As filed with the Securities and Exchange Commission on June 6, 1997
Registration No. 333-26457
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT No. 2
To
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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inTEST Corporation
(Exact name of registrant as specified in its charter)
Delaware 3825 22-2370659
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.)
2 Pin Oak Lane, Cherry Hill, New Jersey 08003, (609) 424-6886
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
ALYN R. HOLT ROBERT E. MATTHIESSEN
Chairman and Chief Executive Officer President and Chief Operating Officer
inTEST Corporation
2 Pin Oak Lane, Cherry Hill, New Jersey 08003, (609) 424-6886
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
CHARLES C. ZALL, ESQ. BARRY M. ABELSON, ESQ.
Saul, Ewing, Remick & Saul Pepper, Hamilton & Scheetz LLP
3800 Centre Square West 3000 Two Logan Square
Philadelphia, Pennsylvania 19102 18th and Arch Streets
(215) 972-7777 Philadelphia, Pennsylvania 19103
(215) 981-4000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
---------------------
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED JUNE 6, 1997
2,275,000 Shares
[GRAPHIC OMITTED] inTEST
Common Stock
----------------
Of the 2,275,000 shares of Common Stock offered hereby, 1,820,000 are
being sold by inTEST Corporation ("inTEST" or the "Company") and 455,000 shares
are being sold by certain stockholders of the Company (the "Selling
Stockholders"). The Company will not receive any of the proceeds from the sale
of shares by the Selling Stockholders. See "Principal and Selling
Stockholders."
Prior to the offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public
offering price for the Common Stock will be between $8.50 and $10.50 per share.
See "Underwriting" for information relating to the factors to be considered in
determining the initial public offering price. The Company has applied to have
the Common Stock approved for quotation on the Nasdaq National Market under the
symbol "INTT."
----------------
Prospective investors should carefully consider "Risk Factors" beginning on
page 5.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
=========================================================================================
Underwriting
Price to Discounts and Proceeds to Proceeds to
Public Commissions(1) Company(2) Selling Stockholders
- -----------------------------------------------------------------------------------------
Per Share ...... $ $ $ $
- -----------------------------------------------------------------------------------------
Total(3) ...... $ $ $ $
=========================================================================================
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including certain liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of $655,000 payable by the Company.
(3) The Selling Stockholders have granted the Underwriters an option,
exercisable within 30 days after the date of this Prospectus, to purchase
up to 341,250 additional shares of Common Stock solely to cover
over-allotments. If this option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Selling
Stockholders will be $_____________, $____________ and $____________,
respectively. See "Underwriting."
----------------
The shares of Common Stock are offered by the several Underwriters named
herein subject to prior sale, receipt and acceptance by them and subject to
their right to reject orders in whole or in part. It is expected that the
delivery of the certificates for such shares will be made on or about ,
1997 at the office of Janney Montgomery Scott Inc., Philadelphia, Pennsylvania.
----------------
JANNEY MONTGOMERY SCOTT INC. NEEDHAM & COMPANY, INC.
The date of this Prospectus is _________, 1997
[Picture of a test head in position to dock to a device handler, each equipped
with inTEXT docking hardware.]
[Picture of inTEXT docking hardware consisting of a docking plate with three
cams and interconnecting cables.]
[Drawings depicting a test head being moved in each of the six degrees of motion
freedom.]
[Picture of inTEXT in2 Test Head Positioner (manipulator) holding a test head
equipped with inTEST docking hardware.]
----------------
"inTEST," the Company's logo on the cover of this Prospectus and the "in2"
logo are registered trademarks of inTEST Corporation. This Prospectus also
contains trademarks of other companies.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Prospectus. Unless the context otherwise requires, all
references herein to the "Company" or "inTEST" include inTEST Corporation
("inTEST CORP") and its subsidiaries. All information in this Prospectus
assumes no exercise of the Underwriters' over-allotment option and gives effect
to (i) a stock split in the form of a stock dividend in the amount of 0.5579
shares for every one share outstanding which was effected on June 4, 1997, (ii)
the termination of the Company's status as an S corporation immediately prior
to the offering and (iii) the issuance of an aggregate of 300,443 shares of
Common Stock simultaneously with the closing of the offering in exchange for
the minority interests in the Company's three foreign subsidiaries (the
"Exchange"). See "The Company" and "S Corporation Distributions."
The Company
The Company is a leading independent designer, manufacturer and marketer
of docking hardware and test head manipulators, which are used with automatic
test equipment ("ATE") by semiconductor manufacturers during the testing of
wafers and packaged devices. The Company also designs and markets related ATE
interface products including high performance test sockets, interface boards
and probing assemblies. The Company's products are designed to improve the
utilization and cost-effectiveness of ATE (including testers, wafer probers and
device handlers) during the testing of linear, digital and mixed signal
integrated circuits. Since inception in 1981, the Company has developed and
continues to support over 4,600 products and has been granted 13 U.S. patents
for its technology.
Testing is an integral and necessary step during the design and
manufacture of wafers and packaged devices. Each integrated circuit is tested
at least twice during the manufacturing process to ensure the functional and
electrical performance of each circuit. The increasing worldwide demand for
semiconductors in recent years has led to an increase in the demand for ATE.
According to VLSI Research Inc., in 1996 semiconductor manufacturers spent an
estimated $3.7 billion on testers and $1.3 billion on wafer probers and device
handlers. The increasing complexity of wafers and packaged devices, as
manifested by larger wafers, higher speeds, growing pin counts, smaller
packaged devices and greater levels of integration has changed the design,
architecture and complexity of ATE used during the testing of such devices and
has resulted in an increased demand for the Company's products.
The Company's docking hardware products mechanically control the intimate
interface between the test head's interface board and the prober's probing
assembly or handler's test socket. Such docking hardware facilitates the quick,
easy and safe changeover of test heads to probers or handlers, thereby allowing
semiconductor manufacturers to achieve cost savings by (i) improving ATE
utilization, (ii) improving the accuracy and integrity of test results and
(iii) reducing the need to repair or replace expensive ATE interface products.
The Company's docking hardware can be designed to be used with substantially
all makes and models of test heads, probers and handlers, and can usually be
designed to allow all ATE on a test floor to be mechanically "plug-compatible."
The Company's in2 free-standing, floating-head universal manipulators are
designed to be used in either a dedicated or a flexible test environment and
have been engineered to hold test heads in an effectively weightless state, and
can be moved up or down, right or left, forward or backward and rotated around
each axis (six degrees of motion freedom). Consequently, an operator using no
more than 22 pounds of force can reposition a test head weighing up to
approximately 900 pounds by grasping it in his or her hands and gently moving
the test head into position to dock with a prober or handler.
The Company's largest customers include Lucent Technologies, Motorola, SGS
Thomson and Texas Instruments among semiconductor manufacturers, and Credence
Systems, LTX and Teradyne among ATE manufacturers. The Company designs, markets
and supports its products globally both through Company account managers based
in New Jersey, Texas, California, the U.K., Singapore and Japan and through
independent sales representatives in the U.S. and abroad. The Company's
executive offices are located in Cherry Hill, New Jersey. Manufacturing
facilities are located in New Jersey and the U.K.
3
The Offering
Common Stock offered by the Company ............... 1,820,000 shares
Common Stock offered by the Selling Stockholders . 455,000 shares
Total offering .................................... 2,275,000 shares
Common Stock to be outstanding after the offering . 5,911,034 shares(1)
Use of Proceeds .................................... For working capital, general corporate
purposes (which may include S corpora-
tion distributions) and possible acquisi-
tions. See "Use of Proceeds."
Proposed Nasdaq National Market symbol ............ INTT
Summary Consolidated Financial Information
(in thousands, except per share data)
Three months ended
Years ended December 31, March 31,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- -------- --------- --------
Consolidated Statement of Earnings Data:
Revenues ............................................. $ 6,512 $ 8,875 $ 9,287 $14,442 $18,582 $ 6,089 $ 3,887
Gross profit .......................................... 3,254 5,415 5,510 9,251 11,827 4,233 2,285
Operating income ....................................... 649 1,767 1,289 4,037 5,616 2,694 1,007
Earnings before income taxes and minority interest ... $ 605 $ 1,782 $ 1,326 $ 4,070 $ 5,717 $ 2,706 $ 1,022
-------- -------- -------- -------- -------- -------- -------
Pro forma net earnings (2) ........................... $ 3,366 $ 537
Pro forma net earnings per share (2) .................. $ 0.82 $ 0.13
Pro forma weighted average shares outstanding (1)(2) ... 4,091 4,091
Supplemental pro forma net earnings per share (3) ...... $0.79 $0.13
Supplemental pro forma weighted average shares out-
standing (3) .......................................... 4,265 4,265
March 31, 1997
-----------------------------------------------
Pro forma
Actual Pro forma (4) as adjusted (4)(5)
--------- --------------- -------------------
Consolidated Balance Sheet Data:
Cash and cash equivalents ...... $ 2,983 $ 2,983 $18,408
Working capital .................. 3,924 560 15,985
Total assets ..................... 7,492 9,115 24,540
Long term debt .................. 148 148 148
Total stockholders' equity ...... 4,154 2,640 18,065
- ------------
(1) Includes 300,443 shares of Common Stock to be issued in the Exchange, and
excludes 150,000 shares of Common Stock issuable upon the exercise of
stock options, the grant of which will become effective as of the
effective date of the Registration Statement of which this Prospectus is a
part (the "Registration Statement") and which will be exercisable at the
initial public offering price. None of such options will be exercisable
until one year after the effective date of grant. See "Management -- 1997
Stock Plan."
(2) Assumes the termination of the Company's S corporation status effective
January 1, 1996 and the completion of the Exchange on January 1, 1996, and
as a result reflects the amortization of goodwill associated therewith and
the absence of a charge for the minority interest. See Note 3 of Notes to
Consolidated Financial Statements.
(3) Supplemental pro forma net earnings per share reflects the assumed issuance
of 174,000 shares of Common Stock, based on an assumed initial public
offering price of $9.50 per share, to fund distributions to the Company's
current stockholders of previously taxed but undistributed S corporation
earnings, net of available cash and cash equivalents (estimated to be $1.7
million as of March 31, 1997). See "Use of Proceeds," "S Corporation
Distributions" and Note 3 of Notes to Consolidated Financial Statements.
(4) Reflects the acquisition of the minority interests in the Company's foreign
subsidiaries pursuant to the Exchange, including goodwill arising from the
Exchange, and the effects of the termination of the Company's S
corporation status, including the distribution described under "S
Corporation Distributions." See Note 3 of Notes to Consolidated Financial
Statements.
(5) Adjusted to reflect the sale by the Company of 1,820,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $9.50
per share and the receipt of the estimated net proceeds therefrom (after
deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by the Company). See "Use of Proceeds" and
"Capitalization."
4
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider the following
risk factors in addition to the other information set forth in this Prospectus.
This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially.
Dependence upon Semiconductor Industry. The Company's business is
substantially dependent upon the level of activity and capital expenditures of
semiconductor manufacturers. The semiconductor industry is highly cyclical and
has from time to time experienced periods of excess capacity which often have
had a severely detrimental effect on the industry's demand for ATE. There can
be no assurance that the Company's business and results of operations will not
be materially adversely affected by downturns in the semiconductor industry
generally, or by downturns or changes in any one or more particular market
segments of the semiconductor industry in which the Company participates. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Fluctuations in Revenues and Operating Results. The Company's revenues and
operating results have fluctuated and could in the future fluctuate
significantly from period to period, including from one quarterly period to
another, due to a combination of factors, including the cyclicality of the
semiconductor industry, delays in the Company's shipments of products, the mix
of products sold, the mix of customers and the regions of the world where sales
are made in a particular period, the level of the Company's fixed costs,
cancellation or rescheduling of orders by customers and competitive pricing
pressures. In the fourth quarter of 1996, for example, the Company experienced
an operating loss substantially as a result of reduced revenues. The Company
believes such reduced revenues reflect the reduction by semiconductor
manufacturers of commitments to purchase ATE products in the second and third
quarters of 1996. The impact of these and other factors on the Company's
revenues and operating results in any future period cannot be forecast with
accuracy. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Importance of Patents and Proprietary Rights; Risk of Litigation. The
Company's success depends in significant part on its ability to obtain patent
protection for its proprietary technologies and to preserve its trade secrets.
The Company's U.S. issued patents will expire at various times beginning in
2002 and extending through 2015. There can be no assurance that additional
patents will be issued on the Company's pending or future applications, or that
any patents now or hereafter owned by the Company will afford protection
against competitors that develop similar technology or products. There is no
certainty that any patents issued to the Company will be held valid if
subsequently challenged or subjected to reexamination or reissue, that others
will not claim rights in the patents and other proprietary technology owned by
the Company or that the Company's efforts to protect its proprietary rights
will be successful generally or in any specific circumstance. There are no
pending lawsuits or claims against the Company regarding infringement of any
existing patents or other intellectual property rights of others.
The Company has notified one of its competitors that the Company believes
the competitor's products infringe on one of the Company's U.S. patents. The
competitor responded by alleging that certain claims of the patent are invalid
based on an earlier issued U.S. patent. The Company, in order to strengthen its
patent position, requested reexamination of its patent by the U.S. Patent and
Trademark Office (the "PTO") over that earlier issued U.S. patent. The
competitor thereafter also requested a reexamination of the patent. A
reexamination provides the PTO with an opportunity to reevaluate the validity
of the claims of a patent previously issued by the PTO. On April 7, 1997, the
PTO issued an Office Action in Reexamination confirming five of the nine claims
of the Company's patent, and rejecting four claims. On April 29, 1997, the
Company's patent attorney presented to the Examiner in charge of the
Reexamination a minor amendment to the claims. In response, the Examiner agreed
that the proposed amendment appears to overcome the rejection of the four
claims. Based on advice of its patent counsel, the Company believes that upon
formal submission of the proposed amendment, all claims will be deemed
patentable and the Commissioner of the PTO will issue a Certificate of
Reexamination to that effect. Although there can be no assurance, the Company
believes that the failure of the PTO ultimately to deem patentable some or all
of the four claims rejected in the Office Action will not have a material
adverse effect on the Company's business or results of operations. See
"Business--Patents and Other Proprietary Rights."
5
Competition. The ATE industry is highly competitive. Many of the Company's
competitors have greater financial resources and some have more extensive
engineering, manufacturing, marketing and customer support capabilities than
the Company. The Company's competitors include independent manufacturers of
docking hardware, manipulators and related ATE interface products, designers
and manufacturers of ATE and, to a lesser extent, semiconductor manufacturers'
in-house ATE interface groups. The independent manufacturers of docking
hardware and manipulators which compete with the Company include Reid-Ashman
Manufacturing of the U.S., Microhandling of Germany and Shang Sheng of Taiwan.
The manufacturers of ATE which compete with the Company in the sale of docking
hardware and manipulators include Credence Systems, LTX, Schlumberger and
Teradyne. The Company competes with numerous independent manufacturers of
related ATE interface products. The Company principally competes on the basis
of product performance and functionality, product reliability, customer
service, applications support, price and timely product delivery. There can be
no assurance that the Company's competitors will not develop competing products
that will offer performance features that are superior to the Company's
products. The Company believes that in order to remain competitive, it must
continue to commit a significant portion of its personnel, financial resources,
research and development and customer support in developing new products and in
maintaining customer satisfaction worldwide. See "Business -- Competition."
Importance of Product Development. The market for ATE is subject to rapid
technological change and new product introductions, as well as advancing
industry standards. The development of increasingly complex semiconductors and
the utilization of semiconductors in a broader spectrum of products have driven
the need for more advanced ATE systems to test such devices at an acceptable
cost. The demand for these new ATE systems provides both the opportunity and
the need for the Company to develop additional products. There can be no
assurance that the Company will be successful in developing, manufacturing or
selling new products, that the introduction of such products will coincide with
the development of new generations of semiconductors or that such products will
satisfy customer needs or achieve market acceptance. The failure to provide
customers with new products could have a material adverse effect on the
Company's business and results of operations, as well as its customer
relationships. See "Business -- Strategy" and " -- Products."
Acquisitions. Although the Company has not made an acquisition since 1985,
a key element of its growth strategy is to acquire businesses, technologies or
products that are complementary to those of the Company. There can be no
assurance that the Company will be able to acquire and integrate successfully
such businesses, technologies or products or that any financing which may be
necessary for such acquisitions can be obtained on favorable terms or at all.
Furthermore, the integration of an acquisition may cause a diversion of
management's time and resources. Acquisitions by the Company could result in
dilutive issuances of equity securities and additional debt and amortization
expenses related to goodwill and intangible assets. In addition, gross profit
margins of acquired products, necessary product or technology development
expenditures and other factors related to any such acquisition could result in
dilution to the Company's stockholders or have other material adverse effects
on the Company's business and results of operations. The Company is not
currently a party to any agreement or understanding with respect to any
acquisition. See "Business -- Strategy."
International Sales and Operations. Approximately 37% and 43% of the
Company's revenues were generated by the Company's three foreign subsidiaries,
and approximately 5% and 19% of the Company's revenues were derived from sales
by inTEST CORP to customers located outside the U.S., in the first quarter of
1997 and in 1996, respectively. The Company intends to expand its international
presence and expects that international revenues will continue to represent a
significant portion of its revenues. See "Business -- Strategy." Sales to
customers outside the U.S. and operations in foreign countries are subject to
risks in addition to those incident to domestic sales and operations, including
the imposition of financial and operational governmental controls and
regulatory restrictions, the need to comply with a wide variety of U.S. and
foreign import and export laws, political and economic instability, trade
restrictions, changes in tariffs and taxes, longer payment cycles and the
greater difficulty of administering business abroad. There can be no assurance
that any of these factors will not have a material adverse effect on the
Company's business or results of operations. A significant portion of the
Company's revenues is denominated in foreign currencies, and accordingly, the
Company's business and results of operations may be affected by fluctuations in
interest and currency exchange rates. Also, the laws of certain foreign
countries may not protect the Company's intellectual property to the same
extent as do the laws of the U.S. See "Business -- Markets and Customers" and
Note 4 of Notes to Consolidated Financial Statements.
6
Customer Concentration. Although the Company's largest customers generally
change from year to year, sales to the Company's top ten customers accounted
for 70%, 73% and 69% of the Company's revenues in 1996, 1995 and 1994,
respectively, and sales to one customer, Lucent Technologies, accounted for
16%, 16% and 7% in 1996, 1995 and 1994, respectively. The Company sells to its
customers on a purchase order or other limited basis and not pursuant to long
term contracts. There can be no assurance that the Company will be able to
retain its largest customers or that such customers will not cancel or
reschedule orders. The loss of a major customer or a reduction in orders by
major customers, including reductions due to market or competitive conditions
in the semiconductor industry, could have a material adverse effect on the
Company's business and results of operations. See "Business -- Markets and
Customers."
Dependence on Key Suppliers. The Company relies on third party suppliers,
fabricators, finishers and manufacturers (collectively, "Suppliers") in the
production of its products. Although the Company believes that all raw
materials and component parts are currently available in adequate amounts,
there can be no assurance that shortages will not develop in the future.
Certain of the raw materials and component parts for the Company's docking
hardware and manipulator products are purchased from single Suppliers, and
certain of the Company's docking hardware and manipulator products are
fabricated by single fabricators and finished by single finishers. The related
ATE interface products sold by the Company are manufactured to the Company's
specifications by third party fabricators, finishers and manufacturers, and
certain of those products are purchased from single Suppliers. The Company does
not have written agreements with such Suppliers. Although the Company believes
there are alternative Suppliers for all such products, a termination or
significant disruption of any of its existing supplier arrangements could have
a material adverse effect on the Company's business and results of operations.
See "Business -- Manufacturing and Supply."
Dependence on Key Personnel. The loss of any one or more of the key
technical staff or managers of the Company could have a material adverse effect
on the Company's business and results of operations. Due to the importance of
long term relationships generally in Japan, the loss of any key employee of the
Company's Japanese subsidiary could have similar adverse consequences on the
Company's Japanese operations. From time to time, there is intense competition
for qualified employees among companies in the ATE industry, academic
institutions and other businesses. The Company does not have written employment
agreements with any of its executive officers or other key employees, nor does
the Company maintain key-person life insurance on any of its employees. There
can be no assurance that the Company will be successful in hiring or retaining
qualified personnel, and the inability to attract and motivate highly skilled
employees could have a material adverse effect on the Company's business and
results of operations. See "Business -- Strategy," " -- Employees" and
"Management."
Control by Principal Stockholders. Upon completion of the offering, the
Company's Chairman and Chief Executive Officer, Alyn R. Holt, and all of the
executive officers and directors of the Company, collectively, will
beneficially own approximately 31% and 50%, respectively, of the Common Stock
(28% and 45%, respectively, if the over-allotment option is exercised in full).
Existing management will hold sufficient voting power to enable it to continue
to exert significant influence over the business and affairs of the Company for
the foreseeable future. Such concentration of control of the Company may also
have the effect of discouraging bids for the Common Stock at a premium over the
market price and may have a material adverse effect on the market price of the
Common Stock. See "Principal and Selling Stockholders."
Broad Management Discretion as to Use of Proceeds. The net proceeds of the
offering will be used for working capital, general corporate purposes and
possible acquisitions of businesses, technologies or products complementary to
the Company's business. If the Company were to make any such acquisition, it
might use a significant portion of the net proceeds in connection with such
acquisition. The Company currently has no specific agreements or plans with
respect to such acquisitions, and there can be no assurance the Company will
consummate any acquisition. Accordingly, the Company's management will retain
broad discretion as to the allocation of a significant portion of the net
proceeds from the offering. See "Use of Proceeds" and "Business -- Strategy."
Anti-Takeover Protection. Certain provisions of the Company's Certificate
of Incorporation and of Delaware law could discourage potential acquisition
proposals and could delay or prevent a change in control of the Company. Such
provisions could diminish the opportunities for a stockholder to participate in
tender offers, including those at a premium over the market price of the Common
Stock. Such provisions may also inhibit
7
increases in the market price of the Common Stock that could result from
takeover attempts. In addition, the Board of Directors is authorized, without
further stockholder approval, to issue up to 5,000,000 shares of Preferred
Stock. The issuance of some or all of such shares could have the effect of
delaying, deterring or preventing a change in control of the Company. The
issuance of Preferred Stock could also have a dilutive effect on stockholders'
equity and a material adverse effect on the voting power of the holders of
Common Stock, including the loss of voting control to others. The Company has
no present plans to issue any Preferred Stock. See "Description of Capital
Stock -- Preferred Stock" and " -- Certain Corporate Provisions."
No Prior Public Market; Possible Volatility of Stock Price;
Dilution. Prior to the offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the
Common Stock will develop or be sustained after the offering. The initial
public offering price was determined through negotiations between the Company
and the representatives of the Underwriters (the "Representatives") based on
several factors and may not be indicative of the market price of the Common
Stock after the offering. See "Underwriting." The trading price of the
Company's Common Stock could be subject to wide fluctuations in response to
quarterly variations in the Company's operating results, announcements of
technological innovations or new products by the Company or its competitors,
developments concerning patents or proprietary rights or other events or
factors. The stock market has experienced extreme price and volume fluctuations
which have particularly affected the market prices of many technology companies
and small capitalization stocks in particular, and which have often been
unrelated to the operating performance of these companies. These broad market
fluctuations, as well as general economic and political conditions, may have an
unfavorable effect on the market price of the Common Stock. Purchasers of the
Common Stock offered hereby will experience immediate and substantial dilution
in net tangible book value of the Common Stock. See " -- Anti-Takeover
Protection" and "Dilution."
Shares Eligible for Future Sale. The sale of a substantial number of
shares of Common Stock, or the perception that such sales could occur, could
have a material adverse effect on prevailing market prices for the Common
Stock. In addition, any such sale or such perception could make it more
difficult for the Company to sell equity securities or equity-related
securities in the future at a time and price that the Company deems
appropriate. Upon consummation of the offering, the Company will have a total
of 5,911,034 shares of Common Stock outstanding, of which the 2,275,000 shares
offered hereby will be eligible for immediate sale in the public market without
restriction, unless they are held by "affiliates" of the Company within the
meaning of Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). The remaining 3,636,034 shares will be "restricted"
securities within the meaning of Rule 144 under the Securities Act and will be
eligible for public sale thereunder subject to volume limitations and other
conditions of Rule 144, if applicable. As of the date of this Prospectus, the
Company and the holders of all of its Common Stock have agreed that they will
not sell any shares of Common Stock or related securities of the Company
without the prior written consent of Janney Montgomery Scott Inc., for a period
of 180 days from the date of this Prospectus. Notwithstanding the foregoing,
Mr. Holt reserved the right to make a charitable contribution of up to 100,000
shares of Common Stock which would not be subject to the lock-up agreement.
Upon expiration of such 180 day period, 297,841 of the currently outstanding
restricted shares will be eligible for public sale under Rule 144 without any
volume or other limitations. No prediction can be made as to the effect, if
any, that future sales of Common Stock, or the availability of Common Stock for
future sale, will have on the market price of the Common Stock from time to
time or the Company's ability to raise capital through an offering of its
equity securities. In addition, the Company plans to file a registration
statement within 185 days of the date of this Prospectus to permit the sale of
up to 500,000 shares of Common Stock which may be issued to employees in the
future pursuant to the Company's 1997 Stock Plan. See "Management -- 1997 Stock
Plan" and "Shares Eligible for Future Sale."
8
THE COMPANY
The Company was incorporated in New Jersey in 1981 and reincorporated in
Delaware in April 1997. The Company has three foreign subsidiaries: inTEST
Limited ("inTEST LTD"), a British corporation located in Thame, England, U.K.;
inTEST Kabushiki Kaisha ("inTEST KK"), a Japanese corporation located in
Kichijoji, Japan; and inTEST PTE, Limited ("inTEST PTE"), a Singapore
corporation located in Singapore. The Company maintains its headquarters at 2
Pin Oak Lane, Cherry Hill, New Jersey 08003. The Company's telephone number is
(609) 424-6886 and its Internet e-mail address is postmaster@intest.com.
The Company and the minority stockholders of each of the Company's foreign
subsidiaries have agreed that simultaneous with the closing of the offering,
the Company will acquire the minority interests in each of the three foreign
subsidiaries by means of the Exchange, pursuant to which the Company will issue
shares of its Common Stock in exchange for the shares of stock of each foreign
subsidiary held by the minority stockholders. The agreed upon exchange ratio
for the minority interests is based on the average percentage contribution of
each subsidiary to the Company's consolidated earnings before interest and
taxes for the three most recent years. Such average percentage contribution to
the Company's consolidated earnings before interest and taxes for inTEST LTD,
inTEST KK and inTEST PTE was 20.5%, 12.0% and 2.5%, respectively. In connection
with the Exchange, the Company will issue 300,443 shares of Common Stock to the
minority stockholders of the foreign subsidiaries. These shares would have a
value of approximately $2.9 million assuming an initial public offering price
of $9.50 per share.
Alyn R. Holt, the Company's Chairman and Chief Executive Officer, will
receive a total of 48,487 shares of the Company's Common Stock in exchange for
his shares of stock in the foreign subsidiaries. Mr. Holt is the only director,
officer or stockholder of inTEST CORP who owns shares of common stock in any of
the foreign subsidiaries. Each of the minority stockholders of the foreign
subsidiaries, including Mr. Holt, will receive shares of the Company's Common
Stock based upon the same exchange ratio. See "Principal and Selling
Stockholders."
USE OF PROCEEDS
The proceeds to be received by the Company from the sale of the Common
Stock offered hereby (net of estimated underwriting discounts and commissions
and offering expenses) will be approximately $15.4 million, assuming an initial
public offering price of $9.50 per share. The Company will not receive any
proceeds from the sale of shares of Common Stock by the Selling Stockholders.
The Company does not have a specific budget for the application of the net
proceeds, which will be used for working capital, general corporate purposes
and possible acquisitions of businesses, technologies or products complementary
to the Company's business. A key element of the Company's growth strategy is to
seek to acquire businesses, technologies or products involving one or more of
the many ATE interface products related to its principal docking hardware and
manipulator product lines. If the Company were to make any such acquisition, it
might use a significant portion of the net proceeds or incur additional
indebtedness in connection with such acquisition. A major purpose of this
offering is to enable the Company to act upon acquisition opportunities by
providing cash as well as a form of marketable security that can be used to
fund one or more acquisitions. At the present time the Company is not engaged
in any negotiations with third parties and has no specific agreements or plans
with respect to such acquisitions, and there can be no assurance the Company
will consummate any acquisition. See "Risk Factors -- Broad Management
Discretion as to Use of Proceeds" and "Business -- Strategy."
Although there can be no assurance, the Company believes it will have,
exclusive of the net proceeds of the offering, cash and cash equivalents in
excess of the amount necessary to pay a final S corporation distribution to the
Company's current stockholders. To the extent the Company does not have
sufficient cash and cash equivalents to pay such distribution, the Company may
use a portion of the net proceeds to fund a portion of such distribution. If
the final S corporation distribution had been made on March 31, 1997, the
distribution would have exceeded the Company's available cash and cash
equivalents by approximately $1.7 million. See "S Corporation Distributions"
and Note 3 of Notes to Consolidated Financial Statements.
Pending use as set forth above, the Company intends to invest the proceeds
in investment-grade, short term, interest-bearing securities or shares of
investment companies investing primarily in such securities.
9
S CORPORATION DISTRIBUTIONS
Prior to the offering, the Company has been a corporation subject to
taxation under Subchapter S of the Internal Revenue Code of 1986, as amended.
As a result, the net earnings of the Company have been taxed, for Federal and
certain New Jersey state income tax purposes, as income of the Company's
stockholders, and the Company periodically paid dividends to its stockholders
in amounts exceeding such stockholders' liabilities for taxes.
The Company will terminate its S corporation status prior to the sale of
the Common Stock offered hereby (the "Termination Date") and distribute to its
current stockholders a final amount representing the Company's previously taxed
but undistributed S corporation earnings through the Termination Date. The
amount of the final distribution would have been approximately $3.4 million if
the Termination Date had been March 31, 1997, but the amount distributed will
include the Company's actual taxable income through the Termination Date, less
distributions to stockholders during that time period. The Company intends to
make this distribution, in one or more installments, prior to December 31,
1997. Purchasers of shares of Common Stock in the offering will not receive any
portion of the S corporation distribution. The Company believes it will have,
exclusive of the net proceeds of the offering, cash and cash equivalents in
excess of the amount necessary to pay the final S corporation distribution
following the Termination Date. See "Use of Proceeds."
DIVIDEND POLICY
The Company does not anticipate paying cash dividends in the foreseeable
future, but intends to retain future earnings, if any, for reinvestment in the
operation and expansion of the Company's business. Any determination to pay
cash dividends will be at the discretion of the Board of Directors and will be
dependent upon the Company's financial condition, results of operations,
capital requirements and such other factors as the Board of Directors deems
relevant.
10
CAPITALIZATION
The following table sets forth (i) the capitalization of the Company at
March 31, 1997, (ii) the pro forma capitalization at that date reflecting both
the issuance of an aggregate of 300,443 shares of Common Stock in the Exchange
and the termination of the Company's S corporation status and (iii) the
capitalization as adjusted at that date to give effect to the pro forma
adjustments described above, the sale of the 1,820,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$9.50 per share and the receipt of the estimated net proceeds therefrom. This
table should be read in conjunction with the Consolidated Financial Statements
and Notes thereto included elsewhere in this Prospectus.
March 31, 1997
--------------------------------------
(in thousands)
Pro forma
Actual Pro forma as adjusted
--------- ----------- ------------
Long term debt ................................................... $ 148 $ 148 $ 148
Minority interest ................................................ 291 -- --
-------- -------- -------
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; no
shares issued or outstanding .................................... -- -- --
Common stock, $0.01 par value; 20,000,000 shares authorized;
3,790,591 shares issued and outstanding actual, 4,091,034 shares
issued and outstanding pro forma and 5,911,034 shares issued and
outstanding pro forma as adjusted .............................. 38 41 59
Additional paid-in capital ....................................... 689 2,633 18,040
Retained earnings ................................................ 3,461 -- --
Foreign currency translation adjustment ........................ (34) (34) (34)
-------- -------- --------
Total stockholders' equity ....................................... 4,154 2,640 18,065
-------- -------- --------
Total capitalization ............................................. $ 4,593 $ 2,788 $ 18,213
======== ======== ========
11
DILUTION
At March 31, 1997, the pro forma net tangible book value of the Company
was $1,073,000 or $0.26 per share of Common Stock. Pro forma net tangible book
value per share represents total assets less intangible assets, less total
liabilities, divided by the number of shares of Common Stock outstanding at
that date after giving effect to the Exchange. After giving effect to the
receipt of the net proceeds from the sale of the 1,820,000 shares of Common
Stock offered by the Company hereby at an assumed initial public offering price
of $9.50 per share, and after deducting underwriting discounts and estimated
offering expenses, the pro forma net tangible book value as of March 31, 1997
would have been $16,498,000 or $2.79 per share of Common Stock. This represents
an immediate increase in net tangible book value of $2.53 per share to existing
stockholders and an immediate dilution of $6.71 per share to new investors
purchasing the shares of Common Stock offered hereby. The following table
illustrates this dilution on a per share basis:
Assumed initial public offering price per share ..................... $ 9.50
Pro forma net tangible book value per share before the offering ... $ 0.26
Increase per share attributable to new investors .................. 2.53
-------
Pro forma net tangible book value per share after the offering ...... 2.79
-------
Dilution per share to new investors ................................. $ 6.71
=======
The following table sets forth, as of March 31, 1997, and after giving
effect to the Exchange and the offering, the difference between existing
stockholders and new investors with respect to the number of shares of Common
Stock purchased from the Company (but not those purchased from the Selling
Stockholders), the total cash consideration paid and the average price per
share.
Shares Purchased Cash Consideration Average
----------------------- ------------------------- Price
Number Percent Amount Percent Per Share
----------- --------- ------------- --------- ----------
Existing stockholders ...... 4,091,034 69.2% $ 1,173,000 6.3% $0.29
New investors ............... 1,820,000 30.8 17,290,000 93.7 9.50
---------- ------- ------------ -------
Total(1) .................. 5,911,034 100.0% $18,463,000 100.0%
========== ======= ============ =======
- ------------
(1) Sales by the Selling Stockholders in the offering will reduce the number of
shares held by existing stockholders to 3,636,034 or 61.5% of the total
number of shares of Common Stock outstanding after the offering (3,294,784
and 55.7% if the Underwriters' over-allotment option is exercised in
full), and will increase the number of shares held by new investors to
2,275,000 or 38.5% of the total number of shares of Common Stock
outstanding after the offering (2,616,250 and 44.3% if the Underwriters'
over-allotment is exercised in full).
12
SELECTED CONSOLIDATED FINANCIAL DATA
The following table contains certain selected consolidated financial data
of the Company and is qualified by the more detailed Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus. The
consolidated statement of earnings data for the years ended December 31, 1992,
1993, 1994, 1995 and 1996 and the consolidated balance sheet data as of
December 31, 1992, 1993, 1994, 1995 and 1996 have been derived from the
Consolidated Financial Statements of the Company which have been audited by
KPMG Peat Marwick LLP, independent certified public accountants, as indicated
in their report included elsewhere in this Prospectus. The consolidated
statement of earnings data for the three months ended March 31, 1996 and 1997
and the consolidated balance sheet data as of March 31, 1996 and 1997 are
derived from unaudited financial statements. The unaudited financial statements
include all adjustments (consisting only of normal recurring adjustments) that
the Company considers necessary for a fair presentation of the results of
operations for such periods. The following data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Consolidated Financial Statements and Notes thereto and
other financial information included elsewhere in this Prospectus.
Three months ended
Years ended December 31, March 31,
------------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- -------- ---------- --------- --------
(in thousands, except per share data)
Consolidated Statement of Earnings Data:
Revenues ........................................... $ 6,512 $ 8,875 $ 9,287 $ 14,442 $ 18,582 $ 6,089 $ 3,887
Cost of revenues .................................. 3,258 3,460 3,777 5,191 6,755 1,856 1,602
-------- -------- -------- -------- -------- -------- --------
Gross profit ..................................... 3,254 5,415 5,510 9,251 11,827 4,233 2,285
Operating expenses:
Selling expense .................................. 1,027 1,466 1,491 2,118 2,471 781 493
Research and development expense ................ 750 953 1,623 1,930 1,928 394 374
General and administrative expense ................ 828 1,229 1,107 1,166 1,812 364 411
-------- -------- -------- -------- -------- -------- --------
Total operating expenses ......................... 2,605 3,648 4,221 5,214 6,211 1,539 1,278
-------- -------- -------- -------- -------- -------- --------
Operating income .................................. 649 1,767 1,289 4,037 5,616 2,694 1,007
Other income (expense):
Interest income .................................. 23 20 22 82 147 23 29
Interest expense .................................. (50) (40) (9) -- (11) (5) (4)
Other ........................................... (17) 35 24 (49) (35) (6) (10)
-------- -------- -------- -------- -------- -------- --------
Total other income (expense) ................... (44) 15 37 33 101 12 15
-------- -------- -------- -------- -------- -------- --------
Earnings before income taxes and minority interest . 605 1,782 1,326 4,070 5,717 2,706 1,022
Income tax expense ............................... 103 254 382 637 858 355 167
-------- -------- -------- -------- -------- -------- --------
Earnings before minority interest ................ 502 1,528 944 3,433 4,859 2,351 855
Minority interest .................................. (36) (64) (127) (181) (213) (94) (11)
-------- -------- -------- -------- -------- -------- --------
Net earnings ..................................... $ 466 $ 1,464 $ 817 $ 3,252 $ 4,646 $ 2,257 $ 844
======== ======== ======== ======== ======== ======== ========
Pro forma net earnings (1) ......................... $ 3,366 $ 537
Pro forma net earnings per share (1) ............. $ 0.82 $ 0.13
Pro forma weighted average shares outstanding (1) . 4,091 4,091
Supplemental pro forma net earnings per share (2) . $ 0.79 $ 0.13
Supplemental pro forma weighted average shares
outstanding (2) .................................. 4,265 4,265
December 31, March 31, 1997
--------------------------------------------------------- ----------------------
Pro
1992 1993 1994 1995 1996 Actual forma (3)
--------- --------- --------- --------- --------- --------- ----------
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents ...... $ 943 $ 1,034 $ 1,336 $ 1,919 $ 3,692 $ 2,983 $ 2,983
Working capital .................. 1,526 2,546 2,944 4,201 4,377 3,924 560
Total assets ..................... 2,976 3,675 4,624 6,352 7,716 7,492 9,115
Long term debt .................. -- -- -- -- 155 148 148
Total stockholders' equity ...... 1,436 2,448 2,765 4,048 4,587 4,154 2,640
- ------------
(1) Assumes the termination of the Company's S corporation status effective
January 1, 1996 and the completion of the Exchange on January 1, 1996, and
as a result reflects the amortization of goodwill associated therewith and
the absence of a charge for the minority interest. See Note 3 of Notes to
Consolidated Financial Statements.
(2) Supplemental pro forma net earnings per share reflects the assumed issuance
of 174,000 shares of Common Stock, based on an assumed initial public
offering price of $9.50 per share, to fund distributions to the Company's
current stockholders of previously taxed but undistributed S corporation
earnings, net of available cash and cash equivalents (estimated to be $1.7
million as of March 31, 1997). See "Use of Proceeds," "S Corporation
Distributions" and Note 3 of Notes to Consolidated Financial Statements.
(3) Reflects the acquisition of the minority interests in the Company's foreign
subsidiaries pursuant to the Exchange, including goodwill arising from the
Exchange, and the effects of the termination of the Company's S
corporation status, including the distribution described under "S
Corporation Distributions." See Note 3 of Notes to Consolidated Financial
Statements.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company was founded in 1981 to design and develop docking hardware,
test head manipulators and related ATE interface products. In 1982, the Company
introduced its first docking hardware and the in2 test head manipulator. The
Company has designed more than 4,600 products since its inception, and believes
that its products have been purchased by most major semiconductor
manufacturers. A significant majority of the Company's revenues for the 15
months ended March 31, 1997 was derived from sales of its docking hardware and
manipulator products, and the remainder was derived from sales of related ATE
interface products.
The Company's revenues have fluctuated generally as a result of
cyclicality in the semiconductor manufacturing industry. The Company believes
that purchases of the Company's docking hardware and manipulators are typically
made from its customers' capital expenditure budgets, while related ATE
interface products, which must be replaced periodically, are typically made
from its customers' operating budgets. When semiconductor manufacturing
activity generally slowed during much of 1996, many semiconductor manufacturers
reduced their capital expenditure budgets and, correspondingly, postponed or
cancelled orders for ATE and related equipment. As a result, starting in the
second quarter of 1996 through the fourth quarter of 1996, the Company's orders
for and sales of docking hardware and manipulators declined substantially.
During this same period, orders for and sales of related ATE interface products
also declined, but to a lesser extent. Although the Company experienced
increased orders for and sales of all of its products in the first quarter of
1997 compared to the fourth quarter of 1996, the Company's revenues were
substantially below the record high revenues realized in the first quarter of
1996.
The Company sells to semiconductor manufacturers and ATE manufacturers
either through inTEST account managers or through independent sales
representatives. The mix of customers during any given period may affect the
Company's gross margin due to the difference in accounting for sales discounts
and commissions. Specifically, sales discounts, typical in sales by inTEST
account managers to ATE manufacturers worldwide, are a direct reduction of
revenue and have the effect of reducing gross margin. In contrast, trade
discounts offered on sales to semiconductor manufacturers, while also a
reduction in revenue, are generally lower than sales discounts to ATE
manufacturers and accordingly have less impact on gross margin. Additionally,
commissions paid to independent sales representatives on sales to semiconductor
manufacturers in North America and Southeast Asia are charged to selling
expense and do not affect gross margin. Consequently, the relative mix of
customers for the Company's products and the region of the world where sales
are made have affected and will affect the Company's gross margin and selling
expense. Operating income, however, has not been materially affected by the
foregoing factors, because commissions paid to independent sales
representatives plus trade discounts on sales to semiconductor manufacturers
are approximately equal to the sales discounts given on sales to ATE
manufacturers. See "Business -- Sales and Distribution."
The Company believes that the ultimate destination of a significant
majority of its products is outside the U.S. Approximately 37%, 43%, 49% and
54% of the Company's revenues for the three months ended March 31, 1997 and the
years ended December 31, 1996, 1995 and 1994, respectively, were derived from
sales by the Company's three foreign subsidiaries. Approximately 5%, 19%, 19%
and 6% of the Company's revenues for the three months ended March 31, 1997 and
the years ended December 31, 1996, 1995 and 1994, respectively, were derived
from sales by inTEST CORP which were shipped to customer locations outside the
U.S. Although the Company has exposure to foreign currency fluctuations as a
result of its foreign operations, it believes its exposure to foreign currency
fluctuations is not significant. Foreign currency transaction gains and losses
were ($31,000), ($43,000) and $25,000 in 1996, 1995 and 1994, respectively. The
minority interest shown in the Company's Consolidated Financial Statements
reflects the approximately 21% interest in each of the Company's three foreign
subsidiaries which are to be acquired upon the closing of the offering pursuant
to the Exchange.
Prior to the offering, the Company and its stockholders elected to be
treated as an S corporation for Federal and New Jersey state income tax
purposes. Accordingly, while the Company's Consolidated Financial Statements
reflect income tax expense related to its foreign operations and certain state
income taxes, they do not include a provision for Federal income tax expense.
In connection with the offering, the Company will terminate
14
its S corporation status and will become subject to Federal and additional New
Jersey state income taxes in future years. Management anticipates that the
Company's prospective effective tax rate will approximate 40%, although this
rate could fluctuate from period-to-period depending on the mix of domestic and
foreign earnings, the availability of foreign tax credits and on other factors.
The Company will also begin to provide for deferred income taxes in future
periods, although no provision will be made for foreign earnings intended to be
permanently invested abroad, which approximate $1.0 million at March 31, 1997.
The Company believes the effect of such additional taxes on the Company's
liquidity will be more than offset by the elimination of the Company's
practice, as an S corporation, of distributing dividends to its stockholders.
Such dividends totaled 88%, 61% and 79% of the Company's net earnings in 1996,
1995 and 1994, respectively.
Results of Operations
The following table sets forth, for the periods indicated, the percentage
of the Company's revenues represented by certain line items of its Consolidated
Statements of Earnings:
Three months ended
Years ended December 31, March 31,
--------------------------------- ----------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ----------
Revenues .......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues .................................... 40.7 35.9 36.4 30.5 41.2
------- ------- ------- ------- -------
Gross margin ....................................... 59.3 64.1 63.6 69.5 58.8
Operating expenses:
Selling expense .................................... 16.0 14.6 13.3 12.8 12.7
Research and development expense .................. 17.5 13.4 10.4 6.5 9.6
General and administrative expense ............... 11.9 8.1 9.7 6.0 10.6
------- ------- ------- ------- -------
Total operating expenses ........................ 45.4 36.1 33.4 25.3 32.9
------- ------- ------- ------- -------
Operating income .................................... 13.9 28.0 30.2 44.2 25.9
Other income ....................................... 0.4 0.2 0.5 0.2 0.4
------- ------- ------- ------- -------
Earnings before income taxes and minority interest . 14.3 28.2 30.7 44.4 26.3
Income tax expense ................................. 4.1 4.4 4.6 5.8 4.3
Minority interest ................................. (1.4) (1.3) (1.1) (1.5) (0.3)
------- ------- ------- ------- -------
Net earnings ....................................... 8.8% 22.5% 25.0% 37.1% 21.7%
======= ======= ======= ======= =======
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
Revenues. Revenues were $3.9 million for the first quarter of 1997
compared to a record $6.1 million for the same period in 1996, a decrease of
$2.2 million or 36%. The substantial fluctuation in revenues followed the
cyclicality of the semiconductor industry during the same periods. Revenues for
the first quarter of 1996 reflected an increased level of capital expenditures
in the semiconductor industry, which was followed by a general decline in such
expenditures during much of the balance of 1996. Revenues for the first quarter
of 1997, although down from the first quarter of 1996, indicate an increase in
commitments for capital expenditures which began in the industry at the end of
1996. As a result, revenues for the first quarter of 1997 exceeded revenues for
the fourth quarter of 1996 by 46% or $1.2 million, and the Company's backlog
increased from $1.8 million at December 31, 1996 to $2.3 million at March 31,
1997.
Gross Margin. Gross margin declined to 59% for the first quarter of 1997
from 70% for the same period in 1996. The decrease was principally attributable
to the fact that sales to ATE manufacturers generated approximately one-third
of the Company's revenues in the first quarter of 1997 compared to
approximately one-fifth in the first quarter of 1996. The Company believes that
this shift in customer mix is not indicative of a trend. The reduced gross
margin also reflects higher incremental material costs, due to lower
manufacturing levels, and higher fixed costs (principally rent, depreciation
and salaries) for the first quarter of 1997 compared to the same period in
1996.
15
Selling Expense. Selling expense was $0.5 million for the first quarter of
1997 compared to $0.8 million for the same period in 1996, a decrease of $0.3
million or 37%. The decrease was due principally to a decrease in commissions
and other variable expenses associated with lower sales activity, as well as a
lower percentage of revenues from commission sales to semiconductor
manufacturers.
Research and Development Expense. Research and development expense was
$0.4 million for the first quarter of both 1997 and 1996. The primary component
of research and development expense is compensation, which did not change
materially for the first quarter of 1997 compared to the same period in 1996.
Most of the Company's technical staff are engaged in both research and
development and sales functions.
General and Administrative Expense. General and administrative expense was
$0.4 million for the first quarter of both 1997 and 1996. The primary component
of general and administrative expense is compensation, which did not change
materially for the first quarter of 1997 compared to the same period in 1996.
Income Tax Expense. As an S corporation, net earnings are taxed as income
to the Company's stockholders for Federal income tax. However, income tax
expense includes certain state income taxes and taxes imposed by foreign
jurisdictions. Income tax expense decreased to $0.2 million for the first
quarter of 1997 from $0.4 million for the same period in 1996, a decrease of
$0.2 million or 53%, primarily as a result of reduced operating income on lower
revenues, offset by an increase in the Company's effective tax rate. The
Company's effective tax rate was 16% for the first quarter of 1997 compared to
13% for the same period in 1996. The increase in the effective tax rate was
caused primarily by a greater percentage of earnings before income taxes and
minority interest being attributable to the Company's foreign subsidiaries.
1996 Compared to 1995
Revenues. Revenues were $18.6 million for 1996 compared to $14.4 million
for 1995, an increase of $4.2 million or 29%. The increase was due to the
higher levels of shipments of the Company's products during the first nine
months of 1996, which were based on orders placed by semiconductor
manufacturers during late 1995 and early 1996. The Company did not increase
sales prices significantly in 1996. The Company believes that more than half of
the Company's increased revenues was from sales of products used in the testing
of mixed signal devices, and the balance was from sales of products used in the
testing of digital devices, such as microprocessors and microcontrollers, and
numerous other devices used in the automotive, computer, telecommunications and
other industries.
Gross Margin. Gross margin remained constant at 64% for both 1996 and
1995. The percentage of the Company's revenues derived from sales to ATE
manufacturers increased by 8% in 1996 compared to 1995, which had the effect of
reducing gross margin for 1996. The reduction in gross margin was offset by the
improved absorption of fixed costs over the higher revenue base and reduced
incremental material costs due to volume discounts received in the first two
quarters of 1996.
Selling Expense. Selling expense was $2.5 million for 1996 compared to
$2.1 million for 1995, an increase of $0.4 million or 17%. The increase was
attributable to increased variable costs associated with higher sales activity
in 1996. Selling expense as a percentage of revenues decreased in 1996 compared
to 1995 because of an increase in non-commission sales as a percentage of
revenues. Salaries associated with sales activities were the same for 1996 as
for 1995, as management elected not to expand its sales staff in anticipation
of third and fourth quarter reductions in capital expenditures by semiconductor
manufacturers.
Research and Development Expense. Research and development expense was
$1.9 million for both 1996 and 1995. Compensation expense incurred in research
and development activities for 1996 increased $0.2 million or 22% over 1995 due
to an increase in staffing levels and associated costs. The increase was offset
by a $0.2 million or 45% decrease in amounts spent for materials.
General and Administrative Expense. General and administrative expense was
$1.8 million for 1996 compared to $1.2 million for 1995, an increase of $0.6
million or 55%. The majority of the increase was attributable to additional
compensation and costs associated with newly hired staff in accounting, MIS and
finance functions and salary increases of other administrative personnel.
16
Income Tax Expense. The Company's effective tax rate decreased slightly in
1996 to 15% compared to 16% for 1995 due principally to a decrease in the
contribution of earnings before income taxes and minority interest from the
Company's foreign subsidiaries.
1995 Compared to 1994
Revenues. Revenues were $14.4 million for 1995 compared to $9.3 million
for 1994, an increase of $5.1 million or 56%. The increase was due to the
higher levels of shipments of the Company's products throughout 1995,
reflecting increased demand as semiconductor manufacturers expanded
manufacturing capacity in excess of historical rates. The increase in revenues
was principally related to volume increases as the Company did not increase
sales prices significantly in 1995. As in 1996, the Company believes the
increase in revenues was attributable to increased sales of products used
during the testing of complex integrated circuits.
Gross Margin. Gross margin was 64% for 1995 compared to 59% for 1994, an
increase of 5%. The improvement in gross margin was primarily the result of
lower incremental material costs due to increased purchasing volume, improved
overhead absorption of fixed costs over the higher revenue base and a 10%
reduction in the percentage of revenues derived from sales to ATE
manufacturers.
Selling Expense. Selling expense was $2.1 million for 1995 compared to
$1.5 million for 1994, an increase of $0.6 million or 42%. The increase was
attributable to increased variable costs associated with the increase in
revenues for 1995 primarily including commissions on sales to semiconductor
manufacturers by independent sales representatives which increased $0.2 million
or 53%. Salaries associated with sales activities also increased $0.2 million
or 56% due to the hiring of additional staff in 1995.
Research and Development Expense. Research and development expense was
$1.9 million for 1995 compared to $1.6 million for 1994, an increase of $0.3
million or 19%. Compensation expense incurred in research and development
activities for 1995 increased $0.1 million or 12% due primarily to salary
increases. In addition, amounts spent for materials increased $0.2 million or
63%.
General and Administrative Expense. General and administrative expense was
$1.2 million for 1995 compared to $1.1 million for 1994, an increase of $0.1
million or 5%, resulting primarily from increased professional expenses related
to patent applications in Europe and Asia and consulting fees.
Income Tax Expense. The Company's effective tax rate declined
significantly in 1995 to 16% compared to 29% for 1994. The decrease was a
function of a significantly greater percentage of earnings before income tax
and minority interest being attributable to the Company's domestic operations
in 1995 (65%) compared to 1994 (26%).
Quarterly Results of Operations
The following tables present certain unaudited consolidated quarterly
financial information for each of the nine quarters ended March 31, 1997. In
the opinion of the Company's management, this quarterly information has been
prepared on the same basis as the Consolidated Financial Statements set forth
elsewhere in this Prospectus and includes all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the information for
the periods presented when read in conjunction with the Consolidated Financial
Statements and Notes thereto. The results of operations for any quarter are not
necessarily indicative of results for the full year or for any future period.
The Company's business is not seasonal, therefore year-over-year quarterly
comparisons of the Company's results of operations may not be as meaningful as
the sequential quarterly comparisons set forth below which tend to reflect the
cyclical activity of the semiconductor industry as a whole. Quarterly
fluctuations in expenses either are related directly to sales activity and
volume, or tend to be a function of personnel costs and the timing of expenses
incurred throughout a year. See "Risk Factors -- Fluctuations in Revenues and
Operating Results."
17
Three months ended
-----------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31,
1995 1995 1995 1995
---------- ---------- ----------- ----------
(in thousands)
Consolidated Statement of Earnings Data:
Revenues ................................. $ 3,158 $ 3,094 $ 3,867 $ 4,323
Cost of revenues ........................ 1,441 1,225 1,479 1,046
------- ------- -------- -------
Gross profit ........................... 1,771 1,869 2,388 3,277
------- ------- -------- -------
Operating expenses:
Selling expense ........................ 313 411 576 818
Research and development expense ...... 360 415 491 664
General and administrative expense ...... 205 286 216 459
------- ------- -------- -------
Total operating expenses ............... 878 1,112 1,283 1,941
------- ------- -------- -------
Operating income (loss) .................. 839 757 1,105 1,336
Other income (expense) .................. 15 35 (24) 7
------- ------- -------- -------
Earnings (loss) before income taxes and
minority interest ..................... 854 792 1,081 1,343
Income tax expense ..................... 208 181 109 139
Minority interest ........................ (65) (43) (30) (43)
------- ------- -------- -------
Net earnings (loss) ..................... $ 581 $ 568 $ 942 $ 1,161
======= ======= ======== =======
As a Percentage of Revenues:
Revenues ................................. 100.0% 100.0% 100.0% 100.0%
Cost of revenues ........................ 45.6 39.6 38.2 24.2
------- ------- -------- -------
Gross margin ........................... 54.4 60.4 61.8 75.8
------- ------- -------- -------
Operating expenses:
Selling expense ........................ 9.9 13.3 14.9 18.9
Research and development expense ...... 11.4 13.4 12.7 15.4
General and administrative expense ...... 6.5 9.2 5.6 10.6
------- ------- -------- -------
Total operating expenses ............... 27.8 35.9 33.2 44.9
------- ------- -------- -------
Operating income (loss) .................. 26.6 24.5 28.6 30.9
Other income (expense) .................. 0.5 1.1 (0.6) 0.2
------- ------- -------- -------
Earnings (loss) before income taxes and
minority interest ..................... 27.1 25.6 28.0 31.1
Income tax expense ..................... 6.6 5.8 2.8 3.2
Minority interest ........................ (2.1) (1.4) (0.8) (1.0)
------- ------- -------- -------
Net earnings (loss) ..................... 18.4% 18.4% 24.4% 26.9%
======= ======= ======== =======
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31,
1996 1996 1996 1996 1997
---------- ---------- ----------- ---------- -----------
Consolidated Statement of Earnings Data:
Revenues ................................. $ 6,089 $ 5,043 $ 4,780 $2,670 $ 3,887
Cost of revenues ........................ 1,856 1,732 1,850 1,317 1,602
------- ------- -------- ------ -------
Gross profit ........................... 4,233 3,311 2,930 1,353 2,285
------- ------- -------- ------ -------
Operating expenses:
Selling expense ........................ 781 555 586 549 493
Research and development expense ...... 394 456 425 653 374
General and administrative expense ...... 364 509 453 486 411
------- ------- -------- ------ -------
Total operating expenses ............... 1,539 1,520 1,464 1,688 1,278
------- ------- -------- ------ -------
Operating income (loss) .................. 2,694 1,791 1,466 (335) 1,007
Other income (expense) .................. 12 20 39 30 15
------- ------- -------- ------ -------
Earnings (loss) before income taxes and
minority interest ..................... 2,706 1,811 1,505 (305) 1,022
Income tax expense ..................... 355 290 180 33 167
Minority interest ........................ (94) (86) (67) 34 (11)
------- ------- -------- ------ -------
Net earnings (loss) ..................... $ 2,257 $ 1,435 $ 1,258 ($ 304) $ 844
======= ======= ======== ====== =======
As a Percentage of Revenues:
Revenues ................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues ........................ 30.5 34.3 38.7 49.3 41.2
------- ------- -------- ------ -------
Gross margin ........................... 69.5 65.7 61.3 50.7 58.8
------- ------- -------- ------ -------
Operating expenses:
Selling expense ........................ 12.8 11.0 12.2 20.5 12.7
Research and development expense ...... 6.5 9.0 8.9 24.5 9.6
General and administrative expense ...... 6.0 10.1 9.5 18.2 10.6
------- ------- -------- ------ -------
Total operating expenses ............... 25.3 30.1 30.6 63.2 32.9
------- ------- -------- ------ -------
Operating income (loss) .................. 44.2 35.5 30.7 (12.5) 25.9
Other income (expense) .................. 0.2 0.4 0.8 1.1 0.4
------- ------- -------- ------ -------
Earnings (loss) before income taxes and
minority interest ..................... 44.4 35.9 31.5 (11.4) 26.3
Income tax expense ..................... 5.8 5.7 3.8 1.3 4.3
Minority interest ........................ (1.5) (1.7) (1.4) 1.3 (0.3)
------- ------- -------- ------ -------
Net earnings (loss) ..................... 37.1% 28.5% 26.3% (11.4%) 21.7%
======= ======= ======== ====== =======
Liquidity and Capital Resources
The Company has funded its working capital requirements principally
through net cash provided by operations. As of March 31, 1997, the Company had
$3.0 million in cash and cash equivalents and $3.9 million in working capital.
Net cash provided by operations was $0.3 million, $5.5 million, $2.7 million
and $1.0 million for the first quarter of 1997, and for the years ended
December 31, 1996, 1995 and 1994, respectively, and principally consisted of
net earnings.
Purchases of machinery, equipment and leasehold improvements in 1996 were
$0.6 million, including $0.2 million to purchase a coordinate measuring machine
for the Company's Cherry Hill, New Jersey facility. In 1996, the Company leased
a 28,630 square foot office and manufacturing facility in Cherry Hill, New
Jersey and spent approximately $0.2 million on leasehold improvements and
furniture costs to outfit this facility, which houses the Company's domestic
manufacturing and customer operations and administrative functions. The Company
also leased 3,077 square feet of office and manufacturing space in Singapore
during 1996 and spent approximately $0.2 million on leasehold improvements and
furniture expenditures to outfit this facility, which houses the Company's
Southeast Asian customer operations office and is anticipated to be utilized
for additional manufacturing operations commencing in 1998.
18
The Company has a five-year $0.2 million term loan, due in August 2001,
and a $1.5 million revolving line of credit with a commercial bank. The
interest rate on the term loan is fixed at 8.65%, and the revolving line of
credit bears interest at the bank's prime lending rate. The term loan is
collateralized by liens on certain equipment and furnishings located at the
Company's Cherry Hill, New Jersey facility. The revolving line of credit is
collateralized by a pledge of certain assets of inTEST CORP. No amounts were
outstanding under the line of credit as of March 31, 1997 or December 31, 1996.
The Company does not have any capital lease obligations.
The Company believes that existing cash and cash equivalents, its
available line of credit, anticipated net cash provided by operations and the
net proceeds from the offering will be sufficient to meet the Company's cash
requirements for the next 24 months. However, if the Company were to make any
acquisitions, the Company may require additional equity or debt financing to
meet working capital requirements or capital expenditure needs.
Although the Company has historically paid cash dividends to its
stockholders, the Company does not anticipate that it will pay any dividends
for the foreseeable future following the offering, except for the final S
corporation distribution. See "Use of Proceeds," "S Corporation Distributions"
and Note 3 of Notes to Consolidated Financial Statements. The Company intends
to retain future earnings, if any, for reinvestment in the operation and
expansion of the Company's business.
19
BUSINESS
The Company is a leading independent designer, manufacturer and marketer
of docking hardware and test head manipulators, which are used with automatic
test equipment ("ATE") by semiconductor manufacturers during the testing of
wafers and packaged devices. The Company also designs and markets related ATE
interface products including high performance test sockets, interface boards
and probing assemblies. The Company's products are designed to improve the
utilization and cost-effectiveness of ATE (including testers, wafer probers and
device handlers) during the testing of linear, digital and mixed signal
integrated circuits. Since inception in 1981, the Company has developed and
continues to support over 4,600 products and has been granted 13 U.S. patents
for its technology.
The Company's largest customers include Lucent Technologies, Motorola, SGS
Thomson and Texas Instruments among semiconductor manufacturers, and Credence
Systems, LTX and Teradyne among ATE manufacturers. The Company designs, markets
and supports its products globally both through Company account managers based
in New Jersey, Texas, California, the U.K., Singapore and Japan and through
independent sales representatives in the U.S. and abroad. The Company's
executive offices are located in Cherry Hill, New Jersey. Manufacturing
facilities are located in New Jersey and the U.K.
Industry Background
Testing is an integral and necessary step during the design and
manufacture of wafers and packaged devices. The increasing worldwide demand for
semiconductors in recent years has led to an increase in the demand for ATE.
According to VLSI Research Inc., in 1996 semiconductor manufacturers spent an
estimated $3.7 billion on testers (the test head and mainframe cabinet) and
$1.3 billion on wafer probers and device handlers. The increasing complexity of
wafers and packaged devices, as manifested by larger wafers, higher speeds,
growing pin counts, smaller packaged devices and greater levels of integration
has changed the design, architecture and complexity of ATE used during the
testing of such devices.
Testers range in price from approximately $0.5 million to over $3.0
million each depending primarily on the complexity of the device to be tested
and the number of test heads, typically one or two, with which each tester is
configured. Probers and handlers range in price from approximately $0.1 to $0.5
million. A typical test floor of a large semiconductor manufacturer can have
approximately 100 test heads and 100 probers or 250 handlers available for use
at any one time. Given such a substantial investment, semiconductor
manufacturers employ testing processes which seek to maximize ATE and floor
space utilization.
Each integrated circuit is tested at least twice during the manufacturing
process to ensure the functional and electrical performance of the circuits
prior to shipment to the device user. After wafer fabrication, each circuit on
a wafer is automatically positioned under a probing assembly by a prober where
the individual circuits on the wafer are tested (the "front-end test"). After
device packaging, devices are individually fed by the handler to an
environmentally controlled test socket where the device is again tested (the
"back-end test"). Manipulators facilitate the movement of a test head to a
prober or handler, and "docking" describes the function of connecting a test
head to a prober or handler with mechanically engineered hardware. Shown below
is a schematic depiction of the major steps in the semiconductor manufacturing
process.
[Schematic depiction of the fabrication of an integrated circuit
using blocks to represent each major step of the process from raw
wafer to finished device with special emphasis on "Wafer Test" and
"Final Test."]
Until the early 1970s, testers were designed with the interface circuits
(also referred to as pin electronics) mounted inside the tester's mainframe
cabinet and connected the pin electronics to the prober's probing assembly or
to the handler's test socket via an electrical cable, typically five to ten
feet long. As devices became faster, more complex and more precise, signal
distortion inherent with the use of such cables resulted in degraded test
results. Although certain devices are still tested in this manner, such devices
tend to be used in older, less technologically advanced applications.
20
During the 1970s, tester manufacturers responded by moving the pin
electronics from the tester's mainframe cabinet to an independent test head,
which could be directly mated with a prober or handler, thereby eliminating the
problems associated with using cables as the connection between the tester's pin
electronics and the prober or handler. Direct mating of the test head pin
electronics to the prober's probing assembly or to the handler's test socket was
accomplished by mounting the test head directly to the prober or handler with a
pivot-mechanism manipulator resembling a waffle iron. Such a combination
resulted in the test head being "dedicated" to only one prober or one handler.
Dedicated manipulators are of greatest value in ATE systems in which the
test head is infrequently disconnected and re-connected to and from one prober
or handler to another prober or handler. Consequently, dedicated manipulators
are used (i) primarily at front-end test, where large, homogeneous lots of
wafers are tested for long, uninterrupted periods of time, and (ii) at back-end
test, where high volume, commodity devices such as DRAMs are tested in large
lots. However, back-end non-commodity devices, such as microcontrollers and
telecommunications devices, generally are tested in smaller lots due to varying
package types and test specifications, thereby requiring frequent handler
changes.
In 1980, free-standing manipulators were introduced to minimize ATE
downtime and increase device testing throughput. Such manipulators used
hand-cranked lead screws to position a test head to a prober or handler. These
early manipulators were only marginally better than the waffle-iron design and
did not significantly improve ATE utilization due to the lack of motion freedom
necessary for successful docking.
Users of these early manipulators attempted to precisely align fragile pin
electronics to test sockets and probing assemblies without docking hardware.
Lack of proper docking hardware often can cause deterioration and damage to the
interface boards, test sockets or probing assemblies. Such damage can lead to
compromised or inaccurate test results and the rejection of good wafers or
devices (yield loss), or, more costly, the acceptance of unsatisfactory wafers
or devices (quality error). In addition, successfully connecting a test head
held by a free-standing manipulator to a prober or handler without docking
hardware is difficult and time-consuming.
The Company's docking hardware and free-standing universal manipulators
are designed to improve the utilization of ATE, particularly ATE employed in
back-end non-commodity flexible testing environments, by facilitating the
quick, easy and safe changeover of test heads to probers and handlers. Shown
below is a graphic representation of a current, typical ATE system
configuration.
[Graphic representation of an ATE test system showing a side-docking
device handler and an in2 test head manipulator holding the test
head in the undocked position. Test head and handler are shown
equipped with in TEST docking hardware.]
21
The Company's docking hardware products mechanically control the intimate
interface between the test head's interface board and the prober's probing
assembly or handler's test socket. As a result, fragile interface boards, test
sockets or probing assemblies are protected from damage during docking. The
Company's docking hardware allows semiconductor manufacturers to achieve cost
savings by (i) improving ATE utilization, (ii) improving the accuracy and
integrity of test results and (iii) reducing the need to repair or replace
expensive ATE interface products. The Company's docking hardware can be
designed for use with substantially all makes and models of test heads, probers
and handlers, and can usually be designed to allow all the ATE on a test floor
to be mechanically plug-compatible. Plug-compatibility simplifies the docking
procedures, allowing for increased flexibility and utilization of test heads,
probers and handlers on a test floor.
The Company's free-standing universal manipulators are designed to be used
in either a dedicated or a flexible test environment. In addition, the
Company's manipulators have been engineered to hold test heads in what seeks to
replicate a "zero gravity" free space. As a result, an operator using no more
than 22 pounds of force can reposition the test head by grasping it in his or
her hands and gently moving the test head into position to dock with a prober
or handler. Test heads currently in use weigh up to approximately 900 pounds
and measure up to a cubic yard in volume.
A test head held in the Company's free-standing universal manipulator and
equipped with the Company's docking hardware can be easily, quickly and safely
docked to any handler. After testing a particular production lot of devices,
the test head can quickly and easily be disconnected and docked to another
handler for testing either a subsequent lot of the same packaged device or to
test a different device.
The continued development of more complex devices will require faster,
higher pin count, and larger and heavier test heads. The Company believes that
semiconductor manufacturers will continue to demand docking hardware and
manipulators which exhibit corresponding design changes and improvements in
utilization and functionality.
Strategy
The Company's goals are to supply the highest quality docking hardware,
test head manipulators and related ATE interface products, and to provide the
most cost effective ATE interface solutions to the semiconductor industry. The
following elements, all of which are interrelated, form the basis of inTEST's
strategy:
Capitalize on Experience and Expertise. Over the past 15 years, the
Company has developed numerous generations of docking hardware and test head
manipulators. The Company has designed, and continues to support, over 4,600
unique products and maintains over 5,100 computerized engineering drawings.
Substantially all of the Company's products are customized to a customer's
particular ATE system configuration. As a result, the Company has accumulated
substantial technical design expertise, evidenced in part by having been
granted 13 U.S. patents to date, with two U.S. patent applications pending. The
Company's product development efforts are focused on the needs of semiconductor
manufacturers and seek to establish the Company's docking hardware and
manipulator products as the industry standard. For example, the Company is
currently developing a new series of fully-automatic, microprocessor-controlled
dedicated manipulators (the Test Head Hoist). These manipulators are primarily
designed for front-end wafer and back-end commodity device testing, two market
segments which the Company has not traditionally targeted.
Maintain Customer Relationships. As an independent provider of docking
hardware and test head manipulators, the Company has cultivated and maintains
close working relationships with nearly all major semiconductor and ATE
manufacturers. The long term and interactive nature of such customer
relationships provides the Company's account managers with hands-on knowledge
of leading-edge test procedures, test room protocol, ATE systems and the
economics of testing. The Company works with its customers in identifying ATE
interface problems, defines and custom designs product solutions, installs the
Company's products and provides post- installation follow-up and operational
support. The Company believes that by maintaining such relationships, it will
be able to respond quickly to new ATE interface applications. The Company
believes that its direct access to a broad and diversified base of ATE system
environments provides it with an important competitive advantage.
Expand International Presence. The Company intends to add manufacturing
capabilities to its existing facility in Singapore in 1998 and to consider
establishing operations in other key back-end markets such as
22
China, Malaysia, the Philippines, Taiwan or Thailand. The Company believes that
proximity to semiconductor manufacturers enables the Company to respond more
quickly and accurately to its customers' needs. In addition, employing account
managers native to such markets minimizes language and cultural barriers and
provides market-specific technical and operational insight.
Pursue Complementary Acquisitions. The Company will seek to acquire
businesses (domestic or foreign), technologies or products that are
complementary to the Company's docking hardware and manipulator products,
including related ATE interface products that must be replaced periodically and
could result in additional recurring revenues. The Company is not currently a
party to any agreement or understanding with respect to any acquisition, nor
has it identified any specific acquisition targets. However, there are numerous
companies which manufacture related ATE interface products that the Company
believes could enhance its ability to provide its customers with the means to
improve the efficiency and cost-effectiveness of semiconductor testing
processes. The Company does not intend to expand its lines of docking hardware
and manipulators by acquisition, nor to acquire tester, prober or handler
manufacturers.
Products
The Company designs, manufactures and markets docking hardware and test
head manipulators used by semiconductor manufacturers during the testing of
wafers and packaged devices. The Company also designs and markets related ATE
interface products. The Company's products are designed to improve the
utilization and cost-effectiveness of testers, wafer probers and device
handlers. Substantially all of the Company's products are customized for use
with particular ATE and, in the case of docking hardware, also to achieve
plug-compatibility among particular combinations of ATE. The Company's docking
hardware, manipulators and related ATE interface products are designed for use
with more than 175 test heads, 30 probers and 300 handlers, all of which are
mechanically unique makes and models. The Company has designed and continues to
support more than 4,600 products, any of which can be manufactured upon
request.
23
Docking Hardware and ATE Interface Products
The Company's docking hardware is designed for use with floating-head
universal manipulators, which are used when maximum mobility and
inter-changeability of handlers between test heads is required. The Company's
docking hardware provides the mechanical control to safely connect, with near
zero electrical length, the test interface board with either the probing
assembly on a prober or the test socket on a handler. A simple cam action docks
and locks the test head to the prober or handler so that the two become a
single mechanism which prohibits motion of the test head relative to the prober
or handler. This minimizes deterioration of the interface boards, test sockets
and probing assemblies caused by the constant vibration characteristic of the
operation of all probers and handlers. The Company's docking hardware allows an
operator to manually align the probing assembly or test socket to within .005"
with respect to the interface board on the test head. Shown below is a graphic
representation of a test head and handler in the un-docked position.
[Graphic representation of a test head and handler in the un-docked
position showing details of inTEST docking hardware.]
The Company offers six standard four-cam families and three standard
three-cam families with load ratings of 200, 400 and 600 pounds. The Company's
docking families are primarily distinguished from one another by the number of
docking cams and guide pins, the load rating and the size of test head
interface boards that can be used with each particular family of docking
hardware. The Company's docking hardware products range in price from
approximately $2,000 to $12,000.
The Company's docking hardware products are distinguished from those
offered by ATE manufacturer competitors by the ability of the Company's
products to make multiple competing brands of test heads plug-
compatible with multiple brands of probers and handlers used by a semiconductor
manufacturer by only changing interface boards. Creating such
plug-compatibility requires detailed information about competing ATE that would
generally not be available to a competing ATE manufacturer. Plug-compatibility
permits non-commodity semiconductor manufacturers to reduce the changeover time
required to un-dock a test head from one handler and dock it to another handler
between production lots or when changing the device type being tested.
24
In addition, the Company designs and sells a variety of related ATE
interface products including high performance test sockets, interface boards,
probing assemblies and other products. The Company custom designs all docking
hardware and related ATE interface products for the specific combinations of
test heads and probers or handlers used by its customers.
Manipulator Products
in2 Test Head Positioner. The in2 Test Head Positioner ("in2") is a
universal manipulator which can be designed to hold any test head. A universal
manipulator enables the test head to be repositioned for alternate use with any
one of several probers or handlers on a test floor. The in2 is distinguished
from universal manipulators manufactured by competitors by its innovative,
floating-head design. The design of the in2 allows a test head to be held in an
effectively weightless state, moved up or down, right or left, forward or
backward and rotated around each axis (six degrees of motion freedom) by an
operator using no more than 22 pounds of force. Consequently, an operator can
manually reposition the test head by grasping it in his or her hands and gently
moving the test head into position to dock with the prober or handler. This
same design feature allows the operator to dock the test interface board (which
is used to connect the test head's pin electronics to the probing assembly on a
prober or to the test socket on a handler) with near zero electrical length
between the pin electronics and the probing assembly or the test socket, while
protecting the fragile electrical contacts from inadvertent damage during the
docking action.
The Company manufactures six styles of the in2, all of which are available
in eight different load-rated sizes. The styles include one tumble mode style
and five cable pivot style manipulators. Each style provides a distinct
combination of performance characteristics suited to different customer
applications. A tumble mode positioner might be specified for various reasons
including test head form factor, compatibility with in-line automation, cable
support simplicity or cost minimization. Reasons for specifying a cable pivot
positioner could include providing improved handling characteristics necessary
for larger test heads, the ability to handle test heads with short
mainframe-to-test head cables or the necessity to position the test head close
to the floor. In addition, the Company designs telescopic cable supports to be
used with its cable pivot manipulators; these cable supports minimize bending
and twisting stress to mainframe-to-test head cables, which can be delicate yet
weigh several hundred pounds. The in2 ranges in price from approximately
$12,000 to $100,000 depending upon load capacity, manipulator style and the
type of cable management.
Test Head Hoist. In July 1996, the Company introduced a new,
fully-automatic, electrically-powered and microprocessor-controlled dedicated
manipulator called the Test Head Hoist ("THH"). The patented, overhead design
of the THH series manipulator uses a powered scissor mechanism to raise and
lower a test head to a prober or a top docking handler. This design enables a
THH to dock very large test heads (weight tested to 1,000 pounds) within .005".
Shown below is a graphic representation of the THH.
[Graphic representation of the Test Head Hoist with test head and
prober shown from 3/4 front view.]
25
Although the Company has had no sales of the THH series manipulator to
date, the Company believes that the THH series of manipulators will be
attractive to semiconductor manufacturers for testing 300 mm wafers and
packaged memory devices. The Company's THH is the only fully-automatic
manipulator which enables a test head to be automatically docked to a prober or
handler with the push of one button. The Company believes that the THH enables
semiconductor manufacturers to increase floor space utilization of their ATE
test systems by 25% to 40% over that achieved by waffle-iron style dedicated
manipulators or universal manipulators because a THH series manipulator has a
virtually zero "footprint." The Company does not expect significant sales of
the THH manipulators before 1999.
Markets and Customers
The Company markets its products globally to semiconductor manufacturers
and, to a lesser extent, ATE manufacturers on an OEM basis. The Company believes
that it sells to most major semiconductor manufacturers in the world. The
Company's docking hardware and universal manipulators are primarily used during
back-end testing of non-commodity packaged devices. Such devices include
linear, digital and mixed signal integrated circuits (such as microprocessors,
digital signal processing chips, ASICs and non-commodity memory devices) and
primarily have applications in the automotive, computer, consumer products and
telecommunications industries.
The Company believes its sales of docking hardware and manipulators are a
function of the general level of capital expenditures by semiconductor
manufacturers. In addition, the Company's sales of docking hardware generally
are driven by changes in device designs or test methods, industry-wide volume
of device testing, sales of new handlers and, to a lesser extent, sales of new
test heads. In the past, sales of the Company's docking hardware generally have
been strong when spending for test heads was low. During such times, the
Company believes that semiconductor manufacturers seek to improve the
utilization, performance and efficiency of existing ATE by purchasing docking
hardware. The Company's sales of manipulators generally follow purchases of
test heads by the Company's semiconductor manufacturer customers. The Company
believes its sales of related ATE interface products primarily depend upon
operating expenditures of the Company's semiconductor manufacturer customers.
Both North American and European semiconductor manufacturers have located
most of their back-end factories in Southeast Asia. The front-end wafer
fabrication plants of U.S. semiconductor manufacturers are primarily in the
U.S. Likewise, European, Taiwanese, South Korean and Japanese semiconductor
manufacturers primarily have located their wafer fabs in their respective
countries. The Company's sales to Japanese semiconductor manufacturers
primarily consist of test sockets and interface boards. Sales of docking
hardware and universal manipulators have been limited in Japan and South Korea
because manufacturers in these countries emphasize mass-produced products such
as memory devices and other commodity devices. Commodity devices are typically
tested using dedicated manipulators rather than universal manipulators with
docking hardware.
As part of the Company's strategy to be domiciled in its major markets,
the Company established inTEST LTD in the U.K. in 1985, inTEST KK in Japan in
1987 and inTEST PTE in Singapore in 1990. inTEST LTD designs, manufactures and
markets the Company's products principally in the European market. inTEST KK
was established to be a liaison office with Japanese ATE manufacturers and to
market inTEST products in Japan. In addition, inTEST KK initiated the Company's
business of designing and marketing related ATE interface products. inTEST PTE
designs, markets and provides technical support to customers in Southeast Asia,
and it intends to commence manufacturing operations in Singapore in 1998.
The Company has maintained long term relationships with substantially all
ATE manufacturers. The Company believes its relations with such manufacturers
are good and have been additionally strengthened due to the fact that the
Company does not compete with such manufacturers for testers, probers and
handlers. The Company believes that maintaining such relationships is essential
to its ability to provide plug-compatible ATE interface solutions.
26
The following semiconductor and ATE manufacturers have each purchased at
least $250,000 of the Company's products since the beginning of 1994:
Analog Devices National Semiconductor
Credence Systems NEC
Harris Philips Electronics
Hewlett Packard Schlumberger
Intel SGS Thomson
LTX Symbios Logic
Lucent Technologies Teradyne
Matsushita Texas Instruments
Microchip Technologies Tokyo Electron
Motorola Xilinx
The Company's largest customers include Lucent Technologies, Motorola, SGS
Thomson and Texas Instruments among semiconductor manufacturers, and Credence
Systems, LTX and Teradyne among ATE manufacturers. See "Risk Factors --
Customer Concentration."
Manufacturing and Supply
The Company's principal manufacturing operations consist of assembly and
testing at its facilities in New Jersey and in the U.K. In 1998, the Company
plans to commence similar operations in its Singapore facility. The Company
believes that it is able to respond more quickly and accurately to its
customers needs by maintaining manufacturing facilities and technical support
in geographic markets where its semiconductor manufacturer customers are
located.
The Company assembles its docking hardware, manipulator products and
certain of its probing assemblies from a combination of standard components and
fabricated custom parts which have been manufactured to the Company's
specifications by third manufacturers. The Company's related ATE interface
products, such as test sockets, interface boards and other of its probing
assemblies, are also manufactured to the Company's specifications by third
party manufacturers. The Company's policy is to use the highest quality raw
materials and components in its products. The primary raw materials used in
fabricated parts are various grades of aluminum and steel, in interface boards
are fiberglass and copper and in test sockets are plastic and copper, all of
which are widely available. Substantially all components are purchased from
multiple Suppliers. Certain raw materials and components are purchased from
single Suppliers. However, the Company believes that all materials and
components are available in adequate amounts from other sources. See "Risk
Factors -- Dependence on Key Suppliers."
In New Jersey, the Company controls the quality of raw materials,
fabricated parts and components by conducting incoming inspections using
sophisticated measurement equipment, including a coordinate measuring machine,
to ensure that products with critical dimensions meet the Company's
specifications. In the U.K., the Company relies upon its Suppliers for
inspecting the quality of fabricated parts. The Company intends to buy a
coordinate measuring machine for inTEST LTD by the end of 1997. The Company's
policy is to inspect all products at various stages prior to shipment. The
Company's inspection standards have been designed to comply with applicable MIL
specifications and ANSI standards. The Company is preparing a quality manual to
comply with such specifications and standards in anticipation of applying for
ISO 9001 certification.
Sales and Distribution
In North America, the Company sells to semiconductor manufacturers
principally through independent, commissioned sales representatives and to ATE
manufacturers through Company account managers. North American sales
representatives also coordinate product installation and support with the
Company's technical staff and participate in trade shows. Technical support is
provided to the Company's North American customers and independent sales
representatives by Company employees based in Cherry Hill, New Jersey,
Sunnyvale, California and Austin, Texas.
27
In Europe, the Company sells to semiconductor and ATE manufacturers
through Company account managers, except in Belgium and Holland where the
Company uses an independent sales representative. In Japan, the Company sells
to semiconductor and ATE manufacturers through Company account managers. In
China, Hong Kong, Malaysia, the Philippines, Singapore, South Korea, Taiwan and
Thailand, the Company sells through independent sales representatives.
International sales representatives are responsible for sales, installation,
support and trade show participation in their geographic market areas.
Company account managers are responsible for a portfolio of customer
accounts and for managing certain independent sales representatives. In
addition, Company account managers are responsible for applications
engineering, custom product design, pricing, quotations, proposals and
transaction negotiations.
Competition
The Company's competitors include independent manufacturers of docking
hardware, manipulators and related ATE interface products, designers and
manufacturers of ATE and, to a lesser extent, semiconductor manufacturers'
in-house ATE interface groups. The Company principally competes on the basis of
product performance and functionality, product reliability, customer service,
applications support, price and timely product delivery.
The independent manufacturers of docking hardware and manipulators which
compete with the Company include Reid-Ashman Manufacturing of the U.S.,
Microhandling of Germany and Shang Sheng of Taiwan, each of which manufactures
docking hardware and manipulators. The manufacturers of ATE which compete with
the Company in the sale of docking hardware and universal manipulators include
Credence Systems, LTX, Schlumberger and Teradyne. Such manufacturers of ATE may
be both competitors and customers of the Company. In addition, in the sale of
related ATE interface products there are approximately 20 manufacturers of
interface boards, four manufacturers of high performance test sockets and eight
manufacturers of probing assemblies. See "Risk Factors -- Competition."
Patents and Other Proprietary Rights
The Company currently holds 13 U.S. patents and 64 foreign patents and has
pending two U.S. patent applications and more than 30 foreign applications that
cover various aspects of its technology. The Company's policy is to protect its
technology by filing patent applications for the technologies that the Company
considers important to its business. The Company first filed for patent
protection in the U.S. for its docking hardware and the in2 test head
manipulator in 1982, less than one year after the formation of the Company.
The Company also relies on trade secrets and unpatentable knowhow to
protect its proprietary rights. It is the Company's policy to require, as a
condition of permanent employment, that all employees of the Company agree to
assign to the Company all rights to inventions or other discoveries relating to
the Company business made while employed by the Company. In addition, all
employees agree not to disclose any information regarding the Company which is
private or confidential.
The Company has notified one of its competitors that the Company believes
the competitor's products infringe on one of the Company's U.S. patents. The
competitor responded by alleging that certain claims of the patent are invalid
based on an earlier issued U.S. patent. The Company, in order to strengthen its
patent position, requested reexamination of its patent by the U.S. Patent and
Trademark Office (the "PTO") over that earlier issued U.S. patent. The
competitor thereafter also requested a reexamination of the patent. A
reexamination provides the PTO with an opportunity to reevaluate the validity
of the claims of a patent previously issued by the PTO. On April 7, 1997, the
PTO issued an Office Action in Reexamination confirming five of the nine claims
of the Company's patent, and rejecting four claims. On April 29, 1997, the
Company's patent attorney presented to the Examiner in charge of the
Reexamination a minor amendment to the claims. In response, the Examiner agreed
that the proposed amendment appears to overcome the rejection of the four
claims. Based on advice of its patent counsel, the Company believes that upon
formal submission of the proposed amendment, all claims will be deemed
patentable and the Commissioner of the PTO will issue a Certificate of
Reexamination to that effect. Although there can be no assurance, the Company
believes that the failure of the PTO ultimately to deem patentable some or all
of the four claims rejected in the Office Action will not have a material
adverse effect on the Company's business or results of operations. See
"Business--Patents and Other Proprietary Rights."
28
Computer Systems
The Company maintains an MIS system at each of its facilities. These
systems are designed to (i) process all quotations, sales orders, work orders,
and purchase orders; (ii) plan, control and allocate inventory; (iii) plan and
schedule production; (iv) cost and price products; and (v) maintain accounting
and financial records. The MIS systems provide a central database of price
lists, product descriptions, applications data, design manuals and engineering
documentation and are simultaneously accessible by all employees of the
Company. In addition, the MIS systems prompt the actions of many of the
employees of the Company, including designers, buyers and inspectors. The MIS
systems, which are fully integrated, interactive and real-time, have been
extensively customized by both Company employees and outside consultants. The
MIS systems control the Company's inventory of approximately 12,000 fabricated
parts, 6,000 purchased parts, 11,000 finished goods and 1,000 sub-
assemblies.
The Company utilizes LAN-based CAD systems at each of its facilities. The
CAD systems currently contain over 4,000 of the Company's 7,600 fabrication
drawings and over 1,100 of the Company's 1,800 customer drawings of product
applications, floor plans and operating procedures. All new designs and
drawings are created in CAD and engineering changes are published as CAD
drawings as the changes are adopted.
Backlog
At March 31, 1997, the Company's backlog of unfilled orders for all
products was approximately $2.3 million compared with approximately $4.3
million at March 31, 1996. The Company's backlog includes customer purchase
orders which have been accepted by the Company. Although backlog generally is
shipped within 45 days, the backlog at March 31, 1996 was unusually high and
was shipped over the next 70 days. The Company's backlog at March 31, 1997
represents shipments which are expected to be made in 40 to 45 days. While
backlog is calculated on the basis of firm purchase orders, no assurance can be
given that customers will purchase the Company's products subject to such
orders. As a result, the Company's backlog at a particular date is not
necessarily indicative of sales for any future period. See "Risk Factors --
Dependence upon Semiconductor Industry" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Employees
At March 31, 1997, the Company had 61 employees, including 26 in customer
operations, 21 in manufacturing operations and 14 in administration.
Substantially all of the Company's key employees are highly skilled and trained
technical personnel, and new technical employees are required to attend an
in-house training program. None of the Company's employees are represented by a
labor union, and the Company has never experienced a work stoppage. The Company
believes that its employee relations are excellent.
Facilities
The Company's headquarters are located in Cherry Hill, New Jersey in
28,630 square feet of office and manufacturing space leased pursuant to a
seven-year lease which expires in 2003. The Company's facility in the U.K. is
located in Thame in 4,600 square feet of office and manufacturing space leased
pursuant to an assumed, 20-year lease which expires in December 1997. The
Company is currently negotiating renewal terms for this lease. In Singapore,
the Company occupies 3,077 square feet of office and manufacturing space leased
pursuant to a four-year lease which expires in 2000 subject to a two-year
renewal option. In Kichijoji, Japan, the Company occupies approximately 1,200
square feet of office space pursuant to an agreement which is cancelable on
reasonable notice by either party. In Sunnyvale, California, the Company
occupies 1,900 square feet of office and warehouse space leased pursuant to a
five-year lease which expires in 2001. The Company believes that its
headquarters and other existing facilities are adequate to meet its current and
foreseeable future needs.
29
MANAGEMENT
Executive Officers, Directors and Significant Employees
The executive officers and directors of the Company are as follows:
Name Age Position
- ---- --- --------
Alyn R. Holt (1) ..................... 59 Chairman and Chief Executive Officer
Robert E. Matthiessen (1)(2) ......... 52 President, Chief Operating Officer and Director
Daniel J. Graham (1) .................. 51 Senior Vice President and Director
Hugh T. Regan, Jr. .................. 37 Chief Financial Officer and Treasurer
Hugh T. Regan, Sr. .................. 62 Secretary
Richard O. Endres (2)(3) ............ 71 Director
Stuart F. Daniels, Ph.D. (2)(3) ...... 56 Director
- ------------
(1) Member of the Executive Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
Other significant employees of the Company include:
Name Age Position
- ---- --- --------
Jack R. Edmunds ...... 56 Director of Operations, inTEST CORP
Brian R. Moore ...... 60 Managing Director, inTEST LTD
Tomoyasu Ogura ...... 47 Representative Director, inTEST KK
Cornelis Hol ......... 59 Managing Director, inTEST PTE
Directors are elected by the stockholders at the Company's annual meeting
of stockholders. Each director is elected to serve for a term of one year or
until his successor is elected and qualified. Executive officers are appointed
by the Board of Directors of the Company. Each executive officer is appointed
to serve until the first meeting of the Board of Directors after the annual
meeting of stockholders next succeeding his election and until his successor is
elected and qualified.
Alyn R. Holt is a co-founder of the Company and has served as Chairman and
Chief Executive Officer since the Company's inception in September 1981. Mr.
Holt has over 35 years experience in the ATE industry, including various
positions in general management, marketing management and engineering. From
1973 to 1980, Mr. Holt was Manager of the Measurement Systems Division of
Siemens Corporation. From 1966 to 1973, he served in various capacities
including Vice President of Marketing for Computest Corporation, a manufacturer
of ATE for the computer industry. Mr. Holt is a co-inventor on several of the
Company's patents. Mr. Holt holds an M.B.A. from California State University
and a B.S. in Electrical Engineering from South Dakota State University.
Robert E. Matthiessen was elected President, Chief Operating Officer and a
Director of the Company in February 1997. Prior to that, Mr. Matthiessen served
as Executive Vice President since joining the Company in October 1984. He has
over 25 years experience in the ATE industry, including various positions in
general management, marketing management and engineering management. In 1982,
Mr. Matthiessen co-founded a company engaged in the production of video
products for training, advertising and sales, and served as its President from
inception to 1984. From 1973 to 1981, he served in various engineering and
marketing management positions with the Measurement Systems Division of Siemens
Corporation. Mr. Matthiessen is a co-inventor on several of the Company's
patents. He studied electrical engineering at Drexel University and business
administration at Rutgers University.
Daniel J. Graham is a co-founder of the Company and has served as Senior
Vice President and a Director of the Company since 1988. Prior to that, Mr.
Graham served as Vice President of the Company since the Company's inception.
Mr. Graham has expertise in integrated circuit test technology and operated his
own software consulting firm from 1978 to 1992. He has over 25 years industrial
experience involving the development of
30
software and hardware systems for ATE. Mr. Graham is a past Chairman of the
Test Technology Technical Committee of the Institute of Electrical and
Electronic Engineers, Inc. (the "IEEE") Computer Society. He currently serves
as General Vice Chair of the International Test Conference which is sponsored
by the IEEE. He holds an M.S. in Computer and Information Science Engineering
from the University of Pennsylvania and a B.S. with honors in Electrical
Engineering from the Queen's University of Belfast, Northern Ireland.
Hugh T. Regan, Jr. has served as the Company's Chief Financial Officer and
Treasurer since joining the Company in April 1996. From 1989 to 1995, Mr. Regan
was the Vice President of Finance for Value Property Trust, a publicly traded
real estate investment trust (the "Trust"). From 1995 until he joined the
Company, Mr. Regan was the Chief Financial Officer of the Trust. Mr. Regan
holds a B.S. in Accounting and Finance from Rider University and is a Certified
Public Accountant.
Hugh T. Regan, Sr. has served as the Company's Secretary since 1982. Mr.
Regan was Chief Financial Officer of the Company from 1982 to 1996. He has
served as President of his accounting firm, Regan Accounting Services, since
1986. He has over 35 years of financial and general management experience in
the computer, ATE and other industries. From 1979 to 1983, he was Executive
Vice President and Chief Financial Officer of Emery Corporation, a home
furnishings manufacturing company. From 1973 to 1979, he was Vice President of
Finance and Chief Financial Officer of Clarke Corporation, a publicly traded
building products manufacturing company. From 1966 to 1973, he was Controller
for Computest Corporation, an early leader in ATE. Mr. Regan holds a B.S. in
Business Administration and Accounting from LaSalle University.
Richard O. Endres has served as a Director of the Company since April
1982. He has served as President of VRA, Inc., which provides business planning
and financial services for start-up companies, since 1976. Mr. Endres founded
Computest Corporation in 1962 and served as its President from 1962 to 1973.
Computest was sold to Siemens Corporation in 1973, at which time Mr. Endres
became Group Vice President for Siemens until 1976. From 1948 to 1953, Mr.
Endres was engaged in early transistor circuit development and computer memory
research at RCA's David Sarnoff Research Center. Mr. Endres holds a B.S. in
Electrical Engineering from Purdue University.
Stuart F. Daniels, Ph.D. is a co-founder of the Company and served as Vice
President and a Director in 1982 and was reappointed as a Director in April
1997. In 1996, Dr. Daniels founded The Daniels Group, which is engaged in
technology transfer and license consulting. From 1980 to 1995, Dr. Daniels held
several management positions with Siemens Corporation. Dr. Daniels also
co-founded Digital General Corp., an ATE company, in 1969. Dr. Daniels holds a
Ph.D. in Electrical Engineering from Case Western Reserve University, an M.S.
in Electrical Engineering from Case Institute of Technology and a B.S. in
Electrical Engineering from the University of New Hampshire. He is also an
adjunct of the Computer Information Science Department at the New Jersey
Institute of Technology. Dr. Daniels holds two patents in ATE technology.
Jack R. Edmunds has served as Director of Operations since joining the
Company in September 1987. He has over 20 years experience in the ATE industry,
including various positions in operations management, marketing management,
engineering and sales. From 1964 to 1975 he held numerous management positions
in operations, engineering, marketing and sales with Computest Corporation. He
studied business administration at Rutgers University.
Brian R. Moore has served as the Managing Director of inTEST LTD since
February 1985. From 1982 to 1985, Mr. Moore was a managing partner in Anglo
European Machinery Company, a manufacturer of test head manipulators and other
specialty machines for the ATE industry, which was acquired by inTEST LTD in
1985. He has over 35 years experience in the ATE industry, including various
positions in general management, engineering management, operations management,
marketing and mechanical design. Mr. Moore is a co-inventor on several of the
Company's patents. He studied mechanical engineering at High Wycombe Technical
College in the U.K.
Tomoyasu Ogura has served as the Representative Director of inTEST KK
since March 1990. Prior to that, Mr. Ogura was Marketing Manager of inTEST KK
since May 1988. From 1981 to 1988, Mr. Ogura was the Technical Manager for a
subsidiary of C. Itoh & Co., a trading company. He has over 20 years experience
in the ATE industry in Japan, including various positions in general
management, sales management, marketing, engineering and sales. Mr. Ogura holds
a B.S. degree in Electrical Engineering from Kanagawa University, Yokohama.
31
Cornelis Hol has served as the Managing Director of inTEST PTE since its
inception in April 1990 and as Director of inTEST KK since its inception in
1987. Mr. Hol is also Managing Director of C. Hol Business Development, a
management consulting company he founded in 1986 with which the Company has a
contract for the management of inTEST PTE. In addition, from 1993 to 1995, Mr.
Hol was President of Intertrade Scientific, Inc. ("ITS"), a distributor of
semiconductor production equipment in the U.S., and Managing Director of ITS in
Munich, Germany. He has over 15 years experience in the semiconductor industry
in Southeast Asia, Japan, Europe and the U.S., including various positions in
general management, sales and distribution management. From 1981 to 1986, Mr.
Hol was Managing Director of MCT Asia, a manufacturer of device handlers. Mr.
Hol holds a Marine Engineering degree from De Ruyter School, Flushing, Holland.
Hugh T. Regan, Jr. is Hugh T. Regan's son; there are no other family
relationships between any of the directors or executive officers of the
Company. Dr. Daniels has agreed to provide consulting services to the Company
including analyzing patents and other intellectual properties relating to the
Company's technology interests, for which he will be compensated for his
services at a rate of $150 per hour. The Company does not expect the consulting
fees paid to Dr. Daniels to exceed $25,000 per year. Non-employee directors are
paid a quarterly retainer of $2,500, a fee of $2,000 per board meeting and a
fee of $1,000 per committee meeting that falls on a day other than a board
meeting. In addition, non-employee directors are reimbursed travel expenses and
other costs associated with attending board or committee meetings. The Company
does not pay additional cash compensation to officers of the Company for their
service as directors of inTEST CORP. However, officers who serve as directors
of the Company's foreign subsidiaries receive compensation as approved each
year by such subsidiary's Board of Directors. The Company intends to hold at
least four meetings of the Board of Directors per year. Directors are also
eligible to participate in the Company's 1997 Stock Plan. See " -- 1997 Stock
Plan" and " -- Executive Compensation."
Board Committees
The Board of Directors has three standing Committees: an Executive
Committee, an Audit Committee and a Compensation Committee. The Executive
Committee is responsible for those duties delegated to it by the Board of
Directors. The Audit Committee reviews the results and scope of the audit and
other services provided by the Company's independent auditors. The Compensation
Committee makes recommendations concerning salaries and incentive compensation
for employees of the Company and administers the Company's stock option and
bonus plan. See " -- 1997 Stock Plan."
32
Executive Compensation
The following table sets forth certain information with respect to the
compensation paid by the Company for services rendered during the years ended
December 31, 1996, 1995 and 1994, to its Chairman and Chief Executive Officer
and the other executive officers of the Company whose total annual salary and
bonus exceeded $100,000 during such period (each, a "Named Executive Officer").
Summary Compensation Table
Annual Compensation
---------------------------------------
Other annual All other
Name and Principal Position Year Salary Bonus compensation compensation
- ------------------------------ ------ ---------- --------- -------------- ----------------
Alyn R. Holt ............... 1996 $155,545 $55,234 $ 47,693(1) $ 145,851(2)
Chairman and Chief 1995 121,300 44,631 19,876(1) 86,557(2)
Executive Officer 1994 112,530 18,280 25,337(1) 20,250(2)
Robert E. Matthiessen ...... 1996 $ 97,020 $ 6,750 $ 13,578(3) $ 5,720(4)
President, Chief Operating 1995 92,620 -- 14,095(3) 756(4)
Officer and Director 1994 89,217 -- 21,567(3) 756(4)
Daniel J. Graham ............ 1996 $105,200 -- $ 18,943(5) $ 35,539(6)
Senior Vice President and 1995 100,000 -- 19,376(5) 45,795(6)
Director 1994 95,503 -- 20,097(5) 17,116(6)
Hugh T. Regan, Sr. (7) ...... 1996 $113,635 -- -- $ 27,628(8)
Secretary 1995 106,150 -- -- 23,295(8)
1994 95,550 -- -- 15,650(8)
- ------------
(1) Includes: $39,500 for the annual lease value of automobiles for Alyn R. and
Connie E. Holt in 1996, and $11,250 and $10,250 for Mr. Holt in 1995 and
1994, respectively; $6,793, $7,426 and $14,087 for group health insurance
in 1996, 1995 and 1994, respectively.
(2) Includes: $3,046, $2,724 and $2,724 for premiums paid on life insurance for
Mr. Holt in 1996, 1995 and 1994, respectively; $4,486 matching
contribution to Mr. Holt's 401(k) Plan account in 1996; and $138,319,
$83,833 and $17,526 for serving as a director of inTEST LTD and inTEST KK
in 1996, 1995 and 1994, respectively.
(3) Includes: $8,750, $7,750 and $10,250 for the annual lease value of an
automobile for Mr. Matthiessen in 1996, 1995 and 1994, respectively;
$4,828, $5,345 and $11,317 for group health insurance in 1996, 1995 and
1994, respectively.
(4) Includes: $1,184, $756 and $756 for premiums paid on life insurance for Mr.
Matthiessen in 1996, 1995 and 1994, respectively; and $4,536 matching
contribution to Mr. Matthiessen's 401(k) Plan account in 1996.
(5) Includes: $10,750, $10,750 and $7,550 for the annual lease value of an
automobile for Mr. Graham in 1996, 1995 and 1994, respectively; $6,793,
$7,426 and $11,317 for group health insurance in 1996, 1995 and 1994,
respectively.
(6) Includes: $2,107, $1,436 and $1,466 for premiums paid on life insurance for
Mr. Graham in 1996, 1995 and 1994, respectively; $4,750 matching
contribution to Mr. Graham's 401(k) Plan account in 1996; and $28,682,
$44,359 and $15,650 for serving as a director of inTEST LTD and inTEST KK
in 1996, 1995 and 1994, respectively.
(7) Mr. Regan served as the Company's Chief Financial Officer through April
1996.
(8) Includes: $785 for premiums paid on life insurance for Mr. Regan in 1996;
$1,920 matching contribution to Mr. Regan's 401(k) Plan account in 1996;
and $24,923, $23,295 and $15,650 for serving as a director of inTEST LTD
in 1996, 1995 and 1994, respectively.
33
401(k) Plan
The inTEST Corporation 401(k) Savings Incentive Plan (the "401(k) Plan")
became effective on January 1, 1996. All employees of inTEST CORP who are at
least 18 years of age and have completed six months of service with the Company
are eligible to participate in the 401(k) Plan. An eligible employee may elect
to contribute up to 15% of his or her compensation each year instead of
receiving that amount in cash, up to the legal limit (the limit for 1997 is
$9,500). The Company will match employee contributions up to 10% of an
employee's compensation, not to exceed $4,750. At the discretion of the Board
of Directors, the Company may also match employee contributions up to an
additional 5% of an employee's salary, not to exceed $4,750 or, in aggregate,
$9,500 for a total matched contribution not to exceed 15% of an employee's
compensation.
1997 Stock Plan
Pursuant to the inTEST Corporation 1997 Stock Plan (the "Plan" or the
"1997 Stock Plan"), directors, key employees and consultants of the Company are
eligible to receive awards of (i) options to purchase shares of Common Stock
and (ii) shares of Common Stock. Options granted under the Plan may be
"incentive stock options" ("ISOs"), within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified stock
options ("NQSOs"). Stock awards may be granted in addition to or in lieu of any
other award granted under the Plan. The Company has authorized 500,000 shares
of Common Stock for issuance upon exercise of options or stock awards under the
Plan (subject to anti-dilution and similar adjustments).
The Plan consists of two parts: the Non-Qualified Plan and the Key
Employee Plan. The Non-Qualified Plan is administered by the Board of Directors
of the Company and the Key Employee Plan is administered by the Compensation
Committee of the Board of Directors of the Company (the Board of Directors or
the Compensation Committee, as the case may be, is referred to herein as the
"Administrator").
Subject to the provisions of the Plan, the Administrator will determine
the type of award, when and to whom awards will be granted, the number of
shares covered by each award and the terms, provisions and kind of
consideration payable, if any, with respect to awards to key employees and
consultants. In determining the persons to whom awards shall be granted and the
number of shares covered by each award, the Administrator shall take into
account the duties of the respective persons, their present and potential
contribution to the success of the Company and such other factors as the
Administrator shall deem relevant. The Administrator may interpret the Plan and
may at any time adopt such rules and regulations for the Plan as it deems
advisable.
An option may be granted on such terms and conditions as the Administrator
may approve. No option may be granted with an exercise period in excess of ten
years from the date of grant. Generally, ISOs will be granted with an exercise
price equal to the "Fair Market Value" (as defined in the Plan) on the date of
grant; the exercise price of an NQSO will be determined by the Administrator.
In the case of ISOs, certain limitations will apply with respect to the
aggregate value of option shares which can become exercisable for the first
time during any one calendar year, and certain additional limitations will
apply to ISOs granted to persons who, at the time the option is granted, own
more than 10% of the combined voting power of the Company. The Administrator
may provide for the payment of the option price in cash, by delivery of Common
Stock having a Fair Market Value equal to such option price, by a combination
thereof or by any other method. Options granted under the Plan will become
exercisable at such times and under such conditions as the Administrator shall
determine, subject to acceleration of the exercisability of options in the
event of, among other things, a "Change in Control" (as defined in the Plan).
All options to the extent not earlier exercised, expire on the earliest of
(i) the last business day immediately preceding the tenth anniversary of the
date of grant, (ii) one year following the optionee's termination of his or her
employment or service with the Company (unless such termination is for cause,
as defined in the Plan, in which case any options held by such optionee will
terminate immediately) or (iii) a date set by the Administrator upon a finding
that a change in the financial accounting treatment for the options would or
may have a material adverse effect on the Company. In addition, in the event of
a change of control, as defined in the Plan, the Administrator may take
whatever actions with respect to outstanding options it deems necessary or
advisable, including accelerating the expiration date of any such outstanding
option to a date not earlier than thirty (30) days from the date notice of such
acceleration is given to the respective optionee.
34
The Plan further provides for the granting of stock awards, which are
awards of Common Stock which may be subject to restrictions on the sale or
other disposition of such shares, except by will or the laws of descent and
distribution, during such period of time as the Administrator determines. The
Administrator may also impose such other conditions and restrictions, if any,
on the shares as it deems appropriate, including, for example, the continued
employment of the recipient.
The Board of Directors may at any time suspend, amend, modify or terminate
the Plan provided that, with respect to the Key Employee Plan, any amendment
which would change the eligibility of employees or a class of employees
eligible to receive an option or to increase the maximum number of shares as to
which options may be granted, will only be effective if such action is approved
by the holders of a majority of the issued and outstanding shares of Common
Stock. In addition, no change may be made which would adversely affect any
award previously granted, except with the written consent of the grantee. No
awards may be granted under the Plan more than ten years from the date the Plan
was adopted.
The Administrator has granted options to purchase 150,000 shares of Common
Stock to key employees pursuant to the Key Employee Plan. The grant of these
options will become effective on the effective date of the Registration
Statement. These options, which are ISOs, will become exercisable on a pro rata
basis annually on the first through fifth anniversaries of the date of this
Prospectus. Stuart F. Daniels, Ph.D. and Hugh T. Regan, Jr. will receive
options to purchase 10,000 and 30,000 shares of Common Stock, respectively. Dr.
Daniels and Mr. Regan are the only directors or executive officers of the
Company to be granted options under the Plan to date.
Limitation of Liability and Indemnification
Pursuant to the provisions of the Delaware General Corporation Law
("DGCL"), the Company has adopted provisions in its Certificate of
Incorporation which limit the personal liability of its directors to the
Company or its stockholders for monetary damages for breach of their fiduciary
duty as a director to the fullest extent permitted by the DGCL, and in its
Bylaws which require the Company to indemnify its directors and officers to the
fullest extent permitted by Delaware law. The Bylaws require the Company to
indemnify an officer or director in connection with a proceeding (or part
thereof) initiated by such officer or director only if the initiation of such
proceeding by such person was authorized by the Board of Directors. The Company
has applied for a directors' and officers' liability insurance policy.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Robert E. Matthiessen, Richard O.
Endres and Stuart F. Daniels, Ph.D. Mr. Matthiessen is the President and Chief
Operating Officer of the Company. Mr. Endres has never served as an officer or
employee of the Company. Dr. Daniels was a co-founder of the Company and served
as Vice President and Director in 1982. From 1982 until Dr. Daniels was
re-elected to the Board of Directors in April 1997, his only relationship with
the Company was as a stockholder. Prior to the offering, the Company did not
have a Compensation Committee, and compensation decisions were made by the
Board of Directors, which consisted of Messrs. Holt, Endres and Graham.
35
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of March 31, 1997 and
after giving effect to the sale of shares of Common Stock in the offering by
(i) each Director or Named Executive Officer of the Company, (ii) each person
known by the Company to own beneficially five percent or more of the Common
Stock, (iii) each Selling Stockholder and (iv) all current executive officers
and directors of the Company as a group.
Prior to Offering(1) After Offering(1)(2)
----------------------------- ----------------------------
Shares Shares
Beneficially Percentage Shares Being Beneficially Percentage
Name of Beneficial Owner Owned Owned Offered(2) Owned Owned
- ------------------------------------- -------------- ------------ -------------- -------------- -----------
Alyn R. Holt (3)(4)(5) ............ 2,083,217 50.9% 232,550 1,850,667 31.3%
Richard O. Endres (3)(4)(6) ......... 483,435 11.8 53,965 429,470 7.3
Daniel J. Graham (3)(4) ............ 446,729 10.9 49,868 396,861 6.7
Deed of Trust f/b/o K.D. Holt (3) . 261,727 6.4 29,216 232,511 3.9
Connie E. Holt ..................... 186,948 4.6 20,869 166,079 2.8
Robert E. Matthiessen (4) ......... 160,364 3.9 17,901 142,463 2.4
Hugh T. Regan, Sr. (4) ............ 129,098 3.2 14,411 114,687 1.9
Brian R. Moore (4) .................. 93,219 2.3 10,406 82,813 1.4
Nils O. Ny (4) ..................... 70,106 1.7 7,826 62,280 1.1
Jack R. Edmunds (4) ............... 67,459 1.6 7,530 59,929 1.0
John W. Lalley ..................... 53,905 1.3 6,017 47,888 *
Micronics Japan Company, Ltd. (7) 48,209 1.2 5,382 42,827 *
Julian P. Partington (4) ............ 45,664 1.1 5,097 40,567 *
Tomoyasu Ogura (4) .................. 43,388 1.1 4,843 38,545 *
Christopher L. West (4) ............ 42,532 1.0 4,748 37,784 *
William R. Blatchley (4) ............ 34,274 * 3,826 30,448 *
Ann L. Martz ........................ 23,369 * 2,609 20,760 *
Dale G. Holt ........................ 18,695 * 2,087 16,608 *
Jerome R. Bortnem (4) ............... 15,579 * 1,739 13,840 *
Stuart F. Daniels, Ph.D. (4) ...... 14,021 * 1,565 12,456 *
John J. Kotarski (4) ............... 9,347 * 1,043 8,304 *
Tomio Wakamatsu (4) ............... 3,214 * 359 2,855 *
Kenji Murayama (4) .................. 3,214 * 359 2,855 *
All executive officers and directors
as a group (7 persons) ............ 3,316,864 81.1% 370,260 2,946,604 49.7%
- ------------
* Denotes less than 1%.
(1) Unless otherwise indicated below, the persons in the above table have sole
voting and investment power with respect to all shares owned by them.
Includes 300,443 shares of Common Stock issued in the Exchange. See "The
Company."
(2) If the Underwriters' over-allotment option is exercised in full, the
Selling Stockholders will sell an aggregate of 341,250 shares, allocated
among them in the same proportion as the relative number of shares being
offered by each of them as set forth above.
(3) The address of the stockholder is: c/o the Company, 2 Pin Oak Lane, Cherry
Hill, New Jersey 08003.
(4) The Selling Stockholder is, or was during the past three years, a director,
officer or employee of the Company.
(5) Does not include 261,727 shares held in trust for the benefit of Mr. Holt's
child or 186,948 shares owned by Mr. Holt's spouse, Connie E. Holt. Mr.
Holt disclaims beneficial ownership of the shares held in trust for his
child and the shares owned by his spouse. Includes 48,487 shares acquired
pursuant to the Exchange. See "The Company."
(6) Includes 261,727 shares held in trust for the benefit of Mr. Holt's child
for which Mr. Endres is trustee.
(7) This Selling Stockholder is a publicly owned Japanese company. inTEST KK
occupies its facility pursuant to an agreement with this Selling
Stockholder.
36
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock and 5,000,000 shares of Preferred Stock.
The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of the Company's Certificate of
Incorporation that are included as an exhibit to the Registration Statement of
which this Prospectus is a part, and by the provisions of applicable law.
Common Stock
As of March 31, 1997, there were 3,790,591 shares of Common Stock
outstanding that were held of record by 17 stockholders. Prior to the offering,
the Company will issue an additional 300,443 shares of its Common Stock in
exchange for the minority interests in the Company's three subsidiaries (the
"Exchange"). Giving effect to the sale of the shares of Common Stock offered by
the Company in the offering and the shares to be issued in the Exchange, there
will be 5,911,034 shares of Common Stock outstanding immediately following the
offering.
Holders of Common Stock are entitled to one vote per share, to receive
dividends when and if declared by the Board of Directors and to share ratably
in the assets of the Company legally available for distribution to its
stockholders in the event of liquidation. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. All outstanding
shares of Common Stock are, and the shares to be sold hereby will be, upon
issuance and payment therefor, duly authorized, fully paid and nonassessable.
The holders of Common Stock do not have cumulative voting rights. The holders
of a majority of the shares of Common Stock can elect all the directors and can
control the management and affairs of the Company. The rights, preferences and
privileges of holders of Common Stock will be subject to the rights of the
holders of any series of Preferred Stock that the Company may issue in the
future.
Preferred Stock
The Company has an authorized class of undesignated Preferred Stock
consisting of 5,000,000 shares. Preferred Stock may be issued in series from
time to time with such designations, relative rights, priorities, preferences,
qualifications, limitations and restrictions thereof, to the extent that such
are not fixed in the Company's Certificate of Incorporation, as the Board of
Directors determines. The rights, priorities, preferences, qualifications,
limitations and restrictions of different series of Preferred Stock may differ
with respect to dividend rates, amounts payable on liquidation, voting rights,
conversion rights, redemption provisions, sinking fund provisions and other
matters. The Board of Directors may authorize the issuance of Preferred Stock
which ranks senior to the Common Stock with respect to the payment of dividends
and the distribution of assets on liquidation. In addition, the Board of
Directors is authorized to fix the limitations and restrictions, if any, upon
the payment of dividends on Common Stock to be effective while any shares of
Preferred Stock are outstanding. The Board of Directors, without stockholder
approval, can issue Preferred Stock with voting and conversion rights which
could adversely affect the voting power of the holders of Common Stock. The
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change of control of the Company. Upon consummation of the
offering, no shares of Preferred Stock will be outstanding. The Company has no
present intention to issue shares of Preferred Stock.
Certain Corporate Provisions
The Company's Certificate of Incorporation and Bylaws contain a number of
provisions relating to corporate governance and to the rights of stockholders.
Certain of these provisions may be deemed to have a potential "anti-takeover"
effect in that such provisions may delay, defer or prevent a change of control
of the Company. These provisions include the authority of the Board of
Directors to issue series of Preferred Stock with such voting rights and other
powers as the Board of Directors may determine. See "Management -- Executive
Officers, Directors and Significant Employees."
37
The Company is subject to the provisions of the DGCL. Section 203 of the
DGCL prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. A "business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates, owns, or within three years did own, 15
percent or more of the corporation's voting stock.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock of the Company is
The First National Bank of Boston.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there has been no public market for the Common
Stock of the Company. Future sales of substantial amounts of Common Stock in
the public market could adversely affect the prevailing market prices.
Upon completion of the offering, there will be 5,911,034 shares of Common
Stock of the Company outstanding, of which 3,338,078 will be "restricted
securities" and may be publicly sold only if registered under the Securities
Act or sold in accordance with an applicable exemption from registration, such
as Rule 144.
In general, under Rule 144 as currently in effect, a stockholder,
including an "affiliate" of the Company, as that term is defined in Rule 144
(an "Affiliate"), who has beneficially owned his or her restricted securities
(as that term is defined in Rule 144) for at least one year from the later of
the date such securities were acquired from the Company or (if applicable) the
date they were acquired from an Affiliate, is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater of
one percent of the then outstanding shares of Common Stock (approximately
59,110 shares immediately after the offering) or the average weekly trading
volume in the Common Stock during the four calendar weeks preceding the date on
which notice of such sale was filed under Rule 144, provided certain
requirements concerning availability of public information, manner of sale and
notice of sale are satisfied. In addition, under Rule 144(k), if a period of at
least two years has elapsed between the later of the date restricted securities
were acquired from the Company and the date they were acquired from an
Affiliate of the Company, a stockholder who is not an Affiliate of the Company
at the time of sale and has not been an Affiliate for at least three months
prior to the sale would be entitled to sell the shares immediately without
compliance with the foregoing requirements under Rule 144.
As of the date of this Prospectus, the Company and each of its
stockholders have agreed that they will not directly or indirectly, offer,
sell, offer to sell, grant any option to purchase or otherwise sell or dispose
(or approve any offer, sale, offer of sale, grant of any options to purchase or
sale or disposition) of any shares of Common Stock or other capital stock of
the Company, or any securities convertible into, or exercisable or exchangeable
for, any shares of Common Stock or other capital stock of the Company without
the prior written consent of Janney Montgomery Scott Inc., on behalf of the
Underwriters, for a period of 180 days from the date of this Prospectus (the
"Lock-up Agreements"). Notwithstanding the foregoing, Mr. Holt reserved the
right to make a charitable contribution of up to 100,000 shares of Common Stock
which would not be subject to the lock-up agreement. Beginning 180 days after
the date of this Prospectus, approximately 297,841 shares of Common Stock will
become eligible for resale without volume or other limitations pursuant to Rule
144.
An additional 500,000 shares of Common Stock in the aggregate are reserved
for future issuance under the 1997 Stock Plan, and options to purchase a total
of 150,000 shares have been granted which will become effective as of the
effective date of the Registration Statement. The Company intends to file a
registration statement under the Act shortly after the effective date of the
Registration Statement, covering certain shares of Common Stock reserved for
issuance under the 1997 Stock Plan. Upon the effectiveness of that registration
statement, most of the shares of Common Stock which may be issued pursuant to
the 1997 Stock Plan, other than shares held by Affiliates, will be immediately
eligible for resale in the public market without restriction, subject to the
terms of the Lock-up Agreements, if applicable. See "Management -- 1997 Stock
Plan."
38
UNDERWRITING
The Underwriters named below, acting through their Representatives, Janney
Montgomery Scott Inc. and Needham & Company, Inc. have severally agreed,
subject to the terms and conditions of the Underwriting Agreement, to purchase
a total of 1,820,000 shares of Common Stock from the Company and 455,000 shares
of Common Stock from the Selling Stockholders. The number of shares of Common
Stock that each Underwriter has agreed to purchase is set forth opposite its
name below. The Underwriters are committed to purchase all of such shares if
any are purchased. Under certain circumstances, the commitments of
non-defaulting Underwriters may be increased. The names of the several
Underwriters and the respective number of shares to be purchased by each of
them are as follows:
Number of
Underwriter Shares
- ----------- ----------
Janney Montgomery Scott Inc. ......
Needham & Company, Inc. ............
----------
Total .............................. 2,275,000
==========
The Company is obligated to sell, and the Underwriters are obligated to
purchase, all of the shares of Common Stock offered hereby if any are
purchased.
The Underwriters, through their Representatives, have advised the Company
and the Selling Stockholders: that they propose to offer the Common Stock
initially at the public offering price set forth on the cover page of this
Prospectus; that the Underwriters may allow to selected dealers a concession of
$ per share; and that such dealers may reallow a concession of $ per
share to certain other dealers. After the initial public offering, the offering
price and the concessions may be changed by the Representatives.
The Selling Stockholders have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to
341,250 additional shares of Common Stock at the initial public offering price,
less underwriting discounts and commissions, as set forth on the cover page of
this Prospectus. The Underwriters may exercise such option solely for the
purpose of covering over-allotments incurred in the sale of the shares of
Common Stock offered hereby. To the extent such option to purchase is
exercised, each Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number set forth next to such Underwriter's name in the preceding
table bears to 2,275,000.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters or contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.
As of the date of this Prospectus, the Company, its officers and
directors, and stockholders of the Company holding 3,636,034 shares of Common
Stock upon completion of the offering, have agreed that they will not, directly
or indirectly, offer, sell, offer to sell, grant any option to purchase or
otherwise sell or dispose (or approve any offer, sale, offer of sale, grant of
any options to purchase or sale or disposition) of any shares of Common Stock
or other capital stock of the Company or any securities convertible into, or
exercisable or exchangeable for, any shares of Common Stock or other capital
stock of the Company without the prior written consent of Janney Montgomery
Scott Inc., for a period of 180 days from the date of this Prospectus.
Notwithstanding the foregoing, Mr. Holt reserved the right to make a charitable
contribution of up to 100,000 shares of Common Stock which would not be subject
to the lock-up agreement. See "Shares Eligible for Future Sale."
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
Prior to the offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price will be
determined through negotiations among the Company and the Representatives.
Among the factors considered in making such determination are the prevailing
market conditions, the Company's financial and operating history and condition,
its prospects and the prospects for its industry in general, the management of
the Company, and the market prices of securities for companies in businesses
similar to that of the Company.
39
LEGAL MATTERS
The legality of the issuance of the shares of Common Stock being offered
hereby will be passed upon for the Company and the Selling Stockholders by
Saul, Ewing, Remick & Saul, Philadelphia, Pennsylvania. Certain legal matters
in connection with patent law matters will be passed upon for the Company by
Ratner & Prestia, Berwyn, Pennsylvania. Certain legal matters will be passed
upon for the Underwriters by Pepper, Hamilton & Scheetz LLP, Philadelphia,
Pennsylvania.
EXPERTS
The Consolidated Financial Statements of the Company as of December 31,
1996 and 1995 and for each of the years in the three-year period ended December
31, 1996, have been included herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
Certain matters dealing with patents and proprietary rights set forth
under "Risk Factors -- Importance of Patents and Proprietary Rights; Risk of
Litigation," "Business -- Strategy -- Capitalize on Experience and Expertise"
and "Business -- Patents and Other Proprietary Rights" have been included in
this Prospectus in reliance upon the written opinion of Ratner & Prestia,
Berwyn, Pennsylvania, patent counsel for the Company, as experts in such
matters.
ADDITIONAL INFORMATION
The Company is not currently subject to the information requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the offering, the Company will be required to file reports and other
information with the Securities and Exchange Commission (the "Commission")
pursuant to the informational requirements of the Exchange Act.
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Act with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. For further information, reference is made to
the Registration Statement and exhibits thereto. The Registration Statement may
be inspected without charge at the Office of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of the Registration Statement may
be obtained from the Commission at prescribed rates from the Public Reference
Section of the Commission at such address, and at the Commission's regional
offices located at 7 World Trade Center, Suite 1300, New York, New York 10048,
and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. In addition, registration statements and certain other filings made
with the Commission through its Electronic Data Gathering, Analysis, and
Retrieval ("EDGAR") system are publicly available through the Commission's site
on the Internet's World Wide Web, located at http://www.sec.gov. The
Registration Statement, including all exhibits thereto and amendments thereof,
has been filed with the Commission through EDGAR.
The Company intends to furnish to its stockholders annual reports
containing financial statements audited by an independent accounting firm.
40
inTEST CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
-----
Report of KPMG Peat Marwick LLP, Independent Auditors ...... F-2
Consolidated Financial Statements:
Consolidated Balance Sheets .............................. F-3
Consolidated Statements of Earnings ..................... F-4
Consolidated Statements of Stockholders' Equity ......... F-5
Consolidated Statements of Cash Flows ..................... F-6
Notes to Consolidated Financial Statements ............... F-7
F-1
Independent Auditors' Report
The Board of Directors and Stockholders
inTEST Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheets of inTEST
Corporation and subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of inTEST Corporation
and subsidiaries at December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
March 14, 1997, except for the first two paragraphs of
Note 12, as to which the date is April 25, 1997, and
the third paragraph of Note 12, as to which the
date is June 4, 1997
F-2
inTEST CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except for share data)
December 31, March 31, 1997
--------------------- ----------------------------
Pro forma
Actual (Note 3)
1995 1996 (unaudited) (unaudited)
--------- --------- ------------- ------------
Current assets:
Cash and cash equivalents ........................ $ 1,919 $ 3,692 $ 2,983 $ 2,983
Trade accounts and notes receivable, net of
allowance for doubtful accounts of $42 at
December 31, 1995 and $88 at December 31,
1996 and March 31, 1997 ........................... 2,992 1,953 2,495 2,495
Inventories ....................................... 1,218 1,313 1,178 1,178
Deferred tax asset ................................. -- -- -- 56
Other current assets .............................. 11 70 167 167
-------- ------- ------- -------
Total current assets .............................. 6,140 7,028 6,823 6,879
-------- ------- ------- -------
Property and equipment:
Machinery and equipment ........................... 633 1,096 1,082 1,082
Leasehold improvements ........................... 55 173 169 169
-------- ------- ------- -------
688 1,269 1,251 1,251
Accumulated depreciation ........................... (547) (676) (701) (701)
-------- ------- ------- -------
Net property and equipment ........................ 141 593 550 550
-------- ------- ------- -------
Other assets ....................................... 71 95 119 119
Goodwill (Note 3) .................................... -- -- -- 1,567
-------- ------- ------- -------
Total assets ....................................... $ 6,352 $ 7,716 $ 7,492 $ 9,115
======== ======= ======= =======
Current liabilities:
Current installments of long term debt ............ $ -- $ 34 $ 34 $ 34
Accounts payable ................................. 845 574 837 837
Dividends payable ................................. -- 973 1,216 1,216
Accrued wages and expenses ........................ 299 595 427 427
Customer deposits ................................. 191 -- -- --
State and foreign income taxes payable ............ 604 475 385 385
S corporation distribution to stockholders (Note 3) -- -- -- 3,420
-------- ------- ------- -------
Total current liabilities ........................... 1,939 2,651 2,899 6,319
-------- ------- ------- -------
Long term debt .................................... -- 155 148 148
Deferred tax liability .............................. -- -- -- 8
Minority interest ................................. 365 323 291 --
-------- ------- ------- -------
Commitments (Note 8)
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; no shares issued or outstanding ...... -- -- -- --
Common stock, $0.01 par value; 20,000,000
shares authorized; 3,790,591 shares issued and
outstanding at December 31, 1995 and 1996 and
March 31, 1997; 4,091,034 shares issued and
outstanding pro forma ........................... 38 38 38 41
Additional paid-in capital ........................ 689 689 689 2,633
Retained earnings ................................. 3,273 3,833 3,461 --
Foreign currency translation adjustment ............ 48 27 (34) (34)
-------- ------- ------- -------
Total stockholders' equity ........................ 4,048 4,587 4,154 2,640
-------- ------- ------- -------
Total liabilities and stockholders' equity ......... $ 6,352 $ 7,716 $ 7,492 $ 9,115
======== ======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
F-3
inTEST CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
(in thousands, except for per share data)
Three months ended
Years ended December 31, March 31,
---------------------------------- ----------------------------
1996 1997
1994 1995 1996 (unaudited) (unaudited)
--------- --------- ---------- ------------- ------------
Revenues .......................................... $ 9,287 $ 14,442 $ 18,582 $ 6,089 $ 3,887
Cost of revenues .................................... 3,777 5,191 6,755 1,856 1,602
-------- -------- -------- -------- --------
Gross profit ....................................... 5,510 9,251 11,827 4,233 2,285
-------- -------- -------- -------- --------
Operating expenses:
Selling expense .................................... 1,491 2,118 2,471 781 493
Research and development expense .................. 1,623 1,930 1,928 394 374
General and administrative expense ............... 1,107 1,166 1,812 364 411
-------- -------- -------- -------- --------
Total operating expenses ........................... 4,221 5,214 6,211 1,539 1,278
-------- -------- -------- -------- --------
Operating income .................................... 1,289 4,037 5,616 2,694 1,007
-------- -------- -------- -------- --------
Other income (expense):
Interest income .................................... 22 82 147 23 29
Interest expense ................................. (9) -- (11) (5) (4)
Other ............................................. 24 (49) (35) (6) (10)
-------- -------- -------- -------- --------
37 33 101 12 15
-------- -------- -------- -------- --------
Earnings before income taxes and minority interest ... 1,326 4,070 5,717 2,706 1,022
-------- -------- -------- -------- --------
Provision for income taxes:
State ............................................. 9 82 126 75 21
Foreign .......................................... 373 555 732 280 146
-------- -------- -------- -------- --------
Income tax expense ................................. 382 637 858 355 167
-------- -------- -------- -------- --------
Earnings before minority interest .................. 944 3,433 4,859 2,351 855
Minority interest ................................. (127) (181) (213) (94) (11)
-------- -------- -------- -------- --------
Net earnings ....................................... $ 817 $ 3,252 $ 4,646 $ 2,257 $ 844
======== ======== ======== ======== ========
Pro forma information (unaudited) (Note 3):
Pro forma earnings before income taxes ............ $ -- $ -- $ 5,613 $ -- $ 996
Pro forma income taxes .............................. -- -- 2,247 -- 459
Pro forma net earnings ........................... -- -- 3,366 -- 537
Pro forma net earnings per share .................. $ -- $ -- $ 0.82 $ -- $ 0.13
Pro forma weighted average shares outstanding ...... -- -- 4,091 -- 4,091
Supplemental pro forma net earnings per share ...... $ -- $ -- $ 0.79 -- $ 0.13
Supplemental pro forma weighted average shares
outstanding ....................................... -- -- 4,265 -- 4,265
======== ======== ======== ======== ========
See accompanying Notes to Consolidated Financial Statements.
F-4
inTEST CORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
(in thousands, except for share data)
Foreign
Common Stock Additional currency Total stock-
---------------------- paid-in Retained translation holders'
Shares Amount capital earnings adjustment equity
----------- -------- ------------ ---------- ------------- -------------
Balance, January 1, 1994 .................. 3,720,486 $37 $639 $ 1,821 $ (49) $ 2,448
Dividends ................................. -- -- -- (642) -- (642)
Net earnings .............................. -- -- -- 817 -- 817
Shares issued as compensation for
services ................................. 7,789 -- 5 -- -- 5
Foreign currency translation adjustment..... -- -- -- -- 137 137
---------- ---- ----- -------- ------ --------
Balance, December 31, 1994 ............... 3,728,275 37 644 1,996 88 2,765
Dividends ................................. -- -- -- (1,975) -- (1,975)
Net earnings .............................. -- -- -- 3,252 -- 3,252
Shares issued as compensation for
services ................................. 62,316 1 45 -- -- 46
Foreign currency translation adjustment..... -- -- -- -- (40) (40)
---------- ---- ----- -------- ------ --------
Balance, December 31, 1995 ............... 3,790,591 38 689 3,273 48 4,048
Dividends ................................. -- -- -- (4,086) -- (4,086)
Net earnings .............................. -- -- -- 4,646 -- 4,646
Foreign currency translation adjustment..... -- -- -- -- (21) (21)
---------- ---- ----- -------- ------ --------
Balance, December 31, 1996 ............... 3,790,591 38 689 3,833 27 4,587
Dividends (unaudited) ..................... -- -- -- (1,216) -- (1,216)
Net earnings (unaudited) .................. -- -- -- 844 -- 844
Foreign currency translation adjustment
(unaudited) .............................. -- -- -- -- (61) (61)
---------- ---- ----- -------- ------ --------
Balance, March 31, 1997 (unaudited) ........ 3,790,591 $38 $689 $ 3,461 $ (34) $ 4,154
========== ==== ===== ======== ====== ========
See accompanying Notes to Consolidated Financial Statements.
F-5
inTEST CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands of dollars)
Three months ended
Years ended December 31, March 31,
--------------------------------- ---------------------------
1994 1995 1996 1996 1997
--------- ---------- ---------- ------------- ------------
(unaudited) (unaudited)
Cash flows from operating activities:
Net earnings .................................... $ 817 $ 3,252 $ 4,646 $ 2,257 $ 844
Adjustments to reconcile net earnings to net cash
Depreciation and amortization .................. 59 36 109 11 41
Foreign exchange (gain) loss .................. (25) 43 31 (3) (3)
Minority interest .............................. 127 181 213 94 11
Stock issued for services received ............ 5 46 -- -- --
Changes in assets and liabilities:
Accounts receivable ........................ (544) (850) 1,182 (1,321) (684)
Inventories ................................. 58 (284) (66) (80) 97
Other current assets ........................ (4) (46) (61) (56) (123)
Notes receivable ........................... (68) (170) (216) 100 42
Accounts payable ........................... 203 342 (235) 753 307
State and foreign income tax payable ......... 249 261 (118) (105) (72)
Accrued expenses ........................... 54 35 50 204 (129)
Other assets ................................. 45 (101) (65) -- --
------- -------- -------- -------- --------
Total adjustments .............................. 159 (507) 824 (403) (513)
------- -------- -------- -------- --------
Net cash provided by operations .................. 976 2,745 5,470 1,854 331
------- -------- -------- -------- --------
Cash flows used in investing activities:
Purchase of property and equipment ............ (38) (39) (554) (13) (5)
------- -------- -------- -------- --------
Net cash used in investing activities ............ (38) (39) (554) (13) (5)
------- -------- -------- -------- --------
Cash flows used in financing activities:
Dividends paid ................................. (642) (1,976) (3,339) (186) (1,001)
Proceeds from long term debt .................. -- -- 200 -- --
Principal payments on debt ..................... (71) (8) (11) -- (8)
------- -------- -------- -------- --------
Net cash used in financing activities ............ (713) (1,984) (3,150) (186) (1,009)
------- -------- -------- -------- --------
Effects of exchange rates on cash ............... 77 (139) 7 (6) (26)
------- -------- -------- -------- --------
Net cash provided by all activities ............ 302 583 1,773 1,649 (709)
Cash at beginning of period .................. 1,034 1,336 1,919 1,919 3,692
------- -------- -------- -------- --------
Cash at end of period ........................ $ 1,336 $ 1,919 $ 3,692 $ 3,568 $ 2,983
======= ======== ======== ======== ========
Cash payments made for:
State and foreign income taxes .................. $ 122 $ 374 $ 977 $ 471 $ 241
Interest ....................................... 13 9 11 5 4
See accompanying Notes to Consolidated Financial Statements.
F-6
inTEST CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Information as of March 31, 1997 and for the three months ended
March 31, 1996 and 1997 is unaudited)
(in thousands, except for share data)
(1) Nature of Operations
inTEST Corporation ("the Company") designs, manufactures and markets
docking hardware and test head manipulators used by semiconductor manufacturers
during the testing of wafers and packaged devices. The Company also designs and
markets related automatic test equipment interface products. The Company
operates in a single industry segment.
The consolidated entity is comprised of inTEST Corporation (parent) and
three 79% owned foreign subsidiaries: inTEST Limited (Thame, U.K.), inTEST
Kabushiki Kaisha (Kichijoji, Japan) and inTEST PTE, Limited (Singapore). All
significant intercompany accounts and transactions have been eliminated upon
consolidation.
inTEST manufactures its products in the U.S. and the U.K. Its subsidiaries
in Singapore and Japan are engaged in marketing and support activities.
(2) Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Short term investments, which have maturities of three months or less when
purchased, are considered to be cash equivalents and are carried at cost, which
approximates market value.
Notes Receivable
Notes receivable are due from trade customers, and have original
maturities of less than three months. The notes are non-interest bearing.
Inventories
Inventories are stated at lower of cost or market. Cost is determined
under the first-in first-out (FIFO) method.
Property and Equipment
Machinery and equipment are stated at cost. Depreciation is based upon the
estimated useful life of the assets using the straight line method. The
estimated useful lives range from five to seven years. Leasehold improvements
are recorded at cost and amortized over the shorter of the lease term or
estimated useful life of the asset. Expenditures for maintenance and repairs
are charged to operations as incurred.
Income Taxes
The Company has elected S corporation status for Federal tax purposes, and
in the State of New Jersey. As a result, any Federal and certain New Jersey
state income tax liabilities are that of the stockholders, not of the Company.
The Company is, however, taxed in foreign countries and for activity in certain
states.
No foreign or state deferred income taxes have been recorded in the
Company's historical financial statements at December 31, 1995 and 1996 as such
amounts are not significant.
F-7
inTEST CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Information as of March 31, 1997 and for the three months ended
March 31, 1996 and 1997 is unaudited)
(in thousands, except for share data)
(2) Summary of Significant Accounting Policies -- (Continued)
Revenue Recognition
Revenues from sales of products are recognized upon shipment to customers.
Research and Development
Research and development costs are expensed as incurred.
Product Warranties
The Company generally provides product warranties and records estimated
warranty expense at time of sale based upon historical claims experience.
Foreign Currency
The accounts of the foreign subsidiaries are translated in accordance with
Statement of Financial Accounting Standard No. 52, Foreign Currency
Translation, which requires that assets and liabilities of international
operations be translated using the exchange rate in effect at the balance sheet
date. The results of operations are translated using an average exchange rate
for the year. The effects of rate fluctuations in translating assets and
liabilities of international operations into U.S. dollars are accumulated and
reflected as a foreign currency translation adjustment in the statements of
stockholders' equity. Transaction gains and losses are included in net
earnings.
Recently Adopted Accounting Standards
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Adoption of this Statement had no impact on the Company's
financial position, results of operations, or liquidity.
(3) Pro forma Information (Unaudited)
Background
In connection with the initial public offering transaction described in
Note 12, the Company plans to terminate its S corporation status and make a
final distribution of previously taxed earnings to its stockholders. In
addition, the Company intends to acquire the minority interest ownership
position in its three foreign subsidiaries in a share exchange transaction.
Accordingly, the accompanying financial statements include certain pro forma
information which gives effect to these events as further explained below.
Pro forma Balance Sheet
The pro forma balance sheet of the Company as of March 31, 1997 reflects:
a) the estimated net deferred income taxes of $48 which will be recorded
by the Company as a result of the termination of its S corporation
status shortly before the closing of the offering.
b) an estimated distribution of $3,420 payable to the stockholders of all
taxed but undistributed S corporation earnings.
F-8
inTEST CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Information as of March 31, 1997 and for the three months ended
March 31, 1996 and 1997 is unaudited)
(in thousands, except for share data)
(3) Pro forma Information (Unaudited) -- (Continued)
c) the acquisition of the minority interests in the Company's foreign
subsidiaries expected to occur concurrent with the closing of the
offering, and the estimated goodwill of $1,567 associated with such
acquisitions.
The Company expects to issue 300,443 shares of common stock in exchange
for the 21% interest in each of its foreign subsidiaries which is not presently
owned by the Company. The shares, exclusive of those to be issued to the
Company's principal stockholder who is also a stockholder of two of the foreign
subsidiaries, have been valued at the assumed initial public offering price of
$9.50 per share to the extent such shares are freely transferable.
Approximately 225,000 of the shares being exchanged are subject to contractual
and legal restrictions on transfer and have been valued at a 25% discount to
the assumed initial public offering price.
The deferred income tax asset will represent the tax effect of the
cumulative differences between the financial reporting and income tax bases of
certain assets and liabilities as of the termination of the S corporation
status.
The significant items comprising the Company's pro forma net deferred
income tax assets and liabilities as of March 31, 1997 are temporary
differences relating to the following:
Allowance for bad debts ......... $ 32
Inventory capitalized costs ...... 2
Accrued expenses .................. 22
-----
Current deferred tax asset ......... 56
Fixed assets ..................... (8)
-----
Net deferred tax asset ............ $ 48
=====
Since the Company does not intend to repatriate the earnings of its
foreign subsidiaries, no deferred taxes have been recorded on such amounts,
which approximate $975 at March 31, 1997.
Pro forma Statement of Earnings Information
Shortly before the closing of the offering, the Company will terminate its
status as an S corporation and will be subject to Federal and additional state
income taxes thereafter. Accordingly, for informational purposes, the statement
of earnings for the year ended December 31, 1996 and the quarter ended March
31, 1997 reflects pro forma earnings on an after-tax basis, assuming the
Company had been taxed as a C corporation. The difference between the Federal
statutory income tax rate and the pro forma income tax rate was as follows:
Year ended Three months ended
December 31, 1996 March 31, 1997
------------------- -------------------
Federal statutory tax rate ............... 34% 34%
State income taxes, net of Federal benefit 3 3
Foreign income taxes ..................... 3 7
Nondeductible goodwill amortization ...... 1 1
Research credits ........................ (1) --
Other .................................... -- 1
---- ----
Pro forma income tax rate ............... 40% 46%
==== ====
F-9
inTEST CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Information as of March 31, 1997 and for the three months ended
March 31, 1996 and 1997 is unaudited)
(in thousands, except for share data)
(3) Pro forma Information (Unaudited) -- (Continued)
In addition, the unaudited pro forma results for the year ended December
31, 1996 and the quarter ended March 31, 1997 also reflect goodwill
amortization resulting from the acquisition of minority interests in foreign
subsidiaries, net of the elimination of the minority interest charge reflected
in the historical financial statements, as if the acquisition had occurred on
January 1, 1996. The goodwill resulting from the acquisition is assumed to be
amortized over 15 years.
Pro forma Net Earnings Per Share
Pro forma net earnings per share was calculated by dividing pro forma net
earnings by the weighted average number of shares of common stock outstanding
during the period, adjusted to give effect to shares to be exchanged to acquire
the minority interests in foreign subsidiaries as if this transaction had
occurred on January 1, 1996.
Supplemental Pro forma Net Earnings Per Share
Supplemental pro forma net earnings per share is based on the weighted
average number of shares of common stock used in the calculation of pro forma
net earnings per share plus the number of shares that would be required to be
sold to fund certain distributions to the Company's current stockholders of
previously taxed but undistributed S corporation earnings, net of available
cash and cash equivalents (the amount of such net proceeds assumed to be used
for this purpose is estimated to be $1,653 at March 31, 1997).
(4) Foreign Operations
The Company operates in a single business segment. However, foreign
operations represent a significant portion of the Company's activity. The
following is a summary of operations by entities located within the indicated
geographic areas:
Three months ended
Years ended December 31, March 31,
--------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- --------
Sales to unaffiliated customers from:
North America ..................... $ 4,299 $ 7,409 $10,614 $ 3,672 $ 2,433
Far East ........................... 2,560 4,862 4,860 1,359 1,108
United Kingdom ..................... 2,428 2,171 3,108 1,058 346
-------- -------- -------- -------- --------
$ 9,287 $14,442 $18,582 $ 6,089 $ 3,887
======== ======== ======== ======== ========
Affiliate sales or transfers from:
North America ........................ $ 1,000 $ 1,596 $ 1,321 $ 559 $ 81
Far East ........................... -- -- -- -- --
United Kingdom ..................... -- 451 54 48 50
-------- -------- -------- -------- --------
$ 1,000 $ 2,047 $ 1,375 $ 607 $ 131
======== ======== ======== ======== ========
Operating profit:
North America ........................ $ 338 $ 2,610 $ 3,815 $ 1,932 $ 790
Far East ........................... 182 612 432 187 66
United Kingdom ..................... 769 815 1,369 575 151
-------- -------- -------- -------- --------
$ 1,289 $ 4,037 $ 5,616 $ 2,694 $ 1,007
======== ======== ======== ======== ========
Identifiable assets:
North America ..................... $ 1,920 $ 3,327 $ 5,408 $ 5,561 $ 4,974
Far East ........................... 1,088 1,408 1,409 1,752 1,536
United Kingdom ..................... 1,616 1,617 899 1,711 982
-------- -------- -------- -------- --------
$ 4,624 $ 6,352 $ 7,716 $ 9,024 $ 7,492
======== ======== ======== ======== ========
F-10
inTEST CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Information as of March 31, 1997 and for the three months ended
March 31, 1996 and 1997 is unaudited)
(in thousands, except for share data)
(4) Foreign Operations -- (Continued)
Amounts for the Far East consist of activities in the Company's Singapore
and Japan subsidiaries.
Export sales from the Company's New Jersey location totaled $591, $2,777,
and $3,486 during the years ended December 31, 1994, 1995, and 1996,
respectively, and $1,528 and $196 during the three months ended March 31, 1996
and 1997, respectively.
The Company's foreign subsidiaries paid directors fees to several
individuals who are members of management of the parent company which totaled
$49, $151, and $192 during the years ended December 31, 1994, 1995, and 1996,
respectively.
(5) Concentrations of Credit Risk
The Company's customers are in the semiconductor industry. During 1994,
1995, and 1996 the Company had sales to certain customers which exceeded 10% of
the Company's consolidated revenues. Those sales were as follows:
Customer 1994 1995 1996
----------- ------ ------ -----
A ......... 7% 16% 16%
B ......... 12 3 9
C ......... 14 11 8
D ......... 16 12 7
Additionally, at December 31, 1996, these four customers accounted for 27%
of trade receivables.
(6) Inventories
Inventories held at December 31 were comprised of the following:
1995 1996
--------- -------
Raw materials ............. $1,075 $1,145
Work in process ........... 20 44
Finished goods ............ 123 124
------ ------
$1,218 $1,313
====== ======
(7) Debt
In 1996, the Company financed a purchase of equipment with a term note.
The note bears interest at a fixed rate of 8.65%, and is to be paid in equal
monthly installments of $4 through August, 2001. At December 31, 1996, $189 was
outstanding. Prior to 1996 the Company had no long term debt.
Principal payments due within the next five years are as follows:
1997 ........................ $ 34
1998 ........................ 37
1999 ........................ 40
2000 ........................ 44
2001 ........................ 34
Additionally, the Company has a $1,500 line of credit. Borrowings under
this line of credit are principally used for working capital purposes.
Borrowings on the line of credit bear interest at prime rate, which is payable
monthly on any outstanding balance. Further, the Company is required to
maintain a $50 compensating balance at the bank which granted the line of
credit. The credit line expires on June 30, 1997. At December 31, 1996 and
March 31, 1997, there were no borrowings outstanding.
F-11
inTEST CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Information as of March 31, 1997 and for the three months ended
March 31, 1996 and 1997 is unaudited)
(in thousands, except for share data)
(8) Commitments
The Company leases its offices, warehouse facilities and automobiles under
noncancelable operating leases which expire at various dates through 2003.
Total rental expense for the years ended December 31, 1994, 1995, and 1996, and
the three months ended March 31, 1996 and 1997 was $336, $388, and $422, $83,
and $115, respectively. The aggregate minimum rental commitments under the
noncancelable operating leases in effect at December 31, 1996 are as follows:
1997 ..................... $ 346
1998 ..................... 309
1999 ..................... 275
2000 ..................... 217
2001 and thereafter ...... 452
(9) Income Taxes
As discussed in Notes 2 and 3, the Company has elected S corporation
status for Federal tax purposes, as well as certain states, and therefore is
not subject to federal income taxes directly. For those states and foreign
jurisdictions in which the Company is subject to taxes, the temporary
differences that give rise to deferred tax assets and liabilities were not
significant at December 31, 1995 and 1996, or March 31, 1997.
Earnings before income taxes were as follows:
Three months ended
Years ended December 31, March 31,
------------------------------- ------------------
1994 1995 1996 1996 1997
--------- -------- -------- -------- -------
Domestic ...... $ 345 $2,651 $3,979 $1,984 $ 835
Foreign ...... 981 1,419 1,738 722 187
-------- ------- ------- ------- -------
$ 1,326 $4,070 $5,717 $2,706 $1,022
======== ======= ======= ======= =======
Income tax expense was as follows:
Three months
ended
Years ended December 31, March 31,
------------------------ --------------
1994 1995 1996 1996 1997
------ ------ ------ ------ -----
Domestic ...... $ 9 $ 82 $126 $ 75 $ 21
Foreign ...... 373 555 732 280 146
----- ----- ----- ----- -----
$382 $637 $858 $355 $167
===== ===== ===== ===== =====
(10) Employee Benefit Plans
In 1996, the Company instituted a defined contribution 401(k) plan for its
employees who work in the U.S. All employees of the parent company who are at
least 18 years of age and have completed six months of service with the Company
are eligible to participate in the plan. Under the plan, the Company matches
employee contributions dollar for dollar up to 10% of the employee's annual
compensation up to $5. In addition, the Company may match employee
contributions dollar for dollar for amounts exceeding 15% of the employee's
annual compensation to a maximum of $5. Employer contributions vest over a
six-year period. The Company contributions in 1996 totaled $71.
F-12
inTEST CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Information as of March 31, 1997 and for the three months ended
March 31, 1996 and 1997 is unaudited)
(in thousands, except for share data)
(10) Employee Benefit Plans -- (Continued)
The Company sponsors a noncontributory pension plan for an employee of its
U.K. subsidiary. The Company has no other defined contribution or defined
benefit plans.
(11) Accrued Expense
Accrued wages and expenses consist of the following:
December 31, March 31,
---------------- ---------
1995 1996 1997
------- ------ ---------
Accrued commissions ...... $ 113 $390 $107
Accrued vacation ......... 101 101 101
Other ..................... 85 104 219
------ ----- -----
$ 299 $595 $427
====== ===== =====
(12) Subsequent Events
In April 1997, the Company's Board of Directors authorized the filing of a
Registration Statement on Form S-1 in connection with a planned initial public
offering of the Company's common stock.
Also in April 1997, the Company's Board of Directors reserved 500,000
shares of common stock for issuance under a newly created stock plan and also
approved the award of stock options to employees to purchase a total of 150,000
shares of common stock. The grants are to become effective on the effective
date of the Registration Statement and the options will be exercisable at a per
share price equal to the initial public offering price.
On June 4, 1997, the Company effected a stock split in the form of a stock
dividend in the amount 0.5579 shares for every one share outstanding as of the
effective date of the transaction. All share and per share information in the
accompanying consolidated financial statements have been retroactively adjusted
to give effect to the modification to the Company's capital structure.
F-13
[Map of world with the locations of the Company's manufacturing and customer
operations identified.]
[Picture of inTEST Test Head Hoist with test head and wafer prober.]
================================================================================
No dealer, sales representative or any other person has been authorized
to give any information or to make any representations in connection with this
offering other than those contained in this Prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company, the Selling Stockholders or any of the Underwriters.
This Prospectus does not constitute an offer to sell or a solicitation of any
offer to buy any security other than the shares of Common Stock offered by this
Prospectus, nor does it constitute an offer to sell or a solicitation of any
offer to buy the shares of Common Stock in any jurisdiction in which such offer
or solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that the information contained herein is correct as of any time subsequent to
the date hereof.
-----------------------------------
TABLE OF CONTENTS
Page
-----
Prospectus Summary ................................................ 3
Risk Factors ...................................................... 5
The Company ...................................................... 9
Use of Proceeds ................................................... 9
S Corporation Distributions ....................................... 10
Dividend Policy ................................................... 10
Capitalization ................................................... 11
Dilution ......................................................... 12
Selected Consolidated Financial Data .............................. 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ...................................................... 14
Business ......................................................... 20
Management ......................................................... 30
Principal and Selling Stockholders ................................. 36
Description of Capital Stock ....................................... 37
Shares Eligible for Future Sale .................................... 38
Underwriting ...................................................... 39
Legal Matters ...................................................... 40
Experts ............................................................ 40
Additional Information ............................................. 40
Index to Consolidated Financial Statements ........................ F-1
-----------------------------------
Until _______, 1997, all dealers effecting transactions in the Common Stock
offered hereby, whether or not participating in this distribution, may be
required to deliver a Prospectus. This is in addition to the obligations of
dealers to deliver a Prospectus when acting as Underwriters and with respect to
their unsold allotments or subscriptions.
================================================================================
================================================================================
2,275,000 Shares
[GRAPHIC OMITTED] inTEST
Common Stock
-------------------
P R O S P E C T U S
-------------------
JANNEY MONTGOMERY SCOTT INC.
NEEDHAM & COMPANY, INC.
____, 1997
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions and discounts) payable by the
Company in connection with the issuance and distribution of the Common Stock
pursuant to the Prospectus contained in this Registration Statement. The
Company will pay all of these expenses.
Approximate
Amount
------------
Securities and Exchange Commission registration fee ...... $ 8,324
NASD filing fee .......................................... 3,248
Blue Sky expenses ....................................... 5,000
Nasdaq company listing fee .............................. 32,277
Accountants fees and expenses ........................... 150,000
Legal fees and expenses ................................. 200,000
Transfer Agent and Registrar fees and expenses ............ 7,000
Printing and engraving expenses ........................... 90,000
Directors' and Officers' insurance ........................ 130,000
Miscellaneous expenses .................................... 29,151
--------
Total ................................................ $655,000
========
Item 14. Indemnification of Directors and Officers
Article VI of the Company's Bylaws provides that the Company shall
indemnify its directors and officers to the fullest extent permitted by the
General Corporation Law of the State of Delaware ("DGCL"). The Bylaws require
the Company, among other things, to indemnify such directors and officers
against certain liabilities that may arise by reason of their status or service
as directors or officers, to advance expenses to them as they are incurred,
provided that they undertake to repay the amount advanced if it is ultimately
determined by a court that they are not entitled to indemnification and to
obtain directors' and officers' liability insurance if available on reasonable
terms. The Bylaws require the Company to indemnify an officer or director in
connection with a proceeding (or part thereof) initiated by such officer or
director only if the initiation of such proceeding was authorized by the Board
of Directors. Reference is made to Section 145 of the DGCL which provides for
indemnification of directors and officers in certain circumstances.
Article IX of the Company's Certificate of Incorporation provides that a
director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of his or her fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for willful or negligent conduct in paying dividends or repurchasing
stock out of other than lawfully available funds or (iv) for any transaction
from which the director derives an improper personal benefit.
The Company has applied for an insurance policy which will entitle the
Company to be reimbursed for certain indemnity payments it is required or
permitted to make to its directors and officers.
Item 15. Recent Sales of Unregistered Securities
On October 4, 1994, the Company issued 5,000 shares (7,789 shares after
the stock dividend to occur on the effective date of this Registration
Statement (the "Stock Dividend")) of Common Stock to William R. Blatchley in
exchange for services rendered. No underwriters were involved in the issuance
of these securities and no commissions were paid. The shares of Common Stock
were issued in reliance on the exemption from registration contained in Section
4(2) of the Securities Act.
II-1
On June 1, 1995, the Company issued 10,000 shares (15,579 shares after
giving effect to the Stock Dividend) of Common Stock to Christopher L. West in
exchange for services rendered. No underwriters were involved in the issuance
of these securities and no commissions were paid. The shares of Common Stock
were issued in reliance on the exemption from registration contained in Section
4(2) of the Securities Act.
On June 27, 1995, the Company issued 10,000 shares (15,579 shares after
giving effect to the Stock Dividend) of Common Stock to William R. Blatchley in
exchange for services rendered. No underwriters were involved in the issuance
of these securities and no commissions were paid. The shares of Common Stock
were issued in reliance on the exemption from registration contained in Section
4(2) of the Securities Act.
On June 27, 1995, the Company issued 10,000 shares (15,579 shares after
giving effect to the Stock Dividend) of Common Stock to Jerome R. Bortnam in
exchange for services rendered. No underwriters were involved in the issuance
of these securities and no commissions were paid. The shares of Common Stock
were issued in reliance on the exemption from registration contained in Section
4(2) of the Securities Act.
On June 27, 1995, the Company issued 10,000 shares (15,579 shares after
giving effect to the Stock Dividend) of Common Stock to Jack R. Edmunds in
exchange for services rendered. No underwriters were involved in the issuance
of these securities and no commissions were paid. The shares of Common Stock
were issued in reliance on the exemption from registration contained in Section
4(2) of the Securities Act.
Each of the foregoing recipients of shares was and is an employee of the
Company, and the shares were issued for services rendered in such person's
capacity as an employee. In each instance, the securityholder represented that
such securities were acquired for investment for his own account and not for
distribution. The certificate representing the securities are legended.
II-2
Item 16. Exhibits
(a) Exhibits.
1. Form of Underwriting Agreement.
3.1* Certificate of Incorporation of inTEST CORP.
3.2 Bylaws of inTEST CORP.
4.1 Specimen stock certificate representing Common Stock.
5. Opinion of Saul, Ewing, Remick & Saul as to the legality of the securities being registered (includ-
ing consent).
10.1* Amended and Restated Loan Agreement, dated June 30, 1996, between inTEST CORP and PNC
Bank, National Association.
10.2* Lease, dated February 11, 1996, between Cherry Hill Industrial Sites, Inc. and inTEST CORP.
10.3* Lease, dated August 5, 1996, between KIP Properties and inTEST CORP.
10.4* Lease, dated December 2, 1977, between Alan Breck Robertson and Mavis Robertson and Robertson
Engineering (Thame) Limited ("U.K. Lease").
10.5* Assignment of U.K. Lease, dated January 28, 1986, between Citycrown Engineering Limited and
inTEST LTD.
10.6* Tenancy Agreement, dated April 18, 1996, between Alambon Tools Private Limited and inTEST PTE.
10.7* Agreement of Exchange between Alyn R. Holt and inTEST CORP, dated April 4, 1997. Each of the
minority stockholders of inTEST LTD, inTEST PTE and inTEST KK have executed Agreements of
Exchange which are substantially identical to Mr. Holt's except as to certain requirements under the
laws of each foreign jurisdiction and also as to the parties, the number of shares exchanged and the
number of inTEST CORP shares received as set forth below:
Number of Shares Number of Shares
Party Pre-Exchange Post-Exchange**
----- ------------------ -----------------
inTEST LTD: Alyn R. Holt 2,775 37,237
Brian R. Moore 6,947 93,219
Julian P. Partington 3,403 45,664
inTEST PTE: Alyn R. Holt 16,500 11,250
Cornelis Hol 15,000 10,228
inTEST KK: Micronics Japan Company, Ltd. 60 48,209
Tomoyasu Ogura 54 43,388
Cornelis Hol 6 4,820
Tomio Wakamatsu 4 3,214
Kenji Murayama 4 3,214
10.8 * 1997 Stock Plan.
10.10*** Consulting Agreement, dated April 1, 1997, between inTEST CORP and Stuart F. Daniels, Ph.D.
21. * Subsidiaries of the Company.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Saul, Ewing, Remick & Saul (contained in its opinion filed as Exhibit 5 hereto).
23.3 Consent of Ratner & Prestia.
24* Power of Attorney (see signature page).
27.1 * Financial Data Schedule for the year ended December 31, 1996.
27.2 * Financial Data Schedule for the quarter ended March 31, 1997.
- ------------
* Previously filed as an exhibit to the Company's Registration Statement filed
on May 2, 1997.
** Adjusted to reflect stock dividend paid as of June 4, 1997.
*** Previously filed as an exhibit to Amendment No. 1 filed on May 13, 1997.
(b) Financial Statement Schedules
Schedule II -- Valuation of Qualifying Accounts.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
II-3
Item 17. Undertakings
The Registrant hereby undertakes:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement, certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the applicable provisions of the DGCL, or otherwise,
the Company has been advised that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(3) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(4) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Amendment No. 2 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the Township of
Cherry Hill, and State of New Jersey on the 6th day of June, 1997.
inTEST CORPORATION
By: /s/ Alyn R. Holt
------------------------------------
Alyn R. Holt
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Amendment No. 2
to the Registration Statement has been signed below by the following persons in
the capacities indicated on June 6, 1997.
Signature Title
--------- -----
/s/ Alyn R. Holt Chairman and Chief Executive Officer
- ----------------------------------- (principal executive officer)
Alyn R. Holt
*
- ----------------------------------- President, Chief Operating Officer and Director
Robert E. Matthiessen
*
- ----------------------------------- Senior Vice President and Director
Daniel J. Graham
* Chief Financial Officer and Treasurer
- ----------------------------------- (principal financial officer and accounting
Hugh T. Regan, Jr. officer)
* Secretary
- -----------------------------------
Hugh T. Regan, Sr.
* Director
- -----------------------------------
Richard O. Endres
* Director
- -----------------------------------
Stuart F. Daniels
/s/ Alyn R. Holt
* By:-------------------------------
Alyn R. Holt
Attorney-in-Fact
II-5
inTEST CORPORATION AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
(in thousands)
Additions
------------------------------
Balance at Charged to
For the year ended beginning costs and Charged to other Balance at
December 31, of period expenses accounts-describe Deductions end of period
- ----------------------------------------------------------------------------------------------------------------------------------
1994 Allowance for doubtful accounts $ 31 $50 $ -- $28 $53
1995 53 18 -- 29 42
1996 42 50 -- 4 88
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
1994 Warranty reserve $ -- $-- $ -- $-- $--
1995 -- -- -- -- --
1996 -- 25 -- -- 25
- ----------------------------------------------------------------------------------------------------------------------------------
S-1
Exhibit Index
Exhibit
Number Title or Description
- ------ --------------------
1. Form of Underwriting Agreement
3.2 Bylaws of inTEST CORP.
4.1 Specimen stock certificate representing Common Stock.
5. Opinion of Saul, Ewing, Remick & Saul.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Saul, Ewing, Remick & Saul (contained in its opinion filed as Exhibit 5 hereto).
23.3 Consent of Ratner & Prestia.
2,616,250 Shares
INTEST CORPORATION
Common Stock
UNDERWRITING AGREEMENT
Philadelphia, Pennsylvania
June __, 1997
JANNEY MONTGOMERY SCOTT INC.
NEEDHAM & COMPANY, INC.
As Representatives of the Several
Underwriters Named in Schedule I
Hereto
c/o Janney Montgomery Scott Inc.
1801 Market Street
Philadelphia, Pennsylvania 19103
Dear Ladies and Gentlemen:
inTEST Corporation, a Delaware corporation (the "Company"),
proposes to sell to Janney Montgomery Scott Inc. and Needham & Company, Inc.
(the "Representatives") and the several other underwriters named in Schedule I
hereto (collectively with the Representatives, the "Underwriters") 1,820,000
shares of the Company's common stock ("Common Shares"), and the selling
stockholders of the Company named in Schedule II hereto (collectively, the
"Selling Stockholders") propose to sell severally to the Underwriters an
aggregate of 455,000 Common Shares. The Common Shares to be sold to the
Underwriters by the Company and the Selling Stockholders are hereinafter
referred to as the "Firm Shares." The respective amounts of the Firm Shares to
be so purchased by the several Underwriters are set forth opposite their names
in Schedule I hereto. The Firm Shares shall be offered to the public at an
initial public offering price of $_____ per Firm Share (the "Offering Price").
In addition, in order to cover over-allotments in the sale of
the Firm Shares, the Underwriters may purchase for the Underwriters' own
accounts, ratably in proportion to the amounts set forth opposite their
respective names in Schedule I hereto, up to 341,250 additional Common Shares
-1-
from the Selling Stockholders as set forth on Schedule II hereto (such
additional Common Shares are referred to herein as the "Optional Shares"). If
any Optional Shares are purchased, the Optional Shares shall be purchased for
offering to the public at the Offering Price and in accordance with the terms
and conditions set forth herein. The Firm Shares and the Optional Shares are
referred to collectively herein as the "Shares."
The Company and the Selling Stockholders, intending to be
legally bound, hereby confirm their agreement with the Underwriters as follows:
1. Representations and Warranties.
(a) Representations and Warranties of the Company. The
Company, and each of the subsidiaries of the Company listed in Exhibit A hereto
(each a "Subsidiary", all of the foreign subsidiaries collectively referred to
as the "Foreign Subsidiaries", all of the domestic subsidiaries referred to as
the "Domestic Subsidiaries" and all of the Foreign Subsidiaries and Domestic
Subsidiaries collectively referred to as the "Subsidiaries") jointly and
severally represent and warrant to, and agree with, the several Underwriters
that:
(i) The Company has prepared, in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Regulations"), of the Securities and Exchange
Commission (the "SEC") under the Act in effect until applicable times, and has
filed with the SEC a registration statement on Form S-1 (File No. 333-_____) and
one or more amendments thereto for the primary purpose of registering the Shares
under the Act. Copies of such registration statement and any amendments thereto,
and all forms of the related prospectus contained therein, have been delivered
to the Representatives; any preliminary prospectus included in such registration
statement or filed with the SEC pursuant to Rule 424(a) of the Regulations is
hereinafter called a "Preliminary Prospectus." The various parts of such
registration statement, including all exhibits thereto and the information (if
any) contained in the form of final prospectus filed with the SEC pursuant to
Rule 424(b) of the Regulations in accordance with Section 5(a) of this Agreement
and deemed by virtue of Rule 424 of the Regulations to be part of the
registration statement at the time it was declared effective, each as amended at
the time the registration statement became effective, are hereinafter
collectively called the "Registration Statement." The final prospectus in the
form included in the Registration Statement or first filed with the SEC pursuant
to Rule 424(b) of the Regulations and any amendments or supplements thereto are
hereinafter called the "Prospectus."
(ii) The Registration Statement has become effective
under the Act and the SEC has not issued any stop order suspending the
effectiveness of the Registration Statement or preventing or suspending the use
of the Preliminary Prospectus, nor has the SEC instituted or threatened to
institute proceedings with respect to such an order. No stop order suspending
the sale of the Shares in any jurisdiction designated by the Representatives as
provided for in Section 5(f) hereof has been issued, and no proceedings for that
-2-
purpose have been instituted or threatened. The Company has complied in all
material respects with all requests of the SEC, or requests of which the Company
has been advised of any state securities commission in a state designated by the
Representatives as provided for in Section 5(f) hereof, for additional
information to be included in the Registration Statement, any Preliminary
Prospectus or the Prospectus unless such request has been waived. Each
Preliminary Prospectus conformed to all the requirements of the Act and the
Regulations as of its date in all material respects and did not as of its date
contain any untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
the foregoing shall not apply to statements in or omissions from any Preliminary
Prospectus in reliance upon and in conformity with information supplied to the
Company in writing by or on behalf of any Underwriter through the
Representatives expressly for use therein. The Registration Statement, on the
date on which it is declared effective by the SEC (the "Effective Date") and
when any post-effective amendment thereof shall become effective, and the
Prospectus, at the time it is filed with the SEC pursuant to Rule 424(b) and on
the Closing Date (as defined in Section 3 hereof) and any Option Closing Date
(as defined in Section 4(b) hereof), will conform in all material respects to
all the requirements of the Act and the Regulations, and will not, on any of
such dates, include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, except that this representation and warranty does not
apply to statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information furnished to
the Company in writing by or on behalf of any Underwriter through the
Representatives expressly for use therein.
(iii) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with all necessary corporate power and authority, and all required licenses,
permits, clearances, certifications, registrations, approvals, consents and
franchises, to own or lease and operate its properties and to conduct its
business as described in the Prospectus, and to execute, deliver and perform
this Agreement. Each of the Subsidiaries has been duly organized and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, with all necessary corporate power and authority, and all
required licenses, permits, clearances, certifications, registrations,
approvals, consents and franchises, to own or lease and operate its properties
and to conduct its business as described in the Prospectus.
(iv) The outstanding shares of capital stock or other
evidence of ownership of the Subsidiaries have been duly authorized and validly
issued and are owned by the Company (A) 100% with respect to the Domestic
Subsidiaries, (B) 79.1% with respect to inTEST Kabushiki Kaisha, the Company's
Japanese subsidiary, (C) 79.0% with respect to inTEST Limited, the Company's
United Kingdom subsidiary, (D) 79.0% with respect to inTEST PTE, Limited, the
Company's Singapore subsidiary and (E) upon the consummation of the transactions
contemplated in the Exchange Agreements (the "Exchange") each dated April 4,
1997 (each an "Exchange Agreement" and collectively, the "Exchange Agreements")
-3-
by and between the Company and each of those persons named in Schedule III
hereto (collectively, the "Subsidiary Stockholders"), 100% with respect to the
Foreign Subsidiaries, in all cases free and clear of all liens, encumbrances and
security interests. There are no outstanding options, obligations to issue or
other rights to convert or exchange any obligations into shares of capital stock
or ownership interests in the Subsidiaries. Except as provided in the
corporation law of the respective jurisdictions of incorporation of the
Subsidiaries or as set forth in the Prospectus, there are no restrictions of any
kind which prevent the payment of dividends by any of the Subsidiaries.
(v) This Agreement has been duly authorized, executed
and delivered by the Company and each of the Subsidiaries and constitutes, with
respect to each, its legal, valid and binding obligation, enforceable against
the Company and each of the Subsidiaries in accordance with its terms, except as
such enforceability may be limited by equitable principles or by the application
of bankruptcy, insolvency or other similar laws relating to or affecting
creditors' rights generally, and except as rights to indemnity and contribution
hereunder may be limited by applicable securities laws.
(vi) The Exchange Agreements have been duly authorized,
executed and delivered by the Company and constitute the Company's legal, valid
and binding obligation, enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by equitable principles or
by the application of bankruptcy, insolvency or other similar laws relating to
or affecting creditors' rights generally.
(vii) The execution, delivery and performance of this
Agreement by the Company and the Subsidiaries does not and will not, with or
without the giving of notice or the lapse of time, or both, (a) conflict with
any term or provision of the Company's and each of the Subsidiaries' Articles of
Incorporation or Bylaws, or similar governing instruments, (b) result in a
breach of, constitute a default under, result in the termination or modification
of, result in the creation or imposition of any lien, security interest, charge
or encumbrance upon any of the assets of the Company or any of the Subsidiaries,
or require any payment by the Company or any of the Subsidiaries, or impose any
liability on the Company or any of the Subsidiaries pursuant to, any contract,
indenture, mortgage, deed of trust, commitment or other agreement or instrument
to which the Company or any of the Subsidiaries is a party or by which any of
the Company's or any of the Subsidiaries' assets are bound or affected, (c)
assuming compliance with Blue Sky laws and regulations applicable to the offer
and sale of the Shares, violate any law, rule, regulation, judgment, order or
decree of any government or governmental agency, instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of its
Subsidiaries or any of the Company's or any of its Subsidiaries' properties or
business or (d) result in a breach, termination or lapse of the Company's or any
of its Subsidiaries' corporate power and authority to own or lease and operate
its assets and properties and conduct its business as described in the
Prospectus.
(viii) At the date or dates indicated in the
Prospectus, the Company had the duly authorized and outstanding capital stock
set forth in the Prospectus; and on the Effective Date, the Closing Date and
-4-
any Option Closing Date, there were and will be no options or warrants for the
purchase of, other outstanding rights to purchase, agreements or obligations to
issue or agreements or other rights to convert or exchange any obligation or
security into, capital stock of the Company or securities convertible into or
exchangeable for capital stock of the Company, except as described in the
Prospectus.
(ix) The authorized capital stock of the Company
conforms in all material respects with the description thereof in the
Prospectus.
(x) The currently outstanding shares of the Company's
and the Subsidiaries' capital stock, including the Shares to be purchased by the
Underwriters from the Selling Stockholders, have been duly authorized and are
validly issued, fully paid and non-assessable, and none of such outstanding
shares of the Company's or Subsidiaries' capital stock has been issued in
violation of any preemptive rights of any security holder of the Company or the
Subsidiaries. The Common Shares to be issued to the Selling Stockholders upon
the consummation of the Exchange will, upon issuance in accordance with the
Exchange Agreements, be duly authorized, validly issued, fully paid and
non-assessable, and none of such outstanding shares of the Company's capital
stock will be issued in violation of any preemptive rights of any security
holder of the Company. The holders of the outstanding shares of the Company's
and the Subsidiaries' capital stock are not subject to personal liability solely
by reason of being such holders. The offers and sales of the outstanding shares
of the Company's and the Subsidiaries' capital stock, whether described in the
Registration Statement or otherwise, were and, as to the Common Shares to be
issued on consummation of the Exchange, will be made in conformity with
applicable federal, state and foreign securities laws.
(xi) When the Shares have been duly delivered against
payment therefor as contemplated by this Agreement, the Shares will be validly
issued, fully paid and non-assessable, and the holders thereof will not be
subject to personal liability solely by reason of being such holders. The
certificates representing the Shares are in proper legal form under, and conform
in all respects to the requirements of, the Delaware General Corporation Law, as
amended. Neither the filing of the Registration Statement nor the offering or
sale of Shares as contemplated by this Agreement gives any security holder of
the Company any rights for or relating to the registration of any Common Shares
or any other capital stock of the Company, except such as have been satisfied or
waived.
(xii) No consent, approval, authorization, order,
registration, license or permit of, or filing or registration with, any court,
government, governmental agency, instrumentality or other regulatory body or
official is required for the valid and legal execution, delivery and performance
by the Company and the Subsidiaries of this Agreement and the consummation of
the transactions contemplated hereby and described in the Prospectus, except
such as may be required for the registration of the Shares under the Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and for
compliance with the applicable state securities or Blue Sky laws.
-5-
(xiii) The Common Shares (including the Shares) have
been approved for inclusion, subject only to official notice of issuance, in the
Nasdaq National Market.
(xiv) The statements in the Registration Statement and
Prospectus, insofar as they are descriptions of or references to contracts,
agreements or other documents, are accurate in all material respects and present
or summarize fairly, in all material respects, the information required to be
disclosed under the Act and/or the Regulations, and there are no contracts,
agreements or other documents required to be described or referred to in the
Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement under the Act or the Regulations that have not been so
described, referred to or filed, as required.
(xv) The consolidated financial statements of the
Company (including the notes thereto) filed as part of any Preliminary
Prospectus, the Prospectus and the Registration Statement present fairly, in all
material respects, the financial position of the Company and the Subsidiaries as
of the respective dates thereof, and the results of operations, stockholders'
equity and cash flows of the Company and the Subsidiaries for the periods
indicated therein, all in conformity with generally accepted accounting
principles consistently applied. The supporting notes and schedules included in
the Registration Statement fairly state in all material respects the information
required to be stated therein in relation to the financial statements taken as a
whole. The financial information included in the Prospectus under the caption
"Prospectus Summary" and "Selected Consolidated Financial Data" presents fairly
the information shown therein and has been compiled on a basis consistent with
that of the audited financial statements included in the Registration Statement.
The unaudited pro forma financial information included in the Registration
Statement complies as to form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X under the Act and the
pro forma adjustments have been properly applied to the historical amounts in
the compilation of this information.
(xvi) since the respective dates as of which
information is given in the Registration Statement and the Prospectus, except as
otherwise expressly stated therein or expressly contemplated thereby, there has
not been (a) any material adverse change (including, whether or not insured
against, any material loss or damage to any material assets), or development
which could reasonably be expected to involve a prospective material adverse
change, in the general affairs, properties, assets, management, condition
(financial or otherwise), results of operations, stockholders' equity, business
or prospects of either the Company or the Subsidiaries taken as a whole, (b) any
material adverse change, loss, reduction, termination or non-renewal of any
contract to which the Company or any Subsidiary is a party, (c) any transaction
entered into by the Company or any Subsidiary not in the ordinary course of its
business that is material to the Company and the Subsidiaries taken as a whole,
-6-
(d) any dividend or distribution of any kind declared, paid or made by the
Company or any Subsidiary on its capital stock, (e) any liabilities or
obligations, direct or indirect, incurred by the Company or any Subsidiary that
are material to the Company and the Subsidiaries taken as a whole, (f) any
change in the capitalization or stock ownership of the Company or any Subsidiary
or (g) any change in the indebtedness of the Company or any Subsidiary that is
material to the Company and the Subsidiaries taken as a whole. Neither the
Company nor any Subsidiary has any contingent liabilities or obligations that
are material to the Company and the Subsidiaries taken as a whole and that are
not disclosed in the Prospectus.
(xvii) The Company has not distributed and will not
distribute any offering material in connection with the offering and sale of the
Shares other than the Registration Statement, a Preliminary Prospectus, the
Prospectus and other material, if any, permitted by the Act and the Regulations.
Neither the Company nor any of its officers, directors or affiliates has taken
nor shall the Company take any action designed to, or that might be reasonably
expected to cause or result in, stabilization or manipulation of the price of
the Shares.
(xviii) The Company and each Subsidiary have filed with
the appropriate federal, state and local governmental agencies, and all foreign
countries and political subdivisions thereof, all tax returns that are required
to be filed or have duly obtained extensions of time for the filing thereof and
have paid all taxes shown on such returns or otherwise due and all material
assessments received by it to the extent that the same have become due. Neither
the Company nor any Subsidiary has executed or filed with any taxing authority,
foreign or domestic, any agreement extending the period for assessment or
collection of any income or other tax or is a party to any pending action or
proceeding by any foreign or domestic governmental agencies for the assessment
or collection of taxes, and no claims for assessment or collection of taxes have
been asserted against the Company or any Subsidiary that might materially
adversely affect the general affairs, assets, properties, condition (financial
or otherwise), results of operations, stockholders' equity, business or
prospects of the Company and the Subsidiaries, taken as a whole.
(xix) To the knowledge of the Company, KPMG Peat
Marwick LLP, which has given its reports on certain financial statements
included as part of the Registration Statement, is a firm of independent
certified public accountants as required by the Act and the Regulations.
(xx) Neither the Company nor any Subsidiary is in
violation of or in default under any of the terms or provisions of (a) its
Articles or Certificate of Incorporation or Bylaws or similar governing
instruments, or (b) any indenture, mortgage, deed of trust, contract, commitment
or other agreement or instrument to which it is a party or by which it or any of
its properties is bound or affected, (c) any law, rule, regulation, judgment,
order or decree of any government or governmental agency, instrumentality or
court, domestic or foreign, having jurisdiction over it or any of its properties
-7-
or business or (d) any license, permit, certification, registration, approval,
consent or franchise referred to in Section 1(a)(iii) hereof, where, with
respect to clauses (b), (c) and (d) of this Section 1(xx), such violation or
default could reasonably be expected to have a material adverse effect on the
general affairs, properties, condition (financial or otherwise), results of
operations, stockholders' equity, business or prospects of the Company and the
Subsidiaries taken as a whole.
(xxi) There are no claims, actions, suits, protests,
proceedings, arbitrations, investigations or inquiries pending before, or
threatened or to the Company's knowledge contemplated by, any governmental
agency, instrumentality, court or tribunal, domestic or foreign, or before any
private arbitration tribunal, including, without limitation, the current
reexamination by the U.S. Patent and Trademark Office of the Company's U.S.
Patent 4,589,815 issued on May 20, 1986, to which the Company or any Subsidiary
is a party, that could reasonably be expected to affect the validity of any of
the outstanding Common Shares, or that, if determined adversely to the Company
or any Subsidiary, would, in any case or in the aggregate, result in any
material adverse change in the general affairs, properties, condition (financial
or otherwise), results of operations, stockholders' equity, business or
prospects of the Company and the Subsidiaries taken as a whole; nor, to the
Company's knowledge, is there any reasonable basis for any such claim, action,
suit, protest, proceeding, arbitration, investigation or inquiry. There are no
outstanding orders, judgments or decrees of any court, governmental agency,
instrumentality or other tribunal, enjoining the Company or any Subsidiary from,
or requiring the Company or any Subsidiary to take or refrain from taking, any
action, or to which the Company or any Subsidiary, their properties, assets or
business are bound or subject.
(xxii) The Company and the Subsidiaries own, or possess
adequate rights to use, all patents, patent applications, trademarks, trade
names, service marks, licenses, inventions, copyrights, know-how, trade secrets,
confidential information, processes and formulations and other proprietary
information necessary for, used in or proposed to be used in the conduct of
their business as described in the Prospectus. The Company and the Subsidiaries
have not infringed upon, are not infringing upon and have not received any
notice of conflict with, the asserted intellectual property or other rights of
others and the Company knows of no reasonable basis for any notice or claim of
such infringement or conflict.
(xxiii) The Company and each Subsidiary have good and
marketable title to all property described in the Prospectus as being owned by
them, free and clear of all liens, security interests, charges or encumbrances,
except such as are described or referred to in the Prospectus or such as do not
materially affect the value of such property and do not interfere in any
material respect with the use made, or proposed to be made, of such property by
the Company or the Subsidiary. The Company and each Subsidiary have adequately
insured their property against loss or damage by fire or other casualty and
maintain, in amounts reasonably believed by them to be adequate, insurance
against such other risks as they deem appropriate. All real and personal
property leased by the Company or any Subsidiary, as described or referred to in
the Prospectus, is held by the Company or such Subsidiary under valid leases.
-8-
All of the facilities of the Company and each Subsidiary (the "Premises"), and
all operations conducted thereon, are now and, since the Company or any
Subsidiary began to use such Premises, always have been and, to the knowledge of
the Company, prior to when the Company or any Subsidiary began to use such
Premises, always had been, in compliance with all, foreign or domestic, federal,
state and local statutes or ordinances, regulations and rules concerning or
relating to industrial hygiene and the protection of health and the environment
(collectively, "the Governmental Laws"), except to the extent that any failure
to be in such compliance would not materially adversely affect the general
affairs, properties, condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects of the Company and the Subsidiaries
taken as a whole. There are no conditions on, about, beneath or arising from the
Premises that might give rise to liability, the imposition of a statutory lien
or require a "Response," "Removal" or "Remedial Action," as defined herein,
under any of the Governmental Laws, and that would materially adversely affect
the general affairs, properties, condition (financial or otherwise), results of
operations, stockholders' equity, business or prospects of the Company and the
Subsidiaries taken as a whole. Neither the Company nor any Subsidiary has
received notice, and the Company does not have knowledge, of any claim, demand,
investigation, regulatory action, suit or other action instituted or threatened
against the Company or any Subsidiary or any portion of the Premises relating to
any of the Governmental Laws. Neither the Company nor any Subsidiary has
received any notice of material violation, citation, complaint, order,
directive, request for information or response thereto, notice letter, demand
letter or compliance schedule to or from any governmental or regulatory agency,
foreign or domestic, arising out of or in connection with "hazardous substances"
(as defined by applicable Governmental Laws) on, about, beneath, arising from or
generated at the Premises. As used in this subsection, the terms "Response,"
"Removal" and "Remedial Action" shall have the respective meanings assigned to
such terms under Sections 101(23)-101(25) of the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund Amendments
and Reauthorization Act, 42 U.S.C. 9601(23)- 9601(25).
(xxiv) The Company and each Subsidiary maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that: (a) transactions are executed in accordance with management's
general or specific authorization; (b) transactions are recorded as necessary in
order to permit preparation of financial statements in accordance with generally
accepted accounting principles and statutory accounting practices and to
maintain accountability for assets; (c) access to assets is permitted only in
accordance with management's general or specific authorization and (d) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xxv) Each contract or other instrument (however
characterized or described) to which the Company or any Subsidiary is a party or
by which any of their properties or business is bound or affected and which is
material to the conduct of the Company's business as described in the Prospectus
has been duly and validly executed by the Company or such Subsidiary, and, to
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the knowledge of the Company, by the other parties thereto. Each such contract
or other instrument is in full force and effect and is enforceable against the
parties thereto in accordance with its terms, and the Company and the
Subsidiaries are not, and to the knowledge of the Company, no other party is, in
material default thereunder, and no event has occurred that, with the lapse of
time or the giving of notice, or both, would constitute a material default under
any such contract or other instrument. All necessary consents under such
contracts or other instruments to disclosure in the Prospectus with respect
thereto have been obtained.
(xxvi) Except for such plans that are expressly
disclosed in the Prospectus, the Company and the Subsidiaries do not have any
employee benefit plan, profit sharing plan, employee pension benefit plan or
employee welfare benefit plan or deferred compensation arrangements ("Plans")
that are subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended, or the rules and regulations thereunder ("ERISA"). All
Plans that are subject to ERISA are in compliance with ERISA, in all material
respects, and, to the extent required by the Internal Revenue Code of 1986, as
amended (the "Code"), in compliance with the Code in all material respects.
Neither the Company nor any Subsidiary has or ever had any employee pension
benefit plan that is subject to Part 3 of Subtitle B of Title I of ERISA or any
defined benefit plan or multi-employer plan. The Company has not maintained
retired life and retired health insurance plans that are employee welfare
benefit plans providing for continuing benefit or coverage for any employee or
any beneficiary of any employee after such employee's termination of employment,
except as required by Section 4980B of the Code. No fiduciary or other party in
interest with respect to any of the Plans has caused any of such Plans to engage
in a prohibited transaction as defined in Section 406 of ERISA. As used in this
subsection, the terms "defined benefit plan," "employee benefit plan," "employee
pension benefit plan," "employee welfare benefit plan," "fiduciary" and
"multi-employer plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
(xxvii) No labor dispute exists with the employees of
the Company or any Subsidiary, and no such labor dispute is threatened. The
Company has no knowledge of any existing or threatened labor disturbance by the
employees of any of the principal suppliers, contractors or customers of the
Company or its Subsidiaries that would materially adversely affect the general
affairs, properties, condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects of the Company and the Subsidiaries
taken as a whole.
(xxviii) Neither the Company nor any Subsidiary has
incurred any liability for any finder's fees or similar payments in connection
with the transactions contemplated herein.
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(xxix) Each of the Company and the Subsidiaries
currently intends to conduct its affairs in such a manner as to ensure that it
will not be an "investment company" within the meaning of the Investment Company
Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder.
(xxx) There is no document or contract of a character
required to be described in the Prospectus or to be filed as an exhibit to the
Registration Statement which is not described or filed as required; no
statement, representation, warranty or covenant made by the Company or any
Subsidiary in this Agreement or in any certificate or document required by this
Agreement to be delivered to the Representatives is, was when made, or as of the
Closing Date or any Option Closing Date will be, inaccurate, untrue or incorrect
in any material respect. No transaction has occurred or is proposed between or
among the Company and any of its officers, directors or stockholders or any
affiliate of any such officer, director or stockholder that is required to be
described in and is not described in the Registration Statement and the
Prospectus.
(xxxi) None of the Company, any Subsidiary or any
officer, director, employee, agent or other person acting on behalf of the
Company or such Subsidiary has, directly or indirectly, given or agreed to give
any money, property or similar benefit or consideration to any customer or
supplier (including any employee or agent of any customer or supplier) or
official or employee of any agency or instrumentality of any government (foreign
or domestic) or political party or candidate for office (foreign or domestic) or
any other person who was, is or in the future may be in a position to affect the
general affairs, properties, condition (financial or otherwise), results of
operations, stockholders' equity, business or prospects of the Company and the
Subsidiaries taken as a whole or any actual or proposed business transaction of
the Company or the Subsidiaries that (a) could subject the Company or such
Subsidiary to any liability (including, but not limited to, the payment of
monetary damages) or penalty in any civil, criminal or governmental action or
proceeding, foreign or domestic, which would have a material adverse effect on
the general affairs, properties, condition (financial or otherwise), results of
operations, stockholders' equity, business or prospects of the Company or the
Subsidiaries taken as a whole or (b) violates any law, rule or regulation,
foreign or domestic, to which the Company or the Subsidiaries are subject, which
violation if proven would have a material adverse effect on the general affairs,
properties, condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects of the Company and the Subsidiaries
taken as a whole.
(xxxii) The Company has not declared, paid or accrued
any dividends or distributions to stockholders since its inception except as
described or referred to in the Prospectus and will not hereafter declare, pay
or, except as described in the Prospectus, accrue any such dividends or
distributions prior to the Closing Date.
(xxxiii) Except as described on Schedule IV attached
hereto, none of the stockholders of the Company, including those who will become
such upon consummation of the Exchange, is affiliated with any member of the
National Association of Securities Dealers, Inc. (the "NASD").
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Any certificate signed by any officer of the Company or any
Subsidiary in such capacity and delivered to the Representatives or to counsel
for the Underwriters pursuant to this Agreement shall be deemed a representation
and warranty by the Company or such Subsidiary to the several Underwriters as to
the matters covered thereby.
(b) Representations and Warranties of the Selling
Stockholders. Each of the Selling Stockholders represents and warrants to, and
agrees with, the several Underwriters that:
(i) Such Selling Stockholder, if a Subsidiary
Stockholder, has duly executed and delivered the Exchange Agreement and the
Exchange Agreement constitutes such Subsidiary Stockholder's legal, valid and
binding obligation, enforceable against the Subsidiary Stockholder in accordance
with its terms, except as such enforceability may be limited by equitable
principles or by the application of bankruptcy, insolvency or other similar laws
relating to or affecting creditors' rights generally, and except as rights to
indemnity and contribution hereunder may be limited by applicable securities
laws.
(ii) Such Selling Stockholder has duly executed and
delivered a power of attorney in the form contained in the Custody Agreement (as
defined below) appointing each of Alyn R. Holt and Hugh T. Regan, Jr. as such
Selling Stockholder's attorney-in-fact (the "Attorney-in-Fact"). The
Attorney-in-Fact is authorized to execute, deliver and perform this Agreement on
behalf of such Selling Stockholder, including, without limitation, the authority
to determine the purchase price to be paid to such Selling Stockholder by the
Underwriters as set forth in Section 2 of this Agreement, and in connection
therewith such Selling Stockholder has duly executed and delivered a Power of
Attorney and Custody Agreement (the "Custody Agreement"), in the form heretofore
delivered to the Representatives, with The First National Bank of Boston as
custodian (the "Custodian"). Certificates in negotiable form representing the
Shares to be sold by such Selling Stockholder hereunder have been deposited with
the Custodian, except for those Shares to be issued in the Exchange in which
case the certificates representing the shares of the Foreign Subsidiaries to be
exchanged have been deposited, pursuant to the Custody Agreement for the purpose
of delivery pursuant to this Agreement. Those Shares to be issued in the
Exchange shall be issued by the Company's transfer agent upon the consummation
thereof and delivered pursuant to this Agreement. Such Selling Stockholder
agrees that the Shares represented by the certificates which are on deposit or
which will be issued by the Company's transfer agent upon the consummation of
the Exchange are subject to the interests of the Underwriters hereunder, that
the arrangements made for such custody and the appointment of the
Attorney-in-Fact are to that extent irrevocable, and that the obligations of
such Selling Stockholder hereunder shall not be terminated, except as expressly
provided in this Agreement or the Custody Agreement, by any act of such Selling
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Stockholder, by operation of law or otherwise, by the death or incapacity of
such Selling Stockholder, or by the occurrence of any other event. If such
Selling Stockholder should die or become incapacitated, or if any other event
should occur, before the delivery of the Shares to be sold by such Selling
Stockholder hereunder, the certificates for such Shares shall be delivered by
the Custodian and issued by the Company's transfer agent in accordance with the
terms and conditions of this Agreement and Custody Agreement as if such death,
incapacity, or other event had not occurred, regardless of whether or not the
Custodian or Attorney-in-Fact shall have received notice thereof.
(iii) Such Selling Stockholder has the full right,
power and authority to enter into this Agreement, the Custody Agreement and any
Exchange Agreement executed by such Selling Stockholder, and has or, in the case
of Shares to be issued pursuant to the Exchange Agreement, will have the full
right, power and authority to sell, transfer and deliver the Shares to be sold
by such Selling Stockholder hereunder, and this Agreement, the Custody Agreement
and any Exchange Agreement executed by such Selling Stockholder have been duly
authorized, executed and delivered by such Selling Stockholder and constitute
the legal, valid and binding obligations of such Selling Stockholder enforceable
in accordance with their respective terms. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and by
the Custody Agreement and any Exchange Agreement executed by such Selling
Stockholder will not result in a violation or breach by such Selling Stockholder
of, or constitute a default by such Selling Stockholder under, any indenture,
mortgage, deed of trust, note, bank loan or credit agreement or any other
agreement or instrument to which such Selling Stockholder is a party or by which
such Selling Stockholder is bound, any organizational document relating to such
Selling Stockholder (including, without limitation, any partnership agreement,
articles of incorporation, bylaws or other governing instruments), or any
statute, judgment, decree, order, rule or regulation of any court or
governmental agency or body, foreign or domestic, applicable to such Selling
Stockholder.
(iv) All authorizations, approvals and consents
necessary for the execution and delivery by such Selling Stockholder of the
Custody Agreement and such Selling Stockholder's Exchange Agreement, if any, the
execution and delivery by or on behalf of such Selling Stockholder of this
Agreement, the consummation of the Exchange and the sale and delivery of the
Shares to be sold by such Selling Stockholder hereunder (other than such
authorizations, approvals or consents as may be necessary under the state
securities or Blue Sky laws), have been obtained and are in full force and
effect.
(v) Such Selling Stockholder now is (except for the
Shares to be issued upon the Exchange), and on the Closing Date will be, the
lawful owner of the Shares to be sold by such Selling Stockholder pursuant to
this Agreement. On the Closing Date, such Selling Stockholder will have valid
and marketable title to such Shares, free and clear of all liens, encumbrances,
security interests or other restrictions (other than those created under the
Custody Agreement). Upon proper delivery of and payment for such Shares as
provided herein, the Underwriters will acquire valid and marketable title
thereto, free and clear of all liens, encumbrances, security interests and other
restrictions.
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(vi) To the knowledge of such Selling Stockholder, the
representations and warranties of the Company contained in Section 1(a) hereof
are true and correct. Such Selling Stockholder has read the Registration
Statement and the Prospectus and has no knowledge of any fact, condition or
information not disclosed therein which has adversely affected or could
adversely affect the general affairs, assets, properties, condition (financial
or otherwise), results of operations, stockholders' equity, business or
prospects of the Company and the Subsidiaries, taken as a whole. To the
knowledge of such Selling Stockholder, neither the Registration Statement nor
the Prospectus contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Such Selling Stockholder is not prompted to sell the
Shares to be sold by such Selling Stockholder hereunder by any information
concerning the Company or any Subsidiary which is not set forth in the
Prospectus.
(vii) Such Selling Stockholder has examined the caption
titled "Principal and Selling Stockholders" in the Registration Statement and
the Prospectus and the information relating to such Selling Stockholder set
forth therein and, as to such information, neither the Registration Statement
nor the Prospectus contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(viii) Such Selling Stockholder has not incurred any
liability for any finder's fee or similar payments in connection with the sale
of such Selling Stockholder's Shares hereunder.
(ix) Such Selling Stockholder (A) has not distributed
and will not distribute any offering material in connection with the offering
and sale of the Shares other than the Registration Statement, a Preliminary
Prospectus, the Prospectus and other material, if any, permitted by the Act and
the Regulations, and (B) has not taken and will not take any action designed to,
or that might be reasonably expected to cause or result in, stabilization or
manipulation of the price of the Shares.
2. Purchase and Sale of Firm Shares. On the basis of the
representations, warranties, covenants and agreements contained herein, but
subject to the terms and conditions set forth herein, (a) the Company shall sell
to the several Underwriters at the Offering Price, less the Underwriting
Discounts and Commissions in the amount of $_______ per Share, the respective
amounts of the Firm Shares set forth opposite their names on Schedule I hereto,
and the Underwriters, severally and not jointly, shall purchase from the Company
on a firm commitment basis, at the Offering Price, less the Underwriting
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Discounts and Commissions in the amount of $______ per Share, the respective
amounts of the Firm Shares set forth opposite their names on Schedule I hereto;
and (b) the Selling Stockholders shall sell to the several Underwriters at the
Offering Price, less the Underwriting Discounts and Commissions in the amount of
$_______ per Share, the respective amounts of the Firm Shares set forth opposite
their names on Schedule II hereto, and the Underwriters, severally and not
jointly, shall purchase from the Selling Stockholders on a firm commitment
basis, at the Offering Price, less the Underwriting Discounts and Commissions in
the amount of $_______ per Share, the respective amounts of the Firm Shares set
forth opposite their names on Schedule I hereto. In making this Agreement, each
Underwriter is contracting severally, and not jointly, and except as provided in
Sections 4 and 11 hereof, the agreement of each Underwriter is to purchase only
that number of shares specified with respect to that Underwriter in Schedule I
hereto. The Underwriters shall offer the Shares to the public as set forth in
the Prospectus.
3. Payment and Delivery. Payment for the Firm Shares shall be
made by certified or official bank check payable to the order of (i) the Company
with respect to the Firm Shares sold by it and (ii) the Custodian with respect
to the Firm Shares sold by the Selling Stockholders, in New York Clearing House
funds at the offices of Janney Montgomery Scott Inc., 1801 Market Street,
Philadelphia, Pennsylvania, or such other place as shall be agreed upon by the
Company, the Attorney-in-Fact and the Representatives, or in immediately
available funds wired to such accounts as the Company or the Custodian may
specify (with all costs and expenses incurred by the Underwriters in connection
with such settlement in immediately available funds, including, but not limited
to, interest or cost of funds and expenses, to be borne by the Company), against
delivery of the Firm Shares to the Representatives at the offices of Janney
Montgomery Scott Inc., 1801 Market Street, Philadelphia, Pennsylvania, or such
other place as shall be agreed upon by the Company, the Attorney-in-Fact and the
Representatives, for the respective accounts of the Underwriters. Such payment
and delivery will be made at 10:00 AM., Philadelphia, Pennsylvania time, on
_________, 1997. Such time and date are referred to herein as the "Closing
Date." The certificates representing the Firm Shares to be sold and delivered
will be in such denominations and registered in such names as the
Representatives request not less than two full business days prior to the
Closing Date, and will be made available to the Representatives for inspection,
checking and packaging at the New York correspondent office of the Company's
transfer agent not less than one full business day prior to the Closing Date.
4. Option to Purchase Optional Shares.
(a) For the purposes of covering any over-allotments in
connection with the distribution and sale of the Firm Shares as contemplated by
the Prospectus, subject to the terms and conditions herein set forth, the
several Underwriters are hereby granted an option by the Selling Stockholders to
purchase all or any part of the Optional Shares, pro rata as among the Optional
Shares from each Selling Stockholder (the "Over-allotment Option"). The purchase
price to be paid for the Optional Shares shall be the Offering Price less the
Underwriting Discounts and Commissions shown on the cover page of the
-15-
Prospectus. The Over-allotment Option granted hereby may be exercised by the
Representatives on behalf of the several Underwriters as to all or any part of
the Optional Shares at any time and from time to time within 30 days after the
date of the Prospectus. No Underwriter shall be under any obligation to purchase
any Optional Shares prior to an exercise of the Over-allotment Option.
(b) The Over-allotment Option granted hereby may be
exercised by the Representatives on behalf of the several Underwriters by giving
notice to the Custodian by a letter sent by registered or certified mail,
postage prepaid, telex, telegraph, telegram or facsimile (such notice to be
effective when received), addressed as provided in Section 13 hereof, setting
forth the number of Optional Shares to be purchased, the date and time for
delivery of and payment for the Optional Shares and stating that the Optional
Shares referred to therein are to be used for the purpose of covering
over-allotments in connection with the distribution and sale of the Firm Shares.
If such notice is given prior to the Closing Date, the date set forth therein
for such delivery and payment shall be the Closing Date. If such notice is given
on or after the Closing Date, the date set forth therein for such delivery and
payment shall be a date selected by the Representatives that is within three
full business days after the exercise of the Over-allotment Option. The date and
time set forth in such a notice is referred to herein as an "Option Closing
Date," and a closing held pursuant to such a notice is referred to herein as an
"Option Closing." Upon each exercise of the Over-allotment Option, and on the
basis of the representations, warranties, covenants and agreements herein
contained, and subject to the terms and conditions herein set forth, the several
Underwriters shall become severally, but not jointly, obligated to purchase from
the Selling Stockholders the number of Optional Shares specified in each notice
of exercise of the Over-allotment Option.
(c) The number of Optional Shares to be sold to each
Underwriter pursuant to each exercise of the Over-allotment Option shall be the
number that bears the same ratio to the aggregate number of Optional Shares
being purchased through such Over-allotment Option exercise as the number of
Firm Shares opposite the name of such Underwriter in Schedule I hereto bears to
the total number of all Firm Shares. Notwithstanding the foregoing, the number
of Optional Shares purchased and sold pursuant to each exercise of the
Over-allotment Option shall be subject to such adjustment as the Representatives
may approve to eliminate fractional shares and subject to the provisions for the
allocation of Optional Shares purchased for the purpose of covering
over-allotments set forth in the agreement entered into by and among the
Underwriters in connection herewith (the "Agreement Among Underwriters"). The
number of Optional Shares to be sold by each Selling Stockholder shall be the
respective number of Optional Shares obtained by multiplying the number of
Optional Shares specified in the notice to the Custodian referred to in Section
4(b) hereof by a fraction the numerator of which is the maximum number of
Optional Shares to be sold by such Selling Stockholders, as specified opposite
such Selling Stockholders name in Schedule II hereto, and the denominator of
which is the maximum number of all Optional Shares that may be sold pursuant to
this Agreement; subject, however, to such adjustment as the Representatives may
approve to eliminate fractional shares.
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(d) Payment for the Optional Shares shall be made to the
Custodian by certified or official bank check payable to the order of the
Custodian in New York Clearing House funds, at the offices of Janney Montgomery
Scott Inc., 1801 Market Street, Philadelphia, Pennsylvania, or such other place
as shall be agreed upon by the Attorney-in-Fact and the Representatives, or in
immediately available funds wired to such account as the Custodian may specify
(with all costs and expenses incurred by the Underwriters in connection with
such settlement in immediately available funds, including, but not limited to,
interest or cost of funds and expenses, to be borne by the Company), against
delivery of the Optional Shares to the Representatives at the offices of Janney
Montgomery Scott Inc., 1801 Market Street, Philadelphia, Pennsylvania, or such
other place as shall be agreed upon by the Company, the Attorney-in-Fact and the
Representatives, for the respective accounts of the Underwriters. The
certificates representing the Optional Shares to be issued and delivered will be
in such denominations and registered in such names as the Representatives
request not less than two full business days prior to the Option Closing Date,
and will be made available to the Representatives for inspection, checking and
packaging at the New York correspondent office of the Company's transfer agent
not less than one full business day prior to the Option Closing Date.
5. Certain Covenants and Agreements of the Company. The
Company covenants and agrees with the several Underwriters as follows:
(a) If Rule 430A of the Regulations is employed, the
Company will timely file the Prospectus pursuant to and in compliance with Rule
424(b) of the Regulations and will advise the Representatives of the time and
manner of such filing.
(b) The Company will not file or publish any amendment or
supplement to the Registration Statement, Preliminary Prospectus or Prospectus
at any time before the completion of the distribution of the Shares by the
Underwriters that is not (i) in compliance with the Regulations and (ii)
approved by the Representatives (such approval not to be unreasonably withheld
or delayed).
(c) The Company will advise the Representatives
immediately, and confirm such advice in writing, (i) when any post-effective
amendment to the Registration Statement is filed with the SEC, (ii) of the
receipt of any comments from the SEC concerning the Registration Statement,
(iii) when any post-effective amendment to the Registration Statement becomes
effective, or when any supplement to the Prospectus or any amended Prospectus
has been filed, (iv) of any request of the SEC for amendment or supplementation
of the Registration Statement or Prospectus or for additional information, (v)
during the period when the Prospectus is required to be delivered under the Act
and Regulations, of the happening of any event as a result of which the
Registration Statement or the Prospectus would include an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading, (vi) during the period noted in (v) above, of the need
to amend the Registration Statement or supplement the Prospectus to comply with
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the Act, (vii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, and (viii)
of the suspension of the qualification of any of the Shares for offering or sale
in any jurisdiction in which the Underwriters intend to make such offers or
sales, or of the initiation or threatening of any proceedings for any of such
purposes known to the Company. The Company will use its best efforts to prevent
the issuance of any such stop order or of any order preventing or suspending
such use and, if any such order is issued, to obtain as soon as possible the
lifting thereof.
(d) The Company has delivered to the Representatives,
without charge, copies of each Preliminary Prospectus. The Company will deliver
to the Representatives, without charge, from time to time during the period when
delivery of the Prospectus is required under the Act, such number of copies of
the Prospectus (as supplemented or amended) as the Representatives may
reasonably request. The Company hereby consents to the use of such copies of the
Preliminary Prospectus and the Prospectus for purposes permitted by the Act, the
Regulations and the securities or Blue Sky laws of the states in which the
Shares are offered by the several Underwriters and by all dealers to whom Shares
may be sold, both in connection with the offering and sale of the Shares and for
such period of time thereafter as the Prospectus is required by the Act to be
delivered in connection with sales by any Underwriter or dealer. The Company has
furnished or will furnish to the Representatives three original signed copies of
the Registration Statement as originally filed and of all amendments and
supplements thereto, whether filed before or after the Effective Date, three
copies of all exhibits filed therewith and three signed copies of all consents
and certificates of experts, and will deliver to the Representatives such number
of conformed copies of the Registration Statement, including financial
statements and exhibits, and all amendments and supplements thereto, as the
Representatives may reasonably request.
(e) The Company will comply with the Act, the Regulations,
the Exchange Act and the rules and regulations thereunder so as to permit the
continuance of sales of and dealings in the Shares for as long as may be
necessary to complete the distribution of the Shares as contemplated hereby.
(f) The Company will furnish such information as may be
required and otherwise cooperate in the registration or qualification of the
Shares, or exemption therefrom, for offering and sale by the several
Underwriters and by dealers under the securities or Blue Sky laws of such
jurisdictions in which the Representatives determine to offer the Shares, after
consultation with the Company, and will file such consents to service of process
or other documents necessary or appropriate in order to effect such registration
or qualification; provided, however, that no such qualification shall be
required in any jurisdiction where, solely as a result thereof, the Company
would be subject to taxation or qualification as a foreign corporation doing
business in such jurisdiction where it is not now so qualified or to take any
action which would subject it to service of process in suits, other than those
arising out of the offering or sale of the Shares, in any jurisdiction where it
is not now so subject. The Company will, from time to time, prepare and file
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such statements and reports as are or may be required to continue such
qualification in effect for so long a period as is required under the laws of
such jurisdictions for such offering and sale.
(g) Subject to subsection 5(b) hereof, in case of any
event, at any time within the period during which, in the opinion of counsel for
the Underwriters, a prospectus is required to be delivered under the Act and
Regulations, as a result of which any Preliminary Prospectus or the Prospectus,
as then amended or supplemented, would contain an untrue statement of a material
fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, if it is necessary at any time to amend any Preliminary
Prospectus or the Prospectus to comply with the Act and Regulations or any
applicable securities or Blue Sky laws, the Company promptly will prepare and
file with the SEC, and any applicable state securities commission, an amendment,
supplement or document that will correct such statement or omission or effect
such compliance and will furnish to the several Underwriters such number of
copies of such amendment(s), supplement(s) or document(s) (in form and substance
satisfactory to the Representatives and counsel for the Underwriters) as the
Representatives may reasonably request. For purposes of this subsection (g), the
Company will provide such information to the Representatives, the Underwriters'
counsel and counsel to the Company as shall be necessary to enable such persons
to consult with the Company with respect to the need to amend or supplement the
Registration Statement, Preliminary Prospectus or Prospectus or file any
document, and shall furnish to the Representatives and the Underwriters' counsel
such further information as each may from time to time reasonably request.
(h) The Company will make generally available to its
security holders not later than 45 days after the end of the period covered
thereby, an earnings statement of the Company (which need not be audited) that
shall comply with Section 11(a) of the Act and cover a period of at least 12
consecutive months beginning not later than the first day of the Company's
fiscal quarter next following the Effective Date.
(i) For a period of five years following the Effective
Date, the Company will furnish to the Representatives copies of all materials
furnished by the Company to its Stockholders and all public reports and all
reports and financial statements furnished by the Company to the SEC pursuant to
the Exchange Act or any rule or regulation of the SEC thereunder.
(j) During the course of the distribution of the Shares,
the Company will not take, directly or indirectly, any action designed to or
that could reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Shares.
(k) The Company has caused each person listed on Schedule V
hereto to execute an agreement (a "Lock-up Agreement"). The Company has
delivered such Lock-up Agreements to Janney Montgomery Scott Inc. prior to the
date of this Agreement. Appropriate stop transfer instructions will be issued by
the Company to the Company's transfer agent for the Common Shares.
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(l) The Company will not engage in any transaction with
affiliates (as defined in the Regulations) without the prior approval of a
majority of the members of its Board of Directors who do not have an interest in
such transaction other than in their capacity as directors of the Company.
(m) Except pursuant to the Exchange Agreements, for a
period of 180 days after the Effective Date, the Company will not, without the
prior written consent of Janney Montgomery Scott Inc. offer, sell, contract to
sell or otherwise dispose of any Common Shares or any securities convertible
into or exercisable for any Common Shares or, except for up to 500,000 Common
Shares pursuant to the Company's 1997 Stock Plan (subject to the agreement of
each holder thereof that, until after the 180th day after the Effective Date,
such holder will not, without the prior written consent of Janney Montgomery
Scott Inc., directly or indirectly offer to sell, sell, contract to sell or
otherwise transfer or dispose of any of such Common Shares), grant options to
purchase any Common Shares.
(n) The Company will use all reasonable efforts to maintain
the qualification or listing of the Common Shares (including, without
limitation, the Shares) on the Nasdaq National Market.
(o) The Company will maintain Directors and Officers
liability insurance in amounts reasonably determined by the Company's Board of
Directors to be appropriate to the Company's circumstances.
6. Payment of Fees and Expenses.
(a) Whether or not the transactions contemplated by this
Agreement are consummated and regardless of the reason this Agreement is
terminated, the Company will pay or cause to be paid, and bear or cause to be
borne, all costs and expenses incident to the performance of the obligations of
the Company and the Selling Stockholders under this Agreement, including: (i)
the fees and expenses of the accountants and counsel for the Company incurred in
the preparation of the Registration Statement and any post-effective amendments
thereto (including financial statements and exhibits), Preliminary Prospectuses
and the Prospectus and any amendments or supplements thereto, (ii) printing and
mailing expenses associated with the Registration Statement and any
post-effective amendments thereto, Preliminary Prospectus, the Prospectus, this
Agreement, the Agreement Among Underwriters, the Underwriters' Questionnaire
submitted to each of the Underwriters by Janney Montgomery Scott Inc. in
connection herewith, the power of attorney executed by each of the Underwriters
in favor of Janney Montgomery Scott Inc. in connection herewith, the Selected
Dealer Agreement and related documents and the preliminary Blue Sky memorandum
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relating to the offering prepared by Pepper, Hamilton & Scheetz LLP, counsel to
the Underwriters (collectively with any supplement thereto, the "Preliminary
Blue Sky Memorandum"), (iii) the costs incident to the authentication, issuance,
sale and delivery of the Shares to the Underwriters, (iv) the fees, expenses and
all other costs of qualifying the Shares for sale under the securities or Blue
Sky laws of those states in which the Shares are to be offered or sold,
including, without limitation, the reasonable fees (not in excess of $5,000) and
expenses of Underwriters' counsel and such local counsel as may have been
reasonably required and retained for such purpose, (v) the fees, expenses and
other costs of, or incident to, securing any review or approvals by or from the
NASD, including the reasonable fees and expenses of the Underwriters' counsel,
(vi) the filing fees of the SEC, (vii) the cost of furnishing to the
Underwriters copies of the Registration Statement, Preliminary Prospectuses and
Prospectuses as herein provided, (viii) the Company's travel expenses in
connection with meetings with the brokerage community and institutional
investors, (ix) the costs and expenses associated with settlement in same day
funds (including, but not limited to, interest or cost of funds expenses), if
desired by the Company, (x) any fees or costs payable to the Nasdaq Stock
Market, Inc. as a result of the offering, (xi) the cost of printing certificates
for the Shares; (xii) the cost and charges of any of the Company's transfer
agent, (xiii) the costs (not in excess of $15,000) of advertising the offering,
including, without limitation, with respect to the placement of "tombstone"
advertisements in publications selected by the Representatives, (xiv) the costs
incident to the consummation of the Exchange Agreements and (xv) all other costs
and expenses reasonably incident to the performance of the Company's and the
Selling Stockholders' obligations hereunder that are not otherwise specifically
provided for in this Section 6(a); provided, however, that, except as
specifically set forth in Section 6(c) hereof, (A) the Underwriters shall be
responsible for their out-of-pocket expenses, including those associated with
meetings with the brokerage community and institutional investors, other than
the Company's travel expenses, and the fees and expenses of their counsel for
other than Blue Sky and NASD representation, and (B) the Selling Stockholders
shall be responsible for any transfer or income taxes assessed with respect to
the Shares sold by the Selling Stockholders and any fees and expenses of the
Selling Stockholders' counsel and such other expenses as are agreed to by the
Company and the Selling Stockholders or as may be required by law or regulation,
foreign or domestic.
(b) The Company shall pay as due any state registration,
qualification and filing fees and any accountable out-of-pocket disbursements in
connection with such registration, qualification or filing in the states in
which the Representatives determine to offer or sell the Shares.
7. Conditions of Underwriters' Obligations. The obligation of
each Underwriter to purchase and pay for the Firm Shares that it has agreed to
purchase hereunder on the Closing Date, and to purchase and pay for any Optional
Shares as to which it exercises its right to purchase under Section 4 on an
Option Closing Date, is subject at the date hereof, the Closing Date and any
Option Closing Date to the continuing accuracy and fulfillment of the
representations and warranties of the Company and the Selling Stockholders, to
the performance by the Company of its covenants and obligations hereunder, and
to the following additional conditions:
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(a) If required by the Regulations, the Prospectus shall
have been filed with the SEC pursuant to Rule 424(b) of the Regulations within
the applicable time period prescribed for such filing by the Regulations; on or
prior to the Closing Date or any Option Closing Date, as the case may be, no
stop order or other order preventing or suspending the effectiveness of the
Registration Statement or the sale of any of the Shares shall have been issued
under the Act or any state securities law and no proceedings for that purpose
shall have been initiated or shall be pending or, to the Representatives'
knowledge or the knowledge of the Company, shall be contemplated by the SEC or
by any authority in any jurisdiction designated by the Representatives pursuant
to Section 5(f) hereof; and any request on the part of the SEC for additional
information shall have been complied with to the reasonable satisfaction of
counsel for the Underwriters.
(b) All corporate proceedings and other matters incident to
the authorization, form and validity of this Agreement, the Shares and the form
of the Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby, shall be
satisfactory in all material respects to counsel to the Underwriters. The
Exchange shall have been consummated. The Company and the Selling Stockholders
shall have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters. The Representatives
shall have received from the Underwriters' counsel, Pepper, Hamilton & Scheetz
LLP, an opinion, dated as of the Closing Date and any Option Closing Date, as
the case may be, and addressed to the Representatives individually and as the
Representatives of the several Underwriters, which opinion shall be satisfactory
in all respects to the Representatives.
(c) The NASD shall have indicated that it has no objection
to the underwriting arrangements pertaining to the sale of any of the Shares.
(d) The Representatives shall have received a copy of an
executed Lock-up Agreement from each person listed on Schedule V hereto.
(e) The Representatives shall have received at or prior to
the Closing Date from the Underwriters' counsel a memorandum or summary, in form
and substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Shares under the
securities or Blue Sky laws of such jurisdictions designated by the
Representatives pursuant to Section 5(f) hereof.
(f) On the Closing Date and any Option Closing Date, there
shall have been delivered to the Representatives signed opinions of Saul, Ewing,
Remick & Saul, counsel for the Company and the Selling Stockholders dated as of
-22-
each such date and addressed to the Representatives individually and as the
Representatives of the several Underwriters to the effect set forth in Exhibit B
hereto or as is otherwise reasonably satisfactory to the Representatives.
(g) On the Closing Date and any Option Closing Date, there
shall have been delivered to the Representatives signed opinions of Ratner &
Prestia, patent counsel for the Company dated as of each such date and addressed
to the Representatives individually and as the Representatives of the several
Underwriters to the effect set forth in Exhibit C hereto or as is otherwise
reasonably satisfactory to the Representatives.
(h) At the Closing Date and any Option Closing Date: (i)
the Registration Statement and any post-effective amendment thereto and the
Prospectus and any amendments or supplements thereto shall contain all
statements that are required to be stated therein in accordance with the Act and
the Regulations and in all material respects shall conform to the requirements
of the Act and the Regulations, and neither the Registration Statement nor any
post-effective amendment thereto nor the Prospectus and any amendments or
supplements thereto shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, (ii) since the respective dates as
of which information is given in the Registration Statement and any
post-effective amendment thereto and the Prospectus and any amendments or
supplements thereto, except as otherwise stated therein, there shall have been
no material adverse change in the properties, condition (financial or
otherwise), results of operations, stockholders' equity, business or management
of the Company and the Subsidiaries, taken as a whole, from that set forth
therein, whether or not arising in the ordinary course of business, other than
as referred to in the Registration Statement or Prospectus (iii) since the
respective dates as of which information is given in the Registration Statement
and the Prospectus or any amendment or supplement thereto, there shall have been
no event or transaction, contract or agreement entered into by the Company or
any of the Subsidiaries, other than in the ordinary course of business and as
set forth in the Registration Statement or Prospectus, that has not been, but
would be required to be, set forth in the Registration Statement or Prospectus,
(iv) since the respective dates as of which information is given in the
Registration Statement and any post-effective amendment thereto and the
Prospectus and any amendments or supplements thereto, there shall have been no
material adverse change, loss, reduction, termination or non-renewal of any
contract to which the Company or any Subsidiary is a party and (v) no action,
suit or proceeding at law or in equity, domestic or foreign, shall be pending or
threatened against the Company or any Subsidiary that would be required to be
set forth in the Prospectus, other than as set forth therein, and no proceedings
shall be pending or threatened against or directly affecting the Company or any
Subsidiary before or by any federal, state or other commission, board or
administrative agency, domestic or foreign, wherein an unfavorable decision,
ruling or finding would materially adversely affect the properties, condition
(financial or otherwise), results of operations, stockholders' equity, or
business of the Company or the Subsidiaries other than as set forth in the
Prospectus.
-23-
(i) The Representatives shall have received at the Closing
Date and any Option Closing Date certificates of the Company executed by the
Chief Executive Officer and the Chief Financial Officer of the Company in their
capacities as such dated as of the date of the Closing Date or Option Closing
Date, as the case may be, and addressed to the Representatives, individually and
as the Representatives of the several Underwriters, to the effect that (i) the
signers of the certificate have read this Agreement and the representations and
warranties of the Company in this Agreement are true and correct in all material
respects, as if made at and as of the Closing Date or the Option Closing Date,
as the case may be, and the Company has complied in all material respects with
all the agreements, fulfilled in all material respects all the covenants and
satisfied all the conditions on its part to be performed, fulfilled or satisfied
at or prior to the Closing Date or the Option Closing Date, as the case may be,
and (ii) the signers of the certificate have examined the Registration Statement
and the Prospectus and any amendments or supplements thereto and that the
conditions set forth in Section 7(h) of this Agreement have been satisfied.
(j) The Representatives shall have received at the Closing
Date and any Option Closing Date certificates of or on behalf of the Selling
Stockholders dated as of the date of the Closing Date or Option Closing Date, as
the case may be, and addressed to the Representatives, individually and as the
Representatives of the several Underwriters, to the effect that (i) the Selling
Stockholders have read this Agreement and the representations and warranties of
the Selling Stockholders in this Agreement are true and correct in all material
respects, as if made at and as of the Closing Date or Option Closing Date, as
the case may be, and (ii) the Selling Stockholders have examined the
Registration Statement and the Prospectus and any amendments or supplements
thereto and that the conditions set forth in Section 7(h) of this Agreement have
been satisfied with respect to the Selling Stockholders.
(k) At the time this Agreement is executed and at the
Closing Date and any Option Closing Date the Representatives shall have received
a letter addressed to the Representatives individually and as the
Representatives of the several Underwriters, and in form and substance
satisfactory to the Representatives in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
from KPMG Peat Marwick LLP dated as of the date of this Agreement, the Closing
Date or the Option Closing Date, as the case may be:
(i) confirming that they are independent certified
public accountants within the meaning of the Act and the Regulations and stating
that the section of the Registration Statement under the caption "Experts" is
correct insofar as it relates to them;
(ii) stating that, in their opinion, the consolidated
financial statements, schedules and notes of the Company and the Subsidiaries
audited by them and included in the Registration Statement comply in form in all
material respects with the applicable accounting requirements of the Act and the
Regulations;
-24-
(iii) stating that, on the basis of specified
procedures, which included the procedures specified by the American Institute of
Certified Public Accountants for a review of interim financial information, as
described in SAS No. 71, Interim Financial Information (with respect to the
latest unaudited consolidated financial statements of the Company), a reading of
the latest available unaudited interim consolidated financial statements of the
Company (with an indication of the date of the latest available unaudited
interim financial statements), a reading of the minutes of the meetings of the
stockholders and the Board of Directors of the Company and the Subsidiaries, and
audit and compensation committees of such Boards, if any, and inquiries to
certain officers and other employees of the Company and the Subsidiaries
responsible for operational, financial and accounting matters and other
specified procedures and inquiries, nothing has come to their attention that
would cause them to believe that (A) the unaudited consolidated financial
statements of the Company included in the Registration Statement, (1) do not
comply in form in all material respects with the applicable accounting
requirements of the Act and the Regulations, or (2) any material modifications
should be made to such unaudited financial statements for them to be in
conformity with generally accepted accounting principles; (B) at the date of the
latest available unaudited interim consolidated financial statements of the
Company and a specified date not more than five business days prior to the date
of such letter, there was any change in the capital stock or debt of the Company
or any decrease in net current assets, total assets or stockholders' equity of
the Company as compared with the amounts shown in the March 31, 1997 balance
sheet of the Company included in the Registration Statement, or that for the
periods from April 1, 1997 to the date of the latest available unaudited
financial statements of the Company and to a specified date not more than five
days prior to the date of the letter, there were any decreases, as compared to
the corresponding periods in the prior year, in revenues, gross profit,
operating income or total or per share amounts of net earnings, except in all
instances for changes, decreases or increases which the Registration Statement
discloses have occurred or may occur and except for such other changes,
decreases or increases which the Representatives shall in their sole discretion
accept; or (C) the unaudited pro forma consolidated financial statements
included in the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of Rule 11-02 of Regulation
S-X under the Act and that the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of those statements; and
(iv) stating that they have compared specific dollar
amounts, numbers of shares and other numerical data and financial information
set forth in the Registration Statement that have been specified by the
Representatives prior to the date of this Agreement, to the extent that such
information is derived from the accounting records subject to the internal
control structure, policies and procedures of the Company's or the Subsidiaries'
accounting systems, or has been derived directly from such accounting records by
analysis or comparison or has been derived from other records and analysis
maintained or prepared by the Company or the Subsidiaries with the results
obtained from the application of readings, inquiries and other appropriate
procedures (which procedures do not constitute an audit in accordance with
generally accepted auditing standards) set forth in the letter, and found them
to be in agreement.
-25-
(l) There shall have been duly tendered to the
Representatives for the respective accounts of the Underwriters certificates
representing all of the Shares to be purchased by the Underwriters on the
Closing Date or any Option Closing Date, as the case may be.
(m) At the Closing Date and any Option Closing Date, the
Representatives shall have been furnished such additional documents, information
and certificates as they shall have reasonably requested.
(n) The issuance and sale of the Shares shall be legally
permitted under applicable Blue Sky or state securities laws so long as such
sales are made in accordance with the Preliminary Blue Sky Memorandum.
All such opinions, certificates, letters and documents shall
be in compliance with the provisions hereof only if they are satisfactory in
form and substance to the Representatives and Underwriters' counsel. The Company
and the Selling Stockholders shall furnish the Representatives with such
conformed copies of such opinions, certificates, letters and other documents as
they shall reasonably request. If any condition to the Underwriters' obligations
hereunder to be fulfilled prior to or at the Closing Date or any Option Closing
Date, as the case may be, is not fulfilled, the Representatives may on behalf of
the several Underwriters, terminate this Agreement with respect to the Closing
Date or such Option Closing Date, as applicable, or, if it so elects, waive any
such conditions which have not been fulfilled or extend the time for their
fulfillment. Any such termination shall be without liability of the Underwriters
to the Company or the Selling Stockholders.
8. Indemnification and Contribution.
(a) The Company and each Selling Stockholder, severally and
not jointly, shall indemnify and hold harmless each Underwriter, and each
person, if any, who controls each Underwriter within the meaning of the Act,
against any and all loss, liability, claim, damage and expense whatsoever,
including, but not limited to, any and all reasonable expenses whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever or in connection with any
investigation or inquiry of, or action or proceeding that may be brought
against, the respective indemnified parties, arising out of or based upon:
(i) in the case of each Selling Stockholder, any breach
of his, her, or its representations and warranties made in this Agreement; and
(ii) in the case of the Company, any breach of its
respective representations and warranties made in this Agreement and any untrue
statements or alleged untrue statements of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, any
-26-
application or other document (in this Section 8 collectively called
"application") executed by the Company and based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify all or any part of the Shares under the securities laws thereof or filed
with the SEC or the NASD, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading;
provided, however, that the foregoing indemnity:
(x) shall not apply to statements in or omissions from any
Preliminary Prospectus, the Registration Statement or the Prospectus, or in any
application or in any communication to the SEC, as the case may be, made in
reliance upon and in conformity with information supplied to the Company in
writing by or on behalf of any Underwriter through the Representatives expressly
for use therein; and
(y) with respect to any Preliminary Prospectus, shall not
inure to the benefit of any Underwriter from whom the person asserting any such
losses, claims, damages, liabilities or expenses purchased the Shares if, at or
prior to the written confirmation of the sale of such Shares, a copy of an
amended Preliminary Prospectus or the Prospectus (or the Prospectus as amended
or supplemented) was delivered to such Underwriter but was not sent, or
delivered to such person and the untrue statement or omission of a material fact
contained in such Preliminary Prospectus was corrected in the amended
Preliminary Prospectus or Prospectus (or the Prospectus as amended or
supplemented).
This indemnity agreement will be in addition to any liability the Company and
the Selling Stockholders may otherwise have.
(b) Each Underwriter, severally and not jointly, shall
indemnify and hold harmless the Company, each of the directors of the Company,
each of the officers of the Company who shall have signed the Registration
Statement, each Selling Stockholder, and each other person, if any, who controls
the Company or a Selling Stockholder within the meaning of the Act to the same
extent as the foregoing indemnities from the Company and the Selling
Stockholders to the several Underwriters, but only with respect to any loss,
liability, claim, damage or expense resulting from statements or omissions, or
alleged statements or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any application or in any
communication to the SEC, as the case may be, made in reliance upon and in
conformity with information supplied to the Company in writing by or on behalf
of any Underwriter through the Representatives expressly for use therein. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
(c) If any action, inquiry, investigation or proceeding is
brought against any person in respect of which indemnity may be sought pursuant
to any of the two preceding paragraphs, such person (hereinafter called the
-27-
"indemnified party") shall, promptly after notification of, or receipt of
service of process for, such action, inquiry, investigation or proceeding,
notify in writing the party or parties against whom indemnification is to be
sought (hereinafter called the "indemnifying party") of the institution of such
action, inquiry, investigation or proceeding and the indemnifying party, upon
the request of the indemnified party, shall assume the defense of such action,
inquiry, investigation or proceeding, including the employment of counsel
(reasonably satisfactory to such indemnified party) and payment of expenses. No
indemnification provided for in this Section 8 shall be available to any
indemnified party who shall fail to give such notice if the indemnifying party
does not have knowledge of such action, inquiry, investigation or proceeding, to
the extent that such indemnifying party has been materially prejudiced by the
failure to give such notice, but the omission to so notify the indemnifying
party shall not relieve the indemnifying party otherwise than under this Section
8. Such indemnified party or controlling person shall have the right to employ
its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless the employment
of such counsel shall have been authorized in writing by the indemnifying party
in connection with the defense of such action. If such indemnified party or
parties shall have been advised by counsel that there may be a conflict between
the positions of the indemnifying party or parties and of the indemnified party
or parties or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, the indemnified party or parties shall be
entitled to select counsel (such counsel, "Separate Counsel") to conduct the
defense to the extent determined by such counsel to be necessary to protect the
interests of the indemnified party or parties and the reasonable fees and
expenses of such Separate Counsel shall be borne by the indemnifying party;
provided, however, that if the indemnified parties engage more than one Separate
Counsel, then the indemnifying party's liability with respect to such Separate
Counsel shall be limited, in the aggregate, to an amount equal to the highest
amount of reasonable fees and expenses charged or incurred by a single Separate
Counsel, which amount shall be divided among the indemnified parties on a pro
rata basis in accordance with the relative amounts of reasonable fees and
expenses of their respective Separate Counsel. Expenses covered by the
indemnification in this Section 8 shall be paid by the indemnifying party as
they are incurred by the indemnified party. Anything in this Section 8 to the
contrary notwithstanding, the indemnifying party shall not be liable for any
settlement of any such claim effected without its written consent.
(d) Each Selling Stockholder's aggregate liability under
this Section 8 shall be limited to an amount equal to the lesser of (i) such
Selling Stockholder's pro-rata portion of the total of all losses, liabilities,
claims, damages or expenses indemnified against (such pro-rata portion being
equal to the number of Shares sold by such Selling Stockholder, divided by the
total number of Shares sold by the Company and all of the Selling Stockholders)
or (ii) the net proceeds (before deducting expenses) received by such Selling
Stockholder from the sale of such Selling Stockholder's Shares pursuant to this
Agreement.
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(e) If the indemnification provided for in this Section 8
is unavailable to, or insufficient to hold harmless an indemnified party under
Sections 8(a) or (b) hereof in respect of any losses, liabilities, claims,
damages or expenses (or actions, inquiries, investigations or proceedings in
respect thereof) referred to therein, except by reason of the provisos set forth
in Section 8(a) hereof or the failure to give notice as required in Section 8(c)
hereof (provided that the indemnifying party does not have knowledge of the
action, inquiry, investigation or proceeding and to the extent such party has
been materially prejudiced by the failure to give such notice), then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, liabilities, claims, damages or
expenses (or actions, inquiries, investigations or proceedings in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company or the Selling Stockholders on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company or each Selling Stockholder on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, liabilities, claims or reasonable expenses (or actions, inquiries,
investigations or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company or each
Selling Stockholder on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company or each Selling Stockholder
bears to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or a Selling Stockholder on the one hand or the
Underwriters on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company, the Selling Stockholders and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
Section 8(e) were determined by pro rata allocation (even if the Selling
Stockholders or the Underwriters were treated as one entity for such purpose) or
by any other method of allocation that does not take account of the equitable
considerations referred to above in this Section 8(e). The amount paid or
payable by an indemnified party as a result of the losses, liabilities, claims,
damages or reasonable expenses (or actions, inquiries, investigations or
proceedings in respect thereof) referred to above in this Section 8(e) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 8(e), (i) the
provisions of the Agreement Among Underwriters shall govern contribution among
Underwriters, (ii) no Underwriter (except as provided in the Agreement Among
Underwriters) shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares purchased by
such Underwriter, and (iii) no person guilty of fraudulent misrepresentation
-29-
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' and the Selling Stockholders' obligations
in this Section 8(e) to contribute are several in proportion to their individual
underwriting obligations and number of Shares sold, respectively, and not joint.
9. Representations and Agreements to Survive Delivery. Except
as the context otherwise requires, all representations, warranties and
agreements contained in this Agreement shall be deemed to be representations,
warranties and agreements at the Closing Date and any Option Closing Date; and
such representations, warranties and agreements of the Underwriters, the Company
and the Selling Stockholders, including, without limitation, the indemnity and
contribution agreements contained in Section 8 hereof and the agreements
contained in Sections 6, 9, 10 and 13 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter or any controlling person, and shall survive delivery of the Shares
and termination of this Agreement, whether before or after the Closing Date or
any Option Closing Date.
10. Effective Date of This Agreement and Termination Hereof.
(a) This Agreement shall become effective at 10:00 a.m.,
Philadelphia, Pennsylvania time, on the first business day following the
Effective Date or at the time of the public offering by the Underwriters of the
Shares, whichever is earlier, except that the provisions of Sections 6, 8, 9, 10
and 13 hereof shall be effective upon execution hereof. The time of the public
offering, for the purpose of this Section 10, shall mean the time when any of
the Shares are first released by the Underwriters for offering by dealers. The
Representatives may prevent the provisions of this Agreement (other than those
contained in Sections 6, 8, 9, 10 and 13) hereof from becoming effective without
liability of any party to any other party, except as noted below, by giving the
notice indicated in Section 10(c) hereof before the time the other provisions of
this Agreement become effective.
(b) The Representatives shall have the right to terminate
this Agreement at any time prior to the Closing Date as provided in Sections 7
and 11 hereof or if any of the following have occurred:
(i) since the respective dates as of which
information is given in the Registration Statement and the Prospectus, any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of the
Company or its Subsidiaries, or the earnings, business affairs, management or
business prospects of the Company or its Subsidiaries, whether or not arising in
the ordinary course of business, that would, in the Representatives' reasonable
judgment, make the offering or delivery of the Shares impracticable;
-30-
(ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic, political or financial
market conditions if the effect on the financial markets of the United States of
such outbreak, calamity, crisis or change is material and adverse and would, in
the Representatives' reasonable judgment, make the offering or delivery of the
Shares impracticable;
(iii) suspension of trading generally in securities
on the New York Stock Exchange, the American Stock Exchange, the Nasdaq Stock
Market or the over-the-counter market or limitation on prices (other than
limitations on hours or numbers of days of trading) for securities or the
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority that in the Representatives' reasonable
opinion materially and adversely affects trading on such exchange or the
over-the-counter market;
(iv) declaration of a banking moratorium by either
federal or Pennsylvania state authorities;
(v) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs that in
the Representatives' reasonable opinion has a material adverse effect on the
securities markets in the United States; or
(vi) trading in any securities of the Company shall
have been suspended or halted by the Nasdaq Stock Market or the SEC.
(c) If the Representatives elect to prevent this
Agreement from becoming effective or to terminate this Agreement as provided in
this Section 10, the Representatives shall notify the Company and the Selling
Stockholders thereof promptly by telephone, telex, telegraph, telegram or
facsimile, confirmed by letter.
11. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in
its or their obligation to purchase Firm Shares or Optional Shares hereunder,
and if the Firm Shares or Optional Shares with respect to which such default
relates do not exceed the aggregate of 10% of the number of Firm Shares or
Optional Shares, as the case may be, that all Underwriters have agreed to
purchase hereunder, then such Firm Shares or Optional Shares to which the
default relates shall be purchased severally by the non-defaulting Underwriters
in proportion to their respective commitments hereunder.
(b) If such default relates to more than 10% of the Firm
Shares or Optional Shares, as the case may be, the Representatives may, in their
discretion, arrange for another party or parties (including a non-defaulting
Underwriter) to purchase such Firm Shares or Optional Shares to which such
default relates, on the terms contained herein. In the event that the
-31-
Representatives do not arrange for the purchase of the Firm Shares or Optional
Shares to which a default relates as provided in this Section 11, this Agreement
may be terminated by the Representatives or by the Company without liability on
the part of the several Underwriters (except as provided in Section 8 hereof) or
the Company (except as provided in Sections 6 and 8 hereof), but nothing herein
shall relieve a defaulting Underwriter of its liability, if any, to the other
several Underwriters and to the Company for damages occasioned by its default
hereunder.
(c) If the Firm Shares or Optional Shares to which the
default relates are to be purchased by the non-defaulting Underwriters, or are
to be purchased by another party or parties as aforesaid, the Representatives or
the Company shall have the right to postpone the Closing Date or any Option
Closing Date, as the case may be, for a reasonable period but not in any event
exceeding seven days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment to the Registration Statement or supplement to the Prospectus that in
the opinion of counsel for the Underwriters may thereby be made necessary. The
terms "Underwriters" and "Underwriter" as used in this Agreement shall include
any party substituted under this Section 11 with like effect as if it had
originally been a party to this Agreement with respect to such Firm Shares
and/or Optional Shares.
12. Information Furnished by Underwriters. The statement set
forth on the inside cover page regarding stabilization and the statements under
the caption "Underwriting" (except for the third to last and last paragraphs
thereunder) in any Preliminary Prospectus and the Prospectus constitute the only
written information furnished by or on behalf of any Underwriter referred to in
Sections 1(a)(ii) and 8 hereof.
13. Notice. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, telexed, telegrammed, telegraphed or
telecopied and confirmed to such Underwriter, c/o Janney Montgomery Scott Inc.,
1801 Market Street, Philadelphia, Pennsylvania 19103, Attention: Mr. Michael J.
Mufson, with a copy to Pepper, Hamilton & Scheetz LLP, 3000 Two Logan Square,
Philadelphia, Pennsylvania 19103, Attention: Barry M. Abelson, Esquire; if sent
to the Company shall be mailed, delivered, telexed, telegrammed, telegraphed or
telecopied and confirmed to inTEST Corporation, 2 Pin Oak Lane, Cherry Hill, New
Jersey 08003, Attention: Alyn R. Holt, with a copy to Saul, Ewing, Remick &
Saul, 3800 Center Square West, Philadelphia, Pennsylvania 19102, Attention:
James W. Schwartz, Esquire; if sent to the Selling Stockholders shall be mailed,
delivered, telexed, telegrammed, telegraphed or telecopied and confirmed to Alyn
R. Holt or Hugh T. Regan, Jr., as Attorney-in-Fact, c/o inTEST Corporation, (at
the address listed above), with a copy to Saul, Ewing, Remick & Saul Attention:
James W. Schwartz, Esquire, (at the address listed above).
-32-
14. Parties. This Agreement shall inure solely to the benefit
of, and shall be binding upon, the several Underwriters, the Company, the
Subsidiaries, the Selling Stockholders and the controlling persons, directors
and officers thereof, and their respective successors, assigns, heirs and legal
representatives, and no other person shall have or be construed to have any
legal or equitable right, remedy or claim under or in respect of or by virtue of
this Agreement or any provision herein contained. The terms "successors" and
"assigns" shall not include any purchaser of the Shares merely because of such
purchase.
In all dealings with the Company and the Selling Stockholders
under this Agreement, the Representatives shall act on behalf of each of the
several Underwriters, and the Company and the Selling Stockholders shall be
entitled to act and rely upon any statement, request, notice or agreement made
or given by the Representatives jointly or by Janney Montgomery Scott Inc. on
behalf of the Representatives.
15. Definition of Business Day. For purposes of this
Agreement, "business day" means any day on which the Nasdaq National Market is
opened for trading.
16. Counterparts. This Agreement may be executed in one or
more counterparts and by facsimile signatures and all such counterparts and
facsimile signatures will constitute one and the same instrument.
17. Construction. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
applicable to agreements made and performed entirely within such Commonwealth.
All references herein to the knowledge of the Company shall be deemed to include
the knowledge of each of the Subsidiaries.
-33-
If the foregoing correctly sets forth your understanding of
our agreement, please sign and return to the Company the enclosed duplicate
hereof, whereupon it will become a binding agreement in accordance with its
terms.
Very truly yours,
INTEST CORPORATION
By:______________________________
Alyn R. Holt
Chairman of the Board and Chief
Executive Officer
THE SELLING STOCKHOLDERS
By: ______________________________
Attorney-in-Fact, acting on behalf of each of
the Selling Stockholders named in Schedule
II hereto.
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
JANNEY MONTGOMERY SCOTT INC.
NEEDHAM & COMPANY, INC.
As Representatives of the Several
Underwriters named in Schedule I
hereto
By: JANNEY MONTGOMERY SCOTT INC.
By:_________________________
Authorized Representative
-34-
JOINDER
Each of the Subsidiaries, intending to be legally bound,
hereby joins this Agreement for purposes of Sections 1 and 9 hereof.
INTEST LIMITED
------------------------------
By:
Title:
INTEST KABUSHIKI KAISHA
-----------------------------
By:
Title:
INTEST PTE, LIMITED
----------------------------
By:
Title:
[DELAWARE SUB]
----------------------------
By:
Title:
[DELAWARE SUB]
----------------------------
By:
Title:
-35-
SCHEDULE I
Schedule of Underwriters
Number of Firm Number of
Shares to be Optional Shares
Underwriter Purchased to be Purchased
- ----------- --------------- ---------------
Janney Montgomery Scott
Inc., Philadelphia, PA
Needham & Company, Inc.
New York, NY
=============== ===============
Total
SCHEDULE II
Schedule of Selling Stockholders
Number of Firm Number of Optional
Selling Stockholder Shares to be Sold Shares to be Sold
------------------- ----------------- -------------------
Alyn R. Holt 232,550 174,411
Richard O. Endres 24,749 18,562
Daniel J. Graham 49,868 37,401
Deed of Trust f/b/o K.D. Holt 29,216 21,913
Connie E. Holt 20,869 15,652
Robert E. Matthiessen 17,901 13,426
Hugh T. Regan, Sr. 14,411 10,808
Brian R. Moore 10,406 7,804
Nils O. Ny 7,826 5,869
Jack R. Edmunds 7,530 5,648
John W. Lalley 6,017 4,513
Micronics Japan Company, Ltd. 5,382 4,036
Julian P. Partington 5,097 3,824
Tomoyasu Ogura 4,843 3,633
Christopher L. West 4,748 3,561
William R. Blatchley 3,826 2,869
Ann L. Martz 2,609 1,956
Dale G. Holt 2,087 1,565
Jerome R. Bortnem 1,739 1,304
Stuart F. Daniels, Ph.D. 1,565 1,174
John J. Kotarski 1,043 783
Tomio Wakamatsu 359 269
Kenji Murayama 359 269
======= =======
Total 455,000 341,250
SCHEDULE III
List of Subsidiary Stockholders
Alyn R. Holt
Micronics Japan Company, Ltd.
Brian R. Moore
Tomoyasu Ogura
Cornelius Hol
Julian P. Partington
Tomio Wakamatsu
Kenji Murayama
SCHEDULE IV
Stockholder NASD Affiliations
None
SCHEDULE V
List of Persons Who Are to Deliver Lock-Up
Agreements Called for Under Sections 5(k) and 7(d)
Alyn R. Holt
Richard O. Endres
Daniel J. Graham
Deed of Trust f/b/o K.D. Holt
Connie E. Holt
Robert E. Matthiessen
Hugh T. Regan, Sr.
Brian R. Moore
Nils O. Ny
Jack R. Edmund
John W. Lalley
Micronics Japan Company, Ltd.
Julian P. Partington
Tomoyasu Ogura
Christopher L. West
William R. Blatchley
Ann L. Martz
Dale G. Holt
Jerome R. Bortnem
Stuart F. Daniels, Ph.D.
John J. Kotarski
Tomio Wakamatsu
Kenji Murayama
Cornelius Hol
EXHIBIT A
Subsidiaries of the Company, Jurisdiction
of Incorporation and Percentage Ownership by the Company
Subsidiary Jurisdiction % Ownership
---------- ------------ -----------
inTEST Limited U.K. 79.0%
inTEST Kabushiki Kaisha Japan 79.1%
inTEST PTE, Limited Singapore 79.0%
-------- Delaware 100%
-------- Delaware 100%
EXHIBIT B
Matters to be Covered in the Opinion of
Saul, Ewing, Remick & Saul
Counsel for the Company
(1) The Company is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, with full power and
authority to conduct all of the activities conducted by it, own or lease all of
the assets owned or leased by it, and conduct its business all as described in
the Registration Statement and the Prospectus; and is duly licensed or qualified
to do business and in good standing as a foreign corporation in all
jurisdictions, domestic or foreign, in which the nature of the activities
conducted by it and/or the character of the assets owned and leased by it makes
such qualification or license necessary, except where failure to do so could
reasonably be expected to have a material adverse effect on the general affairs,
properties, condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects of the Company.
(2) Each of the Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, domestic or foreign, with full power and authority to conduct all
of the activities conducted by it, own or lease all of the assets owned or
leased by it, and conduct its business all as described in the Registration
Statement and the Prospectus; and is duly licensed or qualified to do business
and in good standing as a foreign corporation in all jurisdictions, domestic or
foreign, in which the nature of the activities conducted by it and/or the
character of the assets owned and leased by it makes such qualification or
license necessary;
(3) No authorization, approval, consent or license of any
governmental or regulatory body, domestic or foreign, except as may be required
under the Act or the blue sky laws of the various jurisdictions, is required in
connection with the (A) authorization, issuance, transfer, sale or delivery of
the Shares to be sold by the Company; (B) execution, delivery and performance of
the Agreement by the Company or (C) taking of any action contemplated herein or
in the Registration Statement or the Prospectus, including, without limitation,
the Exchange Agreements, or if so required, all such authorizations, approvals,
consents and licenses, specifying the same, have been obtained and are in full
force and effect and have been disclosed to the Representatives.
(4) The Company has authorized and outstanding capital stock,
stock options and other derivative securities as set forth in the Registration
Statement and the Prospectus. The outstanding shares of the Common Stock,
including the shares of the Common Stock issued pursuant to the Exchange
Agreements, have been, and all of the Shares will be, upon issuance and payment
therefor, duly authorized, validly issued, fully paid and nonassessable, are not
subject to preemptive rights and have not been issued in violation of any
statutory preemptive rights or, to the knowledge of such counsel, similar
contractual rights. The holders of shares of the Common Stock are not and will
not be subject to personal liability solely by reason of being such holders. The
issue and sale of the Shares by the Company have been duly and validly
authorized. The Common Stock has been duly authorized for quotation or listing
on the Nasdaq National Market. The transactions consummated pursuant to the
Exchange Agreements were exempt from, or complied in all material respects with,
the provisions of all applicable federal, state and foreign securities and
corporate laws.
(5) To the knowledge of such counsel, no holder of any
securities of the Company has the right to require registration of shares of the
Common Stock or other securities of the Company. The description of the Common
Stock and the Shares contained in the Registration Statement and the Prospectus
conforms to the rights set forth in the instruments or certificates defining the
same and is in conformity with the requirements of the Act and the Regulations.
(6) The Company is not an "investment company" as defined in
Section 3(a) of the Investment Company Act and, if the Company conducts its
business as set forth in the Registration Statement and the Prospectus, will not
become an "investment company" and will not be required to register under the
Investment Company Act; the Company has not, prior to the date of the
Prospectus, been required to make any filings pursuant to the Exchange Act.
(7) The Company has full power and authority to enter into the
Agreement, and the Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms, except insofar as rights to indemnity
or contribution may be limited by applicable law or equitable principles, and
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, arrangement or similar laws affecting creditors'
rights generally or by general equitable principles.
(8) The Registration Statement and the Prospectus, and each
amendment thereof or supplement thereto, comply as to form with, the
requirements of the Act and the Rules and Regulations (except that no opinion
need be expressed as to matters concerning financial statements and other
financial data and related notes, schedules and financial or statistical data
contained in the Registration Statement or the Prospectus).
(9) Such counsel has participated in the preparation of the
Registration Statement and the Prospectus and nothing has come to the attention
of such counsel to lead it to believe that, both as of the Effective Date and as
of the Closing Date and any Option Closing Date, either the Registration
Statement or the Prospectus, or any amendment or supplement thereto, contained
or contains any untrue statement of a material fact or omitted or omits to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (except that no opinion need be expressed as to matters
concerning financial statements and other financial data and related notes,
schedules and financial or statistical data contained in the Registration
Statement or the Prospectus).
B - 2
(10) Such counsel has read all contracts specifically
enumerated in the Registration Statement and the Prospectus, and such contracts
are fairly summarized or described therein, conform in all material respects to
the descriptions thereof contained therein, and are filed as exhibits thereto,
if required, and there are no contracts or documents required to be so
summarized or disclosed or so filed which have not been so summarized or
disclosed or so filed.
(11) The Registration Statement has become effective under the
Act, and (A) no stop order suspending the effectiveness of the Registration
Statement has been issued and (B) to the best of such counsel's knowledge, no
proceedings for that purpose have been instituted or are threatened, pending or
contemplated. The opinion delivered at the Closing Date shall state that all
filings required by Rule 424 and Rule 430A of the Rules and Regulations have
been made, to the extent that such rules are utilized.
(12) The Exchange has been consummated and the Shares to be
issued pursuant thereto have been duly issued in accordance therewith. The
outstanding shares of capital stock or other evidence of ownership of the
Subsidiaries are duly authorized, validly issued, fully paid and non-assessable,
are not subject to preemptive rights and have not been issued in violation of
any statutory preemptive rights or similar contractual rights. The Company, to
the knowledge of such counsel, owns 100% of the capital stock of the
Subsidiaries, in all cases, free and clear of all liens, encumbrances and
security interests.
(13) The execution and delivery of the Agreement by the
Company and the Subsidiaries, the consummation by the Company and the
Subsidiaries of the transactions herein contemplated, including, without
limitation, the Exchange Agreements, and the compliance with the terms of this
Agreement do not and will not conflict with or result in a breach of any of the
terms or provisions of or violate or constitute a default under, the Certificate
of Incorporation or Bylaws or other constituent documents, domestic or foreign,
of the Company or the Subsidiaries, or any indenture, mortgage or other
agreement or instrument to which the Company or the Subsidiaries is a party or
by which the Company or the Subsidiaries or any material portion of its
properties is bound of which counsel has knowledge, or any existing statute,
rule or regulation, or any judgment, order or decree of any government,
governmental instrumentality or court, domestic or foreign, having jurisdiction
over the Company or the Subsidiaries or any material portion of its properties.
(14) To the knowledge of such counsel, there are no legal
proceedings pending or threatened against the Company or the Subsidiaries which
are required to be disclosed in the Registration Statement, except as described
therein.
B - 3
(15) To the knowledge of such counsel, except as described in
the Prospectus, the Company or the Subsidiaries does not own any interest in any
corporation, partnership, joint venture, trust or other business entity.
(16) Each Selling Stockholder has full power and authority to
enter into the Agreement and the Power of Attorney and Custody Agreement (the
"Custody Agreement"). All authorizations and consents necessary for the
execution and delivery of the Agreement and the Custody Agreement on behalf of
each Selling Stockholder have been given. The delivery of the Shares on behalf
of each Selling Stockholder pursuant to the terms of the Agreement and payment
therefor by the Underwriters will pass marketable title to the Shares to the
Underwriters, free and clear of all liens, encumbrances and claims.
(17) Each of the Agreement and the Custody Agreement has been
duly authorized, executed and delivered by each Selling Stockholder, is a valid
and binding agreement of each Selling Stockholder and the Agreement and the
Custody Agreement are enforceable against each Selling Stockholder in accordance
with the terms thereof, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, arrangement or similar laws affecting creditors'
rights generally or by general equitable principals.
(18) No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body, domestic
or foreign, is required in connection with the authorization, issuance,
transfer, sale or delivery of the Shares by or on behalf of each Selling
Stockholder, in connection with the execution, delivery and performance of the
Agreement and the Custody Agreement by each Selling Stockholder or in connection
with the taking by or on behalf of each Selling Stockholder of any action
contemplated thereby or, if so required, all such consents, approvals,
authorizations and orders, specifying the same, have been obtained and are in
full force and effect, except such as have been obtained under the Act or the
Regulations.
(19) The execution and delivery of the Agreement and the
Custody Agreement by each Selling Stockholder, the consummation by each Selling
Stockholder of the transactions herein contemplated and the compliance by each
Selling Stockholder with the terms thereof do not and will not result in a
breach or violation, in any material respect, of any, domestic or foreign,
statute, judgment, ruling, decree, order, rule or regulation of any, domestic or
foreign, court or other governmental agency or body applicable to each Selling
Stockholder.
(20) There are no transfer or similar taxes payable in
connection with the sale and delivery of the Shares by each Selling Stockholder
to the Underwriters, except as specified in such opinion.
In rendering such opinions, counsel for the Company may set
forth that as to certain matters of fact, such counsel is relying on one or more
certificates of public officials, governmental agencies or officers of the
Company. In addition, as to matters of law, counsel for the Company may rely as
to matters involving the application of laws other than the laws of the
B - 4
United States, the laws of New Jersey, the laws of Pennsylvania, the laws of
Delaware and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance satisfactory to the
Underwriters' counsel) of other counsel reasonably acceptable to the
Underwriters' counsel, familiar with the applicable laws.
Unless the context clearly indicates otherwise, the term
"Company" as used in this Exhibit, shall include the Subsidiaries. The opinion
of counsel for the Company shall include a statement to the effect that it may
be relied upon by counsel for the Underwriters in their opinion delivered to the
Underwriters.
B - 5
EXHIBIT C
Matters to be Covered in the Opinion of
Ratner & Prestia
Patent Counsel for the Company
(1) The statements in the Prospectus under the headings "Risk
Factors -- Uncertainty of Patents and Proprietary Rights ; Risk of Litigation";
"Business - Strategy - Capitalize on Experience and Expertise" and "Business --
Patents and Other Proprietary Rights"; "Business Competition" and "Experts"
insofar as such statements constitute summary descriptions of the legal matters,
documents, proceedings or descriptions referred to therein, fairly present the
information called for with respect to such legal matters, documents,
proceedings or descriptions. To our knowledge, except as described in the
Prospectus, neither the Company nor any of its subsidiaries has received any
notice of infringement of or conflict with (and we know of no infringement of or
conflict with) asserted rights of others in any patents, trade secrets,
copyrights, trademarks, service marks or trade names. To our knowledge, except
as set forth in the Prospectus, there is no infringement or violation by others
of any of the Company's patents, trade secrets, copyrights, trademarks, service
marks or trade names. Except as set forth in the Prospectus, to our knowledge
there are no legal or governmental proceedings pending or threatened related to
patents, trade secrets, copyrights, trademarks, service marks or trade names of
others to which the Company or any of its subsidiaries is a party or, except for
ordinary proceedings initiated by the Company or any of its subsidiaries seeking
statutory rights, registrations or certifications from governmental authorities,
to which any intellectual property of the Company or any of its subsidiaries is
subject.
(2) To our knowledge there is no contract or other document
relating to patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks or
trade names of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Prospectus that is not
filed or described as required.
(3) Attached hereto as Schedule A is an accurate and complete
list describing all patents issued to, and all patent applications filed on
behalf of, the Company or any of its subsidiaries with the U.S. Patent and
Trademark Office or with patent authorities in other countries. It is our
opinion that, based on the declarations of the named inventor(s) in the
applications and our investigation of the facts concerning the inventions by
such inventor(s), the named inventor(s) are the original and first inventor(s)
of the subject matter which is claimed. We are not aware of any other patents
issued to, or patent applications filed by or on behalf of, the Company or any
of its subsidiaries. On the basis of our review of assignments executed by the
inventors, it is our opinion that all the inventors have assigned all their
right, title and interest in the applications and the patents listed on Schedule
A to the Company or its subsidiaries. It is our opinion that the patents listed
on Schedule A are valid and enforceable and we are not aware of any information
B - 1
that would render the patents, or any of the claims therein, invalid or
unenforceable. Further, except as set forth in the Prospectus, we are not aware
of any actions brought or threatened by any party alleging the invalidity or
unenforceability of the patents listed on Schedule A. It is our opinion that
neither U.S. Patent 4,230,985, issued on October 28, 1980 to Matrone et al., nor
U.S. Patent 4,284,311, issued on August 8, 1981 to Forster et al., whether such
patents are taken alone, together or in combination with any other prior art
known to us, will result in the invalidation of any of the claims of U.S. Patent
4,589,815, issued on May 20, 1986, which is currently undergoing reexamination
in the U.S. Patent and Trademark Office. It is our opinion that the Company has
not or is not infringing U.S. Patent 4,230,985, issued on October 28, 1980 to
Matrone et al., nor U.S. Patent 4,284,311, issued on August 8, 1981 to Forster
et al. It is our opinion that claims 1,2,7,8 and 9 of U.S. Patent 4,589,815,
issued on May 20, 1986 and assigned to the Company, protect in the United States
the Company's docking products based on the patent (see attached Schedule B)
from exact copying.
(4) To our knowledge: (i) the Company and its subsidiaries
own, or are licensed or otherwise possess adequate rights to use, all patents,
trademarks, trademark registrations, service marks, service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets and rights
(collectively "Intellectual Property") which are used in or necessary for the
conduct of their respective businesses as described in the Prospectus, except as
otherwise described in the Prospectus, no claims have been asserted by any
person to the use of any Intellectual Property or challenging or questioning the
validity or effectiveness of any Intellectual Property; and (ii) the use, in
connection with the business and operations of the Company and its subsidiaries,
of any Intellectual Property does not infringe on the rights of any person to
the extent that an unfavorable decision, ruling or finding as to such
infringement could materially adversely affect the business, properties,
financial condition or results of operations of the Company and its subsidiaries
taken as a whole.
(5) We hereby consent to the reference to our firm under the
heading "Experts" in the Prospectus.
B - 2
Exhibit 3.2
BYLAWS
OF
inTEST CORPORATION
ARTICLE I
Stockholders
Section 1.1. Annual Meetings. An annual meeting of stockholders shall
be held for the election of directors at such date, time and place, either
within or without the State of Delaware, as may be designated by resolution of
the Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Board of Directors pursuant
to a resolution approved by a majority of the Board of Directors or at the
request in writing of stockholders owning at least fifty percent (50%) of the
voting power of the shares of stock of the corporation entitled to vote at such
meeting. The business transacted at any special meeting of the stockholders
shall be limited to the purposes stated in the notice for the meeting
transmitted to stockholders.
Section 1.3. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given that shall state the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the certificate of incorporation or
these bylaws, the written notice of any meeting shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, such notice shall be
deemed to be given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
corporation.
Section 1.4. Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be given
to each stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. Except as otherwise provided by law, the
certificate of incorporation or these bylaws, at each meeting of stockholders
the presence in person or by proxy of the holders of a majority in voting power
of the outstanding shares of stock entitled
to vote at the meeting shall be necessary and sufficient to constitute a quorum.
In the absence of a quorum, the stockholders so present and entitled to vote
thereat may, by majority vote, adjourn the meeting from time to time in the
manner provided in Section 1.4 of these bylaws until a quorum shall attend.
Shares of the corporation's stock owned by it or another corporation if a
majority of the shares entitled to vote in the election of directors of such
other corporation is held, directly or indirectly, by the corporation, shall
neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of the corporation or any
subsidiary of the corporation to vote stock, including but not limited to its
own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or in his absence by the Vice
Chairman of the Board, if any, or in his absence by the President, or in his
absence by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the person presiding over the
meeting may appoint any person to act as secretary of the meeting. The person
presiding over the meeting shall announce at the meeting of stockholders the
date and time of the opening and the closing of the polls for each matter upon
which the stockholders will vote.
Section 1.7. Voting; Proxies. Except as otherwise provided by the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one (1) vote for each share of stock held
by him which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three (3) years from its date, unless the proxy provides for a longer
period. A proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing with the
Secretary of the corporation an instrument in writing revoking the proxy or by
delivering a proxy in accordance with applicable law bearing a later date to the
Secretary of the corporation. Voting at meetings of stockholders need not be by
written ballot. At all meetings of stockholders for the election of directors a
plurality of the votes cast shall be sufficient to elect. All other elections
and questions shall, unless otherwise provided by law, the certificate of
incorporation or these bylaws, be decided by the affirmative vote of the holders
of a majority in voting power of the shares of stock which are present in person
or by proxy and entitled to vote thereon.
Section 1.8. Fixing Date for Determination of Stockholders of Record.
In order that the corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change,
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conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which record date: (i) in the case of determination
of stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty (60)
nor less than ten (10) days before the date of such meeting; (ii) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten (10) days from the date
upon which the resolution fixing the record date is adopted by the Board of
Directors; and (iii) in the case of determination of stockholders for the
purpose of any other lawful action, shall not be more than sixty (60) days prior
to such other action. If no record date is fixed: (x) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (y) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(z)the record date for determining stockholders for the purpose of any other
lawful action, shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 1.9. List of Stockholders Entitled to Vote. The Secretary shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. Upon the willful
neglect or refusal of the directors to produce such a list at any meeting for
the election of directors, they shall be ineligible for election to any office
at such meeting. Except as otherwise provided by law, the stock ledger shall be
the only evidence as to who are the stockholders entitled (i) to examine the
stock ledger, the list of stockholders entitled to vote at the meeting or the
books of the corporation, (ii) to vote in person or by proxy at any meeting of
stockholders, or (iii) to express consent or dissent to corporate action in
writing without a meeting.
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Section 1.10. Action By Consent of Stockholders. Unless otherwise
restricted by the certificate of incorporation, any action required or permitted
to be taken at any annual or special meeting of the stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and shall be
delivered (by hand or by certified or registered mail, return receipt requested)
to the corporation by delivery to its registered office in the State of
Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which minutes of proceedings of
meetings of stockholders are recorded. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing and who, if the
action had been taken at a meeting, would have been entitled to receive notice
of the meeting if the record date for such meeting had been the date that
written consents signed by a sufficient number of stockholders to take the
action were delivered to the corporation as provided herein.
Section 1.11. Inspectors of Election. The corporation may, and shall if
required by law, in advance of any meeting of stockholders, appoint one (1) or
more inspectors of election, who may be employees of the corporation, to act at
the meeting or any adjournment thereof and to make a written report thereof. The
corporation may designate one (1) or more persons as alternate inspectors to
replace any inspector who fails to act. In the event that no inspector so
appointed or designated is able to act at a meeting of the stockholders, the
person presiding at the meeting shall appoint one (1) or more inspectors to act
at the meeting. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath to execute faithfully the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspector or inspectors so appointed or designated shall (i)
ascertain the number of shares of capital stock of the corporation outstanding
and the voting power of each such share, (ii) determine the shares of capital
stock of the corporation represented at the meeting and the validity of proxies
and ballots, (iii) count all votes and ballots, (iv) determine and retain for a
reasonable period a record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify their determination of the
number of shares of capital stock of the corporation represented at the meeting
and such inspector's or inspectors' count of all votes and ballots. Such
certification and report shall specify such other information as may be required
by law. In determining validity and counting of proxies and ballots cast at any
meeting of stockholders of the corporation, the inspectors may consider such
information as is permitted by applicable law. No person who is a candidate for
an office at an election may serve as an inspector at such election.
Section 1.12. Conduct of Meetings. The Board of Directors of the
corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the person presiding over any meeting of stockholders shall have the
right and authority to prescribe such rules, regulations and procedures and to
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do all such acts as, in the judgment of such person, are appropriate for the
proper conduct of the meeting. Such rules, regulations or procedures, whether
adopted by the Board of Directors or prescribed by the person presiding over the
meeting, may include, without limitation, the following: (i) the establishment
of an agenda or order of business for the meeting; (ii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iii)
limitations on attendance at or participation in the meeting to stockholders of
record of the corporation, their duly authorized and constituted proxies or such
other persons as the person presiding over the meeting shall determine; (iv)
restrictions on entry to the meeting after the time fixed for the commencement
thereof; and (v) limitations on the time allotted to questions or comments by
participants. Unless and to the extent determined by the Board of Directors or
the person presiding over the meeting, meetings of stockholders shall not be
required to be held in accordance with the rules of parliamentary procedure.
ARTICLE II
Board of Directors
Section 2.1. Number; Qualifications. The Board of Directors shall
consist of such number of members as may be determined from time to time by
resolution of the Board of Directors which number shall not be less than five
(5). Directors need not be stockholders of the corporation.
Section 2.2. Election; Term; Resignation; Removal; Vacancies. Each
director shall hold office until his successor is elected and qualified or until
his earlier death, resignation, or removal. At the first annual meeting of
stockholders and at each annual meeting thereafter, the stockholders shall elect
directors each of whom shall hold office for a term of one year until his
successor is elected and qualified or until his earlier death, resignation, or
removal. Any director may resign at any time upon written notice to the
corporation. Any newly created directorship or any vacancy occurring in the
Board of Directors for any cause may be filled by a majority of the remaining
members of the Board of Directors, although such majority is less than a quorum,
or by a plurality of the votes cast at a meeting of stockholders, and each
director so elected shall hold office until the expiration of the term of office
of the director whom he has replaced, or until his successor is elected and
qualified, or until his earlier death, resignation, or removal.
Section 2.3. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board of Directors may from time to time determine, and if
so determined notices thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, the President, the
Secretary, or on the written request of one half or more of the members of the
Board of Directors stating the purpose or purposes for which
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such meeting is requested. Notice of a special meeting of the Board of Directors
shall be given by the person or persons calling the meeting at least twenty-four
(24) hours before the special meeting either personally, or by courier,
telephone, facsimile or mail.
Section 2.5. Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
bylaw shall constitute presence in person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings of the
Board of Directors a majority of the whole Board of Directors shall constitute a
quorum for the transaction of business. Except in cases in which the certificate
of incorporation, these bylaws or applicable law otherwise provides, the vote of
a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 2.7. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
the absence of the foregoing persons by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the person
presiding over the meeting may appoint any person to act as secretary of the
meeting.
Section 2.8. Informal Action by Directors. Unless otherwise restricted
by the certificate of incorporation or these bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board of
Directors or such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one (1) or more
committees, each committee to consist of one (1) or more of the directors of the
corporation. The Board of Directors may designate one (1) or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the
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extent permitted by law and to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it. A majority of the members shall constitute a quorum
and all matters shall be determined by a majority vote of the members present.
Section 3.2. Committee Minutes. Each committee shall keep regular
minutes of its meetings and shall file such minutes and all written consents
executed by its members with the Secretary of the corporation.
Section 3.3. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these bylaws.
ARTICLE IV
Officers
Section 4.1. Executive Officers; Election; Qualifications; Term of
Office; Resignation; Removal; Vacancies. The Board of Directors shall elect a
President and Secretary, and it may, if it so determines, choose a Chairman of
the Board and a Vice Chairman of the Board from among its members. The Board of
Directors may also choose one (1) or more Vice Presidents, one (1) or more
Assistant Secretaries, a Treasurer and one (1) or more Assistant Treasurers, and
one (1) or more other officers having such titles, and such powers and duties as
the Board may provide and, to the extent not so provided, such powers and duties
as may generally pertain to such office(s). Each such officer shall hold office
until the first meeting of the Board of Directors after the annual meeting of
stockholders next succeeding his election, and until his successor is elected
and qualified or until his earlier death, resignation, or removal. Any officer
may resign at any time upon written notice to the corporation. The Board of
Directors may remove any officer with or without cause at any time, but such
removal shall be without prejudice to the contractual rights of such officer, if
any, with the corporation. Any number of offices may be held by the same person.
Any vacancy occurring in any office of the corporation by death, resignation,
removal, or otherwise may be filled for the unexpired portion of the term by the
Board of Directors at any regular or special meeting.
Section 4.2. Powers and Duties of Executive Officers.
(i) President. The President shall be the chief executive
officer of the corporation. Subject to the provisions of the certificate of
incorporation, these bylaws,
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and the direction of the Board of Directors, the President shall have the
responsibility for the general management and control of the business and
affairs of the corporation and shall perform all duties and have all powers
which are commonly incident to the office of chief executive or which are
delegated to him or her by the Board of Directors. The President shall have
power to execute in the name of the corporation all contracts, agreements,
deeds, bonds, mortgages, and other obligations and instruments of the
corporation which are authorized, and to affix the corporate seal thereto. The
President shall have general supervision and direction of all of the other
officers, employees, and agents of the corporation.
(ii) Vice President. Each Vice President, if any, shall
have such powers and perform such duties as the Board of Directors may from time
to time prescribe. The Vice President (if only one (1) Vice President is chosen
by the Board) or one (1) Vice President designated by the Board (if two (2) or
more Vice Presidents are chosen by the Board of Directors) shall perform the
duties and exercise the powers of the President in the event of the President's
absence or disability.
(iii) Treasurer. The Treasurer, if any, shall have the
responsibility for maintaining the financial records of the corporation. The
Treasurer shall make such disbursements of the funds of the corporation as are
authorized and shall render from time to time an account of all such
transactions and of the financial condition of the corporation. The Treasurer
shall have such other powers and perform such other duties as the Board of
Directors may from time to time prescribe.
(iv) Secretary. The Secretary shall issue all authorized
notices for, and shall keep minutes of, all meetings of the stockholders and of
the Board of Directors. The Secretary shall have charge of the corporate books
and shall have such other powers and perform such other duties as the Board of
Directors may from time to time prescribe.
(v) Assistant Secretary and Assistant Treasurer. Each
Assistant Secretary, if any, and each Assistant Treasurer, if any, shall have
such powers and perform such duties as the Board of Directors may from time to
time prescribe.
(vi) Delegation of Authority. The Board of Directors may
from time to time delegate the powers or duties of any officer to any other
officers or agents, notwithstanding any provision hereof.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock shall be entitled to
have a certificate signed by or in the name of the corporation by the Chairman
or Vice Chairman of the Board
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of Directors, if any, or the President or a Vice President, and by the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the
corporation representing the number of shares owned by him in the corporation.
Any of or all the signatures on the certificate may be a facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 5.3. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person or persons registered on its books
as the owner of shares to receive dividends and to vote as such owner, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by law.
ARTICLE VI
Indemnification
Section 6.1. Right to Indemnification. The corporation shall indemnify
and hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person who was or is made or
is threatened to be made a party or is otherwise involved in any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding") by reason of the fact that he,
or a person for whom he is the legal representative, is or was a director or
officer of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust, other enterprise or nonprofit entity,
including service with respect to employee benefit plans (an "indemnitee"),
against all liability and loss suffered (including, without limitation, fines
and amounts paid in settlement) and expenses (including, without limitation,
attorneys' fees) reasonably incurred by such indemnitee in connection with such
action, suit or proceeding (including any such expenses incurred in connection
with such person's successful application for, or any action brought to enforce
such person's right to indemnification or advancement of expenses, provided for
in this Article) to the extent the power to so indemnify has been or
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may be granted by statute. For this purpose, (i) the Board of Directors by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (ii) if there are no such
directors, or if such directors so direct, independent legal counsel in a
written opinion, or (iii) the stockholders, may, and upon the request of any
such person shall, determine in each case whether or not the applicable
standards set forth in any statute have been met. The corporation shall be
required to indemnify an indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if the initiation of such proceeding
(or part thereof) by the indemnitee was authorized by the Board of Directors of
the corporation.
Section 6.2. Advancement of Expenses. The corporation shall pay the
expenses (including, without limitation, attorneys' fees) incurred by a director
or officer of the corporation in defending any proceeding referred to in Section
6.1 in advance of its final disposition; provided, however, that the payment of
expenses incurred by such person in advance of the final disposition of such
proceeding shall be made only upon receipt of an undertaking by such person to
repay all amounts advanced if it should ultimately be determined that such
person is not entitled to be indemnified under this Article or otherwise, except
that no such advance payment will be required if it is determined by the Board
of Directors that there is a substantial probability that such person will not
be able to repay the advance payments. Expenses incurred in such circumstances
by other employees and other persons who may be entitled to indemnification
hereunder may be paid in advance by the corporation upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
Section 6.3. Non-Exclusivity of Rights. The rights conferred on any
person by this Article shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
certificate of incorporation, these bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 6.4. Other Indemnification. The corporation's obligation, if
any, to indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or nonprofit entity shall be reduced by any amount such person
may collect (i) as indemnification from such other corporation, partnership,
joint venture, trust, enterprise or nonprofit entity or (ii) as beneficiary of,
or insured under, any policy of insurance insuring against such liabilities and
expenses covered by this Article.
Section 6.5. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
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ARTICLE VII
Miscellaneous
Section 7.1. Fiscal Year. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
Section 7.2. Seal. The corporate seal shall have the name of the
corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
Section 7.3. Waiver of Notice of Meetings of Stockholders, Directors
and Committees. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 7.4. Interested Directors; Quorum. No contract or transaction
between the corporation and one (1) or more of its directors or officers, or
between the corporation and any other corporation, partnership, association, or
other organization in which one (1) or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if: (i) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his relationship or interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (iii) the contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
Section 7.5. Form of Records. Any records maintained by the corporation
in the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs,
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microphotographs, or any other information storage device, provided that the
records so kept can be converted into clearly legible form within a reasonable
time.
Section 7.6. Amendment of By-Laws. These by-laws may be altered or
repealed, and new bylaws made, by the Board of Directors to the extent permitted
by the certificate of incorporation, but the stockholders may make additional
bylaws and may alter and repeal any bylaws whether adopted by them or otherwise.
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EXHIBIT 4.1
NUMBER INTEST CORPORATION
IN
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 461147 10 0 SHARES
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $0.01 PAR VALUE
PER SHARE OF
INTEST CORPORATION
(hereinafter called the "Corporation"), transferable on the books of the
Corporation in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. The Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class or
series thereof, and the qualifications, limitations or restrictions of such
preferences and/or rights.
This certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
/s/ Hugh T. Regan /s/ Alyn R. Holt
- ----------------- ----------------
Secretary Chief Executive Officer
[SEAL]
[On the lower right corner of the face of this certificate the following
language appears]
Countersigned and Registered:
BANK BOSTON, N.A.
TRANSFER AGENT AND REGISTRAR
By:
AUTHORIZED SIGNATURE
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER UPON REQUEST AND
WITHOUT CHARGE A FULL STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK
OF THE CORPORATION OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. IF THE CORPORATION IS AUTHORIZED
TO ISSUE ANY CLASS OF PREFERRED SHARES IN SERIES, THE CORPORATION WILL FURNISH
THE DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS, PREFERENCES AND LIMITATIONS OF EACH SUCH SERIES, SO FAR AS THE
SAME HAVE BEEN FIXED. SUCH REQUESTS MAY BE MADE TO THE CORPORATION OR TO ITS
TRANSFER AGENT.
THE BOARD OF DIRECTORS OF THE CORPORATION IS AUTHORIZED BY RESOLUTION
OR RESOLUTIONS FROM TIME TO TIME ADOPTED TO PROVIDE FOR THE ISSUANCE OF
PREFERRED STOCK, IN SERIES, AND TO FIX AND STATE THE VOTING RIGHTS IF ANY, THE
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS, AND, QUALIFICATIONS, OR RESTRICTIONS OF SUCH SERIES. THE CORPORATION
WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE A FULL
DESCRIPTION OF EACH CLASS OF STOCK IN ANY SERIES THEREOF.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF TRAN MIN ACT - ______ Custodian ______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Transfers to Minors Act ______________
survivorship and not as
tenants in common
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, __________ hereby sell, assign and transfer unto __________
________________________________________________________________________ Shares
of the Common Stock evidenced by this Certificate, and do hereby irrevocably
constitute and appoint _______________________________________________________,
Attorney, to transfer the said shares on the books of the Corporation with full
power of substitution.
Dated ____________________, ______
_______________________________________
Signature
_______________________________________
Signature
In presence of: ________________________________
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE
STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
-2-
Exhibit 5
LAW OFFICES OF
SAUL, EWING, REMICK & SAUL
BERWYN, PENNSYLVANIA 3800 CENTRE SQUARE WEST PRINCETON, NEW JERSEY
HARRISBURG, PENNSYLVANIA PHILADELPHIA, PA 19102 WILMINGTON, DELAWARE
NEW YORK, NEW YORK
(215) 972-7777
Fax: (215) 972-7725
Internet Email: lawyers@saul.com
World Wide Web: http://www.saul.com
June 5, 1997
inTEST Corporation
2 Pin Oak Lane
Cherry Hill, NJ 08003
Re: inTEST Corporation
Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel to inTEST Corporation, a Delaware corporation
(the "Company"), in connection with the preparation of a Registration Statement
on Form S-1, as amended (the "Registration Statement"), filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), relating to the public offering of up to 2,275,000 shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), of which
1,820,000 shares of authorized but heretofore unissued shares of Common Stock
will be sold by the Company and 455,000 shares of Common Stock will be sold
severally by the selling stockholders named in the Registration Statement (the
"Selling Stockholders").
We have assumed for the purposes of this opinion that an Underwriting
Agreement substantially in the form of that filed as Exhibit 1 to the
Registration Statement (the "Underwriting Agreement") has been duly executed and
delivered by the Company, the Selling Stockholders and Janney Montgomery Scott,
Inc. and Needham & Company, Inc. as representatives of the several underwriters
named therein (the "Underwriters"). The Registration Statement also relates to
341,250 shares of Common Stock that may be sold by the Selling Stockholders
pursuant to the Underwriters' over-allotment option pursuant to the terms of the
Underwriting Agreement. We have also assumed for the purposes of this opinion
that the 300,443 shares of Common Stock to be issued in exchange for the
minority interests of the Company's three foreign subsidiaries has taken place
as contemplated by the Registration Statement.
We have reviewed (a) the Registration Statement; (b) the Company's
Certificate of Incorporation and Bylaws; (c) certain records of the Company's
corporate proceedings as reflected in its minute and stock books; and (d) such
other documents and instruments as we have deemed necessary or appropriate for
purposes of this opinion. In our examination, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals
and the conformity with the original of all documents submitted to us as copies
thereof.
Our opinion set forth below is limited to the General Corporation Law
of the State of Delaware.
We are of the opinion that:
1. The shares of Common Stock to be issued by the Company to the
Underwriters as described in the Registration Statement, when
and to the extent purchased by the Underwriters in accordance
with the Underwriting Agreement, will be legally issued, fully
paid and non-assessable; and
2. The shares of Common Stock to be sold by the Selling
Stockholders to the Underwriters as described in the
Registration Statement have been legally issued and are fully
paid and non-assessable.
We hereby consent to the use of this opinion as Exhibit 5 to the
Registration Statement. In giving such opinion, we do not thereby admit that we
are acting within the category of persons whose consent is required under
Section 7 of the Act or the rules or regulations of the Securities and Exchange
Commission thereunder.
The opinion expressed herein is solely for your benefit, and may be
relied upon only by you.
Very truly yours,
/s/ Saul, Ewing, Remick & Saul
Exhibit 23.1
Consent of Independent Certified Public Accountants
The Board of Directors
inTEST Corporation:
The audits referred to in our report dated March 14, 1997, included the related
financial statement schedule for each of the years in the three-year period
ended December 31, 1996, included in the registration statement. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits. In our opinion, the financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
We consent to the use of our reports included herein and to the references to
our firm under the headings "Selected Consolidated Financial Data" and "Experts"
in the prospectus.
/s/ KPMG Peat Marwick LLP
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Philadelphia, Pennsylvania
June 4, 1997
Exhibit 23.3
CONSENT OF RATNER & PRESTIA
We hereby consent to the reference to our firm under the headings "Legal
Matters" and "Experts" in this Registration Statement and the related Prospectus
of inTEST Corporation.
RATNER & PRESTIA
/s/ Allan Ratner
------------------
Allan Ratner
Berwyn, PA
June 5, 1997
