FORM 10-Q. QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended December 31, 1999
or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ____________________________
to _______________________________
Commission File Number 0-12944
Zygo Corporation
(Exact name of registrant as specified in its charter)
Delaware 06-0864500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Laurel Brook Road, Middlefield, Connecticut 06455
(Address of principal executive offices) (Zip Code)
(860) 347-8506
Registrant's telephone number, including area code
N/A
(Former name, former address, and former fiscal year,
if changed from last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES [ ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
11,692,097 Common Stock, $.10 Par Value at February 8, 2000
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended December 31, Ended December 31,
------------------------- -------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 21,272 $ 15,979 $ 39,173 $ 31,417
Cost of good sold 11,923 9,860 22,499 19,924
-------- -------- -------- --------
Gross profit 9,349 6,119 16,674 11,493
Selling, general and administrative expenses 4,632 3,982 8,800 8,623
Research, development and engineering expenses 2,144 2,562 4,162 4,833
Amortization of goodwill and other intangibles 403 277 806 493
-------- -------- -------- --------
Operating profit (loss) 2,170 (702) 2,906 (2,456)
-------- -------- -------- --------
Other income (expense):
Interest income 255 313 519 624
Miscellaneous (expense), net (10) (23) (70) (114)
-------- -------- -------- --------
245 290 449 510
-------- -------- -------- --------
Earnings (loss) before income taxes and
minority interest 2,415 (412) 3,355 (1,946)
Income tax expense (benefit) 870 (76) 1,224 (539)
-------- -------- -------- ========
Earnings (loss) before minority interest 1,545 (336) 2,131 (1,407)
Minority interest (73) 0 (73) 0
-------- -------- -------- --------
Net earnings (loss) (note 2) $ 1,472 $ (336) $ 2,058 $ (1,407)
======== ======== ======== ========
Earnings (loss) per share:
Basic (1) $ .13 $ (.03)(2) $ .18 $ (.13)(2)
======== ======== ======== ========
Diluted (1) $ .12 $ (.03)(2) $ .17 $ (.13)(2)
======== ======== ======== ========
Weighted average number of shares:
Basic 11,306 11,158 11,273 11,110
======== ======== ======== ========
Diluted 12,328 11,158 12,242 11,110
======== ======== ======== ========
</TABLE>
(1) The difference between basic shares outstanding and diluted shares
outstanding is the assumed conversion of common stock equivalents (stock
options) in the amounts of 1,022,000 in the three months ended December 31,
1999 and 969,000 in the six months ended December 31, 1999.
(2) As per generally accepted accounting principles, the computation of the net
loss per share is based on the weighted average basic shares outstanding.
<PAGE>
CONSOLIDATED BALANCE SHEETS
As of December 31, 1999 and June 30, 1999
(Thousands, except share amounts)
ASSETS December 31, June 30,
1999 1999
-------- --------
Current Assets:
Cash and cash equivalents $ 14,616 $ 13,020
Marketable securities 8,297 8,351
Receivables 21,143 12,094
Inventories:
Raw materials and manufactured parts 5,156 7,866
Work in process 3,907 4,622
Finished goods 2,393 2,985
-------- --------
Total inventories 11,456 15,473
-------- --------
Costs in excess of billings 1,526 660
Income taxes receivable 0 741
Prepaid expenses and taxes 1,086 799
Deferred income taxes 3,678 3,683
-------- --------
Total current assets 61,802 54,821
-------- --------
Property, plant and equipment, at cost 34,478 33,708
Less accumulated depreciation 18,569 17,460
-------- --------
Net property, plant and equipment 15,909 16,248
-------- --------
Goodwill and other intangible assets, net 9,271 9,939
Other assets 964 819
-------- --------
Total assets $ 87,946 $ 81,827
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 6,199 $ 4,989
Accrued expenses and customer progress payments 5,532 6,251
Federal and state income taxes 1,608 0
-------- --------
Total current liabilities 13,339 11,240
-------- --------
Deferred income taxes 2,213 2,213
Minority interest 163 0
Stockholders' Equity:
Common stock, $.10 par value per share:
15,000,000 shares authorized; 11,603,972 1,160 1,140
shares issued (11,402,442 at June 30, 1999)
Additional paid-in capital 44,441 42,587
Retained earnings (note 2) 27,132 25,074
Currency translation effects (104) (57)
Net unrealized (loss) on marketable securities (97) (69)
-------- --------
72,532 68,675
Less treasury stock, at cost; 207,600 shares 301 301
-------- --------
Total stockholders' equity 72,231 68,374
-------- --------
Total liabilities and stockholders' equity $ 87,946 $ 81,827
======== ========
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended December 31, 1999 and 1998
(Thousands of dollars)
<TABLE>
<CAPTION>
Cash provided by (used for) 1999 1998
operating activities: -------- --------
<S> <C> <C>
Net earnings (loss) (note 2) $ 2,058 $ (1,407)
Adjustments to reconcile net earnings (loss) to cash
provided by (used for) operating activities:
Depreciation and amortization 2,524 2,049
Loss on disposal of assets 54 108
Gain on sale of marketable securities 0 (35)
Changes in operating accounts:
Receivables (5,732) 5,128
Costs in excess of billings (866) (866)
Inventories 812 (486)
Prepaid expenses (287) 242
Accounts payable and accrued expenses 4,084 (7,465)
Minority interest 73 0
-------- --------
Net cash provided by (used for) operating activities 2,720 (2,732)
-------- --------
Cash (used for) provided by
investing activities:
Additions to property, plant and equipment (1,439) (1,492)
Investment in marketable securities (248) (9,113)
Investment in other assets (309) (2,212)
Proceeds from sale of marketable securities 0 5,361
Proceeds from maturity of marketable securities 250 2,545
-------- --------
Net cash (used for) by investing activities (1,746) (4,911)
-------- --------
Cash provided by financing activities:
Repayment of long-term debt 0 0
Exercise of employee stock options 532 280
Contributions from minority interest of consolidated subsidiaries 90 0
-------- --------
Net cash provided by financing activities 622 280
-------- --------
Net increase (decrease) in cash and cash equivalents 1,596 (7,363)
Cash and cash equivalents, beginning of year 13,020 22,023
-------- --------
Cash and cash equivalents, end of quarter $ 14,616 $ 14,660
======== ========
</TABLE>
These interim financial statements should be read in conjunction with the
financial statements and notes included in the Company's June 30, 1999 Annual
Report on Form 10-K405 including items incorporated by reference therein.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Principles of Consolidation
The consolidated balance sheet at December 31, 1999, the consolidated statements
of earnings for the three- and six-months ended December 31, 1999 and 1998, and
the consolidated statements of cash flows for the six-months ended December 31,
1999 and 1998 are unaudited but, in the opinion of the Company, include all
adjustments, consisting only of normal recurring accruals, necessary for a fair
statement of the results of the interim periods. The consolidated statements
include the accounts of Zygo Corporation and all consolidated subsidiaries,
including a consolidated joint venture, which the Company entered into in
October 1999. The minority interest represents the 40% of the joint venture not
owned by the Company. The results of operations for the three-month and
six-month periods ended December 31, 1999 are not necessarily indicative of the
results to be expected for the full year.
Note 2: New Accounting Pronouncements
As of July 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income." SFAS No. 130 establishes new
rules for the reporting and display of comprehensive income and its components;
however, the adoption of this statement had no impact on the Company's reported
net income or stockholders' equity. Comprehensive income (loss) is defined as
net income plus nonstockholder direct adjustments to stockholders' equity which
consist of foreign currency translation adjustments and adjustments for the net
unrealized gains (losses) related to the Company's marketable equity securities.
Comprehensive income totaled $1,359,000 and $1,983,000 in the three-month and
six-month periods ended December 31, 1999, respectively, as compared to
comprehensive losses of $372,000 and $1,346,000 in the comparable prior-year
periods.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement establishes standards using
a management approach, for reporting information regarding operating segments.
The Company has viewed its operations as one segment providing sales and service
in metrology, process control, and yield enhancement solutions for high
precision manufacturing industries. Substantially all of the Company's operating
results, assets, depreciation, and amortization are U.S. based. The Company's
export sales are as follows:
For the Three Months For the Six Months
Ended December 31, Ended December 31,
------------------ --------------------
1999 1998 1999 1998
------- ------- ------- -------
(Thousands of dollars)
Far East:
Japan $ 4,412 $ 3,379 $ 8,012 $ 7,836
Pac Rim 2,679 783 5,309 1,383
------- ------- ------- -------
Total Far East 7,091 4,162 13,321 9,219
Europe and other 3,211 2,939 4,915 4,665
------- ------- ------- -------
Total $10,302 $ 7,101 $18,236 $13,884
======= ======= ======= =======
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net sales of $21,272,000 for the three months and $39,173,000 for the six months
ended December 31, 1999, increased by $5,293,000 or 33% and $7,756,000 or 25%,
respectively, from the net sales in the comparable prior year periods. Net sales
of the Company's instruments and systems during the second quarter of fiscal
2000 increased by 38% to $15,680,000 over the second quarter of fiscal 1999,
mainly as a result of sales growth in the mask metrology and automation markets.
Net sales of modules and components totaled approximately $5,592,000, an
increase of 22% from the comparable quarter in the prior year. Net sales of the
Company's instruments and systems and net sales of modules and components
increased by $7,148,000 or 34% and $608,000 or 6%, respectively, for the six
months ended December 31, 1999 as compared to the six-month period ended
December 31, 1998.
Gross profit for the three months and six months ended December 31, 1999,
amounted to $9,349,000 and $16,674,000, respectively, an increase of $3,230,000
and $5,181,000 from the comparable prior year periods. Gross profit as a
percentage of net sales for the quarter and six months ended December 31, 1999,
amounted to 44% and 43%, respectively, an increase in both periods of 6
percentage points from gross profit as a percentage of net sales of 38% and 37%,
respectively, for the three months and six months ended December 31, 1998. The
increase in gross profit and gross profit as a percentage of net sales were
primarily due to the significant increase in sales levels and an improved mix.
Selling, general and administrative expenses of $4,632,000 and $8,800,000,
respectively, in the three months and six months ended December 31, 1999,
increased by $650,000 or 16%, and $177,000 or 2%, respectively, from the same
periods the year earlier. The increases in the three-month period ended December
31, 1999 primarily resulted from product marketing and volume related expenses,
such as commissions paid to the Company's direct sales personnel and external
sales agents, and increased expenses related to the additional infrastructure,
such as sales offices in Japan and a new joint venture in Europe (ZygoLOT). As a
percentage of net sales, selling, general and administrative expenses decreased
in both the three months and six months ended December 31, 1999, to 22%, as
compared to 25% and 27%, respectively, in the comparable prior year period.
Research, development and engineering expenses ("R&D") amounted to $2,144,000 or
10% of net sales and $4,162,000 or 11% of net sales, respectively, for the three
months and six months ended December 31, 1999. In the comparable three- and
six-month periods in the prior year, R&D expenses totaled $2,562,000 or 16% of
net sales and $4,833,000 or 15% of net sales, respectively. The decrease in R&D
expenses is primarily a result of cost reduction actions taken in fiscal 1999.
The Company's management continues to focus considerable attention on projects
which will enhance the Company's product offering and should provide long-term
benefits to the Company.
The Company recorded operating profit in the three months ended December 31,
1999 totaling $2,170,000, as compared to an operating loss in the comparable
prior year period of $702,000. The Company's operating profit in the six months
ended December 31, 1999 was $2,906,000, as compared to an operating loss of
$2,456,000 in the six months ended December 31, 1998.
The Company recorded net income of $1,472,000 in the three-month period ended
December 31, 1999, as compared to a net loss of $336,000 in the three-month
period ended December 31, 1998. The net earnings on a per share basis was $.12
for the quarter ending December 31, 1999, compared with a net loss on a per
share basis in the comparable prior year period of $(.03). The Company recorded
net income of $2,058,000 or $.17 per share for the first half of fiscal 2000, as
compared to a net loss in the comparable prior-year period of $1,407,000 or
$(.13) per share.
<PAGE>
Financial Condition
At December 31, 1999, working capital was $48,463,000, an increase of $4,882,000
from the amount at June 30, 1999 and $3,957,000 from September 30, 1999 levels.
The Company at December 31, 1999 had cash and cash equivalents of $14,616,000
and marketable securities of $8,297,000 for a total of $22,913,000, an increase
of $4,984,000 from September 30, 1999. The increase in working capital in the
quarter was principally due to the increase in the level of cash and cash
equivalents. Receivables increased by $2,058,000 and inventory decreased by
$822,000 from the amounts reported at September 30, 1999. As of December 31,
1999, there were no borrowings outstanding under the Company's $3,000,000 bank
line of credit. Unused amounts under the line of credit are available for
short-term working capital needs.
The Company's backlog at December 31, 1999 totaled $31,987,000, an increase of
$816,000 or 3% from September 30, 1999. The increase in the Company's backlog
from September 30, 1999 was due to increased demand for capital equipment in the
industrial and semiconductor markets.
During the quarter, the Company entered into an agreement with LOT-Oriel GmbH
establishing a European joint venture. Zygo owns a 60% interest in this new
company, called ZygoLOT GmbH. The Company's results for the second quarter
include ZygoLOT financial performance effective October 1, 1999.
Year 2000
The Company has transitioned into the year 2000 with minimal interruptions. We
are continuing to monitor our products, product design tools, manufacturing
tools, information systems, business infrastructure, material and service
suppliers and customers. Overall there has been no significant impact on the
Company. The cost spent on the year 2000 problem has been immaterial to date.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are subject to interest rate risk on our investment portfolio.
A move in interest rates of 10% of our weighted-average worldwide interest rate
in 2000 affecting our financial investments as of December 31, 1999 would have
an insignificant effect on our pretax earnings. In fiscal 1999, the same move in
the interest rate affecting our interest sensitive investments would have had an
insignificant effect on our financial position, results of operations and cash
flows.
Forward Looking Statements
This report contains forward looking statements which are subject to a number of
risks and uncertainties that may cause actual results to differ materially from
expectations. These uncertainties include, but are not limited to, general
economic conditions, competitive conditions in markets served by the Company,
most notably high technology markets such as data storage and semiconductor, and
economic and political developments in countries where the Company conducts
business.
<PAGE>
PART II
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on November 17, 1999. The following
matters were submitted to a vote of the Company's stockholders:
Proposal No. 1 - Election of Board of Directors
To elect eight directors for the ensuing year. The following
individuals, all of whom were Company directors immediately prior to
the vote, were elected as a result of the following vote:
For Against
--- -------
Paul F. Forman 9,786,364 54,088
Seymour E. Liebman 9,785,594 54,858
Robert G. McKelvey 9,787,534 52,918
Paul W. Murrill 9,787,930 52,522
J. Bruce Robinson 9,783,426 57,026
Robert B. Taylor 9,788,810 51,642
Gary K. Willis 9,782,995 57,457
Carl A. Zanoni 9,787,426 53,026
Proposal No. 2 - Amend and Restate Non-Employee Director Stock Option Plan
To approve the adoption of the Zygo Corporation Amended and Restated
Non-Employee Director Stock Option Plan.
For 6,952,202
Against 206,217
There were no other matters submitted to a vote of the Company's
stockholders.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
10.1 Employment Agreement dated November 17, 1999 between Gary K.
Willis and the Company.
10.2 Amended Employment Agreement dated November 17, 1999, between J.
Bruce Robinson and the Company.
27 Financial Data Schedule.
(b) None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Zygo Corporation
----------------------------------
(Registrant)
/s/ J. BRUCE ROBINSON
-------------------------------------
J. Bruce Robinson
President and Chief Executive Officer
/s/ KEVIN M. McGUANE
-------------------------------------
Kevin M. McGuane
Vice President Finance, Treasurer,
and Chief Financial Officer
Date: February 9, 2000
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
10.1 Employment Agreement dated November 17, 1999, between Gary K.
Willis and the Company.
10.2 Amended Employment Agreement dated November 17, 1999, between
J. Bruce Robinson and the Company
27 Financial Data Schedule for the quarterly report on Form
10-Q for the period ended December 31, 1999.
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
AGREEMENT, made as of November 18, 1999, by and between ZYGO CORPORATION, a
Delaware Corporation with an office at Laurel Brook Road, Middlefield,
Connecticut 06455 (the "Company"), and GARY K. WILLIS, residing at 3 Matson
Ridge, Old Lyme, Connecticut 06371 ("Executive").
WITNESSETH:
WHEREAS, Executive and the Company are parties to that certain Employment
Agreement, dated as of February 3, 1992 as amended by the Amendment to
Employment Agreement, dated as of August 26, 1993, and by Second Amendment to
Employment Agreement, dated as of March 10, 1995 (as amended, the "1992
Agreement"); and
WHEREAS, the Company and Executive desire that the 1992 Agreement be
terminated (except for Sections 12(a), 13, 16 and 18 thereof, which Sections
specifically survive such termination), and that this Agreement, providing for
the employment of Executive by the Company upon the terms and conditions herein
set forth, replace the 1992 Agreement, all effective as of the date hereof.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations and covenants herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT.
The Company hereby employs Executive and Executive hereby accepts such
employment, subject to the terms and conditions herein set forth. Executive
shall hold the position of Chairman of the Board of Directors of the Company
(assuming he is then serving as a member of the Board of Directors of the
Company). The Company shall nominate Executive for election as a director of the
Company for all periods during the term of this Agreement.
2. TERM.
The term of employment under this Agreement shall begin on the date hereof
(the "Employment Date") and shall continue through November 17, 2002, subject to
prior termination in accordance with the terms hereof. Thereafter, this
Agreement shall automatically be renewed for successive one year terms unless
either party shall give the other thirty (30) days prior written notice of its
or his intent not to renew this Agreement. The initial three-year term together
with
<PAGE>
all such additional one-year period(s) of employment, if any, are collectively
referred to herein as the "employment term" of this Agreement.
3. COMPENSATION.
As compensation for the employment services to be rendered by Executive
hereunder, including all services as an officer or director of the Company and
any of its subsidiaries, the Company agrees to pay to Executive and Executive
agrees to accept, an annual salary of $137,500.00, or such higher amount as the
Board of Directors of the Company may determine from time to time, subject in
all such instances to such payroll deductions as are required by law and
deductions for applicable employee contributions to the normal benefit programs
of the Company. The annual salary provided for hereunder shall be payable in
equal installments commencing at the Employment Date, in accordance with the
Company's practice.
4. EXPENSES.
The Company shall pay or reimburse Executive, upon presentment of suitable
vouchers, for all reasonable business and travel expenses which may be incurred
or paid by Executive in connection with his employment hereunder. Executive
shall comply with restrictions and shall keep records in compliance with the
Company's policy and procedure related to travel and entertainment expenses.
5. AUTOMOBILE
The Company shall, during the employment term, provide Executive with a
monthly allowance for an automobile in the amount of $900 in lieu of any expense
reimbursement for Company use of an automobile.
6. INSURANCE AND OTHER BENEFITS.
(a) During the employment term, Executive shall be entitled to participate
in and receive any other health and welfare benefits customarily provided by the
Company (including any profit sharing, pension, health insurance, dental
coverage, key man life insurance, AD&D and short and long-term disability in
accordance with the terms of such plans), all as determined from time to time by
the Board of Directors of the Company or appropriate committee thereof; it being
understood that as a part-time employee of the Company, Executive is not
expected to be compensated for or to receive any paid vacation time.
(b) The Company shall, during the employment term, and at the Company's
sole cost and expense, provide Executive with the use of his present office and
secretarial support at the Company's corporate headquarters in Middlefield,
Connecticut, or in lieu thereof shall provide Executive with alternative office
space and secretarial support at the corporate headquarters in Middlefield,
Connecticut or elsewhere in the Middlefield area. Any such alternative space and
<PAGE>
support must be acceptable to Executive, in his discretion, and shall be
comparable to Executive's present space and support.
(c) For so long as Executive is rendering consulting services to the
Company hereunder (as provided in Section 10 hereof) and has not attained the
age 65, and to the extent otherwise permitted pursuant to the terms of the
Company's then existing applicable plans and the then existing policies of the
plan providers, Executive shall be entitled to continue to participate in the
health insurance plan and short and long-term disability plans provided by the
Company for its employees, as determined from time to time by the Board of
Directors of the Company or appropriate committee thereof; provided, however,
that during such continued coverage period, Executive shall pay to the Company
the applicable employee contribution for his participation in such plans.
(d) For so long as Executive is rendering employment or consulting services
to the Company hereunder and has not attained the age of 65, and to the extent
otherwise permitted pursuant to the terms of the insurance policy and the then
existing policies of the insurer, the Company shall continue in effect the
existing term life insurance policy in the amount of $600,000 on the life of
Executive. The entire cost and expense of such continued coverage, including the
premiums paid therefor, shall be borne by (i) the Company, during the employment
term, and (ii) Executive, subsequent to the employment term.
(e) For so long as Executive is rendering employment or consulting services
to the Company hereunder and has not attained the age of 65, and to the extent
otherwise permitted pursuant to the terms of the insurance policy and the then
existing policies of the insurer, the Company shall continue in effect the
existing key man life insurance policy in the amount of $1 million on the life
of Executive. During such time, the cost of such continued coverage, including
the premiums paid therefore, shall be borne by the Company. Upon the death of
Executive, any proceeds actually received by the Company from such policy, after
deducting (i) all costs and expenses paid by the Company for or in any way
associated with such policy from the date hereof and thereafter, together with
(ii) a five percent (5%) annual rate of return on the capital outlay for such
policy (i.e., the total of all costs and expenses incurred in instituting and
maintaining such policy, including all premiums paid thereunder, shall be paid
to Executive's designated beneficiary under such policy (or if none designated,
to Executive's estate).
7. CHANGE IN CONTROL.
(a) Definition. A "Change in Control" shall mean the occurrence of any of
the following events:
(i) The Company is merged with or consolidate with another corporation
in a transaction in which (x) the Company is not the surviving corporation,
and (y) the Company's stockholders immediately prior to such transaction do
not own at least 70% of the outstanding voting securities of the surviving
corporation immediately following the transaction; or
<PAGE>
(ii) Any person or entity or affiliated goup of persons or entities
becomes the holder of more than 51% of the Company's outstanding shares of
Common Stock.
(b) Payments. If a Change in Control occurs during the employment term and
either (i) Executive's employment is terminated by the Company at any time
thereafter for any reason other than death, disability or justifiable cause, or
Executive resigns for "good reason" within one year of the Change in Control, or
(ii) Executive resigns within ninety (90) days after the Change in Control for
any reason which would not constitute "good reason" (collectively, a "Change in
Control Termination"), the Company shall (x) pay to Executive, in one lump sum
payment, on the date of such termination or within seven (7) days of such
resignation, as the case may be, in the case of (i) above, the greater of (a)
one year's base salary then being paid to Executive, but in no event less than
$137,500.00 and (b) the entire amount of Executive's salary, as provided in
Section 3 hereof, otherwise still to be paid to Executive through November 17,
2002, and in the case of (ii) above, one year's base salary then being paid to
Executive, but in no event less than $137,500.00; and (y) continue, at
Executive's sole cost and expense, all existing health insurance, dental
coverage, key may life insurance, AD&D and long-term disability coverage in
effect for Executive at the time of his termination or resignation (or, if
greater, the benefits in existence immediately prior to the Change in Control),
in all instances until Executive attains the age of 65; provided, however, that
during the applicable period in which benefits are being paid by the Company,
Executive agrees to maintain a consulting relationship with the Company as
provided in Section 10 hereof.
(c) Good Reason. For purposes of this Agreement, "good reason" for
resignation shall mean the occurrence of either of the following:
(i) The Company materially diminishes Executive's duties or
responsibilities or employment conditions in a manner which is
inconsistent with his status as a senior executive officer (it
being understood that Executive's failure to continue to hold the
position of Chairman of the Board of Directors of the Company
will not constitute "good reason" for resignation); or
(ii) The company fails to perform or breaches its obligations under
any other material provision of this Agreement.
8. DUTIES.
(a) Executive shall perform such duties and functions as the Board of
Directors of the Company shall from time to time determine and Executive shall
comply in the performance of his duties with the policies of, and be subject to,
the direction of the Board of Directors.
(b) During the employment term, Executive agrees to devote up to one-half
(1/2) of his entire working time, attention and energies to the performance of
the business of the Company and of any of its subsidiaries or affiliates by
which he may be employed; and Executive shall not, directly or indirectly, alone
or as a member of any partnership or other
<PAGE>
organization, or as an officer, director or employee of any other corporation,
partnership or other organization, be actively engaged in or concerned with any
other duties or pursuits which interfere with the performance of his duties
hereunder, or which, even if non-interfering, may be inimical, or contrary, to
the best interests of the Company, except those duties or pursuits specifically
authorized by the Board of Directors of the Company.
9. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.
(a) Executive's employment hereunder may be terminated at any time upon
written notice from the Company to Executive,
(i) Upon the determination by the Board of Directors of the Company
that Executive's performance of his duties has not been fully
satisfactory for any reason which would not constitute
justifiable cause (as hereunder defined) upon five (5) days'
prior written notice to Executive; or
(ii) Immediately upon determination by the Board of Directors of the
Company that justifiable cause exists for such termination.
(b) Executive's employment shall terminate upon:
(i) the death of the Executive; or
(ii) the "disability" of Executive (as hereinafter defined pursuant to
subsection (c) below).
(c) For the purposes of this Agreement, the term "disability" shall mean
the inability of Executive, due to illness, accident or any other physical or
mental incapacity, to perform his duties in a normal manner for a period of
three (3) consecutive months or for a total of six (6) months whether or not
consecutive) in any twelve (12) month period during the term of this Agreement.
(d) For the purposes hereof, the term "justifiable cause" shall mean and be
limited to: any willful breach by Executive of the performance of any of his
duties pursuant to this Agreement; Executive's conviction (which, through lapse
of time or otherwise, is not subject to appeal) of any crime or offense
involving money or other property of the Company or any of its subsidiaries or
which constitutes a felony in the jurisdiction involved; Executive's performance
of any act or his failure to act, for which if he were prosecuted and convicted,
a crime or offense involving money or property of the Company or any of its
subsidiaries, or which constitutes a felony in the jurisdiction involved, would
have occurred; any disclosure by Executive to any person, firm or corporation
other than the Company or any of its subsidiaries and its and their directors,
officers and employees, of any confidential information or trade secret of the
Company or any of its subsidiaries; any attempt by Executive to secure any
personal profit in connection with the business of the Company or any of its
subsidiaries; or the engaging by Executive in any
<PAGE>
business or activities other than the business of the Company and its
subsidiaries which interferes with the performance of his duties, except as
specifically permitted herein. Upon termination of Executive's employment by the
Company for justifiable cause, this Agreement shall terminate immediately and
Executive shall not be entitled to any amount or benefits hereunder other than
such portion of Executive's annual salary and reimbursement of expenses pursuant
to Section 4 hereof as has been accrued through the date of his termination of
employment.
(e) If Executive shall die during the term of his employment hereunder,
this Agreement shall terminate immediately. In such event, the estate of
Executive shall thereupon be entitled to receive such portion of Executive's
annual salary and reimbursement of expenses pursuant to Section 4 hereof as has
been accrued through the date of his death.
(f) Upon Executive's "disability," the Company shall have the right to
terminate Executive's employment. Notwithstanding any inability to perform his
duties, Executive shall be entitled to receive his compensation as provided
herein until the termination of his employment for disability. Any termination
pursuant to this subsection (f) shall be effective on the date thirty (30) days
after which Executive shall have received written notice of the Company's
election to terminate. Notwithstanding anything to the contrary contained
herein, during any period that Executive fails to perform his duties hereunder
as a result of his disability (but prior to receiving the notice of termination
specified in this Section 9(f), (i) Executive shall continue to receive his full
salary at the rate then in effect and all benefits provided in Section 5 and 6
hereof, provided that payments made to Executive pursuant to this Section 9(f)
shall be reduced by the sum of the disability benefit plan or program of, or
provided by the Company, and (ii) the Company shall have the right to hire any
other individual or individuals to perform such duties and functions as the
Company shall desire, including those duties heretofore performed by Executive.
(g) Notwithstanding any provision to the contrary contained herein, in the
event that Executive's employment is terminated by the Company at any time
during the employment term for any reason other than justifiable cause,
disability or death, the Company shall (i) pay to Executive, in one lump sum
payment on the date of such termination, the greater of (x) one year's base
salary then being paid to Executive, as provided in Section 3 hereof, and (y)
the entire amount of Executive's salary, as provided in Section 3 hereof,
otherwise still to be paid to Executive through November 17, 2002, and (ii)
continue, at Executive's election and at his sole cost and expense, all existing
health insurance, dental coverage, key may life insurance, AD&D and long-term
disability coverage in effect for Executive at the time of his termination, in
all instances until Executive attains the age of 65; provided, however, that
during the applicable period in which benefits are being paid by the Company,
Executive agrees to maintain a consulting relationship with the Company as
provided in Section 10 hereof. The payment and benefits provided for under this
Section 9(g) shall be paid as liquidated damages, and not as a penalty, and
shall be in lieu of any and all other payments due and owing to Executive under
the terms of this Agreement.
<PAGE>
10. CONSULTING AGREEMENT.
(a) Consulting Term. In recognition of the fact that the Company desires to
continue to have the benefit from time to time, and to avail itself, of the
knowledge and expertise of Executive after the expiration of the employment term
of this Agreement, the Company hereby agrees to retain Executive as a consultant
to the Company, and Executive agrees to be so retained by the Company, for a
period commencing on the date of the expiration of the employment term of this
Agreement and continuing until the date upon which Executive attains the age of
65 (the "Consulting Period"); provided, however, that the obligations contained
in this Section 10 shall cease to exist (and/or shall not arise) in the event
Executive's employment or consultancy hereunder shall be terminated for
justifiable cause.
(b) Duties. During the Consulting Period, Executive agrees to advise and
consult with respect to the business and affairs of the Company, it being
understood that such services are expected to be performed by telephone or in
writing with the senior management and directors of the Company upon requests
for such services, and to draw upon the knowledge and expertise of Executive
gained while in the full-time employ of the Company. Executive shall perform
such services on an as needed basis, at mutually agreeable dates, times and
locations, provided that such services shall in no way interfere with any other
then existing obligations of Executive.
(c) Compensation. In consideration of the consulting services to be
furnished by Executive hereunder and for being available for consultation in
accordance with this Agreement, the Company shall pay to Executive an annual
consulting fee of $1,200, payable in equal monthly payments (in addition to the
benefits to be continued with respect to Executive during the Consulting
Period).
(d) Expenses. Executive shall be entitled to reimbursement from the
Company, upon presentation of suitable vouchers, for all out-of-pocket expenses
incurred by him in connection with the performance of his obligations hereunder,
in accordance with the policies and practices of the Company.
11. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE.
(a) Executive represents and warrants that he is free to enter into this
Agreement and to perform the duties required hereunder, and that there are no
employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder. Executive further represents and warrants that he is in full
compliance with all existing agreements between himself and the Company.
(b) Executive agrees to submit to a medical examination and to cooperate
and supply such other information and documents as may be required by any
insurance company in
<PAGE>
connection with Executives' inclusion in any insurance or fringe benefit plan or
program as the Company shall determine from time to time to obtain.
12. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION; NON-DISPARAGEMENT.
(a) Executive previously has executed that certain "Zygo Corporation
Non-Disclosure Agreement" (the "Confidentiality Agreement"), all the terms and
provisions of which are incorporated herein as fully set forth herein. In
furtherance of the foregoing, and without limitation thereto, it is expressly
agreed that Section 1 of the Confidentiality Agreement shall include all
knowledge, information and materials regarding (i) any one or more of the
Company's employees, officers and directors, and (ii) the Company's
organizational structure.
(b) Executive agrees not to, directly or indirectly, (i) make any
disparaging statements concerning the Company or any of its subsidiaries,
officers, directors or employees and (ii) disparage or tortuously interfere in
any way with the present or future business activities of the Company (including
of any subsidiary thereof).
13. NON-COMPETITION.
(a) Executive agrees that during his employment by the Company, and for a
period of one (1) year after termination of Executive's employment hereunder,
(the "Non-Competitive Period"), Executive shall not, directly or indirectly, as
owner, partner, joint venturer, stockholder, employee, broker, agent, principal,
trustee, corporate officer, director, licensor, or in any capacity whatsoever
engage in become financially interested in, be employed by, render any
consultation or business advice with respect to, or have any connection with,
any business engaged in the research, development, testing, design, manufacture,
sale, lease, marketing, utilization or exploitation of any products or services
which are designed for the same purpose as, are similar to, or are otherwise
competitive with, products or services of the Company or any of its
subsidiaries, in any geographic area where, at the time of the termination of
his employment hereunder, the business of the Company or any of its subsidiaries
was being conducted or was proposed to be conducted in any manner whatsoever;
provided, however, that Executive may own any securities of any corporation
which is engaged in such business and is publicly owned and traded but in an
amount not to exceed any one time one percent (1%) of any class of stock or
securities of such corporation. In addition, Executive shall not, directly or
indirectly, during the Non-Competitive Period, request or cause contracting
parties, suppliers or customers with whom the Company or any of its subsidiaries
has a business relationship to cancel or terminate any such business
relationship to cancel or terminate any such business relationship with the
Company or any of its subsidiaries or solicit, interfere with or entice from the
Company any employee (or former employee) of the Company. Notwithstanding the
foregoing, in the event the Company is required to pay Executive, after the
termination of his employment hereunder, an amount which is greater than one
year's base salary for Executive, pursuant to the terms of Section 7(b) or 9(g)
hereof, the Non-Competitive Period shall extend through November 17, 2002.
<PAGE>
(b) If any portion of the restrictions set forth in this Section 13 should,
for any reason whatsoever, be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby be adversely affected.
(c) Executive acknowledges that the Company conducts business on a
world-wide basis, that its sales and marketing prospects are for continue
expansion into world markets and that, therefore, the territorial and time
limitations set forth in this Section 13 are reasonable and properly required
for the adequate protection of the business of the Company and its subsidiaries.
In the event any such territorial or time limitation is deemed to be
unreasonable by a court of competent jurisdiction, Executive agrees to the
reduction of the territorial or time limitation as is deemed to be unreasonable
by a court of competent jurisdiction, Executive agrees to the reduction of the
territorial or time limitation to the area or period which such court deems
reasonable.
14. RIGHT TO INJUNCTION.
Executive recognizes that the services to be rendered by him hereunder are
of special, unique, unusual, extraordinary and intellectual character involving
skill of the highest order and giving them peculiar value the loss of which
cannot be adequately compensated for in damages. In the event of a breach of
this Agreement or of the provisions of Section 13 of the 1992 Agreement, by
Executive, the Company shall be entitled to injunctive relief or any other legal
or equitable remedies. Executive agrees that the Company may recover by
appropriate action the amount of the actual damage caused the Company by any
failure, refusal or neglect of Executive to perform his agreements,
representations and warranties herein contained or contained in the 1992
Agreement. The remedies provided in this Agreement shall be deemed cumulative
and the exercise of one shall not preclude the exercise of any other remedy at
law or in equity for the same event or any other event.
15. AMENDMENT OR ALTERATION.
No amendment or alteration of the terms of this Agreement shall be valid
unless made in writing and signed by both of the parties hereto.
16. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Connecticut
applicable to agreements made and to be performed therein.
17. SEVERABILITY.
The holding of any provision of this Agreement to be invalid or
unenforceable by court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
<PAGE>
18. NOTICES.
Any notices required or permitted to be given hereunder shall be sufficient
if in writing, and if delivered by hand, or sent by certified mail, return
receipt requested, to the addresses set forth above or such other address as
either party may from time to time designate in writing to the other, and shall
be deemed given as of the date of the delivery or mailing.
19. WAIVER OR BREACH.
It is agreed that a waiver by either party of a breach of any provision of
this Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
20. ENTIRE AGREEMENT AND BINDING EFFECT.
This Agreement contains the entire agreement of the parties with respect to
the subject matter hereof and shall be binding upon and inure to the benefit of
the parties hereto and their respective legal representatives, heirs,
distributors, successors and assigns. Notwithstanding the foregoing, all prior
agreements between Executive and the Company relating to the confidentiality of
information, trade secrets and patents shall not be affected by this Agreement.
This Agreement replaces and supercedes in its entirety the 1992 Agreement,
except that the provisions of Sections 12(a), 13, 16 and 19 of the 1992
Agreement shall specifically survive.
21. SURVIVAL.
The termination of Executive's employment hereunder shall not affect the
enforceability of Sections 6, 7, 9, 10, 11(a), 12, 13, 14, 16, 20 and 21 hereof.
22. NON-ASSIGNABILITY.
This Agreement is entered into in consideration of the personal qualities
of Executive and may not be, nor may any right or interest hereunder be,
assigned by him without the prior written consent of the Company. It is
expressly understood and agreed that this Agreement, and the rights accruing and
obligations owed to the Company hereunder, and the obligations to be performed
by the Company hereunder, may be assigned at any time, without the consent of
Executive, by the Company to any of its successors or assigns.
23. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same instrument.
<PAGE>
24. FURTHER ASSURANCES.
The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
25. HEADINGS.
This Section headings appearing in this Agreement are for the purposes of
easy reference and shall not be considered a part of this Agreement or in any
way modify, amend or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ZYGO CORPORATION
By: /s/ J. Bruce Robinson
-----------------------------
Name: R. Bruce Robinson
Title: President
EXECUTIVE
/s/ Gary K. Willis
-------------------------------
Gary K. Willis
EXHIBIT 10.2
AMENDMENT TO EMPLOYMENT AGREEMENT
Amendment agreement, made as of November 18, 1999 between ZYGO CORPORATION,
a Delaware corporation with an office at Laurel Brook Road, Middlefield,
Connecticut 06455 (the "Company"), and J. BRUCE ROBINSON, residing at
______________________, (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive are parties to an Employment
Agreement, dated as of January 15, 1999 (the "Agreement"); and
WHEREAS, the Company and the Executive desire to amend the Agreement as
herein provided.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Except as specifically amended herein, the Agreement, and each and every
term thereof, shall remain in full force and effect. All references in the
Agreement to the "Agreement" shall be deemed to refer to the Agreement, as
amended hereby.
2. Section 1 of the Agreement is hereby amended by deleting such Section in
its entirety and substituting therefor the following:
1. EMPLOYMENT.
The Company hereby employs Executive and Executive hereby accepts
such employment, subject to the terms and conditions herein set forth.
Executive shall hold the office of President and Chief Executive
Officer, reporting to the Board of Directors of the Company. The
Company shall nominate Executive for election as a director of the
Company for all periods when Executive holds the office of President
and Chief Executive Officer of the Company."
3. Section 3 of the Agreement is hereby amended by deleting the amount of
"$250,000" in the first sentence of such Section and substituting therefor the
amount of "$275,000."
4. Section 10(a) of the Agreement is hereby amended by deleting such
subsection in its entirety and substituting therefor the following:
<PAGE>
10. DUTIES.
(a) Executive shall perform such duties and functions as the
Board of Directors of the Company shall from time to time determine
and Executive shall comply in the performance of his duties with the
policies of, and be subject to, the direction of the Board of
Directors."
5. Executive represents and warrants that he is free to enter into this
Amendment Agreement and to perform the duties required hereunder, and that there
are no employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder.
6. No amendment or alteration of the terms of this Amendment Agreement
shall be valid unless made in writing and signed by both of the parties hereto.
7. This Amendment Agreement shall be governed by the laws of the State of
Connecticut applicable to agreements made and to be performed therein.
8. This Amendment Agreement may be executed in any number of counterparts
with the same effect as if the signatures hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Agreement as of the date and year first above written.
ZYGO CORPORATION
By:/s/ GARY K. WILLIS
---------------------------------------------
Gary K. Willis, Chairman
EXECUTIVE
/s/ J. BRUCE ROBINSON
------------------------------------------------
J. Bruce Robinson
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of earnings and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 14,616
<SECURITIES> 8,297
<RECEIVABLES> 18,729
<ALLOWANCES> 1,214
<INVENTORY> 11,456
<CURRENT-ASSETS> 61,802
<PP&E> 34,478
<DEPRECIATION> 18,569
<TOTAL-ASSETS> 87,946
<CURRENT-LIABILITIES> 13,339
<BONDS> 0
0
0
<COMMON> 1,160
<OTHER-SE> 71,071
<TOTAL-LIABILITY-AND-EQUITY> 87,946
<SALES> 39,173
<TOTAL-REVENUES> 39,173
<CGS> 22,499
<TOTAL-COSTS> 22,499
<OTHER-EXPENSES> 13,768
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,355
<INCOME-TAX> 1,224
<INCOME-CONTINUING> 2,131
<DISCONTINUED> 0
<EXTRAORDINARY> (73)
<CHANGES> 0
<NET-INCOME> 2,058
<EPS-BASIC> .18
<EPS-DILUTED> .17
</TABLE>
