UNITED STATES
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, 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.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 04-2554632
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10050 16TH STREET NORTH, ST. PETERSBURG, FLORIDA 33716
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(Address of principal executive offices and zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (727) 577-4999
Securities registered pursuant to Section 12(b) of the Act:
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NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
----------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 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[ ]
<PAGE>
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 10, 2000, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $111,745,958.*
As of January 10, 2000, 11,252,311 shares of Common Stock, $.01 par value, were
outstanding.
*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.
ii
<PAGE>
PART I
CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION
Plasma-Therm, Inc. (the "Company") has made forward-looking statements in this
document that are subject to risks and uncertainties. The statements contained
in this report on Form 10-K that are not purely historical are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, including statements
regarding the Company's expectations, hopes, beliefs, intentions, or strategies
regarding the future. Forward looking statements include statements regarding,
among other things: (i) 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; (ii) 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; (iii) the Company 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;
(iv) 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; (v) the
potential loss of material customers; (vi) the Company's financing plans; (vii)
trends affecting the Company's financial condition or results of operations;
(iv) the Company's growth and operating strategies; (viii) the ability to
attract and retain qualified sales, research and development and management
personnel; (ix) the impact of competition from new and existing competitors; (x)
the financial condition of the Company's clients; (xi) potential increases in
the Company's costs; and (xii) the potential for unfavorable interpretation of
existing government regulations or new government legislation. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in the forward-looking
statements as a result of various factors. All forward-looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward-looking statement. Among the factors that could cause actual results to
differ materially are the factors detailed in Items 1 through 3 and 7 of this
report and the risks discussed under the caption "Risk Factors" included in the
Company's filings under the Securities Act of 1933. Prospective investors should
also consult the risks described from time to time in the Company's Reports on
Form 10-Q, 8-K, 10-K and Annual Reports to Shareholders.
1
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ITEM 1. BUSINESS
GENERAL
Plasma-Therm, Inc. 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
On January 28, 2000, Volcano Acquisition Corp. (the "Purchaser"), a Florida
corporation and a wholly owned subsidiary of Oerlikon-Buhrle USA, Inc.
("Parent"), a Delaware corporation, completed its tender offer (the "Offer") for
all of the outstanding shares of voting common stock, par value $.01 per share
("Common Stock"), of the Company, by accepting for payment all of the
approximately 10,629,473 shares (the "Shares") of Common Stock which were
validly tendered and not withdrawn. Upon completion of the Offer, which was made
pursuant to the Agreement and Plan of Merger, dated as of December 20, 1999,
among the Company, Parent and the Purchaser (the "Merger Agreement"), Parent
acquired beneficial ownership of the Shares which represent approximately 94.46%
of the outstanding Common Stock. The Merger Agreement provides that after the
purchase of the Shares pursuant to the Offer, the Purchaser will be merged with
and into the Company (the "Merger") on the business day on which certain
conditions in the Merger Agreement are satisfied or waived. The offer is in line
with OBH's strategy to strengthen its position in the semiconductor equipment
industry. The acquisition will establish OBH as a one-stop-shop and reinforce
its position as a leading systems supplier for the semiconductor industry.
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 five-year promissory note from
Magnetran. Magnetran continues to be a supplier to the Company of specialty
power subsystems and devices.
In May 1999, the Company purchased approximately eight acres of land directly
across from its existing facility for $1.1 million. The land is anticipated to
be used for future expansion.
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. In March 1999, the construction of
the facility was temporarily put on hold. In November 1999, construction
resumed and is expected to be completed by August 2000.
2
<PAGE>
Fiscal year ended November 30, 1999 showed continued strong interest in the
VERSALOCK 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 Giant
Magneto Resistive (GMR) products. Furthermore, additional VERSALOCK sales into
the MEMS market were obtained during this time period. This strong demand for
the VERSALOCK 700 products resulted from both the move to production systems
with current customers, as well as the development of new processes for the
VERSALOCK 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 1999 using the ICP
technology. Acceptance of high-density technology has been well received in the
Company's four served markets.
The Company continued to develop Physical Vapor Deposition (PVD) technology in
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.
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 permit advanced process applications for the Photomask, Data
Storage, 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.
The Company's plasma systems are divided into two groups. The batch group
consists of two product lines: (1) 790 Series, and (2) SHUTTLELOCK. The
automated group of products consists of the VERSALOCK 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.
3
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790 SERIES
The 790 Series RIE, PECVD and ICP plasma systems 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 SERIES
The SHUTTLELOCK Series RIE, PECVD, and ICP plasma systems continue to be
successful products. The SHUTTLELOCK 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
Series is used for pilot production and production of
optoelectronics/telecommunications devices, and MEMS systems.
VERSALOCK 700 SERIES
The VERSALOCK 700 Series RIE, PECVD, HDP and ICP plasma systems are the
Company's newest products. The VERSALOCK 700 is the Company's first plasma
system platform where multiple product generations will be developed using the
same substrate handling mechanisms. The VERSALOCK 700 has a central handler that
permits up to three processing modules. The VERSALOCK 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.
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. During 1999, organization and operational improvements were
introduced based on outside consultant recommendations directed toward
Integrated Supply Chain Management. Results included improved delivery
performance and closer management of inventories during the market resurgence
experienced in the latter half of the year.
4
<PAGE>
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, including a sputter source for dieletric films
are currently in the patent process. 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 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, 1999, 1998 and 1997, the Company spent
approximately $7,330,000, $6,090,000 and $3,725,000, respectively, for research
and product development.
To further improve time to market for development programs and to increase the
speed at which resources were applied to customer products, a separate business
unit was established for each of the Company's four markets. Certain R&D and
applications lab personnel were restructured into specific business unit
functions during 1999. The business units contain these technical resources, as
well as marketing, inside sales, and production interface resources. The move
was initiated in early 1999 and completed by the second half of 1999.
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, 1999, 33 employees were engaged
primarily in research and product development activities.
5
<PAGE>
MARKETING, SALES AND SERVICE
In the United States, the Company sells its products through direct sales force
(West Coast, Central, and East Coast). Service is provided directly with
locations near customer sites throughout the U.S.
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 8%, 13% and 9%
of total revenues in 1999, 1998 and 1997, 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,
--------------------------------------
1999 1998 1997
------- ------ ------
AREA REVENUES
-------------
Domestic 75% 65% 73%
Foreign 25% 35% 27%
--- --- ---
Total 100% 100% 100%
PRODUCT REVENUES
----------------
Plasma systems(1) 98% 97% 95%
Other (2) 2% 3% 5%
--- --- ---
Total 100% 100% 100%
See Note 8 to the Consolidated Financial Statements for additional foreign and
domestic operations and export sales information.
- ------------------------------------------
(1) Includes core products and automated products.
(2) Includes transformers and other systems.
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.
6
<PAGE>
BACKLOG
The Company's backlog as of November 30, 1999 and 1998 was approximately
$25,500,000 and $10,000,000, 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, 1999 backlog will be shipped during fiscal
year 2000.
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 (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 700 system is Veeco Instruments, Inc., Surface
Technology Systems, Trikon Technologies, Tegal Corporations, and Ulcoat, a
subsidiary of Ulvac Technologies, Inc..
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, 1999, the Company had 162 full-time employees, 141 of whom
are employed in Florida, 3 in Europe, with the remaining 18 located in its sales
and service offices throughout the United States. Of such employees, 18 are
executive or administrative, 45 are sales and service, 66 are manufacturing and
33 are research and development personnel. The Company currently does not have
any collective bargaining agreements.
7
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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 59 Chairman of the Board & Chief
Executive Officer
Ronald S. Deferrari 36 President
Edmond A. Richards 49 Vice President of Engineering &
Chief Operating Officer
Stacy L. Wagner 36 Chief Financial Officer, Treasurer &
Corporate Secretary
Dr. Jay N. Sasserath 37 Vice President of Strategic
Marketing & Business Unit Director,
MEMS and Opto/Tele Business Units
Robert D. Anderson, Jr. 59 Vice President of Operations
</TABLE>
- -------------------------
Ronald H. Deferrari is the founder, Chief Executive Office and Chairman of the
Board of Directors 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 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 position, 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, and Chief Operating Officer in July, 1999. 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 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.
8
<PAGE>
Dr. Jay N. Sasserath, Vice President of Strategic Marketing, has been employed
with the Company since December 1996. In addition, Dr. Sasserath is the Business
Unit Director of the MEMS and Optoelectronics/telecommunications business units.
Prior to coming to Plasma-Therm, Inc., he held various management positions in
marketing and technical areas at Materials Research Corporation in New York.
Robert D. Anderson Jr., Vice President of Operations, has been employed with the
Company since February 1999. Mr. Anderson brings over 30 years of semiconductor
engineering and manufacturing experience to the Company. From 1988 to 1999, Mr.
Anderson served in various senior management capacities at Machine Technology,
Inc., Fusion Semiconductor Systems, and Eaton Semiconductor Equipment
Operations. From 1968 to 1988, Mr. Anderson served in various capacities at
International Business Machines Corporation. ("IBM").
OTHER KEY EMPLOYEES
Dr. David J. Johnson, Director of Research and Development, has eighteen 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, Principle Scientist, 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 E. Ochs, Director of Sales and Marketing, 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.
David G. Hartel, Director of Customer Service, has been employed with the
Company since March 1999. From April 1997 to March 1999, Mr. Hartel served as
Regional Service Manager for Mattson Technology, Inc., a manufacturer of
advanced fabrication equipment to the semiconductor manufacturing industry. From
1988 to 1997, Mr. Hartel served in various management capacities at Lam Research
Corporation, a manufacturer of semiconductor processing equipment used in the
fabrication of integrated circuits.
Edward W. Ostan, Business Unit Director, Data Storage, has been employed with
the Company since 1997. Mr. Ostan had previously held a variety of management
positions, including 17 years in technical marketing management at Veeco
Instruments, Inc., a worldwide capital equipment supplier to the Data Storage
industry.
9
<PAGE>
Michael D. Archuletta, Business Unit Director, Photomask, joined the Company in
February 1999. Mr. Archuletta brings over 25 years of semiconductor sales and
marketing experience to the Company. From 1972 to 1999, Mr. Archuletta served in
various senior management capacities at Tokyo Electron Arizona, Perkin-Elmer
Corporation, Materials Research Corporation and Etec Systems, Inc.
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 building is financed by a balloon
note, payable in monthly installments of $33,235, including interest at 8.5%
through July 2001. A balloon payment of $2,687,596 is due at the end of the
term. The land, the building and its contents collateralize the 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. In March 1999, the construction of the facility was
temporarily put on hold. In November 1999, construction resumed and is expected
to be completed by August 2000. 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 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 is $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% (8.72% at November 30, 1999)
through May 2004 at which time a balloon payment in the amount of $466,660 will
be due. The note is secured by the land.
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 1999 and 1998 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 10, 2000, the
closing price of the Company's Common Stock was $12-1/4.
<TABLE>
<CAPTION>
FISCAL 1998 HIGH LOW
----------- -------------- ------------
<S> <C> <C>
First quarter $ 8-7/8 $ 6
Second quarter 8-7/8 6-5/8
Third quarter 8-13/16 2-3/4
Fourth quarter 4-7/8 2-3/8
FISCAL 1999 HIGH LOW
----------- -------------- -------------
First quarter $ 4-15/16 $ 3-5/16
Second quarter 3-3/8 2-1/16
Third quarter 3-7/16 2-7/16
Fourth quarter 9-3/16 3-5/16
</TABLE>
As of January 10, 2000, there were 472 record holders of the shares of Common
Stock.
There have been no dividends declared during 1999. 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, 1999 the Company is in compliance with these and other financial
covenants.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
---------------------------------------------------------------
1999 1998 1997 1996 1995
------ -------- -------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of
Operations:
Revenues $ 40,627 $ 49,088 $ 44,445 $ 37,862 $ 29,612
Net Income/(loss) (762) 1,370 4,661 2,994 1,089
Net Income/(loss) per
Common Share (.07) .12 .42 .28 .10
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
---------------------------------------------------------------
1999 1998 1997 1996 1995
------ -------- -------- -------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet at end
of period:
Working Capital $20,261 $20,605 $ 22,486 $16,319 $15,105
Total Assets 42,316 47,269 39,607 31,475 26,909
Total Long-Term
Obligations 3,426 3,085 3,671 3,589 1,147
Shareholders' Equity 29,958 30,518 28,685 22,219 18,972
</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:
<TABLE>
<CAPTION>
Years ended November 30 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of Sales 61.0 62.1 57.8
----- ----- -----
Gross Profit 39.0 37.9 42.2
Research and development 18.1 12.4 8.4
Selling and administrative 19.8 17.7 16.6
Restructuring charge 2.3 2.6 0.0
----- ----- -----
Operating Income/(Loss) (1.2) 5.2 17.2
Interest expense, net .8 .5 .2
----- ----- -----
Income/(loss) before income taxes (2.0) 4.7 17.0
Income taxes/(benefit) (0.1) 1.9 6.5
----- ----- -----
Net income/(loss) (1.9) 2.8 10.5
</TABLE>
COMPARISON OF FISCAL 1999 AND FISCAL 1998
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 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, which is included in Selling and
Administrative on the Consolidated Statements of Operations. Total revenue of
$880,000 and net income of $25,000 through June 30, 1999 is included in the
Consolidated Statements of Operations.
The Company's net sales decreased $8,460,000, or 17%, to $40,630,000 in 1999,
compared to net sales of $49,090,000 for 1998. The decrease in net sales was
primarily due to the continued slowdown in the Company's four markets during the
first half of the year. The slowdown began in the third quarter of 1998 and
continued through the second quarter of 1999. Revenue increased 19% in the
second half of 1999 over the first half of 1999. Furthermore, revenue for the
second half of 1999 exceeded revenue for the second half of 1998.
13
<PAGE>
Gross profit of $15,830,000 for 1999 was 39% of net sales, compared to
$18,600,000 for 1998, representing 38% of net sales. The slight increase in
gross margin is primarily the result of two factors: (i) in 1998, approximately
$2.2 million of inventory was written off as a result of the implementation of
the Integrated Supply Chain Management philosophy (see the discussion on
restructuring in the Comparison of Fiscal 1998 and Fiscal 1997 below) compared
to approximately $900,000 in 1999, which is consistent with the years prior to
1998, and, (ii) a slight increase in sales of the VERSALOCK product line from
55% of total revenue in 1998 to 59% in 1999. Generally, this product line
carries the highest margin.
Research and development expenses for 1999 were $7,330,000 compared to
$6,090,000 in 1998, which were 18.1% and 12.4% of net sales, respectively. The
increase for 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. To accommodate these research and development efforts (See
Financial Position, Liquidity and Capital Requirements 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 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, 1999 were
$8,040,000, down $640,000 from $8,680,000 for the year ended November 30, 1998
which were 19.8% and 17.7% of net sales, respectively. The decrease in dollars
relates primarily to a decrease in spending for investor relation's initiatives
due to the industry downturn and substantially lower officers' bonuses being
paid in 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.
The increase in selling and administrative expenses as a percentage of net sales
is due to the decrease in net sales from 1998 to 1999.
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 (see discussion below under Comparison of Fiscal 1998 to
Fiscal 1997). The remaining costs of $950,000 were expensed in the first half of
1999.
14
<PAGE>
The Company's effective tax benefit was 5% in 1999 compared to a tax rate of 41%
in 1998. The reduced benefit of 5%, which was less than the statutory rate in
1999, was primarily the result of the following: (i) payment and expense of
various state income taxes in 1999 totaling approximately $120,000 for prior
years' taxes, and (ii) non-deductible charges of approximately $90,000 relating
primarily to meals and entertainment. The higher rate of 41% over the effective
tax rate of 34% in 1998 is primarily the result of non-deductible charges of
approximately $93,000 related primarily to meals and entertainment.
Net loss for 1999 was $762,000 compared to net income of $1,370,000 in 1998. Net
loss per basic and diluted common share was $.07 for 1999, a decrease of $.19
from net income per basic and diluted common share of $.12 for the year ended
November 30, 1998. The components of this decrease are described above.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Instruments and Hedging Activities". This Statement requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. SFAS 133 will be effective for
the Company's fiscal year ending November 30, 2001. The Company believes the
adoption of SFAS No. 133 will not have a material effect on the consolidated
financial statements.
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 700 Series. Total sales related to
VERSALOCK 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 was 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 reflected an
investment in additional service personnel and training to support the
increasing number of installed systems.
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 was 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(R) 7000 series.
15
<PAGE>
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 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).
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 related
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
remained in accrued liabilities relating primarily to the consulting fees and
severance costs. The Company anticipated 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
were higher, resulting in a higher effective tax rate.
16
<PAGE>
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.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL REQUIREMENTS
Even though the semiconductor industry experienced a continued slowdown in 1999,
the Company's financial condition remained strong, with a ratio of current
assets to current liabilities of 3.3:1 at November 30, 1999, compared to 2.5:1
at November 30, 1998.
Cash at November 30, 1999 was $6,910,000, which is a decrease of $260,000 from
$7,170,000 at November 30, 1998. The primary components of this decrease 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:
1999 1998
----------- -----------
Net cash provided by
Operating activities $ 5,160,000 $ 4,700,000
Net cash used in investing activities (2,640,000) (5,540,000)
Net cash provided by (used in)
financing activities (2,780,000) 2,610,000
----------- -----------
Net increase (decrease) in cash (260,000) 1,770,000
The Company generated $5,160,000 of cash from operations in 1999, compared to
$4,700,000 in 1998.
Cash flows from operating activities in 1999 primarily reflected non-cash
depreciation and amortization of $3,300,000, and decreases of $4,940,000 and
$790,000 in accounts receivable and prepaid income taxes, respectively,
increases of $610,000 in accrued payroll and other accrued expenses, partially
offset by a net loss of $760,000, increases in inventory of $1,630,000, and
decreases in accounts payable and accrued restructuring charges of $1,070,000
and $930,000.
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, and prepaid income taxes of $1,150,000.
17
<PAGE>
Depreciation and amortization was $3,300,000 in 1999 compared to $2,410,000 in
1998, a $890,000 increase. Approximately $670,000 and $330,000 of
self-constructed and purchased equipment, respectively, was added in 1999 to be
used in the development efforts in the Company's target markets and PVD
technology discussed previously. Throughout 1998, approximately $4.4 million of
self-constructed and purchased equipment was added. A full year of depreciation
expense was charged on this equipment in 1999, compared to a lesser amount in
1998, based on when the equipment was put into service. In addition, $380,000 of
computer equipment was added in 1999. The majority of the lab equipment is being
depreciated over a three-year life and the computer equipment is being
depreciated over a five-year life.
Accounts receivable decreased by $4,940,000 at November 30, 1999, primarily due
to a recovery of the semiconductor industry. Although net sales for the fourth
quarter of 1999 were slightly less than the same period in 1998, the Company had
extended more favorable payment terms to certain customers as of November 30,
1998 in order to secure sales in a weakened economy in the semiconductor
industry that started in the second half of 1998.
The decrease in prepaid income taxes of $790,000 at November 30, 1999 was
primarily the result of a federal tax refund in the first quarter of 1999 for
the overpayment of 1998 taxes.
The increase in accrued payroll and other accrued expenses of $610,000 at
November 30, 1999 relates primarily to an increase of $100,000, $110,000,
$130,000 and $250,000 for warranty reserve, accrued license fees, accrued bonus,
and other accrued expenses, respectively. The increase in warranty reserve is
the result of an increasing number of systems remaining under warranty. The
increase in accrued license fees is related essentially to the timing of
payment. As of November 30, 1998, no bonus was accrued as a result of a loss in
the fourth quarter of 1998, compared to the fourth quarter of 1999 which
resulted in income. Bonus accruals are primarily based on net income. Of the
$250,000 increase in other accrued expenses, approximately $130,000 relates to
expenses associated with the potential change of control of the Company (see
Recent Developments). The remaining $120,000 relates to various year-end
accruals of invoices which were not recorded in accounts payable.
The increase in inventory of $1,630,000 consists of a $500,000 increase in raw
materials and a $1,100,000 increase in work in process. The increase is the
direct result of increased business which is demonstrated by the Company's
record backlog as of November 30, 1999.
Accounts payable decreased by $1,070,000 at November 30, 1999. 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, 1999, vendors payment
terms were back to normal (generally 30 days).
Accrued restructuring decreased by $930,000, primarily due to the consulting
services to TRW/BDM being completed and paid in full.
18
<PAGE>
Net cash used in investing activities for 1999 was $2,640,000 compared to
$5,540,000 in 1998. Cash used for investing activities in 1999 and 1998 was
primarily for capital expenditures, of which $1,000,000 and $4,450,000,
respectively, was for the construction and purchase of various lab equipment to
be used in research and development. In addition, $300,000 incurred in 1999 and
$310,000 incurred in 1998 is comprised of various production, transportation and
computer equipment. Furthermore, capital expenditures incurred in 1999 and 1998
for the construction of the new R&D facility totaled $300,000 and $620,000,
respectively. The Company also incurred expenditures in 1999 for eight acres of
land across the street from its current facilities totaling $1,150,000. In
addition, in 1998, expenditures were incurred for its current facility totaling
$160,000. In 1999, cash used in investing activities was offset by the net
proceeds of $50,000 from the sale of the Company's wholly owned subsidiary on
June 30, 1999 and $60,000 for the disposition of equipment.
Net cash used in financing activities for 1999 was $2,780,000, compared to net
cash provided by financing activities of $2,610,000 in 1998. For both 1999 and
1998, cash used in financing activities include $610,000 and $720,000, for the
repayment of principal on long-term obligations. Cash used by financing
activities in 1999 included net payments of $3,000,000 under the line of credit
agreements, whereas in 1998, net proceeds of $3,000,000 under the line of credit
agreements provided cash from financing activities. Cash provided by financing
activities in 1999 and 1998 was from the exercise of common stock options of
$130,000 and $330,000, respectively. Furthermore, in 1999 the Company executed a
term loan with its bank for the purchase of eight acres of land across the
street from the existing facility, providing $700,000 in additional funds.
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. In March 1999, the construction of the facility was
temporarily put on hold. In November 1999, construction resumed and is expected
to be completed by August 2000. 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 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% (8.72% at November 30, 1999)
through May 2004. The note is secured by the land.
19
<PAGE>
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% (8.47% at November 30,
1999). The line is collateralized by all the Company's assets. As of November
30, 1999, the Company's availability under the line of credit was reduced by
$30,738 as a result of outstanding letters of credit. The unused balance on the
line at November 30, 1999 and 1998 was $7,969,262 and $4,813,500 respectively.
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 of the
Company's bank debt is cross-defaulted. In addition, the agreements include
financial covenants related to the Company's operating performance and financial
condition.
At November 30, 1999, the Company's primary sources of liquidity consisted of
cash, cash equivalents and a revolving credit facility with its bank.
On January 28, 2000, Volcano Acquisition Corp. (the "Purchaser"), a Florida
corporation and a wholly owned subsidiary of Oerlikon-Buhrle USA,
Inc.("Parent"), a Delaware corporation, completed its tender offer (the "Offer")
for all of the outstanding shares of voting common stock, par value $.01 per
share ("Common Stock"), of the Company, by accepting for payment all of the
approximately 10,629,473 shares (the "Shares") of Common Stock which were
validly tendered and not withdrawn. Upon completion of the Offer, which was made
pursuant to the Agreement and Plan of Merger, dated as of December 20, 1999,
among the Company, Parent and the Purchaser (the "Merger Agreement"), Parent
acquired beneficial ownership of the Shares which represent approximately 94.46%
of the outstanding Common Stock. The Merger Agreement provides that after the
purchase of the Shares pursuant to the Offer, the Purchaser will be merged with
and into the Company (the "Merger") on the business day on which certain
conditions in the Merger Agreement are satisfied or waived.
YEAR 2000
During fiscal 1999, the Company continued its company-wide program to prepare
the Company's computer systems for year 2000 compliance. The year 2000 issue
relates to computer systems that use the last two digits rather than all four to
define a year and whether such systems would properly and accurately process
information when the year changed to 2000.
At the date of this report, the Company had not yet experienced any material
problems related to the year 2000. The Company has not become aware of any
significant year 2000 issues affecting the Company's major customers or
suppliers. The Company also has not received any material complaints regarding
any year 2000 issues related to its products.
Year 2000 related costs through January 14, 2000 were approximately $90,000 and
have been expensed as incurred. These costs included labor expended in
contacting customers and suppliers, testing systems and software, and software
upgrades for year 2000
20
<PAGE>
compliance. The remaining estimated cost to address any additional year 2000
problems is deemed immaterial. No significant information system projects were
deferred to accommodate the year 2000 issues.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN EXCHANGE EXPOSURE
The Company does not have any material market risk sensitive financial
instruments. Currently, all of the Company's revenues and expenses are invoiced
and paid in U.S. dollars, therefore, fluctuations on exchange rates between the
U.S. dollar and such foreign currencies should have no adverse effect on the
Company's business, results of operations, and financial condition.
21
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
-----
PAGE
----
Accountants' Report ..................................... 23
Consolidated Financial Statements
Balance Sheets - November 30, 1999 and 1998 ....... 24
Statements of Operations - Years Ended
November 30, 1999, 1998 and 1997 .............. 26
Statements of Shareholders' Equity - Years Ended
November 30, 1999, 1998 and 1997 .............. 27
Statements of Cash Flows - Years Ended
November 30, 1999, 1998 and 1997 .............. 28
Notes to the Financial Statements ................. 30
22
<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, 1999 and 1998, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended November 30, 1999. 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, 1999 and 1998, and the consolidated results of
their operations and their consolidated cash flows for each of the three years
in the period ended November 30, 1999 in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
Tampa, Florida
January 14, 2000
23
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30,
ASSETS 1999 1998
----------- -----------
Current assets
Cash and cash equivalents $ 6,913,363 $ 7,170,464
Accounts receivable 9,610,493 14,842,937
Inventories 11,191,676 9,859,914
Prepaid income taxes 553,150 1,405,591
Prepaid expenses and other 756,312 747,234
Deferred tax asset 166,909 244,691
----------- -----------
Total current assets 29,191,903 34,270,831
----------- -----------
Property, plant and equipment
Building 5,291,897 4,996,731
Machinery and equipment 12,206,978 11,296,080
Leasehold improvements -- 151,005
----------- -----------
17,498,875 16,443,816
Less accumulated depreciation and
amortization 7,390,281 4,610,619
----------- -----------
10,108,594 11,833,197
Land 2,168,851 1,012,992
----------- -----------
12,277,445 12,846,189
----------- -----------
Other assets 846,155 151,762
----------- -----------
$42,315,503 $47,268,782
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
24
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30,
<TABLE>
<CAPTION>
LIABILITIES 1999 1998
---------- ------------
<S> <C> <C>
Current liabilities
Line of credit $ 2,000,000 $ 5,000,000
Current maturities of long-term obligations 335,635 585,228
Accounts payable 3,789,467 4,828,263
Accrued payroll and related 808,511 605,431
Accrued expenses 1,485,612 1,083,535
Accrued restructuring charge 58,965 992,847
Customer deposits 298,705 570,625
Deferred revenue 153,900 --
----------- -----------
Total current liabilities 8,930,795 13,665,929
----------- -----------
Long-term obligations 3,426,384 3,085,353
----------- -----------
SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock, $.01 par value (25,000,000
shares authorized, 11,252,311 and
11,207,061 shares issued and outstanding
at November 30, 1999 and 1998, respectively ) 112,525 112,072
Additional paid-in capital 17,359,550 17,156,849
Retained earnings 12,486,249 13,248,579
----------- -----------
29,958,324 30,517,500
----------- -----------
$42,315,503 $47,268,782
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
25
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED NOVEMBER 30,
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ----------
<S> <C> <C> <C>
Net sales $ 40,627,328 $ 49,088,445 $ 44,444,657
Cost of sales 24,796,048 30,491,002 25,689,816
------------ ------------ ------------
Gross profit 15,831,280 18,597,443 18,754,841
------------ ------------ ------------
Operating expenses:
Research and development 7,329,755 6,090,516 3,725,465
Selling and administrative 8,044,679 8,683,252 7,379,055
Restructuring Charge 948,069 1,269,532 --
------------- ------------ ------------
Total operating expenses 16,322,503 16,043,300 11,104,520
------------- ------------ ------------
Operating income (loss) (491,223) 2,554,143 7,650,321
Interest expense, net 314,329 226,473 112,107
------------- ------------ ------------
Income (loss) before income taxes (benefit) (805,552) 2,327,670 7,538,214
Income taxes (benefit) (43,222) 957,490 2,877,094
------------- ------------ ------------
Net income (loss) $ (762,330) $ 1,370,180 $ 4,661,120
============= ============ ============
Earnings (loss) per share:
Basic $ (0.07) $ 0.12 $ 0.43
============= ============ ============
Diluted $ (0.07) $ 0.12 $ 0.42
============= ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
26
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE YEARS ENDED NOVEMBER 30, 1999
<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN RETAINED
COMMON STOCK CAPITAL EARNINGS
----------------------------- ----------- ------------
SHARES
ISSUED AMOUNT AMOUNT AMOUNT
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
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
Exercise of stock options
(inclusive of income tax benefits) 45,250 453 190,851 --
Compensation on unexercised
stock options -- -- 11,850 --
Net income (loss) -- -- -- (762,330)
------------ ------------ ------------ ------------
Balance at November 30, 1999 11,252,311 $ 112,525 $ 17,359,550 $ 12,486,249
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
27
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED NOVEMBER 30,
<TABLE>
<CAPTION>
1999 1998 1997
------------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (762,330) $ 1,370,180 $ 4,661,120
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities
Depreciation and amortization 3,302,345 2,406,123 1,872,424
Gain on sale of Magnetran, net of taxes (84,510) -- --
(Gain) loss on disposal of assets (5,761) -- 37,185
Deferred taxes 32,808 49,123 94,499
Compensation - stock options 19,100 24,500 15,310
Tax benefit related to certain stock options
and warrants 54,281 105,256 372,782
Changes in assets and liabilities
(Increase) decrease in accounts receivable 4,936,398 (1,087,159) (5,709,648)
(Increase) decrease in inventories (1,632,846) 15,887 (1,917,181)
(Increase) decrease in prepaid income taxes 788,189 (1,147,490) (163,868)
(Increase) decrease in prepaid expenses and other 16,807 (590,814) 76,230
Increase (decrease) in accounts payable (1,067,452) 1,686,866 917,571
Increase (decrease) in accrued payroll and related 211,856 (46,074) (25,169)
Increase (decrease) in accrued expenses 399,494 348,815 (289,374)
Increase (decrease) in accrued restructuring charge (933,882) 992,847 --
Increase (decrease) in customer deposits (271,920) 570,625 (218,000)
Increase in deferred revenue 153,900 -- --
----------- ----------- -----------
Net cash provided by (used in)
operating activities 5,156,477 4,698,685 (276,119)
----------- ----------- -----------
Cash flows from investing activities
Capital expenditures (2,761,622) (5,541,429) (2,305,667)
Proceeds from sale of fixed assets 66,975 -- --
Net Proceeds from sale of Magnetran 48,706 -- --
Other 11,151 6,501 15,863
----------- ----------- -----------
Net cash used in
investing activities (2,634,790) (5,534,928) (2,289,804)
----------- ----------- -----------
</TABLE>
28
<PAGE>
PLASMA-THERM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
YEAR ENDED NOVEMBER 30,
<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from financing activities
Proceeds from issuance of long-term obligations 700,000 -- 1,000,000
Principal payments on long-term obligations (608,561) (723,968) (719,346)
Net proceeds (payments) under line of credit agreements (3,000,000) 3,000,000 1,000,000
Exercise of common stock and warrants 129,773 332,645 1,417,020
----------- ----------- -----------
Net cash provided by (used in)
financing activities (2,778,788) 2,608,677 2,697,674
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents (257,101) 1,772,434 131,751
----------- ----------- -----------
Cash and cash equivalents, beginning of year 7,170,464 5,398,030 5,266,279
----------- ----------- -----------
Cash and cash equivalents, end of year $ 6,913,363 $ 7,170,464 $ 5,398,030
=========== =========== ===========
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION
The following is supplemental cash flow information for the years ended November
30:
1998 1998 1997
--------- ------------ ----------
Cash paid for:
Interest $ 654,638 $ 616,552 $ 474,602
Income Taxes 276,490 1,951,255 2,526,227
See Note 7 for sale of Magnetran
The accompanying notes are an integral part of these
consolidated financial statements.
29
<PAGE>
Plasma-Therm, Inc.
Notes to Consolidated Financial Statements
November 30, 1999
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 of Plasma-Therm, Inc. at November 30, 1999
includes its wholly owned subsidiary, Magnetran, Inc. through June 30, 1999 (see
Note 7). 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. One such
estimate is the estimated fair value of the Company's products used on various
research and development projects. 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.
30
<PAGE>
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 using the straight-line method
(straight-line and accelerated methods for tax purposes) over the useful lives
of the related assets (machinery and equipment principally over three to five
years and building over 39 years). Depreciation expense for 1999, 1998 and 1997
was $3,242,345, $2,346,123 and $1,812,424, 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, 1999 and 1998 the cost and accumulated depreciation
related to these items are approximately $7,006,000 and $3,863,000, and
$6,507,000 and $1,827,000, 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 relating principally to warranty and installation are
accrued upon the shipment of the products. The warranty reserve included in
accrued expenses at November 30, 1999 and 1998 is $450,000 and $350,000
respectively. The warranty expense recorded in 1999, 1998, and 1997 of
approximately $1,167,000 (inclusive of a $100,000 increase in the warranty
accrual), $897,000, and $428,000 (inclusive of a $260,000 reduction of warranty
accrual), 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.
31
<PAGE>
INCOME PER SHARE
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, 1999
--------------------------------------------------------
INCOME/(LOSS) SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------- ------------- ---------
<S> <C> <C> <C>
Basic EPS:
Income/(loss) available
to common shareholders $(762,330) 11,221,086 $(.07)
======
Effect of Dilutive Securities:
Options -- --
--------- ----------
Diluted EPS:
Income available to common
shareholders + assumed
conversions $(762,330) 11,221,086 $(.07)
========== ========== ======
</TABLE>
<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>
32
<PAGE>
<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>
All potentially dilutive common shares for the year ended November 30, 1999 and
potentially dilutive common shares in the amount of 30,000 and 0 for the years
ended November 30, 1998 and 1997, respectively, have been excluded from the
computation of diluted earnings per share as the effect of their inclusion is
antidilutive.
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.
33
<PAGE>
SEGMENT REPORTING
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (SFAS No. 131), "Disclosures about
Segments of an Enterprise and Related Information". The Statement is effective
for the Company's fiscal year 1999. SFAS No. 131 establishes annual and interim
reporting standards for operating segments of a company. It also requires
entity-wide disclosures about the products and services an entity provides, the
material countries in which it holds assets and reports revenues, and its major
customers. The Company is not organized by multiple operating segments for the
purpose of making operating decisions or assessing performance. Accordingly, the
Company operates in one operating segment and reports only certain
enterprise-wide disclosures.
NEWLY ISSUED ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Instruments and Hedging Activities". This Statement requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. SFAS 133 will be effective for
the Company's fiscal year ending November 30, 2001. The Company believes the
adoption of SFAS No. 133 will not have a material effect on the consolidated
financial statements.
RECLASSIFICATIONS
Minor reclassifications have been made to the 1997 financial statements to
conform to the 1998 and 1999 presentation.
2. INVENTORIES
Inventories consist of the following:
NOVEMBER 30,
--------------------------------
1999 1998
----------- -----------
Raw materials $ 5,526,624 $ 4,974,844
Work-in-process 5,175,904 4,477,355
Finished goods 489,148 407,715
----------- -----------
$ 11,191,676 $ 9,859,914
============ ===========
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.
34
<PAGE>
3. SHORT-TERM AND LONG-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. In March 1999, the construction of the facility was
temporarily put on hold. In November 1999, construction resumed and is expected
to be completed by August 2000. 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. There is no outstanding balance at
November 30, 1999.
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% (8.47% at November 30,
1999). The line is collateralized by all the Company's assets. As of November
30, 1999, the Company's availability under the line of credit was reduced by
$30,738 as a result of outstanding letters of credit. The unused balance on the
line at November 30, 1999 and 1998 was $7,969,262 and $4,813,500 respectively.
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.
35
<PAGE>
NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------------------
1999 1998
------------ -----------
<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. $2,946,471 $3,084,876
Note payable with a bank, payable in monthly installments of
$3,889 plus interest at the one month LIBOR rate plus 2.25%
(8.72% at November 30, 1999) maturing May 2004. The note is
secured by the land across the street from the current
facility. 676,666 - -
Note payable with a bank, payable in monthly installments of
$27,778 plus interest at the one month LIBOR rate plus 2.25%
(8.72% at November 30, 1999) maturing April 2000. The note is
secured by various research and development equipment and is
cross-collateralized with the line of credit above. 138,882 472,218
Other 113,487
---------- ----------
3,762,019 3,670,581
Less current portion 335,635 585,228
---------- ----------
$3,426,384 $3,085,353
========== ==========
</TABLE>
Aggregate maturities of notes payable for five years following November
30, 1999 are as follows:
2000 $ 335,635
2001 2,843,050
2002 46,667
2003 46,667
2004 490,000
----------
$3,762,019
==========
36
<PAGE>
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, 1999, the Company was 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, 1999.
Interest expense for the years ended November 30, 1999, 1998, and 1997 was
$654,638, $616,552, and $474,602, reduced by interest income of $340,309,
$390,079, and $362,495, respectively, for financial statement presentation.
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 (3,042,617 authorized as of November 30, 1999). 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:
37
<PAGE>
<TABLE>
<CAPTION>
NOVEMBER 30,
-----------------------------------------------------------------------------
1999 1998 1997
------------------------ ------------------------ ------------------------
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 1,274,000 $ 5.48 1,023,500 $ 5.06 809,000 $ 3.73
Granted 631,500 3.00 431,000 6.29 712,000 5.56
Exercised 45,250 2.87 80,500 4.13 330,500 3.35
Expired 47,000 5.93 90,000 5.63 97,000 3.92
Forfeited 80,500 5.07 10,000 6.19 70,000 4.46
--------- --------- -------
Outstanding -
end of year 1,732,750 4.65 1,274,000 5.48 1,023,500 5.06
========= ========= =========
Weighted Average
fair value of
options granted
during the year $1.32 $2.50 $2.53
</TABLE>
During 1999, the expiration dates for 213,000 options were extended one year.
The following information applies to options outstanding and exercisable at
November 30, 1999:
Outstanding Shares:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING
RANGE OF NUMBER CONTRACTUAL LIFE WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING (YEARS) EXERCISE PRICE
- --------------------------- -------------------- ----------------------- -------------------------
<S> <C> <C> <C>
$1.65 - 3.87 659,250 1.90 $2.92
$4.12 - 5.25 410,000 0.80 $4.31
$6.19 - 6.97 655,000 0.94 $6.57
$8.50 8,000 1.53 $8.50
Exercisable Shares:
$2.41 - 3.87 499,250 1.62 $3.00
$4.12 - 5.25 410,500 0.80 $4.31
$6.19 - 6.97 652,500 0.93 $6.57
$8.50 8,000 1.53 $8.50
</TABLE>
At November 30, 1998 and 1997 there were 1,234,000 and 651,000 exercisable
shares at a weighted average exercise price of $5.42 and $4.01 respectively.
38
<PAGE>
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. 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>
1999 1998 1997
-------------------- ------------------ ------------------
<S> <C> <C> <C>
Net Income/(Loss) As Reported $(762,330) $1,370,180 $4,661,120
Pro Forma (1,229,110) 221,643 3,863,798
Basic &
Dilutive EPS As Reported $(.07) $.12 $.42
Pro Forma (.11) .02 .34
</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 1999, 1998 and 1997 respectively: No dividend yield for all
years; expected volatility of 75.0, 73.0 and 69.9 percent; risk-free interest
rates of 5.2, 5.3 and 6.1 percent; and expected lives of 2.1, 2.2 and 2.4 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 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.
39
<PAGE>
5. INCOME TAXES
The provisions for income taxes consist of the following:
NOVEMBER 30,
-------------------------------------------
1999 1998 1997
---------- ---------- ----------
Current
Federal $ (270,072) $ 694,809 $2,141,214
State 177,966 108,278 268,599
---------- ---------- ----------
(92,106) 803,087 2,409,813
---------- ---------- ----------
Deferred
Federal (7,154) 47,832 83,823
State 1,757 1,315 10,676
---------- ---------- ----------
(5,397) 49,147 94,499
---------- ---------- ----------
Tax benefit from the
exercise of employee stock
options 54,281 105,256 372,782
---------- ---------- ----------
$ (43,222) $ 957,490 $2,877,094
========== ========== ==========
The income tax provision reconciled to the tax computed at the statutory Federal
rate of 34% is as follows:
NOVEMBER 30,
-------------------------------------------
1999 1998 1997
---------- ---------- ----------
Tax expense at statutory
rate $(273,888) $791,408 $2,562,993
State income taxes, net of
federal income tax benefit 124,040 91,779 233,819
Non-deductible charges 90,527 93,037 63,112
Other 16,099 (18,734) 17,170
--------- -------- ----------
$ (43,222) $957,490 $2,877,094
========= ======== ==========
40
<PAGE>
The deferred taxes consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------
1999 1998
----------- ----------
<S> <C> <C>
Assets:
Vacation accrual $136,456 $129,015
Reserves (warranty and other) 181,361 214,189
Deferred compensation 22,802 65,433
Net operating losses 30,762 --
Stock options 11,253 13,435
-------- --------
382,634 422,072
Liabilities:
Depreciation (215,725) (177,381)
-------- --------
Deferred tax asset, net $166,909 $244,691
======== ========
</TABLE>
The Company has approximately $650,000 of net operating losses for state income
tax purposes that begin to expire in 2019.
6. COMMITMENTS
OPERATING LEASES
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,
2000 239,712
2001 149,021
2002 14,029
--------
Total minimum lease payment $402,762
========
The total rental expense for all operating leases was $303,911, $310,377 and
$303,147 for the years ended November 30, 1999, 1998 and 1997, respectively. In
connection with Magnetran Inc. (See Note 7) total rent paid to the Company's
Chairman of the Board was approximately $57,000, $95,000, and $92,000 for the
years ended November 30, 1999, 1998, and 1997, respectively.
41
<PAGE>
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 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, 1999 to
terminate the agreement, the obligation to repurchase the demonstration
equipment held by the distributor would be approximately $142,000 if terminated.
LICENSE AGREEMENTS
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.
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.
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
limit.
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. Expenditures
incurred through November 30, 1999 and 1998 relating to this contract total
$815,532 and $924,543 which are included on the income statement in
restructuring charge. Total shown on the balance sheet included in accrued
restructuring charge is $0 and $744,543 as of November 30, 1999 and 1998. As of
November 30, 1999, all accrued restructuring charges for TRW/BDM have been paid.
42
<PAGE>
In addition to the costs associated with the contract above, as a result 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 and March 1999 the Company downsized
its workforce, resulting in a charge of $344,989 and $222,529 respectively,
related primarily to severance compensation. These amounts are also included on
the income statement in restructuring charge. Total shown on the balance sheet
included in accrued restructuring charge is $248,304 and $58,965 as of November
30, 1998 and 1999. Approximately $89,992 of the November 30, 1998 accrual of
$248,304 was overstated and reversed and netted against restructuring charge in
the income statement in 1999.
Restructuring charge of $1,269,532 was recognized in the fourth quarter of 1998
and the remaining restructuring charge of $948,069 was recognized in the first
half of 1999 related to the Integrated Supply Chain Management philosophy.
As of November 30, 1999, all restructuring is complete and all related charges
have been paid except for $58,965 which is expected to be paid in Fiscal 2000.
7. 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 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 and has a balance of $789,815 at
November 30, 1999 which is included in the captions "Other assets" and "Prepaid
expenses and other" assets on the balance sheet. The Company recognized a gain
of $84,510 on the sale, net of taxes calculated as follows:
43
<PAGE>
Note receivable from Magnetran $ 800,000
Net cash received from Magnetran 48,706
---------
Total consideration received $ 848,706
Less recorded net assets (exclusive of cash) of Magnetran (706,371)
Less expenses associated with sale (8,193)
---------
Gain on sale of Magnetran, before income taxes $ 134,142
Less income taxes (49,632)
---------
Gain on sale of Magnetran, net of taxes $ 84,510
=========
8. CONCENTRATION OF CREDIT RISK AND FOREIGN INFORMATION
FOREIGN EXCHANGE EXPOSURE
The Company does not have any material market risk sensitive financial
instruments. Currently, all of the Company's revenues and expenses are invoiced
and paid in U.S. dollars, therefore, fluctuations on exchange rates between the
U.S. dollar and such foreign currencies should have no adverse effect on the
Company's business, results of operations, and financial condition.
GEOGRAPHIC SALES
November 30,
-------------------------------------------
1999 1998 1997
----------- ----------- -----------
Export revenues from the
United States to unaffiliated
foreign customers $10,126,337 $16,947,852 $12,110,184
----------- ----------- -----------
All foreign sales are denominated in U.S. dollars.
CUSTOMER SALES
No sales in excess of 10% of revenue were made to a single customer in 1999,
1998 and 1997. In 1999, 1998 and 1997 net sales to the Company's current
Japanese distributor were approximately 8%, 13% and 9% of revenue, respectively.
44
<PAGE>
ACCOUNTS RECEIVABLE
The Company's accounts receivable are concentrated in the following geographic
locations:
NOVEMBER 30,
------------------------------
1999 1998
------------------------------
United States $9,086,274 $10,332,463
Foreign 524,219 4,510,474
---------- -----------
Total $9,610,493 $14,842,937
========== ===========
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 1999, 1998 and 1997
was $160,489, $96,160 and $70,428 respectively.
10. SUBSEQUENT EVENTS
On January 28, 2000, Volcano Acquisition Corp. (the "Purchaser"), a Florida
corporation and a wholly owned subsidiary of Oerlikon-Buhrle USA,
Inc.("Parent"), a Delaware corporation, completed its tender offer (the "Offer")
for all of the outstanding shares of voting common stock, par value $.01 per
share ("Common Stock"), of the Company, by accepting for payment all of the
approximately 10,629,473 shares (the "Shares") of Common Stock which were
validly tendered and not withdrawn. Upon completion of the Offer, which was made
pursuant to the Agreement and Plan of Merger, dated as of December 20, 1999,
among the Company, Parent and the Purchaser (the "Merger Agreement"), Parent
acquired beneficial ownership of the Shares which represent approximately 94.46%
of the outstanding Common Stock. The Merger Agreement provides that after the
purchase of the Shares pursuant to the Offer, the Purchaser will be merged with
and into the Company (the "Merger") on the business day on which certain
conditions in the Merger Agreement are satisfied or waived.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
45
<PAGE>
PART III
ITEM 10. DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION
- ------------------------------------ -------- ---------- ------------------------------------------------------
<S> <C> <C>
Ronald H. Deferrari................ 59 1975 Founder and Chairman of the Board of Directors since
1975; President of the Company from 1975 to 1995; Chief
Executive Officer, Chief Financial Officer and Treasurer
until September 1998. Re-appointed Chief Executive Officer
in March 1999.
Anastasios S. Gianoplus............ 69 1989 President of Open Retail Systems, Inc., a supplier of
software systems and services to the retail industry, since
July 1995. From August 1988 to June 1995, Mr. Gianoplus served
as Executive Vice President of Compex Corporation, a provider of
computer systems and services to government and industry.
Richard T. Heglin.................. 63 1997 Owner and operator of Richard T. Heglin PE, L.L.C., providing
management consulting services in the areas of general management,
marketing, distribution and joint ventures. Former President of
Leybold Semiconductor Vacuum Systems, a Division of Leybold Vakuum
GMBH of Cologne, Germany until April 1999. During calendar year
1998, Mr. Heglin was also President of Balzers and Leybold Taiwan,
located in Hsinchu, R.O.C., and has been with the company for
more than five years.
Lubek Jastrzebski.................. 50 1996 Vice President and founder of Semiconductor Diagnostics Inc. (SDI)
of Tampa, a provider of sophisticated contamination monitoring
equipment to the integrated circuit (IC) industry, for more than
10 years.
</TABLE>
46
<PAGE>
CURRENT BOARD OF DIRECTORS; COMMITTEES, MEETINGS AND COMPENSATION OF DIRECTORS
The Board of Directors held seven meetings during fiscal 1999. In addition to
formal meetings of the Board of Directors and its committees, the directors have
frequent informal communications among themselves and with other executives
regarding Board and Committee issues. The Board of Directors has no standing
nominating committee or committee performing similar functions. The entire Board
of Directors serves as the Compensation Committee.
The Audit Committee of the Board of Directors currently consists of Messrs.
Gianoplus and Jastrzebski. The Audit Committee has responsibility for reviewing
matters involving the retention of auditors, for overseeing internal audit
matters, for responding to and resolving issues with the Company's auditors and
for reporting on these issues to the Board of Directors for appropriate action.
The Audit Committee held one meeting during fiscal 1999.
The Stock Option Committee of the Board of Directors currently consists of
Messrs. Gianoplus and Jastrzebski. The Stock Option Committee has responsibility
for administering the Company's stock option plans. Under the terms of the
Company's 1995 Stock Incentive Plan, each member of the Committee shall be
granted on each June 30 annually, an option to purchase 5,000 shares of the
Company's Common Stock at an exercise price equal to 60% of the fair market
value of the shares on the date the option is granted. All options proposed to
be granted by the Stock Option Committee are approved by the entire Board of
Directors prior to grant. The Stock Option Committee held one meeting during
fiscal 1999.
Mr. Gianoplus, Mr. Heglin and Dr. Jastrzebski are compensated at the rate of
$20,000, $15,000, and $15,000 per year, respectively, for services as a
director. They are also entitled to reimbursement of expenses. During fiscal
1999, certain directors were granted stock options. Mr. Gianoplus and Dr.
Jastrzebski were each granted options to acquire 5,000 shares, on June 30, 1999.
The options are exercisable at an exercise price of $1.65. Ronald H. Deferrari
receives no separate compensation for services as a director.
Each director other than Mr. Deferrari also received an additional $1,500 per
board meeting for meetings held related to potential business combinations.
47
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY AND KEY EMPLOYEES
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME AGE POSITION
---- --- --------
Ronald H. Deferrari 59 Chairman of the Board and Chief Executive
Officer
Ronald S. Deferrari 36 President
Edmond A. Richards 49 Vice President of Engineering & Chief
Operating Officer
Stacy L. Wagner 36 Chief Financial Officer, Treasurer &
Corporate Secretary
Dr. Jay N. Sasserath 37 Vice President of Strategic Marketing &
Business Unit Director, MEMS and Opto/Tele
Business Units
Robert D. Anderson, Jr. 59 Vice President of Operations
</TABLE>
-------------------------
Ronald H. Deferrari is the founder, Chief Executive Officer and Chairman of the
Board of Directors 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 has served as President since June 1995. Mr. Deferrari has
been employed with the Company in various capacities since 1983. Prior to his
current position, he served as Chief Executive Officer, Chief Operating Officer
and Director of Sales and Marketing.
Edmond A. Richards, PE, was appointed Chief Operating Officer in July 1999. Mr.
Richards has served as Vice President of Engineering since October 1996. From
1994 to 1996, Mr. Richards served as Director of Engineering 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 Administration. Ms. Wagner has held
various financial managerial positions since her employment in 1993. Prior to
joining the Company, Ms. Wagner was employed by Grant Thornton LLP and Coopers &
Lybrand.
Dr. Jay N. Sasserath has served as Vice President of Strategic Marketing since
December 1996. In addition, Dr. Sasserath is the Business Unit Director of the
MEMS and Optoelectronics/Telecommunications business units. Prior to joining the
Company, he held various management positions in marketing and technical areas
at Materials Research Corporation in New York.
48
<PAGE>
Robert D. Anderson Jr. has served as Vice President of Operations since February
1999. Mr. Anderson brings over 30 years of semiconductor engineering and
manufacturing experience to the Company. From 1988 to 1999, Mr. Anderson served
in various senior management capacities at Machine Technology, Inc., Fusion
Semiconductor Systems and Eaton Semiconductor Equipment Operations. From 1968 to
1988, Mr. Anderson served in various capacities at International Business
Machines Corporation ("IBM").
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's directors, officers and beneficial owners of more
than 10% of the Company's Common Stock to file with the Securities and Exchange
Commission (the "Commission") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Based solely on its review of the copies of such reports received by it or
written representations from reporting persons, the Company believes that during
the fiscal year ended November 30, 1999, its officers, directors and holders of
more than 10% of the Company's Common Stock complied with all Section 16(a)
filing requirements, except that during fiscal 1999, the Form 3 for Mr. Anderson
was filed late.
49
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning compensation
for the last three fiscal years paid or accrued by the Company's Chief Executive
Officer and each of the four other most highly compensated executive officers of
the Company who earned more than $100,000 (determined as of November 30, 1999):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------------------------------
AWARDS PAYOUTS
---------------------- -------
OTHER RESTRICTED ALL OTHER
ANNUAL STOCK OPTIONS/ LTIP COMPEN-
FISCAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($) (#) ($) ($)
- --------------------------- ------- -------- -------- ----------- ---------- ---------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RONALD H. DEFERRARI (3) 1999 $150,000 -- $34,200 -- -- -- --
Chairman of the Board and 1998 $150,000 $100,000 $33,296 -- -- -- --
former Chief Executive 1997 $150,000 $100,000 $33,454 -- -- -- --
Officer, Chief Financial
Officer and Treasurer.
Re-appointed as Chief
Executive Officer in
March 1999
RONALD S. DEFERRARI (4) 1999 $160,000 $110,597 $38,354 -- 50,000 -- --
President and Chief 1998 $160,000 $199,529 $35,363 -- 125,000 -- --
Executive Officer 1997 $160,000 $250,000 $18,968 -- 275,000 -- --
(CEO until March 1999)
EDMOND A. RICHARDS (5) 1999 $146,772 $ 12,500 -- -- 135,000 -- --
Vice President of 1998 $146,772 $ 19,953 -- -- 50,000 -- --
Engineering and Chief 1997 $146,772 $ 25,201 -- -- 80,000 -- --
Operating Officer
STACY L. WAGNER (6) 1999 $100,000 $ 12,500 $ 7,200 -- 85,000 -- --
Chief Financial Officer, 1998 $ 91,290 $ 39,906 $ 9,300 -- 10,000 -- --
Treasurer and Corporate 1997 $ 76,370 $ 50,400 -- -- 25,000 -- --
Secretary
JAY N. SASSERATH (7) 1999 $112,000 -- $ 7,200 -- 17,500 -- $16,288
Vice President of 1998 $112,800 $ 19,953 $ 7,200 -- 50,000 -- --
Strategic Marketing and 1997 -- -- -- -- -- -- --
Business Unit Director,
MEMS and Opto/Tele
ROBERT D. ANDERSON, JR. (8) 1999 $ 87,730 -- -- -- 25,000 -- --
Vice President of
Operations
</TABLE>
(1) Reflects bonuses based on fiscal year net income prior to 1999. Bonuses are
paid quarterly based on quarterly net income before bonuses, for the first
three fiscal quarters, and are reconciled for the full fiscal year after the
fiscal year end. The bonuses are subject to certain limitations, which vary
among the individuals. See footnote (4), (5) and (6) below for explanation
of 1999 bonus' paid.
(2) Automobile allowance.
50
<PAGE>
(3) In May 1994, the Company entered into an employment agreement with
Ronald H. Deferrari for a term of three years. The agreement was amended in
June 1995, and in January 1997, the Board of Directors resolved to permit
Mr. Deferrari's employment agreement to renew automatically, in accordance
with its terms, for an additional three-year term. Under Mr. Deferrari's
current agreement, he receives $150,000 in base salary per year and a bonus
equal to 3% of the Company's fiscal year net earnings, such bonus not to
exceed $100,000 annually, and reimbursement for payments related to the
lease or purchase of two automobiles. Upon termination of the agreement,
including termination upon death or disability, Mr. Deferrari is entitled to
receive the full compensation provided thereunder for the remainder of the
term of the agreement, unless the termination is made by the Company based
upon reasonable cause as defined in the agreement, in which case the
compensation shall continue for one year from the notice of termination.
Mr. Deferrari is entitled to terminate the agreement in the event of a
change in control of the Company, in which case Mr. Deferrari also will be
entitled to receive the full compensation provided thereunder for the
remainder of the agreement term. Ronald H. Deferrari is the father of Ronald
S. Deferrari.
(4) In May 1994, the Company entered into an employment agreement with Ronald S.
Deferrari for a term of three years. In June 1995, the agreement was amended
to reflect his promotion from Executive Vice President to President. In
addition, Mr. Deferrari was entitled to receive $160,000 per year in base
salary, an annual bonus equal to 5% of the Company's fiscal year net
earnings, such bonus not to exceed $150,000, and reimbursement for payments
related to the lease or purchase of two automobiles. In January 1997, the
Board of Directors resolved to provide Mr. Deferrari with a new employment
agreement for a three-year term, commencing as of January 22, 1997. Under
the new agreement, Mr. Deferrari is entitled to receive $160,000 per year
in base salary, an annual bonus equal to 5% of the Company's fiscal year net
earnings, such bonus not to exceed $250,000, and reimbursement for payments
related to the lease or purchase of two automobiles. If the agreement is
terminated due to death or disability, Mr. Deferrari is entitled to receive
full compensation for the then remaining term of the agreement. If the
agreement is terminated by the Company with cause or by Mr. Deferrari
without cause, Mr. Deferrari is entitled to receive a severance package of
six months salary and benefits (the "severance package") as set forth
in the agreement. If the agreement is terminated by the Company without
cause, Mr. Deferrari is entitled to receive full compensation for the then
remaining term of the agreement as well as the severance package. In the
event of a change in control or change in the Board of Directors of the
Company (as those terms are defined in the agreement), (a) the term of the
agreement will be extended, to the extent necessary, so that there are
18 months remaining in the term from the time of the change in control or
change in the Board of Directors; and (b) Mr. Deferrari commits to continue
to perform his duties under the agreement for 18 months after the time of
the change in control or change in the Board of Directors after which he may
terminate the agreement without a loss of benefits, as if the Company had
terminated the agreement without cause, except that if Mr. Deferrari
terminates the agreement in the event of a change in control or if the
Company terminates the agreement subsequent to a change in control, Mr.
Deferrari is entitled to receive at least 12 months of salary and benefits.
In October 1998, the agreement was amended to reflect Mr. Deferrari's
promotion to Chief Executive Officer. Additionally, under the amended
agreement, the Board of Directors resolved to remove the annual bonus
compensation cap of $250,000. In addition, in the event of a change in
control, (a) all stock options granted to Mr. Deferrari under the Company's
1995 Stock Incentive Plan (the "Plan") shall immediately become fully vested
and exercisable; and (b) in the event of a change in control, the Stock
Option Committee may accelerate the termination of Mr. Deferrari's stock
options granted under the Plan to a date no earlier than six months
following the date of a change in control. On July 19, 1999, the
agreement was amended to extend the initial term of the agreement for an
additional one-year period to January 21, 2001. In addition, the agreement
was amended to reflect a change in Mr. Deferrari's annual bonus compensation
to one-half of one percent (0.5%) on all system, spare parts and labor
sales, to be paid quarterly, effective June 1, 1999, having a maximum annual
amount of $250,000. Additionally, the agreement was amended to reflect that
Mr. Deferrari's duties would be performed in St. Petersburg, Florida.
Ronald S. Deferrari is the son of Ronald H. Deferrari.
51
<PAGE>
(5) The Company entered into an employment agreement with Mr. Richards for a
three-year term, commencing as of January 22, 1997. Under the agreement, Mr.
Richards is entitled to receive $146,772 per year in base salary and an
annual bonus equal to 0.5% of the Company's fiscal year net earnings, such
bonus not to exceed $50,000. If the agreement is terminated due to death or
disability or by the Company without cause, Mr. Richards is entitled to
receive full compensation for the then remaining term of the agreement. In
the event of a change in control (as that term is defined in the agreement),
(a) the term of the agreement will be extended, to the extent necessary, so
that there are 18 months remaining in the term from the time of the change
in control; and (b) Mr. Richards commits to continue to perform his duties
under the agreement for 18 months after the time of the change in control
after which he may terminate the agreement without a loss of benefits, as
if the Company had terminated the agreement without cause. On October 1,
1998, the agreement was amended to address the vesting of options granted
under the Plan upon a change in control. In the event of a change in
control, (a) all stock options granted to Mr. Richards under the Plan shall
immediately become fully vested and exercisable; and (b) in the event of a
change in control, the Stock Option Committee may accelerate the termination
of Mr. Richard's stock options granted under the Plan to a date no earlier
than six months following the date of a change in control. On June 30, 1999,
the agreement was amended to change the term of the initial agreement to a
period of two and one-half years, terminating on June 30, 1999. In addition,
the agreement was amended to reflect that Mr. Richards' duties would be
performed in St. Petersburg, Florida. During fiscal year 1999, Mr. Richards
was awarded a bonus of $12,500 by the Board of Directors for the services
and special effort rendered to the Board of Directors related to the merger.
(6) The Company entered into an employment agreement with Stacy L. Wagner for a
three-year term, commencing as of January 22, 1997. If the agreement is
terminated due to death or disability or by the Company without cause, Ms.
Wagner is entitled to receive full compensation for the then remaining term
of the agreement. In addition, in the event of a change in control (as that
term is defined in the agreement), (a) the term of the agreement will be
extended, to the extent necessary, so that there are 12 months remaining in
the term from the time of the change in control; and (b) Ms. Wagner commits
to continue to perform her duties under the agreement for 12 months after
the time of the change in control after which she may terminate the
agreement without a loss of benefits, as if the Company had terminated the
agreement without cause. The agreement was amended, effective August 19,
1997 to reflect Ms. Wagner's promotion from Vice President of Finance and
Controller to Vice President of Finance and Administration. In addition,
Ms. Wagner is entitled to receive a base salary of $85,000 per year, and an
annual bonus equal to 1% of the Company's fiscal year net earnings, such
bonus not to exceed $100,000, plus a monthly car allowance of $600. On
October 1, 1998, the agreement was amended, to reflect Ms. Wagner's
promotion to Chief Financial Officer, Treasurer and Secretary. Under the
amended agreement, Ms. Wagner is entitled to receive $100,000 per year in
base salary. Additionally, in the event of a change in control, (a) all
stock options granted to Ms. Wagner under the Plan shall immediately become
fully vested and exercisable; and (b) in the event of a change in control,
the Stock Option Committee may accelerate the termination of Ms. Wagner's
stock options granted under the Plan to a date no earlier than six months
following the date of a change in control. On June 30, 1999, the agreement
was amended to change the term of the initial agreement to a period of two
and one-half years, terminating on June 30, 1999. In addition, the agreement
was amended to reflect that upon a change in control, if the term of the
agreement has less than 18 months remaining, the term shall be extended so
that an 18 month term remains from the time of the change in control to the
end of the term. In the event that more than 18 months of the term exists as
of the time of a change in control, there will be no change in the term.
Additionally, the agreement was amended to reflect that Ms. Wagner commits
to continue to perform her duties under the agreement for a minimum of
18 months after a change in control. At the end of 18 months after a change
in control, Ms. Wagner has the option to voluntarily terminate this
agreement without a loss of benefits, as if the Company had terminated the
agreement "without cause". In addition, the agreement was amended to reflect
that Ms. Wagner's would be performed in St. Petersburg, Florida. During
fiscal year 1999, Ms. Wagner was awarded a bonus of $12,500 by the Board
of Directors for the services and special effort rendered to the Board of
Directors related to the merger.
52
<PAGE>
(7) The Company entered into an employment agreement with Jay N. Sasserath for a
three-year term, commencing as of October 1, 1998. Under the agreement, Dr.
Sasserath is entitled to receive $112,800 per year in base salary and an
annual bonus equal to 0.5% of the Company's fiscal year net earnings, such
bonus not to exceed $50,000, plus a monthly car allowance of $600. If the
agreement is terminated due to death or disability or by the Company without
cause, Dr. Sasserath is entitled to receive full compensation for the then
remaining term of the agreement. In the event of a change in control (as
that term is defined in the agreement), (a) the term of the agreement will
be extended, to the extent necessary, so that there are 12 months remaining
in the term from the time of the change in control; (b) Dr. Sasserath
commits to continue to perform his duties under the agreement for 12 months
after the time of the change in control after which he may terminate the
agreement without a loss of benefits, as if the Company had terminated the
agreement without cause; (c) all stock options granted to Dr. Sasserath
under the Plan shall immediately become fully vested and exercisable; and
(d) in the event of a change in control, the Stock Option Committee may
accelerate the termination of Dr. Sasserath's stock options granted under
the Plan to a date no earlier than six months following the date of a change
in control. On January 28, 1999, the agreement was amended to reflect an
increase in the annual bonus equal to 1% of the Company's fiscal year net
earnings, such bonus not to exceed $100,000.
(8) On July 7, 1999, the Company entered into a letter agreement with Robert D.
Anderson, Jr. Under the letter agreement, Mr. Anderson is entitled to an
annual bonus equal to 0.5% of the Company's fiscal year net earnings, such
bonus not to exceed $50,000. In addition, in the event of a change in
control, the Company will guarantee Mr. Anderson's employment 12 months
beyond the change of control date or at the sole option of the new owner pay
Mr. Anderson through that date. In consideration for the salary continuance,
Mr. Anderson agreed to perform his duties through June 30, 2000.
The following table provides certain information regarding the stock options
granted during fiscal 1999 to the executive officers named in the Summary
Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SHARES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OF OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------- -----------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
---- ----------- ------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald H. Deferrari........ -- -- -- -- -- --
Ronald S. Deferrari........ 50,000 8% $ 4.75 01/08/02 $ 37,436 $ 78,613
Edmond A. Richards......... 15,000 2% $ 4.75 01/08/02 $ 11,231 $ 23,584
Edmond A. Richards......... 20,000 3% $ 2.41 04/07/02 $ 7,598 $ 15,954
Edmond A. Richards......... 100,000 16% $ 2.75 07/20/02 $ 43,347 $ 91,025
Stacy L. Wagner............ 15,000 2% $ 4.75 01/08/02 $ 11,231 $ 23,584
Stacy L. Wagner............ 20,000 3% $ 2.41 04/07/02 $ 7,598 $ 15,954
Stacy L. Wagner............ 50,000 8% $ 2.75 07/20/02 $ 21,673 $ 45,513
Jay N. Sasserath........... 7,500 1% $ 4.75 01/08/02 $ 5,615 $ 11,792
Jay N. Sasserath........... 10,000 2% $ 2.41 04/07/02 $ 3,799 $ 7,977
Robert D. Anderson, Jr..... 25,000 4% $ 2.41 04/07/02 $ 9,497 $ 19,943
</TABLE>
53
<PAGE>
The following table sets forth information with respect to grants of stock
options during fiscal 1999 to the executive officers named in the Summary
Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
SHARES OPTIONS/SARS OPTIONS/SARS
ACQUIRED AT FY-END(#) FY-END($)*
ON VALUE ----------------------------- --------------------------
NAME EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald H. Deferrari............ -- -- -- -- -- --
Ronald S. Deferrari (1)........ -- -- 560,000 -- 1,763,800 --
Edmond A. Richards (2)......... -- -- 165,000 100,000 537,825 562,500
Stacy L. Wagner (3)............ 10,000 11,300 130,000 50,000 529,900 281,250
Jay N. Sasserath (4)........... -- -- 117,500 -- 266,338 --
Robert D. Anderson, Jr. (5).... -- -- 25,000 -- 149,125 --
</TABLE>
- --------------
* Based on the closing price of the Company's Common Stock on November 30,
1999 as quoted on The Nasdaq Stock Market.
(1) Of the 560,000 stock options held by Mr. Deferrari on November 30, 1999 (a)
110,000 were granted on April 30, 1996, expire on April 30, 2000, and became
exercisable on October 30, 1996, at an exercise price of $3.87 per share;
(b) 150,000 were granted on May 6, 1997, expire on May 6, 2000, and became
exercisable on November 6, 1997, at an exercise price of $4.12 per share;
(c) 125,000 were granted on August 19, 1997, expire on August 19, 2000, and
became exercisable on February 19, 1998, at an exercise price of $6.97 per
share; (d) 125,000 were granted on January 13, 1998, expire on January 13,
2001, and became exercisable on July 13, 1998, at an exercise price of $6.19
per share; and (e) 50,000 were granted on January 8, 1999, expire on
January 8, 2002, and became exercisable on July 8, 1999, at an exercise
price of $4.75 per share.
(2) Of the 165,000 currently exercisable stock options held by Mr. Richards on
November 30, 1999 (a) 50,000 were granted on May 6, 1997, expire on May 6,
2000, and became exercisable on November 6, 1997, at an exercise price of
$4.12 per share; (b) 30,000 were granted on August 19, 1997, expire on
August 19, 2000, and became exercisable on February 19, 1998, at an exercise
price of $6.97 per share; (c) 50,000 were granted on January 13, 1998,
expire on January 13, 2001, and became exercisable on July 13, 1998, at an
exercise price of $6.19 per share; (d) 15,000 were granted on January 8,
1999, expire on January 8, 2002, and became exercisable on July 8, 1999, at
an exercise price of $4.75 per share; and (e) 20,000 were granted on
April 7, 1999, expire on April 7, 2002, and became exercisable on October 7,
1999 at an exercise price of $2.41 per share. Mr. Richards also holds
currently unexercisable options to purchase 100,000 options which were
granted on July 20, 1999, expire on July 20, 2002, and become exercisable
on January 20, 2000 at a price of $2.75 per share.
(3) Of the 130,000 currently exercisable stock options held by Ms. Wagner on
November 30, 1999 (a) 50,000 were granted on April 30, 1996, expire on
April 30, 2000, and became exercisable on October 30, 1996, at an exercise
price of $3.87 per share; (b) 10,000 were granted on June 26, 1996, expire
on June 26, 2000, and became exercisable on December 26, 1996, at an
exercise price of $5.25 per share; (c) 15,000 were granted on May 6, 1997,
expire on May 6, 2000, and became exercisable on November 6, 1997, at an
exercise price of $4.12 per share; (d) 10,000 were granted on August 19,
1997, expire on August 19, 2000, and became exercisable on February 19,
1998, at an exercise price of $6.97 per share; (e) 10,000 were granted on
January 13, 1998, expire on January 13, 2001, and became exercisable on
July 13, 1998, at an exercise price $6.19 per share; (f) 15,000 were granted
on January 8, 1999, expire on January 8, 2002, and became exercisable on
July 8, 1999, at an exercise price of $4.75 per share; and (g) 20,000 were
granted on April 7, 1999, expire on April 7, 2002, and became exercisable on
October 7, 1999, at an exercise price of $2.41 per share. Ms. Wagner also
holds currently unexercisable options to purchase 50,000 options which were
granted on July 20, 1999, expire on July 20, 2002, and become exercisable on
January 20, 2000 at a price of $2.75 per share.
54
<PAGE>
(4) Of the 117,500 stock options held by Dr. Sasserath on November 30, 1999 (a)
50,000 were granted on August 19, 1997, expire on August 19, 2000, and
became exercisable on February 19, 1998, at an exercise price of $6.97; (b)
50,000 were granted on January 13, 1998, expire on January 13, 2001, and
became exercisable on July 13, 1998, at an exercise price of $6.19 per
share; (c) 7,500 were granted on January 8, 1999, expire on January 8, 2002,
and became exercisable on July 8, 1999, at an exercise price of $4.75 per
share; and (d) 10,000 were granted on April 7, 1999, expire on April 7,
2002, and became exercisable on October 7, 1999, at an exercise price of
$2.41 per share.
(5) Of the 25,000 stock options held by Mr. Anderson on November 30, 1999, all
25,000 were granted on April 7, 1999, expire on April 7, 2002, and became
exercisable on October 7, 1999, at an exercise price of $2.41 per share.
EMPLOYMENT AGREEMENT AMENDMENTS AND
SEVERANCE AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
In connection with the Offer, the Purchaser requested that the Company enter
into Employment Agreement Amendments with Mr. Edmond A. Richards and Ms. Stacy
L. Wagner (the "Employment Agreement Amendments"). The Employment Agreement
Amendments shall only become effective upon the Closing of the Offer. The
amendments are substantially similar in that each Employment Agreement Amendment
extends the term of each Employment Agreement for a period of three (3) years
following the Closing of the Offer. The Employment Agreement Amendments also
extended the non-compete period such that each of the named Executive Officers
will be prohibited from competing with Plasma-Therm for a period of two (2)
years following the termination of the Employment Agreements, regardless of the
reason for such termination.
The Purchaser also requested that the Company enter into a Termination,
Noncompetition and Mutual Release Agreement with Mr. Ronald S. Deferrari, the
current President of the Company (the "Departure Agreement"). The Departure
Agreement will only become effective upon the Closing of the Offer. Pursuant to
the Departure Agreement, Mr. Deferrari will be paid the sum of One Million
Dollars ($1,000,000) payable in one lump sum due one day after Closing of the
Offer. Additionally, the term of Mr. Deferrari's non-compete provision will be
extended to cover the two (2) year period following the Closing of the Offer.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of all of the members of the Board
of Directors. Stock option grants are considered part of the overall
compensation for executive officers and directors of the Company, and members of
the Stock Option Committee are granted options pursuant to a specified formula
under the Company's 1995 Stock Incentive Plan. Anastasios S. Gianoplus and Lubek
Jastrzebski were each granted options to purchase 5,000 shares during fiscal
1999.
55
<PAGE>
REPORT BY THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Board of Directors reviews annually the compensation to be paid to the
Company's executive officers. In making such review, the Board of Directors
evaluates information supplied by management. The compensation provided by the
Company to executive officers includes salary, stock options and bonuses. The
Company's compensation policies are structured to enable the Company to attract,
retain and motivate highly qualified executive officers and to reward
contributions to the Company's success. The objective is to provide a management
team that will consistently produce superior results for the Company and its
shareholders. The Board of Directors negotiates employment agreements, including
provisions for salary and bonuses, with each of the Company's executive
officers. Currently, pursuant to the Company's employment agreements with its
executive officers, each executive officer receives a fixed annual base salary
and a bonus equal to a fixed percentage of the Company's net earnings for each
fiscal year during the term of the agreement, with the exception of Ronald S.
Deferrari. On July 19, 1999, Mr. Deferrari's agreement was amended to reflect a
change in his annual bonus compensation to one-half of one percent (0.5%) on all
systems, spare parts and labor sales, to be paid quarterly, effective June 1,
1999.
SALARY. The Board of Directors' policy is to negotiate salaries including the
salary of Ronald H. Deferrari, the Company's Chairman and Chief Executive
Officer, in relation to the contribution of each incumbent and to grant merit
increases based on individual performance. The Board of Directors considers the
financial condition of the Company, earnings in an absolute manner and in
relation to the previously established business plan, other measures of business
success and the degree of difficulty in achieving these levels. Executive
officer compensation for the last three years is set forth in the Summary
Compensation Table.
STOCK OPTIONS/BONUSES. The Board of Directors believes that providing a portion
of an executive's annual incentive compensation in the form of stock options in
addition to cash bonuses encourages the executive to share with outside
shareholders the goals of increasing the value of the Company's stock and
contributing to the success of the Company. The Board of Directors encourages
stock ownership by management. Option grants are based upon the contributions of
each individual executive toward achievement of corporate and individual goals
during the previous fiscal year. Ronald H. Deferrari, the Company's founder and
Chief Executive Officer, has not been granted options to acquire the Company's
Common Stock since its inception. Executive officer stock option grants for the
last three years are listed in the Summary Compensation Table. Similarly, bonus
formulas are based on the Company's net earnings and revenues, instead of other
measures of performance, because net earnings have a significant effect on the
market price of the Common Stock.
56
<PAGE>
In May 1994, the Company entered into a three-year employment agreement with
Ronald H. Deferrari, the Company's founder and former Chief Executive Officer.
Pursuant to the agreement, Mr. Deferrari receives $150,000 in base salary per
year and a bonus equal to 5% of the Company's net earnings, for each fiscal year
during the term of the agreement, such bonus not to exceed $100,000.
Additionally, Mr. Deferrari receives reimbursement for lease payments and other
expenses related to two automobiles. In June 1995, Mr. Deferrari's bonus
percentage was decreased from 5% to 3% of the Company's fiscal year net
earnings. Mr. Deferrari suggested such decrease so that certain other key
employees could receive bonuses without increasing the overall size of the bonus
pool. In January 1997, the Board of Directors resolved to permit Mr. Deferrari's
employment agreement to renew automatically, in accordance with its terms, for
an additional three-year term. In September, 1998, Mr. Deferrari resigned as
Chief Executive Officer, Chief Financial Officer and Treasurer of the Company.
In March 1999, the Board of Directors re-appointed Mr. Deferrari as Chief
Executive Officer. See Footnote (3) to the Summary Compensation Table.
In May 1994, the Company entered into a three-year employment agreement with
Ronald S. Deferrari. The agreement was amended in June 1995 to reflect Mr.
Deferrari's promotion from Executive Vice President to President. Pursuant to
this agreement, Mr. Deferrari was entitled to receive $160,000 per year in base
salary, an annual bonus equal to 5% of the Company's fiscal year net earnings,
such bonus not to exceed $150,000, and reimbursement for lease payments and
expenses related to two automobiles. In January 1997, the Board of Directors
resolved to provide Mr. Deferrari with a new employment agreement for a
three-year term, with an increase in the annual bonus compensation cap to
$250,000. In October 1998, the agreement was amended to reflect Mr. Deferrari's
promotion to Chief Executive Officer, and to address the vesting of options
granted under the Plan upon a change in control. Additionally, under the amended
agreement, the Board of Directors resolved to remove the annual bonus
compensation cap of $250,000. On July 19, 1999, the agreement was amended to
extend the initial term of the agreement for an additional one-year period to
January 21, 2001. In addition, the agreement was amended to reflect a change in
Mr. Deferrari's annual bonus compensation to one-half of one percent (0.5%) on
all system, spare parts and labor sales, to be paid quarterly, effective June 1,
1999, having a maximum annual amount of $250,000. Additionally, the agreement
was amended to reflect that Mr. Deferrari's duties would be performed in St.
Petersburg, Florida. See Footnote (4) to the Summary Compensation Table.
Effective January 22, 1997, the Company entered into an employment agreement
with Edmond A. Richards for a three-year term. Under the agreement, Mr. Richards
is entitled to receive $146,772 per year in base salary and an annual bonus
equal to 0.5% of the Company's fiscal year net earnings, such bonus not to
exceed $50,000. On October 1, 1998, the agreement was amended to address the
vesting of options granted under the Plan upon a change in control. On June 30,
1999, the agreement was amended to change the term of the initial agreement to a
period of two and one-half years, terminating on June 30, 1999. In addition, the
agreement was amended to reflect that Mr. Richards' duties would be performed in
St. Petersburg, Florida. See Footnote (5) to the Summary Compensation Table.
57
<PAGE>
The Company entered into an employment agreement with Stacy L. Wagner for a
three-year term, commencing as of January 22, 1997. The agreement was amended,
effective August 19, 1997, to reflect Ms. Wagner's promotion to Vice President
of Finance and Administration. Under the amended agreement, Ms. Wagner is
entitled to receive $85,000 per year in base salary and an annual bonus equal to
1% of the Company's fiscal year net earnings, such bonus not to exceed $100,000,
plus a monthly car allowance of $600. On October 1, 1998, the agreement was
amended, to reflect Ms. Wagner's promotion to Chief Financial Officer, Treasurer
and Secretary, and an increase in Ms. Wagner's base salary to $100,000 per year.
Additionally, the amended agreement addresses the vesting of options granted
under the Plan upon a change in control. On June 30, 1999, the agreement was
amended to change the term of the initial agreement to a period of two and
one-half years, terminating on June 30, 1999. In addition, the agreement was
amended to reflect that upon a change in control, if the term of the agreement
has less than 18 months remaining, the term shall be extended so that an 18
month term remains from the time of the change in control to the end of the
term. In the event that more than 18 months of the term exists as of the time of
a change in control, there will be no change in the term. Additionally, the
agreement was amended to reflect that Ms. Wagner commits to continue to perform
her duties under the agreement for a minimum of 18 months after a change in
control. At the end of 18 months after a change in control, Ms. Wagner has the
option to voluntarily terminate this agreement without a loss of benefits, as if
the Company had terminated the agreement "without cause". In addition, the
agreement was amended to reflect that Ms. Wagner's duties would be performed in
St. Petersburg, Florida. See Footnote (6) to the Summary Compensation Table.
Effective October 1, 1998, the Company entered into an employment agreement with
Jay N. Sasserath for a three-year term. Under the agreement, Dr. Sasserath is
entitled to receive $112,800 per year in base salary and an annual bonus equal
to 0.5% of the Company's fiscal year net earnings, such bonus not to exceed
$50,000, plus a monthly car allowance of $600. On January 28, 1999, the
agreement was amended to reflect an increase in the annual bonus equal to 1% of
the Company's fiscal year net earnings, such bonus not to exceed $100,000. See
Footnote (7) to the Summary Compensation Table.
On July 7, 1999, the Company entered into a letter agreement with Robert D.
Anderson, Jr. Under the letter agreement, Mr. Anderson is entitled to an annual
bonus equal to 0.5% of the Company's fiscal year net earnings, such bonus not to
exceed $50,000. In addition, in the event of a change in control, the Company
will guarantee Mr. Anderson's employment 12 months beyond the change of control
date or at the sole option of the new owner pay Mr. Anderson through that date.
In consideration for the salary continuance, Mr. Anderson agreed to perform his
duties through June 30, 2000. See Footnote (8) to the Summary Compensation
Table.
58
<PAGE>
SECTION 162(m). Section 162(m) to the Internal Revenue Code of 1986, as amended
(the "Code"), prohibits a deduction to any publicly held corporation for
compensation paid to a "covered employee" in excess of $1 million per year (the
"Dollar Limitation"). A covered employee is any employee who appears in the
Summary Compensation Table who also is employed by the Company on the last day
of the Company's calendar year. The Compensation Committee does not expect the
deductibility of compensation paid in 1999 to any executive officer to be
affected by Section 162(m). The Compensation Committee may consider alternatives
to its existing compensation programs in the future with respect to qualifying
executive compensation for deductibility.
The Company generally is entitled to a tax deduction upon an employee's exercise
of nonqualified options in an amount equal to the excess of the value of the
shares on the date of exercise over the exercise price. Such deduction is
considered compensation for purposes of the Dollar Limitation with respect to
options having an exercise price less than fair market value at the date of
grant. Deductibility of compensation in future years to the named executive
officers may be affected by the Dollar Limitation if they remain covered
employees and exercise options in amounts which would result in compensation to
them exceeding the Dollar Limitation in any year. As of November 30, 1999, five
named executive officers, Ronald S. Deferrari, Edmond A. Richards, Stacy L.
Wagner, Jay N. Sasserath and Robert D. Anderson, Jr. held then currently
exercisable options to acquire 560,000 165,000, 130,000, 117,500 and 25,000
shares, respectively, of the Company's Common Stock, with values based on the
closing price of the Company's Common Stock as reported on The Nasdaq Stock
Market of approximately $4,690,000, $1,381,875, $1,088,750, $984,063, and
$209,375 respectively. Mr. Richards and Ms. Wagner also hold options to purchase
100,000 and 50,000 shares, respectively, which become exercisable on January 20,
2000, with values based on the closing price of the Company's Common Stock as
reported on The Nasdaq Stock Market of approximately $837,500 and $418,750,
respectively. Ronald S. Deferrari, Edmond A. Richards, Stacy L. Wagner, Jay N.
Sasserath and Robert D. Anderson, Jr. each have agreed to cooperate with the
Company in exercising their options so as to minimize any loss of deductibility
due to the Dollar Limitations, however, no assurances can be given in that
regard. Ronald H. Deferrari, the Company's Chairman, has not been granted any
options to acquire the Company's Common Stock since its inception.
Members of the Board of Directors:
Ronald H. Deferrari, Chairman
Anastasios S. Gianoplus
Richard T. Heglin
Lubek Jastrzebski
59
<PAGE>
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 10, 2000, based on
11,252,311 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 PERCENT
BENEFICIALLY OF
NAME OF BENEFICIAL OWNER OWNED(1) CLASS
- ------------------------ -------------- ---------
Ronald H. Deferrari 2,038,300(2) 18.11%
10050 16th Street North
St. Petersburg, FL 33716
Anastasios S. Gianoplus 45,000(3) *
10050 16th Street North
St. Petersburg, FL 33716
Richard T. Heglin 6,000(4) *
10050 16th Street North
St. Petersburg, FL 33716
Lubek Jastrzebski 45,000(5) *
10050 16th Street North
St. Petersburg, FL 33716
Ronald S. Deferrari 581,892(6) 4.93%
10050 16th Street North
St. Petersburg, FL 33716
Edmond A. Richards 281,000(7) 2.44%
10050 16th Street North
St. Petersburg, FL 33716
Stacy L. Wagner 218,000(8) 1.91%
10050 16th Street North
St. Petersburg, FL 33716
Dr. Jay N. Sasserath 117,500(9) 1.03%
10050 16th Street North
St. Petersburg, FL 33716
Robert D. Anderson, Jr. 25,000(10) *
10050 16th Street North
St. Petersburg, FL 33716
Executive officers and
Directors as a group
(9 persons) 3,357,692 26.90%
*Less than 1% of the outstanding stock.
60
<PAGE>
(1) The named shareholders have sole voting and dispositive power with respect
to all shares shown as being beneficially owned by them, except as otherwise
indicated.
(2) The number of shares reflected includes (i) 500,000 shares owned by the
Ronald H. Deferrari Revocable Trust U/T/A 8/9/97 for which Ronald H.
Deferrari is the sole trustee; (ii) 390,000 shares held by the R & C
Deferrari Family Limited Partnership (the "R&C Deferrari FLP"), the general
partner of which is R & C Management, Inc.; (iii) 390,000 shares held by the
R & S Deferrari Family Limited Partnership (the "R&S Deferrari FLP"), the
general partner of which is R & S Management, Inc.; and (iv) 320,000 shares
held by the R & D Deferrari Family Limited Partnership (the "R&D Deferrari
FLP"), the general partner of which is R & D Management, Inc. Ronald H.
Deferrari is the sole limited partner and is the sole officer, director and
shareholder of the general partners of the R&C Deferrari FLP, the R&S
Deferrari FLP and the R&D Deferrari FLP, and has sole voting and dispositive
power over the shares owned thereby. Ronald H. Deferrari is the founder of
the Company. His address is 10050 16th Street North, St. Petersburg, Florida
33716. Ronald H. Deferrari is the father of Ronald S. Deferrari.
(3) The number of shares reflected includes 20,000, 5,000 and 5,000 shares which
Mr. Gianoplus has the right to acquire pursuant to currently exercisable
stock options at exercise prices of $4.12, $6.97 and $6.19 per share,
respectively. 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, 2000, at an exercise price of $1.65 per share.
(4) The number of shares reflected includes 5,000 shares which Mr. Heglin has
the right to acquire pursuant to currently exercisable stock options at a
price of $6.19 per share.
(5) The number of shares reflected includes 5,000, 20,000, 5,000, 5,000, 5,000
and 5,000 shares which Dr. Jastrzebski has the right to acquire pursuant to
currently exercisable stock options at exercise prices of $3.87, $4.12,
$3.60, $6.97, $6.19 and $3.75 per share, respectively. The number of shares
reflected does not include 5,000 shares which Dr. Jastrzebski has the right
to acquire pursuant to a stock option exercisable after June 30, 2000, at an
exercise price of $1.65 per share.
(6) The number of shares reflected includes 110,000, 150,000, 125,000, 125,000
and 50,000 shares which Mr. Deferrari has the right to acquire pursuant to
currently exercisable stock options at exercise prices of $3.87, $4.12,
$6.97, $6.19 and $4.75 per share, respectively. Ronald S. Deferrari is the
son of Ronald H. Deferrari.
(7) The number of shares reflected includes 50,000, 30,000, 50,000, 15,000 and
20,000 shares which Mr. Richards has the right to acquire pursuant to
currently exercisable stock options at exercise prices of $4.12, $6.97,
$6.19, $4.75 and $2.41 per share, respectively. The number of shares
reflected also includes 100,000 shares which Mr. Richards has the right to
acquire pursuant to a stock option exercisable after January 20, 2000, at an
exercise price of $2.75 per share.
(8) The number of shares reflected includes 50,000, 10,000, 15,000, 10,000,
10,000, 15,000 and 20,000 shares which Ms. Wagner has the right to acquire
pursuant to currently exercisable stock options at exercise prices of $3.87,
$5.25, $4.12, $6.97, $6.19, $4.75 and $2.41 per share, respectively. The
number of shares reflected also includes 50,000 shares which Ms. Wagner has
the right to acquire pursuant to a stock option exercisable after January
20, 2000, at an exercise price of $2.75 per share.
(9) The number of shares reflected includes 50,000, 50,000, 7,500 and 10,000
shares which Dr. Sasserath has the right to acquire pursuant to currently
exercisable stock options at exercise prices of $6.97, $6.19, $4.75 and
$2.41 per share, respectively.
(10) The number of shares reflected includes 25,000 shares which Mr. Anderson
has the right to acquire pursuant to a currently exercisable stock option at
an exercise price of $2.41 per share.
61
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 1, 1994, Magnetran, Inc. ("Magnetran"), the Company's subsidiary
located in New Jersey, entered into a five-year gross lease for approximately
17,750 square feet, with Ronald H. Deferrari, the Company's founder and Chairman
of the Board. The premises were leased by Magnetran at an initial annual base
rental of $86,841, which escalates 3% annually. At the expiration of the initial
term of the lease, Magnetran has an option to renew the lease for five years
with a 3% increase each year. The lease rental paid to Ronald H. Deferrari for
the year ended November 30, 1999 was approximately $57,000. The Company believes
that the terms of the lease are generally as favorable to the Company as could
be obtained from unaffiliated third parties. Magnetran was sold by the Company
on June 30, 1999.
62
<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 22 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, 1999.
(4) Exhibits
63
<PAGE>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
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).
64
<PAGE>
4.7* Form of stock certificate (Exhibit 4.6 to the
Registrant's 1994 Form 10-K).
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.
65
<PAGE>
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).
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).
66
<PAGE>
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).
67
<PAGE>
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 NationsBank 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).
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.
68
<PAGE>
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.
10.52* Design Agreement dated May 4, 1998 between the
Registrant and Facility Planning and Resources.
10.53* Design Agreement dated July 21, 1998 between the
Registrant and The Perry Company.
10.54* Construction Agreement dated February 5, 1999 between
the Registrant and The Perry Company.
10.55* Construction Loan Agreement, Promissory Note, and
Mortgage, Assignment of Rents and Security Agreement
dated February 18, 1999 between the Registrant and The
Perry Company.
10.56* Loan Agreement dated May 31, 1999 between the
Registrant and NationsBank, N.A. (South) (including
Third Amendment to Credit Agreement, Second Amendment
to Security Agreement, Ratification and Reaffirmation
of Guaranty Agreement, Line of Credit Promissory Note).
69
<PAGE>
10.57* Promissory Note dated May 27, 1999 between the
Registrant and NationsBank, N.A., including Mortgage,
Assignment of Rents and Security Agreement, and
Guaranty Agreement.
10.58* Real Estate Purchase and Sale Agreement dated April 21,
1999 between Registrant and M.K.C., Inc., including
First Amendment to Real Estate and Purchase and Sale
Agreement dated April 29, 1999, Assumption and Hold
Harmless Agreement dated May 27, 1999, Hold Harmless
Agreement dated May 27, 1999, and Agreement dated May
27, 1999.
10.59* Amendment to Construction Agreement dated May 31, 1999
between the Registrant and The Perry Company.
10.60* Stock Purchase and Redemption Agreement dated June 21,
1999 between the Registrant and Magnetran, Inc. and
George McCauley, including Promissory Note dated June
30, 1999 from Magnetran, Inc. to the Registrant, and
Stock Pledge and Security Agreement dated June 30,
1999 between the Registrant, Magnetran, Inc., George
McCauley and U.S. Bank Trust National Association.
10.61* Amendment No. 3 to Employment Agreement dated June 30,
1999 between Registrant and Stacy L. Wagner.
10.62* Amendment No. 2 to Employment Agreement dated June 30,
1999 between Registrant and Edmond A. Richards.
10.63* Amendment No. 2 to Employment Agreement between
Registrant and Ronald S. Deferrari, dated July 19,
1999.
10.64 Fourth Amendment to Credit Agreement dated December 29,
1999.
10.65 Modification Agreement dated January 6, 2000 between
the Registrant and NationsBank, N.A., of Construction
Loan Agreement dated February 18, 1999.
10.66 Employment Agreement dated June 1, 1999 between the
Registrant and Dr. Christopher Constantine.
10.67 Employment Agreement dated August 16, 1999 between the
Registrant and Lynn E. Ochs.
70
<PAGE>
10.68* Form of Amendment to Employment Agreement between the
Registrant and certain name Executive Officers.
(Exhibit (C)(2) to Schedule 14D-9)
10.69* Termination, Noncompetition and Mutual Release
Agreement dated December 20, 1999 between the Company
and Ronald S. Deferrari. (Exhibit (C)(4) to Schedule
14D-9)
21 Subsidiary of Registrant.
23 Consent of Grant Thornton LLP.
27 Financial Data Schedule (for SEC use only).
- ------------------
* Incorporated by reference.
71
<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.
/s/ RONALD S. DEFERRARI
------------------------------
Ronald S. Deferrari, President
Date: 2/18/00
---------------------------
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.
By: /s/ RONALD H. DEFERRARI
------------------------------------
Ronald H. Deferrari, Chairman of the Board
and Chief Executive Officer
Date: 2/18/00
----------------------------
By: /s/ A.S. GIANOPLUS
-------------------------------------
A.S. Gianoplus, Director, Chairman of the Audit
and Stock Option Committees
Date: 2/18/00
----------------------------
By: /s/ RICHARD T. HEGLIN
------------------------------------
Richard T. Heglin, Director
Date: 2/18/00
----------------------------
By: /s/ LUBEK JASTRZEBSKI
------------------------------------
Lubek Jastrzebski, Director
Date: 2/18/00
-----------------------------
By: /s/ STACY L. WAGNER
------------------------------------
Stacy L. Wagner, Chief Financial Officer,
Treasurer and Corporate Secretary
Date: 2/18/00
-----------------------------
72
<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 14,
2000, which is included in the Annual Report on Form 10-K for the year ended
November 30, 1999, we have also audited Schedule II for each of the three years
in the period ended November 30, 1999. 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 14, 2000
73
<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
-------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER ACCOUNTS DEDUCTIONS - END OF
DESCRIPTION PERIOD EXPENSES - DESCRIBE DESCRIBE PERIOD
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED NOVEMBER 30, 1999
Warranty Liability $ 350,000 $ 1,167,186 (1) $ -- $1,067,186 $ 450,000
Accrued Restructuring Charge $ 992,847 $ 948,069 (2) $ -- 1,881,951 $ 58,965
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
</TABLE>
(1) Costs incurred for warranty repair during the year (inclusive of a
$100,000 increase in the warranty liability in 1999, and a $260,000
reduction in the warranty liability in 1997).
(2) Costs incurred for restructuring during the year.
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
10.64 Fourth Amendment to Credit Agreement dated December 29,
1999.
10.65 Modification Agreement dated January 6, 2000 between
the Registrant and NationsBank, N.A., of Construction
Loan Agreement dated February 18, 1999.
10.66 Employment Agreement dated June 1, 1999 between the
Registrant and Dr. Christopher Constantine.
10.67 Employment Agreement dated August 16, 1999 between the
Registrant and Lynn E. Ochs.
23 Consent of Grant Thornton LLP.
27 Financial Data Schedule (for SEC use only).
FOURTH
AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (the "Fourth Amendment"), is
executed as of the 29th day of December, 1999, by and between PLASMA-THERM,
INC., a Florida corporation whose address is 10050 16th Street North, St.
Petersburg, Florida 33716 (hereinafter called "Borrower") and BANK OF AMERICA,
N.A., a national banking association, d/b/a NationsBank, N.A., successor to
NationsBank, N.A., f/k/a NationsBank, N.A. (South), whose address is 101 E.
Kennedy Boulevard, 5th Floor (FL1-400-05-03), Tampa, Florida 33602 (hereinafter
called "Lender").
W I T N E S S E T H:
WHEREAS, on April 18, 1997, Borrower and Lender executed that certain
Credit Agreement (the "Credit Agreement") to set forth the terms and provisions
relating to certain loans made by Lender to Borrower.
WHEREAS, the Credit Agreement was amended on March 25, 1998 (the "First
Amendment"), December 8, 1998 (by letter agreement) (the "Letter Amendment"),
February 18, 1999 (the "Second Amendment"), and May 31, 1999 (the "Third
Amendment").
WHEREAS, simultaneously with entering into this Fourth Amendment,
Borrower has modified that certain construction/term loan made by Lender to
Borrower on February 18, 1999, in the original principal amount of
$4,500,000.00.
WHEREAS, in connection with the aforesaid modification, Lender and
Borrower desire to amend the Credit Agreement, as previously amended by the
First Amendment, Letter Amendment, Second Amendment and Third Amendment.
NOW THEREFORE, for and in consideration of the premises and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged by all of the parties hereto, the parties hereby covenant and agree
as follows:
1. AMENDMENTS TO CREDIT AGREEMENT. The terms of the Credit Agreement,
First Amendment, Letter Amendment, Second Amendment and Third Amendment are
hereby modified, supplemented and amended as follows:
a. The Borrowing Base Certificate attached as Exhibit "A" to
the Credit Agreement is hereby deleted in its entirety and replaced by that
certain Borrowing Base Certificate Form attached hereto as Exhibit "A" to this
Fourth Amendment.
SW
-----------------
Initials
<PAGE>
b. Sections 6x. and 6y. of the Credit Agreement as set forth
in Section 1m. of the Third Amendment are hereby deleted in their entirety.
c. The Credit Agreement is hereby amended to add the following
subsections cc., dd. and ee. to Section 6:
cc. The Borrower shall maintain minimum quarterly revenue
of not less than $10,000,000.00.
dd. The Borrower shall maintain minimum quarterly EBITDA of
not less than $1,400,000.00.
ee. The Borrower shall submit to the Lender company
prepared financial statements for the three-month period ended
November 30, 1999, not later than December 31, 1999.
d. Section 7i. of the Credit Agreement as amended by Section
1n. of the Third Amendment is hereby deleted in its entirety and replaced by the
following:
i. The Borrower shall maintain a Cash Flow Coverage
Ratio of 2.00 to 1.00. Cash Flow Coverage Ratio is defined as
EBITDA less fifty percent (50%) of capital expenditures, less
shareholder distributions, less share repurchases, less tax
expense, all divided by current maturities of long term debt
and capital lease obligations and interest expense. EBITDA
shall be defined as net earnings plus interest expense, less
interest income, plus income tax expense, plus depreciation
expense, plus amortization expense. For purposes of
calculating the EBITDA, capital expenditures, interest expense
and income tax expense, the Borrower's third quarter 1999
shall be multiplied by four (4), the Borrower's third and
fourth quarter 1999 performance shall be multiplied by two
(2), and the Borrower's third and fourth quarter 1999 and
first quarter 2000 will be multiplied by 1.33. Beginning at
the fiscal quarter ended May 31, 2000, EBITDA, interest
expense, capital expenditures and income tax expense shall be
calculated based on the last four consecutive fiscal quarters.
In addition, for purposes of calculating the Cash
Flow Coverage Ratio, the current maturities of long term debt
and capital leases in the denominator shall be the greater of
actual current maturities from the financial statements or
$550,000.00. Also, interest
SW
-----------------
Initials
2
<PAGE>
expense in the denominator shall be the greater of the
interest expense as determined in the prior paragraph or
$500,000.00.
For purposes of calculating EBITDA, net income shall
exclude any net gains on the sale, conversion or other
disposition of capital assets, net gains on the acquisition,
retirement, sale or other disposition of capital stock and
other securities of the Borrower and any subsidiaries, net
gains on the collection of proceeds of life insurance
policies, any right-up of any asset, any other net gain or
credit of an extraordinary nature, all determined in
accordance with GAAP.
e. The Credit Agreement is hereby amended to add the following
subsection k. to Section 7:
k. Make any shareholder dividend payments or incur any cash
outflow for the repurchase of its capital stock without prior
written approval from the Lender.
The Credit Agreement, as modified by the First Amendment, the Letter Amendment,
the Second Amendment, the Third Amendment and this Fourth Amendment shall remain
in full force and effect, shall conform fully with this Fourth Amendment, and
shall apply with full force and effect to the Loans described in the Credit
Agreement.
2. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower hereby
restates, reaffirms, and where necessary updates, all representations and
warranties set forth in Section 8 of the Credit Agreement and elsewhere in the
Credit Agreement, as amended from time to time.
3. OTHER TERMS AND CONDITIONS. Except as set forth herein, all other
terms and conditions of the Credit Agreement and the First Amendment, the Letter
Amendment, the Second Amendment and the Third Amendment shall remain in full
force and effect and shall be binding upon the Lender and the Borrower pursuant
to their terms, and the Borrower and Lender hereby ratify and reaffirm all
covenants, obligations, terms, conditions and provisions under the Credit
Agreement.
The remainder of this page is intentionally left blank.
SW
-----------------
Initials
3
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this Third
Amendment the day and year first above written.
Signed, sealed and delivered in PLASMA-THERM, INC., a Florida
the presence of: corporation ("Borrower")
/s/ MICHELLE A. DOWLING
-----------------------
Signature of Witness
/s/ MICHELLE A. DOWLING By: /s/ STACY L. WAGNER
----------------------- -------------------
Legibly Print Name of Witness Stacy L. Wagner
Vice President and Chief Financial Officer
/s/ NEDRA MILLNER
-----------------
Signature of Witness (CORPORATE SEAL)
/s/ NEDRA MILLNER
-----------------
Legibly Print Name of Witness
BANK OF AMERICA, N.A., a national banking
/s/ LINDA R. EARLS association, d/b/a NationsBank, N.A.,
------------------ successor to NationsBank, N.A., f/k/a
Signature of Witness NationsBank, N.A. (South) ("Lender")
/s/ LINDA R. EARLS
------------------
Legibly Print Name of Witness By: /s/ SADAHRI W. BERRY
--------------------
/s/ JEAN L.L. MILLER Sadahri W. Berry
-------------------- Vice President
Signature of Witness
/s/ JEAN L.L. MILLER (CORPORATE SEAL)
--------------------
Legibly Print Name of Witness
STATE OF GEORGIA )
COUNTY OF CLAYTON )
The foregoing instrument was acknowledged before me this 29th day of
December, 1999, by STACY L. WAGNER, as Vice President and Chief Financial
Officer of PLASMA-THERM, INC., a Florida corporation, on behalf of the
corporation. She is |_| personally known to me or |X| has produced FLORIDA
DRIVER'S LICENSE as identification.
Notary Public, Fulton County Georgia
My Commission Expires August 22, 2003
My commission expires: /s/ MICHELLE A. DOWLING
--------------------- --------------------------
Signature of Notary Public
(SEAL) MICHELLE A. DOWLING
-------------------
Legibly Print Name of Notary Public
4
<PAGE>
EXHIBIT "A"
BORROWING BASE CERTIFICATE FORM
Page 1 of 2
BANK OF AMERICA, N.A. DATE: __________________
P.O. Box 31590
FL1-010-02-01
Tampa, Florida 33631
Credit Agreement between us, the undersigned hereby certifies to you, as of the
above date, the following:
<TABLE>
<CAPTION>
<S> <C>
(A) Aggregate amount of domestic Accounts as of the applicable month end $
------------------------
(B) Less Ineligible Accounts (Accounts which do not meet the definition of
Eligible Accounts): $
(C) Net Amount of Eligible domestic Accounts (A)-(B) $
------------------------
(D) 80% of Item (C) $
------------------------
(E) Foreign accounts less than 60 days old backed by letters of credit $
------------------------
(F) 80% of Item (E) $
(G) The lesser of: 25% of raw materials inventory (excluding all raw material
inventory on hand in excess of one year old) OR $3,000,000.00
$
------------------------
(H) Total items (D), (F) and (G) $
------------------------
(I) The lesser of $10,000,000 and Item (H) $
------------------------
(J) The aggregate unpaid principal Line Loan we now owe Lender as of the applicable
month end $
------------------------
(K) The aggregate amount of issued, outstanding Standby Letters of Credit as of the
applicable month end $
------------------------
(L) Total of unpaid principal Line Loan and issued Standby Letters of Credit is as
of the applicable month end $
------------------------
(M) Availability [(I)-(J)] [If Item (M) is negative, paydown of at least a
like amount is required or establishment of minimum liquidity of equal
amount, to Lender's satisfaction] $
------------------------
</TABLE>
<PAGE>
EXHIBIT "A"
BORROWING BASE CERTIFICATE FORM
Page 2 of 2
The undersigned hereby certifies, represents and warrants to Bank of America,
N.A., a national banking association as follows:
1. All of the representations and warranties contained in the Credit
Agreement or in any other Loan Document are true and correct in all
material respects on the date hereof, except to the extent such
representations and warranties expressly relate to an earlier date.
2. No event has occurred, or would result from the Advance made in
connection herewith, that constitutes an Event of Default or a Default
that, with the giving of notice, the passage of time, or both would
constitute an Event of Default under the Credit Agreement or any other
Loan Document.
3. The description of Eligible Accounts and the values assigned thereto
are true and correct in all material respects.
4. The aggregate unpaid principal balance of the Line Loan does not exceed
the lesser of (i) the Line Commitment or (ii) the Borrowing Base,
unless adequate minimum liquidity has been established to Lender's
satisfaction.
Unless the context otherwise requires, all capital terms used in this
Certificate if not separately defined herein, shall have the meanings assigned
to them in the Credit Agreement.
PLASMA-THERM, INC., a Florida corporation
By: __________________________________________
Stacy L. Wagner
Vice President and Chief Financial Officer
Date: __________________________________________
2
Rec ___________
Doc ___________
Int ___________
Total _________
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT (the "Agreement") is executed the
6th day of January, 2000, by PLASMA-THERM, INC., a Florida corporation (the
"Borrower") and BANK OF AMERICA, N.A., a national banking association, d/b/a
NationsBank, N.A., successor to NationsBank, N.A. ("Lender"), and is made in
reference to the following facts:
R E C I T A L S:
A. Borrower is the owner of certain real property and all
improvements thereon lying in Pinellas County, Florida, as more particularly
described in Exhibit "A" attached hereto and by this reference made a part
hereof (the "Property").
B. On or about February 18, 1999, Borrower executed a
promissory note in the original principal amount of $4,500,000.00 (the "Note")
in favor of Lender to evidence a construction loan made for the purpose of
constructing a 31,459 square foot (MOL) office/manufacturing facility, including
leasehold improvements, upon the Property (the "Loan").
C. In order to secure the Note, Borrower executed a Mortgage,
Assignment of Rents and Security Agreement dated February 18, 1999, and recorded
in O.R. Book 10412, Page 1 of the Public Records of Pinellas County, Florida
(the "Mortgage"). The Mortgage secures the Note and encumbers the Property.
D. Simultaneously with the execution of the Mortgage, Borrower
also executed, among other documents, the following loan and security documents:
i) UCC-1 Financing Statement recorded in O.R. Book 10412,
Page 26 of the Public Records of Pinellas County, Florida, and UCC-1 Financing
Statement filed with the Secretary of State of the State of Florida, File No.
96-0000038631 ("UCC-1 Financing Statements");
This instrument prepared by and returned to:
MARY JO CARNEY
Powell, Carney, Hayes & Silverstein, P.A.
Post Office Box 1689
St. Petersburg, FL 33731-1689
<PAGE>
ii) Collateral Assignment of General Construction Contract,
Subcontracts, Plans and Specifications, and Permits and Collateral Assignment of
Professional Agreements and Plans and Specifications, and Permits (the
"Assignments");
iii) Construction Loan Agreement ("Loan Agreement"); and
iv) Environmental Indemnity Agreement ("Indemnity
Agreement").
E. On or about April 18, 1997, the Borrower and Lender
executed that certain Credit Agreement (the "Credit Agreement"), which Credit
Agreement has been amended from time to time, and which Credit Agreement further
secures the Loan.
F. On or about July 13, 1999, the Loan was modified by letter
agreement between the Lender and Borrower (the "Letter Amendment"), when the
Borrower decided that it did not wish to proceed immediately with the
construction of the research and development facility for which the Loan
proceeds were made available.
G. For purposes of this Agreement, the Notes, Mortgage, UCC-1
Financing Statements, Assignments, Loan Agreement, Indemnity Agreement, Credit
Agreement and Letter Amendment shall be referred to as the "Documents".
H. The Borrower has now decided to proceed with the
construction of the building and office portion of the contemplated
improvements, and the Lender has agreed to advance funds under the Loan, up to
$2,400,000.00, for this purpose, subject to the terms and conditions stated
herein.
NOW THEREFORE, for and in consideration of the premises and
for other good and valuable consideration in hand paid by each of the parties
hereto to the others, the receipt of which is hereby acknowledged by each of
them, the parties do hereby covenant and agree as follows:
1. RECITALS. The parties hereto acknowledge and agree that
the statements contained in the recitals of fact set forth above (the
"Recitals") are true and correct, and the Recitals are by this reference made a
part of this Agreement.
2. EXTENSION OF MATURITY DATE. The Maturity Date of the Note
is hereby extended to September 15, 2000, and the Extension Maturity Date is
hereby extended to September 15, 2005.
3. MODIFICATION OF MORTGAGE. The definition for "Loan
Agreement" set forth in Section 1.1(r) of the Mortgage is hereby deleted in its
entirety, and the following definition is inserted in lieu thereof:
2
<PAGE>
(r) LOAN AGREEMENT: The construction loan agreement
of even date herewith between Mortgagor and Mortgagee and that
certain Credit Agreement between Mortgagee and Mortgagor,
dated April 18, 1997, as amended on March 25, 1998, and on
even date herewith, and as may be further amended or modified
from time to time in the future.
4. MODIFICATION OF LOAN AGREEMENT. The Loan Agreement is
hereby amended to address the Borrower's decision to proceed with the
construction of a portion of the Project (as defined in the Loan Agreement). The
Lender has agreed to advance funds under the Loan of up to $2,400,000.00 for the
construction of the building and the office space located therein. As to the
balance of the Loan funds originally approved (in the amount of $2,100,000.00),
the Lender will keep its Loan commitment open until February 28, 2000, provided,
however, that the Lender shall have no obligation to fund said remaining
proceeds under the Loan commitment and the Documents unless further agreed to in
writing by the Lender and Borrower. More specifically, the Loan Agreement is
hereby amended as follows:
(a) EXHIBIT "B" - BASIC INFORMATION. The Loan Agreement is
hereby amended to modify certain basic information definitions, as follows:
"COMPLETION DATE" means September 15, 2000.
"IMPROVEMENTS" means all on-site and off-site
improvements to the Land for a 31,459 square foot
(MOL) building containing approximately 16,545 square
feet (MOL) of office space, and approximately 14,914
square feet (MOL) of vacant space for future
expansion for manufacturing purposes, including
leasehold improvements, to be constructed on Parcel I
of the Land, together with all fixtures and
appurtenances now or later to be located on the Land
and/or in such improvements.
(b) BUDGET. The Budget attached to the Loan Agreement as
Exhibit "D" is hereby replaced by the Budget attached hereto as Exhibit "D", and
hereafter, whenever in the Loan Agreement, the term "Budget" is used, it shall
be deemed to mean the Budget attached hereto as Exhibit "D".
(c) CONSTRUCTION OF THE IMPROVEMENTS. Section 2.3 of the
Loan Agreement is amended only insofar as the Borrower shall be required to
commence construction of the Improvements on or before January 1, 2000.
3
<PAGE>
(d) CONSTRUCTION CONSULTANT AND SUPERVISING ARCHITECT.
Section 2.12 of the Loan Agreement is hereby amended only insofar as the
Borrower shall pay the cost of all services to be performed by the Lender's
Construction Consultant in connection with the construction of the Improvements,
including a review of the Plans and specifications and all proposed changes to
them and preparation of a "cost take-off" construction analysis, except that the
Lender shall pay for the services to be performed by the Lender's Construction
Consultant in approving requests for Loan disbursements, and inspecting the
construction work for conformity with the approved Plans and specifications, up
to the ninth (9th) inspection, if applicable; and thereafter, the Borrower shall
pay the cost of all subsequent inspections of the Property made by the
Construction Consultant, if applicable.
5. MODIFICATION OF OTHER DOCUMENTS. Subsequent to the closing
of the Loan, the name of the Lender changed to Bank of America, N.A.
Accordingly, wherever in the Documents, the name of the Lender appears, it shall
be deemed to mean Bank of America, N.A., a national banking association, d/b/a
NationsBank, N.A., successor to NationsBank, N.A. Wherever in the Documents
references are made to the "Credit Agreement", such references shall be deemed
to include all amendments and modifications made to same as of the date hereof
and in the future. Furthermore, wherever in the Documents the project is
described or defined, such description shall be modified to reflect the
construction of the 31,459 square foot (MOL) building, containing approximately
16,545 square feet (MOL) of office space and 14,914 square feet (MOL) of vacant
space for future expansion for manufacturing purposes, including leasehold
improvements in the office space. Otherwise, the Documents are hereby modified
so that they remain in full force and effect, conform fully with the terms of
this Agreement, and continue to serve as security for the Note remaining unpaid
from time to time.
6. WARRANTY OF TITLE. Borrower hereby warrants and represents
to Lender that there are no mortgages, liens or leases affecting the Property
other than the following:
(a) The Mortgage,
(b) This Agreement,
(c) The UCC-1 Financing Statements,
(d) Ad valorem taxes for the year 2000, and for all
subsequent years, and
(e) Easements, restrictions, agreements, covenants,
mortgages and matters as shown in the Title Insurance
Policy No. FA-M-946453, by First American Title
Insurance Company, as endorsed from time to time
up to the date of this Agreement.
7. STATE DOCUMENTARY STAMP TAXES AND OTHER COSTS. Borrower
shall be liable for and shall promptly pay the full amount of any documentary
stamps, intangible taxes, interest and penalties, if any, levied by the State of
Florida incident to the Loan transaction described in this Agreement.
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<PAGE>
8. CONSENT AND WAIVER. Borrower hereby consents to this
Agreement and agrees that the execution of this Agreement shall in no manner or
way whatsoever impair or otherwise adversely affect their liability to Lender
under the Note, Documents, or this Agreement.
9. WAIVER OF DEFENSES. Borrower hereby waives any claim or
defense which it may have up to the date of this Agreement with respect to the
Note, the Documents and this Agreement, and further agrees not to raise any such
claim or defense, if any, in any civil proceeding or otherwise.
10. RELEASE. AS A MATERIAL INDUCEMENT FOR LENDER TO EXECUTE
THIS AGREEMENT, BORROWER DOES HEREBY RELEASE, WAIVE, DISCHARGE, COVENANT NOT TO
SUE, ACQUIT, SATISFY AND FOREVER DISCHARGE LENDER, ITS OFFICERS, DIRECTORS,
EMPLOYEES, AND AGENTS AND ITS AFFILIATES AND ASSIGNS FROM ANY AND ALL LIABILITY,
CLAIMS, COUNTERCLAIMS, DEFENSES, ACTIONS, CAUSES OF ACTION, SUITS,
CONTROVERSIES, AGREEMENTS, PROMISES AND DEMANDS WHATSOEVER IN LAW OR IN EQUITY
WHICH BORROWER EVER HAD, NOW HAS, OR WHICH ANY PERSONAL REPRESENTATIVE,
SUCCESSOR, HEIR OR ASSIGN OF BORROWER HEREAFTER CAN, SHALL OR MAY HAVE AGAINST
LENDER, ITS OFFICERS, DIRECTORS, EMPLOYEES, AND AGENTS, AND CAUSE OR THING
WHATSOEVER THROUGH THE DATE HEREOF. BORROWER FURTHER EXPRESSLY AGREES THAT THE
FOREGOING RELEASE AND WAIVER AGREEMENT IS INTENDED TO BE AS BROAD AND INCLUSIVE
AS PERMITTED BY THE LAWS OF THE STATE OF FLORIDA. IN ADDITION TO, AND WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, AND IN CONSIDERATION OF LENDER'S
EXECUTION OF THIS AGREEMENT, BORROWER COVENANTS WITH AND WARRANTS UNTO LENDER,
AND ITS AFFILIATES AND ASSIGNS, THAT THERE EXIST NO CLAIMS, COUNTERCLAIMS,
DEFENSES, OBJECTIONS, OFFSETS OR CLAIMS OF OFFSETS AGAINST LENDER OR THE
OBLIGATION OF BORROWER TO PAY THE LOAN TO LENDER WHEN AND AS THE SAME BECOMES
DUE AND PAYABLE.
11. RATIFICATION AND REAFFIRMATION. Borrower hereby ratifies
and reaffirms the continued validity and enforceability of the terms, conditions
and obligations set forth in the Note and Documents, and its continuing or new
obligations under such instruments or any other instruments referenced in this
Agreement. Borrower further states that all warranties and representations made
in the Documents in connection with the Loan are hereby restated and reaffirmed
as of the date of this Agreement with regard to the Loan and the Property.
12. NO NOVATION. It is the intent of the parties that this
Agreement shall not constitute a novation and shall in no way adversely affect
the lien priority of the Mortgage and other Documents referred to above. In the
event that this Agreement, or any part hereof, shall be construed by a court of
competent jurisdiction as operating to affect the lien priority of said Mortgage
or other Documents, or any of them, over the claims which would otherwise be
subordinate thereto, then to
5
<PAGE>
the extent so ruled by such court, and to the extent that third persons
acquiring an interest in the Property between the time of execution of the
Mortgage, other Documents, and the execution hereof, are prejudiced thereby,
this Agreement, or such portion hereof as shall be so construed, shall be at the
option of Lender void and of no force and effect and the Note, Mortgage and
Documents shall be in full force and effect according to their terms prior to
the modifications made in this Agreement. Provided, however, that
notwithstanding the foregoing, the parties hereto, as between themselves, shall
be bound by all terms and conditions hereof until all indebtedness owing from
the Borrower to Lender under the Note, Mortgage and Documents shall have been
paid in full.
13. LIEN. The Borrower affirms, warrants and represents that
the lien of the Mortgage, as modified by this Agreement, is a first lien on the
Property, and that the security interest granted by any security instrument is a
valid security interest in the collateral described therein with the priority as
stated therein. If at any time Lender shall determine that the lien priority of
the Documents as stated therein is invalid or in jeopardy, or if at any time
Lender is unable to obtain title insurance insuring such liens as valid liens
with the priority stated therein on the collateral described therein, then
Lender shall have the option of declaring the entire indebtedness of the Note,
together with all accrued interest, to be immediately due and payable in full.
14. ATTORNEYS' FEES. In the event that Lender must enforce
this Agreement, the Note or any of the Documents to collect any indebtedness
from the Borrower, or to enforce or interpret any provision of this Agreement or
any of the Documents, by law or through attorneys at law, or under advice
therefrom, the Borrower agrees to pay all costs of collection, including
reasonable attorneys' fees (including charges for paralegals and others working
under the direction or supervision of Lender's attorneys) whether or not suit is
brought, and whether incurred in connection with collection, trial, appeal,
bankruptcy or other creditors' proceedings or otherwise, and, if the attorneys
shall include employees of Lender or of any company or bank controlling,
controlled by or under common control with Lender, reasonable attorneys' fees
shall include the costs allocated by Lender's or such affiliated company's or
bank's internal legal department.
15. OTHER PROVISIONS AND DEFINITIONS. Unless otherwise set
forth in this Agreement, all other terms, conditions and obligations set forth
in the Documents shall remain in full force and effect and shall be fully
complied with, and the meaning of any of the defined or other terms herein shall
have the same meaning as ascribed to said terms in the Documents.
16. SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision hereof shall be prohibited or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity only, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
17. FLORIDA CONTRACT. This Agreement shall be deemed a Florida
contract and shall be construed according to the laws of the State of Florida,
regardless of whether this Agreement is executed by certain of the parties
hereto in other states or otherwise.
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<PAGE>
18. BINDING EFFECT. This Agreement shall bind the successors
and assigns of the parties hereto; it constitutes the entire understanding of
the parties, and it may not be modified except in writing.
19. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day and year first above written.
Signed, sealed and delivered in PLASMA-THERM, INC., a Florida corporation
the presence of:
/s/ KATHERINE BARTZOFF
----------------------
Signature of Witness By: /s/ STACY L. WAGNER
-------------------
/s/ KATHERINE BARTZOFF Stacy L. Wagner, Vice President and
--------------------- Chief Financial Officer
Legibly Print Name of Witness
(CORPORATE SEAL)
/s/ CAROL A. MLOTKOWSKI
-----------------------
Signature of Witness
/s/ CAROL A. MLOTKOWSKI
-----------------------
Legibly Print Name of Witness
STATE OF FLORIDA )
COUNTY OF PINELLAS )
The foregoing instrument was acknowledged before me this 6th day of
January, 2000, by STACY L. WAGNER, as Vice President and Chief Financial Officer
of PLASMA-THERM, INC., a Florida corporation, on behalf of the corporation. She
|X| is personally known to me or |_| has produced ____________________________
as identification.
/s/ KATHERINE BARTZOFF
----------------------
(SEAL) KATHERINE BARTZOFF
------------------
My Commission Expires: November 4, 2002 (Print Name of Notary Public)
Notary Public
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<PAGE>
BANK OF AMERICA, N.A., d/b/a NationsBank,
N.A., successor to NationsBank, N.A., a
national banking association
- -------------------------------
Signature of Witness
- -------------------------------
Legibly Print Name of Witness
By: __________________________________
Name: __________________________________
Title: __________________________________
- -------------------------------
Signature of Witness
(CORPORATE SEAL)
- -------------------------------
Legibly Print Name of Witness
STATE OF FLORIDA )
COUNTY OF _________________)
The foregoing instrument was acknowledged before me this _______ day
of January, 2000, by _________________________, as the __________ President of
BANK OF AMERICA, N.A., d/b/a NationsBank, N.A., successor to NationsBank, N.A.,
a national banking association, on behalf of the association. He or she |_| is
personally known to me or |_| has produced___________________ as identification.
_____________________________
_____________________________
(SEAL) (Print Name of Notary Public)
Notary Public
My Commission Expires:
8
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
PARCEL I
Lot 27, Block C of METROPOINTE COMMERCE PARK PHASE II,
according to the plat thereof recorded in Plat Book 103, Pages
25 and 26 of the Public Records of Pinellas County, Florida,
less the North 130.00 feet thereof, together with Lot 26,
Block C of Metropointe Commerce Park, Phase II, according to a
plat thereof as recorded in the Public Records of Pinellas
County, Florida recorded in Plat Book 103, Pages 25 and 26.
PARCEL II
Lots 28, 29, 30, 31 and the Northerly 130 feet of Lot 27, all
in Block C of METROPOINTE COMMERCE PARK PHASE II, according to
the map or plat thereof recorded in Plat Book 103, pages 25
and 26, Public Records of Pinellas County, Florida.
<PAGE>
EXHIBIT "D"
BUDGET
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of this
1st day of June, 1999, by and between Plasma-Therm, Inc., a Florida corporation
(hereinafter referred to as the "Company"), and Dr. Christopher Constantine
(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 June, 1999, and terminating on the
31st day of May, 2002 (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 $110,000.00 payable
in accordance with the Company's usual payroll procedures as they may exist from
time to time; and
<PAGE>
4.2 Three (3) salary increases of ten percent
(10%) each, to be made annually during the initial Term of this Agreement,
effective on the first anniversary date of this Agreement.
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.
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 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.
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
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<PAGE>
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, non-satisfactory performance 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
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)
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<PAGE>
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. In the event Employee
terminates the Agreement pursuant to this Section 8.4, Employee must provide
Company with at least ninety (90) days' advance written notice. Upon expiration
of the ninety (90) day notice period, all obligations by Company to Employee,
except those provided by law, shall cease.
(c) 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.
8.5 With respect to any payments due and owing
as a result of any termination pursuant to this Section 8, Employee may, at
Company's 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
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<PAGE>
the balance of the then remaining Term of this Agreement, not to exceed twelve
(12) months, 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.
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.
5
<PAGE>
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.
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 the maximum allowable under
Company policy. Paid Time Off per annum not used, shall be 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:
6
<PAGE>
If to Company: Stacy L. Wagner, Chief Financial Officer and Secretary
Plasma-Therm, Inc.
10050 16th Street North
St. Petersburg, FL 33716
If to Employee: Dr. Christopher Constantine
1818 Pine Hill Drive
Safety Harbor, FL 34695
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.
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
7
<PAGE>
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) 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.
(c) 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/ EDMOND A. RICHARDS /s/ STACY L. WAGNER
- ---------------------- -------------------
Edmond A. Richards Stacy L. Wagner, Chief Financial Officer
and Secretary
Employee
Witness:
/s/ RICHARD M. FEENEY /s/ CHRISTOPHER CONSTANTINE
- --------------------- ---------------------------
Richard M. Feeney Dr. Christopher Constantine
8
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of this
16th day of August, 1999, by and between Plasma-Therm, Inc., a Florida
corporation (hereinafter referred to as the "Company"), and Lynn E. Ochs
(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
two (2) years commencing on the 16th day of August, 1999, and terminating on the
15th day of August, 2001 (the "Term"). Upon expiration of the initial Term and
any subsequent terms, this Agreement shall automatically renew for additional
subsequent three (2) 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 $110,000.00 payable
in accordance with the Company's usual payroll procedures as they may exist from
time to time;
4.2 A commission plan based on sales and
bookings, which may be restructured, from time to time, by the Company; and
<PAGE>
4.3 A car allowance in the amount of $1,000.00,
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.
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 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.
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
2
<PAGE>
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, non-satisfactory performance 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
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
3
<PAGE>
"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. In the event Employee
terminates the Agreement pursuant to this Section 8.4, Employee must provide
Company with at least ninety (90) days' advance written notice. Upon expiration
of the ninety (90) day notice period, all obligations by Company to Employee,
except those provided by law, shall cease.
(c) 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.
8.5 With respect to any payments due and owing
as a result of any termination pursuant to this Section 8, Employee may, at
Company's 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
4
<PAGE>
the balance of the then remaining Term of this Agreement, not to exceed twelve
(12) months, 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.
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.
5
<PAGE>
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.
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 the maximum allowable under
Company policy. Paid Time Off per annum not used, shall be 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:
6
<PAGE>
If to Company: Stacy L. Wagner, Chief Financial Officer and Secretary
Plasma-Therm, Inc.
10050 16th Street North
St. Petersburg, FL 33716
If to Employee: Mr. Lynn E. Ochs
P.O. Box 22306
St. Petersburg, FL 33742
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.
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
7
<PAGE>
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) 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.
(c) 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/ RONALD S. DEFERRARI /s/ STACY L. WAGNER
- ----------------------- -------------------
Ronald S. Deferrari Stacy L. Wagner, Chief Financial Officer
and Secretary
Employee
Witness:
/s/ RICHARD M. FEENEY /s/ LYNN E. OCHS
- --------------------- ----------------
Richard M. Feeney Lynn E. Ochs
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated January 14, 2000, 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, 1999. 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 14, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets as of November 30, 1999 and consolidated
statements of income for the year ended November 30, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> NOV-30-1999
<CASH> 6,913,363
<SECURITIES> 0
<RECEIVABLES> 9,610,493
<ALLOWANCES> 0
<INVENTORY> 11,191,676
<CURRENT-ASSETS> 29,191,903
<PP&E> 19,667,726
<DEPRECIATION> 7,390,281
<TOTAL-ASSETS> 42,315,503
<CURRENT-LIABILITIES> 8,930,795
<BONDS> 3,762,019
0
0
<COMMON> 112,525
<OTHER-SE> 29,845,799
<TOTAL-LIABILITY-AND-EQUITY> 42,315,503
<SALES> 40,627,328
<TOTAL-REVENUES> 40,627,328
<CGS> 24,796,048
<TOTAL-COSTS> 16,322,503
<OTHER-EXPENSES> (340,309)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 654,638
<INCOME-PRETAX> (805,552)
<INCOME-TAX> (43,222)
<INCOME-CONTINUING> (762,330)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (762,330)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
