. See Section 10 of the
attached Option Agreement.
Value of Shares: If you are granted an Option first exercisable in any
one calendar year to purchase Shares valued in excess of $100,000 on the grant
date, then for tax purposes the incremental portion of such Shares with an
aggregate fair market value in excess of $100,000 shall be treated as
non-statutory stock options, rather than as incentive stock options (as that
term is defined in Section 422 of the Internal Revenue Code of 1986, as
amended).
A G R E E M E N T
3D Systems Corporation, a Delaware corporation, and the Employee each
hereby agrees to be bound by all of the terms and conditions of the Stock Option
Agreement (Incentive Stock Option) which is attached hereto as Annex I and
incorporated herein by this reference as if set forth in full in this document.
DATED:
3D SYSTEMS CORPORATION
By:
Its:
EMPLOYEE
______________________________________
Name:
(Please print
your name exactly as you wish it to appear
on any stock certificates issued to you upon
exercise of the Option)
<PAGE>
ANNEX I
STOCK OPTION AGREEMENT
(Incentive Stock Option for Executives)
This STOCK OPTION AGREEMENT (this "Option Agreement") is made and
entered into on the execution date of the Option Certificate to which it is
attached (the "Certificate"), by and between 3D Systems Corporation, a Delaware
corporation (the "Company"), and the Officer of the Company named in the
Certificate ("Employee").
Pursuant to the 3D Systems Corporation 1996 Stock Incentive Plan (the
"Plan"), the Compensation Committee (the "Committee") of the Board of Directors
of the Company (the "Board") has authorized the grant to Employee of an
incentive stock option to purchase shares of the Company's Common Stock, par
value $0.001 per share (the "Common Stock"), upon the terms and subject to the
conditions set forth in this Option Agreement and in the Plan.
The Company and Employee agree as follows:
1. Grant of Option.
The Company hereby grants to Employee the right and option
(the "Option"), upon the terms and subject to the conditions set forth in this
Option Agreement, to purchase all or any portion of that number of shares of the
Common Stock (the "Shares") set forth in the Certificate, at the Option exercise
price set forth in the Certificate (the "Exercise Price").
2. Term of Option.
The Option shall terminate and expire on the Option Expiration
Date set forth in the Certificate, unless sooner terminated as provided herein.
In no event shall the Option be exercisable after the expiration of ten years
from the date it was granted.
3. Exercise Period.
(a) Subject to the provisions of Sections 3(b) and 5 of this
Option Agreement, the Option shall become exercisable (in whole or in part) upon
and after the dates set forth or referred to under the caption "Exercise
Schedule" in the Certificate. The installments shall be cumulative; i.e., the
Option may be exercised, as to any or all Shares covered by an installment, at
any time or times after the installment first becomes exercisable and until
expiration or termination of the Option.
<PAGE>
(b) Notwithstanding anything to the contrary contained in this
Option Agreement, the Option may not be exercised, in whole or in part, unless
and until any then-applicable requirements of all federal, state and local laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Company and its counsel. In addition, if the Company believes that
Employee has committed an act of misconduct as described in Section 4(g) of the
Plan (which acts of misconduct ("Acts of Misconduct") include an act of
embezzlement, fraud, nonpayment of any obligation owed to the Company or any
subsidiary, breach of fiduciary duty or deliberate disregard of the Company's
rules resulting in loss, damage or injury to the Company, any unauthorized
disclosure of trade secrets or confidential information of the Company, any
conduct constituting unfair competition, or the inducement of any customer of
the Company to breach a contract with the Company), the Company may suspend the
Employee's rights under the Option pending a determination by the Board of
Directors, which shall have the right, as therein provided, to terminate the
Option.
4. Exercise of Option.
There is no obligation to exercise the Option, in whole or in
part. The Option may be exercised, in whole or in part, only by delivery to the
Company of:
(a) written notice of exercise in form and substance identical
to Exhibit "A" attached to this Option Agreement stating the number of shares of
Common Stock then being purchased (the "Purchased Shares");
(b) the Exercise Price for each Purchased Share shall be paid
in full upon exercise and shall be payable in cash in United States dollars
(including check, bank draft or money order); provided, however, that in lieu of
cash the person exercising the Option may pay the Exercise Price in whole or in
part by delivering to the Company shares of the Common Stock having a fair
market value on the date of exercise of the Option, determined as provided in
Section 4(c), equal to the Exercise Price for the Shares being purchased; except
that (i) any portion of the Exercise Price representing a fraction of a Share
shall in any event be paid in cash and (ii) no shares of the Common Stock which
have been held for less than six months may be delivered in payment of the
Exercise Price of an Option. Delivery of shares may also be accomplished through
the effective transfer to the Company of shares held by a broker or other agent.
The Company will also cooperate with any person who participates in a cashless
exercise program of a broker or other agent under which all or part of the
shares received upon exercise of the Option are sold through the broker or other
agent or under which the broker or other agent makes a loan to such person.
Notwithstanding the foregoing, the exercise of the Option shall not be deemed to
occur and no shares of Common Stock will be issued by the Company upon exercise
of the Option until the Company has received payment of the Exercise Price in
full. The date of exercise of an Option shall be determined under procedures
established by the Committee. Payment of the Exercise Price with shares shall
not increase the number of shares of the Common Stock which may be issued under
the Plan.
(c) If payment is made, in whole or in part, by transfer to
the Corporation of issued and outstanding shares of Common Stock, the value of
such shares shall be the mean between the following prices, as applicable, for
the date as of which fair market value is to be determined as
<PAGE>
quoted in The Wall Street Journal (or in such other reliable publication as the
Company, in its discretion, may determine to rely upon): (i) if the Common Stock
is listed on a United States securities exchange, the highest and lowest sales
prices per share of Common Stock for such date on the principal United States
securities exchange on which the Common Stock is listed, or (ii) if the Common
Stock is not listed on any such exchange, the highest and lowest sales prices
per share of the Common Stock for such date on the Nasdaq National Market or any
successor system then in use. If there are no such sale price quotations for the
date as of which fair market value is to be determined but there are such sale
price quotations within a reasonable period both before and after such date,
then fair market value shall be determined by taking an average of the means
between the highest and lowest sales prices per share of the Common Stock as so
quoted on the nearest date before and the nearest date after the date as of
which fair market value is to be determined. If there are no such sale price
quotations on or within a reasonable period both before and after the date as of
which fair market value is to be determined, then fair market value of the
Common Stock shall be the mean between the bona fide bid and asked prices per
share of Common Stock as so quoted for such date on Nasdaq, or if none, the
average of the means between such bid and asked prices on the nearest trading
date before and the nearest trading date after the date as of which fair market
value is to be determined, if both such dates are within a reasonable period. If
the fair market value of the Common Stock cannot be determined on the basis set
forth above, the Committee shall in good faith determine the fair market value
of the Common Stock as of such date.
(d) If Employee delivers shares of Common Stock in payment of
the Exercise Price of the Option, as provided in Paragraph 4(b) above, the
Employee shall be automatically granted the additional right and option (the
"Reload Option") to purchase all or any portion of that number of shares of
Common Stock equal to the number of shares of Common Stock so delivered upon
exercise of the Option. Each Reload Option shall (i) have a per Share Exercise
Price equal to the fair market value of the Common Stock on the date of exercise
of the Option to which such Reload Option relates, determined pursuant to
Section 4(c) of this Option Agreement; (ii) have a term no longer than the
remaining term of the Option at the time of exercise; (iii)become exercisable in
full from and after that date which is six months following its date of grant;
and (iv) otherwise have terms and conditions identical to the Option. The
Company shall promptly following the grant of a Reload Option prepare and
deliver to Employee a written option agreement memorializing the grant of such
Reload Option; but the failure to prepare and deliver such documentation shall
not affect the continuing validity and enforceability of such Reload Option.
5. Termination of Employment.
(a) If Employee shall cease to be an employee of the Company,
or any direct or indirect subsidiary of the Company, (other than as the result
of the transfer of employment of Employee to another corporation which is the
Company, or any direct or indirect subsidiary of the Company) for any reason
other than death or permanent disability (a "Terminating Event"), Employee shall
have the right, subject to the provisions of Section 5(b) below, to exercise the
Option at any time following such Terminating Event until the earliest to occur
of (x) 90 days following the date of such Terminating Event and (y) the
expiration of the term of this Option as set forth in Section 2 of this Option
Agreement. The Option may be exercised following a Terminating Event only to the
extent exercisable as of the date of the Terminating Event. To the extent
unexercised at the end of the period
<PAGE>
referred to above, the Option shall terminate. The Committee, in its sole and
absolute discretion, shall determine whether authorized leaves of absence shall
constitute termination of employment for purposes of this Option Agreement.
(b) Notwithstanding the provisions of Section 5(a), above, if
Employee shall cease to be an employee of the Company, or any direct or indirect
subsidiary of the Company (other than as the result of the transfer of
employment of Employee to another corporation which is the Company, or any
direct or indirect subsidiary of the Company) primarily as a result of any Act
of Misconduct described in Section 4(g) of the Plan, or during the period when
Employee's rights under this Option Agreement have been suspended by the Company
pursuant to Section 4(g) of the Plan, Employee's rights to exercise the Option
shall terminate immediately.
(c) If, by reason of death or disability (a "Special
Terminating Event"), Employee shall cease to be an employee the Company or any
direct or indirect subsidiary of the Company (other than as the result of the
transfer of employment of Employee to another corporation which is the Company,
or any direct or indirect subsidiary of the Company), then Employee, Employee's
executors or administrators or any person or persons acquiring the Option
directly from Employee by bequest or inheritance, shall have the right to
exercise the Option (i) in the event of Employee's disability, within twelve
months following the date of such Special Terminating Event, or (ii) in the
event of Employee's death, within eighteen months following the date of such
Special Terminating Event. The Option may be exercised following a Special
Terminating Event only to the extent exercisable at the date of the Special
Terminating Event. To the extent unexercised at the end of the period referred
to above, the Option shall terminate.
(d) For purposes of this Option Agreement, "disability" shall
mean total and permanent disability as defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the "Code"). Employee shall not be
considered permanently disabled unless he furnishes proof of such disability in
such form and manner, and at such times, as the Committee may from time to time
require.
6. Adjustments upon Recapitalization.
In the event of any change in the outstanding shares of the
Common Stock or other securities then subject to the Plan by reason of any stock
split, reverse stock split, stock dividend, recapitalization, merger,
consolidation, combination or exchange of shares or other similar corporate
change, or if the outstanding securities of the class then subject to this
Agreement are exchanged for or converted into cash, property or a different kind
of securities, or if cash, property or securities are distributed in respect of
such outstanding securities (other than a regular cash divided) then, unless the
terms of such transaction shall otherwise provide, such equitable adjustments
shall be made by the Board, or the Committee, in the Option (including, without
limitation, appropriate and proportionate adjustments to the number and type of
shares or other securities or cash or other property that may be acquired
pursuant to exercise of the Option); and any such adjustments made by the Board
or the Committee shall be final, binding and conclusive for any and all
purposes.
<PAGE>
7. Waiver of Rights to Purchase Stock.
By signing this Option Agreement, Employee acknowledges and
agrees that neither the Company nor any other person or entity is under any
obligation to sell or transfer to Employee any option or equity security of the
Company, other than the shares of Common Stock subject to the Option and any
other right or option to purchase Common Stock which was previously granted in
writing to Employee by the Committee (or the Board). By signing this Option
Agreement, Employee specifically waives all rights which he or she may have had
prior to the date of this Option Agreement (other than any other right or option
to purchase Common Stock which was previously granted in writing to Employee by
the Committee or the Board) to receive any option or equity security of the
Company.
8. No Rights as Shareholder.
Except as provided in Section 6 of this Option Agreement,
Employee shall have no rights as a shareholder with respect to the Shares until
the date of the issuance to Employee of a stock certificate or stock
certificates evidencing such Shares. Except as may be provided in Section 6 of
this Option Agreement, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued.
9. Modification.
Subject to the terms and conditions and within the limitations
of the Plan, the Committee (or the Board) may modify, extend or renew the Option
or accept the surrender of, and authorize the grant of a new option in
substitution for, the Option (to the extent not previously exercised). No
modification of the Option shall be made which, without the consent of Employee,
would cause the Option to fail to continue to qualify as an "incentive stock
option" within Section 422 of the Code or would alter or impair any rights of
the Employee under the Option.
10. Disqualifying Disposition; Withholding.
(a) Employee agrees that should he or she make a "disposition"
(as defined in Section 424(c) of the Code) of all or any of the Purchased Shares
within two years from the date of the grant of the Option or within one year
after the issuance of such Purchased Shares, he or she shall immediately advise
the Company in writing as to the occurrence of the sale and the price realized
upon the sale of such Purchased Shares. Employee agrees that he or she shall
maintain all Purchased Shares in his or her name so long as he or she maintains
beneficial ownership of such Shares.
(b) The Company shall be entitled to require as a condition of
delivery of any Purchased Shares upon exercise of any Option that the Employee
agree to remit, at the time of such delivery or at such later date as the
Company may determine, an amount sufficient to satisfy all
<PAGE>
federal, state and local withholding tax requirements relating thereto, and
Employee agrees to take such other action required by the Company to satisfy
such withholding requirements.
11. Services of Option Holder.
In consideration for the grant of the Option, Employee agrees
to remain in the employ of, and shall continue to render services to, the
Company or any direct or indirect subsidiary of the Company, as the Committee
may from time to time direct, for a period of one year from the date of this
Option Agreement. This provision shall not obligate the Company, or such
subsidiary, to continue to employ, or utilize the services of, Employee for any
period whatsoever. The sole remedy to the Company should Employee breach his or
her obligations under this Section 11 shall be to cancel this Option Agreement
and the Option granted under this Option Agreement. For the purposes of this
Option Agreement, the term "subsidiary" shall mean any present or future
corporation which would be a "subsidiary corporation" of the Company, as defined
in Section 424 of the Code.
12. Character of Option.
The Option is intended to qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.
13. General Provisions.
(a) Further Assurances. Employee shall promptly take all
actions and execute all documents requested by the Company which the Company
deems to be reasonably necessary to effectuate the terms and intent of this
Option Agreement.
(b) Notices. All notices, requests, demands and other
communications under this Option Agreement shall be in writing and shall be
given to the parties hereto as follows:
(i) If to the Company, to:
3D Systems Corporation
26081 Avenue Hall
Valencia, CA 91355
Attention: General Counsel
(ii) If to Employee, to the address set
forth in the records of the Company,
or at such other address or addresses as may have been furnished by such either
party in writing to the other party hereto. Any such notice, request, demand or
other communication shall be effective (i) if
<PAGE>
given by mail, 72 hours after such communication is deposited in the mail by
first-class certified mail, return receipt requested, postage prepaid, addressed
as aforesaid; or (ii) if given by any other means, when delivered at the address
specified in this subparagraph (b).
(c) Transfer of Rights under this Option Agreement. The
Company may at any time transfer and assign its rights and delegate its
obligations under this Option Agreement to any other person, corporation, firm
or entity, including its officers, directors and stockholders, with or without
consideration.
(d) Option Non-Transferable. Employee may not sell, transfer,
assign or otherwise dispose of the Option except by will or the laws of descent
and distribution, and Options may be exercised during the lifetime of Employee
only by Employee or by his or her guardian or legal representative.
(e) Market Stand-Off. In the event of an underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
Employee shall not sell, make any short sale of, loan, hypothecate, pledge,
grant any option for the repurchase of, or otherwise dispose or transfer for
value, or otherwise agree to engage in any of the foregoing transactions with
respect to any shares of Common Stock without the prior written consent of the
Company or its underwriters, for such period of time from and after the
effective date of such registration statement as may be requested by the Company
or such underwriters (the "Market Stand-Off"); provided, however, that in no
event shall such period exceed 180 days.
(f) Successors and Assigns. Except to the extent specifically
limited by the terms and provisions of this Option Agreement, this Option
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns, heirs and personal representatives.
(g) Governing Law. THIS OPTION AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE
TO CONTRACTS MADE IN, AND TO BE PERFORMED SOLELY WITHIN, THAT STATE.
(h) The Plan. This Option Agreement is made pursuant to the
Plan, and it is intended, and shall be interpreted in a manner, to comply
therewith. Any provision of this Option Agreement inconsistent with the Plan
shall be superseded and governed by the Plan.
<PAGE>
(i) Miscellaneous. Titles and captions contained in this
Option Agreement are inserted for convenience of reference only and do not
constitute a part of this Option Agreement for any other purpose.
The Signature Page to this Option Agreement consists of the
last page of the Certificate.
<PAGE>
Exhibit "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
TO: 3D Systems Corporation
The undersigned, the holder of the enclosed Stock Option Agreement
(Incentive Stock Option), hereby irrevocably elects to exercise the purchase
rights represented by the Option and to purchase thereunder ______* shares of
Common Stock of 3D Systems Corporation (the "Company"), and herewith encloses
payment of $__________ and/or _________ shares of the Company's Common Stock in
full payment of the purchase price of such shares being purchased.
Dated: _____________________
------------------------------------------
(Signature must conform in all respects
to name of holder as specified on the face
of the Option)
------------------------------------------
(Please Print Name)
------------------------------------------
(Address)
------------------------------------------
* Insert here the number of shares called for on the face of the Option
(or, in the case of a partial exercise, the number of shares being exercised),
in either case without making any adjustment for additional Common Stock of the
Company, other securities or property which, pursuant to the adjustment
provisions of the Option, may be deliverable upon exercise.
<PAGE>
OPTION CERTIFICATE
(Non-Statutory Stock Option for Executives)
THIS IS TO CERTIFY that 3D Systems Corporation, a Delaware corporation
(the "Company"), has granted to the Officer of the Company named below a
non-statutory stock option (the "Option") to purchase shares of the Company's
Common Stock (the "Shares"), under its 1996 Stock Incentive Plan (the "Plan"),
and upon the terms and conditions determined by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"), as follows:
Name of Optionee:
Address of Optionee:
_________________________________
_________________________________
Number of Shares:
Option Exercise Price: $______________ per share
Date of Grant: _______________ ___, 200_
Option Expiration Date: _______________ ___, 200
Exercise Schedule: The Option shall become exercisable with respect to
25% of the number of shares subject to this Option (rounded up or down to the
nearest whole number) on each of the first four anniversaries of the Date of
Grant. Installments shall be cumulative, and the Option may be exercised as to
any and all shares of Common Stock covered by an installment at any time after
the installment becomes exercisable and prior to the expiration of termination
of the Option.
Summary of Other Terms: This Option is defined in the Stock Option
Agreement (Non-Statutory Stock Option) (the "Option Agreement") which is
attached to this Option Certificate (the "Certificate") as Annex I. This
Certificate summarizes certain of the provisions of the Option Agreement for
your information, but is not complete. Your rights are governed by the Option
Agreement, not by this summary. The Company strongly suggests that you carefully
review the full Option Agreement prior to signing this Certificate or exercising
the Option.
Among the terms of the Option Agreement are the following:
Termination of Employment: While the Option terminates on the Option
Expiration Date, it will terminate earlier if you cease to be employed by the
Company or the direct or indirect subsidiary of the Company with whom you are
employed (transfer of employment
<PAGE>
from one subsidiary to another will not constitute termination of employment).
If your employment ends due to retirement or death, the Option terminates
eighteen months after the date of retirement or death, and is exercisable during
such eighteen-month period as to the portion of the Option which had vested
prior to the date of retirement or death. If your employment ends due to
disability, the Option terminates twelve months after the date of disability,
and is exercisable during such twelve-month period as to the portion of the
Option which had vested prior to the date of disability. If your employment ends
primarily as a result of an act of misconduct described in Section 4(g) of the
Plan, or during the period when your rights under the Option have been suspended
by the Company pursuant to that Section, the Option will terminate immediately.
In all other cases, the Option terminates ninety days after the date of
termination of employment, and is exercisable during such time period as to the
portion of the Option which had vested prior to the date of termination of
employment. See Section 5 of the attached Option Agreement.
Transfer: The Option is personal to you, and cannot be sold,
transferred, assigned or otherwise disposed of to any other person, except upon
your death. See Section 13(d) of the attached Option Agreement.
Exercise: You can exercise the Option (while it is exercisable), in
whole or in part, by delivering to the Company a Notice of Exercise identical to
Exhibit "A" attached to the Option Agreement, accompanied by payment of, or
provision pursuant to the Option Agreement for the payment of, the Exercise
Price for the Shares to be purchased. The Company may require you to submit
certain written reassurances to the Company with respect to your status as a
shareholder. The Company will then issue a certificate to you for the Shares you
have purchased. You are under no obligation to exercise the Option. See Section
4 of the attached Option Agreement.
Reload Option: If and to the extent that the Exercise Price is paid by
delivery of shares of the Company's Common Stock (see Section 4(b) of the
attached Option Agreement), you will automatically be granted a new option (a
"Reload Option") for a like number of shares, with an exercise price equal to
the market value of a share of Common Stock on the date of exercise, and a term
equal to the term of the Option. See Section 4(d) of the attached Option
Agreement.
Adjustments upon Recapitalization: The Option contains provisions which
affect your rights in the event of stock splits, stock dividends, mergers and
other major corporate reorganizations. See Section 6 of the attached Option
Agreement.
Waiver: By signing this Certificate, you will be agreeing to all of the
terms of the Option Agreement, including those not summarized in this
Certificate. You will waive your rights to options or stock which may otherwise
have been promised to you. See Section 7 of the attached Option Agreement.
Withholding: The Company may require you to make any arrangements
necessary to insure the proper withholding of any amount of tax, if any,
required to be withheld by the
<PAGE>
Company as a result of the exercise of the Option. See Section 10 of the
attached Option Agreement.
A G R E E M E N T
3D Systems Corporation, a Delaware corporation, and Optionee each
hereby agrees to be bound by all of the terms and conditions of the Stock Option
Agreement (Non-Statutory Stock Option) which is attached hereto as Annex I and
incorporated herein by this reference as if set forth in full in this document.
DATED:
3D SYSTEMS CORPORATION
By:
Its:
OPTIONEE
___________________________________
Name:
(Please print
your name exactly as you wish it to appear
on any stock certificates issued to you upon
exercise of the Option)
<PAGE>
ANNEX I
STOCK OPTION AGREEMENT
(Non-Statutory Stock Option)
This STOCK OPTION AGREEMENT (this "Option Agreement") is made and
entered into on the execution date of the Option Certificate to which it is
attached (the "Certificate"), by and between 3D Systems Corporation, a Delaware
corporation (the "Company"), and the Officer of the Company named in the
Certificate ("Optionee").
Pursuant to the 3D Systems Corporation 1996 Stock Incentive Plan (the
"Plan"), the Compensation Committee (the "Committee") of the Board of Directors
of the Company (the "Board") has authorized the grant to Optionee of a
non-statutory stock option to purchase shares of the Company's Common Stock, par
value $0.001 per share (the "Common Stock"), upon the terms and subject to the
conditions set forth in this Option Agreement and in the Plan.
The Company and Optionee agree as follows:
1. Grant of Option.
The Company hereby grants to Optionee the right and option
(the "Option"), upon the terms and subject to the conditions set forth in this
Option Agreement, to purchase all or any portion of that number of shares of the
Common Stock (the "Shares") set forth in the Certificate, at the Option exercise
price set forth in the Certificate (the "Exercise Price").
2. Term of Option.
The Option shall terminate and expire on the Option Expiration
Date set forth in the Certificate, unless sooner terminated as provided herein.
In no event shall the Option be exercisable after the expiration of ten years
from the date it was granted.
3. Exercise Period.
<PAGE>
(a) Subject to the provisions of Sections 3(b) and 5 of this
Option Agreement, the Option shall become exercisable (in whole or in part) upon
and after the dates set forth or referred to under the caption "Exercise
Schedule" in the Certificate. The installments shall be cumulative; i.e., the
Option may be exercised, as to any or all Shares covered by an installment, at
any time or times after the installment first becomes exercisable and until
expiration or termination of the Option.
(b) Notwithstanding anything to the contrary contained in this
Option Agreement, the Option may not be exercised, in whole or in part, unless
and until any then-applicable requirements of all federal, state and local laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Company and its counsel. In addition, if the Company believes that
Employee has committed an act of misconduct as described in Section 4(g) of the
Plan (which acts of misconduct ("Acts of Misconduct") include an act of
embezzlement, fraud, nonpayment of any obligation owed to the Company or any
subsidiary, breach of fiduciary duty or deliberate disregard of the Company's
rules resulting in loss, damage or injury to the Company, any unauthorized
disclosure of trade secrets or confidential information of the Company, any
conduct constituting unfair competition, or the inducement of any customer of
the Company to breach a contract with the Company), the Company may suspend the
Employee's rights under the Option pending a determination by the Board of
Directors, which shall have the right, as therein provided, to terminate the
Option.
4. Exercise of Option.
There is no obligation to exercise the Option, in whole or in
part. The Option may be exercised, in whole or in part, only by delivery to the
Company of:
(a) written notice of exercise in form and substance identical
to Exhibit "A" attached to this Option Agreement stating the number of shares of
Common Stock then being purchased (the "Purchased Shares");
(b) the Exercise Price for each Purchased Share shall be paid
in full upon exercise and shall be payable in cash in United States dollars
(including check, bank draft or money order); provided, however, that in lieu of
cash the person exercising the Option may pay the Exercise Price in whole or in
part by delivering to the Company shares of the Common Stock having a fair
market value on the date of exercise of the Option, determined as provided in
Section 4(c), equal to the Exercise Price for the Shares being purchased; except
that (i) any portion of the Exercise Price representing a fraction of a Share
shall in any event be paid in cash and (ii) no shares of the Common Stock which
have been held for less than six months may be delivered in payment of the
Exercise Price of an Option. Delivery of shares may also be accomplished through
the effective transfer to the Company of shares held by a broker or
<PAGE>
other agent. The Company will also cooperate with any person who participates in
a cashless exercise program of a broker or other agent under which all or part
of the shares received upon exercise of the Option are sold through the broker
or other agent or under which the broker or other agent makes a loan to such
person. Notwithstanding the foregoing, the exercise of the Option shall not be
deemed to occur and no shares of Common Stock will be issued by the Company upon
exercise of the Option until the Company has received payment of the Exercise
Price in full. The date of exercise of an Option shall be determined under
procedures established by the Committee. Payment of the Exercise Price with
shares shall not increase the number of shares of the Common Stock which may be
issued under the Plan.
(c) If payment is made, in whole or in part, by transfer to
the Corporation of issued and outstanding shares of Common Stock, the value of
such shares shall be the mean between the following prices, as applicable, for
the date as of which fair market value is to be determined as quoted in The Wall
Street Journal (or in such other reliable publication as the Company, in its
discretion, may determine to rely upon): (i) if the Common Stock is listed on a
United States securities exchange, the highest and lowest sales prices per share
of Common Stock for such date on the principal United States securities exchange
on which the Common Stock is listed, or (ii) if the Common Stock is not listed
on any such exchange, the highest and lowest sales prices per share of the
Common Stock for such date on the Nasdaq National Market or any successor system
then in use. If there are no such sale price quotations for the date as of which
fair market value is to be determined but there are such sale price quotations
within a reasonable period both before and after such date, then fair market
value shall be determined by taking an average of the means between the highest
and lowest sales prices per share of the Common Stock as so quoted on the
nearest date before and the nearest date after the date as of which fair market
value is to be determined. If there are no such sale price quotations on or
within a reasonable period both before and after the date as of which fair
market value is to be determined, then fair market value of the Common Stock
shall be the mean between the bona fide bid and asked prices per share of Common
Stock as so quoted for such date on Nasdaq, or if none, the average of the means
between such bid and asked prices on the nearest trading date before and the
nearest trading date after the date as of which fair market value is to be
determined, if both such dates are within a reasonable period. If the fair
market value of the Common Stock cannot be determined on the basis set forth
above, the Committee shall in good faith determine the fair market value of the
Common Stock as of such date.
(d) If Employee delivers shares of Common Stock in payment of
the Exercise Price of the Option, as provided in Paragraph 4(b) above, the
Employee shall be automatically granted the additional right and option (the
"Reload Option") to purchase all or any portion of that number of shares of
Common Stock equal to the number of shares of Common Stock so delivered upon
exercise of the Option. Each Reload Option shall (i) have a per Share Exercise
Price equal to the fair market value of the Common Stock on the date of exercise
of the Option to which such Reload Option relates, determined pursuant to
Section 4(c) of this Option Agreement; (ii) have a term no longer than the
remaining term of the
<PAGE>
Option at the time of exercise; (iii) become exercisable in full from and after
that date which is six months following its date of grant; and (iv) otherwise
have terms and conditions identical to the Option. The Company shall promptly
following the grant of a Reload Option prepare and deliver to Employee a written
option agreement memorializing the grant of such Reload Option; but the failure
to prepare and deliver such documentation shall not affect the continuing
validity and enforceability of such Reload Option.
5. Termination of Employment.
(a) If Employee shall cease to be an employee of the Company,
or any direct or indirect subsidiary of the Company, (other than as the result
of the transfer of employment of Employee to another corporation which is the
Company, or any direct or indirect subsidiary of the Company) for any reason
other than retirement, death or permanent disability (a "Terminating Event"),
Employee shall have the right, subject to the provisions of Section 5(b) below,
to exercise the Option at any time following such Terminating Event until the
earliest to occur of (x) 90 days following the date of such Terminating Event
and (y) the expiration of the term of this Option as set forth in Section 2 of
this Option Agreement. The Option may be exercised following a Terminating Event
only to the extent exercisable as of the date of the Terminating Event. To the
extent unexercised at the end of the period referred to above, the Option shall
terminate. The Committee, in its sole and absolute discretion, shall determine
whether authorized leaves of absence shall constitute termination of employment
for purposes of this Option Agreement.
(b) Notwithstanding the provisions of Section 5(a), above, if
Employee shall cease to be an employee of the Company, or any direct or indirect
subsidiary of the Company (other than as the result of the transfer of
employment of Employee to another corporation which is the Company, or any
direct or indirect subsidiary of the Company) primarily as a result of any Act
of Misconduct described in Section 4(g) of the Plan, or during the period when
Employee's rights under this Option Agreement have been suspended by the Company
pursuant to Section 4(g) of the Plan, Employee's rights to exercise the Option
shall terminate immediately.
(c) If, by reason of retirement, death or disability (a
"Special Terminating Event"), Employee shall cease to be an employee the Company
or any direct or indirect subsidiary of the Company (other than as the result of
the transfer of employment of Employee to another corporation which is the
Company, or any direct or indirect subsidiary of the Company), then Employee,
Employee's executors or administrators or any person or persons acquiring the
Option directly from Employee by bequest or inheritance, shall have the right to
exercise the Option (i) in the event of Employee's disability, within twelve
months following the date of such Special Terminating Event, or (ii) in the
event of Employee's retirement, or in
<PAGE>
the event of Employee's death, within eighteen months of either Special
Terminating Event. The Option may be exercised following a Special Terminating
Event only to the extent exercisable at the date of the Special Terminating
Event. To the extent unexercised at the end of the period referred to above, the
Option shall terminate.
(d) For purposes of this Option Agreement, "disability" shall
mean total and permanent disability as defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the "Code"). Employee shall not be
considered permanently disabled unless he furnishes proof of such disability in
such form and manner, and at such times, as the Committee may from time to time
require.
6. Adjustments upon Recapitalization.
In the event of any change in the outstanding shares of the
Common Stock or other securities then subject to the Plan by reason of any stock
split, reverse stock split, stock dividend, recapitalization, merger,
consolidation, combination or exchange of shares or other similar corporate
change, or if the outstanding securities of the class then subject to this
Agreement are exchanged for or converted into cash, property or a different kind
of securities, or if cash, property or securities are distributed in respect of
such outstanding securities (other than a regular cash divided) then, unless the
terms of such transaction shall otherwise provide, such equitable adjustments
shall be made by the Board, or the Committee, in the Option (including, without
limitation, appropriate and proportionate adjustments to the number and type of
shares or other securities or cash or other property that may be acquired
pursuant to exercise of the Option); and any such adjustments made by the Board
or the Committee shall be final, binding and conclusive for any and all
purposes.
7. Waiver of Rights to Purchase Stock.
By signing this Option Agreement, Employee acknowledges and
agrees that neither the Company nor any other person or entity is under any
obligation to sell or transfer to Employee any option or equity security of the
Company, other than the shares of Common Stock subject to the Option and any
other right or option to purchase Common Stock which was previously granted in
writing to Employee by the Committee (or the Board). By signing this Option
Agreement, Employee specifically waives all rights which he or she may have had
prior to the date of this Option Agreement (other than any other right or option
to purchase Common Stock which was previously granted in writing to Employee by
the Committee or the Board) to receive any option or equity security of the
Company.
8. No Rights as Shareholder.
<PAGE>
Except as provided in Section 6 of this Option Agreement,
Employee shall have no rights as a shareholder with respect to the Shares until
the date of the issuance to Employee of a stock certificate or stock
certificates evidencing such Shares. Except as may be provided in Section 6 of
this Option Agreement, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued.
9. Modification.
Subject to the terms and conditions and within the limitations
of the Plan, the Committee (or the Board) may modify, extend or renew the Option
or accept the surrender of, and authorize the grant of a new option in
substitution for, the Option (to the extent not previously exercised). No
modification of the Option shall be made which, without the consent of Employee,
would cause the Option to fail to continue to qualify as an "incentive stock
option" within Section 422 of the Code or would alter or impair any rights of
the Employee under the Option.
10. Withholding.
The Company shall be entitled to require as a condition of
delivery of any Purchased Shares upon exercise of any Option that the Optionee
agree to remit, at the time of such delivery or at such later date as the
Company may determine, an amount sufficient to satisfy all federal, state and
local withholding tax requirements relating thereto, and Optionee agrees to take
such other action required by the Company to satisfy such withholding
requirements.
11. Services of Option Holder.
In consideration for the grant of the Option, Employee agrees
to remain in the employ of, and shall continue to render services to, the
Company or any direct or indirect subsidiary of the Company, as the Committee
may from time to time direct, for a period of one year from the date of this
Option Agreement. This provision shall not obligate the Company, or such
subsidiary, to continue to employ, or utilize the services of, Employee for any
period whatsoever. The sole remedy to the Company should Employee breach his or
her obligations under this Section 11 shall be to cancel this Option Agreement
and the Option granted under this Option Agreement. For the purposes of this
Option Agreement, the term "subsidiary" shall mean any present or future
corporation which would be a "subsidiary corporation" of the Company, as defined
in Section 424 of the Code.
<PAGE>
12. Character of Option.
The Option is not intended to qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.
13. General Provisions.
(a) Further Assurances. Employee shall promptly take all
actions and execute all documents requested by the Company which the Company
deems to be reasonably necessary to effectuate the terms and intent of this
Option Agreement.
(b) Notices. All notices, requests, demands and other
communications under this Option Agreement shall be in writing and shall be
given to the parties hereto as follows:
14. If to the Company, to:
3D Systems Corporation
26081 Avenue Hall
Valencia, CA 91355
Attention: General Counsel
15. If to Employee, to the address set
forth in the records of the Company,
or at such other address or addresses as may have been furnished by such either
party in writing to the other party hereto. Any such notice, request, demand or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mail by first-class certified mail, return
receipt requested, postage prepaid, addressed as aforesaid; or (ii) if given by
any other means, when delivered at the address specified in this subparagraph
(b).
(c) Transfer of Rights under this Option Agreement. The
Company may at any time transfer and assign its rights and delegate its
obligations under this Option Agreement to any other person, corporation, firm
or entity, including its officers, directors and stockholders, with or without
consideration.
<PAGE>
(d) Option Non-Transferable. Employee may not sell, transfer,
assign or otherwise dispose of the Option except by will or the laws of descent
and distribution, and Options may be exercised during the lifetime of Employee
only by Employee or by his or her guardian or legal representative.
(e) Market Stand-Off. In the event of an underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
Employee shall not sell, make any short sale of, loan, hypothecate, pledge,
grant any option for the repurchase of, or otherwise dispose or transfer for
value, or otherwise agree to engage in any of the foregoing transactions with
respect to any shares of Common Stock without the prior written consent of the
Company or its underwriters, for such period of time from and after the
effective date of such registration statement as may be requested by the Company
or such underwriters (the "Market Stand-Off"); provided, however, that in no
event shall such period exceed 180 days.
(f) Successors and Assigns. Except to the extent specifically
limited by the terms and provisions of this Option Agreement, this Option
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns, heirs and personal representatives.
(g) Governing Law. THIS OPTION AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE
TO CONTRACTS MADE IN, AND TO BE PERFORMED SOLELY WITHIN, THAT STATE.
(h) The Plan. This Option Agreement is made pursuant to the
Plan, and it is intended, and shall be interpreted in a manner, to comply
therewith. Any provision of this Option Agreement inconsistent with the Plan
shall be superseded and governed by the Plan.
(i) Miscellaneous. Titles and captions contained in this
Option Agreement are inserted for convenience of reference only and do not
constitute a part of this Option Agreement for any other purpose.
The Signature Page to this Option Agreement consists of the
last page of the Certificate.
<PAGE>
Exhibit "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
TO: 3D Systems Corporation
The undersigned, the holder of the enclosed Stock Option Agreement
(Non-Statutory Stock Option), hereby irrevocably elects to exercise the purchase
rights represented by the Option and to purchase thereunder ______* shares of
Common Stock of 3D Systems Corporation (the "Company"), and herewith encloses
payment of $__________ and/or _________ shares of the Company's Common Stock in
full payment of the purchase price of such shares being purchased.
Dated:
__________________________________________________
(Signature must conform in all
respects to name of holder as specified
on the face of the Option)
(Please Print Name)
(Address)
* Insert here the number of shares called for on the face of the Option
(or, in the case of a partial exercise, the number of shares being exercised),
in either case without making any adjustment for additional Common Stock of the
Company, other securities or property which, pursuant to the adjustment
provisions of the Option, may be deliverable upon exercise.
<PAGE>
OPTION CERTIFICATE
(Employee Incentive Stock Option)
THIS IS TO CERTIFY that 3D Systems Corporation, a Delaware corporation
(the "Company"), has granted to the employee named below an incentive stock
option (the "Option") to purchase shares of the Company's Common Stock (the
"Shares"), under its 1996 Stock Incentive Plan (the "Plan"), and upon the terms
and conditions determined by the Compensation Committee (the "Committee") of the
Board of Directors of the Company (the "Board"), as follows:
Name of Employee:
Address of Employee:
Number of Shares:
Option Exercise Price:
Date of Grant:
Option Expiration Date:
Exercise Schedule: The Option shall become exercisable with respect to
25% of the number of shares subject to this Option (rounded up or down to the
nearest whole number) on each of the first four anniversaries of the Date of
Grant. Installments shall be cumulative, and the Option may be exercised as to
any and all shares of Common Stock covered by an installment at any time after
the installment becomes exercisable and prior to the expiration of termination
of the Option.
Summary of Other Terms: This Option is defined in the Stock Option
Agreement (Incentive Stock Option) (the "Option Agreement") which is attached to
this Option Certificate (the "Certificate") as Annex I. This Certificate
summarizes certain of the provisions of the Option Agreement for your
information, but is not complete. Your rights are governed by the Option
Agreement, not by this summary. The Company strongly suggests that you carefully
review the full Option Agreement prior to signing this Certificate or exercising
the Option.
Among the terms of the Option Agreement are the following:
Termination of Employment: While the Option terminates on the Option
Expiration Date, it will terminate earlier if you cease to be employed by the
Company or the direct or indirect subsidiary of the Company with whom you are
employed (transfer of employment from one subsidiary to another will not
constitute termination of employment). If your employment ends due to death, the
Option terminates eighteen months after the date of death, and is exercisable
during such eighteen-month period as to the portion of the Option which had
vested prior to the date of death. If your employment ends due to disability,
the Option terminates twelve months after the date of disability, and is
exercisable during such twelve-month period as to the portion of the Option
which had vested prior to the date of disability. If your employment ends
primarily as a result of an act of misconduct described in Section 4(g) of the
Plan, or during the period when your rights under the Option have been
1
<PAGE>
suspended by the Company pursuant to that Section, the Option will terminate
immediately. In all other cases, including retirement, the Option terminates
ninety days after the date of termination of employment, and is exercisable
during such time period as to the portion of the Option which had vested prior
to the date of termination of employment. See Section 5 of the attached Option
Agreement.
Transfer: The Option is personal to you, and cannot be sold,
transferred, assigned or otherwise disposed of to any other person, except upon
your death. See Section 13(d) of the attached Option Agreement.
Exercise: You can exercise the Option (while it is exercisable), in
whole or in part, by delivering to the Company a Notice of Exercise identical to
Exhibit "A" attached to the Option Agreement, accompanied by payment of, or
provision pursuant to the Option Agreement for the payment of, the Exercise
Price for the Shares to be purchased. The Company may require you to submit
certain written reassurances to the Company with respect to your status as a
shareholder. The Company will then issue a certificate to you for the Shares you
have purchased. You are under no obligation to exercise the Option. See Section
4 of the attached Option Agreement.
Adjustments upon Recapitalization: The Option contains provisions which
affect your rights in the event of stock splits, stock dividends, mergers and
other major corporate reorganizations. See Section 6 of the attached Option
Agreement.
Waiver: By signing this Certificate, you will be agreeing to all of the
terms of the Option Agreement, including those not summarized in this
Certificate. You will waive your rights to options or stock which may otherwise
have been promised to you. See Section 7 of the attached Option Agreement.
Withholding: The Company may require you to make any arrangements
necessary to insure the proper withholding of any amount of tax, if any,
required to be withheld by the Company as a result of the exercise of the
Option. See Section 10 of the attached Option Agreement.
Value of Shares: If you are granted an Option first exercisable in any
one calendar year to purchase Shares valued in excess of $100,000 on the grant
date, then for tax purposes the incremental portion of such Shares with an
aggregate fair market value in excess of $100,000 shall be treated as
non-statutory stock options, rather than as incentive stock options (as that
term is defined in Section 422 of the Internal Revenue Code of 1986, as
amended).
2
<PAGE>
A G R E E M E N T
3D Systems Corporation, a Delaware corporation, and the Employee each
hereby agrees to be bound by all of the terms and conditions of the Stock Option
Agreement (Incentive Stock Option) which is attached hereto as Annex I and
incorporated herein by this reference as if set forth in full in this document.
DATED:_______________________
3D SYSTEMS CORPORATION
By:_____________________________
Its: Vice President and General Counsel
EMPLOYEE
---------------------------------
Name:
---------------------------------
(Please print your name exactly as you
wish it to appear on any stock certificates
issued to you upon exercise of the
Option)
3
<PAGE>
ANNEX I
STOCK OPTION AGREEMENT
(Employee Incentive Stock Option)
This STOCK OPTION AGREEMENT (this "Option Agreement") is made and
entered into on the execution date of the Option Certificate to which it is
attached (the "Certificate"), by and between 3D Systems Corporation, a Delaware
corporation (the "Company"), and the employee named in the Certificate
("Employee").
Pursuant to the 3D Systems Corporation 1996 Stock Incentive Plan (the
"Plan"), the Compensation Committee (the "Committee") of the Board of Directors
of the Company (the "Board") has authorized the grant to Employee of an
incentive stock option to purchase shares of the Company's Common Stock, par
value $0.001 per share (the "Common Stock"), upon the terms and subject to the
conditions set forth in this Option Agreement and in the Plan.
The Company and Employee agree as follows:
1. Grant of Option.
The Company hereby grants to Employee the right and option
(the "Option"), upon the terms and subject to the conditions set forth in this
Option Agreement, to purchase all or any portion of that number of shares of the
Common Stock (the "Shares") set forth in the Certificate, at the Option exercise
price set forth in the Certificate (the "Exercise Price").
2. Term of Option.
The Option shall terminate and expire on the Option Expiration
Date set forth in the Certificate, unless sooner terminated as provided herein.
In no event shall the Option be exercisable after the expiration of ten years
from the date it was granted.
3. Exercise Period.
(a) Subject to the provisions of Sections 3(b) and 5 of this
Option Agreement, the Option shall become exercisable (in whole or in part) upon
and after the dates set forth or referred to under the caption "Exercise
Schedule" in the Certificate. The installments shall be cumulative; i.e., the
Option may be exercised, as to any or all Shares covered by an installment, at
any time or times after the installment first becomes exercisable and until
expiration or termination of the Option.
(b) Notwithstanding anything to the contrary contained in this
Option Agreement, the Option may not be exercised, in whole or in part, unless
and until any then-applicable requirements of all federal, state and local laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Company and its counsel. In addition, if the Company believes that
Employee has committed an act of misconduct as described in Section 4(g) of the
Plan (which acts of misconduct ("Acts of Misconduct") include an act of
embezzlement, fraud, nonpayment of any obligation owed to the Company or any
subsidiary, breach of fiduciary duty or deliberate disregard of the Company's
rules
4
<PAGE>
resulting in loss, damage or injury to the Company, any unauthorized disclosure
of trade secrets or confidential information of the Company, any conduct
constituting unfair competition, or the inducement of any customer of the
Company to breach a contract with the Company), the Company may suspend the
Employee's rights under the Option pending a determination by the Board of
Directors, which shall have the right, as therein provided, to terminate the
Option.
4. Exercise of Option.
There is no obligation to exercise the Option, in whole or in
part. The Option may be exercised, in whole or in part, only by delivery to the
Company of:
(a) written notice of exercise in form and substance identical
to Exhibit "A" attached to this Option Agreement stating the number of shares of
Common Stock then being purchased (the "Purchased Shares");
(b) the Exercise Price for each Purchased Share shall be paid
in full upon exercise and shall be payable in cash in United States dollars
(including check, bank draft or money order); provided, however, that in lieu of
cash the person exercising the Option may pay the Exercise Price in whole or in
part by delivering to the Company shares of the Common Stock having a fair
market value on the date of exercise of the Option, determined as provided in
Section 4(c), equal to the Exercise Price for the Shares being purchased; except
that (i) any portion of the Exercise Price representing a fraction of a Share
shall in any event be paid in cash and (ii) no shares of the Common Stock which
have been held for less than six months may be delivered in payment of the
Exercise Price of an Option. Delivery of shares may also be accomplished through
the effective transfer to the Company of shares held by a broker or other agent.
The Company will also cooperate with any person who participates in a cashless
exercise program of a broker or other agent under which all or part of the
shares received upon exercise of the Option are sold through the broker or other
agent or under which the broker or other agent makes a loan to such person.
Notwithstanding the foregoing, the exercise of the Option shall not be deemed to
occur and no shares of Common Stock will be issued by the Company upon exercise
of the Option until the Company has received payment of the Exercise Price in
full. The date of exercise of an Option shall be determined under procedures
established by the Committee. Payment of the Exercise Price with shares shall
not increase the number of shares of the Common Stock which may be issued under
the Plan.
(c) If payment is made, in whole or in part, by transfer to
the Corporation of issued and outstanding shares of Common Stock, the value of
such shares shall be the mean between the following prices, as applicable, for
the date as of which fair market value is to be determined as quoted in The Wall
Street Journal (or in such other reliable publication as the Company, in its
discretion, may determine to rely upon): (i) if the Common Stock is listed on a
United States securities exchange, the highest and lowest sales prices per share
of Common Stock for such date on the principal United States securities exchange
on which the Common Stock is listed, or (ii) if the Common Stock is not listed
on any such exchange, the highest and lowest sales prices per share of the
Common Stock for such date on the Nasdaq National Market or any successor system
then in use. If there are no such sale price quotations for the date as of which
fair market value is to be determined but there are such sale price quotations
within a reasonable period both before and after such date, then fair market
value shall be determined by taking an average of the means between the highest
and lowest sales prices per share of the Common Stock as so quoted on the
nearest date before and the nearest date after the date as of which fair market
value is to be determined. If there are no such sale price quotations on or
within a reasonable period both before and after the date as of which fair
market value is to be determined, then fair market value of the Common Stock
shall be the mean between the bona fide bid and asked prices per share of
5
<PAGE>
Common Stock as so quoted for such date on Nasdaq, or if none, the average of
the means between such bid and asked prices on the nearest trading date before
and the nearest trading date after the date as of which fair market value is to
be determined, if both such dates are within a reasonable period. If the fair
market value of the Common Stock cannot be determined on the basis set forth
above, the Committee shall in good faith determine the fair market value of the
Common Stock as of such date.
5. Termination of Employment.
(a) If Employee shall cease to be an employee of the Company,
or any direct or indirect subsidiary of the Company, (other than as the result
of the transfer of employment of Employee to another corporation which is the
Company, or any direct or indirect subsidiary of the Company) for any reason
other than death or permanent disability (a "Terminating Event"), Employee shall
have the right, subject to the provisions of Section 5(b) below, to exercise the
Option at any time following such Terminating Event until the earliest to occur
of (x) 90 days following the date of such Terminating Event and (y) the
expiration of the term of this Option as set forth in Section 2 of this Option
Agreement. The Option may be exercised following a Terminating Event only to the
extent exercisable as of the date of the Terminating Event. To the extent
unexercised at the end of the period referred to above, the Option shall
terminate. The Committee, in its sole and absolute discretion, shall determine
whether authorized leaves of absence shall constitute termination of employment
for purposes of this Option Agreement.
(b) Notwithstanding the provisions of Section 5(a), above, if
Employee shall cease to be an employee of the Company, or any direct or indirect
subsidiary of the Company (other than as the result of the transfer of
employment of Employee to another corporation which is the Company, or any
direct or indirect subsidiary of the Company) primarily as a result of any Act
of Misconduct described in Section 4(g) of the Plan, or during the period when
Employee's rights under this Option Agreement have been suspended by the Company
pursuant to Section 4(g) of the Plan, Employee's rights to exercise the Option
shall terminate immediately.
(c) If, by reason of death or disability (a "Special
Terminating Event"), Employee shall cease to be an employee the Company or any
direct or indirect subsidiary of the Company (other than as the result of the
transfer of employment of Employee to another corporation which is the Company,
or any direct or indirect subsidiary of the Company), then Employee, Employee's
executors or administrators or any person or persons acquiring the Option
directly from Employee by bequest or inheritance, shall have the right to
exercise the Option (i) in the event of Employee's disability, within twelve
months following the date of such Special Terminating Event, or (ii) in the
event of Employee's death, within eighteen months following the date of such
Special Terminating Event. The Option may be exercised following a Special
Terminating Event only to the extent exercisable at the date of the Special
Terminating Event. To the extent unexercised at the end of the period referred
to above, the Option shall terminate.
(d) For purposes of this Option Agreement, "disability" shall
mean total and permanent disability as defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the "Code"). Employee shall not be
considered permanently disabled unless he furnishes proof of such disability in
such form and manner, and at such times, as the Committee may from time to time
require.
6
<PAGE>
6. Adjustments upon Recapitalization.
In the event of any change in the outstanding shares of the
Common Stock or other securities then subject to the Plan by reason of any stock
split, reverse stock split, stock dividend, recapitalization, merger,
consolidation, combination or exchange of shares or other similar corporate
change, or if the outstanding securities of the class then subject to this
Agreement are exchanged for or converted into cash, property or a different kind
of securities, or if cash, property or securities are distributed in respect of
such outstanding securities (other than a regular cash divided) then, unless the
terms of such transaction shall otherwise provide, such equitable adjustments
shall be made by the Board, or the Committee, in the Option (including, without
limitation, appropriate and proportionate adjustments to the number and type of
shares or other securities or cash or other property that may be acquired
pursuant to exercise of the Option); and any such adjustments made by the Board
or the Committee shall be final, binding and conclusive for any and all
purposes.
7. Waiver of Rights to Purchase Stock.
By signing this Option Agreement, Employee acknowledges and
agrees that neither the Company nor any other person or entity is under any
obligation to sell or transfer to Employee any option or equity security of the
Company, other than the shares of Common Stock subject to the Option and any
other right or option to purchase Common Stock which was previously granted in
writing to Employee by the Committee (or the Board). By signing this Option
Agreement, Employee specifically waives all rights which he or she may have had
prior to the date of this Option Agreement (other than any other right or option
to purchase Common Stock which was previously granted in writing to Employee by
the Committee or the Board) to receive any option or equity security of the
Company.
8. No Rights as Shareholder.
Except as provided in Section 6 of this Option Agreement,
Employee shall have no rights as a shareholder with respect to the Shares until
the date of the issuance to Optionee of a stock certificate or stock
certificates evidencing such Shares. Except as may be provided in Section 6 of
this Option Agreement, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued.
9. Modification.
Subject to the terms and conditions and within the limitations
of the Plan, the Committee (or the Board) may modify, extend or renew the Option
or accept the surrender of, and authorize the grant of a new option in
substitution for, the Option (to the extent not previously exercised). No
modification of the Option shall be made which, without the consent of Employee,
would cause the Option to fail to continue to qualify as an "incentive stock
option" within Section 422 of the Code or would alter or impair any rights of
the Employee under the Option.
10. Disqualifying Disposition; Withholding.
(a) Employee agrees that should he or she make a "disposition"
(as defined in Section 424(c) of the Code) of all or any of the Purchased Shares
within two years from the date of the grant of the Option or within one year
after the issuance of such Purchased Shares, he or she shall
7
<PAGE>
immediately advise the Company in writing as to the occurrence of the sale and
the price realized upon the sale of such Purchased Shares. Employee agrees that
he or she shall maintain all Purchased Shares in his or her name so long as he
or she maintains beneficial ownership of such Shares.
(b) The Company shall be entitled to require as a condition of
delivery of any Purchased Shares upon exercise of any Option that the Employee
agree to remit, at the time of such delivery or at such later date as the
Company may determine, an amount sufficient to satisfy all federal, state and
local withholding tax requirements relating thereto, and Employee agrees to take
such other action required by the Company to satisfy such withholding
requirements.
11. Services of Option Holder.
In consideration for the grant of the Option, Employee agrees
to remain in the employ of, and shall continue to render services to, the
Company or any direct or indirect subsidiary of the Company, as the Committee
may from time to time direct, for a period of one year from the date of this
Option Agreement. This provision shall not obligate the Company, or such
subsidiary, to continue to employ, or utilize the services of, Employee for any
period whatsoever. The sole remedy to the Company should Employee breach his or
her obligations under this Section 11 shall be to cancel this Option Agreement
and the Option granted under this Option Agreement. For the purposes of this
Option Agreement, the term "subsidiary" shall mean any present or future
corporation which would be a "subsidiary corporation" of the Company, as defined
in Section 424 of the Code.
12. Character of Option.
The Option is intended to qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.
13. General Provisions.
(a) Further Assurances. Employee shall promptly take all
actions and execute all documents requested by the Company which the Company
deems to be reasonably necessary to effectuate the terms and intent of this
Option Agreement.
(b) Notices. All notices, requests, demands and other
communications under this Option Agreement shall be in writing and shall be
given to the parties hereto as follows:
(i) If to the Company, to:
3D Systems Corporation
26081 Avenue Hall
Valencia, CA 91355
Attention: General Counsel
(ii) If to Employee, to the address set
forth in the records of the Company,
or at such other address or addresses as may have been furnished by such either
party in writing to the other party hereto. Any such notice, request, demand or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mail by first-class certified mail,
8
<PAGE>
return receipt requested, postage prepaid, addressed as aforesaid; or (ii) if
given by any other means, when delivered at the address specified in this
subparagraph (b).
(c) Transfer of Rights under this Option Agreement. The
Company may at any time transfer and assign its rights and delegate its
obligations under this Option Agreement to any other person, corporation, firm
or entity, including its officers, directors and stockholders, with or without
consideration.
(d) Option Non-Transferable. Employee may not sell, transfer,
assign or otherwise dispose of the Option except by will or the laws of descent
and distribution, and Options may be exercised during the lifetime of Employee
only by Employee or by his or her guardian or legal representative.
(e) Market Stand-Off. In the event of an underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
Employee shall not sell, make any short sale of, loan, hypothecate, pledge,
grant any option for the repurchase of, or otherwise dispose or transfer for
value, or otherwise agree to engage in any of the foregoing transactions with
respect to any shares of Common Stock without the prior written consent of the
Company or its underwriters, for such period of time from and after the
effective date of such registration statement as may be requested by the Company
or such underwriters (the "Market Stand-Off"); provided, however, that in no
event shall such period exceed 180 days.
(f) Successors and Assigns. Except to the extent specifically
limited by the terms and provisions of this Option Agreement, this Option
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns, heirs and personal representatives.
(g) Governing Law. THIS OPTION AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE
TO CONTRACTS MADE IN, AND TO BE PERFORMED SOLELY WITHIN, THAT STATE.
(h) The Plan. This Option Agreement is made pursuant to the
Plan, and it is intended, and shall be interpreted in a manner, to comply
therewith. Any provision of this Option Agreement inconsistent with the Plan
shall be superseded and governed by the Plan.
(i) Miscellaneous. Titles and captions contained in this
Option Agreement are inserted for convenience of reference only and do not
constitute a part of this Option Agreement for any other purpose.
The Signature Page to this Option Agreement consists of the
last page of the Certificate.
9
<PAGE>
Exhibit "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
TO: 3D Systems Corporation
The undersigned, the holder of the enclosed Stock Option Agreement
(Incentive Stock Option), hereby irrevocably elects to exercise the purchase
rights represented by the Option and to purchase thereunder ______* shares of
Common Stock of 3D Systems Corporation (the "Company"), and herewith encloses
payment of $__________ and/or _________ shares of the Company's Common Stock in
full payment of the purchase price of such shares being purchased.
Dated: _______________________
---------------------------------------
(Signature must conform in all respects
to name of holder as specified on the face of
the Option)
---------------------------------------
(Please Print Name)
---------------------------------------
(Address)
---------------------------------------
* Insert here the number of shares called for on the face of the Option
(or, in the case of a partial exercise, the number of shares being exercised),
in either case without making any adjustment for additional Common Stock of the
Company, other securities or property which, pursuant to the adjustment
provisions of the Option, may be deliverable upon exercise.
10
<PAGE>
OPTION CERTIFICATE
(Employee Non-Statutory Stock Option)
THIS IS TO CERTIFY that 3D Systems Corporation, a Delaware corporation
(the "Company"), has granted to the employee named below a non-statutory stock
option (the "Option") to purchase shares of the Company's Common Stock (the
"Shares"), under its 1996 Stock Incentive Plan (the "Plan"), and upon the terms
and conditions determined by the Compensation Committee (the "Committee") of the
Board of Directors of the Company (the "Board"), as follows:
Name of Employee:
Address of Employee:
_____________________________
_____________________________
Number of Shares:
Option Exercise Price: $______________ per share
Date of Grant: _______________ ___, 199
Option Expiration Date: _______________ ___, 200
Exercise Schedule: The Option shall become exercisable with respect to
25% of the number of shares subject to this Option (rounded up or down to the
nearest whole number) on each of the first four anniversaries of the Date of
Grant. Installments shall be cumulative, and the Option may be exercised as to
any and all shares of Common Stock covered by an installment at any time after
the installment becomes exercisable and prior to the expiration of termination
of the Option.
Summary of Other Terms: This Option is defined in the Stock Option
Agreement (Non-Statutory Stock Option) (the "Option Agreement") which is
attached to this Option Certificate (the "Certificate") as Annex I. This
Certificate summarizes certain of the provisions of the Option Agreement for
your information, but is not complete. Your rights are governed by the Option
Agreement, not by this summary. The Company strongly suggests that you carefully
review the full Option Agreement prior to signing this Certificate or exercising
the Option.
Among the terms of the Option Agreement are the following:
Termination of Employment: While the Option terminates on the Option
Expiration Date, it will terminate earlier if you cease to be employed by the
Company or the direct or indirect subsidiary of the Company with whom you are
employed (transfer of employment from one subsidiary to another will not
constitute termination of employment). If your
<PAGE>
employment ends due to retirement or death, the Option terminates eighteen
months after the date of retirement or death, and is exercisable during such
eighteen-month period as to the portion of the Option which had vested prior to
the date of retirement or death. If your employment ends due to disability, the
Option terminates twelve months after the date of disability, and is exercisable
during such twelve-month period as to the portion of the Option which had vested
prior to the date of disability. If your employment ends primarily as a result
of an act of misconduct described in Section 4(g) of the Plan, or during the
period when your rights under the Option have been suspended by the Company
pursuant to that Section, the Option will terminate immediately. In all other
cases, the Option terminates ninety days after the date of termination of
employment, and is exercisable during such time period as to the portion of the
Option which had vested prior to the date of termination of employment. See
Section 5 of the attached Option Agreement.
Transfer: The Option is personal to you, and cannot be sold,
transferred, assigned or otherwise disposed of to any other person, except upon
your death. See Section 13(d) of the attached Option Agreement.
Exercise: You can exercise the Option (while it is exercisable), in
whole or in part, by delivering to the Company a Notice of Exercise identical to
Exhibit "A" attached to the Option Agreement, accompanied by payment of, or
provision pursuant to the Option Agreement, for the payment of, the Exercise
Price for the Shares to be purchased. The Company may require you to submit
certain written reassurances to the Company with respect to your status as a
shareholder. The Company will then issue a certificate to you for the Shares you
have purchased. You are under no obligation to exercise the Option. See Section
4 of the attached Option Agreement.
Adjustments upon Recapitalization: The Option contains provisions which
affect your rights in the event of stock splits, stock dividends, mergers and
other major corporate reorganizations. See Section 6 of the attached Option
Agreement.
Waiver: By signing this Certificate, you will be agreeing to all of the
terms of the Option Agreement, including those not summarized in this
Certificate. You will waive your rights to options or stock which may otherwise
have been promised to you. See Section 7 of the attached Option Agreement.
Withholding: The Company may require you to make any arrangements
necessary to insure the proper withholding of any amount of tax, if any,
required to be withheld by the Company as a result of the exercise of the
Option. See Section 10 of the attached Option Agreement.
<PAGE>
A G R E E M E N T
3D Systems Corporation, a Delaware corporation, and Employee each
hereby agrees to be bound by all of the terms and conditions of the Stock Option
Agreement (Non-Statutory Stock Option) which is attached hereto as Annex I and
incorporated herein by this reference as if set forth in full in this document.
DATED
3D SYSTEMS CORPORATION
By:
Its:
EMPLOYEE
___________________________________
Name:
(Please print
your name exactly as you wish it to appear
on any stock certificates issued to you upon
exercise of the Option)
<PAGE>
ANNEX I
STOCK OPTION AGREEMENT
(Non-Statutory Stock Option)
This STOCK OPTION AGREEMENT (this "Option Agreement") is made and
entered into on the execution date of the Option Certificate to which it is
attached (the "Certificate"), by and between 3D Systems Corporation, a Delaware
corporation (the "Company"), and the employee named in the Certificate
("Employee").
Pursuant to the 3D Systems Corporation 1996 Stock Incentive Plan (the
"Plan"), the Compensation Committee (the "Committee") of the Board of Directors
of the Company (the "Board") has authorized the grant to Employee of a
non-statutory stock option to purchase shares of the Company's Common Stock, par
value $0.001 per share (the "Common Stock"), upon the terms and subject to the
conditions set forth in this Option Agreement and in the Plan.
The Company and Employee agree as follows:
1. Grant of Option.
The Company hereby grants to Employee the right and option
(the "Option"), upon the terms and subject to the conditions set forth in this
Option Agreement, to purchase all or any portion of that number of shares of the
Common Stock (the "Shares") set forth in the Certificate, at the Option exercise
price set forth in the Certificate (the "Exercise Price").
2. Term of Option.
The Option shall terminate and expire on the Option Expiration
Date set forth in the Certificate, unless sooner terminated as provided herein.
In no event shall the Option be exercisable after the expiration of ten years
from the date it was granted.
3. Exercise Period.
<PAGE>
(a) Subject to the provisions of Sections 3(b) and 5 of this
Option Agreement, the Option shall become exercisable (in whole or in part) upon
and after the dates set forth or referred to under the caption "Exercise
Schedule" in the Certificate. The installments shall be cumulative; i.e., the
Option may be exercised, as to any or all Shares covered by an installment, at
any time or times after the installment first becomes exercisable and until
expiration or termination of the Option.
(b) Notwithstanding anything to the contrary contained in this
Option Agreement, the Option may not be exercised, in whole or in part, unless
and until any then-applicable requirements of all federal, state and local laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Company and its counsel. In addition, if the Company believes that
Employee has committed an act of misconduct as described in Section 4(g) of the
Plan (which acts of misconduct ("Acts of Misconduct") include an act of
embezzlement, fraud, nonpayment of any obligation owed to the Company or any
subsidiary, breach of fiduciary duty or deliberate disregard of the Company's
rules resulting in loss, damage or injury to the Company, any unauthorized
disclosure of trade secrets or confidential information of the Company, any
conduct constituting unfair competition, or the inducement of any customer of
the Company to breach a contract with the Company), the Company may suspend the
Employee's rights under the Option pending a determination by the Board of
Directors, which shall have the right, as therein provided, to terminate the
Option.
4. Exercise of Option.
There is no obligation to exercise the Option, in whole or in
part. The Option may be exercised, in whole or in part, only by delivery to the
Company of:
(a) written notice of exercise in form and substance identical
to Exhibit "A" attached to this Option Agreement stating the number of shares of
Common Stock then being purchased (the "Purchased Shares");
(b) the Exercise Price for each Purchased Share shall be paid
in full upon exercise and shall be payable in cash in United States dollars
(including check, bank draft or money order); provided, however, that in lieu of
cash the person exercising the Option may pay the Exercise Price in whole or in
part by delivering to the Company shares of the Common Stock having a fair
market value on the date of exercise of the Option, determined as provided in
Section 4(c), equal to the Exercise Price for the Shares being purchased; except
that (i) any portion of the Exercise Price representing a fraction of a Share
shall in any event be paid in cash and (ii) no shares of the Common Stock which
have been held for less than six months may be delivered in payment of the
Exercise Price of an Option. Delivery of shares may also be accomplished through
the effective transfer to the Company of shares held by a broker or
<PAGE>
other agent. The Company will also cooperate with any person who participates in
a cashless exercise program of a broker or other agent under which all or part
of the shares received upon exercise of the Option are sold through the broker
or other agent or under which the broker or other agent makes a loan to such
person. Notwithstanding the foregoing, the exercise of the Option shall not be
deemed to occur and no shares of Common Stock will be issued by the Company upon
exercise of the Option until the Company has received payment of the Exercise
Price in full. The date of exercise of an Option shall be determined under
procedures established by the Committee. Payment of the Exercise Price with
shares shall not increase the number of shares of the Common Stock which may be
issued under the Plan.
(c) If payment is made, in whole or in part, by transfer to
the Corporation of issued and outstanding shares of Common Stock, the value of
such shares shall be the mean between the following prices, as applicable, for
the date as of which fair market value is to be determined as quoted in The Wall
Street Journal (or in such other reliable publication as the Company, in its
discretion, may determine to rely upon): (i) if the Common Stock is listed on a
United States securities exchange, the highest and lowest sales prices per share
of Common Stock for such date on the principal United States securities exchange
on which the Common Stock is listed, or (ii) if the Common Stock is not listed
on any such exchange, the highest and lowest sales prices per share of the
Common Stock for such date on the Nasdaq National Market or any successor system
then in use. If there are no such sale price quotations for the date as of which
fair market value is to be determined but there are such sale price quotations
within a reasonable period both before and after such date, then fair market
value shall be determined by taking an average of the means between the highest
and lowest sales prices per share of the Common Stock as so quoted on the
nearest date before and the nearest date after the date as of which fair market
value is to be determined. If there are no such sale price quotations on or
within a reasonable period both before and after the date as of which fair
market value is to be determined, then fair market value of the Common Stock
shall be the mean between the bona fide bid and asked prices per share of Common
Stock as so quoted for such date on Nasdaq, or if none, the average of the means
between such bid and asked prices on the nearest trading date before and the
nearest trading date after the date as of which fair market value is to be
determined, if both such dates are within a reasonable period. If the fair
market value of the Common Stock cannot be determined on the basis set forth
above, the Committee shall in good faith determine the fair market value of the
Common Stock as of such date.
5. Termination of Employment.
(a) If Employee shall cease to be an employee of the Company,
or any direct or indirect subsidiary of the Company, (other than as the result
of the transfer of employment of Employee to another corporation which is the
Company, or any direct or indirect subsidiary of the Company) for any reason
other than retirement, death or permanent disability (a
<PAGE>
"Terminating Event"), Employee shall have the right, subject to the provisions
of Section 5(b) below, to exercise the Option at any time following such
Terminating Event until the earliest to occur of (x) 90 days following the date
of such Terminating Event and (y) the expiration of the term of this Option as
set forth in Section 2 of this Option Agreement. The Option may be exercised
following a Terminating Event only to the extent exercisable as of the date of
the Terminating Event. To the extent unexercised at the end of the period
referred to above, the Option shall terminate. The Committee, in its sole and
absolute discretion, shall determine whether authorized leaves of absence shall
constitute termination of employment for purposes of this Option Agreement.
(b) Notwithstanding the provisions of Section 5(a), above, if
Employee shall cease to be an employee of the Company, or any direct or indirect
subsidiary of the Company (other than as the result of the transfer of
employment of Employee to another corporation which is the Company, or any
direct or indirect subsidiary of the Company) primarily as a result of any Act
of Misconduct described in Section 4(g) of the Plan, or during the period when
Employee's rights under this Option Agreement have been suspended by the Company
pursuant to Section 4(g) of the Plan, Employee's rights to exercise the Option
shall terminate immediately.
(c) If, by reason of retirement, death or disability (a
"Special Terminating Event"), Employee shall cease to be an employee the Company
or any direct or indirect subsidiary of the Company (other than as the result of
the transfer of employment of Employee to another corporation which is the
Company, or any direct or indirect subsidiary of the Company), then Employee,
Employee's executors or administrators or any person or persons acquiring the
Option directly from Employee by bequest or inheritance, shall have the right to
exercise the Option (i) in the event of Employee's disability, within twelve
months following the date of such Special Terminating Event, or (ii) in the
event of Employee's retirement, or in the event of Employee's death, within
eighteen months of either Special Terminating Event. The Option may be exercised
following a Special Terminating Event only to the extent exercisable at the date
of the Special Terminating Event. To the extent unexercised at the end of the
period referred to above, the Option shall terminate.
<PAGE>
(d) For purposes of this Option Agreement, "disability" shall
mean total and permanent disability as defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the "Code"). Employee shall not be
considered permanently disabled unless he furnishes proof of such disability in
such form and manner, and at such times, as the Committee may from time to time
require.
6. Adjustments upon Recapitalization.
In the event of any change in the outstanding shares of the
Common Stock or other securities then subject to the Plan by reason of any stock
split, reverse stock split, stock dividend, recapitalization, merger,
consolidation, combination or exchange of shares or other similar corporate
change, or if the outstanding securities of the class then subject to this
Agreement are exchanged for or converted into cash, property or a different kind
of securities, or if cash, property or securities are distributed in respect of
such outstanding securities (other than a regular cash divided) then, unless the
terms of such transaction shall otherwise provide, such equitable adjustments
shall be made by the Board, or the Committee, in the Option (including, without
limitation, appropriate and proportionate adjustments to the number and type of
shares or other securities or cash or other property that may be acquired
pursuant to exercise of the Option); and any such adjustments made by the Board
or the Committee shall be final, binding and conclusive for any and all
purposes.
7. Waiver of Rights to Purchase Stock.
By signing this Option Agreement, Employee acknowledges and
agrees that neither the Company nor any other person or entity is under any
obligation to sell or transfer to Employee any option or equity security of the
Company, other than the shares of Common Stock subject to the Option and any
other right or option to purchase Common Stock which was previously granted in
writing to Employee by the Committee (or the Board). By signing this Option
Agreement, Employee specifically waives all rights which he or she may have had
prior to the date of this Option Agreement (other than any other right or option
to purchase Common Stock which was previously granted in writing to Employee by
the Committee or the Board) to receive any option or equity security of the
Company.
8. No Rights as Shareholder.
Except as provided in Section 6 of this Option Agreement,
Employee shall have no rights as a shareholder with respect to the Shares until
the date of the issuance to Optionee of a stock certificate or stock
certificates evidencing such Shares. Except as may be provided in Section 6 of
this Option Agreement, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued.
<PAGE>
9. Modification.
Subject to the terms and conditions and within the limitations
of the Plan, the Committee (or the Board) may modify, extend or renew the Option
or accept the surrender of, and authorize the grant of a new option in
substitution for, the Option (to the extent not previously exercised). No
modification of the Option shall be made which, without the consent of Employee,
would alter or impair any rights of the Employee under the Option.
10. Withholding.
The Company shall be entitled to require as a condition of
delivery of any Purchased Shares upon exercise of any Option that the Employee
remit, or agree to remit, at the time of such delivery or at such later date as
the Company may determine, an amount sufficient to satisfy all federal, state
and local withholding tax requirements relating thereto, and Employee agrees to
take such other action required by the Company to satisfy such withholding
requirements.
11. Services of Option Holder.
In consideration for the grant of the Option, Employee agrees
to remain in the employ of, and shall continue to render services to, the
Company or any direct or indirect subsidiary of the Company, as the Committee
may from time to time direct, for a period of one year from the date of this
Option Agreement. This provision shall not obligate the Company, or such
subsidiary, to continue to employ, or utilize the services of, Employee for any
period whatsoever. The sole remedy to the Company should Employee breach his or
her obligations under this Section 11 shall be to cancel this Option Agreement
and the Option granted under this Option Agreement. For the purposes of this
Option Agreement, the term "subsidiary" shall mean any present or future
corporation which would be a "subsidiary corporation" of the Company, as defined
in Section 424 of the Code.
12. Character of Option.
The Option is not intended to qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.
13. General Provisions.
<PAGE>
(a) Further Assurances. Employee shall promptly take all
actions and execute all documents requested by the Company which the Company
deems to be reasonably necessary to effectuate the terms and intent of this
Option Agreement.
(b) Notices. All notices, requests, demands and other
communications under this Option Agreement shall be in writing and shall be
given to the parties hereto as follows:
1. If to the Company, to:
3D Systems Corporation
26081 Avenue Hall
Valencia, CA 91355
Attention: General Counsel
2. If to Employee, to the address set
forth in the records of the Company,
or at such other address or addresses as may have been furnished by such either
party in writing to the other party hereto. Any such notice, request, demand or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mail by first-class certified mail, return
receipt requested, postage prepaid, addressed as aforesaid; or (ii) if given by
any other means, when delivered at the address specified in this subparagraph
(b).
(c) Transfer of Rights under this Option Agreement. The
Company may at any time transfer and assign its rights and delegate its
obligations under this Option Agreement to any other person, corporation, firm
or entity, including its officers, directors and stockholders, with or without
consideration.
(d) Option Non-Transferable. Employee may not sell, transfer,
assign or otherwise dispose of the Option except by will or the laws of descent
and distribution, and Options may be exercised during the lifetime of Employee
only by Employee or by his or her guardian or legal representative.
(e) Market Stand-Off. In the event of an underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
Employee shall not sell, make any short sale of, loan, hypothecate, pledge,
grant any option for the repurchase of, or otherwise dispose or transfer
<PAGE>
for value, or otherwise agree to engage in any of the foregoing transactions
with respect to any shares of Common Stock without the prior written consent of
the Company or its underwriters, for such period of time from and after the
effective date of such registration statement as may be requested by the Company
or such underwriters (the "Market Stand-Off"); provided, however, that in no
event shall such period exceed 180 days.
(f) Successors and Assigns. Except to the extent specifically
limited by the terms and provisions of this Option Agreement, this Option
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns, heirs and personal representatives.
(g) Governing Law. THIS OPTION AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE
TO CONTRACTS MADE IN, AND TO BE PERFORMED SOLELY WITHIN, THAT STATE.
(h) The Plan. This Option Agreement is made pursuant to the
Plan, and it is intended, and shall be interpreted in a manner, to comply
therewith. Any provision of this Option Agreement inconsistent with the Plan
shall be superseded and governed by the Plan.
(h) Miscellaneous. Titles and captions contained in this
Option Agreement are inserted for convenience of reference only and do not
constitute a part of this Option Agreement for any other purpose.
The Signature Page to this Option Agreement consists of the
last page of the Certificate.
<PAGE>
Exhibit "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
TO: 3D Systems Corporation
The undersigned, the holder of the enclosed Stock Option Agreement
(Non-Statutory Stock Option), hereby irrevocably elects to exercise the purchase
rights represented by the Option and to purchase thereunder ______* shares of
Common Stock of 3D Systems Corporation (the "Company"), and herewith encloses
payment of $__________ and/or _________ shares of the Company's Common Stock in
full payment of the purchase price of such shares being purchased.
Dated:
________________________________________________
(Signature must conform in all
respects to name of holder as specified
on the face of the Option)
(Please Print Name)
(Address)
* Insert here the number of shares called for on the face of the Option
(or, in the case of a partial exercise, the number of shares being exercised),
in either case without making any adjustment for additional Common Stock of the
Company, other securities or property which, pursuant to the adjustment
provisions of the Option, may be deliverable upon exercise.
<PAGE>
October 1, 1999
Mr. Grant R. Flaharty
819 27 1/4 Road
Grand Junction, CO 81506
Dear Grant:
We are pleased to confirm your appointment as Vice President and General
Manager, 3D Systems Europe effective September 17, 1999, reporting to the
President and Chief Executive Officer of 3D Systems Corporation. The following
lists the specifics of this position:
Your base annual salary will be $165,000 or $6,346.15 per pay period.
You will also qualify for the 2000 Executive Compensation Plan. The amount of
the actual award will depend on the performance of the company and your
achievement against personal objectives.
We will recommend that the Compensation Committee of the Board of Directors
authorize a grant to you of an option to purchase 75,000 shares of common stock
of 3D Systems Corporation, with a term of ten years, under our 1996 Stock
Incentive Plan. The exercise price will be equal to the closing price of the
stock on the date of the grant, vesting in three equal annual installments (at
the end of each year), except that the vesting shall automatically accelerate in
the event of change of control of the Company, an acquisition of 51% of the
voting stock of the Company or a dissolution, liquidation, merger,
reclassification, or sale of substantially all of the property and assets of the
Company.
Your option agreements dated May 22 1998 and June 21, 1999 will be amended to
include the same change-of-control provision as above.
Your employment will continue to be on an "at-will" basis.
On behalf of the directors and officers of the Company, I welcome you to the
executive team and look forward to your contributions to maximizing 3D's
prosperity over the coming years.
Page 1 of 2
<PAGE>
If this arrangement is acceptable to you, please accept in the space provided
below and return a copy to me.
Sincerely,
Brian K. Service
President and Chief Executive Officer
CC: G. Walter Loewenbaum
ACCEPTED:
- - ---------------------------------------------------------
Grant R. Flaharty Date
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
this 1st day of May, 1999 (the "Effective Date"), by and between G. Walter
Loewenbaum ("Employee") and 3D Systems, Inc. ("Employer"). In consideration of
the covenants, representations and agreements set forth below, Employer and
Employee hereby agree as follows:
1. EMPLOYMENT OF EMPLOYEE. Employer hereby hires Employee, and Employee
hereby accepts such employment on the terms and conditions contained in this
Agreement.
2. TERM OF THE AGREEMENT. The initial term of this Agreement (the "Term")
shall commence upon the Effective Date and shall terminate six (6) months
thereafter (the "Termination Date"), unless sooner terminated as provided
herein. Employer and Employee may, upon mutual agreement, elect to continue
Employee's employment on an at-will basis (meaning that either Employee or
Employer may terminate the employment relationship at any time with or without
cause or notice), after the initial term of this Agreement.
3. SERVICES TO BE PROVIDED BY EMPLOYEE.
3.1 SCOPE, RESPONSIBILITIES AND DUTIES. Employee agrees to provide
services to Employer, generally in the fields of corporate strategy and investor
relations, approximately two working days in each working week, so that Employer
may have the benefit of the experience and knowledge possessed by Employee (the
"Services"). It shall be the duty of Employee in rendering the Services to make
such periodic reports to Employer as the officers or directors of Employer may,
from time to time, reasonably request.
3.2. NON-EXCLUSIVITY. Employee is a short-term, part time employee by
reason of the obligations ascribed to him hereunder, and shall not be required
to devote full time to the affairs of Employer. Subject to the provisions of
Section 7 below, Employee may accept other employment and perform services for
others.
4. COMPENSATION. As sole compensation for the Services to be provided by
Employee to Employer, Employer shall pay to Employee, and Employee agrees to
accept, the sum of Ten Thousand Dollars ($10,000) per month. Employee shall not
be entitled to any other compensation for the Services to be provided hereunder,
except as provided herein.
5. EXPENSES. Upon receipt of itemized vouchers, expense account reports and
supporting documents, submitted to Employer in accordance with Employer's
procedures then in effect, Employer shall reimburse Employee for all reasonable
and necessary business expenses incurred ordinarily and necessarily by Employee
in connection with the performance of Employee's duties hereunder.
<PAGE>
6. TERMINATION. Termination pursuant to this Section shall become effective
immediately upon receipt by Employee of written notice from Employer of such
termination.
6.1 TERMINATION FOR CAUSE. Employer may terminate this Agreement for
cause at any time without further obligation or liability to Employee. For
purposes of this subsection, "cause" shall mean (a) a willful breach by Employee
of any material provision of this Agreement; or (b) conviction of Employee of a
felony.
6.2 TERMINATION BY INCAPACITY OR DISABILITY OF EMPLOYEE. If Employee
shall become unable to fully perform the Services in accordance with the terms
of this Agreement due to incapacity, ill health or disability for a consecutive
period of four weeks, the Employer may, at its option, terminate this Agreement.
6.3 DEATH OF EMPLOYEE. Upon the death of Employee, this Agreement
shall terminate without further obligation or liability on the part of Employer
to Employee's estate.
7. CONFIDENTIALITY AND TRADE SECRETS. Employee acknowledges and agrees that
during the Term of this Agreement, and during any continuing term of employment
on at at-will basis he will become privy to important proprietary, confidential
business information and trade secrets that are the exclusive property of
Employer. This information includes, without limitation, business plans,
marketing concepts, designs, proposals, product information, financial
information, technology and costs, pricing information, customer lists, and key
accounts, including their credit information and product wants and needs (the
"Confidential Information"). This Confidential Information derives independent
economic value, both actual and potential, from not being generally known to the
public or to other persons who can obtain economic value from its disclosure and
use. As Employer has always held the Confidential Information as proprietary,
confidential trade secret information and has taken steps to insure that the
Confidential Information is not disclosed outside of 3D Systems, the
Confidential Information constitutes "trade secrets" under the Uniform Trade
Secrets Act, California Civil Code ss.3426(d)(1). In light of the foregoing,
Employee therefore agrees that: (1) he will not at any time, now or in the
future, share, disseminate, disclose, discuss or use the Confidential
Information in any way; and (2) upon termination of this Agreement, Employee
will return to Employer all property, writings and/or documents in his
possession or custody belonging to or relating to the affairs of Employer or any
of its subsidiaries or affiliates, or comprising or relating to the Confidential
Information.
8. OWNERSHIP OF INTELLECTUAL PROPERTY. Employee hereby acknowledges and
agrees that any and all copyrightable works authored by Employee in connection
with the performance of the Services, alone or with others, during the Term of
this Agreement, and during any continuing term of employment on at at-will
basis, shall be deemed to have been specially ordered or commissioned for use as
either a contribution to a collective work, as a translation, as a supplementary
work, as a compilation, or as an instructional text and, as such, shall be
deemed to be "works for hire" under the United States copyright laws from the
Page 2 of 16
<PAGE>
inception of creation of such works. In the event that any such works shall be
deemed by a court of competent jurisdiction not to be a "work made for hire,"
this Agreement shall operate as an irrevocable assignment by Employee to
Employer of all right, title and interest in and to such works, including
without limitation, all worldwide copyright interests therein, in perpetuity.
The fact that such copyrightable works are created by Employee outside of
Employer's facilities or other than during Employee's working hours with
Employer, shall not diminish Employer's rights with respect to such works which
otherwise fall within this subsection. Employee agrees to execute and deliver to
Employer such further instruments or documents as may be requested by Employer
in order to effectuate the purposes of this subsection.
9. RELATIONSHIP OF THE PARTIES. Employee enters into this Agreement as, and
shall continue to be, a short-term, part time Employee. Employee shall not be
entitled to any benefits except those required by law.
10. APPOINTMENT AS A DIRECTOR. The Board of Directors of Employer (the
"Board") has resolved to appoint Employee as a Class I Director and as Vice
Chairman of the Board. In this capacity, Employee will serve at the pleasure of
the Board and pursuant to Employer's bylaws.
11. STOCK OPTIONS. Concurrently with the execution of this Agreement as an
inducement to Employee to accept employment with Employer, Employee and Employer
are executing and delivering the Stock Option Agreement (the "Option Agreement")
attached hereto as Exhibit "A" and incorporated herein by this reference, which
grants to Employee the option to purchase one hundred fifty thousand (150,000)
shares of the Common Stock of 3D Systems Corporation (the "Company") at an
exercise price of one hundred fifteen percent (115%) of the closing price of the
Common Stock on May 3, 1999. This Option shall become exercisable six (6) months
from May 1, 1999.
12. ARBITRATION.
12.1 Any dispute regarding any aspect of this Agreement or any act
which would violate any provision in this Agreement (hereafter referred to as
"arbitrable disputes" shall be resolved by an experienced arbitrator licensed to
practice law in the State of California and selected in accordance with the
rules of the American Arbitration Association, as the exclusive remedy for such
dispute. Judgment on any award rendered by such arbitrator may be entered in any
court having proper jurisdiction.
12.2 Should Employee or Employer institute any legal action or
administrative proceeding regarding any dispute or matter covered by this
Section by any method other than said arbitration, the responding party shall be
entitled to recover from the other party all damages, costs, expenses and
attorney's fees incurred as a result of such action.
Page 3 of 16
<PAGE>
13. SEVERABILITY AND GOVERNING LAW.
13.1 Should any of the provisions in this Agreement be declared or be
determined to be illegal or invalid, all remaining parts, terms or provisions
shall be valid, and the illegal or invalid part, term or provision shall be
deemed not to be a part of this Agreement.
13.2 This Agreement is made and entered into in the State of
California and shall in all respects be interpreted, enforced and governed under
the laws of California.
14. PROPER CONSTRUCTION.
14.1 The language of all parts of this Agreement shall in all cases be
construed as a whole according to its fair meaning, and not strictly for or
against any of the parties.
14.2 As used in this Agreement, the term "or" shall be deemed to
include the term "and/or" and the singular or plural number shall be deemed to
include the other whenever the context so indicates or requires.
14.3 The paragraph headings used in this Agreement are intended solely
for convenience of reference and shall not in any manner amplify, limit, modify
or otherwise be used in the interpretation of any of the provisions hereof.
15. ENTIRE AGREEMENT. This Agreement is the entire agreement between
Employee and Employer and fully supersedes any and all prior agreements or
understandings between the parties pertaining to its subject matter.
16. NOTICES. All notices, requests, demands and other communications called
for or contemplated under this Agreement shall be in writing and shall be deemed
to have been duly given when personally delivered, on the date of transmission
if sent by facsimile, on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, postage prepaid, and properly
addressed as follows:
<TABLE>
<S> <C>
If to Employer: 3D Systems, Inc.
26801 Avenue Hall
Valencia, California 91355
Attn: A. Sidney Alpert
If to Employee: G. Walter Loewenbaum
1708 Windsor Road
Austin, TX 78703
</TABLE>
17. AMENDMENTS. This Agreement may not be amended, supplemented, canceled,
or discharged except by written instrument executed by the parties hereto.
Page 4 of 16
<PAGE>
18. WAIVERS. All waivers hereunder shall be in writing. No waiver by any
party hereto of any breach or anticipated breach of any provision of this
Agreement by any other party shall be deemed a waiver of any other
contemporaneous, preceding, or succeeding breach or anticipated breach, whether
or not similar, on the part of the same or any other party.
IN WITNESS WHEREOF, the parties hereto have hereby executed this Agreement
as of the day and year first written above.
3D SYSTEMS, INC.
By:
- - ----------------------------- ---------------------------------
G. Walter Loewenbaum Its:
--------------------------------
Page 5 of 16
<PAGE>
EXHIBIT A
OPTION CERTIFICATE
THIS IS TO CERTIFY that 3D Systems Corporation, a Delaware corporation
(the "COMPANY"), has granted to the employee of the Company named below a
non-statutory stock option (the "OPTION") to purchase shares of the Company's
Common Stock (the "SHARES"), and upon the terms and conditions determined by the
Compensation Committee (the "COMMITTEE") of the Board of Directors of the
Company (the "BOARD"), as follows:
<TABLE>
<CAPTION>
<S> <C>
NAME OF OPTIONEE: G. Walter Loewenbaum, III
ADDRESS OF OPTIONEE: c/o 3D Systems Corporation
26081 Avenue Hall
Valencia, CA 91355
NUMBER OF SHARES: 150,000
OPTION EXERCISE PRICE: $6.61251 per share
DATE OF GRANT: July 1, 1999
OPTION EXPIRATION DATE: Ten years from the Date of Grant.
</TABLE>
EXERCISE SCHEDULE: The Option shall become exercisable in full six months
from the Date of Grant, and the Option may be exercised as to any and all shares
of Common Stock after such six-month period has elapsed and prior to the
expiration or termination of the Option, pursuant to its terms.
OUTSIDE OF 1996 STOCK INCENTIVE PLAN: The Option has been granted outside
the 1996 Stock Incentive Plan and is not subject to the terms thereof.
SUMMARY OF OTHER TERMS: This Option is defined in the Stock Option
Agreement (Non-Statutory Stock Option) (the "OPTION AGREEMENT") which is
attached to this Option Certificate (the "CERTIFICATE") as Annex I. This
Certificate summarizes certain of the provisions of the Option Agreement for
your information, but is not complete. Your rights are governed by the Option
Agreement, NOT by this summary. The Company strongly suggests that you carefully
review the full Option Agreement prior to signing this Certificate or exercising
the Option.
Among the terms of the Option Agreement are the following:
TERMINATION OF EMPLOYMENT: While the Option terminates on the Option
Expiration Date, it will terminate earlier upon the termination of your
Relationship, as defined in the Option Agreement, with the Company or any direct
or indirect subsidiary of the Company (transfer of
- - -------------------
(1) Based on the 115% of the closing price of the Common Stock on May 3, 1999.
Page 6 of 16
<PAGE>
employment from one subsidiary to another will not constitute termination of
your Relationship). If your Relationship ends due to retirement or death, the
Option terminates eighteen months after the date of retirement or death, and is
exercisable during such eighteen-month period as to the portion of the Option
which had vested prior to the date of retirement or death. If your Relationship
ends due to disability, the Option terminates twelve months after the date of
disability, and is exercisable during such twelve-month period as to the portion
of the Option which had vested prior to the date of disability. If it is
determined that you have committed an act of misconduct described in Section
5(b) of the Option Agreement, or during the period when your rights under the
Option have been suspended by the Company pursuant to Section 5(b), the Option
will terminate immediately. In all other cases, the Option terminates ninety
days after the date of termination of your Relationship, and is exercisable
during such time period as to the portion of the Option which had vested prior
to the date of termination of your Relationship. See Section 5 of the attached
Option Agreement.
TRANSFER: The Option is personal to you, and cannot be sold, transferred,
assigned or otherwise disposed of to any other person, except upon your death.
See Section 13(d) of the attached Option Agreement.
EXERCISE: You can exercise the Option (while it is exercisable), in whole
or in part, by delivering to the Company a Notice of Exercise identical to
Exhibit "A" attached to the Option Agreement, accompanied by payment of, or
provision pursuant to the Option Agreement for the payment of, the Exercise
Price for the Shares to be purchased. The Company may require you to submit
certain written assurances to the Company with respect to your status as a
shareholder. The Company will then issue a certificate to you for the Shares you
have purchased. You are under no obligation to exercise the Option. See Section
4 of the attached Option Agreement.
ADJUSTMENTS UPON RECAPITALIZATION: The Option contains provisions which
affect your rights in the event of stock splits, stock dividends, mergers and
other major corporate reorganizations. See Section 6 of the attached Option
Agreement.
WAIVER: By signing this Certificate, you will be agreeing to all of the
terms of the Option Agreement, including those not summarized in this
Certificate. You will waive your rights to options or stock which may otherwise
have been promised to you. See Section 7 of the attached Option Agreement.
WITHHOLDING: The Company may require you to make any arrangements necessary
to insure the proper withholding of any amount of tax, if any, required to be
withheld by the Company as a result of the exercise of the Option. See Section
10 of the attached Option Agreement.
Page 7 of 16
<PAGE>
A G R E E M E N T
3D Systems Corporation, a Delaware corporation, and Optionee each hereby
agrees to be bound by all of the terms and conditions of the Stock Option
Agreement (Non-Statutory Stock Option) which is attached hereto as Annex I and
incorporated herein by this reference as if set forth in full in this document.
DATED:____________________________
3D SYSTEMS CORPORATION
By:__________________________________
Its: Chief Executive Officer
OPTIONEE
Name:________________________________
________________________________
(Please print your name exactly as you wish it to appear on
any stock certificates issued to you upon exercise of the Option)
Page 8 of 16
<PAGE>
ANNEX I
STOCK OPTION AGREEMENT
(Non-Statutory Stock Option)
This STOCK OPTION AGREEMENT (this "OPTION AGREEMENT") is made and entered
into on the execution date of the Option Certificate to which it is attached
(the "CERTIFICATE"), by and between 3D Systems Corporation, a Delaware
corporation (the "COMPANY"), and the employee of the Company named in the
Certificate ("OPTIONEE").
The Board of Directors of the Company (the "BOARD") has authorized the
grant to Optionee of a non-statutory stock option to purchase shares of the
Company's Common Stock, par value $0.001 per share (the "COMMON STOCK"), upon
the terms and subject to the conditions set forth in this Option Agreement.
The Company and Optionee agree as follows:
1. GRANT OF OPTION.
The Company hereby grants to Optionee the right and option (the "OPTION"),
upon the terms and subject to the conditions set forth in this Option Agreement,
to purchase all or any portion of that number of shares of the Common Stock (the
"SHARES") set forth in the Certificate, at the Option exercise price set forth
in the Certificate (the "EXERCISE PRICE").
2. TERM OF OPTION.
The Option shall terminate and expire on the Option Expiration Date set
forth in the Certificate, unless sooner terminated as provided herein. In no
event shall the Option be exercisable after the expiration of ten years from the
date it was granted.
3. EXERCISE PERIOD.
(a) Subject to the provisions of Sections 3(b) and 5 of this Option
Agreement, the Option shall become exercisable (in whole or in part) upon and
after the dates set forth or referred to under the caption "Exercise Schedule"
in the Certificate. The installments shall be cumulative; I.E., the Option may
be exercised, as to any or all Shares covered by an installment, at any time or
times after the installment first becomes exercisable and until expiration or
termination of the Option.
Page 9 of 16
<PAGE>
(b) Notwithstanding anything to the contrary contained in this Option
Agreement, the Option may not be exercised, in whole or in part, unless and
until any then-applicable requirements of all federal, state and local laws and
regulatory agencies shall have been fully complied with to the satisfaction of
the Company and its counsel. In addition, if the Company believes that Optionee
has committed an act of misconduct, including an act of embezzlement, fraud,
nonpayment of any obligation owed to the Company or any subsidiary, breach of
fiduciary duty or deliberate disregard of the Company's rules resulting in loss,
damage or injury to the Company, any unauthorized disclosure of trade secrets or
confidential information of the Company, any conduct constituting unfair
competition, or the inducement of any customer of the Company to breach a
contract with the Company), the Company may suspend the Optionee's rights under
the Option pending a determination by the Board of Directors, which shall have
the right, as therein provided, to terminate the Option.
4. EXERCISE OF OPTION.
There is no obligation to exercise the Option, in whole or in part. The
Option may be exercised, in whole or in part, only by delivery to the Company
of:
(a) written notice of exercise in form and substance identical to Exhibit
"A" attached to this Option Agreement stating the number of shares of Common
Stock then being purchased (the "PURCHASED SHARES");
(b) the Exercise Price for each Purchased Share shall be paid in full upon
exercise and shall be payable in cash in United States dollars (including check,
bank draft or money order); PROVIDED, HOWEVER, that in lieu of cash the person
exercising the Option may pay the Exercise Price in whole or in part by
delivering to the Company shares of the Common Stock having a fair market value
on the date of exercise of the Option, determined as provided in Section 4(c),
equal to the Exercise Price for the Shares being purchased; except that (i) any
portion of the Exercise Price representing a fraction of a Share shall in any
event be paid in cash and (ii) no shares of the Common Stock which have been
held for less than six months may be delivered in payment of the Exercise Price
of an Option. Delivery of shares may also be accomplished through the effective
transfer to the Company of shares held by a broker or other agent. The Company
will also cooperate with any person who participates in a cashless exercise
program of a broker or other agent under which all or part of the shares
received upon exercise of the Option are sold through the broker or other agent
or under which the broker or other agent makes a loan to such person.
Notwithstanding the foregoing, the exercise of the Option shall not be deemed to
occur and no shares of Common Stock will be issued by the Company upon exercise
of the Option until the Company has received payment of the Exercise Price in
full. The date of exercise of an Option shall be determined under procedures
established by the Committee.
(c) If payment is made, in whole or in part, by transfer to the Corporation
of issued and outstanding shares of Common Stock, the value of such shares shall
be the mean between the following prices, as applicable, for the date as of
which fair market value is to be determined as quoted in THE WALL STREET JOURNAL
(or in such other reliable publication as the Company, in its
Page 10 of 16
<PAGE>
discretion, may determine to rely upon): (i) if the Common Stock is listed on a
United States securities exchange, the highest and lowest sales prices per share
of Common Stock for such date on the principal United States securities exchange
on which the Common Stock is listed, or (ii) if the Common Stock is not listed
on any such exchange, the highest and lowest sales prices per share of the
Common Stock for such date on the Nasdaq National Market or any successor system
then in use. If there are no such sale price quotations for the date as of which
fair market value is to be determined but there are such sale price quotations
within a reasonable period both before and after such date, then fair market
value shall be determined by taking an average of the means between the highest
and lowest sales prices per share of the Common Stock as so quoted on the
nearest date before and the nearest date after the date as of which fair market
value is to be determined. If there are no such sale price quotations on or
within a reasonable period both before and after the date as of which fair
market value is to be determined, then fair market value of the Common Stock
shall be the mean between the bona fide bid and asked prices per share of Common
Stock as so quoted for such date on Nasdaq, or if none, the average of the means
between such bid and asked prices on the nearest trading date before and the
nearest trading date after the date as of which fair market value is to be
determined, if both such dates are within a reasonable period. If the fair
market value of the Common Stock cannot be determined on the basis set forth
above, the Committee shall in good faith determine the fair market value of the
Common Stock as of such date.
5. TERMINATION OF EMPLOYMENT.
(a) If Optionee shall cease to have a Relationship (as defined below) with
the Company, or any direct or indirect subsidiary of the Company, (other than as
the result of the transfer of employment of Optionee to another corporation
which is the Company, or any direct or indirect subsidiary of the Company) for
any reason other than retirement, death or permanent disability (a "TERMINATING
EVENT"), Optionee shall have the right, subject to the provisions of Section
5(b) below, to exercise the Option at any time following such Terminating Event
until the earliest to occur of (x) 90 days following the date of such
Terminating Event and (y) the expiration of the term of this Option as set forth
in Section 2 of this Option Agreement. For purposes of this Option Agreement,
Optionee shall have a "RELATIONSHIP" with the Company so long as Optionee is
either a member of the Board of Directors of the Company, a consultant of the
Company, or an employee of the Company. The Option may be exercised following a
Terminating Event only to the extent exercisable as of the date of the
Terminating Event. To the extent unexercised at the end of the period referred
to above, the Option shall terminate. The Committee, in its sole and absolute
discretion, shall determine whether (i) authorized leaves of absence shall
constitute termination of Optionee's Relationship with the Company and (ii)
Optionee's Relationship with the Company has terminated, for purposes of this
Option Agreement.
(b) Notwithstanding the provisions of Section 5(a) above, if the Company
believes that Optionee has committed an act of misconduct as described below,
the Company may suspend Optionee's rights under the Option pending a
determination by the Board of Directors of the Company. If the Board of
Directors determines that Optionee has committed an act of embezzlement, fraud,
nonpayment of any obligation owed to the Company or any subsidiary, breach of
fiduciary duty or deliberate disregard of the Company's rules resulting in loss,
damage or injury
Page 11 of 16
<PAGE>
to the Company, or if an Optionee makes an unauthorized disclosure of trade
secret or confidential information of the Company, engages in any conduct
constituting unfair competition, or induces any customer of the Company to
breach a contract with the Company, neither the Optionee nor his or her estate
shall be entitled to exercise any rights whatsoever with respect to the Option.
In making such determination, the Board of Directors shall act fairly and shall
give the Optionee a reasonable opportunity to appear and present evidence on his
behalf at a hearing before a committee of the Board of Directors; and if the
Optionee is an "employee" under Rule 16a-1(f) of the Rules and Regulations of
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, the determination of the Board of Directors shall be subject
to the approval of the Committee.
(c) If, by reason of retirement, death or disability (a "SPECIAL
TERMINATING EVENT"), Optionee shall cease to have a Relationship with the
Company or any direct or indirect subsidiary of the Company (other than as the
result of the transfer of employment of Optionee to another corporation which is
the Company, or any direct or indirect subsidiary of the Company), then
Optionee, Optionee's executors or administrators or any person or persons
acquiring the Option directly from Optionee by bequest or inheritance, shall
have the right to exercise the Option (i) in the event of Optionee's disability,
within twelve months following the date of such Special Terminating Event, or
(ii) in the event of Optionee's retirement, or in the event of Optionee's death,
within eighteen months of either Special Terminating Event. The Option may be
exercised following a Special Terminating Event only to the extent exercisable
at the date of the Special Terminating Event. To the extent unexercised at the
end of the period referred to above, the Option shall terminate.
(d) For purposes of this Option Agreement, "disability" shall mean total
and permanent disability as defined in Section 22(e)(3) of the Internal Revenue
Code of 1986, as amended (the "CODE"). Optionee shall not be considered
permanently disabled unless he furnishes proof of such disability in such form
and manner, and at such times, as the Committee may from time to time require.
6. ADJUSTMENTS UPON RECAPITALIZATION.
In the event of any change in the outstanding shares of the Common Stock or
other securities then subject to this option by reason of any stock split,
reverse stock split, stock dividend, recapitalization, merger, consolidation,
combination or exchange of shares or other similar corporate change, or if the
outstanding securities of the class then subject to this Agreement are exchanged
for or converted into cash, property or a different kind of securities, or if
cash, property or securities are distributed in respect of such outstanding
securities (other than a regular cash divided) then, unless the terms of such
transaction shall otherwise provide, such equitable adjustments shall be made by
the Board, or the Committee, in the Option (including, without limitation,
appropriate and proportionate adjustments to the number and type of shares or
other securities or cash or other property that may be acquired pursuant to
exercise of the Option); and any such adjustments made by the Board or the
Committee shall be final, binding and conclusive for any and all purposes.
Page 12 of 16
<PAGE>
7. WAIVER OF RIGHTS TO PURCHASE STOCK.
By signing this Option Agreement, Optionee acknowledges and agrees that
neither the Company nor any other person or entity is under any obligation to
sell or transfer to Optionee any option or equity security of the Company, other
than the shares of Common Stock subject to the Option and any other right or
option to purchase Common Stock which was previously granted in writing to
Optionee by the Committee (or the Board). By signing this Option Agreement,
Optionee specifically waives all rights which he or she may have had prior to
the date of this Option Agreement (other than any other right or option to
purchase Common Stock which was previously granted in writing to Optionee by the
Committee or the Board) to receive any option or equity security of the Company.
8. NO RIGHTS AS SHAREHOLDER.
Except as provided in Section 6 of this Option Agreement, Optionee shall
have no rights as a shareholder with respect to the Shares until the date of the
issuance to Optionee of a stock certificate or stock certificates evidencing
such Shares. Except as may be provided in Section 6 of this Option Agreement, no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued.
9. MODIFICATION.
The Committee (or the Board) may modify, extend or renew the Option or
accept the surrender of, and authorize the grant of a new option in substitution
for, the Option (to the extent not previously exercised); PROVIDED, that a
modification of the Option shall be effective only with the consent of the
Optionee.
10. WITHHOLDING.
The Company shall be entitled to require as a condition of delivery of any
Purchased Shares upon exercise of any Option that the Optionee agree to remit,
at the time of such delivery or at such later date as the Company may determine,
an amount sufficient to satisfy all federal, state and local withholding tax
requirements relating thereto, and Optionee agrees to take such other action
required by the Company to satisfy such withholding requirements.
Page 13 of 16
<PAGE>
11. CHARACTER OF OPTION.
The Option is not intended to qualify as an "incentive stock option" as
that term is defined in Section 422 of the Code.
12. GENERAL PROVISIONS.
(a) FURTHER ASSURANCES. Optionee shall promptly take all actions and
execute all documents requested by the Company which the Company deems to be
reasonably necessary to effectuate the terms and intent of this Option
Agreement.
(b) NOTICES. All notices, requests, demands and other communications under
this Option Agreement shall be in writing and shall be given to the parties
hereto as follows:
1. If to the Company, to:
3D Systems Corporation
26081 Avenue Hall
Valencia, CA 91355
Attention: General Counsel
2. If to Optionee, to the address set
forth in the records of the Company,
or at such other address or addresses as may have been furnished by such either
party in writing to the other party hereto. Any such notice, request, demand or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mail by first-class certified mail, return
receipt requested, postage prepaid, addressed as aforesaid; or (ii) if given by
any other means, when delivered at the address specified in this subparagraph
(b).
(c) TRANSFER OF RIGHTS UNDER THIS OPTION AGREEMENT. The Company may at any
time transfer and assign its rights and delegate its obligations under this
Option Agreement to any other person, corporation, firm or entity, including its
employees, directors and stockholders, with or without consideration.
(d) OPTION NON-TRANSFERABLE. Optionee may not sell, transfer, assign or
otherwise dispose of the Option except by will or the laws of descent and
distribution, and Options may be exercised during the lifetime of Optionee only
by Optionee or by his or her guardian or legal representative.
(e) MARKET STAND-OFF. In the event of an underwritten public offering by
the Company of its equity securities pursuant to an effective registration
statement filed under the
Page 14 of 16
<PAGE>
Securities Act of 1933, as amended, Optionee shall not sell, make any short sale
of, loan, hypothecate, pledge, grant any option for the repurchase of, or
otherwise dispose or transfer for value, or otherwise agree to engage in any of
the foregoing transactions with respect to any shares of Common Stock without
the prior written consent of the Company or its underwriters, for such period of
time from and after the effective date of such registration statement as may be
requested by the Company or such underwriters (the "MARKET STAND-OFF");
provided, however, that in no event shall such period exceed 180 days.
(f) SUCCESSORS AND ASSIGNS. Except to the extent specifically limited by
the terms and provisions of this Option Agreement, this Option Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors, assigns, heirs and personal representatives.
(g) GOVERNING LAW. THIS OPTION AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS
MADE IN, AND TO BE PERFORMED SOLELY WITHIN, THAT STATE.
(h) MISCELLANEOUS. Titles and captions contained in this Option Agreement
are inserted for convenience of reference only and do not constitute a part of
this Option Agreement for any other purpose.
The Signature Page to this Option Agreement consists of the last page of
the Certificate.
Exhibit "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
TO: 3D Systems Corporation
The undersigned, the holder of the enclosed Stock Option Agreement
(Non-Statutory Stock Option), hereby irrevocably elects to exercise the purchase
rights represented by the Option and to purchase thereunder ______* shares of
Common Stock of 3D Systems Corporation (the "COMPANY"), and herewith encloses
payment of $__________ and/or _________ shares of the Company's Common Stock in
full payment of the purchase price of such shares being purchased.
Dated:__________________________
------------------------------------
(Signature must conform in all respects to name of holder as
specified on the face of the Option)
Page 15 of 16
<PAGE>
------------------------------------
(Please Print Name)
------------------------------------
(Address)
* Insert here the number of shares called for on the face of the Option
(or, in the case of a partial exercise, the number of shares being exercised),
in either case without making any adjustment for additional Common Stock of the
Company, other securities or property which, pursuant to the adjustment
provisions of the Option, may be deliverable upon exercise.
Page 16 of 16
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
as of this 9th day of September, 1999 (the "Effective Date"), by and between
Gary J. Sbona ("Employee") and 3D Systems Corporation. ("Employer"). In
consideration of the covenants, representations and agreements set forth below,
Employer and Employee hereby agree as follows:
1. EMPLOYMENT OF EMPLOYEE. Employer hereby hires Employee pursuant to the
Agreement between Regent Pacific Management Corporation dated September 9, 1999
(the "Regent Agreement"), and Employee hereby accepts such employment on the
terms and conditions contained in this Agreement and the Regent Agreement.
2. TERM OF THE AGREEMENT. The initial term of this Agreement (the "Term")
shall commence upon the Effective Date and shall terminate 12 months thereafter
(the "Termination Date"), unless sooner terminated as provided herein. Employer
and Employee may, upon mutual agreement, elect to continue Employee's employment
on an at-will basis (meaning that either Employee or Employer may terminate the
employment relationship at any time with or without cause or notice), after the
initial term of this Agreement.
3. SERVICES TO BE PROVIDED BY EMPLOYEE.
3.1 SCOPE, RESPONSIBILITIES AND DUTIES. Employee agrees to provide
services to Employer, generally in the field of corporate strategy,
approximately two working days in each working week, so that Employer may have
the benefit of the experience and knowledge possessed by Employee (the
"Services"). It shall be the duty of Employee in rendering the Services to make
such periodic reports to Employer as the officers or directors of Employer may,
from time to time, reasonably request.
3.2. NON-EXCLUSIVITY. Employee is a short-term, part time employee by
reason of the obligations ascribed to him hereunder, and shall not be required
to devote full time to the affairs of Employer. Subject to the provisions of
Section 7 below, Employee may accept other employment and perform services for
others.
4. COMPENSATION. Employee shall not be entitled to any compensation,
other than compensation received from Regent Pacific Management Corporation, for
the Services to be provided hereunder, except as provided herein.
5. EXPENSES. Employer shall reimburse Employee for all reasonable and
necessary business expenses pursuant to the Regent Agreement.
<PAGE>
6. TERMINATION. Termination pursuant to this Section shall become
effective immediately upon receipt by Employee of written notice from Employer
of such termination.
6.1 TERMINATION BY INCAPACITY OR DISABILITY OF EMPLOYEE. If Employee
shall become unable to fully perform the Services in accordance with the terms
of this Agreement due to incapacity, ill health or disability for a consecutive
period of four weeks, the Employer may, at its option, terminate this Agreement.
6.2 DEATH OF EMPLOYEE. Upon the death of Employee, this Agreement
shall terminate without further obligation or liability on the part of Employer
to Employee's estate.
6.3 TERMINATION OF REGENT AGREEMENT. Employee's employment shall
terminate upon termination of the Regent Agreement unless otherwise mutually
agreed between Employer and Employee.
7. CONFIDENTIALITY AND TRADE SECRETS. Employee acknowledges and agrees
that during the Term of this Agreement, and during any continuing term of
employment on at at-will basis he will become privy to important proprietary,
confidential business information and trade secrets that are the exclusive
property of Employer. This information includes, without limitation, business
plans, marketing concepts, designs, proposals, product information, financial
information, technology and costs, pricing information, customer lists, and
key accounts, including their credit information and product wants and needs
(the "Confidential Information"). This Confidential Information derives
independent economic value, both actual and potential, from not being
generally known to the public or to other persons who can obtain economic
value from its disclosure and use. As Employer has always held the
Confidential Information as proprietary, confidential trade secret
information and has taken steps to insure that the Confidential Information
is not disclosed outside of 3D Systems, the Confidential Information
constitutes "trade secrets" under the Uniform Trade Secrets Act, California
Civil Code Sections 3426(d)(1). In light of the foregoing, Employee therefore
agrees that: (1) he will not at any time, now or in the future, share,
disseminate, disclose, discuss or use the Confidential Information in any
way; and (2) upon termination of this Agreement, Employee will return to
Employer all property, writings and/or documents in his possession or custody
belonging to or relating to the affairs of Employer or any of its
subsidiaries or affiliates, or comprising or relating to the Confidential
Information.
8. OWNERSHIP OF INTELLECTUAL PROPERTY. Employee hereby acknowledges and
agrees that any and all copyrightable works authored by Employee in connection
with the performance of the Services, alone or with others, during the Term of
this Agreement, and during any continuing term of employment on at at-will
basis, shall be deemed to have been specially ordered or commissioned for use as
either a contribution to a collective work, as a translation, as a supplementary
work, as a compilation, or as an instructional text and, as such, shall be
deemed to be "works for hire" under the United States copyright laws from the
inception of creation of such works. In the event that any such works shall be
deemed by a court of competent jurisdiction not to be a "work made for hire,"
this Agreement shall
Page 2 of 23
<PAGE>
operate as an irrevocable assignment by Employee to Employer of all right, title
and interest in and to such works, including without limitation, all worldwide
copyright interests therein, in perpetuity. The fact that such copyrightable
works are created by Employee outside of Employer's facilities or other than
during Employee's working hours with Employer, shall not diminish Employer's
rights with respect to such works which otherwise fall within this subsection.
Employee agrees to execute and deliver to Employer such further instruments or
documents as may be requested by Employer in order to effectuate the purposes of
this subsection.
9. RELATIONSHIP OF THE PARTIES. Employee enters into this Agreement as,
and shall continue to be, a short-term, part time Employee. Employee shall not
be entitled to any benefits except those required by law.
10. APPOINTMENT AS A DIRECTOR. The Board of Directors of Employer (the
"Board") has resolved to appoint Employee as a Class II Director. In this
capacity, Employee will serve at the pleasure of the Board and pursuant to
Employer's bylaws.
11. STOCK OPTIONS. Concurrently with the execution of this Agreement as an
inducement to Employee to accept employment with Employer, Employee and Employer
are executing and delivering Stock Option Agreements (the "Option Agreement"),
attached hereto as Exhibits A and C, and Option Certificates, attached hereto as
Exhibits B and D, and incorporated herein by this reference, which grants to
Employee the option to purchase three hundred fifty thousand (350,000) shares of
the Common Stock of Employer at an exercise price of $6.00. The number of shares
subject to this Option shall be earned pro rata over the Term of this Agreement,
and shall become exercisable pursuant to the exercise schedule contained in
Exhibit B. Should Employee's employment terminate as a result of an act of
misconduct described in Section 4(g) of the 3D Systems Corporation 1996 Stock
Incentive Plan, the Options will terminate immediately as to all unvested
shares.
12. ARBITRATION.
12.1 Any dispute regarding any aspect of this Agreement or any act
which would violate any provision in this Agreement (hereafter referred to as
"arbitrable disputes" shall be resolved by an experienced arbitrator licensed to
practice law in the State of California and selected in accordance with the
rules of the American Arbitration Association, as the exclusive remedy for such
dispute. Judgment on any award rendered by such arbitrator may be entered in any
court having proper jurisdiction.
12.2 Should Employee or Employer institute any legal action or
administrative proceeding regarding any dispute or matter covered by this
Section by any method other than said arbitration, the responding party shall be
entitled to recover from the other party all damages, costs, expenses and
attorney's fees incurred as a result of such action.
Page 3 of 23
<PAGE>
13. SEVERABILITY AND GOVERNING LAW.
13.1 Should any of the provisions in this Agreement be declared or be
determined to be illegal or invalid, all remaining parts, terms or provisions
shall be valid, and the illegal or invalid part, term or provision shall be
deemed not to be a part of this Agreement.
13.2 This Agreement is made and entered into in the State of
California and shall in all respects be interpreted, enforced and governed under
the laws of California.
14. PROPER CONSTRUCTION.
14.1 The language of all parts of this Agreement shall in all cases be
construed as a whole according to its fair meaning, and not strictly for or
against any of the parties.
14.2 As used in this Agreement, the term "or" shall be deemed to
include the term "and/or" and the singular or plural number shall be deemed to
include the other whenever the context so indicates or requires.
14.3 The paragraph headings used in this Agreement are intended solely
for convenience of reference and shall not in any manner amplify, limit, modify
or otherwise be used in the interpretation of any of the provisions hereof.
15. ENTIRE AGREEMENT. This Agreement is the entire agreement between
Employee and Employer and fully supersedes any and all prior agreements or
understandings between the parties pertaining to its subject matter.
16. NOTICES. All notices, requests, demands and other communications
called for or contemplated under this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered, on the date of
transmission if sent by facsimile, on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail, postage prepaid,
and properly addressed as follows:
If to Employer: 3D Systems, Inc.
26801 Avenue Hall
Valencia, California 91355
Attn: A. Sidney Alpert
If to Employee: Gary J. Sbona
Regent Pacifc Management Corporation
10600 N. DeAnza Blvd. Suite 140
Cupertino, CA 95914
Page 4 of 23
<PAGE>
17. AMENDMENTS. This Agreement may not be amended, supplemented,
canceled, or discharged except by written instrument executed by
the parties hereto.
18. WAIVERS. All waivers hereunder shall be in writing. No waiver by any
party hereto of any breach or anticipated breach of any provision of this
Agreement by any other party shall be deemed a waiver of any other
contemporaneous, preceding, or succeeding breach or anticipated breach, whether
or not similar, on the part of the same or any other party.
IN WITNESS WHEREOF, the parties hereto have hereby executed this Agreement
as of the day and year first written above.
3D SYSTEMS CORPORATION
- - ---------------------------------- BY:
Gary J. Sbona ------------------------------
Its:
-----------------------------
Page 5 of 23
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
(INCENTIVE STOCK OPTION FOR EXECUTIVES)
This STOCK OPTION AGREEMENT (this "OPTION AGREEMENT") is made and entered
into on the execution date of the Option Certificate to which it is attached
(the "CERTIFICATE"), by and between 3D Systems Corporation, a Delaware
corporation (the "COMPANY"), and the Executive of the Company named in the
Certificate ("EMPLOYEE").
Pursuant to the 3D Systems Corporation 1996 Stock Incentive Plan (the
"PLAN"), the Compensation Committee (the "Committee") of the Board of Directors
of the Company (the "BOARD") has authorized the grant to Employee of an
incentive stock option to purchase shares of the Company's Common Stock, par
value $0.001 per share (the "COMMON STOCK"), upon the terms and subject to the
conditions set forth in this Option Agreement and in the Plan.
The Company and Employee agree as follows:
1. GRANT OF OPTION.
The Company hereby grants to Employee the right and option (the
"OPTION"), upon the terms and subject to the conditions set forth in this Option
Agreement, to purchase all or any portion of that number of shares of the Common
Stock (the "SHARES") set forth in the Certificate, at the Option exercise price
set forth in the Certificate (the "EXERCISE PRICE").
2. TERM OF OPTION.
The Option shall terminate and expire on the Option Expiration Date
set forth in the Certificate, unless sooner terminated as provided herein. In no
event shall the Option be exercisable after the expiration of ten years from the
date it was granted.
3. EXERCISE PERIOD.
(a) Subject to the provisions of Sections 3(b) and 5 of this Option
Agreement, the Option shall become exercisable (in whole or in part) upon and
after the dates set forth or referred to under the caption "Exercise Schedule"
in the Certificate. The installments shall be cumulative; I.E., the Option may
be exercised, as to any or all Shares covered by an installment, at any time or
times after the installment first becomes exercisable and until expiration or
termination of the Option.
(b) Notwithstanding anything to the contrary contained in this Option
Agreement, the Option may not be exercised, in whole or in part, unless and
until any then-applicable requirements of all federal, state and local laws and
regulatory agencies shall have been fully complied with to the satisfaction of
the Company and its counsel.
4. EXERCISE OF OPTION.
There is no obligation to exercise the Option, in whole or in part.
The Option may be exercised, in whole or in part, only by delivery to the
Company of:
Page 6 of 23
<PAGE>
(a) written notice of exercise in form and substance identical to
Exhibit "A" attached to this Option Agreement stating the number of shares of
Common Stock then being purchased (the "PURCHASED SHARES");
(b) the Exercise Price for each Purchased Share shall be paid in full
upon exercise and shall be payable in cash in United States dollars (including
check, bank draft or money order). The Company will cooperate with any person
who participates in a cashless exercise program of a broker or other agent under
which all or part of the shares received upon exercise of the Option are sold
through the broker or other agent or under which the broker or other agent makes
a loan to such person. Notwithstanding the foregoing, the exercise of the Option
shall not be deemed to occur and no shares of Common Stock will be issued by the
Company upon exercise of the Option until the Company has received payment of
the Exercise Price in full. The date of exercise of an Option shall be
determined under procedures established by the Committee.
5. TERMINATION OF EMPLOYMENT.
(a) If Employee shall cease to be an employee of the Company, or any
direct or indirect subsidiary of the Company, under any of the circumstances
described in the Option Certificate under the caption "Exercise Schedule" then
the terms of the Option Certificate shall control.
(b) If, by reason of death or disability (a "SPECIAL TERMINATING
EVENT"), Employee shall cease to be an employee the Company, then Employee,
Employee's executors or administrators or any person or persons acquiring the
Option directly from Employee by bequest or inheritance, shall have the right to
exercise the Option. Following a Special Terminating Event the Option shall be
immediately vested and may be exercised in full.
(c) For purposes of this Option Agreement, "disability" shall mean
total and permanent disability as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"). Employee shall not be considered
permanently disabled unless he furnishes proof of such disability in such form
and manner, and at such times, as the Committee may from time to time require.
6. ADJUSTMENTS UPON RECAPITALIZATION.
In the event of any change in the outstanding shares of the Common
Stock or other securities then subject to the Plan by reason of any stock split,
reverse stock split, stock dividend, recapitalization, merger, consolidation,
combination or exchange of shares or other similar corporate change, or if the
outstanding securities of the class then subject to this Agreement are exchanged
for or converted into cash, property or a different kind of securities, or if
cash, property or securities are distributed in respect of such outstanding
securities (other than a regular cash divided) then, unless the terms of such
transaction shall otherwise provide, such equitable adjustments shall be made by
the Board, or the Committee, in the Option (including, without limitation,
appropriate and proportionate adjustments to the number and type of shares or
other securities or cash or other property that may be acquired pursuant to
exercise of the Option); and any such adjustments made by the Board or the
Committee shall be final, binding and conclusive for any and all purposes.
7. WAIVER OF RIGHTS TO PURCHASE STOCK.
By signing this Option Agreement, Employee acknowledges and agrees
that neither the Company nor any other person or entity is under any obligation
to sell or transfer to Employee any option or equity security of the Company,
other than the shares of Common Stock subject to the Option and any other right
or option to purchase Common Stock which was previously granted in writing to
Employee by
Page 7 of 23
<PAGE>
the Committee (or the Board). By signing this Option Agreement, Employee
specifically waives all rights which he or she may have had prior to the date of
this Option Agreement (other than any other right or option to purchase Common
Stock which was previously granted in writing to Employee by the Committee or
the Board) to receive any option or equity security of the Company.
8. NO RIGHTS AS SHAREHOLDER.
Except as provided in Section 6 of this Option Agreement, Employee
shall have no rights as a shareholder with respect to the Shares until the date
of the issuance to Employee of a stock certificate or stock certificates
evidencing such Shares. Except as may be provided in Section 6 of this Option
Agreement, no adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued.
9. MODIFICATION.
Subject to the terms and conditions and within the limitations of the
Plan, the Committee (or the Board) may modify, extend or renew the Option or
accept the surrender of, and authorize the grant of a new option in substitution
for, the Option (to the extent not previously exercised). No modification of the
Option shall be made which, without the consent of Employee, would cause the
Option to fail to continue to qualify as an "incentive stock option" within
Section 422 of the Code or would alter or impair any rights of the Employee
under the Option.
10. DISQUALIFYING DISPOSITION; WITHHOLDING.
(a) Employee agrees that should he or she make a "disposition" (as
defined in Section 424(c) of the Code) of all or any of the Purchased Shares
within two years from the date of the grant of the Option or within one year
after the issuance of such Purchased Shares, he or she shall immediately advise
the Company in writing as to the occurrence of the sale and the price realized
upon the sale of such Purchased Shares. Employee agrees that he or she shall
maintain all Purchased Shares in his or her name so long as he or she maintains
beneficial ownership of such Shares.
(b) The Company shall be entitled to require as a condition of
delivery of any Purchased Shares upon exercise of any Option that the Employee
agree to remit, at the time of such delivery or at such later date as the
Company may determine, an amount sufficient to satisfy all federal, state and
local withholding tax requirements relating thereto, and Employee agrees to take
such other action required by the Company to satisfy such withholding
requirements.
11. SERVICES OF OPTION HOLDER.
In consideration for the grant of the Option, Employee agrees to
remain in the employ of, and shall continue to render services to, the Company
or any direct or indirect subsidiary of the Company, as the Committee Board may
from time to time direct, for a period of one year from the date of this Option
Agreement. This provision shall not obligate the Company, or such subsidiary, to
continue to employ, or utilize the services of, Employee for any period
whatsoever. The sole remedy to the Company should Employee breach his or her
obligations under this Section 11 shall be to cancel this Option Agreement and
the Option granted under this Option Agreement. For the purposes of this Option
Agreement, the term "subsidiary" shall mean any present or future corporation
that would be a "subsidiary corporation" of the Company, as defined in Section
424 of the Code.
Page 8 of 23
<PAGE>
12. CHARACTER OF OPTION.
The Option is intended to qualify as an "incentive stock option" as
that term is defined in Section 422 of the Code.
13. GENERAL PROVISIONS.
(a) FURTHER ASSURANCES. Employee shall promptly take all actions and
execute all documents requested by the Company that the Company deems to be
reasonably necessary to effectuate the terms and intent of this Option
Agreement.
(b) NOTICES. All notices, requests, demands and other communications
under this Option Agreement shall be in writing and shall be given to the
parties hereto as follows:
(i) If to the Company, to:
3D Systems Corporation
26081 Avenue Hall
Valencia, CA 91355
Attention: General Counsel
(ii) If to Employee, to the address set
forth in the records of the Company,
or at such other address or addresses as may have been furnished by such either
party in writing to the other party hereto. Any such notice, request, demand or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mail by first-class certified mail, return
receipt requested, postage prepaid, addressed as aforesaid; or (ii) if given by
any other means, when delivered at the address specified in this subparagraph
(b).
Page 9 of 23
<PAGE>
(c) TRANSFER OF RIGHTS UNDER THIS OPTION AGREEMENT. The Company may
at any time transfer and assign its rights and delegate its obligations under
this Option Agreement to any other person, corporation, firm or entity,
including its officers, directors and stockholders, with or without
consideration.
(d) OPTION NON-TRANSFERABLE. Employee may not sell, transfer, assign
or otherwise dispose of the Option except by will or the laws of descent and
distribution, and Options may be exercised during the lifetime of Employee only
by Employee or by his or her guardian or legal representative.
(e) MARKET STAND-OFF. In the event of an underwritten public offering
by the Company of its equity securities pursuant to an effective registration
statement filed under the Securities Act of 1933, as amended, Employee shall not
sell, make any short sale of, loan, hypothecate, pledge, grant any option for
the repurchase of, or otherwise dispose or transfer for value, or otherwise
agree to engage in any of the foregoing transactions with respect to any shares
of Common Stock without the prior written consent of the Company or its
underwriters, for such period of time from and after the effective date of such
registration statement as may be requested by the Company or such underwriters
(the "MARKET STAND-OFF"); provided, however, that in no event shall such period
exceed 180 days.
(f) SUCCESSORS AND ASSIGNS. Except to the extent specifically limited
by the terms and provisions of this Option Agreement, this Option Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, assigns, heirs and personal representatives.
(g) GOVERNING LAW. THIS OPTION AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE IN, AND TO BE PERFORMED SOLELY WITHIN, THAT STATE.
(h) THE PLAN. This Option Agreement is made pursuant to the Plan, and
it is intended, and shall be interpreted in a manner, to comply therewith. Any
provision of this Option Agreement inconsistent with the Plan shall be
superseded and governed by the Plan.
(i) MISCELLANEOUS. Titles and captions contained in this Option
Agreement are inserted for convenience of reference only and do not constitute a
part of this Option Agreement for any other purpose.
The Signature Page to this Option Agreement consists of the last page
of the Certificate.
Page 10 of 23
<PAGE>
Exhibit "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
TO: 3D Systems Corporation
The undersigned, the holder of the enclosed Stock Option Agreement
(Incentive Stock Option), hereby irrevocably elects to exercise the purchase
rights represented by the Option and to purchase thereunder ______* shares of
Common Stock of 3D Systems Corporation (the "COMPANY"), and herewith encloses
payment of $__________ and/or _________ shares of the Company's Common Stock in
full payment of the purchase price of such shares being purchased.
Dated:
------------------------
---------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Option)
---------------------------------------
(Please Print Name)
---------------------------------------
(Address)
---------------------------------------
* Insert here the number of shares called for on the face of the
Option (or, in the case of a partial exercise, the number of shares being
exercised), in either case without making any adjustment for additional Common
Stock of the Company, other securities or property which, pursuant to the
adjustment provisions of the Option, may be deliverable upon exercise.
Page 11 of 23
<PAGE>
EXHIBIT B
OPTION CERTIFICATE
(INCENTIVE STOCK OPTION FOR EXECUTIVES)
THIS IS TO CERTIFY that 3D Systems Corporation, a Delaware corporation (the
"COMPANY"), has granted to the employee named below an incentive stock option
(the "OPTION") to purchase shares of the Company's Common Stock (the "SHARES"),
under its 1996 Stock Incentive Plan (the "PLAN"), and upon the terms and
conditions determined bythe Compensation Committee (the "Committee") of the
Board of Directors of the Company (the "BOARD"), as follows:
Name of Employee: Gary J. Sbona
Address of Employee:
-----------------------
-----------------------
Number of Shares: 100,000, provided, however, that the
number of shares subject to this Option shall be earned pro rata over the first
twelve (12) months beginning with the Date of Grant. However, if Regent Pacific
Management Corporation's ("Regent Pacific") contract with the Company is
terminated without cause during this twelve-month period, then the entire amount
shall be considered earned upon termination.
- - -------------------
Option Exercise Price: $6.00 per share
Date of Grant: September 9, 1999
Option Expiration Date: September 8, 2004
EXERCISE SCHEDULE: The shares earned, as described above, shall be
exercisable with respect to one third (rounded up or down to the nearest whole
number) on each of the first three anniversaries of the Date of Grant: provided,
however, that such option shall fully vest (i) upon the termination of Regent
Pacific by the Company without cause, (ii) should Regent Pacific principals
cease to be associated with the management of the Company or, (iii) upon a
"Change of Control Transaction."
Change of Control Transaction shall mean (i) the consummation of a sale of all
or substantially all of the assets of Company, or (ii) a merger of Company with
or into another corporation in which the stockholders of Company immediately
before the transaction do not own, directly or indirectly, a majority of Company
or the surviving entity immediately following the transaction.
SUMMARY OF OTHER TERMS: This Option is defined in the Stock Option
Agreement (Incentive Stock Option) (the "OPTION AGREEMENT") which is attached
to this Option Certificate (the
Page 12 of 23
<PAGE>
"CERTIFICATE") as Annex I. This Certificate summarizes certain of the provisions
of the Option Agreement for your information, but is not complete. Your rights
are governed by the Option Agreement, NOT by this summary. The Company strongly
suggests that you carefully review the full Option Agreement prior to signing
this Certificate or exercising the Option.
Among the terms of the Option Agreement are the following:
TERMINATION OF EMPLOYMENT: The Option terminates on the Option Expiration
Date. If your employment ends as the result of any of the circumstances
described in the Exercise Schedule, above, the terms of that section shall
apply. If your employment ends due to death or disability, the Option shall vest
immediately and continue to be exercisable until the Expiration Date.
TRANSFER: The Option is personal to you, and cannot be sold, transferred,
assigned or otherwise disposed of to any other person, except upon your death.
See Section 13(d) of the attached Option Agreement.
EXERCISE: You can exercise the Option (while it is exercisable), in whole
or in part, by delivering to the Company a Notice of Exercise identical to
Exhibit "A" attached to the Option Agreement, accompanied by payment of, or
provision pursuant to the Option Agreement for the payment of, the Exercise
Price for the Shares to be purchased. The Company may require you to submit
certain written reassurances to the Company with respect to your status as a
shareholder. The Company will then issue a certificate to you for the Shares you
have purchased. You are under no obligation to exercise the Option. See Section
4 of the attached Option Agreement.
ADJUSTMENTS UPON RECAPITALIZATION: The Option contains provisions which
affect your rights in the event of stock splits, stock dividends, mergers and
other major corporate reorganizations. See Section 6 of the attached Option
Agreement.
WAIVER: By signing this Certificate, you will be agreeing to all of the
terms of the Option Agreement, including those not summarized in this
Certificate. You will waive your rights to options or stock that may otherwise
have been promised to you. See Section 7 of the attached Option Agreement.
WITHHOLDING: The Company may require you to make any arrangements necessary
to insure the proper withholding of any amount of tax, if any, required to be
withheld by the Company as a result of the exercise of the Option. See Section
10 of the attached Option Agreement.
VALUE OF SHARES: If you are granted an Option first exercisable in any one
calendar year to purchase Shares valued in excess of $100,000 on the grant date,
then for tax purposes the incremental portion of such Shares with an aggregate
fair market value in excess of $100,000 shall be treated as non-statutory stock
options, rather than as incentive stock options (as that term is defined in
Section 422 of the Internal Revenue Code of 1986, as amended).
Page 13 of 23
<PAGE>
A G R E E M E N T
3D Systems Corporation, a Delaware corporation, and the Employee each
hereby agrees to be bound by all of the terms and conditions of the Stock Option
Agreement (Incentive Stock Option) which is attached hereto as Annex I and
incorporated herein by this reference as if set forth in full in this document.
DATED:
----------------------------
3D SYSTEMS CORPORATION
By:
-------------------------------
Its:
-------------------------------
EMPLOYEE
-----------------------------------
- - ---------------------------------- Name:
-----------------------------------
(Please print your name exactly as
you wish it to appear on any stock
certificates issued to you upon
exercise of the Option)
Page 14 of 23
<PAGE>
EXHIBIT C
OPTION CERTIFICATE
THIS IS TO CERTIFY that 3D Systems Corporation, a Delaware corporation (the
"COMPANY"), has granted to the employee of the Company named below a
non-statutory stock option (the "OPTION") to purchase shares of the Company's
Common Stock (the "SHARES"), and upon the terms and conditions determined by the
Compensation Committee (the "COMMITTEE") of the Board of Directors of the
Company (the "BOARD"), as follows:
NAME OF OPTIONEE: Gary J. Sbona
ADDRESS OF OPTIONEE: c/o 3D Systems Corporation
26081 Avenue Hall
Valencia, CA 91355
NUMBER OF SHARES: 250,000, provided, however, that
the number of shares subject to this Option shall be earned pro rata over the
twelve (12) months beginning with the Date of Grant. However, if Regent
Pacific Management Corporation's ("Regent Pacific") contract with the Company
is terminated without cause during this twelve-month period, then the entire
amount shall be considered earned upon termination.
OPTION EXERCISE PRICE: $ 6.00 per share
DATE OF GRANT: September 9, 1999
OPTION EXPIRATION DATE: Five years from the Date of Grant.
EXERCISE SCHEDULE: The shares earned, as described above, shall be
exercisable with respect to one third (rounded up or down to the nearest whole
number) on each of the first three anniversaries of the Date of Grant: provided,
however, that such option shall fully vest (i) upon the termination of Regent
Pacific by the Company without cause, (ii) should Regent Pacific principals
cease to be associated with the management of the Company or, (iii) upon a
"Change of Control Transaction."
Change of Control Transaction shall mean (i) the consummation of a sale of all
or substantially all of the assets of Company, or (ii) a merger of Company with
or into another corporation in which the stockholders of Company immediately
before the transaction do not own, directly or indirectly, a majority of Company
or the surviving entity immediately following the transaction.
OUTSIDE OF 1996 STOCK INCENTIVE PLAN: The Option has been granted outside
the 1996 Stock Incentive Plan and is not subject to the terms thereof.
SUMMARY OF OTHER TERMS: This Option is defined in the Stock Option
Agreement (Non-Statutory Stock Option) (the "OPTION AGREEMENT") which is
attached to this Option Certificate (the "CERTIFICATE") as Exhibit D. This
Certificate summarizes certain of the provisions of the Option
Page 15 of 23
<PAGE>
Agreement for your information, but is not complete. Your rights are governed by
the Option Agreement, NOT by this summary. The Company strongly suggests that
you carefully review the full Option Agreement prior to signing this Certificate
or exercising the Option.
Among the terms of the Option Agreement are the following:
TERMINATION OF EMPLOYMENT: The Option terminates on the Option Expiration
Date. If your employment ends as the result of any of the circumstances
described in the Exercise Schedule, above, the terms of that section shall
apply. If your employment ends due to death or disability, the Option shall vest
immediately and continue to be exercisable until the Expiration Date.
TRANSFER: The Option is personal to you, and cannot be sold, transferred,
assigned or otherwise disposed of to any other person, except upon your death.
See Section 13(d) of the attached Option Agreement.
EXERCISE: You can exercise the Option (while it is exercisable), in whole
or in part, by delivering to the Company a Notice of Exercise identical to
Exhibit "A" attached to the Option Agreement, accompanied by payment of, or
provision pursuant to the Option Agreement for the payment of, the Exercise
Price for the Shares to be purchased. The Company may require you to submit
certain written assurances to the Company with respect to your status as a
shareholder. The Company will then issue a certificate to you for the Shares you
have purchased. You are under no obligation to exercise the Option. See Section
4 of the attached Option Agreement.
ADJUSTMENTS UPON RECAPITALIZATION: The Option contains provisions which
affect your rights in the event of stock splits, stock dividends, mergers and
other major corporate reorganizations. See Section 6 of the attached Option
Agreement.
WAIVER: By signing this Certificate, you will be agreeing to all of the
terms of the Option Agreement, including those not summarized in this
Certificate. You will waive your rights to options or stock which may otherwise
have been promised to you. See Section 7 of the attached Option Agreement.
WITHHOLDING: The Company may require you to make any arrangements necessary
to insure the proper withholding of any amount of tax, if any, required to be
withheld by the Company as a result of the exercise of the Option. See Section
10 of the attached Option Agreement.
Page 16 of 23
<PAGE>
A G R E E M E N T
3D Systems Corporation, a Delaware corporation, and Optionee each hereby
agrees to be bound by all of the terms and conditions of the Stock Option
Agreement (Non-Statutory Stock Option) which is attached hereto as Annex I and
incorporated herein by this reference as if set forth in full in this document.
DATED:
----------------------------
3D SYSTEMS CORPORATION
By:
-------------------------------
Its: Chief Executive Officer
OPTIONEE
Name:
------------------------------
------------------------------
(Please print your name exactly as
you wish it to appear on any stock
certificates issued to you upon
exercise of the Option)
Page 17 of 23
<PAGE>
EXHIBIT D
STOCK OPTION AGREEMENT
(NON-STATUTORY STOCK OPTION)
This STOCK OPTION AGREEMENT (this "OPTION AGREEMENT") is made and entered
into on the execution date of the Option Certificate to which it is attached
(the "CERTIFICATE"), by and between 3D Systems Corporation, a Delaware
corporation (the "COMPANY"), and the employee of the Company named in the
Certificate ("OPTIONEE").
The Board of Directors of the Company (the "BOARD") has authorized the
grant to Optionee of a non-statutory stock option to purchase shares of the
Company's Common Stock, par value $0.001 per share (the "COMMON STOCK"), upon
the terms and subject to the conditions set forth in this Option Agreement.
The Company and Optionee agree as follows:
9. GRANT OF OPTION.
The Company hereby grants to Optionee the right and option (the
"OPTION"), upon the terms and subject to the conditions set forth in this Option
Agreement, to purchase all or any portion of that number of shares of the Common
Stock (the "SHARES") set forth in the Certificate, at the Option exercise price
set forth in the Certificate (the "EXERCISE PRICE").
10. TERM OF OPTION.
The Option shall terminate and expire on the Option Expiration Date
set forth in the Certificate, unless sooner terminated as provided herein. In no
event shall the Option be exercisable after the expiration of ten years from the
date it was granted.
11. EXERCISE PERIOD.
(a) Subject to the provisions of Sections 3(b) and 5 of this Option
Agreement, the Option shall become exercisable (in whole or in part) upon and
after the dates set forth or referred to under the caption "Exercise Schedule"
in the Certificate. The installments shall be cumulative; I.E., the Option may
be exercised, as to any or all Shares covered by an installment, at any time or
times after the installment first becomes exercisable and until expiration or
termination of the Option.
(b) Notwithstanding anything to the contrary contained in this Option
Agreement, the Option may not be exercised, in whole or in part, unless and
until any then-applicable requirements of all federal, state and local laws and
regulatory agencies shall have been fully complied with to the satisfaction of
the Company and its counsel.
Page 18 of 23
<PAGE>
12. EXERCISE OF OPTION.
There is no obligation to exercise the Option, in whole or in part.
The Option may be exercised, in whole or in part, only by delivery to the
Company of:
(a) written notice of exercise in form and substance identical
to Exhibit "A" attached to this Option Agreement stating the number of shares of
Common Stock then being purchased (the "PURCHASED SHARES");
(b) the Exercise Price for each Purchased Share shall be paid in
full upon exercise and shall be payable in cash in United States dollars
(including check, bank draft or money order). The Company will cooperate with
any person who participates in a cashless exercise program of a broker or other
agent under which all or part of the shares received upon exercise of the Option
are sold through the broker or other agent or under which the broker or other
agent makes a loan to such person. Notwithstanding the foregoing, the exercise
of the Option shall not be deemed to occur and no shares of Common Stock will be
issued by the Company upon exercise of the Option until the Company has received
payment of the Exercise Price in full. The date of exercise of an Option shall
be determined under procedures established by the Committee.
13. TERMINATION OF EMPLOYMENT.
(a) If Employee shall cease to be an employee of the Company, or any
direct or indirect subsidiary of the Company, under any of the circumstances
described in the Option Certificate under the caption "Exercise Schedule" then
the terms of the Option Certificate shall control.
(b) If, by reason of death or disability (a "SPECIAL TERMINATING
EVENT"), Employee shall cease to be an employee the Company, then Employee,
Employee's executors or administrators or any person or persons acquiring the
Option directly from Employee by bequest or inheritance, shall have the right to
exercise the Option. Following a Special Terminating Event the Option shall be
immediately vested and may be exercised in full.
(c) For purposes of this Option Agreement, "disability" shall mean
total and permanent disability as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"). Employee shall not be considered
permanently disabled unless he furnishes proof of such disability in such form
and manner, and at such times, as the Committee may from time to time require.
14. ADJUSTMENTS UPON RECAPITALIZATION.
In the event of any change in the outstanding shares of the Common
Stock or other securities then subject to this option by reason of any stock
split, reverse stock split, stock dividend, recapitalization, merger,
consolidation, combination or exchange of shares or other similar corporate
change, or if the outstanding securities of the class then subject to this
Agreement are exchanged for or converted into cash, property or a different kind
of securities, or if cash, property or securities are distributed in respect of
such outstanding securities (other than a regular cash divided) then, unless the
terms of such transaction shall otherwise provide, such equitable adjustments
shall be made by the Board,
Page 19 of 23
<PAGE>
in the Option (including, without limitation, appropriate and proportionate
adjustments to the number and type of shares or other securities or cash or
other property that may be acquired pursuant to exercise of the Option); and any
such adjustments made by the Board shall be final, binding and conclusive for
any and all purposes.
15. WAIVER OF RIGHTS TO PURCHASE STOCK.
By signing this Option Agreement, Optionee acknowledges and agrees
that neither the Company nor any other person or entity is under any obligation
to sell or transfer to Optionee any option or equity security of the Company,
other than the shares of Common Stock subject to the Option and any other right
or option to purchase Common Stock which was previously granted in writing to
Optionee by the Committee (or the Board). By signing this Option Agreement,
Optionee specifically waives all rights which he or she may have had prior to
the date of this Option Agreement (other than any other right or option to
purchase Common Stock which was previously granted in writing to Optionee by the
Committee or the Board) to receive any option or equity security of the Company.
16. NO RIGHTS AS SHAREHOLDER.
Except as provided in Section 6 of this Option Agreement, Optionee
shall have no rights as a shareholder with respect to the Shares until the date
of the issuance to Optionee of a stock certificate or stock certificates
evidencing such Shares. Except as may be provided in Section 6 of this Option
Agreement, no adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued.
17. MODIFICATION.
The Committee (or the Board) may modify, extend or renew the Option or
accept the surrender of, and authorize the grant of a new option in substitution
for, the Option (to the extent not previously exercised); PROVIDED, that a
modification of the Option shall be effective only with the consent of the
Optionee.
18. WITHHOLDING.
The Company shall be entitled to require as a condition of delivery of
any Purchased Shares upon exercise of any Option that the Optionee agree to
remit, at the time of such delivery or at such later date as the Company may
determine, an amount sufficient to satisfy all federal, state and local
withholding tax requirements relating thereto, and Optionee agrees to take such
other action required by the Company to satisfy such withholding requirements.
19. CHARACTER OF OPTION.
The Option is not intended to qualify as an "incentive stock option"
as that term is defined in Section 422 of the Code.
Page 20 of 23
<PAGE>
20. GENERAL PROVISIONS.
(a) FURTHER ASSURANCES. Optionee shall promptly take all actions and
execute all documents requested by the Company which the Company deems to be
reasonably necessary to effectuate the terms and intent of this Option
Agreement.
(b) NOTICES. All notices, requests, demands and other communications
under this Option Agreement shall be in writing and shall be given to the
parties hereto as follows:
21. If to the Company, to:
3D Systems Corporation
26081 Avenue Hall
Valencia, CA 91355
Attention: General Counsel
22. If to Optionee, to the address set
forth in the records of the Company,
or at such other address or addresses as may have been furnished by such either
party in writing to the other party hereto. Any such notice, request, demand or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mail by first-class certified mail, return
receipt requested, postage prepaid, addressed as aforesaid; or (ii) if given by
any other means, when delivered at the address specified in this subparagraph
(b).
(c) TRANSFER OF RIGHTS UNDER THIS OPTION AGREEMENT. The Company may
at any time transfer and assign its rights and delegate its obligations under
this Option Agreement to any other person, corporation, firm or entity,
including its employees, directors and stockholders, with or without
consideration.
(d) OPTION NON-TRANSFERABLE. Optionee may not sell, transfer, assign
or otherwise dispose of the Option except by will or the laws of descent and
distribution, and Options may be exercised during the lifetime of Optionee only
by Optionee or by his or her guardian or legal representative.
(e) MARKET STAND-OFF. In the event of an underwritten public offering
by the Company of its equity securities pursuant to an effective registration
statement filed under the Securities Act of 1933, as amended, Optionee shall not
sell, make any short sale of, loan, hypothecate, pledge, grant any option for
the repurchase of, or otherwise dispose or transfer for value, or otherwise
agree to engage in any of the foregoing transactions with respect to any shares
of Common Stock without the prior written consent of the Company or its
underwriters, for such period of time from and after the effective date of such
registration statement as may be requested by the Company or such underwriters
(the "MARKET STAND-OFF"); provided, however, that in no event shall such period
exceed 180 days.
Page 21 of 23
<PAGE>
(f) SUCCESSORS AND ASSIGNS. Except to the extent specifically limited
by the terms and provisions of this Option Agreement, this Option Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, assigns, heirs and personal representatives.
(g) GOVERNING LAW. THIS OPTION AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE IN, AND TO BE PERFORMED SOLELY WITHIN, THAT STATE.
(h) MISCELLANEOUS. Titles and captions contained in this Option
Agreement are inserted for convenience of reference only and do not constitute a
part of this Option Agreement for any other purpose.
The Signature Page to this Option Agreement consists of the last page
of the Certificate.
Page 22 of 23
<PAGE>
Exhibit "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
TO: 3D Systems Corporation
The undersigned, the holder of the enclosed Stock Option Agreement
(Non-Statutory Stock Option), hereby irrevocably elects to exercise the purchase
rights represented by the Option and to purchase thereunder ______* shares of
Common Stock of 3D Systems Corporation (the "COMPANY"), and herewith encloses
payment of $__________ and/or _________ shares of the Company's Common Stock in
full payment of the purchase price of such shares being purchased.
Dated:
------------------------------
------------------------------------
Signature must conform in all
respects to name of holder as
specified on the face of the Option)
------------------------------------
(Please Print Name)
------------------------------------
(Address)
* Insert here the number of shares called for on the face of the Option
(or, in the case of a partial exercise, the number of shares being exercised),
in either case without making any adjustment for additional Common Stock of the
Company, other securities or property which, pursuant to the adjustment
provisions of the Option, may be deliverable upon exercise.
Page 23 of 23
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
September 9, 1999, by and among 3D SYSTEMS CORPORATION, a Delaware corporation
("3D Delaware"), 3D SYSTEMS, INC., a California corporation ("3D California"),
and ARTHUR B. SIMS ("Sims"). 3D Delaware and 3D California are collectively
referred to herein as the "Corporation."
R E C I T A L S
A. The Corporation desires to continue the employment of Sims as an
employee and to arrange for his engagement as a consultant to the Corporation,
and Sims desires to accept such engagement, to perform the services and
undertake the duties described herein.
B. The Corporation and Sims wish to formalize their relationship by
entering into a written agreement setting forth the terms and conditions of such
engagement.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
the parties agree as follows:
A G R E E M E N T
1. EMPLOYMENT.
The Corporation hereby employs Sims, and Sims hereby agrees to serve
the Corporation as a senior executive of 3D California.
2. TERM.
Subject to the provisions of this Agreement and subject to Section 5
of this Agreement, Sims shall remain employed by the Corporation as a senior
executive through December 31, 2000 (the "Employment Term"). Following such
date, Sims shall become a Consultant to the Corporation upon the terms set forth
in Section 8 (the "Consulting Term").
3. SALARY AND BENEFITS.
(a) SALARY. For his services to be rendered to 3D California under
this Agreement during the Employment Term, 3D California shall pay to Sims a
salary at the
Page 1 of 12
<PAGE>
rate of $317,250 per year, to be paid in accordance with 3D California's
customary payroll procedures.
(b) BENEFITS. 3D California shall make available to Sims all fringe
benefits (including, without limitation, all pension, profit-sharing,
disability, health and welfare plans, and all disability income, medical and
hospital insurance), which 3D California may from time to time afford, during
the Employment Term, its executive employees generally. The actual dollar
amount of the salary payable under this Section 3 or under Section 8 of this
Agreement, as may be applicable under the circumstances, and the value of all
fringe benefits, are collectively referred to in this Agreement as
"Compensation".
(c) STOCK OPTIONS. On January 1, 2000, Sims shall be granted a stock
option for 25,000 shares. The option price thereof shall be the Sims Exercise
Price (as that term is defined in the May 19, 1999 Minutes of the Meeting of the
Compensation Committee of 3D Delaware). Said stock option shall be by agreement
in substantially the form then in use by 3D Delaware, except for the foregoing
calculation of price, and for the inclusion therein of a provision accelerating
the vesting thereof by a "change of control" provision.
As of January 1, 2001, all remaining unvested share options previously
granted to Sims, including the share options in the amount of 25,000 shares,
granted pursuant to this Section 3(c), shall immediately vest and, pursuant to
the terms of this Agreement, survive during the Consulting Term.
(d) EXPENSES. Sims will be reimbursed for necessary, customary
and/or usual expenses in accordance with 3D California's policies generally in
effect from time to time with respect to its executive employees or business
consultants, as applicable.
4. DUTIES.
During the Employment Term, Sims will report to the Chief Executive
Officer of the Corporation (the "CEO"), and will devote substantially all of his
business time, energy and skill to the business of the Corporation and the
promotion of its interests (vacations and absences because of sickness
excepted). Sims will not engage in or be concerned with any other material
business activities, directly or indirectly, including directorships in other
companies (whether or not in competition with the Corporation) except those in
place as of the date hereof and those activities approved in each case by the
CEO. This Section 4 shall not be interpreted to restrict Sims' ability to
manage his own assets during business hours, so long as such activities do not
detract from the time spent by him in performing his duties hereunder.
5. TERMINATION.
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<PAGE>
(a) FOR JUST CAUSE. Sections 1 through 4 and 6, 8 and 9 of this
Agreement may be terminated by the Corporation at any time during the term of
this Agreement for "just cause." As used in this Agreement, just cause shall
exist upon (i) any material breach by Sims of this Agreement or his duties
hereunder, or Sims' refusal to perform his material duties and obligations, in
each case after notice and reasonable opportunity to cure, or (ii) Sims'
conviction of any crime involving embezzlement or misappropriation of funds or
property of the Corporation or felonious conduct.
(b) TERMINATION UPON DEATH OR DISABILITY.
(i) Sections 1 through 4 and 6, 8 and 9 of this Agreement shall
cease and terminate promptly upon the death of Sims.
(ii) If in the opinion of the Board of Directors of 3D Delaware,
based upon consultation with or a report of a qualified physician or
psychiatrist (as evidenced by a resolution duly adopted subsequent to the end of
the six consecutive month period referred to below) Sims shall become physically
or mentally incapacitated and as a result thereof shall become unable to
continue the proper performance of his duties hereunder during the Consulting
Term and/or the Employment Term (reasonable vacations and reasonable absences
because of sickness, including such physical or mental incapacitation, for up to
six consecutive months, excepted), Sections 1 through 4 and 6, 8 and 9 of this
Agreement shall cease and terminate 15 days following adoption of a resolution
by the Board of Directors of 3D Delaware confirming Sims' termination.
(c) BENEFITS UPON TERMINATION. If the Employment Term or Consulting
Term is terminated pursuant to Section 5(a) or Section 5(b) hereof, Sims shall
be entitled to Compensation up to the date of termination, LESS any amounts
received by Sims with respect to such period from any disability insurance or
similar plan maintained by the Corporation.
6. FACILITIES.
Sims shall at all times during the Employment Term be furnished with
an executive office, stenographic and other necessary clerical assistance, and
such other facilities, amenities and services as are suitable to Sims' position
with the Corporation and adequate for the performance of his duties hereunder.
7. NONSOLICITATION; TRADE SECRETS. Sims shall not, directly or
indirectly:
(a) for a period of four years following termination of the
Employment Term or Consulting Term, as applicable, cause or induce, or attempt
to cause or induce, any present or future employee of the Corporation or any
affiliate thereof to terminate his or her employment with the Corporation;
Page 3 of 12
<PAGE>
(b) for a period of four years following termination of the
Employment Term or Consulting Term, as applicable, directly or indirectly
solicit, induce or influence any present, future or specifically identifiable
potential customer, employee, licensor, sales representative, supplier, lender,
lessor, factor or any other person which on the date of termination of the
Employment Term or Consulting Term, as applicable, has an existing or
specifically identifiable potential business relationship with the Corporation
to discontinue, reject, reduce the extent of, or otherwise adequately modify
such relationship; or
(c) directly or indirectly disclose to any person (other than in the
course of performing his duties for the Corporation) or use or exploit for the
benefit of any person other than the Corporation, any trade secrets, customer
and supplier lists, marketing arrangements, business plans, projections,
financial information, training manuals, pricing manuals, product and service
development manuals, market strategies, internal performance statistics and
other competitively sensitive information concerning the Corporation and its
affiliates which is material to the Corporation and its affiliates and which is
not generally known or available to the public, whether or not in written or
tangible form.
8. CONSULTING.
(a) CONVERSION OF DUTIES. As of January 1, 2001, (the "Effective
Date"), Sims' duties and obligations under Sections 1 and 4 hereof shall convert
to those set forth in this Section 8 (the "Conversion").
(b) EFFECT OF CONVERSION. Upon Conversion, (i) Sections 1, 2, 3(a),
and 4 shall terminate as of the Effective Date; and (ii) assuming this Agreement
has not been earlier terminated pursuant to Section 5 hereof, Sections 8(c)
through 8(i) shall govern the rights and obligations of the parties hereto with
respect to the matters covered by such subsections during the Consulting Term.
(c) ENGAGEMENT. As of the Effective Date, the Corporation agrees to
and hereby does retain and engage Sims as a Consultant, and Sims agrees to
accept such engagement by the Corporation on the terms and subject to the
conditions hereinafter set forth in this Section 8.
(d) CONSULTING TERM; BENEFITS UPON TERMINATION PRIOR TO END OF
CONSULTING TERM. The engagement of Sims as a Consultant hereunder shall
commence as of the Effective Date and shall continue until that date which is
four years after the Effective Date (the "Consulting Term").
(e) CONSULTING DUTIES. Commencing on the Effective Date, Sims shall
be engaged by the Corporation as a business consultant. His duties in such
capacity shall be to consult with the Board of Directors and officers of the
Corporation and its subsidiaries at such reasonable times as the CEO may request
concerning those
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<PAGE>
aspects of the business and affairs of the Corporation with which Sims has
heretofore been concerned and such other matters as the CEO may reasonably
request, to meet with and aid in the retention of the existing and future
clients of the Corporation, to assist the Corporation in marketing and corporate
development and otherwise to assist the Corporation in the maintenance of its
goodwill. Without limiting the generality of the foregoing, such duties shall
include (i) aiding the management of the Corporation in maintaining good
relationships with its employees at all levels; (ii) meeting with customers,
discussing their problems and complaints and proposing solutions to resolve any
problems or complaints which they may have; (iii) aiding in the continued
development and establishment of long-range planning of the business and affairs
of the Corporation; and (iv) protecting and preserving the established goodwill
of the Corporation.
(f) EXTENT AND PLACE OF SERVICES. Sims shall not be required during
the Consulting Term to devote more than 150 hours per fiscal quarter to the
performance of his consulting duties hereunder. The Corporation may, however,
request that Sims devote more than 150 hours during any fiscal quarter to the
performance of his duties hereunder. If Sims, in his discretion, accepts such
request, the Corporation shall compensate Sims, in addition to all other
compensation provided to him under this Section 8, at the rate of two hundred
fifty dollars ($250.00) per hour for all hours exceeding 150 hours during such
quarter devoted by him to the performance of his consulting services to the
Corporation hereunder. Sims' duties hereunder shall be performed at the
executive offices of the Corporation or at such other place or places in Los
Angeles County as shall be reasonably requested b the Corporation from time to
time.
(g) COMPENSATION. As compensation for Sims' services under this
Section 8 during the Consulting Term, the Corporation shall pay Sims the sum of
one hundred fifty thousand dollars ($150,000.00) per year during the Consulting
Term, payable bi-weekly.
(h) OTHER ACTIVITIES. During the Consulting Term, Sims shall be
permitted to accept employment from others, but only to the extent that (i) such
additional activities are not otherwise prohibited by the terms of this
Agreement, and (ii) such other activities do not impair the ability of Sims
fully and completely to discharge all of his duties hereunder.
(i) INDEPENDENT CONTRACTOR. It is the intention and understanding of
the parties hereto that from and after the Effective Date and during the
Consulting Term, Sims will and at all times shall remain an independent
contractor and nothing contained herein shall be deemed or construed to create
the relationship of employer and employee as between the Corporation and Sims.
Without limiting the generality of the foregoing:
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<PAGE>
(A) All final decisions with respect to matters as to which Sims
has provided consulting services hereunder shall be solely those of the
management of the Corporation and Sims shall have no liability relating thereto
or arising therefrom; and
(B) In payment of the compensation to Sims provided for in this
Section 8, the Corporation shall have the right (but not the obligation) to make
any deduction from such payments on account of federal or state income tax
withholdings, disability, unemployment insurance or social security payments or
any other reductions of salary or wage payments applicable to the compensation
of employees generally.
(j) BENEFITS. During the Consulting Term, subject only to early
termination thereof, the Corporation shall provide Sims with continuation of
such life insurance and health insurance benefits as were provided immediately
prior to the inception of the Consulting Term.
9. CERTAIN EVENTS.
(a) CHANGE OF CONTROL.
(i) Upon the occurrence of any of the following events (each, a
"Triggering Event") during the Employment Term, the Corporation shall pay to
Sims a special bonus (the "Special Bonus") as calculated in accordance with
Section 9(a)(ii): (A) the acquisition of one or more shares of "Common Stock"
of 3D Delaware or 3D California by an "Acquiring Person" (each as defined in
Section 9(c)); (B) the consolidation with, or merger with or into, any other
"Person" (as defined in Section 9(c)), by 3D Delaware and, in connection with
such merger or consolidation, 3D Delaware is not the continuing or surviving
entity; (C) the consolidation with, or merger with or into, any other Person by
3D California and, in connection with such merger or consolidation, 3D
California is not the continuing or surviving entity; (D) the sale or transfer
by other means by the Corporation in one transaction or a series of related
transactions, of assets or earning power aggregating more than 50% of the assets
or earning power of the Corporation (taken as a whole and calculated on the
basis of the Corporation's most recent regularly prepared financial statements)
to any other Person or Persons (but excluding from this subsection 9(a)(i)(D)
sales of inventory in the ordinary course of business); or (E) individuals who
were members of the Board of Directors of 3D Delaware immediately prior to a
meeting of the stockholders of 3D Delaware involving a contest for the election
of directors shall not constitute a majority of the Board of Directors of 3D
Delaware immediately following such election; PROVIDED, that the following
transactions shall not be deemed to be a Triggering Event for purposes of this
Agreement; (x) the dissolution and liquidation of the assets of 3D Systems
(Canada), Inc. ("3D Canada") into, or merger 3D Canada with and into, the
Corporation or any of its subsidiaries; or (y) the merger of 3D California with
and into 3D Delaware.
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<PAGE>
(ii) The bonus payable to Sims upon the occurrence of any of the
Triggering Events shall be the lesser of (A) $1,000,000; (B) the maximum amount
(when aggregated with other payments received by Sims related to the occurrence
of a Triggering Event) that could be paid without the Special Bonus being
subject to excise tax under Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"); or (C) 7.5% of the difference between (1) the "Market
Value of 3D Delaware" (as defined in Section 9(c)) on the date the transaction
giving rise to the Triggering Event is consummated, and (2) the Market Value of
3D Delaware on the date of this Agreement, but in no event shall this clause (C)
result in a Special Bonus of less than the maximum amount (when aggregated with
all other "applicable employee renumeration," as calculated in accordance with
Section 162(m) of the Code during the year the Special Bonus is paid) that could
be paid without the Special Bonus being subject to the limitation on deductions
set forth in Section 162(m)(i) of the Code. All references in this Section 9(a)
to Section 162(m) of the Code, or any subsections thereof, shall refer to such
section, and the regulations and interpretations of the Internal Revenue Service
with respect thereto, in existence on the date of this Agreement, and the rights
of Sims to receive a Special Bonus, and the calculation of the amount of the
Special Bonus, shall not be reduced or diminished as a result of amendments or
changes to such section, or such regulations or interpretations, hereafter
enacted or promulgated. All payments due to Sims under this Section 9 shall be
payable by the Corporation upon the consummation of the transaction giving rise
to the Triggering Event.
(b) DETERMINATION OF "CONTINUING" OR "SURVIVING" CORPORATION. The
determination as to which party to a merger or consolidation is the "continuing"
or "surviving" corporation shall be made on the basis of the relative equity
interests of the shareholders in the corporation existing after the merger or
consolidation, as follows: if following any merger or reorganization, the
holders of outstanding Common Stock of 3D California or 3D Delaware immediately
prior to the merger or consolidation Beneficially Own more than fifty percent
(50%) of the Common Stock of the corporation existing following the merger or
consolidation, then for purposes of this Agreement, 3D California or 3D
Delaware, as the case may be, shall be the survivor or continuing corporation.
In making the determination of Beneficial Ownership by the shareholders of a
corporation immediately after the merger or consolidation, of equity securities
which the shareholders owned immediately before the merger or consolidation,
shares which they Beneficially Owned as shareholders of another party to the
transaction shall be disregarded.
(c) DEFINITIONS. For the purposes of this Section 9, the following
definitions shall apply:
"Acquiring Person" shall mean (i) any Person who or which, together
with all Affiliates and Associates of such Person, is not, as of the date
hereof, a Beneficial Owner of 5% or more of the Common Stock of 3D Delaware,
becomes the Beneficial Owner (as hereinafter defined) of at least 50% of the
Common Stock of the Corporation
Page 7 of 12
<PAGE>
or (ii) any Person who or which, together with all Affiliates and Associates of
such Person, as of the date of this Agreement is the Beneficial Owner of 5% or
more of the Common Stock of 3D Delaware, becomes the Beneficial Owner of at
least 80% of the Common Stock of the Corporation. Acquiring Person shall not
include 3D Delaware, 3D California, 3D Holdings, LLC or 3D Canada, any employee
benefit plan of the Corporation or any entity holding Shares which was
organized, appointed or established by the Corporation for or pursuant to the
terms of any such plan.
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as in
effect on the date hereof.
A person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities: (i) which such Person or any of
such Person's Affiliates or Associates, directly or indirectly, beneficially
owns (as determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
in effect on the date of this Agreement, or has the right to dispose of; (ii)
which such Person or any of such Person's Affiliates or Associates has, directly
or indirectly, (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), arrangement
or understanding (whether or not in writing), or upon the exercise of conversion
rights, exchange rights, rights, warrants or options, or otherwise; PROVIDED,
HOWEVER, that a Person shall not be deemed the "Beneficial Owner" of or to
"beneficially own" any security under this clause (ii)(B) as a result of an
agreement, arrangement or understanding to vote such security if such agreement,
arrangement or understanding (1) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and regulations under
the Exchange Act (or any comparable or successor report); or which are
beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person or any of such Person's
Affiliates or Associates has any agreement (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities), arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in Section 9(c)(ii)(B)) or disposing of any Common
Stock of the Corporation.
"Common Stock" of a Person shall mean the common stock (or, in the
case of a trust, partnership or other unincorporated entity, the equivalent
equity interest) with the greatest voting power of such Person (or, (i) if such
Person is a Subsidiary of another Person, the Person which ultimately controls
such first-mentioned Person, or (ii) if such Person is ultimately controlled by
two or more Persons, the controlling Person having common stock or equivalent
equity interests with the greatest aggregate current
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<PAGE>
market value, together with all rights and benefits (however denominated or
constituted) relating to such common stock (including, without limitation, any
rights or warrants to acquire additional shares of such common stock or other
securities or assets, or to participate in any trust for the benefit of holders
of such shares, or to share in the benefits of any agreements or other
arrangements for the benefit of such holders), whether or not such rights are
yet exercisable, and together with any other securities which are represented by
the certificates for such shares or are transferred in connection with transfers
of such shares.
"Market Value of 3D Delaware" on any particular date shall be
determined by multiplying the number of shares of Common Stock of 3D Delaware
issued and outstanding on that date by the Market Price of the Common Stock of
3D Delaware on such date.
"Market Price" of the Common Stock of 3D Delaware on any date shall
mean the closing price per share of such Common Stock on the Trading Day (as
such term is hereinafter defined) immediately prior to such date. The closing
price shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Common Stock of 3D Delaware is not listed or admitted
to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock of 3D
Delaware is listed or admitted to trading or, if the Common Stock is not listed
or admitted to trading on any national securities exchange, the last price or,
if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in
use, or, if on any such date the common stock of 3D Delaware is not quoted by
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Common Stock selected by
the Board of Directors of 3D Delaware. If on any such date no market maker is
making a market in the Common Stock the fair value of such shares on such date
as determined in good faith by the Board of Directors of 3D Delaware shall be
used. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock of 3D Delaware are
listed or admitted to trading or traded is open for the transaction of business
or, if the Common Stock is not so listed or admitted to trading on any national
securities exchange, a day on which commercial banks in Los Angeles, California
are open to the public for business. If the Common Stock is not publicly held
or not so listed or traded, "Market Price" per share shall mean the fair value
per share as determined in good faith by the Board of Directors of 3D Delaware,
or, if at the time of such determination there is an Acquiring Person, by a
nationally recognized investment banking firm selected by the Board of Directors
of 3D Delaware.
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<PAGE>
"Person" shall mean any individual, firm, corporation, trust,
partnership or other entity, whether similar or dissimilar to the foregoing.
"Subsidiary" or "Subsidiaries" shall mean, as the case may be, with
respect to any Person, any other Person of which securities or other ownership
interests having ordinary voting power, in the absence of contingencies, to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such first Person.
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<PAGE>
10. MISCELLANEOUS.
(a) WAIVER. The waiver by any party hereto of a breach of any of the
provisions of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
(b) NOTICE. Any notice to be given hereunder shall be sent by
certified mail addressed, if to the Corporation, to 3D Systems, Inc., 26081
Avenue Hall, Valencia, California 91355, Attn: President, or at such other
address as the Corporation shall hereafter specify in writing, or if to Sims to
875 Gold Spring Place, Westlake Village, California 91362, or at such other
address as Sims shall hereafter specify in writing.
(c) NO ASSIGNMENT. This Agreement is personal in its nature and
neither of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder; PROVIDED, if the
Corporation effects any merger, consolidation or transfer or sale of all or
substantially all the assets of the Corporation in a transaction in which the
Corporation is not the surviving entity, this Agreement shall be binding upon
such successor corporation and such successor corporation shall discharge and
perform all the obligations of the Corporation hereunder.
(d) ENTIRE AGREEMENT. This Agreement embodies the entire agreement
of the parties respecting the matters within its scope and may be modified only
in writing.
(e) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF CALIFORNIA.
(f) ATTORNEYS' FEES. If either party hereto brings an action or
proceeding for a declaration of the rights of the parties under injunctive
relief, or for an alleged breach or default of, or any other action arising out
of this Agreement, the prevailing party in any such action shall be entitled to
an aware of the prevailing party's actual attorneys' fees and any court costs
incurred in such action or proceeding, in addition to any other damages or
relief awarded.
(g) FEDERAL AND STATE TAX WITHHOLDING. The Corporation shall have
the right to withhold from Compensation due Sims all amounts necessary to
satisfy applicable federal and state income tax withholding obligations.
(h) SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
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(i) JOINT AND SEVERAL LIABILITY. The liability of 3D California and
3D Delaware hereunder for all obligations of the Corporation shall be joint and
several.
(j) WARRANTY. The Corporation warrants that this Agreement has been
approved by the Boards of Directors of 3D California and 3D Delaware.
(k) CONFLICTING AGREEMENTS. The Corporation has provided Sims with
copies of all employment policies and benefit plans relating to his employment
and, in the event that any term specified therein is in conflict with the terms
identified in this Agreement, the terms of this Agreement shall control.
(l) TERMINATION OF PRIOR AGREEMENT. Upon execution of this Agreement
by all parties hereto, as of the date hereof, Sections 1, 2, 3(a) and 4 through
7 of that certain Employment Agreement between the Corporation and Sims dated
October 31, 1994, as amended, shall terminate and be of no further force or
effect and neither the Corporation nor Sims shall have any rights or obligations
under those Sections.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
3D SYSTEMS, INC.
______________________________ By:_____________________________
Arthur B. Sims A. Sidney Alpert
Vice President, General Counsel
3D SYSTEMS CORPORATION
By:_____________________________
A. Sidney Alpert
Vice President, General Counsel
Page 12 of 12
<PAGE>
OPTION CERTIFICATE
THIS IS TO CERTIFY that 3D Systems Corporation, a Delaware corporation (the
"COMPANY"), has granted to the Officer of the Company named below a
non-statutory stock option (the "OPTION") to purchase shares of the Company's
Common Stock (the "SHARES"), and upon the terms and conditions determined by the
Compensation Committee (the "Committee") of the Board of Directors of the
Company (the "BOARD"), as follows:
NAME OF OPTIONEE: Arthur B. Sims
ADDRESS OF OPTIONEE: c/o 3D Systems Corporation
26081 Avenue Hall
Valencia, CA 91355
NUMBER OF SHARES: 25,000
OPTION EXERCISE PRICE: $ 6.4113(1) per share
DATE OF GRANT: May 20, 1999
OPTION EXPIRATION DATE: Ten years from the Date of Grant.
EXERCISE SCHEDULE: The Option shall become exercisable with respect to 25%
of the number of shares subject to this Option (rounded up or down to the
nearest whole number) on each of the first four anniversaries of the Date of
Grant, PROVIDED HOWEVER THAT, in the event of an acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") of beneficial
ownership (within the meaning of Rule 13d-3 of the Rules and Regulations of the
Securities and Exchange Commission under the Exchange Act) of at least 51% or
more of the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors, the Option
shall become fully vested and immediately exercisable. Installments shall be
cumulative, and the Option may be exercised as to any and all shares of Common
Stock covered by an installment at any time after the installment becomes
exercisable and prior to the expiration of termination of the Option.
OUTSIDE OF 1996 STOCK INCENTIVE PLAN: The Option has been granted outside
the 1996 Stock Incentive Plan and is not subject to the terms thereof.
SUMMARY OF OTHER TERMS: This Option is defined in the Stock Option
Agreement (Non-Statutory Stock Option) (the "OPTION AGREEMENT") which is
attached to this Option Certificate (the "CERTIFICATE") as Annex I. This
Certificate summarizes certain of the provisions of the Option Agreement for
your information, but is not complete. Your rights
- - ---------------------
(1) Based on the 115% of the average closing price of the Common Stock over the
ten trading day period following shareholder approval of the amended 1996 Stock
Option Plan.
<PAGE>
are governed by the Option Agreement, NOT by this summary. The Company strongly
suggests that you carefully review the full Option Agreement prior to signing
this Certificate or exercising the Option.
Among the terms of the Option Agreement are the following:
TERMINATION OF EMPLOYMENT: While the Option terminates on the Option
Expiration Date, it will terminate earlier if you cease to be employed by the
Company or the direct or indirect subsidiary of the Company with whom you are
employed (transfer of employment from one subsidiary to another will not
constitute termination of employment). If your employment ends due to
retirement or death, the Option terminates eighteen months after the date of
retirement or death, and is exercisable during such eighteen-month period as to
the portion of the Option which had vested prior to the date of retirement or
death. If your employment ends due to disability, the Option terminates twelve
months after the date of disability, and is exercisable during such twelve-month
period as to the portion of the Option which had vested prior to the date of
disability. If your employment ends primarily as a result of an act of
misconduct described in Section 5(b) of the Option Agreement, or during the
period when your rights under the Option have been suspended by the Company
pursuant to Section 5(b), the Option will terminate immediately. In all other
cases, the Option terminates ninety days after the date of termination of
employment, and is exercisable during such time period as to the portion of the
Option which had vested prior to the date of termination of employment. See
Section 5 of the attached Option Agreement.
TRANSFER: The Option is personal to you, and cannot be sold, transferred,
assigned or otherwise disposed of to any other person, except upon your death.
See Section 13(d) of the attached Option Agreement.
EXERCISE: You can exercise the Option (while it is exercisable), in whole
or in part, by delivering to the Company a Notice of Exercise identical to
Exhibit "A" attached to the Option Agreement, accompanied by payment of, or
provision pursuant to the Option Agreement for the payment of, the Exercise
Price for the Shares to be purchased. The Company may require you to submit
certain written reassurances to the Company with respect to your status as a
shareholder. The Company will then issue a certificate to you for the Shares
you have purchased. You are under no obligation to exercise the Option. See
Section 4 of the attached Option Agreement.
RELOAD OPTION: If and to the extent that the Exercise Price is paid by
delivery of shares of the Company's Common Stock (see Section 4(b) of the
attached Option Agreement), you will automatically be granted a new option (a
"Reload Option") for a like number of shares, with an exercise price equal to
the market value of a share of Common Stock on the date of exercise, and a term
equal to the term of the Option. See Section 4(d) of the attached Option
Agreement.
<PAGE>
ADJUSTMENTS UPON RECAPITALIZATION: The Option contains provisions which
affect your rights in the event of stock splits, stock dividends, mergers and
other major corporate reorganizations. See Section 6 of the attached Option
Agreement.
WAIVER: By signing this Certificate, you will be agreeing to all of the
terms of the Option Agreement, including those not summarized in this
Certificate. You will waive your rights to options or stock which may otherwise
have been promised to you. See Section 7 of the attached Option Agreement.
WITHHOLDING: The Company may require you to make any arrangements
necessary to insure the proper withholding of any amount of tax, if any,
required to be withheld by the Company as a result of the exercise of the
Option. See Section 10 of the attached Option Agreement.
<PAGE>
A G R E E M E N T
3D Systems Corporation, a Delaware corporation, and Optionee each hereby
agrees to be bound by all of the terms and conditions of the Stock Option
Agreement (Non-Statutory Stock Option) which is attached hereto as Annex I and
incorporated herein by this reference as if set forth in full in this document.
DATED:____________________________
3D SYSTEMS CORPORATION
By:__________________________________
Its: Vice President and General Counsel
OPTIONEE
Name:________________________________
_______________________________
(Please print your name exactly as you wish
it to appear on any stock certificates issued
to you upon exercise of the Option)
<PAGE>
ANNEX I
STOCK OPTION AGREEMENT
(NON-STATUTORY STOCK OPTION)
This STOCK OPTION AGREEMENT (this "OPTION AGREEMENT") is made and entered
into on the execution date of the Option Certificate to which it is attached
(the "CERTIFICATE"), by and between 3D Systems Corporation, a Delaware
corporation (the "COMPANY"), and the Officer of the Company named in the
Certificate ("OPTIONEE").
The Board of Directors of the Company (the "BOARD") has authorized the
grant to Optionee of a non-statutory stock option to purchase shares of the
Company's Common Stock, par value $0.001 per share (the "COMMON STOCK"), upon
the terms and subject to the conditions set forth in this Option Agreement.
The Company and Optionee agree as follows:
1. GRANT OF OPTION.
The Company hereby grants to Optionee the right and option (the
"OPTION"), upon the terms and subject to the conditions set forth in this Option
Agreement, to purchase all or any portion of that number of shares of the Common
Stock (the "SHARES") set forth in the Certificate, at the Option exercise price
set forth in the Certificate (the "EXERCISE PRICE").
2. TERM OF OPTION.
The Option shall terminate and expire on the Option Expiration Date
set forth in the Certificate, unless sooner terminated as provided herein. In
no event shall the Option be exercisable after the expiration of ten years from
the date it was granted.
3. EXERCISE PERIOD.
(a) Subject to the provisions of Sections 3(b) and 5 of this Option
Agreement, the Option shall become exercisable (in whole or in part) upon and
after the dates set forth or referred to under the caption "Exercise Schedule"
in the Certificate. The installments shall be cumulative; I.E., the Option may
be exercised, as to any or all Shares covered by an installment, at any time or
times after the installment first becomes exercisable and until expiration or
termination of the Option.
<PAGE>
(b) Notwithstanding anything to the contrary contained in this Option
Agreement, the Option may not be exercised, in whole or in part, unless and
until any then-applicable requirements of all federal, state and local laws and
regulatory agencies shall have been fully complied with to the satisfaction of
the Company and its counsel. In addition, if the Company believes that Employee
has committed an Act of Misconduct, including an act of embezzlement, fraud,
nonpayment of any obligation owed to the Company or any subsidiary, breach of
fiduciary duty or deliberate disregard of the Company's rules resulting in loss,
damage or injury to the Company, any unauthorized disclosure of trade secrets or
confidential information of the Company, any conduct constituting unfair
competition, or the inducement of any customer of the Company to breach a
contract with the Company), the Company may suspend the Employee's rights under
the Option pending a determination by the Board of Directors, which shall have
the right, as therein provided, to terminate the Option.
4. EXERCISE OF OPTION.
There is no obligation to exercise the Option, in whole or in part.
The Option may be exercised, in whole or in part, only by delivery to the
Company of:
(a) written notice of exercise in form and substance identical to
Exhibit "A" attached to this Option Agreement stating the number of shares of
Common Stock then being purchased (the "PURCHASED SHARES");
(b) the Exercise Price for each Purchased Share shall be paid in full
upon exercise and shall be payable in cash in United States dollars (including
check, bank draft or money order); PROVIDED, HOWEVER, that in lieu of cash the
person exercising the Option may pay the Exercise Price in whole or in part by
delivering to the Company shares of the Common Stock having a fair market value
on the date of exercise of the Option, determined as provided in Section 4(c),
equal to the Exercise Price for the Shares being purchased; except that (i) any
portion of the Exercise Price representing a fraction of a Share shall in any
event be paid in cash and (ii) no shares of the Common Stock which have been
held for less than six months may be delivered in payment of the Exercise Price
of an Option. Delivery of shares may also be accomplished through the effective
transfer to the Company of shares held by a broker or other agent. The Company
will also cooperate with any person who participates in a cashless exercise
program of a broker or other agent under which all or part of the shares
received upon exercise of the Option are sold through the broker or other agent
or under which the broker or other agent makes a loan to such person.
Notwithstanding the foregoing, the exercise of the Option shall not be deemed to
occur and no shares of Common Stock will be issued by the Company upon exercise
of the Option until the Company has received payment of the Exercise Price in
full. The date of exercise of an Option shall be determined under procedures
established by the Committee.
(c) If payment is made, in whole or in part, by transfer to the
Corporation of issued and outstanding shares of Common Stock, the value of such
shares shall be the mean between the following prices, as applicable, for the
date as of which fair market value is to be
<PAGE>
determined as quoted in THE WALL STREET JOURNAL (or in such other reliable
publication as the Company, in its discretion, may determine to rely upon): (i)
if the Common Stock is listed on a United States securities exchange, the
highest and lowest sales prices per share of Common Stock for such date on the
principal United States securities exchange on which the Common Stock is listed,
or (ii) if the Common Stock is not listed on any such exchange, the highest and
lowest sales prices per share of the Common Stock for such date on the Nasdaq
National Market or any successor system then in use. If there are no such sale
price quotations for the date as of which fair market value is to be determined
but there are such sale price quotations within a reasonable period both before
and after such date, then fair market value shall be determined by taking an
average of the means between the highest and lowest sales prices per share of
the Common Stock as so quoted on the nearest date before and the nearest date
after the date as of which fair market value is to be determined. If there are
no such sale price quotations on or within a reasonable period both before and
after the date as of which fair market value is to be determined, then fair
market value of the Common Stock shall be the mean between the bona fide bid and
asked prices per share of Common Stock as so quoted for such date on Nasdaq, or
if none, the average of the means between such bid and asked prices on the
nearest trading date before and the nearest trading date after the date as of
which fair market value is to be determined, if both such dates are within a
reasonable period. If the fair market value of the Common Stock cannot be
determined on the basis set forth above, the Committee shall in good faith
determine the fair market value of the Common Stock as of such date.
(d) If Employee delivers shares of Common Stock in payment of the
Exercise Price of the Option, as provided in Paragraph 4(b) above, the Employee
shall be automatically granted the additional right and option (the "Reload
Option") to purchase all or any portion of that number of shares of Common Stock
equal to the number of shares of Common Stock so delivered upon exercise of the
Option. Each Reload Option shall (i) have a per Share Exercise Price equal to
the fair market value of the Common Stock on the date of exercise of the Option
to which such Reload Option relates, determined pursuant to Section 4(c) of this
Option Agreement; (ii) have a term no longer than the remaining term of the
Option at the time of exercise; (iii) become exercisable in full from and after
that date which is six months following its date of grant; and (iv) otherwise
have terms and conditions identical to the Option. The Company shall promptly
following the grant of a Reload Option prepare and deliver to Employee a written
option agreement memorializing the grant of such Reload Option; but the failure
to prepare and deliver such documentation shall not affect the continuing
validity and enforceability of such Reload Option.
5. TERMINATION OF EMPLOYMENT.
(a) If Employee shall cease to be an employee of the Company, or any
direct or indirect subsidiary of the Company, (other than as the result of the
transfer of employment of Employee to another corporation which is the Company,
or any direct or indirect subsidiary of the Company) for any reason other than
retirement, death or permanent disability (a "TERMINATING EVENT"), Employee
shall have the right, subject to the provisions of
<PAGE>
Section 5(b) below, to exercise the Option at any time following such
Terminating Event until the earliest to occur of (x) 90 days following the date
of such Terminating Event and (y) the expiration of the term of this Option as
set forth in Section 2 of this Option Agreement. The Option may be exercised
following a Terminating Event only to the extent exercisable as of the date of
the Terminating Event. To the extent unexercised at the end of the period
referred to above, the Option shall terminate. The Committee, in its sole and
absolute discretion, shall determine whether authorized leaves of absence shall
constitute termination of employment for purposes of this Option Agreement.
(b) Notwithstanding the provisions of Section 5(a) above, if the
Company believes that an Employee has committed an act of misconduct as
described below, the Company may suspend the Employee's rights under the Option
pending a determination by the Board of Directors of the Company. If the Board
of Directors determines that an Employee has committed an act of embezzlement,
fraud, nonpayment of any obligation owed to the Company or any subsidiary,
breach of fiduciary duty or deliberate disregard of the Company's rules
resulting in loss, damage or injury to the Company, or if an Employee makes an
unauthorized disclosure of trade secret or confidential information of the
Company, engages in any conduct constituting unfair competition, or induces any
customer of the Company to breach a contract with the Company, neither the
Employee nor his or her estate shall be entitled to exercise any rights
whatsoever with respect to the Option. In making such determination, the Board
of Directors shall act fairly and shall give the Employee a reasonable
opportunity to appear and present evidence on his or her behalf at a hearing
before a committee of the Board of Directors; and if the Employee is an
"officer" under Rule 16a-1(f) of the Rules and Regulations of the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, the
determination of the Board of Directors shall be subject to the approval of the
Committee.
(c) If, by reason of retirement, death or disability (a "SPECIAL
TERMINATING EVENT"), Employee shall cease to be an employee the Company or any
direct or indirect subsidiary of the Company (other than as the result of the
transfer of employment of Employee to another corporation which is the Company,
or any direct or indirect subsidiary of the Company), then Employee, Employee's
executors or administrators or any person or persons acquiring the Option
directly from Employee by bequest or inheritance, shall have the right to
exercise the Option (i) in the event of Employee's disability, within twelve
months following the date of such Special Terminating Event, or (ii) in the
event of Employee's retirement, or in the event of Employee's death, within
eighteen months of either Special Terminating Event. The Option may be
exercised following a Special Terminating Event only to the extent exercisable
at the date of the Special Terminating Event. To the extent unexercised at the
end of the period referred to above, the Option shall terminate.
(d) For purposes of this Option Agreement, "disability" shall mean
total and permanent disability as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"). Employee shall not be considered
permanently disabled unless he
<PAGE>
furnishes proof of such disability in such form and manner, and at such times,
as the Committee may from time to time require.
6. ADJUSTMENTS UPON RECAPITALIZATION.
In the event of any change in the outstanding shares of the Common
Stock or other securities then subject to this option by reason of any stock
split, reverse stock split, stock dividend, recapitalization, merger,
consolidation, combination or exchange of shares or other similar corporate
change, or if the outstanding securities of the class then subject to this
Agreement are exchanged for or converted into cash, property or a different kind
of securities, or if cash, property or securities are distributed in respect of
such outstanding securities (other than a regular cash divided) then, unless the
terms of such transaction shall otherwise provide, such equitable adjustments
shall be made by the Board, or the Committee, in the Option (including, without
limitation, appropriate and proportionate adjustments to the number and type of
shares or other securities or cash or other property that may be acquired
pursuant to exercise of the Option); and any such adjustments made by the Board
or the Committee shall be final, binding and conclusive for any and all
purposes.
7. WAIVER OF RIGHTS TO PURCHASE STOCK.
By signing this Option Agreement, Employee acknowledges and agrees
that neither the Company nor any other person or entity is under any obligation
to sell or transfer to Employee any option or equity security of the Company,
other than the shares of Common Stock subject to the Option and any other right
or option to purchase Common Stock which was previously granted in writing to
Employee by the Committee (or the Board). By signing this Option Agreement,
Employee specifically waives all rights which he or she may have had prior to
the date of this Option Agreement (other than any other right or option to
purchase Common Stock which was previously granted in writing to Employee by the
Committee or the Board) to receive any option or equity security of the Company.
8. NO RIGHTS AS SHAREHOLDER.
Except as provided in Section 6 of this Option Agreement, Employee
shall have no rights as a shareholder with respect to the Shares until the date
of the issuance to Employee of a stock certificate or stock certificates
evidencing such Shares. Except as may be provided in Section 6 of this Option
Agreement, no adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued.
9. MODIFICATION.
The Committee (or the Board) may modify, extend or renew the Option or
accept the surrender of, and authorize the grant of a new option in substitution
for, the Option
<PAGE>
(to the extent not previously exercised); PROVIDED, that a modification of the
Option shall be effective only with the consent of the Optionee.
10. WITHHOLDING.
The Company shall be entitled to require as a condition of delivery of
any Purchased Shares upon exercise of any Option that the Optionee agree to
remit, at the time of such delivery or at such later date as the Company may
determine, an amount sufficient to satisfy all federal, state and local
withholding tax requirements relating thereto, and Optionee agrees to take such
other action required by the Company to satisfy such withholding requirements.
11. SERVICES OF OPTION HOLDER.
In consideration for the grant of the Option, Employee agrees to
remain in the employ of, and shall continue to render services to, the Company
or any direct or indirect subsidiary of the Company, as the Committee may from
time to time direct, for a period of one year from the date of this Option
Agreement. This provision shall not obligate the Company, or such subsidiary,
to continue to employ, or utilize the services of, Employee for any period
whatsoever. The sole remedy to the Company should Employee breach his or her
obligations under this Section 11 shall be to cancel this Option Agreement and
the Option granted under this Option Agreement. For the purposes of this Option
Agreement, the term "subsidiary" shall mean any present or future corporation
which would be a "subsidiary corporation" of the Company, as defined in Section
424 of the Code.
12. CHARACTER OF OPTION.
The Option is not intended to qualify as an "incentive stock option"
as that term is defined in Section 422 of the Code.
13. GENERAL PROVISIONS.
(a) FURTHER ASSURANCES. Employee shall promptly take all actions and
execute all documents requested by the Company which the Company deems to be
reasonably necessary to effectuate the terms and intent of this Option
Agreement.
(b) NOTICES. All notices, requests, demands and other communications
under this Option Agreement shall be in writing and shall be given to the
parties hereto as follows:
14. If to the Company, to:
3D Systems Corporation
26081 Avenue Hall
Valencia, CA 91355
<PAGE>
Attention: General Counsel
15. If to Employee, to the address set
forth in the records of the Company,
or at such other address or addresses as may have been furnished by such either
party in writing to the other party hereto. Any such notice, request, demand or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mail by first-class certified mail, return
receipt requested, postage prepaid, addressed as aforesaid; or (ii) if given by
any other means, when delivered at the address specified in this
subparagraph (b).
(c) TRANSFER OF RIGHTS UNDER THIS OPTION AGREEMENT. The Company may
at any time transfer and assign its rights and delegate its obligations under
this Option Agreement to any other person, corporation, firm or entity,
including its officers, directors and stockholders, with or without
consideration.
(d) OPTION NON-TRANSFERABLE. Employee may not sell, transfer, assign
or otherwise dispose of the Option except by will or the laws of descent and
distribution, and Options may be exercised during the lifetime of Employee only
by Employee or by his or her guardian or legal representative.
(e) MARKET STAND-OFF. In the event of an underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
Employee shall not sell, make any short sale of, loan, hypothecate, pledge,
grant any option for the repurchase of, or otherwise dispose or transfer for
value, or otherwise agree to engage in any of the foregoing transactions with
respect to any shares of Common Stock without the prior written consent of the
Company or its underwriters, for such period of time from and after the
effective date of such registration statement as may be requested by the Company
or such underwriters (the "MARKET STAND-OFF"); provided, however, that in no
event shall such period exceed 180 days.
(f) SUCCESSORS AND ASSIGNS. Except to the extent specifically
limited by the terms and provisions of this Option Agreement, this Option
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns, heirs and personal representatives.
(g) GOVERNING LAW. THIS OPTION AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE IN, AND TO BE PERFORMED SOLELY WITHIN, THAT STATE.
<PAGE>
(h) MISCELLANEOUS. Titles and captions contained in this Option
Agreement are inserted for convenience of reference only and do not constitute a
part of this Option Agreement for any other purpose.
The Signature Page to this Option Agreement consists of the last page
of the Certificate.
<PAGE>
Exhibit "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
TO: 3D Systems Corporation
The undersigned, the holder of the enclosed Stock Option Agreement
(Non-Statutory Stock Option), hereby irrevocably elects to exercise the purchase
rights represented by the Option and to purchase thereunder ______* shares of
Common Stock of 3D Systems Corporation (the "COMPANY"), and herewith encloses
payment of $__________ and/or _________ shares of the Company's Common Stock in
full payment of the purchase price of such shares being purchased.
Dated:__________________________
____________________________________
(Signature must conform in all respects to
name of holder as specified on the face of the
Option)
____________________________________
(Please Print Name)
____________________________________
(Address)
* Insert here the number of shares called for on the face of the Option
(or, in the case of a partial exercise, the number of shares being
exercised), in either case without making any adjustment for additional
Common Stock of the Company, other securities or property which, pursuant to
the adjustment provisions of the Option, may be deliverable upon exercise.
<PAGE>
October 19, 1999
Mr. Arthur B. Sims
875 Gold Spring Place
Westlake Village, CA 91361
Dear Art:
Thank you for the time you have devoted in providing a smooth transition for the
new management team. I appreciate the insights and historical perspective you
have given me.
This to inform you that, effective September 30, 1999, you have provided all of
the services required under the contract dated September 9, 1999 among 3D
Systems Corporation, 3D Systems, Inc. and yourself.
Yours truly,
Brian K. Service
President and Chief Executive Officer
<PAGE>
EXHIBIT 22.1 Subsidiaries of the Company
The Company has the following subsidiaries:
3D Canada Company, a Nova Scotia unlimited liability company
("3D Canada"), a wholly-owned subsidiary of the Company;
and
3D Holdings, LLC, a Delaware limited liability company, owned
by the Company and 3D Canada Company;
and
3D Systems, Inc., a California corporation ("3D California"),
a wholly-owned subsidiary of 3D Canada;
and
3D Systems Europe, a U.K. corporation, a wholly-owned
subsidiary of 3D California;
and
3D Systems GmbH, a German corporation, a wholly-owned
subsidiary of 3D California;
and
3D Systems France SARL, a French corporation, a wholly-owned
subsidiary of 3D California;
and
3D Systems Italia S.r.l., an Italian corporation, a
wholly-owned subsidiary of 3D California and the Company;
and
3D Capital Corporation, a wholly-owned subsidiary of 3D
California;
<PAGE>
and
3D Systems International, Inc., a Barbados corporation, a
wholly-owned subsidiary of 3D California.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statements of 3D Systems Corporation on Form S-8 (Nos. 333-79767, 333-58903,
333-11865 and the S-8 filed on April 30, 1990) of our reports dated February 14,
2000, relating to the consolidated financial statements and financial statement
schedule of 3D Systems Corporation which are included in this Annual Report
on Form 10-K.
PricewaterhouseCoopers LLP
Woodland Hills, California
March 30, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 12,553
<SECURITIES> 0
<RECEIVABLES> 29,684
<ALLOWANCES> (2,912)
<INVENTORY> 8,786
<CURRENT-ASSETS> 53,101
<PP&E> 32,087
<DEPRECIATION> (15,842)
<TOTAL-ASSETS> 90,658
<CURRENT-LIABILITIES> 21,882
<BONDS> 4,495
0
0
<COMMON> 12
<OTHER-SE> 59,596
<TOTAL-LIABILITY-AND-EQUITY> 90,658
<SALES> 66,806
<TOTAL-REVENUES> 96,949
<CGS> 35,938
<TOTAL-COSTS> 56,913
<OTHER-EXPENSES> 47,588
<LOSS-PROVISION> 2,596
<INTEREST-EXPENSE> 404
<INCOME-PRETAX> (7,541)
<INCOME-TAX> (2,240)
<INCOME-CONTINUING> (5,301)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,301)
<EPS-BASIC> (0.47)
<EPS-DILUTED> (0.47)
</TABLE>
