FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended AUGUST 31, 1999
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
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10050 16TH STREET NORTH, ST. PETERSBURG, FLORIDA 33716
- --------------------------------------------------------------------------------
(Address of principal executive offices and zip code)
(727) 577-4999
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.01 per share
Outstanding at September 17, 1999:
11,220,061
Page 1 of 23 Pages
<PAGE>
INDEX
PAGE
NUMBER
------
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheets - August 31, 1999 and
November 30, 1998.......................................................3
Statements of Income - Three Months and Nine Months ended
August 31, 1999 and August 31, 1998 ....................................5
Statements of Cash Flows - Nine Months ended
August 31, 1999 and August 31, 1998 ....................................6
Notes to Consolidated Financial Statements ...............................8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ...........................13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ..............................21
-2-
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AUGUST 31, NOVEMBER 30,
ASSETS 1999 1998
----------- ------------
(UNAUDITED)
Current assets
Cash and cash equivalents $ 6,507,345 $ 7,170,464
Accounts receivable 13,708,292 14,842,937
Inventories 9,535,302 9,859,914
Prepaid income taxes 786,522 1,405,591
Prepaid expenses and other 627,269 747,234
Deferred tax asset 475,583 244,691
----------- -----------
Total current assets 31,640,313 34,270,831
----------- -----------
Property, plant and equipment
Building 5,209,292 4,996,731
Machinery and equipment 11,845,951 11,296,080
Leasehold improvements -- 151,005
----------- -----------
17,055,243 16,443,816
Less accumulated depreciation and
amortization 6,503,222 4,610,619
----------- -----------
10,552,021 11,833,197
Land 2,168,851 1,012,992
----------- -----------
12,720,872 12,846,189
----------- -----------
Other assets 869,209 151,762
----------- -----------
$45,230,394 $47,268,782
=========== ===========
See accompanying notes to these consolidated financial statements.
-3-
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AUGUST 31, NOVEMBER 30,
LIABILITIES 1999 1998
----------- ------------
Current liabilities
Short-term borrowings $ 5,500,000 $ 5,000,000
Current maturities of long-term obligations 415,756 585,228
Accounts payable 3,451,444 4,828,263
Accrued payroll and related 571,835 605,431
Accrued expenses 1,641,166 1,083,535
Accrued restructuring charge 227,759 992,847
Customer deposits 176,507 570,625
Deferred Revenue 875,451 --
----------- -----------
Total current liabilities 12,859,918 13,665,929
----------- -----------
Long-term obligations 3,476,455 3,085,353
----------- -----------
SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock, $.01 par value (25,000,000
shares authorized, 11,220,061 and
11,207,061 shares issued and outstanding
at August 31, 1999 and November 30, 1998) 112,202 112,072
Additional paid-in capital 17,212,257 17,156,849
Retained earnings 11,569,562 13,248,579
----------- -----------
28,894,021 30,517,500
----------- -----------
$45,230,394 $47,268,782
=========== ===========
See accompanying notes to these consolidated financial statements.
-4-
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
AUGUST 31, AUGUST 31,
----------------------------- ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 10,479,330 $ 10,740,789 $ 29,003,142 $ 38,015,377
Cost of sales 6,097,284 6,440,026 18,506,323 21,566,552
------------ ------------ ------------ ------------
Gross profit 4,382,046 4,300,763 10,496,819 16,448,825
------------ ------------ ------------ ------------
Operating expenses:
Research and development 1,649,472 1,620,855 5,738,868 4,383,872
Selling and administrative 1,943,223 2,018,533 5,947,381 6,419,305
Restructuring charge -- -- 948,069 --
------------ ------------ ------------ ------------
Total operating expenses 3,592,695 3,639,388 12,634,318 10,803,177
------------ ------------ ------------ ------------
Operating income 789,351 661,375 (2,137,499) 5,645,648
Interest (income) expense, net 93,785 46,260 252,283 152,894
------------ ------------ ------------ ------------
Income (loss) before income
taxes (benefit) 695,566 615,115 (2,389,782) 5,492,754
Income taxes (benefit) 257,663 250,971 (710,765) 2,075,017
------------ ------------ ------------ ------------
Net income (loss) $ 437,903 $ 364,144 $ (1,679,017) $ 3,417,737
============ ============ ============ ============
Earnings (loss) per share:
Basic $ 0.04 $ 0.03 $ (0.15) $ 0.31
============ ============ ============ ============
Diluted $ 0.04 $ 0.03 $ (0.15) $ 0.30
============ ============ ============ ============
</TABLE>
See accompanying notes to these consolidated financial statements.
-5-
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED AUGUST 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $(1,679,017) $ 3,417,737
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Depreciation and amortization 2,365,832 1,792,087
Gain on sale of Magnetran, net of taxes (84,510) --
Gain on disposal of assets (10,974) --
Deferred taxes (275,866) 27,159
Compensation - stock options 16,340 18,200
Tax benefit related to certain stock options
and warrants 6,638 97,086
Changes in assets and liabilities
Decrease in accounts receivable 838,599 1,430,167
(Increase) decrease in inventories 23,528 (3,369,910)
(Increase) decrease in prepaid income taxes 554,817 (483)
(Increase) decrease in prepaid expenses and other 145,850 (529,920)
Increase (decrease) in accounts payable (1,405,475) 19,320
Decrease in accrued payroll and related (24,820) (227,093)
Increase in accrued expenses 555,048 207,888
Decrease in accrued restructuring charge (765,088) --
Increase (decrease) in customer deposits (394,118) 103,250
Increase in deferred revenue 875,451
----------- -----------
Net cash provided by
operating activities 742,235 2,985,488
----------- -----------
Cash flows from investing activities
Capital expenditures (2,278,322) (3,415,925)
Proceeds from sale of fixed assets 66,975
Net Proceeds from sale of Magnetran 48,706 --
Other 3,097 (75,335)
----------- -----------
Net cash used in investing activities (2,159,544) (3,491,260)
----------- -----------
</TABLE>
See accompanying notes to these consolidated financial statements.
-6-
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED AUGUST 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from financing activities
Proceeds from issuance of long-term obligations 700,000 --
Principal payments on long-term obligations (478,370) (540,354)
Net proceeds under line of credit agreements 500,000 2,000,000
Exercise of stock options and warrants 32,560 306,445
----------- -----------
Net cash provided by
financing activities 754,190 1,766,091
----------- -----------
Net increase (decrease) in cash and
cash equivalents (663,119) 1,260,319
----------- -----------
Cash and cash equivalents, beginning of period 7,170,464 5,398,030
----------- -----------
Cash and cash equivalents, end of period $ 6,507,345 $ 6,658,349
=========== ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
-7-
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1999 AND NOVEMBER 30, 1998
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial
position as of August 31, 1999 and November 30, 1998 and the results of
operations and cash flows for the nine months ended August 31, 1999 and
1998.
The results of operations for the nine months ended August 31, 1999 and
1998 are not necessarily indicative of results for the full year.
The November 30, 1998 balance sheet amounts and disclosures included
herein have been derived from the November 30, 1998 audited financial
statements of the Registrant. While the Company believes that the
disclosures presented are adequate to make the information not
misleading, it is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial
statements and the notes included in the Company's latest annual report
on Form 10-K.
NOTE 2 PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Plasma-Therm, Inc. and its wholly owned subsidiary, Magnetran Inc.
through June 30, 1999 (See Note 6). All significant intercompany
transactions and balances have been eliminated.
NOTE 3 INVENTORIES
Inventories consist of the following:
AUGUST 31, NOVEMBER 30,
1999 1998
----------- ------------
Raw materials $ 5,093,675 $ 4,974,844
Work-in-process 3,875,745 4,477,355
Finished goods 565,882 407,715
----------- -----------
$ 9,535,302 $ 9,859,914
=========== ===========
-8-
<PAGE>
NOTE 4 EARNINGS PER SHARE DISCLOSURES
FOR THE THREE MONTHS ENDED AUGUST 31, 1999
------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Basic EPS:
Income available to common
Shareholders $ 437,903 11,220,061 $.04
====
Effect of Dilutive Securities:
Options -- 40,476
---------- ----------
Diluted EPS:
Income available to common
Shareholders + assumed conversions $ 437,903 11,260,537 $.04
========== ========== ====
FOR THE THREE MONTHS ENDED AUGUST 31, 1998
------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Basic EPS:
Income available to common
Shareholders $ 364,144 11,197,061 $.03
====
Effect of Dilutive Securities:
Options -- 111,721
---------- ----------
Diluted EPS:
Income available to common
Shareholders + assumed conversions $ 364,144 11,308,782 $.03
========== ========== ====
-9-
<PAGE>
FOR THE NINE MONTHS ENDED AUGUST 31, 1999
------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------ ---------
Basic EPS:
Income (loss) available to common
Shareholders ($1,679,017) 11,218,866 ($.15)
====
Effect of Dilutive Securities:
Options -- 23,457
----------- ----------
Diluted EPS:
Income (loss) available to common
Shareholders + assumed conversions ($1,679,017) 11,242,323 ($.15)
========== ========== ====
FOR THE NINE MONTHS ENDED AUGUST 31, 1998
------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Basic EPS:
Income available to common
Shareholders $ 3,417,737 11,169,497 $ .31
=====
Effect of Dilutive Securities:
Options -- 203,791
----------- ----------
Diluted EPS:
Income available to common
Shareholders + assumed conversions $ 3,417,737 11,373,288 $ .30
=========== ========== =====
-10-
<PAGE>
NOTE 5 SHORT-TERM BORROWINGS
CONSTRUCTION LOAN
In February 1999, the Company executed a promissory note for $4,500,000
with its bank for the construction of its 33,000 square foot R&D
facility adjacent to its current facility. During the construction
phase, interest is 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.
In March 1999, the construction of the facility was temporarily put on
hold. The Company is still in the process of evaluating the need for
this facility. No draws have been made on the construction loan.
TERM LOAN
In May 1999, the Company executed a $700,000 term loan with its bank
for the purchase of eight acres of land directly across from its
existing facility. The total cost of the land was $1,150,000. The five
year term loan is amortized over a fifteen year period, and payable in
monthly installments of $3,889 plus interest at the one month LIBOR
rate plus 2.25% (7.61% at August 31, 1999) through May 2004. The note
is secured by the land.
LINE OF CREDIT
In May 1999, the Company renewed its $10,000,000 line of credit with
its bank. The term of the line of credit agreement is through May 2000.
Interest is payable monthly at the one month LIBOR rate plus 2% (7.36%
at August 31, 1999). The line is collateralized by all of the Company's
assets.
All the real estate loans are cross-collateralized, including the $4.5
million construction loan for the new R&D facility, the $700,000 term
loan for the land, and the term loan for the Company's existing
facility. The line of credit is cross-collateralized with the Company's
$1 million term loan. All debt is cross-defaulted.
NOTE 6 SALE OF SUBSIDIARY
On June 30, 1999, the Company disposed of all of the capital stock in
its wholly-owned subsidiary. Magnetran, Inc. redeemed 95% of the
shares, and Magnetran's general manager purchased the remaining 5% of
the shares. The total purchase price for the shares was $1,100,000, of
which the Company received $300,000 in cash. The remaining $800,000
consists of a promissory note from Magnetran dated June 30, 1999. The
principal amount of the note is amortized over 15 years, with a 5-year
balloon. Interest and principal are payable monthly at a
-11-
<PAGE>
rate of 7% per year, with the rate of interest increasing by .25% each
year thereafter. The note is secured by the shares of Magnetran. The
Company recognized a gain of $84,510 on the sale, net of taxes.
-12-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales of $10,479,330 for the third quarter of 1999 was similar to
net sales of $10,740,789 for the third quarter of 1998. For the first nine
months of 1999, the Company reported net sales of $29,003,142, which was 24%
lower than net sales of $38,015,377 for the first nine months of 1998. The
decrease in net sales for the first nine months of 1999 was primarily due to the
continued slowdown in the Company's four market segments during the first half
of the year. The slowdown began in the third quarter of 1998 and continued
through the second quarter of 1999. The Company is experiencing an increase in
business as demonstrated by the increase in net sales from $9,227,437 reported
for the second quarter of 1999.
Gross profit of $4,382,046 for the third quarter of 1999 was 42% of net
sales, compared to $4,300,763 for the third quarter of 1998 which was 40% of net
sales. Gross profit of $10,496,819 for the first nine months of 1999 was 36% of
net sales, compared to $16,448,825 for the first nine months of 1998, which was
43% of net sales. The increase in gross margin for the third quarter of 1999 is
primarily related to product mix. Approximately 69% of net sales related to the
Versalock/registered trademark/ product line in the third quarter of 1999
compared to 43% in the third quarter of 1998. Generally, the
Versalock/registered trademark/ product line carries the highest margin. The
decrease in gross margin for the first nine months of 1999 was attributable to
lower net sales as a result of the slowdown of the Company's four markets during
the first half of the year, causing the Company to experience an increase in
fixed manufacturing costs as a percentage of net sales. Another contributor to
the reduced gross margin is the strategic placement of lower margin systems sold
in the microelectromechanical (MEMS) market, primarily in the first quarter of
1999, in an effort to increase market share.
Research and development expense for the third quarter of 1999 and 1998
was $1,649,472 and $1,620,855, which was 16% and 15% of net sales, respectively.
Research and development expense for the first nine months of 1999 and 1998 was
$5,738,868 and $4,383,872, which was 20% and 12% of net sales respectively. The
increase for the first nine months of 1999 is the direct result of the continued
implementation of new research and development programs to enhance development
efforts in the Company's target markets: optoelectronics/telecommunications,
data storage, photomask, and MEMS. Specifically, within the data storage market
the Company has invested significant resources for its Physical Vapor Deposition
(PVD) development program. 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 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 expense was $1,943,223 for the third quarter
of 1999, down slightly from $2,018,533 for the third quarter of 1998, consisting
of 19% of net sales for both
-13-
<PAGE>
periods. Selling and administrative expense for the first nine months of 1999
was $5,947,381, down from $6,419,305 for the first nine months of 1998,
consisting of 21% and 17% of net sales, respectively. The net decrease of
$75,310 and $471,924, respectively, for the third quarter and first nine months
of 1999 is attributable to the restructuring of overhead and reduction of
personnel in March of 1999, offset by the incremental costs associated with the
implementation of the business units. As of the beginning of the third quarter
of 1999, as part of the Company's continued reorganization, the implementation
of the market-specific business units was complete. A separate business unit was
established for each of the Company's four key markets. In 1999, certain key
executives joined the Company to head up and staff each business unit,
consisting of a Business Unit Director, process development and applications
scientists, and a Customer Program Manager. This new re-organization has allowed
the Company to make greater penetration into its existing markets, with the
potential for increased market share in the year 2000 and beyond. The business
units split efforts between research and development and marketing. Although
there are intellectual property costs associated with the implementation of the
business units, management believes that the benefits far outweigh the costs.
Income before income taxes for the third quarter of 1999 was $695,566
($.04 per diluted share), compared to income before income taxes of $615,115
($.03 per diluted share) in the third quarter of 1998. Net loss before income
tax benefit for the first nine months of 1999 was $2,389,782 ($.15 per diluted
share) compared to net income before income taxes of $5,492,754 ($.30 per
diluted share) for the first nine months of 1998. Included in the net loss
before the income tax benefit for the first nine months of 1999 was an
additional restructuring charge of $948,069 or $.05 per diluted share, related
to services provided by TRW/BDM International pertaining to the Company's
implementation of the Integrated Supply Chain Management Program, and the
restructuring of overhead and personnel in March of 1999. All charges related to
the restructuring were complete as of the end of the second quarter of 1999. The
primary reasons for the increase in net income for the third quarter of 1999 and
the decrease in net income for the first nine months of 1999 as compared to the
same periods in 1998 are described above.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL REQUIREMENTS
Net cash provided by operations totaled $742,235 for the first nine
months of 1999, compared to net cash provided by operations of $2,985,488 for
the same period in 1998. Cash generated from operations for the first nine
months of 1999 consisted of various components including non-cash depreciation
and amortization of $2,365,832 and decreases in accounts receivable and prepaid
income taxes of $838,599 and $554,817, respectively, with an increase in accrued
expenses and deferred revenue of $555,048 and $875,451, respectively. Primary
sources of cash were partially offset by a net loss of $1,679,017 in addition to
decreases in accounts payable, restructuring charge and customer deposits of
$1,405,475, $765,088 and $394,118, respectively.
The $838,599 decrease in accounts receivable is related to the timing
of sales and related payments.
-14-
<PAGE>
The $554,817 decrease in prepaid income taxes consists of a refund of
approximately $1.2 million for the overpayment of federal income taxes for 1998
partially offset by the recording of the federal tax benefit of approximately
$630,000 related to the net loss realized in the first nine months of 1999.
The $555,048 increase in accrued expenses was primarily related to an
increase in commissions payable to international sales representatives.
Commissions due to international sales representatives at any given time are
directly related to the mix between domestic and international sales and the
timing of receipts from customers. International representatives are paid after
payment is received from the customer.
Deferred revenue totaling $875,451 consists of pre-billings in
accordance with the terms of certain purchase orders, prior to shipment of the
product. This deferred revenue will be recognized upon shipment of the product.
The $1,405,475 decrease in accounts payable from November 30, 1998 is a
result of the continued implementation of the Integrated Supply Chain Management
Program which has resulted in better forecasting and sales order management,
improved product quality, lower product costs, improved cycle times and greater
standardization among product lines. This is demonstrated through the increase
in revenue in the third quarter of 1999 over the prior quarters, and an
anticipated increase in the fourth quarter of 1999, yet the inventory balance of
$9.5 million as of August 31, 1999 is lower than the $9.9 balance as of November
30, 1998 and the $9.8 balance as of the end of the second quarter of 1999.
Additionally, as a result of the weakened economic condition of the
semiconductor industry, in the fourth quarter of 1998 the Company temporarily
extended its payment terms to primarily all of its vendors to ninety days. As of
November 30, 1998, 49%, 42% and 9% of the $4,828,263 balance was less than 30
days old, 30-59 days old, and over 60 days old, respectively. As of May 31,
1999, the majority of the vendors on extended terms had been repaid. In
comparison, as a result of the Company's weakened financial condition through
the second quarter of 1999, in June 1999 the Company once again temporarily
extended its payment terms to ninety days. As of August 31, 1999, 51%, 38%, and
11% of the $3,451,444 balance was less than 30 days old, 30-59 days old, and
over 60 days old, respectively. The Company intends to repay all vendors on
extended terms by the end of the last fiscal year.
The $765,088 reduction in accrued restructuring relates primarily to
payments to TRW/BDM International pertaining to the Company's implementation of
the Integrated Supply Chain Management Program. As of the first quarter of
1999, all costs associated with the consulting arrangement had been recognized.
The $394,118 decrease in customer deposits was the result of the
recognition of revenue of approximately $570,000 in the first six months of 1999
upon shipment of systems on which partial payments had been made and classified
as deposits on the balance sheet as of November 30, 1998, offset by a prepayment
on an order in the third quarter of 1999 of approximately $170,000. The
prepayment will be recognized as revenue upon shipment of the system.
-15-
<PAGE>
Net cash used in investing activities for the first nine months of 1999
was $2,159,544 compared to $3,491,260 for the same period in 1998. For the first
nine months of 1999, the Company incurred $2,278,000 in capital expenditures, of
which $578,000 was for the purchase and construction of various lab equipment to
be used for research and development. In addition, approximately $213,000 was
for the construction of a 33,000 square foot facility to be used for additional
research and development and office space. The Company is still evaluating the
need to restart the construction of this facility. The Company also purchased
approximately eight acres of land for $1,150,000 directly across from its
current facilities. The remaining $337,000 was for the purchase of various
computer and manufacturing equipment.
Net cash provided by financing activities for the first nine months of
1999 was $754,190, compared to $1,766,091 for the same period in 1998. Cash
provided by financing activities in the first nine months of 1999 included
$700,000 received from the issuance of a promissory note in relation to the
purchases of the eight acres of land, $500,000 net proceeds on the line of
credit, and approximately $30,000 from the exercise of stock options in
connection with the Company's stock option plan. Cash used for financing
activities in the first nine months of 1999 included principal repayments of
approximately $480,000 for long-term obligations.
-16-
<PAGE>
FORWARD LOOKING INFORMATION
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements, 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 distributors' 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 affect the Company's business.
The Company also relies on the health of its four served markets: data
storage, microelectromechanical, photomask, and
optoelectronics/telecommunications, in addition to the general semiconductor
equipment marketplace. A slowdown in capital equipment purchases could also
affect the Company's business from time to time.
YEAR 2000
The Y2K problem ("Millennium Bug") is the inability of computer
hardware, operating system, and/or software to correctly interpret the date
change associated with the transition from 1999 to the year 2000, and associated
dates of significance, for example, handling of the date 9/9/99 and recognizing
the year 2000 as a leap year.
Y2K scenarios can potentially affect products which Plasma-Therm sells,
computers and other computer-controlled equipment used internally by the Company
in the conduct of its business, and the availability of goods and services from
Plasma-Therm suppliers. The Company
-17-
<PAGE>
makes no certification or warranty, express or implied, of any kind, concerning
its Y2K readiness, or that of its products.
Based on the SEMATECH YEAR 2000 READINESS TEST SCENARIO product test
results, all supported products can be expected to continue to perform
customer-defined processes during Y2K date scenarios. Specific adjustments or
hardware upgrades are available to make certain that dates potentially affected
by Y2K scenarios are handled correctly. Computers and other computer-controlled
equipment used internally by the Company in the conduct of its business are all
expected to continue to support Company operations without interruption.
Suppliers' parts and services are also expected to be uninterrupted by Y2K
scenarios.
Plasma-Therm continues to make every effort to ensure that Y2K
scenarios will have little or no impact on our customers, internal operations,
and suppliers. Products are tested based on the SEMATECH standard described in
the SEMATECH YEAR 2000 READINESS TEST SCENARIO. SEMATECH, Inc., is the leading
professional organization providing technical services to the semiconductor
industry. Computers and computer-controlled equipment used internally by the
Company are addressed as recommended by the manufacturer or supplier. Supplier
readiness is determined based on direct responses from each supplier regarding
the Y2K readiness of their product and/or internal operations.
Product testing began mid-year 1998 using the SEMATECH YEAR 2000
READINESS TEST SCENARIO. Early in 1999, Plasma-Therm chartered a Y2K team to
deploy the Company practices and monitor progress across all three areas:
products, internal operations, and supplier capabilities. The team includes a
member of the executive staff and representatives from throughout the Company:
Quality, Information Systems, Software Engineering, Customer Service,
Purchasing, and Sales. The team meets biweekly to set direction and action
plans, evaluate new developments, and ensure progress of all plans.
Plasma-Therm products are categorized by their type (such as VLR), the
controller used in the product's control system (such as Intel/registered
trademark/ Pentium/registered trademark/), the controller's operating system
(such as Microsoft/registered trademark/ Windows/registered trademark/), and the
system control software (such as Plasma-Therm Versaworks/registered trademark/).
As a result, four platforms are defined.
Each platform type has been surveyed to identify potential concerns and
determine the level of support to be provided by suppliers of essential
components. Aggressive date/time scenarios (several beyond SEMATECH standards)
were tested on representative products for each platform type to ensure that we
fully understand the impact of Y2K date-related scenarios. System hardware,
operating system, and software must all be Y2K compliant to ensure total Y2K
compliance for the system.
The product testing results show all systems to be capable of
performing the customer's defined processes without interruption for each Y2K
scenario. Some system installations may require a one-time manual adjustment on
or after 1/1/2000, or upgrade prior to 1/1/2000 to ensure the system date is
correct. The adjustment procedure is documented in Plasma-Therm Procedure
GEM0007, available at no cost through Plasma-Therm Customer Service. Depending
on system configuration and options installed, customers may choose to upgrade
their system to
-18-
<PAGE>
accommodate a correct system date. The upgrade is dependent upon processor type
and BIOS version installed. Computer hardware shipped since January 1999 is
compliant. The system software for older Versaworks systems (prior to version
3.0) may require a manual adjustment or software date patch to maintain system
functionality. The patch CD and instruction procedure (VWD0007) are available at
no cost through Plasma-Therm Customer Service. Systems with Versaworks software
shipped after May 1999 are compliant.
On an ongoing basis, Plasma-Therm tests all engineering changes to
hardware, software, and operating systems. For those which have potential impact
to date-sensitive operations, tests include current SEMATECH Y2K scenarios to
ensure all product released to manufacturing continue to meet the Company's Y2K
practice.
The Y2K Committee identified areas critical to the Company's internal
operations and addressed Y2K scenarios within these areas. All systems have been
or will be brought into compliance by September 30, 1999.
For Y2K compliance activities, the Y2K Committee groups the Company's
suppliers. Based on these groups, and the value of business transactions over
the past five years, Plasma-Therm sent each supplier a questionnaire. The
response requires a Y2K disclosure statement from each supplier. The standards
and follow-up actions required by Plasma-Therm are defined by supplier category.
The supplier responses indicate that currently, they are positioned to
support the Company without incident with regard to Y2K scenarios. Supplier
response results through August 1999 show that 84% of critical parts suppliers
will be capable of supporting Plasma-Therm without incident. Critical service
providers are all capable of supporting the Company, and 86% of critical
facilities suppliers are capable as of August 1999. The Company continues to
work with each supplier not conforming to Plasma-Therm standards to achieve
readiness by year-end 1999.
For installed products, Plasma-Therm service personnel are prepared to
provide assistance to our customers in preparing for or during Y2K scenarios.
Plasma-Therm procedures are available to assist customers in these activities.
In addition, hardware upgrade kits for processors or BIOS modules may
be available for specific systems. These optional upgrades are stated by the
manufacturer to be Y2K compliant. They can be installed prior to the Y2K
transition date, based on scheduling with Plasma-Therm's Customer Service.
To assist our customers in preparing for Y2K scenarios, Plasma-Therm
provides support via the Y2K Readiness Committee and Customer Service. In
addition, should any unforeseen incident occur during any Y2K scenario,
Plasma-Therm service personnel can provide assistance.
Plasma-Therm is continually assessing year 2000 readiness as additional
information regarding Y2K scenarios becomes available. The Company's Y2K program
is specifically
-19-
<PAGE>
designed to address and help protect our customers from the possibility of
Y2K-related problems. The Plasma-Therm Y2K team ensures the Y2K program
continues its high priority focus. The Company is committed to applying all
reasonable efforts to achieve and maintain compliance in accordance with the
SEMATECH YEAR 2000 READINESS TEST SCENARIO. The Company makes no certification
or warranty, express or implied, of any kind, concerning its Y2K readiness, or
that of its products. Based on the Company's Year 2000 analysis described above,
the Company is uncertain of its worst case scenario if the Company's products,
systems, customers, or suppliers are not Year 2000 compliant.
-20-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
10.60 Stock Purchase and Redemption Agreement dated June
21, 1999 between the Company and Magnetran, Inc. and
George McCauley, including Promissory Note dated June
30, 1999 from Magnetran, Inc. to the Company, and
Stock Pledge and Security Agreement dated June 30,
1999 between the Company, Magnetran, Inc., George
McCauley and U.S. Bank Trust National Association.
10.61 Amendment No. 3 to Employment Agreement between
Registrant and Stacy L. Wagner, dated June 30, 1999.
10.62 Amendment No. 2 to Employment Agreement between
Registrant and Edmond A. Richards, dated June 30,
1999.
10.63 Amendment No. 2 to Employment Agreement between
Registrant and Ronald S. DeFerrari, dated July 19,
1999.
27 Financial Data Schedule (for SEC use only).
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the third quarter of
fiscal 1999.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLASMA-THERM, INC.
Date: September 17, 1999 BY: /s/ STACY WAGNER
--------------------------------------
Stacy Wagner
Chief Financial Officer, Treasurer and
Secretary
-22-
<PAGE>
PLASMA-THERM, INC.
FOR 10-Q (FOR THE NINE MONTHS ENDED AUGUST 31, 1999)
EXHIBIT INDEX
10.60 Stock Purchase and Redemption Agreement dated June
21, 1999 between the Company and Magnetran, Inc. and
George McCauley, including Promissory Note dated June
30, 1999 from Magnetran, Inc. to the Company, and
Stock Pledge and Security Agreement dated June 30,
1999 between the Company, Magnetran, Inc., George
McCauley and U.S. Bank Trust National Association.
10.61 Amendment No. 3 to Employment Agreement between
Registrant and Stacy L. Wagner, dated June 30, 1999.
10.62 Amendment No. 2 to Employment Agreement between
Registrant and Edmond A. Richards, dated June 30,
1999.
10.63 Amendment No. 2 to Employment Agreement between
Registrant and Ronald S. DeFerrari, dated July 19,
1999.
27 Financial Data Schedule (for SEC use only).
EXHIBIT 10.60
STOCK PURCHASE AND REDEMPTION AGREEMENT
THIS STOCK PURCHASE AND REDEMPTION AGREEMENT (this "Agreement") is entered
into on this 21st day of June, 1999, by and among GEORGE McCAULEY, an individual
("McCauley"), MAGNETRAN, INC., a New Jersey corporation (the "Company")
(McCauley and the Company together sometimes collectively referred to as the
"Buyer"), and PLASMA-THERM, INC., a Florida corporation (the "Seller").
RECITALS
Seller is the owner of a total of 100 shares (the "Shares") of capital
stock of the Company, such Shares representing all of the issued and outstanding
capital stock of the Company. McCauley wishes to purchase five of the Shares,
the Company wishes to redeem 95 of the Shares, and the Seller wishes to sell the
Shares, all in accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I.
STOCK PURCHASE
1.1 SHARES.
(a) At the Closing (as defined in Article VIII), Seller shall
deliver to McCauley a duly executed stock certificate representing five (5)
of the Shares, which certificate shall be delivered free and clear of all
encumbrances, liens and security interests, endorsed in blank by the Seller
and accompanied by revenue stamps evidencing the payment of all stock
transfer taxes, if applicable.
(b) At the Closing (as defined in Article VIII), Seller shall
deliver to the Company a duly executed stock certificate representing
ninety-five (95) of the Shares, which certificate shall be delivered free
and clear of all encumbrances, liens and security interests, duly endorsed
in blank by the Seller and accompanied by revenue stamps evidencing the
payment of all stock transfer taxes, if applicable.
1.2 PURCHASE PRICE. The total purchase price for the Shares shall
be $1,100,000 (the "Purchase Price"), payable as follows:
(a) $55,000 in cash, or certified or bank check of McCauley
at Closing (the "Cash Payment");
<PAGE>
(b) $245,000 in cash, or certified or bank check of the
Company at Closing (the "Cash Payment"); and
(c) $800,000 in the form of a promissory note of the Company
(the "Note"), in substantially the form attached hereto as Exhibit A.
ARTICLE II.
SECURITY/SUBORDINATION
The Note shall be secured by a Stock Pledge and Security Agreement in
substantially the form attached hereto as Exhibit B. The Note may be
subordinated only to bank debt which the Company may incur in connection with
the financing of the transactions contemplated hereunder.
ARTICLE III.
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents to Buyer that the following statements are true and
correct as of the date hereof:
3.1 CORPORATE STANDING. The Company has been incorporated and is
validly existing and in good standing under the laws of the State of New Jersey.
The Company is duly qualified to own its property and carry on the business now
being conducted by it. The Company has all necessary corporate power and
authority to own and use the property and to transact the business in which it
is engaged, and holds all necessary franchises, licenses and permits required
therefor.
3.2 SELLER'S SHARES. Seller is the sole owner of the Shares,
which are free and clear of all liens, pledges, encumbrances, charges,
agreements or claims by or on the part of any person, firm or corporation.
Seller has full right and legal capacity to enter into this Agreement and to
sell, assign, transfer and deliver the Shares to Buyer. No right or option to
purchase the Shares exists in favor of any person, firm or corporation.
3.3 CAPITALIZATION. The total authorized capital stock of the
Company is 1,000 shares, $.01 par value, of which 100 shares are issued and
outstanding, with no shares held by the Company in its treasury. All of the
Shares have been validly issued and are fully paid and non-assessable.
3.4 FINANCIAL STATEMENTS. The balance sheet and income statement
(together, the "Financial Statements") of the Company as of August 31, 1998,
attached hereto as Exhibits C and D, respectively, although unaudited,
accurately reflect the financial condition of the Company, except for the
following adjustments that will occur or be made with respect to the Company and
the Financial Statements at or before the Closing:
The following intercompany items, which are shown on the
Financial Statements as receivables to Seller and payables to the Company, will
be forgiven by Seller:
2
<PAGE>
(a) 1997 federal taxes in the amount of $169,729; and
(b) Beginning intercompany account balance of $171,852.
ARTICLE IV.
COVENANTS OF SELLER
Seller will not sell or grant any right or option to any person, firm or
corporation to purchase or otherwise acquire from it the Shares, or any part
thereof, prior to the Closing of this Agreement.
ARTICLE V.
BUYER'S AND COMPANY'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller, as of the date hereof and as of
the Closing Date (as defined in Article VIII), that it has the legal capacity
and full power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby, and that the Note, Stock Pledge and Security
Agreement, and other instruments made by it pursuant to this Agreement are valid
and binding obligations, enforceable against McCauley or the Company, as
applicable, in accordance with their terms.
ARTICLE VI.
COVENANTS OF BUYER
6.1 KEY-MAN LIFE INSURANCE. Buyer covenants to cause the Company
to purchase a key-man life insurance policy covering McCauley's life, with a
minimum face amount of $1,000,000, and to complete a collateral assignment of
the policy to the Seller for the Seller's benefit, which collateral assignment
shall remain in effect so long as any principal or interest remains unpaid on
the Note.
6.2 USE OF NAME "MAGNETRAN, INC.". The Company covenants that,
until such time as all outstanding principal and interest on the Note has been
paid, the Company shall continue to use and operate under the name "Magnetran,
Inc."
6.3 QUARTERLY AND ANNUAL FINANCIAL STATEMENTS. Buyer covenants,
following the Closing, to provide Seller with copies of (a) the Company's
quarterly balance sheets and income statements within 15 days after the end of
each fiscal quarter, and (b) the Company's annual balance sheets and income
statements within 45 days after the end of each fiscal year, so long as any
principal or interest remains unpaid on the Note.
ARTICLE VII.
BROKERAGE
Buyer represents to Seller that it has not retained or employed anyone to
act as broker or finder in connection with the transactions contemplated hereby.
3
<PAGE>
ARTICLE VIII.
CLOSING
The Closing shall take place on or before January 31, 1999, at the offices
of Foley & Lardner, 100 North Tampa Street, Suite 2700, Tampa, Florida, 33602,
or such other date as shall be mutually agreeable to the parties. The date fixed
for Closing in accordance with the provisions of this Article shall be called
the "Closing Date".
8.1 COOPERATION. The parties agree to cooperate with each other
and execute such further documents and diligently pursue all actions needed to
duly complete the title examinations and transfer good and marketable title
under this Agreement.
8.2 ACKNOWLEDGMENT BY PARTIES.
(a) The parties acknowledge that Foley & Lardner has acted
only as counsel to Seller in connection with the transactions
contemplated by this Agreement. Buyer shall have no responsibility to
pay the legal fees of Foley & Lardner, which fees shall be paid by
Seller only. Buyer shall, however, be responsible for paying its
incidental closing expenses.
(b) The parties acknowledge that Kulzer & DiPadova, P.A. has
acted only as counsel to Buyer in connection with the transactions
contemplated by this Agreement. Seller shall have no responsibility to
pay the legal fees of Kulzer & DiPadova, P.A., which fees shall be
paid by Buyer only. Seller shall, however, be responsible for paying
its incidental closing expenses.
8.3 RESIGNATION OF RONALD H. DEFERRARI. At the Closing, Ronald H.
DeFerrari will resign from his positions as President, Secretary and Treasurer
of the Company. McCauley will be the new President of the Company, and, as such,
will execute the Note and the Stock Pledge and Security Agreement on behalf of
the Company at Closing.
ARTICLE IX.
THE COMPANY
9.1 Buyer has reviewed and acknowledges receipt of the corporate
records of the Company.
ARTICLE X.
THE SHARES
10.1 FEDERAL SECURITIES LAWS.
(a) The Shares sold hereby have not been registered under
the Securities Act of 1933, as amended, or the securities laws of
certain states, and are being offered and sold in reliance on
exemptions from the registration requirements of said Act and such
laws. These Shares are subject to restrictions on transferability and
4
<PAGE>
resale and may not be transferred or resold except as permitted under
the Securities Act of 1933, as amended, and applicable state
securities laws, pursuant to registration or exemption therefrom. The
Buyer should be aware that he will be required to bear the financial
risks of this investment for an indefinite period of time.
(b) These Shares have not been recommended, approved or
disapproved by any federal or state securities commission or other
regulatory authority.
10.2 FLORIDA SECURITIES LAWS.
The Shares referred to herein will be sold to, and acquired by, the Buyer
in a transaction exempt under Section 517.061 11(a) of the Florida Securities
Act. The Shares have not been registered under said Act in the State of Florida.
In addition, all Florida residents shall have the privilege of voiding the
purchase within three days after the first tender of consideration is made by
the Buyer to the Seller, an agent of the Seller, or an escrow agent or within
three days after the availability of that privilege is communicated to such
Buyer, whichever occurs later.
ARTICLE XI.
NON-EXCLUSIVE PURCHASE ARRANGEMENT BETWEEN BUYER AND SELLER
The parties agree that, following the Closing, Seller will purchase from
Buyer on a non-exclusive basis some or all of the power conversion equipment
used by Seller in its business. Buyer agrees that Seller will receive "most
favored customer" considerations and that, for similar orders with respect to
product and volume, Buyer will not offer to other parties more favorable pricing
terms than those offered to Seller.
ARTICLE XII.
INDEMNIFICATION
Buyer agrees to indemnify and hold harmless Seller, and its successors and
assigns, from and against all claims asserted against, resulting to, imposed
upon, or incurred by Seller, directly or indirectly, by reason of, arising out
of or resulting from:
(i) the inaccuracy or breach of any representation, warranty or covenant of
Buyer contained in or made pursuant to this Agreement; and
(ii) any action or omission of McCauley, the Company, or any of their
respective employees, agents or representatives, with respect to the business or
operations of the Company following the Closing.
ARTICLE XIII.
CONDITION TO CLOSING
The Closing is contingent upon the following events:
5
<PAGE>
1. The parties shall have received the approval of the New
Jersey Department of Environmental Protection (DEP), with respect to the
transactions proposed herein, as required under the New Jersey Industrial Site
Recovery Act (ISRA). The parties acknowledge and agree that the Buyer shall be
solely responsible for all costs and expenses incurred in connection with
obtaining DEP approval. Further, if the required DEP approval has not been
obtained by April 30, 1999, Seller shall have the right and option to
immediately terminate this Agreement upon written notice to Buyer.
2. Seller shall have received written confirmation from the
Securities and Exchange Commission (SEC) that Seller will be permitted to use
pooling treatment with respect to a certain potential acquisition transaction
after taking into consideration the sale of the Shares to Buyer.
ARTICLE XIV.
MISCELLANEOUS
14.1 AMENDMENTS. This Agreement sets forth the entire
understanding of the parties and supersedes any and all prior agreements
relating to the subject matter hereof. The Agreement may not be changed or
terminated orally and no waiver of compliance with any provision or condition
hereof and no consent provided for herein shall be effective unless signed in
writing by the party sought to be charged.
14.2 NOTICE. Any notice, report, demand or waiver required or
permitted under this Agreement shall be in writing and be given by certified
mail, return receipt requested, addressed to the parties at the addresses set
forth below, or such other address as each party may give the other in writing
pursuant to the provisions of this Section:
If to McCauley and/or the Company: George McCauley
134 Route 73
Voorhees, New Jersey 08043
With copies to: Kulzer & DiPadova, P.A.
76 Euclid Ave., Third Floor
Haddonfield, NJ 08033
Attn: James B. Evans, Jr., Esq.
If to Seller: Plasma-Therm, Inc.
10050 16th Street North
St. Petersburg, Florida 33716
Attn: Stacy Wagner
6
<PAGE>
With copies to: Foley & Lardner
101 North Tampa Street
Suite 2700
Tampa, Florida 33602
Attn: Martin A. Traber, Esq.
14.3 TAX STATUS. It is understood that neither Seller nor Buyer
has made any representation to the other as to the tax status or effect of the
transactions contemplated by this Agreement and each is taking separate counsel
as to such matters.
14.4 EXPENSES TO PARTIES. Buyer and Seller shall each be
responsible for their respective closing and transfer expenses in connection
with the transactions contemplated under this Agreement.
14.5 GOVERNING LAW. This Agreement is being delivered and is
intended to be performed in the State of Florida and shall be governed by the
laws of Florida.
14.6 FURTHER ASSURANCES. The parties each agree that they will,
at the request of the other, execute and deliver all such further documents as
the other may reasonably request to effectuate the transactions contemplated by
this Agreement.
14.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
14.8 SUCCESSORS AND ASSIGNS. The rights and obligations of the
parties to this Agreement shall inure to the benefit of and shall be binding
upon the heirs, personal representatives, successors and assigns, as applicable,
of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
WITNESSES: "McCauley":
/s/ GEORGE MCCAULEY
- ----------------------- --------------------
George McCauley
- -----------------------
7
<PAGE>
ATTEST: "SELLER":
PLASMA-THERM, INC.
/s/ KATHERINE BARTZOFF By:/s/ STACY L. WAGNER
- ---------------------- ----------------------
Stacy L. Wagner
Its: VICE PRESIDENT AND SECRETARY
----------------------------
8
<PAGE>
ATTEST: "COMPANY":
MAGNETRAN, INC.
By:/s/ GEORGE MCCAULEY
- ---------------------- --------------------
Its: GENERAL MANAGER
--------------------
9
<PAGE>
FLORIDA DOCUMENTARY STAMP TAX
REQUIRED BY LAW
IN THE AMOUNT OF $2,800.00
HAS BEEN PAID OR WILL BE PAID
DIRECTLY TO THE DEPARTMENT OF REVENUE
CERTIFICATE OF REGISTRATION
#390473800-39-002
PROMISSORY NOTE
VORHEES, NEW JERSEY JUNE 30, 1999
$800,000.00
FOR VALUE RECEIVED, the undersigned (hereinafter the "Maker") hereby
promises to pay to the order of Plasma-Therm, Inc., a Florida corporation (the
"Payee") at 10050 16th Street North, St. Petersburg, Florida 33716, or at such
other place as may be designated in writing by Payee, or to the holder hereof,
the principal sum of Eight Hundred Thousand Dollars ($800,000.00) together with
interest on the outstanding principal balance hereof at the rate provided
herein. The principal amount of this Note shall be amortized over an
amortization period of 15 years in approximately equal monthly installments of
principal and interest, beginning on July 1, 1999, as set forth in the
Amortization Schedule attached hereto as Exhibit A. Payments of principal and
interest shall be made over 60 months as set forth in the Amortization Schedule.
Upon the conclusion of said 60-month period, Maker shall immediately pay all
outstanding principal, together with all then accrued and unpaid interest
hereunder. Interest shall accrue on the unpaid principal balance at a rate of 7%
per annum for the first 12 months of the Note, with the rate of interest
increasing by 0.25% each year thereafter, as reflected on the Amortization
Schedule. At the end of such 60-month period, after taking into consideration
all of the relevant business conditions then in existence, Payee may consider
refinancing the outstanding balance of the Note for an additional three-year
period. If Payee elects to refinance the balance of the Note, the terms of such
refinancing will be negotiated at that time.
Maker waives presentment, notice of non-payment, dishonor and protest.
In the event Maker defaults with respect to any of the payments due
hereunder, the holder, at its option, shall be entitled to accelerate the
balance owing under this Note, and all such principal sums together with accrued
interest shall be immediately due and payable.
In addition to a default caused by Maker's failure to make any of the
payments due hereunder, the following shall also constitute events of default
upon which the holder shall be entitled to accelerate the balance owing and
immediately collect all amounts of principal and accrued interest:
1. Failure of Magnetran, Inc. to maintain a minimum "quick ratio" of 2.5 to
1.0 for each fiscal quarter. For the purposes of this Note, the "quick ratio"
shall be calculated as follows: (x) current assets less inventory compared to
(y) current liabilities plus new (current) debt.
2. The material breach by Maker or George McCauley of any term, provision,
condition, representation, warranty or covenant contained in that certain Stock
Purchase
<PAGE>
Agreement of approximately even date herewith by and among Maker, Payee and
George McCauley.
In the event of a default hereunder, the holder shall be entitled to
recover all costs plus reasonable attorneys' fees incurred in the collection of
this Note, including, but not limited to, costs and attorneys' fees incurred in
connection with the filing of any action to collect on this Note.
In the event of a default hereunder, interest on the outstanding principal
balance shall accrue at the highest rate allowed by the laws of the State of
Florida.
This Note is secured by that certain Stock Pledge and Security Agreement of
approximately even date herewith by and among George McCauley, Maker and Payee.
Maker reserves the right to prepay this Note without penalty.
Maker shall pay the entire amount of any documentary stamp tax owed to the
Florida Department of Revenue, if any, in connection with the execution and
delivery of this Note.
MAKER:
MAGNETRAN, INC.
By: /s/ GEORGE MCCAULEY
-----------------------
Name: George McCauley
Title: President
2
<PAGE>
STOCK PLEDGE AND SECURITY AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of June 30,
1999, by and among GEORGEMcCAULEY, and individual ("McCauley"), MAGNETRAN, INC.,
a New Jersey corporation (the "Company") (McCauley and the Company are
collectively referred to herein as the "Pledgor"), PLASMA-THERM, INC., a Florida
corporation (the "Pledgee") and U. S. Bank Trust National Association (the
"Pledge Holder").
RECITALS
Contemporaneously with the execution of this Agreement, Pledgor has
purchased from Pledgee 100 shares (the "Shares") of capital stock of the Company
with part of the purchase price represented by a Promissory Note from the
Company in the original principal amount of $800,000.00 (the "Note"). To secure
the payment of the Note, Pledgor has agreed to pledge and assign the Shares to
Pledgee.
NOW THEREFORE, in consideration of the foregoing, and in order to induce
Pledgee to close on the sale of the Shares to Pledgor, it is agreed as follows:
1. Appointment of the Pledge Holder. The Pledgor and Pledgee hereby
designate and appoint U. S. Bank Trust National Association as the Pledge Holder
for the purposes hereinafter set forth, and the Pledge Holder, by its execution
of this document, accepts the appointment as Pledge Holder and agrees to be
bound by and act in accordance with the provisions of this Agreement.
2. DEPOSIT OF THE PLEDGED SHARES. Pledgor, with the present intention of
creating a security interest in the Shares (hereinafter the "Pledged Shares") in
favor of the Pledgee, hereby deposits with the Pledge Holder the Pledged Shares,
with stock powers attached. The
<PAGE>
Pledged Shares are pledged as security for the Note and shall be held and
disposed of by the Pledge Holder in accordance with the terms and provisions of
this Agreement.
3. RIGHTS AND OBLIGATIONS OF THE PLEDGE HOLDER. The Pledgor and the Pledgee
hereby authorize the Pledge Holder to keep and preserve the Pledged Shares in
its possession pending payment in full of the Note by the Company. If a default
occurs under the terms of the Note and the Pledgee declares the entire remaining
balance on the Note to be due and payable, then the Pledgee shall have the right
to direct the Pledge Holder, acting as agent of the Pledgee with respect to the
Pledged Shares, to exercise Pledgee's rights and duties under this Agreement.
Pledgor agrees that any notice to Pledge Holder and Pledgor by Pledgee
concerning the sale, disposition or other intended actions in connection with
the Pledged Shares, whether required by the Uniform Commercial Code or
otherwise, shall constitute reasonable notice to the Pledgor if such notice is
mailed by registered mail, postage prepaid at least ten (10) days prior to such
action. Further, in the event of a default by the Company under the terms of the
Note, Pledgor hereby constitutes and irrevocably appoints the Pledge Holder, its
successors and assigns, attorneys-in-fact of the Pledgor and hereby authorizes
the attorney-in-fact, or its assigns to sell the Pledged Shares, in whole or in
part, apply the proceeds to payment of Pledgee's costs and expenses, including
reasonable attorneys' fees incurred in collection of the Note and sale of the
Pledged Shares, and apply the residue toward the payment to Pledgee of the
remaining balance on the Note. Upon a default of the Note, Pledgee shall have
the option of taking possession of the Pledged Shares or directing the Pledge
Holder to sell such Shares in accordance with the preceding sentence.
2
<PAGE>
4. DIVIDENDS AND CHANGES IN THE PLEDGED SHARES. In the event that during
the term of this Agreement, any stock dividend, reclassification,
reorganization, recapitalization or other change is declared or made in the
capital structure of the Company, all new, substituted and additional shares, or
other securities issued by reason of any such change shall be held by the Pledge
Holder under the terms of this Agreement in the same manner as the Pledged
Shares, in accordance with instructions from both Pledgee and Pledgor.
5. VOTING RIGHTS. Until an event of default shall occur under the Note, the
Pledgor shall have the right to vote the Pledged Shares, and the Pledgee and
Pledge Holder agree to execute any necessary proxies or other documents to
effectuate this right. Upon the occurrence of an event of default under the
Note, the Pledgee shall have the right to vote the Pledged Shares until such
time as the event of default is cured.
6. SUBSTITUTION OF COLLATERAL. There shall be no substitution of collateral
under the terms of this Agreement without the prior written consent of the
Pledgor, the Pledgee and the Pledge Holder.
7. RELEASE OF SHARES AND TERMINATION OF AGREEMENT. Upon payment in full of
the Note, Pledgee shall notify the Pledge Holder in writing that all
installments due under the Note have been paid, and the Pledge Holder shall
deliver or release the Pledged Shares (with stock powers attached, if
applicable) to the Pledgor their respective shares, and all obligations by and
between the Pledgor, the Pledgee and the Pledge Holder under this Agreement
shall thereupon cease.
3
<PAGE>
8. EXPENSES OF PLEDGE HOLDER. Any fees of the Pledge Holder and other costs
as may be incurred by the Pledge Holder in connection with the administration of
the provisions of this Agreement shall be paid by the Pledgor. It is agreed that
the Pledge Holder shall be the exclusive agent of the Pledgee; however, any fee,
compensation or other charge made by the Pledge Holder shall be the
responsibility of the Pledgor.
9. CONDUCT OF PLEDGE HOLDER. The Pledge Holder shall not be required to
exercise any standard of care greater than ordinary care in discharging its
duties and obligations under this Agreement, and the Pledge Holder shall not
incur any liability to anyone for any damages, losses or expenses with respect
to any action taken or omitted in good faith. The Pledge Holder shall have no
duties other than those expressly imposed hereby. The Pledge Holder may rely and
shall be protected in relying upon any paper or other document which may be
submitted to it in connection with its duties hereunder and which it believes to
be genuine and to have been signed or presented by the proper party or parties,
and shall have no liability or responsibility with respect to the form,
execution or validity thereof. The Pledge Holder shall be entitled to rely upon
the written opinion of legal counsel selected by it in discharging its duty of
ordinary care.
10. INDEMNIFICATION. Pledgor and Pledgee jointly and severally agree to pay
and hold the Pledge Holder harmless from and against all costs, charges, damages
and attorneys' fees which it in good faith may incur or suffer in connection
with or arising out of any claims made in connection with this Agreement.
4
<PAGE>
11. NOTICES. Any notice or other communication required or permitted
hereunder shall be sufficiently given if personally delivered or sent, first
class mail, postage prepaid, addressed to the parties at their place of business
or residence or to such other address as may be designated by any party to the
other parties in writing.
12. WAIVER. No delay or omission by Pledgee in exercising any right or
remedy hereunder shall operate as a waiver thereof or of any other right or
remedy, and no single or partial exercise thereof shall preclude any other or
further exercise thereof or the exercise of any other right or remedy. All
rights and remedies of Pledgee hereunder are cumulative.
13. MODIFICATION. No modification, rescission, waiver, release or amendment
of any provision of this Agreement shall be made except by written agreement
signed by the Pledgor and Pledgee. An executed original of any such agreement
shall be delivered to the Pledge Holder upon its execution and if such agreement
affects the rights, duties or obligations of the Pledge Holder under this
Agreement, it must also be executed and agreed to by the Pledge Holder before
the same shall have any legal effect.
14. APPLICABLE LAW. This Agreement and the transaction evidenced hereby
shall be construed under the laws of the State of Florida as the same may, from
time to time, be in effect, including, without limitation, the Uniform
Commercial Code.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above. ATTEST: Pledgor:
ATTEST: Pledgor:
[ILLEGIBLE] /s/ GEORGE MCCAULEY
- ------------------------------ -------------------
George McCauley
Magnetran, Inc.
a New Jersey corporation
[ILLEGIBLE] By: /s/ GEORGE MCCAULEY
- ------------------------------ ------------------------
George McCauley
Its: PRESIDENT
--------------
Title
Pledge Holder:
U. S. Bank Trust National Association
SCOTT A SCHUHLE
- ------------------------------ By: /s/ MICHAEL J. MARRA
-------------------------
[ILLEGIBLE] Michael J. Marra
- ------------------------------
Its: VICE PRESIDENT
-------------------
Title
Plasma-Therm, Inc.
a Florida corporation
/s/ KATHERINE BARTZOFF By: /s/ STACY L. WAGNER
- ---------------------- -----------------------
Katherine Bartzoff Stacy L. Wagner
Its: VICE PRESIDENT,
CHIEF FINANCIAL OFFICER,
TREASURER AND SECRETARY
-------------------------
Title
6
EXHIBIT 10.61
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
This is an Amendment No. 3, dated June 30, 1999 (the "Amendment No. 3"), 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 subsequent amendments dated August 19,
1997 ("Amendment No. 1) and October 1, 1998 ("Amendment No. 2"); and
WHEREAS, the parties wish to amend the Employment Agreement to reflect
changes in sections 2, 8.4(a) and 8.4(b).
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 section 2 to read
in its entirety as follows:
The term of this Agreement shall be for a period of 2 1/2 years
commencing on the 22nd day of January, 1997, and terminating on the 30th
day of June, 1999 (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 her election to
terminate the employment at or prior to the end of such Term.
<PAGE>
3. The Employment Agreement is hereby amended by revising section 8.4(a) to
read in its entirety as follows:
(a) Upon a Change in Control, if the Term of the Agreement has less
than eighteen (18) months remaining, the Term of this Agreement
shall be extended so that an eighteen (18) 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 eighteen (18) months of the Term exists as
of the time of a Change in Control, there will be no change in
the Term.
4. The Employment Agreement is hereby amended by revising section 8.4(b) to
read in its entirety as follows:
(b) Employee commits to continue to perform her duties under this
Agreement for a minimum of eighteen (18) months after a Change in
Control. At the end of eighteen (18) 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.
5. Except as specifically set forth above, the Employment Agreement and
Amendment Nos. 1 and 2 shall remain in full force and effect.
6. This Amendment No. 3 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. 3 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.
2
<PAGE>
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. 3 on the
day and year first written above.
PLASMA-THERM, INC.
/s/ RONALD H. DEFERRARI
-----------------------
Ronald H. Deferrari
Chief Executive Officer
Employee
/s/ STACY L. WAGNER
-------------------
Stacy L. Wagner
3
EXHIBIT 10.62
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This is an Amendment No. 2, dated June 30, 1999 (the "Amendment No. 2"), 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 and subsequent amendment dated October 1, 1998
("Amendment No. 1"); and
WHEREAS, the parties wish to amend the Employment Agreement to reflect
changes in sections 2 and 4.2.
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 section 2 to read
in its entirety as follows:
The term of this Agreement shall be for a period of 2 1/2 years
commencing on the 22nd day of January, 1997, and terminating on
the 30th day of June, 1999 (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. The Employment Agreement is hereby amended by revising section 4.2 to
read in its entirety as follows:
An annual bonus based on one percent (1%) 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 $100,000.00
annually; and
<PAGE>
4. Except as specifically set forth above, the Employment Agreement and
Amendment No. 1 shall remain in full force and effect.
5. 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.
6. 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.
7. This instrument shall be binding upon, and shall inure to the benefit
of, each of the parties' respective personal representatives, heirs, successors,
and assigns.
8. 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 H. DEFERRARI
-----------------------
Ronald H. Deferrari
Chief Executive Officer
Employee
/s/ EDMOND A. RICHARDS
----------------------
Edmond A. Richards
2
EXHIBIT 10.63
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This is an Amendment No. 2, dated July 19, 1999 (the "Amendment No. 2"), 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 and subsequent amendment dated October 1, 1998
("Amendment No. 1"); and
WHEREAS, the parties wish to amend the Employment Agreement to reflect
changes in section 2 and to amend Amendment No. 1 to reflect changes in section
4.2.
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 2 to read as follows:
The term of this Agreement shall be for a period of four (4) years
commencing on the 22nd day of January, 1997, and terminating on the 21st
day of January, 2001 (the "Term").
3. Amendment No. 1 is hereby amended by revising section 4.2 to read in its
entirety as follows:
4.2 A commission plan of one-half of one percent (.5%) on all system,
spare parts and labor sales, to be paid quarterly, effective June 1, 1999,
and having a maximum annual amount of $250,000.
4. Except as specifically set forth above, the Employment Agreement and
Amendment No. 1 shall remain in full force and effect.
<PAGE>
5. 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.
6. 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.
7. This instrument shall be binding upon, and shall inure to the benefit
of, each of the parties' respective personal representatives, heirs, successors,
and assigns.
8. 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 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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets as of August 31, 1999, and consolidated statements
of income for the period ended August 31, 1999 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> AUG-31-1999
<CASH> 6,507,345
<SECURITIES> 0
<RECEIVABLES> 13,708,292
<ALLOWANCES> 0
<INVENTORY> 9,536,302
<CURRENT-ASSETS> 31,640,313
<PP&E> 17,055,243
<DEPRECIATION> 6,503,222
<TOTAL-ASSETS> 45,230,394
<CURRENT-LIABILITIES> 12,859,918
<BONDS> 3,476,455
112,202
0
<COMMON> 0
<OTHER-SE> 28,781,819
<TOTAL-LIABILITY-AND-EQUITY> 45,230,394
<SALES> 29,003,142
<TOTAL-REVENUES> 29,003,142
<CGS> 18,506,323
<TOTAL-COSTS> 12,634,318
<OTHER-EXPENSES> (242,637)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 494,920
<INCOME-PRETAX> (2,389,782)
<INCOME-TAX> (710,765)
<INCOME-CONTINUING> (1,679,017)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,679,017)
<EPS-BASIC> (0.15)
<EPS-DILUTED> 0
</TABLE>
