<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended August 31, 1996 Commission File Number 0-12353
PLASMA-THERM, INC.
------------------
(Exact name of registrant as specified in its charter)
FLORIDA 04-2554632
- ------------------------------ -------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
10050 16th STREET NORTH, ST. PETERSBURG, FLORIDA 33716
------------------------------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (813) 577-4999
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 10,396,061
- -------------------------------------- ------------------------------------
Class Outstanding as of September 18, 1996
-1-
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheets - August 31, 1996 and
November 30, 1995................................................... 3
Statements of Income - Three Months and Nine Months Ended
August 31, 1996 and August 31, 1995................................. 5
Statements of Cash Flows - Nine Months Ended
August 31, 1996 and August 31, 1995................................. 6
Notes to Consolidated Financial Statements.......................... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................. 15
</TABLE>
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<PAGE> 3
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, NOVEMBER 30,
ASSETS 1996 1995
------------ ------------
(unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 5,331,214 $ 5,058,718
Accounts receivable 6,629,294 7,882,427
Prepaid income taxes 42,564 18,048
Inventories 11,756,206 9,832,853
Prepaid expenses and other 809,786 269,875
Deferred tax asset 351,000 603,000
----------- -----------
Total current assets 24,920,064 23,664,921
----------- -----------
Property and equipment, at cost
Building 4,175,678 0
Machinery and equipment 2,665,836 2,301,273
Leasehold improvements 139,527 419,263
----------- -----------
6,981,041 2,720,536
Less accumulated depreciation and
amortization 1,804,837 1,954,377
----------- -----------
5,176,204 766,159
Land 786,017 786,017
Construction in process 0 1,417,353
----------- -----------
5,962,221 2,969,529
----------- -----------
Other assets
Deferred tax asset 68,745 182,850
Other 99,920 91,720
----------- -----------
168,665 274,570
----------- -----------
$31,050,950 $26,909,020
=========== ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
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<PAGE> 4
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, NOVEMBER 30,
LIABILITIES 1996 1995
----------- ------------
(unaudited)
<S> <C> <C>
Current liabilities
Short-term borrowings $2,000,000 $2,000,000
Current portion of notes payable 525,363 343,647
Current maturities of obligations under
capital leases 78,895 73,010
Accounts payable 1,894,712 2,920,079
Accrued payroll and related 411,576 402,649
Accrued expenses 208,527 356,895
Accrued warranty expense 693,515 693,515
Income taxes payable - -
----------- -----------
Total current liabilities 5,812,588 6,789,795
----------- -----------
Long-term obligations
Notes payable 3,502,833 908,485
Obligations under capital leases 178,516 238,475
----------- -----------
3,681,349 1,146,960
----------- -----------
SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock
$.01 par value
Authorized - 25,000,000 shares
Issued and outstanding - 10,354,061
shares - 1996 and 10,279,561 shares -
1995 103,542 102,797
Additional paid-in capital 14,841,540 14,645,775
Retained earnings 6,611,931 4,223,693
----------- -----------
21,557,013 18,972,265
----------- -----------
$31,050,950 $26,909,020
=========== ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
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<PAGE> 5
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
AUGUST 31, AUGUST 31,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $9,622,781 $9,068,855 $27,404,581 $21,215,376
---------- ---------- ----------- -----------
Costs and expenses
Cost of products sold 5,732,189 6,206,380 16,857,224 14,907,565
Research and development 744,113 710,462 2,079,689 1,898,999
Selling and administrative 1,769,385 1,509,488 4,559,038 3,564,795
Interest expense 113,312 60,610 221,462 135,155
Interest income (66,490) (83,097) (201,694) (261,616)
Other (income) expense, net (9,909) (586) 14,450 3,172
---------- ---------- ----------- -----------
8,282,600 8,403,257 23,530,169 20,248,070
---------- ---------- ----------- -----------
Income before income taxes 1,340,181 665,598 3,874,412 967,306
Income taxes 490,368 277,775 1,486,174 395,013
---------- ---------- ----------- -----------
Net income $ 849,813 $ 387,823 $ 2,388,238 $ 572,293
========== ========== =========== ===========
Income per share
(primary and fully diluted) $ 0.08 $ 0.04 $ 0.22 $ 0.05
========== ========== =========== ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
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<PAGE> 6
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED AUGUST 31,
-----------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net income $2,388,238 $ 572,293
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 554,156 372,018
Loss on disposal of assets 16,066 5,100
Deferred taxes 366,105 (246,903)
Compensation - stock options 31,032 93,203
Changes in assets and liabilities
(Increase) decrease in accounts receivable 1,253,133 (3,348,045)
(Increase) decrease in income tax deposits (24,516) 298,807
Increase in inventories (1,923,353) (1,721,195)
(Increase) decrease in prepaid expenses and other (584,911) 11,335
Decrease in billing in excess of costs and
estimated earnings on uncompleted contracts - (27,330)
Increase (decrease) in accounts payable (1,025,367) 616,117
Increase in accrued payroll and related 8,927 11,471
Increase (decrease) in accrued expenses (148,368) 553,471
Increase (decrease) in income taxes payable
(exclusive of tax benefits derived from
exercise of options/warrants) 1,808 (151,962)
Decrease in customer deposits - (698,218)
---------- ----------
Net cash provided by (used in)
operating activities 912,950 (3,659,838)
---------- ----------
Cash flows from investing activities
Capital expenditures (3,573,030) (1,338,487)
Payments received on note receivable 45,000 45,000
Proceeds from sale of assets 10,116 0
Other (8,200) (25,930)
---------- ----------
Net cash used in investing activities (3,526,114) (1,319,417)
---------- ----------
</TABLE>
See accompanying notes to these consolidated financial statements.
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<PAGE> 7
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED AUGUST 31,
-----------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from financing activities
Proceeds from issuance of notes payable 3,118,900 -
Principal payments on notes payable (342,836) (291,667)
Principal payments under capital lease obligations (54,074) (89,372)
Net issuances under line of credit agreements - 1,000,000
Issuance of common stock and warrants 163,670 384,078
Issuance of common stock in private placement - 5,759,097
Net cash provided by
financing activities 2,885,660 6,762,136
---------- ----------
Net increase in cash and cash
equivalents 272,496 1,782,881
---------- ----------
Cash and cash equivalents, beginning of period 5,058,718 2,625,850
---------- ----------
Cash and cash equivalents, end of period $5,331,214 $4,408,731
========== ==========
</TABLE>
See accompanying notes to these consolidated financial statements.
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<PAGE> 8
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1996 AND NOVEMBER 30, 1995
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to
present fairly the financial position as of August 31, 1996 and
November 30, 1995 and the results of operations and cash flows
for the nine months ended August 31, 1996 and 1995.
The results of operations for the nine months ended August 31,
1996 and 1995 are not necessarily indicative of results for the
full year.
The November 30, 1995 balance sheet amounts and disclosures
included herein have been derived from the November 30, 1995
audited financial statements of the Registrant. While the
Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes included in the
Company's latest annual report on Form 10-K.
Reclassifications
To be consistent with the Company's peer groups, in 1995 field
service costs have been reclassified entirely from selling and
administrative to cost of products sold.
NOTE 2 PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Plasma-Therm, Inc. and its wholly-owned subsidiary, Magnetran
Inc.. All significant intercompany transactions and balances
have been eliminated.
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<PAGE> 9
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1996 AND NOVEMBER 30, 1995
(UNAUDITED)
NOTE 3 INCOME PER SHARE
Earnings per share is computed based on the weighted average
number of shares of common stock adjusted for the conversion of
dilutive common stock equivalents. During each of the periods
presented, the primary and fully diluted earnings for such period
was the same. The following is the weighted average outstanding
share information.
<TABLE>
<CAPTION>
Three Months Ended August 31,
--------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
Primary 10,828,856 10,728,344
Fully Diluted 10,850,732 10,734,481
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended August 31,
--------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
Primary 10,724,165 10,692,453
Fully Diluted 10,832,280 10,751,694
</TABLE>
NOTE 4 ACCOUNTING FOR STOCK-BASED COMPENSATION
Management has not yet completely analyzed the provisions of SFAS No.
123 "Accounting for Stock-Based Compensation". Accordingly, management
has not yet determined whether or not SFAS No. 123's accounting
recognition provisions will be adopted or if APB No. 25's method will
be continued. In addition, management has not yet determined the
potential effect that the SFAS No. 123 accounting provision, if
adopted, will have on the Company's financial statements.
-9-
<PAGE> 10
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1996 AND NOVEMBER 30, 1995
(UNAUDITED)
NOTE 5 NOTES PAYABLE
In March 1996 the Company executed two promissory notes for an
aggregate of $496,032 with its bank for the purchase of computer
software and hardware. Monthly installments of $15,423 including
interest at 7.92% is payable through February, 1999. These notes are
secured by various machinery and equipment.
In August, 1995 the Company executed a promissory note for $3,375,000
with its bank for the construction of its new manufacturing facility.
On June 14, 1996, the completion of the construction phase, the note
converted to a five year term loan, amortized over a fifteen year
period. The loan is payable in monthly installments of $33,235,
including interest at 8.5% beginning July 15, 1996. The loan is
collateralized by the land, the building and its contents.
NOTE 6 LICENSE AGREEMENT
Effective June 19, 1996, the Company entered into a license agreement
with a German company for the non-exclusive rights to their patent on
a new plasma process technology. In exchange for the use of the
patent, the Company paid an initial license fee of 450,000 deutsche
marks which is approximately $300,000 at the then current exchange
rates. In addition, during the first five years of the agreement or
the shipment of the first fifty plasma processing chambers including
the licensed technology, whichever comes first, the Company will pay
a royalty fee of 35,000 deutsche marks per plasma processing chamber.
Thereafter, the royalty fee will be reduced to 25,000 deutsche marks
per plasma processing chamber.
NOTE 7 COMMITMENTS
On August 27, 1996 the Company executed a lease with its bank for
furniture for its new manufacturing facility. Total minimum lease
payments are $466,055 to be paid in 60 monthly installments (initial
term) of $7,768 beginning August 27, 1996. At the end of the initial
term the Company has the option to extend the lease for an additional
twelve months at a monthly rental of $4,694 or purchase the furniture
for a price equal to the greater of the then fair market value of the
furniture or $50,216. If the Company chooses to extend the lease
term, at the end of the extended term the Company will either return
the furniture to its bank or purchase the furniture at its then fair
market value.
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<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL POSITION, LIQUIDITY AND CAPITAL REQUIREMENTS
The Company's cash position at August 31, 1996 was $5,331,214
compared to $5,058,718 at November 30, 1995. Working capital at
August 31, 1996 was $19,107,476, which is an increase of
$2,232,350 from November 30, 1995. The increase in working
capital is primarily the result of an increase in inventories of
$1,923,353 due to an increase in backlog and an anticipated
increase in sales over 1995 for the remainder of 1996.
Uses of cash included the principal repayment of approximately
$397,000 of notes payable and capital leases. In addition, the
Company has incurred approximately $3,573,000 in capital
expenditures, of which approximately $716,000 relates primarily
to cash outlays for manufacturing software and various computer
hardware. Of the $716,000, approximately $496,000 was financed
through notes payable to the Company's bank (See Note 5 to the
Consolidated Financial Statements). Approximately $2,758,000
consists of the costs incurred for the construction of the new
building. These costs were reimbursed to the Company through the
construction loan as incurred. On June 14, 1996, the completion
of the construction phase, the note converted to a five year term
loan, amortized over fifteen years. The loan is payable in
monthly installments of $33,235, including interest at 8.5%
beginning July 15, 1996. The loan is collateralized by the land,
the building and its contents. The remaining $99,000 in capital
expenditures relates to the purchase of various machinery and
equipment used in the production of the Company's products.
The Company has extensive ongoing capital requirements for
research and development, the repayment of debt, capital
equipment and inventory. The Company believes that its current
cash reserves, together with the proceeds of its private
placement, working capital expected to be generated by operations
and additional funds available under its line of credit, should
be sufficient to meet its capital requirements for the immediate
future. Should order input exceed projected 1996 levels,
additional working capital may be required.
RESULTS OF OPERATIONS
Net sales of $9.6 million for the third quarter of 1996 increased
by 6% from net sales of $9.1 million for the third quarter of
1995. For the first nine months of 1996, the Company reported
net sales of $27.4 million, 29% higher than net sales of $21.2
million for the first nine months of 1995. The increase in net
sales for both the third quarter and nine month period was
attributable to higher product demand and sales of the Company's
newest product, the Versalock(TM) 700 Series. Sales of the
Versalock(TM) 700 Series began in the fourth quarter 1995.
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<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Cost of products sold of $5.7 million for the third quarter of
1996 was 60% of net sales, compared to 68% for the same period
last year. Cost of products sold of $16.9 million for the first
nine months of 1996 was 62% of net sales compared to 70% for the
same period last year. The decrease for both the third quarter
and nine month period is primarily due to a combination of higher
margins related to the sales of the Versalock(TM) 700 Series in
1996 and lower margins on Clusterlock(R) 7000 orders which
shipped during the second and third quarters of 1995.
Research and development expense for the third quarter of 1996
and 1995 was $744,113 and $710,462, which is 7.7% and 7.8% of net
sales respectively. Research and development expense for the
first nine months of 1996 and 1995 was $2,079,689 and $1,898,999,
which is 7.6% and 9% of net sales respectively. Although the
percentage of research and development expense to net sales has
decreased, total dollars spent has increased. A portion of
research and development expenses are fixed costs; therefore the
percentage as it relates to net sales is lower in fiscal 1996 as
compared to fiscal 1995 since net sales increased significantly
by 29% from fiscal 1995 to fiscal 1996. As sales increase,
certain overhead expenditures increase, however, at a lower rate.
As new product lines continue to be introduced, total dollars
expended on research and development are expected to increase to
typically 9% to 10% of net sales.
Selling and administrative expense was $1,769,385 in the third quarter
of 1996, up from $1,509,488 in the third quarter of 1995. The
increase as a percentage of net sales to 18.4% from 16.6% for the
third quarter of 1996 and 1995, respectively, is primarily the result
of costs associated with the move to the Company's new manufacturing
facility in June. Selling and administrative expense for the first
nine months of 1996 was $4,559,038 up from $3,564,795 for the first
nine months of 1995. Selling and administrative expense has remained
constant at 17% of net sales for the first nine months of 1996 and
1995, although actual expense has increased.
The Company reported income before income taxes of $1,340,181 in
the third quarter of 1996, up from $665,598 in the third quarter
of 1995. Income before income taxes of $3,874,412 for the first
nine months of 1996 as compared to $967,306 for the same period
in 1995, is significantly higher due to increased sales and
higher margins in the Versalock(TM) 700 Series in 1996 and lower
margins related to the Clusterlock(R) 7000 orders in 1995, as
discussed above. In addition, as explained above, overhead
expenses increase as net sales increase, however, at a lower
rate, thus resulting in higher net income.
-12-
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
FORWARD LOOKING INFORMATION
From time to time, the Company may publish forward-looking
statements relating to such matters as anticipated financial
performance, business prospects, technological developments, new
products, research and development activities and similar
matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order
to comply with the terms of the safe harbor, the Company notes
that a variety of factors could cause the Company's actual
results and experience to differ materially from the anticipated
results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may
affect the operations, performance, development and results of
the Company's business include the following:
The Company sells relatively expensive capital equipment, and in
any given quarter or financial period, any one customer or any
individual shipment may represent a significant portion of
revenue in that period. Therefore a delay or cancellation of
that shipment could cause the Company to experience a revenue or
earnings shortfall for a given financial period.
The Company relies on distributors and representatives, which
complement its direct sales and service staff, to sell and
service its products in various geographic locations. Should
these sales and service channels be rendered ineffective, it
could materially impact the Company's business. Some of the
Company's competitors have more extensive direct sales and
service locations in the Company's distributor's and
representatives' channels, which could provide these competitors
with a competitive advantage in certain geographic areas.
Plasma-Therm depends heavily on the success and growth of the
high technology marketplace. In particular, a slowdown in
personal computer consumption could cause a slowdown of disk
drive production, resulting in lower output of thin film heads,
which could materially effect the Company's business.
The Company also relies on the health of the general
semiconductor equipment marketplace. A slowdown in the
semiconductor capital equipment purchases could also affect the
Company's business from time to time.
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<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
The Company also participates in the flat panel display
marketplace. The Company's Clusterlock(R) 7000, a flat panel
display manufacturing system, has been successful in its
customers' R&D and pilot production manufacturing runs of flat
panel displays in the United States. The ability to compete on a
global basis and to compete for the high volume manufacturing of
flat panel displays is essential for the long term viability of
the Clusterlock(R) product line. Many of the Company's
competitors are much larger and are better capitalized and
maintain a larger customer service and support infrastructure.
Currently, the Company has not determined whether it will be
successful in this marketplace.
The rate of growth in Plasma-Therm's Customer Service, Sales,
General & Administrative expenses, and the impact of unusual
items resulting from Plasma-Therm's ongoing evaluation of its
business strategies, could affect results.
The Company faces a risk of technological obsolescence for its
products that are based on rapidly changing technology. Its
ability to remain competitive will depend to a significant extent
on the success of its research and development activities in
enhancing existing products and developing new ones. The success
of its research and development effort will depend in part upon
its ability to attract and retain technically qualified personnel
who are much in demand.
-14-
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits. PAGE NO.
--------
<S> <C>
10.44 Equipment Lease Agreement dated August 27, 1996 between
NationsBanc Leasing Corporation and the Registrant. 17
27. Financial Data Schedule (For SEC use only) 27
</TABLE>
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the third quarter of
fiscal 1996.
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<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLASMA-THERM, INC.
Date: September 27, 1996 By: /s/ STACY WAGNER
---------------------------
Stacy Wagner
V.P. of Finance,
Date: September 27, 1996 By: /s/ RONALD H. DEFERRARI
----------------------------
Ronald H. Deferrari
Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.44
NATIONSBANK MASTER EQUIPMENT Lease
NationsBanc Leasing Corporation LEASE AGREEMENT Number 07186-00300
================================================================================
THIS MASTER EQUIPMENT LEASE AGREEMENT (this "Lease") dated as of August 27,
1996, between NATIONSBANC LEASING CORPORATION ('Lessor"), a corporation
organized under the laws of North Carolina, having its chief executive office
at 2300 Northlake Centre Drive, Suite 300, Tucker, GA 30084, and
Plasma-Therm, Inc. ("Lessee"), a corporation organized under the laws of
Florida. having its chief executive office at 10050 Sixteenth Street, Saint
Petersburg, Florida 33716.
1. LEASE AGREEMENT. Subject to the terms and conditions hereinafter set
forth, Lessor shall lease to Lessee, and Lessee shall hire from Lessor, the
units of personal property (collectively with all attached parts,
replacements, additions, accessions and accessories attached thereto the
"Equipment") described in one or more equipment schedules (each a "Schedule")
which incorporate by reference this Master Equipment Lease Agreement. Each
Schedule shall constitute a separate and independent lease and contractual
obligation of Lessee. Until a Schedule is duly signed and delivered by
Lessor, a Schedule signed and delivered by Lessee constitutes an irrevocable
offer by Lessee to lease the Equipment described in such Schedule from
Lessor.
2. TERM OF LEASE; RENTALS AND DEPOSIT. The lease term with respect to any
Equipment covered by a Schedule shall consist of an "Interim Term" and a
"Base Term" as provided in the Schedule covering such Equipment. Lessee shall
pay rent for the Interim Term ("Interim Rent") as provided and in amounts
determined by Lessor as set forth in the applicable Schedule, and shall pay
rent for the Base Term ("Base Rent") in such amounts and at such times as
shall be specified in the applicable Schedule. At the time Lessee signs and
delivers a Schedule, Lessee shall deposit with Lessor such additional sum
("Security Deposit"), if any, specified in the Schedule as security for the
payment and performance of any obligation of Lessee hereunder.
3. LOCATION AND USE OF EQUIPMENT. Each item of Equipment shall at all times
be and remain in the possession and control of Lessee at the address stated
in the Schedule covering such item. Lessee will use, operate, protect, and
maintain the Equipment in compliance with all applicable insurance policies,
laws, ordinances, rules, regulations, and manufacturer's instructions. The
Equipment shall be used solely for commercial or business purposes, and not
for any consumer, personal, home, or family purpose. Lessee shall not,
through modifications, alterations or any other method, impair the originally
intended function of any Equipment without the prior written consent of
Lessor. Any replacement or substitution of parts, improvements or additions
to the Equipment made by Lessee shall become and remain the property of
Lessor. If requested by Lessor, Lessee shall cause each item of Equipment to
be and remain plainly and conspicuously marked by insignia, stenciling,
plaques, tags, decals or other forms of notice to disclose Lessor's ownership
of the Equipment. Lessee shall keep the Equipment free and clear of any
liens, encumbrances, claims and charges (except for those created expressly
by Lessor) and shall not in any way encumber its rights hereunder or under
any Schedule.
4. TAXES. Lessee shall reimburse Lessor on demand for all taxes,
assessments and other governmental charges paid by Lessor in connection with
the Equipment or its use, ownership or operation while in Lessee's possession
or the payment or receipt of rent or other charges under any Schedule,
including but not limited to foreign, federal, state, county and municipal
fees and taxes, ad valorem, sales, use, excise, stamp and documentary taxes
(other than federal and state taxes based on Lessor's net income), and all
related penalties. fines and interest charges. Upon Lessor's request, Lessee
will immediately furnish to Lessor such information as Lessor shall require
in connection with the preparation and filing of all returns relating to such
taxes, assessments, or charges.
5. NET LEASE, LOSS AND DAMAGE.
(a) Each Schedule is a net lease. All costs, expenses and other liabilities
associated with the Equipment shall be borne by Lessee. Lessee's obligations
under any and all Schedules are absolute and unconditional, and are not to be
subject to any abatement, deferment, reduction, setoff, defense, counter
claim or recoupment for any reason whatsoever. Except as otherwise expressly
provided herein, no Schedule shall terminate nor shall the obligations of
Lessee be affected, by reason of any defect or damage to, or any destruction,
loss, theft, forfeiture, governmental requisition or obsolescence of the
Equipment, regardless of cause.
(b) Lessee assumes all risk of damage to or loss, theft or destruction of the
Equipment from any cause whatsoever from the date the Equipment is shipped by
the vendor or manufacturer. In the event of loss or destruction of the
Equipment from any cause whatsoever from the date the Equipment is shipped by
the vendor or manufacturer but prior to its acceptance by Lessee, Lessee
shall promptly pay to Lessor all sums heretofore paid by Lessor to such
vendor or manufacturer and Lessor shall assign to Lessee all of its rights or
causes of action, if any, against such vendor or manufacturer. In the event
of damage of any kind whatsoever to any item of the Equipment on or after its
acceptance by Lessee, Lessee shall, at Lessor's option, either place the same
in good repair, condition or working order or if in the reasonable judgment
of Lessor the Equipment is determined by Lessor to be lost, stolen, destroyed
or damaged beyond repair, Lessee shall pay Lessor the Stipulated Loss Value
therefor. Upon such payment, the Lease of such Equipment shall terminate and
Lessor thereupon shall convey its interest to such item of the Equipment "AS
IS AND WHERE IS" without warranty, express or implied, with respect to any
matter whatsoever, except that the equipment is free and clear of any liens
and encumbrances created by or arising through Lessor. The Stipulated Loss
Value of any Equipment shall be determined by Lessor in accordance with the
provisions of the Schedule covering such Equipment. Proceeds of Insurance
may be available for the repair or payment of the Stipulated Loss Value, in
accordance with Section 6 hereof.
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<PAGE> 2
6. INSURANCE. Lessee shall, at its own expense, procure and maintain the
following insurance Overages on the Equipment until the Equipment is returned
to Lessor or Lessee's obligations with respect thereto under any applicable
Schedule are otherwise terminated: (i) insurance against theft, fire, and
such other risks as Lessor shall specify or (absent any written specification
by Lessor) as are customarily insured against in Lessee's trade or industry,
under policies naming Lessor as loss payee and (ii) comprehensive public
liability and property damage insurance, under policies naming Lessor as
additional insured. Each such insurance policy shall: (a) include provisions
for the protection of Lessor notwithstanding any action or inaction, neglect,
breach, violation, or default of or by Lessee of any warranty, condition or
declaration, (b) provide for payment of insurance proceeds to Lessor to the
extent of its liability or interest, (c) provide that such policy may not be
modified, terminated or canceled unless Lessor is given at least thirty (30)
days advance written notice thereof, (d) provide that the coverage is
"primary coverage" for the protection of Lessee and Lessor notwithstanding
any other coverage carried by Lessee or Lessor protecting against similar
risks or liabilities, and (e) be issued in such amounts (which in the case of
casualty insurance will never be less than the Stipulated Loss Value of the
Equipment covered thereby), with such deductibles, by such insurance company,
and otherwise in such form as shall all be reasonably satisfactory to Lessor.
Lessee shall furnish Lessor with certificates or other satisfactory evidence
of such insurance, and shall furnish Lessor with a renewal certificate for
each policy at least ten (10) days before the policy renewal date. Lessor
shall have no duty to examine any certificate or other evidence of insurance,
or to advise Lessee in the event that its insurance is not in compliance with
this Section 6. The proceeds of any public liability or property damage
insurance shall be payable first to Lessor to the extent of its liability, if
any, and the balance to Lessee. The proceeds of fire, theft, or other
casualty insurance shall be payable solely to Lessor and shall be used for
the repair or replacement of the affected Equipment, unless an event of
default shall have occurred and be continuing, in which event such proceeds
may, at Lessor's sole option, be applied toward the payment of Lessee's
obligations under the applicable Schedule. Lessee herebv appoints Lessor as
Lessee's agent and attorney-in-fact with full power to do all things
(including but not limited to making, adjusting, and settling claims, and
receiving payments and endorsing documents, checks, or drafts) necessary or
advisable to secure payment due under any insurance policy contemplated
hereby.
7. GENERAL INDEMNITIES. LESSEE SHALL INDEMNIFY LESSOR AGAINST ALL CLAIMS,
LIABILITIES, LOSSES AND EXPENSES WHATSOEVER, INCLUDING REASONABLE ATTORNEYS'
FEES AND COSTS (EXCEPT THOSE DIRECTLY AND PRIMARILY CAUSED BY LESSOR'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT), IN ANY WAY RELATING TO OR ARISING OUT OF
THE EQUIPMENT OR ANY PART THEREOF, OR THE ORDERING, ACQUISITION, REJECTION,
INSTALLATION, POSSESSION, MAINTENANCE, USE, OWNERSHIP, CONDITION,
DESTRUCTION, RETURN, OR DISPOSITION OF THE EQUIPMENT OR ANY PART THEREOF,
INCLUDING NEGLIGENCE AND STRICT LIABILITY IN TORT, AND INCLUDING ANY
INFRINGEMENT CLAIM. LESSEE'S OBLIGATIONS UNDER THIS PROVISION SHALL SURVIVE
ANY PARTIAL OR TOTAL TERMINATION, EXPIRATION, OR CANCELLATION OF THIS LEASE.
8. TAX INDEMNITY.
(a) All references to "Lessor" in this Section 8 shall include each member of
the affiliated group of corporations, as defined in Section 1504(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), of which Lessor is a
member.
(b) Lessor and Lessee agree that Lessor shall be treated for federal, state
and local income tax purposes as the owner of the Equipment and shall be
entitled to take into account in computing its income tax liabilities, all
items of income, deduction, credit, gain or loss relating to ownership of the
Equipment as are provided under the Code and applicable state and local tax
laws to owners of similar equipment (hereinafter collectively, the "Tax
Benefits").
(c) If (i) Lessor shall lose, shall be delayed in claiming, shall not have a
right to claim, shall be required to recapture (other than in connection with
a sale of any Equipment following the end of the lease term, provided Lessee
is not then in default), shall not be allowed or shall not claim as a result
of a written opinion of independent tax counsel selected by Lessor to the
effect that Lessor's claiming of such Tax Benefits probably would not be
upheld by a court if the matter were litigated (that is, that the chances of
a finding against Lessor are at least as great as the chances in favor of
Lessor), all or any portion of any Tax Benefits, under any circumstances, at
any time, and for any reason; or (ii) Lessor is required under Section 467 of
the Code or otherwise to include in its gross income with respect to any
Schedule or item of Equipment any amount at any time other than rentals and
other amounts payable by Lessee hereunder at the times such amounts are
payable as provided herein, then Lessor and Lessee agree, upon Lessor's
demand and at Lessor's option, either: (x) all further rental payments with
respect to such Equipment, if any, shall be increased, or (y) Lessee shall
pay to Lessor a lump sum amount, which shall in either case maintain the net
economic after tax yield, cash-flow and rate of return Lessor originally
anticipated based on the assumptions (excluding changes in Lessor's federal,
state, or local income tax rates) that were originally utilized by Lessor in
originally evaluating the transaction and setting the rental therefor and the
other terms thereof. Lessee shall also pay to Lessor all interest, costs
(including attorneys' fees) and penalties associated with the loss of Tax
Benefits, including costs of collecting amounts payable under this Section 8.
(d) For purposes of paragraph (c) above, Lessor shall at all times be deemed
to have sufficient taxable income and tax liability to be able to utilize the
Tax Benefits on a current basis and the fact that Lessor may lose Tax
Benefits solely because it either (i) has insufficient taxable income or tax
liability or (ii) is subject to the alternative minimum tax shall not be
taken into account.
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<PAGE> 3
9. DELIVERY, ACCEPTANCE AND RETURN OF EQUIPMENT.
(a) Upon delivery to and acceptance by Lessee of any Equipment, Lessee shall
execute and deliver the Schedule relating to such Equipment, identifying same
and acknowledging receipt thereof, with all information required on the Schedule
fully completed. Lessee's execution of such Schedule shall constitute acceptance
of delivery of such Equipment and Lessee's acknowledgment that such Equipment is
in good operating order, repair, condition and appearance, is of the
manufacture, design and capacity selected by Lessee, and is suitable for the
purposes for which such Equipment is leased.
(b) Subject to the provisions of any applicable Schedule, at the expiration of
the lease term with respect to any Equipment, including any renewal thereof,
upon demand Lessee shall, at its own expense, return such Equipment to Lessor at
a place reasonably designated by Lessor, in the same operating order, repair,
condition and appearance as when received, reasonable wear and tear excepted. If
upon such expiration or termination Lessee does not immediately return an item
of Equipment to Lessor, such item shall continue to be held subject to all the
terms and conditions hereof, and Base Rent and other charges shall continue to
accrue and be payable hereunder with respect to such item until it is returned
to Lessor. Payment or acceptance of any such rent or other charge shall not be
deemed a waiver of any default and shall not suspend or otherwise affect any
right or remedy hereunder including without limitation Lessee's obligation to
return immediately (and Lessor's right to take immediate possession of) any such
item.
10. MAINTENANCE. Lessee shall, at its own expense, maintain and keep the
Equipment in good working order, repair, appearance and condition and make
all necessary adjustments and repairs thereto and replacements thereof, all
of which shall become the property of Lessor.
11. RENEWAL AND PURCHASE. Except as set forth in the applicable Schedule,
Lessee may not renew or extend the lease term with respect to any Equipment,
nor shall Lessee have any option to purchase such Equipment.
12. ASSIGNMENT OF WARRANTIES AND LIMITATION OF RESPONSIBILITY. LESSOR
HEREBY TRANSFERS AND ASSIGNS TO LESSEE, TO THE EXTENT ALLOWABLE BY LAW, FOR
AND DURING THE LEASE TERM OF EACH SCHEDULE WITH RESPECT TO ANY EQUIPMENT
COVERED BY SUCH SCHEDULE, THE WARRANTIES, IF ANY, OF THE MANUFACTURER ISSUED
ON SUCH EQUIPMENT, AND HEREBY AUTHORIZES LESSEE TO OBTAIN AT ITS OWN EXPENSE
THE CUSTOMARY SERVICE FURNISHED BY THE MANUFACTURER IN CONNECTION THEREWITH.
LESSEE ACKNOWLEDGES THAT LESSOR IS NOT A MANUFACTURER, THE AGENT OF A
MANUFACTURER OR ENGAGED IN THE SALE OR DISTRIBUTION OF THE EQUIPMENT AND HAS
NOT MADE, AND DOES NOT HEREBY MAKE, ANY REPRESENTATION AS TO MERCHANTABILITY,
PERFORMANCE, CONDITION, FITNESS OR SUITABILITY OF ANY OF THE EQUIPMENT FOR
THE PURPOSES OF LESSEE OR MAKE ANY OTHER REPRESENTATION WITH RESPECT THERETO.
LESSOR SHALL NOT BE LIABLE TO THE LESSEE FOR ANY LOSS, CLAIM, LIABILITY,
COST, DAMAGE OR EXPENSE OF ANY KIND CAUSED, OR ALLEGED TO BE CAUSED, DIRECTLY
OR INDIRECTLY, BY ANY EQUIPMENT, OR BY AN INADEQUACY THEREOF FOR ANY PURPOSE,
OR BY ANY DEFECT THEREIN, OR THE USE OR MAINTENANCE THEREOF, OR ANY REPAIRS,
SERVICING OR ADJUSTMENTS THEREOF, OR ANY DELAY IN PROVIDING OR FAILURE TO
PROVIDE THE SAME, OR ANY INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF, OR
ANY LOSS OF BUSINESS, PROFITS, CONSEQUENTIAL OR OTHER DAMAGE OF ANY NATURE.
LESSEE AGREES THAT ITS OBLIGATIONS HEREUNDER SHALL NOT IN ANY WAY BY AFFECTED
BY ANY DEFECT OR FAILURE OF PERFORMANCE OF EQUIPMENT.
13. PERSONAL PROPERTY. The Equipment shall remain personal property at all
times, notwithstanding the manner in which it may be attached or affixed to
realty, and title shall at all times continue in Lessor. Lessee warrants that
at any time any of the Equipment is leased hereunder, or is removed to a new
location that Lessee shall provide to Lessor written notice thereof within
thirty (30) days of the date of such relocation and either (i) the premises
in which such Equipment will be installed will be owned by Lessee free of any
liens or encumbrances, or (ii) if not owned by Lessee free and clear of all
liens or encumbrances, the owner of such premises and/or the holder of any
such liens or encumbrances on such premises shall have consented and
acknowledge that such Equipment is and shall remain personal property subject
to all the provisions of this Lease. Lessee will obtain and record such
instruments and take such steps as may be necessary to prevent any person
from acquiring any right in any Equipment paramount to the rights of Lessor
by reason of such Equipment being deemed to be real property. If any third
party should attempt to establish any legal right in any Equipment, then
Lessee shall, promptly after learning thereof, notify Lessor in writing and,
within thirty (30) days after the date of such notice, either (i) cause such
right to be waived or eliminated to the satisfaction of Lessor or (ii)
otherwise stay such action or indemnity Lessor to Lessor's satisfaction.
14. DEFAULT AND REMEDIES.
(a) Each of the following shall constitute an event of default hereunder and
under any and all Schedules then in effect (each, an "Event of Default"): (1)
nonpayment when due of any installment of rent or other sum owing by Lessee
hereunder, under any Schedule or under any other agreement between Lessor and
Lessee if such nonpayment continues for ten (10) days; (2) Lessee's failure
to perform and comply with any other provision or condition hereunder or
under any Schedule if such failure continues for ten (10) days after written
notice thereof by Lessor to Lessee; (3) Lessee's attempt to sell, lease or
encumber any item of the Equipment without Lessor's prior written consent, or
the attachment of any lien to any such item in favor of anyone other than
Lessor, or any attempted levy, seizure or attachment on such item; (4) any
representation or warranty made by Lessee to Lessor hereunder or under any
Schedule, certificate, agreement, instrument or other statement including
income and financial statements, proves to have been incorrect in any
material respect when made; (5) the merger, consolidation, reorganization or
dissolution of, or transfer of a controlling stock interest in Lessee or the
suspension of Lessee's present business without prior written consent, which
shall not be unreasonably withheld; (6) Lessee's general assignment for the
benefit of creditors or commencement of any voluntary case or proceeding for
relief under the Bankruptcy Code, or any other present or future law for the
relief
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<PAGE> 4
of debtors, or the taking of any action to authorize or implement any of the
foregoing; (7) the filing of any petition or application against Lessee under
any present or future law for the relief of debtors, including proceedings
under the Bankruptcy Code, or for the subjection of property of Debtor to the
control of any court, receiver or agency for the benefit of creditors if such
petition or application is consented to by Lessee or not dismissed within
sixty (60) days from the date of filing; (8) a default exists under any other
agreement or instrument of Lessee's with or in favor of Lessor; (9) the
attempted repudiation of any guaranties for obligations of Lessee to Lessor;
(10) the Pension Benefit Guaranty Corporation's commencement of proceedings
under Section 4042 of the Employee Retirement Income Security Act of 1974 to
terminate any employee pension benefit plan of Lessee; or (11) the occurrence
of any event described in clauses (6), (7), (8), or (10) of this Section 14
with respect to any guarantor or the person liable for payment or performance
of Lessee's obligations under this Lease.
(b) Upon the occurrence of an Event of Default, Lessor may at its option: (1)
proceed by appropriate court action or actions, either at law or in equity,
to enforce performance by Lessee of the applicable covenants hereunder and
under any or all Schedules or to recover damages for the breach thereof; or
(2) cancel Lessee's right of possession of any or all of the Equipment,
whereupon all rights of Lessee to use the Equipment shall absolutely cease
and terminate, but Lessee shall remain liable as herein provided. Upon such
cancellation, Lessee shall, at its own expense, immediately redeliver such
Equipment to Lessor at a place within the continental United Sates designated
by Lessor. If Lessee shall fail to do so, Lessor may retake possession of
same, free from any right of Lessee, its successors or assigns. If Lessor
elects to cancel Lessee's right of possession of any Equipment, Lessor may
recover from Lessee any and all amounts that, under the terms of the
applicable Schedule, are then due or that have accrued to the date of such
termination, and may also recover forthwith from Lessee, as damages for loss
of its bargain and not as a penalty, an amount equal to the Stipulated Loss
Value of such Equipment as of the rental payment date on or next preceding
the date of default. However, if Lessor recovers possession of such
Equipment, Lessee's obligations under the preceding sentence shall be reduced
by (1) the net amount Lessor in fact receives from the sale of any such
Equipment, or (2) at Lessor's election, the present value (determined on the
basis of the "Discount Ratef as hereinafter defined) of the noncancelable
regularly scheduled rentals receivable under a subsequent lease of any of the
Equipment, taking into account only the rentals receivable from the
commencement date of such subsequent lease until the end of the lease term
for such Equipment under the applicable Schedule. For purposes of this
Section 14, the Discount Rate shall be a rate of interest equal to four
percent (4.0%) plus the "Prime Rate" of NationsBank of Georgia, N.A.,
Atlanta, Georgia (or any successor thereto as announced on the day on which
the commencement date of such subsequent lease occurs.
(c) In addition to any amount recoverable under paragraph (b) above, Lessor
may recover from Lessee all Lessor's costs and expenses incurred by reason of
Lessee's breach or default, including without limitation costs and expenses
of repossession, storing, holding, transporting, insuring, servicing,
repairing, maintaining, renting, and selling any Equipment and collecting
rents and other proceeds of its disposition, and fees expenses of attorneys
in the amount fifteen percent (15%) of all amounts due on or after the time
of such breach or default (but not to exceed the amount actually incurred),
and other professionals employed by Lessor in connection with the protection
and enforcement of its title and interest in any and all Equipment and its
rights under any and all Schedules. From and after the occurrence of an event
of default, any installment of rent or other sum owing under any Schedule
that is not paid when due shall accrue interest from the date of such event
of default or (if later) the date such amount becomes due to the date it is
paid, at a per annum rate equal to the lessor of (i) fifteen percent (15%),
or (ii) the highest rate, if any, permitted by applicable law.
(d) Except as otherwise expressly provided herein, all rights and remedies of
Lessor are concurrent and cumulative. The exercise or partial exercise of any
remedy shall not restrict Lessor from further exercise of that remedy or any
other remedy provided for herein or otherwise available under applicable law.
To the extent permitted by applicable law, Lessee waives any rights now or
hereafter conferred by statute or otherwise that may require Lessor to sell,
release or otherwise use or dispose of any of Equipment in mitigation of
Lessor's damages or that may otherwise limit or modify any of Lessor's rights
or remedies.
15. ASSIGNMENT BY LESSOR. LESSOR MAY ASSIGN OR TRANSFER, AND LESSEE HEREBY
CONSENTS TO THE ASSIGNMENT OR TRANSFER, OF ALL OR ANY PART OF ANY SCHEDULE OR
LESSOR'S INTEREST IN ANY EQUIPMENT WITH NOTICE TO LESSEE IN THE EVENT LESSOR
THEREAFTER CEASES TO ADMINISTER SUCH SCHEDULE, OTHERWISE WITHOUT NOTICE TO
LESSEE. Lessee agrees that the liability of Lessee to any assignee of
Lessor, or any subsequent assignee of such assignee, shall be absolute and
unconditional and shall not be affected by any default hereunder of Lessor
whatsoever or by any breach of any warranty, express or implied, in respect
of any Equipment or Schedule. Lessee further agrees that no such assignee
shall be required to assume any of the obligations of Lessor under any
Schedule except (i) the obligation in respect of the application of any
insurance monies received by such assignee, as hereinabove provided, (ii)
that the assignee shall be responsible for its own misconduct after the
assignment, and (iii) that any successor lessor shall be responsible for the
lessor's duties hereunder accruing after any such assignment. Lessee
acknowledges that no such assignment shall materially change Lessee's duties
hereunder or materially increase any burden or risk imposed on Lessee
hereunder.
16. PROHIBITION OF ASSIGNMENT BY LESSEE. LESSEE SHALL NOT ASSIGN OR IN ANY
WAY DISPOSE OF ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY
SCHEDULE OR ENTER INTO ANY SUBLEASE OF ALL OR ANY PART OF ANY EQUIPMENT
WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR.
17. FINANCIAL AND OTHER DATA.
(a) During the term of this Lease, Lessee (i) shall furnish Lessor annual
balance sheets and profit and loss statements of Lessee and of any guarantor
of Lessee's obligations under any Schedule, and (ii) at Lessor's request,
shall furnish Lessor all other public financial information and reports
reasonably requested by Lessor at any time, including quarterly or other
interim balance sheets and profit and loss statements of
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<PAGE> 5
Lessee and of any such guarantor. Lessee shall furnish such other
information as Lessor may reasonably request at any time concerning Lessee,
including without limitation information concerning the Equipment covered by
a Schedule.
(b) Lessee represents and warrants that all information furnished and to be
furnished by Lessee to Lessor is accurate and that all financial statements
Lessee has furnished and hereafter may furnish to Lessor, including operation
statements and statements of condition, are and will be prepared in accordance
with generally accepted accounting principles, consistently applied, and
reasonably reflect and will reflect, as of their respective dates, results of
the operations and the financial condition of Lessee and of any other entity
they purport to cover.
18. MISCELLANEOUS.
(a) Each Schedule is and is intended to be a lease, and Lessee does not acquire
hereby or under any Schedule any right, title or interest in or to the
Equipment, except the right to use the same under the conditions hereof and
under the additional conditions set forth in the applicable Schedule. Lessee
waives any right to assert any lien or security interest on the Equipment in
Lessee's possession or control for any reason.
(b) The relationship between Lessor and Lessee shall always and only be that of
lessor and lessee. Lessee shall never at any time for any purpose whatsoever be
or become the agent of Lessor and Lessor shall not be responsible for the acts
or omissions of Lessee or its agents.
(c) At Lessor's request, Lessee shall execute, deliver, file, and record such
financing statements and other documents as Lessor shall deem necessary or
advisable to protect Lessor's interest in the Equipment and to effectuate the
purposes of this Lease. Lessee hereby irrevocably appoints Lessor as Lessee's
agent and attorney-in-fact for Lessee to execute, deliver, file, or record
any such item, and to take such action for Lessee and in Lessee's name, place
and stead. The forgoing authorization shall not, however, be used unless and
until an event of default hereunder has occured.
(d) Upon reasonable notification Lessor, its agents and employees shall have
the right to enter any property where Equipment is located and inspect any
Equipment at any reasonable time. Lessor's right to inspect the Equipment is
solely for the benefit of Lessor and shall not impose any obligation of any
kind whatsoever on Lessor.
(e) Lessee agrees to pay Lessor a late charge equal to five percent (5%) of
the rental on all rentals not paid by Lessee to Lessor within ten (10) days
of when due and owing under the provisions of this Lease.
(f) To secure the full and punctual payment and performance of its obligations
under each Schedule, Lessee hereby grants to Lessor a security interest in all
Lessee's right, title and interest, whether now existing or hereafter arising,
in, under and to each other Schedule, lease, security agreement or other
agreement between Lessor and Lessee, and each item of Equipment or other
tangible personal property covered thereby.
(g) Lessor's rights and remedies with respect to any of the terms and conditions
of each Schedule shall be cumulative and not exclusive and shall be in addition
to all other rights and remedies in its favor. Lessor's failure to enforce
strictly any of the provisions of any Schedule shall not be construed as a
waiver thereof or as excusing Lessee from future performance.
(h) The invalidity of any portion of this Lease or any Schedule shall not
affect the force and effect of the remaining valid portions thereof.
(i) All notices shall be binding upon the parties hereto if sent to the
respective addresses set forth herein, or to such other address as either party
may designate in a written notice to the other party. Except as otherwise
expressly provided herein, all notices shall be deemed effective when deposited
in the United States mail (if sent by registered, certified or first-class mail,
postage prepaid) or when received (if sent by any other means).
(j) Except as expressly provided herein, no representation, warranty, promise,
guaranty or agreement, oral or written, expressed or implied, has been made by
either party herein with respect to any Schedule or Equipment. This Lease and
the Schedules governed hereby constitute the entire agreement between the
parties herein with respect to the leasing of the Equipment. Any change or
modification to this Lease or any Schedule governed hereby must be made in
writing and signed by the parties hereto.
(k) To the extent permitted by applicable law, this is a "finance lease"
under Section 2A-103(g) of the Uniform Commercial Code. Lessee waives any
right (i) to cancel or repudiate this Lease or any Schedule governed hereby,
(ii) to reject or revoke acceptance of any item of Equipment, and (iii) to
recover from Lessor any general or consequential damages, for any reason
whatsoever.
(l) THIS LEASE AND EACH SCHEDULE INCORPORATING ITS TERMS AND CONDITIONS SHALL
BE GOVERNED BY AND CONSTRUED ACCORDING TO THE INTERNAL LAWS OF THE STATE OF
GEORGIA AS OF THE DATE HEREOF, WITHOUT GIVING EFFECT TO ANY PRINCIPLE OF
CONFLICTS OF LAW OR CHOICE OF LAW THAT WOULD OTHERWISE MAKE THE LAW OF ANY
OTHER JURISDICTION TE LAW GOVERNING THIS LEASE OR ANY SUCH SCHEDULE.
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<PAGE> 6
(m) LESSOR AND LESSEE EACH WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER AGAINST THE OTHER ON ANY MATTER HOWEVER ARISING
OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE OR ANY SCHEDULE.
(n) Lessee shall reimburse Lessor upon demand for all costs and expenses
incurred by Lessor in connection with the execution and delivery of this Lease
and the transactions contemplated hereunder including, without limitation, any
lien search and filing fees.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the date
first above written.
NATIONSBANC LEASING CORPORATION (LESSOR) PLASMA-THERM, INC. (LESSEE)
By: By:
------------------------------------- ------------------------
Printed Name: Printed Name:
--------------------------- --------------
Title: Title:
---------------------------------- ---------------------
22
<PAGE> 7
NATIONSBANK EQUIPMENT LEASE SCHEDULE
NationsBanc Leasing Corporation FOR MASTER EQUIPMENT LEASE AGREEMENT
================================================================================
SCHEDULE NUMBER 1
This Schedule, dated as of August 27, 1996, between NATIONSBANC LEASING
CORPORATION, as Lessor, and Plasma-Therm, Inc., as Lessee, is executed pursuant
to and is subject to the terms and conditions of Master Equipment Lease
Agreement Number 07186-00300 dated as of August 27, 1996 (the "Lease"). Unless
otherwise defined herein, capitalized terms used in this Schedule have the
respective meanings assigned to such terms in the Lease. Should any terms and
conditions of this Schedule conflict with any provision of the Lease, the terms
and conditions herein shall supersede conflicting terms and conditions in the
Lease.
Lessee hereby authorizes Lessor to insert herein the serial numbers and other
identification data of the Equipment, when determined by Lessor, and dates or
other omitted factual matters.
DESCRIPTION OF EQUIPMENT, the total cost of which to Lessor is $408,190.28
("Total Capitalized Cost"):
<TABLE>
<S> <C> <C> <C> <C>
QUANTITY DESCRIPTION SERIAL NUMBER COST
Office Furniture more specifically described on $408,190.28
Exhibit "A" attached hereto and made a part hereof.
Total Cap Cost $408,190.28
</TABLE>
TERM. The term of the Lease for the Equipment described herein is for a Base
Term of sixty (60) months commencing on the Acceptance Date (the "Base Term
Commencement Date").
RENTAL. Base Rent shall be payable in sixty (60) consecutive monthly rental
installments of $ 7,767.58 each, the first Base Rent installment being payable
on the Base Term Commencement Date and the remaining Base Rent installments
being payable on a like day of each succeeding month.
STIPULATED LOSS VALUE: After the occurrence of any casualty loss or other event
giving Lessor the right to require payment of the Equipment's Stipulated Loss
Value, Lessor shall calculate such Stipulated Loss Value and give Lessee written
notice thereof. Such "Stipulated Loss Value", as of any particular date, shall
be the product obtained by multiplying the Total Capitalized Cost for the item
of Equipment in question by the percentage, as set forth in the attached
"Schedule of Stipulated Loss Values", specified opposite the rent installment
number becoming due immediately after the date Lessor gives Lessee notice
requiring payment of the Stipulated Loss Value (the "SLV Payment Date"). On the
SLV Payment Date, Lessee shall pay Lessor the Stipulated Loss Value plus the
rent installment then due, together with any other unpaid amounts then due and
owing under this Schedule. If only a portion of the Equipment is affected by any
event causing calculation of Stipulated Loss Value, and the cost of such portion
cannot be readily determined from the Total Capitalized Cost set forth above,
then the Total Capitalized Cost for such portion shall be as reasonably
calculated by Lessor, with written notice of such Total Capitalized Cost being
sent to Lessee by Lessor.
ASSETS CLASS AND DEPRECIABLE LIFE: Lessee hereby warrants and represents that
the above described Equipment qualifies under asset guideline class 0.11 and
constitutes "7-year property" within the meaning of Internal Revenue Code
Section 168.
LOCATION OF EQUIPMENT: Equipment will be located at 10050 16th Street North,
Saint Petersburg, Pinellas, FL 33716.
INSURANCE REQUIREMENTS: In addition to the requirements set forth in the Lease,
the following shall apply:
Liability: Not less than $500,000.00 combined single limit liability insurance,
including bodily injury and death and property damage, covering activities of
Lessor and Lessee and naming Lessor as additional insured.
Physical Damage: Comprehensive insurance, including loss by burglary, theft,
malicious mischief and fire, for an amount not less than the Stipulated Loss
Value of the Equipment, and naming Lessor as loss payee.
END OF BASE TERM OPTIONS: (i) Lessee may, provided Lessee is not in default
under any of the provisions of the Lease or this Schedule, and upon its having
provided to Lessor written notice not less than ninety (90) days prior to the
expiration of the Base Term of its election (which shall be irrevocable) to
purchase all of Lessor's right, title and interest in and to all, but not less
than all, of the Equipment for a purchase price equal to the greater of (a) the
then Fair Market Value of the Equipment, or (b) $50,215.57.
23
<PAGE> 8
(ii) If Lessee for any reason does not purchase the Equipment in accordance
with paragraph (i) above, the Base Term shall automatically and without action
on the part of Lessor or Lessee be extended for an additional term of twelve
(12) months at a monthly rental of $4,694.19, with the first such rental being
due and payable by Lessee on the first day following the last day of the Base
Term. Upon termination of the extended lease term, the Lessee shall either (i)
return the Equipment to Lessor in accordance with the terms of the Lease or (ii)
provided, Lessee has given Lessor ninety (90) day's prior written notice,
purchase not less than all of the Equipment for its then Fair Market Value.
(iii) Lessee's purchase of the Equipment pursuant to (i) or (ii)
hereinabove shall be accomplished by Lessor providing a bill of sale to Lessee
conveying all of Lessor's interest in the Equipment "as-is, where-is", without
warranty, express or implied, with respect to any matter wharsoever, except that
the Equipment is free and clear of any liens or encumbrances created by or
arising through Lessor.
EARLY TERMINATION: Should the Equipment become obsolete or no longer useful in
Lessee's business, and provided that Lessee is not in default under any of the
provisions of the Lease or this Schedule, Lessee may, upon giving Lessor not
less than sixty (60) days' prior written notice (which shall be irrevocable),
terminate the lease term for not less than all the Equipment on the last day of
the 12 month of the Base Term. Upon return of the Equipment to Lessor, Lessor
shall sell the Equipment by public or private sale, for immediately available
funds, to a third party unrelated to Lessee. Lessee shall continue to pay Lessor
monthly rentals for the Equipment until Lessor receives proceeds of sale. Lessee
shall use diligent efforts to solicit bids and buyers for such a sale. Lessor
shall have the right, but no obligation, to solicit bids or buyers for any such
sale. The proceeds of sale shall be applied in the following order to: (i) pay
the reasonable expenses of (a) holding and preparing the Equipment for sale, and
(b) selling the Equipment, and; (ii) the remaining proceeds of sale (the "Net
Proceeds") to Lessor. If the Net Proceeds are less than $356,565.63, then Lessee
shall promptly pay to Lessor, as additional rent, at the same time and in the
same manner as the proceeds of sale are required to be paid to Lessor, an amount
equal to such deficiency; provided however, the maximum amount Lessee shall pay
Lessor for such deficiency shall be $301,366.88, together with all other sums
then due and owing by Lessee hereunder. Upon the consummation of such an
approved sale, Lessor will execute and transmit to buyer (or, if none, to
Lessee) a bill of sale conveying all Lessor's right, title and interest "As-Is",
"Where-Is" basis, with no warranties (express or implied) as to any matter
whatsoever, except that no security interest, lien or encumbrance against such
Equipment then exists that has been created by Lessor.
NO MATERIAL ADVERSE CHANGE: Lessee represents and warrants that there has been
no material adverse change in its business or financial condition since August
14, 1996. Lessor shall not be obligated to execute this Schedule and lease the
Equipment hereunder to Lessee if there shall have occurred any change in
applicable law that would have a material adverse impact on the transaction
contemplated hereby or there shall have occurred a material adverse change (in
Lessor's sole judgment) in the financial or business condition of Lessee.
ACKNOWLEDGMENT OF RECEIPT OF EQUIPMENT. Lessee acknowledges that the Equipment
described herein above has been delivered to and received by it, is conforming
as represented, and is acceptable and satisfactory to it, and that the same has
been irrevocably accepted as Equipment leased by Lessee under this Schedule as
of the date written below (the "Acceptance Date").
<TABLE>
<S> <C>
NationsBanc Leasing Corporation Plasma-Therm, Inc.
By: By:
---------------------------- ----------------------------
Printed Name: Printed Name:
------------------ ------------------
Title: Title:
------------------------- -------------------------
Acceptance Date:
---------------
</TABLE>
24
<PAGE> 9
NATIONSBANK SCHEDULE OF STIPULATED LOSS VALUES
NationsBanc Leasing Corporation FOR EQUIPMENT LEASE SCHEDULE
================================================================================
SCHEDULE NUMBER 1
This Schedule of Stipulated Loss Values is made a part of Equipment
Schedule No. 1, dated August 27, 1996, to Master Equipment Lease Agreement
Number 07186-00300, dated as of August 27, 1996, between NATIONSBANC LEASING
CORPORATION (as "Lessor") and Plasma-Therm, Inc. (as "Lessee").
<TABLE>
<CAPTION>
Base Rent Stipulated Loss
Installment Number Value Percent
- ------------------ ---------------
<S> <C>
1-3 100.35079
4-6 96.81845
7-9 93.16730
10-12 89.41266
13-15 85.55071
16-18 81.58098
19-21 77.50183
22-24 73.32217
25-27 69.04775
28-30 64.67350
31-33 60.19794
34-36 55.62263
37-39 50.96013
40-42 46.20209
43 45 41.34708
46-48 36.39143
49-51 31.35252
52-54 26.21889
55-57 20.98988
58-60 20.00000
</TABLE>
IN WITNESS WHEREOF, Lessee and Lessor have caused this Schedule of
Stipulated Loss Values to be executed by its authorized officers.
NationsBanc Leasing Corporation Plasma-Therm, Inc.
By: By:
---------------------------- ---------------------------
Printed Name: Printed Name:
------------------ ----------------
Title: Title:
------------------------- ------------------------
25
<PAGE> 10
Exhibit "A" to Equipment Schedule Number 1 For Master Equipment Lease
Agreement 07186-00300
Lessee: Plasma-Therm, Inc.
Lessor: NationsBanc Leasing Corporation
<TABLE>
<CAPTION>
Office Pavilion Invoice# Date Amount
------------------------ -------- ------
<S> <C> <C>
65712 08-22-96 -50,000.00
65707 08-22-96 1,751.93
65708 08-22-96 676.83
65709 08-22-96 1,053.37
65710 08-22-96 429.40
65704 08-22-96 207,576,32
65705 08-22-96 242,423.68
65706 08-22-96 531.25
65711 08-22-96 3,747.50
TOTAL $408,190.28
</TABLE>
- ---------------------
Initial
26
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF AUGUST 31, 1996 AND CONSOLIDATED STATEMENTS OF
INCOME FOR THE NINE MONTHS ENDED AUGUST 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> AUG-31-1996
<CASH> 5,331,214
<SECURITIES> 0
<RECEIVABLES> 6,629,294
<ALLOWANCES> 0
<INVENTORY> 11,756,206
<CURRENT-ASSETS> 24,920,064
<PP&E> 7,767,058
<DEPRECIATION> 1,804,837
<TOTAL-ASSETS> 31,050,950
<CURRENT-LIABILITIES> 5,812,588
<BONDS> 3,681,349
0
0
<COMMON> 103,542
<OTHER-SE> 21,453,471
<TOTAL-LIABILITY-AND-EQUITY> 31,050,950
<SALES> 27,404,581
<TOTAL-REVENUES> 27,404,581
<CGS> 16,857,224
<TOTAL-COSTS> 23,495,951
<OTHER-EXPENSES> (187,244)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 221,462
<INCOME-PRETAX> 3,874,412
<INCOME-TAX> 1,486,174
<INCOME-CONTINUING> 2,388,238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,388,238
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
