-----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, FuepdABX3bfai9z5ZEnFjPfQZ9H/CWa4eBqI3P7sUediv7Me2noD2NNzlDVPzcuo +uGpEIelgYrrZWyx2v0Btw== 0000927016-97-002139.txt : 19970730 0000927016-97-002139.hdr.sgml : 19970730 ACCESSION NUMBER: 0000927016-97-002139 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970729 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADE CORP CENTRAL INDEX KEY: 0000884498 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 042441829 STATE OF INCORPORATION: MA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26714 FILM NUMBER: 97647192 BUSINESS ADDRESS: STREET 1: 80 WILSON WAY CITY: WESTWOOD STATE: MA ZIP: 02090 MAIL ADDRESS: STREET 1: 77 ROWE ST CITY: NEWTON STATE: MA ZIP: 02166 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________________ FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended April 30, 1997 OR [X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 0-26714 ADE CORPORATION (Exact name of registrant as specified in its charter) Massachusetts 04-2441829 (State of incorporation) (I.R.S. Employer Identification No.) 80 Wilson Way 02090 Westwood, Massachusetts (Zip Code) (Address of principal executive offices) (617) 467-3500 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value (Title of class) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] As of July 22, 1997, there were outstanding 8,630,145 shares of Common Stock, $.01 par value per share. The aggregate market value of shares of Common Stock held by non-affiliates of the registrant, based upon the last sale price for such stock on that date as reported by Nasdaq, was approximately $141,954,764. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement for the 1997 Annual Meeting of Stockholders are incorporated by reference into Part III. ================================================================================ Number of Pages: _______ Exhibit Index on Page: _______ PART I ITEM 1. BUSINESS Certain statements in this report are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements may be found in the material set forth in this Item 1 ("Business") and in Item 7 (''Management's Discussion and Analysis of Financial Condition and Results of Operations") as well as elsewhere in this report. The Company's actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those discussed under the heading "Risk Factors" beginning on page 12 below and elsewhere in this report. Any forward-looking statements are made as of the date of this report and the Company assumes no obligation to update any such forward- looking statements or to update the reasons why actual results could differ materially from those anticipated in such forward-looking statements. ADE Corporation is a leader in the design, manufacture, marketing and service of metrology and inspection systems for the semiconductor wafer manufacturing industry. In addition, the Company is a growing supplier of metrology systems to the semiconductor device and computer hard disk industries. The Company's systems analyze and report product quality at critical manufacturing process steps, sort wafers and disks and provide manufacturers with quality certification data. Semiconductor wafer and device and computer hard disk manufacturers use the Company's systems to improve yield and capital productivity. The Company's products have evolved from single instruments used in off-line engineering analysis to multi-function systems for automated in-line monitoring of process-induced defects throughout the wafer and disk manufacturing processes. The Company's systems are designed to deliver the high throughput, reliability and information delivery and analysis necessary to meet the demands of increasingly complex and time-sensitive manufacturing processes. The Company has over 35 major products currently in use by the wafer, device and disk manufacturing industries and has shipped more than 1,700 systems. PRODUCTS ADE's product strategy is to develop versatile, modular instrumentation and automation sub-systems that can be assembled to form a number of integrated products. These products support multiple metrology and inspection functions and sorting in the semiconductor wafer and device and hard disk fabrication processes. The Company has over 35 major products currently in use by the semiconductor wafer and device and hard disk manufacturing industries and has shipped more than 1,700 systems. During the past fiscal year, semiconductor equipment sales to wafer manufacturers have generated approximately 77% of the Company's annual revenues. The Company, however, must continue to develop and introduce new products and product enhancements to keep pace with technological developments and changing customer requirements. The Company's principal products in the semiconductor wafer, semiconductor device and computer hard disk and disk drive industries and OEM automation are described below. All -1- metrology and inspection systems have the capability to record, print and store measurement data locally, as well as distribute the data via a network for yield and process management, future analysis and Silicon Wafer Order Form ("SWOF") quality certification. Semiconductor Industry Products WAFERCHECK 7000 SERIES. The WaferCheck 7000 series of products are flexible, modular systems capable of automatically characterizing, inspecting and sorting semiconductor wafers. The WaferCheck 7000, the first large-scale, automated metrology system for the wafer manufacturing market, was introduced by the Company in 1983. To meet the industry's increasing demand for the manufacture of 200 millimeter wafers, the Company introduced the WaferCheck 7200 in 1987. These systems measure thickness, flatness, shape, conductivity type, and resistivity on as-cut and etched wafers and provide high speed sorting. The products combine an automated transfer belt module with one or more customer selected measurement modules into a single, floor mounted system. These systems, which are capable of operating in a class 1000 cleanroom environment, provide a non-destructive in-line sorting capability and precise wafer classification at submicron accuracies. The WaferCheck 7000 ranges in price from $160,000 to $475,000. The WaferCheck 7200 ranges in price from $200,000 to $750,000. ULTRASCAN 9000 SERIES. The UltraScan 9000 series of products are high throughput, in-line production systems that perform metrology and sorting at various stages of the wafer manufacturing and device fabrication processes. The 9300 and 9350 systems, introduced in 1990, employ the Company's E station measurement module to measure thickness down to an accuracy of 0.5 microns. The 9600 and 9650 systems, introduced in 1994 and based on the more advanced E-Plus station, measure thickness down to an accuracy of 0.25 microns. The 9350 and 9650 systems have a smaller footprint than their larger counterparts, making them more suitable for applications in the device fabrication process, including photolithography, thermal processing, CMP and thin film deposition. The UltraScan 9000 systems are capable of being operated in a class 10 cleanroom environment. The UltraScan 9000 systems measure wafer thickness, flatness, shape, conductivity type and resistivity and can be integrated with factory automation systems using industry standard protocols. The UltraScan 9300 and 9350 systems range in price from $250,000 to $500,000. The UltraScan 9600 and 9650 systems range in price from $360,000 to $590,000. ULTRAGAGE 9000 SERIES. The UltraGage 9000 series of products are benchtop metrology systems containing a single measurement module, which is capable of making selected measurements, including flatness, thickness and stress. The UltraGage 9500 system, introduced in 1992, is based on the Company's E station measurement module. The UltraGage 9700 system, introduced in 1995, is based on the E-Plus station measurement module. The UltraGage 9000 systems are capable of being operated in a class 10 cleanroom environment. These systems were designed to operate together with applications software to be used by device manufacturers in applications such as chemical mechanical planarization ("CMP") and thermal processing. The UltraGage 9500 system ranges in price from $150,000 to $220,000. The UltraGage 9700 system ranges in price from $210,000 to $260,000. -2- DCS AUTOMATIC DEFECT CLASSIFICATION SERIES. The MicroSpec DCS-II series is a fully integrated in-line automatic defect classification (ADC) system. The OpenADC(TM) approach to yield management of the DCS-II tool allows device process engineers to mix and match automated defect inspection, yield management and defect review tools for their inspection strategies. The DCS-II streamlines and strengthens the yield enhancement process, providing greater accuracy and repeatability than previously possible and eliminating the need for human operators. The DCS-II system ranges in price from $160,000 to $220,000. WIS SERIES The WIS series products are high throughput, in-line production systems that are used to detect, measure and characterize particles and other defects on wafer surfaces and provide process analysis and control information for the wafer manufacturer. The first of these optical-based systems was introduced in 1981. Based on the Company's existing CR80 production tool design, the WIS-CR81 and WIS-CR82, introduced in 1997, detect particles down to 0.1 microns on wafers up to 200 millimeters in diameter. The WIS systems can be integrated with factory automation systems using industry standard protocols. A variety of software packages are available from the Company to tailor the system to specific customer requirements. The WIS systems are capable of being operated in a class 10 cleanroom environment. The WIS0 systems ranges in price from $300,000 to $450,000. Disk Industry Products VIBRATING SAMPLE AND TORQUE LABORATORY MAGNETOMETERS. These computerized systems are used for the magnetic characterization of a broad range of materials (i.e. disks, tapes, powders, crystals, magneto-optic materials and superconducting materials). Since only a small piece of a magnetic material can be measured in these laboratory systems, a magnetic disk must be cut in order to be measured in such systems. Model 1660 is the only magnetometer which combines Vibrating Sample Magnetometer (VSM) and torque measurements in a single tool. The VSM and torque measurement systems ranges in price from $110,000 to $275,000. ROBOTIC KERR-EFFECT AND MRT MAGNETOMETERS. These are fully automated in- line robotic systems used for fast and accurate mapping of the important magnetic properties of computer hard disks. The systems have the capability to record, store, process and print measurement results locally, as well as to transmit the data to a network for process tune-up, quality control, certification, and subsequent sorting of the disks. The Company believes these robotic systems are the only commercially available automated high speed in-line magnetic properties measurement tools available for the disk manufacturing industry. These robotic systems range in price from $185,000 to $300,000. AUTOGAGER 1500 SERIES. The Autogager 1500 series of products are modular systems capable of automatically characterizing, inspecting and sorting hard disks. The Autogager 1500, the first large-scale, automated dimensional metrology system for the hard disk market, was introduced by the Company in 1996 to meet the industry's increasing demand for the manufacture of Magneto- Resistive ("MR") quality hard disks. These systems measure thickness and thickness variation on advanced hard disks and provide high speed sorting. The products combine an industrial robot with the company's capacitive dimensional metrology into a single, floor-mounted system. These systems, which are capable of operating in a class 1000 cleanroom -3- environment, provide a non-destructive in-line sorting capability and precise disk classification at submicron accuracies. The Autogager 1500 systems range in price from $250,000 to $350,000. OEM Automation Components The Company has developed a series of robots, prealigners and wafer elevators for use in its automated systems. The Company also markets and sells these automation components to semiconductor equipment manufacturers. These automation components range in price from $7,000 to $29,000. The Company's OEM product revenues accounted for approximately 3% of revenues in fiscal 1997. PRODUCTS IN DEVELOPMENT In order to maintain its technology leadership, the Company continues to introduce new products. Among those products under development are the Company's Galaxy 10000 Series, specifically designed for 300 millimeter wafers, and the EpiScan 9900 Series. GALAXY 10000 SERIES. The Galaxy series of products are modular, high throughput, in-line production systems that perform metrology and sorting at various stages of the wafer manufacturing and device fabrication processes. A key feature of the systems is their unique ability to measure both the front and back surface of the wafer, holding the wafer gently and only by the edges, so as not to introduce any damage or contamination on either the front or the back surface of the wafer. The AFS-300 and the AWIS-300 systems employ the identical wafer handling platform. The AFS-300 and the AWIS-300 systems will range in price from $650,000 to $1,000,000. The AFS-300 series systems, introduced in 1997, are generally operated in a class 10 cleanroom environment, and are based on ADE's advanced E-Plus station, measure thickness down to an accuracy of 0.25 microns. The AFS-300 series systems measure wafer thickness, flatness, shape, conductivity type and resistivity and can be integrated with factory automation systems using industry standard protocols. The Company has delivered beta units to certain customers. The AWIS-300 series systems, currently in the final stages of development, are based on ADE's proprietary ARS (Angle Resolved Scatter) technologies for the optical inspection of bare and film wafer surfaces, and are intended for use in a class 1 or better cleanroom environment. The AWIS-300 is designed to provide the combination of front and backside measurement, sensitivity, throughput and sorting capabilities required by wafer manufacturers. EPISCAN 9900 SERIES. The EpiScan 9900 series of products are benchtop metrology systems containing a single measurement module, which is capable of making selected measurements, including Epi thickness, thickness variation and dopant profile. The EpiScan 9900 system, introduced in 1997, is based on advanced, model-based FTIR (Fourier Transform Infrared Spectroscopy) technology licensed to the Company by On-Line Technologies, Inc. The -4- EpiScan 9900 system is capable of being operated in a class 10 cleanroom environment. The EpiScan 9900 system will range in price from $150,000 to $220,000. TECHNOLOGY The Company's metrology and inspection products use its proprietary non- contact capacitive, magnetic and optical technologies to measure the dimensional, magnetic and surface characteristics of semiconductor wafers and devices and hard disks. Dimensional Technology The Company's non-contact capacitive gaging technology, which is the subject of a series of patents, is used to measure the dimensional parameters (thickness, flatness, shape) of semiconductor wafers, computer hard disks and other objects. Non-contact technology has largely displaced traditional contact gages, which can damage the wafer through physical contact. The Company's capacitive dimensional gaging technology is based on the measurement of the capacitance between a measurement probe and the surface of the object. The capacitance varies as a precise function of the distance between the probe and the object being measured, permitting the distance to be measured with a precision of better than 0.01 microns. For example, in the measurement of a semiconductor wafer, two probes, one on each side of the wafer, map both wafer surfaces simultaneously. Electronic circuitry converts the probe capacitance signal into distance signals which are translated by the Company's software to produce information concerning the wafer's thickness, flatness and shape. ADE's capacitive dimensional technology has a number of advantages over other non-contact measurement methods. Unlike optical, magnetic or acoustic technologies, capacitive gaging is not significantly affected by environmental conditions such as temperature and humidity or by the optical properties and material characteristics of the wafer. As a result, the Company believes that its capacitive dimensional technology provides a superior combination of accuracy, precision and stability, greater bandwidth and a broader range of potential applications than these other technologies. Surface Inspection Technology The Company uses optical methods to detect microscopic surface defects. A finely focused laser beam is scanned over the surface of the wafer. Surface particles or defects cause some of the beam's energy to scatter. Sensitive detectors quantify this scattering signal, which is translated by the Company's software to produce information about particles, microscratches, haze and other process induced defects on the wafer surface. Although the principles of the Company's optical technology are similar to those used by other manufacturers, the Company believes its theoretical modeling and patented optical engineering and proprietary software result in products having a superior combination of high sensitivity and throughput. -5- Fourier Transform Infrared Spectroscopy Technology Fourier Transform Infrared Spectroscopy Technology (''FTIR'') is used in a broad range of laboratory applications for examining various technical properties of materials and chemicals. On-Line Technologies, Inc., a Connecticut- based technology company, has licensed its FTIR technology to ADE for incorporation into metrology tools for the wafer market. ADE is integrating this technology, which primarily has been confined to laboratory devices, as a metrology module into its automated in-line metrology tools in order to provide the increasing precision and accuracy needed to support the SWOF in the face of ever-tightening Epi specifications. Magnetics Characterization Technology The Company's products for characterizing magnetic materials use a variety of non-contact measurement technologies including lasers (the Kerr effect), vibrating sample and torque-effect inductive sensing techniques. The Company believes its theoretical modeling and magnetics engineering enable it to offer automated products with superior sensitivity, speed, accuracy, and reproducibility. Proprietary Software ADE's proprietary software analyzes and transforms the large amounts of data generated by ADE's metrology and inspection systems to produce information about process induced defects that aids in process control. The flexible design of the software permits reconfiguration of the Company's products to serve new applications with a minimum of hardware or software redesign or development. The Company's software is designed to integrate the Company's various metrology functions with one another and to implement industry standards for integrating the Company's products with the manufacturing facility's information systems. The Company currently is seeking patent protection on certain features of its software. MARKETING, SALES AND CUSTOMER SUPPORT The Company markets and sells its semiconductor metrology and inspection products through its direct sales force, distributors and independent sales representatives. The Company markets and sells its metrology and inspection products in the United States, Europe and Malaysia through full-time salespersons located in Milpitas, Dallas, Portland and Boston, in the United States, in the United Kingdom, in Germany, and in Malaysia. During the past fiscal year, approximately 50% of the Company's revenues were derived through its direct sales organization. The Company's direct sales force is supported by applications engineers in selected field offices and in its manufacturing locations. Sales of dimensional systems in Japan are supported by Japan ADE Limited, a joint venture of the Company and Kanematsu Electronics, Ltd. Sales of optical surface inspection products are provided in Japan by a separate distributor. The Company also sells its semiconductor metrology and inspection products in Israel, South Korea, Singapore, Taiwan, India and the People's -6- Republic of China through independent sales representatives. The Company markets and sells its computer hard disk products in the United States through two full- time salespersons and internationally through distributors and sales representatives. The Company's gaging products are sold worldwide through distributors and independent sales representatives. The selling process for the Company's products frequently involves participation by sales, marketing and customer support personnel. Customers and potential customers often evaluate the Company's products by sending semiconductor wafers to the Company for measurement or by installing demonstration equipment at their facilities. The Company maintains demonstration equipment at its manufacturing sites and some of its sales offices for this purpose. The Company plans to increase its investment in demonstration equipment to accelerate the introduction of products. The Company's marketing activities also include participation in international standards organizations, trade shows, publication of articles in trade journals, participation in industry forums and distribution of sales literature. The Company believes that its strong commitment to service is essential, based on the growing complexity of the equipment used in the semiconductor manufacturing process. This complexity makes it difficult for semiconductor wafer and device manufacturers to maintain an internal workforce sufficiently skilled and specialized to support the disparate equipment and technologies used in their processes. ADE has customer support centers in Boston, Charlotte, Austin, Dallas, Milpitas, Portland, Milton Keynes, England, Munich, Germany and Kuala Lumpur, Malaysia. The Company's customer support and service staff currently consists of 74 persons. In addition, the Company's distributors and sales representatives provide customer support. ADE also offers training programs and maintenance contracts for its customers. The Company offers warranties of up to twelve months covering the performance and reliability of its products. In each of the past four years, the Company was selected as one of the ''ten-best'' semiconductor measurement equipment manufacturers in the world in customer surveys conducted by VLSI Research Inc. CUSTOMERS The Company's customers include all of the leading semiconductor wafer manufacturers and many of the leading semiconductor device and computer hard disk and disk drive manufacturers throughout the world. Historically, a relatively limited number of customers have accounted for a substantial portion of the Company's revenues. In fiscal years 1995, 1996 and 1997, sales to the Company's top five customers accounted for approximately 51%, 45% and 50%, respectively, of the Company's revenue. During fiscal year 1997, one of the Company's customers, Shin-Etsu Handotai Co., accounted for 16% of the Company's revenue. During the past fiscal year, approximately 77% of the Company's revenues were derived from sales made to wafer manufacturers, with the remainder of the Company's revenues derived from sales to manufacturers of semiconductor devices, and computer hard disks and disk drives and semiconductor equipment. The Company's principal customers are as follows: -7- SEMICONDUCTOR WAFER MANUFACTURERS Komatsu LG Silicon MEMC Electronic Materials Mitsubishi International Corporation Posco Huls Company Shin-Etsu Handotai Co. Sumitomo Sitix Silicon Toshiba Corporation Wacker Siltronic Corporation SEMICONDUCTOR DEVICE MANUFACTURERS IBM Corporation Intel Corporation Lucent Technologies Motorola SGS Thomson Texas Instruments Winbond Electronic Corporaton COMPUTER HARD DISK AND DISK DRIVE MANUFACTURERS Akashic Memories HMT Corporation Hyundai Electronics IBM Corporation Komag Seagate Technology Trace Western Digital RESEARCH AND DEVELOPMENT The market for semiconductor wafer and device and computer hard disk and disk drive equipment is characterized by rapid technological change and product innovation. The Company's research and development efforts are designed to enhance the Company's current products and develop and introduce new products to keep pace with technological developments and respond to constantly evolving customer requirements. The Company devotes significant resources to programs directed towards developing new and enhanced products, as well as developing new applications for existing products. As of April 30, 1997, the Company employed a full-time research and development staff of 131 persons. In fiscal years 1995, 1996 and 1997, the Company's research and development expenditures were $6.3 million, $7.8 million and $17.0 million respectively, representing 13.7%, 11.6% and 16.8% of revenues. Research and development expenditures consist primarily of salaries, project materials and other costs associated with the Company's ongoing research and development efforts. -8- Industry standards organizations, such as Semiconductor Equipment and Materials International ("SEMI") and American Standards for Testing and Materials (''ASTM''), are pivotal in defining the test methods, measurement parameters and specifications governing commercial transactions within the semiconductor industry. The Company maintains a significant presence on standards committees of SEMI, ASTM and other international standards organizations. The Company believes that its involvement with these organizations has helped to ensure that the Company's new products conform to industry standards. BACKLOG Backlog increased to approximately $61 million at April 30, 1997 from $58 million at April 30, 1996, as a result of increases in orders for the Company's products. The Company schedules production based on firm customer commitments and anticipated orders during the planning cycle. The Company includes in its backlog only those customer orders for which it has accepted written purchase orders against which it expects to ship within the following twelve months. All orders are subject to cancellation or delay by the customer with limited or no penalty. The Company does not believe that the level of backlog is an accurate indicator of the Company's future performance. MANUFACTURING The Company's principal manufacturing activities take place at its ISO 9001-registered facility near Boston, Massachusetts, where dimensional metrol- ogy systems are manufactured, and Charlotte, North Carolina, where optical surface inspection equipment is manufactured. Certain of the Company's gaging products for the computer disk and disk drive and other industries are manufactured in Milpitas, California. Manufacturing activities consist primarily of assembling and testing components and subassemblies which are supplied by third party vendors and then integrated into the Company's finished products. Many of the components and subassemblies are standard products, although certain items are made to Company specifications. The Company manufactures its semiconductor metrology and inspection systems in a cleanroom environment. Certain components and subassemblies, including certain system controllers and robotics components incorporated into the Company's systems, are obtained from a single source or a limited group of suppliers. Management routinely monitors single or limited source supply parts, and the Company endeavors to ensure that adequate inventory is available to maintain manufacturing schedules should the supply of any part be interrupted. Although the Company seeks to reduce its dependence on sole and limited source suppliers, it has not qualified a second source for these products and the partial or complete loss of certain of these sources could have an adverse effect on the Company's results of operations and damage customer relationships. Further, a significant increase in the list price of one or more of these components could adversely affect the Company's results of operations. -9- COMPETITION The semiconductor and computer hard disk equipment industries are highly competitive. While the Company believes that it does not presently have significant established competitors in the metrology area of the semiconductor wafer equipment industry, there can be no assurance that companies with complementary technologies and greater financial resources will not enter the industry and develop products that are superior to the Company's products or achieve market acceptance. In the market for optical defect inspection equipment, the Company competes directly with Hitachi Electronics Engineering Co., Ltd. and KLA-Tencor Corporation, both of which have significantly greater financial resources than the Company. In the metrology area of the device industry, the Company has encountered, and expects to encounter in the future, competition from companies offering similar and competing technologies, some of which have significantly greater financial resources than the Company or an existing market presence in the device industry, or both. The Company also expects to encounter intense competition in the areas of metrology and inspection for the hard disk industry. The Company's competitors can be expected to continue to improve the design and performance of their products and to introduce new products with competitive price/performance characteristics. Competitive pressures can necessitate price reduction which can adversely affect operating results. Although the Company believes that it has certain technical and other advantages over its competitors, maintaining such advantages will require a continued high level of investment by the Company in research and development and sales, marketing and service. There can be no assurance that the Company will have sufficient resources to continue to make such investment or that the Company will be able to make the technological advances necessary to maintain such competitive advantages. PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS The Company relies on a combination of patent, copyright, trademark and trade secret laws and license agreements to establish and protect its proprietary rights in its products. The Company believes, however, that its success depends to a greater extent upon innovation, technological expertise and distribution strength. The Company requires each of its employees, including its executive officers, to enter into standard employee agreements pursuant to which the employee agrees to keep confidential all proprietary information of the Company and to assign to the Company all rights in any proprietary information or technology made or contributed by the employee during his or her employment or made thereafter as a result of any inventions conceived or work done during such employment. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use the Company's products or technology without authorization or to develop similar technology independently. In addition, effective patent, copyright and trade secret protection may be unavailable or limited in certain foreign countries. As of July 22, 1997, the Company holds 26 United States patents and 15 foreign patents covering existing and potential products and has applied for 4 additional patents in the United States and 14 additional foreign patents. -10- The Company has licensed its prealigner patents to a number of companies following the settlement of a patent infringement suit brought by the Company. The Company is actively pursuing similar licensing arrangements with a number of other companies. As is typical in the Company's industry, the Company and its customers from time to time receive letters from third parties, including some of the Company's competitors, alleging infringement of such parties' patent rights by the Company's products. There can be no assurance that the Company would prevail in any litigation seeking damages or expenses from the Company or to enjoin the Company from selling its products on the basis of such alleged infringement or that the Company would be able to license any valid and infringed patents on reasonable terms. EMPLOYEES As of April 30, 1997, the Company employed a total of 538 persons at all of its locations, including 227 in manufacturing, 131 in research and development, 50 in marketing and sales, 74 in customer service and 56 in administration. Management believes that the Company's ongoing success depends on its continued ability to attract and retain highly skilled employees. There can be no assurance that the Company will be successful in attracting or retaining such personnel. None of the Company's employees is represented by a labor union, and the Company has experienced no work stoppages. The Company considers its employee relations to be good. EXECUTIVE OFFICERS The names, ages and positions held by the executive officers of the Company are as follows:
Name Age Position - ---- --- -------- Robert C. Abbe 59 President and Chief Executive Officer E. Fred Schiele 45 Vice President and General Manager, ADE Semiconductor Systems Mark D. Shooman 50 Vice President and Chief Financial Officer Noel S. Poduje 52 Vice President of Strategic Technology Development William H. Ohm 50 Vice President and General Manager of ADE Technologies, Inc. Barry Glasgow 51 Vice President of Worldwide Sales and Customer Support
All executive officers are elected by the Board of Directors to serve in their respective capacities until their successors are elected and qualified or until their earlier resignations or removal. -11- Robert C. Abbe founded the Company in 1967. Since that time, he has served as President, Chief Executive Officer and a director of the Company. Mr. Abbe received an AB in Physics from Harvard College. E. Fred Schiele joined the Company in 1996 and serves as the Vice President and General Manager of the ADE Semiconductor Group (Dimensional Systems - Westwood and Optical Systems - Charlotte). Prior to joining ADE, Mr. Schiele was a Vice President at Electro Scientific Industries, Inc. and has held senior level positions at Xerox Corporation, Inmos Corporation, RTE Corporation (Cooper Industries) and UVC Corporation. Mr. Schiele holds a B.S. in Physics from Principia College and an M.B.A. from the University of Wisconsin. Mark D. Shooman joined the Company in April 1992 and has served as Vice President and Chief Financial Officer since May 1994. From January 1991 to March 1992, Mr. Shooman served as President of Asbury Associates, Inc., a management consulting firm he founded in 1988. From 1989 to January 1991, he served as a Vice President and the Chief Financial Officer of the retail sales division of Fidelity Investments. Mr. Shooman received a BS in Electrical Engineering from Renesselaer Polytechnic Institute and a MBA from The Ohio State University. Mr. Shooman is a Certified Public Accountant. Noel S. Poduje joined the Company in 1972 and has served as Vice President of Strategic Technology Development since 1985. Mr. Poduje received a BS in Electrical Engineering from the Massachusetts Institute of Technology. William Ohm joined the Company in 1994 and serves as Vice President and General Manager of ADE Technologies, Inc. From 1992 through 1994, Mr. Ohm served as Director of Sales and Marketing for Holographix, Inc. From 1990 to 1991, Mr. Ohm was Marketing Manager for Presstek, Inc. and from 1976 to 1990, Product Line Manager and Engineering Manager for Agfa Compugraphic, a Division of Agfa Corporation. Mr. Ohm received a B.S. in Electrical Engineering from the Massachusetts Institute of Technology and an M.B.A. from Harvard Business School. Barry Glasgow joined the Company in 1997 as Vice President of Sales and Customer Support (Worldwide). From July 1995 to June 1997, he served as Director of Worldwide Sales for Semiconductor Systems Group of Electro Scientific Industries, Inc. From May 1987 to July 1995, he served as Vice President of Sales and Marketing of XRL, Inc. Mr. Glasgow received a B.S. in Physics and Psychology from University of Massachusetts, and studied experimental psychology in the Ph.D. programs at Indiana University and University of Minnesota. RISK FACTORS An investment in the Common Stock of the Company involves a high degree of risk. Investors and prospective investors should consider carefully the following risk factors and those discussed elsewhere in this report. Cyclicality of the Company's Business. The Company's business depends in large part upon the capital expenditures of semiconductor wafer and device and computer hard disk and disk -12- drive manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits, products utilizing integrated circuits and systems requiring hard disk drives, respectively. The semiconductor and hard disk industries are cyclical and have historically experienced periodic downturns, which have had a severe effect on the demand for capital equipment. Two of the principal companies in the disk drive industry have recently announced less than expected demand for their disk drive products. Prior semiconductor and hard disk industry downturns and construction of excess capacity by the industry have adversely affected the Company's revenues, gross margin and net income and have also adversely affected the market price for the Company's Common Stock. No assurance can be given that the Company will continue to achieve the revenue growth it has experienced in recent years. In addition, the need for continued investment in research and development and extensive customer service and support capability worldwide will limit the Company's ability to reduce expenses in the event of a downturn in the industry. Fluctuations of Quarterly Operating Results. The Company's quarterly operating results have varied and may continue to vary significantly. The Company's quarterly revenues typically are derived from a relatively small number of customer orders. These customer orders often consist of multiple systems, each of which are priced between approximately $100,000 and $750,000. As a result, the timing of significant orders or a reduction in the number of systems shipped in a quarter could have a material effect on the Company's revenues and results of operations for that quarter. The results for a particular quarter may also vary due to a number of factors, including economic conditions in the semiconductor and hard disk industries, the timing of shipments of orders to major customers, the mix of products sold by the Company, competitive pricing pressures and the Company's ability to design, introduce and manufacture new products on a cost effective and timely basis. Moreover, customers may cancel or reschedule shipments, and production difficulties or the inability to obtain critical components could delay shipments. In addition, the Company's product sales have fluctuated, and are likely to continue to fluctuate, based on seasonal factors, such as customers' capital budget approval cycles, among others. These factors could have a material adverse effect on the Company's results of operations. The Company has increased its research and development spending in recent periods, in part to support its development of systems for next-generation 300 millimeter semiconductor wafers. The Company's expense levels are fixed in advance and based in part on its expectations as to future revenues. As a consequence, any material shortfall in revenue in a given quarter could have a material adverse effect on the Company's earnings. Rapid Technological Change and Introduction of New Products. The market for semiconductor wafer and device and computer hard disk metrology and inspection equipment is characterized by rapid technological advances, changing customer requirements, evolving industry standards and frequent new product introductions and enhancements. The Company's future success will depend in large part on the Company's ability to enhance its current products and to develop and introduce new products that keep pace with technological developments, achieve market acceptance and respond to customer requirements that are constantly evolving. New product introductions may contribute to fluctuations in quarterly operating results, as customers may defer ordering products from the Company's existing product lines. If new products have reliability or quality problems, then reduced orders, higher manufacturing costs, -13- delays in collecting accounts receivable and additional service and warranty expense may result. Responding to rapid technological change and the need to develop and introduce new products to meet customers' expanding needs and evolving industry standards will require the Company to make substantial investments in research and product development. Any failure by the Company to anticipate or respond adequately to technological developments and customer requirements or any significant delays in product development or introduction could result in a loss of competitiveness and could materially adversely affect the Company's operating results. There can be no assurance that the Company will successfully develop and manufacture new products or that any product enhancements or new products developed by the Company will gain market acceptance. The semiconductor wafer industry is currently undergoing a gradual evolution from 200 millimeter to 300 millimeter wafers. Wafer manufacturers are beginning to establish pilot production lines and specifications for the manufacture of 300 millimeter wafers. The Company is currently developing product enhancements and new products designed to meet increasing demand for metrology and inspection equipment for 300 millimeter wafers. One of the Company's competitors recently began shipping an optical inspection product for 300 millimeter wafers. Until the Company begins shipping its next generation product, the Company's sales of its wafer inspection systems could be adversely affected. There can be no assurance that the Company will be able to develop enhancements and new products successfully or in time to meet emerging demand, or that enhancements and new products developed by the Company will be accepted by the Company's customers. Competition. The semiconductor and computer hard disk equipment industries are highly competitive. There can be no assurance that companies with complementary technologies and greater financial resources will not enter these industries and develop products that are superior to the Company's products or achieve market acceptance. In the market for optical defect inspection equipment, the Company competes directly with Hitachi Electronics Engineering Co., Ltd. and KLA-Tencor Corporation, both of which have significantly greater financial resources than the Company. In the metrology area of the device industry, the Company has encountered, and expects to encounter in the future, competition from companies offering similar and competing technologies, some of which have significantly greater financial resources than the Company or an existing market presence in the device industry, or both. The Company also expects to encounter intense competition in the areas of metrology and inspection for the hard disk industry. The Company's competitors can be expected to continue to improve the design and performance of their products and to introduce new products with competitive price/performance characteristics. Competitive pressures often necessitate price reduction which can adversely affect operating results. In order to remain competitive, the Company must maintain a high level of investment in research and development and sales, marketing and service. There can be no assurance that the Company will have sufficient resources to continue to make such investment or that the Company will be able to make the technological advances necessary to remain competitive. Currently, the Company's lead times for the delivery of products to its customers are longer than the industry average, and, as a consequence, the Company has in a limited number of cases failed to obtain customer orders. Although the Company is taking steps to reduce lead times, there can be no assurance that the Company will be successful in sufficiently reducing its lead times. The failure to sufficiently reduce lead times may result in lost business in the future and may have an adverse impact on the Company's business and results of operations. -14- KLA Corporation recently acquired a competitor of the Company in the market for optical defect inspection equipment, Tencor Corporation, to form KLA-Tencor Corporation. The Company expects that similar acquisitions and business combinations by competitors and potential competitors of the Company, in the metrology as well as in the defect inspection markets, may continue in the future. Acquisitions by the Company's competitors and potential competitors could allow them to offer new products without the lengthy time delays typically associated with internal product development, which could afford such competitors and potential competitors an advantage in meeting customers' demands. Such acquisitions by others could also have the effect of limiting the Company's access to commercially significant technologies. The greater resources, including financial and marketing and support resources, of competitors engaged in these acquisitions could permit them to accelerate the development and commercialization of new competitive products and the marketing of existing competitive products to their larger installed bases. Accordingly, such business combinations and acquisitions by competitors and potential competitors could have an adverse impact on both the Company's market share and the pricing of its products, which could have a material adverse effect on the Company's business and results of operations. The Company relies upon a combination of internal product development and partnerships with certain other companies to broaden its product line to meet customer demand. The increasing competitiveness within the industry, together with acquisitions by the Company and its competitors of businesses possessing complementary technologies, could materially limit the Company's ability to continue to partner with other companies for new or complementary products, which could have a material adverse effect upon the Company's ability to offer in a timely manner products that meet customers' needs. Management of Growth. The Company has been experiencing a period of significant growth that could place a strain on its management and other resources. To support the Company's growth, the Company will need to hire more engineering, manufacturing, sales and marketing, and support and administrative personnel, expand customer service capabilities, and update or expand management information systems, procedures and controls. Competition for the necessary personnel in the Company's industries is high. There can be no assurance that the Company will be able to attract and retain the necessary personnel to accomplish its growth strategies or that it will be able to satisfy customer demand in a timely fashion and satisfactorily support its customers and operations or that its information systems, procedures and controls will be adequate to support the Company's operations. If the Company's management is unable to manage growth effectively, the Company's business, operating results and financial condition could be materially adversely affected. Customer and Industry Concentration. A relatively limited number of customers have historically accounted for a substantial portion of the Company's revenues in each year. In fiscal years 1995, 1996 and 1997, sales to the Company's top five customers in each period, all of which are in the semiconductor wafer industry, accounted for approximately 51%, 45% and 50%, respectively, of the Company's revenue. In fiscal 1997, one of the Company's customers accounted for 16% of the Company's revenue. The loss of or any reduction in orders by any of -15- these customers, including reductions due to market, economic or competitive conditions in the semiconductor industry or in other industries that manufacture products utilizing semiconductors, could adversely affect the Company's business, financial condition and results of operations. In each of the last three fiscal years the Company has derived over 70% of its revenue, including approximately 77% in fiscal 1997, from customers in the semiconductor wafer industry. While the Company is focusing on expanding the level of its business in the device and hard disk industries, there can be no assurance that the Company's efforts will be successful. The Company's ability to maintain or increase its sales levels in the future will depend in part upon its ability to obtain orders from new customers as well as the financial condition and success of its existing customers and the general economy. There can be no assurance that the Company will be able to maintain or continue to increase the level of its revenues in the future or that the Company will be able to retain existing customers or to attract new customers. In addition, given the limited number of customers, any delay in collecting, or inability to collect, accounts receivable could have a material adverse effect on the Company's financial results. See Note 11 of Notes to Consolidated Financial Statements. Dependence on Suppliers. Certain of the components and subassemblies, including certain systems controllers and robotics components, incorporated in the Company's systems are obtained from a single source or a limited group of suppliers. The Company has not qualified a second source for these products and the partial or complete loss of certain of these sources could have an adverse effect on the Company's results of operations and damage customer relationships. Further, a significant increase in the price of one or more of these components could adversely affect the Company's results of operations. Risks Associated with International Operations. International sales accounted for 53%, 59% and 60% of the Company's revenues for the fiscal years 1995, 1996 and 1997, respectively. See Note 11 of Notes to Consolidated Financial Statements. The Company expects that international sales will continue to represent a significant percentage of revenues. The Company's international business may be affected by changes in demand resulting from fluctuations in interest and currency exchange rates as well as by factors such as the risk of government financed competition, changes in trade policies, tariff regulations and difficulties in obtaining U.S. export licenses. Patents and Other Intellectual Property. The Company's success depends in part on its proprietary technology. The Company attempts to protect its proprietary technology through patents, copyrights, trademarks, trade secrets and license agreements. The Company believes, however, that its success will depend to a greater extent upon innovation, technological expertise and distribution strength. There can be no assurance that the Company will be able to protect its technology or that competitors will not be able to develop similar technology independently. No assurance can be given that the claims allowed on any patents held by the Company will be sufficiently broad to protect the Company's technology. In addition, no assurance can be given that any patents issued to the Company will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide competitive advantages to the Company. In addition, effective patent, copyright and trade secret protection may be unavailable or limited in certain foreign countries. -16- As is typical in the Company's industry, the Company and its customers from time to time receive letters from third parties, including some of the Company's competitors, alleging infringement of such parties' patent rights by the Company's products. There can be no assurance that the Company would prevail in any litigation seeking damages or expenses from the Company or to enjoin the Company from selling its products on the basis of such alleged infringement or that the Company would be able to license any infringed patents on reasonable terms. Some customers using certain products of the Company have received a notice of infringement from Technivision Corporation and Jerome H. Lemelson, alleging that equipment used in the manufacture of semiconductor products infringes patents issued to Mr. Lemelson relating to ''computer image analysis'' or ''digital signal generation and analysis.'' Certain of these customers have notified the Company that they may seek indemnification from the Company for any damages and expenses resulting from this matter. Neither the Company nor any of its products has been identified by Mr. Lemelson as infringing his patents. There can be no assurance, however, that Mr. Lemelson would not bring a claim against the Company for infringement or that the Company would prevail in any such action. If Mr. Lemelson were to prevail in any such action, the Company might be required to pay license fees or royalties to Mr. Lemelson, which could have an adverse impact on the Company's profitability. Risks Associated with Acquisitions and Alliances. The Company has addressed the need to offer new products, in part, through the acquisition of technology and other businesses. The acquisition of other businesses involves numerous risks, including the difficulty of assimilating the operations, technologies and products of the acquired business, the diversion of management's attention from other business concerns, the risks of entering markets in which the Company has no or limited direct prior experience and must compete with competitors having stronger market positions, and the potential loss of key employees of the acquired business. The integration of other businesses into ADE requires, among other things, integration of product offerings and coordination of sales, marketing, research, development, and management organizations. There can be no assurance that such integration will be accomplished smoothly or successfully. The difficulties of such integration may be increased by the necessity of coordinating organizations which are separated geographically. The inability of management to successfully integrate the operations of such acquired businesses could have a material adverse effect on the business and results of operations of the Company. Control By Existing Stockholders. The Company's directors and executive officers and members of their immediate families beneficially own over one-third of the Company's outstanding shares of Common Stock. Accordingly, these stockholders acting together have the ability to significantly influence corporate actions requiring stockholder approval, including the election of the Company's directors. This concentration of ownership may also have the effect of delaying or preventing a change of control of the Company. Volatility of Stock Price. The stock market in general and the market for shares of technology companies in particular recently have experienced extreme price fluctuations, which have often -17- been unrelated to the operating performance of the affected companies. Many companies in the semiconductor and semiconductor equipment industries, including the Company, experienced dramatic volatility in the market prices of their common stock during the last two years. The Company believes that factors such as announcements of developments related to the Company's business or its competitors' or customers' businesses, fluctuations in the Company's financial results, general conditions or developments in the semiconductor and semiconductor equipment industries and the worldwide economy, sales of the Company's Common Stock into the market, the number of market makers for the Company's Common Stock, announcements of technological innovations or new or enhanced products by the Company or its competitors or customers, a shortfall in revenue, gross margin, earnings or other financial results from or changes in analysts' expectations and developments in the Company's relationships with its customers and suppliers, or a variety of factors beyond the Company's control could cause the price of the Company's Common Stock to fluctuate, perhaps substantially. There can be no assurance that the market price of the Company's Common Stock will not experience significant fluctuations in the future, including fluctuations that are material, adverse and unrelated to the Company's performance. ITEM 2. PROPERTIES The Company's principal operations are located in an approximately 117,000 square foot company-owned building in Westwood, Massachusetts; a 46,000 square foot building in Newton, Massachusetts under a five-year lease that expires in May 2002 and a 38,000 square foot building in Charlotte, North Carolina under a ten-year lease that expires in September 2004. The Company also owns a 14,400 square foot building in Burlington, Massachusetts and leases space for sales and customer support offices in various other locations. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any material legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended April 30, 1997. -18- PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET PRICE OF COMMON STOCK The Company's Common Stock trades on the Nasdaq Nasdaq Stock Market ("NasdaqNasdaq") under the symbol "ADEX." The following table sets forth the high and low sale prices for each quarter for the Common Stock as reported by Nasdaq Nasdaq for the periods indicated.
FISCAL YEAR ENDED APRIL 30, 1996 HIGH LOW Second quarter (beginning 10/18/96) 18 1/2 14 1/8 Third quarter 18 1/4 12 Fourth quarter 16 12 1/2
FISCAL YEAR ENDED APRIL 30, 1997 HIGH LOW First quarter 22 1/4 8 3/4 Second quarter 11 5/8 8 1/4 Third quarter 20 5/8 8 3/8 Fourth quarter 20 3/4 16 1/2
The last sale price of the Common Stock on July 22, 1997, as reported by Nasdaq, was $28 per share. As of July 22, 1997, there were 122 holders of record of the Common Stock (approximately 2,040 beneficial holders). The Company has never declared or paid any cash dividends on its Common Stock and currently expects that future earnings will be retained for use in its business. RECENT SALES OF UNREGISTERED SECURITIES In February 1997, the Company issued an aggregate of 821,000 shares of Common Stock in consideration for the Company's acquisition by merger of all of the outstanding capital stock of Digital Measurement Systems, Inc. ("DMS"), a privately-owned company, and a building which is integral to the operations of DMS. All of the recipients of shares except one were "accredited investors" under the definition of that term in Regulation D under the Securities Act. The issuance of the shares was privately negotiated in the context of negotiations for the Company's acquisition of DMS, and was exempt from the registration requirements of Section 5 of the Securities Act of 1933 pursuant to Section 4(2) of that Act. -19- ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The following table sets forth selected financial data of the Company for and as of the fiscal years ended April 30, 1993, 1994, 1995, 1996 and 1997. The selected financial data as of April 30, 1996 and 1997 and for the three years ended April 30, 1997 have been derived from the Company's consolidated financial statements which have been audited by Price Waterhouse LLP, independent accountants. The selected financial data as of April 30, 1993, 1994 and 1995 and for the two years ended April 30, 1994 have been derived from the Company's audited consolidated financial statements, together with the unaudited financial statements of DMS as of March 31, 1993, 1994 and 1995 and for the two years ended March 31, 1994. The selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and Notes thereto. No cash dividends were declared or paid in any of the periods presented.
YEAR ENDED APRIL 30, --------------------------------- 1993 1994 1995 1996 1997 --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF INCOME DATA: Revenue.................................................... $ 27,564 $ 32,828 $ 46,152 $ 67,339 $101,403 Cost of revenue............................................ 14,278 16,861 23,293 31,135 44,838 --------- --------- --------- --------- --------- Gross profit............................................. 13,286 15,967 22,859 36,204 56,565 --------- --------- --------- --------- --------- Operating expenses: Research and development................................. 5,532 6,073 6,318 7,798 17,012 Marketing and sales...................................... 4,389 5,981 6,842 10,169 13,665 General and administrative............................... 2,953 4,186 4,445 6,759 7,446 --------- --------- --------- --------- --------- Total operating expenses............................... 12,874 16,240 17,615 24,726 38,123 --------- --------- --------- --------- --------- Income (loss) from operations.............................. 412 (273) 5,244 11,478 18,442 --------- --------- --------- --------- --------- Other income (expense): Interest income expense, net............................. (88) (392) (404) 331 329 Gain on sale of land and building........................ 376 229 -- -- -- --------- --------- --------- --------- --------- Total other income (expense)............................... 288 (163) (404) 331 329 --------- --------- --------- --------- --------- Income (loss) before provision (benefit) for income taxes and equity in net earnings of affiliated companies..... 700 (436) 4,840 11,809 18,771 Provision (benefit) for income taxes....................... 249 (83) 1,709 4,004 5,705 --------- --------- --------- --------- --------- Income (loss) before equity in net earnings of affiliated companies................................... 451 (353) 3,131 7,805 13,066 Equity in net earnings of affiliated companies............. -- -- -- -- 99 --------- --------- --------- --------- --------- Net income (loss)...................................... $ 451 $ (353) $ 3,131 $ 7,805 $ 13,165 ========= ========= ========= ========= ========= Net income (loss) per share................................ $0.07 $(0.05) $0.47 $0.98 $1.48 ========= ========= ========= ========= ========= Weighted average common and common equivalent shares outstanding........................................ 6,609 6,524 6,651 7,965 8,880 ========= ========= ========= ========= =========
APRIL 30, ---------------------------------------- 1993 1994 1995 1996 1997 --------- --------- --------- --------- --------- (IN THOUSANDS) BALANCE SHEET DATA: Cash and cash equivalents............... $ 2,259 $ 1,870 $ 3,277 $21,513 $ 19,374 Working capital......................... 12,223 11,856 15,415 39,828 45,769 Total assets............................ 22,796 25,758 28,763 61,978 88,417 Long-term debt, less current portion.... 1,474 2,121 2,166 677 5,091 Total stockholders' equity.............. $ 13,523 $ 13,200 $ 16,205 $46,502 $ 61,388
-20- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion provides an analysis of the Company's financial condition and results of operations and should be read in conjunction with the "Selected Consolidated Financial Data" and the Consolidated Financial Statements and Notes thereto. OVERVIEW The Company was founded in 1967 to develop and market certain advanced concepts and designs in capacitive and other measurement technologies suitable for industrial applications requiring precise, reliable, damage-free and repeatable measurements. The Company's products have evolved from single instruments used in off-line engineering analysis to multi-function systems for automated in-line monitoring of process-induced defects throughout the wafer and disk manufacturing processes. The Company operates in two major business areas, the Semiconductor Group and the Computer Disk Group. The Semiconductor Group manufactures multifunctional semiconductor metrology and automation systems and optical wafer defect inspection equipment used to detect particles and other defects on wafer surfaces. The Computer Disk Group is primarily engaged in the production of metrology systems for the computer hard disk industry. A relatively limited number of customers have accounted for a substantial portion of the Company's revenue. Moreover, during the past fiscal year approximately 77% of the Company's revenue was derived from sales made to wafer manufacturers, with the remainder of the revenue derived principally from sales to manufacturers of semiconductor devices and computer hard disks. The Company derives a substantial portion of its revenue from a relatively small number of customer orders. These customer orders often consist of multiple systems, which can range in price from approximately $100,000 to $750,000. As a result, the timing of significant orders or a reduction in the number of systems shipped in a quarter could have a material effect on the Company's revenue and results of operations for that quarter. The Company records revenue from product sales upon shipment to the customer. The Company accrues for warranty costs upon shipment and recognizes service revenue when the service is performed. Revenue under certain long-term contracts containing custom engineering is recognized under the percentage of completion method. In February 1997, the Company acquired all of the outstanding stock of and a building used by Digital Measurement Systems, Inc. (''DMS'') of Burlington, Massachusetts. DMS provides magnetic measurement equipment and systems to the computer hard disk manufacturing industry. This transaction has been accounted for as a pooling-of-interests and, therefore, the accompanying financial information has been retroactively restated to reflect the financial position and results of operations and cash flows of the Company and DMS for all periods presented. -21- RESULTS OF OPERATIONS For the periods indicated, the following table sets forth the percentage of total revenue represented by the respective line items in the Company's consolidated statement of income.
YEAR ENDED APRIL 30, -------------------- 1995 1996 1997 -------- -------- -------- Revenue..................... 100.0% 100.0% 100.0% Cost of revenue............. 50.5 46.2 44.2 Gross profit................ 49.5 53.8 55.8 Operating expenses: Research and development.... 13.7 11.6 16.8 Marketing and sales......... 14.8 15.1 13.5 General and administrative.. 9.7 10.0 7.3 Income from operations...... 11.4 17.0 18.2 Other income (expense)...... (0.9) 0.5 0.3 Net income.................. 6.8% 11.6% 13.0%
FISCAL YEAR ENDED APRIL 30, 1997 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1996 Revenue. Revenue increased 50.6% to $101.4 million in fiscal 1997 from $67.3 million in fiscal 1996. The increase was primarily due to increased unit sales of the Company's products. The increase in unit sales resulted primarily from strong demand for capital equipment in the semiconductor industry and increased demand for gaging equipment in the computer disk drive industry. In fiscal 1997, $6.3 million of revenue was provided by the operations of DMS versus $1.7 million in fiscal 1996. The Company is currently developing product enhancements and new products designed to meet increasing demand for metrology and inspection equipment for 300 millimeter wafers. A competitor of the Company has recently begun shipping an optical inspection product for 300 millimeter wafers. The Company believes that its next generation product, which has not yet been shipped to customers, will be technologically superior to the competitor's new product. Until the Company begins shipping its next generation product, the Company's sales of its wafer inspection systems could be adversely affected. Gross Margin. Gross margin increased to 55.8% in fiscal 1997 from 53.8% in fiscal 1996. The increase was primarily due to distributing relatively fixed overhead costs over increased sales. Gross margins were higher in the first and second quarters of fiscal 1997, as the Company operated near capacity in its facilities, as compared to the third and fourth quarters of fiscal 1997. During the third and fourth quarters of the fiscal year, the Company increased capacity and overhead by moving into a new facility in Westwood, Massachusetts and by increasing the capacity of its existing facility in Charlotte, North Carolina. Gross margins in the immediate future are expected to be consistent with the margins experienced during the third and fourth quarters of fiscal 1997. -22- Research and Development. Research and development expense in fiscal 1997 increased 118.2% to $17.0 million from $7.8 million in fiscal 1996 and increased as a percent of revenue to 16.8% from 11.6%. This increase was primarily due to increased spending on next generation products and expenses recognized during the fourth quarter for products under development, a portion of which had been capitalized during the previous three quarters. While future research and development expenses are expected to increase over previous quarters as the Company continues development of next generation products, the Company expects that expenses as a percent of revenue should return to levels experienced during the first three quarters of fiscal 1997. Marketing and Sales. Marketing and sales expense increased 34.4% to $13.7 million in fiscal 1997 from $10.2 million in fiscal 1996, but decreased as a percentage of revenue to 13.5% in fiscal 1997 from 15.1% in fiscal 1996. General and Administrative. General and administrative expenses increased 10.2% to $7.4 million in fiscal 1997 from $6.8 million in fiscal 1996 and decreased as a percent of revenue to 7.3% from 10.0%. General and administrative expenses increased at a lower rate than revenue growth, as these expenses are relatively stable compared to revenue growth. Other Income (Expense). Net interest income was $329,000 in fiscal 1997 versus net interest income of $331,000 in fiscal 1996. Interest income was offset by interest expense associated with an Industrial Development Bond used to finance the acquisition and renovation of the Westwood manufacturing facility. Provision for Income Taxes. The effective tax rates for fiscal 1997 and 1996 were 30.4% and 33.9%, respectively, and differed from the federal statutory rate primarily because of benefits from the use of a foreign sales corporation by the Company and state income taxes. The fiscal 1997 rate was lower than the fiscal 1996 rate due to the benefit of investment tax credits resulting from increased capital spending in fiscal 1997 and the benefit from federal and state research and development tax credits realized in the fourth quarter of fiscal 1997. FISCAL YEAR ENDED APRIL 30, 1996 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1995 Revenue. Revenue increased 45.9% to $67.3 million in fiscal 1996 from $46.2 million in fiscal 1995. The increase was due to increased unit sales of the Company's products and a price increase announced in January 1995. The increase in unit sales resulted primarily from strong demand for capital equipment in the semiconductor industry and increased demand for gaging equipment in the computer disk drive industry. Gross Margin. Gross margin increased to 53.8% in fiscal 1996 from 49.5% in fiscal 1995. The increase was primarily due to distributing relatively fixed overhead costs over increased sales and a price increase announced in January 1995, the impact of which occurred during fiscal 1996. -23- Research and Development. Research and development expense in fiscal 1996 increased 23.4% to $7.8 million from $6.3 million in fiscal 1995, but decreased as a percentage of revenue to 11.6% in fiscal 1996 from 13.7% in fiscal 1995, as revenue increased at a rate greater than the increase in research and development expense. Total expense for research and development increased as the Company made significant investments in next generation products. Marketing and Sales. Marketing and sales expense increased 48.6% to $10.2 million in fiscal 1996 from $6.8 million in fiscal 1995, and increased as a percentage of revenue to 15.1% in fiscal 1996 from 14.8% in fiscal 1995. This increase in expenditures was due to additions in staffing required to support increased demand for the Company's products. General and Administrative. General and administrative expenses increased 51.7% to $6.8 million in fiscal 1996 from $4.5 million in fiscal 1995. The increase was due to higher bonus expenses associated with improved performance, higher employee benefit costs, increased legal fees associated with various legal matters and additional expenses associated with being a public company. Other Income (Expense). Net interest income was $331,000 in fiscal 1996 versus net interest expense of $404,000 in fiscal 1995. The increase in income resulted from interest earned on the proceeds of the initial public offering of the Company's Common Stock completed in October 1995, repayment in full of the outstanding balance of the Company's line of credit in fiscal 1995 and the cancellation of subordinated debt related to the exercise of warrants in connection with the initial public offering. Provision for Income Taxes. The effective tax rates for fiscal 1996 and 1995 were 33.9% and 35.3% respectively, and differed from the federal statutory rate primarily because of benefits from the use of a foreign sales corporation by the Company and state income taxes. -24- SELECTED CONSOLIDATED QUARTERLY OPERATING RESULTS The following tables set forth consolidated statement of income data for each of the eight quarters in the period beginning May 1, 1995 and ending April 30, 1997. This information has been derived from the Company's unaudited financial statements. The unaudited financial statements have been prepared on the same basis as the audited financial statements contained herein and include all adjustments, consisting only of normal recurring adjustments, that the Company considers necessary to present fairly this information when read in conjunction with the Company's annual audited financial statements and notes thereto appearing elsewhere in this Form 10-K. The Company's operating results for any one quarter are not necessarily indicative of results for any future period.
QUARTER ENDED ------------------------------------------------------------------ JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30, ----------- ----------- ----------- ------------ ----------- ----------- ---------- ----------- 1995 1995 1996 1996 1996 1996 1997 1997 ----------- ----------- ----------- ------------ ----------- ----------- ---------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF INCOME DATA: Revenue.................... $ 13,559 $ 15,525 $ 18,693 $ 19,562 $ 19,991 $ 22,882 $ 26,193 $ 32,337 Cost of revenue............ 6,332 7,242 8,670 8,891 8,685 9,882 11,898 14,373 ----------- ----------- ----------- ------------ ----------- ----------- ---------- ----------- Gross profit............... 7,227 8,283 10,023 10,671 11,306 13,000 14,295 17,964 ----------- ----------- ----------- ------------ ----------- ----------- ---------- ----------- Operating expenses: Research and development. 1,712 1,858 1,768 2,460 3,221 3,783 3,757 6,251 Marketing and sales...... 2,214 2,258 3,056 2,641 2,977 2,868 3,272 4,548 General and administrative.......... 1,373 1,590 1,699 2,097 1,421 1,676 1,738 2,611 ----------- ----------- ----------- ------------ ----------- ----------- ---------- ----------- Total operating expenses.............. 5,299 5,706 6,523 7,198 7,619 8,327 8,767 13,410 ----------- ----------- ----------- ------------ ----------- ----------- ---------- ----------- Income from operations..... 1,928 2,577 3,500 3,473 3,687 4,673 5,528 4,554 Interest income (expense), net............ (62) (46) 247 192 151 79 (14) 113 ----------- ----------- ----------- ------------ ----------- ----------- ---------- ----------- Income before provision for income taxes and equity in net earnings (loss) of affiliated companies...... 1,866 2,531 3,747 3,665 3,838 4,752 5,514 4,667 Provision for income taxes. 684 915 1,339 1,066 1,290 1,650 1,851 914 ----------- ----------- ----------- ------------ ----------- ----------- ---------- ----------- Income before equity in net earnings (loss) of affiliated companies...... 1,182 1,616 2,408 2,599 2,548 3,102 3,663 3,753 Equity in net earnings (loss) of affiliated companies................. -- -- -- -- -- 15 156 (72) ----------- ----------- ----------- ------------ ----------- ----------- ---------- ----------- Net income................. $ 1,182 $ 1,616 $ 2,408 $ 2,599 $ 2,548 $ 3,117 $ 3,819 $ 3,681 ----------- ----------- ----------- ------------ ----------- ----------- ---------- ----------- Net income per share....... $0.17 $0.22 $0.27 $0.29 $0.29 $0.36 $0.43 $0.41 ----------- ----------- ----------- ------------ ----------- ----------- ---------- ----------- Weighted average common and common equivalent shares outstanding........ 6,810 7,323 8,884 8,843 8,864 8,772 8,871 9,012 ----------- ----------- ----------- ------------ ----------- ----------- ---------- -----------
QUARTER ENDED ------------------------------------------------------------------ JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30, ----------- ----------- ----------- ------------ ----------- ----------- ---------- ----------- 1995 1995 1996 1996 1996 1996 1997 1997 ----------- ----------- ----------- ------------ ----------- ----------- ---------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) PERCENTAGE OF REVENUE: Revenue.................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Cost of revenue............ 46.7 46.6 46.4 45.5 43.4 43.2 45.4 44.4 Gross profit............... 53.3 53.4 53.6 54.5 56.6 56.8 54.6 55.6 Operating expenses: Research and development. 12.6 12.0 9.5 12.6 16.1 16.5 14.3 19.3 Marketing and sales...... 16.3 14.5 16.3 13.5 14.9 12.5 12.5 14.1 General and administrative.......... 10.1 10.2 9.1 10.7 7.1 7.3 6.6 8.1 Income from operations..... 14.2 16.6 18.7 17.8 18.4 20.4 21.1 14.1 Interest income (expense), net............ (0.5) (0.3) 1.3 1.0 0.8 0.3 (0.1) 0.3 Net income................. 8.7% 10.4% 12.9% 13.3% 12.7% 13.6% 14.6% 11.4%
-25- The Company's quarterly operating results have varied and may continue to vary significantly due to a number of factors, including economic conditions in the semiconductor and computer hard disk industries, the timing of shipments of orders to major customers, the mix of products sold by the Company and competitive pricing. Customers may cancel or reschedule shipments. Production difficulties or the inability to obtain critical components could delay shipments. These factors could have a material adverse effect on the Company's results of operations. As cost of revenue includes manufacturing overhead, which is relatively constant from quarter to quarter, gross margins can vary significantly from quarter to quarter due to varying levels of production and revenue. There can be no assurance that the Company will be profitable in any future period. Marketing and sales expenses can vary from quarter to quarter based on a number of factors, including mix of sales channels, geographic mix and timing of marketing events. LIQUIDITY AND CAPITAL RESOURCES As of April 30, 1997, the Company had cash and cash equivalents of $19.4 million and working capital of $45.8 million. Net cash provided by operating activities was $6.6 million. Net income was $13.2 million. This amount was offset by a $4.4 million increase in accounts receivable resulting from increased sales and a $8.6 million increase in inventory. Management believes that inventory levels are larger than necessary for current sales volumes and has instituted a number of programs to improve inventory turnover in all facilities. Depreciation and amortization for fiscal 1997 was $1.6 million. During fiscal 1997, the Company increased its ownership in its Japanese distributor, Japan ADE Ltd. (''JAL''), from 3.0% to 50.0%. Consequently, in fiscal 1997, $2.7 million in gross profit from sales to JAL have been deferred rather than included in income from operations. During fiscal 1997, $15.0 million of cash was used in investing activities. Purchases of fixed assets represented $10.4 million of this amount. During the next fiscal year, the Company does not anticipate investing in fixed assets to the extent of fiscal 1997. Investments in three companies used an additional $3.1 million. Net cash provided by financing activities was $6.3 million. The primary source of this cash was a $5.5 million Industrial Development Bond used to finance the purchase and renovation of the manufacturing facility in Westwood, Massachusetts. Since inception, the Company has satisfied its cash requirements primarily through cash flow from operations, private placements and an initial public offering of the Company's Common Stock, bank borrowings and equipment financing. On July 9, 1997, the Company filed with the Securities and Exchange Commission a Registration Statement on Form S-3 with respect to a public offering by the Company of up to 2,300,000 shares of Common Stock and by certain stockholders of the Company of up to 540,500 shares of Common Stock, in each case including an underwriters' overallotment option of 15%. The Company may use a portion of the net proceeds to the Company from the offering -26- for acquisitions of complementary businesses and technologies. The Company believes that cash from operations, existing cash resources and bank borrowings, together with the net proceeds of the sale of Common Stock by the Company in the offering, will be adequate to fund operations for at least the next 18 months. The Company's long-term capital requirements will be affected by many factors, including the success of the Company's current product offerings, the Company's ability to enhance its current products and to develop and introduce new products that keep pace with technological developments and general trends in the semiconductor wafer and device industries. The Company plans to finance its long-term capital needs with the net proceeds of the currently pending public offering, together with existing cash reserves and interest earned thereon, revenue from product sales, bank loans, leases and debt financings. To the extent that such funds are insufficient to finance the Company's activities, or if the public offering is not completed, the Company will have to raise additional funds through the issuance of additional equity or debt securities or through other means. There can be no assurance that additional financing will be available on acceptable terms. NEW ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board (''FASB'') issued Statement of Financial Accounting Standards (''SFAS'') No. 128, ''Earnings Per Share.'' This statement establishes and simplifies standards for computing and presenting earnings per share. SFAS No. 128 will be effective beginning with the Company's quarter ended January 31, 1998 and requires the restatement of all previously reported earnings per share data that are presented. Early adoption of SFAS No. 128 is not permitted. SFAS No. 128 replaces primary and fully diluted earnings per share with basic and diluted earnings per share. Pro forma earnings per share under SFAS No. 128 would have been as follows:
YEAR ENDED APRIL 30, --------------------------------------------- 1993 1994 1995 1996 1997 ------- --------- ------- ------- ------- Pro forma basic net income (loss) per share.................................. $ 0.07 $ (0.05) $ 0.48 $ 1.04 $ 1.55 Pro forma diluted net income (loss) per share.................................. 0.07 (0.05) 0.47 0.98 1.48
In June 1997, the FASB issued SFAS No. 130, ''Reporting Comprehensive Income.'' The statement establishes standards for the reporting and display of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. This standard will require that an enterprise display an amount representing total comprehensive income for the period. SFAS No. 130 will be effective for the Company's fiscal year ending April 30, 1998. Adoption of SFAS No. 130 is not expected to significantly impact the Company's financial position or results of operations. In June 1997, the FASB issued SFAS No. 131, ''Disclosures about Segments of an Enterprise and Related Information'' which supersedes SFAS No. 14. This statement changes the -27- way that public business enterprises report segment information, including financial and descriptive information about their operating segments, in annual financial statements and would require that those enterprises report selected segment information in interim financial reports to stockholders. Operating segments are defined as revenue-producing components of the enterprise which are generally used internally for evaluating segment performance. SFAS No. 131 will be effective for the Company beginning with the Company's fiscal year ending April 30, 1998. Adoption of SFAS No. 131 will not impact the Company's financial position or results of operations. INFLATION To date, inflation has not had a significant impact on the Company's operations. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by Item 8 is contained on pages F-1 though F-26 of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information regarding directors required by this Item is included in the definitive Proxy Statement for the Company's 1997 Annual Meeting of Stockholders, to be filed with the Commission on or about August 20, 1997 (the "1997 Proxy Statement"), under "Election of Directors" and is incorporated herein by reference. The information regarding executive officers required by this Item is included in Part I of this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is included in the 1997 Proxy Statement under "Executive Compensation" and is incorporated herein by reference (excluding, however, the "Report on Executive Compensation" and the Performance Graph contained in the 1997 Proxy Statement, which shall not be deemed incorporated herein). -28- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is included in the 1997 Proxy Statement under "Security Ownership of Certain Beneficial Owners and Management" and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) Financial Statements. The Financial Statements required to be filed by Item 8 of Form 10-K, and filed herewith, are as follows: Page Number in this Form 10-K -------------- Report of Independent Accountants......................... F-2 Consolidated Balance Sheet as of April 30, 1996 and 1997.. F-3 Consolidated Statements of Income for the three years ended April 30, 1997............................................ F-5 Consolidated Statements of Stockholders' Equity for the three years ended April 30, 1997................................ F-6 Consolidated Statements of Cash Flows for the three years ended April 30, 1997............................................ F-7 Notes to Consolidated Financial Statements................ F-9 (a)(2) Financial Statement Schedule: II - Valuation and Qualifying Accounts and Reserves for the three years ended April 30, 1997........... S-1 All other schedules are omitted because they are either not applicable or the required information is included in the financial statements or notes thereto. (a)(3) Exhibits. -29- Exhibit Number Description - ------- ---------------------------------------------------------------------- 3.1 Restated Articles of Organization (filed as Exhibit 3.1 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference). 3.2 By-laws (filed as Exhibit 3.2 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference). 4.1 Specimen Common Stock Certificate (filed as Exhibit 4 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference). 10.1 Form of Employee Confidentiality Agreement (filed as Exhibit 10.1 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference). 10.2 1995 Stock Option Plan (filed as Exhibit 10.4 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference).* 10.3 1992 Stock Option Plan (filed as Exhibit 10.5 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference).* 10.4 1982 Stock Option Plan (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8 (333-2280) and incorporated herein by reference).* 10.5 Stock Option Agreement dated October 22, 1992 between the Registrant and Kendall Wright (filed as Exhibit 4.6 to the Company's Registration Statement on Form S-8 (333-2280) and incorporated herein by reference).* 10.6 Employee Stock Purchase Plan (as amended) (filed as Exhibit 10.6 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference).* 10.7 Lease of Corporate Headquarters in Newton, Massachusetts, dated December 9, 1988, as amended, between the Company and Wellco Newton Limited Partnership (which Lease and amendment were filed as Exhibit 10.6 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference); and Third Amendment dated June 6, 1997 (filed herewith). 10.8 Lease of ADE Optical Systems' Charlotte, North Carolina facility, dated June 26, 1984, as assigned and renewed, between Pine Brook Center Limited Partnership and ADEde Optical Systems Corporation (filed as Exhibit 10.7 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference). -30- 10.9 Purchase and Sale Agreement for 80 Wilson Way, Westwood, Massachusetts, dated January 11, 1996, between Met Path New England, Inc., and the Company, with Schedules (filed as Exhibit 10.12 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference). 10.10 Loan Agreement dated as of June 7, 1996, among GE Capital Public Finance, Inc., Massachusetts Industrial Finance Agency and the Company (filed as Exhibit 10.9 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference). 10.11 Certificate as to Nonarbitrage and Tax Compliance, dated as of June 7, 1996, from the Company to Massachusetts Industrial Finance Agency (filed as Exhibit 10.10 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference). 10.12 Letter of Credit Agreement, dated June 7, 1996, between Citizens Bank of Massachusetts and the Company (filed as Exhibit 10.11 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference). 10.13 Mortgage, Security Agreement, and Assignment, dated June 7, 1996, from the Company to Citizens Bank of Massachusetts (filed as Exhibit 10.13 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference). 10.14 Pledge Agreement, dated June 7, 1996, from the Company to Citizens Bank of Massachusetts (filed as Exhibit 10.14 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference). 10.15 Oil and Hazardous Materials Indemnification Agreement, dated June 7, 1996, between the Company and Citizens Bank of Massachusetts (filed as Exhibit 10.15 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference). 10.16 Indemnification Agreement, dated as of February 28, 1996, among MetPath of New England, Inc., Corning Life Sciences, Inc. and the Company (filed as Exhibit 10.16 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference). 10.17 Letter Agreement regarding collateral assignment of Indemnification from the Company to Citizens Bank of Massachusetts, with attachment, (filed as Exhibit 10.17 to the Company's Form 10-K for the fiscal year ended April 30, 1996 and incorporated herein by reference). 10.18 Agreement and Plan of Merger dated as of February 27, 1997 by and between ADE Corporation, ADE Technologies, Inc., Digital Measurement Systems, Inc., Dennis E. Speliotis, Elias Speliotis, Evanthia Speliotis, Ismene Speliotis, Advanced Development -31- Corporation, David C. Bono and Alan Sliski (filed herewith exclusive of exhibits). 10.19 Registration Rights Agreement dated as of February 27, 1997, by and among ADE Corporation and Advanced Development Corporation, David C. Bono and Alan Sliski (filed herewith). 10.20 Purchase and Sale Agreement dated as of February 28, 1997 by and between ADE Corporation and Dennis E. Speliotis, individually and as Trustee of Thouria Investment Trust under a Declaration of Trust dated August 18, 1992, Elias Speliotis, Evanthia Speliotis and Ismene Speliotis (filed herewith). 10.21 Registration Rights Agreement dated as of February 28, 1997 by and between ADE Corporation and Dennis E. Speliotis, individually and as Trustee of Thouria Investment Trust under a Declaration of Trust dated August 18, 1992 recorded in the Middlesex South District Registry of Deeds at Book 22305, Page 375 (filed herewith). 11.1 Statement re: computation of per share earnings (filed herewith). 21.1 Subsidiaries of the Company (filed as Exhibit 21 to the Company's Registration Statement on Form S-1 (33-96408) or amendments thereto and incorporated herein by reference). 23.1 Consent of Price Waterhouse LLP (filed herewith). __________________________ * Compensatory plan or agreement applicable to management and employees. (b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company during the quarter ended April 30, 1997. -32- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ADE CORPORATION July 28, 1997 By: /s/ Robert C. Abbe --------------------- Robert C. Abbe President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Robert C. Abbe President, Chief Executive Officer July 28, 1997 - --------------------------- and Director (Principal Executive Robert C. Abbe Officer) /s/ Mark D. Shooman Vice President and July 28, 1997 - --------------------------- Chief Financial Officer (Principal Mark D. Shooman Financial Officer) /s/ Joseph E. Rovatti Controller (Principal Accounting July 28, 1997 - --------------------------- Officer) Joseph E. Rovatti /s/ Landon T. Clay Chairman of the Board July 28, 1997 - --------------------------- Landon T. Clay /s/ Francis B. Lothrop, Jr. Director July 28, 1997 - --------------------------- Francis B. Lothrop, Jr. /s/ H. Kimball Faulkner Director July 28, 1997 - --------------------------- H. Kimball Faulkner /s/ Kendall Wright Director July 28, 1997 - --------------------------- Kendall Wright
-33- ADE CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Accountants................................................................................ F-2 Consolidated Balance Sheet at April 30, 1996 and 1997............................................................ F-3 Consolidated Statement of Income for the three years ended April 30, 1997........................................ F-5 Consolidated Statement of Stockholders' Equity for the three years ended April 30, 1997.......................... F-6 Consolidated Statement of Cash Flows for the three years ended April 30, 1997.................................... F-7 Notes to Consolidated Financial Statements....................................................................... F-9 Financial Statement Schedule: II - Valuation and Qualifying Accounts and Reserves for the three years ended April 30, 1997................... S-1
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of ADE Corporation In our opinion, the consolidated financial statements listed in the index appearing on page F-1, present fairly, in all material respects, the financial position of ADE Corporation and its subsidiaries at April 30, 1996 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended April 30, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Boston, Massachusetts July 1, 1997 F-2 ADE CORPORATION CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE DATA)
APRIL 30, -------------------- 1996 1997 --------- --------- ASSETS Current assets: Cash and cash equivalents........................................................ $21,513 $19,374 Accounts receivable: Trade, less allowance for doubtful accounts of $476 and $577 at April 30, 1996 and 1997, respectively....................................................... 15,872 19,248 Affiliate..................................................................... -- 1,083 Inventories...................................................................... 13,525 22,160 Prepaid expenses and other current assets........................................ 327 310 Deferred income taxes............................................................ 2,954 5,348 -------- -------- Total current assets....................................................... 54,191 67,523 Fixed assets, net.................................................................. 7,260 15,735 Deferred income taxes.............................................................. 329 234 Investments........................................................................ 13 3,162 Other assets....................................................................... 185 1,763 -------- -------- $61,978 $88,417 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable to related party.................................................... $ 577 $ -- Current portion of long-term debt................................................ 44 899 Accounts payable................................................................. 4,717 5,535 Accrued expenses................................................................. 8,736 10,744 Deferred income on sales to affiliate............................................ -- 2,661 Income taxes payable............................................................. 289 1,915 -------- -------- Total current liabilities.................................................. 14,363 21,754 -------- -------- Long-term debt..................................................................... 677 5,091 -------- -------- Excess of net assets acquired over cost............................................ 436 184 -------- -------- Stockholders' equity: Preferred stock, $1.00 par value; 1,000,000 shares authorized; none issued or outstanding........................................................... -- -- Common stock, $.01 par value; 25,000,000 shares authorized; 8,439,716 and 8,604,160 shares issued and outstanding at April 30, 1996 and 1997, respectively.................................................................... 84 86 Capital in excess of par value................................................... 27,104 28,660 Retained earnings................................................................ 19,573 32,846 -------- -------- 46,761 61,592 Deferred compensation............................................................ (259) (204) -------- --------
F-3 46,502 61,388 -------- -------- Commitments (Note 14).............................................................. -------- -------- $61,978 $88,417 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. F-4 ADE CORPORATION CONSOLIDATED STATEMENT OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED APRIL 30, -------------------------------- 1995 1996 1997 --------- --------- ---------- Revenue $46,152 $67,339 $ 89,218 Revenue from affiliate............................................................. -- -- 12,185 -------- -------- --------- - - Total revenue................................................................... 46,152 67,339 101,403 -------- -------- --------- Cost of revenue.................................................................... 23,293 31,135 39,762 Cost of revenue from affiliate..................................................... -- -- 5,076 -------- -------- --------- - - Total cost of revenue........................................................... 23,293 31,135 44,838 -------- -------- --------- Gross profit.................................................................. 22,859 36,204 56,565 -------- -------- --------- Operating expenses: Research and development........................................................ 6,318 7,798 17,012 Marketing and sales............................................................. 6,842 10,169 13,665 General and administrative...................................................... 4,707 7,011 7,698 Amortization of excess of net assets acquired over cost......................... (252) (252) (252) -------- -------- --------- Total operating expenses...................................................... 17,615 24,726 38,123 -------- -------- --------- Income from operations............................................................. 5,244 11,478 18,442 Other income (expense): Interest income................................................................. 24 535 752 Interest expense................................................................ (428) (204) (423) -------- -------- --------- Income before provision for income taxes and equity in net earnings of affiliated companies.............................................................. 4,840 11,809 18,771 Provision for income taxes......................................................... 1,709 4,004 5,705 -------- -------- --------- Income before equity in net earnings of affiliated companies....................... 3,131 7,805 13,066 Equity in net earnings of affiliated companies..................................... -- -- 99 -------- -------- --------- Net income.................................................................... $ 3,131 $ 7,805 $ 13,165 ======== ======== ========= Net income per share............................................................... $ 0.47 $ 0.98 $ 1.48 ======== ======== ========= Weighted average common and common equivalent shares outstanding................... 6,651 7,965 8,880 ======== ======== =========
The accompanying notes are an integral part of the consolidated financial statements. F-5 ADE CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
CAPITAL IN TOTAL ---------- ----- EXCESS OF RETAINED TREASURY DEFERRED STOCKHOLDERS' --------- -------- -------- -------- ------------- COMMON STOCK PAR VALUE EARNINGS STOCK COMPENSATION EQUITY -------------------- --------- -------- ----- ------------ ------ NUMBER PAR ------ --- OF SHARES VALUE --------- ----- Balance at April 30, 1994........... 6,416,554 $64 $ 4,739 $ 8,637 $(240) $13,200 Board of Director fees.............. 1 11 12 Exercise of common stock options............................ (15) 29 14 Repurchase of 34,430 shares of common stock....................... (152) (152) Compensation related to the grant of common stock options............ 251 $(251) -- Net income.......................... 3,131 3,131 --------- --- ------- ------- ----- ----- ------- Balance at April 30, 1995........... 6,416,554 64 4,976 11,768 (352) (251) 16,205 Exercise of warrants................ 241,578 2 702 352 1,056 Sale of common stock in connection with initial public offering in October 1995, net of issuance costs of $2,315........... 1,617,600 16 20,315 20,331 Exercise of common stock options............................ 163,984 2 660 662 Compensation related to the grant of common stock options............ 58 (58) -- Amortization of deferred compensation....................... 50 50 Tax benefit related to exercise of common stock options............... 393 393 Net income.......................... 7,805 7,805 --------- --- ------- ------- ----- ----- ------- Balance at April 30, 1996........... 8,439,716 84 27,104 19,573 -- (259) 46,502 Exercise of common stock options............................ 154,400 2 660 662 Sale of common stock pursuant to the Employee Stock Purchase Plan............................... 10,044 -- 102 102 Amortization of deferred compensation....................... 55 55 Tax benefit related to exercise of common stock options............... 794 794 Net income.......................... 13,165 13,165 Net income of Digital Measurement Systems, Inc. for the one month ended April 30, 1997 (Note 3)...... 108 108 --------- --- ------- ------- ----- ----- ------- Balance at April 30, 1997........... 8,604,160 $86 $28,660 $32,846 $ -- $(204) $61,388 ========= === ======== ======= ===== ====== ========
The accompanying notes are an integral part of the consolidated financial statements. F-6 ADE CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (IN THOUSANDS)
YEAR ENDED APRIL 30, ------------------------------- 1995 1996 1997 --------- --------- --------- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income....................................................................... $ 3,131 $ 7,805 $13,165 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................................................. 1,318 1,052 1,646 Equity in net earnings of affiliated companies................................ -- -- (99) Deferred income taxes......................................................... (743) (1,275) (2,299) Amortization of deferred compensation......................................... -- 50 55 Change in assets and liabilities: Accounts receivable, trade................................................. (2,105) (6,192) (3,329) Accounts receivable, affiliate............................................. -- -- (1,083) Costs and estimated earnings in excess of billings on uncompleted contracts................................................................. 500 -- -- Inventories................................................................ 95 (3,382) (8,626) Prepaid expenses and other current assets.................................. 6 (102) 18 Accounts payable........................................................... 844 862 833 Accrued expenses........................................................... 937 4,751 2,044 Deferred income on sales to affiliate...................................... -- -- 2,661 Income taxes payable....................................................... 966 (1,278) 1,626 -------- -------- -------- Net cash provided by operating activities................................ 4,949 2,291 6,612 -------- -------- -------- CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Purchases of fixed assets........................................................ (935) (5,337) (10,363) Equity investments............................................................... -- -- (3,050) Decrease (increase) in other assets.............................................. 13 6 (1,578) -------- -------- -------- Net cash used in investing activities.................................... (922) (5,331) (14,991) -------- -------- -------- CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Repayments of line of credit, net................................................ (2,750) -- -- Proceeds from (repayment of) note payable to related party....................... 228 69 (577) Proceeds from issuance of long-term debt......................................... -- -- 5,500 Repayments of long-term debt..................................................... (74) (179) (231) Proceeds from issuance of common stock........................................... 14 20,993 764 Tax benefit related to the exercise of common stock options...................... -- 393 794 Repurchase of common stock....................................................... (38) -- -- -------- -------- -------- Net cash provided by (used in) financing activities...................... (2,620) 21,276 6,250 -------- -------- --------
F-7 Adjustment for DMS activity for the one month ended April 30, 1997(Note 3)......... -- -- (10) -------- -------- -------- Net increase (decrease) in cash and cash equivalents............................... 1,407 18,236 (2,139) Cash and cash equivalents, beginning of year....................................... 1,870 3,277 21,513 -------- -------- -------- Cash and cash equivalents, end of year............................................. $ 3,277 $21,513 $19,374 ======== ======== ========
See supplemental disclosures of cash flow information (Note 15) The accompanying notes are an integral part of the consolidated financial statements. F-8 ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1. NATURE OF BUSINESS ADE Corporation (the ''Company'') designs, manufactures, markets and services highly precise, automated measurement, defect detection and handling equipment with current applications in the production of semiconductor wafers, integrated circuits and computer memory disks. The predominant market for the Company consists of semiconductor wafer and device manufacturing concerns located in the United States, Japan, Europe and the Far East. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of significant accounting policies followed in the preparation of the financial statements follows: Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Effective February 28, 1997, the Company acquired all of the outstanding shares of common stock of Digital Measurement Systems, Inc. (''DMS'') in exchange for 821,000 shares of common stock of the Company. This transaction has been accounted for as a pooling-of-interests and, therefore, the accompanying financial statements have been retroactively restated to reflect the financial position and results of operations and cash flows of the Company and DMS for all periods presented (Note 3). All material intercompany transactions and balances have been eliminated. Investments in 50% or less owned companies over which the Company has the ability to exercise significant influence are accounted for using the equity method. Investments in 20% or less owned companies are accounted for using the cost method. (Note 4) Revenue Recognition Revenue from product sales is recorded upon shipment. The Company accrues for anticipated warranty costs upon shipment. Service revenue is recognized as the services are performed. The Company does not provide the right to return products. F-9 Revenue under certain long-term contracts containing custom engineering is recognized under the percentage-of-completion method. The percentage of completion is determined by relating the actual cost of the work performed to date to the estimated total cost of the respective contracts. Contract costs include all direct material and labor costs as well as an allocated share of indirect costs incurred. Actual costs incurred and estimated earnings on contracts in progress at year end are included in operations for the year. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company invests its excess cash in money market accounts. These investments are subject to minimal credit and market risks. At April 30, 1996 and 1997, the Company has classified its cash equivalent investments totaling $18,092 and $10,465, respectively, as available for sale. The carrying amount of these investments approximates fair market value. Inventories Inventories are stated at the lower of cost or market, cost being determined on a first-in, first-out basis. Fixed Assets Fixed assets are stated at cost. Additions and betterments, unless of a relatively minor amount, are capitalized. Expenditures for normal maintenance and repairs are charged to expense as incurred. Depreciation is provided by use of the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of their useful life or the remaining life of the lease. Excess of Net Assets Acquired Over Cost The excess of net assets acquired over cost represents the unamortized excess of the fair market value of the net assets acquired determined at the date ADE Optical Systems, Inc. (''AOS'') was acquired over the purchase price of AOS, after reducing the basis in noncurrent assets acquired to zero. The original amount of the excess of net assets acquired over cost is being amortized using the straight-line method over five years. F-10 Concentrations Credit Risk Financial instruments which potentially expose the Company to concentration of credit risk include cash, cash equivalents and trade accounts receivable. A significant amount of the Company's cash and cash equivalents are held by four financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100. Uninsured cash balances totaled approximately $2,859 and $8,117 at April 30, 1996 and 1997, respectively. The Company does not believe that such deposits are subject to any unusual credit risk associated with operating its business. The Company's customer base primarily consists of semiconductor wafer, semiconductor device and computer hard disk manufacturers. Accounts receivable from two customers accounted for approximately 42% and 36% of total accounts receivable at April 30, 1996 and 1997, respectively. The Company performs ongoing credit evaluations of customers' financial condition, although collateral is not required. In addition, the Company maintains reserves for potential credit losses and such losses, in aggregate, have not exceeded management expectations. Suppliers Certain of the components and subassemblies incorporated into the Company's systems are obtained from a single source or a limited group of suppliers. The Company seeks to reduce the impact from its dependence on those sole and limited source suppliers by considering alternate sources of supply, alternate designs for its products and by maintaining an adequate supply of the components and subassemblies. However, the loss of one or more of the sole or limited suppliers could cause a delay in manufacturing and a potential loss of sales, which could affect operating results adversely. Financial Instruments The carrying amount of the Company's financial instruments, which include cash, cash equivalents, accounts receivable, accounts payable, accrued expenses, and long-term debt, approximates their fair value at the balance sheet dates. It was not practicable to estimate the fair value of the Company's long-term investments as the stock of the related investees is not publicly traded. F-11 ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Stock-Based Compensation Stock-based compensation awards to employees under the Company's stock plans are accounted for using the intrinsic value method prescribed in Accounting Principles Board Opinion (''APB'') No.25, Accounting for Stock Issued to Employees and related interpretations. The Company has adopted the disclosure requirements of Statement of Financial Accounting Standards (''SFAS'') No. 123, ''Accounting for Stock-Based Compensation.'' Earnings Per Share Earnings per share are determined by dividing net income by the weighted average number of common shares and common share equivalents outstanding during the year. Common share equivalents consist of common stock which may be issuable upon exercise of outstanding stock options and warrants using the treasury stock method. Common stock, warrants and options issued or granted at prices below the initial public offering price per share during the twelve-month period prior to the initial filing of the Company's registration statement on Form S-1 have been included in the calculation as if outstanding for all periods presented through July 31, 1995 using the treasury stock method and the initial public offering price of $14.00 per share. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingencies at April 30, 1996 and 1997, and the reported amounts of revenues and expenses during the three year period ended April 30, 1997. Actual results could differ from those estimates. New Accounting Pronouncements In February 1997, the Financial Accounting Standards Board (''FASB'') issued SFAS No. 128, ''Earnings Per Share.'' This statement establishes and simplifies standards for computing and presenting earnings per share. SFAS No. 128 will be effective beginning with the Company's quarter ended January 31, 1998 and requires the restatement of all previously reported earnings per share data that are presented. Early adoption of SFAS No. 128 is not permitted. SFAS No. F-12 128 replaces primary and fully diluted earnings per share with basic and diluted earnings per share. Pro forma earnings per share under SFAS No. 128 would have been as follows:
YEAR ENDED APRIL 30, ------------------------ 1995 1996 1997 ------ ------- ------- Pro forma basic net income per share................. $ 0.48 $ 1.04 $ 1.55 Pro forma diluted net income per share............... 0.47 0.98 1.48
In June 1997, the FASB issued SFAS No. 130, ''Reporting Comprehensive Income.'' The statement establishes standards for the reporting and display of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. This standard will require that an enterprise display an amount representing total comprehensive income for ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) the period. SFAS No. 130 will be effective for the Company's fiscal year ending April 30, 1998. Adoption of SFAS No. 130 is not expected to significantly impact the Company's financial position or results of operations. In June 1997, the FASB issued SFAS No. 131, ''Disclosures about Segments of an Enterprise and Related Information'' which supersedes SFAS No. 14. This statement changes the way that public business enterprises report segment information, including financial and descriptive information about their operating segments, in annual financial statements and would require that those enterprises report selected segment information in interim financial reports to stockholders. Operating segments are defined as revenue-producing components of the enterprise which are generally used internally for evaluating segment performance. SFAS No. 131 will be effective for the Company beginning with the Company's fiscal year ending April 30, 1998. Adoption of SFAS No. 131 will not impact the Company's financial position or results of operations. 3. ACQUISITION OF SUBSIDIARY; POOLING-OF-INTERESTS On February 28, 1997, pursuant to an Agreement and Plan of Merger (the ''DMS Agreement''), the Company, through its wholly-owned subsidiary ADE Technologies, Inc. (''ATI''), acquired Digital Measurement Systems, Inc. (''DMS''), a Massachusetts corporation, and a building which is integral to the operations of DMS and which was controlled by a significant stockholder of DMS. DMS designs, manufactures, markets and services magnetic measurement devices with current applications in the production of computer memory disks. Pursuant to the DMS Agreement, each outstanding share of DMS capital stock was converted into 759.73 shares of the Company's common stock. Immediately prior to the acquisition, there were 1,000 shares of DMS Class A common stock and 53 shares of DMS Class B common stock outstanding. F-13 Pursuant to the terms of the DMS Agreement, the Company also issued 21,000 shares in connection with the acquisition of the building. In total, 821,000 shares of the Company's common stock were issued in this transaction. This transaction has been accounted for as a pooling-of-interests and, therefore, all prior period financial statements presented have been restated as if the acquisition took place at the beginning of such periods. DMS had a March 31 year end and, accordingly, the results of operations for DMS for the three years ended March 31, 1997 have been combined with the results of operations for the Company's three years ended April 30, 1997. Additionally, the financial position of DMS as of March 31, 1996 has been combined with the Company's financial position as of April 30, 1996. In order to conform DMS to the Company's fiscal year end, the financial position of DMS and the Company have been combined as of April 30, 1997. Accordingly, an adjustment has been made to retained earnings in fiscal 1997 to record the net income of DMS for the one month period ended April 30, 1997 totaling $108. Other results of operations for such one month period of DMS included revenues of $684 and operating costs and expenses of $527. There were no material transactions between the Company and DMS during any of the periods presented prior to the DMS Agreement. All material intercompany transactions and balances subsequent to the DMS Agreement have been eliminated. No material adjustments to net assets or the results of operations were necessary to conform the accounting practices of DMS to those of the Company. ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Separate results of operations for the periods prior to the acquisition of DMS by the Company were as follows:
YEAR ENDED NINE MONTHS APRIL 30, ENDED ------------------- JANUARY 31, 1995 1996 1997 ------- ---------- ------------ (UNAUDITED) Revenue: ADE Corporation......... $45,070 $65,616 $64,749 DMS, Inc................ 1,082 1,723 4,317 ------- -------- ------- Combined................ $46,152 $67,339 $69,066 ======= ======== ======= Net income (loss): ADE Corporation......... $ 3,107 $ 7,832 $ 8,448 DMS, Inc................ 24 (27) 1,036 ------- -------- ------- Combined................ $ 3,131 $ 7,805 $ 9,484 ======= ======== =======
F-14 4. Investments The Company's investments of 50% or less owned companies over which the Company has the ability to exercise significant influence are accounted for using the equity method. Investments carried at equity consist of Japan ADE Ltd. ("JAL"), a Japanese corporation, and Microspec Technologies Ltd. ("Microspec"), an Israeli corporation. In July 1996, the Company acquired 1,410 shares of JAL for $1,300, which increased the Company's investment in JAL from 3% to 50%. JAL has been the exclusive distributor of ADE dimensional products in Japan since 1986. In connection with this investment, JAL and the Company also agreed to reduce the discount provided on sales to JAL. Sales to JAL which have not in turn been sold to unrelated third parties at April 30, 1997 have been eliminated, and the related profit on such sales is recorded as deferred income on sales to affiliate. In July 1996, the Company acquired a 25.1% interest in Microspec for $1,250. In connection with this investment, the Company also executed an exclusive five-year agreement to distribute Microspec products, subject to certain performance criteria. During fiscal year 1997, there were no material purchases from or sales to Microspec. ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) The summarized unaudited financial information below for fiscal year 1997 represents an aggregation of the Company's nonsubsidiary affiliates:
YEAR ENDED APRIL 30, 1997 ---- Revenue................. $26,933 Gross profit............ 9,820 Net income.............. 419 APRIL 30, 1997 ---- Current assets.......... $16,664 Noncurrent assets....... 1,381 Current liabilities..... 14,832 Noncurrent liabilities.. 418
F-15 The Company's share of undistributed earnings of one affiliated company and the Company's share of the losses of the other affiliated company included in consolidated retained earnings was $507 and $136 at April 30, 1997, respectively. The Company has received no dividends from affiliated companies during fiscal year 1997. At April 30, 1997, the Company's investment exceeds the underlying net assets of affiliated companies by $1,476, which is being amortized by decreasing the equity in net earnings of affiliated companies using the straight-line method over five years. Related amortization expense of $273 was recorded in fiscal 1997. Pro forma revenue, net income and net income per share as though the investments in affiliated companies were made at the beginning of fiscal year 1996, including the effect of eliminating the profit on affiliated sales in beginning and ending inventory for the period, have not been included as they are not materially different from actual revenue, net income and net income per share for the two years ended April 30, 1997. The Company also has a less than 20% investment in a company in the amount of $500 that is accounted for using the cost method. ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 5. INVENTORIES Inventories consist of the following:
APRIL 30, ----------------- 1996 1997 -------- ------- Raw materials and purchased parts. $ 6,380 $ 9,867 Work-in-process................... 6,926 11,464 Finished goods.................... 219 829 ------- -------- $13,525 $22,160 ======= ========
6. FIXED ASSETS Fixed assets consist of the following:
APRIL 30, USEFUL LIFE ---------------- IN YEARS 1996 1997 -------- ------ ------ Land.............................. $ 1,288 $ 1,288 Building and improvements......... 15-25 3,475 8,967 Machinery and equipment........... 3-10 9,994 6,976 Office equipment.................. 3-10 4,100 2,370 Leasehold improvements............ 5 278 1,374
F-16 Construction-in-progress............... 263 414 ------- ------- 19,398 21,389 12,138 5,654 ------- ------- Less--accumulated depreciation and amortization........................ $ 7,260 $15,735 ======= =======
Depreciation expense for the years ended April 30, 1995, 1996 and 1997 was $1,570, $1,304 and $1,912, respectively. Fully depreciated assets with a historical cost of $8,396 were written off during fiscal 1997. 7. ACCRUED EXPENSES Accrued expenses consist of the following:
APRIL 30, ----------------- 1996 1997 ------- ------- Accrued commissions............... $ 2,560 $ 1,852 Accrued salaries, wages, vacation 2,489 2,972 pay and bonuses................. Accrued warranty costs............ 1,151 1,832 Accrued loss on abandonment of facilities...................... 911 671 Other............................. 1,625 3,417 ------- ------- $ 8,736 $10,744 ======= =======
The Company purchased a building in February 1996 in which it relocated its headquarters and one of its manufacturing facilities. Upon the purchase of the building, the Company recorded a charge of $911 for the estimated future costs of the abandoned facility for the period subsequent to the relocation. ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 8. BORROWINGS Note Payable to Related Party At April 30, 1996, the Company had a $577 note payable due to a company affiliated with a principal stockholder of DMS, which bore interest at an annual rate of 15%. Interest expense for the years ended April 30, 1995, 1996 and 1997 totaled $48, $88 and $87, respectively. During the year ended April 30, 1997, DMS repaid the entire principal on the note. F-17 Long-term Debt In June 1994, the Company entered into an agreement with a former executive to purchase 34,430 shares of the Company's common stock by paying cash of $38 and issuing a promissory note payable for $114. The note bears interest at the prime rate (8.5% at April 30, 1997) and the remaining principal balance of $38 at April 30, 1997 is payable on August 1, 1997. Under the terms of the DMS Agreement, the Company assumed a mortgage loan which was secured by the acquired building. The principal balance outstanding totaled $645 and $639 at April 30, 1996 and 1997, respectively. The Company paid the remaining principal balance in full in June 1997; accordingly, the balance has been included in the current portion of long-term debt at April 30, 1997. In June 1996, the Company issued a $5.5 million tax exempt Industrial Development Bond through the Massachusetts Industrial Finance Agency. The bond carries a 5.74% interest rate for 10 years with amortization of 50% of the principal and with the remaining 50% due in June 2006. Monthly payments consisting of principal and interest total $43. The proceeds of the bond were used to fund the acquisition and renovation of the manufacturing facility in the Company's new headquarters site. The Company secured the issuance of the bond with a standby letter of credit from a financial institution. The standby letter of credit, bearing a fee of 1.25% of the outstanding bond balance, is secured by a mortgage on the building and land. Under the terms of the letter of credit, the Company is required to comply with certain financial covenants. Future maturities of this bond are as follows:
Year ending April 30, 1998........ $ 222 1999........ 235 2000........ 249 2001........ 264 2002........ 279 Thereafter.. 4,064 ------ $5,313 ======
In December 1992, the Company entered into a $1,250 unsecured, Subordinated Note and Warrant Purchase Agreement (the ''Agreement'') with a financial institution. The subordinated note bore interest at 10% and was scheduled to mature in November 1999. As part of the Agreement, the Company issued a warrant for 325,000 shares of the Company's common stock at an exercise price of $3.25 per share. Upon the closing of the Company's initial public offering, the financial institution exercised the warrant through the cancellation of $1,056 of related debt. The remaining outstanding principal of the note totaling $131 was paid by the Company during fiscal 1996. ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) F-18 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 9. EMPLOYEE COMPENSATION PLANS In 1982, the Company adopted the 1982 Stock Option Plan (the "1982 Plan") which provided for the granting of incentive stock options and non-qualified stock options through 1992 and was administered by a committee of the Board of Directors (the "Compensation Committee"). The Company had reserved 900,000 shares of common stock for grant to employees under the 1982 Plan. In April 1992, the Company adopted the 1992 Stock Option Plan (the "1992 Plan"). The 1992 Plan provides for the issuance to employees of options to purchase 479,000 shares of common stock plus any expired or canceled options granted pursuant to the 1982 Plan. In August 1995, the Company adopted the 1995 Stock Option Plan (the "1995 Plan"). The 1995 Plan provides for the issuance to employees of stock options or stock awards to purchase 400,000 shares of common stock. At April 30, 1997, 27,290 shares and 80,000 shares were available for future grants under the 1992 Plan and the 1995 Plan, respectively. Options are granted under the 1992 and 1995 Plan as either incentive stock options or non-qualified stock options and at exercise prices not less than the fair value of the stock on the date of grant or less than 110% of the fair value in the case of optionees holding more than 10% of the total combined voting power of all classes of stock of the Company. The terms of the options generally may not exceed ten years or five years in the case of optionees holding more than 10% of the total combined voting power of all classes of stock of the Company. The options are exercisable over periods determined by the Compensation Committee, generally at the rate of 20% per year, on a cumulative basis, beginning with the first anniversary of the date of grant. In October 1992, the Company granted non-qualified, fully vested stock options to purchase 30,000 shares of the Company's common stock at an exercise price of $4.15 per share. These options were not granted pursuant to either the 1992 Plan or the 1982 Plan. These options are exercisable from the date of grant through October 2002. In October 1996, the Board of Directors adopted the Employee Stock Purchase Plan (the ''Purchase Plan'') effective as of October 1, 1996. The Purchase Plan provides its full-time employees, nearly all of whom are eligible to participate, the opportunity to purchase common shares, on a quarterly basis, at 85% of the fair market value of the shares on either the first or last day of the applicable quarter, whichever is lower. The term of the Purchase Plan is for five years, and the Company has authorized 1,000,000 shares of the Company's common stock for issuance under the Purchase Plan. Under the Purchase Plan, the Company sold 10,044 shares to employees in fiscal year 1997. F-19 ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) The Company applies APB No. 25 and related interpretations in accounting for stock-based compensation. During fiscal years 1995 and 1996, the Company recorded deferred compensation of $251 and $58, respectively, which is equivalent to the difference between the fair market value of the underlying securities and the exercise price of the related options granted. Such compensation is being amortized over the vesting periods of the related options. The Company has recognized no compensation expense in fiscal year 1995 and has recognized $50 and $55 in fiscal years 1996 and 1997, respectively, for all of its stock-based compensation. Had compensation cost for the stock-based compensation been determined based on the fair value at the grant dates of awards consistent with the provisions of SFAS No. 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts as follows:
YEAR ENDED ---------------- APRIL 30, ---------------- 1996 1997 ------- ------- Net income As reported.......... $ 7,805 $13,165 Pro forma............ 7,768 12,840 Net income per share As reported.......... $ 0.98 $ 1.48 Pro forma............ 0.98 1.46
The fair value of each option and purchase right grant was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions for fiscal years 1996 and 1997: no dividend yield; risk free interest rate of 5.7% and 6.4% in fiscal 1996 and 1997, respectively; expected option term of 6 years and expected purchase right term of three months; no volatility for options granted prior to the initial filing of the Company's registration statement on Form S-1 in August 1995 and 50% for options and purchase rights granted subsequent to August 1995. The weighted average fair value per option for options granted with option exercise prices equal to the fair value of the underlying common stock in fiscal years 1996 and 1997 was $8.09 and $7.25, respectively. The weighted average fair value per option for options granted with exercise prices below the fair value of the underlying common stock in fiscal year 1996 was $9.08. The weighted average fair value per purchase right for purchase rights granted in fiscal year 1997 was $2.82. Because options vest over several years and additional option and purchase right grants are expected to be made in subsequent years, the pro forma impact on fiscal years 1996 and 1997 is not necessarily representative of the pro forma effects of reported net income and earnings per share for future years. F-20 ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Stock option activity is summarized as follows:
WEIGHTED -------- NUMBER AVERAGE ------ ------- OF SHARES EXERCISE PRICE ---------- -------------- Options outstanding at April 30, 1994 669,400 $ 3.99 Granted................................. 226,000 4.43 Exercised............................... (7,010) 2.00 Canceled................................ (91,390) 3.63 -------- Options outstanding at April 30, 1995 797,000 4.17 Granted................................. 137,500 14.23 Exercised............................... (163,984) 4.04 Canceled................................ (8,000) 3.25 -------- Options outstanding at April 30, 1996 762,516 6.02 Granted................................. 211,500 12.94 Exercised............................... (154,400) 4.24 Canceled................................ (45,400) 8.21 -------- Options outstanding at April 30, 1997 774,216 $ 8.14 ========
The number and weighted average exercise price of options exercisable at April 30, 1995, 1996 and 1997 is 206,800 and $3.93; 190,916 and $4.11; and 199,316 and $5.40, respectively. The following table summarizes information about stock options outstanding at April 30, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE - ---------------------- ----------------------- ------------------------ WEIGHTED -------- AVERAGE ------- REMAINING WEIGHTED WEIGHTED --------- -------- -------- RANGE OF NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE -------- ------ ----------- ------- ------ ------- EXERCISE PRICES OUTSTANDING LIFE (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE -------------------- ------------ ------------ -------------- ----------- -------------- $ 3.25- 3.88 22,000 3.87 $ 3.73 22,000 $ 3.73 4.13- 5.88 433,216 6.94 4.27 153,816 4.21 9.38-11.25 129,000 9.49 10.51 -- -- 14.75-17.63 190,000 9.27 15.85 23,500 14.75 ------- ------ ------- ------ 774,216 $ 8.14 199,316 $ 5.40 ======= ====== ======= ======
F-21 10. STOCKHOLDERS' EQUITY Common Stock On August 17, 1995, the stockholders of the Company increased the number of authorized shares of common stock from 6,000,000 to 25,000,000 shares. On the same date, the Board of Directors approved a 2-for-1 split of the common shares to be effected in the form of a stock dividend on all issued stock which was distributed on October 2, 1995. Accordingly, all share and per share data have been restated for all periods presented to reflect the increase in the authorized shares and the split. The par value of the additional shares of common stock issued in connection with the stock split was credited to common stock and a like amount was charged to capital in excess of par value. ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) In October 1995, the Company completed an initial public offering of 1,617,600 shares of its common stock. The net proceeds to the Company were $20,331. Reserved Shares At April 30, 1997, the Company has reserved 1,871,462 shares of common stock for issuance upon the exercise of outstanding and available common stock options and for issuance to employees under the Purchase Plan. Preferred Stock The Company has 1,000,000 shares of $1.00 par value preferred stock authorized. Shares of preferred stock may be issued at the discretion of the Board of Directors of the Company with such designation, rights and preferences as the Board may determine from time to time. The preferred stock may have voting rights, preferences as to dividends and liquidation, conversion and redemption rights and sinking fund provisions which are more expansive than those of the holders of the common stock. 11. EXPORT SALES AND MAJOR CUSTOMERS Revenue by geographic area is summarized as follows: F-22
YEAR ENDED APRIL 30, ---------------------------- 1995 1996 1997 -------- -------- -------- United States.. $21,771 $27,635 $ 40,600 Far East....... 9,891 21,582 27,098 Japan.......... 7,653 11,404 24,199 Europe......... 6,837 6,718 9,506 ------- ------- -------- $46,152 $67,339 $101,403 ======= ======= ========
Revenue from JAL in fiscal years 1995, 1996 and 1997 totaled $7,519 (17%), $8,380 (13%) and $12,185 (12%), respectively. Revenue from another foreign distributor in fiscal year 1997 totaled $9,823 (10%). Revenue from this distributor in fiscal years 1995 and 1996 was less than 10%. In fiscal 1995, revenue approximating $5,816 (13%) and $5,032 (11%) was attributable to two separate customers. In fiscal year 1996, revenue approximating $7,703 (12%) and $6,759 (10%) was attributable to two separate customers. In fiscal 1997, revenue approximating $16,269 (16%) was attributable to one customer. ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 12. INCOME TAXES The provision for income taxes consists of:
YEAR ENDED APRIL 30, -------------------------------------- 1995 1996 1997 --------- -------- ---------- Current tax expense: $ 2,069 $ 4,540 $ 7,037 Federal........................ 383 739 967 State.......................... -------- -------- -------- 2,452 5,279 8,004 -------- -------- -------- Deferred tax benefit: Federal........................ (667) (1,131) (2,046) State.......................... (76) (144) (253) -------- -------- -------- (743) (1,275) (2,299) -------- -------- -------- $ 1,709 $ 4,004 $ 5,705 ======== ======== ========
Deferred tax assets consist of the following:
APRIL 30, ------------------------- 1996 1997 -------- -------- Deferred tax assets: Inventories, due to reserves and additional costs inventoried for tax purposes............................................ $1,353 $2,332
F-23 Accrued expenses............................................. 1,263 1,625 Deferred profit on sales to affiliates....................... -- 1,038 ATI net operating loss carryforwards......................... 421 409 Depreciation................................................. 223 140 Bad debt reserve............................................. 187 225 Other........................................................ 182 159 -------- -------- Gross deferred tax assets.................................... 3,629 5,928 Deferred tax valuation allowance............................. (346) (346) -------- -------- $ 3,283 $ 5,582 ======== ========
ATI net operating loss carryforwards remaining at April 30, 1996 and 1997, not limited in their use due to ownership changes, totaled $195 and $164, respectively. These carryforwards expire in years 2000 through 2007. A valuation allowance of $346, equal to the ATI net operating carryforwards which will expire before they can be used due to ownership change limitations, was recorded at April 30, 1996 and 1997. There have been no changes in the valuation allowance during fiscal 1995, 1996 and 1997. The Company does not provide for taxes which would be payable if undistributed earnings of its foreign affiliates were remitted because the Company either considers these earnings to be invested for an indefinite period or anticipates that if such earnings were distributed, the U.S. income taxes payable would be substantially offset by foreign tax credits. ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) The following is a reconciliation between the amount of reported income tax expense and the amount computed using the U.S. Federal Statutory rate of 34% for 1995 and 35% for 1996 and 1997:
YEAR ENDED APRIL 30, ------------------------------- 1995 1996 1997 --------- --------- --------- Statutory federal rate............ $ 1,637 $ 4,133 $ 6,570 State taxes, net of federal benefit.......................... 202 449 415 Foreign sales corporation benefit. (264) (601) (1,117) Research and development credits.. -- -- (389) Other............................. 134 23 226 -------- -------- -------- $ 1,709 $ 4,004 $ 5,705 ======== ======== ========
The income tax benefits related to the exercise and certain disqualifying dispositions of stock options reduces taxes currently payable and is credited to additional paid-in capital. Such amount approximated $393 and $794 for the years ended April 30, 1996 and 1997, respectively. No such tax benefits were realized in the year ended April 30, 1995. F-24 13. INCENTIVE SAVINGS AND PROFIT SHARING PLAN The Company has an incentive savings and profit sharing plan covering substantially all employees who wish to participate and meet minimum age and service requirements. Annual Company contributions are determined by the Board of Directors and are limited to the maximum amount deductible under the Internal Revenue Code. Company contributions for fiscal 1995, 1996 and 1997 were approximately $125, $196 and $325, respectively. 14. COMMITMENTS Operating Leases The Company leases land and certain buildings, machinery and equipment under operating leases which expire through 2004. Under the terms of the leases, the Company is responsible for normal maintenance and utility expenses and taxes and pays a monthly property management fee on certain leases. Future minimum lease payments under operating leases, including management fees, are as follows:
Year ending April 30, 1998................. $1,276 1999................. 1,147 2000................. 723 2001................. 642 2002................. 522 Thereafter........... 809 ------ Total minimum lease $5,119 payments............ ======
Total rent expense under noncancelable operating leases was approximately $1,188, $1,150, and $1,266 for the years ended April 30, 1995, 1996 and 1997, respectively. ADE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) F-25 15. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
YEAR ENDED APRIL 30, -------------------------- 1995 1996 1997 ------ ------ ------ Cash paid during the year Interest..................... $ 429 $ 221 $ 423 Income taxes, net of refunds received.................... 1,484 6,164 5,584
Non-Cash Investing and Financing Activities During fiscal 1996, $1,056 of long-term debt was canceled as consideration for the exercise of a warrant to purchase 325,000 shares of the Company's common stock (Note 8). During fiscal 1995, the Company repurchased 34,430 shares of the Company's common stock by paying cash of $38 and issuing a promissory note payable for approximately $114 (Note 8). In addition, 2,856 shares of treasury stock with a cost of $11 were issued in lieu of $12 of board of directors fees included in accrued expenses. F-26 FINANCIAL STATEMENT SCHEDULE (IN THOUSANDS) SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
CHARGED TO BALANCE AT ---------- ---------- BALANCE AT COSTS AND CHARGED TO DEDUCTIONS/ APRIL 30, ---------- --------- ---------- ----------- --------- MAY 1, 1994 EXPENSES OTHER ACCOUNTS WRITE-OFFS 1995 ----------- -------- -------------- ---------- ---- DESCRIPTION - -------------------------- Allowance for doubtful accounts......... $ 57 $ 125 -- $ 44 $ 138 Inventory obsolescence.................. 259 413 -- -- 672 Deferred tax asset valuation allowance............................... 346 -- -- -- 346
CHARGED TO BALANCE AT ---------- ---------- BALANCE AT COSTS AND CHARGED TO DEDUCTIONS/ APRIL 30, ----------- --------- ---------- ----------- --------- MAY 1, 1995 EXPENSES OTHER ACCOUNTS WRITE-OFFS 1996 ----------- ---------- -------------- ----------- ---- DESCRIPTION - -------------------------- Allowance for doubtful accounts......... $138 $ 338 -- -- $ 476 Inventory obsolescence.................. 672 295 -- -- 967 Deferred tax asset valuation allowance............................... 346 -- -- -- 346
CHARGED TO BALANCE AT ---------- ---------- BALANCE AT COSTS AND CHARGED TO DEDUCTIONS/ APRIL 30, ---------- --------- ---------- ----------- ---------- MAY 1, 1996 EXPENSES OTHER ACCOUNTS WRITE-OFFS 1997 ----------- ---------- -------------- ----------- ---- DESCRIPTION - ------------------------ Allowance for doubtful accounts......... $476 $ 112 -- $ 11 $ 577 Inventory obsolescence.................. 967 1,034 -- 370 1,631 Deferred tax asset valuation allowance............................... 346 -- -- -- 346
S-1 EX-10.7 2 LEASE OF CORPORATE HEADQUARTERS EXHIBIT 10.7 THIRD AMENDMENT The parties to a Lease dated December 9, 1988 between Wellco Newton Limited Partnership, a Massachusetts limited partnership and ADE Corporation, a Massachusetts corporation hereby agree that all the terms and conditions will remain the same except for the following: 1. Paragraph 2.2 Term. Present term will be amended and extended to ------------------ June 30, 2002. 2. Paragraph 2.2 Renewal Option. Tenant shall have the right to extend ---------------------------- the Term of this Lease for one (1) additional period of three (3) years, by written notice given to the Landlord at least three hundred and sixty (360) days before the expiration of the Extended Term. Such Term shall be governed by all the provisions of this Lease, and the Annual Fixed Rent shall be as set by agreement of the parties but be no less than the rental for the last year of the Extended Term.
3. Paragraph 2.3(a) Annual Fixed Rent (Net) Will be amended as follows: ---------------------------------------- July 1, 1997 to June 30, 1998 $ 354,600 July 1, 1998 to June 30, 1999 364,500 July 1, 1999 to June 30, 2000 387,450 July 1, 2000 to June 30, 2001 410,350 July 1, 2001 to June 30, 2002 456,150
4. Paragraph 2.4 Tenant Improvements. The Tenant will continue to --------------------------------- occupy the building "as is" except that a new membrane roof will be installed by Landlord in coordination with certain building improvements to be done by Tenant. 5. Paragraph 6.8 Assignment and Subletting. The Landlord agrees to add --------------------------------------- to the first sentence of this paragraph which begins on page 8 and continues on page 9, after the word Landlord, "which consent of Landlord will not be unreasonably withheld". Executed as a sealed instrument in two or more counterparts on this the sixth day of June, 1997. Wellco Newton Limited Partnership ADE Corporation /s/ Thomas K. Connolly /s/ Mark D. Shooman - ----------------------------- ------------------------------------- Thomas K. Connolly Name & Title: Mark D. Shooman, Vice President and Chief Financial Officer EX-10.18 3 AGREEMENT AND PLAN OF MERGER DATED 2/27/97 EXHIBIT 10.18 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER dated as of February 27, 1997 by and between ADE CORPORATION, a Massachusetts corporation (hereinafter called "Parent") (when used herein, the term "Parent" will include ADE corporation and its subsidiaries, unless the context requires otherwise), ADE TECHNOLOGIES, INC., a Massachusetts corporation (hereinafter called "Subsidiary"), DIGITAL MEASUREMENT SYSTEMS, INC., a Massachusetts corporation (hereinafter called "Acquired Company"), DENNIS E. SPELIOTIS, ELIAS SPELIOTIS, EVANTHIA SPELIOTIS, ISMENE SPELIOTIS, ADVANCED DEVELOPMENT CORPORATION, DAVID C. BONO and ALAN SLISKI (hereinafter each will be referred to individually as a "Stockholder" and collectively as the "Stockholders"). W I T N E S S E T H: WHEREAS, the respective Boards of Directors of Parent, Subsidiary and Acquired Company and the stockholders of Subsidiary and Acquired Company have approved the Plan of Merger attached hereto as EXHIBIT 1.1 (the "Plan of ----------- Merger"), pursuant to which Acquired Company will be merged into Subsidiary, a wholly-owned subsidiary of Parent, in accordance with the applicable statutes of the Commonwealth of Massachusetts (the merger of the Acquired Company with and into the Subsidiary will be referred to herein as the "Merger"). WHEREAS, the Stockholders together, directly or indirectly, own 100% of the outstanding capital stock of Acquired Company. WHEREAS, Parent owns all of the outstanding capital stock of Subsidiary. WHEREAS, upon the effective date of the merger of Acquired Company with and into Subsidiary, all of the shares of common stock of Acquired Company then issued and outstanding will be converted into the right to receive shares of the Common Stock, par value $.01 per share, of Parent (the "Parent Stock") and the outstanding common stock of Subsidiary will continue to be outstanding stock of the corporation surviving the merger, all upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in order to consummate the transactions described above and in consideration of the mutual covenants, agreements, representations, and warranties herein contained, the parties hereto agree as follows: SECTION 1. MERGER OF ACQUIRED COMPANY INTO SUBSIDIARY - ---------- ------------------------------------------ 1.1. Plan of Merger. Upon the terms and subject to the conditions set -------------- forth in this Agreement and in accordance with the applicable provisions of the laws of the Commonwealth of Massachusetts, Acquired Company will be merged with and into Subsidiary at the Closing (as hereinafter defined) in accordance with the Plan of Merger. 1.2. Effective Date of Merger. The Merger will be effective upon the ------------------------ filing with the Secretary of State of the Commonwealth of Massachusetts of Articles of Merger in the Form of EXHIBIT 1.2 hereto (the "Articles of Merger") ----------- or on such other date and time as is provided in the Plan of Merger (the date and time of the effectiveness of the Merger being hereinafter referred to as the "Effective Date"). 1.3. Effect of Merger. On the Effective Date, the separate existence of ---------------- Acquired Company will cease, and Subsidiary will continue its corporate existence and be the corporation surviving the merger. Upon the Effective Date, the capital stock of Subsidiary then issued and 2 outstanding will not be changed and will continue to be outstanding. As more fully provided in the Plan of Merger, the capital stock of Acquired Company issued and outstanding on such date will be converted into, and the holders of shares of common stock of Acquired Company on the Effective Date (the "Acquired Company Stockholders") will be entitled to receive in exchange for such shares an aggregate of 800,000 shares of Parent Stock, 80,000 of which will be placed in escrow and held in accordance with an escrow agreement substantially in the form of EXHIBIT 1.3 hereto. ----------- SECTION 2. REPRESENTATIONS AND WARRANTIES OF ACQUIRED COMPANY AND THE - ---------- ---------------------------------------------------------- STOCKHOLDERS - ------------ Acquired Company and each of the Stockholders hereby represent and warrant, jointly and severally, as follows, except as stated otherwise with reference to a specific representation or warranty in the disclosure schedule attached hereto as SCHEDULE 2 (the "Disclosure Schedule"): ---------- 2.1. Organization and Authority. Acquired Company is a corporation duly -------------------------- organized, validly existing, and in good standing under the laws of the Commonwealth of Massachusetts with full corporate power and authority to own its assets and to conduct its business in the manner and in the places in which it is now being conducted. SECTION 2.1 of the Disclosure Schedule sets forth all ----------- jurisdictions in which the Acquired Company is qualified to do business as a foreign corporation, which are the only states in which the character of the properties owned or leased by Acquired Company and the nature of the business conducted by it require such qualification and where the failure to be so qualified could have a material adverse effect on its business or financial condition. True and complete copies of the Articles of Organization and 3 Bylaws, together with all amendments thereto, of Acquired Company have been delivered to Parent. 2.2. Authorization; Binding Agreement. Acquired Company has full -------------------------------- corporate power and authority to enter into this Agreement and to carry out its obligations hereunder, including the consummation of the Merger. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, including the consummation of the Merger, have been duly and validly authorized by Acquired Company's Board of Directors and its stockholders. No other corporate acts or proceedings on the part of the Company are necessary to authorize this Agreement and the consummation of the transactions contemplated hereby, including the Merger. When duly executed and delivered by the parties hereto and thereto, (i) this Agreement will constitute a valid and binding obligation of Acquired Company and the Stockholders, (ii) the Escrow Agreement will constitute a valid and binding obligation of the Stockholders, and (iii) the Employment Agreements and the Non competition Agreements will constitute valid and binding obligations of the Stockholders which are parties to them, in each case enforceable against Acquired Company and the Stockholders in accordance with such agreements' respective terms. 2.3. Capitalization. The authorized capital stock of the Acquired Company -------------- consists of 5,000 shares of Class A Common Stock (Voting), no par value (the "Voting Common Stock"), 1,000 of which are issued and outstanding and held beneficially of record by the persons and in the amounts listed in SECTION 2.3 ----------- of the Disclosure Schedule, 5,000 shares of Class B Common Stock (Nonvoting), no par value (the "Nonvoting Common Stock"), 53 of which are issued and outstanding and held beneficially of record by the person listed in SECTION 2.3 of the Disclosure - ----------- 4 Schedule, and 100 shares of Convertible Preferred Stock, $1,000 par value per share, none of which are issued and outstanding. The outstanding shares of Voting Common Stock were validly issued and are fully paid and nonassessable. There are no options, warrants, subscription, preemptive or other rights or commitments outstanding for the sale or issue of any shares or other securities of Acquired Company. 2.4. No Conflicts. Neither the execution and delivery by Acquired Company ------------ and the Stockholders of this Agreement, nor the consummation of the Merger and the other transactions contemplated hereby, nor compliance by Acquired Company and the Stockholders with any of the provisions hereof, will: (a) have a material adverse effect on any of the rights of Acquired Company in, to, or under any of the material agreements or have a material adverse effect on any material assets of Acquired Company; (b) subject to receipt of all third party consents and governmental approvals described in Section 2.22 hereof, violate, conflict with, result in a breach of any provision of, or constitute a default (or an event which, with the giving of notice or the passage of time or otherwise, would constitute such a default) under, or entitle any party (with the passage of time or otherwise) to terminate, accelerate or give notice of a default under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the assets of Acquired Company, under (i) any of the provisions of the Articles of Organization or By-Laws of Acquired Company; (ii) any note, bond, mortgage, indenture, deed of trust, license, contract, undertaking, agreement, lease or other instrument or obligation to which the Acquired Company is a party, or by which 5 Acquired Company or any of its assets may be bound or affected; or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Acquired Company or any of its assets. 2.5. Subsidiaries and Investments. There is no corporation or other legal ---------------------------- entity in which Acquired Company has any direct or indirect ownership interest. 2.6. Financial Statements. Acquired Company has delivered to Parent true -------------------- copies of all of its federal, state and local tax returns for each of its last three fiscal years, an unaudited balance sheet of Acquired Company (the "Balance Sheet") as at December 31, 1996 (the "Balance Sheet Date") and unaudited monthly statements of net income for the nine months period then ended (such tax returns, the Balance Sheet and such income statements will be referred to collectively as the "Financial Statements"). The Financial Statements are in accordance with all books, records and accounts of Acquired Company, are true and complete, were prepared in accordance with generally accepted accounting principles on a consistent basis and present fairly the financial position and results of operations of Acquired Company as of the dates and for the periods indicated. 2.7. Ownership of and Title to Assets. -------------------------------- (a) SECTION 2.7(A) of the Disclosure Schedule sets forth a -------------- complete list and brief description of all real property owned by Acquired Company. Acquired Company has good and marketable title to all such real property, in each case free and clear of all material mortgages, liens, and encumbrances except those shown or reflected in the Balance Sheet and except liens for taxes not yet due and encumbrances which do not materially reduce the value of such property. 6 (b) SECTION 2.7(B) of the Disclosure Schedule sets forth a -------------- complete list of all leases or agreements under which Acquired Company is lessee of or holds or operates any real property and a brief description of the property. Each of such leases is in full force and effect and enforceable in accordance with its terms, and there is not under any of such leases any existing default of Acquired Company (or event or condition which with notice or lapse of time, or both, would constitute a default) with respect to any material term thereof. (c) SECTION 2.7(C) of the Disclosure Schedule sets forth a -------------- complete list and brief description of all personal property and all other assets not listed in SECTION 2.7(A) or SECTION 2.7(B) of the Disclosure Schedule -------------- -------------- owned or leased by Acquired Company (including those shown or reflected in the Balance Sheet, except such properties and assets as have been sold or otherwise disposed of in the ordinary course of business since the Balance Sheet Date). Except as indicated in SECTION 2.7(C) of the Disclosure Schedule, such personal -------------- property and other assets are free and clear of all material mortgages, liens, and encumbrances except those shown or reflected in the Balance Sheet and except liens for taxes not yet due and encumbrances which do not materially reduce the value of such property and assets. (d) SECTION 2.7(D) of the Disclosure Schedule sets forth a -------------- complete list of all leases or agreements under which Acquired Company is lessee of or holds or operates any personal property and a brief description of the personal property. Each of such leases is in full force and effect and enforceable in accordance with its terms, and there is not under any of such leases any existing default of Acquired Company (or event or condition which with notice or lapse of time, or both, would constitute a default) with respect to any material term thereof. 7 (e) All equipment included in the assets of Acquired Company has been maintained in good repair in accordance with the usual practices in the United States of businesses similar to Acquired Company's business, is in good condition, ordinary wear and tear excepted, and is useable in the ordinary course of Acquired Company's business. 2.8. Transactions with Affiliates. SECTION 2.8 of the Disclosure Schedule ---------------------------- ----------- is a complete list of all executory agreements, contracts or commitments of Acquired Company involving any Affiliate of Acquired Company. Except as set forth in SECTION 2.8 of the Disclosure Schedule, since April, 1993, the Company ----------- has not (i) made purchases or sales of products or services from or to any Affiliate, (ii) transferred any assets to any Affiliate, (iii) entered into, amended or canceled any transaction, contract, agreement or commitment involving any Affiliate, or (iv) used any property, asset, facility, service or personnel which are held, owned, provided or employed by any Affiliate. For purposes hereof, the term "Affiliate" will include the Stockholders and will also mean any member of a Stockholder's family, any entity in which any Stockholder or any member of a Stockholder's family, directly or indirectly or through one or more intermediaries, has a significant interest, and any person who, directly or indirectly or through one or more intermediaries, controls or is controlled by, or is under common control with, the Acquired Company. All transactions between Acquired Company and any Affiliate have been entered into at arm's length, on terms no less favorable to Acquired Company than could be obtained from a third party which is not an affiliate of Acquired Company. 2.9. Accounts Receivable. All of the accounts and notes receivable of ------------------- Acquired Company reflected in the Financial Statements have been collected or are current or collectible at 8 the aggregate recorded amounts thereof less any allowance for doubtful accounts reflected in the Financial Statements. 2.10. Inventory. The inventory of Acquired Company is of a quality and --------- quantity usable or salable in the ordinary course of business, is carried on the Financial Statements and the books of the Company at an amount which is not excessive and reflects valuations determined in accordance with generally accepted accounting principles applied on a consistent basis. 2.11. Absence of Undisclosed Liabilities. As of the Balance Sheet Date, ---------------------------------- Acquired Company: (a) had no material liabilities of any nature, whether accrued, absolute, contingent, or otherwise (including, without limitation, liabilities for taxes due) other than liabilities reflected or reserved against in the Financial Statements or described in this Agreement; (b) all tax returns and tax reports required of or in respect of Acquired Company by the laws of the United States or of any other country, or of any state or local governmental body, have been duly filed; (c) all taxes shown to be due thereon have been paid, and adequate provision has been made in the Financial Statements for the payment of all accrued and unpaid Federal, state, local and foreign taxes, whether or not yet due, for all annual, quarterly, month ended periods prior to the date of Closing; and (d) except as set forth in the Disclosure Schedule delivered to Parent by Acquired Company, Acquired Company is not a party to any action or proceeding for the assessment or collection of taxes. 9 2.12. Absence of Certain Changes. Except as set forth in SECTION 2.12 of -------------------------- ------------ the Disclosure Schedule, Acquired Company has not since March 31, 1996: (a) Suffered any material adverse change in its financial condition, assets, liabilities, or business, or become aware of any event which Acquired Company has reasonably grounds to believe could result in any such material and adverse change; (b) Permitted any mortgage, encumbrance, or lien to be placed on any of its assets; (c) Entered into any agreement guaranteeing the obligations of any third person or agreeing to indemnify any third person; (d) Incurred any material liability or obligation except current liabilities incurred in the ordinary course of business, or issued any notes or other corporate debt securities; (e) Sold or otherwise disposed of, or entered into any agreement or other arrangement for the sale or other disposition of, any material item of its assets other than in the ordinary course of its business; (f) Suffered any damage, destruction, or casualty loss, whether or not covered by insurance; (g) Declared or set aside or paid any dividend, made any other distribution in respect of its capital stock, redeemed, purchased, or otherwise acquired any of its capital stock, or issued any stock or other securities or options or other rights to acquire the same; (h) Made any change in the compensation payable to any officer, employee, or agent other than normal increases or bonuses in accordance with its usual compensation practices; 10 (i) Entered into any transaction other than in the ordinary course of business; (j) Been a party to any other event, condition, or state of facts of any character which has had or could have a material adverse effect on the results of operations, business, financial condition, or assets of Acquired Company; or (k) Entered into any agreement with respect to any of the foregoing. 2.13. Patents, Trademarks and Copyrights. SECTION 2.13 of the Disclosure ---------------------------------- ------------ Schedule is a complete list of all domestic and foreign patents, patent applications, trademarks, trade names, inventions, discoveries, confidential know-how, copyrights and licenses (the "Proprietary Rights") therefor which are owned by or registered in the name of Acquired Company and which are material to its business. Acquired Company owns or is licensed under all Proprietary Rights necessary for and material to the operation of its business as presently conducted, all of which are in good standing and uncontested. There is no material claim pending or, to the knowledge of Acquired Company or the Stockholders, threatened against Acquired Company with respect to the ownership or used thereof by Acquired Company by any third party nor to the knowledge of Acquired Company or the Stockholders is there any basis for such a claim. 2.14. Material Agreements. SECTION 2.14 of the Disclosure Schedule is a ------------------- ------------ list of all material contracts, agreements, and other instruments to which Acquired Company is a party. Except as described in SECTION 2.14 of the ------------ Disclosure Schedule, Acquired Company is not a party to any material contract or agreement or other instrument not entered into in the ordinary course of business, including any of the following: 11 (a) Contract for employment of any officer or employee at a salary in excess of $50,000 per year, which is not terminable without liability on not more than thirty days' notice; (b) Bonus, pension, profit sharing, retirement, stock option, deferred compensation, life, medical, or hospital insurance, or other plan or agreement providing employee benefits; (c) Contract with any labor organization; (d) Lease, license, franchise, distributorship, dealer, manufacturer's representative, or sales agency agreement; (e) Contract for future purchase of materials, supplies, services, machinery, or equipment continuing for a period of more than ninety days or involving more than $50,000; (f) Guarantee, subordination, or other similar arrangement or undertaking by which Acquired Company is contingently liable upon the indebtedness or obligation of any other person; (g) Contract or commitment for capital expenditures in excess of Ten Thousand Dollars ($10,000); (h) Power of attorney for any person, firm or corporation for any purpose whatsoever; (i) contract, agreement, commitment or business arrangement with or to, and purchases from or other business arrangements with, any current or former principal stockholders, directors or officers of Acquired Company (or any spouse or relative of the foregoing) or interest in any party with which Acquired Company does business; 12 (j) Note, mortgage, indenture, deed of trust, credit or loan agreement, or similar instrument under which Acquired Company is indebted for borrowed money, or the price of purchased assets. To Acquired Company's and the Stockholders' knowledge, Acquired Company has performed in all material respects all obligations required to be performed by it to date under all such contracts and agreements described in the Disclosure Schedule and is not in default in any material respect under any of such contracts or agreements, and to Acquired Company's and the Stockholders' knowledge all parties with whom it has contractual arrangements are in substantial compliance therewith. 2.15. Insurance. SECTION 2.15 of the Disclosure Schedule sets forth a list --------- ------------ and brief description of all policies or binders of fire, errors and omissions, liability, product liability, workman's compensation, vehicular and other insurance held by or on behalf of the Acquired Company. All premiums payable under such policies and binders have been paid when due and such policies and binders are valid and enforceable in accordance with their terms, are in full force and effect, and are adequate and customary for the type and scope of Acquired Company's assets and business. 2.16. Books and Records. The books of account, ledgers, order books, ----------------- records and documents of the Company accurately reflect all material information relating to the financial affairs of Acquired Company, the nature, acquisition, maintenance, location and collection of the Acquired Company's assets , and the nature of all transactions giving rise to liabilities reflected on the Financial Statements or incurred subsequent to the Balance Sheet Date. 13 2.17. Employee Benefit Plans. Acquired Company has no bonus, deferred ---------------------- compensation, profit sharing, stock purchase, stock option, or retirement arrangement, whether legally binding or not, and Acquired Company is not presently paying any pension, deferred compensation or retirement allowance to anyone. Acquired Company has no employee benefit plans, as that term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). 2.18. Litigation. Except as described in SECTION 2.18 of the Disclosure ---------- ------------ Schedule, there are no actions, suits, proceedings, claims, or investigations by any United States or foreign governmental agency of any other third party pending or, to the knowledge of Acquired Company or either of the Stockholders, threatened against, by, or affecting Acquired Company which might have a material adverse effect on Acquired Company or its business or assets or which might prevent or hinder the consummation of the transactions contemplated by this Agreement. 2.19. Compliance With Laws. Acquired Company has complied with all -------------------- material laws, rules and regulations applicable to its business (including without limitation with respect to wages, hours, hiring, promotions, equal opportunity, nondiscrimination, health, safety, environmental matters, product labeling, warranties, packaging, advertising or the sale of products, trade regulations, antitrust or control and foreign exchange), has filed with the proper authorities all material statements, reports, information and forms required by all applicable laws, rules and regulations, and has maintained in full force and effect all licenses and permits necessary for the conduct of its business. Acquired Company has received no written notice or informal advice concerning any revocation or limitation of any such license or permit and no 14 such proceeding is pending, or to the knowledge of Acquired Company or the Stockholders, threatened. 2.20. Environmental Laws. ------------------ (a) Except as reasonably would not be likely to result in a material liability to Acquired Company, no underground storage tanks and no amount of any substance that has been designated by any governmental agency or by applicable federal, state or local law to be radioactive, toxic, hazardous or otherwise a danger to health or the environment, including, without limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous substances pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to the United States Resource Conservation and Recovery Act of 1976, as amended, and the regulations promulgated pursuant to such laws, (a "Hazardous Material"), but excluding office and janitorial supplies, are present, as a result of the actions of Acquired Company or any affiliate of Acquired Company, or, to Acquired Company's knowledge, as a result of any actions of any third party or otherwise, in, on or under any property, including the land and the improvements, ground water and surface water thereof, that Acquired Company has at any time owned, operated, occupied or leased. (b) Except as reasonably would not be likely to result in a material liability to Acquired Company, Acquired Company has not transported, stored, used, manufactured, disposed of, released or exposed its employees or others to Hazardous Materials in violation of any law in effect on or before the Closing Date, nor has Acquired Company disposed of, transported, sold, used, released, exposed its employees or others to or manufactured any product 15 containing a Hazardous Material (collectively "Hazardous Materials Activities") in violation of any rule, regulation, treaty or statute promulgated by any governmental agency in effect prior to or as of the date hereof to prohibit, regulate or control Hazardous Materials or any Hazardous Material Activity. (c) Acquired Company currently holds all environmental approvals, permits, licenses, clearances and consents (the "Acquired Company Environmental Permits") necessary for the conduct of Acquired Company's Hazardous Material Activities and other businesses of Acquired Company as such activities and businesses are currently being conducted. (d) No material action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending, or to Acquired Company's or the Stockholders' knowledge, threatened concerning any Acquired Company Environmental Permit, Hazardous Material or any Hazardous Materials Activity of Acquired Company. Neither Acquired Company nor either of the Stockholders is aware of any fact or circumstance which could involve Acquired Company in any material environmental litigation or impose upon Acquired Company any material environmental liability. 2.21. Bank Accounts. SECTION 2.21 of the Disclosure Schedule is a complete ------------- ------------ list of the names and locations of all banks in which the Company has accounts, as well as a description and the account number of each such account. 2.22. Third Party Consents and Governmental Approvals. Except as set forth ----------------------------------------------- in SECTION 2.22 of the Disclosure Schedule or as otherwise described in this ------------ Agreement, no filing with or authorization, consent or approval of any third party or of any court, government, or governmental agency or instrumentality is required for Acquired Company and the Stockholders 16 to execute and deliver this Agreement or to consummate the transactions contemplated hereby including the Merger. 2.23. Employee Matters; Labor Contracts. --------------------------------- (a) SECTION 2.23 of the Disclosure Schedule is a complete list of ------------ all employees of Acquired Company as of the date hereof. (b) Acquired Company is in compliance in all material respects with all Federal, State and local laws relating to labor relations; no material labor strike or other material labor controversy or trouble is actually pending or, to the knowledge of Acquired Company and the Stockholders, threatened with respect to Acquired Company or the employees of Acquired Company; and there are no grievance or arbitration proceedings arising out of or under collective bargaining agreements with respect to Acquired Company. There are no claims against Acquired Company by employees of Acquired Company. Relations between Acquired Company and its employees are good, and Acquired Company never has experienced any work stoppage or other labor difficulty. (c) Acquired Company is not a party to or bound by any labor or collective bargaining agreement and no representation question exists respecting the employees of the Acquired Company. 2.24. Securities Act Exemption. Each Stockholder acknowledges that the ------------------------- securities of Parent that will be received by him pursuant to this Agreement will be delivered without registration of the same under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to an exemption from registration available under the Securities Act, and may not be resold by him unless (i) a registration statement is in effect under the Securities Act with respect 17 to such securities or (ii) an exemption from such registration is available under the Securities Act. Each Stockholder, other than Alan Sliski, represents that he is an "accredited investor" within the meaning of that term as it is defined in Rule 501 under the Securities Act. Each Stockholder represents that he is purchasing the securities of Parent hereunder for his own account for investment and not with a view to the resale or distribution thereof. 2.25. Disclosure. No representation or warranty set forth in this Section ---------- or in the Disclosure Schedule contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein and therein not misleading. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY - ---------- ------------------------------------------------------- Parent and Subsidiary jointly and severally represent and warrant as follows: 3.1. Organization and Authority. Parent is a corporation duly organized, -------------------------- validly existing, and in good standing under the laws of the Commonwealth of Massachusetts, with full corporate power and authority to own its property and assets and to conduct its business in the manner and places in which it is now conducted. 3.2. Authorization; Binding Agreement. Parent and Subsidiary have full -------------------------------- corporate power and authority to enter into this Agreement and to carry out their obligations hereunder, including the consummation of the Merger. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, including the consummation of the Merger, have been duly and validly authorized by Parent's and Subsidiary's respective Boards of Directors and Subsidiary's sole stockholder. No other corporate acts or proceedings on the part of Parent or Subsidiary are necessary to authorize this Agreement and the consummation of the transactions contemplated hereby, including the Merger. When duly executed and delivered by 18 the parties hereto and thereto, (i) this Agreement will constitute a valid and binding obligation of Parent and Subsidiary, (ii) the Escrow Agreement will constitute a valid and binding obligation Parent, and (iii) the Employment Agreements will constitute valid and binding obligations of Subsidiary, in each case enforceable against Parent and Subsidiary in accordance with such agreements' respective terms. 3.3. Capitalization. The authorized capital stock of Parent consists of -------------- 25,000,000 shares of common stock, $.01 par value, 7,765,487 shares of which were issued and outstanding on January 31, 1997 and 1,978,635 shares are reserved for issuance upon exercise of outstanding options or options available for granting under Parent's stock option plans and employee stock purchase plan. 3.4. No Conflicts. Neither the execution and delivery by Parent and ------------ Subsidiary of this Agreement, nor the consummation of the Merger and the other transactions contemplated hereby, nor compliance by Parent and Subsidiary with any of the provisions hereof, will: (a) have a material adverse effect on any of the rights of Parent in, to, or under any of the material agreements or have a material adverse effect on any material assets of Parent; (b) violate, conflict with, result in a breach of any provision of, or constitute a default (or an event which, with the giving of notice or the passage of time or otherwise, would constitute such a default) under, or entitle any party (with the passage of time or otherwise) to terminate, accelerate or give notice of a default under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the assets of Parent, under (i) any of the provisions of the Articles of Organization or By-Laws of Parent; (ii) any note, bond, mortgage, indenture, deed of trust, license, contract, undertaking, agreement, lease or other instrument or 19 obligation to which Parent is a party, or by which Parent or any of its assets may be bound or affected; or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent or any of its assets. 3.5. Current Public Information; Material Facts. Parent has furnished to ------------------------------------------ Acquired Company and the Stockholders with copies of the following documents pertaining to Parent: (a) An Annual Report on Form 10-K for the fiscal year ended April 30, 1996; (b) An Annual Report to Stockholders (the "Annual Report") for the fiscal year ended April 30, 1996; (c) Quarterly Reports on Form 10-Q for the quarters ended July 31 and October 31, 1996; (d) A proxy statement for the 1996 Annual Meeting; and (e) A press release in respect of Parent's sales and earnings for the quarter ended January 31, 1997 and other matters; (collectively, the "Disclosure Documents"). Exhibits required to be filed with the Securities and Exchange Commission as part of any of the Disclosure Documents have not been included in the materials furnished to Acquired Company and the Stockholders. 3.6. Absence of Certain Changes. Since the date of the consolidated -------------------------- balance sheet of Parent included in Parent's Quarterly Report on Form 10-Q for the quarter ended October 31, 1996, there has not been any material adverse change in the financial condition, assets, liabilities, or business of Parent, other than changes occurring in the ordinary course of business which have not had a material adverse effect on the financial condition, assets, liabilities or business of Parent. 20 3.7. Validity of Stock to be Issued in Merger. The shares of Parent Stock ---------------------------------------- to be issued upon consummation of the Merger will, when issued as provided therein, be duly authorized, validly issued, fully paid and nonassessable. 3.8. Organization of Subsidiary. Subsidiary is a corporation duly -------------------------- organized, validly existing, and in good standing under the laws of the Commonwealth of Massachusetts, with full corporate power and authority to carry out the transactions contemplated by this Agreement. All of the outstanding capital stock of Subsidiary has been duly authorized and validly issued and is fully paid and nonassessable. All of the outstanding capital stock of Subsidiary is now owned by Parent and will be owned by it as of the Effective Date, and no third party has any right to or interest in any issued or unissued capital stock of Subsidiary. 3.9. Consents. All consents, approvals, or authorizations required to be -------- obtained by Parent or Subsidiary in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, including the Merger, have been obtained. 3.10. Disclosure. No representation or warranty set forth in this Section ---------- or in the Disclosure Documents contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein and therein not misleading. SECTION 4. COVENANTS OF ACQUIRED COMPANY AND THE STOCKHOLDERS PENDING MERGER - ---------- ----------------------------------------------------------------- Acquired Company covenants and agrees that between the date of this Agreement and the Closing: 21 4.1. Conduct of Business. Except as otherwise consented to by Parent in ------------------- writing, Acquired Company will: (a) Conduct its business and maintain its assets and properties in substantially the same manner as heretofore; (b) Refrain from making any purchases or sales of any assets and from mortgaging, pledging, subjecting to lien, or otherwise encumbering any of its assets other than in the ordinary course of business; (c) Refrain from incurring any obligations or liabilities (absolute or contingent) other than those that are usual and normal in the ordinary course of its business; (d) Refrain from making any change in its Articles of Organization, Bylaws, or authorized or issued capital stock; (e) Refrain from declaring, setting aside, or paying any dividend, making any other distribution in respect of its capital stock, or making any direct or indirect redemption, purchase, or other acquisition of its capital stock; (f) Refrain from making any change in the compensation payable or to become payable to any of its officers, employees, or agents or making any bonus payment to or arrangement with any of them, other than in accordance with its past compensation practices; (g) Use its best efforts to prevent any change with respect to its management and supervisory personnel or banking arrangements; (h) Use its best efforts to keep intact its business organization, to keep available the services of its present officers and employees, and to preserve the goodwill of all suppliers, customers, and others having business relations with it; 22 (i) Promptly advise Parent in writing of any matter arising or discovered after the date of this Agreement which, if existing or known at the date hereof, would be required to be set forth or described herein. 4.2. Insurance. Acquired Company will at all times have in effect and --------- maintain all insurance now in force or like policies on or with respect to its assets and its business. 4.3. Access to Books and Records. Between the date of this Agreement and --------------------------- the Effective Date, at the reasonable request of Parent, Acquired Company will give full access to Parent and its agents, accountants, and attorneys to all the properties and assets, books, records and accounts, and other information, documentary or otherwise, concerning the affairs and business of Acquired Company and to cause its officers to furnish to Parent such financial and operating data and other information with respect to its business and properties as Parent shall from time to time request and will permit Parent and its agents, accountants, and attorneys to examine and inspect all such assets, properties, books, and records, during normal business hours. 4.4. Cooperation. Acquired Company will use its best efforts to cooperate ----------- in obtaining all necessary approvals required under applicable laws. SECTION 5. COVENANTS OF PARENT AND SUBSIDIARY PENDING MERGER - ---------- ------------------------------------------------- Parent and Subsidiary jointly and severally covenant and agree that between the date of this Agreement and the Closing Parent will take, and will cause Subsidiary to take, all necessary corporate and other action and will use its best efforts to obtain all consents and approvals required to enable each of them to carry out the transactions contemplated by this Agreement. 23 SECTION 6. CONDITIONS TO OBLIGATIONS OF PARENT AND SUBSIDIARY - ---------- -------------------------------------------------- The obligation of Parent and Subsidiary to consummate this Agreement and the transactions contemplated hereby is subject, at the option of Parent, to the satisfaction at or before the Closing of the following conditions: 6.1. Performance by Acquired Company. Acquired Company shall have duly ------------------------------- performed all of the acts and undertakings to be performed by it at or before the Closing. 6.2. Representations and Warranties. The representations and warranties ------------------------------ of Acquired Company contained in this Agreement shall be true in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing, except for changes contemplated by this Agreement, and Acquired Company shall have delivered a certificate of its chief executive officer to that effect to Parent at the Closing. 6.3. Opinion of Counsel. Acquired Company shall have furnished to Parent ------------------ an opinion of its counsel, Chris I. Pappas, dated the date of the Closing, substantially in the form of EXHIBIT 6.3 hereto. ----------- 6.4. Absence of Adverse Changes. Since the Balance Sheet Date and except -------------------------- as disclosed hereunder, there shall have been no material adverse change in the financial condition, business, or assets of Acquired Company. 6.5. No Governmental Proceedings. Except as set forth herein or in the --------------------------- Disclosure Schedule, there shall not have been any action or proceeding instituted before any court or governmental agency to restrain or prohibit, or obtain substantial damages in respect of, this Agreement or the consummation of the transactions contemplated hereby, nor shall any 24 governmental agency have notified any party to this Agreement that consummation of such transactions would constitute a violation of any law and that it intends to commence proceedings to restrain the consummation of such transaction or to force divestiture, which, in either case, in the opinion of Parent, would make it inadvisable to consummate such transaction. 6.6. Employment Agreements. Dennis E. Speliotis and David C. Bono shall --------------------- have executed and delivered employment agreements with the Subsidiary (the "Employment Agreements"), substantially in the form of EXHIBIT 6.6(A) hereto, in -------------- the case of Mr. Speliotis, and EXHIBIT 6.6(B) hereto, in the case of Mr. Bono. -------------- 6.7. Non competition Agreements. Messrs Bono and Speliotis shall have -------------------------- executed and delivered non competition agreements (the "Noncompetition Agreements") substantially in the form of EXHIBIT 6.7(A) AND EXHIBIT 6.7(B) --------------------------------- hereto. 6.8. Employee Confidentiality Agreements. Each of the employees of ----------------------------------- Acquired Company shall have entered into employee agreements (the "Employee Agreements"), effective as of the Effective Date, substantially in the form of EXHIBIT 6.8 hereto. - ----------- 6.9. Registration Rights Agreement. Advanced Development Corporation and ----------------------------- David C. Bono shall have executed and delivered a Registration Rights Agreement in the form of EXHIBIT 6.9 hereto. ----------- 6.10. Pooling of Interests. Parent's independent accountants shall have -------------------- confirmed that the Merger will be accounted for as a pooling of interests. 6.11. Satisfaction of Counsel. All actions, proceedings, instruments, and ----------------------- documents required to carry out this Agreement and the transactions contemplated hereby and all other 25 related legal matters shall have been completed to the reasonable satisfaction of counsel for Parent. 6.12. Agreement for Amendment of Lease. Dennis E. Speliotis as Trustee of --------------------------------- Thouria Investment Trust shall have executed and delivered to Parent an agreement to amend the Triple Net Lease dated August 31, 1996 between him and the Acquired Company satisfactory in form and substance to Parent. SECTION 7. CONDITIONS TO OBLIGATIONS OF ACQUIRED COMPANY AND THE - ---------- ----------------------------------------------------- STOCKHOLDERS - ------------ The obligation of Acquired Company to consummate this Agreement and the transactions contemplated hereby is subject, at the option of Acquired Company, to the satisfaction at or before the Closing of the following conditions: 7.1. Performance by Parent and Subsidiary. Parent and Subsidiary shall ------------------------------------ each have duly performed all of the acts and undertakings to be performed by it at or before the Closing Date. 7.2. Representations and Warranties. The representations and warranties ------------------------------ of Parent and Subsidiary contained in this Agreement shall be true in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing, except for changes contemplated by this Agreement, and Parent and Subsidiary shall each have delivered an officer's certificate to that effect to Acquired Company at the Closing. 7.3. Employment Agreements. Subsidiary shall have executed and delivered --------------------- the Employment Agreements. 26 7.4. Noncompetition Agreements. Parent shall have executed and delivered ------------------------- the Noncompetition Agreements. 7.5. Registration Rights Agreement. The Registration Rights Agreement ----------------------------- referenced in Section 6.9 shall have been executed and delivered by Parent. 7.6. Tax-Free Reorganization. Acquired Company's tax counsel shall have ----------------------- confirmed that the Merger will be a tax-free reorganization under the Internal Revenue Code of 1986, as amended. 7.7. Opinion of Counsel. Parent shall have furnished to Acquired Company ------------------ and the Stockholders an opinion of its counsel, Warner & Stackpole LLP, dated the date of the Closing, substantially in the form of EXHIBIT 7.7 hereto. ----------- 7.8. Absence of Adverse Changes. Since October 31, 1996 there shall have -------------------------- been no material adverse change in the financial condition, business, or assets of Parent. 7.9. Employee Benefits. Parent shall have made available to employees of ----------------- Acquired Company, effective as of the Effective Date, benefits similar to those provided by Parent to employees similarly situated, including health insurance, 401(k) plan participation and employee stock purchase plan participation. 7.10. Management Compensation. Parent shall have made available to ----------------------- Acquired Company's management effective as of the Effective Date a package of compensation on terms similar to those offered to Parent's similarly situated management employees 7.11. Satisfaction of Counsel. All actions, proceedings, instruments, and ----------------------- documents required to carry out this Agreement and the transactions contemplated hereby and all other 27 related legal matters shall have completed to the reasonable satisfaction of counsel for Acquired Company. SECTION 8. CLOSING - ---------- ------- 8.1. Closing Date. The closing of the transactions contemplated by this ------------ Agreement (the "Closing") will take place on February ____, 1997 at the offices of Warner & Stackpole LLP, 75 State Street, Boston, Massachusetts 02109. 8.2. Execution of Articles of Merger. At the Closing Acquired Company and ------------------------------- Subsidiary shall each execute and deliver Articles of Merger as provided in the Plan of Merger and shall jointly cause such Articles to be filed with the appropriate governmental authorities in the Commonwealth of Massachusetts as soon as reasonably practicable following the execution and delivery thereof. SECTION 9. REPRESENTATIONS AND WARRANTIES - ---------- ------------------------------ 9.1. Survival of Representation and Warranties. All representations, ----------------------------------------- warranties, agreements, covenants, and obligations herein or in any Exhibit, certificate, or financial statement delivered by any party to another party hereunder shall be deemed to have been relied upon by the other party, and shall survive the Closing and shall not merge in the performance of any obligation by any party hereto. SECTION 10. INDEMNIFICATION - ----------- --------------- (a) Each Stockholder, jointly and severally, shall indemnify, defend and hold Parent harmless against and from all losses, claims, liabilities, costs, or expenses (including reasonable attorneys' fees) or other damages of any nature (collectively "Damages") incurred by it which are caused by or arise out of (i) the breach of any representation or warranty made by 28 Acquired Company or the Stockholders in this Agreement or in any document or certificate delivered pursuant to this Agreement or (ii) any breach of any covenant or agreement of Acquired Company or the Stockholders contained herein or in any agreement entered into by the parties hereto in connection with the transactions contemplated herein. Parent agrees that it will not look to the Stockholders' assets (other than funds held under the Escrow Agreement) for satisfaction of any rights to indemnification hereunder unless and until the funds held under the Escrow Agreement have been exhausted or distributed. For purposes of valuing indemnification amounts recovered by Parent pursuant to this Section from shares of Parent Stock held in escrow under the Escrow Agreement, such shares of Parent Stock will be valued at the last sale price for a share of such stock as reported by Nasdaq on the day prior to the Effective Date of the Merger. (b) Whenever Parent shall have notice that a claim or demand has been asserted or threatened against Parent which, if true, would constitute a basis for indemnification hereunder, Parent shall give written notice of such claim or demand to Dennis E. Speliotis (the "Representative"), the representative of the Stockholders; provided, however, that any failure by -------- Parent to give such notice shall not prejudice the rights of Parent to indemnification hereunder, except to the extent that such failure adversely affects the Representative's ability to investigate or defend such claim or demand. The Representative shall then have the right, upon written notice to Parent acknowledging the Stockholders' obligation to indemnify, defend, and hold harmless Parent under this Section against and from all Damages resulting from such claim or demand, to contest, negotiate or settle any such claim or demand through counsel of its choice, subject to approval of such counsel by Parent, and solely at the cost, risk and expense of the Stockholders; provided, however, -------- (i) that the Representative shall not compromise or offer to 29 settle or compromise any such claim or demand on a basis which would or could result in the imposition of a consent order, injunction or decree that would or could restrict the future activity or conduct of Parent, and (ii) Parent shall have the right to participate, at Parent's expense, in the defense of any such claim or demand using counsel of Parent's choosing. In the event that (x) the Representative shall fail to give the above-mentioned written notice to Parent within ten (10) days after Parent has notified the Representative that any such claim or demand has been asserted or threatened, or (y) in the event such notice is given but any such claim or demand is not promptly settled or promptly and diligently contested by the Representative, Parent shall have the right to satisfy and discharge the same by payment, compromise or otherwise, and the Stockholders shall be liable therefor to Parent in accordance with and to the extent provided by this Section. Parent may also defend any such claim or demand in the event the Representative fails to give such notice within such ten day period, and no actions taken or omitted to be taken by Parent in connection with such defense shall affect Parent's right to full indemnification hereunder. (c) Parent shall indemnify, defend and hold each of the Stockholders harmless against and from all Damages incurred by them which are caused by or arise out of (i) the breach of any representation or warranty made by Parent or Subsidiary in this Agreement or in any document or certificate delivered pursuant to this Agreement or (ii) any breach of any covenant or agreement of Parent or Subsidiary contained herein or in any agreement entered into by the parties hereto in connection with the transactions contemplated herein. (d) Whenever any Stockholder shall have notice that a claim or demand has been asserted or threatened against him which, if true, would constitute a basis for 30 indemnification hereunder, the Representative shall give written notice of such claim or demand to Parent; provided, however, that any failure by the -------- Representative to give such notice shall not prejudice the rights of the Stockholders to indemnification hereunder, except to the extent that such failure adversely affects Parent's ability to investigate or defend such claim or demand. Parent shall then have the right, upon written notice to the Representative acknowledging the Parent's obligation to indemnify, defend, and hold harmless the Stockholders under this Section against and from all Damages resulting from such claim or demand, to contest, negotiate or settle any such claim or demand through counsel of its choice, subject to approval of such counsel by the Representative, and solely at the cost, risk and expense of Parent; provided, however, (i) that the Stockholders shall have the right to -------- participate, at the Stockholders' expense, in the defense of any such claim or demand using counsel of the Stockholders' choosing. In the event that (x) Parent shall fail to give the above-mentioned written notice to the Representative within ten (10) days after the Representative has notified Parent that any such claim or demand has been asserted or threatened, or (y) in the event such notice is given but any such claim or demand is not promptly settled or promptly and diligently contested by Parent, the Stockholders shall have the right to satisfy and discharge the same by payment, compromise or otherwise, and Parent shall be liable therefor to the Stockholders in accordance with and to the extent provided by this Section. Parent may also defend any such claim or demand in the event the Representative fails to give such notice within such ten day period, and no actions taken or omitted to be taken by Parent in connection with such defense shall affect Parents right to full indemnification hereunder. 31 (e) The right to indemnification pursuant to this Agreement shall survive any investigation made by the parties or their representatives, lenders on investors or the receipt of any opinion or certificate. SECTION 11. MISCELLANEOUS - ----------- ------------- 11.1. Employee Option Pool. Parent agrees to make available to senior -------------------- management of the Acquired Company options to purchase an aggregate of 40,000 shares of Parent Stock, at an exercise price equal to the last sale price of a share of Parent Stock as reported by Nasdaq for the date preceding the date of grant, for granting to key employees of Acquired Company recommended by management and approved by Parent's Compensation Committee at the earliest date practicable after the Closing. 11.2. Fees and Expenses. Parent and the Stockholders each shall bear its ----------------- own or their expenses in connection with the negotiation and the consummation of this Agreement; provided, however, that if this Agreement is terminated by either party by reason of the other party's failure in an arbitrary and willful manner to satisfy one or more of the conditions to closing hereunder, the party which shall have failed to satisfy such condition or conditions shall reimburse the other party for, in addition to any other damages incurred by such other party, all reasonable out-of-pocket legal, auditing and professional consulting expenses incurred in connection with this Agreement and the transactions contemplated hereby. 11.3. Brokers. Each of the parties represents that it had no dealings in ------- connection with this transaction with any finder or broker. Acquired Company and Parent each agree to indemnify the other against and hold the other harmless from any and all liabilities (including without limitation cost of counsel) to any other persons claiming brokerage commissions or 32 finder's fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby. 11.4. Law Governing. This Agreement shall be governed by and construed in ------------- accordance with the laws of the Commonwealth of Massachusetts without regard to the doctrine of conflicts of laws. 11.5. Notices. All notices, requests, demands and other communications ------- hereunder shall be deemed to have been duly given if delivered or mailed postage prepaid: if to Acquired Company: Dimensional Measurement Systems, Inc. 8 Ray Avenue Burlington, Ma 01803 Attn: President if to Stockholders: Dennis E. Speliotis, Stockholders Representative 8 Ray Avenue Burlington, Ma 01803 if to Parent or Subsidiary: ADE Corporation 80 Wilson Way Westwood, MA 02090-1806 Attn: Business Unit Manager with a copy to: Warner & Stackpole LLP 75 State Street Boston, MA 02109 Attn: Willard G. McGraw, Jr. or to such other address as either party may by notice to the other designate. 11.6. Entire Agreement. This Agreement, the Exhibits delivered pursuant ---------------- hereto, and any documents referred to or delivered pursuant to this Agreement or any of the transactions contemplated hereby constitute the entire agreement between the parties with respect to the transactions contemplated herein and supersede all prior agreements and undertakings of the 33 parties with respect thereto. Each of the Exhibits delivered pursuant to the terms of this Agreement is in writing and has been initialed by an officer of the delivering party. 11.7. Confidentiality. If the Merger and the transactions contemplated by --------------- this Agreement are not consummated, then each of the parties to this Agreement agrees to keep confidential and shall not use for its own benefit any of the information (unless in the public domain) obtained from any other party and shall promptly return to each such other party all schedules, documents or other written information (without retaining copies thereof) previously obtained from each such other party. [SIGNATURE PAGES FOLLOW] 34 IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed under their respective seals by their respective officers hereunto duly authorized, as of the day and year first above written. PARENT: ADE CORPORATION By: /s/ Mark D. Shooman _____________________________ Name: Mark D. Shooman Title: Vice President and Chief Financial Officer SUBSIDIARY: ADE TECHNOLOGIES, INC. By: /s/ Mark D. Shooman _____________________________ Name: Mark D. Shooman Title: Vice President and Chief Financial Officer ACQUIRED COMPANY: DIGITAL MEASUREMENT SYSTEMS, INC. By: /s/ Dennis E. Speliotis ----------------------------- Name: Title: STOCKHOLDERS: ADVANCED DEVELOPMENT CORPORATION By: /s/ Dennis E. Speliotis ----------------------------- Name: Title: /s/ David C. Bono -------------------------------- David C. Bono 62 Wellesley Road Wellesley, Ma 02181 /s/ Dennis E. Speliotis -------------------------------- Dennis E. Speliotis 22 Ingleside Road Lexington, Ma 02173 /s/ Alan Sliski -------------------------------- Alan Sliski 293 Concord Rd -------------------------------- Lincoln, MA. 01773 -------------------------------- ________________________________ /s/ Elias Speliotis -------------------------------- Elias Speliotis 11 Bulkeley Road Littleton, Ma 01460 ________________________________ Evanthia Speliotis 2007 Trevilian Way Louisville, KY 40205 ________________________________ Ismene Speliotis 324 Bergen St., Apt. 3B Brooklyn, NY 11217 ________________________________ Elias Speliotis 11 Bulkeley Road Littleton, Ma 01460 /s/ Evanthia Speliotis -------------------------------- Evanthia Speliotis 2007 Trevilian Way Louisville, KY 40205 ________________________________ Ismene Speliotis 324 Bertin Street Apt. 3B Brooklyn, NY 10112 ________________________________ Elias Speliotis 11 Balkeley Road Littleton, Ma 01460 ________________________________ Evanthia Speliotis 2007 Trevilian Way Louisville, KY 40205 /s/ Ismene Speliotis -------------------------------- Ismene Speliotis 324 Bergen Street Apt. 3B Brooklyn, NY 11217 EX-10.19 4 REGISTRATION RIGHTS AGREEMENT 2/27/97 EXHIBIT 10.19 ADE CORPORATION REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is made as of February 27, 1997, by and among ADE Corporation, a Massachusetts corporation ("ADE" or the "Company"), and the persons and entities listed as Purchasers on the Schedule of Holders attached hereto (the "Purchasers"). RECITALS -------- A. The Purchasers are parties to the Agreement and Plan of Merger dated as of February 27, 1997 (the "Merger Agreement") by and among the Company, ADE Technologies, Inc., a Massachusetts corporation ("ATI"), Digital Measurement Systems, Inc., a Massachusetts corporation ("DMS"), David C. Bono, Alan Sliski and Advanced Development Corporation and all its stockholders pursuant to which DMS was merged with and into ATI. B. The obligations of the Purchasers under the Merger Agreement are conditioned upon, among other things, the execution and delivery of this Agreement by the Company. NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, all parties hereto agree as follows: 1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms ------------------- shall have the following respective meanings: "COMMISSION" means the Securities and Exchange Commission or any ---------- other Federal agency at the time administering the Securities Act. "COMMON STOCK" means the Common Stock, $.01 par value, of the ------------ Company. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, ------------ or any similar Federal rule or statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "HOLDER" means any Purchaser holding Registrable Securities, or any ------ person holding Registrable Securities to whom the rights under this Agreement have been transferred in accordance with Section 2.7 hereof. "INITIATING HOLDERS" means any Holders who in the aggregate hold not ------------------ less than 60% of the Registrable Securities then outstanding. "REGISTRABLE SECURITIES" means the Common Stock issued to the ---------------------- Purchaser pursuant to the Merger Agreement; provided, however, that such shares ----------------- of Common Stock shall 1 only be treated as Registrable Securities if and so long as they have not been registered or sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction and the registration rights with respect to such shares have not terminated pursuant to Section 2.8. The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to the -------- ---------- ------------ filing of a registration statement with the Commission under the Securities Act and such registration statement's becoming effective under the Securities Act. "REGISTRATION EXPENSES" shall mean all expenses, except as otherwise --------------------- stated below, incurred in complying with Sections 2.1 and 2.2 hereof, including without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, the expense of any special audits incident to or required by any such registration. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended,or -------------- any similar Federal rule or statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "SELLING EXPENSES" shall mean all underwriting discounts, selling ---------------- commissions and stock transfer taxes applicable to the securities registered by the Holders and all fees and disbursements of counsel for any Holder. 2. REGISTRATION. ------------- 2.1 PIGGY-BACK REGISTRATION. ----------------------- (a) Notice of Registration. If at any time or from time to time the ---------------------- Company shall decide to register any of its Common Stock, either for its own account or the account of a Holder or other holders, other than (i) a registration relating solely to employee benefit plans or (ii) a registration relating solely to a Rule 145 transaction, the Company will: (i) promptly give to each Holder written notice thereof, and (ii) subject to the limitations set forth below, include in such registration (and any related qualification under Blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests given to the Company by any Holder within five days after the Company gives such written notice. (b) Underwriting. If the registration of which the Company gives notice ------------ is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 2.1(a)(i). In such event, the right of any Holder to registration pursuant to Section 2.1 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of Registrable Securities in the underwriting shall be limited to the extent provided herein. 2 The Company shall, together with all Holders and any other holders of Common Stock proposing to distribute their securities through such underwriting, enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 2.2, if the managing underwriter advises the Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all Holders requesting to be included in the registration and underwriting and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all Holders and all other holders of Common Stock requesting to be included in the registration and underwriting in proportion, as nearly as practicable, to the respective number of shares of Common Stock so to be included by them in the registration statement. No Registrable Securities or other shares of Common Stock excluded from the underwriting by reason of the underwriter's marketing limitation shall be included in such registration. If any Holder of Registrable Securities disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company. (c) Right to Terminate Registration. The Company shall have the right to ------------------------------- terminate or withdraw any registration initiated by it under this Section 2.1 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. 2.2 REGISTRATION ON FORM S-3. ------------------------ (a) Request for Registration. In case the Company shall receive from ------------------------ Initiating Holders a written request that the Company file a registration statement on Form S-3 (or any successor form to Form S-3) for a public offering of shares of the Registrable Securities and the Company is a registrant entitled to use Form S-3 to register the Registrable Securities for such an offering, the Company shall use its best efforts to cause such Registrable Securities to be registered for the offering on such form; provided, however, that (i) the ------------------ Company shall not be required to effect more than one registration pursuant to this Section 2.2 and (ii) the Company shall not be obligated to effect any such registration prior to the filing by the Company with the Commission of financial statements of the Company with a minimum of thirty (30) days of the combined financial results of ADE and DMS. The Company shall give other Holders written notice not less than five days prior to the filing of such registration statement and afford them the opportunity to include their Registrable Securities in the registration statement. (b) Notwithstanding the foregoing, the Company shall not be obligated to take any action pursuant to this Section 2.2: (i) If the Company, within ten (10) days of the receipt of the request of the Initiating Holders, gives notice of its bona fide intention to effect the filing of a registration statement with the Commission within ninety (90) days of receipt of such request (other than with respect to a registration statement relating to a Rule 145 transaction, an offering solely to employees or any other registration which is not appropriate for the registration of Registrable Securities); 3 (ii) During the period starting with the date sixty (60) days prior to the Company's estimated date of filing of, and ending on the date three (3) months immediately following the effective date of, any registration statement pertaining to securities of the Company (other than a registration of securities in a Rule 145 transaction or with respect to an employee benefit plan), provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or (iii) If the Company shall furnish to the Initiating Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company or its stockholders for registration statements to be filed in the near future, then the Company's obligation to use its best efforts to file a registration statement shall be deferred for a period not to exceed 120 days from the receipt of the request to file such registration by such Initiating Holder or Holders, provided that the Company may not exercise this deferral right more than once per twelve month period. 2.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in ------------------------ connection with (i) all registrations pursuant to Section 2.1, and (ii) one registration pursuant to Section 2.2, shall be borne by the Company. Notwithstanding the foregoing, the Company shall not be required to pay for expenses of any registration proceeding begun under Section 2.2, the request for which has been subsequently withdrawn by the Initiating Holders or is otherwise not successfully completed due to no fault of the Company, unless the withdrawal is based upon material adverse information concerning the Company of which the Holders were not aware at the time of such request. Unless otherwise stated, all Selling Expenses relating to securities registered on behalf of the Holders and all other registration expenses shall be borne by the Holders of such securities pro rata on the basis of the number of shares so registered or proposed to be so registered. 2.4 REGISTRATION PROCEDURE. In the case of each registration effected by ---------------------- the Company pursuant to this Agreement, the Company will keep each Holder advised in writing as to the initiation of such registration and as to the completion thereof. The Company will: (a) Prepare and file with the Commission a registration statement and such amendments and supplements as may be necessary and use its best efforts to cause such registration statement to become and remain effective for at least 90 days or until the distribution described in the registration statement has been completed, whichever first occurs; (b) Furnish to the Holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities; (c) Before filing the registration statement or prospectus or amendments or supplements thereto, furnish to one counsel selected by the holders of Registrable Securities copies of such documents proposed to be filed which shall be subject to the reasonable approval of such counsel; 4 (d) Furnish to each Holder who is selling Registrable Securities in a registration pursuant to this Agreement (i) an opinion of counsel for the Company, dated the effective date of the registration statement, and (ii) a "comfort" letter signed by the independent public accountants who have certified the Company's financial statements included in the registration statement, covering substantially the same matters with respect to the registration statement (and the prospectus included therein) and (in the case of the accountants' letter) with respect to events subsequent to the date of the financial statements, as are customarily covered (at the time of such registration) in opinions of the Company's counsel and in accountants' letters delivered to the underwriters in underwritten public offering of securities; (e) Cause all such Registrable Securities registered pursuant hereto to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed. 2.5 INDEMNIFICATION. ---------------- (a) The Company will indemnify each Holder, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration has been effected pursuant to this Agreement, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act, the Exchange Act, state securities law or any rule or regulation promulgated under such laws applicable to the Company in connection with any such registration, and the Company will reimburse each such Holder, each of its officers and directors and partners, and each person controlling such Holder, for any legal and any other expenses reasonably incurred, as such expenses are incurred, in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder or controlling person, and stated to be specifically for use therein. (b) Each Holder will, severally and not jointly, if Registrable Securities held by such Holder are included in the securities as to which such registration is being effected, indemnify the Company, each of its directors and officers, each person who controls the Company within the meaning of Section 15 of the Securities Act, and each other holder of the Company's securities covered by such a registration statement, each of its officers, directors and partners and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on 5 any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such holders, such directors, officers, persons, underwriters or control persons for any legal or any other expenses reasonably incurred, as such expenses are incurred, in connection with investigating or defending any such claim, loss, damage, liability or action, but only to the extent that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with information furnished to the Company by such Holder in an instrument duly executed by such Holder expressly for use in such registration. Notwithstanding the foregoing, the liability of each Holder under this Section 2.5(b) shall be limited in an amount equal to the net proceeds of the shares sold by such Holder. (c) Each party entitled to indemnification or contribution under this Section 2.5 (the "Indemnified Party") shall give notice to the party required to provide indemnification or contribution (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity or contribution may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense, amended further that the failure of any Indemnified Party to give notice as provided herein shall not provide relieve the Indemnifying Party of its obligations under this Agreement unless the failure to give such notice is materially prejudicial to an Indemnifying Party's ability to defend such action and provided further, that the Indemnifying Party shall not assume the defense for matters as to which there is a conflict of interest or there are separate and different defenses. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party (whose consent shall not be unreasonably withheld), consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. 2.6 INFORMATION BY HOLDER. The Holder or Holders of Registrable --------------------- Securities included in any registration shall furnish to the Company such information regarding such Holder or Holders, the Registrable Securities held by them and the distribution proposed by such Holder or Holders as the Company may reasonably request in writing and as shall be required in connection with any registration referred to in this Agreement. 2.7 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to ------------------------------- register securities granted Holders under Sections 2.1 and 2.2 may not be assigned to a transferee or assignee except with the prior written consent of the Company and no such transfer or assignment will be effective unless the transferee or assignee agrees in writing to be bound by the provisions of this Agreement. 6 2.8 TERMINATION OF REGISTRATION RIGHTS. The rights granted pursuant to ---------------------------------- Sections 2.1 and 2.2 of this Agreement shall terminate automatically effective on the first date when the Registrable Securities are eligible for resale by the Holders pursuant to Rule 144 under the Securities Act. 3. AMENDMENT. Any provision of this Agreement may be amended or the --------- observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding. Any amendment or waiver effected in accordance with this Section 3 shall be binding upon each party to this Agreement and each transferee of securities subject to this Agreement. 4. GOVERNING LAW. This Agreement shall be governed in all respects by ------------- the internal laws of the Commonwealth of Massachusetts without regard to conflict of laws provisions. 5. ENTIRE AGREEMENT. This Agreement constitutes the full and entire ---------------- understanding and agreement among the parties regarding the matters set forth herein. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon the successors, assigns, heirs, executors and administrators of the parties hereto. 6. NOTICES. ETC. All notices and other communications required or ------------ permitted hereunder shall be in writing and shall be mailed by certified mail, postage prepaid, or delivered by facsimile transmission, by hand or by messenger, addressed: (a) if to a Holder, at such Holder's address as set forth in Exhibit ------- A, or at such other address as such Holder shall have furnished to the Company, - -- with a copy to [________] Attn: [_____] Fax: (___) ___-_____ (b) if to the Company, to: ADE Corporation 80 Wilson Way Westwood, MA 02090 Attention: Chief Financial Officer Fax: (508) 467-0702 or at such other address as the Company shall have furnished to the Holders, with a copy to: Warner & Stackpole LLP 75 State Street Boston, MA 02109 Attn: Willard G. McGraw, Jr., Esq. 7 Fax: (617) 951-9151 Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if in writing and delivered personally or by facsimile transmission, or, if sent by mail, postage pre-paid, at the earlier of its receipt or three days after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid. Any party may change by such notice the address to which notices to it are to be addressed. 7. COUNTERPARTS. This Agreement may be executed in any number of ------------ counterparts, each of which shall be an original, but all of which together shall constitute one instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. ADE CORPORATION By: /s/ Mark D. Shooman _____________________ Name: Mark D. Shooman Title: Vice President and Chief Financial Officer ADVANCED DEVELOPMENT CORPORATION By: /s/ Dennis E. Speliotis ----------------------- Dennis E. Speliotis, President /s/ David C. Bono ----------------- David C. Bono /s/ Alan Sliski --------------- Alan Sliski 8 EXHIBIT A --------- SCHEDULE OF HOLDERS (to the Registration Rights Agreement) PURCHASERS - ---------- ADVANCED DEVELOPMENT CORPORATION 8 Ray Avenue Burlington, MA 01803 Attn: Dennis E. Speliotis, President 22 Ingleside Road Lexington, MA 02181 DAVID C. BONO 62 Wellesley Road Wellesley, MA 02181 ALAN SLISKI 273 Concord Road Lincoln, MA 01773 9 EX-10.20 5 PURCHASE AND SALES AGREEMENT Exhibit 10.20 PURCHASE AND SALE AGREEMENT --------------------------- Agreement dated as of the 28th day of February, 1997, by and between ADE Corporation (the "Buyer"), a Massachusetts corporation having its principal place of business at 80 Wilson Way, Westwood, Massachusetts, or a nominee thereof, and Dennis E. Speliotis, as Trustee of Thouria Investment Trust under a Declaration of Trust dated August 18, 1992 recorded in the Middlesex South District Registry of Deeds at Book 22305, Page 375 (the "SELLER"), and Dennis E. Speliotis ("Speliotis"), individually, of 22 Ingleside Road, Lexington, Massachusetts. WITNESSETH, that WHEREAS, Buyer is acquiring by merger pursuant to an Agreement and Plan of Merger of even date ("the Merger Agreement") by and among Buyer, SELLER, ADE Technologies, Inc., Advanced Development Corporation, David C. Bono and Alan J. Sliski all of the business and assets, subject to the liabilities, of Digital Measurement Systems, Inc. ("DMS"), a Massachusetts corporation having its principal place of business at 8 Ray Avenue, Burlington, Massachusetts; WHEREAS, Dennis E. Speliotis, as Trustee as aforesaid, is the owner of record of the real property known as and numbered 2-4-6-8 Ray Avenue, Burlington, Massachusetts, leased to and occupied by DMS as its principal place of business and the SELLER and Speliotis, in addition to their direct or indirect ownership interest in DMS, are the owners of the legal and beneficial interest in said property; and WHEREAS, in addition to the assets of DMS acquired by the Buyer under the Merger Agreement, the Buyer wishes to purchase from the SELLER and the SELLER wishes to sell to the Buyer the aforesaid real property for continued operation of the acquired DMS business and assets. NOW, THEREFORE, in consideration of the premises and other valuable undertakings hereinafter set forth, the parties hereby agree to the following terms of sale: 1. PREMISES The land containing approximately 57,600 square feet (the "Land") together with the buildings thereon containing 14,764 square feet ("Buildings") known and numbered as 2-4-6-8 Ray Avenue, Burlington, Massachusetts, all as more fully described in Exhibit A attached hereto and incorporated herein. --------- 2. BUILDINGS, STRUCTURES, IMPROVEMENTS, FIXTURES Included in the sale as a part of said Premises are the (i) buildings, structures, and improvements now thereon, (ii) the fixtures used in connection therewith including, if any, all wall-to-wall carpeting, drapery rods, automatic garage door openers, venetian -1- blinds, window shades, screens, screen doors, storm windows and doors, awnings, shutters, furnaces, heaters, heating equipment, stoves, ranges, oil and gas burners and fixtures appurtenant thereto, hot water heaters, plumbing and bathroom fixtures, garbage disposers, electric and other lighting fixtures, mantels, outside television antennas, fences, gates, trees, shrubs, plants, refrigerators, air conditioning equipment, ventilators, dishwashers, washing machines and dryers, and (iii) all warranties, guarantees, bonds, and all drawings, plans, specifications and manuals relating to the construction, management, maintenance or operation of the Buildings; and (iv) and all rights into and under any existing leases of the Land or the Buildings, or any portions thereof (the "Leases"), except amounts thereunder payable to SELLER for periods prior to the Closing. 3. TITLE DEED A. Said Premises are to be conveyed by a good and sufficient quitclaim deed running to the BUYER, or to the nominee designated by the BUYER by written notice to the SELLER at least seven days before the deed is to be delivered as herein provided, and said deed shall convey a good and clear record and marketable title thereto, free from encumbrances, except: i. Provisions of existing building and zoning laws; ii. Such taxes for the then current year as are not due and payable on the date of the delivery of such deed; iii. Any liens for municipal betterments assessed after the date of this agreement; and iv. All encumbrances listed on Schedule A, which is attached hereto ---------- and incorporated herein. B. Without limitation of any other provisions in this Agreement, the Premises shall not be considered to be in compliance with the provisions of this Agreement with respect to title unless: -2- i. all structures and improvements on the Premises, including all means of access to the Premises shall be wholly within the boundary lines of the Premises and shall not encroach on, upon or under the property of any other person or entity; ii. no building, structure or improvement of any kind belonging to any other person or entity shall encroach upon or under the Premises; iii. title to the Premises is insurable, for the benefit of Buyer, by a title insurance company reasonably acceptable to Buyer in a fee owner's policy of title insurance, at normal premium rates, on the American Land Title Association form currently in use, subject only to those printed exceptions to title normally included in the "jacket" to such form or policy, the standard so- called "Schedule B" exceptions; and iv. the Premises have vehicular and pedestrian access to a public way, duly laid out or accepted as such by the town or city in which the Premises are located. 4. PLANS If said deed refers to a plan necessary to be recorded therewith the SELLER shall deliver such plan with the deed in form adequate for recording or registration. 5. REGISTERED TITLE In addition to the foregoing, if the title to said Premises is registered, said deed shall be in form sufficient to entitle the BUYER to a Certificate of Title of said Premises, and the SELLER shall deliver with said deed all instruments, if any, necessary to enable the BUYER to obtain such Certificate of Title. 6. PURCHASE PRICE The agreed purchase price for said Premises is 21,000 shares of ADE Corporation stock subject to a first mortgage note to the Somerset Savings Bank with an outstanding principal balance of $639,102.25 as of February 13, 1997, which the Buyer shall assume and agree to pay. The SELLER hereby assigns and the Buyer hereby agrees to assume any and all rights and obligations of the SELLER in, to and under said mortgage note and that certain related Mortgage from the SELLER to Somerset Savings Bank dated October 29, 1993 and recorded with Middlesex South Registry of Deeds in Book 23838, Page 198. -3- 7. TIME FOR PERFORMANCE; DELIVERY OF DEED Such deed is to be delivered at 10 o'clock A.M. on the 18th day of June, 1997, at the offices of Warner & Stackpole, 75 State Street, Boston, Massachusetts 02109, unless otherwise agreed upon in writing. It is agreed that time is of the essence of this agreement. 8. POSSESSION AND CONDITION OF PREMISES Full possession of said Premises free of all tenants and occupants, except as herein provided, is to be delivered at the time of the delivery of the deed, said Premises to be then: A. in the same condition as they now are, reasonable use and wear thereof excepted; B. not in violation of said environmental, building and zoning laws; C. in compliance with provisions of any instrument referred to in clause 4 hereof; and D. free of all personal effects and debris and in broom clean condition. The BUYER shall be entitled personally to inspect said Premises prior to the delivery of the deed in order to determine whether the condition thereof complies with the terms of this clause. 9. EXTENSION TO PERFECT TITLE OR MAKE PREMISES CONFORM If the SELLER shall be unable to give title or to make conveyance, or to deliver possession of the Premises, all as herein stipulated, or if at the time of the delivery of the deed the Premises do not conform with the provisions hereof, then SELLER shall use reasonable efforts to remove any defects in title, or to deliver possession as provided herein, or to make the said Premises conform to the provisions hereof, as the case may be, in which event the SELLER shall give written notice thereof to the BUYER at or before the time for performance hereunder, and thereupon the time for performance hereof shall be extended for a period of thirty days. 10. FAILURE TO PERFECT TITLE OR MAKE PREMISES CONFORM, ETC. If at the expiration of the extended time the SELLER shall have failed so to remove any defects in title, deliver possession, or make the Premises conform, as the case may be, all as herein agreed, or if at any time during the period of this agreement or any extension thereof, the holder of a mortgage on said Premises shall refuse to permit the insurance proceeds, if any, to be used for such purposes, then any payments made under -4- this agreement shall be forthwith refunded and all other obligations of the parties hereto shall cease and this agreement shall be void without recourse to the parties hereto. 11. BUYER'S ELECTION TO ACCEPT TITLE The BUYER shall have the election, at either the original or any extended time for performance, to accept such title as the SELLER can deliver to the said Premises in their then condition and to pay therefore the purchase price without deduction, in which case the SELLER shall convey such title, except that in the event of such conveyance in accord with the provisions of this clause, if the said Premises shall have been damaged by fire or casualty insured against, then the SELLER shall, unless the SELLER has previously restored the Premises to their former condition, either: A. pay over or assign to the BUYER, on delivery of the deed, all amounts recovered or recoverable on account of such insurance, less any amounts reasonably expended by the SELLER for any partial restoration, or B. if a holder of a mortgage on said Premises shall not permit the insurance proceeds or a part thereof to be used to restore the said Premises to their former condition or to be so paid over or assigned, give to the BUYER a credit against the purchase price, on delivery of the deed, equal to said amounts so recovered or recoverable and retained by the holder of the said mortgage less any amounts reasonably expended by the SELLER for any partial restoration. 12. ACCEPTANCE OF DEED The acceptance of a deed by the BUYER or his nominee as the case may be, shall be deemed to be a full performance and discharge of every agreement and obligation herein contained or expressed, except such as are, by the terms hereof, to be performed after the delivery of said deed. 13. USE OF MONEY TO CLEAR TITLE To enable the SELLER to make conveyance as herein provided, the SELLER may, at the time of delivery of the deed, use the purchase money or any portion thereof to clear the title of any or all encumbrances or interests, provided that all instruments so procured are recorded simultaneously with the delivery of said deed. 14. INSURANCE Until the delivery of the deed, the SELLER shall maintain fire and extended coverage insurance on said Premises in an amount equal to the full replacement cost of the Buildings. -5- 15. ADJUSTMENTS Collected rents, water and sewer use charges, and taxes for the then current fiscal year, shall be apportioned and fuel value shall be adjusted, as of the day of performance of this agreement and the net amount thereof shall be added to or deducted from, as the case may be, the purchase price payable by the BUYER at the time of delivery of the deed. Uncollected rents for the current rental period shall be apportioned if and when collected by either party. 16. ADJUSTMENT OF UNASSESSED AND ABATED TAXES If the amount of said taxes is not known at the time of the delivery of the deed, they shall be apportioned on the basis of the taxes assessed for the preceding fiscal year, with a reapportionment as soon as the new tax rate and valuation can be ascertained; and, if the taxes which are to be apportioned shall thereafter be reduced by abatement, the amount of such abatement, less the reasonable cost of obtaining the same, shall be apportioned between the parties, provided that neither party shall be obligated to institute or prosecute proceedings for an abatement unless herein otherwise agreed. 17. BROKERAGE WARRANTY The BUYER and SELLER warrant and represent to each other that each has dealt with no broker or person entitled to a broker's commission in connection with the negotiation or execution of this Agreement or the consummation of the transaction contemplated hereby and the BUYER and SELLER agree to hold harmless and indemnify each other against all damages, claims, losses and liabilities arising out of or resulting from the failure of the other party's warranty and representation. These warranties shall survive delivery of the Deed. 18. INTENTIONALLY OMITTED. 19. INTENTIONALLY OMITTED. 20. WARRANTIES AND REPRESENTATIONS A. Neither the SELLER nor Speliotis has received any notices from any insurance companies or governmental agencies indicating that any violation of any law or regulation exists with respect to the Premises. B. Attached as Exhibit B are copies of all Leases with Tenants (as --------- hereinafter defined) of the Premises. None of the Leases attached as Exhibit B have been amended, modified or supplemented, and the Leases --------- constitute the entire agreements with the tenants (the "Tenants") thereunder. -6- C. Neither the SELLER nor Speliotis has received any written notice of violation of any zoning, building, health, traffic, environmental, flood control, fire safety, handicap and other applicable rules, regulations, ordinances and statutes of all local, state and Federal authorities and any other governmental entity having jurisdiction over the Premises. D. There are no service, maintenance, supply, management or equipment contracts ("Service Contracts") affecting the Premises which cannot be canceled without penalty or premium upon thirty (30) days' notice. Neither SELLER nor any other party to a Service Contract shall be in default thereunder. SELLER shall deliver to BUYER within five (5) days of the execution of this Agreement full copies of each Service Contract which copies shall become Exhibit C to the Agreement. BUYER --------- shall accept or reject such Service Contracts within 72 hours of their delivery by SELLER. SELLER shall terminate or otherwise be responsible for any Service Contract rejected by BUYER. Any Service Contract accepted by BUYER shall be adjusted as of the Closing. E. SELLER has all requisite power and authority to execute and deliver this Agreement and to carry over its obligations hereunder and the transactions contemplated hereby. This Agreement has been, and the documents contemplated hereby will be, duly executed and delivered by SELLER and constitutes its legal, valid and binding obligation enforceable against it in accordance with its terms. The consummation by SELLER of the sale of the Premises is not in violation of or conflict with nor does it constitute a default under any term or provision of the organizational documents of SELLER, or any of the terms of any agreement or instrument to which it is a party, or by which it is bound, or of any provision of any applicable law, ordinance, rule or regulation of any governmental authority or of any provision of any applicable order, judgment or decree of any court, arbitrator or governmental authority. F. All written information concerning SELLER, Speliotis, and the Premises provided to BUYER by SELLER pursuant to this Agreement are true, complete and correct in all respects and fairly present the information set forth in a manner that is not misleading as of the date hereof and as of the date of the closing. G. No default or breach exists, or as of the Closing Date will exist, under any of the Leases affecting the Premises. H. To the best knowledge of the SELLER and Speliotis, there are no pending judicial, municipal or administrative proceedings affecting the Premises or any portion thereof or in which SELLER or Speliotis are or will be a party by reason of SELLER'S or Speliotis' ownership of the Premises or any portion thereof, including, without limitation, proceedings for or involving -7- tenant evictions, collections, condemnations, eminent domain, alleged building code or zoning violations, or personal injuries or property damage alleged to have occurred on the Premises or by reason of the construction of the Improvements or use and operation of the Premises. SELLER shall deliver to BUYER notice of any such proceedings arising before closing. I. Except as set forth in Exhibit D, all valid bills and claims against --------- SELLER for labor performed and materials furnished to or for the benefit or the Premises for all periods prior to the closing have been (or prior to the closing will be) paid in full. J. The SELLER and Speliotis warrant to BUYER that neither SELLER nor Speliotis has ever generated, stored, handled or disposed of any hazardous waste or hazardous substance on or in the Premises, and the SELLER and Speliotis are, to the best of their knowledge, not aware of the generation, storage, handling or disposal of such waste or substance on or in the Premises, at any time, by anyone else. For the purposes of this paragraph, "hazardous waste" and "hazardous substance" shall mean any material which may be dangerous to health or to the environment, including without limitation all "hazardous materials", "hazardous substances", and "oil" as defined in both the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. (S)9601, et seq., as amended, the Resource Conservation and -- ---- Recovery Act of 1976, 42 U.S.C. Section 6901, et seq., as amended, -- ---- Massachusetts General Laws Chapter 21C, Massachusetts General Laws Chapter 21E, and the regulations promulgated under all of the foregoing laws. 21. NOTICES All notices required or to be given hereunder shall be in writing and deemed duly given when faxed (with confirmation of receipt acknowledged) delivered or mailed by registered or certified mail or by Federal Express or other comparable express mail service, return receipt requested, postage and registration or certification charges prepaid, addressed as follows: If to the SELLER or to Speliotis: c/o Dennis E. Speliotis 22 Ingleside Road Lexington, Massachusetts 02173 and with a copy to: Chris I. Pappas, Esq. 77 Central Street Boston, MA 02109 Phone - (617) 423-6336 -8- Fax - (617) 423-6708 If to the BUYER: ADE Corporation 80 Wilson Way Westwood, Massachusetts 02090-1806 Attention: Mark Shooman with a copy to: Paul C. Bauer, Esq. Warner & Stackpole 75 State Street Boston, Massachusetts 02109-1808 Phone - (617) 951-9000 Fax - (617) 951-9151 or other address or addresses as may from time to time be designated by either party by written notice to the other; provided any such notice is received in ordinary course. 22. CONTINGENCIES A. Inspection for Hazardous Waste. The BUYER may cause one or more ------------------------------ engineering analyses or tests of the Premises to be made at BUYER's expense in order to ascertain that there are no conditions on the Premises which constitute a violation of any state or federal environmental statute or regulations, including without limitation, Massachusetts G.L. c. 21E. If the results of any such analyses or tests are unsatisfactory to BUYER, the BUYER may notify the SELLER in writing at its address as set forth above prior to the Closing Date, and the deposit will thereupon be returned to the BUYER and there will be no further recourse as between the BUYER and the SELLER. BUYER agrees to indemnify SELLER against any liability or loss resulting from the activities of BUYER, its agents, employees and consultants during the course of any inspection or test on the Premises. B. Zoning and Inspections. BUYER may, at BUYER'S expense, (i) cause its ---------------------- legal counsel to investigate the Premises for compliance with various regulations, including without limitation, those related to building codes and zoning and (ii) investigate the Premises to determine that the same are satisfactory with respect to integrity of structures and adequacy and functioning of mechanical and utility systems. It is agreed that BUYER shall have access to the Premises and to any documentation related to the Premises in SELLER'S possession, for such purposes. BUYER shall have access to any existing and available survey of the Premises. If BUYER determines that the condition of the Premises is unsatisfactory, BUYER -9- may terminate this Agreement prior to the Closing Date and receive a refund of his deposit. 23. CONDUCT PENDING CLOSING Until the Closing, SELLER shall: A. comply with all the obligations of the landlord under the Leases or any New Leases (as hereinafter defined) and with any other contractual arrangements referred to in this Agreement (including, without limitation, Service Contracts); B. not enter into new leases or other similar agreements affecting any portion of the Premises (each a "New Lease") or modify, cancel, waive any default under, or accept surrender of, any Lease without obtaining the prior written consent of BUYER which shall not be unreasonably withheld; C. neither enter into nor renew any: (i) brokerage agreements or (ii) contract for or on behalf of or affecting the Premises which cannot be terminated by SELLER (or by BUYER after passage of title to the Premises on notice of 30 days or less without charge, cost, penalty or premium), nor modify, cancel, accept surrender of, or accept any advance rental except for customary security deposits under any Lease or New Lease, nor modify or agree to any modifications of any of the terms or conditions of the Service Contracts without obtaining the prior written consent of BUYER; D. not remove any personal property from the Premises without the prior written consent of the BUYER, other than in the ordinary course of the operation of the Premises; E. not convey any interest in the Premises or consent to any lien or encumbrance thereon; and F. promptly notify BUYER of any change in any condition with respect to the Premises or of any event or condition which makes any representation or warranty of SELLER to BUYER under this Agreement untrue, or any covenant of BUYER under this Agreement incapable of being performed. 24. ENVIRONMENTAL INDEMNIFICATION A. At all times, the SELLER and Speliotis shall at their sole cost and expense indemnify, exonerate, protect and save the BUYER harmless against and from any and all damages, losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, judgment, suits, proceedings, costs, disbursements or expenses of any kind or nature whatsoever, including without implied limitation, attorneys' and experts' fees and disbursements, -10- which may at any time be imposed upon, incurred by or asserted or awarded against the BUYER and arising from or out of: i. any Hazardous Materials on, in, under or affecting all or any portion of the Property or any areas surrounding the same; ii. the violation by the SELLER or Speliotis of any Legal Requirements; or iii. the enforcement of this Agreement or the assertion by the SELLER or Speliotis of any defense to the obligations of the SELLER or Speliotis hereunder, whether any of such matters arise before or after the execution of this Agreement or taking of title to or possession of all or any portion of the Premises by the Buyer, and specifically including therein, without limitation, the following: iv. costs of removal of any and all Hazardous Materials from all or any portion of the Premises or any areas surrounding the same; v. additional costs required to take necessary precautions to protect against the release of Hazardous Materials on, in, under, or affecting, the Premises or into the air, any body of water or wetland, any other public domain, or any surrounding areas; vi. costs incurred to avoid the imposition of, or to discharge, any lien on the Premises arising from any failure to comply with Legal Requirements; vii. costs incurred to comply with all Legal Requirements relating to the Premises, including without implied limitation, fines, penalties or other charges imposed by any lawful authority; and viii. costs and expenses incurred in ascertaining the existence or extent of any asserted violation of any Legal Requirements relating to the Premises and any remedial action taken on account thereof including, without implied limitation, the costs, fees and expenses of engineers, geologists, chemists, other scientists, attorneys, surveyors and other professionals, and testing and analyses performed in connection therewith. -11- B. For the purposes of this Agreement: i. The term "Hazardous Materials" shall mean and include asbestos, polychlorinated biphenyls, other carcinogens, oil and other petroleum products, and any other hazardous or toxic materials, wastes and substances as defined under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601, et seq., as amended, the Resource ------- Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et -- seq., as amended, and the regulations promulgated thereunder, and ---- all applicable federal, state and local laws, rules and regulations relating to hazardous substances, now existing or hereafter enacted, including, without limitation, Massachusetts General Laws, Chapters 21C and 21E; and ii. The term "Legal Requirements" shall mean all past, present or future federal, state or local laws, rules, codes or regulations, or any judicial or administrative interpretation thereof, including, without limitation, all orders, decrees, judgments and rulings imposed through any public or private enforcement proceedings, relating to Hazardous Materials or the existence, use, discharge, release, containment, transportation or disposal thereof. C. This Paragraph 24 and indemnification herein shall survive the closing and shall be in effect without regard to time. 25. SURVIVAL OF AGREEMENT Notwithstanding anything in this Agreement to the contrary, Paragraphs 17, 20, and 24 of this Agreement shall survive delivery of the deed and the closing of the transactions contemplated hereby and shall be binding upon and inure to the benefit of the parties and their respective heirs, executors, administrators, successors (including successors in title) and assigns thereafter. 26. CLOSING DOCUMENTATION REQUIRED BY BUYER OF SELLER At Closing, SELLER shall execute and deliver to BUYER or cause to be delivered to BUYER the following documents: A. A quitclaim deed to BUYER of the Premises in recordable form, conveying good, clear record and marketable title to the Land and Buildings; -12- B. A bill of sale conveying any personal property required to be conveyed hereunder to BUYER, in form reasonably satisfactory to BUYER; C. An assignment of the Leases, together with an assignment of last month's rent, if any, and the security deposits (if any) not adjusted for in the determination of the purchase price at the Closing and all accrued interest required to be paid thereon pursuant to the Leases, posted in connection therewith; D. An affidavit pursuant to Section 1455 of the Internal Revenue Code, as amended, certifying to the non-foreign entity status of the SELLER and Speliotis; E. A copy of all permits, licenses and approvals currently in the possession of the SELLER necessary for the use and occupancy of the Premises; F. A certificate of SELLER and Speliotis to the effect that each of the representations and warranties made by SELLER and Speliotis in this Agreement or in any Exhibit hereto is true and correct as of the Closing Date, and all obligations to be performed by SELLER on or before the Closing Date have been so performed, or specifying the respects in which the representations and warranties have become untrue or incorrect between the date hereof and the Closing Date or which obligations to be performed on or before the Closing Date are not performed; G. An assignment in form reasonably satisfactory to BUYER and the originals of any existing warranties and guarantees of contractors, subcontractors, suppliers and materialmen received by or inuring to the benefit of SELLER in connection with the Premises; and H. Affidavit with respect to tenants-in-possession and mechanics liens and other indemnities as customarily required by BUYER's title insurance company. I. A Direction of Beneficiaries of all of the beneficiaries of the Thouria Investment Trust directing and authorizing the SELLER to engage in the transaction contemplated by this Agreement and to transfer the Premises to the Buyer. 27. CONSTRUCTION OF AGREEMENT This instrument, executed in multiple counterparts, is to be construed as a Massachusetts contract, is to take effect as a sealed instrument, sets forth the entire contract between the parties, is binding upon and enures to the benefit of the parties hereto and their respective heirs, devisees, executors, administrators, successors and assigns, and may be canceled, modified or amended only by a written instrument -13- executed by both the SELLER and the BUYER. The captions and marginal notes are used only as a matter of convenience and are not to be considered a part of this agreement or to be used in determining the intent of the parties to it. This Agreement is being executed by Speliotis with respect to the provisions of Paragraphs 20 and 24 hereof, and the obligations and liabilities of the SELLER and Speliotis with respect thereto shall be joint and several. SELLER: THOURIA INVESTMENT TRUST /s/ Chris I. Pappas By:/s/ Dennis E. Speliotis - ---------------------------- ---------------------------------- Witness Dennis E. Speliotis,Trustee /s/ Chris I. Pappas /s/ Dennis E. Speliotis - ---------------------------- ------------------------------------- Witness Dennis E. Speliotis, individually BUYER: ADE CORPORATION /s/ Karen E. Murphy By: /s/ Mark D. Shooman ____________________________ __________________________________ Witness Its: Vice President Treasurer -14- EXHIBIT A - --------- DESCRIPTION OF PREMISES ----------------------- A certain parcel of land with the buildings now or hereafter placed thereon being shown as shown as Lot M1 Ray Avenue, Burlington, Middlesex County, Massachusetts, on a plan entitled "Plan of Land in Burlington, Mass.," dated September 5, 1974, K. J. Miller, Inc., Engineers, recorded as Plan No. 533 of 1975 with the Middlesex South Registry of Deeds at the End of Book 12811 and more particularly bounded and described as follows: NORTHWESTERLY by Ray Avenue as shown on said plan, 241.15 feet; NORTHEASTERLY by Lot N1 as shown on said plan, 255.65 feet; SOUTHEASTERLY by land of the City of Woburn and now or formerly of Cummings as shown on said plan by two lines measuring 162.73 feet and 80.45 feet respectively; SOUTHWESTERLY by other land now or formerly of Graham Associates, Inc., 224.84 feet. Containing 57,600 square feet more or less according to said plan or however otherwise said premises may be bounded, measured or described. -15- EXHIBIT B --------- LEASES WITH TENANTS OF THE PREMISES ----------------------------------- 1. Triple Net Lease dated as of August 31, 1996 by and between Dennis E. Speliotis, Trustee of Thouria Investment Trust u/d/t dated August 18, 1992, and Digital Measurement Systems, Inc. -16- EXHIBIT C --------- SERVICE CONTRACTS AFFECTING THE PREMISES ---------------------------------------- NONE -17- EXHIBIT D --------- UNPAID BILLS AND CLAIMS AGAINST ------------------------------- SELLER FOR LABOR PERFORMED AND MATERIALS ---------------------------------------- FURNISHED TO OR FOR THE BENEFIT OF PREMISES ------------------------------------------- NONE -18- SCHEDULE A PERMITTED ENCUMBRANCES 1. Easement from Graham Associates, Inc. to Mystic Valley Gas Company, dated February 28, 1969 recorded with Middlesex South Registry of Deeds in Book 11655, Page 285. 2. Easement from Graham Associates, Inc. to Lizzie Ray et al dated October 3, 1969 and recorded with said Deeds in Book 11755, Page 508. 3. Easements and Restrictions described in deed from Graham Associates, Inc. to Bickford's Family Fare, Inc. dated December 29, 1980 recorded with said Deeds in Book 14175, Page 542. 4. Order of Taking by the Town of Burlington dated October 25, 1982 of a utility easement recorded with said Deeds in Book 14778, page 102. 5. Easement from Graham Associates, Inc. to New England Telephone and Telegraph Company, dated April 24, 1985 recorded with said Deeds in Book 16128, Page 208. 6. Such state of facts (including 20 foot swale easement) as is disclosed on plan entitled "Plan of Land in Burlington, Mass.," dated September 5, 1974, by K.J. Miller Co., Inc., recorded with said Deeds as Plan No. 533 of 1975 at the End of Book 12811. -19- EX-10.21 6 REGISTRATION RIGHTS AGREEMENT DATED EXHIBIT 10.21 ADE CORPORATION REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is made as of February 28, 1997, by and between ADE Corporation, a Massachusetts corporation having its principal place of business at 80 Wilson Way, Westwood, Massachusetts 02090 ("ADE" or the "Company"), and Dennis E. Speliotis of 22 Ingleside Road, Lexington, Massachusetts 02173, individually and as Trustee of Thouria Investment Trust under a Declaration of Trust dated August 18, 1992 recorded in the Middlesex South District Registry of Deeds at Book 22305, Page 375 (the "Purchaser"). RECITALS -------- The Purchaser is a party to the Purchase and Sale Agreement dated as of February 28, 1997 (the "Purchase Agreement") by and among the Company, the Purchaser, Elias Speliotis, Evanthia Speliotis and Ismene Speliotis pursuant to which the Company wishes to purchase from the Purchaser and the Purchaser is the owner of and wishes to sell to the Company the real property known as and numbered 8 Ray Avenue, Burlington, Massachusetts. NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, all parties hereto agree as follows: 1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms ------------------- shall have the following respective meanings: "COMMISSION" means the Securities and Exchange Commission or any other ----------- Federal agency at the time administering the Securities Act. "COMMON STOCK" means the Common Stock, $.01 par value, of the Company. ------------ "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, ------------ or any similar Federal rule or statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "HOLDER" means the Purchaser or any person holding Registrable ------ Securities to whom the rights under this Agreement have been transferred in accordance with Section 2.6 hereof. "REGISTRABLE SECURITIES" means the Common Stock issued to the ---------------------- Purchaser pursuant to the Purchase Agreement; provided, however, that such ----------------- shares of Common Stock shall only be treated as Registrable Securities if and so long as they have not been registered or sold to or through a broker or dealer or underwriter in a public distribution or a public securities 1 transaction and the registration rights with respect to such shares have not terminated pursuant to Section 2.7. The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to the -------- ---------- ------------ filing of a registration statement with the Commission under the Securities Act and such registration statement's becoming effective under the Securities Act. "REGISTRATION EXPENSES" shall mean all expenses incurred in complying --------------------- with Sections 2.1 hereof, including without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses and the expenses of any special audits incident to or required by any such registration, except underwriting discounts, selling commissions and stock transfer taxes applicable to securities registered by the Holder and fees and disbursement of counsel, if any, for the Holder. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or -------------- any similar Federal rule or statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. 2. REGISTRATION. ------------- 2.1 PIGGY-BACK REGISTRATION. ----------------------- (a) Notice of Registration. If at any time or from time to time the ---------------------- Company shall decide to register any of its Common Stock, either for its own account or the account of a stockholder or stockholders, other than (i) a registration relating solely to employee benefit plans or (ii) a registration relating solely to a Rule 145 transaction, the Company will: (i) promptly give to the Holder written notice thereof, and (ii) subject to the limitations set forth below, include in such registration (and any related qualification under Blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests given to the Company by the Holder within five days after the Company gives such written notice. (b) Underwriting. If the registration of which the Company gives notice is ------------ for a registered public offering involving an underwriting, the Company shall so advise the Holder as a part of the written notice given pursuant to Section 2.1(a)(i). In such event, the right of the Holder to registration pursuant to Section 2.1 shall be conditioned upon the Holder's participation in such underwriting and the inclusion of Registrable Securities in the underwriting shall be limited to the extent provided herein. The Company shall, together with the Holder and any other holders of Common Stock proposing to distribute their securities through such underwriting, enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by 2 the Company. If the managing underwriter advises the Company in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all stockholders requesting to be included in the registration and underwriting and the number of shares of Registrable Securities and other shares of Common Stock that may be included in the registration and underwriting, if any, shall be allocated among the Holder and all other holders of Common Stock requesting to be included in the registration and underwriting in proportion, as nearly as practicable, to the respective amounts of Common Stock held by each of them at the time of the filing of the registration statement. No Registrable Securities or other shares of Common Stock excluded from the underwriting by reason of the underwriter's marketing limitation shall be included in such registration. If the Holder disapproves of the terms of the underwriting, he may elect to withdraw therefrom by written notice to the Company. (c) Right to Terminate Registration. The Company shall have the right to ------------------------------- terminate or withdraw any registration initiated by it under this Section 2.1 prior to the effectiveness of such registration whether or not the Holder has elected to include securities in such registration. 2.2 EXPENSES OF REGISTRATION. All Registration Expenses incurred in ------------------------ connection with all registrations pursuant to Section 2.1 shall be borne by the Company. 2.3 REGISTRATION PROCEDURE. In the case of each registration effected by ---------------------- the Company pursuant to this Agreement, the Company will keep the Holder advised as to the initiation of such registration and as to the completion thereof. The Company will: (a) Prepare and file with the Commission a registration statement and such amendments and supplements as may be necessary and use its best efforts to cause such registration statement to become and remain effective for at least 90 days or until the distribution described in the registration statement has been completed, whichever first occurs; (b) Furnish to the Holder such reasonable number of copies of the registration statement, preliminary prospectus and final prospectus as he may request. (c) Furnish to the Holder (i) an opinion of counsel for the Company, dated the effective date of the registration statement, and (ii) a "comfort" letter signed by the independent public accountants who have certified the Company's financial statements included in the registration statement, covering substantially the same matters with respect to the registration statement (and the prospectus included therein) and (in the case of the accountants' letter) with respect to events subsequent to the date of the financial statements, as are customarily covered (at the time of such registration) in opinions of the Company's counsel and in accountants' letters delivered to the underwriters in underwritten public offering of securities; (d) Cause all such Registrable Securities registered pursuant hereto to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed. 3 2.4 INDEMNIFICATION. ---------------- (a) The Company will indemnify the Holder, and each person controlling the Holder within the meaning of Section 15 of the Securities Act, with respect to which registration has been effected pursuant to this Agreement, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act, the Exchange Act, state securities law or any rule or regulation promulgated under such laws applicable to the Company in connection with any such registration, and the Company will reimburse the Holder and each person controlling the Holder, for any legal and any other expenses reasonably incurred, as such expenses are incurred, in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by the Holder or such controlling person, and stated to be specifically for use therein. (b) The Holder will, if Registrable Securities held by the Holder are included in the securities as to which such registration is being effected, indemnify the Company, each of its directors and officers, each person who controls the Company within the meaning of Section 15 of the Securities Act, and each other holder of the Company's securities covered by such a registration statement, each of its officers, directors and partners and each person controlling such holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such holders, such directors, officers, persons, underwriters or control persons for any legal or any other expenses reasonably incurred, as such expenses are incurred, in connection with investigating or defending any such claim, loss, damage, liability or action, but only to the extent that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with information furnished to the Company by the Holder in an instrument duly executed by the Holder expressly for use in such registration. Notwithstanding the foregoing, the liability of the Holder under this Section 2.4(b) shall be limited in an amount equal to the net proceeds of the shares sold by the Holder. 4 (c) Each party entitled to indemnification or contribution under this Section 2.4 (the "Indemnified Party") shall give notice to the party required to provide indemnification or contribution (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity or contribution may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense, provided further that the failure of any Indemnified Party to give notice as provided herein shall not provide relieve the Indemnifying Party of its obligations under this Agreement unless the failure to give such notice is materially prejudicial to an Indemnifying Party's ability to defend such action and provided further that the Indemnifying Party shall not assume the defense for matters as to which there is a conflict of interest or there are separate and different defenses. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party (whose consent shall not be unreasonably withheld), consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. 2.5 INFORMATION BY HOLDER. The Holder shall furnish to the Company such --------------------- information regarding the Holder, the Registrable Securities and the distribution proposed by the Holder as the Company may reasonably request in writing and as shall be required in connection with any registration referred to in this Agreement. 2.6 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to ------------------------------- register securities granted to the Holder under Sections 2.1 may not be assigned to a transferee or assignee except with the prior written consent of the Company and no such transfer or assignment will be effective unless the transferee or assignee agrees in writing to be bound by the provisions of this Agreement. 2.7 TERMINATION OF REGISTRATION RIGHTS. The rights granted pursuant to ---------------------------------- Sections 2.1 of this Agreement shall terminate automatically effective on the first date when the Registrable Securities are eligible for resale by the Holder pursuant to Rule 144 under the Securities Act. 3. AMENDMENT. Any provision of this Agreement may be amended or the --------- observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Holder. Any amendment or waiver effected in accordance with this Section 3 shall be binding upon each party to this Agreement and each transferee of securities subject to this Agreement. 4. GOVERNING LAW. This Agreement shall be governed in all respects by ------------- the internal laws of the Commonwealth of Massachusetts without regard to conflict of laws provisions. 5. ENTIRE AGREEMENT. This Agreement constitutes the full and entire ---------------- understanding and agreement among the parties regarding the matters set forth herein. Except as otherwise 5 expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon the successors, assigns, heirs, executors and administrators of the parties hereto. 6. NOTICES, ETC. All notices and other communications required or ------------ permitted hereunder shall be in writing and shall be mailed by certified mail, postage prepaid, or delivered by facsimile transmission, by hand or by messenger, addressed: (a) if to a Holder, to Thouria Investment Trust, 22 Ingleside Road, Lexington, Massachusetts 02173, ATTN: Dennis E. Speliotis, or at such other address as such Holder shall have furnished to the Company, with a copy to Chris Pappas, Esq. Old Central Wharf 77 Central Street Boston, Massachusetts 02109 Fax (617) 423-6708 (b) if to the Company, to: ADE Corporation 80 Wilson Way Westwood, MA 02090 Attention: Chief Financial Officer Fax: (508) 467-0702 or at such other address as the Company shall have furnished to the Holders, with a copy to: Warner & Stackpole LLP 75 State Street Boston, MA 02109 Attn: Willard G. McGraw, Jr., Esq. Fax: (617) 951-9151 Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if in writing and delivered personally or by facsimile transmission, or, if sent by mail, postage pre-paid, at the earlier of its receipt or three days after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid. Any party may change by such notice the address to which notices to it are to be addressed. 7. COUNTERPARTS. This Agreement may be executed in any number of ------------ counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. ADE CORPORATION By: /s/ Mark D. Shooman ___________________________ Name: Mark D. Shooman Title: Vice President and Treasurer THOURIA INVESTMENT TRUST By: /s/ Dennis E. Speliotis ___________________________ Dennis E. Speliotis, Trustee 7 EX-11.1 7 STATEMENT OF COMPUTATION PER SHARE EXHIBIT 11.1 ADE CORPORATION STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE (1) (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED APRIL 30, 1995 1996 1997 ---- ---- ---- Net income $3,131 $7,805 $13,165 ====== ====== ======= Weighted average common and common equivalent shares outstanding during the period 6,487 7,924 8,880 Shares issuable pursuant to Staff Accounting Bulletin No. 83 using the treasury stock method 164 41 - ------ ------ ------- Shares used in computation 6,651 7,965 8,880 ====== ====== ======= Net income per share $ 0.47 $ 0.98 $ 1.48 ====== ====== =======
(1) Fully diluted net income per share has not been separately presented, as the amounts would not be materially different from primary net income per share. EX-23.1 8 CONSENT OF PRICE WATERHOUSE EXHIBIT 23.1 Consent of Independent Accountants ---------------------------------- We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-2280 and No. 333-4652) of ADE Corporation of our report dated July 1, 1997 appearing on page F-2 of this Form 10-K. /s/ Price Waterhouse LLP PRICE WATERHOUSE LLP Boston, Massachusetts July 29, 1997 -----END PRIVACY-ENHANCED MESSAGE-----