-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G9UN5e0mKkLnDpI2udWHOfaO/dbmBox+GOssDHMZWmYWgU1jWwEssIy+NCw4QvRq uznX1KBIW9aRyFmpimDx4A== 0000814676-98-000003.txt : 19980513 0000814676-98-000003.hdr.sgml : 19980513 ACCESSION NUMBER: 0000814676-98-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980328 FILED AS OF DATE: 19980512 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERAMICS PROCESS SYSTEMS CORP/DE/ CENTRAL INDEX KEY: 0000814676 STANDARD INDUSTRIAL CLASSIFICATION: POTTERY & RELATED PRODUCTS [3260] IRS NUMBER: 042832509 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16088 FILM NUMBER: 98616422 BUSINESS ADDRESS: STREET 1: 111 SOUTH WORCESTER STREET STREET 2: PO BOX 338 CITY: CHARTLEY STATE: MA ZIP: 02712 BUSINESS PHONE: 508-222-0614 MAIL ADDRESS: STREET 1: 111 SOUTH WORCESTER STREET STREET 2: PO BOX 338 CITY: CHARTLEY STATE: MA ZIP: 02712 10-Q 1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended March 28, 1998 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 0-16088 CERAMICS PROCESS SYSTEMS CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 04-2832509 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 111 South Worcester Street, P.O. Box 338, Chartley, Massachusetts 02712 (Address of Principal Executive Offices) (Zip Code) Registrant`s Telephone Number, including Area Code: (508) 222-0614 Former Name, Former Address and Former Fiscal Year if Changed since Last Report: Not Applicable. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. [X] Yes [ ] No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer`s classes of common stock, as of the latest practicable date. Number of shares of common stock outstanding as of March 28, 1998: 8,736,426. 2 CERAMICS PROCESS SYSTEMS CORPORATION Form 10-Q For The Fiscal Quarter Ended March 28, 1998 Index PART I: FINANCIAL INFORMATION Page Item 1: Consolidated Financial Statements 3 Consolidated Balance Sheets as of March 28, 1998 and December 27, 1997 3 Consolidated Statements of Operations for the fiscal quarters ended March 28, 1998 and March 29, 1997 5 Consolidated Statements of Cash Flows for the fiscal quarters ended March 28, 1998 and March 29, 1997 6 Notes to Consolidated Financial Statements 7 Item 2: Management`s Discussion and Analysis of Financial Condition and Results of Operations 10 PART II: OTHER INFORMATION Items 1-6 12 Signatures 12 3 PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Balance Sheets March 28, December 27, 1998 1997 ASSETS ---------- ---------- Current assets: Cash and cash equivalents $ 529,026 $ 561,166 Trade receivables 432,977 626,121 Inventories 385,847 123,325 Prepaid expenses 15,321 15,528 ---------- ---------- Total current assets 1,363,171 1,326,140 ---------- ---------- Property and equipment: Production equipment 1,643,422 1,470,253 Furniture and office equipment 71,724 70,404 ---------- ---------- 1,715,146 1,540,657 Less accumulated depreciation (1,011,051) (967,161) ---------- ---------- Net property and equipment 704,095 573,496 ---------- ---------- Deposits 5,072 5,072 ---------- ---------- Total assets $2,072,338 $1,904,708 ========== ========== See accompanying notes to consolidated financial statements. 4 CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Balance Sheets (continued) LIABILITIES AND STOCKHOLDERS` March 28, December 27, DEFICIT 1998 1997 --------- ----------- Current liabilities: Accounts payable $ 142,502 $ 154,657 Accrued expenses 571,890 677,109 Deferred revenue 155,561 163,430 Notes payable 218,474 206,962 Current portion of convertible notes payable: Related parties 260,000 260,000 Other 1,160,000 1,610,000 Current portion of obligations under capital leases 41,498 42,205 ------------ ------------ Total current liabilities 2,549,925 3,114,363 Obligations under capital leases less current portion 160,840 172,114 Obligations under notes payable less current portion 44,118 137,868 ------------ ------------ Total liabilities 2,754,883 3,424,345 ------------ ------------ Stockholders` Deficit Common stock, $0.01 par value. Authorized 15,000,000 shares; issued 8,736,426 shares at March 28, 1998 and 7,824,582 at December 27, 1997 87,364 78,246 Additional paid-in capital 30,907,846 30,464,833 Accumulated deficit (31,616,920) (32,001,881) ------------ ------------ (621,710) (1,458,802) Less treasury stock, at cost, 22,883 common shares at March 28, 1998 and December 27, 1997 (60,835) (60,835) ------------ ------------ Total shareholders` deficit (682,545) (1,519,637) ------------ ------------ Total liabilities and stockholders` deficit $ 2,072,338 $ 1,904,708 ============ ============ See accompanying notes to consolidated financial statements. 5 CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Statements of Operations Fiscal Quarters Ended March 28, March 29, 1998 1997 Revenue: ---------- ----------- Product sales $1,333,214 $ 937,609 License agreements - - ---------- ----------- Total revenue $1,333,214 $ 937,609 ========== =========== Operating expenses: Cost of product sales 727,807 634,264 Selling, general, and administrative 157,957 129,933 ---------- ----------- Total operating expenses 885,764 764,197 ---------- ----------- Operating income 447,450 173,412 Other income (expense), net (54,633) (64,969) Net income before taxes $ 392,817 $ 108,443 ---------- ----------- Income taxes 7,856 -- Net income $ 384,961 $ 108,443 ========== =========== Net income per basic common share $ 0.05 $ 0.01 ---------- ----------- Weighted average number of basic common shares outstanding 7,978,197 7,781,266 ========== =========== Net income per diluted common share $ 0.03 $ 0.01 ---------- ----------- Weighted average number of diluted common shares outstanding 11,658,621 12,247,964 ========== =========== See accompanying notes to consolidated financial statements. 6 CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Statements of Cash Flows Fiscal Quarters Ended March 28, March 29, 1998 1997 --------- --------- Cash flows from operating activities: Net income $ 384,961 $ 108,443 Adjustments to reconcile net income to cash provided by operating activities Depreciation 34,741 26,400 Amortization 9,150 6,347 Changes in assets and liabilities: Accounts receivable, trade 193,144 (94,218) Inventories (262,522) 72,168 Prepaid expenses 207 (8,624) Accounts payable (12,155) 43,742 Accrued expenses (105,219) (28,678) Deferred revenue ( 7,869) (174,440) --------- ---------- Net cash provided by (used in) operating activities 234,438 ( 48,860) --------- ---------- Cash flows from investing activities: Additions to property and equipment (174,489) (15,681) --------- ---------- Net cash used in investing activities (174,489) (15,681) --------- ---------- Cash flows from financing activities: Principal payments of capital lease obligations (11,983) ( 5,570) Proceeds from issuance of common stock 2,131 Principal payments of notes payable obligations (82,237) -- --------- --------- Net cash used in financing activities (92,089) ( 5,570) --------- --------- Net decrease in cash and cash equivalents (32,140) (70,110) Cash and cash equivalents at beginning of quarter 561,166 113,331 --------- ---------- Cash and cash equivalents at end of quarter $ 529,026 $ 43,221 ========= ========== See accompanying notes to consolidated financial statements. 7 CERAMICS PROCESS SYSTEMS CORPORATION Notes to Consolidated Financial Statement (Unaudited) (1) Nature of Business - ------------------ Ceramics Process Systems Corporation (the `Company` or `CPS`) serves the wireless communications, satellite communications, motor controller and other microelectronic markets by developing, manufacturing, and marketing advanced metal-matrix composite and ceramic components to house, interconnect and thermally manage microelectronic devices. The Company`s products are typically in the form of housings, packages, lids, substrates, thermal planes, or heat sinks, and are used in applications where thermal management and or weight are important considerations. The Company`s products are manufactured by proprietary processes the Company has developed including the QuicksetTM Injection Molding Process (`Quickset Process`) and the QuickCastTM Pressure Infiltration Process (`QuickCast Process`). The Company was incorporated on June 19, 1984. (2) Interim Consolidated Financial Statements ----------------------------------------- As permitted by the rules of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles. The accompanying financial statements for the fiscal quarters ended March 28, 1998 and March 29, 1997 are unaudited. In the opinion of management, the unaudited consolidated financial statements of CPS reflect all adjustments necessary to present fairly the financial position and results of operations for such periods. The consolidated financial statements include the accounts of CPS and its wholly-owned subsidiary, CPS Superconductor Corporation. All significant intercompany balances and transactions have been eliminated. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. (3) Net Income/Loss Per Common and Common Equivalent Share - ------------------------------------------------------ Basic EPS excludes the effect of any dilutive options, warrants or convertible securities and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Diluted EPS is computed by dividing income available to common stockholders by the sum of the weighted average number of common shares 8 and common share equivalents computed using the average market price for the period under the treasury stock method. All earnings per share amounts have been restated to conform with the SFAS 128 requirements. SFAS 128, which now governs earnings per share computation, requires the following reconciliation of the basic and diluted EPS calculations: For the periods ended March 28, March 29, 1998 1997 ----------- ----------- Basic EPS Computation: Numerator: Net income $384,961 $108,443 Denominator: Weighted average common shares outstanding 7,978,197 7,781,266 Basic EPS $0.05 $0.01 Diluted EPS Computation: Numerator: Net income $384,961 $108,443 Interest on convertible debt $ 22,266 34,250 --------- -------- Total net income $407,227 $142,693 Denominator: Weighted average common shares outstanding 7,978,197 7,781,266 Stock options 231,111 102,506 Convertible debt 3,449,313 4,364,192 ---------- --------- Total Shares 11,658,621 12,247,964 Diluted EPS $0.03 $0.01 As of March 28, 1998 and March 29, 1997, the Company had 74,000 and 92,500 securities that were antidilutive, respectively. (4) Newly Issued Accounting Changes - ------------------------------- Financial Accounting Standards Board Statement No. 130 (`FAS 130`) `Reporting Comprehensive Income` is effective for fiscal years beginning after December 15, 1997, although earlier application is permitted. The Company intends to adopt the requirements of this pronouncement in its financial statements for the year ending December 26, 1998. FAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general- PAGE <9> purpose financial statements. FAS 130 requires that all components of comprehensive income shall be reported in the financial statements in the period in which they are recognized. Furthermore, a total amount for comprehensive income shall be displayed in the financial statement where the components of other comprehensive income are reported. The Company was not previously required to present comprehensive income or the components thereof in its financial statements under generally accepted accounting principles. Financial Accounting Standards Board Statement No. 131 (`FAS 131`) `Disclosure about Segment of an Enterprise and Related Information` is effective for financial statements issued for periods beginning after December 15, 1997. FAS 131 requires disclosures about segments of an enterprise and related information regarding the different types of business activities in which an enterprise engages and the different economic environments in which it operates. The Company does not believe that the implementation of FAS 130 or 131 will have a material impact on its financial statements. (5) Inventory --------- Inventories consist of the following: March 28, December 27, 1998 1997 --------- ---------- Raw materials $ 64,819 $ 11,097 Work in process 321,028 112,228 Finished goods - - --------- ---------- $ 385,847 $ 123,325 ========= ========== (6) Accrued Expenses ---------------- Accrued expenses consist of the following: March 28, December 27, 1998 1997 --------- ---------- Accrued legal and accounting $ 32,000 $ 33,190 Accrued interest 377,565 526,294 Accrued payroll 95,738 108,242 Due to landlord 12,893 11,077 Accrued other 53,694 ( 1,694) --------- ---------- $ 571,890 $ 677,109 ========= ========== PAGE <10> (7) Supplemental Cash Flow Information - ---------------------------------- In the first fiscal quarter of 1998, the Company paid interest in cash on notes payable in the amount of $204,319, including accrued interest of $160,542 on convertible notes with principal of $450,000 which were converted into common stock by the note holders on March 19, 1998. In the first fiscal quarter of 1998, the Company paid $5,595 interest on leases for production equipment. (8) Subsequent Event - ---------------- As of the end of the first fiscal quarter of 1998, three convertible notes payable in the total principal amount of $1,420,000 were outstanding and in default. As of April 9, 1998 the Company had cured all conditions of default relating to convertible notes. On April 9, 1998, two convertible notes outstanding in the total principal amount of $920,000 were amended by agreement of note holders and the Company to establish a maturity date of January 15, 1999. The third convertible note outstanding in the principal amount of $500,000 has a maturity date of April 21, 2001. All three convertible notes payable outstanding are convertible into shares of the Company`s common stock at the option of the note holder at a rate of one share of the Company`s common stock for each $0.50 of unpaid principal and related interest. As of March 28, 1998, 3,493,842 shares of common stock were reserved for the conversion of principal and related interest of these convertible notes payable. ITEM 2 MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. There are a number of factors that could cause the Company`s actual results to differ materially from those forecasted or projected in such forward- looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or changed circumstances after the date hereof or to reflect the occurrence of unanticipated events. Financial Condition - ------------------- Net income increased to $385 thousand from $108 thousand, a 256% increase, from the first fiscal quarter of 1997 to the first fiscal quarter of 1998. Revenues increased to $1,333 thousand from $938 thousand, a 42% increase over the same time period. The Company`s cash balance at March 28, 1998 and at December 27, 1997 was $529 thousand and $561 thousand, respectively. PAGE <11> The improvement in the Company`s overall financial performance in the first fiscal quarter of 1998 versus the first fiscal quarter of 1997 was primarily the result of increased unit shipments of the Company`s metal-matrix composites for use in wireless telecommunication applications and improved gross margins. The Company financed its working capital requirements during the first fiscal quarter of 1998 with funds generated by operations. The Company expects it will continue to be able to fund its working capital requirements for the remainder of 1998 through operations. The Company`s entire operations are currently housed in a leased facility in Chartley, Massachusetts. Results of Operations - --------------------- The Company`s total revenue in the first fiscal quarter of 1998 was $1,333 thousand, a 42% increase over revenue in the first fiscal quarter of 1997 of $938 thousand. Unit shipments increased 141%, reflecting an ongoing change in product mix from small prototyping runs to recurring production, and gross margins increased to 45% from 32% over the same period. Total operating expenses in the first fiscal quarter of 1998 were $886 thousand, a 16% increase over operating expenses in the first fiscal quarter of 1997 of $764 thousand. The growth in revenue in the first fiscal quarter of 1998 from the first fiscal quarter of 1997 was primarily due to increased unit shipments of the Company`s metal-matrix composites for use in wireless telecommunication applications. Customer demand increased while unit manufacturing costs declined, resulting in both revenue growth and improved profitability. The improvement in gross margins resulted from process improvements in the Company`s manufacturing operations and the spreading of fixed manufacturing costs over greater unit volume. The cumulative effect of these revenues and costs resulted in net income of $385 thousand, or $0.05 per basic common share, in the first fiscal quarter of 1998, versus net income of $108 thousand, or $0.01 per basic common share, in the first fiscal quarter of 1997. Liquidity - --------- The Company`s liquidity improved during the first quarter as debt was reduced and the Company continued to generate cash from operations. On March 19, 1998 convertible notes outstanding in the principal amount of $450 thousand were converted by note holders into 900,000 shares of the Company`s common stock. The Company paid accrued interest in full on these notes in cash. Inventory increased to $386 thousand at the end of the first fiscal quarter of 1998 from $123 thousand at December 27, 1997. Management believes the higher inventory level will allow the Company to better address weekly fluctuations in demand from a major customer to whom the company supplies several products on a just-in-time basis. PAGE <12> Accounts Receivable decreased to $433 thousand at March 28, 1998 from $626 thousand at December 27, 1997. This change reflects fluctuations in timing of specific customer requirements, and, in the opinion of management, does not reflect any inherent seasonality in the business. PART II OTHER INFORMATION Item 1 through Item 5: None Item 6: Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 10.1 Amendment To 10% Convertible Subordinated Notes Due June 30, 1995, 10% Convertible Subordinated Note Due January 31, 1996 And 10% Convertible Subordinated Notes Due April 24, 1996 Exhibit 10.2 Registration Rights Agreement (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Ceramics Process Systems Corporation (Registrant) Date: May 11, 1998 /s/Grant C. Bennett Grant C. Bennett President and Treasurer (Principal Executive Officer) EX-10 2 Exhibit 10.1 AMENDMENT TO 10% CONVERTIBLE SUBORDINATED NOTES DUE JUNE 30, 1995, 10% CONVERTIBLE SUBORDINATED NOTE DUE JANUARY 31, 1996 AND 10% CONVERTIBLE SUBORDINATED NOTES DUE APRIL 24, 1996 Amendment made this 9th day of April, 1998 by Ceramics Process Systems Corporation, a Delaware corporation ( the `Company`), and the holders listed on Schedule I hereto (the `Noteholders`) of the Company`s outstanding 10% Convertible Subordinated Notes Due June 30, 1995, as amended (the `June Notes`), 10% Convertible Subordinated Note Due January 31, 1996 (the `January Note`) and 10% Convertible Subordinated Notes Due April 24, 1996 (The `April Notes`). The June Notes, January Note and April Notes are collectively referred to herein as the `Notes.` Except as set forth below, the Notes shall remain in full force and effect. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Notes. This Amendment is signed by the holders of the requisite percentage of the principal amount of the Notes outstanding on the date hereof necessary to amend the Notes in accordance with Section 6 (c) thereof. For valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and Noteholders agree as follows: 1. The title of each of the Notes shall be deleted in its entirety and a new title shall be substituted in its place as follows: `10% Convertible Subordinated Note Due January 15, 1999`. 2. All references to (I) `June 30, 1995` in the first two paragraphs of the June Notes, (ii) `January 31, 1996` in the first two paragraphs of the January Note and (iii) `April 24` in the first two paragraphs of the April Notes shall be deleted and, in each case, the following shall be substituted in their place: `January 15, 1999`. 3. Section 3 of the Notes shall be deleted in its entirety and a new Section 3 shall be substituted in its place as follows: `3. Prepayment of Principal and Interest. The principal indebtedness represented by this Note and interest accrued but unpaid thereon may be prepaid in whole or in part at any time or from time to time without premium or penalty, provided, that, the Company provides the holder of this Note with 15 days` prior written notice of its intention so to prepay.` 4. Clause (a) of Section 4 of the Notes shall be deleted in its entirety and a new clause (a) shall be substituted in its place as follows: `(a) If default in payment under any of the Subordinated Notes, any Senior Indebtedness or any other loan instrument of the Company of any installment of interest or principal when it becomes due, which default shall remain unremedied for ten (10) days.` 5. The Notes, as supplemented and modified by this Amendment, together with the other writings referred to in the Notes or delivered pursuant thereto which form a part thereof, contain the entire agreement among the parties with respect to the subject matter thereof and amend, restate and supersede all prior and contemporaneous arrangements or understandings with respect thereto. 6. Upon the effectiveness of this Amendment, on and after the date hereof, each reference in the Notes to `this Note,` `hereunder,` `herein` or words of like import, and each reference in the other documents entered into in connection with the Notes, shall mean and be a reference to the Notes, as amended hereby. Except as specifically amended above, the Notes shall remain in full force and effect and are hereby ratified and confirmed. 7. This Amendment shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the Commonwealth of Massachusetts. 8. This Amendment may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. IN WITNESS WHEREOF the parties hereto have executed this Amendment on the date first above written. COMPANY: CERAMICS PROCESS SYSTEMS CORPORATION By: /s/Grant C. Bennett Title: Chief Executive Officer NOTEHOLDERS: AMPERSAND SPECIALTY MATERIALS VENTURES LIMITED PARTNERSHIP ASMV Management Company Limited ASMV MCLP LLP, its General Partner By: /s/Richard A. Charpie Its: Managing General Partner AMERICAN RESEARCH & DEVELOPMENT I, L.P. By: ARD Master, L.P. By: Phoenix Venture Partners, Inc., General Partner By: /s/Francis J. Hughes, Jr. Its: Vice President AMERICAN RESEARCH & DEVELOPMENT III, L.P. By: ARD Master, L.P. By: Phoenix Venture Partners, Inc., General Partner By: /s/Francis J. Hughes, Jr. Its: Vice President SCHEDULE I Schedule of Noteholders Name and Type Principal of Noteholder Issue Date Amount of Note June Notes: Ampersand Specialty Materials Ventures Limited Partnership February 16, 1994 $ 65,000 American Research & Development I., L.P. February 16, 1994 $ 27,360 American Research & Development III, L.P. February 16, 1994 $ 32,640 January Note: Ampersand Specialty Materials Ventures Limited Partnership July 20, 1994 $120,000 April Notes: Ampersand Specialty Materials Ventures Limited Partnership October 26, 1994 $475,000 American Research & Development I., L.P. October 26, 1994 $ 91,200 American Research & Development III, L.P. October 26, 1994 $108,800 Exhibit 10.2 REGISTRATION RIGHTS AGREEMENT This Agreement dated as of April 9, 1998 is entered into by and among Ceramics Process Systems Corporation, a Delaware corporation (the `Company`), and the holders of certain 10% Convertible Subordinated Notes of the Company (the `Notes`) signatory hereto (the `Noteholders`). WHEREAS, the Company and the Noteholders have amended the Notes on the date hereof; and WHEREAS, the Company and the Noteholders desire to provide for certain arrangements with respect to the registration of shares of capital stock of the Company under the Securities Act of 1933. NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement, the parties hereto agree as follows: 1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: `Commission` means the Securities and Exchange Commission, or any other Federal agency at the time administering the Securities Act. `Common Stock` means the common stock, $.01 par value per share, of the Company. `Exchange Act` means the Securities Exchange Act of 1934, as amended, or any similar Federal statute, and the rules and regulations of the Commission issued under such Act, as they each may, from time to time, be in effect. `Registration Statement` means a registration statement filed by the Company with the Commission for a public offering and sale of Common Stock (other than a registration statement on Form S-8 or Form S-4, or their successors, or any other form for a similar limited purpose, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation). `Registration Expenses` means the expenses described in Section 4. `Registrable Shares` means (i) the shares of Common Stock issued or issuable upon conversion of the Notes and (ii) any other shares of Common Stock issued in respect of such shares (because of stock splits, stock dividends, reclassifications, recapitalizations, or similar events); provided, however, that shares of Common Stock which are Registrable Shares shall cease to be Registrable Shares (i) upon any sale pursuant to a Registration Statement or Rule 144 under the Securities Act or (ii) upon any sale in any manner to a person or entity which, by virtue of Section 8 of this Agreement, is not entitled to the rights provided by this Agreement. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Registrable Shares, the determination of such percentage shall include shares of Common Stock issuable upon conversion of the Notes even if such conversion has not yet been effected. `Securities Act` means the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the Commission issued under such Act, as they each may, from time to time, be in effect. `Stockholders` means the Noteholders and any persons or entities to whom the rights granted under this Agreement are transferred by any Noteholders, their successors or assigns pursuant to Section 8 hereof. 2. Incidental Registration. (a) Whenever the Company proposes to file a Registration Statement at any time and from time to time, it will, prior to such filing, give written notice to all Stockholders of its intention to do so and, upon the written request of a Stockholder or Stockholders given within 20 days after the Company provides such notice (which request shall state the intended method of disposition of such Registrable Shares), the Company shall use its best efforts to cause all Registrable Shares which the Company has been requested by such Stockholder or Stockholders to register to be registered under the Securities Act to the extent necessary to permit their sale or other disposition in accordance with the intended methods of distribution specified in the request of such Stockholder or Stockholders; provided that the Company shall have the right to postpone or withdraw any registration effected pursuant to this Section 2 without obligation to any Stockholder. (b) In connection with any registration under this Section 2 involving an underwriting, the Company shall not be required to include any Registrable Shares in such registration unless the holders thereof accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (provided that such terms must be consistent with this Agreement). If in the opinion of the managing underwriter it is appropriate because of marketing factors to limit the number of Registrable Shares to be included in the offering, then the Company shall be required to include in the registration only that number of Registrable Shares, if any, which the managing underwriter believes should be included therein. If the number of Registrable Shares to be included in the offering in accordance with the foregoing is less than the total number of shares which the holders of Registrable Shares have requested to be included, then the holders of Registrable Shares who have requested registration and other holders of securities entitled to include them in such registration shall participate in the registration pro rata based upon their total ownership of shares of Common Stock (giving effect to the conversion into Common Stock of all securities convertible thereinto). If any holder would thus be entitled to include more securities than such holder requested to be registered, the excess shall be allocated among other requesting holders pro rata in the manner described in the preceding sentence. 3. Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to use its best efforts to effect the registration of any of the Registrable Shares under the Securities Act, the Company shall: (a) file with the Commission a Registration Statement with respect to such Registrable Shares and use its best efforts to cause that Registration Statement to become and remain effective; (b) as expeditiously as possible prepare and file with the Commission any amendments and supplements to the Registration Statement and the prospectus included in the Registration Statement as may be necessary to keep the Registration Statement effective, in the case of a firm commitment underwritten public offering, until each underwriter has completed the distribution of all securities purchased by it and, in the case of any other offering, until the earlier of the sale of all Registrable Shares covered thereby or 120 days after the effective date thereof; (c) as expeditiously as possible furnish to each selling Stockholder such reasonable numbers of copies of the prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as the selling Stockholder may reasonably request in order to facilitate the public sale or other disposition of the Registrable Shares owned by the selling Stockholder; and (d) as expeditiously as possible use its best efforts to register or qualify the Registrable Shares covered by the Registration Statement under the securities or Blue Sky laws of such states as the selling Stockholders shall reasonably request, and do any and all other acts and things that may be necessary or desirable to enable the selling Stockholders to consummate the public sale or other disposition in such states of the Registrable Shares owned by the selling Stockholder; provided, however, that the Company shall not be required in connection with this paragraph (d) to qualify as a foreign corporation or execute a general consent to service of process in any jurisdiction. If the Company has delivered preliminary or final prospectuses to the selling Stockholders and after having done so the prospectus is amended to comply with the requirements of the Securities Act, the Company shall promptly notify the selling Stockholders and, if requested, the selling Stockholders shall immediately cease making offers of Registrable Shares and return all prospectuses to the Company. The Company shall promptly provide the selling Stockholders with revised prospectuses and, following receipt of the revised prospectuses, the selling Stockholders shall be free to resume making offers of the Registrable Shares. 4. Allocation of Expenses. The Company will pay all Registration Expenses of all registrations under this Agreement. For purposes of this Section 4, the term `Registration Expenses` shall mean all expenses incurred by the Company in complying with this Agreement, including, without limitation, all registration and filing fees, exchange listing fees, printing expenses, fees and expenses of counsel for the Company and the fees and expenses of one counsel selected by the selling Stockholders to represent the selling Stockholders, state Blue Sky fees and expenses, and the expense of any special audits incident to or required by any such registration, but excluding underwriting discounts, selling commissions and the fees and expenses of selling Stockholders` own counsel. 5. Indemnification and Contribution. (a) In the event of any registration of any of the Registrable Shares under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless the seller of such Registrable Shares, each underwriter of such Registrable Shares, and each other person, if any, who controls such seller or underwriter within the meaning of the Securities Act or the Exchange Act against any losses, claims, damages or liabilities, joint or several, to which such seller, underwriter or controlling person may become subject under the Securities Act, the Exchange Act, state securities or Blue Sky laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such Registrable Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arise out of or are based upon the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Company will reimburse such seller, underwriter and each such controlling person for any legal or any other expenses reasonably incurred by such seller, underwriter or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or omission made in such Registration Statement, preliminary prospectus or final prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to the Company, in writing, by or on behalf of such seller, underwriter or controlling person specifically for use in the preparation thereof. (b) In the event of any registration of any of the Registrable Shares under the Securities Act pursuant to this Agreement, each seller of Registrable Shares, severally and not jointly, will indemnify and hold harmless the Company, each of its directors and officers and each underwriter (if any) and each person, if any, who controls the Company or any such underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities, joint or several, to which the Company, such directors and officers, underwriter or controlling person may become subject under the Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such Registrable Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, if the statement or omission was made in reliance upon and in conformity with information relating to such seller furnished in writing to the Company by or on behalf of such seller specifically for use in connection with the preparation of such Registration Statement, prospectus, amendment or supplement; provided, however, that the obligations of such Stockholders hereunder shall be limited to an amount equal to the proceeds to each Stockholder of Registrable Shares sold in connection with such registration. (c) Each party entitled to indemnification under this Section 5 (the `Indemnified Party`) shall give notice to the party required to provide indemnification (the `Indemnifying Party`) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld); and, provided, further, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 5. The Indemnified Party may participate in such defense at such party`s expense; provided, however, that the Indemnifying Party shall pay such expense if representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between the Indemnified Party and any other party represented by such counsel in such proceeding. No Indemnifying Party, in the defense of any such claim or litigation shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation, and no Indemnified Party shall consent to entry of any judgment or settle such claim or litigation without the prior written consent of the Indemnifying Party. (d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder of Registrable Shares exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for indemnification pursuant to this Section 5 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 5 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling Stockholder or any such controlling person in circumstances for which indemnification is provided under this Section 5; then, in each such case, the Company and such Stockholder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportions so that such holder is responsible for the portion represented by the percentage that the public offering price of its Registrable Shares offered by the Registration Statement bears to the public offering price of all securities offered by such Registration Statement, and the Company is responsible for the remaining portion; provided, however, that, in any such case, (A) no such holder will be required to contribute any amount in excess of the proceeds to it of all Registrable Shares sold by it pursuant to such Registration Statement, and (B) no person or entity guilty of fraudulent misrepresentation, within the meaning of Section 11(f) of the Securities Act, shall be entitled to contribution from any person or entity who is not guilty of such fraudulent misrepresentation. 6. Information by Holder. Each Stockholder including Registrable Shares in any registration shall furnish to the Company such information regarding such Stockholder and the distribution proposed by such Stockholder as the Company may reasonably request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Agreement. 7. Termination. All of the Company`s obligations to register Registrable Shares under this Agreement shall terminate on the fifth anniversary of this Agreement. 8. Transfers of Rights. This Agreement, and the rights and obligations of each Noteholder hereunder, may be assigned by such Noteholder to any person or entity to which Notes are transferred by such Noteholder, and such transferee shall be deemed a `Noteholder` for purposes of this Agreement; provided that the transferee provides written notice of such assignment to the Company. 9. General. (a) Notices. All notices, requests, consents, and other communications under this Agreement shall be in writing and shall be delivered by hand or mailed by first class certified or registered mail, return receipt requested, postage prepaid: If to the Company, at Ceramics Process Systems Corporation, 111 South Worcester Street, Chartley, Massachusetts 02712-0338, Attention: President, or at such other address or addresses as may have been furnished in writing by the Company to the Noteholders; or If to a Stockholder, at his or its address set forth on Schedule I hereto, or at such other address or addresses as may have been furnished to the Company in writing by such Noteholder. Notices provided in accordance with this Section 9(a) shall be deemed delivered upon personal delivery or two business days after deposit in the mail. (b) Entire Agreement. This Agreement embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. (c) Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the holders of at least 50% of the Registrable Shares. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. (d) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall be one and the same document. (e) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (f) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. Executed as of the date first written above. COMPANY: CERAMICS PROCESS SYSTEMS CORPORATION By: /s/Grant C. Bennett Title: Chief Executive Officer NOTEHOLDERS: AMPERSAND SPECIALTY MATERIALS VENTURES LIMITED PARTNERSHIP ASMV Management Company Limited ASMV MCLP LLP, its General Partner By: /s/Richard A. Charpie Its: Managing General Partner AMERICAN RESEARCH & DEVELOPMENT I, L.P. By: ARD Master, L.P. By: Phoenix Venture Partners, Inc., General Partner By: /s/Francis J. Hughes, Jr. Its: Vice President AMERICAN RESEARCH & DEVELOPMENT III, L.P. By: ARD Master, L.P. By: Phoenix Venture Partners, Inc., General Partner By: /s/Francis J. Hughes, Jr. Its: Vice President Schedule I Noteholders Ampersand Specialty Materials Ventures Limited Partnership 55 William Street, Suite 240 Wellesley, MA 02181 American Research & Development I, L.P. 30 Federal Street Boston, MA 02110 American Research & Development III, L.P. 30 Federal Street Boston, MA 02110 EX-27 3
5 This schedule contains summary financial information extracted from consolidated financial statements of Ceramics Process Systems Corporation and is qualified in its entirety by reference to such Form 10-Q for the period ending March 28, 1998. 3-MOS DEC-26-1998 MAR-28-1998 529,026 0 432,977 0 385,847 1,363,171 704,095 1,011,051 2,072,338 2,549,925 0 0 0 8,736,426 0 2,072,338 1,333,214 1,333,214 727,807 885,764 0 0 54,633 392,817 7,856 384,961 0 0 0 384,961 0.05 0.03
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