-----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, Amd1Q8WDE1HO3X4IqOWqnMaHORIYaiKEJx7OlEKiB+ja8ahvHZEFv2aj+u0dvOo1 v/iSXFuJucLewPpgHx8h4A== 0000849323-97-000017.txt : 19970912 0000849323-97-000017.hdr.sgml : 19970911 ACCESSION NUMBER: 0000849323-97-000017 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19970828 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CFM TECHNOLOGIES INC CENTRAL INDEX KEY: 0000849323 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 232298698 STATE OF INCORPORATION: PA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-34535 FILM NUMBER: 97671977 BUSINESS ADDRESS: STREET 1: 1336 ENTERPRISE DRIVE CITY: WEST CHESTER STATE: PA ZIP: 19380 BUSINESS PHONE: 6106968300 MAIL ADDRESS: STREET 1: 1336 ENTERPRISE DRIVE CITY: WEST CHESTER STATE: PA ZIP: 19380 S-3 1 As filed with the Securities and Exchange Commission On August 28, 1997 Registration No. 333- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _____________ CFM TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Pennsylvania 3559 23-2786977 - ----------------------- -------------------- ----------------------- (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Identification incorporation Classification No.) or organization) Code Number) 1336 Enterprise Drive West Chester, Pennsylvania 19380 (610) 696-8300 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Lorin J. Randall, Vice President CFM Technologies, Inc. 1336 Enterprise Drive West Chester, Pennsylvania 19380 (610) 696-8300 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Justin P. Klein, Esq. Steven J. Feder, Esq. Ballard Spahr Andrews & Ingersoll 1735 Market Street, 51st Floor Philadelphia, Pennsylvania 19103 (215) 665-8500 ____________________ Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: X 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 the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule462(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 434, please check the following box. ____________________________ CALCULATION OF REGISTRATION FEE - --------------------------------------------------------------------------- - -------------------- ------------------------- ----------------------- Title of each class Amount to be registered Proposed maximum of securities to be offering per share(1) registered Common Stock 205,583 Shares $30.0625 - ----------------------------------------------- - -------------------- ------------------------ Proposed maximum Amount of registration aggregate fee(1) offering price(1) $6,180,338.94 $1,872.83 (1) Calculated in accordance with Rule 457(c) on the basis of the average of the high and low sale prices of the Registrant's Common Stock on August 26, 1997 as reported on the Nasdaq Stock Market. 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, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - ------------------------------------------------------------------ Information contained herin is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any State. SUBJECT TO COMPLETION, DATED AUGUST 28, 1997 PROSPECTUS 205,583 Shares CFM TECHNOLOGIES, INC. Common Stock (no par value per share) This Prospectus relates to 205,583 shares of common stock, no par value per share ("Common Stock"), of CFM Technologies, Inc., a Pennsylvania corporation ("CFM" or the "Company"), which are being offered for sale from time to time by certain shareholders of the Company (the "Selling Shareholders"). See "Plan of Distribution." The Company will not receive any of the proceeds from the sale of the shares of Common Stock being offered hereby (the "Shares"). The Shares have been, or will be, acquired from the Company by the Selling Shareholders pursuant to the exercise of certain stock option agreements (the "Options") for which the Company will receive payment of the exercise price for the Options. The Selling Shareholders directly, through agents designated from time to time, or through brokers, dealers or underwriters to be designated, may sell the Shares from time to time on terms to be determined at the time of sale. To the extent required, the specific number of Shares to be sold, the purchase price and public offering price, the names of any such agent, broker, dealer or underwriter, and any applicable commission or discount with respect to the particular offer will be set forth in a supplement to this Prospectus. The expenses of registration of the Shares under the Securities Act of 1933, as amended (the "Securities Act"), will be paid by the Company. The Selling Shareholders will, however, bear the expense of any transfer taxes and underwriting discounts and commissions applicable to the Shares sold by them. The Company and the Selling Shareholders have agreed to indemnify each other against certain liabilities under the Securities Act. The Selling Shareholders and any brokers, dealers, agents or underwriters that participate with the Selling Shareholders in the distribution of Shares may be deemed to be "underwriters" within the meaning of the Securities Act, and any commissions received by them and any profits on the resale of the Shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The Common Stock is traded on the Nasdaq Stock Market under the symbol "CFMT." On August __, 1997, the last reported sale price of the Common Stock was $__ per share. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE DISCUSSION UNDER "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS. _____________________________________________ 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. The date of this Prospectus is August __, 1997. No dealer, salesman or other person has been authorized to give any information or to make any representation not contained in or incorporated by reference in this Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by the Company or any other person. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such an offer in such jurisdiction. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information herein is correct as of any time subsequent to the date hereof or that there has been no change in the affairs of the Company since such date. __________________ TABLE OF CONTENTS __________________ Page AVAILABLE INFORMATION 2 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 3 PROSPECTUS SUMMARY 4 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 6 RISK FACTORS 6 USE OF PROCEEDS 14 DIVIDEND POLICY 14 DESCRIPTION OF CAPITAL STOCK 15 SHARES ELIGIBLE FOR FUTURE SALE 16 RECENT DEVELOPMENTS 17 SELLING SHAREHOLDERS 17 PLAN OF DISTRIBUTION 20 LEGAL MATTERS 22 EXPERTS 22 AVAILABLE INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission") in Washington, D.C. a Registration Statement on Form S-3 under the Securities Act with respect to the Shares. This Prospectus, which constitutes part of the Registration Statement, omits certain of the information contained in the Registration Statement and the exhibits and schedules thereto on file with the Commission pursuant to the Securities Act and the rules and regulations of the Commission thereunder. 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, and each such statement is qualified in all respects by such reference. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements, information statements and other information with the Commission. Such reports, proxy statement, information statements and other information may be inspected and copied at the public reference facilities maintained by the Commission at its office at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the Regional Offices of the Commission at Citicorp Center, 500 West Madison Avenue, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such material can also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates, or from the Commission's internet web site at http://www.sec.gov. Shares of the Common Stock are traded on the Nasdaq Stock Market. Such reports, proxy statement, information statements and other information can also be inspected and copied at the offices of the Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006. As used in this Prospectus all references to fiscal years refer to the Company's fiscal years ended on October 31. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission pursuant to the Exchange Act (File No. 0-27498) are incorporated herein by reference: (i) the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1996; (ii) the Company's Proxy Statement, dated February 13, 1997, for the annual meeting of shareholders held on March 11, 1997; (iii) the Company's Quarterly Report on Form 10-Q for the quarter ended January 31, 1997, as amended by Form 10-Q/A, filed June 2, 1997 (iv) the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1997; and (v) the Company's Current Report on Form 8-K dated April 25, 1997. All other documents and reports filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the termination of the offering made hereby, shall be deemed to be incorporated by reference and to be a part of this Prospectus from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus is delivered, upon oral or written request of any such person, a copy of any or all of the information incorporated herein by reference, other than the exhibits to such documents (unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates). Requests should be directed to Lorin J. Randall, Vice President, Chief Financial Officer, Treasurer and Secretary of CFM Technologies, Inc., 1336 Enterprise Drive, West Chester, Pennsylvania 19380, telephone (610) 696-8300. PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this Prospectus and the documents incorporated herein by reference. All references in this Prospectus to fiscal years refer to the Company's fiscal years ended on October 31. The Company CFM Technologies, Inc. ("CFM" or the "Company") designs, manufactures and markets advanced wet processing equipment for sale to the worldwide semiconductor and flat panel display ("FPD") industries. The Company's products are based on its patented Full-Flow enclosed processing and Direct-Displacement drying technologies and are designed to perform various critical cleaning and etching and photoresist stripping process steps in the manufacture of semiconductors and FPDs. As integrated circuits ("ICs") become increasingly complex and linewidths continue to decrease, the cost of advanced fabrication equipment escalates. Therefore, semiconductor manufacturers are increasingly focused on the cost of owning a particular piece of process equipment compared to competing systems. Determining such cost of ownership ("COO") involves measuring a variety of factors, including acquisition and installation costs, yield, throughput and the use of consumables and facility floor space. Similar trends characterize the market for the FPD industry. Manufacturers of FPDs are focused on equipment that can help to achieve higher resolutions, lower power consumption, improved brightness and clearer images. The Company believes that its patented Full-Flow enclosed processing and Direct-Displacement drying technologies enable it to provide wet processing systems that address a variety of limitations inherent in conventional systems, including wet benches and spray tools, resulting in a significantly lower COO for the Company's Full-Flow systems. The Company's Full-Flow systems automatically load wafers or FPD substrates into a fully-enclosed, flow-optimized processing vessel, which isolates them during processing from the damaging effects of exposure to cleanroom air and associated contaminants. As a result, particle contamination is substantially reduced, watermark defects and native oxide growth are substantially eliminated and process control is improved. In addition, the fully-enclosed processing vessel substantially reduces the use of water and process chemicals. Also, the modular design of the Full-Flow system enables flush mounting in the cleanroom wall, with the majority of the floor space occupied by the system components located outside the cleanroom environment, minimizing the use of expensive cleanroom floor space. In 1990, the Company sold its first Full-Flow system for use in a semiconductor production line. To date, the Company has sold over 90 Full-Flow systems to more than 25 semiconductor and FPD manufacturers. The Company's customers include: GEC Plessey, LG International (America) and related entities ("LG"), Motorola, National Semiconductor, Samsung, SGS-Thomson Microelectronics, Siemens, Texas Instruments and Tower Semiconductor. Full-Flow systems can currently be configured with either one or two vessels that are capable of processing either 50 or 100 5-inch, 6- inch or 8-inch wafers each. 100-wafer systems, which the Company began to ship in April 1996, address the cost-sensitive photoresist strip market as well as other wet processing applications. In addition, the Company believes its Full-Flow technology is well-suited for cleaning and precise etching applications in the manufacture of FPDs, and provides significant COO advantages over competing FPD wet processing technologies. The Company has developed and shipped ten FPD processing systems based on its Full-Flow platform. In addition, the Company received a $16.1 million order for six FPD Systems from LG in the first quarter of fiscal 1997 and has commenced delivery of these systems. The Company's objective is to capitalize on the inherent COO advantages of its Full-Flow systems to become a leading supplier of advanced wet processing equipment to the worldwide semiconductor and FPD industries. The Company's Full-Flow systems are based on a modular design and can be configured using a variety of process and support modules. By basing new process applications on its proprietary Full-Flow platform, the Company can focus primarily on the development and optimization of the applications' process recipes, which the Company believes significantly reduces the time and cost associated with entering new wet processing market segments. The Offering Common Stock outstanding as of July 21, 1997(1) 7,881,589 shares Shares offered by the Selling Shareholders(2) 205,583 shares Common Stock to be outstanding assuming the sale of all of the Shares(3) 8,087,172 shares Nasdaq Stock Market symbol CFMT (1) Excludes 1,042,377 shares of Common Stock issuable upon the exercise of outstanding stock options as of July 21, 1997 of which options to purchase 492,667 shares of Common Stock were then exercisable. See "Shares Eligible for Future Sale." (2) The Shares offered hereby may be acquired from the Company by the Selling Shareholders upon the exercise of the Options. See "Selling Shareholders." (3) Assumes the exercise of the Options. Excludes 836,794 shares of Common Stock issuable upon the exercise of the remaining outstanding stock options as of July 21, 1997 of which options to purchase 287,084 shares of Common Stock were then exercisable. See "Selling Shareholders" and "Shares Eligible for Future Sale." SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Statements in this Prospectus including those concerning the Company's expectations of future sales, gross profits, research, development and engineering expenses, selling, general and administrative expenses, product introductions and cash requirements include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. As such, actual results may vary materially from such expectations. Factors which could cause actual results to differ from expectations include variations in the level of orders, which can be affected by general economic conditions and growth rates in the semiconductor and FPD manufacturing industries, and in the markets served by the Company's customers, international economic and political climates, difficulties or delays in product functionality or performance, the delivery performance of sole source vendors, the timing of future product releases, failure to respond adequately to either changes in technology or customer preferences, changes in pricing by the Company or its competitors, ability to manage growth, risk of nonpayment of accounts receivable, changes in budgeted costs and failure to realize a successful outcome to pending patent litigation, all of which constitute significant risks. For a description of additional risks, see "Risk Factors" beginning on this page. There can be no assurance that the Company's results of operations will not be adversely affected by one or more of these factors. RISK FACTORS In addition to other information in this Prospectus, the following factors should be considered carefully in evaluating an investment in the Common Stock. Fluctuations in Operating Results The Company has derived substantially all of its net sales from the sale of a limited number of wet processing systems which typically have list prices ranging from approximately $0.9 million to $3.2 million per system. At the Company's current revenue level, each sale or failure to make a sale can have a material effect on the Company. A cancellation, rescheduling or delay in a shipment of even one system in a particular quarter may cause net sales in that quarter to fall significantly below the Company's expectations and thus may materially adversely affect the Company's operating results for such quarter. Other factors which may lead to fluctuations in the Company's quarterly and annual operating results include: market acceptance of the Company's systems and its customers' products; the number of systems being manufactured during any particular period; the geographic mix of sales; the mix of sales by distribution channel; the timing of announcement and introduction of new systems by the Company and its competitors; a downturn in the market for personal computers or other products incorporating semiconductors and FPDs; variations in the types of systems sold; product discounts and changes in pricing; delays in deliveries from suppliers; delays in orders due to customers' financial difficulties; and volatility in the semiconductor and FPD industries and the markets served by the Company's customers. Also, customers may face competing capital budget considerations, thus making the timing of customer orders uneven and difficult to predict. Many of the factors listed above are beyond the control of the Company. In addition, continued investments in research, development and engineering and the development of a worldwide sales, marketing and customer satisfaction organization will result in significantly higher fixed costs. There can be no assurance that the Company will be able to achieve a rate of growth or level of sales in any future period commensurate with its level of expenses. The impact of these and other factors on the Company's operating results in any future period cannot be forecast with any degree of certainty. Due to the foregoing factors, it is likely that in some future quarter or quarters the Company's operating results may be below the expectations of analysts and investors. In such event, the price of the Company's Common Stock would likely be materially and adversely affected. Acceptance by Customers of New Technology The Company's products all rely upon proprietary technology to accomplish wet chemical processing during semiconductor or FPD manufacturing, which technology is significantly different from the technological approaches in current usage for these processes. Most of the Company's competitors make use of established technology with competitive product variations. The semiconductor industry is especially resistant to the introduction of changes in process or approach in a manufacturing cycle which is quite long (up to twelve weeks), consists of many separate process events (up to 300 or more) and suffers from limited control measurement points during the overall fabrication process. Accordingly, managers of semiconductor and FPD fabrication facilities ("fabs") have exhibited a strong resistance to changing equipment and have been reluctant to embrace new technology, including the Company's Full-Flow systems. Because a substantial investment is required by semiconductor and FPD manufacturers to install and integrate capital equipment into production lines, these manufacturers will tend to choose suppliers based on past relationships, product compatibility and proven operating performance. Once a manufacturer has selected a particular vendor's capital equipment, the Company believes that the manufacturer generally relies upon that equipment for a specific production line application and frequently will attempt to consolidate related capital equipment purchases with the same vendor, to the degree that such consolidation is possible. Many semiconductor and FPD manufacturers continue to extract marginal improvements from existing wet processing technology in order to address issues such as increases in feature density, reductions in linewidth and planned increases in wafer and substrate size. Thus, there can be no assurance that the Company's products will achieve broad market acceptance. Customer Concentration Historically, relatively few customers have accounted for a substantial portion of the Company's net sales. Sales to LG, IBM, SGS-Thompson Microelectronics and Motorola accounted for approximately 29.1%, 25.3%, 19.0% and 10.8%, respectively, totalling 84.2% of net sales in fiscal 1996. In the first six months of fiscal 1997, sales to ProMos Technologies, IBM, Siemens and Macronix accounted for approximately 16.5%, 16.3%, 14.0% and 12.9%, respectively, totalling 59.7% of net sales for such period. The Company expects a significant portion of its future sales to remain concentrated within a limited number of customers. The Company's arrangements with its customers are generally on a purchase order basis and not pursuant to long-term contracts. There can be no assurance that the Company will be able to retain its major customers or that such customers will not cancel or reschedule orders or that canceled orders will be replaced by other sales. A reduction or delay in orders from any of the Company's significant customers, including reductions or delays due to market economic or competitive conditions in the semiconductor or FPD industries, or the loss of any such customers, could have a material adverse effect upon the Company's results of operations. Sole or Limited Sources of Supply The Company relies to a substantial extent on outside vendors to manufacture and supply many of the components and subassemblies used in the Company's systems. Certain of these components and subassemblies are obtained from a sole supplier or a limited group of suppliers, many of which are small, independent companies. Moreover, the Company believes that certain of these components and subassemblies can only be obtained from its current suppliers. The Company's reliance on outside vendors generally and a sole or a limited group of suppliers in particular, involves several risks, including a potential inability to obtain an adequate supply of required components and reduced control over pricing and timely delivery and quality of components. The Company has experienced and continues to experience some reliability and quality problems with certain key components and subassemblies provided by single source suppliers. Because the manufacture of certain of these components and subassemblies is a complex process and requires long lead times, there can be no assurance that delays or shortages caused by suppliers will not occur. The process of obtaining and qualifying replacement suppliers could be lengthy, and no assurance can be given that any additional sources would be available to the Company on a timely basis or at all. Any inability to obtain adequate deliveries of components and subassemblies that conform to the Company's reliability and quality requirements or any other circumstance that would require the Company to seek alternate sources of supply or, if possible, to manufacture such components internally could delay the Company's ability to ship its systems and could have a material adverse effect on the Company. Dependence on Limited Product Offerings To date, the Company's net sales have consisted primarily of sales to the semiconductor industry. The Company has developed a version of its Full-Flow system for use in FPD manufacturing. While sales of Full-Flow systems for FPD applications have became increasingly significant, there can be no assurance that the Company will be successful in maintaining or expanding these product sales. The ability of the Company to diversify its operations through the introduction and sale of system enhancements with new applications is dependent upon the success of the Company's continuing research, development and engineering activities, as well as its marketing efforts. The Company's continued sales growth will depend upon achieving market acceptance of its Full-Flow systems and future products. There can be no assurance that the Company will be able to develop, introduce or market new systems or system enhancements in a timely or cost-effective manner or that any such systems or enhancements will achieve market acceptance. Dependence upon Product Development The markets in which the Company and its customers compete are characterized by rapidly changing technology, evolving industry standards and continuous improvements in products and services. In order to remain competitive in the future, the Company will need to develop and commercialize additional cleaning and etching processes based on its Full-Flow platform. Further, the Company will need to develop new products which are capable of supporting customers' increasingly complex process requirements and which compete effectively on the basis of overall COO, including process performance and capital productivity. The market for FPD manufacturing equipment presents an additional challenge as the technology is at an earlier stage and subject to more rapid evolution. The success of new system introduction is dependent on a number of factors, including timely completion of new system designs, system performance and market acceptance, and may be adversely affected by manufacturing inefficiencies associated with the start up of such new introductions and the challenge of producing systems in volume which meet customer requirements. Because it is generally not possible to predict the time required and costs involved in reaching certain research, development and engineering objectives, actual development costs could exceed budgeted amounts and estimated product development schedules may require extension. Any delays or additional development costs could have a material adverse effect on the Company's business and results of operations. There can be no assurance that the Company will successfully develop and introduce new products or enhancements to its existing products on a timely basis or in a manner which satisfies or achieves widespread market acceptance. Because of the large number of components in, and the complexity of, the Company's systems, significant delays can occur between the introduction of systems or system enhancements and the commencement of commercial shipments. The Company has from time to time experienced delays in the introduction of, and, certain technical and manufacturing difficulties with, certain of its systems and enhancements, and may experience such delays and technical and manufacturing difficulties in future introductions or volume production of new systems or enhancements. The Company's inability to overcome such difficulties, to meet the technical specifications of any new systems or enhancements, or to manufacture and ship these systems or enhancements in volume and in a timely manner, would materially and adversely affect the Company's business and results of operations, as well as its customer relationships. In addition, the Company from time to time incurs unanticipated costs to ensure the functionality and reliability of its products early in their life cycles, which costs can be substantial. If new products or enhancements experience reliability or quality problems, the Company could encounter a number of difficulties, including reduced orders, higher manufacturing costs, delays in collection of accounts receivable and additional service and warranty expenses, all of which could materially adversely affect the Company's business and results of operations. Management of Growth The Company is currently undergoing a period of rapid growth. To accommodate this growth, the Company is in the process of implementing a variety of new and upgraded operating and financial systems, procedures and controls. There can be no assurance that such efforts can be accomplished successfully, or that the Company's systems, procedures and controls will be adequate to support the Company's operations. The Company also faces the task of identifying, recruiting, training and integrating new employees quickly enough to keep pace with its rapid growth. Many of the positions which are critical to supporting the Company's growth require experience with semiconductor capital equipment. The recent overall growth of the semiconductor capital equipment industry has made the recruitment of such experienced personnel difficult. The Company's growth may also strain the Company's management, manufacturing, financial and other resources. Any failure to expand these areas in an efficient manner could have a material adverse effect on the Company. The Company has significantly increased its operations to support increased revenues, including the hiring of additional personnel, and has made and expects to continue to make substantial investments in research, development and engineering and in sales and marketing to support product development. There can be no assurance that the Company will be able to achieve a rate of growth or level of sales in any future period commensurate with its level of expenses. The Company has recently leased an additional facility and anticipates that additional manufacturing capacity may be required. The need to acquire additional remote facilities could be disruptive and could have a material adverse effect on the Company. Dependence upon Personnel The success of the Company depends to a large extent upon the efforts of key managerial and technical employees. The loss of services of any of these persons could have a material adverse effect on the Company. The Company has not entered into written employment agreements with any of its executive officers other than its chief financial officer, nor does the Company maintain key man life insurance on any of its personnel. In addition, the success of the Company will also depend upon its ability to attract and retain qualified employees, particularly highly skilled design and process engineers involved in the manufacture of existing systems, the development of new applications and systems and the installation, training and maintenance related to those systems already installed at customer sites. There can be no assurance that the Company will be successful in recruiting, training, integrating and retaining the necessary personnel to support its anticipated growth. The failure to do so could have a material adverse effect on the Company's results of operations. Lengthy Sales Cycle Sales of the Company's systems depend upon the decision of a prospective customer either to increase manufacturing capacity or change its established manufacturing process. These decisions typically involve significant capital commitments or a change in process approach, which may require the approval of senior management. The amount of time from the initial contact with the customer to the first order is typically one to two years. The Company's ability to obtain orders from potential customers has depended in the past and may continue to depend in the future upon customers purchasing a new system in order to evaluate Full- Flow and Direct-Displacement drying technologies as an alternative to existing wet processing technologies. For many potential customers, decisions to undertake such evaluations occur infrequently. The Company often experiences delays in finalizing further system sales while the customer evaluates and receives approvals for the purchase of additional systems. Such delays may include the time necessary to plan, design or complete a new or expanded fab. Due to these factors, the Company's systems typically have a lengthy sales cycle during which the Company may expend substantial funds and management effort. There can be no assurance that any of these expenditures or efforts on the part of the Company will result in sales. Volatility of the Semiconductor Industry The Company's business depends, in significant part, upon capital expenditures by manufacturers of semiconductor devices, which in turn depend upon the current and anticipated market demand for such devices and the products utilizing such devices. The semiconductor industry has been highly volatile and historically has experienced periods of oversupply, resulting in significantly reduced demand for capital equipment, including wet processing systems. In late 1995 and in 1996, a number of semiconductor manufacturers experienced a reduction in order growth and, in a few instances, a reduction in overall orders. These events have caused certain semiconductor manufacturers to postpone or cancel equipment deliveries to previously planned expansion or new fab construction projects. In addition, certain market analysts project an overall reduction in expenditures for semiconductor capital equipment in 1997. There can be no assurance that further order cancellations or reductions in order growth or overall orders for semiconductors will not have a material adverse effect upon the Company's business or results of operations. The Company believes that the FPD market may be similarly volatile. The need for continued investment in research, development and engineering, marketing and customer satisfaction activities may limit the Company's ability to reduce expenses in response to future downturns in the semiconductor or FPD industries. The Company's net sales and results of operations could be materially and adversely affected if downturns or slowdowns in the semiconductor or FPD markets occur in the future. International Sales Sales to customers located outside the United States accounted for approximately 63.1% of the Company's net sales in fiscal 1996 and approximately 61.1% of the Company's net sales for the first six months of fiscal 1997. The Company anticipates that such international sales are subject to numerous risks, including United States and international regulatory requirements and policy changes, political and economic instability, increased installation costs, difficulties in accounts receivable collection, exchange rate fluctuations, tariffs and other barriers, extended payment terms, difficulty in staffing and managing international operations, dependence on and difficulties in managing international distributors or representatives and potentially adverse tax consequences. Furthermore, although the Company endeavors to meet technical standards established by foreign regulatory bodies, there can be no assurance that the Company will be able to comply with such standards in the future. In addition, the laws of certain other countries may not protect the Company's intellectual property to the same extent as the laws of the United States. As part of its efforts to penetrate the East Asia market, the Company has entered into a sales agency agreement with ANAM Technology America,Inc. ("ANAM") in Korea (since 1996 with ANAM and 1991 with an affiliate of ANAM), a distribution agreement with Innotech Corporation ("Innotech") in Japan in 1992 and a sales representation agreement with Ampoc Far East Company Limited ("AMPOC") in Taiwan in 1996. Although management believes that it maintains good relationships with ANAM, Innotech and AMPOC, there can be no assurance that these relationships will continue. In the event of a termination of any of the Company's existing representation, agency or distribution arrangements, the Company's international sales could be adversely affected. Although the Company's sales are predominantly denominated in United States dollars, to the extent that the Company expands its international operations or changes its pricing to denominate prices in international currencies, the Company will be exposed to increased risk of currency fluctuation. Additionally, a strengthening in the value of the United States dollar in relation to international currencies may adversely affect the Company's future sales to international customers. There can be no assurance that any of these factors will not have a material adverse effect on the Company. Highly Competitive Industry The Company faces substantial competition in its market segments from both established competitors and potential new entrants. The Company believes that the primary competitive factors in the markets in which the Company competes are yield, throughput, capital and direct costs, system performance, size of installed base, breadth of product line and customer satisfaction, as well as customer commitment to competing technologies. Most of the Company's competitors have been in business longer than the Company, offer traditional wet processing technology, and have broader product lines, more experience with high volume manufacturing, broader name recognition, substantially larger installed bases and significantly greater financial, technical and marketing service and support resources than the Company. In the semiconductor wet processing market, the Company competes primarily with Dainippon Screen, FSI International, SCP Global Technologies, Steag MicroTech, SubMicron Systems, Tokyo Electron Limited, and Verteq. In the FPD wet processing market, the Company competes primarily with Dainippon Screen and Semitool. There can be no assurance that the Company will overcome the established positions of these competitors or that the Company's competitors will not develop enhancements to or future generations of competitive products that will offer price and performance features that are superior to the Company's systems. The Company believes that in order to remain competitive, it must invest significant financial resources in developing new product features and enhancements and in maintaining customer satisfaction worldwide. In marketing its products, the Company will face competition from suppliers employing new technologies in order to extend the capabilities of competitive products beyond their current limits or increase their productivity. In addition, increased competitive pressure could lead to intensified price-based competition, resulting in lower prices and margins, which would materially and adversely affect the Company's business and results of operations. Intellectual Property Rights The Company relies on a combination of patents, copyrights, trademarks and trade secrets, non-disclosure agreements and other forms of intellectual property protection to protect its proprietary technology. Although the Company believes that its patents and trademarks may have value, the Company believes that its future success will depend primarily on the innovation, technical expertise and marketing abilities of its personnel. The Company currently has 36 issued patents, patent applications awaiting notice of final issuance, pending and/or under evaluation in the United States in the United States and various foreign jurisdictions. The Company is currently asserting its patent rights in litigation against three defendants, alleging inducement of infringement and contributory infringement of one of the Company's patents. The defendants have denied infringement and asserted, among other things, that the patent at issue is invalid, and one of the defendants has asserted that the patent is unenforceable. There can be no assurance that any claim in the subject patent will be adjudged to encompass use of the defendants' products or that the subject patent will not be found to be unenforceable or invalid during prosecution of the actions. The Company is also a defendant in a lawsuit which seeks a declaratory judgment of patent noninfringement and invalidity of one of the Company's patents. There can be no assurances that the Company will prevail in either of these actions. A finding of invalidity or unenforceability could result in the Company's competitors developing products using the Company's proprietary technology, which in turn could have a material adverse effect on the Company. The Company believes that these actions, even if completely successful, will be costly to the Company in terms of both financial and management resources. There can be no assurance that additional patents will be issued on the Company's pending or future applications or that competitors will not be able legitimately to ascertain proprietary information embedded in the Company's products which is not covered by patent or copyright. In such cases, the Company may be precluded from preventing its competitors from making use of such information. There are no pending lawsuits or claims against the Company regarding infringement of any existing patents or other intellectual property rights of others. There can be no assurance, however, that such infringement clams will not be asserted in the future, nor can there be any assurance, if such clams are made, that the Company will be able to defend such claims successfully or, if necessary, obtain licenses on reasonable terms or at all. Adverse determinations in any litigation naming the Company could subject the Company to significant liabilities to third parties, require the Company to seek licenses from third parties and prevent the Company from manufacturing and selling its systems. Any of these events could have a material adverse effect on the Company. Environmental Regulation The Company is subject to a variety of federal, state and local laws, rules and regulations relating to the use, storage, discharge and disposal of hazardous chemicals used during its research, development and engineering activities. Failure to so comply with applicable environmental requirements could result in substantial liability to the Company, suspension or cessation of the Company's operations, restrictions on the Company's ability to expand its operations or requirements for the acquisition of additional equipment or other significant expense, any of which could have a material adverse effect on the Company. Effect of Certain Anti-Takeover Provisions The Company's Articles of Incorporation, as amended, and the Pennsylvania Business Corporation Law contain certain provisions which could delay or impede the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving the Company, even if such a transaction would be beneficial to the interests of the shareholders, or could discourage a third party from attempting to acquire control of the Company. The Company has authorized 1,000,000 shares of Preferred Stock, which the Company could issue without further shareholder approval and upon such terms and conditions, and having such rights, privileges and preferences, as the Board of Directors may determine. The Company has no current plans to issue any Preferred Stock. In addition, provisions of the Pennsylvania Business Corporation Law prohibit the Company from engaging in certain business combinations and allow holders of the Company's voting stock to "put" their stock to an acquiror for fair value in the event of a control transaction (the acquisition of 20% of the voting stock of the Company). These provisions could have the effect of delaying, deferring or preventing a change in control of the Company and may adversely affect the voting and other rights of holders of Common Stock. In April 1997, the Company adopted a shareholder rights plan, as a result of which rights were issued which will become exercisable only in the event, with certain exceptions, an acquiring party accumulates, or announces an offer to acquire, 20% or more of the Company's Common Stock. While not intended to prevent a takeover of the Company, the shareholder rights plan is designed to compel a potential acquiror to negotiate with the Company's Board of Directors. Further, the Company's Articles of Incorporation, as amended, and Amended and Restated By-Laws include provisions to reduce the personal liability of the Company's directors for monetary damages resulting from breaches of their fiduciary duty and to permit the Company to indemnify its directors and officers to the fullest extent permitted by Pennsylvania law. See "Description of Capital Stock." Continued Existence of a Control Group Assuming exercise of all of the Options and sale of the shares of Common Stock received thereupon by the Selling Stockholders, Christopher F. McConnell, the Company's Chairman of the Board, and all of the executive officers and directors of the Company, collectively, will beneficially own approximately 15.5% and 18.1%, respectively, of the Common Stock. 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 ownership may also have the effect of delaying, deferring or preventing a change in control of the Company. Volatility of Stock Price The Company believes that a variety of factors could cause the price of the Company's Common Stock to fluctuate, perhaps substantially, including: announcements of developments related to the Company's business; quarterly fluctuations in the Company's actual or anticipated operating results and order levels; general conditions in the semiconductor and FPD industries or the worldwide economy; announcements of technological innovations; new products or product enhancements by the Company or its competitors; developments in patents or other intellectual property rights and litigation; and developments in the Company's relationships with its customers, distributors and suppliers. In addition, in recent years the stock market, in general, and the market for shares of small capitalization and semiconductor industry-related companies, in particular, have experienced extreme price fluctuations which have often been unrelated to the operating performance of affected companies. Any such fluctuations in the future could adversely affect the market price of the Company's Common Stock. There can be no assurance that the market price of the Common Stock of the Company will not decline. Shares Eligible for Future Sale Sales of shares of Common Stock in the public market following this offering by existing shareholders or option holders could adversely affect the market price of the Common Stock. Following completion of this offering, assuming exercise of all of the Options, 8,087,172 shares of Common Stock will be outstanding. Of these shares, 4,283,909 have been sold pursuant to registration statements filed under the Securities Act. Substantially all of the balance of such outstanding shares may be sold or may have been sold in the open market pursuant to the provisions of Rule 144 under the Securities Act. Under Rule 144 as currently in effect, these shares may be sold subject to volume limitations and certain other conditions imposed under such rule. 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 prevailing from time to time. USE OF PROCEEDS The net proceeds from the sale of the Common Stock will be received by the Selling Shareholders. The Company will not receive any of the proceeds from the sale of the Shares. The Company will receive, upon exercise of the Options, payment of the exercise price of the Options aggregating $648,962. See "Selling Shareholders." DIVIDEND POLICY The Company has never declared or paid cash dividends on its Common Stock and does not anticipate paying any cash dividends in the foreseeable future. The Company currently intends to retain its earnings, if any, for the development of its business. The declaration of any future dividends by the Company is within the discretion of the Board of Directors and will be dependent upon the earnings, financial condition and capital requirements of the Company, as well as any other factors deemed relevant by the Board of Directors. DESCRIPTION OF CAPITAL STOCK Following the amendment of its Articles of Incorporation in April 1997, the Company's authorized capital stock consists of 30,000,000 shares of Common Stock, no par value per share, and 1,000,000 shares of Preferred Stock, no par value per share. As of July 21, 1997, 7,881,589 shares of Common Stock and no shares of Preferred Stock were outstanding. The rights of the Company's capital stock are defined by the Company's Articles of Incorporation, as amended (the "Articles"), as described below, as well as by the Company's Amended and Restated By-Laws (the "By-Laws") and the Pennsylvania Business Corporation Law, as amended. The following summary of certain provisions of the capital stock of the Company does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of the Articles and By-Laws, which are included as exhibits hereto. See "Recent Developments." Common Stock The holders of the Common Stock are entitled to one vote per share for each share held of record on all matters submitted to a vote of shareholders. Subject to preferential rights with respect to any series of Preferred Stock that may be issued, holders of the Common Stock are entitled to receive ratably such dividends as may be declared by the Board of Directors on the Common Stock out of funds legally available therefor and, in the event of a liquidation, dissolution or winding-up of the affairs of the Company, are entitled to share equally and ratably in all remaining assets and funds of the Company. The holders of the Common Stock have no preemptive rights or rights to convert shares of the Common Stock into any other securities and are not subject to future calls or assessments by the Company. All outstanding shares of the Common Stock are fully paid and nonassessable by the Company. Preferred Stock The Company, by resolution of the Board of Directors and without any further vote or action by the shareholders, has the authority to issue up to 1,000,000 shares of Preferred Stock in one or more series and to fix from time to time the number of shares to be included in each such series and the designations, preferences, qualifications, limitations, restrictions and special or relative rights of the shares of each such series. The ability of the Company to issue Preferred Stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could adversely affect the voting power of the holders of the Common Stock and could have the effect of making it more difficult for a person to acquire, or of discouraging a person from acquiring, control of the Company. The Company has no present plans to issue any of the Preferred Stock. Anti-Takeover Provisions Certain provisions of the Articles and By-Laws may discourage certain transactions involving a change in control of the Company. For example, the Articles contain a provision which permits the Board to issue "blank check" Preferred Stock without shareholder approval. Further, provisions of the Pennsylvania Business Corporation Law prohibit the Company from engaging in certain business combinations with a holder of 20% or more of the Company's voting securities without super-majority board or shareholder approval and allow holders of voting stock of the Company to "put" their stock to an acquiror for fair value in the event of a control transaction (the acquisition of 20% of the voting stock of the Company). Fair value is defined as not less than the highest price paid by the acquiror during a certain 90-day period. These provisions could have the effect of delaying, deferring or preventing a change in control of the Company and may adversely affect the voting and other rights of holders of Common Stock. Shareholder Rights Plan On April 24, 1997, the Company adopted a shareholder rights plan, providing for a dividend distribution of one right for each share of the Company's Common Stock to holders as of the close of business on May 9, 1997. The rights will become exercisable only in the event, with certain exceptions, an acquiring party accumulates, or announces an offer to acquire, 20% or more of the Company's Common Stock. The rights will expire on April 24, 2007. Each right will entitle the holder to buy one-hundredth of a share of a new series of preferred stock at a price of $180. In addition, upon the occurrence of certain events, holders of the rights will be entitled to purchase either the Company's Common Stock or shares in an acquiring entity at half of market value. The Company will generally be entitled to redeem the rights at $.001 per right at any time until the tenth day following the acquisition of 20% of its Common Stock. While not intended to prevent a takeover of the Company, the shareholder rights plan is designed to compel a potential acquiror to negotiate with the Company's Board of Directors. Transfer Agent and Registrar The transfer agent and registrar for the Common Stock is American Stock Transfer & Trust Company. SHARES ELIGIBLE FOR FUTURE SALE Following completion of this offering, assuming exercise of all of the Options, 8,087,172 shares of Common Stock will be outstanding. Of these shares, 4,283,909 have been sold pursuant to registration statements filed under the Securities Act. Substantially all of the balance of such outstanding shares may be sold in the open market pursuant to the provisions of Rule 144 under the Securities Act. Under Rule 144 as currently in effect, these restricted securities are eligible for public sale subject to the volume limitations and other conditions imposed by Rule 144. In general, under Rule 144 as currently in effect, a person who has beneficially owned his or her shares for at least one year, including persons who may be deemed "affiliates" of the Company as that term is defined in the Securities Act, would be entitled to sell within any three month period a number of shares which does not exceed the greater of 1% of the then outstanding shares of the Company's Common Stock or the average weekly trading volume in such shares in the Nasdaq Stock Market during the four calendar weeks preceding the date on which notice of sale is filed with the Commission. Sales under Rule 144 are also subject to certain manner of sale limitations, notice requirements and the availability of current public information about the Company. Rule 144 also permits, under ordinary circumstances, the sale of Common Stock without regard to the foregoing limitations by a person (or persons whose shares are aggregated) who is not an affiliate of the Company and who has satisfied a two year holding period requirement. An aggregate of 1,563,123 shares of Common Stock are reserved for issuance under the Company's stock option plans and pursuant to certain other stock options not granted under plans (including the Options). In addition, 293,789 shares of Common Stock are reserved for issuance under the Company's Employee Stock Purchase Plan and 150,000 shares of Common Stock are reserved for issuance under the Company's Non-Employee Directors' Stock Option Plan. RECENT DEVELOPMENTS Increase in Authorized Capital At the annual meeting of the Company's shareholders held on March 11, 1997, the shareholders of the Company approved an amendment to the Company's Articles of Incorporation to increase the authorized number of shares of Common Stock from 10,000,000 to 30,000,000. The amendment to the Articles of Incorporation became effective on April 16, 1997. Adoption of Shareholder Rights Plan On April 24, 1997, the Company adopted a shareholder rights plan, providing for a dividend distribution of one right for each share of the Company's Common Stock to holders as of the close of business on May 9, 1997. The rights will become exercisable only in the event, with certain exceptions, an acquiring party accumulates, or announces an offer to acquire, 20% or more of the Company's Common Stock. The rights will expire on April 24, 2007. Each right will entitle the holder to buy one one- hundredth of a share of a new series of preferred stock at a price of $180. In addition, upon the occurrence of certain events, holders of the rights will be entitled to purchase either the Company's Common Stock or shares in an acquiring entity at half of market value. The Company will generally be entitled to redeem the rights at $.001 per right at any time until the tenth day following the acquisition of 20% of its Common Stock. While not intended to prevent a takeover of the Company, the shareholder rights plan is designed to compel a potential acquiror to negotiate with the Company's Board of Directors. SELLING SHAREHOLDERS The Shares being offered by the Selling Shareholders have been, or may be, acquired by certain employees, directors and former directors of the Company upon the exercise of the Options. The Options The table below indicates with respect to each of the Options, the date of grant, number of shares of Common Stock subject to the grant the exercise price and the expiration date. All of the Options are presently exercisable. Shares of Common Stock Date of Underlying Exercise Expiration Name Grant Options Options Date ------- ------- ------- ------- Roger A. Carolin(1) 3/28/91 159,664 $2.40 3/31/01 Milton S.Stearns,Jr.(2) 12/9/94 3,326 7.52 12/8/04 11/3/95 8,317 7.52 11/2/05 Burton E. 3/18/91 8,317 2.40 3/17/01 McGillivray(3) 6/11/93 2,488 2.40 6/10/03 9/25/94 14,144 7.52 9/24/04 Kevin Durr(4) 12/31/90 3,327 .24 12/31/97 John N. McConnell, Sr.(5) 3/3/96 3,000 7.52 3/31/06 Vincent L. Verdiani(6) 3/3/96 3,000 7.52 3/31/06 (1) The options indicated were granted pursuant to an agreement between the Company and Mr. Carolin entered into in connection with his compensation as President and Chief Executive Officer of the Company. The agreement provided for options to purchase 159,664 shares (post-split) at an exercise price of $2.40 per share (post-split). The split refers to the 3.326-for-1 common stock split effected on June 16, 1996. (2) The options indicated were granted pursuant to an agreement between the Company and Mr. Stearns as part of his compensation for serving as a member of the Company's Board of Directors. (3) The options indicated were granted pursuant to an agreement between the Company and Mr. McGillivray as part of his compensation for serving as a member of the Company's Board of Directors. (4) The options indicated were granted pursuant to an agreement between the Company and Mr. Durr as part of his compensation as an employee of the Company. The agreement provided for options to purchase an aggregate of approximately 16,632 shares (post-split) at an exercise price of $.24 per share (post-split) becoming exercisable in installments over a period of five years. Mr. Durr has heretofore exercised a portion of such options, with the balance remaining indicated above. (5) The options indicated were granted pursuant to an agreement between the Company and Mr. McConnell in connection with his retirement from the Company's Board of Directors and appointment as an Honorary Lifetime Director of the Company. The agreement provides for options to purchase 3,000 shares (post-split) at an exercise price of $7.52 per share (post- split). (6) The options indicated were granted pursuant to an agreement between the Company and Mr. Verdiani in connection with his retirement from the Company's Board of Directors and appointment as an Honorary Lifetime Director of the Company. The agreement provides for options to purchase 3,000 shares (post-split) at an exercise price of $7.52 per share (post- split). Security Ownership and Shares Offered The table below sets forth the name of each of the Selling Shareholders, the number of shares of Common Stock owned by each Selling Shareholder and the number of shares that may be sold pursuant to this Prospectus. The following table is based upon information furnished to the Company by the Selling Shareholders. Shares Shares Beneficially Beneficially Owned Prior to Owned After the Offering(1)(2) Offering(1)(2)(3) --------------- ----------------- Shares Name* Number Percent Offered Number Percent - ------------------------- ------- ------- -------- ------ ------- Roger A. Carolin(4) 179,928 2.23% 159,664 20,264 ** Milton S Stearns,Jr.(5) 40,843 ** 11,643 29,200 ** Burton E. cGillivray(6) 53,897 ** 24,949 28,948 ** Kevin Durr(7) 4,827 ** 3,327 1,500 ** John N. McConnell, Sr.(8) 237,135 3.01% 3,000 234,135 2.97% Vincent L. Verdiani(9) 28,623 ** 3,000 25,623 ** ------- TOTAL SHARES OFFERED 205,583 ________________ * Unless otherwise indicated, the business address of each shareholder named in this table is CFM Technologies, Inc., 1336 Enterprise Drive, West Chester, PA 19380. ** Less than 1%. (1) Unless otherwise indicated below, the persons named in the table have sole voting and investment power with respect to all shares beneficially owned. (2) Based on 7,881,589 shares outstanding as of July 21, 1997 and 8,087,172 shares to be outstanding after this offering, except that shares underlying options (including the Options) exercisable within 60 days are deemed to be outstanding for purposes of calculating the percentage owned by the holder of such options (including the Options). (3) Assumes that all of the Shares are sold. (4) Consists of exercisable options to purchase 179,928 shares (including Options to purchase 159,664 shares). Mr. Carolin disclaims beneficial ownership of 56,159 shares owned by his wife, Helena Carolin. (5) Includes 4,000 shares held in a trust of which Mr. Stearns is trustee and exercisable Options to purchase 11,643 shares. (6) Includes 16,632 shares owned jointly with Mr. McGillivray's spouse and exercisable Options to purchase 24,949 shares. (7) Includes exercisable Options to purchase 3,327 shares. (8) Includes 14,211 shares owned jointly with Mr. McConnell's spouse, 219,924 shares held in trust for Mr. McConnell's children and exercisable Options to purchase 3,000 shares. (9) Includes 23,711 shares owned jointly with Mr. Verdiani's spouse and exercisable Options to purchase 3,000 shares. Relationships Between the Company and the Selling Shareholders Roger A. Carolin has served the Company as a director since its inception in 1984 and as President and Chief Executive Officer since April 1991. Milton S. Stearns, Jr. has been a director of the Company since December 1994. Burton E. McGillivray has been a director of the Company since 1990. Kevin Durr has been employed by the Company since November 1988 and currently serves as an Account Executive. John N. McConnell, Sr. served the Company as a Director from its inception in 1984 until March, 1996 and has been an Honorary Lifetime Director of the Company since March 1996. John N. McConnell, Sr. is the father of Christopher F. McConnell, a founder of the Company and currently the chairman of the Board of Directors of the Company. Honorary Lifetime Directors are not elected by the Company's shareholders, do not receive any compensation for their services as such and are not voting members of the Board of Directors. Vincent L. Verdiani served the Company as a Director from 1985 until March 1996 and has been an Honorary Lifetime Director of the Company since March 1996. PLAN OF DISTRIBUTION The Company will not receive any of the proceeds of the sale of the Shares by the Selling Shareholders. The Company will receive, upon exercise of the Options, the exercise price for the Options, aggregating $648,962. The Shares may be sold from time to time to purchasers directly by the Selling Shareholder. Alternatively, the Selling Shareholders may from time to time offer the Shares through underwriters, brokers, dealers or agents who may receive compensation in the form of underwriting discounts, concessions or commissions from the Selling Shareholders and/or the purchasers of the Shares for whom they may act as agent. The Selling Shareholders and any such underwriters, brokers, dealers or agents who participate in the distribution of the Shares may be deemed to be "underwriters," and any profits on the sale of the Shares by them and any discounts, commissions or concessions received by any such underwriters, brokers, dealers or agents might be deemed to be underwriting discounts and commissions under the Securities Act. To the extent the Selling Shareholders may be deemed to be underwriters, the Selling Shareholders may be subject to certain statutory liabilities of the Securities Act, including, but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. Any distribution of the Shares by the Selling Shareholders may be effected from time to time in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. The Shares may be sold by one or more of the following methods without limitation: (i) to underwriters who will acquire Shares for their own account and resell them in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale (any public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time); (ii) a block trade in which the broker or dealer so engaged will attempt to sell the Shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; (iii) purchases by a broker or dealer as principal and resale by such broker or dealer for its own account pursuant to this Prospectus; (iv) ordinary brokerage transactions and transactions in which the broker solicits purchasers; (v) an exchange distribution in accordance with the rules of such exchange; (vi) face-to-face transactions between sellers and purchasers without a broker or dealer; (vii) through the writing of options; and (viii) other legally available means. In addition, the Shares may be sold in private transactions or under Rule 144 rather than pursuant to this Prospectus. There is no assurance that the Selling Shareholders will sell any or all of the Shares or that any of the Selling Shareholders will not transfer, devise or gift such Shares by other means not described herein. Underwriters participating in any offering made pursuant to this Prospectus (as amended or supplemented from time to time) may receive underwriting discounts and commissions, and discounts or concessions may be allowed or reallowed or paid to dealers, and brokers or agents participating in such transaction may receive brokerage or agent's commissions or fees. At the time a particular offering of Shares is made, to the extent required, a revised Prospectus or Prospectus Supplement will be distributed which will set forth the amount of Shares being offered and the terms of the offering, including the purchase price or public offering price, the name or names of any underwriters, brokers, dealers or agents, the purchase price paid by any underwriter for Shares purchased from the Selling Shareholders, any discounts, commissions and other items constituting compensation from the Selling Shareholders and any discounts, commissions or concessions allowed or reallowed or paid to dealers. Such revised Prospectus or Prospectus Supplement and, if necessary, a post-effective amendment to the registration statement of which this Prospectus is a part, will be filed with the Commission to reflect the disclosure of additional information with respect to the distribution of the Shares. The Selling Shareholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M (promulgated under the Exchange Act), which may limit the timing of purchases and sales of any of the Shares by the Selling Shareholders and any other such person. Furthermore, under Regulation M, any person engaged in the distribution of the Shares may not simultaneously engage in market-making activities with respect to the Common Stock for a specified period of time prior to the commencement of such distribution. All of the foregoing may affect the marketability of the Shares and the ability of any person or entity to engage in market-making activities with respect to the Common Stock. In order to comply with the securities laws of certain states, if applicable, the Shares will be sold in such jurisdictions, if required, only through registered or licensed brokers or dealers. The Company has agreed that all costs, expenses and fees in connection with the registration of the Shares will be borne by the Company. The Selling Shareholders will, however, bear the expense of any transfer taxes and underwriting discounts and commissions applicable to the Shares sold by it. The Selling Shareholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the Shares against certain liabilities, including liabilities arising under the Securities Act. The Company and the Selling Shareholders have agreed to indemnify each other against certain liabilities under the Securities Act. LEGAL MATTERS The validity of the Shares offered hereby will be passed upon for the Company by Ballard Spahr Andrews & Ingersoll, Philadelphia, Pennsylvania. EXPERTS The consolidated balance sheets as of October 31, 1995 and 1996 and the consolidated statements of income, shareholders' equity and cash flows for each of the three fiscal years in the period ended October 31, 1996, incorporated by reference in this Prospectus have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, included in the Annual Report on Form 10-K for the fiscal year ended October 31, 1996. PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The following is a list of the estimated expenses to be incurred by the Registrant in connection with the issuance and distribution of the Shares being registered hereby which shall be borne by the Company. All of the expenses listed below, except the Securities and Exchange Commission Registration Fee, represent estimates only. SEC Registration Fee $ 1,872.83 Accountants' Fees and Expenses $ 3,500.00* Legal Fees and Expenses $11,000.00* Miscellaneous Fees and Expenses $ 500.00* ---------- TOTAL $16,872.83* *Estimated Item 15. Indemnification of Directors and Officers. The registrant's Articles of Incorporation, as amended, and Amended and Restated By-Laws include provisions (i) to reduce the personal liability of the registrant's directors for monetary damages resulting from breaches of their fiduciary duty and (ii) to permit the Company to indemnify its directors and officers to the fullest extent permitted by Pennsylvania law. In addition, the Company maintains directors and officers liability insurance. Item 16. Exhibits. Exhibit Number Description - ------- ----------- 3.1 Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-1, Reg. No. 333- 20325) 3.2 Articles of Amendment to Articles of Incorporation, effective April 18, 1997 3.3 Statement with Respect to Shares, filed May 1, 1997 (Incorporation by reference to Exhibits 1 and 2 to the registration statement on Form 8-A dated April 24, 1997.) 3.4 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Registration Statement on Form S-1, Reg. No. 333- 20325) 4 Specimen copy of Common Stock Certificate (incorporated by reference to Exhibit 4 to Registration Statement on Form S-1, Reg. No. 333-20325) 5 Opinion of Ballard Spahr Andrews & Ingersoll 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Ballard Spahr Andrews & Ingersoll (contained in Exhibit 5) 24 Power of Attorney (included on signature page of Registration Statement) 99.1 Option Agreement, dated March 28, 1991, between CFM and Roger A. Carolin Item 17. Undertakings. A. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Act"); (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; Provided, however, That paragraphs (A)(1)(i) and (A)(1)(ii) do not apply if the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Act, each such post-effective amendment 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. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. B. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. D. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the 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 Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the 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. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of West Chester, Commonwealth of Pennsylvania, on August28, 1997. CFM TECHNOLOGIES, INC. By: /s/ Roger A. Carolin ------------------------ Roger A. Carolin, President and Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Christopher F. McConnell, Roger A. Carolin and Lorin J. Randall, and each or any one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated. Signature Title Date - --------------- ----------------- --------------- /s/Christopher F. McConnell Chairman of the August 28, 1997 - --------------------------- Board of Director Christopher F. McConnell /s/ Roger A. Carolin President, Chief August 28, 1997 - --------------------------- Executive Officer Roger A. Carolin and Director (Principal Executive Officer) /s/ Lorin J. Randall Vice President, August 28, 1997 - --------------------------- Chief Financial Lorin J. Randall Officer, Treasurer and Secretary (Principal Financial Officer) /s/ James Kim Director August 28, 1997 - --------------------------- James Kim /s/ Brad Mattson Director August 28, 1997 - --------------------------- Brad Mattson /s/ Burton E. McGillivray Director August 28, 1997 - --------------------------- Burton E. McGillivray /s/ Milton S. Stearns, Jr. Director August 28, 1997 - --------------------------- Milton S. Stearns, Jr. EXHIBIT INDEX Exhibit Number Description - ------- ----------- 3.1 Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-1, Reg. No. 333-20325) 3.2 Articles of Amendment to Articles of Incorporation, effective April 18, 1997 3.3 Statement with Respect to Shares, filed May 1, 1997 (Incorporation by reference to Exhibits 1 and 2 to the registration statement on Form 8-A dated April 24, 1997.) 3.4 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Registration Statement on Form S-1, Reg. No. 333-20325) 4 Specimen copy of Common Stock Certificate (incorporated by reference to Exhibit 4 to Registration Statement on Form S-1, Reg. No. 333-20325) 5 Opinion of Ballard Spahr Andrews & Ingersoll 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Ballard Spahr Andrews & Ingersoll (contained in Exhibit 5) 24 Power of Attorney (included on signature page of Registration Statement) 99.1 Option Agreement, dated March 28, 1991, between CFM and Roger A. Carolin EX-23.1 2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Form S-3 registration statement of our report dated December 19, 1996 included in CFM Technologies, Inc.'s Annual Report on Form 10-K for the year ended October 31, 1996 and to all references to our firm included in this registration statement. Philadelphia, Pa., Arthur Andersen LLP August 26, 1997 EX-99.1 3 CFM Technologies, Inc. March 28, 1991 Mr. Roger Carolin CFM Technologies 1380 Enterprise Drive West Chester, PA 19380 RE: CFM Technologies, Inc. (the "Company") Grant of Non- qualified Stock Option Dear Roger: The Company is pleased to advise you that its Board has granted to you a stock option (an "Option"), as provided below, under the CFM Technologies, Inc. 1992 Employee Stock Option Plan (the "Plan"), a copy of which is attached hereto. This option is in lieu of the option granted in your March 28, 1991 letter and agreed to by the Company. 1. Definitions. For the purposes of this Agreement, the following terms shall have the meanings set forth below: (a) "Board" shall mean the Board of Directors of the Company. (b) "Cause" shall mean (i) your theft or embezzlement, or attempted theft or embezzlement, of money or property of the Company, your perpetration or attempted perpetration of fraud, or your participation in a fraud or attempted fraud, on the Company or your unauthorized appropriation of, or your attempt to misappropriate, any tangible or intangible assets or property of the Company, (ii) any act or acts of disloyalty, misconduct or moral turpitude by you injurious to the interest, property, operations, business or reputation of the Company or your conviction of a crime the commission of which results in injury to the Company, or (iii) your failure or inability to carry out effectively your duties and obligations to the Company or to participate effectively and actively in the management of the Company, as determined in the reasonable judgment of the Board. (c) "Common Stock" shall mean the Company's Common Stock, no par value per share, or, in the event that the outstanding Common Stock is hereafter changed into or exchanged for different stock or securities of the Company, such other stock or securities. (d) "Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor statute. (e) "Committee" shall mean the Executive Compensation and Stock option Committee, or such other committee of the Board which may be designated by the Board to administer the Plan. The Committee shall be composed of two or more directors as appointed from time to time to serve by the Board. (f) "Company" shall mean CFM Technologies, Inc., a Pennsylvania business corporation, and any subsidiary corporation of CFM Technologies, Inc. as such term is defined in Section 425(f) of The Code. (g) "Disability" shall mean your inability,due to illness, accident, injury, physical or mental incapacity or other disability, to carry out effectively your duties and obligations to the Company or to participate effectively and actively in the management of the Company for a period of at least 90 consecutive days or for shorter periods aggregating at least 120 days (whether or not consecutive) during any twelve- month period, as determined in the reasonable judgment of the Board. (h) "Employment Period" shall mean the period of time which you are employed by the Company. (i) "Fair Market Value" of the Common Stock shall be determined by the Committee or, in the absence of the Committee, by the Board. (j) "Option Shares" shall mean (i) all shares of Common Stock issued or issuable upon the exercise of the option and (ii) all shares of Common Stock issued with respect to the Common Stock referred to in clause (i) above by way of stock dividend or stock split or in connection with any conversion, merger, consolidation or recapitalization or other reorganization affecting the Common Stock. Option Shares will continue to be Option Shares in the hands of any holder other than you (except for the Company or the Founders Stockholders and, to the extent that you are permitted to transfer Option Shares pursuant to paragraph (14) or (16) hereof, purchasers pursuant to a public offering under the Securities Act), and each such transferee thereof will succeed to the rights and obligations of a holder of option Shares hereunder. (k) "Founders Stock" shall mean the Common Stock subject to the Buy/Sell Agreement between the Company and certain Shareholders dated 11/1/91, a copy of which is attached hereto. (1) "Public Offering" means a public offering and sale of Common Stock to the public pursuant to an effective registration statement under the Securities Act. (m) "Sale of the Company" shall mean a merger or consolidation effecting a change in control of the Company, a sale of all or substantially all of the Company's assets or a sale of all of the Company's outstanding voting securities. (n) "Securities Act" shall mean the Securities Act of 1933, as amended, and any successor statute. (o) "Subsidiary" means with respect to any Person, any corporation of which the shares of stock having a majority of the general voting power in electing the board of directors are, at the time as of which any determination is being made, owned by such Person either directly or indirectly through Subsidiaries. 2. Option. (a) Terms. Your Option is to purchase up to 48,000 shares of Common Stock (the "Option Shares") at an option price per share of $8.00 (the "Exercise Price"), payable upon exercise as set forth in paragraph 2(b) below. Your option will expire at the close of business on the last day of the month which ends the ten year period beginning with the date of this letter (the "Expiration Date"), subject to earlier expiration in connection with the termination of your employment or your death as provided in paragraph 4(b) below. Your Option is intended to be an "incentive stock option" within the meaning of section 422A of the Code. (b) Payment of Option Price.- Subject to paragraph 3 below, your Option may be exercised in whole or in part upon payment of an amount (the "Option Price") equal to the product of (i) the Exercise Price multiplied by (ii) the number of option Shares to be acquired. Payment shall be made in cash (including check, bank draft or money order) or, in the discretion of the Committee, by delivery of a promissory note (if in accordance with policies approved by the Board). 3. Exercisability Following Employment Termination. If your employment with the Company terminates prior to the Expiration Date for reasons other than Cause, your Option will be fully exercisable as otherwise set forth in this Agreement except that the Company shall have the absolute right in its discretion to purchase your option within thirty days of the date your employment terminates at a price per share which is equal to the difference between the Exercise Price and the Fair Market Value at the date that the Company exercises its right. If the Company does not choose to exercise its right, the Employee may continue to hold the option until the Expiration Date and, if the Employee exercises the Option, the shares received shall be subject to the same restrictions and rights of redemption to which the shareholders who purchase shares pursuant to the private offering dated March 28, 1989 are subject and entitled. 4. Expiration of Option. In no event shall any part of your option be exercisable after the Expiration Date set forth in paragraph 2(a) above. 5 Procedure for Exercise. You may exercise all or any portion of your Option, at any time and from time to time prior to its expiration, by delivering written notice to the Company (to the attention of the Company' a Secretary) together with payment of the Option Price in accordance with the provisions of paragraph 2(b) above. 6. Securities Laws Restrictions and Other Restrictions on Transfer of Option Shares. You represent that when you exercise your option you will be purchasing Option Shares for your own account and not on behalf of others. You understand and acknowl edge that federal and state securities laws govern and restrict your right to offer, sell or otherwise dispose of any Option Shares unless your offer, sale or other disposition thereof is registered under the Securities Act and state securities laws, or in the opinion of the Company's counsel, such offer, sale or other disposition is exempt from registration or qualification thereunder. You agree that you will not offer, sell or otherwise dispose of any Option Shares in any manner which would: (i) require the Company to file any registration statement with the Securities and Exchange Commission (or any similar filing under state law) or to amend or supplement any such filing or (ii) violate or cause the Company to violate the Securities Act, the rules and regulations promulgated thereunder or any other state or federal law. You further understand that the certificates for any Option Shares you purchase will bear such legends as the Company deems necessary or desirable in connection with the Securities Act or other rules, regulations or laws. 7. Non-Transferability of Option. Your option is personal to you and is not transferable by you other than by Will or the laws of descent and distribution. During your lifetime only you (or your guardian or legal representative) may exercise your option. In the event of your death, your Option My be exercised only (i) by the executor or administrator of your estate or the person or persons to whom your rights under the option shall pass by Will or the laws of descent and distribution and (ii) to the extent that you were entitled thereunder at the date of your death. 8. Conformity with Plan. Your Option is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan, which is incorporated herein by reference Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. By executing and returning the enclosed copy of this Agreement, you acknowledge your receipt of this Agreement and the Plan and agree to be bound by all the terms of this Agreement and the Plan. 9. Withholding of Taxes. The Company shall be entitled, if necessary or desirable, to withhold from you from any amounts due and payable by the Company to you (or secure- payment from you in lieu of withholding) the amount of any withholding or other tax due from the Company with respect to any Option Shares issuable under this Plan, and the Company may defer such issuance unless indemnified by you to its satisfaction. 10. Adjustments. (a) In the event of a reorganization, recapitalization, stock dividend or stock split, or combination or other change in the shares of Common Stock, the Board or the Committee may, in order to prevent the dilution or enlargement of rights under your Option, make such adjustments in the number and type of shares authorized by the Plan, the number and type of shares covered by your option and the Exercise Price specified herein as may be determined to be appropriate and equitable. (b) The issuance by the Company of shares of stock of any class, or options or securities exercisable or convertible into shares of stock of any class, for cash or property, or for labor or services either upon direct sale, or upon the exercise or conversion of other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock then subject to any Options. 11. Right to Purchase Option Shares Upon Your Termination of Employment. (a) Repurchase of Option Shares. If your employment with the Company shall terminate for any reason whatsoever, including your death, Disability, resignation or termination (the date on which such termination occurs being referred to as the "Termination Date"), then the Company shall have the option to repurchase all or any part of the Option Shares issued or issuable upon exercise of your Option, whether held by you or by one or more of your transferees, at the price determined in accordance with the provisions of paragraph 12 hereof (the "Repurchase Option"). (b) Repurchase by Company. The Company may elect to purchase all or any portion of the option Shares by delivery of written notice (the "Repurchase Notice") to you or any other holders of the option Shares within 90 days after the Termination Date. The Repurchase Notice shall set forth the number of Option Shares to be acquired from you and such other holder(s), the aggregate consideration to be paid for such shares and the time and place for the closing of the transaction. The number of Option Shares to be repurchased by the company shall first be satisfied to the extent possible from the Option Shares held by you at the time of delivery of the Repurchase Notice. If the number of option Shares then held by you is less than the total number of Option Shares the Company has elected to purchase, then the Company shall purchase the remaining shares elected to be purchased from the other holders thereof, prorate according to the number of shares held by each such holder at the time of delivery of such Repurchase Notice. (c) Repurchase by Founders Stockholders. If for any reason the Company does not elect to purchase all of the Option Shares pursuant to the Repurchase Option, then the Founders Stockholders (other than you) shall be entitled to exercise the Company's Repurchase Option in the manner set forth in paragraph 11(a) for all or any portion of the number of Option Shares the Company has not elected to purchase (the "Available Shares"). As soon as practicable after the Company has determined that there will be Available Shares, but in any event within 90 days after the Termination Date, the Company shall deliver written notice (the "Option Notice") to the Founders Stockholders setting forth the number of Available Shares and the price for each Available Share. Each Founders stockholder may elect to purchase any number of Available Shares by delivering written notice to the Company within 20 days after receipt of the Option Notice from the Company. If more than one Founders Stockholder elects to purchase the Available Shares and such elections exceed the number of Available Shares, the number of Available Shares to be purchased by the electing Founders Stockholders will be allocated among them pro rate based upon their relative percentage ownership of Original Stock as set forth in paragraph 1 hereof. As soon as practicable, and in any event within five days after the expiration of such 20-day period, the Company shall notify you and any other holder(s) of Option Shares as to the number of Option Shares being purchased from you by the Founders stockholders (the "Supplemental Repurchase Notice"). At the time the Company delivers the supplemental Repurchase Notice to you and such other holder(s) of Option Shares, the Founders Stockholders shall also receive written notice from the Company setting forth the number of shares it is entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction. (d) Closing of Repurchase of Option Shares. The purchase of Option Shares pursuant to this paragraph 11 will be closed at the Company's executive offices within 20 days after the expiration of the 120-day period referred to in paragraph 11(b). At the closing, The purchaser or purchasers shall pay the purchase price in the manner specified in paragraph 12(b) and you and any other holders of Option Shares being purchased shall deliver the certificate or certificates representing such shares to the purchaser or purchasers or their nominees, accompanied by duly executed stock powers. Any purchaser of Option Shares under this paragraph 11 shall be entitled to receive customary representations and warranties from you and any other selling holders of Option Shares regarding the sale of such shares (including representations and warranties regarding good title to such shares, free and clear of any liens or encumbrances). 12. Purchase Price Option Shares. (a) Purchase Price. In the event you cease to be employed by the Company for any reason other than termination for Cause and you have not violated any of the provisions of paragraphs 17, 18 and 19 hereof, the purchase price per share to be paid for the Option Shares purchased by the Company and the Founders Stockholders pursuant to paragraph 12 shall be equal to the Fair Market Value of such Option Shares as of the Termination Date. In the event you are discharged for Cause or if you have violated any of the provisions of paragraphs 17, 18 and 19 hereof, the purchase price to be paid for the Option Shares shall be equal to The lesser of the Exercise Price and the Fair Market Value of such Option Shares as of the Termination Date. (b) Manner of Payment. If the Company elects to purchase all or any part of the Option Shares, including Option Shares held by one or more transferees, the Company shall pay for such shares: (i) first, by certified check or wire transfer of funds to the extent such payment would not cause the Company to violate the Business corporation law of the Commonwealth of Pennsylvania and would not cause the Company to breach any agreement to which it is a party relating to the indebtedness for borrowed money or other material agreement; and (ii) thereafter, with a subordinated promissory note of the Company. Such subordinated promissory note shall bear interest at the applicable federal rate as defined under the Code (which shall be payable annually in cash unless otherwise prohibited), shall have all principal payment due on the fifth anniversary of the date of issuance and shall be subordinated on terms and conditions satisfactory to the holders of the Company's indebtedness for borrowed money. If any Founders Stockholders elect to purchase all or any portion of the Available Shares, such Founders Stockholders shall pay for that portion of such Option Shares by certified check or wire transfer of funds. 13. Restrictions on Transfer. (a) Transfer of Option Shares. You will not sell, pledge or otherwise transfer any interest in any Option Shares except pursuant to the provisions of paragraph 12 or 15 hereof ("Exempt Transfers") and except pursuant to the provisions of this paragraph 13. At least 30 days prior to making any transfer other than an Exempt Transfer, you will deliver a written notice (the "Sale Notice") to the Company and the Founders Stockholders. The Sale Notice will disclose in reasonable detail the identity of the prospective transferee(s) and the terms and conditions of the proposed transfer. You agree not to consummate any such transfer until 30 days after the Sale Notice has been delivered to the Company and the Founders Stockholders, unless the parties to the transfer have -been finally determined pursuant to this paragraph 13 prior to the expiration of such 30-day period. (The date of the first to occur of such events is referred to herein as the "Authorization Date"). (b) First Refusal Rights. The Company may elect to purchase all (but not less than all) of the Option Shares to be transferred by you upon the same terms and conditions as those set forth in the Sale Notice by delivering a written notice of such election to you within 20 days after the receipt of the Sale Notice by the Company. If the Company has not elected to purchase all of the Option Shares to be transferred, than the Founders Stockholders may elect to purchase all (but not less than all) of the option Shares to be transferred upon the same terms and conditions as those set forth in the Sale Notice by delivering a written notice of such election to you within 30 days after the receipt of the Sale Notice by the Founders Stockholder. My person who has the right to acquire Option Shares pursuant to this paragraph 13(b) will be given up to 30 days (after it has been determined that such person has such right) to consummate the purchase and sale of Option Shares. If more than one Founders Stockholder elects to purchase the Option Shares specified in the Sale Notice end such elections exceed the number of remaining shares, then the number of Option Shares to be purchased by the electing Founders Stockholders will be allocated among them pro rata based upon their relative percentage ownership of original Stock as set forth in paragraph 1 hereof. If neither the Company nor any Founders Stockholder has elected to purchase all of the Option Shares specified in the Sale Notice, you may transfer the Option Shares specified in the Sale Notice at a price and on the terms no more favorable to the transferee(s) thereof than specified in the Sale Notice during the 60--day period immediately following the Authorization Date. Any Option Shares not transferred within such 60-day period will be subject to the provisions of this paragraph 13(b) upon subsequent transfer. (c) Certain Permitted Transfers. The restrictions contained in this paragraph 13 will not apply with respect to transfers of Option Shares (i) pursuant to applicable laws of descent and distribution or (ii) among your family group; provided that the restrictions contained in this paragraph will continue to be applicable to the Option Shares after any such transfer and the transferees of such Option Shares have agreed in writing to be bound by the provisions of this Agreement. Your "family - group" means your spouse and descendants. (d) Termination of Restrictions. The restrictions on the transfer of Option Shares set forth in this paragraph 13 will continue with respect to each option Share until the date on which such Option Share has been transferred in a transaction permitted by this paragraph (except in a transaction contemplated by paragraph 13(c); provided in any event the restrictions on transfers set forth in this paragraph 13 will terminate when the company has sold shares of its Common stock pursuant to a Public Offering. 14. Additional Restrictions on Transfer. (a) Restrictive Legend. The certificates representing the Option Shares will bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON ____________ HAVE NOT BEEN REGISTERED UNDER TILE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN OPTION AGREEMENT BETWEEN THE COMPANY AND ROGER CAROLIN DATED AS OF ___________, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." (b) Option of Counsel. You may not sell, transfer or dispose of any option Shares (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion of counsel reasonably acceptable in form and substance to the Company that registration under the Securities Act or any applicable state securities law is not required in connection with such transfer. (c) Holdback. You agree not to effect any public sale or distribution of any equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and the 180 days after the effectiveness of any underwritten registration, except as part of such underwritten registration if otherwise permitted. 15. Sale of the company. (a) Consent to Sale of Company. If the Board and the holders of a majority of the Company's Common Stock then outstanding approve the sale of the Company to an independent third party (whether by merger, consolidation, sale of all or substantially all of its assets or sale of all of the outstanding Common Stock) (the "Approved Sale"), you will consent to and raise no objections against the Approved Sale of the Company, and if the Approved Sale of the Company is structured as a sale of stock, you will agree to sell all of your Option Shares and rights to acquire Option Shares on the terms and conditions approved by the Board and the holders of a majority of the Common Stock then outstanding. You will take all necessary and desirable actions in connection with the consummation of the Approved Sale of the Company. For purposes of this paragraph 15, an "independent third party" is any person who does not own in excess of 5% of the Company's Common Stock on a fully-diluted basis, who is not controlling, controlled by or under common control with any such 5% owner of the Company' s Common Stock and who is not the spouse, ancestor or descendant (by birth or adoption) of such 5% owner of the Company's Common Stock. (b) Purchaser Representative. If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), you will, at the request of the Company, appoint a purchase representative (as such term is defined in Rule 501) reasonably acceptable to the Company. If you appoint the purchase representative designated by the Company, the Company will pay the fees of such purchaser representative, but if you decline to appoint the purchaser representative designated by the Company, you will appoint another purchaser representative (reasonably acceptable to the Company), and you will he responsible for the fees of the purchaser representative so appointed. (c) Termination of Restrictions. The provisions of this paragraph 15 will terminate when the Company has sold shares of its Common Stock pursuant to a Public Offering. 16. Voting Agreement. Until such time as the Company has effectuated a Public Offering, you agree to appoint members of the Committee as your proxy to vote your Option Shares and to authorize such proxies to vote such shares in the same manner as a majority of the Common Stock (excluding the Option Shares) is voted on any matter. 17. Confidential Information. You acknowledge that the information, observations and data obtained by you while employed by the Company concerning the business or affairs of the Company, any of its affiliates or any Subsidiary ("Confidential Informa tion") are the property of the Company or such affiliate or Subsidiary, as the case may be. Therefore, you agree that you shall not disclose to any unauthorized person or use for your own account any Confidential information without prior written consent of the Board, unless and to the extent that the afore mentioned matters become generally known to and available for use by the public other than as a result of your acts or omissions to act. You shall deliver to the Company at the termination of your Employment Period, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential information, Work Product (as defined in paragraph 18 below) or the business of the Company, any of its affiliates or any Subsidiary which you may then possess or have under your control. l8. Inventions and Patents. You agree that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information which relates to the Company's, its affiliates' or any of its Subsidiaries' actual or anticipated semiconductor wet processing business, research and development or existing or future products or services and which are conceived, developed or made by you while employed by the company and/or its Subsidiaries ("Work Product") belong to the Company or such affiliate or Subsidiary, as the case may be. You will promptly disclose such Work Product to the Board and perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm such owner-ship (including, without limitation, assignments, consents, powers or attorney and other instruments). 19. Non-Compete, Non-Solicitation. (a) You acknowledge that in the course of employment with the Company you have become and will become familiar with the Company's trade secrets and with other confidential information concerning the Company, its affiliates, its subsidiaries and its predecessors and that your services have been and will be of special, unique and extraordinary value to the Company. Therefore, you agree that, during the Employment Period and for the two (2) years immediately thereafter (the "Non- Compete Period"), you shall not directly or indirectly own, manage, control, participate in, consult with, render services for, or in any manner engage in any business competing with the businesses of the Company or its Subsidiaries as such businesses exist or are in process on the date of the termination of Executive's employment, within any geographical area in which the Company, its affiliates or its Subsidiaries engage or plan to engage in such businesses. You further agree that during the Non- Compete Period you will not own or hold, directly or indirectly, any interest in any business in the semiconductor wet processing equipment industry except for interests in the Company or any of its Subsidiaries. Nothing herein shall prohibit you from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as you have no active participation in the business of such corporation. (b) During the Non-compete Period, you shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company, any of its affiliates or any subsidiary to leave the employ of the Company or such affiliate or Subsidiary, or in any way interfere with the relationship between the company, any of its affiliates or any Subsidiary and any employee thereof, (ii) hire any person who was an employee of the Company, any of its affiliates or any subsidiary at any time during the Employment Period, or (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company, any of its affiliates or any Subsidiary to cease doing business with the Company or such affiliate or Subsidiary, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company, any of its affiliates or any Subsidiary. (c) You covenant and agree that, if you shall violate any of the covenants or agreements under this paragraph 19, (i) the Company shall be entitled to an accounting and repayment of all profits, compensation, commissions, remuneration or benefits that you directly or indirectly have realized and/or may realize as a result of, growing out of or in connection with any such violation and (ii) all severance payment, insurance or other benefits (if any) you are otherwise entitled shall cease; such remedies shall be in addition to and not in limitation of any injunctive relief or other rights or remedies that the Company is or may be entitled at law in equity or under this Agreement. (d)You hereby acknowledge that you have carefully read and considered the provisions of this paragraph 19 and, having done so, agree that the restrictions set forth in such paragraph 19 (including, but not limited to, the time period of restriction and the geographical areas of restriction set forth in this paragraph 19) are fair and reasonable and are reasonably required for the protection of the interests of the Company, its officers, directors and other employees. 20. Scope of Provisions. If at the time of enforcement of paragraph 17, 18 or 19 of this Agreement, a court holds that the restrictions stated here in are unreasonable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area. 21. Remedies. The parties hereto (and the Founders stockholders as third-party beneficiaries) will be entitled to enforce their rights under this Agreement specifically to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto acknowledge and agree that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party hereto (and any Founders stockholder as a third-party beneficiary) may, in its sole discretion, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement. 22. Amendment. Except as otherwise provided herein, any provision of this Agreement may be amended or waived only with the prior written consent of you and the Company; provided that no provision of paragraphs 11, 12, 13, 14, 15 or 21 or of this paragraph 22 may be amended or waived without the prior written consent of the Founders Stockholders owning a majority of the Original Stock held by all Founders Stockholders. 23. Successors and Assigns. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto whether so expressed or not. 24. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 25. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same Agreement. 26. Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 27. Governing law. The corporate law of Pennsylvania will govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement will be governed by the internal law, and not the law of conflicts, of Pennsylvania. 28. Notice. All notices, demands or other communications to he given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally or mailed by certified or registered mail, return receipt requested and postage prepaid, to the recipient. Such notices, demands and other communications shall he sent to you and to the Company and the Founders Stockholders at the addresses indicated below: (a) If to the Optionee: Roger Carolin __________________ __________________ (b) If to the Company: CFM Technologies, Inc. 1380 Enterprise Drive West Chester, PA 19380 Attention: President (c) If to the Founders Stockholders: CFM Technologies, Inc. 1380 Enterprise Drive West Chester, PA 19380 Attention: Christopher F. McConnell or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party 29. Third-Party Beneficiary. The Company and you acknowledge that the Founders Stockholders are third-party beneficiaries under this Agreement. 30. Entire Agreement. This Agreement constitutes the entire understanding between you and the Company, and supersedes all other agreements, whether written or oral, with respect to the acquisition by you of Common Stock of the Company. Please execute the extra copy of this Agreement in the space below and return it to the Company's Secretary at its executive offices to confirm your understanding and acceptance of the agreements contained in this Agreement. Very truly yours, CFM TECHNOLOGIES, INC. By:/s/Chris McConnell Enclosures: 1. Extra copy of this Agreement 2. Copy of the Plan The undersigned hereby acknowledges having read this Agreement and the Plan and hereby agrees to be bound by all provisions set forth herein and in the Plan. Dated as of OPTIONEE: 3/28/93 By:/s/ Roger Carolin Roger Carolin EX-3.2 4 Microfilm Number ---------------- Filed with the Department of State on April 16, 1997 -------------- Entity Number ----------------- ------------------------------- Secretary of the Commonwealth ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION DSCB:15-1915 (Rev 91) In compliance with the requirements of 15 Pa. C.S. 1915 (relating to articles of amendment), the undersigned business corporation, desiring to amend its Articles, hereby states that: 1. The name of the corporation is: CFM Technologies, Inc. ---------------------- 2. The (a) address of this corporation's current registered office in this Commonwealth or (b) name of its commercial registered office provider and the county of venue is (the Department is hereby authorized to correct the following information to conform to the records of the Department): (a) 1381 Enterprise Drive, West Chester, PA 19380 Chester ------------------------------------------------------------- Number and Street City State Zip County (b) c/o ---------------------------------------------------------- Name of Commercial Registered Office Provider County For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the corporation is located for venue and official publication purposes. 3. The statute by or under which it was incorporated is: Pa. Business Corporation Law of 1988, as amended. ------------------------------------------------- 4. The date of its incorporation is: 11/1/94 ------- 5. (Check, and if appropriate complete, one of the following): X The amendment shall be effective upon filing these Articles of Amendment in the Department of State. The amendment shall be effective on:--------- at --------- Date Hour 6. (Check one of the following): X The amendment was adopted by the shareholders (or members) pursuant to 15 Pa.C.S. 1914 (a) and (b). The amendment was adopted by the board of directors pursuant to 15 Pa. C.S.1914 (c). 7. (Check, and if appropriate complete, one of the following): The amendment adopted by the corporation, set forth in full, is as follows: X The amendment adopted by the corporation as set forth in full in Exhibit A attached hereto and made a part hereof. (Check if the amendment restates the Articles): The restated Articles of Incorporation supersede the original Articles and all amendments thereto. IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of Amendment to be signed by a duly authorized officer thereof this 27 day of March , 1997 . CFM TECHNOLOGIES, INC --------------------- (Name of Corporation) BY:Lorin J. Randall ------------------- TITLE:Secretary ------------------- EXHIBIT A TO ARTICLES OF AMENDMENT OF CFM TECHNOLOGIES, INC. The Address of the Corporation's Registered Address is this Commonwealth is hereby changed to: 1336 Enterprise Drive West Chester, Pennsylvania 19380 Chester County Article 6(a) of the Corporation's Articles of Incorporation is hereby amended in its entirety to read in full as follows: "6. (a) The aggregate number of shares which the Corporation shall have authority to issue is Thirty-One Million (31,000,000) shares, to be divided into Thirty Million (30,000,000) shares of Common Stock, no par value per share, and One Million (1,000,000) shares of Preferred Stock, no par value per share." EX-5 5 BALLARD SPAHR ANDREWS & INGERSOLL 1735 Market Street, 51st Floor Philadelphia, PA 19103-7599 August 26, 1997 CFM Technologies, Inc. 1336 Enterprise Drive West Chester, Pennsylvania 19380 Re: CFM Technologies, Inc. Registration Statement on Form S-3 Gentlemen: We have acted as counsel to CFM Technologies, Inc., a Pennsylvania corporation (the "Company"), in connection with the preparation of the Company's Registration Statement filed on Form S-3 (the "Registration Statement") on the date hereof with the Securities and Exchange Commission (the "Commission") pursuant to which the Company is registering under the Securities Act of 1933, as amended, 205,583 shares of its common stock, no par value per share (the "Common Stock"), for sale by certain Selling Shareholders as described in the Registration Statement. In this connection, we have examined and relied upon such corporate records and other documents, instruments and certificates and have made such other investigation as we deemed appropriate as the basis for the opinion set forth below. In our examination, we have assumed legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of documents submitted to us as certified, conformed or photostatic copies and the authenticity of such original documents. Based upon the foregoing, we are of the opinion that the shares of Common Stock to be sold by the Selling Shareholders have been duly authorized and, when issued as described in the Company's Registration Statement, will be legally issued, fully paid and nonassessable. We hereby consent to the filing of this opinion as Exhibit 5 to the Registration Statement and to the reference to this firm under the caption "Legal Matters" in the Prospectus forming a part thereof. Very truly yours, Ballard Spahr Andrews & Ingersoll -----END PRIVACY-ENHANCED MESSAGE-----