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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1998 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO ___________
COMMISSION FILE NUMBER 0-12353
PLASMA-THERM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 04-2554632
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10050 16TH STREET NORTH,
ST. PETERSBURG, FLORIDA 33716
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) ZIP CODE
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (727) 577-4999
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
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(TITLE OF CLASS)
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 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 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 January 15, 1999, the aggregate market value of the voting stock
held by non-affiliates of the Registrant was approximately $37,551,397.*
As of January 15, 1999, 11,218,561 shares of Common Stock, $.01 par value,
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its Annual
Meeting of Stockholders presently scheduled to be held on May 11, 1999 are
incorporated by reference in Part III.
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* Calculated by using the applicable closing trade price and by excluding all
shares that may be deemed to be beneficially owned by executive officers and
directors of the Registrant, without conceding that all such persons are
"affiliates" of the Registrant for purposes of the Federal securities laws.
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Plasma-Therm, Inc., together with its subsidiary, (collectively, the
"Company") is engaged in the design and production of thin film etching and
deposition manufacturing equipment. The Company sells this equipment directly
to manufacturers in the optoelectronics/telecommunications, data storage,
photomask, and microelelectromechanical (MEMS) industries. The Company's
products are marketed, together with service and technical support, by the
Company's direct sales force, its Japanese distributor and independent foreign
manufacturer's representatives. The Company is a Florida corporation and was
founded in 1975.
RECENT DEVELOPMENTS
Fiscal year ended November 30, 1998 showed continued strong interest in
the Versalock/registered trademark/ 700 family of cluster tools. Solid sales
were observed in the optoelectronics/telecommunications and photomask markets.
Data storage saw Versalock systems sales for development applications needed to
produce GMR products. Additionally, initial Versalock sales into the MEMS
market were obtained during this time period. This strong demand for the
Versalock/registered trademark/ 700 products resulted from both the move to
production systems with current customers, as well as the development of new
processes for the Versalock/registered trademark/ 700.
The Inductively Coupled Plasma source (ICP) has continued to be well
accepted in the market place for a number of advanced etch processes.
Deposition processes were also developed for data storage applications during
1998 using the ICP technology. Investigations for use of this technology in the
MEMS and compound semiconductor markets were also pursued during 1998.
Acceptance of high-density technology has been well received in the Company's
four served markets resulting in increases in both Shuttlelock/registered
trademark/ 770 and Versalock/registered trademark/ 770 sales.
The Company began entrance into a new market with the development of
Physical Vapor Deposition (PVD) technology in 1998. The Company believes that
this program will open major new market opportunities during 1999. Although the
potential for this technology extends through all markets, initial efforts are
aimed at the data storage market. Additionally, PVD will be incorporated into
the Versalock platform.
In December 1997, the Company purchased approximately 1.4 acres to
accompany the existing land, for the purpose of constructing a new 33,000-sq.
ft. R&D, customer applications, and training center. Construction of the
facility will begin in February 1999 and is expected to be completed in
September 1999. More than half of the new facility will contain cleanroom areas
for use in customer demonstration and support and development activities.
Additionally, a dedicated training facility will be housed in the new building.
The Company is investing heavily in capital equipment; once complete, the
building will include more than 40 pieces of Plasma-Therm, Inc. processing
equipment, as well as a significant number of new metrology and advanced
analytical tools.
In June 1998, the Company entered into a performance based, fixed price
contract with BDM International, Inc., a wholly owned subsidiary of TRW, Inc.,
to facilitate the Company's transformation from its existing business processes
to an Integrated Supply Chain Management philosophy. The program focuses in
three areas: product realization, demand management, and supply management. The
objective of the program is to reduce total delivered cost of a product through
an aggressive cycle time and process improvement initiatives that leverages the
technology investment the Company has made. In summary, the program identifies
and puts into place all the tools and techniques and methods to ensure
consistency and reliability of results.
1
<PAGE>
PLASMA-THERM, INC. PRODUCT LINES
The Company manufactures various product lines that perform thin film
etching and deposition. Several products utilize batch processing in which
wafers or substrates are placed into the plasma chamber and processed
simultaneously. Also, the Company's products permit single wafer or substrate
processing.
The Company's thin film etching systems provide a combination of Reactive
Ion Etching (RIE), Plasma-Etching (PE) and Inductively Coupled Plasma (ICP)
capability, which permits advanced process applications for the Photomask, Data
Storage, Compound Semiconductor, and Microelectromechanical (MEMS) markets.
The Company also offers Plasma Enhanced Chemical Vapor Deposition (PECVD)
and High Density Plasma (HDP) systems for depositing thin films for use in the
same four served markets. Additionally, as stated above, Physical Vapor
Deposition (PVD) is currently being developed, anticipating initial sales
beginning in 1999.
The Company's plasma systems are divided into two groups. The batch group
consists of two product lines: (1) 790 Series, and (2) Shuttlelock/registered
trademark/. The automated group of products consists of the
Versalock/registered trademark/ 700 Series. These groups of products permit our
customers to go from research and development to pilot production and then on
to high volume manufacturing, utilizing the Company as their primary supplier.
The batch product lines are marketed as related products to a wide range
of industries (see Item 1, Business, General). They are modular in design with
components that are largely interchangeable. The automated group of products
are targeted specifically to high volume manufacturers of data storage
products, optoelectronics/telecommunications, MEMS devices, and Mask/Reticles.
790 SERIES
The 790 Series RIE, PECVD and ICP plasma system are widely accepted
research and development plasma processing tools. The 790 Series has been
successful in the marketplace as the successor to the System VII 70 and 700
Series. The 790 Series is primarily used for advanced research and development
and pilot production of optoelectronics/telecommunications devices.
SHUTTLELOCK/registered trademark/ SERIES
The Shuttlelock/registered trademark/ Series RIE, PECVD, and ICP plasma
systems continue to be successful products. The Shuttlelock/registered
trademark/ is a loadlocked, single or dual chamber plasma processing system.
The loadlock allows the processing chambers to remain under vacuum; thus
permitting increased process integrity. The Shuttlelock/registered trademark/
Series is used for pilot production and production of compound semiconductor
devices, optoelectronics/telecommunications, and MEMS systems.
VERSALOCK/registered trademark/ 700 SERIES
The Versalock/registered trademark/ 700 Series RIE, PECVD, HDP and ICP
plasma systems are the Company's newest products. The Versalock/registered
trademark/ 700 is the Company's first plasma system platform where multiple
product generations will be developed using the same substrate handling
mechanisms. The Versalock/registered trademark/ 700 has a central handler that
permits up to three processing modules. The Versalock/registered trademark/ 700
is available with manual or cassette-to-cassette capability allowing it to meet
advanced research and development and volume production requirements of the
optoelectronics/telecommunications, data storage, photomask and MEMS system
markets. This platform will serve as the basis for integration of new
technologies that the Company chooses to market in the future.
SPECIALTY POWER SUBSYSTEMS AND DEVICES
The Company's wholly owned subsidiary, Magnetran, Inc., is in the business
of manufacturing transformers, reactors, power centers and related components.
Manufacturers of induction melting furnaces, RF power supplies and AM/FM
broadcast transmitters use these products.
2
<PAGE>
MANUFACTURING AND SUPPLIES
The Company designs and develops a substantial portion of its systems'
components. The Company has multiple potential commercial sources for all of
its components and sub-assemblies that it acquires from outside vendors,
although it often uses a single vendor for a given item to achieve consistency,
favorable pricing and dependable close relationships. The Company maintains
significant inventory due to lengthy lead times of certain components,
aggressive customer delivery requirements and the need to provide quality parts
and service to its customers. An outside consultant, BDM International, Inc.
(TRW/BDM) Integrated Supply Chain Solutions Management Consulting, was hired by
the company during 1998 to improve manufacturing efficiencies and reduce
inventories. Implementation of this program has begun in 1998, with completion
scheduled during 1999.
PATENTS AND TRADEMARKS
The Company believes that its success is dependent upon its ability to
access and apply core technology to its products. This technology may be
obtained either through internal development activities (and obtaining
appropriate patent protection) or through licensing of important technology.
There are a number of active patent activities currently being
investigated at Plasma-Therm. The Company is actively pursuing two patents for
MEMS processing. Additionally, other inventions that may require patent
activities are under examination. These efforts are expected to continue over
the short term.
In addition to developing technology using Plasma-Therm internal
resources, the company may decide to pursue licensing agreements with outside
companies to gain time to market advantages over the competition. Examples of
these agreements include the cluster tool license from Applied Materials, The
ControlWorks license for non-exclusive rights for the installation and
distribution of Cluster Tool control Software from Adventa, and the Bosch
license for the non-exclusive rights to use their new plasma process
technology.
RESEARCH AND DEVELOPMENT
The markets served by the Company are characterized by rapid and constant
technological change. There is no assurance that the Company's current products
will be viable for extended time periods. Accordingly, the Company spends
substantial resources for research and product development directed toward
improving existing products and developing new products.
During fiscal years ended November 30, 1998, 1997 and 1996, the Company
spent approximately $6,090,000, $3,725,000 and $2,880,000, respectively, for
research and product development.
The company restructured it's R&D activities during 1998 to ensure that
new products are developed quickly, cost effectively, and exceed customer
requirements. Research personnel and equipment have been removed from day to
day responsibilities, by physical separation of the R&D and applications
laboratories. Additionally, R&D activities are only pursued if a customer
sponsor is available for the project. These changes will act together to ensure
R&D efforts will add to the bottom line in the future.
No assurance can be given that the Company will be technologically or
commercially successful in its current or in any other research and product
development efforts. As of November 30, 1998, 42 employees were engaged
primarily in research and product development activities.
MARKETING, SALES AND SERVICE
In the United States, the Company sells its products through a direct sales
force (West Coast, Central, and East Coast). Service is provided directly with
locations near customer sites throughout the U.S.
3
<PAGE>
A substantial portion of the Company's business is outside of the United
States. In Japan, the Company distributes its products exclusively through its
distributor, Hakuto Co., Ltd., located in Tokyo. Hakuto purchases the Company's
products for resale for its own account and provides sales and service through
several locations in Japan. Sales to Hakuto Co., Ltd. amounted to 13%, 9% and
8% of total revenues in 1998, 1997 and 1996, respectively.
Sales of the Company's products in Europe are handled through a network of
manufacturer's representatives managed by the Company's direct sales office
located in Somerset, England. Service is provided by locations throughout
Europe.
In the Far East (other than directly in Japan), manufacturer's
representatives exclusively handle sales. The manufacturer's representatives
and the Company support Far Eastern service directly.
The following table sets forth the estimated percentages of revenues
represented by the Company's principal areas of activity for the periods
indicated:
YEAR ENDED NOVEMBER 30,
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1998 1997 1996
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AREA REVENUES
Domestic .................. 65% 73% 61%
Foreign ................... 35% 27% 39%
--- --- ---
Total ................... 100% 100% 100%
PRODUCT REVENUES
Plasma systems(1) ......... 97% 95% 94%
Other(2) .................. 3% 5% 6%
--- --- ---
Total ................... 100% 100% 100%
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(1) Includes core products and automated products.
(2) Includes transformers and other systems.
See Note 8 to the Consolidated Financial Statements for additional foreign
and domestic operations and export sales information.
A substantial amount of equipment is sold by the Company with applications
support and warranties of the systems' ability to perform the desired process
within specified limits. In substantiating those warranties, the Company offers
customers the opportunity to perform tests on the customers' sample wafers and
substrates in the Company's process laboratories. The warranty period is
typically one year from date of shipment.
BACKLOG
The Company's backlog as of November 30, 1998 and 1997 was approximately
$10,000,000 and $19,000,000, respectively. Backlog orders consist solely of
those systems for which a delivery schedule has been specified and to which the
customer has assigned a purchase order number. Orders generally are subject to
cancellation by the customer upon payment of charges, which vary depending on
the nature of the order and the timing of the cancellation. It is expected that
substantially all of the November 30, 1998 backlog will be shipped during
fiscal year 1999.
COMPETITION
BATCH PRODUCTS
The Company experiences substantial competition for all of its batch
products. Competition derives mainly from two European companies, Oxford Plasma
Technology and Surface Technology Systems
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<PAGE>
(STS). Due to the Company's locally available Applications Laboratory and
substantially larger service organization and installed base, the Company
believes that it maintains competitive advantages in selling its products in
the United States. Conversely, the Company experiences significantly greater
competition in Europe and Japan because of its competitors' locations.
AUTOMATED PRODUCTS
The competition for the Versalock/registered trademark/ 700 system is
Balzers Process Systems, CVC Products, Veeco, STS, and Ulcoat, a subsidiary of
Ulvac.
Principal competitive factors include system performance, cost of
ownership, size of installed base, diversity of product line and overall
customer support. The Company's competitors have experience with complex
high-volume manufacturing, and financial, technical, and marketing resources.
Therefore, there can be no assurance that the Company's competitors will not
develop systems and features that are superior to the Company's.
EMPLOYEES
As of November 30, 1998, the Company had 186 full-time employees, 148 of
whom are employed in Florida, 17 in New Jersey (Magnetran, Inc., the Company's
wholly-owned subsidiary), 5 in Europe, with the remaining 16 located in its
sales and service offices throughout the United States. Of such employees, 23
are executive or administrative, 46 are sales and service, 75 are manufacturing
and 42 are research and development personnel. The Company currently does not
have any collective bargaining agreements.
EXECUTIVE OFFICERS OF THE COMPANY AND KEY EMPLOYEES
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Ronald H. Deferrari 58 Chairman of the Board
Ronald S. Deferrari 35 President, Chief Executive Officer
Edmond A. Richards 48 Vice President of Engineering
Stacy L. Wagner 35 Chief Financial Officer, Treasurer & Corporate Secretary
Dr. Jay Sasserath 36 Vice President of Strategic Marketing
</TABLE>
Ronald H. Deferrari is the founder of the Company and the father of Ronald
S. Deferrari. Mr. Deferrari served as President of the Company since its
formation in 1975 until Ronald S. Deferrari became President in 1995.
Ronald S. Deferrari was appointed Chief Executive Officer in September
1998 and has been serving as President since June 1995. Mr. Deferrari has been
employed with the Company in various capacities since 1983. Prior to his
current positions, he served as Chief Operating Officer and Director of Sales
and Marketing.
Edmond A. Richards, PE, was appointed Vice President of Engineering in
October 1996. Mr. Richards has been Director of Engineering since 1994 and has
been employed with the Company for over twenty years. Since 1991 Mr. Richards
has held various engineering management positions and prior to 1996, he served
as General Manager of the Company for 11 years.
Stacy L. Wagner, CPA, was appointed Chief Financial Officer, Treasurer and
Corporate Secretary in September 1998. Prior to her current positions, she
served as Vice President of Finance and
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<PAGE>
Administration. Ms. Wagner has held various financial managerial positions
since her employment in 1993. Prior to joining Plasma-Therm, Inc., Ms. Wagner
was employed by Grant Thornton LLP and Coopers & Lybrand.
Dr. Jay Sasserath, Vice President of Strategic Marketing, has been
employed with the Company since December 1996. Prior to coming to Plasma-Therm,
Inc., he held various management positions in marketing and technical areas at
Materials Research Corporation in New York.
OTHER KEY EMPLOYEES
Dr. David J. Johnson, Process Scientist, has seventeen years of experience
in the plasma-processing field and has been employed with Plasma-Therm, Inc.
since 1979. Dr. Johnson is the Director of Research and Development with
responsibility over all the Company's research and development. He is a widely
acknowledged expert in the area of metal etching for the manufacture of silicon
integrated circuits and complements this with knowledge and publications in
virtually every aspect of plasma processing.
Dr. Christopher Constantine, Applications Manager, has been employed with
the Company since 1984. He has acquired considerable experience working in the
ECR and ICP plasma processes after an extensive career in traditional parallel
plate plasmas, and is widely acknowledged for his expertise.
Lynn Ochs, Director of Sales, has been employed with the Company since
1996. Mr. Ochs brings over 20 years of semiconductor capital equipment
experience to the Company, having held similar positions at Applied Materials,
Perkin-Elmer and Bruce Technologies.
Stephen M. Schultheis, Director, PVD Program and New Business Development,
joined the company in 1998. Mr. Schultheis brings over 20 years of
semiconductor capital equipment experience to Plasma-Therm, Inc. He has held
senior marketing and technical management positions at Mattson Technology,
Metron Technology, and Tylan Corporation.
Sandy Miller, Director of Customer Service, joined the company in 1998.
Mr. Miller has been in customer service management for over 20 years, with 12
years in the semiconductor equipment arena. Prior to joining Plasma-Therm, Inc.
Mr. Miller held positions at Applied Materials and Speed Fam Corporation.
ITEM 2. PROPERTIES
The Company's executive offices, manufacturing and product development
facilities are located in a 60,000 square foot building in St. Petersburg,
Florida that was constructed in June 1996. The Company holds a mortgage on the
building, payable in monthly installments of $33,235, including interest at
8.5% through July 2001. A balloon payment is due at the end of the term. The
land, the building and its contents collateralize the loan.
In April, 1998, the Company executed a commitment letter with its bank for
the financing of a 33,000 square foot R&D facility adjacent to its current
facility. Total cost of the new facility will be approximately $6,000,000, of
which 75% will be financed by the bank. Construction is anticipated to begin in
February 1999 with a completion date of September, 1999. During the
construction phase, interest will be payable monthly at the one month LIBOR
rate plus 2.25% on the outstanding balance. Upon completion of the construction
phase, the note will be converted to a five-year term loan and amortized over a
fifteen-year period. Equal payments of principal and interest will be payable
monthly at a fixed interest rate based on the LIBOR rate plus 2.25%. The
interest rate will be determined prior to conversion. The land, the building
and its contents will collateralize the loan. The facility will reside on 1.4
acres of land purchased in December 1997 for $226,975.
The Company's subsidiary, Magnetran, Inc., operates in one facility
located in New Jersey. Magnetran, Inc. entered into a 5 year gross lease with
the Company's Chairman of the Board
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<PAGE>
commencing November 1, 1994 for approximately 17,750 square feet in New Jersey.
The premises are leased at an aggregate annual base rental of $86,841, which
escalates 3% annually. After the initial term of the lease, Magnetran has an
option to renew for five years with a 3% increase each year. The aggregate
rentals paid to the Chairman of the Board for all leases for the years ended
November 30, 1998, 1997 and 1996, were approximately $95,000, $92,000 and
$90,000, respectively.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material litigation, and is not aware of
any pending or threatened litigation, that is expected to have a material
adverse effect on the Company or its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ National Market under
the symbol PTIS. The following table sets forth the range of high and low trade
prices for the Common Stock for fiscal 1998 and 1997 as reported by NASDAQ. The
Company began trading on the NASDAQ National Market on June 6, 1996 and
previously traded on the NASDAQ SmallCap Market. As of January 15, 1999, the
closing price of the Company's Common Stock was $41/8.
HIGH LOW
---------- ----------
FISCAL 1997
First quarter .......... $611/16 $ 39/16
Second quarter ......... 65/16 311/16
Third quarter .......... 87/8 51/16
Fourth quarter ......... 1213/16 73/8
FISCAL 1998
First quarter .......... $ 87/8 $ 6
Second quarter ......... 87/8 65/8
Third quarter .......... 813/16 23/4
Fourth quarter ......... 47/8 23/8
As of January 15, 1999, there were 531 record holders of the shares of
Common Stock.
There have been no dividends declared during 1998. The Company entered
into a loan agreement with NationsBank of Florida, N.A. (NationsBank) in April
1997. That agreement contains covenants, which relate to the Company's
operating performance and financial condition, including a tangible net worth
ratio not to exceed 1 to 1 and a minimum cash flow ratio (as defined) of 2 to
1. As of November 30, 1998 and during the fiscal year the Company has been in
compliance with these and other financial covenants. These covenants do not
restrict the Company's ability to pay out dividends from retained earnings as
of November 30, 1998. However, the Company currently intends to retain all of
its earnings for use in its business and does not anticipate paying any
dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Statement of Operations:
Revenues ............................ $49,088 $44,445 $37,862 $29,612 $23,318
Net Income .......................... 1,370 4,661 2,994 1,089 1,963
Net Income per common share ......... .12 .42 .28 .10 .22(1)
</TABLE>
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(1) Includes .04 increase (from .18 to .22) as a result of the cumulative
effect of adopting SFAS 109.
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Balance Sheet at end of period:
Working Capital ..................... $20,605 $22,486 $16,319 $15,102 $10,114
Total assets ........................ 47,269 39,607 31,475 26,909 16,583
Total long-term obligations ......... 3,085 3,671 3,589 1,147 811
Shareholders' Equity ................ 30,518 28,685 22,219 18,972 11,105
</TABLE>
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The dollar amounts referenced throughout this section are approximations,
rounded to the nearest ten thousand ($10,000). References to years are to the
Company's fiscal years ended November 30 of the year to which referred.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
operating data as a percentage of net revenue:
YEARS ENDED NOVEMBER 30,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
Net sales .......................... 100.0% 100.0% 100.0%
Cost of Sales ...................... 62.1 57.8 62.0
----- ----- -----
Gross Profit ....................... 37.9 42.2 38.0
Research and development ........... 12.4 8.4 7.6
Selling and administrative ......... 17.7 16.6 17.4
Restructuring charge ............... 2.6 0.0 0.0
----- ----- -----
Operating Income ................... 5.2 17.2 13.0
Interest expense, net .............. .5 .2 .2
----- ----- -----
Income before income taxes ......... 4.7 17.0 12.8
Income taxes ....................... 1.9 6.5 4.9
----- ----- -----
Net income ......................... 2.8 10.5 7.9
COMPARISON OF FISCAL 1998 AND FISCAL 1997
The Company's net sales increased $4,650,000, or 10%, to $49,090,000 in
1998, compared to net sales of $44,440,000 for 1997. The increase in net sales
was primarily attributable to higher product demand and increased sales of the
Company's newest product line, the Versalock/registered trademark/ 700 Series.
Total sales related to Versalock/registered trademark/ 700 Series in 1998 and
1997 were $27,240,000 and $20,540,000, which represented 55% and 46% of net
sales respectively.
Gross profit of $18,600,000 for 1998 was 38% of net sales, compared to
$18,750,000 for 1997, representing 42% of net sales. The decrease is primarily
the result of a write down of inventory of approximately $2.2 million in 1998,
compared to $1.2 million in 1997 as discussed in the following paragraph. In
addition, to a lesser extent, the decrease in gross profit reflects an
investment in additional service personnel and training to support the
increasing number of installed systems. The Company believes it is essential to
continue to make substantial investments in experienced customer service
personnel to meet the high demands and expectations of its customers.
In June of 1998 the Company entered into a contract with BDM
International, Inc. (TRW/BDM) Integrated Supply Chain Solutions Management
Consulting to facilitate the Company's transformation from its existing
business processes to an Integrated Supply Chain Management philosophy (see the
discussion on restructuring charge below). A byproduct of this program is the
identification of non-productive inventory related to, among other things,
engineering design changes, bill of materials restructuring, slow moving
inventory, and de-emphasization of product lines and options. Accordingly,
$2,230,000 of inventory related to these items was identified and written off
during the year. In 1997 $1,200,000 of obsolete inventory was written off, of
which $670,000 related to the discontinuance of Clusterlock/registered
trademark/ 7000 series.
Research and development expenses for 1998 were $6,090,000 compared to
$3,730,000 in 1997, which were 12.4% and 8.4% of net sales, respectively. In
1998, the Physical Vapor Deposition, or PVD
9
<PAGE>
technology was being developed, which required additional resources as the
development stage matured. In addition, several other research and development
programs were implemented to enhance development efforts in the Company's
target markets: optoelectronics/telecommunications, data storage, photomask,
and microelectromechanical (MEMS). To accommodate these research and
development efforts, as noted below, the Company is constructing a new facility
to be used primarily for this purpose. The Company operates in constantly
changing and highly competitive markets. Therefore, the Company believes it is
critical to continue to increase its investment in research and development
programs and facilities in order to continue to provide innovative,
high-quality products, as well as maintain and increase its position as a
technology leader in the markets served.
Selling and administrative expenses for the year ended November 30, 1998
were $8,680,000, up from $7,380,000 for the year ended November 30, 1997 which
were 17.7% and 16.6% of net sales, respectively. The increase of $1,300,000
relates primarily to increased spending for marketing and investor relation's
initiatives to support the ongoing development of markets and heightened
awareness of the Company and its products. The Company's marketing department
was established during the second quarter of 1997. In addition, to a lesser
extent, the Company incurred a higher level of overhead required to support the
increased sales volume.
The Company incurred a restructuring charge of $1,270,000 in 1998, which
was the result of the implementation of the Integrated Supply Chain Management
(SCM) program with TRW/BDM. The SCM initiative is made up of three aspects:
Product Realization, Demand Management and Supply Management. The Product
Realization process is designed to speed product development efforts, while
identifying the best markets for the Company to invest its resources. The
Demand Management process is designed to evaluate forecasting and sales order
management, while working with customers to improve cycle times. The Supply
Management process is designed to foster closer relationships with suppliers,
improve quality, lower costs and improve cycle times. These three areas of
focus are implemented in an integrated fashion using a 5-phase program and
include improved use of information technology.
As of November 30, 1998, new and streamlined business processes, new
performance measures and improved cycle times related to the demand management
and the supply management activities had begun to yield improved efficiencies
throughout the Company. A number of operating activities were no longer
required, and certain other activities were over-staffed. As a result, the
Company downsized its workforce by approximately 15%, resulting in a charge of
$340,000 related primarily to severance compensation. The balance of $930,000
consists of the consulting fees for TRW/BDM services. As of November 30, 1998,
$1,000,000 remains in accrued liabilities relating primarily to the consulting
fees and severance costs. The Company anticipates incurring approximately an
additional $1,000,000 in 1999, with the majority of the cost being incurred in
the first quarter of 1999, for the completion of this program.
The Company's effective tax rate was 41% in 1998 compared to 38% in 1997.
The higher rate in 1998 is a combination of lower income before income taxes in
1998 compared to 1997 and non-deductible charges related primarily to meals and
entertainment remaining at the same level for both years. Therefore, as a
percentage of income before income taxes, the non-deductible charges for 1998
are higher, resulting in a higher effective tax rate.
Net income for 1998 was $1,370,000 compared to $4,660,000 in 1997. Net
income per share was $.12 (diluted) for 1998, a decrease of $.30 from $.42
(diluted) for the year ended November 30, 1997. The components of this decrease
are described above.
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information is effective for fiscal years beginning after December 15, 1997.
This Statement supersedes SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise, and amends SFAS No. 94, Consolidation of All
Majority-Owned Subsidiaries. This Statement requires annual financial
statements to disclose information about products and services, geographic
areas and major customers based on a
10
<PAGE>
management approach, along with interim reports. The management approach
requires disclosing financial and descriptive information about an enterprise's
reportable operating segments, based on the way management organizes the
segments for making business decisions and assessing performance. The Company
plans to adopt SFAS No. 131 in 1999, which has a possible impact only to the
Company's disclosure information and not its results of operations.
COMPARISON OF FISCAL 1997 AND FISCAL 1996
For 1997 the Company reported net sales of $44,440,000, 17% higher than
net sales of $37,860,000 for 1996. The increase in net sales was attributable
to higher product demand and increased sales of the Company's newest products,
the Versalock/registered trademark/ 700 Series and the Shuttlelock/registered
trademark/ ICP Series. Sales of the Versalock/registered trademark/ 700 Series
began in the fourth quarter of 1995 while sales of the Shuttlelock/registered
trademark/ (770) ICP Series began in 1996. Total sales related to
Versalock/registered trademark/ 700 Series in 1997 and 1996 were $20,540,000
and $16,210,000, respectively. Total sales related to the
Shuttlelock/registered trademark/ (770) ICP Series in 1997 and 1996 were
$7,240,000 and 2,390,000, respectively. These products combined, represented
62% and 49% of net sales in 1997 and 1996, respectively.
Cost of products sold of $25,690,000 for 1997 was 58% of net sales,
compared to $23,480,000 for 1996, representing 62% of net sales. The percentage
decrease was primarily due to a combination of increased sales of the Company's
most profitable product line, the Versalock/registered trademark/ 700 Series
and an increase in average gross margin for both the Versalock/registered
trademark/ 700 Series and Shuttlelock/registered trademark/ (770) Series. In
addition, other manufacturing costs as a percentage of net sales decreased
slightly from 1996 to 1997 which was primarily the result of improved operating
efficiencies.
Also included in cost of products sold was a provision for warranty costs
and inventory obsolescence totaling $430,000 and $1,200,000 in 1997 and
$660,000 and $390,000 in 1996, respectively. The $230,000 decrease in warranty
costs and $810,000 increase in inventory obsolescence was primarily the direct
result of the discontinuance of the Clusterlock/registered trademark/ 7000
series product line in 1997. As of November 30, 1997, the Company had no
material warranty obligations related to this product line. Furthermore, the
Company's increase in net sales in 1997 did not result in a corresponding
increase in the warranty provision because the increase in net sales related
primarily to the Company's newest products, the Versalock/registered trademark/
700 series and Shuttlelock/registered trademark/ (770) ICP series which have
lower warranty costs as compared to the Company's other products. Of the
$1,200,000 provision for inventory obsolescence in 1997, $670,000, representing
2.6% of cost of products sold, related to the discontinuance of
Clusterlock/registered trademark/ 7000 series. The remaining $530,000 provision
was 2% of cost of products compared to $390,000 for 1996, which was 1.7% of
cost of products sold.
Research and development expenses for 1997 were $3,730,000, compared to
$2,880,000 in 1996, which were 8.4% and 7.6% of net sales, respectively. In
1997 several research and development programs were implemented to enhance
development efforts in the Company's target markets.
Selling and administrative expenses for the year ended November 30, 1997
were $7,340,000, up from $6,540,000 for the year ended November 30, 1996 which
were 16.5% and 17.3% of net sales, respectively. The slight decrease in the
percentage was the result of certain overhead expenditures increasing at a
lower rate than the increase in sales. Although selling and administrative
expense as a percentage of net sales decreased slightly from 1996 to 1997,
total dollars expended increased by $800,000. This increase related primarily
to the marketing initiatives which began in the second quarter of 1997,
resulting in higher expenditures associated with payroll, travel, conventions
and advertising.
Income before income taxes for 1997 was $7,540,000, an increase of
$2,690,000 or 55.3%, from $4,850,000 earned in 1996. Net income increased
$1,667,000, or 55.7%, from $2,994,000 for 1996 to $4,661,000 for 1997. Net
income per share was $.41 for 1997, an increase of $.13 from $.28 for the year
ended November 30, 1996. Additionally, net income for 1997 and 1996 was 10.5%
and 7.9% of net sales, respectively. The components of this increase are
described above.
11
<PAGE>
FINANCIAL POSITION, LIQUIDITY AND CAPITAL REQUIREMENTS
Even though the semiconductor industry experienced a slowdown in 1998, the
Company's financial condition remained strong, with a ratio of current assets
to current liabilities of 2.5:1 at November 30, 1998, compared to 4.1:1 at
November 30, 1997.
Cash at November 30, 1998 was $7,170,000, which is an increase of
$1,770,000 over $5,400,000 at November 30, 1997. The primary components of this
increase are described herein. The following discussion highlights certain
aspects of the Company's cash flow activities impacting cash along with certain
related balance sheet line items. The activities to be discussed are as
follows:
<TABLE>
<CAPTION>
1998 1997
--------------- --------------
<S> <C> <C>
Net cash provided by (used in) operating activities .......... $ 4,700,000 $ (280,000)
Net cash used in investing activities ........................ (5,540,000) (2,290,000)
Net cash provided by financing activities .................... 2,610,000 2,700,000
------------ ------------
Net increase in cash ......................................... 1,770,000 130,000
</TABLE>
The Company generated $4,700,000 of cash from operations in 1998, compared
to $280,000 of cash used in 1997.
Cash flows from operating activities in 1998 primarily reflected net
income of $1,370,000, non-cash depreciation and amortization of $2,410,000, and
increases of $1,690,000, $350,000, and $990,000 in accounts payable, accrued
expenses, and accrued restructuring charge, respectively, partially offset by
increases in accounts receivable of $1,080,000, prepaid income taxes of
$1,150,000.
Cash flows used in operating activities in 1997 primarily reflected net
income of $4,660,000, non-cash depreciation and amortization of $1,870,000, and
an increase of $920,000 in accounts payable, partially offset by increases in
accounts receivable and inventories of $5,710,000 and $1,920,000, respectively.
Depreciation and amortization was $2,410,000 in 1998 compared to
$1,870,000 in 1997, a $540,000 increase. Approximately $3,590,000 and $860,000
of self-constructed and purchased equipment, respectively, was added in 1998 to
be used in the development efforts in the Company's target markets and PVD
technology discussed previously. The majority of the equipment is being
depreciated over a three-year life.
Accounts payable increased by $1,690,000 at November 30, 1998 to
$4,830,000 from $3,140,000 at November 30, 1997. As a result of the weakened
economic condition of the semiconductor industry, in September 1998, the
Company temporarily extended its payment terms to primarily all of its vendors
to ninety days. Although the payment terms are ninety days, the Company makes
an effort to pay down the liabilities at an earlier date. As of November 30,
1998, 49%, 42% and 9%, of the balance was less than 30 days old, 30-59 days
old, and over 60 days old, respectively, compared to 84% and 16% less than 30
days old and 30-59 days old as of November 30, 1997.
Accrued expenses increased by $350,000 at November 30, 1998 to $1,080,000
from $730,000 at November 30, 1997. The balance in accrued commissions has
increased $250,000 over 1997 related essentially to the timing of shipments and
receipts on international sales.
Accrued restructuring charge balance of $990,000, the increase over 1997,
is related to an accrual for the TRW/BDM consulting services and severance
costs discussed above.
Accounts receivable increased by $1,080,000 at November 30, 1998 to
$14,840,000 from $13,760,000 at November 30, 1997. Although net sales for the
fourth quarter of 1998 were less than the same period in 1997, as a result of
the weakened economy in the semiconductor industry, in order to secure sales,
the Company has extended more favorable payment terms to certain customers.
12
<PAGE>
Prepaid income taxes increased by $1,150,000 at November 30, 1998 to
$1,410,000 from $260,000 at November 30, 1997. The Company has overpaid
$1,410,000 of federal and state income taxes, of which the majority is expected
to be refunded in January 1999. This amount represents an increase over 1997 of
$1,150,000.
Net cash used in investing activities for 1998 was $5,540,000 compared to
$2,290,000 in 1997. Cash used for investing activities in 1998 and 1997 was
primarily for capital expenditures, of which $4,450,000 and $1,900,000,
respectively, was for the construction and purchase of various lab equipment to
be used in research and development. In addition, $310,000 incurred in 1998 and
$410,000 incurred in 1997 is comprised of various production, transportation
and computer equipment. Furthermore, in 1998, capital expenditures incurred for
the land and construction of the new R&D facility totaled $230,000 and
$390,000, respectively. The Company also incurred expenditures in 1998 related
to its current facility totaling $160,000.
In April, 1998 the Company executed a commitment letter with its bank for
the financing of a 33,000 square foot R&D facility adjacent to its current
facility. Total cost of the new facility will be approximately $6,000,000, of
which 75% will be financed by the bank. Construction is anticipated to begin in
February 1999 with a completion date of September, 1999. During the
construction phase, interest will be payable monthly at the one month LIBOR
rate plus 2.25% on the outstanding balance. Upon completion of the construction
phase, the note will be converted to a five-year term loan and amortized over a
fifteen-year period. Equal payments of principal and interest will be payable
monthly at a fixed interest rate based on the LIBOR rate plus 2.25%. The
interest rate will be determined prior to conversion. The land, the building
and its contents will collateralize the loan. The facility will reside on a
portion of the existing land and 1.4 acres purchased in December, 1997.
Net cash provided by financing activities for 1998 was $2,610,000 compared
to $2,700,000 in 1997. For both 1998 and 1997, cash used in financing
activities include $720,000 for the repayment of principal on long-term
obligations. Cash provided by financing activities in 1998 and 1997 include an
increase in proceeds under the line of credit agreements of $3,000,000 and
$1,000,000, respectively, and an increase in the exercise of common stock in
1998 of $330,000 and an increase in the exercise of common stock and warrants
in 1997 of $1,420,000. Additionally, in 1997 the Company executed a term loan
with its bank, providing $1,000,000 in additional funds.
In March, 1998 the Company increased its existing line of credit with its
bank from $7,000,000 to $10,000,000. The term of the line of credit agreement
is through May, 1999. Interest is payable monthly at the one month LIBOR rate
plus 2% (7.55% at November 30, 1998). The line is collateralized by accounts
receivable. The line is cross collateralized with the Company's $1,000,000 term
loan, and the bank has a security interest in the proceeds for the collection
of accounts receivable and the Company's depository accounts. The agreements
include financial covenants relating to the Company's operating performance and
financial condition. In addition, a negative pledge agreement was executed
which does not permit the Company to hold a lien or encumbrance on its
inventory. Magnetran, Inc. guarantees the line. As of November 30, 1998, the
Company's availability under the line of credit was reduced by $186,500 as a
result of outstanding letters of credit. The unused balance on the line at
November 30, 1998 and 1997 was $4,813,500 and $4,957,850, respectively.
At November 30, 1998, the Company's primary sources of liquidity consisted
of cash, cash equivalents and a revolving credit facility with its bank.
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
13
<PAGE>
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements, including
the forward-looking statements contained in this report. The risks and
uncertainties that may affect the operations, performance, development and
results of the Company's business include but are not limited to 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, Inc. 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 data storage, 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.
YEAR 2000
The inability of computers, software, and other equipment that utilize
microprocessors to recognize and properly process data fields containing a
two-digit year commonly is referred to as the Year 2000 issue. The Company has
conducted a comprehensive review of its hardware and software systems and all
of the Company's embedded systems contained in the Company's buildings, plant,
equipment, and other infrastructure to identify applications that could be
affected by the Year 2000 issue. Following this review, the Company took
corrective measures to resolve any problems associated with the Year 2000
issue, and the costs associated with such corrective measures were not
material. All of the Company's hardware and software systems and embedded
systems have been tested internally and the Company believes them to be Year
2000 compliant. However, there cannot be any guaranty that all of the Company's
systems are Year 2000 compliant.
The Company also has conducted a comprehensive review of the Year 2000
readiness of the Company's products, which includes the computers that form a
part of the Company's products and the software included with the
Versalock/registered trademark/ 700 Series. With respect to the computers that
form a part of the Company's products, each of these computers is substantially
Year 2000 compliant. However, the functions performed by these computers are
not affected by their ability to recognize and perform properly date-sensitive
functions. As a result, the performance of the Company's products is not
affected by whether these computers are Year 2000 compliant. Accordingly, the
failure of these computers to be Year 2000 compliant would not have a material
affect on the Company.
The Company includes a software program with the Versalock/registered
trademark/ 700 Series. The Company has tested this software and found that the
software could be affected by the Year 2000 issue. However, the Year 2000
problem associated with the software can be corrected by the user by changing
the date manually on the computer. The Company is notifying its
Versalock/registered trademark/ 700 Series customers of the manual method of
correcting the Year 2000 problem. In addition, the Company is in the process of
upgrading the software and expects to have the upgrade completed before
December 31, 1999. Even without a software upgrade, because of the ease of
correcting the problem manually, the Company does not believe the Year 2000
issue associated with this software will have a material affect on the Company.
14
<PAGE>
The Company does not interact electronically with either its customers or
suppliers. Moreover, the Company does not believe that the failure of its
customers or suppliers to be Year 2000 compliant would materially affect the
Company's business, results of operations, or financial condition. Nonetheless,
the Company has sent letters to each of its suppliers from whom the Company has
purchased at least $1,000 of materials during 1998 to determine their Year 2000
readiness. The Company has received responses from a majority of these
suppliers that they are or will be Year 2000 compliant, and the Company will
continue to seek responses from the rest of its suppliers.
Based on the Company's Year 2000 analysis described above, the Company is
uncertain of its most reasonably likely worst case scenario if either the
Company's products, systems, customers, or suppliers are not Year 2000
compliant. In addition, the Company has not established and does not intend to
establish a contingency plan in case it is not Year 2000 compliant.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have any material market risk sensitive financial
instruments.
15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
PAGE
-----
Accountants' Report ....................................... 23
Consolidated Financial Statements
Balance Sheets --
November 30, 1998, and 1997 ............................ 24
Statements of Income --
Years Ended November 30, 1998, 1997, and 1996 .......... 26
Statements of Shareholders' Equity --
Years Ended November 30, 1998, 1997, and 1996 .......... 27
Statements of Cash Flows --
Years Ended November 30, 1998, 1997, and 1996 .......... 28
Notes to the Financial Statements ........................ 30
16
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors
Plasma-Therm, Inc.
We have audited the accompanying consolidated balance sheets of
Plasma-Therm, Inc. and Subsidiary as of November 30, 1998 and 1997, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended November 30, 1998. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Plasma-Therm,
Inc. and Subsidiary as of November 30, 1998 and 1997, and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended November 30, 1998 in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Tampa, Florida
January 18, 1999
17
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30,
-----------------------------
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents .................................. $ 7,170,464 $ 5,398,030
Accounts receivable ........................................ 14,842,937 13,755,778
Inventories ................................................ 9,859,914 9,875,801
Prepaid income taxes ....................................... 1,405,591 258,101
Prepaid expenses and other ................................. 747,234 156,420
Deferred tax asset ......................................... 244,691 293,814
----------- -----------
Total current assets ..................................... 34,270,831 29,737,944
----------- -----------
Property, plant and equipment
Building ................................................... 4,996,731 4,444,649
Machinery and equipment .................................... 11,296,080 7,678,097
Leasehold improvements ..................................... 151,005 148,055
----------- -----------
16,443,816 12,270,801
Less accumulated depreciation and amortization .............. 4,610,619 3,405,935
----------- -----------
11,833,197 8,864,866
Land ........................................................ 1,012,992 786,017
----------- -----------
12,846,189 9,650,883
----------- -----------
Other assets ................................................ 151,762 218,263
----------- -----------
$47,268,782 $39,607,090
=========== ===========
LIABILITIES
Current liabilities
Line of credit ............................................. $ 5,000,000 $ 2,000,000
Current maturities of long-term obligations ................ 585,228 723,968
Accounts payable ........................................... 4,828,263 3,141,397
Accrued payroll and related ................................ 605,431 651,505
Accrued expenses ........................................... 1,083,535 734,720
Accrued restructuring charge ............................... 992,847 --
Customer deposits .......................................... 570,625 --
----------- -----------
Total current liabilities ................................ 13,665,929 7,251,590
----------- -----------
Long-term obligations ....................................... 3,085,353 3,670,581
----------- -----------
SHAREHOLDER'S EQUITY
Shareholders' equity
Common stock, $.01 par value (25,000,000 shares authorized,
11,207,061 and 11,126,561 shares issued and outstanding at
November 30, 1998 and 1997, respectively ) ............... 112,072 111,267
Additional paid-in capital ................................. 17,156,849 16,695,253
Retained earnings .......................................... 13,248,579 11,878,399
----------- -----------
30,517,500 28,684,919
----------- -----------
$47,268,782 $39,607,090
=========== ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
18
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
------------------------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net sales .............................. $ 49,088,445 $ 44,444,657 $ 37,862,185
Cost of sales .......................... 30,491,002 25,689,816 23,480,636
------------ ------------ ------------
Gross profit ......................... 18,597,443 18,754,841 14,381,549
------------ ------------ ------------
Operating expenses:
Research and development .............. 6,090,516 3,725,465 2,880,226
Selling and administrative ............ 8,683,252 7,379,055 6,574,536
Restructuring Charge .................. 1,269,532 -- --
------------ ------------ ------------
Total operating expenses ............. 16,043,300 11,104,520 9,454,762
------------ ------------ ------------
Operating income ..................... 2,554,143 7,650,321 4,926,787
Interest (income) expense, net ......... 226,473 112,107 72,412
------------ ------------ ------------
Income before income taxes ........... 2,327,670 7,538,214 4,854,375
Income taxes ........................... 957,490 2,877,094 1,860,789
------------ ------------ ------------
Net income ........................... $ 1,370,180 $ 4,661,120 $ 2,993,586
============ ============ ============
Earnings per share:
Basic ................................. $ 0.12 $ 0.43 $ 0.29
============ ============ ============
Diluted ............................... $ 0.12 $ 0.42 $ 0.28
============ ============ ============
</TABLE>
See accompanying notes to these consolidated financial statements.
19
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE YEARS ENDED NOVEMBER 30, 1998
<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN RETAINED
COMMON STOCK CAPITAL EARNINGS
-------------------------- -------------- -------------
SHARES
ISSUED AMOUNT AMOUNT AMOUNT
------------ ----------- -------------- -------------
<S> <C> <C> <C> <C>
Balance at November 30, 1995 .......... 10,279,561 $102,797 $14,645,775 $ 4,223,693
Exercise of stock options (inclusive of
income tax benefits) ................. 116,500 1,165 240,466 --
Compensation on unexercised
stock options ........................ -- -- 11,205 --
Net income ............................ -- -- -- 2,993,586
---------- -------- ----------- -----------
Balance at November 30, 1996 .......... 10,396,061 103,962 14,897,446 7,217,279
Exercise of stock options (inclusive of
income tax benefits) ................. 330,500 3,305 1,482,967 --
Exercise of warrants .................. 400,000 4,000 304,840 --
Compensation on unexercised
stock options ........................ -- -- 10,000 --
Net income ............................ -- -- -- 4,661,120
---------- -------- ----------- -----------
Balance at November 30, 1997 .......... 11,126,561 111,267 16,695,253 11,878,399
Exercise of stock options (inclusive of
income tax benefits) ................. 80,500 805 437,096 --
Compensation on unexercised
stock options ........................ -- -- 24,500 --
Net income ............................ -- -- -- 1,370,180
---------- -------- ----------- -----------
Balance at November 30, 1998 .......... 11,207,061 $112,072 $17,156,849 $13,248,579
========== ======== =========== ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
20
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income .............................................. $ 1,370,180 $ 4,661,120 $ 2,993,586
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization .......................... 2,406,123 1,872,424 934,464
Loss on disposal of assets ............................. -- 37,185 14,066
Deferred taxes ......................................... 49,123 94,499 397,537
Compensation -- stock options .......................... 24,500 15,310 33,306
Tax benefit related to certain stock options
and warrants ......................................... 105,256 372,782 10,442
Changes in assets and liabilities
Increase in accounts receivable ....................... (1,087,159) (5,709,648) (163,703)
(Increase) decrease in inventories .................... 15,887 (1,917,181) 100,713
Increase in prepaid income taxes ...................... (1,147,490) (163,868) (76,187)
(Increase) decrease in prepaid expenses
and other .......................................... (590,814) 76,230 (7,775)
Increase (decrease) in accounts payable ............... 1,686,866 917,571 (696,253)
Increase (decrease) in accrued payroll
and related ........................................ (46,074) (25,169) 274,025
Increase (decrease) in accrued expenses ............... 348,815 (289,374) (26,316)
Increase in accrued restructuring charge .............. 992,847 -- --
Increase (decrease) in customer deposits .............. 570,625 (218,000) 218,000
------------ ------------ ------------
Net cash provided by (used in)
operating activities .............................. 4,698,685 (276,119) 4,005,905
------------ ------------ ------------
Cash flows from investing activities
Capital expenditures .................................... (5,541,429) (2,305,667) (5,382,421)
License acquisition ..................................... -- -- (297,462)
Other ................................................... 6,501 15,863 122,171
------------ ------------ ------------
Net cash used in investing activities ................ (5,534,928) (2,289,804) (5,557,712)
------------ ------------ ------------
Cash flows from financing activities
Proceeds from issuance of long-term obligations ......... -- 1,000,000 3,118,900
Principal payments on long-term obligations ............. (723,968) (719,346) (568,622)
Net proceeds (payments) under line of
credit agreements ..................................... 3,000,000 1,000,000 (1,000,000)
Exercise of common stock and warrants ................... 332,645 1,417,020 209,090
------------ ------------ ------------
Net cash provided by financing activities ............ 2,608,677 2,697,674 1,759,368
------------ ------------ ------------
Net increase in cash and cash equivalents ............ 1,772,434 131,751 207,561
------------ ------------ ------------
Cash and cash equivalents, beginning of year ............. 5,398,030 5,266,279 5,058,718
------------ ------------ ------------
Cash and cash equivalents, end of year ................... $ 7,170,464 $ 5,398,030 $ 5,266,279
============ ============ ============
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION
The following is supplemental cash flow information for the years ended
November 30:
1998 1997 1996
------------ ------------ ------------
Cash paid for:
Interest ............. $ 616,552 $ 474,602 $ 347,956
Income Taxes ......... 1,951,255 2,526,227 1,528,019
See accompanying notes to these consolidated financial statements.
21
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Plasma-Therm, Inc., a Florida corporation, together with its subsidiary
(collectively, the "Company"), is engaged in the design and production of thin
film etching and deposition manufacturing equipment. The Company sells this
equipment directly to manufacturers in the optoelectronics/ telecommunications,
data storage, photomask, microelectromechanical (MEMS), and other industries.
The Company's products are marketed, together with service and technical
support, by the Company's direct sales force, its Japanese distributor and
independent domestic and foreign manufacturer's representatives.
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.
USE OF ESTIMATES IN FINANCIAL STATEMENTS
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. While
actual results could differ from those estimates, management does not expect
the variances, if any, to have a material effect on the financial statements.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments purchased with maturities of three
months or less to be cash equivalents. The Company utilizes an
overnight-automated investment account for sweeping of funds. The overnight
investment account is held in repurchase agreements backed by U.S. government
securities.
ACCOUNTS RECEIVABLE AND BAD DEBTS
The Company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required. If amounts become
uncollectible, they will be charged to operations when that determination is
made. Historically, bad debts have not been material.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost was determined
using the first-in, first-out (FIFO) method for substantially all inventories.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation and
amortization of property, plant and equipment is provided by generally using
the straight-line method (straight-line and accelerated methods for tax
purposes) over the useful lives of the related assets (machinery and equipment
22
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
principally over three to five years and building over 39 years). Depreciation
expense for 1998, 1997 and 1996 was $2,346,123, $1,812,424 and $904,464,
respectively.
Machinery and equipment category includes certain of the Company's current
products, which are used two to three years on various research and development
projects and subsequently sold. The items are depreciated over three years to
reflect their use and correspondingly adjust the items to their estimated fair
value. At November 30, 1998 and 1997 the cost and accumulated depreciation
related to these items are approximately $6,507,000 and $1,827,000, and
$3,932,000 and $1,477,000, respectively.
REVENUE AND COST RECOGNITION
Sales of the Company's products are recognized upon acceptance by the
customer and transfer of title, which is generally by the date of shipment.
FIELD SERVICE COSTS (PRINCIPALLY WARRANTY AND INSTALLATION)
Field service costs related principally to warranty and installation are
accrued upon the shipment of the products. The warranty reserve included in
accrued expenses at November 30, 1998 and 1997 is $350,000. The warranty
expense recorded in 1998, 1997, and 1996 of approximately $897,000, $428,000
(inclusive of a $260,000 reduction of warranty accrual) and $661,000,
respectively, was determined by management using current and historical actual
expense, industry experience and other factors.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
INCOME PER SHARE
In 1998 the Company adopted the provisions of Statement of Financial
Accountings Standards No. 128, "Earnings per Share" ("SFAS 128"), which require
the retroactive restatement of previously reported earnings per share data.
SFAS 128 requires the presentation of basic and diluted earnings per share.
23
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The following is a reconciliation of the numerators and denominators of
the computations of basic and diluted EPS for all periods presented.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED NOVEMBER 30, 1998
--------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------- --------------- ----------
<S> <C> <C> <C>
Basic EPS:
Income available to common shareholders ......... $1,370,180 11,176,945 $ .12
=====
Effect of Dilutive Securities:
Options ......................................... -- 154,038
---------- ----------
Diluted EPS:
Income available to common shareholders +
assumed conversions ........................... $1,370,180 11,330,983 $ .12
========== ========== =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED NOVEMBER 30, 1997
--------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------- --------------- ----------
<S> <C> <C> <C>
Basic EPS:
Income available to common shareholders ......... $4,661,120 10,941,888 $ .43
=====
Effect of Dilutive Securities:
Options ......................................... -- 227,205
---------- ----------
Diluted EPS:
Income available to common shareholders +
assumed conversions ........................... $4,661,120 11,169,093 $ .42
========== ========== =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED NOVEMBER 30, 1996
--------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------- --------------- ----------
<S> <C> <C> <C>
Basic EPS:
Income available to common shareholders ......... $2,993,586 10,328,818 $ .29
=====
Effect of Dilutive Securities:
Options ......................................... -- 269,065
---------- ----------
Diluted EPS:
Income available to common shareholders +
assumed conversions ........................... $2,993,586 10,597,883 $ .28
========== ========== =====
</TABLE>
Potentially dilutive common shares in the amount of 30,000, 0, and 102,000
for the years ended November 30, 1998, 1997, and 1996, respectively, have been
excluded from the computation of diluted earnings per share as the effect of
their inclusion is antidilutive.
24
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
ACCOUNTING FOR STOCK-BASED COMPENSATION
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," is used to account for stock option awards granted to employees.
As a result, Statement of Accounting Standards No. 123 (SFAS No. 123),
"Accounting or Stock-Based Compensation" proforma disclosures are included in
Note 4 of the financial statements.
FAIR VALUE PRESENTATION
The carrying amounts of cash, accounts receivable, prepaid expenses,
accounts payable, and accrued expenses approximate fair value because of the
short maturity of these items. The carrying amounts of the short-term
borrowings and certain notes payable approximate fair value because the
interest rates on these instruments change with market interest rates. Certain
notes payable with fixed interest rates and obligations under capital leases
approximate fair value because the interest rates on these instruments are
approximately comparable to market rates.
NEW ACCOUNTING PRONOUNCEMENT -- SEGMENT AND RELATED INFORMATION (NOT YET
ADOPTED)
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, is effective for fiscal years beginning after December 15, 1997.
This Statement supersedes SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise, and amends SFAS No. 94, Consolidation of All
Majority-Owned Subsidiaries. This Statement requires annual financial
statements to disclose information about products and services, geographic
areas and major customers based on a management approach, along with interim
reports. The management approach requires disclosing financial and descriptive
information about an enterprise's reportable operating segments based on
reporting information the way management organizes the segments for making
business decisions and assessing performance. The Company plans to adopt SFAS
No. 131 in 1999 which has a possible impact only to the Company's disclosure
information and not to its results of operations.
RECLASSIFICATIONS
Minor reclassifications have been made to the 1997 and 1996 financial
statements to conform to the 1998 presentation.
NOTE 2. INVENTORIES
Inventories consist of the following:
NOVEMBER 30,
-----------------------------
1998 1997
------------- -------------
Raw materials ........... $4,974,844 $6,738,918
Work-in-process ......... 4,477,355 2,494,527
Finished goods .......... 407,715 642,356
---------- ----------
$9,859,914 $9,875,801
========== ==========
For the year ended November 30, 1998, the Company incurred a charge of
$2,202,885 for obsolete and slow-moving inventory, of which $1,947,885 was
recorded in the fourth quarter. This charge is included in cost of sales on the
income statement.
25
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. SHORT-TERM AND LONG-TERM BORROWINGS
LINE OF CREDIT
In March, 1998 the Company increased its existing line of credit with its
bank from $7,000,000 to $10,000,000. The term of the line of credit agreement
is through May, 1999. Interest is payable monthly at the one month LIBOR rate
plus 2% (7.55% at November 30, 1998). The line is collateralized by accounts
receivable. The line is cross-collateralized with the term loan below, and the
bank has a security interest in the proceeds for the collection of accounts
receivable and the Company's depository accounts. The agreements include
financial covenants relating to the Company's operating performance and
financial condition. In addition, a negative pledge agreement was executed
which does not permit the Company to hold a lien or encumbrance on its
inventory. The line is guaranteed by Magnetran, Inc. As of November 30, 1998,
the Company's availability under the line of credit was reduced by $186,500 as
a result of outstanding letters of credit. The unused balance on the line at
November 30, 1998 and 1997 was $4,813,500 and $4,957,850 respectively.
BANK COMMITMENT
In April, 1998, the Company executed a commitment letter with its bank for
the financing of a 33,000 square foot R&D facility adjacent to its current
facility. Total cost of the new facility will be approximately $6,000,000, of
which 75% will be financed by the bank. Construction is anticipated to begin in
February 1999 with an estimated completion date of September 1999. During the
construction phase, interest will be payable monthly at the one month LIBOR
rate plus 2.25% on the outstanding balance. Upon completion of the construction
phase, the note will be converted to a five year term loan and amortized over a
fifteen year period. Equal payments of principal and interest will be payable
monthly at a fixed interest rate based on the LIBOR rate plus 2.25%. The
interest rate will be determined prior to conversion. The loan will be
collateralized by the land, the building and its contents. The facility will
reside on existing land and 1.4 acres purchased in December 1997 for $226,975.
26
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. SHORT-TERM AND LONG-TERM BORROWINGS--(CONTINUED)
NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
-----------------------------
1998 1997
------------- -------------
<S> <C> <C>
Note payable with a bank, payable in monthly installments
of $33,235 including interest at 8.5% payable through
July 2001. The note is secured by the land, the building
and its contents. ....................................... $3,084,876 $3,211,891
Note payable with a bank, payable in monthly installments
of $27,778 plus interest at the one month LIBOR rate
plus 2.25% (7.8% at November 30, 1998) maturing
April 2000. The note is secured by various research
and development equipment and is cross collateralized
with the line of credit above. .......................... 472,218 805,554
Notes payable with a bank, payable in monthly installments
of $15,423 including interest of 7.92% payable through
February 1999. The notes are secured by various
machinery and equipment. ................................ 45,668 219,585
Obligations under capital lease agreements through
August 1999 with an interest rate of 10.3%. The
carrying value of related assets is $72,079 at
November 30, 1998. ...................................... 67,819 157,519
---------- ----------
3,670,581 4,394,549
Less current portion ..................................... 585,228 723,968
---------- ----------
$3,085,353 $3,670,581
========== ==========
</TABLE>
Aggregate maturities of notes payable for three years following November
30, 1998 are as follows:
1999 ................................................. $ 585,228
2000 ................................................. 288,969
2001 ................................................. 2,796,384
----------
$3,670,581
==========
The Company's line of credit and principally all its notes payable with
its bank are subject to certain financial covenants including a tangible net
worth ratio not to exceed 1 to 1 and a minimum cash flow ratio (as defined) of
2 to 1. As of November 30, 1998, and during the fiscal year, the Company has
been in compliance with these and other financial covenants. These covenants do
not restrict the Company's ability to pay out dividends from retained earnings
as of November 30, 1998.
Interest expense for the years ended November 30, 1998, 1997, and 1996 was
$616,552, $474,602, and $342,203, reduced by interest income of $390,079,
$362,495, and $269,791, respectively, for financial statement presentation.
27
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. SHAREHOLDERS' EQUITY
1995 STOCK INCENTIVE PLAN
In June 1995, the Company's shareholders approved the 1995 Stock Incentive
Plan (the Plan). The Plan authorizes the granting of both incentive stock
options and non-qualified stock options up to a total of 1,000,000 shares,
increased annually by an additional number of shares equal to 1% of the number
of shares outstanding on the last day of each fiscal year, commencing November
30, 1995, provided that the maximum aggregate number of shares to be issued
shall not exceed 4,500,000 (2,930,094 authorized as of November 30, 1998). The
Plan authorizes the granting of both incentive stock options and non-qualified
stock options. The option price for non-qualified stock options may be less
than, equal to, or greater than the fair market value on the date the option is
granted, whereas for incentive stock options, the price will be at least 100%
of the fair market value. Compensation expense, representing the difference
between the exercise price and the fair market value at date of grant, is
recognized over the vesting or service period. For all the periods presented
substantially all of the options were granted at an exercise price equal to the
fair market value of the Company's common stock at the date of grant. Stock
option activity under the 1995 Plan was as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------------------------------------------------
1998 1997 1996
---------------------- ----------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
----------- ---------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -- beginning of year ..... 1,023,500 $ 5.06 809,000 $ 3.73 223,000 $ 3.00
Granted .............................. 431,000 6.29 712,000 5.56 817,500 3.81
Exercised ............................ 80,500 4.13 330,500 3.35 94,500 1.80
Expired .............................. 90,000 5.63 97,000 3.92 -- --
Forfeited ............................ 10,000 6.19 70,000 4.46 137,000 4.35
--------- ------- -------
Outstanding -- end of year ........... 1,274,000 5.48 1,023,500 5.06 809,000 3.73
========= ========= =======
Weighted Average fair value of
options granted during the year ..... $ 2.50 $ 2.53 $ 1.79
</TABLE>
The following information applies to options outstanding and exercisable
at November 30, 1998:
WEIGHTED AVERAGE
REMAINING
CONTRACTUAL
NUMBER LIFE WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES OUTSTANDING (YEARS) EXERCISE PRICE
- ------------------------- ------------- ----------------- -----------------
OUTSTANDING SHARES:
$2.12 - 3.87 226,000 0.55 $ 3.77
$4.12 - 5.25 338,000 1.38 $ 4.19
$6.19 - 6.97 680,000 1.93 $ 6.56
$8.50 30,000 2.53 $ 8.50
EXERCISABLE SHARES:
$2.12 - 3.87 216,000 0.45 $ 3.78
$4.12 - 5.25 338,000 1.38 $ 4.19
$6.19 - 6.97 680,000 1.93 $ 6.56
28
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. SHAREHOLDERS' EQUITY--(CONTINUED)
1988 STOCK OPTION PLAN AND INCENTIVE STOCK OPTION PLAN
Upon adoption of the 1995 Stock Incentive Plan, the Company determined
that no additional options would be granted under its former 1988 Plan. At
November 30, 1996 no options were outstanding under this Plan. In addition, its
former Incentive Stock Option Plan expired on September 15, 1991, with no
options outstanding at November 30, 1996. Stock option activity was as follows
under these Plans:
NOVEMBER 30, 1996
--------------------------
EXERCISE
SHARES PRICE
-------- ---------------
Outstanding -- beginning of year ......... 63,000 $ 1.41-2.50
Granted .................................. --
Exercised ................................ 22,000 1.41-2.50
Canceled ................................. 41,000 1.41-2.50
------
Outstanding -- end of year ............... --
======
ACCOUNTING FOR STOCK-BASED COMPENSATION
Management has made the determination not to adopt SFAS No. 123's
accounting recognition provisions for employee stock options. Therefore, only
proforma disclosures under SFAS No. 123 are required for 1996, 1997, 1998 and
thereafter. Had compensation cost for stock options been determined based on
the fair value of the options at the grant dates consistent with the method of
Statement of Financial Accounting Standards 123, Accounting for Stock-Based
Compensation (SFAS 123), the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below.
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net Income As reported $ 1,370,180 $ 4,661,120 $ 2,993,586
Pro Forma 221,643 3,863,798 2,118,899
Basic & Dilutive EPS As Reported $ .12 $ .42 $ .28
Pro Forma .02 .34 .20
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Binomial options-pricing model with the following weighted-average
assumptions used for grants in 1998, 1997 and 1996 respectively: No dividend
yield for all years; expected volatility of 73.0, 69.9 and 79.3 percent;
risk-free interest rates of 5.3, 6.1 and 6.0 percent; and expected lives of
2.2, 2.4 and 2.1 years.
COMMON STOCK WARRANTS
In connection with the Company's borrowing from its former primary bank,
the Company's Chairman of the Board of Directors executed a limited guarantee
of the Company's indebtedness, which was subsequently released in 1989. The
Company agreed to compensate the Company's Chairman of the Board of Directors
for giving such guarantee by issuing to him a warrant expiring in April 2002,
for the purchase of 500,000 shares of the Company's common stock at a purchase
price per share of $.875. In accordance with the anti-dilution provisions
contained in the above warrants, the exercise price of the warrants was
adjusted as a result of the spin-off of the Company's subsidiary in
29
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. SHAREHOLDERS' EQUITY--(CONTINUED)
1992. The adjusted conversion price of the warrants is $.7721 per share.
Warrants totaling 100,000 were exercised in April 1995 for $77,210. The
remaining 400,000 warrants were exercised in January 1997 for $308,840.
NOTE 5. INCOME TAXES
The provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------------------------------
1998 1997 1996
----------- ------------- -------------
<S> <C> <C> <C>
Current
Federal ................................ $694,809 $2,141,214 $1,279,668
State .................................. 108,278 268,599 181,951
-------- ---------- ----------
803,087 2,409,813 1,461,619
-------- ---------- ----------
Deferred
Federal ................................ 47,832 83,823 154,818
State .................................. 1,315 10,676 18,000
-------- ---------- ----------
49,147 94,499 172,818
-------- ---------- ----------
Investment tax credits .................. -- -- 223,476
Tax benefit from the exercise of employee
stock options .......................... 105,256 372,782 10,442
Other ................................... -- -- (7,566)
-------- ---------- ----------
$957,490 $2,877,094 $1,860,789
======== ========== ==========
</TABLE>
The income tax provision reconciled to the tax computed at the statutory
Federal rate of 34% is as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------------------------------
1998 1997 1996
----------- ------------- -------------
<S> <C> <C> <C>
Tax expense at statutory rate ........... $ 791,408 $2,562,993 $1,650,488
State income taxes, net of federal income
tax benefit ............................ 91,779 233,819 139,175
Non-deductible charges .................. 93,037 63,112 61,172
Other ................................... (18,734) 17,170 9,954
--------- ---------- ----------
$ 957,490 $2,877,094 $1,860,789
========= ========== ==========
</TABLE>
30
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. INCOME TAXES--(CONTINUED)
The deferred taxes consist of the following:
NOVEMBER 30,
-----------------------------
1998 1997
------------- -------------
Assets:
Vacation accrual ...................... $ 129,015 $ 82,942
Reserves (warranty and other) ......... 214,189 298,034
Deferred compensation ................. 65,433 19,105
Stock options ......................... 13,435 1,599
---------- ----------
$ 422,072 $ 401,680
Liabilities:
Depreciation .......................... (177,381) (107,866)
---------- ----------
Deferred tax asset, net ................ $ 244,691 $ 293,814
========== ==========
NOTE 6. COMMITMENTS
OPERATING LEASES
Magnetran, Inc. entered into a 5 year gross lease with the Company's
Chairman of the Board, commencing November 1, 1994 for approximately 17,750
square feet in New Jersey. The premises are leased at an aggregate annual base
rental of $86,841, which escalates 3% annually. After the initial term of the
lease, Magnetran has an option to renew for five years with a 3% increase each
year. Total rent paid to the Chairman of the Board for the years ended November
30, 1998, 1997 and 1996, were approximately $95,000, $92,000 and $90,000,
respectively.
In August 1996 the Company executed a lease with its bank for furniture
for its manufacturing facility. Total minimum lease payments are $466,080 to be
paid in 60 monthly installments beginning in August 1996. At the end of the
initial term the Company has the option to extend the lease for an additional
twelve months or purchase the furniture at the then fair market value. Also,
the Company uses office equipment under non-cancelable operating leases
expiring through 2002.
The future minimum rental payments required under operating leases that
have an initial or remaining non-cancelable lease term in excess of one year
are as follows:
YEAR ENDED NOVEMBER 30,
- -----------------------
1999 ................................... $336,091
2000 ................................... 239,755
2001 ................................... 149,064
2002 ................................... 14,040
--------
Total minimum lease payments ........... $738,950
========
The total rental expense for all operating leases was $310,377, $303,147
and $553,188 for the years ended November 30, 1998, 1997 and 1996,
respectively.
DISTRIBUTORSHIP AGREEMENT
The Company has an exclusive distributorship agreement with a Japanese
company. If the Company terminates the agreement for reasons other than breach
of contract, the Company is required
31
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. COMMITMENTS--(CONTINUED)
to repurchase the demonstration systems and spare parts inventory sold to the
distributor at a purchase price equal to a percentage of the original sales
price, discounted each year the equipment is held by the distributor. Although
there is no intent at November 30, 1998 to terminate the agreement, the
obligation to repurchase the demonstration equipment held by the distributor
would be approximately $285,000 if terminated.
LICENSE AGREEMENT
In June 1996, the Company entered into a license agreement with a German
company for the non-exclusive rights to its patent on a new plasma process
technology. In exchange for the use of the patent the Company paid an initial
license fee which is being amortized using the straight line method and a five
year useful life (unamortized license fee is classified in other assets). 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 specified royalty fee per plasma
processing chamber. After this initial time period, the specified royalty fee
per plasma processing chamber will be reduced.
CONTRACTUAL OBLIGATIONS
The Company has employment agreements with its key executive officers, the
terms of which expire at various times through September 2001. The agreements
provide for minimum annual total compensation of approximately $670,000. In
addition, key officers receive an annual bonus as a percent of net income up to
a certain cap.
RESTRUCTURING CHARGE
On June 29, 1998 the Company entered into a performance based, fixed price
contract with BDM International, Inc., a wholly owned subsidiary of TRW, Inc.
(TRW/BDM) to facilitate the Company's transformation from its existing business
processes to an Integrated Supply Chain Management philosophy. The program
focuses in three areas: product realization, demand management and supply
management. The objective of the program is to reduce total delivered
configured cost of a product through an aggressive cycle time, process
improvement initiative, that leverages the technology investment the Company
has made, and put into place all the tools and techniques and methods to ensure
consistency and reliability of results. Estimation of total fees from June 29,
1998 to completion estimated date of April, 1999 ranges from $1,200,000 to
$1,800,000. Expenditures incurred through November 30, 1998 relating to this
contract total $924,543 which are included on the income statement in
restructuring charge. Total shown on the balance sheet included in accrued
restructuring charge is $744,543 as of November 30, 1998. This amount is
expected to be paid prior to November 30, 1999.
In addition to the costs associated with the contracts above, as a result
of the beginning stages of the implementation of the new and streamlined
business processes, a number of operating activities were no longer required,
and certain other activities were over-staffed. Therefore, in November, 1998
the Company downsized its workforce by approximately 15%, resulting in a charge
of $344,989 related primarily to severance compensation. This amount is also
included on the income statement in restructuring charge. Total shown on the
balance sheet included in accrued restructuring charge is $248,304 as of
November 30, 1998. This amount is expected to be paid prior to May 31, 1999.
The total restructuring charge of $1,269,532 was recognized in the fourth
quarter of 1998.
32
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7. AFFILIATE TRANSACTIONS
During 1996 in the ordinary course of business the Company had net sales
to and purchases from RF Power Products, a former subsidiary which was spun off
in 1992, of $871,573 and $1,490,559, respectively. RF Power Products was
purchased by Advanced Energy Industries in 1998. The Company's Chairman of the
Board's ownership in RFPP's common stock received at the time of the spin-off
has substantially declined since the spin-off, and accordingly, no disclosures
are made herein of the sales and purchase activity subsequent to 1996.
NOTE 8. SEGMENT AND OTHER INFORMATION
GEOGRAPHIC SALES
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Export revenues from the United States to
unaffiliated foreign customers ......... $16,947,852 $12,110,184 $14,761,397
----------- ----------- -----------
</TABLE>
All foreign sales are denominated in U.S. dollars.
CUSTOMER SALES
In 1996 approximately 24% of consolidated net sales were to one customer.
No sales in excess of 10% of revenue were made to a single customer in 1998 and
1997. In 1998, 1997 and 1996 net sales to the Company's current Japanese
distributor were approximately 13%, 9% and 8% of revenue, respectively.
NOTE 9. DEFINED CONTRIBUTION PLAN
The Company has a defined contribution plan which is qualified under
Section 401(k) of the Internal Revenue Code. This plan covers substantially all
employees over the age of twenty-one. The plan consists of an employee elective
contribution and a company matching contribution for each eligible participant.
The Company's matching contribution is specified by the Company's Board of
Directors, is discretionary and can change from year to year. Forfeitures
resulting from a terminated participant's failure to be fully vested in the
Company's matching contribution will be used to reduce future contributions of
the Company. The Company's contribution for this plan for 1998, 1997 and 1996
was $96,160, $70,428 and $23,616 respectively.
NOTE 10. SUBSEQUENT EVENTS
In January 1999, the Company entered into a license agreement with a
domestic company for the non-exclusive rights to its patent on cluster tool
technology. In exchange for the use of the patent the Company paid an initial
license fee for use of the patent prior to the effective date of this
agreement. In addition, the Company will pay a specified royalty fee calculated
as a percentage of the net revenue of each system shipped including this
technology.
33
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
PART III
Except for the information regarding executive officers called for by Item
401 of Regulation S-K, which is included in Item 1, "Executive Officers of the
Company", and the information regarding security ownership of certain
beneficial owners and management called for by Item 403 of Regulation S-K,
which is included in Item 12, "Security Ownership of Certain Beneficial Owners
and Management", Items 10, 11 and 13 are hereby incorporated by reference to
the Company's definitive proxy statement for its Annual Meeting of Stockholders
presently scheduled for May 11, 1999 (the "Proxy Statement") which Proxy
Statement will be filed pursuant to Regulation 14A not later than 120 days
after the end of the Company's fiscal year, in accordance with General
Instruction G(3) to Form 10-K. Only those sections of the Proxy Statement that
specifically address the items set forth herein are incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 15, 1999, based on
11,218,561 shares of the Company's Common Stock outstanding on that date, by
(i) each person who is known to beneficially own more than 5% of the Company's
Common Stock, computed in accordance with Rule 13d-3 of the Securities Exchange
Act of 1934, as amended; (ii) each of the Company's directors; (iii) each of
the Company's named executive officers; and (iv) all directors and executive
officers of the Company as a group. The shareholders listed possess sole voting
and investment power with respect to the shares listed.
AMOUNT OF APPROXIMATE
BENEFICIAL PERCENT OF
NAME OWNERSHIP CLASS
- --------------------------------- --------------- ------------
Ronald H. Deferrari ............. 2,038,300 18.17%
10050 16th Street North
St. Petersburg, FL 33716
Anastasios S. Gianoplus ......... 40,000(1) *
10050 16th Street North
St. Petersburg, FL 33716
Lubek Jastrzebski ............... 40,000(2) *
10050 16th Street North
St. Petersburg, FL 33716
Richard T. Heglin ............... 6,000(3) *
10050 16th Street North
St. Petersburg, FL 33716
Ronald S. Deferrari ............. 531,892(4) 4.54%
10050 16th Street North
St. Petersburg, FL 33716
Edmond A. Richards .............. 146,000(5) 1.29%
10050 16th Street North
St. Petersburg, FL 33716
Stacy Wagner .................... 128,000(6) 1.13%
10050 16th Street North
St. Petersburg, FL 33716
34
<PAGE>
AMOUNT OF APPROXIMATE
BENEFICIAL PERCENT OF
NAME OWNERSHIP CLASS
- ---------------------------------- ---------------- -------------
Dr. Jay N. Sasserath ............. 100,000(7) *
10050 16th Street North
St. Petersburg, FL 33716
Executive officers and directors
as a group (8 persons) ......... 3,030,192 24.97%
- ----------------
* Less than 1% of the outstanding stock.
(1) Includes an option to purchase 20,000 shares at a price of $4.12 per share,
which expires on May 6, 2000; an option to purchase 5,000 shares at a
price of $3.60 per share, which expires on June 30, 2000; an option to
purchase 5,000 shares at a price of $6.97 which expires on August 19,
2000; an option to purchase 5,000 shares at a price of $6.19 which expires
on January 13, 2001. The number of shares reflected does not include 5,000
shares which Mr. Gianoplus has the right to acquire pursuant to a stock
option exercisable after June 30, 1999 at an exercise price of $3.75 per
share.
(2) Includes an option to purchase 5,000 shares at a price of $3.87 per share,
which expires April 30, 1999; an option to purchase 20,000 shares at a
price of $4.12 per share, which expires on May 6, 2000; an option to
purchase 5,000 shares at a price of $3.60 per share, which expires on June
30, 2000; an option to purchase 5,000 shares at a price of $6.97 per
share, which expires on August 19, 2000; and an option to purchase 5,000
shares at a price of $6.19 which expires on January 13, 2001. The number
of shares reflected does not include 5,000 shares which Mr. Jastrzebski
has the right to acquire pursuant to a stock option exercisable after June
30, 1999 at an exercise price of $3.75 per share.
(3) Includes an option to purchase 5,000 shares at a price of $6.19, which
expires on January 13, 2001.
(4) Includes an option to purchase 110,000 shares at a price of $3.87 per
share, which expires on April 30, 1999; an option to purchase 150,000
shares at a price of $4.12 per share, which expires on May 6, 2000; an
option to purchase 125,000 shares at a price of $6.97 per share, which
expires on August 19, 2000; and an option to purchase 125,000 shares at a
price of $6.19 per share, which expires on January 13, 2001. The number of
shares reflected does not include 50,000 shares which Mr. DeFerrari has
the right to acquire pursuant to a stock option exercisable after July 8,
1999 at an exercise price of $4.75 per share.
(5) Includes an option to purchase 50,000 shares at a price of $4.12 per share,
which expires on May 6, 2000; an option to purchase 30,000 shares at a
price of $6.97 which expires on August 19, 2000; and an option to purchase
50,000 shares at a price of $6.19 which expires on January 13, 2001. The
number of shares reflected does not include 15,000 shares which Mr.
Richards has the right to acquire pursuant to a stock option exercisable
after July 8, 1999 at an exercise price of $4.75 per share.
(6) Includes an option to purchase 50,000 shares at a price of $3.87 per share,
which expires on April 30, 1999; an option to purchase 10,000 shares at a
price of $5.25 which expires on June 26, 1999; an option to purchase
15,000 shares at a price of $4.12 per share, which expires on May 6, 2000;
an option to purchase 10,000 shares at a price of $6.97 per share, which
expires on August 19, 2000; and an option to purchase 10,000 shares at a
price of $6.19 which expires on January 13, 2001. The number of shares
reflected does not include 15,000 shares which Ms. Wagner has the right to
acquire pursuant to a stock option exercisable after July 8, 1999 at an
exercise price of $4.75 per share.
(7) Includes an option to purchase 50,000 shares at a price of $6.97 per share,
which expires on August 19, 2000; and an option to purchase 50,000 shares
at a price of $6.19, which expires on January 13, 2001. The number of
shares reflected does not include 7,500 shares which Mr. Sasserath has the
right to acquire pursuant to a stock option exercisable after July 8, 1999
at an exercise price of $4.75 per share.
35
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. The following documents are filed as part of this Form 10-K:
(1) Consolidated Financial Statements
The index to the Consolidated Financial Statements of the Company is
included on page 21 in Part II, Item 8.
(2) Financial Statement Schedules
(a) Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted either because the schedule is
inapplicable or the required information is included elsewhere in the
Financial Statements.
(3) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended
November 30, 1998.
(4) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBITS
- -------- ------------------------------------------------------------------------------------------------
<S> <C>
3.1 Articles of Incorporation of the Registrant, as amended May 6, 1994 (Exhibit 3.1 to the
Registrant's 1994 Form 10-K).*
3.2 By-laws of the Registrant (Exhibit 3.2 to the Registrant's 1994 Form 10-K).*
3.3 Amendment to the Registrant's Articles of Incorporation (Exhibit 3.1 to the Registrant's
May 31, 1995 Form 10-Q).*
3.4 Amendment to the Registrant's Articles of Incorporation (Exhibit 3.4 to the Registrant's
May 31, 1996 Form 10Q).*
4.1 Notes and Warrant Agreements dated July 1, 1980 and February 17, 1981, and amendments
thereto, between the Registrant and Atalanta Investment Company, Inc. and related
consents (Exhibits 3.3, 3.4 and 3.5 to the 1981 Registration Statement, Exhibit 3.5.1 to
Amendment No. 1 to the Registration Statement No. 2-73281-NY filed on July 20, 1981 and
Exhibit 4.3 to the Registration Statement No. 2-82980 filed on April 11, 1983).*
4.2 Amendment, dated November 1, 1988, to the Note and Warrant Agreements between the
Registrant and Atalanta Investment Company (Exhibit 4.2 to the Registrant's Annual
Report Form 10-K for the year ended November 30, 1988).*
4.3 Amendment, dated July 21, 1989 to the Note and Warrant Agreements between the Registrant
and Atalanta Investment Company (Exhibit 4.3 to Registrant's Annual Report on
Form 10-K for the year ended November 30, 1989).*
4.4 Warrant dated as of July 24, 1987 between the Registrant and Ronald H. Deferrari (Exhibit 4.6
to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1987).*
4.5 Stock Option Plan of the Registrant, dated December 1, 1988. (Exhibit 4.4 to the Registrant's
1988 Form 10-K).*
4.6 1995 Stock Incentive Plan of the Registrant, dated June 14, 1995 (Exhibit 4 to the Registrant's
1995 Form S-8).*
4.7 Form of stock certificate (Exhibit 4.6 to the Registrant's 1994 Form 10-K).*
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBITS
- -------- -----------------------------------------------------------------------------------------
<S> <C>
4.8 The Company's 1995 Stock Incentive Plan, as Amended and Restated Effective as of May 6,
1997.*
4.9 The Company's 1995 Stock Incentive Plan, as Amended and Restated Effective as of
January 8, 1999.
10.1 Employment Agreement dated May 3, 1994 between the Registrant and Ronald H. Deferrari
(Exhibit 10.1 to the Registrant's 1994 Form 10-K).*
10.2 Amendment to Employment Agreement between the Registrant and Ronald H. Deferrari,
dated June 26, 1995 (Exhibit 10.30 to the Registrant's August 31, 1995 Form 10-Q).*
10.3 Amendment between the Registrant and Diana M. DeFerrari, dated September 18, 1996.*
10.4 Employment Agreement between the Registrant and Diana M. DeFerrari, dated February 9,
1995 (Exhibit 10.1 to the Registrant's May 31, 1995 Form 10-Q).*
10.5 Employment Agreement dated May 18, 1994 between the Registrant and Ronald S. Deferrari
(Exhibit 10.3 to the Registrant's 1994 Form 10-K).*
10.6 Amendment to Employment Agreement between the Registrant and Ronald S. Deferrari,
dated June 26, 1995 (Exhibit 10.31 to the August 31, 1995 Form 10-Q).*
10.7 Lease dated as of November 1, 1994 between Magnetran, Inc., and Ronald H. Deferrari for
property located at 136 Route 73, Voorhees, New Jersey.*
10.8 Amendment to Employment Agreement between the Registrant and Ronald S. Deferrari,
dated June 26, 1995.*
10.9 Employment Agreement dated December 1, 1992 between the Registrant and Edmond A.
Richards.*
10.10 Amendment to Employment Agreement between the Registrant and Curtis A. Barratt, dated
September 18, 1996.*
10.11 Amendment to Employment Agreement between the Registrant and Edmond A. Richards,
dated October 9, 1996.*
10.12 Employment Agreement between the Registrant and Edmond A. Richards, dated January 22,
1997.*
10.13 Employment Agreement between the Registrant and Ronald S. Deferrari, dated January 22,
1997.*
10.14 Employment Agreement between the Registrant and Stacy L. Wagner, dated January 22,
1997.*
10.15 Amendment to Employment Agreement between Registrant and Stacy L. Wagner, effective
August 19, 1997 (Exhibit 10.15 to the Registrant's May 31, 1998 Form 10-Q).*
10.16 Amendment No. 1 to Employment Agreement between Registrant and Edmond A. Richards,
dated October 1, 1998.
10.17 Amendment No. 2 to Employment Agreement between Registrant and Stacy L. Wagner, dated
October 1, 1998.
10.18 Amendment No. 1 to Employment Agreement between Registrant and David J. Johnson,
dated October 1, 1998.
10.19 Loan Agreement dated January 19, 1995 between the Registrant and NationsBank of Florida,
N.A. (including Revolving Credit Agreement, Security Agreement, Term Promissory Note
and Line of Credit Note), (Exhibit 10.16 to the Registrant's 1994 Form 10-K).*
10.20 Promissory Note dated August 14, 1995 between the Registrant and NationsBank of Florida,
N.A. (Exhibit 10.23 to the Registrant's August 31, 1995 Form 10-Q).*
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBITS
- ---------- --------------------------------------------------------------------------------------------
<S> <C>
10.21 Mortgage, Assignment of Rents and Security Agreement dated August 14, 1995 between the
Registrant and NationsBank of Florida, N.A. (Exhibit 10.24 to the Registrant's August 31,
1995 Form 10-Q).*
10.22 Environmental Indemnity Agreement dated August 14, 1995 between the Registrant and
NationsBank of Florida, N.A. (Exhibit 10.25 to the Registrant's August 31, 1995
Form 10-Q).*
10.23 Amendment dated August 14, 1995 (to Amended and Restated Revolving Credit Agreement
between Plasma-Therm, Inc. and NationsBank of Florida, N.A., dated January 19, 1995)
between the Registrant and NationsBank of Florida, N.A. (Exhibit 10.26 to the Registrant's
August 31, 1995 Form 10-Q).*
10.24 Construction Loan Agreement dated August 14, 1995 between the Registrant and
NationsBank of Florida, N.A. (Exhibit 10.27 to the Registrant's August 31, 1995
Form 10-Q).*
10.25 Collateral Assignment of General Construction Contract, Subcontracts, Plans and
Specifications and Permits dated August 14, 1995 between the Registrant and NationsBank
of Florida, N.A. (Exhibit 10.28 to the Registrant's August 31, 1995 Form 10-Q).*
10.26 Collateral Assignment of Professional Agreements and Plans and Specifications dated August
14, 1995 between the Registrant and NationsBank of Florida, N.A. (Exhibit 10.29 to the
Registrant's August 31, 1995 Form 10-Q).*
10.27 Third Future Advance Promissory Note dated November 17, 1995 between the Registrant and
NationsBank of Florida, N.A. (Exhibit 10.27 to the Registrant's 1995 Form 10-K).*
10.28 Third Consolidation Line of Credit Promissory Note dated November 17, 1995 between the
Registrant and NationsBank of Florida, N.A. (Exhibit 10.28 to the Registrant's 1995 10-K).*
10.29 Future Advance Consolidation and Modification Agreement dated November 17, 1995
between the Registrant and NationsBank of Florida, N.A. (Exhibit 10.29 to the Registrant's
1995 10-K).*
10.30 Second Amendment (to Amended and Restated Revolving Credit Agreement) dated
November 17, 1995 between the Registrant and NationsBank of Florida, N.A. (Exhibit 10.30
to the Registrant's 1995 10-K).*
10.31 Amendment to Amended and Restated Security Agreement dated November 17, 1995
between the Registrant and NationsBank of Florida, N.A. (Exhibit 10.31 to the Registrant's
1995 10-K).*
10.36 Registrant's 401(k) Savings Plan Summary Plan Description dated July 1, 1992 (Exhibit 10.25
to the Registrant's 1992 Form 10-K).*
10.37 Registrant's 401(k) Adoption and Trust Agreement dated January 1, 1995.*
10.38 Distributorship Agreement between the Registrant and Hakuto Co., Ltd., dated August 1,
1995 (Exhibit 10.38 to the Registrant's 1995 Form 10-K).*
10.39 Note and Security Agreement dated March 6, 1996 between the Registrant and NationsBanc
Leasing Corporation. (Exhibit 10.39 to the February 29, 1996 Form 10-Q).*
10.40 Employment Agreement between the Registrant and Curtis A. Barratt, dated February 28,
1996 (Exhibit 10.40 to the February 29, 1996 Form 10-Q).*
10.41 Note and Security Agreement dated March 20, 1996 between the Registrant and NationsBanc
Leasing Corporation (Exhibit 10.41 to the May 31, 1996 Form 10-Q).*
10.42 Extension Agreement dated June 14, 1996 and Addendum Letter to Extension Agreement
dated June 17, 1996 between the Registrant and NationsBank, N.A. (South) (Exhibit 10.42
to the May 31, 1996 Form 10-Q).*
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBITS
- ---------- -----------------------------------------------------------------------------------------------
<S> <C>
10.43 License Agreement dated June 19, 1996 between the Registrant and Robert Bosch GmbH
(Exhibit 10.43 to the May 31, 1996 form 10-Q).*
10.44 Equipment Lease Agreement dated August 27, 1996 between the Registrant and NationsBanc
Leasing Corporation (Exhibit 10.44 to the August 31, 1996 Form 10-Q).*
10.45 Loan Agreement dated April 18, 1997 between the Company and NationsBank, N.A. (South)
including Credit Agreement, Security Agreement, Negative Pledge Agreement, Third
Amendment (to Amended and Restated Revolving Credit Agreement) and First
Amendment (to Amended and Restated Security Agreement), Term Promissory Note and
Line of Credit Note.*
10.46 License Agreement Amendment dated August 2, 1997 between the Registrant and Robert
Bosch GmbH.*
10.47 Loan Agreement dated March 25, 1998 between the Company and NationsBank, N.A. (South)
including Amendment to Credit Agreement, Amendment to Security Agreement,
Amendment to Negative Pledge Agreement, Guaranty Agreement, Line of Credit Note and
Line of Credit Consolidation Note (Exhibit 10.47 to the Registrant's May 31, 1998
Form 10-Q).*
10.48 Employment Agreement between the Registrant and Jay N. Sasserath, dated October 1, 1998.
10.49 Performance Based Firm Fixed Price Contract dated June 29, 1998 between the Registrant and
BDM International, Inc., a wholly owned subsidiary of TRW, Inc. (Due to the confidential
nature, this contract has been filed without exhibits. The Company offers to file the exhibits
as a supplement at the request of the SEC).
10.50 License Agreement dated January 4, 1999 between the Registrant and Applied Materials, Inc.
10.51 Amendment No. 1 to Employment Agreement between Registrant and Ronald S. Deferrari,
dated October 1, 1998.
21. Subsidiary of the Registrant.
23. Consent of Grant Thornton LLP.
27. Financial Data Schedule (for SEC use only).
</TABLE>
- ----------------
* Incorporated by reference.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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.
BY: /s/ RONALD S. DEFERRARI
--------------------------------------------
Ronald S. Deferrari
President & Chief Executive Officer
Dated: February 8, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, the
following persons on behalf of the registrant in the capacities have signed
this report below on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
<S> <C> <C>
/s/ RONALD H. DEFERRARI Chairman of the Board February 8, 1999
- --------------------------------
Ronald H. Deferrari
/s/ A.S. GIANOPLUS Director, Chairman of the Audit February 8, 1999
- -------------------------------- and Stock Option Committees
A.S. Gianoplus
/s/ LUBEK JASTRZEBSKI Director February 8, 1999
- --------------------------------
Lubek Jastrzebski
/s/ RICHARD T. HEGLIN Director February 8, 1999
- --------------------------------
Richard T. Heglin
/s/ STACY WAGNER Chief Financial Officer, February 8, 1999
- -------------------------------- Corporate Secretary, Treasurer
Stacy Wagner
</TABLE>
40
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS ON THE SCHEDULE
Board of Directors
Plasma-Therm, Inc.
In connection with our audit of the consolidated financial statements of
Plasma-Therm, Inc. and Subsidiary referred to in our report dated January 18,
1999, which is included in the Annual Report on Form 10-K for the year ended
November 30, 1998, we have also audited Schedule II for each of the three years
in the period ended November 30, 1998. In our opinion, the schedule presents
fairly, in all material respects, the information required to be set forth
therein.
GRANT THORNTON LLP
Tampa, Florida
January 18, 1999
41
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- --------------------------------------- ------------ ---------------------------------- -------------- -----------
ADDITIONS
----------------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS - DEDUCTIONS - END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- --------------------------------------- ------------ ------------------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED NOVEMBER 30, 1998
Warranty Liability ................... $350,000 $ 897,038(1) $ -- $897,038 $350,000
Accrued Restructuring Charge ......... $ -- $ 1,269,532(2) $ -- 276,685 $992,847
YEAR ENDED NOVEMBER 30, 1997:
Warranty Liability ................... $610,000 $ 427,800(1) $ -- $687,800 $350,000
YEAR ENDED NOVEMBER 30, 1996:
Warranty Liability ................... $693,515 $ 661,147(1) $ -- $744,662 $610,000
</TABLE>
- ----------------
(1) Costs incurred for warranty repair during the year (inclusive of a $260,000
reduction in the warranty liability in 1997).
(2) Costs incurred for restructuring during the year.
42
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
4.9 The Company's 1995 Stock Incentive Plan, as Amended and
Restated Effective as of January 8, 1999.
10.16 Amendment No. 1 to Employment Agreement between Registrant
and Edmond A. Richards, dated October 1, 1998.
10.17 Amendment No. 2 to Employment Agreement between Registrant
and Stacy L. Wagner, dated October 1, 1998.
10.18 Amendment No. 1 to Employment Agreement between Registrant
and David J. Johnson, dated October 1, 1998.
10.48 Employment Agreement between the Registrant and Jay N.
Sasserath, dated October 1, 1998.
10.49 Performance Based Firm Fixed Price Contract dated June 29,
1998 between the Registrant and BDM International, Inc., a
wholly owned subsidiary of TRW, Inc. (Due to the
confidential nature, this contract has been filed without
exhibits. The Company offers to file the exhibits as a
supplement at the request of the SEC).
10.50 License Agreement dated January 4, 1999 between the
Registrant and Applied Materials, Inc.
10.51 Amendment No. 1 to Employment Agreement between Registrant
and Ronald S. Deferrari, dated October 1, 1998.
21. Subsidiary of the Registrant.
23. Consent of Grant Thornton LLP.
27. Financial Data Schedule (for SEC use only).
EXHIBIT 4.9
PLASMA-THERM, INC.
1995 STOCK INCENTIVE PLAN
AS ADOPTED BY THE BOARD OF DIRECTORS
AND THE STOCK OPTION COMMITTEE ON MARCH 17, 1995
AND AS AMENDED AND RESTATED EFFECTIVE AS OF MAY 6, 1997
AND AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 8, 1999
1. PURPOSE. Plasma-Therm, Inc., a Florida corporation (the "Company"),
hereby amends and restates the Plasma-Therm, Inc. 1995 Stock Incentive Plan (the
"Plan"). The Plan is intended to recognize the contributions made to the Company
by employees (including employees who are members of the Board of Directors) of
the Company or any Affiliate, to provide such persons with additional incentive
to devote themselves to the future success of the Company or an Affiliate, and
to improve the ability of the Company or an Affiliate to attract, retain, and
motivate individuals upon whom the Company's sustained growth and financial
success depend, by providing such persons with an opportunity to acquire or
increase their proprietary interest in the Company through receipt of rights to
acquire the Company's common stock, par value $.01 per Share (the "Common
Stock") and through the transfer or issuance of Common Stock. In addition, the
Plan is intended as an additional incentive to directors of the Company who are
not employees of the Company or an Affiliate to serve on the Board of Directors
and to devote themselves to the future success of the Company by providing them
with an opportunity to acquire or increase their proprietary interest in the
Company through the receipt of rights to acquire Common Stock. Furthermore, the
Plan may be used to encourage consultants and advisors of the Company to further
the success of the Company.
2. DEFINITIONS. Unless the context clearly indicates otherwise, the
following terms shall have the following meanings:
(a) "Affiliate" means a corporation which is a parent
corporation or a subsidiary corporation with respect to the Company
within the meaning of Section 424(e) or (f) of the Code.
(b) "Award" shall mean a transfer of Common Stock made
pursuant to the terms of the Plan.
(c) "Award Agreement" shall mean the agreement between the
Company and a Grantee with respect to an Award made pursuant to the
Plan.
(d) "Board of Directors" means the Board of Directors of the
Company.
(e) "Change of Control" shall have the meaning as set forth in
Section 10 of the Plan.
<PAGE>
(f) "Code" means the Internal Revenue Code of 1986, as
amended.
(g) "Committee" shall have the meaning set forth in Section 3
of the Plan.
(h) "Common Stock" shall have the meaning set forth in Section
1 of the Plan.
(i) "Company" means Plasma-Therm, Inc., a Florida corporation.
(j) "Disability" shall have the meaning set forth in Section
22(e)(3) of the Code.
(k) "Employee" means an employee of the Company or an
Affiliate.
(l) "Fair Market Value" shall have the meaning set forth in
Subsection 8(b) of the Plan.
(m) "Grantee" shall mean a person to whom an Award has been
granted pursuant to the Plan.
(n) "ISO" means an Option granted under the Plan which is
intended to qualify as an "incentive stock option" within the meaning
of Section 422(b) of the Code.
(o) "Qualified Director" shall mean a member of the Board of
Directors of the Company who is a "non-employee director" as that term
is defined in paragraph (b)(3) of Rule 16b-3 and an "outside director"
within the meaning of Section 162(m) of the Code and any Treasury
Regulations promulgated thereunder.
(p) "Non-qualified Stock Option" means an Option granted under
the Plan which is not intended to qualify, or otherwise does not
qualify, as an "incentive stock option" within the meaning of Section
422(b) of the Code.
(q) "Option" means either an ISO or a Non-qualified Stock
Option granted under the Plan.
(r) "Optionee" means a person to whom an Option has been
granted under the Plan, which Option has not been exercised and has not
expired or terminated.
(s) "Option Document" means the document described in Section
8 or Section 9 of the Plan, as applicable, which sets forth the terms
and conditions of each grant of Options.
(t) "Option Price" means the price at which Shares may be
purchased upon exercise of an Option, as calculated pursuant to
Subsection 8(b) of the Plan.
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(u) "PERFORMANCE OBJECTIVES" shall mean such performance
criteria as is determined by the Committee (as defined below) or the
Board and which will qualify the related Option as performance-based
compensation under Section 162(m) of the Code. Such Performance
Objectives shall be equal to a desired level or levels for any fiscal
period, year or years of any or a combination of the following criteria
on an absolute or relative basis, and, where applicable, measured
before or after interest, depreciation, amortization, service fees,
extraordinary items and/or special items: (i) pre-tax earnings, (ii)
operating earnings, (iii) after-tax earnings, (iv) return on
investment, (v) earnings value added, (vi) earnings per share, (vii)
revenues, (viii) cash flow or cash flow return on investment, (ix)
return on assets or return on net assets, (x) return on capital, (xi)
return on equity, (xii) return on sales, (xiii) operating margin or
(xiv) total shareholder return or stock price appreciation, or such
other non-financial criteria as determined by the Committee; provided
that with respect to certain participants, the Performance Objectives
may be based upon divisional rather than consolidated results, or a
combination of the two.
(v) "Rule 16b-3" means Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended.
(w) "SAR" shall have the meaning set forth in Section 12 of
the Plan.
(x) "Section 16 Officers" means any person who is an "officer"
within the meaning of Rule 16a-1(f) promulgated under the Securities
Exchange Act of 1934, as amended, or any successor rule.
(y) "Shares" means the shares of Common Stock of the Company
which are the subject of Options or granted as Awards under the Plan.
3. ADMINISTRATION OF THE PLAN. The Board of Directors may designate a
committee ("the Committee") composed of two or more of directors, each of whom
is a Qualified Director, to operate and administer the Plan with respect to all
or a designated portion of the participants. Any such committee designated by
the Board of Directors, and the Board of Directors itself in its administrative
capacity with respect to the Plan, is referred to as the "Committee." With the
exception of the timing of grants of Options, the price at which Shares may be
purchased, and the number of Shares covered by Options granted to each member of
the Committee, all of which shall be as specifically set forth in Section 9, the
other provisions set forth herein, as it pertains to members of the Committee,
may be administered by the Board of Directors.
(a) MEETINGS. The Committee shall hold meetings at such times
and places as it may determine, shall keep minutes of its meetings, and
shall adopt, amend and revoke such rules or procedures as it may deem
proper; provided, however, that it may take action only upon the
agreement of a majority of the whole Committee. Any action which the
Committee shall take through a written instrument signed by a majority
of its
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members shall be as effective as though it had been taken at a meeting
duly called and held.
(b) EXCULPATION. No member of the Board of Directors shall be
personally liable for monetary damages for any action taken or any
failure to take any action in connection with the administration of the
Plan or the granting of Options or Awards under the Plan, provided that
this Subsection 3(b) shall not apply to (i) any breach of such member's
duty of loyalty to the Company, an Affiliate, or the Company's
stockholders, (ii) acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law, (iii) acts or
omissions that would result in liability under applicable law, and (iv)
any transaction from which the member derived an improper personal
benefit.
(c) INDEMNIFICATION. Service on the Committee shall constitute
service as a member of the Board of Directors of the Company. Each
member of the Committee shall be entitled, without further act on his
part, to indemnity from the Company and limitation of liability to the
fullest extent provided by applicable law and by the Company's Articles
of Incorporation and/or By-law in connection with or arising out of any
action, suit or proceeding with respect to the administration of the
Plan or the granting of Options or Awards thereunder in which he or she
may be involved by reason of his or her being or having been a member
of the Committee, whether or not he or she continues to be such member
of the Committee at the time of the action, suit or proceeding.
(d) AUTHORITY. The Committee shall have authority to grant
Options to any participants under the Plan. Subject to the express
provisions of the Plan, the Committee shall have complete authority to
establish such rules and regulations as it deems necessary or advisable
for the proper administration of the Plan, and, in its discretion, to
determine the individuals to whom, and the time or times at which
Options shall be granted, the exercise periods, vesting periods,
limitations on exercise, the number of shares to be subject to each
Option and any other terms, limitations, conditions and restrictions on
Options as the Committee, in its discretion, deems appropriate. In
making such determinations, the Committee may take into account the
nature of the services rendered by the respective individuals, their
present and potential contributions to the success of the Company or
its subsidiaries, and such other factors as the Committee in its
discretion shall deem relevant. The Committee shall have the power and
authority to interpret the Plan and to adopt rules and regulations for
its administration that are not inconsistent with the express terms of
the Plan. Any such actions by the Committee shall be final, binding and
conclusive on all parties in interest.
4. GRANTS UNDER THE PLAN. Grants under the Plan may be in the form of a
Non-qualified Stock Option, an ISO or a combination thereof, at the discretion
of the Committee.
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5. ELIGIBILITY. All Employees, members of the Board of Directors and
consultants and advisors to the Company shall be eligible to receive Options and
Awards hereunder. Consultants and advisors shall be eligible only if they render
bona fide services to the Company unrelated to the offer or sale of securities.
The Committee, in its sole discretion, shall determine whether an individual
qualifies as an employee.
6. SHARES SUBJECT TO PLAN. The aggregate maximum number of Shares for
which Awards or Options may be granted pursuant to the Plan is 2,706,757
(including Options and Awards granted under the Plan prior to the effective date
of this amended and restated Plan), increased on November 30 of each year from
and including November 30, 1997 by a number of shares equal to one percent (1%)
of the number of shares of Common Stock outstanding on such date; provided,
however, that any such increase shall be made only to the extent that the
Company has sufficient authorized and unreserved Common Stock for such purpose;
and further provided that the maximum aggregate number of Shares to be issued
under the Plan shall not exceed 4,500,000. Such increase shall be made each
November 30, regardless of the number of shares remaining available for issuance
under the Plan on such date. The number of shares which may be issued under the
Plan shall be further subject to adjustment in accordance with Section 11. In
all cases, determinations under this Section 6 shall be made in a manner that is
consistent with the exemption for performance-based compensation provided by
Section 162 (m) of the Code (or any successor provision thereto) and any
Treasury Regulations promulgated thereunder. The Shares shall be issued from
authorized and unissued Common Stock or Common Stock held in or hereafter
acquired for the treasury of the Company. If an Option terminates or expires
without having been fully exercised for any reason or if Shares subject to an
Award have been conveyed back to the Company pursuant to the terms of an Award
Agreement, the Shares for which the Option was not exercised or the Shares that
were conveyed back to the Company may again be the subject of one or more
Options or Awards granted pursuant to the Plan.
7. TERM OF THE PLAN. The Plan (as amended and restated herein) is
effective as of January 8, 1999. No ISO may be granted under the Plan after
March 16, 2005.
8. OPTION DOCUMENTS AND TERMS. Each Option granted under the Plan shall
be a Non-qualified Stock Option unless the Option shall be specifically
designated at the time of grant to be an ISO for Federal income tax purposes,
provided that ISO's may only be granted to Employees. If any Option designated
an ISO is determined for any reason not to qualify as an incentive stock option
within the meaning of Section 422 of the Code, such Option shall be treated as a
Non-qualified Stock Option for all purposes under the provisions of the Plan.
Options granted pursuant to the Plan shall be evidenced by the Option Documents
in such form as the Committee shall from time to time approve, which Option
Documents shall comply with and be subject to the following terms and conditions
and such other terms and conditions as the Committee shall from time to time
require which are not inconsistent with the terms of the Plan. However, the
provisions of this Section 8 shall not be applicable to Options granted to
members of the Committee, except as otherwise provided in Subsection 9(c).
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<PAGE>
(a) NUMBER OF OPTION SHARES. Each Option Document shall state
the number of Shares to which it pertains. An Optionee may receive more
than one Option, which may include Options which are intended to be
ISO's and Options which are not intended to be ISO's, but only on the
terms and subject to the conditions and restrictions of the Plan.
Notwithstanding anything herein to the contrary, no Optionee shall be
granted Options during one fiscal year of the Company for more than
Five Hundred Thousand (500,000) Shares (such number to be subject to
adjustment in accordance with Section 11). Any Option that is cancelled
shall count against the foregoing yearly limitation for the fiscal year
in which the Option is granted, in accordance with U.S. Treasury
Regulations Section 1.162-27(e)(vi)(B).
(b) OPTION PRICE. Subject to the provisions of Section 9
hereof, each Option Document shall state the Option Price which, for
both a Non-qualified Stock Option and for an ISO, shall be at least
100% of the Fair Market Value of the Shares on the date the Option is
granted as determined by the Committee in accordance with this
Subsection 8(b); provided, however, that if an ISO is granted to an
Optionee who then owns, directly or by attribution under Section 424(d)
of the Code, shares possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or an
Affiliate, then the Option Price shall be at least 110% of the Fair
Market Value of the Shares on the date the Option is granted. If the
Common Stock is traded in a public market, then the Fair Market Value
per share shall be, if the Common Stock is listed on a national
securities exchange or included in the NASDAQ System, the last reported
sale price thereof on the relevant date, or, if the Common Stock is not
so listed or included, the mean between the last reported "bid" and
"asked" prices thereof on the relevant date, as reported on NASDAQ or,
if not so reported, as reported by the National Daily Quotation Bureau,
Inc. or as reported in a customary financial reporting service, as
applicable and as the Committee determines.
(c) EXERCISE. The Committee shall prescribe the manner in
which a participant may exercise an Option, which may not be
inconsistent with the provisions of this Plan. No Option shall be
deemed to have been exercised prior to the receipt by the Company of
written notice of such exercise and (unless arrangements satisfactory
to the Company have been made for payment through a broker in
accordance with procedures permitted by Regulation T of the Federal
Reserve Board) of payment in full of the Option Price for the Shares to
be purchased. Each such notice shall specify the number of Shares to be
purchased and shall (unless the Shares are covered by a then current
registration statement or a Notification under Regulation A under the
Securities Act of 1933, as amended (the "Act")), contain the Optionee's
acknowledgment in form and substance satisfactory to the Company that
(a) such Shares are being purchased for investment and not for
distribution or resale (other than a distribution or resale which, in
the opinion of counsel satisfactory to the Company, may be made without
violating the registration provisions of the Act), (b) the Optionee has
been advised and understands that (i) the Shares have not been
registered under the Act and are "restricted securities" within the
meaning of Rule 144 under the Act and are subject to restrictions on
transfer and (ii) the Company is under no obligation to register the
Shares under the Act or to take any
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<PAGE>
action which would make available to the Optionee any exemption from
such registration, (c) such Shares may not be transferred without
compliance with all applicable federal and state securities laws, and
(d) an appropriate legend referring to the foregoing restrictions on
transfer and any other restrictions imposed under the Option Documents
may be endorsed on the certificates. Notwithstanding the foregoing, if
the Company determines that issuance of Shares should be delayed
pending (A) registration under federal or state securities laws, (B)
the receipt of an opinion of counsel satisfactory to the Company that
an appropriate exemption from such registration is available, (C) the
listing or inclusion of the Shares on any securities exchange or an
automated quotation system or (D) the consent or approval of any
governmental regulatory body whose consent or approval is necessary in
connection with the issuance of such Shares, the Company may defer
exercise of any Option granted hereunder until any of the events
described in this sentence has occurred.
(d) MEDIUM OF PAYMENT. Subject to the terms of the applicable
Option Document, an Optionee shall pay for Shares (i) in cash, (ii) by
certified or cashier's check payable to the order of the Company, or
(iii) by such other mode of payment as the Committee may approve,
including payment through a broker in accordance with procedures
permitted by Regulation T of the Federal Reserve Board. The Optionee
may also exercise the Option in any manner contemplated by Section 12.
Furthermore, the Committee may provide in an Option Document that
payment may be made in whole or in part in shares of the Company's
Common Stock held by the Optionee, provided that the shares have been
held for more than six (6) months. If payment is made in whole or in
part in shares of the Company's Common Stock, then the Optionee shall
deliver to the Company certificates registered in the name of such
Optionee representing the shares owned by such Optionee, free of all
liens, claims and encumbrances of every kind and having an aggregate
Fair Market Value on the date of delivery that is at least as great as
the Option Price of the Shares (or relevant portion thereof) with
respect to which such Option is to be exercised by the payment in
shares of Common Stock, endorsed in blank or accompanied by stock
powers duly endorsed in blank by the Optionee. In the event that
certificates for shares of the Company's Common Stock delivered to the
Company represent a number of shares in excess of the number of shares
required to make payment for the Option Price of the Shares (or
relevant portion thereof) with respect to which such Option is to be
exercised by payment in shares of Common Stock, the stock certificate
or certificates issued to the Optionee shall represent (i) the Shares
in respect of which payment is made, and (ii) such excess number of
shares. Notwithstanding the foregoing, the Committee may impose from
time to time such limitations and prohibitions on the use of shares of
the Common Stock to exercise an Option as it deems appropriate.
(e) TERMINATION OF OPTIONS.
(i) No Option shall be exercisable after the first to
occur of the following:
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<PAGE>
(A) Expiration of the Option term specified
in the Option Document, which, in the case of an ISO,
shall not occur after (1) ten years from the date of
grant, or (2) five years from the date of grant if
the Optionee on the date of grant owns, directly or
by attribution under Section 424(d) of the Code,
shares possessing more than ten percent (10%) of the
total combined voting power of all classes of stock
of the Company or of an Affiliate (a "10%
Shareholder");
(B) Except to the extent otherwise provided
in an Optionee's Option Document, a finding by the
Committee, after full consideration of the facts
presented on behalf of both the Company and the
Optionee, that the Optionee has been engaged in
disloyalty to the Company or an Affiliate, including,
without limitation, fraud, embezzlement, theft,
commission of a felony or proven dishonesty in the
course of his employment or service, or has disclosed
trade secrets or confidential information of the
Company or an Affiliate. In such event, in addition
to immediate termination of the Option, the Optionee
shall automatically forfeit all Shares for which the
Company has not yet delivered the share certificates
upon refund by the Company of the Option Price.
Notwithstanding anything herein to the contrary, the
Company may withhold delivery of share certificates
pending the resolution of any inquiry that could lead
to a finding resulting in a forfeiture;
(C) The date, if any, set by the Board of
Directors as an accelerated expiration date in the
event of the liquidation or dissolution of the
Company; or
(D) The occurrence of such other event or
events as may be set forth in the Option Document as
causing an accelerated expiration of the Option.
(E) Except as otherwise set forth in the
Option Document and subject to the foregoing
provisions of this Subsection 8(e), three months
after the Optionee's employment or service with the
Company or its Affiliates terminates for any reason
other than Disability or death or one year after such
termination due to Optionee's Disability or death.
With respect to this Subsection 8(e)(i)(E), the only
Options that may be exercised during the three-month
or one-year period, as the case may be, are Options
which were exercisable on the last date of such
employment or service and not Options which, if the
Optionee were still employed or rendering service
during such three-month or one-year period, would
become exercisable, unless the Option Document
specifically provides to the contrary. The terms of
an executive severance agreement or other agreement
between the Company and an Optionee, approved by the
Committee, whether entered into prior or subsequent
to the grant of an
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<PAGE>
Option, which provide for Option exercise dates later
than those set forth in Subsection 8(e)(i) shall be
deemed to be Option terms approved by the Committee
and consented to by the Optionee.
(ii) Notwithstanding the foregoing, the Committee may
extend the period during which all or any portion of
an Option may be exercised to a date no later than
the Option term specified in the Option Document
pursuant to Subsection 8(e)(i)(A), provided that any
change pursuant to this Subsection 8(e)(ii) which
would cause an ISO to become a Non-qualified Stock
Option may be made only with the consent of the
Optionee.
(iii) Notwithstanding anything to the contrary
contained in the Plan or an Option Document, an ISO
shall be treated as a Non-qualified Stock Option to
the extent such ISO is exercised at any time after
the expiration of the time period permitted under the
Code for the exercise of an ISO.
(f) TRANSFERS. No Option granted under the Plan may be
transferred, except by will or by the laws of descent and distribution.
During the lifetime of the person to whom an Option is granted, such
Option may be exercised only by him. Notwithstanding the foregoing, an
Option, other than an ISO, shall be transferrable pursuant to a
"qualified domestic relations order" as defined in the Code and also
shall be transferable, without payment of consideration, to (a)
immediate family members of the holder (i.e. spouse or former spouse,
parents, issue, including adopted and "step" issue or siblings), (b)
trusts for the benefit of immediate family members, and (c)
partnerships whose only partners are such family members. Any
transferee will be subject to all of the conditions set forth in the
Option prior to its transfer.
(g) LIMITATION ON ISO GRANTS. To the extent that the aggregate
fair market value of the shares of Common Stock (determined at the time
the ISO is granted) with respect to which ISO's under all incentive
stock option plans of the Company or its Affiliates are exercisable for
the first time by the Optionee during any calendar year exceeds
$100,000, such ISO's shall, to the extent of such excess, be treated as
Non-qualified Stock Options.
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(h) OTHER PROVISIONS. Subject to the provisions of the Plan,
the Option Documents shall contain such other provisions including,
without limitation, provisions authorizing the Committee to accelerate
the vesting and exercisability of all or any portion of an Option
granted pursuant to the Plan, including, but not limited to, an
Optionee's attainment of Performance Objectives specified in the Option
Documents, additional restrictions upon the exercise of the Option or
additional limitations upon the term of the Option, as the Committee
shall deem advisable. In the case of an ISO, any accelerated exercise
period must terminate within ten (10) years (or five (5) years, in the
case of a 10% Shareholder) from the date of grant of the Option.
(i) AMENDMENT. Subject to the provisions of the Plan, the
Committee shall have the right to amend any Option Document or Award
Agreement issued to an Optionee or Award holder, subject to the
Optionee's or Award holder's consent if such amendment is not favorable
to the Optionee or Award holder, or if such amendment has the effect of
changing an ISO to a Non-Qualified Stock Option, except that the
consent of the Optionee or Award holder shall not be required for any
amendment made pursuant to Subsection 8(e)(i)(C) or Section 10 of the
Plan, as applicable.
9. SPECIAL PROVISIONS RELATING TO GRANTS OF OPTIONS TO MEMBERS OF THE
COMMITTEE. Options granted pursuant to the Plan to members of the Committee
shall be granted, without any further action by the Committee, in accordance
with the terms and conditions set forth in this Section 9. Options granted
pursuant to this Section 9 shall be evidenced by Option Documents in such form
as the Committee shall from time to time approve, which Option Documents shall
comply with and be subject to the following terms and conditions and such other
terms and conditions as the Committee shall from time to time require which are
not inconsistent with the terms of the Plan. Notwithstanding the foregoing, a
Committee member may elect not to receive a formula option grant (in which case
the Committee member will receive nothing in lieu thereof) and may also revoke
such election. In either case, the election or the revocation of the election
will be effective only for formula option grants that otherwise were scheduled
to be made after the date of the election.
(a) TIMING OF GRANTS; NUMBER OF SHARES SUBJECT OF OPTIONS;
EXERCISABILITY OF OPTIONS; OPTION PRICE. Each member of the Committee
shall be granted on each June 30 annually, commencing on June 30, 1995,
an Option to purchase Five Thousand (5,000) Shares (such number to be
subject to adjustment as provided in Section 11). Each such Option
shall be a Non-qualified Stock Option becoming exercisable with respect
to (100%) of the Shares covered thereby on the first anniversary of the
date of grant and expiring five years after the date of grant. The
Option Price shall be equal to 60% the Fair Market Value of the Shares
on the date the Option is granted. The Option shall permit any method
of exercise permitted by Section 12.
(b) TERMINATION OF OPTIONS GRANTED PURSUANT TO SECTION 9. All
Options granted pursuant to this Section 9 shall be exercisable until
the first to occur of the following:
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(i) Expiration of five (5) years from the date of
grant;
(ii) Expiration of three (3) months from the date the
Optionee's service as a director of the Company
terminates for any reason other than disability or
death; or
(iii) Expiration of one (1) year from the date the
Optionee's service as a director terminates due to the
Optionee's disability or death.
(c) APPLICABILITY OF PROVISIONS OF SECTION 8 TO OPTIONS
GRANTED PURSUANT TO SECTION 9. The following provisions of Section 8
shall be applicable to Options granted pursuant to this Section 9:
Subsection 8(a)(provided that all Options granted pursuant to this
Section 9 shall be Non-qualified Stock Options); the last sentence of
Subsection 8(b); Subsection 8(c); Subsection 8(d) (provided that Option
Documents relating to Options granted pursuant to this Section 9 shall
provide that payment may be made in whole or in part in shares of
Company Common Stock); Subsection 8(f); and Subsection 8(i).
10. CHANGE OF CONTROL. Except as otherwise may be provided in an Option
Document (which will take precedence over the provisions of this Section 10), in
the event of a Change of Control, the Committee may take whatever actions it
deems necessary or desirable with respect to any of the Options outstanding
(other than Options granted pursuant to Section 9), which need not be treated
identically, including, without limitation, accelerating (a) the expiration or
termination date in the respective Option Documents to a date no earlier than
thirty (30) days after notice of such acceleration is given to the Optionees, or
(b) the exercisability of the Option. In the event of a Change of Control,
Options granted pursuant to Section 9 shall accelerate and become exercisable
immediately. Notwithstanding the foregoing, in the event of a Change of Control,
Options granted pursuant to the Plan will become automatically fully vested and
exercisable in full.
A "Change of Control" shall be deemed to have occurred upon the
earliest to occur of the following events:
(i) any "person," as such term is used in Sections
3(a)(9) and 13(d) of the Securities Exchange Act of
1934, other than Ronald H. Deferrari, his children
and/or their respective affiliates and their respective
heirs, executors, administrators and successors,
becomes a "beneficial owner," as such term is used in
Rule 13d-3 promulgated under that act, of 50% or more
of the Company's Voting Stock;
(ii) individuals who are Incumbent Directors cease to
constitute a majority of the members of the Board of
Directors ("Incumbent Directors" for this purpose being
the members of the Board of Directors on the date of
adoption of this Plan, provided that any person
becoming a member of the Board of Directors subsequent
to such date whose election or nomination for election
was supported by two-thirds of the
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directors who then comprised the Incumbent Directors
shall be considered to be an Incumbent Director);
(iii) the Company adopts any plan of liquidation
providing for the distribution of all or substantially
all of its assets;
(iv) all or substantially all of the business of the
Company is disposed of pursuant to a merger,
consolidation or other transaction (unless the
stockholders of the Company immediately prior to such
merger, consolidation or other transaction beneficially
own, directly or indirectly, in substantially the same
proportion as they owned the voting stock of the
Company, all of the voting stock or other ownership
interests of the entity or entities, if any, that
succeed to the business of the Company);
(v) the Company combines with another company and is
the surviving corporation but, immediately after the
combination, the stockholders of the Company
immediately prior to the combination hold, directly or
indirectly, 50% or less of the voting stock entitled to
vote for the election of directors of the combined
company (there being excluded from the number of shares
held by such stockholders, but not from the voting
stock of the combined company, any shares received by
"affiliates", as such term is defined in the rules of
the Securities and Exchange Commission, of such other
company in exchange for stock of such other company);
or
(vi) a "change of control" as defined in the form of
indenture governing any indebtedness of the Company
shall have occurred.
11. ADJUSTMENTS ON CHANGES IN CAPITALIZATION.
(a) In the event that the outstanding Shares are changed by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination or exchange of shares and
the like (not including the issuance of Common Stock on the conversion
of other securities of the Company which are outstanding on the date of
grant and which are convertible into Common Stock) or dividends payable
in Shares, an equitable adjustment shall be made by the Committee in
the aggregate number of shares available under the Plan and in the
number of Shares and price per Share subject to outstanding Options.
Unless the Committee makes other provisions for the equitable
settlement of outstanding options, if the Company shall be reorganized,
consolidated, or merged with another corporation, or if all or
substantially all of the assets of the Company shall be sold or
exchanged, an Optionee shall at the time of issuance of the stock under
such corporate event be entitled to receive upon the exercise of his or
her Option the same number and kind of shares of stock or the same
amount of property, cash or securities as he or she would have been
entitled to receive upon the
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occurrence of any such corporate event as if he or she had been,
immediately prior to such event, the holder of the number of shares
covered by his or her Option.
(b) Any adjustment under this Section 11 in the number of
Shares subject to Options shall apply proportionately to only the
unexercised portion of any Option granted hereunder. If fractions of a
Share would result from any such adjustment, the adjustment shall be
revised to the next lower whole number of Shares.
(c) The Committee shall have authority to determine the
adjustments to be made under this Section, and any such determination
by the Committee shall be final, binding and conclusive.
12. STOCK APPRECIATION RIGHTS (SARs).
(a) IN GENERAL. Subject to the terms and conditions of the
Plan, the Committee may, in its sole and absolute discretion, grant to
an Optionee the right to surrender an Option to the Company, in whole
or in part, and to receive in exchange therefor payment by the Company
of an amount equal to the excess of the fair market value of the shares
of Common Stock subject to such Option, or portion thereof, so
surrendered (determined in the manner described in section 8(b) as of
the date the SARs are exercised) over the exercise price to acquire
such shares (which right shall be referred to as an "SAR"). Except as
may otherwise be provided in an Option Document, such payment may be
made, as determined by the Committee in accordance with subsection
12(c) below and set forth in the Option Agreement, either in shares of
Common Stock or in cash or in any combination thereof. Notwithstanding
anything herein to the contrary, an Option granted to a member of the
Committee pursuant to Section 9 shall provide for SARs and the Optionee
shall have the right to determine the method of payment to the
Optionee.
(b) GRANT. Each SAR shall relate to a specific Option granted
under the Plan and shall be granted to the Optionee concurrently with
the grant of such Option by inclusion of appropriate provisions in the
Option Agreement pertaining thereto. The number of SARs granted to an
Optionee shall not exceed the number of shares of Common Stock which
such Optionee is entitled to purchase pursuant to the related Option.
The number of SARs held by an Optionee shall be reduced by (i) the
number of SARs exercised under the provisions of the Option Agreement
pertaining to the related Option, and (ii) the number of shares of
Common Stock purchased pursuant to the exercise of the related Option.
(c) PAYMENT. The Committee shall have sole discretion to
determine whether payment in respect of SARs granted to any Optionee
shall be made in shares of Common Stock, or in cash, or in a
combination thereof, except that the method of payment shall be
determined solely by the Optionee of an Option granted to a member of
the Committee pursuant to Section 9. If payment is made in Common
Stock, the number of shares of Common Stock which shall be issued
pursuant to the exercise of
13
<PAGE>
SARs shall be determined by dividing (i) the total number of SARs being
exercised, multiplied by the amount by which the Fair Market Value (as
determined under section 8(b)) of a share of Common Stock on the
exercise date exceeds the exercise price for shares covered by the
related Option, by (ii) the Fair Market Value of a share of Common
Stock on the exercise date of the SARs. No fractional share of Common
Stock shall be issued on exercise of an SAR; cash may be paid by the
Company to the individual exercising an SAR in lieu of any such
fractional share. If payment on exercise of an SAR is to be made in
cash, the individual exercising the SAR shall receive in respect of
each share to which such exercise relates an amount of money equal to
the difference between the Fair Market Value of a share of Common Stock
on the exercise date and the exercise price for shares covered by the
related Option.
(d) LIMITATIONS. SARs shall be exercisable at such times and
under such terms and conditions as the Committee, in its sole and
absolute discretion, shall determine; provided, however, that an SAR
may be exercised only at such times and by such individuals as the
related Option under the Plan and the Option Agreement may be
exercised.
13. TERMS AND CONDITIONS OF AWARDS. Awards granted pursuant to the Plan
shall be evidenced by written Award Agreements in such form as the Committee
shall from time to time approve, which Award Agreements shall comply with and be
subject to the following terms and conditions and such other terms and
conditions which the Committee shall from time to time require which are not
inconsistent with the terms of the Plan.
(a) NUMBER OF SHARES. Each Award Agreement shall state the
number of shares of Common Stock to which it pertains.
(b) PURCHASE PRICE. Each Award Agreement shall specify the
purchase price, if any, which applies to the Award. If the Board
specifies a purchase price, the Grantee shall be required to make
payment on or before the date specified in the Award Agreement. A
Grantee shall pay for Shares (i) in cash, (ii) by certified check
payable to the order of the Company, or (iii) by such other mode of
payment as the Committee may approve.
(c) GRANT. In the case of an Award which provides for a grant
of Shares without any payment by the Grantee, the grant shall take
place on the date specified in the Award Agreement. In the case of an
Award which provides for a payment, the grant shall take place on the
date the initial payment is delivered to the Company, unless the
Committee or the Award Agreement otherwise specifies. Stock
certificates evidencing Shares granted pursuant to an Award shall be
issued in the sole name of the Grantee. Notwithstanding the foregoing,
as a precondition to a grant, the Company may require an acknowledgment
by the Grantee as required with respect to Options under Section 8.
14
<PAGE>
(d) CONDITIONS. The Committee may specify in an Award
Agreement any conditions under which the Grantee of that Award shall be
required to convey to the Company the Shares covered by the Award. Upon
the occurrence of any such specified condition, the Grantee shall
forthwith surrender and deliver to the Company the certificates
evidencing such Shares as well as completely executed instruments of
conveyance. The Committee, in its discretion, may provide that
certificates for Shares transferred pursuant to an Award be held in
escrow by the Company or an officer of the Company until such time as
each and every condition has lapsed and that the Grantee be required,
as a condition of the Award, to deliver to such escrow agent or Company
officer stock powers covering the Award Shares duly endorsed by the
Grantee. Unless otherwise provided in the Award Agreement,
distributions made on Shares held in escrow will be deposited in
escrow, to be distributed to the party becoming entitled to the Shares
on which the distribution was made. Stock certificates evidencing
Shares subject to conditions shall bear a legend to the effect that the
Common Stock evidenced thereby is subject to repurchase or conveyance
to the Company in accordance with an Award made under the Plan and that
the Shares may not be sold or otherwise transferred.
(e) LAPSE OF CONDITIONS. Upon termination or lapse of each and
every forfeiture condition, the Company shall cause certificates
without the legend referring to the Company's repurchase right (but
with any other legends that may be appropriate) evidencing the Shares
covered by the Award to be issued to the Grantee upon the Grantee's
surrender of the legended certificates held by him to the Company.
(f) RIGHTS AS STOCKHOLDER. Upon payment of the purchase price,
if any, for Shares covered by an Award and compliance with the
acknowledgment requirement of subsection 13(c), the Grantee shall have
all of the rights of a stockholder with respect to the Shares covered
thereby, including the right to vote the Shares and receive all
dividends and other distributions paid or made with respect thereto,
except to the extent otherwise provided by the Committee or in the
Award Agreement.
14. AMENDMENT OF THE PLAN. The Board of Directors of the Company may
amend the Plan from time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not change the class of
individuals eligible to receive an ISO or increase the maximum number of shares
as to which Options may be granted without obtaining approval, within twelve
months before or after such action, by the stockholders in the manner required
by state law. In addition, the provisions of Section 9 that determine (i) which
directors shall be granted Options pursuant to Section 9; (ii) the amount of
Shares subject to Options granted pursuant to Section 9; (iii) the price at
which shares subject to Options granted pursuant to Section 9 may be purchased
and (iv) the timing of grants of Options pursuant to Section 9 shall not be
amended more than once every six months, other than to comport with changes in
the Code or the Employee Retirement Income Security Act of 1974, as amended. No
amendment to the Plan shall adversely affect any outstanding Option, however,
without the consent of the Optionee.
15
<PAGE>
15. NO COMMITMENT TO RETAIN. The grant of an Option or Award pursuant
to the Plan shall not be construed to imply or to constitute evidence of any
agreement, express or implied, on the part of the Company or any Affiliate to
retain the Optionee or Grantee as an employee, consultant or advisor of the
Company or any Affiliate, as a member of the Company's Board of Directors or in
any other capacity.
16. WITHHOLDING OF TAXES. In connection with any event relating to an
Option or Award, the Company shall have the right to (a) require the recipient
to remit or otherwise make available to the Company an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements prior to
the delivery or transfer of any certificate or certificates for such Shares or
(b) take whatever other action it deems necessary to protect its interests with
respect to tax liabilities. The Company's obligations under the Plan shall be
conditioned on the Optionee's or Grantee's compliance, to the Company's
satisfaction, with any withholding requirement.
17. INTERPRETATION. The Plan is intended to enable transactions under
the Plan with respect to directors to satisfy the conditions of Rule 16b-3; to
the extent that any provision of the Plan would cause a conflict with such
conditions or would cause the administration of the Plan as provided in Section
3 to fail to satisfy the conditions of Rule 16b-3, such provision shall be
deemed null and void to the extent permitted by applicable law. This section
shall not be applicable if no class of the Company's equity securities is then
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended.
18. GOVERNING LAW. The Plan and all determinations made and actions
taken pursuant thereto shall be governed by and construed in accordance with the
internal laws of the State of Florida.
16
EXHIBIT 10.16
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This is an Amendment No. 1, dated October 1, 1998 (the "Amendment No.
1"), to an Employment Agreement dated January 22, 1997 (the "Employment
Agreement"), between Plasma-Therm, Inc., a Florida corporation (the "Company"),
and Edmond A. Richards (the "Employee").
BACKGROUND
WHEREAS, the Employee is currently employed by the Company pursuant to
the terms of the Employment Agreement. The parties wish to amend section 8.4 of
the Employment Agreement with respect to the vesting and exercising of stock
options in the event of a change of control of the Company.
NOW, THEREFORE, the parties hereto intending to be legally bound
hereby, and in consideration of the mutual covenants herein contained, agree as
follows:
TERMS
1. The foregoing recitals are true and correct and incorporated herein
by reference. Any capitalized terms used but not defined herein shall have the
same meaning ascribed to them in the Employment Agreement.
2. The Employment Agreement is hereby amended by adding a new section
8.4(d) to read in its entirety as follows:
In the event of a Change of Control, all stock options
granted under the Company's 1995 Stock Incentive Plan (the "Plan")
shall immediately become fully vested and exercisable. In addition,
in the event of a Change of Control, the Stock Option Committee shall
have the discretion to accelerate the termination of any stock option
granted under the Plan to a date no earlier than six (6) months
following the date of a Change of Control.
3. Except as specifically set forth above, the Employment Agreement
shall remain in full force and effect.
4. This Amendment No. 1 may be executed in any number of counterparts,
each of which shall be deemed to be an original, and all of which together shall
constitute one document.
5. This Amendment No. 1 contains the final, complete, and exclusive
expression of the parties' understanding and agreement concerning the matters
contemplated
<PAGE>
herein and supersedes any prior or contemporaneous agreement of representation,
oral or written, among them.
6. This instrument shall be binding upon, and shall inure to the
benefit of, each of the parties' respective personal representatives, heirs,
successors, and assigns.
7. This instrument shall be governed by, and construed and enforced in
accordance with, the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have executed this Amendment
No. 1 on the day and year first written above.
PLASMA-THERM, INC.
/s/ RONALD S. DEFERRARI
-----------------------
Ronald S. Deferrari
President and Chief Operating Officer
Employee
/s/ EDMOND A. RICHARDS
-----------------------
Edmond A. Richards
2
EXHIBIT 10.17
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This is an Amendment No. 2, dated October 1, 1998 ("Amendment No. 2"),
to an Employment Agreement dated January 22, 1997 (the "Employment Agreement"),
between Plasma-Therm, Inc., a Florida corporation (the "Company"), and Stacy L.
Wagner (the "Employee").
BACKGROUND
WHEREAS, the Employee is currently employed by the Company pursuant
to the terms of the Employment Agreement and a subsequent amendment dated
August 19, 1997 ("Amendment No. 1").
WHEREAS, the parties wish to amend the Employment Agreement to reflect
changes in section 8.4 and to amend Amendment No. 1 to reflect changes in
sections 3 and 4.
NOW, THEREFORE, the parties hereto intending to be legally bound
hereby, and in consideration of the mutual covenants herein contained, agree as
follows:
TERMS
1. The foregoing recitals are true and correct and incorporated herein
by reference. Any capitalized terms used but not defined herein shall have the
same meaning ascribed to them in the Employment Agreement and Amendment No. 1.
2. The Employment Agreement is hereby amended by adding a new section
8.4(d) to read in its entirety as follows:
"In the event of a Change of Control, all stock options granted
under the Company's 1995 Stock Incentive Plan (the "Plan") shall
immediately become fully vested and exercisable. In addition, in the
event of a Change of Control, the Stock Option Committee shall have the
discretion to accelerate the termination of any stock option granted
under the Plan to a date no earlier than six (6) months following the
date of a Change of Control."
3. Amendment No. 1 is hereby amended by revising section 3 to read in
its entirety as follows:
"The Employee shall be employed as Chief Financial Officer,
Secretary and Treasurer. Employee's particular duties and power in such
capacity shall be such as may be determined from time to time by the
Board of Directors, President and Chief Executive Officer of the
Company. Any material diminution of Employee's duties or
responsibilities pursuant to this Agreement will be considered a breach
of this Agreement."
<PAGE>
4. Amendment No. 1 is hereby amended by revising section 4.1 to read
in its entirety as follows:
"A base annual salary of $100,000 payable in accordance with the
Company's usual payroll procedures as they may exist from time to
time;"
5. Except as specifically set forth above, the Employment Agreement
and Amendment No. 1 shall remain in full force and effect.
6. This Amendment No. 2 may be executed in any number of counterparts,
each of which shall be deemed to be an original, and all of which together shall
constitute one document.
7. This Amendment No. 2 contains the final, complete, and exclusive
expression of the parties' understanding and agreement concerning the matters
contemplated herein and supersedes any prior or contemporaneous agreement of
representation, oral or written, among them.
8. This instrument shall be binding upon, and shall inure to the
benefit of, each of the parties' respective personal representatives, heirs,
successors, and assigns.
9. This instrument shall be governed by, and construed and enforced in
accordance with, the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 2 on
the day and year first written above.
PLASMA-THERM, INC.
/s/ RONALD S. DEFERRARI
-----------------------
Ronald S. Deferrari
President and Chief Operating Officer
Employee
/s/ STACY L. WAGNER
-----------------------
Stacy L. Wagner
2
EXHIBIT 10.18
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This is an Amendment No. 1, dated October 1, 1998 (the "Amendment No.
1"), to an Employment Agreement dated January 22, 1997 (the "Employment
Agreement"), between Plasma-Therm, Inc., a Florida corporation (the "Company"),
and David J. Johnson (the "Employee").
BACKGROUND
WHEREAS, the Employee is currently employed by the Company pursuant to
the terms of the Employment Agreement. The parties wish to amend section 8.4 of
the Employment Agreement with respect to the vesting and exercising of stock
options in the event of a change of control of the Company.
NOW, THEREFORE, the parties hereto intending to be legally bound
hereby, and in consideration of the mutual covenants herein contained, agree as
follows:
TERMS
1. The foregoing recitals are true and correct and incorporated herein
by reference. Any capitalized terms used but not defined herein shall have the
same meaning ascribed to them in the Employment Agreement.
2. The Employment Agreement is hereby amended by adding a new section
8.4(d) to read in its entirety as follows:
In the event of a Change of Control, all stock options granted
under the Company's 1995 Stock Incentive Plan (the "Plan") shall
immediately become fully vested and exercisable. In addition, in the
event of a Change of Control, the Stock Option Committee shall have the
discretion to accelerate the termination of any stock option granted
under the Plan to a date no earlier than six (6) months following the
date of a Change of Control.
3. Except as specifically set forth above, the Employment Agreement
shall remain in full force and effect.
4. This Amendment No. 1 may be executed in any number of counterparts,
each of which shall be deemed to be an original, and all of which together shall
constitute one document.
5. This Amendment No. 1 contains the final, complete, and exclusive
expression of the parties' understanding and agreement concerning the matters
contemplated
<PAGE>
herein and supersedes any prior or contemporaneous agreement of
representation, oral or written, among them.
6. This instrument shall be binding upon, and shall inure to the
benefit of, each of the parties' respective personal representatives, heirs,
successors, and assigns.
7. This instrument shall be governed by, and construed and enforced in
accordance with, the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 on
the day and year first written above.
PLASMA-THERM, INC.
/s/ RONALD S. DEFERRARI
-----------------------
Ronald S. Deferrari
President and Chief Executive Officer
Employee
/s/ DAVID J. JOHNSON
-----------------------
David J. Johnson
2
EXHIBIT 10.48
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of this 1st day
of October, 1998, by and between Plasma-Therm, Inc., a Florida corporation
(hereinafter referred to as the "Company"), and Jay N. Sasserath (hereinafter
referred to as "Employee").
WHEREAS, Company desires to employ Employee and Employee desires to
accept such employment and both parties are entering into this Agreement to set
forth their entire understanding with respect to such employment;
NOW, THEREFORE, the parties hereto intending to be legally bound
hereby, and in consideration of the mutual covenants herein contained, agree as
follows:
1. EMPLOYMENT
Company hereby employs Employee and Employee hereby accepts such
employment upon the terms and subject to the conditions set forth herein.
2. TERM
The term of this Agreement shall be for a period of three (3) years
commencing on the 1st day of October, 1998, and terminating on the 30th day of
September, 2001 (the "Term"). Upon expiration of the initial Term and any
subsequent terms, this Agreement shall automatically renew for additional
subsequent three (3) year Terms unless at least ninety (90) days prior to the
end of the then current Term, either Company or Employee has given written
notice to the other of its or his election to terminate the employment at or
prior to the end of such Term.
3. DUTIES
Subject to the terms and conditions of this Agreement, the Company
shall employ the Employee during the Term (as hereinafter defined) in such
management capacities as may be assigned, from time to time, by the Company. The
Employee accepts such employment and agrees to devote his best efforts and
entire business time, skill, labor and attention to the performance of such
duties.
4. COMPENSATION
Company agrees to pay and Employee agrees to accept as compensation
for all services rendered hereunder:
4.1 A base annual salary of $112,800.00 payable in accordance
with the Company's usual payroll procedures as they may exist from time to time;
and
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<PAGE>
4.2 An annual bonus based on one-half of one percent (.5%) of
fiscal year Net Earnings, as defined by Company policy, to be paid on a
quarterly basis and reconciled at year end, not to exceed $50,000.00 annually.
4.3 Reimbursement for car-related expenses in the amount of
$600.00, payable monthly.
5. EXPENSES
The parties recognize that in the course of performing his duties
hereunder, Employee may incur expenses. Company agrees to reimburse Employee
upon presentation of vouchers for reasonable expenses incurred by Employee in
the performance of his duties hereunder according to the Company Travel and
Expense policy. Additionally, Employee will be entitled to reimbursement for
such reasonable expenses granted to other executive level employees which may or
may not be included in the Company Travel and Expense policy.
6. FRINGE BENEFITS
Employee shall be entitled to such fringe benefits paid for or
supplied by Company and shall be further entitled to the following:
6.1 Participation in retirement and Employee benefit plans such
as 401(k), tuition reimbursement, health, dental, accident, disability, life, or
other group insurance plans, and other plans as Company determines from time to
time to make available generally to the other executive employees of Company.
6.2 Company may elect to pay for the Employee's entire health
insurance premium payments to the extent that this is offered to the other
executive employees of Company. Otherwise, Employee bears the cost of such
benefits, as determined by then existing Company policy.
6.3 If the insurance policy permits, the Employee may at any time
direct Company, in writing to assign the insurance policy or policies to the
Employee. In the event of Employee's termination for any reason whatsoever,
whether or not with cause, payments on the policy or policies, and Company's
obligations, if any, under the policy or policies shall cease.
6.4 Nothing herein shall be construed to alter, amend or modify
the terms of any stock option plan or policy that may be made available to
Employee by Company. Upon termination of this Agreement for any reason, any and
all such benefits granted under any such plan or policy shall be governed by the
terms and conditions of that plan or policy as it may exist from time to time.
6.5 Company presently maintains, and shall continue to maintain
Directors and Officers Liability Insurance coverage for the benefit of Employee
for so long as Employee remains an officer of Company.
2
<PAGE>
7. DEATH OR DISABILITY
In the event the Employee becomes permanently disabled so that he is
unable to perform his essential employment duties hereunder, and no requested
reasonable accommodation of Employee's disability is possible, this Agreement
shall terminate. Notwithstanding the foregoing, the compensation then payable by
Company to Employee pursuant to Section 4 hereof shall continue to be paid as if
Employee were not disabled in any way, until the end of the current Term of
employment pursuant to Section 2 hereof. For the purposes of this Agreement, the
term "permanent disability" shall mean any disability lasting ninety (90)
calendar days or more.
In the event Employee becomes temporarily disabled so that he is unable
to perform his essential employment duties hereunder, and no requested
reasonable accommodation of Employee's disability is possible, then Company has
the right to terminate this Agreement without cause consistent with the
obligations set forth in Section 8.3.1, except as otherwise provided by law. For
the purpose of this Agreement, the term "temporary disability" shall mean any
disability lasting less than ninety (90) calendar days.
In the event Employee becomes either permanently or temporarily
disabled, Company shall be entitled to credit against its obligations under
Section 7 of this Agreement the amount of any and all other disability benefits
provided by or paid for by the Company that inure to Employee's benefit. In the
event this Agreement is terminated pursuant to this Section, should an
Employee's disability cease prior to the expiration of the Term of employment
during which the Agreement was terminated, then Employee remains obligated to
return to his employment duties with the Company for the balance of the then
current Term, at the Company's option.
The terms "disability" and "disabled" as used in this Agreement connote
the inability of Employee, for a period of time greater than seven (7)
consecutive business days, to perform his regular employment duties hereunder as
a result of death, mental or physical illness, or injury or accident.
8. TERMINATION
8.1 Notwithstanding anything herein contained to the contrary,
subject to Section 7 hereof, Company shall have the right to terminate this
Agreement "with cause." A termination "with cause" may occur as provided by law
or as a result of any criminal activity, reckless misconduct, gross negligence
or abandonment of corporate responsibility. In the event of a termination by
Company with cause, Company agrees to provide Employee with one (1) day's notice
and pay, but will not have any further obligations under this Agreement, except
as provided by law. Company may elect to waive the one (1) day notice
requirement by providing one (1) day's pay in lieu of notice.
8.2 During the Term of this Agreement, Employee will not have,
either directly or indirectly, any more than ten percent (10%) equity interest
in any entity, including any person, partnership, trust or incorporated or
unincorporated association or entity, that is manufacturing, distributing or
marketing products or services directly competitive to those
3
<PAGE>
manufactured, distributed or marketed by Company. It is expressly understood
that such ownership or interest may represent a conflict of interest which may
be grounds for Company to terminate this Agreement with cause.
8.3 Notwithstanding anything herein contained to the contrary,
subject to Sections 7 and 8 herein, Company and Employee shall have the right to
terminate the Agreement hereunder without cause.
8.3.1 In the event Company terminates the Agreement without
cause, pursuant to Section 8.3 herein, Employee shall receive the full
compensation hereunder for the then remaining Term of this Agreement pursuant to
Section 2. Company reserves the right to exercise its option to pay the
comparable value of any benefit set forth in Section 6, above, to which employee
is entitled, rather than continuing the benefit for the balance of the Term;
except that, Employee will not have any continuing rights under the 401(k) plan
or other defined benefit plan, except as otherwise provided by law.
8.3.2 In the event Employee terminates the Agreement without
cause, Employee must provide Company with at least ninety (90) days' advance
written notice. Upon the expiration of the ninety (90) day notice period, all
obligations by Company to the Employee, except those provided by law, shall
cease. Failure to provide Company with at least ninety (90) days' advance
written notice constitutes grounds for Company to terminate the Agreement with
"cause" as provided in Section 8.1 above, and voids any other right that
Employee may have to compensation, benefits or plans pursuant to Company
programs or policies, except those required to be provided by law.
8.4 In the event of a "Change in Control" of Company, as defined
in Sections 10 and 11 below, the following shall apply:
(a) Upon a Change in Control, if the Term of the Agreement has
less than twelve (12) months remaining, the Term of this Agreement
shall be extended so that a twelve (12) month Term remains from the
time of the Change in Control to the end of the Term. The extended
Term of the Agreement will be on terms identical to those in effect at
the time of the Change in Control. In the event that more than twelve
(12) months of the Term exists as of the time of a Change in Control,
there will be no change in the Term.
(b) Employee commits to continue to perform his duties under this
Agreement for a minimum of twelve (12) months after a Change in
Control. At the end of twelve (12) months after a Change in Control,
Employee has the option to voluntarily terminate this Agreement
without a loss of benefits, as if Company had terminated this
Agreement "without cause" pursuant to Section 8.3.1 above.
(c) In the event of a Change in Control, Section 4.2, providing
for an annual bonus, will be modified to provide that Employee's
current fiscal year annual bonuses will in no event, be less than the
annual bonus given in the full year prior to the Change in Control.
(d) In the event of a Change of Control, all stock options
granted under the Company's 1995 Stock Incentive Plan (the "Plan")
shall immediately become fully vested and exercisable. In addition, in
the event of a Change of Control, the Stock Option Committee shall
have the discretion to accelerate the termination of any stock option
4
<PAGE>
granted under the Plan to a date no earlier than six (6) months
following the date of a Change of Control.
8.5 With respect to any payments due and owing as a result of any
termination pursuant to this Section 8, Employee may, at his option, receive
payment for any such obligations in a one-time lump sum payment, or, may
continue to receive payments in accordance with Company's usual payroll
procedures, as they may exist from time to time.
9. COVENANTS BY EMPLOYEE
9.1 Employee hereby acknowledges that Company is one of only a
small number of companies worldwide that designs, manufactures and sells plasma
process thin film etching and deposition equipment. Employee also acknowledges
that pursuant to his prior relationship with Company, and under the terms of
this Agreement, he will gain access to valuable trade secrets of Company and
other valuable confidential business and proprietary information, and will
become aware of and a part of Company's substantial relationships with
customers, potential customers, suppliers, and sources. Accordingly, Employee
hereby covenants that he shall not, either directly or indirectly, as a
principal, partner, stockholder, officer, director, agent or employee, or in any
other capacity, enter into any employment agreement, or accept employment with
or render services for, any company, partnership, person or entity that competes
or attempts to compete, whether directly or indirectly, with Company, for the
balance of the then remaining Term of this Agreement or for a period of twelve
months (12) from the termination of this Agreement, whichever is greater,
regardless of the reason for said termination.
9.2 The Employee agrees that he shall not solicit or attempt to
solicit, sell to, lease to or offer to sell to, or offer to lease to, except on
behalf of Company or any Affiliate, any present or future customer of Company or
Affiliate, any goods or services competitive to the goods and services now or
hereafter offered for sale or lease by Company or any Affiliate for the periods
of time set forth in Section 9.1 herein.
9.3 The parties hereto recognize that the covenants of Employee
herein contained are unique and that in the event there is a breach or
threatened breach of such covenants, Company shall be entitled, in addition to
any other remedies available to it, to institute and prosecute proceedings in
any court of competent jurisdiction either in law or in equity, to obtain
damages for any breach of covenants or to enforce a specific performance thereof
by Employee, or to enjoin Employee from performing services or doing any act in
breach of such covenants.
9.4 For the purposes of this Agreement, the term "Affiliate"
shall mean any person who or which, directly and/or indirectly, controls, is
controlled by or is under common control with another person. For the purpose of
this definition, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of management and policies, whether
through the ownership of voting securities, by contract or otherwise. For the
purpose of this definition, "person," refers to an individual, partnership,
company, corporation, or other entity.
5
<PAGE>
9.5 Employee agrees that during the Term hereof and after the
termination of Employee for any reason whatsoever, the Employee shall not
disclose to any person, firm, partnership, company, or other legal entity any
information concerning any of the methods of conducting business utilized by
Company or any Affiliate or any details relating thereto including, but not
limited to, the names of suppliers, customers and methods of operation of
Company or any of its Affiliates; Employee hereby acknowledges that this
information is confidential in nature. This provision shall not be construed to
prevent Employee from using any knowledge that he possessed at the time he
commenced his employment with Company or from using any information that is not
confidential.
9.6 Employee has carefully read the provisions of Section 9
herein, and of each subsection or subparagraph thereof, and having done so
agrees that:
(a) the restrictions set forth therein are fair and reasonable
and are reasonably required for the protection of the interests of
Company; and
(b) each subsection or subparagraph set forth therein is separate
and independent and all are to be construed as separate and
independent of any other so as to promote their enforcement to the
maximum extent possible.
10. CHANGE IN CONTROL
"Change in Control" as used in this Agreement shall refer to any one
or more of the following:
(a) the acquisition in any manner of the beneficial ownership of
shares of Company having twenty percent (20%) or more of the total
number of votes that may be cast for the election of one or more
directors of Company by any person, or persons acting as a group
within the meaning of Section 13(d) of the Securities and Exchange Act
of 1934, if the Board has made a determination that such acquisition
constitutes or will constitute control of Company;
(b) any liquidation, dissolution or sale of all or substantially
all of the assets of Company; or
(c) any action taken following, as a result of, or in connection
with, any tender or exchange, offer, merger or other business
combination of the foregoing whereby the persons who were the
Directors of Company immediately prior to such action shall cease to
constitute a majority of the Board of Company or any successor to
Company.
The term "Person," as used in this Section 10, refers to an individual,
partnership, company, corporation, or other entity.
11. ASSIGNABILITY
Employee may not transfer or assign this Agreement to any other
person. Company may assign this Agreement to any other company or entity that
acquires all or substantially all of the assets of Company, without further
permission of the Employee. In the event Company assigns this Agreement, said
assignment will be deemed to constitute a "Change in Control" as referred to in
Sections 8.4 and 10, above.
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12. PAID TIME OFF
Employee shall be entitled to take Paid Time Off at such time as shall
reasonably be requested by Employee and approved by Company in accordance with
Company policy, not to exceed five (5) weeks per annum. Paid Time Off less than
five (5) weeks per annum not used, shall either be "cashed out" or forfeited
according to Company policy. In the event of termination without cause by
Company or by Employee or with cause by Employee, Employee will receive cash
equivalent of time not yet taken during the Term in accordance with Company
policy.
13. MISCELLANEOUS PROVISIONS
13.1 NOTICES
Any notice required or permitted to be given under this Agreement
shall be in writing, and shall be deemed to have been given when delivered
personally or sent by registered or certified mail, postage prepaid, addressed
as follows:
If to Company: Stacy L. Wagner, Vice President of Finance & Administration
Plasma-Therm, Inc.
10050 16th Street North
St. Petersburg, FL 33716
If to Employee: Dr. Jay N. Sasserath
1922 Illinois Avenue N.E.
St. Petersburg, FL 33703
The designation of the person to be so notified or the address of such person
for the purposes of such notice may be changed from time to time by a similar
notice to be effective ten (10) days after such changed designation is supplied.
13.2 CHOICE OF LAW
This Agreement, and any dispute arising between the parties by
virtue of their relationship under this Agreement, shall be governed by and
construed in accordance with the applicable laws of the State of Florida. The
parties further agree that any lawsuit or action pertaining to, or arising from,
this Agreement, shall be brought in the state or federal courts within the State
of Florida, and the parties expressly waive the right to proceed in any other
jurisdiction or forum.
13.3 ENTIRE AGREEMENT
This Agreement constitutes the full and complete understanding
and agreement of the parties and supersedes all prior understandings and
agreements, and may not be modified or amended orally, but only by an agreement
in writing, signed by the party against whom enforcement of the Agreement, or of
or any waiver, change, modification, extension or discharge of the Agreement, is
sought.
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13.4 SEVERABILITY
This Agreement shall be construed to be valid and enforceable to
the full extent allowed by law. It is understood and agreed by the parties that
if any part, term or provision of this Agreement is determined to be illegal or
in conflict with applicable law, the validity of the remaining portions or
provisions shall not be affected, and the rights and obligations of the parties
shall be construed and enforced as if the Agreement did not contain the part,
term or provision held to be invalid.
13.5 INDEMNIFICATION
(a) THIRD-PARTY PROCEEDING: Company shall indemnify Employee, his
heirs, or personal representative, made, or threatened to be made, a party to
any threatened, pending, or completed action or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that he was or
is a corporate agent, or serves or served any other corporation or other
enterprise in any capacity at the request of Company, to the full extent
permitted by Florida law, including, without limitation, indemnification against
his expenses and liabilities in connection with the third-party proceeding if he
acted in good faith and in a manner reasonably believed by him to be in, or not
opposed to, the best interests of Company, and with respect to any criminal
third-party proceeding, had no reasonable cause to believe his conduct was
unlawful or in violation of applicable rules. The termination of any third-party
proceeding by judgment, order, settlement, consent, filing of a criminal
complaint or information, indictment, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
Employee did not act in good faith and in a manner which he reasonably believed
to be in, or not opposed to, the best interests of Company or, with respect to
any criminal third-party proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) DERIVATIVE ACTIONS: Company shall indemnify any director or
officer of Company, who was or is a party or is threatened to be made a party to
any derivative action by reason of the fact that such director or officer was or
is a corporate agent, against his expenses in the action if he acted in good
faith and in a manner reasonably believed by him to be in, or not opposed to,
the best interest of Company; except, that no indemnification shall be made in
respect of any claim, issue or matter as to which he shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to Company
unless and only to the extent that the court in which such derivative action is
or was pending shall determine upon application that, despite the adjudication
of liability but in view of all circumstances of the case, he is fairly and
reasonably entitled to indemnity for such items as the court shall deem proper.
(c) INDEPENDENT LEGAL COUNSEL: In the event of an actual or
potential conflict of interest, Employee shall be entitled to an independent
legal counsel and said counsel shall be chosen by Company, subject to the
consent of Employee, and all such reasonable expenses incurred in defense of
Employee shall be paid directly by Company, or reimbursed to Employee at
Employee's sole option.
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(d) SCOPE OF EMPLOYMENT: Pursuant to this Section 13.5, Company
shall only indemnify Employee, his heirs, or personal representative, made, or
threatened to be made, a party to any threatened, pending, or completed action
or proceeding, for claims relating to or arising out of Employee's actions, or
omissions, within the scope of his employment by Company.
(e) The term and conditions of this Section 13.5 shall survive
the termination of this Agreement and shall apply to any claims made against
Employee, relating to, or arising from Employee's actions pursuant to this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first written above.
PLASMA-THERM, INC.
Witness:
/s/ STACY L. WAGNER /s/ RONALD S. DEFERRARI
- ------------------- -----------------------
Stacy L. Wagner Ronald S. Deferrari
President and Chief Executive Officer
Witness: Employee
/s/ RICHARD M. FEENEY /s/ DR. JAY N. SASSERATH
- --------------------- ------------------------
Richard M. Feeney Dr. Jay N. Sasserath
9
EXHIBIT 10.49
BDM INTERNATIONAL, INC.
PERFORMANCE BASED FIRM FIXED PRICE CONTRACT
INTRODUCTION
This Performance Based Firm Fixed Price Contract effective June 29, 1998 is made
by and between BDM INTERNATIONAL, INC., a wholly owned subsidiary of TRW, Inc
(hereinafter known as "BDM"), a Delaware corporation with offices at 7915 Jones
Branch Drive, McLean, VA 22102 and Plasma-Therm (hereinafter known as
"Plasma-Therm"), a Florida corporation, with offices at 10050 16th Street North,
St. Petersburg, FL. The work, defined in ATTACHMENT A--Statement of Services,
will be performed on a fixed price basis pursuant to task orders issued in
accordance with the following General Terms and Conditions, ATTACHMENT
A--Statement of Services, and ATTACHMENT B--Fees.
GENERAL TERMS AND CONDITIONS
1. GENERAL PERFORMANCE SPECIFICATIONS
BDM agrees, at Plasma-Therm's request, to provide services as identified in
ATTACHMENT A, attached hereto. Services performed under this Contract shall
commence upon receipt of specific task order(s) signed by an authorized
Plasma-Therm representative. Services performed shall be completed in
accordance with issued task orders and the terms and conditions of this
Contract. Services performed shall comply with all applicable federal,
state and local laws, and regulations.
2. NOTICE OF DELAYS
In the event BDM encounters or anticipates difficulty in meeting
performance or schedule requirements, or when it anticipates or encounters
difficulty in complying with the Contract performance schedule, or whenever
the BDM has knowledge that any actual or potential situation is delaying or
threatens to delay the timely performance of this Contract, BDM shall
notify Plasma-Therm's representative, in writing, giving pertinent details.
3. FORCE MAJEURE
Neither party shall be held responsible for any delay or failure in
performance hereunder to the extent such delay or failure is caused by
fire, flood, explosion, war, strike, embargo, civil or military authority,
act of God, act or omission of carriers or similar causes beyond its
control ("force majeure conditions"). If any force majeure condition
occurs, the party delayed or unable to perform shall give immediate notice
to the other party.
4. PLACE OF PERFORMANCE
All services will be performed at Plasma's Therm's office located at 10050
16th Street North, St. Petersburg, Florida or BDM'S office located 7915
Jones Branch Drive McLean, Virginia 22102.
5. CHANGES
The services set forth in the Statement of Services (ATTACHMENT A) will be
performed under the direction of Plasma-Therm's Technical Representative.
When, in BDM's opinion, such direction constitutes a change to the
Contract, Plasma-Therm's Contractual Representative shall be immediately
notified in writing of any such change. Until Plasma Therm's Contractual
Representative authorized such change, in writing BDM shall perform in
accordance with the Contract as written.
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6. PRICE
The prices for the services rendered under this Contract will be as
negotiated for each task order according to the terms and conditions
specified in ATTACHMENT B of this Contract and are exclusive of all
Federal, State, and Local taxes applicable to the rendering of these
services.
7. PRICE/INVOICE AND PAYMENT
BDM shall invoice Plasma-Therm in accordance with line number 4 (Monthly
Earned Services Billing Schedule) as set forth in Attachment B Fees,
Schedule 2, the basis of work performed according to the schedule in
ATTACHMENT B. All invoices shall be due and payable within thirty (30)
calendar days of the date of invoice or when fees are considered due and
payable in accordance with Attachment B, Item #6 - Invoice Timing, except
as otherwise agreed. Balances that are overdue will be assessed a late
charge of 1.5% per month of the total invoice. All payments will be made in
US dollars. Payments of $10,000 or more shall be sent by a reliable
overnight delivery service or by electronic funds transfer.
Payment will be mailed to: BDM
Philadelphia National Bank
P.O. Box 8500-S-6365
Philadelphia, PA 19178
Account No. 00013-10801
8. TECHNICAL AND CONTRACTUAL REPRESENTATIVES
The following authorized representatives are hereby designated for this
Contract:
BDM INTERNATIONAL, INC. PLASMA-THERM
----------------------- ------------
Technical: Larry Mendenhall Technical: Stacy Wagner, CPA
Contractual: Diane Flowers Contractual: Stacy Wagner, CPA
9. CONTRACTUAL NOTIFICATIONS
All notices, requests or demands and other communications hereunder shall
be in writing and telecopied (with confirmation of receipt), delivered by
overnight delivery service or mailed to the intended recipient through the
U.S. Postal Service (registered or certified mail, return receipt
requested, postage and certification or registration prepaid) at the
telecopy number or address specified below. Notices shall be effective upon
receipt.
BDM International, Inc. Plasma-Therm, Inc.
7915 Jones Branch Drive 10050 16th Street North
McLean, VA 22102 St. Petersburg, FL 33716
Fax: (703) 848-6461 Fax: (813) 579-0801
Any party may change its address for the purpose of notice to any other
address by giving notice in accordance with the foregoing provisions.
10. WARRANTY
BDM shall warrant a 1:1 ratio of annual benefits realized to the payments
for professional services received as finalized by both parties in November
1998 as defined in Attachments A and B. At that time, BDM and Plasma-Therm
shall agree to the final schedule of fees, benefits, and benefit
timeframes. The warranty period begins at the time the 1:1 ratio benefits
are identified. The warranty period continues for a period of 12 months or
when the 1:1 ratio is realized, whichever is less. BDM is not responsible
for obsolescence that may result from changes in the client's requirements.
During the warranty period, BDM shall identify and help Plasma-Therm
realize additional benefits to ensure the 1:1 ratio is met.
None of the software owned or licensed by BDM, including software developed
by BDM under this Contract infringes upon any patent or copyright. BDM
shall pay all applicable royalties and other
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costs related to the use of any third party software following completion
of this project as well as, for the provision of services to Plasma- Therm
in connection with this Contract.
EXCEPT AS SPECIFICALLY PROVIDED IN THIS SECTION ("WARRANTIES") BDM HEREBY
DISCLAIMS WITH RESPECT TO ALL SERVICES, SOFTWARE PRODUCTS, UPDATES OR OTHER
"DELIVERABLES" PROVIDED HEREUNDER, ALL EXPRESS AND IMPLIED WARRANTIES.
INCLUDING ANY IMPLIED WARRANTIES OF MERCHATABILITY, TITLE OR FITNESS FOR A
PARTICULAR PURPOSE.
11. LIMITATION OF LIABILITY
NEITHER PARTY SHALL BE LIABLE FOR PERSONAL INJURY, OR PHYSICAL EQUIPMENT OR
PROPERTY DAMAGE EXCEPT PERSONAL INJURY, OR PHYSICAL EQUIPMENT OR PROPERTY
DAMAGE DIRECTLY CAUSED BY THE NEGLIGENCE OF EACH SUCH PARTY, ITS EMPLOYEES,
AGENTS, AND REPRESENTATIVES.
NOTWITHSTANDING ANY OTHER PROVISION HEREIN, THE CUMULATIVE LIABILITY OF BDM
REGARDLESS OF THE FORM OF ACTION FOR ALL CLAIMS WHATSOEVER RELATED TO THIS
CONTRACT, INCLUDING, BUT NOT LIMITED TO, ANY CAUSE OF ACTION SOUNDING IN
CONTRACT, TORT, OR STRICT LIABILITY, SHALL NOT EXCEED THE TOTAL AMOUNT OF
ALL FEES PAID TO BDM BY PLASMA-THERM UNDER EACH PROGRAM OF THE CONTRACT
FROM WHERE THE CLAIM AROSE (E.G. SCHEDULE A, IS CONSIDERED AS ONE PROGRAM),
EXCLUSIVE OF REIMBURSED EXPENSES AND EQUIPMENT HARDWARE PLUS THIRD-PARTY
SOFTWARE CHARGES, UNDER THIS CONTRACT. THIS LIMITATION OF LIABILITY IS
INTENDED TO APPLY TO ALL CLAIMS OF PLASMA-THERM, WITHOUT REGARD TO WHICH
OTHER PROVISIONS OF THIS CONTRACT HAVE BEEN BREACHED OR HAVE PROVED
INEFFECTIVE.
12. CONSEQUENTIAL AND SPECIAL DAMAGES
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY LOSS OF PROFITS, REVENUE,
BUSINESS OPPORTUNITY, OR BUSINESS ADVANTAGE, LOSS OF USE, INTERRUPTION OF
BUSINESS, LOSS OF GOOD WILL, DATA LOSS, COMPUTER FAILURE OR MALFUNCTION,
WORK STOPPAGE, ANY INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, OR
CONSEQUENTIAL DAMAGES, EVEN IF THE PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH CLAIMS WITHOUT REGARD TO WHICH OTHER PROVISIONS OF THIS
CONTRACT HAVE BEEN BREACHED OR PROVEN INEFFECTIVE.
13. DISCLOSURE/CONFIDENTIALITY
During the performance of this Contract Plasma-Therm and BDM may exchange
information regarding the policies, procedures, systems, methods, costs, or
other proprietary or confidential information ("Confidential Information").
Plasma-Therm and BDM each agree to keep in confidence and prevent any
disclosure of the Confidential Information, to any person or persons
outside their respective organizations or any unauthorized person or
persons within such organizations, with the exception of subcontractors to
either party who agree in writing to be bound by these obligations of
confidentiality, for a period of three (3) years from termination of this
Contract. Confidential Information shall not include information which:
(a) is or becomes part of the public domain through no act or
omission of the receiving party;
(b) was in the receiving party's possession prior to the disclosure
and had not been obtained directly or indirectly from the
disclosing party;
(c) is lawfully disclosed to the receiving party by a third party
without restriction on disclosure;
(d) is independently developed by the receiving party without using
any of the Confidential Information of the other party; or
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(e) is disclosed by operation of law provided the non-disclosing
party has notice and opportunity to object.
Both BDM and Plasma-Therm agree that damages resulting from a disclosure of
Confidential Information are difficult to establish. Both agree that in the
event of a breach of the confidentiality provisions outlined in this
Section, the non-disclosing party shall be entitled to all available
remedies at law or in equity "including injunctive relief" or any breach of
these provisions regarding Confidential Information.
14. SITE ACCESS
Where any work under this Contract requires access to proprietary or
confidential material or secured facilities by BDM personnel, it shall be
the responsibility of BDM to comply with all Confidential Information
Provision.
15. ASSIGNMENT
Neither this Contract nor any interest herein may be assigned, in whole or
in part, by either party hereto without the prior written consent of the
other party, except each party may assign this Contract or any interest
herein, to an affiliated entity without the prior consent of the other or
in the event of a change and control of such party.
16. RELATIONSHIP OF PARTIES
Throughout the performance of this Contract and task orders issued under
it, BDM and Plasma-Therm are independent parties and nothing contained in
this Contract or any task orders issued hereunder shall be construed or
implied to create the relationship of principal and agent, or partners of
employer and employees or joint venturers between the parties. At no time
shall either party make any commitments or incur any charges or expenses
for, or in the name of, the other party without the prior written consent
of the other party.
17. INSURANCE
BDM shall procure and maintain the following types of insurance and
coverage during the term of this Contract:
<TABLE>
<CAPTION>
TYPE OF INSURANCE MINIMUM AMOUNT
<S> <C>
(a) Workmen's Compensation Statutory limits in accordance with the
requirements of the applicable laws of
the jurisdiction (State or Commonwealth)
in which work is to be performed.
(b) Employer's Liability
Bodily Injury By Accident $100,000 Each Accident
Bodily Injury By Disease $100,000 Policy Limit
Bodily Injury By Disease $100,000 Each Employee
(c) Commercial General Liability $1,000,000 Bodily Injury and Property Damage
includes coverage for contractual CSL Per Occurrence.
liability, coverage for the use of $1,000,000 Bodily Injury and Property Damage
independent contractors, products CSL Gen. Aggregate
and completed operations.
(d) Automobile Liability, including $1,000,000 Bodily Injury and Property Damage
coverage for owned, hired, leased, CSL Per Accident
rented, and non-owned vehicles.
</TABLE>
All insurance evidenced by this Contract shall be with insurers licensed to
do business in the state(s) where the service is being performed.
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BDM shall promptly furnish, if requested by Plasma-Therm, certificates or
insurance providing proof of the foregoing insurance. BDM shall notify in
writing at least thirty (30) calendar days prior to cancellation of, or any
material change of such coverage.
18. OWNERSHIP/WORK PRODUCT
Notwithstanding any other provision in this Contract, BDM shall own all
right, title, and interest in and to all intellectual property, software,
documentation, data rights, notes, designs, specifications, drawings,
technology and associated intellectual property, which BDM owned prior to
entering into this Contract or which BDM or a BDM's consultant or
subcontractor developed outside the performance of this Contract which BDM
uses to perform this Contract (hereinafter "BDM Background IP"). To the
extent that the BDM Background IP is modified, changed, or improved outside
of or in connection with the performance of this Contract (hereinafter
"Modified BDM Background IP"), and BDM delivers or uses Modified BDM
Background IP to perform this Contract, BDM shall own all right, title, and
interest in and to such Modified BDM Background IP. BDM grants Plasma-Therm
a non-exclusive, perpetual, paid-up license to use, execute, reproduce,
display, perform, distribute internally copies of and prepare derivative
works based upon any software products derived in connection with BDM's
performance under this Contract.
19. INDEMNIFICATION
BDM shall indemnify, defend and hold harmless the Plasma-Therm and
Plasma-Therm's directors, officers, and employees, from and against any
claim that the BDM owned software, including software developed by BDM
under this Contract, infringes any U.S. patent or copyright. BDM shall pay
any royalties and other costs related to the settlement of such claim or
any damages, including attorney's fees. BDM has the right to assume full
control over any claim or litigation proceeding. Plasma-Therm shall
promptly notify BDM of any such claim and shall give BDM such assistance
and information as is available to Plasma-Therm for the defense of such
claim, and Plasma-Therm will not settle or compromise any such claim
without BDM's prior written consent.
BDM and Plasma-Therm shall each defend, indemnify and hold harmless each
other as well as their respective directors, officers, agents and employees
from any claim, loss or liability including without limitation those for
personal injury (including death) or damage to property, arising out of or
connected with any aspect of the performance by that party or its
directors, officers, agents, or employees, of activities or obligations
performed under this Contract.
20. NON-WAIVER OF RIGHTS/SEVERABILILTY
The failure or delay of either party to insist upon strict performance of
any of the terms and conditions in the Contract or to exercise any rights
or remedies, shall not be construed as a waiver of its rights to assert any
of same or to rely on any such terms or conditions at any time thereafter.
If any provision of this Contract is held illegal, unenforceable or void,
then both parties will be relieved of all obligations arising under that
provision, but only to the extent the provision is illegal, unenforceable
or void, it being the intent and agreement of the parties that this
Contract will be deemed amended by modifying such provision to the extent
necessary to make it valid and enforceable while preserving its intent or,
if that is not possible, by substituting therefor another provision which
is valid and enforceable and achieves the same objectives.
21. DISPUTES
If any dispute arises under this Contract, the parties shall first attempt
to resolve such dispute by its management. Should the parties not be
successful, any dispute arising under this Contract may be settled by
appropriate legal proceedings.
22. TERMINATION FOR DEFAULT
(a) Plasma-Therm may, by written notice of the default to BDM, terminate
in whole this Contract or any task order issued hereunder in any one
of the following circumstances:
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(1) Material non-performance by BDM where it is not cured within a
period of sixty (60) days after receipt of written notice from
Plasma-Therm specifying such failure; or
(2) BDM becomes the subject of proceedings under any law relating to
bankruptcy and such proceedings have not been dismissed within sixty
(60) days.
(b) Either BDM or Plasma-Therm has the right to terminate this contract if
either party determines that the savings identification agreed to in
Schedule B Fees no longer satisfies the intent or scope of the
original contract or the savings identified in Schedule 2 , line
number 43 "Cumulative Inventory plus Productivity Savings" are not
being realized.
(c) Either party may terminate this Contract for breach upon written
notice, providing cure has not been made within sixty (60) days of
written notice of such breach.
(d) If BDM proposes savings that Plasma Therm agrees to and is unwilling
to implement for whatever reason, BDM has the right to terminate the
engagement and collect all fees for professional services, previously
rendered travel and other expenses up to the date of termination.
(e) BDM shall have the right to terminate this Contract if its invoices
have not been paid in a timely manner, in accordance with Item 7 of
this agreement, and such failure to pay has not been cured within ten
(10) days of written notice of failure to pay.
(f) BDM and Plasma-Therm shall agree upon the whole or any part of the
amount to be paid (per Attachment B, Schedule 2, Plasma-Therm:
Flow-Through to P&L) in full for any work performed by BDM, after such
termination, provided however that such amounts shall not exceed the
remaining unpaid balance of the Task Order price.
(g) Neither party shall be liable to the other for damages resulting from
default due to causes beyond the party's control and without the
party's fault or negligence.
23. TERMINATION FOR PLASMA-THERM'S CONVENIENCE
(a) This Contract and/or Task Order may be terminated by Plasma-Therm in
whole whenever Plasma-Therm shall determine that such termination is
in the best interest of Plasma-Therm.
(b) After the receipt of a Notice of Termination, and except as otherwise
directed by Plasma-Therm, BDM shall:
(i) Stop work under the Task Order on the date and to the extent
specified in the Notice of Termination;
(ii) Complete performance of such part of the Task Order as shall
not have been terminated by the Notice of Termination; and,
(c) BDM and Plasma-Therm shall agree upon the whole or any part of the
amount to be paid (per Attachment B, Schedule 2, Plasma-Therm:
Flow-Through to P&L) in full for any work performed by BDM, after such
termination, provided however that such amounts shall not exceed the
remaining unpaid balance of the Task Order price.
24. NON-HIRE
Each party agrees not to solicit, directly or indirectly, or hire any
employee of the other party for employment by any entity without the
permission of the other party during the term of this Contract, and for a
period six months (6) after termination of this Contract.
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25. GOVERNING LAW
This Contract shall be governed by and construed in accordance with the
laws of the State of Florida, without regard to its conflict of laws,
principles. Any proceeding shall be initiated and maintained in said State.
26. COMPLIANCE WITH LAWS
In performance of this Contract, neither BDM nor Plasma-Therm of itself,
nor through or by its affiliates, agents, employees, representatives or
otherwise, shall either directly or indirectly make, give, or promise any
payment or other thing of value to any person for any purpose, or commit
any other act that is unlawful under the provisions of the United States
laws entitled the Foreign Corrupt Practices Act, the Export Administration
Act, the Arms Export Control Act, and the Internal Revenue Code and, to the
extent not inconsistent with any of the laws of the United States, the laws
of any other applicable jurisdiction.
27. ATTORNEY'S FEES
If any legal action, arbitration or other proceeding is brought for the
enforcement of this Contract or any arbitration award, or because of an
alleged dispute, breach, default, or misrepresentation in connection with
any of the provisions of this Contract, the prevailing party will be
entitled to recover reasonable attorney's fees and other cost incurred in
that action or proceeding, in addition to any other relief to which it may
be entitled.
28. SURVIVAL
Any provision of this Contract which contemplates performance or observance
subsequent to any termination or expiration of this Contract shall survive
any termination of this Contract and continue in full force and effect.
29. ORDER OF PRECEDENCE
In the event of an inconsistency or conflict between or among the
provisions of this Contract, the inconsistency shall be resolved by giving
precedence in the following order:
(a) Specific terms and conditions of this Contract;
(b) Attachment A--Statement of Services;
(c) Attachment B--Fees
30. HEADINGS
The headings and titles of this Contract are inserted only for convenience
and shall not affect the interpretation or construction of any provisions.
31. TERM OF THIS CONTRACT
The period of performance of this Contract is a maximum of 21 months from
the effective date of this Contract, unless renewed in writing by the
parties. The period of performance of individual task orders will be as
identified in the Task Orders. Delivery schedules on individual tasks will
be set forth in the applicable Task Order.
32. ENTIRE CONTRACT
This Contract and all attachments, and any documents incorporated herein by
reference shall constitute the entire Contract between the parties hereto
and supersede all prior Contracts and understandings relating to the
subject matter hereof. This Contract shall not be modified or terminated,
and neither modification nor any claimed waiver of any of the provisions
hereof shall be binding upon either party except in writing and signed by
the Parties.
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THIS CONTRACT SHALL BECOME EFFECTIVE ONLY AFTER EXECUTION BY AND IN THE PLACE
PROVIDED BELOW.
IN WITNESS THEREOF, the parties hereto have caused this Contract to be executed
by their duly authorized representatives on the day, month, and year set forth
below.
FOR PLASMA-THERM: FOR BDM INTERNATIONAL, INC. (BDM):
/s/ STACY WAGNER /s/ LARRY A. MENDENHALL
- -------------------------- ----------------------------
Signature Signature
Stacey Wagner Larry A. Mendenhall
- -------------------------- ----------------------------
Name Name
V.P. of Finance & Administration Vice President
- ------------------------------- ----------------------------
Title Title
6/26/98 6/26/98
- -------------------------- ----------------------------
Date Date
8
EXHIBIT 10.50
LICENSE AGREEMENT
This Agreement is between Applied Materials, Inc. (hereinafter "LICENSOR"),
a Delaware corporation having its principle place of business at 2881 Scott
Boulevard, Santa Clara California 95050, and Plasma-Therm, Inc. (hereinafter
"LICENSEE"), a Florida corporation having its principle place of business at
10050 16th Street North, St. Petersburg Florida 33716.
WHEREAS, LICENSOR is the owner of all right, title and interest to certain
Licensed Patents as set forth below; and
WHEREAS, LICENSEE is desirous of obtaining a right to use the Licensed
Patents in the manufacture and sale of Licensed Products as set forth below.
NOW THEREFORE, for good and valuable consideration, the parties agree as
follows:
1. DEFINITIONS
1.1. LICENSED PATENTS. The term "Licensed Patents" shall mean U.S. Patent
No. 4,715,921; U.S. Patent No. 5,013,385; U.S. Patent No. 5,102,495; U.S. Patent
No. 5,308,431; U.S. Patent No. 5,344,542; Canadian Patent No. 1,331,163;
Canadian Patent No. 1,283,174; and Japanese Patent No. 2,596,422. Licensed
Patents shall also include any patent or certificate resulting from a reissue or
reexamination of any of the foregoing patents, as well as any patent issuing
from an application that relates to or claims priority from any patent
application which led to or resulted in any of the foregoing identified issued
patents.
1.2 FIELD OF USE. The term "Field of Use" shall mean the following
technical fields: (i) semiconductor photomasks; (ii) compound semiconductors,
including gallium arsenide, for
1
<PAGE>
wireless optoelectronic telecommunications on six inch or smaller substrates;
(iii) thin film heads; and (iv) systems used to fabricate MEMS devices
(micro-electro-mechanical systems).
1.3 LICENSED PRODUCTS. The term "Licensed Products" shall mean any product
within the Field of Use which in manufacture, use, sale, offer for sale, lease,
importation or other disposition is covered by the claims of the Licensed
Patents.
1.4 LICENSOR. The term "LICENSOR" shall mean Applied Materials, Inc., and
all of its legal representatives, predecessors, successors and assigns, and any
of its officers, directors, employees, subsidiaries, divisions, partnerships,
joint ventures, affiliates, attorneys, and agents.
1.5 LICENSEE. The term "LICENSEE" shall mean Plasma-Therm, Inc., and all of
its legal representatives, officers, directors, employees, attorneys, or agents.
The term "LICENSEE" shall include any subsidiaries, divisions, partnerships,
joint ventures, or affiliates of LICENSEE to the extent that more than fifty
percent of the controlling interest in such entity is owned or controlled,
directly or indirectly, by Plasma-Therm, Inc.
1.6 NET REVENUE. The term "Net Revenue" shall mean the price invoiced by
LICENSEE to a third party in a bona fide, arm's length transaction, or if not
invoiced, the price actually charged or the amount actually received by LICENSEE
in such transaction, less (i) any sales taxes, use taxes, value-added taxes or
other identifiable governmental or regulatory surcharge; and (ii) freight and
insurance charges to the extent actually incurred by LICENSEE and charged to the
third party.
1.7 EFFECTIVE DATE. The term "Effective Date" shall mean the date this
Agreement is signed by both parties.
2
<PAGE>
2. LICENSE
2.1 GRANT. Subject to the terms and conditions of this Agreement, LICENSOR
hereby grants to LICENSEE, and LICENSEE hereby accepts, a non-exclusive license
to make, use, sell, offer to sell, or import Licensed Products.
2.2 TRANSFER. LICENSEE may not assign or delegate or transfer its rights or
obligations under this Agreement either in whole or in part, without the prior
written consent of LICENSOR.
3. TERM AND TERMINATION
3.1 TERM. This Agreement shall expire concurrently with the last to expire
of any enforceable Licensed Patents, unless sooner terminated as provided
herein.
3.2 TERMINATION. Upon breach of any term of this Agreement, the
non-breaching party shall provide written notice of the breach to the breaching
party. If the breaching party fails to cure the breach within thirty days after
receiving written notice thereof, the non-breaching party may terminate the
agreement by giving written notice thereof to the breaching party.
3.3 TERMINATION BY LICENSOR. LICENSOR shall have the right to terminate
this Agreement by giving written notice to LICENSEE in the event: (i) a third
party acquires in a single transaction or a series of transactions a controlling
interest in the outstanding stock entitled to vote for the election of directors
of the LICENSEE; (ii) LICENSEE consolidates or merges with or into another
corporation or other entity, regardless of name of the surviving entity; (iii)
LICENSEE ceases actively doing business in the Field of Use; or (iv) LICENSEE
sells or otherwise transfers substantially all of its business assets related to
Licensed Products.
3
<PAGE>
4. PAYMENT
4.1 INITIAL PAYMENT. LICENSEE shall pay to LICENSOR within five working
days following the Effective Date of this Agreement the sum of $XXXXX as a
non-refundable license fee for use, if any, of the Licensed Patents by LICENSEE
prior to the Effective Date.
4.2 ROYALTIES. LICENSEE shall pay to LICENSOR on an annual basis a royalty
of XXXXX, based on the initial sale of the system as it is shipped, regardless
of whether it has one or more processing modules. No royalty is due on the sale
of separate modules apart from the system. The minimum annual royalty shall be
$XXXXX; however, in any year in which annual royalties fall below $XXXXX,
royalties in excess of $XXXXX from the previous year (if any) may be carried
forward to meet the minimum annual royalty. Further, if LICENSEE exceeds
payments of $XXXXX in annual royalties for XXXXX consecutive years, the annual
minimum shall be abolished.
4.3 REPORTS AND PAYMENTS. LICENSEE shall provide to LICENSOR within thirty
days following the close of each calendar quarter a report summarizing all sales
of Licensed Products together with any royalty payment due thereon. In
particular, such report shall include at least the following: (i) the total Net
Revenue for the quarterly reporting period, including an itemized listing of the
Net Revenue in the currency in which it was billed, the exchange rates used and
the final United States Dollar value; and (ii) such additional information as
LICENSOR may reasonably prescribe from time to time to enable LICENSOR to
ascertain the computation of royalties. LICENSOR shall consider this information
to be confidential, and shall not disclose it to third parties.
4
<PAGE>
4.3 ACCOUNTING FOR PAST SALES. LICENSEE shall provide to LICENSOR within
two months following LICENSEE's signature of this Agreement a full disclosure
and accounting for sales of Licensed Products prior to the Effective Date,
including both the Clusterlock and Versalock systems.
4.4 AUDIT. LICENSEE shall maintain in accord with generally accepted
accounting principles account records sufficient to verify royalties payable by
LICENSEE to LICENSOR under this Agreement. Upon reasonable notice by LICENSOR
and no more than twice per year, LICENSEE shall make such records available for
examination and audit by an independent auditor selected and paid for by
LICENSOR. LICENSEE shall keep and maintain such records for the purpose of
access for at least five years after the termination of this Agreement.
5. MOST FAVORED LICENSEE
It is the intention of the parties that LICENSEE receive most favored
LICENSEE status and treatment under this Agreement. In the event that LICENSOR
grants a non-exclusive license under the Patent Rights in any Field of Use to
any other Person making or selling any product(s) that directly compete with
Licensed Products, and such license contains rates of royalties applicable to
the sale of such products(s) in any country or countries which (calculated on an
equivalent basis with respect to the Patent Rights) are lower than those
provided in this Agreement, LICENSOR shall (a) promptly notify LICENSEE in
writing of such license, and (b) extend to LICENSEE such lower rates of royalty
applicable to sales of the Products by LICENSEE and its Affiliates in such Field
of Use and in the same country or countries, effective as of the date or dates
on which such rates of royalty shall become effective pursuant to such license;
provided, that the extension of such lower rates of royalty to LICENSEE shall
only
5
<PAGE>
become effective hereunder if LICENSEE shall, within 60 days of receipt of
the notice described in clause (a) above, give written notice to LICENSOR that
LICENSEE (i) desires to have such lower rates of royalties substituted for the
rates of royalty set forth herein with respect to such country or countries and
(ii) accepts all terms of such license which are more favorable to LICENSEE than
corresponding terms of this Agreement and which are disclosed to LICENSEE in the
notice described in clause (a) above, including, without limitation, any
financial terms (but without any obligation on the part of LICENSOR to perform
any obligations relating thereto). LICENSOR shall not have any obligation under
this Section for any activities relating to the grant of a license under any of
the Patent Rights to any university, governmental authority or for any other
non-commercial purpose, or to comply with any law, rule, regulation, order or
decree of any governmental authority of competent jurisdiction, whether as a
result of compulsory licensing or otherwise.
6. REPRESENTATIONS AND WARRANTIES
6.1 AUTHORITY TO ACT. LICENSOR and LICENSEE, and each of them, represent
and warrant solely for the benefit of the other that it has the corporate power
and authority to execute, deliver and perform this Agreement.
6.2 OWNERSHIP OF INTELLECTUAL PROPERTY. LICENSOR represents and warrants
that it has all right, title and interest to the Licensed Patents. LICENSEE
acknowledges and agrees that the Licensed Patents are the sole property of
LICENSOR and that title and ownership shall remain vested in LICENSOR. LICENSEE
agrees to not do or permit to be done any action or thing which may impair
LICENSOR's ownership rights in and to the Licensed Patents. Nothing in this
Agreement shall be construed as a transfer of title or ownership in the Licensed
Patents.
6
<PAGE>
6.3 COOPERATION. LICENSEE shall promptly notify LICENSOR regarding any
infringement by a third party of any of the Licensed Patents. Upon LICENSOR's
request, and at LICENSOR'S expense, LICENSEE shall reasonably assist and
cooperate with LICENSOR in the prosecution of any action against a third party
infringer.
6.4 COVENANT NOT TO SUE. LICENSOR shall not bring or maintain a civil
action or enforcement proceeding against any customer of LICENSEE for
infringement of any of the Licensed Patents to the extent that such customer
purchased product from LICENSEE that falls within the specified Field of Use.
6.5 PATENT MARKING. LICENSEE shall include and affix to all Licensed
Products any and all legends and notices for patents and applications therefor
consistent with the requirements of 35 United States Code ss. 287 or the
equivalent thereof in any foreign jurisdiction.
6.6 WARRANTY OF ENFORCEMENT. Enforcement of the Patents against any direct
competitor of LICENSEE will be in the sole discretion of LICENSOR. However, in
the event that LICENSOR learns of a likelihood of direct infringement of the
Patents by a direct competitor of LICENSEE in an amount exceeding $5,000,000 in
gross annual sales ("the minimum infringement"), LICENSOR will take steps to
either assure LICENSEE that the competitor is licensed on substantially equal
terms as LICENSEE, or bring suit to enjoin further infringement. Failure to
provide assurances or bring suit within the first 90 days of learning of the
direct infringement will suspend LICENSEE's obligation to pay royalties on its
own competing licensed products. If no action is taken within the second 90
days, then LICENSEE will be relieved of any obligation to pay future royalties
and royalties for the second 90 day period, and the license becomes a
royalty-free license for those products, unless LICENSOR subsequently obtains a
license or brings suit, at which time LICENSEE'S royalty obligations
7
<PAGE>
under this Agreement are revived. If during the second 90 days; (1) LICENSOR has
brought suit to enjoin infringement; or (2) has licensed an infringer, in which
the infringer is obligated to pay liquidated damages for past infringement, then
LICENSEE will pay all royalties which were suspended during the second 90 days.
Moreover, LICENSOR shall only be obligated to deal with one infringer at a time.
Therefore, failure to provide assurances or bring suit to enjoin infringement
with regard to additional infringing direct competitors during the time LICENSOR
is bringing suit against the one infringer or within the first and second 90
days of notice with respect to the one infringer will not suspend or relieve
LICENSEE's royalty obligation, based on LICENSOR's failure to provide assurances
or bring suit to enjoin infringement with regard to the additional infringing
direct competitors.
6.7 DISCLAIMER. LICENSOR EXPRESSLY DISCLAIMS ANY OTHER WARRANTY OR
REPRESENTATION REGARDING THE LICENSED PATENTS OR THE LICENSED PRODUCTS. Nothing
in this Agreement shall be construed as: (i) an obligation to furnish any
technical assistance, information or know-how; (ii) a warranty or representation
by LICENSOR as to the validity, enforceability or scope of any Licensed Patent;
(iii) a warranty or representation that any manufacture, sale, offer to sell,
lease, use, import or other disposition of Licensed Products hereunder will be
free from infringement of any patents, utility models, copyrights, mask works,
trade secrets, trademarks, trade names, or other proprietary rights of third
parties; and (iv) conferring any right to use in advertising, publicity, or
otherwise, any trademark, trade name, service mark of LICENSOR, or any
confusingly similar designation.
8
<PAGE>
7. GENERAL PROVISIONS
7.1 APPLICABLE LAW. This Agreement shall be construed in accordance with
California law.
7.2 VENUE AND JURISDICTION. Any action or proceeding arising out of this
Agreement shall be brought in a state or federal court of competent subject
matter jurisdiction located in Santa Clara, California. The parties specifically
consent to personal jurisdiction if such courts and each party irrevocably
waives its rights to contest venue in such courts.
7.3 SEVERABILITY. If any provision of this agreement is held by a court of
competent jurisdiction to be unenforceable, the remainder of this Agreement
shall be continued in full force and effect.
7.4 ENTIRE AGREEMENT - AMENDMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes and replaces all prior or contemporaneous understandings or
agreements, written or oral, regarding such subject matter. No amendment to or
modification of this Agreement shall be binding unless in writing and signed by
duly authorized representatives of both parties.
7.5 CONFIDENTIALITY. The parties shall maintain the terms and conditions of
this Agreement as confidential.
7.6 NOTICES. All notices and other correspondence regarding this Agreement
shall be delivered as follows:
FOR LICENSEE: FOR LICENSOR:
Plasma-Therm, Inc. Applied Materials, Inc.
10050 16th Street North 2881 Scott Boulevard
St. Petersburg Florida 33716 Santa Clara California 95050
ATTN: ATTN: Michael L. Sherrard, Esq.
9
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives.
LICENSEE LICENSOR
Plasma-Therm, Inc. Applied Materials, Inc.
Date:___________________________ Date:___________________________
By:_____________________________ By:_____________________________
Print Name:_____________________ Print Name:_____________________
Title:__________________________ Title:__________________________
10
EXHIBIT 10.51
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This is an Amendment No. 1, dated October 1, 1998 (the "Amendment No. 1"),
to an Employment Agreement dated January 22, 1997 (the "Employment Agreement"),
between Plasma-Therm, Inc., a Florida corporation (the "Company"), and Ronald S.
DeFerrari (the "Employee").
BACKGROUND
WHEREAS, the Employee is currently employed by the Company pursuant to the
terms of the Employment Agreement. The parties wish to amend the Employment
Agreement to reflect changes in sections 3, 4.2, and 8.4.
NOW, THEREFORE, the parties hereto intending to be legally bound hereby,
and in consideration of the mutual covenants herein contained, agree as follows:
TERMS
1. The foregoing recitals are true and correct and incorporated herein by
reference. Any capitalized terms used but not defined herein shall have the same
meaning ascribed to them in the Employment Agreement.
2. The Employment Agreement is hereby amended by revising the first
sentence of section 3 to read as follows:
"The Employee shall be employed by Company as President and Chief Executive
Officer."
3. The Employment Agreement is hereby amended by revising section 4.2 to
read in its entirety as follows:
"An annual bonus based on five percent (5%) of fiscal year Net
Earnings, as defined by Company policy, to be paid on a quarterly basis and
reconciled at year end; and"
4. The Employment Agreement is hereby amended by adding a new section
8.4(d) to read in its entirety as follows:
In the event of a Change of Control, all stock options granted under
the Company's 1995 Stock Incentive Plan (the "Plan") shall immediately
become fully vested and exercisable. In addition, in the event of a Change
of Control, the Stock Option Committee shall have the discretion to
accelerate the termination of any stock option granted under the Plan to a
date no earlier than six (6) months following the date of a Change of
Control.
<PAGE>
5. Except as specifically set forth above, the Employment Agreement shall
remain in full force and effect.
6. This Amendment No. 1 may be executed in any number of counterparts, each
of which shall be deemed to be an original, and all of which together shall
constitute one document.
7. This Amendment No. 1 contains the final, complete, and exclusive
expression of the parties' understanding and agreement concerning the matters
contemplated herein and supersedes any prior or contemporaneous agreement of
representation, oral or written, among them.
8. This instrument shall be binding upon, and shall inure to the benefit
of, each of the parties' respective personal representatives, heirs, successors,
and assigns.
9. This instrument shall be governed by, and construed and enforced in
accordance with, the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 on the
day and year first written above.
PLASMA-THERM, INC.
/s/ RONALD H. DEFERRARI
------------------------------------------
Ronald H. DeFerrari, Chairman of the Board
/s/ ANASTASIOS S. GIANOPLUS
------------------------------------------
Anastasios S. Gianoplus
/s/ LUBEK JASTRZEBSKI
------------------------------------------
Lubek Jastrzebski
/s/ RICHARD T. HEGLIN
------------------------------------------
Richard T. Heglin
CONSTITUTING ALL OF THE MEMBERS OF THE BOARD
OF DIRECTORS
Employee
/s/ RONALD S. DEFERRARI
------------------------------------------
Ronald S. DeFerrari
2
EXHIBIT 21
SUBSIDIARY OF THE REGISTRANT
STATE OR OTHER JURISDICTION
NAME OF INCORPORATION
- ---- ----------------
Magnetran, Inc. New Jersey
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated January 18, 1999, accompanying the consolidated
financial statements and the schedule of Plasma-Therm, Inc. and Subsidiary
included in the Annual Report on Form 10-K of Plasma-Therm, Inc. and Subsidiary
for the year ended November 30, 1998. We hereby consent to the incorporation by
reference of said reports in the Registration Statements of Plasma-Therm, Inc.
and Subsidiary on Form S-3 (File No. 33-88836, effective February 1, 1995) and
Form S-8s (File No. 33-29104, effective June 22, 1989, File 33-60375, effective
June 14, 1995 and File 33-44405, effective January 16, 1998).
GRANT THORNTON LLP
Tampa, Florida
January 18, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF NOVEMBER 30, 1998 AND CONSOLIDATED
STATEMENTS OF INCOME FOR THE YEAR ENDED NOVEMBER 30, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<CASH> 7,170,464
<SECURITIES> 0
<RECEIVABLES> 14,842,937
<ALLOWANCES> 0
<INVENTORY> 9,859,914
<CURRENT-ASSETS> 34,270,831
<PP&E> 17,456,808
<DEPRECIATION> 4,610,619
<TOTAL-ASSETS> 47,268,782
<CURRENT-LIABILITIES> 13,665,929
<BONDS> 3,670,581
0
0
<COMMON> 112,072
<OTHER-SE> 30,405,428
<TOTAL-LIABILITY-AND-EQUITY> 47,268,782
<SALES> 49,088,445
<TOTAL-REVENUES> 49,088,445
<CGS> 30,491,002
<TOTAL-COSTS> 16,043,300
<OTHER-EXPENSES> (390,079)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 616,552
<INCOME-PRETAX> 2,327,670
<INCOME-TAX> 957,490
<INCOME-CONTINUING> 1,370,180
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,370,180
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
